                 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT


                          DATED AS OF DECEMBER 1, 2005


                                      AMONG


                 BOWATER INCORPORATED AND BOWATER AMERICA INC.,
                                   AS SELLERS,


                                       AND



                              BOWATER FUNDING INC.,
                                    AS BUYER






<PAGE>




                                TABLE OF CONTENTS

                                                                            PAGE


ARTICLE I AMOUNTS AND TERMS OF CONTRIBUTIONS AND PURCHASES....................2

Section 1.1    Contribution of Certain Receivables............................2
Section 1.2    Purchases of Other Receivables.................................2

Section 1.3    Payment for the Purchases......................................5

Section 1.4    Purchase Price Credit Adjustments..............................6

Section 1.5    Payments and Computations, Etc.................................6

Section 1.6    License of Software............................................7

Section 1.7    Characterization...............................................7


ARTICLE II REPRESENTATIONS AND WARRANTIES.....................................8

Section 2.1    Representations and Warranties of Each Seller..................8
   (a)   Existence and Power..................................................8
   (b)   Power and Authority; Due Authorization, Execution and Delivery.......9
   (c)   No Conflict..........................................................9
   (d)   Governmental Authorization...........................................9
   (e)   Actions, Suits.......................................................9
   (f)   Binding Effect.......................................................9
   (g)   Accuracy of Information.............................................10
   (h)   Use of Proceeds.....................................................10
   (i)   Good Title..........................................................10
   (j)   Perfection..........................................................10
   (k)   Chief Executive Office and Locations of Records.....................11
   (l)   LockBoxes, Etc......................................................11
   (m)   Seller Material Adverse Effect......................................11
   (n)   Names...............................................................11
   (o)   Ownership...........................................................11
   (p)   Not a Holding Company or an Investment Company......................11
   (q)   Compliance with Law.................................................11
   (r)   Compliance with Credit and Collection Policy........................12
   (s)   Payments to Seller..................................................12
   (t)   Enforceability of Contracts.........................................12
   (u)   Accounting..........................................................12
   (v)   Solvency............................................................12


ARTICLE III CONDITIONS OF PURCHASE...........................................12

Section 3.1    Conditions Precedent to Initial Purchase......................12

Section 3.2    Conditions Precedent to Subsequent Payments...................12
<PAGE>

ARTICLE IV COVENANTS.........................................................13

Section 4.1    Affirmative Covenants of Each Seller..........................13
   (a)   Financial Reporting.................................................13
      (i)   Annual Reporting.................................................13
      (ii)     Quarterly Reporting...........................................13
      (iii)    Compliance Certificate........................................14
      (iv)     Change in Credit and Collection Policy........................14
      (v)   Other Information................................................14
   (b)   Notices.............................................................14
      (i)   Termination Events or Unmatured Termination Events...............14
      (ii)     Judgment and Proceedings......................................14
      (iii)    Seller Material Adverse Effect................................14
   (c)   Compliance with Laws and Preservation of Existence..................14
   (d)   Audits..............................................................15
   (e)   Keeping and Marking of Records and Books............................15
    (f)  Compliance with Contracts and Credit and Collection Policy..........16
   (g)   Ownership...........................................................16
   (h)   Agents' and Lenders' Reliance.......................................16
   (i)   Collections.........................................................16
   (j)   Taxes...............................................................17

Section 4.2    Negative Covenants of Each Seller.............................17
   (a)   Name Change, Offices and Records....................................17
   (b)   Change in Payment Instructions to Obligors..........................17
   (c)   Modifications to Contracts and Credit and Collection Policy.........17
   (d)   Sales, Adverse Claims...............................................17
   (e)   Accounting for Purchases............................................18


ARTICLE V TERMINATION EVENTS.................................................18

Section 5.1    Termination Events............................................18

Section 5.2    Remedies......................................................19


ARTICLE VI INDEMNIFICATION...................................................20

Section 6.1    Indemnities by Sellers........................................20

Section 6.2    Other Costs and Expenses......................................22

Section 6.3    Taxes.........................................................22


ARTICLE VII MISCELLANEOUS....................................................23

Section 7.1    Waivers and Amendments........................................23

Section 7.2    Notices.......................................................23

Section 7.3    Protection of Ownership Interests of Buyer....................23

Section 7.4    Confidentiality...............................................24
<PAGE>

Section 7.5    Bankruptcy Petition...........................................25

Section 7.6    Return of Funds Not Constituting Collections..................25

Section 7.7    CHOICE OF LAW.................................................25

Section 7.8    CONSENT TO JURISDICTION.......................................25

Section 7.9    WAIVER OF JURY TRIAL..........................................26

Section 7.10      Integration; Binding Effect; Survival of Terms.............26

Section 7.11      Counterparts; Severability; Section References.............26

                             EXHIBITS AND SCHEDULES

Exhibit I             -             Definitions

Exhibit II            -             Jurisdictions of Organization; Chief
                                    Executive Offices; Principal Places of
                                    Business; Locations of
                                    Records; Organizational Identification
                                    Numbers; Other Names

Exhibit III           -             LockBoxes and LockBox Accounts

Exhibit IV            -             Form of Compliance Certificate

Exhibit V-1           -             Form of Purchase Price Loan Note

Exhibit V-2           -             Form of Subordinated Note

Exhibit VI                          Form of Purchase Report

Exhibit VII                         Credit and Collection Policy

Exhibit VIII      .........         Form of Letter of Credit Request

Schedule A                          List of Documents to Be Delivered to Buyer
                                    Prior to the Initial Purchase




<PAGE>





                 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT

     THIS AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT,  dated as of December
1, 2005, is by and among Bowater Incorporated,  a Delaware corporation (together
with its successors,  "Bowater" or a "Seller"), Bowater America Inc., a Delaware
corporation  (together with its  successors,  "BAI" or a "Seller"),  and Bowater
Funding Inc., a Delaware  corporation  (together with its successors,  "Buyer").
Unless defined elsewhere herein,  capitalized terms used in this Agreement shall
have the meanings assigned to such terms in Exhibit I hereto (or, if not defined
in Exhibit I hereto,  the meaning  assigned to such term in the Loan Agreement).
This Agreement amends and restates in its entirety that certain Receivables Sale
Agreement  dated as of  December  19,  2002  among the  parties  (the  "Existing
Agreement").

                             PRELIMINARY STATEMENTS

          Bowater  now  owns,   and  from  time  to  time  hereafter  will  own,
     Receivables.  Bowater  wishes  to sell to BAI,  and BAI  wishes to sell and
     contribute  to Buyer  (each of Buyer  and BAI being  sometimes  hereinafter
     referred to as a "Transferee"  with respect any such sale or contribution),
     all of their respective right, title and interest in and to all Receivables
     originated  by Bowater  from and after the Initial  Cutoff Date through and
     including the  Termination  Date,  together  with the Related  Security and
     Collections with respect thereto.

          In addition,  BAI now owns,  and from time to time hereafter will own,
     Receivables.  BAI wishes to sell and contribute to Buyer, all of its right,
     title and  interest in and to all  Receivables  originated  by BAI from and
     after the Initial Cutoff Date through and including the  Termination  Date,
     together with the Related Security and Collections with respect thereto.

          Each of the  parties  hereto  intends  the  transactions  contemplated
     hereby to be true sales or true  contributions by the applicable  Seller to
     the  applicable  Transferee of the  Receivables  originated or acquired (in
     each case, as applicable) by it,  providing the applicable  Transferee with
     the full benefits of ownership of such Receivables, and none of the parties
     intends these  transactions  to be, or for any purpose to be  characterized
     as, loans from any of the Transferees to any of the Sellers.

          Buyer plans to finance  its  purchases  of  Receivables  hereunder  by
     borrowing  under that certain  Amended and Restated Loan Agreement dated as
     of  December  1,  2005  (as the same may  from  time to time  hereafter  be
     amended,   supplemented,   restated  or  otherwise   modified,   the  "Loan
     Agreement") among (a) Buyer, as borrower, (b) Bowater, as initial servicer,
     (c) Three  Pillars  Funding  LLC,  Variable  Funding  Capital  Company LLC,
     SunTrust Bank and Wachovia Bank, National Association, as lenders (together
     with their respective successors and assigns, the "Lenders"),  (d) SunTrust
     Bank and Wachovia Bank, National Association, as "LC Issuers," (e) SunTrust
     Capital  Markets,  Inc.  and  Wachovia
<PAGE>

     Bank,  National  Association,  as  "Co-Agents,"  and (f)  SunTrust  Capital
     Markets, Inc., as administrative agent (in such capacity, together with its
     successor and assigns in such  capacity,  the  "Administrative  Agent" and,
     together with the Co-Agents, the "Agents").

          NOW,  THEREFORE,  in  consideration  of the  premises  and the  mutual
     agreements herein contained and for other good and valuable  consideration,
     the receipt and sufficiency of which are hereby  acknowledged,  the parties
     hereto agree as follows:

                                    ARTICLE I
                AMOUNTS AND TERMS OF CONTRIBUTIONS AND PURCHASES

     Section 1.1 Contribution of Certain Receivables.

          (a)  Effective  on  December  19,  2002,  BAI  contributed,  assigned,
     transferred,  set-over and otherwise  conveyed to Buyer, and Buyer accepted
     from BAI as a contribution to Buyer's capital,  all Receivables  originated
     by BAI  that  could  not be  purchased  with  cash  or  the  proceeds  of a
     Subordinated  Loan in accordance  with the limitation  specified in Section
     1.2(c)  of  the  Existing   Agreement  (such   Receivables,   the  "Initial
     Contributed  Receivables"),  together  with all Related  Security  relating
     thereto and all Collections  thereof.  The Initial Contributed  Receivables
     had an aggregate  Outstanding  Balance as of the Initial Cutoff Date of not
     less than $100,000,000.

          (b) Any Seller may from time to time, at its option,  by notice to the
     applicable Transferee on or prior to the date of the proposed contribution,
     identify  Receivables which it proposes to contribute to such Transferee as
     a capital  contribution.  On the date of each such  contribution  and after
     giving  effect  thereto,  such  Transferee  shall  own the  Receivables  so
     identified and contributed (collectively,  the "Contributed  Receivables"),
     together with all Related  Security  relating  thereto and all  Collections
     thereof.

     Section 1.2 Purchases of Other Receivables.

     (a)  Effective on December 19, 2002:

          (i) in  consideration  for the Purchase Price paid to Bowater and upon
     the terms and subject to the conditions set forth herein: (A) Bowater sold,
     assigned,  transferred,  set-over and  otherwise  conveyed to BAI,  without
     recourse  (except to the extent  expressly  provided  herein),  and (B) BAI
     purchased from Bowater,  all of Bowater's right,  title and interest in and
     to all  Receivables  originated  by Bowater and existing as of the close of
     business on the Initial  Cutoff Date,  together  with all Related  Security
     relating thereto and all Collections thereof; and

          (ii) in consideration  for the Purchase Price paid to BAI and upon the
     terms  and  subject  to the  conditions  set  forth  herein:  (A) BAI sold,
     assigned,  transferred,  set-over and otherwise conveyed to Buyer,  without
     recourse (except to the extent expressly  provided  herein),  and (B) Buyer
     purchased  from BAI, all of BAI's  right,  title and interest in and to all
     Receivables (1) originated by Bowater and (2) originated by BAI (other than
     the  Initial  Contributed  Receivables),  and  existing  as of the close of
     business  on the  Initial  Cutoff  Date,  in each case,  together  with all
     Related Security relating thereto and all Collections thereof.

(b)      On each Purchase Date after December 19, 2002:

          (i) in  consideration  for the Purchase Price paid to Bowater and upon
     the terms and subject to the conditions set forth herein:  (A) Bowater does
     hereby  sell,  assign,  transfer,  set-over  and  otherwise  convey to BAI,
     without recourse (except to the extent expressly provided herein),  and (B)
     BAI shall purchase from Bowater, all of Bowater's right, title and interest
     in and to all  Receivables  originated  by Bowater  and  existing as of the
     close of business on the Business Day  immediately  prior to such  Purchase
     Date (other than any Contributed  Receivables  and  Receivables  previously
     sold pursuant to this Agreement),  in each case,  together with all Related
     Security relating thereto and all Collections thereof; and

          (ii) in consideration  for the Purchase Price paid to BAI and upon the
     terms and subject to the conditions  set forth herein:  (A) BAI does hereby
     sell,  assign,  transfer,  set-over and otherwise convey to Buyer,  without
     recourse (except to the extent expressly  provided  herein),  and (B)
<PAGE>

     Buyer does hereby purchase from BAI, all of BAI's right, title and interest
     in and to all  Receivables  originated by either Bowater or BAI (other than
     the  Initial  Contributed  Receivables,  any  Contributed  Receivables  and
     Receivables  previously sold pursuant to this Agreement) and existing as of
     the  close  of  business  on the  Business  Day  immediately  prior to such
     Purchase Date, in each case,  together with all Related  Security  relating
     thereto and all Collections thereof.

     (c) Each  Transferee  shall be obligated to pay the  applicable  Seller the
Purchase Price for the Receivables purchased by it hereunder:

           (i) in immediately available funds,

          (ii) if Bowater has  delivered  a Letter of Credit  Request to BAI, by
               BAI's  causing a Letter of  Credit to be  issued,  and if BAI has
               delivered  a Letter of Credit  Request to the  Buyer,  by Buyer's
               obtaining and delivery of a Letter of Credit pursuant to the Loan
               Agreement  (in each case,  with the  issuance  of such  Letter of
               Credit  constituting  a payment  of  Purchase  Price in an amount
               equal  to the sum of (A) the LC  Commission,  plus  (B) the  face
               amount of such Letter of Credit),
<PAGE>

          (iii) by delivery  to such Seller of the  proceeds of a loan from such
               Seller to such  Transferee  (each, a "Purchase Price Loan") in an
               amount  not to  exceed  the  least  of (A) the  remaining  unpaid
               portion of such Purchase  Price,  (B) the maximum  Purchase Price
               Loan that could be borrowed without  rendering the Net Worth less
               than the Required  Capital Amount,  and (C) fifteen percent (15%)
               of such Purchase Price, and/or

          (iv) unless  the  Termination  Date  has  occurred,   by  accepting  a
               contribution  to its capital in an amount equal to the  remaining
               unpaid balance of such Purchase Price.

         Each Purchase Price Loan made by Bowater to BAI shall be a senior loan,
         and all such senior Purchase Price Loans shall be evidenced by a grid
         promissory note in the form of Exhibit V-1 hereto (the "Purchase Price
         Loan Note"). Each Purchase Price Loan made by BAI to the Buyer shall be
         a subordinated loan (each, a "Subordinated Loan"), and all such
         Subordinated Loans shall be evidenced by a single grid promissory note
         in the form of Exhibit V-2 hereto (the "Subordinated Note"). Bowater is
         hereby authorized by BAI to endorse on the schedule attached to the
         Purchase Price Loan Note an appropriate notation evidencing the date
         and amount of each advance thereunder, as well as the date of each
         payment with respect thereto, provided that the failure to make such
         notation shall not affect any obligation of BAI thereunder. BAI is
         hereby authorized by Buyer to endorse on the schedule attached to the
         Subordinated Note an appropriate notation evidencing the date and
         amount of each advance thereunder, as well as the date of each payment
         with respect thereto, provided that the failure to make such notation
         shall not affect any obligation of Buyer thereunder. On each Reporting
         Date, each Seller shall (or shall require Servicer to) deliver to the
         applicable Transferee (with a copy to the Administrative Agent, as
         Buyer's pledgee, if requested by the Administrative Agent) a report in
         substantially the form of Exhibit VI hereto (each such report being
         herein called a "Purchase Report") with respect to the Receivables sold
         or contributed by such Seller during the Calculation Period then most
         recently ended. In addition to, and not in limitation of, the
         foregoing, in connection with the payment of the Purchase Price for any
         Receivables purchased hereunder, each applicable Transferee may request
         that the applicable Seller deliver, and such Seller shall deliver, such
         information or documents as such Transferee may reasonably request.

     (d)  It  is  the  intention  of  the  parties  hereto  that  each  sale  or
contribution of Receivables to a Transferee  pursuant to the Existing  Agreement
or this Agreement shall constitute a true sale or contribution or other absolute
transfer and  assignment,  which sale,  contribution,  transfer or assignment is
absolute and  irrevocable  and provides the applicable  Transferee with the full
benefits of ownership of the Receivables.  Except for the Purchase Price Credits
owed to the applicable  Seller pursuant to Section 1.4, each sale of Receivables
under the Existing  Agreement or hereunder by a Seller is made without  recourse
to such Seller;  provided,  however, that (i) such Seller shall be liable to the
applicable   Transferee  and  each  of  its  assigns  for  all  representations,
warranties,  covenants and indemnities made by such Seller pursuant to the terms
of the Transaction  Documents
<PAGE>

to which  such  Seller  is a party,  and (ii) no such  sale  constitutes,  or is
intended to result in, an assumption by any  Transferee or any assignee  thereof
of any obligation of such Seller or any other Person arising in connection  with
the  Receivables,  the related  Contracts  and/or other Related  Security or any
other obligations of such Seller. In view of the intention of the parties hereto
that each sale or contribution of Receivables  made hereunder shall constitute a
true  sale  or  contribution  of such  Receivables  rather  than a loan  secured
thereby,   each   Seller,   in   accordance   with   Section   4.1(e)(ii),   has
------------------  marked its master data  processing  records  relating to the
Receivables  with a legend  stating  that "The  accounts  receivable  of Bowater
Incorporated  and  Bowater  America  Inc.  reflected  herein  have  been sold or
contributed,  directly or indirectly,  to Bowater  Funding Inc.  (`SPC'),  and a
security  interest  in such  receivables  has been  granted  by SPC to  SunTrust
Capital Markets,  Inc., as administrative agent for various parties" and to note
in its financial  statements that its Receivables  have been sold or contributed
to  the  applicable  Transferee.  Upon  the  request  of any  Transferee  or the
Administrative  Agent,  each Seller  will  prepare  and file such  financing  or
continuation statements,  or amendments thereto or assignments thereof, and such
other instruments or notices,  as may be necessary or appropriate to perfect and
maintain the perfection of its applicable Transferee's (and ultimately, Buyer's)
ownership  interest in the Receivables and the Related  Security that is subject
to  Article  9 of the  UCC  and  Collections  with  respect  thereto,  or as any
Transferee or the Administrative Agent may reasonably request.

