EXHIBIT 10.1

 

LETTER LOAN AGREEMENT

 

US$100,000,000 SUPER-PRIORITY, SENIOR SECURED

DEBTOR-IN-POSSESSION CREDIT FACILITY

May 6, 2009

Abitibi-Consolidated Inc.

1155 Metcalfe Street, Suite 800

Montreal, Quebec

H3B 5H2

 

Donohue Corp.

1155 Metcalfe Street, Suite 800

Montreal, Quebec

H3B 5H2

 

Dear Sirs/Mesdames:

Abitibi-Consolidated Inc. (“ACI”), with certain of its subsidiaries
(collectively, the “CCAA Debtors”), has applied and been granted relief as a
debtor company under the Companies’ Creditors Arrangement Act (Canada) (the
“CCAA”) pursuant to an order (the “CCAA Initial Order”) of the Superior Court of
Quebec (the “CCAA Court”) entered on April 17, 2009 (the “CCAA Initial Order
Date”). Donohue Corp. (“Donohue”), with certain of its subsidiaries
(collectively, the “Chapter 11 Debtors”), each filed a voluntary petition for
relief on April 16, 2009 (collectively, the “US Bankruptcy Cases”) under Title
11 of the United States Code (the “US Bankruptcy Code”) with the United States
Bankruptcy Court for the District of Delaware (the “US Bankruptcy Court”).

ACI seeks adequate financial resources to proceed with its restructuring until
it receives the proceeds from a sale of assets and the receipt of such proceeds
is expected for November 1, 2009, at the latest. Given the extended timing of
the receipt of the proceeds of such sale, ACI has requested that Bank of
Montreal provide as a bridge a debtor-in-possession credit facility to ACI and
Donohue for the period until the anticipated closing of such sale so that ACI
and Donohue have access to the necessary liquidity to fund their working capital
requirements and to pay for certain expenses during such period.

For purposes of (i) providing for working capital and for other general
corporate purposes of the Borrowers and the Subsidiary Guarantors, (ii) paying
fees and expenses associated with this Financing and (iii) paying costs and
expenses in connection with the CCAA Debtors’ proceedings pursuant to the CCAA
(the “CCAA Cases”), Bank of Montreal is pleased to offer its commitment to
provide to the Borrowers up to US$100,000,000 (the “Commitment Amount”) of
senior secured financing (the “DIP Facility” or the “Financing”) during the
course of the CCAA Cases, subject to the terms and conditions set forth or
referred to in this letter loan agreement (as amended, restated and supplemented
from time to time, this “Agreement”).

 

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LETTER LOAN AGREEMENT
DIP FACILITY

 

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Capitalized terms used in this Agreement but not otherwise defined shall have
the respective meanings given to them in Schedule A hereto. Each of the
Schedules to this Agreement form part of and are integral to this Agreement.

THE PARTIES

 

Borrowers:

ACI and Donohue (collectively, the “Borrowers”)

 

 

Lender:

Bank of Montreal (together with its successors and permitted assigns, the
“Lender”)

 

 

Subsidiary Guarantors:

The following subsidiaries of ACI shall guarantee the Obligations of the
Borrowers (collectively, the “Subsidiary Guarantors”):

 

 

 

(i)

Abitibi-Consolidated Company of Canada (“ACCC”);

 

 

 

 

(ii)

3224112 Nova Scotia Limited;

 

 

 

 

(iii)

Marketing Donohue Inc.;

 

 

 

 

(iv)

Abitibi-Consolidated Canadian Office Products Holdings Inc.;

 

 

 

 

(v)

3834328 Canada Inc.;

 

 

 

 

(vi)

6169678 Canada Incorporated;

 

 

 

 

(vii)

4042140 Canada Inc.;

 

 

 

 

(viii)

Donohue Recycling Inc.;

 

 

 

 

(ix)

1508756 Ontario Inc.;

 

 

 

 

(x)

Abitibi-Consolidated Nova Scotia Incorporated;

 

 

 

 

(xi)

Saguenay Forest Products Inc.;

 

 

 

 

(xii)

Les Explorations Terra Nova Ltd.;

 

 

 

 

(xiii)

The Jonquiere Pulp Company;

 

 

 

 

(xiv)

The International Bridge and Terminal Company;

 

 

 

 

(xv)

Scramble Mining Ltd.; and

 

 

 

 

(xvi)

9150-3383 Québec Inc.

 

 

 

Sponsor:

Investissement Quebec

 

 

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LETTER LOAN AGREEMENT
DIP FACILITY

 

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THE DIP FACILITY

 

DIP Facility:

The Lender hereby makes available a DIP Facility of up to US$100,000,000 to the
Borrowers upon the terms and conditions hereof. The DIP Facility shall be made
available by way of Loans bearing interest at a rate determined by reference to
the LIBO Rate (each a “LIBOR Loan”) and/or loans based on the BMO US Base Rate
(each a “Base Rate Loan”) in accordance with the terms and conditions of this
Agreement.

 

 

 

Purpose:

The proceeds of the Loans advanced under the DIP Facility shall be used only for
the following purposes:

 

 

(i)

to provide for working capital for and for other general corporate purposes of
(x) ACI, (y) Donohue and (z) the Subsidiary Guarantors;

 

 

 

 

(ii)

to pay fees and expenses associated with the DIP Facility, including without
limitation all reasonable legal and other out-of-pocket expenses incurred by the
Lender and by the Sponsor in connection with the execution, maintenance and
enforcement of this Agreement and the other DIP Loan Documents (collectively,
the “DIP Expenses”); and

 

 

 

 

(iii)

to pay costs and expenses in connection with the CCAA Cases.

 

 

 

 

 

The Borrowers shall not transfer any proceeds of the Loans to any subsidiary or
Affiliate other than ACI and the Subsidiary Guarantors or, if the US DIP Order
has been obtained, to Donohue.

 

 

None of the proceeds of the Loans shall directly be used in any way, to repay
any of the obligations under the Existing Securitization Facility or any
Replacement Securitization Facility.

 

 

 

 

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LETTER LOAN AGREEMENT
DIP FACILITY

 

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Availability:

Subject to the satisfaction of the Initial Availability Conditions (as set forth
below), the DIP Facility shall be available to the Borrowers, up to but
excluding November 1, 2009 (the “Expected Repayment Date”), by way of multiple
borrowings; provided that the aggregate amount of Loans made to Donohue shall
not exceed US$10 million.

 

For greater certainty, (i) Donohue may not borrow any Loans under the DIP
Facility unless and until Donohue is granted an order from the US Bankruptcy
Court (the “US DIP Order”) authorizing and approving the DIP Facility and
granting the Lender a super-priority charge over the assets and undertaking of
Donohue and the Chapter 11 Debtors which are subsidiaries of Donohue
(collectively, the “US Subsidiary Guarantors”) and (ii) the failure to satisfy
any condition herein relating to the availability of the DIP Facility insofar as
Donohue is concerned (other than the absence of Specified Events of Default or
Termination Events) shall not preclude ACI from borrowing hereunder.

 

 

 

Each borrowing of Loans under the DIP Facility shall be subject to the
satisfaction of the Drawdown Conditions (as set forth below).

 

 

 

Loans under the DIP Facility will cease to be available and the Lender shall
have no further obligation to advance Loans to the Borrowers (i) if the Further
Availability Conditions (as set forth below) have not been satisfied or waived
within 30 days of the Effective Date or (ii) on and after the occurrence of a
Specified Event of Default and a Termination Event; provided that the Lender, in
its sole discretion, may advance Base Rate Loans in the amount of any interest,
fees or expenses then due and payable, which Loans shall be deemed to have been
requested by ACI, and apply the proceeds of such Loans to the payment of such
interest, fees or expenses.

 

 

 

Any amounts borrowed and repaid under the DIP Facility may not be re-borrowed.

 

 

Minimum Availability:

Notwithstanding the foregoing, a minimum availability of US$12.5 million of the
Commitment Amount shall be maintained under the DIP Facility at all times.

 

 

Minimum Amounts:

Each Loan under the DIP Facility shall be in a minimum amount of US$10,000,000
(or the available undrawn amount of the Commitment Amount if it is less than
US$10,000,000) and, if in excess of such amount, in multiples of US$1,000,000.

 

 

 

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LETTER LOAN AGREEMENT
DIP FACILITY

 

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Notice of Borrowing:

The Borrowers shall provide to each of the Lender and the Sponsor a borrowing
request in the form attached as Schedule F (a “Borrowing Request”), in which,
among other things, the Borrowers shall represent and warrant to the Lender that
all of the Drawdown Conditions have been satisfied, at least six (6) Business
Days prior to each borrowing of Loans under the DIP Facility.

 

 

Manner of Borrowing:

The Borrowers shall have the option, subject to the terms and conditions of this
Agreement, to specify the type of Loan which they wish to borrow in their
borrowing request; provided that (i) LIBOR Loans shall not be available if the
Interest Period of such LIBOR Loan would extend past the Maturity Date and (ii)
no more than five (5) LIBO Rate contracts in respect of Loans may be outstanding
at any one time. If the Borrowers do not specify the type of Loan which they
wish to borrow in their borrowing request, they shall be deemed to have
requested a LIBOR Loan (subject to the availability of LIBOR Loans at such
time). Subject to the terms and conditions hereof, and provided that no Default
or Specified Event of Default has occurred and is then continuing, unless the
Borrowers have otherwise given written notice to the Lender, the Borrowers shall
be deemed to have elected to continue a LIBOR Loan for another Interest Period
upon the termination of the current Interest Period in respect of such LIBOR
Loan.

 

 

 

After any Specified Event of Default or Termination Event, all LIBOR Loans
shall, at the option of the Lender, be converted to Base Rate Loans and the
Borrowers shall be responsible for any Breakage Costs associated with such
conversion.

 

 

Disbursement of Loan Proceeds:

The proceeds of all Loans advanced to the Borrowers pursuant to this Agreement
shall be paid to a US Dollar account of ACI to be opened and maintained with the
Lender at its main branch located at Montreal(the “Loan Account”) and such Loan
proceeds shall be kept segregated from other funds of the Borrowers.

 

 

Term and Termination:

All Loans advanced hereunder shall be repaid in full and the DIP Facility shall
terminate at the earliest of (each, a “Termination Event”):

 

 

 

(i)

April 30, 2010 (the “Maturity Date”);

 

 

 

 

(ii)

he effective date of a plan of compromise and arrangement of the CCAA Debtors
pursuant to the CCAA or a plan of compromise and arrangement of the Chapter 11
Debtors under Chapter 11 of the US Bankruptcy Code;

 

 

 

 

 

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LETTER LOAN AGREEMENT
DIP FACILITY

 

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(iii)

upon acceleration of the DIP Facility in accordance with the terms hereof or
upon the occurrence of a Specified Event of Default; and

 

 

 

 

(iv)

upon any actual or asserted invalidity, impairment or unenforceability of the
Sponsor Guarantee.

 

 

 

 

Evidence of Borrowings:

The Lender’s accounts and records shall constitute, in the absence of manifest
error, prima facie evidence of the indebtedness of the Borrowers to the Lender.

REPAYMENT, INTEREST RATES AND FEES

 

 

Interest Payment Dates:

Interest on the Loans advanced hereunder shall accrue daily and shall be payable
in arrears on each Interest Payment Date at the rate applicable to such Loans.

 

 

Account for Payment:

Each payment under this Agreement shall be made for value on the day the payment
is due, provided that if that day is not a Business Day, the payment shall be
due on the immediately preceding Business Day (unless otherwise specified
herein). All interest and other fees shall continue to accrue until payment has
been received by the Lender. The Lender shall debit the Loan Account in the
amount of each payment due hereunder at or before 12:00 noon (Montreal time) on
the day that such payment is due.

