CREDIT AND GUARANTY AGREEMENT

Exhibit 10.10

CREDIT AND GUARANTY AGREEMENT

dated as of April 1, 2008

among

ABITIBI-CONSOLIDATED COMPANY OF CANADA,

ABITIBI-CONSOLIDATED INC.,

CERTAIN SUBSIDIARIES AND AFFILIATES OF ABITIBI-CONSOLIDATED INC.,

as Guarantors,

VARIOUS LENDERS,

GOLDMAN SACHS CREDIT PARTNERS L.P.,

as Joint-Lead Arranger, Syndication Agent and Joint-Lead Bookrunner,

WACHOVIA CAPITAL MARKETS, LLC,

as Joint-Lead Arranger and Joint-Lead Bookrunner

GOLDMAN SACHS CREDIT PARTNERS L.P.,

as Collateral Agent,

GOLDMAN SACHS CREDIT PARTNERS L.P.,

as Administrative Agent,

and

GOLDMAN SACHS CREDIT PARTNERS L.P.,

as Documentation Agent

$400,000,000 Senior Secured Credit Facility

TABLE OF CONTENTS

i

ii

iii

iv

v

CREDIT AND GUARANTY AGREEMENT

This CREDIT AND GUARANTY AGREEMENT , dated as of April 1, 2008, is entered into by and among ABITIBI-CONSOLIDATED COMPANY OF CANADA , a company amalgamated under the laws of the Province of Québec, Canada ( “Borrower” ), ABITIBI-CONSOLIDATED INC. , a corporation amalgamated under the laws of Canada ( “Holdings” ), CERTAIN SUBSIDIARIES AND AFFILIATES OF HOLDINGS , as Guarantors, the Lenders party hereto from time to time, GOLDMAN SACHS CREDIT PARTNERS L.P. ( “GSCP” ), as Syndication Agent (in such capacity, “Syndication Agent” ), as Administrative Agent (together with its permitted successors in such capacity, “Administrative Agent” ), and as Documentation Agent (in such capacity, “Documentation Agent” ), and GSCP , as Collateral Agent (together with its permitted successors in such capacity, “Collateral Agent” ).

RECITALS:

WHEREAS, capitalized terms used in these Recitals shall have the respective meanings set forth for such terms in Section 1.1 hereof;

WHEREAS, Lenders have agreed to extend certain Term Loans to Borrower in the aggregate principal amount of $400,000,000, the proceeds of which will be used to (i) refinance in part and cash collateralize Existing Refinanced Indebtedness, and (ii) pay fees, commissions and expenses incurred in connection with the consummation of the transactions contemplated by this Agreement;

WHEREAS, Borrower has agreed to secure all of its Obligations by granting to Collateral Agent, for the benefit of Secured Parties, a First Priority Lien on substantially all of its non-fixed assets (excluding intellectual property and a pledge of Equity Interests of its Subsidiaries) and proceeds of the foregoing as further set forth in the Collateral Documents; and

WHEREAS, Guarantors have agreed to guarantee the obligations of Borrower hereunder and to secure their respective Obligations by granting to Collateral Agent, for the benefit of Secured Parties, a First Priority Lien on (i) substantially all of their respective non-fixed assets (excluding intellectual property and, except with respect to Equity Interests in the Subsidiaries of Donohue following the Donohue Sale, a pledge of Equity Interests of their respective Subsidiaries) and proceeds of the foregoing, and (ii) in the case of Donohue and its Subsidiaries that are Guarantors, following the Donohue Sale, substantially all of their respective assets, in each case as further set forth in the Collateral Documents.

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows:

SECTION 1. DEFINITIONS AND INTERPRETATION

1.1. Definitions . The following terms used herein, including in the preamble, recitals, exhibits and schedules hereto, shall have the following meanings:

“Abitibi Consolidated Europe” means Abitibi Consolidated Europe, a company organized in Belgium.

“Abitibi Entity” means each of Holdings, Donohue and their respective Subsidiaries.

“ Abitibi SPV ” means Abitibi-Consolidated U.S. Funding Corp., a Delaware corporation.

“AC Hydro Indebtedness” means the Indebtedness of ACH Limited Partnership, a Manitoba limited partnership, arising under (a) that Cdn$250,000,000 Credit Agreement dated as of March 31, 2007 among ACH Limited Partnership, as borrower, Caisse de Dépôt et Placement du Québec, as administrative agent, and Caisse de Dépôt et Placement du Québec, as the initial lender, and (b) that Cdn$15,000,000 Credit Agreement dated as of March 31, 2007 among ACH Limited Partnership, as borrower, and Canadian Imperial Bank of Commerce, as administrative agent and initial lender, in each case as same may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under Section 6.15.

“ACSC” means Abitibi Consolidated Sales Corporation, a Delaware corporation.

“ ACSC Securitization ” means the program for the securitization of accounts receivable originated with Holdings and ACSC pursuant to the ACSC Securitization Documents.

“ACSC Securitization Documents” means (i) the Amended and Restated Receivables Purchase Agreement dated as of January 31, 2008 among Abitibi SPV, Eureka Securitisation, PLC, Citibank, N.A., Citibank, N.A., London Branch, the originators named therein, ACSC and Holdings, (ii) the Amended and Restated Purchase and Contribution Agreement dated as of January 31, 2008 among Holdings, ACSC and Abitibi SPV, and (iii) each other document executed in connection therewith, as each such document may be amended, restated, replaced, supplemented or otherwise modified from time to time to the extent permitted under Section 6.15.

“ACSC Securitization Indebtedness” means Indebtedness owing by Abitibi SPV to the investor and the banks party to the ACSC Securitization Documents pursuant to the terms thereof.

“Adjusted Eurodollar Rate” means, for any Interest Rate Determination Date with respect to an Interest Period for a Eurodollar Rate Loan, the greater of (I) 3.50% and (II) the rate per annum obtained by dividing (and rounding upward to the next whole multiple of 1/16 of 1%) (i) (a) the rate per annum (rounded to the nearest 1/100 of 1%) equal to the rate determined by Administrative Agent to be the offered rate which appears on the page of the Reuters Screen which displays an average British Bankers Association Interest Settlement Rate (such page currently being LIBOR01 page) for deposits (for delivery on the first day of such period) with a term equivalent to such period in Dollars, determined as of approximately 11:00 a.m. (London, England time) on such Interest Rate Determination Date, or (b) in the event the rate referenced in the preceding clause (a) does not appear on such page or service or if such page or service shall cease to be available, the rate per annum (rounded to the nearest 1/100 of 1%) equal to the rate

2

determined by Administrative Agent to be the offered rate on such other page or other service which displays an average British Bankers Association Interest Settlement Rate for deposits (for delivery on the first day of such period) with a term equivalent to such period in Dollars, determined as of approximately 11:00 a.m. (London, England time) on such Interest Rate Determination Date, or (c) in the event the rates referenced in the preceding clauses (a) and (b) are not available, the rate per annum (rounded to the nearest 1/100 of 1%) equal to the offered quotation rate to first class banks in the London interbank market by JPMorgan Chase Bank, N.A. for deposits (for delivery on the first day of the relevant period) in Dollars of amounts in same day funds comparable to the principal amount of the applicable Loan of Administrative Agent, in its capacity as a Lender, for which the Adjusted Eurodollar Rate is then being determined with maturities comparable to such period as of approximately 11:00 a.m. (London, England time) on such Interest Rate Determination Date, by (ii) an amount equal to (a) one minus (b) the Applicable Reserve Requirement.

“Administrative Agent” as defined in the preamble hereto.

“Adverse Proceeding” means any action, claim (including any Environmental Claims), suit, charge, order, direction, proceeding, hearing (in each case, whether administrative, judicial or otherwise), governmental investigation or arbitration (whether or not purportedly on behalf of any Abitibi Entity) at law or in equity, or before or by any Governmental Authority, domestic or foreign, whether pending or, to the knowledge of any Abitibi Entity, threatened against or affecting any Abitibi Entity or any property of any Abitibi Entity.

“Affected Lender” as defined in Section 2.18(b).

“Affected Loans” as defined in Section 2.18(b).

“Affiliate” means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, that 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 (i) to vote 10% or more of the Securities having ordinary voting power for the election of directors of such Person or (ii) to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise.

“Agent” means each of Syndication Agent, Administrative Agent, Collateral Agent and Documentation Agent.

“Agent Affiliates” as defined in Section 10.1(b).

“Aggregate Amounts Due” as defined in Section 2.17.

“Aggregate Payments” as defined in Section 7.2.

“Agreement” means this Credit and Guaranty Agreement, dated as of April 1, 2008, as it may be amended, restated, supplemented or otherwise modified from time to time.

3

“Alabama River Facilities Lease” means that certain Lease Agreement between the Industrial Development Board of Monroe County and Alabama River Newsprint Company, an Alabama general partnership, dated October 1, 1988, together with all amendments, supplements and modifications thereto.

“Alabama River Facilities Supplemental Lease” means that certain Lease Agreement between the Industrial Development Board of Monroe County and Alabama River Newsprint Company, an Alabama general partnership, successor in interest by merger to Alabama River Recycling Company, an Alabama general partnership, as the successor in interest by assignment to Alabama River Recycling Company, Inc., an Alabama corporation, dated May 1, 1992, together with all amendments, supplements and modifications thereto.

“Alabama River Facility” means the newsprint plant commonly referred to as “Alabama River”, which is owned by the Industrial Development Board of Monroe County and leased to Alabama River Newsprint Company, an Alabama general partnership.

“Alabama River Mortgage” means a fully executed and notarized mortgage, in proper form for recording in the appropriate recording office in Alabama, encumbering the leasehold estate under the Alabama River Facilities Lease in the form of Exhibit I-6 attached hereto.

“Alabama River Supplemental Mortgage” means a fully executed and notarized mortgage, which amends and restates the Alabama River Mortgage, in proper form for recording in the appropriate recording office in Alabama, encumbering the Industrial Development Board of Monroe County’s fee interest in the Alabama River Facility and the leasehold estate under the Alabama River Facilities Supplemental Lease in form and substance reasonably satisfactory to Collateral Agent.

“Applicable Margin” means (i) with respect to Eurodollar Rate Loans, 8.00% per annum and (ii) with respect to Base Rate Loans, 7.00% per annum.

“Applicable Reserve Requirement” means, at any time, for any Eurodollar Rate Loan, the maximum rate, expressed as a decimal, at which reserves (including any basic marginal, special, supplemental, emergency or other reserves) are required to be maintained with respect thereto against “Eurocurrency liabilities” (as such term is defined in Regulation D) under regulations issued from time to time by the Board of Governors or other applicable banking regulator. Without limiting the effect of the foregoing, the Applicable Reserve Requirement shall reflect any other reserves required to be maintained by such member banks with respect to (i) any category of liabilities which includes deposits by reference to which the applicable Adjusted Eurodollar Rate or any other interest rate of a Term Loan is to be determined, or (ii) any category of extensions of credit or other assets which include Eurodollar Rate Loans. A Eurodollar Rate Loan shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credit for proration, exceptions or offsets that may be available from time to time to the applicable Lender. The rate of interest on Eurodollar Rate Loans shall be adjusted automatically on and as of the effective date of any change in the Applicable Reserve Requirement.

4

“Approved Electronic Communications” means any notice, demand communication, information, document or other material that any Credit Party provides to an Agent pursuant to any Credit Document or the transactions contemplated therein which is distributed to the Agents or to the Lenders by means of electronic communications pursuant to Section 10.1(b).

“Asset Sale” means a sale, lease or sub-lease (as lessor or sublessor), sale and leaseback, assignment, conveyance, exclusive license (as licensor or sublicensor), transfer or other disposition to, or any exchange of property with, any Person (other than Borrower or any Guarantor (other than Holdings)), in one transaction or a series of transactions, of all or any part of any Abitibi Entity’s businesses, assets or properties of any kind, whether real, personal, or mixed and whether tangible or intangible, whether now owned or hereafter acquired, leased or licensed, including the Equity Interests of any of Holdings’ or Donohue’s Subsidiaries, other than (i) inventory (or other assets) sold, leased or licensed in the ordinary course of business (excluding any such sales, leases or licenses out by operations or divisions discontinued or to be discontinued), and (ii) sales, leases or licenses out of other assets for aggregate consideration of less than $3,000,000 with respect to any transaction or series of related transactions and less than $20,000,000 in the aggregate prior to the Maturity Date.

“Assignment Agreement” means an Assignment and Assumption Agreement substantially in the form of Exhibit E, with such amendments or modifications as may be approved by Administrative Agent.

“Assignment Effective Date” as defined in Section 10.6(b).

“ Augusta Newsprint ” means Augusta Newsprint Company, a Georgia corporation.

“Authorized Officer” means, as applied to any Person, any individual holding the position of chairman of the board (if an officer), chief executive officer, president or one of its vice presidents (or the equivalent thereof), and such Person’s chief financial officer or treasurer.

“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy,” as now and hereafter in effect, or any successor statute.

“Base Rate” means, for any day, a rate per annum equal to the greatest of (i) 4.50%, (ii) the Prime Rate in effect on such day and (iii) the Federal Funds Effective Rate in effect on such day plus  ¹ / 2 of 1%. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.

“Base Rate Loan” means a Term Loan bearing interest at a rate determined by reference to the Base Rate.

“Beneficiary” means each Agent and Lender.

“ BIA ” means the Bankruptcy and Insolvency Act (Canada).

5

“Blocked Account” means a Deposit Account maintained by a Credit Party at a financial institution reasonably satisfactory to Collateral Agent and which is subject to a Blocked Account Agreement that is in full force and effect.

“Blocked Account Agreement” means a three-party agreement entered into by a Credit Party, Collateral Agent and a financial institution which maintains one or more Deposit Accounts for such Credit Party, in form and substance reasonably satisfactory to Collateral Agent (it being agreed and acknowledged that any such agreement that includes an indemnity owing by Collateral Agent, other than in respect of chargebacks or returned amounts in respect of the applicable account in accordance with normal banking practice in an amount not exceeding the amount received by Collateral Agent from such account after activation of Collateral Agent’s sole control of such account pursuant to such agreement, shall not be satisfactory to Collateral Agent).

“Board of Governors” means the Board of Governors of the United States Federal Reserve System, or any successor thereto.

“Borrower” as defined in the preamble hereto.

