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Exhibit 10.1

CREDIT AGREEMENT     between     POPE & TALBOT LTD.
and
P&T FUNDING LIMITED PARTNERSHIP   as Borrowers     POPE & TALBOT MACKENZIE PULP
OPERATIONS LTD.
and
MACKENZIE PULP LAND LTD.   as Guarantors     THE TORONTO-DOMINION BANK
BANK OF MONTREAL
and
THE BANK OF NOVA SCOTIA   as Lenders     and     THE TORONTO-DOMINION BANK   as
Administration Agent     Dated as of June 15, 2001  

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TABLE OF CONTENTS

 
   
   
  Page No.

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Article 1  INTERPRETATION   1     1.1   Defined Terms   1     1.2   Computation
of Time Periods   19     1.3   Accounting Terms   19     1.4   Incorporation of
Appendix and Schedules   20     1.5   Singular, Plural, etc.   20     1.6  
Acquisition Borrower   20               Article 2  CREDIT FACILITIES   20    
2.1   Credit Facilities   20     2.2   Purposes   20     2.3   Availability   21
    2.4   Termination of Availability   21     2.5   Revolving Nature of
Operating Facility   21     2.6   Non-Revolving Nature of Acquisition Facility  
21     2.7   Borrowing Options   21     2.8   Repayment of Credit Facilities  
22     2.9   Extension of Conversion Date for Operating Facility   22     2.10  
Available Amount of the Credit Facilities   23     2.11   Operating Facility
Borrowings not to Exceed Borrowing Base   23     2.12   Optional Repayment   23
    2.13   Optional Reduction of Commitments   24     2.14   Repayment of
Outstandings to Reflect Commitment   24     2.15   General Interest Provisions  
24     2.16   Business Day Payments   25     2.17   Interest on Overdue Amounts
  25     2.18   Breakage Costs   25     2.19   Allocation   26     2.20  
Application of Payments   26     2.21   Sharing of Payments   26     2.22  
Conditions Solely for the Benefit of the Lenders   27     2.23   No Waiver   27
    2.24   Authorized Debit   27     2.25   Commitment Fee   27     2.26  
Administration Agent's Fee   27     2.27   Payment to Administration Agent   28
              Article 3  LOANS   28     3.1   Advances   28     3.2   Minimum
Advances   28     3.3   Notice Requirements for Advances   28     3.4   Payment
of Advances to Administration Agent   28     3.5   Notices Irrevocable   29    
3.6   Election of Interest Rates and Currencies   29     3.7   Continuation of
Libor Advances   29     3.8   Conversion of Advances   29     3.9   Automatic
Conversion of Libor Advances   30     3.10   Circumstances Requiring Prime Rate
or Base Rate Pricing   30

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    3.11   Interest Periods   31     3.12   Interest on Advances   32     3.13  
Interest Payment Dates   33     3.14   Overdraft Advances   33              
Article 4  BANKERS' ACCEPTANCES   33     4.1   Creation of Bankers' Acceptances
  33     4.2   Drawings   34     4.3   Power of Attorney   34     4.4  
Completion and Delivery of Bankers' Acceptances   35     4.5   Stamping Fees  
35     4.6   Netting   36     4.7   Payment on Maturity   36     4.8   Custody
of Bankers' Acceptances   36     4.9   Conversions   37     4.10   Renewal or
other Payment of Bankers' Acceptance   37     4.11   Prepayments of Bankers'
Acceptances   37     4.12   No Days of Grace   37     4.13   Suspension of
Bankers' Acceptance Option   38     4.14   Depository Bills   38              
Article 5  LETTERS OF CREDIT AND GUARANTEE LETTERS   38     5.1   Request and
Issuance   38     5.2   Maximum Face Amount   38     5.3   Fees   38     5.4  
Payment by Issuing Lender   39     5.5   Reimbursement of Issuing Lender   39  
  5.6   Deemed Prime Rate or Base Rate Advances   39     5.7   Indemnification
by Lenders   39     5.8   Provision of Cash Collateral   40     5.9   Letters of
Credit under the Acquisition Facility   40               Article 6  CLOSING
CONDITIONS   41     6.1   Closing Conditions   41     6.2   Conditions Precedent
to Subsequent Borrowings   44               Article 7  REPRESENTATIONS AND
WARRANTIES   44     7.1   Representations and Warranties by the Borrowers   44  
  7.2   Reaffirmation of Representations and Warranties   48              
Article 8  POSITIVE COVENANTS   48     8.1   Positive Covenants   48            
  Article 9  NEGATIVE COVENANTS   54     9.1   Negative Covenants   54          
    Article 10  GUARANTEES   56     10.1   Guarantees   56     10.2   Guarantee
Absolute and Unconditional   57     10.3   Demand   58

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    10.4   Remedies   58     10.5   Set-Off   58     10.6   Amount of Guaranteed
Obligations   59     10.7   Payment Free and Clear of Taxes   59     10.8  
Subrogation and Repayment   59     10.9   Postponement and Assignment   60    
10.10   Rights on Subrogation   60     10.11   Continuing Guarantee   61    
10.12   Third Party Beneficiaries   61     10.13   Additional Guarantee   61    
10.14   Remedies Cumulative   61               Article 11  SECURITY   61    
11.1   Security   61     11.2   Continued Perfection of Security   61     11.3  
Set-Off   62     11.4   Discharges   62     11.5   Conflict   62     11.6  
Principal Amount and Interest Rate   62               Article 12  EVENTS OF
DEFAULT   63     12.1   Events of Default   63     12.2   Cancellation and
Acceleration   65     12.3   Remedies Cumulative   66     12.4   Waivers   66  
            Article 13  THE ADMINISTRATION AGENT   66     13.1   Authorization
and Action   66     13.2   Administration Agent's Reliance   66     13.3  
Administration Agent as Lender   67     13.4   Lender Credit Decisions   67    
13.5   Funds Held by the Administration Agent   68     13.6   Application of
Payments after Acceleration   68     13.7   Indemnification   68     13.8  
Accommodations under the Credit Facilities   68     13.9   Repayments by Lenders
  69     13.10   Successor Administration Agent   69              
Article 14  MISCELLANEOUS   70     14.1   Records   70     14.2   Amendments  
70     14.3   Notices   71     14.4   No Waiver; Remedies   71     14.5  
Expenses   71     14.6   Taxes   72     14.7   Increased Costs   73     14.8  
Environmental Indemnity   73     14.9   Judgment Currency   74     14.10  
Governing Law   74     14.11   Consent to Jurisdiction   74

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    14.12   Lenders' Several Liability   75     14.13   Reasonable Consent or
Approval of the Parties   75     14.14   Successors and Assigns   75     14.15  
Assignment   75     14.16   Participation   76     14.17   Severability   76    
14.18   Prior Understandings   76     14.19   Time of Essence   76     14.20  
Counterparts   76                   Appendix 1—Commitments                      
Schedule 1—Borrowing Notice         Schedule 2—Notice of Repayment or
Cancellation         Schedule 3—Quarterly Financial Certificate        
Schedule 4—Margin Report         Schedule 5—Material Subsidiaries        
Schedule 6—Lender Assignment Agreement         Schedule 7—Pope & Talbot US
Postponement Agreement         Schedule 8—Trust Postponement Agreement    

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CREDIT AGREEMENT

    THIS CREDIT AGREEMENT dated as of the 15th day of June, 2001

BETWEEN:             POPE & TALBOT LTD., a company formed by amalgamation under
the laws of the Province of British Columbia, as Acquisition Borrower (as herein
defined)             OF THE FIRST PART           AND:             P&T FUNDING
LIMITED PARTNERSHIP, a limited partnership formed under the laws of the Province
of British Columbia, as Operating Borrower (as herein defined)             OF
THE SECOND PART           AND:             POPE & TALBOT MACKENZIE PULP
OPERATIONS LTD., a corporation continued under the laws of the Province of
Alberta, and MACKENZIE PULP LAND LTD., a company formed by incorporation under
the laws of the Province of British Columbia, as Guarantors (as herein defined)
            OF THE THIRD PART           AND:             EACH OF THE LENDERS
NAMED ON THE SIGNATURE PAGES OF THIS AGREEMENT, as Lenders (as herein defined)  
          OF THE FOURTH PART           AND:             THE TORONTO-DOMINION
BANK, in its capacity as Administration Agent (as herein defined)             OF
THE FIFTH PART

    WHEREAS the Acquisition Borrower has requested the Lenders to make available
to it a secured non-revolving acquisition term facility in the maximum principal
amount of Cdn.$35,000,000 (or its equivalent in US Dollars), and the Operating
Borrower has requested the Lenders to make available to it a secured extendible
revolving credit facility in the maximum principal amount of Cdn.$110,000,000
(or its equivalent in US Dollars), and the Lenders have agreed to do so on the
terms and conditions set forth herein;

    AND WHEREAS the Guarantors are, together with the Borrowers, indirect wholly
owned Subsidiaries of Pope & Talbot US and accordingly will benefit from the
Lenders making Accommodations to the Borrowers under the Credit Facilities.

    THIS AGREEMENT WITNESSES that in consideration of the mutual covenants and
agreements contained herein, it is agreed by and between the parties hereto as
follows:

ARTICLE 1
INTERPRETATION

1.1Defined Terms.

    As used in this Agreement, the following terms have the following meanings:

(a)"Acceptance Purchase Price" has the meaning ascribed to that term in
Section 4.6.

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(b)"Accommodation" means the making of any Advance by a Lender, the creation of
a Bankers' Acceptance by a Lender and the issuance of a Letter of Credit or
Guarantee Letter by the Issuing Lender, and includes an Advance and a Bankers'
Acceptance resulting from a Rollover or Conversion (whether requested or deemed
to have been requested hereunder).

(c)"Accounts Receivable" means, collectively, Eligible Insured Accounts
Receivable and Eligible Uninsured Accounts Receivable.

(d)"Acquisition Borrower" means Pope & Talbot Canada.

(e)"Acquisition Facility" means the Credit Facility described in Section 2.1(b)
of this Agreement.

(f)"Acquisition Facility Maturity Date" means June 14, 2003.

(g)"Administration Agent" means The Toronto-Dominion Bank as agent for the
Lenders in respect of the Credit Facilities hereunder, and any successor
appointed in accordance with the provisions of this Agreement.

(h)"Advances" means advances made or deemed to have been made by a Lender
hereunder, including any Advance resulting from a Rollover or Conversion;
Advances may be denominated in Canadian Dollars (a "Canadian Dollar Advance") or
in US Dollars (a "US Dollar Advance"); a Canadian Dollar Advance shall be
designated as a "Prime Rate Advance" and a US Dollar Advance may from time to
time, by election of the applicable Borrower, be designated as a "Base Rate
Advance" or a "Libor Advance"; each of a Prime Rate Advance, a Base Rate Advance
and a Libor Advance is a "Type" of Advance.

(i)"Affiliate" of any designated person means any other person that, directly or
indirectly, controls or is controlled by or is under common control with such
designated person; provided that in any event any person that beneficially owns
directly or indirectly securities having 50% or more of the voting power for the
election of directors or other governing body or 50% or more of the partnership
or other ownership interests of any other person will be deemed to control such
corporation or other person; for the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such person, whether through the ownership of voting
securities or by contract or otherwise.

(j)"Application" has the meaning ascribed to that term in Section 5.1.

(k)"Assignee" means a Canadian chartered bank which accepts an assignment of all
or any part of a Lender's interest in the Credit Facilities in accordance with
the terms of this Agreement.

(l)"Authorized Officer" means:

(i)with respect to Pope & Talbot Canada, the chairman, the president, the chief
executive officer, the chief financial officer, the chief legal officer, the
secretary, the assistant secretary, the treasurer or the assistant treasurer of
Pope & Talbot Canada; and

(ii)with respect to the Limited Partnership, the chairman, the president, the
chief executive officer, the chief financial officer, the chief legal officer,
the secretary, the assistant secretary, the treasurer or the assistant treasurer
of the General Partner.

(m)"Bankers' Acceptance" means a depository bill as defined by the Depository
Bills and Notes Act (Canada) or a blank non-interest bearing bill of exchange as
defined by the Bills of Exchange Act (Canada), in either case drawn by a
Borrower, denominated in Canadian Dollars and accepted by a Lender as a bankers'
acceptance, as evidenced by such Lender's endorsement thereof at the request of
a Borrower pursuant to a Borrowing Notice, and includes a Bankers' Acceptance
resulting from a Conversion or Rollover. Any depository bill may be made payable
to "CDS & Co." and be deposited with CDS.

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(n)"Base Rate" on any day means the greater of:

(i)the rate of interest per annum then in effect (based on a year of 365 days)
established by TD Bank from time to time as the reference rate of interest for
the determination of interest rates that TD Bank charges to customers of varying
degrees of creditworthiness for US Dollar loans made by it in Canada; and

(ii)the sum of (A) the Federal Funds Rate in effect on that day multiplied by
365 and divided by 360, plus (B) 75 basis points per annum;

provided that each change in the Base Rate shall be effective from and including
the date such change is made without any requirement of notification to the
Borrowers or any other person.

(o)"Base Rate Advances" means Advances on which interest is determined by
reference to the Base Rate in effect from time to time.

(p)"basis point" means one one-hundredth of one percent, or 0.01%.

(q)"Beneficiary" means, in respect of any Letter of Credit or Guarantee Letter,
the beneficiary specified therein or any other person to whom payments may be
required to be made pursuant to such Letter of Credit or Guarantee Letter.

(r)"Beneficiary Authorization and Charge" means an instrument in a form
reasonably satisfactory to the Lenders executed by Mackenzie Pulp in respect of
the Land Trustee and Mackenzie Pulp's beneficial interest in property held by
the Land Trustee.

(s)"Borrowers" means the Operating Borrower and the Acquisition Borrower, and
"Borrower" means either one of them.

(t)"Borrowing" means a utilization by the Acquisition Borrower of the
Acquisition Facility, or by the Operating Borrower of the Operating Facility, in
each case by way of Prime Rate Advances, Base Rate Advances, Libor Advances,
Bankers' Acceptances, Letters of Credit or Guarantee Letters, and "Borrowings"
means the aggregate of such utilizations.

(u)"Borrowing Base" means, as at any particular date, the sum of the following:

(i)90% of Eligible Insured Accounts Receivable which are insured by the Export
Development Corporation of Canada, as set out in the most recent Margin Report;

    plus

(ii)85% of other Eligible Insured Accounts Receivable, as set out in the most
recent Margin Report;

    plus

(iii)80% of Eligible Uninsured Accounts Receivable, as set out in the most
recent Margin Report;

    plus

(iv)50% of Inventory, as set out in the most recent Margin Report;

provided that the amount described in clause (iv) above shall not exceed 60% of
the Borrowing Base. For purposes of determining the Borrowing Base, Inventory
shall be valued at the lower of cost and market value.

