10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007

Commission file number: 1-33776

ABITIBIBOWATER INC.

(Exact name of registrant as specified in its charter)

Delaware	98-0526415
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

1155 Metcalfe Street, Suite 800, Montreal, Quebec, Canada H3B 5H2
(Address of principal executive offices) (Zip code)
Registrant’s telephone number, including area code: (514) 875-2160

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common stock, par value $1.00 per share	New York Stock Exchange
	Toronto Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes n No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No n

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes n No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer n      Accelerated Filer o       Non-accelerated Filer o      Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No n

The aggregate market value of the voting common equity held by non-affiliates of the registrant’s predecessor, Bowater Incorporated, as of June 30, 2007, was approximately $1.4 billion. Without acknowledging that any individual director or executive officer of the registrant is an affiliate, the shares over which they are deemed to have voting control are considered to be owned by affiliates solely for purposes of this calculation.

As of February 29, 2008, there were 52,613,316 shares of AbitibiBowater’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement to be delivered with respect to the 2008 Annual Meeting of Shareholders are incorporated by reference into Part III.

TABLE OF CONTENTS

Part I.
Item 1. Business	1
Item 1A. Risk Factors	12
Item 1B. Unresolved Staff Comments	19
Item 2. Properties	19
Item 3. Legal Proceedings	19
Item 4. Submission of Matters to a Vote of Security Holders	20
Part II.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	21
Item 6. Selected Financial Data	23
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	55
Item 8. Financial Statements and Supplementary Data	57
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	109
Item 9A. Controls and Procedures	109
Item 9B. Other Information	109
Part III.
Item 10. Directors, Executive Officers and Corporate Governance	110
Item 11. Executive Compensation	110
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	110
Item 13. Certain Relationships and Related Transactions and Director Independence	110
Item 14. Principal Accounting Fees and Services	110
Part IV.
Item 15. Exhibits, Financial Statement Schedules	111
Signatures	115
Exhibit 2.3
Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 10.4
Exhibit 10.5
Exhibit 10.6
Exhibit 10.7
Exhibit 10.8
Exhibit 10.9
Exhibit 10.10
Exhibit 10.11
Exhibit 10.12
Exhibit 10.13
Exhibit 10.14
Exhibit 10.15
Exhibit 10.16
Exhibit 10.17
Exhibit 10.18
Exhibit 10.19
Exhibit 10.20
Exhibit 10.21
Exhibit 10.22
Exhibit 10.23
Exhibit 10.24
Exhibit 10.25
Exhibit 10.26
Exhibit 10.27
Exhibit 10.28
Exhibit 10.40
Exhibit 10.41
Exhibit 10.42
Exhibit 10.43
Exhibit 10.44
Exhibit 10.45
Exhibit 10.46
Exhibit 10.47
Exhibit 10.48
Exhibit 12.1
Exhibit 21.1
Exhibit 23.1
Exhibit 23.2
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

FORWARD-LOOKING STATEMENTS

     Statements in this report that are not reported financial results or other historical information are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. They include, for example, statements relating to our plans for addressing our current liquidity situation, our plans to achieve operational improvements and efficiencies such as the planned reduction of newsprint and coated and specialty paper capacity, the closures of certain of our paper and sawmills, our ability to realize synergies from the combination of Abitibi-Consolidated Inc. (“Abitibi”) and Bowater Incorporated (“Bowater”), the anticipated timing and progress of integration efforts related to the combination, our ability to meet our $1 billion debt reduction target (including the success of our program to sell non-core assets, consolidate operations and the success of other actions aimed at reducing our debt), our ability to maintain and improve customer service levels, and our assessment of market conditions, anticipated future financial performance and our business outlook generally. Forward-looking statements may be identified by the use of forward-looking terminology such as the words “will,” “could,” “may,” “expect,” “believe,” “anticipate,” and other terms with similar meaning indicating possible future events or potential impact on the business or shareholders of AbitibiBowater.

The reader is cautioned not to place undue reliance on these forward-looking statements, which are not guarantees of future performance. These statements are based on management’s current assumptions, beliefs and expectations, all of which involve a number of business risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include, but are not limited to, our ability to obtain additional financing or otherwise derive additional liquidity in a timely fashion and on terms acceptable to the Company, if at all, our ability to reduce newsprint and specialty papers capacity as quickly as anticipated, our ability to obtain timely contributions to our cost reduction initiatives from our unionized and salaried employees, the continued strength of the Canadian dollar against the U.S. dollar, worsening industry conditions and further growth in alternative media, actions of competitors, the demand for higher margin coated and uncoated mechanical paper, our ability to realize announced price increases, and the costs of raw materials such as energy, chemicals and fiber. In addition, with respect to forward-looking statements relating to the combination of Abitibi and Bowater, the following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements: the risk that the businesses will not be integrated successfully or that the improved financial performance, product quality and product development will not be achieved; the risk that other combinations within the industry or other factors may limit our ability to improve our competitive position; the risk that the cost savings and other expected synergies from the combination may not be fully realized or may take longer to realize than expected; and disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers. Additional risks that could cause actual results to differ from forward-looking statements are enumerated in Item 1A “Risk Factors.” All forward-looking statements in this report are expressly qualified by information contained in this report and in the Company’s other filings with the SEC and the Canadian securities regulatory authorities. AbitibiBowater disclaims any obligation to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

PART I

Item 1. Business

AbitibiBowater Inc. (referred to, with its subsidiaries and affiliates unless otherwise indicated, as “AbitibiBowater,” “we,” “our” or the “Company”) produces a wide range of newsprint and coated and specialty papers, market pulp and wood products globally. We are the largest producer of newsprint in the world by capacity and one of the largest publicly traded pulp and paper manufacturers in the world. We currently own or operate 28 pulp and paper facilities and 31 wood products facilities located in Canada, the United States, the United Kingdom and South Korea. We are also among the world’s largest recyclers of newspapers and magazines, and have more third-party certified sustainable forest land than any other company in the world.

We are a Delaware corporation incorporated on January 25, 2007. On October 29, 2007, Abitibi and Bowater combined in a merger of equals with each becoming a wholly-owned subsidiary of AbitibiBowater (the “Combination”). The Combination was designed to create a stronger company, better able to meet changing customer needs, compete more effectively in an increasingly global market, adapt to lower demand for newsprint in North America, and deliver increased value to shareholders.

As a result of the Combination, each issued and outstanding share of Bowater common stock was converted into 0.52 of a share of AbitibiBowater common stock. Each issued and outstanding exchangeable share of Bowater Canada Inc. (a wholly-owned subsidiary of Bowater now named AbitibiBowater Canada Inc.) was changed into 0.52 of an exchangeable share of AbitibiBowater Canada Inc. Each issued and outstanding share of Abitibi common stock was exchanged for either 0.06261 of a share of AbitibiBowater common stock or 0.06261 of an exchangeable share of AbitibiBowater Canada Inc. All Abitibi and Bowater

1

stock options, stock appreciation rights and other stock-based awards outstanding, whether vested or unvested, were converted into AbitibiBowater stock options, stock appreciation rights or stock-based awards. The number of shares subject to such converted awards was adjusted by multiplying the number of shares outstanding by the Abitibi exchange ratio of 0.06261, in the case of an Abitibi award, and by the Bowater exchange ratio of 0.52, in the case of a Bowater award. Similarly, the exercise price of the converted stock options or base price of the stock appreciation rights was adjusted by dividing such price by the Abitibi exchange ratio or the Bowater exchange ratio as appropriate. We retroactively restated all share and share-related information in our consolidated financial statements and notes for all periods before the Combination to reflect the Bowater exchange ratio of 0.52.

As a result of the Combination, we issued, or reserved for issuance, approximately 57.4 million shares of AbitibiBowater common stock, including 5.6 million exchangeable shares, to the former shareholders of Abitibi and Bowater. Our common stock began trading under the symbol “ABH” on both the New York Stock Exchange and the Toronto Stock Exchange on October 29, 2007. Our exchangeable shares began trading under the symbol “AXB” on the Toronto Stock Exchange on October 29, 2007.

Even though Abitibi and Bowater consider the Combination to have been a “merger-of-equals”, Bowater is deemed to be the “acquirer” of Abitibi for accounting purposes, and AbitibiBowater is deemed to be the successor to Bowater for purposes of U.S. securities laws and regulations governing financial reporting. Therefore, unless otherwise indicated, the financial information included in this Annual Report on Form 10-K reflects the results of operations and financial position of Bowater for the periods before October 29, 2007 and those of both Abitibi and Bowater for periods beginning on or after October 29, 2007. This means that our consolidated results of operations for 2007 include Abitibi’s results of operations for only the 64 days following the Combination. In accordance with United States generally accepted accounting principles (“GAAP”), Abitibi’s results of operations prior to the consummation of the Combination are excluded. All non-financial information included in Part 1 of this Annual Report on Form 10-K reflects the combined businesses of Abitibi and Bowater unless otherwise indicated.

Product Lines

We manage our business based on the products that we manufacture and sell to external customers. Our reportable segments, which correspond to our primary product lines, are newsprint, coated papers, specialty papers, market pulp, and wood products. In general, our products are globally traded commodities. Pricing and the level of shipments of these products will continue to be influenced by the balance between supply and demand as affected by global economic conditions, changes in consumption and capacity, the level of customer and producer inventories and fluctuations in currency exchange rates.

Certain segment and geographical financial information, including net sales by segment and by geographic area, operating income (loss) by segment, total assets by segment and long-lived assets by geographic area, can be found in Note 26 to our Consolidated Financial Statements.

Newsprint

AbitibiBowater produces newsprint at 18 facilities in North America, South Korea and the United Kingdom. We are the largest producer of newsprint in the world by capacity, with annual capacity estimated at 5.4 million metric tons or approximately 13% of worldwide capacity. Our annual North American production capacity of approximately 4.9 million metric tons represents approximately 43% of North American capacity.

We supply leading publishers in more than 90 countries with top-quality newsprint, including products made of up to 100% recycled fiber. Our North American newsprint is sold directly by our regional sales offices. Sales outside North America are serviced primarily through our international offices located in or near the markets we supply or through international agents. We sell approximately 45% of our total newsprint production to markets outside North America. We distribute newsprint by rail, truck and ship.

We sell newsprint to various joint venture partners (partners with AbitibiBowater in the ownership of certain mills we operate). During 2007, these joint venture partners purchased approximately 535,000 metric tons from our consolidated entities and approximately 298,000 metric tons from our Ponderay facility, an unconsolidated partnership of which we own a 40% equity interest. Newsprint sold to these joint venture partners represents approximately 20% of the total newsprint tons we sold in 2007.

2

Coated Papers

AbitibiBowater produces coated mechanical paper at two facilities in North America. We are one of the largest producers of coated mechanical paper in North America, with a capacity of approximately 785,000 short tons in 2007. This tonnage represents approximately 12% of North American capacity. Our coated papers are used in magazines, catalogs, books, retail advertising, direct mail and coupons.

We sell coated papers to major commercial printers, publishers, catalogers and retailers. We distribute coated papers by truck and rail. Export markets are served primarily through international agents.

Specialty Papers

AbitibiBowater produces specialty papers at 11 facilities in North America. We are one of the largest producers of specialty papers including, supercalendered, superbright, high bright, bulky book and directory papers, in North America, with a capacity of approximately 2.6 million short tons in 2007. This tonnage represents approximately 38% of North American capacity. AbitibiBowater’s combined specialty and coated papers’ broad product family allows us to present a more balanced paper offering to our customers. Our specialty papers are used in books, retail advertising, direct mail, coupons, and other commercial printing applications.

We sell specialty papers to major commercial printers, direct mailers, publishers, catalogers and retailers. We distribute specialty papers primarily by truck and rail. Export markets are served primarily through international agents.

Market Pulp

AbitibiBowater produces approximately 1.1 million metric tons of market pulp at five facilities in North America, which represents approximately 5% of North American capacity. We also sell market pulp in numerous overseas markets. Market pulp is used to make a range of consumer products including tissue, packaging, specialty paper products, diapers and other absorbent products.

North American market pulp sales are made through our regional sales offices, while export sales are made through international sales agents local to their markets. We distribute market pulp by truck, rail and ship.

3

The following table provides a listing of the pulp and paper manufacturing facilities we own or operate (as of December 31, 2007) and production information by product line (which represents all of our reportable segments except wood products). For better illustrative purposes, we have reflected the production for the full year of 2007 for Abitibi’s facilities.

							2007 Production by Product Line
	Number		2008		2007
	of Paper		Annual		Total						Specialty
(In 000’s of metric tons)	Machines		Capacity		Production		Newsprint		Coated Paper		Paper		Market Pulp
Canada
Alma, Quebec		3		335		330		-		-		330		-
Amos, Quebec		1		207		200		200		-		-		-
Baie-Comeau, Quebec		4		573		560		560		-		-		-
Beaupré, Quebec		2		233		192		-		-		192		-
Belgo, Quebec (3)		4		29		306		104		-		202		-
Clermont, Quebec (1)		2		343		335		335		-		-		-
Dalhousie, New Brunswick (3)		2		17		241		209		-		32		-
Dolbeau, Quebec (2)		2		239		160		-		-		160		-
Donnacona, Quebec (3)		1		160		152		-		-		152		-
Fort Frances, Ontario		3		387		391		-		-		275		116
Gatineau, Quebec (3)		2		351		334		334		-		-		-
Grand Falls, Newfoundland		2		206		177		170		-		7		-
Iroquois Falls, Ontario		2		280		260		225		-		35		-
Kénogami, Quebec		2		206		209		-		-		209		-
Laurentide, Quebec		2		364		341		-		-		341		-
Liverpool, Nova Scotia (4)		2		256		242		242		-		-		-
Mackenzie, British Columbia (3)		1		195		174		174		-		-		-
Thorold, Ontario		2		412		398		398		-		-		-
Thunder Bay, Ontario (5)		3		645		525		154		-		65		306
United States
Alabama River, Alabama		1		255		240		240		-		-		-
Augusta, Georgia (6)		2		421		422		422		-		-		-
Calhoun, Tennessee (7)		5		886		845		301		-		404		140
Catawba, South Carolina		3		901		890		-		668		-		222
Coosa Pines, Alabama		2		635		585		330		-		-		255
Covington, Tennessee (8)		-		70		49		-		49		-		-
Grenada, Mississippi		1		251		232		232		-		-		-
Snowflake, Arizona (9)		2		89		325		325		-		-		-
Usk, Washington (10)		1		257		226		226		-		-		-
United Kingdom
Bridgewater, England		2		211		195		195		-		-		-
South Korea
Mokpo, South Korea		1		258		249		249		-		-		-
		62		9,672		9,785		5,625		717		2,404		1,039

(1)	Donohue Malbaie Inc. (“DMI”), which owns one of Clermont’s paper machines, is owned 51% by AbitibiBowater and 49% by the New York Times. We manage the facility and wholly own all of the other assets at the site. Manufacturing costs are transferred between AbitibiBowater and DMI at agreed-upon transfer costs. DMI’s paper machine produced 212,000 metric tons of newsprint in 2007.
(2)	We indefinitely idled paper machine no. 2 at our Dolbeau, Quebec facility in late May 2007. We restarted this machine in February 2008. As a result, the production capacity of this machine is included in our 2008 annual production capacity.
(3)	On November 29, 2007, we announced the results of the initial phase of a comprehensive strategic review of our businesses, which included a decision to reduce our newsprint and specialty papers production capacity by approximately 1 million metric tons per year during the first quarter of 2008. The reductions include the permanent closure of our Belgo facility located in Shawinigan, Quebec (115,000 metric tons of newsprint and 260,000 metric tons of specialty papers) along with our Dalhousie, New Brunswick facility (200,000 metric tons of newsprint and

4

	40,000 metric tons of specialty papers) and the indefinite idling of our Donnacona, Quebec (160,000 metric tons of specialty papers) and Mackenzie, British Columbia (195,000 metric tons of newsprint) facilities. In addition, we announced the permanent closure of our previously idled Fort William facility in Thunder Bay, Ontario and Lufkin, Texas facility, as well as paper machine No. 3 at our Gatineau, Quebec facility, which was previously idled in March 2007. The previously idled locations and machine had a production capacity of approximately 650,000 metric tons of newsprint. We have accepted a letter of intent to purchase our Fort William facility. For the mills that have been permanently closed the 2008 annual capacity represents the expected production up and until the closure of the mills. We plan to announce the results of the second phase of our comprehensive review in the second quarter of 2008.
(4)	The Bowater Mersey Paper Company Limited (“Mersey”) is located in Liverpool, Nova Scotia and is owned 51% by AbitibiBowater and 49% by The Washington Post Company. We manage the facility. The amounts in the above table represent the mill’s total capacity and production.
(5)	Thunder Bay is shown net of base sheet capacity of 51,000 metric tons and production of 47,000 metric tons to remove the capacity used to produce uncoated base stock for our Covington, Tennessee facility. The increase in 2008 production capacity is a result of restarting paper machine No. 4 at Thunder Bay in May 2007, which had been previously idled in September 2006.
(6)	Augusta Newsprint Company, which operates our newsprint mill in Augusta, Georgia, is owned 52.5% by AbitibiBowater and 47.5% by The Woodbridge Company. We manage the facility. The amounts in the above table represent the mill’s total capacity and production.
(7)	Calhoun Newsprint Company (“CNC”), which owns one of Calhoun’s paper machines, Calhoun’s recycle fiber plant and a portion of the thermomechanical pulp (“TMP”) mill, is owned approximately 51% by AbitibiBowater and approximately 49% by Herald Company, Inc. We manage the facility and wholly own all of the other assets at the site, including the remaining portion of the TMP mill, a kraft pulp mill, a market pulp dryer, four other paper machines and other support equipment. Pulp, other raw materials, labor and other manufacturing services are transferred between AbitibiBowater and CNC at agreed-upon transfer costs. CNC’s paper machine produced 197,000 metric tons of newsprint in 2007. The amounts in the above table represent the mill’s total capacity and production including CNC’s paper machine.
(8)	Our Covington, Tennessee facility operates a paper coating machine that converts uncoated base stock, produced by our Thunder Bay paper mill, into coated paper.
(9)	In connection with the review and approval of the Combination by the antitrust division of the U.S. Department of Justice, we agreed, among other things, to sell our Snowflake, Arizona newsprint mill and certain related assets. We expect to complete the sale of this facility to Catalyst Paper Corporation in the second quarter of 2008 for approximately $161 million, excluding trade receivables of approximately $19 million that we will retain. As a result, the production capacity of the Snowflake mill (349,000 metric tons of newsprint) has been adjusted to reflect approximately 3 months of operation in 2008.
(10)	The Ponderay Newsprint Company (“Ponderay”) is located in Usk, Washington. Ponderay is an unconsolidated partnership in which AbitibiBowater has a 40% interest and, through a wholly-owned subsidiary, is the managing partner. The balance of the partnership is held by subsidiaries of five newspaper publishers. The amounts in the above table represent the mill’s total capacity and production.

Wood Products

AbitibiBowater operates sawmills in Canada and the United States that produce construction-grade lumber that is sold in North America. Our sawmills have an annual capacity of close to 3 billion board feet of lumber. In addition, our sawmills are a major source of wood chips for our pulp and paper mills.

On October 12, 2006, an agreement regarding Canada’s softwood lumber exports to the U.S. became effective. The softwood lumber agreement (“SLA”) provides for softwood lumber to be subject to one of two ongoing border restrictions, depending upon the province of first manufacture with several provinces, including Nova Scotia, being exempt from these border restrictions. Volume quotas have been established for each company within the provinces of Ontario, Quebec and British Columbia based on historical production, and the volume quotas are not transferable between provinces. The volume that we were allocated was insufficient to operate both our Ignace and Thunder Bay, Ontario sawmills; therefore, we decided to indefinitely shut our Ignace sawmill, which had an annual capacity of 84,000 board feet, in December 2006. U.S. composite prices would have to rise above $355 per thousand board feet before the quota volume restrictions would be lifted. Our average transaction price for lumber in the fourth quarter of 2007 was $289 per thousand board feet.

5

The following table provides a listing of our sawmills and their respective capacity and lumber production. For better illustrative purposes, we have reflected the production for the full year of 2007 for Abitibi’s facilities.

	2008		2007
(In million board feet)	Annual Capacity		Total Production
Canada
Chibougamau, Quebec (2)		112		141
Comtois, Quebec		144		143
Girardville-Normandin, Quebec		114		108
La Doré, Quebec		130		148
La Tuque, Quebec (2 facilities) (1)		125		103
Mackenzie, British Columbia (2 facilities) (2)		500		322
Maniwaki, Quebec		115		123
Mistassini, Quebec		144		129
Oakhill, Nova Scotia		151		141
Obedjiwan, Quebec (3)		30		30
Pointe-aux-Outardes, Quebec		175		49
Roberval, Quebec		105		93
Saguenay, Quebec (3 facilities)(4)		190		165
Saint-Félicien, Quebec		125		125
Saint-Hilarion, Quebec		51		43
Saint-Ludger-de-Milot, Quebec (5)		80		88
Saint-Raymond, Quebec		54		16
Saint-Thomas, Quebec		90		88
Senneterre, Quebec		85		113
Thunder Bay, Ontario (6)		208		204
United States
Albertville, Alabama		58		52
Westover, Alabama		54		51
		2,840		2,475

(1)	The production at La Tuque also includes Produits Forestiers La Tuque, which is owned 82% by AbitibiBowater and 18% by Coopérative Forestiére du Haut Saint-Maurice. The two facilities will be consolidated into one in 2008. We manage both facilities.
(2)	On November 29, 2007, we announced the results of the initial phase of a comprehensive strategic review of our businesses, which included a decision to indefinitely idle the two Mackenzie sawmills, which directly support the Mackenzie paper operation, which was also indefinitely idled. In January 2008, we announced the transfer of the wood allocation of the Chibougamau sawmill to other sawmills in the Lac St-Jean region effective in the second quarter of 2008. Our sawmill in Price, Quebec (representing approximately 66 million board feet), which we closed in December 2007, is currently being marketed for sale to potential buyers.
(3)	Société en Commandite Scierie Opticiwan is located in Obedjiwan, Quebec and is an unconsolidated entity in which AbitibiBowater has a 45% interest. The amounts in the above table represent the mill’s total capacity and production.
(4)	Produits Forestiers Saguenay is owned 86% by AbitibiBowater and 14% by Les Placements H.N.M.A. Inc. We manage the facility. The amounts in the above table represent the mill’s total capacity and production.
(5)	Produits Forestiers Petit-Paris is located in Saint-Ludger-de-Milot, Quebec, and is an unconsolidated entity in which AbitibiBowater has a 50% interest. The amounts in the above table represent the mill’s total capacity and production.
(6)	Our Ignace, Ontario sawmill was indefinitely shut in December 2006 due to an insufficient allocation of quotas. Approximately 84,000 board feet are excluded from the table.

6

We also operate facilities that remanufacture and engineer wood for greater strength for specialized applications such as bedding components, roofing and flooring material, and other products. The following table provides a listing of our remanufacturing and engineered wood facilities and their respective capacity and wood production. For better illustrative purposes, we have reflected the production for the full year of 2007 for Abitibi’s facilities.

	2008		2007
(In million board feet, except where otherwise stated)	Annual Capacity		Total Production
Remanufacturing Wood Facilities:
Château-Richer, Quebec		63		50
La Doré, Quebec		15		14
Manseau, Quebec		20		20
Saint-Prime, Quebec		28		23
Total Remanufacturing Facilities		126		107
Engineered Wood Facilities:
Larouche and Saint-Prime, Quebec (million linear feet) (1)		145		81

⁽¹⁾ Abitibi-LP Engineering Wood Inc. is located in Larouche and Saint-Prime, Quebec, and is an unconsolidated entity in which AbitibiBowater has a 50% interest. We operate the facility, and our joint venture partner sells the products. The amounts in the above table represent the mill’s total capacity and production.

Other Products

In addition to paper, market pulp and wood products, we sell pulpwood, sawtimber, wood chips and electricity to customers located in Canada and the United States. Sale of these other products is considered a recovery of the cost of manufacturing our primary products.

Raw Materials

Our operations consume substantial amounts of raw materials, such as wood, recovered paper and chemicals, and energy, including electricity, natural gas, fuel oil, coal and wood waste, in the manufacturing of our pulp, paper and wood products. We purchase our raw materials and energy sources primarily on the open market.

Wood

Our sources of wood include property we own or lease, property on which we possess cutting rights and purchases from local producers, including sawmills that supply residual wood chips. At December 31, 2007, we owned or leased approximately 0.1 million acres of timberlands in the southeastern United States, and we owned approximately 2.8 million acres in Canada. We also have contractual cutting rights on approximately 49.5 million acres of Crown-owned land in Canada. The contractual cutting rights contracts are approximately 20-25 years in length and automatically renew every 5 years, contingent upon our continual compliance with environmental performance and reforestation requirements.

In accordance with our values, our environmental vision statement and forestry policies and the interests of our customers and other stakeholders, we are committed to environmental management systems with the goal of sustainable forest management. All of our forestlands and wood-purchasing operations in the United States are third-party certified to be in compliance with standards of the Sustainable Forestry Initiative^® (“SFI”). The SFI program combines the perpetual growing and harvesting of trees with the protection of wildlife, plants, soil and water quality. AbitibiBowater has also achieved SFI^® certification for its New Brunswick and Ontario Crown-owned land operations (former Bowater licenses) and its freehold forest land in Nova Scotia. All Ontario licenses and private land of former Abitibi are certified to the Canadian Standards Association Z809 (CSA Z809) forest management standard. This standard utilizes a continual improvement approach and requires public participation, practical demonstration of sustainable forest management practices and management commitment. In addition, approximately 92% of our Crown-owned land operations in Quebec are certified to the CSA Z809 standard, while all of AbitibiBowater’s private land are certified to either SFI or the CSA Z809 standard.

7

Recovered Paper

We are among the largest recyclers of newspapers and magazines in the world. We have a number of recycling plants that utilize advanced mechanical and chemical processes to manufacture high quality pulp from a mixture of old newspapers and old magazines (“recovered paper”). The resulting products, which include recycled fiber newsprint and uncoated specialty paper, are comparable in quality to paper produced with 100% virgin fiber pulp. The Bridgewater, Coosa Pines, Thorold and South Korea operations produce newsprint containing 100% recycled fiber. In 2007, we used 2.7 million metric tons of recovered paper worldwide. The average de-inking yield in our recycling facilities is approximately 82%. In 2007, our recycled fiber content in newsprint averaged 36%. We produce more than 40 grades with recycled content.

Our North American recycling division collects or purchases 2.4 million metric tons of recovered paper per year. Our trademarked Paper Retriever^® program collects recovered fiber through a combination of community drop-off containers and recycling programs with businesses and commercial offices. The recovered paper we physically purchase is from suppliers generally within the region of our recycling plants, primarily under long-term agreements.

Our European recycling division focuses its efforts on Paper Retriever^® and Paper Bank^® programs, and curbside collection from over 1.7 million homes in the United Kingdom.

Energy

Steam and electrical power are the primary forms of energy used in pulp and paper production. Process steam is produced in boilers using a variety of fuel sources. All of AbitibiBowater’s mills produce all of their own steam requirements, except our Alabama, Bridgewater, Iroquois Falls, Dolbeau and Mersey operations, which purchase their steam from third-party suppliers. Our Alma, Baie-Comeau, Calhoun, Catawba, Coosa Pines, Fort Frances, Grand Falls, Iroquois Falls, Kenogami, Mackenzie, Snowflake and Thunder Bay operations collectively produce approximately 41% of their own electrical requirements. The balance of our energy needs is purchased from third parties.

We have nine sites in Canada with cogeneration facilities which generate “green energy” from carbon-neutral biomass. In addition, we utilize alternative fuels such as methane from landfills, used oil, and tire-derived fuel to reduce consumption of virgin fossil fuels.

The following table provides a listing of our hydroelectric facilities and their respective capacity and generation. For better illustrative purposes, we have reflected the generation of these Abitibi facilities for the full year of 2007.

												Share of
				Installed		Share of				Share of		Generation
				Capacity		Capacity		Generation		Generation		Received
	Ownership			(MW)		(MW)		(GWh)		(GWh)		(GWh)
Hydro Saguenay		100	%		162		162		1,043		1,043		1,043
Grand Falls		100	%		61		61		488		488		488
Fort Frances (1) (2)		75	%		27		20		127		100		100
Kenora (1) (2)		75	%		18		14		64		51		51
Iroquois Falls (1) (2)		75	%		92		69		509		423		423
Manicouagan Power Company(1) (3)		60	%		335		201		2,889		1,733		632
Star Lake Hydro Partnership(4)		51	%		18		9		148		75		75
Exploits River Hydro Partnership(4)		49	%		37		18		153		75		75
					750		554		5,421		3,988		2,887

(1)	The amounts in the above table represent the facility’s total installed capacity and power generation.
(2)	Prior to April 2, 2007, we owned 100% of these facilities.
(3)	We are required to sell a portion of our share of the power generation back to Alcoa, Inc. through January 1, 2011; therefore, the power we receive is net of the amounts sold under this contract with our partner.
(4)	Star Lake Hydro Partnership and Exploits River Hydro Partnership are limited partnerships and unconsolidated entities in which AbitibiBowater has 51% and 49% interest, respectively. The amounts in the above table represent the facility’s total installed capacity and power generation.

8

Competition

In general, our products are globally traded commodities, and the markets in which we compete are highly competitive. Pricing and the level of shipments of our products are influenced by the balance between supply and demand, global economic conditions, changes in consumption and capacity, the level of customer and producer inventories and fluctuations in currency exchange rates. Any material decline in prices for our products or other adverse developments in the markets for our products could have a material adverse effect on our financial results, financial condition and cash flow. Prices for our products have been and are likely to continue to be highly volatile.

Newsprint, one of our principal products, is produced by numerous manufacturers worldwide. Aside from quality specifications to meet customer needs, the production of newsprint does not depend upon a proprietary process or formula. The five largest North American producers represent approximately 78% of the North American capacity for newsprint. The five largest global producers represent approximately 44% of global newsprint capacity. Our annual production capacity is approximately 13% of worldwide capacity. We face actual and potential competition from both large, global producers and numerous smaller regional producers. In recent years, a number of global producers of newsprint based in Asia, particularly China, have grown their production capacity substantially. Price, quality, customer relationships and the ability to produce paper with recycled fiber are important competitive determinants.

AbitibiBowater competes with ten other coated mechanical paper producers with operations in North America. The five largest North American producers represent approximately 77% of the North American capacity for coated mechanical paper. In addition, several major offshore suppliers of coated mechanical paper compete for North American business. As a major supplier to printers and magazine/catalog publishers in North America, AbitibiBowater competes with numerous worldwide suppliers of other grades of paper such as coated freesheet, supercalendered and uncoated mechanical paper. We compete on the basis of price, quality and service.

AbitibiBowater produced approximately 2.6 million short tons of uncoated mechanical papers. This represented about 38% of North American uncoated mechanical paper demand in 2007 and was comprised mainly of supercalendered, superbright, high bright, bulky book and directory papers. Other producers of uncoated mechanical papers include Catalyst, New Page (formerly Stora Enso North America), Fraser, Irving, St. Marys, Madison and Norpac. In addition, imports from overseas represented about 10% of North American demand in 2007. We compete on the basis of price, quality and service.

AbitibiBowater competes with six other major market pulp suppliers with operations in North America along with other smaller competitors. Market pulp is a globally traded commodity for which competition exists in all major markets. Aside from quality specifications to meet customer needs, the production of market pulp does not depend on a proprietary process or formula. We produce five major grades of market pulp (northern and southern hardwood, northern and southern softwood and fluff) and compete with other producers from South America (eucalyptus hardwood and radiata pine softwood), Europe (northern hardwood and softwood), and Asia (mixed tropical hardwood). Price, quality and service are considered the main competitive determinants.

As with other global commodities, the competitive position of our products is significantly affected by the volatility of currency exchange rates. See “Quantitative and Qualitative Disclosures about Market Risk” in Item 7A of this Form 10-K. We have operations in Canada, the United States, the United Kingdom and South Korea. Several of our primary competitors are located in Canada, Sweden, Finland and certain Asian countries. Accordingly, the relative rates of exchange between those countries’ currencies and the United States dollar can have a substantial effect on our ability to compete. In addition, the degree to which we compete with foreign producers depends in part on the level of demand abroad. Shipping costs and relative pricing generally cause producers to prefer to sell in local markets when the demand is sufficient in those markets.

Trends in advertising, electronic data transmission and storage, and the Internet have adversely affected and could continue to adversely affect traditional print media, including our products and those of our customers, but neither the timing nor the extent of those trends can be predicted with certainty. Our newspaper publishing customers in North America use and compete with businesses that use other forms of media and advertising, such as direct mailings and newspaper inserts (both of which are end uses for several of our products), television and the Internet. U.S. consumption of newsprint declined in 2007 as a result of continued declines in newspaper circulation, declines in newspaper advertising volume and publishers’ conservation measures which include increased usage of lighter basis-weight newsprint and web-width and page count reductions. Our magazine and catalog publishing customers are also subject to the effects of competing media, including the Internet.

9

Employees

As of December 31, 2007, AbitibiBowater employed approximately 18,000 people, of whom approximately 13,000 were represented by bargaining units. Our unionized employees are represented predominantly by the Communications, Energy and Paperworkers Union in Canada and predominantly by the United Steelworkers Union in the U.S. In conjunction with our implementation of synergistic opportunities, we expect our employee base to decline over the next twelve months.

Seventeen collective bargaining agreements covering approximately 1,600 of our employees have been renewed in 2007. Six collective bargaining agreements, covering approximately 1,000 of our employees, which expired on or before December 31, 2007, are in the process of being renewed. In 2008, another nine collective bargaining agreements will expire, covering approximately 1,200 employees. A significant number of our collective bargaining agreements with respect to our paper operations in Eastern Canada will expire in the second quarter of 2009. We began negotiations with the union representing the majority of our Eastern Canadian employees on the 2009 agreements in March 2008. These negotiations continued for a week without resolution, and we are not currently in negotioations. The employees at the facility in Mokpo, South Korea have complied with all conditions necessary to strike. The possibility of a strike or lockout of those employees is not clear. While negotiations with the unions in the past have resulted in collective agreements being signed, as is the case with any negotiation, we may not be able to negotiate acceptable new agreements, which could result in strikes or work stoppages by affected employees. Renewal of collective bargaining agreements could also result in higher wage or benefit costs. Therefore, we could experience a disruption of our operations or higher ongoing labor costs which could have a material adverse effect on our business, financial condition or results of operations.

Trademarks

We have applied for registration of the mark “AbitibiBowater” and the AbitibiBowater logo in the countries of our principal markets. We consider our interest in the logo and mark to be valuable and necessary to the conduct of our business.

Environmental Matters

Information regarding environmental matters is included in Note 22 to our Consolidated Financial Statements.

We believe that our operations are in material compliance with all applicable federal, state, provincial and local environmental regulations and that the currently required control equipment is in operation. While it is impossible to predict future environmental regulations that may be established, we believe that we will not be at a competitive disadvantage with regard to meeting future Canadian, United States, British or South Korean standards.

Internet Availability of Information

We make our Form 10-K, our Form 10-Qs and our Form 8-Ks, and any amendments to them, available free of charge through our Internet website (www.abitibibowater.com) as soon as reasonably practicable after we file or furnish such materials to the Securities and Exchange Commission.

Corporate Governance

In accordance with the corporate governance rules of the New York Stock Exchange, we have adopted Corporate Governance Principles related to certain key areas such as director qualifications and responsibilities, responsibilities of key board committees and director compensation. We have also adopted a Board of Directors Code of Conduct and a Code of Business Conduct for directors, officers and employees. Our Corporate Governance Principles, our Board of Directors Code of Conduct, our Code of Business Conduct and the charters of our Audit Committee, Human Resources & Compensation Committee and Nominating & Governance Committee are published on our website. We will disclose any amendments to our Board of Directors Code of Conduct, our Code of Business Conduct or waivers of any provision thereof on our website within four business days following the date of the amendment or waiver, and that information will remain available for at least a twelve-month period. We will provide any shareholder with printed versions of any of the foregoing guidelines, code or committee charter upon request.

10

Executive Officers

Our executive officers are elected by the Board of Directors to serve one-year terms. There are no family relationships among officers or directors and no arrangements or understandings between any officer and any other person under which the officer was selected other than any provision contained in the Combination Agreement and Agreement and Plan of Merger dated as of January 29, 2007, as amended. Set forth below are the names, positions, ages and a brief description of the business experiences, as of February 29, 2008, of our executive officers:

			Officer
Name	Age	Position	Since
John W. Weaver	62	Executive Chairman	2007
David J. Paterson	53	President and Chief Executive Officer	2007
Alain Grandmont	51	Senior Vice President, Commercial Printing Papers Division	2007
William G. Harvey	50	Senior Vice President and Chief Financial Officer	2007
Yves Laflamme	51	Senior Vice President, Wood Products Division	2007
Jon Melkerson	45	Senior Vice President, Business and Corporate Development	2007
Pierre Rougeau	50	Senior Vice President, North American Newsprint Division	2007
W. Eric Streed	63	Senior Vice President, Supply Chain	2007
Thor Thorsteinson	54	Senior Vice President, International Business Division	2007
Jacques P. Vachon	48	Senior Vice President, Corporate Affairs and Chief Legal Officer	2007
James T. Wright	61	Senior Vice President, Human Resources	2007
Joseph B. Johnson	45	Vice President and Controller	2007

Mr. Weaver served as President and Chief Executive Officer of Abitibi from 1999 to October 2007, when he was appointed as Executive Chairman of AbitibiBowater. He holds a Ph.D. from the Institute of Paper Science and Technology and possesses over 30 years experience in the forest products industry. He is the current chair of both the Forest Products Association of Canada (FPAC) and FPInnovations. Mr. Weaver is also a Director of the not-for-profit US Endowment for Forestry and Communities.

Mr. Paterson served as Chairman, President and Chief Executive Officer of Bowater from January 2007 to October 2007, when he was appointed as President and Chief Executive Officer of AbitibiBowater. From May 2006 to January 2007, he was President and Chief Executive Officer and a Director of Bowater. Previously, from 1987 through 2006, Mr. Paterson worked for Georgia-Pacific Corporation where he was most recently Executive Vice President in charge of its Building Products Division. He has also been responsible for its Pulp and Paperboard Division, its Paper and Bleached Board Division and its Communications Papers Division.

Mr. Grandmont served as Senior Vice President, Commercial Printing Papers of Abitibi from 2005 to October 2007, when he was appointed as Senior Vice President, Commercial Printing Papers Division of AbitibiBowater. He served as Senior Vice President, Value-Added Operations and Sales of Abitibi in 2004. Previously, he was Senior Vice President, Value-Added Operations of Abitibi.

Mr. Harvey served as Executive Vice President and Chief Financial Officer of Bowater from August 2006 to October 2007, when he was appointed as Senior Vice President and Chief Financial Officer of AbitibiBowater. From 2005 to 2006, he was Senior Vice President and Chief Financial Officer and Treasurer of Bowater. From 1998 to 2005, he served as Vice President and Treasurer of Bowater. Previously, he was Vice President and Treasurer of Avenor Inc., a pulp and paper company, until its acquisition by Bowater.

Mr. Laflamme served as Senior Vice President, Woodlands and Sawmills of Abitibi from 2006 to October 2007, when he was appointed as Senior Vice President, Wood Products Division of AbitibiBowater. He was Vice President, Sales, Marketing and Value-Added Wood Products Operations of Abitibi from 2004 to 2005. Previously, he was Vice President, Sales and Marketing, Wood Products of Abitibi.

Mr. Melkerson served as Vice President, International Newsprint Sales of Abitibi from 2006 to October 2007, when he was appointed as Senior Vice President, Business and Corporate Development of AbitibiBowater. He was Vice President, Operations, Commercial Printing Papers Division of Abitibi from 2004 to 2006. Previously, he was Vice President and General Manager, Newsprint Sales of Abitibi.

11

Mr. Rougeau served as Senior Vice President, Corporate Development and Chief Financial Officer of Abitibi from 2001 to October 2007, when he was appointed as Senior Vice President, North American Newsprint Division of AbitibiBowater.

Mr. Streed served as Executive Vice President of Operations and Process Improvement of Bowater from August 2006 to October 2007, when he was appointed as Senior Vice President, Supply Chain of AbitibiBowater. Previously, he was Vice President of Supply Chain Projects and Information Technology at Domtar Inc. He also served as Vice President of U.S. Operations for Domtar Inc. and previously held positions in engineering and mill management with Georgia-Pacific Corporation.

Mr. Thorsteinson served as Senior Vice President, Newsprint of Abitibi from 2006 to October 2007, when he was appointed as Senior Vice President, International Business Division of AbitibiBowater. He was Senior Vice President, North America Newsprint Sales and Operations of Abitibi from 2005 to 2006. Previously, he was Senior Vice President, Newsprint and Operations of Abitibi.

Mr. Vachon served as Senior Vice President, Corporate Affairs and Secretary of Abitibi from 1997 to October 2007, when he was appointed as Senior Vice President, Corporate Affairs and Chief Legal Officer of AbitibiBowater.

Mr. Wright served as Executive Vice President, Human Resources of Bowater from August 2006 to October 2007, when he was appointed as Senior Vice President, Human Resources of AbitibiBowater. He was Senior Vice President, Human Resources of Bowater from 2002 to 2006 and Vice President, Human Resources of Bowater from 1999 to 2002. Previously, he was Vice President of Human Resources for Georgia-Pacific Corporation.

Mr. Johnson served as Vice President and Controller of Bowater from January 2006 to October 2007, when he was appointed as Vice President and Controller of AbitibiBowater. From 2003 to 2006, he was Director of Accounting and Compliance Reporting for Bowater and from 2001 to 2003, served as Director of Financial Reporting for Bowater.

Cautionary Statements Regarding the Use of Third Party Data

Information about industry or general economic conditions contained in this report are derived from third-party sources (e.g. the Pulp and Paper Products Council, RISI, Inc. and trade publications) that AbitibiBowater believes are widely accepted and accurate; however, we have not independently verified this information and cannot provide assurances of its accuracy.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the following factors which could materially affect our business, financial condition or future results. The risks described below are not the only risks we are facing. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially affect our business, financial condition or results of operation.

We have substantial indebtedness that could adversely affect our financial health, and our efforts to reduce and restructure this indebtedness may not be successful.

We have a significant amount of indebtedness. As of December 31, 2007, AbitibiBowater had outstanding total debt of approximately $5.6 billion, of which $589 million was secured debt, and shareholders’ equity of $1.9 billion. Each of our Abitibi and Bowater subsidiaries has outstanding long-term notes and also utilizes bank credit facilities for working capital and other operating needs. While Bowater is expected to meet its debt service obligations as they come due, Abitibi is currently experiencing a liquidity shortfall and faces significant near-term liquidity problems, all of which is discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Business Strategy and Outlook.”

Management does not expect the current liquidity constraints and near term debt repayment obligations at Abitibi to affect the financial condition at Bowater or at the holding company level. Nevertheless, our substantial amount of debt could have important negative consequences. For example, it could:

• limit our ability to obtain additional financing, if needed, or refinancing, when needed, for debt service requirements, working capital, capital expenditures, acquisitions, or other purposes;

• increase our vulnerability to adverse economic and industry conditions;

12

• require us to dedicate a substantial portion of our cash flows from operations to make payments on our debt;

• cause us to monetize assets such as timberland or production facilities on terms that may be unfavorable to us;

• cause us to offer debt or equity securities on terms that may not be favorable to the Company or its shareholders;

• reduce funds available for operations, future business opportunities or other purposes;

• limit our flexibility in planning for, or reacting to, changes in our business and our industry;

• increase employee turnover and uncertainty, divert management’s attention from routine business, and hinder our ability to recruit qualified employees; and

• place us at a competitive disadvantage compared to our competitors that have less debt.

Abitibi has 6.95% Senior Notes, in the principal amount of $196 million, which mature by their terms on April 1, 2008 and 5.25% Senior Notes, in the principal amount of $150 million, which mature by their terms on June 20, 2008. We also have an additional $20 million in indebtedness and the risks attendant thereto that matures by its terms in 2008 and an aggregate of $416 million in notes that mature by their terms in 2009. Our efforts to refinance or restructure this indebtedness are discussed below in the risk factor entitled “Our Abitibi subsidiary has a significant amount of indebtedness that matures in the second quarter of 2008, and significant additional maturities in 2009, that we may be unable to repay, renew or extend.”

Bowater’s Canadian facility is a 364-day facility that is currently scheduled to expire on May 30, 2008. Under the terms of the Bowater Canadian facility, so long as lenders holding a majority of the facility commitments agree to renew their commitments for a period of 364 days, Bowater has the right either to replace any lender who declines to renew its commitment with a substitute lender or to renew the facility with only the commitments of the lenders who have agreed to renew their commitments. In the event that lenders holding a majority of the commitments do not agree to extend, we would be forced to seek a new facility for the Bowater Canada operations. No assurance can be given that we will be able to obtain a new facility should a majority of the lenders decline to renew or that we will be able to replace the lender who has notified us that it will not renew.

We intend to sell approximately $500 million of our assets in order to reduce our indebtedness. On February 10, 2008, we entered into an agreement with Catalyst Paper Corporation pursuant to which we agreed to sell our Snowflake, Arizona mill and related assets for approximately $180 million, including $161 million in cash and approximately $19 million in retained trade receivables. We expect this sale to close in April 2008, once all conditions to close, including a financing condition, which is expected to be satisfied in part by a fully backstopped rights offering, and certain customary closing conditions have been satisfied. This sale is required to comply with the requirements set forth by the U.S. Department of Justice (“DOJ”) in October 2007 for approval of Abitibi’s combination with Bowater. If this sale does not close as expected, the DOJ may ask a court to appoint a trustee, who will be empowered to complete the sale on terms then obtainable by the trustee using its reasonable efforts. We continue to explore opportunities for the sale of other assets such as timberland or production facilities, but can make no assurances that we will be able to complete any such sales or that the terms of any such sales would be favorable to us.

Our bank credit facilities, the indentures governing our various notes, debentures and other debt securities and the terms and conditions of our other indebtedness may permit us or our subsidiaries to incur or guarantee additional indebtedness, including secured indebtedness in some circumstances. To the extent we incur additional indebtedness, some or all of the risks discussed above will increase.

Although management believes that we will be able to comply with the terms of its debt agreements, there can be no assurance that we will not be required to refinance all or a portion of its debt or to obtain additional financing. We may be unable to refinance or obtain additional financing because of our high levels of debt and the debt incurrence restrictions under our debt agreements. We may be forced to default on our debt obligations if cash flow is insufficient and refinancing or additional financing is unavailable. If we default under the terms of some of our indebtedness, the relevant debt holders may accelerate the maturity of its obligations, which could cause cross-defaults or cross-acceleration under our other obligations.

There can be no assurance that we will be able to generate sufficient cash flows to repay our outstanding indebtedness when it matures, in light of (1) the significant decreases in North American demand for newsprint, which is our principal product, (2) the current weakness in the housing and lumber markets, and (3) the strength of other currencies, particularly the Canadian dollar, against the U.S. dollar.

13

Our Abitibi subsidiary has a significant amount of indebtedness that matures in the second quarter of 2008, and significant additional maturities in 2009, that we may be unable to repay, renew or extend.

Abitibi has an aggregate of $346 million of long-term notes that matures between April and June 2008: $196 million principal amount of 6.95% Senior Notes due April 1, 2008 issued by Abitibi and $150 million principal amount of 5.25% Senior Notes due June 20, 2008 issued by Abitibi-Consolidated Company of Canada, a wholly-owned subsidiary of Abitibi. In addition, another subsidiary of Abitibi has $150 million principal amount of 7.875% Senior Notes that will mature in 2009. None of these debts have been refinanced. We are negotiating with various financing sources and actively exploring various alternatives to secure the necessary funds or to otherwise restructure these loans. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Business Strategy and Outlook.” However, there can be no assurance that we will be able to consummate any such financing or restructuring transactions prior to the maturities. The current disrupted state of the credit and capital markets, among other things, is creating a significant impediment to our efforts. In addition, the credit agreement governing Bowater’s bank credit facility substantially restricts the transfer of funds from Bowater to Abitibi. If we are unable to refinance or restructure Abitibi’s 2008 notes on or before their maturities, Abitibi would be in default under the indentures relating to those notes. Such default could trigger defaults under Abitibi’s other indebtedness, which would permit the holders of such indebtedness to accelerate Abitibi’s repayment obligations under them. As a result, if we are unsuccessful in refinancing or restructuring the Abitibi maturities in April or June, Abitibi may be compelled to seek protection under or be forced into a proceeding under Canada’s Companies’ Creditors Arrangement Act, the U.S. Bankruptcy Code, or both.

We need additional funds to mitigate the liquidity shortfall at Abitibi and we may not be able to obtain the needed funds on terms that are favorable to us.

We are currently seeking additional funds, by borrowing more money and by selling equity-linked securities, to repay Abitibi’s indebtedness and fund our operations. Although we currently have availability under certain of our credit facilities, these facilities and our term loans contain a borrowing base provision and financial covenants that limit the amount we can borrow under the facilities or from other sources. Moreover, the indentures for our outstanding notes contain provisions that may restrict the secured debt we may incur in the future. In addition, the agreement governing Bowater’s bank credit facility substantially restricts the transfer of funds from Bowater to Abitibi.

The availability of additional funds, whether from private capital sources (including banks), or the public capital markets, fluctuates as market conditions change. There may be times when the private capital markets and the public debt or equity markets are disrupted and lack sufficient liquidity or when our securities cannot be sold at attractive prices, in which case we may not be able to access capital from these sources. We believe the markets for our indebtedness are currently experiencing this type of disruption, making it difficult to secure the financing we need on terms acceptable to us. We also believe that concerns about our liquidity have contributed to recent declines in our stock price, which may result in greater dilution of our stockholders’ equity if we issue equity or equity-linked securities.

In addition, a weakening of our financial condition, including in particular a material increase in our leverage, a decrease in our profitability, or a decrease in our interest coverage ratio or borrowing base, could result in a credit ratings downgrade or change in outlook or otherwise adversely affect our ability to obtain necessary funds. During 2007, Moody’s Investor Service and Fitch Ratings downgraded our corporate and debt ratings and Standard & Poor’s changed its outlook to negative due to, among other things, the projected lower absolute levels of our interest coverage ratio coupled with the general decline in the newsprint market. On February 20, 2008, Fitch Ratings further downgraded our corporate and debt ratings due to, among other things, the declining North American demand for newsprint, the weak U.S. housing and lumber markets, and Fitch’s perception of our ability to refinance our near term indebtedness. On March 10, 2008, Standard & Poor’s Ratings Services downgraded the corporate and debt rating on both Abitibi and Bowater and expressed concern regarding our ability to timely address Abitibi’s near term debt maturities given current credit market conditions.  It is possible that additional downgrades could occur if our interest coverage, leverage levels and/or outlook for our industry deteriorates further.

Even if we are successful in obtaining additional financing, such financing could be costly or have adverse consequences. If additional funds are raised through the issuance of equity or equity-linked securities, dilution to stockholders would result. If additional funds are raised through the incurrence of debt, we would incur increased debt servicing costs and may become subject to additional restrictive financial and other covenants. We can give no assurance as to the terms or availability of additional capital.

14

We may experience difficulties in integrating the businesses of Abitibi and Bowater and may not realize the anticipated synergies, efficiencies and cost savings from the Combination.

The success of the Combination will depend, in significant part, on our ability to realize the anticipated synergies, efficiencies and cost savings from integrating the businesses of Abitibi and Bowater. Our success in realizing these synergies, efficiencies and cost savings, and the timing of this realization, depend on the successful integration of such businesses and operations. We may not be able to accomplish this integration process smoothly or successfully. The necessity of coordinating geographically disparate organizations and addressing possible differences in corporate and regional cultures and management philosophies may increase the difficulties of integration. The integration of certain operations following the Combination will take time and will require the dedication of significant management resources, which may temporarily divert management’s attention from the routine business of AbitibiBowater. Employee uncertainty and lack of focus during the integration process may also disrupt the business of AbitibiBowater.

Even if we are able to integrate such businesses and operations successfully, there can be no assurance that this integration will result in the realization of the full benefits of synergies, efficiencies and cost savings that we currently expect from this integration or that these benefits will be achieved within the time frame or in the manner anticipated. For example, the elimination of duplicative costs may not be possible or may take longer than anticipated, or the benefits from the Combination may be offset by the costs incurred in integrating the businesses and operations or adverse conditions imposed by regulatory authorities on the combined business in connection with granting approval for the Combination. If we do not realize our anticipated synergies and efficiencies, in the amounts or in the time frame expected, or if our management cannot integrate successfully the operations of the two companies, our business and results of operations may be adversely affected.

Developments in alternative media could continue to adversely affect the demand for our products, especially in North America, and our responses to these developments may not be successful.

Trends in advertising, electronic data transmission and storage and the Internet could have further adverse effects on traditional print media, including our products and those of our customers, but neither the timing nor the extent of those trends can be predicted with certainty. Our newspaper, magazine and catalog publishing customers may increasingly use, and compete with businesses that use, other forms of media and advertising and electronic data transmission and storage, including television and the Internet, instead of newsprint, coated paper, uncoated specialty papers or other products made by us. The demand for certain of our products weakened significantly over the last several years. For example, industry statistics indicate that North American newsprint consumption has been in decline since 1999 and has experienced annual declines of 5.1% in 2005, 6% in 2006 and 9.8% in 2007. We believe, and certain third party forecasters indicate, that these declines in newsprint demand could continue in 2008 and beyond due to conservation measures taken by publishers, reduced North American newspaper circulation, less space devoted to advertising and substitution to other uncoated mechanical grades.

In response to the decline in North American demand for our newsprint product, we have reduced our paper production capacity. Between November 29, 2007 and February 29, 2008, we reduced our newsprint and specialty papers production capacity by almost 1 million metric tons per year. As a result of our continuing review of our business to reduce cost, improve our manufacturing platform, and better position ourselves in the global marketplace, it may be necessary to curtail even more production or permanently shut down even more machines or facilities. We expect to announce the results and detailed action steps from this review during the second quarter of 2008 and additional curtailments or closures could take place by mid-2008. Such curtailments and shut downs would become increasingly likely as North American newsprint demand continues to decline or if market conditions otherwise worsen. Curtailments or shutdowns could result in goodwill or asset write-downs at the affected facilities and could negatively impact our cash flows and materially affect our results of operations and financial condition.

Currency fluctuations may adversely affect our results of operations and financial condition, and changes in foreign currency exchange rates can affect our competitive position, selling prices and manufacturing costs.

We compete with North American, European and Asian producers in most of our product lines. Our products are sold and denominated in U.S. dollars, Canadian dollars and selected foreign currencies. A substantial portion of our manufacturing costs are denominated in Canadian dollars. In addition to the impact of product supply and demand, changes in the relative strength or weakness of the U.S. dollar may also affect international trade flows of these products. A stronger U.S. dollar may attract imports into North America from foreign producers, increase supply and have a downward effect on prices, while a weaker U.S. dollar may encourage U.S. exports and increase manufacturing costs that are in Canadian dollars or other foreign currencies. Variations in the exchange rates between the U.S. dollar and other currencies, particularly the Euro and

15

the currencies of Canada, United Kingdom, Sweden and certain Asian countries, will significantly affect our competitive position compared to many of our competitors.

We are particularly sensitive to changes in the value of the Canadian dollar versus the U.S. dollar. The impact of these changes depends primarily on our production and sales volume, the proportion of our production and sales that occur in Canada, the proportion of our financial assets and liabilities denominated in Canadian dollars, our hedging levels and the magnitude, and direction and duration of changes in the exchange rate. We expect exchange rate fluctuations to continue to impact costs and revenues; however, we cannot predict the magnitude or direction of this effect for any quarter, and there can be no assurance of any future effects. During 2007, the relative value of the Canadian dollar ranged from a low of US$0.85 in January 2007 to a high of US$1.03 in November 2007.

Under the exchange rates, hedging levels and operating conditions that existed during 2007, for every one cent increase in the Canadian-U.S. dollar exchange rate, our operating income, before currency hedging, for 2007 would have been reduced by approximately $14 million.

Based on exchange rates, hedging levels and operating conditions projected for the first quarter of 2008, we project that a one-cent increase in the Canadian dollar exchange rate would reduce our operating income for the first quarter by approximately $7 million.

If the Canadian dollar remains strong for an extended period of time, it could influence the foreign exchange rate assumptions that are used in our evaluation of goodwill and long-lived assets for impairment and, consequently, result in additional goodwill or asset impairment charges. See the discussion under “Critical Accounting Estimates – Goodwill” and “Critical Accounting Estimates – Long-lived Assets” in Item 7 of this 10-K.

We may not be successful in our strategy of increasing our share of coated and specialty papers and competing in growth markets with higher returns.

One of the components of our long-term strategy is to improve our portfolio of businesses by focusing on coated and specialty papers and competing more aggressively in growth markets with higher returns. There are risks associated with the implementation of this strategy, which is complicated and which involves a substantial number of mills, machines and personnel. Full implementation of this strategy may also require significant capital investment. To the extent we are unsuccessful in achieving this strategy, our results of operations may be adversely affected.

We face intense competition in the forest products industry and the failure to compete effectively would have a material adverse effect on our business, financial condition and results of operations.

We compete with numerous forest products companies, some of which have greater financial resources than we do. There has been a continued trend toward consolidation in the forest products industry, leading to new global producers. These global producers are typically large, well-capitalized companies that may have greater flexibility in pricing and financial resources for marketing, investment and expansion than we do. The markets for our products are all highly competitive. Actions by competitors can affect our ability to sell our products and can affect the volatility of the prices at which our products are sold. While the principal basis for competition is price, we also compete on the basis of customer service, quality and product type. There has also been an increasing trend toward consolidation among our customers. With fewer customers in the market for our products, our negotiation position with these customers could be weakened.

In addition, our industry is capital intensive, which leads to high fixed costs. Some of our competitors may be lower-cost producers in some of the businesses in which we operate. Global newsprint capacity, particularly Chinese and European newsprint capacity, has been increasing, which is expected to result in lower prices, volumes or both for our exported products. We believe that new hardwood pulp capacity at South American pulp mills has unit costs that are significantly below those of our hardwood kraft pulp mills. Other actions by competitors, such as reducing costs or adding low-cost capacity, may adversely affect our competitive position in the products we manufacture and, consequently, our sales, operating income and cash flows. We may not be able to compete effectively and achieve adequate levels of sales and product margins. Failure to compete effectively would have a material adverse effect on our business, financial condition and results of operations.

16

The forest products industry is highly cyclical. Fluctuations in the prices of, and the demand for, our products could result in smaller or negative profit margins, lower sales volumes, and curtailment or closure of operations.

The forest products industry is highly cyclical. Historically, economic and market shifts, fluctuations in capacity and changes in foreign currency exchange rates have created cyclical changes in prices, sales volume and margins for our products. Most of our paper and wood products are commodities that are widely available from other producers and even our coated and specialty paper is susceptible to these fluctuations. Because our commodity products have few distinguishing qualities from producer to producer, competition for these products is based primarily on price, which is determined by supply relative to demand. The overall levels of demand for the products we manufacture and distribute and, consequently, our sales and profitability, reflect fluctuations in levels of end-user demand, which depend in part on general economic conditions in North America and worldwide. In 2007, we experienced lower demand and decreased pricing for our wood products due to a weaker U.S. housing market. We are not expecting any significant improvements in the wood products market before 2009. As such, we have recently announced the curtailment of annualized capacity of approximately 1.3 billion board feet of lumber in the provinces of Quebec and British Columbia. We are also conducting an in-depth review of our wood products business with the objective of selling non-core assets, consolidating facilities, and curtailing or closing non-contributing operations. Curtailments or shutdowns could result in goodwill or asset write-downs at the affected facilities and could negatively impact our cash flows and materially affect our results of operations and financial condition. See also “Developments in alternative media could continue to adversely affect the demand for our products, especially in North America and our responses to these developments may not be successful.”

Our manufacturing businesses may have difficulty obtaining fiber at favorable prices, or at all.

Fiber is the principal raw material we use in our business. We use both virgin fiber (wood chips and logs) and recycled fiber (old newspapers and magazines) as fiber sources for our paper mills. Wood fiber is a commodity and prices historically have been cyclical. The primary source for wood fiber is timber. Environmental litigation and regulatory developments have caused, and may cause in the future, significant reductions in the amount of timber available for commercial harvest in Canada and the United States. In addition, future domestic or foreign legislation, litigation advanced by aboriginal groups and litigation concerning the use of timberlands, the protection of endangered species, the promotion of forest biodiversity and the response to and prevention of catastrophic wildfires could also affect timber supplies. Availability of harvested timber may further be limited by factors such as fire and fire prevention, insect infestation, disease, ice storms, wind storms, drought, flooding and other natural and man-made causes, thereby reducing supply and increasing prices.

Wood fiber pricing is subject to market influences and our cost of wood fiber may increase in particular regions due to market shifts. In 2007, we experienced lower demand and decreased pricing for our wood products due to a weaker U.S. housing market. We are not expecting any significant improvements in the wood products market before 2009. As such, we have recently announced the curtailment of annualized capacity of approximately 1.3 billion board feet of lumber in the provinces of Quebec and British Columbia. We are also conducting an in-depth review of our wood products business with the objective of selling non-core assets, consolidating facilities, and curtailing or closing non-contributing operations. Other wood products producers have also announced closures or curtailments of sawmills. Continued closures and curtailments are likely to reduce the supply and increase the price of wood fiber.

Pricing of recycled fiber has recently been increasing. For example, prices of old newspapers have increased from an average of $88 per ton in December 2006 to $118 per ton in December 2007, reaching a high of $132 per ton in March 2007. We believe that these price increases are related to expanding paper and packaging capacity in Asia, as well as strong North American demand, and that prices may remain at elevated levels. Any sustained increase in fiber prices would increase our operating costs and we may be unable to increase prices for our products in response.

Although we believe that the balance of fiber supply between our internal sources and the open market is adequate to support our current wood products and paper and pulp production requirements, there is no assurance that access to fiber will continue at the same levels achieved in the past. The cost of softwood fiber and the availability of wood chips may be affected. If our cutting rights pursuant to the forest licenses or forest management agreements of Abitibi and Bowater are reduced or if any third-party supplier of wood fiber stops selling or is unable to sell wood fiber to us, our financial condition and operating results would suffer.

An increase in the cost of our purchased energy, chemicals and other raw materials would lead to higher manufacturing costs, thereby reducing our margins.

Our operations consume substantial amounts of energy such as electricity, natural gas, fuel oil, coal and wood waste. We buy energy and raw materials, including chemicals, wood, recovered paper and other raw materials, primarily on the open market.

17

The prices for raw materials and energy are volatile and may change rapidly, directly affecting our results of operations. The availability of raw materials and energy may also be disrupted by many factors outside our control, adversely affecting our operations. Energy prices, particularly for electricity, natural gas and fuel oil, have been volatile in recent years and prices for 2005, 2006 and 2007 exceeded historical averages. As a result, fluctuations in energy prices will impact our manufacturing costs and contribute to earnings volatility.

We are a major user of renewable natural resources such as water and wood. Accordingly, significant changes in climate and agricultural diseases or infestation could affect our financial condition and results of operations. The volume and value of timber that we can harvest or purchase may be limited by factors such as fire and fire prevention, insect infestation, disease, ice storms, wind storms, flooding, other weather conditions and other causes. As is typical in the industry, we do not maintain insurance for any loss to our standing timber from natural disasters or other causes. Also, we can provide no assurance that we will be able to maintain our rights to utilize water or to renew them at conditions comparable to those currently in effect.

For our commodity products, the relationship between industry supply and demand for these products, rather than changes in the cost of raw materials, will determine our ability to increase prices. Consequently, we may be unable to pass along increases in our operating costs to our customers. Any sustained increase in energy, chemical or raw material prices without any corresponding increase in product pricing would reduce our operating margins and potentially require us to limit or cease operations of one or more of our machines.

We could experience disruptions in operations and/or increased labor costs due to labor disputes.

We believe we are the largest employer in the Canadian pulp and paper sector and have the sector’s largest representation by unions. A significant number of our collective bargaining agreements with respect to our paper operations in Eastern Canada will expire on the same date in 2009. In early 2008, we initiated negotiations with the union representing the majority of our Eastern Canadian employees on the 2009 agreements. Those negotiations occurred in March 2008 and were not successful in reaching an early agreement. The employees at the facility in Mokpo, South Korea have complied with all conditions necessary to strike, but the possibility of a strike or lockout of those employees is not clear. Furthermore, our collective agreements for our employees at our facilities in Coosa Pines and Calhoun, located in Southeast U.S., and Bridgewater, U.K. will be renewed in 2008. While negotiations with the unions in the past have resulted in collective agreements being signed, as is the case with any negotiation, we may not be able to negotiate acceptable new agreements, which could result in strikes or work stoppages by affected employees. Renewal of collective bargaining agreements could also result in higher wage or benefit costs. Therefore, we could experience a disruption of our operations or higher ongoing labor costs which could have a material adverse effect on our business, financial condition or results of operations.

Our operations require substantial capital and we may not have adequate capital resources to provide for all of our capital requirements.

Our businesses are capital intensive and require that we regularly incur capital expenditures in order to maintain our equipment, increase our operating efficiency and comply with environmental laws. If our available cash resources and cash generated from operations are not sufficient to fund our operating needs and capital expenditures, we would have to obtain additional funds from borrowings or other available sources or reduce or delay our capital expenditures. We may not be able to obtain additional funds on favorable terms or at all. In addition, our debt service obligations will reduce our available cash flows. If we cannot maintain or upgrade our equipment as we require, we may become unable to manufacture products that compete effectively in one or more of our product lines.

Changes in laws and regulations could adversely affect our results of operations.

We are subject to a variety of foreign, federal, state, provincial and local laws and regulations dealing with trade, employees, transportation, taxes, timber and water rights and the environment. Changes in these laws or regulations or their interpretations or enforcement have required in the past, and could require in the future, substantial expenditures by us and adversely affect our results of operations. For example, changes in environmental laws and regulations have in the past, and could in the future, require us to spend substantial amounts to comply with restrictions on air emissions, wastewater discharge, waste management and landfill sites, including remediation costs. Environmental laws are becoming increasingly stringent. Consequently, our compliance and remediation costs could increase materially.

18

Changes in the political or economic conditions in Canada, the United States or other countries in which our products are manufactured or sold could adversely affect our results of operations.

We manufacture products in Canada, the United States, the United Kingdom and South Korea and sell products throughout the world. Paper prices are tied to the health of the economies of North and South America, Asia and Europe, as well as to paper inventory levels in these regions. The economic and political climate of each region has a significant impact on our costs and the prices of, and demand for, our products. Changes in regional economies or political instability, including acts of war or terrorist activities, can affect the cost of manufacturing and distributing our products, pricing and sales volume, directly affecting our results of operations. Such changes could also affect the availability or cost of insurance.

We may be subject to environmental liabilities.

We are subject to a wide range of general and industry-specific laws and regulations relating to the protection of the environment, including those governing air emissions, wastewater discharges, timber harvesting, the storage, management and disposal of hazardous substances and waste, the clean-up of contaminated sites, landfill operation and closure, forestry operations, endangered species habitat, and health and safety. As an owner and operator of real estate and manufacturing and processing facilities, we may be liable under environmental laws for cleanup and other costs and damages, including tort liability and damages to natural resources, resulting from past or present spills or releases of hazardous or toxic substances on or from our current or former properties. We may incur liability under these laws without regard to whether we knew of, were responsible for, or owned the property at the time of, any spill or release of hazardous or toxic substances on or from our property, or at properties where we arranged for the disposal of regulated materials. Claims may arise out of currently unknown environmental conditions or aggressive enforcement efforts by governmental or private parties.

We have net liabilities with respect to our pension plans and the actual cost of our pension plan obligations could exceed current provisions.

As of December 31, 2007, our defined benefit pension plans were under-funded by an aggregate of approximately $496 million on a financial accounting basis. Abitibi and Bowater used different measurement dates and assumptions in determining their combined pension plan obligations. Our future funding obligations for the defined benefit pension plans depend upon changes to the level of benefits provided by the plans, the future performance of assets set aside in trusts for these plans, the level of interest rates used to determine minimum funding levels, actuarial data and experience and any changes in government laws and regulations. Any adverse change to any of these factors may require us to increase our cash contributions to our pension plans and those additional contributions could have a material adverse effect on our cash flows and results of operations.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Information regarding our owned properties is included in Item 1 of this Form 10-K.

In addition to the properties that we own, we also lease under long-term leases certain timberlands, office premises and office and transportation equipment and have cutting rights with respect to certain timberlands. Information regarding timberland leases, operating leases and cutting rights is included in Note 25 to our Consolidated Financial Statements.

Item 3. Legal Proceedings

We are involved in various legal proceedings relating to contracts, commercial disputes, taxes, environmental issues, employment and workers’ compensation claims and other matters. We periodically review the status of these proceedings with both inside and outside counsel. Although the final outcome of any of these matters is subject to many variables and cannot be predicted with any degree of certainty, we establish reserves for a matter when we believe an adverse outcome is probable and the amount can be reasonably estimated. We believe that the ultimate disposition of these matters will not have a material adverse effect on our financial condition, but it could have a material adverse effect on the results of operations in any given quarter or year.

On September 7, 2007, Bowater Canadian Forest Products Inc. (“BCFPI”) received a decision in an arbitration related to the

19

sale to Weyerhaeuser Company Limited and Weyerhaeuser Company (collectively, “Weyerhaeuser”) of Bowater’s former pulp and paper facility in Dryden, Ontario. BCFPI and Weyerhaeuser had been arbitrating a claim regarding the cost of certain environmental matters related to the mill. The arbitrators awarded Weyerhaeuser approximately $43 million (CDN $44 million), including interest. As a result of the arbitrator’s decision, which is binding upon Bowater and not subject to appeal, we recorded a pre-tax charge of $28 million (CDN $29 million) during the three and nine months ended September 30, 2007. We had previously established a reserve of approximately $15 million (CDN $15 million) in connection with these environmental matters at the time of the sale.

On June 18, 2007, The Levin Group, L.P. filed a complaint against Bowater in the Supreme Court of New York, New York County, asserting claims for breach of contract and related claims relating to certain advisory services purported to have been provided by the plaintiff in connection with the Combination. The complaint seeks damages of no less than $70 million, related costs and such other relief as the court deems just and proper. We believe this claim is entirely without merit and intend to contest this matter vigorously.

On April 26, 2006, we received a notice of violation from the U.S. Environmental Protection Agency (“EPA”) alleging four violations of the Clean Air Act (“CAA”) at our Calhoun mill for which penalties in excess of $100,000 could be imposed. We have strong arguments that the Calhoun mill did not violate the CAA and continue to discuss these issues with the EPA.

Since late 2001, Bowater, several other paper companies, and numerous other companies have been named as defendants in asbestos personal injury actions. These actions generally allege occupational exposure to numerous products. We have denied the allegations and no specific product of ours has been identified by the plaintiffs in any of the actions as having caused or contributed to any individual plaintiff’s alleged asbestos-related injury. These suits have been filed by approximately 1,800 claimants who sought monetary damages in civil actions pending in state courts in Delaware, Georgia, Illinois, Mississippi, Missouri, New York, Tennessee, and Texas. Approximately 1,000 of these claims have been dismissed, either voluntarily or by summary judgment, and approximately 770 claims remain. Insurers are defending these claims, and we have not settled or paid any of these claims. We believe that all of these asbestos-related claims are covered by insurance, subject to any applicable deductibles and our insurers’ rights to dispute coverage. While it is not possible to predict with certainty the outcome of these matters, we do not expect these claims to have a material adverse impact on our business, financial position or results of operations.

We may be a “potentially responsible party” with respect to three hazardous waste sites that are being addressed pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“Superfund”) or the Resource Conservation and Recovery Act (“RCRA”) corrective action authority. The first two sites are on CNC timberland tracts in South Carolina. One was already contaminated when acquired, and subsequently, the prior owner remediated the site and continues to monitor the groundwater. On the second site, several hundred steel drums containing textile chemical residue were discarded by unknown persons. The third site, at our mill in Coosa Pines, Alabama, contained buried drums and has been remediated pursuant to RCRA. We continue to monitor the groundwater. We believe we will not be liable for any significant amounts at any of these sites.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth quarter of 2007.

20

PART II

Item 5. Market for the Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchases

Our common stock began trading under the symbol “ABH” on both the New York Stock Exchange and the Toronto Stock Exchange on October 29, 2007, following the consummation of the Combination. Prior to the Combination, Abitibi common shares traded on the New York Stock Exchange under the symbol “ABY” and on the Toronto Stock Exchange under the symbol “A,” and Bowater common stock traded on the New York Stock Exchange under the symbol “BOW.” Shares of Abitibi and Bowater common stock ceased separate trading on October 29, 2007.

In the Combination, shareholders of Abitibi generally received 0.06261 shares of AbitibiBowater common stock for each common share of Abitibi they owned and shareholders of Bowater received 0.52 shares of common stock of AbitibiBowater for each share of Bowater common stock they owned.

Since Bowater was the deemed “acquirer” of Abitibi in the Combination, the following table sets forth the high and low sales prices per share and cash dividends paid on the common stock of Bowater prior to the Combination (adjusted for the 0.52 exchange ratio), and AbitibiBowater subsequent to the Combination, for each fiscal quarter of 2007 and 2006, as applicable.

	Bowater				AbitibiBowater				Dividends
	High		Low		High		Low		Per share
2006
First quarter	$	61.52	$	48.42		-		-	$	0.38
Second quarter	$	58.02	$	41.23		-		-	$	0.38
Third quarter	$	45.33	$	37.71		-		-	$	0.38
Fourth quarter	$	45.00	$	37.90		-		-	$	0.38
2007
First quarter	$	57.62	$	41.29		-		-	$	0.38
Second quarter	$	51.52	$	39.10		-		-	$	0.38
Third quarter	$	50.23	$	26.87		-		-	$	0.38
Fourth quarter	$	37.60	$	28.58	$	37.45	$	14.13		-

As of February 29, 2008, there were 2,206 holders of record of AbitibiBowater common stock.

During the fourth quarter of 2007, the payment of a quarterly dividend to shareholders was suspended indefinitely. AbitibiBowater’s ability to pay dividends to shareholders in the future is dependent upon the distribution of dividends to AbitibiBowater from its two operating subsidiaries, Abitibi and Bowater. The credit facilities of each subsidiary restricts the subsidiary’s ability to make distributions to AbitibiBowater, which may materially limit AbitibiBowater’s ability to pay future dividends to shareholders. See “Short-Term Financing – Abitibi’s Bank Credit Facilities” and “Short-Term Financing – Bowater’s Bank Credit Facilities” in Item 7 and Note 17 to our Consolidated Financial Statements in Item 8 of this Form 10-K.

21

The following graph compares the cumulative 5-year total return attained by shareholders on our common stock versus the cumulative total returns of the S&P 500 index and a peer group of fifteen companies. The individual companies comprising the peer group are: Bemis Company Inc, Caraustar Industries, Domtar Corp., Graphic Packaging Corp., International Paper Company, Louisiana Pacific Corp., Meadwestvaco Corp., Packaging Corp. Of America, Potlatch Corp., Rock Tenn, Sealed Air Corp., Smurfit-Stone Container Corp., Sonoco Products Company, Temple Inland Inc and Wausau Paper Corp. The graph tracks the performance of a $100 investment in our common stock, in the peer group, and in the index (with the reinvestment of all dividends) from December 31, 2002 to December 31, 2007. The stock price performance included in the graph is not necessarily indicative of future stock price performance.

	12-02		12-03		12-04		12-05		12-06		12-07
AbitibiBowater Inc.		100.00		112.57		108.98		78.00		59.13		55.75
S & P 500		100.00		128.68		142.69		149.70		173.34		182.87
Peer Group		100.00		127.92		139.99		123.75		135.09		120.03

22

Item 6. Selected Financial Data

The following table presents summary historical consolidated financial information for each of the last five years. The selected financial information for 2007, 2006 and 2005 under the captions “Income Statement Data,” “Segment Sales Information” and “Financial Position” shown below has been derived from our audited Consolidated Financial Statements included in Item 8 of this Form 10-K. This table should be read in conjunction with Items 7 and 8 of this Form 10-K. On October 29, 2007, Abitibi and Bowater became wholly-owned subsidiaries of AbitibiBowater. See information regarding the Combination in Notes 1 and 3 to our Consolidated Financial Statements. The data set forth below reflects the results of operations and financial position of Bowater for the periods before October 29, 2007 and those of both Abitibi and Bowater for periods beginning on or after October 29, 2007, and may not be indicative of our future financial condition or results of operations (see “Risk Factors” in Item 1A).

(In millions, except per-share amounts or otherwise indicated)	2007			2006			2005			2004			2003
Income Statement Data
Sales	$	3,876		$	3,530		$	3,484		$	3,190		$	2,721
Operating income (loss)(1)		(400	)		41			99			30			(101	)
Net loss		(490	)		(138	)		(121	)		(87	)		(205	)
Basic and Diluted loss per common share(2)		(14.11	)		(4.64	)		(4.05	)		(2.93	)		(6.92	)
Dividends declared per common share(2)(3)		1.15			1.54			1.54			1.54			1.54
Segment Sales Information
Newsprint	$	1,574		$	1,438		$	1,429		$	1,341		$	1,236
Coated papers		570			612			625			495			384
Specialty papers		800			570			477			409			342
Market pulp		600			559			534			543			490
Wood products		318			332			385			370			237
Other		14			19			34			32			32
	$	3,876		$	3,530		$	3,484		$	3,190		$	2,721
Financial Position
Timber and timberlands(4)	$	58		$	61		$	85		$	186		$	184
Fixed assets, net	$	5,707		$	2,878		$	3,049		$	3,301		$	3,557
Total assets	$	10,319		$	4,646		$	5,152		$	5,450		$	5,616
Long-term debt, including current
installments (5)	$	5,059		$	2,267		$	2,422		$	2,442		$	2,306
Total debt (5)	$	5,648		$	2,267		$	2,477		$	2,515		$	2,506
Additional Information
Return on average common equity (%)		(35.8	)%		(13.5	)%		(8.9	)%		(5.6	)%		(12.2	)%
Cash flow from operations	$	(247	)	$	182		$	169		$	123		$	20
Cash invested in fixed assets, timber and timberlands	$	128		$	199		$	168		$	84		$	216
Book value per common share(2)	$	33.04		$	27.89		$	40.75		$	50.63		$	54.41
Employees (number)		18,000			7,400			8,000			8,100			8,200

(1)	Operating income (loss) includes a net gain on disposition of assets of $145 million, $186 million, $66 million, $7 million and $124 million for the years 2007, 2006, 2005, 2004 and 2003, respectively. Operating income (loss) for 2007, 2006, and 2005 includes closure costs, impairment and other related charges of $123 million, $253 million and $83 million, respectively. Operating income includes a lumber duties refund of $92 million in 2006.
(2)	For all periods before the Combination, the basic and diluted loss per common share, dividends declared per common share and book value per common share have been retroactively restated to reflect the Bowater exchange ratio of 0.52. See Note 1 to our Consolidated Financial Statements.
(3)	Dividends were declared quarterly. During the fourth quarter of 2007, the payment of a quarterly dividend to shareholders was suspended indefinitely.
(4)	We sold approximately 133,600 acres, 535,200 acres, 29,900 acres, 3,200 acres and 90,500 acres of timberlands in 2007, 2006, 2005, 2004 and 2003, respectively, the proceeds from which was used primarily to pay down our debt.
(5)	Our total liquidity is currently comprised of liquidity at our Abitibi and Bowater subsidiaries. Our Bowater subsidiary is expected to meet its obligations as they become due. Our Abitibi subsidiary is currently experiencing a liquidity shortfall and faces significant near-term liquidity challenges. See Note 4 to our Consolidated Financial Statements.

23

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following management’s discussion and analysis of financial condition and results of operations (“MD&A”) provides information that we believe is useful in understanding our operating results, cash flows and financial condition for the three years ended December 31, 2007. The discussion should be read in conjunction with, and is qualified in its entirety by reference to, the Consolidated Financial Statements and related notes appearing in Item 8 of this Form 10-K. As discussed in more detail in Item 1 of this report, on October 29, 2007, Bowater and Abitibi combined in a merger of equals under a newly formed holding company, AbitibiBowater. Bowater is deemed to be the “acquirer” of Abitibi for accounting purposes; therefore, the financial information and discussion below reflect the results of operations and financial position of Bowater for the periods before the closing of the Combination and those of both Abitibi and Bowater for periods beginning on or after the closing of the Combination. This means that our consolidated results of operations for 2007 include Abitibi’s results of operations for only the 63 days following the Combination. Our year-end results of operations for 2006 include only Bowater results of operations. All share and share-related information has been restated for all periods presented prior to the Combination to reflect the Bowater exchange ratio of 0.52 per share.

Business Fundamentals

Through our subsidiaries, we manufacture newsprint, coated and specialty papers, market pulp and wood products, operating pulp and paper facilities and wood products facilities in Canada, the United States, the United Kingdom and South Korea. Our reportable segments, which correspond to our primary product lines, are newsprint, coated papers, specialty papers, market pulp and wood products.

We manufacture approximately 8 million metric tons annually of a broad range of mechanical-based printing papers — newsprint, coated mechanical and mechanical specialty papers. These products are sold to leading publishers, commercial printers and advertisers. We also sell pulp that is not used in the production of our newsprint, coated and specialty printing papers to paper, tissue and toweling manufacturers who do not have a sufficient supply of pulp for their own needs. We are involved in the recovery of old paper, which fulfills part of our recycled fiber needs. We operate sawmills that produce close to 3 billion board feet of lumber annually and provide a source of residual wood chips that we use to manufacture pulp and paper. We also operate remanufacturing and engineered wood facilities. Our wood products are sold to a diversified group of customers, including large retailers, buying groups, distributors, wholesalers and industrial accounts.

To produce our pulp and paper products, we currently own or operate 28 pulp and paper mills, 23 of which are located in eastern North America. One of our facilities in eastern North America converts a base sheet to coated paper. Mills outside of eastern North America include a newsprint mill in the state of Washington for which we are the managing partner, a newsprint mill in the province of British Columbia in Canada, a newsprint mill in the United Kingdom that provides access to the European markets, a newsprint mill in South Korea that provides access to the growing Asian markets and a newsprint mill in Snowflake, Arizona that we will be selling to comply with requirements set forth by the DOJ in connection with their review and approval of the Combination.

Our North American manufacturing facilities are located near key domestic markets and many have access to export markets. They are supported by approximately 53 million acres of timberland - about 3 million acres are owned or leased and the balance of 50 million acres is under long-term cutting rights on Crown-owned land in Canada.

Our products are, in large part, commodities sold in global markets. Our business is influenced by general economic conditions that impact our customers as well as changes within our industry that affect demand, supply, pricing, shipments or the cost of production. North American demand for newsprint continued to decline in 2007, and there is no indication as to whether or when the demand will stabilize.

The manufacturing facilities we operate are capital-intensive and require significant amounts of cash to maintain. Our ability to generate positive cash flow is dependent on achieving revenues that exceed manufacturing and interest costs and on the amount of cash that must be reinvested in the business.

A significant portion of our manufacturing facilities are located outside the U.S.; however, the majority of our sales are denominated in U.S. dollars. Therefore, fluctuations in currency rates can have a significant impact on our costs, relative cost competitiveness and cash flows. In particular, our results can be materially influenced by the movement of the Canadian dollar. A stronger Canadian dollar, such as existed throughout 2007, will typically weaken our results, whereas a weaker Canadian dollar will tend to strengthen our earnings. We can also be subject to government imposed trade restrictions that can limit shipments or increase costs.

24

Significant cost components of manufacturing our products can be highly volatile, particularly the cost of wood, recycled fiber (old newspapers and magazines), energy, and commodity and specialty chemicals.

The strength of the general economy influences the level and extent of publishing and advertising, which in turn affects the demand for our pulp and paper products. The strength of the construction and real estate markets influences the level of building and remodeling, which impacts the demand for our wood products. An unanticipated decline in demand for our products also could have a negative effect on prices. Changes in the level of supply caused by capacity additions or contractions could also influence the supply and demand balance for our products and have a direct impact on shipment levels and pricing.

Overview of Financial Performance

Our net loss for 2007 was $490 million, or $14.11 per diluted share, as compared to a net loss of $138 million, or $4.64 per diluted share, for 2006.

Our sales in 2007 were $3.9 billion, an increase of $346 million from 2006, primarily due to the inclusion of Abitibi’s operating results beginning on October 29, 2007, the date of the Combination. Excluding sales of $665 million attributable to Abitibi, sales for 2007 amounted to $3.2 billion, a decrease of $319 million, or 9.0%, from 2006. In 2007, average transaction prices, excluding the sales attributable to Abitibi, decreased for all of our major products except for market pulp, and shipments decreased for all of our major products except for specialty papers. Including the Abitibi sales for the two months following the Combination, the average transaction prices year over year were lower except for specialty papers, which was flat year over year, and market pulp which increased.

The discussion of comparative historical financial information that follows in this “Overview of Financial Performance” section includes the operating results of Abitibi for the two months following the Combination, which closed on October 29, 2007, unless otherwise stated.

In our Newsprint segment, North American newsprint consumption continued to decline, but we are taking advantage of the stronger global markets by exporting more newsprint from North America into areas where market conditions are stronger. The supply-demand balance for coated mechanical papers improved in the second half of 2007, despite the negative impact on demand of the May 2007 postal increase, primarily due to capacity closures by some of our North American competitors and reduced offshore imports. In specialty papers, excluding the impact of Abitibi’s operating results following the Combination, we realized a 3.3% increase in shipments in 2007 as we continue to shift machine capacity from newsprint to specialty papers. The increase in global demand for market pulp in 2007 was from both North America and offshore markets, particularly China. The market pulp market was also impacted by supply constraints in some markets and a weak U.S. dollar. Higher transaction prices for market pulp helped drive a 5% increase in pulp sales in 2007, despite an 8.5% decrease in shipments (excluding the impact of Abitibi’s operating results following the Combination) as a result of a capital outage at our Coosa Pines mill and the shut of a kraft pulp mill in May 2006 at our Thunder Bay facility. Our Wood Products segment continues to be negatively impacted by a weaker U.S. housing market, lower demand and the restrictions imposed by quotas under the Softwood Lumber Agreement.

Our operating loss in 2007 was $400 million, a decrease of $441 million from an operating income of $41 million in 2006. Abitibi was included in the operating results beginning October 29, 2007 and contributed an operating loss of $98 million to our consolidated results. Other factors that lowered our operating results include asset impairment and other related charges associated with the initial phase of our comprehensive strategic review, merger related expenses incurred in connection with the Combination, an arbitration award related to a 1998 asset sale, the strengthening of the Canadian dollar against the U.S. dollar, reduced benefits from our Canadian dollar hedging program, higher wood costs (particularly recycled fiber), and closure costs. These factors were only partially offset by lower costs associated with lower volumes, as well as lower labor, energy, maintenance and chemical costs.

During 2007, immediately upon the Combination, we began a comprehensive strategic review of our operations to reduce costs and improve our profitability. On November 29, 2007, we announced the results of the initial phase of our comprehensive review, which included a decision to reduce our newsprint and commercial papers production capacity by approximately one million metric tons per year during the first quarter of 2008. The reductions include the permanent closure of Bowater’s Dalhousie, New Brunswick facility, as well as the indefinite idling of Bowater’s Donnacona, Quebec facility. Additionally, we decided to permanently close paper machine no. 3 at Bowater’s Gatineau, Quebec facility. Long-lived asset impairment charges of $100 million and severance and termination costs of $23 million were recorded as a

25

reduction of our 2007 operating results. A number of our Abitibi facilities were also permanently closed as a result of the initial phase of our comprehensive review, including our Belgo, Quebec facility; Fort William, Ontario facility; and Lufkin, Texas facility, and we indefinitely idled Abitibi’s Mackenzie, British Columbia facility, which includes the paper mill and two sawmills directly supporting the paper mill operations. The associated costs of Abitibi’s closures were included in liabilities assumed in the Combination and therefore did not impact our results of operations in 2007. We are also continuing with the second phase of our comprehensive strategic review which is intended to result in an action plan to further reduce costs, improve our manufacturing platform, and better position the Company in a global marketplace. We plan to announce the results of the second phase of our comprehensive strategic review in the second quarter of 2008.

On September 7, 2007, BCFPI received a decision from an arbitration related to the 1998 sale to Weyerhaeuser of our former pulp and paper facility in Dryden, Ontario. Bowater and Weyerhaeuser had been arbitrating a claim regarding the cost of certain environmental matters related to the mill. The arbitrators in the matter awarded Weyerhaeuser a judgment of approximately $43 million, including interest, which was paid in 2007 and resulted in a pre-tax charge of $28 million. We had previously established a provision of approximately $15 million in connection with these environmental matters at the time of the sale.

Total assets grew to $10.3 billion as at December 31, 2007, an increase of $5.7 billion compared to December 31, 2006. The increase relates primarily to total assets of $6.4 billion acquired in the Combination. Total debt (short-term and long-term) was $5.6 billion at December 31, 2007, an increase of $3.4 billion when compared to December 31, 2006, almost all of which relates to Abitibi’s debt acquired in the Combination. Cash and cash equivalents increased by $96 million to $195 million at December 31, 2007, also primarily reflecting the $116 million of cash acquired in the Combination, as cash generated from investing and financing activities was used to fund the cash shortfall for operating activities. Our current liquidity assessment and outlook, including the significant near-term liquidity challenges at our Abitibi subsidiary, is discussed further in the “Business Strategy and Outlook” section below and the “Liquidity and Capital Resources” section of this MD&A.

Business Strategy and Outlook

On October 29, 2007, we completed the combination of Abitibi and Bowater. The Combination will have a material impact on our results of operations, financial condition and liquidity going forward. Through the Combination, we have become a global leader in newsprint manufacturing, one that we believe to be well positioned to compete more effectively in an increasingly global market. In addition, through the Combination, we are creating a stronger and a more efficient manufacturing platform that we believe will be better enabled to address the challenges of continuing newsprint demand declines in North America and the near-historic strength of the Canadian dollar. Our goal is to create a low-cost, financially disciplined organization with a stronger financial profile and increased focus on value-added products and growth markets. Our business strategy is to successfully execute on this goal, the result of which we believe will be a more dynamic and competitive organization better able to meet the needs of our customers and deliver significant value to our shareholders.

We intend to maintain our core focus on the largest component of our combined business, newsprint and coated and specialty papers. We believe that the Combination will allow us to reduce excess capacity at our higher cost facilities and bring our capacity more in line with customer demand. Additionally, we continue to focus on the faster growing export market by exporting more newsprint from North America into Asia, South America and certain European countries, where market conditions are stronger.

We expect to generate annualized synergies as a result of the Combination of approximately $250 million by the first quarter of 2009, and anticipate that these will increase to $375 million by the end of 2009. We will seek to implement additional measures as we enhance our operating efficiency and productivity through continual systems analyses and operational improvements. We believe that the synergies resulting from the Combination and these additional measures will enhance our ability to further decrease production costs per ton and to increase operating cash flow and margins. We expect these synergies to be achieved from improved efficiencies in such areas as production, selling, general and administrative (“SG&A”) costs, procurement and logistics costs, as described below:

• Approximately $205 million from lower manufacturing costs. Since the Combination, we have focused on reallocating production of newsprint and paper grades across our combined machine base, improving asset performance by operating machines in narrower ranges around their peak production and sharing best practices among mills to enhance production efficiency and lower cost.

• Approximately $90 million from reducing SG&A costs. Through the elimination of duplicative sales, marketing and customer service personnel and centralization of corporate administration, management, finance and human resource functions, we intend to lower fixed overhead costs and achieve headcount reductions.

26

• Approximately $50 million from reducing procurement costs. We are seeking to lower prices of key raw materials through negotiation of volume discounts, consolidation of raw materials collection and improvement in inventory management.

• Approximately $30 million from improved logistics. We also intend to realize cost reductions from improved logistics through an optimization of freight rates as well as an enhancement of distribution facilities and timberland-mill and mill-customer pairings.

For a description of certain risks relating to the achievement of the synergies described above, see “Risk Factors — We may experience difficulties in integrating the businesses of Abitibi and Bowater and may not realize the anticipated synergies, efficiencies and cost savings from the Combination” in Item 1A of this Form 10-K.

We continue to seek opportunities to increase sales of higher-margin grades of coated and value added uncoated papers, such as higher-end grades of coated papers, ultra lightweight coated groundwood papers and ultra hi-brite offset alternatives through grade improvements and optimizing grade shifts to mills. We intend to continue to do so through increased sales to our existing customers as well as to new customers, in particular, publishers and paper merchants. We also seek to increase our margins by focusing on more profitable customer categories, such as corporate end users, and expanding our relationships with these customers.

Immediately upon the Combination, we began a company-wide strategic review of our business. The first phase of this review was concluded on November 29, 2007, when our Board of Directors approved an action plan to reduce our newsprint and specialty papers production capacity by almost 1 million metric tons per year by the end of the first quarter of 2008. The reductions included the permanent closure of the Belgo (Shawinigan, Quebec) and Dalhousie (New Brunswick) mills, as well as the indefinite idling of the Donnacona (Quebec) and Mackenzie (British Columbia) mills. We also indefinitely idled two sawmills that directly support the Mackenzie paper operation. These facilities in the aggregate represent capacity of approximately 600,000 metric tons of newsprint, 400,000 metric tons of specialty papers, and 500 million board feet of lumber, and were all cash flow negative. Additionally, we permanently closed previously idled paper mills at Fort William (Thunder Bay, Ontario) and Lufkin (Texas), as well as the No. 3 paper machine at the Gatineau (Quebec) facility. The previously idled operations had a total capacity of approximately 650,000 metric tons. These actions were completed by February 18, 2008. These actions were taken in order to assist us in supplying our customers’ demand efficiently by manufacturing products on machines best positioned to produce the products and by taking specific actions designed to ensure that our production is focused on our more profitable product lines from lower cost sites.

During the implementation of the action plan generated during the first phase of our strategic review, we have simultaneously been working on phase two, which is a comprehensive review of all aspects of our business in an effort to further reduce costs, improve our manufacturing platform and better position the Company in the global marketplace. We expect to announce the results and detailed action steps from this second phase during the second quarter of 2008. We are also conducting an in-depth review of our wood products business with the objective of selling non-core assets, consolidating facilities, and curtailing or closing non-contributing operations.

From a financial perspective, achieving stable liquidity and reducing out debt are the top priorities going forward. Our total liquidity is currently comprised of liquidity at our Abitibi and Bowater subsidiaries. See the “Liquidity and Capital Resources” section for discussion of our Bowater and Abitibi bank credit facilities and liquidity. Our Bowater subsidiary is expected to meet its debt obligations as they become due. Our Abitibi subsidiary, however, is currently experiencing a liquidity shortfall and faces significant near-term liquidity challenges. Abitibi has a total of $346 million of long-term debt that matures in 2008: $196 million principal amount of its 6.95% Senior Notes due April 1, 2008 and $150 million principal amount of its 5.25% Senior Notes due June 20, 2008. Abitibi also has revolving bank credit facilities with commitments totaling $711 million maturing in the fourth quarter of 2008. None of these debts has been refinanced. As of February 29, 2008, we had cash of approximately $190 million (approximately $94 million at Abitibi and approximately $96 million at Bowater), and undrawn amounts under our bank credit facilities of approximately $280 million, (approximately $62 million at Abitibi and approximately $218 million at Bowater). We are prohibited by the terms of Bowater’s bank credit facility from transferring Bowater funding to Abitibi. If Abitibi is unable to secure adequate new financing, it will be unable to make the near term mandatory repayments when due.

Abitibi is currently in compliance with financial covenants under its bank credit facilities; however, there can be no assurance that Abitibi will remain in compliance in the near term in light of the factors discussed above and its forecast of continued operating losses. Based on current forecasts for Abitibi, we expect it to be in default with its net funded debt to total capitalization covenant as measured at the end of the first quarter of 2008. However, we have developed a refinancing plan (discussed below) to address the upcoming debt maturities and replace Abitibi’s bank credit facilities. Failure to comply with the financial or other covenants of our

27

Abitibi credit facilities could result in the outstanding borrowings under these facilities becoming immediately due and payable (unless the lenders waive any resulting event of default).

If Abitibi defaults under the terms of any of its indebtedness, the relevant debt holders may accelerate the maturity of their obligations, which could cause cross-defaults or cross-acceleration under its other obligations. In the event of any combination of an inability to repay or refinance Abitibi’s 2008 debt maturities or acceleration of indebtedness under its bank credit facilities, our Abitibi subsidiary may be compelled to seek protection or be forced into a proceeding under Canada’s Companies’ Creditors Arrangement Act, the U.S. Bankruptcy Code, or both. These circumstances lend substantial doubt as to the ability of Abitibi to meet its obligations as they come due and our continued ability to exercise control over Abitibi and, accordingly, the appropriateness of Abitibi’s use of accounting principles applicable to a going concern. Furthermore, these circumstances lend substantial doubt regarding our continued ability to exercise control over Abitibi and accordingly our application of consolidation accounting for Abitibi. Our financial statements do not reflect the adjustment to the carrying values of assets and liabilities and the reported expenses and balance sheet classification that would be necessary if the going concern assumption or the consolidation basis for Abitibi were no longer appropriate, which adjustments could be material. At December 31, 2007, Abitibi represented approximately 71% of consolidated net assets and, on an annualized basis, approximately 55% of sales.

To address these near-term liquidity challenges, we have developed a refinancing plan to address upcoming debt maturities and general liquidity needs designed to enable Abitibi to repay the $346 million due in April and June 2008 and to repay all its maturities due in 2009, while continuing to fund its operations, debt service and capital expenditures. We expect these initiatives for our Abitibi subsidiary to consist of $200-300 million of a new senior unsecured exchange notes due 2010; up to $450 million of a new 364-day senior secured term loan secured by substantially all of Abitibi’s assets other than fixed assets; approximately $400 million of new senior secured notes or a term loan due 2011 secured by fixed assets; and $200-300 million of new convertible notes of AbitibiBowater. The current state of the credit markets is a significant impediment to securing the necessary financing for Abitibi. There is no assurance that these financing alternatives will ultimately be consummated on terms acceptable to us or at all.

Management does not expect that the liquidity constraints at Abitibi will affect the financial condition of Bowater or the holding company, AbitibiBowater, since there are no cross-defaults or cross-acceleration provisions under Bowater’s obligations as it relates to Abitibi.

As part of our efforts to provide funding to Abitibi, AbitibiBowater will be seeking an amendment to the existing revolving bank credit facilities of our Bowater subsidiary to allow for, among other things, the potential issuance of new equity-linked securities of AbitibiBowater. Bowater had already amended its bank credit facilities to permit an intercompany restructuring of the ownership of our Catawba, South Carolina coated paper facility in order to permit additional debt financing by Bowater, AbitibiBowater, or both. However, we no longer expect Bowater to pursue a secured debt financing against the Catawba facility at the present time and, therefore, expect Bowater to further amend its credit facilities to delay or modify those covenants related to the previously planned separation of its Catawba facility.

We have established an aggressive goal of reducing our debt by $1 billion within the next three years. For 2008, we have targeted approximately $500 million in asset sales, including non-core facilities, U.S. timberlands and the recently announced sale of our newsprint mill in Snowflake, Arizona. We announced an agreement with Catalyst for the sale of Snowflake, excluding approximately $19 million of trade receivables, for approximately $161 million in cash. This sale is expected to close early in the second quarter of 2008. As part of this debt reduction initiative, we will continue to review non-core assets and seek to divest those that no longer fit within our long-term strategic business plan.

Because we recognize that cash preservation is critical, we will continue to take a disciplined approach to capital spending and expect that total capital spending will be below $200 million, which is significantly below depreciation.

We have announced price increases for several of our products in the fourth quarter of 2007 and further price increases in the first quarter of 2008. We expect our financial performance in the first quarter of 2008 to be better than our performance in the fourth quarter of 2007. We believe that the combination of recently announced price improvements, continued integration efforts, implementation of actions resulting from our strategic review, and further progress toward achievement of our synergy targets will result in further improvements in financial performance.

28

Business and Financial Review

Consolidated Results of Operations

	Year Ended December 31,									Change
										2007 vs.
(In millions, except per share amounts)	2007			2006			2005			2006			2006 vs. 2005
Sales	$	3,876		$	3,530		$	3,484		$	346		$	46
Operating (loss) income		(400	)		41			99			(441	)		(58	)
Net loss		(490	)		(138	)		(121	)		(352	)		(17	)
Loss per diluted share		(14.11	)		(4.64	)		(4.05	)		(9.47	)		(0.59	)

Significant items that improved (lowered) operating (loss) income:
Product pricing – Bowater	$	(89	)	$	144
Shipments – Bowater		(230	)		(98	)
Sales – Abitibi		665			-
Change in sales		346			46
Manufacturing costs – Bowater		77			(143	)
Manufacturing costs – Abitibi		(654	)		-
Manufacturing costs – employee termination costs		(22	)		7
Change in total manufacturing costs and depreciation, amortization and cost of timber harvested		(599	)		(136	)
Distribution costs – Bowater		6			6
Distribution costs – Abitibi		(82	)		-
Change in distribution costs		(76	)		6
Selling and administrative expenses – Bowater		(6	)		(4	)
Selling and administrative expenses – Abitibi		(28	)		-
Selling and administrative – merger and severance related costs		(47	)		(12	)
Change in selling and administrative expenses		(81	)		(16	)
Closure costs, impairment and other related charges		130			(170	)
Lumber duties refund		(92	)		92
Arbitration award		(28	)		-
Net gains on disposition of assets		(41	)		120
	$	(441	)	$	(58	)

Year ended 2007 compared to 2006

Sales

Sales increased in 2007 as compared to 2006 primarily due to the inclusion of Abitibi’s results since October 29, 2007. Excluding sales of $665 million attributable to Abitibi, sales for 2007 amounted to $3,211 million, a decrease of $319 million from 2006. The decrease was due primarily to lower shipments of newsprint, coated papers, market pulp and wood products, as well as lower product pricing for newsprint, coated papers, specialty papers and wood products. These were partially offset by higher transaction prices for market pulp and higher shipments of specialty papers. The impacts of each of these items is discussed further in the “Segment Results of Operations” section of this MD&A.

29

Operating (loss) income

Operating income decreased to an operating loss in 2007 as compared to 2006 due to a number of factors, including changes in sales discussed previously, and costs as listed in the table above and further described below. The inclusion of Abitibi’s results since October 29, 2007 contributed an operating loss of $98 million.

Excluding the impact of the Abitibi manufacturing costs since October 29, 2007, our manufacturing costs decreased in 2007 as compared to 2006. The decrease is mainly attributable to lower volumes ($112 million), as well as lower labor ($39 million), energy ($19 million), maintenance ($17 million) and chemical costs ($4 million). These were partially offset by a stronger Canadian dollar ($73 million), higher wood costs ($55 million) and reduced benefits from our Canadian dollar hedging program ($34 million).

Excluding the impact of the Abitibi distribution costs since October 29, 2007, our distribution costs were flat despite a decrease in shipments. Overall distribution costs per ton were higher as a result of our mix of domestic versus export shipments, higher fuel charges by our carriers and the destination of customers.

Excluding the impact of the Abitibi selling and administrative costs since October 29, 2007, the increase in our selling and administrative expenses reflects the impact of merger related costs incurred in 2007 in connection with the Combination, employee termination costs and higher share-based compensation costs. These costs are discussed further in the “Segment Results of Operations – Corporate and Other” section of this MD&A.

In 2007, we incurred $123 million for closure costs, impairment and other related charges related mainly to the permanent closure of our Dalhousie, New Brunswick facility, the indefinite idling of our Donnacona, Quebec facility and permanent closure of paper machine no. 3 at our Gatineau, Quebec facility. We also recorded a charge of $28 million relating to an arbitration award for a claim regarding the cost of certain environmental matters related to the 1998 sale of our pulp and paper facility in Dryden, Ontario to Weyerhaeuser. In 2007, we realized $145 million in net gains on disposition of timberlands and other fixed assets. These costs and charges are discussed further in the “Segment Results of Operations – Corporate and Other” section of this MD&A.

In 2006, we received a refund of $92 million for lumber duties that were previously paid to the U.S. government as a result of the finalization of a softwood lumber agreement between the U.S. and Canada (the “Softwood Lumber Agreement”). This is discussed further in the “Segment Results of Operations – Wood Products” section of this MD&A.

Net loss

Net loss in 2007 was $490 million, or $14.11 per common share, an increase in net loss of $352 million or $9.47 per common share, compared to 2006. The increase in net loss was a result of the decrease in operating income as noted above and an increase in interest expense, which were partially offset by an income tax benefit recorded in 2007.

Interest expense increased $53 million in 2007, from $196 million in 2006 to $249 million in 2007 due to the inclusion of Abitibi’s results since October 29, 2007, contributing $64 million of interest expense to our consolidated results.

Our effective tax rate, which resulted in the recording of a tax benefit on a pre-tax loss for 2007, was 24% compared to a tax provision on a pre-tax loss of 17% in 2006. Most of our Canadian operations have continued to experience operating losses. Consequently, income tax benefits and tax credits of $139 million and $41 million for 2007 and 2006, respectively, were offset by tax charges to increase our tax valuation allowance. The effective tax rate for the year ended December 31, 2007 was primarily impacted by the tax valuation charges as described above, the reversal of tax reserves upon the expiration of the statute of limitations associated with certain tax matters, and the tax treatment on foreign currency gains and losses, while the effective tax rate for the year ended December 31, 2006 was impacted by those same items plus the goodwill impairment charge, which did not provide any tax benefit.

Our effective tax rate varies frequently and substantially from the weighted-average effect of both domestic and foreign statutory tax rates primarily as a result of the tax treatment on foreign currency gains and losses. We have a number of foreign subsidiaries whose unconsolidated foreign currency gains and losses are taxed in Canada. Upon consolidation, such income and gains were eliminated, but we are still liable for the Canadian taxes. Due to the variability and volatility of foreign exchange rates, we are unable to estimate the impact of future changes in exchange rates on our effective tax rate. Additionally, we will likely not be recording income tax benefits on most of our 2008 operating losses generated in Canada, which will have the impact of increasing our overall effective income tax rate in future periods. To the extent that our Canadian operations become profitable, the impact of this valuation allowance would lessen or reverse and positively impact

30

our effective tax rate in those periods. See discussion under “Critical Accounting Estimates — Tax Valuation Allowances” for a discussion of the judgments and uncertainties involved in determining a tax valuation allowance.

Year ended 2006 compared to 2005

Sales

Sales increased in 2006 as compared to 2005 due to higher product pricing in newsprint, specialty papers, and market pulp and higher shipments of coated papers and specialty papers. These increases were partially offset by lower transaction prices for our coated papers and wood products and lower shipments of newsprint, market pulp and wood products. These items are discussed further in the “Segment Results of Operations” section of this MD&A.

Operating income

Operating income decreased in 2006 as compared to 2005 due to a number of factors, primarily sales discussed previously, and costs as listed in the table above and further described below.

The increase in manufacturing costs in 2006 as compared to 2005 can be attributed mainly to a stronger Canadian dollar ($108 million), reduced benefits from our Canadian dollar hedging program ($62 million), as well as higher chemical ($15 million) and energy costs ($15 million). These were partially offset by lower volumes, as well as lower wood, depreciation, and labor costs.

The lower distribution costs were primarily due to lower shipments of wood products and a reduction in lumber duties paid as a result of the Softwood Lumber Agreement.

In 2006, we incurred $253 million for closure costs, impairment and other related charges related mainly to an impairment of goodwill at our Thunder Bay, Ontario facility and the permanent closure of certain of our facilities. We also realized $186 million in net gains on disposition of timberlands and other fixed assets. These items are discussed further in the “Segment Results of Operations — Corporate and Other” section of this MD&A.

Net loss

Net loss in 2006 was $138 million, or $4.64 per common share, an increase of $17 million or $0.59 per diluted share, compared to 2005. This increased net loss was a result of lower operating income as noted above, partially offset by an increase in interest income on the lumber duties refund, foreign exchange gains compared to foreign exchange losses in the prior year, slightly lower interest expense, and a decrease in the tax provision.

Interest expense decreased $3 million in 2006, from $199 million in 2005 to $196 million in 2006, due primarily to lower average debt balances carried in 2006 and slightly higher capitalized interest in 2006 as compared to 2005.

Our income tax provision was lower in 2006 due to a $27 million valuation allowance being recorded as compared to a $97 million valuation allowance being recorded in 2005.

Fourth Quarter of 2007

Net loss for the fourth quarter of 2007 was $250 million, or $5.09 per diluted share, on sales of $1,491 million. This compares to a net income for the fourth quarter of 2006 of $107 million, or $3.58 per diluted share, on sales of $861 million.

The $630 million increase in sales was mainly the result of the inclusion of Abitibi’s results since October 29, 2007, which contributed sales of $665 million.

Operating loss for the fourth quarter of 2007 was $358 million compared to an operating income of $113 million for the fourth quarter of 2006. This decrease in operating income was primarily the result of an increase of $117 million in closure costs, impairment and other related charges, the inclusion of Abitibi’s results since October 29, 2007 (which contributed an operating loss of $98 million), the $92 million refund of lumber duties received in 2006 as noted above, $29 million of merger related costs incurred in the fourth quarter of 2007, and a decrease of $26 million in net gains on disposition of assets.

Other expense for the fourth quarter of 2007 was $72 million, an increase of $60 million compared to the fourth quarter of 2006. The increase reflects higher interest expense of $60 million mainly due to the inclusion of Abitibi’s interest expense since October 29, 2007, which contributed $57 million of interest expense to our consolidated results, and a decrease of $11 million in interest income mainly related to the lumber duties refund, which were partially offset by a $24 million increase in

31

foreign exchange gains.

Segment Results of Operations

We manage our business based on the products that we manufacture and sell to external customers. Our reportable segments, which correspond to our primary product lines, are newsprint, coated papers, specialty papers, market pulp, and wood products. In general, our products are globally traded commodities. Pricing and the level of shipments of these products will continue to be influenced by the balance between supply and demand as affected by global economic conditions, changes in consumption and capacity, the level of customer and producer inventories, and fluctuations in currency exchange rates. None of the income or loss items following “Operating (loss) income” in our Consolidated Statements of Operations are allocated to our segments, since those items are reviewed separately by management. For the same reason, impairments, employee termination costs, gains on dispositions of assets and other discretionary charges or credits are not allocated to the segments. Share-based compensation expense and depreciation expense are, however, allocated to our segments. For further information regarding our segments, see Note 26 to our Consolidated Financial Statements included in this Form 10-K.

Newsprint

	2007		2006		2005
Average price (per metric ton)	$	601	$	636	$	583
Average cost (per metric ton)		652		601		553
Shipments (thousands of metric tons)		2,620		2,260		2,452
Downtime (thousands of metric tons)		237		245		199
Inventory at end of year (thousands of metric tons)		221		68		87

	Year Ended December 31,							Change
								2007 vs.			2006 vs.
(In millions)	2007			2006		2005		2006			2005
Sales	$	1,574		$	1,438	$	1,429	$	136		$	9
Segment (loss) income		(134	)		79		72		(213	)		7
Significant items that improved (lowered) segment (loss) income:
Product pricing – Bowater								$	(74	)	$	123
Shipments – Bowater									(148	)		(114	)
Sales – Abitibi									358			-
Change in sales									136			9
Manufacturing costs – Bowater									28			(5	)
Manufacturing costs – Abitibi									(329	)		-
Change in total manufacturing costs and									(301	)		(5)	)
depreciation, amortization and cost of timber harvested
Distribution costs – Bowater									(3	)		-
Distribution costs – Abitibi									(44	)		-
Change in distribution costs									(47	)		-
Selling and administrative expenses – Bowater									2			3
Selling and administrative expenses – Abitibi									(3	)		-
Change in selling and administrative expenses									(1	)		3
								$	(213	)	$	7

Year ended 2007 compared to 2006

Sales increased in 2007 as compared to 2006 primarily due to the inclusion of Abitibi’s results since October 29, 2007. Excluding sales of $358 million attributable to Abitibi, sales for 2007 amounted to $1,216 million, a decrease of $222 million from 2006. The decrease was due primarily to lower shipments of newsprint by Bowater mills and lower product pricing. Excluding shipments of 589,000 metric tons attributable to Abitibi, newsprint shipments for 2007 were 10.1% lower when compared to 2006 as we curtailed production in response to the decline in our customer orders and continued the shift of machine capacity from the production of newsprint to the production of specialty paper grades. Excluding Abitibi’s results, our average price for newsprint was 5.8% lower in 2007 compared to 2006. While North American consumption remains in decline, global newsprint demand excluding North America has increased in 2007 compared to 2006. We continue to take

32

advantage of the stronger global markets by shipping more newsprint out of North America and into areas where market conditions are stronger. We have informed our North American customers of a $120 per metric ton newsprint price increase over six equal monthly installments, beginning January 2008.

In 2007, we had total downtime of 237,000 metric tons, including 39,000 metric tons of maintenance downtime. We will continue to match production to our orders. Inventory levels of 221,000 metric tons increased by 153,000 metric tons at December 31, 2007 as compared to December 31, 2006 due to the inclusion of Abitibi’s newsprint inventory of 133,000 metric tons and an increase in export warehouse inventory levels.

Segment income decreased to a segment loss in 2007 as compared to 2006 primarily as a result of lower sales for Bowater as noted above and an operating loss of $18 million contributed by Abitibi’s operations since October 29, 2007, partially offset by lower manufacturing costs for Bowater. Manufacturing costs for Bowater were lower as a result of lower volumes ($68 million), lower labor costs ($24 million), lower maintenance costs ($11 million), lower depreciation ($6 million) and lower energy costs ($4 million), partially offset by higher wood costs ($49 million), a stronger Canadian dollar ($34 million) and reduced benefits from our Canadian dollar hedging program ($14 million). Although Bowater’s manufacturing costs were lower year over year, shipments were substantially lower, which resulted in higher fixed costs per ton and higher operating costs per ton. Bowater's distribution costs per ton were also higher due primarily to an increase in export shipments.

Newsprint Third Party Data (source: Pulp and Paper Products Council): For the year ended December 31, 2007, total North American demand for newsprint declined 10.3%, as compared to the same period last year. North American net exports of newsprint were 10.7% higher than 2006 levels. Total inventories (North American mills and users) at December 31, 2007 were 1.1 million metric tons, which is 7.6% lower than December 31, 2006. The days of supply at the U.S. daily newspapers declined to 34 days at December 31, 2007 compared to 39 days at December 31, 2006. The North American operating rate was 92% for the year ended December 31, 2007. Newspaper advertising linage declined 9.7% in 2007 when compared to 2006.

Year ended 2006 compared to 2005

Sales of newsprint increased marginally in 2006 as compared to 2005 as a result of higher product pricing being offset by lower shipments. Our average newsprint transaction price was 9.1% higher in 2006 compared to 2005. The increase reflects the realization of price increases in our North American and international markets. Shipments were 7.8% lower in 2006 as we converted a newsprint machine at our Calhoun site to specialty paper production and newsprint production was curtailed at our Thunder Bay facility in the third and fourth quarters of 2006 and at our Mokpo facility in the fourth quarter of 2006. Specifically, 68,000 metric tons at our Thunder Bay mill and 19,000 metric tons at our Mokpo mill were curtailed. At Thunder Bay, two of our paper machines were curtailed beginning in September with one restarted in the fourth quarter. The downtime at our Mokpo mill was a result of labor issues.

Segment income increased in 2006 as compared to 2005 as a result of higher sales as noted above and lower distribution and selling and administrative expenses, offset by higher manufacturing costs. The higher manufacturing costs were primarily due to a stronger Canadian dollar ($54 million), a reduced benefit from our Canadian dollar hedging program ($26 million), combined with higher energy ($13 million) and chemical costs ($4 million) partially offset by lower volumes ($69 million), lower labor costs ($12 million) and lower wood costs ($7 million). Although Bowater’s costs were flat in 2006 versus 2005 our overall cost per ton increased due to substantially lower shipments and increased downtime, both resulting in higher fixed costs per ton.

33

Coated Papers

	2007		2006		2005
Average price (per short ton)	$	720	$	769	$	792
Average cost (per short ton)		667		673		647
Shipments (thousands of short tons)		792		797		790
Downtime (thousands of short tons)		29		68		84
Inventory at end of year (thousands of short tons)		26		37		35

	Year Ended December 31,						Change
							2007 vs.			2006 vs.
(In millions)	2007		2006		2005		2006			2005
Sales	$	570	$	612	$	625	$	(42	)	$	(13	)
Segment income		42		76		114		(34	)		(38	)
Significant items that improved (lowered) segment income:
Product pricing							$	(37	)	$	(17	)
Shipments								(5	)		4
Change in sales								(42	)		(13	)
Change in manufacturing costs and depreciation, amortization and cost of timber harvested								7			(20	)
Change in distribution costs								(1	)		(4	)
Change in selling and administrative expenses								2			(1	)
							$	(34	)	$	(38	)

Year ended 2007 compared to 2006

Sales of coated papers decreased in 2007 as compared to 2006 as a result of lower product pricing and lower shipments. Our average transaction price declined 6.4% and our coated mechanical papers shipments decreased 0.6% in 2007 as compared to 2006. Demand for our coated mechanical papers improved in the second half of 2007, despite the negative impact of the May 2007 postal increase on demand, primarily due to capacity closures by some of our North American competitors and reduced offshore imports. Price increases of $120 per short ton were announced during the fourth quarter for our coated grades. The Combination did not impact these segment results as Abitibi does not have any facilities that produce or sell coated papers.

Segment income decreased in 2007 as compared to 2006 primarily as a result of lower sales, as noted above. The lower sales were partially offset by lower manufacturing costs including the impact of lower energy costs ($9 million), lower volumes ($7 million) and lower depreciation ($4 million), partially offset by higher wood ($5 million) and chemical costs ($3 million).

Coated Papers Third Party Data (source: Pulp and Paper Products Council): U.S. consumer magazine advertising pages decreased 0.8% in 2007 compared to 2006. North American demand for coated mechanical papers increased 5.0% in 2007 compared to the 2006. The industry operating rate was 98% in 2007 compared to 92% in 2006. North American coated mechanical mill inventories were at 11 days supply at December 31, 2007, compared to 20 days supply at December 31, 2006.

Year ended 2006 compared to 2005

Sales of coated paper decreased in 2006 as compared to 2005 as a result of lower transaction prices. Our average transaction price decreased 2.9% as a result of offshore imports, the high level of inventories in the industry and the restart of previously idled capacity in North America by a competitor. The effect of the lower transaction prices in 2006 was partially offset by an increase in coated mechanical papers shipments in 2006 due to increased production at our Catawba facility. During the third quarter of 2006, we made the decision to close our Benton Harbor facility. Previous to this closure, our Benton Harbor and Covington facilities were running at approximately 50% capacity.

34

Segment income decreased in 2006 as compared to 2005 primarily due to lower sales as discussed above, higher distribution costs and higher manufacturing costs. The higher manufacturing costs were primarily due to higher repair ($4 million), wood ($4 million), and chemical costs ($4 million), as well as higher volumes ($3 million).

Specialty Papers

	2007		2006		2005
Average price (per short ton)	$	669	$	669	$	628
Average cost (per short ton)		741		711		625
Shipments (thousands of short tons)		1,195		852		760
Downtime (thousands of short tons)		102		5		6
Inventory at end of year (thousands of short tons)		151		48		35

	Year Ended December 31,								Change
									2007 vs.			2006 vs.
(In millions)	2007			2006			2005		2006			2005
Sales	$	800		$	570		$	477	$	230		$	93
Segment loss		(85	)		(35	)		2		(50	)		(37	)
Significant items that improved (lowered) segment loss:
Product pricing – Bowater									$	(13	)	$	37
Shipments – Bowater										24			56
Sales – Abitibi										219			-
Change in sales										230			93
Manufacturing costs – Bowater										(36	)		(128	)
Manufacturing costs – Abitibi										(213	)		-
Change in total manufacturing costs and										(249	)		-
depreciation, amortization and cost of timber harvested
Distribution costs – Bowater										(5	)		(2	)
Distribution costs – Abitibi										(26	)		-
Change in distribution costs										(31	)		(2	)
Selling and administrative expenses – Bowater										2			-
Selling and administrative expenses – Abitibi										(2	)		-
Change in selling and administrative expenses										-			-
									$	(50	)	$	(37	)

Year ended 2007 compared to 2006

Sales increased in 2007 as compared to 2006 primarily due to the inclusion of Abitibi’s results since October 29, 2007. Excluding sales of $219 million attributable to Abitibi, sales for 2007 amounted to $581 million, an increase of $11 million from 2006. The increase was due to higher shipments of specialty papers by Bowater, partially offset by lower product pricing. Excluding shipments of 315,000 metric tons attributable to Abitibi, shipments of specialty papers for 2007 were 3.3% higher when compared to 2006. We continue to shift machine capacity from newsprint to specialty papers. We completed the conversion of a newsprint machine to specialty production at our Calhoun mill in July 2006. In addition, we increased production of specialty papers at our Thunder Bay mill beginning late in the third quarter of 2007. This increased production was partially offset by the indefinite idling of paper machine no. 2 at our Dolbeau, Quebec facility in late May 2007. Dolbeau’s paper machine no. 2 has since been restarted beginning in February 2008. Price increases of $60 per short ton were announced during the fourth quarter for our superbright products as well as for our supercalendered grades.

In 2007, we had total downtime of 102,000 short tons, including 73,000 short tons of downtime related to the idling of a specialty-producing machine at our Dolbeau facility in May 2007. Inventory levels were higher at December 31, 2007 as compared to December 31, 2006 due to the inclusion of Abitibi’s specialty papers inventory of 83,000 short tons, increased capacity and a weaker market in 2007 as compared to 2006.

Segment loss increased in 2007 as compared to 2006 primarily as a result of increased manufacturing costs, the inclusion of Abitibi’s results since October 29, 2007 which contributed an operating loss of $22 million, and higher distribution costs, which were partially offset by higher sales, as discussed above. The higher manufacturing costs were a result of higher

35

volumes ($17 million), higher wood costs ($22 million), a stronger Canadian dollar ($18 million), higher depreciation ($10 million) and reduced benefits from our Canadian dollar hedging program ($8 million), partially offset by lower energy costs ($12 million) and lower chemical costs ($11 million). As a result of the higher costs, including the costs of Abitibi since the Combination, our average cost per ton has increased. Additionally, due to the increased downtime taken on certain machines producing specialty products, our depreciation cost per ton increased substantially year over year.

Specialty Papers Third Party Data (source: Pulp and Paper Products Council): North American demand for supercalendered high gloss papers was up 4.9%, for lightweight or directory grades was up 0.1%, and for standard uncoated mechanical papers was down 3.5% for 2007 compared to 2006. The industry operating rate was stable at 90% in 2007 and 2006. North American uncoated mechanical mill inventories were at 19 days supply at December 31, 2007, compared to 15 days supply at December 31, 2006.

Year ended 2006 compared to 2005

Sales of specialty papers increased in 2006 as compared to 2005 as a result of a 6.5% increase in our average transaction price in 2006 and a 12.1% increase in shipments. This increase in average price reflects the realization of price increases in 2006 and the introduction of a freesheet hybrid product at our Calhoun mill in June 2006 which has a higher transaction price than our other specialty paper offerings. Our increase in shipments is due to the conversion of a newsprint machine to specialty production at our Calhoun mill in July 2006 and increased shipments to customers moving from traditional freesheet grades to mechanical specialties and customers upgrading from newsprint to mechanical specialties.

Segment income decreased in 2006 as compared to 2005 primarily due to higher manufacturing costs, partially offset by higher sales discussed above. The higher manufacturing costs were primarily due to higher volume ($42 million), a stronger Canadian dollar ($23 million) and reduced benefits from our Canadian dollar hedging program ($14 million), combined with higher repair ($20 million), labor ($19 million), depreciation ($6 million), energy ($6 million) and chemical costs ($5 million). These costs were partially offset by lower wood costs ($4 million).

36

Market Pulp

	2007		2006		2005
Average price (per metric ton)	$	661	$	576	$	531
Average cost (per metric ton)		556		538		524
Shipments (thousands of metric tons)		907		972		1,006
Downtime (thousands of metric tons)		43		25		67
Inventory at end of year (thousands of metric tons)		50		49		63

	Year Ended December 31,						Change
							2007 vs.			2006 vs.
(In millions)	2007		2006		2005		2006			2005
Sales	$	600	$	559	$	534	$	41		$	25
Segment income		96		37		8		59			29
Significant items that improved (lowered) segment income:
Product pricing – Bowater							$	73		$	43
Shipments – Bowater								(45	)		(18	)
Sales – Abitibi								13			-
Change in sales								41			25
Manufacturing costs – Bowater								34			11
Manufacturing costs – Abitibi								(10	)		-
Change in total manufacturing costs and depreciation, amortization and cost of timber harvested								24			11
Change in distribution costs – Bowater								(4	)		(7	)
Change in selling and administrative expenses – Bowater								(2	)		-
							$	59		$	29

Year ended 2007 compared to 2006

Sales increased in 2007 as compared to 2006, which were impacted slightly by the inclusion of Abitibi’s results since October 29, 2007. Excluding sales of $12 million attributable to Abitibi, sales for 2007 amounted to $588 million, an increase of $29 million from 2006. The increase was a result of higher product pricing, partially offset by lower shipments by Bowater. Excluding Abitibi’s results, our average price for market pulp was 12.8% higher in 2007 compared to 2006. The increase in demand is from both North America and offshore markets, particularly China, primarily due to supply constraints and a weak U.S. dollar. Excluding shipments of 18,000 metric tons attributable to Abitibi, shipments of market pulp for 2007 were 8.5% lower when compared to 2006, due to reduced production from our Thunder Bay facility as a result of the permanent shut of our “A” kraft pulp mill in May 2006. Our downtime increased in 2007 when compared to 2006 and consisted mainly of maintenance downtime taken at our Calhoun, Coosa Pines and Thunder Bay facilities. Mill inventories remain at low levels, particularly in softwood products, and consumer inventories are at near record lows as well. Currently, softwood grades have better market supply-demand dynamics than hardwood grades, but with the tight softwood grade market, demand for the hardwood grades is growing. We have implemented several price increases this fall and in the first quarter.

Segment income increased in 2007 as compared to 2006, primarily as a result of the increase in sales, as noted above, and lower manufacturing costs for Bowater. The lower manufacturing costs consisted of lower volumes ($30 million) and lower labor costs ($7 million), partially offset by a stronger Canadian dollar ($9 million) and reduced benefits from our Canadian dollar hedging program ($8 million). Although Bowater’s manufacturing costs were lower year over year, shipments were substantially lower, which resulted in higher fixed costs per ton and overall resulted in a higher average cost per ton for market pulp. Distribution costs per ton were also a big component of the increase year over year due to increased exports, carrier and fuel costs.

Market Pulp Third Party Data (source: Pulp and Paper Products Council): World demand for market pulp increased 3.4% or 1.3 million metric tons in 2007 compared to 2006. Demand was up 1.1% in Western Europe, the world’s largest pulp

37

market, 2.5% in North America, 20% in China and 10% in Latin America. World producers shipped at 94% of capacity in 2007 compared to 97% in 2006. World producer inventories were at 29 days supply at December 31, 2007, a slight increase compared to 28 days supply at December 31, 2006.

Year ended 2006 compared to 2005

Sales of market pulp increased in 2006 as compared to 2005 as a result of higher product pricing which was partially offset by lower shipments. Our average price for market pulp was 8.5% higher in 2006 compared to 2005. This increase reflects improved world-wide demand. Our shipments decreased 3.4% compared to 2005, due to reduced production from our Thunder Bay facility as a result of the permanent shut of our “A” kraft pulp mill at this site in May 2006. Our market pulp inventories at the end of 2006 were at 18 days supply which was 11 days below industry average. Generally, our inventories are below industry average because our mills are geographically close to the markets they serve. Our downtime decreased significantly in 2006 primarily due to maintenance downtime taken at our Calhoun and Coosa Pines facilities in 2005.

Segment income increased in 2006 as compared to 2005 primarily as a result of higher sales as noted above, as well as lower manufacturing costs, partially offset by higher distribution costs. The lower manufacturing costs were due to lower volumes ($10 million), as well as lower wood ($11 million), repair ($6 million), depreciation ($6 million), labor ($4 million) and energy costs ($3 million), partially offset by a reduced benefit from our Canadian dollar hedging program ($16 million), a stronger Canadian dollar ($13 million), and higher chemical costs ($2 million).

Wood Products

	2007		2006		2005
Average price (per fbm)	$	287	$	317	$	358
Average cost (per fbm)		368		346		344
Shipments (millions of fbm)		1,111		1,045		1,076
Downtime (millions of fbm)		279		232		201
Inventory at end of year (millions of fbm)		228		44		54

	Year Ended December 31,							Change
								2007 vs.			2006 vs.
(In millions)	2007			2006		2005		2006			2005
Sales	$	318		$	332	$	385	$	(14	)	$	(53	)
Segment (loss) income		(91	)		63		14		(154	)		49
Significant items that improved (lowered) segment (loss) income:
Product pricing – Bowater								$	(30	)	$	(43	)
Shipments – Bowater									(59	)		(10	)
Sales – Abitibi									75			-
Change in sales									(14	)		(53	)
Manufacturing costs – Bowater									40			(9	)
Manufacturing costs – Abitibi									(96	)		-
Change in total manufacturing costs and depreciation, amortization and cost of timber harvested									(56	)		(9	)
Distribution costs – Bowater									19			19
Distribution costs – Abitibi									(12	)		-
Change in distribution costs									7			19
Change in lumber duties refund									(92	)		92
Change in selling and administrative expenses – Bowater									1			-
								$	(154	)	$	49

Year ended 2007 compared to 2006

Sales in 2007 were positively impacted by the inclusion of Abitibi’s results since October 29, 2007. Excluding sales of $75 million attributable to Abitibi, sales for 2007 amounted to $243 million, a decrease of $89 million from 2006. The decrease was a result of lower shipments of wood products by Bowater and lower product pricing. Excluding shipments of 254.6

38

millions of board feet attributable to Abitibi, shipments of wood products for 2007 were 18.1% lower when compared to 2006 mainly as a result of sawmills that we sold in 2006, the restrictions imposed by quotas under the Softwood Lumber Agreement and a weaker U.S. housing market. Excluding Abitibi’s results, our average price for wood products was 10.7% lower in 2007 compared to 2006, due primarily to lower demand from a weaker U.S. housing market. We are not expecting any significant improvements in the wood products market before 2009. As such, we have recently announced the curtailment of annualized capacity of approximately 1.3 billion board feet of lumber in the provinces of Quebec and British Columbia.

Downtime at our sawmills is the result of weak lumber markets and limited availability of timber supply from our cutting rights on Crown-owned land.

Segment income decreased to a segment loss in 2007 as compared to 2006 as a result of lower sales discussed above, the lumber duties refund received in 2006 and the inclusion of Abitibi’s results since October 29, 2007, which contributed an operating loss of $33 million. These were partially offset by lower manufacturing and distribution costs for Bowater. The decrease in manufacturing costs consisted of lower volumes ($18 million) and lower wood ($21 million), labor ($8 million) and maintenance costs ($5 million), partially offset by a stronger Canadian dollar ($12 million) and reduced benefits from our Canadian dollar hedging program ($5 million). The lower distribution costs were primarily due to lower shipments by Bowater and a reduction in lumber duties paid as a result of the Softwood Lumber Agreement. Our average cost per thousand board feet increased primarily as a result of the inclusion of Abitibi’s operating results since October 29, 2007.

On October 12, 2006, an agreement regarding Canada’s softwood lumber exports to the U. S. became effective. The agreement provided for the return of accumulated cash deposits to Canadian industry and U.S. interests for lumber duties paid between May 22, 2002 and October 12, 2006. Through an arrangement with Export Development Corporation, which the government of Canada designated as its agent to expedite the refund of duties, we recovered approximately $104 million on November 10, 2006. The refund consisted of a return of $92 million of the duties paid and $12 million in interest due the company. We do not expect to recover any additional amounts.

The Softwood Lumber Agreement provides for softwood lumber to be subject to one of two ongoing border restrictions, depending upon the province of first manufacture with several provinces, including Nova Scotia, being exempt from these border restrictions. Volume quotas have been established for each company within the provinces of Ontario, Quebec and British Columbia based on historical production, and the volume quotas are not transferable between provinces. The volume that we were allocated was insufficient to operate both our Ignace and Thunder Bay, Ontario sawmills; therefore, we decided to indefinitely shut our Ignace sawmill in December 2006. U.S. composite prices would have to rise above $355 per thousand board feet before the quota volume restrictions would be lifted. Our average transaction price for lumber in the fourth quarter of 2007 was $287 per thousand board feet.

Wood Products Third Party Data (source: U.S. Census Bureau): U.S. housing starts decreased 25% to 1.4 million units in 2007 compared to 1.8 million units in 2006, and are at their lowest level in approximately 14 years.

Year ended 2006 compared to 2005

Sales decreased in 2006 as compared to 2005 as a result of an 11.5% lumber price decrease due primarily to a weaker U.S. housing market. Our lumber shipments decreased 2.9% in 2006 compared to 2005 mainly as a result of the sale of two sawmills in 2006 offset by the continued ramp up of the Thunder Bay sawmill as a result of a recent plant modernization.

Segment income increased in 2006 as compared to 2005 primarily as a result of the $92 million refund of lumber duties in December 2006 as discussed above and lower distribution costs, partially offset by lower sales discussed above and higher manufacturing costs. The decrease in distribution costs is primarily due to the decrease in lumber duties in 2006 and the sale of the two sawmills. The higher manufacturing costs were primarily due to a stronger Canadian dollar ($17 million), a reduced benefit from our Canadian dollar hedging program ($6 million), and a higher lower of cost or market inventory adjustment ($4 million), partially offset by lower wood ($15 million), labor ($4 million), and repair costs ($3 million), lower production volumes ($10 million) and lower depreciation ($2 million).

Corporate and Other

We exclude net gain on disposition of assets, closure costs, impairment and other related charges, employee termination costs and merger related charges from our internal review of segment results. Also excluded from our segment results are

39

corporate and other items which include timber sales and general and administrative expenses. These items are analyzed separately from our segment results. The following table is included in order to facilitate the reconciliation of our segment sales and segment income (loss) to our total sales and operating (loss) income on our Consolidated Statements of Operations.

	Year Ended December 31,									Change
										2007 vs.			2006 vs.
(In millions)	2007			2006			2005			2006			2005
Sales	$	14		$	19		$	34		$	(5	)	$	(15	)
Corporate and other loss		(228	)		(179	)		(111	)		(44	)		(68	)
Costs comprised of:
Manufacturing costs – Bowater		(18	)		(22	)		(30	)		4			8
Manufacturing costs – Abitibi		(6	)		-			-			(6	)		-
Manufacturing costs – Employee severance costs		(26	)		(4	)		(11	)		(22	)		7
Total manufacturing costs		(50	)		(26	)		(41	)		(24	)		15
Administrative expenses – Bowater		(104	)		(93	)		(87	)		(11	)		(6	)
Administrative expenses – Abitibi		(23	)		-			-			(23	)		-
Administrative expenses – Merger and severance related costs		(59	)		(12	)		-			(47	)		(12	)
Total administrative expenses		(186	)		(105	)		(87	)		(81	)		(18	)
Closure costs, impairment and other related charges		(123	)		(253	)		(83	)		130			(170	)
Arbitration award		(28	)		-			-			(28	)		-
Net gain on disposition of assets		145			186			66			(41	)		120
Total corporate and other loss		(228	)		(179	)		(111	)		(49	)		(68	)

Sales

Sales decreased in 2007 when compared to 2006, and in 2006 when compared to 2005, due to lower timber sales, as the land that was producing the timberlands has been sold in our land sales program. We sold approximately 133,600, 535,200, and 29,900 acres of timberlands in 2007, 2006 and 2005, respectively.

Manufacturing costs

Manufacturing costs included in corporate and other includes the cost of timberlands. Employee severance costs include the cost of employee reduction initiatives (severance and pension related) throughout the Company.

Administrative expenses

The increase in administrative expenses in 2007 as compared to 2006 was primarily due to merger and severance related costs of $59 million incurred in 2007 in connection with the Combination and employee reduction initiatives implemented throughout the Company earlier in the year, an increase in share-based compensation expense of $8 million and the inclusion of Abitibi’s administrative expenses since October 29, 2007 of approximately $23 million.

The increase in administrative expenses in 2006 as compared to 2005 is primarily related to pension and other postretirement benefit plan amendments.

Closure costs, impairment and other related charges

During 2007, immediately upon the Combination, we began a comprehensive strategic review of our operations to reduce costs and improve our profitability. On November 29, 2007, we announced our decision to reduce our newsprint and commercial papers production capacity by approximately one million metric tons per year during the first quarter of 2008. We recorded asset impairment ($100 million) and severance charges ($23 million) associated with the permanent closure of our Dalhousie, New Brunswick facility ($110 million), the permanent closure of paper machine no. 3 at our Gatineau, Quebec facility ($10 million) and the indefinite idling of our Donnacona, Quebec facility ($3 million). A number of Abitibi’s facilities were also permanently closed or indefinitely idled, with the associated costs included in liabilities assumed in the Combination and therefore did not impact our results of operations in 2007.

40

During 2006, we recorded impairment and other related charges related to impairment of goodwill at our Thunder Bay, Ontario facility ($200 million), the closure of our Benton Harbor, Michigan facility ($28 million), paper machine No. 3 at our Thunder Bay facility ($19 million), our Ignace sawmill ($5 million), and our Girardville sawmill ($1 million).

During 2005, we recorded asset impairment charges related to our Thunder Bay “A” kraft pulp mill ($67 million), a coating line at our Benton Harbor facility ($12 million) and a paper machine at our Mokpo, Korea paper mill ($4 million).

Please refer to the discussion of “Critical Accounting Estimates — Goodwill” and “Critical Accounting Estimates — Long Lived Assets” in Item 7 of this Form 10-K for information regarding the judgments and uncertainties involved in determining these impairment charges. For further information, see Note 6 to the Consolidated Financial Statements included in this Annual Report on Form 10-K.

Arbitration award

On September 7, 2007, BCFPI received a decision from an arbitration related to the 1998 sale to Weyerhaeuser of our former pulp and paper facility in Dryden, Ontario. Bowater and Weyerhaeuser had been arbitrating a claim regarding the cost of certain environmental matters related to the mill. The arbitrators in the matter awarded Weyerhaeuser a final and unappealable judgment of approximately $43 million, including interest, which was paid in 2007 and resulted in a pre-tax charge of $28 million. We had previously established a provision of approximately $15 million, in connection with these environmental matters, at the time of the sale.

Net gain on disposition of assets

In 2007, we recorded net pre-tax gains of $145 million related primarily to the sale of approximately 133,600 acres of timberlands and other fixed assets for cash proceeds of $197 million. In 2006, we recorded net pre-tax gains of $186 million related primarily to the sale of approximately 535,200 acres of timberlands, our Baker Brook and Dégelis sawmills and other fixed assets for cash proceeds of $332 million. In 2005, we recorded net pre-tax gains of $66 million related primarily to the sale of approximately 29,900 acres of timberlands and other fixed assets for cash proceeds of $76 million.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity and capital resources are cash provided from operations and available borrowings under our subsidiaries credit facilities including the accounts receivable securitization program, which are discussed in more detail below. We also periodically review timberland holdings and sell timberlands as a source of additional liquidity. In 2007, the sale of timberlands and other assets generated proceeds of $197 million, providing a significant source of liquidity. In 2006 and 2007, we generated an aggregate of approximately $529 million of proceeds and have targeted an additional approximately $500 million in asset sales, including non-core facilities, U.S. timberlands and the recently announced sale of our newsprint mill in Snowflake, Arizona.

Our Bowater subsidiary is expected to meet its debt obligations as they become due. Our Abitibi subsidiary, however, is currently experiencing a liquidity shortfall and faces significant near-term liquidity challenges. See Management’s Discussion of Financial Condition and Results of Operations – Business Strategy and Outlook” for a discussion of Abitibi’s current liquidity shortfall and our plans to address it.

Cash Provided by Operations

Cash used in operating activities amounted to $247 million in 2007, a deterioration of $429 million compared to cash provided by operating activities of $182 million in 2006. This can be attributed to a number of factors, including lower Bowater sales, an increase in selling and administrative expenses primarily due to severance and merger related expenses, that were partially offset by lower manufacturing costs as noted in the “Consolidated Results of Operations” section of our MD&A, the $104 million cash refund of lumber duties received in 2006 as discussed further in the “Segment Results of Operations – Wood Products” section of our MD&A, the payment of a $43 million arbitration award in 2007 as noted in the “Segment Results of Operations – Corporate and Other” section of our MD&A and an increase in interest payments of $17 million. These were partially offset by a $191 million improvement in working capital, driven mainly by lower levels of accounts receivable and an increase in accounts payable and accrued liabilities related to the timing of payments.

In 2006, cash provided by operating activities totaled $182 million compared to $169 million in 2005. Cash generated from operations increased primarily as a result of the $104 million refund of lumber duties and related interest and increases in product prices for most of our products. These increases were offset by a stronger Canadian dollar, lower production at our Thunder Bay mill as a result of the permanent shut of the “A” kraft pulp line, lower production and higher maintenance costs

41

at the Calhoun mill as we converted a newsprint machine to the production of specialty papers in the second quarter of 2006 and higher costs associated with the closure of our Benton Harbor facility. Working capital in 2006 was negatively impacted by an increase in accounts receivable, primarily as a result of higher product pricing from most of our products, and lower income taxes payable. The negative impact to working capital was partially offset by lower inventory levels, primarily as a result of the shut of the Thunder Bay “A” line and curtailed newsprint production at our Thunder Bay mill.

Cash Provided by (Used for) Investing Activities

Cash provided by investing activities totaled $177 million and $130 million in 2007 and 2006, respectively, compared to cash used for investing activities of $92 million in 2005. The increase of $47 million in cash from investing activities in 2007 as compared to 2006 is primarily due to Abitibi’s cash on hand of $116 million acquired in the Combination and a $71 million decrease in capital expenditures, which were largely offset by $135 million less in proceeds from timberland and other fixed asset sales. We spent $128 million on capital expenditures in 2007, well below depreciation expense. Additionally, in connection with the Combination with Abitibi, we spent $35 million for direct acquisition costs in 2007. We also received cash proceeds of $24 million from the monetization of Abitibi’s forward exchange contracts.

The increase in cash from investing activities in 2006 as compared to 2005 is due primarily to the increased proceeds from timberland and other asset sales, partially offset by increased capital expenditures. The capital expenditures in 2006 of $199 million include $36 million associated with the conversion of a machine at our Calhoun mill to specialty paper production and other return-based projects of approximately $60 million for our Catawba, Calhoun, Coosa Pines and Thunder Bay facilities.

Capital expenditures for all periods include compliance, maintenance, and projects to increase returns on production assets. We expect to maintain capital spending, on an annual basis, below $200 million until market conditions improve and translate to strong positive cash flow. The only major project we have underway is a $61 million boiler project at our Fort Frances facility. We have approximately $51 million in costs remaining to be paid on this project.

Cash Provided by (Used for) Financing Activities

Cash provided by financing activities amounted to $166 million in 2007, compared to cash used for financing activities of $243 million and $77 million for 2006 and 2005, respectively. In 2007, we had net short-term borrowings of $230 million, paid $49 million in dividends and made net payments of $15 million on our long-term debt. The net borrowings were used to help pay for operating activities that used $247 million in cash in 2007 and capital expenditures of $128 million.

In 2006, we had net payments of $62 million on our short-term borrowings, net payments of $135 million of long-term debt and paid $46 million in dividends. We used the cash raised from operating activities and the disposition of assets to reduce our borrowing levels in 2006.

During the fourth quarter of 2007, the payment of a quarterly dividend to shareholders was suspended indefinitely.

42

SHORT-TERM FINANCING

As of December 31, 2007, we had cash and cash equivalents of approximately $195 million ($132 million for Abitibi and $63 million for Bowater). Abitibi and Bowater each maintain separate credit facilities.

Short-term Bank Debt

As of December 31, 2007, our available borrowings under bank credit facilities were as follows:

								Weighted
								Average
			Amount		Commitment		Termination	Interest
(In millions)	Commitment		Outstanding		Available(1)		Date	Rate(2)
Abitibi:
Credit facilities	$	711	$	384	$	252	11/08 & 12/08		7.98	%
Bowater:
U.S. credit facility		415		205		141	05/11		7.35	%
Canadian credit facility		165		-		132	05/08		n/a
	$	1,291	$	589	$	525

(1)

The commitment available under each of the revolving bank credit facilities is subject to collateral requirements and covenant restrictions as described below and is reduced by outstanding letters of credit of $69 million for the Bowater U.S. credit facility, $33 million for the Bowater Canadian credit facility and $75 million for the Abitibi credit facility, while commitment fees for unused portions are 50, 25, and 70 basis points, respectively.

(2)

Borrowings under the Abitibi and Bowater credit facilities incur interest based, at our option, on specified market interest rates plus a margin. We had no borrowings under Bowater’s Canadian credit facility during 2007.

Since December 31, 2007, we have borrowed additional amounts under our credit facilities. As of February 29, 2008, we had cash available of approximately $102 million (approximately $60 million at Abitibi and approximately $42 million at Bowater) and undrawn amounts under our credit facilities of approximately $280 million (approximately $62 million at Abitibi and approximately $218 million at Bowater). Our credit facilities are described in more detail below.

Accounts Receivable Securitization Programs

As of December 31, 2007, our borrowings under our accounts receivable programs were as follows:

							Weighted
							Average
			Amount		Termination		Interest
(In millions)	Commitment		Outstanding		Date		Rate
Off-Balance Sheet:
Accounts receivable securitization programs	$	425	$	342		10/08		6.21	%

Abitibi has historically sold most of its trade accounts receivable through two securitization programs in order to reduce working capital requirements. As of December 31, 2007, we had sold $495 million of trade receivables resulting in cash proceeds of $342 million, which represented the total available at that time under the securitization programs. Accounts receivable are sold at discounted amounts based on the securitization provider’s funding cost plus a margin. The average discount rate during 2007 was 6.2%. We act as a servicing agent and administer the collection of the accounts receivable sold pursuant to these agreements. The fees received for servicing the accounts receivable approximate the value of services rendered. The amount that can be obtained under our securitization programs depends on the amount and nature of the accounts receivable available to be sold.

43

In January 2008, one of those programs, which was uncommitted, was terminated and the other, which is committed, was amended to increase its committed amount and reset its maturity date so that we now maintain an ongoing securitization program committed until July 2009 to obtain aggregate cash proceeds of up to $350 million from accounts receivable, pursuant to sale agreements.

Abitibi’s Credit Facilities

The CDN$710 million ($711 million) Abitibi credit facility has two components: “Facility A” is a CDN$510 million ($511 million) credit facility secured by certain fixed assets and “Facility B” is a CDN$200 million ($200 million) revolving credit facility secured by certain working capital elements. The carrying value of the secured assets is $1,560 million as of December 31, 2007.

Financial covenants under Abitibi’s credit facility must be maintained at the end of each financial quarter based upon its consolidated financial results, prepared under Canadian GAAP and using pre-Combination historical bases for assets and liabilities, and consist of the following two ratios:

i.

a maximum ratio of net funded debt (including all advances under Abitibi’s facilities and the outstanding amount of any securitization programs, less cash and cash equivalents) to total capitalization (generally defined as equity and net funded debt) of 70% until December 31, 2007 and 65% thereafter; and

ii.

a minimum ratio of EBITDA (generally defined as net income, excluding extraordinary and non-recurring gains (or losses), gains (or losses) from assets sales or abandonments or reserves related thereto, and non-controlling interest items, plus interest expenses, plus income taxes plus amortization and depreciation) to interest expense of 1.50 to 1. This ratio has been waived, as noted below, until the end of the second quarter of 2008.

In July 2007, Abitibi amended its credit agreement to waive its interest coverage ratio requirement until the end of the second quarter of 2008 and also waived certain other provisions to permit the reorganization and rationalization of its corporate structure.

Abitibi’s credit agreement limits Abitibi’s ability to provide financial assistance in favor of any person that is not an Abitibi subsidiary, including its parent AbitibiBowater. However, Abitibi (including its subsidiaries) may (1) pay dividends or make other distributions to its shareholders and (2) guarantee the funded debt of any other person (certain subsidiaries of Abitibi are restricted however in their ability to incur funded debt and to guarantee funded debt of other persons).

Although we are currently in compliance with covenants under Abitibi’s credit facility, there can be no assurance that we will remain in compliance in the near term in light of the factors discussed above and our forecast of continued operating losses. Based on current forecasts for Abitibi, we expect it to be in default with its net funded debt to total capitalization covenant as measured at the end of the first quarter of 2008, however, we have developed a refinancing plan to address the upcoming debt maturities and replace Abitibi’s bank credit facilities. See discussion of liquidity and covenants under the “Business Strategy and Outlook” section.

Bowater’s Credit Facilities

On May 31, 2006, we entered into (i) a five-year credit agreement among Bowater as Borrower, several lenders, and Wachovia Bank, National Association, as Administrative Agent (the “U.S. Credit Agreement”) and (ii) a 364-day credit agreement, along with our subsidiary Bowater Canadian Forest Products Inc. (“BCFPI”), among BCFPI as Borrower, Bowater as parent Guarantor, several lenders, and The Bank of Nova Scotia as Administrative Agent (the “Canadian Credit Agreement”).

Bowater’s U.S. credit agreement provides for a $415 million revolving credit facility with a scheduled maturity date of May 25, 2011. The U.S. credit agreement is guaranteed by certain of our wholly-owned subsidiaries in the United States, and is secured by (i) liens on the inventory, accounts receivable and deposit accounts of Bowater and the guarantors (ii) pledges of 65% of the stock of certain of our foreign subsidiaries, and (iii) pledges of the stock of our U.S. subsidiaries that do not own mills or converting facilities. Availability under the U.S. credit facility is limited to 90% of the net consolidated book value of our accounts receivable and inventory, excluding BCFPI and its subsidiaries.

Bowater’s Canadian credit agreement provides for a $165 million revolving credit facility with a maturity date of May 30, 2008, subject to annual extensions. The Canadian credit agreement is secured by liens on the inventory, accounts receivable and deposit accounts of BCFPI. Availability under the Canadian credit facility is limited to 65% of the net book value of the accounts receivable and inventory of BCFPI and its subsidiaries. We believe that this credit agreement will be extended or a

44

similar agreement entered into given the fact that the agreement is secured by liens on the inventory, accounts receivable and deposit accounts of BCFPI.

Financial covenants under Bowater’s U.S. and Canadian credit facilities are based upon Bowater’s consolidated financial results and consist of the following two ratios:

i.

a maximum ratio of senior secured indebtedness (including all advances and letters of credit under the U.S. and Canadian facilities, and any other indebtedness secured by assets of Bowater and its subsidiaries) to EBITDA (generally defined as net income, excluding extraordinary, non-recurring or non-cash items and gains (or losses) on asset dispositions, plus income taxes plus depreciation plus interest expense) of 1.25 to 1; and

ii.

a minimum ratio of EBITDA, as defined, plus gains (or minus losses) from asset dispositions to interest expense of 2.00 to 1. This ratio has been amended, as noted below, through October 1, 2008.

On November 2, 2007, we obtained an amendment to Bowater’s U.S. and Canadian credit agreements allowing us to adjust EBITDA (generally defined as net income, excluding extraordinary, non-recurring or non-cash items and gains (or losses) on asset dispositions, plus income taxes plus depreciation plus interest expense) for non-recurring gains or losses without limitation. In addition, the minimum ratio of EBITDA, as defined, plus gains (or minus losses) from asset dispositions to interest expense was lowered from 2.00 to 1 to 1.50 to 1 effective October 1, 2007, increasing gradually back up to 2.00 to 1 by October 1, 2008.

On February 25, 2008, we obtained amendments to Bowater’s U.S. and Canadian credit agreements. The amendment to the U.S. credit agreement was entered into between Bowater and certain subsidiaries of Bowater, AbitibiBowater, certain lenders and Wachovia Bank, National Association, as administrative agent for the various lenders under that credit agreement. The amendment to the Canadian credit agreement was entered into among BCFPI, Bowater and certain subsidiaries of Bowater, AbitibiBowater, certain lenders and The Bank of Nova Scotia, as administrative agent for the lenders under that credit agreement. The amendments principally (i) contemplate the transfer by Bowater of the Catawba, South Carolina mill assets and related operations to a new wholly-owned subsidiary of Bowater (the “Catawba Subsidiary”); (ii) permit the transfer of the equity of the Catawba Subsidiary to AbitibiBowater, (iii) make the Catawba Subsidiary an additional borrower under the U.S. credit agreement and a guarantor of the Canadian obligations; (iv) permit the Catawba Subsidiary, AbitibiBowater, Bowater and/or certain of their subsidiaries to incur up to an aggregate of $700 million of additional secured indebtedness, subject to certain conditions; (v) for 2008, increase the applicable margin and increase the first lien leverage ratio requirement (4.50 to 1 to March 31, 2008 and gradually decreasing to 1.25 to 1 by October 1, 2008) and decrease the interest coverage ratio requirement (.75 to 1 to March 31, 2008 and gradually increasing to 2.00 to 1 by January 1, 2009) and (vi) waive any and all defaults that may have occurred as a result of a failure by Bowater and its subsidiaries to comply with certain financial covenants. The amendments contemplate that the Catawba Subsidiary will grant a mortgage on the Catawba mill assets on or before March 31, 2008 as security for $250 million of the indebtedness outstanding under the U.S. credit agreement and for $50 million as security for the Canadian credit agreement. As a consequence of the new previously announced financing plan, we have decided to delay the transfer of the Catawba mill and the granting of security, we will be asking the lenders of our bank facility to agree to this delay as well as make other modifications of the agreement.

Both Bowater’s U.S. and Canadian credit agreements limit AbitibiBowater’s ability to receive cash from Bowater. Bowater may make dividends and distributions to AbitibiBowater sufficient to pay (1) taxes attributable to Bowater and its subsidiaries, (2) up to $75 million in aggregate annual dividends to the holders of common stock and exchangeable shares, and (3) up to $10 million more than 50% of AbitibiBowater’s annual overhead expenses, such as accounting and auditing costs, director fees, director and officer insurance premiums, franchise taxes, transfer agent fees, and legal and other expenses connected to AbitibiBowater’s status as a public company. Overhead expenses do not include management fees, salaries, bonuses, or debt service.

Bowater was not in compliance with both financial covenants as of December 31, 2007; however, we have obtained a waiver through March 31, 2008, the next compliance date. Considering the covenant amendments obtained on February 25, 2008, and anticipating the lenders’ agreement to delay or waive both our separation of the Catawba mill and the corresponding grant of additional security to the lenders, we expect Bowater to be in compliance throughout 2008.

45

CONTRACTUAL OBLIGATIONS

We have obligations to repay our outstanding debt that matures at various dates in the future. In addition, we enter into various supply and cutting rights agreements, guarantees and purchase commitments in the normal course of business. The following summarizes our contractual obligations at December 31, 2007 on a consolidated basis and the effect such obligations are expected to have on our liquidity and cash flow in future periods.

			Within		1 – 3		4 – 5		After
(In millions)	Total		1 Year		Years		Years		5 Years
Long-term debt, including current installments (1)	$	6,221	$	955	$	2,146	$	878	$	2,242
Non-cancelable operating lease obligations (2)		145		36		49		18		42
Purchase obligations (3)		588		71		182		113		222
Tax reserves		88		7		28		14		39
Pension funding (4)		260		260		-		-		-
Severance obligation(5)		103		101		2		-		-
Total contractual obligations	$	7,405	$	1,430	$	2,407	$	1,023	$	2,545

(1)	Long-term debt commitments exclude related discounts and revaluation of debt of $573 million at December 31, 2007, as these items require no cash outlay.
(2)	We control 0.1 million acres of timberlands under long-term leases expiring 2023 to 2058. In addition, we lease certain office premises, office equipment, and transportation equipment under operating leases.
(3)	Purchase obligations include, among other things, a fiber supply contract for our Coosa Pines operation with commitments totaling $74 million through 2014 and a steam supply contract for our Dolbeau operations with commitments totaling $206 million through 2023. Purchase obligations from Abitibi include a cogeneration agreement at our Bridgewater operations in England, totaling $199 million through 2015. We also have a gas pipeline contract at our Mackenzie operations totaling $3 million through 2012.
(4)	Pension funding is calculated on an annual basis.
(5)	Approximately $49 million of our severance obligation is associated with the closures announced as a result of our comprehensive strategic review (See Note 6, Closure Costs, Impairment and Related Charges); mill-wide restructurings at our Thunder Bay, Ontario; Gatineau, Quebec and Dolbeau, Quebec facilities; lump-sum payouts of pension assets to certain employees and changes to our postretirement benefit plans. We recorded an additional severance liability of $60 million as a result of the preliminary allocation of the purchase price of Abitibi to severance liabilities assumed in the Combination. This obligation is expected to be paid out in 2008 and 2009.

In addition to the items shown in the table above, AbitibiBowater is party to employment and change-in-control agreements with its executive officers. Those agreements are described under the heading “Executive Compensation – Employment and Change in Control Agreements” in our Proxy Statement with respect to the 2008 Annual Meeting of Shareholders to be filed under Regulation 14A under the Securities Exchange Act of 1934, as amended.

MONETIZATION OF TIMBER NOTES

In connection with certain timberland sales transactions in 2002 and prior years, Bowater received a portion of the sale proceeds in notes receivable from institutional investors. In order to increase our liquidity, we monetized these notes receivable using qualified special-purpose entities (“QSPEs”) set up in accordance with SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” The more significant aspects of the QSPEs are as follows:

§ The QSPEs are not consolidated within our financial statements. The business purpose of the QSPEs is to hold the notes receivable and issue debt securities to third parties. The value of these debt securities is equal to approximately 90% of the value of the notes receivable. The full principal amounts of the notes receivable are backed by letters of credit issued by third-party financial institutions.

46

§	Our retained interest consists principally of the net excess cash flows (the difference between the interest received on the notes receivable and the interest paid on the debt issued by the QSPE to third parties) and a cash reserve account. Fair value of our retained interests was estimated based on the present value of future excess cash flows to be received over the life of the notes, using management’s best estimate of key assumptions, including credit risk and discount rates.
§	The cash reserve accounts were established at inception and are required to meet specified minimum levels throughout the life of the debt issued by the QSPEs to third party investors. Any excess cash flows revert to Bowater on a quarterly or semi-annual basis. The cash reserve accounts revert to Bowater at the maturity date of the third-party debt.
§	We may be required to make capital contributions to the QSPEs from time to time in sufficient amounts so that the QSPEs will be able to comply with their covenants regarding the payment of taxes, maintenance as entities in good standing, transaction fees, contractual indemnification of the collateral agent and certain other parties, and the maintenance of specified minimum amounts in the cash reserve account. Notwithstanding these covenants, because of the expected net available cash flow to the QSPEs (interest and principal on notes receivable backed by letters of credit will be in excess of interest and principal on debt securities), Bowater does not expect to be required to make additional capital contributions, nor have any capital contributions been required to date.
§	Bowater currently guarantees approximately $6 million, representing 25% of the outstanding investor notes’ principal balance of Timber Note Holdings LLC, one of our QSPEs. This guarantee is proportionately reduced by annual principal repayments on the investor notes (annual minimum repayment of $2 million) through 2008. The remaining investor notes’ principal amount is to be repaid in 2009. Bowater would be required to perform on the guarantee if the QSPE were to default on the investor notes or if there were a default on the notes receivable, neither of which has ever occurred.

The following summarizes our retained interest in QSPEs and those QSPEs total assets and obligations as of December 31, 2007 (in millions):

							Excess of
	Retained		Total		Total		Assets over
Qualified Special Purpose Entity	Interest		Assets		Obligations		Obligations
Calhoun Note Holdings AT LLC	$	7	$	73	$	64	$	9
Calhoun Note Holdings TI LLC		10		73		62		11
Bowater Catawba Note Holdings I LLC		2		19		17		2
Bowater Catawba Note Holdings II LLC		10		96		87		9
Timber Note Holdings LLC		3		28		25		3
Bowater Saluda LLC		8		99		89		10
	$	40	$	388	$	344	$	44

No QSPEs are permitted to hold AbitibiBowater stock and there are no commitments or guarantees that provide for the potential issuance of AbitibiBowater stock. These entities do not engage in speculative activities of any description and are not used to hedge AbitibiBowater positions, and no AbitibiBowater employee is permitted to invest in any QSPE.

EXCHANGE RATE FLUCTUATION EFFECT ON EARNINGS

We compete with North American, European and Asian producers in most of our product lines. Our products are sold and denominated in U.S. dollars, Canadian dollars and selected foreign currencies. A substantial portion of our manufacturing costs are denominated in Canadian dollars. In addition to the impact of product supply and demand, changes in the relative strength or weakness of the U.S. dollar may also affect international trade flows of these products. A stronger U.S. dollar may attract imports into North America from foreign producers, increase supply and have a downward effect on prices, while a weaker U.S. dollar may encourage U.S. exports and increase manufacturing costs that are in Canadian dollars or other foreign currencies. Variations in the exchange rates between the U.S. dollar and other currencies, particularly the Euro and the currencies of Canada, United Kingdom, Sweden and certain Asian countries, will significantly affect our competitive position compared to many of our competitors.

We are particularly sensitive to changes in the value of the Canadian dollar versus the U.S. dollar. The impact of these changes depends primarily on our production and sales volume, the proportion of our production and sales that occur in Canada, the proportion of our financial assets and liabilities denominated in Canadian dollars, our hedging levels and the magnitude, and direction and duration of changes in the exchange rate. We expect exchange rate fluctuations to continue to

47

impact costs and revenues; however, we cannot predict the magnitude or direction of this effect for any quarter, and there can be no assurance of any future effects. During 2007, the relative value of the Canadian dollar ranged from a low of US$0.85 in January 2007 to a high of US$1.09 in November 2007.

Under the exchange rates, hedging levels and operating conditions that existed during 2007, for every one cent increase in the Canadian-U.S. dollar exchange rate, our operating income, before currency hedging, for 2007 would have been reduced by approximately $14 million.

Based on exchange rates, hedging levels and operating conditions projected for the first quarter of 2008, we project that a one-cent increase in the Canadian dollar exchange rate would reduce our operating income for the first quarter by approximately $7 million.

If the Canadian dollar remains strong for an extended period of time, it could influence the foreign exchange rate assumptions that are used in our evaluation of goodwill and long-lived assets for impairment and, consequently, result in additional goodwill or asset impairment charges. See the discussion under “Critical Accounting Estimates – Goodwill” and “Critical Accounting Estimates – Long-lived Assets.”

We have entered into sales agreements denominated in the British pound sterling, representing less than 5% of our sales for the year ended December 31, 2007. Accordingly, changes in the British pound sterling-U.S. dollar exchange rate impact the amount of revenues we recognize. The magnitude and direction of the impact primarily depends on our sales volume under these sales agreements, our hedging levels, and the magnitude, direction and duration of changes in the British pound sterling-U.S. dollar exchange rate. Decreases in the value of the British pound sterling versus the U.S. dollar reduce our sales, which are reported in U.S. dollars.

HEDGING PROGRAMS

For a description of our hedging activities, see Note 19 to our Consolidated Financial Statements included in this Report on Form 10-K.

Abitibi’s foreign exchange instruments were in a substantial gain position at the date of the Combination due to the strengthening of the Canadian dollar against the U.S. dollar. In November 2007, the Board authorized the monetization of Abitibi’s forward exchange and tunnel contracts (a combination of put and call options). We completed the monetization of these derivative instruments in 2007 and, as a result, received cash proceeds of approximately $24 million upon the termination of certain of these contracts. For those contracts that were not terminated, we entered into offsetting currency forward contracts to effectuate the monetization.

Canadian Dollar and U.S. Dollar Forward Contracts and U.S. Dollar Tunnel Contracts

We pay a significant portion of the operating expenses of our Canadian mill sites in Canadian dollars. To reduce our exposure to U.S.-Canadian dollar exchange rate fluctuations, we enter into and designate forward contracts and tunnel contracts to hedge certain of our forecasted Canadian dollar cash outflows at our Canadian mill operations, which we believe are probable of occurring. Hedge ineffectiveness associated with these forward contracts was negligible for the periods presented. The contracts outstanding at December 31, 2007 relate only to the financial instruments discussed above that were not terminated but were monetized through the establishment of offsetting contracts. These financial instruments do not qualify for hedge accounting. Gains and losses of the outstanding contracts are expected to, for the most part, offset each other in the Consolidated Statement of Operations. As of December 31, 2007, the fair value of our outstanding forward contracts and offsetting forward contracts, which each have a notional amount of $70 million, is a net asset of $5 million.

British Pound Sterling Forward Contracts

We have entered into sales agreements denominated in British pound sterling. We began entering into currency forward contracts in early 2007 to partially limit our exposure to British pound sterling-U.S. dollar exchange rate fluctuations with respect to our British pound sterling sales. These currency forward contracts, which did not qualify for hedge accounting treatment during the year, are recorded at fair value with changes in fair value reported in sales in the Consolidated Statement of Operations. Pre-tax losses recognized on these contracts in 2007 were negligible. There are no contracts outstanding as of December 31, 2007.

48

Natural Gas Hedging Program

We began entering into natural gas swap agreements in 2006 under our natural gas hedging program for the purpose of reducing the risk inherent in fluctuating natural gas prices. Our natural gas costs are based on a publicly traded index of natural gas prices plus a fixed amount. The natural gas swap agreements allow us to minimize the effect of fluctuations in that index by contractually exchanging the publicly traded index upon which we are billed for a fixed amount of natural gas costs. The swap agreements, which did not qualify for hedge accounting treatment during the year, are recorded at fair value with changes in fair value reported in cost of sales in the Consolidated Statements of Operations. As a result, approximately $1 million of pre-tax losses were recognized in our Consolidated Statement of Operations in both 2007 and 2006, respectively, for contracts that we entered into to economically hedge forecasted transactions expected to occur through December 2008. As of December 31, 2007, the fair value of our outstanding natural gas swap agreements, which have a notional amount of $6 million, is negligible.

Interest rate swaps

We acquired Abitibi’s outstanding interest rate swaps in the Combination. Abitibi had utilized interest rate swaps to manage their fixed and floating interest rate mix on their long-term debt. The interest rate swaps do not qualify for hedge accounting treatment after the Combination; therefore, changes in fair value of these derivative instruments is recorded in interest expense in the Consolidated Statement of Operations. As of December 31, 2007, the fair value of our outstanding interest rate swaps, which have a notional amount of $850 million, is a liability of $4 million. Approximately $7 million of pre-tax gains were included in interest expense in 2007.

ENVIRONMENTAL ITEMS

We are subject to a variety of federal, state, provincial and local environmental laws and regulations in the jurisdictions in which we operate. We believe our operations are in material compliance with current applicable environmental laws and regulations. Environmental regulations promulgated in the future could require substantial additional expenditures for compliance and could have a material impact on AbitibiBowater, in particular, and the industry in general.

We may be a “potentially responsible party” with respect to three hazardous waste sites that are being addressed pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“Superfund”) or the Resource Conservation and Recovery Act (“RCRA”) corrective action authority. The first two sites are on CNC timberland tracts in South Carolina. One was contaminated when acquired, and subsequently, the prior owner remediated the site and continues to monitor the groundwater. On the second site, several hundred steel drums containing textile chemical residue were discarded by unknown persons. The third site, at our mill in Coosa Pines, Alabama, contained buried drums and has been remediated pursuant to RCRA. We continue to monitor the groundwater. We believe we will not be liable for any significant amounts at any of these sites.

We currently have recorded $27 million for environmental liabilities. Approximately $24 million of this $27 million relates to environmental reserves established in connection with prior acquisitions, including the Combination with Abitibi. The majority of these liabilities are discounted to present value, and they are included in other long-term liabilities on the Consolidated Balance Sheets. The $27 million represents management’s estimate based on an assessment of relevant factors and assumptions of the ultimate settlement amounts for these liabilities. The amount of these liabilities could be affected by changes in facts or assumptions not currently known to management.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2007, the FASB issued Statement No. 160, “Non-controlling Interests in Consolidated Financial Statements—an amendment of ARB No. 51” (“SFAS 160”). SFAS 160 amends ARB 51 to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 requires that all changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently as equity transactions. It also requires that any gain or loss on the deconsolidation of the subsidiary to be measured using the fair value of any non-controlling equity investment rather than the carrying amount of that retained investment. This Statement requires expanded presentation and disclosures in the consolidated financial statements that clearly identify and distinguish between the interests of the parent’s owners and the interests of the non-controlling owners of a subsidiary. SFAS 160 is effective for fiscal years beginning after December 15, 2008. We are currently evaluating the impact of this statement on our results of operations and financial position.

49

In December 2007, the FASB issued Statement No. 141R, “Business Combinations” (“SFAS 141R”). SFAS 141R retains the fundamental requirements in SFAS 141, “Business Combinations”, that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. SFAS 141R makes a number of changes in the following areas: how the acquisition method is applied, such as measuring the assets acquired, the liabilities assumed, and any non-controlling interest at their fair values; recognizing assets acquired and liabilities assumed arising from contingencies; recognizing contingent consideration at the acquisition date, measured at its fair value; and recognizing a gain in the event of a bargain purchase (i.e. negative goodwill). SFAS 141R will be applied prospectively for business combinations for which the acquisition date is on or after the beginning of fiscal years beginning after December 15, 2008, and in the case of post-acquisition tax adjustments, for all business combinations, regardless of the acquisition date.

In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”), which permits entities to choose to measure many financial instruments and certain other items at fair value. The fair value option established by SFAS 159 permits all companies to choose to measure eligible items at fair value at specified election dates. Unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings at each subsequent reporting date. The decision to elect the fair value option may be applied on an instrument by instrument basis, with a few exceptions, is irrevocable, unless a new election date occurs, and is applied to entire instruments only, not to portions of instruments. SFAS 159 is effective for fiscal years beginning after November 1, 2007. SFAS 159 would allow us, for example, to change the way we account for certain investments from the equity method (where we records our proportional interest in the operations of an investee) to a method that would base our income on a change in the fair value of the investment. We have not yet determined whether we will make this election to change the accounting basis of any of our eligible assets or liabilities.

In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 provides enhanced guidance for determining the fair value of assets and liabilities. SFAS 157 also responds to investors’ requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. SFAS 157 applies to other accounting pronouncements that require or permit fair value measurements and is effective for financial statements issued for fiscal years beginning after November 15, 2007 as it is applied to financial assets and liabilities and for fiscal years beginning after November 15, 2008 as it is applied to non-financial assets and liabilities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction. Under the guidance of SFAS 157, the valuation of liabilities assumes that the credit risk of the liability is the same before and after the transfer. Although we are still determining which of the valuations used in our financial statements will be affected by this guidance, we have identified that the liability for the fair value of interest rate swaps is one of them. These instruments are carried in the balance sheet at fair value, which has previously been based on the amount for which they could be settled with their counterparty. Under the guidance of SFAS 157, beginning in 2008, their valuation will also consider the credit risk of AbitibiBowater, resulting in the liability being recorded at an amount different than its settlement value. We have not yet determined the amount of this difference.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates, assumptions and judgments and rely on future projections of results of operations and cash flows. We base our estimates, assumptions and judgments on historical data and other information that we believe are reasonable under the circumstances. These estimates, assumptions and judgments affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of our financial statements. In addition, they affect the reported amounts of revenues and expenses during the reporting periods. It is important that the reader of our financial statements understand that actual results could differ materially from these estimates, assumptions and judgments.

A summary of our significant accounting policies is disclosed in Note 2 to our Consolidated Financial Statements. Based upon a review of our significant accounting policies, we believe the following accounting policies require us to make estimates, assumptions and judgments that can significantly affect the results reported in our Consolidated Financial Statements.

50

Pension and Other Postretirement Benefit Obligations

Description

We record assets and liabilities associated with our pension and other postretirement benefit obligations that may be considered material to our financial position. We also record net periodic benefit costs associated with these obligations as our employees render service.

Judgments and Uncertainties Involved in the Estimate

The following inputs are needed to calculate the fair value of our plan assets and our pension and other postretirement benefit obligations. These inputs are also used to determine our net periodic benefit costs each year. The determination of these inputs requires judgment:

§	discount rate – used to arrive at the net present value of the pension and other postretirement benefit obligations;
§	return on assets – used to estimate the growth in the value of invested assets that are available to satisfy pension benefit obligations;
§	rate of compensation increase – used to calculate the impact future pay increases will have on pension and other postretirement benefit obligations; and
§	health care cost inflation rate – used to calculate the impact of future health care costs on postretirement benefit obligations.

We determined the discount rate by considering the timing and amount of projected future benefit payments and is based on, for our U.S. plans, a portfolio of long-term high quality corporate bonds of a similar duration or, for our Canadian and other plans, a model that matches the plan’s duration to published yield curves. To develop the assumption for our expected long-term rate of return on assets, we considered the historical returns and the future expectations for returns for each class of assets held in our pension portfolios, as well as the target asset allocation of those portfolios. In determining the rate of compensation increase, we reviewed historical salary increases and promotions while considering the impact of current industry conditions and our future industry outlook. For the health care cost inflation rate, we considered historical trends for these costs in the U.S. and Canada.

Effect if Actual Results Differ from Assumptions

Variations in assumptions could have a significant effect on the net periodic benefit cost and net pension and other postretirement benefit obligations reported in our Consolidated Financial Statements. For example, a 25 basis point change in any one of these assumptions would increase (decrease) our 2007 net periodic benefit cost for our pension and other postretirement plans and our net pension and other postretirement benefit obligations as follows (in millions):

							Net Pension and Other
							Postretirement Benefit
	Net Periodic Benefit Cost						Obligations
	25 Basis			25 Basis			25 Basis			25 Basis
	Point			Point			Point			Point
Assumption	Increase			Decrease			Increase			Decrease
Discount rate	$	(7	)	$	6		$	(187	)	$	191
Return on assets		(6	)		6			-			-
Rate of compensation increase		2			(2	)		28			(28	)
Health care cost inflation rate		1			(1	)		9			(8	)

51

The above sensitivity amounts for net periodic benefit cost include the impact of our Abitibi pension and other postretirement benefit plans for the period following the Combination (from October 29, 2007 to December 31, 2007) and for our Bowater pension and other postretirement plans for the entire year, presented separately in the table below (in millions):

	Net Periodic Benefit Cost for						Net Periodic Benefit Cost for
	Bowater Plans						Abitibi Plans (from October 29,
	(for the entire year of 2007)						2007 to December 31, 2007)
	25 Basis			25 Basis			25 Basis			25 Basis
	Point			Point			Point			Point
Assumption	Increase			Decrease			Increase			Decrease
Discount rate	$	(7	)	$	6		$	-		$	-
Return on assets		(5	)		5			(1	)		1
Rate of compensation increase		2			(2	)		-			-
Health care cost inflation rate		1			(1	)		-			-

Goodwill

Description

We have a significant amount of goodwill recorded in our Consolidated Balance Sheets. We review the carrying value of our goodwill for impairment in the fourth quarter of each year or more frequently, if an event occurs that triggers such an interim review. Goodwill is allocated to reporting units for purposes of performing a test for impairment. As a result of the Combination with Abitibi, our goodwill increased by approximately $190 million. The purchase price allocation is preliminary and subject to refinement during the allocation period, which is not expected to last beyond a year from the date of purchase to allow for the finalization of the gathering and review of all pertinent information and as such the goodwill may change. We performed our annual test for impairment in the fourth quarter of 2007 prior to the Combination. As discussed more fully in Note 2 to our Consolidated Financial Statements, if a reporting unit’s carrying value exceeds its fair value, an impairment charge equal to the difference in the carrying value of the goodwill and the implied fair value of the goodwill is recorded. No impairment charges were recorded in 2007. As a result of the decisions announced upon the completion of the initial phase of the comprehensive strategic review on November 29, 2007, we reviewed the facts and circumstances surrounding the event and determined that it was not more likely than not that the fair value of the reporting units have fallen below their carrying values and, therefore, an interim test of impairment was not performed.

Judgments and Uncertainties Involved in the Estimate

We determined the fair values of our reporting units relying primarily on the discounted cash flow method. This method uses projections of cash flows from each of the reporting units. Several of the key assumptions used in our valuation models include periods of operation, projections of product pricing, production levels, product costs, market supply and demand, foreign exchange rates, inflation, weighted average cost of capital and capital spending. We derive these assumptions from several sources, including our internal budgets, which contain existing sales data based on current product lines and assumed production levels, manufacturing costs and product pricing. We believe that our internal forecasts are consistent with those that would be used by a potential buyer in valuing our reporting units.

Our products are commodity products; therefore, pricing is inherently volatile and often follows a cyclical pattern. The average price over a commodity cycle forms the basis of our product pricing assumption. We derive our pricing estimates from information generated internally, from industry research firms and from other published reports and forecasts. Because the strength of the Canadian dollar (as compared to the U.S. dollar) is near historical highs, we believe a potential buyer would consider a shorter-term view of exchange rates between the Canadian and U.S. dollar. Therefore, we used foreign exchange rates that are based on market forward rates for 2008 followed by a gradual reversion to a 5-year historical average.

Determining the reporting units to which we should allocate the goodwill takes considerable judgment and is based upon the determination of the reportable segments, which in and of itself, requires management’s judgment. We are required to evaluate whether each component (i.e., one level below the reportable segment) is a business by assessing those business elements (inputs, processes, outputs) that are present within the component, those business elements that are missing from the component, and the degree of difficulty in replacing the missing elements. Further, if any of the components are considered a business, we are required to determine whether they are similar for purposes of aggregation into a single reporting unit. Our similarity assessment included a review of the customers, products, distribution methods and other pertinent information associated with each component that qualified as a business. Once the reporting units are defined, we are required to

52

determine which reporting units benefit synergistically from the Combination and allocate the acquired goodwill to those reporting units based on their relative fair values.

In our 2007 impairment test, there were no indications of impairment for any of our reporting units, and the fair values of each reporting unit exceeded its carrying value amounts by at least 10%.

Effect if Actual Results Differ from Assumptions

A number of judgments were made in the determination of our reporting units. If a different conclusion had been reached for any one of those assumptions, it could have resulted in the identification of reporting units different from those we actually identified. This may have resulted in a different conclusion when comparing the fair value to the carrying value of the reporting unit.

The assumptions used in our valuation models are interrelated. The continuing degree of interrelationship of these assumptions is itself a significant assumption. Because of the interrelationships among the assumptions, we do not believe it would be meaningful to provide a sensitivity analysis on any of the individual assumptions. However, one key assumption in our valuation model is the weighted average cost of capital, which is used to discount the projected cash flows. If the weighted average cost of capital was lower, the measure of the fair value of our assets would increase. Conversely, if the weighted average cost of capital was higher, the measure of the fair value of our assets would decrease. If our estimate of the weighted average cost of capital used were to increase by 25 basis points, the fair value of each reporting unit in our 2007 annual impairment test would continue to exceed their respective carrying values.

Another key assumption in our valuation model is foreign exchange. Continuation of a strong Canadian dollar could have a significant impact on the 5-year historical average and negatively impact future valuations. It could also have a significant impact on the other key assumptions used in our valuation models.

Future changes in our assumptions or the interrelationship of those assumptions may negatively impact future valuations. In future measurements of fair value, adverse changes in discounted cash flow assumptions could result in an impairment of goodwill that would require a non-cash charge to the Consolidated Statements of Operations and may have a material effect on our financial condition and operating results.

Long-lived Assets  

Asset Impairment

Losses related to impairment of long-lived assets are recognized when circumstances indicate the carrying values of the assets may not be recoverable, such as continuing losses in certain locations. When certain indicators that the carrying value of a long-lived asset may not be recoverable are triggered, we evaluate the carrying value of the asset in relation to its expected undiscounted future cash flows. If the carrying value of the asset is greater than the expected undiscounted future cash flows, an impairment charge is recorded based on the excess of the long-lived asset’s carrying value over its fair value.

Immediately upon the Combination, we began a comprehensive strategic review of our operations to reduce costs and improve our profitability. On November 29, 2007, we announced our decision to reduce our newsprint and commercial papers production capacity by approximately one million metric tons per year during the first quarter of 2008. The reductions include the permanent closure of our Dalhousie, New Brunswick facility, the indefinite idling of our Donnacona, Quebec facility and the permanent closure of paper machine no. 3 at our Gatineau, Quebec facility. We recorded long-lived asset impairment charges of $100 million in 2007. (See Note 6 to our Consolidated Financial Statements).

Fixed Assets Acquired in an Acquisition

For fixed assets acquired in an acquisition, we estimate their fair value based on accepted valuation techniques. These techniques are dependent upon management estimates and assumptions. In connection with the Combination the preliminary estimates of fair value related to Abitibi’s fixed assets and other intangible assets were $3.2 billion and $1.2 billion, respectively. The purchase price allocation is preliminary and subject to refinement during the allocation period, which is not expected to last beyond a year from the date of purchase to allow for the finalization of the gathering and review of all pertinent information. 

Judgments and Uncertainties Involved in the Estimate

Fixed assets acquired in an acquisition and asset impairment loss calculations require us to apply judgment in estimating asset fair values and future cash flows, including periods of operation, projections of product pricing, first quality production levels, product costs, market supply and demand, foreign exchange rates, inflation, projected capital spending and

53

specifically for fixed assets acquired assigned useful lives and discount rate. One key assumption, especially for our long-lived assets in Canada, is the foreign exchange rate. We determined the foreign exchange rates based on market forward rates for 2008 followed by a gradual reversion to a 5-year historical average.

Effect if Actual Results Differ from Assumptions

Actual asset impairment losses could vary positively or negatively from estimated impairment losses if actual results are not consistent with the assumptions and judgments used in estimating future cash flows and asset fair values. The fair value of the fixed assets and other intangible assets acquired in connection with the Combination could vary positively or negatively once the purchase price allocation is finalized. If the fair value of the fixed assets were to increase or decrease by $100 million, our depreciation could increase or decrease by approximately $5 million annually. If the fair value of the other intangible assets were to increase or decrease by $100 million, our amortization could increase or decrease by approximately $3 million annually.

Tax Exposure Matters

Description

In the normal course of business, we are subject to audits from federal, state, provincial and other tax authorities regarding various tax issues. Tax audits may alter the timing or amount of taxable income or deductions, or the allocation of income among tax jurisdictions. The amount ultimately paid upon resolution of issues raised may differ from the amount accrued. We believe that taxes accrued on the Consolidated Balance Sheets fairly represent the amount of future tax liability due. See further discussion of our ongoing and completed tax audits in Note 21 to our Consolidated Financial Statements.