 

 

Applicable Rates:

Each LIBOR Loan shall bear interest at the LIBO Rate for the Interest Period in
effect for such LIBOR Loan plus the Applicable Margin.

 

 

 

Each Base Rate Loan shall bear interest at the BMO US Base Rate in effect for
each day such Loan is outstanding plus the Applicable Margin.

 

 

 

The “Applicable Margin” shall mean, as applicable:

 

(i)

with respect to LIBOR Loans, 1.75% per annum; and

 

 

 

 

(ii)

with respect to Base Rate Loans, 0.75% per annum.

 

 

 

 

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LETTER LOAN AGREEMENT
DIP FACILITY

 

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Overdue Payments:

In the event that the Borrowers fail to make any payment hereunder when due, as
a late charge, interest on such overdue payment shall accrue at an annual rate
equal to the interest rate applicable otherwise applicable hereunder in respect
of such payment plus 2% per annum, from the due date thereof to the date of
actual payment. If there is no interest rate specified hereunder in respect of
any such payment, then the per annum interest rate for such payment shall be
deemed to be the BMO US Base Rate plus 0.75% per annum.

 

 

Provisions Relating to Interest Payments:

Calculation of Interest. Any and all interest payable hereunder shall accrue
from day to day and the amounts thereof shall be calculated on the basis of a
year of 360 days.

 

 

 

Interest Act Disclosure. Solely for purposes of the Interest Act (Canada), (i)
whenever any interest or fee under this Agreement is calculated using a rate
based on a year of 360 days or 365 days, as the case may be, the rate determined
pursuant to such calculation, when expressed as an annual rate, is equivalent to
the applicable rate based on a year of 360 days or 365 days, as the case may be,
multiplied by a fraction, the numerator of which is the actual number of days in
the calendar year in which the period for which such interest or fee is payable
(or compounded) ends and the denominator of which is 360 or 365, as the case may
be, (ii) the rates of interest under this Agreement are nominal rates and not
effective rates or yields and (iii) the principle of deemed reinvestment of
interest does not apply to any interest calculation under this Agreement.

 

 

 

Criminal Rate of Interest. If any provision of this Agreement or the DIP Loan
Documents would obligate the Borrowers to make any payment of interest or other
amount payable to the Lender in an amount or calculated at a rate which would be
prohibited by law or would result in a receipt by the Lender of interest at a
criminal rate (as such terms are construed under the Criminal Code (Canada))
then, notwithstanding such provision, such amount or rate shall be deemed to
have been adjusted with retroactive effect to the maximum amount or rate of
interest, as the case may be, as would not be so prohibited by law or so result
in a receipt by the Lender of interest at a criminal rate and any such amounts
actually paid by the Borrowers in excess of the adjusted amount shall be
forthwith refunded to the Borrowers.

 

 

 

Miscellaneous. Interest payable under this provision is payable both before and
after any or all of default, demand and judgement.

 

 

 

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LETTER LOAN AGREEMENT
DIP FACILITY

 

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Alternate Rate of Interest:

If prior to the commencement of any Interest Period for a LIBOR Loan: (a) the
Lender determines (which determination shall be conclusive absent manifest
error) that adequate and reasonable means do not exist for ascertaining the LIBO
Rate for such Interest Period, then the Lender shall give notice thereof to the
Borrowers by telephone or facsimile as promptly as practicable thereafter and,
until the Lender notifies the Borrowers that the circumstances giving rise to
such notice no longer exist, (i) any borrowing request that requests the
continuation of any Loan as a LIBOR Loan shall be ineffective, and (ii) if any
borrowing request requests a LIBOR Loan, such Loan shall be made as Base Rate
Loan.

 

 

Break Funding Payments:

In the event of (a) the payment of any principal of any LIBOR Loan other than on
the last day of an Interest Period applicable thereto (including as a result of
a Specified Event of Default) or (b) the failure to borrow, continue or prepay
any LIBOR Loan on the date specified in any notice delivered pursuant hereto,
then, in any such event, the Borrowers shall compensate the Lender for the loss,
cost and expense attributable to such event (“Breakage Costs”) as determined by
the Lender in its sole discretion. A certificate of the Lender setting forth any
amount or amounts that the Lender is entitled to receive pursuant to this
provision shall be delivered to the Borrowers and shall be conclusive absent
manifest error. The Borrowers shall pay the Lender the amount shown as due on
any such certificate within five Business Days after receipt thereof.

 

 

Voluntary Prepayment:

The Borrowers shall have the right to prepay any or all of the Loans at any time
without premium or penalty, provided that the Borrowers shall indemnify the
Lender for any Breakage Costs resulting from such prepayment in accordance with
this Agreement.

 

 

Mandatory Prepayments:

The Borrowers shall be required to make mandatory prepayments of the outstanding
Loans to the extent of 100% of the net cash proceeds of:

 

 

(i)

sales of assets of the Borrowers and Subsidiary Guarantors, other than (x) sales
of eligible accounts receivable directly or indirectly to the Existing
Securitization Facility or any Replacement Securitization Facility, (y) sales of
working capital Collateral in the ordinary course of business, and (z) the sale
of any and all lots of timberlands listed in Schedule G hereto;

 

 

 

 

(ii)

insurance proceeds in respect of Collateral in the case where the insured
Collateral is considered a total loss;

 

 

 

 

(iii)

any payment by a Governmental Authority in respect of any expropriation claim;
and

 

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LETTER LOAN AGREEMENT
DIP FACILITY

 

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(iv)

any direct or indirect sale of the Borrowers’ interest in the assets of the
Manicouagan Power Company.

 

 

 

 

 

For greater certainty, the Borrowers shall indemnify the Lender for any Breakage
Costs resulting from such mandatory prepayment in accordance with this
Agreement.

 

Undrawn Fee:

The Borrowers shall pay a fee to the Lender, from the date of this Agreement
until the Maturity Date, payable in arrears on the last Business Day of each
month and on the Termination Date, at the rate of 0.525% per annum on the
average daily undrawn portion of the Commitment Amount.

 

Structuring Fee:

The Borrowers shall pay the following structuring fees to the Lender:

 

 

 

(i)

1.0% of the Commitment Amount upon the Lender’s execution and delivery of this
Agreement;

 

 

 

 

(ii)

1.0% of the Commitment Amount upon the Effective Date; and

 

 

 

 

(iii)

1.0% of the Commitment Amount if any Obligations are still outstanding hereunder
as of the Expected Repayment Date.

 

 

 

 

Sponsor’s Upfront Fee:

The Borrowers shall pay a fee in the amount of US$656,250 to the Sponsor upon
the acceptance by ACI of this Agreement.

 

 

Sponsor’s Guarantee Fee:

The Borrowers shall pay a fee in the amount of 1.75% of the Commitment Amount to
the Sponsor upon the Effective Date and upon each anniversary of the Effective
Date.

 

SECURITY AND PRIORITY

 

 

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LETTER LOAN AGREEMENT
DIP FACILITY

 

 

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Security:

To secure all Obligations of the Borrowers and each of the Subsidiary Guarantors
under or in connection with the DIP Facility, the Lender shall be granted and
will receive, pursuant to the CCAA DIP Order (and the US DIP Order, if
applicable) and the DIP Loan Documents, a fully perfected first ranking (except
as otherwise contemplated herein) hypothec, security interest and court-ordered
superpriority charge on or applicable equivalents thereto outside of the
Province of Quebec (such hypothec, security interest and charge, collectively,
the “DIP Liens”) all of the existing and after acquired real and personal,
tangible and intangible, assets of each of ACI (and Donohue if a Loan is
advanced to it hereunder) and the Subsidiary Guarantors, including, without
limitation, all cash, cash equivalents, bank accounts, accounts, other
receivables, chattel paper, contract rights, inventory, instruments, documents,
securities (whether or not marketable), equipment, fixtures, real property
interests, franchise rights, patents, tradenames, trademarks, copyrights,
intellectual property, general intangibles, capital stock, investment property,
supporting obligations, letter of credit rights, causes of action and all
substitutions, accessions and proceeds of the foregoing, wherever located,
including insurance or other proceeds (collectively, the “Collateral”). For
greater certainty, the Collateral shall, in no circumstances, extend to any
assets sold or transferred pursuant to the Existing Securitization Facility or
any Replacement Securitization Facility (whether before or after the date
hereof) or any assets of ACUSFC (as defined below).

 

 

Carve-Out:

Notwithstanding the foregoing, the DIP Liens in the Collateral shall be subject
and subordinate to:

 

 

(i)

an administration charge ordered by the CCAA Court (the “Administration Charge”)
in an aggregate amount not exceeding US$6.0 million for the payment of (x)
allowed and unpaid professional fees and disbursements incurred by professionals
retained by ACI and its subsidiaries in respect of the CCAA Cases and the
associated business and financial restructuring and (y) allowed professional
fees and disbursements of the Monitor appointed in the CCAA Cases, including
allowed legal fees and expenses of such monitor; and

 

 

 

 

(ii)

a directors’ charge (a “Directors’ Charge”) in favour of the directors and
officers of ACI and Donohue and their respective subsidiaries in an amount not
to exceed US$22.5 million and upon terms reasonably satisfactory to the Lender
and the Sponsor.

 

 

 

Permitted Encumbrances:

All Collateral shall be free and clear of other liens, encumbrances and claims,
except for the following (collectively, the “Permitted Encumbrances”):

 

 

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LETTER LOAN AGREEMENT
DIP FACILITY

 

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(i)

charges, including without limitation the Administration Charge and the
Directors’ Charge, created under the CCAA Initial Order and the CCAA DIP Order;

 

 

 

 

(ii)

existing validly perfected liens granted by the Borrowers and the Subsidiary
Guarantors prior to the CCAA Initial Order Date, which shall rank after the DIP
Liens; and

 

 

 

 

(iii)

those Liens listed on Schedule C hereto.

 

 

 

 

Notwithstanding the foregoing or anything to the contrary contained in this
Agreement or any DIP Loan Document (including any provision for, reference to,
or acknowledgement of, any Lien or Permitted Encumbrance), nothing herein and no
approval by the Lender of any Lien or Permitted Encumbrance (whether such
approval is oral or in writing) shall be construed as or deemed to constitute a
subordination by the Lender of any security interest or other right, interest or
Lien in or to the Collateral or any part thereof in favour of any Lien or
Permitted Encumbrance or any holder of any Lien or Permitted Encumbrance, except
to the extent specifically set forth herein or in such approval.