“Business Day” means (i) any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York, the Province of Ontario or the Province of Québec or is a day on which banking institutions located in the State of New York, the City of Toronto or the City of Québec are authorized or required by law or other governmental action to close and (ii) with respect to all notices, determinations, fundings and payments in connection with the Adjusted Eurodollar Rate or any Eurodollar Rate Loans, any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks in Dollar deposits in the London interbank market.

“Capital Lease” means, as applied to any Person, any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is or should be accounted for as a capital lease on the balance sheet of that Person.

“Canadian Credit Party” means each of Holdings, Borrower and each other Credit Party that (i) is organized under the laws of Canada or any province or territory thereof, (ii) carries on business in Canada, or (iii) has any title or interest in or to any property in Canada.

“Canadian Dollars” and the sign “Cdn$” mean the lawful money of Canada.

“Canadian Security Agreement” means the Security Agreement to be executed by each Credit Party that has its registered office or chief executive office situated in any jurisdiction in Canada outside of the Province of Québec or has any right, title or interest in any Collateral which is located in any jurisdiction in Canada outside of the Province of Québec or in respect of which the validity, perfection, effect of perfection or non-perfection, or priority of a security interest in such Collateral is governed by the laws of any jurisdiction in Canada other than the Province of Québec, substantially in the form of Exhibit I-2, as it may be amended, restated, supplemented or otherwise modified from time to time.

6

“Cash” means money, currency or a credit balance in any demand or Deposit Account.

“Cash Equivalents” means, as at any date of determination, any of the following to the extent readily monetized: (i) marketable securities (a) issued or directly and unconditionally guaranteed as to interest and principal by the United States Government or the Government of Canada, or (b) issued by any agency of the United States Government or the Government of Canada, the obligations of which are backed by the full faith and credit of such government, in each case maturing within one year after such date; (ii) marketable direct obligations issued by any state of the United States of America or any province of Canada, or any political subdivision of any such state or province or any public instrumentality thereof, in each case maturing within one year after such date and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody’s; (iii) commercial paper maturing no more than one year from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody’s; (iv) certificates of deposit or bankers’ acceptances maturing within one year after such date and issued or accepted by any Lender or by (a) any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia that (x) is at least “adequately capitalized” (as defined in the regulations of its primary Federal banking regulator) and (y) has Tier 1 capital (as defined in such regulations) of not less than $100,000,000, or (b) any bank listed on Schedule I of the Bank Act (Canada) that has Tier 1 capital (as defined in OSFI Guideline A-1 on Capital Adequacy Requirements) of not less than $500,000,000; and (v) shares of any money market mutual fund that (a) has substantially all of its assets invested continuously in the types of investments referred to in clauses (i) and (ii) above, (b) has net assets of not less than $500,000,000, and (c) has the highest rating obtainable from either S&P or Moody’s.

“ CCAA ” means the Companies’ Creditors Arrangement Act (Canada).

“ Change of Control ” means, at any time, (i) any Person or “group” (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) (other than any holders of the Convertible Notes following conversion of the Convertible Notes in accordance with the terms thereof) (a) shall have acquired beneficial ownership of 35% or more on a fully diluted basis of the voting and/or economic interest in the Equity Interests of Parent or (b) shall have obtained the power (whether or not exercised) to elect a majority of the members of the board of directors (or similar governing body) of Parent; (ii) Parent shall cease to beneficially own and control directly 100% on a fully diluted basis of the economic and voting interest in the Equity Interests of Holdings, provided that for purposes of this clause (ii), the exchangeable shares issued by AbitibiBowater Canada Inc. (f/k/a Bowater Canada, Inc.) outstanding on the Closing Date shall be deemed to have been exchanged for Equity Interests of Parent; (iii) Holdings shall cease to beneficially own and control directly 100% on a fully diluted basis of the economic and voting interest in the Equity Interests of Borrower; (iv) Designated Donohue Parent and Borrower shall cease to collectively and beneficially own and control directly 100% on a fully diluted basis of the economic and voting interest in the Equity Interests of Donohue; (v) Borrower shall cease to beneficially own and control, directly or indirectly, 100% on a fully diluted basis of the economic and voting interest in the Equity Interests of each Guarantor Subsidiary/Affiliate other than Donohue and its Subsidiaries; (vi) Donohue shall cease to beneficially own and control,

7

directly or indirectly, 100% on a fully diluted basis of the economic and voting interest in the Equity Interests of each of its Subsidiaries that is a Guarantor Subsidiary/Affiliate; (vii) the majority of the seats (other than vacant seats) on the board of directors (or similar governing body) of Parent cease to be occupied by Persons who either (a) were members of the board of directors of Parent on the Closing Date or (b) were nominated for election by the board of directors of Parent, a majority of whom were directors on the Closing Date or whose election or nomination for election was previously approved by a majority of such directors; or (viii) any “change of control” or similar event under any Senior Note Documents, Convertible Note Documents or ACSC Securitization Documents shall occur.

“Closing Date” means the date on which Term Loans are made.

“Closing Date Certificate” means a Closing Date Certificate substantially in the form of Exhibit G-1.

“Collateral” means, collectively, all of the real, personal and mixed property (including Equity Interests of Subsidiaries of Donohue following the Donohue Sale) in which Liens are purported to be granted pursuant to the Collateral Documents as security for Obligations.

“Collateral Agent” as defined in the preamble hereto.

“Collateral Documents” means the US Security Agreements, the Canadian Security Agreement, the Québec Security Agreements, the UK Security Agreement, the Netherlands Security Agreement, the Intellectual Property Security Agreements, the Intercreditor Agreement, the Securitization Intercreditor Agreement, the Alabama River Mortgage, the Blocked Account Agreements, the Landlord Personal Property Collateral Access Agreements, if any, and all other instruments, documents and agreements delivered by or on behalf of or at the request of any Credit Party pursuant to this Agreement or any of the other Credit Documents in order to grant to, or perfect in favor of, Collateral Agent, for the benefit of Secured Parties, a Lien on any real, personal or mixed property of that Credit Party as security for the Obligations or to protect or preserve the interests of Collateral Agent or the Secured Parties therein.

“Collateral Questionnaire” means a certificate in form satisfactory to Collateral Agent that provides information with respect to the personal property of each Credit Party.

“Combined Capital Expenditures” means an amount equal to the sum, without duplication, of (i) Consolidated Capital Expenditures of Holdings and its Subsidiaries plus (ii) Consolidated Capital Expenditures of Donohue and its Subsidiaries.

“Commitment” means any Term Loan Commitment.

“Commodity Agreement” means any commodity exchange contract, commodity swap agreement, futures contract, option contract, synthetic cap or other similar agreement or arrangement, each of which is for the purpose of hedging the commodity risk associated with the Abitibi Entities’ operations and not for speculative purposes.

8

“Consolidated Capital Expenditures” means, for any period, the aggregate of all expenditures of a Person and its Subsidiaries during such period determined on a consolidated basis that, in accordance with GAAP, are or should be included in “purchase of property and equipment” or similar items reflected in the consolidated statement of cash flows of such Person and its Subsidiaries; provided that Consolidated Capital Expenditures shall not include any expenditures for replacements and substitutions for fixed assets, capital assets or equipment to the extent made with Net Insurance/Condemnation Proceeds invested pursuant to Section 2.14(b) or with Net Asset Sale Proceeds invested pursuant to Section 2.14(a).

“Consolidated Net Tangible Assets” means the total amount of assets of the Abitibi Entities on a consolidated combined basis, including deferred pension costs, after deducting therefrom:

all as set forth in the most recent consolidated combined balance sheet of the Abitibi Entities delivered to Agents and the Lenders pursuant to Section 5.1(a), and as determined on a consolidated basis in accordance with GAAP.

“Contractual Obligation” means, as applied to any Person, any obligation of such Person under any Security issued by that Person or any indenture, mortgage, deed of trust, lease, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject.

“Contributing Guarantors” as defined in Section 7.2.

“Conversion/Continuation Date” means the effective date of a continuation or conversion, as the case may be, as set forth in the applicable Conversion/Continuation Notice.

“Conversion/Continuation Notice” means a Conversion/Continuation Notice substantially in the form of Exhibit A-2.

“Convertible Notes” means the 8.00% Convertible Notes Due 2013 of Parent in the initial aggregate principal amount up to $350,000,000 and issued pursuant to the Convertible Note Indenture, as such notes may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under Section 6.15.

“Convertible Note Documents” means the Convertible Note Indenture, the Convertible Notes and each other document executed in connection with such notes, as each such document may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under Section 6.15.

9

“Convertible Note Indenture” means that certain Indenture, dated April 1, 2008, between Parent, as issuer, Bowater Incorporated, as guarantor, and The Bank of New York Trust Company, N.A., as trustee, pursuant to which the Convertible Notes are issued.

“Counterpart Agreement” means a Counterpart Agreement substantially in the form of Exhibit H delivered by a Credit Party pursuant to Section 5.10.

“Credit Document” means any of this Agreement, the Notes, if any, the Collateral Documents, and all other documents, certificates, instruments or agreements executed and delivered by or on behalf of or at the request of a Credit Party (or any officer of a Credit Party pursuant to the terms hereof) for the benefit of any Agent or any Lender in connection herewith on or after the date hereof.

“Credit Extension” means the making of a Term Loan.

“Credit Party” means each of Holdings, Borrower and Donohue, and each of their respective Subsidiaries that provides a Guaranty from time to time.

“Currency Agreement” means any foreign exchange contract, currency swap agreement, futures contract, option contract, synthetic cap or other similar agreement or arrangement, each of which is for the purpose of hedging the foreign currency risk associated with the Abitibi Entities’ operations and not for speculative purposes.

“Current Asset Amount” means, at any time, an amount equal to the sum of, without duplication: (a) Net Eligible Accounts multiplied by 85%, plus (b) Net Eligible Inventory multiplied by 70%, minus (c) reserves established with respect to identifiable risks or contingencies by the Administrative Agent and Collateral Agent in their commercially reasonable discretion.

“Current Asset Amount Certificate” means a Current Asset Amount Certificate substantially in the form of Exhibit G-3.

“Default” means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default.

“Deposit Account” means a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit.

“Designated Donohue Parent” means either Parent or a wholly-owned Subsidiary of Parent that is organized under the laws of any State of the United States of America but is not Bowater Incorporated or any Subsidiary thereof.

“ Disqualified Equity Interests ” means any Equity Interest which, by its terms (or by the terms of any security or other Equity Interests into which it is convertible or for which it is exchangeable) or upon the happening of any event or condition, (i) matures or is mandatorily redeemable (other than solely for Equity Interests which are not otherwise Disqualified Equity Interests), pursuant to a sinking fund obligation or otherwise, (ii) is redeemable at the option of

10

the holder thereof (other than solely for Equity Interests which are not otherwise Disqualified Equity Interests), in whole or in part, (iii) provides for the scheduled payments or dividends in cash, or (iv) is or becomes convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is 91 days after the Maturity Date, except, in the case of clauses (i) and (ii), if as a result of a change of control or asset sale, so long as any rights of the holders thereof upon the occurrence of such a change of control or asset sale event are subject to the prior payment in full of all Obligations and the termination of the Commitments.

“Documentation Agent” as defined in the preamble hereto.

“Dollars” and the sign “$” mean the lawful money of the United States of America.

“Donohue” means Donohue Corp., a Delaware corporation.

“Donohue Cash Collateral Account” means a Deposit Account in the name of the Collateral Agent bearing interest (in accordance with Collateral Agent’s customary practices) on behalf of Borrower at the Federal Funds Rate.

“Donohue Cash Collateral Proceeds” means $150,000,000 of Cash held in the Donohue Cash Collateral Account.

“Donohue Sale” means (i) the recapitalization of preferred Equity Interests of Donohue into common Equity Interests of Donohue, and immediately thereafter (ii) the sale by Borrower of all or a majority of the common Equity Interests of Donohue to the Designated Donohue Parent in exchange for the assumption by the Designated Donohue Parent of approximately Cdn$142,000,000 of Indebtedness (and any accrued and unpaid interest thereon) owing by Borrower to Donohue, in each case pursuant to agreements in form and substance reasonably satisfactory to the Administrative Agent; provided that, immediately upon consummation of the Donohue Sale, Donohue and its Subsidiaries that are Guarantor Subsidiary/Affiliates shall have:

(a) granted First Priority Liens on substantially all of their assets (including all Equity Interests of their respective Subsidiaries (including Abitibi SPV)) pursuant to the US Security Agreement to Collateral Agent as security for the Obligations;

(b) granted First Priority Liens on the Alabama River Facility pursuant to the Alabama River Mortgage to Collateral Agent as security for the Obligations;

(c) delivered to Collateral Agent (i) an opinion of counsel (which counsel shall be reasonably satisfactory to Collateral Agent) in the state of Alabama with respect to the Alabama River Mortgage, and (ii) an opinion of counsel (which counsel shall be reasonably satisfactory to Collateral Agent) with respect to the creation, attachment, validity and perfection of the security interests in favor of Collateral Agent in Collateral described in clause (a) of this proviso and such other matters governed by the laws of each jurisdiction in which any such Credit Party or any such Collateral is located as Collateral Agent may reasonably request, in each case in the form set forth in Exhibit D attached hereto;

11

(d) delivered to Collateral Agent (x) an ALTA mortgagee title insurance policy (and copies of all recorded documents listed as exceptions to title or otherwise referred to therein) issued by a title company reasonably satisfactory to Collateral Agent with respect to the Alabama River Mortgage (the “Alabama Title Policy” ), in amounts not less than the fair market value of the Alabama River Facility, in form and substance reasonably satisfactory to Collateral Agent, and (y) evidence satisfactory to Collateral Agent that the title company and/or the appropriate Governmental Authorities have been paid all expenses and premiums of the title company and all other sums required in connection with the issuance of the Alabama Title Policy and all recording and stamp taxes (including mortgage recording and intangible taxes) payable in connection with recording the Alabama River Mortgage in the appropriate real estate records;

(e) delivered to Collateral Agent flood certifications with respect to the Alabama River Mortgage and evidence of flood insurance if the Alabama River Facility is a Flood Hazard Property and located in a community that participates in the National Flood Insurance Program, in each case in compliance with any applicable regulations of the Board of Governors, in form and substance reasonably satisfactory to Collateral Agent;

(f) delivered to Collateral Agent an ALTA survey of the Alabama River Facility, certified to Collateral Agent and dated not more than twenty days prior to the consummation of the Donohue Sale;

(g) delivered to Collateral Agent reports and other information (including a Phase 1 environmental report), in form, scope and substance satisfactory to Administrative Agent and Collateral Agent, regarding environmental matters relating to the Alabama River Facility;

(h) delivered to Administrative Agent a Solvency Certificate from Holdings dated the date of the consummation of the Donohue Sale and addressed to Administrative Agent and Lenders, in form, scope and substance satisfactory to Administrative Agent, and demonstrating that, after giving effect to the consummation of the Donohue Sale, Holdings and its Subsidiaries, taken as a whole, are and will be Solvent;

(i) delivered to Administrative Agent a Solvency Certificate from Donohue, dated the date of the consummation of the Donohue Sale and addressed to Administrative Agent and Lenders, in form, scope and substance satisfactory to Administrative Agent, and demonstrating that, after giving effect to the consummation of the Donohue Sale, Donohue and its Subsidiaries, taken as a whole, are and will be Solvent;

12

(j) delivered to Administrative Agent and Collateral Agent fully executed and notarized Intellectual Property Security Agreements, in proper form for filing or recording in all appropriate places in all applicable jurisdictions, memorializing and recording the encumbrance of the Intellectual Property Assets listed in Schedule 5.2 to the US Security Agreements; and

(k) delivered to Administrative Agent a certificate of the chief financial officers of Borrower and Donohue certifying that the conditions to the Donohue Sale set forth in this proviso have been complied with in all respects.

