BACKSTOP LOAN COMMITMENT AGREEMENT by and among TEMBEC INC. AND ITS SUBSIDIARIES SET FORTH HEREIN and JPMORGAN CHASE BANK, N.A. Dated as of December 18, 2007

[Signature Page of Backstop Loan Commitment Agreement]

For the purposes of this Term Sheet, Identified Events of Default means the Events of Default (as defined in the Indentures), if any, that arise as a result of the transactions contemplated by this Term Sheet, the Recapitalization, the Plan, the commencement or prosecution of the arrangement proceedings contemplated hereby, or any failure to pay interest under the Indentures during the course of such arrangement proceedings prior to the implementation of the Plan.

(i)

the Plan, Approval Order, the new (or amended) articles, by-laws and other constating documents, and all definitive legal documentation in connection with all of the foregoing, to be satisfactory to Tembec and JPM, each acting reasonably;

(ii)

from the effective date of the Support Agreements, there shall have been no material adverse change in Tembec’s business operations; for greater certainty, any change in Tembec’s business operations resulting from or arising in connection with any of the following does not constitute a material adverse change in Tembec’s business operations: (a) any change in GAAP; (b) any adoption, proposal, implementation or change in applicable laws or any interpretation thereof by any governmental authority; (c) any change in global, national or regional political conditions (including the outbreak of war or acts of terrorism) or in general economic, business, regulatory, political or market conditions or in national or global financial or capital markets; (d) any change affecting any of the industries in which Tembec operates, including changes in exchange rates or commodity prices; (e) any natural disaster; (f) the execution, announcement, or performance of a Support Agreement, this Term Sheet, the Plan or any other related agreement and the consummation of the transactions completed thereby; (g) any change in the market price or trading volume of any securities of Tembec or any suspension of trading in securities generally on any securities exchange on which any securities of Tembec trade; (h) the failure, in and of itself, of Tembec to meet any internal or public projections, forecasts or estimates of revenues or earnings; or (i) any action taken by Tembec which is contemplated in this Term Sheet;

(iii)

timely satisfaction by Tembec in all material respects of each obligation referred to in this Term Sheet and in the Support Agreements that is to be performed on or before the Implementation Date; and

(iv)

successful approval of the Plan and the Approval Order being in full force and effect and consummation of the transactions contemplated by the Plan.

Upon implementation of the Plan, Tembec, the Shareholders, the Noteholder Committee, JPM, the Backstop Parties, the indenture trustees named in the Indentures (the "Indenture Trustees"), and any of the foregoing persons’ respective officers, directors, employees, auditors, financial advisors, legal counsel and agents shall be released and discharged from any liabilities or claims (other than liabilities or claims attributable to any of such persons’ gross negligence, fraud or wilful misconduct as determined by the final, non-appealable judgment of a court of competent jurisdiction) arising on or prior to the date of implementation of the Plan in connection with the Existing Equity, the Notes, the Indentures (including, without limitation, the guarantee obligation of Tembec Inc. contained therein), the Recapitalization, the New Loan, any proceedings commenced with respect to the Plan and the Recapitalization, and any other actions or matters related directly or indirectly to the foregoing; provided that nothing in this paragraph will release or discharge any of Tembec, the Shareholders, the Noteholder Committee, JPM, the Backstop Parties or the Indenture Trustees from or in respect of their respective obligations under the Plan or the New Loan.

The Noteholder Released Parties (as defined in the Support Agreements) shall be indemnified as more particularly described in the Support Agreements.

The target implementation date of the Recapitalization will be February 29, 2008, subject to approval of the Plan by the Court and any regulatory matters (the date on which the Plan is implemented being the "Implementation Date").

Tembec, in consultation with JPM, shall designate the administrative agent (the "Administrative Agent") and the collateral agent(s) (the "Collateral Agent") for the lenders under the New Loan.

TII (the "Borrower")

Tembec Inc., TEI and all material wholly-owned Canadian and United States ("U.S.") subsidiaries of Tembec Inc., TEI and the Borrower from time to time (collectively, the "Guarantors") will jointly and severally guarantee indebtedness of the Borrower under the New Loan.