 

 

 

CONDITIONS TO EFFECTIVENESS AND AVAILABILITY

 

 

Initial Availability Conditions:

The effectiveness of the DIP Facility and the Lender’s obligation to advance the
initial Loan hereunder (which must be advanced to ACI) shall be subject to and
conditional upon the satisfaction of the following:

 

 

 

(i)

receipt of a certified signed copy of the CCAA Initial Order, which shall not
have been vacated, reversed, modified, amended or stayed;

 

 

 

 

(ii)

receipt of a certified signed copy of the order of the CCAA Court (the “CCAA DIP
Order”), in form and substance satisfactory to the Lender, the Lender’s counsel,
the Sponsor and the Sponsor’s counsel, approving and authorizing the DIP
Facility and the granting of the DIP Liens, and which CCAA DIP Order (i) shall
authorize extensions of credit in amounts not in excess of US$100 million, (ii)
shall authorize the payment by the Loan Parties of all of the DIP Expenses
provided for in respect of the DIP Facility in this Agreement and (iii) shall
not have been vacated, reversed, modified, amended or stayed;

 

 

 

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LETTER LOAN AGREEMENT
DIP FACILITY

 

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(iii)

each of this Agreement and the other DIP Loan Documents (including for greater
certainty the Sponsor Guarantee) shall have been duly executed and delivered to
the Lender;

 

 

 

 

(iv)

receipt by the Lender of a certified copy of the signed order in council of the
Government of Quebec authorizing the Sponsor to grant the Sponsor Guarantee;

 

 

 

 

(v)

the Loan Account shall have been opened by the Borrowers;

 

 

 

 

(vi)

receipt by the Lender of a duly executed Perfection Certificate, although a
Perfection Certificate in respect of Donohue and its subsidiaries shall only be
required prior to the initial advance of a Loan to Donohue;

 

 

 

 

(vii)

receipt by the Lender of satisfactory certificates of status, certificates of
compliance, certificates of good standing or other equivalent certificates,
issued in respect of each Loan Party by the applicable Governmental Authority in
each Loan Party’s respective jurisdiction of incorporation or organization,
which certificates shall be dated no earlier than five (5) Business Days prior
to the Effective Date;

 

 

 

 

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LETTER LOAN AGREEMENT
DIP FACILITY

 

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(viii)

receipt by the Lender of a certificate and/or certificates of each Loan Party
signed on behalf of such Loan Party by its respective President, Chief Executive
Officer, Treasurer or Secretary, dated the Effective Date (the statements made
in which certificate shall be true on and as of the Effective Date), certifying
as to: (A) the accuracy and completeness of the articles or other charter
documents of such Loan Party attached to such certificate and the absence of any
changes thereto; (B) the accuracy and completeness of the bylaws or equivalent
governing documents of such Loan Party attached to such certificate and the
absence of any changes thereto; (C) the accuracy and completeness of the
resolutions of the board of directors or of the shareholders (or persons
performing similar functions) of such Loan Party attached to such certificate,
approving the DIP Facility and each of the DIP Loan Documents, and that such
resolutions are in effect and have not been rescinded or amended; (D) the
incumbency and specimen signatures of the officers and directors of such Loan
Party authorized to execute the DIP Loan Documents on behalf of such Loan Party;
and (E) the absence of any proceeding known to be pending for the dissolution,
liquidation or other termination of the existence of such Loan Party;

 

 

 

 

(ix)

receipt by the Lender of such certificates representing certificated securities
of the wholly-owned subsidiaries of the Borrowers other than ACUSFC whose equity
interests are pledged to the Lender pursuant to a security document required
hereunder (the “Wholly-Owned Pledged Securities”) accompanied by undated
transfer powers of attorney, duly executed in blank, as the Loan Parties may be
able to deliver using their best efforts;

 

 

 

 

(x)

receipt by the Lender of a signed legal opinion from Gowling Lafleur Henderson
LLP, counsel to the Sponsor, in form and substance acceptable to the Lender, as
to (a) the existence and capacity of the Sponsor, (b) the authorization,
execution and delivery by the Sponsor of the Sponsor Guarantee, (c) the
enforceability of the Sponsor Guarantee, (d) the non-contravention of
Requirements of Law, and all other matters which the Lender or the Lender
consider necessary in their sole absolute discretion;

 

 

 

 

(xi)

the Borrowers shall have paid all accrued and unpaid fees and DIP Expenses;

 

 

 

 

(xii)

receipt by the Lender of a rolling 13 week cash forecast of receipts and
disbursements of the Borrowers and their respective subsidiaries, in form and
substance reasonably satisfactory to the Lender;

 

 

 

 

(xiii)

no Default, Specified Event of Default or Termination Event under the DIP Loan
Documents shall have occurred and be continuing;

 

 

 

 

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LETTER LOAN AGREEMENT
DIP FACILITY

 

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(xiv)

evidence of the continuance of the Existing Securitization Facility until at
least 45 days following the earlier of (i) the CCAA Initial Order Date and (ii)
the date that the Chapter 11 Debtors commenced proceedings before the US
Bankruptcy Court;

 

 

 

 

(xv)

receipt by the Lender of written confirmation from the Sponsor, in the form
attached as Schedule H hereto, that it is satisfied that all of the Initial
Availability Conditions and all of the conditions under the Sponsor Guarantee
have been met; and

 

 

 

 

(xvi)

receipt by the Lender of evidence acceptable to the Lender that all other
actions that the Lender may deem necessary or desirable in order to perfect and
protect the DIP Liens has been taken, including without limitation, receipt by
the Lender of proper financing statements, publications and equivalent
registration statements under the personal property legislation of all
jurisdictions that the Lender may deem necessary or desirable in order to
perfect and protect the DIP Liens in the Collateral created or purported to be
created hereunder or under the DIP Loan Documents, in each case completed in a
manner reasonably satisfactory to the Lender;

 

 

 

 

(xvii)

the Lender being named as additional insured under the liability insurance
coverages maintained by the Loan Parties and loss payee on any casualty
insurances in existence and required by the Lender, including insurance with
respect to any real property Collateral; and

 

 

 

 

(xviii)

such other documents, conditions or evidences as the Lender may request, acting
reasonably.

 

 

 

Further Availability Conditions:

The Lender’s obligation to advance Loans to the Borrowers under this Agreement
shall be subject to and conditional upon the satisfaction of the following on or
before 30 days after the Effective Date:

 

 

 

(i)

the Initial Availability Conditions shall continue to be satisfied;

 

 

 

 

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LETTER LOAN AGREEMENT
DIP FACILITY

 

--------------------------------------------------------------------------------

 

 

(ii)

not later than May 15, 2009, the term of the stay of proceedings against the
CCAA Debtors shall have been extended by the CCAA Court (the “CCAA Extension
Order”) beyond the term initially set out in the CCAA Initial Order, and the
CCAA Extension Order shall be in full force and effect without any variation,
amendment, stay or other modification to which Lender has not consented in
writing in its sole discretion;

 

 

 

 

(iii)

receipt by the Lender of all Wholly-Owned Pledged Securities not previously
delivered accompanied by undated transfer powers of attorney, duly executed in
blank;

 

 

 

 

(iv)

receipt by the Lender of such certificates representing the issued and
outstanding equity interests of Manicouagan Power Company and ACH Limited
Partnership held by Abitibi-Consolidated Company of Canada accompanied by
undated transfer powers of attorney, duly executed in blank, as the Loan Parties
may be able to deliver using commercially reasonable best efforts;

 

 

 

 

(v)

receipt by the Lender of the current Cash Flow Forecast;

 

 

 

 

(vi)

receipt by the Lender of satisfactory results of Lien searches in each of the
jurisdictions where the Borrowers and the Subsidiary Guarantors are organized
and where assets of Borrowers or Subsidiary Guarantors are located, and such
search shall reveal no liens or encumbrances on any of the Collateral other than
Permitted Encumbrances;

 

 

 

 

(vii)

receipt by the Lender of written confirmation from the Sponsor, in the form
attached as Schedule H hereto, that it is satisfied that all of the Further
Availability Conditions and all of the conditions under the Sponsor Guarantee
have been met; and

 

 

 

 

(viii)

payment of all accrued and unpaid fees and DIP Expenses.

 

 

 

Drawdown Conditions:

The obligation of the Lender to make a Loan to the Borrowers (or to continue a
LIBOR Loan) on any date is subject to the satisfaction of the following
conditions:

 

 

 

-15-

LETTER LOAN AGREEMENT
DIP FACILITY

 

--------------------------------------------------------------------------------

 

 

(i)

the Loan requested pursuant to the Borrowing Request shall have been authorized
by the Sponsor (as evidenced by the confirmation referred to in paragraph (ii)
below) and the Lender based on the needs of ACI and the Subsidiary Guarantors
given the most recent Cash Flow Forecast reviewed and taken into consideration
by the Monitor (it being understood that such Cash Flow Forecast, as of the date
hereof, provides for a first Loan of US$30 million to be disbursed in the week
of May 3, 2009);

 

 

 

 

(ii)

receipt by the Lender, no later than three (3) Business Days prior to the
requested date of the borrowing, of written confirmation from the Sponsor, in
the form attached as Schedule H hereto, (i) that it is satisfied that all of the
Drawdown Conditions and all of the conditions under the Sponsor Guarantee have
been met and (ii) authorizing the Lender to advance the requested Loan to the
Borrowers;

 

 

 

 

(iii)

there shall be minimum availability of US$12.5 million of the Commitment Amount;

 

 

 

 

(iv)

receipt by the Lender of a duly executed Borrowing Request;

 

 

 

 

(v)

the representations and warranties contained in each of the DIP Loan Documents
shall be correct in all material respects on and as of such date, before and
after giving effect to such Loan (or continuance), as though made on and as of
such date, other than any such representations or warranties that, by their
terms, refer to a specific date other than the date of such Loan (or
continuance);

 

 

 

 

(vi)

the Loan Parties shall not be in any material breach of any covenant under this
Agreement or the other DIP Loan Documents;

 

 

 

 

(vii)

each of the Orders (if applicable) shall be executory notwithstanding appeals
and have not been vacated, reversed, modified, amended or stayed in any respect
without the prior written consent of the Lender and the Sponsor acting in their
sole discretion;

 

 

 

 

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LETTER LOAN AGREEMENT
DIP FACILITY

 

--------------------------------------------------------------------------------

 

 

(viii)

the net cash (determined after taking into account the availability under the
DIP Facility) of the Borrowers, as disclosed in the Cash Flow Forecast, for the
following four weeks is sufficient to meet the anticipated obligations of the
Borrowers during such time period as disclosed in the Cash Flow Forecast;

 

 

 

 

(ix)

no Default, Specified Event of Default or Termination Event under the DIP Loan
Documents shall have occurred or be continuing;

 

 

 

 

(x)

with respect to Loans to be made to Donohue and the Chapter 11 Debtors only, the
Lender shall have received a certified copy of the US DIP Order, in form and
substance satisfactory to the Lender, the Lender’s counsel, the Sponsor and the
Sponsor’s counsel, approving and authorizing the DIP Facility and the granting
of the DIP Liens, and which US DIP Order (i) shall authorize extensions of
credit in amounts not in excess of US$100 million, (ii) shall authorize the
payment by the Loan Parties of all of the DIP Expenses provided for in respect
of the DIP Facility in this Agreement and (iii) shall not have been vacated,
reversed, modified, amended or stayed; and

 

 

 

 

(xi)

for all Loans other than the initial Loan hereunder, the Monitor shall have
approved, in writing, the requested Loan.

 

 

 

REPRESENTATIONS; COVENANTS; EVENTS OF DEFAULT

 

 

Representations and Warranties:

See Schedule D.

 

 

 

 

Covenants:

See Schedule E.

 

 

 

 

Specified Events of Default:

The occurrence of any of the following shall constitute a “Specified Event of
Default” under this Agreement:

 

 

(i)

failure of the Borrowers to pay (i) the principal of any Loan when due
(including any mandatory prepayments thereof) or (ii) any interest on any Loan
or any other amount within three business days after such interest or other
amount becomes due;

 

 

 

 

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LETTER LOAN AGREEMENT
DIP FACILITY

 

--------------------------------------------------------------------------------

 

 

(ii)

any of the Orders are stayed, vacated or otherwise cease to be in full force and
effect or are modified or amended in a manner which could have a Material
Adverse Effect, as determined by the Lender and the Sponsor in their sole
discretion;

 

 

 

 

(iii)

any Borrower or their respective subsidiaries (other than Bridgewater Paper
Company Limited) becomes subject to a proceeding under the Bankruptcy and
Insolvency Act (Canada) or equivalent bankruptcy statutes or any Borrower or
Subsidiary Guarantor shall file a motion or other pleading seeking the dismissal
of the CCAA Cases or US Bankruptcy Cases;

 

 

 

 

(iv)

any material provision (as determined by the Lender in its sole discretion) of
any DIP Loan Document (other than the Sponsor Guarantee) shall for any reason
cease to be valid and binding on or enforceable against any Loan Party intended
to be a party to it, or any such Loan Party shall so state in writing;

 

 

 

 

(v)

the Existing Securitization Facility is terminated without replacement by a
Replacement Securitization Facility or there occurs a default which continues
unwaived beyond the applicable grace period under the Existing Securitization
Facility or under a Replacement Securitization Facility; or

 

 

 

 

(vi)

The failure of the Borrowers to repay the DIP Facility on or before November 1,
2009.