(v)"Borrowing Notice" means a notice by a Borrower to the Administration Agent
substantially in the form attached as Schedule 1 hereto.

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(w)"Business Day" means any day of the year, other than a Saturday, Sunday or
other day on which:

(i)major commercial banks are closed in Toronto or Vancouver;

(ii)where used in the context of a Base Rate Advance, major commercial banks are
closed in Toronto, Vancouver or New York City; or

(iii)where used in the context of a Libor Advance, major commercial banks are
closed in Toronto, Vancouver or New York City, or which is not a day for trading
by and between banks in US Dollar deposits in the London Eurodollar market.

(x)"Business Plan" means a business plan prepared by Pope & Talbot Canada in
respect of the business and financial activities of Pope & Talbot Canada and its
Subsidiaries for the ensuing year, containing financial forecasts, an operating
budget and other matters typically included in an annual business plan.

(y)"Canadian Dollars" and "Cdn.$" each mean lawful money of Canada.

(z)"Capital Expenditure Plan" means a detailed financial plan prepared by Pope &
Talbot Canada for the ensuing fiscal year covering, inter alia, planned capital
expenditures, including maintenance capital expenditures (which need not be
separately identified), for Pope & Talbot Canada and its Subsidiaries for the
ensuing fiscal year, together with proposed sources for financing such capital
expenditures and such additional details as the Lenders may reasonably request.

(aa)"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 capital lease obligations or
finance lease obligations on a balance sheet of such person in accordance with
GAAP.

(ab)"Closing Date" means June 15, 2001, or such other date as the Borrowers and
the Lenders may agree upon.

(ac)"CDS" means The Canadian Depository for Securities Limited.

(ad)"Commitment" means, as to any Lender, the obligation of that Lender to make
Accommodations to the Operating Borrower under the Operating Facility and to the
Acquisition Borrower under the Acquisition Facility in an aggregate principal
amount not exceeding the amount set forth opposite such Lender's name on
Appendix 1 to this Agreement (or the Equivalent Amount in US Dollars), and with
such aggregate amount being allocated rateably between the Operating Facility
and the Acquisition Facility, as such amounts may be reduced from time to time
in accordance with the provisions of this Agreement.

(ae)"Commitment Fees" has the meaning ascribed to that term in Section 2.25.

(af)"Compensation" has the meaning ascribed to that term in Section 14.7.

(ag)"Contingent Payment Letters" has the meaning ascribed to that term in
Section 5.1.

(ah)"Conversion" means, in respect of any Drawing or type of Advance, the
conversion of the method for calculating interest or fees thereon from one
method to another pursuant to Sections 3.8 or 4.9, without increasing the
Outstandings under the Credit Facilities.

(ai)"Conversion Date" means June 14, 2002, subject to extension by the Lenders
pursuant to Section 2.9.

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(aj)"corporation" includes a company incorporated under the Company Act (British
Columbia), a corporation incorporated under the Canada Business Corporations Act
and any other corporation wherever or however incorporated.

(ak)"Credit Facilities" means the Operating Facility and the Acquisition
Facility to be made available hereunder to the Operating Borrower and the
Acquisition Borrower, respectively, as set out in Section 2.1, and "Credit
Facility" means either one of them.

(al)"Credit Facility Documents" means this Agreement, the Security Documents,
the Postponement Agreements and all other documents to be executed and delivered
to the Lenders or the Administration Agent by Pope & Talbot Canada, the Limited
Partnership, Mackenzie Pulp, the Land Trustee, the Trust or Pope & Talbot US
pursuant to this Agreement.

(am)"Default" means an event which, with the giving of notice or passage of
time, or both, would constitute an Event of Default.

(an)"Documents against Payment Transaction" means a transaction under which a
bill of lading or other negotiable document representing title to goods, an
invoice and related shipping documents (collectively, the "documents") are
delivered to a bank designated by the buyer of the goods (the "recipient bank"),
on the condition that the recipient bank not release the documents to the buyer
or any other person unless the recipient bank immediately makes payment of the
invoice price to a Lender for credit to a Borrower.

(ao)"Drawing" means the creation of Bankers' Acceptances by a Lender in
accordance with the provisions of this Agreement.

(ap)"Drawing Date" means any Business Day fixed in accordance with the
provisions of this Agreement for a Drawing.

(aq)"Eligible Insured Accounts Receivable" means trade accounts receivable of
Pope & Talbot Canada, the Limited Partnership or Mackenzie Pulp, which are
insured as to at least 90% under a customary comprehensive accounts receivable
insurance policy issued by the Export Development Corporation of Canada or at
least 85% under a customary comprehensive accounts receivable insurance policy
issued by either the Foreign Credit Insurance Association ("FCIA") or Great
American Insurance Co. ("GAI"), a wholly owned subsidiary of American Financial
Group, Inc.; provided that:

(i)any accounts receivable insurance policy issued by FCIA in favour of Pope &
Talbot Canada, the Limited Partnership or Mackenzie Pulp is backed by GAI; and

(ii)GAI has an Insurer Financial Strength Rating of at least A- or higher by
Standard & Poor's Rating Services;

and provided that if any of Pope & Talbot Canada, the Limited Partnership or
Mackenzie Pulp has made a claim in respect of any account receivable under any
such insurance policy which has been denied in whole or in part by the relevant
insurer, the amount denied shall not be included in Eligible Insured Accounts
Receivable.

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(ar)"Eligible Uninsured Accounts Receivable" means trade accounts receivable of
Pope & Talbot Canada, the Limited Partnership or Mackenzie Pulp which:

(i)are not outstanding more than 95 days (or, in the case of a Letter of Credit
Transaction, 180 days) after the invoice date;

(ii)result from a Documents against Payment Transaction, a North American Open
Account Transaction or a Letter of Credit Transaction, or which consist of trade
accounts receivable not exceeding Cdn.$5,000,000 in aggregate (or the equivalent
thereof in any other currency) resulting from sales of goods on credit to a
buyer in Japan;

(iii)are owed by entities which are not Affiliates of either Borrower, other
than such Affiliates as may from time to time be approved by the Lenders,
provided that any such approved Affiliate is meeting normal trade terms of
credit;

(iv)are owed by entities which are not bankrupt or insolvent or have not
suspended operations (excluding temporary shutdowns or curtailments), other than
trade accounts receivable owed by the owner or operator of the Celgar Pulp Mill
in the vicinity of Castlegar, British Columbia, provided such owner or operator
is meeting normal trade terms of credit;

(v)are not subject to any mortgage, charge, lien, security interest or other
encumbrance, other than Permitted Liens;

(vi)are not subject to a material claim or assertion of a right of set-off by
the account debtor; and

(vii)would not be required to be treated as doubtful accounts receivable.

(as)"Envirochem Report" means the report of Envirochem Services Inc. dated
December 18, 2000 entitled "Pre-Acquisition Environmental Due Diligence Review
of Norske Skog Mackenzie Pulp Operations".

(at)"Environmental Laws" means all applicable Laws, Governmental Approvals and
guidelines or requirements of any Governmental Body (whether or not having the
force of Law, and including consent decrees as to which Pope & Talbot Canada or
any of its Subsidiaries is a party or otherwise subject, and administrative
orders which may affect Pope & Talbot Canada or a Subsidiary thereof) relating
to public health and safety, protection of the environment, the release of
Hazardous Materials or occupation health and safety.

(au)"Equivalent Amount" means, on a particular date in respect of any amount
expressed in a particular currency (the "first currency"), the equivalent amount
expressed in a second designated currency (the "second currency") determined by
reference to the Bank of Canada noon rate at which the first currency may be
exchanged into the second currency as published on the Reuters Screen page BOFC.
In the event that such rate does not appear on such Reuters page, such rate
shall be ascertained by reference to any other means (as selected by the
Administration Agent) by which such rate is quoted or published from time to
time by the Bank of Canada; provided that if, at the time of any such
determination, for any reason, no such exchange rate is being quoted or
published, the Administration Agent may use such reasonable method as it
considers appropriate to ascertain such rate, and the resulting determination
shall be conclusive absent manifest error.

(av)"Event of Default" means any of the events specified in Section 12.1.

(aw)"Face Amount" means, in respect of:

(i)a Bankers' Acceptance, the amount payable to the holder thereof on its
maturity; and

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(ii)a Letter of Credit or Guarantee Letter, the maximum amount payable to the
Beneficiary.

(ax)"Federal Funds Rate" means, for any day, an interest rate per annum
expressed on the basis of a 360 day year equal to the weighted average (rounded
upwards if necessary to the next 0.01%) of the rates on overnight federal funds
transactions with members of the United States Federal Reserve System arranged
by federal funds brokers on such day, as published for such day (or, if such day
is not a Business Day, for the immediately preceding Business Day) by the
Federal Reserve Bank of New York; or, if such rate is not so published for any
day which is a Business Day, the average (rounded upwards if necessary to the
next 0.01%) of the quotations at approximately 11:00 a.m. (New York time) for
such day for such transactions received by the Administration Agent from three
federal funds brokers of recognized standing selected by the Administration
Agent in its sole discretion.

(ay)"Forest Act" means the Forest Act (British Columbia) in effect on the
Closing Date, all amendments and supplements thereto, all regulations and rules
made pursuant thereto and all Ministry of Forests policy statements, guidelines,
orders or decisions relating thereto.

(az)"Funded Debt" means, without duplication, all Indebtedness of Pope & Talbot
Canada and its Subsidiaries on a consolidated basis (excluding (i) Indebtedness
described in paragraph (v) of the definition thereof, and (ii) the first
Cdn.$20,000,000 of reforestation Obligations), provided that, in the case of
Indebtedness under Treasury Contracts, an amount shall be included in respect
thereof only to the extent such amount represents the net obligation of Pope &
Talbot Canada or a Subsidiary thereof under a terminated Treasury Contract.

(ba)"GAAP" means, in relation to any person at any time, accounting principles
generally accepted in Canada as recommended in the Handbook of the Canadian
Institute of Chartered Accountants, applied on a basis consistent with the most
recent financial statements of such person (except for changes resulting from a
change in Canadian generally accepted accounting principles), provided only that
revenue will be recognized in accordance with generally accepted accounting
principles in the United States of America as per Securities Exchange Commission
Staff Accounting Bulletin No. 101.

(bb)"General Partner" means Pope & Talbot Canada, in its capacity as general
partner of the Limited Partnership, and any successor or other general partners
of the Limited Partnership.

(bc)"Governmental Approval" means any permit, licence, approval, consent, order,
right, certificate, judgment, writ, injunction, award, determination, direction,
decree, authorization, franchise, privilege, grant, waiver, exemption and other
similar concession or by-law, rule or regulation, whether or not having the
force of Law, of, by or from any Governmental Body.

(bd)"Governmental Body" means any government (including without limitation any
federal, provincial, state, municipal or local government) or political
subdivision or any agency, authority, bureau, central bank, monetary authority,
commission, department or instrumentality thereof, or any court or tribunal,
whether foreign or domestic, having jurisdiction over Pope & Talbot Canada or
any of its Subsidiaries.

(be)"Guarantee" means, with respect to any person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other financial obligation of any other person in any
manner, whether directly or indirectly, including (without limitation)
obligations incurred through an agreement, contingent or otherwise, by such
person:

(i)to purchase such Indebtedness or any property constituting security therefor;

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(ii)to advance or supply funds for the purchase or payment of such Indebtedness
or to maintain any working capital or other balance sheet condition or any
income statement condition of any other person or otherwise to advance or make
available funds for the purchase or payment of such Indebtedness;

(iii)to lease properties or to purchase properties or services primarily for the
purpose of assuring the owner of such Indebtedness of the ability of any other
person to make payment of the Indebtedness; or

(iv)otherwise to assure the owner of such Indebtedness against loss in respect
of payment thereof;

and in any computation of the Indebtedness or other liabilities of the obligor
under any Guarantee, the Indebtedness or other financial obligations that are
the subject of such Guarantee shall be assumed to be direct obligations of such
obligor and the principal amount thereof and any other sums then due and owing
shall be used in such computation.

(bf)"Guarantee Letters" means letters of guarantee issued by the Issuing Lender
pursuant to Article 5.

(bg)"Guarantors" means, collectively:

(i)Mackenzie Pulp;

(ii)the Land Trustee;

(iii)Pope & Talbot Canada in its capacity as a guarantor of the obligations of
the Limited Partnership pursuant to Article 10 hereof; and

(iv)the Limited Partnership in its capacity as a guarantor of the obligations of
Pope & Talbot Canada pursuant to Article 10 hereof.

(bh)"Hazardous Materials" means:

(i)any oil, flammable substances, explosives, radioactive materials, hazardous
wastes or substances, toxic wastes or substances or any other wastes,
contaminates, materials or pollutants which:

(A)pose a hazard to any real property, or to persons on or about any real
property; or

(B)cause any real property to be in violation of any Law;

(ii)asbestos in any form which is or could become friable, urea formaldehyde
foam insulation, transformers or other equipment which contain dielectric fluid
containing levels of polychlorinated biphenyls in excess of limits prescribed by
Law, or radon gas;

(iii)any chemical, material or substance defined as or included in the
definition of "dangerous goods", "deleterious substance", "hazardous
substances", "hazardous wastes", "hazardous materials", "extremely hazardous
wastes", "restricted hazardous waste", "toxic substances", "waste" or words of
similar import under any Law, including the Canadian Environmental Protection
Act (Canada), Fisheries Act (Canada), Transportation of Dangerous Goods Act
(Canada), Canada Water Act (Canada) and any applicable provincial legislation;
and

(iv)any other chemical, material or substance, exposure to which is prohibited,
limited or regulated by any Governmental Body or which may or could pose a
hazard to the occupants of any real property or any other person coming upon any
real property or adjacent or surrounding property;

8

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and references to a "release" of Hazardous Materials include spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing, dumping or other form of release, or permitting any of the
foregoing to occur.