“Eligible Assignee” means (i) any Lender, any Affiliate of any Lender and any Related Fund (any two or more Related Funds being treated as a single Eligible Assignee for all purposes hereof), and (ii) any commercial bank, insurance company, investment or mutual fund or other entity that is an “accredited investor” (as defined in Regulation D under the Securities Act or as defined under the Canadian Securities Administrators National Instrument 45-106, as amended, supplemented, replaced or otherwise modified from time to time) and which extends credit or buys loans in the ordinary course of business; provided , no Affiliate of any Credit Party shall be an Eligible Assignee.

“Employee Benefit Plan” means (i) in respect of any Credit Party other than a Canadian Credit Party, any “employee benefit plan” as defined in Section 3(3) of ERISA which is or was sponsored, maintained or contributed to by, or required to be contributed by, Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates, and (ii) in respect of any Canadian Credit Party, any employee benefit plan of any nature or kind that is not a Pension Plan and is maintained by or contributed to, or required to be maintained by or contributed to, by such Canadian Credit Party.

“Environmental Claim” means any investigation, notice, notice of violation, claim, action, suit, charge, proceeding, demand, abatement order or other order or directive (conditional or otherwise), by any Governmental Authority or any other Person, arising (i) pursuant to or in connection with any Environmental Law or any actual or alleged violation of any Environmental Law; (ii) in connection with any Hazardous Material or any actual or alleged Hazardous Materials Activity; or (iii) in connection with any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment.

“Environmental Laws” means any and all current or future foreign or domestic, federal, state, provincial or municipal or any subdivision of any of them laws (including the common law), statutes, ordinances, orders, rules, regulations, judgments, Governmental Authorizations, or any other requirements of Governmental Authorities relating to: (i) environmental matters, including those relating to any Hazardous Materials Activity and endangered or threatened species; (ii) the use, manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, abatement, removal, remediation, management, control, containment, disposal, disposition or handling of any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing; (iii) any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment; (iv) forestation; or (v) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health or welfare; in each case, in any manner applicable to or in relation to any Abitibi Entity or any Facility.

13

“Equity Interests” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation), including partnership interests and membership interests, and any and all warrants, rights or options to purchase or other arrangements or rights to acquire any of the foregoing.

“ Equivalent Amount ” in one currency on any day means the amount of such currency that would result from Administrative Agent converting into such currency another currency at approximately 12:00 noon (New York time) on such day in accordance with Administrative Agent’s customary practice for commercial loans being administered by it.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto.

“ERISA Affiliate” means, as applied to any Person, (i) any corporation which is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or not incorporated) which is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member. Any former ERISA Affiliate of any Abitibi Entity shall continue to be considered an ERISA Affiliate of any such Abitibi Entity within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of such Abitibi Entity and with respect to liabilities arising after such period for which such Abitibi Entity could be liable under the Internal Revenue Code or ERISA.

“ERISA Event” means (i) a “reportable event” within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for 30-day notice to the PBGC has been waived by regulation); (ii) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(c) of the Internal Revenue Code) or the failure to make by its due date a required installment under Section 430(j) of the Internal Revenue Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal by any Abitibi Entity or any of their respective ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in liability to any Abitibi Entity or any of their respective Affiliates pursuant to Section 4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which might constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (vi) the imposition of liability on any Abitibi Entity or any of their respective ERISA Affiliates pursuant

14

to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal of any Abitibi Entity or any of their respective ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential liability therefore, or the receipt by any Abitibi Entity or any of their respective ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or omission which could give rise to the imposition on any Abitibi Entity or any of their respective ERISA Affiliates of fines, penalties, taxes or related charges under Chapter 43 of the Internal Revenue Code or under Section 409, Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of any Employee Benefit Plan; (ix) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof, or against any Abitibi Entity or any of their respective ERISA Affiliates in connection with any Employee Benefit Plan; (x) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan (or any other Employee Benefit Plan intended to be qualified under Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of the Internal Revenue Code, or the failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Internal Revenue Code; or (xi) the imposition of a lien pursuant to Section 430(k) of the Internal Revenue Code or ERISA or a violation of Section 436 of the Internal Revenue Code.

“Eurodollar Rate Loan” means a Term Loan bearing interest at a rate determined by reference to the Adjusted Eurodollar Rate.

“Event of Default” means each of the conditions or events set forth in Section 8.1.

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended from time to time, and any successor statute.

“Exchange Note Cash Collateral Account” means a Deposit Account in the name of the Collateral Agent bearing interest (in accordance with Collateral Agent’s customary practices) on behalf of Borrower at the Federal Funds Rate.

“Exchange Note Cash Collateral Arrangement” means the arrangement pursuant to which the Exchange Note Cash Collateral Proceeds are deposited in the Exchange Note Cash Collateral Account in accordance with Section 5.13(d).

“Exchange Note Cash Collateral Proceeds” means $6,336,137.77 of Cash held in the Exchange Note Cash Collateral Account.

“Excluded Deposit Accounts” means, collectively, (i) Deposit Accounts of the Credit Parties subject to Liens securing the ACSC Securitization, (ii) payroll accounts of the Credit Parties, (iii) trust accounts of the Credit Parties, (iv) zero-balance Deposit Accounts of the Credit Parties that sweep all cash therein on a daily basis to a Blocked Account, (v) the Senior Secured Note Collateral Account and (vi) Deposit Accounts of the Credit Parties holding less than $100,000 individually or $300,000 in the aggregate.

15

“Existing Refinanced Indebtedness” means, collectively, (i) Indebtedness under the Credit Agreement dated as of October 3, 2005 among Holdings and Borrower, as borrowers, Canadian Imperial Bank of Commerce, as administrative agent, and the lenders from time to time parties thereto, (ii) the 6.95% notes due 2008 issued by Holdings, (iii) the 5.25% notes due 2008 issued by the Borrower and (iv) the 7.875% notes due 2009 issued by Abitibi-Consolidated Finance L.P.

“Facility” means any real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or heretofore owned, leased, operated or used by any Abitibi Entity or any of their respective predecessors or Affiliates.

“Fair Share” as defined in Section 7.2.

“Fair Share Contribution Amount” as defined in Section 7.2.

“Federal Funds Effective Rate” means for any day, the rate per annum (expressed, as a decimal, rounded upwards, if necessary, to the next higher 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided , (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to Administrative Agent, in its capacity as a Lender, on such day on such transactions as determined by Administrative Agent.

“Financial Officer Certification” means, with respect to the financial statements for which such certification is required, the certification of the chief financial officer of Holdings or Donohue, as applicable, that such financial statements fairly present, in all material respects, the financial condition of Holdings and its Subsidiaries or Donohue and its Subsidiaries, as applicable, as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments.

“Financial Plan” as defined in Section 5.1(i).

“First Priority” means, with respect to any Lien purported to be created in any Collateral pursuant to any Collateral Document, that such Lien is the only Lien to which such Collateral is subject, other than any Lien permitted by clauses (a), (b), (c), (d), (e), (g), (h), (i), (j), (n), (r), (s), (t), (v), (w) and (y) of Section 6.2.

“Fiscal Quarter” means a fiscal quarter of any Fiscal Year.

“Fiscal Year” means the fiscal year of the Abitibi Entities ending on December 31 of each calendar year.

16

“Flood Hazard Property” means any Real Estate Asset subject to a mortgage in favor of Collateral Agent, for the benefit of Secured Parties, and located in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards.

“Funding Guarantors” as defined in Section 7.2.

“Funding Notice” means a notice substantially in the form of Exhibit A-1.

“GAAP” means, subject to the limitations on the application thereof set forth in Section 1.2, generally accepted accounting principles set forth in the opinions and pronouncements of the Canadian Institute of Chartered Accountants in effect as of the date of determination thereof, provided , that, if Borrower so elects upon notice to the Administrative Agent, then for periods following the date of such election, “GAAP” shall means generally accepting accounting principles in the United States ( “US GAAP” ) in effect as of the date of determination thereof; provided further , that any such election, once made shall be irrevocable. If Borrower elects to use US GAAP, each provision of Section 5.1 that requires an analysis including comparative figures to be provided in respect of a previous period shall be deemed to require comparative figures to be provided in respect of the previous two such periods, with such figures being reconciled in accordance with US GAAP.

“Governmental Acts” means any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Governmental Authority.

“Governmental Authority” means any federal, state, provincial, municipal, national or other government, governmental department, commission, board, bureau, court, agency, authority, tribunal or instrumentality or political subdivision thereof or any other entity, officer or examiner exercising executive, legislative, judicial, regulatory, or administrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, a province of Canada, Canada, England and Wales, or a foreign entity or government.

“Governmental Authorization” means any permit, license, approval, authorization, plan, directive, consent order or consent decree or other like instrument of or from or required by any Governmental Authority.

“Grantor” as defined in each of the US Security Agreements, the Canadian Security Agreement, the Quebec Security Agreements, the UK Security Agreement and the Netherlands Security Agreement.

“Guaranteed Obligations” as defined in Section 7.1.

“Guarantor” means each of Holdings, Donohue, each Subsidiary of Holdings (including Produits Forestiers Saguenay Inc. but excluding Borrower) and each Subsidiary of Donohue, in each case other than Abitibi SPV, Star Lake, Augusta Newsprint, Abitibi Consolidated Europe, Donohue Malbaie Inc., Compagnie de Flottage du St-Maurice Ltee, Produits Forestiers La Tuque Inc., Manicouagan Power Company, Abitibi-Consolidated Hydro Inc., ACH Limited Partnership and its Subsidiaries, and the Liquidated Subsidiaries.

17

“Guarantor Subsidiary/Affiliate” means each Guarantor other than Holdings.

“Guaranty” means the guaranty of each Guarantor set forth in Section 7.

“Hazardous Materials” means any chemical, material, substance or waste, exposure to which is prohibited, limited or regulated by any Governmental Authority or which may or could pose a hazard or cause an adverse effect to the health and safety of the owners, occupants or any Persons or property in the vicinity of any Facility or to the indoor or outdoor environment, including asbestos, petroleum (or any breakdown constituents), dioxin, pentachlorophenol and polychlorinated biphenyls.

“Hazardous Materials Activity” means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous Materials, including the use, manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, abatement, removal, remediation, disposal, disposition or handling of any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing.

“Hedge Agreement” means an Interest Rate Agreement, a Commodity Agreement or a Currency Agreement.

“Highest Lawful Rate” means the maximum lawful interest rate, if any, that at any time or from time to time may be contracted for, charged, or received under the laws applicable to any Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow.

“Historical Financial Statements” means as of the Closing Date, the audited financial statements of Holdings and its Subsidiaries, for the immediately preceding three Fiscal Years, consisting of balance sheets and the related consolidated statements of income, stockholders’ equity and cash flows for such Fiscal Years, and certified by the chief financial officer of Borrower that they fairly present, in all material respects, the financial condition of Holdings and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated.

“Holdings” as defined in the preamble hereto.

“Increased-Cost Lenders” as defined in Section 2.23.

“Indebtedness” means, as applied to any Person, without duplication, (i) all indebtedness for borrowed money; (ii) that portion of obligations with respect to Capital Leases that is properly classified as a liability on a balance sheet in conformity with GAAP; (iii) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money; (iv) any obligation owed for all or any part of the deferred purchase price of property or services, including any earn-out obligations (excluding any such obligations incurred under ERISA), which purchase price is (a) due more than six months from the date of incurrence of the obligation in respect thereof or (b) evidenced by a note or similar written instrument; (v) all indebtedness secured by any Lien on any property or asset owned or

18

held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person, provided that the amount of any such Indebtedness that is nonrecourse to the credit of that Person shall be determined to be the lesser of (A) the amount of such Indebtedness and (B) the value of the property or assets subject to such Lien; (vi) the undrawn amount of any letter of credit or banker’s acceptance issued or accepted, as the case may be, for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings or otherwise; (vii) Disqualified Equity Interests; (viii) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another; (ix) any obligation of such Person the primary purpose or intent of which is to provide assurance to an obligee that the obligation of the obligor thereof will be paid or discharged, or any agreement relating thereto will be complied with, or the holders thereof will be protected (in whole or in part) against loss in respect thereof; (x) any liability of such Person for an obligation of another through any agreement (contingent or otherwise) (a) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (b) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclauses (a) or (b) of this clause (x), the primary purpose or intent thereof is as described in clause (ix) above; and (xi) all obligations of such Person in respect of any exchange traded or over the counter derivative transaction, including any Hedge Agreement, in each case, whether entered into for hedging or speculative purposes.