     Section 1.3 Payment for the Purchases.

          (a) The  Purchase  Price for each  Purchase  occurring on December 19,
     2002 was paid in full by the applicable Transferee to the applicable Seller
     on such date in the  manner  described  in Section  1.2(c) of the  Existing
     Agreement.   The   Purchase   Price  for  each   Receivable   coming   into
     --------------  existence  after the  Initial  Cutoff Date shall be due and
     owing in full (but not necessarily payable) by the applicable Transferee to
     the  applicable  Seller or its  designee on the Purchase  Date  immediately
     following the Business Day on which such  Receivable  comes into  existence
     (except that each  Transferee may, with respect to any such Purchase Price,
     offset  against such Purchase Price any amounts owed by such Seller to such
     Transferee hereunder and which have become due but remain unpaid) and shall
     be paid to such Seller in the manner  provided in the following  paragraphs
     (b), (c) and (d).

          (b)  With  respect  to  each  Receivable  (other  than  a  Contributed
     Receivable)  coming into  existence  after the Initial Cutoff Date, on each
     Settlement Date, each applicable Transferee shall pay the applicable Seller
     the Purchase Price therefor, in accordance with Sections 1.2(c) and 1.3(d).

          (c) From and after the Termination  Date, no Seller shall be obligated
     to  but  may,  at  its  option)  sell  or  contribute  Receivables  to  any
     Transferee.

          (d)  Although  the  Purchase  Price for each  Receivable  coming  into
     existence  after the Initial  Cutoff Date shall be due and owing in full by
     the  applicable  Transferee to the  applicable  Seller on the Purchase Date
     immediately  following the Business Day on
<PAGE>

     which  such  Receivable  comes  into  existence,  to the  extent  that  the
     obligation  to pay Purchase  Price is not satisfied  through  arranging the
     issuance of a Letter of Credit,  settlement  of the Purchase  Price between
     each  Transferee and its  applicable  Seller shall be effected on a monthly
     basis on Settlement Dates with respect to all Receivables originated during
     the same Calculation  Period and based on the information  contained in the
     applicable Purchase Report delivered by or on behalf of such Seller for the
     Calculation Period then most recently ended.  Although  settlement shall be
     effected on Settlement  Dates,  any  contribution of capital by a Seller to
     its  Transferee  made  pursuant to Section  1.3(b)  shall be deemed to have
     occurred  -------------- and shall be effective as of the last Business Day
     of the Calculation Period to which such settlement relates.

               Section 1.4  Purchase  Price Credit  Adjustments.  If on any day:

          (a)  the Outstanding Balance of any Receivable purchased from a Seller
               is:

               (i)  reduced as a result of any  defective,  rejected or returned
          goods or  services,  any discount or  adjustment  or otherwise by such
          Seller (other than a reduction in such Outstanding  Balance  resulting
          from (A) cash Collections received by the applicable  Transferee or by
          its assigns or Servicer,  on such  Transferee's  behalf, on account of
          such Receivable's  Outstanding Balance, or (B) any reserve established
          against  or  write-off  of such  Receivable  that  is made  due to its
          becoming  a   Defaulted   Receivable   or   otherwise   based  on  the
          uncollectibility  of such  Receivable  on account  of the  insolvency,
          bankruptcy,  lack of creditworthiness or financial inability to pay of
          the applicable Obligor), or

               (ii)  reduced  (in  whole or in part) as a result  of a setoff in
          respect of any claim by any Person  (whether  such claim arises out of
          the same or a related transaction or an unrelated transaction), or

          (b) any of such Seller's  representations  and warranties set forth in
     Sections 2.1(i),  (j), (r), (s), (t), the second sentence of Section 2.1(q)
     hereof and the last  sentence  of Section  2.1(c) are not true when made or
     deemed made with respect to any Receivable,

then, in such event, the applicable Transferee shall be entitled to a credit
(each, a "Purchase Price Credit") against the Purchase Price otherwise payable
to such Seller hereunder equal to (x) in the case of a reduction under the
preceding clause (a)(i) or (ii), the amount of such whole or partial reduction,
and (y) in the case of a misrepresentation described in the preceding clause
(b), the full Outstanding Balance of such Receivable. In any event described in
clause (a)(i) or (a)(ii), the applicable Transferee shall deem this Receivable
collected. If such Purchase Price Credit owing to a Transferee by its applicable
Seller exceeds the aggregate Original Balance of the Receivables originated on
any day by such Seller, such Seller shall pay the remaining amount of such
Purchase Price Credit in cash (i) if the Termination Date has not occurred, not
later than the next Settlement Date, and (ii) if the Termination Date has
occurred, immediately.

     Section  1.5  Payments  and  Computations,  Etc.  All amounts to be paid or
deposited by a  Transferee  hereunder  shall be paid or deposited in  accordance
with the terms

                                       1
<PAGE>

hereof on the day when due in immediately  available funds to the account of the
applicable  Seller  designated  from time to time by such Seller or as otherwise
directed  by such  Seller.  In the event  that any  payment  owed by any  Person
hereunder  becomes due on a day that is not a Business  Day,  then such  payment
shall be made on the next  succeeding  Business  Day. If any Person fails to pay
any amount hereunder when due, such Person agrees to pay, on demand, the Default
Fee in respect thereof until paid in full; provided,  however, that such Default
Fee shall not at any time exceed the maximum rate  permitted by applicable  law.
All computations of interest  payable  hereunder shall be made on the basis of a
year of 360  days  for the  actual  number  of days  (including  the  first  but
excluding the last day) elapsed.

     Section 1.6 License of Software.

               (a) To the extent that any  software  used by a Seller to account
          for the Receivables transferred by it is non-transferable, each Seller
          hereby  grants  to its  Transferee,  such  Transferee's  assigns,  the
          Administrative  Agent  and  Servicer  an  irrevocable,   non-exclusive
          license to use,  without  royalty  or  payment  of any kind,  all such
          software used by such Seller to account for such  Receivables,  to the
          extent necessary to administer such Receivables, whether such software
          is owned by such  Seller or is owned by others and used by such Seller
          under license  agreements with respect  thereto,  provided that should
          the consent of any licensor of such software be required for the grant
          of the license described  herein, to be effective,  such Seller hereby
          agrees that upon the request of its Transferee (or its assigns),  such
          Seller will use its  reasonable  efforts to obtain the consent of such
          third-party licensor.  The license granted hereby shall be irrevocable
          until the later to occur of (i)  indefeasible  payment  in full of the
          Obligations (as defined in the Loan  Agreement),  and (ii) the date on
          which each of this  Agreement  and the Loan  Agreement  terminates  in
          accordance with its terms.

               (b) Upon the request to any Seller by its  Transferee  and/or the
          Administrative Agent (as the ultimate assignee), such Seller (i) shall
          take such action that may be necessary or  appropriate  to ensure that
          Buyer has an enforceable ownership interest in the records included in
          the Receivable Files relating to the  Receivables,  and (ii) shall use
          its  reasonable  efforts  to  ensure  that  each  of  the  Buyer,  the
          Administrative  Agent  and  the  Servicer  has  an  enforceable  right
          (whether  by license or  sublicense  or  otherwise)  to use all of the
          computer  software  used to  account  for such  Receivables  and/or to
          recreate such records.

     Section 1.7  Characterization.  If,  notwithstanding  the  intention of the
parties  expressed in Section  1.2(d),  any sale or  contribution by a Seller of
Receivables hereunder shall be characterized as a secured loan and not a sale or
such  sale  shall for any  reason be  ineffective  or  unenforceable,  then this
Agreement  shall be deemed to constitute a security  agreement under the UCC and
other  applicable  law. For this purpose and without  being in derogation of the
parties' intention that each transfer of Receivables by a Seller hereunder shall
constitute a true sale  thereof:  each Seller  hereby  grants to its  applicable
Transferee  and its assigns a valid and continuing  security  interest in all of
such  Seller's  right,  title and  interest  in,  to and  under all  Receivables
originated  or  acquired  by such Seller  which are now  existing  or  hereafter
arising  and are  intended  to be  sold or  contributed  to such  Transferee  in
accordance  with the  terms  of this

                                       2
<PAGE>

Agreement,  all Collections and Related Security with respect thereto, all other
rights  and  payments  relating  to such  Receivables  and all  proceeds  of the
foregoing  to secure the prompt and  complete  payment of a loan  deemed to have
been made in an amount equal to the Purchase Price of the Receivables  purchased
from such Seller together with all other  obligations of such Seller  hereunder,
which  security  interest  shall be prior to all other Adverse  Claims  thereto.
Furthermore,  to the extent that any Seller has been granted a security interest
pursuant to this Section 1.7, such Seller  hereby grants a valid and  continuing
security  interest in such security  interest to its  applicable  Transferee and
such Transferee's assigns. The applicable Transferee and its assigns shall have,
in addition to the rights and remedies which they may have under this Agreement,
all other rights and remedies  provided to a secured  creditor under the UCC and
other applicable law, which rights and remedies shall be cumulative.

     Section 1.8 Extensions of Letters of Credit. From time to time prior to the
Termination Date:

     (a)  Letters  of  Credit  may be  automatically  extended  by their  terms,
whereupon each applicable  Seller who originally  requested the issuance of such
Letter of Credit  shall pay to its  applicable  Transferee  the  applicable  L/C
Commission  (which  payment may be made in cash,  by  reduction  of the Purchase
Price Loans owing to such Seller,  or through  reduction  of the Purchase  Price
otherwise  payable to such  Seller on such date by such  Transferee  pursuant to
this Agreement).

     (b) In addition to automatic  extensions  described in Section 1.8(a), each
Seller may request that its applicable Transferee arrange for the extension of a
Letter of Credit with a fixed expiration  date,  whereupon such Transferee shall
arrange or, as applicable, shall request the Buyer to arrange, for the extension
of the expiration date of such Letter of Credit,  and the Buyer shall obtain and
deliver such extension. If the applicable LC Issuer (with the consent of each of
the Co-Agents),  agrees to such extension,  each applicable Seller shall pay its
applicable Transferee the applicable LC Commission (which payment may be made in
cash, by reduction of the Purchase Price Loans owing to such Seller,  or through
reduction of the Purchase Price otherwise payable to such Seller on such date by
such Transferee pursuant to this Agreement).

     Section 1.9  Expiration of Letters of Credit.  In the event that any Letter
of Credit expires without being fully drawn or is surrendered  for  cancellation
without being fully drawn,  Buyer shall promptly pay to BAI (and, if applicable,
BAI shall  promptly  pay to Bowater) an amount  equal to the undrawn  balance of
such Letter of Credit.  The amount of such payment  shall be paid in cash to the
extent  of its  available  funds or,  in case of a  payment  owing by Buyer,  at
Buyer's  election,  by adding the amount to be paid to the  outstanding  balance
under the Subordinated Note provided the aggregate outstanding principal balance
thereunder  resulting  from such  addition  does not exceed the  maximum  amount
permitted under Section 1.2(c).



<PAGE>


                                   ARTICLE II
                         REPRESENTATIONS AND WARRANTIES

        Section 2.1 Representations and Warranties of Each Seller. Each Seller
hereby represents and warrants to its applicable Transferee and its assigns on
December 19, 2002 and on each Purchase Date thereafter as to such Seller and the
Receivables transferred by it that:

     (a) Existence and Power.  Such Seller is duly  organized  under the laws of
its jurisdiction of organization  specified in Exhibit II hereto. Such Seller is
validly  existing and in good  standing  under the laws of its  jurisdiction  of
organization  and is duly  qualified to do business and is in good standing as a
foreign  corporation  and has and holds all  corporate or company  power and all
governmental licenses, authorizations,  consents and approvals required to carry
on its business in each  jurisdiction in which its business is conducted  except
where the failure to so qualify or so hold could not  reasonably  be expected to
have a Seller Material Adverse Effect.

     (b) Power and Authority;  Due  Authorization,  Execution and Delivery.  The
execution  and  delivery  by  such  Seller  of this  Agreement  and  each  other
Transaction  Document  to  which  it is a  party,  and  the  performance  of its
obligations  hereunder and thereunder,  and such Seller's use of the proceeds of
each  Purchase  made from it  hereunder,  are  within its  corporate  powers and
authority and have been duly  authorized  by all  necessary  action on its part.
This  Agreement  and each other  Transaction  Document to which such Seller is a
party has been duly executed and delivered by such Seller.

     (c) No  Conflict.  The  execution  and  delivery  by  such  Seller  of this
Agreement and each other  Transaction  Document to which it is a party,  and the
performance  of its  obligations  hereunder and  thereunder do not contravene or
violate  (i) its  Organizational  Documents,  (ii) any law,  rule or  regulation
applicable  to it,  (iii) any  restrictions  under any  agreement,  contract  or
instrument  to which it is a party  or by  which  it or any of its  property  is
bound, or (iv) any order, writ, judgment, award, injunction or decree binding on
or affecting it or its property, and do not result in the creation or imposition
of any  Adverse  Claim on assets of such Seller or its  Subsidiaries  (except as
created hereunder)except, in any case set forth in clause (ii)-(iv) above, where
such  contravention  or  violation could not  reasonably  be expected to have a
Seller Material  Adverse  Effect.  No transaction  contemplated  hereby requires
compliance with any bulk sales act or similar law.

     (d)  Governmental  Authorization.  Other than the  filing of the  financing
statements required hereunder,  no authorization or approval or other action by,
and no notice to or filing with, any  governmental  authority or regulatory body
is required for the due execution and delivery by such Seller of this  Agreement
and each other  Transaction  Document to which it is a party and the performance
of its obligations hereunder and thereunder.

     (e)  Actions,  Suits.  There is no  litigation,  arbitration,  governmental
investigation,  proceeding or inquiry pending or, to the knowledge of any of its
Senior  Executives,  threatened  against or affecting  such Seller or any of its
Subsidiaries that, if adversely



                                       4
<PAGE>

determined,  would  have a Seller  Material  Adverse  Effect  or which  seeks to
prevent, enjoin or delay any Purchase.

     (f) Binding Effect.  This Agreement and each other Transaction  Document to
which such Seller is a party constitute the legal, valid and binding obligations
of such  Seller  enforceable  against  such  Seller  in  accordance  with  their
respective  terms,  except as such  enforcement  may be  limited  by  applicable
bankruptcy,  insolvency,  reorganization  or other  similar laws  relating to or
limiting  creditors'  rights  generally  and by  general  principles  of  equity
(regardless  of whether  enforcement  is sought in a proceeding  in equity or at
law).

        (g) Accuracy of Information.

     (i) All written representations, warranties, reports or certificates of any
Seller's Senior Executives heretofore furnished by such Seller to its applicable
Transferee  (or  its  assigns)  for  purposes  of or  in  connection  with  this
Agreement,   any  of  the  other   Transaction   Documents  or  any  transaction
contemplated  hereby  or  thereby  are,  and all such  written  representations,
warranties,  reports or certificates  hereafter  furnished by such Seller to its
applicable Transferee (or its assigns) shall be, complete and correct and fairly
present the  information  contained  therein as of the date such  information is
certified and do not and will not contain any material  misstatement  of fact as
of such date or omit to state a material fact or any fact  necessary to make the
information contained therein, taken as a whole with all other written or verbal
information  provided by such Seller's  Senior  Executives as of such date,  not
misleading.

     (ii)  To the  best of  such  Seller's  knowledge,  all  verbal  information
furnished by any Senior  Executive of such Seller to its  applicable  Transferee
(or its assigns) for purposes of or in connection  with this  Agreement,  any of
the  other  Transaction  Documents  or any  transaction  contemplated  hereby or
thereby are, and all such verbal information  hereafter  furnished by any Senior
Executive of such Seller to its applicable Transferee (or its assigns) shall be,
complete  and correct as of the date when made and will not contain any material
misstatement  of fact as of such  date or omit to state a  material  fact or any
fact necessary to make such information, taken as a whole with all other written
or verbal  information  provided by such Seller's  Senior  Executives as of such
date, not misleading.

     (h) Use of Proceeds.  No portion of any Purchase  Price  payment  hereunder
will be used for a purpose that  violates,  or would be  inconsistent  with, any
law, rule or regulation applicable to such Seller.

     (i)  Good  Title.  Immediately  prior to each  Purchase  from  such  Seller
hereunder and upon the creation of each Receivable  originated after the Initial
Cut-Off  Date,  such  Seller  (i) is the  legal  and  beneficial  owner  of such
Receivable and the  Collections  with respect  thereto and (ii) is the legal and
beneficial  owner of the Related  Security  with respect  thereto or possesses a
valid and perfected  security interest therein,  in each case, free and clear of
any Adverse Claim,  except as created by the Transaction  Documents and the Loan
Agreement.

     (j) Perfection.  This Agreement,  together with the filing of the financing
statements  contemplated  hereby,  is  effective  to transfer  to such  Seller's
applicable  Transferee



                                       5
<PAGE>

(and such  Transferee  shall acquire from such Seller):  (i) legal and equitable
title to, with the right to sell and  encumber  each  Receivable  originated  or
acquired by such Seller,  whether now existing and hereafter  arising,  together
with the Collections with respect thereto,  and (ii) all of such Seller's right,
title and interest in the Related Security associated with each such Receivable,
in each  case,  free and clear of any  Adverse  Claim,  except as created by the
Transactions  Documents and the Loan  Agreement.  There have been duly filed all
financing  statements or other similar  instruments or documents necessary under
the UCC (or any  comparable  law) of all  appropriate  jurisdictions  to perfect
Buyer's  ownership  interest in such  Receivables,  the Related Security and the
Collections.