(bi)"Indebtedness" means, with respect to any person at any time, the sum of the
following (without duplication): (i)all Obligations of such person for borrowed
money, including without limitation all Obligations for borrowed money which are
convertible into shares of stock or other equity interests of such person
(whether at the option of such person or of the holder) until such conversion is
actually made, but excluding the Obligations of Pope & Talbot Canada under the
Pope & Talbot Canada Financing Agreement (provided that, at the time
Indebtedness is determined, Pope & Talbot Canada is then able to satisfy such
Obligations by the delivery of common shares of Pope & Talbot Canada in
accordance with the terms of the Pope & Talbot Canada Financing Agreement);

(ii)all Obligations of such person evidenced by bonds, debentures, notes or
similar instruments;

(iii)all Capital Lease Obligations of such person;

(iv)all Obligations in respect of which interest charges are customarily paid by
such person;

(v)all shares of stock or other equity interests of such person that are
required to be redeemed or repurchased by such person at the option of the
holder thereof, whether upon the happening of any event or contingency or
otherwise;

(vi)all Obligations of such person for the deferred purchase price of property
or services acquired by such person or any predecessor and all Obligations of
such person under any conditional sale or other title retention agreement with
respect to any property;

(vii)all Obligations secured by any Lien upon or in any property owned by such
person whether or not such person has assumed or become liable for the payment
of such Obligations;

(viii)all Obligations of such person in respect of letters of credit, letters of
guarantee, bankers' acceptances or similar credit instruments;

(ix)all Obligations of such person under Treasury Contracts, including
termination liabilities;

(x)all reforestation Obligations of such person; and

(xi)any Guarantee by such person of any Obligation of a type described in any of
clauses (i) through (x) above.

The amount of any Indebtedness outstanding as of any date shall be the accreted
value thereof, in the case of any Indebtedness issued with an original issue
discount, and the principal amount thereof together with any interest or other
amount that is past due, in the case of any other Indebtedness.

(bj)"Insurer Financial Strength Rating" means the Insurer Financial Strength
Rating of Standard & Poor's Rating Services, representing the current opinion of
Standard & Poor's Rating Services of the financial security characteristics of
an insurance organization with respect to its ability to pay under its insurance
policies and contracts in accordance with their terms.

(bk)"Interest Expense" means, for any period, all amounts that would, in
accordance with GAAP consistently applied, be deducted in computing Net Income
on account of interest on

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Indebtedness, including imputed interest in respect of Capital Leases, accrued
interest (whether or not paid) and amortization of debt discount and expense.

(bl)"Interest Period" means, for each Libor Advance, a period commencing: (i)in
the case of the initial Interest Period for such Advance, on the date of such
Advance; and

(ii)in the case of any subsequent Interest Period for such Advance, on the last
day of the immediately preceding Interest Period;

and ending, in either case, on the last day of the period as selected by the
applicable Borrower pursuant to this Agreement.

(bm)"Inventory" means inventory of Pope & Talbot Canada, the Limited Partnership
or Mackenzie Pulp comprising finished goods, work-in-progress and raw materials,
provided such inventory is located in a jurisdiction where the security interest
constituted by the Security Documents in respect of such inventory has been
perfected, and provided further that such inventory is not subject to any
mortgage, charge, lien, consignment, title retention arrangement, security
interest or other encumbrance, other than Liens described in clauses (i), (ii),
(iii) and (xi) of the definition of Permitted Liens.

(bn)"Inventory and Receivables Sale Agreement" means the agreement dated
June 15, 2001 among Pope & Talbot Canada, Mackenzie Pulp and the Limited
Partnership providing for the sale of inventory and accounts receivable by
Pope & Talbot Canada and Mackenzie Pulp to the Limited Partnership.

(bo)"Issuing Lender" means, subject to Section 13.10, TD Bank.

(bp)"Judgment Currency" means the currency in which a court of competent
jurisdiction may render judgment in connection with any litigation relating to
the repayment of Outstandings under this Agreement.

(bq)"Land Trustee" means Mackenzie Pulp Land Ltd., a company incorporated under
the Company Act (British Columbia), and its successors.

(br)"Land Trustee Debenture" means a debenture in the principal amount of
Cdn.$160,000,000, executed by the Land Trustee in favour of the Administration
Agent for the benefit of the Lenders, containing a fixed charge over all real
property interests of the Land Trustee and a floating charge and security
interest over all present and after-acquired personal property of the Land
Trustee, in form and content satisfactory to the Lenders.

(bs)"Law" means any law (including common law and equity), constitution,
statute, order, treaty, regulation or rule having the force of law of any
Governmental Body.

(bt)"Lender Assignment Agreement" means an assignment agreement substantially in
the form attached as Schedule 6.

(bu)"Lender's Proportion" means, with respect to each Lender, the percentage of
the aggregate Commitments of all Lenders represented by such Lender's individual
Commitment.

(bv)"Lenders" means The Toronto-Dominion Bank, Bank of Montreal and The Bank of
Nova Scotia and their respective successors and Assignees.

(bw)"Letters of Credit" means letters of credit issued by the Issuing Lender
pursuant to Article 5.

(bx)"Letter of Credit Transaction" means a transaction under which a negotiable
letter of credit is issued by a bank designated by the buyer of goods (the
"issuing bank") under which the issuing bank agrees that, when the issuing bank
receives a bill of lading or other negotiable

10

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document representing title to the goods, an invoice and related shipping
documents (collectively, the "documents") which comply with the terms of the
letter of credit, the issuing bank will pay the invoice price to the holder of
the letter of credit, either upon receipt of the documents by the issuing bank
or on a date specified in the letter of credit which is not later than 180 days
after the date of the bill of lading; provided that any such transaction will
not be a Letter of Credit Transaction for purposes of this Agreement unless:

(i)a Lender has possession of the original negotiable letter of credit;

(ii)documents have been delivered to a Lender which comply with the terms of the
letter of credit; and

(iii)the issuing bank is acceptable to a Lender.

(by)"Libor", with respect to any Interest Period, means:

(i)the rate of interest (expressed as an annual rate on the basis of a 360 day
year) determined by the Administration Agent to be the arithmetic mean (rounded
up to the nearest 0.01%) of the offered rates for deposits in US Dollars for a
period equal to the particular Interest Period, which rates appear on (A) the
Reuters screen LIBO page, or (B) if such Reuters screen LIBO page is not readily
available to the Administration Agent, Page 3750 of the Telerate screen, in
either case as of 11:00 a.m. (London time) on the second Business Day before the
first day of that Interest Period;

(ii)if neither the Reuters screen LIBO page nor Page 3750 of Telerate is readily
available to the Administration Agent for any reason, the rate of interest
determined by the Administration Agent which is equal to the simple average of
the rates of interest (expressed as a rate per annum on the basis of a year of
360 days and rounded up to the nearest 0.01%) at which three of the five largest
(as to total assets) Schedule I Banks (as selected by the Administration Agent)
would be prepared to offer leading banks in the London interbank market a
deposit in US Dollars for a term co-extensive with that Interest Period in an
amount substantially equal to the relevant Libor Advance at or about 10:00 a.m.
(Toronto time) on the second Business Day before the first day of such Interest
Period.

(bz)"Libor Advances" means Advances on which interest is determined by reference
to Libor.

(ca)"Lien" means, with respect to any person, any mortgage, lien, pledge,
adverse claim, charge, security interest or other encumbrance, or any interest
or title of any vendor, lessor, lender or other secured party to or of such
person under any conditional sale or other title retention agreement or capital
lease, upon or with respect to any property or asset of such person, or the
signing of any security agreement authorizing any other person as the secured
party to file any financing statement.

(cb)"Limited Partnership" means P&T Funding Limited Partnership, a limited
partnership formed under the Partnership Act (British Columbia), and its
successors.

(cc)"Limited Partnership Agreement" means the limited partnership agreement
dated June 11, 2001 made between the General Partner and the Trust in respect of
the Limited Partnership.

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(cd)"Limited Partnership Security Agreement" means a security agreement executed
by the Limited Partnership in favour of the Administration Agent granting to and
creating in favour of the Administration Agent, for the benefit of the Lenders,
a security interest over all present and after-acquired personal property of the
Limited Partnership, in form and content satisfactory to the Lenders.

(ce)"Mackenzie Pulp" means Pope & Talbot Mackenzie Pulp Operations Ltd.
(formerly called Norske Skog Canada Mackenzie Pulp Limited), a company initially
incorporated under the Company Act (British Columbia) and continued under the
laws of the Province of Alberta, and its successors.

(cf)"Mackenzie Pulp Common Shares" means all common shares in the capital of
Mackenzie Pulp which are issued and outstanding on the Closing Date.

(cg)"Mackenzie Pulp Debenture" means a debenture in the principal amount of
Cdn.$160,000,000, executed by Mackenzie Pulp in favour of the Administration
Agent for the benefit of the Lenders, containing a fixed charge over all real
property interests of Mackenzie Pulp and a floating charge and security interest
over all present and after-acquired personal property of Mackenzie Pulp, in form
and content satisfactory to the Lenders.

(ch)"Mackenzie Pulp Preferred Shares" means 1,620,000 Class A Preference Shares
in the capital of Mackenzie Pulp.

(ci)"Mackenzie Pulp Security Agreement" means a security agreement executed by
Mackenzie Pulp in favour of the Administration Agent granting to and in favour
of the Administration Agent, for the benefit of the Lenders, a security interest
over all accounts receivable and inventory of Mackenzie Pulp, in form and
content satisfactory to the Lenders.

(cj)"Mackenzie Pulp Share Purchase Agreement" means the agreement dated
March 29, 2001 among Norske Skog Canada Limited, the Vendor, Pope & Talbot
Canada, Pope & Talbot US and Mackenzie Pulp, as amended by amending agreement
dated June 14, 2001, under which Pope & Talbot Canada agreed to purchase from
the Vendor the Mackenzie Pulp Common Shares and all shareholder advances to
Mackenzie Pulp.

(ck)"Majority Lenders" means, at any time, Lenders having in excess of 662/3% of
the Total Commitment.

(cl)"Margin Report" means a monthly report setting out the amount and containing
a breakdown of Eligible Insured Accounts Receivable, Eligible Uninsured Accounts
Receivable and Inventory, substantially in the form attached as Schedule 4.

(cm)"Material Adverse Effect" means a material adverse effect:

(i)on the financial condition, business or prospects of Pope & Talbot Canada and
its Subsidiaries, taken as a whole;

(ii)on the ability of Pope & Talbot Canada or the Limited Partnership to perform
its obligations under this Agreement; or

(iii)on the validity or enforceability of this Agreement, any of the Security
Documents or any of the Postponement Agreements.

(cn)"Material Subsidiary" means, at any time and from time to time, any
Subsidiary of Pope & Talbot Canada whose business or assets form a material part
of the business or assets of Pope & Talbot Canada and its Subsidiaries taken as
a whole and shall include, without limitation, Mackenzie Pulp and the Land
Trustee.

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(co)"Net Income" means, for any particular period, the net income of Pope &
Talbot Canada for such period, determined on a consolidated basis in accordance
with GAAP; provided that Net Income shall not include:

(i)any loss, writedown, gain or other amount classified as an unusual or
extraordinary item in accordance with GAAP;

(ii)any portion of the net income or loss of any person:

(A)that is not a Subsidiary of Pope & Talbot Canada (other than cash amounts
actually received by Pope & Talbot Canada or a wholly-owned Subsidiary of Pope &
Talbot Canada); or

(B)that is a Subsidiary of the Limited Partnership; or

(iii)any gain or loss on the disposition of fixed assets or any income or loss
attributable to discontinued operations.

(cp)"Net Worth" means at any time the net worth of Pope & Talbot Canada
(excluding any Subsidiaries of the Limited Partnership) consisting of capital
stock, contributed surplus and retained earnings (or, in the case of the Limited
Partnership, contributed capital and retained earnings) and including the
Obligations of Pope & Talbot Canada under the Pope & Talbot Canada Financing
Agreement (provided that such Obligations do not constitute Indebtedness of
Pope & Talbot Canada at such time), determined on a consolidated basis in
accordance with GAAP, less any amounts in respect of intangibles.

(cq)"Non-Resident of Canada" has the meaning assigned to the expression
"non-resident" in the Income Tax Act (Canada).

(cr)"Normalized EBITDA" means, for any particular period:

(i)the Net Income for that period;

plus

(ii)all amounts deducted in computing Net Income for such period in respect of
depreciation and amortization, Interest Expense and income taxes;

plus

(iii)wood products, marketing and administration costs, corporate administration
costs and pulp marketing and administration costs charged by Pope & Talbot US
(or any of its Affiliates) to Pope & Talbot Canada or any of its Subsidiaries
and deducted in computing Net Income, to a maximum of Cdn.$2,500,000 for each
fiscal quarter of Pope & Talbot Canada.

(cs)"North American Open Account Transaction" means a sale of goods on credit to
a buyer located in the United States or Canada.

(ct)"Notice of Repayment or Cancellation" means a notice substantially in the
form attached as Schedule 2.

(cu)"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.

(cv)"Operating Borrower" means the Limited Partnership.

(cw)"Operating Facility" means the Credit Facility described in Section 2.1(a)
of this Agreement.

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(cx)"Operating Facility Maturity Date" means, as of any date, the date that is
two years after the then current Conversion Date.

(cy)"Original Currency" means the currency in respect of which any Outstandings
are owed by a Borrower to a Lender in accordance with the provisions of this
Agreement.

(cz)"Other Default" means:

(i)a material default by Pope & Talbot Canada or any of its Subsidiaries under
any material agreement relating to borrowed money in excess of Cdn.$5,000,000
(or its equivalent in any other currency); or

(ii)a default by Pope & Talbot Canada or any of its Subsidiaries under any other
agreement which would reasonably be expected to give rise to a Material Adverse
Effect.

(da)"Outstandings" means, on any day, an amount calculated and expressed in
Canadian Dollars (with each relevant US Dollar amount converted, for purposes of
such calculation, into its Equivalent Amount in Canadian Dollars) equal to:

(i)the aggregate principal amount of all Advances under the Credit Facilities;

(ii)the aggregate Face Amount of all outstanding Bankers' Acceptances under the
Credit Facilities; and

(iii)the aggregate Face Amount of all issued Letters of Credit and Guarantee
Letters under the Credit Facilities.

(db)"Overdraft Advances" has the meaning ascribed to that term in Section 3.14.

(dc)"Participant" means a person which accepts a grant of participation in all
or any part of a Lender's interest in a Credit Facility in accordance with
Section 14.16 of this Agreement.