“Indemnified Liabilities” means, collectively, any and all liabilities, obligations, losses, damages (including natural resource damages), fines, penalties, claims (including Environmental Claims), actions, judgments, suits, costs (including the costs of any investigation, study, sampling, testing, abatement, cleanup, removal, remediation or other response action necessary to address, control, manage, remove, remediate, clean up or abate any Hazardous Materials Activity), Taxes, expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicial proceeding or hearing commenced or threatened by any Person, whether or not any such Indemnitee shall be designated as a party or a potential party thereto, and any fees or expenses incurred by Indemnitees in enforcing this indemnity), whether direct, indirect or consequential and whether based on any federal, state, provincial or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations and Environmental Laws), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of (i) this Agreement or the other Credit Documents (or any related fee letter) or the transactions contemplated hereby or thereby (including the Lenders’ agreement to make Credit Extensions, the syndication of the credit facilities provided for herein or the use or intended use of the proceeds thereof, or any enforcement of any of the Credit Documents (including any sale of, collection from, or other realization upon any of the Collateral or the enforcement of the Guaranty) or any related fee letter); (ii) the engagement letter delivered by any Agent or any Lender to Borrower with respect to the transactions contemplated by this Agreement; or (iii) any Environmental Claim or any Hazardous Materials Activity relating to or arising from, directly or indirectly, any past or present activity, operation, land ownership, occupation or use, or practice of any Abitibi Entity.

19

“Indemnitee” as defined in Section 10.3.

“ Insolvency Laws ” means any of the BIA, the CCAA, the WURA, the UK Insolvency Act and the Bankruptcy Code, each as now and hereafter in effect, any successors to such statutes, and any other applicable insolvency or other similar law of any jurisdiction including any law of any jurisdiction permitting a debtor to obtain a stay or a compromise of the claims of its creditors against it.

“Intellectual Property” has the meaning assigned to that term in the US Security Agreements.

“Intellectual Property Asset” means, at the time of determination, any interest (fee, license or otherwise) then owned by any Credit Party in any Intellectual Property.

“Intellectual Property Security Agreements” means the patent security agreement, the copyright security agreement and the trademark security agreement referred to in the US Security Agreements.

“Intercompany Note” means (i) a promissory note substantially in the form of Exhibit K evidencing Indebtedness owed among Credit Parties and their Subsidiaries or (ii) any other promissory note evidencing such Indebtedness in form and substance reasonably satisfactory to the Administrative Agent.

“Intercreditor Agreement” means the Intercreditor Agreement dated as of April 1, 2008, among the Credit Parties, the Collateral Agent and Wells Fargo Bank National Association, in its capacity as the collateral trustee under the Senior Secured Note Documents, as it may be amended, restated, supplemented or otherwise modified from time to time.

“Interest Payment Date” means with respect to (i) any Loan that is a Base Rate Loan, each March 31, June 30, September 30 and December 31 of each year, commencing on the first such date to occur after the Closing Date and the final maturity date of such Loan; and (ii) any Loan that is a Eurodollar Rate Loan, the last day of each Interest Period applicable to such Loan; provided , in the case of each Interest Period of longer than three months, “Interest Payment Date” shall also include each date that is three months, or an integral multiple thereof, after the commencement of such Interest Period.

“Interest Period” means, in connection with a Eurodollar Rate Loan, an interest period of one-, two-, three- or six-months, as selected by Borrower in the Funding Notice or applicable Conversion/Continuation Notice, (i) initially, commencing on the Closing Date or Conversion/Continuation Date thereof, as the case may be; and (ii) thereafter, commencing on the day on which the immediately preceding Interest Period expires; provided , (a) if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day unless no further Business Day occurs in such month, in which case such Interest Period shall expire on the immediately preceding Business Day; (b) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c), of this definition, end on the last Business Day of a calendar month; and (c) no Interest Period with respect to any portion of the Term Loans shall extend beyond the Maturity Date.

20

“Interest Rate Agreement” means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedging agreement or other similar agreement or arrangement, each of which is for the purpose of hedging the interest rate exposure associated with the Abitibi Entities’ operations and not for speculative purposes.

“Interest Rate Determination Date” means, with respect to any Interest Period, the date that is two Business Days prior to the first day of such Interest Period.

“Internal Revenue Code” means the U.S. Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and any successor statute.

“Investment” means (i) any direct or indirect purchase or other acquisition by any Abitibi Entity of, or of a beneficial interest in, any of the Securities of any other Person (other than a Guarantor Subsidiary/Affiliate); (ii) any direct or indirect redemption, retirement, purchase or other acquisition for value, by any Subsidiary of Holdings or Donohue from any Person (other than Holdings or any Guarantor Subsidiary/Affiliate), of any Equity Interests of such Person; (iii) any direct or indirect loan, advance (other than advances to employees for moving, entertainment and travel expenses, drawing accounts and similar expenditures in the ordinary course of business) or capital contribution by any Abitibi Entity to any other Person (other than Holdings or any Guarantor Subsidiary/Affiliate), including all indebtedness and accounts receivable from that other Person that are not current assets or did not arise from sales to that other Person in the ordinary course of business; and (iv) all investments consisting of any exchange traded or over the counter derivative transaction, including any Hedge Agreement, whether entered into for hedging or speculative purposes. The amount of any Investment of the type described in clauses (i), (ii) and (iii) above shall be the original cost of such Investment plus the cost of all additions thereto minus the amount of all payments (other than payments of interest and dividend payments) received in respect thereof, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment.

“Joint Venture” means a joint venture, partnership or other similar arrangement, whether in corporate, partnership or other legal form; provided , in no event shall any corporate Subsidiary of any Person be considered to be a Joint Venture to which such Person is a party.

“Landlord Personal Property Collateral Access Agreement” means a Landlord Waiver and Consent Agreement substantially in the form of Exhibit J attached hereto with such amendments or modifications as may be approved by Collateral Agent.

“Leasehold Property” means any leasehold interest of any Credit Party as lessee under any lease of real property.

“Lender” means each financial institution listed on the signature pages hereto as a Lender, and any other Person that becomes a party hereto pursuant to an Assignment Agreement.

21

“Lien” means (i) any lien, mortgage, hypothec, pledge, assignment, security interest, charge or encumbrance of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, and any lease or license in the nature thereof) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing and (ii) in the case of Securities, any purchase option, call or similar right of a third party with respect to such Securities.

“Liquidated Subsidiaries” means each of 9150-3383 Quebec Inc., 4042140 Canada Inc. (Sub 1) and Bridgewater Paper Leasing Limited.

“Loan” means a Term Loan.

“Margin Stock” as defined in Regulation U of the Board of Governors as in effect from time to time.

“Material Adverse Effect” means a material adverse effect on and/or material adverse developments with respect to (i) the business, operations, properties, assets or condition (financial or otherwise) of the Abitibi Entities taken as a whole; (ii) the ability of any Credit Party to fully and timely perform its Obligations; (iii) the legality, validity, binding effect or enforceability against a Credit Party of a Credit Document to which it is a party; or (iv) the rights, remedies and benefits available to, or conferred upon, any Agent and any Lender or any Secured Party under any Credit Document.

“Material Contract” means any contract or other arrangement to which any Abitibi Entity is a party (other than the Credit Documents) for which breach, nonperformance, cancellation or failure to renew could reasonably be expected to have a Material Adverse Effect.

“Maturity Date” means the earlier of (i) March 30, 2009, and (ii) the date on which all Term Loans shall become due and payable in full hereunder, whether by acceleration or otherwise.

“Maximum Amount” means an amount equal to the Commitment of all Lenders as of the Closing Date, minus the aggregate amount of any prepayments of the Term Loans made pursuant to Section 2.13 and Section 2.14.

“Moody’s” means Moody’s Investor Services, Inc.

“Multiemployer Plan” means any Employee Benefit Plan which is a “multiemployer plan” as defined in Section 3(37) of ERISA.

“NAIC” means The National Association of Insurance Commissioners, and any successor thereto.

“Narrative Report” means, with respect to the financial statements for which such narrative report is required, a narrative report describing the operations of the Abitibi Entities in the form prepared for presentation to senior management thereof for the applicable month, Fiscal Quarter or Fiscal Year and for the period from the beginning of the then current Fiscal Year to the end of such period to which such financial statements relate.

22

“Net Asset Sale Proceeds” means, with respect to any Asset Sale, an amount equal to: (i) Cash payments (including any Cash received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise (including by way of milestone payment), but only as and when so received) received by any Abitibi Entity from such Asset Sale, minus (ii) any bona fide direct costs incurred in connection with such Asset Sale, including (a) income or gains taxes payable by the seller as a result of any gain recognized in connection with such Asset Sale during the tax period the sale occurs, (b) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness (other than the Loans) that is secured by a Lien on the stock or assets in question and that is required to be repaid under the terms thereof as a result of such Asset Sale and (c) a reasonable reserve for any indemnification payments (fixed or contingent) attributable to seller’s indemnities and representations and warranties to purchaser in respect of such Asset Sale undertaken by any Abitibi Entity in connection with such Asset Sale; provided that upon release of any such reserve, the amount released shall be considered Net Asset Sale Proceeds.

“Net Eligible Accounts” means, at any time, an amount equal to the sum of, without duplication: (a) (i) the book value of trade accounts receivable of the Credit Parties (other than accounts receivable subject to the ACSC Securitization), as reflected on the combined consolidated balance sheet of the Abitibi Entities as of the last day of the most recently ended month, plus (ii) the residual value of accounts receivable of the Credit Parties subject to the ACSC Securitization that is due and payable in cash, which shall consist of (A) the book value of the deferred purchase price note owing from Abitibi SPV to ACSC and (B) the book value of ACSC’s shareholder’s equity in Abitibi SPV, in each case as reflected on the balance sheet of ACSC as of the last day of the most recently ended month, plus (iii) the book value of non-trade accounts receivable (including any Tax refunds) of the Credit Parties that are due and payable in cash, as reflected on the combined consolidated balance sheet of the Abitibi Entities as of the last day of the most recently ended month, in each case provided that such accounts receivable are subject to valid and enforceable First Priority Liens in favor of the Secured Parties, minus (b) (i) any reserves or allowances for doubtful accounts receivable identified by the Credit Parties, as reflected on the combined consolidated balance sheet of the Abitibi Entities as of the last day of the most recently ended month, (ii) any accounts receivable owing to any of the Credit Parties from any Affiliate thereof, (iii) any accounts receivable owing to any of the Credit Parties from any Governmental Authority (other than Tax refunds included in clause (a)(iii) of this definition), and (iv) any accounts receivable subject to an offset by the account debtor (to the extent of such offset).

“Net Eligible Inventory” means, at any time, an amount equal to the sum of, without duplication: (i) the book value of inventory of the Credit Parties subject to valid and enforceable First Priority Liens in favor of the Secured Parties, as reflected on the combined consolidated balance sheet of the Abitibi Entities as of the last day of the most recently ended month, less (ii) any reserves relating to such inventory identified by the Credit Parties, as reflected on the combined consolidated balance sheet of the Abitibi Entities as of the last day of the most recently ended month, less (iii) the book value of any inventory that is obsolete or otherwise non-saleable, less (iv) the book value of any in-transit inventory, less (v) beginning with the month ended April 30, 2008, a three months’ rent reserve for each warehouse having in excess of $1,000,000 of inventory at such time for which the Collateral Agent has not received an executed Landlord Personal Property Collateral Access Agreement, provided that no such

23

reserves shall be included in such calculation if more than 75% of all inventory located at warehouses at such time is located at warehouses for which the Collateral Agent has received an executed Landlord Personal Property Collateral Access Agreement.

“Net Insurance/Condemnation Proceeds” means an amount equal to: (i) any Cash payments or proceeds received by any Abitibi Entity (a) under any casualty, business interruption, or “key man” insurance policy in respect of a covered loss thereunder or (b) as a result of the taking of any assets of any Abitibi Entity by any Person pursuant to the power of eminent domain, condemnation or otherwise, or pursuant to a sale of any such assets to a purchaser with such power under threat of such a taking, minus (ii) (a) any actual and reasonable costs incurred by any Abitibi Entity in connection with the adjustment or settlement of any claims of such Abitibi Entity in respect thereof, and (b) any bona fide direct costs incurred in connection with any sale of such assets as referred to in clause (i)(b) of this definition, including income taxes payable as a result of any gain recognized in connection therewith.

“Net Mark-to-Market Exposure” of a Person means, as of any date of determination, the excess (if any) of all unrealized losses over all unrealized profits of such Person arising from Hedge Agreements or other Indebtedness of the type described in clause (xi) of the definition thereof. As used in this definition, “unrealized losses” means the fair market value of the cost to such Person of replacing such Hedge Agreement or such other Indebtedness as of the date of determination (assuming the Hedge Agreement or such other Indebtedness were to be terminated as of that date), and “unrealized profits” means the fair market value of the gain to such Person of replacing such Hedge Agreement or such other Indebtedness as of the date of determination (assuming such Hedge Agreement or such other Indebtedness were to be terminated as of that date).

“Netherlands Security Agreement” means the Security Agreement to be executed by each Credit Party that has any right, title or interest in any Collateral which is located in the Netherlands or in respect of which the validity, perfection, effect of perfection or non-perfection or priority of a security interest in such Collateral is governed by the laws of any jurisdiction in the Netherlands, substantially in the form of Exhibit I-5, as same may be amended, restated, supplemented or otherwise modified from time to time.

“Non-Public Information” means information which has not been disseminated in a manner making it available to investors generally, within the meaning of Regulation FD.

“Note” means a Term Note.

“Notice” means a Funding Notice or a Conversion/Continuation Notice.

“Obligations” means all obligations of every nature of each Credit Party, including obligations from time to time owed to the Agents (including former Agents), the Lenders or any of them, under any Credit Document, whether for principal, interest (including interest which, but for the filing of a petition in bankruptcy with respect to such Credit Party, would have accrued on any Obligation, whether or not a claim is allowed against such Credit Party for such interest in the related bankruptcy proceeding), fees, expenses, indemnification or otherwise.

24

“Obligee Guarantor” as defined in Section 7.7.

“Organizational Documents” means (i) with respect to any corporation or company, its certificate, articles or memorandum of incorporation, organization, association or amalgamation, its letters patent or other constating documents, in each case, as amended, and its by-laws, if any, as amended, (ii) with respect to any limited partnership, its certificate or declaration of limited partnership, as amended, and its partnership agreement, as amended, (iii) with respect to any general partnership, its partnership agreement, as amended, (iv) with respect to any limited liability company, its articles of organization, as amended, and its operating or incorporation agreement, as amended, and (v) in addition to the foregoing, with respect to Augusta Newsprint, the call agreement entered into among its partners and their affiliates. In the event any term or condition of this Agreement or any other Credit Document requires any Organizational Document to be certified by a secretary of state or similar governmental official, the reference to any such “Organizational Document” shall only be to a document of a type customarily certified by such governmental official.

“Parent” means AbitibiBowater Inc., a Delaware corporation.

“PATRIOT Act” as defined in Section 3.1(v).