No later than 15 business days prior to the Implementation Date, the Borrower shall notify JPM and the Administrative Agent of the aggregate principal amount of the New Loan that will actually be borrowed (the "New Loan Amount") by the Borrower on the Implementation Date, which amount shall not be less than US$250,000,000 nor more than US$300,000,000 (the "Maximum New Loan Amount"). If the New Loan Amount will be less than the Maximum New Loan Amount, conforming changes will be made to the Definitive New Loan Documentation (defined below) in order to reflect the New Loan Amount as the stated amount of the New Loan.

The Noteholders as of the Claims Record Date (including any Backstop Parties in their capacity as Noteholders) will be entitled to participate for up to their pro rata share (based on their respective share of the Noteholders’ Principal Claim Amount) of the New Loan, subject to a minimum participation of US$250,000, provided that (i) in the case of a Noteholder resident in the United States, such Noteholder would otherwise qualify as, or is a fund that is an affiliate of and managed by the same fund manager as, a "qualified institutional buyer" within the meaning of Rule 144A under the US Securities Act of 1933, as amended or, (ii) in the case of a Noteholder resident in a province or territory of Canada, such Noteholder would otherwise qualify as an "accredited investor" as such term is defined in National Instrument 45-106 Prospectus and Registration Exemptions (the "National Instrument"), or (iii) in the case of a Noteholder resident outside of Canada or the United States, such Noteholder would otherwise qualify as an "accredited investor" as such term is defined in the National Instrument as if such Noteholder was resident in Canada and can demonstrate to Tembec that it is qualified to participate in the New Loan in accordance with the laws of its jurisdiction of residence (the aggregate amount participated, the "Participated Amount") (those who participate, the "New Lenders").

(i)

To secure repayment of amounts owing under the New Loan and the related guarantees, the Borrower and the Guarantors (collectively, the "Credit Parties") will provide the Collateral Agent with a security interest in all of their respective property, assets and undertakings, including, without limitation, a pledge of the stock or other interests in their respective material majority-owned subsidiaries. With respect to the collateral currently securing the Senior Bank Facility (the "Working Capital Assets"), the security interest will be a second lien; with respect to all other property, assets and undertakings of the Credit Parties (the "Fixed Assets"), the security interest will be a first lien. It is understood and agreed that the liens securing the New Loan will be subject only to the permitted liens as outlined in Section 27(iv)

(ii)

The Credit Parties shall be permitted to enter into agreements designed to protect the Credit Parties against fluctuations in interest rates and currency exchange rates subject to conditions and limitations to be agreed to by the Credit Parties and JPM ("Permitted Hedging Agreements"), and the Credit Parties shall be permitted to grant security in respect of its obligations under Permitted Hedging Agreements, which security shall rank pari passu with the security securing the amounts owing under the New Loan.

(iii)

The security interest described in paragraph (i) above will take the form of a charge on all assets and a fixed charge on material assets as agreed by JPM and the Credit Parties and shall be subject to usual exceptions, including, without limitation: (a) assets that cannot be pledged without the consent of one or more third parties (provided that, (x) upon request by JPM, the relevant Borrower or Guarantor will use commercially reasonable efforts to obtain such consent and (y) upon elimination of such restriction, such assets shall be pledged (and for the avoidance of doubt, this exception shall not apply to assets as to which consent is required under the Senior Bank Facility)); and (b) any assets to the extent that (1) the burden or cost of obtaining or perfecting a security interest therein outweighs the benefit of the security afforded thereby as reasonably determined by the Credit Parties and JPM, (2) the granting of a security interest therein is not available or would be prohibited by enforceable anti-assignment provisions of contracts or applicable law in the relevant jurisdiction (provided that, upon elimination of such restriction, such assets shall be pledged), and (3) a pledge of such assets would violate the terms of any contract with respect to such assets. Upon implementation of the Plan, TEI shall release all security granted to it by TII in respect of any obligations outstanding between such parties.

(iv)

For greater certainty, nothing in this Section 22 shall apply to or affect any joint venture to which Tembec is a party or any of Tembec’s interests in or obligations with respect to any such joint venture, and nothing in this Section 22 shall apply to or affect any non-Canadian and non-U.S. subsidiaries or Tembec’s interests therein (other than to the extent of the pledge of a Credit Party’s equity interests therein and the second lien security interest in any receivables from such subsidiaries that may be owing to a Credit Party).

The funds borrowed under the New Loan may be used by Tembec for the repayment of working capital facilities, capital expenditures and general corporate purposes.