When appropriate, we utilize certain income tax planning strategies to reduce our overall cost of income taxes. We have provided for our estimated exposure attributable to income tax planning strategies in accordance with FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”). We believe that the provision for liabilities resulting from the implementation of income tax planning strategies is appropriate. To date, we have not experienced an examination by governmental revenue authorities that would lead management to believe that our past provisions for exposures related to income tax planning strategies are not adequate.

Judgments and Uncertainties Involved in the Estimate

The amount of our income tax contingency reserve is based on our best estimate of the ultimate settlement of uncertain tax positions on specific issues upon audit by a taxing authority. The process to derive our reserve for all income tax liabilities, including those related to tax planning strategies, requires significant judgment, historical comparisons and reference to authoritative tax resources. On a quarterly basis, we review tax reserves based on changes in tax law, changes in facts or circumstances and all other relevant information.  Our tax reserves are adjusted based on current year requirements, an agreed determination or settlement of a particular matter, the expiration of the statute of limitations for a particular tax period or a change in facts or circumstances regarding the matter.

Effect if Actual Results Differ from Assumptions

Upon audit, it is possible that certain tax strategies might be challenged resulting in a change in our liability for income taxes. If actual results are not consistent with the assumptions and judgments used in determining and estimating our income tax reserves, actual tax expense could vary positively or negatively from our estimates.

Tax Valuation Allowances

Description

We have significant deferred tax assets in the U.S. and Canada related to certain discretionary costs such as research and development expenditures and capital cost recoveries, as well as tax credit carryforwards and ordinary loss carryforwards. We evaluate the deferred tax assets and assess the need for a valuation allowance based on changes in tax law, changes in facts or circumstances and all other relevant information. We have recorded a valuation allowance for certain Canadian, U.S., Korean and United Kingdom deferred tax assets. See discussion of our valuation allowances in Note 21 to our Consolidated Financial Statements.

Judgments and Uncertainties Involved in the Estimate

We are required to assess whether it is more likely than not that the deferred tax assets will be realized, based on forecasted income, or where necessary, the implementation of prudent and feasible tax planning strategies. The carrying value of our deferred tax assets (tax benefits expected to be realized in the future) assumes that we will be able to generate, based on certain estimates and assumptions, sufficient future taxable income in certain tax jurisdictions to utilize these deferred tax

54

benefits, or in the absence of sufficient future taxable income, that we would implement tax planning strategies to generate sufficient taxable income.

Effect if Actual Results Differ from Assumptions

If actual results are not consistent with the assumptions and judgments used in determining and estimating the realization of our deferred tax assets, actual tax expense could vary positively or negatively from our estimates.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

AbitibiBowater is exposed to risks associated with foreign currency exchange rates, commodity price risk and changes in interest rates.

Foreign Currency Exchange Risk

We have manufacturing operations in Canada, the United States, the United Kingdom and South Korea and sales offices located throughout the world. As a result, we are exposed to movements in foreign currency exchange rates in countries outside the United States. Our most significant foreign currency exposure relates to Canada. Approximately 39% of our pulp and paper production capacity and a significant portion of our wood products production are in Canada, with manufacturing costs primarily denominated in Canadian dollars. Also, certain other assets and liabilities are denominated in Canadian dollars and are exposed to foreign currency movements. As a result, our earnings are affected by increases or decreases in the value of the Canadian dollar. Increases in the value of the Canadian dollar versus the United States dollar will tend to reduce reported earnings, and decreases in the value of the Canadian dollar will tend to increase reported earnings. See the information set forth under “Item 1A — Risks Factors – Currency fluctuations may adversely affect our results of operations and financial condition, and changes in foreign currency exchange rates can affect our competitive position, selling prices and manufacturing costs” and under “Item 7- Management’s Discussion and Analysis of Financial Condition and Results of Operations—Exchange Rate Fluctuation Effect on Earnings” for further information on foreign exchange risks related to our operating costs. To reduce our exposure to differences in Canadian dollar exchange rate fluctuations, we periodically enter into and designate Canadian dollar-forward contracts to hedge certain of our forecasted Canadian dollar cash outflows. We estimate the monthly forecasted Canadian dollar outflows on a rolling 24-month basis and, depending on the level of the Canadian dollar, hedge the first monthly Canadian dollar outflows of manufacturing costs up to 90% of such monthly forecasts in each of the first twelve months and up to 80% in the following twelve months of total forecasted Canadian dollar outflows. At December 31, 2007, we had Canadian dollar forward contracts and offsetting forward contracts outstanding for a notional amount of $70 million each. We enter into British pound sterling forward contracts for an amount equal to up to 75% of outstanding sales contracts with U.K. customers, depending on the level of the British pound sterling. At December 31, 2007, we had no British pound sterling forward contracts outstanding. Information regarding the carrying value and fair market value of the contracts is set forth in Note 19 to our Consolidated Financial Statements included in this Form 10-K.

Interest Rate Risk

We are exposed to interest rate risk on our fixed-rate and variable-rate long-term debt and our short-term variable-rate bank debt. Our objective is to manage the impact of interest rate changes on earnings and cash flows and on the market value of our borrowings. We have a mix of fixed-rate and variable-rate borrowings. At December 31, 2007 and 2006, we had $4.6 billion and $2.0 billion, respectively, of fixed rate long-term debt and $1.1 billion and $268 million, respectively, of short and long-term variable rate debt. The fixed rate long-term debt is exposed to fluctuations in fair value resulting from changes in market interest rates, but not earnings or cash flows. Our variable rate short and long-term debt approximates fair value as it bears interest rates that approximate market, but changes in interest rates do affect future earnings and cash flows. Based on our outstanding short and long-term variable rate debt, a 100 basis-point increase in interest rates would have increased our interest expense in 2007 and 2006 by approximately $11 million and $3 million, respectively, before the impact of our interest rate swaps. In addition, Abitibi has $850 million of notional amount of interest rate swaps that exchange a variable rate for a fixed rate. These swaps do not qualify for hedge accounting. A 100 basis point increase in short-term interest rates would have increased our cash disbursements for these swaps by approximately $9 million in 2007. The change in fair value of the instruments is recorded in interest expense in our Consolidated Statement of Operations.

Commodity Price Risk

We purchase significant amounts of energy, chemicals, wood fiber and recovered paper to supply our manufacturing facilities. These raw materials are market-priced commodities and, as such, are subject to fluctuations in market prices. Increases in the

55

prices of these commodities will tend to reduce our reported earnings and decreases will tend to increase our reported earnings. From time to time, we may enter into contracts aimed at securing a stable source of supply for commodities such as timber, wood fiber, energy, chemicals and recovered paper. These contracts typically require us to pay the market price at the time of purchase. Thus under these contracts we generally remain subject to market fluctuations in commodity prices.

56

Item 8. Financial Statements and Supplementary Data

Index to Financial Statements

	Page(s)
Consolidated Statements of Operations for Each of the Years in the Three-Year Period Ended December 31, 2007		58
Consolidated Balance Sheets at December 31, 2007 and 2006		59
Consolidated Statements of Stockholders’ Equity for Each of the Years in the Three-Year Period Ended December 31, 2007		60
Consolidated Statements of Cash Flows for Each of the Years in the Three-Year Period Ended December 31, 2007		61
Notes to Consolidated Financial Statements		62-105
Management’s Report on Financial Statements and Assessment of Internal Control over Financial Reporting		106
Reports of Independent Registered Public Accounting Firms		107-108

Abitibi and Bowater combination

On October 29, 2007, pursuant to a Combination Agreement and Agreement and Plan of Merger, dated as of January 29, 2007, Abitibi-Consolidated Inc. (“Abitibi”) and Bowater Incorporated (“Bowater”) became wholly-owned subsidiaries of AbitibiBowater (the “Combination”). The Combination has been accounted for in accordance with Statement of Financial Accounting Standards No. 141 (“SFAS 141”), “Business Combinations.” Bowater is deemed to be the “acquirer” of Abitibi for accounting purposes, and AbitibiBowater is deemed to be the successor to Bowater for purposes of U.S. securities laws and regulations governing financial reporting. Therefore, unless otherwise indicated, our consolidated financial statements and notes reflect the results of operations and financial position of Bowater for the periods before October 29, 2007 and those of both Abitibi and Bowater for periods beginning on or after October 29, 2007.

57

ABITIBIBOWATER INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions of US dollars except share and per share amounts)

	Years Ended December 31,
	2007			2006			2005
				(Restated)			(Restated)
Sales	$	3,876		$	3,530		$	3,484
Costs and expenses:
Cost of sales, excluding depreciation, amortization and cost of timber harvested		3,206			2,683			2,541
Depreciation, amortization and cost of timber harvested		396			323			329
Distribution costs		410			334			340
Selling and administrative expenses		258			174			158
Closure costs, impairment and other related charges		123			253			83
Lumber duties refund		-			(92	)		-
Arbitration award		28			-			-
Net gain on disposition of assets		(145	)		(186	)		(66	)
Operating (loss) income		(400	)		41			99
Interest expense		(249	)		(196	)		(199	)
Other income, net		-			44			9
Loss before income taxes, minority interests and cumulative effect of accounting changes		(649	)		(111	)		(91	)
Income tax benefit (provision)		158			(19	)		(39	)
Minority interests, net of tax		1			(5	)		10
Loss before cumulative effect of accounting changes		(490	)		(135	)		(120	)
Cumulative effect of accounting changes, net of tax		-			(3	)		(1	)
Net loss	$	(490	)	$	(138	)	$	(121	)
Loss per share:
Basic loss per common share:
Loss before cumulative effect of accounting changes	$	(14.11	)	$	(4.55	)	$	(4.03	)
Cumulative effect of accounting changes, net of tax		-			(0.09	)		(0.02	)
Net loss	$	(14.11	)	$	(4.64	)	$	(4.05	)
Diluted loss per common share:
Loss before cumulative effect of accounting changes	$	(14.11	)	$	(4.55	)	$	(4.03	)
Cumulative effect of accounting changes, net of tax		-			(0.09	)		(0.02	)
Net loss	$	(14.11	)	$	(4.64	)	$	(4.05	)
Average number of shares outstanding (in millions):
Basic and diluted		34.7			29.8			29.8

See accompanying notes to consolidated financial statements.

58

ABITIBIBOWATER INC.

CONSOLIDATED BALANCE SHEETS
(In millions of US dollars except share amounts)

	At December 31,
	2007			2006
				(Restated)
Assets
Current assets:
Cash and cash equivalents	$	195		$	99
Accounts receivable, net		754			444
Inventories, net		906			350
Assets held for sale		184			19
Other current assets		103			47
Total current assets		2,142			959
Timber and timberlands		58			61
Fixed assets, net		5,707			2,878
Goodwill		779			590
Other intangible assets, net		1,203			-
Other assets		430			158
Total assets	$	10,319		$	4,646
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable and accrued liabilities	$	1,206		$	431
Short-term bank debt		589			-
Current installments of long-term debt		364			15
Liabilities associated with assets held for sale		19			-
Total current liabilities		2,178			446
Long-term debt, net of current installments		4,695			2,252
Pension and other postretirement benefit obligations		936			653
Other long-term liabilities		231			90
Deferred income taxes		230			313
Minority interests in subsidiaries		150			59
Commitments and contingencies
Shareholders’ equity:
Common stock, $1 par value. Authorized 100,000,000 shares; issued 52,363,033 and 35,144,254 shares at December 31, 2007 and 2006, respectively		52			35
Exchangeable shares, no par value. Unlimited shares authorized; 5,106,627 and 740,392 shares outstanding at December 31, 2007 and 2006, respectively		276			68
Additional paid-in capital		2,313			1,663
Deficit		(598	)		(76	)
Accumulated other comprehensive loss		(144	)		(371	)
Treasury stock at cost, none at December 31, 2007 and 6,032,372 shares at December 31, 2006		-			(486	)
Total shareholders’ equity		1,899			833
Total liabilities and shareholders’ equity	$	10,319		$	4,646

See accompanying notes to consolidated financial statements.

59

ABITIBIBOWATER INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions of US dollars except share and per-share amounts)

Additional

Accumulated

Common

Paid In

Retained

Other

Treasury

Total

Stock

Exchangeable

Capital

Earnings

Comprehensive

Stock

Shareholders’

(Restated)

Shares

(Restated)

(Deficit)

Loss

(Restated)

Equity

Balance at December 31, 2004

$

35

$

70

$

1,650

$

267

$

(29

)

$

(486

)

$

1,507

Retraction of exchangeable shares (16,595 shares issued and exchangeable shares retracted)

–

(2

)

2

–

–

–

–

Dividends on common stock ($1.54 per share)

–

–

–

(46

)

–

–

(46

)

Stock options exercised (35,880 shares)

–

–

2

–

–

–

2

Restricted stock units cancellation (5,306 shares)

–

–

–

–

–

–

–

Share-based compensation costs for equity awards

–

–

–

–

–

–

–

Treasury stock used for dividend reinvestment plans and to pay employee and director benefits (1,722 shares)

–

–

–

–

–

–

–

Comprehensive (loss) income:

Net loss

–

–

–

(121

)

–

–

(121

)

Foreign currency translation

–

–

–

–

4

–

4

Minimum pension liability, net of tax of $1

–

–

–

–

(73

)

–

(73

)

Change in unrealized gain on hedged transactions, net of tax of $35

–

–

–

–

(58

)

–

(58

)

Total comprehensive loss

(248

)

Balance at December 31, 2005

$

35

$

68

$

1,654

$

100

$

(156

)

$

(486

)

$

1,215

Cumulative adjustment to retained earnings for adoption of SAB 108

–

–

–

9

–

–

9

Retraction of exchangeable shares (5,520 shares issued and exchangeable shares retracted)

–

–

–

–

–

–

–

Dividends on common stock ($1.54 per share)

–

–

–

(47

)

–

–

(47

)

Restricted stock units vested (24,178 shares, net of shares forfeited for employee withholding taxes)

–

–

–

–

–

–

–

Share-based compensation costs for equity awards

–

–

9

–

–

–

9

Treasury stock used for dividend reinvestment plans and employee and director benefits (2,266 shares)

–

–

–

–

–

–

–

Comprehensive (loss) income:

Net loss

–

–

–

(138

)

–

–

(138

)

Foreign currency translation

–

–

–

–

–

–

–

Minimum pension liability, net of tax of $15

–

–

–

–

60

–

60

Change in unrealized gain on hedged transactions, net of tax of $12

–

–

–

–

(19

)

–

(19

)

Total comprehensive loss

(97

)

Adjustment to initially apply SFAS 158, net of tax of $60

–

–

–

–

(256

)

–

(256

)

Balance at December 31, 2006

$

35

$

68

$

1,663

$

(76

)

$

(371

)

$

(486

)

$

833

Cumulative adjustment to retained deficit for the adoption of FIN 48

–

–

–

2

–

–

2

Retraction of exchangeable shares (598,625 shares issued and exchangeable shares retracted)

1

(34

)

33

–

–

–

–

Dividends on common stock ($1.15 per share)

–

–

–

(34

)

–

–

(34

)

Restricted stock units vested (55,404 shares, net of shares forfeited for employee withholding taxes)

–

–

2

–

–

–

2

Share-based compensation costs for equity awards

–

–

12

–

–

–

12

Treasury stock used for dividend reinvestment plans and employee and director benefits (2,321 shares)

–

–

–

–

–

–

–

Cancellation of 6,030,051 shares of treasury stock and issuance of 22,594,801 common shares and 4,964,860 exchangeable shares to affect the Combination

16

242

603

–

–

486

1,347

Comprehensive (loss) income:

Net loss

–

–

–

(490

)

–

–

(490

)

Change in unamortized prior service costs, net of tax of $15

–

–

–

–

23

–

23

Change in unamortized actuarial gains and losses, net of tax of $43

–

–

–

–

224

–

224

Foreign currency translation

–

–

–

–

(11

)

–

(11

)

Change in unrealized gain on hedged transactions, net of tax of $4

–

–

–

–

(9

)

–

(9

)

Total comprehensive loss

(263

)

Balance at December 31, 2007

$

52

$

276

$

2,313

$

(598

)

$

(144

)

$

–

$

1,899

See accompanying notes to consolidated financial statements.

60

ABITIBIBOWATER INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions of US dollars)

	Years Ended December 31,
	2007			2006			2005
Cash flows from operating activities:
Net loss	$	(490	)	$	(138	)	$	(121	)
Adjustments to reconcile net loss to net cash (used for) provided by operating activities:
Cumulative effect of accounting changes, net of tax		–			3			1
Share-based compensation		13			5			–
Depreciation, amortization and cost of timber harvested		396			323			329
Closure costs, impairment and other related charges		100			249			83
Deferred income taxes		(76	)		25			29
Minority interests, net of tax		(1	)		5			(10	)
Net pension (contributions) benefit costs		(116	)		(41	)		(33	)
Net gain on disposition of assets		(145	)		(186	)		(66	)
Gain on extinguishment of debt		–			(13	)		–
Gain on translation of foreign currency denominated debt		(29	)		(1	)		(10	)
Changes in working capital:
Accounts receivable		99			(34	)		(33	)
Inventories		(1	)		20			(40	)
Income taxes receivable and payable		(3	)		(21	)		22
Accounts payable and accrued liabilities		63			(2	)		13
Other, net		(57	)		(12	)		5
Net cash (used for) provided by operating activities		(247	)		182			169
Cash flows from investing activities:
Cash invested in fixed assets, timber and timberlands		(128	)		(199	)		(168	)
Dispositions of assets, including timber and timberlands		197			332			76
Cash acquired in the Combination		116			–			–
Direct acquisition costs related to the Combination		(35	)		–			–
Cash received in monetization of financial instruments		24			–			–
Other investing activities, net		3			(3	)		–
Net cash provided by (used for) investing activities		177			130			(92	)
Cash flows from financing activities:
Cash dividends, including minority interests		(49	)		(46	)		(46	)
Short-term financing		263			370			572
Short-term financing repayments		(33	)		(432	)		(591	)
Repurchases and payments of long-term debt		(15	)		(135	)		(14	)
Stock options exercised		–			–			2
Net cash provided by (used for) financing activities		166			(243	)		(77	)
Net increase in cash and cash equivalents		96			69			–
Cash and cash equivalents:
Beginning of year		99			30			30
End of year	$	195		$	99		$	30
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest, including capitalized interest of $–, $4, and $1	$	220		$	210		$	207
Income taxes	$	–		$	15		$	–

See accompanying notes to consolidated financial statements.

61

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization and Basis of Presentation

Nature of operations

AbitibiBowater Inc. (“AbitibiBowater”, also referred to as “we” or “our”) was incorporated in Delaware on January 25, 2007. AbitibiBowater is a leading producer of newsprint and coated and specialty papers. In addition, we produce and sell market pulp and wood products. We operate pulp and paper manufacturing facilities in Canada, the United States, the United Kingdom and South Korea as well as sawmills, remanufacturing facilities and engineered wood facilities in Canada and the United States. We are among the largest recyclers of newspapers and magazines in the world.

Abitibi and Bowater combination

On October 29, 2007, pursuant to a Combination Agreement and Agreement and Plan of Merger, dated as of January 29, 2007, Abitibi-Consolidated Inc. (“Abitibi”) and Bowater Incorporated (“Bowater”) combined in a merger of equals with each becoming a wholly-owned subsidiary of AbitibiBowater (the “Combination”). The Combination has been accounted for in accordance with Statement of Financial Accounting Standards No. 141 (“SFAS 141”), “Business Combinations.” Bowater is deemed to be the “acquirer” of Abitibi for accounting purposes, and AbitibiBowater is deemed to be the successor to Bowater for purposes of U.S. securities laws and regulations governing financial reporting. Therefore, unless otherwise indicated, our consolidated financial statements and notes reflect the results of operations and financial position of Bowater for the periods before October 29, 2007 and those of both Abitibi and Bowater for periods beginning on or after October 29, 2007.

As a result of the Combination, each issued and outstanding share of Bowater common stock was converted into 0.52 of a share of AbitibiBowater common stock. Each issued and outstanding exchangeable share of Bowater Canada Inc. (a wholly-owned subsidiary of Bowater now named AbitibiBowater Canada Inc.) was changed into 0.52 of an exchangeable share of AbitibiBowater Canada Inc. Each issued and outstanding share of Abitibi common stock was exchanged for either 0.06261 of a share of AbitibiBowater common stock or 0.06261 of an exchangeable share of AbitibiBowater Canada Inc. All Abitibi and Bowater stock options, stock appreciation rights and other stock-based awards outstanding, whether vested or unvested, were converted into AbitibiBowater stock options, stock appreciation rights or stock-based awards. The number of shares subject to such converted awards was adjusted by multiplying the number of shares outstanding by the Abitibi exchange ratio of 0.06261, in the case of an Abitibi award, and by the Bowater exchange ratio of 0.52, in the case of a Bowater award. Similarly, the exercise price of the converted stock options or base price of the stock appreciation rights was adjusted by dividing such price by the Abitibi exchange ratio or the Bowater exchange ratio as appropriate. We retroactively restated all share and share-related information in our consolidated financial statements and notes for all periods before the Combination to reflect the Bowater exchange ratio of 0.52.

Refer to Note 3, Business Combination, for pro forma financial information and the preliminary allocation of the purchase price to the identifiable assets and liabilities of Abitibi.

Financial statements

We have prepared the consolidated financial statements in accordance with U.S. GAAP. All amounts are expressed in U.S. dollars, unless otherwise indicated. We have reclassified some of the figures for the comparative years in the consolidated financial statements and notes to make them consistent with the presentation for the current year.

Consolidation

Our consolidated financial statements include the accounts of AbitibiBowater and our wholly-owned and controlled subsidiaries. All significant transactions and balances between these companies have been eliminated. All consolidated subsidiaries are wholly-owned with the exception of the following:

	AbitibiBowater			Partner
Consolidated Subsidiary	Ownership		Partner	Ownership
Produits Forestiers Saguenay	85.5	%	Les Placements H.N.M.A. Inc.	14.5	%
Produits Forestiers La Tuque	82.2	%	Coopérative Forestière du Haut Saint-Maurice	17.8	%
ACH Limited Partnership	75	%	Caisse de dépôt et placement du Québec	25	%
Manicouagan Power Company	60	%	Alcoa Inc.	40	%
Augusta Newsprint Company	52.5	%	The Woodbridge Company	47.5	%
Calhoun Newsprint Company (“CNC”)	51	%	Herald Company, Inc.	49	%
Bowater Mersey Paper Company Ltd.	51	%	Washington Post Company	49	%
Donohue Malbaie Inc.	51	%	New York Times	49	%

62

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Equity method investments

We account for our investments in affiliated companies where we have significant influence, but not control, over their operations using the equity method of accounting.

Note 2. Summary of Significant Accounting Policies

Use of estimates

In preparing the consolidated financial statements in accordance with U.S. GAAP, management is required to make estimates and assumptions. These estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period and the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. The most significant estimates relate to expected future cash flows used in our goodwill and long-lived asset impairment testing, fair value estimates in the preliminary allocation of the Abitibi purchase price, deferred tax asset valuation allowances and assumptions underlying our pension accounting. Estimates are based on a number of factors, including historical experience, current events and other assumptions that we believe are reasonable under the circumstances. Actual results could differ materially from those estimates under different assumptions or conditions.

Cash and cash equivalents

Cash and cash equivalents generally consist of direct obligations of the United States and Canadian governments and their agencies, demand deposits, banker’s acceptances, investment-grade commercial paper and other short-term investment-grade securities with a maturity of three months or less from the date of purchase. These investments are recorded at cost, which approximates their market value.

Accounts receivable (note 18)

Accounts receivable are recorded at cost, net of an allowance for doubtful accounts that is based on expected collectibility. Losses on the sale of accounts receivable (through our securitization program) are calculated by comparing the book value of the accounts receivable sold to the total of the cash proceeds received from the sale and the fair value of the retained interest in such receivables on the date of the transfer. Fair value is determined on a discounted cash flow basis. Losses on the sale of accounts receivable are recognized when incurred and included in “Other (expense) income, net” in the Consolidated Statements of Operations.

Monetization of notes receivable (note 18)

We monetized notes receivable using qualified special purpose entities (“QSPEs”) set up in accordance with SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” (“SFAS 140”). The QSPEs that were established for note monetization purposes have not been consolidated within our financial statements. Our retained interest consists principally of the excess cash flows (the difference between the interest received on the notes receivable and the interest paid on the securities issued by the QSPE to third parties) and a cash reserve account established at inception. Fair value of the retained interests was estimated based on the present value of future excess cash flows to be received over the life of the notes, using management’s best estimate of key assumptions, including credit risk and discount rates. Our retained interests are included in “Other assets” in the Consolidated Balance Sheets. Excess cash flows revert to us on a quarterly or semi-annual basis. The cash reserve account reverts to us at the maturity of the investor notes.

Inventories (note 11)

Inventories are stated at the lower of cost or market value. Cost includes labor, materials and production overhead and is determined by using the average cost and last-in, first-out (“LIFO”) methods. Production overhead included in the cost of our inventories is based on the normal capacity of our production facilities. Unallocated overhead, including production overhead associated with abnormal production levels, is recognized in “Cost of sales” in the Consolidated Statements of Operations when incurred.

Timber and timberlands

We capitalize costs related to the acquisition of timber and timberlands and subsequent costs incurred for the planting and growing of timber. The cost generally includes the acquisition cost of land and timber, property taxes, lease payments, site preparation and other costs. These costs, excluding land, are expensed at the time the timber is harvested, based on annually determined depletion rates, and are included in “Depreciation, amortization and cost of timber harvested” in the Consolidated Statements of Operations. Growth and yield models are used to estimate timber volume on our land from year to year. These volumes affect the depletion rates, which are calculated annually based on the capitalized costs and the total timber volume based on the current stage of the growth cycle.

63

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fixed assets (note 13)

Fixed assets are stated at cost less accumulated depreciation. The cost of the fixed asset is reduced by any investment tax credits or government capital grants received. Depreciation is provided on a straight-line basis over the estimated useful lives of the assets. Repair and maintenance costs, including those associated with planned major maintenance, are expensed as incurred. We capitalize interest on borrowings during the construction period of major capital projects as part of the related asset and amortize the capitalized interest into earnings over the related asset’s remaining useful life.

Asset retirement obligations (note 16)

We record an asset and a liability equal to the present value of the estimated costs associated with the retirement of long-lived assets where a legal or contractual obligation exists; life is determinable; and a reasonable estimate of fair value can be made, even if the timing and/or settlement of the obligation is conditional on a future event that may or may not be within our control. The liability is accreted to recognize the passage of time using a credit adjusted risk-free interest rate, and the asset is depreciated over the life of the related equipment or facility. The asset and liability are subsequently adjusted for changes in the amount or timing of the estimated costs.

Environmental costs (note 22)

We expense environmental costs related to existing conditions resulting from past or current operations and from which no current or future benefit is discernible. Expenditures that extend the life of the related property are capitalized. We determine our liability on a site-by-site basis and record a liability at the time it is probable and can be reasonably estimated. Such accruals are adjusted as further information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are discounted to their present value when the amount and timing of expected cash payments are reliably determinable.

Impairment of long-lived assets (note 6)

Long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying value of a long-lived asset or group of assets (herein defined as “long-lived asset”) may no longer be recoverable. The recoverability of a long-lived asset to be held and used is tested by comparing the carrying amount of the long-lived asset to the sum of the estimated future undiscounted cash flows expected to be generated by that asset. In estimating the future undiscounted cash flows, we use projections of cash flows directly associated with, and which are expected to arise as a direct result of, the use and eventual disposition of the asset. The principal assumptions include periods of operation, projections of product pricing, first quality production levels, product costs, market supply and demand, foreign exchange rates, inflation and projected capital spending. Changes in any of these estimates could have a material effect on the estimated future undiscounted cash flows expected to be generated by the asset. If it is determined that a long-lived asset is not recoverable, an impairment loss would be calculated equal to the excess of the carrying amount of the long-lived asset over its fair value. Long-lived assets classified as held for sale are recorded at the lower of their carrying amount or fair value less cost to sell. In making our determination of the fair value of a long-lived asset, we rely primarily on the discounted cash flow method. Long-lived assets to be disposed of other than by sale are classified as held and used until the long-lived asset is disposed or use has ceased.

Goodwill and other intangible assets (note 5)

We test goodwill for impairment annually in the fourth quarter of each year and when events or changes in circumstances indicate that goodwill might be impaired. We compare our reporting units’ fair values with their respective carrying values, including goodwill. If a reporting unit’s fair value exceeds its carrying value, no impairment loss is recognized. If a reporting unit’s carrying value exceeds its fair value, an impairment charge equal to the difference between the carrying value of the goodwill and the implied fair value of the goodwill is recorded. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. The excess of the fair value of the reporting unit over the fair value of the identifiable net assets of the reporting unit is the implied fair value of goodwill. In making our determination of the fair value of a reporting unit, we rely primarily on the discounted cash flow method. This method uses projections of cash flows from each of the reporting units and makes use of several key assumptions.

Intangible assets are recorded at cost. Amortization is provided on a straight-line basis over the estimated life of the asset. An impairment loss is recognized in the amount that the intangible asset’s carrying value exceeds its fair value if it is determined that the carrying amount is not recoverable.

Income taxes (note 21)

Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to be recovered or settled. Valuation allowances are recognized to reduce deferred tax assets to the amount that is more likely than not to be realized. In assessing the likelihood of realization, we consider estimates of future taxable income and tax planning

64

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

strategies. We have not provided for U.S. income taxes on the undistributed earnings of certain of our foreign subsidiaries, as we have specific plans for the reinvestment of such earnings. We recognize interest and penalties accrued related to unrecognized tax benefits as components of income tax expense.

In January 2007, we adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for the uncertainty in income taxes recognized by prescribing the threshold a tax position is required to meet before being recognized in the financial statements. Tax benefits recognized in the Consolidated Statements of Operations are measured based on the largest benefit that cumulatively has a greater than fifty percent likelihood of being sustained. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the adoption, we recorded a $2 million credit to our opening deficit balance. The credit represents the cumulative effect of adoption on prior periods.

Pension and other postretirement benefit obligations (note 20)

We recognize an asset or a liability for pension and other postretirement obligations net of the fair value of plan assets. An asset is recognized for a plan’s over-funded status, and a liability is recognized for a plan’s under-funded status. Changes in the funding status that have not been recognized in our net periodic benefit costs are reflected as an adjustment to our “Accumulated other comprehensive loss.” Net periodic benefit costs are recognized as employees render the services necessary to earn the pension and other postretirement benefits. Amounts we pay to match employees’ contributions in our defined contribution plans are expensed as incurred.

Financial instruments (note 19)

We record all derivatives as either assets or liabilities in the balance sheet at fair value. Changes in the fair value of a derivative that has been designated and qualifies as a cash flow hedge are deferred and recorded as a component of “Accumulated other comprehensive loss” until the underlying transaction is recorded in earnings. At that time, gains or losses are reclassified from “Accumulated other comprehensive loss” to the Consolidated Statements of Operations on the same line as the underlying transaction has been recorded (cost of sales or interest expense). Any ineffective portion of a hedging derivative’s change in fair value is recognized immediately in earnings. Changes in the fair value of a derivative that has not been designated or does not qualify for hedge accounting treatment are recognized in earnings immediately.

Share-based compensation (note 24)

We amortize the fair value of our share-based awards over the requisite service period using the straight-line attribution approach. The requisite service period is reduced for those employees who are retirement eligible at the date of the grant or who will become retirement eligible during the vesting period. The fair value of our stock options is determined using a Black-Scholes option pricing formula. The fair value of our restricted stock units (“RSUs”) and deferred stock units (“DSUs”) are determined by multiplying the market price of a share of AbitibiBowater common stock on the grant date by the number of units. Share-based awards that are settled in cash or with shares purchased on the open market are recognized as a liability, which is remeasured at fair value at each balance sheet date. The cumulative effect of the change in fair value is recognized in the period of the change as an adjustment to compensation cost. We estimate forfeitures of share-based awards based on historical experience and recognize compensation cost only for those awards expected to vest. Estimated forfeitures are adjusted to actual experience as needed. Compensation cost for performance-based awards is recognized when it is probable that the performance criteria will be met.

We have elected to adopt the alternative transition method provided in FASB issued Staff Position (“FSP”) No. FAS 123R-3, “Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards” for calculating the tax effects of share-based compensation. The additional paid-in capital (“APIC”) pool represents the excess tax benefits related to share-based compensation that are available to absorb future tax deficiencies. If the amount of future tax deficiencies is greater than the available APIC pool, we will record the excess as income tax expense in our Consolidated Statements of Operations. For the years ended December 31, 2007 and 2006, we had a sufficient APIC pool to cover any tax deficiencies recorded; as a result, these deficiencies did not affect our results of operations.

We classify the cash flows resulting from the tax benefit that arises from the exercise of stock options and the vesting of RSUs and DSUs that exceed the compensation cost recognized (excess tax benefits) as financing cash flows.

Before our adoption of the fair value recognition provisions of SFAS No. 123R, “Share-based Payments” and related interpretations (“SFAS 123R”) on January 1, 2006, our compensation costs were much lower as they were based on the intrinsic value of an award. In 2005, the Board accelerated the vesting of 609,830 unvested stock options granted to employees in 2004 and 2005. The exercise price for substantially all of the unvested stock option awards were below the closing market price at the time of the acceleration. We accelerated the vesting of these stock options to reduce compensation expense that would have been recorded in the Consolidated Statement of Operations in future periods upon the adoption of SFAS No. 123R. Results for periods prior to our adoption of SFAS 123R have not been restated. The table

65

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

below illustrates the pro forma effect on net loss and loss per share if we had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”, to our share-based compensation plans in the year ended December 31, 2005:

(In millions, except per-share amounts)	2005
Net loss as reported:	$	(121	)
Add: Share-based compensation expense included in net loss		-
Deduct: Share-based compensation expense determined under fair value based methods, net of related tax effects		(8	)
Pro forma net loss	$	(129	)
Loss per share:
Basic and diluted, as reported (restated)	$	(4.05	)
Basic and diluted, pro forma (restated)		(4.33	)

For purpose of the above disclosure, the fair value of each option granted during the year ended 2005 was estimated as of the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

	2005
Assumptions:
Expected dividend yield		2.2	%
Expected stock price volatility		29.0	%
Risk-free interest rate		4.0	%
Expected option lives	7.2 years
Weighted average fair value of options granted (restated)	$21.52

We estimated the expected dividend yield, expected volatility and expected life of each stock option based upon historical experience. The risk-free rate of interest is based on a zero-coupon U.S. Treasury instrument with a remaining term approximating the expected life of the stock option. Forfeitures were recognized as they occurred.

The adoption of SFAS 123R resulted in a cumulative effect of accounting change of $3 million, net of tax, (or $0.09 per share) that we recorded in the first quarter of 2006. This cumulative charge represents the fair value of the equity participation rights obligation at January 1, 2006, net of tax, which was estimated based on a Black-Scholes option pricing formula.

Revenue recognition

Most of our sales are generated from sales of pulp and paper products, which are primarily delivered to our customers directly from our mills by either truck or rail and typically have the terms free on board (“FOB”) shipping point. For these sales, revenue is typically recorded when the product leaves the mill. Sales are reported net of allowances and rebates, and the following criteria must be met before they are recognized: persuasive evidence of an arrangement exists, delivery has occurred and we have no remaining obligations, prices are fixed or determinable, and collectibility is reasonably assured.

Loss per share (note 10)

We calculate the basic loss per common share by dividing the net loss by the weighted average number of issued and outstanding common shares and exchangeable shares. The diluted loss per share represents what our loss per share would have been if instruments convertible into common shares (such as stock options and restricted stock units) that had the impact of increasing our loss per share had been converted either at the beginning of the year for instruments that were outstanding all year or from the date of issue for instruments issued during the year. The incremental shares are calculated using the treasury stock method.

Translation

The functional currency of the majority of our operations is the U.S. dollar. However, some of these operations maintain their books and records in their local currency in accordance with certain statutory requirements. Non-monetary assets and liabilities and related depreciation and amortization for these foreign operations are remeasured into U.S. dollars using historical exchange rates. Remaining assets and liabilities are remeasured into U.S. dollars using the exchange rates as of the

66

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

balance sheet date. Gains and losses from foreign currency transactions and from remeasurement of the balance sheet are reported as “Other income, net” in the Consolidated Statements of Operations. Income and expense items are remeasured into U.S. dollars using an average exchange rate for the period.

The functional currency of our self-sustaining foreign operations is the local currency. Assets and liabilities of these subsidiaries are translated into U.S. dollars at the exchange rates in effect at the balance sheet dates. Income and expense items are translated at average daily or monthly exchange rates for the period. The resulting translation gains or losses are recognized as a component of equity in “Accumulated other comprehensive loss.”

Staff Accounting Bulletin No. 108

In December 2006, we adopted the provisions of Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). We elected, as allowed under SAB 108, to reflect the effect of initially applying this guidance by adjusting the carrying amount of the impacted liabilities as of the beginning of 2006 and recording an offsetting adjustment to the opening balance of our retained earnings in 2006. We recorded a cumulative adjustment to increase our Retained Earnings by $9 million for the adoption of SAB 108.

The following table presents a description of the individual adjustments included in the cumulative adjustment to Retained Earnings. These adjustments were identified by management in the normal course of performing our internal control activities:

(In millions)				Description of the Adjustment	Years Impacted
Vacation liability (net of tax of $5)	$	(9	)	Adjusted to reflect under accrual of vacation liability	1980’s – 2003
Deferred tax liability		8		Adjusted to reflect impact of tax rate changes	1998 – 2002
Deferred tax liability		7		Adjusted to reflect tax basis of retirement assets	1980’s – 2005
Purchased materials liability		3		Adjusted to reflect accrual of amounts owed	2004 – 2005
Total	$	9

In the 1980’s, our vacation expenses were recorded on a cash basis. Upon review of the vacation policies, it was determined that certain of our mill locations were not properly accruing their liabilities based on the vacation earned by employees. In 2003, we began adjusting the vacation liability for the change in vacation earned as compared to the prior year, thus reflecting the correct adjustment to each year’s income statement. A tax benefit of $5 million was recorded for the vacation liability adjustment.

In 1998, in connection with an acquisition, we established deferred tax liabilities through purchase accounting associated with certain Canadian mills acquired. These purchase accounting related deferred taxes were maintained at the existing effective tax rate and were not adjusted for changes in our effective tax rate. In 2003, we began adjusting these deferred tax liabilities for the current year’s income statement impact. In 2006, the deferred tax liability was adjusted to reflect the then current tax rates.

In the 1980’s, we established deferred tax liabilities for certain retirement plan assets based on our conclusions regarding the tax basis of these assets. The carrying amounts of that liability was not adjusted until 2006 after it was determined that the actual tax basis should have been lower than originally calculated and adjusted for contributions and distributions.

During a balance sheet review at one of our locations, it was determined that an accrual for purchased materials and services was overstated by $3 million. Automatic accruals had been established for the purchase order amount upon receipt of materials or services rendered, however, the appropriate amount was not released from the system upon receipt of a final invoice. The purchased materials liability was adjusted to reflect the amounts owed in 2006.

Recent accounting pronouncements

In December 2007, the FASB issued Statement No. 160, “Non-controlling Interests in Consolidated Financial Statements—an amendment of ARB No. 51” (“SFAS 160”). SFAS 160 amends ARB 51 to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 requires that all changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently as equity transactions. It also requires that any gain or loss on the deconsolidation of the subsidiary to be measured using the fair value of any non-controlling equity investment rather than the carrying amount of that retained investment. This Statement requires expanded presentation and disclosures in the consolidated financial statements that clearly identify and distinguish between the interests of the parent’s owners and the interests of the non-

67

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

controlling owners of a subsidiary. SFAS 160 is effective for fiscal years beginning after December 15, 2008. We are currently evaluating the impact of this statement on our results of operations and financial position.

In December 2007, the FASB issued Statement No. 141R, “Business Combinations” (“SFAS 141R”). SFAS 141R retains the fundamental requirements in SFAS 141, “Business Combinations,” that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. The Statement makes a number of changes to how the acquisition method is applied, such as measuring the assets acquired, the liabilities assumed, and any non-controlling interest at their fair values; recognizing assets acquired and liabilities assumed arising from contingencies; recognizing contingent consideration at the acquisition date, measured at its fair value; and recognizing a gain in the event of a bargain purchase (i.e. negative goodwill). SFAS 141R will be applied prospectively for business combinations for which the acquisition date is on or after the beginning of fiscal years beginning after December 15, 2008, and in the case of post-acquisition tax adjustments, for all business combinations, regardless of the acquisition date.

In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”), which permits entities to choose to measure many financial instruments and certain other items at fair value. The fair value option established by SFAS 159 permits all companies to choose to measure eligible items at fair value at specified election dates. Unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings at each subsequent reporting date. The decision to elect the fair value option may be applied on an instrument by instrument basis, with a few exceptions, is irrevocable, unless a new election date occurs, and is applied to entire instruments only, not to portions of instruments. SFAS 159 is effective for fiscal years beginning after November 1, 2007. For example, SFAS 159 would allow us to change the way we account for certain investments from the equity method (where we record our proportional interest in the operations of an investee) to a method that would base our income on a change in the fair value of the investment. We have not yet determined whether we will make this election to change the accounting basis of any of our eligible assets or liabilities.

In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 provides enhanced guidance for determining the fair value of assets and liabilities. SFAS 157 also responds to investors’ requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. SFAS 157 applies to other accounting pronouncements that require or permit fair value measurements and is effective for financial statements issued for fiscal years beginning after November 15, 2007 as it is applied to financial assets and liabilities and for fiscal years beginning after November 15, 2008 as it is applied to non-financial assets and liabilities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction. Under the guidance of SFAS 157, the valuation of liabilities assumes that the credit risk of the liability is the same before and after the transfer. Although we are still determining which of the valuations used in our financial statements will be affected by this guidance, we have identified that the liability for the fair value of interest rate swaps is one of them. These instruments are carried in the balance sheet at fair value, which has previously been based on the amount for which they could be settled with the counterparty. Under the guidance of SFAS 157, beginning in 2008, their valuation will also consider the credit risk of AbitibiBowater, resulting in the liability being recorded at an amount different than its settlement value. We have not yet determined the amount of this difference.

Note 3. Business Combination

As discussed in Note 1, Bowater combined with Abitibi on October 29, 2007 to form AbitibiBowater. To effect the Combination, we issued 29,253,446 shares of common stock and 625,424 exchangeable shares to former Bowater shareholders and 22,594,801 shares of common stock and 4,964,860 exchangeable shares to former Abitibi shareholders.

Abitibi is a leading producer of newsprint, coated and specialty papers, market pulp and wood products. The Combination was designed to create a stronger company, better able to meet changing customer needs, compete more effectively in an increasingly global market, adapt to lower demand for newsprint in North America, and deliver increased value to shareholders. Since AbitibiBowater is the successor to Bowater, Bowater’s historical share prices were used to calculate the purchase price per share, which was determined using an average of Bowater’s closing price beginning two days before and ending two days after January 29, 2007, the date on which the Combination Agreement was signed and announced. The Bowater exchange ratio of 0.52 was applied to this average share price, resulting in a purchase price per share of $48.79.

68

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The purchase price was determined as follows (in millions, except for the exchange ratio and purchase price per share):

Number of Abitibi issued and outstanding shares at January 29, 2007		440.0
Exchange ratio		0.06261
AbitibiBowater exchanged shares		27.6
Purchase price per share	$	48.79
Fair value of Abitibi’s outstanding shares at January 29, 2007	$	1,344
Fair value of Abitibi’s stock options		3
Direct acquisition costs		37
Total purchase price	$	1,384

In order to apply purchase accounting, the purchase price of $1.4 billion was allocated to the identifiable assets acquired and liabilities assumed based on their relative fair values.  The purchase price allocation is preliminary and subject to refinement during the allocation period, which is not expected to last beyond a year from the date of purchase to allow for the finalization of the gathering and review of all pertinent information.  We have allocated the purchase price based on our preliminary estimates of the fair value of assets acquired and liabilities assumed as follows:

(in millions)
Cash	$	116
Accounts receivable		411
Inventories		554
Assets held for sale		200
Prepaids and other current assets		69
Fixed assets		3,214
Goodwill (note 5)		188
Other intangible assets (note 5)		1,242
Other assets		617
Total assets acquired in the Combination	$	6,611
Accounts payable and accrued liabilities	$	695
Short-term bank debt		371
Current installments of long-term debt		342
Liabilities associated with assets held for sale		17
Long-term debt, net of current installments		2,454
Pension and other postretirement benefit obligations		646
Other long-term liabilities		230
Deferred income taxes		472
Total liabilities assumed in the Combination	$	5,227
Total purchase price allocated to assets and liabilities acquired in the Combination	$	1,384

In connection with the review and approval of the transaction by the Canadian government, AbitibiBowater agreed, among other things, for a period of three years after closing, to maintain its headquarters in Montreal, Canada; to maintain at least five Canadians on its Board of Directors; and to apply for listing of its common stock on the Toronto Stock Exchange (TSX). In connection with the review and approval of the transaction by the U.S. Department of Justice (“DOJ”), AbitibiBowater agreed, among other things, to divest one newsprint mill, Abitibi’s mill in Snowflake, Arizona. As a result, the assets and liabilities of our Snowflake mill have been recorded at fair value less costs to sell in assets held for sale and liabilities associated with assets held for sale, respectively.

As a result of the completion of the initial phase of our comprehensive strategic review, which began immediately following the Combination, we announced on November 29, 2007 that we will be permanently closing Abitibi’s Belgo, Quebec facility; Fort William, Ontario facility; and Lufkin, Texas facility and indefinitely idling Abitibi’s Mackenzie, British Columbia facility, including two sawmills that directly support the Mackenzie paper mill operations, during the first quarter of 2008. We included the costs to involuntarily terminate or relocate employees and the cost of certain contractual obligations, including environmental and asset retirement obligations, associated with these mill closures in liabilities assumed in the Combination, and they did not impact our Consolidated Statement of Operations. Additionally, the fair value of the fixed assets associated with these mills, recorded as part of the preliminary allocation of the purchase price, has been estimated taking into account the

69

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

announced permanent closures and indefinite idlings.

The following unaudited information for the years ended December 31 presents a summary of consolidated results of operations of AbitibiBowater as if the Combination had occurred at the beginning of the respective periods. These pro forma results have been prepared for comparative purposes only.

	Year Ended December 31,
(Unaudited, in millions except per share data)	2007			2006
Sales	$	7,000		$	7,774
Operating (loss) income		(496	)		360
Loss before cumulative effect of accounting changes		(436	)		(93	)
Net loss		(436	)		(96	)
Basic loss per share:
Loss before cumulative effect of accounting changes		(7.59	)		(1.62	)
Net loss		(7.59	)		(1.67	)
Diluted loss per share:
Loss before cumulative effect of accounting changes		(7.59	)		(1.62	)
Net loss		(7.59	)		(1.67	)

The 2007 pro forma operating loss and net loss include approximately $222 million of gains on disposition of assets, $123 million of closure costs, impairment and other related charges, $386 million of foreign currency transaction gains and $28 million of costs associated with an arbitration award, excluding any tax impact. The 2006 pro forma operating income and net loss include approximately $266 million of lumber duty refunds, $203 million of gains on disposition of assets, $261 of closure costs, impairment and other related charges and $18 million of foreign currency transaction gains, excluding any tax impact.

Note 4. Current Liquidity Assessment and Outlook

Our total liquidity is currently comprised of liquidity at our Abitibi and Bowater subsidiaries. See note 17, Short-term and Long-term Debt, for a discussion of our Bowater and Abitibi bank credit facilities and liquidity. Our Bowater subsidiary is expected to meet its debt obligations as they become due. Our Abitibi subsidiary, however, is currently experiencing a liquidity shortfall and faces significant near-term liquidity challenges. Abitibi has a total of $346 million of long-term debt that matures in 2008: $196 million principal amount of its 6.95% Senior Notes due April 1, 2008 and $150 million principal amount of its 5.25% Senior Notes due June 20, 2008. Abitibi also has revolving bank credit facilities with commitments totaling $711 million maturing in the fourth quarter of 2008. None of these debts has been refinanced. As of February 29, 2008, we had cash of approximately $190 million (approximately $94 million at Abitibi and approximately $96 million at Bowater), and undrawn amounts under our bank credit facilities of approximately $280 million, (approximately $62 million at Abitibi and approximately $218 million at Bowater). We are prohibited by the terms of Bowater’s bank credit facility from transferring Bowater funding to Abitibi. If Abitibi is unable to secure adequate new financing, it will be unable to make the near term mandatory repayments when due.

Abitibi is currently in compliance with financial covenants under its bank credit facilities; however, there can be no assurance that Abitibi will remain in compliance in the near term in light of the factors discussed above and its forecast of continued operating losses. Based on current forecasts for Abitibi, we expect it to be in default with its net funded debt to total capitalization covenant as measured at the end of the first quarter of 2008. However, we have developed a refinancing plan (discussed below) to address the upcoming debt maturities and replace Abitibi’s bank credit facilities. Failure to comply with the financial or other covenants of our Abitibi credit facilities could result in the outstanding borrowings under these facilities becoming immediately due and payable (unless the lenders waive any resulting event of default).

If Abitibi defaults under the terms of any of its indebtedness, the relevant debt holders may accelerate the maturity of their obligations, which could cause cross-defaults or cross-acceleration under its other obligations. In the event of any combination of an inability to repay or refinance Abitibi’s 2008 debt maturities or acceleration of indebtedness under its bank credit facilities, our Abitibi subsidiary may be compelled to seek protection or be forced into a proceeding under Canada’s Companies’ Creditors Arrangement Act, the U.S. Bankruptcy Code, or both. These circumstances lend substantial doubt as to the ability of Abitibi to meet its obligations as they come due and our continued ability to exercise control over Abitibi and, accordingly, the appropriateness of Abitibi’s use of accounting principles applicable to a going concern. Furthermore, these circumstances lend substantial doubt regarding our continued ability to exercise control over Abitibi and accordingly our application of consolidation accounting for Abitibi. Our financial statements do not reflect the adjustment to the carrying

70

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

values of assets and liabilities and the reported expenses and balance sheet classification that would be necessary if the going concern assumption or the consolidation basis for Abitibi were no longer appropriate, which adjustments could be material. At December 31, 2007, Abitibi represented approximately 71% of consolidated net assets and, on an annualized basis, approximately 55% of sales.

To address these near-term liquidity challenges, we have developed a refinancing plan to address upcoming debt maturities and general liquidity needs designed to enable Abitibi to repay the $346 million due in April and June 2008 and to repay all its maturities due in 2009, while continuing to fund its operations, debt service and capital expenditures. We expect these initiatives for our Abitibi subsidiary to consist of $200-300 million of new senior unsecured exchange notes due 2010; up to $450 million of a new 364-day senior secured term loan secured by substantially all of Abitibi’s assets other than fixed assets; approximately $400 million of new senior secured notes or a term loan due 2011 secured by fixed assets; and $200-300 million of new convertible notes of AbitibiBowater. The current state of the credit markets is a significant impediment to securing the necessary financing for Abitibi. There is no assurance that these financing alternatives will ultimately be consummated on terms acceptable to us or at all.

Management does not expect that the liquidity constraints at Abitibi will affect the financial condition of Bowater or the holding company, AbitibiBowater, since there are no cross-defaults or cross-acceleration provisions under Bowater’s obligations as it relates to Abitibi.

As part of our efforts to provide funding to Abitibi, AbitibiBowater will be seeking an amendment to the existing revolving bank credit facilities of our Bowater subsidiary to allow for, among other things, the potential issuance of new equity-linked securities of AbitibiBowater. Bowater had already amended its bank credit facilities to permit an intercompany restructuring of the ownership of our Catawba, South Carolina coated paper facility in order to permit additional debt financing by Bowater, AbitibiBowater, or both. However, we no longer expect Bowater to pursue a secured debt financing against the Catawba facility at the present time.

Note 5. Goodwill and Other Intangible Assets, Net

Goodwill by reportable segment is as follows as of December 31:

(In millions)	2007		2006
Newsprint	$	535	$	535
Specialty Papers		56		55
Unallocated arising from Combination with Abitibi (note 3)		188		-
	$	779	$	590

Goodwill increased by $188 million in 2007 as a result of the Combination and by $1 million as a result of an adjustment to the deferred taxes associated with a previous acquisition. We have not yet completed the assignment of the purchased goodwill to our reporting units. The allocation will be completed in 2008. Each of our reportable segments is expected to benefit from the synergies of the Combination; therefore, the unallocated goodwill is expected to be allocated to reporting units within each of our reportable segments. The steps for identifying the reporting units include defining the operating segments (See note 25, Segment Information), determining the components one level below the operating segments, determining whether an identified component is a business, and determining whether components within an operating segment meet the requirements for aggregation. Goodwill is then allocated to the identified reporting units based on a relative fair value allocation approach. Fair value will be determined on a discounted cash flow methodology using assumptions similar to the ones described below.

We completed our annual goodwill impairment test in the fourth quarter of 2007, prior to the Combination. There was no impairment of any of our reporting units as a result of performing our annual impairment test. As a result of the decisions announced upon the completion of the initial phase of the comprehensive strategic review on November 29, 2007, we reviewed the facts and circumstances surrounding the event and determined that it was not more likely than not that the fair value of the reporting units have fallen below their carrying values and, therefore, an interim test of impairment was not performed. As discussed below, the testing methodology requires us to make estimates and judgments that are subjective and difficult to apply, and thus they are inherently uncertain. Our management has reviewed these estimates with the Audit Committee of our Board of Directors.

In making our determination of fair value, we rely primarily on the discounted cash flow method. This method uses

71

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

projections of cash flows from each of the reporting units. Several of the key assumptions include periods of operation, projections of product pricing, production levels and sales volumes, product costs, market supply and demand, foreign exchange rates, inflation, weighted average cost of capital and capital spending. We derive these assumptions used in our valuation models from several sources. Many of these assumptions are derived from our internal budgets, which would include existing sales data based on current product lines and assumed production levels, manufacturing costs and product pricing. We believe that our internal forecasts are consistent with those that would be used by a potential buyer in valuing our reporting units. Our products are commodity products; therefore, pricing is inherently volatile and often follows a cyclical pattern. We derive our pricing estimates from information generated internally, from industry research firms and from other published reports and forecasts. Foreign exchange rates were based on market forward rates for 2008 followed by a gradual reversion to a 5-year historical average.

In future measurements of fair value, adverse changes in any of these assumptions could result in an impairment of goodwill that would require a non-cash charge to the Consolidated Statements of Operations and may have a material effect on our financial condition and operating results.

Other intangible assets, net, are as follows as of December 31:

		2007
				Accumulated
(In millions)	Estimated life	Carrying Value		Amortization
Water rights	11 - 40 years	$	1,172	$	5
Call option	2 years		11		1
Power purchase agreement	3 years		20		1
		$	1,203	$	7

In 2007, we identified and recorded the fair value of purchased water rights, a call option and a power purchase agreement as a result of the Combination (see note 3, Business Combination). In making our determination of fair value, we relied primarily on the discounted cash flow method. In Canada, water rights are generally owned by the provincial governments, which also have the right to control water levels. Abitibi has agreements with different governmental authorities in Canada to have rights to use water in order to produce power, mainly to be consumed in its pulp and paper manufacturing process. Terms of these agreements typically vary from 10 to 50 years and are generally renewable, under certain conditions, for additional periods well ahead of the expiration date. In certain circumstances, water rights are granted without expiration dates. We believe that we will generally be able to continue meeting the conditions for future renewals. We have assigned an expected useful life of 11 - 40 years, which corresponds to the related hydroelectric power plants’ expected useful lives. Abitibi has a contractual option to purchase the minority interest of 47.5% in our Augusta paper mill for an amount less than the expected discounted cash flows of the operation. The option expires in December 2009. Abitibi has a contractual right to purchase power at one of its paper mills at favorable prices until December 2010. We expect to record $42 million per year in amortization of these intangibles, assuming no change in the Canadian-U.S. dollar exchange rate. The carrying value of our water rights fluctuates with changes in the Canadian-U.S. dollar exchange rate.

Note 6. Closure Costs, Impairment and Other Related Charges

Immediately upon the Combination, we began a comprehensive strategic review of our operations to reduce costs and improve our profitability. On November 29, 2007, we announced the results of the initial phase of our comprehensive review, which included a decision to reduce our newsprint and specialty papers production capacity by approximately one million metric tons per year during the first quarter of 2008. The reductions include the permanent closure of Bowater’s Dalhousie, New Brunswick facility, as well as the indefinite idling of Bowater’s Donnacona, Quebec facility. Additionally, we decided to permanently close paper machine no. 3 at Bowater’s Gatineau, Quebec facility. Long-lived asset impairment charges, including the costs associated with asset retirement obligations, and severance and termination costs associated with these Bowater closures were recorded in “Closure costs, impairment and other related charges” in our Consolidated Statement of Operations. As disclosed in note 3, Business Combination, a number of our Abitibi facilities were permanently closed or indefinitely idled as well. The costs associated with these Abitibi closures were included in liabilities assumed in the Combination and did not impact our Consolidated Statement of Operations. We plan to announce the results of the second phase of our comprehensive review in the second quarter of 2008.

72

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The principal components of closure costs, impairment and other related charges are as follows:

(In millions)	2007		2006		2005
Impairment of long-lived assets	$	100	$	49	$	83
Impairment of goodwill		-		200		-
Contractual obligations and other commitments		-		4		-
Severance and related costs		23		-		-
	$	123	$	253	$	83

In addition, we recorded pension curtailment charges and inventory write-downs associated with these closures. See note 20, Pensions and Other Postretirement Benefit Plans, and note 11, Inventories, Net, for additional information.

Impairment of Long-lived assets

In 2007, permanent closures included our Dalhousie, New Brunswick facility and paper machine no. 3 at our Gatineau, Quebec facility. Upon review of the long-lived assets at these facilities, including the capitalized asset retirement obligations recognized as a result of the closures, we recorded non-cash asset impairment charges of $100 million. The Dalhousie facility and Gatineau’s paper machine will be dismantled. The fair value of the assets of approximately $16 million was determined based on the estimated sale and salvage value plus any projected cash generated from operating the facility through the date of closing. We expect to recover the carrying value of our long-lived assets at our indefinitely-idled Donnacona facility; thus, no impairment exists.

In 2006, based on the continued decline of North American newsprint consumption, we determined we had no plans to restart paper machine no. 3 at our Thunder Bay facility which had been previously idled since 2003. Accordingly, we recorded a non-cash asset impairment charge of $19 million to write down the value of this paper machine to its estimated fair value, which was determined using discounted cash flows. We determined the fair value of our Thunder Bay mill utilizing a probability-weighted approach that assumes a potential buyer of the facility would consider alternative courses of action in estimating the discounted cash flows. Courses of action that were probability-weighted in our fair value estimation of the Thunder Bay facility include operating the mill as it is currently operated and restarting paper machine No. 3, which we permanently shut in the third quarter of 2006 but could be fully operational to a potential buyer of the facility. Also in 2006, we recorded long-lived asset impairment charges of $30 million associated with the closure of our Benton Harbor operations ($24 million), our Ignace sawmill ($5 million) and our Girardville sawmill ($1 million). The fair value of the Benton Harbor assets was approximately $3 million and was determined using discounted cash flows. The fair value of the Ignace and Girardville sawmill assets was nominal and was determined using discounted cash flows.

In 2005, the asset impairment charges relate to the permanent closure of our Thunder Bay “A” kraft pulp mill ($67 million), a coating line at our Benton Harbor paper mill ($12 million) and a paper machine at our Mokpo, Korea paper mill ($4 million). Fair value of the “A” kraft pulp mill, coating line and paper machine was nominal and was determined based on the estimated sale and salvage value plus any projected cash generated from operation of the asset through the date of closure.

We do not allocate impairment charges to our reportable segments; therefore, these charges are included in Corporate and Other in note 26, Segment Information.

Impairment of Goodwill

We recorded a goodwill impairment charge of $200 million in 2006. In 2006, we realigned our organizational structure from a divisional structure to a functional structure. As a result of economic conditions and the operating environment at our Thunder Bay site, including an asset impairment charge we recorded related to paper machine No. 3 and our organizational realignment in that same quarter, we performed an interim goodwill impairment test on our existing reporting units. The assumptions and methodology we used to determine fair value were similar to those used in our annual goodwill impairment test (see note 5, Goodwill and Other Intangible Assets, Net). We determined the fair value of our Thunder Bay mill utilizing a probability-weighted approach that assumes a potential buyer of the facility would consider alternative courses of action in estimating the discounted cash flows. Courses of action that were probability-weighted in our fair value estimation of the Thunder Bay facility include operating the mill as it is currently operated and restarting paper machine No. 3, which we permanently shut in the third quarter of 2006 but could be fully operational to a potential buyer of the facility.

As a result of the continued strengthening of the Canadian dollar and a reduction in our estimated probability that a potential buyer would restart paper machine No. 3 or convert another newsprint machine to coated paper production, an interim test of our Thunder Bay reporting unit in 2006, under both our current operating scenario and our probability-weighted scenario,

73

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

indicated that the carrying value of Thunder Bay’s net assets exceeded its fair value. Therefore, we proceeded to measure the amount of the impairment loss. The implied fair value of goodwill related to our Thunder Bay reporting unit, which was previously included in our Coated and Specialty Papers Division segment, was approximately $296 million; therefore, we recorded a goodwill impairment charge of $200 million in 2006. An interim test of our other reporting units indicated that the fair value of each of the reporting units exceeded the carrying amount of the respective reporting unit’s net assets.

Contractual obligations and other commitments

In the first quarter of 2008, we anticipate recording approximately $10 million in charges for noncancelable contracts at our Dalhousie or Donnacona operations. These amounts are expected to be paid in 2008. In 2006, we recorded $4 million for lease costs and contract termination costs associated with the closure of our Benton Harbor operation.

Severance and related costs

In 2007, we recorded $23 million of severance and related costs associated with the permanent closure of our Dalhousie, New Brunswick facility ($20 million), and the indefinite idling of our Donnacona, Quebec facility ($3 million). See note 15, Severance Related Liabilities, for information on changes in our severance accruals.

Note 7. Net Gain on Disposition of Assets

(In millions)	2007		2006		2005
Net gain on disposition of timber and timberlands	$	144	$	179	$	62
Net gain on disposition of sawmills and other fixed assets		1		7		4
	$	145	$	186	$	66

We sold approximately 133,600 acres, 535,200 acres, and 29,900 acres of timberlands primarily located in Tennessee, Georgia, South Carolina and Canada during 2007, 2006 and 2005, respectively. During 2006, we also sold our Baker Brook and Dégelis sawmills for proceeds of $21 million. Goodwill of $25 million was included in the calculation of the net gain on the disposition of certain of our timberlands in 2006.

Note 8. Other Income, Net

Other income, net includes non-operating items. The breakdown of the components of “Other income, net” for the three years ended December 31 is as follows:

(In millions)	2007			2006			2005
Foreign exchange gain (loss)	$	(2	)	$	9		$	(3	)
Earnings from equity method investments		(6	)		7			4
Interest income (note 22)		9			18			5
Charges related to repurchase of debt (note 17)		-			(8	)		-
Gain on extinguishment of debt (note 17)		-			13			-
Loss on sale of accounts receivable (note 18)		(4	)		-			-
Miscellaneous income		3			5			3
	$	-		$	44		$	9

74

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9. Accumulated Other Comprehensive Loss

The components of “Accumulated other comprehensive loss” in the Consolidated Balance Sheets are as follows:

(In millions)	2007			2006
Unamortized prior service costs (1)	$	-		$	(23	)
Unamortized actuarial losses (2)		(135	)		(359	)
Foreign currency translation (3)		1			12
Unrealized loss on hedging transactions (4)		(10	)		(1	)
	$	(144	)	$	(371	)

(1)	Net of deferred tax provision of $13 million in 2007 and deferred tax benefit of $2 million in 2006. Net of minority interest of $2 million in both 2007 and 2006.
(2)	Net of deferred tax benefit of $67 million and $110 million in 2007 and 2006, respectively. Net of minority interest of $5 million in 2006.
(3)	No tax effect is recorded for foreign currency translation since the foreign net assets translated are deemed permanently invested.
(4)	Net of deferred tax benefit of $5 million and $1 million in 2007 and 2006, respectively.

Note 10. Loss Per Share

The information required to compute net loss per basic and diluted share is as follows:

(In millions)	2007		2006		2005
			(Restated)		(Restated)
Basic weighted-average number of common shares outstanding		34.7		29.8		29.8
Effect of potentially dilutive securities:
Stock options		-		-		-
Restricted stock units		-		-		-
Diluted weighted-average number of common shares outstanding		34.7		29.8		29.8

No adjustments to net loss are necessary to compute net loss per basic and diluted share. Options to purchase 3.4 million shares, 2.6 million shares and 2.6 million shares for years ended December 31, 2007, 2006 and 2005, respectively, were excluded from the calculation of diluted loss per share as the impact would have been anti-dilutive. In addition, 0.4 million and 0.3 million restricted stock units for the years ended December 31, 2007 and 2006, respectively, were excluded from the calculation of diluted loss per share for the same reason. Refer to note 1, Organization and Basis of Presentation, for information regarding the restatement of share and per share information in periods prior to the Combination to reflect the Bowater exchange ratio of 0.52. Refer to note 3, Business Combination, for information regarding shares issued on October 29, 2007 in conjunction with the Combination. These shares were weighted for only 63 days in the calculation of the weighted-average number of shares outstanding in 2007.

75

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11. Inventories, Net

Inventories, net consist of the following as of December 31:

(In millions)	2007			2006
At lower of cost or market:
Raw materials and work in process	$	220		$	108
Finished goods		355			123
Mill stores and other supplies		345			132
		920			363
Excess of current cost over LIFO inventory value		(14	)		(13	)
	$	906		$	350

Inventories valued using the LIFO method comprised 4% and 11% of total inventories at December 31, 2007 and 2006, respectively. Refer to note 3, Business Combination, for the preliminary allocation of the purchase price of Abitibi to inventories acquired in the Combination.

In 2007, we recorded charges of $7 million for write-downs of spare parts inventories associated with the closure of our Bowater Dalhousie facility and paper machine no. 3 at our Bowater Gatineau facility. In 2006, we recorded a charge of $2 million for the write-down of spare parts inventory associated with the closure of our Benton Harbor paper mill and the decision to permanently idle paper machine no. 3 at our Thunder Bay paper mill. Charges for inventory write-downs are included in cost of sales in our Consolidated Statements of Operations. See also note 6, Closure Costs, Impairment and Other Related Charges, for additional information regarding these closures.

Note 12. Assets Held for Sale and Liabilities Associated with Assets Held for Sale

Assets held for sale are comprised of the following as of December 31:

(In millions)	2007		2006
Accounts receivable	$	2	$	-
Inventories		15		-
Timber and timberlands		8		19
Fixed assets, net		159		-
	$	184	$	19

Liabilities associated with assets held for sale are comprised of the following as of December 31:

(In millions)	2007		2006
Accounts payable and accrued liabilities	$	19	$	-
	$	19	$	-

In connection with the review and approval of the Combination by the antitrust division of the DOJ, we agreed, among other things, to sell our Snowflake, Arizona newsprint mill, which is included in our Newsprint segment, and certain related assets and liabilities. We expect to complete the sale of this facility to Catalyst Paper Corporation in the second quarter of 2008 for approximately $161 million, excluding trade receivables of approximately $19 million that we will retain. Additionally, our Fort William, Ontario facility, our Price sawmill and some of our timberlands are being held for sale at December 31, 2007. We plan to complete the sale of these assets in early 2008 for an amount that exceeds their individual carrying values. The assets and liabilities to be sold are carried on our Consolidated Balance Sheet as of December 31, 2007 at the lower of carrying value or fair value less costs to sell.

76

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 13. Fixed Assets, Net

Fixed assets are comprised of the following as of December 31:

	Range of Estimated
(In millions)	Useful Lives in Years	2007			2006
Land and land improvements	10-20	$	172		$	50
Buildings	20-40		575			296
Machinery and equipment	5-20		8,080			6,072
Hydroelectric power plants	40		774			-
Leasehold improvements	10-20		1			2
Construction in progress			83			123
			9,685			6,543
Less accumulated depreciation and amortization			(3,978	)		(3,665	)
		$	5,707		$	2,878

Refer to note 3, Business Combination, for the preliminary allocation of the purchase price of Abitibi to fixed assets acquired in the Combination.

Note 14. Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities are comprised of the following as of December 31:

(In millions)	2007		2006
Trade accounts payable	$	611	$	218
Payroll, bonuses and severance payable		288		84
Accrued interest		101		29
Pension and other postretirement benefit obligations		55		27
Income and other taxes payable		35		20
Electricity, gas and other energy payable		21		18
Dividends payable		-		11
Other		95		24
	$	1,206	$	431

Refer to note 3, Business Combination, for the preliminary allocation of the purchase price of Abitibi to accounts payable and accrued liabilities acquired in the Combination.

77

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 15. Severance Related Liabilities

The activity in our severance related liabilities is as follows:

	2007			2006			2005			2004
(In millions)	Initiatives			Initiatives			Initiatives			Initiatives			Total
Balance at December 31, 2005	$	-		$	-		$	13		$	3			16
Charges (Credits)		-			19			(2	)		-			17
Payments		-			(6	)		(5	)		(3	)		(14	)
Reclass to pension and other post retirement benefit obligation		-			(8	)		-			-			(8	)
Balance at December 31, 2006		-			5			6			-			11
Charges		59			-			-			-			59
Liabilities assumed (Note 3)		60			-			-						60
Payments		(9	)		(2	)		(6	)		-			(17	)
Reclass to pension and other post retirement benefit obligation		(10	)		-			-			-			(10	)
Balance at December 31, 2007	$	100		$	3		$	-		$	-			103

In 2007, we recorded approximately $59 million of employee termination costs, primarily associated with the closures announced as a result of our comprehensive strategic review (See note 6, Closure Costs, Impairment and Related Charges); mill-wide restructurings at our Thunder Bay, Ontario; Gatineau, Quebec; Donnacona, Quebec and Dolbeau, Quebec facilities, lump-sum payouts of pension assets to certain employees and certain changes to our U.S. postretirement benefit plans. Approximately $10 million of these costs increased our pension and postretirement benefit obligation. These initiatives resulted in the elimination of approximately 428 positions. We recorded an additional severance liability of $60 million as a result of the preliminary allocation of the purchase price of Abitibi to severance liabilities assumed in the Combination. The remaining severance accrual of $103 million at December 31, 2007 is expected to be paid out in 2008 and 2009.

In 2006, we recorded approximately $19 million of employee termination costs including severance and other benefits related to the closure of our Benton Harbor facility, the closure of our Ignace sawmill, the sale of certain other sawmills and organizational realignments. Approximately $8 million of these costs increased our pension and postretirement benefit obligation.

In 2005, we recorded approximately $13 million of employee termination costs including severance and other benefits. Approximately $12 million of the $13 million relates to the permanent closure of the “A” kraft pulp mill at our Thunder Bay facility in May 2006 and the elimination of approximately 260 positions.

We do not allocate employee termination and severance costs to our segments; thus, these costs are included in “Corporate and Other” in note 26, Segment Information. Termination costs are classified as cost of sales (manufacturing personnel), selling and administrative expense (administrative personnel) or closure costs, impairment and other related charges (mill closures) in our Consolidated Statements of Operations. The severance accruals are included in “Accounts payable and accrued liabilities” in the Consolidated Balance Sheets.

78

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 16. Asset Retirement Obligations

The activity in our liability for asset retirement obligations as of and for the period ending December 31 is as follows:

(In millions)	2007			2006
Beginning of year	$	7		$	6
Additions: Combination (Note 3)		38			-
Additions: Mill closures (Note 6)		9			-
Changes in estimate		-			-
Accretion expense		1			1
Payments		(1	)		-
End of year	$	54		$	7

These asset retirement obligations consist primarily of liabilities for landfills, sludge basins and decontamination of closed sites. The related costs are capitalized as part of land and land improvements. We have not had to legally restrict assets for purposes of settling our asset retirement obligations. Refer to note 3, Business Combination, for the preliminary allocation of the purchase price of Abitibi to asset retirement obligations acquired in the Combination, which include $20 million of obligations associated with the Abitibi mill closures announced as part of the first phase of our comprehensive strategic review. These obligations include wastewater and effluent ponds that will be required to be drained, removal of chemicals and other related materials, soil and groundwater testing and remediation, capping of landfills and clean-up of sludge basins. The costs associated with these obligations and are expected to be paid over the next three years.

In 2007, as part of our comprehensive strategic review, we also announced the permanent closure of Bowater’s Dalhousie paper mill. As a result, we were able to estimate the fair value for certain asset retirement obligations that were conditional on the closing of the facility and could not previously be estimated since the settlement date of the obligation was indeterminable. These obligations include soil and groundwater testing and remediation, removal of chemicals and other related materials and landfill capping. The costs associated with these obligations are expected to be paid over the next three years.

Additionally, we have certain other asset retirement obligations for which the timing of settlement is conditional upon the closure of the related operating facility. At this time we have no specific plans for the closure of these other facilities, and we currently intend to make improvements to the assets as necessary that would extend their lives indefinitely. Furthermore, the settlement dates have not been specified by law, regulation or contract. As a result, we are unable at this time to estimate the fair value of the liability because there are indeterminate settlement dates for the conditional asset retirement obligations. If a closure plan for any of these facilities is initiated in the future, the settlement dates will become determinable, an estimate of fair value will be made, and an asset retirement obligation will be recorded.

79

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 17. Long-term and Short-term Debt

Short-term Bank Debt

As of December 31, 2007, we had cash and cash equivalents of approximately $195 million ($132 million for Abitibi and $63 million for Bowater). Abitibi and Bowater each maintain separate bank credit facilities. As of December 31, 2007, our available borrowings under such bank credit facilities were as follows:

									Weighted
									Average
			Amount		Commitment		Termination		Interest
(In millions)	Commitment		Outstanding		Available(1)		Date		Rate(2)
Abitibi:
Credit facilities	$	711	$	384	$	252		11/08 & 12/08		7.98	%
Bowater:
U.S. credit facility		415		205		141		05/11		7.35	%
Canadian credit facility		165		-		132		05/08		n/a
	$	1,291	$	589	$	525

(1)

The commitment available under each of the revolving bank credit facilities is subject to collateral requirements and covenant restrictions as described below and is reduced by outstanding letters of credit of $69 million for the Bowater U.S. credit facility, $33 million for the Bowater Canadian credit facility and $75 million for the Abitibi credit facility, while commitment fees for unused portions are 50, 25, and 70 basis points, respectively.

(2)

Borrowings under the Abitibi and Bowater bank credit facilities incur interest based, at our option, on specified market interest rates plus a margin. We had no borrowings under Bowater’s Canadian credit facility during 2007. The fair value of our short-term bank debt approximates its carrying value.

Since December 31, 2007, we have borrowed additional amounts under our bank credit facilities. As of February 29, 2008, we had cash available of approximately $102 million (approximately $60 million at Abitibi and approximately $42 million at Bowater) and undrawn amounts under our bank credit facilities of approximately $280 million (approximately $62 million at Abitibi and approximately $218 million at Bowater). Our bank credit facilities are described in more detail below.

Abitibi’s Bank Credit Facilities

The CDN$710 million ($711 million) Abitibi credit facility has two components: “Facility A” is a CDN$510 million ($511 million) credit facility secured by certain fixed assets and “Facility B” is a CDN$200 million ($200 million) revolving credit facility secured by certain working capital elements. The carrying value of the secured assets is $1,560 million as of December 31, 2007.

Financial covenants under Abitibi’s credit facility must be maintained at the end of each financial quarter based upon its consolidated financial results, prepared under Canadian GAAP and using pre-Combination historical bases for assets and liabilities, and consist of the following two ratios:

i.

a maximum ratio of net funded debt (including all advances under Abitibi’s facilities and the outstanding amount of any securitization programs, less cash and cash equivalents) to total capitalization (generally defined as equity and net funded debt) of 70% until December 31, 2007 and 65% thereafter; and

ii.

a minimum ratio of EBITDA (generally defined as net income, excluding extraordinary and non-recurring gains (or losses), gains (or losses) from assets sales or abandonments or reserves related thereto, and non-controlling interest items, plus interest expenses, plus income taxes plus amortization and depreciation) to interest expense of 1.50 to 1. This ratio has been waived, as noted below, until the end of the second quarter of 2008.

In July 2007, Abitibi amended its credit agreement to waive its interest coverage ratio requirement until the end of the second quarter of 2008 and also waived certain other provisions to permit the reorganization and rationalization of its corporate structure.

Abitibi’s credit facility limits Abitibi’s ability to provide financial assistance in favor of any person that is not an Abitibi subsidiary, including its parent AbitibiBowater. However, Abitibi (including its subsidiaries) may (1) pay dividends or make

80

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

other distributions to its shareholders and (2) guarantee the funded debt of any other person (certain subsidiaries of Abitibi are restricted however in their ability to incur funded debt and to guarantee funded debt of other persons).

Although we are currently in compliance with covenants under Abitibi’s credit facility, there can be no assurance that we will remain in compliance in the near term in light of the factors discussed above and our forecast of continued operating losses. Based on current forecasts for Abitibi, we expect it to be in default with its net funded debt to total capitalization covenant as measured at the end of the first quarter of 2008; however, we have developed a refinancing plan to address the upcoming debt maturities and replace Abitibi’s bank credit facilities. Failure to comply with the financial or other covenants of our bank credit facilities or failure to refinance the debt as planned, could result in the outstanding borrowings under these facilities becoming immediately due and payable (unless the lenders waive any resulting event of default).

Bowater’s Bank Credit Facilities

On May 31, 2006, we entered into (i) a five-year credit agreement among Bowater as Borrower, several lenders, and Wachovia Bank, National Association, as Administrative Agent (the “U.S. Credit Agreement”) and (ii) a 364-day Credit Agreement, along with our subsidiary Bowater Canadian Forest Products Inc. (“BCFPI”), among BCFPI as Borrower, Bowater as parent Guarantor, several lenders, and The Bank of Nova Scotia as Administrative Agent (the “Canadian Credit Agreement”).

Bowater’s U.S. credit agreement provides for a $415 million revolving credit facility with a scheduled maturity date of May 25, 2011. The U.S. credit agreement is guaranteed by certain of our wholly-owned subsidiaries in the United States, and is secured by (i) liens on the inventory, accounts receivable and deposit accounts of Bowater and the guarantors (ii) pledges of 65% of the stock of certain of our foreign subsidiaries, and (iii) pledges of the stock of our U.S. subsidiaries that do not own mills or converting facilities. Availability under the U.S. credit facility is limited to 90% of the net consolidated book value of our accounts receivable and inventory, excluding BCFPI and its subsidiaries.

Bowater’s Canadian credit agreement provides for a $165 million revolving credit facility with a maturity date of May 30, 2008, subject to annual extensions. The Canadian credit agreement is secured by liens on the inventory, accounts receivable and deposit accounts of BCFPI. Availability under the Canadian credit facility is limited to 65% of the net book value of the accounts receivable and inventory of BCFPI and its subsidiaries. We believe that this credit agreement will be extended or a similar agreement entered into given the fact that the agreement is secured by liens on the inventory, accounts receivable and deposit accounts of BCFPI.

Financial covenants under Bowater’s U.S. and Canadian credit facilities are based upon Bowater’s consolidated financial results and consist of the following two ratios:

i.

a maximum ratio of senior secured indebtedness (including all advances and letters of credit under the U.S. and Canadian facilities, and any other indebtedness secured by assets of Bowater and its subsidiaries) to EBITDA (generally defined as net income, excluding extraordinary, non-recurring or non-cash items and gains (or losses) on asset dispositions, plus income taxes plus depreciation plus interest expense) of 1.25 to 1; and

ii.

a minimum ratio of EBITDA, as defined, plus gains (or minus losses) from asset dispositions to interest expense of 2.00 to 1. This ratio has been amended, as noted below, through October 1, 2008.

On November 2, 2007, we obtained an amendment to Bowater’s U.S. and Canadian credit agreements allowing us to adjust EBITDA (generally defined as net income, excluding extraordinary, non-recurring or non-cash items and gains (or losses) on asset dispositions, plus income taxes plus depreciation plus interest expense) for non-recurring gains or losses without limitation. In addition, the minimum ratio of EBITDA, as defined, plus gains (or minus losses) from asset dispositions to interest expense was lowered from 2.00 to 1 to 1.50 to 1 effective October 1, 2007, increasing gradually back up to 2.00 to 1 by October 1, 2008.

On February 25, 2008, we obtained amendments to Bowater’s U.S. and Canadian credit agreements. The amendment to the U.S. credit agreement was entered into between Bowater and certain subsidiaries of Bowater, AbitibiBowater, certain lenders and Wachovia Bank, National Association, as administrative agent for the various lenders under that credit agreement. The amendment to the Canadian credit agreement was entered into among BCFPI, Bowater and certain subsidiaries of Bowater, AbitibiBowater, certain lenders and The Bank of Nova Scotia, as administrative agent for the lenders under that credit agreement. The amendments principally (i) contemplate the transfer by Bowater of the Catawba, South Carolina mill assets and related operations to a new wholly-owned subsidiary of Bowater (the “Catawba Subsidiary”); (ii) permit the transfer of the equity of the Catawba Subsidiary to AbitibiBowater, (iii) make the Catawba Subsidiary an additional borrower under the U.S. credit agreement and a guarantor of the Canadian obligations; (iv) permit the Catawba Subsidiary, AbitibiBowater, Bowater and/or certain of their subsidiaries to incur up to an aggregate of $700 million of additional secured indebtedness,

81

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

subject to certain conditions; (v) for 2008, increase the applicable margin and increase the first lien leverage ratio requirement (4.50 to 1 to March 31, 2008 and gradually decreasing to 1.25 to 1 by October 1, 2008) and decrease the interest coverage ratio requirement (.75 to 1 to March 31, 2008 and gradually increasing to 2.00 to 1 by January 1, 2009) and (vi) waive any and all defaults that may have occurred as a result of a failure by Bowater and its subsidiaries to comply with certain financial covenants. The amendments contemplate that the Catawba Subsidiary will grant a mortgage on the Catawba mill assets on or before March 31, 2008 as security for $250 Million of the indebtedness outstanding under the U.S. credit agreement and for $50 Million as security for the Canadian credit agreement. As a consequence of the new previously announced financing plan, we have decided to delay the transfer of the Catawba mill and the granting of security, we will be asking the lenders of our bank facility to agree to this delay as well as make other modifications of the agreement.

Both Bowater’s U.S. and Canadian credit agreements limit AbitibiBowater’s ability to receive cash from Bowater. Bowater may make dividends and distributions to AbitibiBowater sufficient to pay (1) taxes attributable to Bowater and its subsidiaries, (2) up to $75 million in aggregate annual dividends to the holders of common stock and exchangeable shares, and (3) up to $10 million more than 50% of AbitibiBowater’s annual overhead expenses, such as accounting and auditing costs, director fees, director and officer insurance premiums, franchise taxes, transfer agent fees, and legal and other expenses connected to AbitibiBowater’s status as a public company. Overhead expenses do not include management fees, salaries, bonuses, or debt service.

Bowater was not in compliance with both financial covenants as of December 31, 2007; however, we have obtained a waiver through March 31, 2008, the next compliance date. Considering the covenant amendments obtained on February 25, 2008, and anticipating the lenders’ agreement to delay or waive both our separation of the Catawba mill and the corresponding grant of additional security to the lenders, we expect Bowater to be in compliance throughout 2008.

82

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Long-term debt

Long-term debt, net of current installments, consists of:

			Unamortized
	Principal		Premium						As of December 31,
(In millions)	Amount		(Discount)			Effective Rate			2007		2006
Unsecured Debt of Abitibi:
8.375% Notes due 2015	$	450	$	(97	)		13.1	%	$	353	$	-
8.55% Notes due 2010		395		(45	)		13.9	%		350		-
8.85% Debentures due 2030		450		(117	)		12.3	%		333		-
6.0% Notes due 2013		350		(89	)		12.6	%		261		-
7.132% Notes due 2017		250		(1	)		7.3	%		249		-
8.5% Debentures due 2029		250		(69	)		12.1	%		181		-
7.5% Debentures due 2028		250		(80	)		11.6	%		170		-
7.75% Notes due 2011		200		(35	)		14.5	%		165		-
Notes due 2011 with interest at floating rates (8.49% at December 31, 2007)		200		(36	)	LIBOR+10.2		%		164		-
7.875% Notes due 2009		150		(6	)		10.5	%		144		-
7.4% Debentures due 2018		100		(26	)		11.8	%		74		-
0% Debentures, due in installments through 2011		14		(5	)		13.9	%		9		-
Unsecured Debt of Bowater:
7.95% Notes due 2011		600		(1	)		7.9	%		599		599
6.5% Notes due 2013		400		(1	)		6.5	%		399		399
9.38% Debentures due 2021		200		(1	)		9.4	%		199		199
9.00% Debentures due 2009		248								248		248
Notes due 2010 with interest at floating rates (7.99% and 8.36% at December 31, 2007 and 2006)		234								234		234
10.85% Debentures due 2014		125		20			6.5	%		145		130
9.50% Debentures due in 2012		125								125		125
10.60% Notes due 2011		70		9			6.6	%		79		81
7.75% Recycling facilities revenue bonds due 2022		62								62		62
7.40% Recycling facilities revenue bonds due 2022		40								40		40
Industrial revenue bonds due 2029 with interest at floating rates (3.5% at December 31, 2007)		34								34		34
7.62% Recycling facilities revenue bonds due 2016		30								30		30
10.50% Notes due at various dates from 2008 to 2010		20		7			7.3	%		27		41
10.26% Notes due at various dates from 2008 to 2011		7		2			7.2	%		9		11
6.5% UDAG loan agreement due at various dates from 2008 to 2010		5								5		5
7.40% Pollution control revenue bonds due at various dates from 2008 to 2010		4								4		5
10.63% Notes due 2010		3								3		3
Non-interest bearing loan with Government of Quebec due 2008		6								-		6
	$	5,272	$	(571	)				$	4,695	$	2,252

Refer to note 3, Business Combination, for the preliminary allocation of the purchase price of Abitibi to long-term debt acquired in the Combination.

83

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Total debt

The principal amount of debt maturities for the next five years are as follows:

(In millions)	Abitibi			Bowater		Total
2008	$	729		$	226	$	955
2009		154			259		413
2010		399			254		653
2011		403			661		1,064
2012		3			125		128
Thereafter		2,101			907		3,008
		3,789			2,432		6,221
Discounts and revaluation of debt		(609	)		36		(573	)
	$	3,180		$	2,468	$	5,648

The amounts due in 2008 are recorded as “Current installments of long-term debt” in our Consolidated Balance Sheet. All other amounts are recorded as “Long-term debt, net of current installments.” Total long-term debt, net of current installments, includes a reduction of $576 million and an additional $46 million at December 31, 2007 and 2006, respectively, due to the revaluation of the debt balances upon the acquisition of Abitibi in October 2007, the acquisition of the Grenada Operations paper mill in August 2000 and the acquisition of Avenor Inc. in July 1998. Total long-term debt, net of current installments, also includes unamortized original issue discounts of $3 million at both December 31, 2007 and 2006.

If Abitibi defaults under the terms of any of its indebtedness, the long-term debt may also go into default, possibly leading to the acceleration of the maturity of their obligations, and requiring the presentation of these obligations as current liabilities.

During August 2006, we repurchased approximately $16 million of our $250 million floating rate notes due March 15, 2010 and in September 2006, we repurchased approximately $2 million of our $250 million 9% notes due August 1, 2009. In conjunction with these transactions, we recorded charges of approximately $1 million for premiums, fees and unamortized deferred financing fees. The charges for the early extinguishment of debt are included in “Other income, net” in the accompanying Consolidated Statement of Operations.

During November 2006, we repurchased $95 million face value of our Series A, 10.625% notes due June 15, 2010 for total cash consideration of approximately $103 million, or a 7.8% premium over face value. This debt had a book carrying value of $108 million. In conjunction with this transaction, we recorded a net gain on the extinguishment of debt of approximately $5 million, which is included in “Other income, net” in the accompanying Consolidated Statement of Operations.

The fair value of our notes and debentures were determined by reference to quoted market prices or were determined by discounting the cash flows using current interest rates for financial instruments with similar characteristics and maturities. The fair value of our debt at December 31, 2007 and 2006 was $4,392 million and $2,251 million, respectively.

Note 18. Securitizations

Accounts Receivable Securitization Programs

As of December 31, 2007, our borrowings under our accounts receivable programs were as follows:

							Weighted
			Amount		Termination		Average
(In millions)	Commitment		Outstanding		Date		Interest Rate
Off-Balance Sheet:
Accounts receivable securitization programs	$	425	$	342		10/08		6.21	%

84

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Abitibi has historically sold most of its trade accounts receivable through two securitization programs in order to reduce working capital requirements. As of December 31, 2007, we had sold $495 million of trade receivables resulting in cash proceeds of $342 million, which represented the total available at that time under the securitization programs. Accounts receivable are sold at discounted amounts based on the securitization provider’s funding cost plus a margin. The average discount rate during 2007 was 6.2%. We act as a servicing agent and administer the collection of the accounts receivable sold pursuant to these agreements. The fees received for servicing the accounts receivable approximate the value of services rendered. The amount that can be obtained under our securitization programs depends on the amount and nature of the accounts receivable available to be sold.

In January 2008, one of those programs, which was uncommitted, was terminated and the other, which is committed, was amended to increase its committed amount and reset its maturity date so that we now maintain an ongoing securitization program committed until July 2009 to obtain aggregate proceeds of up to $350 million from accounts receivable, pursuant to sale agreements.

Monetization of Timber Notes

In connection with certain timberland sales transactions in 2002 and prior years, Bowater received a portion of the sale proceeds in notes receivable from institutional investors. The full principal amounts of the notes receivable are backed by letters of credit issued by third party financial institutions. In order to increase our liquidity, we monetized these notes receivable using QSPEs set up in accordance with SFAS 140. The more significant aspects of the QSPEs are as follows:

• The notes receivable were monetized through bankruptcy-remote limited liability companies. The bankruptcy-remote entities are QSPEs under SFAS 140 and are not consolidated in our financial statements.

• These QSPEs have issued fixed and floating rate senior secured notes which are secured by the notes receivable held by the QSPEs. The value of these senior secured notes is equal to approximately 90% of the value of the notes receivable.

• We retain interests in the excess future cash flows of the QSPEs (cash received from notes receivable versus cash paid out on the senior secured notes). Our retained interests are recorded at a proportional amount of the previous carrying amount of the notes receivable and treated as interest bearing investments.

• In connection with Bowater’s 1999 land sale and note monetization, we guarantee 25% of the outstanding investor notes principal balance of Timber Note Holdings LLC, one of our QSPEs. Bowater currently guarantees approximately $6 million of the investor notes principal balance. This guarantee is proportionately reduced by annual principal repayments on the investor notes (annual minimum repayments of $2 million) through 2008. The remaining investor notes principal amount is to be repaid in 2009. Timber Note Holdings LLC has assets of approximately $29 million and obligations of approximately $25 million, which include the investor notes. Bowater would be required to perform on the guarantee if the QSPE were to default on the investor notes or if there were a default on the notes receivable, events we believe are extremely unlikely to occur.

The following summarizes our retained interest in QSPEs as of December 31, 2007 and 2006, which are included in “Other assets” in our Consolidated Balance Sheets.

(In millions)	2007		2006
Calhoun Note Holdings AT LLC	$	7	$	7
Calhoun Note Holdings TI LLC		10		10
Bowater Catawba Note Holdings I LLC		2		2
Bowater Catawba Note Holdings II LLC		10		9
Timber Note Holdings LLC		3		4
Bowater Saluda LLC		8		8
	$	40	$	40

85

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 19. Financial Instruments

We utilize certain derivative instruments to enhance our ability to manage risk relating to cash flow exposures. Derivative instruments are entered into for periods consistent with related underlying cash flow exposures and do not constitute positions independent of those exposures. We do not enter into contracts for speculative purposes; however, we do, from time to time enter into interest rate, commodity and currency derivative contracts that are not accounted for as accounting hedges. Counterparty risk is limited to institutions with long-term debt ratings of A or better for North American financial institutions or ratings of AA or better for international institutions.

For derivatives that qualify for hedge accounting, we designate the derivative as a hedge at its inception. Contemporaneous with the completion of the Combination (see note 3, Business Combination), we designated Abitibi’s forward exchange contracts and tunnel contracts (a combination of put and call options) as cash flow hedges. We formally document all relationships between the hedging instruments and the hedged items, as well as our risk management objectives and strategies for undertaking the various hedge transactions. We link all hedges that are designated as cash flow hedges to forecasted transactions. Under the terms of our risk management policy, we may enter into derivative contracts to hedge forecasted transactions for a period not to exceed two years. We also assess, both at the inception of the hedge and on an on-going basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of the hedged items. If it is determined that a derivative is no longer highly effective as a hedge, we discontinue hedge accounting prospectively.

Canadian dollar and U.S. dollar forward contracts and U.S. dollar tunnel contracts

We pay a significant portion of the operating expenses of our Canadian mill sites in Canadian dollars. To reduce our exposure to U.S.-Canadian dollar exchange rate fluctuations, we periodically enter into and designate forward contracts and tunnel contracts to hedge certain of the forecasted Canadian dollar cash outflows at our Canadian mill operations, which we believe are probable of occurring. Hedge ineffectiveness associated with these forward contracts was negligible for the periods presented.

British pound sterling forward contracts

We have entered into sales agreements denominated in British pound sterling. We began entering into currency forward contracts in early 2007 to partially limit our exposure to British pound sterling-U.S. dollar exchange rate fluctuations with respect to our British pound sterling sales. These currency forward contracts, which did not qualify for hedge accounting treatment during the year, are recorded at fair value with changes in fair value reported in sales in the Consolidated Statement of Operations. Pre-tax losses recognized on these contracts for the year ended December 31, 2007 were negligible. There were no contracts outstanding at December 31, 2007.

Natural gas hedging instruments

We began entering into natural gas swap agreements in 2006 under our natural gas hedging program for the purpose of reducing the risk inherent in fluctuating natural gas prices. Our natural gas costs are based on a publicly traded index of natural gas prices plus a fixed amount. The natural gas swap agreements allow us to minimize the effect of fluctuations in that index by contractually exchanging the publicly traded index upon which we are billed for a fixed amount of natural gas costs. The swap agreements, which did not qualify for hedge accounting treatment during the year, are recorded at fair value with changes in fair value reported in cost of sales in the Consolidated Statements of Operations. As a result, approximately $1 million of pre-tax losses were recognized in our Consolidated Statements of Operations in both 2007 and 2006 for contracts that we entered into to economically hedge forecasted transactions expected to occur through December 2008.

Interest rate swaps

We acquired Abitibi’s outstanding interest rate swaps in the Combination (see note 3, Business Combination). Abitibi had utilized interest rate swaps to manage their fixed and floating interest rate mix on their long-term debt. The interest rate swaps do not qualify for hedge accounting treatment after the Combination; therefore, changes in fair value of these derivative instruments is reported in interest expense in the Consolidated Statement of Operations. Approximately $7 million of pre-tax gains were included in interest expense in 2007.

86

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Monetization of Financial Instruments

Abitibi’s foreign exchange instruments were in a substantial gain position at the date of the Combination due to the strengthening of the Canadian dollar against the U.S. dollar. In November 2007, the Board authorized the monetization of Abitibi’s forward exchange and tunnel contracts. We completed the monetization of these derivative instruments in 2007 and, as a result, received cash proceeds of approximately $24 million upon the termination of certain of these contracts. For those contracts that were not terminated, we entered into offsetting currency forward contracts to effectuate the monetization. The change in fair value of the contracts from the date of the Combination to the date of the monetization has been recorded in accumulated other comprehensive loss and is reclassified into our Consolidated Statement of Operations as the hedged transactions occur. The notional amount of these contracts represents the amount of foreign currencies or natural gas to be purchased or sold at maturity and does not represent our exposure on these contracts.

Information regarding our outstanding Canadian dollar, U.S. dollar and natural gas swap contracts’ notional amount, fair market value and range of exchange rates or natural gas index prices is summarized in the table below. The fair value of our derivative financial instruments is based on current termination values or quoted market prices of comparable contracts. The notional amount of these contracts represents the amount of foreign currencies or natural gas to be purchased or sold at maturity or the principal amount used to calculate the amount of interest and does not represent our exposure on these contracts.

						Range Of Natural
	Notional		Asset/(Liability)			Gas Index Prices, Interest
	Amount of					Rates and US$/CDN$
(In millions)	Derivatives		Fair Market Value			Exchange Rates
As of December 31, 2007:
Foreign Currency Exchange Agreements:
Buy Canadian dollars due in 2008	$	70	$	6		$	.9262 - .9544
Sell Canadian dollars due in 2008		70		(1	)		.9892 - .9951
Natural Gas Swap Agreements Due in 2008	$	6	$	-		$	6.56 – 9.87
Interest Rate Swaps	$	850	$	(4	)		2.53 -4.73	%
As of December 31, 2006:
Foreign Currency Exchange Agreements:
Canadian dollar due in 2007	$	76	$	-		$	.8592 - .8801
Natural Gas Swap Agreements due in 2007	$	9	$	(1	)	$	5.87 – 8.98

The counterparties to our derivative financial instruments are substantial and creditworthy multi-national financial institutions. We have entered into master netting agreements with those counterparties that provide that in the event of default, any amounts due to or from a counterparty will be offset. The risk of counterparty nonperformance is considered to be remote.

The components of the cash flow hedges included in “Accumulated other comprehensive loss” are as follows:

(In millions)	2007			2006			2005
Gains reclassified on matured cash flow hedges	$	2		$	(31	)	$	(96	)
Unrealized (losses) gains for change in value on outstanding cash flow hedges		(15	)		-			3
		(13	)		(31	)		(93	)
Income tax benefit		4			12			35
	$	(9	)	$	(19	)	$	(58	)

We expect to reclassify losses of $13 million ($9 million, net of tax) from “Accumulated other comprehensive loss” to the Consolidated Statement of Operations during the next twelve months as the hedged forecasted transactions occur.

87

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 20. Pension and Other Postretirement Benefit Plans

We have multiple contributory and noncontributory defined benefit pension plans covering substantially all of our employees. We also sponsor a number of other postretirement benefit plans (e.g., defined benefit health care and life insurance plans) for retirees (“OPEB plans”) at certain locations. Benefits are based on years of service and, depending on the plan, average compensation earned by employees either during their last years of employment or over their careers. Our cash contributions to the plans have been sufficient to provide pension benefits to participants and meet the funding requirements of Employee Retirement Income Security Act (“ERISA”) in the United States and applicable Pension Benefits Acts in Canada.

In addition to the previously described plans, we also sponsor a number of defined contribution plans. Employees are allowed to contribute to these plans, and for the most part we make matching contributions varying from 40% to 50% on the first 6% of a union hourly employee’s contribution, and, beginning in 2007, a matching contribution of 100% on the first 3% and 50% on the next 2% of a salaried or non-union employee’s contribution. In addition, in 2007 we began making an automatic contribution, regardless of the employee’s contribution, of 2.5% to 6.5% of a salaried or non-union employee’s annual compensation, depending on their age plus years of service on the previous December 31. The new match for salaried and non-union employees was implemented for Bowater employees as a result of the freeze of benefits effective January 1, 2007 for certain Bowater employees under our defined benefit pension plan for U.S. salaried employees. Prior to 2007, we made matching contributions of 60% on the first 6% of a salaried or non-union employee’s annual compensation. Our expense for the defined contribution plans totaled $11 million in 2007, $7 million in 2006, and $8 million in 2005.

Certain of the above plans are covered under collective bargaining agreements.

A measurement date of September 30 is used for all of our Bowater plans, while the measurement date for our Abitibi plans was October 29. SFAS 158 will require us to use a December 31 measurement date beginning in 2008. We have elected to use the 15-month transition method to determine the amount of the adjustment to our opening retained deficit balance and opening accumulated other comprehensive loss balance on January 1, 2008, and the adjustment is expected to be an increase to our retained deficit of approximately $8 million and a decrease to our accumulated other comprehensive loss of approximately $2 million. The following tables include both our foreign and domestic plans. The benefit obligations of the plans outside the United States are significant relative to the total benefit obligation; however, the assumptions used to measure the obligations of those plans are not significantly different from those used for the United States plans.

88

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The change in our benefit obligation, change in plan assets, funded status and reconciliation of amounts recognized in our Consolidated Balance Sheets is as follows:

	Pension Plans						Other Postretirement Plans
(In millions)	2007			2006			2007			2006
Change in benefit obligation:
Benefit obligation at beginning of year	$	2,314		$	2,295		$	264		$	300
Business Combination (note 3)		4,029			-			185			-
Service cost		38			44			2			4
Interest cost		129			119			13			16
Amendments		2			5			(44	)		-
Actuarial (gain) loss		(134	)		1			(14	)		(36	)
Participant contributions		11			12			3			3
Curtailments, settlements and special termination benefits		(21	)		(14	)		1			(6	)
Benefits paid		(166	)		(152	)		(17	)		(17	)
Effect of foreign currency exchange rate changes		245			4			8			-
Benefit obligation at end of year	$	6,447		$	2,314		$	401		$	264
Change in plan assets:
Fair value of plan assets at beginning of year	$	1,858		$	1,715		$	-		$	-
Business Combination (note 3)		3,621			-			-			-
Actual return on plan assets		217			150			-			-
Employer contributions		129			130			14			14
Participant contributions		11			12			3			3
Settlements		-			-			-			-
Benefits paid		(166	)		(152	)		(17	)		(17	)
Effect of foreign currency exchange rate changes		215			3			-			-
Fair value of plan assets at end of year	$	5,885		$	1,858		$	-		$	-
Reconciliation of funded status:
Funded status deficiency	$	(562	)	$	(456	)	$	(401	)	$	(264	)
Post-measurement date contributions		66			37			4			3
Funded status at end of year	$	(496	)	$	(419	)	$	(397	)	$	(261	)
Amounts recognized in the Consolidated Balance Sheets consist of:
Other assets	$	98		$	-		$	-		$	-
Accounts payable and accrued liabilities		(23	)		(11	)		(32	)		(16	)
Pension and other postretirement benefit obligations		(571	)		(408	)		(365	)		(245	)
Net obligation recognized	$	(496	)	$	(419	)	$	(397	)	$	(261	)

The sum of the projected benefit obligations and the sum of the fair value of plan assets for pension plans with projected benefit obligations in excess of plan assets were $4,603 million and $3,964 million, respectively, as of December 31, 2007, and were $2,290 million and $1,833 million, respectively, as of December 31, 2006. The sum of the accumulated benefit obligations and the sum of the fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $2,917 million and $2,519 million, respectively, as of December 31, 2007, and were $1,573 million and $1,269 million, respectively, as of December 31, 2006. The total accumulated benefit obligation for all pension plans was $6,043 million and $2,153 million at December 31, 2007 and 2006, respectively.

89

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of our net periodic benefit cost consist of:

	Pension Plans									Other Postretirement Plans
(In millions)	2007			2006			2005			2007			2006			2005
Net Periodic Benefit Cost:
Service cost	$	47		$	44		$	36		$	3		$	4		$	4
Interest cost		168			119			116			14			16			17
Expected return on Plan assets		(180	)		(122	)		(114	)		-			-			-
Amortization of prior service cost		4			5			3			(11	)		(6	)		(6	)
Recognized net actuarial loss		27			36			17			6			8			9
Curtailments, settlement and special termination benefits		29			14			-			(4	)		(6	)		(5	)
	$	95		$	96		$	58		$	8		$	16		$	19

A detail of amounts included in accumulated other comprehensive loss can be found in note 9, Accumulated Other Comprehensive Loss. We estimate that $7 million of prior service benefits and $13 million of net actuarial losses will be amortized from accumulated other comprehensive loss into our Consolidated Statement of Operations in 2008.

Events Impacting Net Periodic Benefit Cost for the Year Ended December 31, 2007

In October 2006, we approved changes to the other postretirement plan for our U.S. salaried employees. Benefits for employees were either eliminated or reduced depending on whether the employee met certain age and years of service criteria. As a result, a curtailment gain of $3 million was included in the net periodic benefit cost of our OPEB plans in 2007.

In February 2007, union members at our Thunder Bay, Ontario facility ratified a new labor agreement. As a result of a mill-wide restructuring of this facility, 157 jobs were eliminated. A curtailment loss of approximately $2 million and the cost of special termination benefits of $4 million were included in the net periodic benefit cost of our pension plans as a result of the employee reduction. This event will also result in a settlement loss at the time the benefits are paid.

In May 2007, union members at our Gatineau, Quebec facility ratified a new labor agreement. As a result of a mill-wide restructuring of this facility, 175 jobs were eliminated. A curtailment loss of approximately $2 million and special termination benefits of approximately $2 million were included in the net periodic benefit cost of our pension plans as a result of the employee reduction.

In June 2007, union members at our Dolbeau, Quebec facility ratified a new labor agreement. As a result of a mill-wide restructuring of this facility, 130 jobs were eliminated. A curtailment loss of approximately $2 million and special termination benefits of $3 million were included in the net periodic benefit cost of our pension plans as a result of the employee reduction.

At various dates from December 2006 to December 2007, certain employees received lump-sum payouts from three of our retirement pension plans. Accordingly, settlement losses of $8 million were included in the net periodic benefit cost of our pension plans.

In November 2007, we announced the permanent closure of our Dalhousie, Quebec mill (see Note 6, Closure Costs, Impairment and Other Related Charges). As a result, a curtailment loss of $3 million and special termination benefits of $1 million were included in the net periodic benefit cost of our pension plans, and a curtailment gain of $1 million was included in the net periodic benefit cost of our OPEB plans.

In December 2007, we amended the Bowater U.S. Supplemental Executive Retirement Plan and Equalization Plan to finance benefits of grandfathered executives and allow for an in-service distribution election for all active members. Accordingly, a curtailment loss of $2 million was included in the net periodic benefit cost of our pension plans.

Events Impacting Net Periodic Benefit Cost for the Year Ended December 31, 2006

As a result of the reduction of employees at our Thunder Bay “A” kraft pulp mill, curtailment losses of $5 million and special termination benefits of $1 million were included in the net periodic benefit cost of our pension plans. This event resulted in a partial plan termination and will result in a settlement loss when the assets and liabilities are eventually settled.

90

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In May 2006, we approved changes to our defined benefit pension plan for our U.S. salaried employees. Benefits for certain employees were frozen effective January 1, 2007 and were replaced with a Company contribution to a defined contribution plan. A curtailment loss of $4 million was included in net periodic benefit cost for our pension plans.

In June 2006, we approved changes to our defined benefit pension plan for our Canadian salaried employees. Benefits for certain employees will be frozen January 1, 2008 and will be replaced by a Company contribution to a defined contribution plan. A curtailment loss of approximately $2 million was included in net periodic benefit cost for our pension plans.

In June 2006, we approved changes to our OPEB plan for Canadian salaried employees. The OPEB plan was redesigned to phase out OPEB costs by the end of 2010 by increasing the retirees’ contributions from 20% to 100% over a four-year period beginning January 1, 2007. A curtailment gain of approximately $6 million was included in net periodic benefit cost for our OPEB plans.

At various dates in 2006, certain employees received lump-sum payouts from the supplemental executive retirement plan. Accordingly, settlement losses of $2 million were included in net periodic benefit cost for our pension plans.

Events Impacting Net Periodic Benefit Cost for the Year Ended December 31, 2005

The OPEB curtailment gain of $5 million recorded in 2005 is associated with changes to certain postretirement benefits in Canada.

The following weighted average assumptions were used to determine the projected benefit obligation at the measurement dates and the net periodic benefit cost for the year:

	Pension Plans									Other Postretirement Plans
	2007			2006			2005			2007			2006			2005
Projected benefit obligation:
Discount rate		5.8	%		5.4	%		5.3	%		6.1	%		5.8	%		5.3	%
Rate of compensation increase		2.5	%		2.7	%		3.6	%		3.0	%		3.0	%		3.8	%
Net periodic benefit cost:
Discount rate		5.6	%		5.2	%		6.0	%		5.9	%		5.4	%		6.0	%
Expected return on assets		7.2	%		7.5	%		7.8	%		-			-			-
Rate of compensation increase		2.6	%		3.2	%		3.9	%		3.0	%		4.0	%		3.9	%

The discount rate for our plans is determined by considering the timing and amount of projected future benefit payments and is based on a portfolio of long-term high quality corporate bonds of a similar duration or, for our Canadian plans, a model that matches the plan’s duration to published yield curves. To develop the expected long-term rate of return on assets assumption, we considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio. In determining the rate of compensation increase (below), we reviewed historical salary increases and promotions while considering the impact of current industry conditions and future industry outlook. For the health care cost inflation rate (below), we considered historical trends in these types of costs in the U.S. and Canada.

The assumed health care cost trend rates used to determine the projected benefit obligation for the other postretirement benefit plans as of December 31, 2007 and 2006 are as follows:

	2007			2006
Health care cost trend rate assumed for next year		9.0	%		8.5	%
Rate to which the cost trend rate is assumed to decline (ultimate rate)		4.8	%		4.7	%
Year that the rate reaches the ultimate trend rate		2011			2011

Variations in this health care cost trend rate can have a significant effect on the amounts reported. A 1% change in this assumption would have the following impact to our 2007 obligations and costs:

(In millions)	1% Increase				1% Decrease
Accumulated postretirement benefit costs	$	37	9	%	$	(32	)	(8	%)
Service and interest costs		2	14	%		(2	)	(12	%)

91

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The allocation of fair value by asset category for plan assets held by our pension plans as of the measurement dates were as follows:

	Weighted
	Average Target
Asset Category	Allocation			2007			2006
Equity securities		53	%		50	%		63	%
Debt securities		46	%		49	%		35	%
Real estate		1	%		1	%		2	%
		100	%		100	%		100	%

Our investment strategy for our plans is to maximize the long-term rate of return on plan assets within an acceptable level of risk in order to secure our obligation to pay pension benefits to qualifying employees while minimizing and stabilizing pension benefit costs and contributions. The asset allocation for each plan is reviewed periodically and rebalancing toward target asset mix is made when asset classes fall outside of a predetermined range. Risk is managed for each plan through diversification of asset classes, specific constraints imposed within asset classes, annual review of the investment policies to assess the need for changes and monitoring of fund managers for compliance with mandates as well as performance measurement. A series of permitted and prohibited investments are listed in our respective investment policies. Prohibited investments include investments in the equity securities of AbitibiBowater or its affiliates as well as investments in our debt securities.

During 2008, we expect to contribute approximately $260 million to our pension plans and approximately $33 million to our other postretirement plans.

The following benefit payments are expected to be paid from the plans’ net assets. The other postretirement plans’ projected benefit payments have been reduced by expected Medicare subsidy receipts associated with the Medicare Prescription Drug, Improvement and Modernization Act of 2003.

			Other		Expected
	Pension		Postretirement		Subsidy
(In millions)	Plans		Plans		Receipts
2008	$	437	$	33	$	4
2009		389		32		5
2010		435		32		5
2011		460		32		6
2012		490		31		6
Years 2013 – 2017		2,311		156		33

Note 21. Income Taxes

The components of “Loss before income taxes, minority interests and cumulative effect of accounting changes” consist of the following for the years ended December 31, 2007, 2006 and 2005:

(In millions)	2007			2006			2005
United States	$	(26	)	$	194		$	188
Foreign		(623	)		(305	)		(279	)
	$	(649	)	$	(111	)	$	(91	)

92

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The income tax benefit (provision) consists of:

(In millions)	2007			2006			2005
Federal:
Current	$	6		$	6		$	-
Deferred		39			(46	)		(49	)
		45			(40	)		(49	)
State:
Current		(1	)		(1	)	-
Deferred		3			9			(6	)
		2			8			(6	)
Foreign:
Current		(7	)		1			(10	)
Deferred		118			12			26
		111			13			16
Total:
Current		(2	)		6			(10	)
Deferred		160			(25	)		(29	)
	$	158		$	(19	)	$	(39	)

The components of deferred income taxes at December 31, 2007 and 2006, in the accompanying Consolidated Balance Sheets are as follows:

(In millions)	2007			2006
Timber and timberlands	$	(21	)	$	(27	)
Fixed assets, net		(658	)		(438	)
Deferred gains		(113	)		(119	)
Other assets		(199	)		(47	)
Deferred tax liabilities		(991	)		(631	)
Current assets and liabilities		33			18
Employee benefits and other long-term liabilities		-			247
United States tax credit carryforwards		96			86
Canadian investment tax credit carryforwards		349			57
Ordinary loss carryforwards		718			155
Valuation allowance		(415	)		(237	)
Deferred tax assets		781			326
Net deferred tax liability	$	(210	)	$	(305	)

93

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The income tax benefit (provision) attributable to loss before income taxes, minority interests and cumulative effect of accounting changes differs from the amounts computed by applying the United States federal statutory income tax rate of 35% as a result of the following:

(In millions)	2007			2006			2005
Loss before income taxes, minority interests and cumulative effect of accounting changes	$	(649	)	$	(111	)	$	(91	)
Expected income tax benefit		227			39			32
Increase (decrease) in income taxes resulting from:
Valuation allowance (1)		(147	)		(27	)		(97	)
Tax reserves		16			13			9
Goodwill (2)		-			(77	)		-
Foreign exchange		(23	)		(5	)		1
State income taxes, net of federal income tax benefit		4			(5	)		(5	)
Foreign taxes		43			40			21
Change in statutory tax rates		54			-			-
Other, net		(16	)		3			-
Income tax benefit (provision)	$	158		$	(19	)	$	(39	)

(1)

We have significant deferred tax assets in the U.S. and Canada related to tax credit carryforwards and ordinary loss carryforwards. The carrying value of our deferred tax assets (tax benefits expected to be realized in the future) assumes that we will be able to generate, based on certain estimates and assumptions, sufficient future taxable income in certain tax jurisdictions to utilize these deferred tax benefits, or in the absence of sufficient future taxable income, that we would implement tax planning strategies to generate sufficient taxable income. If these tax planning strategies, estimates and related assumptions change in the future, we may be required to reduce the value of our deferred tax assets, resulting in additional income tax expense. During 2005, based on operating losses for our Canadian operations and current evaluation of available tax planning strategies, in accordance with SFAS No. 109, “Accounting for Income Taxes,” we recorded a tax charge to establish a valuation allowance against most of our remaining net Canadian deferred tax assets that arose during all tax years 2005 and prior, which are primarily for loss carryforwards and tax credits in Canada. In connection with this requirement, most of the income tax benefits that were generated by our 2006 and 2007 Canadian operations losses at Bowater were entirely offset by a tax charge in order to increase the valuation allowance. Additionally, any income tax benefit recorded on any future operating losses generated in these Canadian operations will probably be offset by additional increases to the valuation allowance (tax charge). This would have a negative impact on our overall effective income tax rate in future periods.

(2)

We recorded a goodwill impairment charge of $200 million during the year ended December 31, 2006. No tax benefit is provided by this charge.

We adopted the provisions of FIN 48 on January 1, 2007. As a result of the implementation of FIN 48, we decreased our liability for unrecognized tax benefits by $2 million, which was accounted for as a decrease to our January 1, 2007 retained deficit balance.

94

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follow:

(In millions)	2007
Balance at January 1, 2007	$	28
Increase (decrease) in unrecorded tax benefits resulting from:
Positions taken in a prior period		1
Combination with Abitibi (note 3)		82
Settlements with taxing authorities		(2	)
Change in Canadian foreign exchange rate		(3	)
Expiration of statute of limitations		(18	)
Balance at December 31, 2007	$	88

We recognize interest and penalties accrued related to unrecognized tax benefits as components of income tax expense. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $85 million. If recognized, these items would impact the Consolidated Statements of Operations and our effective tax rate. We anticipate that the total amount of unrecognized tax benefits will decrease by approximately $6 to $7 million during the next twelve months due to certain U.S. federal and state statute of limitations expiring, primarily in the third quarter of 2008. The approximately $6 to $7 million of unrecognized tax benefits is attributable to various U.S. income tax issues including interest deductibility, intercompany transactions and purchase price allocations. We remain subject to income tax examinations in Canada for tax years 2004-2006 and in the U.S. for tax years 2003-2006.

At December 31, 2007, we had U.S. federal and state net operating loss carryforwards of $985 million and $1,105 million, respectively, and Canadian federal and provincial net operating loss carryforwards of $1,026 million and $1,088 million, respectively. In addition, $349 million of Canadian investment tax credit and expense carryforwards and $96 million of U.S. tax credit carryforwards were available to reduce future income taxes. The U.S. federal and state loss carryforwards expire at various dates up to 2027. The Canadian non-capital loss and investment tax credit carryforwards expire at various dates between 2008 and 2027. Of the U.S. tax credit carryforwards, $79 million consists of alternative minimum tax credits that have no expiration. A valuation allowance totaling $415 million has been recorded against these and other deferred tax assets where recovery of the asset or carryforward is uncertain.

The American Jobs Creation Act of 2004 (the “AJCA”) introduced a special one-time dividend-received deduction on the repatriation of certain foreign earnings to a U.S. taxpayer (repatriation provision) provided certain criteria are met. We determined that we would not repatriate any foreign earnings under the provisions of the AJCA.

At December 31, 2007 and December 31, 2006, we had unremitted earnings of our subsidiaries outside the United States totaling $103 million and $125 million, respectively, which, notwithstanding the AJCA, have been deemed to be permanently invested. No deferred tax liability has been recognized with regard to such earnings. It is not practicable to estimate the income tax liability that might be incurred if such earnings were remitted to the United States.

In the normal course of business, we are subject to audits from the federal, state, provincial and other tax authorities regarding various tax liabilities. The U.S. federal statute of limitations for pre-2004 tax years expired on September 15, 2007; however, the IRS may adjust our reported tax liabilities for these years to the extent of refunds generated by operating loss carrybacks from subsequent years. We are not currently under audit by the IRS and have not been contacted by the taxing authorities regarding an audit of the post-2003 tax years. The Canadian taxing authorities are auditing years 2002 through 2006 for our Canadian entities. There were no significant adjustments to our tax liabilities arising from any audits over the last three years.

Any audits may alter the timing or amount of taxable income or deductions, or the allocation of income among tax jurisdictions. The amount ultimately paid upon resolution of issues raised may differ from the amount accrued. We believe that taxes accrued on our Consolidated Balance Sheets fairly represent the amount of future tax liability due.

95

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 22. Commitments and Contingencies

Legal items

We are involved in various legal proceedings relating to contracts, commercial disputes, taxes, environmental issues, employment and workers’ compensation claims and other matters. We periodically review the status of these proceedings with both inside and outside counsel. Although the final outcome of any of these matters is subject to many variables and cannot be predicted with any degree of certainty, we establish reserves for a matter when we believe an adverse outcome is probable and the amount can be reasonably estimated. We believe that the ultimate disposition of these matters will not have a material adverse effect on our financial condition, but it could have a material adverse effect on the results of operations in any given quarter or year.

On June 18, 2007, The Levin Group, L.P. filed a complaint against Bowater in the Supreme Court of New York, New York County, asserting claims for breach of contract and related claims relating to certain advisory services purported to have been provided by the plaintiff in connection with the Combination. The complaint seeks damages of no less than $70 million, related costs and such other relief as the court deems just and proper. We believe this claim is entirely without merit and intend to contest this matter vigorously.

On September 7, 2007, BCFPI received a decision in an arbitration related to the 1998 sale to Weyerhaeuser Company (“Weyerhaeuser”) of Bowater’s former pulp and paper facility in Dryden, Ontario. BCFPI and Weyerhaeuser had been arbitrating a claim regarding the cost of certain environmental matters related to the mill. The arbitrators awarded Weyerhaeuser approximately $43 million (CDN $44 million), including interest. As a result of the arbitrator’s decision, which is binding upon Bowater and not subject to appeal, we recorded a pre-tax charge of $28 million (CDN $29 million) during the three and nine months ended September 30, 2007. We had previously established a reserve of approximately $15 million (CDN $15 million) in connection with these environmental matters at the time of the sale.

On April 26, 2006, we received a notice of violation from the U.S. Environmental Protection Agency (“EPA”) alleging four violations of the Clean Air Act (“CAA”) at our Calhoun mill for which penalties in excess of $100,000 could be imposed. We have strong arguments that the Calhoun mill did not violate the CAA and continue to discuss these issues with the EPA.

Since late 2001, Bowater, several other paper companies and numerous other companies have been named as defendants in asbestos personal injury actions. These actions generally allege occupational exposure to numerous products. We have denied the allegations and no specific product of ours has been identified by the plaintiffs in any of the actions as having caused or contributed to any individual plaintiff’s alleged asbestos-related injury. These suits have been filed by approximately 1,800 claimants who sought monetary damages in civil actions pending in state courts in Delaware, Georgia, Illinois, Mississippi, Missouri, New York, Tennessee and Texas. Approximately 1,000 of these claims have been dismissed, either voluntarily or by summary judgment, and approximately 770 claims remain. Insurers are defending these claims, and we have not settled or paid any of these claims. We believe that all of these asbestos-related claims are covered by insurance, subject to any applicable deductibles and our insurers’ rights to dispute coverage. While it is not possible to predict with certainty the outcome of these matters, we do not expect these claims to have a material adverse impact on our business, financial position or results of operations.

Lumber duties

Lumber duties imposed by the U.S. Department of Commerce (“DOC”) were effective for lumber shipments from Canada to the U.S. beginning May 22, 2002. Between May 22, 2002 and October 12, 2006, we paid duties totaling approximately $113 million to cover the various duty rates then in effect. Lumber duties were included as a component of distribution costs on our Consolidated Statements of Operations.

On October 12, 2006, an agreement regarding Canada’s softwood lumber exports to the U. S. became effective. The agreement provides for the return of approximately $4.5 billion in accumulated cash deposits to Canadian industry with the remaining $1 billion to U.S. interests. Through an arrangement with Export Development Corporation (“EDC”), which the government of Canada designated as its agent to expedite the refund of duties, we recovered approximately $104 million on November 10, 2006. The refund consisted of a return of $92 million of the duties paid and $12 million in interest due the company. We do not expect to recover any additional amounts.

96

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Softwood Lumber Agreement (“SLA”) provides for softwood lumber to be subject to one of two ongoing border restrictions, depending upon the province of first manufacture with several provinces, including Nova Scotia, being exempt from these border restrictions. Volume quotas have been established for each company within the provinces of Ontario, Quebec and British Columbia based on historical production, and the volume quotas are not transferable between provinces. The volume that we were allocated was insufficient to operate both our Ignace and Thunder Bay, Ontario sawmills; therefore, we decided to indefinitely shut our Ignace sawmill in December 2006. U.S. composite prices would have to rise above $355 per thousand board feet before the quota volume restrictions would be lifted. Our average transaction price for lumber in the fourth quarter of 2007 was $287 per thousand board feet.

In 2005, the province of Quebec mandated that the annual harvests of softwood timber on Crown-owned land would be reduced 20% below 2004 levels. The 20% reduction was required to be achieved, on average, for the period 2005 to 2008. In December 2006, the province of Quebec increased that reduction to 23.8% below 2004 levels for the period 2008 to 2013. These requirements did not have any material impact on our results of operations or financial condition during 2006 or 2007.

Letters of credit

There were outstanding letters of credit commitments totaling $177 million at December 31, 2007 (primarily for employee benefit programs, certain debt obligations and other purchase commitments), reducing availability under the revolving credit facilities. (See note 17, Long-term and Short-term Debt).

Employees

As of December 31, 2007, AbitibiBowater employed approximately 18,000 people, of whom approximately 13,000 were represented by bargaining units. Our unionized employees in Canada are represented predominantly by the Communications, Energy and Paperworkers Union and in the U.S. predominantly by the United Steelworkers Union.

Seventeen collective bargaining agreements covering approximately 1,600 of our employees have been renewed in 2007. Six collective bargaining agreements, covering approximately 1,000 of our employees, which expired on or before December 31, 2007, are in the process of being renegotiated. In 2008, another nine collective bargaining agreements will expire, covering approximately 1,200 employees. A significant number of our collective bargaining agreements with respect to our paper operations in Eastern Canada will expire on the same date in 2009. We requested that the union representing the majority of our Eastern Canadian employees begin negotiations on the 2009 agreements in early 2008. Those negotiations were not successful in reaching an early agreement. The employees at the facility in Mokpo, South Korea have complied with all conditions necessary to strike. The possibility of a strike or lockout of those employees is not clear. While negotiations with the unions in the past have resulted in collective agreements being signed, as is the case with any negotiation, we may not be able to negotiate acceptable new agreements, which could result in strikes or work stoppages by affected employees. Renewal of collective bargaining agreements could also result in higher wage or benefit costs. Therefore, we could experience a disruption of our operations or higher ongoing labor costs which could have a material adverse effect on our business, financial condition or results of operations.

Environmental matters

We may be a “potentially responsible party” with respect to three hazardous waste sites that are being addressed pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“Superfund”) or the Resource Conservation and Recovery Act (“RCRA”) corrective action authority. The first two sites are on CNC timberland tracts in South Carolina. One was already contaminated when acquired, and subsequently, the prior owner remediated the site and continues to monitor the groundwater. On the second site, several hundred steel drums containing textile chemical residue were discarded by unknown persons. The third site, at our mill in Coosa Pines, Alabama, contained buried drums and has been remediated pursuant to RCRA. We continue to monitor the groundwater. We believe we will not be liable for any significant amounts at any of these sites.

We currently have recorded $27 million for environmental liabilities. Approximately $24 million of this $27 million relates to environmental reserves established in connection with prior acquisitions, including the Combination with Abitibi (see note 3, Business Combination). The majority of these liabilities are recorded at discounted amounts, and they are included in other long-term liabilities on the Consolidated Balance Sheets. The $27 million represents management’s estimate based on an assessment of relevant factors and assumptions of the ultimate settlement amounts for these liabilities. The amount of these liabilities could be affected by changes in facts or assumptions not currently known to management.

97

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the activity for the liabilities associated with environmental costs related to prior acquisitions or dispositions

	Balance at		Payments							Balance
	beginning		Against			Increase to		Foreign		at end
(In millions)	of year		Reserve (1)			Reserve (2)		Exchange		of year
Year ended December 31, 2007	$	18	$	(17	)	$	22	$	1	$	24
Year ended December 31, 2006	$	19	$	(2	)	$	1	$	—	$	18
Year ended December 31, 2005	$	19	$	(1	)	$	—	$	1	$	19

(1)	Approximately $15 million of the payments were to Weyerhaeuser (see discussion under Legal Items earlier in this note).
(2)	Approximately $21 million of the increase during the year ended December 31, 2007 is attributable to the Combination with Abitibi (see note 3, Business Combination).

Note 23. Share Capital

Refer to note 1, Organization and Basis of Presentation, for information regarding the restatement of share and share-related information in periods prior to the Combination to reflect the Bowater exchange ratio of 0.52. Refer to note 3, Business Combination, for information regarding the merger of Abitibi and Bowater and the resulting issuance of shares.

Preferred stock

AbitibiBowater is authorized to issue 10 million shares of serial preferred stock, $1 par value. As of December 31, 2007 and 2006, no preferred shares were issued and outstanding.

Common stock

AbitibiBowater is authorized to issue 100 million shares of common stock, $1 par value per share. At December 31, 2007, 5.2 million shares of common stock are reserved for issuance upon the exchange of AbitibiBowater Canada Inc. exchangeable shares, and 4.3 million shares of common stock are reserved for issuance upon the exercise from time to time of stock options and other share-based awards.

Exchangeable shares

In conjunction with the 1998 acquisition of Avenor, the 2001 acquisition of Alliance and the 2007 acquisition of Abitibi, our indirect wholly-owned subsidiary, AbitibiBowater Canada Inc. (“ABCI”) (formerly known as Bowater Canada Inc.), issued shares of no par value exchangeable shares (“Exchangeable Shares”). The Exchangeable Shares are exchangeable at any time, at the option of the holder, on a one-for-one basis for shares of AbitibiBowater common stock (previously Bowater common stock). Holders of Exchangeable Shares have voting rights substantially equivalent to holders of AbitibiBowater common stock and are entitled to receive dividends equivalent, on a per-share basis, to dividends paid by AbitibiBowater on its common stock. At some future date (i.e., after 2026 or if there are ever fewer than 500,000 Exchangeable Shares held by the public), the shares become redeemable at the option of ABCI in consideration for the issuance and delivery of shares of AbitibiBowater common stock.

Treasury stock

At December 31, 2006, we held shares of common stock in treasury to pay for employee and director benefits and to fund our dividend reinvestment plan. These shares were cancelled upon consummation of the Combination.

98

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 24. Share-Based Compensation

We maintain incentive stock plans that provide for grants of stock options, restricted stock units (“RSUs”) and deferred stock units (“DSUs”) to our directors, officers and certain key employees. Our stock options and certain of our restricted stock units are accounted for as equity-classified awards because these awards are settled by issuing shares of AbitibiBowater common stock upon exercise, in the case of stock options, or upon vesting, in the case of RSUs. The Human Resources and Compensation Committee, a sub-committee of the Board, approves on an annual basis the stock option and RSU grants and the vesting conditions. All outstanding stock options and RSUs at December 31, 2007 are service-based awards. In addition to equity-classified awards, we have liability-classified awards outstanding. Certain of our RSUs, as well as our DSUs, are accounted for as liability-classified awards because these awards are settled by giving the employee cash or common shares that we have purchased on the open market.

The following table details the share-based compensation expense (excluding the cumulative effect of accounting change) recorded in the Consolidated Statements of Operations by award for the years ended December 31:

(In millions)	2007			2006			2005
Stock options	$	1		$	1		$	-
Restricted stock units		13			8			-
Liability–classified awards		(1	)		(4	)		-
Share-based compensation expense	$	13		$	5		$	-

The following table details the tax (benefit) provision by award for the years ended December 31:

(In millions)	2007			2006			2005
Stock options	$	-		$	-		$	-
Restricted stock units		(4	)		(2	)		-
Liability–classified awards		-			1			-
Tax benefit on share-based compensation expense	$	(4	)	$	(1	)	$	-

Our share-based compensation plans authorized the grant of up to 13.5 million shares of our common stock in the form of stock options, RSUs, DSUs and EPRs. At December 31, 2007, approximately 4.3 million shares were available for grant under these plans.

Refer to note 1, Organization and Basis of Presentation, for information regarding the restatement of share and per share information in periods prior to the Combination to reflect the Bowater exchange ratio of 0.52 and information regarding the exchange of outstanding Abitibi and Bowater share-based awards into AbitibiBowater share-based awards.

Stock Options

We grant options to eligible employees to buy AbitibiBowater common stock at exercise prices equal to the market stock price on the date that the options are granted. Stock options granted generally become exercisable over a period of two to four years, except for those granted to directors, which vest immediately. Unless terminated earlier in accordance with their terms, all options expire 10 years from the date of grant.

In May 2006, we granted 182,328 stock options, of which 52,328 cliff vest after 32 months and 130,000 vest ratably over 36 months. In January 2007, we granted 37,516 stock options, which cliff vest after three years and allow for accelerated vesting upon a grantee’s retirement. In October 2007, as a result of the Combination, we granted 920,020 stock options to Abitibi employees in exchange for 14,694,457 outstanding stock options that had been previously granted to them by Abitibi. These awards cliff vest four years after the original grant date and allow for accelerated vesting upon a grantee’s retirement. The exercise price on the stock options granted to Abitibi employees remained the same as the exercise price on the original awards, adjusted for the Abitibi exchange ratio.

99

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In September 2007, the terms of all outstanding stock options granted in 2006 were modified to allow for accelerated vesting in full upon a grantee’s involuntary termination without cause. The modification of these 164,241 stock options was treated as a cancellation of the 2006 awards and a new grant of the modified awards. Of the modified stock options, 12,922 were considered Type III modifications (i.e., stock option grants for which future vesting was considered improbable under the original terms of the grant, but considered probable under the modified terms). For those stock options, we reversed cumulative compensation expense recognized through the date of the modification, and started recognizing compensation expense over the new requisite service periods (based on the expected vesting date for each applicable grantee). Of the modified stock options, 151,319 were considered Type I modifications (i.e., stock option grants for which future vesting was considered probable under the original terms of the grant and is still considered probable under the modified terms), and the original compensation expense continues to be recognized over the original requisite service periods. The impact of these modifications on 2007 compensation expense was negligible.

A summary of option activity under our stock plans as of December 31, 2007, and the changes during the year ended December 31, 2007, is presented below:

						Weighted-
						Average		Aggregate
	Number Of			Weighted-		Remaining		Intrinsic
	Shares			Average		Contractual		Value
	(000’s)			Exercise Price		Life (years)		($000)
Outstanding at December 31, 2006 (Restated)		2,590		$	83.55
Granted		958			165.58
Exercised		-			-
Canceled		(136	)		84.08
Outstanding at December 31, 2007		3,412		$	106.55		4.3	$	-
Exercisable at December 31, 2007		3,024		$	111.44		3.8	$	-

The following table shows the weighted-average assumptions used to determine the fair value of each stock option granted or issued in 2007 and 2006:

	2007			2006
	Stock Options			Stock Options
	Granted			Granted
Assumptions:
Expected dividend yield		0.11	%		2.95	%
Expected volatility		41.8	%		32.1	%
Risk-free interest rate		4.0	%		5.1	%
Expected life (in years)		3.9			6.1
Weighted-average fair value of options granted (Restated)	$	3.74		$	15.38

We estimated the expected dividend yield based on the projected dividend payment per share divided by the stock price on the grant date. We estimated the expected life based on historical experience. We estimated the risk-free interest rate based on a zero-coupon U.S. Treasury instrument with a remaining term approximating the expected life of the option. We estimated the expected volatility based on an equal weighting of the historical volatility of our common stock (measured over a term approximating the expected life of the stock option) and implied volatility from traded options on our common stock having a life of more than one year.

At December 31, 2007, there was $2 million of unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted-average period of 1.9 years. During 2007 and 2006, all vested stock options were “out-of-the-money” (i.e., they had an exercise price greater than our trading stock price). As a result, there were no stock options exercised. The total intrinsic value of stock options exercised in 2005 was $1 million.

100

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Units

We grant RSUs to eligible employees the right to receive one share of AbitibiBowater common stock for each unit that vests. RSUs granted generally vest over a period of two to four years, except for those granted to directors, which vest immediately.

In May 2006, we granted 403,275 equity-classified RSUs, of which 22,635 were performance-based and cliff vest after 32 months, 92,738 were service-based and cliff vest after 32 months, 261,902 were service-based and cliff vest after 20 months and 26,000 were service-based and cliff vest after 12 months. In August 2006 and September 2006, we granted 10,400 and 5,200 equity-classified RSUs, respectively, that were service-based and cliff vest after 36 months. In January 2007, we granted 170,531 equity-classified RSUs that were service-based and cliff vest after 36 months and allow for accelerated vesting upon a grantee’s retirement. In February 2007, we granted 18,773 equity-classified RSUs that were performance-based awards that vested upon the completion of the Combination (see note 3, Business Combination). In March 2007, we granted 28,184 equity-classified RSUs that were performance-based awards. The vesting of these awards is contingent upon the realization of certain synergies within two years of the Combination. The key terms and conditions of these RSUs have not been finalized; therefore, a grant date for FAS 123R purposes has not yet occurred. As such, no compensation expense was recorded in 2007, nor were these awards included in our outstanding RSUs at the end of the period. In June 2007, we granted 986 equity-classified RSUs that were service-based and cliff vest after 36 months.

In September 2007, the terms of all outstanding performance-based and service-based RSUs granted in 2006, except the awards granted in May 2006 that cliff vest over 20 months, were modified to allow for accelerated vesting in full upon a grantee’s involuntary termination without cause and to remove any performance conditions from the awards. The modification of these 106,968 RSUs was treated as a cancellation of the 2006 awards and a new grant of the modified awards. Of the modified RSUs, 33,763 were considered Type III modifications. For those RSUs, we reversed cumulative compensation expense recognized through the date of modification, and started recognizing compensation expense over the new requisite service periods (based on the expected vesting date for each applicable grantee). Of the modified RSUs, 73,205 were considered Type I Modifications, and the original compensation expense continues to be recognized over the original requisite service periods. The impact of these modifications on 2007 compensation expense was negligible.

The following table summarizes recent activity and the status of the equity-classified RSUs:

	Number Of Shares			Weighted-Average Fair
	(000’s)			Value at Grant Date
Outstanding at December 31, 2006 (Restated)		346		$	50.20
Granted		190			53.53
Vested		(96	)		51.71
Forfeited		(7	)		51.60
Outstanding at December 31, 2007		433		$	51.31

At December 31, 2007, there was $7 million of unrecognized compensation cost related to equity-classified RSUs, which is expected to be recognized over a weighted-average period of 1.7 years. The total fair value of equity-classified RSUs vested during 2007 was $3 million.

Liability-Classified Awards

At the date of the Combination, we granted liability-classified RSUs and DSUs to senior executives and directors of Abitibi in exchange for similar outstanding awards that had been granted to them by Abitibi prior to the Combination. All of the DSUs granted are fully vested, while the RSUs will continue to vest over their original requisite service periods, which continue for periods up to two years. Additionally, we grant DSUs to directors upon deferral of their annual board retainer and meeting fees and as share-based awards. Each DSU is equivalent in value to one share of AbitibiBowater common stock. The DSUs granted to directors for board retainer and meeting fees vest immediately, while the DSUs credited to directors as retirement awards vest after five years of service. DSUs are payable upon termination or retirement.

At December 31, 2007 there were 1,283,153 liability-classified awards outstanding at a weighted-average share price of $76.22 with a remaining contractual term of 2.2 years. The liability for these awards was $3 million at December 31, 2007 and $3 million at December 31, 2006.

101

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 25. Timberland Leases, Operating Leases and Purchase Obligations

We control approximately 67,000 acres of timberlands under long-term leases expiring 2023 to 2058 for which aggregate lease payments were less than $1 million each year in 2007, 2006 and 2005. These lease costs are capitalized as part of timberlands and are charged against income at the time the timber is harvested. In addition, we lease certain office premises, office equipment and transportation equipment under operating leases. Total rental expense for operating leases was $27 million in 2007, $9 million in 2006 and $9 million in 2005. We also enter into various supply and cutting rights agreements, guarantees and purchase commitments in the normal course of business. Total expenses for these agreements, guarantees and purchase commitments were $91 million in 2007, $76 million in 2006 and $78 million in 2005. We manage approximately 50 million acres of Crown-owned land in Canada on which we have cutting rights. We make payments to various Canadian provinces based on the amount of timber harvested.

At December 31, 2007, the future minimum rental payments under timberland leases, operating leases and commitments for purchase obligations are as follows:

	Timberland		Operating		Purchase
(In millions)	Lease Payments		Leases, Net		Obligations(1)
2008	$	—	$	36	$	71
2009		1		21		68
2010		—		15		57
2011		1		11		57
2012		—		9		57
Thereafter		11		40		278
	$	13	$	132	$	588

⁽¹⁾ Purchase obligations include, among other things, a fiber supply contract for our Coosa Pines operation with commitments totaling $74 million through 2014, a steam supply contract for our Dolbeau operations with commitments totaling $206 million through 2023 and a cogeneration supply agreement at our Bridgewater operations with commitments totaling $199 million through 2015.

Note 26. Segment Information

We manage our business based on the products that we manufacture and sell to external customers. Our reportable segments are newsprint, coated papers, specialty papers, market pulp and wood products.

None of the income or loss items following “Operating (loss) income” in our Consolidated Statements of Operations are allocated to our segments, since those items are reviewed separately by management. For the same reason, impairments, employee termination costs, gains on dispositions of assets and other discretionary charges or credits are not allocated to the segments. Share-based compensation expense is, however, allocated to our segments. We also allocate depreciation expense to our segments, although the related fixed assets are not allocated to segment assets.

Only assets which are identifiable by segment and reviewed by our management are allocated to segment assets. Allocated assets include goodwill and finished goods inventory. All other assets are not identifiable by segment and are included in “Corporate and Other.” Goodwill of $188 million related to the Combination with Abitibi has not been allocated to any segment yet and is included in “Corporate and Other” (See note 5, Goodwill and Other Intangible Assets, Net). Information needed to recast 2005 goodwill based on our current reportable segments, which were changed in 2006, is not readily available.

In conjunction with the Combination, we added 17 paper and pulp manufacturing facilities, 17 sawmills and 5 remanufactured and engineered wood facilities to our operations, which impacted all of our segments except coated papers.

102

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes information about segment profit and loss and segment assets for the three years ended December 31, 2007, 2006 and 2005:

					Coated		Specialty			Market		Wood			Corporate			Consolidated
(In millions)		Newsprint			Papers		Papers			Pulp		Products			and Other			Total
Sales
	2007	$	1,574		$	570	$	800		$	600	$	318		$	14		$	3,876
	2006		1,438			612		570			559		332			19			3,530
	2005		1,429			625		477			534		385			34			3,484
Depreciation, amortization and cost of timber harvested
	2007	$	165		$	38	$	109		$	54	$	23		$	7		$	396
	2006		137			42		64			53		18			9			323
	2005		142			44		57			58		19			9			329
Segment (loss) income (1)
	2007	$	(134	)	$	42	$	(85	)	$	96	$	(91	)	$	(228	)	$	(400	)
	2006		79			76		(35	)		37		63			(179	)		41
	2005		72			114		2			8		15			(112	)		99
Capital expenditures
	2007	$	41		$	7	$	25		$	40	$	6		$	9		$	128
	2006		65			14		65			40		4			11			199
	2005		54			14		49			24		14			13			168
Assets
	2007	$	671		$	15	$	149		$	25	$	86		$	9,373		$	10,319
	2006		574			21		83			25		10			3,933			4,646
	2005		45			15		17			29		15			5,031			5,152

(1) Corporate and other operating loss includes net gains from dispositions of assets of $145 million, $186 million and $66 million for the years ended December 31, 2007, 2006 and 2005, respectively; and closure costs, impairment and other related charges of $123 million, $253 million and $83 million for the years ended December 31, 2007, 2006 and 2005, respectively. Operating income for Wood Products includes a refund of lumber duties of $92 million for the year ended December 31, 2006. The Combination with Abitibi impacted our 2007 results beginning October 29, 2007.

Sales to our joint venture partners, which are transacted at arm’s length, were $255 million, $359 million and $326 million in 2007, 2006 and 2005, respectively. Amounts due from joint venture partners were $30 million and $51 million at December 31, 2007 and 2006, respectively, and are included in “Accounts receivable, net” on our Consolidated Balance Sheets.

Sales by country are as follows:

	Sales by Country(1)
(In millions)	2007		2006		2005
United States	$	2,498	$	2,493	$	2,484
Foreign Countries:
Canada		333		235		271
Korea		92		106		104
United Kingdom		150		64		78
Mexico		112		93		71
Italy		104		74		73
Other countries (2)		587		465		403
		1,378		1,037		1,000
	$	3,876	$	3,530	$	3,484

103

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Long-lived assets by country are as follows:

	Long-Lived Assets by Country(3)
(In millions)	2007		2006		2005
United States	$	1,907	$	1,549	$	1,717
Foreign Countries:
Canada		3,717		1,253		1,357
Korea		124		135		146
United Kingdom		17		-		-
		3,858		1,388		1,503
	$	5,765	$	2,937	$	3,220

(1)	Sales are attributed to countries based on the location of the customer. No single customer, related or otherwise, accounted for 10% or more of AbitibiBowater’s 2007, 2006 or 2005 consolidated sales.
(2)	No country in this group exceeded 2% of consolidated sales.
(3)	Excludes goodwill, intangible assets, financial instruments and deferred tax assets.

Note 27. Supplemental Cash Flow Information

Transactions related to investing and financing activities with significant non-cash components include the impact of the Combination with Abitibi on October 29, 2007. The net assets of Abitibi were acquired through the issuance of AbitibiBowater common stock and Exchangeable Shares. Individual items on the Consolidated Statement of Cash Flows for the year ended December 31, 2007 exclude the impact of this Combination, except for the cash acquired in the Combination. Refer to note 3, Business Combination, for additional details related to assets acquired and liabilities assumed in the Combination.

Note 28. Quarterly Information (Unaudited)

Year ended December 31, 2007
(In millions, except per-share amounts)	First			Second			Third			Fourth(1)			Year
Sales	$	772		$	798		$	815		$	1,491		$	3,876
Operating income (loss) (2)		25			15			(82	)		(358	)		(400	)
Net loss		(35	)		(63	)		(142	)		(250	)		(490	)
Basic income (loss) per common share:
Net loss (restated)		(1.19	)		(2.09	)		(4.75	)		(5.09	)		(14.11	)
Diluted loss per common share:
Net loss (restated)		(1.19	)		(2.09	)		(4.75	)		(5.09	)		(14.11	)

Year ended December 31, 2006
(In millions, except per-share amounts)	First			Second			Third			Fourth		Year
Sales	$	893		$	900		$	876		$	861	$	3,530
Operating income (loss) (3)		40			67			(179	)		113		41
Income (loss) before cumulative effect of accounting changes		(16	)		(11	)		(216	)		108		(135	)
Net income (loss)		(19	)		(11	)		(216	)		108		(138	)
Basic income (loss) per common share:
Income (loss) before cumulative effect of accounting changes (restated)		(0.54	)		(0.35	)		(7.24	)		3.59		(4.55	)
Net income (loss) (restated)		(0.63	)		(0.35	)		(7.24	)		3.59		(4.64	)
Diluted income (loss) per common share:
Income (loss) before cumulative effect of accounting changes (restated)		(0.54	)		(0.35	)		(7.24	)		3.58		(4.55	)
Net income (loss) (restated)		(0.63	)		(0.35	)		(7.24	)		3.58		(4.64	)

(1)

The fourth quarter of 2007 includes the operating results of Abitibi from the date of the Combination through December 31, 2007. Sales for Abitibi during this period were $665 million and operating loss was $99 million.

(2)

Includes gains on dispositions of assets of $58 million in the first quarter, $65 million in the second quarter, $17 million in the third quarter and $5 million in the fourth quarter; severance of $7 million in the first quarter, $12 million in the second quarter, $8 million in the third quarter and $32 million in the fourth quarter; merger related costs of $2 million in the first quarter, $8 million in the second quarter, $10 million in the third quarter and $29 million in the fourth quarter;

104

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

an arbitration award of $28 million in the third quarter and closure costs, impairment and other related charges of $123 million in the fourth quarter.

(3)

Includes gains on dispositions of assets of $29 million in the first quarter, $72 million in the second quarter, $54 million in the third quarter and $31 million in the fourth quarter; severance of $4 million in the first quarter, $7 million in the third quarter and $5 million in the fourth quarter; closure costs, impairment and other related charges of $247 million in the third quarter and $6 million in the fourth quarter; and a refund of lumber duties of $92 million in the fourth quarter.

105

Management’s Report on Financial Statements and Assessment of Internal Control over Financial Reporting

Financial Statements

Management of AbitibiBowater Inc. is responsible for the preparation of the financial information included in this Annual Report on Form 10-K. The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles and include amounts that are based on the best estimates and judgments of management.

Assessment of Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. AbitibiBowater Inc.’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that:  

§	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of AbitibiBowater Inc.;
§	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles;
§	provide reasonable assurance that receipts and expenditures of AbitibiBowater Inc. are being made only in accordance with the authorizations of management and directors of AbitibiBowater Inc.; and
§	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the Consolidated Financial Statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of AbitibiBowater Inc.’s internal control over financial reporting as of December 31, 2007. Management based this assessment on the criteria for effective internal control over financial reporting described in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included an evaluation of the design of AbitibiBowater Inc.’s internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting. Management reviewed the results of its assessment with the Audit Committee of our Board of Directors.

Based on this assessment, management determined that, as of December 31, 2007, AbitibiBowater Inc.’s internal control over financial reporting was effective.

PricewaterhouseCoopers LLP, the independent registered public accounting firm which audited and reported on the Consolidated Financial Statements of AbitibiBowater Inc. included in this Form 10-K, has issued an attestation report on the operating effectiveness of internal control over financial reporting. PricewaterhouseCoopers LLP’s report follows this report.

106

Report of Independent Registered Public Accounting Firm

To the Board of Directors and the Shareholders of AbitibiBowater Inc.

In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, capital accounts and cash flows present fairly, in all material respects, the financial position of AbitibiBowater Inc. at December 31, 2007, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the accompanying financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Financial Statements and Assessment of Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audit of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions. The consolidated financial statements of Bowater Incorporated, the predecessor to AbitibiBowater Inc., as of December 31, 2006 and for the two years then ended were audited by other auditors whose report dated March 1, 2007 expressed an unqualified opinion on those statements.

As discussed in Note 4 to the consolidated financial statements, the Company’s wholly-owned subsidiary, Abitibi-Consolidated Inc. (“Abitibi”) is currently experiencing a liquidity shortfall and liquidity problems and there is substantial doubt about Abitibi’s ability to continue as a going concern.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Montreal, Canada
March 17, 2008

107

Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements

The Board of Directors of AbitibiBowater Inc.:

We have audited the accompanying consolidated balance sheet of AbitibiBowater Inc. and subsidiaries (formerly Bowater Incorporated) as of December 31, 2006, and the related consolidated statements of operations, capital accounts and cash flows for each of the years in the two-year period ended December 31, 2006. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of AbitibiBowater Incorporated and subsidiaries as of December 31, 2006, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.

As discussed in notes 1 and 2 to the consolidated financial statements, in 2006 the Company (i) changed its method of quantifying errors; (ii) changed its method of accounting for share-based payment; and (iii) changed its method of accounting for pensions and other postretirement benefits plans. In addition, in 2005 the Company changed its method of accounting for conditional asset retirement obligations.

/s/ KPMG LLP
KPMG LLP
Greenville, South Carolina
March 1, 2007

108

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

Disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) are our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Executive Chairman and Senior Vice President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

We have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2007. Based on that evaluation, the Executive Chairman and the Senior Vice President and Chief Financial Officer concluded that our disclosure controls and procedures are effective in recording, processing, summarizing, and timely reporting information required to be disclosed in our reports to the Securities and Exchange Commission.

Internal Control over Financial Reporting

Management has issued its report on internal control over financial reporting, which included management’s assessment that the Company’s internal control over financial reporting was effective at December 31, 2007. Management’s report on internal control over financial reporting can be found on page 105 of this Annual Report on Form 10-K. Our independent registered public accounting firm has issued an attestation report on the operating effectiveness of internal control over financial reporting as of December 31, 2007. This report can be found on page 106 of this Annual Report on Form 10-K.

Changes in Internal Control

As discussed in more detail in Item 1 of this report, on October 29, 2007, Bowater and Abitibi combined in a merger of equals under a newly formed holding company, AbitibiBowater. Abitibi and Bowater became wholly-owned subsidiaries of AbitibiBowater. Bowater is deemed to be the “acquirer” of Abitibi for accounting purposes. We have extended our Section 404 compliance program under the Sarbanes-Oxley Act of 2002 and the applicable rules and regulations under such Act to include the internal controls over financial reporting of both Abitibi and Bowater.

There was no change in our internal control over financial reporting during the fourth quarter of 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

109

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Information regarding AbitibiBowater’s directors is incorporated by reference to the material under the headings “Election of Directors - Information on Nominees and Directors” and “Board and Committee Meetings” in our Proxy Statement with respect to the 2008 Annual Meeting of Stockholders to be filed under Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Proxy Statement”).

Information regarding AbitibiBowater’s Audit Committee and its Audit Committee Financial Expert is included by reference to material under the heading “Corporate Governance-Audit Committee” in the Proxy Statement.

Information regarding changes to the procedures by which security holders may recommend nominees to AbitibiBowater’s board of directors is incorporated by reference to the material under the headings “Election of Directors - Corporate Governance Principles” and “Proposals by Shareholders” in the Proxy Statement.

Information regarding AbitibiBowater’s executive officers is provided under the caption “Executive Officers” in Item 1 of this Form 10-K.

Information regarding Section 16(a) beneficial ownership reporting compliance is incorporated by reference to the material under the heading “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement.

AbitibiBowater has adopted a code of business conduct that applies to all of AbitibiBowater’s North American employees, including but not limited to, AbitibiBowater’s chief executive officer, principal financial and accounting officer and controller. The code of business conduct is posted on AbitibiBowater’s website (www.abitibibowater.com). AbitibiBowater will disclose amendments to its code of business conduct and any waivers of its provisions with respect to its chief executive officer, chief financial officer, principal accounting officer and controller on its website within five business days following the date of the amendment or waiver.

Item 11. Executive Compensation

Information regarding executive compensation is incorporated by reference to the material under the headings “Election of Directors — Director Compensation”, “Human Resources and Compensation Committee Report on Executive Compensation”, “Compensation Committee Interlocks and Insider Participation”, and “Executive Compensation” in the Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information concerning (1) any person or group known to AbitibiBowater to be the beneficial owner of more than 5% of its voting stock, (2) ownership of its equity securities by management and (3) its equity compensation plans is incorporated by reference to the material under the heading “Stock Ownership” in the Proxy Statement.

Item 13. Certain Relationships and Related Transactions and Director Independence

Information regarding certain relationships and related transactions is incorporated by reference to the material under the heading “Related Party Transactions” and “Director Independence” in the Proxy Statement.

Item 14. Principal Accountant Fees and Services

Information regarding the fees and services of AbitibiBowater’s principal accountants is incorporated by reference to the material under the heading “Appointment of Independent Registered Public Accounting Firm” in the Proxy Statement.

110

PART IV

Item 15. Exhibits and Financial Statement Schedule

(a) The following are filed as a part of this Annual Report on Form 10-K:

(1) The following are included at the indicated page of this Annual Report on Form 10-K:

	Page(s)
Consolidated Statements of Operations for Each of the Years in the Three-Year Period Ended December 31, 2007	58
Consolidated Balance Sheet at December 31, 2007 and 2006	59
Consolidated Statements of Shareholders’ Equity for Each of the Years in the Three-Year Period Ended December 31, 2007	60
Consolidated Statements of Cash Flows for Each of the Years in the Three-Year Period Ended December 31, 2007	61
Notes to Consolidated Financial Statements	62-105
Management’s Report on Financial Statements and Assessment of Internal Control over Financial Reporting	106
Reports of Independent Registered Public Accounting Firms	107-108

(2) The following financial statement schedule for the year ended December 31, 2007 is submitted:

Schedule I–AbitibiBowater Condensed Financial Statements and Notes F-1 

All other financial statement schedules are omitted because they are not applicable or because the required information is included in the financial statements or notes.

(3) Exhibits (numbered in accordance with Item 601 of Regulation S-K):

Exhibit No.		Description
	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. (incorporated by reference to Exhibit 2.1 to Bowater Incorporated’s Form 8-K filed January 29, 2007)
	2.1.1*	First Amendment, dated as of May 7, 2007, to the Combination Agreement and Agreement and Plan of Merger dated as of January 29, 2007 among AbitibiBowater Inc., Abitibi-Consolidated Inc., Bowater Incorporated, Alpha-Bravo Merger Sub Inc. and Bowater Canada Inc. (the “First Amendment”) (incorporated by reference to Exhibit 10.1 to Bowater Incorporated’s Form 10-Q filed May 10, 2007 for the Period ended March 31, 2007)
	2.2*	Form of Plan Arrangement (incorporated by reference to Annex E to the Joint Proxy Statement/Prospectus/Management Information Circular of AbitibiBowater Inc., filed pursuant to Rule 424(b)(3) on June 25, 2007
	2.3**	Asset and Stock Purchase Agreement dated as of February 10, 2008 between Abitibi Consolidated Sales Corporation and Catalyst Paper Corporation
	3.1*	Amended and Restated Certificate of Incorporation of AbitibiBowater Inc. effective October 29, 2007 (incorporated by reference to Exhibit 3.1 to AbitibiBowater Inc.’s Form 8-K12B filed October 29, 2007)
	3.2*	Form of Amended and Restated By-Laws of AbitibiBowater Inc. (incorporated by reference to Exhibit 3.2 to AbitibiBowater Inc.’s Form 8-K12B filed October 29, 2007)
	4.1*	Form of Amended and Restated Support Agreement, among AbitibiBowater Inc., Bowater Canadian Holdings Incorporated, AbitibiBowater Canada Inc. and Bowater Incorporated (incorporated by reference to Exhibit 4.1 to AbitibiBowater Inc.’s Form S-3ASR filed October 29, 2007)
	4.2*	Form of Provisions Attaching to the Exchangeable Shares (incorporated by reference to Schedule 1 of Annex F to the Joint Proxy Statement/Prospectus/Management Information Circular of AbitibiBowater Inc., filed pursuant to Rule 424(b)(3) on June 25, 2007

111

Exhibit No.		Description
	4.3*	Certificate of Designation of Special Voting Stock of AbitibiBowater Inc. effective as of 5:45 a.m. Eastern Time on October 29, 2007 (incorporated by reference to Exhibit 4.1 to AbitibiBowater Inc.’s Form 8-K12B filed October 29, 2007).
	4.4*	Purchase Agreement dated June 16, 2003, by and between Bowater Incorporated and UBS Securities, LLC as Representative of the Several Initial Purchasers named in Schedule I thereto (incorporated by referenced to Exhibit 4.1 to Bowater Incorporated’s Quarterly Report on Form 10-Q for the Period ended June 30, 2003).
	4.5*	Indenture dated June 19, 2003, by and between Bowater Incorporated, as Issuer, and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.2 to Bowater Incorporated’s Quarterly Report on Form 10-Q for the Period ended June 30, 2003).
	4.6*	Indenture dated as of October 31, 2001 by and among Bowater Canada Finance Corporation (as Issuer), Bowater Incorporated (as Guarantor) and The Bank of New York (as Trustee) (incorporated by reference to Exhibit 10.3 to Bowater Incorporated’s Quarterly Report on Form 10-Q for the Period ended September 30, 2001).
	4.7*	Senior Indenture, dated March 17, 2004, between Bowater Incorporated and The Bank of New York (incorporated by reference to Bowater Incorporated’s Current Report on Form 8-K filed on March 17, 2004).
	4.8*	2004 Supplemental Indenture, dated March 17, 2004, between Bowater Incorporated and The Bank of New York (incorporated by reference to Exhibit 4.1 to Bowater Incorporated’s Current Report on Form 8-K filed March 17, 2004).
	4.9*	Indenture, dated June 15, 2004, among Abitibi-Consolidated Inc., Abitibi-Consolidated Company of Canada (as Issuer) and the Bank of Nova Scotia Trust Company of New York (as Trustee) (incorporated by reference to Exhibit 7.1 to Abitibi-Consolidated Inc.’s Form F-10 filed July 26, 2004).
	4.10*	Indenture, dated November 2001, among Abitibi-Consolidated Inc., Abitibi-Consolidated Company of Canada (as Issuer) and the Bank of Nova Scotia Trust Company of New York (as Trustee) (incorporated by reference to Exhibit 7.1 to Abitibi-Consolidated Inc.’s Form F-9/A filed November 20, 2001).
	4.11*	Indenture, dated November 2001, among Abitibi-Consolidated Inc., Abitibi-Consolidated Finance L.P. (as Issuer) and the Bank of Nova Scotia Trust Company of New York (as Trustee) (incorporated by reference to Exhibit 7.1 to Abitibi-Consolidated Inc.’s Form F-9/A filed July 12, 2000).
	4.12	Purchase Agreement among Abitibi-Consolidated Company of Canada, Abitibi-Consolidated Inc., Banc of America Securities LLC, Citigroup Global Markets Inc., CIBC World Markets Corp., Scotia Capital (USA) Inc., NBF Securities (USA) Corp., RBC Dominion Securities Corporation, ABN Amro Incorporated, SG Americas Securities, LLC, Credit Suisse First Boston LLC, Tokyo-Mitsubishi International PLC, dated June 10, 2004 (incorporated by reference to Exhibit 3.1 to Abitibi-Consolidated Inc.’s Form F-10 filed July 26, 2004).
	9.1*	Form of Amended and Restated Voting and Exchange Trust Agreement among AbitibiBowater Canada Inc., Bowater Canadian Holdings Incorporated, AbitibiBowater Inc., Bowater Incorporated and CIBC Mellon Trust Company (incorporated by reference to Exhibit 9.1 to AbitibiBowater Inc.’s Form S-3ASR filed October 29, 2007).
	†10.1**	Offer letter between Pierre Rougeau and AbitibiBowater Inc. dated September 28, 2007.
	†10.2**	Severance Compensation Agreement between Abitibi-Consolidated Inc. and Pierre Rougeau, dated April 1, 2002.
	†10.3**	Repayment Agreement between William G. Harvey and Bowater Incorporated, dated October 29, 2007.
	†10.4**	Bonus Letter between William G. Harvey and Bowater Incorporated, dated October 26, 2007.
	†10.5**	Offer Letter between William G. Harvey and AbitibiBowater Inc., dated October 12, 2007.
	†10.6**	Repayment Agreement between Jim T. Wright and Bowater Incorporated, dated November 1, 2007.
	†10.7**	Offer Letter between Jim T. Wright and AbitibiBowater Inc., dated October 17, 2007.
	†10.8**	Bonus Letter between Jim T. Wright and Bowater Incorporated, dated October 17, 2007.
	†10.9**	Severance Compensation Agreement between Abitibi-Consolidated Inc. and John W. Weaver, dated February 18, 2006.
	†10.10**	Severance Entitlements Letter between Abitibi-Consolidated Inc. and John W. Weaver, dated September 25, 2000.
	†10.11**	Severance Compensation Agreement between Abitibi-Consolidated Inc. and Alain Grandmont, dated April 1, 2002.
	†10.12**	Offer Letter between Alain Grandmont and AbitibiBowater Inc., dated September 27, 2007.
	†10.13**	Severance Compensation Agreement between Abiti-Consolidated Inc. and Thor Thorsteinson, dated April 1, 2002.
	†10.14**	Offer Letter between Thor Thorsteinson and AbitibiBowater Inc., dated September 27, 2007.
	†10.15**	Supplemental Executive Retirement Plan of AbitibiBowater Inc.’s subsidiary, Abitibi-Consolidated Inc. (formerly Donohue Inc.) dated December 1999.
	†10.16**	Supplement Retirement Plan between Donohue Inc. and Yves Laflamme, dated January 27, 2000.
	†10.17**	Severance Compensation Agreement Letter between Abiti-Consolidated and Yves Laflamme, dated December 11, 2006.
	†10.18**	Severance Compensation Agreement between Abitibi-Consolidated and Yves Laflamme, dated September 1, 2006.

112

Exhibit No.		Description
	†10.19**	Severance Compensation Agreement between Abitibi-Consolidated and Jacques Vachon, dated November 10, 1998.
	†10.20*	Offer Letter between W. Eric Streed and AbitibiBowater Inc., dated October 19, 2007.
	†10.21**	Bonus Letter between W. Eric Streed and Bowater Incorporated, dated October 16, 2007.
	†10.22**	Repayment Agreement between W. Eric Streed and Bowater Incorporated, undated.
	†10.23**	Repayment Agreement between David J. Paterson and Bowater Incorporated, dated January 23, 2008.
	†10.24**	Abitibi-Consolidated Executive Deferred Share Units Plan, effective date as of January 1, 2000.
	†10.25**	Abitibi-Consolidated Inc. Restricted Share Unit Plan, undated.
	†10.26**	Abitibi-Consolidated Deferred Share Unit Plan (Stock plan for non-employee directors), dated March 11, 1998.
	†10.27**	Abitibi-Consolidated U.S. Supplement Executive Retirement Plan (SERP), as Amended and Restated, dated January 1, 2007.
	†10.28**	Canadian Supplement Executive Retirement Plan (SERP) for Executive Employees of Abitibi-Consolidated Inc., dated January 1, 1999.
	†10.29*	Fifth Amendment to the Bowater Incorporated Benefits Equalization Plan (incorporated by reference to Exhibit 10.2 to AbitibiBowater Inc.’s Form 8-K filed December 3, 2007).
	†10.30*	Sixth Amendment to the Supplemental Benefit Plan for Designated Employees of Bowater Incorporated and Affiliated Companies (incorporated by reference to Exhibit 10.1 to AbitibiBowater Inc.’s Form 8-K filed December 3, 2007).
	†10.31*	Seventh Amendment to the Bowater Incorporated Retirement Plan (incorporated by reference to Exhibit 10.3 to AbitibiBowater Inc.’s Form 8-K filed December 3, 2007).
	†10.32*	Second Amendment to the Bowater Incorporated Retirement Savings Plan (incorporated by reference to Exhibit 10.4 to AbitibiBowater Inc.’s Form 8-K filed December 3, 2007).
	10.33*	Third Amendment and Waiver, dated as of February 25, 2008, to the Credit Agreement dated as of May 31, 2006 by and among Bowater Incorporated, certain subsidiaries of Bowater party thereto, AbitibiBowater Inc., the Lenders and the Canadian Lenders party thereto and Wachovia Bank, National Association, as administrative agent for the Lenders party thereto (incorporated by reference to Exhibit 10.1 to AbitibiBowater Inc.’s Form 8-K filed February 29, 2008).
	10.34*	Third Amendment and Waiver, dated as of February 25, 2008, to the Credit Agreement dated as of May 31, 2006 by and among Bowater Canadian Forest Products Inc., Bowater Incorporated, certain subsidiaries and affiliates of Bowater party thereto, AbitibiBowater, Inc., the Lenders and the U.S. Lenders party thereto and The Bank of Nova Scotia, as administrative agent for the Lenders party thereto (incorporated by reference to Exhibit 10.2 to AbitibiBowater Inc.’s Form 8-K filed February 29, 2008).
	10.35*	Second Amendment, effective as of November 2, 2007, to the Credit Agreement between Bowater Incorporated and Wachovia Bank, National Association, as Administrative Agent for the Lenders party thereto, dated as of May 31, 2006 (incorporated by reference to Exhibit 10.1 to AbitibiBowater Inc.’s Form 8-K filed November 8, 2007).

113

Exhibit No.		Description
	10.36*	Second Amendment, effective as of November 2, 2007, to the Credit Agreement among Bowater Incorporated, Bowater Canadian Forest Products Inc., Bowater Canadian Holdings Incorporated and The Bank of Nova Scotia, as Administrative Agent for the Lenders party thereto, dated as of May 31, 2006 (incorporated by reference to Exhibit 10.2 to AbitibiBowater Inc.’s Form 8-K filed November 8, 2007).
	10.37*	First Amendment to the Bowater Incorporated Supplemental Retirement Savings Plan (incorporated by reference to Exhibit 10.5 to AbitibiBowater Inc.’s Form 8-K filed December 3, 2007).
	10.38*	Credit Agreement, dated May 31, 2006, by and among Bowater Incorporated, several lenders and Wachovia Bank, National Association (incorporated by reference to Exhibit 4.1 to Bowater Incorporated’s Form 10-Q filed August 4, 2007 for the Period ended June 30, 2006).
	10.39*	Credit Agreement, dated May 31, 2006, by and among Bowater Incorporated, several lenders and Wachovia Bank, National Association (incorporated by reference to Exhibit 4.2 to Bowater Incorporated’s Form 10-Q filed August 4, 2007 for the Period ended June 30, 2006).
	10.40**	Amended and Restated Receivables Purchase Agreement among Abitibi-Consolidated U.S. Funding Corp., Eureka Securitisation, PLC, Citibank, N.A., the Originators Named Herein, Abitibi Consolidated Sales Corporation and Abitibi-Consolidated Inc. dated January 31, 2008.
	10.41**	Amended and Restated Purchase and Contributed Agreement among Abitibi-Consolidated Inc., Abitibi Consolidated Sales Corporation, Abitibi Consolidated Sales Corporation and Abitibi-Consolidated U.S. Funding Corp., dated January 31, 2008.
	10.42**	Credit Agreement among Abitibi-Consolidated Inc., Abitibi-Consolidated Company of Canada, the Bank of Nova Scotia, Citibank, N.A. and Goldman Sachs Credit Partners, dated October 3, 2005.
	10.43**	First Amendment, dated September 28, 2006, to the Credit Agreement among Abitibi-Consolidated Inc., Abitibi-Consolidated Company of Canada, the Bank of Nova Scotia, Citibank, N.A. and Goldman Sachs Credit Partners, dated October 3, 2005.
	10.44**	Second Amendment, dated November 24, 2006, to the Credit Agreement among Abitibi-Consolidated Inc., Abitibi-Consolidated Company of Canada, the Bank of Nova Scotia, Citibank, N.A. and Goldman Sachs Credit Partners, dated October 3, 2005.
	10.45**	Third Amendment, dated July 16, 2007, to the Credit Agreement among Abitibi-Consolidated Inc., Abitibi-Consolidated Company of Canada, the Bank of Nova Scotia, Citibank, N.A. and Goldman Sachs Credit Partners, dated October 3, 2005.
	10.46**	Fourth Amendment, dated August 14, 2007, to the Credit Agreement among Abitibi-Consolidated Inc., Abitibi-Consolidated Company of Canada, the Bank of Nova Scotia, Citibank, N.A. and Goldman Sachs Credit Partners, dated October 3, 2005.
	10.47**	Fifth Amendment, dated December 27, 2007, to the Credit Agreement among Abitibi-Consolidated Inc., Abitibi-Consolidated Company of Canada, the Bank of Nova Scotia, Citibank, N.A. and Goldman Sachs Credit Partners, dated October 3, 2005.
	10.48**	Offer Letter between Jon Melkerson and AbitibiBowater Inc., dated October 3, 2007.
	12.1**	Statement Regarding Computation of Unaudited Raito of Earnings to Fixed Charges.
	21.1**	Subsidiaries of the registrant.
	23.1**	Consent of Independent Registered Public Accounting Firm.
	23.2**	Consent of Previous Independent Registered Public Accounting Firm.
	31.1**	Certification of Executive Chairman Pursuant to Section 302.
	31.2**	Certification of CFO Pursuant to Section 302.
	32.1**	Certification of Executive Chairman Pursuant to Section 906.
	32.2**	Certification of CFO Pursuant to Section 906.

*	Previously filed and incorporated herein by reference
**	Filed with this Form 10-K
†	This is a management contract or compensatory plan or arrangement.

(b) The above-referenced exhibits are being filed with this report.

(c) None.

114

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, AbitibiBowater has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ABITIBIBOWATER INC.
Date: March 17, 2008	By:	/s/ John W. Weaver
		John W. Weaver
		Executive Chairman

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of AbitibiBowater and in the capacities indicated, as of March 17, 2008.

Signature	Title	Date
/s/ John W. Weaver John W. Weaver	Executive Chairman	March 17, 2007
/s/ William G. Harvey William G. Harvey	Senior Vice President and Chief Financial Officer	March 17, 2007
/s/ Joseph B. Johnson Joseph B. Johnson	Vice President and Controller	March 17, 2007
/s/ John Q. Anderson John Q. Anderson	Director	March 17, 2007
/s/ Hans P. Black Hans P. Black	Director	March 17, 2007
/s/ Jacques Bougie Jacques Bougie	Director	March 17, 2007
/s/ William E. Davis William E. Davis	Director	March 17, 2007
/s/ Richard B. Evans Richard B. Evans	Director	March 17, 2007
/s/ Gordon D. Giffin Gordon D. Giffin	Director	March 17, 2007
/s/ Ruth R. Harkin Ruth R. Harkin	Director	March 17, 2007
/s/ Lise Lachapelle Lise Lachapelle	Director	March 17, 2007
/s/ Gary J. Lukassen Gary J. Lukassen	Director	March 17, 2007
/s/ David J. Paterson David J. Paterson	Director	March 17, 2007
/s/ John A. Rolls John A. Rolls	Director	March 17, 2007
/s/ Bruce W. Van Saun Bruce W. Van Saun	Director	March 17, 2007
/s/ Togo D. West, Jr. Togo D. West, Jr.	Director	March 17, 2007

* William G. Harvey, by signing his name hereto, does sign this document on behalf of the persons indicated above pursuant to powers of attorney duly executed by such persons that are filed herewith as Exhibit 24.

By:		/s/ William G. Harvey
	William G. Harvey, Attorney-in-Fact

115

Schedule I — ABITIBIBOWATER CONDENSED FINANCIAL STATEMENTS AND NOTES

AbitibiBowater
(Parent Company Only)
($ millions)

Condensed Balance Sheet
December 31, 2007

Assets
Investment in Subsidiaries	$	1,900
Total Assets	$	1,900
Liabilities and Stockholders’ Equity
Accounts payable — Subsidiaries	$	1
Total Liabilities	$	1
Stockholders’ Equity
Capital Stock
Common stock, $1 par value. Authorized 100,000,000 shares; issued 52,363,033 shares at December 31, 2007	$	52
Exchangeable shares, no par value. Unlimited shares authorized; 5,106,627 shares outstanding at December 31, 2007		276
Additional paid-in capital		2,313
Retained Earnings Deficit		(598	)
Accumulated other comprehensive loss		(144	)
Total Stockholders’ Equity		1,899
Total Liabilities and Stockholders’ Equity	$	1,900

Schedule I — ABITIBIBOWATER CONDENSED FINANCIAL STATEMENTS AND NOTES

AbitibiBowater
(Parent Company Only)
($ millions)

Condensed Statement of Operations and Retained Deficit
For the period from inception (January 25, 2007) through December 31, 2007

Expenses
General and Administrative Expenses	$	1
Equity in Operations of Subsidiaries		489
Net Loss		490
Retained Deficit at inception		108
Retained Deficit at December 31, 2007	$	598

Condensed Statement of Cash Flows
For the period from inception (January 25, 2007) through December 31, 2007

Cash Flows from Operating Activities
Net loss	$	(490	)
Adjustments to reconcile net loss to net cash provided by operating activities
Equity in Operations of Subsidiaries		489
Increase in Accounts Payable		1
Net cash provided by operations		—
Net increase (decrease) in cash		—
Cash at December 31, 2007		—

Schedule I — ABITIBIBOWATER CONDENSED FINANCIAL STATEMENTS AND NOTES

AbitibiBowater
(Parent Company Only)
($ millions)

NOTES TO CONDENSED FINANCIAL STATEMENTS

Note A — Organization and Basis of Presentation:

The accompanying condensed financial statements, including the notes thereto, should be read in conjunction with the consolidated financial statements of AbtibiBowater Inc.

AbitibiBowater Inc. (“AbitibiBowater”, also referred to as “we” or “our”. was incorporated in Delaware on January 25, 2007. On October 29, 2007, pursuant to a Combination Agreement and Agreement and Plan of Merger, dated as of January 29, 2007, Abitibi-Consolidated Inc. “(Abitibi”) and Bowater Incorporated (“Bowater”) combined in a merger of equals with each becoming a wholly-owned subsidiary of AbitibiBowater (the “Combination”).

As a result of the Combination, each issued and outstanding share of Bowater common stock was converted into 0.52 of a share of AbitibiBowater common stock. Each issued and outstanding exchangeable share of Bowater Canada Inc. (a wholly-owned subsidiary of Bowater now named AbitibiBowater Canada Inc.) was changed into 0.52 of an exchangeable share of AbitibiBowater Canada Inc. Each issued and outstanding share of Abitibi common stock was exchanged for either 0.06261 of a share of AbitibiBowater common stock or 0.06261 of an exchangeable share of AbitibiBowater Canada Inc. All Abitibi and Bowater stock options, stock appreciation rights and other stock-based awards outstanding, whether vested or unvested, were converted into AbitibiBowater stock options, stock appreciation rights or stock-based awards. The number of shares subject to such converted awards was adjusted by multiplying the number of shares outstanding by the Abitibi exchange ratio of 0.06261, in the case of an Abitibi award, and by the Bowater exchange ratio of 0.52, in the case of a Bowater award. Similarly, the exercise price of the converted stock options or base price of the stock appreciation rights was adjusted by dividing such price by the Abitibi exchange ratio or the Bowater exchange ratio as appropriate.

The Combination has been accounted for in accordance with Statement of Financial Accounting Standards No. 141 (“SFAS 141”), “Business Combinations.” Bowater is deemed to be the “acquirer” of Abitibi for accounting purposes, and AbitibiBowater is deemed to be the successor to Bowater for purposes of U.S. securities laws and regulations governing financial reporting.

The Combination resulted in AbitibiBowater becoming a holding company whose only assets are the common stock of Atibiti and Bowater. As successor to Bowater, AbitibiBowater has recorded its investment in Bowater at the amount of its shareholders’ equity at the date of the combination. The investment in Abitibi has been recorded at its fair value at the date of the combination.

Certain expenses of AbitibiBowater are paid for by its subsidiaries and have not been reflected in these condensed financial statements. These expenses include office and administrative expenses, compensation of employees and directors and travel expenses of officers and directors.

Note B — Financing Arrangements

Both Abitibi and Bowater have entered into various financing arrangements. These arrangements relate to the specific borrowers and there are no cross collateralization or guarantees from direct or indirect subsidiaries of AbitiBowater that are not the debtors. Certain of these agreements impose restrictions on the ability of the subsidiaries to transfer funds or other assets to AbitibiBowater in the form of dividends or advances. These restrictions could affect AbitibiBowater’s operations or its ability to pay dividends in the future. See Note 17 to our Consolidated Financial Statements in Item 8 of this Form 10-K.

EX-2.3

Exhibit 2.3

ASSET AND STOCK PURCHASE AGREEMENT

BETWEEN

ABITIBI CONSOLIDATED SALES CORPORATION
(as Seller)

AND

CATALYST PAPER CORPORATION
(as Purchaser)

DATED AS OF THE 10th DAY OF FEBRUARY, 2008

TABLE OF CONTENTS

1. PURCHASE AND SALE OF ASSETS AND SHARES AND ASSUMPTION OF LIABILITIES	1
1.1 Newsprint Assets	1
1.2 Apache Stock	3
1.3 Excluded Assets and Non-Owned Assets	3
1.4 Nonassignable Rights	5
1.5 Assumed Obligations	6
1.6 Newsprint Retained Obligations	7
1.7 Purchase Price	7
1.8 Estimated Purchase Price Adjustment	7
1.9 Post-Closing Purchase Price Adjustment	8
1.10 Allocation of Newsprint Purchase Price	10
1.11 Section 338(h)(10) Election	10
1.12 Taxes on Transfer	10
1.13 Real Estate and Personal Property Taxes	10
2. CLOSING	11
2.1 Closing Date and Time	11
2.2 Seller Deliveries	11
2.3 Purchaser’s Deliveries	12
3. REPRESENTATIONS AND WARRANTIES OF SELLER	13
3.1 Organization of Seller and Apache and Ownership of Apache Shares	14
3.2 Power and Authority	14
3.3 No Violation	15
3.4 Financial Statements	15
3.5 No Undisclosed Liabilities	16
3.6 Legal Proceedings	16
3.7 Compliance With Laws and Orders	16
3.8 Tax Matters	17
3.9 Benefit Plans; ERISA	18
3.10 Real Property	19
3.11 Equipment	21
3.12 Intellectual Property Rights	22
3.13 Material Contracts	23
3.14 Employees; Labor Relations	24
3.15 Brokers	25
3.16 Title	25
3.17 Permits	26
3.18 Environmental Matters	26
3.19 Absence of Certain Changes	27
3.20 Inventory	28
3.21 Related Party Transactions	29
3.22 Customers; Suppliers	29
3.23 Shared Services	29
3.24 FERC	29

- 2 -

3.25 Updating Schedules and Defined Terms	30
3.26 No Other Representation or Warranty	30
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER	30
4.1 Organization	30
4.2 Power and Authority	30
4.3 No Violation	31
4.4 Legal Proceedings	31
4.5 Brokers	31
4.6 Investigation by Purchaser; Seller Liability	31
4.7 Intent of Purchaser	33
4.8 Rail Carrier	33
4.9 FERC	33
4.10 No Other Representations or Warranties	33
5. COVENANTS AND AGREEMENTS	33
5.1 Water Rights Litigation	33
5.2 Post-Closing Amounts	35
5.3 Conduct During Interim Period	35
5.4 Commercially Reasonable Efforts	38
5.5 Publicity	40
5.6 Intercompany Arrangements	40
5.7 Insurance	41
5.8 Intercompany Payables and Indebtedness	41
5.9 Preservation of Records and Cooperation	42
5.10 Transitional Services	42
5.11 Tax Matters	43
5.12 Access to Information	44
5.13 Audited Financial Statements	45
5.14 Covenant Not-to-Sue	46
5.15 Apache Benefit Accrual	47
5.16 Outage Work Sharing and Cost-Sharing Arrangement	47
6. LABOR AND EMPLOYEE BENEFITS MATTERS	48
6.1 Transition of Labor Matters	48
6.2 Crediting of Service under Purchaser’s Salaried Retirement Plan	52
6.3 Seller’s Hourly Pension Plan	52
6.4 Seller’s Salaried 401(k) Plan	52
6.5 Seller’s Hourly 401(k) Plan	53
6.6 IBEW Hourly Plans	53
6.7 Multiemployer Pension Plans	53
6.8 Welfare Plans	54
6.9 Union Discussions	54
6.10 Filipovic Canadian Benefits	54
7. CONDITIONS OF CLOSING	55
7.1 Conditions to Each Party’s Obligation to Effect the Closing	55
7.2 Conditions to Obligations of Purchaser to Effect the Closing	55
7.3 Conditions to Obligations of Seller to Effect the Closing	56
7.4 Termination	57

- 3 -

7.5 Effect of Termination	58
8. SURVIVAL	59
9. INDEMNIFICATION	59
9.1 Indemnification by Seller	59
9.2 Indemnification by Purchaser	61
9.3 Method of Asserting Claims	62
9.4 Tax Contests	63
9.5 Environmental Procedures	64
9.6 Exclusive Remedy	67
9.7 Excluded/Included Damages	67
9.8 Taxes	67
9.9 Insurance and Mitigation	67
10. DEFINITIONS	67
10.1 Definitions	67
10.2 Schedules and Exhibits	84
10.3 Language	88
11. MISCELLANEOUS	88
11.1 Notices	88
11.2 Entire Agreement	89
11.3 Further Assurance	90
11.4 Expenses	90
11.5 Confidentiality Agreement	90
11.6 Waiver	90
11.7 Amendment	90
11.8 No Third Party Beneficiary	90
11.9 No Assignment; Binding Effect	91
11.10 Headings	91
11.11 Invalid Provisions	91
11.12 Governing Law	91
11.13 Submission to Jurisdiction; Consent to Service of Process	91
11.14 Construction	92
11.15 Counterparts	92
11.16 Specific Performance	92

ASSET AND STOCK PURCHASE AGREEMENT

     THIS ASSET AND STOCK PURCHASE AGREEMENT is entered into and effective as of February 10, 2008 (the “Effective Date”) by and between Abitibi Consolidated Sales Corporation, a corporation organized and existing under the laws of the State of Delaware (“Seller”) and Catalyst Paper Corporation, a Canadian corporation (“Purchaser”). Capitalized terms used in this Agreement shall have the meanings ascribed to them in Section 10.1.