“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.

“PCTFA” as defined in Section 3.1(v).

“Pension Plan” means, in respect of any Credit Party other than a Canadian Credit Party, any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code or Section 302 of ERISA and is subject to Title IV of ERISA, and in respect of any Canadian Credit Party, each pension, supplementary pension, retirement savings or other retirement income plan or arrangement of any kind, registered or non-registered, established, maintained or contributed to by such Canadian Credit Party in respect of its employees or former employees, but does not include the Canada Pension Plan or the Québec Pension Plan that is maintained by the Government of Canada or the Province of Québec, respectively.

“Permitted Joint Venture Dispositions” means:

(a) the sale of Equity Interests and/or assets of Bridgewater Paper Company Limited to a Person that is not an Affiliate of the Abitibi Entities in exchange for fair market value in connection with a Joint Venture, so long as (i) no Default or Event of Default shall have occurred and be continuing at the time of such sale or shall be caused thereby, (ii) no prepayment of the Term Loans shall be required under Section 2.14(d) on a pro forma basis after giving effect to such sale as of the last day of the month most recently ended (unless such prepayment is made concurrent therewith), (iii) following the consummation of such sale, Bridgewater Paper Company Limited shall continue to (and, in the case of any such sale of assets, the Person purchasing such assets shall) be a Subsidiary of Holdings or Donohue, be a Guarantor under this Agreement, and be a Grantor of Liens on Collateral under the Collateral Documents, and (iv) the Net Asset Sale Proceeds therefrom are applied in accordance with Section 2.15(a); and

25

(b) the transfer of Borrower’s Rivière-aux-Rats sawmill and the timber rights held by Produits Forestiers La Tuque Inc. to Produits Forestiers Mauricie L.P., and the concurrent issuance, directly or indirectly, of any limited or general partnership interest in such limited partnership, or in any general partner of such limited partnership, in exchange therefor, which issuance shall constitute fair market value therefor, or any other transaction having substantially the effect of the foregoing, so long as (i) no Default or Event of Default shall have occurred and be continuing at the time of such transfer and issuance or other transaction or shall be caused thereby, (ii) no prepayment of the Term Loans shall be required under Section 2.14(d) on a pro forma basis after giving effect to such sale as of the last day of the month most recently ended (unless such prepayment is made concurrent therewith), and (iii) the Net Asset Sale Proceeds therefrom are applied in accordance with Section 2.15(a).

“Permitted Liens” means each of the Liens permitted pursuant to Section 6.2.

“Person” means and includes natural persons, corporations, limited partnerships, general partnerships, unlimited liability companies, limited liability companies, limited liability partnerships, joint stock companies, Joint Ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and Governmental Authorities.

“Platform” as defined in Section 5.1(o).

“ PPSA ” means the Personal Property Security Act (Ontario), provided , however, if the validity, attachment, perfection (or opposability), effect of perfection or of non-perfection or priority of Collateral Agent’s security interest in any Collateral are governed by the personal property security laws or laws relating to movable property of any jurisdiction other than Ontario, PPSA shall mean those personal property security laws or laws relating to movable property in such other jurisdiction for the purpose of the provisions hereof relating to such validity, attachment, perfection (or opposability), effect of perfection or of non-perfection or priority and for the definitions related to such provisions.

“Prime Rate” means the rate of interest quoted in The Wall Street Journal , Money Rates Section as the Prime Rate (currently defined as the base rate on corporate loans posted by at least 75% of the nation’s thirty (30) largest banks), as in effect from time to time. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Agent or any other Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Rate.

“Principal Office” means Administrative Agent’s “Principal Office” as set forth on Appendix B, or such other office or office of a third party or sub-agent, as appropriate, as Administrative Agent may from time to time designate in writing to Borrower and each Lender.

“Projections” as defined in Section 4.8.

26

“Pro Rata Share” means, with respect to all payments, computations and other matters relating to the Term Loan of any Lender, the percentage obtained by dividing (a) the Term Loan Exposure of that Lender by (b) the aggregate Term Loan Exposure of all Lenders.

“Québec Security Agreements” means collectively the deed of hypothec and related debenture and pledge of debenture agreement to be executed by each Credit Party that has its registered office or chief executive office situated in the Province of Québec or has any right, title or interest in any Collateral which is located in the Province of Québec or in respect of which the validity, perfection, effect of perfection or non-perfection or priority of a security interest in such Collateral is governed by the laws of the Province of Québec, substantially in the form of Exhibit I-4, as same may be amended, restated, supplemented or otherwise modified from time to time.

“Real Estate Asset” means, at any time of determination, any interest (fee, leasehold or otherwise) then owned by any Credit Party in any real property.

“Register” as defined in Section 2.7(b).

“Regulation D” means Regulation D of the Board of Governors as in effect from time to time.

“Regulation FD” means Regulation FD as promulgated by the U.S. Securities and Exchange Commission under the Securities Act and Exchange Act as in effect from time to time.

“Related Agreements” means, collectively the Senior Secured Note Documents, the Senior Unsecured Exchange Note Documents and the Convertible Note Documents .

“Related Fund” means, with respect to any Lender that is an investment fund, any other investment fund that invests in commercial loans and that is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

“Related Transactions” means the transactions contemplated to be consummated on or prior to the Closing Date by the Related Agreements.

“Release” means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of any Hazardous Material into the indoor or outdoor environment (including the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Material) or the movement of any Hazardous Material through the air, soil, surface water or groundwater.

“Replacement Lender” as defined in Section 2.23.

“Required Prepayment Date” as defined in Section 2.15(b).

“Requisite Lenders” means one or more Lenders having or holding Term Loan Exposure representing more than 50% of the aggregate Term Loan Exposure of all Lenders.

27

“Restricted Junior Payment” means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of Holdings or, after the Donohue Sale, Donohue now or hereafter outstanding, except a dividend payable solely in shares of that class of stock to the holders of that class; (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of Holdings or, after the Donohue Sale, Donohue now or hereafter outstanding; (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock of Holdings, Donohue or Borrower (or any direct or indirect parent thereof) now or hereafter outstanding; and (iv) any payment or prepayment of principal of, premium, if any, or interest on, or redemption, purchase, retirement, defeasance (including in-substance or legal defeasance), sinking fund or similar payment with respect to, the Senior Notes, any subordinated Indebtedness permitted under Section 6.1 and any Indebtedness owing to an Abitibi Entity that is not a Credit Party.

“S&P” means Standard & Poor’s, a Division of The McGraw-Hill Companies.

“Secured Parties” has the meaning assigned to that term in each of the US Security Agreement, the Canadian Security Agreement, the Quebec Security Agreements, the UK Security Agreement and the Netherlands Security Agreement.

“Securities” means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as “securities” or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing.

“Securities Act” means the U.S. Securities Act of 1933, as amended from time to time, and any successor statute.

“ Securitization Intercreditor Agreement ” means the Intercreditor Agreement dated as of April 1, 2008, among the Credit Parties, the Collateral Agent and Citibank, N.A., London Branch, in its capacity as agent for the investor and the banks under the ACSC Securitization Documents, as they may be amended, restated, supplemented or otherwise modified from time to time.

“Senior Notes” means Indebtedness owing under each of the following senior notes issued by Holdings and/or Borrower: (i) the Senior Secured Notes; (ii) the Senior Unsecured Exchange Notes; (iii) the 8.550% notes due 2010 issued by Holdings, (iv) the 7.750% notes due 2011 issued by Holdings, (v) the floating rate notes due 2011 issued by Borrower, (vi) the 6.0% notes due 2013 issued by Borrower, (vii) the 8.375% notes due 2015 issued by Borrower, (viii) the 7.40% debentures due 2018 issued by Holdings, (ix) the 7.50% debentures due 2028 issued by Holdings, (x) the 8.50% debentures due 2029 issued by Holdings and (xi) the 8.850% notes due 2030 issued by Holdings.

28

“Senior Note Documents” means, collectively, (i) the Senior Secured Note Documents, (ii) the Senior Unsecured Exchange Note Documents, (iii) the Senior Notes; (iv) the Indenture, dated as of April 6, 1998, between Holdings and Montreal Trust Company, as trustee, as modified by (a) the First Supplemental Indenture, dated as of September 1, 2001, between Holdings, 3834328 Canada Inc. (“ 3834328 ”) and Holdings as partners of Abitibi-Consolidated General Partnership (“ ACGP ”) and Computershare Trust Company of Canada, successor to Montreal Trust Company, as trustee; (b) the Second Supplemental Indenture, dated as of October 1, 2001, between Holdings, Holdings and 3834328 in their capacities as partners of ACGP, Donohue Forest Products Inc., a Quebec corporation (“ DFP ”), and Computershare Trust Company of Canada; and (c) the Third Supplemental Indenture, dated as of December 1, 2001, between Holdings, Borrower, ACGP and Computershare Trust Company of Canada; (v) the Indenture, dated as of July 26, 1999, between Holdings, Abitibi-Consolidated Finance L.P. (“ Finance LP ”) and The Bank of Nova Scotia Trust Company of New York, as trustee as modified by (a) the First Supplemental Indenture, dated as of September 1, 2001, between Holdings, Finance LP, Holdings and 3834328 as partners of ACGP and The Bank of Nova Scotia Trust Company of New York; (b) the Second Supplemental Indenture, dated as of October 1, 2001, between Holdings, Finance LP, Holdings and 3834328 in their capacities as partners of ACGP, DFP and The Bank of Nova Scotia Trust Company of New York; (c) the Third Supplemental Indenture, dated as of December 1, 2001, between Holdings, Finance LP, Borrower, ACGP and The Bank of Nova Scotia Trust Company of New York; and (d) the Fourth Supplemental Indenture, dated as of November 21, 2005, between Holdings, Finance LP, Borrower and The Bank of Nova Scotia Trust Company of New York; (vi) the Indenture, dated as of December 11, 2001, between Holdings, Borrower and The Bank of Nova Scotia Trust Company of New York, as trustee; and (vii) the Indenture, dated as of June 15, 2004, between Holdings, Borrower and The Bank of Nova Scotia Trust Company of New York, as trustee.

“Senior Secured Notes” means the 13.75% Senior Secured Notes Due 2011 of Borrower in the initial aggregate principal amount of up to $413,000,000 and issued pursuant to the Senior Secured Note Indenture, and any registered notes issued by Borrower in exchange for, and as contemplated by, such notes with substantially identical terms as such notes, in each case as such notes may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under Section 6.15.

“Senior Secured Note Collateral Account” means the “Collateral Proceeds Account” as defined in the Senior Secured Note Indenture.

“Senior Secured Note Collateral Trustee” means the “Collateral Trustee” as defined in the Senior Secured Note Indenture.

“Senior Secured Note Documents” means the Senior Secured Note Indenture, the Senior Secured Notes and each other document executed in connection with such notes, as each such document may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under Section 6.15.

“Senior Secured Note Indenture” means that certain Indenture, dated April 1, 2008, among Borrower, the guarantors party thereto, and Wells Fargo Bank, National Association, as trustee, pursuant to which the Senior Secured Notes are issued.

29

“Senior Unsecured Exchange Notes” means the 15.5% Senior Unsecured Exchange Notes Due 2010 of Borrower in the initial aggregate principal amount up to $290,000,000 and issued pursuant to the Senior Unsecured Exchange Note Indenture, and any registered notes issued by Borrower in exchange for, and as contemplated by, such notes with substantially identical terms as such notes, in each case as such notes may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under Section 6.15.

“Senior Unsecured Exchange Note Documents” means the Senior Unsecured Exchange Note Indenture, the Senior Unsecured Exchange Notes and each other document executed in connection with such notes, as each such document may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under Section 6.15.

“Senior Unsecured Exchange Note Indenture” means that certain indenture, dated April 1, 2008, among Borrower, the guarantors party thereto and Wells Fargo Bank, National Association, as trustee, pursuant to which the Senior Unsecured Exchange Notes are issued.

“Snowflake Disposition” means the sale by ACSC to Catalyst Paper Corporation of (a) all of the capital stock of The Apache Railway Company and (b) certain assets related to the production of newsprint pursuant to the Asset and Stock Purchase Agreement dated as of February 10, 2008 (without giving effect to any amendments or other modifications thereof) between such parties, in each case (i) the proceeds of which may be distributed by ACSC to Donohue and by Donohue to Designated Donohue Parent as a loan, dividend or redemption of Equity Interests and simultaneously used by Designated Donohue Parent to purchase from Borrower preferred Equity Interests of Donohue or to pay principal or interest on any promissory note owing by the Designated Donohue Parent to Borrower, and (ii) so long as (A) no prepayment of the Term Loans shall be required under Section 2.14(d) on a pro forma basis after giving effect to such sale as of the last day of the month most recently ended (unless such prepayment is made concurrent therewith), and (B) the Net Asset Sale Proceeds therefrom are applied by Borrower, following receipt from Designated Donohue Parent, in accordance with Section 2.15(a).

“Solvency Certificate” means a Solvency Certificate of the chief financial officer of Parent, Holdings or Donohue, as applicable, substantially in the form of Exhibit G-2.

“Solvent” means, with respect to any Person, that as of the date of determination is subject to the Insolvency Laws of (a) any jurisdiction other than Canada or any political subdivision thereof, both (i) (1) the sum of such Person’s debt (including contingent liabilities) does not exceed the fair value of such Person’s present assets; (2) such Person’s capital is not unreasonably small in relation to its business as contemplated on the Closing Date and reflected in the Projections or with respect to any transaction contemplated or undertaken after the Closing Date; and (3) such Person has not incurred and does not intend to incur, or believe (nor should it reasonably believe) that it will incur, debts beyond its ability to pay such debts as they become due (whether at maturity or otherwise); and (ii) such Person is “solvent” within the meaning given that term and similar terms under the applicable Insolvency Laws and applicable laws

30

relating to fraudulent transfers and conveyances, and (b) Canada or any political subdivision thereof, (i) the property of such Person is sufficient, if disposed of at a fairly conducted sale under legal process, to enable payment of all its obligations, due and accruing due, (ii) the property of such Person is, at a fair valuation, greater than the total amount of liabilities, including contingent liabilities, of such Person; and (iii) such Person has not ceased paying its current obligations in the ordinary course of business as they generally become due. For purposes of this definition, the amount of any contingent liability at any time shall 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 (irrespective of whether such contingent liabilities meet the criteria for accrual under Statement of Financial Accounting Standard No. 5 or any other analogous criteria in any jurisdiction).