(dd)"Permitted Liens" means:

(i)carriers', warehousemen's, builders', mechanics', woodsmen's, landlords' and
other like Liens arising in the ordinary course of business by operation of law
for sums not yet delinquent or being contested in good faith, if such reserves
as are required by GAAP have been made with respect thereto and the Lenders have
been provided with such security for payment of the contested amounts (and any
interest, penalties or other costs) as the Lenders may require;

(ii)Liens resulting from judgments or awards not giving rise to an Event of
Default, the time for the appeal or petition for re-hearing of which shall not
have expired or in respect of which Pope & Talbot Canada or any of its
Subsidiaries shall in good faith be prosecuting an appeal or proceeding for
review and in respect of which:

(A)a stay of execution pending such appeal or proceeding for review shall have
been obtained; or

(B)the Lenders have been provided with such security as the Lenders may require
for payment of such judgment (including interest and other costs);

(iii)Liens or trusts for taxes, assessments and other governmental charges
either not yet due and payable or being contested in good faith if such reserves
as are required by GAAP have been made with respect thereto and the Lenders have
been provided with such security for payment of the contested amounts (and any
interest, penalties or other costs) as the Lenders may require;

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(iv)pledges or deposits made under workers' compensation laws or similar
legislation or good faith deposits or bonds or similar instruments to secure the
performance of bids, tenders, leases, contracts (other than for the payment of
Indebtedness) or expropriation proceedings, or deposits to secure surety and
appeal bonds or deposits as security for contested taxes or export or import
duties, levies, charges or surcharges;

(v)the right reserved to or vested in any Governmental Body by the terms of any
lease, licence, franchise, tenure, contract, grant or permit acquired by Pope &
Talbot Canada or any of its Subsidiaries, or by any statutory provisions, to
terminate any such lease, license, franchise, tenure, contract, grant or permit
(provided that such right is not then being exercised), or to require annual or
other periodic payments or the performance of obligations or imposition of
conditions, as a condition of the continuance thereof;

(vi)security given to a public utility or to any Governmental Body when required
by such public utility or Governmental Body in connection with operations in the
ordinary course of business of Pope & Talbot Canada or any of its Subsidiaries;

(vii)the reservations, limitations, provisos and conditions, if any, expressed
in any grants from the Crown in the right of Canada or in the right of any
Province or Territory thereof;

(viii)minor survey exceptions, minor encumbrances, leases, rights or options to
repurchase, restrictions, easements or reservations of or rights of others for
rights of way, sewers, electric lines, telegraph and telephone lines and other
similar purposes, title defects or irregularities or zoning or other
restrictions as to the use of real properties or Liens incidental to the conduct
of business or the ownership of properties which were not incurred in connection
with the incurrence of Indebtedness or other extensions of credit and which do
not in the aggregate materially detract from the value of such properties or
materially impair their use in the operation of the business of Pope & Talbot
Canada or any of its Subsidiaries;

(ix)Purchase Money Mortgages, Liens constituted by capital leases or finance
leases which create Capital Lease Obligations, and Liens created by operation of
Law in respect of leases of personal property having a term of more than one
year;

(x)any Lien renewing, extending or refunding any Permitted Lien securing
Indebtedness; provided that

(A)the principal amount of Indebtedness secured by such Lien immediately prior
to such extension, renewal or refunding is not increased or the maturity thereof
reduced;

(B)such Lien is not extended to any other property; and

(C)immediately after such extension, renewal or refunding no Default or Event of
Default would exist;

(xi)Liens created by or contained in the Security Documents and Liens (if any)
created by or contained in the Postponement Agreements or in any postponement
agreement or subordination agreement entered into by the Lenders (or the
Administration Agent on their behalf) with any other lender to or creditor of
Pope & Talbot Canada or any of its Subsidiaries;

(xii)rights of set-off, consolidation and combination available to a
deposit-taking institution in respect of deposit accounts of Pope & Talbot
Canada or any of its Subsidiaries maintained with that institution; and

(xiii)rights of any counterparty to a Treasury Contract with Pope & Talbot
Canada or any of its Subsidiaries to net amounts payable to Pope & Talbot Canada
or such Subsidiary

15

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under that Treasury Contract or other Treasury Contracts with Pope & Talbot
Canada or such Subsidiary against amounts payable by Pope & Talbot Canada or
such Subsidiary to the counterparty under that Treasury Contract or other
Treasury Contracts.

(de)"person" includes an individual, partnership, corporation, trust,
unincorporated association, joint venture or other entity, or a foreign state or
political subdivision thereof or any agency of such state or subdivision.

(df)"Pope & Talbot Canada" means Pope & Talbot Ltd., a company amalgamated under
the Company Act (British Columbia), and its successors.

(dg)"Pope & Talbot Canada Financing Agreement" means the preferred security loan
agreement dated June 13, 2001 between Pope & Talbot Canada and Pope & Talbot US.

(dh)"Pope & Talbot Canada Security Agreement" means a security agreement
executed by Pope & Talbot Canada in favour of the Administration Agent granting
to and creating in favour of the Administration Agent, for the benefit of the
Lenders, a security interest over all accounts receivable and inventory of
Pope & Talbot Canada, in form and content satisfactory to the Lenders.

(di)"Pope & Talbot US" means Pope & Talbot, Inc., a corporation incorporated
under the laws of the State of Delaware, and its successors.

(dj)"Pope & Talbot US Postponement Agreement" means an agreement between the
Administration Agent, the Lenders, Pope & Talbot Canada and Pope & Talbot US
substantially in the form attached as Schedule 7.

(dk)"Postponement Agreements" means the Trust Postponement Agreement and the
Pope & Talbot US Postponement Agreement.

(dl)"Power of Attorney" means the power of attorney regarding Bankers'
Acceptances contained in Section 4.3.

(dm)"Prime Rate" on any day means the greater of:

(i)the rate of interest per annum then in effect (based on a year of 365 days)
established and reported by TD Bank to the Bank of Canada from time to time as
the reference rate of interest for the determination of interest rates that TD
Bank charges to customers of varying degrees of creditworthiness in Canada for
Canadian Dollar loans made by it in Canada and designated by it as its "prime
rate"; and

(ii)the sum of:

(A)the average one month bankers' acceptance rate as quoted on Reuters Service
page CDOR as at 10:00 a.m. (Toronto time) on such day, expressed as a rate per
annum; plus

(B)100 basis points;

provided that each change in the Prime Rate shall be effective from and
including the date such change is made without any requirement of notification
to the Borrowers or any other person.

(dn)"Prime Rate Advances" means Advances on which interest is determined by
reference to the Prime Rate in effect from time to time.

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(do)"Purchase Money Mortgage" means:

(i)any Lien existing on any property acquired by Pope & Talbot Canada or any of
its Subsidiaries from an arm's-length third party after the date hereof and
assumed by Pope & Talbot Canada or such Subsidiary at the time of such
acquisition, provided such Lien is secured only by the property so acquired and
not by any other property or assets of Pope & Talbot Canada or any of its
Subsidiaries; and

(ii)any Lien created to secure all or any part of the purchase price, or to
secure Indebtedness incurred or assumed to pay all or any part of the purchase
price or cost of development or construction, of property (or any improvement
thereof) acquired or constructed by Pope & Talbot Canada or any of its
Subsidiaries, provided that:

(A)any such Lien shall extend solely to the item or items of such property (or
improvement thereof) so acquired or constructed and, if required by the terms of
the instrument originally creating such Lien, other property (or any improvement
thereon) which is an improvement to or is acquired for specific use in
connection with such acquired or constructed property (or improvement thereon)
or which is real property being improved by such acquired or constructed
property (or improvement thereon);

(B)the principal amount of the Indebtedness secured by any such Lien shall at no
time exceed an amount equal to 100% of the lesser of:

    (1)   the cost to Pope & Talbot Canada or such Subsidiary of the property
(or improvement thereon) so acquired or constructed; and
 
 
(2)
 
the fair market value (as determined in good faith by the directors of Pope &
Talbot Canada or such Subsidiary, or the directors of the General Partner, as
the case may be) of such property (or improvement thereon) at the time of such
acquisition or construction; and

(C)any such Lien shall be created contemporaneously with, or within 180 days
after, the acquisition or completion of development or construction of such
property; provided that such period may be extended for an additional 90 days if
a written commitment to finance such acquisition, development, construction or
improvement is provided.

(dp)"Quarterly Compliance Certificate" means the certificate of the chief
financial officers or other Authorized Officer of each of Pope & Talbot Canada
and the Limited Partnership, required to be delivered to the Lenders following
each fiscal quarter of Pope & Talbot Canada and the Limited Partnership pursuant
to Section 8.1(o), substantially in the form attached as Schedule 3.

(dq)"Responsible Officer" means:

(i)with respect to Pope & Talbot Canada, any Authorized Officer of Pope & Talbot
Canada, any vice president, treasurer or controller of Pope & Talbot Canada, and
any other officer of Pope & Talbot Canada responsible for monitoring compliance
with, or otherwise administering, this Agreement; and

(ii)with respect to Limited Partnership, any Authorized Officer of the Limited
Partnership, any vice president, treasurer or controller of the General Partner,
and any other officer of the General Partner responsible for monitoring
compliance with, or otherwise administering, this Agreement.

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(dr)"Rollover" means:

(i)the issuance of Bankers' Acceptances on any day in a Face Amount not
exceeding the Face Amount of Bankers' Acceptances maturing on that day, the
proceeds from which are used (directly or indirectly) to pay the maturing
Bankers' Acceptances; and

(ii)the continuation of a Libor Advance for a further Interest Period without
increasing the principal amount thereof.

(ds)"Security Documents" means, collectively:

(i)the Pope & Talbot Canada Security Agreement;

(ii)security granted by Pope & Talbot Canada under section 427 of the Bank Act
(Canada);

(iii)the Limited Partnership Security Agreement;

(iv)security granted by the Limited Partnership under section 427 of the Bank
Act (Canada);

(v)the Mackenzie Pulp Debenture;

(vi)the Mackenzie Pulp Security Agreement;

(vii)the Beneficiary Authorization and Charge;

(viii)the Land Trustee Debenture; and

(ix)any other documents or instruments from time to time delivered to the
Administration Agent and the Lenders to secure the obligations of any of the
Borrowers or the Guarantors under this Agreement.

(dt)"Subsidiary" means, with respect to any person, any corporation, partnership
or other entity of which or in which such person (alone or with its
Subsidiaries) owns directly or indirectly more than 50% of the combined voting
power of all classes of Voting Stock, and, for the purposes of this Agreement,
the Limited Partnership shall be a Subsidiary of Pope & Talbot Canada for so
long as Pope & Talbot Canada is the sole general partner of the Limited
Partnership.

(du)"Taxes" means any and all present or future taxes (including without
limitation all stamp, documentary, excise or property taxes), levies, imposts,
deductions, charges or withholdings and liabilities with respect thereto.

(dv)"TD Bank" means The Toronto-Dominion Bank or any successor.

(dw)"this Agreement", "herein", "hereof", "hereto" and "hereunder" and similar
expressions mean and refer to this Agreement as supplemented or amended and not
to any particular Article, Section, Schedule or other portion hereof, and the
expressions "Article", "Section" and "Schedule" followed by a number mean and
refer to the specified Article, Section or Schedule of this Agreement.

(dx)"Timber Tenures" mean all forest licences, timber sale licences, timber
licences, tree farm licences, pulpwood agreements, woodlot licences, free use
permits, licences to cut, road permits, road use permits, cutting permits and
special use permits granted to Pope & Talbot Canada or any of its Subsidiaries
pursuant to the Forest Act and all other timber tenures or entitlements of
Pope & Talbot Canada or any of its Subsidiaries in respect of timber now owned
or hereafter acquired by Pope & Talbot Canada or such Subsidiary together with
all rights, authorizations and benefits connected therewith or appurtenant
thereto and all renewals, replacements, amendments, subdivisions,
consolidations, partitions, conversions or substitutions thereof or therefor.

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(dy)"Total Capitalization" means the sum of:

(i)Funded Debt; and

(ii)Net Worth.

(dz)"Total Commitment" means the sum of the Commitments of the Lenders under the
Acquisition Facility and the Operating Facility from time to time, irrespective
of Borrowings.

(ea)"Treasury Contracts" means any agreement entered into by Pope & Talbot
Canada or any of its Subsidiaries to control, fix or regulate currency exchange
fluctuations or the rate or rates of interest payable on indebtedness, and
includes interest rate swaps, interest rate agreements, caps, collars, futures
or hedging agreements and other like money market facilities.

(eb)"Treasury Contract Breakage Costs" means the aggregate of all costs and
liabilities incurred by Pope & Talbot Canada or the Limited Partnership to a
Lender as a result of the termination or cancellation of any Treasury Contract
or Treasury Contracts.

(ec)"Trust" means P&T Community Trust, the sole limited partner of the Limited
Partnership, formed pursuant to a trust agreement dated June 11, 2001.

(ed)"Trust Postponement Agreement" means an agreement between the Administration
Agent, the Lenders, the Limited Partnership and the Trust substantially in the
form attached as Schedule 8.

(ee)"US Dollars" and "US$" each mean lawful money of the United States of
America.

(ef)"Vendor" means Norske Skog Canada Pulp Operations Limited, a corporation
incorporated under the Canada Business Corporations Act.

(eg)"Voting Stock" of any designated person means any and all shares of capital
stock of such person of any class, or any other ownership interests, the holders
of which have the right (not depending upon the happening of a contingency) to
manage such person or elect the members of the board of directors, or other
persons performing similar functions, for such person.

1.2   Computation of Time Periods.

    Where, in this Agreement, a notice must be given a number of days prior to a
specified action, the day on which such notice is given shall be included and
the day of the specified action shall be excluded.

1.3   Accounting Terms.

    All accounting terms not specifically defined herein shall be construed in
accordance with GAAP.

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1.4   Incorporation of Appendix and Schedules.

    The following Appendix and Schedules to this Agreement shall, for all
purposes hereof, form an integral part of this Agreement:

Appendix 1   —   Commitments Schedule 1   —   Borrowing Notice Schedule 2—Notice
of Repayment or Cancellation Schedule 3   —   Quarterly Compliance Certificate
Schedule 4   —   Margin Report Schedule 5   —   Material Subsidiaries Schedule 6
  —   Lender Assignment Agreement Schedule 7   —   Pope & Talbot US Postponement
Agreement Schedule 8   —   Trust Postponement Agreement

1.5   Singular, Plural, etc.

    As used herein, each gender shall include all genders, and the singular
shall include the plural and the plural the singular as the context shall
require.

1.6   Acquisition Borrower.

    All references in this Agreement and the other Credit Facility Documents to
the Acquisition Borrower shall be references to Pope & Talbot Canada, regardless
of whether or not the Acquisition Facility has then been repaid in full and
whether or not the Acquisition Borrower is then entitled to a Borrowing
thereunder, and accordingly, all obligations of the Acquisition Borrower under
this Agreement and the other Credit Facility Documents, including without
limitation all obligations of the Acquisition Borrower as a Guarantor under this
Agreement, shall continue as obligations of Pope & Talbot Canada throughout the
term of this Agreement.