WITNESSETH

     WHEREAS, Seller desires to sell to Purchaser and Purchaser desires to acquire from Seller, on a going concern basis, certain assets of the Newsprint Business that Seller owns or in which Seller has a transferable interest, on the terms and subject to the conditions set forth herein;

     WHEREAS, Seller desires to sell to Purchaser and Purchaser desires to acquire from Seller, all of the issued and outstanding shares of capital stock (the “Apache Shares”) of The Apache Railway Company, an Arizona corporation (“Apache”), on the terms and subject to the conditions set forth herein; and

     WHEREAS, concurrently with the execution of this Agreement, and as a condition and inducement to Purchaser’s willingness to enter into this Agreement, Seller shall have provided the Guaranty, duly executed by AbitibiBowater Inc.

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

1.	PURCHASE AND SALE OF ASSETS AND SHARES AND ASSUMPTION OF LIABILITIES
1.1	Newsprint Assets.
	Subject to and upon the terms and conditions set forth in this Agreement, at the Closing, Seller shall sell, convey, transfer, assign and deliver to Purchaser and Purchaser shall purchase from Seller, on a going concern basis, all of Seller’s right, title and interest, as at the Closing Time, in and to the assets of Seller, to the extent used in, held for use in, or necessary for the conduct of the Newsprint Business, whether tangible or intangible, real, personal or mixed (the “Newsprint Assets”) including all of Seller’s right, title and interest, as at the Closing Time, in and to the following (except, in each case to the extent otherwise provided in Section 1.3):

1.1.1	all accounts and other claims for money due to Seller or any of its Affiliates (other than Apache) related to the Newsprint Business (the “Snowflake Accounts Receivable”), except for trade receivables related to the sale of newsprint (“Trade Receivables”);
1.1.2	the inventory of finished goods (including goods in transit and goods on consignment), work in progress, raw materials, spare parts and supplies of Seller used or held for use in the Newsprint Business or that are included as an asset in the determination of Adjusted Closing Net Working Capital (the “Newsprint Inventory”);
1.1.3	the real property described on Schedule 1.1.3, together with Seller’s right, title and interest in and to all buildings, structures, fixtures and improvements thereon and all

- 2 -

	privileges, rights, easements and rights of way appurtenant thereto (the “Newsprint Owned Real Property”);
1.1.4	the real property leases listed on Schedule 1.1.4 pursuant to which Seller is the tenant (the “Newsprint Real Property Leases”);
1.1.5	the machinery, equipment, parts, furniture, fixtures, materials, supplies, tools, leasehold improvements, telephone systems, computer systems, motor vehicles and other tangible personal property that are owned by Seller, are located in or on the Real Property and are used in, held for use in, or necessary for the conduct of the Newsprint Business (the “Newsprint Owned Equipment”);
1.1.6	the equipment leases set forth on Schedule 1.1.6 (the “Newsprint Equipment Leases” and the equipment with respect thereto being the “Newsprint Leased Equipment”);
1.1.7	the intellectual property licenses set forth on Schedule 1.1.7 (the “Newsprint Intellectual Property Licenses” and the intellectual property licensed pursuant thereto being the “Newsprint Licensed Intellectual Property”);
1.1.8	all customer orders to the extent reasonably intended by Seller at the time of such order to be fulfilled from the Newsprint Business and to the extent not included in any Trade Receivable (the “Newsprint Customer Orders”);
1.1.9	all orders for supplies and services to the extent reasonably intended by Seller at the time of such order to be used in connection with the Newsprint Business (the “Newsprint Purchase Orders”);
1.1.10	(i) the Contracts set forth on Schedule 1.1.10 (subject to any limitations expressly set forth therein), (ii) all Material Contracts to the extent related to the Newsprint Business (subject to any limitations set forth on Schedule 3.13.1) and (iii) all Contracts to which Seller is a party that primarily relate to the Newsprint Business and that do not provide for the purchase or sale of significant products or services by any other business of Seller or any of its Affiliates; but in each case not including any Contract set forth on Schedule 1.3.1.2 (the “Newsprint Business Contracts”);
1.1.11	all Permits relating to the Newsprint Business to the extent assignable (the “Newsprint Assigned Permits”);
1.1.12	Seller’s rights pursuant to the Operating and Management Agreement and the Stone Container Lease;
1.1.13	the Books and Records relating to the Newsprint Business or the Newsprint Employees (the “Newsprint Acquired Books and Records”), which Newsprint Acquired Books and Records shall consist of the original copies of Books and Records relating to the Newsprint Business; provided, that, Seller may maintain copies of such Newsprint Acquired Books and Records as it may require to comply with Contractual obligations and applicable laws, rules and regulations;
1.1.14	all rights to any insurance claims that relate to all property and casualty proceeds received or receivable in connection with the damage or destruction of any asset that

- 3 -

	would have been included in the Newsprint Assets but for such damage or destruction, except to the extent any such insurance claim is to reimburse or indemnify Seller or its Affiliates for costs incurred by Seller or its Affiliates in connection with the repair of such damage or destruction or the replacement of the damaged or destroyed asset (the “Newsprint Insurance Claims”);
1.1.15	any credits, prepaid expenses, deferred charges, advanced payments, prepaid items and claims for refunds or reimbursements against third parties (but excluding cash security or other deposits), in each case to the extent reflected as an asset in the determination of Adjusted Closing Net Working Capital (the “Newsprint Prepaid Items”);
1.1.16	any groundwater, surface and subsurface water rights related to the Newsprint Business, including any such rights appurtenant to or otherwise associated with the Owned Real Property and any water rights evidenced by certificates, permits, filings, registrations (including well registrations), statements, notices and claims (including Statements of Claimant filed in the Water Rights Litigation) on file with ADWR and appurtenant to or otherwise associated with the Owned Real Property, except to the extent any such claim, cause of action, defense and right of offset or counterclaims related to the period prior to the Closing Time (the “Newsprint Water Rights”);
1.1.17	subject to Section 1.3.1.4, all claims, causes of action, defenses and rights of offset or counterclaim (at any time or in any manner existing or arising, whether choate or inchoate, known or unknown, contingent or noncontingent), in each case against third parties, including under warranties, guarantees or indemnities to the extent related to the Businesses, the Newsprint Assets or Assumed Obligations, but excluding Seller’s claims, causes of action, defenses, and rights of offset or counterclaim to the extent of any Loss incurred by Seller that gave rise to such claims, causes of action, defenses and rights of offset or counterclaim; and
1.1.18	the goodwill associated with the Newsprint Business.

	For greater certainty, the Newsprint Assets do not include the Excluded Assets.
1.2	Apache Stock.
	Subject to and upon the terms and conditions set forth in this Agreement, at the Closing, Seller agrees to sell to Purchaser and Purchaser agrees to purchase from Seller the Apache Shares.
1.3	Excluded Assets and Non-Owned Assets.

1.3.1 Notwithstanding anything in this Agreement, from and after the Closing Date, Seller and its Affiliates shall retain all of the right, title and interest in and to, and there shall be excluded from the sale, conveyance, assignment or transfer to Purchaser hereunder, and the Newsprint Assets shall not include, the following (the “Excluded Assets”):

1.3.1.1 all cash, commercial paper, certificates of deposit and other bank deposits, treasury bills, petty cash, cash on deposit and other cash equivalents, and other marketable and non-marketable securities (other than the Apache Shares and cash received (i) upon payment of any Accounts Receivable from and after the Closing Time, and (ii) that

- 4 -

	relates to Newsprint Insurance Claims or Newsprint Prepaid Items) owned or held by Seller;
1.3.1.2	subject to Section 1.3.3, (i) all Contracts set forth on Schedule 1.3.1.2, (ii) all Contracts other than any Newsprint Business Contracts and (iii) Contracts for the sale of newsprint (other than the Newsprint Customer Orders) (the “Excluded Contracts”);
1.3.1.3	the names (and logos) “Abitibi”, “Abitibi Consolidated”, “AbitibiBowater” and “Bowater” or any similar trade names, trademarks or logos to the extent the same incorporate such names (or logos) or any variation thereof, and any other intellectual property that is owned, licensed, used or required by Seller or its Affiliates (other than Apache) to provide services under the Transitional Services Agreement but not required for the operation of the Businesses outside the scope of the services provided under the Transitional Services Agreement (the “Excluded Intellectual Property”);
1.3.1.4	Seller’s rights, claims and causes of action against third parties to the extent related to (i) any Excluded Asset, (ii) any Newsprint Retained Obligation or (iii) any of those matters set forth on Schedule 1.3.1.4;
1.3.1.5	all Contracts of insurance to which Seller is a party, or relating to any right, asset, property, business or operation of Seller, including all rights to any claims thereunder (except the Newsprint Insurance Claims). For greater certainty, such Contracts of insurance shall be included in the Excluded Contracts;
1.3.1.6	all corporate minute books and stock transfer books of Seller and the corporate seal of Seller;
1.3.1.7	all refunds and credits due to Seller to which Seller is entitled in respect of any Tax or Taxes;
1.3.1.8	all accounts of Seller with banks and other financial institutions;
1.3.1.9	all of Seller’s interests in any Plans or arrangements maintained by Seller on behalf of Newsprint Employees and/or Apache Employees, other than as expressly set forth in Section 6;
1.3.1.10	except for the Apache Shares, all of Seller’s right, title and interest in and to any asset, right or property to the extent not used in, or held for use in, or necessary for the conduct of the Newsprint Business;
1.3.1.11	the Trade Receivables; and
1.3.1.12	the rights of Seller under this Agreement.

- 5 -

	For the avoidance of doubt, to the extent any asset is included in determining Adjusted Closing Net Working Capital, such asset shall not constitute an Excluded Asset.
1.3.2	The Newsprint Assets shall also exclude the assets and/or properties listed on Schedule 1.3.2 (the “Third Party Assets”).
1.3.3	Schedule 1.3.3 sets forth certain Contracts related to the Newsprint Business to which Seller or any of its Affiliates is a party, and that provide for products or services to or from any other business of Seller or any of its Affiliates, which as at the Effective Date, are not included within the Newsprint Business Contracts and are included within the Excluded Contracts; provided, that: (i) within five (5) Business Days following the Effective Date, Seller shall provide or make available to Purchaser a copy of all Contracts set forth on Schedule 1.3.3, as redacted to remove all confidential information or data that is not applicable to the Newsprint Business (the “Redacted Contracts”); (ii) within ten (10) Business Days after the date on which Seller provided or made available such Redacted Contracts to Purchaser, Purchaser may elect to assume, as at the Closing Date, Seller’s right, title and interest, to the extent related to the Newsprint Business, in and to any Redacted Contracts by providing written notice to Seller to such effect, which notice shall set forth the Redacted Contracts that Purchaser wishes to assume (the “Assumed Redacted Contracts”); and (iii) at the Closing, Seller shall assign to Purchaser, and Purchaser shall assume from Seller, Seller’s right, title and interest in and to the Assumed Redacted Contracts, if any, to the extent related to the Newsprint Business, and same shall be included within the Newsprint Business Contracts as of the Effective Date. For greater certainty, any Redacted Contract that Purchaser does not elect to assume pursuant to this Section 1.3.3 shall remain an Excluded Contract.

1.4

Nonassignable Rights.

To the extent that the sale, conveyance, assignment, sublease, transfer or delivery or the attempted sale, assignment, sublease, transfer, conveyance or delivery to Purchaser of any Newsprint Asset or any claim or right or any benefit arising thereunder or resulting therefrom is prohibited by any applicable law, rule, regulation, order or judgment or would require the authorization, approval, consent or waiver of any third party (including any Governmental Entity) (a “Nonassignable Right”) and such authorization, approval, consent or waiver shall not have been obtained prior to the Closing, this Agreement shall not constitute a sale, conveyance, assignment, sublease, transfer or delivery, or an attempted sale, conveyance, assignment, sublease, transfer or delivery thereof until such authorization, approval, consent or waiver has been obtained and the following provisions shall be applicable:

1.4.1 Following the Closing, Seller shall use its commercially reasonable efforts at its sole cost and expense, and Purchaser shall cooperate therewith, to obtain such authorization, approval, consent or waiver or cause the taking of any required action, as applicable. To the extent that any such authorization, approval, consent or waiver is not so obtained or any such action is not so taken, Seller shall, to the extent reasonably possible and not prohibited by any applicable law, rule, regulation, order or judgment (i) provide to Purchaser the benefits of any such Nonassignable Right as though it were the sole owner thereof, (ii) cooperate in any reasonable and lawful arrangement reasonably requested by Purchaser designed to provide such benefits to Purchaser including

- 6 -

purchasing or contracting for the account of Purchaser, or reimbursing Purchaser for any costs or expenses related to the purchase of or the contracting for, such product, service, license, asset or other lawful arrangement that will provide to Purchaser the benefits of such Nonassignable Right, and (iii) at the reasonable request of Purchaser, enforce for the account of Purchaser any right of Seller arising from any such Nonassignable Right against such third party. All costs and expenses incurred by Seller in carrying out the foregoing clauses (i) and (ii) will be paid by Seller; provided, that, Purchaser will be responsible for obligations and liabilities relating to such Nonassignable Rights as if they had been transferred or assigned to Purchaser in accordance with the terms of this Agreement. Once such authorization, approval, consent or waiver for the sale, conveyance, assignment, sublease, transfer or delivery of any Newsprint Asset not sold, conveyed, assigned, subleased, transferred, or delivered at the Closing is obtained, Seller shall, or shall cause its Affiliate to, convey, assign, sublease, transfer and deliver such Newsprint Asset to Purchaser at no additional cost. With respect to the provisions of this Section 1.4, Seller shall, or shall cause its Affiliate to, pay promptly to Purchaser, when received, all income, proceeds and other monies (other than the Purchase Price or any other amount payable by Purchaser to Seller or its Affiliate pursuant to this Agreement or any other Operative Agreement or any other amounts constituting an Excluded Asset) received by Seller after the Closing to the extent related to any Newsprint Asset.

1.4.2

To the extent that Purchaser is provided the benefits pursuant to this Section 1.4 of any such Nonassignable Right, Purchaser shall perform, for the benefit of the applicable third party, the obligations of Seller thereunder or in connection therewith and shall indemnify and hold Seller harmless against any such liability or obligations thereunder arising or to be performed on or after the Closing Date or otherwise constituting an Assumed Obligation.

1.5

Assumed Obligations.

On the terms and subject to the conditions set forth in this Agreement, except to the extent indemnified by Seller pursuant to this Agreement, at the Closing, Purchaser agrees to assume and to pay, perform and discharge when due the following liabilities and obligations of Seller relating to the conduct and operations of the Newsprint Business, as the same shall exist as of the Closing Time (other than Newsprint Retained Obligations) (the “Assumed Obligations”):

1.5.1	all liabilities and obligations of Seller to be performed on or after the Closing Date under the Newsprint Real Property Leases, the Newsprint Equipment Leases, the Newsprint Intellectual Property Licenses, the Newsprint Customer Orders, the Newsprint Purchase Orders, the Newsprint Business Contracts, the Newsprint Assigned Permits, the Newsprint Insurance Claims, the Newsprint Prepaid Items and the Newsprint Water Rights (subject to Section 5.1); provided, that, Purchaser shall assume no liability or obligation, to pay any rebates based on aggregate annual volumes of newsprint sold to a customer with respect to any Newsprint Customer Orders (the “Excluded Newsprint Customer Order Liabilities”);
1.5.2	all liabilities included in determining the Adjusted Closing Net Working Capital;
1.5.3	all liabilities in respect of Actions described on Schedule 1.5.3;

- 7 -

1.5.4	Seller’s obligations pursuant to the Operating and Management Agreement, the Stone Container Lease and, to the extent provided under the terms of the Stone Container Assignment, the Stone Container Guaranty;
1.5.5	the specific liabilities and obligations listed on Schedule 1.5.5;
1.5.6	all liabilities and obligations assumed by Purchaser pursuant to Section 6; and
1.5.7	all other liabilities and obligations specifically assumed by Purchaser pursuant to this Agreement or any other Operative Agreement.

1.6	Newsprint Retained Obligations.
	Notwithstanding anything in this Agreement to the contrary, (i) liabilities and obligations of Seller owed to an Affiliate of Seller (except to the extent reflected as a liability in the determination of Adjusted Closing Net Working Capital), (ii) liabilities of Seller for Taxes, (iii) any liability or obligation of Seller or any of its Affiliates not constituting an Assumed Obligation and (iv) any liability or obligation to the extent related to or arising out of any Excluded Assets shall be excluded from the Assumed Obligations and retained by Seller or its Affiliates, as applicable (the “Newsprint Retained Obligations”).
1.7	Purchase Price.
	The purchase price for the Newsprint Assets and the Apache Shares shall be one hundred sixty one million Dollars ($161,000,000) (the “Purchase Price”), subject to adjustment as set forth in Section 1.8 (the Purchase Price as it may be adjusted pursuant to Section 1.8 being referred to as the “Estimated Adjusted Purchase Price”) and Section 1.9 (the Estimated Adjusted Purchase Price as it may be further adjusted pursuant to Section 1.9 being referred to as the “Adjusted Purchase Price”). The Estimated Adjusted Purchase Price shall be paid at the Closing. Purchaser and Seller shall in good faith attempt to agree, within thirty (30) days following the Closing Date, to an allocation of the Adjusted Purchase Price between the Newsprint Assets (the “Newsprint Purchase Price”) and the Apache Shares (the “Apache Purchase Price”).
1.8	Estimated Purchase Price Adjustment.

1.8.1

Not less than three (3) Business Days prior to the Closing Date, Seller shall prepare, or cause to be prepared, and deliver to Purchaser a good faith estimate of the Closing Net Working Capital as of the Closing Time (the “Estimated Closing Net Working Capital Statement”), which shall set forth the Estimated Net Working Capital of the Newsprint Business and of Apache as of the Closing Time (which shall be set forth separately for each of the Newsprint Business and Apache, but as aggregated shall be referred to as the “Estimated Net Working Capital”) and shall be prepared in accordance with Seller’s past accounting methods, policies, practices and procedures and in the same manner, with consistent classification and estimation methodology, as the Financial Statements were prepared, except that the Excluded Assets and the Newsprint Retained Obligations shall be excluded.

1.8.2

At the Closing, the Purchase Price shall be adjusted by an amount equal to (i) the Estimated Net Working Capital minus (ii) the Normalized Net Working Capital (the “Estimated Purchase Price Adjustment Amount”). If the Estimated Purchase Price

- 8 -

Adjustment Amount is a negative number, then the payment made by Purchaser at the Closing shall be decreased by the absolute value of the Estimated Purchase Price Adjustment Amount and if the Estimated Purchase Price Adjustment Amount is a positive number, then the payment made by Purchaser at the Closing shall be increased by the Estimated Purchase Price Adjustment Amount.

1.9 Post-Closing Purchase Price Adjustment.

1.9.1

Within ninety (90) days following the Closing Date, Seller shall prepare, or cause to be prepared, and deliver to Purchaser a statement (the “Closing Net Working Capital Statement”) which shall set forth the Net Working Capital of the Newsprint Business and of Apache as of the Closing Time (which shall be set forth separately for each of the Newsprint Business and Apache, but as aggregated shall be referred to as the “Closing Net Working Capital”) and shall be prepared in accordance with Seller’s past accounting methods, policies, practices and procedures and in the same manner, with consistent classification and estimation methodology, as the Financial Statements were prepared, except that the Excluded Assets and the Newsprint Retained Obligations shall be excluded. The Closing Net Working Capital Statement may not be amended by Seller after it is delivered to Purchaser.

1.9.2

Purchaser shall, within thirty (30) days after the delivery of the Closing Net Working Capital Statement to it, complete its review of the Closing Net Working Capital reflected on the Closing Net Working Capital Statement. If Purchaser wishes to dispute the Closing Net Working Capital, Purchaser shall notify Seller in writing in reasonable detail of such disagreement and any reason therefore (“Purchaser’s Objection”), setting forth a specific description of the basis of Purchaser’s Objection and the adjustments to the Closing Net Working Capital that Purchaser believes should be made, on or before the last day of such thirty (30) day period, which Purchaser’s Objection may not be amended by Purchaser after it is delivered to Seller (except to withdraw any such Purchaser’s Objection). Any items on the Closing Net Working Capital Statements not disputed in Purchaser’s Objection shall be irrevocably deemed to be accepted by Purchaser. Seller shall then have thirty (30) days to review and respond to Purchaser’s Objection. If Seller and Purchaser are unable to resolve all of their disagreements with respect to the determination of the foregoing items within thirty (30) days following Seller’s receipt of Purchaser’s Objection (the “Negotiation Period”), they shall refer their remaining differences to a mutually agreeable independent accounting firm of national recognition (other than an independent accounting firm utilized by any of Seller, Apache or Purchaser or any Affiliate of any of the foregoing within the past three (3) years) acceptable to both Seller and Purchaser or if Seller and Purchaser are unable to agree as to such third party accounting firm within ten (10) days after the conclusion of the Negotiation Period, either Seller or Purchaser may request that the Chairman of the American Arbitration Association (or the nominated representative of the Chairman) appoint a third party accounting firm meeting the aforementioned requirements to resolve the dispute (the accounting firm selected being referred to as the “CPA Firm”), who shall determine, only with respect to the remaining differences so submitted, whether and to what extent, if any, the Closing Net Working Capital requires adjustment. The procedure and schedule under which any dispute shall be submitted to the CPA Firm shall be as follows:

- 9 -

(a)	Within ten (10) days after the later of (i) the end of the Negotiation Period and (ii) the selection of the CPA Firm, Purchaser shall submit any unresolved elements of the Purchaser’s Objection to the CPA Firm in writing (with a copy to Seller), supported by any documents and/or affidavits upon which it relies. Failure to timely do so shall constitute a withdrawal by Purchaser of the Purchaser’s Objection with respect to any unresolved element to which such failure relates.
(b)	Within fifteen (15) days following Purchaser’s submission of the unresolved elements of the Purchaser’s Objection as specified in sub-clause (a) above, Seller shall submit its response to the CPA Firm in writing (with a copy to Purchaser), supported by any documents and/or affidavits upon which it relies. Failure to timely do so shall constitute an acceptance by Seller with respect to any unresolved elements to which such failure relates.
(c)	The CPA Firm shall deliver its written determination to Purchaser and Seller no later than the thirtieth (30th) day after the remaining differences underlying Purchaser’s Objection are referred to the CPA Firm, or such longer period of time as the CPA Firm determines is necessary.

The CPA Firm’s determination shall be conclusive and binding upon Purchaser and Seller. Purchaser and Seller shall make readily available to the CPA Firm all relevant Books and Records and any work papers (including those of the parties’ respective accountants) relating to the Closing Net Working Capital Statement and all other items commercially reasonably required by the CPA Firm. The “Adjusted Closing Net Working Capital” shall be (i) the Closing Net Working Capital if Purchaser’s Objection is not delivered to Seller during the thirty (30) day period specified above, (ii) the Closing Net Working Capital, adjusted in accordance with Purchaser’s Objection if Seller does not respond to Purchaser’s Objection within the thirty (30) day period specified above, or (iii) the Closing Net Working Capital, as adjusted by either (A) the agreement of Seller and Purchaser, (B) the CPA Firm or (C) treatment of any unresolved element of the Purchaser’s Objection as contemplated by clauses (a) or (b) above. Any expenses relating to the engagement of the CPA Firm shall be allocated between Purchaser and Seller so that Purchaser’s share of such costs shall be in the same proportion that (x) the amount equal to the aggregate value of the disputed items submitted by Purchaser to the CPA Firm that are unsuccessfully disputed by Purchaser bears to (y) the amount equal to the aggregate value of all disputed items submitted by Purchaser to the CPA Firm. Seller and Purchaser shall each bear the fees of their respective counsel, accountants and other representatives incurred in connection with the determination of the Adjusted Closing Net Working Capital.

1.9.3

Within ten (10) days following the date that the Adjusted Closing Net Working Capital is finalized in accordance with Section 1.9.2, the adjustment payment payable pursuant to this Section 1.9.3 (the “Post-Closing Adjustment Amount”), plus interest thereon from the Closing Date to, but not including, the date of payment at eight percent (8%) calculated on a three hundred and sixty-five (365)-day basis, shall be paid by wire transfer of immediately available funds to a bank account designated by Purchaser or Seller, as the case may be. The Post-Closing Adjustment Amount shall be an amount equal to (i) the Adjusted Closing Net Working Capital minus (ii) the Estimated Net Working Capital. If the Post-Closing Adjustment Amount is a negative number, then Seller shall pay an amount equal to the absolute value of the Post-Closing Adjustment

- 10 -

Amount to Purchaser and if the Post-Closing Adjustment Amount is a positive number, then Purchaser shall pay an amount equal to the Post-Closing Adjustment Amount to Seller.

1.10	Allocation of Newsprint Purchase Price.
	Seller and Purchaser each acknowledges and agrees that the purchase and sale of the Newsprint Assets is an “applicable asset acquisition” within the meaning of Section 1060(c) of the Code. Purchaser and Seller shall in good faith attempt to agree, within one hundred twenty (120) days following the Closing Date, to an allocation of the Newsprint Purchase Price (as it may be adjusted pursuant to Section 1.9 and including for this purpose the Assumed Obligations) among the Newsprint Assets in a manner consistent with rules under Section 1060 of the Code and the Treasury Regulations thereunder. Seller and Purchaser shall each file Internal Revenue Service Form 8594 and any required attachments thereto, together with all federal, state, local and foreign Tax Returns, in a manner consistent with and in accordance with any such agreed allocation.
1.11	Section 338(h)(10) Election.
	At Purchaser’s request within thirty (30) days following the Closing Date, Seller and Purchaser agree, in connection with the sale and purchase of the Apache Shares, that each shall make a joint election pursuant to Section 338(h)(10) of the Code with respect to Apache, and corresponding elections, where available, in any states where Apache is doing business, in the same or similar manner as provided by the Code and applicable rules and regulations (the “338(h)(10) Elections”). Purchaser and Seller shall in good faith attempt to agree, within one hundred twenty (120) days following the Closing Date, to an allocation of the Apache Purchase Price (as it may be adjusted pursuant to Sections 1.8 and 1.9 and including for this purpose the liabilities of Apache (plus other relevant items)), among the assets of Apache in a manner consistent with rules under Section 338 of the Code, the Treasury Regulations thereunder. Seller and Purchaser shall each file Internal Revenue Service Form 8883 and any required attachments thereto, together with all federal, state, local and foreign Tax Returns, in a manner consistent with and in accordance with any such agreed upon allocations.
1.12	Taxes on Transfer.
	Any sales Tax, use Tax, real property transfer Tax, documentary stamp Tax or similar Tax attributable to the sale or transfer of the Newsprint Assets, the Newsprint Business or the Apache Shares (for the avoidance of doubt, not including any Tax measured by income or gains which shall be payable one hundred per cent (100%) by Seller) shall be paid fifty percent (50%) by Purchaser and fifty percent (50%) by Seller. Purchaser and Seller each agree to timely sign and deliver such certificates or forms as may be necessary or appropriate to establish any available exemption from (or otherwise reduce) such Taxes, and shall file any Tax Returns required with respect to such Taxes. Any out of pocket cost incurred with respect to the preparation or filing of such certificates, forms or Tax Returns shall be paid fifty percent (50%) by Purchaser and fifty percent (50%) by Seller.
1.13	Real Estate and Personal Property Taxes.
	To the extent not otherwise covered by the adjustment to the Purchase Price contemplated by Section 1.9, all real estate and personal property Taxes with respect to the Newsprint Assets shall

- 11 -

	be prorated as of the Closing Date, with Seller liable for such Taxes through the Closing Date and Purchaser being liable for such Taxes on and after the Closing Date.
2.	CLOSING
2.1	Closing Date and Time.
	The closing of the purchase and sale of the Newsprint Assets and the Apache Shares (the “Closing”) shall take place at the offices of Davies Ward Phillips & Vineberg LLP in Montreal, Québec at 10:00 a.m. (Montreal time) on the third (3rd) Business Day following the date on which the conditions of the parties set forth in Section 7 have been satisfied or waived (other than those conditions that by their nature are to be fulfilled at the Closing, but subject to the satisfaction or waiver of those conditions) (such third (3rd) Business Day being the “Closing Date”) with effect from 12:01 a.m. (Arizona time) on the Closing Date (the “Closing Time”). Time shall be of the essence for purposes of this Section 2.1.
2.2	Seller Deliveries.
	At the Closing, Seller shall deliver to Purchaser (or as Purchaser may request or to such other Person as is entitled to receive such delivery pursuant to this Agreement):

2.2.1	a bill of sale in the form of Exhibit 2.2.1 (the “Bill of Sale”), duly executed by Seller;
2.2.2	the Newsprint Acquired Books and Records, which shall be delivered constructively;
2.2.3	a special warranty deed in the form of Exhibit 2.2.3 (the “Deed” ), duly executed by Seller;
2.2.4	the consent of Coalsales, LLC under that certain Purchase Agreement for Purchase and Sale of Coal dated as of January 1, 2007, between Seller and Coalsales, LLC;
2.2.5	a FIRPTA certificate in the form of Exhibit 2.2.5, duly executed by Seller;
2.2.6	an assignment and assumption agreement by and between Purchaser and Seller in the form of Exhibit 2.2.6 (the “Assignment and Assumption Agreement”), duly executed by Seller;
2.2.7	the ONP Supply Agreement and the OCC Supply Agreement, in each case duly executed by Seller or its applicable Affiliate;
2.2.8	the Transitional Services Agreement, duly executed by Seller;
2.2.9	required Arizona and local real estate and other filings, including an Affidavit of Property Value attached hereto as Exhibit 2.2.9 (the “Real Property Affidavit”);
2.2.10	the Stone Container Assignment, duly executed by Seller;
2.2.11	stock certificate(s) evidencing the Apache Shares duly endorsed in blank by Seller;

- 12 -

2.2.12	resignations dated the Closing Date, duly executed by all of the directors and officers of Apache, or alternatively (but only to the extent permitted under applicable law), certified resolutions of the shareholder or directors of Apache removing all directors and officers of Apache and replacing them with such individuals as Purchaser may designate;
2.2.13	the certificate required pursuant to Section 7.2.6;
2.2.14	a duly executed release or releases, in form and substance reasonably acceptable to Purchaser releasing the Newsprint Assets from the Encumbrances set forth on Schedule 2.2.14;
2.2.15	with respect to the Newsprint Water Rights, the appropriate executed assignments, requests to change well information and notifications, each in a form (i) acceptable to ADWR when supplemented by evidence of transfer of title and (ii) reasonably acceptable to Purchaser;
2.2.16	the Pension Plans Assignment and Assumption Agreement, duly executed by Seller;
2.2.17	the Welfare Benefit Plans Assignment and Assumption Agreement, duly executed by Seller;
2.2.18	each Arizona Lease Assignment and Assumption Agreement, in each case together with an Arizona Lease Application Form, each duly executed and completed by Seller;
2.2.19	in form and substance reasonably satisfactory to Purchaser, all other consents or waivers from third parties to Material Contracts required to be obtained in connection with the consummation of the transactions contemplated by this Agreement, the failure of which to obtain would, individually or in the aggregate, be material to the Newsprint Business or Apache after the Closing; and
2.2.20	such other agreements, documents and instruments as are contemplated to be delivered by Seller at the Closing pursuant to this Agreement.

2.3	Purchaser’s Deliveries.
	At the Closing, Purchaser shall deliver to Seller (or as Seller may request or to such other Person as is entitled to receive such delivery pursuant to this Agreement):

2.3.1	the Estimated Adjusted Purchase Price by wire transfer of immediately available funds in accordance with the wire instructions attached as Exhibit 2.3.1 (or as such instructions may be modified by Seller by written notice to Purchaser no later than two (2) Business Days prior to the Closing Date);
2.3.2	the Bill of Sale, duly executed by Purchaser;
2.3.3	the Assignment and Assumption Agreement, duly executed by Purchaser;
2.3.4	the ONP Supply Agreement and the OCC Supply Agreement, in each case duly executed by Purchaser;

- 13 -

2.3.5	the Transitional Services Agreement, duly executed by Purchaser;
2.3.6	required Arizona and local real estate and other filings, including the Real Property Affidavit;
2.3.7	evidence of the unconditional and irrevocable release of Seller and its Affiliates (other than Apache) under the letter of credit set forth on Schedule 2.3.7, or if Purchaser, despite using commercially reasonable efforts, is unable to obtain such release at or prior to the Closing, a letter of credit in form and substance acceptable to Seller, acting reasonably, in an amount of no less than the amount of the obligations guaranteed pursuant to the letter of credit set forth on Schedule 2.3.7, provided, however, that Purchaser shall continue to use commercially reasonable efforts after the Closing to obtain such release;
2.3.8	the Stone Container Assignment, duly executed by Purchaser;
2.3.9	the Pension Plans Assignment and Assumption Agreement, duly executed by Purchaser;
2.3.10	the Welfare Benefit Plans Assignment and Assumption Agreement, duly executed by Purchaser;
2.3.11	each Arizona Lease Assignment and Assumption Agreement, in each case together with an Arizona Lease Application Form, each duly executed and completed by Purchaser;
2.3.12	the certificate required pursuant to Section 7.3.4;
2.3.13	copies of the signed Amendment Applications (the “APP Amendment Applications”) to be filed promptly after the Closing to transfer to Purchaser the Aquifer Protection Permits listed as items 16, 17, 18 and 19 on Schedule 3.17(a) as contemplated by Section 5.4.2; and
2.3.14	such other agreements, documents and instruments as are contemplated to be delivered by Purchaser at the Closing pursuant to this Agreement.

3. REPRESENTATIONS AND WARRANTIES OF SELLER

Except as set forth in the attached Schedules, Seller represents and warrants to Purchaser as at the Effective Date as set forth in this Section 3. For the purposes of the representations and warranties of Seller contained herein, disclosure in any of the Schedules attached hereto of any facts or circumstances shall be deemed to be an adequate response and disclosure of such facts or circumstances with respect to all representations or warranties by Seller calling for disclosure of such information, whether or not such disclosure is specifically associated with or purports to respond to one or more or all of such representations or warranties, provided that, and only to the extent that, the relevance of the fact or circumstance so disclosed to the applicable representation or warranty is readily apparent. The inclusion of any information in any Schedule or other document delivered or made available by Seller pursuant to this Agreement or the other Operative Agreements, including the specification of any dollar amount, shall not be deemed to be an admission or evidence of the materiality of such item or amount, nor shall it establish a standard of materiality for any purpose whatsoever. Notwithstanding anything herein contained, except for the representations and warranties in Sections 3.1, 3.2 and 3.15, all of the

- 14 -

representations and warranties of Seller are limited, insofar as they relate to Seller (and not to Apache), to the extent to which they apply to the Newsprint Business or the Newsprint Assets, as applicable.

3.1 Organization of Seller and Apache and Ownership of Apache Shares.

3.1.1	Each of Seller and Apache is duly organized, validly existing and in good standing under the laws of its state of incorporation and Seller is qualified to transact business and is in good standing in the State of Arizona. Each of Seller and Apache is qualified to do business as a foreign corporation in each jurisdiction where the conduct of the Newsprint Business or Railway Business, as applicable, would require it to be so qualified or licensed except where the failure to be so qualified would not have a Material Adverse Effect. Seller has all requisite corporate power and corporate authority to own, lease and operate the Newsprint Assets and carry on the Newsprint Business. Apache has all requisite corporate power and corporate authority to own, lease and operate its assets and properties and to carry on the Railway Business.
3.1.2	The number of authorized, issued and outstanding shares of capital stock of Apache is set forth on Schedule 3.1.2. All of the Apache Shares (i) have been duly authorized and validly issued, (ii) are fully paid and non-assessable, (iii) have not been issued in violation of preemptive rights, and (iv) are owned of record and beneficially solely by Seller free and clear of any Encumbrances, and Seller has good and valid title to the Apache Shares. There is no outstanding option, warrant, convertible security, arrangement, commitment or other Contract relating to the issued or unissued equity interests of Apache that gives any Person the right to purchase or receive an equity interest in Apache. The Apache Shares represent one hundred percent (100%) of the issued and outstanding capital stock of Apache.
3.1.3	Apache does not own, directly or indirectly, any equity interest in any Person.

3.2

Power and Authority.

Seller has the necessary corporate power and authority to execute and deliver this Agreement and the other Operative Agreements to which it is a party and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Seller of this Agreement and the other Operative Agreements to which it is a party, the performance by Seller of its obligations hereunder and thereunder, and the consummation by Seller of the transactions contemplated hereby and thereby, have been duly and validly authorized by all necessary corporate action. This Agreement and each of the other Operative Agreements to which Seller or an Affiliate of Seller is a party (when such other Operative Agreements are executed and delivered by Seller or such Affiliate of Seller) have been duly and validly executed and delivered by Seller. This Agreement and each of the other Operative Agreements to which Seller or an Affiliate of Seller is a party (when such other Operative Agreements are executed and delivered by Seller or such Affiliate of Seller) constitute the legal, valid and binding obligation of Seller or such Affiliate of Seller, enforceable against Seller or such Affiliate of Seller in accordance with their respective terms, in each case subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights and to general equity principles.

- 15 -

3.3	No Violation.
	The execution and delivery by Seller of this Agreement and the other Operative Agreements to which it is a party, the performance by Seller of its obligations under this Agreement and such Operative Agreements and the consummation of the transactions contemplated hereby and thereby do not and will not:

3.3.1	result in a violation or breach of any of the terms, conditions or provisions of the organizational documents of Seller or of Apache;
3.3.2	result in a violation or breach of any term or provision of any applicable law, injunction, agreement or decree;
3.3.3	except as disclosed on Schedule 3.3.3, (i) result in a violation or breach of, (ii) constitute a default under, (iii) require Seller or Apache to obtain any permit, authorization, consent, approval or action of, or make any filing with or give any notice to, any Person as a result or under the terms of, or (iv) result in or give to any Person including any Governmental Entity any right of first offer, first refusal, option, termination, cancellation, acceleration or modification in or with respect to, or under, any Contract included within the Newsprint Assets or to which Apache is a party or an obligor; or
3.3.4	result in the creation or imposition of any Encumbrance (other than Permitted Liens) upon any of (i) the Newsprint Assets, (ii) the Apache Shares or any of Apache’s assets or (iii) any Contract included within of the Newsprint Assets or to which Apache is a party or an obligor,

	except for, in the case of Sections 3.3.2, 3.3.3 and 3.3.4 above, those that, in each case or collectively, (i) would not have a Material Adverse Effect and (ii) has not and would not reasonably be expected to, individually or in aggregate, materially and adversely affect the ability of Seller to consummate the transactions contemplated by this Agreement and the other Operative Agreements.
3.4	Financial Statements.

3.4.1

Attached hereto as Schedule 3.4.1 are true and complete copies of the unaudited balance sheets for the Newsprint Business as at December 31, 2007 and December 31, 2006 and statements of operations for the Newsprint Business for the years ended December 31, 2007, December 31, 2006, and December 31, 2005 (the “Newsprint Financial Statements”). Except as set forth in the notes thereto, except as disclosed on Schedule 3.5, and except that the statements of operations included in the Newsprint Financial Statements have been prepared on a pre-Income Tax basis and the balance sheets contained in the Newsprint Financial Statements do not reflect any liabilities for Income Taxes, the Newsprint Financial Statements were prepared in accordance with GAAP and fairly present in all material respects the financial condition and results of operations of the Newsprint Business as of the dates thereof and for the periods covered thereby.

3.4.2

Attached hereto as Schedule 3.4.2 are true and complete copies of the unaudited balance sheets for Apache as at December 31, 2007 and December 31, 2006 and

- 16 -

	statements of operations for Apache for the years ended December 31, 2007, December 31, 2006, and December 31, 2005 (the “Apache Financial Statements”). Except as set forth in the notes thereto, and except as disclosed on Schedule 3.5, the Apache Financial Statements were prepared in accordance with GAAP and fairly present in all material respects the financial condition and results of operations of Apache as of the dates thereof and for the periods covered thereby.
3.4.3	Since the date of the latest balance sheet included in the Financial Statements (the “Balance Sheet Date”), except as set forth on Schedule 3.4.3 and except as set forth on Schedule 3.19, Seller has conducted the Newsprint Business and Apache has conducted the Railway Business only in the ordinary course of business and there has not occurred any event with respect to the Newsprint Business or the Apache Business that would have a Material Adverse Effect.
3.4.4	The books and records of each of the Newsprint Business and Apache are in all material respects correct and complete, are maintained in accordance with good business practice and all applicable laws, and fairly reflect in all material respects all of the transactions and operations that are or should be therein described.

3.5	No Undisclosed Liabilities.
	Except for the liabilities and obligations set forth on the Financial Statements, as incurred since the Balance Sheet Date in the ordinary course of business or as disclosed on Schedule 3.5, there are no liabilities of, relating to or affecting Apache or the Newsprint Business of the type that would be required to be set forth in a financial statement prepared in accordance with GAAP.
3.6	Legal Proceedings.
	Except as disclosed on Schedule 3.6:

3.6.1	there are no Actions pending or, to the Knowledge of Seller, threatened against, relating to or affecting the Newsprint Assets or Apache that, if adversely determined, would have a Material Adverse Effect;
3.6.2	there is no order, writ, judgment, award, injunction, agreement or decree of any Governmental Entity of competent jurisdiction or any arbitrator or arbitrators outstanding against, relating to or affecting the Newsprint Assets or Apache other than those that would not have a Material Adverse Effect; and
3.6.3	there are no Actions pending or, to the Knowledge of Seller, threatened against Seller or any of its Affiliates, or otherwise relating to or affecting Seller, the Newsprint Assets or Apache that would result in the issuance of an order restraining, enjoining or otherwise prohibiting or making illegal the consummation of the transactions contemplated by this Agreement or any of the other Operative Agreements.

3.7	Compliance With Laws and Orders.
	Except as disclosed on Schedule 3.7, (i) Seller (as it relates to the Newsprint Business) complies with all applicable laws (excluding, for the purposes of this Section 3.7, ERISA, Environmental Laws, labor laws and Tax laws which are specifically covered in this Section 3) and (ii) Apache

 - 17 - 

complies with all applicable laws (excluding, for the purposes of this Section 3.7, ERISA, Environmental Laws, labor laws and Tax laws which are specifically covered in this Section 3), except for such non-compliance as would not have a Material Adverse Effect. Since January 1, 2005, neither Seller nor Apache received any written communication from a Governmental Entity that alleged that Seller (as it relates to the Newsprint Business) or Apache is not in compliance with any federal, state, foreign or local laws, rules and regulations, except to the extent any instances of non-compliance would not have a Material Adverse Effect.

3.8

Tax Matters.

3.8.1	All material Tax Returns required to be filed for tax years beginning after December 31, 2003 (i) by Seller with respect to the Newsprint Business and (ii) by or with respect to Apache have been timely filed. All such Tax Returns were correct and complete in all material respects. For tax years beginning after December 31, 2003, all material Taxes owed by Seller with respect to the Newsprint Business and, for all tax years for which the relevant statute of limitations has not yet expired, all material Taxes owed by Apache (in each case whether or not shown on any Tax Return) have been paid or adequate reserves (in conformity with GAAP consistently applied) have been established in the Financial Statements for the payment of such Taxes.
3.8.2	There are no Encumbrances for Taxes (other than Taxes not yet due and payable) upon any of the Newsprint Assets, the Apache Shares, or the assets of Apache. For tax years beginning after December 31, 2003, Seller with respect to the Newsprint Business and, for all tax years for which the relevant statute of limitations has not yet expired, Apache, have each withheld and paid all material Taxes required to be withheld and paid in connection with amounts paid and owing to any employee, independent contractor, creditor, stockholder or other third party (whether domestic or foreign).
3.8.3	Apache does not have any liability for the Taxes of any Person (i) for any tax period beginning on or after January 1, 1998, under Treasury Regulation §1.1502-6 (or any similar provision of state, local, or foreign law) other than as a member of any Affiliated Group of which any of AbitibiBowater Inc., Donohue Corp., or Abitibi-Price Corporation were the parent, or (ii) as a transferee or successor or, by contract.
3.8.4	Apache was included in a consolidated federal Income Tax Return that also included Seller for the taxable year immediately preceding the current taxable year, and will continue to be included in such Tax Return through the Closing Date.
3.8.5	Except as disclosed on Schedule 3.8.5, there is no action, suit, proceeding, audit, investigation or claim pending or, to the Knowledge of Seller, threatened concerning any material Tax liability of Seller with respect to the Newsprint Assets, Newsprint Business or Apache that has been raised by any Taxing Authority, nor has any material deficiency or claim for any such Taxes been proposed, asserted or, to the Knowledge of Seller, threatened. Neither Seller with respect to the Newsprint Business or Newsprint Assets nor Apache has waived any statute of limitations in respect of any material Taxes or agreed to any extension of time with respect to a material Tax assessment or deficiency.

- 18 -

3.8.6 The representations and warranties contained in this Section 3.8 are the only representations and warranties made by Seller with respect to matters arising under Tax law.

3.9 Benefit Plans; ERISA.

3.9.1

Except for Seller’s equity compensation plans, all Benefit Plans are listed on Schedule 3.9.1(a). Except as provided on Schedule 3.9.1(b), with respect to each Benefit Plan, Seller or Apache has heretofore made available to Purchaser, true and complete copies of the following documents: (i) a copy of each written Benefit Plan; (ii) a copy of the most recent summary plan description required under ERISA with respect thereto; (iii) if the Benefit Plan is funded through a trust or any third party funding vehicle, a copy of the trust or other funding agreement and the latest Form 5500, if applicable; and (iv) the most recent determination letter received from the IRS with respect to each Benefit Plan intended to qualify under Section 401(a) of the Code.

3.9.2

Except as disclosed on Schedule 3.9.2:

(a)	Seller and Apache are members of a controlled group as defined in 430(k)(6)(C) of the Code. All contributions required under Sections 412 and 430 of the Code to each Benefit Plan have been made;
(b)	neither Apache, nor Seller with respect to the Newsprint Business, nor any ERISA Affiliate of Apache or of Seller with respect to the Newsprint Business, has filed a notice of intent to terminate any single-employer defined benefit pension plan or has adopted an amendment to treat a single-employer defined benefit pension plan as terminated, nor has such a plan been terminated by Apache, Seller, any ERISA Affiliate of Apache or of Seller or the PBGC;
(c)	neither Apache, nor Seller with respect to the Newsprint Business, nor any ERISA Affiliate of Apache or of Seller with respect to the Newsprint Business, has withdrawn from any multiemployer plan with respect to which there is any current outstanding liability; and
(d)	since January 1, 2005, all contributions to Benefit Plans that were required to be made under such Benefit Plans have been made and prior to January 1, 2005 all material contributions to Benefit Plans that were required to be made under such Benefit Plans have been made.

3.9.3	Each Benefit Plan has been operated and administered in all material respects in accordance with its terms and applicable laws, including ERISA and the Code.
3.9.4	Except as set forth on Schedule 3.9.4, each Benefit Plan intended to qualify under Section 401 of the Code is, and since its inception has been, so qualified and a determination letter (or notification letter in the case of a prototype plan) has been issued by the IRS to the effect that each such Benefit Plan is so qualified.
3.9.5	Except as expressly otherwise provided in Sections 6.2 and 6.3, and except as disclosed on Schedule 3.9.5, the execution of, and performance of the transactions contemplated by this Agreement will not (either alone or to the Knowledge of Seller upon the

- 19 -

	occurrence of any additional or subsequent events) constitute an event under any Benefit Plan, trust or loan that will or would be reasonably be expected to result in any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any Newsprint Employee or Apache Employee.
3.9.6	There are no pending or, to the Knowledge of Seller, threatened actions, suits, arbitrations or claims with respect to any Benefit Plan, other than routine claims for benefits by any current or former Newsprint Employee or Apache Employee against Seller, Apache or any Benefit Plan.
3.9.7	Seller in respect of Newsprint Employees and Apache have no liability, actual or contingent, by reason of any employee who was improperly excluded from participating in any Benefit Plan.
3.9.8	Except as set forth on Schedule 3.9.8, (i) neither Seller, Apache nor any Benefit Plan has received written notice, nor to the Knowledge of Seller, oral notice, that Seller in respect of Newsprint Employees, Apache, or any Benefit Plan is under audit or investigation or similar proceeding by the IRS, the Department of Labor, the PBGC or other governmental authorities, and (ii) to the Knowledge of Seller, no such audit, investigation, or proceeding is threatened.
3.9.9	With respect to the Multiemployer Plan, in its three (3) most recently completed plan years, there has not been a “contribution decline” or “partial cessation” (as each is defined in Section 4205 of ERISA) with respect to Seller or any of its ERISA Affiliates.

	The representations and warranties contained in this Section 3.9 and in Section 3.14 are the only representations and warranties made by Seller with respect to matters arising under ERISA or concerning Benefit Plans.
3.10	Real Property.

3.10.1.	Schedule 3.10.1(a) contains a complete and accurate description of all Owned Real Property (including a legal description that is accurate in all material respects) and all Encumbrances thereon. The Owned Real Property constitutes all of the real property owned (i) by Apache or (ii) by Seller with respect to the Newsprint Business. Except as disclosed on Schedule 3.10.1(b), Seller or Apache has good, marketable, undivided, insurable fee simple title to the Owned Real Property, free and clear of any Encumbrances other than Permitted Liens.
3.10.2.	Except as set forth on Schedule 3.10.2, each Real Property Lease is a legal, valid and binding Contract of Seller or Apache, as applicable, and to the Knowledge of Seller, of the other parties thereto; provided that no representation or warranty is made as to any Contract that is not in writing and fully executed by all parties thereto or where the term thereof has expired, in each case to the extent set forth on Schedule 3.10.2. Except for such defaults as would not have a Material Adverse Effect, there is no existing default under any Real Property Lease (i) by Seller or Apache, or (ii) to the Knowledge of Seller, by the other parties thereto.
3.10.3.	Except as set forth on Schedule 3.10.3:

- 20 -

(a)	to the Knowledge of Seller, the legal descriptions of the Owned Real Property contained in the Title Commitment describe the Owned Real Property fully and adequately;
(b)	except as otherwise indicated in the Surveys (i) all Structures are located within the boundary lines of Owned Real Property and no buildings, structures, fixtures, facilities, or improvements to any parcel adjacent to the Owned Real Property encroach onto any portion of the Owned Real Property and (ii) the Structures do not encroach on any easement which burdens any portion of the Owned Real Property;
(c)	none of the Owned Real Property serves any adjacent parcel for any purpose inconsistent with the use of the Owned Real Property or otherwise encroaches upon the real property of any Person, except where such inconsistencies or encumbrances would not have a Material Adverse Effect;
(d)	Seller or Apache has legal rights of physical and legal ingress and egress to and from the Owned Real Property from and to adjoining streets and roads and, to the Knowledge of Seller, no conditions exist that would result in the termination of such ingress and egress;
(e)	the Owned Tangible Real Assets are (i) free of defects that would not be considered reasonably customary or reasonably expected for assets of a similar age and use as the Owned Tangible Real Assets and that would have a Material Adverse Effect, and (ii) fit for the particular purpose for which they are used, and no maintenance or repair to the Owned Real Property or any Owned Tangible Real Asset has been unreasonably deferred other than such of the foregoing that would not have a Material Adverse Effect;
(f)	all gas, electric, telephone, communications and all other utilities required by any applicable law or by the use and operation of the Owned Real Property in the operation of the Businesses, are connected to municipal or public or other utility services, are adequate to and usable by the Owned Real Property and to service the Owned Real Property in the operation of the Businesses in the ordinary course of business and to permit compliance, in all material respects, with the requirements of all applicable laws in the operation of the Businesses;
(g)	the Owned Real Property and all present uses and operations of the Owned Real Property comply, in all material respects, with all applicable laws, court orders, governmental permits, or restrictions of any Governmental Entity having jurisdiction over any portion of the Owned Real Property, including those related to zoning, land use, and access by the handicapped, covenants, conditions, restrictions, easements, disposition Contracts, and similar matters affecting the Owned Real Property;
(h)	there are no pending, or to the Knowledge of Seller, threatened, condemnation, fire, health, safety, building, zoning, or other land use regulatory proceedings, lawsuits, or administrative actions relating to any portion of the Owned Real Property or any other matters that do or would have a Material Adverse Effect, nor has Seller or Apache received written notice of any pending or threatened

- 21 -

	special assessment proceedings affecting any portion of the Owned Real Property;
(i)	since January 1, 2005, no portion of the Owned Real Property or the Structures has suffered any material damage by fire or other casualty that has not heretofore been repaired and restored in all material respects;
(j)	except as may be a Permitted Lien, there are no outstanding options, rights of first offer, or rights of first refusal or other similar Contracts or rights to purchase or lease the Owned Real Property (other than as contained in the Snowflake Lease), or any portion thereof or interest therein, other than this Agreement;
(k)	no Violations exist at the Owned Real Property, except such Violations that would not have a Material Adverse Effect; and
(l)	to the Knowledge of Seller, since January 1, 2005, no third party has requested permission to enter the Real Property pursuant to a statutory or contractual right for the purpose of extracting oil, gases, geothermal resources, coal, ores, minerals, fertilizer, fossils or any similar commodity.

3.10.4.	Except as set forth on Schedule 3.10.4, to the Knowledge of Seller, the Newsprint Water Rights include all necessary water rights required to continue the Businesses on the Owned Real Property, and all charges, filings, registrations and assessments related thereto have been made and are current.
3.10.5.	Except as set forth on Schedule 3.10.5 or as would not have a Material Adverse Effect, the Owned Real Property is not located within any water conservation, irrigation, soil conservation, weed or insect abatement or other similar district, or any special improvement district and the Owned Real Property is not within a flood control district.
3.10.6.	To the extent that any wells are located on the Owned Real Property (the “Wells”), Seller has not received any written notice from ADWR that such Wells require meters under the requirements of ADWR.
3.10.7.	To the Knowledge of Seller, (a) no historical or archaeological materials or artifacts of any kind or any Indian ruins of any kind located on the Owned Real Property interfere in any material respect with the operation of either Business and (b) no third party has made a claim against Seller or Apache with respect to any such materials, artifacts or ruins on any parcel of the Owned Real Property on which any Owned Tangible Real Asset is located nor has any such claim been made on any other parcel of the Owned Real Property since January 1, 2006.
3.10.8.	The Encumbrances contained on Schedule 3.10.8 do not, in the aggregate, have a material adverse effect on either of the Businesses.

3.11 Equipment.

3.11.1 Except as set forth on Schedule 3.11.1, all of the Equipment (excluding Inventory for purposes of this Section 3.11) is operational, usable in the ordinary course of business, and conforms, in all material respects, with any applicable laws relating to its

- 22 -

	construction, use and operation; provided that no representation or warranty is made as to any Equipment that individually or in the aggregate is not material to either of the Businesses. To the Knowledge of Seller, there are no facts or conditions affecting any Equipment that could reasonably be expected, individually or in the aggregate, to interfere in any material respect with the operation of the Businesses.
3.11.2	Except as set forth on Schedule 3.11.2, each Equipment Lease is a legal, valid and binding Contract of Seller or Apache, as applicable, and to the Knowledge of Seller, of the other parties thereto; provided that no representation or warranty is made as to any Contract that is not in writing and fully executed by all parties thereto or where the term thereof has expired, in each case to the extent set forth on Schedule 3.11.2. Seller or Apache, as applicable, is not in default under any Equipment Lease, except for such defaults as would not have a Material Adverse Effect. Since January 1, 2005, neither Seller nor Apache has received any written communication from, or given any written communication to, any other party indicating that there is a default under any Equipment Lease. To the Knowledge of Seller, (i) none of the other parties to any Equipment Lease is in default thereunder, except for such defaults that would not have a Material Adverse Effect and (ii) each such Equipment Lease is enforceable against the other parties thereto in accordance with the terms thereof.
3.11.3	Except as set forth on Schedule 3.11.3 and the products and services described in Section 5.10, when taken together with any assets, services or rights to be provided by Seller or its Affiliates pursuant to the ONP Supply Agreement, the OCC Supply Agreement and the Transitional Services Agreement, the Newsprint Assets, the Apache Shares and the assets of Apache constitute all the assets that will be necessary for Purchaser to continue to operate and conduct the Newsprint Business immediately following the Closing in all material respects as currently conducted.

3.12

Intellectual Property Rights.

The Intellectual Property Assets constitute the only intellectual property of Seller, Apache or any third party material to the current conduct of the Businesses, other than the Excluded Intellectual Property. Except as set forth on Schedule 3.12(a), each of the Newsprint Intellectual Property Licenses is a legal, valid and binding Contract of Seller or Apache, as applicable, and to the Knowledge of Seller, of the other parties thereto, and there is no existing default of Seller or Apache, as applicable, or to the Knowledge of Seller, of the other parties thereto in any material respect under any such Newsprint Intellectual Property License; provided, that, no representation or warranty is given as to any Contract that is not in writing and fully executed by all parties thereto or where the term thereof has expired, to the extent set forth on Schedule 3.12(a). Except as disclosed on Schedule 3.3, each Newsprint Intellectual Property License is assignable by Seller to Purchaser without consent of any third party. No action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand against Seller or any Affiliate of Seller (in either case in connection with the Newsprint Business) or Apache is pending or, to the Knowledge of Seller, is threatened which challenges the legality, validity, enforceability, use or ownership of any of the Intellectual Property Assets in connection with the Businesses. Except as disclosed on Schedule 3.12(b), neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will impair or alter in any material respect any rights in the Intellectual Property Assets.

- 23 -

3.13 Material Contracts.

3.13.1 Except for the BCBSA Contract, Schedule 3.13.1 contains a true and complete list of each Contract to which Seller or Apache is a party or by which Seller or Apache is bound (and in the case of Seller, that relates to the Newsprint Business) that:

(a)	provides for the sale or supply of products (including purchase orders and sale orders) or performance of services, and provides for aggregate future payments in respect of the Newsprint Business or Apache of more than $500,000 on an annual basis, provided, however, that any Contract for the sale of newsprint (other than the Newsprint Customer Orders) shall not be included on Schedule 3.13.1 and shall be an Excluded Contract;
(b)	provides for the future purchase of, or payment for, supplies or products from a third party, the lease of any real or personal property from or to a third party, or the performance of services by a third party, and in each case provides for aggregate future payments in respect of the Newsprint Business or Apache of more than five hundred thousand Dollars ($500,000) on an annual basis;
(c)	is a Contract to operate for any other party any real or personal property, and provides in each case for aggregate future payments in respect of the Newsprint Business or Apache of more than five hundred thousand Dollars ($500,000) on an annual basis;
(d)	is a Collective Bargaining Agreement;
(e)	is with respect to a partnership or joint venture;
(f)	limits the right of Apache or the Newsprint Business to engage in any type or line of business, conduct business in any geographical area or with any Person or to solicit for hire or hire any Person, or would limit the right of Purchaser or any of its Affiliates to do any of the foregoing;
(g)	contains a “most favored nation” pricing agreement in favor of a customer;
(h)	is an agreement for (i) the employment of any employee or with respect to the compensation of any employee or consultant employed or retained by Seller or Apache that in any such case provides for base compensation (or payment in the case of consultants) in excess of one hundred fifteen thousand Dollars ($115,000) per annum and is not terminable-at-will (without payment other than for service rendered up to the date of termination) or (ii) severance of any employee or consultant of Seller or Apache that provides for severance or other compensation in an amount exceeding one third (1/3) of the annual compensation of such employee or consultant;
(i)	is a note, debenture, bond, conditional sale Contract, equipment trust Contract, letter of credit Contract, reimbursement Contract, loan Contract or other Contract for the borrowing or lending of money (including loans to or from officers or directors but excluding advances to officers, directors or employees consistent with past

- 24 -

	practice), a Contract for a line of credit or for a guarantee of, or other undertaking in connection with, the indebtedness of any other Person;
(j)	is a Contract for any capital expenditure or leasehold improvement, and provides for aggregate future payments in respect of the Newsprint Assets or Apache of more than five hundred thousand Dollars ($500,000) on an annual basis; and
(k)	is a Contract creating an Encumbrance on the Newsprint Assets or the assets of Apache (except for Permitted Liens), excluding leases,

	(those Contracts set forth on Schedule 3.13.1, together with the Operating and Management Agreement, the Snowflake Lease and any other Contracts required to be set forth on Schedule 3.13.1 (excluding, however, the BCBSA Contract) are collectively referred to as the “Material Contracts”).
3.13.2	Seller has delivered or made available to Purchaser complete and correct copies of all written Material Contracts and accurate descriptions of all material terms of all unwritten Material Contracts.
3.13.3	Except as set forth on Schedule 3.13.3(a), each Material Contract is a legal, valid and binding Contract of Seller or Apache, as applicable, and to the Knowledge of Seller, the other parties thereto; provided that no representation or warranty is given as to any Contract that is not in writing and fully executed by all parties thereto or where the term thereof has expired, in each case to the extent set forth on Schedule 3.13.1. Seller or Apache, as applicable, is not in default under any Material Contract, except for such defaults as would not have a Material Adverse Effect. Since January 1, 2005, except as set forth on Schedule 3.13.3(b), neither Seller nor Apache has received any written communication from, or given any written communication to, any other party indicating that there is a material default under any Material Contract. Except as set forth on Schedule 3.13.3(c), to the Knowledge of Seller, (i) none of the other parties to any Material Contract is in default thereunder, except for such defaults that would not have a Material Adverse Effect and (ii) each such Material Contract is enforceable against the other parties thereto in accordance with the terms thereof; provided that no representation or warranty is given as to any Contract that is not in writing and fully executed by all parties thereto or where the term thereof has expired, in each case to the extent set forth on Schedule 3.13.1.

3.14 Employees; Labor Relations.

3.14.1

Schedule 3.14.1 contains a list of the name of each employee (i) of Apache and (ii) of Seller in the current conduct of the Newsprint Business, as at the date indicated therein.

3.14.2

Except as set forth on Schedule 3.14.2, there are no pending, or to the Knowledge of Seller, threatened labor disputes, proceedings or Actions, including any charges of unfair labor practices within the meaning of applicable labor relations legislation, strikes, slowdowns, picketing, work stoppages, lock-outs, hand billings, boycotts, arbitrations, charges or similar labor related disputes or proceedings pertaining to Seller or Apache by or with respect to any Newsprint Employees or Apache Employees or by any labor union, council of labor unions, employee bargaining agency or affiliated bargaining agent on behalf of any Newsprint Employee or Apache Employee. Except as

- 25 -

	disclosed on Schedule 3.14.2, (a) to the Knowledge of Seller, no Newsprint Employee or Apache Employee is represented by a labor union, (b) Seller is not a party to, or otherwise subject to, any collective bargaining agreement or other labor union contract, (c) no petition has been filed or proceeding instituted since January 1, 2003 by a Newsprint Employee or Apache Employee, or group of such employees, with any labor relations board seeking recognition of a bargaining representative, and (d) there are no pending, or to the Knowledge of Seller, threatened organizing activities by or on behalf of any trade union, council of trade unions, employee bargaining agency or affiliated bargaining agent, with respect to any employees of Seller.
3.14.3	Since January 1, 2005, and to the Knowledge of Seller, prior to January 1, 2005, except as set forth on Schedule 3.14.3, Seller has arbitrated no material dispute with any labor union representing Newsprint Employees or Apache Employees.
3.14.4	Except as set forth on Schedule 3.14.4, Seller has not entered into any written agreement with any labor union representing Newsprint Employees or Apache Employees which materially modifies any Collective Bargaining Agreement.
3.14.5	Except as set forth on Schedule 3.14.5, no Newsprint Employees or Apache Employees covered by a Collective Bargaining Agreement are on layoff status or to the Knowledge of Seller scheduled or otherwise planned to be transferred to layoff status.
3.14.6	Seller represents and agrees that it has fulfilled (or will fulfill prior to the Closing) relating to the transactions contemplated by this Agreement, all of its material legal and contractual obligations to all labor unions that represent Newsprint Employees and Apache Employees.
3.14.7	Seller in respect of Newsprint Employees and Apache (i) are in compliance in all material respects with all applicable laws respecting employment, overtime pay and wages and hours, (ii) have withheld all material amounts required by law or by agreement to be withheld from the wages, salaries and other payment to the Newsprint Employees and Apache Employees, as applicable and (iii) are not liable for or in arrears with respect to wages or any taxes or any penalty for failure to comply with any of the foregoing.

3.15	Brokers.
	Other than Scotia Capital Inc., no agent, broker, finder, investment banker, financial advisor or other similar Person will be entitled to any fee, commission or other compensation in connection with any of the transactions contemplated by this Agreement or any of the other Operative Agreements on the basis of any act or statement made by Seller, Apache or any of their Affiliates (the fees of Scotia Capital Inc. being solely the responsibility of Seller).
3.16	Title.

3.16.1 Except as disclosed on Schedule 3.16.1, (i) Seller has good and transferable title to, valid leasehold interests in, or valid licenses to use all of the Newsprint Assets (excluding for this purpose the Newsprint Owned Real Property, which is covered by Section 3.10), free of any Encumbrances (other than Permitted Liens) and (ii) the Newsprint Assets (excluding for this purpose the Newsprint Owned Real Property,

- 26 -

	which is covered by Section 3.10) are not subject to any Encumbrances other than Permitted Liens, except for such title defects and/or Encumbrances that would not have a Material Adverse Effect.
3.16.2	Except as disclosed on Schedule 3.16.2, Apache has good and transferable title to, valid leasehold interests in or valid licenses to use all of its material assets (excluding for this purpose the Apache Owned Real Property which is covered by Section 3.10), in each case free and clear of all Encumbrances other than Permitted Liens.

3.17	Permits.
	Apache and Seller (in the current conduct of the Newsprint Business) (i) hold all Permits necessary or required by applicable law to be held by Apache and Seller to conduct their respective Businesses; (ii) have made all appropriate filings for issuance or renewal of such Permits, and (iii) are in compliance with (and have complied at all times since January 1, 2005 with) any and all obligations required to be met to obtain or renew any such Permit (and no material capital expenditures are reasonably expected to be required to be made under current applicable laws and regulations (including enacted but not yet effective laws) during the two (2) years following the Effective Date in order to be in such compliance or to meet such obligations), except where the failure to have such Permits or the failure to be in such compliance would not have a Material Adverse Effect. All Permits necessary to conduct the Businesses are set forth on Schedule 3.17(a) , other than Permits the failure of which to have is not, individually or in the aggregate, material to the Newsprint Business or Apache, as the case may be (the “Material Permits”). Since January 1, 2005, neither Seller nor Apache has received written notice of any proceeding threatening the validity of, or alleging noncompliance with, any Material Permit. There are no defects in any Permit that individually or in the aggregate would be material to the Newsprint Business or Apache, as the case may be, and following the Closing, Seller will not undertake, directly or indirectly, any challenges to, any Permits relating to the operation of the Newsprint Assets or Apache. Schedule 3.17(b) sets forth a list of those Material Permits of Seller that cannot be transferred, assigned or conveyed to Purchaser prior to the Closing pursuant to the terms of such Material Permits or as a result of applicable law.
3.18	Environmental Matters.
	Except as set forth on Schedule 3.18, (i) Seller conducts the Newsprint Business and Apache conducts the Railway Business in compliance in all material respects with all currently applicable Environmental Laws and Permits issued pursuant to Environmental Law and neither Seller nor Apache has received any written notice from any Governmental Entity or third party alleging that Seller or Apache is not in material compliance with any Environmental Law, which alleged noncompliance (and any associated penalties, liabilities or other obligations) remains unresolved, or remediation or other corrective action has not been taken and paid for; (ii) there are no Actions pending or, to the Knowledge of Seller, threatened against Seller (or, to the Knowledge of Seller, any predecessor of Seller) in connection with the Newsprint Business or Apache (or any predecessor entity of Apache) in connection with the Railway Business based on, arising out of, or relating to any Environmental Law, and neither Seller nor Apache are subject to any material outstanding order, writ, judgment, award, injunction or decree of any Governmental Entity or any arbitrator or arbitrators, in each case based on, arising out of, or relating to Environmental Law; (iii) there is no contamination of, and there have been no Releases or, to the Knowledge of Seller, threatened Releases of Hazardous Substances at the Real Property or, to the Knowledge of Seller, any real property formerly owned, leased or operated by Seller (or any predecessor of Seller) in

- 27 -

	connection with the Newsprint Business or Apache (or any predecessor entity of Apache) in connection with the Railway Business, in each case, requiring investigation or remediation under any Environmental Laws that has not been addressed to the satisfaction of all Governmental Entities with oversight responsibility therefor; (iv) neither Seller (nor, to the Knowledge of Seller, any predecessor of Seller) in connection with the Newsprint Business nor Apache (nor, to the Knowledge of Seller, any predecessor entity of Apache) in connection with the Railway Business has used any waste disposal site, or otherwise disposed of, transported, or arranged for the transportation of, any Hazardous Substances to any place or location (a) in violation of any Environmental Laws, (b) to the Knowledge of Seller, listed on the National Priorities List or any comparable list of state sites, or (c) in a manner that has given or would reasonably expected to give rise to material liabilities pursuant to any Environmental Laws; (v) to the Knowledge of Seller, there are no past or present conditions, events, circumstances, facts, activities, practices, incidents, actions, omissions or plans that are reasonably expected to give rise to any material liability on Seller in connection with the Newsprint Business or Apache under any Environmental Laws; and (vi) to the extent within its possession or reasonably available to Seller or Apache, Seller has delivered, or made available, to Purchaser true and complete copies and results of all material environmental assessments, material audits and Material Permits, and any other material reports, studies, analyses, tests, or monitoring possessed or initiated by Seller or Apache, in either case, since January 1, 2005 in connection with the Newsprint Business or Apache pertaining to compliance with, or liability under, any Environmental Laws, other than documents for which Seller has a reasonably valid claim of attorney-client or attorney work product privilege; provided that, to the Knowledge of Seller, Seller has disclosed to Purchaser in the due diligence materials made available by Seller any existing material liabilities and obligations arising under Environmental Law. The representations and warranties contained in this Section 3.18 and, insofar as it relates to Permits issued pursuant to Environmental Laws, Section 3.17, are the only representations and warranties made by Seller with respect to matters arising under Environmental Law.
3.19	Absence of Certain Changes.
	Except as set forth on Schedule 3.4.3 and except as set forth on Schedule 3.19, since the Balance Sheet Date:

3.19.1	there has been no event, change, effect, condition or circumstance that has occurred that, individually or in the aggregate, that would have a Material Adverse Effect;
3.19.2	neither Seller nor Apache has entered into or terminated any Contract outside the ordinary course of business that is or would have been a Material Contract had it not been terminated, except as set forth on Schedule 3.13.1 or Schedule 5.3;
3.19.3	neither Seller (to the extent related to the Newsprint Assets) nor Apache has adopted a plan or agreement of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other material reorganization;
3.19.4	neither Seller nor Apache has acquired, sold, transferred or assigned any assets relating to the Newsprint Business or the Railway Business, as applicable, except in the ordinary course of business consistent with past practice;

- 28 -

3.19.5	neither Seller nor Apache has mortgaged, pledged, or subjected to any Encumbrance (other than Permitted Liens) any Newsprint Asset or any of the Apache Shares in the case of Seller or any of Apache’s assets in the case of Apache;
3.19.6	neither Seller, with respect to the Newsprint Assets, nor Apache has sold, assigned or transferred any material patents, trademarks, trade names, copyrights, trade secrets or other intangible assets, except in the ordinary course of business consistent with past practice;
3.19.7	there has been no casualty, loss, damage or destruction (whether or not covered by insurance) of any property which casualty, loss, damage or destruction is, individually or in aggregate, material to the Newsprint Business or Apache or waiver of any rights of material value against any Person;
3.19.8	Apache has not instituted or settled any material legal proceeding and Seller has not instituted or settled any material legal proceeding relating to the Newsprint Business;
3.19.9	other than in the ordinary course of business consistent with past practice, neither Seller (to the extent relating to the Newsprint Business) nor Apache has made any waiver or release of any material claim or right or cancellation of any material debt;
3.19.10	neither Seller nor Apache has (i) made any increase in the compensation payable or to become payable to any director, officer, employee, or agent, nor any other material change in any employment or consulting agreement that would be required to be set forth in Schedule 3.13.1, except in any such case in the ordinary course of business consistent with past practice and changes provided for under the terms of a Benefit Plan or under the terms of a Collective Bargaining Agreement, (ii) entered into any employment, retention, severance, change in control, or similar Contract that would be required to be set forth in Schedule 3.13.1 with any Person, or (iii) established or amended in any material respect any Benefit Plan;
3.19.11	neither Seller (as it relates to the Newsprint Business) nor Apache has allowed or agreed to allow the lapse of any right with respect to any Material Permit;
3.19.12	neither Seller nor Apache has committed or agreed, whether in writing or otherwise, to do any of the foregoing; and
3.19.13	no default occurred under the Snowflake Lease by either the landlord or, to the Knowledge of Seller, the tenant thereunder.

3.20

Inventory.

As at the Balance Sheet Date: (i) the Newsprint Inventory consisted of items of usable quality for the purposes of which they were manufactured in all material respects and none of such Newsprint Inventory was damaged or defective or obsolete, in all such cases, except to the extent of any reserves set forth on the Newsprint Financial Statements, (ii) such Newsprint Inventory is recorded in the Newsprint Financial Statements in accordance with GAAP in the manner described in the Newsprint Financial Statements subject to normal year end adjustments and (iii) each write-down of such Newsprint Inventory that should have been made pursuant to GAAP since January 1, 2005 has been made.

- 29 -

3.21	Related Party Transactions.
	Schedule 3.21(a) describes each agreement, transaction or series of transactions between Seller (to the extent related to the Newsprint Business) or Apache, on the one hand, and any Related Party, on the other hand, which is currently in effect or which occurred or was in effect at any time since January 1, 2005, that, together with all related agreements, transactions or series of transactions, provides for aggregate future payments of more than five hundred thousand Dollars ($500,000) on an annual basis. Schedule 3.21(b) sets forth any balance payable to or receivable from such Related Party as of the Effective Date (other than compensation and payments paid in the ordinary course of business and employee benefits paid or provided in the ordinary course of business consistent with past practice pursuant to Benefit Plans disclosed on Schedule 3.9.1(a)) that exceeds five hundred thousand Dollars ($500,000).
3.22	Customers; Suppliers.

3.22.1

Schedule 3.22.1 sets forth a true, correct and complete list of the ten (10) largest customers (the “Customers”) of the Newsprint Business (based on amounts of revenues from the Customers for the twelve (12)-month period ended December 31, 2007), together with the volume of the purchases from the Newsprint Business made by such Customers during such period. To the Knowledge of Seller, as of the Effective Date, none of the Customers has cancelled or otherwise terminated, or threatened in writing to cancel or otherwise terminate its relationship with Seller. To the Knowledge of Seller, as of the Effective Date, no Customer has notified Seller of its intention to materially decrease or materially limit the supplies or materials sold by Seller in the Newsprint Business. Except as set forth in Schedule 3.22.1, neither any Customer has, nor any Newsprint Customer Order includes, any entitlement or right to a rebate based on aggregate annual volumes of newsprint sold to such customer or with respect to such Newsprint Customer Order.

3.22.2

As of the Effective Date, none of the material suppliers to the Newsprint Business has cancelled or otherwise terminated, or threatened in writing to cancel or otherwise terminate its relationship with Seller. No material supplier has notified Seller in writing of its intention to materially decrease or materially limit the supplies or materials sold to Seller.

3.23	Shared Services.
	Except as set forth on Schedule 3.23 and except for those products and services described in Section 5.10 and those assets, services or rights to be provided by Seller or its Affiliates pursuant to the Transitional Services Agreement, the ONP Supply Agreement and the OCC Supply Agreement, (i) Seller and its Affiliates do not provide any services to the Businesses, the Newsprint Assets or Apache and (ii) Seller and its Affiliates, on the one hand, and the Newsprint Assets, Apache and the Businesses on the other hand, do not share any real or personal property or other assets which are used in, held for use in, or necessary for the conduct of the Businesses.
3.24	FERC.
	The electric cogeneration facility owned and operated by Seller and included in the Newsprint Assets (“Cogeneration Facility”) is a “qualifying cogeneration facility” within the meaning of section 3(18)(B) of the Federal Power Act, as amended, and the implementing regulations of

- 30 -

	FERC. Since March 17, 2006, all sales of energy, capacity, and ancillary services by Seller from the Cogeneration Facility have been made pursuant to that certain Power Purchase and Sale Agreement by and between Seller and Arizona Public Service Company (APS Contract No. 61977) executed on April 23, 2001.
3.25	Updating Schedules and Defined Terms.
	The Schedules and the defined terms herein shall be deemed to be updated to reflect Contracts expressly permitted to be entered into by Seller and any of its Affiliates (including Apache) pursuant to this Agreement, including pursuant to Section 5.3, and actions otherwise approved in writing by Purchaser.
3.26	No Other Representation or Warranty.
	The representations and warranties of Seller contained in this Section 3 are the only representations and warranties made by Seller in connection with the transactions contemplated herein or in any other Operative Agreement and, for greater certainty and without limiting the generality of the foregoing, no other representation or warranty, whether express or implied by Seller, is made in connection with, arising out of or relating to the transactions contemplated by this Agreement or in any other Operative Agreement, Purchaser hereby waiving any such other representation or warranty. EXCEPT AS SPECIFICALLY SET FORTH IN THIS SECTION 3, THE BUSINESSES ARE SOLD ON AN “AS IS WHERE IS” BASIS WITH ALL FAULTS AND WITHOUT ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE OR ANY OTHER WARRANTY OF ANY NATURE WHATSOEVER, EXPRESS OR IMPLIED.
4.	REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser represents and warrants to Seller as follows:

4.1	Organization.
	Purchaser is a corporation, duly organized, validly existing and in good standing under the laws of Canada.
4.2	Power and Authority.
	Purchaser has the necessary corporate power and authority to execute and deliver this Agreement and the other Operative Agreements to which it is a party and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Purchaser of this Agreement and the other Operative Agreements to which it is a party, and the performance by Purchaser of its obligations hereunder and thereunder, have been duly and validly authorized by all necessary corporate action. This Agreement and the other Operative Agreements to which Purchaser is a party (when such other Operative Agreements are executed and delivered by Purchaser) have been duly and validly executed and delivered by Purchaser and constitute legal, valid and binding obligations of Purchaser enforceable against Purchaser in accordance with their respective terms, in each case subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights and to general equity principles.

- 31 -

4.3	No Violation.
	Except as set forth on Schedule 4.3, the execution and delivery by Purchaser of this Agreement and the other Operative Agreements to which it is a party, the performance by Purchaser of its obligations under this Agreement and such Operative Agreements and the consummation of the transactions contemplated hereby and thereby do not and will not:

4.3.1	result in a violation or breach of any of the terms, conditions or provisions of the organizational documents of Purchaser;
4.3.2	result in a violation or breach of any term or provision of any applicable law; or
4.3.3	result in a violation or breach of any Contract to which Purchaser is a party;

	which, in each case or collectively, would reasonably be expected to materially and adversely affect the ability of Purchaser to consummate the transactions contemplated by this Agreement and the other Operative Agreements.
4.4	Legal Proceedings.
	There are no Actions pending or, to the Knowledge of Purchaser, threatened against, relating to or affecting Purchaser or any Affiliate of Purchaser or any of Purchaser’s assets or properties that would reasonably be expected to (i) result in the issuance of an order restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement or any of the other Operative Agreements or (ii) have a material adverse effect on the financial condition of Purchaser.
4.5	Brokers.
	Other than BMO Capital Markets, no agent, broker, finder, investment banker, financial advisor or other similar Person will be entitled to any fee, commission or other compensation in connection with any of the transactions contemplated by this Agreement or any of the other Operative Agreements on the basis of any act or statement made by Purchaser or any of its Affiliates (the fees of BMO Capital Markets being solely the responsibility of Purchaser).
4.6	Investigation by Purchaser; Seller Liability.

4.6.1 Purchaser acknowledges and agrees that it has conducted its own independent investigation, review and analysis of the business, operations, properties, liabilities, results of operations, financial condition and prospects of Apache, the Railway Business and the Newsprint Business, which investigation, reviews and analysis was done by Purchaser and its Affiliates and, to the extent Purchaser deemed appropriate, by Purchaser’s representatives. Purchaser acknowledges that it and its representatives have been provided access to the Data Room, and a reasonable amount of time to consider the content of the Data Room, has participated in presentations by Seller’s and Apache’s management and has visited the Real Property. In entering into this Agreement and the other Operative Agreements, Purchaser acknowledges that it is relying solely upon the aforementioned investigation, review and analysis and not on any representations, warranties, statements or opinions of Seller or its representatives

- 32 -

(except the specific representations and warranties of Seller set forth in Section 3), and Purchaser:

(a)	acknowledges that neither Seller nor any of its directors, officers, shareholders, employees, Affiliates, agents, advisors or representatives makes or has made, nor has it relied on, any oral or written representation or warranty, either express or implied, as to the accuracy or completeness of any of the information (including any estimates, projections, forecasts, operating plans or budgets concerning financial or other information relating to the Businesses) provided or made available to Purchaser or its representatives (including (i) in materials furnished in the Data Room, (ii) in presentations by Seller’s or Apache’s management or (iii) otherwise), except that the foregoing limitations shall not apply to Seller insofar as it has made the specific representations and warranties set forth in Section 3;
(b)	agrees, to the fullest extent permitted by law, that none of Seller or any of its directors, officers, employees, shareholders, Affiliates, agents, advisors or representatives shall have any liability, obligation or responsibility whatsoever to Purchaser (including in contract or tort, as a fiduciary, under any applicable law or otherwise) based upon any information (including any estimates, projections, forecasts, operating plans or budgets concerning financial or other information relating to the Businesses) provided or made available, or statements made (including (i) in materials furnished in the Data Room, (ii) in presentations by Seller’s or Apache’s management or (iii) otherwise), except that the foregoing limitations shall not apply to Seller insofar as it has made the specific representations and warranties set forth in Section 3; and
(c)	agrees that this is an arm’s length transaction in which the parties’ undertakings and obligations are limited to the performance of their obligations under this Agreement and the other Operative Agreements, that Purchaser has only a contractual relationship with Seller, based solely on the terms of this Agreement and the other Operative Agreements, and that there is no special relationship of trust or reliance between Purchaser and Seller.

4.6.2

As part of Purchaser’s agreement to purchase and accept the Newsprint Assets and the Apache Shares, Purchaser unconditionally and irrevocably waives any and all actual or potential rights Purchaser might have against Seller regarding any form of warranty of any kind or type, other than those expressly set forth in this Agreement and the other Operative Agreements. Such waiver includes a waiver of express warranties, implied warranties, warranties of fitness for a particular use, warranties of merchantability, warranties against eviction, warranties of occupancy, strict liability rights, and claims of every kind and type, including claims regarding defects that might have been discoverable, claims regarding defects that were not or are not discoverable, product liability claims, product liability type claims, and all other claims whether currently existing or later created or conceived including any claim of strict liability other than those expressly set forth in this Agreement and the other Operative Agreements.

4.6.3

Purchaser is acquiring the Apache Shares for investment and not with a view toward, or for sale in connection with, any distribution thereof. Purchaser agrees that the Apache Shares may not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of without registration under any applicable securities laws, except

- 33 -

pursuant to an exemption from such registration under such laws. Purchaser is able to bear the economic risk of holding the Apache Shares for an indefinite period, and has knowledge and experience in financial and business matters such that it is capable of evaluating the risks of the investment in the Apache Shares.

4.7 Intent of Purchaser.

Purchaser is acquiring the Newsprint Assets and the Apache Shares with the intent of competing effectively in the production, distribution and sale of newsprint.

4.8	Rail Carrier.
	Neither Purchaser, nor any of its Related Affiliates is now or shall be at any time prior to the Closing a Person that is a Rail Carrier.
4.9	FERC.
	Assuming the accuracy of Seller’s representation and warranty in Section 3.24, as to FERC, no consent, approval, order, license, permit or authorization or, registration, declaration, notice or filing with FERC is necessary or required to be obtained or made by or with respect to Purchaser or any of its Affiliates in connection with the execution and delivery of this Agreement by Purchaser or the performance and consummation by Purchaser of the transactions contemplated hereby at or prior to the Closing.
4.10	No Other Representations or Warranties.
	The representations and warranties of Purchaser contained in this Section 4 are the only representations and warranties made by or on behalf of Purchaser in connection with the transactions contemplated herein and, for greater certainty and without limiting the generality of the foregoing, no other representation, warranty or condition, whether express or implied, is made by any Person in connection with, arising out of or relating to the transactions contemplated by this Agreement.
5.	COVENANTS AND AGREEMENTS
5.1	Water Rights Litigation.

(a) Notwithstanding anything to the contrary in Section 9, as between Seller and Purchaser (and without prejudice to the rights of Seller or Purchaser or their respective successors or predecessors in interest vis-à-vis any other Person), Seller shall be solely liable for any Losses resulting directly or indirectly from the Water Rights Litigation attributable to the period prior to the Closing Date and Purchaser shall be solely liable for any Losses resulting directly or indirectly from the Water Rights Litigation attributable to the period on and after the Closing Date; provided, however, that Seller and Purchaser shall cooperate with each other, at their own expense, in connection with the defense or conduct of settlement or other negotiations with respect to the Water Rights Litigation. For the avoidance of doubt, Seller’s obligation under this Section 5.1(a) extends to all Losses attributable directly or indirectly to the usage of water that occurred prior to the Closing Date regardless of when the Loss occurred or notice of a claimed Loss was given. In

- 34 -

	connection with any Water Rights Litigation, the subject matter of which either (i) includes both Seller and Purchaser or their respective successors in interest as parties thereto or (ii) relates to the right to use water for periods both before and after the Closing Date, neither Seller nor Purchaser (nor any Affiliate or successor in interest of either of them) shall settle any such Action without the consent of the other, which consent shall not be unreasonably withheld, delayed or conditioned.
(b)	Following the Closing Date, as between Seller and Purchaser, Purchaser shall have the right to control the prosecution and defense of the Water Rights Litigation, provided that in doing so, Purchaser shall in good faith take into consideration Seller’s rights and obligations in connection therewith and shall not make determinations that adversely affect Seller’s rights and obligations in connection therewith except to the extent that Purchaser’s rights and obligations in connection therewith are similarly affected. However, prior to the Closing, in addition to the requirements of Section 5.12, Seller shall keep Purchaser reasonably informed about activity in the Water Rights Litigation. Following the Closing, Purchaser shall keep Seller reasonably informed about activity in the Water Rights Litigation, and Seller and Purchaser shall cooperate with each other, at their own expense, in connection with the prosecution, defense or conduct of settlement or other negotiations with respect to the Water Rights Litigation.
(c)	Following the Closing Date, Seller and Purchaser shall cooperate in seeking to have Purchaser added or substituted for Seller as a party to the Water Rights Litigation. Such addition or substitution shall not operate to alter Seller’s liability for Losses resulting directly or indirectly from the Water Rights Litigation as provided in this Section 5.1.
(d)	Seller shall use commercially reasonable efforts to assign to Purchaser and Purchaser shall accept and assume, to the extent assignable, (i) Seller’s rights with respect to the period on and after the Closing Date, and Seller’s obligations accruing on or after the Closing Date, under the Joint Defense Expense Allocation Agreement dated as of February 15, 2002 between Seller and Stone Container (the “Joint Defense Expense Agreement”), (ii) Seller’s rights with respect to the period on and after the Closing Date, and Seller’s obligations accruing on or after the Closing Date, under the Joint Defense Agreement dated as of February 15, 2002 between Seller and Stone Container (the “Joint Defense Agreement”) and (iii) Seller’s rights with respect to the period on and after the Closing Date, and Seller’s obligations accruing on or after the Closing Date, under the Stipulation dated December 12, 2001 between Seller and The United States of America in the Water Rights Litigation (the “Stipulation”).
(e)	Following the Closing Date, all costs of prosecuting or defending claims in the Water Rights Litigation, including but not limited to attorneys’ fees and expert fees (other than such costs required to be paid by Stone Container pursuant to the Joint Defense Expense Agreement and the Joint Defense Agreement, which shall be paid by Stone Container or as provided below), shall be split equally between Seller and Purchaser, provided, however, that to the extent Stone Container fails to pay its share of any such costs that it is due to pay pursuant to the Joint Defense Expense Agreement, the Joint Defense Agreement or any other agreement, such shortfall shall be the sole responsibility of Seller, and Seller shall indemnify and hold

- 35 -

	Purchaser harmless against any Losses resulting from such non-payment by Stone Container.
(f)	Seller shall use commercially reasonable efforts to substitute Purchaser as a party to the Joint Expert Witness Fee and Expense Agreement dated July 31, 1996 (as amended).

5.2 Post-Closing Amounts.

5.2.1

All cash or cash equivalents collected after the Closing Date from the Trade Receivables shall belong to Seller and, if received by Purchaser shall be received for the benefit of Seller, and Purchaser shall, on a weekly basis, transfer and remit to Seller all such amounts received by Purchaser. All cash or cash equivalents collected after the Closing Time from Accounts Receivable shall belong to Purchaser and, if received by Seller or any of its Affiliates, shall be received for the benefit of Purchaser, and Seller shall, on a weekly basis, transfer and remit, or cause such Affiliate to transfer and remit, to Purchaser all such amounts received by Seller or its Affiliates.

5.2.2

To the extent that, after the Closing, Purchaser incurs any expense or makes any payments related to Excluded Newsprint Customer Order Liabilities, Seller shall, promptly upon notification by Purchaser of such expense or payment but in no event later than five (5) Business Days after such notification, reimburse Purchaser for all such payments or expenses, provided that Seller shall have no liability hereunder if it was not obligated to incur such expense or make such payment.

5.3

Conduct During Interim Period.

During the period from the Effective Date to the Closing (the “Interim Period”), except as otherwise contemplated by this Agreement, as set forth on Schedule 5.3 or as Purchaser otherwise agrees in writing in advance (such agreement not to be unreasonably withheld, delayed or conditioned), Seller shall conduct, and shall cause its Affiliates and Apache to conduct, the Businesses in the ordinary course of business consistent with past practice and use its commercially reasonable efforts to preserve intact the Businesses and the relationships with the customers, suppliers, creditors and employees of the Businesses. During the period from the Effective Date to the Closing, except as otherwise contemplated by this Agreement or any Operative Agreement, as Purchaser shall otherwise consent in writing or as set forth on Schedule 5.3, Seller shall not, and shall cause each of its Affiliates and Apache not to, with respect to the Businesses:

5.3.1

incur, create or assume any Encumbrance on any of its assets other than a Permitted Lien or any Encumbrance on an Excluded Asset;

5.3.2

sell, lease, license, transfer or dispose of any assets (other than Inventory in the ordinary course of business consistent with past practice as well as obsolete or redundant assets); provided, however, that Apache shall be permitted to distribute or transfer to Seller or its Affiliates all accounts receivable, trade accounts, notes receivable and/or book debts due or accruing to Apache from Seller or its Affiliates; provided that any such accounts receivable, trade accounts, notes receivable and/or book debts due or accruing shall not be reflected as an asset in the determination of Net Working Capital;

- 36 -

5.3.3	enter into any Contract that would be a Material Contract or terminate or materially amend any existing Material Contract, in each case other than in the ordinary course of business consistent with past practice;
5.3.4	amend in any material respect the Articles of Incorporation, Bylaws or other organizational documents of Apache;
5.3.5	issue, sell, pledge, transfer, dispose of or Encumber any shares of Apache’s capital stock or securities convertible into or exchangeable for any such shares, or any rights, warrants, options, calls or commitments to acquire any such shares or other securities;
5.3.6	split, combine, subdivide, reclassify or redeem any outstanding securities of Apache;
5.3.7	dispose of or permit to lapse any rights in, to or for the use of any Intellectual Property Assets other than as required by applicable law;
5.3.8	(i) increase the compensation payable or to become payable to any director, officer, or employee of Seller or Apache, except for increases made in the ordinary course of business consistent with past practice and for increases under the terms of a Collective Bargaining Agreement as of the Effective Date, (ii) hire any employee for the Businesses with annual compensation in excess of one hundred fifteen thousand Dollars ($115,000), (iii) increase the employee benefits of any Newsprint Employee or Apache Employee or pay any pension or retirement allowance to any Newsprint Employee or Apache Employee not required by law, by the terms of a Benefit Plan in effect as of the Effective Date or by the terms of a Collective Bargaining Agreement in effect as of the Effective Date or (iv) become a party to, amend or commit itself to any pension, retirement, profit-sharing or welfare benefit plan or agreement or employment, retention, severance, collective bargaining, change in control or similar agreement with or for the benefit of any Newsprint Employee or Apache Employee, other than, in the case of each of (iii) and (iv) to the extent required by law, under the terms of a Benefit Plan as of the Effective Date or under the terms of a Collective Bargaining Agreement as of the Effective Date;
5.3.9	undertake to negotiate with any labor union, enter into any agreement with any labor union, or otherwise amend, modify or change any terms or conditions of employment of any Newsprint Employee or Apache Employee represented by any labor union, except to the extent required by law, under the terms of a Benefit Plan in effect as of the Effective Date or under the terms of a Collective Bargaining Agreement in effect as of the Effective Date;
5.3.10	make any loans, advances or capital contributions to, or investments in, any other Person (other than relocation and business travel advances to employees in the ordinary course of business consistent with past practice);
5.3.11	except, as applicable, in the ordinary course of the Newsprint Business or the Railway Business consistent with past practice accelerate the delivery or sale of products or the incurrence of capital expenditures, offer discounts on the sale of products, on the provision of services or the payment of accounts receivable, or offer premiums on the purchase of raw materials;

- 37 -

5.3.12	permit Apache to adopt a plan of complete or partial liquidation or authorize or undertake a dissolution, consolidation, restructuring, recapitalization or other reorganization of Apache or the Newsprint Business to the extent, in each case, inconsistent with the consummation of the transactions contemplated by this Agreement;
5.3.13	permit Apache to acquire (by merger, consolidation or acquisition of stock or assets) any corporation, partnership or other business organization or division thereof or any equity interest therein;
5.3.14	except in the ordinary course of business consistent with past practice, cancel, compromise or settle any debt or claim or waive any rights of material value to Apache or the Newsprint Business without Apache or the Newsprint Business receiving a realizable benefit of similar or greater value, or voluntarily suffer any extraordinary loss;
5.3.15	enter into any transactions, contracts and understandings with Seller or any of its Related Parties that would be binding on the Newsprint Assets or Apache after the Closing;
5.3.16	incur any debt for borrowed money, other than in the ordinary course of the Newsprint Business consistent with past practice;
5.3.17	make any change in its fiscal year or its accounting methods or practices except as required by reason of a concurrent change in GAAP;
5.3.18	in the case of Apache only, make or change any tax election or file any tax returns, except in the ordinary course of business consistent with past practice;
5.3.19	settle any audit relating to Apache;
5.3.20	institute or settle any material legal proceeding, whether pending or threatened, relating to the Newsprint Business, or, in the case of Apache, institute or settle any material legal proceeding, whether pending or threatened;
5.3.21	settle or compromise on any issue, question or dispute in or relating to the Water Rights Litigation;
5.3.22	fail to maintain the Wells in operating condition;
5.3.23	fail to use any payments received by Seller or its Affiliates relating to Newsprint Insurance Claims of Seller or its Affiliates covering the Newsprint Assets to acquire replacement assets or to repair assets or to reimburse Seller or its Affiliates for expenses incurred to acquire replacement assets or to repair assets;
5.3.24	not divert customers or any orders from the Newsprint Business to other businesses of Seller or any of its Affiliates except to the extent that there are replacement customers or replacement orders such that there is no material adverse impact on the Newsprint Business, it being acknowledged and agreed to by the parties that certain customers of the Newsprint Business are also customers of Seller and its Affiliates with respect to

- 38 -

	businesses other than the Newsprint Business and nothing contained in this Section 5.3.24 or elsewhere in this Agreement shall prevent Seller and its Affiliates from maintaining their relationships with or soliciting business from, such customers;
5.3.25	allow or agree to allow the lapse of any material right with respect to any Material Permit;
5.3.26	permit an event of default to continue uncured under the Snowflake Lease;
5.3.27	fail to maintain the Owned Tangible Real Assets and the Equipment in all material respects in a manner consistent with past practice;
5.3.28	fail to maintain, in all material respects, the Newsprint Inventory levels in a manner consistent with past practice, taking into account cyclical variances and the Outage; or
5.3.29	authorize or enter into any agreement or commitment with respect to any of the foregoing.

5.4 Commercially Reasonable Efforts.

5.4.1

Prior to the Closing, upon the terms and subject to the conditions of this Agreement, Seller and Purchaser shall cooperate and use their commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things reasonably required to consummate the transactions contemplated herein and in any other Operative Agreement as promptly as reasonably practicable, including (i) the execution of delivery of such documents and other papers and (ii) the preparation and filing of all forms, registrations and notices required to be filed to consummate such transactions and the taking of such actions as are reasonably required to obtain any requisite consents, authorizations, waivers or approvals by any third party (including any Governmental Entity). In addition, no party (or any of its respective Affiliates) shall take any action after the Effective Date that would reasonably be expected to delay the obtaining of, or result in not obtaining, any consent or approval from any third party (including any Governmental Entity) required to be obtained prior to the Closing. Except as provided in Section 5.4.5, Purchaser shall provide such commercially reasonable assurances as to financial capability, resources and creditworthiness as may be commercially reasonably requested by any third party (including any Governmental Entity) whose consent or approval is sought hereunder provided, that, Purchaser shall not be required to provide any such assurances which are financially dissimilar from those provided to such third party by Seller as of the Effective Date.

5.4.2

After the Effective Date, each of the Seller and Purchaser shall promptly furnish to the other such necessary information and reasonable assistance as are required with respect to all filings required to be made with any Governmental Entity or any other information required to be supplied by Purchaser or Seller or any of its Affiliates to a Governmental Entity in connection with this Agreement and the transactions contemplated herein and in the other Operative Agreements and each of Seller and Purchaser shall promptly, but in no event more than ten (10) days after the Effective Date (or, in the case of any notification to be provided to the DOJ by Seller as required by the Final Judgment, within two (2) Business Days), make all filings required to be made by such party in connection with the consummation of the transactions

- 39 -

	contemplated by this Agreement; provided, that, with respect to this Section 5.4, nothing shall require either Purchaser or Seller, as applicable, (the “Information Provider”) to provide to such other party (the “Information Receiver”) any information that the Information Provider should reasonably determine is necessary for the Information Provider to keep confidential from the Information Receiver for the purpose of competing effectively in the production, distribution and sale of newsprint. Each of Seller and Purchaser shall promptly inform the other party of any substantive meeting, discussion, or communication with any Governmental Entity (and shall supply to the other party any written communication or other written correspondence or memoranda) in respect of any filings, investigation or inquiry concerning the transactions contemplated herein and in any other Operative Agreement, including with respect to any approvals or other requirements relating to the divestitures under the Final Judgment, and shall use commercially reasonable efforts to consult with the other party in advance and, to the extent permitted by such Governmental Entity, give the other party the opportunity to attend and participate thereat. If any party or Affiliate thereof receives a request for information or documentary material from any Governmental Entity with respect to any of the transactions contemplated herein or in any other Operative Agreement, then such party shall make, or cause to be made, as soon as reasonably practicable and after consultation with the other party, an appropriate response in compliance with such request. In addition, each of Seller and Purchaser will keep the other apprised of the status of any such meetings, discussions, or communications with, and any inquiries or requests for additional information from any Governmental Entity. For purposes of clarity of the foregoing requirement of Purchaser to provide financial assurances as to financial capability, resources and creditworthiness, in connection with the Aquifer Protection Permits issued to Seller and Apache, listed as items 1, 16, 17, 18, and 19 on Schedule 3.17(a), Purchaser expressly agrees to take commercially reasonable measures promptly after the Closing to provide substitute financial assurance for such permits consistent with the requirements of applicable regulations (i.e. by providing documentation to the Arizona Department of Environmental Quality that Purchaser meets the financial test for self-assurance detailed in Arizona Code Section R18-9-A203(C)(1) or an alternate commercially reasonable mechanism for financial assurance that complies with applicable Environmental Laws) to enable the release of the guarantee currently provided by Seller to satisfy the applicable financial assurance requirements.
5.4.3	Seller shall diligently, promptly and in good faith seek an extension or extensions of up to sixty (60) days of the divestiture period specified in Section IV of the Final Judgment consistent with the Final Date.
5.4.4	Neither Purchaser nor Seller shall, and each shall cause its respective Affiliates not to, take any action that could reasonably be expected to adversely affect the approval of any Governmental Entity of any of the aforementioned filings.
5.4.5	Purchaser shall cooperate in good faith with all Governmental Entities, in each case with competent jurisdiction, and shall undertake promptly any and all action required to complete lawfully the transactions contemplated by this Agreement; provided, that, nothing in this Agreement shall obligate Purchaser or any of its Affiliates to take any action or agree (i) to divest, dispose of or hold separate all or any portion of their respective businesses, assets or properties, or of the business, assets or properties of the Newsprint Business or Apache, (ii) to limit the ability of Purchaser or any of its

- 40 -

	Affiliates to conduct or control their respective businesses or own such assets or properties or to conduct or control the Newsprint Business or Apache or own the Newsprint Assets or (iii) to take any action that could reasonably be expected to have a material adverse impact on the business, operations or revenues of Purchaser or any of its Affiliates, the Newsprint Business or Apache.
5.4.6	Following the Effective Date and prior to the Closing Date, subject to applicable law, Seller shall use its commercially reasonable efforts to cooperate with Purchaser to integrate the Businesses into the existing businesses of Purchaser, effective as of the Closing.
5.4.7	Following the Effective Date and on or prior to the Closing Date, Seller shall not (with respect to the Newsprint Business) adopt a plan of complete or partial liquidation or authorize or undertake a dissolution, consolidation, restructuring, recapitalization or other reorganization.
5.4.8	Following the filing of the Preliminary Prospectus, Purchaser shall use commercially reasonable efforts to close the Rights Offering as promptly as practicable.
5.4.9	Each party agrees to notify the other if it becomes aware that it is reasonably likely that any of the conditions set forth in Section 7.1 and, in the case of Seller, Section 7.2, and in the case of Purchaser, Section 7.3, will be incapable of being satisfied by the Final Date.

5.5	Publicity.
	Neither Seller nor Purchaser, nor any of their respective Affiliates shall issue or cause the publication of any press release or other public announcement with respect to this Agreement or the transactions contemplated herein or in any other Operative Agreement without the agreement of the other party, except as may be required by law or by any listing agreement with a securities exchange or trading market and then only after the other party has been afforded, to the extent permitted by applicable law, a reasonable opportunity to review and comment on the same. Notwithstanding the foregoing sentence, each party and its Affiliates are permitted to file this Agreement and any other Operative Agreement electronically on the System for Electronic Document Analysis and Retrieval in Canada and the EDGAR system in the United States following the execution of this Agreement by Seller and Purchaser; provided that each party shall in good faith redact any information that it is permitted to redact under applicable Canadian securities laws and the parties shall cooperate in good faith with respect to such redactions.
5.6	Intercompany Arrangements.
	Except as provided in Section 5.8 or as otherwise expressly contemplated by this Agreement or the other Operative Agreements, (i) all Contracts relating to the conduct of the Railway Business that are solely between Apache, on the one hand, and Seller and any of its Affiliates, on the other hand, and (ii) all Contracts relating to the conduct of the Newsprint Business that are between Seller, on the one hand, and any Affiliate of Seller, on the other hand (all of the Contracts described in (i) and (ii) above being set forth on Schedule 5.6), shall be terminated and of no further effect simultaneously with the Closing, without any further action, liability or obligation on the part of the parties thereto save in respect of any accrued rights or obligations (including as

- 41 -

	to any payment obligations) to the extent included as an asset or a liability in Adjusted Closing Net Working Capital.
5.7	Insurance.

5.7.1

Purchaser acknowledges and agrees that effective upon the Closing all insurance coverage provided to the Newsprint Business or Apache shall terminate and no further coverage shall be available under any of such policies to the extent such coverage or policies are not assignable to Purchaser or Apache. Except for Newsprint Insurance Claims as contemplated by Section 5.7.2, all rights to make claims with respect to any insurance policy shall belong to Seller, and Purchaser shall promptly remit to Seller any amount received in connection therewith.

5.7.2

After the Closing Time, Purchaser shall have the right to receive any Newsprint Insurance Claims, including claims being processed under such insurance policies as of the Closing Time and claims not made as of the Closing Time. Any such rights of Purchaser to receive payment on any such Newsprint Insurance Claim shall be subject to any deductibles, self-insured retentions, retained amounts, retentions or exclusions. If so requested by Seller, Purchaser shall, as a condition to receiving payment on any such Newsprint Insurance Claim, make arrangements reasonably satisfactory to Seller for the payment directly to the applicable insurance carrier of any amounts which are the responsibility of Purchaser in accordance with the immediately preceding sentence. Notwithstanding the foregoing, in no event shall Seller or its Affiliates have any liability to Purchaser as a result of the refusal by an insurer under any of the policies of Seller or its Affiliates to reimburse or pay Purchaser with respect to any Newsprint Insurance Claim.

5.8 Intercompany Payables and Indebtedness.

5.8.1

Subject to Section 5.3, the parties agree and acknowledge that any intercompany payable balance owing by Seller or any Affiliate of Seller to Apache or by Apache to Seller or any Affiliate of Seller that arose from the intercompany supply of goods or services (trading balances) in the ordinary course of business shall be repaid in accordance with its terms to the extent included as an asset or liability in determining Adjusted Closing Net Working Capital and otherwise shall be deemed to be cancelled.

5.8.2

The parties further agree and acknowledge that any intercompany indebtedness owing by Apache to Seller or an Affiliate of Seller shall be paid in full, by dividend or otherwise, by Apache before the Closing Time and that any intercompany indebtedness owing by Seller or an Affiliate of Seller to Apache shall be paid in full by Seller or an Affiliate of Seller before the Closing Time; provided, however, that to the extent necessary the amount of such intercompany indebtedness estimated and settled at the Closing will be reconciled with the actual amount of such intercompany indebtedness as finally determined by the parties after the Closing pursuant to Section 1.9 and any outstanding balances shall be promptly settled as therein set forth to the extent not included in determining the Adjusted Purchase Price.

- 42 -

5.9 Preservation of Records and Cooperation.

5.9.1	Purchaser shall preserve, until at least the eighth anniversary of the Closing Date, all pre-Closing Date records (i) of Apache and/or (ii) included in the Newsprint Assets. Seller shall preserve, until at least the eighth anniversary of the Closing Date, all original pre-Closing records (i) of Apache and/or (ii) the Newsprint Business retained by it. After the Closing Date and up until at least the eighth anniversary of the Closing Date, upon any Covered Request, Seller or Purchaser, as applicable, shall (a) provide the other party or such other party’s respective representatives commercially reasonable access to such records during normal business hours and (b) permit the other party or such other party’s respective representatives to make copies of such records, in each case at the sole cost to the requesting party (which in any case shall only be for reasonable out-of-pocket expenses). A “Covered Request” shall mean a written request in connection with an audit, accounting, tax, litigation, securities disclosure or other similar need or any other reasonable business purpose. Notwithstanding the foregoing, three years following the Closing Date, any and all such records may be destroyed by Seller or Purchaser (the “Notifying Party”) if the Notifying Party sends to the other party written notice of its intent to destroy such records, specifying in reasonable detail the contents of the records to be destroyed; such records may then be destroyed after the sixtieth (60th) day following such notice unless the other party notifies the Notifying Party that it desires to obtain possession of such records, in which event the Notifying Party shall transfer the records to the other party.
5.9.2	Purchaser shall provide reasonable assistance to Seller and its Affiliates following the Closing in connection with any matter subject to a Covered Request, including by making available to Seller and its Affiliates and their respective agents and representatives, including insurers, the personnel necessary or appropriate to assist with any such matter.
5.9.3	Within ten (10) days following the date that the Purchaser and Seller agree to an allocation (the “Agreed Allocation”) of the Newsprint Purchase Price pursuant to Section 1.10, (i) Seller shall pay to Purchaser the amount (if any) by which the Standard Amount would have been higher if the Agreed Allocation was used on the Closing Date to determine the Standard Amount and (ii) Purchaser shall pay to Seller the amount (if any) by which the Extended Amount would have been higher if the Agreed Allocation was used on the Closing Date to determine the Extended Amount.

5.10

Transitional Services.

Effective as of Closing Time, except as set forth in the ONP Supply Agreement, the OCC Supply Agreement and the Transitional Services Agreement, all sales and marketing, treasury functions, insurance, legal, audit, benefits and certain human resources functions, recycled fibre and procurement, engineering and technical support, purchasing functions, logistics functions, data processing functions and general administration and other products or services provided to the Businesses by Seller or any Affiliates of Seller automatically will terminate.

- 43 -

5.11 Tax Matters.

5.11.1	Purchaser shall cause Apache to deliver to Seller, promptly upon receipt, any refunds received by Apache of Taxes relating to a Pre-Closing Period (net of any Tax Losses to Apache resulting from the receipt of such refund).
5.11.2	Seller shall timely prepare all Tax Returns for Apache for Pre-Closing Periods (other than Tax Returns for a Straddle Period) that are due (taking into account extensions) after the Closing Date. With respect to any Pre-Closing Period that would otherwise be a Straddle Period, Seller will cause Apache, where permitted under applicable law, to elect to file a short-period Tax Return for the portion of such period which ends on the Closing Date. All such Tax Returns shall be prepared in a manner consistent with Apache’s past practice except as required to by Law. Any such Tax Return that is prepared by Seller, other than a Tax Return that is a consolidated or combined income Tax Return that includes Seller (“a Consolidated Return”), shall be submitted to Purchaser for its review and comment at least fifteen (15) days before the due date of such Return. Seller shall be responsible for timely paying any Taxes applicable to such Tax Returns (including Consolidated Returns) in excess of the reserves for Taxes taken into account in determining Adjusted Closing Net Working Capital and, in the case of any Tax Return other than a Consolidated Return, shall pay the amount of Taxes for which it is responsible to Purchaser at least five (5) days prior to the date that the Tax payment with respect to such Return is required to be made. Purchaser shall be responsible for signing (where appropriate) and timely filing any such Tax Returns other than a Consolidated Return (provided that such Tax Returns have been timely provided to Purchaser and that payment of the Tax show due has been timely submitted to Purchaser). Purchaser shall cause Apache to furnish information to Seller, as reasonably requested by Seller, to allow Seller to satisfy its obligations under this Section 5.11 in accordance with past custom and practice.
5.11.3	Purchaser shall timely prepare and file all Tax Returns for Apache for all Straddle Periods, and shall timely pay all Taxes shown due on such Tax Returns. Purchaser shall provide to Seller copies of such Tax Returns at least fifteen (15) days before filing for Seller’s review and comment and Purchaser shall make such revisions to such Tax Returns as mutually agreed by Purchaser and Seller acting in good faith. Seller shall be responsible for the portion of any Tax liability due with respect to a Straddle Return that is attributable to the Pre-Closing Period in excess of the reserves for such Taxes taken into account in determining Adjusted Closing Net Working Capital and shall pay such amount to Purchaser at least five (5) days prior to the time such Tax is required to be paid or if later five (5) days after Purchaser’s written request for such Tax.
5.11.4	Purchaser and Seller shall cooperate in the preparation of all Tax Returns by or including Apache for the period ending on or including the Closing Date, including preparation and filing of any and all forms and schedules required as a result of the 338(h)(10) Elections, if any. Purchaser and Seller agree (i) to retain all Books and Records with respect to Tax matters and pertinent to Apache relating to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and, to the extent notified by Purchaser or Seller, as the case may be, any extensions thereof) of the respective taxable periods, and to abide by all record retention agreements entered into with any Taxing Authority, and (ii) to give the other party reasonable written notice prior to transferring, destroying or discarding any such Books

- 44 -

and Records and, if the other party so requests, Purchase or Seller, as the case may be, shall allow the other party to take possession of such Books and Records.

5.11.5

All tax-sharing agreements or similar agreements with respect to Apache shall be terminated as of the Closing Date and, after the Closing Date, Apache shall not be bound thereby or have any liability thereunder. No amended Tax Return of Apache shall be filed for any Pre-Closing Period, without the consent of Seller, except as may be required to reflect the outcome of an audit or where otherwise required by law.

5.12 Access to Information.

(a)	Subject to the restrictions of any applicable law and except to the extent subject to attorney-client privilege, between the Effective Date and the Closing, Seller shall (i) give Purchaser and its authorized representatives reasonable access to the books, records, work papers, personnel, contracts, offices and other facilities and properties of Apache and the Newsprint Assets, (ii) permit Purchaser to make such inspections thereof as Purchaser may reasonably request and (iii) cause the employees of Seller and its Affiliates to furnish Purchaser with such financial and operations data and other information with respect to Apache, the Newsprint Assets and the Newsprint Business as Purchaser may reasonably request; provided, that, any such investigation shall be conducted during normal business hours under the supervision of Seller’s or its Affiliates’ designated personnel and in such a manner as not to interfere with the business operations of Seller or any of its Affiliates. Purchaser and its counsel, environmental consultants, investment bankers, financial sources, lenders and other representatives shall be permitted to conduct Phase I environmental assessments, studies, investigations, or other inquiries pertaining to Environmental Laws or Hazardous Substances and relating to the Owned Real Property or the Newsprint Leased Real Property; provided that (x) no sampling or testing shall be conducted as part of such investigations without the prior written consent of Seller, which it may grant or withhold in its sole discretion, and (y) if requested by Seller, Purchaser shall provide Seller with copies of any Phase I environmental assessment prepared by Purchaser in connection with the transactions contemplated by this Agreement, in each case, between the Effective Date and the Closing.
(b)	All information furnished or provided by Seller or any of its Affiliates or representatives to Purchaser or any of its Affiliates or representatives (whether furnished before, on or after the Effective Date) and all information derived therefrom and all information resulting from any assessments, studies, investigations or other inquiries by Purchaser shall be held subject to the Confidentiality Agreement until the Closing.
(c)	As soon as practical following the Closing Date, Seller shall request the return, or the destruction of all originals and copies, of (i) any information (or information prepared by such third party referred to below on the basis of the information provided by Seller or its Affiliates or representatives to such third party) and (ii) all originals and copies of the Confidential Information Memorandum, in each case in possession of any third party (other than Purchaser) or in the possession of any such third party’s representatives or Affiliates, which, were provided to such third parties for the purpose of evaluating the transactions contemplated by this Agreement.

- 45 -

(d)

Seller hereby agrees that, from and after the Effective Date until two years from the Closing Date, it shall not, and shall cause its Affiliates, officers, directors, representatives, agents and employees not to, divulge or disseminate Confidential Business Information at any time to any Person, except Seller may disclose Confidential Business Information (a) to its legal or financial advisors for the purposes of receiving legal or financial advice from such advisor (it being understood that such advisor will be informed by Seller of the confidential nature of such information and shall be directed by Seller to treat the information confidentially), (b) with the prior written consent of Purchaser, (c) as required by law, including any disclosure obligations under the rules and regulations of the United States Securities and Exchange Commission or any other securities authority or other applicable law or in connection with any judicial, administrative or similar proceeding or (d) that has been publicly disclosed by Purchaser after the Closing, in a manner not subject to confidentiality restrictions. In the event that Seller receives a request to disclose any Confidential Business Information under clause (c), it will (I) promptly notify Purchaser thereof (to the extent permitted by law) so that Purchaser may seek a protective order or otherwise seek to resist or narrow such request and (II) if Seller is nonetheless required to make such disclosure or if it is advised by its counsel that such disclosure is necessary, it will take reasonable steps, at Purchaser’s request and expense, to attempt to obtain or help Purchaser obtain an order or other reliable assurance that confidential treatment will be accorded to such portion of the disclosed information.

(e)

Between the Effective Date and the Closing Date, Seller agrees that it shall provide a copy of the “order book” for the Newsprint Business to Purchaser on a weekly basis, as of a date during the previous week selected on a consistent basis, which order book shall set forth the orders for the sale of newsprint in connection with the Newsprint Business by volumes of newsprint, but shall not show pricing or customer names.

5.13 Audited Financial Statements.

5.13.1 If requested at anytime between the Effective Date and the first anniversary of the Closing Date, Seller shall, and shall cause its Affiliates to reasonably cooperate with Purchaser and its representatives and use its commercially reasonable efforts to assist Purchaser and its representatives, at Purchaser’s cost and expense as set forth below, in the preparation of audited financial statements of the Businesses for the year ended December 31, 2007, including balance sheets and statements of stockholders’ equity, income and cash flow (the “Audited Financial Statements”), which cooperation and assistance shall include making available to Purchaser during normal business hours under the supervision of Seller’s or Apache’s designated employees and in such a manner as not to interfere in any material respect with the business operation of Seller or any of its Affiliates, the books, records and employees of Seller or its Affiliates and each of their representatives (including, subject to applicable law, the independent accountants of Seller and the workpapers of such independent accountants) to the extent related to the Businesses which is reasonably required with respect to the preparation of the Audited Financial Statements. Seller may retain third parties to fulfill its obligations under this Section 5.13.1, the cost of which shall be Expenses. In consideration for the cooperation of Seller and any of Seller’s Affiliates, (i) Purchaser shall pay to Seller a fee of $100 per hour of time spent by Seller’s employees

- 46 -

(excluding an hourly fee for independent accountants, contractors or other third parties) from the date hereof through 6 months following the Closing Date, $125 per hour of time spent by Seller’s employees (excluding an hourly fee for independent accountants, contractors or other third parties) during the 7th month through to the 9th month following the Closing Date and $150 per hour of time spent by Seller’s employees (excluding an hourly fee for independent accountants, contractors or other third parties) from the 10th month following the Closing Date (the “Fees”) cooperating with Purchaser and its representatives; and (ii) in addition to the Fees, Purchaser shall reimburse the Seller for all reasonable and customary out-of-pocket costs and expenses (including independent accountant, contractor and other third party charges calculated at customary rates) incurred by Seller in connection with such time spent by Seller’s employees or such cooperation of Seller and any of Seller’s Affiliates (the “Expenses”). Any value-added taxes, sales or similar taxes or levies shall be payable by Purchaser. For the avoidance of doubt, (a) the Fees will exclude any hourly fees for independent accountants of Seller, contractors, other third parties and any other Person, and (b) the Expenses will exclude any expenses for employee overtime and the allocation of overhead expenses relating to any Person. All information furnished or provided by Seller or any of its Affiliates or their respective representatives (including the independent accountants of Seller) to Purchaser or its representatives with respect to the preparation of the Audited Financial Statements and all information derived therefrom and all information resulting from the review and analysis of such information shall be held subject to the Confidentiality Agreement until Closing and notwithstanding anything herein contained may not be used or referred to, in whole or in part, whether directly or indirectly, to make a claim against Seller or any of its Affiliates.

5.13.2

Seller shall furnish a monthly invoice for the Fees and Expenses incurred during the prior month. Purchaser shall pay each such invoice by the later of (x) thirty (30) days following the receipt of such invoice and (y) the Closing Date. Payment against monthly invoices shall be made via electronic funds transfer or, if electronic funds transfer is unavailable, by paper check. Unless otherwise mutually agreed, all invoices and payments therefor shall be in US Dollars. Interest on all late payments shall be charged at the rate of ten percent (10%) per annum, which interest shall accrue on a daily basis and shall be compounded on a monthly basis.

5.14

Covenant Not-to-Sue.

Seller hereby agrees that it shall not assert against the Purchaser Parties any claims or demands, or otherwise institute any actions, suits or proceedings, whether in law or in equity, for infringement, misappropriation or other violation of the Newsprint Know How in connection with the use of the Newsprint Know How by or on behalf of the Purchaser Parties on and after the Closing Date. The foregoing covenant shall be perpetual and irrevocable, and shall be binding upon Seller’s Affiliates, successors and assigns. The foregoing covenant shall also inure to the benefit of any acquirer of the Newsprint Assets or the Newsprint Business (whether by merger, consolidation, sale of equity or sale of all or substantially all of assets in which the Newsprint Know How is used), and the foregoing covenant shall extend to any consultant, vendor or other contractor of Purchaser that uses the Newsprint Know How to provide services to or on behalf of Purchaser Parties. “Purchaser Parties” means Purchaser, its Affiliates, successors and assigns, and their respective officers, directors, employees or representatives and “Newsprint Know How” means all trade secrets, know-how, formulae, concepts, data, designs, processes,

- 47 -

procedures, specifications, ideas, methods, models and techniques that are proprietary to Seller and used or held for use by Seller in the operation of the Newsprint Business as of the Closing Date.

5.15 Apache Benefit Accrual.

	Prior to the Closing Time, Seller shall cause the liability relating to employee future benefits of approximately sixty seven thousand Dollars ($67,000) on Apache’s books and records to be reversed. To the extent such liability gives rise to a Loss by Apache (or any successor thereto) after the Closing Time, Seller shall indemnify Apache and hold Apache harmless with respect to such Loss.
5.16	Outage Work Sharing and Cost-Sharing Arrangement.
	Commencing on April 21, 2008, certain capital improvements and major maintenance are scheduled to be performed on the Newsprint Assets as described on Schedule 5.16(a) , the work responsibility and the cost responsibility of which shall be allocated between Seller and Purchaser in accordance with the following principles:

5.16.1	The capital improvements to be made and the estimated cost therefor are set out on Schedule 5.16(b).
5.16.2	Seller agrees not to delay the Outage or the work to be performed in connection therewith and not to defer any capital improvements or maintenance beyond the Outage.
5.16.3	The party owning the Newsprint Assets on the date that a capital improvement is to be made or maintenance is to be performed shall be responsible for making such improvements and performing such work. For greater certainty, Purchaser shall be responsible for all capital improvements to be made and maintenance to be performed on the Closing Date.
5.16.4	Notwithstanding when the Closing Date occurs (but only if the Closing occurs), Purchaser shall pay for all capital improvements costs (other than the equipment cost for the drum pulper, but including all installation costs with respect to the drum pulper) set forth on Schedule 5.16(b). Promptly following the Closing, Seller and Purchaser shall agree in good faith on the capital improvement costs paid or accrued (which accrual shall be reflected in the determination of Net Working Capital) by Seller at or prior to the Closing. Seller shall deliver to Purchaser an invoice setting forth the amounts so paid or accrued (which accrual shall be reflected in the determination of Net Working Capital) by Seller in reasonable detail and Purchaser shall reimburse Seller for such costs within thirty (30) days following receipt of such invoice; provided, however, that in no event shall such reimbursement exceed six million six hundred thousand Dollars ($6,600,000). Any dispute between the parties with regard to such invoice shall be resolved by the CPA Firm.
5.16.5	Notwithstanding when the Closing Date occurs, Seller shall pay the equipment cost for the drum pulper and notwithstanding when the Closing Date occurs (but only if the Closing occurs), Purchaser shall pay the installation costs for the drum pulper, subject to the dollar limitation in Section 5.16.4.

- 48 -

5.16.6	Seller shall pay all costs for major maintenance incurred prior to the Closing Date and Purchaser shall pay all costs for major maintenance incurred on and after the Closing Date. If either party pays costs that are the responsibility of the other party, the paying party shall send the other party an invoice setting forth the amount paid in reasonable detail and the other party shall reimburse the paying party for such costs within thirty (30) days following receipt of such invoice. Any dispute between the parties with regard to such invoices shall be resolved by the CPA Firm. The parties shall, if practical, net out their respective invoices and the party with the lower invoice shall pay the amount of the difference between the invoices to the party with the higher invoice.
5.16.7	Each party shall incur the lost profits due to lost production due to the Outage during the period of its ownership of the Newsprint Assets; provided that if the commencement of the Outage is delayed, the lost profits due to lost production due to the Outage shall be allocated between the parties as if the Outage had occurred commencing April 21, 2008.
5.16.8	Notwithstanding anything herein contained, with the exception of the cost of the drum pulper, all capital expenditures, maintenance costs and losts profits due to lost production due to the Outage incurred on or after the Closing Date shall be paid by Purchaser, subject to the proviso to the second sentence of Section 5.16.7.
5.16.9	Notwithstanding anything herein contained, if Seller breaches any of its covenants in this Section 5.16, Purchaser shall not be entitled to terminate this Agreement, but instead an amount equal to the cost of the capital expenditures and maintenance that should have been paid by Seller pursuant to this Section 5.16, as well as for any lost profits due to lost production due to the Outage incurred by Purchaser that would not have been incurred if Seller had not breached such covenants shall, without duplication, be paid by Seller to Purchaser within thirty (30) days following the agreement of Purchaser and Seller as to the amount owed by Seller to Purchaser pursuant to this such Section 5.16.9. Any dispute between the parties with regard to the amounts owed by Seller pursuant to this Section 5.16.9 shall be resolved by the CPA Firm.
5.16.10	At the request of Purchaser, Seller shall permit Purchaser to review the planning documents with respect to the Outage and to ask questions and receive answers with respect thereto, as well as to observe Seller’s implementation of the capital improvements and major maintenance; provided, however, that the foregoing shall be done in such a manner so as not to interfere with the work during the Outage or with the business operations of Seller.
5.16.11	Any dispute between the parties to be resolved by the CPA Firm under this Section 5.16 shall be subject to the methodology set forth in Section 1.9.

6.	LABOR AND EMPLOYEE BENEFITS MATTERS
6.1	Transition of Labor Matters.
	The parties acknowledge that certain Newsprint Employees are represented by the United Steelworkers of America, Local No. 2688 (“Steelworkers”) and the International Brotherhood of Electrical Workers, Local No.518 (“IBEW”) and that their respective terms and conditions of employment are set forth in the Labor Agreement between Abitibi Consolidated Sales

- 49 -

Corporation Snowflake Division and the United Steelworkers International Union (Snowflake Local No. 2688) effective March 1, 2007 through February 28, 2010 (“Steelworkers Agreement”) and the Labor Agreement between Abitibi Consolidated Sales Corporation Snowflake Division and the Local Union 518 International Brotherhood of Electrical Workers, AFL-CIO-CFL effective March 1, 2007 through February 28, 2010 (“IBEW Agreement” and together with the Steelworkers Agreement, the “Newsprint Collective Bargaining Agreements”). Further, certain Apache Employees are represented by the United Transportation Union (“UTU”) and by Carpenters, Local 408 effective January 1, 2005 through December 31, 2011 (the “Carpenters”) and the terms and conditions of their respective employment are set forth in the Agreement between Abitibi Consolidated Sales Corporation, Snowflake Division – Apache Railway Company, Snowflake, Arizona and UTU effective January 1, 2005 through December 31, 2011 (“UTU Agreement”) and the Collective Bargaining Agreement between Apache Railway Company, Snowflake, Arizona and Southwest Regional Council of Carpenters, Local 408 (“Carpenters Agreement” and together with the UTU Agreement, the “Apache Collective Bargaining Agreements”). The parties make the following agreements with respect to the transition of Newsprint Employees and Apache Employees.

6.1.1

Continuation of Employment. Purchaser shall (i) cause Apache to continue to employ all Apache Employees, including such employees who are represented by the UTU or the Carpenters on the Closing Date and (ii) shall offer employment to all Newsprint Employees represented by the Steelworkers or the IBEW on the Closing Date (collectively the employees in (i) and (ii) are referred to as the “Retained Employees”), provided that Apache and Purchaser shall not be prohibited by this Agreement from subsequently terminating any Retained Employee.

6.1.2

Retained Liability. Except as otherwise provided in this Agreement, Seller will retain all liabilities relating to any Retained Employee accruing prior to the Closing Date, including any long-term disability benefits of a Retained Employee who became disabled as defined under the terms of Seller’s long term disability policy on or prior to the Closing Date, but not including honoring rights to unused vacation during 2008 (including for carry over days from prior years) and liabilities for short-term disability benefits payable after the Closing Date, all of which vacation and short-term disability liabilities shall be assumed by Purchaser as of the Closing Date. Subject to the foregoing, Seller shall timely pay all Retained Employees’ accrued wages through the Closing Date.

6.1.3

Steelworkers Agreement. Purchaser agrees to assume the Steelworkers Agreement commencing on the Closing Date, and shall comply with Exhibit C to the Steelworker Agreement, (“Exhibit C”) which is attached as Schedule 6.1.3 to this Agreement. Notwithstanding any provision of Exhibit C to the contrary, the Union (as defined in Exhibit C) shall not be a third party beneficiary of this Agreement.

6.1.4

IBEW Agreement. Purchaser agrees to offer to assume the IBEW Agreement commencing on the Closing Date, and Purchaser and Seller agree to execute any documents reasonably necessary to effectuate the assumption of the IBEW Agreement. If the IBEW does not consent to Purchaser’s assumption of the IBEW Agreement, then Purchaser’s obligation to assume the IBEW Agreement shall be deemed waived. It is agreed that the IBEW shall not be a third party beneficiary of this Agreement.

- 50 -

6.1.5	Apache Collective Bargaining Agreements. Purchaser acknowledges that after the Closing Date the Apache Collective Bargaining Agreements will remain in full force and effect.
6.1.6	Management and Non-Represented Employees. Purchaser agrees to offer employment at substantially the same aggregate base compensation to all Salaried Newsprint Employees and all Hourly Newsprint Employees not represented by the Steelworkers or the IBEW and all Apache Employees not represented by the UTU or the Carpenters (collectively the “Business Employees”). Purchaser agrees that it will recognize years of service with Seller and Apache and their respective predecessors in applying its policies, if any, that vary benefits based on years of service. Any Business Employee who accepts such employment offer and reports for work on the date directed by Purchaser is referred to as a “Hired Employee”. Except as otherwise provided in this Agreement, Seller shall retain (i) all liabilities relating to any Business Employee who does not become a Hired Employee (whether arising at, prior to or after the Closing Date); and (ii) all liabilities arising prior to the Closing Date relating to any Business Employee who becomes a Hired Employee, including any long-term disability benefits of a Hired Employee who became disabled as defined under the terms of Seller’s long term disability policy on or before the Closing Date, but not including honoring rights to unused vacation during 2008 (including for carry over days from prior years), liabilities for short-term disability benefits payable after the Closing Date and liabilities for relocation allowances, all of which vacation, short-term disability and relocation allowance liabilities shall be assumed by Purchaser as of the Closing Date. Subject to the foregoing, Seller shall timely pay all Hired Employees’ accrued wages through the Closing Date.
6.1.7	WARN Act. Purchaser covenants and agrees that it will allow no mass layoff or plant closing (as defined in the Worker Adjustment and Retraining Notification Act and the regulations thereunder) to occur after the Closing Date that will require Seller to provide any notice or make any severance payment to comply with the requirements of the Worker Adjustment and Retraining Notification Act and/or any comparable state law.
6.1.8	COBRA. Purchaser agrees and acknowledges that, upon consummation of this transaction, Purchaser is deemed a “Buying Group” (as defined in Treas. Reg. §54.4980B-9, Q&A-2(c) and Q&A-3(b)). Purchaser agrees it will be solely responsible for providing COBRA continuation coverage to all M&A Qualified Beneficiaries (as defined in Treas. Reg. §54.4980B-9, Q&A-4(a), except for any Salaried Employee who is eligible to elect COBRA continuation coverage prior to the Closing Date. Purchaser assumes any responsibility Seller would otherwise have to provide such continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), except for any Salaried Employee who is eligible to elect COBRA continuation coverage prior to the Closing Date.
6.1.9	Obligation to Provide Benefits. Except as expressly provided in this Section 6, nothing in this Agreement shall (i) require Purchaser or any of its Affiliates to continue the employment of any Retained Employee or Hired Employee after the Closing Date, (ii) require Purchaser or any of its Affiliates to establish or continue any particular employee benefit plan, practice, program or policy for any particular period of time after the Closing Date or (iii) prohibit or in any way limit Purchaser’s ability to amend

- 51 -

	or terminate any such plan, practice, program or policy. Purchaser and its Affiliates shall not assume any obligation to Newsprint Employees and Apache Employees that is not expressly provided for herein. Purchaser shall have no obligation to employees of Seller or its Affiliates other than the Retained Employees or Hired Employees, whether or not such employees received salary continuation or other payments or benefits under any plan or policy of Seller or its Affiliates.
6.1.10	Employee Communications. Prior to the Closing, Seller and Purchaser agree to cooperate in and agree on the preparation and dissemination of one or more written or formal oral communications to Newsprint Employees and Apache Employees describing the retirement, group health, life insurance, long term disability and other welfare and fringe benefit plan coverage that will be provided after the Closing Date, it being understood that the Purchaser has the sole right to communicate in respect of retiree health and retiree life insurance. Prior to the Closing Date, Seller and its Affiliates shall make no other written employee communications to Newsprint Employees and Apache Employees regarding benefits to be provided after the Closing Date without the prior written consent of Purchaser which consent shall not be unreasonably withheld, delayed or conditioned, it being understood that the Purchaser has the sole right to communicate in respect of retiree health and retiree life insurance.
6.1.11	Seller Obligations. Seller agrees to pay or to cause its Affiliates to pay any and all obligations, liabilities and costs arising before, on or after the Closing Date: (i) that have arisen or may arise in connection with any Benefit Plan except for the Multiemployer Plan with respect to withdrawal liability Seller’s Hourly 401(k) Plan and the IBEW Hourly Defined Contribution Plans and (ii) that have arisen or may arise in connection with the PBGC’s involvement or intervention with respect to the Seller’s Hourly Pension Plan or the Seller’s Salaried Employees Pension Plan. In addition, Seller and its Affiliates shall be solely responsible for any and all Controlled Group Liabilities. “Controlled Group Liabilities” are any and all liabilities (A) under Title IV of ERISA, (B) under Section 302 of ERISA, (C) under Sections 412 and 4971 of the Code, and/or (D) except as provided in Section 6.1.8, as a result of Seller failing to comply with the continuation coverage requirements of Section 4980B et seq. of the Code and Section 601 et seq. of ERISA (including in connection with the transactions contemplated hereby), in each case relating to any employee benefit plan currently or formerly sponsored, maintained or contributed to by Seller or any ERISA Affiliate, except for the Multiemployer Plan with respect to withdrawal liability, Seller’s Hourly 401(k) Plan and the IBEW Hourly Defined Contribution Plans.
6.1.12	Equity Plans. Seller shall take such action as is necessary to cause (i) all outstanding stock options (that are in the money), restricted stock units and other equity-based awards held by Retained Employees and Hired Employees to vest on the Closing Date. Seller shall be responsible for any and all payments, withholding and reporting obligations that arise before, on or after the Closing Date related to such stock options, restricted stock units and other equity-based awards.
6.1.13	Third Party Beneficiary. Except as expressly set forth in this Section 6, no Person other than the parties to this Agreement shall be a beneficiary of the provisions of this Section 6.

- 52 -

6.2	Crediting of Service under Purchaser’s Salaried Retirement Plan.
	Seller shall cause all Salaried Employees that participate in the Abitibi Consolidated U.S. (Cash Balance) Retirement Plan (“Seller’s Salaried Employees Retirement Plan”) to become fully vested therein on the Closing Date. Purchaser agrees that each Salaried Employee who is a participant in Seller’s Salaried Employees Retirement Plan as of the Closing Date (“Participating Salaried Employees (Retirement Plan)”) shall immediately become eligible to participate in one or more retirement plans of Purchaser (including a defined contribution plan) that provide substantially comparable benefits in the aggregate as provided by Seller’s Salaried Employees Retirement Plan as of the Closing Date, and shall, for eligibility and vesting purposes, be credited with the “service” credited under the terms of Seller’s Salaried Employees Retirement Plan as if such service had been rendered to Purchaser, subject to Purchaser’s rights to amend or terminate its retirement plans. Attached as Schedule 6.2 is a list of the Participating Salaried Employees (Retirement Plan) and each such employee’s “service” for eligibility and vesting purposes as at the date indicated in such Schedule.
6.3	Seller’s Hourly Pension Plan.
	Seller shall cause all Hourly Apache Employees and Hourly Newsprint Employees that participate in the Abitibi Consolidated U.S. Hourly Employees Pension Plan (“Seller’s Hourly Pension Plan”) to become fully vested therein on the Closing Date. Purchaser agrees that all participants in the Seller’s Hourly Pension Plan that are represented by a Collective Bargaining Agreement and who become Retained Employees shall immediately become eligible to participate in a defined benefit pension plan sponsored by Purchaser (“Purchaser’s Hourly Pension Plan”) and shall continue benefit accruals for such employees under Purchaser’s Hourly Pension Plan at the benefit levels provided in Seller’s Hourly Pension Plan on the Closing Date. Purchaser agrees that all participants in Seller’s Hourly Pension Plan that are not represented by a Collective Bargaining Agreement and who become Retained Employees shall immediately become eligible to participate in one or more retirement plans of Purchaser (including a defined contribution plan) that provide substantially comparable benefits in the aggregate as provided by Seller’s Hourly Pension Plan on the Closing Date. Under Purchaser’s Hourly Pension Plan and other retirement plans, Retained Employees who formerly participated in Seller’s Hourly Pension Plan, shall, for eligibility and vesting purposes, be credited with the “service” credited under the terms of Seller’s Hourly Pension Plan as if such service had been rendered to Purchaser, subject to Purchaser’s rights to amend or terminate its retirement plans. Attached as Schedule 6.3 is a list of (i) all participants in Seller’s Hourly Pension Plan that are represented by a Collective Bargaining Agreement and such employees’ “service” for eligibility and vesting purposes and (ii) all participants in Seller’s Hourly Pension Plan that are not represented by a Collective Bargaining Agreement and such employees’ “service” for eligibility and vesting purposes as at the date indicated in such Schedule.
6.4	Seller’s Salaried 401(k) Plan.
	Seller shall cause the Salaried Employees that participate in the Abitibi Consolidated 401(k) Plan for Salaried Employees (“Seller’s Salaried 401(k) Plan”) to become fully vested therein on the Closing Date. Purchaser agrees that all such Salaried Employees that become Hired Employees (“Participating Salaried Employees (401(k) Plan)”) shall immediately become eligible to participate in a defined contribution plan sponsored by Purchaser (“Purchaser’s Salaried 401(k) Plan”), and shall, for eligibility and vesting purposes, be credited with the “service” credited under the terms of Seller’s Salaried 401(k) Plan as if such service had been rendered to Purchaser. Purchaser agrees to cause the Purchaser’s Salaried 401(k) Plan to accept a “direct rollover” of a

- 53 -

	Hired Employee’s account balance from Seller’s Salaried 401(k) Plan, including any outstanding Plan loan, and to continue any such loan in accordance with its existing terms in all material respects. Attached as Schedule 6.4 is a list of Participating Salaried Employees (401(k) Plan), together with a listing of each such employee’s “service” for eligibility and vesting purposes as at the date indicated in such Schedule.
6.5	Seller’s Hourly 401(k) Plan.
	Effective as of the Closing Date, Purchaser shall fully assume, and succeed to all rights, obligations and duties of Seller with respect to the Abitibi Consolidated Sales Corporation Hourly Employees 401(k) Plan, including the applicable trust (“Seller’s Hourly 401(k) Plan”), which covers Hourly Newsprint Employees who are represented by the Steelworkers and Hourly Apache Employees. Purchaser shall make appropriate amendments to Seller’s Hourly 401(k) Plan to provide that Purchaser is the new sponsor of Seller’s Hourly 401(k) Plan. The parties shall enter into the Pension Plans Assignment and Assumption Agreement in this regard and shall cooperate in transferring the Seller’s Hourly 401(k) Plan’s books and records to Purchaser.
6.6	IBEW Hourly Plans.
	Effective as of the Closing Date, Purchaser shall fully assume, and succeed to all rights, obligations and duties of Seller with respect to the Abitibi Consolidated Sales Corporation Retirement and Savings Plans for I.B.E.W. Hourly Employees at its Snowflake Division, which cover Hourly Newsprint Employees who are represented by the IBEW (collectively, including the applicable trusts, the “IBEW Hourly Defined Contribution Plans”). Purchaser shall make appropriate amendments to the IBEW Hourly Defined Contribution Plans to provide that Purchaser is the new sponsor of the IBEW Hourly Defined Contribution Plans. The parties shall enter into the Pension Plans Assignment and Assumption Agreement in this regard and shall cooperate in transferring the IBEW Hourly Defined Contribution Plans’ books and records to Purchaser.
6.7	Multiemployer Pension Plans.

Purchaser shall continue to contribute to the PACE Industry-Union Management Pension Fund (the “Multiemployer Plan”) for substantially the same number of “contribution base units” for which Seller had an “obligation to contribute” (as those terms are defined in Section 4001(a)(11) and 4212 of ERISA, respectively) to the Multiemployer Plan pursuant to the Steelworkers Agreement. Purchaser shall provide the Multiemployer Plan for a period of five (5) plan years, commencing with the first plan year beginning on or after the Closing Date, an acceptable surety bond or escrow arrangement in the form and amount specified in Section 4204(a)(1)(B) of ERISA (the “Multiemployer Plan Bond or Escrow”), unless such bond or escrow arrangement is waived pursuant to the U.S. Department of Labor regulations under Section 4204 of ERISA. The Multiemployer Plan Bond or Escrow shall be paid to the Multiemployer Plan should Purchaser completely or partially withdraw from or fail to make a contribution to the Multiemployer Plan at any time during the first five (5) plan years beginning after the Closing Date. If on or after the Closing Date, and within the five (5) plan years of the Multiemployer Plan following the Closing Date, Purchaser withdraws from or fails to make a required contribution to the Multiemployer Plan, Purchaser will be solely liable to the Multiemployer Plan for any assessment of withdrawal liability. Pursuant to Section 4204(a)(1)(C) of ERISA, if Purchaser completely or partially withdraws from the Multiemployer Plan during the first five (5) plan years of the Multiemployer Plan beginning after the Closing Date, Seller acknowledges that it will be secondarily liable for any withdrawal liability it would have had to the Multiemployer Plan (but for Section 4204 of ERISA) if the withdrawal liability of

- 54 -

Purchaser to the Multiemployer Plan is not paid. Purchaser or Seller shall promptly notify the other party of any demand for payment of withdrawal liability received by it from the Multiemployer Plan. Upon presentation by the Multiemployer Plan to Seller or Purchaser of a participation agreement effective March 1, 2008, Purchaser shall execute such agreement with effect from and after the Closing Date.

6.8	Welfare Plans.
	Effective as of the Closing Date, Purchaser shall provide group health, life insurance, long term disability and other welfare and fringe benefit plan coverage and benefits (for the purposes of this Section 6.8, “Purchaser’s Health, Welfare and Fringe Benefit Plans”) for Newsprint Employees and Apache Employees who are offered and accept employment with Purchaser as of the Closing Date and who otherwise qualify for such coverage or benefits. In the case of Hourly Newsprint Employees and Hourly Apache Employees, such coverage or benefits shall provide substantially comparable coverage and benefits in the aggregate as Seller’s health, life insurance, welfare and fringe benefit plans provide (for the purposes of this Section 6.8, “Seller’s Health, Welfare and Fringe Benefit Plans”) and otherwise comply with the relevant Collective Bargaining Agreements and in part shall provide for Purchaser’s assumption and continuation of Seller’s Health, Welfare and Fringe Benefit Plans covering Hourly Newsprint Employees and Hourly Apache Employees. In the case of Salaried Employees, Purchaser shall offer substantially comparable coverage and benefits in the aggregate as provided under Seller’s Health, Welfare and Fringe Benefit Plans, except for including retiree health and retiree life insurance. Purchaser may assume and continue any or all of Seller’s Health, Welfare and Fringe Benefit Plans, except for Seller’s health and dental benefits for Salaried Employees, coverage under which shall be provided to Retained Employees and Hired Employees in accordance with the terms of the Transitional Services Agreement. A Newsprint Employee’s or Apache Employee’s last continuous period of service with Seller or Apache shall be counted as if it had been service for Purchaser in determining eligibility for the coverage and benefits set forth in this Section 6.8. Attached as Schedule 6.8 is a list of the last continuous period of service of Newsprint Employees and Apache Employees as of the date set forth on Schedule 6.8. If Purchaser assumes and continues one or more of Seller’s Health, Welfare and Fringe Benefit Plans, the parties shall enter into the Welfare Benefit Plans Assignment and Assumption Agreement in this regard.
6.9	Union Discussions.
	In connection with Purchaser’s proposed assumption of the respective Collective Bargaining Agreements, Seller agrees that Purchaser may, prior to the Closing Date, discuss, and if required, negotiate, with the United Steelworkers International Union (Local No. 2688) and the International Brotherhood of Electrical Workers (Local No. 518). Seller agrees to cooperate with Purchaser and to facilitate such discussions and, if required, negotiations, if requested by Purchaser.
6.10	Filipovic Canadian Benefits.
	Purchaser agrees to assume and continue the employment arrangement of Mike Filipovic, as set forth in a letter dated May 2, 2007, a copy of which is attached as Schedule 6.10, including providing the Canadian pension plan benefits described therein, either through Purchaser’s Canadian defined contribution pension plan or a comparable Canadian pension plan arrangement established by Purchaser. Seller and Purchaser shall cooperate in transferring to Purchaser’s group RSP plan, the assets and applicable records related to Mike Filipovic’s interest in Seller’s Canadian defined contribution plan that currently covers Mike Filipovic.

- 55 -

7.	CONDITIONS OF CLOSING
7.1	Conditions to Each Party’s Obligation to Effect the Closing.
	The respective obligation of each of the parties to effect the Closing shall be subject to the satisfaction (or waiver) at or prior to the Closing of each of the following conditions:

7.1.1	No law shall have been enacted or promulgated by any Governmental Entity that prohibits the consummation of the transactions contemplated herein or in the other Operative Agreements and there shall be no order or judgment in effect prohibiting consummation of such transactions; provided that the parties shall use their commercially reasonable efforts to have any such order or judgment vacated or lifted;
7.1.2	All consents, authorizations, waivers or approvals of any Governmental Entity (except for (i) that required by the DOJ, which is covered by Section 7.1.3, (ii) those required in respect of Material Permits, which are covered by Section 7.2.4, or (iii) those required pursuant to any Contracts to which a Governmental Entity is a party), including those required by FERC or any state or federal law or Governmental Entity controlling energy production and sales, as may be required to be obtained in connection with the execution, delivery or performance of this Agreement, the failure to obtain of which would prevent the consummation of the transaction contemplated hereby or would, individually or in the aggregate, be material to Apache or the Newsprint Assets, shall have been obtained; and
7.1.3	Written notice from the DOJ to Seller that the DOJ does not object to Purchaser, as prescribed in the Final Judgment, shall have been obtained.

7.2	Conditions to Obligations of Purchaser to Effect the Closing.
	The obligations of Purchaser to effect the Closing shall be subject to the satisfaction (or waiver by Purchaser) at or prior to the Closing of each of the following conditions:

7.2.1	All of the representations and warranties of Seller set forth in this Agreement, considered collectively shall be true and correct as of the date of this Agreement and as of the Closing Date as if made on the Closing Date (or if made as of a specified date, only as of such date), except where the failure to be true and correct would not have a Material Adverse Effect (ignoring for the purposes of this Section 7.2.1 any qualifications relating to materiality or Material Adverse Effect contained in such representations and warranties).
7.2.2	Seller shall have performed in all material respects its obligations and complied in all material respects with all covenants and agreements required to be performed or complied with by it under this Agreement, considered collectively and not individually, provided that Seller’s covenant in Section 5.16 shall not be included in making such determination.
7.2.3	Seller shall have obtained and delivered to Purchaser those items required by Section 2.2 (other than items required by Section 2.2.20 if the failure to deliver such items would not have a Material Adverse Effect).

- 56 -

7.2.4	Purchaser shall have obtained (i) all Material Permits (either by assignment from Seller or, if not assignable, a new Permit in the name of Purchaser), other than those listed on Schedule 3.17(b) and (ii) Title Insurance, whose premiums shall be paid, subject to Section 5.9.3, as follows: (a) Seller shall pay (the “Standard Amount”) only the portion of the title insurance premium allocated to the “Standard” ALTA Owner’s Title Policy for a policy in an amount equal to the portion of the Purchase Price estimated to be allocated to the Owned Real Property pursuant to this Agreement; and (b) Purchaser shall pay the balance of the title insurance premium (the “Extended Amount”), including the portion thereof applicable to (x) an “Extended” ALTA Owner’s Policy, (y) the “Standard” ALTA Owner’s Title Policy for the portion of the policy which is in excess of the portion of the Purchase Price estimated to be allocated to the Owned Real Property, if any, and (z) the cost of all title insurance endorsements.
7.2.5	Since the Balance Sheet Date, there has been no Material Adverse Effect.
7.2.6	An authorized officer of Seller shall have executed and delivered to Purchaser a certificate as to Seller’s compliance with the conditions set forth in Sections 7.2.1, 7.2.2 and 7.2.5.
7.2.7	The closing of the transactions contemplated by the Rights Offering shall have occurred raising gross proceeds of not less than the Offering Amount and Purchaser shall have irrevocably tendered to the Trustee for the Subscription Receipts a Release and Payment Certificate providing for the exchange of the Subscription Receipts into common shares of Purchaser and the release of the gross proceed to Purchaser to be applied in payment of the Purchase Price.

7.3	Conditions to Obligations of Seller to Effect the Closing.
	The obligations of Seller to effect the Closing shall be subject to the satisfaction (or waiver by Seller) at or prior to the Closing of each of the following conditions:

7.3.1	All of the representations and warranties of Purchaser set forth in this Agreement, considered collectively, shall be true and correct in all material respects as of the Effective Date and as of the Closing Date (or if made as of a specified date, only as of such date).
7.3.2	Purchaser shall have performed in all material respects any obligations and complied in all material respects with all covenants and agreements to be performed or complied with by it under this Agreement.
7.3.3	Purchaser shall have obtained and delivered to Seller those items required by Section 2.3 (other than items required by Section 2.3.14 if the failure to deliver such items would not have a Material Adverse Effect).
7.3.4	An authorized officer of Purchaser shall have executed and delivered to Seller a Certificate of Compliance as to compliance with the conditions set forth in Sections 7.3.1 and 7.3.2.

- 57 -

7.4	Termination.
	This Agreement may be terminated at any time prior to the Closing (the “Termination Date”) (such termination to be effective on the day notice of termination is validly given to the other party hereunder):

7.4.1	By the mutual written consent of Purchaser and Seller;
7.4.2	By Purchaser or Seller if any Governmental Entity issues an order or takes any other action (which order or other action the parties shall use their commercially reasonable efforts to lift) that permanently restrains, enjoins or otherwise prohibits the consummation of the transactions contemplated herein and such order or other action shall have become final and non-appealable;
7.4.3	By either Purchaser or Seller if the Closing does not occur on or prior to May 30, 2008 (the “Final Date”); provided, that, the right to terminate this Agreement pursuant to this Section 7.4.3 shall not be available to any party (i) whose failure to take any action required to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, the failure of the Closing to occur prior to the Final Date or (ii) who is in material breach of its obligations under this Agreement;
7.4.4	By Seller if Purchaser breaches in any material respect any of its representations, warranties, covenants or other agreements contained in this Agreement that would give rise to the failure of a condition set forth in this Section 7, which breach (i) if curable, has not been cured (A) within thirty (30) days after the giving of written notice by Seller to Purchaser specifying such breach or (B) before the Final Date, which ever occurs first, or (ii) has not been waived in writing by Seller;
7.4.5	By either Seller or Purchaser if DOJ advises Seller in writing that DOJ objects to Purchaser;
7.4.6	By Trustee for any reason;
7.4.7	By Purchaser if Seller shall have breached in any material respect any of its representations, warranties, covenants or other agreements contained in this Agreement that would give rise to the failure of a condition set forth in this Section 7, which breach (i) if curable, has not been cured (A) within thirty (30) days after the giving of written notice by Purchaser to Seller specifying such breach or (B) before the Final Date, which ever occurs first, or (ii) has not been waived in writing by Purchaser;
7.4.8	By Seller (in the case of clauses (i) – (vi)) or Purchaser (in the case of clause (v) or (vi)) if (i) the preliminary prospectus prepared in connection with the Rights Offering (the “Preliminary Prospectus”) is not filed by Purchaser with the Securities Commissions (as defined in the Standby Agreement) and the SEC (as defined in the Standby Agreement) on or before February 22, 2008 (and is not so filed before Seller terminates this Agreement), provided that if the Precedent Conditions are not satisfied on such date, such date shall be extended to the next day on which the Precedent Conditions are satisfied, (ii) the final prospectus prepared in connection with the Rights Offering (the “Final Prospectus”) is not filed by Purchaser with the Securities Commissions and the SEC on or before such date as will permit the Closing to occur (assuming for this

- 58 -

	purpose that all other conditions to the Closing have been satisfied) on April 30, 2008 (and is not so filed before Seller terminates this Agreement), such date to be extended by the number of days, if any, that the filing of the Preliminary Prospectus was delayed beyond February 22, 2008 due to the failure of the Precedent Conditions to be satisfied, provided that if the Precedent Conditions are not satisfied on such date, such date shall be extended to the next day on which the Precedent Conditions are satisfied, (iii) the Rights Offering does not close on or before April 30, 2008 (and is not so closed before Seller terminates this Agreement) (such April 30, 2008 date to be extended by the number of days, if any, that the filing of the Preliminary Prospectus was delayed beyond February 22, 2008 and the filing of the Final Prospectus was delayed beyond the applicable filing date in clause (ii), in each case due to the failure of the Precedent Conditions to be satisfied), (iv) the Final Prospectus is not filed by May 10, 2008, (v) TAVIX exercises any of its termination rights under the TAVIX Oversubscription Agreement or the TAVIX Oversubscription Agreement otherwise terminates prior to the closing of the Rights Offering; or (vi) either of the Standby Purchasers exercises any of its termination rights under the Standby Agreement or the Standby Agreement is otherwise terminated prior to the closing of the Rights Offering; provided that if Seller desires to exercise its termination right pursuant to clause (ii) or (iii) of this Section 7.4.8, it must do so within three (3) Business Days following the date on which such termination right first arises.
7.4.9	By Purchaser if any of the conditions set forth in Sections 7.1 or 7.2 have not been satisfied or waived and are incapable of being satisfied by the Final Date; provided, that, the right to terminate this Agreement pursuant to this Section 7.4.9 shall not be available to Purchaser if (i) the failure by Purchaser to take any action required to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, any such conditions being incapable of being satisfied by the Final Date or (ii) Purchaser is in material breach of its obligations under this Agreement; or
7.4.10	By Seller if any of the conditions set forth in Sections 7.1 or 7.3 have not been satisfied or waived and are incapable of being satisfied by the Final Date; provided, that, the right to terminate this Agreement pursuant to this Section 7.4.10 shall not be available to Seller if (i) the failure of Seller to take any action required to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, any such conditions being incapable of being satisfied by the Final Date or (ii) Seller is in material breach of its obligations under this Agreement.

7.5 Effect of Termination.

7.5.1 Subject to Section 11.16, if this Agreement is terminated by any party pursuant to the terms hereof, this Agreement shall forthwith terminate and have no further force and effect and neither party shall have any obligations or liability hereunder, except that (i) the representations and warranties in Section 3.15 and Section 4.5 shall survive such termination indefinitely, (ii) the covenants and agreements set forth in Section 5.5, this Section 7.5.1, Section 11.4 and Section 11.5 shall survive such termination indefinitely and (iii) nothing in this Section 7.5.1 shall be deemed to release any party from any liability for any breach by such party of the terms of this Agreement or to impair the right of any party to compel specific performance by the other party of its obligations under this Agreement. Purchaser agrees that in no event will it file a lis pendens or any notice of pendency against the Real Property or any portion thereof.

- 59 -

7.5.2 Notwithstanding anything herein contained, if this Agreement is terminated pursuant to Section 7.4.8 and at the time of such termination, Purchaser does not have the right to terminate this Agreement pursuant to Section 7.4 (other than pursuant to Section 7.4.8) then, in lieu of all other claims and remedies that might otherwise be available with respect thereto, including elsewhere hereunder and notwithstanding any other provision of this Agreement, Purchaser shall pay the Termination Fee to Seller within ten (10) Business Days following such termination, it being understood and agreed that in no event shall Purchaser be required to pay the Termination Fee on more than one occasion; provided that no Termination Fee shall be payable if (a) Seller terminates this Agreement pursuant to Section 7.4.8(iii) before May 29, 2008 and such termination is prior to the Expiry Time (as defined in the Standby Agreement), (b) Seller terminates this Agreement pursuant to Section 7.4.8(ii) or (c) the termination takes place later than April 30, 2008 and the DOJ has not yet provided written notice to Seller that it does not object to Purchaser, as prescribed in the Final Judgment.

8.	SURVIVAL
	The representations, warranties, covenants and agreements of Purchaser and Seller contained in this Agreement or in any other Operative Agreement will survive the Closing until the expiration of the “Survival Period,” which shall be (i) the date that is fourteen (14) months after the Closing Date with respect to all representations and warranties (other than specified below); (ii) five (5) years following the Closing Date with respect to (x) the representations and warranties set forth in Sections 3.18 and 3.17 (insofar as it relates to Permits issued pursuant to Environmental Law) and (y) Seller’s indemnification obligations pursuant to Section 9.1.2 (a), (b) and (c); (iii) indefinitely, with respect to (x) the representations and warranties set forth in Sections 3.1.1, 3.1.2, 3.2, 3.15, 3.16, 4.1, 4.2 and 4.5, (y) Seller’s indemnification obligations pursuant to Sections 9.1.1(b), 9.1.2(d), and 9.1.2(e) and (z) Purchaser’s indemnification obligation under Section 9.2 (other than breaches of representations and warranties under Section 9.2.1 which shall be governed by the other subclauses of this Section 8), (iv) six (6) months following the expiration of the statute of limitations with respect to (x) Section 3.8 and (y) Seller’s indemnification obligations with respect to Section 9.1.1(c); and (v) with respect to each other covenant or agreement contained in this Agreement, until such time as such covenant or agreement has been fully performed (unless otherwise provided herein).
9.	INDEMNIFICATION
9.1	Indemnification by Seller.

9.1.1 Subject to the other provisions of this Section 9, Seller agrees to indemnify and to hold each Purchaser Group Member harmless for, from and against any and all Losses incurred by such Purchaser Group Member to the extent arising from or relating to, directly or indirectly:

(a) any breach by Seller of any representations, warranties, covenants, obligations or agreements in this Agreement or in any other Operative Agreement (except to the extent that the amount of the Loss relating to such breach was taken into account in determining the Adjusted Closing Net Working Capital); it being agreed that the determination of whether Seller has breached a covenant, obligation or agreement shall be determined on an individual and not collective basis;

- 60 -

(b)	any Newsprint Retained Obligation; or
(c)	any Indemnified Tax.

9.1.2 Subject to the other provisions of this Section 9, Seller agrees to indemnify and to hold each Purchaser Group Member harmless for, from and against any and all Losses incurred by such Purchaser Group Member to the extent arising from or relating to, directly or indirectly:

(a)	the Known Environmental Matters listed on Schedule 9.1.2;
(b)	the violation by Seller or Apache of any Environmental Law or Permit issued pursuant to Environmental Law, on or prior to the Closing Date;
(c)	the presence of Hazardous Substances in the soil and/or groundwater at, on, under, within or migrating from the Real Property, which exists prior to the Closing Date and gives rise to investigation and/or remediation under a requirement of applicable Environmental Law;
(d)	contamination at any offsite location resulting from the disposal of, or arranging for the disposal of, any Hazardous Substances used, generated or stored by Seller with respect to the Newsprint Business or Apache (or any predecessor entity of Apache) with respect to the Railway Business prior to the Closing Time; provided however, it is understood and agreed that this Section 9.1.2(d) is not intended to and shall not be construed to include offsite migration of contamination from the Real Property; and
(e)	any real property formerly owned, leased or operated by Seller in connection with the Newsprint Business or Apache (or any predecessor entity of Apache) in connection with the Railway Business.

9.1.3 (i) No Purchaser Group Member shall be entitled to any indemnification and Seller shall not be required to indemnify and hold any Purchaser Group Member harmless with respect to any Losses arising from any breach by Seller of any of its representations and warranties in Section 9.1.1(a) (for the avoidance of doubt, but not for any breach by Seller of its covenants, obligations or other agreements (other than Sections 9.1.2(a), 9.1.2(b) and 9.1.2(c) as set forth below), and excluding the representations and warranties in the last sentence of Section 3.22.1) or under Section 9.1.2(a), (b) and (c) until and unless such Losses exceed, in the aggregate, one percent (1%) of the Adjusted Purchase Price (without giving effect to Section 9.8) (the “Deductible Amount”), in which case Seller shall be liable only for the portion of the amount exceeding the Deductible Amount, and (ii) the aggregate amount that the Purchaser Group Members may claim and that Seller may be required to pay pursuant to this Agreement with respect to Losses arising from any breach by Seller of any of its representations and warranties in Section 9.1.1(a) (for the avoidance of doubt, but not for any breach by Seller of its covenants, obligations or other agreements (other than Sections 9.1.2(a), 9.1.2(b) and 9.1.2(c) as set forth below), and excluding the representations and warranties in the last sentence of Section 3.22.1) and pursuant to Section 9.1.2(a), (b) and (c) shall not exceed an aggregate amount equal to seventeen and one-half percent (17.5%) of the Adjusted Purchase Price (without giving effect to

- 61 -

Section 9.8) (the “Maximum Amount”), provided, however, that in determining the amount of any Loss arising from any breach by Seller of any of its representations and warranties in Section 9.1.1(a) (for the avoidance of doubt, but not for any breach by Seller of its covenants, obligations or other agreements (other than Sections 9.1.2(a), 9.1.2(b) and 9.1.2(c) as set forth below), and excluding the representations and warranties in the last sentence of Section 3.22.1) or under Sections 9.1.2(a), (b) and (c), there shall not be included any Loss or series of related Losses that does not exceed twenty-five thousand Dollars ($25,000) (the “Minimum Amount”).

9.1.4

The indemnifications provided for in this Section 9.1 and Section 9.2 shall in each case terminate at the end of the applicable Survival Period and no claims may be made by any Purchaser Group Member or Seller Group Member pursuant to this Agreement thereafter, except that (i) the indemnification by Seller or Purchaser shall continue as to any claim that any Purchaser Group Member or Seller Group Member has notified Seller or Purchaser, as the case may be, in accordance with the requirements of Section 9.3, 9.4 or 9.5, as the case may be, on or prior to end of the applicable Survival Period, as to which the obligation of Seller or Purchaser shall continue until the liability of Seller or Purchaser shall have been determined in accordance with this Section 9.

9.2	Indemnification by Purchaser.
	Purchaser agrees to indemnify and to hold each Seller Group Member harmless for, from and against any and all Losses incurred by such Seller Group Member arising from or relating to, directly or indirectly:

9.2.1	any breach by Purchaser of any of its representations, warranties, covenants, obligations or agreements in this Agreement or in any other Operative Agreement;
9.2.2	any Assumed Obligation;
9.2.3	any liability or obligation of or related to Apache, except liabilities for which Purchaser is indemnified hereunder or Seller has otherwise agreed to pay under the terms of this Agreement or otherwise;
9.2.4	any and all liability and defense costs arising out of or relating to any claim for COBRA continuation coverage by any M&A Qualified Beneficiary;
9.2.5	(i) any liability incurred by Seller pursuant to its being secondarily liable for withdrawal liability under the Multiemployer Plan and (ii) any withdrawal liability assessed against Seller by the Multiemployer Plan as a result of the transactions contemplated by this Agreement;
9.2.6	any Tax Claim of Seller with respect to any Post-Closing Period;
9.2.7	all liabilities arising from the operation of the Newsprint Assets or the Newsprint Business on or after the Closing Date except liabilities for which Purchaser is indemnified hereunder or Seller has otherwise agreed to pay under the terms of this Agreement or otherwise;

- 62 -

9.2.8	any liability arising from any action by Purchaser or its counsel, environmental consultants, investment bankers, financial sources, lenders, accountants and other representatives (A) pursuant to any sampling or testing conducted pursuant to the final sentence of Section 5.12(a) or (B) with respect to any matter described in Section 9.1.2, to the extent that Seller does not have an indemnity obligation to Purchaser hereunder;
9.2.9	the failure of Purchaser to timely pay the Termination Fee; and
9.2.10	the failure of Purchaser to obtain the unconditional and irrevocable release of Seller and its Affiliates as set forth in Section 2.3.7.

9.3	Method of Asserting Claims.
	All claims for indemnification under Section 9, other than any Tax Claim (which shall be asserted and resolved as set forth in Section 9.4) and any Environmental Claim (which shall be asserted and resolved as set forth in Section 9.5), will be asserted and resolved as follows:

9.3.1

Subject to the provisions of each of Section 9.1 and Section 9.2, a party claiming indemnification (the “Indemnified Party”) in respect of, arising out of or involving a claim or demand made by a third party against the Indemnified Party (a “Third Party Claim”) shall deliver notice (a “Claim Notice”) to the other party (the “Indemnifying Party”) within fifteen (15) Business Days after receipt by the Indemnified Party of written notice of the Third Party Claim; provided, however, that failure to timely give such Claim Notice shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have (i) been prejudiced as a result of such failure or (ii) forfeited rights and defenses otherwise available to the Indemnifying Party as a result of such failure.

9.3.2

In the case of a Third Party Claim, the Indemnifying Party shall be entitled to assume and control the defense and settlement thereof with counsel selected by the Indemnifying Party. Should the Indemnifying Party so assume the defense of a Third Party Claim, the Indemnifying Party shall not be liable to the Indemnified Party for legal expenses subsequently incurred by the Indemnified Party in connection with the defense thereof. If the Indemnifying Party assumes such defense, the Indemnified Party shall have the right to employ counsel, at its own expense, separate from the counsel employed by the Indemnifying Party, provided that the Indemnifying Party shall be permitted to control such defense and any settlement. If the Indemnifying Party does not assume the defense of a Third Party Claim within thirty (30) days following a Claim Notice, the Indemnified Party, by notice to the Indemnifying Party, may employ its own counsel and control the defense of the Third Party Claim and the Indemnifying Party shall be liable for the reasonable fees and disbursements of one counsel employed by the Indemnified Party in each applicable jurisdiction, provided that in any such case the Indemnified Party shall diligently and in good faith contest such Third Party Claim. Whether the Indemnifying Party or the Indemnified Party controls the defense of any Third Party Claim, the parties shall cooperate in the defense thereof. Such cooperation shall include the retention and provision to the counsel of the controlling party of records and information that are reasonably relevant to such Third Party Claim, and making employees available on a commercially reasonable, mutually convenient basis to provide additional information and explanation of any material provided hereunder. The Indemnifying Party shall have the right to settle, compromise or discharge a Third

- 63 -

Party Claim without the Indemnified Party’s consent if such settlement, compromise or discharge (i) constitutes a complete and unconditional discharge and release of the Indemnified Party, (ii) does not include any statement as to or an admission of fault, culpability or a failure to act by, or on behalf of, any such Indemnified Party and (iii) provides for no relief other than the payment of monetary damages and such monetary damages are paid by the Indemnifying Party (subject to, if Seller is the Indemnifying Party, the Deductible Amount, the Minimum Amount and the Maximum Amount, as provided above). No Third Party Claim may be settled by the Indemnified Party without the written consent of the Indemnifying Party. If the Indemnified Party desires to settle a Third Party Claim, it shall provide the Indemnifying Party with a written document signed by the Person making the Third Party Claim and the Indemnified Party setting forth the terms of the proposed settlement (the “Settlement Offer”). The Indemnifying Party shall not unreasonably withhold its consent to such proposed settlement unless it agrees that it shall indemnify the Indemnified Party with respect to such Third Party Claim in accordance with this Section 9, subject to the Maximum Amount, the Minimum Amount and the Deductible Amount, provided that the amount of the final settlement or judgment with respect to such Third Party Claim that is in excess of the amount of the Settlement Offer shall not be subject to the Maximum Amount nor shall it be applied against the Maximum Amount.

9.3.3

If an Indemnified Party has a claim against any Indemnifying Party that does not involve a Third Party Claim, the Indemnified Party shall deliver notice (an “Indemnity Notice”) within thirty (30) days after the Indemnified Party has Knowledge of any claim that the Indemnified Party has determined has given or could give rise to a right of indemnification under this Agreement describing in reasonable detail the facts giving rise to any claim for indemnification and shall include in such Indemnity Notice the amount or the method of computation of the amount of such claim, and a reference to the provision of this Agreement upon which such claim is based, provided, however, that failure to timely give such Indemnity Notice shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have (i) been prejudiced as a result of such failure or (ii) forfeited rights and defenses otherwise available to the Indemnifying Party as a result of such failure. If the Indemnifying Party disputes its liability with respect to such claim, the Indemnifying Party and the Indemnified Party will proceed in good faith to negotiate a resolution of such dispute, and if not resolved through negotiations within thirty (30) days, the Indemnified Party may commence an Action in connection therewith.

9.4 Tax Contests.

9.4.1

If any Taxing Authority asserts any Tax Claim, then the party hereto first receiving notice of such Tax Claim promptly shall provide written notice thereof to the other party. Such notice shall specify in reasonable detail the basis for such Tax Claim and shall include a copy of any relevant correspondence received from the Taxing Authority. However, failure to give such notice shall not affect the indemnification obligations under Section 9.1.1(c), except to the extent the Indemnifying Party shall have (i) been prejudiced as a result of such failure or (ii) forfeited rights and defenses otherwise available to the Indemnifying Party as a result of such failure.

9.4.2

Seller shall have the sole right to defend or prosecute, at its sole cost, expense and risk, any Tax Claim attributable to a Pre-Closing Period (except for any Tax Claim

- 64 -

attributable to a Straddle Period); provided that in the case of a Tax Claim relating to Apache it (i) acknowledges its responsibility to provide indemnification with respect to such claim and (ii) notifies Purchaser in writing within thirty (30) days of being notified of such Tax Claim that it intends to defend such claim. Purchaser and its authorized representatives shall be entitled, at Purchaser’s expense, to attend, but not participate in or control, all conferences, meetings and proceedings relating to any such Tax Claim attributable to a Pre-Closing Period. In the case of any such Tax Claim relating to Apache, Seller shall not settle or compromise such Tax Claim without Purchaser’s consent (which shall not be unreasonably withheld, delayed or conditioned) if such settlement or compromise would have an adverse effect on Purchaser or Apache in any Post-Closing Period. Purchaser shall have the sole right to defend or prosecute, any Tax Claim attributable to a Straddle Period. With respect to a Tax Claim attributable to a Straddle Period, Purchaser shall not settle or compromise such Tax Claim without Seller’s prior written consent (which consent shall not be unreasonably withheld, delayed or conditioned). Seller and its authorized representatives shall be entitled, at Seller’s expense, to attend, but not participate in or control, all conferences, meetings and proceedings relating to any Tax Claim attributable to a Straddle Period. Any party that does not have the right to defend or prosecute a particular Tax Claim shall take or cause to be taken such actions in connection with contesting such Tax Claim as the party defending or prosecuting such Tax Claim shall reasonably request from time to time. So long as Purchaser or Seller is defending or prosecuting a Tax Claim, Seller, Purchaser or Apache (as appropriate) shall provide or cause to be provided any information reasonably requested to the requesting party and relating to such Tax Claim. The parties shall otherwise cooperate with each other and each other’s representatives in good faith in order to contest effectively such Tax Claim including any necessary powers of attorney required to contest such Tax Claim.

9.4.3

In the case of any Tax Claim that is defended or prosecuted to a Final Determination pursuant to this Section 9.4, the party responsible for such Tax pursuant to Section 5.11 shall pay the amount of any Tax arising or resulting from such Tax Claim within seven days after such Final Determination. In the case of any Tax Claim not covered by the preceding sentence, the party responsible for such Tax pursuant to Section 5.11 shall pay the full amount of any Tax arising or resulting from such Tax Claim, at least seven (7) days before the date payment of such Tax is due. At its election, Seller shall pay the amount of Tax attributable to any Tax Claim directly to the appropriate Taxing Authority and send evidence of such payment to Purchaser or Apache, as appropriate.

9.5 Environmental Procedures.

9.5.1

The Purchaser Group Members shall provide prompt written notice to Seller with respect to any claim for indemnification under Sections 9.1.1(a) (with respect to the representations in Section 3.18 and 3.17, insofar as it relates to Permits issued pursuant to Environmental Law) and 9.1.2 of any order, demand, notice of potential liability, complaint or claim for indemnification by any Governmental Entity or other third party, or any other claim for indemnification that does not result for a third-party claim, in each case that may result in indemnified Losses (an “Environmental Claim”).

9.5.2

The Purchaser Group Members shall control the defense or negotiation (including, without limitation, any investigatory, response and remedial actions) of any Environmental Claim relating to the Real Property, including its compromise or

- 65 -

	settlement, with counsel and environmental consultant selected by the Purchaser Group Members reasonably acceptable to Seller. No compromise or settlement in respect of such Environmental Claim may be reached by the Purchaser Group Members without Seller’s prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed).
9.5.3	Seller shall have the right to control the defense or negotiation (including any investigatory, response or remedial actions) of any Environmental Claim concerning any real property other than the Real Property, including its compromise or settlement, with counsel and environmental consultant selected by Seller reasonably acceptable to the Purchaser Group Members. No compromise or settlement in respect of such Environmental Claim may be reached by Seller without the Purchaser Group Members’ prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed). If Seller has the right, but elects not to, control the defense of any such Environmental Claim, the Purchaser Group Members shall control the defense of any such Environmental Claim, including its compromise or settlement, with counsel and consultant selected by the Purchaser Group Members reasonably acceptable to Seller, and no compromise or settlement in respect of such Environmental Claim may be reached by the Purchaser Group Members without Seller’s prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed).
9.5.4	The Purchaser Group Members or Seller, as the case may be, with respect to any matter managed and controlled by the other, with the exception of Seller-controlled matters arising under Section 9.1.2(d) or Section 9.1.2(e), shall have the right to (i) participate fully in any meetings or negotiations with any Governmental Entity or other third party (excluding meetings attended solely by counsel, consultants or other experts retained by the controlling party) with respect to any Environmental Claim, including the scope, nature and schedule for implementation of any action relating thereto and shall be provided with reasonable advance notice of the same; and (ii) review in advance and provide comments on any documents proposed to be submitted to Governmental Entities or other third parties, including any proposed or final work plan, report, compliance schedule, compliance or consent order, decree or agreement.
9.5.5	To the extent an Environmental Claim involves the remediation of or other response action to address a condition on any real property or implementation of a compliance plan to address a non-compliance with Environmental Laws at the Real Property, Seller’s indemnification and reimbursement obligation shall be applicable to and include only the amount of any Losses attributable to such remediation or other response action or compliance plan performed or implemented by Purchaser or Seller, as the case may be, in a “Commercially Reasonable Manner”, which for the purposes of this Section 9.5.5 shall mean cost-effective methods for such remediation or other response action or compliance plan permitted by applicable Environmental Laws for industrial, commercial, agricultural or, to the extent applicable, residential purposes, as the case may be, for which the relevant Real Property is used on the Closing Date, determined from the perspective of a reasonable business person whose purpose (without regard to the availability of indemnification hereunder) is to achieve compliance with Environmental Laws or minimize liability under Environmental Law or to third parties with respect to the matter giving rise to the Environmental Claim (it being understood that (i) such Commercially Reasonable Manner shall include, where feasible, the use of risk-based remedies, including natural attenuation, institutional or

- 66 -

	engineering controls, or deed restrictions, provided such remedies and controls do not unreasonably interfere with Purchaser’s use of the Real Property or Purchaser’s ability to conduct the Businesses in the manner conducted as of the Closing Date; (ii) with respect to remediation or other response action on property other than the Real Property, the Commercially Reasonable Manner shall reflect the clean-up standard for the then current use of such property or such other standard as is required by the owner of such real property; and (iii) in the event of an actual conflict between (x) a requirement under applicable Environmental Law or an order, direction or mandate by a Governmental Entity to the extent relating to the basis for the Environmental Claim giving rise to Seller’s indemnification obligation and (y) what would otherwise be a Commercially Reasonable Manner, such requirement, order direction or mandate shall be deemed the Commercially Reasonable Manner). Seller and Purchaser Group Members agree that Purchaser Group Members may elect, for operational or other reasons in its discretion, to perform or implement a remediation or other response action or compliance plan at the Real Property that goes beyond what would be considered a “Commercially Reasonable Manner,” provided Purchaser Group Members shall be solely responsible for any cost or expense in excess of the amount that would have been required to perform such remediation or other response action or implement such compliance plan in a Commercially Reasonable Manner and Seller shall have no indemnification obligation for such additional costs or expenses.
9.5.6	Seller shall not be required to indemnify any Purchaser Group Member for any Loss resulting from voluntary sampling of soil, sediment or groundwater conducted by or initiated through the action of Purchaser, other than such actions: (i) required pursuant to any Environmental Law or Permits issued pursuant to Environmental Law, (ii) reasonably necessary to respond to an imminent hazard or emergency situation, (iii) reasonably necessary to respond to any Third Party Claim, (iv) undertaken as the result of a reasonable diligence request with respect to any future sale or financing transaction, or (v) provided such sampling is of a nature normally undertaken in connection with the activities being performed, and subject to the limitations of Section 9.5.8, undertaken in connection with any construction, repair or maintenance activities, or performed in the ordinary course of business (which includes sampling that ensues as a reasonable response to conditions otherwise discovered in the ordinary course of business but not sampling conducted without such reasonable cause).
9.5.7	Seller shall not be required to indemnify any Purchaser Group Member for any Loss to the extent resulting from (i) a change in use of the Real Property from industrial use to commercial or residential use; (ii) a change in use of the areas identified on Schedule 9.5.7 (it being understood that closure of such areas shall not be considered a change in use); or (iii) Purchaser’s failure to comply with the Voluntary Mitigation Use Restriction covering a portion of the Real Property recorded on December 23, 1998 at the Navajo County Records Office.
9.5.8	Seller shall not be required to indemnify any Purchaser Group Member for any Loss to the extent resulting from maintenance work (other than maintenance work normally performed by a prudent owner or operator of the Real Property), construction or demolition activities by or on behalf of any Purchaser Group Member on any areas identified on Schedule 9.5.8 unless such activities are required by Environmental Law or Permits issued pursuant to Environmental Law or ordered, directed or mandated by a Governmental Entity.

- 67 -

9.6	Exclusive Remedy.
	From and after the Closing, except for injunctive relief as contemplated by Section 11.16 and absent actual fraud, neither party shall be liable or responsible in any manner whatsoever to the other party (whether in contract, breach of warranty, tort or otherwise), whether for indemnification or otherwise, except for the indemnity obligations expressly provided in this Section 9 and any other indemnity obligations expressly provided for in this Agreement, which provide the exclusive remedies and causes of action of the parties with respect to any matter arising out of or in connection with this Agreement and the other Operative Agreements, and each party hereby expressly waives and releases any other claim or cause of action arising under law, including laws based on negligence or strict liability, or otherwise against the other party with respect to any matter, including environmental matters, arising out of or in connection with this Agreement and the other Operative Agreements.
9.7	Excluded/Included Damages.
	The obligations of any Indemnifying Party pursuant to this Agreement shall not include any special, exemplary, punitive, indirect, incidental or consequential damages (including loss of profit or revenue or loss of use) incurred by the Indemnified Party, provided that this shall not limit any damages representing lost profits that Purchaser may incur due to lost production caused by a delay in the commencement of the Outage or in the performance of work in connection therewith, in accordance with and subject to Section 5.16. For the purposes of this Section 9, Losses shall be calculated without regard to any materiality or Material Adverse Effect or similar qualifier.
9.8	Taxes.
	Purchaser and Seller agree that for purposes of computing the amount of any indemnification hereunder, any such indemnification payment shall be treated as an adjustment to the Adjusted Purchase Price for all Tax purposes.
9.9	Insurance and Mitigation.
	The liability of an Indemnifying Party pursuant to this Section 9 shall be reduced by any insurance proceeds received by any Indemnified Party in respect of such claim, less all out-of-pocket costs and expenses incurred by such Indemnified Party in connection with obtaining such insurance proceeds (including reasonable attorneys’ fees). Furthermore, an Indemnified Party shall use its commercially reasonable efforts (which shall be assessed without the benefit of hindsight) to mitigate any Losses with respect to which it wishes to seek indemnification hereunder, which obligation shall be limited to acting in a manner consistent in all material respects with the manner in which a reasonable person would have acted under similar circumstances if it was not entitled to indemnification hereunder; provided, that, any failure to so mitigate will only result in a reduction of Losses to the extent of any Loss attributable to such failure.
10.	DEFINITIONS
10.1	Definitions.
	As used in this Agreement, the following defined terms shall have the meanings indicated below:

- 68 -

10.1.1	“338(h)(10) Elections” has the meaning set forth in Section 1.11.
10.1.2	“Accounts Receivable” has the meaning set forth in Section 1.1.1.
10.1.3	“Action” means any action, suit, hearing, proceeding, arbitration, demand, claim, notice or Governmental Entity investigation or audit, whether civil, criminal, administrative or otherwise, including grievances.
10.1.4	“Adjusted Closing Net Working Capital” has the meaning set forth in Section 1.9.2.
10.1.5	“Adjusted Purchase Price” has the meaning set forth in Section 1.7.
10.1.6	“ADWR” means the Arizona Department of Water Resources.
10.1.7	“Affiliate” means, as applied to any Person, (i) any other Person directly or indirectly controlling, controlled by or under common control with, that Person, (ii) any other Person that owns or controls ten percent (10%) or more of any class of equity interest (including any equity interest issuable upon the exercise of any option, warrant, Contract right or convertible security) of that Person or any of its Affiliates, or (iii) any director, partner, officer, agent, employee or relative of such Person. For the purposes of this definition, “control” (including with correlative meanings, the terms “controlling”, “controlled by”, and “under common control with”) as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through ownership of voting securities or by Contract or otherwise.
10.1.8	“Affiliated Group” means any affiliated group within the meaning of Code §1504(a) or any similar group defined under a similar provision of state, local or foreign law.
10.1.9	“Agreed Allocation” has the meaning set for in Section 5.9.3.
10.1.10	“Agreement” means this Agreement and the Exhibits and Schedules hereto and the certificates delivered in connection herewith, as same may be amended, modified, supplemented, restated or replaced from time to time in accordance with the terms hereof.
10.1.11	“Apache” has the meaning set forth in the Recitals.
10.1.12	“Apache Collective Bargaining Agreements” has the meaning set forth in Section 6.1.
10.1.13	“Apache Employees” means employees of Apache who are employed on the Closing Date, including employees who are on military leave, sick leave, Family and Medical Leave Act leave, workers compensation, transitional work, long-term or short-term disability leave (whether pursuant to a Benefit Plan or required by Law).
10.1.14	“Apache Equipment Leases” means the equipment leases set forth on Schedule 10.1.14.
10.1.15	“Apache Financial Statements” has the meaning set forth in Section 3.4.2.