If the New Loan Amount is less than the Maximum New Loan Amount, then each New Lender’s share of the New Loan will be in an amount equal to such New Lender’s pro rata share (based on the participation requested by each New Lender as a proportion of the Maximum New Loan Amount) of the New Loan Amount.

The New Loan will mature on the date that is 4 years from the Implementation Date with no principal repayments prior to maturity except as noted in Section 27(i) below and except for customary provisions relating to casualty and insurance proceeds and 35% of equity issuance proceeds. A prepayment premium shall not apply to any of the foregoing repayments.

For LIBOR loans, payable in cash in arrears at the end of one, two or three months after the beginning of the relevant interest period (as designated in writing by the Borrower to the Administrative Agent prior to the beginning of a new interest period) at the rate equal to the relevant LIBOR plus 7.0%.

Default rate of Base Rate plus 8.0% (the "Default Rate"). LIBOR loans shall not be available after the occurrence of a Default, and any loans outstanding as at the time of such Default shall be automatically converted to Base Rate loans at such time and accrue interest at the Default Rate.

(i)

A customary asset sale covenant covering collateral; provided that the Credit Parties may: (a) dispose of certain defined assets listed on a Schedule provided to the Committee Advisors prior to the JPM Backstop Date (defined below) having a maximum fair market value not to exceed CDN$50 million in the aggregate during the term of the New Loan; (b) sell inventory and receivables in the ordinary course; (c) dispose of any assets with an aggregate value of less than CDN$15 million in any 12-month period; and (d) dispose of any fixed assets (or exchange any existing fixed assets for substantially new fixed assets of substantially equal value, which will be added to the collateral pool for the New Loan) provided that any net proceeds from the disposition of such fixed assets shall be applied within 180 days to acquire or reinvest in, at fair market value, any new fixed assets, and provided that until the application thereof (x) such proceeds shall be held by the Administrative Agent (or, at the Administrative Agent’s option, by the Collateral Agent) under its sole dominion and control; provided that the Administrative Agent or the Collateral Agent, as the case may be, shall release a portion of the proceeds to the Credit Parties as required for reinvestment in capital expenditures relating to projects (but excluding ordinary course maintenance capital expenditures) based on a budgeted amount of such capital expenditures, (y) such dispositions shall not exceed CDN$50,000,000 per year, and (z) proceeds not so reinvested or in excess of such limit shall be applied to repay the New Loan;

(ii)

A debt incurrence covenant such that the Credit Parties may not incur debt other than: (a) debt obligations in respect of Permitted Hedging Agreements; (b) debt under the Senior Bank Facility in an amount not to exceed the amount available from time to time under the Senior Bank Facility based on the borrowing base formula set out in the Senior Bank Facility as at the JPM Backstop Date; (c) capital lease obligations, purchase money debt (including for permitted acquisitions or investments) and mortgage financings in an aggregate amount not to exceed CDN$25,000,000; (d) debt incurred in respect of or in connection with any government incentive programs not to exceed an amount outstanding at any one time during the term of the New Loan of CDN$20,000,000; (e) debt existing as at September 30, 2007 identified on a Schedule provided to the Committee Advisors prior to the JPM Backstop Date; (f) debt assumed in connection with an acquisition of assets or of a business; (g) replacement or refinancing of existing debt and debt permitted to be incurred pursuant to this paragraph in an amount not to exceed the amount of such debt and with no earlier maturity date; (h) debt incurred in the ordinary course of business as agreed to by the Borrower and JPM; (i) a general basket of CDN$50,000,000 outstanding at any one time for the term of the New Loan; and (j) any other permitted debt as agreed to by the Borrower and JPM;

(iii)

A customary restricted payments covenant with carve-outs to include, among other things, a general basket to be agreed upon by the Borrower and JPM and permitted investments to be agreed upon by the Borrower and JPM, including, without limitation, a basket of CDN$20,000,000 in the aggregate for investments in joint ventures and a general basket to be agreed upon by the Borrower and JPM;

(iv)

A limitation on liens covenant such that the Credit Parties may not create or incur any lien upon their property except: (a) customary permitted liens; (b) liens securing Permitted Hedging Agreements; (c) liens in respect of the Senior Bank Facility, permitted capital lease obligations, purchase money debt and mortgage financings; (d) subordinated liens in respect of debt permitted under subparagraph (ii)(i) above, subject to an intercreditor agreement acceptable to the Administrative Agent; and (e) other liens agreed upon by the Borrower and JPM;