ARTICLE 2
CREDIT FACILITIES

2.1 Credit Facilities.

    The Credit Facilities to be made available to the Borrowers hereunder
consist of:

(a)an extendible revolving term facility (the "Operating Facility") in the
maximum principal amount of Cdn.$110,000,000 (or the Equivalent Amount in US
Dollars) to be made available to the Operating Borrower; and

(b)a non-revolving term facility (the "Acquisition Facility") in the maximum
principal amount of Cdn.$35,000,000 (or the Equivalent Amount in US Dollars) to
be made available to the Acquisition Borrower.

2.2   Purposes.

    The Acquisition Facility will be made available to the Acquisition Borrower
to finance, or assist in financing, the acquisition of the Mackenzie Pulp Common
Shares and all shareholder advances to Mackenzie Pulp pursuant to the Mackenzie
Pulp Share Purchase Agreement and as contemplated in Section 5.9. The Operating
Facility will be made available to the Operating Borrower for its general
corporate purposes.

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2.3   Availability.

    Subject to Sections 2.4 and 5.9 and the provisions of Article 6:

(a)the Operating Facility shall be available for drawdown commencing on the
Closing Date and terminating on the day prior to the Conversion Date; and

(b)the Acquisition Facility shall be available for drawdown by way of a single
advance on the Closing Date.

If the Acquisition Facility is not fully drawn on the Closing Date, the amount
not so drawn shall cease to be available and the Commitments of the Lenders in
respect of the Acquisition Facility will be reduced by that amount.

2.4   Termination of Availability.

    If the Closing Date does not occur on or before June 30, 2001, the Credit
Facilities shall no longer be available and, subject to the obligations of the
Borrowers under Section 14.5 (which shall continue), this Agreement shall
terminate.

2.5   Revolving Nature of Operating Facility.

    Subject to Section 2.9(d)(ii)(B), prior to the Conversion Date, the
Operating Facility shall revolve and any amounts borrowed thereunder and repaid
may, subject to the terms and conditions of this Agreement, be borrowed again,
provided that any such reborrowing would not result in the amount of the
Outstandings under the Operating Facility exceeding the then applicable
aggregate Commitments of the Lenders in respect of the Operating Facility. On
and after the Conversion Date, the Operating Facility shall no longer revolve,
and any amount repaid shall constitute a permanent repayment and reduction of
the Commitments in respect of the Operating Facility and may not be redrawn.

2.6   Non-Revolving Nature of Acquisition Facility.

    Subject to Section 5.9, the Acquisition Facility shall not revolve, and any
amount borrowed under the Acquisition Facility and repaid shall constitute a
permanent repayment and reduction of the Commitments in respect of the
Acquisition Facility and may not be redrawn.

2.7   Borrowing Options.

    Subject to the provisions of this Agreement, the Borrowers may, at their
option, utilize the Credit Facilities by way of:

(a)Prime Rate Advances, Base Rate Advances or Libor Advances pursuant to
Article 3 hereof; and

(b)Bankers' Acceptances for terms of one month to six months (or, subject to
availability, shorter or longer terms) in Canadian Dollars pursuant to Article 4
hereof.

In addition, the Operating Borrower may, at its option and subject to the
provisions of this agreement, utilize the Operating Facility by way of Letters
of Credit or Guarantee Letters issued by the Issuing Lender in Canadian Dollars
or US Dollars pursuant to Article 5 hereof and the Acquisition Borrower may, at
its option and subject to the provisions of this agreement, utilize a portion of
the Acquisition Facility by way of Letters of Credit or Guarantee Letters issued
by the Issuing Lender in Canadian Dollars or US Dollars pursuant to Section 5.9.

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2.8   Repayment of Credit Facilities.

    All Outstandings under the Acquisition Facility, together with all unpaid
interest, fees and other amounts owing to the Lenders in respect of the
Acquisition Facility, shall be paid by the Acquisition Borrower to the
Administration Agent on the Acquisition Facility Maturity Date, for the account
of the Lenders, and the Commitments of the Lenders in respect of the Acquisition
Facility reduced to nil.

    All Outstandings under the Operating Facility, together with all unpaid
interest, fees and other amounts owing to the Lenders under or in respect of
this Agreement shall be paid by the Operating Borrower on the Operating Facility
Maturity Date, for the account of the Lenders, and the Commitments of the
Lenders in respect of the Operating Facility reduced to nil.

2.9   Extension of Conversion Date for Operating Facility.

    The Lenders may, in their absolute discretion, agree to extend the
Conversion Date for the Operating Facility for a further period of 364 days at
any time, in accordance with the following provisions:

(a)The Operating Borrower shall, if it wishes to extend the Conversion Date,
make such request to each of the Lenders by means of written notice given to the
Administration Agent not earlier than 90 days nor later than 75 days prior to
the then applicable Conversion Date. Each Lender shall provide a written
response to such request to the Administration Agent no less than 30 days after
receiving the request. If any Lender fails to so respond, such Lender shall be
deemed to have declined to grant any such extension (and shall have no liability
for failing to respond). The Administration Agent will advise the Operating
Borrower by notice in writing of the response of the Lenders no less than
45 days prior to the Conversion Date, which notice shall include the names of
all Lenders who declined or were deemed to have declined to grant such extension
(the "Declining Lenders").

(b)If all of the Lenders agree to extend the Conversion Date, the Conversion
Date shall be extended by 364 days from the then applicable Conversion Date.

(c)If the aggregate amount of the Commitments in respect of the Operating
Facility of all Lenders who agree to extend the Conversion Date (the "Accepting
Lenders") is less than or equal to 50% of the aggregate Commitments in respect
of the Operating Facility of all Lenders then in effect, the Conversion Date
shall not be extended.

(d)If the aggregate amount of the Commitments of the Accepting Lenders exceeds
50% of the aggregate Commitments of all Lenders in respect of the Operating
Facility then in effect, the Conversion Date shall (subject to paragraph (e)
below) be extended by 364 days from the then applicable Conversion Date,
provided that the Operating Borrower has, prior to the then applicable
Conversion Date, replaced, cancelled or converted the Commitments in respect of
the Operating Facility of all Declining Lenders in the following manner:

(i)the Operating Borrower may negotiate an agreement with:

(A)one or more of the Accepting Lenders, or

(B)one or more other financial institutions ("New Lenders") which have been
identified by the Operating Borrower (with the assistance of the Administration
Agent, if requested) and which are acceptable to the Accepting Lenders, acting
reasonably,

to assume the Commitments of the Declining Lenders upon payment to the Declining
Lenders of all amounts owed to the Declining Lenders under this Agreement, and
in that event an assignment by the Declining Lenders to the Accepting Lenders or
the New Lenders will be deemed to have occurred pursuant to Section 14.15; and

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(ii)to the extent the Commitments of the Declining Lenders have not been fully
assumed by the Accepting Lenders and the New Lenders pursuant to paragraph (i)
above, and all amounts owed to the Declining Lenders paid by the Accepting
Lenders and the New Lenders, the Operating Borrower may:

(A)cancel the Commitments of the Declining Lenders and pay to the Declining
Lenders on the then-applicable Conversion Date all amounts owed to the Declining
Lenders under this Agreement, without penalty but subject to payment of any
losses, costs and expenses payable to the Declining Lenders pursuant to Sections
2.18 and 14.5; or

(B)elect to convert, effective on or before the then-applicable Conversion Date,
such portion of the Operating Facility as is represented by the Commitments of
the Declining Lenders into a non-revolving term credit facility with a maturity
date of two years from the date of such conversion and, on such maturity date,
the Commitments of the Declining Lenders shall be cancelled and the Operating
Borrower shall pay to the Declining Lenders all amounts owed to the Declining
Lenders under this Agreement, without penalty but subject to payment of any
losses, costs and expenses payable to the Declining Lenders pursuant to Sections
2.18 and 14.5.

(e)Notwithstanding paragraph (d) above, the Operating Borrower may elect not to
extend the Conversion Date by giving a further written notice to the
Administration Agent to that effect prior to the then applicable Conversion
Date.

2.10   Available Amount of the Credit Facilities.

    The available amount of each Credit Facility shall be determined in Canadian
Dollars, with Borrowings by way of US Dollars converted to Canadian Dollars by
determining the Equivalent Amount in US Dollars. Any repayment of a Borrowing by
a Borrower shall be in the currency of such Borrowing.

2.11   Operating Facility Borrowings not to Exceed Borrowing Base.

    Notwithstanding anything to the contrary in this Agreement, the Operating
Borrower shall not be entitled to any Borrowing under the Operating Facility if
such Borrowing would result in the Outstandings under the Operating Facility
exceeding the then applicable Borrowing Base, as determined in accordance with
the last Margin Report required to be provided to the Administration Agent under
Section 8.1(p). If at any time the Outstandings under the Operating Facility
exceed the then applicable Borrowing Base, the Operating Borrower shall
immediately repay such amount as will result in the Outstandings under the
Operating Facility being less than or equal to the Borrowing Base and provided
that, following the Conversion Date, the aggregate Commitments of the Lenders in
respect of the Operating Facility shall be permanently reduced by the amount of
any such repayment.

2.12   Optional Repayment.

    The applicable Borrower may at any time, on three Business Days' notice to
the Administration Agent by way of a Notice of Repayment or Cancellation, repay
all or any part of the amount outstanding under a Credit Facility, together with
interest thereon without penalty, bonus or premium, provided that, for any
repayments under the Acquisition Facility or, after the Conversion Date, under
the Operating Facility, the aggregate Commitments of the Lenders under such
Credit Facility shall be permanently reduced by the amount of such repayment.
Subject to Section 2.18, no repayment may be made in respect of a Libor Advance
on a day other than the last day of an Interest Period applicable to such Libor
Advance and no repayment may be made in respect of a Bankers' Acceptance on a
date other than the maturity date of such Bankers' Acceptance.

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2.13   Optional Reduction of Commitments.

    The Operating Borrower or the Acquisition Borrower may at any time, on three
Business Days' notice to the Administration Agent by way of a Notice of
Repayment or Cancellation, permanently reduce the unused portions of the
Commitments of the Lenders in respect of the Operating Facility and the
Acquisition Facility, respectively, rateably between or among the Lenders,
without penalty, bonus or premium. Each partial reduction shall be not less than
an aggregate of Cdn.$5,000,000 and in integral multiples of Cdn.$1,000,000.

2.14   Repayment of Outstandings to Reflect Commitment.

    If the Outstandings under the Acquisition Facility or the Operating Facility
exceed the then prevailing Total Commitment for a period of three Business Days
by virtue of a change in the Equivalent Amount in Canadian Dollars of
Accommodations made in US Dollars, the Acquisition Borrower or the Operating
Borrower, as the case may be, shall at the request of the Administration Agent
forthwith repay such amount as will result in the Outstandings under the Credit
Facilities being less than or equal to the Total Commitment.

2.15   General Interest Provisions.

    The following provisions shall apply in respect of interest payable under
this Agreement:

(a)in the event of any dispute, disagreement or adjudication involving or
pertaining to the determination of Prime Rate, Base Rate or Libor in effect at
any time, the certificate of the Administration Agent as to such rate shall be
accepted, in the absence of manifest error, as prima facie evidence thereof for
all purposes of this Agreement;

(b)each determination by the Administration Agent of the amount of interest,
stamping fees or other amounts due from the Borrowers hereunder shall, in the
absence of manifest error, be prima facie evidence of the accuracy of such
determination;

(c)all interest and other amounts payable shall accrue daily, be computed as
described herein, and be payable both before and after demand, maturity, default
and judgment;

(d)to the maximum extent permitted by law, the covenant of the Borrowers to pay
interest at rates provided herein shall not merge in any judgment relating to
any obligation of the Borrowers to the Lenders or the Administration Agent;

(e)in no event shall any interest, fees or other amounts payable hereunder
exceed the maximum permitted by law; in the event any such interest or fee
exceeds such maximum rate, such interest or fee shall be reduced to the maximum
rate recoverable under law and the Lenders and the Borrowers shall be deemed to
have agreed to such amount by contract;

(f)for the purposes of the Interest Act (Canada):

(i)the annual rate of interest which is equivalent to the interest rate
determined by reference to Libor shall be the determined rate multiplied by a
fraction, the numerator of which is the total number of days in such year and
the denominator of which is 360;

(ii)unless otherwise stated, the rates of interest specified in this Agreement
are to be calculated on the basis of a year of 365 days and the annual rate of
interest which is equivalent to the interest rate determined by reference to
such 365 day period hereunder shall be the determined rate multiplied by a
fraction, the numerator of which is the total number of days in such year and
the denominator of which is 365;

(iii)the principle of deemed reinvestment of interest shall not apply to any
interest calculation under this Agreement; and

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(iv)the rates of interest specified in this Agreement are intended to be nominal
rates and not effective rates.

2.16   Business Day Payments.

    Except as otherwise provided herein in the case of a Libor Advance, whenever
any payment hereunder shall be stated to be due on a day other than a Business
Day, such payment shall be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.

2.17   Interest on Overdue Amounts.

    If all or a portion of the principal amount of any Advance, any interest
payable thereon, any stamping fee, Commitment Fee or other fee or any other
amount payable by the Borrowers hereunder shall not be paid when due (whether at
stated maturity, by acceleration or otherwise), such overdue amount shall bear
interest at a rate per annum equal to the Prime Rate plus 2.0% in the case of
any overdue amount in Canadian Dollars and the Base Rate plus 2.0% in the case
of any overdue amount in US Dollars. Interest on any such overdue amount shall
be computed from and including the date on which such amount becomes due to the
date such amount is paid, and shall be compounded monthly and be paid on demand
both before and after maturity, default and judgment.

2.18   Breakage Costs.

    Each of the Borrowers shall promptly pay to each Lender any amounts required
to compensate such Lender for any loss, cost of redeploying funds or other cost
or expense suffered or incurred by such Lender as a result of:

(a)any payment being made by such Borrower in respect of a Libor Advance or a
Bankers' Acceptance (due to acceleration of the maturity of the Advance
hereunder or a mandatory or optional prepayment of principal or for any other
reason) on a day other than the last day of an Interest Period or a maturity
date applicable thereto, respectively;

(b)such Borrower's failure to give notice in the manner and at the times
required hereunder;

(c)the failure of such Borrower to accept an Advance or make a Drawing after
delivery of a Borrowing Notice in the manner and at the time specified in such
Borrowing Notice; or

(d)the failure of such Borrower to make a payment or a prepayment to the
Administration Agent in the manner and at the time specified in a notice given
to the Administration Agent.