- 69 -

10.1.16	“Apache Inventory” means all of the inventory of finished goods, work in process, raw materials and supplies of Apache as at the Closing Date.
10.1.17	“Apache Leased Equipment” means the equipment that is leased by Apache pursuant to the Apache Equipment Leases.
10.1.18	“Apache Licensed Intellectual Property” means Apache’s right, title and interest in the intellectual property set forth in Schedule 10.1.18.
10.1.19	“Apache Owned Equipment” means the machinery, equipment, parts, furniture, fixtures, tools, leasehold improvements, telephone systems, computer systems, motor vehicles and other fixed assets that are owned by Apache as at the Closing Date.
10.1.20	“Apache Owned Real Property” means the real property described on Schedule 10.1.20, together with Apache’s right, title and interest in and to all buildings, structures, fixtures and improvements thereon.
10.1.21	“Apache Prepaid Items” means any credits, prepaid expenses, deferred charges, advanced payments, prepaid items and claims for refunds or reimbursements against third parties (but excluding cash security or other deposits) relating to Apache.
10.1.22	“Apache Purchase Price” has the meaning set forth in Section 1.7.
10.1.23	“Apache Shares” has the meaning set forth in the Recitals.
10.1.24	“APP Amendment Applications” has the meaning set forth in Section 2.3.13.
10.1.25	“Arizona Lease Application Form” means the lease application form attached as Exhibit 10.1.25.
10.1.26	“Arizona Lease Assignment and Assumption Agreement” means, in respect of each Newsprint Real Property Lease, the assignment of lease and assumption of lease obligations agreement in the form attached as Exhibit 10.1.26.
10.1.27	“Assignment and Assumption Agreement” has the meaning set forth in Section 2.2.6.
10.1.28	“Assumed Obligations” has the meaning set forth in Section 1.5.
10.1.29	“Assumed Redacted Contracts” has the meaning set forth in Section 1.3.3.
10.1.30	“Audited Financial Statements” has the meaning set forth in Section 5.13.
10.1.31	“Balance Sheet Date” has the meaning set forth in Section 3.4.3.
10.1.32	“Benefit Plan” means any Plan established with respect to any Apache Employee or Newsprint Employee to which Apache or Seller or any ERISA Affiliate of Apache or of Seller contributes or has contributed on behalf of any Apache Employee or Newsprint Employee, or under which any such employee or any beneficiary thereof is covered, is eligible for coverage or has benefit rights.
10.1.33	“Bill of Sale” has the meaning set forth in Section 2.2.1.

- 70 -

10.1.34	“Books and Records” means all files, documents, papers, books and records relating to a Person’s business, including with respect to accounts, customers (including credit related records), repair and performance.
10.1.35	“BSBCA Agreement” means the Group Master Contract (Group Contract No. 15885) effective as of April 1, 2001, between Blue Cross and Blue Shield of Arizona, Inc. and Abitibi Consolidated Inc., as amended.
10.1.36	“Business Day” means a day other than Saturday, Sunday or any day on which banks located in New York, New York, Vancouver, British Columbia or Montreal, Quebec are authorized or obligated to close.
10.1.37	“Business Employees” has the meaning set forth in Section 6.1.6.
10.1.38	“Businesses” means the Newsprint Business and the Railway Business and “Business” means either of such Businesses.
10.1.39	“Carpenters” has the meaning set forth in Section 6.1.
10.1.40	“Carpenters Agreement” has the meaning set forth in Section 6.1.
10.1.41	“Claim Notice” has the meaning set forth in Section 9.3.1.
10.1.42	“Closing” has the meaning set forth in Section 2.1.
10.1.43	“Closing Date” has the meaning set forth in Section 2.1.
10.1.44	“Closing Net Working Capital” has the meaning set forth in Section 1.9.1.
10.1.45	“Closing Net Working Capital Statement” has the meaning set forth in Section 1.9.1.
10.1.46	“Closing Time” has the meaning set forth in Section 2.1.
10.1.47	“COBRA” has the meaning set forth in Section 6.1.8.
10.1.48	“Code” means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder, and any successor legislation thereto.
10.1.49	“Cogeneration Facility” has the meaning set forth in Section 3.24.
10.1.50	“Collective Bargaining Agreements” means, collectively, the Newsprint Collective Bargaining Agreements and the Apache Collective Bargaining Agreements, and “Collective Bargaining Agreement” means any of them individually.
10.1.51	“Confidential Business Information” means all commercially sensitive information in any form heretofore or hereafter obtained by Seller to the extent relating to the Newsprint Business, the Newsprint Assets, Apache, or the Railway Business, whether pertaining to financial condition, results of operations, methods of operation or otherwise, other than information which is in the public domain through no violation of this Agreement and other than information to the extent relating to businesses of Seller and its Affiliates other than the Businesses.

- 71 -

10.1.52	“Confidential Information Memorandum” means the Confidential Information Memorandum dated November 2007 prepared by Seller and Scotia Capital Inc. regarding the Businesses.
10.1.53	“Confidentiality Agreement” has the meaning set forth in Section 11.5.
10.1.54	“Contract” means any contract, agreement, arrangement or undertaking.
10.1.55	“Covered Request” has the meaning set forth in Section 5.9.
10.1.56	“CPA Firm” has the meaning set forth in Section 1.9.2.
10.1.57	“Customers” has the meaning set forth in Section 3.22.1.
10.1.58	“Data Room” means the electronic data room established and maintained by Seller’s counsel containing documents relating to the Businesses, Seller and Apache and made available to Purchaser.
10.1.59	“Deductible Amount” has the meaning set forth in Section 9.1.1.
10.1.60	“Deed” has the meaning set forth in Section 2.2.3.
10.1.61	“DOJ” means the United States Department of Justice.
10.1.62	“Dollars” or “$” means United States dollars.
10.1.63	“Effective Date” has the meaning set forth in the Preamble.
10.1.64	“Encumbrance” or “Encumber” means any lien, mortgage, security interest, pledge, adverse claim, restriction on transferability, defect of title, or other claim, charge, or encumbrance of any nature whatsoever on any property or property interest, including any restriction on the use, voting, transfer, receipt of income, or other exercise of any attributes of ownership.
10.1.65	“Environmental Claim” has the meaning set forth in Section 9.5.1.
10.1.66	“Environmental Laws” means any foreign, federal, state or local law, statute, ordinance, rule, regulation, legally binding guidance document or directive, common law and all applicable judicial and administrative decisions, orders and decrees (collectively, “Laws and Standards”) that relate to pollution or protection of the environment or, insofar as such Laws and Standards relate to exposure to Hazardous Substances, human health or safety; in each case, as in effect on or prior to the Closing Date; provided, however, that solely for purposes of conducting any investigation, remediation, remedial action, monitoring or other response action (collectively, “Response Actions”) to address any Release or threatened Release of Hazardous Substances to soil, surface water, sediment or groundwater (collectively, “Applicable Environmental Media”) for which Seller has an indemnification obligation pursuant to Section 9, “Environmental Laws,” as applied to such Response Actions shall mean such Laws and Standards in effect at the time such Response Actions are performed with respect to any Applicable Environmental Media.

- 72 -

10.1.67	“Equipment” means, collectively, the Owned Equipment and the Leased Equipment.
10.1.68	“Equipment Leases” means, collectively, the Newsprint Equipment Leases and the Apache Equipment Leases.
10.1.69	“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.
10.1.70	“ERISA Affiliate” means any member of (i) a controlled group of corporations (as defined in Section 414(b) of the Code); (ii) a group of trades or businesses under common control (as defined in Section 414(c) of the Code); or (iii) an affiliated service group (as defined in Section 414(m) of the Code or the regulations under Section 414(o) of the Code).
10.1.71	“Estimated Closing Net Working Capital Statement” has the meaning set forth in Section 1.8.1.
10.1.72	“Estimated Net Working Capital” has the meaning set forth in Section 1.8.1.
10.1.73	“Estimated Adjusted Purchase Price” has the meaning set forth in Section 1.7.
10.1.74	“Estimated Purchase Price Adjustment Amount” has the meaning set forth in Section 1.8.2.
10.1.75	“Excluded Assets” has the meaning set forth in Section 1.3.1.
10.1.76	“Excluded Contracts” has the meaning set forth in Section 1.3.1.2.
10.1.77	“Excluded Newsprint Customer Order Liabilities” has the meaning set forth in Section 1.5.1.
10.1.78	“Excluded Intellectual Property” has the meaning set forth in Section 1.3.1.3.
10.1.79	“Exhibit C” has the meaning set forth in Section 6.1.3.
10.1.80	“Expenses” has the meaning set forth in Section 5.13.1.
10.1.81	“Extended Amount” has the meaning set forth in Section 7.2.4.
10.1.82	“Fees” has the meaning set forth in Section 5.13.1.
10.1.83	“FERC” means Federal Energy Regulatory Commission and its successors.
10.1.84	“Final Date” has the meaning set forth in Section 7.4.3.
10.1.85	“Final Determination” means (i) a decision, judgment, decree or other order by any court of competent jurisdiction, which decision, judgment, decree or other order has become final after all allowable appeals by either party to the action have been exhausted or the time for filing such appeals has expired, (ii) a closing agreement entered into under Section 7121 of the Code or any other settlement agreement entered into in connection with an administrative or judicial proceeding, (iii) the expiration of

- 73 -

	the time for instituting suit with respect to a claimed deficiency or (iv) the expiration of the time for instituting a claim for refund, or if such a claim was filed, the expiration of the time for instituting suit with respect thereto.
10.1.86	“Final Judgment” means the final judgment entered by the United States District Court for the District of Columbia on October 23, 2007 in “United States of America v. Abitibi-Consolidated Sales Corporation and Bowater Incorporated”.
10.1.87	“Final Prospectus” has the meaning set forth in Section 7.4.8.
10.1.88	“Financial Statements” means the Newsprint Financial Statements and the Apache Financial Statements.
10.1.89	“GAAP” means United States generally accepted accounting principles, consistently applied throughout the specified period and in the immediately prior comparable period.
10.1.90	“Governmental Entity” means any federal, state or local government, any political subdivision thereof or any court, administrative or regulatory agency, department, instrumentality, body or commission or other governmental authority or agency.
10.1.91	“Guaranty” means the guaranty by AbitibiBowater Inc. made as of the Effective Date in favour of Purchaser.
10.1.92	“Hazardous Substance” means any waste, pollutant, contaminant, hazardous substance, toxic or corrosive substance, hazardous waste, special waste, industrial substance, by-product, process-intermediate product or waste, petroleum or petroleum-derived substance or waste, asbestos or asbestos containing material polychlorinated biphenyl (“PCB”) or PCB-containing equipment, chemical liquids or solids, liquid or gaseous products, or any constituent of any such substance or waste; in each case that are regulated by, or may form the basis of liability under, Environmental Law due to the hazardous, toxic, corrosive, explosive or dangerous nature of such substance or waste.
10.1.93	“Hired Employee” has the meaning set forth in Section 6.1.6.
10.1.94	“Hourly Apache Employees” means all Apache Employees who are compensated on an hourly, as opposed to salaried, basis, whether represented by the UTU or the Carpenters or not represented.
10.1.95	“Hourly Newsprint Employees” means all Newsprint Employees who are compensated on an hourly, as opposed to salaried, basis, whether represented by the Steelworkers or the IBEW or not represented.
10.1.96	“IBEW” has the meaning set forth in Section 6.1.
10.1.97	“IBEW Agreement” has the meaning set forth in Section 6.1.
10.1.98	“IBEW Hourly Defined Contribution Plans” has the meaning set forth in Section 6.6.

- 74 -

10.1.99	“Income Tax” means any federal, state, local, or foreign income tax measured by or imposed on net income, including any interest, penalty, or addition thereto, whether disputed or not.
10.1.100	“Income Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to Income Taxes, including any schedule or attachment thereto.
10.1.101	“Indemnified Party” has the meaning set forth in Section 9.3.1.
10.1.102	“Indemnified Tax” means (i) all liabilities for Taxes (or the non-payment thereof) of (x) Seller with respect to the Newsprint Assets or the Newsprint Business and (y) Apache, for all Pre-Closing Periods, in each case in excess of the reserves for Taxes taken into account in determining Adjusted Closing Net Working Capital, (ii) all liabilities for Income Taxes for Pre-Closing Periods of any member of an Affiliated Group of which Apache (or any predecessor of the foregoing) is or was a member on or prior to the Closing Date, including pursuant to Treasury Regulation § 1.1502-6 (or any analogous or similar state, local, or foreign law or regulation), (iii) any and all liabilities for Taxes of any Person imposed on Apache for Pre-Closing Periods as a transferee or successor, by contract or otherwise and (iv) any liability for Tax in any Post-Closing Period that would not be payable but for Seller’s breach of the representation made in Section 3.8.4.
10.1.103	“Indemnifying Party” has the meaning set forth in Section 9.3.1.
10.1.104	“Indemnity Notice” has the meaning set forth in Section 9.3.3.
10.1.105	“Information Provider” has the meaning set forth in Section 5.4.2.
10.1.106	“Information Receiver” has the meaning set forth in Section 5.4.2.
10.1.107	“Intellectual Property Assets” means the Newsprint Licensed Intellectual Property, the Apache Licensed Intellectual Property and the Newsprint Know How.
10.1.108	“Interim Period” has the meaning set forth in Section 5.3.
10.1.109	“Inventory” means the Newsprint Inventory and the Apache Inventory.
10.1.110	“IRS” means the Internal Revenue Service.
10.1.111	“Joint Defense Agreement” has the meaning set forth in Section 5.1(d).
10.1.112	“Joint Defense Expense Agreement” has the meaning set forth in Section 5.1(d).
10.1.113	“Knowledge” means, (i) with respect to Seller, the actual knowledge of (a) John McKee, James Willis, Pierre Rougeau, Martin Savoie and Melanie Allaire, (b) Skip Hellerud (with respect to Sections 3.18 and 3.17 (insofar as it relates to Permits issued pursuant to Environmental Law) only), (c) Jeff Comer (with respect to Sections 3.9 and 3.14 only), (d) Johanne Desjardins (with respect to Section 3.8 only), (e) Alice Minville (with respect to Section 3.10 only) and (f) Rob Kreizenbeck, Chuck Amos and Mike

- 75 -

	Filipovic (each with respect to Section 3.11 only), in each case, without independent investigation and, (ii) with respect to Purchaser, means the actual knowledge of Richard Garneau, Paul Einarson, David Smales and Valerie Seager, in each case, without independent investigation. For greater certainty, none of the foregoing individuals shall have any personal liability hereunder.
10.1.114	“Leased Equipment” means the Newsprint Leased Equipment and the Apache Leased Equipment.
10.1.115	“Losses” means demands, claims, actions or causes of action, assessments, losses, damages, liabilities, costs and expenses, including interest, penalties, and reasonable attorneys’ fees and disbursements.
10.1.116	“Material Adverse Effect” means any event, change, effect, condition or circumstance that has occurred that, individually or in the aggregate with any other event, change, effect, condition or circumstance, has, or would be reasonably be expected to have, a material adverse effect upon the condition (financial or otherwise), business, assets, properties, operations or results of operations of the Newsprint Business and the Railway Business taken as a whole, other than any such effect to the extent resulting or arising from (a) any failure by Seller (with respect to the Newsprint Business) or Apache to meet any internal projections, forecasts, or revenue or earnings predictions for any period ending on or after the Effective Date (provided that the underlying causes of such failures shall not be excluded); (b) any adverse change, effect, event, occurrence, state of facts or development to the extent attributable to the announcement or pendency of the transactions contemplated by this Agreement (including any cancellations of or delays in customer orders, any reduction in sales, any disruption in supplier, distributor, partner or similar relationships or any loss of employees, in each case, to the extent attributable to the announcement or pendency of the transactions contemplated by this Agreement); (c) any adverse change, effect, occurrence, state of facts or development attributable to conditions affecting (i) the industries in which the Newsprint Business and Apache operate (including fluctuating conditions resulting from cyclicality, seasonality or weather patterns affecting the Newsprint Business and Apache, including their customers and suppliers), (ii) the U.S. or Canadian economy individually, or taken as a whole, (iii) the world economy, (iv) banking, financial or securities markets; (d) terrorist activities, hostilities or acts of war; (e) reductions of prices in response to reduction in prices offered by competitors; (f) any adverse change, effect, event, occurrence, state of facts or development resulting from or relating to compliance with the terms of, or the taking of any action required by, this Agreement or any of the other Operative Agreements; (g) any adverse change, effect, event, occurrence, state of facts or development after the date of this Agreement arising from or relating to any required change in accounting requirements or principles (including GAAP) or any change in applicable laws, rules or regulations or the interpretation or enforcement thereof, or other binding directives issued by Governmental Entity; or (h) any adverse change, effect, event, occurrence, state of facts or development arising from or relating to actions required to be taken under applicable laws, rules, regulations or Contracts; (i) any adverse change, effect, event, occurrence, state of facts or development arising from or relating to any act of Purchaser or any of its Affiliates or (j) any Permitted Encumbrances, Third Party Assets, Excluded Asset or Newsprint Retained Obligation; except in the cases of (c), (d), (e) or (g) above, only to the extent they do not adversely affect the Newsprint Business or the Railway Business in a

- 76 -

	disproportionate manner compared to other participants in the industries or markets in which the Newsprint Business or the Railway Business operate.
10.1.117	“Material Contracts” has the meaning set forth in Section 3.13.1.
10.1.118	“Material Permits” has the meaning set forth in Section 3.17.
10.1.119	“Maximum Amount” has the meaning set forth in Section 9.1.1.
10.1.120	“Minimum Amount” has the meaning set forth in Section 9.1.1.
10.1.121	“Multiemployer Plan” has the meaning set forth in Section 6.7.
10.1.122	“Multiemployer Plan Bond or Escrow” has the meaning set forth in Section 6.7.
10.1.123	“Negotiation Period” has the meaning set forth in Section 1.9.2.
10.1.124	“Net Working Capital” means all current assets (other than cash) less all current liabilities of the Newsprint Business and Apache (including all liabilities relating to any employee retention arrangements referred to on Schedule 3.13.1), prepared in a manner consistent with GAAP, the Financial Statements and Schedule 10.1.124 (but excluding Excluded Assets and Newsprint Retained Obligations). For greater certainty, (i) accruals with respect to the Outage shall be included in the determination of Net Working Capital as contemplated by Section 5.16.4 and (ii) the liability of approximately sixty seven thousand Dollars ($67,000) referred to in Section 5.15 that is being reversed by Seller shall not be included in the determination of Net Working Capital.
10.1.125	“Newsprint Acquired Books and Records” has the meaning set forth in Section 1.1.13.
10.1.126	“Newsprint Assets” has the meaning set forth in Section 1.1.
10.1.127	“Newsprint Assigned Permits” has the meaning set forth in Section 1.1.11.
10.1.128	“Newsprint Business” means the production of newsprint by Seller conducted with the Newsprint Assets at the facilities located on the Property and the production of medium for Stone Container pursuant to the Operating and Management Agreement, and all activities undertaken in connection therewith or incidental thereto, including the operation of the farm, the boilers and the electrical substation, the well field and the water lines connecting such well fields to the improvements, each of which is located on the Real Property.
10.1.129	“Newsprint Business Contracts” has the meaning set forth in Section 1.1.10.
10.1.130	“Newsprint Collective Bargaining Agreements” has the meaning set forth in Section 6.1.
10.1.131	“Newsprint Customer Orders” has the meaning set forth in Section 1.1.8.

- 77 -

10.1.132	“Newsprint Employees” means employees of Seller whose place of employment is the Real Property and who are employed on the Closing Date, including employees who are on military leave, sick leave, Family and Medical Leave Act leave, workers compensation, transitional work, long-term or short-term disability leave (whether pursuant to a Benefit Plan or required by Law).
10.1.133	“Newsprint Equipment Leases” has the meaning set forth in Section 1.1.6.
10.1.134	“Newsprint Financial Statements” has the meaning set forth in Section 3.4.1.
10.1.135	“Newsprint Insurance Claims” has the meaning set forth in Section 1.1.14.
10.1.136	“Newsprint Intellectual Property Licenses” has the meaning set forth in Section 1.1.7.
10.1.137	“Newsprint Inventory” has the meaning set forth in Section 1.1.2.
10.1.138	“Newsprint Know How” has the meaning set forth in Section 5.13.
10.1.139	“Newsprint Leased Equipment” has the meaning set forth in Section 1.1.6.
10.1.140	“Newsprint Leased Real Property” means, collectively, the immovable properties leased pursuant to the Newsprint Real Property Leases.
10.1.141	“Newsprint Licensed Intellectual Property” has the meaning set forth in Section 1.1.7.
10.1.142	“Newsprint Owned Equipment” has the meaning set forth in Section 1.1.5.
10.1.143	“Newsprint Owned Real Property” has the meaning set forth in Section 1.1.3.
10.1.144	“Newsprint Prepaid Items” has the meaning set forth in Section 1.1.15.
10.1.145	“Newsprint Purchase Orders” has the meaning set forth in Section 1.1.9.
10.1.146	“Newsprint Purchase Price” has the meaning set forth in Section 1.7.
10.1.147	“Newsprint Real Property Leases” has the meaning set forth in Section 1.1.4.
10.1.148	“Newsprint Retained Obligations” has the meaning set forth in Section 1.6.
10.1.149	“Newsprint Water Rights” has the meaning set forth in Section 1.1.16.
10.1.150	“Nonassignable Right” has the meaning set forth in Section 1.4.
10.1.151	“Normalized Net Working Capital” means one million two hundred thousand Dollars ($1,200,000).
10.1.152	“Notifying Party” has the meaning set forth in Section 5.9.

- 78 -

10.1.153	“OCC Supply Agreement” means that certain supply agreement to be entered into at the Closing between Seller or its applicable Affiliate, on the one hand, and Purchaser, on the other hand, in the form of Exhibit 10.1.153.
10.1.154	“Offering Amount” means proceeds of not less than one hundred twenty-five million Dollars ($125,000,000) and not greater than one hundred twenty-six million Dollars ($126,000,000) to be raised under the Rights Offering.
10.1.155	“ONP Supply Agreement” means that certain supply agreement to be entered into at the Closing between Seller or its applicable Affiliate, on the one hand, and Purchaser, on the other hand, in the form of Exhibit 10.1.155.
10.1.156	“Operating and Management Agreement” means the Operating and Management Agreement dated as of October 15, 1998, by and between Seller and Stone Container.
10.1.157	“Operative Agreements” means this Agreement and any other Contract to be entered into pursuant to or in connection with this Agreement, including the Bill of Sale, the Assignment and Assumption Agreement, the Deed, the Guaranty, the ONP Supply Agreement, the OCC Supply Agreement, the Transitional Services Agreement, the Stone Container Assignment, the Pension Plans Assignment and Assumption Agreement, the Welfare Benefit Plans Assignment and Assumption Agreement, the Arizona Lease Assignment and Assumption Agreements and the APP Amendment Applications.
10.1.158	“Outage” means the outage for the Newsprint Business scheduled to commence on April 21, 2008.
10.1.159	“Owned Equipment” means the Newsprint Owned Equipment and the Apache Owned Equipment.
10.1.160	“Owned Real Property” means the Newsprint Owned Real Property and the Apache Owned Real Property.
10.1.161	“Owned Tangible Real Assets” means all Structures and all structural, mechanical, and other physical systems thereof that constitute part of the Owned Real Property, including the walls, roofs, and structural elements thereof and the heating, ventilation, air conditioning, plumbing, electrical, communications, mechanical, water, sewer, waste water, storm water, paving, and parking equipment, systems, and facilities included therein.
10.1.162	“Participating Salaried Employees (401(k) Plan)” has the meaning set forth in Section 6.4.
10.1.163	“Participating Salaried Employees (Retirement Plan)” has the meaning set forth in Section 6.2.
10.1.164	“PBGC” means the Pension Benefit Guaranty Corporation.
10.1.165	“Pension Plans Assignment and Assumption Agreement” means the assignment and assumption agreement attached as Exhibit 10.1.165.

- 79 -

10.1.166	“Permits” means, collectively, all identification numbers, licenses, permits, certificates of authority, authorizations, approvals, registrations, franchises and similar consents required by any laws administered by any Governmental Entity, including those relating to Environmental Law and zoning.
10.1.167	“Permitted Liens” means (a) Encumbrances for Taxes and other governmental charges and assessments that are not yet due and payable, (b) Encumbrances of landlords, carriers, warehousemen, mechanics and materialmen, in each case arising in the ordinary course of business for sums not yet due and payable, (c) Encumbrances for water, sewer and other utility charges, (d) Encumbrances of title, easements, rights of ways, covenants, encumbrances, planning and zoning restrictions or other property rights that have either been disclosed in the Schedules or in the Surveys, if any, including any Encumbrances or imperfections of title set forth in the Title Commitment or that would be disclosed on a survey of such portion of the Real Property which is not covered by the Surveys, (e) with respect to the Owned Real Property, any applicable building and zoning ordinances, (f) Encumbrances of employees for salaries or wages earned but not yet paid, (g) Encumbrances of unpaid vendors of personal property, or other similar Encumbrances arising in the ordinary course of business, (h) any lease of personal property in which the lessor is Seller or Apache listed on Schedule 1.1.4, (i) Encumbrances set forth on Schedule 2.2.14 to be discharged on or prior to the Closing, and (j) all other matters affecting title that have been waived or consented to by Purchaser.
10.1.168	“Person” means any natural person, corporation, limited liability company, general partnership, limited partnership, other entity, trust, association or Governmental Entity.
10.1.169	“Plan” means any bonus, incentive compensation, deferred compensation, pension, profit sharing, retirement, stock purchase, stock option, stock ownership, stock appreciation rights, phantom stock, employment, consulting, retention, change-incontrol, leave of absence, layoff, vacation, day or dependent care, legal services, cafeteria, life, health, accident, disability, severance, separation or other employee benefit plan, practice, policy or arrangement of any kind, including, but not limited to, any “employee benefit plan” within the meaning of Section 3(3) of ERISA.
10.1.170	“Post-Closing Adjustment Amount” has the meaning set forth in Section 1.9.3.
10.1.171	“Post-Closing Period” means any taxable period or portion thereof beginning after the Closing Date. If a taxable period begins on or before the Closing Date and ends after the Closing Date, then the portion of any Tax which relates to the taxable period that begins after the Closing Date shall be deemed to be equal to the amount of Tax which would be payable if the taxable period began on the day after the Closing Date.
10.1.172	“Precedent Conditions” means with respect to a specified day that the Toronto Stock Exchange is open for business on such day and the divestiture period specified in Section IV of the Final Judgment has been extended such that such day is within the extension period.
10.1.173	“Pre-Closing Period” means any taxable period or portion thereof ending on or before the Closing Date. If a taxable period begins on or before the Closing Date and ends after the Closing Date, then the portion of any Tax which relates to the taxable period to

- 80 -

	and including the Closing Date shall be deemed to equal the amount of Tax which would be payable if the taxable period ended on the Closing Date.
10.1.174	“Preliminary Prospectus” has the meaning set forth in Section 7.4.8.
10.1.175	“Purchase Price” has the meaning set forth in Section 1.7.
10.1.176	“Purchaser” has the meaning set forth in the Preamble.
10.1.177	“Purchaser Group Members” means collectively Purchaser and Apache and their respective directors, officers, employees, agents and Affiliates, and “Purchaser Group Member” means any of them individually.
10.1.178	“Purchaser Parties” has the meaning set forth in Section 5.13.
10.1.179	“Purchaser’s Health, Welfare and Fringe Benefit Plans” has the meaning set forth in Section 6.8.
10.1.180	“Purchaser’s Hourly Pension Plan” has the meaning set forth in Section 6.3.
10.1.181	“Purchaser’s Objection” has the meaning set forth in Section 1.9.2.
10.1.182	Intentionnally omitted.
10.1.183	“Purchaser’s Salaried 401(k) Plan” has the meaning set forth in Section 6.4.
10.1.184	“Rail Carrier” means (i) a Person providing common carrier railroad transportation for compensation, but does not include street, suburban, or interurban electric railways not operated as part of the general system of rail transportation, (ii) any rail carrier operating in the U.S., Canada, or Mexico in which a rail carrier holds a controlling interest, and (iii) all other rail carriers involved in the transactions contemplated by this Agreement, except that it does not include carriers that are involved in the transaction only by virtue of an existing trackage rights agreement. For the purposes of this definition only, “control” means, when referring to a relationship between Persons, actual control, legal control, and the power to exercise control, through or by (x) common directors, officers, stockholders, a voting trust, or a holding or investment company, or (y) any other means.
10.1.185	“Railway Business” means the business and operation conducted by Apache.
10.1.186	“Real Property” means the Owned Real Property and the Newsprint Leased Real Property.
10.1.187	“Real Property Affidavit” has the meaning set forth in Section 2.2.9.
10.1.188	“Real Property Leases” means (i) the Newsprint Real Property Leases and (ii) the leases of real property to which Apache is party as tenant, if any.
10.1.189	“Redacted Contracts” has the meaning set forth in Section 1.3.3.

- 81 -

10.1.190	“Related Affiliates” means a Person that is affiliated with a Rail Carrier if, because of the relationship between that Person and a Rail Carrier, it is reasonable to believe that the affairs of another Rail Carrier, control of which may be acquired by that Person, will be managed in the interest of the other Rail Carrier.
10.1.191	“Related Party” means any Affiliate of Seller or Apache.
10.1.192	“Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, dumping or disposing in the environment.
10.1.193	“Retained Employees” has the meaning set forth in Section 6.1.1.
10.1.194	“Rights Offering” means an offering of transferable rights to acquire subscription receipts of Purchaser, each such subscription receipt being convertible into a certain number, to be determined in accordance with the terms of such offering, of common shares of Purchaser upon the Closing, to the holders of record of Purchaser’s issued and outstanding common shares as of a date specified by Purchaser pursuant to a short form prospectus under Canadian Law and a registration statement pursuant to United States Law to raise the Offering Amount to be used to fund a portion of the Purchase Price, including the related rights and obligations of TAVIX under the TAVIX Oversubscription Agreement and the Standby Commitment of the Standby Purchasers under the Standby Agreement.
10.1.195	“Salaried Apache Employees” means all Apache Employees who are compensated on a salaried, as opposed to hourly, basis.
10.1.196	“Salaried Employees” means the Salaried Apache Employees and the Salaried Newsprint Employees, collectively.
10.1.197	“Salaried Newsprint Employees” means all Newsprint Employees who are compensated on a salaried, as opposed to hourly, basis.
10.1.198	“Seller” has the meaning set forth in the Preamble.
10.1.199	“Seller Group Members” means collectively Seller and its Affiliates and their respective directors, officers, employees and agents and “Seller Group Member” means any of them individually.
10.1.200	“Seller’s Health, Welfare and Fringe Benefit Plans” has the meaning set forth in Section 6.8.
10.1.201	“Seller’s Hourly 401(k) Plan” has the meaning set forth in Section 6.5.
10.1.202	“Seller’s Hourly Pension Plan” has the meaning set forth in Section 6.3.
10.1.203	“Seller’s Salaried 401(k) Plan” has the meaning set forth in Section 6.4.
10.1.204	“Seller’s Salaried Employees Retirement Plan” has the meaning set forth in Section 6.2.
10.1.205	“Settlement Offer” has the meaning set forth in Section 9.3.2.

- 82 -

10.1.206	“Snowflake Accounts Receivable” has the meaning set forth in Section 1.1.1.
10.1.207	“Snowflake Lease” means the Ground Lease Agreement dated as of 2005, by and between Seller and Snowflake White Mountain Power, LLC, as amended, a copy of which was delivered or made available to Purchaser prior to the Effective Date.
10.1.208	“Standard Amount” has the meaning set forth in Section 7.2.4.
10.1.209	“Standby Agreement” means the standby agreement among the Purchaser and the Standby Purchasers dated February 10, 2008.
10.1.210	“Standby Commitment” means the commitment of each of the Standby Purchasers, severally (and not jointly and severally) to subscribe for subscription receipts representing up to an aggregate of twenty-five percent (25%) of the Offering Amount.
10.1.211	“Standby Purchasers” means Genuity Capital Markets and BMO Nesbitt Burns Inc.
10.1.212	“Steelworkers” has the meaning set forth in Section 6.1.
10.1.213	“Steelworkers Agreement” has the meaning set forth in Section 6.1.
10.1.214	“Stipulation” has the meaning set forth in Section 5.1(d).
10.1.215	“Stone Container” means Stone Container Corporation, a Delaware corporation.
10.1.216	“Stone Container Assignment” means the assignment and assumption agreement between Purchaser, Seller and, if Catalyst Paper Corporation has assigned this Agreement or its rights thereunder, Catalyst Paper Corporation, in the form attached as Exhibit 10.1.216.
10.1.217	“Stone Container Guaranty” means that certain guaranty made on October 15, 1998, by Abitibi Consolidated Inc. in favor of Stone Container and Stone Snowflake Newsprint Company.
10.1.218	“Stone Container Lease” means the Lease dated as of October 15, 1998, by and between Seller and Stone Container, as amended.
10.1.219	“Straddle Period” means a taxable period beginning on or before and ending after the Closing Date.
10.1.220	“Structures” means all buildings, structures, fixtures, facilities, and improvements on the Owned Real Property.
10.1.221	“Surveys” means the surveys listed on Schedule 3.10.1(a), copies of which were delivered or made available to Purchaser prior to the Effective Date.
10.1.222	“Survival Period” has the meaning set forth in Section 8.
10.1.223	“TAVIX” means Third Avenue International Value Fund.

- 83 -

10.1.224	“TAVIX Oversubscription Agreement” means the oversubscription agreement between TAVIX and Purchaser dated February 10, 2008.
10.1.225	“Tax” or “Taxes” means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Section 59A of the Code), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not.
10.1.226	“Tax Claim” means any written claim with respect to Taxes that, if pursued successfully could serve as the basis for a claim for indemnification under this Agreement.
10.1.227	“Taxing Authority” means any Governmental Entity of any United States federal, state or local jurisdiction, or any foreign jurisdiction having or purporting to exercise jurisdiction with respect to any Tax.
10.1.228	“Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any Schedule or attachment thereto, and including any amendment thereof.
10.1.229	“Termination Date” has the meaning set forth in Section 7.4.
10.1.230	“Termination Fee” means six million five hundred thousand Dollars ($6,500,000.00).
10.1.231	“Third Party Assets” has the meaning set forth in Section 1.3.2.
10.1.232	“Third Party Claim” has the meaning set forth in Section 9.3.1.
10.1.233	“Title Commitment” means the Commitment for Owner’s Title Insurance issued by Stewart Title Guaranty Company dated November 13, 2007 (Order Number 07100677), Amend. No. 1, Effective Date: February 4, 2008, as amended by the parties, a copy of which is attached as Exhibit 10.1.233.
10.1.234	“Title Insurance” means title insurance coverage in the ALTA 2006 Policy Form from any nationally recognized title insurance company related to the Owned Real Property, containing as exceptions only Permitted Liens and standard exceptions for policies of this type in the United States.
10.1.235	“Trade Receivables” has the meaning set forth in Section 1.1.1.
10.1.236	“Transitional Services Agreement” means that certain Transitional Services Agreement to be entered into at the Closing between Seller or any of its Affiliates on the one hand, and Purchaser, on the other hand, in the form of Exhibit 10.1.236.
10.1.237	“Trustee” means the trustee appointed pursuant to Part V of the Final Judgment.

- 84 -

10.1.238	“UTU” has the meaning set forth in Section 6.1.
10.1.239	“UTU Agreement” has the meaning set forth in Section 6.1.
10.1.240	“Violation” means any and all violations of law, rules, regulations, ordinances, orders or requirements noted in or issued by any federal, state, county, municipal or other department or governmental agency having jurisdiction against or affecting the Real Property whenever noted or issued.
10.1.241	“Water Rights Litigation” means the action captioned “In Re: The General Adjudication of All Rights to Use Water in the Little Colorado River System and Source”, Superior Court, Apache County, Arizona, Civil Case No. 6417, and any contested cases or other proceedings conducted in connection with that action; and any other Action that in whole or in part concerns the same or similar subject matter, including any Action or claim for indemnity, contribution or reimbursement of any other Losses, under any legal, equitable or contractual theory, that may arise from that action.
10.1.242	“Welfare Benefit Plans Assignment and Assumption Agreement” means the assignment and assumption agreement attached as Exhibit 10.1.242.
10.1.243	“Wells” has the meaning set forth in Section 3.10.6.

10.2	Schedules and Exhibits.
	The following Schedules and Exhibits are attached hereto and form an integral part of this Agreement:

Schedule 1.1.3	Newsprint Owned Real Property
Schedule 1.1.4	Newsprint Real Property Leases
Schedule 1.1.6	Newsprint Equipment Leases
Schedule 1.1.7	Newsprint Intellectual Property Licenses
Schedule 1.1.10	Newsprint Business Contracts
Schedule 1.3.1.2	Excluded Contracts
Schedule 1.3.1.4	Excluded Seller’s Claims
Schedule 1.3.2	Third Party Assets
Schedule 1.3.3	Redacted Contracts
Schedule 1.5.3	Assumed Actions
Schedule 1.5.5	Specific Assumed Obligations
Schedule 2.2.14	Encumbrances to be Discharged

- 85 -

Schedule 2.3.7	Guaranties and Letters of Credit
Schedule 3.1.2	Outstanding Shares of Apache
Schedule 3.3.3	No Violation (Seller)
Schedule 3.4.1	Unaudited Balance Sheets and Statements of Operation for the Newsprint Business
Schedule 3.4.2	Unaudited Balance Sheets and Statements of Operation for Apache
Schedule 3.4.3	Ordinary Course of Business
Schedule 3.5	Undisclosed Liabilities
Schedule 3.6	Actions
Schedule 3.7	Liabilities — Compliance with Laws and Orders
Schedule 3.8.5	Tax Disputes and Waivers of Statute of Limitation
Schedule 3.9.1(a)	List of Benefit Plans
Schedule 3.9.1(b)	Benefit Plans Document Not Provided
Schedule 3.9.2	Controlled Group, Single-Employer Defined Benefit Pension Plan Terminations, Multi Employer Plan withdrawals, Benefit Plan Contribution
Schedule 3.9.4	Qualified Benefit Plans Exceptions
Schedule 3.9.5	Payments
Schedule 3.9.8	Audits, Investigations, Proceedings
Schedule 3.10.1(a)	Description of Owned Real Property
Schedule 3.10.1(b)	Owned Real Property Encumbrances
Schedule 3.10.2	Illegal, Invalid or Non-Binding Real Property Lease
Schedule 3.10.3	Owed Real Property Exceptions
Schedule 3.10.4	Newsprint Water Rights
Schedule 3.10.5	Conservation Districts
Schedule 3.10.8	Unreviewed Title Exceptions
Schedule 3.11.1	Non-Operational Equipment
Schedule 3.11.2	Illegal, invalid or Non-Binding Equipment Leases

- 86 -

Schedule 3.11.3	Other Necessary Services
Schedule 3.12(a)	Intellectual Property Rights
Schedule 3.12(b)	Impairment of Rights in Intellectual Property Assets
Schedule 3.13.1	Material Contracts
Schedule 3.13.3(a)	Material Contracts Exceptions
Schedule 3.13.3(b)	No Material Default of Materials Contracts Exceptions
Schedule 3.13.3(c)	No Default of Other Parties to Materials Contracts Exceptions
Schedule 3.14.1	Employees
Schedule 3.14.2	Union Disputes, Grievances, Open Claims
Schedule 3.14.3	Arbitrations
Schedule 3.14.4	Written Agreements with Unions
Schedule 3.14.5	Layoffs
Schedule 3.16.1	Title Exceptions (Newsprint Assets)
Schedule 3.16.2	Title Exceptions (Apache Shares)
Schedule 3.17(a)	Material Permits
Schedule 3.17(b)	Non-Assignable Permits
Schedule 3.18	Environmental Matters
Schedule 3.19	Absence of Certain Changes
Schedule 3.21(a)	Related Party Transactions (Agreements)
Schedule 3.21(b)	Related Party Transactions (Balances/Receivables)
Schedule 3.22.1	Customers
Schedule 3.23	Shared Services
Schedule 4.3	No Violation (Purchaser)
Schedule 5.3	Conduct During Interim Period
Schedule 5.6	Intercompany Arrangements
Schedule 5.16(a)	Outage Capital Expenditures

- 87 -

Schedule 5.16(b)	Capital Improvements
Schedule 6.1.3	Exhibit C to the Steelworkers Agreement
Schedule 6.2	Salaried Newsprint Employees participating in Seller’s Salaried Employees Retirement Plan
Schedule 6.3	Participants in the Seller’s Hourly Pension Plan that are Represented by a Collective Bargaining Agreement
Schedule 6.4	Participating Salaried Employees (401(k) Plan)
Schedule 6.8	Period of Service of Employees
Schedule 6.10	Mike Filipovic Letter Agreement
Schedule 9.1.2	Known Environmental Matters
Schedule 9.5.7	Active Waste Management Areas
Schedule 9.5.8	Closed Landfills
Schedule 10.1.14	Apache Equipment Leases
Schedule 10.1.18	Apache Licensed Intellectual Property
Schedule 10.1.20	Apache Owned Real Property
Schedule 10.1.124	Net Working Capital
Exhibit 2.2.1	Bill of Sale
Exhibit 2.2.3	Deed
Exhibit 2.2.5	FIRPTA Certificate
Exhibit 2.2.6	Assignment and Assumption Agreement
Exhibit 2.2.9	Real Property Affidavit
Exhibit 2.3.1	Seller’s Wire Instructions
Exhibit 10.1.26	Arizona Lease Assignment and Assumption Agreement
Exhibit 10.1.25	Arizona Lease Application Form
Exhibit 10.1.153	OCC Supply Agreement
Exhibit 10.1.155	ONP Supply Agreement
Exhibit 10.1.165	Pension Plans Assignment and Assumption Agreement

- 88 -

Exhibit 10.1.216	Stone Container Assignment
Exhibit 10.1.233	Title Commitment
Exhibit 10.1.236	Transitional Services Agreement
Exhibit 10.1.242	Welfare Benefit Plans Assignment and Assumption Agreement

10.3	Language.
	Unless the context of this Agreement otherwise requires, (i) words of any gender include each other gender; (ii) words using the singular or plural number also include the plural or singular number, respectively; (iii) the terms “hereof,” “herein,” “hereby” and derivative or similar words refer to this entire Agreement; (iv) the term “Section” refers to the specified Section of this Agreement; (v) the term “other party” refers to Seller, on the one hand, and Purchaser, on the other; (vi) the phrase “ordinary course of business” refers to the business and practice of Seller and (vii) the phrases “include” and “including” shall mean “include without limitation” and “including without limitation”. All accounting terms used herein and not expressly defined herein shall have the meanings given to them under GAAP. The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if”. To the extent a Schedule is used to define a term, where such term is used in this Agreement such term shall also include such items that should have been included on such Schedule but were omitted.
11.	MISCELLANEOUS
11.1	Notices
	All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given as provided below:
	If to Seller:
	Abitibi Consolidated Sales Corporation c/o AbitibiBowater Inc. 1155 Metcalfe St. Suite 800 Montreal, Quebec H3C 2R5
	Facsimile No.: (514) 394-3644
	Attn: Legal Department
	with a copy (which shall not constitute notice) to:

- 89 -

Davies Ward Phillips & Vineberg LLP
1501 McGill College Avenue
26th Floor
Montreal, Quebec H3A3N9

Facsimile No.: (514) 841-6499

Attn: Sébastien Savage

If to Purchaser:

Catalyst Paper Corporation
3600 Lysander Lane
2nd Floor
Richmond, BC V7B 1C3

Facsimile No.: (604) 247-0551

Attn: Vice President and General Counsel

with a copy (which shall not constitute notice) to:

Fried, Frank, Harris Shriver & Jacobson LLP
One New York Plaza
New York, NY 10004

Facsimile No.: (212) 859-4000

Attn: Jeffrey Bagner

All such notices, requests and other communications will (i) if delivered personally to the address as provided in this Section, be deemed given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided in this Section, be deemed given upon receipt (or if such day is not a Business Day or if received after normal business hours, on the next Business Day), (iii) if delivered by mail in the manner described above to the address as provided in this Section, be deemed given upon receipt provided that such notice is sent by certified mail and (iv) if delivered by overnight courier to the address as provided in this Section, be deemed given upon receipt (in each case regardless of whether such notice, request or other communication is received by any other Person to whom a copy of such notice is to be delivered pursuant to this Section). Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving notice specifying such change to the other party. If any party refuses to accept delivery of a notice hereunder, such notice shall be deemed to have been received on the day such delivery is refused.

11.2	Entire Agreement
	This Agreement and the other Operative Agreements supersede all prior discussions and agreements between the parties with respect to the subject matter hereof and thereof and contain

- 90 -

	the sole and entire agreement between the parties hereto with respect to the subject matter hereof and thereof (other than the Confidentiality Agreement).
11.3	Further Assurance.
	If at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement or any other Operative Agreement, each of the parties shall take such further action (including the execution and delivery of such further instruments and documents) as any other party reasonably may request. Without limiting the generality of the foregoing, if after the Closing, Purchaser or Seller discovers that any Newsprint Asset was not assigned, conveyed, transferred, subleased, sold or delivered as contemplated herein or that any Assumed Obligation was not assumed as contemplated herein, Purchaser or Seller shall, upon written notice from the other party, in the case of Seller promptly take such further action as Purchaser reasonably may request to promptly convey such Newsprint Asset to Purchaser as contemplated herein, and in the case of Purchaser promptly take such further action as Seller reasonably may request to promptly assume such Assumed Obligation as contemplated herein.
11.4	Expenses.
	Except as otherwise expressly provided in this Agreement, each party will pay its own costs and expenses incident to its negotiation and preparation of this Agreement and the other Operative Agreements and the performance of its obligations hereunder and thereunder.
11.5	Confidentiality Agreement.
	Subject to Section 5.5, the Confidentiality Agreement dated November 15, 2007, between Seller and Purchaser (the “Confidentiality Agreement”) remains in full force and effect until the Closing Date.
11.6	Waiver.
	Any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving such term or condition. No waiver by any party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion.
11.7	Amendment.
	This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of each party hereto.
11.8	No Third Party Beneficiary.
	The terms and provisions of this Agreement are intended solely for the benefit of each party hereto and their respective successors or permitted assigns, and it is not the intention of the parties to confer third-party beneficiary rights, and this Agreement does not confer any such rights, upon any other Person other than any Person entitled to indemnity pursuant to this Agreement. Without limiting the foregoing, nothing in this Agreement is intended to or shall

- 91 -

	confer upon any employee or former employee of Seller or Apache, any legal or equitable right, benefit or remedy of any nature whatsoever, including any right of employment for any specified period.
11.9	No Assignment; Binding Effect.
	Neither this Agreement nor any right, interest or obligation hereunder may be assigned by any party hereto without the prior written consent of the other party and any attempt to do so will be void; provided that (i) Purchaser shall be entitled to assign this Agreement on or prior to the Closing to a wholly-owned subsidiary of Purchaser, provided that such assignment shall not relieve Purchaser of its obligations hereunder and/or under the other Operative Agreements, and the consent of Seller shall not be required in order to do so, and (ii) Seller may assign this Agreement to the Trustee. Subject to the first sentence of this Section 11.9, this Agreement is binding upon, inures to the benefit of and is enforceable by the parties hereto and their respective successors and permitted assigns.
11.10	Headings.
	Section titles and headings to sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. The Schedules and Exhibits referred to herein shall be construed with and as an integral part of this Agreement to the same extent as if they were set forth verbatim herein. The specification of any dollar amount in the representations or warranties contained in this Agreement or the inclusion of any specific item in any Schedules hereto is not intended to imply that such amounts, or higher amounts, or the items so included or other items, are material, and Purchaser shall not use the fact of the setting of such amounts or the inclusion of any such item in any dispute or controversy between the parties as to whether any obligation, item or matter not described herein or included in a Schedule is material for the purposes of this Agreement.
11.11	Invalid Provisions.
	If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future law, and if the rights or obligations of any party hereto under this Agreement will not be materially and adversely affected thereby, (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, and (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom.
11.12	Governing Law.
	This Agreement shall be governed by and construed in accordance with the domestic laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.
11.13	Submission to Jurisdiction; Consent to Service of Process.

11.13.1 Seller and Purchaser hereby irrevocably submit in any Action arising out of or related to this Agreement or any of the transactions contemplated hereby to the jurisdiction of

- 92 -

	the United States District Court for the Southern District of New York and the jurisdiction of any court of the State of New York located in the Borough of Manhattan, State of New York and waive any and all objections to jurisdiction (including forum non conveniens) that they may have under the laws of the State of New York or the United States.
11.13.2	As a method of service, each of the parties hereto hereby irrevocably consents to the service of any and all process in any Action brought in any court in or for the State of New York by the deliveries of copies of such process to such party at its respective address set forth in Section 11.1 hereof or by certified mail direct to such address.

11.14	Construction.
	The parties hereto agree that this Agreement is the product of negotiation between sophisticated parties and individuals, all of whom were represented by counsel, and each of whom had an opportunity to participate in and did participate in, the drafting of each provision hereof. Accordingly, ambiguities in this Agreement, if any, shall not be construed strictly or in favor of or against any party hereto but rather shall be given a fair and reasonable construction without regard to the rule of contra proferentum.
11.15	Counterparts.
	This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.
11.16	Specific Performance.
	The parties acknowledge and agree that any breach of the terms of this Agreement by either party would give rise to irreparable harm for which money damages would not be an adequate remedy and accordingly the parties agree that, in addition to any other remedies, each party shall be entitled to enforce the terms of this Agreement against the other party by a decree of specific performance without the necessity of proving the inadequacy of money damages as a remedy. Seller’s sole and exclusive remedies following termination of this Agreement pursuant to Section 7.4.8 shall be the remedies set forth in Section 7.5.2 and (i) Seller shall not seek to recover any money damages in excess of such amount from Purchaser other than as provided in Section 9.2.9; and (ii) in no event shall any Affiliate or representative of Purchaser have any other liability or obligation relating to or arising out this Agreement or the transactions contemplated by this Agreement.

The Remainder of this Page Intentionally Left Blank

- S1 -

     IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by each party hereto as of the date first above written.

ABITIBI CONSOLIDATED SALES CORPORATION
by	/s/ Colin Keeler Name: Colin Keeler
	Title: Vice President
	/s/ Breen Blaine
	Name: Breen Blaine
	Title: President
CATALYST PAPER CORPORATION
by	/s/ David Smales
	Name: David Smales
	Title: Vice President, Finance and           Chief Financial Officer

EX-10.1

EXHIBIT 10.1

September 28, 2007

Mr. Pierre Rougeau
394 Lakeshore Rd
Beaconsfield, Quebec
H9W 4H9

Re: Offer letter

Dear Pierre,

We are pleased to offer you the position of Senior Vice President North American Newsprint Business, in the new AbitibiBowater, Inc. The following are details as agreed upon on this date:

Location:     Montreal, Quebec, Canada

Effective Date:

The offer is contingent on conclusion of the Merger and will be effective at such date.

Compensation:

Your annual base salary, effective the date of the merger, will be US$450,000. You will be eligible to participate in a short-term incentive plan with a target level of 70% of your base salary. In addition, you will receive a signing bonus of US$50,000, to be paid as soon as practical following the closing.

We will request that the Human Resources and Compensation Committee (HRCC) of the new company, at its first meeting, approve base compensation and incentive targets for the new executive team and approve several compensation redesigns. We anticipate closing the 2007 Annual Incentive Plan effective with the merger and will substitute a new plan for the remainder of 2007 and all of 2008, emphasizing achievement of synergies.

Additionally, for executives at your level, we will request an equity award tied to synergy achievement. We anticipate continuing annual equity grants of similar value as you currently receive and a target level of ownership of common shares may be required. Previous equity awards will roll-over into the New Company and will be paid according to the initial payout schedule.

You will also be eligible for a perquisite allowance of US$12,000 per year as well as a complete annual medical examination.

Offer Letters — ACI in Mtl P Rougeau 2 1/2

Other benefits:

Subject to the approval of the new HRCC, you will be covered by an employment agreement and a new Change in Control (CIC) agreement.

You will maintain your current participation in various benefit plans such as pension, group insurance and vacation. However, following the merger, the new company intends to harmonize certain benefits offered to salaried employees, including senior executives, which may lead to changes in the current benefits. You will be informed about any changes at the appropriate time.

We are excited about the prospects of the combination of the two companies and look forward to having you join us on the leadership team. It will be a challenge.

Please acknowledge receipt of this offer letter and agreement with its terms by signing the two originals and returning one copy to Viateur Camiré on or before October 3, 2007.

/s/ John W. Weaver John W. Weaver	/s/ David J. Paterson David J. Paterson
Executive Chairman	President and Chief Executive Officer
I accept this offer:
/s/ Pierre Rougeau	OCT, 4, 2007
Pierre Rougeau	Date

Offer Letters — ACI in Mtl P Rougeau 2 2/2

EX-10.2

EXHIBIT 10.2

SEVERANCE COMPENSATION AGREEMENT

THIS AGREEMENT made the 1^st day of April, 2002.

BETWEEN:

ABITIBI–CONSOLIDATED INC., a company amalgamated under the laws of Canada

(the “Corporation”)

– and –

PIERRE ROUGEAU, an individual residing in the City of Senneville, in the province of Québec

(the “Executive”)

RECITALS:

A.	The Executive is a senior officer of the Corporation and is considered by the Board of Directors of the Corporation to be a valued employee of the Corporation and has acquired outstanding and special skills and abilities and an extensive background in and knowledge of the Corporation’s business and the industry in which it is engaged.
B.	The Board of Directors recognizes that it is essential and in the best interests of the Corporation and its shareholders that the Corporation retain the continuing dedication of the Executive to his office and employment.
C.	The Board of Directors further believes that the past service of the Executive to the Corporation requires that the Executive receive fair treatment, in the event of a change in control of the Corporation.
D.	It is desirable to clarify the scope of the arrangements under this Agreement.

          NOW THEREFORE in consideration of these premises and the mutual covenants herein contained and in consideration of the Executive continuing in office and in the employment of the Corporation, the Corporation and the Executive hereby covenant and agree as follows:

April 1, 2002

-2-

1. Definitions

In this Agreement,

(a)	“Agreement” means this agreement and all schedules attached to this agreement, in each case as they may be restated, amended or supplemented from time to time, and the expressions “hereof, “herein”, “hereto”, “hereunder”, “hereby”, and similar expressions refer to this agreement and, unless otherwise indicated, references to sections are to sections in this agreement;
(b)	“Annual Compensation” means the aggregate of (i) the annual base salary of the Executive, payable by the Corporation as at the end of the month immediately preceding the month in which the termination of employment hereunder takes effect; and (ii) the greater of (A) the last bonus payment earned by the Executive pursuant to the Key Executive Incentive Plan in the fiscal year immediately preceding the termination of the Executive’s employment hereunder; or (B) an amount equal to the average of the bonus payments earned by the Executive pursuant to the Key Executive Incentive Plan in the two fiscal years immediately preceding the termination of the Executive’s employment hereunder;
(c)	“Change of Control” means any of:

(i)	The acquisition, directly or indirectly and by any means whatsoever, by any person, or by a group of persons acting jointly or in concert, of that number of Voting Shares which is equal to or greater than 35% of the total issued and outstanding Voting Shares immediately after such acquisition unless another person or group of persons has previously acquired and continues to hold a number of Voting Shares which represents a greater percentage than the first-mentioned person or group of persons;
(ii)	The election or appointment by any holder of Voting Shares, or by any group of holders of Voting Shares acting jointly or in concert, of a number of members of the Board of Directors of the Corporation equal to or greater than one third of the members of the Board of Directors unless another holder or group of holders has previously elected or appointed a greater number of members of the Board of Directors and re-elects such greater number of members at the same time as the first-mentioned holder or group of holders;
(iii)	Any transaction or series of transactions, whether by way of reconstruction, reorganization, consolidation, amalgamation, arrangement, merger, transfer, sale or otherwise, whereby assets of the Corporation become the property of any other person (other than a subsidiary of the Corporation) if such assets which become the property of any other person have a fair market value (net of the fair market value of any then existing liabilities of the Corporation assumed by such other person as part of the same transaction) equal to 50%

Canadian SCA — Pierre Rougeau April 1, 2002

-3-

	or more of the Market Capitalization of the Corporation immediately before such transaction; or
(iv)	The completion of any transaction or the first of a series of transactions which would have the same or similar effect as any transaction or series of transactions referred to in paragraphs (i), (ii) and (iii) above;

(d) “Disability” means the mental or physical state of the Executive such that:

(i)

The directors of the Corporation, other than the Executive if he is a director, unanimously determine that the Executive has been unable, due to illness, disease, mental or physical disability or similar cause, to fulfil his obligations as an employee or officer of the Corporation either for any consecutive 6 month period or for any period of 12 months (whether or not consecutive) in any consecutive 24 month period; or

(ii)

A court of competent jurisdiction has declared the Executive to be mentally incompetent or incapable of managing his affairs;

(e) “Good Reason” means:

(i)	Without the express written consent of the Executive, the assignment to the Executive of any duties materially inconsistent with his positions, duties and responsibilities with the Corporation immediately prior to the date hereof or any removal of the Executive from, or any failure to re-elect the Executive to, material positions, duties and responsibilities with the Corporation, except in connection with the termination of the Executive’s employment for Just Cause, Disability or Retirement or as a result of the Executive’s death or by the Executive other than for Good Reason;
(ii)	A reduction by the Corporation in the Executive’s salary as in effect on the date hereof or as the same may be increased from time to time;
(iii)	The failure by the Corporation to continue in effect any incentive or compensation plan, or any pension, life insurance, health and accident or disability plan in which the Executive is participating at the date hereof, (or plans providing the Executive with substantially similar benefits) unless such plans have been replaced by new plans providing the Executive with benefits that are as good as or better than the benefits provided in such plans, or the taking of any action by the Company which would adversely affect the Executive’s participation in or materially reduce the Executive’s benefits under any of such plans or deprive the Executive of any material fringe benefit enjoyed by him at the date hereof;
(iv)	The requirement that the Executive be based anywhere other than the Corporation’s principal executive offices except for required travel on the Corporation’s business to an extent substantially consistent with the

Canadian SCA — Pierre Rougeau April 1, 2002

-4-

Executive’s present employment or travel obligations, or in the event the Executive consents to any such relocation, the failure by the Corporation to pay (or reimburse the Executive for) all reasonable moving expenses incurred by the Executive or to indemnify the Executive against any excess in (A) the cost of a principal residence in the new location which is comparable to the Executive’s principal residence at the time of the relocation, over (B) the amount realized by the Executive upon the sale of his principal residence at the time of the relocation; or

(v)

Any reason which would be considered to amount to constructive dismissal by a court of competent jurisdiction;

(f)	“Just Cause” means wilful failure of the Executive to properly carry out his duties after written notice by the Corporation of the failure to do so and an opportunity for the Executive to correct the same within a reasonable time from the date of receipt of such written notice from the Corporation, or theft, fraud or dishonesty or material misconduct by the Executive involving the property or affairs of the Corporation or the carrying out of the Executive’s duties;
(g)	“Key Executive Incentive Plan” means any program adopted by the Corporation from time to time with the intention of providing bonus or similar compensation to the executives of the Corporation;
(h)	“Market Capitalization of the Corporation” at any time means the product of (i) the number of outstanding common shares of the Corporation at that time, and (ii) the average of the closing prices for the common shares of the Corporation on the principal securities exchange (in terms of volume of trading) on which the common shares of the Corporation are listed at that time for each of the last 10 days prior to such time on which the common shares of the Corporation traded on such securities exchange;
(i)	“Person” means includes an individual, partnership, association, body corporate, trustee, executor, administrator, legal representative and any national, provincial, state or municipal government;
(j)	“Retirement” means the retirement or early retirement of the Executive in accordance with the terms of the Retirement Agreement;
(k)	“Retirement Agreement” means any agreement between the Corporation and the Executive, under which the Corporation agreed to pay the Executive a retirement allowance following his retirement or early retirement from employment with the Corporation, in accordance with the terms of that agreement and including any amendments made from time to time to such agreement;
(l)	“Stock Option Plans” means the Abitibi-Consolidated Inc. Stock Option Plan and any similar plan of the Corporation under which the Corporation from time to time

Canadian SCA — Pierre Rougeau April 1, 2002

-5-

	grants options to purchase Voting Shares of the Corporation and loans for the purpose of exercising such options;
(m)	“Subsidiary” has the meaning ascribed to it in the Canada Business Corporations Act, as in force on the date hereof; and
(n)	“Voting Shares” means any securities of the Corporation ordinarily carrying the right to vote at elections of directors.

2. Scope of Agreement

          The parties hereto intend that this Agreement set out their respective rights and obligations in certain circumstances in which the Executive’s employment is terminated. This Agreement does not purport to provide for any other terms of the Executive’s employment with the Corporation.

3. Position, Duties and Responsibilities of Executive

          The Executive shall continue to have the responsibilities and powers that he currently has or such other responsibilities and powers as he and the Corporation may from time to time agree upon. The Executive shall devote the whole of his working time to the Executive’s duties and shall use his best efforts to promote the interests of the Corporation.

4. Termination of Employment by the Corporation for Just Cause

          The Corporation may terminate the Executive’s employment at any time without notice or further obligations to the Executive under this Agreement for reasons of Just Cause. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Just Cause unless and until there has been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board of Directors of the Corporation (excluding the Executive if the Executive is at that time a director of the Corporation) at a meeting of the Board called and held for the purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with his legal counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Executive was guilty of conduct constituting Just Cause and specifying the particulars thereof. The effective date of any termination pursuant to this section shall be the date on which such resolution is given to the Executive.

5. Termination of Employment by the Corporation Without Just Cause or by the Executive for Good Reason

          If at any time within two years following a Change of Control the Executive’s employment is terminated, (a) by the Corporation other than for Just Cause or (b) by the Executive in response to a Good Reason, the following provisions shall apply:

Canadian SCA — Pierre Rougeau April 1, 2002

-6-

(a)	The Executive shall be entitled to receive, and the Corporation shall pay to the Executive, immediately following termination, a cash amount equal to three times the Annual Compensation of the Executive less required statutory deductions;
(b)	The Executive shall continue to receive until the earlier of (i) three years after the date of termination or (ii) receipt of equivalent benefits from a new employer, all group benefits including health, dental, life and car allowance (excluding all maintenance and operating expenses) other than disability insurance benefits on the scale provided by the Corporation to the Executive as at the date of termination or in lieu of such continued coverage, the Executive shall be entitled to receive a cash amount equal to the value to the Executive (as determined by a chartered accountant or firm of chartered accountants acceptable to the Corporation and the Executive) of such coverage for such period of time;
(c)	The Executive will also be entitled to receive on termination the normal and any supplementary pension benefits in effect on the date of termination according to the terms of the Corporation’s registered pension plans and the Retirement Agreement or according to similar provisions of any successor plan, of which the Executive is a member at the date of termination (the “Retirement Plans”). The Executive’s total pension entitlement and retirement options will be determined on the basis that the Executive had three years of credited service and age under the Retirement Plans at his date of termination of employment (over and above his actual years of credited service as otherwise determined). In addition, such additional years of service shall be included for the purpose of determining final or best average earnings assuming that the Executive’s monthly rate of salary at date of termination would have continued unchanged during the period of additional service. For Retirement Plans that include performance bonuses in the definition of pensionable earnings, the average of the highest three actual bonuses earned in the five years immediately prior to the date of termination shall be used for calculating the bonuses for each year during the severance period used for the purpose of determining final or best average earnings. Any portion of the total pension entitlement of the Executive not eligible to be paid under provisions of the registered pension plans of the Corporation shall be payable as supplementary payments in accordance with the Retirement Agreement;
(d)	if at the date of termination of the Executive’s employment, the Executive holds options for the purchase of shares under the Stock Option Plans, all options so held shall, unless the Executive has breached the terms of section 13 hereof, (i) immediately vest to the extent they have not already vested at such date and (ii) continue to be held, in both cases, notwithstanding the terms of the Stock Option Plans, on the same terms and conditions as if the Executive continued to be employed by the Corporation;

Canadian SCA — Pierre Rougeau April 1, 2002

-7-

(e) If at the date of the termination of the Executive’s employment, the Executive owes any money to the Corporation pursuant to loans to the Executive for the purchase of shares under the Stock Option Plans or for assisting the Executive to purchase property, such loans shall, notwithstanding the terms of any other agreement between the Corporation and the Executive respecting these loans, be repayable by the Executive in the same manner and at the same time as if the Executive continued to be employed by the Corporation following such termination, provided that if the Executive has breached the terms of section 13 hereof, the loans shall become immediately due on the date of such breach and shall be repaid forthwith.

For greater certainty, this section 5 applies with respect to each Change of Control until this Agreement has been terminated in accordance with section 14 hereof. In addition, with respect to a particular Change of Control, this section 5 expires two years following such Change of Control unless this Agreement is otherwise terminated in accordance with section 14 hereof. This section 5 does not apply in the event of the termination of the employment of the Executive as a result of death, Disability or Retirement or by the Executive otherwise than in response to a Good Reason or by the Corporation for Just Cause. If the Executive or the Corporation intend to terminate the Executive’s employment as contemplated in this section, the party having such intention shall give the other notice thereof and the effective date of such termination shall be the date on which such notice is given to the other party.

6. Disability

          In the event of Disability of the Executive, this Agreement may be terminated by the Corporation on thirty days’ notice. Notwithstanding anything contained in this Section 6, the Executive shall be entitled to all benefits provided under the disability and pension plans of the Corporation applicable to the Executive at the date of this Agreement.

7. No Obligation to Mitigate

          The Executive shall not be required to mitigate the amount of any payment or benefit provided for in section 5 of this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for in section 5(a) be reduced by any compensation earned by the Executive as a result of employment by another employer after termination or otherwise.

8. Binding on Successors

(a) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation, by agreement in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. Failure of the Corporation to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Corporation on the same terms and conditions as the Executive would be entitled hereunder if the

Canadian SCA — Pierre Rougeau April 1, 2002

-8-

Executive terminated his employment for Good Reason. As used in this Agreement, “Corporation” shall mean the Corporation as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this section 8 (a) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

(b)

This Agreement shall ensure to the benefit of and be enforceable by the Executive’s successors or legal representatives but otherwise it is not assignable. If the Executive should die while any amounts would still be payable to the Executive hereunder if the Executive had continued to live, all such amounts unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s estate.

9. Expenses

          The Corporation agrees to pay all legal fees and expenses incurred by the Executive as a result of the termination of his employment in circumstances covered by this Agreement (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement).

10. Entire Agreement

          Except for the Executive’s rights to continued participation in the Corporation’s employee benefit plans, including, without limitation, the Corporation’s Stock Option Plans, this Agreement constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof and superceedes and replaces the terms of the Prior Agreements. Upon execution of the present Agreement, the Prior Agreements will be of no further force or effect. No amendment or waiver of this Agreement shall be binding unless executed in writing by both parties hereto.

11. Confidential Information

          In the event of termination of employment of the Executive, the Executive agrees to keep confidential all information of a confidential or proprietary nature concerning the Corporation, its subsidiaries and affiliates and their respective operations, assets, finances, business and affairs and further agrees not to use such information for personal advantage, provided that nothing herein shall prevent disclosure of information which is publicly available or which is required to be disclosed under appropriate statutes, rules or law or legal process.

12. Choice of Law

          This Agreement shall be governed and interpreted in accordance with the laws of the Province of Québec and the courts of the Province of Québec shall be the sole and proper forum with respect to any suits brought with respect to this Agreement. The present agreement has been drafted in English at the request of the Executive. La présente entente a été rédigée en anglais à la demande de l’employé.

Canadian SCA — Pierre Rougeau April 1, 2002

-9-

13. Non-Competition

          The Executive agrees that in the event of his termination of service with the Corporation under Section 5 of this Agreement, the Executive will not for a period of 2 years beginning on the date of such termination, without written approval of the Board of Directors, undertake or carry on, either alone or in partnership, or either on his own account or on behalf of or as agent or employee or director of any person or persons, firm or corporation (other than the Corporation), or be employed or interested or engaged (other than as a holder of securities of not more than five percent (5%) of the stock or equity of any corporation the capital stock of which is publicly traded) in any business in competition with that carried on by the Corporation at the date of termination.

14. Notices

          Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by prepaid first-class mail, by facsimile or other means of electronic communication or by hand-delivery as hereinafter provided. Any such notice or other communication, if mailed by prepaid first-class mail at any time other than during a general discontinuance of postal service due to strike, lockout or otherwise, shall be deemed to have been received on the fourth business day following the sending, or if delivered by hand shall be deemed to have been received at the time it is delivered to the applicable address noted below either to the individual designated below or to an individual at such address having apparent authority to accept deliveries on behalf of the addressee. Notice of change of address shall also be governed by this section. In the event of a general discontinuance of postal service due to strike, lock-out or otherwise, notices or other communications shall be delivered by hand or sent by facsimile or other means of electronic communication and shall be deemed to have been received in accordance with this section. Notices and other communications shall be addressed as follows:

(a) If to the Executive:

Pierre Rougeau,
Senior Vice-President, Corporate Development and Chief Financial Officer

(b) If to the Corporation:

Abitibi-Consolidated Inc.
Att. Jacques Vachon
1155, Metcalfe Street, Suite 800
Montréal (Québec) H3B 5H2

Attention:  Chairman of the H.R.C.C.
Telecopier: (416) 367-3549

Canadian SCA — Pierre Rougeau April 1, 2002

-10-

15. Termination

          This Agreement shall terminate immediately on the occurrence of any of the following events: (i) the date of death of the Executive; (ii) voluntary resignation by the Executive from the Corporation otherwise than in response to a Good Reason; (iii) the giving of notice by the Corporation in the event of Disability as contemplated by section 6 hereof; (iv) termination for Just Cause; (v) termination of employment of the Executive at any time when there has been no Change of Control or more than two years after the immediately preceding Change of Control; or (vi) satisfaction by the Corporation of its obligations under section 5 of this Agreement in the event of termination of the Executive in the circumstances contemplated by section 5.

16. Copy of Agreement

          The Executive hereby acknowledges receipt of a copy of this Agreement duly signed by the Corporation.

          IN WITNESS WHEREOF the parties hereto have duly executed and delivered this Agreement.

ABITIBI-CONSOLIDATED INC.
By:	/s/ John Weaver
	John Weaver
	President and Chief Executive Officer

/s/ John A. Tory  

John A. Tory 

Chairman of the H.R.C.C. 

Witness: /s/ (name unrecognizable)	/s/ Pierre Rougeau,
	Pierre Rougeau,
	Senior Vice-President, Corporate Development and Chief Financial Officer

Canadian SCA — Pierre Rougeau April 1, 2002

EX-10.3

EXHIBIT 10.3

BOWATER INCORPORATED REPAYMENT AGREEMENT

     I, William G. Harvey, an employee of BOWATER INCORPORATED (the “Company”), have received a bonus amount equal to $174,000 (the “Bonus”) from Bowater Incorporated (the Company) in connection with services rendered in anticipation of the merger between Bowater Incorporated and Abitibi-Consolidated Inc. (the “Merger”).

     I hereby agree that if my employment with the Company or an affiliate of the Company terminates within thirty-six months of the effective date of the Merger as the result of either my voluntary termination or my involuntary termination for cause, I will be required to reimburse the Company for a prorated portion of the after-tax value of my Bonus. In order to determine the after-tax value, the effective tax rate shall be assumed to be 43%. The proration of the amount of Bonus owed shall be computed as follows:

(1 — (days from effective date of the Merger to date of termination divided by 1,095)).

     The Company shall, to the extent permitted by applicable laws, reduce any compensation otherwise due to me upon my termination of employment, including but not limited to regular wages, severance pay and bonuses, by the amount of the Bonus that I am required to reimburse the Company.

     The amount of the Bonus owed by me shall bear interest at the maximum rate of interest permitted by law from the date of the termination of my employment until the date of repayment. In addition, I agree to pay all costs of enforcement and collection, including, without limitation, reasonable attorney’s fees.

     This Agreement shall be binding upon me and my heirs, executors, administrators, successors and assigns, and shall inure to the benefit of and be enforceable by the Company, its successors and assigns.

     No provision of this Agreement may be modified, waived or discharged except in a writing specifically referring to such provision and signed by the party against which enforcement of such modification, waiver or discharge is sought. No waiver by either party hereto of the breach of any condition or provision of this Agreement shall be deemed a waiver of any other condition or provision at the same or any other time.

     The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

     The validity, interpretation, construction and performance of this Agreement shall be governed by the substantive laws of the State of South Carolina.

/s/ William G. Harvey	Oct 29, 2007
Signature: William G. Harvey	Date

EX-10.4

EXHIBIT 10.4

55 East Camperdown Way
Post Office Box 1028
Greenville, SC 29602-1028
Phone: 864/282-9483
Fax: 864/282-9594

JIM T. WRIGHT
Executive Vice President — Human Resources

Corrected

October 15, 2007

Mr. William G. Harvey
1 Rugosa Way
Greer, SC 29650

Re: Bonus Award

Dear Bill:

In recognition of your hard work in anticipation of the closing of the merger with Abitibi-Consolidated Inc., I am pleased to award you a bonus in the amount of $174,000, contingent upon the closing of the merger. The pre-merger activities have been more complex and taken more time than originally anticipated and thus required greater effort on your part.

The bonus amount will be paid to you as soon as practicable after the closing, subject to all applicable withholding obligations.

Again, thank you for your efforts during this stressful time.

Sincerely,

/s/ James T. Wright  

James T. Wright 

Executive Vice President — Human Resources 

EX-10.5

EXHIBIT 10.5

October 12, 2007

Mr. William G. Harvey
1 Rugosa Way
Greer, SC 29650

Re: Offer letter

Dear Bill,

We are pleased to offer you the position of Senior Vice-President and Chief Financial Officer, in the new AbitibiBowater, Inc. The following are details as agreed upon on this date:

Location:

For the time being, you may maintain an office in the Greenville, South Carolina area and you will continue to be an employee of Bowater Incorporated, as well as AbitibiBowater. During this interim time, you will be paid by Bowater Incorporated. However, you will be required eventually to relocate to the head office located in Montreal. The effective relocation date will be discussed and determined in the year 2008.

Effective Date:

The effective date is the closing of the merger (“Closing Date”). This offer is contingent on the conclusion of the merger, and subject to approval of the Human Resources and Compensation Committee (“HRCC”) of the new company of various compensation items.

Compensation:

Your annual base salary, effective the date of the merger, will be US$425,000. You will be eligible to participate in a short-term incentive plan with a target level of 70% of your base salary.

We will request that the HRCC approve base compensation and incentive targets for the new executive team and approve several compensation redesigns.

We expect to terminate the current 2007 Annual Incentive Plan on the Closing Date and to pay the resulting bonus as soon as practicable. We will substitute a new plan for the remainder of 2007 and all of 2008, emphasizing the achievement of synergies.

Additionally, for executives at your level, we will request an equity award tied to synergy achievement. We anticipate continuing annual equity grants of similar value as you currently receive and a target level of ownership of common shares may be required. Previous equity awards will roll-over into the new company and will be paid according to the initial payout schedule.

1/2

You will also be eligible for a perquisite allowance of US$12,000 per year and an additional benefit value of up to US$5,000 for US tax preparation.

Others:

(1)	You will participate in the company’s (or any affiliate’s) pension and benefit plans.
(2)	Following the merger, the new company intends to harmonize certain benefits offered to salaried employees, including senior executives, which may lead to changes in the current benefits. You will be informed about any changes at the appropriate time.
(3)	Subject to the approval of the new HRCC, you will be covered by an employment agreement (substantially in the form attached as Exhibit A) and a new Change in Control agreement.
(4)	In addition, you will be eligible for the company’s international relocation policy to assist you with your move to Montreal. In order to facilitate the process, we have assigned Paula Ferreira to facilitate and coordinate all aspects of your relocation. Please feel free to contact her at your earliest convenience at (514) 954-2988 or ferreirap@bowater.com. The relocation benefits will include a lump sum of $133,279 as a housing and cost of living offset, which will be payable only when you begin the relocation process and will be subject to Canadian taxes. This payment includes an amount attributable to the higher Canadian tax rate. In addition, considering your special circumstance, the company will provide an education allowance for a period of three years, up to a maximum of $15,000/per child per year. Please refer to the enclosed policy for more details.

We are excited about the prospects of the combination of the two companies and look forward to having you joining us on the leadership team. It will be a challenge.

Please acknowledge receipt of this offer letter and agreement with its terms by signing the two originals and returning one copy to Jim Wright.

Sincerely,
 

/s/ Jim T. Wright  

Jim T. Wright 

Senior Vice President — Human Resources 

I accept this offer:

/s/ William G. Harvey	Oct 29, 2007
William G. Harvey	Date

2/2

EXHIBIT A

EMPLOYMENT AGREEMENT

     THIS AGREEMENT, is made as of this day of            2007, by and between ABITIBIBOWATER INC., a Delaware corporation having a mailing address of (the “Corporation”), and William G. Harvey, 1 Rugosa Way, Greer, SC 29681 (the “Executive”).

     WHEREAS, the Corporation desires to employ the Executive as Senior Vice President and Chief Financial Officer of the Corporation; and

     WHEREAS, the Executive is desirous of serving the Corporation in such capacity;

     NOW, THEREFORE, the parties hereto agree to enter into an Employment Agreement as follows:

     1. Employment. During the term of this Agreement, the Corporation agrees to employ the Executive and the Executive agrees to be in the employ of the Corporation, in accordance with and subject to the provisions of this Agreement.

     2. Term.

(a)

Subject to the provisions of subparagraphs (b) and (c) of this Section 2, the term of this Agreement shall begin on the date hereof and shall continue thereafter until terminated by either party by written notice given to the other party at least thirty (30) days prior to the effective date of any such termination. The effective date of the termination shall be the date stated in such notice, provided that if the Corporation specifies an effective date that is more than thirty (30) days following the date of such notice, the Executive may, upon thirty (30) days’ written notice to the Corporation, accelerate the effective date of such termination.

(b)

Notwithstanding Section 2(a), the term of this Agreement shall end upon:

(i)	the death of the Executive;
(ii)	the inability of the Executive to perform his duties properly, whether by reason of ill-health, accident or other cause, for a

1

	period of one hundred and eighty (180) consecutive days or for periods totaling one hundred and eighty (180) days occurring within any twelve (12) consecutive calendar months; or
(iii)	the Executive’s retirement.

     3. Position and Duties. Throughout the term hereof, the Executive shall be employed as Senior Vice President and Chief Financial Officer of the Corporation, with the duties and responsibilities customarily attendant to that office and which the executive fulfilled as the Chief Financial Office of Bowater Incorporated, provided that the Executive shall undertake such other and further assignments and responsibilities of at least comparable status as the Board of Directors may direct. The Executive shall diligently and faithfully devote his full working time and best efforts to the performance of the services under this Agreement and to the furtherance of the best interests of the Corporation.

     4. Place of Employment. The Executive will be employed at the Corporation’s offices located in Greenville, South Carolina (prior to relocation) or Montreal, Quebec, Canada, or at such other place as the Corporation shall designate from time to time.

     5. Compensation and Benefits.

(a)

Base Salary. The Corporation shall pay to the Executive a base salary of U.S.$425,000 payable in substantially equal periodic installments on the Corporation’s regular payroll dates. The Executive’s base salary shall be reviewed by the Board of Directors and from time to time may be increased (or reduced, if such reduction is effected pursuant to across-the-board salary reductions similarly affecting all management personnel of the Corporation).

(b)

Incentive Plans.

(i) Annual Incentive Plan. In addition to his base salary, the Executive shall be eligible to receive an annual incentive award with a target level of 70% of base salary under the Corporation’s annual incentive plan in effect from time to time determined in the manner, at the time, and in the amounts set forth under such plan.

2

(ii) Stock-Based Incentive Compensation. Subject to the approval of the Board of Directors, the Executive shall be eligible for an annual award under a stock-based incentive program, as modified from time to time, and for so long as such program continues.

(c)	Benefit Plans. The Corporation shall make contributions on the Executive’s behalf to the various benefit plans and programs of the Corporation in which the Executive is eligible to participate in accordance with the provisions thereof as in effect from time to time.
(d)	Vacations. The Executive shall be entitled to paid vacation in keeping with the Corporate policy as in effect from time to time, to be taken at such time or times as may be approved by the Corporation.
(e)	Expenses. The Corporation shall reimburse the Executive for all reasonable expenses properly incurred, and appropriately documented, by the Executive in connection with the business of the Corporation.
(f)	Perquisites. The Corporation shall make available to the Executive all perquisites to which he is entitled by virtue of his position.

     6. Nondisclosure. During and after the term of this Agreement, the Executive shall not, without the written consent of the Board of Directors of the Corporation, disclose or use directly or indirectly (except in the course of employment hereunder and in furtherance of the business of the Corporation or any of its subsidiaries and affiliates) any of the trade secrets or other confidential information or proprietary data of the Corporation or its subsidiaries or affiliates; provided, however, that confidential information shall not include any information known generally to the public (other than as a result of unauthorized disclosure by the Executive) or any information of a type not otherwise considered confidential by persons engaged in the same or similar businesses.

     7. Noncompetition. During the term of this Agreement and for a period of one (1) year after the date the Executive’s employment terminates, the Executive shall not, without the prior approval of the Board of Directors of the Corporation or its delegate, in the same or a similar capacity engage in or invest in, or aid or assist anyone else in the conduct of any business (other than the businesses of the Corporation and its subsidiaries and affiliates) which directly competes with the business of the Corporation and its

3

subsidiaries and affiliates as conducted during the term hereof. If any court of competent jurisdiction shall determine that any of the provisions of this Section 7 shall not be enforceable because of the duration or scope thereof, the parties hereto agree that said court shall have the power to reduce the duration and scope of such provision to the extent necessary to make it enforceable and this Agreement in its reduced form shall be valid and enforceable to the extent permitted by law. The Executive acknowledges that the Corporation’s remedy at law for a breach by the Executive of the provisions of this Section 7 will be inadequate. Accordingly, in the event of the breach or threatened breach by the Executive of this Section 7, the Corporation shall be entitled to injunctive relief in addition to any other remedy it may have. To the extent that the Executive is subject to any other noncompete obligations that are more restrictive than those described above, such more restrictive obligations will apply.

     8. Severance Pay. (a) If the Executive’s employment hereunder is involuntarily terminated for any reason other than those set forth in Section 2(e) hereof including for “Good Reason” as defined below, then the Corporation shall pay the Executive severance pay in an amount equal to twenty-four (24) months of the Executive’s base salary on the effective date of the termination, plus 1/12 of the amount of the last bonus paid to the Executive under the Corporation’s annual incentive plan as applicable to the Executive, for each month in the period beginning on January 1 of the year in which the date of the termination occurs and ending on the date of the termination and for each months’ base salary to which the Executive is entitled under this Section 8.

     (b) The Executive shall have the right to terminate this Agreement for “Good Reason” and receive the severance pay described above. In addition, if the Executive exercises the right to terminate for Good Reason as defined in Section 8(d)(vi), he shall be entitled to (i) the full benefits of the Corporation’s relocation policy as in effect on such date if he relocates within six (6) months following the termination of his employment and (ii) he shall not be required to re-pay any amounts paid to him under the relocation policy in connection with his move to Montreal or awarded to him as a bonus in connection with his pre-merger activities.

     (c) For purposes of this Agreement, the term for “Cause” shall mean because of gross negligence or willful misconduct by the Executive either in the course of his employment hereunder or which has a material adverse effect on the Corporation or the Executive’s ability to perform adequately and effectively his duties hereunder.

     (d) For purposes of this Agreement, the term for “Good Reason” shall mean: (i) a reduction by the Corporation in the Executive’s Base Salary or target bonus unless such reduction is effected pursuant to across-the-board salary or bonus reductions similarly affecting all management personnel of the Corporation, (ii) a material diminution in the Executive’s titles, duties or responsibilities, (iii) a change in Executive’s reporting lines such that he no longer reports to the Chairman of the Board (unless his reporting line is changed so that he reports to the Chief Executive Officer), (iv) an unconsented relocation of Executive’s principal place of work to a location more than thirty (30) miles from the

4

initial locations referred to in Section 4, (v) the failure of a successor to expressly assume this Agreement, or (vi) for a period of twenty-four months following the effective date of this Agreement, for failure to provide an acceptable work environment as determined in the Executive’s sole discretion; provided, that for a termination for Good Reason under Clauses (i), (ii), (iii), or (v), the Executive shall have provided the Corporation with written notice, and the Corporation shall fail to cure the basis for Good Reason within twenty (20) days of such notice.

     (e) The severance pay shall be paid in a lump sum as soon as administratively feasible following the executive’s effective date of termination, but in no event shall payment be made later than March 15 following the calendar year of the Executive’s termination from employment, unless otherwise required by Internal Revenue Code Section 409A or guidance issued thereunder. The severance pay shall be in lieu of all other compensation or payments of any kind relating to the termination of the Executive’s employment hereunder; provided that the Executive’s entitlement to compensation or payments under the Corporation’s (or any affiliate’s) retirement plans, stock-based incentive plans, savings plans, or bonus plans attributable to service rendered prior to the effective date of the termination shall not be affected by this clause and shall continue to be governed by the applicable provisions of such plans; and further provided that in lieu hereof, at his election, the Executive shall be entitled to the benefits of the Change in Control Agreement between the Corporation and the Executive, if termination occurs in a manner and at a time when such Change in Control Agreement is applicable

     9. Notices. Any notices required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered or mailed, by registered or certified mail, return receipt requested to the respective addresses of the parties set forth above, or to such other address as any party hereto shall designate to the other party in writing pursuant to the terms of this Section 9.

     10. Severability. The provisions of this Agreement are severable, and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of any other provision.

     11. Governing Law. This Agreement shall be governed by and interpreted in accordance with the substantive laws of the State of Delaware.

     12. Supersedure. This Agreement shall cancel and supersede all prior agreements relating to employment between the Executive and the Corporation or its predecessor.

     13. Waiver of Breach. The waiver by a party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any prior or subsequent breach by any of the parties hereto.

5

     14. Binding Effect. The terms of this Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Corporation and the heirs, executors, administrators and successors of the Executive, but this Agreement may not be assigned by the Executive.

     IN WITNESS WHEREOF, the Corporation and the Executive have executed this Agreement as of the day and year first above written.

ABITIBIBOWATER INC.
By	/s/ James T. Wright
	James T. Wright	William G. Harvey
	Sr. Vice President — Human Resources
Date Signed:		Date Signed:

6

EX-10.6

EXHIBIT 10.6

BOWATER INCORPORATED REPAYMENT AGREEMENT

     I, Jim T. Wright, an employee of BOWATER INCORPORATED (the “Company”), have received an amount equal to $171,450 (the “Bonus”) from Bowater Incorporated (the Company) in connection with services rendered in anticipation of the merger between Bowater Incorporated and Abitibi-Consolidated Inc. (the “Merger”).

     I hereby agree that if my employment with the Company or an affiliate of the Company terminates within thirty-six months of the effective date of the Merger as the result of either my voluntary termination or my involuntary termination for cause, I will be required to reimburse the Company for a prorated portion of the after-tax value of my Bonus. In order to determine the after-tax value, the effective tax rate shall be assumed to be 43%. The proration of the amount of Bonus owed shall be computed as follows:

(1 — (days from effective date of the Merger to date of termination divided by 1,095)).

     The Company shall, to the extent permitted by applicable laws, reduce any compensation otherwise due to me upon my termination of employment, including but not limited to regular wages, severance pay and bonuses, by the amount of the Bonus that I am required to reimburse the Company.

     The amount of the Bonus owed by me shall bear interest at the maximum rate of interest permitted by law from the date of the termination of my employment until the date of repayment. In addition, I agree to pay all costs of enforcement and collection, including, without limitation, reasonable attorney’s fees.

     This Agreement shall be binding upon me and my heirs, executors, administrators, successors and assigns, and shall inure to the benefit of and be enforceable by the Company, its successors and assigns.

     No provision of this Agreement may be modified, waived or discharged except in a writing specifically referring to such provision and signed by the party against which enforcement of such modification, waiver or discharge is sought. No waiver by either party hereto of the breach of any condition or provision of this Agreement shall be deemed a waiver of any other condition or provision at the same or any other time.

     The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

     The validity, interpretation, construction and performance of this Agreement shall be governed by the substantive laws of the State of South Carolina.

/s/ Jim T. Wright	11.1.07
Signature: Jim T. Wright	Date

EX-10.7

EXHIBIT 10.7

October 17, 2007

Mr. Jim T. Wright
10 Hillswick Rd
Tryon, NC 28782

Re: Offer letter

Dear Jim,

We are pleased to offer you the position of Senior Vice-President, Human Resources, in the new AbitibiBowater, Inc. The following are details as agreed upon on this date:

Location:

For the time being, you may maintain an office in the Greenville, South Carolina area and you will continue to be an employee of Bowater Incorporated, as well as AbitibiBowater. During this interim time, you will be paid by Bowater Incorporated. However, you will be required eventually to relocate to the head office located in Montreal. The effective relocation date will be discussed and determined in the year 2008.

Effective Date:

The effective date is the closing of the merger (the “Closing Date”). This offer is contingent on the conclusion of the merger and your being authorized to work in Canada.

Compensation:

Your annual base salary, effective on the Closing Date, will be US$340,000. You will be eligible to participate in a short-term incentive plan with a target level of 50% of your base salary.

We will request that the Human Resources and Compensation Committee (“HRCC”) of the new company approve base compensation and incentive targets for the new executive team and approve several compensation redesigns. We expect to terminate the current 2007 Annual Incentive Plan on the Closing Date and to pay the resulting bonus as soon as practicable. We will substitute a new plan for the remainder of 2007 and all of 2008 emphasizing the achievement of synergies.

Additionally, for executives at your level, we will request an equity award tied to synergy achievement. We anticipate continuing annual equity grants of similar value as you currently receive and a target level of ownership of common shares may be required. Previous equity awards will roll-over into the new company and will be paid according to the initial payout schedule.

1/2

You will also be eligible for a perquisite allowance of US$12,000 per year as well as a complete annual medical examination and an additional benefit value of up to US$5,000 for US tax preparation.

Others:

(1)	You will participate in the company’s benefit plans.
(2)	Following the merger, the new company intends to harmonize certain benefits offered to salaried employees, including senior executives, which may lead to changes in the current benefits. You will be informed about any changes at the appropriate time.
(3)	Subject to the approval of the HRCC, you will be covered by an employment agreement and a new Change in Control agreement.
(4)	In addition, you will be eligible for the company’s international relocation policy to assist you with your move to Montreal. In order to facilitate the process, we have assigned Paula Ferreira to facilitate and coordinate all aspects of your relocation. Please feel free to contact her at your earliest convenience at (514) 954-2988 or ferreirap@bowater.com. Please refer to the enclosed policy for more details. The relocation benefits will include a lump sum of $104,649 as a housing and cost of living offset, which will be payable only when you begin the relocation process, and will be subject to Canadian taxes. This payment includes an amount attributable to the higher Canadian tax rate.

We are excited about the prospects of the combination of the two companies and look forward to having you joining us on the leadership team. It will be a challenge.

Please acknowledge receipt of this offer letter and agreement with its terms by signing the two originals and returning one copy.

/s/ John W. Weaver	/s/ David J. Paterson
John W. Weaver	David J. Paterson
Executive Chairman	President and Chief Executive Officer
I accept this offer:
/s/ Jim T. Wright
Jim T. Wright	Date

2/2

EX-10.8

EXHIBIT 10.8

55 East Camperdown Way
Post Office Box 1028
Greenville, SC 29602-1028
Phone: 864/282-9413
Fax: 864/282-9594

WILLIAM G. HARVEY
Executive Vice President
and Chief Financial Officer

October 17, 2007

Mr. Jim T. Wright
10 Hillswick Road
Tryon, NC 28782

Re: Bonus Award

Dear Jim:

In recognition of your hard work in anticipation of the closing of the merger with Abitibi-Consolidated Inc., I am pleased to award you a bonus in the amount of $171,450, contingent upon the closing of the merger. The pre-merger activities have been more complex and taken more time than originally anticipated and thus required greater effort on your part.

The bonus amount will be paid to you as soon as practicable after the closing, subject to all applicable withholding obligations.

Again, thank you for your efforts during this stressful time.

Sincerely,
 

/s/ William G. Harvey  

William G. Harvey 

Executive Vice President and Chief Financial Officer 

EX-10.9

EXHIBIT 10.9

SEVERANCE COMPENSATION AGREEMENT

THIS AGREEMENT made the                      day of February 2006

BETWEEN:

ABITIBI-CONSOLIDATED INC., a company amalgamated under the laws of Canada

(the “Corporation”)

— and —

John W. Weaver, an individual residing in the City of Westmount

(the “Executive”)

RECITALS:

A.	The Executive is a senior officer of the Corporation and is considered by the Board of Directors of the Corporation to be a valued employee of the Corporation and has acquired outstanding and special skills and abilities and an extensive background in and knowledge of the Corporation’s business and the industry in which it is engaged.
B.	The Board of Directors recognizes that it is essential and in the best interests of the Corporation and its shareholders that the Corporation retain the continuing dedication of the Executive to his office and employment.
C.	The Board of Directors further believes that the past service of the Executive to the Corporation requires that the Executive receive fair treatment, in the event of a change in control of the Corporation.
D.	It is desirable to clarify the scope of the arrangements under this Agreement.

          NOW THEREFORE in consideration of the premises and the mutual covenants herein contained and in consideration of the Executive continuing in office and in the employment of the Corporation, the Corporation and the Executive hereby covenant and agree as follows:

US SCA (JJW) Feb 18, 2006

-2-

1. Definitions

     In this Agreement,

(a)	“Agreement” means this agreement and all schedules attached to this agreement, in each case as they may be restated, amended or supplemented from time to time, and the expressions “hereof, “herein”, “hereto”, “hereunder”, “hereby”, and similar expressions refer to this agreement and, unless otherwise indicated, references to sections are to sections in this agreement;
(b)	“Annual Compensation” means the aggregate of (i) the annual base salary of the Executive, payable by the Corporation as at the end of the month immediately preceding the month in which the termination of employment hereunder takes effect; and (ii) the greater of (A) the last bonus payment earned by the Executive pursuant to the Key Executive Incentive Plan in the fiscal year immediately preceding the termination of the Executive’s employment hereunder; or (B) an amount equal to the average of the bonus payments earned by the Executive pursuant to the Key Executive Incentive Plan in the two fiscal years immediately preceding the termination of the Executive’s employment hereunder;
(c)	“Change of Control” means any of:

(i)	the acquisition, directly or indirectly and by any means whatsoever, by any person, or by a group of persons acting jointly or in concert, of that number of Voting Shares which is equal to or greater than 35% of the total issued and outstanding Voting Shares immediately after such acquisition unless another person or group of persons has previously acquired and continues to hold a number of Voting Shares which represents a greater percentage than the first-mentioned person or group of persons;
(ii)	the election or appointment by any holder of Voting Shares, or by any group of holders of Voting Shares acting jointly or in concert, of a number of members of the Board of Directors of the Corporation equal to or greater than one third of the members of the Board of Directors unless another holder or group of holders has previously elected or appointed a greater number of members of the Board of Directors and re-elects such greater number of members at the same time as the first-mentioned holder or group of holders;
(iii)	any transaction or series of transactions, whether by way of reconstruction, reorganization, consolidation, amalgamation, arrangement, merger, transfer, sale or otherwise, whereby assets of the Corporation become the property of any other person (other than a subsidiary of the Corporation) if such assets which become the property of any other person have a fair market value (net of the fair market value of any then existing liabilities of the Corporation assumed by such other person as part of the same

US SCA (JJW) Feb 18, 2006

-3-

transaction) equal to 50% or more of the Market Capitalization of the Corporation immediately before such transaction; or

(iv) the completion of any transaction or the first of a series of transactions which would have the same or similar effect as any transaction or series of transactions referred to in paragraphs (i), (ii) and (iii) above;

(d) “Disability” means the mental or physical state of the Executive such that:

(i)

the directors of the Corporation, other than the Executive if he is a director, unanimously determine that the Executive has been unable, due to illness, disease, mental or physical disability or similar cause, to fulfil his obligations as an employee or officer of the Corporation either for any consecutive 6 month period or for any period of 12 months (whether or not consecutive) in any consecutive 24 month period; or

(ii)

a court of competent jurisdiction has declared the Executive to be mentally incompetent or incapable of managing his affairs;

(e) “Good Reason” means:

(i)	without the express consent of the Executive, the assignment to the Executive of any duties materially inconsistent with his positions, duties and responsibilities with the Corporation immediately prior to the date hereof or any removal of the Executive from, or any failure to re-elect the Executive to, material positions, duties and responsibilities with the Corporation, except in connection with the termination of the Executive’s employment for Just Cause, Disability or Retirement or as a result of the Executive’s death or by the Executive other than for Good Reason.
(ii)	a reduction by the Corporation in the Executive’s salary as in effect on the date hereof or as the same may be increased from time to time;
(iii)	the failure by the Corporation to continue in effect any incentive or compensation plan, or any pension, life insurance, health and accident or disability plan in which the Executive is participating at the date hereof, (or plans providing the Executive with substantially similar benefits) unless such plans have been replaced by new plans providing the Executive with benefits that are as good as or better than the benefits provided in such plans, or the taking of any action by the Company which would adversely affect the Executive’s participation in or materially reduce the Executive’s benefits under any of such plans or deprive the Executive of any material fringe benefit enjoyed by him at the date hereof;
(iv)	the requirement that the Executive be based anywhere other than the Corporation’s principal executive offices except for required travel on the Corporation’s business to an extent substantially consistent with the Executive’s present employment or travel obligations, or in the event the

US SCA (JJW) Feb 18, 2006

-4-

Executive consents to any such relocation, the failure by the Corporation to pay (or reimburse the Executive for) all reasonable moving expenses incurred by the Executive or to indemnify the Executive against any excess in (A) the cost of a principal residence in the new location which is comparable to the Executive’s principal residence at the time of the relocation, over (B) the amount realized by the Executive upon the sale of his principal residence at the time of the relocation; or

(v)

any reason which would be considered to amount to constructive dismissal by a court of competent jurisdiction;

(f)	“Just Cause” means wilful failure of the Executive to properly carry out his duties after written notice by the Corporation of the failure to do so and an opportunity for the Executive to correct the same within a reasonable time from the date of receipt of such written notice from the Corporation, or theft, fraud or dishonesty or material misconduct by the Executive involving the property or affairs of the Corporation or the carrying out of the Executive’s duties;
(g)	“Key Executive Incentive Plan” means any program adopted by the Corporation from time to time with the intention of providing bonus or similar compensation to the executives of the Corporation;
(h)	“Market Capitalization of the Corporation” at any time means the product of (i) the number of outstanding common shares of the Corporation at that time, and (ii) the average of the closing prices for the common shares of the Corporation on the principal securities exchange (in terms of volume of trading) on which the common shares of the Corporation are listed at that time for each of the last 10 days prior to such time on which the common shares of the Corporation traded on such securities exchange;
(i)	“person” means includes an individual, partnership, association, body corporate, trustee, executor, administrator, legal representative and any national, provincial, state or municipal government;
(j)	“Retirement” means the retirement or early retirement of the Executive in accordance with the terms of the Retirement Agreement;
(k)	“Retirement Agreement” means any agreement between the Corporation and the Executive, under which the Corporation agreed to pay the Executive a retirement allowance following his retirement or early retirement from employment with the Corporation, in accordance with the terms of that agreement and including any amendments made from time to time to such agreement;
(1)	“Stock Option Plans” means the Abitibi-Consolidated Inc. Stock Option Plan and any similar plan of the Corporation under which the Corporation from time to time grants options to purchase Voting Shares of the Corporation and loans for the purpose of exercising such options;

US SCA (JJW) Feb 18, 2006

-5-

(m)	“subsidiary” has the meaning ascribed to it in the Canada Business Corporations Act, as in force on the date hereof; and
(n)	“Voting Shares” means any securities of the Corporation ordinarily carrying the right to vote at elections of directors.

2. Scope of Agreement

     The parties hereto intend that this Agreement set out their respective rights and obligations in certain circumstances in which the Executive’s employment is terminated. This Agreement does not purport to provide for any other terms of the Executive’s employment with the Corporation.

3. Position, Duties and Responsibilities of Executive

     The Executive shall continue to have the responsibilities and powers that he currently has or such other responsibilities and powers as he and the Corporation may from time to time agree upon. The Executive shall devote the whole of his working time to the Executive’s duties and shall use his best efforts to promote the interests of the Corporation.

4. Termination of Employment by the Corporation for Just Cause

     The Corporation may terminate the Executive’s employment at any time without notice or further obligations to the Executive under this Agreement for reasons of Just Cause. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Just Cause unless and until there has been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board of Directors of the Corporation (excluding the Executive if the Executive is at that time a director of the Corporation) at a meeting of the Board called and held for the purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with his legal counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Executive was guilty of conduct constituting Just Cause and specifying the particulars thereof. The effective date of any termination pursuant to this section shall be the date on which such resolution is given to the Executive.

5. Termination of Employment by the Corporation Without Just Cause or by the Executive for Good Reason Following a Change of Control

     If at any time within two years following a Change of Control the Executive’s employment is terminated by the Corporation other than for Just Cause or by the Executive in response to a Good Reason, the following provisions shall apply:

(a) the Executive shall be entitled to receive, and the Corporation shall pay to the Executive, on or as soon as practicable after the seventh (7th) month anniversary of the Executive’s termination, a cash amount equal to one and a half (1.50) times the Annual Compensation of the Executive less required statutory deductions;

US SCA (JJW) Feb 18, 2006

-6-

(b)	the Executive shall continue to receive until the earlier of (i) three years after the date of termination or (ii) receipt of equivalent benefits from a new employer, all group benefits including health, dental, life and car allowance (excluding all maintenance and operating expenses) other than disability insurance benefits on the scale provided by the Corporation to the Executive as at the date of termination or in lieu of such continued coverage, the Executive shall be entitled to receive a cash amount equal to the value to the Executive (as determined by a chartered accountant or firm of chartered accountants acceptable to the Corporation and the Executive) of such coverage for such period of time;
(c)	the Executive will also be entitled to receive on termination the normal and any supplementary pension benefits in effect on the date of termination according to the terms of the Corporation’s registered pension plans and the Retirement Agreement or according to similar provisions of any successor plan, of which the Executive is a member at the date of termination (the “Retirement Plans”). The Executive’s total pension entitlement and retirement options will be determined on the basis that the Executive had three years of credited service and age under the Retirement Plans at his date of termination of employment (over and above his actual years of credited service as otherwise determined). In addition, such additional years of service shall be included for the purpose of determining final or best average earnings assuming that the Executive’s monthly rate of salary at date of termination would have continued unchanged during the period of additional service. For Retirement Plans that include performance bonuses in the definition of pensionable earnings, the average of the highest three actual bonuses earned in the five years immediately prior to the date of termination shall be used for calculating the bonuses for each year during the severance period used for the purpose of determining final or best average earnings. Any portion of the total pension entitlement of the Executive not eligible to be paid under provisions of the registered pension plans of the Corporation shall be payable as supplementary payments in accordance with the Retirement Agreement;
(d)	if at the date of termination of the Executive’s employment, the Executive holds options for the purchase of shares under the Stock Option Plans, all options so held shall, unless the Executive has breached the terms of section 13 hereof, (i) immediately vest to the extent they have not already vested at such date and (ii) continue to be held, in both cases, notwithstanding the terms of the Stock Option Plans, on the same terms and conditions as if the Executive continued to be employed by the Corporation;
(e)	if at the date of the termination of the Executive’s employment, the Executive owes any money to the Corporation pursuant to loans to the Executive for the purchase of shares under the Stock Option Plans or for assisting the Executive to purchase property, such loans shall, notwithstanding the terms of any other agreement between the Corporation and the Executive respecting these loans, be repayable by the Executive in the same manner and at the same time as if the Executive continued to be employed by the Corporation following such termination, provided that if the Executive has breached the terms of section 13

US SCA (JJW) Feb 18, 2006

-7-

hereof, the loans shall become immediately due on the date of such breach and shall be repaid forthwith.

(f)

Notwithstanding any other provision of this Agreement, if any payment to or for the benefit of the Executive under this Agreement either alone or together with other payments to or for the benefit of the Executive would constitute a “parachute payment” (as defined in Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”)), the payments under this Agreement shall be reduced to the largest amount that will eliminate both the imposition of the excise tax imposed by Section 4999 of the Code and the disallowance of deductions to the Corporation under Section 280G of the Code for any such payments. The amount and method of any reduction in the payments under this Agreement pursuant to this Section 5(f) shall be as reasonably determined by the Compensation Committee of the Board of Directors.

For greater certainty, this section 5 applies with respect to each Change of Control until this Agreement has been terminated in accordance with section 14 hereof. In addition, with respect to a particular Change of Control, this section 5 expires two years following such Change of Control unless this Agreement is otherwise terminated in accordance with section 14 hereof. This section 5 does not apply in the event of the termination of the employment of the Executive as a result of death, Disability or Retirement or by the Executive otherwise than in response to a Good Reason or by the Corporation for Just Cause. If the Executive or the Corporation intend to terminate the Executive’s employment as contemplated in this section, the party having such intention shall give the other notice thereof and the effective date of such termination shall be the date on which such notice is given to the other party.

6. Disability

     In the event of Disability of the Executive, this Agreement may be terminated by the Corporation on thirty days’ notice. Notwithstanding anything contained in this Section 6, the Executive shall be entitled to all benefits provided under the disability and pension plans of the Corporation applicable to the Executive at the date of this Agreement.

7. No Obligation to Mitigate

     The Executive shall not be required to mitigate the amount of any payment or benefit provided for in section 5 of this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for in section 5(a) be reduced by any compensation earned by the Executive as a result of employment by another employer after termination or otherwise.

8. Binding on Successors

(a) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation, by agreement in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. Failure of the

US SCA (JJW) Feb 18, 2006

-8-

Corporation to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Corporation on the same terms and conditions as the Executive would be entitled hereunder if the Executive terminated his employment for Good Reason. As used in this Agreement, “Corporation” shall mean the Corporation as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this section 8(a) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

(b)

This Agreement shall enure to the benefit of and be enforceable by the Executive’s successors or legal representatives but otherwise it is not assignable. If the Executive should die while any amounts would still be payable to the Executive hereunder if the Executive had continued to live, all such amounts unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s estate.

9. Expenses

     The Corporation agrees to pay all legal fees and expenses incurred by the Executive as a result of the termination of his employment in circumstances covered by this Agreement (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement).

10. Entire Agreement

     Except for the Executive’s rights to continued participation in the Corporation’s employee benefit plans, including, without limitation, the Corporation’s Stock Option Plans, this Agreement constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof. No amendment or waiver of this Agreement shall be binding unless executed in writing by both parties hereto.

11. Confidential Information

     In the event of termination of employment of the Executive, the Executive agrees to keep confidential all information of a confidential or proprietary nature concerning the Corporation, its subsidiaries and affiliates and their respective operations, assets, finances, business and affairs and further agrees not to use such information for personal advantage, provided that nothing herein shall prevent disclosure of information which is publicly available or which is required to be disclosed under appropriate statutes, rules or law or legal process.

12. Choice of Law

     This Agreement shall be governed and interpreted in accordance with the laws of the Province of Québec and the courts of the Province of Québec shall be the sole and proper forum with respect to any suits brought with respect to this Agreement. The present agreement has been drafted in English at the request of the Executive. La présente entente a été rédigée en anglais à la demande de l’employé.

US SCA (JJW) Feb 18, 2006

-9-

13. Non-Competition

     The Executive agrees that in the event of his termination of service with the Corporation under Section 5 of this Agreement, the Executive will not for a period of 2 years beginning on the date of such termination, without written approval of the Board of Directors, undertake or carry on, either alone or in partnership, or either on his own account or on behalf of or as agent or employee or director of any person or persons, firm or corporation (other than the Corporation), or be employed or interested or engaged (other than as a holder of securities of not more than five percent (5%) of the stock or equity of any corporation the capital stock of which is publicly traded) in any business in competition with that carried on by the Corporation at the date of termination. In consideration of the Executive’s covenant not to compete, the Executive shall be entitled to receive, and the Corporation shall pay to the Executive in semi-annual instalments a cash amount equal to one and a half (1.5) times the Annual Compensation of the Executive less statutory deductions, the first instalment of which shall be made on or as soon as practicable after the seventh (7th) month anniversary of the Executive’s termination of employment.

14. Notices

     Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by prepaid first-class mail, by facsimile or other means of electronic communication or by hand-delivery as hereinafter provided. Any such notice or other communication, if mailed by prepaid first-class mail at any time other than during a general discontinuance of postal service due to strike, lockout or otherwise, shall be deemed to have been received on the fourth business day following the sending, or if delivered by hand shall be deemed to have been received at the time it is delivered to the applicable address noted below either to the individual designated below or to an individual at such address having apparent authority to accept deliveries on behalf of the addressee. Notice of change of address shall also be governed by this section. In the event of a general discontinuance of postal service due to strike, lock-out or otherwise, notices or other communications shall be delivered by hand or sent by facsimile or other means of electronic communication and shall be deemed to have been received in accordance with this section. Notices and other communications shall be addressed as follows:

(a)    if to the Executive:

John W. Weaver, President and Chief Executive Officer

(b)    if to the Corporation:

Abitibi-Consolidated Inc.
Att. Jacques Vachon
1155, Metcalfe Street, Suite 800
Montréal (Québec) H3B 5H2

Attention:  Chairman of the H.R.C.C.
Telecopier: (416) 367-3549

US SCA (JJW) Feb 18, 2006

-10-

15. Termination

     This Agreement shall terminate immediately on the occurrence of any of the following events: (i) the date of death of the Executive; (ii) voluntary resignation by the Executive from the Corporation otherwise than in response to a Good Reason; (iii) the giving of notice by the Corporation in the event of Disability as contemplated by section 6 hereof; (iv) termination for Just Cause; (v) termination of employment of the Executive at any time when there has been no Change of Control or more than two years after the immediately preceding Change of Control; or (vi) satisfaction by the Corporation of its obligations under section 5 of this Agreement in the event of termination of the Executive in the circumstances contemplated by section 5.

16. Copy of Agreement

     The Executive hereby acknowledges receipt of a copy of this Agreement duly signed by the Corporation.

     IN WITNESS WHEREOF the parties hereto have duly executed and delivered this Agreement.

ABITIBI-CONSOLIDATED INC.
By:	/s/ Jacques Vachon
	Jacques Vachon
	Senior Vice President and Corporate Secretary

/s/ John A. Tory  

John A. Tory
Chairman of the H.R.C.C. 

Witness: /s/ (name unrecognizable)	/s/ John Weaver
	John Weaver
	President and Chief Executive Officer

US SCA (JJW) Feb 18, 2006

EX-10.10

EXHIBIT 10.10

	Abitibi-Consolidated Inc. 1155 Metcalfe Street, Suite 800 Montréal, Québec, Canada H3B 5H2 Tel. 514-875-2160 Fax. 514-875-6284
	Postal address: Post Office Box 69 Montréal, Québec, Canada H3C 2R5

Mr. John Weaver

Dear John:

          Re: Severance Entitlements

          The purpose of this letter is to set out your entitlements in the event that your employment is terminated without Just Cause in a circumstance other than a circumstance involving a “Change of Control” of Abitibi-Consolidated Inc. (“ACI”).

          If your employment is terminated without “Just Cause” or for “Good Reason” following a Change of Control, your entitlement to severance payments and other benefits will be covered by the terms of the Severance Compensation Agreement dated September 26, 1995 between you and Abitibi-Price Inc. as amended by the Severance Compensation Agreement dated May 30, 1997 (the “Change of Control Arrangements”). For greater certainty, unless otherwise specified in this letter, all defined terms will have the meaning ascribed to them in the Change of Control Arrangements.

          If your employment is terminated without Just Cause in a circumstance other than a circumstance involving a Change of Control of ACI, you will be entitled to:

• your accrued and unused vacation entitlement;

• your accrued and unpaid salary and bonus remuneration;

• a cash amount equal to three times your annual compensation. For purposes of this agreement, “annual compensation” shall mean the annual base salary payable to you at the end of the month immediately preceding the month in which your employment is terminated plus the average annual bonus paid to you in the two year period immediately prior to the calendar year in which your employment was terminated;

• your coverage under all of the Company benefit plans, except for the long- term disability plan, will cease on the earlier of three years following the date that your employment was terminated or the date that you accept comparable employment. Your coverage under the ACI long-term disability plan will cease 8 weeks after the date that your employment is terminated.

• three years additional credited service in the ACI pension plan;

-2-

• continued use of the automobile provided to you by ACI for three years following the date of your termination. You will be responsible for its maintenance and operating costs and ACI will continue to insure the automobile;

• all of your options will vest and they will continue to be exercisable as if you continued to be employed by the Company;

• your entitlements pursuant to the terms of the ACI Deferred Share Unit and Performance Share Unit Plans will be determined in accordance with the terms of those plans; and

• You will be permitted to elect to relocate to the United States. If you so elect, all costs and expenses that you incur will be subject to the terms of the ACI relocation policy attached as Schedule “A” hereto.

          Except as provided above, where your employment has been terminated by you or terminated by the Corporation for any reason, you will not be entitled, except to the extent required under any mandatory employment standard under applicable employment legislation, to receive any payment as termination pay, severance pay, pay in lieu of notice, or as damages. Except as to any entitlement as provided above, you hereby waive any claim you may have against ACI for or in respect of termination pay, severance pay, or on account of loss of office or employment or notice in lieu thereof or damages in lieu thereof. Payments to you upon termination in accordance with this agreement by ACI will be deemed to include and to satisfy entitlement to termination pay, vacation pay and severance pay pursuant to the applicable employment legislation to the extent of those payments. Receipt by you of payments in accordance with this agreement will be deemed to constitute a full and final release and discharge by you of ACI, and all of its directors, officers and agents (for each of whom ACI contracts as a trustee) from all claims in respect of your hiring by, employment with and termination of employment with ACI. For greater certainty, you will, subject to the terms of all applicable corporate law, continue to be indemnified by ACI for actions that you undertook in your capacity as an executive of ACI.

          In addition, you agree as follows:

• For a period of three years after your termination in the circumstance described above, you shall not, without the prior written consent of ACI, directly or indirectly, be an owner, consultant, employee, officer, director, advisor, partner, venturer, or agent of, or render or provide any services to any corporation, trust, firm or partnership which competes in any way, whether directly or indirectly, with the business of ACI in Canada or the United States.

• Notwithstanding the foregoing, nothing herein shall prevent you from owning not more than 5% of the issued shares of a corporation, the shares of which are listed on a recognized stock exchange or traded in the over-the-counter

-3-

	market in Canada or the United States, which carries on a business which is the same as or substantially similar to or which competes with or would compete with the business of ACI or any of its Subsidiaries.
•	You shall not for a period of 3 years following your termination, directly or indirectly, contact or solicit any designated customers of ACI or any of its subsidiaries for the purpose of selling to the designated customers any products or services which are the same as or substantially similar to, or in any way competitive with, the products or services sold by ACI or any of its subsidiaries at the end of your employment period. For the purpose of this section, a designated customer means a person who was a customer of ACI or of any of its subsidiaries during some part of your employment period.
•	You agree that for a period of three years following the date that your employment is terminated, you will not, directly or indirectly, employ or retain as an independent contractor any employee of ACI or any of its subsidiaries or induce or solicit, or attempt to induce, any such person to leave his/her employment.
•	You shall not at any time, directly or indirectly, use or disclose to any person any confidential information provided, however, that nothing in this section shall preclude you from disclosing or using confidential information if:

(a)	the confidential information is available to the public or in the public domain at the time of such disclosure or use, without breach of this Agreement; or
(b)	disclosure of the confidential information is required to be made by any law, regulation, governmental authority or court.

• You acknowledge and agree that the obligations under this section are to remain in effect in perpetuity and shall exist and continue in full force and effect notwithstanding any breach or repudiation, or alleged breach or repudiation, of this Agreement by ACI.

• You agree that for purposes of this Agreement, confidential information shall mean: (i) all intellectual property (including trade secrets); (ii) all information relating to ACI’s business policies, strategies, operations, finances, marketing plans or business opportunities; mergers and acquisitions, (iii) the identity of ACI’s customers that became known to you during your employment, including, without limitation, any customer lists or any information about the business of ACI’s customers; and (iv) the identity of ACI’s suppliers that became known to you during your employment.

• You acknowledge that a breach or threatened breach by you of the provisions set out above will result in ACI and its shareholders suffering irreparable

-4-

	harm which is not capable of being calculated and which cannot be fully or adequately compensated by the recovery of damages alone. Accordingly, you agree that ACI shall be entitled to interim and permanent injunctive relief, specific performance and other equitable remedies, in addition to any other relief to which ACI may become entitled.
•	You agree not to disclose the terms of this Agreement to anyone other than your spouse, your financial advisor or your solicitor.

          All amounts payable to you hereunder are subject to all applicable deductions and withholdings. If you wish to receive the amounts set out above in a more tax effective manner, ACI will comply with any lawful direction that you may give concerning the payments.

          You acknowledge that you have had an opportunity to read and consider this Agreement and to obtain such independent legal or other advice concerning the interpretation and effect of this Agreement as you considered advisable.

          This Agreement will be governed by the laws of the Province of Quebec and the federal laws of Canada applicable therein.

          The parties hereto acknowledge that they have expressly requested and are satisfied that this Agreement and all related documents be drawn up in the English language. Les parties aux présentes reconnaissent avoir expressément requis que la présente entente et les documents qui y sont relatifs soient rédigés en anglais.

          Please indicate your acceptance of and your agreement to the terms of this letter by signing as appropriate and returning to us a copy of this letter.

Yours truly, ABITIBI-CONSOLIDATED INC.
Per:	/s/ (name unrecognizable)
	DIRECTOR

          IN WITNESS WHEREOF I have hereunto set my hand and seal this 25^th day of September, 2000.

SIGNED, SEALED AND DELIVERED in the presence of:	) )
/s/ Jacques Vachon WITNESS SIGNATURE	) )	/s/ John Weaver John Weaver	l/s
Jacques Vachon PRINT NAME OF WITNESS	) )
4325 Montrose, Westmount ADDRESS OF WITNESS	) )

EX-10.11

EXHIBIT 10.11

SEVERANCE COMPENSATION AGREEMENT

          THIS AGREEMENT made the 1^st day of April, 2002.

BETWEEN:

                    ABITIBI-CONSOLIDATED INC., a company amalgamated under the laws of Canada

                    (the “Corporation”)

                    — and —

                    ALAIN GRANDMONT, an individual residing in the City of Montreal, in the province of Québec

                    (the “Executive”)

RECITALS:

A.	The Executive is a senior officer of the Corporation and is considered by the Board of Directors of the Corporation to be a valued employee of the Corporation and has acquired outstanding and special skills and abilities and an extensive background in and knowledge of the Corporation’s business and the industry in which it is engaged.
B.	The Board of Directors recognizes that it is essential and in the best interests of the Corporation and its shareholders that the Corporation retain the continuing dedication of the Executive to his office and employment.
C.	The Board of Directors further believes that the past service of the Executive to the Corporation requires that the Executive receive fair treatment, in the event of a change in control of the Corporation.
D.	It is desirable to clarify the scope of the arrangements under this Agreement.

          NOW THEREFORE in consideration of these premises and the mutual covenants herein contained and in consideration of the Executive continuing in office and in the employment of the Corporation, the Corporation and the Executive hereby covenant and agree as follows:

April 1, 2002

-2-

1. Definitions

	In this Agreement,
(a)	“Agreement” means this agreement and all schedules attached to this agreement, in each case as they may be restated, amended or supplemented from time to time, and the expressions “hereof”, “herein”, “hereto”, “hereunder”, “hereby”, and similar expressions refer to this agreement and, unless otherwise indicated, references to sections are to sections in this agreement;
(b)	“Annual Compensation” means the aggregate of (i) the annual base salary of the Executive, payable by the Corporation as at the end of the month immediately preceding the month in which the termination of employment hereunder takes effect; and (ii) the greater of (A) the last bonus payment earned by the Executive pursuant to the Key Executive Incentive Plan in the fiscal year immediately preceding the termination of the Executive’s employment hereunder; or (B) an amount equal to the average of the bonus payments earned by the Executive pursuant to the Key Executive Incentive Plan in the two fiscal years immediately preceding the termination of the Executive’s employment hereunder;
(c)	“Change of Control” means any of:

(i)	The acquisition, directly or indirectly and by any means whatsoever, by any person, or by a group of persons acting jointly or in concert, of that number of Voting Shares which is equal to or greater than 35% of the total issued and outstanding Voting Shares immediately after such acquisition unless another person or group of persons has previously acquired and continues to hold a number of Voting Shares which represents a greater percentage than the first-mentioned person or group of persons;
(ii)	The election or appointment by any holder of Voting Shares, or by any group of holders of Voting Shares acting jointly or in concert, of a number of members of the Board of Directors of the Corporation equal to or greater than one third of the members of the Board of Directors unless another holder or group of holders has previously elected or appointed a greater number of members of the Board of Directors and re-elects such greater number of members at the same time as the first-mentioned holder or group of holders;
(iii)	Any transaction or series of transactions, whether by way of reconstruction, reorganization, consolidation, amalgamation, arrangement, merger, transfer, sale or otherwise, whereby assets of the Corporation become the property of any other person (other than a subsidiary of the Corporation) if such assets which become the property of any other person have a fair market value (net of the fair market value of any then existing liabilities of the Corporation assumed by such other person as part of the same transaction) equal to 50%

Canadian SCA-Alain Grandmont April 1, 2002

-3-

or more of the Market Capitalization of the Corporation immediately before such transaction; or

(iv) The completion of any transaction or the first of a series of transactions which would have the same or similar effect as any transaction or series of transactions referred to in paragraphs (i), (ii) and (iii) above;

(d) “Disability” means the mental or physical state of the Executive such that:

(i)

The directors of the Corporation, other than the Executive if he is a director, unanimously determine that the Executive has been unable, due to illness, disease, mental or physical disability or similar cause, to fulfil his obligations as an employee or officer of the Corporation either for any consecutive 6 month period or for any period of 12 months (whether or not consecutive) in any consecutive 24 month period; or

(ii)

A court of competent jurisdiction has declared the Executive to be mentally incompetent or incapable of managing his affairs;

(e) “Good Reason” means:

(i)	Without the express written consent of the Executive, the assignment to the Executive of any duties materially inconsistent with his positions, duties and responsibilities with the Corporation immediately prior to the date hereof or any removal of the Executive from, or any failure to re-elect the Executive to, material positions, duties and responsibilities with the Corporation, except in connection with the termination of the Executive’s employment for Just Cause, Disability or Retirement or as a result of the Executive’s death or by the Executive other than for Good Reason;
(ii)	A reduction by the Corporation in the Executive’s salary as in effect on the date hereof or as the same may be increased from time to time;
(iii)	The failure by the Corporation to continue in effect any incentive or compensation plan, or any pension, life insurance, health and accident or disability plan in which the Executive is participating at the date hereof, (or plans providing the Executive with substantially similar benefits) unless such plans have been replaced by new plans providing the Executive with benefits that are as good as or better than the benefits provided in such plans, or the taking of any action by the Company which would adversely affect the Executive’s participation in or materially reduce the Executive’s benefits under any of such plans or deprive the Executive of any material fringe benefit enjoyed by him at the date hereof;
(iv)	The requirement that the Executive be based anywhere other than the Corporation’s principal executive offices except for required travel on the Corporation’s business to an extent substantially consistent with the

Canadian SCA— Alain Grandmont April 1, 2002

-4-

Executive’s present employment or travel obligations, or in the event the Executive consents to any such relocation, the failure by the Corporation to pay (or reimburse the Executive for) all reasonable moving expenses incurred by the Executive or to indemnify the Executive against any excess in (A) the cost of a principal residence in the new location which is comparable to the Executive’s principal residence at the time of the relocation, over (B) the amount realized by the Executive upon the sale of his principal residence at the time of the relocation; or

(v)

Any reason which would be considered to amount to constructive dismissal by a court of competent jurisdiction;

(f)	“Just Cause” means wilful failure of the Executive to properly carry out his duties after written notice by the Corporation of the failure to do so and an opportunity for the Executive to correct the same within a reasonable time from the date of receipt of such written notice from the Corporation, or theft, fraud or dishonesty or material misconduct by the Executive involving the property or affairs of the Corporation or the carrying out of the Executive’s duties;
(g)	“Key Executive Incentive Plan” means any program adopted by the Corporation from time to time with the intention of providing bonus or similar compensation to the executives of the Corporation;
(h)	“Market Capitalization of the Corporation” at any time means the product of (i) the number of outstanding common shares of the Corporation at that time, and (ii) the average of the closing prices for the common shares of the Corporation on the principal securities exchange (in terms of volume of trading) on which the common shares of the Corporation are listed at that time for each of the last 10 days prior to such time on which the common shares of the Corporation traded on such securities exchange;
(i)	“Person” means includes an individual, partnership, association, body corporate, trustee, executor, administrator, legal representative and any national, provincial, state or municipal government;
(j)	“Retirement” means the retirement or early retirement of the Executive in accordance with the terms of the Retirement Agreement;
(k)	“Retirement Agreement” means any agreement between the Corporation and the Executive, under which the Corporation agreed to pay the Executive a retirement allowance following his retirement or early retirement from employment with the Corporation, in accordance with the terms of that agreement and including any amendments made from time to time to such agreement;
(l)	“Stock Option Plans” means the Abitibi-Consolidated Inc. Stock Option Plan and any similar plan of the Corporation under which the Corporation from time to time

Canadian SCA — Alain Grandmont April 1, 2002

-5-

	grants options to purchase Voting Shares of the Corporation and loans for the purpose of exercising such options;
(m)	“Subsidiary” has the meaning ascribed to it in the Canada Business Corporations Act, as in force on the date hereof; and
(n)	“Voting Shares” means any securities of the Corporation ordinarily carrying the right to vote at elections of directors.

2. Scope of Agreement

          The parties hereto intend that this Agreement set out their respective rights and obligations in certain circumstances in which the Executive’s employment is terminated. This Agreement does not purport to provide for any other terms of the Executive’s employment with the Corporation.

3. Position, Duties and Responsibilities of Executive

          The Executive shall continue to have the responsibilities and powers that he currently has or such other responsibilities and powers as he and the Corporation may from time to time agree upon. The Executive shall devote the whole of his working time to the Executive’s duties and shall use his best efforts to promote the interests of the Corporation.

4. Termination of Employment by the Corporation for Just Cause

          The Corporation may terminate the Executive’s employment at any time without notice or further obligations to the Executive under this Agreement for reasons of Just Cause. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Just Cause unless and until there has been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board of Directors of the Corporation (excluding the Executive if the Executive is at that time a director of the Corporation) at a meeting of the Board called and held for the purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with his legal counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Executive was guilty of conduct constituting Just Cause and specifying the particulars thereof. The effective date of any termination pursuant to this section shall be the date on which such resolution is given to the Executive.

5. Termination of Employment by the Corporation Without Just Cause or by the Executive for Good Reason

          If at any time within two years following a Change of Control the Executive’s employment is terminated, (a) by the Corporation other than for Just Cause or (b) by the Executive in response to a Good Reason, the following provisions shall apply:

Canadian SCA —Alain Grandmont April 1, 2002

-6-

(a)	The Executive shall be entitled to receive, and the Corporation shall pay to the Executive, immediately following termination, a cash amount equal to three times the Annual Compensation of the Executive less required statutory deductions;
(b)	The Executive shall continue to receive until the earlier of (i) three years after the date of termination or (ii) receipt of equivalent benefits from a new employer, all group benefits including health, dental, life and car allowance (excluding all maintenance and operating expenses) other than disability insurance benefits on the scale provided by the Corporation to the Executive as at the date of termination or in lieu of such continued coverage, the Executive shall be entitled to receive a cash amount equal to the value to the Executive (as determined by a chartered accountant or firm of chartered accountants acceptable to the Corporation and the Executive) of such coverage for such period of time;
(c)	The Executive will also be entitled to receive on termination the normal and any supplementary pension benefits in effect on the date of termination according to the terms of the Corporation’s registered pension plans and the Retirement Agreement or according to similar provisions of any successor plan, of which the Executive is a member at the date of termination (the “Retirement Plans”). The Executive’s total pension entitlement and retirement options will be determined on the basis that the Executive had three years of credited service and age under the Retirement Plans at his date of termination of employment (over and above his actual years of credited service as otherwise determined). In addition, such additional years of service shall be included for the purpose of determining final or best average earnings assuming that the Executive’s monthly rate of salary at date of termination would have continued unchanged during the period of additional service. For Retirement Plans that include performance bonuses in the definition of pensionable earnings, the average of the highest three actual bonuses earned in the five years immediately prior to the date of termination shall be used for calculating the bonuses for each year during the severance period used for the purpose of determining final or best average earnings. Any portion of the total pension entitlement of the Executive not eligible to be paid under provisions of the registered pension plans of the Corporation shall be payable as supplementary payments in accordance with the Retirement Agreement;
(d)	if at the date of termination of the Executive’s employment, the Executive holds options for the purchase of shares under the Stock Option Plans, all options so held shall, unless the Executive has breached the terms of section 13 hereof, (i) immediately vest to the extent they have not already vested at such date and (ii) continue to be held, in both cases, notwithstanding the terms of the Stock Option Plans, on the same terms and conditions as if the Executive continued to be employed by the Corporation;

Canadian SCA — Alain Grandmont April 1, 2002

-7-

(e) If at the date of the termination of the Executive’s employment, the Executive owes any money to the Corporation pursuant to loans to the Executive for the purchase of shares under the Stock Option Plans or for assisting the Executive to purchase property, such loans shall, notwithstanding the terms of any other agreement between the Corporation and the Executive respecting these loans, be repayable by the Executive in the same manner and at the same time as if the Executive continued to be employed by the Corporation following such termination, provided that if the Executive has breached the terms of section 13 hereof, the loans shall become immediately due on the date of such breach and shall be repaid forthwith.

For greater certainty, this section 5 applies with respect to each Change of Control until this Agreement has been terminated in accordance with section 14 hereof. In addition, with respect to a particular Change of Control, this section 5 expires two years following such Change of Control unless this Agreement is otherwise terminated in accordance with section 14 hereof. This section 5 does not apply in the event of the termination of the employment of the Executive as a result of death, Disability or Retirement or by the Executive otherwise than in response to a Good Reason or by the Corporation for Just Cause. If the Executive or the Corporation intend to terminate the Executive’s employment as contemplated in this section, the party having such intention shall give the other notice thereof and the effective date of such termination shall be the date on which such notice is given to the other party.

6. Disability

          In the event of Disability of the Executive, this Agreement may be terminated by the Corporation on thirty days’ notice. Notwithstanding anything contained in this Section 6, the Executive shall be entitled to all benefits provided under the disability and pension plans of the Corporation applicable to the Executive at the date of this Agreement.

7. No Obligation to Mitigate

          The Executive shall not be required to mitigate the amount of any payment or benefit provided for in section 5 of this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for in section 5(a) be reduced by any compensation earned by the Executive as a result of employment by another employer after termination or otherwise.

8. Binding on Successors

(a) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation, by agreement in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. Failure of the Corporation to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Corporation on the same terms and conditions as the Executive would be entitled hereunder if the

Canadian SCA — Alain Grandmont April 1, 2002

-8-

Executive terminated his employment for Good Reason. As used in this Agreement, “Corporation” shall mean the Corporation as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this section 8 (a) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

(b) This Agreement shall ensure to the benefit of and be enforceable by the Executive’s successors or legal representatives but otherwise it is not assignable. If the Executive should die while any amounts would still be payable to the Executive hereunder if the Executive had continued to live, all such amounts unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s estate.

9. Expenses

          The Corporation agrees to pay all legal fees and expenses incurred by the Executive as a result of the termination of his employment in circumstances covered by this Agreement (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement).

10. Entire Agreement

          Except for the Executive’s rights to continued participation in the Corporation’s employee benefit plans, including, without limitation, the Corporation’s Stock Option Plans, this Agreement constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof and superceedes and replaces the terms of the Prior Agreements. Upon execution of the present Agreement, the Prior Agreements will be of no further force or effect. No amendment or waiver of this Agreement shall be binding unless executed in writing by both parties hereto.

11. Confidential Information

          In the event of termination of employment of the Executive, the Executive agrees to keep confidential all information of a confidential or proprietary nature concerning the Corporation, its subsidiaries and affiliates and their respective operations, assets, finances, business and affairs and further agrees not to use such information for personal advantage, provided that nothing herein shall prevent disclosure of information which is publicly available or which is required to be disclosed under appropriate statutes, rules or law or legal process.

12. Choice of Law

          This Agreement shall be governed and interpreted in accordance with the laws of the Province of Québec and the courts of the Province of Québec shall be the sole and proper forum with respect to any suits brought with respect to this Agreement. The present agreement has been drafted in English at the request of the Executive. La présente entente a été rédigée en anglais à la demande de l’employé.

Canadian SCA — Alain Grandmont April 1, 2002

-9-

13. Non-Competition

          The Executive agrees that in the event of his termination of service with the Corporation under Section 5 of this Agreement, the Executive will not for a period of 2 years beginning on the date of such termination, without written approval of the Board of Directors, undertake or carry on, either alone or in partnership, or either on his own account or on behalf of or as agent or employee or director of any person or persons, firm or corporation (other than the Corporation), or be employed or interested or engaged (other than as a holder of securities of not more than five percent (5%) of the stock or equity of any corporation the capital stock of which is publicly traded) in any business in competition with that carried on by the Corporation at the date of termination.

14. Notices

          Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by prepaid first-class mail, by facsimile or other means of electronic communication or by hand-delivery as hereinafter provided. Any such notice or other communication, if mailed by prepaid first-class mail at any time other than during a general discontinuance of postal service due to strike, lockout or otherwise, shall be deemed to have been received on the fourth business day following the sending, or if delivered by hand shall be deemed to have been received at the time it is delivered to the applicable address noted below either to the individual designated below or to an individual at such address having apparent authority to accept deliveries on behalf of the addressee. Notice of change of address shall also be governed by this section. In the event of a general discontinuance of postal service due to strike, lock-out or otherwise, notices or other communications shall be delivered by hand or sent by facsimile or other means of electronic communication and shall be deemed to have been received in accordance with this section. Notices and other communications shall be addressed as follows:

(a) If to the Executive:

Alain Grandmont,
Senior Vice-President, Value-Added Paper Operations

(b) If to the Corporation:

Abitibi-Consolidated Inc.
Att. Jacques Vachon
1155, Metcalfe Street, Suite 800
Montréal (Qu#233;bec) H3B 5H2

Attention:   Chairman of the H.R.C.C.
Telecopier:  (416)367-3549

Canadian SCA — Alain Grandmont April 1, 2002

-10-

15. Termination

          This Agreement shall terminate immediately on the occurrence of any of the following events: (i) the date of death of the Executive; (ii) voluntary resignation by the Executive from the Corporation otherwise than in response to a Good Reason; (iii) the giving of notice by the Corporation in the event of Disability as contemplated by section 6 hereof; (iv) termination for Just Cause; (v) termination of employment of the Executive at any time when there has been no Change of Control or more than two years after the immediately preceding Change of Control; or (vi) satisfaction by the Corporation of its obligations under section 5 of this Agreement in the event of termination of the Executive in the circumstances contemplated by section 5.

16. Copy of Agreement

          The Executive hereby acknowledges receipt of a copy of this Agreement duly signed by the Corporation.

          IN WITNESS WHEREOF the parties hereto have duly executed and delivered this Agreement.

		ABITIBI-CONSOLIDATED INC.
		By:	/s/ John Weaver
			John Weaver
			President and Chief Executive Officer
		/s/ John A. Tory
		John A. Tory
		Chairman of the H.R.C.C.
Witness:	(name unrecognizable)	/s/ Alain Grandmont
		Alain Grandmont
		Senior Vice-President, Value-Added Paper Operations

Canadian SCA — Alain Grandmont April 1, 2002

EX-10.12

EXHIBIT 10.12

September 27, 2007

Mr. Alain Grandmont
89 Terry Fox
Verdun, Quebec
H3E 1L4

Re: Offer letter

Dear Alain,

We are pleased to offer you the position of Senior Vice-President, Commercial Printing and Coated Papers, in the new AbitibiBowater, Inc. The following are details as agreed upon on this date:

Location:                Montreal, Quebec, Canada

Effective Date:

The offer is contingent on conclusion of the Merger and will be effective at such date.

Compensation:

Your annual base salary, effective the date of the merger, will be US$425,000. You will be eligible to participate in a short-term incentive plan with a target level of 70% of your base salary. In addition, you will receive a signing bonus of US$30,000, to be paid as soon as practical following the closing.

We will request that the Human Resources and Compensation Committee (HRCC) of the new company, at its first meeting, approve base compensation and incentive targets for the new executive team and approve several compensation redesigns. We anticipate closing the 2007 Annual Incentive Plan effective with the merger and will substitute a new plan for the remainder of 2007 and all of 2008, emphasizing achievement of synergies.

Additionally, for executives at your level, we will request an equity award tied to synergy achievement. We anticipate continuing annual equity grants of similar value as you currently receive and a target level of ownership of common shares may be required. Previous equity awards will rollover into the New Company and will be paid according to the initial payout schedule.

You will also be eligible for a perquisite allowance of US$12,000 per year as well as a complete annual medical examination.

Offer Letters — ACI in Mtl A Grandmont 2 1/2

Other benefits:

Subject to the approval of the new HRCC, you will be covered by an employment agreement and a new Change in Control (CIC) agreement.

You will maintain your current participation in various benefit plans such as pension, group insurance and vacation. However, following the merger, the new company intends to harmonize certain benefits offered to salaried employees, including senior executives, which may lead to changes in the current benefits. You will be informed about any changes at the appropriate time.

We are excited about the prospects of the combination of the two companies and look forward to having you join us on the leadership team. It will be a challenge.

Please acknowledge receipt of this offer letter and agreement with its terms by signing the two originals and returning one copy to Viateur Camire on or before October 3, 2007.

/s/ John W. Weaver
John W. Weaver	David J. Paterson
Exepmive Chairman	President and Chief Executive Officer
I accept this offer:
/s/ Alain Grandmont	9 OCTOBER 2007
Alain Grandmont	Date

Offer Letters — ACI in Mtl A Grandmont 2 2/2

EX-10.13

EXHIBIT 10.13

SEVERANCE COMPENSATION AGREEMENT

          THIS AGREEMENT made the 1^st day of April 2002

BETWEEN:

ABITIBI-CONSOLIDATED INC., a company amalgamated under the laws of Canada

(the “Corporation”)

—and—

THOR THORSTEINSON, an individual residing in the City of Montreal, in the province of Québec

(the “Executive”)

RECITALS:

A.	The Executive is a senior officer of the Corporation and is considered by the Board of Directors of the Corporation to be a valued employee of the Corporation and has acquired outstanding and special skills and abilities and an extensive background in and knowledge of the Corporation’s business and the industry in which it is engaged.
B.	The Board of Directors recognizes that it is essential and in the best interests of the Corporation and its shareholders that the Corporation retain the continuing dedication of the Executive to his office and employment.
C.	The Board of Directors further believes that the past service of the Executive to the Corporation requires that the Executive receive fair treatment, in the event of a change in control of the Corporation.
D.	It is desirable to clarify the scope of the arrangements under this Agreement.

          NOW THEREFORE in consideration of the premises and the mutual covenants herein contained and in consideration of the Executive continuing in office and in the employment of the Corporation, the Corporation and the Executive hereby covenant and agree as follows:

April 1, 2002

-2-

1. Definitions

In this Agreement,

(a)	“Agreement” means this agreement and all schedules attached to this agreement, in each case as they may be restated, amended or supplemented from time to time, and the expressions “hereof, “herein”, “hereto”, “hereunder”, “hereby”, and similar expressions refer to this agreement and, unless otherwise indicated, references to sections are to sections in this agreement;
(b)	“Annual Compensation” means the aggregate of (i) the annual base salary of the Executive, payable by the Corporation as at the end of the month immediately preceding the month in which the termination of employment hereunder takes effect; and (ii) the greater of (A) the last bonus payment earned by the Executive pursuant to the Key Executive Incentive Plan in the fiscal year immediately preceding the termination of the Executive’s employment hereunder; or (B) an amount equal to the average of the bonus payments earned by the Executive pursuant to the Key Executive Incentive Plan in the two fiscal years immediately preceding the termination of the Executive’s employment hereunder;
(c)	“Change of Control” means any of:

(i)	the acquisition, directly or indirectly and by any means whatsoever, by any person, or by a group of persons acting jointly or in concert, of that number of Voting Shares which is equal to or greater than 35% of the total issued and outstanding Voting Shares immediately after such acquisition unless another person or group of persons has previously acquired and continues to hold a number of Voting Shares which represents a greater percentage than the first-mentioned person or group of persons;
(ii)	the election or appointment by any holder of Voting Shares, or by any group of holders of Voting Shares acting jointly or in concert, of a number of members of the Board of Directors of the Corporation equal to or greater than one third of the members of the Board of Directors unless another holder or group of holders has previously elected or appointed a greater number of members of the Board of Directors and re-elects such greater number of members at the same time as the first-mentioned holder or group of holders;
(iii)	any transaction or series of transactions, whether by way of reconstruction, reorganization, consolidation, amalgamation, arrangement, merger, transfer, sale or otherwise, whereby assets of the Corporation become the property of any other person (other than a subsidiary of the Corporation) if such assets which become the property of any other person have a fair market value (net of the fair market value of any then existing liabilities of the Corporation assumed by such other person as part of the same transaction) equal to 50% or more of the Market Capitalization of the Corporation immediately before such transaction; or

US SCA — Thor Thorsteinson April 1, 2002

-3-

(iv) the completion of any transaction or the first of a series of transactions which would have the same or similar effect as any transaction or series of transactions referred to in paragraphs (i), (ii) and (iii) above;

(d) “Disability” means the mental or physical state of the Executive such that:

(i)

the directors of the Corporation, other than the Executive if he is a director, unanimously determine that the Executive has been unable, due to illness, disease, mental or physical disability or similar cause, to fulfil his obligations as an employee or officer of the Corporation either for any consecutive 6 month period or for any period of 12 months (whether or not consecutive) in any consecutive 24 month period; or

(ii)

a court of competent jurisdiction has declared the Executive to be mentally incompetent or incapable of managing his affairs;

(e) “Good Reason” means:

(i)	without the express consent of the Executive, the assignment to the Executive of any duties materially inconsistent with his positions, duties and responsibilities with the Corporation immediately prior to the date hereof or any removal of the Executive from, or any failure to re-elect the Executive to, material positions, duties and responsibilities with the Corporation, except in connection with the termination of the Executive’s employment for Just Cause, Disability or Retirement or as a result of the Executive’s death or by the Executive other than for Good Reason.
(ii)	a reduction by the Corporation in the Executive’s salary as in effect on the date hereof or as the same may be increased from time to time;
(iii)	the failure by the Corporation to continue in effect any incentive or compensation plan, or any pension, life insurance, health and accident or disability plan in which the Executive is participating at the date hereof, (or plans providing the Executive with substantially similar benefits) unless such plans have been replaced by new plans providing the Executive with benefits that are as good as or better than the benefits provided in such plans, or the taking of any action by the Company which would adversely affect the Executive’s participation in or materially reduce the Executive’s benefits under any of such plans or deprive the Executive of any material fringe benefit enjoyed by him at the date hereof;
(iv)	the requirement that the Executive be based anywhere other than the Corporation’s principal executive offices except for required travel on the Corporation’s business to an extent substantially consistent with the Executive’s present employment or travel obligations, or in the event the Executive consents to any such relocation, the failure by the Corporation to pay (or reimburse the Executive for) all reasonable moving expenses incurred by the Executive or to indemnify the Executive against any excess in (A) the

US SCA — Thor Thorsteinson April 1, 2002

-4-

	cost of a principal residence in the new location which is comparable to the Executive’s principal residence at the time of the relocation, over (B) the amount realized by the Executive upon the sale of his principal residence at the time of the relocation; or
(v)	any reason which would be considered to amount to constructive dismissal by a court of competent jurisdiction;

(f)	“Just Cause” means wilful failure of the Executive to properly carry out his duties after written notice by the Corporation of the failure to do so and an opportunity for the Executive to correct the same within a reasonable time from the date of receipt of such written notice from the Corporation, or theft, fraud or dishonesty or material misconduct by the Executive involving the property or affairs of the Corporation or the carrying out of the Executive’s duties;
(g)	“Key Executive Incentive Plan” means any program adopted by the Corporation from time to time with the intention of providing bonus or similar compensation to the executives of the Corporation;
(h)	“Market Capitalization of the Corporation” at any time means the product of (i) the number of outstanding common shares of the Corporation at that time, and (ii) the average of the closing prices for the common shares of the Corporation on the principal securities exchange (in terms of volume of trading) on which the common shares of the Corporation are listed at that time for each of the last 10 days prior to such time on which the common shares of the Corporation traded on such securities exchange;
(i)	“person” means includes an individual, partnership, association, body corporate, trustee, executor, administrator, legal representative and any national, provincial, state or municipal government;
(j)	“Retirement” means the retirement or early retirement of the Executive in accordance with the terms of the Retirement Agreement;
(k)	“Retirement Agreement” means any agreement between the Corporation and the Executive, under which the Corporation agreed to pay the Executive a retirement allowance following his retirement or early retirement from employment with the Corporation, in accordance with the terms of that agreement and including any amendments made from time to time to such agreement;
(1)	“Stock Option Plans” means the Abitibi-Consolidated Inc. Stock Option Plan and any similar plan of the Corporation under which the Corporation from time to time grants options to purchase Voting Shares of the Corporation and loans for the purpose of exercising such options;
(m)	“subsidiary” has the meaning ascribed to it in the Canada Business Corporations Act, as in force on the date hereof; and

US SCA — Thor Thorsteinson April 1, 2002

-5-

(n) “Voting Shares” means any securities of the Corporation ordinarily carrying the right to vote at elections of directors.

2. Scope of Agreement

          The parties hereto intend that this Agreement set out their respective rights and obligations in certain circumstances in which the Executive’s employment is terminated. This Agreement does not purport to provide for any other terms of the Executive’s employment with the Corporation.

3. Position, Duties and Responsibilities of Executive

          The Executive shall continue to have the responsibilities and powers that he currently has or such other responsibilities and powers as he and the Corporation may from time to time agree upon. The Executive shall devote the whole of his working time to the Executive’s duties and shall use his best efforts to promote the interests of the Corporation.

4. Termination of Employment by the Corporation for Just Cause

          The Corporation may terminate the Executive’s employment at any time without notice or further obligations to the Executive under this Agreement for reasons of Just Cause. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Just Cause unless and until there has been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board of Directors of the Corporation (excluding the Executive if the Executive is at that time a director of the Corporation) at a meeting of the Board called and held for the purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with his legal counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Executive was guilty of conduct constituting Just Cause and specifying the particulars thereof. The effective date of any termination pursuant to this section shall be the date on which such resolution is given to the Executive.

5. Termination of Employment by the Corporation Without Just Cause or by the Executive for Good Reason Following a Change of Control

          If at any time within two years following a Change of Control the Executive’s employment is terminated by the Corporation other than for Just Cause or by the Executive in response to a Good Reason, the following provisions shall apply:

(a)	the Executive shall be entitled to receive, and the Corporation shall pay to the Executive, immediately following termination, a cash amount equal to one and a half (1.50) times the Annual Compensation of the Executive less required statutory deductions;
(b)	the Executive shall continue to receive until the earlier of (i) three years after the date of termination or (ii) receipt of equivalent benefits from a new employer, all group benefits including health, dental, life and car allowance (excluding all maintenance and operating expenses) other than disability insurance benefits on the scale provided

US SCA — Thor Thorsteinson April 1, 2002

-6-

	by the Corporation to the Executive as at the date of termination or in lieu of such continued coverage, the Executive shall be entitled to receive a cash amount equal to the value to the Executive (as determined by a chartered accountant or firm of chartered accountants acceptable to the Corporation and the Executive) of such coverage for such period of time;
(c)	the Executive will also be entitled to receive on termination the normal and any supplementary pension benefits in effect on the date of termination according to the terms of the Corporation’s registered pension plans and the Retirement Agreement or according to similar provisions of any successor plan, of which the Executive is a member at the date of termination (the “Retirement Plans”). The Executive’s total pension entitlement and retirement options will be determined on the basis that the Executive had three years of credited service and age under the Retirement Plans at his date of termination of employment (over and above his actual years of credited service as otherwise determined). In addition, such additional years of service shall be included for the purpose of determining final or best average earnings assuming that the Executive’s monthly rate of salary at date of termination would have continued unchanged during the period of additional service. For Retirement Plans that include performance bonuses in the definition of pensionable earnings, the average of the highest three actual bonuses earned in the five years immediately prior to the date of termination shall be used for calculating the bonuses for each year during the severance period used for the purpose of determining final or best average earnings. Any portion of the total pension entitlement of the Executive not eligible to be paid under provisions of the registered pension plans of the Corporation shall be payable as supplementary payments in accordance with the Retirement Agreement;
(d)	if at the date of termination of the Executive’s employment, the Executive holds options for the purchase of shares under the Stock Option Plans, all options so held shall, unless the Executive has breached the terms of section 13 hereof, (i) immediately vest to the extent they have not already vested at such date and (ii) continue to be held, in both cases, notwithstanding the terms of the Stock Option Plans, on the same terms and conditions as if the Executive continued to be employed by the Corporation;
(e)	if at the date of the termination of the Executive’s employment, the Executive owes any money to the Corporation pursuant to loans to the Executive for the purchase of shares under the Stock Option Plans or for assisting the Executive to purchase property, such loans shall, notwithstanding the terms of any other agreement between the Corporation and the Executive respecting these loans, be repayable by the Executive in the same manner and at the same time as if the Executive continued to be employed by the Corporation following such termination, provided that if the Executive has breached the terms of section 13 hereof, the loans shall become immediately due on the date of such breach and shall be repaid forthwith.
(f)	Notwithstanding any other provision of this Agreement, if any payment to or for the benefit of the Executive under this Agreement either alone or together with other

US SCA — Thor Thorsteinson April 1, 2002

-7-

payments to or for the benefit of the Executive would constitute a “parachute payment” (as defined in Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”)), the payments under this Agreement shall be reduced to the largest amount that will eliminate both the imposition of the excise tax imposed by Section 4999 of the Code and the disallowance of deductions to the Corporation under Section 280G of the Code for any such payments. The amount and method of any reduction in the payments under this Agreement pursuant to this Section 5(f) shall be as reasonably determined by the Compensation Committee of the Board of Directors.

For greater certainty, this section 5 applies with respect to each Change of Control until this Agreement has been terminated in accordance with section 14 hereof. In addition, with respect to a particular Change of Control, this section 5 expires two years following such Change of Control unless this Agreement is otherwise terminated in accordance with section 14 hereof. This section 5 does not apply in the event of the termination of the employment of the Executive as a result of death, Disability or Retirement or by the Executive otherwise than in response to a Good Reason or by the Corporation for Just Cause. If the Executive or the Corporation intend to terminate the Executive’s employment as contemplated in this section, the party having such intention shall give the other notice thereof and the effective date of such termination shall be the date on which such notice is given to the other party.

6. Disability

          In the event of Disability of the Executive, this Agreement may be terminated by the Corporation on thirty days’ notice. Notwithstanding anything contained in this Section 6, the Executive shall be entitled to all benefits provided under the disability and pension plans of the Corporation applicable to the Executive at the date of this Agreement.

7. No Obligation to Mitigate

          The Executive shall not be required to mitigate the amount of any payment or benefit provided for in section 5 of this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for in section 5(a) be reduced by any compensation earned by the Executive as a result of employment by another employer after termination or otherwise.

8. Binding on Successors

(a) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation, by agreement in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. Failure of the Corporation to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Corporation on the same terms and conditions as the Executive would be entitled hereunder if the Executive terminated his employment for Good Reason. As used in this Agreement,

US SCA — Thor Thorsteinson April 1, 2002

-8-

“Corporation” shall mean the Corporation as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this section 8(a) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

(b)

This Agreement shall enure to the benefit of and be enforceable by the Executive’s successors or legal representatives but otherwise it is not assignable. If the Executive should die while any amounts would still be payable to the Executive hereunder if the Executive had continued to live, all such amounts unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s estate.

9. Expenses

          The Corporation agrees to pay all legal fees and expenses incurred by the Executive as a result of the termination of his employment in circumstances covered by this Agreement (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement).

10. Entire Agreement

          Except for the Executive’s rights to continued participation in the Corporation’s employee benefit plans, including, without limitation, the Corporation’s Stock Option Plans, this Agreement constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof. No amendment or waiver of this Agreement shall be binding unless executed in writing by both parties hereto.

11. Confidential Information

          In the event of termination of employment of the Executive, the Executive agrees to keep confidential all information of a confidential or proprietary nature concerning the Corporation, its subsidiaries and affiliates and their respective operations, assets, finances, business and affairs and further agrees not to use such information for personal advantage, provided that nothing herein shall prevent disclosure of information which is publicly available or which is required to be disclosed under appropriate statutes, rules or law or legal process.

12. Choice of Law

          This Agreement shall be governed and interpreted in accordance with the laws of the Province of Québec and the courts of the Province of Québec shall be the sole and proper forum with respect to any suits brought with respect to this Agreement. The present agreement has been drafted in English at the request of the Executive. La présente entente a été rédigée en anglais à la demande de l’employé.

13. Non-Competition

          The Executive agrees that in the event of his termination of service with the Corporation under Section 5 of this Agreement, the Executive will not for a period of 2 years

US SCA — Thor Thorsteinson April 1, 2002

-9-

beginning on the date of such termination, without written approval of the Board of Directors, undertake or carry on, either alone or in partnership, or either on his own account or on behalf of or as agent or employee or director of any person or persons, firm or corporation (other than the Corporation), or be employed or interested or engaged (other than as a holder of securities of not more than five percent (5%) of the stock or equity of any corporation the capital stock of which is publicly traded) in any business in competition with that carried on by the Corporation at the date of termination. In consideration of the Executive’s covenant not to compete, the Executive shall be entitled to receive, and the Corporation shall pay to the Executive in semi-annual instalments a cash amount equal to one and a half (1.5) times the Annual Compensation of the Executive less statutory deductions.

14. Notices

          Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by prepaid first-class mail, by facsimile or other means of electronic communication or by hand-delivery as hereinafter provided. Any such notice or other communication, if mailed by prepaid first-class mail at any time other than during a general discontinuance of postal service due to strike, lockout or otherwise, shall be deemed to have been received on the fourth business day following the sending, or if delivered by hand shall be deemed to have been received at the time it is delivered to the applicable address noted below either to the individual designated below or to an individual at such address having apparent authority to accept deliveries on behalf of the addressee. Notice of change of address shall also be governed by this section. In the event of a general discontinuance of postal service due to strike, lock-out or otherwise, notices or other communications shall be delivered by hand or sent by facsimile or other means of electronic communication and shall be deemed to have been received in accordance with this section. Notices and other communications shall be addressed as follows:

     (a) if to the Executive:

     Thor Thorsteinson

     Senior Vice-President, Southern Newsprint Operations

     (b) if to the Corporation:

     Abitibi-Consolidated Inc.

     Att. Jacques Vachon

     1155, Metcalfe Street, Suite 800

     Montréal (Québec) H3B 5H2

          Attention: Chairman of the H.R.C.C.

          Telecopier: (416) 367-3549

US SCA — Thor Thorsteinson April 1, 2002

-10-

15. Termination

          This Agreement shall terminate immediately on the occurrence of any of the following events: (i) the date of death of the Executive; (ii) voluntary resignation by the Executive from the Corporation otherwise than in response to a Good Reason; (iii) the giving of notice by the Corporation in the event of Disability as contemplated by section 6 hereof; (iv) termination for Just Cause; (v) termination of employment of the Executive at any time when there has been no Change of Control or more than two years after the immediately preceding Change of Control; or (vi) satisfaction by the Corporation of its obligations under section 5 of this Agreement in the event of termination of the Executive in the circumstances contemplated by section 5.

16. Copy of Agreement

          The Executive hereby acknowledges receipt of a copy of this Agreement duly signed by the Corporation.

          IN WITNESS WHEREOF the parties hereto have duly executed and delivered this Agreement.

ABITIBI-CONSOLIDATED INC.
By:	/s/ John Weaver
	John Weaver
	President and Chief Executive Officer

/s/ John A. Tory  

John A. Tory 

Chairman of the H.R.C.C. 

Witness: /s/ (name unrecognizable)	/s/ Thor Thorsteinson
	Thor Thorsteinson
	Senior Vice-President, Southern Newsprint Operations

US SCA — Thor Thorsteinson April 1, 2002

Abitibi Consolidated U.S. Severance Compensation Agreement

I, Thor Thorsteinson, hereby acknowledge that the Severance Compensation Agreement entered into with Abitibi-Consolidated Inc. (the Company), has been amended under sections No. 5 and No. 13 in order to ensure the agreement complies with legislative requirements, notably the American Jobs Creation Act.

I understand that these amendments will cause a delay in the remittance of compensation defined in the terms of the Agreement until the seventh (7^th) month anniversary of my termination.

Signed	/s/ Thor Thorsteinson	February 24/06
	Thor Thorsteinson	Date

US SCA memo Agreeement (Thor) 2/2

EX-10.14

EXHIBIT 10.14

September 27, 2007

Mr. Thor Thorsteinson

#210–l McGill
Montreal, Quebec
H2Y 4A3

Re: Offer letter

Dear Thor,

We are pleased to offer you the position of Senior Vice-President, International Business, in the new AbitibiBowater, Inc. The following are details as agreed upon on this date:

Location:               Montreal, Quebec, Canada

Effective Date:

The offer is contingent on conclusion of the Merger and will be effective at such date.

Compensation:

Your annual base salary, effective the date of the merger, will be US$425,000. You will be eligible to participate in a short-term incentive plan with a target level of 60% of your base salary. In addition, you will receive a signing bonus of US$30,000, to be paid as soon as practical following the closing.

We will request that the Human Resources and Compensation Committee (HRCC) of the new company, at its first meeting, approve base compensation and incentive targets for the new executive team and approve several compensation redesigns. We anticipate closing the 2007 Annual Incentive Plan effective with the merger and will substitute a new plan for the remainder of 2007 and all of 2008, emphasizing achievement of synergies.

Additionally, for executives at your level, we will request an equity award tied to synergy achievement. We anticipate continuing annual equity grants of similar value as you currently receive and a target level of ownership of common shares may be required. Previous equity awards will rollover into the New Company and will be paid according to the initial payout schedule.

You will also be eligible for a perquisite allowance of US$12,000 per year as well as a complete annual medical examination.

Offer Letters — T Thorsteinson final 1/2

Other benefits:

Subject to the approval of the new HRCC, you will be covered by an employment agreement and a new Change in Control (CIC) agreement.

You will maintain your current participation in various benefit plans such as pension, group insurance and vacation. However, following the merger, the new company intends to harmonize certain benefits offered to salaried employees, including senior executives, which may lead to changes in the current benefits. You will be informed about any changes at the appropriate time.

We are excited about the prospects of the combination of the two companies and look forward to having you join us on the leadership team. It will be a challenge.

Please acknowledge receipt of this offer letter and agreement with its terms by signing the two originals and returning one copy to Viateur Camiré on or before October 3, 2007.

John W. Weaver	David J. Paterson
Executive Chairman	President and Chief Executive Officer
I accept this offer:
Thor Thorsteinson	Date

Offer Letters — T Thorsteinson final 2/2

EX-10.15

EXHIBIT 10.15

À PROPOS DE VOTRE

RÉGIME SUPPLÉMENTAIRE DE RETRAITE

Régime supplémentaire de retraite
pour les cadres supérieurs désignés de Donohue Inc.
(Décembre 1999)

Table des matières

Régime supplémentaire de retraite pour
les cadres supérieurs désignés de Donohue Inc.
(Décembre 1999)

	Page
Avant-propos
Admissibilité	4
Cotisations	5
Âge de la retraite	6
Salaire, Non-concurrence et confidentialité	7
Calcul de la rente	9
Calcul de la rente temporaire	12
Garantie de la rente	14
Cessation de service/Décès	15
Absence temporaire et invalidité	17
Dispositions générales	18
Notes complémentaires	19
Hypothèses actuarielles	20

Avant-propos

Le Régime supplémentaire de retraite pour les cadres supérieurs désignés de Donohue Inc. est un régime de retraite non enregistré et non capitalisé, lequel a pour but d’augmenter votre revenu à la retraite. En effet, ce régime est un supplément au Régime complementaire de retraite pour les cadres supérieurs désignés de Donohue Inc.

Ce régime est entré en vigueur le 1^er janvier 1995 a et a été modifié au cours de 1999. II pourra également faire l’objet de révisions périodiques futures afin d’en assurer sa compétitivité.

Pour les cadres supérieurs désignés de “Produits Forestiers Donohue Inc. — Division Pâtes et Papier — Secteur Thorold”, la participation à ce régime, i.e. le service reconnu, débute le l^er janvier 1997; ces cadres supérieurs conservent cependant leurs droits acquis, s’il y a lieu, selon les dispositions du “QUNO Corporation Supplemental Retirement Plan” pour le service reconnu avant le l^er janvier 1997, lequel fût également modifié au cours de 1999.

Pour les cadres supérieurs désignés de “Produits Forestiers Donohue Inc. — Division Pâtes et Papier — Secteur MacKenzie” à l’emploi de Finlay Forest Industries Inc. au 4 août 1999, la participation à ce régime, i.e. le service reconnu, débute le l^er janvier 2000; ces cadres supérieurs conservent cependant leurs droits acquis, s’il y a lieu, selon les dispositions du “ Supplemental Retirement Plan for Senior Executives of Finlay Forest Industries Inc.” pour le service reconnu avant le l^er janvier 2000.

Vous trouverez dans cette brochure les modalités applicables à ce régime supplémentaire de retraite.

Pour toute information sur le régime, vous pouvez communiquer avec le vice-président, ressources humaines. Toute interpretation pourra être sujette à l’approbation de la direction de Donohue Inc. (la “ Compagnie ”).

N.B.: Cette brochure s’adresse également aux femmes et aux hommes. Toutefois, afin d’en faciliter la lecture, il a été convenu d’utiliser le genre masculin.

Admissibilité Page 4

Tout employé de Donohue Inc. ou de l’une de ses compagnies affiliées, ayant, en vertu des critères de la Compagnie, le statut de cadre supérieur désigné, est admissible aux bénéfices offerts en vertu du présent régime dès la date de cette désignation.

Cotisations page 5

Ce régime étant non capitalisé, aucune cotisation n’est versée, tant par l’employé que par la Compagnie. Les bénéfices payables à la retraite, à la cessation de service ou au moment du décès proviendront des fonds généraux de la Compagnie.

Âge de la retraite Page 6

Retraite normale

L’âge normal de la retraite est le premier jour du mois coïncidant avec ou suivant immédiatement le 65^e anniversaire de naissance.

Retraite facultative

Tout participant actif peut toutefois prendre une retraite “facultative” sans réduction de la rente, dès l’âge de 58 ans, si la somme de son âge et de ses années de service totalise au moins 80 ou encore dès l’âge de 60 ans s’il compte alors 15 ans ou plus de service.

Retraite anticipée

De même, tout participant qui n’est pas admissible à la retraite facultative peut prendre une retraite “anticipée” dès l’âge de 55 ans, s’il compte alors au moins deux années de participation au régime. Sa rente sera cependant réduite, pour tenir compte du fait qu’elle commence à être versée avant la date de la retraite facultative. Le montant de la réduction variera selon les modalités suivantes :

• Si le participant est âgé d’au moins 55 ans et compte au moins 20 années de service, la rente sera réduite de 0,50% par mois (6% par année) compris entre la date de retraite anticipée et l’âge de 58 ans.

• Si le participant est âgé d’au moins 58 ans et compte au moins 10 années de service, la rente sera réduite de 0,25% par mois (3% par année) compris entre la date de retraite anticipée et l’âge de 65 ans.

• Si le participant ne satisfait à aucun de ces critères, la rente sera réduite par équivalence actuarielle pour la période comprise entre la date de retraite anticipée et l’âge de 65 ans.

Retraite ajournée

Un participant qui prend sa retraite au-delà de l’âge normal de retraite, i.e. qui demeure en service actif après avoir atteint l’âge de 65 ans, a droit à une rente ajournée. La rente acquise et déterminée à l’âge de 65 ans est alors ajustée, i.e. augmentée par équivalence actuarielle. Ainsi, aucune rente n’est payable tant que le cadre supérieur désigné demeure en service actif.

Salaire, Non-concurrence et Confidentialité Page 7

i) Salaire

L’expression “salaire final” désigne la moyenne des salaires, tels que définis ci-dessous, des cinq années de service reconnu avant l’âge de 65 ans au cours desquelles le salaire fut le plus élevé ou, si l’employé a accumulé moins de cinq années, la moyenne des salaires pour cette période.

Le salaire au cours d’une année donnée est défini comme étant la rémunération de base effectivement reçue de la Compagnie et apparaissant sur sa liste de paie augmentée, le cas échéant et sous certaines conditions, du boni gagné en vertu du Régime d’intéressement à court terme pour l’année en cause.

En cas de cessation d’emploi avant l’âge de 55 ans ou de décès avant la retraite, le boni peut être inclus à la définition de salaire, selon les dispositions du tableau suivant:

		Sans boni	Avec boni
•	Départ volontaire ou renvoi pour cause	√
•	Décès avant la retraite		√
•	Autre cessation d’emploi		√

De plus, afin que le boni gagné soit inclus à la définition de salaire en cas de retraite avant la date normale de la retraite, le cadre supérieur désigné doit se conformer aux termes des clauses de non-concurrence et de confidentialité suivantes :

ii) Non-concurrence

L’employé devra s’abstenir, pour une période de deux (2) ans suivant la retraite anticipée, sauf s’il s’agit d’une retraite anticipée faisant suite à une cessation d’emploi à l’initiative de la Compagnie, de faire concurrence à quelque titre que ce soit (employeur, employé, dirigeant, actionnaire (détenant 10% ou plus des actions volontaires) ou conseiller) pour le compte de toute entreprise ou personne morale ou physique oeuvrant dans des affaires ou activités substantiellement similaires à celles de la Compagnie, à savoir le domaine des pâtes et papier, des scieries et forêt, et ce, sur le territoire dans lequel l’employeur fait affaires en date de prise de retraite de l’employé. Cette période de deux (2) ans ne peut toutefois excéder l’âge normal de la retraite établi selon les dispositions du Régime supplémentaire de retraite.

Salaire, Non-concurrence et Confidentialité Page 8

Confidentialité

L’employé s’engage à respecter le caractére confidentiel de toute information portée à sa connaissance et concernant la Compagnie ou ses filiales et qui, pour des motifs de concurrence ou selon les pratiques courantes et normales de l’industrie, ne fait pas habituellement l’objet de divulgation à des personnes autres que celles qui doivent en prendre connaissance pour bien accomplir leur tâche dans l’intérêt de la Compagnie. Toutefois, rien n’empêche la divulgation par l’employé d’informations qui sont autrement accessibles au public ou dont la divulgation est obligatoire en vertu d’une loi ou d’une demande judiciaire ou administrative.

Dans le cas où les présentes dispositions de non-concurrence et de confidentialité ne seraient pas respectées par l’employé, la prestation de retraite serait dès lors établie en utilisant uniquement le salaire de base.

Calcul de la rente Page 9

À la date de la retraite normale, de la retraite anticipée, de la retraite facultative ou de la retraite ajournée, le participant a droit à une rente annuelle régulière ainsi qu’à une rente additionnelle.

b) Rente réguliére

La rente régulière est calculée à l’aide d’une formule qui tient compte du salaire final et des années de participation, selon les modalités suivantes :

•	Pour chaque année de participation au régime, 2% du salaire final
	moins
	la rente payable pour ces mémes années en vertu du Régime complémentaire de retraite pour les cadres supérieurs désignés de Donohue Inc., sans considérer toute cession de droit.
•	Cette rente ainsi déterminée est respectivement réduite ou augmentée, dans le cas d’une retraite anticipée ou ajournée, selon les modalités décrites à la section “Âge de la retraite”.

Par “année de participation”, on entend :

1) une année ou fraction d’année de service pendant laquelle le participant est au service de la Compagnie en tant que cadre supérieur désigné, à l’exclusion de toute période d’absence temporaire non rémunérée. Ces années ou fractions d’année doivent être ultérieures aux dates suivantes:

•	Cadres supérieurs du Secteur MacKenzie étant à l’emploi de Finlay Forest Industries Inc. au 4 août 1999	31 décembre 1999
•	Cadres supérieurs du Secteur Thorold	31 décembre 1996
•	Autres cadres supérieurs	31 décembre 1994

(2) les années de participation reconnues au participant au 1^er Janvier 1995.

Calcul de la rente Page 10

Les années durant lesquelles le participant est admissible à une prestation de remplacement de revenu de la CSST / Worker’s Compensation Board, ou du régime d’assurance collective contracté par la Compagnie, sont incluses dans le calcul des années de participation tandis que les années de service actif au-delà de 65 ans sont exclues.

La rente à la retraite est versée mensuellement et comporte certaines garanties, telle la conversion à une rente à échéance fixe, lesquelles sont décrites à la section “Garantie de la rente”.

Cette rente ne comporte aucune indexation après la retraite.

Exemple — Rente régulière

Retraite normale

DONNÉES : PARTICIPANT DE SEXE MASCULIN
•	Date d’adhésion	1er janvier 1997
•	Âge à la date d’adhésion	40 ans
•	Âge à la date normale de retraite	65 ans
•	Années de service reconnu à la date normale de retraite	25
•	Salaire final (incluant boni)	150 000 $
CALCUL DE LA RENTE VIAGÈRE RÉGULIÈRE
	[2% x 150 000 $ x 25] – (1722,22 x 25) * =	31 945 $
CONVERSION À ÉCHÉANCE FIXE
	Terme 5 ans	77 281 $
	Terme 6 ans	66 746
	Terme 7 ans	59 266
	Terme 8 ans	53 694
	Terme 9 ans	49 394
	Terme 10 ans	45 984

* La rente payable à tout participant au niveau du régime complémentaire de retraite est limitée à la rente annuelle maximale permise par Revenu Canada, Impôt, soit 1 722,22 $ par année de service reconnu (variant selon l’année de la retraite).

Calcul de la rente Page 11

i) Rente additionnelle

La rente additionnelle correspond à la rente pourvue par les cotisations salariales versées au Régime complémentaire de retraite pour les cadres supérieurs désignés de Donohue Inc. en excédent de 2 000 $ par année et accumulées avec intérêts jusqu’à la date de la retraite réduites de toutes cotisations excédentaires payables par ce régime, le cas échéant.

Exemple — Rente additionnelle

Retraite normale

DONNÉES : PARTICIPANT DE SEXE MASCULIN
•	Âge à la retraite normale	65 ans
•	Cotisations salariales en excédent de 2 000 $ accumulées avec intérêts	225 000 $
RENTE À ÉCHÉANCE FIXE
	Terme 5 ans Terme 6 ans Terme 7 ans Terme 8 ans Terme 9 ans Terme 10 ans	54 212 $ 46 822 41 575 37 666 34 650 32 258

Le revenu à la retraite sera également constitué de la rente temporaire décrite à la section suivante, des rentes provenant du Régime complémentaire de retraite pour les cadres supérieurs désignés de Donohue Inc. ainsi que des prestations du Régime de rentes du Québec/ Régime de pension du Canada et de la Pension de Sécurité de la vieillesse, le cas échéant.

Calcul de la rente temporaire Page 12

En plus des rentes régulière et additionnelle décrites à la section “Calcul de la rente”, le participant actif qui prend sa retraite avant l’âge de 65 ans alors qu’il est âgé d’au moins 55 ans et qui compte 20 années ou plus de service ou encore d’au moins 58 ans et qui compte 10 années ou plus de service, a droit à une rente annuelle temporaire payable jusqu’à l’âge de 65 ans calculée de la façon suivante:

•	216 $ pour chaque année de service reconnu en vertu du Régime complémentaire de retraite pour les cadres supérieurs désignés de Donohue Inc. antérieure au 1er janvier 1985 (360 $ pour chaque année de service reconnu antérieure au ler janvier 1997, réduisant à 180 $ à compter de 60 ans, pour les cadres supérieurs désignés de “Produits Forestiers Donohue Inc. — Division Pâtes et Papier — Secteur Thorold”)
	plus
	1 % du salaire final moyen pour chaque année de service reconnu en vertu du Régime complémentaire de retraite pour les cadres supérieurs désignés de Donohue Inc. à compter du 1er janvier 1985 ( 1er janvier 1997 pour les cadres supérieurs désignés de “Produits Forestiers Donohue Inc. — Division Pâtes et Papier — Secteur Thorold” et 1er janvier 2000 pour les cadres supérieurs de “Produits Forestiers Donohue Inc. — Division Pâtes et Papier — Secteur MacKenzie” à 1’emploi de Finlay Forest Industries Inc. au 4 août 1999)
	moins
	la rente temporaire payable en vertu du. Régime complémentaire de retraite pour les cadres supérieurs désignés de Donohue Inc.

• Cette rente est réduite, le cas échéant, de ¹/2 % par mois entre la date de la retraite et l’âge de 58 ans.

• En aucun temps, la rente temporaire totale payable en vertu du Régime complémentaire de retraite et du Régime supplémentaire de retraite ne peut excéder 11 000 $ par année et ce avant l’application des réductions applicables.

La rente temporaire est versée mensuellement et comporte certaines garanties, lesquelles sont décrites à la section “Garantie de la rente”.

Calcul de la rente temporaire Page 13

Exemple — Rente temporaire

Retraite anticipée

DONNÉES: PARTICIPANT DE SEXE MASCULIN
•	Date d’adhésion	1er janvier 1997
•	Âge à la date d’adhésion	40 ans
•	Âge à la date de retraite anticipée	58 ans
•	Années de service reconnu à la date de retraite anticipée	18
•	Salaire final (incluant boni)	150 000 $
•	Rente temporaire maximale payable du
	Régime complémentaire de retraite *	4 643 $
CALCUL DE LA RENTE TEMPORAIRE
	MIN[ (1 % x 150 000 $ x 18) ; 11 000 ] - 4 643 $ =	6357 $

* La rente temporaire payable à tout participant au niveau du régime complémentaire de retraite est limitée à la rente temporaire annuelle maximale permise par Revenu Canada, Impôt (variant, entre autres, selon le nombre d’années de service reconnu et l’année de la retraite).

Garantie de la rente Page 14

Au moment de la retraite, la rente régulière, laquelle comporte une garantie qu’en cas de décès, 60 % de cette rente se continuera au conjoint survivant (en l’absence d’un conjoint, la rente comporte une garantie de 180 versements), sera transformée, par équivalence actuarielle, en rente à terme fixe d’une durée pouvant varier, au choix du participant, de cinq (5) à dix (10) ans. À défaut d’un tel choix par le participant, le terme sera de dix (10) ans.

La rente additionnelle sera également payable sous forme d’une rente à terme fixe d’une durée pouvant varier, au choix du participant, de cinq (5) à dix (10) ans.

La rente temporaire comporte une garantie qu’en cas de décès, 60 % de cette rente se continuera au conjoint survivant jusqu’à la date à laquelle le participant aurait atteint l’âge de 65 ans (en l’absence d’un conjoint, la rente cesse au décès du participant).

Au moment de sa retraite, le participant sera informé des montants de rente payables et des garanties applicables.

Cessation de service/Décès Page 15

Cessation de service ou décès avant la retraite

La prestation payable lors d’une cessation de service ou d’un décès avant la retraite correspond à un pourcentage de la valeur actuelle de la rente régulière créditée à cette date et qui aurait été payable à la date normale de la retraite.

Ce pourcentage est de 20% par année de participation postérieure au l^er janvier 1995, sujet à un maximum de 100%.

Pour l’employé de “Produits Forestiers Donohue Inc. — Division Pâtes et Papier — Secteur Thorold” ayant obtenu le statut de cadre désigné avant le l^er janvier 1997, ce pourcentage est de 100% dès qu’il compte 24 mois ou plus de participation au Régime complémentaire de retraite pour les cadres supérieurs désignés de Donohue Inc.

Pour l’employé de “Produits Forestiers Donohue Inc. — Division Pâtes et Papier — Secteur MacKenzie”, ce pourcentage est de 20 % par année de service, sujet à un maximum de 100 %, et la détermination du pourcentage inclut les années de service avant le 4 août 1999.

La valeur de cette prestation doit être au moins égale aux cotisations salariales annuelles, sujet à un maximum de 2 000 $ par année, versées après le 31 décembre 1994 (31 décembre 1996 pour ĺes cadres supérieurs désignés de “Produits Forestiers Donohue Inc. — Division Pâtes et Papier — Secteur Thorold” et 31 décembre 1999 pour les cadres supérieurs de “Produits Forestiers Donohue Inc. — Division Pâtes et Papier — Secteur MacKenzie” à l’emploi de Finlay Forest Industries Inc. au 4 août 1999) dans le Régime complémentaire de retraite pour les cadres supérieurs désignés de Donohue Inc., accumulées avec intérêts.

De plus, si le cadre supérieur désigné a choisi de verser une cotisation salariale égale à 6% de son salaire dans le Régime complémentaire de retraite pour les cadres supérieurs désignés de Donohue Inc., il a droit, en plus de la prestation décrite précédemment, au remboursement de ses cotisations salariales versées en excédent de 2 000 $ par année dans le régime complémentaire de retraite accumulées avec intérêts. Cette prestation sera réduite, s’il y a lieu, si le versement d’une telle cotisation crée des cotisations excédentaires dans ce régime de retraite. Dans un tel cas, le montant de la réduction correspondra au montant des cotisations excédentaires devant être remboursées via la caisse du Régime complémentaire de retraite pour les cadres supérieurs désignés de Donohue Inc.

Cessation de service/Décès Page 16

Décès après la retraite

Le solde des versements est payé au conjoint survivant ou, à défaut, aux ayants droit, selon les modalités et le terme applicables ou choisis par le participant au moment de la retraite. À défaut d’un conjoint, cette prestation sera payée sous forme d’un versement forfaitaire.

Absence temporaire et invalidité Page 17

Le participant maintient sa participation au régime au cours d’une absence temporaire ou d’une invalidité de courte durée, s’il est admissible à une prestation de remplacement de revenu de la C.S.S.T. / Worker’s Compensation Board ou d’un régime d’assurance collective contracté par la compagnie. Le maintien de la participation signifie qu’il continue d’accumuler des créances de rente dont le coût est défrayé par la caisse de retraite. Les rentes qui sont créditées pendant cette période sont fondées uniquement sur le salaire de base que le participant recevait tout juste avant le début de son invalidité, indexé annuellement selon les modalités du Régime de rentes du Québec, sujet toutefois à une indexation maximale de 3% par année.

Dispositions générales Page 18

CONJOINT

Le bénéficiaire de la prestation de décès est le conjoint du participant tel que défini dans les Lois provinciales sur les régimes complémentaires de retraite.

On entend par “conjoint” la personne qui, à la date de la retraite ou au jour qui précède le décès, si antérieur:

• Pour le cadre supérieur désigné résidant au Québec:

• est mariée avec le participant; ou

• vit maritalement avec le participant (alors que lui-même n’est pas marié) depuis au moins trois ans ou, dans les cas suivants, depuis au moins un an;

• un enfant au moins est ne ou est à naître de leur union;

• ils ont conjointement adopté au moins un enfant durant leur période de vie maritale;

• l’un d’eux a adopté au moins un enfant de l’autre durant cette période.

• Pour le cadre superieur désigné résidant en Ontario:

• est mariée avec le participant; ou

• n’est pas mariée avec le participant mais vit avec celui-ci dans une union conjugale:

• soit de façon continue depuis au moins trois ans;

• soit dans une relation d’une certaine permanence, s’ils sont les parents naturels ou adoptifs d’un enfant, au sens de la Loi sur le droit de la famille.

• Pour le cadre supérieur désigné résidant en Colombie-Britannique:

• est mariée avec le participant et ne vit pas séparé de lui depuis plus de deux ans; ou

• vit maritalement avec le participant depuis au moins deux ans.

Notes complémentaires Page 19

CONTINUATION DU RÉGIME

Bien que la Compagnie ait l’intention de maintenir indéfiniment en vigueur le Régime supplémentaire de retraite pour les cadres supérieurs désignés de Donohue Inc., elle se réserve le droit d’amender et/ ou terminer le régime, en totalité ou en partie, et ce, pour quelque raison que ce soit.

RENÉGOCIATION DE L’ENTENTE

Si, dans l’avenir, le fardeau financier du Régime supplémentaire de retraite pour les cadres supérieurs désignés de Donohue Inc. devient substantiellement plus onereux pour l’une ou 1’autre des parties qu’il ne l’était au moment de sa mise en vigueur, une partie pourra demander la renégociation de 1’entente afin que les parties soient remises dans la même position fiscale qui prévalait au moment de sa mise en place.

CESSION

Les bénéfices octroyés au cadre supérieur désigné aux termes de la présente convention sont déclarés purement personnels et, par conséquent, ne peuvent être cédés ni transférés, ni donnés en garantie par celui-ci.

DROITS ACQUIS

L’adoption des présentes dispositions n’a pas et ne doit pas avoir pour effet de diminuer les droits acquis des participants actuels au régime.

SUCCESSEURS

La présente entente sera pour le bénéfice des parties aux presentes et de leurs successeurs et les liera tous.

INTERPRÉTATION

La présente entente sera régie et interprétée conformément aux lois de la province de Québec.

Hypothèses actuarielles Page 20

Les hypothèses actuarielles suivantes sont utilisées pour transformer la rente viagère en une rente à échéance fixe et pour établir, s’il y a lieu, la valeur de la prestation lors du décès avant la retraite ou de la cessation de service.

TABLE DE MORTALITÉ:	GAM 83 sans projection Taux — Homme/Femme
TAUX D’INTÉRÊT:	8 % par année
TAUX D’AUGMENTATION DES SALAIRES:	6 % par année
ÂGE DE RETRAITE:	62 ans
DIFFÉRENCE D’ÂGE ENTRE LES CONJOINTS:	3 ans (le conjoint de sexe féminin étant le plus jeune des deux)

EX-10.16

EXHIBIT 10.16

RÉGIME SUPPLÉMENTAIRE DE RETRAITE
pour les cadres supérieurs désignés de Donohue Inc.

Le participant soussigné accuse réception du document ci-joint relatif au Régime supplémentaire de retraite (RSR) pour les cadres supérieurs désignés de Donohue Inc., tel qu’amendé par le conseil d’administration de Donohue Inc. le 21 juillet 1999.

Le participant reconnaît avoir pris connaissance de ses dispositions et accepte chacune d’elles, plus particuliérement celles relatives à la définition du salaire final (avec ou sans le boni) pour les fins :

• du calcul de la prestation de décès ou de cessation d’emploi;

• du calcul de la prestation de retraite en cas de retraite avant la date normale de la retraite, comportant des dispositions de non-concurrence et de confidentialité

le tout tel que stipulé aux paragraphes i) et ii) de la section « Salaire, Non-concurrence et Confidentialité ».