(v)

A subsidiary distributions covenant such that the Credit Parties may not restrict the ability of any material subsidiary of the Credit Parties to make payments or transfer assets to the Credit Parties, except for customary carve-outs, including, without limitation, restrictions entered into pursuant to the Recapitalization and the New Loan, restrictions imposed pursuant to an agreement to sell a subsidiary of the Credit Parties (or all or substantially all of its assets), and any restrictions on transfers of assets pursuant to permitted liens;

(vi)

A fundamental changes covenant such that the Credit Parties may not enter into any merger, consolidation, amalgamation or other change of control transaction, except such transactions as are customarily permitted in a fundamental changes covenant for transactions of this type and any amalgamations among the Credit Parties;

(vii)

a limitation on affiliate transactions covenant such that, subject to customary carve-outs for transactions of this type, the Credit Parties shall not be permitted to enter into transactions with affiliates unless such transactions are either: (a) in the ordinary course and on terms and conditions no less favourable to Tembec than they would be if the transaction were to be negotiated with a party dealing at arms-length (in which case clause (b) does not apply); or (b) approved by the New Board in the case of affiliate transactions in excess of CDN$2,000,000 that do not fall within clause (a), provided that the aggregate amount of transactions outlined in this clause (b) shall not exceed CDN$15,000,000 during any 12-month period;

(viii)

A maintenance covenant such that, during any Non-Availability Period, Tembec Inc. shall maintain at all times consolidated EBITDA (as provided for in the Senior Bank Facility) of not less than CDN$150,000,000, calculated at the end of each monthly accounting period of Tembec Inc. for the 12 month period then ended, provided that for the purposes of this calculation, EBITDA shall be increased by the amount of the net proceeds of any debt which is unsecured with respect to any property or assets of Tembec or any of its restricted subsidiaries or any common share equity issuances of Tembec, in each case, which is permitted to be incurred or issued pursuant to the Senior Bank Facility, received by Tembec during such period (the "Maintenance Covenant"). For the purposes of this paragraph, "Non-Availability Period" means the period from the date on which Availability (as defined in the Senior Bank Facility) under the Senior Bank Facility has been less than CDN$35,000,000 (calculated on a daily basis) for 5 consecutive business days until the date Availability under the Senior Bank Facility has been greater than CDN$35,000,000 for 30 consecutive business days;

(ix)

A covenant limiting guarantees by the Credit Parties as agreed upon between the Borrower and JPM; and

(x)

A covenant concerning the addition of new material Guarantors and the release of immaterial dormant Guarantors as agreed upon between the Borrower and JPM.

In the event that the terms of (including any defined terms referenced in) the financial maintenance covenant currently set out in Section 7.4(b) of the CIT Facility or any event of default relating to such financial maintenance covenant are amended, waived or modified in any way, the comparable Maintenance Covenant or event of default relating to such Maintenance Covenant set out in the Definitive New Loan Documentation shall be automatically and correspondingly amended, waived or modified (taking into account any differences between defined terms in the Senior Bank Facility and defined terms in the Definitive New Loan Documentation) without the consent of the Administrative Agent or any of the New Lenders.

In the event that the Senior Bank Facility is amended to include an additional financial maintenance covenant, such additional financial maintenance covenant, or event of default relating to such covenant, shall be automatically and correspondingly added to the Definitive New Loan Documentation (taking into account any differences between the defined terms in the Senior Bank Facility and the defined terms of the Definitive New Loan Documentation) (an "Additional Maintenance Covenant"). In the event that any additional financial maintenance covenant added to the Senior Bank Facility or any event of default relating to such additional financial maintenance covenant is amended, waived or modified in any way, the comparable Additional Maintenance Covenant or event of default relating to such Additional Maintenance Covenant set out in the Definitive New Loan Documentation shall be automatically and correspondingly amended, waived or modified (taking into account any differences between defined terms in the Senior Bank Facility and defined terms in the Definitive New Loan Documentation) without the consent of the Administrative Agent or any of the New Lenders.

If the Borrower pays any consent fee or waiver fee or provides any other inducement (financial, collateral or otherwise) with respect to any amendment, modification, waiver or consent of the financial maintenance covenant currently set out in Section 7.4(b) of the CIT Facility or of any additional financial maintenance covenant added to the Senior Credit Facility, the same fee (or other inducement) shall be payable to the Administrative Agent on behalf of the New Lenders under the New Loan.