 

 

 

 

Remedies:

Upon the occurrence of a Specified Event of Default or Termination Event,
whether or not there is availability under the DIP Facility, without any notice
or demand whatsoever, the right of the Borrower to receive any Loan or other
accommodation of credit shall be terminated, subject to any applicable notice
provision in any Order (as the case may be) in the case of remedies against
Collateral (which notice provisions shall be acceptable to the Lender) and the
Lender shall be entitled, in addition to all other remedies at law and under any
security or other agreement, to sweep the Loan Account and to apply any credit
balance in such Loan Account against any outstanding Obligations owing to the
Lender, in any order as the Lender may determine in its sole discretion.

 

 

 

 

-18-

LETTER LOAN AGREEMENT
DIP FACILITY

 

--------------------------------------------------------------------------------

 

 

 

Without limiting the foregoing, upon the occurrence of a Specified Event of
Default or Termination Event the Lender shall have the right to exercise all
other customary remedies, including, without limitation, the right to realize on
all Collateral and to call upon the Monitor to file a report with the Court
stating the occurrence of such an event and the fact of the DIP being
immediately due and payable (and, as the case may be, unpaid) under provisions
of Section 11.7 of the CCAA apply.

 

 

 

PROTECTIVE PROVISIONS

 

 

Increased Costs:

If, due to either (i) the introduction of or any change in or in the
interpretation of any Requirement of Law or (ii) the compliance with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any increase in the
cost to the Lender of agreeing to make or of making, funding or maintaining
LIBOR Loans, then the Borrowers shall from time to time, upon demand by the
Lender, pay to the Lender additional amounts sufficient to compensate the Lender
for such increased costs; provided, however, that the Lender agrees to use
reasonable efforts (consistent with its internal policy and legal and regulatory
restrictions) to designate a different lending office if the making of such a
designation would avoid the need for, or reduce the amount of, such increased
cost that may thereafter accrue and would not, in the reasonable judgment of the
Lender, be otherwise disadvantageous to the Lender. A certificate as to the
amount of such increased cost, submitted to the Borrowers by the Lender, shall
be conclusive and binding for all purposes, absent manifest error.

 

 

 

If the Lender determines that compliance with any Requirement of Law or any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law) affects or would affect the amount of
capital required or expected to be maintained by the Lender and that the amount
of such capital is increased by or based upon the existence of the Lender’s
commitment to lend hereunder, then, upon demand by the Lender, the Borrowers
shall pay to the Lender, from time to time as specified by the Lender,
additional amounts sufficient to compensate the Lender in the light of such
circumstances, to the extent that the Lender reasonably determines such increase
in capital to be allocable to the existence of the Lender’s commitment to lend
hereunder. A certificate as to such amounts submitted to the Borrowers by the
Lender shall be conclusive and binding for all purposes, absent manifest error.

 

 

 

 

-19-

LETTER LOAN AGREEMENT
DIP FACILITY

 

--------------------------------------------------------------------------------

 

Illegality:

Notwithstanding any other provision of this Agreement, if the introduction of or
any change in or in the interpretation of Requirement of Law shall make it
unlawful, or any central bank or other Governmental Authority shall assert that
it is unlawful, for the Lender to perform its obligations hereunder to make
LIBOR Loans or to continue to fund or maintain LIBOR Loans hereunder, then, on
notice thereof and demand therefor by the Lender to the Borrowers, (i) each
LIBOR Loan will automatically, upon such demand, converted into a Base Rate Loan
and (ii) the obligation of the Lender to make LIBOR Loans shall be suspended
until the Lender shall notify the Borrowers that the Lender has determined that
the circumstances causing such suspension no longer exist; provided, however,
that, before making any such demand, the Lender agrees to use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions) to
designate a different lending office if the making of such a designation would
allow the Lender or its lending office to continue to perform its obligations to
make LIBOR Loans or to continue to fund or maintain LIBOR Loans and would not,
in the judgment of the Lender, be otherwise disadvantageous to the Lender.

 

 

Indemnity:

The Borrowers and the Subsidiary Guarantors will indemnify and hold harmless the
Lender and each of its affiliates and their respective officers, directors,
employees, agents and advisors (each, an “Indemnified Person”) from and against
any and all suits, actions, proceedings, orders, claims, damages, losses,
liabilities and expenses (including reasonable legal fees and disbursements and
other costs of investigation or defence, including those incurred upon any
appeal) that may be instituted or asserted against or incurred by any such
Indemnified Person as a result of or in connection with credit having been
extended, suspended or terminated under the DIP Facility, the DIP Loan Documents
or the use of the proceeds thereof, and the administration of such credit, and
in connection with or arising out of the transactions contemplated hereunder or
thereunder and any actions or failures to act in connection therewith including
the taking of any enforcement actions by the Lender, including any and all
environmental liabilities and legal costs and expenses arising out of or
incurred in connection with disputes between or among any parties to any of the
DIP Loan Documents save and except in the case of gross negligence or wilful
misconduct of an Indemnified Person.

 

 

 

-20-

LETTER LOAN AGREEMENT
DIP FACILITY

 

--------------------------------------------------------------------------------

 

 

Taxes:

All payments made by the Borrowers or the Subsidiary Guarantors to the Lender
under this Agreement and the other DIP Loan Documents shall be free and clear of
any present or future Taxes whatsoever (other than income and franchise taxes in
the jurisdiction of the Lender’s applicable lending office). The Lender will use
reasonable efforts (consistent with their respective internal policies and legal
and regulatory restrictions and so long as such efforts would not otherwise be
disadvantageous to the Lender) to minimize to the extent possible any applicable
Taxes and the Borrowers will indemnify the Lender for such taxes paid by the
Lender.

 

 

 

MISCELLANEOUS

 

 

Expenses:

The DIP Expenses shall be paid by the Borrowers and shall be secured by the DIP
Liens. Such expenses shall be payable whether or not the DIP Facility closes.

 

Notice:

All notices and other communications provided for hereunder shall be in writing
(including via facsimile communication) and mailed, telecopied or delivered: if
to any Borrower or any Subsidiary Guarantor, at 1155 Metcalfe Street, Suite 800,
Montréal, Québec H3B 5H2, Attention: Chief Financial Officer and Chief Legal
Officer, fax number 514.394.3644 as well as to the attention of (i) Stikeman
Elliott LLP, Canadian counsel to the Borrowers, at its address at 1155
René-Lévesque Blvd. West, Suite 4000, Montreal, Quebec, H3B 3V2, Attention: Marc
Barbeau and Howard Rosenoff, fax number 514.397.3222, and (ii) Paul, Weiss,
Rifkind, Wharton & Garrison LLP, 1285 Avenue of the Americas, New York, NY
10019-6064, Attention: Kelly Cornish, fax number 212.757.3990; if to the Lender,
at its address at 4th Floor, First Canadian Place, 100 King St West, Toronto,
M5X 1H3, Attention: Stanley Julien and Elizabeth Armstrong, fax number
416.359.7796 with a copy to McMillan LLP, Brookfield Place, Suite 4400, Bay
Wellington Tower, 181 Bay Street, Toronto, Ontario, M5J 2T3, Attention: Andrew
J.F. Kent, fax number 416.865.7048; or, as to the Borrowers, any Subsidiary
Guarantor or the Lender, at such other address as shall be designated by such
party in a written notice to the other parties. All such notices and
communications shall, when mailed, telegraphed or telecopied, be effective three
Business Days after being deposited in the mail, first class postage prepaid or
confirmed as received when sent by telecopier, respectively.

 

 

 

 

-21-

LETTER LOAN AGREEMENT
DIP FACILITY

 

--------------------------------------------------------------------------------

 

Right of Set-Off:

Subject to the Orders, upon (a) the occurrence and during the continuance of any
Specified Event of Default or Termination Event, the Lender and each Affiliate
of the Lender is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and otherwise apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by the Lender or such Affiliate to
or for the credit or the account of the Borrowers or any Subsidiary Guarantor
against any and all of the Obligations now or hereafter existing under this
Agreement or the DIP Loan Documents, irrespective of whether the Lender shall
have made any demand under this Agreement or such DIP Loan Documents and
although such obligations may be unmatured. The Lender agrees promptly to notify
the applicable Borrowers or Subsidiary Guarantors after any such set-off and
application; provided, however, that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of the Lender
and its respective Affiliates under this provision are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
that the Lender and its respective Affiliates may have.

 

 

Governing Law:

This Agreement shall be construed in accordance with and governed by the laws of
the Province of Quebec and the federal laws of Canada applicable therein and the
parties shall attorn to the non-exclusive jurisdiction of the courts of the
Province of Quebec.

 

 

Entire Agreement:

This Agreement, the DIP Loan Documents and all documents contemplated by or
delivered under or in connection with this Agreement and the DIP Loan Documents,
constitute the entire agreement between the parties with respect to the subject
matter and supersedes all prior agreements, negotiations, discussions,
undertakings, representations, warranties and understandings, whether written or
verbal.

 

 

Amendments:

No amendment, supplement, restatement or termination of any provision of this
Agreement is binding unless it is in writing and signed by each party to this
Agreement.

 

 

Waivers:

No failure to exercise, and no delay in exercising, on the part of the Lender,
any right, remedy, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, remedy, power or privilege
shall preclude the exercise of any other right, remedy, power or privilege.

 

 

 

-22-

LETTER LOAN AGREEMENT
DIP FACILITY

 

--------------------------------------------------------------------------------

 

Assignment and Enurement:

This Agreement shall enure to the benefit of and be binding on the parties
hereto and their successors and permitted assigns. The Borrowers may not assign
their respective rights or obligations under this Agreement or the DIP Loan
Documents without the prior written consent of the Lender. The Lender, subject
to the prior authorization of the Sponsor, acting reasonably and without delay,
may assign its Loans under the DIP Facility and its rights and interests under
this Agreement and the other DIP Loan Documents and customary participation
rights will be available; provided that the Lender shall not require the prior
authorization of the Sponsor to assign its Loans under the DIP Facility and its
rights and interests under this Agreement and the other DIP Loan Documents: (i)
to any financial institution listed under Schedule I or Schedule II of the Bank
Act (Canada) or (ii) after the occurrence of a Termination Event if the Sponsor
is in breach of its obligations under the Sponsor Guarantee.

 

 

Voting

If the Lender assigns any part of its Loans under the DIP Facility and its
rights and interests under this Agreement and the other DIP Loan Documents in
accordance with the terms of this Agreement, including by way of subrogation,
then any action expressed to be taken or discretion expressed to be exercised
hereunder by the Lender shall require the unanimous consent of the Lender and
all such assignees or subrogated parties.

 

 

Counterparts:

This Agreement may be executed and delivered by way of facsimile and in any
number of counterparts each of which when executed and delivered is an original
but all of which taken together constitute one and the same instrument.