“Star Lake” means Star Lake Hydro Partnership, a Newfoundland general partnership.

“ Star Lake Indebtedness ” means Indebtedness incurred under the Credit Agreement dated April 25, 1997 between Star Lake, the lenders party thereto and The Mutual Life Assurance Company of Canada, as agent for such lenders, as same may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under Section 6.15.

“Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company, association, joint venture or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof; provided , in determining the percentage of ownership interests of any Person controlled by another Person, no ownership interest in the nature of a “qualifying share” of the former Person shall be deemed to be outstanding.

“Syndication Agent” as defined in the preamble hereto.

“Tax” means any present or future tax, levy, impost, duty, assessment, charge, fee, deduction or withholding of any nature and whatever called, including any interest, additions to tax or penalties thereto, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed; provided , “Tax on the overall net income” of a Person shall be construed as a reference to a tax imposed by the jurisdiction in which that Person is organized or in which that Person’s applicable principal office (and/or, in the case of a Lender, its lending office) is located or in which that Person (and/or, in the case of a Lender, its lending office) is deemed to be doing business on all or part of the net income, profits or gains (whether worldwide, or only insofar as such income, profits or gains are considered to arise in or to relate to a particular jurisdiction, or otherwise) of that Person (and/or, in the case of a Lender, its applicable lending office).

31

“Term Loan” means a term loan made by the Lenders to Borrower pursuant to Section 2.1(a).

“Term Loan Commitment” means the commitment of a Lender to make or otherwise fund a Term Loan, and “Term Loan Commitments” means such commitments of all Lenders in the aggregate. The amount of each Lender’s Term Loan Commitment, if any, is set forth on Appendix A or in the applicable Assignment Agreement, subject to any adjustment or reduction pursuant to the terms and conditions hereof. The aggregate amount of the Term Loan Commitments as of the Closing Date is $400,000,000.

“Term Loan Exposure” means, with respect to any Lender, as of any date of determination, the outstanding principal amount of the Term Loans of such Lender; provided , at any time prior to the making of the Term Loans, the Term Loan Exposure of any Lender shall be equal to such Lender’s Term Loan Commitment.

“Term Loan Note” means a promissory note in the form of Exhibit B, as it may be amended, restated, supplemented or otherwise modified from time to time.

“Terminated Lender” as defined in Section 2.23.

“Transaction Costs” means the fees, costs and expenses payable by the Abitibi Entities on or before the Closing Date in connection with the Transactions.

“Transactions” means, collectively, the transactions contemplated by this Agreement, the repayment of the Existing Refinanced Indebtedness and the Related Transactions.

“Type of Loan” means a Base Rate Loan or a Eurodollar Rate Loan.

“UCC” means the personal property security laws as from time to time in effect in any applicable jurisdiction which govern the validity, perfection (or opposability), effect of perfection or of non-perfection or priority of Collateral Agent’s security interest in any Collateral.

“Unadjusted Eurodollar Rate Component” means that component of the interest costs to Borrower in respect of a Eurodollar Rate Loan that is based upon the rate obtained pursuant to clause (i) of the definition of Adjusted Eurodollar Rate.

“UK Credit Party” means each Credit Party that (i) is organized under the laws of England and Wales, (ii) carries on business in England and Wales, or (iii) has any title or interest in or to any property in England and Wales.

“UK Insolvency Act” means the Insolvency Act of 1986 of England and Wales, as amended by the Enterprise Act of 2002 of England and Wales.

“UK Security Agreement” means the Debenture to be executed by each Credit Party that is incorporated in any jurisdiction in the United Kingdom or has any right, title or interest in any Collateral which is located in any jurisdiction in the United Kingdom or in respect

32

of which the validity, perfection, effect of perfection or non-perfection, or priority of a security interest in such Collateral is governed by the laws of any jurisdiction in the United Kingdom, substantially in the form of Exhibit I-3, as it may be amended, restated, supplemented or otherwise modified from time to time.

“US Security Agreements” means (i) the Pledge and Security Agreement to be executed by each Credit Party that is a Subsidiary of Borrower (other than Donohue and its Subsidiaries) and has any right, title or interest in any Collateral which is located in the United States or in respect of which the validity, perfection, effect of perfection or non-perfection, or priority of a security interest in such Collateral is governed by the laws of any jurisdiction in the United States, and (ii) the Pledge and Security Agreement to be executed by Donohue and each Subsidiary of Donohue that is a Credit Party and has any right, title or interest in any Collateral which is located in the United States or in respect of which the validity, perfection, effect of perfection or non-perfection, or priority of a security interest in such Collateral is governed by the laws of any jurisdiction in the United States, in each case substantially in the form of Exhibit I-1, as same may be amended, restated, supplemented or otherwise modified from time to time.

“Waivable Mandatory Prepayment” as defined in Section 2.15(b).

“Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years obtained by dividing:

(i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of such Indebtedness, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by

(ii) the then outstanding principal amount of such Indebtedness.

“WURA” means the Winding-Up and Restructuring Act (Canada).

1.2. Accounting Terms . Except as otherwise expressly provided herein, all accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with GAAP. Financial statements and other information required to be delivered to Lenders pursuant to Section 5.1(a), 5.1(b) and 5.1(c) shall be prepared in accordance with GAAP as in effect at the time of such preparation (and delivered together with the reconciliation statements provided for in Section 5.1(e), if applicable). Subject to the foregoing, calculations in connection with the definitions, covenants and other provisions hereof shall utilize accounting principles and policies in conformity with those used to prepare the Historical Financial Statements.

1.3. Interpretation, Etc . (a) Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. References herein to any Section, Appendix, Schedule or Exhibit shall be to a Section, an Appendix, a Schedule or an Exhibit, as the case may be, hereof unless otherwise specifically provided. The use herein of the word “include” or “including”, when following any general

33

statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not non-limiting language (such as “without limitation” or “but not limited to” or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. The terms lease and license shall include sub-lease and sub-license, as applicable. A reference to a statute includes all regulations made pursuant to such statute and, unless otherwise specified, the provisions of any statute or regulation which amends, revises, restates, supplements or supersedes any such statute or any such regulation.

(b) For purposes of any assets, liabilities or entities located in the Province of Québec and for all other purposes pursuant to which the interpretation or construction of this Agreement may be subject to the laws of the Province of Québec or a court or tribunal exercising jurisdiction in the Province of Québec, (i) “personal property” shall be deemed to include “movable property”, (ii) “real property” shall be deemed to include “immovable property”, (iii) “tangible property” shall be deemed to include “corporeal property”, (iv) “intangible property” shall be deemed to include “incorporeal property”, (v) “security interest”, “mortgage” and “lien” shall be deemed to include a “hypothec”, “prior claim”, “reservation of ownership” and a “resolutory clause”, (vi) all references to filing, registering or recording under the UCC or PPSA shall be deemed to include publication under the Civil Code of Québec, (vii) all references to “perfection” of or “perfected” liens or security interest shall be deemed to include a reference to an “opposable” or “set up” hypothec as against third parties, (viii) any “right of offset”, “right of setoff” or similar expression shall be deemed to include a “right of compensation”, (ix) “goods” shall be deemed to include “corporeal movable property” other than chattel paper, documents of title, instruments, money and securities, (x) an “agent” shall be deemed to include a “mandatary”, (xi) “construction liens” shall be deemed to include “legal hypothecs in favour of persons having taken part in the construction or renovation of an immovable”; (xii) “joint and several” shall be deemed to include “solidary”; (xiii) “gross negligence or willful misconduct” shall be deemed to be “intentional or gross fault”; (xiv) “beneficial ownership” shall be deemed to include “ownership”; (xv) “legal title” shall be deemed to include “holding title on behalf of an owner as mandatary or prête-nom”; (xvi) “easement” shall be deemed to include “servitude”; (xvii) “priority” shall be deemed to include “rank” or “prior claim”, as applicable; (xviii) “survey” shall be deemed to include “certificate of location and plan”; (xix) “state” shall be deemed to include “province”; (xx) “fee simple title” shall be deemed to include “ownership” (including ownership under a right of superficies); (xi) “ground lease” shall be deemed to include “emphyteusis” or a “lease with a right of superficies”, as applicable; (xii) “leasehold interest” shall be deemed to include “a valid lease”; and (xiii) “lease” shall be deemed to include a “leasing contract”. The parties hereto confirm that it is their wish that this Agreement and any other document executed in connection with the transactions contemplated herein be drawn up in the English language only and that all other documents contemplated thereunder or relating thereto, including notices, may also be drawn up in the English language only. Les parties aux présentes confirment que c’est leur volonté que cette convention et les autres documents de crédit soient rédigés en langue anglaise seulement et que tous les documents, y compris tous avis, envisagés par cette convention et les autres documents peuvent être rédigés, en la langue anglaise seulement .

34

1.4. Currency Matters . All Obligations of each Credit Party under the Credit Documents shall be payable in the Dollars, and all calculations, comparisons, measurements or determinations under the Credit Documents shall be made in Dollars. For the purpose of such calculations, comparisons, measurements or determinations, amounts denominated in other currencies shall be converted into the Equivalent Amount of Dollars on the date of calculation, comparison, measurement or determination. Throughout the Credit Documents, all references to amounts in Dollars include the Equivalent Amount of Canadian Dollars.

SECTION 2. LOANS

2.1. Term Loan .

(a) Term Loan Commitments . Subject to the terms and conditions hereof, each Lender severally agrees to make, on the Closing Date, a Term Loan to Borrower in an amount equal to such Lender’s Term Loan Commitment. The Borrower may make only one borrowing hereunder, which shall be on the Closing Date. Any amount borrowed under this Section 2.1(a) and subsequently repaid or prepaid may not be reborrowed. Subject to Sections 2.13(a) and 2.14, all amounts owed hereunder with respect to the Term Loans shall be paid in full no later than the Maturity Date. Each Lender’s Term Loan Commitment shall terminate immediately and without further action on the Closing Date after giving effect to the funding of such Lender’s Term Loan Commitment on such date.

(b) Borrowing Mechanics for Term Loans .

(i) Borrower shall deliver to Administrative Agent a fully executed Funding Notice no later than three Business Days prior to the Closing Date. Promptly upon receipt by Administrative Agent of such Funding Notice, Administrative Agent shall notify each Lender of the proposed borrowing.

(ii) Each Lender shall make its Term Loan available to Administrative Agent not later than 12:00 p.m. (New York City time) on the Closing Date, by wire transfer of same day funds in Dollars, at the Principal Office designated by Administrative Agent. Upon satisfaction or waiver of the conditions precedent specified herein, Administrative Agent shall make the proceeds of the Term Loans available to Borrower on the Closing Date by causing an amount of same day funds in Dollars equal to the proceeds of all such Term Loans received by Administrative Agent from Lenders to be credited to the account of Borrower at the Principal Office designated by Administrative Agent or to such other account as may be designated in writing to Administrative Agent by Borrower.

2.2. [Reserved] .

2.3. [Reserved] .

2.4. [Reserved] .

2.5. Pro Rata Shares; Availability of Funds .

35

(a) Pro Rata Shares . All Term Loans shall be made, and all participations purchased, by Lenders simultaneously and proportionately to their respective Pro Rata Shares, it being understood that no Lender shall be responsible for any default by any other Lender in such other Lender’s obligation to make a Term Loan requested hereunder or purchase a participation required hereby nor shall any Term Loan Commitment of any Lender be increased or decreased as a result of a default by any other Lender in such other Lender’s obligation to make a Term Loan requested hereunder or purchase a participation required hereby.

(b) Availability of Funds . Unless Administrative Agent shall have been notified by any Lender prior to the Closing Date that such Lender does not intend to make available to Administrative Agent the amount of such Lender’s Term Loan requested on the Closing Date, Administrative Agent may assume that such Lender has made such amount available to Administrative Agent on the Closing Date and Administrative Agent may, in its sole discretion, but shall not be obligated to, make available to Borrower a corresponding amount on the Closing Date. If such corresponding amount is not in fact made available to Administrative Agent by such Lender, Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from the Closing Date until the date such amount is paid to Administrative Agent, at the customary rate set by Administrative Agent for the correction of errors among banks for three Business Days and thereafter at the Base Rate. If such Lender does not pay such corresponding amount forthwith upon Administrative Agent’s demand therefor, Administrative Agent shall promptly notify Borrower and Borrower shall immediately pay such corresponding amount to Administrative Agent together with interest thereon, for each day from the Closing Date until the date such amount is paid to Administrative Agent, at the rate payable hereunder for Base Rate Loans. Nothing in this Section 2.5(b) shall be deemed to relieve any Lender from its obligation to fulfill its Term Loan Commitments hereunder or to prejudice any rights that Borrower may have against any Lender as a result of any default by such Lender hereunder.

2.6. Use of Proceeds . The proceeds of the Term Loans made on the Closing Date shall be applied by Borrower to (i) refinance and cash collateralize Existing Refinanced Indebtedness, and (ii) pay fees, commissions and expenses incurred in connection with the consummation of the transactions contemplated by this Agreement. No portion of the proceeds of the Term Loans shall be used in any manner that causes or might cause such Term Loans or the application of such proceeds to violate Regulation T, Regulation U or Regulation X of the Board of Governors or any other regulation thereof or to violate the Exchange Act.

2.7. Evidence of Debt; Register; Lenders’ Books and Records; Term Loan Notes.

(a) Lenders’ Evidence of Debt . Each Lender shall maintain on its internal records an account or accounts evidencing the Obligations of Borrower to such Lender, including the amounts of the Loans made by it and each repayment and prepayment in respect thereof. Any such recordation shall be conclusive and binding on Borrower, absent manifest error; provided , that the failure to make any such recordation, or any error in such recordation, shall not affect the Borrower’s Obligations in respect of any applicable Term Loans; and provided further , in the event of any inconsistency between the Register and any Lender’s records, the recordations in the Register shall govern.

36

(b) Register . Administrative Agent (or its agent or sub-agent appointed by it) shall maintain at the Principal Office a register for the recordation of the names and addresses of Lenders and Term Loans of each Lender from time to time (the “Register” ). The Register shall be available for inspection by Borrower or any Lender (with respect to any entry relating to such Lender’s Loans) at any reasonable time and from time to time upon reasonable prior notice. Administrative Agent shall record, or shall cause to be recorded, in the Register the Term Loans in accordance with the provisions of Section 10.6, and each repayment or prepayment in respect of the principal amount of the Term Loans, and any such recordation shall be conclusive and binding on Borrower and each Lender, absent manifest error; provided , failure to make any such recordation, or any error in such recordation, shall not affect the Borrower’s Obligations in respect of any Term Loan. Borrower hereby designates GSCP to serve as Borrower’s agent solely for purposes of maintaining the Register as provided in this Section 2.7, and Borrower hereby agrees that, to the extent GSCP serves in such capacity, GSCP and its officers, directors, employees, agents, sub-agents and affiliates shall constitute “Indemnitees.”