Notwithstanding the foregoing, if any amendment, restatement, modification, or replacement of the Senior Credit Facility has the effect of removing or eliminating such financial maintenance covenant or any additional financial maintenance covenant or related event of default, then: (a) the Definitive New Loan Documentation shall continue to contain such financial maintenance covenant or any additional financial maintenance covenant as in effect immediately prior to such amendment, restatement, modification, or replacement; and (b) no consent fee or waiver fee (or other inducement) provided under the Senior Bank Facility with respect to such amendment, restatement, modification or replacement shall be payable to the Administrative Agent.

Other than as set out above, no amendments, waivers or modifications to the Senior Bank Facility shall affect or alter in any way the Definitive New Loan Documentation.

Other than as set out in Section 27 or as contemplated in this Section 28, the Definitive New Loan Documentation shall not contain any financial covenants or financial maintenance covenants.

The Definitive New Loan Documentation shall provide Tembec with the option to prepay all or a portion of the New Loan at any time upon payment of the principal amount of the New Loan to be prepaid (the "Prepaid Principal Amount") plus accrued and unpaid interest on such Prepaid Principal Amount and a premium on the Prepaid Principal Amount of 4% in the first year, 3% in the second year, 2% in the third year and no premium thereafter. Any principal amounts prepaid shall not be available for reborrowing. Any such prepayments not made at the end of an interest rate period shall include appropriate breakage costs.

The default provisions in the Definitive New Loan Documentation shall be similar to those in the Senior Bank Facility, except that it will only include cross-acceleration and not cross-default provisions with respect to the Senior Bank Facility.

(i)

customary individual background checks on senior management and compliance with the Patriot Act, the results of which are satisfactory to JPM, acting reasonably;

(ii)

all definitive legal documentation, including a credit agreement, security agreements, pledge agreements, intercreditor agreements, subordination agreements and legal opinions satisfactory to JPM, acting reasonably;

(iii)

compliance with US and Canadian banking rules and regulations (e.g. anti-money laundering, "know your customer", Patriot Act etc.);

(iv)

no default or event of default shall have occurred and be continuing, both immediately prior to and after giving effect to the transactions on the Implementation Date, pursuant to the terms of the Definitive New Loan Documentation; and

(v)

satisfaction of the Conditions to Recapitalization in Section A.14.

Nothing herein shall limit or restrict JPM from acting in any capacity in addition to acting as the JPM Backstop provider.

In consideration for providing the JPM Backstop, JPM shall be entitled to a backstop fee of US$3,000,000, which shall be earned on the JPM Backstop Date and paid in full on January 2, 2008.

"Additional Backstop Amount" means the backstop amount agreed to be provided by the Additional Backstop Parties, up to a maximum aggregate amount of US$201,500,000.

"Additional Backstop Parties" means those Noteholders (or their affiliates) (i) who are designated by Tembec no later than January 31, 2008 (the "Additional Backstop Date") and (ii) who enter into support agreements with Tembec substantially similar to the Support Agreements.

"Backstop Parties" means, collectively, the Initial Backstop Parties and the Additional Backstop Parties.

"Initial Backstop" means the backstop provided by the Initial Backstop Parties for the Initial Backstop Amount.

"Initial Backstop Amount" means US$300,000,000 minus the Additional Backstop Amount.

"Initial Backstop Parties" means those Noteholders (or their affiliates) who (i) are not disqualified by JPM’s customary policies and requirements for lending syndicate members, consistently applied and (ii) have, on or before the JPM Backstop Date, executed backstop loan commitment agreements with JPM as identified to Tembec.

"Participation Shortfall" means the difference between the New Loan Amount and the Participated Amount.

"Standby Backstop" means the backstop provided by the Initial Backstop Parties in the amount of US$300,000,000 minus the Initial Backstop Amount (which difference is equal to the Additional Backstop Amount).

The backstop agreement between JPM and each Initial Backstop Party shall be on customary terms and shall: (a) commit the Initial Backstop Party, subject to Section 39, to provide a loan to Tembec in an amount equal to such Initial Backstop Party’s relevant backstop amount as may be required to fully fund the Maximum New Loan Amount; (b) outline the terms of its backstop arrangements with JPM, including, without limitation, the Standby Backstop; and (c) provide that JPM may assign such backstop loan commitment agreement to Tembec without the consent of such Initial Backstop Party.