En foi de quoi, les parties ont signé, ce 27 January 2000.

Par : Le participant au RSR	Par : Donohue Inc.
/s/ Monsieur Yves Laflamme    01 Feb 2000 Monsieur Yves Laflamme	/s/ M. Michel Desbiens M. Michel Desbiens
	Président et chef de la direction

EX-10.17

EXHIBIT 10.17

	Abitibi-Consolidated Inc. 1155, Metcalfe Street, Suite 800 Montréal, Québec, Canada H3B 5H2 Tel. 514-875-2160 Fax. 514-394-2213
	Postal address:
December 11, 2006	Post office Box 69 Montréal, Québec, Canada H3C 2R5

Mr. Yves Laflamme
Senior Vice President, Woodlands & Sawmills
Abitibi-Consolidated inc.
Montreal

Subject:   Severance Compensation Agreement (SCA)

Yves:

At its regular meeting held October 24, 2006, the Board of Directors approved your eligibility to the SCA applicable in case of a change of control, as for other Executives.

Nevertheless, the Board requested that a study be undertaken to verify if the SCA’s provisions were aligned with the current market and that a recommendation for amendments be proposed, if applicable. Accordingly, even if your eligibility to the current SCA has been approved, it should be understood that any amendments resulting from the market study, duly approved by the Board of Directors, would amend the current provisions of your SCA.

Sincerely,
 

/s/ John W. Weaver  

John W. Weaver 

President and Chief Executive Officer 

c.c.  J. Vachon
V. Camiré

JWW/jl
Encl.

Letter YLaflamme SCA Dec 2006

EX-10.18

EXHIBIT 10.18

SEVERANCE COMPENSATION AGREEMENT

THIS AGREEMENT made the 1^st day of September, 2006.

BETWEEN:

ABITIBI-CONSOLIDATED INC., a company amalgamated under the laws of
Canada

(the “Corporation”)

—and—

YVES LAFLAMME, an individual residing in the City of
Boucherville, in the province of Québec

(the “Executive”)

RECITALS:

A.	The Executive is a senior officer of the Corporation and is considered by the Board of Directors of the Corporation to be a valued employee of the Corporation and has acquired outstanding and special skills and abilities and an extensive background in and knowledge of the Corporation’s business and the industry in which it is engaged.
B.	The Board of Directors recognizes that it is essential and in the best interests of the Corporation and its shareholders that the Corporation retain the continuing dedication of the Executive to his office and employment.
C.	The Board of Directors further believes that the past service of the Executive to the Corporation requires that the Executive receive fair treatment, in the event of a change in control of the Corporation.
D.	It is desirable to clarify the scope of the arrangements under this Agreement.

          NOW THEREFORE in consideration of these premises and the mutual covenants herein contained and in consideration of the Executive continuing in office and in the employment of the Corporation, the Corporation and the Executive hereby covenant and agree as follows:

Dec 08, 2006

-2-

1. Definitions

     In this Agreement,

(a)	“Agreement” means this agreement and all schedules attached to this agreement, in each case as they may be restated, amended or supplemented from time to time, and the expressions “hereof, “herein”, “hereto”, “hereunder”, “hereby”, and similar expressions refer to this agreement and, unless otherwise indicated, references to sections are to sections in this agreement;
(b)	“Annual Compensation” means the aggregate of (i) the annual base salary of the Executive, payable by the Corporation as at the end of the month immediately preceding the month in which the termination of employment hereunder takes effect; and (ii) the greater of (A) the last bonus payment earned by the Executive pursuant to the Key Executive Incentive Plan in the fiscal year immediately preceding the termination of the Executive’s employment hereunder; or (B) an amount equal to the average of the bonus payments earned by the Executive pursuant to the Key Executive Incentive Plan in the two fiscal years immediately preceding the termination of the Executive’s employment hereunder;
(c)	“Change of Control” means any of:

(i)	The acquisition, directly or indirectly and by any means whatsoever, by any person, or by a group of persons acting jointly or in concert, of that number of Voting Shares which is equal to or greater than 35% of the total issued and outstanding Voting Shares immediately after such acquisition unless another person or group of persons has previously acquired and continues to hold a number of Voting Shares which represents a greater percentage than the first-mentioned person or group of persons;
(ii)	The election or appointment by any holder of Voting Shares, or by any group of holders of Voting Shares acting jointly or in concert, of a number of members of the Board of Directors of the Corporation equal to or greater than one third of the members of the Board of Directors unless another holder or group of holders has previously elected or appointed a greater number of members of the Board of Directors and re-elects such greater number of members at the same time as the first-mentioned holder or group of holders;
(iii)	Any transaction or series of transactions, whether by way of reconstruction, reorganization, consolidation, amalgamation, arrangement, merger, transfer, sale or otherwise, whereby assets of the Corporation become the property of any other person (other than a subsidiary of the Corporation) if such assets which become the property of any other person have a fair market value (net of the fair market value of any then existing liabilities of the Corporation assumed by such other person as part of the same transaction) equal to 50%

Canadian SCA — Yves Laflamme Dec 08, 2006

-3-

or more of the Market Capitalization of the Corporation immediately before such transaction; or

(iv) The completion of any transaction or the first of a series of transactions which would have the same or similar effect as any transaction or series of transactions referred to in paragraphs (i), (ii) and (iii) above;

(d) “Disability” means the mental or physical state of the Executive such that:

(i)

The directors of the Corporation, other than the Executive if he is a director, unanimously determine that the Executive has been unable, due to illness, disease, mental or physical disability or similar cause, to fulfil his obligations as an employee or officer of the Corporation either for any consecutive 6 month period or for any period of 12 months (whether or not consecutive) in any consecutive 24 month period; or

(ii)

A court of competent jurisdiction has declared the Executive to be mentally incompetent or incapable of managing his affairs;

(e) “Good Reason” means:

(i)	Without the express written consent of the Executive, the assignment to the Executive of any duties materially inconsistent with his positions, duties and responsibilities with the Corporation immediately prior to the date hereof or any removal of the Executive from, or any failure to re-elect the Executive to, material positions, duties and responsibilities with the Corporation, except in connection with the termination of the Executive’s employment for Just Cause, Disability or Retirement or as a result of the Executive’s death or by the Executive other than for Good Reason;
(ii)	A reduction by the Corporation in the Executive’s salary as in effect on the date hereof or as the same may be increased from time to time;
(iii)	The failure by the Corporation to continue in effect any incentive or compensation plan, or any pension, life insurance, health and accident or disability plan in which the Executive is participating at the date hereof, (or plans providing the Executive with substantially similar benefits) unless such plans have been replaced by new plans providing the Executive with benefits that are as good as or better than the benefits provided in such plans, or the taking of any action by the Company which would adversely affect the Executive’s participation in or materially reduce the Executive’s benefits under any of such plans or deprive the Executive of any material fringe benefit enjoyed by him at the date hereof;
(iv)	The requirement that the Executive be based anywhere other than the Corporation’s principal executive offices except for required travel on the Corporation’s business to an extent substantially consistent with the

Canadian SCA — Yves Laflamme Dec 08, 2006

-4-

Executive’s present employment or travel obligations, or in the event the Executive consents to any such relocation, the failure by the Corporation to pay (or reimburse the Executive for) all reasonable moving expenses incurred by the Executive or to indemnify the Executive against any excess in (A) the cost of a principal residence in the new location which is comparable to the Executive’s principal residence at the time of the relocation, over (B) the amount realized by the Executive upon the sale of his principal residence at the time of the relocation; or

(v) Any reason which would be considered to amount to constructive dismissal by a court of competent jurisdiction;

(f)	“Just Cause” means wilful failure of the Executive to properly carry out his duties after written notice by the Corporation of the failure to do so and an opportunity for the Executive to correct the same within a reasonable time from the date of receipt of such written notice from the Corporation, or theft, fraud or dishonesty or material misconduct by the Executive involving the property or affairs of the Corporation or the carrying out of the Executive’s duties;
(g)	“Key Executive Incentive Plan” means any program adopted by the Corporation from time to time with the intention of providing bonus or similar compensation to the executives of the Corporation;
(h)	“Market Capitalization of the Corporation” at any time means the product of (i) the number of outstanding common shares of the Corporation at that time, and (ii) the average of the closing prices for the common shares of the Corporation on the principal securities exchange (in terms of volume of trading) on which the common shares of the Corporation are listed at that time for each of the last 10 days prior to such time on which the common shares of the Corporation traded on such securities exchange;
(i)	“Person” means includes an individual, partnership, association, body corporate, trustee, executor, administrator, legal representative and any national, provincial, state or municipal government;
(j)	“Retirement” means the retirement or early retirement of the Executive in accordance with the terms of the Retirement Agreement;
(k)	“Retirement Agreement” means any agreement between the Corporation and the Executive, under which the Corporation agreed to pay the Executive a retirement allowance following his retirement or early retirement from employment with the Corporation, in accordance with the terms of that agreement and including any amendments made from time to time to such agreement;
(l)	“Stock Option Plans” means the Abitibi-Consolidated Inc. Stock Option Plan and any similar plan of the Corporation under which the Corporation from time to time

Canadian SCA — Yves Laflamme Dec 08, 2006

-5-

grants options to purchase Voting Shares of the Corporation and loans for the purpose of exercising such options;

(m)	“Subsidiary” has the meaning ascribed to it in the Canada Business Corporations Act, as in force on the date hereof; and
(n)	“Voting Shares” means any securities of the Corporation ordinarily carrying the right to vote at elections of directors.

2. Scope of Agreement

          The parties hereto intend that this Agreement set out their respective rights and obligations in certain circumstances in which the Executive’s employment is terminated. This Agreement does not purport to provide for any other terms of the Executive’s employment with the Corporation.

3. Position, Duties and Responsibilities of Executive

          The Executive shall continue to have the responsibilities and powers that he currently has or such other responsibilities and powers as he and the Corporation may from time to time agree upon. The Executive shall devote the whole of his working time to the Executive’s duties and shall use his best efforts to promote the interests of the Corporation.

4. Termination of Employment by the Corporation for Just Cause

          The Corporation may terminate the Executive’s employment at any time without notice or further obligations to the Executive under this Agreement for reasons of Just Cause. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Just Cause unless and until there has been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board of Directors of the Corporation (excluding the Executive if the Executive is at that time a director of the Corporation) at a meeting of the Board called and held for the purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with his legal counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Executive was guilty of conduct constituting Just Cause and specifying the particulars thereof. The effective date of any termination pursuant to this section shall be the date on which such resolution is given to the Executive.

5. Termination of Employment by the Corporation Without Just Cause or by the Executive for Good Reason

          If at any time within two years following a Change of Control the Executive’s employment is terminated, (a) by the Corporation other than for Just Cause or (b) by the Executive in response to a Good Reason, the following provisions shall apply:

Canadian SCA — Yves Laflamme Dec 08, 2006

-6-

(a)	The Executive shall be entitled to receive, and the Corporation shall pay to the Executive, immediately following termination, a cash amount equal to three times the Annual Compensation of the Executive less required statutory deductions;
(b)	The Executive shall continue to receive until the earlier of (i) three years after the date of termination or (ii) receipt of equivalent benefits from a new employer, all group benefits including health, dental, life and car allowance (excluding all maintenance and operating expenses) other than disability insurance benefits on the scale provided by the Corporation to the Executive as at the date of termination or in lieu of such continued coverage, the Executive shall be entitled to receive a cash amount equal to the value to the Executive (as determined by a chartered accountant or firm of chartered accountants acceptable to the Corporation and the Executive) of such coverage for such period of time;
(c)	The Executive will also be entitled to receive on termination the normal and any supplementary pension benefits in effect on the date of termination according to the terms of the Corporation’s registered pension plans and the Retirement Agreement or according to similar provisions of any successor plan, of which the Executive is a member at the date of termination (the “Retirement Plans”). The Executive’s total pension entitlement and retirement options will be determined on the basis that the Executive had three years of credited service and age under the Retirement Plans at his date of termination of employment (over and above his actual years of credited service as otherwise determined). In addition, such additional years of service shall be included for the purpose of determining final or best average earnings assuming that the Executive’s monthly rate of salary at date of termination would have continued unchanged during the period of additional service. For Retirement Plans that include performance bonuses in the definition of pensionable earnings, the average of the highest three actual bonuses earned in the five years immediately prior to the date of termination shall be used for calculating the bonuses for each year during the severance period used for the purpose of determining final or best average earnings. Any portion of the total pension entitlement of the Executive not eligible to be paid under provisions of the registered pension plans of the Corporation shall be payable as supplementary payments in accordance with the Retirement Agreement;
(d)	if at the date of termination of the Executive’s employment, the Executive holds options for the purchase of shares under the Stock Option Plans, all options so held shall, unless the Executive has breached the terms of section 13 hereof, (i) immediately vest to the extent they have not already vested at such date and (ii) continue to be held, in both cases, notwithstanding the terms of the Stock Option Plans, on the same terms and conditions as if the Executive continued to be employed by the Corporation;

Canadian SCA — Yves Laflamme Dec 08, 2006

-7-

(e) If at the date of the termination of the Executive’s employment, the Executive owes any money to the Corporation pursuant to loans to the Executive for the purchase of shares under the Stock Option Plans or for assisting the Executive to purchase property, such loans shall, notwithstanding the terms of any other agreement between the Corporation and the Executive respecting these loans, be repayable by the Executive in the same manner and at the same time as if the Executive continued to be employed by the Corporation following such termination, provided that if the Executive has breached the terms of section 13 hereof, the loans shall become immediately due on the date of such breach and shall be repaid forthwith.

For greater certainty, this section 5 applies with respect to each Change of Control until this Agreement has been terminated in accordance with section 14 hereof. In addition, with respect to a particular Change of Control, this section 5 expires two years following such Change of Control unless this Agreement is otherwise terminated in accordance with section 14 hereof. This section 5 does not apply in the event of the termination of the employment of the Executive as a result of death, Disability or Retirement or by the Executive otherwise than in response to a Good Reason or by the Corporation for Just Cause. If the Executive or the Corporation intend to terminate the Executive’s employment as contemplated in this section, the party having such intention shall give the other notice thereof and the effective date of such termination shall be the date on which such notice is given to the other party.

6. Disability

          In the event of Disability of the Executive, this Agreement may be terminated by the Corporation on thirty days’ notice. Notwithstanding anything contained in this Section 6, the Executive shall be entitled to all benefits provided under the disability and pension plans of the Corporation applicable to the Executive at the date of this Agreement.

7. No Obligation to Mitigate

          The Executive shall not be required to mitigate the amount of any payment or benefit provided for in section 5 of this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for in section 5(a) be reduced by any compensation earned by the Executive as a result of employment by another employer after termination or otherwise.

8. Binding on Successors

(a) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation, by agreement in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. Failure of the Corporation to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Corporation on the same terms and conditions as the Executive would be entitled hereunder if the

Canadian SCA — Yves Laflamme Dec 08, 2006

-8-

Executive terminated his employment for Good Reason. As used in this Agreement, “Corporation” shall mean the Corporation as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this section 8 (a) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

(b) This Agreement shall ensure to the benefit of and be enforceable by the Executive’s successors or legal representatives but otherwise it is not assignable. If the Executive should die while any amounts would still be payable to the Executive hereunder if the Executive had continued to live, all such amounts unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s estate.

9. Expenses

          The Corporation agrees to pay all legal fees and expenses incurred by the Executive as a result of the termination of his employment in circumstances covered by this Agreement (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement).

10. Entire Agreement

          Except for the Executive’s rights to continued participation in the Corporation’s employee benefit plans, including, without limitation, the Corporation’s Stock Option Plans, this Agreement constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof and superceedes and replaces the terms of the Prior Agreements. Upon execution of the present Agreement, the Prior Agreements will be of no further force or effect. No amendment or waiver of this Agreement shall be binding unless executed in writing by both parties hereto.

11. Confidential Information

          In the event of termination of employment of the Executive, the Executive agrees to keep confidential all information of a confidential or proprietary nature concerning the Corporation, its subsidiaries and affiliates and their respective operations, assets, finances, business and affairs and further agrees not to use such information for personal advantage, provided that nothing herein shall prevent disclosure of information which is publicly available or which is required to be disclosed under appropriate statutes, rules or law or legal process.

12. Choice of Law

          This Agreement shall be governed and interpreted in accordance with the laws of the Province of Québec and the courts of the Province of Quebéc shall be the sole and proper forum with respect to any suits brought with respect to this Agreement. The present agreement has been drafted in English at the request of the Executive. La présente entente a été rédigée en anglais à la demande de 1’employé.

Canadian SCA — Yves Laflamme Dec 08, 2006

-9-

13. Non-Competition

          The Executive agrees that in the event of his termination of service with the Corporation under Section 5 of this Agreement, the Executive will not for a period of 2 years beginning on the date of such termination, without written approval of the Board of Directors, undertake or carry on, either alone or in partnership, or either on his own account or on behalf of or as agent or employee or director of any person or persons, firm or corporation (other than the Corporation), or be employed or interested or engaged (other than as a holder of securities of not more than five percent (5%) of the stock or equity of any corporation the capital stock of which is publicly traded) in any business in competition with that carried on by the Corporation at the date of termination.

14. Notices

          Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by prepaid first-class mail, by facsimile or other means of electronic communication or by hand-delivery as hereinafter provided. Any such notice or other communication, if mailed by prepaid first-class mail at any time other than during a general discontinuance of postal service due to strike, lockout or otherwise, shall be deemed to have been received on the fourth business day following the sending, or if delivered by hand shall be deemed to have been received at the time it is delivered to the applicable address noted below either to the individual designated below or to an individual at such address having apparent authority to accept deliveries on behalf of the addressee. Notice of change of address shall also be governed by this section. In the event of a general discontinuance of postal service due to strike, lock-out or otherwise, notices or other communications shall be delivered by hand or sent by facsimile or other means of electronic communication and shall be deemed to have been received in accordance with this section. Notices and other communications shall be addressed as follows:

(a) If to the Executive:

Yves Laflamme
Senior Vice-President, Woodlands & Sawmills

(b) If to the Corporation:

Abitibi-Consolidated Inc.
Att. Jacques Vachon
1155, Metcalfe Street, Suite 800
Montréal (Québéc) H3B 5H2

Attention: Chairman of the H.R.C.C.
Telecopier: (416) 367-3549

Canadian SCA — Yves Laflamme Dec 08, 2006

-10-

15. Termination

          This Agreement shall terminate immediately on the occurrence of any of the following events: (i) the date of death of the Executive; (ii) voluntary resignation by the Executive from the Corporation otherwise than in response to a Good Reason; (iii) the giving of notice by the Corporation in the event of Disability as contemplated by section 6 hereof; (iv) termination for Just Cause; (v) termination of employment of the Executive at any time when there has been no Change of Control or more than two years after the immediately preceding Change of Control; or (vi) satisfaction by the Corporation of its obligations under section 5 of this Agreement in the event of termination of the Executive in the circumstances contemplated by section 5.

16. Copy of Agreement

          The Executive hereby acknowledges receipt of a copy of this Agreement duly signed by the Corporation.

          IN WITNESS WHEREOF the parties hereto have duly executed and delivered this Agreement.

ABITIBI-CONSOLIDATED INC.
By:	/s/ John W. Weaver
	John Weaver
	President and Chief Executive Officer
	/s/ John A. Tory
	John A. Tory
	Chairman of the H.R.C.C.

Witness:	(name unrecognizable)	/s/ Yves Laflamme
		Yves Laflamme
		Senior Vice-President, Woodlands & Sawmills

Canadian SCA — Yves Laflamme Dec 08, 2006

EX-10.19

EXHIBIT 10.19

SEVERANCE COMPENSATION AGREEMENT

THIS AGREEMENT made the 10^th day of November, 1998.

BETWEEN:

ABITIBI-CONSOLIDATED INC., a company amalgamated under the laws of Canada

(the “Corporation”)

—and—

JACQUES VACHON, an individual residing in the City of Montreal, in the Province of Quebec

(the “Executive”)

RECITALS:

A.	The Executive is a senior officer of the Corporation and is considered by the Board of Directors of the Corporation to be a valued employee of the Corporation and has acquired outstanding and special skills and abilities and an extensive background in and knowledge of the Corporation’s business and the industry in which it is engaged.
B.	The Board of Directors recognizes that it is essential and in the best interests of the Corporation and its shareholders that the Corporation retain the continuing dedication of the Executive to his office and employment.
C.	The Board of Directors further believes that the past service of the Executive to the Corporation requires that the Executive receive fair treatment, in the event of a change in control of the Corporation.
D.	It is desirable to clarify the scope of the arrangements under this Agreement.

          NOW THEREFORE in consideration of these premises and the mutual covenants herein contained and in consideration of the Executive continuing in office and in the employment of the Corporation, the Corporation and the Executive hereby covenant and agree as follows:

-2-

1. Definitions

	In this Agreement,
(a)	“Agreement” means this agreement and all schedules attached to this agreement, in each case as they may be restated, amended or supplemented from time to time, and the expressions “hereof, “herein”, “hereto”, “hereunder”, “hereby”, and similar expressions refer to this agreement and, unless otherwise indicated, references to sections are to sections in this agreement;
(b)	“Annual Compensation” means the aggregate of (i) the annual base salary of the Executive, payable by the Corporation as at the end of the month immediately preceding the month in which the termination of employment hereunder takes effect; and (ii) the amount equal to the gross amount of the last bonus payment earned by the Executive pursuant to the Key Executive Incentive Plan immediately preceding the termination of the employment hereunder;
(c)	“Change of Control” means any of:

(i)	the acquisition, directly or indirectly and by any means whatsoever, by any person, or by a group of persons acting jointly or in concert, of that number of Voting Shares which is equal to or greater than 35% of the total issued and outstanding Voting Shares immediately after such acquisition unless another person or group of persons has previously acquired and continues to hold a number of Voting Shares which represents a greater percentage than the first-mentioned person or group of persons;
(ii)	the election or appointment by any holder of Voting Shares, or by any group of holders of Voting Shares acting jointly or in concert, of a number of members of the Board of Directors of the Corporation equal to or greater than one third of the members of the Board of Directors unless another holder or group of holders has previously elected or appointed a greater number of members of the Board of Directors and re-elects such greater number of members at the same time as the first-mentioned holder or group of holders;
(iii)	any transaction or series of transactions, whether by way of reconstruction, reorganization, consolidation, amalgamation, arrangement, merger, transfer, sale or otherwise, whereby assets of the Corporation become the property of any other person (other than a subsidiary of the Corporation) if such assets which become the property of any other person have a fair market value (net of the fair market value of any then existing liabilities of the Corporation assumed by such other person as part of the same transaction) equal to 50% or more of the Market Capitalization of the Corporation immediately before such transaction; or

-3-

(iv) the completion of any transaction or the first of a series of transactions which would have the same or similar effect as any transaction or series of transactions referred to in paragraphs (i), (ii) and (iii) above;

(d) “Disability” means the mental or physical state of the Executive such that:

(i)

the directors of the Corporation, other than the Executive if he is a director, unanimously determine that the Executive has been unable, due to illness, disease, mental or physical disability or similar cause, to fulfil his obligations as an employee or officer of the Corporation either for any consecutive 6 month period or for any period of 12 months (whether or not consecutive) in any consecutive 24 month period; or

(ii)

a court of competent jurisdiction has declared the Executive to be mentally incompetent or incapable of managing his affairs;

(e) “Good Reason” means:

(i)	without the express written consent of the Executive, the assignment to the Executive of any duties materially inconsistent with his positions, duties and responsibilities with the Corporation immediately prior to the date hereof or any removal of the Executive from, or any failure to reelect the Executive to, material positions, duties and responsibilities with the Corporation, except in connection with the termination of the Executive’s employment for Just Cause, Disability or Retirement or as a result of the Executive’s death or by the Executive other than for Good Reason;
(ii)	a reduction by the Corporation in the Executive’s salary as in effect on the date hereof or as the same may be increased from time to time;
(iii)	the failure by the Corporation to continue in effect any incentive or compensation plan, or any pension, life insurance, health and accident or disability plan in which the Executive is participating at the date hereof, (or plans providing the Executive with substantially similar benefits) unless such plans have been replaced by new plans providing the Executive with benefits that are as good as or better than the benefits provided in such plans, or the taking of any action by the Company which would adversely affect the Executive’s participation in or materially reduce the Executive’s benefits under any of such plans or deprive the Executive of any material fringe benefit enjoyed by him at the date hereof;
(iv)	the requirement that the Executive be based anywhere other than the Corporation’s principal executive offices except for required travel on the Corporation’s business to an extent substantially consistent with the Executive’s present travel obligations, or in the event the Executive consents to any such relocation, the failure by the Corporation to pay (or reimburse the

-4-

	Executive for) all reasonable moving expenses incurred by the Executive or to indemnify the Executive against any excess in (A) the cost of a principal residence in the new location which is comparable to the Executive’s principal residence at the time of the relocation, over (B) the amount realized by the Executive upon the sale of his principal residence at the time of the relocation; or
(v)	any reason which would be considered to amount to constructive dismissal by a court of competent jurisdiction;

(f)	“Just Cause” means wilful failure of the Executive to properly carry out his duties after written notice by the Corporation of the failure to do so and an opportunity for the Executive to correct the same within a reasonable time from the date of receipt of such written notice from the Corporation, or theft, fraud or dishonesty or material misconduct by the Executive involving the property or affairs of the Corporation or the carrying out of the Executive’s duties;
(g)	“Key Executive Incentive Plan” means any program adopted by the Corporation from time to time with the intention or providing bonus or similar compensation to the executives of the Corporation;
(h)	“Market Capitalization of the Corporation” at any time means the product of (i) the number of outstanding common shares of the Corporation at that time, and (ii) the average of the closing prices for the common shares of the Corporation on the principal securities exchange (in terms of volume of trading) on which the common shares of the Corporation are listed at that time for each of the last 10 days prior to such time on which the common shares of the Corporation traded on such securities exchange;

(i)	“person” means includes an individual, partnership, association, body corporate, trustee, executor, administrator, legal representative and any national, provincial, state or municipal government;
(j)	“Retirement” means the retirement or early retirement of the Executive in accordance with the terms of the Retirement Agreement;
(k)	“Retirement Agreement” means any agreement between the Corporation and the Executive, under which the Corporation agreed to pay the Executive a retirement allowance following his retirement or early retirement from employment with the Corporation, in accordance with the terms of that agreement and including any amendments made from time to time to such agreement;
(l)	“Stock Option Plans” means the Abitibi-Consolidated Inc. Stock Option Plan and any similar plan of the Corporation under which the Corporation from time to time grants options to purchase Voting Shares of the Corporation and loans for the purpose of exercising such options;

-5-

(m)	“subsidiary” has the meaning ascribed to it in the Canada Business Corporations Act, as in force on the date hereof; and
(n)	“Voting Shares” means any securities of the Corporation ordinarily carrying the right to vote at elections of directors.

2. Scope of Agreement

          The parties hereto intend that this Agreement set out their respective rights and obligations in certain circumstances in which the Executive’s employment is terminated. This Agreement does not purport to provide for any other terms of the Executive’s employment with the Corporation.

3. Position, Duties and Responsibilities of Executive

          The Executive shall continue to have the responsibilities and powers that he currently has or such other responsibilities and powers as he and the Corporation may from time to time agree upon. The Executive shall devote the whole of his working time to the Executive’s duties and shall use his best efforts to promote the interests of the Corporation.

4. Termination of Employment by the Corporation for Just Cause

          The Corporation may terminate the Executive’s employment at any time without notice or further obligations to the Executive under this Agreement for reasons of Just Cause. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Just Cause unless and until there has been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board of Directors of the Corporation (excluding the Executive if the Executive is at that time a director of the Corporation) at a meeting of the Board called and held for the purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with his legal counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Executive was guilty of conduct constituting Just Cause and specifying the particulars thereof. The effective date of any termination pursuant to this section shall be the date on which such resolution is given to the Executive.

5. Termination of Employment by the Corporation Without Just Cause or by the Executive for Good Reason

          If at any time within two years following a Change of Control the Executive’s employment is terminated, (a) by the Corporation other than for Just Cause or (b) by the Executive in response to a Good Reason, the following provisions shall apply:

(a) the Executive shall be entitled to receive, and the Corporation shall pay to the Executive, immediately following termination, a cash amount equal to three times the Annual Compensation of the Executive less required statutory deductions;

-6-

(b)	the Executive shall continue to receive until the earlier of (i) three years after the date of termination or (ii) receipt of equivalent benefits from a new employer, all group benefits (including health, dental, life and car allowance) other than disability insurance benefits on the scale provided by the Corporation to the Executive as at the date of termination or in lieu of such continued coverage, the Executive shall be entitled to receive a cash amount equal to the value to the Executive (as determined by a chartered accountant or firm of chartered accountants acceptable to the Corporation and the Executive) of such coverage for such period of time;
(c)	the Executive will also be entitled to receive on termination the normal and any supplementary pension benefits in effect on the date of termination according to the terms of the Corporation’s registered pension plans and the Retirement Agreement or according to similar provisions of any successor plan, of which the Executive is a member at the date of termination (the “Retirement Plans”). The Executive’s total pension entitlement and retirement options will be determined on the basis that the Executive had three years of credited service and age under the Retirement Plans at his date of termination of employment (over and above his actual years of credited service as otherwise determined). In addition, such additional years of service shall be included for the purpose of determining final or best average earnings assuming that the Executive’s monthly rate of salary at date of termination would have continued unchanged during the period of additional service. For Retirement Plans that include performance bonuses in the definition of pensionable earnings, the average of the highest three actual bonuses earned in the five years immediately prior to the date of termination shall be used for the purpose of determining final or best average earnings. Any portion of the total pension entitlement of the Executive not eligible to be paid under provisions of the registered pension plans of the Corporation shall be payable as supplementary payments in accordance with the Retirement Agreement;
(d)	if at the date of termination of the Executive’s employment, the Executive holds options for the purchase of shares under the Stock Option Plans, all options so held shall, unless the Executive has breached the terms of section 13 hereof, (i) immediately vest to the extent they have not already vested at such date and (ii) (A) continue to be held, in both cases, notwithstanding the terms of the Stock Option Plans, on the same terms and conditions as if the Executive continued to be employed by the Corporation or (B) if the Executive so elects in writing within 90 days after the date of termination, shall be purchased by the Corporation at a cash purchase price equal to the amount by which the aggregate “fair market value” of the shares subject to such options exceeds the aggregate option price for such shares, provided that for this purpose “fair market value” means the greater of (i) the average of the closing prices for the shares of the same class of the Corporation on the principal securities exchange (in terms of volume of trading) on which such shares are listed at the time of termination for each of the last 10 days prior to such time on which such shares traded on such securities exchange, and (ii) if a Change of Control occurred within two years prior to the date of termination, the average value of the

-7-

consideration paid to the shareholders of the Corporation in connection with the transactions resulting in the Change of Control;

(e)

if at the date of the termination of the Executive’s employment, the Executive owes any money to the Corporation pursuant to loans to the Executive for the purchase of shares under the Stock Option Plans or for assisting the Executive to purchase property, such loans shall, notwithstanding the terms of any other agreement between the Corporation and the Executive respecting these loans, be repayable by the Executive in the same manner and at the same time as if the Executive continued to be employed by the Corporation following such termination, provided that if the Executive has breached the terms of section 13 hereof, the loans shall become immediately due on the date of such breach and shall be repaid forthwith.

For greater certainty, this section 5 applies with respect to each Change of Control until this Agreement has been terminated in accordance with section 14 hereof. In addition, with respect to a particular Change of Control, this section 5 expires two years following such Change of Control unless this Agreement is otherwise terminated in accordance with section 14 hereof. This section 5 does not apply in the event of the termination of the employment of the Executive as a result of death, Disability or Retirement or by the Executive otherwise than in response to a Good Reason or by the Corporation for Just Cause. If the Executive or the Corporation intend to terminate the Executive’s employment as contemplated in this section, the party having such intention shall give the other notice thereof and the effective date of such termination shall be the date on which such notice is given to the other party.

6. Disability

          In the event of Disability of the Executive, this Agreement may be terminated by the Corporation on thirty days’ notice. Notwithstanding anything contained in this Section 6, the Executive shall be entitled to all benefits provided under the disability and pension plans of the Corporation applicable to the Executive at the date of this Agreement.

7. No Obligation to Mitigate

          The Executive shall not be required to mitigate the amount of any payment or benefit provided for in section 5 of this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for in section 5(a) be reduced by any compensation earned by the Executive as a result of employment by another employer after termination or otherwise.

8. Binding on Successors

(a) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation, by agreement in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. Failure of the Corporation to obtain such

-8-

agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Corporation on the same terms and conditions as the Executive would be entitled hereunder if the Executive terminated his employment for Good Reason. As used in this Agreement, “Corporation” shall mean the Corporation as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this section 9(a) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

(b)

This Agreement shall enure to the benefit of and be enforceable by the Executive’s successors or legal representatives but otherwise it is not assignable. If the Executive should die while any amounts would still be payable to the Executive hereunder if the Executive had continued to live, all such amounts unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s estate.

9. Expenses

          The Corporation agrees to pay all legal fees and expenses incurred by the Executive as a result of the termination of his employment in circumstances covered by this Agreement (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement).

10. Entire Agreement

          Except for the Executive’s rights to continued participation in the Corporation’s employee benefit plans, including, without limitation, the Corporation’s Stock Option Plans, this Agreement constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof. No amendment or waiver of this Agreement shall be binding unless executed in writing by both parties hereto.

11. Confidential Information

          In the event of termination of employment of the Executive, the Executive agrees to keep confidential all information of a confidential or proprietary nature concerning the Corporation, its subsidiaries and affiliates and their respective operations, assets, finances, business and affairs and further agrees not to use such information for personal advantage, provided that nothing herein shall prevent disclosure of information which is publicly available or which is required to be disclosed under appropriate statutes, rules or law or legal process.

12. Choice of Law

          This Agreement shall be governed and interpreted in accordance with the laws of the Province of Ontario and the courts of the Province of Ontario shall be the sole and proper forum with respect to any suits brought with respect to this Agreement.

-9-

13. Non-Competition

          The Executive agrees that in the event of his termination of service with the Corporation under circumstances entitling him to benefits under this Agreement, the Executive will not, without approval of the Board of Directors, undertake or carry on, either alone or in partnership, or either on his own account or on behalf of or as agent or employee or director of any person or persons, firm or corporation (other than the Corporation), or be employed or interested or engaged (other than as a holder of securities) in any business in competition with that carried on by the Corporation at the date of termination.

14. Notices

          Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by prepaid first-class mail, by facsimile or other means of electronic communication or by hand-delivery as hereinafter provided. Any such notice or other communication, if mailed by prepaid first-class mail at any time other than during a general discontinuance of postal service due to strike, lockout or otherwise, shall be deemed to have been received on the fourth business day following the sending, or if delivered by hand shall be deemed to have been received at the time it is delivered to the applicable address noted below either to the individual designated below or to an individual at such address having apparent authority to accept deliveries on behalf of the addressee. Notice of change of address shall also be governed by this section. In the event of a general discontinuance of postal service due to strike, lock-out or otherwise, notices or other communications shall be delivered by hand or sent by facsimile or other means of electronic communication and shall be deemed to have been received in accordance with this section. Notices and other communications shall be addressed as follows:

(a)	if to the Executive:
(b)	if to the Corporation:
	Abitibi-Consolidated Inc.
	Attention:      Chairman of the Board of Directors Telecopier:

15. Termination

          This Agreement shall terminate immediately on the occurrence of any of the following events: (i) the date of death of the Executive; (ii) voluntary resignation by the Executive

-10-

from the Corporation otherwise than in response to a Good Reason; (iii) the giving of notice by the Corporation in the event of Disability as contemplated by section 6 hereof; (iv) termination for Just Cause; (v) termination of employment of the Executive at any time when there has been no Change of Control or more than two years after the immediately preceding Change of Control; or (vi) satisfaction by the Corporation of its obligations under section 5 of this Agreement in the event of termination of the Executive in the circumstances contemplated by section 5.

16. Copy of Agreement

          The Executive hereby acknowledges receipt of a copy of this Agreement duly signed by the Corporation.

          IN WITNESS WHEREOF the parties hereto have duly executed and delivered this Agreement.

	ABITIBI-CONSOLIDATED INC.
	By:	(name unrecognizable)
		c/s
		(name unrecognizable)
		DIRECTOR
Witness:(name unrecognizable)		/s/ JACQUES VACHON
		JACQUES VACHON

EX-10.20

EXHIBIT 10.20

October 19, 2007

Mr. W. Eric Streed
5324 Kimblewick Cove
Dunwoody, GA 30338

Re: Offer letter

Dear Eric,

We are pleased to offer you the position of Senior Vice-President, Supply Chain in the new AbitibiBowater, Inc. The following are details as agreed upon on this date:

Location: Montreal, Quebec, Canada

Effective Date:

The effective date is the closing of the merger. This offer is contingent on the conclusion of the merger, your being authorized to work in Canada and subject to approval of the Human Resources and Compensation Committee (“HRCC”) of the new company of various compensation items.

Compensation:

Your annual base salary, effective the date of the merger, will be US$340,000. You will be eligible to participate in a short-term incentive plan with a target level of 50% of your base salary.

We will request that the HRCC approve base compensation and incentive targets for the new executive team and approve several compensation redesigns. We expect to terminate the current 2007 Annual Incentive Plan on the Closing Date and to pay the resulting bonus as soon as practicable. We will substitute a new plan for the remainder of 2007 and all of 2008, emphasizing the achievement of synergies.

Additionally, for executives at your level, we will request an equity award tied to synergy achievement. We anticipate continuing annual equity grants of similar value as you currently receive and a target level of ownership of common shares may be required. Previous equity awards will rollover into the new company and will be paid according to the initial payout schedule.

You will also be eligible for a perquisite allowance of US$12,000 per year and an additional benefit value of up to US$5,000 for US tax preparation.

1/2

Others:

(1)	You will participate in the company’s pension and benefit plans.
(2)	Following the merger, the new company intends to harmonize certain benefits offered to salaried employees, including senior executives, which may lead to changes in the current benefits. You will be informed about any changes at the appropriate time.
(3)	Subject to the approval of the HRCC, you will be covered by an employment agreement and a new Change in Control agreement.
(4)	In addition, you will be eligible for the company’s international relocation policy to assist you with your move to Montreal. In order to facilitate the process, we have assigned Paula Ferreira to facilitate and coordinate all aspects of your relocation. Please feel free to contact her at your earliest convenience at (514) 954-2988 or ferreirap@bowater.com. The relocation benefits will include a lump sum of $103,826 as a housing and cost of living offset, which will be payable only when you begin the relocation process and will be subject to Canadian taxes. This payment includes an amount attributable to the higher Canadian tax rate. Please refer to the enclosed policy for more details.

We are excited about the prospects of the combination of the two companies and look forward to having you joining us on the leadership team. It will be a challenge.

Please acknowledge receipt of this offer letter and agreement with its terms by signing the two originals and returning one copy to Jim Wright.

Yours truly

/s/ Jim T. WrightJim T. Wright
Senior Vice-President, Human Resources

I accept this offer:

/s/ W. Eric Streed
W. Eric Streed	Date

2/2

EX-10.21

EXHIBIT 10.21

55 East Camperdown Way
Post Office Box 1028
Greenville, SC 29602-1028
Phone: 864/282-9413
Fax: 864/282-9594

WILLIAM G. HARVEY
Executive Vice President
and Chief Financial Officer

October 16, 2007

Mr. W. Eric Streed
5324 Kimblewick Cove
Dunwoody, GA 30338

Re: Bonus Award

Dear Eric:

In recognition of your hard work in anticipation of the closing of the merger with Abitibi-Consolidated Inc., I am pleased to award you a bonus in the amount of $127,650, contingent upon the closing of the merger. The pre-merger activities have been more complex and taken more time than originally anticipated and thus required greater effort on your part.

The bonus amount will be paid to you as soon as practicable after the closing, subject to all applicable withholding obligations.

Again, thank you for your efforts during this stressful time.

Sincerely,

William G. Harvey
Executive Vice President and Chief Financial Officer

EX-10.22

EXHIBIT 10.22

BOWATER INCORPORATED REPAYMENT AGREEMENT

     I, W. Eric Streed, an employee of BOWATER INCORPORATED (the “Company”), have received a bonus amount equal to $127,650 (the “Bonus”) from Bowater Incorporated (the Company) in connection with services rendered in anticipation of the merger between Bowater Incorporated and Abitibi-Consolidated Inc. (the “Merger”).

     I hereby agree that if my employment with the Company or an affiliate of the Company terminates within thirty-six months of the effective date of the Merger as the result of either my voluntary termination or my involuntary termination for cause, I will be required to reimburse the Company for a prorated portion of the after-tax value of my Bonus. In order to determine the after-tax value, the effective tax rate shall be assumed to be 43%. The proration of the amount of Bonus owed shall be computed as follows:

(1 — (days from effective date of the Merger to date of termination divided by 1,095)).

     The Company shall, to the extent permitted by applicable laws, reduce any compensation otherwise due to me upon my termination of employment, including but not limited to regular wages, severance pay and bonuses, by the amount of the Bonus that I am required to reimburse the Company.

     The amount of the Bonus owed by me shall bear interest at the maximum rate of interest permitted by law from the date of the termination of my employment until the date of repayment. In addition, I agree to pay all costs of enforcement and collection, including, without limitation, reasonable attorney’s fees.

     This Agreement shall be binding upon me and my heirs, executors, administrators, successors and assigns, and shall inure to the benefit of and be enforceable by the Company, its successors and assigns.

     No provision of this Agreement may be modified, waived or discharged except in a writing specifically referring to such provision and signed by the party against which enforcement of such modification, waiver or discharge is sought. No waiver by either party hereto of the breach of any condition or provision of this Agreement shall be deemed a waiver of any other condition or provision at the same or any other time.

     The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

     The validity, interpretation, construction and performance of this Agreement shall be governed by the substantive laws of the State of South Carolina.

/s/ W. Eric Streed
Signature: W. Eric Streed	Date

EX-10.23

EXHIBIT 10.23

BOWATER INCORPORATED REPAYMENT AGREEMENT

     I, David J. Paterson, an employee of BOWATER INCORPORATED (the “Company”), have received an amount equal to $380,970 (the “Bonus”) from Bowater Incorporated (the Company) in connection with services rendered in anticipation of the merger between Bowater Incorporated and Abitibi-Consolidated Inc. (the “Merger”).

     I hereby agree that if my employment with the Company or an affiliate of the Company terminates within thirty-six months of the effective date of the Merger as the result of either my voluntary termination or my involuntary termination for cause, I will be required to reimburse the Company for a prorated portion of the after-tax value of my Bonus. In order to determine the after-tax value, the effective tax rate shall be assumed to be 43%. The proration of the amount of Bonus owed shall be computed as follows:

(1 — (days from effective date of the Merger to date of termination divided by 1,095)).

     The Company shall, to the extent permitted by applicable laws, reduce any compensation otherwise due to me upon my termination of employment, including but not limited to regular wages, severance pay and bonuses, by the amount of the Bonus that I am required to reimburse the Company.

     The amount of the Bonus owed by me shall bear interest at the maximum rate of interest permitted by law from the date of the termination of my employment until the date of repayment. In addition, I agree to pay all costs of enforcement and collection, including, without limitation, reasonable attorney’s fees.

     This Agreement shall be binding upon me and my heirs, executors, administrators, successors and assigns, and shall inure to the benefit of and be enforceable by the Company, its successors and assigns.

     No provision of this Agreement may be modified, waived or discharged except in a writing specifically referring to such provision and signed by the party against which enforcement of such modification, waiver or discharge is sought. No waiver by either party hereto of the breach of any condition or provision of this Agreement shall be deemed a waiver of any other condition or provision at the same or any other time.

     The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

     The validity, interpretation, construction and performance of this Agreement shall be governed by the substantive laws of the State of South Carolina.

/s/ David J. Paterson	1/28/08
Signature: David J. Paterson	Date

EX-10.24

EXHIBIT 10.24

EXECUTIVE DEFERRED SHARE UNITS

PLAN

Abitibi-Consolidated Inc. Executive Deferred
Share Unit Plan

TABLE OF CONTENTS

SECTION 1. GENERAL PROVISIONS	1
1.1 Purpose	1
1.2. Definitions	1
1.3. Effective Date	2
1.4. Administration	2
1.5. Governing law	2
SECTION 2. ELECTION UNDER THE PLAN	2
2.1. Payment and Deferral of Annual Remuneration	2
2.2. Adjustments and Reorganizations	3
2.3. Termination of Service	4
SECTION 3. GENERAL	5
3.1. Transferability of Awards	5
3.2. No Right Service	5
3.3. Unfunded Plan	5
3.4. Successors and Assigns	5
3.5. Plan Amendment	5
3.6. Plan Termination	6
	i

SECTION 1. General Provisions

1.1. Purpose

          The purpose of the Abitibi-Consolidated Inc. Executive Deferred Share Unit Plan is to promote a greater alignment of interests between eligible officers and executives of the Corporation and the shareholders of the Corporation.

1.2. Definitions

As used in the Plan, the following terms have the following meanings:

(a)	“Board” means the Board of Directors of the Corporation;
(b)	“Committee” means the Human Resources Compensation Committee of the Board, or such other persons designated by the Board;
(c)	“Common Share” means a common share of Abitibi-Consolidated Inc.;
(d)	“Corporation” means Abitibi-Consolidated Inc.;
(e)	“Deferred Share Unit” means a right granted by the Corporation to an Eligible Executive to receive, on a deferred payment basis, a Common Share or the cash equivalent of a Common Share on the terms contained herein;
(f)	“Eligible Executive” means any officer or executive of the Corporation or any subsidiary of the Corporation determined to be an Eligible Executive pursuant to paragraph 1.4;
(g)	“Executive’s Annual Incentive Remuneration” means all bonus amounts (if any) payable to an Eligible Executive by the Corporation or a subsidiary of the Corporation in respect of the services provided to the Corporation or subsidiary by the Eligible Executive in any calendar year;
(h)	“Fair Market Value” means the average of the high and low prices per Common Share at which Common Shares are traded on the principal Canadian stock exchange on which the Common Shares are traded on the applicable day or, if such stock exchange is not open on such day, or if there are no prices per Common Share quoted on such day, on the immediately preceding day on which such stock exchange is open or there is a quoted price, as the case may be. If the Common Shares are not listed on a stock exchange, the Fair Market Value shall be the value established by the Committee based on the price per Common Share on any other public exchange on which the shares are listed, or if the Common Shares are not listed on any public exchange, by the Committee acting in good faith;
(i)	“Filing Date” has the meaning ascribed to that term in paragraph 2.3(a);

1

(j)	“Final Payment” has the meaning ascribed to that term in paragraph 2.3(a);
(k)	“Plan” means the Abitibi-Consolidated Inc. Executive Deferred Share Unit Plan; and
(l)	“Trustee” means a trustee of a trust or custodial account established by the Corporation for the purpose of purchasing Common Shares pursuant to paragraph 2.3(a).

1.3. Effective Date

The Plan shall be effective as of January 1, 2000.

1.4. Administration

          The Committee shall, in its sole and absolute discretion: (i) determine from time to time which officers or executives of the Corporation or any subsidiary of the Corporation shall be Eligible Executives for the purposes of the Plan; (ii) interpret and administer the Plan; (iii) establish, amend and rescind any rules and regulations relating to the Plan; and (iv) make any other determinations that the Committee deems necessary or desirable for the administration of the Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan in the manner and to the extent the Committee deems, in its sole and absolute discretion, necessary or desirable. Any decision of the Committee with respect to the administration and interpretation of the Plan shall be conclusive and binding on the Eligible Executive.

1.5. Governing Law

          The Plan shall be governed by and construed in accordance with the laws of the Province of Québec and the federal laws of Canada applicable therein.

SECTION 2. Election under the Plan

2.1. Payment and Deferral of Annual Remuneration

          Subject to such rules, approvals and conditions as the Committee may impose, an Eligible Executive may elect to receive the Executive’s Annual Incentive Remuneration, in whole or in part, in the form of Deferred Share Units or cash.

(a) Method of Electing. To elect a form or forms of payment of an Executive’s Annual Incentive Remuneration, the Eligible Executive shall complete and deliver to the Secretary of the Corporation a written election by no later than December 31 of the calendar year preceding the calendar year in which the Executive’s Annual Incentive Remuneration becomes payable. The Eligible Executive’s written election shall designate the percentage of the Executive’s Annual Incentive Remuneration for the applicable calendar year that is to be

2

	deferred into Deferred Share Units and the percentage to be paid in cash. In the absence of a designation to the contrary, the Eligible Executive’s election for the latest calendar year with respect to the percentage of the Executive’s Annual Incentive Remuneration that is to be deferred into Deferred Share Units and the percentage that is to be paid in cash shall continue to apply to all subsequent Executive’s Annual Incentive Remuneration payments until the Eligible Executive submits another written election in accordance with this paragraph. An Eligible Executive shall only file one election in respect of the Executive’s Annual Incentive Remuneration payable in any calendar year and the election shall be irrevocable for that year. If no election is made, and no prior election remains effective, the Eligible Executive shall be deemed to have elected to be paid all the Executive’s Annual Incentive Remuneration for the applicable calendar year in cash.
(b)	Payment of Executive’s Annual Incentive Remuneration. The portion of the Executive’s Annual Incentive Remuneration shall be paid in cash or credited as Deferred Share Units, as elected by the Eligible Executive, on the date on which bonus payments are payable under the applicable bonus arrangement.
(c)	Deferred Share Units. Deferred Share Units elected by an Eligible Executive pursuant to the Plan shall be credited to an account maintained for the Eligible Executive by the Corporation. The number of Deferred Share Units (including fractional Deferred Share Units) to be credited on each of the dates prescribed by paragraph 2.1(b) shall be determined by dividing the amount of the Executive’s Annual Incentive Remuneration to be deferred into Deferred Share Units on such date by the Fair Market Value per Common Share on such date.
(d)	Dividends. When dividends are paid on Common Shares, an Eligible Executive shall be credited with dividend equivalents in respect of Deferred Share Units credited to the Eligible Executive’s account as of the record date for payment of dividends. Such dividend equivalents shall be converted into additional Deferred Share Units (including fractional Deferred Share Units) based on the Fair Market Value per Common Share on the date credited.

2.2. Adjustments and Reorganizations

          In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation, spin-off or other distribution (other than normal cash dividends) of the Corporation’s assets to shareholders, or any other change in the capital of the Corporation affecting Common Shares, such proportionate adjustments, if any, as the Committee in its discretion may deem appropriate to reflect such change, shall be made with respect to the number of Deferred Share Units outstanding under the Plan.

3

2.3. Termination of Service

(a)

Termination of Service. An Eligible Executive who has retired from all positions with the Corporation and any subsidiary of the Corporation as officer, executive and director, or who, except as a result of death, has otherwise ceased to hold any such positions with the Corporation and any such subsidiaries, may redeem the Deferred Share Units credited to the Eligible Executive’s account by filing with the Secretary of the Corporation a notice of redemption of the Deferred Share Units in the prescribed form on or before December 15 of the first calendar year commencing after the date the Eligible Executive retires from or otherwise ceases to hold such positions. If the Eligible Executive fails to file a notice of redemption of the Deferred Share Units on or before such December 15, the Eligible Executive shall be deemed to have filed with the Secretary of the Corporation a notice of redemption on such December 15. The date on which a notice of redemption is filed or deemed to be filed with the Secretary of the Corporation is the “Filing Date”. The notice of redemption filed by the Eligible Executive shall specify that the Eligible Executive has elected to receive either: (i) a lump sum cash payment (net of any applicable withholdings) (the “Final Payment”) equal to the number of Deferred Share Units credited to the Eligible Executive’s account as of the Filing Date multiplied by the Fair Market Value per Common Share on the Filing Date; or (ii) the number of Common Shares that may be purchased with the Final Payment on the basis set out in this paragraph below by the Trustee. The Eligible Executive may also elect on the notice of redemption to receive a percentage of the Final Payment in cash and the remaining percentage of the Final Payment by the purchase of Common Shares, in either case in accordance with the preceding sentence as appropriately amended. If a notice of redemption is deemed to be filed or the notice of redemption filed does not specify receipt of cash or Common Shares, the Eligible Executive shall be deemed to have elected to receive the entire payment in cash. Within 7 days following the Filing Date, the Corporation shall either: (i) if the Eligible Executive elected to receive all or a portion of the Final Payment, make such payment to the Eligible Executive; or (ii) if the Eligible Executive elected to receive Common Shares, contribute all or the appropriate portion of the Final Payment to the Trustee and require the Trustee to use such amount as soon as practicable thereafter to purchase Common Shares on the principal Canadian stock exchange on which the Common Shares are traded. An amount that would otherwise give rise to fractional shares shall be paid in cash.

(b)

Death of Eligible Executive. In the event of the death of an Eligible Executive, the Corporation shall, within 90 days of the Eligible Executive’s death, make a lump sum cash payment to or for the benefit of the legal representative or beneficiary of the Eligible Executive. The lump sum cash payment shall equal the number of Deferred Share Units credited to the Eligible Executive’s Account on the date of payment multiplied by the Fair Market Value per Common Share on the day immediately preceding the date of payment. If permitted by applicable law, the Eligible Executive may appoint a beneficiary of his rights under the Plan.

4

“Beneficiary” for the purpose of the Plan means a person who is a relation or dependent of the Eligible Executive.

(c)

Death of Eligible Executive after Retirement. If an Eligible Executive dies after ceasing to hold all positions as officer, executive and director of the Corporation or any of its subsidiaries but before filing a notice of redemption with the Secretary of the Corporation, paragraphs 2.3(a) and (b) shall apply with such modifications as the circumstances require provided that, in no event shall payment be made later than December 31 of the first calendar year commencing after the Eligible Executive ceases to hold the aforementioned positions.

SECTION 3. General

3.1. Transferability of Awards

          Rights respecting Deferred Share Units shall not be transferable or assignable other than by will or the laws of descent and distribution.

3.2. No Right to Service

          Neither participation in the Plan nor any action under the Plan shall be construed to give any Eligible Executive a right to be retained as an employee, officer or otherwise in the service of the Corporation.

3.3. Unfunded Plan

          Unless otherwise determined by the Committee, the Plan shall be unfunded. To the extent any individual holds any rights by virtue of an election under the Plan, such rights (unless otherwise determined by the Committee) shall be no greater than the rights of an unsecured general creditor of the Corporation.

3.4. Successors and Assigns

          The Plan shall be binding on all successors and assigns of the Corporation and an Eligible Executive, including without limitation, the estate of such Eligible Executive and the legal representative of such estate, or any receiver or trustee in bankruptcy or representative of the Corporation’s or Eligible Executive’s creditors.

3.5. Plan Amendment

          The Board may amend the Plan as it deems necessary or appropriate, but no such amendment shall, without the consent of the Eligible Executive or unless required by law, adversely affect the rights of an Eligible Executive with respect to Deferred Share Units to which the Eligible Executive is then entitled under the Plan.

5

3.6. Plan Termination

          The Board may terminate the Plan at any time, but no such termination shall, without the consent of the Eligible Executive or unless required by law, adversely affect the rights of an Eligible Executive with respect to Deferred Share Units to which the Eligible Executive is then entitled under the Plan.

6

APPENDIX 2 — Financial Performance Criterion, Comparator Group and Ranking Schedule for grant

[appropriate information from HRCC approved guidelines to be inserted for each grant]

7

EX-10.25

EXHIBIT 10.25

RESTRICTED SHARE UNIT PLAN

Abitibi-Consolidated Inc. RESTRICTED SHARE UNIT PLAN

Table of contents

1. PURPOSE	1
2. ADMINISTRATION	1
3. PARTICIPANTS	1
4. DEFINITIONS	1
5. GRANT OF RESTRICTED SHARE UNITS	2
6. EARNED AWARDS	2
8. TERMS OF RESTRICTED SHARE UNITS	3
(A) Vesting	3
(B) Non-transferability	3
(C) Termination of Employment	3
(D) Payment of Plan Award Value	4
9. CHANGES IN SHARE CAPITAL	4
10. AMENDMENT	4
11. UNFUNDED PLAN	5
12. TERMINATION	5

ABITIBI-CONSOLIDATED INC.
RESTRICTED SHARE UNIT PLAN

1.	PURPOSE
	The purpose of the Abitibi-Consolidated Inc. (together with its subsidiaries, the “Company”) Restricted Share Unit Plan (the “Plan”) is to: 1) promote a greater alignment between the interests of shareholders and key employees (Executives and high-potential / high performing Managers); 2) reward and retain key employees of the Company; and 3) link key employees’ total direct compensation with the long term performance of the Company.
2.	ADMINISTRATION
	The Plan shall be administered by the Human Resources and Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of Abitibi-Consolidated Inc. or such other committee as may be designated by the Board. The Committee and the Board shall have the full and complete authority to interpret and to modify the Plan, prescribe such rules and regulations, as appropriate, and make such other determinations as it deems necessary or desirable for the administration of the Plan. All decisions and determinations of the Committee and the Board respecting the Plan shall be binding and conclusive on the Plan and the Participants (as defined herein).
3.	PARTICIPANTS
	The Committee shall, in its sole discretion, designate, from time to time, any of the key employees of the Company, as described in Section 1 hereof, (including directors but excluding directors who are not officers or salaried employees) as participants in the Plan (the “Participants”). The Committee may delegate to the Chief Executive Officer the authority to grant a certain number of Restricted Share Units’ to high performing and/or high potential non-Executive or non-officer employees of the Company selected by the Chief Executive Officer, who shall then be treated as Participants.. No person shall be entitled to participate in the Plan and the decision as to who shall have the opportunity to participate in the Plan and the extent of the participation will, subject to the terms hereof, be made by the Committee in its sole and absolute discretion.
4.	DEFINITIONS
	For purposes of this Plan:

(i)	“Common Shares” means the common shares in the capital of Abitibi-Consolidated Inc., and includes any shares of Abitibi-Consolidated Inc. into which such shares may be converted, reclassified, redesignated, subdivided, consolidated, exchanged or otherwise changed, pursuant to a Reorganization or otherwise;
(ii)	“Financial Performance Criterion” means such corporate accounting or financial measure, ratio or calculation as may be selected on an annual basis by the Committee;

1

(iii)	“Performance Period” means 3 years or another period specifically established by the Committee and set out in the Grant Letter;
(iv)	“Reorganization” means any (i) capital reorganization, (ii) merger, (iii) amalgamation, (iv) offer for Common Shares, which, if successful, would entitle the offeror to acquire all of the Common Shares, or (v) arrangement or other scheme of reorganization;
(v)	“Ranking Schedule” means a list of comparator companies indicating the percentage (%) of a Participant’s RSU award that vests based on the number of comparator companies the Company beats in terms of the selected Financial Performance Criterion;
(vi)	“Restricted Share Unit(s)” or “RSU(s)” means a phantom unit with a value pegged to the Common Shares’ actual stock price and which has time and financial performance vesting restrictions tied to it that define the portion and when any given award is actually earned by the Participant.
(vii)	“Closing Value” means the closing price of a Common Share on the last trading day immediately prior to the end of the Performance Period on the principal stock exchange on which the Common Shares are traded;
(viii)	“Plan Award Value” means the dollar value of the number of RSUs which vest multiplied by the Closing Value;

5. GRANT OF RESTRICTED SHARE UNITS

(a)	At the time of the grant, the Board, upon recommendation from the Committee, shall determine the number of Restricted Share Units to be granted to each Participant and the vesting and other terms of such grant. The Chief Executive Officer shall determine the number of Restricted Share Units for which the granting authority was delegated to him by the Board to be granted to each non-Executive and/or non-officer Participant.
(b)	As soon as practical after determining the grant of a Participant, the Committee shall cause a notice in writing (the “Grant Letter”) to be given to the Participant. The Grant Letter shall set out the following information: (i) the number of Restricted Share Units granted to the Participant; (ii) the Ranking Schedule (which is subject to adjustment, if required, per section 6(a)); (iii) the length of the Performance Period; and (iv) any additional time vesting conditions.
(c)	All Restricted Share Units granted under the Plan shall be subject to the terms and conditions of the Grant Letter as well as the terms of this Plan.
(d)	The Committee will approve a Ranking Schedule for each Performance Period.

6. EARNED AWARDS

(a) At the end of each Performance Period, the Committee shall determine the extent, if any, to which the Participant has earned his Restricted Share Units. Such determination will be based upon the Ranking Schedule. The Committee may modify the Financial

2

	Performance Criterion at its discretion prior to the start of any given Performance Period. The Committee may also adjust the Ranking Schedule during the term of an award should one or more of the companies become inappropriate or cease in its then current form during the Performance Period.
(b)	The number of Restricted Share Units earned by the Participant will be based upon the Ranking Schedule that is set out in the Grant Letter.

7. AWARD PAYMENTS

(a)	At the end of each Performance Period, the value of the Participant’s Restricted Share Units will be equal to the number of Restricted Share Units earned by such Participant in accordance with paragraphs 6(a) and 6(b) hereof multiplied by the Closing Value.
(b)	The award payments will be made in cash and/or by the delivery of Common Shares purchased by the Company on the open market. The form of award payments shall be made by the Committee at its sole discretion. The award payments shall be made by no later than March 15 of the calendar year immediately following the calendar year in which the award payment vests in accordance with Section 6(a).

8. TERMS OF RESTRICTED SHARE UNITS

(a) Vesting

Awarded Restricted Share Units will vest in accordance with Section 6(a).

(b) Non-transferability

The Plan Award Value is payable only to the Participant or, in the event of his death, his heirs or other legal representatives, as hereinafter provided. A Participant shall not be entitled to transfer, assign, charge, pledge or hypothecate, or otherwise alienate, whether by operation of law or otherwise, a Restricted Share Unit and shall not be subject to execution, attachment or similar process.

(c) Termination of Employment

Notwithstanding the foregoing provisions of this Section 8, if the employment of any Participant shall be terminated so that he is no longer employed by the Company, his entitlement to a payment in respect of his Restricted Share Units shall be determined as follows:

(i) if the employment of such Participant shall terminate by termination for cause or in the event the Participant voluntarily terminates his employment with the Company, then all unvested RSUs as of the date of termination of employment, shall forthwith become void and no amount shall be payable to the Participant unless otherwise determined by the Committee.

(ii) if the employment of such Participant shall terminate by retirement or involuntary termination leading to retirement eligibility at termination or immediately following the severance period, then vesting of previously granted RSUs will proceed as if the employee was actively at work.

3

(iii) if the employment of such Participant shall terminate by involuntary termination otherwise than as referred to in sub-paragraph (c)(ii) of this paragraph, then vesting of previously awarded RSUs will proceed based on prorated time worked in relation to the Performance Period, including the severance period.

(iv) if the employment of such Participant shall terminate by death, then one of the following vesting arrangements will apply:

a- during employment: vesting based on prorated time worked in relation to the Performance Period

b- after retirement: vesting will continue based on time worked and the period of retirement up to the date of death prorated over the Performance Period

c- after involuntary termination (including if termination is immediately followed by retirement): vesting will continue as if actively at work, including the severance period, no later than the date of death, prorated over the Performance Period.

(d) Payment of Plan Award Value

The Company shall deduct any taxes that are required to be deducted by any applicable law from payments to Participants. All taxes due are the full and sole responsibility of the Participant.

9.	CHANGES IN SHARE CAPITAL
	In the event of any change in the outstanding Common Shares by reason of any stock dividend (other than an issue of shares to shareholders pursuant to their election to receive dividends in the form of shares in lieu of cash dividends declared payable in the ordinary course by Abitibi-Consolidated Inc.), stock split or consolidation, or Reorganization, the Committee shall make such substitution or adjustment to the terms of the Restricted Share Units as it deems appropriate including, without limiting the generality of the foregoing, appropriate provisions for the continuance or other recognition of outstanding rights under the Plan.
10.	AMENDMENT

(a)	The Board may at any time, and from time to time, by resolution and without other formality amend the Plan in any respect, provided that no amendment shall operate to affect materially any rights already acquired by a Participant under the Plan.
	Without amending the Plan the Committee may with the consent of any Participant, approve any variation in terms of that Participant’s Restricted Share Units.
(b)	The cost of the operation of the Plan shall be borne by the Company.
(c)	All notices under the Plan shall be in writing and, if to the Company, shall be delivered to the Company or sent by first class post to their respective head or registered offices for the time being, and if to a Participant, shall be delivered personally or sent by first class

4

post to the Participant at the address which he shall give for the purpose, or failing any such address to his last known place of abode. If a notice is sent by post, service thereof shall be deemed to be effected by properly addressing, prepaying and posting a letter containing the same to such address and shall be deemed to be served forty-eight hours after such posting.

11.	UNFUNDED PLAN
	The Plan shall be unfunded. To the extent that a Participant holds any rights by virtue of a grant of Restricted Share Units such rights shall be no greater than the rights of an unsecured general creditor of the Company.
12.	TERMINATION
	The Board may at any time terminate the Plan provided that the existing rights of Participants will not thereby be affected.

5

APPENDIX 1 — Special Provisions for Senior Management Participants

1- Senior Executives and officers who have Company share ownership obligations will receive the appropriate portion of their award in Common Shares until their respective holding requirements have been met.

Consequently, all or a portion of a calculated earned payment (less applicable income taxes) will be made to the Participant in the form of Common Shares which must be held by the Participant in order to comply with his stock ownership guidelines.

2- After the commencement of the Performance Period, the Committee may designate additional eligible Senior Executives as Participants in the Plan (the “Mid-Term Participants”). Mid-Term Participants’ initial grant will be prorated based on time to be worked during the Performance Period.

6

APPENDIX 2 — Financial Performance Criterion, Comparator Group and Ranking Schedule for grant

[appropriate information from HRCC approved guidelines to be inserted for each grant]

7

EX-10.26

EXHIBIT 10.26

DEFERRED SHARE UNIT PLAN

(Stock plan for non-employee directors)
DATED MARCH 11, 1998

1.

Purpose: The Abitibi-Consolidated Inc. Stock Plan for Non-Employee Directors (the “Plan”) is intended to enhance the Company’s ability to attract and retain talented individuals to serve as members of the Board and to promote a greater alignment of interests between non-employee members of the Board and the shareholders of the Company. All Eligible Directors are eligible to participate in the Plan and enjoy the benefits of the Plan as set out below upon the Effective Date or, for Eligible Directors elected or appointed to the Board after the Effective Date, on the date of his or her election or appointment.

2.

Definitions: As used in the Plan, the following terms have the respective meanings:

(a)	“Board” means the Board, of Directors of the Company.
(b)	‘Committee” means the Human Resources and Compensation Committee of the Board, or such other persons designated by the Board.
(c)	“Common Share” means a common share without nominal or par value of the Company.
(d)	“Common Share Award” means an award of Common Shares under the Plan.
(e)	“Company” means Abitibi-Consolidated Inc.
(f)	“Deferred Share Unit’ means a bookkeeping entry, equivalent in value to a Common Share, credited in accordance with an election made by an Eligible Director pursuant to Section 5 or Section 6.
(g)	“Effective Date” shall mean the effective date of the Plan -set out in Section 3.
(h)	“Election Date” means the date on which an Eligible Director files an election with the Corporate Secretary of the Company pursuant to Section 5(a).
(i)	“Eligible Director” means any director who is -neither an employee nor a full-time officer of the Company or any affiliate or subsidiary of the Company on the applicable Election Date.
(j)	“Fair Market Value” on a particular date means the average of the closing prices of the Common Shares as reported on the principal Canadian securities exchange on which such shares are listed or admitted to trading during the last five days on which the Common Shares traded ending on such particular date or, if the Common Shares

- Page 2 -

	are not so listed or traded, the five day simple average of the mean between the closing bid price and the closing asked price as quoted on the National Association of Securities Dealers Automated Quotation System on each date within that five day period, or such other market in which such prices are regularly quoted, or, if there have been no published bid or asked quotations with respect to the Common Shares, the Fair Market Value shall be the value on that date established by the Committee in good faith.
(k)	“Plan” means the Abitibi-Consolidated Stock Plan for Non-Employee Directors.
(I)	“Purchase Date” shall be, unless otherwise determined by the Committee, the last day of March, June, September and December.
(m)	“Termination” means the date on which an Eligible Director terminates Board service by reason of his or her death, retirement from, or loss of office as a director of the Board.

3.	Effective Date: The Plan shall be effective on a date to be determined by the Committee, provided that an election pursuant to Sections 5 and 6 hereof may apply to all amounts earned during the year that the Plan becomes effective.
4.	Administration: The Plan shall be administered by the Committee, which may delegate its duties and powers in whole or in part to any subcommittee thereof consisting solely of at least two “Eligible Directors’. The Committee is authorized to interpret, construe and administer the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, and to make any other determinations that it deems necessary or desirable for the administration of the Plan. The Committee may correct any defect or supply any omission or reconcile any- inconsistency in the Plan in the manner and to the extent the Committee deems necessary or- desirable. Any decision of the Committee in the interpretation, construction and administration of the Plan, or any action, all as described herein, shall lie within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned for all purposes. Neither the Committee or any member thereof, nor any officer or employee of the Company, shall be liable for any act, omission, interpretation, construction or determination made in good faith ‘m connection with the Plan, and the members of the Committee and the officers and employees of the Company shall be entitled to indemnification by the Company in respect of any claim, loss, damage or expense (including legal fees -and disbursements) arising therefrom to the fullest extent permitted by law. The expenses of administering the Plan shall be borne by the Company.
5.	Payment and Deferral of ALL or a Portion of Annual Retainer: Each Eligible Director may receive all or a portion of his or her annual retainer in the form of Deferred Share Units.

(a) Method of Electing: The Eligible Director must complete and deliver to the Corporate Secretary of the Company an annual written election designating the portion of his or her annual retainer that is to be paid in Deferred Share Units as follows:

(i) for Eligible Directors in office on the Effective Date, the election for 1998 shall be delivered within 30 days after the Effective Date;

- Page 3 -

(ii)	for Eligible Directors not in office on the Effective Date, the election for 1998 shall be delivered within 30 days after the Eligible Director is elected or appointed as a director of the Company; and
(iii)	in respect of any subsequent year,- the election shall be made at least 30 days prior to the commencement of that year (unless an Eligible Director takes office during that year in which case the election shall be made within 30 days after the Eligible Director is elected or appointed as a director).

	An election made in accordance with the foregoing shall be effective for the year or balance thereof, in respect of which it is made. An election may be revoked or changed only with respect to the period in the year for which Deferred Share Units have not yet been credited.
	-If no election is made, the Eligible Director shall be deemed to have elected to be paid the annual retainer entirely in cash.
(b)	Deferred Share Units. The Eligible Director will have Deferred Share Units credited to an account maintained for the Eligible Director on the books of the Company as of the Purchase Date. The number of Deferred Share Units (including fractional Deferred Share Units) to be credited shall be determined by dividing one quarter of the amount of annual retainer to be deferred into Deferred Share Units by the Fair Market Value on the Purchase Date.

	Deferred Share Units shall be credited with dividend equivalents when dividends are paid on Common Shares and such dividend equivalents shall be converted into additional Deferred Share Units based on the Fair Market Value of Common Shares on the date credited.
6.	Payment and Deferral of Meeting and Chairmanship Fees: An Eligible Director who makes an election in accordance with Section 5 for a year may also receive (in the same percentage as applicable to his or her annual retainer) in the form of Deferred Share Units (a) amounts granted pursuant to the Company’s Directors’ Share Award Plan for the year; and/or (b) his or her fees otherwise payable for attending Board (or committee) meetings and serving as Chair of a Board committee during the year. Any such election shall be subject to such approvals and conditions as the Committee may impose, including appropriate adjustments -to the Purchase Date.
7.	Adjustments and Reorganizations: In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation, recapitalization, amalgamation, plan of arrangement, reorganization, spin-off or other distribution (other than normal cash dividends) of Company assets to shareholders, or any other change affecting shares, such proportionate adjustments, if any, as the Committee in its discretion may deem appropriate to reflect such change, shall be made with respect to the number of Deferred Share Units outstanding under the Plan. In the event the Company is not the surviving company of a merger, consolidation, amalgamation or plan of arrangement or other corporate restructuring with another company or in the event of a liquidation, dissolution or reorganization and in the absence of any surviving corporation’s assumption of

-Page 4 -

	outstanding awards made under the Plan, the Committee may provide for appropriate settlements of Deferred Share Units.
8.	Termination of Board Service: At any time after the Termination of an Eligible Director to whom Deferred Share Units have been granted under the Plan but no later than the last business day in December of the first calendar year commencing after that Termination, on a day (the “Settlement Date’) within such period to be determined by the Eligible Director or Ws or her representative in his or her sole discretion upon at least 10 days prior written notice to the Company, the Company shall pay to the Eligible Director a lump sum payment (or as the Committee may otherwise determine), net of any applicable withholdings, in cash equal to the number of Deferred Share Units credited to his or her account as of that Termination multiplied by the Fair Market Value on the Settlement Date.
9.	Transferability of Awards: Deferred Share Units shall not be transferable or assignable other than by will or the laws of descent and distribution provided that any payment in respect of an Eligible Director who at the time of payment is under legal disability or who is, in the judgment of the Committee, unable to care for his or her affairs because of illness or accident, may be made to the spouse or any child or personal representative of such person, or to any other individual or entity deemed by the Company to have incurred expenses -for such person. Any such distribution shall constitute a complete discharge of the Company’s obligation to make such payment pursuant to this Plan. If any person shall attempt to, or shall alienate, sell, transfer, assign, pledge or otherwise encumber his or her Deferred Share Units, or if by any reason of his or her bankruptcy or other event happening at any time, such Deferred Share Units would devolve upon any other person or would not be enjoyed by the person entitled thereto under the Plan, then the Committee in its discretion, may terminate the interest in any such Deferred Share Units of the person entitled thereto under the Plan and hold or apply them to or for the benefit of such person entitled thereto under the Plan or his or her spouse, children or other dependents, or any of them, in such manner as the Committee may deem proper.
10.	No right to Service: Neither participation in the Plan nor any action under the Plan shall be construed to give any Eligible Director a right to be retained in the service of the Company.
11.	Unfunded Plan: Unless otherwise determined by the Committee, the Plan shall be unfunded. The Company’s obligation hereunder shall (unless otherwise determined by the Committee) constitute a general, unsecured obligation, payable solely out of its general assets, and no Eligible Director or other person shall have any right to any specific assets of the Company. Neither the Company nor the Committee shall be required to segregate any assets that may at any time be represented by the amounts credited with respect to Deferred Share Units hereunder. Neither the Company nor the Committee shall be deemed to be a trustee of any amounts to be distributed or paid pursuant to the Plan. No liability or obligation of the Company pursuant to the Plan shall be deemed to be secured by any pledge of, or encumbrance on, any property of the Company or any affiliate of the Company.
12.	Successors and Assigns: The Plan shall be binding on all successors and assigns of the Company and an Eligible Director, including without limitation, the estate of such Eligible Director and the executor, administrator or trustee of such estate, or any receiver or trustee in bankruptcy or representative of the Eligible Director’s creditors.

- Page 5 -

13.	Plan Amendment: The Board may, in its sole discretion and without the consent of any Eligible Director (acting in his or her capacity as a participant in the Plan) or beneficiary, amend the Plan at any time; provided, however, that no amendment shall reduce the amount of Deferred Share Units credited prior to such amendment to any Eligible Director.
14.	Plan Termination: The Board may, in its sole discretion and without the consent of any Eligible Director (acting in his or her capacity as a participant in the Plan) or beneficiary, terminate the Plan at any time by giving written notice thereof to each Eligible Director who is -a participant hereunder. Any amounts distributable under the Plan shall be paid to the persons entitled thereto at such time and in such manner as -the Committee shall determine, but not later than the date- on which distributions would have been made had the Plan not been terminated.
15.	Governing Law: The validity, construction -and effect of the Plan and any actions taken or relating to the Plan shall be governed by the substantive laws, but not the choice of law rules, of the Province of Quebec.

March 11, 1998

EX-10.27

EXHIBIT 10.27

ABITIBI CONSOLIDATED U.S.

SUPPLEMENTAL EXECUTIVE

RETIREMENT PLAN (SERP)

AS AMENDED AND RESTATED

EFFECTIVE January 1, 2007

	ABITIBI-CONSOLIDATED INC.
	/s/ [ILLEGIBLE]
Date	Signature
	Title:
	/s/ [ILLEGIBLE]
Date	Signature
	Title:

Table of Contents
Section 1 - Purpose	1
Section 2 - Definitions	3
Section 3 - Eligibility	11
Section 4 - Contributions	13
Section 5 - Normal Retirement and Postponed Retirement Benefits	14
Section 6 - Early Retirement Benefits	15
Section 7 - Disability	16
Section 8 - Form of Pension	17
Section 9 - Death Prior to Retirement	29
Section 10 - Termination of Employment	31
Section 11 - Increase in Benefits under Qualified Pension Plan	37
Section 12 - Commutation of Benefits	38
Section 13 - Service Outside United States	39
Section 14 - Conditions for Payment	40
Section 15 - General Provisions	42
Section 16 - Administration	45
Section 17 - Future of the Plan	46

Appendix A	List of Participating Subsidiaries or Associated Companies.	A-l
Appendix B	Additional Credited Service or Credited Service Date.	B-l
Appendix C	Executive Employee who held an MSBA and elected to convert his defined benefit entitlement under the prior Abitibi-Price Inc. Registered Pension Plan to a defined contribution entitlement on January 1, 1996	C-l
Appendix D	Formula for calculating the interest rate assumption under Section 2.12 for lump sum benefit payments made after May 6, 2007	D-l

Section 1 – Purpose

1.01	The purpose of this Supplemental Executive Retirement Plan (hereinafter the “SERP”) is to provide special retirement benefits to Executive Employees eligible to become a participant thereunder, in accordance with the terms and provisions of this document. Such special retirement benefits are in addition to those payable from any qualified pension plan of Abitibi Consolidated Sales Corporation or any subsidiary or associated company listed in Appendix A.
1.02	This SERP was established, effective as of January 1, 1999, and as of such date replaced and cancelled the application of the individual supplementary retirement benefits agreement known as Memorandum Supplemental Benefit Agreement (“MSBA”) in the case of an Executive Employee who was a former Abitibi-Price Sales Corporation employee and of the Stone-Consolidated Corporation Senior Management Retirement Plan (SMRP) in the case of an Executive Employee who was a former Stone- Consolidated Corporation employee. For greater certainty, this SERP shall not apply to or otherwise modify supplemental retirement benefits payable or the terms and conditions for payment of such benefits to any former Executive Employee who has retired from or otherwise terminated his employment with the Corporation or its predecessors or their affiliates prior to the effective date of the SERP, nor will it apply to an Executive Employee who, in accordance with Section 3 hereof, has elected to not participate in this SERP. The provisions of this SERP were amended by an Amendment No. One, effective January 1, 2005, to comply with U.S. Internal Revenue Code (I.R.C.) Section 409A. The provisions of this restated SERP document are adopted, effective as of January 1, 2007, to comply with I.R.C. Section 409A as interpreted by the U.S. Treasury Department Regulations thereunder, (most of which were promulgated in 2007). This SERP is intended to be maintained and operated in accordance with I.R.C. Section 409A and the U.S. Treasury Department Regulations thereunder.
1.03	The provisions of this restated SERP are effective as of January 1, 2007, unless stated otherwise herein.

1

1.04 The name of the Plan shall be the “Abitibi Consolidated U.S. Supplemental Executive Retirement Plan”.

2

Section 2 — Definitions

In this SERP, the following words and phrases shall have the following meaning, respectively, unless a different meaning is specifically required by the context:

2.01	“Actuarial Equivalent Value” shall mean a value deemed to be equal to another value, as determined on a basis of the SERP provisions in effect on the date such determination is being made. The Actuarial Equivalent Value of a benefit of a Participant under this SERP shall be determined in the same manner and using the same assumptions as those used or that would be used for similar purposes under the Abitibi Consolidated U.S. Retirement Plan (for Salaried and Certain Non-Bargaining Hourly Employees).
	For greater certainty, in determining the Actuarial Equivalent Value of a benefit, account shall not be taken of the income tax consequences that would arise to the recipient of the benefit.
2.02	“Additional Voluntary Contribution” shall mean a contribution, other than a required contribution, which may be made by a Participant under a Qualified Pension Plan of the Corporation.
2.03	“Average Pensionable Earnings” shall mean, in respect of a Participant, the sum of:

a)

the average of the Participant’s monthly base salary during the sixty (60) consecutive months within the one hundred and twenty (120) months of continuous employment immediately preceding his retirement or termination of employment during which such base salary was the highest, multiplied by twelve (12); plus

b)

the average of the Participant’s annual bonus earned in the five (5) years, whether consecutive or not, within the ten (10) years of continuous employment immediately preceding his retirement, disability, or termination of employment, during which such annual bonus was the highest. For greater certainty, the term “bonus” shall refer to an award paid under the Corporation’s annual incentive plan as may be adopted from time to time and shall exclude any special bonus not paid

3

under an annual incentive plan, any amount payable under any long-term incentive plan of the Corporation, or any stock option benefit.

2.04 “Basic Pension” shall mean the annual lifetime pension which the Participant would otherwise be entitled to receive from time to time pursuant to any Qualified Pension Plan, in regards to the period of Credited Service recognized for purposes of this SERP or that would be so recognized for purposes of this SERP in absence of the 35 year limit on Credited Service as per Section 2.08, but limited to the period of Credited Service actually recognized in the Qualified Pension Plan. It shall be assumed that such annual pension is payable from the same date as supplementary benefits commence to be paid under this SERP and is calculated on the basis of the following assumptions:

a) where the Qualified Pension Plan is a defined benefit pension plan:

i)	the annual pension is in the form of a pension payable under the normal form provided for under the Qualified Pension Plan, or if the Participant elects an optional form in accordance with Section 8.03, the annual pension payable under such optional form;
ii)	the Participant has made no Additional Voluntary Contribution; and
iii)	the amount of the Basic Pension shall be determined according to the formula under the Qualified Pension Plan regardless of any reduction in benefits that may be applied, by operation of statute or otherwise, as a result of the funded status of such Qualified Pension Plan on the date of such determination (it being understood that, where the Qualified Pension Plan is a defined benefit pension plan, the foregoing assumption shall also be applicable to the determination of the amount of survivor pension payable to the Spouse under the Qualified Pension Plan following the death of the Participant (or any survivor pension that would have been payable had the benefits under the Qualified Pension Plan not been commuted or paid in the form of a lump sum payment) as referred to in Section 8, and any amount payable under the Qualified Pension Plan to the

4

Participant’s estate or any designated beneficiary following the death of the Participant (or any amount that would have been payable had the benefits under the Qualified Pension Plan not been commuted or paid in a lump sum payment) as referred to in Section 8; and

b)	where the Qualified Pension Plan is a defined contribution pension plan, an annual pension which is the Actuarial Equivalent, based on the assumptions in Section 2.01 and the form of pension described in paragraph a) of this Section 2.04, of the amount accumulated since January 1, 1999 by the Participant under the Qualified Pension Plan, excluding his Additional Voluntary Contributions, as of the date of his retirement, death or termination of employment with the Corporation; and
c)	where the Qualified Pension Plan is the Abitibi Consolidated U.S. 401(k) Plan for Salaried Employees or any other 401(k) plan maintained by a sponsor listed in Appendix A of this document, an annual pension which is the Actuarial Equivalent, based on the assumptions in Section 2.01 and the form of pension referred to in paragraph a) of this Section 2.04, of the amount that would have accumulated since January 1, 1999 by the Participant under the Qualified Pension Plan, excluding his voluntary contributions, if he had participated in the plan each year so as to receive the maximum contribution from the Corporation, and invested all of his contributions in the Abitibi Consolidated U.S. 401(k) Plan for Salaried Employees American Century Stable Value Fund (or a stable value investment option that replaces this fund), as of the date of his retirement, death or termination of employment with the Corporation; and
d)	in the case of an Executive Employee who is a former Abitibi-Price Inc. employee who held a MSBA and who elected to convert his defined benefit entitlement under Abitibi-Price Inc.’s Registered Pension Plan to a defined contribution entitlement, a list of such Executive Employees being attached hereto as Appendix C, the Basic Pension in respect of such Participant shall be determined as if the Participant had elected not to convert his defined benefit entitlement

5

	under Abitibi-Price Inc.’s Registered Pension Plan and such defined benefit entitlement has been determined in accordance with the provisions in effect on January 1, 1996 of the Abitibi-Price Inc.’s Registered Pension Plan and in accordance with the assumptions and the form of pension described in paragraph a) of this Section 2.04; and
e)	in all cases, where a Participant’s entitlement under the Qualified Plan has been divided between the Participant and his Spouse or former Spouse as a result of divorce, separation or annulment of marriage, his Basic Pension shall be determined as if no such division of his entitlement had occurred.

2.05	“Change of Control” shall have the meaning described in Treas. Reg. §1.409A-3(i)(5), i.e., a change in the ownership of the Corporation of more than fifty percent (50%), a change in the effective control of the Corporation of thirty percent (30%) or more, or the sale of a substantial portion of the Corporation’s assets.
2.06	“Continuous Service” shall mean a Participant’s uninterrupted period of employment, with the Corporation or with a predecessor company, deemed to have commenced on the first day of the month coinciding with or immediately following the Participant’s hiring date by the Corporation, or deemed to have commenced on the Participant’s hiring date by such predecessor company, as the case may be; for such purpose a predecessor company shall mean Donohue Industries Inc. or any other company considered to be a predecessor company for such purpose. The continuous service of a Participant shall not be interrupted as a result of any absence due to disability, which was approved by the Corporation, or due to temporary absence other than as a result of disability, which was approved by the Corporation.
	For Participants hired on or after January 1, 2002, Continuous Service shall mean a Participant’s uninterrupted period of employment with the Corporation deemed to have commenced on the Participant’s hiring date.
	Continuous Service shall be measured in years with proportional allowance for non-completed years.

6

2.07	“Corporation” means Abitibi-Consolidated Inc. and its affiliated companies, or any subsidiary of the Corporation or associated company, provided however, that any reference in this SERP to action to be taken, consent, approval or opinion to be given, decision to be made or discretion to be exercised by the Corporation shall refer to Abitibi-Consolidated Inc., or its successor, acting through its Board of Directors or any person or persons authorized to act on behalf of the Corporation for the purposes of this SERP, in accordance with the normal practices of the Corporation.
2.08	“Credited Service” shall mean the Participant’s period of Continuous Service, following the Participant’s hiring date by the Corporation. However, with respect to those Executive Employees who were previously employed by Donohue Industries Inc., credited service shall begin on June 1, 1998. For greater certainty, Credited Service shall not include any period of service recognized as credited service under any other nonqualified pension plan sponsored by the Corporation other than this SERP.
	Subject to the approval of the Human Resources and Compensation Committee of the Board of Directors of the Corporation, the Corporation may also recognize, for newly hired Executive Employees or any short service Executive Employees, additional service up to a maximum of five (5) years for purposes of calculating the Participant’s Continuous and Credited Service, such additional service being as described in Appendix B hereto, as updated from time to time. Effective from August 23, 2000, such additional service shall be vested with the Participant on a basis established by the Corporation.
	Subject to the approval of the Human Resources and Compensation Committee of the Board of Directors of the Corporation, the Corporation may also recognize for Executive Employees who were previously employed by Donohue Industries Inc., additional service as described in Appendix B hereto, such additional service to be vested only on the dates specified in Appendix B.
	Credited Service shall be measured in years with proportional allowance for non-completed years. Total years of Credited Service under this SERP and under all other unregistered or nonqualified pension plans sponsored by the Corporation shall not exceed 35.

7

2.09	“Early Retirement Date” shall mean the first day of the month immediately following the date on which the Participant elects to retire early in accordance with Section 6 hereof, provided he is then at least 55 years of age.
2.10	“Effective Date” shall mean January 1, 1999. The effective date of this restated SERP is January 1, 2007.
2.11	“Executive Employee” shall mean an executive employee considered as such by the Corporation and who is eligible for participation in this SERP in accordance with Section 3 herein.
2.12	“Lump Sum Assumptions” shall mean an interest rate and mortality table used to determine the value of a lump sum distribution under Section 8 or Section 10. The interest rate for a lump sum distribution paid before January 1, 2007 shall be based upon Abitibi-Consolidated Inc.’s (ACI’s) after tax cost of debt derived in accordance with ACI’s administrative policies. ACI’s treasury department will furnish such rate on an annual basis. The interest rate for lump sum distributions paid during the period from January 1, 2007 to May 6, 2007 shall be five and five-tenths percent (5.5%). The interest rate for lump sum distributions paid after May 6, 2007, shall be calculated by ACI’s treasury department in accordance with the formula set forth in Appendix D (which is similar to the way the interest rate for a letter of credit for the Canadian SERP benefit is calculated). This interest rate shall be calculated by ACI, or its successor’s, treasury department on an annual basis. The mortality table will be based on the underlying mortality table used for actuarial equivalent benefit calculation purposes in the Abitibi Consolidated U.S. Retirement Plan for Salaried and Certain Hourly-Paid Non-Bargaining Employees. However, the table used for purposes of this Section 2.12 will be used on a sex distinct basis instead of a blended mortality basis. Effective March 1, 2003, such table is the sex distinct GAR94, projected to 2002, Mortality Table.
2.13	“MSBA” shall mean the Memorandum Supplemental Benefit Agreement, an individual supplementary benefits agreement with an Executive Employee who was a former Abitibi-Price Sales Corporation employee.

8

2.14	“Normal Retirement Date” shall mean the first day of the month coinciding with or next following the month in which the Participant attains the age of 65 years.
2.15	“Participant” shall mean an Executive Employee who is eligible to participate in this SERP in accordance with Section 3 herein.
2.16	“Qualified Pension Plan” means any one or more pension plans sponsored by the Corporation from time to time and qualified under Section 401 (a) of the U. S. Internal Revenue Code. When used in respect of a Participant, this expression shall refer to the one or more Qualified Pension Plans under which such Participant is entitled to receive benefits following his termination of employment, death or retirement from the Corporation with regards to the period of Credited Service which is recognized for purposes of this SERP.
2.17	“SERP” shall mean the Supplemental Executive Retirement Plan for Executive Employees of Abitibi Consolidated Sales Corporation, as described in this document and as it may be amended from time to time.
2.18	“SMRP” shall mean Stone-Consolidated Corporation Senior Management Retirement Plan, an individual supplementary benefits agreement of Stone-Consolidated Corporation with an Executive Employee who was a former Stone-Consolidated Corporation employee.
2.19	“Spouse” shall mean the person who satisfies the definition of spouse as defined under the Qualified Pension Plan of which the Participant is a member at the time the spousal status needs to be determined, or would have been a member had his benefits not been commuted or paid in a lump sum.
	Spousal status shall be determined on the day proceeding the date of death of the Participant or on the day when the Participant commences receiving his supplementary retirement allowance, whichever occurs first.

9

For the purpose of this SERP, unless the context indicates otherwise, references to the masculine include the feminine and vice versa and references to the singular include the plural and vice versa.

10

Section 3 — Eligibility

3.01 An Executive Employee who is in the service of the Corporation on the Effective Date shall be eligible to become a Participant of this SERP as of the Effective Date subject to the following conditions:

a)	An Executive Employee who was a former Abitibi-Price Sales Corporation employee and who was party to an MSBA providing for supplementary retirement benefits may elect to become a Participant under this SERP as of the Effective Date. Upon such election, he shall cease to accrue benefits under such individual agreement and shall no longer be entitled to any benefits thereunder. If he elects not to participate in this SERP, he shall forever forfeit his entitlement to participate hereunder and will continue to accrue and be entitled to supplementary pension benefits in accordance with the terms and provisions of his MSBA.
b)	An Executive Employee who is a former Stone-Consolidated Corporation employee and who participated in an SMRP may elect to become a Participant under this SERP as of the Effective Date. Upon such election, he shall cease to accrue benefits under the SMRP and shall no longer be entitled to benefits thereunder and shall become a Participant in this SERP as of the Effective Date. If he elects to not become a Participant in this SERP, he will forever forfeit his entitlement to participate hereunder and will continue to accrue and be entitled to supplementary pension benefits in accordance with the terms and provisions of the SMRP.
c)	In the case of an Executive Employee who was in the service of Abitibi Consolidated Sales Corporation or any subsidiary or associated company listed in Appendix A as of the Effective Date but was not party to an MSBA with Abitibi- Price Sales Corporation providing for supplementary pensions or did not participate in an SMRP, or in the case of an employee of Abitibi Consolidated Sales Corporation or any subsidiary or associated company listed in Appendix A who becomes classified as an Executive Employee after the Effective Date, such Executive Employee shall become eligible to participate under this SERP upon:

11

i)	completion of at least two years in a senior position of the Corporation and demonstration of superior performance; and
ii)	designation in writing by the Chief Executive Officer of the Corporation. Participation shall commence as of the date determined in such designation. At the discretion of the Chief Executive Officer of the Corporation, the two-year requirement in part i) above may be waived.

d) Executive Employees who are employed for a temporary period to complete functions relating to the merger of Abitibi-Price Sales Corporation and/or Stone-Consolidated Corporation shall not be eligible to participate in this SERP, unless provided otherwise in a severance compensation agreement with the Corporation.

3.02	The election referred to in Section 3.01 a) or 3.01 b) above shall be made at such time and in such form as determined by the Corporation.
3.03	An Executive Employee who has become a Participant under this SERP in accordance with this Section 3 shall remain a Participant as long as he continues to be entitled to receive benefits hereunder.
3.04	In the event that a Participant remains an employee of the Corporation but ceases to be classified as an Executive Employee, and unless he is otherwise designated by the Corporation as eligible to continue to accrue Credited Service under this SERP, the benefits otherwise payable to or in respect of such Participant under this SERP shall be payable as of the Participant’s retirement, death or termination of employment, as the case may be, but shall be based on such Participant’s Credited Service and Average Pensionable Earnings up to the date he ceases to be classified as an Executive Employee or as of such later date specified by the Corporation.

12

Section 4 — Contributions

4.01	No contribution shall be required from a Participant in respect of benefits payable under this SERP.
4.02	The Corporation shall pay the full cost of the benefits provided under the SERP.

13

Section 5 — Normal Retirement and Postponed Retirement Benefits

5.01 A Participant who retires on his Normal Retirement Date shall be entitled to receive an annual supplementary retirement allowance payable in equal monthly installments and commencing on his Normal Retirement Date in an amount equal to the excess, if any, of a) over b) below:

a)	2% of his Average Pensionable Earnings multiplied by his number of years of Credited Service;
b)	his Basic Pension from the Qualified Pension Plan, or where such Basic Pension has been commuted, the Basic Pension he would have received if such commutation had not taken place.

5.02 In the event a Participant remains in the employ of the Corporation after his Normal Retirement Date, he shall be entitled to receive an annual supplementary retirement allowance, payable in equal monthly installments and commencing on the first day of the month following his actual lifetime supplementary retirement allowance benefit commencement date, equal to the amount determined in accordance with Section 5.01, and based on his Credited Service and Average Pensionable Earnings as of his Normal Retirement Date, and his Basic Pension as of his actual lifetime supplementary retirement allowance benefit commencement date.

14

Section 6 — Early Retirement Benefits

6.01	A Participant may retire prior to his Normal Retirement Date, provided he is then at least 55 years of age and has completed at least 2 years of Continuous or Credited Service. For the purpose of this SERP, his Early Retirement Date shall be the first day of the month coinciding with or next following the date on which the Participant retires.
6.02	Where the Participant is at least 58 years of age and the sum of his age and years of Continuous or Credited Service totals at least 80, such Participant shall be entitled to an annual supplementary retirement allowance, payable in equal monthly installments, determined in accordance with Section 5.01 and commencing on his Early Retirement Date.
6.03	A Participant other than a Participant referred to in Section 6.02 who retires early in accordance with Section 6.01 shall be entitled to receive an annual supplementary retirement allowance, payable in equal monthly installments, and commencing on his Early Retirement Date in an amount equal to the excess, if any, of a) over b) below:

a) 2% of his Average Pensionable Earnings multiplied by his number of years of Credited Service, such amount to be reduced by 0.5% multiplied by the number of months that his Early Retirement Date precedes:

i)	where the Participant has completed at least 20 years of Continuous or Credited Service, the date at which the Participant would first have qualified for an unreduced supplementary retirement allowance in accordance with Section 6.02 hereof had he continued in the plan;
ii)	where the Participant has not completed 20 years of Continuous or Credited Service, age 65.

b) his Basic Pension from the Qualified Pension Plan, or where such Basic Pension has been commuted or paid in a lump sum, the Basic Pension he would have received if such commutation or lump sum payment had not taken place.

15

Section 7 — Disability

7.01

During a period of disability entitling the Participant to either receive (i) disability benefits under U.S. Social Security or (ii) disability benefits under a long-term disability plan maintained by the Corporation from time to time, such Participant shall continue to accrue Credited Service for the purpose of this SERP. During such period, the Participant shall be deemed to receive a base salary equal to the annual rate of base salary he was receiving immediately prior to his becoming disabled.

7.02

If the Participant, for any reason, ceases to be eligible to receive benefits under the short-term or long-term disability plan maintained by the Corporation prior to his Normal Retirement Date and within such period as determined by the Corporation:

a)

the Participant returns to active employment with the Corporation, then at the date of his subsequent termination, death or retirement, he shall be entitled to supplementary retirement benefits calculated in accordance with the provisions of this SERP, taking into account the provisions of Section 7.01 above, or

b)

the Participant does not return to active employment with the Corporation then, he will be deemed to have terminated his employment or retired for the purposes of this SERP as of the day he ceases to be eligible to receive benefits from the disability plans maintained by the Corporation and his supplementary retirement benefits shall be calculated based on the provisions of this SERP, taking into account the provisions of Section 7.01 above.

7.03	A Participant whose period of disability continues until his Normal Retirement Date shall be deemed to have retired on his Normal Retirement Date for the purpose of this SERP.
7.04	In the event of the death of a Participant who is accumulating Credited Service while in receipt of disability benefits as provided in Section 7.01 hereof, the benefits payable under this SERP shall be determined in accordance with the terms of Section 9 hereof as if he died while in service of the Corporation.

16

Section 8 — Form of Pension

8.01 This Section 8.01 shall only apply to a supplementary retirement allowance that started prior to January 1, 2005. Such an annual supplementary retirement allowance payable to a Participant under this SERP shall be paid during the lifetime of the Participant. Following the death of the Participant while in receipt of such supplementary retirement allowance, the Participant’s Spouse shall be entitled to receive during his or her lifetime an annual supplementary survivor allowance, payable in equal monthly installments, and commencing on the first day of the month following the month in which the Participant dies, equal to the excess of a) over b) below:

a)

50% of the annual supplementary retirement allowance that would have been payable to the Participant under this SERP at the time of his death, if such supplementary allowance had not been reduced by the Participant’s Basic Pension;

b)

any survivor pension payable to the Spouse under the Qualified Pension Plan following the death of the Participant, or any survivor pension that would have been payable had the benefits under the Qualified Pension Plan not been commuted or paid in a lump sum. Where the Qualified Pension Plan is a plan as defined in Section 2.04 b) or c), the survivor pension payable to the Spouse shall be equal to 50% of the Participants Basic Pension as defined in Section 2.04.

8.02 This Section 8.02 shall only apply to a supplementary retirement allowance that started prior to January 1, 2005. If a Participant, who does not have a Spouse at the start of his supplementary retirement allowance dies before 120 monthly payments of the supplementary retirement allowance have been paid to him, his estate shall receive a lump sum which is the Actuarial Equivalent of the excess of a) over b) below:

a) the balance of the 120 monthly payments of the supplementary retirement allowance that would have been payable to the Participant under this SERP at the time of his death if such supplementary allowance had not been reduced by the Participant’s Basic Pension;

17

b) any amount payable under the Qualified Pension Plan to his estate or any designated beneficiary following the death of the Participant, or any amount that would have been payable had the benefits under the Qualified Pension Plan not been commuted or paid in a lump sum. Where the Qualified Pension Plan is a plan as defined in Section 2.04 b) or c), the amount that would have been payable to his estate or any designated beneficiary following the death of the Participant, had the Participant elected to receive his Basic Pension as defined in Section 2.04 as a life annuity with 120 payments guaranteed.

8.03 Optional Form of Pension

          This Section 8.03 shall only apply to a supplementary retirement allowance that started prior to January 1, 2005 or a lump sum payment that was made prior to January 1, 2005.

a)	Instead of receiving his supplementary retirement allowance in accordance with the normal form of payment described in Sections 8.01 and 8.02, a Participant may elect to receive his supplementary retirement allowance payable under this SERP under one of the optional forms determined by the Corporation as eligible for the purpose of this SERP. In such a case, the Participant must elect the same optional form for purpose of his benefits under the Qualified Pension Plans. However, in the case where the Qualified Pension Plan is a plan as defined in Section 2.04 a) for which the Participant elects a lump sum form of payment or a plan as defined in Section 2.04 b) or c), the Participant will be deemed to have elected the same form of payment that is elected for purposes of this SERP.
	If the Participant elects an optional form of pension, then the amount of his annual supplementary retirement allowance, prior to applying the offset for his Basic Pension, shall be adjusted on an Actuarial Equivalent Value basis.
b)	If a Participant who is an active Participant or who is accruing credited service on March 1, 2003 or becomes an active Participant after March 1, 2003, retires or terminates employment under Sections 5, 6, or 10 of the SERP on or after March 1, 2003, and prior to January 1, 2005, then such Participant shall be

18

entitled to elect to receive the value of his total benefit payable from this SERP in the form of a lump sum payment in lieu of a lifetime supplementary retirement allowance or any further lifetime supplementary allowance payments.

If a Participant retires directly from active employment pursuant to Section 5 or 6, then the election and payment of this lump sum will not be available until two years after such Participant’s lifetime supplementary retirement allowance benefit commencement date. Furthermore, upon a Participant’s initial lifetime supplementary retirement allowance benefit commencement date an election of a monthly annuity will occur in accordance with this Section 8 and will continue until such time the Participant may elect to receive the lump sum value of his pension as defined in this Section 8.03 b).

If a Participant voluntarily terminates employment pursuant to Section 10.01 prior to January 1, 2005, then such Participant will have the option to elect to receive the lump sum value of his pension as defined in this Section 8.03 b) upon his lifetime supplementary retirement allowance benefit commencement date or two years after such voluntary termination, if later.

If a Participant involuntarily terminates employment pursuant to Section 10.02 prior to January 1, 2005, then such election and payment of a lump sum will not be available until two years after such Participant’s termination date. If such Participant chooses not to elect the lump sum at the end of the SERP’s two-year non-compete agreement, then such Participant will only have such option again upon his lifetime supplementary retirement allowance benefit commencement date.

To receive a lump sum payment, a Participant who retired or otherwise terminated employment prior to January 1, 2007 must request the lump sum payment option, in writing, at least one year prior to the payment.

The lump sum payment will be calculated as of the first day the Participant is eligible for such payment. No interest will be credited to the lump sum amount

19

for the period between the date of the calculation and the date of the actual payment. Furthermore, such calculation will be based upon the Lump Sum Assumptions as defined in Section 2.12. For a voluntary termination, such Lump Sum Assumptions shall be those in effect at the time of the Participant’s lifetime supplementary retirement allowance benefit commencement date or at the end of the SERP’s two-year non-compete agreement, if later. For an involuntary termination, such Lump Sum Assumptions shall be those in effect at the end of the SERP’s two-year non-compete agreement, unless such Participant chooses not to elect the lump sum at the end of such two-year period, but later decides to elect such option upon his lifetime supplementary retirement allowance benefit commencement date, in which event, the Lump Sum Assumptions will be those in effect at his lifetime supplementary retirement allowance benefit commencement date.

Payments under this Section 8.03 b) are subject to the conditions as set forth in Section 14. If the Participant requests the lump sum payment, then the payment is made and the Corporation does not have the power to refuse payment unless any of the conditions set forth in Section 14 are violated.

8.04 Form of Pension for a Married Participant whose Supplementary Allowance Starts After December 31, 2004 and before January 1, 2007.

          This Section 8.04 shall apply in determining any supplementary retirement allowance that starts after December 31, 2004 and before January 1, 2007 for a married Participant who is entitled to elect the immediate commencement of a supplementary retirement allowance under Section 5 or Section 6 of this SERP (because the Participant is married Participant, retires at age 55 or older and has completed at least two years of Continuous or Credited Service). The amount of the married Participant’s supplementary retirement allowance shall be equal to the Participant’s supplementary retirement allowance, calculated under Section 5 or Section 6, whichever is applicable, payable in the form of monthly supplementary retirement allowance for the Participant’s life with a 50% Spouse supplementary retirement allowance, payable for the Spouse’s life after the Participants death. The Participant’s monthly supplementary retirement

20

allowance shall be payable to the Participant starting on (or as of) the first day of the month coinciding with or immediately following the Participants retirement. Effective from January 1, 2005 to December 31, 2006, this SERP shall conclusively presume that such a Participant irrevocably elected the time and form of payment described above. Therefore, the Participant cannot elect any other time or form of payment. If the married Participant is age 55 or older, but not age 65, his or her supplementary retirement allowance starting date shall be deemed to be Participant’s Early Retirement Date under Section 6.01 hereof. If the married Participant retires on his 65th birthday, his or her supplementary retirement allowance starting date shall be deemed to be the Participant’s Normal Retirement Date under Section 5.01 hereof. If the married Participant retires after his or her 65th birthday, his or her supplementary retirement allowance starting date shall be deemed to be the Participant’s actual supplementary retirement allowance benefit commencement date under Section 5.02 hereof.

          The married Participant’s supplemental retirement allowance shall be paid for twenty-four (24) months, unless the Participant dies during such twenty-four month period. If the Participant dies while in receipt of such monthly supplementary retirement allowance payments, or before the second anniversary of the start of his or her monthly supplementary retirement allowance payments, the Participant’s Spouse shall automatically be entitled to receive a lump sum payment, calculated in accordance with Section 2.12, equivalent to an immediate monthly lifetime supplementary survivor allowance which is an income amount equal to the excess of a) over b) below:

a)	50% of the monthly supplementary retirement allowance that would have been payable to the Participant under this SERP at the time of his death, provided such supplementary allowance had not been reduced by the Participant’s Basic Pension;
b)	any survivor pension payable to the Spouse under the Qualified Pension Plan following the death of the Participant, or any survivor pension that would have been payable had the benefits under the Qualified Pension Plan not been commuted or paid in a lump sum. Where the Qualified Pension Plan is a plan as

21

defined in Section 2.04 b) or c), the survivor pension payable to the Spouse shall be equal to 50% of the Participants Basic Pension as defined in Section 2.04.

          If the married Participant was an officer of the Corporation, his or her initial supplementary retirement allowance payment shall be made on the first day of the seventh month immediately following the married Participant’s retirement. The amount of this initial supplementary retirement allowance shall be equal to seven (7) times the amount of the married Participant’s monthly supplementary retirement allowance. The married Participant’s supplemental retirement allowance shall be paid for an additional seventeen (17) months, unless the Participant dies during the twenty-four (24) month period starting with the date of his retirement, in which event, the lump sum payment to the Participant’s Spouse described in the immediately preceding paragraph shall be made on or as soon as reasonably practicable after the Participant’s death.

          If the Participant’s Spouse dies before the Participant’s death, no survivor’s supplementary retirement allowance or other death benefit shall be payable under this SERP.

          On or as soon as reasonably practicable after the second anniversary of the start of the Participant’s twenty-four (24) months of supplementary retirement allowance payments, a lump sum amount shall be paid to the Participant, if then living, equal to the Participant’s then total benefit under this SERP, calculated in accordance with Section 2.12 hereof. This lump sum payment shall be paid to the Participant in lieu of any other benefit payments of any kind under this SERP. If the Participant was an officer of the Corporation whose supplementary retirement allowance payments did not start until the first day of the seventh month immediately following his/her retirement, the start of his supplementary retirement allowance, for this purpose, shall be deemed to be the first day of the month coincident with or immediately following the Participant’s retirement.

          Payments under this section 8.04 are subject to the conditions set forth in Section 14.

22

8.04A Form of Pension for a Married Participant whose Supplementary Allowance Starts After December 31, 2006.

          This Section 8.04A shall apply in determining any supplementary retirement allowance that starts after December 31, 2006 for a married Participant who is entitled to the immediate commencement of a supplementary retirement allowance under Section 5 or Section 6 of this SERP (because the married Participant retires, is age 55 or older and has completed two years or more of Continuous or Credited Service). The amount of the married Participant’s supplementary retirement allowance shall be equal to the Participant’s supplementary retirement allowance, calculated under Section 5 or Section 6, whichever is applicable, payable in the form of a monthly supplementary retirement allowance for the Participant’s life with a 50% Spouse supplementary retirement allowance, payable for the Spouse’s life after the Participants death. The Participant’s monthly supplementary retirement allowance shall be payable to the Participant starting on (or as of) the first day of the seventh month immediately following the Participant’s retirement. The amount of this initial supplementary retirement allowance shall be equal to seven (7) times the married Participant’s monthly supplemental retirement allowance. Effective from and after January 1, 2007, this SERP shall conclusively presume that such a Participant irrevocably elected the time and form of payment described above. Therefore, the Participant cannot elect any other time or form of payment. If the married Participant is age 55 or older, but not age 65, his or her supplementary retirement allowance starting date shall be deemed to be Participant’s Early Retirement Date under Section 6.01 hereof. If the married Participant retires on his 65th birthday, his or her supplementary retirement allowance starting date shall be deemed to be the Participant’s Normal Retirement Date under Section 5.01 hereof. If the married Participant retires after his or her 65th birthday, his or her supplementary retirement allowance starting date shall be deemed to be the Participant’s actual supplementary retirement allowance benefit commencement date under Section 5.02 hereof.

          If the married Participant dies during such twenty-four month period immediately following the Participant’s retirement, the Participant’s Spouse shall automatically be entitled to receive a lump sum payment, calculated in accordance with Section 2.12 as of the date of the deceased Participant’s death, equivalent to an immediate monthly lifetime supplementary survivor allowance which is an income amount equal to the excess of a) over b) below:

23

a)

50% of the monthly supplementary retirement allowance that would have been payable to the Participant under this SERP at the time of his death, provided such supplementary allowance had not been reduced by the Participant’s Basic Pension;

b)

any survivor pension payable to the Spouse under the Qualified Pension Plan following the death of the Participant, or any survivor pension that would have been payable had the benefits under the Qualified Pension Plan not been commuted or paid in a lump sum. Where the Qualified Pension Plan is a plan as defined in Section 2.04 b) or c), the survivor pension payable to the Spouse shall be equal to 50% of the Participants Basic Pension as defined in Section 2.04.

          If the Participant’s Spouse dies before the Participant’s death, no survivor’s supplementary retirement allowance or other death benefit shall be payable under this SERP.

          On or as soon as reasonably practicable after the first day of the month immediately following the second anniversary of the Participant’s retirement, a lump sum amount shall be paid to the Participant, if then living, equal to the Participant’s then total benefit under this SERP, calculated in accordance with the assumptions specified in Section 2.12 hereof as of the date of the Participant’s retirement based on the Participant and, if applicable, spouse’s nearest age as of the second anniversary of the Participant’s retirement. This lump sum payment shall be paid to the Participant in lieu of any other benefit payments of any kind under this SERP.

          Payments under this Section 8.04A are subject to the conditions set forth in Section 14.

8.05 Form of Pension for an Unmarried Participant whose Supplementary Allowance Starts After December 31, 2004 and before January 1, 2007.

          This Section 8.05 shall apply in determining any supplementary retirement allowance or other benefit that starts after December 31, 2004 and before January 1, 2007 for an unmarried Participant who is entitled to elect the immediate commencement of a supplementary retirement allowance under Section 5 or Section 6 of this Plan (because the unmarried Participant retires, is age 55 or older and has at least two years or more of Continuous or Credited Service). The amount of the unmarried Participant’s supplementary retirement allowance shall be equal to the

24

supplementary retirement allowance the unmarried Participant is entitled to receive under Section 5 or Section 6, whichever is applicable, payable in the form of a lifetime monthly supplementary allowance with 120 monthly payments of the supplemental retirement allowance guaranteed. This supplemental retirement allowance shall be paid to the Participant starting on (or as of) the first day of the month coinciding with or immediately following the Participant’s retirement. Effective from January 1, 2005 to December 31, 2006, this SERP shall conclusively presume that such a Participant irrevocably elected the time and form of payment described above. Therefore, the Participant cannot elect any other time or form of payment.

          If the unmarried Participant is age 55 or older, but not age 65 or older, his or her supplementary retirement allowance starting date shall be deemed to be the Participant’s Early Retirement Date under Section 6.01. If the unmarried Participant retires on his 65th birthday, his or her supplementary retirement allowance starting date shall be deemed to be the Participant’s Normal Retirement Date under Section 5.01. If the unmarried Participant retires after his or her 65th birthday, his or her supplemental retirement allowance starting date shall be deemed to be the Participant’s actual supplemental retirement allowance benefit commencement date under Section 5.02 hereof.

          The unmarried Participant’s supplementary retirement allowance shall be paid to the Participant for twenty-four (24) months, unless the Participant dies during such twenty-four (24) month period or before the second anniversary of the start of his or her supplementary retirement allowance, in which event, the deceased Participant’s beneficiary designated under Section 9.02(b) shall automatically receive a lump sum payment, calculated in accordance with Section 2.12 as of the date of the Participant’s death, in an amount equal to the discounted present value of the remainder of the guaranteed 120 monthly supplementary allowance payments.

          If the unmarried Participant was an officer of the Corporation, his or her initial supplementary retirement allowance payment shall be made on the first day of the seventh month immediately following the unmarried Participant’s retirement. The amount of this initial supplementary retirement allowance shall be equal to seven (7) times the amount of the unmarried Participant’s monthly supplementary retirement allowance. The unmarried Participant’s supplementary retirement allowance shall be paid for an additional seventeen (17)

25

months, unless the Participant dies during the twenty-four month period starting with the date of his retirement, in which event, the lump sum payment to the deceased Participant’s beneficiary designated under Section 9.02(b), calculated as of the date of the Participant’s death, shall be made on or as soon as reasonably practicable after the Participant’s death.

          On or as soon as reasonably practicable on or after the second anniversary of the start of the Participant’s twenty-four (24) months of supplementary retirement allowance payments, a lump sum amount shall automatically be paid to the Participant, if then living, equal to the Participant’s then total benefit under this SERP, calculated in accordance with Section 2.12 hereof. This lump sum amount shall be paid to the Participant in lieu of any other benefit payment of any kind from this SERP. If the Participant was an officer of the Corporation whose supplementary retirement allowance payments did not start until the first day of the seventh month immediately following his/her retirement, the start of his supplementary retirement allowance for this purpose shall be deemed to be the first day of the month coincident with or immediately following the Participant’s retirement.

          Payments under this Section 8.05 are subject to the conditions set forth in Section 14.

8.05A Form of Pension for an Unmarried Participant whose Supplementary Allowance Starts After December 3, 2006.

          This Section 8.05A shall apply in determining any supplementary retirement allowance or other benefit that starts after December 31, 2006 for an unmarried Participant who is entitled to the immediate commencement of a supplementary retirement allowance under Section 5 or Section 6 of this Plan (because the unmarried Participant retires, is age 55 or older and has at least two years or more of Continuous Service or Credited Service). The amount of the unmarried Participant’s supplementary retirement allowance shall be equal to the supplementary retirement allowance the unmarried Participant is entitled to receive under Section 5 or Section 6, whichever is applicable, payable in the form of a lifetime monthly supplementary allowance with 120 monthly payments of the supplemental retirement allowance guaranteed. This supplemental retirement allowance shall be paid to the Participant starting on (or as of) the first day of the seventh month immediately following the Participant’s retirement. The amount of this initial supplementary retirement allowance shall be equal to seven (7) times the unmarried

26

Participant’s monthly supplemental retirement allowance. Effective from and after January 1, 2007, this SERP shall conclusively presume that such a Participant irrevocably elected the time and form of payment described above. Therefore, the Participant cannot elect any other time or form of payment.

          If the unmarried Participant is age 55 or older, but not age 65 or older, his or her supplementary retirement allowance starting date shall be deemed to be the Participant’s Early Retirement Date under Section 6.01. If the unmarried Participant retires on his 65th birthday, his or her supplementary retirement allowance starting date shall be deemed to be the Participant’s Normal Retirement Date under Section 5.01. If the unmarried Participant retires after his or her 65th birthday, his or her supplemental retirement allowance starting date shall be deemed to be the Participant’s actual supplemental retirement allowance benefit commencement date under Section 5.02 hereof.

          If the unmarried Participant dies during such twenty-four (24) month period immediately following the Participant’s retirement, the deceased Participant’s beneficiary designated under Section 9.02(b) shall automatically receive a lump sum payment, calculated in accordance with Section 2.12, calculated as of the date of the Participant’s death, in an amount equal to the discounted present value of the remainder of the guaranteed 120 monthly supplementary allowance payments.

          On or as soon as reasonably practicable on or after the first day of the month immediately following the second anniversary of the start of the Participant’s retirement, a lump sum amount shall automatically be paid to the Participant, if then living, equal to the Participant’s then total benefit under this SERP, calculated in accordance with Section 2.12 hereof as of the date of the Participant’s retirement. This lump sum amount shall be paid to the Participant in lieu of any other benefit payment of any kind from this SERP.

          Payments under this Section 8.05A are subject to the conditions set forth in Section 14.

27

8.06 Special 2006 Form of Payment Election.

          Notwithstanding the provisions of Section 8.04 or 8.05 of this SERP, if a Participant’s supplementary retirement allowance started in 2005 or in the first three months of 2006, pursuant to the election of a form of payment under either Section 8.01, Section 8.02 or Section 8.03, the Participant shall be afforded the opportunity to elect in writing on or before March 31, 2006 whether he or she wants to: (i) receive a lump sum payment in an amount equal to his or her then total benefit under this SERP, calculated in accordance with Section 2.12 hereof, determined as of and payable on or as soon as reasonably practicable after the second anniversary of the start of his or her supplementary retirement allowance payments; or (ii) continue to receive the form of supplementary retirement payments he or she elected in 2005 or in the first three months of 2006. If the retired Participant does not make this election by March 31, 2006 and the written election is not received by a designated representative of the Corporation by such date, the form of supplementary retirement allowance payment elected by the Participant in 2005 or in the first three months of 2006, will continue to be paid after the second anniversary of the start of the Participant’s supplementary retirement allowance payments. Payments pursuant to any election by a Participant under this Section 8.06 are subject to the conditions set forth in Section 14 until the second anniversary of the start of the Participant’s supplementary allowance payments. If the Participant makes the election described in (ii) above in 2005 or in the first three months of 2006 (i.e., continuation of the supplementary retirement payments elected in 2005 or in the first three months of 2006), then the provisions of Section 8.01 or Section 8.02 shall continue to apply to such Participant and his Spouse or, if applicable, beneficiary, notwithstanding the first sentence in Section 8.01 or Section 8.02, as amended by Amendment No. One to this SERP. A retired Participant who makes the election described in (ii) above may not later elect to receive a lump sum payment.

28

Section 9 — Death Prior to Retirement

9.01 Death after age 55 but prior to retirement

a)	In the event that a Participant dies while in the service of the Corporation after having reached age 55 and having completed at least 2 years of Continuous or Credited Service, his Spouse shall be entitled to receive an annual supplementary survivor allowance determined in accordance with Section 8.01 hereof as if the Participant had retired immediately prior to the date of his death and, in the case of retirement prior to January 1, 2005, had not elected an optional form of pension in accordance with Section 8.03. However, where the survivor benefit under the Qualified Pension Plan is payable in a lump sum, the survivor pension payable to the Spouse shall be equal to the pension that could be provided by such lump sum, calculated on an Actuarial Equivalent Value basis over the survivor’s lifetime.
b)	In the event of there being no Spouse at the time of death of a Participant referred to in paragraph a) of this Section 9.01, his beneficiary or, if he has not designated a beneficiary, his estate shall receive a lump sum equal to the lump sum that would otherwise have been payable under this SERP to the Participant’s estate as would be determined under Section 8 if the Participant had retired immediately prior to the date of his death. However, where the benefit payable to the designated beneficiary or estate under the Qualified Pension Plan is payable in a lump sum, any amount payable to the designated beneficiary or estate shall be equal to such lump sum.
c)	In the event that a Participant who has terminated his employment and who is entitled to a deferred annual supplementary retirement allowance in accordance with Section 10 dies after having reached age 55 and prior to payment commencement, his Spouse shall be entitled to receive an annual supplementary survivor allowance determined in accordance with the applicable provision in Section 8 hereof as if the Participant had requested payment commencement of his deferred annual supplementary retirement allowance on the first day of the calendar month immediately preceding or coinciding with his date of death.

29

If the Participant is not survived by a Spouse at the time of death, his estate shall receive a lump sum equal to the lump sum that would otherwise have been payable under the SERP to the Participant’s estate as would be determined under Section 8 as if the Participant had requested payment commencement of his deferred annual supplementary retirement allowance on the first day of the calendar month immediately preceding or coinciding with his date of death.

9.02 Death before age 55

a)

In the event that a Participant dies while in service of the Corporation prior to having reached age 55 but after having completed at least 2 years of Continuous or Credited Service, his Spouse or, if he is not survived by a Spouse, his beneficiary or, if he has not named a beneficiary, his estate, shall receive the lump sum value of the deferred supplementary retirement allowance that would otherwise have been payable under the SERP, determined under the applicable provision in Section 10 as if the Participant had voluntarily terminated his employment with the Corporation. Such lump sum value shall be calculated in accordance with Section 2.12 as of the date of the Participant’s death.

b)

In the event that a Participant who has terminated his employment and who is entitled to a deferred annual supplementary allowance in accordance with the applicable provision in Section 10 dies prior to having reached age 55, his Spouse or, if the Participant is not survived by a Spouse, his beneficiary or, if he has not designated a beneficiary, his estate shall receive the lump sum value of the deferred supplementary retirement allowance that would otherwise have been payable under the SERP. Such lump sum value shall be calculated under Section 2.12 as of the date of the Participant’s death.

9.03 No benefit shall be payable under this SERP following the death of a Participant prior to having reached age 55 if he has not completed at least 2 years of Continuous or Credited Service.

30

Section 10 — Termination of Employment

10.01 Voluntary termination after 2 years of Continuous or Credited Service and Before Age 55.

          This Section 10.01 only applies to supplementary retirement allowances that start before January 1, 2005 or any other benefit that is paid before January 1, 2005.

          A Participant who terminates his service with the Corporation on a voluntary basis prior to his 55th birthday and provided he has then completed at least 2 years of Continuous or Credited Service shall be entitled to receive a deferred annual supplementary retirement allowance the amount of which shall be determined as provided hereunder.

          The Participant may request that payment commencement of his deferred annual supplementary retirement allowance start on the first day of any calendar month during the period between his attainment of age 55 and his Normal Retirement Date. The amount of the deferred annual supplementary retirement allowance payable, shall be established based on the payment commencement date as follows:

a) if the payment commencement date is the Participant’s Normal Retirement Date:

i)	2% of his Average Pensionable Earnings multiplied by his number of years of Credited Service; less
ii)	his Basic Pension from the Qualified Pension Plan, or where such Basic Pension has been commuted, the Basic Pension he would have received if such commutation had not taken place.

b) If the payment commencement date is prior to the Participant’s Normal Retirement Date:

i) 2% of his Average Pensionable Earnings multiplied by his number of years of Credited Service, such amount to be reduced by 0.5 % multiplied by the number of months the payment commencement date precedes the Participant’s Normal Retirement Date; less

31

ii) his Basic Pension from the Qualified Pension Plan, or where such Basic Pension has been commuted, the Basic Pension he would have received if such commutation had not taken place.

          The deferred annual supplementary allowance shall be paid in the same form and in the same manner as the supplementary retirement allowance that would have been payable if the Participant had retired on his Normal Retirement Date.

10.02 Involuntary termination after 2 years of Continuous or Credited Service and Before Age 55.

          This Section 10.02 only applies to supplementary retirement allowances that start before January 1, 2005 or any other benefit that is paid before January 1, 2005.

          A Participant who, prior to his 55th birthday and provided he has then completed at least 2 years of Continuous or Credited Service, ceases to be employed by the Corporation as a result of the termination of his employment initiated by the Corporation for any reason other than for cause, shall be entitled to receive a deferred annual supplementary retirement allowance the amount of which shall be determined as provided hereunder.

          The Participant may request that payment commencement of his deferred annual supplementary retirement allowance start the first day of any calendar month during the period between his attainment of age 55 and his Unreduced Early Retirement Date. For such purpose, the Participant’s Unreduced Early Retirement Date shall correspond to the earliest date he could have been entitled to an unreduced supplementary early retirement allowance as provided in Section 6.02, established as if his termination of employment had not occurred.

          The amount of the deferred annual supplementary retirement allowance payable, shall be established based on the payment commencement date as follows:

a) if the payment commencement date is the Participant’s Unreduced Early Retirement Date:

i) 2% of his Average Pensionable Earnings multiplied by his number of years of Credited Service; less

32

ii) his Basic Pension from the Qualified Pension Plan, or where such Basic Pension has been commuted, the Basic Pension he would have received if such commutation had not taken place.

b) If the payment commencement date is prior to the Participant’s Unreduced Early Retirement Date:

i)	2% of his Average Pensionable Earnings multiplied by his number of years of Credited Service, such amount to be reduced by 0.5 % multiplied by the number of months the payment commencement date precedes the Participant’s Unreduced Early Retirement Date; less
ii)	his Basic Pension from the Qualified Pension Plan, or where such Basic Pension has been commuted, the Basic Pension he would have received if such commutation had not taken place.

               The deferred annual supplementary allowance shall be paid in the same form and in the same manner as the supplementary retirement allowance that would have been payable if the Participant had retired on his Normal Retirement Date.

10.03 No benefit shall be payable under this SERP to a Participant who ceases to be in the employ of the Corporation prior to his 55th birthday:

a)	as a result of the termination of his employment by the Corporation for cause, or
b)	as a result of the termination of his employment for any reason prior to having completed at least 2 years of Continuous or Credited Service.

10.04	Termination of Employment Before Age 55 and After December 31, 2004 But Before January 1, 2007.
	Voluntary Termination:

           Effective from and after January 1, 2005 and prior to January 1, 2007, a Participant who voluntarily terminates his service with the Corporation prior to his 55th birthday and with at least

33

2 years of Continuous or Credited Service shall not be entitled to receive an annual supplementary retirement allowance upon attaining age 55. Rather, the terminated Participant shall be entitled on or as soon as reasonably practicable after the later of (i) his 55th birthday, or (ii) the second anniversary of his termination of employment, to automatically be paid the total value of his or her then SERP benefit, calculated in accordance with Section 2.12 hereof. If such a terminated Participant dies before the payment of his SERF benefit and is survived by a Spouse, the then lump sum value of the deceased former Participant’s SERP benefit, calculated in accordance with Section 2.12 hereof as of the date of the Participant’s death, shall be payable to the deceased Participant’s Spouse, or, if the Participant is not survived by a Spouse, to his or her designated beneficiary in accordance with Section 9.02(b) hereof. This death benefit shall be paid on or as soon as reasonably practicable after the terminated participant’s death. If the deceased former Participant is not survived by a Spouse and had not designated a beneficiary in accordance with Section 9.02(b), such benefit shall be paid to the Participant’s estate. Payments under this Section 10.04 are subject to the conditions in Section 14.

          Involuntary Termination:

          Effective from and after January 1, 2005 and prior to January 1, 2007, a Participant whose service with the Corporation is involuntarily terminated prior to his 55th birthday and with at least 2 years of Continuous or Credited Service shall not be entitled to receive an annual supplementary retirement allowance on or after the second anniversary of his or her termination of employment. Rather, the terminated Participant shall be entitled on or as soon as reasonably practicable after the second anniversary of his termination of employment, to automatically be paid the total value of his or her then SERP benefit, calculated in accordance with Section 2.12 hereof. If such a terminated Participant dies before the second anniversary of his termination of employment and is survived by a Spouse, the then lump sum value of the deceased former Participant’s SERP benefit, calculated in accordance with Section 2.12 hereof as of the date of the Participant’s death, shall be payable to the deceased Participant’s Spouse, or if the Participant is not survived by a Spouse, to his or her designated beneficiary in accordance with Section 9.02(b) hereof. This death benefit shall be paid on or as soon as reasonably practicable after the terminated Participant’s death. If the deceased former Participant is not survived by a Spouse

34

and had not designated a beneficiary in accordance with Section 9.02(b), such benefit shall be paid to the Participant’s estate.

           Payments under this Section 10.04 are subject to the conditions in Section 14.

10.05	Termination of Employment After December 31, 2006 and Before Age 55.
	Voluntary Termination.

           Effective from and after January 1, 2007, a Participant who voluntarily terminates his service with the Corporation prior to this 55^th birthday and with at least 2 years of Continuous or Credited Service shall not be entitled to receive an annual supplementary retirement allowance upon attaining age 55. Rather, the terminated Participant shall be entitled on or as soon as reasonably practicable after the later of (i) his 55^th birthday, or (ii) the second anniversary of his termination of employment, to automatically be paid the total value of his or her then SERP benefit, calculated in accordance with Section 2.12. If such a terminated Participant dies before the payment of his SERP benefit and is survived by a Spouse, the then lump sum value of the deceased Participant’s SERP benefit, shall be payable to the deceased Participant’s Spouse, or, if the Participant is not survived by a Spouse, to his or her designated beneficiary, in accordance with Section 9.02(b) hereof. This death benefit shall be paid on or as soon as reasonably practicable after the terminated Participant’s death. If the deceased former Participant is not survived by a Spouse and had not designated a beneficiary in accordance with Section 9.02(b), such benefit shall be paid to the Participant’s estate. Payments under this Section 10.05 are subject to the conditions in Section 14.

          Involuntary Termination:

          Effective from and after January 1, 2007, a Participant whose service with the Corporation is involuntarily terminated prior to his 55th birthday and with at least 2 years of Continuous or Credited Service shall not be entitled to receive an annual supplementary retirement allowance on or after the second anniversary of his or her termination of employment. Rather, the terminated Participant shall be entitled on or as soon as reasonably practicable after the second anniversary of his termination of employment, to automatically be paid the total value of his or her then SERP benefit, calculated in accordance with Section 2.12 hereof based on the

35

Participant’s nearest age as of the second anniversary of the Participant’s termination of employment. If such a terminated Participant dies before the second anniversary of his termination of employment and is survived by a Spouse, the then lump sum value of the deceased former Participant’s SERP benefit, shall be payable to the deceased Participant’s Spouse, or if the Participant is not survived by a Spouse, to his or her designated beneficiary in accordance with Section 9.02(b) hereof. This death benefit shall be paid on or as soon as reasonably practicable after the terminated Participant’s death. If the deceased former Participant is not survived by a Spouse and had not designated a beneficiary under Section 9.02(b), such benefit shall be paid to the Participant’s estate.

             Payments under this Section 10.05 are subject to the conditions in Section 14.

36

Section 11 — Increase in Benefits under Qualified Pension Plan

11.01	Any ad hoc increases in the pension payments made under the Qualified Pension Plan to a retired Participant, or in the case of his death, to his surviving Spouse, will not have the effect of reducing benefits otherwise payable under this SERP.
11.02	Any automatic annual increases in the pension payments made under the Qualified Pension Plan, or deemed to have been made if the benefits have been commuted or paid in a lump sum, to a retired Participant, or in the case of his death, to his surviving Spouse, will have the effect of reducing benefits otherwise payable under this SERP.
11.03	Effective July 1, 2001, monthly supplementary allowances paid under this SERP, shall be increased by a percentage per the following table:

Year of Retirement		Percentage Increase
	1999	1.72%
	2000	1.72% divided by 12 and multiplied by the number of months between the lifetime supplementary retirement allowance benefit commencement date and December 31, 2000.

37

Section 12 — Commutation of Benefits

This Section 12 only applies to any commuted lump sum supplementary retirement allowance that was paid prior to January 1, 2005.

12.01

Any supplementary retirement allowance or deferred supplementary retirement allowance payable under this SERP in the form of monthly payments may, at the discretion of the Corporation and subject to the approval of the Participant or, following his death, of his Spouse, be paid in a lump sum, calculated in accordance with the Corporation’s policy.

12.02

Any commutation of benefits otherwise payable under this SERP shall, unless it is decided otherwise by the Corporation at its entire discretion, not be permitted during the first 2 years following the Participant’s retirement or termination of employment. Furthermore, the corporation may require that the Participant or other beneficiary of a benefit under this SERP submit satisfactory evidence of good health before any such benefit is commuted.

38

Section 13 — Service Outside United States

13.01 In the event that a Participant’s employment includes periods of service with Abitibi Consolidated Sales Corporation or any subsidiary or associated company listed in Appendix A (hereinafter called “U.S. Service”) and periods of service in another country with any affiliated company or any subsidiary or associated company of the Corporation (hereinafter called “non-U.S. Service”), for the determination of the Participant’s supplementary benefits hereunder, the following provisions shall apply:

a)	the Participant’s Credited Service shall include his periods of non-U.S. Service during which he continued to accrue credited service under the Qualified Pension Plan plus any other period of non-U.S. Service as approved by the Corporation;
b)	for purposes of calculating the Participant’s Average Pensionable Earnings, the Participant’s base salary and annual bonus for his non-U.S. Service shall be established in accordance with the administrative policies and practices of the Corporation.

39

Section 14 — Conditions for Payment

14.01 Notwithstanding anything herein contained to the contrary, no amount of benefit shall be payable or continued to be paid pursuant to this SERP in the event that during his employment with the Corporation or during a period of 2 years following his termination of employment or retirement, the Participant, directly or indirectly, without the consent of the Corporation:

a)

engages in or becomes interested as a principal, agent, officer, employee, manager, advisor, financial backer, shareholder (except as a passive investor in a public corporation) or in any other capacity whatsoever in a business which may be fairly regarded as being in competition with the business of the Corporation; or

b)

assists financially or in any manner whatsoever any person, firm, association or corporation, whether as principal, agent, officer, employee, manager, advisor, financial backer, shareholder (except as a passive investor in a public corporation) or in any capacity whatsoever to enter into, develop, carry on or maintain a business, which may fairly be regarded as being in competition with the business of the Corporation.

14.02 Furthermore, notwithstanding anything herein contained to the contrary, no amount of benefit shall be payable or continued to be paid pursuant to this SERP in the event that during his employment with the Corporation or at any time thereafter, the Participant fails to keep confidential any information of a confidential or proprietary nature concerning the Corporation, its subsidiaries and affiliates and their respective operations, assets, finances, business and affairs or uses such information for personal advantage, provided that nothing herein shall prevent the Participant from disclosing information which is publicly available or which is required to be disclosed under appropriate statutes, rules or law or legal process. Furthermore, in the event that a lump sum has been paid to a participant pursuant to Section 8 or Section 10 and the provisions of this Section 14.02 have been or subsequently are violated, the participant will be required to remit payment of the lump sum to Abitibi-Consolidated Inc. or its successor.

40

In the event of doubt regarding the confidentiality of any information, the Participant must verify the confidentiality nature of the information with the Corporation.

41

Section 15 — General Provisions

15.01	Proof of Age
	Any Participant or Spouse entitled to benefits hereunder shall, upon request, furnish proof of age satisfactory to the Corporation. In the case that the age of the Participant or his Spouse is found to be inexact, the Corporation is authorized to adjust benefits accordingly.
15.02	Executive Employee Rights
	The implementation of this SERP shall not constitute an enlargement of any rights which a Participant had apart from his membership in this SERP. The benefits conferred herein shall not be used to increase damages in respect of the dismissal or termination of employment of any Participant.
15.03	Non Alienation
	Benefits payable under this SERP are not subject to:

a)	assignment, alienation, anticipation, surrender or any other form of transfer (including, but not limited to, an assignment pursuant to a domestic relations order); or
b)	execution, seizure, garnishment, attachment or any other form of attachment.

Notwithstanding the above, a Participant can waive his entitlement to benefit payments under this SERP and the Corporation may offset a Participant’s SERP benefits by the amount of any financial obligation a Participant owes to the Corporation.

15.04	Non Commutability of Benefits
	The benefits provided under this SERP shall not be capable of surrender or commutation except as provided herein.

42

15.05	Records
	Wherever the records of the Corporation are used for the purpose of this SERP, such record shall be considered conclusive of the facts with which they are concerned unless and until they are proven to be in error.
15.06	In competency
	If, in the opinion of the Corporation, any person receiving or entitled to receive a benefit under the terms of this SERP is, as a result of physical and mental infirmity, incapable of managing his affairs, the Corporation may authorize any payment to which such person is entitled to be made to a curator or administrator appointed by the Court or in the absence of any such person, payment shall be made to his Spouse, children or other person on his behalf and such payment shall be in complete discharge of the obligations of the Corporation under this SERP to make such payment.
15.07	Interpretation

a)	The provisions of this SERP shall be interpreted in accordance with the laws of the State of New York, to the extent not preempted by federal laws, and shall be binding upon and inure to the benefit of the Corporation and its successors and assigns.
b)	Headings wherever used herein are for reference purposes only and do not limit or extend the meaning of any provisions of this SERP.

15.08 Severability

Should any of the provisions of this SERP and/or its conditions be illegal or not enforceable, it or they shall be considered severable and the SERP and the remaining conditions shall remain in full force and effect and be binding upon the parties as though the said provision or provisions have never been included.

43

15.09	Currency
	All benefits payable under the SERP shall be in United States Currency.
15.10	Taxability of Benefits
	All benefits under this SERP shall be subject to applicable withholding tax and reporting pursuant to the U.S. Internal Revenue Code and any other applicable law.
15.11	Gender and Number.
	Except as otherwise indicated by the context, any masculine and feminine terminology shall include the opposite gender, and the definition of any term in the singular or plural shall include the opposite number.

44

Section 16 — Administration

16.01 The Corporation shall decide on all matters relating to the interpretation, administration and application of this SERP, consistent with the provisions of this SERP and such interpretation or performance, fairly and reasonably done, shall be final and conclusive.

45

Section 17 — Future of the Plan

17.01 Notwithstanding anything to the contrary herein, the Corporation reserves the right to amend or terminate this SERP, including the right to amend the SERP, retroactively, if necessary, to comply with applicable law including, but not limited to, compliance with Section 409A of the U. S. Internal Revenue Code. Any amendment or decision to terminate this SERP shall be communicated in writing by the Corporation to the affected Participants indicating the effective date of such amendment or termination of this SERP which shall not precede the date that such communication is given to the Participants unless a retroactive amendment is required to comply with applicable law including, but not limited to, Section 409A of the U.S. Internal Revenue Code. No such amendment shall have the effect of reducing the amount or value of benefits accrued by the Participants under this SERP prior to the effective date of such amendment.

17.02 In the event this SERP is terminated as of a given date by a decision of the Corporation as provided for under Section 17.01 and the conditions set forth in Section 17.03 are satisfied, then the following provisions shall apply:

a)	an active Participant who has reached 55 years of age shall be deemed, for the purpose of this SERP, to have retired on the date of the termination of the SERP (the “Termination Date”), and shall be entitled to supplementary retirement benefits determined in accordance with Section 5 or 6, as the case may be;
b)	an active Participant who has not yet reached age 55 shall be deemed, for the purpose of this SERP, to have terminated his employment on the Termination Date as a result of a Corporation initiated termination of employment and shall be entitled to supplementary retirement benefits determined in accordance with Section 10.05 hereof;
c)	the supplementary retirement benefits to which a Participant is entitled to or deemed to be entitled to under to Section 17.02 a) or b), as the case may be, shall be paid in an amount equal to the lump sum value of such supplementary benefits, calculated in accordance with Section 2.12 hereof;

46

d)	any other benefit to which a Participant, Spouse or beneficiary is entitled under this Plan in a lump sum payment, shall be paid;
e)	any annuity benefit to which a Participant, spouse or beneficiary is entitled under this Plan may, at the sole discretion of the Corporation, be provided by the purchase of an annuity from a commercial life insurance company.
f)	the obligations of the Participant pursuant to Section 14.01 and Section 14.02 shall be waived as of the Termination Date.

17.03 The lump sum payments described in Section 17.02(c) shall only be made if (i) either the requirements set forth in Section 17.03(a) or Section 17.03(b) are satisfied, and (ii) the conditions set forth in Section 17.03(c) are also satisfied.

a) the plan termination is made within twelve months of a corporate dissolution, taxed under U.S. Internal Revenue Code Section 331 or with the approval of a bankruptcy court pursuant to 11 U.S.C. Section 503(b)(l)(A), provided the lump sum payment amounts are included in gross income in the latest of-

(1)	the calendar year in which the plan termination occurs;
(2)	the first calendar year in which the lump sum payment is no longer subject to a substantial risk of forfeiture; or
(3)	the first calendar year in which the payment is administratively practicable.

b)	The plan termination is made within the thirty (30) days preceding or the twelve months following a Change of Control, as defined in Section 2.05.
c)	Additional Conditions

(1) The corporation also terminates all the other non-account balance plans that apply to the affected participants that are subject to U.S. Internal Revenue Code Section 409A;

47

(2)	The plan termination does not occur proximate to a downturn in the financial health of the Corporation or its successor;
(3)	The lump sum payments provided in Section 17.02 are not made until at least twelve months after all the actions required to terminate the Plan have been taken and are made within twenty-four months after such actions have been taken;
(4)	The Corporation or its successor does not establish a new non-account balance plan that is subject to U.S. Internal Revenue Code Section 409A at any time within three years after the date all actions are taken to terminate this Plan;
(5)	The Corporation satisfies any other conditions that may be prescribed by the Commissioner of the Internal Revenue in this regard that is prescribed in generally applicable guidance that is published in the Internal Revenue Bulletin.

48

Appendix A

List of Participating Subsidiaries or Associated Companies

Abitibi-Consolidated Corp. (formerly Donohue Industries Inc.)

Abitibi Consolidated Sales Corporation

Augusta Newsprint Corporation

Alabama River Pulp Company, Inc.

A-1

Appendix B

Additional Credited Service or Credited Service
for periods otherwise not covered in this SERP

Participants	Additional Credited Service	Credited Service Date
Larry Stanley	—	1/1/1984
John Weaver	5.00 years	N/A
Darryl Wharton	Earns one additional year of	N/A
	service per year beginning
	January 1, 2003 to a maximum
	of 5 additional years.
Richard Zgol	5.00 years	N/A

B-1

Appendix C

Executive Employee who held an MSBA and elected to convert his defined benefit
entitlement under the prior Abitibi-Price Inc. Registered Pension Plan to a defined
contribution entitlement on January 1, 1996

Robert Collez

C-1

     Appendix D

Formula for calculating the interest rate assumption under Section 2.12 for lump sum
benefit payments made after May 6, 2007

     The interest rate shall be the average of adjusted yields for 10-year and 30-year U.S. Treasury Bonds. The adjustments to each yield shall include:

(1)	an annualization rate;
(2)	a gross-up of five-tenths percent (0.50%);
(3)	a gross-up of the longest Treasury Bond yield of the difference between the two yields; and
(4)	a rounding of the blended yield to the nearest twenty-five one hundredths of a percent (0.25%).

     This interest rate assumption shall be calculated as of the last business day of each calendar year to be used in the immediately following calendar year.

     An example of this assumed interest rate, based on December 29, 2006 Treasury Bond interest rates, adjusted as described above to make the methodology for determining this assumed interest rate similar to the methodology used for Canadian SERP purposes, is set forth below:

	10 Years			30 Years
U.S. Treasury Bond Rates:		4.704	%		4.811	%
Annualization:		0.055	%		0.058	%
		4.759	%		4.869	%
First Gross Up*		0.500	%		0.500	%
		5.259	%		5.369	%
Second Gross Up*		0.000	%		0.055	%
		5.259	%		5.424	%

Average	5.289	%**
Rounded	5.250	%

*	The two gross up adjustments are intended to make the methodology for determining this assumed interest rate similar to the methodology used for Canadian SERP purposes.
**	The average interest rate is a weighted average of the resulting adjusted rates with gross up. The weighting is determined so the weighted modified duration of the pre-adjusted Treasury yields results in a modified duration similar to the weighted modified duration of the underlying Canadian yields used for Canadian SERP purposes.

D-1

EX-10.28

EXHIBIT 10.28

CANADIAN SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN (SERP)
FOR EXECUTIVE EMPLOYEES
OF ABITIBI-CONSOLIDATED INC.

(Effective as at January 1, 1999)

CERTIFIED to be a true and complete copy of the text of the Canadian Supplemental Executive Retirement Plan (SERP) for Executive Employees of Abitibi-Consolidated Inc.

/s/ [ILLEGIBLE] Signature	December 15, 2003 Date
/s/ [ILLEGIBLE] Signature	December 15, 2003 Date

October 2003

Table of Contents

Section 1	-	Purpose	1
Section 2	-	Definitions	2
Section 3	-	Eligibility	8
Section 4	-	Contributions	10
Section 5	-	Normal Retirement and Postponed Retirement Benefits	11
Section 6	-	Early Retirement Benefits	12
Section 7	-	Disability	14
Section 8	-	Form of Pension	15
Section 9	-	Death Prior to Retirement	17
Section 10	-	Termination of Employment	19
Section 11	-	Increase in Benefits	22
Section 12	-	Commutation of Benefits	23
Section 13	-	Service Outside Canada	24
Section 14	-	Conditions for Payment	25
Section 15	-	General Provisions	26
Section 16	-	Administration	29
Section 17	-	Future of the Plan	30
Appendix A		Additional Service
Appendix B		Executive Employee who held an MSBA and elected to convert his defined benefit entitlement under the prior Abitibi-Price Inc. Registered Pension Plan to a defined contribution entitlement on January 1, 1996

Section 1 — Purpose

1.01	The purpose of this Canadian Supplemental Executive Retirement Plan (hereinafter the “SERP”) is to provide special retirement benefits to Executive Employees eligible to become a participant thereunder, in accordance with the terms and provisions of this document. Such special retirement benefits are in addition to those payable from any Registered Pension Plan of Abitibi-Consolidated Inc. (the “Corporation”).
1.02	This SERP is effective as of January 1, 1999 and as of such date replaces and cancels the application of the individual supplementary retirement benefits agreement known as MSBA in the case of an Executive Employee who was a former Abitibi-Price Inc. employee and of the Stone-Consolidated Corporation Senior Management Retirement Plan (SMRP) in the case of an Executive Employee who was a former Stone- Consolidated Corporation employee. For greater certainty, this SERP shall not apply to or otherwise modify supplemental retirement benefits payable or the terms and conditions for payment of such benefits to any former Executive Employee who has retired from or otherwise terminated his employment with the Corporation or its predecessors or their affiliates prior to the effective date of the SERP, nor will it apply to an Executive Employee who, in accordance with Section 3 hereof, has elected not to participate in this SERP.
1.03	The provisions of this SERP are effective as of January 1, 1999, unless stated otherwise herein.

-1-

Section 2 — Definitions

In this SERP, the following words and phrases shall have the following meaning, respectively, unless a different meaning is specifically required by the context:

2.01

“Actuarial Equivalent Value” shall mean a value deemed to be equal to another value, as determined on a basis of the SERP provisions in effect on the date such determination is being made. The Actuarial Equivalent Value of a benefit of a Participant under this SERP shall be determined in the same manner and using the same assumptions as those used or that would be used for purposes of calculating the commuted value of termination of employment benefits under the Registered Pension Plan under which the Participant is entitled to receive benefits following his termination of employment or retirement from the Corporation.

For greater certainty, in determining the Actuarial Equivalent Value of a benefit, account shall not be taken of the income tax consequences that would arise to the recipient of the benefit.

2.02	“Additional Voluntary Contribution” shall mean a contribution, other than a required contribution, which may be made by a Participant under a Registered Pension Plan of the Corporation.
2.03	“Average Pensionable Earnings” shall mean, in respect of a Participant, the sum of:

a)

the average of the Participant’s monthly base salary during the sixty (60) consecutive months within the one hundred and twenty (120) months of continuous employment immediately preceding his retirement or his termination of employment during which such base salary was the highest, multiplied by twelve (12); plus

b)

the average of the Participant’s annual bonus earned in the five (5) years, whether consecutive or not, within the ten (10) years of continuous employment immediately preceding his retirement, disability or his termination of employment, during which such annual bonus was the highest. For greater certainty, the term “bonus” shall refer to an award paid under the Corporation’s annual incentive plan as may be adopted from time to time and shall exclude any

-2-

special bonus not paid under an annual incentive plan, any amount payable under any long-term incentive plan of the Corporation, or any stock option benefit.

2.04 “Basic Pension” shall mean the lifetime annual pension which the Participant would otherwise be entitled to receive from time to time pursuant to the Registered Pension Plan in regards to the period of Credited Service recognized for purposes of this SERP or that would be so recognized for purposes of this SERP in absence of the 35 year limit on Credited Service as per Section 2.07, but limited to the period of Credited Service actually recognized in the Registered Pension Plan. It shall be assumed that such annual pension is payable from the same date as supplementary benefits commence to be paid under this SERP and is calculated on the basis of the following assumptions:

a) where the Registered Pension Plan is a defined benefit pension plan:

i)	the annual pension is in the form of a pension payable under the normal form provided for under the Registered Pension Plan, or if the Participant elects an optional form in accordance with Section 8.03, the annual pension payable under such optional form;
ii)	the Participant has made no Additional Voluntary Contribution; and
iii)	the amount of the Basic Pension shall be determined according to the formula under the Registered Pension Plan regardless of any reduction in benefits that may be applied, by operation of statute or otherwise, as a result of the funded status of such Registered Pension Plan on the date of such determination (it being understood that, where the Registered Pension Plan is a defined benefit pension plan, the foregoing assumption shall also be applicable to the determination of the amount of survivor pension payable to the Spouse under the Registered Pension Plan following the death of the Participant (or any survivor pension that would have been payable had the benefits under the Registered Pension Plan not been commuted) as referred to in Section 8.01 b), and any amount payable under the Registered Pension Plan to the Participant’s estate or any designated beneficiary following the death of the Participant (or any amount that would have been payable had the benefits under the Registered Pension Plan not been commuted) as referred to in Section 8.02 b)); and

-3-

b)	where the Registered Pension Plan is a defined contribution pension plan, and subject to paragraph c) of this Section 2.04, an annual pension which is the Actuarial Equivalent, based on the assumptions and the normal form of pension referred to in paragraph a) of this Section 2.04, of the amount accumulated by the Participant under the Registered Pension Plan, excluding his Additional Voluntary Contributions, as of the date of his retirement, death or termination of employment with the Corporation (for greater certainty, the normal form shall be a lifetime joint and 60% survivor pension for a Participant with a Spouse and the normal form shall be a lifetime pension with a guarantee of a minimum of 120 monthly payments for a Participant without a Spouse); and
c)	in the case of an Executive Employee who is a former Abitibi-Price Inc. employee who held a MSBA and who elected to convert his defined benefit entitlement under Abitibi-Price Inc.’s Registered Pension Plan to a defined contribution entitlement, a list of such Executive Employees being attached hereto as Appendix B, the Basic Pension in respect of such Participant shall be determined as if the Participant had elected not to convert his defined benefit entitlement under Abitibi-Price Inc.’s Registered Pension Plan and such defined benefit entitlement has been determined in accordance with the provisions in effect on January 1, 1996 of the Abitibi-Price Inc.’s Registered Pension Plan and in accordance with the assumptions and the form of pension described in paragraph a) of this Section 2.04; and
d)	in all cases, where a Participant’s entitlement under the Registered Pension Plan has been divided between the Participant and his Spouse or former Spouse as a result of divorce, separation or annulment of marriage, his Basic Pension shall be determined as if no such division of his entitlement had occurred.

2.05 “Continuous Service” shall mean a Participant’s uninterrupted period of employment, with the Corporation or with a predecessor company, deemed to have commenced on the first day of the month coinciding with or immediately following the Participant’s hiring date by the Corporation, or deemed to have commenced on the Participant’s hiring date by such predecessor company, as the case may be; for such purpose a predecessor company shall mean Donohue Inc. or any other company considered to be a predecessor company for such purpose. The continuous service of a Participant shall not be

-4-

interrupted as a result of any absence due to disability, or due to temporary absence other than as a result of disability, which was approved by the Corporation.

For Participants hired on or after January 1, 2002, Continuous Service shall mean a Participant’s uninterrupted period of employment with the Corporation deemed to have commenced on the Participant’s hiring date.

Continuous Service shall be measured in years with proportional allowance for non-completed years.

2.06	“Corporation” shall mean Abitibi-Consolidated Inc. and its affiliated companies, or any subsidiary of the Corporation or associated company, provided however, that any reference in this SERP to action to be taken, consent, approval or opinion to be given, decision to be made or discretion to be exercised by the Corporation shall refer to Abitibi-Consolidated Inc., acting through its Board of Directors or any person or persons authorized to act on behalf of the Corporation for the purposes of this SERP, in accordance with the normal practices of the Corporation.
2.07	“Credited Service” shall mean the Participant’s period of Continuous Service with the Corporation, following the Participant’s hiring date by the Corporation. For greater certainty, Credited Service shall not include any period of service recognized as credited service under any other unregistered pension plan sponsored by the Corporation other than this SERP.
	Subject to the approval of the Human Resources and Compensation Committee of the Board of Directors of the Corporation, the Corporation may also recognize, for newly hired Executive Employees or any short service Executive Employees, additional service up to a maximum of five (5) years for purposes of calculating the Participant’s Continuous and Credited Service, such additional service being as described in Appendix A hereto, as updated from time to time. Effective from August 23, 2000, such additional service shall be vested with the Participant on a basis established by the Corporation.
	Subject to the approval of the Human Resources and Compensation Committee of the Board of Directors of the Corporation, the Corporation may also recognize for Executive Employees who were previously employed by Donohue Inc., additional service as

-5-

described in Appendix A hereto, such additional service to be vested only on the dates specified in Appendix A.

Credited Service shall be measured in years with proportional allowance for non-completed years. Total years of Credited Service under this SERP and under all other unregistered pension plans sponsored by the Corporation other than this SERP, shall not exceed 35.

2.08	“Early Retirement Date” shall mean the first day of the month immediately following the date on which the Participant elects to retire early in accordance with Section 6 hereof, provided he is then at least 55 years of age.
2.09	“Effective Date” shall mean January 1, 1999.
2.10	“Executive Employee” shall mean an executive employee considered as such by the Corporation and who is eligible for participation in this SERP in accordance with Section 3.
2.11	“Normal Retirement Date” shall mean the first day of the month coinciding with or next following the month in which the Participant attains the age of 65 years.
2.12	“Participant” shall mean an Executive Employee who is eligible to participate in this SERP in accordance with Section 3 herein.
2.13	“Registered Pension Plan” means any one or more pension plans sponsored by the Corporation from time to time and registered with Canada Customs and Revenue Agency. When used in respect of a Participant, this expression shall refer to the one or more Registered Pension Plans under which such Participant is entitled to receive benefits following his termination of employment, death or retirement from the Corporation with regards to the period of Credited Service which is recognized for purposes of this SERP.
2.14	“SERP” shall mean the Canadian Supplemental Executive Retirement Plan for Executive Employees of Abitibi-Consolidated Inc., as described in this document and as may be amended from time to time.

-6-

2.15	“Spouse” shall mean the person who satisfies the definition of spouse as defined under the Registered Pension Plan of which the Participant is a member at the time the spousal status needs to be determined, or would have been a member had his benefits not been commuted.
	Spousal status shall be determined on the day preceding the date of death of the Participant or on the day when the Participant commences receiving his supplementary retirement allowance, whichever occurs first.

For the purpose of this SERP, unless the context indicates otherwise, references to the masculine include the feminine and vice versa and references to the singular include the plural and vice versa.

-7-

Section 3 — Eligibility

3.01 An Executive Employee who is in the service of the Corporation on the Effective Date shall be eligible to become a Participant of this SERP as of the Effective Date subject to the following conditions:

a)	An Executive Employee who was a former Abitibi-Price Inc. employee and who was party to an individual agreement (known as an “MSBA”) providing for supplementary retirement benefits may elect to become a Participant under this SERP as of the Effective Date. Upon such election, he shall cease to accrue benefits under such individual agreement and shall no longer be entitled to any benefits thereunder. If he elects not to participate in this SERP, he shall forever forfeit his entitlement to participate hereunder and will continue to accrue and be entitled to supplementary pension benefits in accordance with the terms and provisions of his individual agreement.
b)	An Executive Employee who is a former Stone-Consolidated Corporation employee and who participated in the Stone-Consolidated Corporation Senior Management Retirement Plan may elect to become a Participant under this SERP as of the Effective Date. Upon such election, he shall cease to accrue benefits under the Stone-Consolidated Senior Management Retirement Plan and shall no longer be entitled to benefits thereunder and shall become a Participant in this SERP as of the Effective Date. If he elects not to become a Participant in this SERP, he will forever forfeit his entitlement to participate hereunder and will continue to accrue and be entitled to supplementary pension benefits in accordance with the terms and provisions of the Stone-Consolidated Corporation Senior Management Retirement Plan.
c)	In the case of an Executive Employee who was in the service of the Corporation as of the Effective Date but was not party to an individual agreement with Abitibi-Price Inc. providing for supplementary pensions or was not a member of the Stone-Consolidated Corporation Senior Management Retirement Plan, or in the case of an employee of the Corporation who becomes classified as an Executive Employee after the Effective Date, such Executive Employee shall become eligible to participate under this SERP upon:

-8-

i)	completion of at least two years in an eligible position of the Corporation and demonstration of superior performance; and
ii)	designation in writing by the Chief Executive Officer of the Corporation.

Participation shall commence as of the date determined in such designation. At the discretion of the Chief Executive Officer of the Corporation, the two year requirement in part i) above may be waived.

d) Executive Employees who are employed for a temporary period to complete functions relating to the merger of Abitibi-Price Inc. and Stone-Consolidated Corporation shall not be eligible to participate in this SERP unless provided otherwise in their Severance Compensation Agreement with the Corporation.

3.02	The election referred to in Section 3.01 a) or 3.01 b) above shall be made at such time and in such form as determined by the Corporation.
3.03	An Executive Employee who has become a Participant under this SERP in accordance with this Section 3 shall remain a Participant as long as he continues to be entitled to receive benefits hereunder.
3.04	In the event that a Participant remains an employee of the Corporation but ceases to be classified as an Executive Employee, and unless he is otherwise designated by the Corporation as eligible to continue to accrue Credited Service under this SERP, the benefits otherwise payable to or in respect of such Participant under this SERP shall be payable as of the Participant’s retirement date, date of death or date of termination of employment, as the case may be, but shall be based on such Participant’s Credited Service and Average Pensionable Earnings up to the date as of which he ceases to be classified as an Executive Employee or as of such later date specified by the Corporation.

-9-

Section 4 — Contributions

4.01	No contribution shall be required from a Participant in respect of benefits payable under this SERP.
4.02	The Corporation shall pay the full cost of the benefits provided under the SERP.
4.03	For all SERP Participants, except for those who will have elected in writing to be excluded for taxation purposes, the payment of benefits provided under the SERP shall be secured in whole or in part, in accordance with the Corporation’s policy. Such security shall be provided either through contributions paid to a trust fund to be established for the purpose of this SERP and/or through the depositing into such trust fund of a letter of credit issued by a financial institution.

-10-

Section 5 — Normal Retirement and Postponed Retirement Benefits

5.01 A Participant who retires on his Normal Retirement Date shall be entitled to receive an annual supplementary retirement allowance payable in equal monthly installments and commencing on his Normal Retirement Date in an amount equal to the excess, if any, of
a) over b) below:

a)	2% of his Average Pensionable Earnings multiplied by his number of years of Credited Service;
b)	his Basic Pension from the Registered Pension Plan, or where such Basic Pension has been commuted, the Basic Pension he would have received if such commutation had not taken place.

5.02 In the event a Participant remains in the employ of the Corporation after his Normal Retirement Date, he shall be entitled to receive an annual supplementary retirement allowance, payable in equal monthly installments and commencing on the first day of the month following his actual retirement date, equal to the amount determined in accordance with Section 5.01, and based on his Credited Service and Average Pensionable Earnings as of his Normal Retirement Date, and his Basic Pension as of his actual retirement date.

-11-

Section 6 — Early Retirement Benefits

6.01	A Participant may retire prior to his Normal Retirement Date provided he is then at least 55 years of age and has completed at least 2 years of Continuous or Credited Service. For the purpose of this SERF, his Early Retirement Date shall be the first day of the month coinciding with or next following the date on which such Participant so retires.
6.02	Where the Participant is at least 58 years of age and the sum of his age and years of Continuous or Credited Service totals at least 80, such Participant shall be entitled to an annual supplementary retirement allowance, payable in equal monthly installments, determined in accordance with Section 5.01 and commencing on his Early Retirement Date.
6.03	A Participant other than a Participant referred to in Section 6.02 who retires early in accordance with Section 6.01 shall be entitled to receive an annual supplementary retirement allowance, payable in equal monthly installments, and commencing on his Early Retirement Date in an amount equal to the excess, if any, of a) over b) below:

a) 2% of his Average Pensionable Earnings multiplied by his number of years of Credited Service, such amount to be reduced by 0.5% multiplied by the number of months that his Early Retirement Date precedes:

i)	where the Participant has completed at least 20 years of Continuous or Credited Service, the date at which the Participant would first have qualified for an unreduced supplementary retirement allowance in accordance with Section 6.02 hereof had he continued in the plan;
ii)	where the Participant has not completed 20 years of Continuous or Credited Service, age 65.

b) his Basic Pension from the Registered Pension Plan, or where such Basic Pension has been commuted, the Basic Pension he would have received if such commutation had not taken place.

-12-

6.04 Where in addition to his Basic Pension, the Participant is entitled to receive a bridging benefit under the Registered Pension Plan, the amount of his annual supplementary retirement allowance shall be further reduced by the annual amount of such bridging benefit during the period for which such bridging benefit continues to be paid.

-13-

Section 7 — Disability

7.01

During a period of disability entitling the Participant to receive disability benefits under the short-term or long-term disability plan maintained by the Corporation from time to time, such Participant shall continue to accrue Credited Service for the purpose of this SERP. During such period, the Participant shall be deemed to receive a salary equal to the annual rate of base salary he was receiving immediately prior to his becoming disabled.

7.02

If the Participant, for any reason, ceases to be eligible to receive benefits under the short-term or long-term disability plan maintained by the Corporation prior to his Normal Retirement Date and within such period as determined by the Corporation:

a)

the Participant returns to active employment with the Corporation, then at the date of his subsequent termination, death or retirement, he shall be entitled to supplementary retirement benefits calculated in accordance with the provisions of this SERP, taking into account the provisions of Section 7.01 above, or

b)

the Participant does not return to active employment with the Corporation then, he will be deemed to have terminated his employment or retired for the purposes of this SERP as of the day he ceases to be eligible to receive benefits from the disability plans maintained by the Corporation and his supplementary retirement benefits shall be calculated based on the provisions of this SERP, taking into account the provisions of Section 7.01 above.

7.03	A Participant whose period of disability continues until his Normal Retirement Date shall be deemed to have retired on his Normal Retirement Date for the purpose of this SERP.
7.04	In the event of the death of a Participant who is accumulating Credited Service while in receipt of disability benefits as provided in Section 7.01 hereof, the benefits payable under this SERP shall be determined in accordance with the terms of Section 9 hereof as if he died while in service of the Corporation.

-14-

Section 8 — Form of Pension

8.01 The annual supplementary retirement allowance payable to a Participant under this SERP shall be paid during the lifetime of the Participant. Following the death of the Participant while in receipt of such supplementary retirement allowance, the Participant’s Spouse shall be entitled to receive during his or her lifetime an annual supplementary survivor allowance, payable in equal monthly installments, and commencing on the first day of the month following the month in which the Participant dies, equal to the excess of a) over b) below:

a)

50% of the annual supplementary retirement allowance that would have been payable to the Participant under this SERP at the time of his death, if such supplementary allowance had not been reduced by the Participant’s Basic Pension;

b)

any survivor pension payable to the Spouse under the Registered Pension Plan following the death of the Participant, or any survivor pension that would have been payable had the benefits under the Registered Pension Plan not been commuted. Where the Registered Pension Plan is a defined contribution pension plan, and subject to paragraph c) of Section 2.04, the survivor pension payable to the Spouse shall be equal to 60% of the Participant’s Basic Pension as defined in Section 2.04.

8.02 If the Participant does not have a Spouse and the Participant dies before 120 monthly payments of the supplementary retirement allowance have been paid to him, his estate shall receive a lump sum which is the Actuarial Equivalent of the excess of a) over b) below:

a) the balance of the 120 monthly payments of the supplementary retirement allowance that would have been payable to the Participant under this SERP at the time of his death if such supplementary allowance had not been reduced by the Participant’s Basic Pension;

-15-

b) any amount payable under the Registered Pension Plan to his estate or any designated beneficiary following the death of the Participant, or any amount that would have been payable had the benefits under the Registered Pension Plan not been commuted. Where the Registered Pension Plan is a defined contribution pension plan, and subject to paragraph c) of Section 2.04, the amount that would have been payable to his estate or any designated beneficiary following the death of the Participant, had the Participant elected to receive his Basic Pension as defined in Section 2.04 as a life annuity with 120 payments guaranteed.

8.03 Optional Form of Pension

Instead of receiving his supplementary retirement allowance in accordance with the normal form of payment described in Sections 8.01 and 8.02, a Participant may elect to receive his supplementary retirement allowance payable under this SERP under one of the optional forms determined by the Corporation as eligible for the purpose of this SERP. In such a case, the Participant must elect the same optional form for purpose of his benefits under the Registered Pension Plans. However, in the case where the Registered Pension Plan is a defined contribution pension plan, and subject to paragraph c) of Section 2.04, the Participant will be deemed to have elected the same form of payment that is elected for purposes of this SERP.

If the Participant elects an optional form of pension, then the amount of his annual supplementary retirement allowance, prior to applying the offset for his Basic Pension, shall be adjusted on an Actuarial Equivalent Value basis.

-16-

Section 9 — Death Prior to Retirement

9.01 Death after age 55 but prior to retirement

a)	In the event that a Participant dies while in the service of the Corporation after having reached age 55 and having completed at least 2 years of Continuous or Credited Service, his Spouse shall be entitled to receive an annual supplementary survivor allowance determined in accordance with Section 8.01 hereof as if the Participant had retired immediately prior to the date of his death and had not elected an optional form of pension in accordance with Section 8.03. However, with respect to Section 8.01 b), where the survivor benefit under the Registered Pension Plan is payable in a lump sum, the survivor pension payable to the Spouse shall be equal to the pension that could be provided by such lump sum, calculated on an Actuarial Equivalent Value basis over the survivor’s lifetime.
b)	In the event of there being no Spouse at the time of death of a Participant referred to in paragraph a) of this Section 9.01, his estate shall receive a lump sum equal to the lump sum that would otherwise have been payable under this SERF to the Participant’s estate as would be determined under Section 8.02 if the Participant had retired immediately prior to the date of his death. However, with respect to Section 8.02 b), where the benefit payable to the estate or designated beneficiary under the Registered Pension Plan is payable in a lump sum, any amount payable to the estate or designated beneficiary shall be equal to such lump sum.
c)	In the event that a Participant who has terminated his employment and who is entitled to a deferred annual supplementary retirement allowance in accordance with Section 10.01 or Section 10.02 dies after having reached age 55 and prior to payment commencement, his Spouse shall be entitled to receive an annual supplementary survivor allowance determined in accordance with Section 8.01 hereof as if the Participant had requested payment commencement of his deferred annual supplementary retirement allowance on the first day of the calendar month immediately preceding or coinciding with his date of death.
	In the event of there being no Spouse at the time of death, his estate shall receive a lump sum equal to the lump sum that would otherwise have been payable under the SERP to the Participant’s estate as would be determined under Section 8.02 if

-17-

the Participant had requested payment commencement of his deferred annual supplementary retirement allowance on the first day of the calendar month immediately preceding or coinciding with his date of death.

9.02 Death before age 55

a)

In the event that a Participant dies while in service of the Corporation prior to having reached age 55 but after having completed at least 2 years of Continuous or Credited Service, his Spouse or, in the absence of a Spouse his estate, shall receive a lump sum payment which is the Actuarial Equivalent of the deferred supplementary retirement allowance that would otherwise have been payable under the SERP to the Participant as would be determined under Section 10.01 if the Participant had voluntarily terminated his employment with the Corporation.

b)

In the event that a Participant who has terminated his employment and who is entitled to a deferred annual supplementary allowance in accordance with Section 10.01 or Section 10.02 dies prior to having reached age 55, his Spouse or, in absence of a Spouse, his estate shall receive a lump sum payment which is the Actuarial Equivalent of the deferred supplementary retirement allowance.

9.03 No benefit shall be payable under this SERP following the death of a Participant prior to having reached age 55 if he has not completed at least 2 years of Continuous or Credited Service.

-18-

Section 10 — Termination of Employment

10.01 Voluntary termination after 2 years of Continuous or Credited Service

A Participant who terminates his service with the Corporation on a voluntary basis prior to his 55^th birthday and provided he has then completed at least 2 years of Continuous or Credited Service shall be entitled to receive a deferred annual supplementary retirement allowance the amount of which shall be determined as provided hereunder.

The Participant may request that payment commencement of his deferred annual supplementary retirement allowance start on the first day of any calendar month during the period between his attainment of age 55 and his Normal Retirement Date. The amount of the deferred annual supplementary retirement allowance payable, shall be established based on the payment commencement date as follows:

a) if the payment commencement date is the Participant’s Normal Retirement Date :

i)	2 % of his Average Pensionable Earnings multiplied by his number of years of Credited Service; less
ii)	his Basic Pension from the Registered Pension Plan, or where such Basic Pension has been commuted, the Basic Pension he would have received if such commutation had not taken place.

b) If the payment commencement date is prior to the Participant’s Normal Retirement Date:

i)	2 % of his Average Pensionable Earnings multiplied by his number of years of Credited Service, such amount to be reduced by 0.5 % multiplied by the number of months the payment commencement date precedes the Participant’s Normal Retirement Date; less
ii)	his Basic Pension from the Registered Pension Plan, or where such Basic Pension has been commuted, the Basic Pension he would have received if such commutation had not taken place.

-19-

The deferred annual supplementary allowance shall be paid in the same form and in the same manner as the supplementary retirement allowance that would have been payable if the Participant had retired on his Normal Retirement Date.

10.02	Involuntary termination after 2 years of Continuous or Credited Service
	A Participant who, prior to his 55th birthday and provided he has then completed at least 2 years of Continuous or Credited Service, ceases to be employed by the Corporation as a result of the termination of his employment initiated by the Corporation for any reason other than for cause, shall be entitled to receive a deferred annual supplementary retirement allowance the amount of which shall be determined as provided hereunder.
	The Participant may request that payment commencement of his deferred annual supplementary retirement allowance start the first day of any calendar month during the period between his attainment of age 55 and his Unreduced Early Retirement Date. For such purpose, the Participant’s Unreduced Early Retirement Date shall correspond to the earliest date he could have been entitled to an unreduced supplementary early retirement allowance as provided in Section 6.02, established as if his termination of employment had not occurred.
	The amount of the deferred annual supplementary retirement allowance payable, shall be established based on the payment commencement date as follows:

a) if the payment commencement date is the Participant’s Unreduced Early Retirement Date:

i)	2 % of his Average Pensionable Earnings multiplied by his number of years of Credited Service; less
ii)	his Basic Pension from the Registered Pension Plan, or where such Basic Pension has been commuted, the Basic Pension he would have received if such commutation had not taken place.

b) If the payment commencement date is prior to the Participant’s Unreduced Early Retirement Date:

i) 2 % of his Average Pensionable Earnings multiplied by his number of years of Credited Service, such amount to be reduced by 0.5 % multiplied

-20-

	by the number of months the payment commencement date precedes the Participant’s Unreduced Early Retirement Date; less
ii)	his Basic Pension from the Registered Pension Plan, or where such Basic Pension has been commuted, the Basic Pension he would have received if such commutation had not taken place.

The deferred annual supplementary allowance shall be paid in the same form and in the same manner as the supplementary retirement allowance that would have been payable if the Participant had retired on his Normal Retirement Date.

10.03 No benefit shall be payable under this SERP to a Participant who ceases to be in the employ of the Corporation prior to his 55^th birthday:

a)	as a result of the termination of his employment by the Corporation for cause, or
b)	as a result of the termination of his employment for any reason prior to having completed at least 2 years of Continuous or Credited Service.

-21-

Section 11 — Increase in Benefits

11.01	Any ad hoc increases in the pension payments made under the Registered Pension Plan to a retired Participant, or in the case of his death, to his surviving Spouse, will not have the effect of reducing benefits otherwise payable under this SERP.
11.02	Any automatic annual increases in the pension payments made under the Registered Pension Plan, or deemed to have been made if the benefits have been commuted, to a retired Participant, or in the case of his death, to his surviving Spouse, will have the effect of reducing benefits otherwise payable under this SERP.
11.03	Effective July 1, 2001, monthly supplementary retirement allowances paid under this SERP, shall be increased by a percentage as per the following table:

Year of Retirement	Percentage Increase
1999	1.4%
2000	1.4% divided by 12 and multiplied by the number of months between the date of retirement and December 31, 2000

-22-

Section 12 — Commutation of Benefits

12.01

Any supplementary retirement allowance or deferred supplementary retirement allowance payable under this SERP in the form of monthly payments may, at the discretion of the Corporation and subject to the approval of the Participant or, following his death, of his Spouse, may be paid in a lump sum calculated in accordance with the Corporation’s policy.

12.02

Any commutation of benefits otherwise payable under this SERP shall, unless it is decided otherwise by the Corporation at its entire discretion, not be permitted during the first 2 years following the Participant’s retirement or termination of employment. Furthermore, the Corporation may require that the Participant or other beneficiary of a benefit under this SERP submit satisfactory evidence of good health before any such benefit is commuted.

-23-

Section 13 — Service Outside Canada

13.01 In the event that a Participant’s employment includes periods of service with the Corporation in Canada (hereinafter called “Canadian Service”) and periods of service in another country with any affiliated company, any subsidiary or associated company of the Corporation (hereinafter called “Non Canadian Service”), for the determination of the Participant’s supplementary benefits hereunder, the following provisions shall apply:

a)	the Participant’s Credited Service shall include his periods of Non Canadian Service during which he continued to accrue credited service under the Registered Pension Plan plus any other period of Non Canadian Service as approved by the Corporation;
b)	for purposes of calculating the Participant’s Average Pensionable Earnings, the Participant’s base salary and annual bonus for his Non Canadian Service shall be established in accordance with the administrative policies and practices of the Corporation.

-24-

Section 14 — Conditions for Payment

14.01 Notwithstanding anything herein contained to the contrary, no amount of benefit shall be payable or continued to be paid pursuant to this SERP in the event that during his employment with the Corporation or during a period of 2 years following his termination of employment or retirement, the Participant, directly or indirectly, without the consent of the Corporation:

i)

engages in or becomes interested as a principal, agent, officer, employee, manager, advisor, financial backer, shareholder (except as a passive investor in a public corporation) or in any other capacity whatsoever in a business which may be fairly regarded as being in competition with the business of the Corporation; or

ii)

assists financially or in any manner whatsoever any person, firm, association or corporation, whether as principal, agent, officer, employee, manager, advisor, financial backer, shareholder (except as a passive investor in a public corporation) or in any capacity whatsoever to enter into, develop, carry on or maintain a business, which may fairly be regarded as being in competition with the business of the Corporation.

14.02

Furthermore, notwithstanding anything herein contained to the contrary, no amount of benefit shall be payable or continued to be paid pursuant to this SERP in the event that during his employment with the Corporation or at any time thereafter, the Participant fails to keep confidential any information of a confidential or proprietary nature concerning the Corporation, its subsidiaries and affiliates and their respective operations, assets, finances, business and affairs or uses such information for personal advantage, provided that nothing herein shall prevent the Participant from disclosing information which is publicly available or which is required to be disclosed under appropriate statutes, rules or law or legal process.

In the event of doubt regarding the confidentiality of any information, the Participant must verify the confidentiality nature of the information with the Corporation.

-25-

Section 15 — General Provisions

15.01	Proof of Age
	Any Participant or Spouse entitled to benefits hereunder shall, upon request, furnish proof of age satisfactory to the Corporation. In the case that the age of the Participant or his Spouse is found to be inexact, the Corporation is authorized to adjust benefits accordingly.
15.02	Executive Employee Rights
	The implementation of this SERP shall not constitute an enlargement of any rights which a Participant had apart from his membership in this SERP. The benefits conferred herein shall not be used to increase damages in respect of the dismissal or termination of employment of any Participant.
15.03	Non Alienation
	Subject to any applicable legal requirement, all benefits payable under the terms of this SERP are for the Participant’s own use and are subject to the following restriction:

i) any transaction that purports to assign, charge, anticipate, surrender or give as security any right of a person under this SERP or benefit payable under this SERP shall not be enforceable against this SERP.

Notwithstanding the above paragraph, a Participant can waive his entitlement under this SERP.

15.04	Non Commutability of Benefits
	The benefits provided under this SERP shall not be capable of surrender or commutation except as provided herein.

-26-

15.05	Records
	Wherever the records of the Corporation are used for the purpose of this SERP, such record shall be considered conclusive of the facts with which they are concerned unless and until they are proven to be in error.
15.06	Incompetency
	If, in the opinion of the Corporation, any person receiving or entitled to receive a benefit under the terms of this SERP is, as a result of physical and mental infirmity, incapable of managing his affairs, the Corporation may authorize any payment to which such person is entitled to be made to a curator or administrator appointed by the Court or in the absence of any such person, payment shall be made to his Spouse, children or other person on his behalf and such payment shall be in complete discharge of the obligations of the Corporation under this SERP to make such payment.
15.07	Interpretation

a)	The provisions of this SERP shall be interpreted in accordance with the laws of the Province of Québec and shall be binding upon and enure to the benefit of the Corporation and its successors and assigns.
b)	Headings wherever used herein are for reference purposes only and do not limit or extend the meaning of any provisions of this SERP.

15.08	Severability
	Should any of the provisions of this SERP and/or its conditions be illegal or not enforceable, it or they shall be considered severable and the SERP and the remaining conditions shall remain in full force and effect and be binding upon the parties as thought the said provision or provisions have never been included.
15.09	Currency
	All benefits payable under the SERP shall be in Canadian Currency.

-27-

15.10	Taxability of Benefits
	All benefits under this SERP are expressed on a pre-tax basis and shall be subject to applicable withholding tax and reporting pursuant to the Income Tax Act (Canada) and any other applicable law.

-28-

Section 16 — Administration

16.01 The Corporation shall decide on all matters relating to the interpretation, administration and application of this SERP, consistently with the provisions of this SERP and such interpretation or performance, fairly and reasonably done, shall be final and conclusive.

-29-

Section 17 — Future of the Plan

17.1

Notwithstanding anything to the contrary herein, the Corporation reserves the right to amend or terminate this SERP. Any amendment or decision to terminate this SERP shall be communicated in writing by the Corporation to the affected Participants indicating the effective date of such amendment or termination of this SERP which shall not precede the date that such communication is given to the Participants. No such amendment shall have the effect of reducing the amount or value of benefits accrued by the Participants under this SERP prior to the date of such amendment.

17.2

In the event this SERP is terminated as of a given date by a decision of the Corporation as provided for under Section 17.01, or otherwise, the following provisions shall apply:

a)	an active Participant who has reached 55 years of age shall be deemed, for the purpose of this SERP, to have retired on the date of termination of the SERP (the “Termination Date”), and shall be entitled to supplementary retirement benefits determined in accordance with Section 5 or 6, as the case may be;
b)	an active Participant who has not yet reached age 55 shall be deemed, for the purpose of this SERP, to have terminated his employment on the Termination Date as a result of a Corporation initiated termination of employment and shall be entitled to supplementary retirement benefits determined in accordance with Section 10.02 hereof;
c)	the supplementary retirement benefits to which a Participant is entitled to, or deemed to be entitled to under Section 17.02 a) or b), as the case may be, shall be paid in a lump sum amount equal to the Actuarial Equivalent Value of such supplementary benefits; and
d)	the obligations of the Participant pursuant to Section 14.01 and Section 14.02 shall be waived as of the Termination Date.

-30-

Appendix A

Additional Service

	Additional Years of Service				Vesting date
Participants	Continuous Service		Credited Service
Louis-Marie Bouchard		5.00		5.00	December 4, 2005 (1)
Viateur Camiré		—		5.03	April 18,2002
Luc Caron		—		13.03	July 1st, 2002
Dave Chown		—		1.33	Fully vested
Gilbert Demers		—		14.21	July 1st, 2002
Christian Gélinas		—		4.97	July 1st, 2002
Mike Innes		—		3.083	Fully vested
Denis Jean		5.00		5.00	December 4, 2005 (1)
Yves Laflamme		—		17.10	July 1st, 2002
Pierre Levasseur		—		1.92	July 1st, 2002
Gordon Oldford		5.00		5.00	Fully vested
Jocelyn Pépin		5.00		5.00	January 1, 2011(1)(3)
Daniel Perkins		5.00		5.00	Fully vested
André Piché		—		9.70	July 1st, 2002
Roger Quesnel		—		14.49	July 1st, 2002
Luc Ranger		5.00		5.00	January 1,2011(1)(3)
Pierre Rougeau		5.00		5.00	September 4, 2009(1)(2)

(l)	Gradual Vesting of one year for each year of employment. Vesting date represents date from which additional years of service will be fully vested.
(2)	For purposes of gradual vesting, years of employment are only counted from September 4, 2004 and onward.
(3)	For purposes of gradual vesting, years of employment are only counted from January 1, 2006 and onward.

Extract from the Canadian Supplemental Executive Retirement Plan (SERP) for Executive Employees of Abitibi-Consolidated Inc.