(c) Term Loan Notes . If so requested by any Lender by written notice to Borrower (with a copy to Administrative Agent) at least two Business Days prior to the Closing Date, or at any time thereafter, Borrower shall execute and deliver to such Lender (and/or, if applicable and if so specified in such notice, to any Person who is an assignee of such Lender pursuant to Section 10.6) on the Closing Date (or, if such notice is delivered after the Closing Date, promptly after Borrower’s receipt of such notice) a Term Loan Note or Term Loan Notes to evidence such Lender’s Term Loan.

2.8. Interest on Loans .

(a) Except as otherwise set forth herein, the Term Loans shall bear interest on the unpaid principal amount thereof from the date made through repayment (whether by acceleration or otherwise) thereof as follows:

(i) in the case of a Base Rate Loan, at the Base Rate plus the Applicable Margin; or

(ii) in the case of a Eurodollar Rate Loan, at the Adjusted Eurodollar Rate plus the Applicable Margin.

(b) The basis for determining the rate of interest with respect to the Term Loans and the Interest Period with respect to any Eurodollar Rate Loan shall be selected by Borrower and notified to Administrative Agent and Lenders pursuant to the applicable Funding Notice or Conversion/Continuation Notice, as the case may be; provided , until the earlier of (i) the date on which Syndication Agent notifies Borrower that the primary syndication of the Term Loans has been completed, as determined by Syndication Agent, and (ii) 90 days following the Closing Date, the Term Loans shall be maintained as either (1) Eurodollar Rate Loans having an Interest Period of no longer than one month or (2) Base Rate Loans. If on any day a Term Loan is outstanding with respect to which a Conversion/Continuation Notice has not been delivered to Administrative Agent in accordance with the terms hereof specifying the applicable basis for determining the rate of interest, then for that day such Term Loan shall be a Base Rate Loan.

37

(c) In connection with Eurodollar Rate Loans there shall be no more than five (5) Interest Periods outstanding at any time. In the event Borrower fails to specify between a Base Rate Loan or a Eurodollar Rate Loan in the Funding Notice or the applicable Conversion/Continuation Notice, such Term Loan (if outstanding as a Eurodollar Rate Loan) will be automatically converted into a Base Rate Loan on the last day of the then-current Interest Period for such Term Loan (or if outstanding as a Base Rate Loan will remain as, or (if not then outstanding) will be made as, a Base Rate Loan). In the event Borrower fails to specify an Interest Period for any Eurodollar Rate Loan in the Funding Notice or the applicable Conversion/Continuation Notice, Borrower shall be deemed to have selected an Interest Period of one month. As soon as practicable after 10:00 a.m. (New York City time) on each Interest Rate Determination Date, Administrative Agent shall determine (which determination shall, absent manifest error, be final, conclusive and binding upon all parties) the interest rate that shall apply to the Eurodollar Rate Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to Borrower and each Lender.

(d) Interest payable pursuant to Section 2.8(a) shall be computed (i) in the case of Base Rate Loans on the basis of a 365-day or 366-day year, as the case may be, and (ii) in the case of Eurodollar Rate Loans, on the basis of a 360-day year, in each case for the actual number of days elapsed in the period during which it accrues. In computing interest on any Term Loan, the date of the making of such Term Loan or the first day of an Interest Period applicable to such Term Loan or the last Interest Payment Date or, with respect to a Base Rate Loan being converted from a Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate Loan, as the case may be, shall be included, and the date of payment of such Loan or the expiration date of an Interest Period applicable to such Term Loan or, with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the case may be, shall be excluded; provided , if a Term Loan is repaid on the same day on which it is made, one day’s interest shall be paid on that Term Loan.

(e) Except as otherwise set forth herein, interest on the Term Loans (i) shall accrue on a daily basis on and shall be payable in arrears on each Interest Payment Date with respect to interest accrued on and to each such payment date, (ii) shall accrue on a daily basis and shall be payable in arrears upon any prepayment of that Term Loan, whether voluntary or mandatory, to the extent accrued on the amount being prepaid, and (iii) shall accrue on a daily basis and shall be payable in arrears on the Maturity Date; provided , however, with respect to any voluntary prepayment of a Base Rate Loan, accrued interest shall instead be payable on the applicable Interest Payment Date.

2.9. Conversion/Continuation .

(a) Subject to Section 2.18 and so long as no Default or Event of Default shall have occurred and then be continuing, Borrower shall have the option:

(i) to convert at any time all or any part of any Term Loan equal to $5,000,000 and integral multiples of $1,000,000 in excess of that amount from one Type of Loan to another Type of Loan; provided , a Eurodollar Rate Loan may only be

38

converted on the expiration of the Interest Period applicable to such Eurodollar Rate Loan unless Borrower shall pay all amounts due under Section 2.18 in connection with any such conversion; or

(ii) upon the expiration of any Interest Period applicable to any Eurodollar Rate Loan, to continue all or any portion of such Loan equal to $5,000,000 and integral multiples of $1,000,000 in excess of that amount as a Eurodollar Rate Loan.

(b) Borrower shall deliver a Conversion/Continuation Notice to Administrative Agent no later than 10:00 a.m. (New York City time) at least one Business Day in advance of the proposed conversion date (in the case of a conversion to a Base Rate Loan) and at least three Business Days in advance of the proposed conversion/continuation date (in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan). Except as otherwise provided herein, a Conversion/Continuation Notice for conversion to, or continuation of, any Eurodollar Rate Loans (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Borrower shall be bound to effect a conversion or continuation in accordance therewith.

2.10. Default Interest . Upon the occurrence and during the continuance of an Event of Default under Section 8.1(a), the principal amount of all Term Loans outstanding and, to the extent permitted by applicable law, any interest payments on the Term Loans or any fees or other amounts owed hereunder, shall thereafter bear interest (including post-petition interest in any proceeding under applicable Insolvency Laws) payable on demand at a rate that is 2% per annum in excess of the interest rate otherwise payable hereunder with respect to the Term Loans (or, in the case of any such fees and other amounts, at a rate which is 2% per annum in excess of the interest rate otherwise payable hereunder for Base Rate Loans); provided , in the case of Eurodollar Rate Loans, upon the expiration of the Interest Period in effect at the time any such increase in interest rate is effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans and shall thereafter bear interest payable upon demand at a rate which is 2% per annum in excess of the interest rate otherwise payable hereunder for Base Rate Loans. Payment or acceptance of the increased rates of interest provided for in this Section 2.10 is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Administrative Agent or any Lender.

2.11. Fees .

(a) Borrower agrees to pay on the Closing Date to each Lender party to this Agreement as a Lender on the Closing Date, as fee compensation for the funding of such Lender’s Loan, a closing fee in an amount equal to 4.00% of the stated principal amount of such Lender’s Loan, payable to such Lender from the proceeds of its Loan as and when funded on the Closing Date. Such closing fee will be in all respects fully earned, due and payable on the Closing Date and non-refundable and non-creditable thereafter.

(b) In addition to the foregoing fee, the Borrower agrees to pay to Agents such other fees in the amounts and at the times separately agreed upon.

39

2.12. Scheduled Payments . The principal amount of the Term Loans shall be payable in full on the Maturity Date.

2.13. Voluntary Prepayments .

(i) Any time and from time to time:

(1)with respect to Base Rate Loans, Borrower may prepay any such Loans on any Business Day in whole or in part, in an aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess of that amount; and

(2) with respect to Eurodollar Rate Loans, Borrower may prepay any such Loans on any Business Day in whole or in part (together with any amounts due pursuant to Section 2.18(c)) in an aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess of that amount;

in each case, without premium or penalty.

(ii) All such prepayments shall be made:

(1) upon not less than one Business Day’s prior written or telephonic notice in the case of Base Rate Loans; and

(2) upon not less than three Business Days’ prior written or telephonic notice in the case of Eurodollar Rate Loans;

in each case given to Administrative Agent by 12:00 p.m. (New York City time) on the date required and, if given by telephone, promptly confirmed in writing to Administrative Agent (and Administrative Agent will promptly transmit such telephonic or original notice for the Term Loans by telefacsimile or telephone to each Lender). Upon the giving of any such notice, the principal amount of the Term Loans specified in such notice shall become due and payable on the prepayment date specified therein. Any such voluntary prepayment shall be applied as specified in Section 2.15(a).

2.14. Mandatory Prepayments .

(a) Asset Sales . No later than the third Business Day following the date of receipt by any Abitibi Entity of any Net Asset Sale Proceeds, Borrower shall prepay the Loans as set forth in Section 2.15(a) in an aggregate amount equal to (i) in the case of any Asset Sale of Collateral, 100% of such Net Asset Sale Proceeds, (ii) in the case of any Asset Sale of property or assets of the Abitibi Entities that do not secure the Obligations or the Senior Secured Notes, 50% of such Net Asset Sale Proceeds, provided , so long as no Default or Event of Default shall

40

have occurred and be continuing on the date of such Asset Sale or caused thereby, Borrower shall have the option, directly or through one or more Guarantor Subsidiary/Affiliates, to invest such Net Asset Sale Proceeds, prior to the earlier of (A) the Maturity Date and (B) the date that is 180 days following receipt thereof, in Collateral or long-term productive assets of the general type used in the business of the Abitibi Entities, provided , that (x) no Event of Default may exist on the date of the proposed investment, and (y) Borrower deliver to Administrative Agent a certificate within 10 Business Days following receipt of any such Net Asset Sale Proceeds stating that such Net Asset Sale Proceeds shall be used for investment in accordance with the terms hereof, (iii) in the case of the Snowflake Disposition, $50,000,000 of such Net Asset Sale Proceeds, or (iv) in the case of any Asset Sale of Equity Interests of Augusta Newsprint, 100% of such Net Asset Sale Proceeds; provided , that notwithstanding the foregoing, Borrower shall not be required to make any prepayment of the Loans pursuant to this Section 2.14(a) with Net Asset Sale Proceeds from (1) Asset Sales of property or assets of the Abitibi Entities that secure the Senior Secured Notes, (2) sales by Holdings, ACSC or Abitibi SPV of receivables, payment intangibles, collections thereon and related assets, in each case pursuant to the ACSC Securitization Documents, and (3) sales by Borrower of preferred Equity Interests of Donohue to the Designated Donohue Parent.

(b) Insurance/Condemnation Proceeds . No later than the third Business Day following the date of receipt by any Abitibi Entity, or Administrative Agent as loss payee, of any Net Insurance/Condemnation Proceeds, Borrower shall prepay the Loans as set forth in Section 2.15(a) in an aggregate amount equal to such Net Insurance/Condemnation Proceeds; provided , so long as no Default or Event of Default shall have occurred and be continuing on the date of receipt thereof or caused thereby, Borrower shall have the option, directly or through one or more of the Guarantors to invest such Net Insurance/Condemnation Proceeds, prior to the earlier to occur of (i) the Maturity Date and (ii) the date that is 180 days following receipt thereof, in Collateral or long-term productive assets of the general type used in the business of the Abitibi Entities, which investment may include the repair, restoration or replacement of the applicable assets thereof, provided , that (x) no Event of Default may exist on the date of the proposed expenditure to repair, restore or replace, and (y) Borrower deliver to Administrative Agent a certificate within 10 Business Days following receipt of any such Net Insurance/Condemnation Proceeds stating that such Net Insurance/Condemnation Proceeds shall be used to repair, restore or replace applicable assets in accordance with the terms hereof; provided , further , that notwithstanding the foregoing, Borrower shall not be required to make any prepayment of the Loans pursuant to this Section 2.14(b) with Net Insurance/Condemnation Proceeds not in excess of $3,000,000 individually or $20,000,000 in the aggregate.

(c) Issuance of Debt . On the date of receipt by any Abitibi Entity of any Cash proceeds from the incurrence of any Indebtedness of any Abitibi Entity (other than with respect to any Indebtedness permitted to be incurred pursuant to Section 6.1), Borrower shall prepay the Loans as set forth in Section 2.15(a) in an aggregate amount equal to 100% of such proceeds, net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including reasonable legal fees and expenses. Payment or acceptance of such prepayment provided for in this Section 2.14(c) is not a permitted alternative to compliance with Section 6.1 and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of any Agent or Lender.

41

(d) Asset Coverage . Borrower shall from time to time prepay the Term Loans as set forth in Section 2.15(a) to the extent necessary so that the aggregate principal amount of Term Loans outstanding under this Agreement shall not at any time exceed the lesser of (i) the Maximum Amount and (ii) the Current Asset Amount, as reflected on the most recent certificate delivered to the Administrative Agent and the Lenders pursuant to Section 5.1(d).

(e) Cash Collateral Funds . Borrower shall prepay the Loans as set forth in Section 2.15(a) in an aggregate amount equal to (i) 50% of Exchange Note Cash Collateral Proceeds that are not used within five Business Days following the Closing Date to refinance Existing Refinanced Indebtedness (with the remaining 50% of such Exchange Note Cash Collateral Proceeds being disbursed at such time by Collateral Agent to Borrower to provide for the ongoing working capital requirements of Borrower, Donohue and their respective Subsidiaries and for general corporate purposes), and (ii) 100% of the Donohue Cash Collateral Proceeds if the Donohue Sale is not consummated in compliance with Section 5.11.

2.15. Application of Prepayments .

(a) Application of Prepayments of Loans . Any prepayment of any Loan pursuant to Section 2.13 or Sections 2.14(a) through (e) shall be applied to prepay the Term Loans on a pro rata basis (in accordance with the respective outstanding principal amounts thereof).