On or before the Additional Backstop Date, each Additional Backstop Party shall enter into a backstop loan commitment agreement with Tembec: (a) committing, subject to Section 39, to provide a loan to Tembec in an amount equal to such Additional Backstop Party’s relevant backstop amount required in order to fully fund the Additional Backstop Amount; (b) outlining the terms of its backstop arrangements with Tembec; and (c) providing that (i) Tembec may, if so requested by JPM, assign such backstop loan commitment agreement to JPM without the consent of such Additional Backstop Party and (ii) in the event such Additional Backstop Party defaults on its obligations under its backstop loan commitment agreement with Tembec and JPM funds such default in accordance with Section 38, Tembec shall assign such backstop loan commitment agreement to JPM. The backstop agreements with the Additional Backstop Parties shall not be on terms more favourable to the Additional Backstop Parties than contained in the backstop agreements with the Initial Backstop Parties.

The Participation Shortfall (if any) shall be funded pro rata by the Initial Backstop Parties and the Additional Backstop Parties based on the Initial Backstop Parties' and the Additional Backstop Parties' respective proportions of the sum of the Initial Backstop Amount and the Additional Backstop Amount.

(i)

The Initial Backstop Parties shall be entitled to:

(a)

2,000,000 of the New Common Shares when issued; plus

(b)

The number of New Common Shares (when issued) equal to (x) 5,000,000 times (y) a fraction, the numerator of which is the Initial Backstop Amount and the denominator of which is the Maximum New Loan Amount; plus

(ii)

The Additional Backstop Parties shall be entitled to:

(a)

The number of New Common Shares (when issued) equal to (x) 5,000,000 times (y) a fraction, the numerator of which is the Additional Backstop Amount and the denominator of which is the Maximum New Loan Amount.

(i)

The Initial Backstop Parties shall be entitled to:

(a)

Cash on the Implementation Date in an amount equal to 2.25% of the Initial Backstop Amount; plus

(b)

Cash on the Implementation Date in an amount equal to 1.0% of the Additional Backstop Amount.

(ii)

The Additional Backstop Parties shall be entitled to:

(a)

Cash on the Implementation Date in an amount equal to 2.25% of the Additional Backstop Amount.

(i)

the parties are unable, after having negotiated in good faith, to agree on final documentation (including the Definitive New Loan Documentation) consistent with the economic and covenant terms of this Term Sheet;

(ii)

the Plan or any Alternative Recapitalization either does not obtain necessary percentage approval by the Noteholders or does not obtain necessary Court approval, in each case notwithstanding the reasonable best efforts of the parties hereto (for the avoidance of doubt the failure to obtain necessary Shareholder approval shall not constitute an exception to Tembec’s obligation to pay the termination fee);

(iii)

CIT does not consent to the Recapitalization or the New Loan and Tembec is not reasonably able to consummate the Recapitalization or the New Loan as a result of such failure to consent (for the avoidance of doubt, if Tembec is able to obtain a replacement to the CIT Facility on reasonably acceptable business terms and the replacement lender consents to the Recapitalization and the New Loan, CIT’s non-consent shall not constitute an exception to Tembec’s obligation to pay the termination fee); or

(iv)

JPM materially breaches its commitments herein.

Tembec shall thereafter have no further debts, liabilities or obligations to JPM, the Backstop Parties or the New Lenders in relation to the New Loan, this Term Sheet or the Support Agreements, including any obligation to pay fees pursuant to Section 36 hereof.

Subject to Section 39, in the event any Additional Backstop Party defaults on its obligation to Tembec to fund its relevant portion of the Additional Backstop Amount (an "Additional Backstop Default Amount"), pursuant to the Standby Backstop, Tembec shall promptly notify JPM and the Initial Backstop Parties shall fund, on a pro rata basis, each Additional Backstop Default Amount and the applicable backstop fees relating to the Additional Backstop Default Amount shall be adjusted and paid to the Initial Backstop Parties on the same basis as they would have been paid to the defaulting Additional Backstop Party.