     (k) Chief  Executive  Office and Locations of Records.  The location of the
chief executive  office of such Seller and the offices where it keeps all of its
Receivable  Files are  located at the  address(es)  listed on Exhibit II or such
other  locations  of which Buyer has been  notified in  accordance  with Section
4.2(a) in  jurisdictions  where all action  required by Section  4.2(a) has been
taken and  completed.  Such  Seller's  Organizational  Identification  Number is
correctly set forth on Exhibit II.

     (l) LockBoxes, Etc. The addresses of all existing LockBoxes and the related
banks,  account names and account numbers for all existing  LockBox Accounts are
correctly  listed  on  Exhibit  III.  Each  of the  LockBox  Accounts  has  been
transferred  into Buyer's  name.  Such Seller has not granted any Person,  other
than Buyer (and the  Administrative  Agent, as its pledgee) dominion and control
of any LockBox or LockBox Account,  or the right to take dominion and control of
any such LockBox or LockBox Account at a future time or upon the occurrence of a
future event.

     (m) Seller Material  Adverse Effect.  Since the last day of the fiscal year
of such  Seller  as to  which  financial  statements  have  most  recently  been
delivered pursuant to Section 4.1(a)(i), no event has occurred and is continuing
that would have a Seller Material Adverse Effect.

     (n) Names.  The name in which such Seller has  executed  this  Agreement is
identical to the name of such Seller as  indicated  on the public  record of its
jurisdiction of  organization  as listed on Exhibit II hereto.  In the past five
(5) years,  such  Seller has not used any legal  names,  trade  names or assumed
names other than the name in which it has executed this  Agreement and as listed
on Exhibit II.

     (o)  Ownership.  Bowater  owns 100% of the  issued and  outstanding  equity
interests  of BAI,  and BAI  owns  100% of the  issued  and  outstanding  equity
interests of Buyer. All such equity interests are validly issued, fully paid and
nonassessable,  and there are no options,  warrants  or other  rights to acquire
securities of any Seller (other than Bowater) or Buyer.

     (p) Not a Holding  Company or an Investment  Company.  Such Seller is not a
"holding  company" or a  "subsidiary  holding  company"  of a "holding  company"
within  the  meaning of the  Public  Utility  Holding  Company  Act of 1935,  as
amended,  or any successor




<PAGE>

statute.  Such Seller is not an "investment  company"  within the meaning of the
Investment Company Act of 1940, as amended, or any successor statute.

     (q) Compliance with Law. Such Seller has complied with all applicable laws,
rules, regulations, orders, writs, judgments,  injunctions, decrees or awards to
which it is  subject,  except  where the  failure to so comply  would not have a
Seller  Material  Adverse Effect.  Each  Receivable  transferred by such Seller,
together with the Contract related thereto,  does not contravene any laws, rules
or regulations  applicable thereto (including,  without limitation,  laws, rules
and regulations relating to truth in lending,  fair credit billing,  fair credit
reporting,  equal  credit  opportunity,   fair  debt  collection  practices  and
privacy),  and no part of such Contract is in violation of any such law, rule or
regulation, except where such contravention or violation could not reasonably be
expected to have a Seller Material Adverse Effect.

     (r)  Compliance  with  Credit and  Collection  Policy.  With regard to each
Receivable  transferred by such Seller, such Seller has complied in all material
respects with the Credit and Collection  Policy and the related  Contract.  Such
Seller has not made any  change in or  amendment  to the  Credit and  Collection
Policy,  except  (i) to  the  extent  such  change  or  amendment  would  not be
reasonably  likely to materially  and  adversely  affect the  collectibility  of
Receivables  transferred  by such Seller or to  materially  decrease  the credit
quality of any newly created  Receivables in any material respect or (ii) to the
extent  such  change or  amendment  has been  consented  to by the Buyer and the
Co-Agents.

     (s) Payments to Seller. With regard to each Receivable sold by such Seller,
the Purchase Price  received by such Seller  constitutes  reasonably  equivalent
value in  consideration  therefor.  No transfer  hereunder by such Seller of any
Receivable is or may be voidable under any section of the Bankruptcy  Reform Act
of 1978 (11 U.S.C. ss.ss. 101 et seq.), as amended.

     (t) Enforceability of Contracts. As of the Purchase Date of each Receivable
transferred by such Seller, each Contract with respect to such Receivable is, on
such date,  effective to create,  and has created,  a legally  valid and binding
obligation  of  the  related  Obligor  to pay  the  Outstanding  Balance  of the
Receivable  created  thereunder and any accrued  interest  thereon,  enforceable
against the Obligor in accordance with its terms, except as such enforcement may
be limited by applicable bankruptcy, insolvency, reorganization or other similar
laws  relating  to or  limiting  creditors'  rights  generally  and  by  general
principles  of  equity  (regardless  of  whether  enforcement  is  sought  in  a
proceeding in equity or at law).

     (u)  Accounting.   The  manner  in  which  such  Seller  accounts  for  the
transactions contemplated by this Agreement in its financial statements does not
jeopardize the characterization of the transactions contemplated herein as being
true sales.

     (v) Solvency. Such Seller is Solvent.




<PAGE>

                                  ARTICLE III
                             CONDITIONS OF PURCHASE

     Section 3.1 Conditions Precedent to Initial Purchase.  The initial Purchase
under this Agreement is subject to the conditions precedent that (a) Buyer shall
have been capitalized with the Initial Contributed Receivables and not less than
$300,000 of cash,  (b) Buyer shall have received on or before  December 19, 2002
those  documents  listed on  Schedule  A, and (c) all of the  conditions  to the
initial  Loan under the Loan  Agreement  shall have been  satisfied or waived in
accordance with the terms thereof.

     Section 3.2 Conditions  Precedent to Subsequent  Payments.  Each applicable
Transferee's  obligation to pay for Receivables  coming into existence after the
Initial Cutoff Date shall be subject to the further  conditions  precedent that:
(a) the  Commitment  Termination  Date  shall not have  occurred  under the Loan
Agreement;  (b) Buyer (and the  Administrative  Agent as its pledgee)  shall not
have received  written  notice that the  indebtedness  under the Bowater  Credit
Agreement  has  been  accelerated  (it  being  understood  that  this  condition
precedent cannot be waived by Buyer or its assigns);  (c) Buyer (or its assigns)
shall have received such other documents as it may reasonably  request;  and (d)
on the date such Receivable came into existence,  the following statements shall
be true (and acceptance of the proceeds of any payment for such Receivable shall
be deemed a  representation  and  warranty  by the  applicable  Seller that such
statements are then true):

                    (i) the  representations  and  warranties of such Seller set
               forth in  Article  II are true and  correct on and as of the date
               such  Receivable  came into existence as though made on and as of
               such date; and

                    (ii)  no  event  has   occurred  and  is   continuing   that
               constitutes a Termination Event.

     Notwithstanding  the foregoing  conditions  precedent,  upon the applicable
Purchase Date for a Receivable (prior to the occurrence of a Termination Event),
title to such Receivable and the Related  Security and Collections  with respect
thereto shall vest in the applicable  Transferee,  whether or not the conditions
precedent to such  Transferee's  obligation to pay for such  Receivable  were in
fact  satisfied and whether or not the Purchase  Price has actually been paid as
of such date.  If any Seller  fails to satisfy any of the  foregoing  conditions
precedent,  however, Buyer, as the ultimate Transferee,  may rescind the related
Purchase and direct BAI to pay to Buyer (and BAI may, in turn direct  Bowater to
pay to BAI) an amount equal to the Purchase  Price  payment,  if any,  made with
respect to the Receivables included in such Purchase.

                                   ARTICLE IV
                                    COVENANTS

     Section 4.1 Affirmative  Covenants of Each Seller.  Until the date on which
this  Agreement  terminates  in  accordance  with its terms,  each Seller hereby
covenants as set forth below:

     (a)  Financial  Reporting.  Bowater  will  maintain,  for  itself  and each
Consolidated  Subsidiary, a system of accounting established and administered in
accordance


<PAGE>

with GAAP,  and  furnish to Buyer and to the  Administrative  Agent (as  Buyer's
pledgee) for distribution to the Co-Agents:

          (i) Annual  Reporting.  Within 120 days after the close of each of its
     fiscal  years,  an audit  report  (with all  amounts  stated  in  Dollars),
     unqualified  as to scope or going  concern  and  certified  by  independent
     certified public  accountants of recognized  national standing or otherwise
     reasonably  acceptable to the Administrative  Agent, prepared in accordance
     with  GAAP  on a  consolidated  basis  for  Bowater  and  the  Consolidated
     Subsidiaries,  including  a  consolidated  balance  sheet  and the  related
     consolidated  statements of income, cash flows and statements of changes in
     common shareholders' equity, setting forth in each case in comparative form
     the figures for such fiscal year and the  previous  fiscal  year;  provided
     that delivery of a copy of Bowater's  Forms 10-K filed with the  Securities
     and Exchange  Commission for such fiscal year shall  constitute  compliance
     with this requirement.

          (ii) Quarterly Reporting.  Within 60 days after the close of the first
     three  quarterly  periods of each of its fiscal years,  for Bowater and the
     Consolidated  Subsidiaries,  an unaudited  consolidated balance sheet as at
     the close of each such period and a  consolidated  income  statement  and a
     statement  of cash flows for the period from the  beginning  of such fiscal
     year  to the  end of  such  quarter,  setting  forth  in the  case  of such
     statements of income and cash flows in comparative form the figures for the
     corresponding  quarter and the  corresponding  portion of Seller's previous
     fiscal year, all certified  (subject to normal year-end  adjustments) as to
     fairness  of   presentation,   preparation  in  accordance  with  GAAP  and
     consistency by a Financial Officer of Bowater;  provided that delivery of a
     copy of  Bowater's  Forms  10-Q  filed  with the  Securities  and  Exchange
     Commission for such fiscal quarter shall  constitute  compliance  with this
     requirement.

          (iii) Compliance  Certificate.  Together with the financial statements
     required hereunder,  a compliance  certificate in substantially the form of
     Exhibit IV signed by a  Financial  Officer of Bowater and dated the date of
     such annual financial statement or such quarterly financial  statement,  as
     the case may be.

          (iv) Change in Credit and Collection Policy. At least thirty (30) days
     prior to the  effectiveness of any change in or amendment to the Credit and
     Collection  Policy,  a  notice  (A)  indicating  such  proposed  change  or
     amendment, and (B) if such proposed change or amendment would be reasonably
     likely  to  materially  and  adversely  affect  the  collectibility  of the
     Receivables transferred by such Seller or to materially decrease the credit
     quality  of  any  newly  created   Receivables  in  any  material  respect,
     requesting  Buyer's (and the  Co-Agents')  consent  thereto,  which consent
     shall not be unreasonably withheld or delayed.

          (v)  Other  Information.  Promptly,  from  time to  time,  such  other
     information,  documents,  records or reports  relating  to the  Receivables
     transferred  by such Seller or the  condition or  operations,  financial or
     otherwise,  of such Seller as Buyer (or its  assigns) may from time to time
     reasonably  request in order to  protect  the  interests  of Buyer (and its
     assigns) under or as contemplated by this Agreement.
<PAGE>

     (b)  Notices.  As soon  as  practicable  and in any  event  within  one (1)
Business  Day after  learning of any of the  following,  such Seller will notify
Buyer (or its assigns) in writing of any of the  following,  describing the same
and, if applicable, the steps being taken with respect thereto:

          (i) Termination Events or Unmatured Termination Events. The occurrence
     of each Termination Event and each Unmatured Termination Event.

          (ii) Judgment and  Proceedings.  The  institution  of any  litigation,
     arbitration  proceeding or governmental  proceeding  against such Seller or
     any of its Subsidiaries,  except proceedings or disputes that, if adversely
     determined, would not have a Seller Material Adverse Effect.

          (iii) Seller Material  Adverse Effect.  The occurrence of any event or
     condition that has had, or would have, a Seller Material Adverse Effect.

     (c) Compliance with Laws and  Preservation  of Existence.  Such Seller will
comply in all respects with all applicable  laws,  rules,  regulations,  orders,
writs,  judgments,  injunctions,  decrees or awards to which it is then subject,
except where the failure to so comply could not reasonably be expected to have a
Seller Material Adverse Effect. Such Seller will preserve and maintain its legal
existence,  rights,  franchises  and  privileges  in  the  jurisdiction  of  its
organization,  and qualify and remain  qualified  in good  standing as a foreign
entity in each  jurisdiction  where its business is conducted,  except where the
failure  to so  qualify  or remain in good  standing  could  not  reasonably  be
expected to have a Seller Material Adverse Effect.

     (d) Audits. Such Seller will furnish to Buyer and the Administrative  Agent
(as Buyer's  pledgee)  from time to time such  information  with respect to such
Seller  and the  Receivables  transferred  by it as Buyer or the  Administrative
Agent may reasonably request. Such Seller will, from time to time during regular
business  hours  as  requested  by Buyer  (or the  Administrative  Agent),  upon
reasonable notice and at the sole cost of such Seller, permit an accounting firm
designated  by the  Administrative  Agent (as Buyer's  pledgee)  and  reasonably
acceptable to the Buyer:  (i) to examine and make copies of and  abstracts  from
all  Receivable  Files in the possession or under the control of such Seller and
other  records  relating to the  Receivables,  the  Collections  and the Related
Security,  including,  without  limitation,  the related Contracts,  and (ii) to
visit the offices  and  properties  of such Seller for the purpose of  examining
such materials described in clause (i) above, and to discuss matters relating to
such Seller's financial condition or the Receivables and the Related Security or
such  Seller's  performance  under  any of the  Transaction  Documents  or  such
Seller's  performance  under the  Contracts  and, in each case,  with any of the
officers or employees of such Seller having knowledge of such matters; provided,
however,  that, prior to a Bowater Downgrade and in the absence of a Termination
Event,  Sellers will only be required to pay for up to one (1) such  examination
in any calendar year, and provided further, in the event of a Bowater Downgrade,
the Sellers shall only be required to pay for up to two (2) such examinations in
any calendar year, and provided further, that from and after the occurrence of a
Termination  Event,  the  Sellers  shall  be  responsible  to pay  for,  and the
Administrative Agent (or its  representatives)  shall be entitled to


<PAGE>

conduct,  as many  examinations  as Buyer or the  Administrative  Agent may deem
necessary or  appropriate  to protect the interests of the Buyer and the Secured
Parties.

     (e) Keeping and Marking of Records and Books.

               (i) Such Seller will  maintain and implement  administrative  and
          operating  procedures  (including,  without limitation,  an ability to
          recreate   records   evidencing   Receivables  in  the  event  of  the
          destruction  of the  originals  thereof),  and keep and  maintain  all
          documents,  books, records and other information  reasonably necessary
          or advisable for the collection of all Receivables (including, without
          limitation, records adequate to permit the immediate identification of
          each new  Receivable and all  Collections  of and  adjustments to each
          existing  Receivable).  Such Seller  will give Buyer (or its  assigns)
          notice of any  material  change in the  administrative  and  operating
          procedures referred to in the previous sentence.

               (ii) Such Seller will (A) on or prior to December 19, 2002,  mark
          its  master  data  processing  records  and other  books  and  records
          relating to the Receivables with a legend, acceptable to Buyer (or its
          assigns),  describing  Buyer's ownership  interests in the Receivables
          and further  describing  the security  interest of the  Administrative
          Agent (on behalf of the Secured  Parties) under the Loan Agreement and
          (B) upon the  request  of Buyer  (or its  assigns)  from and after the
          occurrence of a Termination  Event:  (x) mark each invoice  evidencing
          any Receivable with a legend describing  Buyer's ownership thereof and
          further describing the security interest of the  Administrative  Agent
          (on behalf of the Agents  and the  Lenders)  and (y) at any time after
          such  Seller  (or  one of  its  Affiliates)  is no  longer  acting  as
          Servicer,  deliver to Buyer (or its assigns) all Contracts relating to
          such Receivables.

     (f) Compliance with Contracts and Credit and Collection Policy. Such Seller
will timely and fully (i) perform and comply in all material  respects  with all
provisions, covenants and other promises required to be observed by it under the
Contracts related to the Receivables hereunder,  and (ii) comply in all material
respects with the Credit and Collection Policy in regard to each such Receivable
and the related Contract.

     (g) Ownership.  Such Seller will take all necessary action to establish and
maintain,  irrevocably in Buyer as ultimate Transferee:  (A) legal and equitable
title to the Receivables  transferred by it and the related  Collections and (B)
all  of  such  Seller's  right,  title  and  interest  in the  Related  Security
associated with the Receivables  described in the preceding  clause (A), in each
case,  free and clear of any Adverse  Claims  other than the  Adverse  Claims in
favor of Buyer (and its assigns) (including,  without limitation,  the filing of
all financing  statements or other similar  instruments  or documents  necessary
under  the UCC (or any  comparable  law)  of all  appropriate  jurisdictions  to
perfect Buyer's interest in such  Receivables,


<PAGE>

Related  Security and Collections  and such other action to perfect,  protect or
more  fully  evidence  the  interest  of  Buyer as Buyer  (or its  assigns)  may
reasonably request).

     (h) Agents' and Lenders' Reliance. Such Seller acknowledges that the Agents
and  Lenders  are  entering  into  the  transactions  contemplated  by the  Loan
Agreement in reliance  upon Buyer's  identity as a legal entity that is separate
from such Seller and any Affiliates  thereof.  Therefore,  such Seller will take
all reasonable  steps within such Seller's  control to maintain Buyer's identity
as a separate  legal entity and to make it manifest to third  parties that Buyer
is an entity with assets and liabilities  distinct from those of such Seller and
any  Affiliates  thereof  and not just a  division  of such  Seller  or any such
Affiliate.  Without  limiting the generality of the foregoing and in addition to
the other  covenants set forth herein,  such Seller (i) will not hold itself out
to third  parties as liable for the debts of Buyer nor purport to own any of the
Receivables  and other assets  acquired by Buyer,  (ii) will not take any action
that would  cause  Buyer to violate the  "separateness  covenants"  set forth in
Section  9.1.7 of the Loan  Agreement  and (iii) will cause all tax  liabilities
arising in connection with the transactions  contemplated herein or otherwise to
be  allocated  between such Seller and Buyer on an  arm's-length  basis and in a
manner  consistent  with the procedures set forth in U.S.  Treasury  Regulations
ss.ss.1.1502-33(d) and 1.1552-1.