 

 

Time of the Essence:

For each provision of this Agreement, time is of the essence.

 

 

Donohue:

Notwithstanding anything contained herein to the contrary and Donohue’s
signature hereinbelow (i) this Agreement shall not be enforceable against
Donohue or its subsidiaries; and (ii) all references to “Borrowers”, “Loan
Parties” and “subsidiaries” shall be deemed to exclude Donohue and its
subsidiaries, until such time as the US DIP Order has been entered by the US
Bankruptcy Court. The Lender hereby acknowledges that Donohue shall have no
obligation to take any actions with a view to obtaining the US DIP Order and its
failure to take any such actions shall not affect the rights of ACI hereunder.

 

 

Choice of Language:

It is the express wish of the parties that this document and any related
documents be drawn up and executed in English. Les parties aux présentes ont
expressément demandé que ce document et tous les documents s’y rattachant soient
rédigés et signés en anglais.

 

[SIGNATURE PAGE FOLLOWS]

 

 

-23-

LETTER LOAN AGREEMENT
DIP FACILITY

 

--------------------------------------------------------------------------------

 

If the foregoing is acceptable to you, please confirm your acceptance of the
terms and conditions as set forth herein by executing and delivering this
Agreement to the Lender by no later than 5:00 pm (Toronto time) on May 7, 2009.

 

 

 

Yours very truly,

 

 

 

 

BANK OF MONTREAL

 

 

Per: 

/s/ Y. Sanda

 

 

Name:

Y. Sanda

 

 

Title:

Managing Director

 

 

    ACKNOWLEDGED, AGREED AND ACCEPTED

    this 6 of May, 2009 by:

 

ABITIBI-CONSOLIDATED INC.,
a debtor and a debtor-in-possession, as Borrower

 

 

 

 

 

 

Per:

/s/ Allen Dea

 

 

Name:

Allen Dea

 

 

Title:

Authorized Signatory

 

 

 

 

DONOHUE CORP.,
a debtor and a debtor-in-possession, as Borrower

 

 

 

 

 

 

Per:

/s/ William G. Harvey

 

 

Name:

William G. Harvey

 

 

Title:

Authorized Signatory

 

 

 

    LES PRÉSENTES SONT REÇUES ET

    ACCEPTÉES LE  6 May 2009 PAR:

INVESTISSEMENT QUÉBEC

 

 

 

 

 

 

Per:

/s/ Gerald Tremblay

 

 

Name:

Gerald Tremblay

 

 

Title:

Authorized Signatory

 

 

 

 

 

 

LETTER LOAN AGREEMENT
DIP FACILITY

 

--------------------------------------------------------------------------------

Schedule A – Definitions and Interpretation

SECTION 1 - DEFINITIONS

1.1

Definitions.

In this Agreement, capitalized terms shall have the meanings given to them in
the body of the Agreement, and:

(1)       Affiliate means, as to any Person, any other Person that, directly or
indirectly, Controls, is Controlled by or is under common Control with such
Person or is a director or officer of such Person.

(2)       BMO US Base Rate means the greater of (i) the rate of interest per
annum equal to the sum of the LIBO Rate plus 1.00% and (ii) the rate of interest
per annum publicly announced from time to time by the Lender as its prime rate
in effect at its office in Toronto for US Dollar commercial loans (such rate not
being intended to be the lowest rate of interest charged by the Lender in
connection with extensions of credit to debtors).

(3)       Business Day means a day on which banks are open for business in the
City of Montreal, but does not include a Saturday, Sunday or holiday in the
Province of Quebec. Each Business Day will end at 4:00 p.m. (Toronto time) on
that day.

(4)       Cash Flow Forecast means, collectively, the 13-week cash flow forecast
prepared each week by the Borrowers in form and with detail substantially
similar to the 13-week cash flow forecast delivered to the Lender on the
Effective Date, which shall reflect the Borrowers’ good faith projection of all
cash receipts and disbursements in connection with the operation of their and
their respective subsidiaries’ businesses for the next 13 week period.

(5)       Control means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies, or the dismissal or
appointment of management, of a Person, whether through the ability to exercise
voting power, by contract or otherwise.

(6)       Default means any event or condition that constitutes a Specified
Event of Default or Termination Event or that upon notice, lapse of time or both
would, unless cured or waived, become a Specified Event of Default or
Termination Event.

(7)       DIP Loan Documents means, collectively, the following agreements, each
of which shall be in form and substance satisfactory to the Lender in its sole
discretion:

 

(a)

this Agreement;

 

(b)

an Offer of Loan Guaranty between the Sponsor and the Borrowers (the “Sponsor
Commitment”);

 

(c)

a Guarantee from the Sponsor of all of the Obligations of the Borrowers under
the DIP Loan Documents (the “Sponsor Guarantee”);

 

 

Sch. A - 1

LETTER LOAN AGREEMENT
DIP FACILITY

 

--------------------------------------------------------------------------------

 

(d)

universal hypothecs for an amount of CDN$140,000,000 charging the universality
of the assets of ACI and each of the Subsidiary Guarantors’ movable and
immovable property, present and future (the “Hypothecs”);

 

(e)

a Guarantee from each of the Subsidiary Guarantors of all of the obligations of
the Borrowers under the DIP Loan Documents (collectively, the “Subsidiary
Guarantees”); and

 

(f)

a debenture charging the real property and personal property of ACI and each of
the Subsidiary Guarantors (the “Debentures”).

(8)       Effective Date means the date upon which all of the Initial
Availability Conditions have been satisfied or waived.

(9)       Environmental Laws means all treaties, laws, rules, regulations,
codes, ordinances, orders, decrees, directives, judgments, injunctions, notices
or binding agreements issued, promulgated or entered into by or with any
Governmental Authority, relating in any way to the environment, the preservation
or reclamation of natural resources, the generation, management, Release of, or
exposure to, any Hazardous Material or to occupational health and safety
matters.

(10)     Existing Securitization Facility means the receivables purchase
facility pursuant to the Amended and Restated Purchase and Contribution
Agreement dated as of January 31, 2008, as amended, among ACI, Abitibi
Consolidated Sales Corporation (“ACSC”) and Abitibi-Consolidated U.S. Funding
Corp. (“ACUSFC”) and to the Amended and Restated Receivables Purchase Agreement
dated as of January 31, 2008, as amended, among ACUSFC, Eureka Securitisation,
plc, Citibank, N.A., Citibank, N.A., London Branch, ACSC and ACI and any
agreement and/or document executed and/or delivered in connection therewith.

(11)     Governmental Authority means the government of Canada, the United
States of America, or any other nation, or any political subdivision thereof,
whether state, provincial, territorial or local, and any agency, authority,
instrumentality, regulatory body, court, central bank or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative powers or
functions of or pertaining to government.

(12)     Hazardous Materials means (i) any petroleum products or by-products and
all other hydrocarbons, coal ash, radon gas, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, chlorofluorocarbons and other
ozone-depleting substances, and toxic mold; and (ii) any chemical, material,
substance or waste that is prohibited, limited or regulated by or pursuant to
any Environmental Law.

(13)     Interest Payment Date means (a) with respect to any Base Rate Loan, the
last day of each calendar month and the Termination Date (or the next preceding
Business Day if the last day of a calendar month is not a Business Day) and (b)
with respect to any LIBOR Loan, the last day of the Interest Period applicable
to such Loan.

(14)     Interest Period means, with respect to any LIBOR Loan, the period
commencing on the date of the borrowing of such Loan and ending on the
numerically corresponding day in the calendar month that is one month
thereafter, provided that (a) if any Interest Period would end on a day other
than a Business Day, such Interest Period shall be extended to the next
succeeding

 

Sch. A - 2

LETTER LOAN AGREEMENT
DIP FACILITY

 

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Business Day unless such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day and (b) any Interest Period that commences on the last
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the last calendar month of such Interest Period) shall end
on the last Business Day of the last calendar month of such Interest Period. For
purposes hereof, the date of a LIBOR Loan initially shall be the date on which
the advance of such Loan is made and thereafter shall be the effective date of
the most recent continuation of such Borrowing.

(15)     LIBO Rate means, with respect to any LIBOR Loan for any Interest
Period, the rate appearing on Reuters BBA Libor Rates Page 3750 (or on any
successor or substitute page of such service, or any successor to or substitute
for such service, providing rate quotations comparable to those currently
provided on such page of such service, as determined by the Lender from time to
time for purposes of providing quotations of interest rates applicable to U.S.
Dollar deposits in the London interbank market) at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period, as the rate for U.S. Dollar deposits in an amount comparable to the
amount of such LIBOR Loan and with a maturity comparable to such Interest
Period. If at any time the LIBO Rate would otherwise be less than 3.00% based on
the foregoing methodology, then the LIBO Rate shall be deemed to be 3.00% at
such time notwithstanding the foregoing.

(16)     Lien means, with respect to any asset, (a) any mortgage, deed of trust,
lien, pledge, hypothecation, encumbrance, charge (including any court-ordered
charge) or security interest in, on or of such asset, (b) the interest of a
vendor or a lessor under any conditional sale agreement, capital lease or title
retention agreement (or any financing lease having substantially the same
economic effect as any of the foregoing) relating to such asset and (c) in the
case of securities owned by the applicable Person, any purchase option, call or
similar right of a third party with respect to such securities.

(17)

Loan Parties means each of ACI, Donohue and each Subsidiary Guarantor.

(18)     Loan means each of the loans and advances made by the Lender pursuant
to this Agreement.

(19)     Material Adverse Effect means a material adverse effect on (a) the
business, assets, results of operations or financial condition of ACI, Donohue
and their respective subsidiaries, taken as a whole, (b) the ability of any Loan
Party to perform any of its material obligations under any DIP Loan Document,
(c) the Collateral, taken as a whole, or the Lender’s DIP Liens on the
Collateral, taken as a whole, or the priority of such DIP Liens, or (d) the
rights and remedies of the Lender under the DIP Loan Documents, provided that
the filing of the CCAA Cases and the US Bankruptcy Cases and the DIP Liens and
the consequences that customarily result from proceedings under Chapter 11 of
the Bankruptcy Code or the CCAA, as the case may be, shall not be considered in
determining whether there has been a “Material Adverse Effect”.

(20)     Monitor means Ernst & Young Inc. in its capacity as court appointed
monitor in the CCAA Cases.

(21)     Obligations means all the indebtedness, liabilities and obligations of
the Borrowers and each of the Subsidiary Guarantors, present and future, direct
and indirect, absolute and

 

 

Sch. A - 3

LETTER LOAN AGREEMENT
DIP FACILITY

 

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contingent, matured and unmatured, solidarily, at any time or from time to time
existing or arising under or by virtue of or otherwise in connection with this
Agreement and any other DIP Loan Documents which are or may become at any time
and from time to time owing or payable by the Borrowers or any of the Subsidiary
Guarantors to the Lender, or which remain owing and unpaid to the Lender or the
Sponsor, including, without limitation, any costs or expenses, including all
reasonable legal and other costs, including any Breakage Costs, incurred by the
Lender and the Sponsor in connection with preserving or enforcing, or attempting
to preserve or enforce, their rights under this Agreement or the DIP Loan
Documents.

(22)     Orders means, collectively, the CCAA Initial Order, the CCAA DIP Order,
the CCAA Extension Order, the US DIP Order and the US Bankruptcy Cases.

(23)     Perfection Certificate means a certificate executed by an officer of
ACI and each Subsidiary Guarantor and, upon the initial borrowing by Donohue, by
an officer of Donohue, which provides details of the Collateral owned by each
such Loan Party, which certificate shall be in form and substance acceptable to
the Lender and the Sponsor.