Approved by:

Date:

-A-1-

Appendix B

Executive Employee who held an MSBA and elected

to convert his defined benefit entitlement

under the prior Abitibi-Price Inc. Registered Pension Plan

to a defined contribution entitlement on January 1, 1996

Jean-Claude Casavant

Allen Dea

Alain Grandmont

Alain Lalonde

Anders Nordin

Ronald Oberlander

William Sheffield

-B-1-

EX-10.40

EXHIBIT 10.40

AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT

Dated as of January 31, 2008

Among

ABITIBI-CONSOLIDATED U.S. FUNDING CORP.
as the Seller

and

EUREKA SECURITISATION, PLC
as the Investor

and

CITIBANK, N.A.
as a Bank

and

CITIBANK, N.A., LONDON BRANCH
as the Agent

and

THE ORIGINATORS NAMED HEREIN

and

ABITIBI CONSOLIDATED SALES CORPORATION
as Servicer

and

ABITIBI-CONSOLIDATED INC.
as Subservicer

TABLE OF CONTENTS

	Page
ARTICLE I DEFINITIONS		1
Section 1.01 Certain Defined Terms		1
Section 1.02 Other Terms		33
ARTICLE II AMOUNTS AND TERMS OF THE PURCHASES		34
Section 2.01 Purchase Facility		34
Section 2.02 Making Purchases		34
Section 2.03 Receivable Interest Computation		36
Section 2.04 Settlement Procedures		36
Section 2.05 Fees		39
Section 2.06 Payments and Computations, Etc.		39
Section 2.07 Dividing or Combining Receivable Interests		40
Section 2.08 Increased Costs		40
Section 2.09 [Intentionally Omitted]		41
Section 2.10 Taxes		41
Section 2.11 Security Interest		43
Section 2.12 Sharing of Payments		44
Section 2.13 Intentionally Omitted		44
Section 2.14 Purchase by Term-Out Banks		44
Section 2.15 Interest on Cash Secured Advances		45
Section 2.16 Repayment of Cash Secured Advances		45
Section 2.17 Use of Proceeds; Security Interest in Collateral Advance Account		45
Section 2.18 Repurchase Option		46
ARTICLE III CONDITIONS OF PURCHASES		46
Section 3.01 [Intentionally Omitted]		46
Section 3.02 Conditions Precedent to All Purchases and Reinvestments		47
Section 3.03 Conditions Precedent to the Effectiveness of Amendment and Restatement		47
ARTICLE IV REPRESENTATIONS AND WARRANTIES		49
Section 4.01 Representations and Warranties of the Seller		49
Section 4.02 Representations and Warranties of the Servicer		53
ARTICLE V COVENANTS		55
Section 5.01 Covenants of the Seller		55
Section 5.02 Covenant of the Seller and the Originators		62
ARTICLE VI ADMINISTRATION AND COLLECTION OF POOL RECEIVABLES		63
Section 6.01 Designation of Servicer		63
Section 6.02 Duties of Servicer		63

-i-

	Page
Section 6.03 Certain Rights of the Agent		65
Section 6.04 Rights and Remedies		66
Section 6.05 Further Actions Evidencing Purchases		67
Section 6.06 Covenants of the Servicer and each Originator		67
Section 6.07 Indemnities by the Servicer		67
Section 6.08 Collateral Advance Account		69
Section 6.09 Canadian Residents		70
Section 6.10 Collateral Advance Account Agreement; Deposit Account Agreements		71
ARTICLE VII EVENTS OF TERMINATION		71
Section 7.01 Events of Termination		71
ARTICLE VIII THE AGENT		75
Section 8.01 Authorization and Action		75
Section 8.02 Agent’s Reliance, Etc.		75
Section 8.03 CNAI and Affiliates		75
Section 8.04 Bank’s Purchase Decision		76
Section 8.05 Indemnification of Agent		76
ARTICLE IX INDEMNIFICATION		76
Section 9.01 Indemnities by the Seller		76
ARTICLE X MISCELLANEOUS		79
Section 10.01 Amendments, Etc.		79
Section 10.02 Notices, Etc.		83
Section 10.03 Assignability		83
Section 10.04 Costs and Expenses		86
Section 10.05 No Proceedings		87
Section 10.06 Confidentiality		87
Section 10.07 GOVERNING LAW		89
Section 10.08 Execution in Counterparts		89
Section 10.09 Survival of Termination		89
Section 10.10 Consent to Jurisdiction		89
Section 10.11 WAIVER OF JURY TRIAL		90
Section 10.12 Judgment		90
Section 10.13 Execution by ACI		91
Section 10.14 Language		91
Section 10.15 Tax Treatment		91
Section 10.16 Acknowledgment		91

-ii-

SCHEDULES
SCHEDULE I	-	Deposit Accounts
SCHEDULE II	-	Credit and Collection Policy
SCHEDULE III	-	Addresses
SCHEDULE IV	-	UCC and PPSA Information
SCHEDULE V	-	Special Country Concentration Limits
ANNEXES
ANNEX A-1	-	Form of Monthly Report
ANNEX A-2	-	Form of Weekly Report
ANNEX B	-	Form of Deposit Account Agreement
ANNEX C	-	Form of Collateral Advance Account Agreement
ANNEX D	-	[Intentionally Omitted]
ANNEX E-1	-	Form of Funds Transfer Letter
ANNEX E-2	-	Form of Direction Letter
ANNEX F	-	Form of Undertaking (Originator)
ANNEX G	-	Form of Undertaking (Servicer)
ANNEX H	-	Insurance Policy
ANNEX I	-	Form of Notice of Continuance and Change of Address
ANNEX J	-	Form of Notice of Amalgamation
ANNEX K	-	Form of Assumption Agreement
ANNEX L	-	Form of Notice of Change of Address
ANNEX M	-	Forms of Bank Agreement Security Letters
ANNEX N	-	Form of Certificate Regarding Adverse Claims

-iii-

AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT

Dated as of January 31, 2008

          ABITIBI-CONSOLIDATED U.S. FUNDING CORP., a Delaware corporation (the “Seller”), EUREKA SECURITISATION, PLC, an English corporation, as an Investor, CITIBANK, N.A., as a Bank, CITIBANK, N.A., LONDON BRANCH, as operating agent (the “Agent”) for the Investors and the Banks (each as defined herein), ABITIBI-CONSOLIDATED INC., a Canadian corporation (“ACI”), ABITIBI CONSOLIDATED SALES CORPORATION, a Delaware corporation (“ACSC”), as Originators (as defined herein), ACI, as Subservicer (as defined herein), and ACSC, as Servicer (as defined herein), agree as follows:

          PRELIMINARY STATEMENT. The Seller, Eureka, Citibank, the Agent, ACI and ACSC (as such terms are herein defined) entered into that certain Receivables Purchase Agreement dated as of October 27, 2005 (as amended prior to the date hereof, the “Original RPA”). The Seller has acquired, and may continue to acquire, Receivables from the Originators (as hereinafter defined), either by purchase or (in the case of ACSC) by contribution to the capital of the Seller, as determined from time to time by the Seller and the applicable Originator. The Seller has sold and is prepared to continue to sell undivided fractional ownership interests (referred to herein as “Receivable Interests”) in the Receivables. Eureka (as hereinafter defined) may, in its sole discretion, purchase such Receivable Interests, and the Banks are prepared to purchase such Receivable Interests, in each case on the terms set forth herein. The parties hereto wish to amend and restate the Original RPA in its entirety. Accordingly, the parties agree that the Original RPA is amended and restated to read in its entirety as follows:

ARTICLE I

DEFINITIONS

          Section 1.01 Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

          “ACCC” means Abitibi Consolidated Company of Canada.

           “ACG” means American Color Graphics, Inc.

          “Adjusted Eurodollar Rate” means, for any Fixed Period, an interest rate per annum equal to the rate per annum obtained by dividing (i) the Eurodollar Rate for such Fixed Period by (ii) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Fixed Period.

          “Adverse Claim” means a lien, security interest, mortgage, pledge, assignment, hypothec, hypothecation, privilege, title retention or other charge or encumbrance, or any other type of preferential arrangement (which, for the avoidance of doubt, does not include Taxes not yet due and payable).

[Receivables Purchase Agreement]

           “Affected Person” has the meaning specified in Section 2.08(a).

          “Affiliate” means, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by or is under common control with such Person or is a director or officer of such Person.

          “Affiliated Obligor” means any Obligor that is an Affiliate of another Obligor.

          “Agent’s Account” means the special account (account number 311-3744) of the Investor maintained at the office of the Agent in London.

          “Aggregate Loss and Dilution Reserve” means, on any date, an amount equal to the product of (a) the Aggregate Loss and Dilution Reserve Percentage on such date multiplied by (b) the Net Receivables Pool Balance on such date.

          “Aggregate Loss and Dilution Reserve Percentage” means, as of any date, the greater of (a) the sum of (i) the Dynamic Loss Reserve Percentage as of such date plus (ii) the Dynamic Dilution Reserve Percentage as of such date and (b) the sum of (i) the Loss Reserve Floor Percentage as of such date plus (ii) the Dilution Reserve Floor Percentage as of such date.

          “Alternate Base Rate” means a fluctuating interest rate per annum as shall be in effect from time to time, which rate shall be at all times equal to the highest of:

     (a) the rate of interest announced publicly by Citibank in New York, New York, from time to time as Citibank’s base rate;

     (b) 1/2 of one percent above the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average being determined weekly on each Monday (or, if such day is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank from three New York certificate of deposit dealers of recognized standing selected by Citibank, in either case adjusted to the nearest 1/4 of one percent or, if there is no nearest 1/4 of one percent, to the next higher 1/4 of one percent; and

     (c) the Federal Funds Rate.

     “Amalgamated Entity” has the meaning specified in the definition of “Amalgamation” set forth below.

     “Amalgamation” means the amalgamation of the Continued Entity with a newly incorporated Nova Scotia limited liability company, as described in more detail in Annex J (the resulting entity, the “Amalgamated Entity”).

-2-

     “Amalgamation Effective Date” has the meaning specified in Section 10.01(d).

     “Amalgamation Opinion” has the meaning specified in Section 10.01(c)(B).

     “Applicable Margin” has the meaning specified in the Fee Agreement.

          “Approved Country” means the United States, Canada, and any other country outside of the European Area other than those:

     (i) whose government or central bank (x) shall have prohibited the sale of the currency of such country in exchange for United States dollars or shall have admitted in writing its inability to pay its debts as the same become due, (y) shall have declared a moratorium on the payment of its debts or the debts of any national governmental authority of such country, or (z) shall have ceased to be a member of the International Monetary Fund or ceased to be eligible to use the resources of the International Monetary Fund; or

     (ii) with respect to which the United States shall have imposed economic sanctions.

          “Asset Purchase Agreement” means (a) in the case of any Bank other than Citibank, the asset purchase agreement entered into by such Bank concurrently with the Assignment and Acceptance pursuant to which it became party to this Agreement and (b) in the case of Citibank, the secondary market agreement, asset purchase agreement or other similar liquidity agreement entered into by Citibank for the benefit of Eureka, to the extent relating to the sale or transfer of interests in Receivable Interests.

          “Assignee Rate” for any Fixed Period for any Receivable Interest means an interest rate per annum equal to the Adjusted Eurodollar Rate for such Fixed Period plus the Applicable Margin; provided, however, that in case of:

          (i) any Fixed Period on or prior to the first day of which an Investor or Bank shall have notified the Agent that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for such Investor or Bank to fund such Receivable Interest at the Assignee Rate set forth above (and such Investor or Bank shall not have subsequently notified the Agent that such circumstances no longer exist),

          (ii) any Fixed Period of one to (and including) 29 days (it being understood and agreed that this clause (ii) shall not be applicable to a Fixed Period for which Yield is to be computed by reference to the Adjusted Eurodollar Rate that is intended to have a one-month duration but due solely to LIBOR interest period convention the duration thereof will be less than 30 days),

          (iii) any Fixed Period as to which the Agent does not receive notice, by no later than 12:00 noon (New York City time) on the third Business Day preceding the first day of such Fixed Period, that the related Receivable

-3-

Interest will not be funded by Eureka through the issuance of Promissory Notes, or

          (iv) any Fixed Period for a Receivable Interest the Capital of which allocated to the Investors or the Banks is less than $500,000,

the “Assignee Rate” for such Fixed Period shall be an interest rate per annum equal to the Alternate Base Rate in effect from time to time during such Fixed Period plus the Applicable Margin; provided further that at any time when an Event of Termination shall exist, the “Assignee Rate” for such Fixed Period shall be an interest rate per annum equal to the Alternate Base Rate in effect from time to time during such Fixed Period plus the Applicable Margin plus 2.0%.

          “Assignment and Acceptance” means an assignment and acceptance agreement entered into by a Bank, an Eligible Assignee and the Agent, pursuant to which such Eligible Assignee may become a party to this Agreement, in a form acceptable to the Agent and approved by the Seller (which approval by the Seller shall not be unreasonably withheld or delayed and shall not be required if an Event of Termination or an Incipient Event of Termination has occurred and is continuing).

          “Assumption Agreement” means an Assumption Agreement made by the Amalgamated Entity in favor of the Agent, the Investors, the Banks, the Seller and ACSC, substantially in the form of Annex K hereto, as the same may be amended, modified or restated from time to time.

          “Average Dilution Ratio” means, for any calendar month, the product of (i) the sum of (A) the Dilution Ratio for such calendar month plus (B) 50% of the Dilution Ratio for the immediately preceding calendar month multiplied by (ii) 0.6667.

          “Bank Agreement” means the Credit Agreement dated as of October 3, 2005 among ACI and Abitibi-Consolidated Company of Canada, as borrowers, Canadian Imperial Bank of Commerce and the other financial institutions from time to time party thereto, as the same may be amended, restated or supplemented from time to time.

          “Bank Agreement Security Letters” means, collectively, a request letter from ACI to Canadian Imperial Bank of Commerce and a confirmation letter between Canadian Imperial Bank of Commerce and the Agent, in the forms attached hereto as Annex M.

          “Bank Commitment” of any Bank means, (a) with respect to Citibank, $350,000,000 or such amount as reduced or increased by any Assignment and Acceptance entered into between Citibank and other Banks; or (b) with respect to a Bank that has entered into an Assignment and Acceptance, the amount set forth therein as such Bank’s Bank Commitment, in each case as such amount may be reduced or increased by an Assignment and Acceptance entered into between such Bank and an Eligible Assignee, and as may be further reduced (or terminated) pursuant to the next sentence. Any reduction (or termination) of the Purchase Limit pursuant to the terms of this Agreement shall reduce ratably (or terminate) each Bank’s Bank Commitment.

-4-

          “Banks” means Citibank and each Eligible Assignee that shall become a party to this Agreement pursuant to Section 10.03.

          “Business Day” means any day on which (i) banks are not authorized or required to close in London, New York City or Montreal, and (ii) if this definition of “Business Day” is utilized in connection with the Eurodollar Rate, dealings are carried out in the London interbank market.

          “Canadian Dollars” or “CAD” means dollars in the lawful currency of Canada.

          “Canadian Originator” means ACL.

          “Capital” of any Receivable Interest means the original amount paid to the Seller for such Receivable Interest at the time of its purchase by Eureka or a Bank pursuant to this Agreement, or such amount divided or combined in accordance with Section 2.07, in each case reduced from time to time by Collections distributed on account of such Capital pursuant to Section 2.04(e); provided that if such Capital shall have been reduced by any distribution and thereafter all or a portion of such distribution is rescinded or must otherwise be returned for any reason, such Capital shall be increased by the amount of such rescinded or returned distribution, as though it had not been made.

          “Cash Collateral” has the meaning specified in Section 2.17(b).

          “Cash Secured Advance” means, in respect of any Bank, without duplication, the aggregate amount of the proceeds (a) (i) of the advance, if any, made by such Bank pursuant to Section 2.01(d) and (ii) of such Bank’s ratable share of any applications of Collections of Receivables during the Term Period for such Bank to reduce the “Capital” in respect of the Receivable Interest hereunder and (b) on deposit at such time in the Collateral Advance Account (including any such proceeds invested by the Agent at such time in Eligible Investments pursuant to Section 6.08(c)), it being understood that the amount of such Bank’s Cash Secured Advance shall be decreased by such Bank’s ratable share of the funds paid from time to time from the Collateral Advance Account to the Seller to make a purchase of an interest in the Receivable Interest from time to time during the Term Period for such Bank.

          “Cash Secured Advance Commencement Date” means, with respect to any Bank, the same day as the Term-Out Bank Purchase Date for such Bank, provided that the Cash Secured Advance Commencement Date shall occur if, but only if, the Facility Termination Date shall not have occurred on or prior to such date and no Event of Termination or Incipient Event of Termination exists on such date.

          “Change of Address” means the first change of address of the principal place of business, chief executive office and location of receivables records of each of the Seller and ACSC hereunder as described in the Notice of Change of Address.

          “Change of Address Effective Date” has the meaning specified in Section 10.01(e).

           “Citibank” means Citibank, N.A., a national banking association.

-5-

          “CLB” means Citibank, N.A., London Branch.

          “CNAI” means Citicorp North America, Inc., a Delaware corporation.

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

          “Collateral Advance Account” has the meaning specified in Section 6.08(a).

          “Collateral Advance Account Agreement” means an agreement among the Servicer, the Seller, the Agent and the Collateral Advance Account Bank in substantially the form of Annex C.

          “Collateral Advance Account Bank” has the meaning specified in Section 6.08(a).

          “Collateral Advance Account Direction” has the meaning specified in Section 6.08(b).

          “Collection Delay Period” means 10 days or such other number of days as the Agent may select upon three Business Days’ notice to the Seller.

          “Collections” means, with respect to any Receivable, all cash collections and other cash proceeds of such Receivable, including, without limitation, (i) all cash proceeds of Related Security with respect to such Receivable, (ii) any Collection of such Receivable deemed to have been received pursuant to Section 2.04 and (iii) any Insurance Proceeds received with respect to such Receivable.

          “Commitment Termination Date” means the earliest of (a) January 29, 2009, unless, prior to such date (or the date so extended pursuant to this clause), upon the Seller’s request, made not more than 45 days prior to the then Commitment Termination Date, one or more Banks having Bank Commitments equal to 100% of the Purchase Limit shall in their sole discretion consent, which consent shall be given not more than 30 days prior to the then Commitment Termination Date, to the extension of the Commitment Termination Date to a date occurring not more than 364 days after the then Commitment Termination Date; provided, however, that any failure of any Bank to respond to the Seller’s request for such extension shall be deemed a denial of such request by such Bank, (b) the Facility Termination Date, (c) the date determined pursuant to Section 7.01, and (d) the date the Purchase Limit reduces to zero pursuant to Section 2.01(b); provided, however, that if, and only if, there shall have occurred a Cash Secured Advance Commencement Date for any Bank, the Commitment Termination Date for such Bank shall mean the earliest of July 29, 2009 and the dates referenced in the preceding clauses (b), (c) and (d).

          “Concentration Limit” for any Obligor means at any time 4.00% (“Normal Concentration Limit”), or, with respect to an Obligor which has a billing address in the United States or Canada, such higher credit limit (“Special Concentration Limit”) for such Obligor which (i) prior to the occurrence of any Insurance Policy Event, is designated by the Insurer under the Insurance Policy; provided that if (x) the Receivables related to an Investment Grade Obligor are greater than 10% of the Net Receivables Pool Balance or (y) the Receivables related to a Non-Investment Grade Obligor are greater than 6% of the Net Receivables Pool Balance,

-6-

then any Special Concentration Limit with respect to the related Obligor shall be subject to the prior written consent of the Agent, and (ii) on and after the occurrence of any Insurance Policy Event, corresponds to the Uninsured Special Concentration Limit for such Obligor; provided further that, in the case of an Obligor with any Affiliated Obligor, the Concentration Limit shall be calculated as if such Obligor and such Affiliated Obligor are one Obligor (except that Sun Media Corporation shall not be so treated as one Obligor with Quebecor World Inc. and its other Affiliated Obligors); and provided further that the Agent may, in its sole discretion and at any time, on account of bona fide credit reasons, reduce or cancel any Special Concentration Limit (including any Uninsured Special Concentration Limit) and reinstate the Normal Concentration Limit upon notice to the Seller. For the purposes of the foregoing definition, prior to the occurrence of any Insurance Policy Event, the Special Concentration Limits for (x) ACG shall be 6%, and (y) Vertis Inc. shall be 6%, subject in each case to Agent’s right to cancel such Special Concentration Limits and reinstate the Normal Concentration Limit as set forth above.

          “Continuance” means ACI’s continuance of itself under the laws of Nova Scotia and the related change of the address of its registered office, as described in more detail in Annex I (such continued entity, the “Continued Entity”).

          “Continuance Effective Date” has the meaning specified in Section 10.01(c).

          “Continued Entity” has the meaning specified in the definition of “Continuance” set forth above.

          “Contract” means an agreement between an Originator and an Obligor (including, in the case of any open account agreement, an invoice), pursuant to or under which such Obligor shall be obligated to pay for merchandise, insurance or services from time to time.

          “Control Event” means (i) a Servicer Default, (ii) an Event of Termination, (iii) a Significant Incipient Event of Termination or (iv) an event that, but for notice or lapse of time or both, would constitute a Servicer Default pursuant to clause (iv)(B) or (vi) of the definition thereof.

          “Country Concentration Limit” means at any time, for any Approved Country other than the United States or Canada, 4.00% (or, if such Approved Country is not listed on the “Country Schedule” to the Insurance Policy, 2.00%) of the Net Receivables Pool Balance (the “Normal Country Concentration Limit”), or such other higher percentage (a “Special Country Concentration Limit”) for such Approved Country as is designated on Schedule V hereto and, after the date of this Agreement, is designated by the Agent in its sole discretion in a writing delivered to the Seller; provided that the Agent may, in its sole discretion and at any time, on account of bona fide credit reasons, reduce or cancel any Special Country Concentration Limit and reinstate the Normal Country Concentration Limit with respect to the applicable Approved Country upon notice to the Seller.

          “CP Fixed Period Date” means, for any Receivable Interest, the date of purchase of such Receivable Interest and thereafter the first day of each calendar month or any other day as shall have been agreed to in writing by the Agent and the Seller prior to the first day of such Fixed Period.

-7-

          “Credit and Collection Policy” means those receivables credit and collection policies and practices of the Originators in effect on the date of this Agreement and described in Schedule II hereto, as modified in compliance with this Agreement.

          “Debt” means (i) indebtedness for borrowed money, (ii) obligations evidenced by bonds, debentures, notes or other similar instruments, (iii) obligations to pay the deferred purchase price of property or services, (iv) obligations as lessee under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, and (v) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (iv) above.

          “Debt Rating” for any Person, means the public rating by S&P of such Person’s long term non credit enhanced, senior unsecured debt, or the corporate family rating assigned to such Person by Moody’s.

          “Defaulted Receivable” means an Originator Receivable:

          (i) as to which any payment, or part thereof, remains unpaid for more than 90 days from the original due date for such payment;

          (ii) as to which the Obligor thereof or any other Person obligated thereon has taken any action, or suffered any event to occur, of the type described in Section 7.01(g);

          (iii) which, consistent with the Credit and Collection Policy, would be written off the applicable Originator’s or the Seller’s books as uncollectible; or

          (iv) for which the applicable Originator or the Seller has (or, consistent with the Credit and Collection Policy, should have) established an Obligor specific reserve for non payment.

          “Deferred Purchase Price” has the meaning specified in the Originator Purchase Agreement.

          “Delinquency Ratio” means the ratio (expressed as a percentage) computed as of the last day of each calendar month by dividing (i) the aggregate Outstanding Balance of all Originator Receivables that were Delinquent Receivables on such day by (ii) the aggregate Outstanding Balance of all Originator Receivables on such day. For the purpose of calculating the Delinquency Ratio as of any date, Originator Receivables shall include all Repurchased Receivables which were Delinquent Receivables as of such date.

          “Delinquent Receivable” means an Originator Receivable that is not a Defaulted Receivable and:

-8-

          (i) as to which any payment, or part thereof, remains unpaid for more than 30, but not more than 90, days from the original due date for such payment; or

          (ii) which, consistent with the Credit and Collection Policy, would be classified as delinquent by the applicable Originator or the Seller.

          “Deposit Account” means an account maintained at a Deposit Bank into which (i) Collections in the form of checks and other items are deposited that have been sent to one or more Lock-Boxes by Obligors and/or (ii) Collections in the form of electronic funds transfers and other items are paid directly by Obligors.

          “Deposit Account Agreement” means an agreement, in substantially the form of Annex B.

          “Deposit Bank” means any of the banks holding one or more Deposit Accounts.

          “Diluted Receivable” means, without duplication, that portion (and only that portion) of any Originator Receivable which is either (a) reduced or canceled as a result of (i) any defective, rejected or returned merchandise or services, any cash discount, or any failure by the applicable Originator to deliver any merchandise or provide any services or otherwise to perform under the underlying Contract, (ii) any change in the terms of, or cancellation of, a Contract or any cash discount, discount for quick payment or other adjustment by the applicable Originator which reduces the amount payable by the Obligor on the related Originator Receivable (except any such change or cancellation resulting from or relating to the financial inability to pay or insolvency of the Obligor of such Originator Receivable) or (iii) any set off by an Obligor in respect of any claim by such Obligor as to amounts owed by it on the related Originator Receivable (whether such claim arises out of the same or a related transaction or an unrelated transaction), (b) subject to any specific dispute, offset, counterclaim or defense whatsoever (except the discharge in bankruptcy of the Obligor thereof) or (c) the outstanding balance of the related invoice that was reversed due to unship-reship transactions; provided that Diluted Receivables are calculated assuming that all chargebacks are resolved in the Obligor’s favor.

          “Dilution Horizon Factor” means, as of any date, a ratio computed by dividing (i) the sum of (A) the aggregate original Outstanding Balance of all Originator Receivables created by the Originators during the most recently ended calendar month plus (B) 50% of the aggregate original Outstanding Balance of all Originator Receivables created by the Originators during the second most recently ended calendar month by (ii)(A) the Outstanding Balance of Originator Receivables (other than Defaulted Receivables) as at the last day of the most recently ended calendar month minus (B) the aggregate amount of Unapplied Cash/Credit Memos as at the last day of the most recently ended calendar month.

          “Dilution Ratio” means, as of any date, the ratio (expressed as a percentage) computed for the most recently ended calendar month by dividing (i) the aggregate amount of Originator Receivables which became Diluted Receivables during such calendar month (but excluding, solely for the purpose of calculating the Dilution Reserve Floor Percentage and the

-9-

Dynamic Dilution Reserve Percentage, any portion of such Diluted Receivables constituting amounts relating to Off-Invoice Allowance Accruals) by (ii) the sum of (A) 50% of the aggregate Outstanding Balance (in each case, at the time of creation) of all Originator Receivables created during the calendar month preceding such calendar month plus (B) 50% of the aggregate Outstanding Balance (in each case, at the time of creation) of all Originator Receivables created during the second calendar month preceding such calendar month.

          “Dilution Reserve Floor Percentage” means, as of any date, the product of (a) the average of the Dilution Ratios for each of the twelve most recently ended calendar months and (b) the Dilution Horizon Factor.

          “Dilution Volatility Ratio” means, as of any date, a ratio (expressed as a percentage) equal to the product of (a) the highest of the Average Dilution Ratios calculated for each of the twelve most recently ended calendar months minus the average of the Dilution Ratios calculated for each of the twelve most recently ended calendar months, and (b) a ratio calculated by dividing the highest of the Average Dilution Ratios calculated for each of the twelve most recently ended calendar months by the average of the Dilution Ratios calculated for each of the twelve most recently ended calendar months.

          “Direction Letter” means that certain letter executed and delivered by the Seller to the Agent and dated the date hereof, in the form of Annex E-2 hereto.

          “Dollar Equivalent” means, as of any date, the amount obtained by applying the rate for converting currency into Dollars at the spot rate of exchange for that currency as reasonably determined and advised by the Agent.

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

          “Dynamic Dilution Reserve Percentage” means, as of any date, the product of (a) the sum of (i) the product of (x) 2.25, multiplied by (y) the average of the Dilution Ratios for each of the twelve most recently ended calendar months, plus (ii) the Dilution Volatility Ratio as at the last day of the most recently ended calendar month, multiplied by (b) the Dilution Horizon Factor as of such date.

          “Dynamic Loss Reserve Percentage” means, as of any date, the product of (i) the Stress Factor as of such date multiplied by (ii) the Loss Horizon Factor as of such date multiplied by (iii) the highest of the Three-Month Loss Ratios calculated for each of the twelve most recently ended calendar months.

          “Eligible Assignee” means (i) Citibank or any of its Affiliates, (ii) any Person managed by Citibank, CNAI or any of their Affiliates, or (iii) any financial or other institution acceptable to the Agent and approved by the Seller (which approval by the Seller shall not be unreasonably withheld or delayed (it being understood that it would be reasonable for the Seller to withhold its consent to any assignment if, as a result thereof, the Seller or its Affiliates would be exposed to any greater liability of any type (including, without limitation, indemnification costs and expenses) than would be the case if such assignment had not occurred) and shall not be required if an Event of Termination or an Incipient Event of Termination has occurred and is continuing).

-10-

          “Eligible Institution” means a depository institution organized under the laws of the United States of America or any state thereof or the District of Columbia (or any domestic branch of a foreign bank authorized under any such laws), (a) whose senior long-term unsecured debt obligations are rated at least A- or better by S&P and A3 or better by Moody’s, and (b) which is subject to regulation regarding fiduciary funds on deposit substantially similar to 12 C.F.R. Section 9.10(b), if applicable, and (c) which has a combined capital and surplus of at least $100,000,000.

          “Eligible Investments” means book entry securities entered on the books of the registrar of such securities and held in the name or on behalf of the Agent, negotiable instruments or securities represented by instruments in bearer or registered form (registered in the name of the Agent or its nominee) which evidence:

          (i) readily marketable direct obligations of the Government of the United States or any agency or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the United States;

          (ii) insured demand deposits, time deposits or certificates of deposit of any commercial bank that (A) is a member of the Federal Reserve System, (B) issues (or the parent of which issues) commercial paper rated, at the time of the investment or contractual commitment to invest therein, as described in clause (iv), (C) is organized under the laws of the United States or any state thereof and (D) has combined capital and surplus of at least $500,000,000;

          (iii) repurchase obligations with a term of not more than ten days for underlying securities of the types described in clauses (i) and (ii) above entered into with any bank of the type described in clause (ii) above;

          (iv) commercial paper (maturing no later than the Business Day prior to the first Settlement Date (Yield and Fees) following the date of purchase) having, at the time of the investment or contractual commitment to invest therein, the highest short term rating from each of S&P and Moody’s;

          (v) investments in no load money market funds having a rating from each rating agency rating such fund in its highest investment category (including such funds for which the Agent or any of its Affiliates is investment manager or advisor); and

          (vi) any other investments agreed upon between the Seller and the Agent.

-11-

“Eligible Obligor” means an Obligor which:

          (i) has a billing address in an Approved Country; and

          (ii) is not a Person with respect to which the United States, Canada or any other Approved Country shall have imposed sanctions; and

          (iii) is not in violation of any applicable law, rule or regulation relating to terrorism or money-laundering (“Anti-Terrorism Laws”), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the “Executive Order”), and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56 and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada); and

          (iv) is not a Person (A) that is listed in the annex to, or otherwise subject to the provisions of, the Executive Order, (B) that is owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order, (C) with which an Affected Person or an Originator is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law, (D) that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order, or (E) that is named as a “specifically designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website or any replacement website or other replacement official publication of such list or any similar lists published in any other Approved Country; and

          (v) is not a Person (A) whose property or interest in property is otherwise blocked or subject to blocking pursuant to Section 1 of the Executive Order or any other Anti-Terrorism Law, or (B) that engages in any dealings or transactions prohibited by Section 2 of the Executive Order or any other Anti-Terrorism Law, or is otherwise associated with any such Person in any manner violative of such Section 2 or any other Anti-Terrorism Law.

“Eligible Receivable” means, at any time, a Receivable:

          (i) (x) the related Obligor of which is (A) Vertis Inc. or (B) ACG, or (y) which is, prior to any Insurance Policy Event, fully insured (to the extent provided for therein) by the Insurance Policy;

          (ii) the Obligor of which is an Eligible Obligor, is not an Affiliate of any of an Originator or the Seller, and is not a Canadian federal or provincial Crown corporation;

          (iii) the Obligor of which is not a government or a governmental subdivision or agency; provided, however, that if a Receivable satisfies all of the requirements of an Eligible Receivable other than this clause

-12-

(iii), such Receivable shall be an Eligible Receivable, but only to the extent that including such Receivable as an Eligible Receivable will not cause the aggregate Outstanding Balance of all Receivables included as Eligible Receivables, the Obligor of which is a government or a governmental subdivision or agency, to exceed 1% of the aggregate Outstanding Balance of all Eligible Receivables;

          (iv) which is not a Defaulted Receivable;

          (v) the Obligor of which is not the Obligor of any Defaulted Receivables which in the aggregate constitute 10% or more of the aggregate Outstanding Balance of all Receivables of such Obligor;

          (vi) which has been billed and, according to the Contract related thereto, is required to be paid in full within 60 days of the original billing date therefor or, prior to any Insurance Policy Event, within 90 days of the original billing date therefor if the “maximum payment terms” with respect to such Receivable set forth in the Insurance Policy permits such payment terms;

          (vii) which is an obligation representing all or part of the sales price of merchandise, insurance or services within the meaning of Section 3(c)(5) of the Investment Company Act of 1940, as amended, and the nature of which is such that its purchase with the proceeds of notes would constitute a “current transaction” within the meaning of Section 3(a)(3) of the Securities Act of 1933, as amended;

          (viii) which (A) in the case of a Receivable originated by the U.S. Originator, is an “account” or “payment intangible” within the meaning of Article 9 of the UCC of the applicable jurisdictions governing the perfection of the interest created by a Receivable Interest and (B) in the case of a Receivable originated by the Canadian Originator, is an “account” or “intangible” within the meaning of the PPSA or a “claim” under the Civil Code of Quebec;

          (ix) which (A) in the case of a Receivable originated by the U.S. Originator, is denominated and payable only in Dollars in the United States, (B) in the case of an International Receivable originated by the Canadian Originator, is denominated and payable only in Dollars in the United States, and (C) in the case of a Receivable other than an International Receivable originated by the Canadian Originator, is denominated and payable only in Dollars or Canadian Dollars in Canada;

          (x) which arises under a Contract which, together with such Receivable, is in full force and effect and constitutes the legal, valid and binding obligation of the Obligor of such Receivable and is not subject to any Adverse Claim or any dispute, offset, counterclaim or defense whatsoever (except the potential discharge in bankruptcy of such Obligor) and is not settled on a net basis;

-13-

          (xi) which represents a bona fide obligation of the Obligor of such Receivable to pay the stated amount;

          (xii) as to which the applicable Originator has satisfied and fully performed all obligations with respect to such Receivable required to be fulfilled by it other than customary warranty obligations, and no further action is required to be performed by any Person with respect thereto other than payment thereon by the applicable Obligor;

          (xiii) which, together with the Contract related thereto, does not contravene in any material respect any laws, rules or regulations applicable thereto (including, without limitation, laws, rules and regulations relating to usury, consumer protection, truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy) and with respect to which none of the Seller, the applicable Originator or the Obligor is in violation of any such law, rule or regulation in any material respect;

          (xiv) which arises under a Contract which does not contain a legally enforceable provision requiring the Obligor thereunder to consent to the transfer, sale or assignment of the rights of the Seller or the applicable Originator thereunder (unless a written consent of such Obligor has been obtained) or that otherwise purports to restrict the ability of the Agent, the Investors or the Banks to exercise their rights under this Agreement, including, without limitation, their right to review the related invoice or the payment terms of such Contract;

          (xv) which arose from the sale of goods or the rendering of services in the ordinary course of the applicable Originator’s business;

          (xvi) which has not been extended, rewritten or otherwise modified from the original terms thereof (except as permitted by Section 6.02(c));

          (xvii) the transfer, sale or assignment of which does not contravene any applicable law, rule or regulation;

          (xviii) which (A) satisfies all applicable requirements of the Credit and Collection Policy and (B) complies with such other criteria and requirements (other than those relating to the collectibility of such Receivable) as the Agent may from time to time specify to the Seller on account of bona fide credit reasons upon 30 days’ notice; and

          (xvix) which, if the Obligor thereof has a billing address in Canada, satisfies the requirements of Sections 4.01(s) and (t).

          “E-Mail Seller Report” has the meaning specified in Section 6.02(g).

          “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

-14-

          “ERISA Affiliate” means any corporation or trade or business that is a member of any group of organizations (i) described in Section 414(b) or (c) of the Code of which ACI or any of its Subsidiaries is a member and (ii) solely for purposes of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which ACI or any of its Subsidiaries is a member.

          “Eureka” means Eureka Securitisation, plc, an English corporation, and any successor or permitted assign under Section 10.03 of Eureka that is a receivables investment company which in the ordinary course of its business issues commercial paper or other securities to fund its acquisition and maintenance of receivables.

          “Eurocurrency Liabilities” has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.

          “Eurodollar Rate” means, for any Fixed Period, an interest rate per annum equal to the rate per annum at which deposits in U.S. dollars are offered by the principal office of Citibank in London, England to prime banks in the London interbank market at 11:00 A.M. (London Time) two Business Days before the first day of such Fixed Period in an amount substantially equal to the Capital associated with such Fixed Period on such first day and for a period equal to such Fixed Period.

          “Eurodollar Rate Reserve Percentage” of any Investor or Bank for any Fixed Period in respect of which Yield is computed by reference to the Adjusted Eurodollar Rate means the reserve percentage applicable two Business Days before the first day of such Fixed Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) (or if more than one such percentage shall be applicable, the daily average of such percentages for those days in such Fixed Period during which any such percentage shall be so applicable) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for such Investor or Bank with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Eurocurrency Liabilities is determined) having a term equal to such Fixed Period.

          “European Area” means the United Kingdom, Belgium, Ireland and Germany.

          “Event of Termination” has the meaning specified in Section 7.01.

          “Excess Interest” means, in respect of Cash Secured Advances at any time, the excess of (i) the aggregate unpaid accrued interest on the Cash Secured Advances at such time over (ii) the aggregate interest and dividends received by the Agent in respect of the Cash Collateral and available for withdrawal from the Collateral Advance Account at such time.

          “Facility Termination Date” means the earliest of (a) January 27, 2011 or (b) the date determined pursuant to Section 7.01 or (c) the date the Purchase Limit reduces to zero pursuant to Section 2.01(b).

-15-

          “Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it.

          “Fee Agreement” has the meaning specified in Section 2.05(b).

          “Fees” has the meaning specified in Section 2.05(b).

          “Finance Charge” means, with respect to any Receivable, any interest, finance charges or other similar charges payable at any time by an Obligor in connection with such Receivable not having been paid on the due date thereof.

          “Fixed Period” means, with respect to any Receivable Interest:

     (a) in the case of any Fixed Period in respect of which Yield is computed by reference to the Investor Rate, each successive period commencing on each CP Fixed Period Date for such Receivable Interest and ending on the next succeeding CP Fixed Period Date for such Receivable Interest; and

     (b) in the case of any Fixed Period in respect of which Yield is computed by reference to the Assignee Rate, each successive period of from one to and including 29 days, or a period of one month, as the Seller shall select and the Agent may approve on notice by the Seller received by the Agent (including notice by telephone, confirmed in writing) not later than 11:00 A.M. (New York City time) on (A) the day which occurs three Business Days before the first day of such Fixed Period (in the case of Fixed Periods in respect of which Yield is computed by reference to the Adjusted Eurodollar Rate) or (B) the first day of such Fixed Period (in the case of Fixed Periods in respect of which Yield is computed by reference to the Alternate Base Rate), each such Fixed Period for such Receivable Interest to commence on the last day of the immediately preceding Fixed Period for such Receivable Interest (or, if there is no such Fixed Period, on the date of purchase of such Receivable Interest), except that if the Agent shall not have received such notice, or the Agent and the Seller shall not have so mutually agreed, before 11:00 A.M. (New York City time) on such day, such Fixed Period shall be one day;

provided, however, that:

          (i) any Fixed Period in respect of which Yield is computed by reference to the Assignee Rate (other than a Fixed Period of one day) which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day (provided, however, if Yield in respect of such Fixed Period is computed by reference to the Adjusted Eurodollar Rate, and such Fixed Period would otherwise end on a day which is not a Business Day, and

-16-

there is no subsequent Business Day in the same calendar month as such day, such Fixed Period shall end on the next preceding Business Day);

          (ii) in the case of any Fixed Period of one day, (A) if such Fixed Period is the initial Fixed Period for a Receivable Interest, such Fixed Period shall be the day of the purchase of such Receivable Interest; (B) any subsequently occurring Fixed Period which is one day shall, if the immediately preceding Fixed Period is more than one day, be the last day of such immediately preceding Fixed Period and, if the immediately preceding Fixed Period is one day, be the day next following such immediately preceding Fixed Period; and (C) if such Fixed Period occurs on a day immediately preceding a day which is not a Business Day, such Fixed Period shall be extended to the next succeeding Business Day; and

          (iii) in the case of any Fixed Period for any Receivable Interest which commences before the Termination Date for such Receivable Interest and would otherwise end on a date occurring after such Termination Date, such Fixed Period shall end on such Termination Date and the duration of each Fixed Period which commences on or after the Termination Date for such Receivable Interest shall be of such duration (including, without limitation, one day) as shall be selected by the Agent or, in the absence of any such selection, each period of thirty days from the last day of the immediately preceding Fixed Period.

          “Foreign Currency Adjustment” means, as of any date of determination, an amount equal to the product of (A) the Outstanding Balance of Receivables that are denominated in Canadian Dollars as of such date multiplied by (B) the product of (i) the largest monthly decline (in percentage terms) of the Canadian Dollar versus the Dollar during the most recent sixty months multiplied by (ii) a stress factor of 1.25.

          “Foreign Currency Long-Term Debt Rating” for any Approved Country means the rating by S&P or Moody’s of such Approved Country’s public, long-term foreign currency debt.

          “Four Party Agreement” means that certain Second Amended and Restated Four Party Agreement for Sold Accounts (General), dated as of the date hereof, among ACI, the Seller, the Agent and the Insurer.

          “Funds Transfer Letter” means that certain letter executed and delivered by the Seller to the Agent and dated October 27, 2005, in the form of Annex E-l hereto, as the same may be amended or restated in accordance with the terms thereof.

          “GST” means all goods and services tax payable under Part IX of the Excise Tax Act (Canada), all QST and all harmonized sales tax in the Provinces of Nova Scotia, Newfoundland and New Brunswick payable under the Excise Tax Act (Canada), as such statutes may be amended, modified, supplemented or replaced from time to time, including any successor statute.

-17-

          “Impermissible Qualification” means, relative to the opinion or report of any independent auditors as to any financial statement, any qualification or exception to such opinion or report which (i) is of a “going concern” or similar nature; (ii) relates to any limited scope of examination of material matters relevant to such financial statement, if such limitation results from the refusal or failure of the Parent or any of its Subsidiaries to grant access to necessary information therefor; or (iii) relates to the treatment or classification of any item in such financial statement and which, as a condition to its removal, would require an adjustment to such item the effect of which would result in (x) a material adverse effect on the financial condition, business, operations, assets or liabilities of the Parent and its Subsidiaries taken as a whole, (y) a material adverse effect on the ability of the Servicer or the Seller to perform its obligations under this Agreement or any other Transaction Document, or (z) a material impairment of the rights or remedies of Agent, the Investors or the Banks under this Agreement or any other Transaction Document.

          “Incipient Event of Termination” means an event that but for notice or lapse of time or both would constitute an Event of Termination.

          “Indemnified Party” has the meaning specified in Section 9.01.

          “Insurance Policy” means that certain Accounts Receivable Policy (Shipments) General Terms and Conditions, plus the Coverage Certificate effective September 1, 2006 (together with all schedules and endorsements and other documents issued by the Insurer in connection therewith), together with any replacement Coverage Certificates, issued by the Insurer to ACI, a copy of which is annexed hereto as Annex H.

          “Insurance Policy Event” means the occurrence of any of the following: (i) the Insurance Policy shall, for any reason, be terminated or otherwise no longer be in full force and effect, (ii) an event of the type described in Section 7.01(g) shall occur with respect to either entity comprising the Insurer, (iii) (A) either entity comprising the Insurer fails to make a payment under the Insurance Policy, (B) either entity comprising the Insurer rejects or denies claims submitted under the Insurance Policy or (C) there is a claim payment return pursuant to Section 25 of the Insurance Policy in a cumulative aggregate amount with respect to (A), (B) and (C) of this clause (iii) in excess of $1,000,000 (if any such claim is subsequently paid by the Insurers then the cumulative aggregate amount referred to above shall be reduced by the amount of any such payment), (iv) the terms of any Coverage Certificate issued in replacement of the Coverage Certificate comprising part of the Insurance Policy on November 24, 2006 are deemed unfavorable to the Agent, the Investors or the Banks by the Agent (in its reasonable discretion) when compared with the Coverage Certificate current as of November 24, 2006, or (v) the aggregate claims made under the Insurance Policy in any Policy Period (as defined in the Insurance Policy) with respect to receivables that are not Originator Receivables and the Obligors of which are not located in Canada shall exceed an amount equal to 7.50% of EDC’s Maximum Liability Amount (as defined in the Coverage Certificate included in the Insurance Policy).

          “Insurance Proceeds” means any amounts paid by the Insurer under the Insurance Policy with respect to claims relating to Originator Receivables.

-18-

          “Insurer” means, collectively, Export Development Canada and Compagnie Française d’Assurance pour le Commerce Extérieur — Canada Branch.

          “Intercompany Agreement (Undertaking Agreements)” means that certain Intercompany Agreement (Undertaking Agreements) between ACSC and ACI dated as of December 21, 2007, as the same may be amended, modified or restated from time to time pursuant to its terms.

          “International Receivable” means a Receivable the Obligor of which has a billing address in an Approved Country other than the United States or Canada.

          “Investment Grade Obligor” means an Obligor having Debt Ratings equal to the Required Ratings, provided that, if (a) either a Debt Rating from S&P or Moody’s (but not both) is not available, the Obligor will be an Investment Grade Obligor only if the available Debt Rating is BBB- or above or Baa3 or above, as applicable, and (b) a Debt Rating is not available from S&P and is also not available from Moody’s, then the Obligor will not be an Investment Grade Obligor.

          “Investor” means Eureka and all other owners by assignment or otherwise of a Receivable Interest originally purchased by Eureka and, to the extent of the undivided interests so purchased, shall include any participants.

          “Investor Rate” for any Fixed Period for any Receivable Interest means the per annum rate equivalent to the weighted average of the per annum rates paid or payable by Eureka from time to time as interest on or otherwise (by means of interest rate hedges or otherwise) in respect of those Promissory Notes issued by Eureka that are allocated, in whole or in part, by the Agent (on behalf of Eureka) to fund the purchase or maintenance of such Receivable Interest during such Fixed Period as determined by the Agent (on behalf of Eureka) and reported to the Seller and, if the Servicer is not the Seller, the Servicer, which rates shall reflect and give effect to the commissions of placement agents and dealers in respect of such Promissory Notes, to the extent such commissions are allocated, in whole or in part, to such Promissory Notes by the Agent (on behalf of Eureka); provided, however, that (a) if any component of such rate is a discount rate, in calculating the “Investor Rate” for such Fixed Period the Agent shall for such component use the rate resulting from converting such discount rate to an interest bearing equivalent rate per annum; (b) the Investor Rate with respect to Receivable Interests funded by Participants shall be the same rate as in effect from time to time on Receivable Interests or portions thereof that are not funded by a Participant; (c) if all of the Receivable Interests maintained by Eureka are funded by Participants, then the Investor Rate shall be Eureka’s pool funding rate in effect from time to time for its largest size pool of transactions which settles monthly; and (d) the per annum rate determined pursuant hereto shall be increased by 2% at any time when an Event of Termination shall exist.

          “Liquidation Day” means, for any Receivable Interest, (i) each day during a Fixed Period for such Receivable Interest on which the conditions set forth in Section 3.02 are not satisfied, and (ii) each day which occurs on or after the Termination Date for such Receivable Interest.

-19-

          “Liquidation Fee” means, for (i) any Fixed Period for which Yield is computed by reference to the Investor Rate and a reduction of Capital is made for any reason on any day or (ii) any Fixed Period for which Yield is computed by reference to the Adjusted Eurodollar Rate and a reduction of Capital is made for any reason on any day other than the last day of such Fixed Period, the amount, if any, by which (A) the additional Yield (calculated without taking into account any Liquidation Fee or any shortened duration of such Fixed Period pursuant to clause (iii) of the definition thereof) which would have accrued from the date of such repayment to the last day of such Fixed Period (or, in the case of clause (i) above, the maturity of the underlying commercial paper tranches) on the reductions of Capital of the Receivable Interest relating to such Fixed Period had such reductions remained as Capital, exceeds (B) the income, if any, received by the Investors or the Banks which hold such Receivable Interest from the investment of the proceeds of such reductions of Capital.

          “Lock-Box” means a post office box administered by a Deposit Bank for the purpose of receiving Collections.

          “Loss Horizon Factor” means, as of any date, a ratio computed by dividing (a)(i) the aggregate Outstanding Balance (in each case, at the time of creation) of all Originator Receivables created by the Originators during the four most recently ended calendar months plus (ii) 50.0% of the aggregate Outstanding Balance (in each case, at the time of creation) of all Originator Receivables created by the Originators during the fifth calendar month prior to the determination date (including the most recently ended calendar month) by (b)(i) the Outstanding Balance of Originator Receivables (other than Defaulted Receivables) as of the last day of the most recently ended calendar month minus (ii) the aggregate Unapplied Cash/Credit Memos as at the last day of the most recently ended calendar month.

          “Loss Ratio” means, as of any date, a ratio computed by dividing (a) the sum of (i) the aggregate Outstanding Balance of Originator Receivables that were more than 90 days past due but equal to or less than 120 days past due at the end of the most recent calendar month plus (ii) the aggregate Outstanding Balance of Originator Receivables that were less than or equal to 90 days past due and were written off by the applicable Originator or the Seller, or which should have been written off by such Originator or the Seller in accordance with the Credit and Collection Policy during the most recent calendar month (net of recoveries with respect to any Originator Receivables previously written off when less than or equal to 90 days past due), by (b) the sum of (i) 50% of the aggregate Outstanding Balance (in each case, at the time of creation) of all Originator Receivables created by the Originators during the fifth calendar month prior to the determination date (including the most recently ended calendar month) plus (ii) 50% of the aggregate Outstanding Balance (in each case, at the time of creation) of all Originator Receivables created by the Originators during the sixth calendar month prior to the determination date (including the most recently ended calendar month). For the purpose of calculating the Loss Ratio as of any date, Originator Receivables shall include all Repurchased Receivables which were more than 90 days past due but equal to or less than 120 days past due as of such date.

          “Loss Reserve Floor Percentage” means, (i) at any time when no Insurance Policy Event has occurred, three times the Normal Concentration Limit and (ii) at any other time, five times the Normal Concentration Limit.

-20-

          “Loss-to-Liquidation Ratio” means the ratio (expressed as a percentage) computed as of the last day of each calendar month by dividing (i) the aggregate Outstanding Balance of all Originator Receivables written off by the Originators or the Seller (net of recoveries), or which should have been written off by the Originators or the Seller in accordance with the Credit and Collection Policy, during the applicable calendar month ending on such last day by (ii) the aggregate amount of Collections of Originator Receivables actually received during such calendar month. For the purpose of calculating the Loss-to-Liquidation Ratio as of any date, Originator Receivables shall include Repurchased Receivables as of such date.

          “Majority Banks” shall mean at any time Banks having Bank Commitments that aggregate more than 50% of the Purchase Limit or, if the Bank Commitments have been terminated, Banks either holding Receivable Interests (or interests therein) or obligated to purchase interests in Receivable Interests pursuant to the Asset Purchase Agreement which aggregate more than 50% of all outstanding Receivable Interests.

          “Material Adverse Effect” means (A) a material adverse effect on (i) the financial condition, business, operations, assets or liabilities of the Seller, individually, or of the Parent and its Subsidiaries taken as a whole, (ii) the ability of an Originator, the Seller or the Servicer to perform any of its respective obligations under any of the Transaction Documents to which it is a party, (iii) the legality, validity or enforceability of the Transaction Documents (including, without limitation, the validity, enforceability or priority of the ownership or security interests granted thereunder) or (iv) the collectibility of the Receivables Pool or (B) a material impairment of the rights or remedies of the Agent, the Investors or the Banks under any of the Transaction Documents.

          “Maximum Percentage Factor” means, at any time, 100% minus:

               (a) during the calendar months of February through November:

               (i) if Weekly Reports are being delivered pursuant to Section 6.02(g), (x) the highest monthly decline (expressed in percentage terms) in the Outstanding Balance of all Pool Receivables during the most recent 12 months (but excluding the calendar months of December and January) divided by (y) 4; and

               (ii) at any other time, the highest monthly decline (expressed in percentage terms) in the Outstanding Balance of all Pool Receivables during the most recent 12 months (but excluding the calendar months of December and January);

               (b) during the calendar month of December:

               (i) if Weekly Reports are being delivered pursuant to Section 6.02(g), (x) the highest monthly decline (expressed in percentage terms) in the Outstanding Balance of all Pool Receivables during the calendar month of December in each of the previous two calendar years divided by (y) 4; and

-21-

               (ii) at any other time, the highest monthly decline (expressed in percentage terms) in the Outstanding Balance of all Pool Receivables during the calendar month of December in each of the previous two calendar years; and

               (c) during the calendar month of January:

               (i) if Weekly Reports are being delivered pursuant to Section 6.02(g), (x) the highest monthly decline (expressed in percentage terms) in the Outstanding Balance of all Pool Receivables during the calendar month of January in each of the previous two calendar years divided by (y) 4; and

               (ii) at any other time, the highest monthly decline (expressed in percentage terms) in the Outstanding Balance of all Pool Receivables during the calendar month of January in each of the previous two calendar years.

          “Monthly Report” means a report in substantially the form of Annex A-1 hereto and containing such additional information as the Agent may reasonably request from time to time, furnished by the Servicer pursuant to Section 6.02(g)(i).

          “Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.

          “Multiemployer Plan” means a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been made by ACI or any of its Subsidiaries or any ERISA Affiliate and which is covered by Title IV of ERISA, and as to which ACI or any of its Subsidiaries could have any liability.

          “Net Receivables Pool Balance” means at any time the Outstanding Balance of all Pool Receivables reduced, without duplication, by the sum of (i) the Outstanding Balance of all Pool Receivables that are not Eligible Receivables, (ii) the aggregate amount by which the Outstanding Balance of Eligible Receivables of each Obligor then in the Receivables Pool exceeds (A) if the Concentration Limit for such Obligor is expressed as a percentage, the product of (x) the Concentration Limit for such Obligor multiplied by (y) the Net Receivables Pool Balance, and (B) if the Concentration Limit for such Obligor is expressed as a dollar amount, such Concentration Limit, (iii) the aggregate outstanding amount of deposits received by the Originators from any Obligors with respect to Receivables then in the Receivables Pool, (iv) the aggregate amount of Unapplied Cash/Credit Memos at such time, (v) the aggregate of all potential set off amounts representing amounts owed by the Originators (or any Affiliate of an Originator) to any Obligor, (vi) the aggregate amount of PST (in the case of Canadian Receivables), sales taxes (in the case of Receivables other than Canadian Receivables) and other similar types of sales taxes (in each case, to the extent included in the Outstanding Balance of Eligible Receivables then in the Receivables Pool), (vii) the Foreign Currency Adjustment, (viii) prior to the occurrence of any Insurance Policy Event, the aggregate amount by which the Outstanding Balance of Eligible Receivables of ACG which is not insured by the Insurance Policy (either as a result of the coinsurance ratio or the credit limit under the Insurance Policy) exceeds 3.75% of the Net Receivables Pool Balance, (ix) prior to the occurrence of any Insurance Policy Event, the aggregate amount by which the Outstanding Balance of Eligible Receivables of Vertis Inc. which is not insured by the Insurance Policy (either as a result of the

-22-

coinsurance ratio or the credit limit under the Insurance Policy) exceeds 3.75% of the Net Receivables Pool Balance, (x) an amount equal to the then aggregate outstanding balance of all Off-Invoice Allowance Accruals, (xi) an amount equal to the then aggregate amount of early payment discounts that are expected to be taken by Obligors with respect to the Outstanding Balance of all Receivables, (xi) an amount equal to 49% of the Outstanding Balance of all Receivables arising out of the Restated and Amended Purchase Agreement, dated as of January 1, 2005, among Donohue Malbaie Inc., the New York Times Company and ACI that are attributable to the “Malbaie tonnage” (as defined therein), and (xii) the aggregate amount by which the Outstanding Balance of Eligible Receivables of all Obligors with a billing address in an Approved Country other than Canada or the United States then in the Receivables Pool exceeds (A) if the Country Concentration Limit for such Approved Country is expressed as a percentage, the product of (x) the Country Concentration Limit for such Approved Country multiplied by (y) the Net Receivables Pool Balance, and (B) if the Country Concentration Limit for such Approved Country is expressed as a dollar amount, such Country Concentration Limit. For the purpose of determining “Net Receivables Pool Balance”, all Collections, deemed Collections and other amounts in Canadian Dollars shall be expressed as the Dollar Equivalent thereof.

          “Non-Investment Grade Obligor” means an Obligor which is not an Investment Grade Obligor.

          “Normal Concentration Limit” has the meaning specified in the definition of “Concentration Limit” set forth above.

          “Normal Country Concentration Limit” has the meaning specified in the definition of “Country Concentration Limit” set forth above.

          “Notice of Amalgamation” has the meaning specified in Section 10.01(d).

          “Notice of Change of Address” has the meaning specified in Section 10.01(e).

          “Notice of Continuance and Change of Address” has the meaning specified in Section 10.01(c).

          “Obligor” means a Person obligated to make payments pursuant to a Contract.

          “Off-Invoice Allowance Accruals” means, at any time, with respect to a Receivable, a rebate or competitive allowance that does not appear on the face of the related invoice.

          “Original RPA” has the meaning specified in the Preliminary Statement.

          “Original Originator Purchase Agreement” means that certain Purchase and Contribution Agreement dated as of October 27, 2005, among the Originators, as sellers, the Seller, as purchaser, and ACI, as Servicer, as amended prior to the date hereof.

          “Originator” means each of the Canadian Originator and the U.S. Originator.

-23-

          “Originator Purchase Agreement” means the Amended and Restated Purchase and Contribution Agreement dated as of the date of this Agreement among the Originators, as sellers, the Seller, as purchaser, and ACI, as Servicer, as the same may be amended, modified or restated from time to time.

          “Originator Receivable” means the indebtedness of any Obligor (whether present or future and whether a claim, book debt or a receivable) resulting from the provision or sale of merchandise, insurance or services by any Originator under a Contract (whether constituting an account, instrument, chattel paper or general intangible), and which, (i) includes the right to payment of any Finance Charges and other obligations of such Obligor with respect thereto and, (ii) in respect of such a claim, book debt or receivable indebtedness, the Obligor of which has a billing address in Canada, includes GST; provided, however, that the term “Originator Receivable” shall not include (x) any such indebtedness originated by ACSC, the Obligor of which has a billing address that is not in Canada or the United States or any such indebtedness originated by ACI, the Obligor of which has a billing address that is not in any Approved Country or (y) any portion of any such indebtedness, the Obligor of which has a billing address in Canada, that constitutes PST.

          “Other Companies” means the Parent, the Originators and all of their Subsidiaries except the Seller.

          “Outstanding Balance” of any Receivable at any time means the then outstanding principal balance thereof; provided, that to the extent that the amount of any Receivable is, under the terms of the applicable Contract, expressed in Canadian Dollars, such amount for the purposes of this definition shall be the Dollar Equivalent thereof at the relevant time. Sales or use tax, PST and any other taxes (other than GST) and Finance Charges which may be billed in connection with a Receivable are not included in the Outstanding Balance. For purposes of this Agreement (but without affecting the rights of the Seller against the relevant Obligor), the Outstanding Balance of a Receivable shall be reduced by the amount of any Insurance Proceeds received by the Agent with respect thereto.

          “Parent” means AbitibiBowater Inc., a Delaware corporation.

          “Participant” has the meaning specified in Section 10.03(h).

          “PBGC” means Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.

          “Percentage” of any Bank means, (a) with respect to Citibank, the percentage set forth on the signature page to this Agreement, or such amount as reduced or increased by any Assignment and Acceptance entered into with an Eligible Assignee, or (b) with respect to a Bank that has entered into an Assignment and Acceptance, the amount set forth therein as such Bank’s Percentage, or such amount as reduced or increased by an Assignment and Acceptance entered into between such Bank and an Eligible Assignee.

          “Percentage Factor” means, at any time, a percentage equal to (i) the sum of the outstanding Capital plus the Aggregate Loss and Dilution Reserve plus the Yield and Fee Reserve plus the Premium Reserve divided by (ii) the Net Receivables Pool Balance. The

-24-

Percentage Factor is to be computed daily to reflect changes in the Net Receivables Pool Balance and Capital.

          “Person” means an individual, partnership, corporation, limited liability company, joint stock company, trust (including a business or statutory trust), unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.

          “Plan” means an employee benefit or other plan established or maintained by ACI or any of its Subsidiaries or any ERISA Affiliate and that is covered by Title IV of ERISA, other than a Multiemployer Plan, and as to which ACI or any of its Subsidiaries could have any liability.

          “Policy Coverage Period” means any of the following three month periods: (i) June, July and August, (ii) September, October and November, (iii) December, January and February and (iv) March, April and May.

          “Pool Receivable” means a Receivable in the Receivables Pool.

          “PPSA” means, with respect to any jurisdiction in Canada, the personal property security or similar legislation applicable in such jurisdiction, including with respect to the jurisdictions of Canada other than Quebec, the Personal Property Security Act applicable in such jurisdictions, and, with respect to Quebec, the Civil Code of Quebec, in each case as from time to time in effect.

          “Premium Reserve” means on any date of determination occurring in any Policy Coverage Period an amount equal to the premium due under the Insurance Policy with respect to such Policy Coverage Period. By way of example, if the relevant date of determination is July 30, the amount of the Premium Reserve as of such date shall be the amount of the premium due with respect to the June, July and August Policy Coverage Period.

          “Promissory Notes” means, collectively, (i) promissory notes issued by Eureka and (ii) participations sold by Eureka pursuant to Section 10.03(h); provided that the term “Promissory Notes” shall not include the interests sold by Eureka to a Bank or its designee under the Asset Purchase Agreement.

          “PST” means all taxes payable under the Retail Sales Tax Act (Ontario) or any similar statute of another jurisdiction of Canada, other than GST.

          “Purchase Limit” means $350,000,000, as such amount may be reduced pursuant to Section 2.01(b). References to the unused portion of the Purchase Limit shall mean, at any time, the Purchase Limit, as then reduced pursuant to Section 2.01(b), minus the then outstanding Capital of Receivable Interests under this Agreement.

          “QST” means the tax payable under the Act Respecting the Quebec Sales Tax, R.S.Q. c.T-01, as amended.

-25-

          “Receivable” means any Originator Receivable which has been acquired by the Seller from an Originator by purchase or by capital contribution pursuant to the Originator Purchase Agreement.

          “Receivable Interest” means, at any time, an undivided percentage ownership interest in (i) all then outstanding Pool Receivables, (ii) all Related Security with respect to such Pool Receivables, and (iii) all Collections with respect to, and other proceeds of, such Pool Receivables. Such undivided percentage interest shall be computed as

C

AC

          where:

C	=	the Capital of such Receivable Interest at the time of computation.
AC	=	the aggregate Capital of all Receivable Interests at the time of computation.

Each Receivable Interest shall be determined from time to time pursuant to the provisions of Section 2.03.

          “Receivables Pool” means at any time the aggregation of each then outstanding Receivable.

          “Register” has the meaning specified in Section 10.03(c).

          “Related Security” means with respect to any Receivable:

               (i) all security interests or liens or other Adverse Claims and property subject thereto from time to time purporting to secure payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise, together with all financing statements or registration applications filed against an Obligor describing any collateral securing such Receivable;

               (ii) all guaranties, insurance (including the Insurance Policy) and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable whether pursuant to the Contract related to such Receivable or otherwise; and

               (iii) the Contract and all other books, records and other information (including, without limitation, computer programs, tapes, discs, punch cards, data processing software and related property and rights) relating to such Receivable and the related Obligor.

          “Replacement Bank Agreement” has the meaning specified in Section 10.01(b).

-26-

          “Reporting Date” means any date on which a Seller Report is delivered or required to be delivered by the Servicer pursuant to Section 6.02(g).

          “Repurchased Receivable” means any Defaulted Receivable or Delinquent Receivable which has been repurchased pursuant to Section 2.18.

          “Required Ratings” means, for any Person, Debt Ratings of either (i) BB+ or above by S&P and Baa3 or above by Moody’s, or (ii) BBB- or above by S&P and Ba1 or above by Moody’s.

          “S&P” means Standard and Poor’s, a division of The McGraw Hill Companies, Inc. and any successor thereto.

          “SEC” means the Securities and Exchange Commission.

          “Seller Report” means a Monthly Report or a Weekly Report.

          “Servicer” means at any time the Person then authorized pursuant to Section 6.01 to administer and collect Pool Receivables.

          “Servicer Default” means the occurrence of any of the following:

               (i) The Servicer or the Subservicer (A) shall fail to perform or observe any term, covenant or agreement under this Agreement (other than as referred to in clause (B) or (C) of this subsection (i)) and such failure shall remain unremedied for three Business Days or (B) shall fail to make when due any payment or deposit to be made by it under this Agreement or (C) shall fail to deliver any Seller Report when required; or

               (ii) Any representation or warranty made or deemed made by the Servicer (or any of its officers) under or in connection with this Agreement or any other Transaction Document or any information or report delivered by the Servicer or the Subservicer pursuant to this Agreement or any other Transaction Document shall prove to have been incorrect or untrue in any material respect when made or deemed made or delivered; or

               (iii) The Servicer or the Subservicer shall fail to pay any principal of or premium or interest on any of its Debt which is outstanding under the Bank Agreement or any other Debt which is outstanding in a principal amount of at least CAD 65,000,000 (or the Dollar Equivalent thereof) in the aggregate when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt; or any such Debt shall be declared to

-27-

be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), redeemed, purchased or defeased, or an offer to repay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof; or

               (iv) (A) The Servicer or the Subservicer shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or (B) any proceeding shall be instituted by or against the Servicer or the Subservicer seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or arrangement of debt, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 60 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or (C) any receiver, trustee, custodian or similar official shall be appointed for the Servicer or the Subservicer under any private right; or (D) the Servicer or the Subservicer shall take any corporate action to authorize any of the actions set forth above in this clause (iv); or

               (v) There shall have occurred any event which may materially adversely affect the ability of the Servicer or the Subservicer to collect Pool Receivables or otherwise perform its obligations under this Agreement and the other Transaction Documents; or

               (vi) One or more judgments for the payment of money in an aggregate amount in excess of CAD 65,000,000 (or the Dollar Equivalent thereof) (except to the extent covered by insurance as to which the insurer has acknowledged such coverage in writing) shall be rendered against the Servicer or the Subservicer or a combination thereof, and the same shall remain undischarged for a period of 60 consecutive days during which execution shall not be effectively stayed, or any action shall be taken by a judgment creditor to attach or levy upon any assets of the Servicer or the Subservicer to enforce any such judgment.

          “Servicer Fee” has the meaning specified in Section 2.05(a).

          “Servicer Fee Reserve Percentage” means, on any date, a percentage equal to the product of (a) 0.50% and (b)(i) the Three-Month Turnover Rate for the most recently ended calendar month divided by (ii) 360.

-28-

          “Settlement Date (Capital)” means the Business Day immediately following the due date of each Seller Report; provided that if the Termination Date for all Receivable Interests shall have occurred, the “Settlement Dates (Capital)” shall be the date(s) selected by the Agent or, in the absence of any such selection, the “Settlement Date (Capital)” shall be each Business Day.

          “Settlement Date (Yield and Fees)” for any Receivable Interest means the third Business Day of each calendar month (commencing with the calendar month immediately following the calendar month in which such Receivable Interest was purchased); provided, however, that at any time that the Servicer is required to deliver a Weekly Report in accordance with Section 6.02(g)(ii), the “Settlement Date (Yield and Fees)” shall be the second Settlement Date (Capital) of each calendar month (commencing with the calendar month immediately following the calendar month in which such Receivable Interest was purchased); provided, however, that if the Termination Date for all Receivable Interests shall have occurred, the “Settlement Date (Yield and Fees)” for all Receivable Interests shall be the date(s) selected by the Agent, or in the absence of any such selection, the “Settlement Date (Yield and Fees)” for all Receivable Interests shall be the third Business Day of each calendar month.

          “Significant Incipient Event of Termination” means an event that, but for notice or lapse of time or both, would constitute an Event of Termination pursuant to clause (g)(ii) or (n) of Section 7.01.

          “SCC” means an Approved Country which has both (i) a Foreign Currency Long-Term Debt Rating of at least BB+ by S&P and (ii) a Foreign Currency Long-Term Debt Rating of at least Bal by Moody’s.

          “Special Concentration Limit” has the meaning specified in the definition of “Concentration Limit” set forth above.

          “Special Country Concentration Limit” has the meaning specified in the definition of “Country Concentration Limit” set forth above.

          “Stress Factor” means (i) at any time when no Insurance Policy Event has occurred, 1.5 and (ii) at any other time, 2.25.

          “Subservicer” has the meaning specified in Section 6.01.

          “Subsidiary” means any corporation or other entity of which securities having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Parent, the Seller or an Originator, as the case may be, or one or more Subsidiaries, or by the Parent, the Seller or any Originator, as the case may be, and one or more Subsidiaries.

          “Tangible Net Worth” means at any time the excess of (i) the sum of (a) the product of (x) 100% minus the Discount (as such term is defined in the Originator Purchase Agreement) multiplied by (y) the Outstanding Balance of all Receivables other than Defaulted Receivables plus (b) cash and cash equivalents of the Seller, minus (ii) the sum of (a) Capital

-29-

plus (b) the Deferred Purchase Price. To the extent any amounts referenced in the preceding sentence are not denominated in Dollars, the Dollar Equivalent thereof shall be utilized.

          “Term Period” means, for any Bank, the period commencing on the Cash Secured Advance Commencement Date, if any, for such Bank and ending on the first day on which the Termination Date for all Receivable Interests held by such Bank has occurred.

          “Term-Out Bank” means any Bank for which the Term Period has commenced.

          “Term-Out Bank Purchase Date” means, for any Term-Out Bank, the Commitment Termination Date for such Bank determined pursuant to clause (a) of the definition thereof, without giving effect to the final proviso at the end of the definition of Commitment Termination Date.

          “Termination Date” for any Receivable Interest means (i) in the case of a Receivable Interest owned by an Investor, the earlier of (a) the Business Day which the Seller or the Agent so designates by notice to the other at least one Business Day in advance for such Receivable Interest and (b) the Facility Termination Date and (ii) in the case of a Receivable Interest owned by a Bank, the earlier of (a) the Business Day which the Seller so designates by notice to the Agent at least one Business Day in advance for such Receivable Interest and (b) the Commitment Termination Date.

          “Three-Month Loss Ratio” means, for any calendar month, the average of the Loss Ratios for such calendar month and the two immediately preceding calendar months.

          “Three-Month Turnover Rate” means, for any calendar month, the average of the Turnover Rate for such calendar month and the two immediately preceding calendar months.

          “Total Reserves” means at any time the sum of (i) the Aggregate Loss and Dilution Reserve and (ii) the Yield and Fee Reserve.

          “Transaction Document” means any of this Agreement, the Originator Purchase Agreement, the Undertaking (Originator), the Undertaking (Servicer), the Insurance Policy, the Four Party Agreement, the Collateral Advance Account Agreement, the Deposit Account Agreements, the Fee Agreement, the Intercompany Agreement (Undertaking Agreements), all amendments to any of the foregoing and all other agreements and documents delivered and/or related hereto or thereto.

          “Turnover Rate” means, on any date, an amount equal to

[OBOR] x (30 + CDP)

     CO

          where:

OBOR ⁼ the Outstanding Balance of all Pool Receivables

-30-

CO	=	Collections received during such calendar month
CDP	=	the Collection Delay Period.

          “UCC” means the Uniform Commercial Code as from time to time in effect in the specified jurisdiction.

          “Unapplied Cash/Credit Memos” means, as at any time, the sum of (i) the aggregate amount of Collections (expressed as the Dollar Equivalent, if any such amount is in Canadian Dollars) on hand at such time for payment on account of any Eligible Receivables, the Obligor of which has not been identified and (ii) the aggregate Outstanding Balance of all Receivables in respect of which any credit memo issued by the applicable Originator or the Seller is outstanding at such time to the extent deemed Collections have not been paid pursuant to Section 2.04(f).

          “Undertaking (Originator)” means the Undertaking Agreement (Originator) dated as of October 27, 2005 made by ACI in favor of the Seller and relating to obligations of the U.S. Originator, substantially in the form of Annex F hereto, as the same may be amended, modified or restated from time to time.

          “Undertaking (Servicer)” means the Undertaking Agreement (Servicer) dated as of October 27, 2005 made by ACI in favor of the Agent, the Investors and the Banks and relating to obligations of the Servicer, substantially in the form of Annex G hereto, as the same may be amended, modified or restated from time to time.

          “Uninsured Special Concentration Limit” for any Obligor means at any time on or after the occurrence of any Insurance Policy Event:

                    (i) if such Obligor is The Tribune Publishing Company or The New York Times Company, 75.0% of the higher of (x) the Dynamic Loss Reserve Percentage and (y) the Loss Reserve Floor Percentage at such time; and

               (ii) with respect to any other Obligor:

                    (x) if and so long as such Obligor has Debt Ratings of at least AA- by S&P and Aa3 by Moody’s, 100.0% of the higher of (x) the Dynamic Loss Reserve Percentage and (y) the Loss Reserve Floor Percentage at such time; or

                    (y) if and so long as such Obligor has Debt Ratings of at least BBB- by S&P and Baa3 by Moody’s and the preceding clause (x) is not applicable, 50.0% of the higher of (x) the Dynamic Loss Reserve Percentage and (y) the Loss Reserve Floor Percentage at such time;

          provided that, in the event that none of clause (i), clause (ii)(x) or clause (ii)(y) above is applicable to a particular Obligor, the Concentration Limit for such Obligor shall be the Normal Concentration Limit.

-31-

          “U.S. Originator” means ACSC.

          “Weekly Report” means a report in substantially the form of Annex A-2 hereto and containing such additional information as any Agent may reasonably request from time to time, furnished by the Servicer pursuant to Section 6.02(g)(ii).

          “Yield” means for each Receivable Interest for each Fixed Period:

               (i) for each day during such Fixed Period to the extent such Receivable Interest will be funded on such day by Eureka through the issuance of Promissory Notes,

IR x C x ED + LF
	360

               (ii) for each day during such Fixed Period to the extent such Receivable Interest will not be funded on such day by Eureka through the issuance of Promissory Notes,

AR x C x ED + LF
	360

          where:

AR	=	the Assignee Rate for such Receivable Interest for such Fixed Period;
C	=	the Capital of such Receivable Interest during such Fixed Period;
IR	=	the Investor Rate for such Receivable Interest for such Fixed Period;
ED	=	the actual number of days elapsed during such Fixed Period;
LF	=	the Liquidation Fee, if any, for such Receivable Interest for such Fixed Period;

provided that no provision of this Agreement shall require the payment or permit the collection of Yield in excess of the maximum permitted by applicable law; and provided further that Yield for any Receivable Interest shall not be considered paid by any distribution to the extent that at any time all or a portion of such distribution is rescinded or must otherwise be returned for any reason.

-32-

          “Yield and Fee Reserve” means, for any Receivable Interest on any date, an amount equal to

(C x YFRP) + AUYF + (SFRP x OBOR)

          where:

C	=	the Capital of such Receivable Interest at the close of business of the Servicer on such date.
YFRP	=	the Yield and Fee Reserve Percentage on such date.
AUYF	=	accrued and unpaid Yield, Servicer Fee and Fees on such date, in each case for such Receivable Interest.
SFRP	=	the Servicer Fee Reserve Percentage.
OBOR	=	the aggregate Outstanding Balance of all Pool Receivables on such date.

          “Yield and Fee Reserve Percentage” means, on any date, a percentage equal to

1.5 x (AER + AM + PF) x TR
	360

          where:

AER	=	the one-month Adjusted Eurodollar Rate in effect on such date.
AM	=	the applicable spread or margin over the Adjusted Eurodollar Rate used in the calculation of the Assignee Rate in effect on such date.
PF	=	the Program Fee Rate (as defined in the Fee Agreement), in effect on such date.
TR	=	the Three-Month Turnover Rate for the most recently ended calendar month.

          Section 1.02 Other Terms. All accounting terms not specifically defined herein shall be construed in accordance with Canadian generally accepted accounting principles All terms used in Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in such Article 9.

-33-

ARTICLE II

AMOUNTS AND TERMS OF THE PURCHASES

          Section 2.01 Purchase Facility. (a) On the terms and conditions hereinafter set forth, Eureka may, in its sole discretion, and the Banks shall, ratably in accordance with their respective Bank Commitments, purchase Receivable Interests from the Seller from time to time during the period from the date hereof to the Facility Termination Date (in the case of Eureka) and to the Commitment Termination Date (in the case of the Banks). Under no circumstances shall Eureka make any such purchase, or the Banks be obligated to make any such purchase, if after giving effect to such purchase the aggregate outstanding Capital of Receivable Interests would exceed the Purchase Limit.

          (b) The Seller may at any time, upon at least five Business Days’ notice to the Agent, terminate the facility provided for in this Agreement in whole or, from time to time, reduce in part the unused portion of the Purchase Limit; provided that each partial reduction shall be in the amount of at least $1,000,000 or an integral multiple thereof.

          (c) Until the Agent gives the Seller the notice provided in Section 3.02(d)(iii), the Agent, on behalf of the Investors which own Receivable Interests, may have the Collections attributable to such Receivable Interests automatically reinvested pursuant to Section 2.04 in additional undivided percentage interests in the Pool Receivables by making an appropriate readjustment of such Receivable Interests. The Agent, on behalf of the Banks which own Receivable Interests, shall have the Collections attributable to such Receivable Interests automatically reinvested pursuant to Section 2.04 in additional undivided percentage interests in the Pool Receivables by making an appropriate readjustment of such Receivable Interests.

          (d) At least three Business Days prior to the Cash Secured Advance Commencement Date for any Bank, the Seller shall notify such Bank if the Seller wishes such Bank to make the advances described in this Section. Following such notice, on the Cash Secured Advance Commencement Date for such Bank, such Bank shall, and agrees to, make an advance to the Seller in Dollars in an amount equal to the excess of (i) such Bank’s Bank Commitment over (ii) the outstanding Capital of all Receivable Interests owned by such Bank (after giving effect to any purchase made by such Bank on or prior to such Cash Secured Advance Commencement Date pursuant to this Agreement or pursuant to the Asset Purchase Agreement to which it is a party) on the Term-Out Bank Purchase Date for such Bank, and such Bank shall make such advance by causing an amount equal to such advance to be deposited in same day funds into the Collateral Advance Account.

          Section 2.02 Making Purchases. (a) Each purchase by Eureka or the Banks shall be made on at least one Business Day’s notice from the Seller to the Agent (which, for any period during which Weekly Reports are required to be delivered pursuant to Section 6.02(g)(ii), shall be provided by delivery of a completed Weekly Report containing information covering the most recently ended reporting period for which such information is required pursuant to Section 6.02(g)(ii)); provided that no more than one purchase shall be made in any one calendar week. Each such notice of a purchase shall specify (i) the amount requested to be paid to the Seller (such amount being referred to herein as the initial “Capital” of the Receivable Interest

-34-

then being purchased), (ii) the date of such purchase (which shall be a Business Day), and (iii) if the Assignee Rate based on the Adjusted Eurodollar Rate is to apply to such Receivable Interest, the duration of the initial Fixed Period for such Receivable Interest. The Agent shall promptly thereafter notify the Seller whether Eureka has determined to make a purchase and, if so, whether all of the terms specified by the Seller are acceptable to Eureka.

          If Eureka has determined not to make a proposed purchase, the Agent shall promptly send notice of the proposed purchase to all of the Banks concurrently by telecopier, telex or cable specifying the date of such purchase, each Bank’s Percentage multiplied by the aggregate amount of Capital of Receivable Interest being purchased, whether the Yield for the Fixed Period for such Receivable Interest is calculated based on the Adjusted Eurodollar Rate (which may be selected only if such notice is given at least three Business Days prior to the purchase date) or the Alternate Base Rate, and the duration of the Fixed Period for such Receivable Interest (which shall be one day if the Seller has not selected another period); provided, however, that during the Term Period for any Bank, such Bank shall, on the date of such purchase, instruct the Agent to make available to the Seller at the account set forth in the Funds Transfer Letter such Bank’s ratable share of the amount of Capital of the interest in the Receivable Interest being acquired by such Bank out of the funds available therefor in the Collateral Advance Account.

          (b) On the date of each such purchase of a Receivable Interest, Eureka or the Banks, as the case may be, shall, upon satisfaction of the applicable conditions set forth in Article III, make available to the Seller in same day funds an amount equal to the initial Capital of such Receivable Interest, at the account set forth in the Funds Transfer Letter (or, with respect to the purchase of Receivable Interests made on the date hereof, at the accounts set forth in the Direction Letter); provided, however, if such purchase is being made by the Banks following the designation by the Agent of a Termination Date for a Receivable Interest owned by an Investor pursuant to clause (i)(a) of the definition of Termination Date and any Capital of such Receivable Interest is outstanding on such date of purchase, the Seller hereby directs the Banks to pay the proceeds of such purchase (to the extent of the outstanding Capital and accrued Yield on such Receivable Interest of the Investor) to the Agent’s Account, for application to the reduction of the outstanding Capital and accrued Yield on such Receivable Interest of the Investor; provided, further, however, that during the Term Period for any Bank, after receipt by the Agent of the instruction from such Bank referred to in the proviso to the last sentence of Section 2.02(a) and upon fulfillment of the applicable conditions set forth in Article III, the Agent shall make available to the Seller at the account set forth in the Funds Transfer Letter such Bank’s ratable share of such purchase, solely out of the funds available therefor in the Collateral Advance Account, and upon such deposit such Bank will be deemed to have paid to the Seller such Bank’s ratable share of such Bank’s amount of the Capital of the interest in the Receivable Interest being acquired for all purposes of this Agreement.

          (c) Effective on the date of each purchase pursuant to this Section 2.02 and each reinvestment pursuant to Section 2.04, the Seller hereby sells and assigns to the Agent, for the benefit of the parties making such purchase, an undivided percentage ownership interest, to the extent of the Receivable Interest then being purchased, in each Pool Receivable then existing and in the Related Security and Collections with respect thereto.

-35-

          (d) Notwithstanding the foregoing, (i) Eureka shall not make purchases under this Section 2.02 during the Term Period for any Bank in an amount which would exceed the Purchase Limit minus the aggregate Bank Commitments of the Term-Out Banks, and (ii) a Bank shall not be obligated to make purchases under this Section 2.02 at any time in an amount which would exceed such Bank’s Bank Commitment less such Bank’s ratable share of the aggregate outstanding Capital held by Eureka (whether or not any portion thereof has been assigned under the Asset Purchase Agreement), after giving effect to any reductions of the Capital held by Eureka to be made on the date of such purchase (whether from the distribution of Collections or from the proceeds of purchases by the Banks). Each Bank’s obligation shall be several, such that the failure of any Bank to make available to the Seller any funds in connection with any purchase shall not relieve any other Bank of its obligation, if any, hereunder to make funds available on the date of such purchase, but no Bank shall be responsible for the failure of any other Bank to make funds available in connection with any purchase.

          Section 2.03 Receivable Interest Computation. Each Receivable Interest shall be initially computed on its date of purchase. Thereafter until the Termination Date for such Receivable Interest, such Receivable Interest shall be automatically recomputed (or deemed to be recomputed) on each day on which there is an increase or decrease in the amount of Capital of such Receivable Interest or any other Receivable Interest. Any Receivable Interest, as computed (or deemed recomputed) as of the day immediately preceding the Termination Date for such Receivable Interest, shall thereafter remain constant. Each Receivable Interest shall become zero when Capital thereof and Yield thereon shall have been paid in full, and all Fees and other amounts owed by the Seller hereunder to the Investor, the Banks or the Agent are paid and the Servicer shall have received the accrued Servicer Fee thereon.

          Section 2.04 Settlement Procedures. (a) Collection of the Pool Receivables shall be administered by a Servicer, in accordance with the terms of Article VI of this Agreement. The Seller shall provide to the Servicer (if other than the Seller) on a timely basis all information needed for such administration, including notice of the occurrence of any Liquidation Day and current computations of each Receivable Interest.

          (b) The Servicer shall, on each day on which Collections of Pool Receivables are received by it:

               (i) with respect to each Receivable Interest, set aside and hold in trust (but not physically segregate) for the Investors or the Banks that hold such Receivable Interest, out of the percentage of such Collections represented by such Receivable Interest, an amount equal to the Yield, Fees and Servicer Fee (and, during the Term Period, an amount equal to the Excess Interest in respect of all Cash Secured Advances) accrued through such day for such Receivable Interest and not previously set aside;

               (ii) with respect to each Receivable Interest, if such day is not a Liquidation Day for such Receivable Interest, reinvest with the Seller on behalf of the Investors or the Banks that hold such Receivable Interest the percentage of such Collections represented by such Receivable Interest;

-36-

               (iii) if such day is a Liquidation Day for (x) any one or more (but not all) Receivable Interests, set aside and hold in trust (and, at the request of the Agent, segregate) for the Investors or the Banks that hold such Receivable Interests, the percentage of such Collections represented by such Receivable Interests, or (y) all of the Receivable Interests, set aside and hold in trust (and, at the request of the Agent, segregate) all of the remaining Collections received by the Servicer on such date (but not in excess of the Capital of such Receivable Interests and any other amounts payable by the Seller hereunder); provided that if amounts are set aside and held in trust on any Liquidation Day occurring prior to the Termination Date for the applicable Receivable Interest, and thereafter prior to the next occurring Settlement Date (Capital) the conditions set forth in Section 3.02 are satisfied or waived by the Agent, such previously set aside amounts shall, to the extent representing a return of Capital, be reinvested in accordance with the preceding subsection (ii) on the day of such subsequent satisfaction or waiver of conditions; and

               (iv) during such times as amounts are required to be reinvested in accordance with the foregoing subsection (ii) or the proviso to subsection (iii), release to the Seller for its own account any Collections in excess both of such amounts and of the amounts that are required to be set aside pursuant to subsection (i) above.

          (c) [Intentionally Omitted].

          (d) The Servicer shall deposit into the Agent’s Account, (i) on the Settlement Date (Yield and Fees) for each Receivable Interest, Collections held for the Investors or the Banks with respect to Yield, Fees, Excess Interest and other amounts (other than Capital) that relate to such Receivable Interest pursuant to Section 2.04(b), (ii) on each Settlement Date (Capital) following delivery of a Seller Report which shows that (x) the outstanding Capital plus Total Reserves exceeded (y) the product of the Maximum Percentage Factor multiplied by the Net Receivables Pool Balance (as of the related Reporting Date), all other Collections held for the Investors or the Banks pursuant to clause (iii) of Section 2.04(b); provided, however, that the aggregate amount deposited in the Agent’s Account pursuant to this clause (ii) with respect to any Seller Report shall not exceed an amount such that, after giving effect to the application of such amount to the reduction of Capital with respect to the Receivable Interests shown in that Seller Report, the sum of outstanding Capital plus the Total Reserves is equal to the product of the Maximum Percentage Factor multiplied by the Net Receivables Pool Balance, and (iii) on each Settlement Date (Capital) on which Collections are held for the Investors or the Banks pursuant to clause (iii) of Section 2.04(b), after giving effect to any deposits to be made on such date pursuant to the preceding clause (ii) of this Section 2.04(d), all such remaining Collections.

          (e) Upon receipt of funds deposited into the Agent’s Account, the Agent shall distribute them as follows:

               (i) if such distribution occurs on a day that is not a Liquidation Day, first to the Investors, the Banks and, during any Term-Out Period, the Term-Out Banks that hold the relevant Receivable Interest and to the Agent in

-37-

ratable payment in full of all accrued Yield and Fees and remaining unpaid accrued interest in respect of all Cash Secured Advances (pursuant to the last sentence of Section 2.15) and then to the Servicer in payment in full of all accrued Servicer Fee; and

               (ii) if such distribution occurs on a Liquidation Day, first to the Investors or the Banks and/or Term-Out Banks that hold the relevant Receivable Interest and to the Agent in ratable payment in full of all accrued Yield and Fees and interest in respect of all Cash Secured Advances, second to such Investors or Banks in reduction to zero of all Capital, third to the Term-Out Banks in reduction to zero of the principal amount of all Cash Secured Advances remaining after application of the Cash Collateral in accordance with Section 2.17(d), fourth to the Investors, Banks, Term-out Banks or the Agent in payment of any other amounts owed by the Seller hereunder or under any other Transaction Document, and fifth to the Servicer in payment in full of all accrued Servicer Fee.

          After the payment in full of Capital, Yield, Fees and the Servicer Fee with respect to all Receivable Interests, and any other amounts payable by the Seller to the Investors, the Banks or the Agent hereunder or under any other Transaction Document, including, without limitation, any reimbursement obligations of the Seller with respect to any indemnity provided by the Agent under any Deposit Account Agreement or the Collateral Advance Account Agreement, all additional Collections with respect to the Receivable Interests shall be paid to the Seller for its own account.

          (f) For the purposes of this Section 2.04:

               (i) if on any day any Pool Receivable becomes (in whole or in part) a Diluted Receivable, the Seller shall be deemed to have received on such day a Collection of such Pool Receivable in the amount of such Diluted Receivable;

               (ii) if on any day any of the representations or warranties contained in Section 4.01(h) is no longer true with respect to any Pool Receivable, the Seller shall be deemed to have received on such day a Collection of such Pool Receivable in full;

               (iii) except as provided in subsection (i) or (ii) of this Section 2.04(f), or as otherwise required by applicable law or the relevant Contract, all Collections received from an Obligor of any Receivables shall be applied to the Receivables of such Obligor in the order of the age of such Receivables, starting with the oldest such Receivable, unless such Obligor designates its payment for application to specific Receivables;

               (iv) if and to the extent the Agent, the Investors or the Banks shall be required for any reason to pay over to an Obligor any amount received on its behalf hereunder, such amount shall be deemed not to have been so received but rather to have been retained by the Seller and, accordingly, the Agent, the

-38-

Investors or the Banks, as the case may be, shall have a claim against the Seller for such amount, payable when and to the extent that any distribution from or on behalf of such Obligor is made in respect thereof.

          (g) Within one Business Day after the end of each Fixed Period in respect of which Yield is computed by reference to the Investor Rate, the Agent shall furnish the Seller with an invoice setting forth the amount of the accrued and unpaid Yield and Fees for such Fixed Period with respect to the Receivable Interests held by the Investors and the Banks.

          (h) All amounts payable by the Seller or the Servicer under this Agreement to the Agent for its own account or for the account of the Investor or the Banks shall be paid in Dollars. The purchase price for Receivable Interests and all other amounts payable by the Investor or the Banks under this Agreement shall be payable in Dollars.

          Section 2.05 Fees. (a) Each Investor and Bank shall pay to the Servicer and the Subservicer an aggregate fee (the “Servicer Fee”) in respect of each Receivable Interest owned by it in an amount equal to 1/2 of 1% per annum of the Receivable Interest (expressed as a percentage) of such Investor or Bank multiplied by the average daily aggregate Outstanding Balance of all Receivables, from the date of purchase of such Receivable Interest until the later of the Termination Date for such Receivable Interest or the date on which the Capital of such Receivable Interest is reduced to zero, payable on each Settlement Date (Yield and Fees) for such Receivable Interest. So long as ACSC is the Servicer and ACI is the Subservicer, the Servicer hereby directs the Investors and the Banks to pay 80% of the Servicer Fee to the Subservicer and 20% of the Servicer Fee to the Servicer. Upon three Business Days’ notice to the Agent, the Servicer (if not the Originator, the Seller or its designee or an Affiliate of the Seller) may elect to be paid, as such fee, another percentage per annum on the average daily aggregate Outstanding Balance of Receivables, but in no event in excess of 110% of the actual and reasonable costs and expenses of the Servicer in administering and collecting the Receivables in the Receivables Pool. The Servicer Fee shall be payable only from Collections pursuant to, and subject to the priority of payment set forth in, Section 2.04. So long as ACSC is acting as the Servicer hereunder and ACI is acting as the Subservicer, amounts paid as the Servicer Fee pursuant to this Section 2.05(a) shall reduce, on a dollar for dollar basis, the obligation of the Seller to pay the “Servicer Fee” pursuant to Section 6.03 of the Originator Purchase Agreement, provided that such obligation of the Seller shall in no event be reduced below zero.

          (b) The Seller shall pay to the Agent certain fees (collectively, the “Fees”) in the amounts and on the dates set forth in that certain fee agreement dated as of October 27, 2005 between the Seller and the Agent, as the same may be amended or restated from time to time (the “Fee Agreement”).

          Section 2.06 Payments and Computations, Etc. (a) All amounts to be paid or deposited by the Seller or the Servicer hereunder shall be paid or deposited no later than 11:00 A.M. (New York City time) on the day when due in same day funds to the Agent’s Account.

          (b) All computations of Yield, fees, and other amounts hereunder (including, without limitation, interest on Cash Secured Advances during the Term Period) shall be made on

-39-

the basis of a year of 360 days for the actual number of days (including the first but excluding the last day) elapsed. Whenever any payment or deposit to be made hereunder shall be due on a day other than a Business Day, such payment or deposit shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of such payment or deposit.

          Section 2.07 Dividing or Combining Receivable Interests. Either the Seller or the Agent may, upon notice to the other party received at least three Business Days prior to the last day of any Fixed Period in the case of the Seller giving notice, or up to the last day of such Fixed Period in the case of the Agent giving notice, either (i) divide any Receivable Interest into two or more Receivable Interests having aggregate Capital equal to the Capital of such divided Receivable Interest, or (ii) combine any two or more Receivable Interests originating on such last day or having Fixed Periods ending on such last day into a single Receivable Interest having Capital equal to the aggregate of the Capital of such Receivable Interests; provided, however, that no Receivable Interest owned by Eureka may be combined with a Receivable Interest owned by any Bank.

          Section 2.08 Increased Costs. (a) Without duplication with respect to any amounts payable pursuant to Section 2.10 and excluding amounts specifically excluded from the definition of “Taxes” as set forth in Section 2.10 and, without duplication of any amounts otherwise payable as interest hereunder, if, after the date hereof, the Agent, any Investor, any Bank, or any bank or other financial institution providing liquidity and/or credit support to any Investor in connection with such Investor’s commercial paper program, or any of their respective Affiliates (each, an “Affected Person”) determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of the capital required or expected to be maintained by such Affected Person and such Affected Person determines that the amount of such capital is increased by or based upon the existence of any commitment to make purchases of or otherwise to maintain the investment in Pool Receivables or interests therein related to this Agreement or to the funding thereof and other commitments of the same type, then, upon demand by such Affected Person (with a copy to the Agent), the Seller shall immediately pay to the Agent for the account of such Affected Person (as a third-party beneficiary), from time to time as specified by such Affected Person, additional amounts sufficient to compensate such Affected Person in the light of such circumstances, to the extent that such Affected Person reasonably determines such increase in capital to be allocable to the existence of any of such commitments; provided, however, that no Eligible Assignee or Participant shall be entitled to receive any greater payment under this Section 2.08(a) than such Affected Person would have been entitled to receive with respect to the rights assigned, participated or otherwise transferred unless the circumstances giving rise to such greater payment occurred after the date of such assignment, participation or transfer. A certificate as to such amounts submitted to the Seller and the Agent by such Affected Person shall be conclusive and binding for all purposes, absent manifest error.

          (b) Without duplication with respect to any amounts payable pursuant to Section 2.10 and excluding amounts specifically excluded from the definition of “Taxes” as set forth in Section 2.10 and, without duplication of any amounts otherwise payable as interest hereunder, if, after the date hereof, due to either (i) the introduction of or any change (other than

-40-

any change by way of imposition or increase of reserve requirements which are included in the calculation of the Eurodollar Rates Reserve Percentage) in or in the interpretation of any law or regulation or (ii) compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Investor or Bank of agreeing to purchase or purchasing, or maintaining the ownership of Receivable Interests in respect of which Yield is computed by reference to the Adjusted Eurodollar Rate, then, upon demand by such Investor or Bank (with a copy to the Agent), the Seller shall immediately pay to the Agent, for the account of such Investor or Bank (as a third party beneficiary), from time to time as specified by such Investor or Bank, additional amounts sufficient to compensate such Investor or Bank for such increased costs; provided, however, that no Eligible Assignee or Participant shall be entitled to receive any greater payment under this Section 2.08(b) than such Investor or Bank would have been entitled to receive with respect to the rights assigned, participated or otherwise transferred unless the circumstances giving rise to such greater payment occurred after the date of such assignment, participation or transfer. A certificate as to such amounts submitted to the Seller and the Agent by such Investor or Bank shall be conclusive and binding for all purposes, absent manifest error.

          (c) Failure or delay on the part of any Affected Person, any Investor or any Bank, as the case may be, to demand compensation pursuant to this Section 2.08 shall not constitute a waiver of such Person’s right to demand such compensation; provided, that the Seller shall not be required to compensate an Affected Person, an Investor or a Bank (as the case may be) pursuant to this Section 2.08 for any increased costs incurred more than 180 days prior to the date that such Person notifies the Seller of the applicable law, regulation, guideline or request giving rise to such increased costs and of such Person’s intention to claim compensation therefor; provided, further that, if the applicable law, regulation, guideline or request giving rise to such increased costs is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.

          Section 2.09 [Intentionally Omitted].

          Section 2.10 Taxes. (a) Except as otherwise required by law, any and all payments and deposits required to be made hereunder or under any other Transaction Document by the Servicer or the Seller shall be made free and clear of and without deduction or withholding for or on account of any and all present or future income, stamp or, without limitation, other taxes, levies, imposts, deductions, duties, fees, charges or withholdings, and all liabilities with respect thereto, excluding (A) net income taxes and franchise taxes (imposed in lieu of net income taxes) and backup withholding taxes that are imposed on an Affected Person by the United States, a state thereof or a foreign jurisdiction under the laws of which such Affected Person is organized or any political subdivision thereof and net income taxes and capital taxes imposed by Canada or any political subdivision thereof other than Canadian withholding taxes and other than Canadian taxes based on or measured by income or capital in connection with the Receivables or the transactions contemplated by the Transaction Documents resulting from the Seller or any Affected Person (but only directly and exclusively as a result of any breach by the Seller or the Servicer (or any delegatee thereof, including the Subservicer) of their respective obligations under the Transaction Documents) having a permanent establishment in Canada solely as a result of such transactions, (B) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction described in clause (A) above,

-41-

(C) any withholding taxes imposed on amounts payable to an Affected Person at the time such Affected Person becomes an Affected Person hereunder by virtue of an assignment, except to the extent that such Affected Person’s assignor (if any) was entitled at the time of assignment, to receive additional amounts from the Servicer or the Seller with respect to such Taxes pursuant to this Section 2.10(a), or (D) any taxes that are imposed as a result of any event occurring after the Affected Person becomes an Affected Person hereunder by virtue of an assignment other than a change in law or regulation or the introduction of any law or regulation or a change in interpretation or administration of any law (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as “Taxes”). If the Seller or the Servicer or any Obligor shall be required by law to deduct any Taxes from or in respect of any sum payable or deposited hereunder to (or for the benefit of) any Affected Person, (i) the Seller, or the Servicer, as the case may be, shall make an additional payment to such Affected Person, in an amount sufficient so that, after making all required deductions (including deductions applicable to additional sums payable under this Section 2.10), such Affected Person receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Seller or the Servicer, as the case may be, shall make such deductions and (iii) the Seller or the Servicer, as the case may be, shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. Within 30 days after the date of any payment of Taxes, the Seller or the Servicer, as the case may be, will furnish to the Agent, at its address referred to in Section 10.02, the original or a certified copy of a receipt evidencing payment thereof.

          (b) In addition, the Seller agrees to pay any present or future stamp or other documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under any other Transaction Document or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Transaction Document (hereinafter referred to as “Other Taxes”).

          (c) The Seller and Servicer will indemnify each Affected Person for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.10) paid by such Affected Person or deducted or withheld from any Collections (including any Taxes or amounts on account of Taxes deducted by any Obligor) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within thirty days from the date the Affected Person makes written demand therefor (and a copy of such demand shall be delivered to the Agent). A certificate as to the amount of such indemnification submitted to the Seller and the Agent by such Affected Person, setting forth, in reasonable detail, the basis for and the calculation thereof, shall be conclusive and binding for all purposes absent manifest error.

          (d) Each Affected Person that is not (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States (or any jurisdiction thereof), or (iii) any estate or trust that is subject to federal income taxation regardless of the source of its income shall, on or prior to the date hereof (or, in the case of any Person who becomes an Affected Person after the date hereof, on or prior to the date on which it so becomes an Affected Person), deliver to the Seller two copies of either Internal Revenue Service Form W-8BEN or Form W-8ECI and any other certificate or statement

-42-

of exemption required by Treasury Regulation Section 1.1441-1(a) or Section 1.1441-6(c) or any subsequent version thereof or successors thereto, properly completed and duly executed by such Affected Person as will permit, insofar as the laws of the United States are applicable, such payments to be made by the Servicer or Seller without withholding or at a reduced rate. Each such Affected Person shall from time to time thereafter, upon written request from the Seller, deliver to the Seller any new certificates, documents or other evidence as described in the preceding sentence as will permit, insofar as the laws of the United States are applicable, payments under this Agreement to be made without withholding or at a reduced rate (but only so long as such Affected Person is legally able to do so).

          (e) The Seller and the Servicer shall not be required to pay any amounts to any Affected Person in respect of Taxes and Other Taxes pursuant to paragraphs (a), (b) and (c) above to the extent the obligation to pay such amounts is attributable to the failure by such Affected Person to comply with the provisions of paragraph (d) above; provided, however, that should an Affected Person become subject to Taxes because of its failure to deliver a form required hereunder, the Seller and the Servicer shall take such steps as such Affected Person shall reasonably request to assist such Affected Person to recover such Taxes, at the sole cost and expense of such Affected Person.

          (f) The Seller and Eureka agree that it is each such party’s intent that any interest income paid to Eureka pursuant to this Agreement and the other Transaction Documents shall be “portfolio interest” and, therefore, exempt from U.S. federal withholding tax, under section 881(c) of the Code and the regulations promulgated thereunder.

          (g) If an Affected Person receives a refund in respect of any Taxes or Other Taxes as to which it has been indemnified by the Seller and Servicer or with respect to which the Seller and Servicer have paid additional amounts pursuant to this Section 2.10, it shall within 30 days from the date of such receipt pay over the amount of such refund to the Seller and Servicer, net of all reasonable out-of-pocket expenses of such Affected Person and without interest (other than interest paid by the relevant taxation authority with respect to such refund); provided that the Seller and Servicer, upon the request of such Affected Person, agrees to repay the amount paid over to the Seller and Servicer (plus penalties, interest or other reasonable charges) to such Affected Person in the event such Affected Person is required to repay such refund to such taxation authority.

          Section 2.11 Security Interest. As collateral security for the performance by the Seller of all the terms, covenants and agreements on the part of the Seller (whether as Seller or otherwise) to be performed under this Agreement or any document delivered in connection with this Agreement in accordance with the terms thereof, including the punctual payment when due of all obligations of the Seller hereunder or thereunder, whether for indemnification payments, principal and interest on the Cash Secured Advances, Yield, Capital, fees, expenses or otherwise, the Seller hereby assigns to the Agent for its benefit and the ratable benefit of the Investors and the Banks, and hereby grants to the Agent for its benefit and the ratable benefit of the Investors and the Banks, a security interest in, all of the Seller’s right, title and interest in and to (A) the Originator Purchase Agreement and the Undertaking (Originator), including, without limitation, (i) all rights of the Seller to receive moneys due or to become due under or pursuant to the Originator Purchase Agreement or the Undertaking (Originator), (ii) all security interests and

-43-

property subject thereto from time to time purporting to secure payment of monies due or to become due under or pursuant to the Originator Purchase Agreement or the Undertaking (Originator), (iii) all rights of the Seller to receive proceeds of any insurance (including, without limitation, the right to receive Insurance Proceeds), indemnity, warranty or guaranty with respect to the Originator Purchase Agreement or the Undertaking (Originator), (iv) claims of the Seller for damages arising out of or for breach of or default under the Originator Purchase Agreement or the Undertaking (Originator), and (v) the right of the Seller to compel performance and otherwise exercise all remedies thereunder, (B) all Receivables, whether now owned and existing or hereafter acquired or arising, the Related Security with respect thereto and the Collections and all other assets, including, without limitation, accounts, chattel paper, goods, instruments and general intangibles (as those terms are defined in the UCC), including undivided interests in any of the foregoing, (C) the Lock-Boxes and Deposit Accounts, and any funds on deposit in any such account, and (D) to the extent not included in the foregoing, all proceeds of any and all of the foregoing.

          Section 2.12 Sharing of Payments. If any Investor or any Bank (for purposes of this Section only, referred to as a “Recipient”) shall obtain payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) on account of the Capital of, or Yield on, any Receivable Interest or portion thereof owned by it in excess of its ratable share of payments made on account of the Capital of, or Yield on, all of the Receivable Interests owned by the Investors and the Banks (other than as a result of a payment of Liquidation Fee or different methods for calculating Yield), such Recipient shall forthwith purchase from the Investors or the Banks which received less than their ratable share participations in the Receivable Interests owned by such Persons as shall be necessary to cause such Recipient to share the excess payment ratably with each such other Person; provided, however, that if all or any portion of such excess payment is thereafter recovered from such Recipient, such purchase from each such other Person shall be rescinded and each such other Person shall repay to the Recipient the purchase price paid by such Recipient for such participation to the extent of such recovery, together with an amount equal to such other Person’s ratable share (according to the proportion of (a) the amount of such other Person’s required payment to (b) the total amount so recovered from the Recipient) of any interest or other amount paid or payable by the Recipient in respect of the total amount so recovered.

          Section 2.13 Intentionally Omitted.

          Section 2.14 Purchase by Term-Out Banks. At least three Business Days prior to the Cash Secured Advance Commencement Date for any Bank, the Seller shall notify the Agent if the Seller wishes the purchase described in this Section 2.14 to occur. Following such notice, on the Cash Secured Advance Commencement Date for such Bank, such Bank shall, and agrees to, purchase from the Investor such Bank’s ratable share of all Receivable Interests then owned by the Investor for a purchase price equal to the sum of such Bank’s ratable share of the Capital of such Receivable Interests plus accrued and unpaid Yield and Fees thereon. Such purchase price shall be payable in immediately available funds on the Cash Secured Advance Commencement Date for such Bank. The Investor shall notify the Agent and the Seller of any such purchase. No further documentation of such purchase shall be required for the effectiveness thereof, provided that if requested by any purchasing Bank, the Investor (or its

-44-

administrative agent) will execute and deliver an assignment to such Bank in such form as may be mutually agreed between the Investor and such Bank.

          Section 2.15 Interest on Cash Secured Advances. The Seller shall pay interest to each Term-Out Bank on the unpaid principal amount of such Bank’s Cash Secured Advance from the date of such Cash Secured Advance until such principal amount shall be repaid in full, at a rate per annum equal at all times during each Fixed Period to the Assignee Rate for such Fixed Period, payable in arrears on each Settlement Date (Yield and Fees). On each Settlement Date (Yield and Fees) after the Cash Secured Advance Commencement Date for any Bank, the Agent shall pay to such Bank, on behalf of the Seller, pursuant to a Collateral Advance Account Direction from the relevant Bank, such Bank’s ratable portion (based on the outstanding principal amounts of each Bank’s Cash Secured Advances) of the cash funds that constitute that interest on, and those dividends from, the Cash Collateral which shall then be available to be withdrawn from the Collateral Advance Account, for application to the payment of unpaid accrued interest on the Cash Secured Advances. Any remaining unpaid accrued interest on the Cash Secured Advances shall be paid from the Collections of the Pool Receivables pursuant to Section 2.04 and Section 2.17(d).

          Section 2.16 Repayment of Cash Secured Advances. The Seller shall repay to each Term-Out Bank the aggregate outstanding principal amount of such Bank’s Cash Secured Advance on the Commitment Termination Date; provided, however, that recourse for such repayment shall be from, and shall be limited to, the Cash Collateral and the Collections of the Pool Receivables in accordance with Section 2.04.

          Section 2.17 Use of Proceeds; Security Interest in Collateral Advance Account. (a) The Seller hereby agrees that it shall use the proceeds of the Cash Secured Advances solely to fund and maintain the Collateral Advance Account for the purpose of funding purchases of Receivable Interests from time to time during the Term Period.

          (b) The Seller hereby grants to the Agent, for the ratable benefit of the Term- Out Banks, a security interest in the following, whether now owned and existing or hereafter acquired or arising (collectively, the “Cash Collateral”):

     (i) the Collateral Advance Account, all funds from time to time credited to the Collateral Advance Account, all financial assets (including, without limitation, Eligible Investments) from time to time acquired with any such funds or otherwise credited to the Collateral Advance Account, all interest, dividends, cash, instruments and other investment property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such funds or such financial assets, and

     (ii) all proceeds of, collateral for, and supporting obligations relating to any and all of the Cash Collateral.

          (c) The grant of a security interest by the Seller to the Agent for the ratable benefit of the Term-Out Banks pursuant to subsection (b) above secures the payment of the

-45-

Seller’s obligation to repay the Cash Secured Advances, and to pay interest thereon, pursuant to Section 2.15 and Section 2.16, respectively.

          (d) On the Commitment Termination Date for any Bank as to which the Term Period has occurred, the Agent shall (i) convert the Cash Collateral that does not constitute cash into cash proceeds and (ii) pay to each Term-Out Bank, on behalf of the Seller, such Bank’s ratable portion of the Cash Collateral (it being understood that all the Cash Collateral shall then constitute cash or cash proceeds), according to the respective outstanding principal amounts of their respective Cash Secured Advances, for application, first, to the repayment of the outstanding principal amounts of the Cash Secured Advances and, second, to the payment of unpaid accrued interest on the Cash Secured Advances (to the extent such funds are available therefor). Any remaining outstanding principal amount of, and/or unpaid accrued interest on, the Cash Secured Advances shall be paid from the Collections of the Pool Receivables pursuant to Section 2.04.

          Section 2.18 Repurchase Option. So long as no Event of Termination or Incipient Event of Termination would occur or be continuing after giving effect thereto, the Seller shall have the right (but not any obligation) to repurchase that portion of each Receivable Interest sold pursuant hereto representing one or more specified Pool Receivables which are Defaulted Receivables or Delinquent Receivables, or otherwise identified by the Seller (including such Pool Receivables as are identified for repurchase by the Seller in order to conform with, or not to breach, any provision of or order under, the Foreign Extraterritorial Measures Act (Canada) or regulations thereunder), upon not less than three Business Days’ prior written notice to the Agent. Such notice shall specify the date that the Seller desires that such repurchase occur (such date, the “Repurchase Date”) and shall identify the Receivables to be included in such repurchase. On the Repurchase Date, the Seller shall transfer to the Agent’s Account in immediately available funds an amount equal to the lesser of (i) the Outstanding Balance of the Receivables included in such repurchase and (ii) the excess, if any, of the outstanding Capital plus Total Reserves over the product of the Net Receivables Pool Balance (excluding the Receivables included in such repurchase) and the Maximum Percentage Factor, and upon receipt thereof, the Agent, the Investors and the Banks shall be deemed to assign and release, without recourse, representation or warranty, their right, title and interest in and to the Receivables included in such repurchase. In connection with any such repurchase, the Agent shall execute and deliver, at the Seller’s request and expense, any assignment or release that the Seller may reasonably request to evidence the repurchase of the applicable Receivables. At such time, if any, that the aggregate Outstanding Balance of all Receivables repurchased pursuant to this Section exceeds 2% of the aggregate Outstanding Balance of all Pool Receivables, the Seller will (or will cause the Servicer or the applicable Originator to) instruct all Obligors of Receivables that are repurchased pursuant hereto to remit all of their payments in respect of such Receivables to accounts or post offices boxes other than the Deposit Accounts or the Lock-Boxes.

-46-

ARTICLE III

CONDITIONS OF PURCHASES

          Section 3.01 [Intentionally Omitted].

          Section 3.02 Conditions Precedent to All Purchases and Reinvestments. Each purchase (including the initial purchase) and each reinvestment shall be subject to the conditions precedent that (a) in the case of each purchase, the Servicer shall have delivered to the Agent at least one Business Day prior to such purchase, in form and substance satisfactory to the Agent, a completed Seller Report containing information covering the most recently ended reporting period for which information is required pursuant to Section 6.02(g) and demonstrating that after giving effect to such purchase no Event of Termination or Incipient Event of Termination under Section 7.01(i) would occur, (b) in the case of each reinvestment, the Servicer shall have delivered to the Agent on or prior to the date of such reinvestment, in form and substance satisfactory to the Agent, a completed Seller Report containing information covering the most recently ended reporting period for which information is required pursuant to Section 6.02(g), (c) as of the date of such purchase or reinvestment, an Investor or Bank or the Agent shall not have determined, acting reasonably, and notified the Seller and the Agent that it has or is deemed to have a permanent establishment within Canada solely as a result of the transactions contemplated hereby or as a result of any breach by the Seller or the Servicer of any of their obligations under this Agreement, (d) on the date of such purchase or reinvestment the following statements shall be true, except that the statement in clause (iii) below is required to be true only if such purchase or reinvestment is by an Investor (and acceptance of the proceeds of such purchase or reinvestment shall be deemed a representation and warranty by the Seller and the Servicer (each as to itself) that such statements are then true):

     (i) The representations and warranties contained in the second sentence of Section 4.01(e) and Section 4.02(e)(ii) are correct on and as of the date of any such purchase as though made on and as of such date and all other representations and warranties contained in Sections 4.01 and 4.02 are correct on and as of the date of such purchase or reinvestment as though made on and as of such date (except insofar as such representations and warranties relate expressly to an earlier date certain, in which case such representations and warranties shall be correct as of such earlier date),

     (ii) No event has occurred and is continuing, or would result from such purchase or reinvestment, that constitutes an Event of Termination or an Incipient Event of Termination, and

     (iii) The Agent shall not have given the Seller at least one Business Day’s notice that the Investors have terminated the reinvestment of Collections in Receivable Interests, and

     (iv) The Originators shall have sold or contributed to the Seller, pursuant to the Originator Purchase Agreement, all Originator Receivables arising on or prior to such date, and

(e) the Agent shall have received such other approvals, opinions or documents as it may reasonably request.

          Section 3.03 Conditions Precedent to the Effectiveness of Amendment and Restatement. The effectiveness of this amendment and restatement of the Original RPA is

-47-

subject to the conditions precedent that the Agent shall have received on or before the date hereof the following, each (unless otherwise indicated) dated such date, in form and substance satisfactory to the Agent:

          (a) Certified copies of the resolutions of the Board of Directors of the Seller, ACI and ACSC approving this Agreement, the amendment and restatement effected by the Originator Purchase Agreement and the other documents to be delivered by such Person hereunder and thereunder and certified copies of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement and the Originator Purchase Agreement.

          (b) A certificate of the Secretary or Assistant Secretary of each of the Seller, ACI and ACSC certifying the names and true signatures of the officers of the Seller and the Originators authorized to sign this Agreement, the Originator Purchase Agreement and the other documents to be delivered by it hereunder and thereunder.

          (c) Acknowledgment copies or time stamped receipt copies (or other satisfactory evidence of filing) of proper financing statement amendments, duly filed on or before the date hereof under the UCC and PPSA of all jurisdictions that the Agent may deem necessary or desirable in order to add the International Receivables and effect such other revisions as the Agent may deem necessary or desirable to reflect the amendments to the Original RPA, the Original Originator Purchase Agreement and the other Transaction Documents contemplated by this Agreement and the Originator Purchase Agreement.

          (d) Acknowledgment copies or time stamped receipt copies (or other satisfactory evidence of filing), or copies accompanied by filing authorizations signed by the applicable secured party, of proper financing statement amendments and terminations, if any, necessary to release all security interests and other rights of any Person in (i) the Receivables, Contracts or Related Security previously granted by the Seller or any Originator and (ii) the collateral security referred to in Section 2.11 previously granted by the Seller.

          (e) Completed requests for information and search reports, dated on or before the date hereof, listing all effective financing statements and other registrations filed in the jurisdictions referred to in subsection (c) above and in any other jurisdictions reasonably requested by the Agent that name the Seller or any Originator as debtor, together with copies of such financing statements and other registrations (none of which shall cover any Receivables, Contracts, Related Security or the collateral security referred to in Section 2.11).

          (f) An executed copy of the Deposit Account Agreement relating to the Deposit Account maintained with Citibank, N.A., as depositary bank, and described in more detail in Schedule I hereto.

          (g) Favorable opinions (or letters of confirmation and reliance, to the extent satisfactory to the Agent) of (i) Paul, Weiss, Rifkind, Wharton & Garrison LLP, U.S. counsel for ACI, the Seller and the Originators and (ii) Stikeman Elliott LLP, Canadian counsel for ACI and the Canadian Originator, in each case in form and substance satisfactory to the Agent.

          (h) An executed copy of the Originator Purchase Agreement.

-48-

          (i) A copy of the by-laws of the Seller and each Originator, certified by the Secretary or Assistant Secretary of the Seller or such Originator, as the case may be (or, to the extent previously delivered, such officer may certify that the by-laws of such Person remain unchanged).

          (j) A copy of the certificate or articles of incorporation of the Seller and each Originator, certified as of a recent date by the Secretary of State or other appropriate official of the state of its organization (or, to the extent previously delivered, the Secretary or Assistant Secretary of such Person may certify that the articles of incorporation or the certificate of formation of such Person remain unchanged), and a certificate as to the good standing of the Seller and each Originator from such Secretary of State or other official, dated as of a recent date.

          (k) A pro forma Weekly Report for the period ending January 25, 2008 and a pro forma Monthly Report for the period ending December 31, 2007, each certified by an authorized financial officer of the Servicer with responsibility for such Seller Report and reflecting the inclusion of the International Receivables.

          (1) An executed copy of the Four Party Agreement.

          (m) An executed copy of each of (i) an amendment and reaffirmation of the Undertaking (Originator) and (ii) an amendment and reaffirmation of the Undertaking (Servicer).

          (n) Representative samples of invoices with respect to the International Receivables.

          (o) Executed copies of the documents comprising the Bank Agreement Security Letters.

          (p) An executed copy of a certificate of the chief financial officer of ACI regarding Adverse Claims in the form attached hereto as
Annex N.

          (q) Evidence that the Seller has paid all reasonable fees, costs, expenses and other amounts owed by the Seller to the Investors, the Banks and the Agent as of the date hereof.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

          Section 4.01 Representations and Warranties of the Seller. The Seller hereby represents and warrants as follows:

          (a) The Seller is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction set forth in Schedule IV hereto (as such Schedule IV is modified in accordance herewith), and is duly qualified to do business, and is in good standing, in every jurisdiction where the nature of its business requires it to be so qualified, unless the failure to so qualify would not have a Material Adverse Effect.

-49-

          (b) The execution, delivery and performance by the Seller of the Transaction Documents and the other documents to be delivered by it hereunder, including the Seller’s use of the proceeds of purchases and reinvestments, (i) are within the Seller’s corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) do not contravene (1) the Seller’s charter or by-laws, (2) any law, rule or regulation applicable to the Seller, (3) any contractual restriction binding on or affecting the Seller or its property or (4) any order, writ, judgment, award, injunction or decree binding on or affecting the Seller or its property, and (iv) do not result in or require the creation of any lien, security interest or other Adverse Claim, charge or encumbrance upon or with respect to any of its properties (except for the interest created pursuant to this Agreement). Each of the Transaction Documents to which the Seller is a party has been duly executed and delivered by the Seller.

          (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Seller of the Transaction Documents or any other document to be delivered thereunder, except for the filing of UCC financing statements which are referred to therein.

          (d) Each of the Transaction Documents to which the Seller is a party constitutes the legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws affecting the rights of creditors generally and general equitable principles (whether considered in a proceeding at law or in equity).

          (e) Since September 30, 2007 there has been no material adverse change in the business, operations or financial condition of the Seller.

          (f) There is no pending or, to the Seller’s knowledge, threatened action, investigation or proceeding affecting the Seller before any court, governmental agency or arbitrator which may have a Material Adverse Effect.

          (g) No proceeds of any purchase or reinvestment will be used to acquire any equity security of a class which is registered pursuant to Section 12 of the Securities Exchange Act of 1934.

          (h) Immediately prior to the purchase by the Investor or the Banks, as the case may be, the Seller is the legal and beneficial owner of the Pool Receivables and Related Security free and clear of any Adverse Claim; upon each purchase or reinvestment, the Investors or the Banks, as the case may be, shall acquire a valid and perfected first priority undivided percentage ownership interest to the extent of the pertinent Receivable Interest in each Pool Receivable then existing or thereafter arising and in the Related Security and Collections with respect thereto. No effective financing statement or other instrument similar in effect covering any Contract or any Pool Receivable or the Related Security or Collections with respect thereto is on file in any recording office, except those filed in favor of the Agent relating to this Agreement and those filed by the Seller pursuant to the Originator Purchase Agreement. Each Receivable characterized in any Seller Report or other written statement made by or on behalf of the Seller as an Eligible Receivable or as included in the Net Receivables Pool Balance is, as of the date of

-50-

such Seller Report or other statement, an Eligible Receivable or properly included in the Net Receivables Pool Balance.

          (i) Each Seller Report (if prepared by the Seller or one of its Affiliates, or to the extent that information contained therein is supplied by the Seller or an Affiliate), including the calculations therein, and all information, exhibits, financial statements, documents, books, records or reports furnished or to be furnished at any time by or on behalf of the Seller to the Agent, the Investors or the Banks in connection with this Agreement is or will be accurate in all material respects as of its date or (except as otherwise disclosed to the Agent, Investors or the Banks, as the case may be, at such time) as of the date so furnished, and no such document contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, not misleading.

          (j) The principal place of business and chief executive office of the Seller and the office where the Seller keeps its records concerning the Pool Receivables are located at the address or addresses referred to in Section 5.01(b). The Seller is located in the jurisdiction of organization set forth in Schedule IV hereto (as modified in accordance herewith) for purposes of Section 9-307 of the UCC as in effect in the State of New York; and the office in the jurisdiction of organization of the Seller in which a UCC financing statement is required to be filed in order to perfect the security interest granted by the Seller hereunder is set forth in Schedule IV hereto (as modified in accordance herewith).

          (k) The names and addresses of all the Deposit Banks, together with the post office boxes and account numbers of the Lock-Boxes and Deposit Accounts of the Seller at such Deposit Banks, are as specified in Schedule I hereto, as such Schedule I may be amended from time to time pursuant to Section 5.01(g). The Lock-Boxes and Deposit Accounts are the only post office boxes and accounts into which Collections of Receivables are deposited or remitted. The Seller has delivered to the Agent a fully executed Deposit Account Agreement with respect to each Deposit Account and any associated Lock-Boxes.

          (l) Each purchase of a Receivable Interest and each reinvestment of Collections in Pool Receivables will constitute (i) a “current transaction” within the meaning of Section 3(a)(3) of the Securities Act of 1933, as amended, and (ii) a purchase or other acquisition of notes, drafts, acceptances, open accounts receivable or other obligations representing part or all of the sales price of merchandise, insurance or services within the meaning of Section 3(c)(5) of the Investment Company Act of 1940, as amended.

          (m) The Seller is not known by and does not use any tradename or doing-business-as name.

          (n) The Seller was incorporated on October 20, 2005, and the Seller (i) did not engage in any business activities prior to October 27, 2005 and (ii) has not engaged in business activities inconsistent with the terms of all the transactions contemplated by the Original Originator Purchase Agreement or the Original RPA prior to the date of this Agreement. The Seller has no Subsidiaries.

-51-

          (o) (i) The fair value of the property of the Seller is greater than the total amount of liabilities, including contingent liabilities, of the Seller, (ii) the present fair salable value of the assets of the Seller is not less than the amount that will be required to pay all probable liabilities of the Seller on its debts as they become absolute and matured, (iii) the Seller does not intend to, and does not believe that it will, incur debts or liabilities beyond the Seller’s abilities to pay such debts and liabilities as they mature and (iv) the Seller is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which the Seller’s property would constitute unreasonably small capital.

          (p) With respect to each Pool Receivable, the Seller (i) shall have received such Pool Receivable as a contribution to the capital of the Seller by the U.S. Originator or (ii) shall have purchased such Pool Receivable from an Originator in exchange for payment (made by the Seller to such Originator in accordance with the provisions of the Originator Purchase Agreement) of cash or the Deferred Purchase Price, or a combination thereof, in an amount which constitutes fair consideration and reasonably equivalent value. Each such sale referred to in clause (ii) of the preceding sentence shall not have been made for or on account of an antecedent debt owed by any Originator to the Seller and no such sale is or may be voidable or subject to avoidance under any section of the Federal Bankruptcy Code or any other state, Canadian or provincial law.

          (q) The Seller has (i) timely filed all federal tax returns required to be filed, (ii) timely filed all other material state and local tax returns and (iii) paid or made adequate provision for the payment of all taxes, assessments and other governmental charges (other than any tax, assessment or governmental charge which is being contested in good faith and by proper proceedings, and with respect to which the obligation to pay such amount is adequately reserved against in accordance with Canadian generally accepted accounting principles).

          (r) No transaction contemplated by this Agreement or any of the other Transaction Documents with respect to the Seller requires compliance with any bulk sales act or similar law (other than the Bulk Sales Act (Newfoundland and Labrador)).

          (s) No Receivable originated by the Canadian Originator, the Obligor of which has a billing address in Canada, was issued for an amount in excess of the fair market value of the merchandise, insurance or services provided by the Canadian Originator to which the Receivable relates.

          (t) No Contract or any other books, records or other information relating to any Receivable originated by the Canadian Originator, the Obligor of which has a billing address in Canada, contain any “personal information” as defined in, or any other information regulated under (i) the Personal Information Protection and Electronic Documents Act (Canada), or (ii) any other similar statutes of Canada or any province in force from time to time which restrict, control, regulate or otherwise govern the collection, holding, use or communication of information.

          (u) The Seller has marked its master data processing records evidencing Pool Receivables, including master data processing records evidencing Pool Receivables arising out

-52-

of the sale of lumber, with a legend evidencing that Receivable Interests related to such Pool Receivables have been sold in accordance with this Agreement.

          Section 4.02 Representations and Warranties of the Servicer. The Servicer hereby represents and warrants as follows:

          (a) The Servicer is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware, and is duly qualified to do business, and is in good standing, in every jurisdiction where the nature of its business requires it to be so qualified, unless the failure to so qualify would not have a Material Adverse Effect.

          (b) The execution, delivery and performance by the Servicer of this Agreement, the other Transaction Documents to which it is a party and any other documents to be delivered by it hereunder or thereunder (i) are within the Servicer’s corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) do not contravene (1) the Servicer’s charter or by-laws, (2) any law, rule or regulation applicable to the Servicer, (3) any material contractual restriction binding on or affecting the Servicer or its property or (4) any order, writ, judgment, award, injunction or decree binding on or affecting the Servicer or its property, and (iv) do not result in or require the creation of any lien, security interest or other Adverse Claim, charge or encumbrance upon or with respect to any of its properties. This Agreement has been duly executed and delivered by the Servicer.

          (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Servicer of this Agreement or any other document to be delivered by it hereunder.

          (d) This Agreement constitutes the legal, valid and binding obligation of the Servicer enforceable against the Servicer in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws affecting the rights of creditors generally and general equitable principles (whether considered in a proceeding at law or in equity).

          (e) (i) The consolidated balance sheet of ACI as at September 30, 2007, and the related consolidated statements of income and cash flow of ACI for the fiscal quarter then ended, copies of which have been furnished to the Agent, fairly present the financial condition of ACI as at such date and the results of the operations of ACI for the period ended on such date, all in accordance with Canadian generally accepted accounting principles consistently applied, and (ii) since September 30, 2007 there has been no material adverse change in the business operation or financial condition of ACI and its Subsidiaries taken as a whole.

          (f) There is no pending or, to the Servicer’s knowledge, threatened action, investigation or proceeding affecting the Servicer or any of its Subsidiaries before any court, governmental agency or arbitrator which may have a Material Adverse Effect.

          (g) Each Receivable characterized in any Seller Report as an Eligible Receivable or as included in the Net Receivables Pool Balance is, as of the date of such Seller Report, an Eligible Receivable or properly included in the Net Receivables Pool Balance.

-53-

          (h) Each Seller Report (if prepared by the Servicer or one of its Affiliates, or to the extent that information contained therein is supplied by the Servicer or an Affiliate), including the calculations therein, and all information, exhibits, financial statements, documents, books, records or reports furnished or to be furnished at any time by the Servicer to the Agent, the Investors or the Banks in connection with this Agreement is or will be accurate in all material respects as of its date or (except as otherwise disclosed to the Agent, Investors or the Banks, as the case may be, at such time) as of the date so furnished, and no such document contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, not misleading.

          (i) The Servicer has (i) timely filed all federal tax returns required to be filed, (ii) timely filed all material state and local tax returns and (iii) paid or made adequate provision for the payment of all taxes, assessments and other governmental charges (other than any tax, assessment or governmental charge which is being contested in good faith and by proper proceedings, and with respect to which the obligation to pay such amount is adequately reserved against in accordance with Canadian generally accepted accounting principles).

          (j) For purposes of Section 9-307 of the UCC as in effect in the State of New York, the U.S. Originator is located in the jurisdiction of organization set forth in Schedule IV hereto, and the Canadian Originator is located in the jurisdiction of its chief executive and registered office set forth in Schedule IV hereto (in each case as such Schedule IV is modified in accordance herewith). The office in the jurisdiction of organization (or other applicable jurisdictions, in the case of the Canadian Originator) of each Originator in which a financing statement or other applicable registrations under the PPSA are required to be filed in order to perfect the security or ownership interest granted by such Originator under the Originator Purchase Agreement is set forth in Schedule IV hereto (as modified in accordance herewith). The principal place of business and chief executive office of the U.S. Originator, the principal place of business and chief executive and registered office of the Canadian Originator and the office where each Originator keeps its records concerning the Originator Receivables are located (and have been located for the five years prior to the date of this Agreement) at the address or addresses set forth in Schedule IV hereto (as modified in accordance herewith). Neither Originator has changed its name during the five years prior to the date of this Agreement, except as set forth in Schedule IV hereto, as modified in accordance herewith.

          (k) The Insurance Policy has been validly issued by the Insurer to ACI and is, on the date hereof, in full force and effect. The copy of the Insurance Policy attached hereto as Annex H is true, correct and complete as of the date hereof. All statements made by ACI in the application for the Insurance Policy were true, correct and complete in all material respects when made. As of the date hereof, all the premiums due on December 10, 2007 under the Insurance Policy for the policy period ended August 31, 2007 have been paid. ACI has performed all of its duties under the Insurance Policy and has timely filed all claims payable thereunder in such form as is required by the Insurer. The Insurance Policy has not been amended, supplemented or otherwise modified except as permitted by Section 6.02(a), and ACI has not waived any of its rights thereunder. The Insurer has been directed to pay all Insurance Proceeds directly into a Deposit Account that is subject to a Deposit Account Agreement or as otherwise directed by the Agent.

-54-

          (l) The Servicer has marked the Seller’s master data processing records evidencing the Pool Receivables, including master data processing records evidencing Pool Receivables arising out of the sale of lumber, with a legend, acceptable to the Agent, evidencing that Receivable Interests therein have been sold.

ARTICLE V

COVENANTS

          Section 5.01 Covenants of the Seller. Until the latest of the Facility Termination Date or the date on which no Capital of or Yield on any Receivable Interest shall be outstanding or the date all other amounts owed by the Seller hereunder to the Investors, the Banks or the Agent are paid in full:

          (a) Compliance with Laws, Etc. The Seller will comply in all material respects with all applicable laws, rules, regulations and orders and preserve and maintain its corporate existence, rights, franchises, qualifications, and privileges except to the extent that the failure so to comply with such laws, rules and regulations or the failure so to preserve and maintain such rights, franchises, qualifications, and privileges would not have a Material Adverse Effect.

          (b) Offices, Records, Name and Organization. Subject to Section 10.01(e), the Seller will keep its principal place of business and chief executive office and the office where it keeps its records concerning the Pool Receivables at the address of the Seller set forth on Schedule III hereto or, upon 30 days’ prior written notice, together with an updated Schedule III, to the Agent, at any other locations within the United States. The Seller will not change its name or its state of organization, unless (i) the Seller shall have provided the Agent with at least 30 days’ prior written notice thereof, together with an updated Schedule IV, and (ii) no later than the effective date of such change, all actions, documents and agreements reasonably requested by the Agent to protect and perfect the Agent’s interest in the Receivables, the Related Security and the other assets of the Seller in which a security interest is granted hereunder have been taken and completed. Upon confirmation by the Agent to the Seller of the Agent’s receipt of any such notice (together with an updated Schedule IV) and the completion or receipt of the actions, agreements and documents referred to in clause (ii) of the preceding sentence, Schedule IV hereto shall, without further action by any party, be deemed to be amended and replaced by the updated Schedule IV accompanying such notice. The Seller also will maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Pool Receivables and related Contracts in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of all Pool Receivables (including, without limitation, records adequate to permit the daily identification of each Pool Receivable and all Collections of and adjustments to each existing Pool Receivable).

          (c) Performance and Compliance with Contracts and Credit and Collection Policy. The Seller will, at its expense, timely and fully perform and comply with all material provisions, covenants and other promises required to be observed by it under the Contracts

-55-

related to the Pool Receivables, and timely and fully comply in all material respects with the Credit and Collection Policy in regard to each Pool Receivable and the related Contract.

          (d) Sales, Liens, Etc. Except for the ownership and security interests created hereunder in favor of the Agent, the Seller will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Adverse Claim upon or with respect to, the Seller’s undivided interest in any Pool Receivable, Related Security, related Contract or Collections, or upon or with respect to any account to which any Collections of any Pool Receivable are sent, or assign any right to receive income in respect thereof.

          (e) Extension or Amendment of Receivables. Except as provided in Section 6.02(c), the Seller will not (and will not permit the Servicer or any Originator to) extend, amend or otherwise modify the terms of any Pool Receivable, or amend, modify or waive any term or condition of any Contract related thereto.

          (f) Change in Business or Credit and Collection Policy. The Seller will not make any change in the character of its business or in the Credit and Collection Policy that would, in either case, have a Material Adverse Effect.

          (g) Change in Payment Instructions to Obligors. The Seller will not add or terminate any bank, post office box or bank account as a Deposit Bank, Lock-Box or Deposit Account from those listed in Schedule I hereto, or make any change in its instructions to Obligors regarding payments to be made to the Seller or payments to be made to any Lock-Box or Deposit Account, unless the Agent shall have received prior notice of such addition, termination or change (including an updated Schedule I) and a fully executed Deposit Account Agreement with each new Deposit Bank or with respect to each new Lock-Box or Deposit Account. Upon confirmation by the Agent to the Seller of the Agent’s receipt of any such notice and the related documents, Schedule I hereto shall, without further action by any party, be deemed to be amended and replaced by the updated Schedule I accompanying such notice.

          (h) Deposits to Lock-Boxes and Deposit Accounts. The Seller will (or will cause the Servicer or the Originators to) instruct all Obligors to remit all their payments in respect of Receivables to Lock-Boxes or Deposit Accounts (provided that Obligors with respect to International Receivables and Receivables originated by the U.S. Originator shall be instructed to remit such payments to Lock-Boxes or Deposit Accounts located in the United States). If the Seller or Servicer shall receive any Collections directly, it shall immediately (and in any event within two Business Days) deposit the same to a Lock-Box or a Deposit Account (provided that Collections related to an International Receivable or a Receivable originated by the U.S. Originator shall be deposited to a Lock-Box or a Deposit Account in the United States) and until it does so, shall hold the same in trust for the Agent. The Seller will not deposit or otherwise credit, or cause or permit to be so deposited or credited, to any Lock-Box or Deposit Account, cash or cash proceeds other than Collections of Receivables, provided, that if any PST are deposited or credited to any Lock-Box or Deposit Account, the Seller will (or will cause the Servicer or the Originators to), within two Business Days of such deposit or credit, separate such deposits and credits from the Collections held in any applicable Lock-Box or Deposit Account and withdraw such deposited or credited amount from such Lock-Box or Deposit Account.

-56-

          (i) Marking of Records. At its expense, the Seller will mark its master data processing records evidencing Pool Receivables with a legend evidencing that Receivable Interests related to such Pool Receivables have been sold in accordance with this Agreement.

          (j) Further Assurances. (i) The Seller agrees from time to time, at its expense, promptly to execute and deliver all further instruments and documents, and to take all further actions, that may be necessary or desirable, or that the Agent may reasonably request, to perfect, protect or more fully evidence the Receivable Interests purchased under this Agreement, or to enable the Investors, the Banks or the Agent to exercise and enforce their respective rights and remedies under this Agreement.

               (ii) The Seller authorizes the Agent to file financing or continuation statements, and amendments thereto and assignments thereof, relating to the collateral described in Section 2.11, which financing statements may describe the collateral covered thereby as “all assets of the Seller,” “all personal property of the Seller” or words of similar effect.

          (k) Reporting Requirements. The Seller will provide to the Agent (in multiple copies, if requested by the Agent) the following:

          (i) as soon as available and in any event within 60 days after the end of each quarter of each fiscal year of each of the Parent and ACI (including the fourth quarter), a consolidated balance sheet of each of the Parent and ACI as of the end of such quarter and consolidated statements of income and cash flow of each of the Parent and ACI for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, in each case certified by the chief financial officer of the Parent or ACI, as the case may be; provided that to the extent a consolidated balance sheet and consolidated statements of income and cash flow are not prepared in respect of ACI, the delivery of a consolidated balance sheet and consolidated statements of income and cash flow of the Parent as prescribed above shall satisfy the reporting requirements set forth in this Section 5.01(k)(i);

          (ii) as soon as available and in any event within 90 days after the end of each fiscal year of the Parent, a copy of the consolidated annual report for such year for the Parent, containing consolidated financial statements accompanied by an audit report of independent certified public accountants of recognized national standing with no Impermissible Qualifications;

          (iii) as soon as available and in any event within 90 days after the end of each fiscal year of the Seller, a balance sheet of the Seller as of the end of such fiscal year and a statement of income and cash flow of the Seller for the period commencing at the end of the previous fiscal year and ending with the end of such fiscal year, certified by the chief financial officer of the Seller;

          (iv) as soon as possible and in any event within five days after the occurrence of each Event of Termination or Incipient Event of Termination, a statement of the chief financial officer of the Seller setting forth details of such

-57-

Event of Termination or Incipient Event of Termination and the action that the Seller has taken and proposes to take with respect thereto;

          (v) promptly after the sending or filing thereof, copies of all reports that any Originator sends to any of its security holders, and copies of all reports and registration statements that any Originator or any of its Subsidiaries files with the SEC or any other U.S., Canadian or other national or provincial securities exchange;

          (vi) with respect to the Seller or any ERISA Affiliate, as soon as possible, and in any event within 10 days after the Seller or ACI knows or has reason to believe that any of the events or conditions specified below has occurred or exists, notice of such event or condition (and provide a copy of any report or notice required to be filed with or given to PBGC):

     (A) any reportable event, as defined in Section 4043(b) of ERISA and the regulations issued thereunder, unless the 30 day notice requirement in respect thereof has been waived by the PBGC;

     (B) a notice of intent to terminate any Plan or any action taken to terminate any Plan, provided notice of intent to terminate is required pursuant to Section 4041(a)(2) of ERISA;

     (C) the institution by PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt of a notice from a Multiemployer Plan that such action has been taken by PBGC with respect to such Multiemployer Plan;

     (D) the complete or partial withdrawal from a Multiemployer Plan that results in liability under Section 4201 or 4204 of ERISA or the receipt of notice from a Multiemployer Plan that it is in reorganization or insolvency or that it intends to terminate or has terminated;

     (E) the institution of a proceeding by a fiduciary of any Multiemployer Plan to enforce Section 515 of ERISA, which proceeding is not dismissed within 30 days; and

     (F) the adoption of an amendment to any Plan that, pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the loss of tax exempt status of the trust of which such Plan is a part if security has not been provided in accordance with the provisions of these Sections;

          (vii) subject to Section 10.01(f), at least 30 days prior to any change in the name, chief executive or registered office or jurisdiction of

-58-

organization of any Originator or the Seller, a notice setting forth the new name, chief executive or registered office or jurisdiction of organization and the effective date thereof;

          (viii) promptly after the Seller obtains knowledge thereof, notice of any “Event of Termination” or “Facility Termination Date” under the Originator Purchase Agreement and notice of any Insurance Policy Event;

          (ix) so long as any Capital shall be outstanding, as soon as possible and in any event no later than the day of occurrence thereof, notice that any Originator has stopped selling or contributing to the Seller, pursuant to the Originator Purchase Agreement, all newly arising Originator Receivables;

          (x) at the time of the delivery of the financial statements provided for in clauses (i) and (ii) of this paragraph, a certificate of the president, the chief financial officer or the treasurer of the Seller to the effect that, to the best of such officer’s knowledge, no Event of Termination has occurred and is continuing or, if any Event of Termination has occurred and is continuing, specifying the nature and extent thereof;

          (xi) promptly after receipt thereof, copies of all notices received by the Seller from any Originator under the Originator Purchase Agreement;

          (xii) promptly following receipt thereof, copies of all schedules, endorsements and notices received from the Insurer with respect to the Insurance Policy (including any notice that any additional premium is due in accordance with Section 4 of the “Declarations and Payment of Premium” endorsement to the Insurance Policy);

          (xiii) immediately upon obtaining knowledge thereof, and in any event on the day such event occurs, notice that all indebtedness under the Bank Agreement has become due and payable (whether by declaration or automatically);

          (xiv) concurrently with the sending thereof to the Insurer, any notice by ACI terminating the Insurance Policy; and

          (xv) such other information respecting the Receivables or the condition or operations, financial or otherwise, of the Seller as the Agent may from time to time reasonably request.

Reports and financial statements required to be delivered pursuant to clauses (i), (ii) and (v) of this Section 5.01(k) shall be deemed to have been delivered on the date on which the Parent posts such reports, or reports containing such financial statements, on the Parent’s website on the Internet at www.abitibibowater.com or when such reports, or reports containing such financial statements, are posted on the SEC’s website at www.sec.gov; provided that the Seller shall deliver paper copies of the reports and financial statements referred to in clauses (i), (ii) and (v) of this Section 5.01(k) to the Agent or any Investor or Bank who requests the Seller to deliver

-59-

such paper copies until written notice to cease delivering paper copies is given by the Agent or such Investor or Bank, as applicable.

          (1) Separateness. (i) The Seller shall at all times maintain at least one independent director (x) who is not currently and has not been during the five years preceding the date of this Agreement an officer, director or employee of an Affiliate of the Seller or any Other Company, (y) is not a current or former officer or employee of the Seller and (z) is not a stockholder of any Other Company or any of their respective Affiliates.

               (ii) The Seller shall not direct or participate in the management of any of the Other Companies’ operations.

               (iii) The Seller shall conduct its business from an office separate from that of the Other Companies (but which may be located in the same facility as one or more of the Other Companies). The Seller shall have stationery and other business forms and a mailing address and a telephone number separate from that of the Other Companies.

               (iv) The Seller shall at all times be adequately capitalized in light of its contemplated business.

               (v) The Seller shall at all times provide for its own operating expenses and liabilities from its own funds.

               (vi) The Seller shall maintain its assets and transactions separately from those of the Other Companies and reflect such assets and transactions in financial statements separate and distinct from those of the Other Companies and evidence such assets and transactions by appropriate entries in books and records separate and distinct from those of the Other Companies. The Seller shall hold itself out to the public under the Seller’s own name as a legal entity separate and distinct from the Other Companies. The Seller shall not hold itself out as having agreed to pay, or as being liable, primarily or secondarily, for, any obligations of the Other Companies.

               (vii) The Seller shall not maintain any joint account with any Other Company or become liable as a guarantor or otherwise with respect to any Debt or contractual obligation of any Other Company.

               (viii) The Seller shall not make any payment or distribution of assets with respect to any obligation of any Other Company or grant an Adverse Claim on any of its assets to secure any obligation of any Other Company.

               (ix) The Seller shall not make loans, advances or otherwise extend credit to any of the Other Companies.

               (x) The Seller shall hold regular duly noticed meetings of its Board of Directors and make and retain minutes of such meetings.

-60-

               (xi) The Seller shall have bills of sale (or similar instruments of assignment) and, if appropriate, UCC-1 or PPSA financing statements or other appropriate registrations, with respect to all assets purchased from any of the Other Companies.

               (xii) The Seller shall not engage in any transaction with any of the Other Companies, except as permitted by this Agreement and as contemplated by the Originator Purchase Agreement.

               (xiii) The Seller shall comply with (and cause to be true and correct) each of the facts and assumptions contained in paragraphs I. A. 1-2 on pages 5-11 of the true sale and substantive non-consolidation opinion of Paul, Weiss, Rifkind, Wharton & Garrison LLP delivered pursuant to Section 3.01(g) of the Original RPA.

          (m) Originator Purchase Agreement. The Seller will not amend, waive or modify any provision of the Originator Purchase Agreement or waive the occurrence of any “Event of Termination” under the Originator Purchase Agreement, without in each case the prior written consent of the Agent; provided, however, that the Seller may amend the percentage set forth in the definition of “Discount” in the Originator Purchase Agreement in accordance with the provisions of the Originator Purchase Agreement without the consent of the Agent; provided, further, that the Seller shall promptly notify the Agent of any such amendment. The Seller will perform all of its obligations under the Originator Purchase Agreement in all material respects and will enforce the Originator Purchase Agreement in accordance with its terms in all material respects.

          (n) Nature of Business. The Seller will not engage in any business other than the purchase or acquisition of Receivables, Related Security and Collections from the Originators and the transactions contemplated by this Agreement. The Seller will not create or form any Subsidiary.

          (o) Mergers, Etc. The Seller will not merge with or into or consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions), all or substantially all of its assets (whether now owned or hereafter acquired) to, or acquire all or substantially all of the assets or capital stock or other ownership interest of, or enter into any joint venture or partnership agreement with, any Person, other than as contemplated by this Agreement and the Originator Purchase Agreement.

          (p) Distributions, Etc. The Seller will not declare or make any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any shares of any class of capital stock of the Seller, or return any capital to its shareholders as such, or purchase, retire, defease, redeem or otherwise acquire for value or make any payment in respect of any shares of any class of capital stock of the Seller or any warrants, rights or options to acquire any such shares, now or hereafter outstanding; provided, however, that the Seller may declare and pay cash dividends on its capital stock to its shareholders so long as (i) no Event of Termination shall then exist or would occur as a result thereof, (ii) such dividends are in compliance with all applicable law including the corporate law of the state of Seller’s incorporation, and (iii) such dividends have been approved by all necessary and appropriate corporate action of the Seller.

-61-

          (q) Debt. The Seller will not incur any Debt, other than any Debt incurred pursuant to this Agreement and the Deferred Purchase Price payable to the Originators.

          (r) Certificate of Incorporation. The Seller will not amend or delete Articles THIRD, FIFTH, SEVENTH, TENTH, ELEVENTH or TWELFTH of its certificate of incorporation.

          (s) Tangible Net Worth. The Seller will have, as of the due date of each Monthly Report, a Tangible Net Worth equal to at least 8.0% of the Outstanding Balance of the Receivables at such time.

          (t) Insurance. The Seller will not take or omit to take, any action which gives rise to an exclusion from coverage under the Insurance Policy.

          Section 5.02 Covenant of the Seller and the Originators. Until the latest of the Facility Termination Date or the date on which no Capital of or Yield on any Receivable Interest shall be outstanding or the date all other amounts owed by the Seller hereunder to the Investors, the Banks or the Agent are paid in full, each of the Seller and each Originator will, at their respective expense, from time to time during regular business hours as requested by the Agent, permit the Agent or its agents or representatives (including independent public accountants, which may be the Seller’s or such Originator’s independent public accountants), (i) to conduct periodic audits of the Receivables, the Related Security and the related books and records and collections systems of the Seller or such Originator, as the case may be, (ii) to examine and make copies of and abstracts from all books, records and documents (including, without limitation, computer tapes and disks) in the possession or under the control of the Seller or any Originator, as the case may be, relating to Pool Receivables and the Related Security, including, without limitation, the Contracts, and (iii) to visit the offices and properties of the Seller or any Originator, as the case may be, for the purpose of examining such materials described in clause (ii) above, and to discuss matters relating to Pool Receivables and the Related Security or the Seller’s or any Originator’s performance under the Transaction Documents or under the Contracts with any of the officers or employees of the Seller or any Originator, as the case may be, having knowledge of such matters. In addition, in relation to each audit of the type described in clause (i) above, the Agent may, at the Seller’s expense, appoint independent public accountants (which may be accountants other than the Seller’s regular independent public accountants) or consultants, or utilize the Agent’s representatives or auditors, to prepare and deliver to the Agent a written report with respect to the Receivables and the Credit and Collection Policy (including, in each case, the systems, procedures and records relating thereto) on a scope and in a form reasonably requested by the Agent. The expense of one audit in each calendar year of the type described in clause (i) above, together with the associated written reports of the independent public accountant or consultant described in the preceding sentence, shall be borne by the Seller; provided, however, that after the occurrence and during the continuance of an Event of Termination or an Incipient Event of Termination or following an audit report indicating an audit deficiency that remains uncorrected, the expense of any additional audits and visits as the Agent shall deem reasonably necessary under the circumstances shall be borne by the Seller.

-62-

ARTICLE VI

ADMINISTRATION AND COLLECTION
OF POOL RECEIVABLES

          Section 6.01 Designation of Servicer. The servicing, administration and collection of the Pool Receivables shall be conducted by the Servicer so designated hereunder from time to time. Until the Agent gives notice to the Seller of the designation of a new Servicer in accordance with the provisions of the next sentence, ACSC is hereby designated as, and hereby agrees to perform the duties and obligations of, the Servicer pursuant to the terms hereof. The Agent may, at any time after the occurrence and during the continuance of a Servicer Default, designate as Servicer any Person (including itself) to succeed ACSC or any successor Servicer, if such Person shall consent and agree to the terms hereof. The Servicer may, with the prior consent of the Agent, subcontract with any other Person for the servicing, administration or collection of the Pool Receivables. Any such subcontract shall not affect the Servicer’s liability for performance of its duties and obligations pursuant to the terms hereof, and any such subcontract shall automatically terminate upon designation of a successor Servicer. The Servicer hereby appoints ACI as subservicer (ACI, in such capacity, the “Subservicer”) to perform the servicing, administration and collections functions of the Servicer hereunder and with respect to the other Transaction Documents; provided that the foregoing designation of ACI as subservicer does not (i) extend to the amendment or modification of a Receivable in accordance with Section 6.02(c) or (ii) contravene or otherwise exceed or violate Section 6.09. In no instance will the servicing and subservicing hereunder be inconsistent with, or in violation of, the terms and conditions of the Insurance Policy (and ACI shall continue its servicing and administration of the Insurance Policy). The Agent hereby consents to the designation of ACI as subservicer hereunder.

          Section 6.02 Duties of Servicer. (a) The Servicer shall take or cause to be taken all such actions as may be necessary or advisable to collect each Pool Receivable from time to time, all in accordance with applicable laws, rules and regulations, with reasonable care and diligence, and in accordance with the Credit and Collection Policy. The Seller and the Agent hereby appoint the Servicer, from time to time designated pursuant to Section 6.01, as agent for themselves and for the Investors and the Banks to enforce their respective rights and interests in the Pool Receivables, the Related Security and the Collections with respect thereto. In performing its duties as Servicer, the Servicer shall exercise the same care and apply the same policies as it would exercise and apply if it owned such Receivables and shall act in the best interests of the Seller, the Investors and the Banks. The Servicer’s and the Subservicer’s duties hereunder shall include paying, on behalf of the Originators, all premiums due under the Insurance Policy when the same are due (and the Servicer and the Subservicer shall provide the Agent with evidence of such payment by no later than the Business Day following the date such payment is due) and performing all obligations of ACI under the Insurance Policy in accordance with the terms of the Insurance Policy. Without limiting the foregoing, the Servicer or the Subservicer will (i)(x) immediately, upon obtaining knowledge of the relevant Obligor’s insolvency and (y) in all other cases, no later than four months after the relevant Receivable becomes due, file a claim under the Insurance Policy in such form as is required by the Insurer and with properly completed supporting documentation; (ii) not take any action to amend, supplement or otherwise modify the Insurance Policy (including, without limitation, consenting

-63-

to any changes to the Insurance Policy proposed by the Insurer as part of the annual renewal process) or waive any of its rights thereunder, without the Agent’s prior written consent in each case (other than any replacement of a Coverage Certificate that would not result in an Insurance Policy Event); (iii) not change the directions given to the Insurer to pay all Insurance Proceeds directly into the Agent’s Account; (iv) service the Receivables as required by the Insurer pursuant to the Insurance Policy; (v) deliver to the Insurer in a timely fashion any document or report required by the Insurer; and (vi) not take, or omit to take, any action which gives rise to an exclusion from coverage under the Insurance Policy. The Servicer and the Subservicer will ensure that all records relating to the Receivables are consistent with the requirements of the Insurance Policy and that such records are in such form as will not result in rejection of otherwise proper claims under the Insurance Policy. In the event the Servicer or the Subservicer fails to file a claim with respect to any Receivable, the Agent may (but shall not be required to) file such claim under the Insurance Policy.

          (b) The Servicer (including the Subservicer) shall administer the Collections in accordance with the procedures described in Section 2.04.

          (c) If no Event of Termination or Incipient Event of Termination shall have occurred and be continuing, an Originator (other than ACI), while it is the Servicer (subject to the provisions of Section 6.09), may, in accordance with the Credit and Collection Policy, extend the maturity or adjust the Outstanding Balance of any Receivable as the Originator deems appropriate to maximize Collections thereof, or otherwise amend or modify other terms of any Receivable, provided that (i) any necessary approval of the Insurer shall have been obtained, and (ii) the classification of any such Receivable as a Delinquent Receivable or Defaulted Receivable shall not be affected by any such extension.

          (d) The Servicer shall hold in trust for the Seller and each Investor and Bank, in accordance with their respective interests, all documents, instruments and records (including, without limitation, computer tapes or disks) which evidence or relate to Pool Receivables. The Servicer shall mark the Seller’s master data processing records evidencing the Pool Receivables with a legend, acceptable to the Agent, evidencing that Receivable Interests therein have been sold.

          (e) The Servicer shall, as soon as practicable (and in any event within two Business Days) following receipt, turn over to the Person entitled thereto any cash collections or other cash proceeds received with respect to Receivables not constituting Pool Receivables.

          (f) The Servicer shall, from time to time at the request of the Agent, furnish to the Agent (promptly after any such request) a calculation of the amounts set aside for the Investors and the Banks pursuant to Section 2.04.

          (g) (i) Prior to 10:00 A.M. (New York City Time) on the 17^th calendar day of each month (or, if such day is not a Business Day, the next succeeding Business Day), the Servicer shall prepare and forward to the Agent a Monthly Report relating to the Receivable Interests outstanding on the last day of the immediately preceding month; provided that at any time that the Servicer is required to deliver a Weekly Report in accordance with Section 6.02(g)(ii) below, the Monthly Report shall be delivered prior to 10:00 A.M. (New York City

-64-

Time) on the day that the third Weekly Report for any calendar month is due, unless the due date of such third Weekly Report is the 15^th or 16^th calendar day of such month, in which case the Monthly Report shall be delivered prior to 10:00 A.M. (New York City Time) on the day that the fourth Weekly Report for such calendar month is due.

               (ii) At any time when the Debt Ratings of ACI are not equal to the Required Ratings, prior to 10:00 A.M. (New York City Time) on the second Business Day of each calendar week, the Servicer shall prepare and forward to the Agent a Weekly Report which shall contain information related to the Receivables Pool as of the close of business on the last Business Day of the preceding calendar week.

               (iii) Prior to 10:00 A.M. (New York City Time) on the 17^th calendar day of each month (or, if such day is not a Business Day, the next succeeding Business Day), the Servicer shall prepare and forward to the Agent a report with respect to all claims submitted by ACI or any of its Subsidiaries under the Insurance Policy during the immediately preceding month (such report to include, without limitation, (A) information with respect to any claims paid or rejected by the Insurer, (B) a breakdown as to claims made with respect to Originator Receivables and receivables that are not Originator Receivables, and (C) a breakdown of claims made by country of location of Obligor), such report to be in form and substance satisfactory to the Agent; provided that at any time that the Servicer is required to deliver a Weekly Report in accordance with Section 6.02(g)(ii) above, the foregoing report shall be delivered prior to 10:00 A.M. (New York City Time) on the day that the third Weekly Report for any calendar month is due, unless the due date of such third Weekly Report is the 15^th or 16^th calendar day of such month, in which case the foregoing report shall be delivered prior to 10:00 A.M. (New York City Time) on the day that the fourth Weekly Report for such calendar month is due.

          The Servicer shall transmit Seller Reports to the Agent concurrently by facsimile and by electronic mail (each, an “E-Mail Seller Report”). Each E-Mail Seller Report shall be (A) formatted as the Agent may designate from time to time and (B) sent to the Agent at an electronic mail address designated by the Agent.

          (h) [Intentionally Omitted].

          (i) The Servicer shall file all tax returns required by law to be filed by it with respect to the Receivables and shall (or shall cause the applicable Originator to) promptly pay, remit or account for, as applicable, all sales taxes (including, without limitation, PST, QST and GST) paid or owing in connection with any Receivables, except any such taxes which are not yet delinquent or are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with applicable generally accepted accounting principles shall have been set aside on its books.

          Section 6.03 Certain Rights of the Agent. (a) At any time following the occurrence of a Control Event, the Agent will be authorized to date, and to deliver to the Deposit Banks, the Notices of Effectiveness attached to the Deposit Account Agreements. Pursuant to Section 2.11 hereof, the Seller granted a security interest in the Lock-Boxes and Deposit Accounts to which the Obligors of Pool Receivables shall make payments to the Agent and, pursuant to the Deposit Account Agreements, will provide the Agent with “control” (as such

-65-

term is defined in Article 9 of the UCC) thereof. After a Control Event, the Agent may notify the Obligors of Pool Receivables, at any time and at the Seller’s expense, of the ownership of Receivable Interests under this Agreement.

          (b) At any time following the designation of a Servicer other than an Originator pursuant to Section 6.01 or following a Control Event:

               (i) The Agent may direct the Obligors of Pool Receivables that all payments thereunder be made directly to the Agent or its designee.

               (ii) At the Agent’s request and at the Seller’s expense, the Seller shall notify each Obligor of Pool Receivables of the ownership of Receivable Interests under this Agreement and direct that payments be made directly to the Agent or its designee.

               (iii) At the Agent’s request and at the Seller’s expense, the Seller and the Servicer shall (A) assemble all of the documents, instruments and other records (including, without limitation, computer tapes and disks) that evidence or relate to the Pool Receivables and the related Contracts and Related Security, or that are otherwise necessary or desirable to collect the Pool Receivables (including, without limitation, the Insurance Policy), and shall make the same available to the Agent at a place selected by the Agent or its designee, and (B) segregate all cash, checks and other instruments received by it from time to time constituting Collections of Pool Receivables in a manner acceptable to the Agent and, promptly upon receipt, remit all such cash, checks and instruments, duly indorsed or with duly executed instruments of transfer, to the Agent or its designee.

               (iv) The Seller authorizes the Agent to take any and all steps in the Seller’s name and on behalf of the Seller that are necessary or desirable, in the determination of the Agent, to collect amounts due under the Pool Receivables, including, without limitation, endorsing the Seller’s name on checks and other instruments representing Collections of Pool Receivables and enforcing the Pool Receivables and the Related Security and related Contracts and the Insurance Policy.

          Section 6.04 Rights and Remedies. (a) If the Servicer fails to perform any of its obligations under this Agreement, the Agent may (but shall not be required to) itself perform, or cause performance of, such obligation; and the Agent’s costs and expenses incurred in connection therewith shall be payable by the Servicer.

          (b) The Seller and each of the Originators shall perform their respective obligations under the Contracts related to the Pool Receivables to the same extent as if Receivable Interests had not been sold and the exercise by the Agent on behalf of the Investors and the Banks of their rights under this Agreement shall not release the Servicer or the Seller from any of their duties or obligations with respect to any Pool Receivables or related Contracts or the Insurance Policy. Neither the Agent, the Investors nor the Banks shall have any obligation or liability with respect to any Pool Receivables or related Contracts, nor shall any of them be obligated to perform the obligations of the Seller thereunder.

-66-

          (c) In the event of any conflict between the provisions of Article VI of this Agreement and Article VI of the Originator Purchase Agreement, the provisions of Article VI of this Agreement shall control.

          Section 6.05 Further Actions Evidencing Purchases. Each Originator agrees from time to time, at its expense, to promptly execute and deliver all further instruments and documents, and to take all further actions, that may be necessary or desirable, or that the Agent may reasonably request, to perfect, protect or more fully evidence the Receivable Interests purchased hereunder, or to enable the Investors, the Banks or the Agent to exercise and enforce their respective rights and remedies hereunder. Without limiting the foregoing, each Originator will (i) upon the request of the Agent, execute and file such financing or continuation statements, or amendments thereto, and such other instruments and documents, that may be reasonably necessary or desirable, or that the Agent may reasonably request, to perfect, protect or evidence such Receivable Interests and (ii) mark its master data processing records evidencing the Pool Receivables with a legend, acceptable to the Agent, evidencing that Receivable Interests therein have been sold. Each Originator authorizes the Seller or the Agent to file financing statements or other applicable registrations under the PPSA with respect to the Originator Purchase Agreement as permitted by the UCC and the PPSA.

          Section 6.06 Covenants of the Servicer and each Originator. (a) Audits. In the event the Servicer is not an Originator, the Servicer will, from time to time during regular business hours as requested by the Agent, permit the Agent, or its agents or representatives (including independent public accountants, which may be the Servicer’s independent public accountants), (i) to conduct periodic audits of the Receivables, the Related Security and the related books and records and collections systems of the Servicer, (ii) to examine and make copies of and abstracts from all books, records and documents (including, without limitation, computer tapes and disks) in the possession or under the control of the Servicer relating to Pool Receivables and the Related Security, including, without limitation, the Contracts, and (iii) to visit the offices and properties of the Servicer for the purpose of examining such materials described in clause (ii) above, and to discuss matters relating to Pool Receivables and the Related Security or the Servicer’s performance hereunder with any of the officers or employees of the Servicer having knowledge of such matters. In the event the Servicer is an Originator, the Agent’s audit rights shall be as set forth in Section 5.02.

          (b) Change in Credit and Collection Policy. Neither the Servicer nor any Originator will make any change in the Credit and Collection Policy that would materially adversely affect the collectibility of any Pool Receivable or the ability of any Originator (if it is acting as Servicer) to perform its obligations under this Agreement. In the event that the Servicer or any Originator makes any change to the Credit and Collection Policy, it shall, contemporaneously with such change, provide the Agent with an updated Credit and Collection Policy and a summary of all material changes.

          Section 6.07 Indemnities by the Servicer. Without limiting any other rights that the Agent, any Investor, any Bank, any of their respective Affiliates or members or any of their respective officers, directors, employees or advisors (each, a “Special Indemnified Party”) may have hereunder or under applicable law, and in consideration of its appointment as Servicer, the Servicer hereby agrees to indemnify each Special Indemnified Party from and against any and all

-67-

claims, losses and liabilities (including reasonable attorneys’ fees) (all of the foregoing being collectively referred to as “Special Indemnified Amounts”) arising out of or resulting from any of the following (excluding, however, (a) Special Indemnified Amounts to the extent found in a final non-appealable judgment of a court of competent jurisdiction to have resulted from gross negligence or willful misconduct on the part of such Special Indemnified Party, (b) recourse for Receivables which are not collected, not paid or uncollectible on account of the insolvency, bankruptcy or financial inability to pay of the applicable Obligor or (c) any income taxes or any other tax or fee measured by income incurred by such Special Indemnified Party arising out of or as a result of this Agreement or the ownership of Receivable Interests or in respect of any Receivable or any Contract, other than (i) Taxes (to the extent provided in Section 2.10) and (ii) Canadian taxes strictly on income or capital in connection with the Receivables or the transactions contemplated by this Agreement and the other Transaction Documents and resulting from the Seller, any Investor or any Bank having a permanent establishment in Canada solely as a result of the transactions contemplated hereby (but only directly and exclusively as a result of any breach by the Seller or the Servicer (or any delegatee thereof) of its obligations hereunder or under any other Transaction Document):

          (i) any representation made or deemed made by the Servicer pursuant to Section 4.02(g) hereof which shall have been incorrect in any respect when made or any other representation or warranty or statement made or deemed made by the Servicer under or in connection with this Agreement which shall have been incorrect in any material respect when made;

          (ii) the failure by the Servicer to comply with any applicable law, rule or regulation with respect to any Pool Receivable or Contract; or the failure of any Pool Receivable or Contract to conform to any such applicable law, rule or regulation;

          (iii) the failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC or PPSA of any applicable jurisdiction or other applicable laws with respect to any Receivables in, or purporting to be in, the Receivables Pool, the Contracts and the Related Security and Collections in respect thereof, whether at the time of any purchase or reinvestment or at any subsequent time;

          (iv) any failure of the Servicer to perform its duties or obligations in accordance with the provisions of this Agreement, including, without limitation, any failure of the Servicer to file claims under the Insurance Policy in a timely fashion and with properly completed supporting documentation, any action or omission by the Servicer which gives rise to an exclusion from coverage under the Insurance Policy, any failure by the Servicer to service the Receivables in the manner required by the Insurer or any failure by the Servicer to deliver to the Insurer any document or report required by the Insurer to be delivered in a timely manner;

          (v) the commingling of Collections of Pool Receivables at any time by the Servicer with other funds;

-68-

          (vi) any action or omission by the Servicer reducing or impairing the rights of the Investors or the Banks with respect to any Pool Receivable or the value of any Pool Receivable except in accordance with the Credit and Collection Policy and Section 6.02(c);

          (vii) [intentionally omitted];

          (viii) any claim brought by any Person other than a Special Indemnified Party arising from any activity by the Servicer or its Affiliates in servicing, administering or collecting any Receivable;

          (ix) the occurrence of any purchase or reinvestment under this Agreement on any date on which (after giving effect to such purchase or reinvestment) the Percentage Factor is greater than the Maximum Percentage Factor; or

          (x) after the date hereof, any Investor or Bank shall be subject to Canadian taxes on income or capital in connection with the Receivables or the transactions contemplated by this Agreement and the other Transaction Documents and resulting from the Seller, such Investor or such Bank having a permanent establishment in Canada solely as a result of the transactions contemplated hereby (but only directly and exclusively as a result of any breach by the Seller or the Servicer (or any delegatee thereof) of its obligations hereunder or under any other Transaction Document).

          Section 6.08 Collateral Advance Account. (a) Prior to the occurrence of the first Cash Secured Advance Commencement Date hereunder, the Servicer, for the benefit of the Banks, shall establish and maintain or cause to be established and maintained in the name of the Seller with Citibank an account (such account being the “Collateral Advance Account” and Citibank in such capacity, being the “Collateral Advance Account Bank”), such account bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Banks and entitled “Citibank, N.A., London Branch, as Agent — Collateral Advance Account for the Abitibi Receivables Purchase Agreement” and, in connection therewith, the Servicer, the Seller, the Agent and the Collateral Advance Account Bank shall enter into the Collateral Advance Account Agreement. The Collateral Advance Account shall be under the sole dominion and control of the Agent for the benefit of the Banks which have made Cash Secured Advances, and neither the Seller, the Servicer, nor any Person claiming by, through or under the Seller or the Servicer, shall have any right, title or interest in, or any right to withdraw any amount from, the Collateral Advance Account. Except as expressly provided in this Agreement, Citibank agrees that it, in its capacity as Collateral Advance Account Bank, shall have no right of set off or banker’s lien against, and no right to otherwise deduct from, any funds held in the Collateral Advance Account for any amount owed to it by any Bank, the Investor, any Agent, the Seller or any Originator. The tax identification no. associated with the Collateral Advance Account shall be that of the Seller.

          (b) The Agent will comply with (i) all written instructions directing disposition of the funds in the Collateral Advance Account, (ii) all notifications and entitlement

-69-

orders that the Agent receives directing it to transfer or redeem any financial asset in the Collateral Advance Account, and (iii) all other directions concerning the Collateral Advance Account, including, without limitation, directions to distribute to any Bank proceeds of any such transfer or redemption or interest or dividends on property in the Collateral Advance Account (any such instruction, notification or direction referred to in clause (i), (ii) or (iii) above being a “Collateral Advance Account Direction”), in the case of each of clauses (i), (ii) and (iii) above originated by the relevant Bank (except as otherwise specified in subsection (c) of this Section 6.08).

          (c) Funds on deposit in the Collateral Advance Account shall, at the written direction of the Seller, be invested by the Agent in Eligible Investments as instructed by the Seller in writing (which may be a standing instruction). All such Eligible Investments shall be held in the Collateral Advance Account by the Agent for the ratable benefit of the Banks which have made Cash Secured Advances. Such funds shall be invested in Eligible Investments that will mature so that funds will be available in amounts sufficient for the Agent to make each distribution as and when required under the terms of this Agreement. All interest and other investment earnings (net of losses and investment expenses) received on funds on deposit in the Collateral Advance Account, to the extent such investment income is not needed to pay the Agent for the ratable benefit of the Term-Out Banks under the terms of this Agreement, shall be added to the Collateral Advance Account.

          (d) If, at any time after the Servicer has established the Collateral Advance Account, the institution with which the Collateral Advance Account is maintained ceases to be an Eligible Institution, the Seller, upon obtaining actual knowledge thereof, shall, within five Business Days from obtaining such knowledge or, if earlier, from notice to such effect by the Agent, (i) establish a new Collateral Advance Account meeting the conditions specified above with an Eligible Institution, and (ii) transfer any cash and/or any financial assets held in the old Collateral Advance Account to such new Collateral Advance Account, respectively. From the date such new Collateral Advance Account is established, it shall be the “Collateral Advance Account” hereunder and for all purposes hereof.

          Section 6.09 Canadian Residents. (a) Notwithstanding anything contained herein or anything contained in any other Transaction Document, the Servicer, as Servicer (and each Person to whom the Servicer delegates any of its responsibilities (including, without limitation, the Subservicer), shall not while acting in Canada, and shall not (and has no authority to) delegate to any Person acting in Canada the authority to, or permit any such Person to, enter into contracts or other agreements in the name of or on behalf of the Seller, the Agent, the Investor or any Bank; and the Servicer, as Servicer (or any such delegate), is not permitted to (nor has authority to) establish an office or other place of business of the Seller, the Agent, the Investor or any Bank in Canada. To the extent any responsibilities of any Person acting in Canada (including for greater certainty a Servicer employee or servant or ACI as subservicer) to whom the Servicer has delegated responsibilities in respect of the Pool Receivables, the Related Security or the Collections hereunder or under any other Transaction Document involve or require such Person to enter a contract or other agreement in the name of or on behalf of the Seller, the Agent, the Investor or the Banks, such servicing responsibility shall be fulfilled solely by, or upon specific approval of, the Servicer, and such Person is authorized to take such action or give such approval, but only from a place of business outside Canada, and such Person may

-70-

not delegate such responsibility except upon consent or the direction of the Agent (and then only subject to these same restrictions).

          (b) Notwithstanding anything contained herein or anything contained in any other Transaction Document, the Seller (and each Person to whom the Seller delegates any of its responsibilities (including, without limitation, the Subservicer)) shall not, while acting in Canada, and shall not (and has no authority to) delegate to any Person acting in Canada the authority to, or permit any such Person to, enter into contracts or other agreements in the name of or on behalf of the Seller. The Seller is not permitted to (nor has authority to) establish an office or other place of business in Canada.

          Section 6.10 Collateral Advance Account Agreement; Deposit Account Agreements. Without limiting Section 6.07, the Servicer hereby agrees that it will reimburse the Agent on demand for any payments or obligations that the Agent may incur pursuant to any indemnity provided by the Agent under the Collateral Advance Account Agreement or any Deposit Account Agreement, including, without limitation, the Blocked Accounts Agreement dated October 27, 2005 among ACI, ACSC, the Agent, Royal Bank of Canada and the Seller, as such Deposit Account Agreements may be amended, restated, supplemented or otherwise modified from time to time.

ARTICLE VII

EVENTS OF TERMINATION

          Section 7.01 Events of Termination. If any of the following events (“Events of Termination”) shall occur and be continuing:

          (a) Any Servicer Default; or

          (b) The Seller shall fail to make any payment required under Section 2.04(f); or

          (c) Any representation or warranty (unless (x) such representation or warranty relates solely to one or more specific Receivables incorrectly characterized as Eligible Receivables and either (i) immediately following the removal of such Receivables from the Net Receivables Pool Balance the Percentage Factor is not greater than the Maximum Percentage Factor or (ii) the Seller shall have made any required deemed Collection payment pursuant to Section 2.04(f) with respect to such Receivables or (y) in the case of the representations and warranties contained in Sections 4.01 (a), (j) (the first sentence only) or (q), the breach of such representation or warranty is capable of being cured and is in fact cured (without any adverse impact on the Agent, the Investors or the Banks or the collectibility of the Pool Receivables) within five Business Days after the first date on which the Seller obtains knowledge or receives written notice of such breach from the Agent) made or deemed made by ACI, any Originator or the Seller (or any of their respective officers) under or in connection with this Agreement or any other Transaction Document or any information or report delivered by ACI, any Originator or the Seller pursuant to this Agreement or any other Transaction Document shall prove to have

-71-

been incorrect or untrue in any material respect as of the date when made or deemed made or delivered; or

          (d) The Seller or any Originator shall fail to perform or observe (i) any term, covenant or agreement contained in this Agreement (other than as referred to in Section 7.01(b) or clauses (ii) and (iii) of this Section 7.01(d)) or any other Transaction Document on its part to be performed or observed and any such failure shall remain unremedied for 10 days after written notice thereof shall have been given to the Seller by the Agent, (ii) any covenant applicable to it contained in Sections 5.01(d), 5.01(g), 5.01(h), 5.01(m) (first sentence only), 5.01(n), 5.01(o), 5.01(p), 5.01(q) or 5.01(r) or (iii) any covenant or agreement contained in Section 5.02 on its part to be performed or observed and any such failure referred to in this clause (iii) shall remain unremedied for three Business Days; or

          (e) The Parent, any Originator or Seller shall fail to pay any principal of or premium or interest on any of its Debt (which, in the case of the Parent or any Originator, either arises under the Bank Agreement or is outstanding in a principal amount of at least CAD 65,000,000 (or the Dollar Equivalent thereof) in the aggregate) when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to such Debt, and shall continue after the applicable grace period, if any, specified in such agreement or instrument, the effect of which default or other event or condition is to cause, or to permit the holder or beneficiary of such Debt to cause, with the giving of notice if required, such Debt to become due prior to its stated maturity or to become subject to a mandatory offer to purchase by the obligor thereunder; or

          (f) Any purchase or any reinvestment pursuant to this Agreement shall for any reason (other than pursuant to the terms hereof) cease to create, or any Receivable Interest shall for any reason cease to be, a valid and perfected first priority undivided percentage ownership interest to the extent of the pertinent Receivable Interest in each applicable Pool Receivable and the Related Security and Collections with respect thereto; or the security interest created pursuant to Section 2.11 or Section 2.17(b) shall for any reason cease to be a valid and perfected first priority security interest in the collateral security referred to in that section; or

          (g) (i) The Parent, any Originator or the Seller shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or (ii) any proceeding shall be instituted by or against Parent, any Originator or the Seller seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or arrangement of debt, or seeking the entry of an order for reliefer the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted

-72-

by it), either such proceeding shall remain undismissed or unstayed for a period of 60 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or (iii) any receiver, trustee, custodian or similar official shall be appointed for the Parent, any Originator or the Seller under any private right; or (iv) the Parent, any Originator or the Seller shall take any corporate action to authorize any of the actions set forth above in this subsection (g); or

          (h) As of the last day of any calendar month, either (i) the average of the Delinquency Ratios for such calendar month and the two immediately preceding calendar months shall exceed 4.0% or (ii) the average of the Loss Ratios for such calendar month and the two immediately preceding calendar months shall exceed 2.0% or (iii) the average of the Dilution Ratios for such calendar month and the two immediately preceding calendar months shall exceed 9.0% or (iv) the average of the Loss-to-Liquidation Ratios for such calendar month and the two immediately preceding calendar months shall exceed 1.0%; or

          (i) The Percentage Factor on any Reporting Date shall be greater than the Maximum Percentage Factor unless the Seller reduces the outstanding Capital on the Business Day immediately following the date the relevant Seller Report is due, bringing the recalculated Percentage Factor to less than or equal to the Maximum Percentage Factor; or the Percentage Factor on the day on which any Insurance Policy Event occurs (based on the data in the most recent Seller Report but utilizing the Stress Factor and Loss Reserve Floor Percentage required following an Insurance Policy Event) shall be greater than the Maximum Percentage Factor unless the Seller reduces the outstanding Capital within three Business Days following the day after the occurrence of such Insurance Policy Event, bringing the recalculated Percentage Factor to less than or equal to the Maximum Percentage Factor; or

          (j) There shall have occurred any material adverse change (as determined by the Agent) in the collectibility of the Receivables Pool or the ability of ACI, any Originator, the Seller or the Servicer to collect Pool Receivables or otherwise perform its obligations under this Agreement and the other Transaction Documents; or

          (k) An “Event of Termination” or “Facility Termination Date” shall occur under the Originator Purchase Agreement, or the Originator Purchase Agreement shall cease to be in full force and effect; or

          (1) All of the outstanding capital stock of the Seller shall cease to be owned, directly or indirectly, by ACSC, or all of the outstanding capital stock of ACSC or ACI shall cease to be owned, directly or indirectly, by the Parent; or

          (m) One or more judgments for the payment of money (except to the extent covered by insurance as to which the insurer has acknowledged such coverage in writing) shall be rendered against the Seller, and the same shall remain undischarged for a period of 60 consecutive days during which execution shall not be effectively stayed, or any action shall be taken by a judgment creditor to attach or levy upon any assets of the Seller to enforce any such judgment; or

-73-

          (n) One or more judgments for the payment of money in an aggregate amount in excess of CAD 65,000,000 (or the Dollar equivalent thereof) (except to the extent covered by insurance as to which the insurer has acknowledged such coverage in writing) shall be rendered against the Parent or any Originator or the Seller or any combination thereof, and the same shall remain undischarged for a period of 60 consecutive days during which execution shall not be effectively stayed, or any action shall be taken by a judgment creditor to attach or levy upon any assets of the Parent or any Originator or the Seller to enforce any such judgment; or

          (o) The PBGC or the Internal Revenue Service shall, or shall indicate its intention to, file notice of a lien pursuant to Section 4068 of ERISA or Section 6320 of the Code with regard to any of the assets of the Parent, the Seller or the Originators and such lien has not been discharged within 30 days of receipt of notice thereof and the amount of such lien is greater than $1,000,000; or

          (p) (i) ACI shall fail to make any payment required by the Undertaking (Originator) or the Undertaking (Servicer) or (ii) ACI shall fail to perform or observe any other term, covenant or agreement contained in the Undertaking (Originator) or the Undertaking (Servicer) and any such failure shall remain unremedied for 10 days after written notice thereof shall have been given to the Seller by the Agent, or (iii) any of the Undertaking (Originator) or the Undertaking (Servicer) shall cease to be in full force and effect; or

          (q) The Insurer shall refuse to pay any claim under the Insurance Policy specific to the Receivables solely as a result of an action by an Originator constituting “Corruption”, as such term is defined in Section 8(7) of the Insurance Policy; or

          (r) The Insurer shall terminate, or send ACI any notice of termination of, the Insurance Policy pursuant to Section 37(2) or 37(3) of the Insurance Policy;

then, and in any such event, any or all of the following actions may be taken by notice to the Seller: (x) the Investor or the Agent may declare the Facility Termination Date to have occurred (in which case the Facility Termination Date shall be deemed to have occurred), (y) the Agent may declare the Commitment Termination Date to have occurred (in which case the Commitment Termination Date shall be deemed to have occurred), and (z) without limiting any right under this Agreement to replace the Servicer, if such Event of Termination is a Servicer Default, the Agent may designate another Person to succeed ACSC as the Servicer; provided, that, automatically upon the occurrence of any event (without any requirement for the passage of time or the giving of notice) described in paragraph (g) of this Section 7.01, the Facility Termination Date and the Commitment Termination Date shall occur. Upon any such declaration or designation or upon such automatic termination, the Investors, the Banks and the Agent shall have, in addition to the rights and remedies which they may have under this Agreement, all other rights and remedies provided after default under the UCC, the PPSA and under other applicable law, which rights and remedies shall be cumulative.

-74-

ARTICLE VIII

THE AGENT

          Section 8.01 Authorization and Action. Each Investor and each Bank hereby appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Transaction Documents as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto. The Agent reserves the right, in its sole discretion (subject to Section 10.01), to agree to any amendment, modification or waiver of the provisions of this Agreement or any instrument or document delivered pursuant hereto, and also to exercise any rights and remedies available under this Agreement and the other Transaction Documents or pursuant to applicable law. As to any matters not expressly provided for by this Agreement or the other Transaction Documents (including, without limitation, enforcement of this Agreement or the other Transaction Documents), the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Banks and such instructions shall be binding upon all Banks; provided, however, that the Agent shall not be required to take any action which exposes the Agent to personal liability or which is contrary to this Agreement, the other Transaction Documents or applicable law.

          Section 8.02 Agent’s Reliance, Etc. Neither the Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them as Agent under or in connection with this Agreement (including, without limitation, the Agent’s servicing, administering or collecting Pool Receivables as Servicer) or any other Transaction Document, except for its or their own gross negligence or willful misconduct. Without limiting the generality of the foregoing, the Agent: (a) may consult with legal counsel (including counsel for the Parent, the Seller, the Originators and the Servicer), independent certified public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (b) makes no warranty or representation to any Investor or Bank (whether written or oral) and shall not be responsible to any Investor or Bank for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement or any other Transaction Document; (c) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement relating to the Parent, Seller, any Originator or the Servicer or to inspect the property (including the books and records) of the Parent, the Seller, any Originator or the Servicer; (d) shall not be responsible to any Investor or Bank for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and (e) shall incur no liability under or in respect of this Agreement or any other Transaction Document by acting upon any notice (including notice by telephone), consent, certificate or other instrument or writing (which may be by telecopier or telex) believed by it to be genuine and signed or sent by the proper party or parties.