(b) Waivable Mandatory Prepayment . Anything contained herein to the contrary notwithstanding, so long as any Term Loans are outstanding, in the event Borrower is required to make any mandatory prepayment (a “Waivable Mandatory Prepayment” ) of the Term Loans, not less than three Business Days prior to the date (the “Required Prepayment Date” ) on which Borrower is required to make such Waivable Mandatory Prepayment, Borrower shall notify Administrative Agent of the amount of such prepayment, and Administrative Agent will promptly thereafter notify each Lender holding an outstanding Term Loan of the amount of such Lender’s Pro Rata Share of such Waivable Mandatory Prepayment and such Lender’s option to refuse such amount. Each such Lender may exercise such option by giving written notice to Borrower and Administrative Agent of its election to do so on or before the first Business Day prior to the Required Prepayment Date (it being understood that any Lender which does not notify Borrower and Administrative Agent of its election to exercise such option on or before the first Business Day prior to the Required Prepayment Date shall be deemed to have elected, as of such date, not to exercise such option). On the Required Prepayment Date, Borrower shall pay to Administrative Agent an amount equal to that portion of the Waivable Mandatory Prepayment payable to those Lenders that have elected not to exercise such option, to prepay the Term Loans of such Lenders (which prepayment shall be applied in accordance with Section 2.15(a)).

(c) Application of Prepayments of Loans to Base Rate Loans and Eurodollar Rate Loans . Any prepayment of the Term Loans shall be applied first to Base Rate Loans to the full extent thereof before application to Eurodollar Rate Loans, in each case in a manner which minimizes the amount of any payments required to be made by Borrower pursuant to Section 2.18(c).

42

2.16. General Provisions Regarding Payments .

(a) All payments by Borrower of principal, interest, fees and other Obligations shall be made in Dollars in same day funds, without defense, recoupment, setoff or counterclaim, free of any restriction or condition, and delivered to Administrative Agent not later than 12:00 p.m. (New York City time) on the date due at the Principal Office designated by Administrative Agent for the account of the Lenders; for purposes of computing interest and fees, funds received by Administrative Agent after that time on such due date shall be deemed to have been paid by Borrower on the next succeeding Business Day.

(b) All payments in respect of the principal amount of any Loan shall be accompanied by payment of accrued interest on the principal amount being repaid or prepaid, and all such payments (and, in any event, any payments in respect of any Loan on a date when interest is due and payable with respect to such Loan) shall be applied to the payment of interest then due and payable before application to principal.

(c) Administrative Agent (or its agent or sub-agent appointed by it) shall promptly distribute to each Lender at such address as such Lender shall indicate in writing, such Lender’s applicable Pro Rata Share of all payments and prepayments of principal and interest due hereunder, together with all other amounts due thereto, including all fees payable with respect thereto, to the extent received by Administrative Agent.

(d) Notwithstanding the foregoing provisions hereof, if any Conversion/Continuation Notice is withdrawn as to any Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any Eurodollar Rate Loans, Administrative Agent shall give effect thereto in apportioning payments received thereafter.

(e) Subject to the provisos set forth in the definition of “Interest Period”, whenever any payment to be made hereunder with respect to any Term Loan shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder.

(f) Borrower hereby authorizes Administrative Agent to charge Borrower’s accounts with Administrative Agent or any of Administrative Agent’s Affiliates in order to cause timely payment to be made to Administrative Agent of all principal, interest, fees and expenses due hereunder (subject to sufficient funds being available in its accounts for that purpose). Following each such charge, Administrative Agent shall use reasonable efforts to notify Borrower thereof.

(g) Administrative Agent shall deem any payment by or on behalf of Borrower hereunder that is not made in same day funds prior to 12:00 p.m. (New York City time) to be a non-conforming payment. Any such payment shall not be deemed to have been received by Administrative Agent until the later of (i) the time such funds become available funds, and (ii) the applicable next Business Day. Administrative Agent shall give prompt telephonic notice to Borrower and each applicable Lender (confirmed in writing) if any payment is non-conforming. Any non-conforming payment may constitute or become a Default or Event of Default in accordance with the terms of Section 8.1(a). Interest shall continue to accrue on any principal as to which a non-conforming payment is made until such funds become available funds (but in no

43

event less than the period from the date of such payment to the next succeeding applicable Business Day) at the rate determined pursuant to Section 2.10 from the date such amount was due and payable until the date such amount is paid in full.

(h) If an Event of Default shall have occurred and not otherwise been waived, and the maturity of the Obligations shall have been accelerated pursuant to Section 8.1, all payments or proceeds received by any Agent hereunder or under any Collateral Document in respect of any of the Obligations, shall be applied in accordance with the application arrangements described in Section 8.2.

2.17. Ratable Sharing . Lenders hereby agree among themselves that, except as otherwise provided in the Collateral Documents with respect to amounts realized from the exercise of rights with respect to Liens on the Collateral, if any of them shall, whether by voluntary payment (other than a voluntary prepayment of Loans made and applied in accordance with the terms hereof), through the exercise of any right of set-off, consolidation or banker’s lien, by counterclaim or cross action or by the enforcement of any right under the Credit Documents or otherwise, or as adequate protection of a deposit treated as cash collateral under the Insolvency Laws, receive payment or reduction of a proportion of the aggregate amount of principal, interest, fees and other amounts then due and owing to such Lender hereunder or under the other Credit Documents (collectively, the “Aggregate Amounts Due” to such Lender) which is greater than the proportion received by any other Lender in respect of the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greater payment shall (a) notify Administrative Agent and each other Lender of the receipt of such payment and (b) apply a portion of such payment to purchase participations (which it shall be deemed to have purchased from each seller of a participation simultaneously upon the receipt by such seller of its portion of such payment) in the Aggregate Amounts Due to the other Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by all Lenders in proportion to the Aggregate Amounts Due to them; provided , if all or part of such proportionately greater payment received by such purchasing Lender is thereafter recovered from such Lender upon the bankruptcy or reorganization of Borrower or otherwise, those purchases shall be rescinded and the purchase prices paid for such participations shall be returned to such purchasing Lender ratably to the extent of such recovery, but without interest. Borrower expressly consents to the foregoing arrangement and agrees that any holder of a participation so purchased may exercise any and all rights of banker’s lien, set-off or counterclaim with respect to any and all monies owing by Borrower to that holder with respect thereto as fully as if that holder were owed the amount of the participation held by that holder. The provisions of this Section 2.17 shall not be construed to apply to (a) any payment made by Borrower pursuant to and in accordance with the express terms of this Agreement or (b) any payment obtained by any Lender as consideration for the assignment or sale of a participation in any of its Loans or other Obligations owed to it.

2.18. Making or Maintaining Eurodollar Rate Loans .

(a) Inability to Determine Applicable Interest Rate . In the event that Administrative Agent shall have determined (which determination shall be final and conclusive and binding upon all parties hereto), on any Interest Rate Determination Date with respect to any Eurodollar Rate Loans, that by reason of circumstances affecting the London interbank market

44

adequate and fair means do not exist for ascertaining the interest rate applicable to such Loans on the basis provided for in the definition of Adjusted Eurodollar Rate, Administrative Agent shall on such date give notice (by telefacsimile or by telephone confirmed in writing) to Borrower and each Lender of such determination, whereupon (i) no Loans may be made as, or converted to, Eurodollar Rate Loans until such time as Administrative Agent notifies Borrower and Lenders that the circumstances giving rise to such notice no longer exist, and (ii) any Funding Notice or Conversion/Continuation Notice given by Borrower with respect to the Loans in respect of which such determination was made shall be deemed to be rescinded by Borrower.

(b) Illegality or Impracticability of Eurodollar Rate Loans . In the event that on any date any Lender shall have determined (which determination shall be final and conclusive and binding upon all parties hereto but shall be made only after consultation with Borrower and Administrative Agent) that the making, maintaining or continuation of its Eurodollar Rate Loans (i) has become unlawful as a result of compliance by such Lender in good faith with any law, treaty, governmental rule, regulation, guideline or order (or would conflict with any such treaty, governmental rule, regulation, guideline or order not having the force of law even though the failure to comply therewith would not be unlawful), or (ii) has become impracticable, as a result of contingencies occurring after the date hereof which materially and adversely affect the London interbank market or the position of such Lender in that market, then, and in any such event, such Lender shall be an “Affected Lender” and it shall on that day give notice (by telefacsimile or by telephone confirmed in writing) to Borrower and Administrative Agent of such determination (which notice Administrative Agent shall promptly transmit to each other Lender). Thereafter, (1) the obligation of the Affected Lender to make Loans as, or to convert Loans to, Eurodollar Rate Loans shall be suspended until such notice shall be withdrawn by the Affected Lender, (2) to the extent such determination by the Affected Lender relates to a Eurodollar Rate Loan then being requested by Borrower pursuant to the Funding Notice or a Conversion/Continuation Notice, the Affected Lender shall make such Loan as (or continue such Loan as or convert such Loan to, as the case may be) a Base Rate Loan, (3) the Affected Lender’s obligation to maintain its outstanding Eurodollar Rate Loans (the “Affected Loans” ) shall be terminated at the earlier to occur of the expiration of the Interest Period then in effect with respect to the Affected Loans or when required by law, and (4) the Affected Loans shall automatically convert into Base Rate Loans on the date of such termination. Notwithstanding the foregoing, to the extent a determination by an Affected Lender as described above relates to a Eurodollar Rate Loan then being requested by Borrower pursuant to the Funding Notice or a Conversion/Continuation Notice, Borrower shall have the option, subject to the provisions of Section 2.18(c), to rescind the Funding Notice or Conversion/Continuation Notice as to all Lenders by giving notice (by telefacsimile or by telephone confirmed in writing) to Administrative Agent of such rescission on the date on which the Affected Lender gives notice of its determination as described above (which notice of rescission Administrative Agent shall promptly transmit to each other Lender). Except as provided in the immediately preceding sentence, nothing in this Section 2.18(b) shall affect the obligation of any Lender other than an Affected Lender to make or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in accordance with the terms hereof.

(c) Compensation for Breakage or Non-Commencement of Interest Periods . Borrower shall compensate each Lender, upon written request by such Lender (which request shall set forth the basis for requesting such amounts), for all reasonable losses, expenses and

45

liabilities (including any interest paid by such Lender to Lenders of funds borrowed by it to make or carry its Eurodollar Rate Loans and any loss, expense or liability sustained by such Lender in connection with the liquidation or re-employment of such funds but excluding loss of anticipated profits) which such Lender may sustain: (i) if for any reason (other than a default by such Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date specified therefor in a Funding Notice or a telephonic request for borrowing, or a conversion to or continuation of any Eurodollar Rate Loan does not occur on a date specified therefor in a Conversion/Continuation Notice or a telephonic request for conversion or continuation; (ii) if any prepayment or other principal payment of, or any conversion of, any of its Eurodollar Rate Loans occurs on a date prior to the last day of an Interest Period applicable to that Loan; or (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on any date specified in a notice of prepayment given by Borrower.

(d) Booking of Eurodollar Rate Loans . Any Lender may make, carry or transfer Eurodollar Rate Loans at, to, or for the account of any of its branch offices or the office of an Affiliate of such Lender.

(e) Assumptions Concerning Funding of Eurodollar Rate Loans . Calculation of all amounts payable to a Lender under this Section 2.18 and under Section 2.19 shall be made as though such Lender had actually funded each of its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit bearing interest at the rate obtained pursuant to clause (II)(i) of the definition of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar Rate Loan and having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshore office of such Lender to a domestic office of such Lender in the United States of America; provided , however , each Lender may fund each of its Eurodollar Rate Loans in any manner it sees fit and the foregoing assumptions shall be utilized only for the purposes of calculating amounts payable under this Section 2.18 and under Section 2.19.

2.19. Increased Costs; Capital Adequacy .

(a) Compensation For Increased Costs and Taxes . Subject to the provisions of Section 2.20 (which shall be controlling with respect to the matters covered thereby), in the event that any Lender shall determine (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or governmental authority, in each case that becomes effective after the date hereof, or compliance by such Lender with any guideline, request or directive issued or made after the date hereof by any central bank or other governmental or quasi-governmental authority (whether or not having the force of law): (i) subjects such Lender (or its applicable lending office) to any additional Tax (other than any Tax on the overall net income of such Lender) with respect to this Agreement or any of the other Credit Documents or any of its obligations hereunder or thereunder or any payments to such Lender (or its applicable lending office) of principal, interest, fees or any other amount payable hereunder; (ii) imposes, modifies or holds applicable any reserve (including any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, FDIC insurance or similar

46

requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender (other than any such reserve or other requirements with respect to Eurodollar Rate Loans that are reflected in the definition of Adjusted Eurodollar Rate); or (iii) imposes any other condition (other than with respect to a Tax matter) on or affecting such Lender (or its applicable lending office) or its obligations hereunder or the London interbank market; and the result of any of the foregoing is to increase the cost to such Lender of agreeing to make, making or maintaining Loans hereunder or to reduce any amount received or receivable by such Lender (or its applicable lending office) with respect thereto; then, in any such case, Borrower shall promptly pay to such Lender, upon receipt of the statement referred to in the next sentence, such additional amount or amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as may be necessary to compensate such Lender for any such increased cost or reduction in amounts received or receivable hereunder. Such Lender shall deliver to Borrower (with a copy to Administrative Agent) a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to such Lender under this Section 2.19(a), which statement shall be conclusive and binding upon all parties hereto absent manifest error.

(b) Capital Adequacy Adjustment . In the event that any Lender shall have determined that the adoption, effectiveness, phase-in or applicability after the Closing Date of any law, rule or regulation (or any provision thereof) regarding capital adequacy, reserve requirements, or similar requirements, or any change therein or in the interpretation, application or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation, application or administration thereof, or compliance by any Lender (or its applicable lending office) with any guideline, request or directive regarding capital adequacy, reserve requirements, or similar requirements (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of, or with reference to, such Lender’s Loans or participations therein or other obligations hereunder with respect to the Loans to a level below that which such Lender or such controlling corporation could have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Lender or such controlling corporation with regard to capital adequacy), then from time to time, within ten days after receipt by Borrower from such Lender of the statement referred to in the next sentence, Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling corporation on an after-Tax basis for such reduction. Such Lender shall deliver to Borrower (with a copy to Administrative Agent) a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to Lender under this Section 2.19(b), which statement shall be conclusive and binding upon all parties hereto absent manifest error.

2.20. Taxes; Withholding, Etc .

(a) Payments to Be Free and Clear . All sums payable by or on behalf of any Credit Party hereunder and under the other Credit Documents shall (except to the extent required by law) be paid free and clear of, and without any deduction or withholding on account of, any Tax (other than a Tax on the overall net income of any Lender) imposed, levied, collected,

47

withheld or assessed by or within the United States of America, Canada or any political subdivision in or of the United States of America, Canada or any other jurisdiction from or to which a payment is made by or on behalf of any Credit Party or by any federation or