Subject to Section 39, in the event any Initial Backstop Party defaults on its obligation to fund its relevant portion of the Initial Backstop Amount (the "Initial Backstop Default Amount") or the Additional Backstop Default Amount (the "Standby Backstop Default Amount"), JPM (pursuant to the JPM Backstop) shall fund (or arrange to be funded) each Initial Backstop Default Amount or Standby Backstop Default Amount, as the case may be, and the applicable backstop fees relating to the Initial Backstop Default Amount or the Standby Backstop Default Amount, as the case may be, shall be adjusted and paid to JPM on the same basis as they would have been paid to the defaulting Initial Backstop Party.

Subject to the remainder of this Section 39, and other customary closing conditions, the JPM Backstop and JPM’s agreement to perform the services relating to the JPM Backstop described herein are subject to: (a) there not occurring or becoming known to JPM any material adverse condition or material adverse change in or affecting the business, operations, property, condition (financial or otherwise) or prospects of the Borrower and its subsidiaries, taken as a whole, other than solely as a result of: (1) changes in exchange rates between the Canadian Dollar and United States Dollar; (2) changes in commodity prices; (3) the execution, announcement, or performance of a Support Agreement, this Term Sheet, the Plan or any other related agreement and the consummation of the transactions contemplated thereby; or (4) any action taken by Tembec which is contemplated in this Term Sheet; (b) JPM not becoming aware after the date hereof of any information or other matter affecting the Borrower or the transactions contemplated hereby which is inconsistent in a material and adverse manner with any such information or other matter disclosed to JPM prior to the date hereof; (c) there not having occurred a material disruption of or material adverse change in financial, banking or capital market conditions that could reasonably be expected to materially impair the JPM Backstop; and (d) the New Loan Amount is not funded on or before the Expiry Date. For the purposes of this Section 39: (1) "Expiry Date" means the later of (x) 14 days following the delivery by JPM to Tembec of written notice of expiry pursuant to clause (d) above and (y) March 31, 2008; and (2) "JPM Backstop Termination Date" means, if termination is pursuant to the foregoing clause (d), the Expiry Date, and if termination is pursuant to the foregoing clauses (a), (b) or (c) above, the date on which written notice is provided by JPM to Tembec of such termination.

(ii)

Upon the occurrence of the JPM Backstop Termination Date and subject to paragraph (iii) below, JPM shall assign to Tembec all of JPM’s rights and interests in and to the backstop agreements entered into by each Initial Backstop Party that elects to become a Continuing Backstop Party (defined below).

(iii)

On or before the fifth business day following the JPM Backstop Termination Date (such fifth business day being the "Noteholder Backstop Termination Date"), each of the Initial Backstop Parties and each of the Additional Backstop Parties shall have the right in its sole discretion to terminate the Initial Backstop, the Standby Backstop or the Additional Backstop, as the case may be, and its agreement to perform the services relating to the Initial Backstop, the Standby Backstop or the Additional Backstop, as the case may be, upon providing written notice to Tembec (a Backstop Party that elects to provide such a termination notice is referred to as a "Terminating Backstop Party" and a Backstop Party that does not elect to provide such a termination notice is referred to as a "Continuing Backstop Party").

(iv)

On the thirtieth day after the Noteholder Backstop Termination Date, all backstop obligations of each Continuing Backstop Party shall automatically terminate unless, prior to such date, either (a) the New Lenders have theretofore subscribed in the aggregate for not less than $250,000,000 of the New Loan or (b) Tembec has entered into an agreement for (1) a replacement backstop provider to provide a backstop for the New Loan Amount on substantially similar terms as the JPM Backstop or (2) replacement backstop parties to provide an initial backstop, standby backstop or additional backstop, as the case may be, on substantially similar terms (including the same aggregate amount) as the Initial Backstop, the Standby Backstop or the Additional Backstop, as the case may be, provided by the Terminating Backstop Parties. In either such event, the obligations of each Continuing Backstop Party shall continue in accordance with the remaining provisions of this Term Sheet, its backstop agreement and the Plan, subject to Sections A.14 and B.31, provided that, without its written consent, each Continuing Backstop Party shall not be required to fund more than it would have been required to fund if there had been no Terminating Backstop Parties.

(v)

No fees (other than accrued professional fees of JPM to the extent set out in Section 32), including without limitation, the Termination Fee, or other consideration shall be paid or payable to either JPM or any Terminating Backstop Party upon or following any termination of their obligations in accordance with this Section 39, it being understood that nothing in this paragraph affects Section 37 as it relates to the Continuing Backstop Parties.