          Section 8.03 CNAI and Affiliates. The obligation of Citibank to purchase Receivable Interests under this Agreement may be satisfied by CNAI or any of its Affiliates. With respect to any Receivable Interest or interest therein owned by it, CNAI shall have the

-75-

same rights and powers under this Agreement as any Bank and may exercise the same as though its Affiliate CLB were not the Agent. CNAI and any of its Affiliates may generally engage in any kind of business with the Parent, the Seller, the Servicer or any Obligor, any of their respective Affiliates and any Person who may do business with or own securities of the Parent, the Seller, the Servicer, any Originator, or any Obligor or any of their respective Affiliates, all as if CLB were not the Agent and without any duty to account therefor to the Investors or the Banks.

          Section 8.04 Bank’s Purchase Decision. Each Bank acknowledges that it has, independently and without reliance upon the Agent, any of its Affiliates or any other Bank and based on such documents and information as it has deemed appropriate, made its own evaluation and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent, any of its Affiliates or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own decisions in taking or not taking action under this Agreement.

          Section 8.05 Indemnification of Agent. Each Bank agrees to indemnify the Agent (to the extent not reimbursed by the Seller or the Servicer), ratably according to the amount of its Bank Commitment (or, if the Bank Commitments have been terminated, then ratably according to the respective amounts of Capital of the Receivable Interests (or interests therein) owned by it or which it may be required to purchase under the Asset Purchase Agreement), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of this Agreement or the other Transaction Documents or any action taken or omitted by the Agent under this Agreement or the other Transaction Documents, provided that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent’s gross negligence or willful misconduct.

ARTICLE IX

INDEMNIFICATION

          Section 9.01 Indemnities by the Seller. Without limiting any other rights that the Agent, the Investors, the Banks, any of their respective Affiliates or members or any of their respective officers, directors, employees or advisors (each, an “Indemnified Party”) may have hereunder or under applicable law, the Seller hereby agrees to indemnify each Indemnified Party from and against any and all claims, losses and liabilities (including reasonable attorneys’ fees) (all of the foregoing being collectively referred to as “Indemnified Amounts”) arising out of or resulting from this Agreement or the other Transaction Documents or the use of proceeds of purchases or reinvestments or the ownership of Receivable Interests or in respect of any Receivable or any Contract, excluding, however, (a) Indemnified Amounts to the extent found in a final non appealable judgment of a court of competent jurisdiction to have resulted from gross negligence or willful misconduct on the part of such Indemnified Party, (b) recourse (except as otherwise specifically provided in this Agreement) for Receivables which are not collected, not paid or uncollectible on account of the insolvency, bankruptcy or financial inability to pay of the

-76-

applicable Obligor or (c) any income taxes or any other tax or fee measured by income incurred by such Indemnified Party arising out of or as a result of this Agreement or the ownership of Receivable Interests or in respect of any Receivable or any Contract, other than (i) Taxes (to the extent provided in Section 2.10) and (ii) Canadian taxes strictly on income or capital in connection with the Receivables or the transactions contemplated by this Agreement and the other Transaction Documents and resulting from the Seller, any Investor or any Bank having a permanent establishment in Canada solely as a result of the transactions contemplated hereby (but only directly and exclusively as a result of any breach by the Seller or the Servicer (or any delegatee thereof) of its obligations hereunder or under any other Transaction Document). Without limiting or being limited by the foregoing, the Seller shall pay on demand to each Indemnified Party any and all amounts necessary to indemnify such Indemnified Party from and against any and all Indemnified Amounts relating to or resulting from any of the following:

     (i) the characterization in any Seller Report or other written statement made by or on behalf of the Seller of any Receivable as an Eligible Receivable or as included in the Net Receivables Pool Balance which, as of the date of such Seller Report or other statement, is not an Eligible Receivable or should not be included in the Net Receivables Pool Balance;

     (ii) any representation or warranty or statement made or deemed made by the Seller (or any of its officers) under or in connection with this Agreement or any of the other Transaction Documents which shall have been incorrect in any material respect as of the date when made;

     (iii) the failure by the Seller to comply with any applicable law, rule or regulation with respect to any Pool Receivable or the related Contract or the transfer of such Pool Receivable hereunder; or the failure of any Pool Receivable or the related Contract to conform to any such applicable law, rule or regulation; or the failure by the Seller to pay, remit or account for any taxes related to or included in a Receivable when due;

     (iv) the failure to vest in the Investors or the Banks, as the case may be, (a) a perfected undivided percentage ownership interest, to the extent of each Receivable Interest, in the Receivables in, or purporting to be in, the Receivables Pool and the Related Security and Collections in respect thereof, or (b) a perfected security interest as provided in Section 2.11, in each case free and clear of any Adverse Claim;

     (v) the failure to have filed or sent, or any delay in filing or sending, financing statements, notices or other similar instruments or documents under the UCC or the PPSA of any applicable jurisdiction or other applicable laws with respect to any Receivables in, or purporting to be in, the Receivables Pool and the Related Security and Collections in respect thereof, whether at the time of any purchase or reinvestment or at any subsequent time; or the failure to have properly notified any Obligor of the transfer, sale or assignment of any Receivable pursuant to the Transaction Documents, to the extent such notice is required to perfect the same under Quebec law; for purposes of this clause (v),

-77-

“perfect” under Quebec law, means to render opposable, publish and allow the setting up of the purchaser’s interest in, and right to collect payment under, the assets which are the subject of such transfer, sale and assignment, and to make opposable, publish and allow the setting up of such transfer, sale and assignment as against Obligors and other third parties, including any trustee in bankruptcy;

     (vi) any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable in, or purporting to be in, the Receivables Pool (including, without limitation, a defense based on such Receivable or the related Contract not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of the merchandise or services related to such Receivable or the furnishing or failure to furnish such merchandise or services or relating to collection activities with respect to such Receivable (if such collection activities were performed by the Seller or any of its Affiliates acting as Servicer);

     (vii) any failure of the Seller to perform its duties or obligations in accordance with the provisions hereof or to perform its duties or obligations under the Contracts, including, without limitation, any act or omissions by the Seller which gives rise to an exclusion from coverage under the Insurance Policy;

     (viii) any products liability or other claim arising out of or in connection with merchandise, insurance or services which are the subject of any Contract;

     (ix) the commingling of Collections of Pool Receivables at any time with other funds;

     (x) any investigation, litigation or proceeding related to this Agreement or the use of proceeds of purchases or reinvestments or the ownership of Receivable Interests or in respect of any Receivable or Related Security or Contract (including, without limitation, in connection with the preparation of a defense or appearing as a third party witness in connection therewith and regardless of whether such investigation, litigation or proceeding is brought by the Seller, an Indemnified Party or any other Person or an Indemnified Party is otherwise a party thereto);

     (xi) any failure of the Seller to comply with its covenants contained in this Agreement or any other Transaction Document;

     (xii) any claim brought by any Person other than an Indemnified Party arising from any activity by the Seller or any Affiliate of the Seller in servicing, administering or collecting any Receivable;

     (xiii) any claim arising out of any failure by the Seller to obtain a consent (if required) from the relevant Obligor to the transfer, sale or assignment of any Receivable pursuant to the Transaction Documents; or

-78-

     (xiv) after the date hereof, any Investor or Bank shall be subject to Canadian taxes on income or capital in connection with the Receivables or the transactions contemplated by this Agreement and the other Transaction Documents and resulting from the Seller, such Investor or such Bank having a permanent establishment in Canada solely as a result of the transactions contemplated hereby (but only directly and exclusively as a result of any breach by the Seller or the Servicer (or any delegatee thereof) of its obligations hereunder or under any other Transaction Document).

ARTICLE X

MISCELLANEOUS

          Section 10.01 Amendments, Etc. (a) Amendments Generally. No amendment or waiver of any provision of this Agreement or consent to any departure by the Seller, any Originator or the Servicer therefrom shall be effective unless in a writing signed by the Agent, as agent for the Investors and the Banks (and, in the case of any amendment, also signed by the Seller and the Originators; provided, however, that the signatures of the Seller and the Originators shall not be required for the effectiveness of any amendment which modifies the representations, warranties, covenants or responsibilities of the Servicer at any time when the Servicer is not ACI, the Originator or an Affiliate of the Originator or a successor Servicer is designated by the Agent pursuant to Section 6.01), and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by the Servicer in addition to the Agent, affect the rights or duties of the Servicer under this Agreement. Notwithstanding any other provision of this Section 10.01 (a), (i) Schedules I and IV hereto may be amended in accordance with the procedures set forth in Sections 5.01(g) and 5.01(b), respectively, and (ii) the amendments described in clauses (c)-(e) of this Section 10.01 shall become effective upon the satisfaction of the applicable conditions precedent set forth in this Section 10.01. No failure on the part of the Investors, the Banks or the Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right.

          (b) Replacement Bank Agreement. In the event that any financing is provided to ACI or any of its subsidiaries, pursuant to which the Parent is a borrower or guarantor or the lenders otherwise rely upon the credit or the financial position of the Parent, including by incorporation of representations and warranties, covenants or events of default relating to the Parent (such financing, the “Replacement Bank Agreement”), the Seller, the Servicer, the Agent, the Investors, the Banks and the Originators agree to enter into good faith negotiations for a period of 30 days after the effectiveness of such Replacement Bank Agreement, or such longer period as may be agreed to, in writing, by the Agent and the Originators, in order to amend the Events of Termination set forth in Sections 7.01(e), (g), (n) and (o) of this Agreement and any other provisions of this Agreement and the Originator Purchase Agreement as reasonably agreed to between the Agent and the Originators, so as to reflect, as applicable, the terms and conditions of analogous clauses in the Replacement Bank Agreement to the reasonable satisfaction of the

-79-

Agent and the Originators. This Section 10.01(b) shall not limit any rights of the Seller under Section 2.01(b).

          (c) Continuance Amendments. Effective as of the effective date (the “Continuance Effective Date”) of the Continuance as set forth in the Notice of Continuance and Change of Address to be delivered by the Seller to the Agent in the form attached hereto as Annex I (the “Notice of Continuance and Change of Address”), which Notice of Continuance and Change of Address shall be delivered to the Agent by no later than five (5) calendar days prior to the Continuance Effective Date, and subject to the satisfaction of the conditions precedent set forth in this Section 10.01(c):

          (i) The introductory paragraph to this Agreement is amended by deleting the phrase “ABITIBI-CONSOLIDATED INC., a Canadian corporation” and replacing it with the name and description of the Continued Entity, as indicated in the Notice of Continuance and Change of Address.

          (ii) Schedule IV to this Agreement is deleted in its entirety and replaced with Schedule IV attached to the Notice of Continuance and Change of Address.

          (iii) Each reference to “Abitibi-Consolidated Inc.,” “ACI”, the “Canadian Originator” and the “Subservicer” (to the extent ACI continues to be so designated and to act in such capacity) in this Agreement and each Transaction Document shall mean and be a reference to the Continued Entity, as indicated in the Notice of Continuance and Change of Address.

The amendments described in this Section 10.01(c) shall become effective on the Continuance Effective Date, subject to the receipt by the Agent (subject to the terms of clause (B) below) of each of the following, each in form and substance satisfactory to the Agent:

          (A) acknowledgment copies or time stamped receipt copies (or other satisfactory evidence of filing) of proper financing statements, financing change statements and financing statement amendments, duly filed against ACI and the Continued Entity, as applicable, on or before the Continuance Effective Date under the UCC and PPSA of all jurisdictions that the Agent may deem necessary or desirable in order to continue perfection of the ownership and security interests contemplated by this Agreement and the other Transaction Documents;

          (B) favourable opinions of (x) Stikeman Elliott LLP, Canadian counsel for the Continued Entity and (y) Stewart McKelvey LLP, Nova Scotia counsel for the Continued Entity, each of which opinions may be combined with and incorporated in the relevant opinion to be delivered pursuant to Section 10.01(d)(C) (the “Amalgamation Opinion”) provided that the Amalgamation Opinion is delivered to the Agent within thirty (30) days of the Continuance Effective Date; for greater certainty, the delivery of the opinions required pursuant to this clause (B) shall not delay the coming into effect of the amendments described in this Section 10.01(c);

-80-

          (C) a copy of the constating documents of the Continued Entity, giving effect to the Continuance, certified by the Secretary or Assistant Secretary of the Continued Entity;

          (D) a copy of the organizational documents of the Continued Entity, giving effect to the Continuance, certified by or on behalf of the Registrar of Joint Stock Companies of Nova Scotia, dated as of a recent date; and

          (E) a certificate as to the good standing or qualification to do business, as applicable, of the Continued Entity from an appropriate official of each of Nova Scotia and Quebec, dated as of a recent date.

          (d) Amalgamation Amendments. Effective as of the effective date (the “Amalgamation Effective Date”) of the Amalgamation as set forth in the Notice of Amalgamation to be delivered by the Seller to the Agent in the form attached hereto as Annex J (the “Notice of Amalgamation”), which Notice of Amalgamation shall be delivered to the Agent by no later than five (5) calendar days prior to the Amalgamation Effective Date, and subject to the satisfaction of the conditions precedent set forth in this Section 10.01(d):

          (i) The introductory paragraph to this Agreement is amended by deleting the name and description of the Continued Entity and replacing it with the name and description of the Amalgamated Entity, as indicated in the Notice of Amalgamation.

          (ii) Schedule III to this Agreement is deleted in its entirety and replaced with Schedule III attached to the Notice of Amalgamation.

          (iii) Schedule IV to this Agreement is deleted in its entirety and replaced with Schedule IV attached to the Notice of Amalgamation.

          (iv) Each reference to the Continued Entity, “Abitibi-Consolidated Inc.,” “ACI”, the “Canadian Originator” and the “Subservicer” (to the extent ACI continues to be so designated and to act in such capacity) in this Agreement and each Transaction Document shall mean and be a reference to the Amalgamated Entity, as indicated in the Notice of Amalgamation.

The amendments described in this Section 10.01(d) shall become effective on the Amalgamation Effective Date, subject to the receipt by the Agent of each of the following, each in form and substance satisfactory to the Agent:

          (A) an executed copy of the Assumption Agreement, in the form attached hereto as Annex K;

          (B) acknowledgment copies or time stamped receipt copies (or other satisfactory evidence of filing) of proper financing statements, financing change statements and financing statement amendments, duly filed against the Continued Entity and the Amalgamated Entity, as applicable, on or before the Amalgamation Effective Date under the UCC and PPSA of all jurisdictions that the Agent may deem necessary or

-81-

desirable in order to continue perfection of the ownership and security interests contemplated by this Agreement and the other Transaction Documents;

          (C) favourable opinions of (x) Stikeman Elliott LLP, Canadian counsel for the Amalgamated Entity and (y) Stewart McKelvey LLP, Nova Scotia counsel for the Amalgamated Entity;

          (D) a copy of the constating documents of the Amalgamated Entity, giving effect to the Amalgamation, certified by the Secretary or Assistant Secretary of the Amalgamated Entity;

          (E) a copy of the organizational documents of the Amalgamated Entity, giving effect to the Amalgamation, certified by or on behalf of the Registrar of Joint Stock Companies of Nova Scotia, dated as of a recent date;

          (F) a certificate as to the good standing or qualification to do business, as applicable, of the Amalgamated Entity from an appropriate official of each of Nova Scotia and Quebec, dated as of a recent date;

          (G) completed requests for information and search reports, dated on or before the Amalgamation Effective Date, listing all effective financing statements and other registrations filed in the jurisdictions referred to in subsection (b) above and in any other jurisdictions reasonably requested by the Agent that name 3224112 Nova Scotia Limited as debtor, together with copies of such financing statements and other registrations; and

          (H) acknowledgment copies of proper financing statements and registrations, if any, necessary to release all security interests and other rights of any Person in the Receivables, Contracts, Related Security or the collateral security referred to in Section 2.11.

          (e) Change of Address Amendments. Effective as of the effective date (the “Change of Address Effective Date”) of the Change of Address as set forth in the Notice of Change of Address to be delivered by the Seller to the Agent in the form attached hereto as Annex L (the “Notice of Change of Address”), which Notice of Change of Address shall be delivered to the Agent by no later than five (5) Business Days prior to the Change of Address Effective Date, and subject to the satisfaction of the conditions precedent set forth below, Schedules III and IV to this Agreement are deleted in their entirety and replaced with Schedules III and IV attached to the Notice of Change of Address, respectively.

               The amendments described in this Section 10.01(e) shall become effective on the Change of Address Effective Date, subject to the receipt by the Agent, on or prior to the Change of Address Effective Date, of acknowledgment copies or time stamped receipt copies (or other satisfactory evidence of filing) of proper financing statements and financing statement amendments, duly filed against ACSC and the Seller on or before the Change of Address Effective Date under the UCC of all jurisdictions that the Agent may deem necessary or

-82-

desirable in order to continue perfection of the ownership and security interests contemplated by this Agreement and the other Transaction Documents.

          (f) Waivers. The Agent, as agent for the Investors and the Banks, hereby waives the requirement to provide thirty (30) days’ written notice set forth in Section 5.01(k)(vii), solely to the extent relating to the Continuance, the Amalgamation and the Change of Address; provided that the Seller timely complies with the requirements to provide such notice in each case pursuant to its agreements set forth in clauses (c), (d) and (e) of this Section 10.01, as applicable.

          Section 10.02 Notices, Etc. All notices and other communications hereunder shall, unless otherwise stated herein, be in writing (which shall include facsimile communication) and faxed or delivered, to each party hereto, at its address set forth on Schedule III hereto or at such other address as shall be designated by such party in a written notice to the other parties hereto. Notices and communications by facsimile shall be effective when sent (and shall be followed by hard copy sent by regular mail), and notices and communications sent by other means shall be effective when received.

          Section 10.03 Assignability. (a) This Agreement and the Investors’ rights and obligations herein (including ownership of each Receivable Interest) shall be assignable by the Investors and their successors and assigns (including, without limitation, pursuant to the Asset Purchase Agreement). Each assignor of a Receivable Interest or any interest therein shall notify the Agent and the Seller of any such assignment. Each assignor of a Receivable Interest or any interest therein may, in connection with any such assignment, disclose to the assignee or potential assignee any information relating to the Seller, the Parent or any Originator, including the Receivables, furnished to such assignor by or on behalf of the Seller or by the Agent; provided that, prior to any such disclosure, the assignee or potential assignee agrees in writing to preserve the confidentiality of any such information which is confidential in accordance with the provisions of Section 10.06 hereof.

          (b) Each Bank may assign to any Eligible Assignee or to any other Bank all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Bank Commitment and any Receivable Interests or interests therein owned by it); provided, however, that

     (i) each such assignment shall be of a constant, and not a varying, percentage of all rights and obligations under this Agreement,

     (ii) the amount being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance Agreement with respect to such assignment) shall in no event be less than the lesser of (x) $10,000,000 and (y) all of the assigning Bank’s Bank Commitment,

     (iii) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register, an Assignment and Acceptance Agreement, together with a processing and recordation fee of $2,500, and

-83-

     (iv) concurrently with such assignment, such assignor Bank shall assign to such assignee Bank or other Eligible Assignee an equal percentage of its rights and obligations under the Asset Purchase Agreement (or, if such assignor Bank is Citibank, it shall arrange for such assignee Bank or other Eligible Assignee to become a party to the Asset Purchase Agreement for a maximum Capital amount equal to the assignee’s Bank Commitment).

          Upon such execution, delivery, acceptance and recording, from and after the effective date specified in such Assignment and Acceptance Agreement, (x) the assignee thereunder shall be a party to this Agreement and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance Agreement, have the rights and obligations of a Bank hereunder and (y) the assigning Bank shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance Agreement, relinquish such rights and be released from such obligations under this Agreement (and, in the case of an Assignment and Acceptance Agreement covering all or the remaining portion of an assigning Bank’s rights and obligations under this Agreement, such Bank shall cease to be a party hereto).

          (c) The Agent shall maintain at its address referred to in Section 10.02 of this Agreement a copy of each Assignment and Acceptance Agreement delivered to and accepted by it and a register for the recordation of (i) the names and addresses of the Investors and the Banks, (ii) the Bank Commitment of, and aggregate outstanding Capital of Receivable Interests or interests therein owned by, each Bank from time to time and (iii) the aggregate outstanding Capital of Receivable Interests owned by each Investor (the “Register”). The entries in the Register shall be conclusive and binding for all purposes regarding the ownership of the Receivable Interests, absent manifest error, and the Seller, the Originators, the Agent, the Investors and the Banks shall treat each person whose name is recorded in the Register as the owner of a Receivable Interests and as a Bank or an Investor, as applicable, under this Agreement for all purposes of this Agreement. The Register as the owner of a Receivable Interests and shall be available for inspection by the Seller, any Investor or any Bank at any reasonable time and from time to time upon reasonable prior notice. The parties hereto intend that the Register will satisfy the requirement that indebtedness for U.S. federal income tax purposes represented by the Receivable Interests be in “registered form” as such term is used for purposes of portfolio interest under sections 881(c) and 163(f) of the Code and the regulations promulgated thereunder. Upon its receipt of an Assignment and Acceptance Agreement executed by an assigning Bank and an Eligible Assignee, the Agent shall, if such Assignment and Acceptance Agreement has been completed, (i) accept such Assignment and Acceptance Agreement, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Seller.

          (d) Notwithstanding any other provision of this Section 10.03, any Bank may at any time pledge or grant a security interest in all or any portion of its rights (including, without limitation, rights to payment of Capital and Yield) under this Agreement or under the Asset
Purchase Agreement to secure obligations of such Bank to a Federal Reserve Bank, without notice to or consent of the Seller or the Agent; provided that no such pledge or grant of a security interest shall release a Bank from any of its obligations hereunder or under the Asset Purchase

-84-

Agreement, as the case may be, or substitute any such pledgee or grantee for such Bank as a party hereto or to the Asset Purchase Agreement, as the case may be.

          (e) Each Bank may sell participations, to one or more banks or other entities, in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Bank Commitment and the Receivable Interests or interests therein owned by it); provided, however, that

          (i) such Bank’s obligations under this Agreement (including, without limitation, its Bank Commitment to the Seller hereunder) shall remain unchanged,

          (ii) such Bank shall remain solely responsible to the other parties to this Agreement for the performance of such obligations and

          (iii) concurrently with such participation, the selling Bank shall sell to such bank or other entity a participation in an equal percentage of its rights and obligations under the Asset Purchase Agreement.

The Agent, the other Banks, the Seller and the Servicer shall have the right to continue to deal solely and directly with such Bank in connection with such Bank’s rights and obligations under this Agreement.

          (f) This Agreement and the rights and obligations of the Agent herein shall be assignable by the Agent and its successors and assigns; provided, however, that the Agent agrees that it will not assign such rights and obligations to any Person other than an Affiliate of Citibank unless:

     (i) in the reasonable judgment of the Agent, the Agent determines that continued service by it (or its Affiliate) as Agent hereunder would be inconsistent with, or otherwise materially disadvantageous under, applicable legal, tax or regulatory restrictions; or

     (ii) an Event of Termination or Incipient Event of Termination shall have occurred and be continuing; or

     (iii) the Seller shall have consented to such assignment (such consent not to be unreasonably withheld or delayed).

          (g) The Seller may not assign its rights or obligations hereunder or any interest herein without the prior written consent of the Agent.

          (h) Eureka may sell participations to one or Eligible Assignees (each, a “Participant”) in all or a portion of its rights and obligations hereunder (including the outstanding Receivable Interests) without the consent of the Seller (except as otherwise provided in the definition of Eligible Assignee); provided that following the sale of a participation under this Agreement (i) the obligations of Eureka shall remain unchanged, (ii) Eureka shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Seller,

-85-

the Agent, and the Banks shall continue to deal solely and directly with Eureka in connection with Eureka’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which Eureka sells such a participation shall provide that the Participant shall not have any right to direct the enforcement of this Agreement or the other Transaction Documents or to approve any amendment, modification or waiver of any provision of this Agreement or the other Transaction Documents; provided that such agreement or instrument may provide that Eureka will not, without the consent of the Participant, agree to any amendment, modification or waiver that (i) reduces the amount of Capital or Yield that is payable on account of any Receivable Interest or delays any scheduled date for payment thereof or (ii) reduces any fees payable by the Seller to the Agent (to the extent relating to payments to the Participant) or delays any scheduled date for payment of such fees. The Seller acknowledges and agrees that Eureka’s source of funds may derive in part from its Participants. Accordingly, references in Sections 2.08, 2.10, 6.07, 9.01 and 10.04 and the other terms and provisions of this Agreement and the other Transaction Documents to determinations, reserve and capital adequacy requirements, expenses, increased costs, reduced receipts and the like as they pertain to Eureka shall be deemed also to include those of its Participants; provided that the Seller shall not be required to pay higher costs, expenses and indemnification amounts pursuant to this sentence than would be required to be paid by the Seller in the absence of the sale of any participation by Eureka to a Participant as contemplated by this Section 10.03(h). Eureka or the Agent may, in connection with any such participation, disclose to Participants and potential Participants any information relating to the Seller or the Originator, including the Receivables, furnished to Eureka or the Agent by or on behalf of the Seller; provided that, prior to any such disclosure, such Participant or potential Participant agrees in writing to preserve the confidentiality of any such information which is confidential in accordance with the provisions of Section 10.06 hereof. Any interest sold by Eureka to a Bank or its designee under the Asset Purchase Agreement shall not be considered a participation for the purpose of this Section 10.03(h) (and the Bank or its designee shall not be considered a Participant as a result thereof).

          Section 10.04 Costs and Expenses. (a) In addition to the rights of indemnification granted under Section 9.01 hereof, the Seller agrees to pay on demand all reasonable costs and expenses in connection with the preparation, execution, delivery and administration (including periodic auditing and the other activities contemplated in Section 5.02) of this Agreement, any Asset Purchase Agreement and the other documents and agreements to be delivered hereunder, including, without limitation, the reasonable fees and reasonable out-of-pocket expenses of counsel for the Agent, CNAI, Eureka, Citibank and their respective Affiliates with respect thereto and with respect to advising the Agent, CNAI, Eureka, Citibank and their respective Affiliates as to their rights and remedies under this Agreement, and all costs and expenses, if any (including reasonable counsel fees and expenses), of the Agent, CNAI, the Investors, the Banks and their respective Affiliates, in connection with the enforcement of this Agreement and the other documents and agreements to be delivered hereunder.

          (b) In addition, the Seller shall pay, to the extent not included in the calculation of Yield, (i) any and all commissions of placement agents and dealers in respect of Promissory Notes issued to fund the purchase or maintenance of any Receivable Interest, and (ii) any and all costs and expenses of any issuing and paying agent or other Person responsible for the administration of Eureka’s Promissory Notes program in connection with the preparation,

-86-

completion, issuance, delivery or payment of Promissory Notes issued to fund the purchase or maintenance of any Receivable Interest.

          (c) Further, the Seller agrees to pay any and all breakage and other expenses of the Agent, the Investor and the Banks (including, without limitation, reasonable attorneys’ fees and disbursements and the cost including accrued interest, of terminating or transferring any agreements such as interest rate swaps, over-the-counter forward agreements and future contracts engaged by the Investor, the Banks or the Agent) in connection with any reduction of the Capital relating to the funding or maintenance of any Receivable Interest (or portion thereof), but without duplication of any such breakage and other expenses that were included in any Liquidation Fee paid with respect thereto.

          Section 10.05 No Proceedings. Each of the Seller, the Agent, the Servicer, each Originator, ACI, each Investor, each Bank, each assignee of a Receivable Interest or any interest therein and each entity which enters into a commitment to purchase Receivable Interests or interests therein hereby agrees that it will not institute against, or join any other Person in instituting against, Eureka any proceeding of the type referred to in Section 7.01 (g) so long as any commercial paper or other senior indebtedness issued by Eureka shall be outstanding or there shall not have elapsed one year plus one day since the last day on which any such commercial paper or other senior indebtedness shall have been outstanding.

          Section 10.06 Confidentiality. (a) The Seller, each Originator and the Servicer each agrees to maintain the confidentiality of this Agreement, the Originator Purchase Agreement and the Fee Agreement and the respective terms thereof in communications with third parties and otherwise; provided that this Agreement or the terms hereof may be disclosed (i) to third parties to the extent such disclosure is made pursuant to a written agreement of confidentiality in form and substance reasonably satisfactory to the Agent, (ii) to their respective Affiliates, directors, officers, employees, agents, auditors and advisors, including, without limitation, attorneys, accountants and consultants on a strictly “need to know” basis if they agree to hold it confidential, (iii) to third parties, solely with respect to (x) the Program Limit, the Commitment Termination Date, the Facility Termination Date, the aggregate Outstanding Balance of Receivables, a summary of the Events of Termination, the definition of “Receivable” and the related definition of “Originator Receivable” set forth in the Originator Purchase Agreement and (y) other terms of the Agreement, to the extent that the Agent has provided its prior written consent to such disclosure, (iv) to the extent required by applicable law, regulation, subpoena, court order or other legal process, including, without limitation, under applicable securities regulations or by securities regulators, or by any court, regulatory body or agency having jurisdiction over such party, (v) in connection with any action or proceeding related to, or the exercise of any remedies under, this Agreement and the other Transaction Documents, or (vi) as may be determined by such party or its auditors, acting reasonably, to be necessary in connection with financial reporting under generally accepted accounting principals or to rating agencies in respect of such party; and provided, further, that such party shall have no obligation of confidentiality in respect of any information which may be generally available to the public or becomes available to the public through no fault of such party.

          (b) Each Investor, each Bank and the Agent agrees to keep confidential and not disclose to any third parties any information, including, but not limited to, any Contracts, the

-87-

identity of the Obligors, any customer lists and aging, the Parent’s or its Affiliates’ accounts receivable policy, credit policy, technical information, operating procedures, financial information, research data, documents, formulas, compilations, reports, studies, test results, software (including source code and object code), database compilations and the format, structure and configuration of any databases (whether or not such information is marked “confidential,” “privileged” or otherwise identified as confidential) (collectively, the “Confidential Information”) provided to it pursuant to the terms of this Agreement, the Transaction Documents or otherwise with respect to the Parent, the Seller, the Originators, the Obligors, the Contracts or the Receivables Pool (including the Seller Reports) in connection with the transactions contemplated by this Agreement and the other Transaction Documents; provided, that such Confidential Information may be disclosed (i) to such party’s Affiliates, directors, officers, employees, agents, auditors and advisors, including, without limitation, attorneys, accountants and consultants (such Affiliates, directors, officers, employees, agents, auditors and advisors are collectively referred to herein as the “Representatives”) and to such party’s assignees and participants and potential assignees and participants and their respective counsel, (ii) to the rating agencies, (iii) to any actual or potential subordinated investor in any Investor or any provider of liquidity for any Investor, (iv) to credit enhancers and dealers and investors in respect of promissory notes of each Investor in accordance with the customary practices of such Investor for disclosures to credit enhancers, dealers or investors, as the case may be, it being understood that any such disclosure to dealers or investors will not identify the Parent, the Seller, the Originators or any of their affiliates by name, (v) to the extent required by applicable law, regulation, subpoena, court order or other legal process and (vi) to the extent requested by any governmental or regulatory authority having jurisdiction over such party; provided, further, that (A) any such disclosure pursuant to clause (i), (ii), (iii) or (iv) shall be disclosed to such party on a strictly “need to know” basis and (B) in the case of any such disclosure pursuant to clause (i), the party receiving such Confidential Information shall agree to hold such information confidential in accordance with terms consistent with this Section 10.06 or shall be legally obligated, or otherwise obligated by virtue of such party’s relationship with an Investor, a Bank or the Agent, to preserve the confidentiality thereof (and any Person making a disclosure pursuant to the foregoing will be responsible for any failure of any of its own Representatives to comply with the provisions of this Section 10.06); and provided, further that such party shall have no obligation of confidentiality in respect of any information (X) which may be generally available to the public or becomes available to the public through no fault of such party, (Y) that was or becomes, without a breach of this Section 10.06 by such party, available to such party on a non-confidential basis from a source that is not known to such party to be subject to a confidentiality agreement with the Parent, or (Z) that is approved for release or other use by written authorization of an authorized representative of the Parent or the applicable Affiliate of the Parent. In the event that an Investor, Bank or the Agent or any of their Representatives are requested pursuant to, or required by, applicable law, regulation or legal process to disclose any of the Confidential Information, such party shall (except in the case of an examination by any regulatory authority), if permitted by applicable law, (x) promptly notify the Parent, the Seller, the applicable Originator or the Servicer, as the case may be, so that such Person may seek a protective order, injunctive relief or other appropriate remedy and (y) use its reasonable efforts to request that the Person or entity propounding any subpoena or demand give the Parent, the Seller, the applicable Originator or the Servicer, as the case may be, a reasonable amount of time to object to the disclosure or production of the Confidential Information.

-88-

          (c) Upon the written request of the Parent, the Seller, an Originator or the Servicer, at any time following the later of the Facility Termination Date and the date on which no Capital or Yield on any Receivable Interest shall be outstanding and all other amounts owed by the Seller hereunder are paid in full, any party hereto that has received Confidential Information will either (i) promptly deliver to the Person requesting such Confidential Information, and at the requesting party’s own expense, all copies of the Confidential Information in its or its Representatives’ possession or (ii) if so requested, promptly destroy all copies of the Confidential Information in its or its Representatives’ possession and confirm in writing such destruction to the Person requesting such destruction. Notwithstanding the foregoing, the party to which any such request is made may retain Confidential Information in accordance with its document retention procedures, provided that such party’s obligations with respect to such Confidential Information shall continue in accordance with the terms of this Section 10.06.

          (d) Notwithstanding any other provision herein or in any other Transaction Document, each Investor, each Bank and the Agent hereby confirms that the Seller, each Originator and the Servicer (and each employee, representative or other agent of each such party) may disclose to any and all Persons, without limitation of any kind, the U.S. tax treatment and U.S. tax structure of the transaction contemplated by this Agreement and the other Transaction Documents.

          Section 10.07 GOVERNING LAW. THIS AGREEMENT SHALL, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION, EXCEPT TO THE EXTENT THAT, PURSUANT TO THE UCC OF THE STATE OF NEW YORK, THE PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF THE INTERESTS OF THE INVESTORS AND THE BANKS IN THE RECEIVABLES AND THE ORIGINATOR PURCHASE AGREEMENT ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.

          Section 10.08 Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.

          Section 10.09 Survival of Termination. The provisions of Sections 2.08, 2.10, 6.07, 9.01, 10.04, 10.05 and 10.06 shall survive any termination of this Agreement.

          Section 10.10 Consent to Jurisdiction. (a) Each party hereto hereby irrevocably submits to the non-exclusive jurisdiction of any New York State or Federal court sitting in New York City in any action or proceeding arising out of or relating to this Agreement or the other Transaction Documents, and each party hereto hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State court or, to the extent permitted by law, in such Federal court. The parties hereto hereby irrevocably

-89-

waive, to the fullest extent they may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. The parties hereto agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

          (b) Each of the Seller and the U.S. Originator consents to the service of any and all process in any such action or proceeding by the mailing of copies of such process to it at its address specified in Section 10.02. Each of ACI and the Canadian Originator consents to the service of any and all process in any such action or proceeding by the mailing of copies of such process to the attention of the U.S. Originator at its address specified in Section 10.02, or in any other manner permitted by applicable law. Nothing in this Section 10.10 shall affect the right of the Investors, any Bank or the Agent to serve legal process in any other manner permitted by
law.

          (c) To the extent that ACI or the Canadian Originator has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, ACI or the Canadian Originator, as applicable, hereby irrevocably waives such immunity in respect of its obligations under this Agreement.

          Section 10.11 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT EXECUTED OR DELIVERED PURSUANT HERETO.

          Section 10.12 Judgment. (a) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in Dollars into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Agent or its assigns could purchase Dollars with such other currency at New York, New York on the Business Day preceding that on which final judgment is given.

          (b) The obligations of the Seller, the Servicer and each Originator (each, a “Payor”) in respect of any sum due from such Payor to the Investor, the Banks or the Agent (each, a “Recipient”) hereunder shall, notwithstanding any judgment in a currency other than Dollars, be discharged only to the extent that on the Business Day following such Recipient’s receipt of any sum adjudged to be so due in such other currency, such Recipient may, in accordance with normal banking procedures purchase (and remit in New York) Dollars with such other currency; if the Dollars so purchased and remitted are less than the sum originally due to such Recipient in Dollars, the relevant Payor agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the relevant Recipient against such loss, and if the Dollars so purchased exceed the sum originally due to the relevant Recipient in Dollars, the relevant Recipient agrees to remit to the relevant Payor such excess.

-90-

          Section 10.13 Execution by ACI. This Agreement shall be considered to be executed and delivered by ACI at White Plains, New York and once an authorized director or officer of ACI resident in the United States of America has executed the same.

          Section 10.14 Language. This Agreement and all related documents have been written in the English language at the express request of the parties. Le présent contrat ainsi que tous les documents s’y rattachant ont été rédigés en anglais à la demande expresse des parties.

          Section 10.15 Tax Treatment. It is the intent of the Seller, the Investor and each Bank, and all other parties to this Agreement that, for U.S. federal, state and local income and franchise tax (in the nature of income tax) purposes only, each Receivable Interest will be treated as indebtedness secured by the Seller’s assets. The Seller, by entering into this Agreement, and the Investor and each Bank, and all other parties to this Agreement, by purchasing a Receivable Interest, agree to treat the Receivable Interests for U.S. federal, state and local income and franchise tax (in the nature of income tax) purposes as indebtedness. The provisions of this Agreement and all related Transaction Documents shall be construed to further these intentions of the parties.

          Section 10.16 Acknowledgment. Each of the parties hereto acknowledges that the amendment and restatement of the Original RPA on the terms and conditions set forth herein shall not in any way affect any sales, transfers, assignments or security interest grants effected pursuant to the Original RPA or any representations, warranties or covenants made by the Seller or the Servicer with respect to such sales, transfers, assignments or security interest grants, any indemnities made by the Seller or by the Servicer, or any rights or remedies of the Agent, the Investors or the Banks with respect thereto. Each of the relevant parties hereto confirms all sales, transfers, assignments and security interests effected pursuant to the Original RPA.

-91-

          IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

SELLER: ABITIBI-CONSOLIDATED U. S. FUNDING CORP.
By:	/s/ Breen H. Blaine
	Title: President
	Name: Breen H. Blaine
By:	/s/ Colin J. Keeler
	Title: VP
	Name: Colin Keeler

INVESTOR: EUREKA SECURITISATION, PLC
By:	Citibank, N. A., London Branch, as Attorney-in-Fact

By:	/s/ Nigel Kilvington
	Title: Vice President
	Name: Nigel Kilvington

AGENT: CITIBANK, N. A., London Branch,                 as Agent
By:	/s/ Nigel Kilvington
	Title: Vice President
	Name: Nigel Kilvington
BANK: CITIBANK, N. A.
By:	/s/ Nigel Kilvington
	Title: Nigel Kilvington
	Name: Vice President

[Receivables Purchase Agreement]

SERVICER: ABITIBI CONSOLIDATED SALES                      CORPORATION
By:	/s/ Breen H. Blaine
	Title: Vice President
	Name: Breen H. Blaine
By:	/s/ Colin J. Keeler
	Title: Vice President
	Name: Colin Keeler
SUBSERVICER: ABITIBI-CONSOLIDATED INC.
By:	/s/ [UNREADABLE]
	Title:
	Name:
By:	/s/ [UNREADABLE]
	Title:
	Name:

(Receivables Purchase Agreement]

ORIGINATORS: ABITIBI-CONSOLIDATED INC.
By:	/s/ [UNREADABLE]
	Title:
	Name:
By:	/s/ [UNREADABLE]
	Title:
	Name:
ABITIBI CONSOLIDATED SALES CORPORATION
By:	/s/ Breen H. Blaine
	Title: VP
	Name: Breen H. Blaine
By:	/s/ Colin J. Keeler
	Title: VP
	Name: Colin Keeler

[Receivables Purchase Agreement]

SCHEDULE I

Deposit Accounts

					Complete Name of
	Complete Name of	Name and Address of			Deposit Account		Deposit
Originator	Lock-box Owner	Deposit Bank*	Lock-Box Nos.	Location	Owner	Account Bank
Abitibi-Consolidated Inc.	Abitibi-Consolidated Inc.	Royal Bank of Canada 1 Place Ville Marie Montreal	T01972C V05410C and M05333C V05410U and M05333U	Toronto Vancouver Montreal Vancouver Montreal	Abitibi-Consolidated Inc.		Royal Bank of Canada	1 1 4
Abitibi Consolidated Sales Corporation	Abitibi-Consolidated U. S. Funding Corp.	LaSalle Bank National Association 135 South LaSalle Street Chicago IL 60603	1228 1070	Chicago Chicago	Abitibi-Consolidated U. S. Funding Corp.		LaSalle Bank National Association	5 5
Abitibi-Consolidated Inc.	N/A	Citibank, N. A. 390 Greenwich Street, 8th Floor New York NY 10013	N/A	N/A	Abitibi-Consolidated U. S. Funding Corp.		Citibank, N. A.	4

* And, if different, name and address of processor of lock-box.

S- 1

SCHEDULE III

Addresses

Seller:	Abitibi-Consolidated U. S. Funding Corp.
	4 Gannett Drive, ACUSFC Room White Plains, N. Y. 10604-3400 Attention: Breen Blaine Facsimile No.: 914-640-8920
Investor:	Eureka Securitisation, plc
	Citigroup Centre 33 Canada Square, 5th Floor Canary Wharf London E14 5LB England Attention: Nigel Kilvington Facsimile: 44-207-986-4705
	With a copy to:
	450 Mamaroneck Avenue Harrison, N. Y. 10528
	Attention: Global Securitization Facsimile No.: 914 899-7890
Agent:	Citibank, N. A., London Branch
	Citigroup Centre 33 Canada Square, 5th Floor Canary Wharf London E14 5LB England
	Attention: Nigel Kilvington Facsimile: 44-207-986-4705
	With a copy to:
	450 Mamaroneck Avenue Harrison, N. Y. 10528
	Attention: Global Securitization Facsimile No.: 914 899-7890

S- 2

Bank:	Citibank, N. A.
	450 Mamaroneck Avenue Harrison, N. Y. 10528
	Attention: Global Securitization Facsimile No.: 914 899-7890

S- 3

Parent:	ABITIBI-CONSOLIDATED INC
	1155 METCALFE STREET SUITE 800
	MONTREAL QC H3B 542 CANADA
	ATTENTION: TREASURY DEPARTMENT Facsimile No.: 514-3942267
With a copy to (in the event of claims or disputes only):	ABITIBI-CONSOLIDATED INC 1155 METCALFE STREET SUITE 800
	MONTREAL QC H3B 542
	CANADA
	ATTENTION: LEGAL DEPARTMENT
	Facsimile No.: 514-394-3644
Servicer:	Abitibi Consolidated Sales Corporation
	4 Gannett Drive
	White Plains, N. Y. 10604-3400 Attention: Breen Blaine
	Facsimile No.: 914-640-8917
	With Copy To:
	Attention: Montréal Legal Department
	Facsimile No.: 514-394-3644
Canadian Originator:	ABITIBI-CONSOLIDATED INC
	1155 METCALFE STREET SUITE 800
	MONTREAL QC H3B 542 CANADA
	ATTENTION: TREASURY DEPARTMENT Facsimile No.: 514-394 2267
U. S. Originator:	Abitibi Consolidated Sales Corporation
	4 Gannett Drive
	White Plains, N. Y. 10604-3400 Attention: Breen Blaine
	Facsimile No.: 914-640-8917
	With Copy To:
	Attention: Montreal Legal Department
	Facsimile No.: 514-394-3644

S- 4

SCHEDULE IV

UCC and PPSA Information

Seller:
Name:	Abitibi-Consolidated U.S. Funding Corp.
Current Address:	4 Gannett Drive, ACUSFC Room
	White Plains, N.Y. 10604-3400
Prior Address:	None
Jurisdiction of Organization:	Delaware
UCC Filing Office:	Delaware Secretary of State
Prior Name:	None
U.S. Originator:
Name:	Abitibi Consolidated Sales Corporation
Current Address:	4 Gannett Drive
(and location of chief	White Plains, NY 10604-3400
executive office and
Receivables records)
Prior Address:	None
Jurisdiction of Organization:	Delaware
UCC Filing Office:	Delaware Secretary of State
Prior Name:	Abitibi-Price Sales Corporation
Canadian Originator:
Name:	Abitibi-Consolidated Inc.
Chief Executive and	1155 Metcalfe Street, Suite 800
Registered Office
and locations of
Receivables records:	Montreal, Quebec, Canada H3B 5H2
Jurisdiction of Organization:	Canada

S-5

PPSA Filing Offices:	British Columbia
	Ontario
	Quebec
	Alberta
Prior Name:	None

S-6

SCHEDULE V

Special Country Concentration Limits

     The Special Country Concentration Limits for SCCs shall be equal to the lower of (a) the percentage based on the Foreign Currency Long-Term Debt Ratings of the applicable SCC set forth in the table below and (b) the credit limit approved for the applicable SCC pursuant to the Insurance Policy. If S&P and Moody’s ratings fall within different categories, then the lower Foreign Currency Long-Term Debt Rating will apply.

	Special Country
Foreign Currency Long-Term Debt	Concentration Limit
Ratings at least:	Percentage:
AA- by S&P and Aa3 by Moody’s		12.00	%
BB+- by S&P and Ba1 by Moody’s		8.00	%

S-7

ANNEX E-1

[Form of Funds Transfer Letter]

ABITIBI-CONSOLIDATED U.S. FUNDING CORP.

October 27, 2005          

Citibank, N.A., London Branch
  as Agent
Citigroup Centre
33 Canada Square, 5th Floor
Canary Wharf
London E14 5LB
England

               Re: Funds Transfers

Ladies and Gentlemen:

          This letter is the Funds Transfer Letter referred to in Section 2.02(b) of the Receivables Purchase Agreement, dated as of October 27, 2005, as modified, amended or restated from time to time (the “RPA”; terms used in the RPA, unless otherwise defined herein, having the meaning set forth therein) among the undersigned, Eureka Securitisation, plc, Citibank, N.A., you, as Agent for the Investors and the Banks and the Originators.

          You are hereby directed to use the proceeds of the initial purchase of $281,480,958.86 of Receivable Interests under the RPA occurring on the date hereof to make the following payments (and to deposit the same to the respective accounts referred to below):

          (1) pay US$675,000.00 to Citibank, N.A. representing the up-front structuring fee payable in accordance with the Fee Letter dated October 27, 2005;

          (2) pay US$275,000.00 to Kaye Scholer LLP representing legal fees incurred by the Program Agent payable in accordance with Kaye Scholer’s invoice dated October 26, 2005;

          (3) pay US$35,782.41 to Protiviti representing audit fees incurred payable in accordance with Protiviti’s invoice dated October 14, 2005;

          (4) pay US$275,000,000 to Canadian Imperial Bank of Commerce (“CIBC”), representing the price to be paid to CIBC under the Assignment and Assumption Agreement dated October 27, 2005; and

          (5) pay the balance to the account of the Seller referred to below.

Remittance Information:
Citibank, N.A.
Bank Name:	Citibank N.A.
ABA Number:	021-000-089
Account Name:	CNA CAP Funding Account
Account Number:	38858088
Ref:	Abitibi Upfront Fee
Kaye Scholer LLP:
Bank Name:	Citibank, N.A.
ABA Number:	021-000-089
Account Name:	Kaye Scholer LLP
Account Number:	24589163
Invoice Number:	467461
Swiftcode:	CITIUS33
Ref:	Citigroup / Abitibi Transaction
Protiviti:
Bank Name:	Bank of America
ABA Number:	121-000-358
Account Number:	12331-03129
Invoice Number:	019976
Ref:	Citicorp / Abitibi Transaction
Canadian Imperial Bank of Commerce:
Bank Name:	Bank of America NT & SA, NYC
ABA Number:	026009593
Account Number:	655-08-26157
For further credit to	CIBC, Main Branch
Transit Number:	00002, Toronto
For further credit to MACRO Trust — General Account
Account Number:	05-68716

2

Seller:
Bank Name:	LaSalle National Bank
ABA Number:	071 000 505
Account Name:	Abitibi-Consolidated U.S. Funding Corp. Collection Account for the benefit of Citibank, N.A., London Branch, as Agent
Account Number:	5800031568
Ref:	Citicorp / Abitibi Transaction

               You are hereby directed to deposit all funds representing amounts paid for Receivable Interests purchased after the date hereof to the account described on Exhibit A attached hereto.

[Remainder of page intentionally left blank]

3

               The provisions of this Letter may not be changed or amended orally, but only by a writing in substantially the form of this letter signed by the undersigned and acknowledged by you.

Very truly yours, ABITIBI-CONSOLIDATED U.S. FUNDING CORP.
By:
	Title:
	Name:
By:
	Title:
	Name:

Receipt acknowledged:
CITIBANK, N.A., LONDON BRANCH
  as Agent

By:
	Title: Vice President
	Name:

EXHIBIT A

to Funds Transfer Letter

All funds representing amounts paid for Receivable Interests purchased after October 27, 2005 are to be remitted to the following account:

Bank Name:	LaSalle National Bank
ABA Number:	071 000 505
Account Name:	Abitibi-Consolidated U.S. Funding Corp. Collection Account for the benefit of Citibank, N.A., London Branch, as Agent
Account Number:	5800031568
Ref:	Citicorp / Abitibi Transaction

5

ANNEX E-2

[Form of Direction Letter]

ABITIBI-CONSOLIDATED U.S. FUNDING CORP.

January 31, 2008          

Citibank, N.A., London Branch
  as Agent
Citigroup Centre
33 Canada Square, 5th Floor
Canary Wharf
London E14 5LB
England

               Re: Closing Date Funds Transfers

Ladies and Gentlemen:

          This letter is the Direction Letter referred to in Section 2.02(b) of the Amended and Restated Receivables Purchase Agreement, dated as of January 31, 2008, as modified, amended or restated from time to time (the “RPA”; terms used in the RPA, unless otherwise defined herein, having the meaning set forth therein) among the undersigned, Eureka Securitisation, plc, Citibank, N.A., you, as Agent for the Investors and the Banks, and the Originators.

          You are hereby directed to use the proceeds of the purchase of US$84,344,861.28 of Receivable Interests under the RPA occurring on the date hereof to make the following payments (and to deposit the same to the respective accounts referred to below):

          (1) pay US$600,000.00 to Citibank, N.A. representing the up-front arrangement and structuring fee payable in accordance with that certain letter agreement between the Seller and the Agent regarding fees dated January 31, 2008;

          (2) pay US$99,244.76 to Kaye Scholer LLP (“Kaye Scholer”) representing legal fees incurred by the Program Agent payable in accordance with Kaye Scholer’s invoice dated January 29, 2008;

          (3) pay US$58,106.18 to Blake, Cassels & Graydon LLP (“Blakes”) representing legal fees incurred by the Program Agent payable in accordance with Blakes’ invoice dated January 29, 2008 and prior unpaid invoices; and

          (4) pay US$83,587,510.34 to ABN Amro Bank N.V. (“ABN Amro”), representing the price to be paid to ABN Amro under the letter agreement between ACSC and ABN Amro dated January 31, 2008 regarding “Termination of the Purchase Agreement and

Assignment of the Eligible Receivables and the Related Security”, as directed by ACI and ACSC in their capacities as sellers under the Originator Purchase Agreement.

Remittance Information:
Citibank, N.A.
Bank Name:	Citibank N.A.
ABA Number:	021 -000-089
Account Name:	CNA CAP Funding Account
Account Number:	38858088
Ref:	Abitibi Upfront Fee
Kaye Scholer LLP:
Bank:	Citibank, N.A.
	666 5th Avenue, 5th Floor
	New York, NY 10103
	Attn: Yoannis Cepeda
ABA Number:	021 -000-089
Account Name:	Kaye Scholer LLP
Account Number:	24589163
Invoice Number:	547376
Swiftcode:	CITIUS33
Ref:	Citigroup / Abitibi Transaction
Blakes:
Bank of America NT & SA
100 West 33rd Street
New York, NY 10001
Swiftcode: BOFAUS3N
ABA No. 026009593
For Further Credit to:
Canadian Imperial Bank of Commerce Main Branch, Commerce Court West Toronto, Ontario M5L 1A2
Swiftcode: CIBCCATT
Transit No. 00002
Final Beneficiary: Blake Cassels & Graydon LLP
Account No. 000021602012
Reference: Invoice No. 1334416

2

ABN Amro:
Bank Name:	ABN Amro Bank N.V.
ABA Number:	026 009 580
Account of:	ABN Amro
Account Number:	673001195941
Ref:	Abitibi-Consolidated Inc.

          The Seller hereby agrees and acknowledges that the aggregate amount of the payments set forth in items (l)-(4) above represents the full amount of the US$84,344,861.28 purchase of Receivable Interests under the RPA occurring on the date hereof.

[Remainder of page intentionally left blank]

3

          The provisions of this Letter may not be changed or amended orally, but only by a writing in substantially the form of this letter signed by the undersigned and acknowledged by you.

Very truly yours, ABITIBI-CONSOLIDATED U.S. FUNDING CORP.
By:
	Title:
	Name:
By:
	Title:
	Name:

Agreed and acknowledged by ACI and ACSC, in
their capacities as sellers under the Originator
Purchase Agreement:

ABITIBI-CONSOLIDATED INC.

By:
	Title:
	Name:

By:
	Title:
	Name:

ABITIBI CONSOLIDATED SALES CORPORATION

By:
	Title:
	Name:

By:
	Title:
	Name:

Receipt acknowledged:
CITIBANK, N.A., LONDON BRANCH
as Agent

By:
	Title: Vice President
	Name:

ANNEX F

Form of Undertaking (Originator)

F-1 

ANNEX G

Form of Undertaking (Servicer)

G-1 

ANNEX H

Insurance Policy

H-1 

ANNEX I

Form of Notice of Continuance and Change of Address

I-1 

ANNEX J

Form of Notice of Amalgamation

J-1 

ANNEX K

Form of Assumption Agreement

K-1 

ANNEX L

Form of Notice of Change of Address

L-1 

ANNEX M

Forms of Bank Agreement Security Letters

M-1 

ANNEX N

Form of Certificate Regarding Adverse Claims

N-1 

EX-10.41

EXHIBIT 10.41

AMENDED AND RESTATED
PURCHASE AND CONTRIBUTION AGREEMENT

Dated as of January 31, 2008

Among

ABITIBI-CONSOLIDATED INC.

and

ABITIBI CONSOLIDATED SALES CORPORATION

as Sellers

and

ABITIBI-CONSOLIDATED U.S. FUNDING CORP.

as Purchaser

TABLE OF CONTENTS

		Page
ARTICLE I DEFINITIONS			1
	SECTION 1.01. Certain Defined Terms		1
	SECTION 1.02. Other Terms		12
ARTICLE II AMOUNTS AND TERMS OF PURCHASES AND CONTRIBUTIONS			12
	SECTION 2.01. Facility		12
	SECTION 2.02. Making Purchases		13
	SECTION 2.03. Collections		14
	SECTION 2.04. Settlement Procedures		15
	SECTION 2.05. Payments and Computations, Etc		16
	SECTION 2.06. Contributions		16
	SECTION 2.07. Payments Free and Clear of Taxes, Etc		16
	SECTION 2.08. Repurchase Option		18
ARTICLE III CONDITIONS OF PURCHASES			18
	SECTION 3.01. Conditions Precedent to Initial Purchase from the Sellers		18
	SECTION 3.02. Conditions Precedent to All Purchases		20
ARTICLE IV REPRESENTATIONS AND WARRANTIES			21
	SECTION 4.01. Representations and Warranties of the Sellers		21
ARTICLE V COVENANTS			25
	SECTION 5.01. Covenants of the Sellers		25
	SECTION 5.02. Covenant of the Sellers and the Purchaser		29
ARTICLE VI ADMINISTRATION AND COLLECTION			30
	SECTION 6.01. Designation of Servicer		30
	SECTION 6.02. Duties of Servicer		30
	SECTION 6.03. Servicer Fee		32
	SECTION 6.04. Certain Rights of the Purchaser		32
	SECTION 6.05. Rights and Remedies		33
	SECTION 6.06. Transfer of Records to Purchaser		34
	SECTION 6.07. Limitation on Activities of Servicer in Canada		34
ARTICLE VII EVENTS OF TERMINATION			35
	SECTION 7.01. Events of Termination		35
ARTICLE VIII INDEMNIFICATION			37
	SECTION 8.01. Indemnities by the Sellers		37

i

		Page
ARTICLE IX MISCELLANEOUS			40
	SECTION 9.01. Amendments, Etc		40
	SECTION 9.02. Notices, Etc		40
	SECTION 9.03. Binding Effect; Assignability		41
	SECTION 9.04. Costs, Expenses and Taxes		41
	SECTION 9.05. No Proceedings		41
	SECTION 9.06. [Intentionally Omitted]		42
	SECTION 9.07. GOVERNING LAW		42
	SECTION 9.08. Third Party Beneficiary		42
	SECTION 9.09. Execution in Counterparts		42
	SECTION 9.10. Consent to Jurisdiction		42
	SECTION 9.11. Judgment		43
	SECTION 9.12. Execution by ACI		43
	SECTION 9.13. Language		43
	SECTION 9.14. Acknowledgment		43

EXHIBITS

EXHIBIT A	Credit and Collection Policy
EXHIBIT B	Deposit Accounts
EXHIBIT C	Form of Deferred Purchase Price Note
EXHIBIT D	[Intentionally Omitted]
EXHIBIT E	Addresses and Prior Names
EXHIBIT F	Seller UCC and PPSA Information
EXHIBIT G	Form of Notice of Continuance and Change of Address
EXHIBIT H	Form of Notice of Amalgamation
EXHIBIT I	Form of Notice of Change of Address
ANNEX A	Insurance Policy

ii

AMENDED AND RESTATED
PURCHASE AND CONTRIBUTION AGREEMENT

Dated as of January 31, 2008

          ABITIBI-CONSOLIDATED INC., a Canadian corporation, and ABITIBI CONSOLIDATED SALES CORPORATION, a Delaware corporation (each, a “Seller” and together, the “Sellers”), and ABITIBI-CONSOLIDATED U.S. FUNDING CORP., a Delaware corporation (the “Purchaser”), agree as follows:

          PRELIMINARY STATEMENTS. (1) Certain terms which are capitalized and used throughout this Agreement (in addition to those defined above) are defined in Article I of this Agreement.

          (2) The Sellers and the Purchaser are parties to that certain Purchase and Contribution Agreement dated as of October 27, 2005 (as amended prior to the date hereof, the “Original PCA”).

          (3) The Sellers have sold Receivables to the Purchaser and wish to continue to sell Receivables to the Purchaser, and the Purchaser is prepared to purchase such Receivables on the terms set forth herein.

          (4) The U.S. Seller has also contributed, and may wish to continue to contribute, Receivables to the capital of the Purchaser on the terms set forth herein.

          (5) The parties hereto wish to amend and restate the Original PCA in its entirety.

          NOW, THEREFORE, the parties agree that the Original PCA is amended and restated to read in its entirety as follows:

ARTICLE I

DEFINITIONS

          SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

          “ACCC” means Abitibi-Consolidated Company of Canada, a Canadian corporation.

          “ACI” means Abitibi-Consolidated Inc., a Canadian corporation.

          “ACSC” means Abitibi Consolidated Sales Corporation, a Delaware corporation.

          “Adverse Claim” means a lien, security interest, mortgage, pledge, assignment, hypothec, hypothecation, privilege, title retention or other charge or encumbrance, or any other type of preferential arrangement (which, for the avoidance of doubt, does not include Taxes not yet due and payable).

          “Affiliate” means, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by or is under common control with such Person or is a director or officer of such Person.

          “Agent” has the meaning specified in the RPA.

          “Alternate Base Rate” means a fluctuating interest rate per annum as shall be in effect from time to time, which rate shall be at all times equal to the highest of:

          (a) the rate of interest announced publicly by Citibank, N.A. in New York, New York, from time to time as Citibank, N.A.’s base rate;

          (b) 1/2 of one percent above the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average being determined weekly on each Monday (or, if such day is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank, N.A. on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank, N.A. from three New York certificate of deposit dealers of recognized standing selected by Citibank, N.A., in either case adjusted to the nearest 1/4 of one percent or, if there is no nearest 1/4 of one percent, to the next higher 1/4 of one percent; and

          (c) the Federal Funds Rate.

          “Amalgamated Entity ” has the meaning specified in the definition of “Amalgamation” set forth below.

          “Amalgamation” means the amalgamation of the Continued Entity with a newly incorporated Nova Scotia limited liability company, as described in more detail in Exhibit H (the resulting entity, the “Amalgamated Entity”).

          “Amalgamation Effective Date” has the meaning specified in Section 9.01(d).

          “Amalgamation Opinion” has the meaning specified in Section 9.01(c)(B).

          “Approved Country” means the United States, Canada, and any other country outside of the European Area other than those:

2

          (i) whose government or central bank (x) shall have prohibited the sale of the currency of such country in exchange for United States dollars or shall have admitted in writing its inability to pay its debts as the same become due, (y) shall have declared a moratorium on the payment of its debts or the debts of any national governmental authority of such country, or (z) shall have ceased to be a member of the international Monetary Fund or ceased to be eligible to use the resources of the International Monetary Fund; or

          (ii) with respect to which the United States shall have imposed economic sanctions.

          “Bank Agreement” means the Credit Agreement dated as of October 3, 2005 among ACI and Abitibi-Consolidated Company of Canada, as borrowers, Canadian Imperial Bank of Commerce and the other financial institutions from time to time party thereto, as the same may be amended, restated or supplemented from time to time.

          “Business Day” means any day on which banks are not authorized or required to close in London, New York City or Montreal.

          “Canadian Dollar” or “CAD” means dollars in the lawful currency of Canada.

          “Canadian Seller” means ACI.

          “Change of Address” means the first change of address of the principal place of business, chief executive office and location of receivables records of ACSC hereunder as described in the Notice of Change of Address.

          “Change of Address Effective Date” has the meaning specified in Section 9.01(e).

          “Collections” means, with respect to any Receivable, all cash collections and other cash proceeds of such Receivable, including, without limitation, (i) all cash proceeds of Related Security with respect to such Receivable, (ii) all funds deemed to have been received by a Seller or any other Person as a Collection pursuant to Section 2.04 and (iii) any Insurance Proceeds received with respect to such Receivable.

          “Continuance” means ACI’s continuance of itself under the laws of Nova Scotia and the related change of the address of its registered office, as described in more detail in Exhibit G (such continued entity, the “Continued Entity”).

          “Continuance Effective Date” has the meaning specified in Section 9.01(c).

          “Continued Entity” has the meaning specified in the definition of “Continuance” set forth above.

3

          “Contract” means an agreement between a Seller and an Obligor (including, in the case of any open account agreement, an invoice), pursuant to or under which such Obligor shall be obligated to pay for merchandise, insurance or services from time to time.

          “Contributed Receivable” has the meaning specified in Section 2.06.

          “Control Event” means any event which constitutes a “Control Event” under the RPA.

          “Credit and Collection Policy” means those receivables credit and collection policies and practices of the applicable Seller in effect on the date of this Agreement applicable to the Receivables and described in Exhibit A hereto, as modified in compliance with this Agreement.

          “Debt” means (i) indebtedness for borrowed money, (ii) obligations evidenced by bonds, debentures, notes or other similar instruments, (iii) obligations to pay the deferred purchase price of property or services, (iv) obligations as lessee under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, and (v) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (iv) above.

          “Debt Rating” for any Person, means the public rating by S&P of such Person’s long term non credit enhanced, senior unsecured debt, or the corporate family rating assigned to such Person by Moody’s.

          “Defaulted Receivable” means a Receivable:

          (i) as to which any payment, or part thereof, remains unpaid for more than 90 days from the original due date for such payment;

          (ii) as to which the Obligor thereof or any other Person obligated thereon has taken any action, or suffered any event to occur, of the type described in Section 7.01(g);

          (iii) which, consistent with the Credit and Collection Policy, would be written off the relevant Seller’s books as uncollectible; or

          (iv) for which the relevant Seller has (or, consistent with its Credit and Collection Policy, should have) established an Obligor specific reserve for nonpayment.

4

          “Deferred Purchase Price” means the portion of the Purchase Price of Purchased Receivables purchased from and originated by the U.S. Seller on any Purchase Date exceeding the amount of the Purchase Price under Section 2.02 to be paid in cash to the U.S. Seller. The obligations of the Purchaser in respect of the Deferred Purchase Price due to the U.S. Seller shall be evidenced by the Purchaser’s subordinated promissory note to such Seller in the form of Exhibit C hereto.

          “Delinquent Receivable” means a Receivable that is not a Defaulted Receivable and:

          (i) as to which any payment, or part thereof, remains unpaid for more than 30, but not more than 90, days from the original due date for such payment or

          (ii) which, consistent with the Credit and Collection Policy, would be classified as delinquent by the applicable Seller.

          “Deposit Account” means an account maintained at a Deposit Bank into which (i) Collections in the form of checks and other items are deposited that have been sent to one or more Lock-Boxes by Obligors and/or (ii) Collections in the form of electronic funds transfers and other items are paid directly by Obligors.

          “Deposit Account Agreement” means an agreement among a Seller, the Purchaser (or its assignees or designees) and any Deposit Bank in form and substance satisfactory to the Purchaser (or its assignees or designees) in substantially the form of Annex B to the RPA.

          “Deposit Bank” means any of the banks holding one or more Deposit Accounts.

          “Diluted Receivable” means, without duplication, that portion (and only that portion) of any Receivable which is either (a) reduced or canceled as a result of (i) any defective, rejected or returned merchandise or services, any cash discount, or any failure by the applicable Seller to deliver any merchandise or provide any services or otherwise to perform under the underlying Contract, (ii) any change in the terms of, or cancellation of, a Contract or any cash discount, discount for quick payment or other adjustment by the applicable Seller which reduces the amount payable by the Obligor on the related Receivable (except any such change or cancellation resulting from or relating to the financial inability to pay or insolvency of the Obligor of such Receivable) or (iii) any setoff by an Obligor in respect of any claim by such Obligor as to amounts owed by it on the related Receivable (whether such claim arises out of the same or a related transaction or an unrelated transaction), (b) subject to any specific dispute, offset, counterclaim or defense whatsoever (except the discharge in bankruptcy of the Obligor thereof) or (c) the outstanding balance of the related invoice that was reversed due to unship-reship transactions; provided that Diluted Receivables are calculated assuming that all chargebacks are resolved in the Obligor’s favor.

5

          “Discount” means, in respect of each Purchase from the Canadian Seller, 1% of the Outstanding Balance of the Receivables that are the subject of such Purchase and, in respect of each Purchase from the U.S. Seller, 1% of the Outstanding Balance of the Receivables that are the subject of such Purchase (for the purposes of calculating Tangible Net Worth, the Discount shall be the Discount applicable to the U.S. Seller); provided, however, any of the foregoing Discounts may be revised prospectively by request of any of the parties hereto to reflect changes in recent experience with respect to write-offs, timing and cost of Collections and cost of funds, provided that such revision is consented to by each of the relevant parties (it being understood that each party agrees to duly consider such request but shall have no obligation to give such consent).

          “Dollar Equivalent” means, as of any date, the amount obtained by applying the rate for converting currency into Dollars at the spot rate of exchange for that currency as reasonably determined and advised by the Agent.

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

            “Eligible Obligor” means an Obligor which:

          (i) has a billing address in an Approved Country; and

          (ii) is not a Person with respect to which the United States, Canada or any other Approved Country shall have imposed sanctions; and

          (iii) is not in violation of any applicable law, rule or regulation relating to terrorism or money-laundering (“Anti-Terrorism Laws”), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the “Executive Order”), and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56 and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada); and

          (iv) is not a Person (A) that is listed in the annex to, or otherwise subject to the provisions of, the Executive Order, (B) that is owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order, (C) with which an Affected Person or an Originator is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law, (D) that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order, or (E) that is named as a “specifically designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website or any replacement website or other replacement official publication of such list or any similar lists published in any other Approved Country; and

6

          (v) is not a Person (A) whose property or interest in property is otherwise blocked or subject to blocking pursuant to Section 1 of the Executive Order or any other Anti-Terrorism Law, or (B) that engages in any dealings or transactions prohibited by Section 2 of the Executive Order or any other Anti-Terrorism Law, or is otherwise associated with any such Person in any manner violative of such Section 2 or any other Anti-Terrorism Law.

     “Eligible Receivable” means a Receivable:

          (i) (x) the related Obligor of which is (A) Vertis Inc. or (B) American Color Graphics, Inc., or (y) which is, prior to any Insurance Policy Event, fully insured (to the extent provided for therein) by the Insurance Policy;

          (ii) the Obligor of which is an Eligible Obligor, is not an Affiliate of any of the parties hereto, and is not a Canadian federal or provincial Crown corporation;

          (iii) the Obligor of which is not a government or a governmental subdivision or agency; provided, however, that if, at the time of the transfer thereof under this Agreement, a Receivable satisfies all of the requirements of an Eligible Receivable other than this clause (iii), such Receivable shall be an Eligible Receivable, but only to the extent that including such Receivable as an Eligible Receivable will not cause the aggregate Outstanding Balance of all Receivables included as Eligible Receivables, the Obligor of which is a government or a governmental subdivision or agency, to exceed 1% of the aggregate Outstanding Balance of all Eligible Receivables;

          (iv) which, at the time of the transfer thereof under this Agreement, is not a Defaulted Receivable;

          (v) the Obligor of which, at the time of the transfer of such Receivable under this Agreement, is not the Obligor of any Defaulted Receivables which in the aggregate constitute 10% or more of the aggregate Outstanding Balance of all Receivables of such Obligor;

          (vi) which has been billed and, according to the Contract related thereto, is required to be paid in full within 60 days of the original billing date therefor or, prior to any Insurance Policy Event, within 90 days of the original billing date therefor if the “maximum payment terms” with respect to such Receivable set forth in the Insurance Policy permits such payment terms;

          (vii) which is an obligation representing all or part of the sales price of merchandise, insurance or services within the meaning of Section 3(c)(5) of the Investment Company Act of 1940, as amended, and the nature of which is such that its purchase with the proceeds of notes would constitute a “current

7

transaction” within the meaning of Section 3(a)(3) of the Securities Act of 1933, as amended;

          (viii) which (A) in the case of a Receivable originated by the U.S. Seller, is an “account” or “payment intangible” within the meaning of Article 9 of the UCC of the applicable jurisdictions governing the perfection of the transfer of such Receivable under this Agreement and (B) in the case of a Receivable originated by the Canadian Seller, is an “account” or “intangible” within the meaning of the PPSA or a “claim” under the Civil Code of Quebec;

          (ix) which (A) in the case of a Receivable originated by the U.S. Seller, is denominated and payable only in Dollars in the United States, (B) in the case of an International Receivable originated by the Canadian Seller, is denominated and payable only in Dollars in the United States, and (C) in the case of a Receivable other than an International Receivable originated by the Canadian Seller, is denominated and payable only in Dollars or Canadian Dollars in Canada;

          (x) which arises under a Contract which, together with such Receivable, is in full force and effect and constitutes the legal, valid and binding obligation of the Obligor of such Receivable and is not subject to any Adverse Claim or any dispute, offset, counterclaim or defense whatsoever (except the potential discharge in bankruptcy of such Obligor) and is not settled on a net basis;

          (xi) which represents a bona fide obligation of the Obligor of such Receivable to pay the stated amount;

          (xii) as to which the applicable Seller has satisfied and fully performed all obligations with respect to such Receivable required to be fulfilled by it other than customary warranty obligations, and no further action is required to be performed by any Person with respect thereto other than payment thereon by the applicable Obligor;

          (xiii) which, together with the Contract related thereto, does not contravene in any material respect any laws, rules or regulations applicable thereto (including, without limitation, laws, rules and regulations relating to usury, consumer protection, truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy) and with respect to which no party to the Contract related thereto is in violation of any such law, rule or regulation in any material respect;

          (xiv) which arises under a Contract which does not contain a legally enforceable provision requiring the Obligor under such Contract to consent to the transfer, sale or assignment of the rights of the applicable Seller under such Contract (unless a written consent of such Obligor has been obtained) or that

8

otherwise purports to restrict the ability of the Purchaser or its assignees to exercise their rights under this Agreement, including, without limitation, their right to review the related invoice or the payment terms of such Contract;

          (xv) which arose from the sale of goods or the rendering of services in the ordinary course of the applicable Seller’s business;

          (xvi) which, at the time of the transfer of such Receivable under this Agreement, has not been extended, rewritten or otherwise modified from the original terms thereof;

          (xvii) the transfer, sale or assignment of which does not contravene any applicable law, rule or regulation;

          (xviii) which (A) satisfies all applicable requirements of the Credit and Collection Policy and (B) complies with such other criteria and requirements (other than those relating to the collectibility of such Receivable) as the Purchaser or its assignee may from time to time specify to the Sellers on account of bona fide credit reasons upon 30 days’ notice; and

          (xix) which, if the Obligor thereof has a billing address in Canada, satisfies the requirements of Sections 4.01(r) and (s).

          “European Area” means the United Kingdom, Belgium, Ireland and Germany.

           “Event of Termination” has the meaning specified in Section 7.01.

          “Facility Termination Date” means the earliest of (i) the “Facility Termination Date” (as such term is defined in the RPA), (ii) the date determined pursuant to Section 7.01 and (iii) the date which the Sellers designate by at least five Business Days’ notice to the Purchaser and (prior to the RPA Final Payment Date) the Agent.

          “Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Citibank, N. A. from three Federal funds brokers of recognized standing selected by it.

          “Finance Charge” means, with respect to any Receivable, any interest, finance charges or other similar charges payable at any time by an Obligor in connection with such Receivable not having been paid on the due date thereof.

9

          “Four Party Agreement” has the meaning specified in the RPA.

          “General Trial Balance” of either Seller on any date means such Seller’s accounts receivable trial balance (whether in the form of a computer printout, magnetic tape or diskette) on such date, listing Obligors and the Receivables respectively owed by such Obligors on such date together with the aged Outstanding Balances of such Receivables, in form and substance satisfactory to the Purchaser.

          “GST” means all goods and services tax payable under Part IX of the Excise Tax Act (Canada), all QST and all harmonized sales tax in the Provinces of Nova Scotia, Newfoundland and New Brunswick payable under the Excise Tax Act (Canada), as such statutes may be amended, modified, supplemented or replaced from time to time, including any successor statute.

          “Incipient Event of Termination” means an event that but for notice or lapse of time or both would constitute an Event of Termination.

          “Indemnified Amounts” has the meaning specified in Section 8.01.

          “Insurance Policy” means that certain Accounts Receivable Policy (Shipments) General Terms and Conditions, plus the Coverage Certificate effective September 1, 2006 (together with all schedules and endorsements and other documents issued by the Insurer in connection therewith), together with any replacement Coverage Certificates, issued by the Insurer to ACI, a copy of which, as it exists as of the date hereof, is attached hereto as Annex A.

          “Insurance Policy Event” means the occurrence of any of the following: (i) the Insurance Policy shall, for any reason, be terminated or otherwise no longer be in full force and effect, (ii) an event of the type described in Section 7.01(g) shall occur with respect to either entity comprising the Insurer, (iii) (A) either entity comprising the Insurer fails to make a payment under the Insurance Policy, (B) either entity comprising the Insurer rejects or denies claims submitted under the Insurance Policy or (C) there is a claim payment return pursuant to Section 25 of the Insurance Policy in a cumulative aggregate amount with respect to (A), (B) and (C) of this clause (iii) in excess of $1,000,000 (if any such claim is subsequently paid by the Insurers then the cumulative aggregate amount referred to above shall be reduced by the amount of any such payment), (iv) the terms of any Coverage Certificate issued in replacement of the Coverage Certificate comprising part of the Insurance Policy on November 24, 2006 are deemed unfavorable to the Purchaser or the Agent (in each such party’s reasonable discretion) when compared with the Coverage Certificate current as of November 24, 2006, or (v) the aggregate claims made under the Insurance Policy in any Policy Period (as defined in the Insurance Policy) with respect to receivables that are not Receivables and the Obligors of which are not located in Canada shall exceed an amount equal to 7.50% of EDC’s Maximum Liability Amount (as defined in the Coverage Certificate included in the Insurance Policy).

10

          “Insurance Proceeds” means any amounts paid by the Insurer under the Insurance Policy with respect to claims relating to Receivables.

          “Insurer” means, collectively, Export Development Canada and Compagnie Française d’Assurance pour le Commerce Extérieur — Canada Branch.

          “Intercompany Agreement (Undertaking Agreements)” means an Intercompany Agreement (Undertaking Agreements) between ACSC and ACI, dated as of December 21, 2007, as the same may be amended, modified or restated from time to time pursuant to its terms.

          “International Receivable” means a Receivable the Obligor of which has a billing address in an Approved Country other than the United States or Canada.

          “Lock-Box” means a post office box administered by a Deposit Bank for the purpose of receiving Collections.

          “Material Adverse Effect” means (A) a material adverse effect on (i) the financial condition, business, operations, assets or liabilities of the Parent and its subsidiaries taken as a whole, (ii) the ability of any Seller to perform any of its respective obligations under this Agreement or under any of the other Transaction Documents to which it is a party, (iii) the legality, validity or enforceability of the Transaction Documents (including, without limitation, the validity, enforceability or priority of the ownership or security interests granted thereunder) or (iv) the collectibility of the Receivables or (B) a material impairment of the rights or remedies of the Purchaser or any of its assignees under this Agreement or any of the other Transaction Documents.

          “Notice of Amalgamation” has the meaning specified in Section 9.01(d).

          “Notice of Change of Address” has the meaning specified in Section 9.01(e).

          “Notice of Continuance and Change of Address” has the meaning specified in Section 9.01(c).

          “Obligor” means a Person obligated to make payments to a Seller pursuant to a Contract.

          “Original PCA” has the meaning specified in the Preliminary Statements.

          “Original RPA” means that certain Receivables Purchase Agreement, dated as October 27, 2005, among the Purchaser, as seller, Eureka Securitisation, Plc, as purchaser, Citibank, N.A., Citibank, N.A., London Branch, as agent, the Sellers, as originators, the U.S. Seller, as servicer, and ACI, as subservicer, as amended prior to the date hereof.

11

          “Outstanding Balance” of any Receivable at any time means the then outstanding principal balance thereof; provided, that to the extent that the amount of any Receivable is, under the terms of the applicable Contract, expressed in Canadian Dollars, such amount for the purposes of this definition shall be the Dollar Equivalent thereof at the relevant time. Sales or use tax, PST and any other taxes (other than GST) and Finance Charges which may be billed in connection with a Receivable are not included in the Outstanding Balance. For purposes of this Agreement (but without affecting the rights of the applicable Seller against the relevant Obligor), the Outstanding Balance of a Receivable shall be reduced by the amount of any Insurance Proceeds received by the Purchaser or the Agent with respect thereto.

          “Parent” means AbitibiBowater Inc., a Delaware corporation.

          “Person” means an individual, partnership, corporation, limited liability company, joint stock company, trust (including a business or statutory trust), unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.

          “PPSA” means, with respect to any jurisdiction in Canada, the personal property security or similar legislation applicable in such jurisdiction, including with respect to the jurisdictions of Canada other than Quebec, the Personal Property Security Act applicable in such jurisdictions, and, with respect to Quebec, the Civil Code of Quebec, in each case as from time to time in effect.

          “PST” means all taxes payable under the Retail Sales Tax Act (Ontario) or any similar statute of another jurisdiction of Canada, other than GST.

          “Purchase” means (i) a purchase by the Purchaser of Receivables from the U.S. Seller pursuant to Section 2.02 and (ii) the purchase by the Purchaser of Receivables from the Canadian Seller pursuant to Section 2.01(b) and the subsequent transfer of title to the Purchaser of Receivables from the Canadian Seller pursuant to Section 2.02(c).

          “Purchase Date” means each day on which a Purchase is made pursuant to Article II.

          “Purchase Price” for any Purchase means an amount equal to the Outstanding Balance of the Receivables that are the subject of such Purchase as set forth in the relevant Seller’s General Trial Balance, minus the Discount for such Purchase.

          “Purchased Receivable” means any Receivable which is purchased by or title of which is transferred to the Purchaser pursuant to Section 2.01(b) or 2.02; provided that “Purchased Receivables” shall not include any Receivable that has been repurchased by a Seller, whether pursuant to Section 2.04(b), 2.08, or otherwise.

12

          “QST” means the tax payable under the Act Respecting the Quebec Sales Tax, R.S.Q. c.T-01, as amended.

          “Receivable” means the indebtedness of any Obligor (whether present or future and whether a claim, book debt or a receivable) resulting from the provision or sale of merchandise, insurance or services by any Seller under a Contract (whether constituting an account, instrument, chattel paper or general intangible), and which, (i) includes the right to payment of any Finance Charges and other obligations of such Obligor with respect thereto and, (ii) in respect of any such indebtedness, the Obligor of which has a billing address in Canada, includes GST; provided, however, that the term “Receivable” shall not include (x) any such indebtedness originated by the U.S. Originator, the Obligor of which has a billing address that is not in Canada or the United States or any such indebtedness originated by the Canadian Seller, the Obligor of which has a billing address that is not in any Approved Country, or (y) any portion of any such indebtedness, the Obligor of which has a billing address in Canada, that constitutes PST.

          “Related Security” means with respect to any Receivable:

          (i) all security interests or liens or other Adverse Claims and property subject thereto from time to time purporting to secure payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise, together with all financing statements or registration applications filed against an Obligor describing any collateral securing such Receivable;

          (ii) all guaranties, insurance (including the Insurance Policy) and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable whether pursuant to the Contract related to such Receivable or otherwise; and

          (iii) the Contract and all other books, records and other information (including, without limitation, computer programs, tapes, discs, punch cards, data processing software and related property and rights) relating to such Receivable and the related Obligor.

          “Replacement Bank Agreement” has the meaning specified in Section 9.01(b).

          “Required Ratings” means, for any Person, Debt Ratings of either (i) BB+ or above by S&P and Baa3 or above by Moody’s, or (ii) BBB- or above by S&P and Bal or above by Moody’s.

          “RPA” means that certain Amended and Restated Receivables Purchase Agreement, dated as of the date hereof, among the Purchaser, as seller, Eureka Securitisation, plc, as an investor, Citibank, N.A., as a bank, Citibank, N.A., London Branch, as agent, the Sellers, as originators, the U.S. Seller, as servicer, and ACI, as subservicer, as amended or restated from time to time.

13

          “RPA Final Payment Date” means the later of the “Facility Termination Date” (as such term is defined in the RPA) and the date on which all Capital, Yield, fees and other obligations under the RPA are paid in full.

          “Seller Report” means a report in form and substance satisfactory to the Purchaser, furnished by the Servicer to the Purchaser pursuant to Section 6.02(b).

          “Servicer” means at any time the Person then authorized pursuant to Section 6.01 to service, administer and collect Transferred Receivables.

          “Servicer Default” means (i) an Event of Termination described in Section 7.01(a), or (ii) the occurrence of any event of the type described in Section 7.01(g) with respect to the Servicer.

          “Servicer Fee” has the meaning specified in Section 6.03.

          “Settlement Date” means the third Business Day of each calendar month; provided, however, that at any time that the Servicer is required to deliver Seller Reports on a weekly basis in accordance with Section 6.02(b)(i), “Settlement Date” shall mean the Business Day immediately following the due date of the second Seller Report for each calendar month; provided, however, that following the occurrence of an Event of Termination, Settlement Dates shall occur on such days as are selected from time to time by the Purchaser or its assignee in a written notice to the Servicer, or in the absence of any such selection, the third Business Day of each calendar month.

          “Subservicer” has the meaning specified in Section 6.01.

          “Tangible Net Worth” means at any time the excess of (i) the sum of (a) the product of (x) 100% minus the Discount multiplied by (y) the Outstanding Balance of all Transferred Receivables other than Defaulted Receivables plus (b) cash and cash equivalents of the Purchaser, minus (ii) the sum of (a) Capital (as such term is defined in the RPA) plus (b) the Deferred Purchase Price. To the extent any amounts referenced in the preceding sentence are not denominated in Dollars, the Dollar Equivalent thereof shall be utilized.

          “Taxes” has the meaning specified in Section 2.07.

          “Transaction Document” means any of this Agreement, the RPA, the Undertaking, the Deposit Account Agreements, the Intercompany Agreement (Undertaking Agreements), the Insurance Policy, all amendments to any of the foregoing, and any other agreements and documents delivered and/or related hereto or thereto.

          “Transferred Receivable” means a Purchased Receivable or a Contributed Receivable.

14

          “UCC” means the Uniform Commercial Code as from time to time in effect in the specified jurisdiction.

          “Undertaking” means the Undertaking Agreement (Originator) dated as of October 27, 2005 made by ACI in favor of the Purchaser and relating to obligations of the U.S. Seller, in form and substance satisfactory to the Purchaser, as the same may be amended, modified or restated from time to time.

          “U.S. Seller” means ACSC.

          SECTION 1.02. Other Terms. All accounting terms not specifically defined herein shall be construed in accordance with Canadian generally accepted accounting principles. All terms used in Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in such Article 9.

ARTICLE II

AMOUNTS AND TERMS OF PURCHASES AND CONTRIBUTIONS

           SECTION 2.01. Facility. (a) U.S. Seller. On the terms and conditions hereinafter set forth and without recourse to the U.S. Seller (except to the extent specifically provided herein), the U.S. Seller shall at its option sell or contribute to the Purchaser all Receivables originated by it from time to time and the Purchaser shall purchase or accept as a contribution from the U.S. Seller all such Receivables from time to time, during the period from the date hereof to the Facility Termination Date.

          (b) Canadian Seller. On the terms and conditions hereinafter set forth and without recourse to the Canadian Seller (except to the extent specifically provided herein) and other than the Receivables and Related Security (as such terms were defined in the Original PCA) that were sold, transferred and assigned by the Canadian Seller to the Purchaser prior to the date hereof pursuant to the Original PCA, the Canadian Seller hereby sells, transfers and assigns on the date hereof, to the Purchaser all Receivables originated by it, which exist on such date or which arise at any time thereafter up to the Facility Termination Date, and the Purchaser hereby purchases from the Canadian Seller all such Receivables, provided, that title to such Receivables not in existence on the date hereof shall transfer to the Purchaser in accordance with the terms of Section 2.02(c).

          SECTION 2.02. Making Purchases. (a) [Intentionally Omitted].

          (b) Purchases — U.S. Seller. On each Business Day beginning on the date hereof, unless either the U.S. Seller or the Purchaser shall notify the other party to the contrary, the U.S. Seller shall sell to the Purchaser and the Purchaser shall purchase from the U.S. Seller, upon satisfaction of the applicable conditions set forth in Article III, all Receivables originated by the U.S. Seller which have not previously been sold or contributed to the Purchaser pursuant to

15

this Agreement or the Original PCA; provided, however, that the U.S. Seller may, at its option on any Purchase Date, contribute all or any of such Receivables to the Purchaser pursuant to Section 2.06, instead of selling such Receivables to the Purchaser pursuant to this Section 2.02(b). On or within five Business Days after the date of each such Purchase, the Purchaser shall pay to the U.S. Seller the Purchase Price for such Purchase in the manner provided in Section 2.02(d).

          (c) Transfer of Title — Canadian Seller. On each Business Day beginning on the date hereof, title to all Receivables originated by the Canadian Seller and not already transferred pursuant to this Agreement or the Original PCA shall, ipso facto, and without any further action on the part of the Canadian Seller or the Purchaser but subject to satisfaction of the applicable conditions set forth in Article 3.02, transfer to the Purchaser. On or within five Business Days after the date of each such Purchase, the Purchaser shall pay to the Canadian Seller the Purchase Price for such Purchase in the manner provided in Section 2.02(d).

          (d) Payment of Purchase Price. The Purchase Price for each Purchase shall be paid on or within five Business Days after the Purchase Date therefor, in each case by means of any one or a combination of the following: (i) a deposit in same day funds to the relevant Seller’s account designated by the applicable Seller or (ii) in the case of a purchase from the U.S. Seller, a contribution by the U.S. Seller to the Purchaser’s capital or an increase in the Deferred Purchase Price. In the case of each Seller, the allocation of the Purchase Price as among such methods of payment shall be subject in each instance to the approval of the Purchaser and such Seller; provided, however, that the Deferred Purchase Price payable to the U.S. Seller may not be increased to the extent that, (x) after giving effect to such increase, the Tangible Net Worth would be less than 8.0% of the Outstanding Balance of the Transferred Receivables at such time or (y) the Deferred Purchase Price would exceed the lesser of (A) 10.0% of the Outstanding Balance of the Transferred Receivables at such time and (B) $35,000,000.

          (e) Ownership of Receivables and Related Security. On each Purchase Date, after giving effect to the Purchase (and any contribution of Receivables) on such date, the Purchaser shall own all Receivables originated by the Sellers as of such date (including Receivables which have been previously sold, transferred, assigned or contributed to the Purchaser hereunder). The Purchase or contribution of any Receivable shall include all Related Security with respect to such Receivable.

          (f) GOVERNING LAW FOR PURCHASES FROM CANADIAN SELLER. SOLELY WITH RESPECT TO PURCHASES FROM THE CANADIAN SELLER (INCLUDING PAYMENT OF THE PURCHASE PRICE WITH RESPECT THERETO), SECTION 2.01(b) AND THIS SECTION 2.02 SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE PROVINCE OF QUEBEC AND THE LAWS OF CANADA APPLICABLE THEREIN WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.

16

          SECTION 2.03. Collections. (a) Unless otherwise agreed, the Servicer shall, on each Settlement Date, deposit into an account of the Purchaser or the Purchaser’s assignee all Collections of Transferred Receivables then held by the Servicer.

          (b) In the event that a Seller believes that Collections which are not Collections of Transferred Receivables have been deposited into an account of the Purchaser or the Purchaser’s assignee, such Seller shall so advise the Purchaser and, on the Business Day following such identification, the Purchaser shall remit, or shall cause to be remitted, all Collections so deposited which are identified, to the Purchaser’s satisfaction, to be Collections of Receivables which are not Transferred Receivables to such Seller.

          (c) On each Settlement Date, the Purchaser shall pay to the U.S. Seller accrued interest on the Deferred Purchase Price and the Purchaser may, at its option, prepay in whole or in part the principal amount of the Deferred Purchase Price; provided that each such payment shall be made solely from (i) Collections of Transferred Receivables after all other amounts then due from the Purchaser under the RPA have been paid in full and all amounts then required to be set aside by the Purchaser or the Servicer under the RPA have been so set aside or (ii) excess cash flow from operations of the Purchaser which is not required to be applied to the payment of other obligations of the Purchaser; and provided further, that no such payment shall be made at any time when an Event of Termination shall have occurred and be continuing. Following the RPA Final Payment Date, the Purchaser shall apply, on each Settlement Date, all Collections of Transferred Receivables received by the Purchaser pursuant to Section 2.03(a) (and not previously distributed) first to the payment of accrued interest on the Deferred Purchase Price, and then to the reduction of the principal amount of the Deferred Purchase Price. If at any time more than one Deferred Purchase Price note is outstanding, such payments of interest and principal shall be made ratably, based on the outstanding accrued interest and principal amounts of such notes, respectively.

          SECTION 2.04. Settlement Procedures. (a) If on any day any Transferred Receivable becomes (in whole or in part) a Diluted Receivable, the Seller which originated such Receivable shall be deemed to have received on such day a Collection of such Transferred Receivable in the amount of such Diluted Receivable. If such Seller is not the Servicer, such Seller shall pay to the Servicer on or prior to the next Settlement Date all amounts deemed to have been received pursuant to this subsection. If any payment of Purchase Price is due to such Seller on such Settlement Date, such Seller may pay such deemed Collection by crediting the cash portion of such Purchase Price in an amount equal to such deemed Collection.

          (b) Upon discovery by a Seller or the Purchaser of a breach of any of the representations and warranties made by such Seller in Section 4.01(j) with respect to any Transferred Receivable, such party shall give prompt written notice thereof to the Purchaser or the relevant Seller, as the case may be, as soon as practicable and in any event within three Business Days following such discovery. Such Seller shall, upon not less than two Business Days’ notice from the Purchaser or its assignee or designee, repurchase such Transferred Receivable on the next succeeding Settlement Date for a repurchase price equal to the Outstanding Balance of such Transferred Receivable. Each repurchase of a Transferred Receivable shall include the Related Security with respect to such Transferred Receivable. The proceeds of any such repurchase

17

shall be deemed to be a Collection in respect of such Transferred Receivable. If such Seller is not the Servicer, such Seller shall pay to the Servicer on or prior to the next Settlement Date the repurchase price required to be paid pursuant to this subsection. If any payment of Purchase Price is due to such Seller on such Settlement Date, such Seller may pay such repurchase price by crediting the cash portion of such Purchase Price in an amount equal to such repurchase price.

          (c) Except as stated in subsection (a) or (b) of this Section 2.04 or as otherwise required by law or the underlying Contract, all Collections from an Obligor of any Transferred Receivable shall be applied to the Receivables of such Obligor in the order of the age of such Receivables, starting with the oldest such Receivable, unless such Obligor designates its payment for application to specific Receivables.

          (d) Deemed Collections with respect to any Transferred Receivable payable by any Seller under this Section 2.04 shall be paid in Dollars, if such Transferred Receivable is denominated in Dollars, and shall be paid in Canadian Dollars, if such Transferred Receivable is denominated in Canadian Dollars.

          SECTION 2.05. Payments and Computations, Etc. (a) All amounts to be paid or deposited by the Sellers or the Servicer hereunder shall be paid or deposited no later than 11:00 A.M. (New York City time) on the day when due in same day funds to an account or accounts designated by the Purchaser from time to time, which accounts, prior to the RPA Final Payment Date, shall be those set forth in the RPA.

          (b) Each Seller shall, to the extent permitted by law, pay to the Purchaser interest on any amount not paid or deposited by such Seller (whether as Servicer or otherwise) when due hereunder at an interest rate per annum equal to 2% per annum above the Alternate Base Rate, payable on demand.

          (c) Other than as set forth in Section 2.05(d), all computations of interest and all computations of fees hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first but excluding the last day) elapsed. Whenever any payment or deposit to be made hereunder shall be due on a day other than a Business Day, such payment or deposit shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of such payment or deposit.

          (d) For purposes of the Interest Act (Canada), where in this Agreement a rate of interest is to be calculated on the basis of a period of less than one year, the yearly rate of interest to which the said rate is equivalent is the said rate divided by the actual number of days in the period for which such calculation is made and multiplied by 365 days (or 366 days in the case of a leap year).

          SECTION 2.06. Contributions. The U.S. Seller may from time to time at its option, by notice to the Purchaser on or prior to the date of the proposed contribution, identify Receivables which it proposes to contribute to the Purchaser as a capital contribution. On the date of each such contribution and after giving effect thereto, the Purchaser shall own the Receivables

18

so identified and contributed (collectively, the “Contributed Receivables”) and all Related Security with respect thereto.

          SECTION 2.07. Payments Free and Clear of Taxes, Etc. (a) Except as otherwise required by law, any and all payments required to be made by the Servicer, the U.S. Seller or the Canadian Seller hereunder shall be made free and clear of and without deduction or withholding for or on account of any and all present or future income, stamp or, without limitation, other taxes, levies, imposts, deductions, duties, fees, charges or withholdings, and all liabilities with respect thereto, excluding (A) net income taxes and franchise taxes (imposed in lieu of net income taxes) and backup withholding taxes that are imposed on the Purchaser or its assigns (the Purchaser and such assigns, each an “Affected Person”) by the United States, a state thereof or a foreign jurisdiction under the laws of which such Affected Person is organized or any political subdivision thereof and net income taxes and capital taxes imposed by Canada or any political subdivision thereof other than Canadian withholding taxes and other than Canadian taxes based on or measured by income or capital in connection with the Receivables or the transactions contemplated by the Transaction Documents resulting from any Affected Person (but only directly and exclusively as a result of any breach by the Sellers or the Servicer (or any delegatee thereof, including the Subservicer) of their respective obligations under the Transaction Documents) having a permanent establishment in Canada solely as a result of such transactions, or (B) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction described in clause (A) above (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as “Taxes”). If the Servicer, the U.S. Seller or the Canadian Seller or any Obligor shall be required by law to deduct any Taxes from or in respect of any sum payable or deposited hereunder to (or for the benefit of) the Purchaser or its assigns, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Purchaser or its assigns (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Servicer or the Canadian Seller, as applicable, shall make such deductions and (iii) the Servicer or the Canadian Seller, as applicable, shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. Within 30 days after the date of any payment of Taxes, the Servicer or the Canadian Seller, as applicable, will furnish to the Purchaser, at its address referred to in Section 9.02, the original or a certified copy of a receipt evidencing payment thereof.

          (b) In addition, the Canadian Seller agrees to pay any present or future stamp or other documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement, other than U.S. federal taxes except for withholding taxes on interest (hereinafter referred to as “Other Taxes”).

          (c) The Servicer or the Canadian Seller will indemnify the Purchaser or its assigns for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section, and excluding Taxes or Other Taxes resulting from the gross negligence or willful misconduct of the Purchaser

19

or its assigns) paid by the Purchaser or its assigns (as the case may be) or deducted or withheld from any Collections (including any Taxes or amounts on account of Taxes deducted by any Obligor) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date the Purchaser or its assigns (as the case may be) makes written demand therefor. A certificate as to the amount of such indemnification submitted to the Servicer or the Canadian Seller, as applicable, by the Purchaser or its assigns (as the case may be) setting forth, in reasonable detail, the basis for and the calculation thereof, shall be conclusive and binding for all purposes absent manifest error.

          (d) Without prejudice to the survival of any other agreement of the Servicer or the Canadian Seller hereunder, the agreements and obligations of the Servicer and the Canadian Seller contained in this Section 2.07 shall survive any termination of this Agreement.

          SECTION 2.08. Repurchase Option. So long as no Event of Termination or Incipient Event of Termination would occur or be continuing after giving effect thereto, each Seller shall have the right (but not any obligation) to repurchase Transferred Receivables originated by it (including, with respect to the Canadian Seller, such Transferred Receivables as are identified for repurchase by such Seller in order to conform with, or not to breach, any provision of or order under, the Foreign Extraterritorial Measures Act (Canada) or regulations thereunder) upon not less than three Business Days’ prior written notice to the Purchaser; provided, however, that the aggregate Outstanding Balance of Transferred Receivables repurchased pursuant to this Section may not exceed the lesser of (i) 10% of the highest aggregate Outstanding Balance of Transferred Receivables at any time or (ii) $35,000,000. Such notice shall specify the date that the applicable Seller desires that such repurchase occur (such date, the “Repurchase Date”) and shall identify the Receivables to be included in such repurchase. Each Seller agrees that it will not utilize any selection procedure in selecting the Receivables to be so repurchased which is adverse to the interests of the Purchaser or its assigns or would reasonably be expected to result in the repurchased Receivables containing a lower percentage of Defaulted Receivables or Delinquent Receivables than the percentage of Defaulted Receivables or Delinquent Receivables, as applicable, in the Receivables retained by the Purchaser. On the Repurchase Date, the applicable Seller shall remit to the Purchaser in immediately available funds an amount equal to the aggregate Outstanding Balance of the Receivables included in such repurchase (provided that if any payment of Purchase Price is due to such Seller on such Repurchase Date, such Seller may pay all or a portion of such amount by crediting the cash portion of such Purchase Price therewith), and upon receipt thereof, the Purchaser shall be deemed to assign and release, without recourse, representation or warranty, its right, title and interest in and to the Receivables included in such repurchase. In connection with any such repurchase, the Purchaser shall execute and deliver, at the request and expense of such Seller, any assignment or release that such Seller may reasonably request to evidence the repurchase of the applicable Receivables. At such time, if any, that the aggregate Outstanding Balance of all Receivables repurchased pursuant to this Section exceeds 2% of the aggregate Outstanding Balance of all Receivables, the applicable Seller will (or will cause the Servicer to) instruct all Obligors of Receivables being repurchased on such Repurchase Date to remit all their payments in respect of

20

such repurchased Receivables to post office boxes or deposit accounts other than the Lock Boxes or Deposit Accounts.

ARTICLE III

CONDITIONS OF PURCHASES

          SECTION 3.01.[Intentionally Omitted].

          SECTION 3.02. Conditions Precedent to All Purchases. Each Purchase hereunder shall be subject to the conditions precedent that:

     (a) with respect to any such Purchase, on or prior to the date of such Purchase, the relevant Seller shall have delivered to the Purchaser, (i) if requested by the Purchaser, such Seller’s General Trial Balance (which if in magnetic tape or diskette format shall be compatible with the Purchaser’s computer equipment) as of a date not more than 31 days prior to the date of such Purchase, and (ii) a written report identifying, among other things, the Receivables to be included in such Purchase and such additional information concerning such Receivables as may reasonably be requested by the Purchaser;

     (b) with respect to any such Purchase, on or prior to the date of such Purchase, the Servicer shall have delivered to the Purchaser, in form and substance satisfactory to the Purchaser, a completed Seller Report for the most recently ended reporting period for which information is required pursuant to Section 6.02(b);

     (c) [Intentionally Omitted];

     (d) as of the date of such Purchase the Purchaser shall not have determined, acting reasonably, and notified the Sellers and the Agent that the Purchaser has or is deemed to have a permanent establishment within Canada solely as a result of the transactions contemplated hereby (but only directly and exclusively as a result of any breach by the Sellers or the Servicer of any of their obligations under this Agreement);

     (e) on the date of such Purchase the following statements shall be true (and the relevant Seller, by accepting the Purchase Price for such Purchase, shall be deemed to have certified that):

     (i) The representations and warranties contained in Section 4.01 are correct on and as of the date of such Purchase as though made on and as of such date (except insofar as such representations and warranties relate expressly to an earlier date certain, in which case such representations and warranties shall be correct as of such earlier date),

21

     (ii) No event has occurred and is continuing, or would result from such Purchase, that constitutes an Event of Termination or an Incipient Event of Termination, and

     (iii) The Purchaser shall not have delivered to the Sellers a notice that the Purchaser shall not make any further Purchases hereunder; and

     (f) the Purchaser shall have received such other approvals, opinions or documents as the Purchaser may reasonably request.

          SECTION 3.03. Conditions Precedent to the Effectiveness of Amendment and Restatement. The effectiveness of this amendment and restatement of the Original PCA is subject to the conditions precedent that the Purchaser shall have received on or before the date hereof the following, each (unless otherwise indicated) dated such date, in form and substance satisfactory to the Purchaser:

     (a) Certified copies of the resolutions of the Board of Directors of each Seller approving this Agreement and the other documents to be delivered by such Seller hereunder and certified copies of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement.

     (b) A certificate of the Secretary or Assistant Secretary of each Seller certifying the names and true signatures of the officers of each Seller authorized to sign this Agreement and the other documents to be delivered by it hereunder.

     (c) Acknowledgment copies or time stamped receipt copies (or other satisfactory evidence of filing) of proper financing statement amendments, duly filed on or before the date hereof under the UCC and PPSA of all jurisdictions that the Purchaser may deem necessary or desirable in order to add the International Receivables and effect such other revisions as the Purchaser may deem necessary or desirable to reflect the amendments to the Original PCA and the other Transaction Documents contemplated by this Agreement.

     (d) Acknowledgment copies or time stamped receipt copies (or other satisfactory evidence of filing), or copies accompanied by filing authorization signed by the applicable secured party, of proper financing statement amendments and terminations, if any, necessary to release all security interests and other rights of any Person in the Transferred Receivables, Contracts or Related Security previously granted by the Sellers.

     (e) Completed requests for information and search reports, dated on or before the date of this Agreement, listing all effective financing statements and other registrations filed in the jurisdictions referred to in subsection (c) above and

22

that name either Seller as debtor, together with copies of such other financing statements and other registrations (none of which shall cover any Transferred Receivables, Contracts or Related Security unless they are in favor of the Purchaser).

     (f) Favorable opinions (or letters of confirmation and reliance, to the extent satisfactory to the Purchaser) of (i) Paul, Weiss, Rifkind, Wharton & Garrison LLP, U.S. counsel for the Sellers and (ii) Stikeman Elliott LLP, Canadian counsel for ACI, in each case in form and substance satisfactory to the Purchaser.

     (g) An executed copy of the Four Party Agreement.

     (h) An executed copy of an amendment and reaffirmation of the Undertaking.

     (i) An executed copy of the Deposit Account Agreement relating to the Deposit Account maintained with Citibank, N. A., as depositary bank, and described in more detail in Exhibit B hereto.

     (j) A pro forma Seller Report for the period ending January 25, 2008, certified by an authorized financial officer of the Servicer with responsibility for such Seller Report and reflecting the inclusion of the International Receivables.

     (k) Representative samples of invoices with respect to the International Receivables.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

          SECTION 4.01. Representations and Warranties of the Sellers. Each Seller represents and warrants as to itself as follows:

     (a) Such Seller is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction set forth in Exhibit F hereto (as modified in accordance herewith), and is duly qualified to do business, and is in good standing, in every jurisdiction where the nature of its business requires it to be so qualified, unless the failure to so qualify would not have a Material Adverse Effect.

     (b) The execution, delivery and performance by such Seller of this Agreement and the other documents to be delivered by it hereunder, including such Seller’s sale and contribution of Receivables hereunder and such Seller’s use of the proceeds of Purchases, (i) are within such Seller’s corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) do not contravene (1) such

23

Seller’s charter or by-laws, (2) any law, rule or regulation applicable to such Seller, (3) any material contractual restriction binding on or affecting such Seller or its property or (4) any order, writ, judgment, award, injunction or decree binding on or affecting such Seller or its property, and (iv) do not result in or require the creation of any lien, security interest or other Adverse Claim, charge or encumbrance upon or with respect to any of its properties (except for the transfer of such Seller’s interest in the Transferred Receivables pursuant to this Agreement). This Agreement has been duly executed and delivered by such Seller.

     (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by such Seller of this Agreement or any other document to be delivered by it hereunder.

     (d) This Agreement constitutes the legal, valid and binding obligation of such Seller enforceable against such Seller in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws affecting the rights of creditors generally and general equitable principles (whether considered in a proceeding at law or in equity).

     (e) Sales and contributions made pursuant to this Agreement will constitute a valid sale, transfer, and assignment of the Transferred Receivables to the Purchaser, enforceable against creditors of, and purchasers from, such Seller. Such Seller shall have no remaining property interest in any Transferred Receivable.

     (f) Any inventory or goods acquired by such Seller from ACCC are acquired free and clear of any Adverse Claim created by or arising through ACCC. Such acquisitions of inventory or goods from ACCC do not contravene any law, rule or regulation applicable to ACCC, any contractual restriction binding on or affecting ACCC or its property or any order, writ, judgment, award, injunction or decree binding on or affecting ACCC or its property.

     (g) There is no pending or, to such Seller’s knowledge, threatened action, investigation or proceeding affecting such Seller or any of its subsidiaries before any court, governmental agency or arbitrator which may have a Material Adverse Effect.

     (h) No proceeds of any Purchase will be used to acquire any equity security of a class which is registered pursuant to Section 12 of the Securities Exchange Act of 1934.

     (i) No transaction contemplated hereby requires compliance with any bulk sales act or similar law (other than the Bulk Sales Act (Newfoundland and Labrador)).

24

     (j) Each Receivable characterized in any Seller Report as an Eligible Receivable is, as of the date of such Seller Report, an Eligible Receivable. Each Transferred Receivable, together with the Related Security, is owned (immediately prior to its sale or contribution hereunder) by such Seller free and clear of any Adverse Claim (other than any Adverse Claim arising solely as the result of any action taken by the Purchaser). When the Purchaser makes a Purchase it shall acquire valid and perfected first priority ownership of each Purchased Receivable and the Related Security and Collections with respect thereto free and clear of any Adverse Claim (other than any Adverse Claim arising solely as the result of any action taken by the Purchaser), and no effective financing statement or other instrument similar in effect covering any Transferred Receivable, any interest therein, the Related Security or Collections with respect thereto is on file in any recording office except such as may be filed in favor of Purchaser in accordance with this Agreement or in connection with any Adverse Claim arising solely as the result of any action taken by the Purchaser.

     (k) Each Seller Report (if prepared by such Seller, or to the extent that information contained therein is supplied by such Seller), including the calculations therein, and all information, exhibits, financial statements, documents, books, records or reports furnished or to be furnished at any time by such Seller to the Purchaser in connection with this Agreement is or will be accurate in all material respects as of its date or (except as otherwise disclosed to the Purchaser at such time) as of the date so furnished, and no such document contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, not misleading.

     (l) The U.S. Seller is located in the jurisdiction of incorporation set forth for such Seller in Exhibit F hereto for the purposes of Section 9-307 of the UCC as in effect in the State of New York; and the office in the jurisdiction of incorporation of such Seller in which a UCC financing statement is required to be filed in order to perfect the security interest granted by such Seller hereunder is set forth in Exhibit F hereto (as modified in accordance herewith). The Canadian Seller is located in the jurisdiction of its chief executive and registered office set forth in Exhibit F hereto (as modified in accordance herewith) for purposes of Section 9-307 of the UCC as in effect in the State of New York; and the offices in which PPSA financing statements or other applicable registrations are required to be filed in order to perfect the security interest granted by the Canadian Seller hereunder are set forth in Exhibit F hereto, in each case as such Exhibit F may be modified in accordance herewith. The office where each Seller keeps its records concerning the Transferred Receivables is located (and has been located for the five years prior to the date of this Agreement, except as set forth on Exhibit F hereto) at the address or addresses referred to in Section 5.01(b). The principal place of business and chief executive office of the U.S. Seller, the principal place

25

of business and chief executive and registered office of the Canadian Seller and the office where each Seller keeps its records concerning the Receivables are located (and have been located for the five years prior to the date of this Agreement) at the address or addresses set forth in Exhibit F hereto. Neither Seller has changed its name, or, in the case of the Canadian Seller, had any other name (including French names) during the five years prior to the date of this Agreement, except as set forth in Exhibit F hereto, as modified in accordance herewith.

     (m) The names and addresses of all the Deposit Banks, together with the post office boxes and account numbers of the Lock-Boxes and Deposit Accounts at such Deposit Banks, are specified in Exhibit B (as the same may be amended from time to time pursuant to Section 5.01(g)). The Lock-Boxes and Deposit Accounts are the only post office boxes and accounts into which Collections of Receivables are deposited or remitted.

     (n) Such Seller is not known by and does not use any tradename or doing-business-as name.

     (o) With respect to any programs used by such Seller in the servicing of the Receivables, no sublicensing agreements are necessary in connection with the designation of a new Servicer pursuant to Section 6.01 so that such new Servicer shall have the benefit of such programs (it being understood that, however, the Servicer, if other than such Seller, shall be required to be bound by a confidentiality agreement reasonably acceptable to such Seller).

     (p) The transfers of Transferred Receivables by such Seller to the Purchaser pursuant to this Agreement, and all other transactions between such Seller and the Purchaser, have been and will be made in good faith and without intent to hinder, delay or defraud creditors of such Seller.

     (q) Such Seller has (i) timely filed all Canadian or U.S. federal tax returns required to be filed, (ii) timely filed all other material state, provincial and local tax returns and (iii) paid or made adequate provision for the payment of all taxes, assessments and other governmental charges (other than any tax, assessment or governmental charge which is being contested in good faith and by proper proceedings, and with respect to which the obligation to pay such amount is adequately reserved against in accordance with Canadian generally accepted accounting principles).

     (r) No Receivable originated by the Canadian Seller, the Obligor of which has a billing address in Canada, was issued for an amount in excess of the fair market value of the merchandise, insurance or services provided by the Canadian Seller to which such Receivable relates.

26

     (s) No Contract or any other books, records or other information relating to any Receivable originated by the Canadian Seller, the Obligor of which has a billing address in Canada, contain any “personal information” as defined in, or any other information regulated under (i) the Personal Information Protection and Electronic Documents Act (Canada), or (ii) any other similar statutes of Canada or any province in force from time to time which restrict, control, regulate or otherwise govern the collection holding, use or communication of information.

     (t) The Insurance Policy has been validly issued by the Insurer to ACI and is, on the date hereof, in full force and effect. All statements made by ACI in the application for the Insurance Policy were true, correct and complete in all material respects when made. As of the date hereof, all the premiums due on December 10, 2007 under the Insurance Policy for the policy period ended August 31, 2007 have been paid. ACI has performed all of its duties under the Insurance Policy and has timely filed all claims payable thereunder in such form as is required by the Insurer. The Insurance Policy has not been amended, supplemented or otherwise modified except as permitted by Section 6.02(a), and ACI has not waived any of its rights thereunder.

     (u) The Canadian Seller is a resident of Canada for purposes of the Income Tax Act (Canada).

     (v) Such Seller has marked its master data processing records, including master data processing records evidencing Receivables arising out of the sale of lumber, evidencing Receivables with a legend evidencing that the Transferred Receivables have been sold or contributed in accordance with this Agreement.

ARTICLE V

COVENANTS

     SECTION 5.01. Covenants of the Sellers. Each Seller covenants with respect to itself from the date hereof until the first day following the Facility Termination Date on which all of the Transferred Receivables are either collected in full or become Defaulted Receivables:

     (a) Compliance with Laws, Etc. Such Seller will comply in all material respects with all applicable laws, rules, regulations and orders and preserve and maintain its corporate existence, rights, franchises, qualifications and privileges except to the extent that the failure so to comply with such laws, rules and regulations or the failure so to preserve and maintain such rights, franchises, qualifications, and privileges would not have a Material Adverse Effect. In particular, but without limiting the generality of the foregoing, the Canadian Seller shall file all tax returns required by law to be filed by it with respect to the

27

Transferred Receivables and shall promptly pay, remit or account for, as applicable, all sales taxes (including, without limitation, PST, QST and GST) paid or owing in connection with any Transferred Receivables, except any such taxes which are not yet delinquent or are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with applicable generally accepted accounting principles shall have been set aside on its books.

     (b) Offices, Records, Name and Organization. Subject to Section 9.01(e), such Seller will keep its principal place of business and chief executive office and the office where it keeps its records concerning the Transferred Receivables at the address of such Seller set forth on Exhibit E hereto or, (subject to Section 9.01(f)) upon 30 days’ prior written notice to the Purchaser, at any other locations within the United States or (in the case of the Canadian Seller) Canada. Subject to Section 9.01(f), such Seller will not change its name or (in the case of the U.S. Seller) its jurisdiction of organization or (in the case of the Canadian Seller) its chief executive office and shall not consummate any amalgamation, consolidation or merger, unless (i) such Seller shall have provided the Purchaser with at least 30 days’ prior written notice thereof, together with an updated Exhibit F, and (ii) no later than the effective date of such change, all actions required by Section 5.01(j) shall have been taken and completed. Upon confirmation by the Agent (prior to the RPA Final Payment Date) or the Purchaser (following the RPA Final Payment Date) of receipt of any such notice (together with an updated Exhibit F) and the completion, as aforesaid, of all actions required by Section 5.01(j), Exhibit F to this Agreement shall, without further action by any party, be deemed to be amended and replaced by the updated Exhibit F accompanying such notice. Such Seller also will maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Transferred Receivables and related Contracts in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of all Transferred Receivables (including, without limitation, records adequate to permit the daily identification of each new Transferred Receivable and all Collections of and adjustments to each existing Transferred Receivable). Such Seller shall make a notation in its books and records, including its computer files, to indicate which Receivables have been sold or contributed to the Purchaser hereunder.

     (c) Performance and Compliance with Contracts and Credit and Collection Policy. Such Seller will, at its expense, timely and fully perform and comply with all material provisions, covenants and other promises required to be observed by it under the Contracts related to the Transferred Receivables, and timely and fully comply in all material respects with the Credit and Collection Policy in regard to each Transferred Receivable and the related Contract.

28

     (d) Sales, Liens, Etc. Except for the sales and contributions of Receivables contemplated herein, such Seller will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Adverse Claim upon or with respect to, any Transferred Receivable, Related Security, related Contract or Collections, or upon or with respect to any account to which any Collections of any Transferred Receivable are sent, or assign any right to receive income in respect thereof.

     (e) Extension or Amendment of Transferred Receivables. Except as provided in Section 6.02(c), such Seller will not (and will not permit the Servicer to) extend, amend or otherwise modify the terms of any Transferred Receivable, or amend, modify or waive any term or condition of any Contract related thereto.

     (f) Change in Business or Credit and Collection Policy. Such Seller will not make any change in the character of its business or in the Credit and Collection Policy that would, in either case, have a Material Adverse Effect.

     (g) Change in Payment Instructions to Obligors. Such Seller will not add or terminate any post office box, bank, or bank account as a Lock-Box, Deposit Bank or Deposit Account from those listed in Exhibit B hereto, or make any change in its instructions to Obligors regarding payments to be made to any Lock-Box or Deposit Account, unless the Purchaser shall have received prior notice of such addition, termination or change (including an updated Exhibit B) and a fully executed Deposit Account Agreement with each new Deposit Bank or with respect to each new Lock-Box or Deposit Account. Upon confirmation by the Agent (prior to the RPA Final Payment Date) or the Purchaser (following the RPA Final Payment Date) of receipt of any such notice and the related documents, Exhibit B hereto shall, without further action by any party, be deemed to be amended and replaced by the updated Exhibit B accompanying such notice.

     (h) Deposits to Lock-Boxes and Deposit Accounts. Such Seller will (or will cause the Servicer to) instruct all Obligors to remit all their payments in respect of Transferred Receivables to Lock Boxes or Deposit Accounts (provided that Obligors with respect to International Receivables and Receivables originated by the U.S. Seller shall be instructed to remit such payments to Lock-Boxes or Deposit Accounts located in the United States). If such Seller or the Servicer shall receive any Collections directly, such Seller shall (or, if applicable, shall cause the Servicer to) immediately (and in any event within two Business Days) deposit the same to a Lock Box or a Deposit Account (provided that Collections related to an International Receivable or a Receivable originated by the U.S. Seller shall be deposited to a Lock-Box or a Deposit Account in the United States) and until it does so, shall hold the same in trust for the Purchaser and its assignees. Such Seller will not deposit or otherwise credit, or cause or permit to be so deposited or credited, to any Lock Box or Deposit Account, cash or cash proceeds other than Collections of Transferred Receivables, provided, that if any PST are deposited or

29

credited to any Lock Box or Deposit Account, such Seller will (or will cause the Servicer to), within two Business Days of such deposit or credit, separate such deposits and credits from the Collections held in any applicable Lock Box or Deposit Account and withdraw such deposited or credited amount from such Lock Box or Deposit Account.

     (i) Examinations and Visits. Such Seller will, from time to time during regular business hours as requested by the Purchaser, permit the Purchaser, or its agents or representatives, (i) to examine and make copies of and abstracts from all books, records and documents (including, without limitation, computer tapes and disks) in the possession or under the control of such Seller relating to Transferred Receivables and the Related Security, including, without limitation, the related Contracts, and (ii) to visit the offices and properties of such Seller for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to Transferred Receivables and the Related Security or such Seller’s performance hereunder or under the Contracts with any of the officers or employees of such Seller having knowledge of such matters.

     (j) Further Assurances. (i) Such Seller agrees from time to time, at its expense, promptly to execute and deliver all further instruments and documents, and to take all further actions, that may be necessary or desirable, or that the Purchaser or its assignee may reasonably request, to perfect, protect or more fully evidence the sale and contribution of Receivables under this Agreement, or to enable the Purchaser or its assignee to exercise and enforce its respective rights and remedies under this Agreement. Without limiting the foregoing, such Seller will, upon the request of the Purchaser or its assignee, (A) execute and file such financing or continuation statements, or amendments thereto, and such other instruments and documents, that may be necessary or desirable to perfect, protect, make opposable or evidence such Transferred Receivables and any security interest in other assets of such Seller granted hereunder; and (B) deliver to the Purchaser copies of all Contracts relating to the Transferred Receivables and all records relating to such Contracts and the Transferred Receivables, whether in hard copy or in magnetic tape or diskette format (which if in magnetic tape or diskette format shall be compatible with the Purchaser’s computer equipment).

     (ii) Such Seller authorizes the Purchaser or its assignee to file financing or continuation statements, and amendments thereto and assignments thereof, relating to the Transferred Receivables and the Related Security, the related Contracts and the Collections with respect thereto, and any other assets of such Seller in which a security interest is granted hereunder.

     (iii) Such Seller shall perform its obligations under the Contracts related to the Transferred Receivables to the same extent as if the Transferred Receivables had not been sold or transferred.

30

     (k) Reporting Requirements. Such Seller will provide to the Purchaser the following:

     (i) as soon as possible and in any event within five days after the occurrence of each Event of Termination or Incipient Event of Termination with respect to such Seller or an Insurance Policy Event, a statement of the chief financial officer of such Seller setting forth details of such Event of Termination, Incipient Event of Termination or Insurance Policy Event and the action that such Seller or the Sellers, as applicable, has taken and proposes to take with respect thereto;

     (ii) subject to Section 9.01(f), at least 30 days prior to any change in such Seller’s name, jurisdiction of incorporation, chief executive or registered office, or any amalgamation, consolidation or merger involving such Seller, a notice setting forth the new name, jurisdiction of incorporation, chief executive or registered office or the details of any such amalgamation, consolidation or merger involving such Seller and the effective date thereof;

     (iii) promptly following receipt thereof, copies of all schedules, endorsements and notices received from the Insurer with respect to the Insurance Policy (including any notice that any additional premium is due in accordance with Section 4 of the “Declarations and Payment of Premium” endorsement to the Insurance Policy);

     (iv) immediately upon obtaining knowledge thereof, and in any event on the day such event occurs, notice that all indebtedness under the Bank Agreement has become due and payable (whether by declaration or automatically);

     (v) concurrently with the sending thereof to the Insurer, any notice by ACI terminating the Insurance Policy; and

     (vi) such other information respecting the Transferred Receivables or the condition or operations, financial or otherwise, of such Seller as the Purchaser may from time to time reasonably request.

     (1) Separate Conduct of Business. Such Seller will: (i) maintain separate corporate records and books of account from those of the Purchaser; (ii) conduct its business from an office separate from that of the Purchaser (but which may be located in the same facility as the Purchaser); (iii) ensure that all oral and written communications, including without limitation, letters, invoices, purchase orders, contracts, statements and applications, will be made solely in its own name; (iv) have stationery and other business forms and a mailing address and a telephone number separate from those of the Purchaser; (v) not hold itself out as having agreed to pay, or as being liable for, the obligations of the Purchaser; (vi) not engage in any transaction with the Purchaser except as contemplated by

31

this Agreement or as permitted by the RPA; (vii) continuously maintain as official records the resolutions, agreements and other instruments underlying the transactions contemplated by this Agreement; and (viii) disclose on its annual financial statements (A) the effects of the transactions contemplated by this Agreement in accordance with generally accepted accounting principles and (B) that the assets of the Purchaser are not available to pay its creditors.

     (m) Insurance Policy Exclusions. Such Seller will not take or omit to take any actions which give rise to an exclusion from coverage under the Insurance Policy.

     (n) Marking of Records. At its expense, such Seller will mark its master data processing records evidencing Receivables with a legend evidencing that the Transferred Receivables have been sold or contributed in accordance with this Agreement.

     (o) ACCC. Such Seller will not, and will not permit any Subsidiary to, enter into agreement that restricts the sale of inventory or goods from ACCC to such Seller.

          SECTION 5.02. Covenant of the Sellers and the Purchaser. Each Seller and the Purchaser have structured this Agreement with the intention that each Purchase of Receivables hereunder be treated as a sale of all of such Seller’s right, title and interest in, to and under such Receivables by such Seller to the Purchaser for all purposes and each contribution of Receivables by the U.S. Seller hereunder shall be treated as an absolute transfer of all of the U.S. Seller’s right, title and interest in, to and under such Receivables by the U.S. Seller to the Purchaser for all purposes. Each Seller and the Purchaser shall record each Purchase and contribution as a sale or purchase or capital contribution, as the case may be, on its books and records, and reflect each Purchase and contribution in its financial statements and tax returns as a sale or purchase or capital contribution, as the case may be. In the event that, contrary to the mutual intent of the Sellers and the Purchaser, any Purchase or contribution of Receivables hereunder is not characterized as a sale or absolute transfer, each Seller shall, effective as of the date hereof, be deemed to have granted (and each Seller hereby does grant) to the Purchaser a first priority security interest in and to any and all Receivables, the Related Security and the Collections and other proceeds thereof to secure the repayment of all amounts advanced to such Seller hereunder with accrued interest thereon, and this Agreement shall be deemed to be a security agreement.

ARTICLE VI

ADMINISTRATION AND COLLECTION

          SECTION 6.01. Designation of Servicer. The servicing, administration and collection of the Transferred Receivables shall be conducted by such Person (the “Servicer”) so designated hereunder from time to time. Until the RPA Final Payment Date, the U.S. Seller (or

32

such other Person as may be designated from time to time under the RPA) is hereby designated as, and hereby agrees to perform the duties and obligations of, the Servicer pursuant to the terms hereof. Following the RPA Final Payment Date, the Purchaser, by notice to the U.S. Seller, may at any time designate as Servicer any Person (including itself) to succeed the U.S. Seller or any successor Servicer, if such Person shall consent and agree to the terms hereof. Upon the U.S. Seller’s receipt of such notice, the U.S. Seller agrees that it will terminate its activities as Servicer hereunder in a manner which the Purchaser (or its designee) believes will facilitate the transition of the performance of such activities to the new Servicer, and the U.S. Seller shall use its best efforts to assist the Purchaser (or its designee) to take over the servicing, administration and collection of the Transferred Receivables, including, without limitation, providing access to and copies of all computer tapes or disks and other documents or instruments that evidence or relate to Transferred Receivables maintained in its capacity as Servicer and access to all employees and officers of the U.S. Seller responsible with respect thereto. The Servicer may, with the prior consent of the Purchaser, subcontract with any other Person for the servicing, administration or collection of Transferred Receivables. Any such subcontract shall not affect the Servicer’s liability for performance of its duties and obligations pursuant to the terms hereof, and any such subcontract shall terminate upon designation of a successor Servicer. The Servicer hereby appoints ACI as subservicer (ACI, in such capacity, the “Subservicer”) to perform the servicing, administration and collections functions of the Servicer hereunder; provided that the foregoing designation of ACI as subservicer does not (i) extend to the amendment or modification of a Receivable in accordance with Section 6.02(c) or (ii) contravene or otherwise exceed or violate Section 6.07. In no instance will the servicing and subservicing hereunder be inconsistent with, or in violation of, the terms and conditions of the Insurance Policy (and ACI shall continue its servicing and administration of the Insurance Policy). The Purchaser hereby consents to the designation of ACI as subservicer hereunder.

          SECTION 6.02. Duties of Servicer. (a) The Servicer shall take or cause to be taken all such actions as may be necessary or advisable to collect each Transferred Receivable from time to time, all in accordance with applicable laws, rules and regulations, with reasonable care and diligence, and in accordance with the Credit and Collection Policy. The Purchaser hereby appoints the Servicer, from time to time designated pursuant to Section 6.01, as agent to enforce its ownership and other rights in the Transferred Receivables, the Related Security and the Collections with respect thereto. In performing its duties as Servicer, the Servicer shall exercise the same care and apply the same policies as it would exercise and apply if it owned the Transferred Receivables and shall act in the best interests of the Purchaser and its assignees. The Servicer’s and the Subservicer’s duties hereunder shall include paying, on behalf of the Sellers, all premiums due under the Insurance Policy when the same are due (and the Servicer and the Subservicer shall provide the Purchaser with evidence of such payment by no later than the Business Day following the date such payment is due) and performing all obligations of ACI under the Insurance Policy in accordance with the terms of the Insurance Policy. Without limiting the foregoing, the Servicer or the Subservicer will (i) (x) immediately, upon obtaining knowledge of the relevant Obligor’s insolvency and (y) in all other cases, no later than four months after the relevant Receivable becomes due, file a claim under the Insurance Policy in such form as is required by the Insurer and with properly completed supporting documentation; (ii) not take any action to amend, supplement or otherwise modify the Insurance Policy (including, without

33

limitation, consenting to any changes to the Insurance Policy proposed by the Insurer as part of the annual review process) or waive any of its rights thereunder, without the Purchaser’s prior consent in each case (other than any replacement of a Coverage Certificate that would not result in an Insurance Policy Event); (iii) not change the directions given to the Insurer regarding the remittance of Insurance Proceeds; (iv) service the Receivables as required by the Insurer pursuant to the Insurance Policy; (v) deliver to the Insurer in a timely fashion any document or report required by the Insurer; and (vi) not take, or omit to take, any action which gives rise to an exclusion from coverage under the Insurance Policy. The Servicer and the Subservicer will ensure that all records relating to the Receivables are consistent with the requirements of the Insurance Policy and that such records are in such form as will not result in rejection of otherwise proper claims under the Insurance Policy. In the event the Servicer or the Subservicer fails to file a claim with respect to any Receivable, the Purchaser may (but shall not be required to) file such claim under the Insurance Policy.

          (b) (i) At any time when the Debt Ratings of ACI are not equal to the Required Ratings, prior to 10:00 A.M. (New York City Time) on the second Business Day of each calendar week, the Servicer shall prepare and forward to the Purchaser a Seller Report which shall contain information related to the Transferred Receivables as of the close of business on the last Business Day of the preceding calendar week.

          (ii) At all other times, the Servicer shall prepare and forward to the Purchaser Seller Reports prior to 10:00 A.M. (New York City Time) on the 17th calendar day of each month (or, if such day is not a Business Day, the next succeeding Business Day), relating to all Transferred Receivables, and the Related Security and Collections with respect thereto on the last day of the immediately preceding month.

          (c) If no Event of Termination or Incipient Event of Termination shall have occurred and be continuing, the Seller (other than ACI), while it is the Servicer (subject to the provisions of Section 6.07), may, in accordance with the Credit and Collection Policy, extend the maturity or adjust the Outstanding Balance of any Transferred Receivable as the Servicer deems appropriate to maximize Collections thereof, or otherwise amend or modify other terms of any Transferred Receivable, provided that, in each case, any necessary approval of the Insurer shall have been obtained.

          (d) Each Seller shall deliver to the Servicer, and the Servicer shall hold in trust for such Seller and the Purchaser in accordance with their respective interests, all documents, instruments and records (including, without limitation, computer tapes or disks) which evidence or relate to Transferred Receivables.

          (e) The Servicer shall as soon as practicable (and, in any event, within two Business Days) following receipt turn over to the relevant Seller any cash collections or other cash proceeds received with respect to Receivables not constituting Transferred Receivables.

          (f) [Intentionally Omitted].

34

          (g) The Servicer also shall perform the other obligations of the “Servicer” set forth in this Agreement with respect to the Transferred Receivables.

          SECTION 6.03. Servicer Fee. The Purchaser shall pay to the Servicer (and the Subservicer, to the extent required by the second sentence of this Section 6.03), so long as it is acting as the Servicer hereunder, an aggregate periodic collection fee (the “Servicer Fee”) of 0.50% per annum on the average daily aggregate Outstanding Balance of the Transferred Receivables, payable on each Settlement Date, or such other day during each calendar month as the Purchaser and the Servicer shall agree. So long as U.S. Seller is the Servicer and ACI is the Subservicer, the Servicer hereby directs the Purchaser to pay 80% of the Servicer Fee to the Subservicer and 20% of the Servicer Fee to the Servicer. So long as the U.S. Seller is acting as the Servicer hereunder and the Canadian Seller is acting as the Subservicer, amounts payable as the Servicer Fee pursuant to this Section 6.03 shall be reduced, on a dollar for dollar basis, by any amounts paid to the U.S. Seller and the Canadian Seller as a “Servicer Fee” and subservicing fee pursuant to Section 2.05(a) of the RPA, provided that such obligation of the Purchaser shall in no event be reduced below zero.

          SECTION 6.04. Certain Rights of the Purchaser. (a) After a Control Event, the Purchaser may, at any time, give notice of ownership and/or direct the Obligors of Transferred Receivables and any Person obligated on any Related Security, or any of them, that payment of all amounts payable under any Transferred Receivable shall be made directly to the Purchaser or its designee. Each Seller hereby transfers to the Purchaser (and its assigns and designees) the exclusive ownership and control of the Lock-Boxes and Deposit Accounts maintained by such Seller for the purpose of receiving Collections.

          (b) After a Control Event, each Seller shall, at any time upon the Purchaser’s request and at such Seller’s expense, give notice of the Purchaser’s ownership to each Obligor of Transferred Receivables and direct that payments of all amounts payable under the Transferred
Receivables be made directly to the Purchaser or its designee.

          (c) At any time after a Control Event, at the Purchaser’s request and at the relevant Seller’s expense, such Seller and the Servicer shall (A) assemble all of the documents, instruments and other records (including, without limitation, computer tapes and disks) that evidence or relate to the Transferred Receivables, and the related Contracts and Related Security, or that are otherwise necessary or desirable to collect the Transferred Receivables (including, without limitation, the Insurance Policy), and shall make the same available to the Purchaser at a place selected by the Purchaser or its designee, and (B) segregate all cash, checks and other instruments received by it from time to time constituting Collections of Transferred Receivables in a manner acceptable to the Purchaser and, promptly upon receipt, remit all such cash, checks and instruments, duly indorsed or with duly executed instruments of transfer, to the Purchaser or its designee. The Purchaser shall also have the right to make copies of all such documents, instruments and other records at any time.

          (d) At any time after a Control Event, each Seller authorizes the Purchaser to take any and all steps in such Seller’s name and on behalf of such Seller that are necessary or

35

desirable, in the determination of the Purchaser, to collect amounts due under the Transferred Receivables, including, without limitation, (i) endorsing such Seller’s name on checks and other instruments representing Collections of Transferred Receivables, (ii) giving notice of the Purchaser’s ownership to each Obligor of Transferred Receivables and direct that payments of all amounts payable under the Transferred Receivables be made directly to the Purchaser or its designee and (iii) enforcing the Transferred Receivables and the Related Security and related Contracts and the Insurance Policy.

          SECTION 6.05. Rights and Remedies. (a) If either Seller or the Servicer fails to perform any of its obligations under this Agreement, the Purchaser may (but shall not be required to) itself perform, or cause performance of, such obligation, and, if such Seller (as Servicer or otherwise) fails to so perform, the costs and expenses of the Purchaser incurred in connection therewith shall be payable by such Seller as provided in Section 8.01 or Section 9.04 as applicable.

          (b) Each Seller shall perform all of its obligations under the Contracts related to the Transferred Receivables to the same extent as if such Seller had not sold or contributed Receivables hereunder and the exercise by the Purchaser of its rights hereunder shall not relieve such Seller from such obligations or its obligations with respect to the Transferred Receivables. The Purchaser shall not have any obligation or liability with respect to any Transferred Receivables or related Contracts or the Insurance Policy, nor shall the Purchaser be obligated to perform any of the obligations of the Sellers thereunder.

          (c) Each Seller shall cooperate with the Servicer in collecting amounts due from Obligors in respect of the Transferred Receivables.

          (d) Each Seller hereby grants to Servicer an irrevocable power of attorney, with full power of substitution, coupled with an interest, to take in the name of such Seller all steps necessary or advisable to endorse, negotiate or otherwise realize on any writing or other right of any kind held or transmitted by such Seller or transmitted or received by Purchaser (whether or not from such Seller) in connection with any Transferred Receivable.

          SECTION 6.06. Transfer of Records to Purchaser. Each Purchase and contribution of Receivables hereunder shall include the transfer to the Purchaser of all of the relevant Seller’s right and title to and interest in the records relating to such Receivables and shall include an irrevocable non-exclusive license to the use of such Seller’s computer software system to access and create such records. Such license shall be without royalty or payment of any kind, is coupled with an interest, and shall be irrevocable until all of the Transferred Receivables are either collected in full or become Defaulted Receivables.

          Each Seller shall take such action requested by the Purchaser, from time to time hereafter, that may be necessary or appropriate to ensure that the Purchaser has an enforceable ownership interest in the records relating to the Transferred Receivables and rights (whether by ownership, license or sublicense) to the use of such Seller’s computer software system to access and create such records.

36

          In recognition of each Seller’s need to have access to the records transferred to the Purchaser hereunder, the Purchaser hereby grants to such Seller an irrevocable license to access such records in connection with any activity arising in the ordinary course of such Seller’s business or in performance of its duties as Servicer, provided that (i) such Seller shall not disrupt or otherwise interfere with the Purchaser’s use of and access to such records during such license period and (ii) such Seller consents to the assignment and delivery of the records (including any information contained therein relating to such Seller or its operations) to any assignees or transferees of the Purchaser provided they agree to hold such records confidential.

          SECTION 6.07. Limitation on Activities of Servicer in Canada. (a) Notwithstanding anything contained herein or anything contained in any other document delivered in connection herewith, the Servicer, as Servicer (and each Person to whom the Servicer delegates any of its responsibilities, including, without limitation, the Subservicer) shall not while acting in Canada, and shall not (and has no authority to) delegate to any Person acting in Canada the authority to, or permit any such Person to, enter into contracts or other agreements in the name of or on behalf of the Servicer or the Purchaser; and the Servicer (or any such delegate) is not permitted to (nor has authority to) establish an office or other place of business of the Servicer or the Purchaser in Canada. To the extent any responsibilities of any Person acting in Canada (including for greater certainty a Servicer employee or servant or ACI as Subservicer) to whom the Servicer has delegated responsibilities in respect of Transferred Receivables, the Related Security and the Collections hereunder or under any other Transaction Document involve or require such Person to enter a contract or other agreement in the name of or on behalf of the Sellers or the Purchaser, such servicing responsibility shall be fulfilled solely by, or upon specific approval of, the Servicer, and such Person is authorized to take such action or give such approval, but only from a place of business outside Canada, and such Person may not delegate such responsibility except upon the consent or the direction of the Agent (and then only subject to these same restrictions).

          (b) Notwithstanding anything contained herein or anything contained in any other document delivered in connection herewith, the U.S. Seller (and each Person to whom the U.S. Seller delegates any of its responsibilities (including, without limitation, the Subservicer)) shall not, while acting in Canada, and shall not (and has no authority to) delegate to any Person acting in Canada the authority to, or permit any such Person to, enter into contracts or other agreements in the name of or on behalf of the U.S. Seller. The U.S. Seller is not permitted to (nor has authority to) establish an office or other place of business in Canada.

ARTICLE VII

EVENTS OF TERMINATION

          SECTION 7.01. Events of Termination. If any of the following events (“Events of Termination”) shall occur and be continuing:

37

     (a) The Servicer or the Subservicer (i) shall fail to perform or observe any term, covenant or agreement under this Agreement (other than as referred to in clause (ii) or (iii) of this subsection (a)) and such failure shall remain unremedied for three Business Days or (ii) shall fail to make when due any payment or deposit to be made by it under this Agreement or (iii) shall fail to deliver any Seller Report when required and such failure shall remain unremedied for two Business Days; or

     (b) Either Seller shall fail to make any payment required under Section 2.04(a) or 2.04(b); or

     (c) Any representation or warranty (unless (x) such representation or warranty relates solely to one or more specific Receivables incorrectly characterized as Eligible Receivables and the applicable Seller shall have made any required deemed Collection payment pursuant to Section 2.04 with respect to such Receivables or (y) in the case of the representations and warranties contained in Sections 4.01 (a), (1) (the fourth sentence only) or (q), the breach of such representation or warranty is capable of being cured and is in fact cured (without any adverse impact on the Purchaser or its assigns or the collectibility of the Transferred Receivables) within five Business Days after the first date on which either Seller obtains knowledge or receives written notice of such breach from the Purchaser or its assigns) made or deemed made by either Seller (or any of its officers) under or in connection with this Agreement or any information or report delivered by either Seller, the Servicer or the Subservicer pursuant to this Agreement shall prove to have been incorrect or untrue in any material respect as of the date when made or deemed made or delivered; or

     (d) Either Seller shall fail to perform or observe (i) any term, covenant or agreement contained in this Agreement (other than as referred to in Section 7.01(b) or clause (ii) of this Section 7.01(d)) on its part to be performed or observed and any such failure shall remain unremedied for 10 days after written notice thereof shall have been given to such Seller by the Purchaser or its assignees, or (ii) any covenant applicable to it contained in Sections 5.01(d), 5.01(g) or 5.01(h);or

     (e) Either Seller shall fail to pay any principal of or premium or interest on any of its Debt which either arises under the Bank Agreement is outstanding in a principal amount of at least CAD 65,000,000 or the Dollar Equivalent thereof (or the equivalent in any other currency) in the aggregate when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such

38

Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to such Debt, and shall continue after the applicable grace period, if any, specified in such agreement or instrument, the effect of which default or other event or condition is to cause, or to permit the holder or beneficiary of such Debt to cause, with the giving of notice if required, such Debt to become due prior to its stated maturity or to become subject to a mandatory offer to purchase by the obligor thereunder; or

     (f) Any Purchase or contribution of Receivables hereunder, the Related Security and the Collections with respect thereto shall for any reason cease to constitute valid and perfected ownership of such Receivables, Related Security and Collections free and clear of any Adverse Claim; or

     (g) (i) Either Seller, the Servicer or the Subservicer shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or (ii) any proceeding shall be instituted by or against such Seller, the Servicer or the Subservicer seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or arrangement of debt, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 60 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or (iii) any receiver, trustee, custodian or similar official shall be appointed for either Seller, the Servicer or the Subservicer under any private right; or (iv) either Seller, the Servicer or the Subservicer shall take any corporate action to authorize any of the actions set forth above in this subsection (g); or

     (h) An Event of Termination shall have occurred under the RPA;

then, and in any such event, the Purchaser may, by notice to the Sellers, take either or both of the following actions: (x) declare the Facility Termination Date to have occurred (in which case the Facility Termination Date shall be deemed to have occurred) and (y) without limiting any right under this Agreement to replace the Servicer (but subject, prior to the RPA Final Payment Date, to the designation made under the RPA), designate another Person to succeed the U.S. Seller as Servicer; provided, that, automatically upon the occurrence of any event (without any requirement for the passage of time or the giving of notice) described in clause (g)(ii) or (g)(iii) of this Section 7.01, the Facility Termination Date shall occur. Upon any such declaration or designation or upon such automatic termination, the Purchaser shall have, in addition to the rights and remedies under this Agreement, all other rights and remedies with respect to the Receivables provided after default under the UCC, the PPSA and under other applicable law, which rights and remedies shall be cumulative.

39

ARTICLE VIII

INDEMNIFICATION

          SECTION 8.01. Indemnities by the Sellers. Without limiting any other rights which the Purchaser may have hereunder or under applicable law, each Seller hereby agrees to indemnify the Purchaser and its assigns and transferees (each, an “Indemnified Party”) from and against any and all damages, claims, losses, liabilities and related costs and expenses, including reasonable attorneys’ fees and disbursements (all of the foregoing being collectively referred to as “Indemnified Amounts”), awarded against or incurred by any Indemnified Party arising out of or as a result of this Agreement or the purchase or contribution of any Transferred Receivables or in respect of any Transferred Receivable originated by such Seller or any related Contract, including, without limitation, arising out of or as a result of:

     (i) the characterization in any Seller Report or other statement made by or on behalf of such Seller of any Transferred Receivable as an Eligible Receivable which is not an Eligible Receivable as of the date of such Seller Report or statement;

     (ii) any representation or warranty or statement made or deemed made by such Seller (or any of its officers) under or in connection with this Agreement, which shall have been incorrect in any material respect as of the date when made;

     (iii) the failure by such Seller to comply with any applicable law, rule or regulation with respect to any Transferred Receivable or the related Contract or the transfer of such Receivable hereunder (including, without limitation, the Bulk Sales Act (Newfoundland and Labrador)); or the failure of any Transferred Receivable or the related Contract to conform to any such applicable law, rule or regulation; or the failure by such Seller to pay, remit, or account for any taxes related to or included in a Receivable when due;

     (iv) the failure to vest in the Purchaser absolute ownership of the Receivables that are, or that purport to be, the subject of a Purchase or contribution under this Agreement and the Related Security and Collections in respect thereof, free and clear of any Adverse Claim (other than created pursuant to the Transaction Documents);

     (v) the failure of such Seller to have filed or sent, or any delay in filing or sending, financing statements, notices or other similar instruments or documents under the UCC or the PPSA of any applicable jurisdiction or other applicable laws with respect to any Receivables that are, or that purport to be, the subject of a

40

Purchase or contribution under this Agreement and the Related Security and Collections in respect thereof, whether at the time of any Purchase or contribution or at any subsequent time or the failure to take any other steps required to perfect any such Purchase or contribution; or the failure to have properly notified any Obligor of the transfer, sale or assignment of any Receivable pursuant to this Agreement, to the extent such notice is required to perfect the same under Quebec law for purposes of this clause (v), “perfect” under Quebec law means to render opposable, publish and allow the setting up of the purchaser’s interest in, and right to collect payment under, the assets which are the subject of such transfer, sale and assignment, and to make opposable, publish and allow the setting up of such transfer, sale and assignment as against Obligors and other third parties, including any trustee in bankruptcy;

     (vi) any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable that is, or that purports to be, the subject of a Purchase or contribution under this Agreement (including, without limitation, a defense based on such Receivable or the related Contract not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of the merchandise or services related to such Receivable or the furnishing or failure to furnish such merchandise or services or relating to collection activities with respect to such Receivable (if such collection activities were performed by the U.S. Seller acting as Servicer);

     (vii) any failure of such Seller, as Servicer or otherwise, to perform its duties or obligations in accordance with the provisions hereof or to perform its duties or obligations under any Contract related to a Transferred Receivable, including, without limitation, any failure of such Seller to file (or cause the Servicer to file) claims under the Insurance Policy in a timely fashion and with properly completed supporting documentation, any action or omission by such Seller which gives rise to an exclusion from coverage under the Insurance Policy, any failure by such Seller to cause the Servicer to service the Receivables in the manner required by the Insurer or any failure by such Seller to deliver (or cause the Servicer to deliver) to the Insurer any document or report required by the Insurer to be delivered in a timely manner;

     (viii) any products liability or other claim arising out of or in connection with merchandise, insurance or services which are the subject of any Contract relating to a Transferred Receivable originated by such Seller;

     (ix) the commingling of Collections of Transferred Receivables by such Seller or a designee of such Seller, as Servicer or otherwise, at any time with other funds of such Seller or an Affiliate of such Seller;

41

     (x) any investigation, litigation or proceeding related to this Agreement or the use of proceeds of Purchases or the ownership of Receivables, the Related Security, or Collections with respect thereto or in respect of any Receivable, Related Security or Contract (including, without limitation, in connection with the preparation of a defense or appearing as a third party witness in connection therewith and regardless of whether such investigation, litigation or proceeding is brought by either Seller, an Indemnified Party or any other Person or an Indemnified Party is otherwise a party thereto);

     (xi) any failure of such Seller to comply with its covenants contained in this Agreement (including in its capacity as Servicer or Subservicer);

     (xii) any claim brought by any Person other than an Indemnified Party arising from any activity by a Seller or any Affiliate of such Seller in servicing, administering or collecting any Transferred Receivable;

     (xiii) any claim arising out of any failure by such Seller to obtain a consent (if required) from the relevant Obligor to the transfer, sale or assignment of any Receivable pursuant to this Agreement; or

     (xiv) after the date hereof, any Indemnified Party shall be subject to Canadian taxes on income or capital in connection with the Receivables or the transactions contemplated by this Agreement and resulting from such Indemnified Party having a permanent establishment in Canada solely as a result of the transactions contemplated hereby (but only directly and exclusively as a result of any breach by such Seller or the Servicer (or any delegatee thereof including ACI as Subservicer) of its obligations hereunder).

It is expressly agreed and understood by the parties hereto (i) that the foregoing indemnification is not intended to, and shall not, constitute a guarantee of the collectibility or payment of the Transferred Receivables and (ii) that nothing in this Section 8.01 shall require either Seller to indemnify any Person (A) for Receivables which are not collected, not paid or uncollectible on account of the insolvency, bankruptcy, or financial inability to pay of the applicable Obligor, (B) for damages, losses, claims or liabilities or related costs or expenses to the extent found in a final non-appealable judgment of a court of competent jurisdiction to have resulted from such Person’s gross negligence or willful misconduct, or (C) for any income taxes or franchise taxes incurred by such Person arising out of or as a result of this Agreement or in respect of any Transferred Receivable or any Contract, other than (x) Taxes (to the extent provided in Section 2.07) and (y) Canadian taxes strictly on income or capital in connection with the Receivables or the transactions contemplated by this Agreement and resulting from any Indemnified Party having a permanent establishment in Canada solely as a result of the transactions contemplated hereby (but only directly and exclusively as a result of any breach by such Seller or the Servicer (or any delegatee thereof) of its obligations hereunder).

42

ARTICLE IX

MISCELLANEOUS

          SECTION 9.01. Amendments, Etc. (a) Amendments Generally. No amendment or waiver of any provision of this Agreement or consent to any departure by either Seller therefrom shall be effective unless in a writing signed by the Purchaser and, in the case of any amendment, also signed by the Sellers, and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No failure on the part of the Purchaser to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. Notwithstanding any other provision of this Section 9.01 (a), Exhibits B and F hereto may be amended in accordance with the procedures set forth in Sections 5.01(g) and 5.01(b), respectively, and (ii) the amendments described in clauses (c)-(e) of this Section 9.01 shall become effective upon the satisfaction of the applicable conditions precedent set forth in this Section 9.01.

          (b) Replacement Bank Agreement. In the event that any financing is provided to the Parent, or any of its subsidiaries, pursuant to which the Parent is a borrower or guarantor or the lenders otherwise rely upon the credit or the financial position of the Parent, including by incorporation of representations and warranties, covenants or events of default relating to the Parent (such financing, the “Replacement Bank Agreement”), the Sellers and the Purchaser agree to enter into good faith negotiations for a period of 30 days after the effectiveness of such Replacement Bank Agreement, or such longer period as may be agreed to, in writing, by the Sellers, the Purchaser and the Purchaser’s assigns, in order to amend this Agreement so as to reflect, as applicable, the terms and conditions of analogous clauses in the Replacement Bank Agreement to the reasonable satisfaction of the Purchaser and its assigns, but in each case in a manner which is consistent with the provisions of Section 4.0 l(e) and the first sentence of Section 5.02.

          (c) Continuance Amendments. Effective as of the effective date (the “Continuance Effective Date”) of the Continuance as set forth in the Notice of Continuance and Change of Address to be delivered by ACI to the Purchaser in the form attached hereto as Exhibit G (the “Notice of Continuance and Change of Address”), which Notice of Continuance and Change of Address shall be delivered to the Purchaser by no later than five (5) calendar days prior to the Continuance Effective Date, and subject to the satisfaction of the conditions precedent set forth in this Section 9.01(c):

     (i) The introductory paragraph to this Agreement is amended by deleting the phrase “ABITIBI-CONSOLIDATED INC., a Canadian corporation” and replacing it with the name and description of the Continued Entity, as indicated in the Notice of Continuance and Change of Address.

     (ii) Exhibit F to this Agreement is deleted in its entirety and replaced with Exhibit F attached to the Notice of Continuance and Change of Address.

43

     (iii) Each reference to “Abitibi-Consolidated Inc.,” “ACI”, the “Canadian Seller” and the “Subservicer” (to the extent ACI continues to be so designated and to act in such capacity) in this Agreement shall mean and be a reference to the Continued Entity, as indicated in the Notice of Continuance and Change of Address.

The amendments described in this Section 9.01(c) shall become effective on the Continuance Effective Date, subject to the receipt by the Purchaser (subject to the terms of clause (B) below) of each of the following, each in form and substance satisfactory to the Purchaser and its assigns:

     (A) acknowledgment copies or time stamped receipt copies (or other satisfactory evidence of filing) of proper financing statements, financing change statements and financing statement amendments, duly filed against ACI and the Continued Entity, as applicable, on or before the Continuance Effective Date under the UCC and PPSA of all jurisdictions that the Purchaser may deem necessary or desirable in order to continue the Purchaser’s ownership of the Transferred Receivables and Related Security and Collections with respect thereto;

     (B) favourable opinions of (x) Stikeman Elliott LLP, Canadian counsel for the Continued Entity and (y) Stewart McKelvey LLP, Nova Scotia counsel for the Continued Entity, each of which opinions may be combined with and incorporated in the relevant opinion to be delivered pursuant to Section 9.01(d)(B) (the “Amalgamation Opinion”) provided that the Amalgamation Opinion is delivered to the Purchaser within thirty (30) days of the Continuance Effective Date; for greater certainty, the delivery of the opinions required pursuant to this clause (B) shall not delay the coming into effect of the amendments described in this Section 9.01(c);

     (C) a copy of the constating documents of the Continued Entity, giving effect to the Continuance, certified by the Secretary or Assistant Secretary of the Continued Entity;

     (D) a copy of the organizational documents of the Continued Entity, giving effect to the Continuance, certified by or on behalf of the Registrar of Joint Stock Companies of Nova Scotia, dated as of a recent date; and

     (E) a certificate as to the good standing or qualification to do business, as applicable, of the Continued Entity from an appropriate official of each of Nova Scotia and Quebec, dated as of a recent date.

          (d) Amalgamation Amendments. Effective as of the effective date (the “Amalgamation Effective Date”) of the Amalgamation as set forth in the Notice of Amalgamation to be delivered by ACI to the Purchaser in the form attached hereto as Exhibit H (the “Notice of Amalgamation”), which Notice of Amalgamation shall be delivered to the Purchaser by no later

44

than five (5) calendar days prior to the Amalgamation Effective Date, and subject to the satisfaction of the conditions precedent set forth in this Section 9.01(d):

     (i) The introductory paragraph to this Agreement is amended by deleting the name and description of the Continued Entity and replacing it with the name and description of the Amalgamated Entity, as indicated in the Notice of Amalgamation.

     (ii) Exhibit E to this Agreement is deleted in its entirety and replaced with Exhibit E attached to the Notice of Amalgamation.

     (iii) Exhibit F to this Agreement is deleted in its entirety and replaced with Exhibit F attached to the Notice of Amalgamation.

     (iv) Each reference to the Continued Entity, “Abitibi-Consolidated Inc.,” “ACI”, the “Canadian Seller” and the “Subservicer” (to the extent ACI continues to be so designated and to act in such capacity) in this Agreement shall mean and be a reference to the Amalgamated Entity, as indicated in the Notice of Amalgamation.

The amendments described in this Section 9.01(d) shall become effective on the Amalgamation Effective Date, subject to the receipt by the Purchaser of each of the following, each in form and substance satisfactory to the Purchaser and its assigns:

     (A) acknowledgment copies or time stamped receipt copies (or other satisfactory evidence of filing) of proper financing statements, financing change statements and financing statement amendments, duly filed against the Continued Entity and the Amalgamated Entity, as applicable, on or before the Amalgamation Effective Date under the UCC and PPSA of all jurisdictions that the Purchaser may deem necessary or desirable in order to continue the Purchaser’s ownership of the Transferred Receivables and Related Security and Collections with respect thereto;

     (B) favourable opinions of (i) Stikeman Elliott LLP, Canadian counsel for the Amalgamated Entity and (ii) Stewart McKelvey LLP, Nova Scotia counsel for the Amalgamated Entity;

     (C) a copy of the constating documents of the Amalgamated Entity, giving effect to the Amalgamation, certified by the Secretary or Assistant Secretary of the Amalgamated Entity;

     (D) a copy of the organizational documents of the Amalgamated Entity, giving effect to the Amalgamation, certified by or on behalf of the Registrar of Joint Stock Companies of Nova Scotia, dated as of a recent date;

45

     (E) a certificate as to the good standing or qualification to do business, as applicable, of the Amalgamated Entity from an appropriate official of each of Nova Scotia and Quebec, dated as of a recent date;

     (F) completed requests for information and search reports, dated on or before the Amalgamation Effective Date, listing all effective financing statements and other registrations filed in the jurisdictions referred to in subsection (A) above and in any other jurisdictions reasonably requested by the Purchaser that name 3224112 Nova Scotia Limited as debtor, together with copies of such financing statements and other registrations; and

     (G) acknowledgment copies of proper financing statements and registrations, if any, necessary to release all security interests and other rights of any Person in the Transferred Receivables, Contracts or Related Security.

          (e) Change of Address Amendments. Effective as of the effective date (the “Change of Address Effective Date”) of the Change of Address as set forth in the Notice of Change of Address to be delivered by ACSC to the Purchaser in the form attached hereto as
Exhibit I (the “Notice of Change of Address”), which Notice of Change of Address shall be delivered to the Purchaser by no later than five (5) Business Days prior to the Change of Address Effective Date, and subject to the satisfaction of the conditions precedent set forth below, Exhibits E and F to this Agreement are deleted in their entirety and replaced with Exhibits E and F attached to the Notice of Change of Address, respectively.

               The amendments described in this Section 9.01(e) shall become effective on the Change of Address Effective Date, subject to the receipt by the Purchaser, on or prior to the Change of Address Effective Date, of acknowledgment copies or time stamped receipt copies (or other satisfactory evidence of filing) of proper financing statements and financing statement amendments, duly filed against ACSC on or before the Change of Address Effective Date under the UCC of all jurisdictions that the Purchaser may deem necessary or desirable in order to continue the Purchaser’s ownership of the Transferred Receivables and Related Security and Collections with respect thereto.

          (f) Waivers. The Purchaser hereby waives the requirement to provide thirty (30) days’ written notices set forth in Sections 5.01(b) and 5.01(k)(ii), solely to the extent relating to the Continuance, the Amalgamation and the Change of Address; provided that ACI or ACSC, as applicable, timely complies with the requirements to provide such notices in each case pursuant to its agreements set forth in clauses (c), (d) and (e) of this Section 9.01, as applicable.

          SECTION 9.02. Notices, Etc. All notices and other communications hereunder shall, unless otherwise stated herein, be in writing (which shall include facsimile communication) and be faxed or delivered, to each party hereto, at its address set forth on Exhibit E hereto or at such other address as shall be designated by such party in a written notice to the other parties hereto. Notices and communications by facsimile shall be effective when sent (and shall be

46

followed by hard copy sent by regular mail), and notices and communications sent by other means shall be effective when received.

          SECTION 9.03. Binding Effect; Assignability. (a) This Agreement shall be binding upon and inure to the benefit of the Sellers, the Purchaser and their respective successors and assigns; provided, however, that neither Seller may assign its rights or obligations hereunder or any interest herein without the prior written consent of the Purchaser, hi connection with any sale or assignment by the Purchaser of all or a portion of the Transferred Receivables, the buyer or assignee, as the case may be, shall, to the extent of its purchase or assignment, have all rights of the Purchaser under this Agreement (as if such buyer or assignee, as the case may be, were the Purchaser hereunder) except (i) such assignee or buyer shall not be entitled to the Purchaser’s rights under Section 5.01(i) (but nothing contained herein shall limit any similar rights which the Sellers may separately grant to such assignee or buyer) and (ii) to the extent specifically provided in the agreement between the Purchaser and such buyer or assignee, as the case may be.

          (b) This Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms, and shall remain in full force and effect until such time, after the Facility Termination Date, when all of the Transferred Receivables are either collected in full or become Defaulted Receivables; provided, however, that rights and remedies with respect to any breach of any representation and warranty made by either Seller pursuant to Article IV and the provisions of Article VII and Sections 9.04, 9.05 and 9.06 shall be continuing and shall survive any termination of this Agreement.

          SECTION 9.04. Costs, Expenses and Taxes. (a) In addition to the rights of indemnification granted to the Purchaser pursuant to Article VIII hereof, the Sellers jointly and severally agree to pay on demand all reasonable costs and expenses in connection with the preparation, execution and delivery of this Agreement and the other documents and agreements to be delivered hereunder, including, without limitation, the reasonable fees and reasonable out-of-pocket expenses of counsel for the Purchaser with respect thereto and with respect to advising the Purchaser as to its rights and remedies under this Agreement, and the Sellers jointly and severally agree to pay all costs and expenses, if any (including reasonable counsel fees and expenses), in connection with the enforcement of this Agreement and the other documents to be delivered hereunder excluding, however, any costs of enforcement or collection of Transferred Receivables which are not paid on account of the insolvency, bankruptcy or financial inability to pay of the applicable Obligor.

          (b) In addition, the Sellers jointly and severally agree to pay any and all stamp and other taxes and fees payable in connection with the execution, delivery, filing and recording of this Agreement or the other documents or agreements to be delivered hereunder, and the Sellers jointly and severally agree to save each Indemnified Party harmless from and against any liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees.

          SECTION 9.05. No Proceedings. Each Seller hereby agrees that it will not institute against, or join any other Person in instituting against, the Purchaser any proceeding of

47

the type referred to in Section 7.01(g) so long as there shall not have elapsed one year plus one day since the later of (i) the Facility Termination Date and (ii) the date on which all of the Transferred Receivables are either collected in full or become Defaulted Receivables.

          SECTION 9.06. [Intentionally Omitted].

          SECTION 9.07. GOVERNING LAW. THIS AGREEMENT SHALL, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION, EXCEPT (A) AS OTHERWISE PROVIDED IN SECTION 2.02(f) AND (B) TO THE EXTENT THAT, PURSUANT TO THE UCC OF THE STATE OF NEW YORK, THE PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF THE PURCHASER’S OWNERSHIP OF OR SECURITY INTEREST IN THE RECEIVABLES ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.

          SECTION 9.08. Third Party Beneficiary. Each of the parties hereto hereby acknowledges that the Purchaser may assign all or any portion of its rights under this Agreement and that such assignees may (except as otherwise agreed to by such assignees) further assign their rights under this Agreement, and each Seller hereby consents to any such assignments. All such assignees, including parties to the RPA in the case of assignment to such parties, are intended by the parties hereto to be and shall be third party beneficiaries of, and shall be entitled to enforce the Purchaser’s rights and remedies under, this Agreement to the same extent as if they were parties thereto, except to the extent specifically limited under the terms of their assignment.

          SECTION 9.09. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.

          SECTION 9.10. Consent to Jurisdiction. (a) Each party hereto hereby irrevocably submits to the non-exclusive jurisdiction of any New York State or Federal court sitting in New York City in any action or proceeding arising out of or relating to this Agreement or the other Transaction Documents, and each party hereto hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State court or, to the extent permitted by law, in such Federal court. The parties hereto hereby irrevocably waive, to the fullest extent they may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. The parties hereto agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

          (b) The U.S. Seller consents to the service of any and all process in any such action or proceeding by the mailing of copies of such process to it at its address specified in

48

Section 9.02. The Canadian Seller consents to the service of any and all process in any such action or proceeding by the mailing of copies of such process to the attention of the U.S. Seller at its address specified in Section 9.02, or in any other manner permitted by applicable law. Nothing in this Section 9.10 shall affect the right of the Purchaser or its assigns to serve legal process in any other manner permitted by law.

          (c) To the extent that the Canadian Seller has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, the Canadian Seller hereby irrevocably waives such immunity in respect of its obligations under this Agreement.

          SECTION 9.11. Judgment. (a) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in Dollars into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Purchaser or its assigns could purchase Dollars with such other currency at New York, New York on the Business Day preceding that on which final judgment is given.

          (b) The obligations of each Seller and the Servicer (each, a “Payor”) in respect of any sum due from such Payor to the Purchaser or its assigns (each, a “Recipient”) hereunder shall, notwithstanding any judgment in a currency other than Dollars, be discharged only to the extent that on the Business Day following such Recipient’s receipt of any sum adjudged to be so due in such other currency, such Recipient may, in accordance with normal banking procedures purchase (and remit in New York) Dollars with such other currency; if the Dollars so purchased and remitted are less than the sum originally due to such Recipient in Dollars, the relevant Payor agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the relevant Recipient against such loss, and if the Dollars so purchased exceed the sum originally due to the relevant Recipient in Dollars, the relevant Recipient agrees to remit to the relevant Payor such excess.

          SECTION 9.12. Execution by ACI. This Agreement shall be considered to be executed and delivered by ACI at White Plains, New York and once an authorized director or officer of ACI resident in the United Sates of America has executed the same.

          SECTION 9.13. Language. This Agreement and all related documents have been written in the English language at the express request of the parties. Le présent contrat ainsique tousles documents s’y rattachant ont été rédigés en anglais à la demande expresse des parties.

          SECTION 9.14. Acknowledgment. Each of the parties hereto acknowledges that the amendment and restatement of the Original PCA on the terms and conditions set forth herein shall not in any way affect any sales, transfers, assignments or security interest grants effected pursuant to the Original PCA or any representations, warranties or covenants made by the Sellers or the Servicer with respect to such sales, transfers, assignments or security interest grants, any indemnities made by the Sellers or by the Servicer, or any rights or remedies of the Purchaser or

49

its assigns with respect thereto. Each of the relevant parties hereto confirms all sales, transfers, assignments and security interests effected pursuant to the Original PCA.

50

          IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

SELLERS:	ABITIBI-CONSOLIDATED INC.
	By:	/s/ [UNREADABLE]
		Title:
		Name:

By:	/s/ [UNREADABLE]
	Title:
	Name:

ABITIBI CONSOLIDATED SALES CORPORATION
By:	/s/ Breen H Blaine
	Title: Vice President
	Name: BREEN H BLAINE

By:	/s/ Colin Keeler
	Title: Vice President
	Name: Colin Keeler

PURCHASER:	ABITIBI-CONSOLIDATED U.S. FUNDING CORP.
	By:	/s/ Breen H Blaine
		Title: President Name: BREEN H BLAINE

By:	/s/ Colin Keeler
	Title: Vice President
	Name: Colin Keeler

[Purchase and Contribution Agreement)

Pursuant to Section 5.01(m) of the Original RPA, Citibank, N.A., London Branch, as Agent, consents to the foregoing Agreement:

CITIBANK, N.A., London Branch, as Agent

By:	/s/ Nigel Kilvington
	Title: Vice President
	Name: Nigel Kilvington

[Purchase and Contribution Agreement]

EXHIBIT A

CREDIT AND COLLECTION POLICY

A-1

EXHIBIT B

Deposit Accounts

						Complete
	Complete					Name of
	Name of	Name and				Deposit
	Lock box	Address of	Lock Box			Account	Deposit
Originator	Owner	Deposit Bank	Nos.		Location	Owner	Account Bank
Abitibi- Consolidated Inc.	Abitibi- Consolidated Inc.	Royal Bank of Canada		T01972C	Toronto	Abitibi- Consolidated Inc.	Royal Bank of Canada
		1 Place Ville Marie Montreal	V05410C and M05333C		Vancouver Montreal
			V05410U and M05333U		Vancouver Montreal
Abitibi Consolidated Sales Corporation	Abitibi- Consolidated U.S. Funding Corp.	LaSalle Bank National Association 135 South		12281070	Chicago	Abitibi- Consolidated U.S. Funding Corp.	LaSalle Bank National Association
		LaSalle Street Chicago IL 60603			Chicago
Abitibi- Consolidated Inc.	N/A	Citibank, N.A. 390 Greenwich St., 8th Floor New York NY 10013		N/A	N/A	Abitibi- Consolidated U.S. Funding Corp.	Citibank, N.A.

B-1

EXHIBIT C

FORM OF
DEFERRED PURCHASE PRICE NOTE

New York, New York
                    , 200   

          FOR VALUE RECEIVED, ABITIBI-CONSOLIDATED U.S. FUNDING CORP., a Delaware corporation (the “Purchaser”), hereby promises to pay to [NAME OF SELLER] (the “Seller”) the principal amount of this Note, determined as described below, together with interest thereon at a rate per annum equal at all times to the sum of the Adjusted Eurodollar Rate (as defined in the RPA) for periods of one month plus the Applicable Margin (as defined in the RPA) plus 0.25%, in each case in lawful money of the United States of America. Capitalized terms used herein but not defined herein shall have the meanings assigned to such terms in the Purchase and Contribution Agreement dated as of October 27, 2005 among Abitibi-Consolidated Inc., Abitibi Consolidated Sales Corporation and the Purchaser (such agreement, as it may from time to time be amended, restated or otherwise modified in accordance with its terms, the “Purchase and Contribution Agreement”). This Note is one of the notes referred to in the definition of “Deferred Purchase Price” in the Purchase and Contribution Agreement.

          The aggregate principal amount of this Note at any time shall be equal to the difference between (a) the sum of the aggregate principal amount of this Note on the date of the issuance hereof and each addition to the principal amount of this Note pursuant to the terms of Section 2.02 of the Purchase and Contribution Agreement minus (b) the aggregate amount of all payments made in respect of the principal amount of this Note, in each case, as recorded on the schedule annexed to and constituting a part of this Note, but failure to so record shall not affect the obligations of the Purchaser to the Seller.

          The entire principal amount of this Note shall be due and payable one year and one day after the Facility Termination Date or such later date as may be agreed in writing by the Seller and the Purchaser. The principal amount of this Note may, at the option of the Purchaser, be prepaid in whole at any time or in part from time to time. Interest on this Note shall be paid in arrears on each Settlement Date, at maturity and thereafter on demand. All payments hereunder shall be made by wire transfer of immediately available funds to such account of the Seller as the Seller may designate in writing.

          Notwithstanding any other provisions contained in this Note, in no event shall the rate of interest payable by the Purchaser under this Note exceed the highest rate of interest permissible under applicable law.

          The obligations of the Purchaser under this Deferred Purchase Price Note are subordinated in right of payment, to the extent set forth in Section 2.03(c) of the Purchase and

C-1

Contribution Agreement, to the prior payment in full of all Capital, Yield, Fees and other obligations of the Purchaser under the RPA.

          Notwithstanding any provision to the contrary in this Deferred Purchase Price Note or elsewhere, other than with respect to payments specifically permitted by Section 2.03(c) of the Purchase and Contribution Agreement, no demand for any payment may be made hereunder, no payment shall be due with respect hereto and the Seller shall have no claim for any payment hereunder prior to the occurrence of the Facility Termination Date and then only on the date, if ever, when all Capital, Yield, Fees and other obligations owing under the RPA shall have been paid in full.

          In the event that, notwithstanding the foregoing provision limiting such payment, the Seller shall receive any payment or distribution on this Deferred Purchase Price Note which is not specifically permitted by Section 2.03(c) of the Purchase and Contribution Agreement, such payment shall be received and held in trust by the Seller for the benefit of the entities to whom the obligations are owed under the RPA and shall be promptly paid over to such entities.

          The Purchaser hereby waives diligence, presentment, demand, protest and notice of any kind whatsoever.

          Neither this Note, nor any right of the Seller to receive payments hereunder, shall, without the prior written consent of the Purchaser and (prior to the RPA Final Payment Date) the Agent under the RPA, be assigned, transferred, exchanged, pledged, hypothecated, participated or otherwise conveyed.

          THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

         ABITIBl-CONSOLIDATED U.S. FUNDING CORP.

By:
	Title:
By:
	Title:

C-2

SCHEDULE TO DEFERRED PURCHASE PRICE NOTE

		Amount of
	Addition to	Principal paid	Unpaid Principal	Notation
Date	Principal Amount	or Prepaid	Balance	Made By

C-3

EXHIBIT D

[INTENTIONALLY OMITTED]

D-1

EXHIBIT E

ADDRESSES

Purchaser:	Abitibi-Consolidated U.S. Funding Corp.
	4 Gannett Drive, ACUSFC Room
	White Plains, N.Y. 10604-3400
	Attention: Breen Blaine
	Facsimile No.: 914-640-8920
Canadian Seller:	ABITIBI-CONSOLIDATED INC
	1155 METCALFE STREET
	SUITE 800
	MONTREAL QC H3B 542
	CANADA
	ATTENTION: TREASURY DEPARTMENT
	Facsimile No.: 514-3942267
U.S. Seller:	Abitibi Consolidated Sales Corporation
	4 Gannett Drive
	White Plains, N.Y. 10604-3400
	Attention: Breen Blaine
	Facsimile No.: 914-640-8917
	With Copy To:
	Attention: Montréal Legal Department
	Facsimile No.: 514-394-3644

E-1

EXHIBIT F

SELLER UCC AND PPSA INFORMATION

U.S. Seller:

Name:	Abitibi Consolidated Sales Corporation
Current Address (and location of chief executive office and Receivables records):	4 Gannett Drive White Plains, NY 10604-3400
Prior Address:	None
Jurisdiction of Organization:	Delaware
UCC Filing Office:	Delaware Secretary of State
Prior Name:	Abitibi-Price Sales Corporation

Canadian Seller:

Name:	Abitibi-Consolidated Inc.
Chief Executive and Registered Office (and location of Receivables records):	1155 Metcalfe Street, Suite 800 Montreal, QC H3B 5H2 Canada
Jurisdiction of Organization:	Canada
PPSA Filing Offices:	Quebec, Ontario, British Columbia and Alberta
Prior Name:	None

F-1

EXHIBIT G

FORM OF NOTICE OF CONTINUANCE
AND CHANGE OF ADDRESS

G-1

EXHIBIT H

FORM OF NOTICE OF AMALGAMATION

H-1

EXHIBIT I

FORM OF NOTICE OF CHANGE OF ADDRESS

I-1

EX-10.42

EXHIBIT 10.42

CREDIT AGREEMENT

dated as of October 3,2005

Among

Abitibi-Consolidated Inc.
Abitibi-Consolidated Company of Canada
(as Borrowers)

- and-

Canadian Imperial Bank of Commerce
(as Sole Lead Arranger, Bookrunner
and Administrative Agent)

-and-

The Financial Institutions
from Time to Time Parties Hereto
(as Lenders)

$700,000,000 Facilities

The Bank of Nova Scotia
(as Syndication Agent)

Citibank, N.A., Canadian Branch
(as Documentation Agent)

Goldman Sachs Credit Partners
(as Managing Agent)

McCarthy Tetrault LLP

- i -

TABLE OF CONTENTS

			Page
1 - Interpretation				1
	1.1	Definitions		1
	1.2	Currency Conversions		13
	1.3	Accounting Terms and Calculations		13
	1.4	Time		13
	1.5	Headings and Table of Contents		14
	1.6	Governing Law		14
	1.7	Inconsistency		14
2 - The Facilities				14
	2.1	Facilities A and B		14
	2.2	Availability		14
	2.3	Extension of Facility B Maturity Date		15
	2.4	Purpose		16
	2.5	Borrowing Options		16
	2.6	Borrowing Base Limitations for Facility B		16
	2.7	Borrowings Proportionate to Commitments		16
	2.8	Notice of Borrowings		16
	2.9	Overdraft Utilizations with the Swingline Lender		17
	2.10	Funding		18
	2.11	Lender’s Failure to Fund		18
	2.12	Conversions and Renewals		18
	2.13	Limitations on Lender’s Obligation to Fund		19
	2.14	Increase of Facility B		19
3 - Acceptances				20
	3.1	Period and Amounts		20
	3.2	Disbursement		20
	3.3	Power of Attorney		21
	3.4	Depository Bills		21
	3.5	Availability		21
4- Libor Loans				21
	4.1	Amounts and Periods		21
	4.2	Changed Circumstances		22
	4.3	Conversion Prior to Maturity		22
5 - Letters of Credit				22
	5.1	Availability		22
	5.2	Maturity of Letters of Credit		22

- ii -

			Page
	5.3	Borrowings		22
	5.4	Payments under Letters of Credit		23
	5.5	Currency Conversion		23
	5.6	Indemnity		23
	5.7	I.C.C. Rules		23
	5.8	Deemed Utilizations		23
6- Fees and Interest				24
	6.1	Agency Fee		24
	6.2	Commitment Fees		24
	6.3	Letter of Credit Fees		24
	6.4	Administrative Charges with respect to Letters of Credit		24
	6.5	Standby Fee		24
	6.6	Usage Fee		25
	6.7	Acceptance Fees		25
	6.8	Interest on Prime Rate Loans		25
	6.9	Interest on US Base Rate Loans		25
	6.10	Interest on Libor Loans		25
	6.11	Calculation of Interest Rates		26
	6.12	Interest on Arrears		26
7- Repayment, Prepayment and Cancellation				26
	7.1	Repayment of the Facilities		26
	7.2	Mandatory Prepayments		26
	7.3	Optional Prepayments		26
	7.4	Exchange Rate Fluctuations		27
	7.5	Letters of Credit		27
	7.6	Optional Reduction of the Facilities		27
8- Place and Currency of Payment				28
	8.1	Payments to the Agent		28
	8.2	Time of Payments		28
	8.3	Currency		28
	8.4	Judgment Currency		28
	8.5	Payments Net of Taxes		28
9- Conditions Precedent to Borrowings				29
	9.1	Conditions Precedent to the Initial Borrowing under Facility A		29
	9.2	Conditions Precedent to Initial Borrowing under Facility B		30
	9.3	Conditions Precedent to All Borrowings		31
	9.4	Waiver of Conditions Precedent		31
	9.5	Special Waiver in respect of the Security		31
	9.6	Early Termination of the Commitments		31
10- Security				32
	10.1	Guarantees by Borrowers		32

- iii -

			Page
	10.2	Guarantees by Designated Subsidiaries		32
	10.3	Facility A Security		32
	10.4	Facility B Security		34
	10.5	Insurance		35
	10.6	Securitization Program		35
	10.7	Validity of the Security and Contents of Security Documents		35
	10.8	Release of the Security		35
11 - Representations and Warranties				36
	11.1	Corporate Existence and Capacity		36
	11.2	Authorization and Validity		36
	11.3	No Breach		36
	11.4	Approvals		36
	11.5	Compliance with Laws and Permits		37
	11.6	Title to Assets		37
	11.7	Fibre Supply Arrangements		37
	11.8	Litigation		37
	11.9	No Default		37
	11.10	Solvency		37
	11.11	Taxes		38
	11.12	Margin Stock Restrictions		38
	11.13	Pension Plans		38
	11.14	Investment Company Act		38
	11.15	Public Utility Holding Company Act		39
	11.16	Restriction on Payments		39
	11.17	Corporate Structure		39
	11.18	Financial Statements and Financial Year		39
	11.19	Material Adverse Change		39
	11.20	True and Complete Disclosure		39
12 - Affirmative Covenants				40
	12.1	General Covenants		40
	12.2	Rating		41
	12.3	Environmental Reports for Charged Mills		41
	12.4	Use of Proceeds		41
	12.5	Disclosure of Facilities		41
	12.6	Further Assurances		41
	12.7	Representations and Warranties		42
13 - Negative Covenants				42
	13.1	Negative Pledge		42
	13.2	Indebtedness		42
	13.3	Limitations on Fundamental Changes		43
	13.4	Core Business		44
	13.5	Financial Assistance		44
	13.6	Share Buy-Backs		44

- iv -

				Page
		13.7	Transactions with Related Parties		44
14 - Financial Covenants					45
		14.1	Net Funded Debt to Total Capitalization Ratio		45
		14.2	Interest Coverage Ratio		45
15 - Reporting Requirements					45
		15.1	Annual Reporting		45
		15.2	Quarterly Reports		46
		15.3	Borrowing Base Report		46
		15.4	ERISA		46
		15.5	Environmental Reporting		47
		15.6	Additional Reporting Requirements		48
		15.7	Reporting from Time to Time		48
		15.8	Documentation		48
16 - Events of Default and Remedies					49
		16.1	Events of Default		49
		16.2	Remedies		50
17 - Equality Among Lenders					51
		17.1	Distribution among Lenders		51
		17.2	Other Security		51
		17.3	Direct Payment to a Lender		51
		17.4	Adjustments		51
18 - The Agent and The Lenders					52
		18.1	Appointment of the Agent		52
		18.2	Restrictions on the Powers of the Lenders		52
		18.3	Security Documents		52
		18.4	Action by Agent		52
		18.5	Enforcement Measures		52
		18.6	Indemnification		52
		18.7	Reliance on Reports		53
		18.8	Liability of the Agent		53
		18.9	Liability of Lenders		53
		18.10	Rights of the Agent as Lender		53
		18.11	Sharing of Information		53
		18.12	Competition		54
		18.13	Successor Agent		54
19 - Decisions, Waivers and Amendments					54
	19.1		Amendments and Waivers by the Majority Lenders		54
	19.2		Amendments and Waivers by Unanimous Approval		54
	19.3		Dissenting Lenders		55

- V -

				Page
20 - miscellaneous					56
		20.1	Books and Accounts		56
		20.2	Determination		56
		20.3	Prohibition on Assignment by Borrowers		56
		20.4	Assignments and Participations		56
		20.5	Notes		57
		20.6	No Waiver		57
		20.7	Irrevocability of Notices of Borrowings		57
		20.8	Indemnification		57
		20.9	Mitigation of costs		58
		20.10	Corrections of Errors		58
		20.11	Communications		59
		20.12	Counterparts		59
		20.13	Submission to Jurisdiction		59
		20.14	Waiver of Jury Trial		59
21 - Notices					59
		21.1	Sending of Notices		59
		21.2	Receipt of Notices		60
SCHEDULE “A”					64
	APPLICABLE MARGINS OR RATES				64
SCHEDULE “B”					66
	BORROWING BASE REPORT				66
SCHEDULE “C”					67
	FORM OF DESIGNATION NOTICE				67
SCHEDULE “D”					68
	NOTICE OF BORROWING [CONVERSION or RENEWAL]				68
SCHEDULE “E”					69
	EXISTING LETTERS OF CREDIT				69
SCHEDULE “F”					71
	COMPLIANCE CERTIFICATE				71
SCHEDULE “G”					72
	FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT				72
SCHEDULE “H”					76
	ADDRESSES FOR NOTICE PURPOSES				76

CREDIT AGREEMENT

     This Agreement is made as of October 3,2005 among Abitibi-Consolidated Inc., a corporation amalgamated under the laws of Canada (“ACI”), Abitibi-Consolidated Company of Canada, a company amalgamated under the laws of the Province of Québec (“ACCC”) (each a “Borrower” and, collectively the “Borrowers”), Canadian Imperial Bank OF commerce, a Canadian bank, as administrative agent (in such capacity, the “Agent”), and each of the financial institutions having executed this Agreement as a Lender.

Recitals

A.	The Borrowers have requested that the Lenders make available to the Borrowers (i) a multi-year revolving facility in the principal amount of’$550,000,000 and (ii) a 364-day revolving facility in the principal amount of $150,000,000, for general corporate and working capital purposes.
B.	The Lenders are willing to make the Facilities available to the Borrowers and the Agent has agreed to act in such capacity, on the terms and subject to the conditions set out in this Agreement.
	Therefore, the parties agree as follows:

1 - - Interpretation

1.1 Definitions

     In this Agreement, unless the context otherwise requires, the following terms have the respective meanings set out below (and all such terms that are defined in the singular have the corresponding meaning in the plural and vice versa).