A certificate of such Lender, which may be submitted by the Administration Agent
on such Lender's behalf, as to the amount necessary so to compensate such Lender
shall be prima facie evidence, absent manifest error, of the amount due from
such Borrower to such Lender.

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2.19   Allocation.

    The Administration Agent is authorized by the Borrowers and each Lender to
allocate among the Lenders the Libor Advances and Bankers' Acceptances which are
the subject of a Borrowing in such manner and amounts as the Administration
Agent may, in its discretion, consider necessary and equitable, rounding up or
down in respect of individual Lenders, so as to ensure if possible that no
Lender has a participation with respect to a Bankers' Acceptance for a fraction
of Cdn.$100,000 or a Libor Advance for a fraction of US$100,000, as the case may
be, and the Lenders' respective participation in any such Libor Advances and
Bankers' Acceptances and repayments thereof shall be altered accordingly.

2.20   Application of Payments.

    So long as no Event of Default has occurred and is continuing, all amounts
received by the Lenders from or on behalf of either of the Borrowers and not
previously applied in another manner in accordance with this Agreement shall be
applied by the Lenders as follows:

(a)first, to fulfil the Borrowers' obligation to pay accrued and unpaid interest
due and owing on the principal amount of Advances or unpaid stamping fees in
respect of Bankers' Acceptances;

(b)second, to fulfil the Borrowers' obligation to pay any other fees which are
due and owing, and any accrued and unpaid costs and expenses of the Lenders in
connection with any of the Credit Facility Documents;

(c)third, to fulfil the Borrowers' obligation to pay any amounts due and owing
on account of the unpaid principal amount of Borrowings and the Borrowers'
reimbursement obligations in respect of Bankers' Acceptances; and

(d)fourth, to fulfil any other obligation of the Borrowers under this Agreement.

After the occurrence of an Event of Default, unless such Event of Default is
cured or waived by the Lenders, payments received by the Lenders shall be
applied to the Borrowers' obligations as the Lenders see fit.

2.21   Sharing of Payments.

    If any Lender shall obtain any payment (whether voluntary, involuntary,
through the exercise of any right of set-off at Law or otherwise and other than
amounts paid by the Borrowers in respect of Taxes or resulting from an
allocation pursuant to Section 2.19 hereof) in excess of its rateable share of
payments due to it under the Credit Facility Documents, such Lender shall
receive such payment in trust for the Administration Agent for and on behalf of
the Lenders, shall forthwith remit such payment to the Administration Agent, and
take all such action and do or cause to be done all such things as shall be
necessary in order that such payment shall be preserved and shall enure to the
Administration Agent for and on behalf of all the Lenders. Prior to a
declaration pursuant to Section 12.2 hereof, any such payment received by the
Administration Agent shall be shared among the Lenders pro rata in proportion to
the outstanding obligations owing to them by the Borrowers under the Credit
Facility Documents (subject to any allocations made pursuant to Section 2.19).
From and after a declaration pursuant to Section 12.2 hereof, the Lenders shall
forthwith purchase from other Lenders such participation in Accommodations made
by other Lenders or take any such action or do any such thing as may be
necessary to ensure the Outstandings are rateably shared amongst all Lenders in
proportion to their Commitments and any amounts received by the Administration
Agent shall be applied so as to, and the Lenders shall take all such action and
do or cause to be done all such things as shall be necessary so as to, cause the
reduction in whole or in part of the outstanding obligations owing to them by
the Borrowers pro rata in proportion to each Lender's Commitment.

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2.22   Conditions Solely for the Benefit of the Lenders.

    All conditions to the obligations of the Lenders to make any Accommodation
under the Credit Facilities are solely for the benefit of the Lenders, and no
other person shall have standing to require satisfaction of any condition and no
other person shall be deemed to be a beneficiary of any such condition, any and
all of which may be freely waived in whole or in part by the Lenders at any
time.

2.23   No Waiver.

    The making of an Accommodation without fulfilment of one or more of the
conditions set forth in this Agreement shall not constitute a waiver by the
Lenders of any such condition, and the Lenders reserve the right to require the
fulfilment of each condition prior to the making of any subsequent
Accommodation.

2.24   Authorized Debit.

    Each of the Borrowers authorizes the Administration Agent and each Lender to
debit such Borrower's accounts with the amounts required to pay principal,
interest, stamping fees, Commitment Fees and other amounts required to be paid
by the Borrowers under this Agreement.

2.25   Commitment Fee.

    The Operating Borrower shall pay to the Administration Agent for the account
of the Lenders a fee (the "Commitment Fee") in Canadian Dollars on the amount of
each Lenders' Proportion of the Total Commitment in respect of the Operating
Facility not utilized by the Operating Borrower. In determining the amount of
each Lender's Proportion of the Total Commitment not utilized by the Operating
Borrower:

(a)Borrowings in US Dollars shall be deemed to be the Equivalent Amount thereof
in Canadian Dollars; and

(b)the following Borrowings shall be deemed to be a utilization only of the
Issuing Lender's Commitment, and shall not reduce any other Lender's Proportion
of the Total Commitment not utilized by the Operating Borrower:

(i)Overdraft Advances made by the Issuing Lender pursuant to Section 3.14; and

(ii)Contingent Payment Letters issued by the Issuing Lender at the request of
the Operating Borrower pursuant to Article 5 up to an aggregate Face Amount of
Cdn.$11,000,000 (or the Equivalent Amount in US Dollars) outstanding at any one
time.

The Commitment Fee shall be calculated at the rate of 25 basis points per annum
calculated on a daily basis on the portion of the Total Commitment under the
Operating Facility not utilized by the Operating Borrower on such date, provided
that the Commitment Fee shall cease to be payable in respect of the Operating
Facility upon the conversion of the Operating Facility to a non-revolving
facility on the Conversion Date. The Commitment Fee shall be payable from and
after the Closing Date and shall be paid to the Administration Agent for the
account of the Lenders quarterly in arrears on the third Business Day following
the end of each calendar quarter.

2.26   Administration Agent's Fee.

    The Borrowers shall pay the Administration Agent annually in advance,
commencing on the Closing Date and thereafter on the anniversary of the Closing
Date, an agent's fee separately agreed upon by the Administration Agent and the
Borrowers.

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2.27   Payment to Administration Agent.

    A Borrower's obligation to pay any amount to a Lender under this Agreement
shall be deemed to be satisfied if such amount is paid to the Administration
Agent for the account of such Lender.

ARTICLE 3
LOANS

3.1   Advances.

    Each Lender severally agrees, on the terms and conditions hereinafter set
forth, from time to time to make Prime Rate Advances, Base Rate Advances and
Libor Advances (or any combination thereof) to the Operating Borrower under the
Operating Facility on any Business Day prior to the Conversion Date, and to the
Acquisition Borrower under the Acquisition Facility on any Business Day prior to
the Acquisition Facility Maturity Date.

3.2   Minimum Advances.

    Each Prime Rate Advance (other than an Overdraft Advance) shall be in an
aggregate amount of not less than Cdn.$1,000,000. Each Base Rate Advance (other
than an Overdraft Advance) shall be in an aggregate amount of not less than
US$1,000,000. Each Libor Advance shall be in an aggregate amount of not less
than US$1,000,000 and in an integral multiple of US$100,000.

3.3   Notice Requirements for Advances.

    Each Advance shall be made:

(a)without notice, in the case of Overdraft Advances pursuant to Section 3.14
which do not exceed an aggregate of Cdn.$10,000,000 (or the Equivalent Amount in
US Dollars) on any Business Day;

(b)on at least two Business Days' prior written notice, in the case of Prime
Rate Advances exceeding Cdn.$10,000,000 or Base Rate Advances exceeding
US$10,000,000;

(c)on at least one Business Day's prior written notice, in the case of any Prime
Rate Advance or Base Rate Advance not described in paragraphs (a) or (b) above;
and

(d)on at least three Business Days' prior written notice, in the case of a Libor
Advance.

Notice shall be given not later than 9:00 a.m. (Vancouver time) by a Borrower to
the Administration Agent by way of a Borrowing Notice. The Administration Agent
shall give each Lender prompt notice thereof and of such Lender's rateable
portion of such Advance.

3.4   Payment of Advances to Administration Agent.

    Each Lender shall, before 11:00 a.m. (Vancouver time) on the date of the
requested Advance, pay to the Administration Agent in same day funds such
Lender's rateable portion of such Advance in:

(a)Canadian Dollars, in the case of a Prime Rate Advance; and

(b)US Dollars, in the case of a Base Rate Advance or a Libor Advance.

Promptly upon receipt by the Administration Agent of such funds, and subject to
the provisions of this Agreement, the Administration Agent will make such funds
available to the Acquisition Borrower or the Operating Borrower, as the case may
be.

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3.5   Notices Irrevocable.

    Each Borrowing Notice shall be irrevocable and binding on the Borrower
providing such Borrowing Notice. Such Borrower shall indemnify the Lenders
against any loss or expense (excluding loss of profit or other consequential
losses) incurred by the Lenders in reliance on a Borrowing Notice as a result of
any failure by such Borrower to fulfil or honour the provisions of this
Agreement if an Advance, as a result of such failure, is not made or a Libor
Advance is not continued on the date specified in any Borrowing Notice.

3.6   Election of Interest Rates and Currencies.

    Each Advance shall be the Type of Advance specified in the applicable
Borrowing Notice and shall bear interest at the rate applicable to such Type of
Advance, determined in accordance with the provisions of this Agreement, until:

(a)in the case of a Libor Advance, the end of the initial Interest Period
applicable thereto as specified in the applicable Borrowing Notice; or

(b)in the case of a Prime Rate Advance or Base Rate Advance, the date on which
such Advance is repaid in full.

3.7   Continuation of Libor Advances.

    Each Borrower may from time to time, by delivering a Borrowing Notice, elect
to continue a Libor Advance for an additional Interest Period beginning on the
last day of the then current Interest Period applicable to such Libor Advance.
Each such election shall be made on at least three Business Days' prior written
notice given not later than 9:00 a.m. (Vancouver time) by such Borrower to the
Administration Agent. Each Borrowing Notice delivered pursuant to this Section
shall specify the duration of the additional Interest Period and the date on
which such Interest Period is to begin.

3.8   Conversion of Advances.

(a)Each Borrower may from time to time, by delivering a Borrowing Notice, elect
to change the Type of any outstanding Advance, as follows:

(i)if such Advance is a Libor Advance, such Borrower may elect to change such
Libor Advance in whole or in part to a Prime Rate Advance or a Base Rate Advance
beginning on the last day of the then current Interest Period applicable to such
Libor Advance;

(ii)if such Advance is a Prime Rate Advance, such Borrower may elect to change
such Prime Rate Advance in whole or in part to a Libor Advance or a Base Rate
Advance; and

(iii)if such Advance is a Base Rate Advance, such Borrower may elect to change
such Base Rate Advance in whole or in part to a Libor Advance or a Prime Rate
Advance.

(b)Each such election shall be made on at least three Business Days' prior
written notice for a conversion into a Libor Advance and on at least two
Business Days' notice in any other case, given not later than 9:00 a.m.
(Vancouver time) by such Borrower to the Administration Agent.

(c)Each Borrowing Notice delivered pursuant to this Section shall specify the
new Type of Advance selected, the date on which the requested change is to be
made, the currency (if changed) and, if the new Type of Advance is a Libor
Advance, the duration of the initial Interest Period applicable thereto.

(d)Such Borrower will, upon the date of any change in the Type of an Advance
which results in a change in the currency borrowed, pay to the Lender an amount
equal to the outstanding

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principal of the Advance (or part thereof) being converted in the currency of
such Advance, and the Lender shall provide to such Borrower in replacement
thereof currency of the requested Type of Advance.

(e)Any change in the Type of an Advance pursuant to this Section shall be deemed
to be a change in the type or form of borrowing and not a repayment or
reborrowing by such Borrower.

3.9   Automatic Conversion of Libor Advances.

    If a Borrower fails, in the manner required herein, to give to the
Administration Agent in respect of all or any part of a Libor Advance:

(a)a Borrowing Notice continuing such Libor Advance for a further Interest
Period pursuant to Section 3.7; or

(b)a Borrowing Notice changing such Libor Advance into a different Type of
Advance pursuant to Section 3.8 or into Bankers' Acceptances pursuant to
Section 4.9; or

(c)a Notice of Repayment or Cancellation;

then any such Libor Advance, or part thereof, shall become a Base Rate Advance
under the applicable Credit Facility on the last day of the Interest Period
applicable thereto, and shall bear interest at the rate otherwise applicable to
Base Rate Advances. Such Borrower shall also promptly pay to each Lender any
amounts required to compensate such Lender for any loss, cost or expense
(excluding loss of profit or other consequential loss) suffered or incurred by
such Lender as a result of such Borrower's failure to give to the Administration
Agent any of the notices described in this Section.

3.10   Circumstances Requiring Prime Rate or Base Rate Pricing.

(a)If a Lender determines in good faith, and notifies the Administration Agent
in writing, that:

(i)by reason of circumstances affecting financial markets inside or outside
Canada, deposits of US Dollars are unavailable to such Lender;

(ii)adequate and fair means do not exist for ascertaining the applicable
interest rate on the basis provided in the definition of Libor;

(iii)the making or continuation of any Libor Advance has been made impracticable
by:

(A)the occurrence of a contingency which materially and adversely affects the
funding of the Credit Facilities at any interest rate computed on the basis of
Libor;

(B)the introduction or change in the interpretation of any Law since the date of
this Agreement;

(C)compliance by such Lender with any guideline, official directive or request
from any central bank or Governmental Body (whether or not having the force of
Law); or

(D)a change since the date of this Agreement in any relevant financial market
which results in Libor no longer representing the effective cost to such Lender
of deposits in such market for a relevant Interest Period or other applicable
period; or

(iv)any introduction or change in the interpretation of any Law since the date
of this Agreement, or any compliance by such Lender with any guideline, official
direction or request from any central bank or Governmental Body (whether or not
having the force of Law) has made it unlawful for such Lender to make or
maintain or to give effect to its obligations in respect of Libor Advances as
contemplated hereby;

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    then, with respect to such Lender:

(v)the right of the Borrowers to select a Libor Advance shall be suspended;

(vi)if any affected Libor Advance is not yet outstanding, any applicable
Borrowing Notice shall be cancelled and the Libor Advance requested therein
shall not be made in that form, without affecting the right of the Borrowers to
request another Type of Advance (without any additional notice period if a
Borrower requests a Prime Rate Advance or a Base Rate Advance);

(vii)if any Libor Advance is already outstanding at any time when the right of
the Borrowers to select a Libor Advance from such Lender is suspended, it and
all other Libor Advances shall, upon ten days' notice to the Borrowers and
subject to the Borrowers having the right to select Prime Rate Advances or Base
Rate Advances at such time, become Base Rate Advances on the last day of the
then current Interest Period applicable thereto (or on such earlier date as may
be required to comply with applicable Law).