     (i)  Collections.  In  the  event  any  payments  relating  to  Receivables
transferred by such Seller are remitted directly to such Seller or any Affiliate
of such  Seller,  such Seller will remit (or will cause all such  payments to be
remitted)  directly to a Lockbox  Account which is in Buyer's name and listed on
Exhibit III hereto within three (3) Business Days following receipt thereof and,
at all times  prior to such  remittance,  such  Seller  will  itself hold or, if
applicable,  will  cause  such  payments  to be held in trust for the  exclusive
benefit of Buyer and its assigns. Such Seller will transfer exclusive ownership,
dominion and control of each LockBox and LockBox  Account to Buyer and, will not
grant the right to take  dominion  and  control of any  LockBox  or any  LockBox
Account at a future time or upon the occurrence of a future event to any Person,
except to Buyer, as contemplated  by this Agreement,  and to the  Administrative
Agent, as contemplated by the Loan Agreement.

     (j) Taxes.  Such Seller  will file all tax returns and reports  required by
law to be filed by it and  promptly  pay all  Covered  Taxes at any time  owing,
except  any  such  Covered  Taxes  which  are not yet  delinquent  or are  being
diligently  contested  in good faith by  appropriate  proceedings  and for which
adequate  reserves  in  accordance  with GAAP  shall  have been set aside on its
books.

     Section 4.2 Negative Covenants of Each Seller. Until the date on which this
Agreement  terminates in accordance with its terms, each Seller hereby covenants
that:

     (a) Name Change,  Offices and Records.  Such Seller will not change its (i)
state of organization,  (ii) legal name, (iii) identity or structure (within the
meaning of Article 9 of any applicable enactment of the UCC) or any office where
Receivable Files are kept unless, in each of the foregoing cases, it shall have:
(A) given Buyer (and the  Administrative  Agent as Buyer's pledgee) at least ten
(10)  Business  Days' prior  written  notice  thereof and (B)  delivered  to the
Administrative Agent (as Buyer's pledgee) all financing statements,  instruments
and other

<PAGE>

documents reasonably requested by Buyer (or the Administrative Agent, as Buyer's
pledgee) in connection with such change or relocation.

     (b) Change in Payment Instructions to Obligors. Such Seller will not add or
terminate any LockBox or LockBox Account, or make any change in the instructions
to Obligors regarding payments to be made to any LockBox or any LockBox Account,
unless Buyer and the Administrative Agent shall have received, at least ten (10)
days before the proposed  effective  date  therefor,  (i) written notice of such
addition,  termination  or change  and (ii) with  respect to the  addition  of a
LockBox or LockBox  Account,  an executed LockBox Account  Agreement;  provided,
however,  that Seller may make  changes in  instructions  to Obligors  regarding
payments  if such new  instructions  require  such  Obligor to make  payments to
another existing LockBox or LockBox Account.

     (c)  Modifications  to Contracts  and Credit and  Collection  Policy.  Such
Seller will not,  without the consent of the Buyer and the  Co-Agents,  make any
change to the Credit and Collection  Policy that could reasonably be expected to
materially  and  adversely   affect  the   collectibility   of  the  Receivables
transferred by it or materially  decrease the credit quality of any of its newly
created  Receivables.  Except (i) in accordance  with the Credit and  Collection
Policy and (ii) as otherwise  permitted  hereunder and under the Loan Agreement,
if such Seller is acting as Servicer pursuant to the Loan Agreement, such Seller
will not extend,  amend or otherwise  modify the terms of any  Receivable or any
Contract related thereto.

     (d) Sales,  Adverse Claims. Such Seller will not sell, assign (by operation
of law or otherwise)  or otherwise  dispose of, or grant any option with respect
to, or create or suffer to exist any  Adverse  Claim  upon  (including,  without
limitation,  the filing of any  financing  statement)  or with  respect  to, any
Receivable,  Related  Security or  Collections,  or upon or with  respect to any
Contract  under  which any  Receivable  arises,  or any  LockBox or any  LockBox
Account, or assign any right to receive income with respect thereto (other than,
in each case,  the  creation  of the  interests  therein  in favor of Buyer,  as
provided for herein, and of Lenders, as provided for in the Loan Agreement), and
such Seller will defend the right,  title and interest of Buyer in, to and under
any of the  foregoing  property,  against all claims of third  parties  claiming
through or under such Seller.

     (e) Accounting for Purchases. Such Seller will not, and will not permit any
Affiliate to, account for the transactions  contemplated hereby in any financial
statements in any manner other than the sale (or other  outright  conveyance) by
such Seller to the applicable  Transferee of the  Receivables and the associated
Collections and Related Security except to the extent that such transactions are
not recognized on account of consolidated financial reporting in accordance with
generally accepted accounting principles.

                                   ARTICLE V
                               TERMINATION EVENTS

     Section 5.1  Termination  Events.  The occurrence of any one or more of the
following events shall constitute a Termination Event:
<PAGE>

          (a) Any  Seller  shall fail to make any  payment  or deposit  required
     hereunder   when  due  and  such  failure  shall  continue  for  three  (3)
     consecutive Business Days.

          (b) Any representation,  warranty,  certification or statement made by
     any Seller in this  Agreement,  any other  Transaction  Document  or in any
     other  document  delivered  pursuant  hereto or thereto shall prove to have
     been incorrect in any material  respect when made or deemed made;  provided
     that  the  materiality  threshold  in the  preceding  clause  shall  not be
     applicable  with  respect to any  representation  or warranty  which itself
     contains  a  materiality  threshold  and  provided  further,  that any such
     incorrect representation,  warranty, certification or statement relating to
     a Receivable for which Buyer has actually  received a Purchase Price Credit
     shall not constitute a Termination Event hereunder.

          (c)  Any  Seller  shall  breach  any  covenant  contained  in  Section
     4.1(b)(i)  which is not cured  within  three (3) days,  or any Seller shall
     breach any  covenant  contained in Section  4.2(c) or 4.2(e),  which is not
     cured  within  thirty  (30)  days,  or any  Seller  shall  breach any other
     covenant contained in Section 4.2(a), (b) or (d).

          (d) Any Seller shall  breach,  fail to perform or observe any covenant
     contained in any Section of this Agreement (which is not covered by another
     subsection,  paragraph  or  clause  of this  Section  5.1) or of any  other
     Transaction  Document  to which it is a party  which  is not  cured  within
     thirty (30) days after  written  notice  from Buyer (or the  Administrative
     Agent, as Buyer's pledgee).

          (e)  Failure  of any  Seller  or any of its  Subsidiaries  to pay  any
     Material  Debt  when  due;  or  the  default  by any  Seller  or any of its
     Subsidiaries  in  the  performance  of any  term,  provision  or  condition
     contained in any agreement  under which any Material Debt was created or is
     governed,  or any other event shall occur or condition exist, the effect of
     which is to cause, or to permit the holder or holders of such Material Debt
     to cause such Material Debt to become due prior to its stated maturity;  or
     Material Debt of any Seller or any of its Subsidiaries shall be declared to
     be due and  payable or  required  to be prepaid  (other than by a regularly
     scheduled  payment  or as a result  of the sale of an asset  securing  such
     Material Debt) prior to the stated maturity thereof.

          (f) (i) Any  Seller  shall  generally  not pay its debts as such debts
     become  due or shall  admit  in  writing  its  inability  to pay its  debts
     generally or shall make a general  assignment for the benefit of creditors;
     or (ii) any proceeding shall be instituted by or against any Seller seeking
     to adjudicate it bankrupt or insolvent, or seeking liquidation, winding up,
     reorganization,  arrangement, adjustment, protection, relief or composition
     of it or its debts under any law  relating  to  bankruptcy,  insolvency  or
     reorganization  or relief of debtors,  or seeking the entry of an order for
     relief or the appointment of a receiver,  trustee or other similar official
     for it or any substantial part of its property, and, if against Seller, any
     such  proceeding or case shall continue  undismissed  for a period of sixty
     (60) or more days, or (iii) any Seller shall take any  corporate  action to
     authorize any of the actions set forth in the foregoing clauses (i) or (ii)
     of this subsection (f).
<PAGE>

          (g) A Change of Control shall occur.

          (h) A final  judgment or judgments  for the payment of money in excess
     of  $10,000,000  in the  aggregate  (exclusive  of judgment  amounts  fully
     covered by insurance where the insurer has admitted liability in respect of
     such judgment) or in excess of $50,000,000 in the aggregate  (regardless of
     insurance coverage) shall be rendered by one or more courts, administrative
     tribunals or other bodies having jurisdiction  against any Seller or any of
     its  Subsidiaries  and the same shall not be discharged (or provision shall
     not be made for such discharge),  or a stay of execution  thereof shall not
     be procured, within thirty (30) days from the date of entry thereof and the
     Company or the relevant  Subsidiary shall not, within said period of thirty
     (30) days, or such longer  period during which  execution of the same shall
     have been stayed,  appeal  therefrom and cause the execution  thereof to be
     stayed during such appeal

          (i) The  Subordinated  Note shall be  assigned,  pledged or  otherwise
     transferred to any Person in violation of the last section thereof.

     Section 5.2 Remedies.

     Upon the occurrence  and during the  continuation  of a Termination  Event,
Buyer may take any of the following actions: (i) declare the Termination Date to
have occurred,  whereupon the Termination  Date shall forthwith  occur,  without
demand, protest or further notice of any kind, all of which are hereby expressly
waived  by each  Seller;  provided,  however,  that  upon  the  occurrence  of a
Termination  Event described in Section 5.1(f),  or of an actual or deemed entry
of an order for relief with respect to any Seller  under the Federal  Bankruptcy
Code, the Termination Date shall automatically occur, without demand, protest or
any notice of any kind, all of which are hereby  expressly waived by each Seller
and (ii) to the fullest  extent  permitted by applicable  law,  declare that the
Default Fee shall  accrue with respect to any amounts then due and owing by each
Seller to any  Transferee.  The  aforementioned  rights  and  remedies  shall be
without  limitation and shall be in addition to all other rights and remedies of
each of the  Transferees  and its assigns  otherwise  available  under any other
provision of this Agreement, by operation of law, at equity or otherwise, all of
which are hereby expressly preserved,  including, without limitation, all rights
and remedies provided under the UCC, all of which rights shall be cumulative.

                                   ARTICLE VI
                                 INDEMNIFICATION

     Section 6.1 Indemnities by Sellers.  Without limiting any other rights that
any Transferee may have  hereunder or under  applicable  law, each Seller hereby
agrees to indemnify  (and pay upon demand to) each  Transferee  and its assigns,
officers,  directors,  agents and employees (each a "Seller  Indemnified Party")
from  and  against  any  and  all  damages,   losses,   claims,  Covered  Taxes,
liabilities,  costs,  expenses  and for all  other  amounts  payable,  including
reasonable  attorneys' fees (which attorneys may be employees of a Transferee or
any such assign) and  disbursements  (all of the  foregoing  being  collectively
referred to as "Seller

<PAGE>

Indemnified  Amounts") awarded against or incurred by any of them arising out of
any of the following:

          (i)  any  representation  or  warranty  made by  such  Seller  (or any
     officers of such Seller) under or in connection  with any Purchase  Report,
     this Agreement,  any other Transaction Document or any other information or
     report  delivered by or on behalf of such Seller pursuant hereto or thereto
     that shall have been false or incorrect when made or deemed made, except to
     the extent Buyer (as the ultimate Transferee) has received a Purchase Price
     Credit in connection therewith;

          (ii) the failure by such Seller,  to comply with any  applicable  law,
     rule or regulation with respect to any Receivable  transferred by it or any
     Contract  related thereto,  or the  nonconformity of any such Receivable or
     Contract  included therein with any such applicable law, rule or regulation
     or any failure of such  Seller to keep or perform  any of its  obligations,
     express or implied, with respect to any Contract;

          (iii) any failure of such Seller to perform its duties,  covenants  or
     other  obligations  in accordance  with the provisions of this Agreement or
     any other Transaction Document to which such Seller is a party;

          (iv) any products liability,  personal injury or damage, suit or other
     similar  claim  arising out of or in  connection  with goods,  insurance or
     services that are the subject of any Contract or any Receivable transferred
     by such Seller;

          (v) any dispute,  claim,  offset or defense  (other than  discharge in
     bankruptcy of the Obligor or failure to pay due to financial  inability) of
     the Obligor to the  payment of any  Receivable  transferred  by such Seller
     (including,  without limitation,  a defense based on such Receivable or the
     related  Contract not being a legal,  valid and binding  obligation of such
     Obligor  enforceable against it in accordance with its terms), or any other
     claim resulting from the sale of the merchandise or service related to such
     Receivable  or the  furnishing  or failure to furnish such  merchandise  or
     services;

          (vi) the  commingling  by such Seller of Collections of Receivables at
     any time with other funds;

          (vii)  any  investigation,  litigation  or  proceeding  related  to or
     arising from this Agreement or any other Transaction Document to which such
     Seller is a party, the transactions  contemplated hereby, such Seller's use
     of the proceeds of any Purchase  from it  hereunder,  the  ownership of the
     Receivables or any other  investigation,  litigation or proceeding relating
<PAGE>

     to such Seller in which any Seller  Indemnified Party becomes involved as a
     result of any of the transactions contemplated hereby;

          (viii) any  inability  to  litigate  any claim  against any Obligor in
     respect of any  Receivable  transferred  by such Seller as a result of such
     Obligor being immune from civil and  commercial law and suit on the grounds
     of sovereignty or otherwise from any legal action, suit or proceeding;

          (ix) any failure to vest and maintain  vested in Buyer, or to transfer
     to Buyer,  legal and equitable  title to, and ownership of, the Receivables
     and the associated Collections  transferred by such Seller, and all of such
     Seller's right, title and interest in the Related Security  associated with
     such  Receivables,  in each case, free and clear of any Adverse Claim other
     than as created under the Loan Agreement;

          (x) the  failure  to have  filed,  or any delay in  filing,  financing
     statements or other similar  instruments or documents  under the UCC of any
     applicable  jurisdiction  or other  applicable  laws  with  respect  to any
     Receivable  transferred  by  such  Seller,  or  the  Related  Security  and
     Collections with respect thereto, and the proceeds of any thereof,  whether
     at the time of any Purchase from such Seller hereunder or at any subsequent
     time; and/or

          (xi) any attempt by any Person to void any  Purchase  from such Seller
     hereunder under statutory provisions or common law or equitable action;

excluding, however, (a) Seller Indemnified Amounts to the extent a final
judgment of a court of competent jurisdiction holds that such Seller Indemnified
Amounts resulted from gross negligence or willful misconduct on the part of the
Seller Indemnified Party seeking indemnification; (b) Seller Indemnified Amounts
to the extent the same includes losses in respect of Receivables that are
uncollectible on account of the insolvency, bankruptcy, financial inability to
pay or lack of creditworthiness of the related Obligor; and (c) Excluded Taxes.
Nothing in this Section 6.1 shall limit the liability of any Seller or limit the
recourse of any applicable Transferee (or its assigns) to such Seller for
amounts otherwise specifically provided to be paid by such Seller under the
terms of this Agreement.

     Anything contained in this Section 6.1 to the contrary notwithstanding: (1)
the foregoing  indemnification  is not intended to, and shall not,  constitute a
guarantee  of  the  collectibility  or  payment  of  the  Receivables   conveyed
hereunder,  and (2)  nothing in this  Section  6.1 shall  require  any Seller to
indemnify any Seller  Indemnified Party for Receivables which are not collected,
not paid or are otherwise uncollected on account of the insolvency,  bankruptcy,
lack  of  creditworthiness  or  financial  inability  to pay  of the  applicable
Obligor.

     Section  6.2 Other  Costs and  Expenses.  Subject to Section  4.1(d),  each
Seller agrees to pay to its  applicable  Transferee,  on demand,  all reasonable
out-of-pocket  costs  and  expenses  in  connection  with  (a) the  preparation,
execution and delivery of this Agreement and the other documents to be delivered
hereunder,  (b) the preparation,  execution and delivery of any amendment hereto
or  waiver  hereof  requested  by such  Seller,  and (b) any and all  costs  and
expenses of such  Transferee,  if any,  including  reasonable  counsel  fees and
expenses,  in connection  with the  enforcement  of this Agreement and the other
documents delivered hereunder.

     Section 6.3 Taxes. All payments by each Seller to or for the account of its
Transferee  (or any of its  assigns)  hereunder  or under any other  Transaction
Document  to which  such  Seller is a party  shall be made free and clear of and
without deduction for any and all Covered Taxes. If any Seller shall be required
by law to  deduct  any  Covered  Taxes  from or in  respect  of any sum  payable
hereunder to its  applicable  Transferee  (or any of its  assigns),  (a) the sum
payable  shall be  increased  as  necessary  so that after  making all  required
deductions  (including  deductions  applicable to additional  sums payable under
this Section 6.3), such Transferee (or such assign, as the case may be) receives
an amount equal to the sum it would have  received had no such  deductions  been
made, (b) such Seller shall make such deductions,  (c) such Seller shall pay the
full amount deducted to the relevant authority in accordance with applicable law
and (d) such Seller shall furnish to such Transferee (and to the  Administrative
Agent, as the Buyer's pledgee) the original copy of a receipt evidencing payment
thereof within 30 days after such payment is made.

                                  ARTICLE VII
                                  MISCELLANEOUS

     Section 7.1 Waivers and Amendments.