(24)     Person means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.

(25)     Replacement Securitization Facility means any replacement facility of
the Existing Securitization Facility, including, without limitation, an asset
based lending facility, which provides a materially equivalent benefit or is
substantially similar to the Existing Securitization Facility and any agreement
and/or document executed and/or delivered in connection therewith.

(26)     Requirement of Law means, with respect to any Person, (a) the charter,
articles or certificate of organization or incorporation and by-laws or other
organizational or governing documents of such Person and (b) any statute, law,
treaty, rule, regulation, order, decree, writ, injunction or determination of
any arbitrator or court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject, and including Environmental Laws.

(27)     subsidiary means, with respect to any Person (the “parent”) at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent’s consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests are,
as of such date, owned, controlled or held, or (b) that is, as of such date,
otherwise Controlled, by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.

(28)     Taxes means any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.

 

 

Sch. A - 4

LETTER LOAN AGREEMENT
DIP FACILITY

 

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SECTION 2 - INTERPRETATION

(1)       The definitions of terms herein shall apply equally to the singular
and plural forms of the terms defined. Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter forms.
The words “include”, “includes” and “including” shall be deemed to be followed
by the phrase “without limitation”. The word “will” shall be construed to have
the same meaning and effect as the word “shall”. Unless the context requires
otherwise (a) any definition of or reference to any agreement, instrument or
other document herein shall be construed as referring to such agreement,
instrument or other document as from time to time amended, amended and restated,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person’s successors and
assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Sections and
Schedules shall be construed to refer to Sections of, and Schedules to, this
Agreement, (e) the words “asset” and “property” shall be construed to have the
same meaning and effect and to refer to any and all tangible and intangible
assets and properties, including cash, securities, accounts and contract rights
and (f) any reference to any Requirement of Law shall, unless otherwise
specified, refer to such Requirement of Law as amended, modified or supplemented
from time to time.

(2)       For purposes of any assets, liabilities or entities located in the
Province of Quebec 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 Quebec or a court or tribunal exercising jurisdiction in the
Province of Quebec, (a) “personal property” shall include “movable property”,
(b) “real property” or “real estate” shall include “immovable property”, (c)
“tangible property” shall include “corporeal property”, (d) “intangible
property” shall include “incorporeal property”, (e) “security interest”,
“mortgage” and “lien” shall include a “hypothec”, “right of retention”, “prior
claim” and a resolutory clause, (f) all references to filing, perfection,
priority, remedies, registering or recording under the UCC, PPSA or Code shall
include publication under the Civil Code of Quebec, (g) all references to
“perfection” of or “perfected” liens or security interest shall include a
reference to an “opposable” or “set up” lien or security interest as against
third parties, (h) any “right of offset”, “right of setoff” or similar
expression shall include a “right of compensation”, (i) “goods” shall include
“corporeal movable property” other than chattel paper, documents of title,
instruments, money and securities, (j) an “agent” shall include a “mandatary”,
(k) “construction liens” shall include “legal hypothecs”; (1) “joint and
several” shall include “solidary”; (m) “gross negligence or willful misconduct”
shall be deemed to be “intentional or gross fault”; (n) “beneficial ownership”
shall include “ownership on behalf of another as mandatary”; (o) “easement”
shall include “servitude”; (p) “priority” shall include “prior claim”; (q)
“survey” shall include “certificate of location and plan”; (r) “state” shall
include “province”; (s) “fee simple title” shall include “absolute ownership”;
(t) “accounts” shall include “claims”.

 

 

Sch. A - 5

LETTER LOAN AGREEMENT
DIP FACILITY

 

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Schedule B

 

[Intentionally deleted]

 

 

 

 

Sch. B - 1

LETTER LOAN AGREEMENT
DIP FACILITY

 

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Schedule C – Permitted Encumbrances

 

 

1.

Any Lien for Taxes not yet due or delinquent or being contested in good faith by
appropriate proceedings for which adequate reserves have been established.

 

2.

Any statutory Lien arising in the ordinary course of business by operation of
law with respect to a liability that is not yet due or delinquent.

 

3.

Liens constituting encumbrances in the nature of zoning restrictions, easements
(including reciprocal easement agreements), rights-of-way, municipal building
and zoning ordinances and similar charges, utility agreements, covenants,
reservations, restrictions, encroachments, charges, encumbrances, or other
similar restrictions, title defects or other irregularities that were not
incurred in connection with and do not secure indebtedness for borrowed money
and do not materially affect the value the property subject to such Lien or the
use of such property in the conduct of the business of any Loan Party.

 

4.

Liens in connection with indebtedness for borrowed money so long as such Liens
extend solely to the property (and improvements and proceeds of such property)
acquired with the proceeds of such indebtedness or subject to the applicable
capital lease.

 

5.

Liens arising from judgments, orders, or other awards.

 

6.

Liens consisting of deposits or pledges made in the ordinary course of business
in connection with, or to secure payment of, obligations under workers’
compensation, unemployment insurance or similar legislation.

 

7.

Liens given to a public utility or any municipality or governmental or other
public authority when required by such utility or other authority in connection
with business operations or the ownership of a Loan Party’s assets, provided
that such Liens do not materially interfere with the use of such Loan Party’s
assets or the operation of its business.

 

 

 

Sch. C - 1

LETTER LOAN AGREEMENT
DIP FACILITY

 

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Schedule D – Representations and Warranties

 

Each of the Borrowers represents and warrants to the Lender that:

1.

Organization; Qualification; Authority. Each of the Borrowers and their
respective subsidiaries (i) is a corporation, partnership, limited liability
company or other organization duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or formation
except where the failure to be in good standing, individually or in the
aggregate, would not have a Material Adverse Effect, (ii) is duly qualified as a
foreign corporation (or other entity) and in good standing (or the functional
equivalent thereof, if applicable) in each other jurisdiction in which it owns
or leases property or in which the conduct of its business requires it to so
qualify or be licensed, except where the failure to so qualify or be licensed
and in good standing (or the functional equivalent thereof, if applicable),
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect, and (iii) subject to the entry of the CCAA Initial
Order by the CCAA Court, has all requisite power and authority (including,
without limitation, all governmental licenses, permits and other approvals) to
own or lease and operate its properties and to carry on its business as now
conducted and as proposed to be conducted.

2.

No Contravention. Upon the entry of the applicable Orders, the execution,
delivery and performance by each Loan Party of this Agreement, and each of the
other DIP Loan Documents to which it is or is to be a party, and the
consummation of each aspect of the transactions contemplated hereby and thereby,
are within such Loan Party’s constitutive powers, have been duly authorized by
all necessary constitutive action, and do not (i) contravene such Loan Party’s
constitutive documents, (ii) violate any Requirement of Law, (iii) conflict with
or result in the breach of, or constitute a default under, any contract, loan
agreement, indenture, mortgage, deed of trust, lease or other instrument binding
on or affecting any Loan Party, or any of their properties entered into by such
Loan Party after the CCAA Initial Order Date, or (iv) except for the Liens
created under the DIP Loan Documents and the Orders, result in or require the
creation or imposition of any Lien upon or with respect to any of the properties
of any Loan Party or any of its subsidiaries.

3.

Execution; Enforceability. This Agreement has been, and each of the other DIP
Loan Documents when delivered hereunder will have been, duly executed and
delivered by each Loan Party thereto. This Agreement is, and each other DIP Loan
Document when delivered hereunder will be, subject to the entry of the
applicable Order, the legal, valid and binding obligation of each Loan Party
thereto, enforceable against such Loan Party in accordance with its terms and
the Orders.

4.

Approvals and Consents. Except for the entry of the Orders, filings or
recordings already made or to be made pursuant to any federal law, rule or
regulation or filings or recordings to be made in any jurisdiction outside of
Canada, no authorization, approval or other action by, and no notice to or
filing with, any Governmental Authority or regulatory body

 

 

Sch. D - 1

LETTER LOAN AGREEMENT
DIP FACILITY

 

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or any other third party, is required for (i) the due execution, delivery,
recordation, filing or performance by any Loan Party of this Agreement or any
other DIP Loan Document to which it is or is to be a party, or for the
consummation of each aspect of the transactions contemplated hereby, (ii) the
grant by any Loan Party of the Liens granted by it pursuant to the DIP Loan
Documents, (iii) the validity, priority, perfection or maintenance of the Liens
created under the DIP Loan Documents (including the requisite priority set forth
in the Orders) or (iv) subject to the Orders, the exercise by the Lender of its
rights under the DIP Loan Documents or the remedies in respect of the Collateral
pursuant to the DIP Loan Documents.

5.

Subsidiaries. The Perfection Certificate sets forth a complete and accurate list
of all subsidiaries of ACI and Donohue, as the case may be, showing as of the
Effective Date (as to each such subsidiary) the jurisdiction of its
incorporation or organization, as the case may be, and the percentage of the
equity interests owned (directly or indirectly) by each such Borrower or its
respective subsidiaries, and, in addition with respect to each Loan Party, such
Loan Party’s exact legal name, location, chief executive office, type of
organization and organizational identification number.

6.

Capital Stock. As of the Effective Date, all of the outstanding capital stock of
each Loan Party (other than any Borrower) has been validly issued, is fully paid
and non-assessable and is owned by the Persons listed in the Perfection
Certificate in the percentages specified therein free and clear of all Liens,
except for the DIP Liens and Permitted Encumbrances.

7.

Properties. As of the Effective Date, each of the Loan Parties has good and
marketable title (subject only to Permitted Encumbrances) to the properties
reflected on the Borrowers’ balance sheet as of December 31, 2008. Each of the
Loan Parties owns and has on the date hereof good and marketable title or
subsisting leasehold interest subject to Permitted Encumbrances to, and enjoys
on the date hereof peaceful and undisturbed possession of, all such material
properties, including without limitation, the Collateral, that are necessary for
the operation and conduct of its business. There are no Liens of any nature
whatsoever on any assets of any Loan Party other than: (i) Liens granted
pursuant to the Orders, this Agreement and the DIP Loan Documents except as set
out in the Orders and (ii) Permitted Encumbrances. The Perfection Certificate
contains a complete and correct list of all Liens in existence as of the
Effective Date with respect to any Loan Party. No Loan Party is party to any
contract, agreement, lease or instrument entered into on or after the CCAA
Initial Order Date the performance of which, either unconditionally or upon the
happening of an event, will result in or require the creation of a Lien that is
not a Permitted Encumbrance on any assets of such Loan Party in violation of
this Agreement.

8.

Tax Returns. Each Loan Party and each of its subsidiaries has filed or caused to
be filed all tax returns and reports (federal, state, provincial, local and
foreign) which are required to have been filed and has paid or caused to be paid
all Taxes required to have been paid by it, together with applicable interest
and penalties, except (i) Taxes that are being contested in good faith by
appropriate proceedings and for which such Loan Party, as

 

 

 

Sch. D - 2

LETTER LOAN AGREEMENT
DIP FACILITY

 

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applicable, has set aside on its books adequate reserves or (ii) to the extent
that the failure to do so could not reasonably be expected to result in a
Material Adverse Effect.

9.