(b)The Administration Agent shall promptly notify the Borrowers of the
suspension of the Borrowers' right to select Libor Advances from a particular
Lender and, following written notice to the Administration Agent from such
Lender, of the termination of any such suspension.

3.11   Interest Periods.

    Interest Periods for Libor Advances shall be the period, as requested by a
Borrower, from one to six months or such other period as the Lenders may allow,
provided that the Lenders may in their discretion restrict the term of any
Interest Period. No Interest Period may be selected under the Operating Facility
which would end on a day after the Operating Facility Maturity Date, or under
the Acquisition Facility which would end on a day after the Acquisition Facility
Maturity Date. Whenever the last day of an Interest Period would otherwise occur
on a day other than a Business Day, the last day of such Interest Period shall
be altered to occur on the immediately preceding Business Day.

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3.12   Interest on Advances.

    Each Borrower shall pay interest on the unpaid principal amount of each
Advance from the date of such Advance until such principal amount shall be
repaid in full, at the following rates per annum:

(a)for Advances under the Acquisition Facility:

(i)from the Closing Date to and including January 4, 2002:

(A)in the case of Prime Rate Advances, at a rate per annum equal to the Prime
Rate in effect from time to time plus 37.5 basis points per annum;

(B)in the case of Base Rate Advances. at a rate per annum equal to the Base Rate
in effect from time to time plus 37.5 basis points per annum; and

(C)in the case of Libor Advances, at a rate per annum equal to Libor for the
applicable Interest Period plus 137.5 basis points per annum;

(ii)on and after January 5, 2002 to and including July 4, 2002:

(A)in the case of Prime Rate Advances, at a rate per annum equal to the Prime
Rate in effect from time to time plus 62.5 basis points per annum;

(B)in the case of Base Rate Advances. at a rate per annum equal to the Base Rate
in effect from time to time plus 62.5 basis points per annum; and

(C)in the case of Libor Advances, at a rate per annum equal to Libor for the
applicable Interest Period plus 162.5 basis points per annum; and

(iii)on and after July 5, 2002 to and including the Acquisition Facility
Maturity Date:

(A)in the case of Prime Rate Advances, at a rate per annum equal to the Prime
Rate in effect from time to time plus 100 basis points per annum;

(B)in the case of Base Rate Advances. at a rate per annum equal to the Base Rate
in effect from time to time plus 100 basis points per annum; and

(C)in the case of Libor Advances, at a rate per annum equal to Libor for the
applicable Interest Period plus 200 basis points per annum; and

(b)for Advances under the Operating Facility:

(i)prior to the Conversion Date:

(A)in the case of Prime Rate Advances, at a rate per annum equal to the Prime
Rate in effect from time to time;

(B)in the case of Base Rate Advances. at a rate per annum equal to the Base Rate
in effect from time to time; and

(C)in the case of Libor Advances, at a rate per annum equal to Libor for the
applicable Interest Period plus 100 basis points per annum; and

(ii)on and after the Conversion Date:

(A)in the case of Prime Rate Advances, at a rate per annum equal to the Prime
Rate in effect from time to time, plus 25 basis points per annum;

(B)in the case of Base Rate Advances, at a rate per annum equal to the Base Rate
in effect from time to time, plus 25 basis points per annum; and

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(C)in the case of Libor Advances, at a rate per annum equal to Libor for the
applicable Interest Period plus 125 basis points per annum.

3.13   Interest Payment Dates.

    Interest on Libor Advances shall be calculated and payable at the end of the
applicable Interest Period except where the Interest Period exceeds three months
in duration, in which case such interest shall be calculated and payable at the
end of each successive three month portion thereof (determined with reference to
the commencement of the Interest Period) and, finally, at the end of such
Interest Period. Interest on Prime Rate Advances and Base Rate Advances shall be
calculated on the daily balance up to and including the last day of each month,
and shall be payable monthly in arrears on the third Business Day of each month.

3.14   Overdraft Advances.

    In order to facilitate the Operating Borrower's general cash management
requirements, prior to the Operating Facility Maturity Date the Operating
Borrower shall be permitted to utilize a portion of the Operating Facility, at
any time other than at any time when a Default shall have occurred and be
continuing hereunder, by way of overdraft positions ("Overdraft Advances") in
its operating accounts with the Issuing Lender, without being required to
request an Advance under the Operating Facility by way of a Borrowing Notice;
provided, however, that except as may be agreed from time to time by the
Operating Borrower, the Administration Agent and the Lenders, the maximum
aggregate principal amount of all such Overdraft Advances at any time
outstanding hereunder shall be $20,000,000 (or the Equivalent Amount in US
Dollars) less the aggregate Face Amount of outstanding Contingent Payment
Letters issued at the request of the Operating Borrower pursuant to Article 5.
Overdraft Advances in Canadian Dollars shall constitute Prime Rate Advances for
the purposes of this Agreement and Overdraft Advances in US Dollars shall
constitute Base Rate Advances for the purposes of this Agreement. At any time
and from time to time in its discretion, notwithstanding the occurrence of a
Default or an Event of Default, the Issuing Lender may notify the Administration
Agent that the Issuing Lender wishes each of the Lenders to provide its Lender's
Proportion of such Overdraft Advances, in which case the Administration Agent
shall forthwith notify each of the Lenders of such Lender's Proportion and each
such Lender shall thereupon provide to the Administration Agent, for the account
of the Issuing Lender, such Lender's Proportion of the then outstanding
Overdraft Advances. Each such amount so provided in the case of Overdraft
Advances by each such Lender shall be deemed to be a Prime Rate Advance (in
respect of Canadian Dollars) or a Base Rate Advance (in respect of US Dollars)
under the Operating Facility in accordance with the provisions of this Agreement
to the same extent as if the Operating Borrower had issued a Borrowing Notice in
respect thereof (and for such purposes any notice provisions or minimum amounts
of such Advances otherwise referred to in this Agreement shall be disregarded).
The aggregate of the amounts so provided by such Lenders to the Administration
Agent in respect of Overdraft Advances shall be paid by the Administration Agent
to the Issuing Lender and applied by the Issuing Lender to reduce the then
outstanding Overdraft Advances held by it.

ARTICLE 4
BANKERS' ACCEPTANCES

4.1 Creation of Bankers' Acceptances.

    Each Lender severally agrees, on the terms and subject to the conditions
herein set forth, to create Bankers' Acceptances under the Credit Facilities by
accepting Bankers Acceptances in Canadian Dollars in accordance with the
provisions of this Agreement.

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4.2   Drawings.

(a)Each Bankers' Acceptance presented by a Borrower for acceptance shall be in
an integral multiple of Cdn.$100,000 and shall mature and be payable on a
Business Day which occurs one, two, three or six months (or such other period as
the Lenders may agree) after the date thereof, provided that the Administration
Agent may at its discretion restrict the term or maturity date of any Bankers'
Acceptance. All Bankers' Acceptances presented by a Borrower to the Lenders for
acceptance on a particular day shall aggregate at least Cdn.$1,000,000.

(b)Each Drawing shall be made on two Business Days' prior written notice given
not later than 9:00 a.m. (Vancouver time) by a Borrower to the Administration
Agent by way of a Borrowing Notice. The Administration Agent shall give each
Lender prompt written notice thereof and of such Lender's rateable portion of
Bankers' Acceptances to be accepted under the Drawing.

(c)A Borrower shall not request in a Borrowing Notice a maturity date for a
Bankers' Acceptance which would be subsequent to the Operating Facility Maturity
Date, in the case of Bankers' Acceptances under the Operating Facility, or the
Acquisition Facility Maturity Date, in the case of Bankers' Acceptances under
the Acquisition Facility.

(d)Each Borrowing Notice shall be irrevocable and binding on the Borrower
providing such Borrowing Notice. Such Borrower shall indemnify the Lenders
against any loss or expense (excluding loss of profits or other consequential
losses) incurred by the Lenders in reliance on a Borrowing Notice as a result of
any failure by such Borrower to fulfil or honour the provisions of this
Agreement before the date specified for any Drawing if the Drawing, as a result
of such failure, is not made on such date.

4.3   Power of Attorney.

    In order to facilitate the issuance of Bankers' Acceptances (including
without limitation depository bills that comply with the Depository Bills and
Notes Act) each of the Borrowers authorizes each of the Lenders to complete,
sign, endorse, negotiate and deliver Bankers' Acceptances on behalf of such
Borrower in handwritten form, or by facsimile or mechanical signature or
otherwise and, once so completed, signed, endorsed or delivered to accept them
as Bankers' Acceptances under this Agreement in accordance with the provisions
hereof and then to purchase, discount or negotiate such Bankers' Acceptances in
accordance with the provisions of this Agreement. Bankers' Acceptances so
completed, signed, endorsed, purchased, discounted, negotiated or delivered on
behalf of a Borrower by a Lender shall bind such Borrower as fully and
effectively as if so completed, signed, endorsed, purchased, discounted,
negotiated or delivered by an Authorized Officer of such Borrower. Each Bankers'
Acceptance completed, signed, endorsed, purchased, discounted, negotiated or
delivered by a Lender shall mature on the due date set out on such Bankers'
Acceptance.

    Each of the Borrowers hereby agrees to indemnify each of the Lenders and its
respective directors, officers, employees, affiliates and agents and to hold it
and them harmless from and against any loss, liability, expense or claim of any
kind or nature whatsoever incurred by any of them as a result of any action or
inaction in any way relating to or arising out of the power of attorney
contained in this Section (the "Power of Attorney") or the acts contemplated
hereby; provided that this indemnity shall not apply to any such loss,
liability, expense or claim which results from the gross negligence or wilful
misconduct of a Lender or any of its directors, officers, employees, affiliates
or agents.

    The Power of Attorney may be revoked by the applicable Borrower at any time
upon not less than five business days' prior written notice served upon the
Administration Agent, provided that no such revocation shall reduce, limit or
otherwise affect the obligations of such Borrower in respect of any Bankers'
Acceptances executed, completed, endorsed, purchased, discounted, negotiated or
delivered in accordance herewith prior to the time at which such revocation
becomes effective.

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    The Power of Attorney is in addition to and not in substitution for any
other agreement to which any Lender and either Borrower are parties.

4.4   Completion and Delivery of Bankers' Acceptances.

    Not later than 1:00 p.m. (Vancouver time) on an applicable Drawing Date,
each Lender will, in accordance with the applicable Borrowing Notice:

(a)sign each Bankers' Acceptance on behalf of the Borrower providing such
Borrowing Notice pursuant to the Power of Attorney;

(b)complete the date, amount and maturity of each Bankers' Acceptance to be
accepted;

(c)accept such Bankers' Acceptances; and

(d)upon such acceptance deliver the stamped Bankers' Acceptance to such Borrower
or, in accordance with such Borrower's instructions, to a person designated in
writing by such Borrower (or, in the case of a depository bill held by CDS,
instruct CDS to credit the account of a CDS participant designated in writing by
such Borrower).

    No Lender shall be obligated to purchase or discount any Bankers'
Acceptances and such Borrower shall be responsible for arranging the purchase or
discounting of any such Bankers' Acceptances by a money market dealer. The
failure of any Lender to accept Bankers' Acceptances shall not relieve any other
Lender of its obligation, if any, to accept Bankers' Acceptances hereunder, but
no Lender shall be responsible for the failure of any other Lender to accept
Bankers' Acceptances on any Drawing Date.

4.5   Stamping Fees.

    Each Borrower shall pay to each Lender at the time of each acceptance of a
Bankers' Acceptance a stamping fee in each case calculated on the basis of the
number of days from and including the date of acceptance to and including the
date immediately preceding the date of maturity of the applicable Bankers'
Acceptance, and on the basis of a year of 365 days, at a rate per annum
determined as follows:

(a)in the case of Bankers' Acceptances under the Acquisition Facility:

(i)from the Closing Date to and including January 4, 2002, a stamping fee of
137.5 basis points per annum of the Face Amount of the Bankers' Acceptance;

(ii)on and after January 5, 2002 to and including July 4, 2002, a stamping fee
of 162.5 basis points per annum of the Face Amount of the Bankers' Acceptance;
and

(iii)on and after July 5, 2002 to and including the Acquisition Facility
Maturity Date, a stamping fee of 200 basis points per annum of the Face Amount
of the Bankers' Acceptance; and

(b)in the case of Bankers' Acceptances under the Operating Facility

(i)prior to the Conversion Date, a stamping fee of 100 basis points per annum of
the Face Amount of the Bankers' Acceptance; and

(ii)on and after the Conversion Date, a stamping fee of 125 basis points per
annum of the Face Amount of the Bankers' Acceptance.

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4.6   Netting.

    Each Borrower authorizes each Lender to retain the amount received by the
Lender (the "Acceptance Purchase Price") from any purchaser of a Bankers'
Acceptance created by the Lender (including proceeds received by the Lender from
any person to whom a Bankers' Acceptance has been delivered pursuant to
instructions of such Borrower under Section 4.4(d)) and to apply the Acceptance
Purchase Price to the reimbursement obligations of such Borrower in respect of
any Bankers' Acceptance created by the Lender which matures on the date of
creation of the Bankers' Acceptance in respect of which the Acceptance Purchase
Price is received. If the Acceptance Purchase Price received by the Lender is
less than the undiscounted Face Amount of the then maturing Bankers' Acceptance,
such Borrower shall pay the amount of such deficiency to the Lender pursuant to
Section 4.7.

4.7   Payment on Maturity.

    Each Borrower shall provide payment for any Bankers' Acceptances created by
a Lender by payment to the Administration Agent for the account of such Lender
of the Face Amount thereof (or alternatively any deficiency in the Acceptance
Purchase Price retained by the Lender pursuant to Section 4.6) by 10:00 a.m.
(Vancouver time) on the maturity date of the Bankers' Acceptance. Payment to the
Administration Agent of the Face Amount of a Bankers' Acceptance shall terminate
the obligation of such Borrower to pay such Bankers' Acceptance at maturity. If
such Borrower fails to provide payment to a Lender (or to the Administration
Agent for the account of the Lender) of an amount equal to the Face Amount of a
Bankers' Acceptance created by such Lender on its maturity, the unpaid amount
due and payable in respect thereof shall be converted as of such date, and
without any necessity for such Borrower to give a Borrowing Notice in accordance
with this Agreement to, and thereafter be outstanding as, a Prime Rate Advance
made by, and due and payable on such date to, the Lender and shall bear interest
for the three day period following the maturity of such Bankers' Acceptance at a
rate equal to 115% of the rate applicable to Prime Rate Advances, and thereafter
at the rate applicable to Prime Rate Advances. Each Borrower shall also promptly
pay to each Lender any amounts required to compensate such Lender for any loss,
cost or expense (excluding loss of profits or other consequential loss) suffered
or incurred by such Lender as a result of such Borrower's failure to pay any
Bankers' Acceptance when due.