          (a) No failure or delay on the part of any Transferee (or its assigns)
     in exercising any power, right or remedy under this Agreement shall operate
     as a waiver thereof,  nor shall any single or partial  exercise of any such
     power,  right or remedy preclude any other further  exercise thereof or the
     exercise  of any other  power,  right or remedy.  The  rights and  remedies
     herein  provided  shall be  cumulative  and  nonexclusive  of any rights or
     remedies  provided by law. Any waiver of this Agreement  shall be effective
     only in the specific instance and for the specific purpose for which given.

          (b) No  provision  of this  Agreement  may be  amended,  supplemented,
     modified  or waived  except in writing  signed by Sellers and Buyer and, to
     the extent  required  under the Loan  Agreement,  the Agents.  Any material
     amendment,  supplement,  modification  of waiver may require the applicable
     Conduit  Lender's  receipt of written  notice from the rating  agencies who
     rate its Commercial  Paper Notes that such change will not cause the rating
     on  the  then  outstanding  Commercial  Paper  Notes  to be  downgraded  or
     withdrawn.

     Section 7.2 Notices.  All communications and notices provided for hereunder
shall be in writing  (including  bank wire,  telecopy  or  electronic  facsimile
transmission or similar  writing) and shall be given to the other parties hereto
at their respective addresses or telecopy

<PAGE>

numbers  set forth on  Schedule  B hereto or at such other  address or  telecopy
number as such Person may hereafter specify for the purpose of notice to each of
the other  parties  hereto.  Each such  notice or other  communication  shall be
effective (a) if given by telecopy,  upon the receipt  thereof,  (b) if given by
mail, five (5) Business Days after the time such  communication  is deposited in
the mail with first class  postage  prepaid or (c) if given by any other  means,
when received at the address specified in this Section 7.2.

     Section    7.3    Protection    of    Ownership    Interests    of   Buyer.


     (a) Each Seller  agrees  that from time to time,  at its  expense,  it will
promptly  execute  and  deliver  all  instruments  and  documents,  and take all
actions, that may be necessary or desirable,  or that Buyer (or its assigns) may
reasonably request,  to perfect,  protect or more fully evidence the interest of
Buyer and its assigns  therein,  or to enable Buyer (or its assigns) to exercise
and enforce all rights and remedies afforded to any Transferee hereunder. At any
time  following the earlier to occur of a Termination  Event or an  Amortization
Event:  Buyer (or its assigns)  may, at the  applicable  Seller's  sole cost and
expense, direct each Seller to notify the Obligors of Receivables transferred by
it of the ownership  interests of Buyer under this Agreement and may also direct
that payments of all amounts due or that become due under any or all Receivables
transferred by it be made directly to Buyer or its designee.

     (b) If any Seller fails to perform any of its obligations hereunder:

               (i) Buyer (or its  assigns)  may (but shall not be  required  to)
          perform,  or cause performance of, such  obligations,  and Buyer's (or
          such  assigns')  costs and expenses  incurred in connection  therewith
          shall be payable by such Seller as provided in Section 6.2;

               (ii) Each Seller  irrevocably  authorizes Buyer (and its assigns)
          at any time and from time to time in the sole  discretion of Buyer (or
          its   assigns),   and   appoints   Buyer  (and  its  assigns)  as  its
          attorney(ies)-in-fact,  to act on behalf of such Seller (A) to execute
          (if  necessary)  on behalf of such  Seller as debtor and to file (with
          or, to the extent  permitted by applicable  law,  without  signatures)
          financing  statements  necessary  or  desirable  in  Buyer's  (or  its
          assigns')  sole  discretion to perfect and to maintain the  perfection
          and priority of the interest of Buyer in the  Receivables  transferred
          by such Seller and the associated Related Security and Collections and
          (B) to file a  carbon,  photographic  or  other  reproduction  of this
          Agreement or any financing  statement with respect to the  Receivables
          as a financing  statement in such offices as Buyer (or its assigns) in
          their sole  discretion  deem  necessary or desirable to perfect and to
          maintain  the  perfection  and  priority of Buyer's  interests in such
          Receivables.

     The appointment under the foregoing clause (ii) is coupled with an interest
and is irrevocable.

     Section 7.4 Confidentiality.
<PAGE>

               (a) Each  Seller  shall  maintain  and  shall  cause  each of its
          employees  and  officers to maintain  the  confidentiality  of the Fee
          Letters (as defined in the Loan Agreement) and the other  confidential
          or proprietary  information with respect to the Agents and Lenders and
          their respective  businesses obtained by it or them in connection with
          the  structuring,   negotiating  and  execution  of  the  transactions
          contemplated  herein,  except  that each Seller and its  officers  and
          employees may disclose  such  information  to such  Seller's  external
          accountants,  attorneys  and other  advisors  and as  required  by any
          applicable  law,  rule,  direction,  request or order of any judicial,
          administrative or regulatory  authority or proceeding  (whether or not
          having the force or effect of law). The  restrictions  in this Section
          7.4(a)  shall  not  apply  to  any  information  which  is or  becomes
          generally available to the public other than as a result of disclosure
          by a Seller.

               (b)  Each  Seller  hereby  consents  to  the  disclosure  of  any
          nonpublic  information  with respect to it (i) to Buyer, the Agents or
          Lenders by each other,  (ii) to any  prospective or actual assignee or
          participant  of any of the Persons  described in clause (i), and (iii)
          to any rating agency, Commercial Paper Note dealer or Support Provider
          (as  defined  in the  Loan  Agreement)  to any  Lender  or any  entity
          organized for the purpose of  purchasing,  or making loans secured by,
          financial assets for which any of the Agents acts as the administrator
          or  agent  or any  of the  Agents  and  to  any  officers,  directors,
          employees,  outside accountants and attorneys of any of the foregoing,
          provided each Person described in the foregoing clauses (ii) and (iii)
          is informed of the  confidential  nature of such  information and each
          Person  described  in the  foregoing  clause (ii) agrees in writing to
          maintain the confidential nature of such information. In addition, the
          Lenders  and  Agents  may  disclose  any  such  nonpublic  information
          pursuant to any law, rule, regulation,  direction, request or order of
          any judicial,  administrative  or regulatory  authority or proceedings
          (whether or not having the force or effect of law).

     Section 7.5 Bankruptcy Petition.  Each Seller and Buyer hereby covenant and
agree that,  prior to the date that is one year and one day after the payment in
full of all outstanding senior indebtedness of any Conduit Lender (as defined in
the Loan Agreement),  it will not institute against, or join any other Person in
instituting  against,   any  Conduit  Lender  any  bankruptcy,   reorganization,
arrangement,  insolvency or liquidation  proceedings or other similar proceeding
under the laws of the United States or any state of the United States.

     Section  7.6  Return of Funds Not  Constituting  Collections.  If any funds
other than  Collections are received in any Lock Box Account,  such  remittances
will be removed from such account and will be  delivered  through  inter-company
transfers  or  otherwise to the owner  thereof  within  three (3) Business  Days
following determination that the same do not comprise Collections.

     Section 7.7 CHOICE OF LAW

     . THIS  AGREEMENT  SHALL BE A  CONTRACT  MADE  UNDER  AND  GOVERNED  BY THE
INTERNAL  LAWS OF THE STATE OF NEW YORK  WITHOUT  REGARD TO THE  CONFLICT OF LAW
PRINCIPLES   THEREOF  (OTHER  THAN  SECTION  5-1401  OF  THE  NEW  YORK  GENERAL
OBLIGATIONS  LAW)  EXCEPT TO

<PAGE>

THE EXTENT THAT THE LAWS OF ANOTHER  JURISDICTION GOVERN THE PERFECTION,  OR THE
EFFECT OF PERFECTION OR NONPERFECTION, OF THE OWNERSHIP OR SECURITY INTERESTS OF
BUYER.

     Section 7.8 CONSENT TO  JURISDICTION.  TO THE FULLEST  EXTENT  PERMITTED BY
APPLICABLE  LAW,  EACH  OF  THE  PARTIES  HEREBY  IRREVOCABLY   SUBMITS  TO  THE
NON-EXCLUSIVE  JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT
SITTING IN NEW YORK,  NEW YORK IN ANY  ACTION OR  PROCEEDING  ARISING  OUT OF OR
RELATING TO THIS  AGREEMENT OR ANY DOCUMENT  EXECUTED BY SUCH PARTY  PURSUANT TO
THIS AGREEMENT AND EACH OF THE PARTIES HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS
IN RESPECT OF SUCH ACTION OR PROCEEDING  MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND  IRREVOCABLY  WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER  HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN  INCONVENIENT  FORUM.  NOTHING  HEREIN SHALL LIMIT THE RIGHT OF
BUYER (OR ITS ASSIGNS) TO BRING PROCEEDINGS  AGAINST ANY SELLER IN THE COURTS OF
ANY OTHER JURISDICTION.  ANY JUDICIAL PROCEEDING BY ANY SELLER AGAINST BUYER (OR
ITS ASSIGNS) OR ANY AFFILIATE  THEREOF  INVOLVING,  DIRECTLY OR INDIRECTLY,  ANY
MATTER IN ANY WAY ARISING OUT OF,  RELATED TO, OR CONNECTED  WITH THIS AGREEMENT
OR ANY  DOCUMENT  EXECUTED BY SUCH SELLER  PURSUANT TO THIS  AGREEMENT  SHALL BE
BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK.

     Section  7.9 WAIVER OF JURY  TRIAL.  TO THE  FULLEST  EXTENT  PERMITTED  BY
APPLICABLE  LAW,  EACH PARTY HERETO  HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING  INVOLVING,  DIRECTLY OR INDIRECTLY,  ANY MATTER (WHETHER SOUNDING IN
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH THIS  AGREEMENT,  ANY  DOCUMENT  EXECUTED  BY ANY SELLER  PURSUANT  TO THIS
AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.

     Section   7.10   Integration;    Binding   Effect;   Survival   of   Terms.


     (a) This Agreement and each other  Transaction  Document  contain the final
and complete  integration  of all prior  expressions  by the parties hereto with
respect to the subject matter hereof and shall  constitute the entire  agreement
among the parties hereto with respect to the subject  matter hereof  superseding
all prior oral or written understandings.

     (b) This  Agreement  shall be  binding  upon and  inure to the  benefit  of
Sellers,  Buyer and their respective successors and permitted assigns (including
any  trustee  in  bankruptcy).  No  Seller  may  assign  any of its  rights  and
obligations  hereunder or any interest  herein without the prior written consent
of Buyer. Buyer may assign at any time its rights and obligations  hereunder and
interests herein to any other Person without the consent of any Seller.

<PAGE>

Without limiting the foregoing, each Seller acknowledges that Buyer, pursuant to
the Loan Agreement,  may pledge to the Administrative  Agent, for the benefit of
the  Agents  and the  Lenders,  its  rights,  remedies,  powers  and  privileges
hereunder.  Each Seller agrees that the Administrative  Agent, as the pledgee of
Buyer,  shall,  subject  to the terms of the Loan  Agreement,  have the right to
enforce  this  Agreement  and to  exercise  directly  all of Buyer's  rights and
remedies under this Agreement (including,  without limitation, the right to give
or  withhold  any  consents  or  approvals  of Buyer  to be  given  or  withheld
hereunder).   This   Agreement   shall  create  and  constitute  the  continuing
obligations of the parties hereto in accordance  with its terms and shall remain
in full  force  and  effect  until  terminated  in  accordance  with its  terms;
provided,  however,  that the rights and remedies with respect to (i) any breach
of any  representation  and warranty made by any Seller  pursuant to Article II;
(ii) the indemnification and payment provisions of Article VI; and (iii) Section
7.5 shall be continuing and shall survive any termination of this Agreement.

     Section 7.11 Counterparts; Severability; Section References. This Agreement
may be executed in any number of counterparts and by different parties hereto in
separate  counterparts,  each of which when so executed shall be deemed to be an
original and all of which when taken together shall  constitute one and the same
Agreement.   Any   provisions  of  this   Agreement   which  are  prohibited  or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability  without  invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render  unenforceable such provision in any
other jurisdiction.  Unless otherwise expressly indicated, all references herein
to  "Article,"  "Section,"  "Schedule"  or  "Exhibit"  shall mean  articles  and
sections of, and schedules and exhibits to, this Agreement.



<PAGE>


     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed and delivered by their duly authorized officers as of the date hereof.

                                        BOWATER INCORPORATED


                                        By:    /s/ William G. Harvey
                                            -----------------------------------
                                            Name:    William G. Harvey
                                            Title:   Senior Vice President and
                                                     Chief Financial Officer



                                        BOWATER AMERICA INC.


                                        By:       /s/ William G. Harvey
                                            -----------------------------------
                                            Name:    William G. Harvey
                                            Title:   Vice President and
                                                     Treasurer


                                        BOWATER FUNDING INC.


                                        By:       /s/ William G. Harvey
                                             -----------------------------------
                                             Name:    William G. Harvey
                                             Title:   President



<PAGE>






                                                                       Exhibit I

                                   Definitions

     This is Exhibit I to the Agreement (as hereinafter defined). As used in the
Agreement and the Exhibits and  Schedules  thereto,  capitalized  terms have the
meanings set forth in this Exhibit I (such meanings to be equally  applicable to
the singular and plural forms  thereof).  If a  capitalized  term is used in the
Agreement,  or any Exhibit or Schedule  thereto,  and is not  otherwise  defined
therein or in this Exhibit I, such term shall have the meaning  assigned thereto
in the Loan Agreement (hereinafter defined).

     "Administrative  Agent"  has  the  meaning  set  forth  in the  Preliminary
Statements to the Agreement.

     "Adverse  Claim" means any lien  (statutory  or other),  mortgage,  pledge,
hypothecation, assignment, encumbrance or preference, priority or other security
agreement  or  preferential   arrangement  of  any  kind  or  nature  whatsoever
(including,  without  limitation,  the  interest of a vendor or lessor under any
conditional sale, capitalized lease or other title retention agreement).

     "Agents"  has the meaning set forth in the  Preliminary  Statements  to the
Agreement.

     "Agreement"  means the Amended and  Restated  Receivables  Sale  Agreement,
dated as of December  1, 2005,  between  Sellers  and Buyer,  as the same may be
amended, restated or otherwise modified.

     "BAI" has the meaning set forth in the preamble to the Agreement.

     "Bowater" has the meaning set forth in the preamble to the Agreement.

     "Bowater Credit  Agreement" means that certain Credit Agreement dated as of
May 22, 2002, between Bowater and various of its Subsidiaries, as borrowers, the
lenders  from  time  to  time  party  thereto,   and  JPMorgan  Chase  Bank,  as
administrative  agent,  as amended,  restated or otherwise  modified or replaced
from time to time.

     "Bowater  Downgrade"  means that Bowater's  unsecured  senior debt is rated
"BB" or less by S&P or "Ba2" or less by Moody's.

     "Bowater Group" means,  collectively,  Bowater and each of its Subsidiaries
other than any Receivables Entity and any Subsidiary of any Receivables Entity.

     "Buyer" has the meaning set forth in the preamble to the Agreement.

     "Calculation  Period"  means each calendar  month or portion  thereof which
elapses during the term of the Agreement. The first Calculation Period commenced
on December 19, 2002 and the final  Calculation  Period  shall  terminate on the
Termination Date.
<PAGE>

     "Capital Lease Obligations"  means, for any Person, all obligations of such
Person  to pay  rent or  other  amounts  under a lease  of (or  other  agreement
conveying the right to use) property to the extent such obligations are required
to be classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP (including  Statement of Financial Accounting Standards No. 13
of the  Financial  Accounting  Standards  Board),  and,  for  purposes  of  this
Agreement,  the  amount  of such  obligations  shall be the  capitalized  amount
thereof, determined in accordance with GAAP (including such Statement No. 13).

     "Change of Control" means (a) during any period of 25 consecutive  calendar
months,  a majority  of the Board of  Directors  of  Bowater  shall no longer be
composed of  individuals  (i) who were members of said Board on the first day of
such period,  (ii) whose  election or  nomination  to said Board was approved by
individuals  referred  to in clause (i) above  constituting  at the time of such
election or nomination at least a majority of said Board or (iii) whose election
or nomination to said Board was approved by  individuals  referred to in clauses
(i) and (ii) above  constituting  at the time of such  election or nomination at
least a majority  of said  Board,  or (b)  Bowater  ceases to own  (directly  or
indirectly)  and  control  the right to vote 100% of the  outstanding  shares of
voting stock of (i) BAI or (ii) Buyer.

     "Co-Agents" has the meaning set forth in the Preliminary  Statements to the
Agreement.

     "Collections"  means, with respect to any Receivable,  all cash collections
and other  cash  proceeds  in  respect of such  Receivable,  including,  without
limitation,  all yield,  Finance  Charges or other related  amounts  accruing in
respect  thereof and all cash proceeds of Related  Security with respect to such
Receivable.

     "Consolidated  Subsidiary" means, at any date as of which the same is to be
determined,  any  Subsidiary  or other  entity the  accounts  of which  would be
consolidated with those of Bowater in its consolidated  financial  statements if
such statements were prepared as of such date in accordance with GAAP.

     "Contract"  means  either (i) a written  agreement  between a Seller and an
Obligor,  or (ii) an invoice issued by a Seller to an Obligor,  in either of the
foregoing  cases,  pursuant to which such Obligor is obligated to pay for goods,
merchandise and/or services.

     "Contributed  Receivables"  has the meaning set forth in Section  1.1(b) to
the Agreement.

     "Covered Taxes" means all Taxes other than Excluded Taxes.

     "Credit  and  Collection  Policy"  means the credit and  collection  policy
relating to Contracts and Receivables  attached hereto as Exhibit VII, as may be
modified from time to time in accordance with this Agreement.