(vi)

Nothing in this Section 39 shall affect (a) any party’s obligations (including JPM, any Continuing Backstop Party, any Terminating Backstop Party and any New Lender) under its Support Agreement except to the extent specifically provided in such Support Agreement or (b) any New Lender’s obligations under the Definitive New Loan Documentation, the Plan or other documents executed in connection with the New Loan and the Plan, each of which such obligations shall remain in full force and effect in accordance with their terms.

Tembec Inc. shall issue 11,111,111 warrants to the Shareholders as additional consideration for their Existing Equity, which may be exercised without any payment or consideration pursuant to the terms of this Part D.

Each Warrant shall be convertible into one New Common Share, subject to adjustment, as described in Section 44.

The Warrants shall expire 4 years after the Implementation Date if not exercised.

(i)

The Warrants shall be deemed to be exercised and shall be automatically converted into an aggregate of 11,111,111 New Common Shares of Tembec Inc.:

(a)

when the 20-day volume-weighted average trading price of a single New Common Share reaches or exceeds CDN$12.00; or

(b)

immediately prior to any transaction that would constitute a change of control of Tembec Inc. (including by way of merger, plan of arrangement or similar transaction) (a "Change of Control") at a price per common share equal to at least CDN$12.00, as determined by a nationally-recognized investment dealer selected by Tembec Inc.;

(ii)

If there is a Change of Control transaction during the term of the Warrants prior to the price per common share reaching or exceeding CDN$12.00 as provided in paragraph (i)(a) above, the holders of the Warrants will be entitled to participate in such transaction and receive an amount determined by a nationally-recognized investment dealer selected by Tembec Inc. using a Black-Scholes valuation model for a security of this nature, assuming (a) 35% volatility, (b) the effective price being offered for a common share of Tembec Inc. in such transaction, (c) the remaining term of the Warrants and (d) a risk-free rate equal to the yield on the Government of Canada 90-day treasury ▇▇▇▇.

The Warrants shall carry standard terms customary to such warrant offerings, including anti-dilution protection and adjustments for dividends.

The Board of Directors of Tembec Inc. following the Recapitalization (the "New Board") shall be comprised of nine Directors. The Chief Executive Officer of Tembec Inc. shall occupy one position on the New Board. A union representative shall also occupy one position on the New Board.

The Noteholders’ Representatives and Tembec Representatives may agree on a professional search firm to assist in the selection process.

If the Noteholders’ Representatives and Tembec Representatives are unable to agree on the selection of the remaining seven directors, the Noteholders’ Representatives shall have selection rights in respect of five directors and the Tembec Representatives shall have selection rights in respect of two directors.

Notwithstanding the foregoing, any single Noteholder holding 20% or more of the Notes shall be entitled to nominate one director to the New Board, provided that the total number of directors nominated by any such Noteholder and the Noteholders’ Representatives shall not exceed five.

The Chair of the New Board shall be selected by mutual agreement of the Noteholders’ Representatives and Tembec Representatives, or, failing such agreement, shall be selected by the New Board.

Effective on the implementation of the Plan and subject to approval by the Shareholders, Tembec Inc. will establish a shareholder rights plan (the "Rights Plan") to ensure, to the extent practicable, that all shareholders of Tembec Inc. will be treated equally and fairly in connection with any take-over offer for Tembec Inc. For the purposes of the Rights Plan, the "Permitted Bid" mechanism will endeavour to ensure that any person seeking to acquire beneficial ownership of more than 20% of the New Common Shares gives shareholders and the New Board sufficient time to evaluate the transaction, negotiate with the acquiror and encourage the making of competing bids, all with a view to maximizing shareholder value.

Tembec and the Noteholders’ Representatives will select a nationally recognized firm of compensation consultants to work with (i) the current Board of Tembec Inc. to review and address, on or prior to the Implementation Date, all employee loan obligations under Tembec’s existing employee equity program in an appropriate manner based on similar transactions of this nature, (ii) the current Board of Tembec Inc. to implement, on or prior to the Implementation Date, an appropriate compensation plan for senior management in the context of the completed Recapitalization based on similar transactions of this nature, and (iii) the New Board to design and implement an appropriate compensation program including a compensation plan and incentive plan for senior management based on an appreciation of the Recapitalized Equity.

The Head Office and Corporate Office of Tembec shall remain in the Province of Quebec.