Tax Withholdings. Each of the Loan Parties has withheld from each payment to
each of their respective officers, directors and employees the amount of all
Taxes, including income tax, pension plan, unemployment insurance and other
payments and deductions required to be withheld therefrom, and has paid the same
to the proper taxation or other receiving authority in accordance with all
Requirements of Law. No Loan Party is subject to any claim by or liability to
any of their respective officers, directors or employees for salary (including
vacation pay) or benefits which would rank in whole or in part pari passu with
or prior to the Liens created by the DIP Loan Documents. For any Canadian
pension plan, and for any other Canadian benefit plan of the Loan Parties, which
is a defined contribution plan requiring any Loan Party to contribute thereto,
or to deduct from payments to any individual and pay such deductions into or to
the credit of such Canadian pension plan or Canadian benefit plan, all required
employer contributions have been properly withheld by such Loan Party and fully
paid into the funding arrangements for the applicable Canadian pension plan or
Canadian benefit plan other than the failure to pay the special amortization
payments pursuant to any of its Canadian pension plans. Any assessments owed to
the Pension Benefits Guarantee Fund established under the Pension Benefits Act
(Ontario), or other assessments or payments required under similar legislation
in any other jurisdiction, have been paid when due.

10.

Security Documents and Perfection. Each of the Hypothecs and each of the
Debentures is effective to create in favour of the Lender an enforceable
security interest or hypothec in the Collateral described therein and proceeds
and products thereof. When financing statements and certified statements in
appropriate form are filed in the applicable public offices in the jurisdictions
specified in the Perfection Certificate and such other filings and actions as
are specified in the Hypothecs and each of the Debentures have been completed,
the Hypothecs and each of the Debentures shall constitute a valid and fully
perfected Lien on, and, as applicable, security interest and hypothec in, all
right, title and interest of the Loan Parties in such Collateral and the
proceeds and products thereof, as security for the Obligations, in each case
prior and superior in right to any other Person (except Permitted Encumbrances).

11.

Mortgages. Each of the Debentures and Hypothecs when delivered by the Loan
Parties with respect to the real property Collateral will be effective to create
in favour of the Lender an enforceable Lien on the mortgaged properties
described therein and, when filed in the recording office designated by the
Borrowers, shall constitute a validly registered Lien on all right, title and
interest of the Loan Parties in the mortgaged properties described therein, as
security for the Obligations, in each case prior and superior in right to any
other Person (other than Persons holding Permitted Encumbrances).

12.

Insurance. The Loan Parties maintain insurance policies and coverage which (i)
is sufficient for compliance with all Requirements of Law and of all material
agreements to which any Loan Party is a party, (ii) is provided under valid,
outstanding and enforceable policies, and (iii) provides adequate insurance
coverage in at least such amounts and against at least such risks (but including
in any event public liability) as are usually

 

 

Sch. D - 3

LETTER LOAN AGREEMENT
DIP FACILITY

 

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insured against in the same general area by Persons engaged in the same or a
similar business to the assets and operations of the Loan Parties. All such
material policies are in full force and effect, all premiums with respect
thereto have been paid in accordance with their respective terms, and no notice
of cancellation or termination has been received with respect to any such
policy. No Loan Party maintains any formalized self-insurance program with
respect to its assets or operations or material risks with respect thereto.

 

 

 

 

 

 

 

 

 

 

Sch. D - 4

LETTER LOAN AGREEMENT
DIP FACILITY

 

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Schedule E – Covenants

The Borrowers will, and shall cause each of the Subsidiary Guarantors to
covenant and agree so long as any Obligations remain outstanding under the DIP
Facility, the Borrowers and each of the Subsidiary Guarantors, provided that
these covenants shall only apply to Donohue and the US Subsidiary Guarantors if
a Loan is advanced to Donohue hereunder:

1.

Corporate Existence. Shall preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits, licenses and
franchises necessary or desirable in the normal conduct of its business;
provided that, notwithstanding the foregoing, such failure to preserve the same
shall only be permitted if it could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.

2.

Compliance with Laws. Shall comply with all Requirements of Law applicable to it
or its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.

3.

Insurance.

 

(i)

Shall keep its insurable properties insured at all times, against such risks,
including fire and other risks insured against by extended coverage, as is
customary with companies of the same or similar size in the same or similar
businesses (subject to deductibles and including provisions for self-insurance);
and maintain in full force and effect public liability insurance against claims
for personal injury or death or property damage occurring upon, in, about or in
connection with the use of any properties owned, occupied or controlled by any
Borrower or any Subsidiary Guarantor, as the case may be, in such amounts and
with such deductibles as are customary with companies of the same or similar
size in the same or similar businesses and in the same geographic area and in
each case with financially sound and reputable insurance companies (subject to
provisions for self-insurance).

 

(ii)

Shall, in the case of any fire, accident or other casualty causing loss or
damage to any Collateral of any Loan Party, cause all proceeds of such policies
to be used promptly to repair or replace any such damaged properties, unless
otherwise directed by the Lender.

 

(iii)

Shall obtain endorsements to the policies pertaining to all physical properties
in which the Lender shall have a Lien under the DIP Loan Documents, naming the
Lender as a loss payee and containing (A) provisions that such policies will not
be cancelled without 30 days prior written notice having been given by the
insurance company to the Lender, and (B) a standard non contributory
“mortgagee”, “lender” or “secured party” clause, as well as such other
provisions as the Lender may require to fully protect the Lender’s interest in
the Collateral and to any payments to be made under such policies. All original
policies or true copies thereof are to be delivered to the Lender, premium
prepaid.

 

 

Sch. E - 1

LETTER LOAN AGREEMENT
DIP FACILITY

 

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4.

Obligations and Taxes. Shall pay all its obligations arising after the CCAA
Initial Order Date promptly and, in accordance with their terms except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, and pay and discharge and cause
each of its subsidiaries to pay and discharge promptly all Taxes, assessments
and governmental charges or levies imposed upon it or upon its income or profits
or in respect of its property other than de minimus amounts in relation to
Taxes, assessments, governmental charges or levies arising, or attributed to the
period, after the CCAA Initial Order Date, before the same shall become in
default, as well as all lawful claims for labour, materials and supplies or
otherwise arising after the CCAA Initial Order Date which, if unpaid, would
become a Lien or charge upon such properties or any part thereof; provided,
however, that each Borrower and each Subsidiary Guarantor shall not be required
to pay and discharge or to cause to be paid and discharged any such Tax,
assessment, charge, levy or claim so long as the validity or amount thereof
shall be contested in good faith by appropriate proceedings, in each case, if
the Borrowers and the Subsidiary Guarantors shall have set aside on their books
adequate reserves therefor in conformity with GAAP.

5.

Access to Books, Records and Properties.

 

(i)

Shall maintain or cause to be maintained at all times true and complete books
and records in accordance with GAAP of the financial operations of the Borrowers
and their respective subsidiaries; and provide the Lender and its
representatives access to all such books and records during regular business
hours upon reasonable advance notice, in order that the Lender may examine and
make abstracts from such books, accounts, records and other papers for the
purpose of verifying the accuracy of the various reports delivered by any
Borrower or any Subsidiary Guarantor to the Lender pursuant to this Agreement or
for otherwise ascertaining compliance with this Agreement and to discuss the
affairs, finances and condition of the Borrowers and the Subsidiary Guarantors
with the officers and independent accountants of the Borrowers; provided that
the Borrowers shall have the right to be present at any such visit or
inspection.

 

(ii)

Shall grant the Lender access to and the right to inspect all reports, audits
and other internal information of the Borrowers and the Subsidiary Guarantors
relating to environmental matters upon reasonable advance notice, but subject to
appropriate limitations so as to preserve attorney-client privilege.

 

(iii)

Shall at any reasonable time and from time to time during regular business
hours, upon reasonable notice, permit the Lender and/or any representatives
designated by the Lender (including any consultants, accountants, lawyers and
appraisers retained by the Lender) to visit the properties of the Borrowers and
the Subsidiary Guarantors to conduct evaluations, appraisals, environmental
assessments and ongoing maintenance and monitoring in connection with the
Collateral, and to monitor the Collateral and all related systems; provided that
the Borrowers shall have the right to be present at any such visit and, unless a
Specified Event of Default has occurred and is continuing, such visits permitted
under this clause (iii)

 

 

Sch. E- 2

LETTER LOAN AGREEMENT
DIP FACILITY

 

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shall be coordinated through the Lender and shall be made no more frequently
than once in any fiscal quarter.

6.

Use of Proceeds. Shall use the proceeds of the Loans solely for the purposes,
and subject to the restrictions, set forth under the heading “Purpose”.

7.

Validity of Loan Documents. Shall object to any application made on behalf of
any Loan Party or by any Person to the validity of any DIP Loan Document or the
applicability or enforceability of any DIP Loan Document or which seeks to void,
avoid, limit, or otherwise adversely affect the security interest created by or
in any DIP Loan Document or any payment made pursuant thereto.

8.

Further Assurances.

 

(i)

Shall promptly upon reasonable request by the Lender, correct, and cause each of
its subsidiaries promptly to correct, any material defect or error that may be
discovered in any DIP Loan Document or in the execution, acknowledgment, filing
or recordation thereof

 

(ii)

Shall promptly upon reasonable request by the Lender, do, execute, acknowledge,
deliver, record, re-record, file, re-file, register and re-register any and all
such further acts, deeds, conveyances, pledge agreements, mortgages, deeds of
trust, trust deeds, assignments, financing statements and continuations thereof,
termination statements, notices of assignment, transfers, certificates,
assurances and other instruments as the Lender may reasonably require from time
to time in order to (A) carry out more effectively the purposes of the DIP Loan
Documents, (B) to the fullest extent permitted by Requirements of Law, subject
any Loan Party’s properties, assets, rights or interests to the Liens now or
hereafter required to be covered by any of the DIP Loan Documents, (C) perfect
and maintain the validity, effectiveness and priority of any of the DIP Loan
Documents and any of the Liens required to be created thereunder and (D) assure,
convey, grant, assign, transfer, preserve, protect and confirm more effectively
unto the Lender the rights granted or now or hereafter intended to be granted to
the Lender under any DIP Loan Document or under any other instrument executed in
connection with any DIP Loan Document to which any Loan Party is or is to be a
party.

9.

Maintenance of Properties, Etc. Shall (i) maintain and preserve all of its
properties that are used or useful in the conduct of its business in good
working order and condition as when new, ordinary wear and tear excepted, and
will from time to time make or cause to be made all appropriate repairs,
renewals and replacements thereof except where failure to do so would not have a
Material Adverse Effect; provided that, this covenant shall not prohibit the
sale, transfer or other disposition of any such property consummated in
accordance with the other terms of this Agreement, (ii) keep its equipment and
inventory (other than inventory sold in the ordinary course of business) at the
places therefor specified in the Perfection Certificate or, upon 30 days’ prior
written notice to the Lender, at such other places designated by such Loan Party
in such notice, (iii) promptly furnish to the Lender a statement respecting any
loss or damage exceeding US$2,500,000 per

 

 

Sch. E - 3

LETTER LOAN AGREEMENT
DIP FACILITY

 

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occurrence to any of its equipment or inventory, and (iv) pay promptly when due
all property and other Taxes, assessments and governmental charges or levies
imposed upon, and all claims (including, without limitation, claims for labor,
materials and supplies) against, the Collateral.

10.

Liens. Shall not incur, create, assume or suffer to exist any Lien on any asset
of any Borrower or any of its Subsidiary Guarantors now owned or hereafter
acquired by any Borrower or any Subsidiary Guarantor, other than: (i) Permitted
Encumbrances or (ii) Liens in favour of the Lender.

11.

Chapter 11 Claims; CCAA Claims. If Donohue borrows hereunder, shall not, in the
US Bankruptcy Cases, incur, create, assume, suffer to exist or permit any other
superpriority claim that is pari passu with or senior to the claims of the
Lender granted pursuant to the DIP Loan Documents and the Orders against the
Chapter 11 Debtors except with respect to the Carve-Outs; and in the CCAA Cases
incur, create, assume, suffer to exist or permit any court-ordered charge or
Lien that is senior or pari passu to the DIP Liens except with respect to the
Permitted Encumbrances.