     "Debt" means, with respect to any Person at any date, without  duplication:
(i) all indebtedness of such Person for borrowed money, (ii) all indebtedness of
such Person for the deferred  purchase price of property or services (other than
property and services purchased,

<PAGE>

and expense accruals and deferred  compensation  items arising,  in the ordinary
course of business),  (iii) all  obligations of such Person  evidenced by notes,
bonds,  debentures or other similar instruments (other than performance,  surety
and  appeal  bonds  arising  in the  ordinary  course  of  business),  (iv)  all
indebtedness  of such Person  created or arising under any  conditional  sale or
other title retention agreement with respect to property acquired by such Person
(even  though  the  rights  and  remedies  of the  seller or lender  under  such
agreement  in the event of default are limited to  repossession  or sale of such
property),  (v) all  obligations  of such Person under leases which have been or
should be, in accordance with GAAP,  recorded as capital  leases,  to the extent
required  to  be  so  recorded,  (vi)  all  reimbursement,  payment  or  similar
obligations of such Person, contingent or otherwise, under acceptance, letter of
credit or similar  facilities  (other than letters of credit in support of trade
obligations or in connection with workers' compensation, unemployment insurance,
old-age  pensions and other social  security  benefits in the ordinary course of
business),  (vii) all net obligations of such Person in respect of interest rate
swap,  cap,  collar,  swaption,   option  or  similar  agreements,   (viii)  all
obligations  arising in connection  with a sale or other transfer of any of such
Person's  financial assets which are, or are intended to be, classified as loans
for  federal  tax  purposes,  (ix) all Debt  referred  to in clauses (i) through
(viii) above  guaranteed  directly or  indirectly  by such Person,  or in effect
guaranteed directly or indirectly by such Person through an agreement (A) to pay
or purchase  such Debt or to advance or supply funds for the payment or purchase
of such Debt, (B) to purchase,  sell or lease (as lessee or lessor) property, or
to purchase or sell  services,  primarily for the purpose of enabling the debtor
to make  payment of such Debt or to assure the holder of such Debt  against loss
in respect of such Debt, (C) to supply funds to or in any other manner invest in
the debtor (including any agreement to pay for property or services irrespective
of whether  such  property is received or such  services  are  rendered)  or (D)
otherwise to assure a creditor against loss in respect of such Debt, and (x) all
Debt  referred to in clauses (i) through  (viii) above  secured by (or for which
the holder of such Debt has an existing  right,  contingent or otherwise,  to be
secured by) any Adverse Claim,  security interest or other charge or encumbrance
upon or in  property  (including,  without  limitation,  accounts  and  contract
rights) owned by such Person,  even though such Person has not assumed or become
liable for the payment of such Debt.

     "Default  Fee" means a per annum rate of  interest  equal to the sum of (i)
the Base Rate, plus (ii) 2.00% per annum.

     "Discount  Factor"  means a percentage  calculated  to provide Buyer with a
reasonable  return on its investment in the Receivables  after taking account of
(i) the time value of money based upon the  anticipated  dates of  collection of
such Receivables and the weighted average cost to Buyer of obtaining  Letters of
Credit issued  pursuant to the Loan  Agreement  and financing its  investment in
such  Receivables  during  such  period,  (ii)  the  risk of  nonpayment  by the
Obligors,  and (iii)  contractual  allowances  granted to Obligors.  Sellers and
Buyer may agree from time to time to change the Discount Factor based on changes
in one or more of the items affecting the calculation thereof, provided that any
change to the  Discount  Factor  shall take effect as of the  commencement  of a
Calculation  Period,  shall  apply only  prospectively  and shall not affect the
Purchase Price payment made prior to the Calculation Period during which Sellers
and Buyer agree to make such change.
<PAGE>

     "Dollars,"  "dollars"  and "$" shall mean lawful money of the United States
of America.

     "Excluded  Taxes"  means,  in the case of Buyer (or any Seller  Indemnified
Party),  taxes imposed on its overall net income, and franchise taxes and branch
profit taxes based on net income,  imposed on it by (i) the  jurisdiction  under
the laws of which Buyer (or such Seller  Indemnified  Party) is  incorporated or
organized or (ii) the jurisdiction in which Buyer's (or such Seller  Indemnified
Party's) principal executive office is located.

     "Existing  Agreement"  has the meaning  specified  in the  preamble to this
Agreement.

     "Finance Charges" means, with respect to a Contract, any finance, interest,
late  payment,  returned  check  charges or similar  charges owing by an Obligor
pursuant to such Contract.

     "Financial  Officer" means, as to any Seller,  the Chief Financial Officer,
Treasurer or Controller of such Seller.

     "GAAP" means accounting  principles generally accepted in the United States
of America as  recommended  by the Financial  Accounting  Standards  Board as in
effect as of December 19, 2002 applied  consistently  with the audited financial
statements  of Bowater  and its  Consolidated  Subsidiaries  for the fiscal year
ended December 31, 2001.

     "Governmental  Authority"  means any  nation or  government,  any  federal,
state,  local or other political  subdivision  thereof and any entity exercising
executive,  legislative,  judicial,  regulatory or  administrative  authority or
functions  of or  pertaining  to  government  including  any  authority or other
quasi-governmental entity established to perform any of such functions.

     "Guarantee" means a guarantee,  an endorsement,  a contingent  agreement to
purchase or to furnish funds for the payment or maintenance  of, or otherwise to
be or become  contingently  liable under or with  respect to, the  Indebtedness,
other  obligations,  net worth,  working capital or earnings of any Person, or a
guarantee of the payment of dividends or other  distributions  upon the stock or
equity interests of any Person,  or an agreement to purchase,  sell or lease (as
lessee or lessor) property, products,  materials, supplies or services primarily
for the  purpose  of  enabling  a  debtor  to  make  payment  of  such  debtor's
obligations  or an agreement to assure a creditor  against  loss,  and including
causing  a bank or other  financial  institution  to issue a letter of credit or
other  similar  instrument  for the  benefit of another  Person,  but  excluding
endorsements  for collection or deposit in the ordinary course of business.  The
terms  "Guarantee"  and  "Guaranteed"  used as a verb shall  have a  correlative
meaning.

     "Indebtedness"  means, for any Person: (a) obligations  created,  issued or
incurred by such Person for borrowed  money  (whether by loan,  the issuance and
sale of debt  securities or the sale of property to another Person subject to an
understanding or agreement, contingent or otherwise, to repurchase such property
from such Person);  (b) obligations of such Person to pay the deferred  purchase
or acquisition price of property or services,  other than trade accounts

<PAGE>

payable (other than for borrowed money) arising,  and accrued expenses incurred,
in the ordinary course of business,  so long as such trade accounts  payable are
payable  within 90 days of the date the  respective  goods are  delivered or the
respective  services  are  rendered;  (c)  Indebtedness  of others  secured by a
Adverse  Claim on the  property of such  Person,  whether or not the  respective
Indebtedness  so  secured  has been  assumed  by such  Person;  (d)  obligations
(contingent  or  otherwise)  of such  Person in  respect of letters of credit or
similar instruments issued or accepted by banks and other financial institutions
for account of such Person;  (e) Capital Lease  Obligations of such Person;  (f)
Indebtedness  of others  Guaranteed by such Person;  and (g) any  obligations of
such  Person in respect  of  transactions  commonly  referred  to in  commercial
settings as an "accounts receivable securitization."

     "Initial  Contributed  Receivables"  has the  meaning  set forth in Section
1.1(a) to the Agreement.

     "Initial Cutoff Date" means December 18, 2002.

     "Interest Rate Protection  Agreement"  shall have the meaning given to such
term in the Bowater Credit Agreement.

     "IRS" means the Internal  Revenue Service and any Person  succeeding to the
functions thereof.

     "LC Commission" means, for any Letter of Credit on its date of issuance and
on each date,  if any, on which its expiry date is extended,  the product of (a)
the LC  Premium,  multiplied  by (b) the face  amount of such  Letter of Credit,
multiplied by (c) the actual number of days until such Letter of Credit's expiry
date  (or,  in the case of an  extension,  the  actual  number  of days from but
excluding the initial  expiry date to and  including the extended  expiry date),
divided by 360 days.

     "LC Issuer" means SunTrust Bank or Wachovia Bank, National Association,  in
its capacity as the issuer of a Letter of Credit.

     "LC Premium" means, for any Letter of Credit on its date of issuance and on
each date, if any, on which its expiry date is extended,  the excess, if any, of
the rate at which the LC Fee (under and as defined in the Co-Agents' Fee Letter)
is then  being  computed  over the rate at which  the Usage  Fee  (under  and as
defined in the Co-Agents' Fee Letter) is being computed.

     "Letter of Credit" means a stand-by letter of credit issued by an LC Issuer
in United States  dollars upon  application of Buyer at the request of a Seller,
as extended  from time to time in  accordance  with this  Agreement and the Loan
Agreement.

     "Letter of Credit  Request"  means a request  in the form of  Exhibit  VIII
hereto, with appropriate insertions thereto, duly executed by a Seller.

     "Lenders"  has the meaning set forth in the  Preliminary  Statements to the
Agreement.
<PAGE>

     "Loan Agreement" has the meaning set forth in the Preliminary Statements to
the Agreement.

     "Material  Debt"  means  Debt  of any  Seller  and/or  one or  more  of its
Subsidiaries  (other than  Buyer),  arising in one or more  related or unrelated
transactions,  in an aggregate  principal or face amount exceeding  $50,000,000.
For  purposes  of  determining  Material  Debt,  the  "principal  amount" of the
obligations of any Person in respect of any Interest Rate  Protection  Agreement
at any time shall be the maximum  aggregate amount (giving effect to any netting
requirements)  that such Person would be required to pay if such  Interest  Rate
Protection Agreement were terminated at such time.

     "Moody's" means Moody's Investors Service, Inc.

     "Net Worth" means as of the last  Business Day of each  Calculation  Period
preceding any date of  determination,  the excess,  if any, of (a) the aggregate
Outstanding Balance of the Receivables at such time, over (b) the sum of (i) the
aggregate outstanding principal balance of the Loans under the Loan Agreement at
such  time,  plus  (ii)  the  aggregate  outstanding  principal  balance  of the
Subordinated  Loans (including any Subordinated  Loan proposed to be made on the
date of determination).

                  "Organizational Documents" means, for any Person, the
documents for its formation and organization, which, for example, (a) for a
corporation are its corporate charter and bylaws, (b) for a partnership are its
certificate of partnership (if applicable) and partnership agreement, (c) for a
limited liability company are its certificate of formation or organization and
its operating agreement, regulations or the like and (d) for a trust is the
trust agreement, declaration of trust, indenture or bylaws under which it is
created.

     "Original  Balance" means, with respect to any Receivable,  the Outstanding
Balance of such Receivable on the date it was created.

     "Outstanding  Balance"  of  any  Receivable  at any  time  means  the  then
outstanding principal balance thereof.

     "Person"  means an  individual,  partnership,  limited  liability  company,
corporation   (including  a  business  trust),   joint  stock  company,   trust,
unincorporated association, joint venture, government or any agency or political
subdivision thereof or any other entity.

     "Purchase"  means each purchase by a Transferee  from a Seller  pursuant to
Section  1.2 of the  Agreement  of  Receivables  and the  Related  Security  and
Collections related thereto.

     "Purchase Date" means December 19, 2002 and each such  subsequent  Business
Day on or before the Termination Date.

     "Purchase Price" means,  with respect to each Purchase by a Transferee from
a Seller,  the aggregate  price to be paid by such Transferee to such Seller for
such  Purchase  in  accordance  with  Section  1.3  of  the  Agreement  for  the
Receivables  transferred  by such  Seller  and


<PAGE>

the associated Collections and Related Security,  which price shall equal on any
date (i) the product of (x) the Outstanding  Balance of such  Receivables  being
sold on such date,  multiplied by (y) one minus the Discount Factor in effect on
such date,  minus (ii) any Purchase  Price  Credits to be credited in accordance
with Section 1.4 of the Agreement against the Purchase Price otherwise payable.

     "Purchase  Price  Credit"  has the  meaning set forth in Section 1.4 of the
Agreement.

     "Purchase Price Loan" has the meaning set forth in Section 1.2(c).

     "Purchase Price Loan Note" has the meaning set forth in
Section 1.2(c).

     "Purchase  Report"  has the  meaning  set  forth in  Section  1.2(c) of the
Agreement.

     "QSPE" means each  subsidiary of Bowater  organized  for a limited  purpose
with traditional "bankruptcy-remote" features such as an independent director or
member, provided that:

     (a)  either  no  portion  of  the  Indebtedness  or any  other  obligations
(contingent or otherwise) of such  Subsidiary (i) is Guaranteed by any member of
the Bowater  Group,  (ii) is recourse to or obligates  any member of the Bowater
Group in any way other than pursuant to Standard Securitization  Undertakings or
(iii)  subjects  any  property of any member of the Bowater  Group,  directly or
indirectly,  contingently or otherwise, to the satisfaction thereof (other than,
in  the  case  of  this  clause  (iii),  pursuant  to  Standard   Securitization
Undertakings),

     (b) with which no member of the Bowater  Group has any  material  contract,
agreement, arrangement or understanding other than on terms no less favorable to
any member of the  Bowater  Group than those that might be  obtained at the time
from Persons that are not Affiliates of any member of the Bowater Group, and

     (c) to which no member of the Bowater Group has any  obligation to maintain
or preserve  such entity's  financial  condition or cause such entity to achieve
certain levels of operating results.

     "Receivable"  means all indebtedness and other obligations owed to a Seller
(at the times it arises, including, without limitation,  before giving effect to
any transfer or conveyance under the Agreement and whether  evidenced by chattel
paper or any  instrument)  arising in  connection  with the sale of goods or the
rendering of services by such Seller (other than as to any sales of goods (a) to
any  Affiliate of such Seller,  or (b) which are  incidental  to the sale of any
operational unit of such Seller),  and further includes the applicable Obligor's
obligation to pay any Finance Charges,  freight charges and other obligations of
such Obligor with respect thereto. Indebtedness and other rights and obligations
arising from any one transaction,  including,  without limitation,  indebtedness
and other rights and  obligations  represented by an individual  invoice,  shall
constitute  a  Receivable   separate   from  a  Receivable

<PAGE>

consisting of the indebtedness and other rights and obligations arising from any
other  transaction;  provided,  that any  indebtedness,  rights  or  obligations
referred  to  in  the  immediately  preceding  sentence  shall  be a  Receivable
regardless  or whether  the  account  debtor or  applicable  Seller  treats such
indebtedness, rights or obligations as a separate payment obligation.

     "Receivables  Entity"  means  (a) the  Buyer  and (b) any  other  direct or
indirect  Subsidiary  of Bowater (or  another  Person in which any member of the
Bowater Group may make an  Investment)  to which any member of the Bowater Group
sells,  conveys or otherwise transfers (whether directly or indirectly) accounts
receivable and Related Security and/or one or more financial instruments arising
from the sale  (whether  through  the sale of  stock,  membership  interests  or
assets)  of  accounts  receivable  and  Related  Security,  which  engages in no
material  activities  other than in connection with the financing of such assets
and which is designated by Bowater (as provided below) as a Receivables  Entity,
(i) no portion  of the  Indebtedness  or any other  obligations  (contingent  or
otherwise) of which (A) is Guaranteed by any member of the Bowater Group, (B) is
recourse to or obligates  any member of the Bowater  Group in any way other than
pursuant to Standard Securitization Undertakings or (C) subjects any property of
any  member of the  Bowater  Group,  directly  or  indirectly,  contingently  or
otherwise,  to the satisfaction thereof, other than such accounts receivable and
Related  Security sold,  conveyed or otherwise  transferred  into the applicable
securitization  permitted by Bowater's  agreements  governing  Indebtedness  and
other than pursuant to Standard Securitization Undertakings,  (ii) with which no
member of the Bowater Group has any material contract, agreement, arrangement or
understanding other than on terms no less favorable to any member of the Bowater
Group than those that might be  obtained at the time from  Persons  that are not
Affiliates  of any member of the Bowater  Group,  other than fees payable in the
ordinary course of business in connection with servicing receivables,  and (iii)
to which no member  of the  Bowater  Group has any  obligation  to  maintain  or
preserve  such  entity's  financial  condition  or cause such  entity to achieve
certain levels of operating  results.  Any such  designation by Bowater shall be
evidenced to the Administrative Agent by filing with the Administrative Agent an
officer's  certificate  of  Bowater  certifying,  to the best of such  officer's
knowledge  and belief  after  consulting  with  counsel,  that such  designation
complied with the foregoing conditions.

     "Related  Security" means,  with respect to any Receivable,  (a) all right,
title and interest,  but none of the obligations,  of the applicable  Seller, in
the goods (including  returned goods),  if any,  relating to the sale which gave
rise to such  Receivable,  (b) all right,  title and  interest,  but none of the
obligations,  of such Seller, in, to and under other Adverse Claims and property
subject to Adverse Claims from time to time purporting to secure payment of such
Receivable,  whether  pursuant to the  Contract  related to such  Receivable  or
otherwise,  (c) all UCC financing statements or similar instruments covering any
collateral securing payment of such Receivable, (d) all guaranties, indemnities,
insurance  and other  agreements  (including  the  related  Receivable  File) or
arrangement  and  other  collateral  of  whatever  character  from  time to time
supporting  or  securing  payment of such  Receivable,  whether  pursuant to the
Contract  relating to such Receivable or otherwise  relating to such Receivable,
(e) all right,  title and interest,  if any, of such Seller in any related money
held in any LockBox or LockBox  Account,  and (f) all other  instruments and all
rights under the documents in the Receivables  File relating to such Receivables
and all rights (but not obligations) relating to such Receivables.
<PAGE>

     "Reporting Date" means the second Business Day preceding each  Distribution
Date (as defined in the Loan Agreement).

     "Required  Capital Amount" means (a) as of any date of determination  while
the Loan Agreement  remains in effect, an amount equal to the greater of (i) the
product of (A) 1.5 times the  product of the  Default  Ratio (as  defined in the
Loan Agreement)  times the Loss Horizon Ratio (as defined in the Loan Agreement)
times (B) the  Outstanding  Balance of all  Receivables as of such date, each as
determined  from the most recent  Monthly  Report  delivered  to  Administrative
Agent, and (ii) the amount  necessary to ensure that Buyer remains Solvent,  and
(b) at all other times, the amount  determined  pursuant to the preceding clause
(a)(ii).