“Abitibi Entities” means ACI and each of its Subsidiaries;

“Acceptance” means:

(a)	in respect of a Lender who is a bank that customarily accepts bankers’ acceptances, at such Lender’s discretion, either a depository bill subject to the Depository Bills and Notes Act (Canada) or a bill of exchange subject to the Bills of Exchange Act (Canada), in each case, drawn by a Borrower on and accepted by such Lender; and
(b)	in respect of any other Lender, a promissory note bearing no interest, made by a Borrower to the order of such Lender;

- 2 -

     “Affiliate” means, with respect to a Person, any other Person that directly or indirectly Controls, or is Controlled by, or is under common Control with, that Person;

     “Agent” means Canadian Imperial Bank of Commerce or any successor agent appointed pursuant to Section 18.13;

     “Agent’s Office” means the administrative office of the Agent designated by the Agent from time to time as its administrative office for the purposes hereof, after notice to the Lenders;

     “Applicable Margin (or Rate)” means a margin (or rate) determined in accordance with Schedule “A”;

     “Authorized Officer” means, in respect of ACI or ACCC, the chief executive officer, the president, the chief financial officer, the treasurer or any other senior officer performing similar functions designated as such in writing to the Agent by ACI or ACCC, as the case may be;

     “Borrowers” means, collectively, the Borrowers described in the recitals hereto;

     “Borrowing Base” means the amount (expressed in Dollars) determined by the Agent as being the sum of:

(a)

60% of the book value of trade account receivables of the Borrowers and the Designated Subsidiaries which are subject to the Security and are owed by customers located in (i) Canada and the United States and (ii) the United Kingdom, Belgium, Ireland and Germany to the extent insured by Export Development Canada or other credit insurer acceptable by the Majority Lenders pursuant to trade credit insurance policies acceptable to the Majority Lenders (with the Agent being loss payee under such policies), but excluding accounts that have been outstanding for more than 90 days since their original billing date, accounts owed by any Abitibi Entity, accounts subject to set-off, accounts in dispute and doubtful accounts;

(b)

60% of the book value of the raw materials (to the extent consisting of roundwood and woodchips) and finished goods inventory of the Borrowers and the Designated Subsidiaries which are subject to the Security and are located in Canada and the United States;

less a reasonable estimate of the aggregate of all amounts owing to creditors (including governments) whose claims are secured or protected by a Lien capable of ranking pari passu with or prior to the Security with respect to such account receivables and inventory;

     “Borrowing Base Report” means a report on the Borrowing Base in the form of Schedule “B”;

     “Borrowings” means the Prime Rate Loans, the US Base Rate Loans, the Acceptances, the Libor Loans and the Letters of Credit which may be available to any of the Borrowers;

- 3 -

     “Branch of Account” means, with respect to any Facility, a branch of a bank where the Agent has established an account for such Facility, in each case as may be designated by the Agent from time to time as the applicable branch of account, after consultation with the Borrowers;

     “Business Day” means a day on which banks are open for business in Montreal and in Toronto, excluding Saturday and Sunday, where such term is used in the context of a US Base Rate Loan, such day must also be a day on which banks are open for business in New York City and where such term is used in the context of a Libor Loan, such day must also be a day on which banks are open for business in New York City and London, England;

     “CDOR Rate” means, for any day, the arithmetic average of the bankers’ acceptances rates of the Canadian Schedule I banks for the applicable period which appear on the Reuter’s Screen CDOR Page at 10:00 a.m., or if such day is not a Business Day, then on the immediately preceding Business Day; provided however, that if such rates are not available, then the CDOR Rate for any day will be the bankers’ acceptance, rate of the Agent for the applicable period as of 10:00 a.m. on such day, or if said day is not a Business Day, then on the immediately preceding Business Day;

     “Charged Mills” means the mills and related assets of ACCC which are subject to the Security, as provided in Section 10.3;

     “Charged Mills EBITDA” means, in respect of any period, the aggregate of Mill EBITDAs of all Charged Mills;

     “Charged Mills Threshold EBITDA” means, until December 31, 2006, $120,000,000 and thereafter, $140,000,000, in each case, as may be adjusted pursuant to Section 10.3(g);

     “Code” means the Internal Revenue Code of the United States, as amended from time to time, and any successor statute;

     “Commitment” means, with respect to each Lender, its proportion (expressed as a percentage or as an amount, as the case may be) of the aggregate amount of the Facilities or, as applicable, of the relevant Facility, as specified opposite its name on the signature pages of this Agreement, subject however to any readjustment resulting from a reduction in the amount of any Facility or from an assignment of a Commitment made pursuant to this Agreement;

     “Control” (including any correlative term) means the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person (whether through ownership of securities or partnership or trust interests, by contract or otherwise); without limiting the generality of the foregoing (i) a Person is deemed to Control a corporation if such Person (or such Person and its Affiliates) holds outstanding shares of the corporation carrying votes in sufficient number to elect a majority of the board of directors of the corporation, (ii) a Person is deemed to Control a partnership if such Person (or such Person and its Affiliates) holds more than 50% in value of the equity of the partnership, (iii) a Person is deemed to Control a trust if such Person (or such Person and its Affiliates) holds more than 50%

- 4 -

in value of the beneficial interests in the trust, and (iv) a Person that controls another Person is deemed to Control any Person controlled by that other Person;

     “Core Business” means the marketing and manufacture of printing and writing papers and any related or ancillary business of the Abitibi Entities (including woodlands, sawmills, wood products, recycled paper, pulp and power generation);

     “Corporate Structure Chart” means the corporate and capital structure of the Abitibi Entities and the other information contemplated by Section 11.17, as set out in the chart delivered to the Agent and the Lenders concurrently with the execution of this Agreement;

     “Credit Documents” means this Agreement, the Security Documents, any note issued pursuant to Section 20.5 and any other present and future document relating to any of the foregoing, in each case, as amended, supplemented or restated;

     “Default” means any event or circumstance which constitutes an Event of Default or which, with the lapse of time, the giving of a notice or both, would constitute an Event of Default;

     “Designated Subsidiary” means each wholly-owned Subsidiary of ACI (other than ACCC) acceptable to the Majority Lenders who has been designated by ACI as a Designated Subsidiary pursuant to a designation notice in the form of Schedule “C” provided that ACI may revoke any such designation by giving to the Agent a notice of revocation if the following conditions are fulfilled:

(a)	the notice is accompanied by a Borrowing Base Report as at the last Business Day of the previous month (but giving effect to the revocation);
(b)	after giving effect to the revocation, the outstanding Borrowings under Facility B will not exceed the Borrowing Base; and
(c)	there is no Default at the time of the notice and no Default would result from the revocation;

whereupon the Subsidiary concerned will cease to be a Designated Subsidiary and will be released from its obligations under the designation agreement and Security Documents to which it is a party (it being understood that the notice of revocation will be ineffective if any of the above conditions is not met);

     “Depreciation and Amortization Expense” means, for any period, the aggregate of all depreciation, amortization (including amortization of debt discount and expense), depletion and other like non-cash reductions to income of ACI appearing on its consolidated financial statements as determined for such period in accordance with GAAP;

     “Discount Rate” means on any day,

- 5 -

(a)	in respect of any Acceptance accepted by a Lender that is a Canadian Schedule I bank, the CDOR Rate on such day for the applicable period; and
(b)	in respect of any Acceptance accepted by a Lender that is not a Canadian Schedule I bank, the CDOR Rate plus 0.10%;

     “Discounted Proceeds” means, with respect to any issue of Acceptances, an amount (rounded to the nearest whole cent and with one-half of one cent being rounded up) calculated by multiplying:

(a)	the aggregate face amount of such Acceptances; by
(b)	the price, where the price is determined by dividing one by the sum of one plus the product of:

(i)	the Discount Rate applicable to such Acceptances (expressed as a decimal); and
(ii)	a fraction, the numerator of which is the number of days in the period of such Acceptances and the denominator of which is 365;

with the price as so determined being rounded up or down to the fifth decimal place and .000005 being rounded up;

     “Distribution” means any payment in cash or in kind that provides an income (including interest or dividend) or a return on, or constitutes a distribution or redemption or other retirement of, the equity or capital of a Person (other than a dividend paid by way of the issuance of new equity interests);

     “Dollar” and the symbol “$” mean lawful money of Canada;

     “EBITDA” means, for any four-quarter period ending on the date ACI’s EBITDA is determined, Net Income increased, to the extent deducted in calculating Net Income, by the sum of (i) Interest Expense, (ii) Income Tax Expense, (iii) Depreciation and Amortization Expense, (iv) losses from asset sales or abandonments or reserves relating thereto, (v) items classified as extraordinary or non-recurring losses, and (vi) non-controlling interest items, and decreased by (vii) gains from asset sales or abandonments or reserves relating thereto, and (viii) items classified as extraordinary or non-recurring gains, all as determined for such period on a consolidated basis in accordance with GAAP;

     “Equity” means the shareholders’ equity appearing on the consolidated balance sheet of ACI as determined in accordance with GAAP, but calculated without taking into account the impact of non-cash write-downs from the beginning of the fourth quarter of ACI’s 2004 financial year up to an aggregate amount of $500,000,000 for all such write-downs (calculated on an aftertax basis);

- 6 -

     “ERISA” means the Employee Retirement Income Security Act of 1974 of the United States, as amended from time to time;

     “ERISA Affiliate” means any corporation or trade or business that is a member of any group of organizations (i) described in Section 414(b) or (c) of the Code of which any Abitibi Entity is a member and (ii) solely for purposes of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the US Revenue Code of which any Abitibi Entity is a member;

     “Event of Default” means any event of default specified in Section 16.1;

     “Environmental Laws” means all applicable laws, rules and regulations, and any orders or binding policies, relating to the natural environment, health and safety matters or conditions, Hazardous Substances, pollution or protection of the environment, including laws relating to: (i) on site or off-site contamination; (ii) occupational health and safety; (iii) chemical substances; (iv) releases of Hazardous Substances; and (v) the manufacture, processing, distribution, use, treatment, storage, transport or handling of Hazardous Substances;

     “Environmental Notice” means any written claim, citation, directive, statement of claim, notice of investigation, or other such letter or other communication from any Person to an Abitibi Entity relating to any Environmental Laws;

     “Environmental Permits” includes all permits, certificates, approvals, registrations and licences to an Abitibi Entity or to their businesses pursuant to Environmental Laws and required for the operation of their businesses or the use of their assets;

     “Existing Facilities” mean the $816,234,438 credit facilities made available to the Borrowers under the amended and restated credit agreement dated July 30, 2004 among the Borrowers and the other parties thereto.

     “Facility A” means that portion of the Facilities made available to the Borrowers pursuant to Section 2.1(a);

     “Facility A Maturity Date” means December 31, 2008;

     “Facility B” means that portion of the Facilities made available to the Borrowers pursuant to Section 2.1(b);

     “Facility B Availability Date” has the meaning set out in Section 9.2;

     “Facility B Maturity Date” means the date which is 364 days after the Facility B Availability Date or such other date thereafter as may be agreed to pursuant to Section 2.3 hereof, but in any event no later than December 31, 2008, provided that if any such date falls on a day which is not a Business Day then the applicable date will be the immediately preceding Business Day;

- 7 -

     “Facilities” means Facility A and Facility B;

     “Funded Debt” means, with respect to a Person, and without duplication;

(a)	indebtedness of such Person for monies borrowed or raised or for the borrowings of commodities, including any indebtedness represented by a note, bond, debenture or other similar instrument of such Person;
(b)	reimbursement obligations of such Person arising from bankers’ acceptances, letters of credit (valued at 50% of face value) or letters of guarantee or similar instruments;
(c)	indebtedness of such Person for the deferred purchase price of property or services, other than for consumable non-capital goods and services purchased in the ordinary course of business, including arising under any conditional sale or title retention agreement;
(d)	the capitalized portion of the obligations of such Person under capital leases;
(e)	the discounted present value of the total obligations of such Person under synthetic leases and sale and leaseback transactions;
(f)	the aggregate amount at which shares in the capital of such Person that are redeemable at fixed dates or intervals or at the option of the holder thereof may be redeemed; and
(g)	Guarantees or Liens granted by such Person in respect of Funded Debt of another Person;

all as is required to be disclosed in the financial statements or notes thereto of such Person in accordance with GAAP;

     “GAAP” means generally accepted accounting principles in Canada in effect from time to time;

     “Guarantee” means any obligation, contingent or not, directly or indirectly guaranteeing any liability or indebtedness of any Person or protecting a creditor of such Person from a loss in respect of any such liability or indebtedness or having the same economic effect;

     “Hazardous Substance” means any substance, waste, liquid, gaseous or solid matter, fuel, micro-organism, sound, vibration, ray, heat, odor, radiation, energy, plasma and organic or inorganic matter, alone or in any combination which is regulated under any applicable Environmental Laws which is deemed to be, alone or in any combination, hazardous, hazardous waste, toxic, a pollutant, a deleterious substance, a contaminant or a source of pollution or contamination under any Environmental Law;

- 8 -

     “Impermissible Qualification” means, relative to the opinion or report of any independent auditors as to any financial statement, any qualification or exception to such opinion or report which (i) is of a “going concern” or similar nature; (ii) relates to any limited scope of examination of material matters relevant to such financial statement, if such limitation results from the refusal or failure of any Abitibi Entity to grant access to necessary information therefor; or (iii) relates to the treatment or classification of any item in such financial statement and which, as a condition to its removal, would require an adjustment to such item the effect of which would result in a Material Adverse Effect;

     “Income Tax Expense” means, for any period, the aggregate of all taxes based on income appearing on ACI’s consolidated financial statements as determined for such period in accordance with GAAP;

     “Interest Coverage Ratio” means the ratio of EBITDA to Interest Expense, in each case for the period ending on the date such ratio is calculated;

     “Interest Expense” means, for any period, the aggregate of all items properly classified as interest expense (whether expensed or capitalized) as appearing on ACI’s consolidated financial statements as determined for such period in accordance with GAAP (net of interest earnings) (including the imputed interest component for any element of Funded Debt which would be classified as interest expense under GAAP, calculated using an interest rate determined under GAAP), in each case for such period, but excluding (i) any amount, such as amortization of debt discount and issue expenses, which would qualify as Depreciation and Amortization Expense, (ii) up-front fees in respect of the Facilities, and (iii) the amount reflected in income for such period in respect of gains (or losses) attributable to translation of Funded Debt denominated in a currency other than Dollars;

     “Issuing Lender” means the Agent or such other Lender selected by the Agent and the Borrowers who is willing and has the capability to issue Letters of Credit;

     “Lender” means each of the Persons having executed this Agreement as Lender and any other Person that becomes a Lender pursuant to an assignment made in accordance with this Agreement;

     “Letter of Credit” means a documentary or standby letter of credit or a letter of guarantee issued pursuant to this Agreement;

     “Libor” means, with respect to any Libor Loan, the rate of interest determined by the Agent as being the average (rounded upwards to the nearest multiple of .00001%) of the rates for deposits in US Dollars which appear on the display referred to as the “Libor Page” on Reuter Monitor Money Rates Services as of 11:00 a.m. (London, England time) on the second Business Day prior to the commencement of the applicable Libor Loan or if such rates are not available, the average (rounded up to the nearest 1/16 per cent) of the rates per annum which leading banks in the London interbank market offer to the Agent for placing deposits in US Dollars with the Agent at approximately 11:00 a.m. (London time) two Business Days prior to the applicable

- 9 -

Libor Loan for a period comparable to the period of such loan and in an amount approximately equal to the amount of same;

     “Libor Loan” means a loan denominated in US Dollars made pursuant to this Agreement and bearing interest at Libor, plus the Applicable Margin;

     “Lien” means any hypothec, security interest, mortgage, lien, right of preference, pledge, assignment by way of security or any other agreement or encumbrance of any nature that secures the performance of an obligation, and a Person is deemed to own subject to a Lien any property or assets that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital or synthetic lease or similar agreement (other than an operating lease) relating to such property or assets;

     “Majority Lenders” means any group of Lenders whose Commitments amount in the aggregate to more than 50% of the aggregate amount of the Facilities, provided that with respect to a matter which specifically affects the Lenders under a Facility, the Majority Lenders must also include Lenders whose Commitments under such Facility amount in the aggregate to more than 50% of said Facility;

     “Material Adverse Change” means any change, condition, event or occurrence which, when considered individually or together with other changes, conditions, events or occurrences, could reasonably be expected to have a Material Adverse Effect, excluding (i) the loss of one or more customers of any Abitibi Entity, (ii) a general decline in paper, pulp or lumber prices, (iii) the taking of down time to reduce capacity and (iv) general operating losses;

     “Material Adverse Effect” means (i) a material adverse effect on the financial condition, business, operations, assets or liabilities of ACI and its Subsidiaries taken as a whole or on the value of Charged Mills taken as whole, (ii) a material adverse effect on the ability of any Borrower or Designated Subsidiary to perform its obligations under any Credit Document, or, (iii) a material impairment of the rights or remedies of the Lenders under any Credit Document;

     “Mill EBITDA” means, in respect of any mill which is (or is being proposed to become) a Charged Mill, for any four-quarter period ending on the date Mill EBITDA is determined, gross sales less (i) cost of products sold, (ii) distribution costs, countervailing and antidumping duties, and (iii) selling, general and administrative expenses, which, in each case, are reasonably attributable to such mill;

     “Moody’s” means Moody’s Investor Service, Inc. and includes any successors thereto;

     “Multiemployer Plan” means a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been made by any Abitibi Entity or any ERISA Affiliate and which is covered by Title IV of ERISA;

     “Net Funded Debt” means, for any day, the sum of (i) Funded Debt and (ii) the outstanding amount of any Securitization Program, less (iii) cash and cash equivalents of ACI;

- 10 -

     “Net Funded Debt To Total Capitalization Ratio” means, for any day, the ratio expressed as a percentage of Net Funded Debt to Total Capitalization;

     “Net Income” means, for any period, the net income (loss) after allowance for minority interests as appearing on ACI’s consolidated financial statements as determined for such period in accordance with GAAP;

     “Net Tangible Assets” means, at any time, the aggregate of all assets of ACI less (i) current liabilities (other than Funded Debt classified as a current liability) and (ii) goodwill, in each case, as appearing on ACI’s consolidated financial statements and determined in accordance with GAAP;

     “PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA;

     “Permitted Lien” means:

(a)	Liens imposed or arising by operation of law or resulting from a judgment, in each case, in respect of obligations not yet due or which have been postponed or are being contested in good faith and by appropriate proceedings to the extent that adequate reserves are maintained;
(b)	pledges or deposits made in the ordinary course of business in connection with bids or tenders or to comply with the requirements of any legislation or regulation or any public utility’s policy applicable to the Person concerned or its business or assets;
(c)	Liens securing obligations incurred in connection with the purchase or the lease of any property (or any renewal, extension or replacement thereof), provided that any such Lien charges only the property purchased or leased and for an amount not in excess of the related obligation and that the aggregate of all outstanding amounts secured by such Liens does not at any time exceed for all Abitibi Entities 5% of Net Tangible Assets and provided further that no such property is part of the Charged Mills or material to the operations of such mills;
(d)	Liens on movable or personal property, securing obligations (or any renewal, extension or replacement thereof) in an amount equal to or less than the book value of such property, (x) acquired after the date hereof by an Abitibi Entity or (y) of a Person acquired or which becomes a Subsidiary after the date hereof, which Liens and obligations were created and incurred (respectively) prior to and not in anticipation of such acquisition, provided, in each case, that no such property is part of the Charged Mills or material to the operations of such mills;
(e)	Liens securing obligations under a Securitization Program, provided that such Liens charge only accounts receivable (including related guarantees and security)

- 11 -

	sold pursuant to such program (except that Liens granted by a Securitization SPV may charge any of the assets of such Securitization SPV);
(f)	Liens on any assets (other than assets charged pursuant to the Security) granted by any Abitibi Entity to another Abitibi Entity;
(g)	Liens on any assets (other than assets charged pursuant to the Security) if at the same time all obligations of the Borrowers under this Agreement are equally and rateably secured by such Liens;
(h)	Liens on any assets (other than assets charged pursuant to the Security) if, after giving effect thereto, the sum of all obligations secured by Liens not otherwise permitted under this Agreement does not exceed for all Abitibi Entities an amount equal to 10% of Net Tangible Assets less the amount of Facility A; and;

(i) Liens on current assets (other than assets charged pursuant to the Security) securing Funded Debt which is payable upon demand or matures by its terms less than 12 months from the date such Funded Debt was incurred;

     “Person” means any natural person, corporation, company, partnership, joint venture, limited liability company, unincorporated organization, trust or any other entity;

     “Plan” means an employee benefit or other plan established or maintained by any Abitibi Entity or any ERISA Affiliate and that is covered by Title IV of ERISA, other than a Multiemployer Plan;

     “Prime Rate” means, for any day, the greater of:

(a)	the annual rate of interest established by the Agent as being its reference rate then in effect for determining interest rates for commercial loans denominated in Dollars made in Canada; and
(b)	the CDOR Rate for bankers’ acceptances with a period of one month, plus 1.00%;

     “Prime Rate Loan” means a loan denominated in Dollars made pursuant to this Agreement and bearing interest at the Prime Rate, plus the Applicable Margin;

     “Release” when used as a verb includes release, spill, leak, emit, deposit, discharge, leach, migrate or dispose into the natural environment and the term “Release” when used as a noun has a correlative meaning, but does not include any emission or discharge pursuant to a valid Environmental Permit or otherwise in compliance with Environmental Laws;

     “Remedial Action” means any material action required under any applicable Environmental Law to:

(a) clean up, remove, treat or in any other way remediate Hazardous Substances in the natural environment which are in violation of any Environmental Laws;

- 12 -

(b)	prevent any Release of Hazardous Substances where such Release would violate any Environmental Laws; or
(c)	perform remedial studies, investigations, restoration and post-remedial studies, investigations and monitoring on, about or in connection with any of the assets as required by any Environmental Laws;

     “S&P” means Standard and Poor’s Ratings Services and includes any successors thereto;

     “Securitization Program” means any program for the securitization of accounts receivable of any Abitibi Entity;

     “Securitization SPV” means any wholly-owned Subsidiary of ACI created for the sole purpose of and the business of which is confined to purchasing and selling or otherwise disposing of accounts receivable pursuant to a Securitization Program;

     “Security” means the Liens and Guarantees provided to or for the benefit of the Lenders and the Agent pursuant to this Agreement;

     “Security Documents” means any document or agreement evidencing or relating to the Security;

     “Solvent” means, with respect to any Person, that as of the date of determination:

(a)

(i) the sum of such Person’s indebtedness does not exceed all of its property, at a fair valuation; (ii) the present fair saleable value of the property of such Person is not less than the amount that will be required to pay such Person’s indebtedness as it becomes due; (iii) such Person’s capital is not unreasonably small in relation to its business or any contemplated or undertaken transaction; and (iv) such Person does not intend to incur, or believe (nor should it reasonably believe) that it will incur, indebtedness beyond its ability to pay as and when due; and

(b)

such Person is “solvent” within the meaning given to that term and similar terms under applicable laws relating to fraudulent transfers or conveyances.

     For purposes of this definition, the amount of any contingent liability at any time will be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability;

     “Subsidiary” means a Person that is under the Control of another Person;

     “Swingline Lender” means Canadian Imperial Bank of Commerce, as Lender, provided that the Borrowers will be entitled with the consent of the Agent to replace the Swingline Lender by another Lender who agrees to become the Swingline Lender;

     “Total Capitalization” means, for any day, the aggregate of Equity and the principal amount of Net Funded Debt at the time outstanding;

- 13 -

“US Base Rate” means, for any day, the greater of:
(a)	the annual rate of interest established by the Agent as being its reference rate then in effect for determining interest rates for commercial loans denominated in US Dollars made in Canada; and
(b)	the federal funds effective rate in effect on such day (and if such day is not a Business Day, then on the preceding Business Day), plus 1.00%; the term “federal funds effective rate” means the rate usually designated as such and as published by the Federal Reserve Bank of New York for the relevant Business Day, or if such rate is not available on any Business Day, the rate that the Agent is prepared to offer, at approximately 9:00 a.m. on such day, for overnight deposits in US Dollars in New York;

     “US Base Rate Loan” means a loan denominated in US Dollars and bearing interest at the US Base Rate, plus the Applicable Margin;

     “US Dollar” and the symbol “US$” mean lawful money of the United States;

     “Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from the Multiemployer Plan, as such terms are defined in Part 1 of Subtitle E of Title IV of ERISA.

1.2 Currency Conversions

     Where any amount expressed in any currency has to be converted or expressed in another currency, or where its equivalent in another currency has to be determined (or vice versa), the calculation is made at the exchange rate announced or quoted by the Bank of Canada at or around noon on the relevant date for the relevant currency against the other currency (or vice versa).

1.3 Accounting Terms and Calculations

     Unless otherwise provided, (i) terms and expressions of an accounting or financial nature have the respective meanings given to such terms and expressions under GAAP; (ii) calculations must be made in accordance with GAAP insofar as applicable, and (iii) financial ratios must be calculated on a consolidated basis of ACI.

1.4 Time

     Except where otherwise indicated in this Agreement, any reference to time means local time in Montréal, Québec.

- 14 -

1.5 Headings and Table of Contents

     The headings and the Table of Contents are inserted for convenience of reference only and do not affect the construction or interpretation of this Agreement.

1.6 Governing Law

     This Agreement is governed by and construed in accordance with laws of the Province of Québec and the laws of Canada applicable therein.

1.7 Inconsistency

     In the event of inconsistency between this Agreement and any other Credit Document, the provisions of this Agreement must be accorded precedence.

2 - The Facilities

2.1 Facilities A and B

(a)

Upon fulfillment of the conditions precedent set forth in Section 9.1, each Lender individually agrees to make available to the Borrowers a revolving facility (“Facility A”) in a principal amount not to exceed its Commitment set out opposite its name on the signature pages. As at the date of this Agreement, the collective Commitments of the Lenders under Facility A aggregate to $550,000,000.

(b)

Upon fulfillment of the conditions precedent set forth in Sections 9.1 and 9.2, each Lender individually agrees to make available to the Borrowers a revolving facility (“Facility B”) in a principal amount not to exceed its Commitment set out opposite its name on the signature pages. As at the date of this Agreement the collective Commitments of the Lenders under Facility B aggregate to $150,000,000.

2.2 Availability

(a)	Facility A will revolve and, accordingly, Borrowings may be obtained, repaid and re-obtained under Facility A until the Facility A Maturity Date.
(b)	From the Facility B Availability Date, Facility B will revolve and, accordingly, Borrowings may be obtained, repaid and re-obtained under Facility B until the Facility B Maturity Date. However, Borrowings may be obtained by the Borrowers under Facility B only to the extent that Facility A is fully used at the time of such Borrowings. For purposes of determining whether Facility A is so

- 15 -

	fully used, any overdraft availability pursuant to Section 2.9 will be deemed to be utilized in its entirety.
(c)	Each of the Borrowers may obtain and, where applicable, convert or renew Borrowings under any of the Facilities without the concurrence of or notice to the other Borrower.

2.3 Extension of Facility B Maturity Date

(a)

The Borrowers may request that Facility B be extended for a 364-day period by delivering to the Agent a written notice to that effect prior to the 90th day preceding the Facility B Maturity Date. If all Lenders who have Commitments under Facility B agree to the extension request within 30 days from the receipt of such notice, the Agent will notify the Borrowers of same and the Facility B Maturity Date will be extended for a period of 364 days from the date of such notification. Subject to paragraph (b) below, unless all such Lenders agree to the extension request within said 30-day period, the Facility B Maturity Date will not be extended and the Borrowings under Facility B will be repayable on the then current Facility B Maturity Date.

(b)

If a group of Lenders whose Commitments amount in the aggregate to more than 66 2/3% (but less than 100%) of Facility B have agreed to an extension of the relevant Facility B Maturity Date within the 30-day period specified in Section 2.3(a), the Agent will notify ACI of same together with specifying the names of the Lenders who have not provided their consent (the “Dissenting Lenders”). After receipt of such notice and until the 15th Business Day prior to the Facility B Maturity Date, ACI will be entitled to exercise any of the following options (or a combination of them):

(i)

ACI may require that each such Dissenting Lender assign its rights under Facility B to another Lender who has agreed to assume the Commitment of such Dissenting Lender under Facility B and to consent to the extension, provided that no such assignment and assumption will be effective unless all amounts owed to such Dissenting Lender in respect of Facility B are paid to the latter by the assignee; Section 20.4 will apply (adapted accordingly) to the said assignment and assumption;

(ii)

ACI may cancel in its entirety the Commitment of each Dissenting Lender in respect of Facility B provided that no such cancellation will be effective unless all amounts owed to such Dissenting Lender in respect of Facility B are paid to the latter.

(c) If the Commitments of all Dissenting Lenders in respect of Facility B have been assumed or cancelled in accordance with Section 2.3(b) within the period of time therein specified, the Agent will notify the Lenders of same and the Facility B

- 16 -

Maturity Date will be extended for a period of 364 days from the date of such notification. However, if the Commitments of all Dissenting Lenders in respect of Facility B have not been assumed or cancelled in accordance with Section 2.3(b) within such period of time, the Facility B Maturity Date will not be extended and the Agent will notify the Borrowers and the Lenders of same and of the fact that the Borrowings under Facility B must be repaid on the current Facility B Maturity Date.

2.4 Purpose

     The Borrowers will use the Facilities for general corporate purposes and to refinance the Existing Facilities.

2.5 Borrowing Options

     Borrowings may be obtained by any Borrower under each of the Facilities in the form of:

(a)	Prime Rate Loans;
(b)	Acceptances;
(c)	US Base Rate Loans;
(d)	Libor Loans; and
(e)	Letters of Credit.

2.6 Borrowing Base Limitations for Facility B

     The Borrowers must ensure that the aggregate amount of outstanding Borrowings (expressed in Dollars) under Facility B will not at any time exceed the lesser of (i) the amount of Facility B and (ii) the Borrowing Base. Accordingly, no Borrower may request a Borrowing if the making of such Borrowing would result in such limit being exceeded.

2.7 Borrowings Proportionate to Commitments

     Except as otherwise provided in this Agreement, each Borrowing will be made through the Agent at the Branch of Account and will be allocated by the Agent among the Lenders approximately in the proportion of their respective Commitments under the applicable Facility.

2.8 Notice of Borrowings

     To obtain a Borrowing, the Borrower concerned must give a notice to the Agent specifying:

- 17 -

(a)	the Facility to be utilized and the selected form of Borrowing;
(b)	the amount of the Borrowing, in multiples of $1,000,000 (or US$1,000,000) with a minimum of $20,000,000 (or US$20,000,000, as the case may be) per Borrowing;
(c)	the date of the Borrowing, which must be a Business Day; and
(d)	to the extent applicable, the period of the Borrowing.

     The notice must be given by telephone not later than 11:00 a.m. two Business Days prior to the Borrowing, except in the case of a Libor Loan where the notice must be given not later than 10:00 a.m. three Business Days prior to the date of such Libor Loan. Each telephone notice must be followed by a written confirmation on the same date, in the form of Schedule “D” or in any other manner as may be agreed between the Agent and the relevant Borrower.

2.9 Overdraft Utilizations with the Swingline Lender

(a)	The notice and minimum amount requirements otherwise applicable to Borrowings do not apply to Borrowings under Facility A in the form of Prime Rate Loans or US Base Rate Loans (as applicable) obtained from the Swingline Lender by way of overdrafts in accounts opened for such purpose with the Swingline Lender up to a maximum outstanding amount at any time not exceeding $75,000,000. Any cheque or payment instruction or debit authorization from the Borrower concerned and resulting in an overdraft in any such account will be deemed to be a request for such a Borrowing, in an amount that is sufficient to cover the overdraft.
(b)	The said accounts may include accounts of the Borrower concerned and of other Abitibi Entities in respect of which set-off and netting arrangements have been made with the Swingline Lender, including any notional account reflecting the such arrangements. The outstanding Borrowings owed to the Swingline Lender may be calculated after giving effect to said arrangements.
(c)	The Agent may also permit that Prime Rate Loans and US Base Rate Loans under Facility A be owing to the Lenders in proportions other than those of their respective Commitments under Facility A. However, the Agent may from time to time, and will upon the request of the Swingline Lender, make adjustments among the Lenders under Facility A so that all Borrowings under Facility A be approximately in the proportion of the respective Commitments of the Lenders (including the Swingline Lender) under Facility A.
(d)	For greater certainty, (i) this Section 2.9 does not authorize the Agent to allow that Borrowings owing to a Lender other than the Swingline Lender exceed the amount of the Commitment of such Lender under Facility A, and (ii) the

- 18 -

aggregate amount of the Borrowings outstanding under Facility A (including Borrowings from the Swingline Lender) may not exceed the amount of Facility A.

2.10 Funding

(a)

At the request of the Agent, each Lender will promptly pay to the Agent such Lender’s share of any Borrowing made or to be made by the Agent on behalf of the Lenders and of any adjustment payable pursuant to Section 2.9(c). The Agent will promptly provide the Lenders with such information as may be necessary in order for the Lenders to make payments to the Agent and fund their respective shares of any Borrowing.

(b)

Any amount to be paid by a Lender to the Agent must be available to the Agent at the Agent’s Office by 2:00 p.m. on the applicable day. Any amount to be disbursed by the Agent to a Borrower will be made available to the relevant Borrower by crediting such Borrower’s account at the Branch of Account or at any other place to be agreed upon from time to time between the relevant Borrower and the Agent.

2.11 Lender’s Failure to Fund

     If a Lender fails to advance its share of any Borrowing and, despite such failure, the Agent advances such amount to a Borrower, the Agent may recover such amount from such Lender or, if it is unable to do so, from such Borrower, with interest from the date of disbursement at the rate applicable to Borrowings in the same form. Nothing in this Section obliges the Agent to fund any Borrowing or advance any sums on behalf of a Lender who has failed to comply with its obligations.

2.12 Conversions and Renewals

(a)	A Borrower may convert from one form of permitted Borrowings to another form of permitted Borrowings the whole or any part of the outstanding Borrowings under the relevant Facility, provided that (i) Acceptances and Libor Loans may not be converted prior to the maturity of their respective periods and (ii) Letters of Credit may not be converted.
(b)	Sections 2.5 to 2.11 apply to a conversion or a renewal with such modifications as may be required.
(c)	Unless they are repaid, converted or renewed upon the maturity date of their respective periods, (i) Acceptances will then become Prime Rate Loans for the face amount of such Acceptances and (ii) Libor Loans will then become US Base Rate Loans.

- 19 -

(d) Any conversion to Borrowings in another currency is effected by the repayment of the Borrowings to be so converted and by the re-borrowing of an equivalent amount in the other currency.

2.13 Limitations on Lender’s Obligation to Fund

     Each Lender’s obligation to fund Borrowings is limited to such Lender’s Commitment under the relevant Facility. The obligations of the Lenders hereunder are not solidary and are not joint and several, and no Lender is responsible for the obligations of any other Lender.

2.14 Increase of Facility B

(a) At any time after the execution of this Agreement but no later than the 90th day preceding the Facility B Maturity Date and provided that the aggregate amount of the Facilities has not then been reduced (otherwise than by way of a temporary reduction pursuant to Section 10.3), ACI may, by notice to the Agent, request an increase up to $115,000,000 in the aggregate amount of the Facilities (an “Increase”). The notice must specify:

(i)	the amount of the proposed Increase, which must be a multiple of $5,000,000, provided that the aggregate amount of all Increases made pursuant to this Section 2.14 may not exceed $115,000,000; and
(ii)	the names of the Persons who have accepted to participate in the Increase and the amount of their participation, provided that if any such Person is not already a Lender, said Person would qualify as a permitted assignee under Section 20.4 and its participation would meet the requirements of such Section as if the participation were an assignment made hereunder.

(b) Promptly after the giving of such notice, the Agent, the Borrowers, the Lenders and the Persons who have accepted to participate in the Increase will execute an amendment to this Agreement providing that:

(i)	Facility B will be increased by the amount of the Increase;
(ii)	each Person who has accepted to participate in the Increase will have a Commitment under the Facilities equal to the amount of its participation in the Increase (or an additional Commitment equal to such amount in the case of a Person who is already a Lender);
(iii)	the total Commitment of each new or existing Lender will be allocated or reallocated (as applicable) between Facility A and Facility B pro rata to the respective amounts of Facility A and B; and
(iv)	the new and existing Lenders will make among themselves such assignments of Borrowings or adjustments as are necessary to ensure that

-20-

all outstanding Borrowings under any Facility are owed to the Lenders under such Facility in the proportion of their respective Commitments.

	and containing such other provisions as may be necessary to give effect to the Increase, including conditions precedent to the effectiveness of the Increase such as the absence of a Default and the delivery of legal opinions.
(c)	For greater certainty, (i) nothing in this Section is intended to commit any Lender to participate or the Agent to arrange for a participation in an Increase, and (ii) the aggregate amount of all Increases made pursuant to this Section 2.14 may not exceed $115,000,000.

3 - Acceptances

3.1	Period and Amounts
	Acceptances

(a)	are for periods of one, two, three or six months or such other periods as may be agreed to by all Lenders, but must mature on a date which is a Business Day and which is no later than the maturity date of the applicable Facility;
(b)	are denominated in Dollars, with a minimum of $20,000,000 per issue, provided that the Agent may round each Lender’s allocation of such issue to the nearest $1,000 increment;
(c)	constitute outstanding Borrowings for their face amount;
(d)	do not bear interest nor carry any days of grace; and
(e)	may be discounted by the Lenders for their own account or may be sold to third parties.

3.2 Disbursement

(a)	The amount to be disbursed to a Borrower with respect to Acceptances discounted by the Lenders is the Discounted Proceeds of such Acceptances, less the applicable acceptance fee.
(b)	In the case of an issue of Acceptances for the purposes of replacing existing Borrowings, the Borrower concerned must, concurrently with such issue, pay to the Agent an amount equal to the aggregate amount of the Borrowings so replaced. The amount so paid to the Agent will be applied to the portion of the Borrowings which have been replaced by such Acceptances.

-21-

3.3 Power of Attorney

(a)	Upon any issue of Acceptances, each Lender is authorized to sign, complete, endorse and deliver on behalf of a Borrower the Acceptances to be issued and to do all things necessary or useful in order to facilitate such issuance. The Agent is also authorized to make the necessary arrangements for the negotiation and delivery of Acceptances intended to be sold on the money market.
(b)	In the case of an issue of Acceptances by way of promissory notes to the order of Lenders who do not customarily accept banker’s acceptances (as provided in paragraph (b) of the definition of Acceptances), a Borrower will be deemed to have issued the corresponding notes to such Lenders, without the necessity of physical execution and delivery of any note.

3.4 Depository Bills

     A Lender who accepts Acceptances that are “depository bills” within the meaning of the Depository Bills and Notes Act (Canada) may deposit same with the Canadian Depository for Securities Limited (“CDS”) and such Acceptances may be dealt with in accordance with the rules and procedures of CDS.

3.5 Availability

     The availability of Acceptances is subject to funds being available for such purpose in the Canadian money market; the Agent will notify the Borrowers if Acceptances cease to be so available as well as when availability resumes. The Borrowers must ensure that no more than 25 different issues of Acceptances and Borrowings by way of Libor Loans under the Facilities are outstanding at any time.

4 - Libor Loans

4.1 Amounts and Periods

(a)	Libor Loans may be obtained for periods of one, two, three or six months or such other periods as may be agreed to by all Lenders, but must mature on a Business Day which is not later than the maturity date of the relevant Facility;
(b)	Libor Loans must be in multiples of US$1,000,000, with a minimum of US$20,000,000 per Borrowing; and
(c)	The Borrowers must ensure that no more than 25 different Borrowings by way of Libor Loans and issues of Acceptances are outstanding at any time under the Facilities.

-22-

4.2 Changed Circumstances

If a Lender determines that:

(a)	it is unable to obtain US Dollars in the London inter-bank market,
(b)	a law, regulation, administrative decision or guideline, or a Court decision has made it unlawful or prohibits such Lender from making or maintaining Libor Loans, or has imposed costs or constraints on such Lender that do not exist on the date hereof in respect of Libor Loans, or
(c)	Libor is less than its effective funding cost for making or maintaining Libor Loans,

the Lender may so notify the Agent and the Borrower concerned and no new Borrowing by way of Libor Loans in the applicable currency, no conversion into Libor Loans and no renewal of Libor Loans may be made with such Lender from the date of the notice until the cause of such determination has ceased to exist. In any such case, Borrowings with such Lender that otherwise would have been made by way of Libor Loans will be made by way of US Base Rate Loans, notwithstanding Section 2.7.

4.3 Conversion Prior to Maturity

     If it becomes unlawful or prohibited for a Lender to maintain Libor Loans, all Libor Loans owed to such Lender will become US Base Rate Loans on the date of the notice given pursuant to Section 4.2.

5 - - Letters of Credit

5.1 Availability

     Letters of Credit will be issued by the Issuing Lender in Dollars, US Dollars or any other freely tradable currency acceptable to the Issuing Lender, for such transactions and on such terms and conditions as are mutually agreed upon between the Borrower concerned and the Issuing Lender and are not inconsistent with the provisions of this Article 5. Letters of Credit are available only up to an aggregate outstanding amount at any time not exceeding $150,000,000.

5.2 Maturity of Letters of Credit

     Except with the consent of all Lenders, no Letter of Credit may mature more than 365 days after the date of its issue (or renewal) or after the Facility A Maturity Date.

5.3 Borrowings

     Any Letter of Credit constitutes from the date of its issue an outstanding Borrowing under Facility A or Facility B, as applicable, in a principal amount equal to the maximum

-23-

amount of the obligation of the Issuing Lender thereunder. The Issuing Lender will notify the Agent of the issue of any Letter of Credit at least one Business Day prior to the date of such issue.

5.4 Payments under Letters of Credit

     Each amount paid by the Issuing Lender under a Letter of Credit will constitute, as of the date of payment, a Prime Rate Loan, if the payment is made in Dollars or in a currency other than the US Dollar, and a US Base Rate Loan if the payment is made in US Dollars. Any such loan will be allocated among the Lenders pro rata to their respective Commitments under the applicable Facility. Each Lender must fund such loan by remitting to the Agent (for the account of the Issuing Lender) the amount of its share of such loan. The provisions of Section 2.11 will apply in the event of non-disbursement by a Lender.

5.5 Currency Conversion

     If the Issuing Lender has paid an amount under a Letter of Credit in a currency other than the Dollar or the US Dollar, such amount will be converted into the applicable currency (as specified in Section 5.4) on the date of payment.

5.6 Indemnity

     The Borrower concerned will pay all reasonable costs incurred and indemnify the Issuing Lender, the Agent and the Lenders in respect of any loss or damage suffered by them in connection with Letters of Credit, including legal fees and other costs of litigation, except for any loss, damage or cost resulting from wilful misconduct or gross negligence of the Issuing Lender, the Agent or the Lenders.

5.7 I.C.C. Rules

     Unless otherwise provided in this Agreement or in any agreement relating to their issue, Letters of Credit are governed by the Uniform Customs and Practice for Documentary Credits (I.C.C. Publication 500, 1993 revision).

5.8 Deemed Utilizations

     Concurrently with the initial Borrowing hereunder, the letters of credit listed in Schedule “E” will be deemed to be Letters of Credit issued at the request of the applicable Borrower and outstanding under this Agreement. Such letters of credit were issued by issuing lenders under the Existing Facilities. It will be the responsibility of the applicable Borrower to negotiate with such lenders any reimbursement which may be made to it with respect to the non-accrued portion of any fee previously paid in respect of any such letter of credit. From the date of the initial Borrowing hereunder, the provisions of Sections 6.3 and 6.4 in respect of Letters of Credit fees and charges will apply to the letters of credit listed in Schedule “E” as if the term of

-24-

such letters of credit had commenced on such date. Accordingly, letters of credit fees payable pursuant to Section 6.3 in respect of the letters of credit listed in Schedule “E” will accrue from the date of the initial Borrowing hereunder.

6 - Fees And Interest

6.1 Agency Fee

     The Borrowers must pay to the Agent, for its own account, an annual agency fee in an amount agreed to between the Borrowers and the Agent in a separate agreement.

6.2 Commitment Fees

     The Borrowers must pay, concurrently with the execution of this Agreement, the commitment fees specified in the commitment fee letter executed by the Borrowers prior to the date of this Agreement.

6.3 Letter of Credit Fees

     The Borrower concerned must pay a fee for each Letter of Credit issued under the Facilities. The fee for each Letter of Credit will be at an annual rate equal to the Applicable Rate. Fees are calculated on the face amount of each Letter of Credit for the number of days included in the period of same subject to a minimum of $250 (or US $250 for any Letter of Credit in US Dollars). Any such fee must be paid to the Agent quarterly in arrears on the first Business Day of the following quarter, for distribution to the Lenders pro rata to their Commitments under the relevant Facility. Concurrently with the payment of any such fee, the Borrower concerned must also pay to the Agent (for the account of the Issuing Lender) a fronting fee at an annual rate equal to 0.125%, calculated as aforesaid.

6.4 Administrative Charges with respect to Letters of Credit

     The Borrower concerned must pay to the Issuing Lender administrative charges in connection with Letters of Credit at the rates and on the terms generally applicable to the other customers of such Issuing Lender.

6.5 Standby Fee

     The Borrowers must pay to the Agent, for distribution to the Lenders pro rata to their Commitments under Facility A and Facility B, a standby fee on the unused portion of Facility A and Facility B. The standby fees will be calculated daily at a rate equal to the Applicable Rate and will be payable quarterly in arrears on the first Business Day of the following quarter. For greater certainty, (i) the unused portion of Facility A will be calculated without taking into account any temporary reduction of Facility A pursuant to Section 10.3, and (ii) the standby fee

-25-

on the unused portion of Facility B will accrue from the date of this Agreement and not from the Facility B Availability Date.

6.6 Usage Fee

     If, on any day, the aggregate of all outstanding Borrowings under the Facilities exceeds 50% of the aggregate amount of all Commitments under the Facilities, the Borrowers will pay a usage fee at the annual rate of 0.25% calculated on the aggregate amount of the Borrowings under the Facilities which are outstanding on such day. The usage fee will be payable to the Agent quarterly in arrears on the first Business Day of the following quarter, for distribution to the Lenders pro rata to their Commitments under the Facilities. For greater certainty, prior to the Facility B Availability Date, the aggregate amount of all Commitments will be calculated (i) including the Commitments under Facility B, but (ii) without taking into account any temporary reduction of Facility A pursuant to Section 10.3.

6.7 Acceptance Fees

     Upon the issue of any Acceptance, the Borrower concerned must pay to the relevant Lender (or to the Agent for the account of such Lender) an acceptance fee at an annual rate equal to the Applicable Rate. The acceptance fee will be calculated on the face amount of the applicable Acceptance and for the number of days included in the period of same.

6.8 Interest on Prime Rate Loans

     Prime Rate Loans bear interest until they are converted or repaid in full (both before and after any Event of Default or judgment) at the Prime Rate in effect from time to time, plus the Applicable Margin. Such interest is payable monthly in arrears on the first Business Day of the following month.

6.9 Interest on US Base Rate Loans

     US Base Rate Loans bear interest until they are converted or repaid in full (both before and after an Event of Default or judgment) at the US Base Rate in effect from time to time, plus the Applicable Margin. Such interest is payable monthly in arrears on the first Business Day of the following month.

6.10 Interest on Libor Loans

     Each Libor Loan bears interest at the Libor applicable to each such loan, plus the Applicable Margin. Such interest is payable at the maturity of the period of the loan or, if the period of such loan is more than three months, at three-month intervals during the period of the loan.

-26-

6.11 Calculation of Interest Rates

(a)	Interest rates and fees to which Applicable Margins or Rates apply are annual rates and are calculated daily on the basis of a 365-day year, except for Libor Loans, where rates are calculated on the basis of a 360-day year.
(b)	For the purposes of the Interest Act (Canada) only, the annual rate of interest equivalent to a rate otherwise calculated under this Agreement is equal to the rate so calculated multiplied by the actual number of days included in a given year and divided by 365 days (or by 360 days, in the case of a rate calculated on the basis of a 360-day year).

6.12 Interest on Arrears

(a)	Any amount (other than an amount due on account of principal or interest) which is not paid when due will bear interest at the Prime Rate in effect from time to time, plus the Applicable Margin increased by 2%, in the case of an amount to be paid in Dollars, and at the US Base Rate in effect from time to time, plus the Applicable Margin increased by 2%, in the case of an amount to be paid in US Dollars or any other currency.
(b)	Any interest which is not paid when due will bear interest at the rate that has been used to calculate such unpaid interest.
(c)	Interest on arrears is compounded monthly and is payable on demand.

7 - Repayment, Prepayment and Cancellation

7.1 Repayment of the Facilities

     The Borrowers must repay in full the outstanding Borrowings and pay all other amounts owing under Facility A on the Facility A Maturity Date. The Borrowers must repay in full the outstanding Borrowings and pay all other amounts owing under Facility B on the Facility B Maturity Date.

7.2 Mandatory Prepayments

     The Borrowers must make such prepayments as may be necessary to ensure that the aggregate of outstanding Borrowings (expressed in Dollars) under Facility B will not at any time exceed the lesser of (i) the amount of Facility B and (ii) the Borrowing Base.

7.3 Optional Prepayments

(a) The Borrowers may at any time make prepayments on Borrowings outstanding under any of the Facilities without affecting their right to re-borrow under the

-27-

	applicable Facility up to its maximum available amount. Except for prepayments applied to overdraft utilizations made pursuant to Section 2.8, (i) prepayments will at all times be applied firstly to Facility B and then to Facility A, and (ii) the notice and amount requirements set forth in Section 2.8 (adapted accordingly) apply to prepayments.
(b)	No prepayment may be made in respect of Acceptances or Libor Loans before the maturity date of their respective periods.

7.4 Exchange Rate Fluctuations

     If, at any time, due to fluctuations in the rate of exchange of a currency against another currency, the outstanding amount of the Borrowings under any Facility, expressed in Dollars, exceeds the then maximum amount of such Facility, expressed in Dollars, the Borrower concerned must pay to the Agent, three Business Days following a demand to that effect, the amount of such excess. However, no such demand will be made as long as the excess is not more than 2%.

7.5 Letters of Credit

     For greater certainty, if Letters of Credit issued under any Facility are outstanding on the maturity date of such Facility or on the date the indebtedness of the Borrowers becomes repayable pursuant to Section 16.2, the aggregate amount of such outstanding Letters of Credit will be included in the Borrowings to be repaid on any such date. However, if any such Letter of Credit expires or is cancelled without having been drawn, the amount repaid in respect of same will be reimbursed to the Borrower concerned but only after performance of all other obligations of, and payment of all other amounts payable by, the Borrowers or the Designated Subsidiaries under the Credit Documents.

7.6 Optional Reduction of the Facilities

     ACI may, on giving not less than 10 Business Days prior notice to the Agent, permanently reduce the aggregate amount of the Facilities by amounts of not less than $20,000,000. Any such reduction will be applied first to Facility B and then to Facility A. The notice of reduction must specify the amount of the reduction and the Business Day when the reduction will be become effective. On such date, the Borrowers must make a repayment in an amount sufficient for the outstanding Borrowings under the Facilities not to exceed the new lesser amount of such Facilities.

-28-

8 - - Place and Currency of Payment

8.1 Payments to the Agent

     Unless otherwise specified, (i) all payments to be made by a Borrower must be made to the Agent at the Branch of Account, and (ii) all payments made to the Agent will be deemed to have been made to the Agent for the rateable benefit of the applicable Lenders. Any payment due by a Borrower may be charged to an account maintained by such Borrower with the Agent.

8.2 Time of Payments

     Any payment that is due on a day that is not a Business Day may be made on the next Business Day but will bear interest until received in full. All payments must be made in funds which are immediately available on the date on which payment is due.

8.3 Currency

     Unless otherwise provided, (i) all amounts owing under any Borrowing are payable in the currency of such Borrowing, (ii) Letter of Credit fees are payable in Dollars, except that any such fee owing as a result of a Letter of Credit issued in US Dollars is payable in US Dollars, (iii) standby fees and usage fees are payable in Dollars, and (iv) all other amounts are payable in Dollars or US Dollars, as may be specified by the Agent.

8.4 Judgment Currency

     If a judgment is rendered against a Borrower for an amount owed hereunder and if the judgment is rendered in a currency (“other currency”) other than that in which such amount is owed under this Agreement (“currency of the Agreement”), such Borrower will pay, if applicable, at the date of payment of the judgment, an additional amount equal to the excess (i) of the said amount owed under this Agreement, expressed into the other currency as at the date of payment of the judgment, over (ii) the amount of the judgment. For the purposes of obtaining the judgment and making the calculation referred to in (i), the exchange rate will be the rate announced or quoted by the Bank of Canada at or around noon, on the relevant date, for converting the currency of the Agreement to obtain the other currency. Any additional amount owed under this Section will constitute a cause of action distinct from the cause of action which gave rise to the judgment, and said judgment will not constitute res judicata in that respect.

8.5 Payments Net of Taxes

(a) If a Borrower, the Agent or any Lender is compelled by law to make any withholding or deduction due to any tax or if a Lender is liable to pay tax in respect of any payment due or made by a Borrower, the Borrower concerned must pay to the Agent or such Lender such additional amount as may be necessary in order that the payment actually received be equal to the payment which otherwise

-29-

would have been received in the absence of such withholding or deduction or tax (including in the absence of any additional withholding or deduction or tax in respect of any additional amount payable pursuant to this Section). However, this Section 20.8 will not apply in respect of a tax on the overall net income or capital of a Lender.

(b)

Notwithstanding Section 8.5(a), the Borrowers will not be required to pay any such additional amounts in respect of taxes to any Lender who is not a Canadian qualified lender, unless (i) the Borrowers have consented to such Lender benefiting from Section 8.5(a) or (ii) after the occurrence of and during the continuance of an Event of Default. For the purpose hereof, “Canadian qualified lender” means a Lender who (i) is not a “non-resident” within the meaning of the Income Tax Act (Canada), or (ii) is an “authorized foreign bank” within the meaning of the Bank Act (Canada) but only in respect of amounts paid or credited hereunder in respect of its “Canadian banking business” within the meaning of the Income Tax Act (Canada).

9 - - Conditions Precedent to Borrowings

9.1 Conditions Precedent to the Initial Borrowing under Facility A

     Facility A will not be available and the Borrowers may not obtain any Borrowing under Facility A until the following conditions precedent have been fulfilled to the satisfaction of the Agent and Lenders:

(a) the Agent and the Lenders must have received, in form and substance satisfactory to them, each of the following documents:

(i)	a copy of the constitutive documents of each of the Borrowers;
(ii)	a certificate of good standing in respect of each of the Borrowers;
(iii)	a copy of the documents evidencing the authority and attesting to the authenticity of the signatures of the Persons acting on behalf of each of the Borrowers;
(iv)	the Security Documents required to be delivered pursuant to Article 10 (except Sections 10.2 and 10.4);
(v)	a compliance certificate in the form of Schedule “F”;
(vi)	a direction of payment for the repayment of the Existing Facilities;
(vii)	a certificate evidencing the insurance coverage required to be maintained by the Abitibi Entities pursuant to this Agreement; and

-30-

(viii) legal opinions addressed to the Agent and the Lenders from counsel to the Borrowers and counsel to the Agent, relating to such matters as the Agent and the Lenders may reasonably require.

(b) all fees and expenses owing by the Borrowers to the Agent and the Lenders at the time of execution of this Agreement and all fees and expenses of the Agent’s counsel in connection with the Credit Documents must have been paid in full.

9.2 Conditions Precedent to Initial Borrowing under Facility B

     Facility B will not be available and the Borrowers may not obtain any Borrowings under Facility B until the conditions precedent set forth in Section 9.1 as well as the following conditions precedent have been fulfilled to the satisfaction of the Agent and the Lenders (the date on which the Agent confirms that such conditions precedent have been fulfilled being the “Facility B Availability Date”):

(a) the Agent and the Lenders must have received, in form and substance satisfactory to them, each of the following documents:

(i)	a 10-Business Day prior written notice from the Borrowers specifying the proposed Facility B Availability Date;
(ii)	a copy of the constitutive documents of each of the Designated Subsidiaries;
(iii)	a certificate of good standing in respect of each of the Designated Subsidiaries;
(iv)	a copy of the documents evidencing the authority and attesting to the authenticity of the signatures of the Persons acting on behalf of each of the Designated Subsidiaries;
(v)	the Security Documents required to be delivered pursuant to Article 10 in respect of Facility B;
(vi)	a compliance certificate in the form of Schedule “F” and a Borrowing Base Report as at the last Business Day of the month preceding the proposed Facility B Availability Date but giving effect to the foregoing clause (v);
(vii)	a description of the accounts receivable subject to any Securitization Program which will be in effect on the proposed Facility B Availability Date, such description to also include the amount and term of any such program as well as a summary of the termination events thereunder; and
(viii)	legal opinions addressed to the Agent and the Lenders from counsel to Borrowers and the Designated Subsidiaries and counsel to the Agent,

-31-

relating to such matters as the Agent and the Lenders may reasonably require;

(b) all fees and expenses owed by the Borrowers and the Designated Subsidiaries to the Agent and the Lenders and of the Agent’s counsel in connection with the Credit Documents must have been paid in full.

9.3 Conditions Precedent to All Borrowings

The Borrowers may not obtain any Borrowing or convert or renew any Borrowing:

(a)	if the Agent has not received timely notice of such Borrowing, conversion or renewal; or
(b)	if a Default has occurred and is continuing.

Each notice of Borrowing or of the renewal or conversion of a Borrowing constitutes a certification by the Borrowers that no Default has occurred and is continuing.

9.4 Waiver of Conditions Precedent

     The conditions precedent provided for in this Article are for the sole benefit of the Agent and the Lenders. The Agent and the Lenders may waive such conditions precedent, in whole or in part, with or without conditions, without prejudice to any other or future rights that they might have against the Borrowers and any other Person.

9.5 Special Waiver in respect of the Security

     Notwithstanding clauses (iv) and (viii) of Section 9.1 (a), delivery of title opinions and certificates of location will become a condition precedent to Borrowings only from the 91^st day following the date of this Agreement. The Borrowers undertake to provide such opinions and surveys to the Lenders as soon as practicable, but no later than the 90^th day following the date of this Agreement. The Borrowers also undertake to correct within a reasonable time any material deficiency revealed by title opinions and certificates of location relating to immovable property.

9.6 Early Termination of the Commitments

     If all of the conditions precedent set forth in Section 9.1 (but subject to Section 9.5) have not previously fulfilled or waived, the Lenders’ Commitments will terminate on October 15, 2005.

-32-

10 - Security

10.1 Guarantees by Borrowers

(a)	Each of ACI and ACCC will be at all times solidarity (i.e. jointly and severally) liable for all Borrowings owed by and all obligations of any Borrower under this Agreement and any other Credit Document. Each of ACI and ACCC waives all benefit of division or discussion and will be liable to the Agent and the Lenders in the same manner and with the same force as if it had been the primary debtor of all such Borrowings and obligations. In particular, but without limitation, each of ACI and ACCC will be liable to pay on its due date any amount owing hereunder or under any other Credit Document, without notice or demand and without any requirement that it be notified or informed of the time or manner of Borrowings and repayments by any Borrower.
(b)	The liability of ACI and ACCC under this Section 10.1 will not be released, reduced or affected by reason of any waiver or extension granted by the Lenders without the consent of ACI or ACCC or by reason of any release of or any stay of proceedings against any Borrower pursuant to any law relating to bankruptcy, insolvency, restructuration or affecting creditors’ rights or by reason of any circumstance which might otherwise constitute a defence available to, or a discharge of, any Borrower.
(c)	None of ACI and ACCC will be entitled to exercise any subrogation in the rights of the Lenders by reason of a payment made pursuant to this Section 10.1 until all Lenders will have been paid in full of all monies owed to them by the Borrowers hereunder or any other Credit Document.

10.2 Guarantees by Designated Subsidiaries

     Each Designated Subsidiary must guarantee in favour of the Agent and the Lenders the performance of all obligations of the Borrowers under Facility B.

10.3 Facility A Security

(a)	To secure the performance of the obligations of the Borrowers under Facility A, ACCC must provide in favour of the Agent and the Lenders security on ACCC’s shares in Manicouagan Power Company;
(b)	To secure the performance of the obligations of the Borrowers under Facility A, ACCC must provide in favour of the Agent and the Lenders security over:

(i) the value-added papers mill of ACCC located in Alma, Québec including related assets necessary for the operation of such mill;

-33-

(ii)	the newsprint mill of ACCC located in Amos, Québec including related assets necessary for the operation of such mill;
(iii)	the Laurentide value-added papers mill of ACCC located in Grand-Mére, Québec including related assets necessary for the operation of such mill;
(iv)	the newsprint mill of ACCC located in Baie-Comeau, Québec including related assets necessary for the operation of such mill.

Each such mill and other mills (together with related assets) which will become subject to the Security as contemplated by this Section 10.3 is called herein a “Charged Mill”.

(c) If the Charged Mills EBITDA is less than the Charged Mills EBITDA Threshold (hereafter, the “shortfall”) at the end of two consecutive quarters, the Borrowers may exercise within 3 months from such time (the “option period”) any one of the following options:

(i)	permanently reduce Facility A by an amount equal to four times the amount of the shortfall and increase Facility B by an amount which is a multiple of $1,000,000 but does not exceed the amount by which Facility A has been reduced;
(ii)	temporarily reduce Facility A by an amount equal to four times the amount of the shortfall; or
(iii)	grant security on another mill or other mills provided that this option may only be exercised if such other mill or mills are located in Canada or the United States and are acceptable to the Majority Lenders and if the grant of such security results in the Charged Mills EBITDA being equal to or greater than 110% of the Charged Mills EBITDA Threshold at the end of the option period;

(d)	Upon the occurrence of an event resulting or likely to result in an interruption of the operations of a Charged Mill for a period of at least 180 days (by reason of a closure, a casualty or any other cause), the Mill EBITDA for such Charged Mill will be deemed to have been zero from and including the last day of the quarter immediately preceding the quarter in which such event has occurred.
(e)	Concurrently with the grant of any security on Charged Mills, ACI must provide to the Agent a certificate by an Authorized Officer (i) confirming that the grant of such security does not breach the terms of any of the indentures governing outstanding notes or debentures issued or guaranteed by ACI (the “indentures”) and (ii) setting forth the calculations supporting such confirmation.

-34-

(f)	If the Borrowers are willing to exercise the option of Section 10.3(c)(iii) and the conditions permitting the exercise of such option are met but the grant of security pursuant to such clause would result in a breach of the terms of any of the indentures, then the Borrowers may permanently or temporarily reduce Facility A to the maximum amount that would allow such security to be granted without causing such breach.
(g)	Upon any permanent or temporary reduction of Facility A, the Charged Mills EBITDA Threshold will be reduced by an amount representing 25% of the amount of the reduction of Facility A. In the event of any such reduction of the Charged Mills EBITDA Threshold in circumstances where the Borrowers are willing to exercise the option of Section 10.3(c)(iii), they will be required to grant additional security only to the extent the provisions of said Section would still require the grant of such security after giving effect to the reduction.
(h)	If the Borrowers are willing to exercise the option of Section 10.3(c)(iii) but any mill proposed by the Borrowers to be given as security is not acceptable to the Majority Lenders, then the Borrowers may exercise the option of Section 10.3(c)(i) or of Section 10.3(c)(ii).
(i)	If the Borrowers do not exercise any of the options provided in Section 10.3(c) before the expiry of the option period, then Facility A will be reduced by an amount equal to four times the amount of the shortfall, effective on the first Business Day following the expiry of the option period.
(j)	Concurrently with any permanent or temporary reduction of Facility A pursuant to Section 10.3, the Borrowers will make a repayment on Borrowings outstanding under Facility A in an amount sufficient for such Borrowings not to exceed the new amount of Facility A.
(k)	In the event of a temporary reduction of Facility A, the Borrowers may thereafter, by a 10-day prior notice to the Agent, increase Facility A by the amount of the reduction and increase the Charged Mills EBITDA Threshold to its previous amount but only if, after giving effect to such increases, the Charged Mills EBITDA was equal to or greater than 110% of the Charged Mills EBITDA Threshold at the end of the last and the next to the last quarters immediately preceding the quarter in which the notice is given.
(l)	Any increase in Facility B and any permanent or temporary reduction of Facility A pursuant to this Section 10.3(c) will be allocated among the Lenders under Facility A pro rata to their Commitments under Facility A.

10.4 Facility B Security

     To secure the performance of the obligations of the Borrowers under Facility B, each of the Borrowers and the Designated Subsidiaries must provide in favour of the Agent and the

- 35 -

Lenders security over their present and future inventory located in Canada and their accounts receivable due by customers located in Canada and the United States. To the extent they wish to increase the Borrower Base, the Borrowers and the Designated Subsidiaries may also elect to grant security over all or part of their present and future inventory located in the United States and their accounts receivable due by customers located in the other countries listed in clause (a) of the definition of Borrowing Base.

10.5 Insurance

     The Borrowers will cause the Agent (or its representative) to be named as first loss payee on all insurance policies relating to the property and assets covered by the security. Each policy covering immovable property and equipment must contain a “mortgage clause”.

10.6 Securitization Program

     In connection with any Securitization Program, the Agent will be authorized without any further consent of the Lenders to execute on behalf of the Lenders an intercreditor agreement between the Lenders and the relevant securitization providers for the purposes of determining the respective rights and priorities of the Lenders and such securitization providers over the accounts receivable (and proceeds thereof) of the relevant Abitibi Entities.

10.7 Validity of the Security and Contents of Security Documents

     The Security must be perfected and first-ranking at all times with respect to all property intended to be covered thereby, subject however to Permitted Liens. Each Security Document must be in form and substance satisfactory to the Agent and remain valid and in force at all times. The Security Documents will include such corporate documents, consents, legal opinions, Lien searches and certificates of location or surveys as the Agent may reasonably require.

10.8 Release of the Security

     In the event of a disposition to any non-Abitibi Entity permitted by and complying with Section 13.3(b)(iii) of property subject to the Security, the Agent will be authorized without any further consent of the Lenders to release the Security with respect to such property and to execute on behalf of the Lenders any instrument evidencing such release.

- 36 -

11 - Representations and Warranties

Each of the Borrowers represents and warrants that:

11.1	Corporate Existence and Capacity
Each of the Abitibi Entities

(a)	is a Person duly constituted and organized, validly existing and in good standing under the laws of the jurisdiction of its constitution;
(b)	has all requisite corporate or other power necessary to own its assets and carry on its business as now being or as proposed to be conducted; and
(c)	is qualified to do business and is in good standing in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary and where failure to so qualify could reasonably be expected to have a Material Adverse Effect.

11.2 Authorization and Validity

     Each Borrower and Designated Subsidiary has all necessary power, authority and legal right to execute, deliver and perform its obligations under the Credit Documents to which it is a party, has duly authorized by all necessary action the execution, delivery and performance of its obligations under such Credit Documents and has duly and validly executed and delivered the Credit Documents to which it is a party. The obligations of each Borrower and Designated Subsidiary under the Credit Documents to which it is a party constitute legal, valid and binding obligations of such Borrower and Designated Subsidiary.

11.3 No Breach

     The execution and delivery of the Credit Documents and the performance by the Borrowers and Designated Subsidiaries of their respective obligations thereunder will not conflict with, result in a breach of or require any consent under, (i) their constitutive documents or by-laws, (ii) any applicable law or regulation, (iii) any order, injunction or decree of any court or governmental authority or agency, or (iv) any material agreement or instrument to which any Borrower or Designated Subsidiary is a party or by which it or any of its property is bound.

11.4 Approvals

     Except for filings or registrations required to perfect the Security, no authorization, approval or consent of, nor any filing or registration with, any governmental or regulatory authority or agency, is necessary for the execution, delivery or performance by each Borrower

- 37 -

and Designated Subsidiary of the Credit Documents to which it is a party or to ensure the legality, validity or enforceability thereof.

11.5 Compliance with Laws and Permits

     Each of the Abitibi Entities (i) is in compliance in all material respects with all laws and regulations applicable to it and its business and assets, including Environmental Laws, (ii) holds all material permits, licenses, approvals, consents and other authorizations required under all such laws and regulations to own its assets and to carry on its business as now being or as proposed to be conducted, except where such non-compliance or failure could not reasonably be expected to have a Material Adverse Effect.

11.6 Title to Assets

     The property and assets of the Abitibi Entities, taken as a whole, are not subject to title defects or restrictions which could materially and adversely impair their value or normal use. The Abitibi Entities own or have rights of use for all property and assets (including intellectual property) necessary to carry on their businesses, except where such failure to own or to have such rights of use could not reasonably be expected to have a Material Adverse Effect.

11.7 Fibre Supply Arrangements

     The fibre supply arrangements available to the Borrowers provide sufficient volumes to sustain the operations of each Charged Mill.

11.8 Litigation

     There are no legal or arbitration proceedings at law or in equity, or any proceedings by or before any governmental or regulatory authority or agency, or, to the best of its knowledge, any claim or investigation under Environmental Laws, or any labour disputes, now pending or, to the best of its knowledge, threatened against any of the Abitibi Entities or any of their properties or rights that, if adversely determined, could reasonably be expected to have a Material Adverse Effect.

11.9	No Default
	No Default has occurred and is continuing.
11.10	Solvency
	Each of the Borrowers and the Designated Subsidiaries is Solvent.

- 38 -

11.11 Taxes

     Each of the Abitibi Entities has filed all income tax returns and all other tax returns and paid all taxes (other than those not yet delinquent or contested in good faith) that are required to be filed or paid by them. The charges, accruals and reserves on the books of the Abitibi Entities in respect of taxes and other governmental charges are adequate.

11.12 Margin Stock Restrictions

     None of the Abitibi Entities is engaged principally, or as one of its important activities, in the business of extending credit for the purpose, of buying or carrying margin stock, and no part of the proceeds of any extension of credit hereunder will be used to buy or carry any margin stock. “Margin stock” herein has the meaning specified in Regulations U and X of the Board of Governors of the Federal Reserve System of the United States.

11.13 Pension Plans

     Except as does not otherwise have a Material Adverse Effect, (i) all contributions required under applicable law in respect of each pension or benefit plan and Plan maintained by any Abitibi Entity or any of their ERISA Affiliates have been made, (ii) each such plan is fully funded on an ongoing and termination basis to the extent required under applicable law, including ERISA, (iii) each of the Borrowers, any Subsidiaries and any of their ERISA Affiliates has fulfilled its obligations under the minimum funding standards of Section 302 of ERISA and Section 412 of the Code with respect to each Plan, (iv) none of the Borrowers or any of their Subsidiaries or any of their ERISA Affiliates has incurred any Withdrawal Liability that has not been satisfied in full, (v) none of the Borrowers or any of their Subsidiaries nor any of their ERISA Affiliates has received any notification that any Multiemployer Plan is in reorganization or has been terminated within the meaning of Title IV of ERISA, (vi) none of the Borrowers or any of their Subsidiaries or any of their ERISA Affiliates has any liability to the PBGC (other than for unpaid premiums); and (vii) each Plan which is intended to qualify under Section 401(a) of the Code has been determined by the United States Internal Revenue Service (“IRS”) to be so qualified (or will be submitted to the IRS pursuant to a request that the IRS make such determination) and, to the knowledge of the Borrowers nothing has occurred since the date of such determination that would adversely affect such determination.

11.14 Investment Company Act

     None of the Abitibi Entities is an “investment company”, or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940 of the United States, as amended.

- 39 -

11.15 Public Utility Holding Company Act

     None of the Abitibi Entities is a “holding company”, or an “affiliate” of a “holding company” or a “subsidiary company” of a “holding company”, within the meaning of the Public Utility Holding Company Act of 1935 of the United States, as amended.

11.16 Restriction on Payments

     None of the Abitibi Entities (other than a Securitization SPV) is subject to any law, regulation, agreement or legal impediment that prohibits, restricts or imposes any condition upon the ability of an Abitibi Entity to pay Distributions or to make or repay loans or advances, except for laws of general application providing that the declaration or payment of Distributions by a Person is subject to such Person being in compliance with solvency or other similar requirements.

11.17 Corporate Structure

(a)

The Corporate Structure Chart contains a complete and correct list of (i) all Abitibi Entities together with the jurisdiction of organization of each such entity, (ii) each Person holding ownership interests in each such entity (except as to ACI), (iii) the percentage of ownership held by each such Person and (iv) any prior name of the Borrowers (including any pre-merger corporate name), in each case, as of the date of this Agreement.

(b)

The Control of Manicouagan Power Company is directly held by ACCC.

11.18 Financial Statements and Financial Year

     The last audited financial statements of ACI are complete and correct and fairly present the consolidated financial condition and results of operation of ACI as at their stated date, all in accordance with GAAP. None of the Abitibi Entities has on the date thereof any material contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavourable commitments that have not been disclosed in writing to the Agent and the Lenders. The financial year of each of the Abitibi Entities ends in December of each year.

11.19	Material Adverse Change
	There has been no Material Adverse Change since December 31, 2004.
11.20	True and Complete Disclosure

     The information, reports, financial statements and documents furnished or to be furnished by or on behalf of the Abitibi Entities to the Agent or any Lender in connection with the

- 40 -

negotiation, preparation, execution, delivery or performance of the Credit Documents, when taken as a whole, do not and will not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

12 - Affirmative Covenants

12.1	General Covenants
	Each of the Borrowers will, and will cause each of the other Abitibi Entities to:

(a)	Legal Existence — preserve and maintain (i) its legal existence, except to the extent permitted by Section 13.3 and (ii) all of its material rights, privileges and licenses, except where failure to preserve and maintain such rights, privileges and licenses could not reasonably be expected to have a Material Adverse Effect;
(b)	Legal Compliance — comply in all material respects with the requirements of all laws and regulations applicable to it and its business and assets (including Environmental Laws) and with all orders of governmental or regulatory authorities;
(c)	Payment of Taxes — pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its property or assets prior to the date on which penalties or interest attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained;
(d)	Maintenance of Property — maintain all of its properties and assets used or useful in its business in good working order and condition, ordinary wear and tear excepted, except for such property or assets that are no longer necessary for the operations and business of the Abitibi Entities;
(e)	Material Agreements — perform its obligations under and preserve and maintain in force all agreements to which it is a party that are necessary for or material to its operations and business;
(f)	Insurance — maintain insurance on its property with financially sound and reputable insurance companies against loss and damage in at least the amounts (and with only those deductibles) customarily maintained, and against such risks as are typically insured against in the same general area, by Persons of comparable size engaged in the same or similar business as the Abitibi Entities; and also maintain all worker’s compensation, employer’s liability insurance or similar insurance as may be required under applicable laws;
(g)	Business — conduct its operations in a business-like manner;

- 41 -

(h)	Records — keep adequate records and books of account, in which complete entries will be made in accordance with GAAP (with the exception of certain US Abitibi Entities whose records and books of accounts are to be maintained in accordance with US generally accepted accounting principles); and
(i)	Access — permit representatives of the Agent and any Lender, upon reasonable prior notice and during normal business hours, to examine, copy and make extracts from its books and records, to inspect any property subject to the Security, and to discuss its business and affairs with its officers and auditors.

12.2 Rating

     ACI will use its best efforts to maintain at all times long-term senior unsecured debt or corporate ratings with both of Moody’s and S&P.

12.3 Environmental Reports for Charged Mills

     ACI will, (i) within 60 days of the date hereof, provide to the Agent, for distribution to the Lenders, a Phase I environmental review for each of the Charged Mills referred to in Section 10.3(b), (ii) promptly, if recommended by such Phase I environmental review and requested by the Majority Lenders, an intrusive Phase II review, in each case, conducted by an environmental consultant acceptable to the Agent, and (iii) remedy any material non-compliance with Environmental Laws revealed by any such review within a reasonable time.

12.4 Use of Proceeds

     The Borrowers will use the proceeds of the Facilities only for the purposes permitted under this Agreement. The Borrowers will not use the Facilities to finance any private or public tender offer for the shares or other securities of a Person whose governing body has not approved such offer (“hostile take-over”).

12.5 Disclosure of Facilities

     ACI will always describe the Facilities in any press release or public disclosure document in a manner that is consistent with the terms of this Agreement and the conditions for the availability of the applicable Facility.

12.6 Further Assurances

     Each of the Borrowers will, and will cause each of the other Abitibi Entities to, cooperate with the Lenders and the Agent and execute such further instruments and documents as the Agent may reasonably request to carry out to its satisfaction the transactions contemplated by the Credit Documents.

- 42 -

12.7 Representations and Warranties

     Each of the Borrowers will ensure that all representations made in this Agreement are true and correct at all times, except for representations made as of a date expressly stated therein.

13 - Negative Covenants

     Each of the Borrowers covenants and agrees that:

13.1 Negative Pledge

     None of the Abitibi Entities will create, incur, assume or suffer to exist any Lien on their present and future property or assets except for the Security and Permitted Liens.

13.2 Indebtedness

(a)	No Borrower will create, incur, assume or permit to exist any Funded Debt to any other Abitibi Entity unless such Funded Debt is subordinate in right of payment to the indebtedness hereunder on terms and conditions satisfactory to the Agent;
(b)	None of the Abitibi Entities other than the Borrowers will create, incur, assume or permit to exist any Funded Debt, other than:

(i)	indebtedness to the Agent and the Lenders under the Credit Documents;
(ii)	indebtedness to the other Abitibi Entities;
(iii)	indebtedness of Abitibi-Consolidated Finance, L.P., at any time not exceeding US$250,000,000;
(iv)	indebtedness of a Person which becomes a Subsidiary after the date hereof, provided that no other Abitibi Entity is liable for the payment of such indebtedness;
(v)	indebtedness up to an aggregate outstanding amount for all Abitibi Entities other than the Borrowers not exceeding at any time 10% of Net Tangible Assets; and
(vi)	indebtedness arising from a Securitization Program.

- 43 -

13.3	Limitations on Fundamental Changes
	None of the Abitibi Entities will:

(a) enter into any transaction of merger or amalgamation, or liquidate, wind up or dissolve itself, except that any Abitibi Entity may merge or amalgamate with another Abitibi Entity provided that the following conditions are fulfilled:

(i)	no Default occurs as a result of the merger or amalgamation;
(ii)	if any of the merging or amalgamating entity is a Borrower or a Designated Subsidiary, the surviving or amalgamated entity executes and delivers to the Agent all such documents as may be necessary or advisable to confirm that such entity is bound as successor of the merging or amalgamating entities by all Credit Documents to which such entities were parties;
(iii)	if any of the merging or amalgamating entity is a Borrower, the surviving or amalgamated entity is organized under the laws of Canada, or a political division thereof, and, if any of the merging or amalgamating entity is a Designated Subsidiary, the surviving or amalgamated entity is organized under the laws of Canada, the United States, the United Kingdom or a political division thereof; and
(iv)	the Agent has been provided at least 20 days prior to the merger or amalgamation with satisfactory evidence of compliance with the requirements of clauses (i), (ii) and (iii) including such financial information, certificates, documents and legal or other professional opinions as the Agent may reasonably request.

(b) sell, lease, transfer or otherwise dispose of in one transaction or a series of related transactions to any Person (in each case a “disposition”) any property (other than inventory sold in the ordinary course of business), except for the following dispositions (in each case, provided that no Default occurs as a result of the disposition):

(i)	dispositions of property not subject to the Security where the book value of the property disposed, together with the book value of all property disposed in the aggregate since the date of this Agreement, does not exceed 22.5% of Net Tangible Assets as at December 31, 2004;
(ii)	dispositions by an Abitibi Entity to another Abitibi Entity, provided that the conditions of paragraph (a) above are fulfilled in the case of a disposition by a Borrower or a Designated Subsidiary (as if the disposition were a merger and the transferee were the surviving entity) and provided further that if the disposition relates to substantially all of the property of the

- 44 -

transferor, the latter (if not a Borrower) may wind-up or dissolve itself after completion of such disposition; or

(iii)

dispositions of accounts receivable (including related guarantees and security) pursuant to a Securitization Program to the extent such accounts receivable are not generated by a disposition of inventory subject to the Security made after the occurrence of an Event of Default specified in Section 16.1(f) or Section 16.1(g) or after the date the indebtedness of the Borrowers hereunder becomes repayable pursuant to a notice given under Section 16.2 and provided that no account receivable subject to a Securitization Program (in whole or in part) will be included in the Borrowing Base, it being understood however that accounts receivable permitted to be disposed pursuant to this clause (iii) will be excluded from the Security from the date of any such permitted disposition.

13.4 Core Business

     None of the Abitibi Entities (other than a Securitization SPV) will, directly or indirectly, carry on any business other than the Core Business.

13.5 Financial Assistance

     None of the Abitibi Entities will provide financial assistance (whether by way of loan, Guarantee or otherwise) in favour of Persons who are not Abitibi Entities or in which ACI has an equity interest of less than 10% in value, except for financial assistance that constitutes Funded Debt permitted hereunder and other financial assistance in an amount at any time not exceeding in the aggregate of $5,000,000 for all Abitibi Entities.

13.6 Share Buy-Backs

     ACI will not make, and will cause the Subsidiaries not to make any redemption, purchase or other acquisition of ACI’s shares except for (i) mandatory redemptions made in accordance with the terms and conditions attached to the related shares, (ii) redemptions, purchases or other acquisitions made in accordance with buy-back programs for employees or small shareholders and (iii) redemptions made in connection with a redemption program in the normal course of business in accordance with the rules of any exchange where ACI’s shares are traded and (iv) redemptions made in accordance with the provisions of section 147.21(c) of the Securities Act (Québec) or its equivalent under any other securities act of any other jurisdiction.

13.7 Transactions with Related Parties

     ACI will not conduct, or permit any of its Subsidiaries, to conduct, directly or indirectly, any business or enter into or permit to exist any transaction or series of related transactions (including purchases, dispositions, any investments, giving any guarantee or rendering of

- 45 -

services) with, or for the benefit of, any related party, except such business, transaction or series of related transactions (i) entered into on terms set forth in writing that are no less favourable to ACI or such Subsidiary than those that would be obtained in a comparable arm’s length transaction with an entity that is not a related party, and (ii) other than in the case of a bona fide sales or purchases of inventory or raw materials to or from related parties in the ordinary course of the business, with respect to each such business, transaction or series of related transactions involving in the aggregate payments in excess of $25,000,000, if ACI delivers to the Agent an officer’s certificate certifying that such business, transaction or series of related transactions complies with the foregoing and was approved by a majority of each of the independent directors and the board of directors of ACI as a whole, as evidenced by a resolution. For the purposes of this Section 13.7, (i) related party means, with respect to a Person, another Person that Controls or is Controlled by or is under common Control with the relevant Person, and (ii) the definition of Control must be read replacing 50% by 20%. Notwithstanding the foregoing, any public pension fund or discretionary portfolio manager which is not involved in the management of ACI or which does not exercise management control over ACI will not be deemed to be a related party.

14 - Financial Covenants

14.1 Net Funded Debt to Total Capitalization Ratio

     ACI must maintain at the end of each quarter of each of its financial years, on a consolidated basis, a Net Funded Debt to Total Capitalization Ratio of not more than 70% until December 31, 2007 and 65% thereafter.

14.2 Interest Coverage Ratio

     ACI must maintain at the end of each quarter of each of its financial years, on a consolidated basis, an Interest Coverage Ratio of not less than 1.50:1.

15 - Reporting Requirements

15.1 Annual Reporting

(a)

ACI will deliver to the Agent, for distribution to the Lenders, as soon as possible and, in any event, within 90 days after the end of each financial year of ACI, the audited annual financial statements of ACI, on a consolidated basis, accompanied by an audit report with no Impermissible Qualifications; and

(b)

ACI will deliver to the Agent, for distribution to the Lenders, within 10 days from the date of the final review thereof by ACI’s board of directors and in any event by no later than February 28th of each year, its annual budget and operating plans for such year, including income statement, balance sheet and cash flow statement projections and a capital expenditure plan, together with the assumptions therefor, prepared on a consolidated basis.

- 46 -

15.2 Quarterly Reports

     ACI will deliver to the Agent, for distribution to the Lenders, as soon as possible and in any event within 60 days after the end of each of its financial quarters (including the fourth quarter):

(a)	the unaudited financial statements of ACI for the relevant quarter, on a consolidated basis;
(b)	the operating statements for the relevant quarter for each of the businesses operated with the Charged Mills, together with the details of calculation of the Mill EBITDA of each Charged Mill; and
(c)	a compliance certificate relating to the covenants herein in the form of Schedule “F”(with sufficient details to reconcile the financial statements with the calculation base of the financial covenants of Article 14).

15.3 Borrowing Base Report

     Within 20 days after the end of each month (commencing with the month in which the Facility B Availability Date occurs), ACI will deliver to the Agent, for distribution to the Lenders, a Borrowing Base Report.

15.4 ERISA

     The Borrowers will inform the Agent as soon as possible, and in any event within 10 days after it knows or has reason to believe that any of the events or conditions specified below has occurred or exists (and will provide a copy of any report or notice required to be filed with or given to PBGC):

(a)	any reportable event, as defined in Section 4043(b) of ERISA and the regulations issued thereunder, unless the 30-day notice requirement in respect thereof has been waived by the PBGC;
(b)	a notice of intent to terminate any Plan or any action taken by an Abitibi Entity to terminate any Plan, provided notice of intent to terminate is required pursuant to Section 4041(a)(2) of ERISA;
(c)	the institution by PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt of a notice from a Multiemployer Plan that such action has been taken by PBGC with respect to such Multiemployer Plan;
(d)	the complete or partial withdrawal, from a Multiemployer Plan that results in liability under Section 4201 or 4204 of ERISA or the receipt of notice from a

- 47 -

Multiemployer Plan that it is in reorganization or insolvency or that it intends to terminate or has terminated;

(e)	the institution of a proceeding by a fiduciary of any Multiemployer Plan to enforce Section 515 of ERISA, which proceeding is not dismissed within 30 days; and
(f)	the adoption of an amendment to any Plan that, pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the loss of tax-exempt status of the trust of which such Plan is a part if security has not been provided in accordance with the provisions of these Sections;

15.5 Environmental Reporting

     The Borrowers will promptly notify the Agent of any incident relating to environmental matters which has a Material Adverse Effect. For the purposes of this Section 15.5, incidents which could have a Material Adverse Effect will include incidents where any of any Abitibi Entity:

(a)	becomes aware of any material Release of any Hazardous Substance not in compliance with Environmental Laws;
(b)	receives an Environmental Notice or claim to the effect that any Abitibi Entity is liable to any Person in a material amount as a result of the Release or threatened Release of any Hazardous Substance into the environment in, on, under or adjacent to the assets not in compliance with Environmental Laws;
(c)	receives any Environmental Notice that any Abitibi Entity is subject to investigation (other than an investigation carried out in the ordinary course) evaluating whether any Remedial Action is needed to respond to the Release or threatened Release of any Hazardous Substance into the environment in, on, under or adjacent to the assets not in compliance with Environmental Laws;
(d)	receives any Environmental Notice that all or any material portion of its assets are subject to an order of a governmental entity or Lien under or pursuant to any Environmental Law; or
(e)	receives any written notice of the commencement of any judicial or administrative proceeding alleging a violation of any Environmental Law with respect to its assets.

- 48 -

15.6	Additional Reporting Requirements
	The Borrowers will promptly deliver to the Agent, for distribution to the Lenders:

(a)	notices of any event of default, any default or circumstance which, with notice or lapse of time, or both, would constitute an event of default under any agreement in respect of indebtedness to which any Abitibi Entity owes (contingently or otherwise) at least $25,000,000 (or the equivalent amount in any other currency);
(b)	copies of all notices, reports, press releases, circulars, offering documents and other continuous disclosure documents filed with, or delivered to, any regulatory authorities; the Borrowers will be deemed to have delivered the information and documents required hereunder by making the said information and documents available on SEDAR and notifying the Agent that said information and documents have been posted on SEDAR and are freely accessible without charge;
(c)	(i) any auditor letter highlighting issues or deficiencies that, if not addressed or corrected, could result in a Material Adverse Change or an Impermissible Qualification or (ii) upon any change in its auditors, notice of any change in its auditors;
(d)	upon any change in its rating from either S&P or Moody’s, notice of any rating change by either S&P or Moody’s; and
(e)	a description of the accounts receivable subject to any Securitization Program coming into effect after the Facility B Maturity Date (such description to also include the amount and term of any such program together with a summary of the termination events thereunder) and of any material change made after such date to any of the foregoing elements of any Securitization Program.

15.7 Reporting from Time to Time

     The Borrowers will promptly notify the Agent of any Default. The Borrowers will also furnish the Agent all information, documents and records and allow any enquiry, study, audit or inspection that the Agent may reasonably request in connection with the business, financial condition, property, assets or prospects of the Abitibi Entities, or to verify compliance with the obligations of any of the Abitibi Entities under any Credit Document.

15.8 Documentation

     Any document to be furnished to the Agent by a Borrower must be supplied in a sufficient number of copies for each Lender and two for the Agent (unless such document is sent to the Agent by electronic mail) and promptly after receipt by the Agent, must be forwarded to the Lenders by the Agent.

- 49 -

16 - Events of Default and Remedies

16.1 Events of Default

     The occurrence of one or more of the following events constitutes an event of default (“Event of Default”) under the Credit Documents:

(a)	a Borrower defaults in the payment when due of any amount owing under any Facility in respect of principal, or defaults for more than three Business Days in the payment of any interest or fees or of other amount owing under a Credit Document;
(b)	any Abitibi Entity (i) fails to make a payment or payments exceeding in the aggregate $65,000,000 in respect of any obligation or obligations (other than the Facilities), when and as due, or (ii) is in default under any agreement or agreements (other than the Credit Documents) with respect to obligations exceeding $65,000,000 in the aggregate if the effect of such default is to accelerate or to permit the acceleration of such obligations and, in each case, such failure or default continues after the applicable notice or grace period, if any;
(c)	any representation, warranty or certification made or deemed made by a Borrower or Designated Subsidiary in any Credit Document proves to be false or misleading in any material respect as of the time made or deemed made and such misrepresentation remains unremedied for 30 days;
(d)	any of the provisions of Articles 10 and 14 is not complied with;
(e)	any of the covenants contained in Article 13 and Article 15 is not complied with and such failure remains unremedied for 10 days;
(f)	any Borrower or Designated Subsidiary or any other Abitibi Entity having assets with a value exceeding $65,000,000 becomes unable to pay its debts generally as such debts become due or is adjudicated bankrupt or insolvent;
(g)	any Borrower or Designated Subsidiary or any other Abitibi Entity having assets with a value exceeding $65,000,000 (i) applies for or consents to or is the subject of an order for the appointment of a receiver, interim receiver or trustee (or any Person performing similar functions) in respect of itself or of all or a substantial part of its assets, (ii) makes a general assignment for the benefit of its creditors, (iii) takes advantage of any law relating to bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement or winding-up, or (iv) takes any action for the purpose of effecting any of the foregoing;
(h)	a proceeding (or any similar action) is commenced against any Borrower or Designated Subsidiary or any other Abitibi Entity having assets with a value exceeding $65,000,000 seeking (i) its bankruptcy, reorganization, liquidation,

- 50 -

dissolution, arrangement or winding-up, or similar relief, (ii) the appointment of a receiver, interim receiver or trustee (or any Person performing similar functions) in respect of itself or of all or any substantial part of its assets, or (iii) the seizure or the attachment of, or the enforcement of remedies on, any part of its assets having a value of more than $65,000,000, and, in each case, such proceeding (or similar action) is not dismissed or withdrawn after a period of 60 days (for movable or personal property) or 90 days (for immovable or real property), provided that such grace period will apply only if such proceeding (or action) is diligently contested in good faith and does not disrupt the business or normal operations of the Person concerned;

(i)	any Impermissible Qualification of the audited consolidated financial statements of any Borrower by ACI’s independent auditors;
(j)	any Subsidiary of ACI that is a Borrower or a Designated Subsidiary ceases to be wholly-owned;
(k)	any Person (or group of Persons acting in concert) (x) purchases or acquires, directly or indirectly, or beneficially owns, shares of ACI having ordinary voting power to elect a majority of ACI’s board of directors, pursuant to a transaction that is not approved by a majority of ACI’s board of directors at the time that the transaction is publicly announced, or (y) causes, as a result of any proxy solicitation made otherwise than by or on behalf of ACI’s management, continuing directors to cease to be a majority of the board of directors of ACI (where “continuing directors” are members of ACI’s board of directors as of the date of this Agreement or members appointed or whose nomination is approved by a majority of continuing directors or nominated at a time that continuing directors form a majority of the board of directors);
(1)	a Material Adverse Change; or
(m)	any Abitibi Entity defaults in the performance of any of its other obligations under a Credit Document and such default continues unremedied for a period of 30 days after notice by the Agent to the Borrowers.

16.2 Remedies

     If an Event of Default occurs and is continuing, the Agent may, on giving a notice to the Borrowers take any one or more of the following actions:

(a)	terminate the right of the Borrowers to use the Facilities;
(b)	declare all indebtedness of the Borrowers under the Credit Documents to be immediately payable and demand immediate payment of the whole or part thereof; and

- 51 -

(c) exercise all of the rights and remedies of the Agent and the Lenders including their rights and remedies under any Credit Document;

provided that all indebtedness of the Borrowers under the Credit Documents will automatically become due and payable without any notice upon the occurrence of any Event of Default specified in Section 16.1(f) or Section 16.1(g).

17 - Equality Among Lenders

17.1 Distribution among Lenders

     Any payment received by the Agent on account of any indebtedness hereunder, including any amount received through the exercise of any right of set-off and the enforcement of any Security, must be distributed among the Lenders proportionately to the amount of the indebtedness owing to them hereunder and which is then payable.

17.2 Other Security

     No Lender may take any Security or Lien in connection with the Facilities except in accordance with Article 10.

17.3 Direct Payment to a Lender

     Except as otherwise provided herein, if a Lender receives, otherwise than through the Agent, a payment on account of the Facilities (including any payment received through the exercise of any right of set-off), such Lender will remit the payment to the Agent, for distribution among all Lenders.

17.4 Adjustments

     If, at any time, the ratio of Borrowings owing to a Lender under any Facility to the aggregate amount of all outstanding Borrowings under such Facility is not proportional to such Lender’s Commitment under said Facility, expressed as a percentage, the Agent may (and will, after termination of such Facility) make from time to time such adjustments as may be necessary in order that the outstanding Borrowings under the applicable Facility are in the proportions of the Commitments under such Facility and the Lenders will make all such payments as the Agent may direct to give full effect to such adjustments. The Borrowers will be bound by such adjustments.

- 52 -

18 - The Agent and The Lenders

18.1 Appointment of the Agent

     Each Lender irrevocably appoints the Agent to exercise on its behalf the rights and powers delegated to the Agent hereunder and authorizes the Agent to take any action necessary for the performance of its duties. Whenever acting in such capacity, the Agent represents and binds all Lenders.

18.2 Restrictions on the Powers of the Lenders

     No Lender may exercise individually the rights and powers delegated to the Agent, including the enforcement of remedies after the occurrence of an Event of Default.

18.3 Security Documents

     The Agent is authorized to hold any Security on behalf of the Lenders and to execute in their name any Security Document. For greater certainty, the Agent is authorized to act as representative (fondé de pouvoir) of the Lenders (notwithstanding that the Agent is also a Lender) for the purposes of any hypothec granted by any Abitibi Entity pursuant to article 2692 of the Civil Code of Québec to secure debentures or similar instruments issued for the benefit of the Lenders pursuant to the Security.

18.4 Action by Agent

     The duties of the Agent are limited to those specifically conferred upon it in the Credit Documents. Except as otherwise provided, the Agent is not required to exercise any discretion or to take any action under the Credit Documents, unless the Agent has been so required by the Majority Lenders (or by all Lenders where the consent of all Lenders is required). In no event, will the Agent be required to exercise any right or power, if in its judgment, doing so would contravene any Credit Document or applicable law or where the Agent determines that the indemnity provided in Section 18.6 may not be available or adequate.

18.5 Enforcement Measures

     Any legal proceedings and enforcement measures on behalf of the Lenders will be taken by the Agent; at the Agent’s request, all Lenders must join the Agent in such proceedings or enforcement measures.

18.6 Indemnification

     Each Lender will indemnify the Agent (and its directors, officers, employees and agents), proportionately to its respective Commitment (and not solidarily), from and against all losses suffered or liabilities or expenses incurred by the Agent of any kind or nature when exercising its

- 53 -

rights and powers, save any losses, liabilities or expenses resulting from the wilful misconduct or gross negligence of the Agent (or its directors, officers, employees or agents).

18.7 Reliance on Reports

     The Agent will be entitled to make any determination of the Borrowing Base or of any Applicable Margin or Rate based on the most recent reports or certificates furnished by any Borrower in relation to such matters.

18.8 Liability of the Agent

     The Agent will only be liable to the Lenders for willful misconduct or gross negligence, and will have no liability as a consequence of a failure of any Person to fulfil its obligations or any action authorized by the Majority Lenders (or by all Lenders where the consent of all Lenders is required). The Agent will be entitled to assume that there exists no Default, unless the Agent has been notified in writing of the existence of a Default.

18.9 Liability of Lenders

     Each Lender acknowledges that it has been and will continue to be solely responsible for making its own independent appraisal and investigation of the financial condition of the Borrowers and the other Abitibi Entities and of the value of their assets (including the value of the Charged Mills) and for the assessment of the risks arising from the Facilities. No Lender may rely on the Agent in this regard nor will the Agent be responsible for ensuring the validity or enforceability of any Credit Document.

18.10 Rights of the Agent as Lender

     In its capacity as Lender, the Agent has the same rights as the other Lenders and may exercise such rights independently of its role as Agent; unless the context otherwise requires, the expression “Lender” also refers to the Lender which is the Agent.

18.11 Sharing of Information

(a)

The Lenders may share with each other any information held by them regarding the financial condition, business or property of the Abitibi Entities or relating to matters contemplated by the Credit Documents. The Lenders may provide such information on a confidential and need-to-know basis to any financial institution which is an assignee or a prospective assignee of Commitments or a participant in the Credit Facilities.

(b)

The Agent may disclose to any agency or organization that assigns standard identification numbers to credit facilities such basic information describing the Facilities as is necessary to assign unique identifiers (and, if requested, supply a

- 54 -

copy of this Agreement), it being understood that the Person to whom such disclosure is made will be informed of the confidential nature of such information and instructed to make available to the public only such information as such person normally makes available in the course of its business of assigning identification numbers. In addition, the Agent may provide to Loan Pricing Corporation or other recognized publishers of information for circulation in the loan market information of the type customarily provided by financial institutions to Loan Pricing Corporation.

18.12 Competition

     Subject to the other provisions of this Agreement, the Agent and each of the Lenders may enter into other transactions with any Abitibi Entity and they are not required to notify each other of such transactions.

18.13 Successor Agent

     The Agent may resign by giving notice thereof to the Borrowers and to the Lenders. The Agent may also be replaced by the Majority Lenders following the failure by the Agent to perform its obligations under this Agreement. The resignation or replacement of the Agent will be effective 30 days after the appointment by the Majority Lenders, after consultation with the Borrowers, of a successor Agent from among the Lenders. Promptly after being so appointed, any successor Agent must give notice thereof to the Borrowers and the Lenders. From the effective date of its appointment, any successor Agent will be vested with all the rights, powers and duties of the Agent under the Credit Documents.

19 - Decisions, Waivers and Amendments

19.1 Amendments and Waivers by the Majority Lenders

     Subject to Section 19.2 and except as otherwise expressly provided in this Agreement, the provisions of the Credit Documents may be amended or waived, and consents thereunder may be given, only by an instrument in writing signed by the Agent, with the approval of the Majority Lenders, and in the case of an amendment, also signed by the relevant Abitibi Entities.

19.2 Amendments and Waivers by Unanimous Approval

     Except as otherwise expressly provided in this Agreement, an amendment, waiver or consent that relates to any of the following matters must be made or given by an instrument in writing signed by the Agent, with the prior consent of all Lenders, and in the case of an amendment, also signed by the relevant Abitibi Entities:

(a) the extension of the maturity date of any Facility;

- 55 -

(b)	any change in the amount of any Facility or in the Commitment of any Lender;
(c)	any postponement of the due date, any subordination or any reduction of any amount payable hereunder;
(d)	the reduction of any interest rate, discount rate or fee;
(e)	the release or subordination of any portion of the Security; and
(f)	the provisions of Section 9.1 and Section 9.2, any Event of Default provided in Sections 16.1 (a), 16.1(f), 16.1(g) and 16.1(h), the provisions of Articles 17, 18 and 19 and the definition of the “Majority Lenders”.

19.3 Dissenting Lenders

(a)

Where an amendment or waiver referred to in Section 19.2 has been approved by the Majority Lenders, but not by all the Lenders, the Agent will notify the Borrowers and each Lender of such fact and will identify the Lenders approving of such amendment or waiver (each an “Approving Lender”) and the Lenders disapproving of such amendment or waiver (each a “Dissenting Lender”).

(b)

Each Approving Lender may at its option, and with the approval of all of the other Approving Lenders, acquire all or any portion of the Commitments of and the outstanding Borrowings owing to the Dissenting Lenders by giving written notice to the Agent of the portion of the Commitments of and Borrowings owing to the Dissenting Lenders which such Approving Lender is prepared to acquire. Such notice will be given not more than 10 Business Days following receipt by such Approving Lender of the notice given by the Agent pursuant to Section 19.3 (a). If more than one Approving Lender gives notice to the Agent that it wishes to acquire all or a portion of the Commitments and outstanding Borrowings of the Dissenting Lenders, then to the extent that the amount of Commitments and outstanding Borrowings which such Approving Lenders wish to acquire exceeds the amount of Commitments and outstanding Borrowings to be acquired, each of the Approving Lenders will be entitled to acquire its rateable portion (determined according to the respective amounts which they have indicated in such notice) of the said Commitments and outstanding Borrowings. Any such acquisition will be effected through an assignment and substantially in accordance with Section 20.4. The Agent will notify the Borrowers of the acquisition pursuant to this Section 19.3 of any portion of the Commitments and the outstanding Borrowings of the Dissenting Lenders. The Borrowers and each Dissenting Lender whose Commitment and Borrowings are to be acquired pursuant to this Section 19.3 will execute all such agreements and instruments as may be reasonably required by the Agent and the Approving Lenders to give effect to such acquisition.

- 56 -

20 - Miscellaneous

20.1 Books and Accounts

     The Agent will keep books and accounts evidencing the transactions made pursuant to this Agreement. Absent manifest error, such books and accounts will be deemed to represent accurately such transactions and the Indebtedness of the Borrowers under the Facilities.

20.2 Determination

     In the absence of manifest error, any determination made by the Agent of the amounts payable hereunder will be conclusive and binding upon the Lenders and the Borrowers.

20.3 Prohibition on Assignment by Borrowers

     No Borrower may assign its rights, or the amounts to be received by it, under this Agreement.

20.4 Assignments and Participations

(a)	A Lender (the “Assignor”) may assign, in whole or in part, its Commitment (including outstanding Borrowings owing to it) to any Person who makes, purchases or otherwise invests in commercial loans in the ordinary course of its business (the “Assignee”). The assignment must be made in an instrument in substantially in the form of Schedule “G”. The Assignor must pay to the Agent, for its own account, an assignment fee of $3,500. When the assignment becomes effective, the Assignee will become a Lender and will benefit from the rights and be liable for the obligations of the Assignor, proportionately to the assigned Commitment, and, to the same extent, the Assignor will be released from its obligations.
(b)	No partial assignment of a Commitment may be made if the residual amount of the total Commitment of the Assignor or if the total Commitment of the Assignee is less than $5,000,000.
(c)	Concurrently with any assignment in favour of an Assignee who is not at the time of the assignment party to this Agreement, each Abitibi Entity who has provided Security will, if requested by the Agent, acknowledge that the Assignee is entitled to the benefit of the Security.
(d)	Each assignment by a Lender is subject to the prior consent of the Agent, the Issuing Lender and the Swingline Lender and, if made at a time when no Default is continuing, to the prior consent of the Borrowers (which consents will not be

- 57 -

unreasonably withheld). However, no such consent of the Borrowers will be required if the Assignee is already a Lender.

(e)

Sections 20.4(a) to 20.4(d) do not apply to a participation that a Lender may grant to another financial institution provided that no such participation will release any Lender from its obligations under the Credit Documents.

(f)

No Assignee who is an Affiliate of ACI will have any voting right for the purposes of any decision of the Lenders contemplated by Article 19 or any other provisions of the Credit Documents. Therefore, all decisions required to be made under the Credit Documents by all Lenders or by Lenders whose Commitments represent a certain percentage of the Facilities will be made excluding the Commitment of such Assignee from the calculation of the amount of the Facilities and as if said Assignee were not a Lender. For purposes of this Section 20.4(f), the definition of “Control” must be read replacing 50% by 5%.

20.5 Notes

     At the request of a Lender, any Borrower will execute in favour of such Lender a note evidencing its indebtedness to such Lender under this Agreement.

20.6 No Waiver

     The omission by the Agent or any Lender to exercise any of its rights will not be deemed to be a waiver of the exercise of any such right subsequently. The omission by the Agent or any Lender to notify any Abitibi Entity of the occurrence of a Default will not be deemed to be a waiver of the right of the Agent or of such Lender to avail itself of such Default.

20.7 Irrevocability of Notices of Borrowings

     No Borrower may cancel a notice of Borrowing, conversion, renewal, reduction or prepayment. The Borrower concerned must indemnify the Lenders in respect of any loss resulting from its failure to act in accordance with such notice.

20.8 Indemnification

(a) The Borrowers must pay on demand the amount of all reasonable costs and expenses (including legal and other professional fees) incurred by the Agent in connection with the implementation of the Facilities and the preparation, negotiation, execution, syndication and administration of the Credit Documents, as well as the reasonable costs and expenses incurred by the Agent or the Lenders in connection with the enforcement of, or the preservation of any rights under, any Credit Document.

- 58 -

(b)	If any law, regulation, administrative decision or guideline or decision of a Court (i) increases the cost of the Facilities for any Lender or (ii) reduces the income receivable by any Lender from the Facilities (including, without limitation, by reason of the imposition of reserves, taxes or requirements as to the capital adequacy of such Lender but in no event by reason of taxes on the overall net income of a Lender), such Lender may send to the Borrowers a statement indicating the amount of such additional cost or reduction of income; in the absence of manifest error, this statement will be conclusive evidence of the amount of such additional cost or reduction of income and the Borrowers must pay forthwith said amount to such Lender.
(c)	The Borrowers must pay on demand the amount of any loss suffered by a Lender as a result of the conversion or repayment of a Borrowing before the maturity date of its period, irrespective of the cause of such conversion or repayment (including a repayment resulting from a demand for payment after the occurrence of an Event of Default). In the absence of manifest error, a statement prepared by the affected Lender indicating the amount of such loss and the method by which the loss was calculated will be binding and conclusive.
(d)	The Borrowers must indemnify the Agent, the Lenders, their Affiliates and their respective officers, directors, employees and agents and hold them harmless from and against all losses, liabilities, claims, damages or expenses (including the costs to defend any claim) suffered or incurred by or made against any of them in any manner whatsoever arising from or related to the Credit Documents or the transactions contemplated thereby (including the use or intended use of the proceeds from any Borrowing or as a result of any Default or non-compliance by any Abitibi Entity with any Environmental Laws or of any claim under Environmental Laws in connection with the operations of, or any property owned or operated by, any Abitibi Entity).

20.9 Mitigation of costs

     Each Lender will use its best efforts to avoid any additional cost or reduction of income for which a Borrower is required to indemnify such Lender pursuant to Section 20.8(b). However, nothing herein will require any Lender to take any action which would cause such Lender to incur any expense which would not materially reduce any amount to be received pursuant to Section 20.8(b) or which the Lender determines in its sole judgment to be inadvisable for regulatory, competitive or internal management reasons. The Borrowers will reimburse any Lender for any such expense incurred by such Lender in taking any action pursuant to this Section 20.9.

20.10 Corrections of Errors

     The Agent is authorized to correct any typographical error or other error of an editorial nature in this Agreement and to substitute such corrected text in the counterparts of this

- 59 -

Agreement, provided that such corrections do not modify the meaning or the interpretation of this Agreement and provided that copies of the corrected texts are remitted to each party.

20.11 Communications

     The Agent is entitled to rely in its dealings with any Borrower upon any instruction or notice which the Agent believes in good faith to have been given by a Person authorized to give such instruction or notice or to make the applicable transaction.

20.12 Counterparts

     This Agreement may be executed in any number of counterparts, all of which taken together constitute one and the same instrument. A party may execute this Agreement by signing any counterpart.

20.13 Submission to Jurisdiction

     The Borrowers hereby submit to the nonexclusive jurisdiction of the courts sitting in the judicial district of Montréal for the purposes of all legal proceedings arising out of or relating to the Credit Documents or the transactions contemplated thereby. The Borrowers irrevocably waive, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum.

20.14 Waiver of Jury Trial

     EACH OF THE BORROWERS, THE AGENT AND THE LENDERS IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER CREDIT DOCUMENTS.

21 - Notices

21.1 Sending of Notices

     Unless otherwise provided, any notice to be given to a party in connection with this Agreement will be given in writing and will be given by personal delivery, by a reputable delivery service, by telecopier or (except for any notice pursuant to Article 16) by electronic mail, addressed to the recipient at its address specified in Schedule “H” hereof or at such other address as may be notified by such party to the others pursuant to this Article.

- 60 -

21.2 Receipt of Notices

     Any notice given by personal delivery or by a delivery service will be conclusively deemed to have been given at the time of such delivery and, if given by telecopier or by electronic mail, on the day of transmittal if before 3:00 p.m. on a Business Day, or on the following Business Day if such transmission occurs on a day which is not a Business Day or after 3:00 p.m. on a Business Day. If the telecopy or electronic transmission system suffers any interruptions by way of a strike, slow-down, a force majeure, or any other cause, a party giving a notice must do so using another means of communication not affected by the disruption.

     IN WITNESS WHEREOF the parties have caused this Agreement to be duly executed as of the date and year first above written.

Abitibi-Consolidated Inc.
Per:	/s/ [UNREADABLE]
Per:	/s/ [UNREADABLE]
Abitibi-Consolidated Company of Canada
Per:	/s/ [UNREADABLE]
Per:	/s/ [UNREADABLE]
Canadian Imperial Bank of Commerce, as Agent
Per:	/s/ [UNREADABLE]
Per:	/s/ [UNREADABLE]
(the names and signatures of the Lenders are on the next page)

- 61 -

Commitment Amounts			Lenders
			Canadian Imperial Bank of Commerce
Facility A:	$	104,500,000
Facility B:	$	28,500,000	Per:	/s/ [UNREADABLE]
Total:	$	133,000,000		/s/ [UNREADABLE]
			The Bank of Nova Scotia
Facility A:	$	95,857,000	Per:	/s/ [UNREADABLE]
Facility B:	$	26,143,000
Total:	$	122,000,000	Per:	/s/ [UNREADABLE]
			Citibank, N.A., Canadian Branch
Facility A:	$	91,929,000	Per:	/s/ Isabelle Côté
Facility B:	$	25,071,000		ISABELLE CÔTÉ
Total:	$	117,000,000		Director
			Goldman Sachs Canada Credit Partners Co.
Facility A:	$	78,571,000
Facility B:	$	21,429,000	Per:	/s/ [UNREADABLE]
Total:	$	100,000,000

- 62 -

Commitment Amounts			Lenders
			Credit Suisse, Toronto Branch
Facility A:	$	62,857,000	Per:	/s/ Alain Daoust	/s/ Bruce F. Wetherly
Facility B:	$	17,143,000		Alain Daoust	Bruce F. Wetherly
Total:	$	80,000,000		Director	Director,
					Controllers Department
			National Bank of Canada
Facility A:	$	58,929,000	Per:	/s/ [UNREADABLE]	/s/ [UNREADABLE]
Facility B:	$	16,071,000
Total:	$	75,000,000
			ABN AMRO Bank N.V.
Facility A:	$	33,786,000	Per:	/s/ Francors Blenvence	/s/ Marie-Helene Lacroix
Facility B:	$	9,214,000		Francors Blenvence,	Marie-Helene Lacroix
Total:	$	43,000,000		VP	Senior Associate
			Export Development Canada
Facility A:	$	23,571,000	Per:	/s/ Ryan Bell	/s/ Norman Low
Facility B:	$	6,429,000		Ryan Bell	Norman Low
Total:	$	30,000,000

SCHEDULE “A”

APPLICABLE MARGINS OR RATES

		Acceptance Fee/
		Libor/Letter of
Rating	Prime / US Base Rate	Credit fee	Stand-By Fee
BBB-/Baa3 or Higher	0 bps	87.5 bps	25 bps
BB+/Ba1	25 bps	125 bps	30 bps
BB/Ba2	75 bps	175 bps	40 bps
BB-/Ba3	125 bps	225 bps	50 bps
B+/B1	175 bps	275 bps	60 bps
B/B2 or Lower	225 bps	325 bps	70 bps

DETERMINATION OF APPLICABLE MARGIN OR RATE

1.	The rates of the margins applicable to Prime Rate, US Base Rate and Libor and the rates of the Acceptance fees, stand-by fees and Letter of Credit fees under the Facilities (the “Rates”) will be determined as set forth in this Schedule.
2.	During any day that ACI has a senior unsecured long-term debt rating from S&P or Moody’s (a “Rating”), the applicable Rates will be those which correspond to the Rating in effect at the close of business on such day, as specified in the above grid. If, on any day, ACI has a Rating from both of S&P and Moody’s but the two Ratings are not at the same level, then (i) the higher Rating will apply if the Ratings are not more than one level apart, and (ii) the Rating which is at mid-point will apply if the Ratings are more than one level apart; if there is no mid-point level, the applicable Rates will be the simple average of the Rates corresponding to the two intermediate Ratings will apply; if at least one Rating is not greater than BB+ or Bal, then the lower Rating applies. If there exists any day that ACI does not have any Rating, the applicable Rates for such day will be those which correspond to a Rating of lower than B/B2.
3.	Interest and stand-by fees will be calculated, for any day, using the applicable Rate in effect on the relevant day. Acceptance and Letter of Credit fees will be calculated using the Rate in effect on the date such fees are payable. Any change in a Rating resulting in a modification of Rate will give rise to adjustments to Acceptance and Letter of Credit fees previously calculated if the period of calculation extended beyond the date of the modification. The adjustments will apply to the number of days remaining to accrue from the date of the modification. The adjustments will be calculated by the Agent and be payable by the Borrower concerned or the Lenders (as applicable) three Business Days after demand from the Agent.

- 65 -

4. With respect to Letter of Credit fees, the “Letter of Credit fee” Rate specified in the above grid will apply to financial Letters of Credit; the Rate applicable to non-financial Letters of Credit will be equal to 50% of the Rate applicable to financial Letters of Credit. For the purposes of the foregoing:

(b)

“non-financial Letter of Credit” means a commercial or documentary letter of credit or guarantee backing the purchase price of goods or supporting the particular performance of non-financial or commercial contracts or undertakings which is subject to a conversion factor of 20% or 50% according to the Capital Adequacy Guideline of the Office of the Superintendent of Financial Institutions (Canada) in effect on the date of issue of such letter of credit or guarantee, and also includes any letter of credit or guarantee which is subject to the same conversion factor; as of the date hereof, the following are considered by such guideline as subject to such conversion factors: (i) performance bonds, warranties, indemnities, performance stand-by letters of credit backing the performance of non-financial or commercial contracts or undertakings (including arrangements backing sub-contractors’ and suppliers’ performance, labour and materials contracts, delivery of merchandise, bids or tender bonds), (ii) guarantees of repayment of deposits or prepayments in cases of non-performance, and (iii) customs and excise bonds; and

(c)

“financial Letter of Credit” means any Letter of Credit which is not a non- financial Letter of Credit.

- 66 -

SCHEDULE “B”

BORROWING BASE REPORT

[ Date ]

[Name and address of Agent]

RE: Credit Agreement dated as of October 3, 2005

     Reference is made to the above-mentioned Credit Agreement entered into between, inter alia, Abitibi-Consolidated Inc. (“ACI”) and the Lenders mentioned therein. I am an Authorized Officer of ACI and I hereby certify in such capacity that:

1.	As at the last Business Day of the month immediately preceding the date hereof, the Borrowing Base (expressed in Dollars) amounted to $•. The calculation has been made in accordance with the requirements of the Credit Agreement and the details of such calculation are set forth in the annex attached hereto.
2.	The Borrowing Base has been calculated on the basis of qualifying inventory located in Canada [and the United States] and qualifying receivables due by customers located in Canada, the United States [and •]. For purposes of such calculation, the location of an account receivable is the billing address of the relevant customer.
3.	The attached annex also contains a breakdown by Borrower, by Designated Subsidiary and by country of the inventory and accounts receivable included in the Borrowing Base and also, in the case of inventory, by Canadian province or state of the United States.
	[If any Securitization Program is outstanding while Facility B is available the annex must also contain information permitting to identify the class(es) of accounts receivable which are subject to such program and to distinguish such accounts receivable from those included in the Borrowing Base.]

- 67 -

SCHEDULE “C”

FORM OF DESIGNATION NOTICE

To the Agent and the Lenders under the Credit Agreement below:

RE: Designation of [name] as a Designated Subsidiary

Reference is made to the Credit Agreement dated as of October 3, 2005 between Abitibi Consolidated Inc., Abitibi-Consolidated Company of Canada (the “Borrowers”), Canadian Imperial Bank of Commerce as agent (the “Agent”) and the Lenders from time to time parties thereto (as amended and restated from time to time, the “Credit Agreement”). Capitalized terms used but not defined herein have the meaning given to them in the Credit Agreement.

We hereby designate [name] as a Designated Subsidiary and we confirm that all representations and warranties made in the Credit Agreement which are applicable to Designated Subsidiaries and Abitibi Entities are true and correct in respect of [name] . [Name] is a corporation incorporated under the laws of • and a [direct/indirect] wholly-owned Subsidiary of ACI [in that all outstanding shares of [name] are held by • which in turn is a wholly-owned Subsidiary of ACI*]. The registered and chief executive offices of [name] are located at •. We attach the following documents:

1.	A copy of the unaudited unconsolidated financial statements of [name] for its financial year ended in December of last year as well as its unaudited unconsolidated financial statements for the quarter ended [most recent].
2.	A summary description of the inventory and accounts receivable of [name], indicating (i) their value with a breakdown by jurisdiction, and (ii) the categories of inventory and accounts receivable intended to be included in the Borrowing Base.

Please advise whether the designation made hereby is acceptable to the Majority Lenders. Promptly after your positive response to that effect, we will provide to the Agent and the Lenders in respect of [name] the Security Documents required to be delivered pursuant to Article 10 of the Credit Agreement by a Designated Subsidiary. The designation will become effective upon your confirmation that such Security Documents have been received, in form and substance satisfactory to the Agent and the Lenders.

*This language applies only in the case of an indirect holding and may have to be adapted to correspond to the applicable corporate structure.

- 68 -

SCHEDULE “ D ”

NOTICE OF BORROWING
[CONVERSION OR RENEWAL]

[ Date ]

[Name and address of Agent]

RE: Credit Agreement dated October 3, 2005

Sirs:

     Reference is made to the above-mentioned Credit Agreement entered into between, inter alia, the undersigned and the Lenders mentioned therein.

     We confirm our request for a Borrowing [or for a conversion or renewal] to be made on [date], the details of which are as follows:

- Applicable Facility:

- Form of Borrowing: [Prime Rate, Acceptances, US Base Rate Loan, Libor Loan]

- Amount:

- Date of Borrowing: [or of conversion or renewal]

- Period:

     On the date hereof, we certify that the representations and warranties set forth in the Credit Agreement are still true and correct in all material respects and that no Default has occurred and is continuing.

           [Name of the Borrower concerned]

Per:

Note: This form (adapted accordingly) may also be used for a notice of repayment.

- 69 -

SCHEDULE “E”

EXISTING LETTERS OF CREDIT
Deemed Utilizations

Issuer	Amount	Beneficiary	Maturity
The Bank of Nova Scotia	Cdn. $1,075,824.97	WSIB Ontario Schedule 2 Industry Sector	July 10, 2006
	Cdn. $699,269.00	Clarica Life Insurance Company	May 31,2006
	Cdn. $219,300.00	Clarica Life Insurance Company	May 31,2006
	US $15,000.00	Texas Department of Transportation	July 3, 2006
	US $57,800.00	Akhbar el Yom Organization	November 5, 2005
	US $56,300.00	Al Ahram Establishment	November 23, 2005
	US $20,000.00	Al Ahram Establishment	November 23, 2005
	US $154,500.00	Al Ahram Establishment	December 2, 2005
	US $91,649.40	Al Ahram Establishment	December 16, 2005
	US $101,250.00	Dar El Tahrir Printing & Publishing	October 13, 2005
	US $101,250.00	Dar El Tahrir Printing & Publishing	October 13, 2005
	US $101,000.00	Dar El Tahrir Printing & Publishing	November 20, 2005
	US $67,500.00	Dar El Tahrir Printing & Publishing	December 16, 2005
	US $64,665.00	Al Ahram Establishment	November 29, 2005
	US $133,000.00	Akhbar el Yom Organization	December 1, 2005
	US $236,670.00	Al Ahram Establishment	December 6, 2005
	Cdn. $12,521,544.00	Independent Electricity Market Operator	April 30, 2006
	Cdn. $10,000.00	Transport Quebec	June 30, 2006

- 70 -

Issuer	Amount	Beneficiary	Maturity
Canadian Imperial Bank of Commerce	Cdn. $400,000.00	Marine Environment (Dept. Fisheries & Oceans)	February 28, 2006
	Cdn. $1,796,511.00	Ministry of Environment & Energy	December 30, 2005
	Cdn. $43,081.00	Ministry of Environment	December 23, 2005
	Cdn. $60,506.00	Ministry of Environment	February 24, 2006
	Cdn. $5,000.00	Minister of Finance & Corporate Relations	May 15, 2006
	Cdn. $139,875.00	Minister of Finance & Corporate Relations	June 12, 2006
	Cnd. $2,500.00	Ministry of Energy & Mines BC (Donohue)	April 3, 2006
	Cnd. $2,500.00	Ministry of Energy & Mines BC (Donohue)	June 30, 2006
	Cdn. $750,000.00	Clarica Life Insurance Company “as agent”	July 12, 2006
	Cdn. $1,200,000.00	Clarica Life Insurance Company “as agent”	May 31, 2006
	Cdn. $661,288.32	Her Majesty the Queen in right of Ontario	December 15, 2005
	Cdn. $44,685.16	Her Majesty the Queen in right of Ontario	June 30, 2006
	Cdn. $500,000.00	City of Toronto Transportation Services	May 2, 2006
	Cdn. $6,164,000.00	Fiducie Desjardins (Serp executive pension plan)	July 14, 2006
	Cdn. $258,748.00	Her Majesty the Queen in right of Ontario	December 29, 2005

   - 71 - 

SCHEDULE “ F ”

COMPLIANCE CERTIFICATE

[ Date ]

[Name and address of Agent]

RE: Credit Agreement dated October 3, 2005

     Reference is made to the above-mentioned Credit Agreement entered into between, inter alia, Abitibi-Consolidated Inc. (“ACI”) and the Lenders mentioned therein. I am an Authorized Officer of ACI and I hereby certify in such capacity that, to the best of my knowledge but after reasonable enquiry, the representations and warranties set forth in the Credit Agreement are still true and correct in all material respects and no Default has occurred and is continuing.

     I also certify that, on the last day of the last financial quarter of ACI,

i)	the Net Funded Debt to Total Capitalization Ratio of ACI was •,
ii)	the Interest Coverage Ratio of ACI was •,
iii)	the Charged Mills EBITDA was •,
iv)	the aggregate amount of all non-cash write-downs effected for the purposes of determining Consolidated Equity was •, and
iv)	after giving effect to the Security and other existing Liens on the assets of the Abitibi Entities, the principal amount of indebtedness for borrowed money that the Abitibi Entities would still have been permitted pursuant to the indentures to secure by Liens over their assets was •; for purposes of the foregoing, the term “indentures” means any and all of the indentures governing outstanding notes or debentures issued or guaranteed by ACI.

     All calculations supporting the above statements have been made in accordance with the Credit Agreement (or, with respect to paragraph v), the indentures) and the details of such calculations are set forth in the attached annex.

- 72 -

SCHEDULE “G”

FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT

     ASSIGNMENT AND ASSUMPTION AGREEMENT entered into in •, on this         day of                    , • between                                         (the “Assignor”) and                                        (the “Assignee”).

     WHEREAS a credit agreement has been entered into as of October 3, 2005 among Abitibi-Consolidated Inc. and Abitibi-Consolidated Company of Canada, as Borrowers, Canadian Imperial Bank of Commerce, as Agent, and the Lenders (as amended and supplemented from time to time, the “Credit Agreement”);

     WHEREAS the Assignor is a Lender under the Credit Agreement;

     WHEREAS, as provided in the Credit Agreement, the Assignor has Commitments in respect of the Facilities, with $                     being allocated to Facility A and with $                     being allocated to Facility B;

     WHEREAS a Lender may assign, in whole or in part, its Commitments with respect to the Facilities to any other financial institution pursuant to Section 20.4 of the Credit Agreement;

     WHEREAS the Assignor proposes to assign to the Assignee all of its rights under the Credit Agreement in respect of a portion of the Assignor’s Commitments, such assigned portion to be in the aggregate amount of $                     in respect of the Facility A and to be in the aggregate amount of $                     in respect of the Facility B (the “Assigned Amounts”), together with a corresponding portion of the Borrowings owed to the Assignor, and the Assignee proposes to accept such assignment and assume the corresponding obligations of the Assignor;

NOW, THEREFORE, the parties hereto agree as follows:

1.	Definitions
	Capitalized terms used but not defined herein have the meanings assigned to them in the Credit Agreement.
2.	Assignment
	The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor (the “Assigned Rights”) under the Credit Agreement to the extent of the Assigned Amounts.

- 73 -

3.	Assumption
	The Assignee hereby accepts such assignment and assumes all of the obligations of the Assignor (the “Assigned Obligations”) under the Credit Agreement to the extent of the Assigned Amounts.
4.	Effective Date
	This Agreement will come into effect on                                         (the “Effective Date”).
5.	Rights and Obligations of the Parties
	Upon the execution and delivery of this Agreement by the Assignor and the Assignee, the consent hereto by the Borrowers (if required under the Credit Agreement) and the Agent:

vi)	the Assignee will, as of the Effective Date, have the rights and be obligated to perform the obligations of a Lender under the Credit Agreement with Commitments in respect of the Facilities in amounts equal to the Assigned Amounts, with $                     being allocated to the Facility A and with $                     being allocated to the Facility B;
vii)	the Commitments of the Assignor in respect of the Facilities will, as of the Effective Date, be reduced by like amounts and the Assignor will be released from its obligations under the Credit Agreement to the extent of the Assigned Obligations which are assumed by the Assignee; and
viii)	the Assignee will, as of the Effective Date, be bound by and entitled to the full benefit of the Credit Agreement and of the other Credit Documents (including the Security Documents) to the extent of the Assigned Rights and Assigned Obligations as if it were an original party thereto.

6.	Payments
	From the Effective Date, the Agent will make all payments in respect of the Assigned Rights to the Assignee, whether such amounts have accrued prior to or after the Effective Date. The Assignor and the Assignee will make directly between themselves their own arrangements relating to the payment by the Assignee to the Assignor of the price of assignment or to the payment of adjustments (if any) on account of interest and fees accrued prior to or after the Effective Date.
7.	Non-Reliance on Assignor
	The Assignor makes no representation in connection with, and will have no responsibility with respect to the solvency or financial condition or statements of any Abitibi Entity or of any other Person, or the validity and enforceability of the Credit Documents. The Assignee acknowledges that it has, independently and without reliance on the Assignor,

- 74 -

	and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the financial condition of any Abitibi Entity or of any other Person.
8.	Representations
	The Assignee represents and warrants to the Borrower that this assignment will not increase for the Borrower the costs of the Borrowings pursuant to Section 8.4 of the Credit Agreement. The Assignee and the Assignor represent and warrant to one another, and also to the Borrowers, the Agent and the Lenders that they have the capacity, right and power to execute this Agreement and to perform the obligations resulting therefrom, [that they are Affiliates] and that they have taken all necessary action to authorize the execution of this Agreement. The Assignor represents and warrants to the Assignee that the Assignor has not granted any Lien on and has not assigned the Assigned Rights to any other Person.
9.	Warranty
	Subject to Section 8, this assignment is made without any warranty, express or implied, from the Assignor.
10.	Existing Lender
	The rights and obligations of the Assignee resulting form this Agreement are in addition to, and not in substitution for, the rights and obligations that the Assignee may otherwise have as Lender under the Credit Agreement.
11.	Governing Law
	This Agreement will be governed by and construed in accordance with the laws of the Province of Québec.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed in the place and on the date mentioned on the first page hereof.

	[ASSIGNOR], as Lender		[ASSIGNEE]
By:		By:
Title:		Title:

- 75 -

The Agent and the Borrowers consent to this Agreement. Each Abitibi Entity acknowledges and agrees that the Security granted by it in favour of the Agent and the Lenders will also benefit the Assignee.

	ABITIBI-CONSOLIDATED INC. ABITIBI-CONSOLIDATED COMPANY OF COMPANY, as Borrowers
By:
Title:
	CANADIAN IMPERIAL BANK OF
	COMMERCE, acting as Agent
By:
Title:
	[Names of the other Abitibi Entities]
By:
Title:

- 76 -

S C H E D U L E “H”

ADDRESSES FOR NOTICE PURPOSES

Canadian Imperial Bank of Commerce,	The Bank of Nova Scotia
as Agent and as Lender	as Lender
c/o CIBC World Markets	1002 Sherbrooke Street West
Credit Capital Markets	9th Floor
BCE Place, 8th Floor	Montréal (Québec) H3A 3L6
161 Bay Street
Toronto, Ontario M5J 2S8

		Attention:	David Angel
Attention:	Loan Syndications	Fax:	(514) 499-5504
Fax:	(416) 956-3830	E-mail:	david_angel@scotiacapital.com
E-mail:	david.evelyn@cibc.ca

Citibank, N.A., Canadian Branch	National Bank of Canada
as Lender	as Lender
630, René-Lévesque Blvd. West	1155 Metcalfe Street, 5th Floor
Suite 2450	Montréal, Québec H3B 4S9
Montréal, Québec H3B 1S6

		Attention:	Roch Ledoux
Attention:	Isabelle Côté		Director
Fax:	(514)227-8222	Fax:	(514) 390-7828
E-mail:	isabelle.f.Côté@citigroup.com	E-mail:	roch.ledoux@nbfinancial.com

ABN AMRO Bank N.V.,	Credit Suisse, Toronto Branch, as Lender
as Lender
	1 First Canadian Place
600 de Maisonneuve Blvd. West	Suite 3000
Suite 1500	Toronto, Ontario M5X 1C9
Montréal, Québec H3A 3J2

		Attention:	Alain Daoust
Attention :	Vice President		Director
Fax:	(514) 284-2357	Fax:	(416) 352-4527
E-mail:	francois.bienvenue@abnamro.com	E-mail:	alain.daoust@csfb.com

- 77 -

Goldman Sachs Canada Credit	Export Development Canada
Partners Co., as Lender	as Lender
30 Hudson Street, 17th Floor	151 O’Connor
Jersey City, NJ 07302	Ottawa, Ontario K1A 1K3

Attention:	Michelle E. Latzoni	Attention:	Financial Services Manager
Fax:	(212) 357-4597		Advanced Technologies and
E-mail:	michelle. latzoni@gs.com		Manufacturing
		Fax:	(613) 598-6858
		E-mail:	rbell@edc.ca

All notices to the Borrowers collectively or	Abitibi-Consolidated Inc.
to anyone of them may be addressed to:	1155 Metcalfe Street, Suite 800
	Montréal, Québec H3B 5H2

Attention:	Vice President and Treasurer
Attention:	Allen Dea
Fax:	(514) 394-2270
E-mail:	allen_dea@abicon.com

- 78 -

EX-10.43

EXHIBIT 10.43

FIRST AMENDING AGREEMENT dated as of September 28, 2006

BETWEEN:	ABITIBI-CONSOLIDATED INC., (“ACI”)
AND:	ABITIBI CONSOLIDATED COMPANY OF CANADA,
	(the “Borrowers”)
AND:	THE LENDERS PARTY TO THE CREDIT AGREEMENT REFERRED TO BELOW,
	(the “existing Lenders”)
AND:	THE TORONTO-DOMINION BANK, (“TD”)
	(“Lender”)
AND:	CANADIAN IMPERIAL BANK OF COMMERCE,
	(the “Agent”)

Recitals

A.	The Borrowers, the Agent and the existing Lenders are party to a credit agreement dated as of October 3, 2005 (the “Credit Agreement”) providing for credit facilities in an aggregate amount of $700,000,000 (the “Facilities”).
B.	The Facilities are comprised of Facility A (which is an aggregate amount of $550,000,000) and Facility B (which is in an aggregate amount of $150,000,000).
C.	Facility A is currently available while Facility B will be available only when the Facility B Availability Date has occurred (as provided in Section 9.2 of the Credit Agreement).
D.	Pursuant to Section 2.14 of the Credit Agreement, ACI is entitled to request an increase up to $115,000,000 in the aggregate amount of the Facilities (any such increase to be allocated to Facility B but with the total Commitment of each existing or new Lender being reallocated or allocated pro rata to the respective amounts of Facility A and Facility B).
E.	ACI has requested a $50,000,000 increase in the aggregate amount of the Facilities and TD has agreed to become a Lender under the Credit Agreement with a total Commitment equal to the amount of such increase.

- 2 -

F.	Section 2.14 of the Credit Agreement also provides that after such request and the acceptance by a Person who qualifies as new Lender to commit for the amount of the increase, the Agent, the Borrowers, the existing Lenders and the new Lenders will execute an amendment to the Credit Agreement giving effect to the increase and containing the other provisions contemplated in said Section 2.14.
G.	TD qualifies as new Lender pursuant to the Credit Agreement and the parties hereto wish to amend the Credit Agreement as provided in Section 2.14 thereof.

NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:

1. Interpretation

1.1 Capitalized terms used herein and defined in the Credit Agreement have the meanings ascribed to them in the Credit Agreement unless otherwise defined herein.

1.2 Any reference to the Credit Agreement in any Credit Document (including any Security Document) refers to the Credit Agreement as amended hereby.

2. Amendments to the Credit Agreement

2.1	TD hereby becomes a Lender under the Credit Agreement with a total Commitment of $50,000,000.
2.2	Facility B is hereby increased from $150,000,000 to $200,000,000 and the provisions of the Credit are amended accordingly.
2.3	The total Commitment of each existing Lender is hereby reallocated and the total Commitment of TD is hereby allocated, in each case, pro rata to the amount of Facility A and to the new amount of Facility B. As a result of the foregoing, the new amount of the total Commitment of each Leader (and of its Commitment in respect of Facility A and Facility B) is as specified opposite its name on the signature page of this Agreement.

- 3 -

3. Adjustments

3.1	Upon this Agreement being effective, the Agent will notify the Borrowers and the Lenders of the adjustments which are required to be made among the Lenders to ensure that all outstanding Borrowings under Facility A are owed to the Lenders in the proportion of their respective Commitments under Facility A.
3.2	Upon receipt of such notification, TD will promptly pay to the Agent the amounts payable by TD under such adjustments and the Agent will promptly distribute to the other Lenders the amounts so received to give effect to such adjustments. The Borrowers acknowledge that upon such payment and distribution being made, the Borrowings so adjusted will be owing to the Lenders as provided in such adjustments.
3.3	The Agent may determine the adjustments to be made pursuant to Section 3.1 without regard to outstanding overdraft utilizations with the Swingline Lender pursuant to Section 2.9.

4. Conditions Precedent

Prior to or concurrently upon the execution of this Agreement, each of the Borrowers must have delivered to the Lenders a copy of the corporate resolutions and other documents evidencing the authority of the persons herein acting on behalf of such Borrower.

5. Confirmation

The Borrowers (i) represent to the Agent and the Lenders that this Agreement will not result in any Default and (ii) confirm and acknowledge that TD as Lender is also entitled to the benefit of the Security Documents.

6. Fees and Expenses

The Borrowers agree to pay on demand all reasonable costs and expenses of the Agent in connection with the preparation, execution, delivery and implementation and administration of this Agreement including the reasonable fees and expenses of counsel for the Agent.

7. Counterparts

This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered will be deemed to be an original and all of which taken together will constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier will be effective as delivery of a manually executed counterpart of this Agreement.

- 4 -

8. Governing Law

This Agreement is governed by, and construed in accordance with, the laws of the Province of Quebec and of the laws of Canada applicable therein.

9. Effectiveness

This Agreement will be effective as of the date on which the Agent confirms to the Borrowers and the Lenders that this Agreement has been executed by all parties hereto.

- 5 -

     IN WITNESS WHEREOF the parties have caused this Agreement to be duly executed as of the date and year first above written.

Abitibi-Consolidated Inc.
Per:	/s/ [UNREADABLE]
Per:	/s/ [UNREADABLE]
Abitibi-Consolidated Company of Canada
Per:	/s/ [UNREADABLE]
Per:	/s/ [UNREADABLE]
Canadian Imperial Bank of Commerce, as Agent
Per:	/s/ David Evelyn
	David Evelyn Director
Per:	/s/ Mark Chandler
	Mark Chandler Executive Director
(the names and signatures of the Lenders are on the next page)

 - 6 -

		Lenders
		Canadian Imperial Bank of Commerce
Facility A:	$97,533,000	Per:	/s/ Peter Rawlins
Facility B:	$35,467,000		Peter Rawlins
			DIRECTOR
Total:	$133,000,000	Per:	/s/ Scott Curtia
			Scott Curtia
			Managing Director
		The Bank of Nova Scotia
Facility A:	$89,467,000	Per:	/s/ David Angel
Facility B:	$32,533,000		David Angel
Total:	$122,000,000	Per:	/s/ David Loewen
			David Loewen
		Citibank, N.A., Canadian Branch
Facility A:	$85,800,000	Per:	/s/ Isabelle Cõté
Facility B:	$31,200,000		Isabelle Cõté
			Director
Total:	$117,000,000	Per:
		Goldman Sachs Canada Credit Partners Co.
Facility A:	$73,333,000	Per:	/s/ Pedro Ramirez
Facility B:	$26,667,000		Pedro Ramirez
			Authorized Signatory
Total:	$100,000,000	Per:

- 7 -

		Lenders
		Credit Suisse, Toronto Branch
Facility A:	$58,667,000	Per:	/s/ Alain Daoust
Facility B:	$21,333,000		Alain Daoust
			Director
Total:	$80,000,000	Per:	/s/ Bruce F. Wetherly
			Bruce F. Wetherly
			Director,
			CREDIT SUISSE, TORONTO BRANCH
		National Bank of Canada
Facility A:	$55,000,000	Per:	/s/ [UNREADABLE]
Facility B:	$20,000,000
Total:	$75,000,000	Per:	/s/ [UNREADABLE]
		The Toronto-Dominion Bank
Facility A:	$36,667,000	Per:	/s/ [UNREADABLE]
Facility B:	$13,333,000
Total:	$50,000,000	Per:	/s/ [UNREADABLE]
		ABN AMRO Bank N.V.
Facility A:	$31,533,000	Per:	/s/ [UNREADABLE]
Facility B:	$11,467,000
Total:	$43,000,000	Per:	/s/ [UNREADABLE]
		Export Development Canada
Facility A:	$22,000,000	Per:	/s/ Dan Kovacs
Facility B:	$8,000,000		Dan Kovacs
			SENIOR ASSET MANAGER
Total:	$30,000,000	Per:	/s/ Kevin Skilliter
			Kevin Skilliter
			SENIOR ASSET MANAGER

EX-10.44

EXHIBIT 10.44

SECOND AMENDING AGREEMENT dated as of November 24, 2006

BETWEEN:	ABITIBI-CONSOLIDATED INC., (“ACI”)
AND:	ABITIBI-CONSOLIDATED COMPANY OF CANADA, (collectively, the “Borrowers”)
AND:	THE LENDERS PARTY TO THE CREDIT AGREEMENT REFERRED TO BELOW, (collectively, the “Lenders”)
AND:	CANADIAN IMPERIAL BANK OF COMMERCE, (the “Agent”)

Recitals

A.	The Borrowers, the Agent and the Lenders are party to a credit agreement dated as of October 3, 2005, as amended on September 28, 2006 (the “Credit Agreement”) providing for credit facilities in an aggregate amount of $750,000,000 (the “Facilities”).
B.	The Lenders have consented to an amendment to the pricing grid further to the Borrower’s request for amendments dated November 10, 2006 addressed to the Agent and the Lenders.
C.	The parties wish to amend the Credit Agreement accordingly.
	NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:

1. Interpretation

1.1	Capitalized terms used herein and defined in the Credit Agreement have the meanings ascribed to them in the Credit Agreement unless otherwise defined herein.
1.2	Any reference to the Credit Agreement in any Credit Document (including any Security Document) refers to the Credit Agreement as amended hereby.

-2-

2. Amendments to the Credit Agreement

Section 2 of Schedule A (Applicable Margins or Rates) is deleted in its entirety and replaced by the following’:

“During any day that ACI has a Corporate Family Issuer Rating from Moody’s or a similar type rating from S&P (a “Rating”), the applicable Rates will be those which correspond to the Rating in effect at the close of business on such day as specified in the above grid. In the absence of such ratings from either Moody’s or S&P, the respective senior unsecured long-term debt ratings from the applicable rating agency shall apply. If, on any day, ACI has a Rating from both of S&P and Moody’s but the two Ratings are not at the same level, then (i) the higher Rating will apply if the Ratings are not more than one level apart, and (ii) the Rating which is at mid-point will apply if the Ratings are more than one level apart; if there is no mid-point level, the applicable Rates will be the simple average of the Rates corresponding to the two intermediate Ratings will apply; if at least one Rating is not greater than BB+ or Ba l, then the lower Rating applies. If there exists any day that ACI does not have any Rating, the applicable Rates for such day will be those which correspond to a Rating of lower than B/B2.”

3. Adjustments

The Agent will make among the Borrowers and the Lenders such adjustments as are necessary to reflect any changes in the Applicable Margin (or Rate) applicable to Borrowings as of the Effective Date (as defined hereunder), and the Borrowers or the Lenders, as applicable, will make to the Agent such payments as are required to give effect to such adjustments.

4. Condition Precedent

Prior to or concurrently upon the execution of this Agreement, each of the Borrowers must have delivered to the Lenders a copy of the corporate resolutions and other documents evidencing the authority of the persons herein acting on behalf of such Borrower.

5. Confirmation

The Borrowers represent to the Agent and the Lenders that this Agreement will not result in any Default.

6. Fees and Expenses

The Borrowers agree to pay on demand all reasonable costs and expenses of the Agent in connection with the preparation, execution, delivery and implementation and administration of this Agreement including the reasonable fees and expenses of counsel for the Agent.

-3-

7. Counterparts

This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered will be deemed to be an original and all of which taken together will constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier will be effective as delivery of a manually executed counterpart of this Agreement.

8. Governing Law

This Agreement is governed by, and construed in accordance with, the laws of the Province of Quebec and of the laws of Canada applicable therein.

9. Effectiveness

This Agreement will be effective as of September 21, 2006 notwithstanding the actual date of its execution (the “Effective Date”).

-4-

     IN WITNESS WHEREOF the parties have caused this Agreement to be duly executed as of the date and year first above written.

Abitibi-Consolidated Inc.
Per:	/s/ [UNREADABLE]
Per:	/s/ [UNREADABLE]
Abiti-Consolidated Company of canada
Per:	/s/ [UNREADABLE]
Per:	/s/ [UNREADABLE]
Canadian Imperial Bank of Commerce, as Agent
Per:	/s/ David Evelyn Director
Per:	/s/ Mark Chandler Executive Director
(the names and signatures of the Lenders are on the next page)

-5-

Lenders
Canadian Imperial Bank of Commerce
Per:	/s/ Mark Chandler Executive Director
Per:	/s/ Peter Rawlins Director
The Bank of Nova Scotia
Per:	/s/ [UNREADABLE]
Per:	/s/ [UNREADABLE]
Citibank, N.A., Canadian Branch
Per:	/s/ [UNREADABLE]
Per:
Goldman Sachs Canada Credit Partners Co.
Per:	/s/ Pedro Ramirez Authorized Signatory
Per:

-6-

	Lenders
Credit Suisse, Toronto Branch
Per:	/s/ Alain Daoust
	Alain Daoust Director
Per:	/s/ Bruce F. Wetherly
	Bruce F. Wetherly Director Credit Suisse, Toronto Branch
National, Bank of Canada
Per:	/s/ [UNREADABLE]
Per:	/s/ [UNREADABLE]
The Toronto-Dominion Bank
Per:	/s/ Mel Saklatvala
	Mel Saklatvala Associate
Per:	/s/ Yves Bergeron
	Yves Bergeron Managing Director
ABN Amro Bank N.V.
Per:	/s/ Francois Bienvenue,
	Francois Bienvenue, Vice President
Per:	/s/ Francois Morin,
	Francois Morin, Assistant Vice President
Export Development Canada
Per:	/s/ [UNREADABLE]
Per:	/s/ [UNREADABLE]

EX-10.45

EXHIBIT 10.45

THIRD AMENDING AGREEMENT dated as of July 16, 2007

BETWEEN:	ABITIBI-CONSOLIDATED INC., (“ACI”)
AND:	ABITIBI-CONSOLIDATED COMPANY OF CANADA,
	(ACCC and collectively with ACI, the “Borrowers”)
AND:	THE LENDERS PARTY TO THE CREDIT AGREEMENT REFERRED TO BELOW,
	(collectively, the “Lenders”)
AND:	CANADIAN IMPERIAL BANK OF COMMERCE,
	(the “Agent”)

Recitals

A.	The Borrowers, the Agent and the Lenders are party to a credit agreement dated as of October 3, 2005, as amended on September 28, 2006 and November 26, 2006 (the “Credit Agreement”) providing for credit facilities in an aggregate amount of $750,000,000 (the “Facilities”).
B.	The Lenders have been requested (i) to grant certain waivers in connection with certain transactions contemplated by ACI and Bowater Incorporated to achieve their proposed merger and described in the Schedule, and (ii) to waive the Interest Coverage Ratio requirement until the second quarter of the 2008 financial year.
C.	The Borrowers have represented to the Lenders that the transactions described in the Schedule hereto are required in order for the proposed merger to achieve its financial and operational efficiency objectives.
D.	In consideration for such waivers, ACCC is willing to provide additional security to the Lenders by way of a mortgage over the ACCC mill located in Thorold, Ontario.
E.	The Majority Lenders are willing to provide the waivers described in Recital B and the Agent, the Borrowers and the Majority Lenders wish to amend the Credit Agreement to give effect to Recital D.

- 2 -

	Now, therefore, the parties agree as follows:
1.	Interpretation

1.1	Capitalized terms used herein and defined in the Credit Agreement have the meanings ascribed to them in the Credit Agreement unless otherwise defined herein.
1.2	Any reference to the Credit Agreement in any Credit Document (including any Security Document) refers to the Credit Agreement as amended hereby.

2. Waivers under the Credit Agreement

2.1	The Lenders hereby waive the provisions of Sections 13.2, 13.3(b) and 13.6 of the Credit Agreement insofar as (but only to the extent that) they do not permit the sale by ACCC and the ultimate transfer of the shares of Donohue Corporation (the “DCorp Shares”) to Abitibi-Bowater Inc. (“ABI”) under the various transactions described in the Schedule hereto or under other transactions not different in their substance which have the same economic effect and produce the same ultimate result. For greater certainty, the book value of the DCorp Shares will not be included in the calculation of permitted dispositions for the purposes of Section 13.3(b)(i) of the Credit Agreement.
2.2	The Lenders hereby waive the requirements of the Interest Coverage Ratio covenant provided for in Section 14.2 of the Credit Agreement from the Effective Date (as defined in Section 4 hereof) to the end of the second quarter of ACI’s 2008 financial year.
2.3	The waivers in Section 2.1 are conditional upon the following:

a)	the simplified final structure described on the last page of the attached Schedule must be in place no later than December 31, 2007 with no substantial change; and
b)	the ABI note in an amount of approximately $550,000,000 referred to in the Schedule must have a maturity falling no later than December 31, 2008 and contain a covenant that substantially all of the assets of DCorp will remain part of the consolidated assets of ABI until repayment in full of the note or other terms which have a similar economic effect and produce a similar ultimate result.

2.4 The Borrowers acknowledge that the waivers in Section 2.1 are granted by the Lenders solely in connection with the proposed merger of ACI and Bowater Incorporated and hereby undertake, in the event that such merger does not occur

- 3 -

	and that certain of the Pre-Combination steps described in the Schedule have occurred, to wind-up and dissolve the entity described as Newco in the Pre-Combination steps of the Schedule and not to complete any of the steps described in the Post-Combination Steps of the Schedule.
2.5	The Borrowers also undertake not to effect or complete any of the transactions and steps described in the Schedule if a Default would result therefrom.

3. Amendments to the Credit Agreement

3.1	Section 10.3(b) of the Credit Agreement is amended by adding the following paragraph immediately after sub-paragraph (iv) :
	“To secure the performance of the obligations of the Borrowers under Facility A, ACCC must also cause 1508756 Ontario Inc. to provide a Guarantee and ACCC and 1508756 Ontario Inc. must provide security over their mill located in Thorold, Ontario (the “Thorold Mill”) including related assets necessary for the operation of such mill.”
3.2	The Thorold Mill will be included in the Charged Mills from the time that the requirements of Sections 10.3(e), 10.5 and 10.7 of the Credit Agreement have been fulfilled in respect of such mill and that 1508756 Ontario Inc. has provided a Guarantee to the Agent and the Lenders of the obligations of the Borrowers under Facility A. From the date of execution of such Guarantee, 1508756 Ontario Inc. will be deemed to be a Designated Subsidiary (except for the purposes of Section 10.2 of the Credit Agreement). ACI will not have the ability to revoke such designation of 1508756 Ontario Inc. as a Designated Subsidiary.
3.3	The Borrowers will, (i) by no later than December 30, 2007, provide to the Agent, for distribution to the Lenders, a Phase I environmental review for the Thorold Mill, (ii) promptly, if recommended by such Phase I environmental review and requested by the Majority Lenders, an intrusive Phase II review, in each case, conducted by an environmental consultant acceptable to the Agent, and (iii) remedy any material non-compliance with Environmental Laws revealed by any such review within a reasonable time.
3.4	Notwithstanding Section 3.1 of this Agreement and Section 10.7 of the Credit Agreement, delivery of a title opinion and of a survey will become a condition precedent to Borrowings only from the 91st day following the date of this Agreement. The Borrowers undertake to provide such opinions and surveys to the Lenders as soon as practicable, but no later than the 90th day following the date of this Agreement. The Borrowers also undertake to correct within a reasonable time any material deficiency revealed by the title opinion and survey relating to the Thorold Mill.

- 4 -

3.5 The Agent and the Lenders hereby agree to execute and deliver, to the extent required to permit ACCC and 1508756 Ontario Inc. to comply with Article XVIII of the Co-gen Lease (as defined below), a postponement of the Security in respect of the Thorold Mill to: (i) the lease of a portion of such property made as of August 1, 2006 between ACCC and 1508756 Ontario Inc., collectively as landlord, and Thorold Co-Gen L.P. (the “Lessee”), as tenant (the “Co-gen Lease”), as the same may be amended; (ii) any mortgage of the Co-gen Lease granted by the Lessee, as the same may be amended; and (iii) the rights of the Lessee under easements and energy supply agreements entered into between ACCC, 1508756 Ontario Inc. and the Lessee, the whole upon terms and conditions acceptable to the Agent.

4. Conditions Precedent

This Agreement will become effective on the date on which the Agent will notify the Borrowers and the Lenders that this Agreement has been executed by all parties hereto, and that the Agent has received copy of the following documents, in form and substance satisfactory to the Agent and counsel to the Agent (the “Effective Date”):

4.1.1	a certificate of good standing in respect of each of the Borrowers and copies of the documents evidencing the authority of the persons acting on behalf of the Borrowers,
4.1.2	an opinion from counsel to the Borrowers that this Agreement has been executed by duly authorized representatives of the Borrowers and constitutes valid and binding obligations of the Borrowers;
4.1.3	the Security Documents relating to the additional security contemplated in Section 3 hereof (other than the Security Documents referred to in Section 3,4); and
4.1.4	an estimate (giving effect to the granting of Security under Section 3 hereof) of the principal amount of Facility A that the Abitibi Entities will be permitted pursuant to the indentures to secure by Liens over their assets.

5. Confirmation

The Borrowers represent to the Agent and the Lenders that this Agreement will not result in any Default.

6. Fees and Expenses

The Borrowers agree to pay on demand all reasonable costs and expenses of the Agent in connection with the preparation, execution, delivery and implementation and administration of this Agreement including the reasonable fees and expenses of counsel for the Agent.

- 5 -

7. Counterparts

This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered will be deemed to be an original and all of which taken together will constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier will be effective as delivery of a manually executed counterpart of this Agreement.

8.	Governing Law
	This Agreement is governed by, and construed in accordance with, the laws of the Province of Quebec and of the laws of Canada applicable therein.

          IN WITNESS WHEREOF the parties have caused this Agreement to be duly executed as of the date and year first above written.

Abitibi-Consolidated Inc.
Per:	/s/ [UNREADABLE]
Per:	/s/ [UNREADABLE]
Abitibi-Consolidated Company of Canada
Per:	/s/ [UNREADABLE]
Per:	/s/ [UNREADABLE]

- 6 -

Canadian Imperial Bank of Commerce, as Agent
Per:	/s/ [UNREADABLE]
Per:	/s/ [UNREADABLE]
(the names and signatures of the Lenders are on the next page)

- 7 -

Lenders
Canadian Imperial Bank of Commerce
Per:	/s/ [UNREADABLE]
Per:	/s/ [UNREADABLE]
The Bank of Nova Scotia
Per:	/s/ [UNREADABLE]
Per:	/s/ [UNREADABLE]
Citibank, N.A., Canadian Branch
Per:	/s/ [UNREADABLE]
Per:	/s/ [UNREADABLE]
Goldman Sachs Canada Credit Partners Co.
Per:	/s/ Pedro Ramirez
	Pedro Ramirez Authorized Signatory
Per:

- 8 -

	Lenders
Credit Suisse, Toronto Branch
Per:	/s/ Bruce F. Netherly Director,
	CREDIT SUISSE TORONTO BRANCH
Per:
	Steve W. Fuh
	Vice-President
National Bank of Canada
Per:
Per:
The Toronto-Dominion Bank
Per:	/s/ Yues Bergeron
	YUES BERGERON
	MANAGING DIRECTOR
Per:	/s/ Mel Saklatvala
	MEL SAKLATVALA, ASSOCIATE
ABN Amro Bank N.V.
Per:	/s/ (UNREADABLE)
Per:	/s/ (UNREADABLE)
Export Development Canada
Per:	/s/ Howard Clysdale
	HOWARD CLYSDALE
	PORTFOLIO MANAGER
Per:	/s/ Isha Aggarwal
	ISHA AGGARWAL
	ASSET MANAGEMENT

- 9 -

Schedule

Please see document attached hereto

SCHEDULE

The following is an overview of the various transactions that are currently contemplated by Abitibi-Consolidated Inc. before and after its combination with Bowater Incorporated. These various steps are subject to change.

Definitions:

“ABI”: AbitibiBowater Inc.

“ACCC”: Abitibi Consolidated Company of Canada

“ACI”: Abitibi-Consolidated Inc.

“BCFP”: “Bowater Canadian Forest Products Inc.,

“BCI”: Bowater Canada Inc,

“BCHI”: Bowater Canadian Holdings incorporated

“B Inc.”: Bowater Incorporated

“D Corp.”: Donohue Corporation

Pre-combination

Simplified current structure:

Step 1: ACCC creates a new subsidiary (“Newco”)

Step 2: ACCC transfers all the shares of D Corp to Newco in exchange for additional shares of Newco and the assumption by Newco of approximately US$750M of debt of ACCC.

Combination: ABI and BCI acquire all the shares of ACI pursuant to a plan of arrangement.

Step 3: Immediately after the combination, Newco is liquidated into ACCC and dissolved.

Post-Combination

Simplified structure immediately after the combination:

Step 1: ABI forms US Sub 1 and transfers approximately 30% of the common shares of ACI to US Sub 1 in exchange for US Sub 1 shares.

     Step 2: ABI forms US Sub 2 and transfers approximately 32.5% of the common shares of ACI to US Sub 2 in exchange for US Sub 2 shares.

Step 3: ABI transfers approximately 17.5% of the common shares of ACI to BCHI in exchange for BCHI shares.

Step 4(a): B Inc. borrows approximately approximately $550M from a third party lender and distributes approximately $550M to ABI¹.

1. Third party borrowing may occur only at a later time to repay the ABI Note 1 (see step 4(b))

Step 4(b): ABI acquires approximately $750M of D Corp shares from ACCC in. exchange for a cash consideration of approximately $550M or for a note of approximately $550M from ABI (the “ABI Note 1”) and a note of approximately $200M from ABI (the “ABI Note 2”). ACCC uses the cash to fund Canadian operations and repay existing debt.

Step 5: ACCC distributes the remaining shares of D Corp to ACI.

Step 6(a): Continuance of ACI under the laws of Nova Scotia and amalgamation with a Nova Scotia unlimited liability company.

Step 6(b): ACI redeems its shares held by US Sub 1 and US Sub 2 by distributing D Corp shares.

Step 7: Transfer of the ABI Note 2 to BCI in exchange for BCFP common stock.

Step 8: Distribution of the ABI Note 2 to B Inc.

Simplified Final Structure:

EX-10.46

EXHIBIT 10.46

FOURTH AMENDING AGREEMENT (this “Agreement”) dated as of August 14, 2007

BETWEEN:	ABITIBI-CONSOLIDATED INC.,
	(“ACI”)
AND:	ABITIBI-CONSOLIDATED COMPANY OF CANADA,
	(“ACCC”)
	(ACI and ACCC are hereinafter collectively referred to as the “Borrowers”)
AND:	THE LENDERS PARTY TO THE CREDIT AGREEMENT REFERRED TO BELOW,
	(collectively, the “Lenders”)
AND:	CANADIAN IMPERIAL BANK OF COMMERCE,
	(the “Agent”)

Recitals

A.	The Borrowers, the Agent, and the Lenders are parties to a credit agreement dated as of October 3, 2005 (as amended as of September 28, 2006, November 26, 2006 and July 17, 2007, the “Credit Agreement”) pursuant to which the Lenders have agreed to make available to the Borrowers Facilities in an aggregate principal amount of up to $750,000,000;
B.	The Facilities are comprised of Facility A (which is in an aggregate amount of $550,000,000) and Facility B (which is in an aggregate amount of $200,000,000);
C.	The Borrowers have requested, from the Agent and the Lenders that the aggregate amount of Facility A be permanently reduced by an amount of $40,000,000;
D.	The Lenders have consented to such an amendment to the Credit Agreement further to the Borrowers’ request dated July 20, 2007.
E.	The parties wish to amend the Credit Agreement accordingly.

2

Now, therefore, the parties agree as follows:

1. Interpretation

1.1	Capitalized terms used herein and defined in the Credit Agreement have the meanings ascribed to them in the Credit Agreement unless otherwise defined herein.
1.2	Any reference to the Credit Agreement in any Credit Document (including any Security Document) refers to the Credit Agreement as amended hereby.

2. Amendments to the Credit Agreement

2.1	Section 2.1 (a) of the Credit Agreement is hereby amended by replacing in the last line “$550,000,000” by “$510,000,000”.
2.2	The total Commitment of each Lender is hereby reallocated pro rata to the new amount of Facility A. As a result of the foregoing, the amount of the total Commitment of each Lender (and of its Commitment in respect of Facility A and Facility B) is now as specified opposite its name on the signature page of this Agreement.
2.3	Section 2.14 (a) of the Credit Agreement is hereby amended by adding the following words after the words “otherwise than by way of” in the first parentheses: “an amendment to this Agreement or”.

3.	Repayments and Adjustments
	On the Effective Date (as defined below), the Borrowers must make a repayment in an amount sufficient for the outstanding Borrowings under Facility A not to exceed the new amount of Facility A.

4.	Conditions Precedent
	This Agreement will become effective on the date (the “Effective Date”) on which the Agent will notify the Borrowers and the Lenders that:

4.1.1	this Agreement has been executed by all parties hereto
4.1.2	the Agent has received copies of the documents evidencing the authority of the persons acting on behalf of the Borrowers;
4.1.3	the Agent has received an opinion from counsel to the Borrowers that this Agreement has been executed by duly authorized representatives of the Borrowers and constitutes valid and binding obligations of the Borrowers; and

3

4.1.4 the third amending agreement to the Credit Agreement dated as of July 17, 2007 has become effective, in that the conditions precedent provided for in Section 4 of such amending agreement have been met.

5.	Confirmation
	The Borrowers represent to the Agent and the Lenders that this Agreement will not result in any Default.

6.	Fees and Expenses
	The Borrowers agree to pay on demand all reasonable costs and expenses of the Agent in connection with the preparation, execution, delivery and implementation and administration of this Agreement including the reasonable tees and expenses of counsel for the Agent.

7.

Counterparts

This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered will be deemed to be an original and all of which taken together will constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier will be effective as delivery of a manually executed counterpart of this Agreement.

8.	Governing Law
	This Agreement is governed by, and construed in accordance with, the laws of the Province of Quebec and of the laws of Canada applicable therein.

IN WITNESS WHEREOF the parties have caused this Agreement to be duly executed as of the date and year first above written.

Abitibi-Consolidated Inc.
Per:	/s/ [UNREADABLE]
Per:	/s/ [UNREADABLE]

4

Abitibi-Consolidated Company of Canada
Per:	/s/ [UNREADABLE]
Per:	/s/ [UNREADABLE]
Canadian Imperial Bank Of Commerce,
as Agent
Per:	/s/ David Evelyn David Evelyn
	Director
Per:	/s/ Mark Chandler Mark Chandler
	Executive Director
(the names and signatures of the Lenders are on the next pages)

5

			Lenders
		Canadian Imperial Bank of Commerce
Facility A:	$90,440,000
Facility B:	$35,467,000	Per:	/s/ [UNREADABLE]
Total:	$125,907,000	Per:	/s/ [UNREADABLE]
		The Bank of Nova Scotia
Facility A:	$82,960,000
Facility B:	$32,533,000	Per:	/s/ [UNREADABLE]
Total:	$115,493,000	Per:	/s/ [UNREADABLE]
		Citibank, N.A., Canadian Branch
Facility A:	$79,560,000
Facility B:	$31,200,000	Per:	/s/ [UNREADABLE]
Total:	$110,760,000	Per:
		Goldman Sachs Canada Credit Partners Co.
Facility A:	$68,000,000
Facility B:	$26,667,000	Per:	/s/ James Balcom
			James Balcom
Total:	$94,667,000	Per:	Authorized Signatory

6

		Lenders
		Credit Suisse, Toronto Branch
Facility A:	$54,400,000
Facility B:	$21,333,000	Per:	/s/ Alain Daousf
			Alain Daousf
			Director
Total:	$75,733,000	Per:	/s/ Steve W. Fuh
			Steve W. Fuh
			Vice-President
		National Bank of Canada
Facility A:	$51,000,000
Facility B:	$20,000,000	Per:	/s/ [UNREADABLE]
Total:	$71,000,000	Per:	/s/ [UNREADABLE]
		The Toronto-Dominion Bank
Facility A:	$34,000,000
Facility B:	$13,333,000	Per:	/s/ [UNREADABLE]
Total:	$47,333,000	Per:	/s/ [UNREADABLE]
		ABN AMRO Bank N, V.
Facility A:	$29,240,000
Facility B:	$11,467,000	Per:	/s/ [UNREADABLE]
Total:	$40,707,000	Per:	/s/ [UNREADABLE]
		Export Development Canada
Facility A:	$20,400,000
Facility B:	$8,000,000	Per:	/s/ Janine Dopson
			JANINE DOPSON
			LOAN ASSET MANAGER
Total:	$28,400,000	Per:	/s/ Howard Clysdale
			HOWARD CLYSDALE
			PORTFOLIO MANAGER

7

The undersigned, as Designated Subsidiary under the Credit Agreement, hereby agrees with the terms of this Fourth Amending Agreement.

1508756 Ontario Inc.
Per:	/s/ [UNREADABLE]
Per:	/s/ [UNREADABLE]

EX-10.47

EXHIBIT 10.47

FIFTH AMENDING AGREEMENT (this “Agreement”) dated as of December 21, 2007

BETWEEN:	ABITIBI-CONSOLIDATED INC.,
	(“ACI”)
AND:	ABITIBI-CONSOLIDATED COMPANY OF CANADA,
	(“ACCC”)
	(ACI and ACCC are hereinafter collectively referred to as the “Borrowers”)
AND:	THE LENDERS PARTY TO THE CREDIT AGREEMENT REFERRED TO BELOW,
	(collectively, the “Lenders”)
AND:	CANADIAN IMPERIAL BANK OF COMMERCE,
	(the “Agent”)

Recitals

A.	The Borrowers, the Agent, and the Lenders are parties to a credit agreement dated as of October 3, 2005 (as amended as of September 28, 2006, November 26, 2006 and July 17, 2007 and August 14, 2007, the “Credit Agreement”) pursuant to which the Lenders have agreed to make available to the Borrowers Facilities in an aggregate principal amount of up to $710,000,000;
B.	The Lenders provided to the Borrowers certain waivers to the provisions of the Credit Agreement pursuant to the terms of the Third Amending Agreement dated as of July 16, 2007 (the “Third Amending Agreement”);
C.	In connection with the decision of the Borrowers to fulfill the conditions precedent to the availability of Facility B, on November 22, 2007 ACI designated Abitibi Consolidated Sales Corporation (“ACSC”) as a Designated Subsidiary under the Credit Agreement;
D.	Pursuant to a Borrowers’ request dated as of December 13, 2007 (the “December Request”), the Lenders have been requested to (i) consent to an extension of the completion date of the reorganization described in the Third Amending Agreement from December 31, 2007 (as provided in the Third Amending Agreement) to March 31, 2008, (ii) consent to an extension of the delivery date of the Phase I environmental review for

Page 2 of 8

	the Thorold Mill from December 30, 2007 (as provided in the Third Amending Agreement) to March 31, 2008, (iii) consider ACSC as a Designated Subsidiary under the Credit Agreement despite the fact that in the future it may cease to be a wholly-owned Subsidiary to ACI and, (iv) amend Section 2.2(b) of the Credit Agreement in order to remove the requirement that Borrowings may be obtained under Facility B only to the extent that Facility A is fully used at the time of such Borrowing.
E.	The Majority Lenders are willing to provide the waivers and amendments described in the December Request, provided however that, upon termination of Facility B, the parties be placed in the same position as if Section 2.2(b) of the Credit Agreement had not been amended and, accordingly, that outstanding Borrowings under Facility B be converted in Borrowings under Facility A (up to the then unused amount thereof).
	NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:

1. Interpretation

1.1	Capitalized terms used herein and defined in the Credit Agreement (as amended) have the meanings ascribed to them in the Credit Agreement unless otherwise defined herein.
1.2	Any reference to the Credit Agreement in any Credit Document (including any Security Document) refers to the Credit Agreement as amended hereby.

2. Waivers to Third Amendment

2.1	Section 2.3(a) of the Third Amending Agreement is amended by replacing “December 31, 2007” by “March 31, 2008”.
2.2	Section 3.3(i) of the Third Amending Agreement is amended by replacing “December 30, 2007” by “March 31, 2008”.

3. Waivers to Credit Agreement

3.1

The Lenders hereby waive, with respect to ACSC, the requirement that such Subsidiary remain a wholly-owned Subsidiary (as provided for in the definition of Designated Subsidiary in Section 1.1 of the Credit Agreement) until completion of Step 9 of the reorganization transactions described in Schedule A to the December Request, it being understood that ACSC will cease to be a Designated Subsidiary on the date such Step 9 is completed and, from such date, its receivables and inventory will no longer be included in the Borrowing Base.

3.2

The Lenders hereby waive the requirement provided for in Section 2.2(b) of the Credit Agreement that Borrowings may be obtained under Facility B only to the

Page 3 of 8

extent that Facility A is fully used at the time of such Borrowing, it being understood that the Borrowers will use their best efforts to use Facility A in full before obtaining Borrowings under Facility B, provided, however, that for such purpose, any overdraft availability pursuant to Section 2.9 of the Credit Agreement will be deemed fully utilized and the Borrowers will be entitled to reserve a reasonable amount of availability for the issuance of additional Letters of Credit under Facility A pursuant to Section 5.1 of the Credit Agreement.

4. Amendments to the Credit Agreement

4.1	A new Section 17.5 is added to the Credit Agreement by adding die following:
	“17.5 Conversions of Borrowings under Facility B

(a)	From the next Business Day following the occurrence of the earlier of (i) the Facility B Maturity Date or (ii) the termination of the right of the Borrowers to use the Facilities pursuant to Section 16.2(a), the outstanding Borrowings under Facility B will automatically be converted into Borrowings under Facility A up to the then unused amount of Facility A.
(b)	For the purposes of such conversion, Prime Rate Loans, US Base Rate Loans, Acceptances, Libor Loans and Letters of Credit under Facility B will become, in the same order, Prime Rate Loans, US Base Rate Loans, Acceptances, Libor Loans and Letters of Credit under Facility A.”

5. Conditions Precedent

This Agreement will become effective on the date (the “Effective Date”) on which the Agent will notify the Borrowers and the Lenders that this Agreement has been executed and that the Agent has received copies of the documents evidencing the authority of the persons acting on behalf of die Borrowers.

6. Confirmation

The Borrowers represent to the Agent and the Lenders that this Agreement will not result in any Default.

7. Fees and Expenses

The Borrowers agree to pay on demand all reasonable costs and expenses of the Agent in connection with the preparation, execution, delivery and implementation and administration of this Agreement including the reasonable fees and expenses of counsel for the Agent.

Page 4 of 8

8. Counterparts

This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered will be deemed to be an original and all of which taken together will constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier will be effective as delivery of a manually executed counterpart of this Agreement.

9. Governing Law

This Agreement is governed by, and construed in accordance with, the laws of the Province of Quebec and of the laws of Canada applicable therein.

IN WITNESS WHEREOF the parties have caused this Agreement to be duly executed as of the date and year first above written.

Abitibi-Consolidated Inc.
Per:	/s/ [UNREADABLE]
Per:	/s/ [UNREADABLE]
Abitbi-Consolidated Company of Canada
Per:	/s/ [UNREADABLE]
Per:	/s/ [UNREADABLE]

Page 5 of 8

Canadian Imperial Bank of Commerce, as Agent
Per:	/s/ David Evelyn
	David Evelyn Director
Per:	/s/ [UNREADABLE]
	UNREADABLE Director
(the names and signatures of the Lenders are on the next pages)

Page 6 of 8

	Lenders
	Canadian Imperial Bank of Commerce
Facility A: $90,440,000
Facility B: $35,467,000	Per: /s/ Mark Chandler
	Mark Chandler
	Executive Director
Total:       $125,907,000	Per: /s/ [UNREADABLE]
	[UNREADABLE]        Executive Director
	The Bank of Nova Scotia
Facility A: $82,960,000
Facility B: $32,533,000	Per: /s/ [UNREADABLE]
Total:       $115,493,000	Per: /s/ [UNREADABLE]
	Citibank, N.A., Canadian Branch
Facility A: $79,560,000
Facility B: $31,200,000	Per: /s/ [UNREADABLE]
Total:       $110,760,000	Per:
	Goldman Sachs Canada Credit Partners Co.
Facility A: $68,000,000	Per: /s/ [UNREADABLE]
Facility B: $26,667,000	Per: /s/ Pedro Ramirez
	Pedro Ramirez        Authorized Signatory
Total:         $94,667,000

Page 7 of 8

	Lenders
	CREDIT SUISSE, TORONTO BRANCH
Facility A:  $54,400,000
Facility B:  $21,333,000	Per: /s/ Alain Daoust
	Alain Daoust         Director
Total:         $75,733,000	Per: /s/ Bruce F. Wernerly
	Bruce F. Wernerly         Director,         CREDIT SUISSE TORONTO BRANCH
	National Bank of Canada
Facility A:  $51,000,000
Facility B:  $20,000,000	Per:
Total:         $71,000,000	Per:
	The Toronto-Dominion Bank
Facility A:  $34,000,000
Facility B:  $13,333,000	Per:
Total:         $47,333,000	Per:
	ABN AMRO Bank N.V.
Facility A:  $29,240,000
Facility B:  $11,467,000	Per:
Total:         $40,707,000	Per:
	Export Development Canada
Facility A:  $20,400,000
Facility B:    $8,000,000	Per: /s/ MATTHEW [UNREADABLE]
	MATTHEW [UNREADABLE]
	ASSET MANAGER
Total:         $28,400,000	Per: /s/ Howard Clysdale
	Howard Clysdale
	Portfolio Manager

Page 8 of 8

The undersigned, as Designated Subsidiaries under the Credit Agreement, hereby agree with the terms of this Fifth Amending Agreement.

1508756 Ontario Inc.
Per:	/s/ [UNREADABLE]
Per:	/s/ [UNREADABLE]
Abitibi Consolidated Sales Corporation
Per:	/s/ [UNREADABLE]
Per:	/s/ [UNREADABLE]

EX-10.48

September 28, 2007

Mr. Jon Melkerson
612 Argyle
Westmount, Quebec
H3Y 3B9

Re: Offer letter

Dear Jon,

We are pleased to offer you the position of Senior Vice President, Business and Corporate Development, in the new AbitibiBowater, Inc. The following are details as agreed upon on this date:

Location:           Montreal, Quebec, Canada

Effective Date:

The offer is contingent on the conclusion of the Merger and will be effective at such date.

Compensation:

Your annual base salary, effective the date of the merger, will be US$325,000. You will be eligible to participate in a short-term incentive plan with a target level of 50% of your base salary.

We will request that the Human Resources and Compensation Committee (HRCC) of the new company, at its first meeting, approve base compensation and incentive targets for the new executive team and approve several compensation redesigns. We anticipate closing the 2007 Annual Incentive Plan effective with the merger and will substitute a new plan for the remainder of 2007 and all of 2008, emphasizing achievement of synergies.

Additionally, for executives at your level, we will request an equity award tied to synergy achievement. We anticipate continuing annual equity grants of similar value as you currently receive and a target level of ownership of common shares may be required. Previous equity awards will rollover into the New Company and will be paid according to the initial payout schedule.

You will also be eligible for a perquisite allowance of US$12,000 per year.

1/2

Other benefits:

Subject to the approval of the new HRCC, you will be covered by an employment agreement and a Change in Control (CIC) agreement.

You will maintain your current participation in various benefit plans such as pension, group insurance and vacation. However, following the merger, the new company intends to harmonize certain benefits offered to salaried employees, including senior executives, which may lead to changes in the current benefits. You will be informed about any changes at the appropriate time.

We are excited about the prospects of the combination of the two companies and look forward to having you join us on the leadership team. It will be a challenge.

Please acknowledge receipt of this offer letter and agreement with its terms by signing the two originals and returning one copy to Viateur Camire on or before October 3, 2007.

John W. Weaver	David J. Paterson
Executive Chairman	President and Chief Executive Officer
I accept this otter:
	October 3, 2007
Jon Melkerson	Date

2/2

EX-12.1

Exhibit 12.1

AbitibiBowater Inc
Statement of Computation of Unaudited Ratio of Earnings to Fixed Charges
(in millions, except ratio information)

	Year Ended December 31,
	2007			2006			2005
(Loss) Earnings:
Loss before income taxes, minority interests and cumulative effect of accounting changes	$	(648	)	$	(111	)	$	(91	)
Add: Fixed charges from below		262			207			208
Less: Capitalized interest		(1)			(4)			(1)
	$	(387	)	$	92		$	116
Fixed Charges:
Interest expense, net of interest capitalized		249			196			199
Capitalized interest		1			4			1
Estimate of interest within rental expense		9			3			4
Amortized premium and discounts related to indebtedness		3			4			4
	$	262		$	207		$	208
Deficiency of Earnings to Fixed Charges		649			115			92

EX-21.1

EXHIBIT 21.1

ABITIBIBOWATER INC.
SUBSIDIARY LISTING

	Jurisdiction of
Name	Incorporation
1508756 Ontario Inc.	Ontario
3834328 Canada Inc.	Canada
6169678 Canada Incorporated	Canada
Abitibi-Consolidated Alabama Corporation	Alabama
Abitibi-Consolidated Company of Canada	Quebec
Abitbi-Consolidated Corp.	Delaware
Abitibi-Consolidated Inc.	Canada
Abitibi-Consolidated Canadian Office Products Holdings Inc.	Canada
Abitibi-Consolidated Hydro Inc.	Canada
Abitibi-Consolidated Nova Scotia Incorporated	Nova Scotia
Abitibi Consolidated Europe	Belgium
Abitibi-Consolidated Finance LP	Delaware
Abitibi Consolidated Sales Corp.	Delaware
Abitibi-Consolidated U.S. Funding Corp.	Delaware
ACH Calm Lake Inc.	Canada
ACH Fort Frances Inc.	Canada
ACH Iroquois Falls Inc.	Canada
ACH Island Falls Inc.	Canada
ACH Kenora Inc.	Canada
ACH Limited Partnership	Manitoba
ACH Norman Inc.	Canada
ACH Sturgeon Falls Inc.	Canada
ACH Twin Falls Inc.	Canada
Alabama River Newsprint Company	Alabama
Alliance Forest Products (2001) Inc.	Canada
The Apache Railway Company	Arizona
Augusta Newsprint Company	Georgia
Augusta Woodlands, LLC	Delaware
Bowater Alabama Inc.	Alabama
Bowater America Inc.	Delaware
Bowater Asia Pte Ltd.	Singapore
Bowater Canada Finance Corporation	Nova Scotia
Bowater Canada Inc.	Canada
Bowater Canada Treasury Corporation	Nova Scotia
Bowater Canadian Forest Products Inc.	Nova Scotia
Bowater Canadian Holdings Incorporated	Nova Scotia
Bowater Canadian Limited	Canada
Bowater Europe Limited	United Kingdom
Bowater Finance Company Inc.	Delaware
Bowater Incorporated	Delaware
Bowater-Korea Ltd.	Korea
Bowater LaHave Corporation	Nova Scotia
Bowater Maritimes Inc	New Brunswick
Bowater Mersey Paper Company Limited(1)	Nova Scotia
Bowater Mississippi LLC	Delaware

Bowater Nuway Inc.	Delaware
Bowater S. America Ltda.	Brazil
Bowater Shelburne Corporation	Nova Scotia
Bridgewater Paper Leasing Ltd.	United Kingdom
Bridgewater Paper Company Limited	United Kingdom
Calhoun Newsprint Company(2)	Delaware
Cheshire Recycling Ltd.	United Kingdom
Donohue Corp.	Delaware
Donohue Malbaie Inc. (3)	Quebec
Donohue Recycling Inc.	Ontario
The International Bridge and Terminal Company	Canada
La Compagnie de Pulpe de Jonquiere	Quebec
Lake Superior Forest Products Inc.	Delaware
Manicouagin Power Company(4)	Quebec
Marketing Donohue Inc.	Quebec
Produits Forestiers La Tuque Inc. (5)	Quebec
Produits Forestiers Saguenay Inc. (6)	Quebec
Scramble Mining Ltd.	Ontario
Star Lake Hydro Partnership(7)	Newfoundland
St. Maurice River Drive Company Limited	Quebec
Tenex Data Inc.	Delaware
Terra Nova Explorations Ltd.	Quebec

Note: Except as otherwise indicated, each of the above entities is a wholly owned direct or indirect subsidiary of AbitibiBowater Inc. The names of certain other direct and indirect subsidiaries of AbitibiBowater Inc. have been omitted from the list above because such unnamed subsidiaries in the aggregate as a single subsidiary would not constitute a significant subsidiary.

(1) 51 percent owned
(2) Approximately 51 percent owned
(3) 51 percent owned
(4) 60 percent owned
(5) 83 percent owned
(6) Approximately 86 percent owned
(7) 51 percent owned

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-146979 and 333-149548) and Form S-8 (No. 333-146982) of AbitibiBowater Inc. of our report dated March 17, 2008 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

(Signed) PricewaterhouseCoopers LLP
March 17, 2008
Montréal, Canada

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

The Board of Directors
AbitibiBowater Incorporated:

We consent to the incorporation by reference in the following registration statements of AbitibiBowater Incorporated of our report dated March 1, 2007, with respect to the consolidated balance sheet of AbitibiBowater Incorporated and subsidiaries (formerly Bowater Incorporated) as of December 31, 2006, and the related consolidated statements of operations, capital accounts, and cash flows for each of the years in the two-year period ended December 31, 2006, which report appears in the December 31, 2007 annual report on Form 10-K of AbitibiBowater Incorporated:

		Filing Date or
		Last Amendment
No. 333-146979	AbitibiBowater Inc. common stock offered in exchange for exchangeable shares of AbitibiBowater Canada Inc.	10/29/2007
No. 333-146982	AbitibiBowater Inc.’s stock option plans for Abitibi-Consolidated Inc. and Bowater Incorporated, Bowater Incorporated Deferred Compensation for Outside Directors and BI’s Savings Plan and Abitibi-Consolidated Inc.’s Employee Share Ownership Plans	10/29/2007
No. 333-149548	AbitibiBowater Inc. shelf registration of common stock, preferred stock, warrants and debt securities	3/5/2008

Our report with respect to the consolidated financial statements refers to the Company’s change in its method of quantifying errors in 2006, the change in its method of accounting for share-based payment in 2006, the change in its method of accounting for pensions and other postretirement benefit plans in 2006, and the change in its method of accounting for conditional asset retirement obligations in 2005.

/s/ KPMG LLP
KPMG LLP
Greenville, South Carolina
March 17, 2008

EX-31.1

Exhibit 31.1

Certification

I, John W. Weaver, Executive Chairman of AbitibiBowater Inc., certify that:

1. I have reviewed this annual report on Form 10-K of AbitibiBowater Inc;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: March 17, 2008

/s/ John W. Weaver

John W. Weaver

Executive Chairman

EX-31.2

Exhibit 31.2

Certification

I, William G. Harvey, Senior Vice President and Chief Financial Officer of AbitibiBowater Inc., certify that:

1. I have reviewed this annual report on Form 10-K of AbitibiBowater Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: March 17, 2008

/s/ William G. Harvey

William G. Harvey

Senior Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

Certification

     Pursuant to 18 U.S.C. § 1350, the undersigned officer of AbitibiBowater Inc. (the “Company”), hereby certifies, to such officer’s knowledge, that the Company’s annual report on Form 10-K for the year ended December 31, 2007 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 17, 2008	/s/ John W. Weaver
	Name:	John W. Weaver
	Title:	Chief Executive Officer

     The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.

EX-32.2

EXHIBIT 32.2

Certification

     Pursuant to 18 U.S.C. § 1350, the undersigned officer of AbitibiBowater Inc. (the “Company”), hereby certifies, to such officer’s knowledge, that the Company’s annual report on Form 10-K for the year ended December 31, 2007 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 17, 2008	/S/ William G. Harvey
	Name:	William G. Harvey
	Title:	Chief Financial Officer

     The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.