12.

Transactions with Affiliates. Shall not enter into or permit any of its
Subsidiary Guarantors to enter into any transaction with any Affiliate, other
than (a) any transaction pursuant to the Existing Securitization Facility or any
Replacement Securitization Facility or (b) any transaction on terms and
conditions at least as favourable to such Borrower or such Subsidiary Guarantor
as could reasonably be obtained at that time in a comparable arm’s length
transaction with a Person other than an Affiliate, except for the following: (i)
any transaction between any Loan Party and any other Loan Party; (ii) any
transaction between any Loan Party and any non-Loan Party that is in the
ordinary course of business and in a manner and to an extent consistent with
past practice; or (iii) reasonable and customary director, officer and employee
compensation and other benefits (including retirement, health, stock option and
other benefit plans) and indemnification arrangements, in each case approved by
the relevant board of directors.

13.

Distributions. Shall not declare or pay any dividends on, or make any other
distributions (whether by reduction of capital or otherwise) with respect to any
shares of the Borrower or any of the Subsidiary Guarantors, without the prior
written consent of the Lender, except to another Loan Party.

14.

Mergers; etc.. Shall not enter into any merger, amalgamation, consolidation,
reorganization or recapitalization or change ownership or control of the
Borrowers or any of the Subsidiary Guarantors, except to the extent such
transaction only involves one or more of the other Loan Parties (provided that
such transaction would not result in a Material Adverse Effect), without the
prior written consent of the Lender.

15.

Pre-Petition Payments. Shall not make any pre-petition payment other than as
permitted in the Orders, including payments in connection with the Existing
Securitization Facility or other court order to which each of the Lender and the
Sponsor has consented, and shall not waive, amend, modify, terminate or release
the provisions of (i) any pre-petition debt or (ii) any document, agreement or
instrument evidencing, creating or governing any

 

 

Sch. E - 4

LETTER LOAN AGREEMENT
DIP FACILITY

 

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post-petition indebtedness or any other material pre-petition or post-petition
agreement if in the case of clause (i) or (ii), the same could reasonably be
expected to adversely affect the Lender.

16.

Modification of Orders. Shall not seek or consent to, any modification, stay
vacation or amendment to the Orders without the prior consent of the Lender and
the Sponsor.

17.

Plans. Shall not seek or consent to any plan of reorganization or liquidation or
any plan of arrangement unless all of the indebtedness under the DIP Facility
are to be paid in full in cash or other immediately available funds the
arrangements provided for in the DIP Loan Documents terminated pursuant thereto
prior to or contemporaneously with the effectiveness of such plan.

18.

No Other DIP Facilities. Shall not request any additional debtor-in-possession
facility from any other Person unless the proceeds of such facility are used to
repay any outstanding Loans.

19.

Reporting. The Borrowers shall deliver to the Lender the following:

 

(i)

Default Notice. As soon as possible and in any event within three Business Days
after any responsible officer of any Borrower has knowledge of the occurrence of
each Default, a statement of such responsible officer (or person performing
similar functions) of the Borrowers setting forth details of such Default or
other event and the action that the Borrowers have taken and proposes to take
with respect thereto.

 

(ii)

Monitor’s Reports. As soon as available, each report of the Monitor to the CCAA
Court.

 

(iii)

Monthly Financials. For each month, as soon as available and in any event within
30 days after the end of such month, the financial information required to be
delivered to the CCAA Court for such month.

 

(iv)

Cash Flows Forecasts. Commencing May 15, 2009, the Borrowers shall provide to
each of the Lender and the Sponsor: (i) on the last Business Day of each week, a
rolling cash flow forecast detailing the consolidated cash receipts and cash
disbursements of the Borrowers and their respective subsidiaries on a weekly
basis for the next 13 weeks, and (ii) on the fifth Business Day of each week, a
combined weekly cash flow results of the Borrowers and their respective
subsidiaries for the previous week.

 

(v)

Litigation. Promptly after the commencement thereof, notice of each unstayed
action, suit, investigation, litigation and proceeding before any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, affecting any Loan Party or any of its subsidiaries that
(i) is reasonably likely to be determined adversely and if so determined
adversely could be reasonably likely to have a Material Adverse Effect or (ii)
purports to affect the

 

 

Sch. E - 5

LETTER LOAN AGREEMENT
DIP FACILITY

 

--------------------------------------------------------------------------------

legality, validity or enforceability of this Agreement or any other DIP Loan
Document or the consummation of the transactions contemplated hereby.

 

(vi)

Bankruptcy Pleadings, Etc. Promptly after the same is available, copies of all
pleadings, motions, applications, judicial information, financial information
and other documents filed by or on behalf of any of the Loan Parties with the
CCAA Court in the CCAA Cases or with the US Bankruptcy Court in the US
Bankruptcy Cases, or distributed by or on behalf of any of the Loan Parties to
the Monitor, providing copies of same to the Lender and counsel for Lender;
provided that such documents may be made available by posting on a website
maintained by the Borrowers, and identified to the Lender, in connection with
the CCAA Cases and the US Bankruptcy Cases.

20.

Advances. Shall, not at any time after the Effective Date, permit to exist any
loans or advances to, or guarantee an obligation of any other Person (without
taking into account any loan or advance made prior to the Effective Date) except
(i) loans or advances made by one Loan Party to any other Loan Party, (ii) loans
or advances made by a Loan Party to Donohue Corp. or Bridgewater Paper Company
Limited for an amount not exceeding US$30,000,000 at all times.

 

 

 

 

 

 

 

 

 

Sch. E - 6

LETTER LOAN AGREEMENT
DIP FACILITY

 

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Schedule F – Form of Borrowing Request

 

[DATE]

Bank of Montreal

5th Floor, First Canadian Place

100 King St West

Toronto, Ontario

M5X 1H3

Attention:

Claudette Ho and Stanley Julien, Vice President

Fax No.:

416.867.5785

and to

Investissement Québec

393, rue St-Jacques

Bureau 500

Montréal, Québec

H2Y 1N9

Attention:

Secrétaire

Fax No.:

514.873.9917

Dear Sirs/Mesdames:

Reference is made to that certain Letter Loan Agreement dated as of May 6, 2009
(as amended, restated, supplemented or otherwise modified from time to time, the
“Loan Agreement”), between Bank of Montreal as lender (the “Lender”) and
Abitibi-Consolidated Inc. (“ACI”) and Donohue Corp. (“Donohue”) as borrowers
(collectively, the “Borrowers” and each a “Borrower”). Capitalized terms used
and not defined herein have the meanings given to them in the Loan Agreement.

[ACI / Donohue] hereby gives irrevocable notice, in accordance with the Loan
Agreement, that it hereby requests a [LIBOR Loan / Base Rate Loan] in the amount
of US$[(].

[[ACI / Donohue] hereby gives irrevocable notice, in accordance with the Loan
Agreement, that it hereby requests a continuation of the LIBOR Loan in the
amount of US$[(] which has an Interest Period ending on [DATE] for another
Interest Period].

The Borrower is familiar with and has examined the provisions of the Loan
Agreement and has made reasonable investigations of the records of the Borrowers
and their respective subsidiaries and based on the foregoing and as of the date
of this Borrowing Request, hereby certifies to the Lender that:

 

 

Sch. F - 1

LETTER LOAN AGREEMENT
DIP FACILITY

 

--------------------------------------------------------------------------------

 

(i)

the aggregate amount of Loans which are, or will be outstanding after the
advance of any Loans requested under this Borrowing Request, is not greater than
US$87.5 million;

 

(ii)

the representations and warranties contained in each of the DIP Loan Documents
are correct in all material respects on and as of the date hereof, before and
after giving effect to the Loan requested (or continued) hereby, as though made
on and as of the date hereof, other than any such representations or warranties
that, by their terms, refer to a specific date other than the date hereof;

 

(iii)

none of the Loan Parties are in any material breach of any of their covenants
under the Loan Agreement or the other DIP Loan Documents;

 

(iv)

each of the Orders (if applicable) are executory notwithstanding appeals and
have not been vacated, reversed, modified, amended or stayed in any respect as
of the date hereof without the prior written consent of the Lender and the
Sponsor;

 

(v)

as disclosed on Schedule A hereto, the net cash (determined after taking into
account the availability under the DIP Facility) of the Borrowers as disclosed
in the Cash Flow Forecast for the following four weeks is sufficient to meet the
anticipated obligations of the Borrowers during such time period; and

 

(vi)

no Default, Specified Event of Default or Termination Event under the DIP Loan
Documents has occurred or is continuing.

 

 

IN WITNESS WHEREOF, the applicable Borrower has caused this Borrowing Request to
be executed and delivered by its duly authorized officer(s) as of the date first
set forth above.

 

 

 

ABITIBI-CONSOLIDATED INC.
as Borrower

 

 

By: 

 

 

 

Name:
Title:

 

[or]

 

 

 

Sch. F - 2

LETTER LOAN AGREEMENT
DIP FACILITY

 

--------------------------------------------------------------------------------

 

 

 

DONOHUE CORP.
as Borrower

 

 

By: 

 

 

 

Name:
Title:

 

 

 

 

 

 

 

 

 

 

Sch. F - 3

LETTER LOAN AGREEMENT
DIP FACILITY

 

--------------------------------------------------------------------------------

Schedule A – Cash Flow Calculations

[To be completed by Borrower]

 

 

 

 

 

 

 

 

Sch. F - 4

LETTER LOAN AGREEMENT
DIP FACILITY

 

--------------------------------------------------------------------------------

Schedule B – Avis de déboursement de prêt

(See attached)

 

 

 

 

 

 

 

 

 

Sch. F - 5

LETTER LOAN AGREEMENT
DIP FACILITY

 

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Schedule G – Timberland Lots

(See attached)

 

 

 

 

 

 

 

 

Sch. G - 1

LETTER LOAN AGREEMENT
DIP FACILITY

 

--------------------------------------------------------------------------------

Schedule H – Form of Sponsor’s Confirmation

 

Bank of Montreal

5th Floor, First Canadian Place

100 King St West

Toronto, Ontario

M5X 1H3

Attention:

Claudette Ho and Stanley Julien, Vice President

Fax No.:

416.867.5785

Dear Sirs/Mesdames:

Reference is made to that certain Letter Loan Agreement dated as of May 6, 2009
(as amended, restated, supplemented or otherwise modified from time to time, the
“Loan Agreement”), between Bank of Montreal as lender (“BMO”) and
Abitibi-Consolidated Inc. and Donohue Corp. as borrowers (collectively, the
“Borrowers” and each a “Borrower”). Capitalized terms used and not defined
herein have the meanings given to them in the Loan Agreement.

Reference is also made to that certain Convention de cautionnement dated as of
May 6, 2009 (the “Loan Guarantee”), between Investissement Quebec and BMO.

Investissement Québec hereby confirms to BMO that (i) Investissement Quebec is
satisfied that all of the Initial Availability Conditions [, the Further
Availability Conditions and the Drawdown Conditions] stipulated in the Loan
Agreement have been met or, if not met, that Investissement Québec hereby waives
satisfaction of such conditions, (ii) Investissement Quebec is satisfied that
all of the conditions set forth in the Loan Guarantee have been met and (iii)
BMO is hereby authorized to advance the [initial / requested] Loan to the
Borrowers pursuant to the terms of the Loan Agreement.

 

 

DATE:

________________________, 2009.

 

INVESTISSEMENT QUÉBEC

 

 

By:

 

 

Name:

 

Title:

 

 

 

Sch. H - 1

LETTER LOAN AGREEMENT
DIP FACILITY