     "S&P" means Standard & Poor's Ratings Group, a division of The  McGraw-Hill
Companies, Inc.

     "Seller" has the meaning set forth in the preamble to the Agreement.

     "Seller Indemnified Amounts" has the meaning set forth in Section 6.1.

     "Seller Indemnified Party" has the meaning set forth in Section 6.1.

     "Seller  Material Adverse Effect" means a material adverse effect on (i) on
the  business,  property,  condition  (financial  or  otherwise)  or  results of
operations or prospects of Sellers and their Subsidiaries taken as a whole, (ii)
the ability of any Seller to perform its obligations  under the Agreement or any
other Transaction Document to which it is a party, (iii) the legality,  validity
or enforceability of the Agreement or any other Transaction  Document,  (iv) the
interest  of any  Transferee  or of the  Administrative  Agent (on behalf of the
Agents and the  Lenders)  in the  Receivables  generally  or in any  significant
portion of the  Receivables,  the Related  Security or Collections  with respect
thereto,  or (v)  the  collectibility  of the  Receivables  generally  or of any
material portion of the Receivables.

     "Senior  Executive" means, as to any Seller,  the Chief Executive  Officer,
Chief Financial Officer, President, Treasurer, Assistant Treasurer,  Controller,
Secretary,  Assistant Secretary, Executive Vice President, Senior Vice President
or Director of Corporate Finance of such Seller.

     "Settlement  Date" means,  with  respect to each  Calculation  Period,  the
second  Business  Day  after  the  Reporting  Date  following  the  end of  such
Calculation Period.

     "Solvent" means with respect to any Person that as of the date
of determination both (A)(i) the then fair saleable value of the property of
such Person is (y) greater than the total amount of liabilities (including
contingent liabilities) of such Person and (z) not less than the amount that
will be required to pay the probable liabilities on such Person's then existing
debts as they become absolute and matured considering all financing alternatives
and potential asset sales reasonably available to such Person; (ii) such
Person's capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (B) such Person is
"solvent" within

<PAGE>

the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.

     "Standard Securitization  Undertakings" means, collectively,  (i) customary
arms-length   servicing  obligations  (together  with  any  related  performance
guarantees), (ii) obligations (together with any related performance guarantees)
to refund the purchase price or grant purchase price credits for dilutive events
or   misrepresentation   (in  each  case  unrelated  to  the  collectibility  of
receivables  or  creditworthiness  of the  associated  account  debtors),  (iii)
representations,  warranties,  covenants  and  indemnities  (together  with  any
related  performance  guarantees)  of a type that are  reasonably  customary  in
accounts receivable securitizations (or, in the case of a QSPE, the transactions
of the type for which such Person was organized) and (iv) in the case of a QSPE,
a guarantee by members of the Bowater Group of any  make-whole  premium (but not
any principal or interest) on Indebtedness of the QSPE.

     "Subordinated Loan" has the meaning set forth in Section 1.2(c).

     "Subordinated Note" has the meaning set forth in Section 1.2(c).

     "Subsidiary"  means, for any Person, any corporation,  partnership or other
entity  of  which at  least a  majority  of the  securities  or other  ownership
interests  having by the terms thereof ordinary voting power to elect a majority
of the board of directors or other persons  performing similar functions of such
corporation,  partnership or other entity (irrespective of whether or not at the
time  securities or other  ownership  interests of any other class or classes of
such  corporation,  partnership  or other entity shall have or might have voting
power by reason of the happening of any  contingency) is at the time directly or
indirectly  owned or  controlled by such Person or one or more  Subsidiaries  of
such  Person or by such  Person  and one or more  Subsidiaries  of such  Person;
provided, however, that the term "Subsidiary" shall not include any QSPE.

     "Taxes" means any and all present or future taxes, duties, levies, imposts,
deductions,  charges or withholdings, and any and all liabilities (including but
not limited to interest and penalties) with respect to the foregoing, imposed by
any Governmental Authority.

     "Termination  Date"  means  the  earliest  to occur  of (i) the  Commitment
Termination  Date under and as defined in the Loan Agreement,  (ii) the Business
Day  immediately  prior to the  occurrence of a  Termination  Event set forth in
Section 5.1(f),  (iii) the Business Day specified in a written notice from Buyer
to Sellers following the occurrence of any other Termination Event, (v) the date
which is ten (10) Business Days after Buyer's receipt of written notice from any
Seller that it wishes to terminate the facility evidenced by this Agreement, and
(v) the first date on which the  condition  precedent  in Section  3.2(b) is not
satisfied.

     "Termination  Event"  has the  meaning  set  forth  in  Section  5.1 of the
Agreement.
<PAGE>

     "Transaction Documents" means,  collectively,  this Agreement, each LockBox
Account Agreement, the Subordinated Note, each Purchase Price Loan Note, and all
other instruments, documents and agreements executed and delivered in connection
herewith.

     "Transferee" has the meaning set forth in the preliminary statements to the
Agreement.

     "Unmatured  Termination  Event" means an event  which,  with the passage of
time or the giving of notice, or both, would constitute a Termination Event.

     All accounting terms not specifically  defined herein shall be construed in
accordance with GAAP. All terms used in Article 9 of the UCC in the State of New
York, and not  specifically  defined herein,  are used herein as defined in such
Article 9.



<PAGE>


                                   Exhibit II

      JURISDICTIONS OF ORGANIZATION; CHIEF EXECUTIVE OFFICES; PRINCIPAL PLACES
               OF BUSINESS; LOCATIONS OF RECORDS; ORGANIZATIONAL
                       IDENTIFICATION NUMBERS; OTHER NAMES


<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                                                                                              Organizational
             Jurisdiction of      Chief Executive Office/                                                     Identification
   Entity     Organization     Principal Place of Business     Locations of Records                        Number   Other Names
---------------------------------------- -------------------- -------------------------------- -------------------------------------
<CAPTION>
<S>                                                                        <C>
                                                                Lisle, IL  60532
                                                                177 Broad Street, 10th Floor
                                                                Stamford, CT  06901
                                                                28 Park Ridge Road
                                                                San Rafael, CA  94903
</TABLE>


<PAGE>


44


                                   Exhibit III
                         LOCKBOXES AND LOCKBOX ACCOUNTS

     Bank of America

         Bowater Funding Inc.
         Account Number 3750202618

         PO Box 100207
         Atlanta, GA  30384

         PO Box 503362
         St. Louis, MO 63150

         PO Box 503393
         St. Louis, MO 63150


     Wachovia Bank

         Bowater Funding Inc.
         Account Number 0451023812
         PO Box 75081
         Charlotte, NC  28275

         Bowater Funding Inc.
         Account Number 2345038
         3 Bishopsgate, London  EC2N 3AB


     JPMorgan Chase Manhattan Bank

         Bowater Funding Inc.
         ABA 021000021
         Account Number 9102524478   (electronic lockbox)



<PAGE>


                                   Exhibit IV
                         FORM OF COMPLIANCE CERTIFICATE

     This Compliance  Certificate is furnished  pursuant to that certain Amended
and Restated  Receivables  Sale  Agreement  dated as of December 1, 2005,  among
Bowater Incorporated (together with its successors,  "Bowater"), Bowater America
Inc., and Bowater Funding Inc. (as amended,  restated or otherwise modified from
time to time, the "Agreement"). Capitalized terms used and not otherwise defined
herein are used with the meanings attributed thereto in the Agreement.

     THE UNDERSIGNED FINANCIAL OFFICER HEREBY CERTIFIES THAT:

     1........I am the duly elected ______________ of Bowater.

     2........I  have  reviewed the terms of the  Agreement  and I have made, or
have  caused  to be  made  under  my  supervision,  a  detailed  review  of  the
transactions  and  conditions  of  Bowater  and  its  Subsidiaries   during  the
accounting period covered by the attached financial statements.

     3........The  examinations described in paragraph 2 did not disclose, and I
have no knowledge of, the existence of any condition or event which  constitutes
a  Termination  Event or an Unmatured  Termination  Event,  as each such term is
defined  under  the  Agreement,  during or at the end of the  accounting  period
covered  by  the  attached  financial  statements  or as of  the  date  of  this
Certificate[, except as set forth below].

     [4.......Described  below are the  exceptions,  if any,  to  paragraph 3 by
listing,  in detail,  the nature of the  condition or event,  the period  during
which it has  existed and the action  which  Bowater  has taken,  is taking,  or
proposes   to  take   with   respect   to  each   such   condition   or   event:
_______________________________].

     The  foregoing  certifications,  together  with  the  financial  statements
delivered  with  this  Certificate,  are made  and  delivered  this  ____ day of
______________, 200_.

                                                     BOWATER INCORPORATED


                                                     By:_______________________
                                                     Name:
                                                     Title:


<PAGE>


                                   Exhibit V-1
                       [FORM OF] PURCHASE PRICE LOAN NOTE

     PURCHASE PRICE LOAN NOTE December 1, 2005

     1  Note. FOR VALUE RECEIVED, the undersigned, Bowater America Inc., a
Delaware corporation  ("Transferee"),  hereby unconditionally promises to pay to
the order of Bowater Incorporated,  a Delaware corporation ("Seller"), in lawful
money of the United States of America and in immediately  available funds,  upon
demand,  the aggregate  unpaid  principal sum  outstanding of all Purchase Price
Loans  made  from  time to time  by  Seller  to  Transferee  pursuant  to and in
accordance with the terms of that certain Amended and Restated  Receivables Sale
Agreement  dated as of December 1, 2005 among Seller,  Transferee and certain of
their affiliates (as amended, restated,  supplemented or otherwise modified from
time to time, the "Sale Agreement").  Reference to Sections 1.2(c) and 1.3(b) of
the Sale  Agreement is hereby made for a statement  of the terms and  conditions
under which the loans evidenced  hereby have been and will be made.  Capitalized
terms used and not otherwise  defined herein shall have the meanings ascribed to
such terms in the Sale  Agreement.  This  Purchase  Price  Loan Note  amends and
restates in its entirety that certain  Purchase  Price Loan Note dated  December
19, 2002 made by Transferee in favor of Seller.

     2  Interest.  Transferee  further  promises  to pay  interest  on the
outstanding unpaid principal amount hereof from the date of the initial Purchase
Price Loan  hereunder  until payment in full hereof at a rate per annum equal to
the Prime Rate (as hereinafter defined);  provided,  however, that if Transferee
shall default in the payment of any  principal  hereof,  Transferee  promises to
pay,  on  demand,  interest  at the rate  equal to the Prime Rate plus 2.00% per
annum on any such unpaid amounts,  from the date such payment is due to the date
of actual  payment.  Interest shall be payable on the first Business Day of each
month in arrears;  provided,  however, that Transferee may elect on the date any
interest  payment is due  hereunder to defer such payment and upon such election
the amount of interest  due but unpaid on such date shall  constitute  principal
under this Purchase Price Loan Note. The outstanding  principal of any loan made
under this Purchase Price Loan Note may be repaid or prepaid at any time without
premium or penalty. As used herein, "Prime Rate" means a rate per annum equal to
the prime rate published from time to time in The Wall Street Journal,  changing
when and as such  published  rate  changes and shall be computed for actual days
elapsed on the basis of a year consisting of 360 days.

     3. Principal.  Seller is  authorized  and directed by  Transferee  to
enter on the grid attached hereto,  or, at its option, in its books and records,
the date and amount of each  Purchase  Price Loan and the amount of each payment
of principal made by Transferee,  and absent manifest error,  such entries shall
constitute  prima facie evidence of the accuracy of the  information so entered;
provided  that neither the failure of Seller to make any such entry or any error
therein shall expand, limit or affect the obligations of Transferee hereunder.
<PAGE>

     4  GOVERNING  LAW. THIS PURCHASE PRICE LOAN NOTE SHALL BE GOVERNED BY
THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW
PRINCIPLES   THEREOF  (OTHER  THAN  SECTION  5-1401  OF  THE  NEW  YORK  GENERAL
OBLIGATIONS  LAW).  WHEREVER POSSIBLE EACH PROVISION OF THIS PURCHASE PRICE LOAN
NOTE SHALL BE  INTERPRETED  IN SUCH  MANNER AS TO BE  EFFECTIVE  AND VALID UNDER
APPLICABLE  LAW, BUT IF ANY PROVISION OF THIS PURCHASE  PRICE LOAN NOTE SHALL BE
PROHIBITED  BY  OR  INVALID  UNDER  APPLICABLE  LAW,  SUCH  PROVISION  SHALL  BE
INEFFECTIVE  TO  THE  EXTENT  OF  SUCH   PROHIBITION   OR  INVALIDITY,   WITHOUT
INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS
PURCHASE PRICE LOAN NOTE.

     5........Waivers.  All parties  hereto,  whether as makers,  endorsers,  or
otherwise,  severally waive presentment for payment,  demand, protest and notice
of dishonor.

                                             BOWATER AMERICA INC.


                                             By:_____________________________
                                             Name:
                                             Title:


<PAGE>




                                    SCHEDULE
                                       TO
                            PURCHASE PRICE LOAN NOTE
                 PURCHASE PRICE LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

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

                  AMOUNT OF        AMOUNT OF     UNPAID
                SUBORDINATED      PRINICIPAL    PRINCIPAL         NOTATION MADE
    DATE           LOAN             PAID         BALANCE           BY (INITIALS)
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------


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</TABLE>

<PAGE>



                                   Exhibit V-2
                           [FORM OF] SUBORDINATED NOTE

                                SUBORDINATED NOTE
                                                                December 1, 2005

     1 Note.  FOR VALUE  RECEIVED,  the  undersigned,  Bowater  Funding  Inc., a
Delaware corporation ("Buyer"),  hereby  unconditionally  promises to pay to the
order of Bowater America Inc., a Delaware  corporation  ("BAI"), in lawful money
of the United States of America and in immediately available funds, on or before
the date following the Termination  Date which is one year and one day after the
date on which (i) the Outstanding  Balance of all Receivables  sold by BAI under
that  certain  Amended  and  Restated  Receivables  Sale  Agreement  dated as of
December  1,  2005  between  BAI and  certain  of its  affiliates  and Buyer (as
amended,  restated,  supplemented  or otherwise  modified from time to time, the
"Sale  Agreement")  has been  reduced to zero and (ii) BAI has paid to Buyer all
indemnities,  adjustments  and other  amounts  which may be owed  thereunder  in
connection with the Purchases  thereunder (the "Collection Date"), the aggregate
unpaid  principal sum  outstanding of all  Subordinated  Loans made from time to
time by BAI to Buyer  pursuant to and in  accordance  with the terms of the Sale
Agreement.  Reference  to Sections  1.2(c) and 1.3(b) of the Sale  Agreement  is
hereby made for a statement  of the terms and  conditions  under which the loans
evidenced  hereby  have been and will be made.  Capitalized  terms  used and not
otherwise  defined herein shall have the meanings  ascribed to such terms in the
Sale Agreement.  This Subordinated Note amends and restates in its entirety that
certain Subordinated Note dated December 19, 2002 made by Buyer in favor of BAI.

     2  Interest.  Buyer  further  promises to pay  interest on the  outstanding
unpaid  principal amount hereof from the date of the initial  Subordinated  Loan
hereunder  until  payment in full  hereof at a rate per annum equal to the Prime
Rate (as hereinafter defined); provided, however, that if Buyer shall default in
the payment of any principal hereof, Buyer promises to pay, on demand,  interest
at the rate  equal to the  Prime  Rate plus  2.00% per annum on any such  unpaid
amounts,  from the date  such  payment  is due to the  date of  actual  payment.
Interest  shall be payable on the first  Business  Day of each month in arrears;
provided,  however, that Buyer may elect on the date any interest payment is due
hereunder  to defer such  payment and upon such  election the amount of interest
due but unpaid on such date shall constitute  principal under this  Subordinated
Note. The outstanding  principal of any loan made under this  Subordinated  Note
shall be due and payable on the Collection  Date and may be repaid or prepaid at
any time without premium or penalty.  As used herein,  "Prime Rate" means a rate
per annum equal to the prime rate published from time to time in The Wall Street
Journal,  changing when and as such published rate changes and shall be computed
for actual days elapsed on the basis of a year consisting of 360 days.

     3 Principal.  BAI is authorized  and directed by Buyer to enter on the grid
attached  hereto,  or, at its  option,  in its books and  records,  the date and
amount of each

<PAGE>

Subordinated Loan and the amount of each payment of principal made by Buyer, and
absent manifest error, such entries shall constitute prima facie evidence of the
accuracy of the information so entered; provided that neither the failure of BAI
to make any such entry or any error therein  shall  expand,  limit or affect the
obligations of Buyer hereunder.

     4 Subordination. BAI shall have the right to receive, and Buyer shall make,
any and all  payments  and  prepayments  relating  to the loans  made under this
Subordinated  Note,  provided  that,  after giving effect to any such payment or
prepayment,  the aggregate  Outstanding Balance of Receivables owned by Buyer at
such  time  exceeds  any and all then  outstanding  "Obligations"  under  and as
defined in that certain Loan Agreement dated as of December 1, 2005 by and among
Buyer, Bowater Incorporated, as initial Servicer, various lenders and co-agents,
and SunTrust Capital Markets, Inc., a Tennessee corporation,  as "Administrative
Agent" (as amended,  restated,  supplemented or otherwise  modified from time to
time, the "Loan Agreement"). BAI hereby agrees that at any time during which the
conditions set forth in the proviso of the immediately  preceding sentence shall
not be  satisfied,  BAI shall be  subordinate  in right of  payment to the prior
payment of all Obligations  under and as defined under the Loan  Agreement.  The
subordination provisions contained herein are for the direct benefit of, and may
be enforced by, Administrative Agent, on behalf of the Secured Parties under and
as defined in the Loan Agreement  (Administrative  Agent and the Secured Parties
being hereinafter collectively referred to as the "Senior Claimants"). Until the
date on which the "Obligations"  under and as defined in the Loan Agreement (all
such Obligations,  collectively, the "Senior Claim") have been indefeasibly paid
and satisfied in full,  BAI shall not institute  against Buyer any proceeding of
the type described in Section 5.1(f) of the Sale Agreement  unless and until the
Collection  Date has occurred.  Should any payment,  distribution or security or
proceeds  thereof be received by BAI in  violation of this Section 4, BAI agrees
that  such  payment  shall be  segregated,  received  and held in trust  for the
benefit of, and deemed to be the property of, and shall be immediately paid over
and delivered to Administrative Agent for the benefit of the Senior Claimants.

     5 Bankruptcy; Insolvency. Upon the occurrence of any proceeding of the type
described in Section  5.1(f) of the Sale  Agreement  involving  Buyer as debtor,
then and in any such event the Senior Claimants shall receive payment in full of
all  amounts  due or to become due on or in respect  of the  Aggregate  Invested
Amount and the Senior Claim (including, without limitation, any interest thereon
accruing after the  commencement of any such  proceeding,  whether or not any or
all of such interest is an allowable claim in any such proceeding) before BAI is
entitled to receive  payment on account of this  Subordinated  Note, and to that
end, any payment or  distribution  of assets of Buyer of any kind or  character,
whether in cash,  securities or other  property,  in any  applicable  insolvency
proceeding,  which would  otherwise  be payable to or  deliverable  upon or with
respect to any or all  indebtedness  under  this  Subordinated  Note,  is hereby
assigned to and shall be paid or delivered by the Person  making such payment or
delivery (whether a trustee in bankruptcy, a receiver,  custodian or liquidating
trustee or otherwise) directly to Administrative Agent for application to, or as
collateral  for the payment of, the Senior  Claim until such Senior  Claim shall
have been paid in full and satisfied.

     6  Amendments.  This  Subordinated  Note shall not be  amended or  modified
except in accordance with Section 7.1 of the Sale  Agreement.  The terms of this
Subordinated  Note may not be amended or  otherwise  modified  without the prior
written  consent  of  each of the  Agents  (under  and as  defined  in the  Loan
Agreement).

     7 GOVERNING LAW. THIS  SUBORDINATED  NOTE SHALL BE GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF NEW YORK WITHOUT  REGARD TO THE CONFLICT OF LAW  PRINCIPLES
THEREOF  (OTHER THAN SECTION  5-1401 OF THE NEW YORK GENERAL  OBLIGATIONS  LAW).
WHEREVER  POSSIBLE EACH PROVISION OF THIS SUBORDINATED NOTE SHALL BE INTERPRETED
IN SUCH MANNER AS TO BE  EFFECTIVE  AND VALID UNDER  APPLICABLE  LAW, BUT IF ANY
PROVISION OF THIS  SUBORDINATED  NOTE SHALL BE  PROHIBITED  BY OR INVALID  UNDER
APPLICABLE  LAW,  SUCH  PROVISION  SHALL BE  INEFFECTIVE  TO THE  EXTENT OF SUCH
PROHIBITION OR INVALIDITY,  WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION
OR THE REMAINING PROVISIONS OF THIS SUBORDINATED NOTE.

     8 Waivers. All parties hereto, whether as makers,  endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of dishonor.
BAI  additionally  expressly  waives all notice of the  acceptance by any Senior
Claimant of the subordination and other provisions of this Subordinated Note and
expressly  waives  reliance by any Senior  Claimant upon the  subordination  and
other provisions herein provided.

     9 Assignment, Pledge and Transfer. This Subordinated Note may not assigned,
pledged or  otherwise  transferred  to any Person other than its delivery to the
Administrative  Agent,  and any  attempted  assignment,  pledge or  transfer  in
violation hereof shall be void ab initio.

                                              BOWATER FUNDING INC.


                                              By:_____________________________
                                              Name:
                                              Title:


<PAGE>





                                    SCHEDULE
                                       TO
                                SUBORDINATED NOTE
                  SUBORDINATED LOANS AND PAYMENTS OF PRINCIPAL

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
---------------------------------------------------------------------------------------------------------

             AMOUNT OF           AMOUNT OF         UNPAID
            SUBORDINATED         PRINCIPAL        PRINCIPAL        NOTATION MADE
     DATE     LOAN                 PAID           BALANCE          BY(INITIALS)
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------


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</TABLE>

<PAGE>



                                   Exhibit VI
                            [FORM OF] PURCHASE REPORT

          For the Calculation Period beginning [date] and ending [date]

                                                                 -----


TO:      ______________________, AS TRANSFEREE, AND THE ADMINISTRATIVE
         AGENT
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

--------------------------------------------------------- -------------------------- ----------------------- ---------
--------------------------------------------------------- -------------------------- ----------------------- ---------
Aggregate Outstanding Balance of all Receivables
created during the period:                                $_____________                                        A
--------------------------------------------------------- -------------------------- ----------------------- ---------
--------------------------------------------------------- -------------------------- ----------------------- ---------
Less (if applicable): Aggregate Outstanding Balance of all Receivables
contributed during the period:
                                                          $____________)                                       (B)
--------------------------------------------------------- -------------------------- ----------------------- ---------
Equals:  Aggregate Outstanding Balance of all
Receivables sold during the period (A - B ):
                                                                                     $___________               =C
--------------------------------------------------------- -------------------------- ----------------------- ---------
Less:  Purchase Price discount during the Period:
                                                          ($____________)                                      (D)
--------------------------------------------------------- -------------------------- ----------------------- ---------
Equals:  Gross Purchase Price Payable during the period
(A - D)                                                                              $____________              =E
--------------------------------------------------------- -------------------------- ----------------------- ---------
Less:  Total Purchase Price Credits arising during the
Period:                                                   ($____________)                                      (F)
--------------------------------------------------------- -------------------------- ----------------------- ---------
Equals:  Net Purchase Price payable during the Period
(E - F):                                                                             $____________              =G
--------------------------------------------------------- -------------------------- ----------------------- ---------

--------------------------------------------------------- -------------------------- ----------------------- ---------
Cash Purchase Price Paid to Seller:                       $_____________                                        H
--------------------------------------------------------- -------------------------- ----------------------- ---------


</TABLE>

<PAGE>


                                   Exhibit VII
                          CREDIT AND COLLECTION POLICY

                                  CREDIT MANUAL
                              BOWATER INCORPORATED
                                 PAPER PRODUCTS

MISSION:

The mission of the credit department is to assist in the selling of the
company's products to all qualified customers while protecting the company's
investment in accounts receivable.

CREDIT PHILOSOPHY:

The company manufactures pulp, and paper products for a wide variety of end
users. Each class of users has different degrees of risk. The company is willing
to take a larger degree of risk in order to make our products available to a
wider audience.

CREDIT DEPARTMENT GOALS:

The credit department sets goals each year. The goals will be based on the
department's accomplishment of the prior year's goals, current market
conditions, corporate goals, and the company's credit philosophy.

CREDIT STAFF AND RESPONSIBILITIES:

The Credit Department reports to the Director of Financial Planning and
Analysis, who reports to the VP Administration and Planning. There are 6 staff
positions within the Credit Department.

a. Director of Credit - Has over-all responsibility for the Credit Department
b. Two credit managers - Have responsibility for credit and collection for
assigned products and geographic areas c. Accounts Receivable manger - Has
responsibility for the integrity of corporate AR d. Two Credit Analyst - Assist
AR manager and credit managers

CREDIT MANAGEMENT POLICIES:

Each new potential customer is reviewed by the appropriate credit manager and if
warranted ask to complete and sign a credit application. A credit investigation
to determine the creditworthiness of each new potential customer is performed by
obtaining bank and trade reports or by pulling a credit report from a credit
reporting agency or from an industry credit group. Financial statements are
required at the discretion of the assigned credit manager. Credit lines are
assigned at the discretion of the assigned credit manager. If no credit limit is
assigned, all orders for the account are credit approved before production.
Terms other than the industry or country "normal" require approval by the next
level of management.
<PAGE>

Customer will receive products as long as their account is current and within
the approved line of credit. If a customer's account is not current or within
the approved line of credit, each new order for the customer is reviewed by the
assigned credit manager and must be manually approved before production. All
efforts are made to proactively qualify orders for production.

COLLECTION MANAGEMENT POLICIES:

The Credit Department will collect all outstanding AR in a timely manner.
Customer will be contacted by:

a. CSR or sales person responsible for account b. Directly by credit manager or
other assigned credit personnel

Aging reports are produced weekly or on demand to assist CSR/sales and credit
manager ascertain which accounts need collection effort. If a customer is unable
or unwilling to pay their outstanding balance, the Credit Manager will consider
placing the account with an authorized collection agency or collection attorney.
Items are not written off to bad debt until all efforts to collect are exhausted
..

INFORMATION MANAGEMENT POLICIES:

The AR/credit system is CODA. CODA provides on line real time customer
information. Weekly, monthly and on-demand aging reports are available to assist
the credit mangers in account evaluations. Reports are provided to higher
management as required. Each credit manager is a member of NACM and attends
industry credit meeting. Each Credit Manager is responsible for his/her self
education in credit management skills.





<PAGE>


                                  Exhibit VIII
                        FORM OF LETTER OF CREDIT REQUEST


                                     [Date]




To:    [Bowater America Inc./Bowater Funding Inc.]
       55 East Camperdown Way
       Greenville, SC  29602

       Attention: Treasurer



                          Re: LETTER OF CREDIT REQUEST


Ladies and Gentlemen:

                  Reference is hereby made to the Amended and Restated
Receivables Sale Agreement, dated as of December 1, 2005, among Bowater
Incorporated and Bowater America Inc., as sellers, and Bowater Funding Inc., as
buyer (as amended, supplemented, restated or otherwise modified from time to
time, the "Agreement"). Capitalized terms used and not otherwise defined herein
are used with the meanings attributed to them in the Agreement.

                  As payment for that portion of the Purchase Price of the
Receivables to be sold to you on [date] by [Bowater Incorporated/Bowater America
Inc.] pursuant to the Agreement that is calculated from the information below
and in accordance with the Agreement, you are hereby requested to arrange for
and obtain the issuance of a standby letter of credit with the following terms
for your account:


     1.  Name  and  address  of  beneficiary:  _______________________
     2.  To be delivered  by  [overnight   carrier/teletransmission/mail/other
         (specify)]
     3.  Currency and amount:  US$_____________
     4.  Advising  bank name and address,  if applicable:  _________________
     5.  Expiration date (not to exceed one year from the date of issuance or
         extension): __________________
     6. Credit to be available for payment  against  beneficiary's  draft(s)
        drawn at sight  accompanied by the following documents (check one):

        /  / Statement purportedly signed by the beneficiary which reads
        as follows:  ________________.

        Other Documents:  ______________________________

        /  / Special Conditions (including,  if you have a preference,
       selection of UCP or ISP98): ------------------------------

        /  / Issue substantially in form of attached specimen.

     7.   [We hereby offer you a commission  for this letter of credit,  payable
          upon its issuance and delivery, of $___________.]

     8.   [If the beneficiary specified above is a financial institution that is
          to issue its own undertaking based on this requested letter of credit:
          Request  beneficiary  to  issue  and  deliver  its  (specify  type  of
          undertaking)  ___________ in favor of  ________________  for an amount
          not  exceeding  the  amount  specified  above,  effective  immediately
          relative to (specify  contract  number or other  pertinent  reference)
          ____________ to expire on _________________. ]

     9.   The  requested  letter of credit  should state that it is being issued
          upon  application  of Bowater  Funding  Inc. at the request of [insert
          name of applicable Bowater affiliate].


         Sincerely,

         [BOWATER INCORPORATED/BOWATER AMERICA INC.], AS SELLER



         By:  __________________________________
         Name:
         Title:




<PAGE>



                                   Schedule A
                       DOCUMENTS TO BE DELIVERED TO BUYER
          ON OR PRIOR TO EFFECTIVENESS OF THE AMENDMENT AND RESTATEMENT

     1. Executed copies of the Amended and Restated  Receivables Sale Agreement,
duly executed by the parties thereto.

     2. A certificate of each Seller's [Assistant] Secretary certifying:

     (a) A copy of the  Resolutions  of the Board of  Directors  of such Seller,
authorizing such Seller's execution, delivery and performance of the Amended and
Restated  Receivables  Sale Agreement and the other documents to be delivered by
it thereunder;

     (b) A copy of the Organizational  Documents of such Seller (also certified,
to the extent that such documents are filed with any governmental  authority, by
the  Secretary  of State of the  jurisdiction  of  organization  of Seller on or
within thirty (30) days prior to closing);

     (c) Good Standing  Certificates  for such Seller issued by the Secretary of
State of its state of  organization  and each  other  jurisdiction  where it has
material operations; and

     (d) The names and  signatures  of the officers  authorized on such Seller's
behalf to execute the Amended and Restated  Receivables  Sale  Agreement and any
other documents to be delivered by it hereunder.

     3. One or more favorable opinions of internal and outside legal counsel for
each Seller reasonably  acceptable to Buyer (and the Administrative Agent) as to
the  following  (it being  understood  that at a minimum,  all UCC  opinions and
enforceability   opinions  are  to  come  from  outside  counsel,   as  well  as
non-contravention  of the Bowater Credit Agreement and other material  financing
agreements  or  indentures  identified  in an  officer's  certificate  as  being
material to Bowater and its Subsidiaries taken as a whole):

     (a) Such Seller is a corporation,  duly organized, validly existing, and in
good standing under the laws of the State of ______________.

     (b) Such Seller has all requisite authority to conduct its business in each
jurisdiction  where  failure to be so  qualified  would have a material  adverse
effect on such Seller's business.

     (c) The  execution  and delivery by such Seller of the Amended and Restated
Receivables Sale Agreement and each other Transaction  Document to which it is a
party  and  its  performance  of  its  obligations  thereunder  have  been  duly
authorized by all necessary organizational action and proceedings on the part of
such Seller and will not:

     (i)  require  any  action  by  or  in  respect  of,  or  filing  with,  any
governmental  body,  agency or official  (other than the filing of UCC financing
statements);
<PAGE>

     (ii) contravene, or constitute a default under, any provision of applicable
law  or  regulation  or of its  Organizational  Documents  or of any  agreement,
judgment,  injunction,  order,  decree  or other  instrument  binding  upon such
Seller; or

     (iii) result in the creation or  imposition  of any Adverse Claim on assets
of such Seller (except as contemplated  by the Amended and Restated  Receivables
Sale Agreement).

     (d) The Amended and  Restated  Receivables  Sale  Agreement  and each other
Transaction Document to which it is a party has been duly executed and delivered
by such Seller and constitutes the legally valid, and binding obligation of such
Seller  enforceable  in  accordance  with its  terms,  except to the  extent the
enforcement  thereof may be limited by  bankruptcy,  insolvency  or similar laws
affecting the enforcement of creditors' rights generally and subject also to the
availability of equitable remedies if equitable remedies are sought.

     (e) In the event that the Amended and Restated  Receivables  Sale Agreement
is held to create a transfer  for security  purposes  rather than a true sale or
other  outright   assignment,   the  provisions  of  the  Amended  and  Restated
Receivables  Sale Agreement are effective to create valid security  interests in
favor of the applicable  Transferee,  in all of such Seller's  right,  title and
interest, in and to the Receivables and Related Security described therein which
constitute "accounts," "chattel paper" or "general intangibles" (each as defined
in the UCC)  (collectively,  the  "Opinion  Collateral"),  as  security  for the
payment of a loan deemed to have been made by such  Transferee to such Seller in
an amount equal to the  aggregate  Purchase  Prices (as defined  therein) of the
Receivables  (as defined  therein) sold by such Seller,  together with all other
obligations of such Seller thereunder.

     (f) Each of the UCC-1  Financing  Statements  naming such Seller as debtor,
any Transferee,  as secured party, and/or the Administrative  Agent, as assignee
of secured party to be filed in the [describe filing offices], is in appropriate
form for filing therein.  Upon filing of such UCC-1 Financing Statements in such
filing offices and payment of the required filing fees, the security interest in
favor of such  Transferee in the Opinion  Collateral  transferred by such Seller
will be perfected and assigned of record to the Administrative Agent.

     (g) Based solely on our review of the  [describe UCC Search  Reports],  and
assuming (i) the filing of the Financing  Statements and payment of the required
filing  fees in  accordance  with  paragraph  (f) and  (ii) the  absence  of any
intervening filings between the date and time of the Search Reports and the date
and time of the filing of the  Financing  Statements,  the security  interest of
Buyer in the Opinion Collateral is prior to any security interest granted in the
Opinion Collateral by such Seller, the priority of which is determined solely by
the filing of a financing statement in the [describe filing offices].

     (h) To the best of the opinion giver's knowledge,  there is no action, suit
or other  proceeding  against any Seller or any  Affiliate of any Seller,  which
would  materially  adversely  affect the business or financial  condition of any
Seller and its Affiliates taken as a whole or which would  materially  adversely
affect the  ability of any Seller to perform its  obligations  under the Amended
and Restated Receivables Sale Agreement.

     4. A "true sale" opinion and "substantive  consolidation"  opinion(s)
of outside counsel for the Sellers with respect to the transactions contemplated
by the Amended and Restated Receivables Sale Agreement.

     5. A Certificate of a Financial  Officer of Bowater  certifying that, as of
the Closing Date, no Termination Event or Unmatured Termination Event exists and
is continuing.

     6. Amended and Restated  Performance  Undertaking executed by Bowater
in favor of the Buyer.

     7.Amended  and  Restated  Loan  Agreement  and  each of the  closing
documents described therein.

<PAGE>




                                   Schedule B
                                NOTICE ADDRESSES





                  Sellers:

                  c/o Bowater Incorporated
                  55 East Camperdown Way
                  Greenville, SC  29602
                  Attention:        Treasurer
                  Facsimile:        (864) 282-9219
                  Telephone:        (864) 282-9413





                  Buyer:

                  Bowater Funding Inc.
                  55 East Camperdown Way
                  Greenville, SC  29602
                  Attention:        Treasurer
                  Facsimile:        (864) 282-9219
                  Telephone:        (864) 282-9413