4.8   Custody of Bankers' Acceptances.

    If requested by a Lender, a Borrower shall execute and deliver to such
Lender a supply of Bankers' Acceptances executed by such Borrower. The Lender
shall not be responsible or liable for its failure to accept a Bankers'
Acceptance as required hereunder if the cause of the failure is, in whole or in
part, due to the failure of a Borrower to provide such Bankers' Acceptances to
the Lender on a timely basis, nor shall any Lender be liable for any damage,
loss or other claim arising by reason of any loss or improper use of such
Bankers' Acceptances except a loss or improper use arising by reason of the
negligence or wilful act of the Lender. Each Lender agrees to use its best
efforts to advise a Borrower in a timely manner when it requires additional
executed Bankers' Acceptances from such Borrower. In case any authorized
signatory of a Borrower whose signatures shall appear on the pre-signed Bankers'
Acceptances shall cease to have such authority before the creation of a Bankers'
Acceptance with respect to such Bankers' Acceptance, such signature shall
nevertheless be valid and sufficient for all purposes as if such authority had
remained in force at the time of such creation. Bankers' Acceptances held by a
Lender need only be held in safekeeping with the same degree of care as if they
were the Lender's property. If executed but incomplete Bankers' Acceptances are
delivered to a Lender, the Lender may complete the same on behalf of the
applicable Borrower and in accordance with its instructions following a request
from such Borrower to accept a Bankers' Acceptance. All Bankers' Acceptances
will be cancelled by a Lender upon payment thereof.

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4.9   Conversions.

    Each Borrower may convert all or any portion of the outstanding principal
amount of Advances of any Type to Bankers' Acceptances by giving a Borrowing
Notice to that effect. Each Borrower may also convert all or a portion of the
Face Amount of a Bankers' Acceptance to an Advance by giving a Borrowing Notice
to that effect. Such Borrower shall give three Business Days' prior written
notice to the Administration Agent of any such conversion. A Borrower may
convert a Prime Rate Advance or a Base Rate Advance to Bankers' Acceptances on
any Business Day. A Borrower may only convert a Libor Advance to Bankers'
Acceptances on the last day of the Interest Period applicable thereto, and may
only convert a Bankers' Acceptance to an Advance on the maturity date of the
Bankers' Acceptance. A Borrower will, on the date of any conversion under this
Section which results in a change in the currency of the applicable Borrowing,
pay to the Administration Agent for the account of the Lenders an amount equal
to outstanding principal of the Advance being converted or the outstanding Face
Amount of the Bankers' Acceptance being converted in the currency of such
Advance or Bankers' Acceptance, and the Lenders shall provide to such Borrower
in replacement thereof currency of the requested Type of Advance or Bankers'
Acceptance. Any such conversion shall be deemed to be a change in the type or
form of borrowing and not a repayment or reborrowing by such Borrower.

4.10   Renewal or other Payment of Bankers' Acceptance.

    Not later than 9:00 a.m. (Vancouver time) two Business Days prior to the
maturity of a Bankers' Acceptance, the applicable Borrower shall (unless it has
previously given written notice of the conversion of such Bankers' Acceptance to
an Advance pursuant to Section 4.9):

(a)request, by way of a Borrowing Notice, the issuance of further Bankers'
Acceptances in an amount sufficient, upon receipt of the Acceptance Purchase
Price by the Lenders, to pay the Face Amount of the maturing Bankers'
Acceptance; or

(b)give written notice to the Administration Agent, by way of a Notice of
Repayment or Cancellation, that such Borrower will pay the maturing Bankers'
Acceptance.

If such Borrower fails to give any of the notices required under this Section,
the amount due and payable in respect of such Bankers' Acceptance on the
maturity date thereof shall be converted as of such date, and thereafter be
outstanding as, a Prime Rate Advance made by and due and payable on such date to
the Lenders rateably, and shall bear interest for the three day period following
the maturity of such Bankers' Acceptance at a rate equal to 115% of the rate
applicable to Prime Rate Advances and thereafter at the rate applicable to Prime
Rate Advances.

4.11   Prepayments of Bankers' Acceptances.

    If for whatever reason a Bankers' Acceptance becomes due and payable on a
date which is not its maturity date, such Bankers' Acceptance shall be paid by
the applicable Borrower paying the Face Amount of the maturing Bankers'
Acceptance to the Administration Agent, which amount shall be held in an
interest bearing cash collateral account for future set-off against such
maturing Bankers' Acceptance. Interest accrued on the amount so held shall be
for the account of such Borrower.

4.12   No Days of Grace.

    Neither Borrower shall claim any days of grace from a Lender for the payment
at maturity of any Bankers' Acceptances.

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4.13   Suspension of Bankers' Acceptance Option.

    If at any time or from time to time there no longer exists a market for
Bankers' Acceptances, or if as a result of a change in any law, regulation or
guideline (whether or not having the force of law) it is not practical or
becomes more expensive for the Lenders to create or commit to create Bankers'
Acceptances, the Lenders shall promptly so advise the Administration Agent and
the Administration Agent shall in turn promptly give notice to the Borrowers.
After such notice, the Lenders shall not be obliged to accept Bankers'
Acceptances of either Borrower presented to the Lenders pursuant to the
provisions of this Agreement and the option of the Borrowers to request the
creation of Bankers' Acceptances shall be suspended until such time as the
Lenders have determined that the circumstances giving rise to such suspension no
longer exist.

4.14   Depository Bills.

    At the option of either Borrower and any Lender, Bankers' Acceptances under
this Agreement to be accepted by that Lender may be issued in the form of
depository bills for deposit with CDS pursuant to and settled pursuant to the
Depository Bills and Notes Act (Canada). All depository bills so issued shall be
governed by this Article 4.

ARTICLE 5
LETTERS OF CREDIT AND GUARANTEE LETTERS

5.1 Request and Issuance.

    The Operating Borrower may request the Issuing Lender to issue a Letter of
Credit or a Guarantee Letter (each, a "Contingent Payment Letter") under the
Operating Facility in Canadian Dollars or US Dollars by delivering to the
Administration Agent and the Issuing Lender a written request and such other
application materials (collectively, an "Application") as are required by the
Issuing Lender, completed to the satisfaction of the Issuing Lender. Each such
Application shall be irrevocable upon delivery to the Issuing Lender. Upon
receipt of any Application, the Issuing Lender shall issue the Contingent
Payment Letter on the date specified in the Application (but in no event shall
the Issuing Lender be required to issue any Contingent Payment Letter earlier
than two Business Days after its receipt of the Application) by issuing the
original of such Contingent Payment Letter to the Beneficiary thereof or as
otherwise may be agreed by the Issuing Lender and the Operating Borrower. The
Issuing Lender shall furnish a copy of such Contingent Payment Letter to the
Operating Borrower promptly following the issuance thereof. The Issuing Lender
shall not be obliged to issue any Contingent Payment Letter with a maturity
exceeding one year, or which is for any other reason not acceptable to the
Lender.

5.2   Maximum Face Amount.

    The maximum aggregate Face Amount of all Contingent Payment Letters under
the Operating Facility shall be Cdn.$11,000,000 (or the Equivalent Amount in US
Dollars).

5.3   Fees.

    The Operating Borrower will pay to the Issuing Lender fees in respect of
Contingent Payment Letters at the rate of 100 basis points per annum prior to
the Conversion Date, and at the rate of 125 basis points per annum on and after
the Conversion Date, in each case calculated on the Face Amount of the
particular Contingent Payment Letter and on the basis of the number of days
(with thirty days as the minimum number of days) such Contingent Payment Letter
will be outstanding. Such fees shall be paid by the Operating Borrower to the
Issuing Lender in advance of or upon the issue of the applicable Contingent
Payment Letter, in Canadian Dollars if the Face Amount of the Contingent Payment
Letter is in Canadian Dollars and in US Dollars if the Face Amount of the
Contingent

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Payment Letter is in US Dollars. If a Contingent Payment Letter is returned to
the Issuing Lender and the obligations of the Issuing Lender thereunder
terminated prior to the stated expiry date of such Contingent Payment Letter, or
the Face Amount of a Contingent Payment Letter is reduced, the Issuing Lender
will refund to the Operating Borrower a pro rata portion of the fee paid to the
Issuing Lender in respect of the Contingent Payment Letter.

5.4   Payment by Issuing Lender.

    The Operating Borrower unconditionally and irrevocably authorizes the
Issuing Lender to pay the amount of any draft or demand made on the Issuing
Lender under and in accordance with the terms of any Contingent Payment Letter
on demand, without requiring proof of the Operating Borrower's agreement that
the amount so demanded was due and notwithstanding that the Operating Borrower
may dispute the validity of any such draft, demand or payment, unless otherwise
ordered by a court of competent jurisdiction prior to payment.

5.5   Reimbursement of Issuing Lender.

    The Operating Borrower shall reimburse the Issuing Lender on demand for any
amounts paid by the Issuing Lender from time to time as contemplated by this
Article 5 and, without limiting the foregoing, the Operating Borrower shall
indemnify and save the Issuing Lender harmless on demand from and against any
and all other losses (other than lost profits), costs, damages, expenses,
claims, demands or liabilities which the Issuing Lender may suffer or incur
arising in any manner whatsoever in connection with the making of any such
payments (including, without limitation, in connection with proceedings to
restrain the Issuing Lender from making, or to compel the Issuing Lender to
make, any such payment).

5.6   Deemed Prime Rate or Base Rate Advances.

    Without limiting any other provisions of this Agreement, if the Operating
Borrower shall fail to reimburse the Issuing Lender in respect of any payments
made by the Issuing Lender under a Contingent Payment Letter, the amount that
the Operating Borrower fails to reimburse the Issuing Lender shall be
conclusively deemed to be a Prime Rate Advance (if the payment made by the
Issuing Lender was in Canadian Dollars) or a Base Rate Advance (if the payment
made by the Issuing Lender was in US Dollars) to the Operating Borrower under
the Operating Facility. The Issuing Lender shall forthwith give notice of such
deemed Advance to the Operating Borrower. Interest shall be payable on such
Prime Rate Advance or Base Rate Advance in accordance with the terms applicable
to Prime Rate Advances or Base Rate Advances, as the case may be, under this
Agreement. Advances in respect of Contingent Payment Letters shall be repayable
forthwith upon being made.

5.7   Indemnification by Lenders.

    Each Lender agrees to indemnify the Issuing Lender (to the extent not
reimbursed by the Operating Borrower), rateably according to its respective
Commitment, from and against any and all liabilities and obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against the Issuing Lender in any way relating to or arising out of the
issuance of a Contingent Payment Letter in accordance with this Agreement,
provided that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Issuing Lender's gross negligence
or wilful misconduct.

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5.8   Provision of Cash Collateral.

    In the event that, pursuant to Section 12.2, the obligations of the
Operating Borrower to the Lenders hereunder shall be declared due and payable
while any Contingent Payment Letter is outstanding, the Issuing Lender shall
have the right to require the Operating Borrower to provide to the Issuing
Lender cash collateral in an amount equal to the undrawn amount of, and in the
currency of, all Contingent Payment Letters issued by the Issuing Lender then
outstanding. The Operating Borrower agrees to provide such cash collateral to
the Issuing Lender upon demand pursuant to this Section 5.8, together with such
security agreements respecting such cash collateral as the Issuing Lender may,
acting reasonably, deem advisable or necessary, including without limitation,
assignments of credit balances in such cash collateral accounts. If the
Operating Borrower fails to provide such cash collateral, the Lenders shall be
entitled, without further authorization from the Operating Borrower, to make
Prime Rate Advances or Base Rate Advances or both (and shall make such Advances
at the request of the Issuing Lender) under the Operating Facility in amounts
equal to and in the applicable currency of the undrawn amount of all Contingent
Payment Letters issued by the Issuing Lender and then outstanding, and the
provisions of this Agreement applicable to Prime Rate Advances or Base Rate
Advances shall be applicable to such Advances. The cash collateral amount so
paid by the Operating Borrower to the Issuing Lender or advanced by way of Prime
Rate Advances or Base Rate Advances shall be placed by the Issuing Lender in one
or more interest bearing cash collateral accounts held by the Issuing Lender and
subsequent drawings under Contingent Payment Letters shall be funded through
debits to the cash collateral accounts maintained by the Issuing Lender,
provided that as such Contingent Payment Letters expire, an amount equal to the
undrawn portion of such Contingent Payment Letters shall be debited to the cash
collateral accounts maintained by the Issuing Lender and applied by the Issuing
Lender in reduction of the then outstanding amount owing to the Lenders under
the Operating Facility. Any excess amounts in such cash collateral accounts
shall be applied in reduction of any loans or other amounts which shall be due
and payable to the Lenders hereunder. At such time as there are no amounts due
and outstanding hereunder, any amount remaining in the cash collateral accounts
shall be paid to the Operating Borrower by the Issuing Lender. Cash collateral
accounts maintained hereunder shall bear interest at the normal rates of
interest paid by the Issuing Lender from time to time in respect of similar
deposit accounts and such interest shall be credited to the cash collateral
account and dealt with in the same manner as other balances in the cash
collateral account.

5.9   Letters of Credit under the Acquisition Facility.

    As part of the credit available under the Acquisition Facility, the
Acquisition Borrower may request that the Issuing Lender issue one or more
Contingent Payment Letters in Canadian Dollars or US Dollars on the Closing Date
up to a maximum aggregate amount of $1,000,000 and with a maturity date on or
before the Acquisition Facility Maturity Date. The Acquisition Borrower will pay
to the Issuing Lender fees in respect of such Contingent Payment Letters at the
equivalent rates as the stamping fees for Banker's Acceptances under the
Acquisition Facility pursuant to Section 4.5, and otherwise upon the terms and
conditions as set out in this Article 5 in respect of Contingent Payment Letters
issued under the Operating Facility, mutatis mutandis. Upon the maturity of such
Contingent Payment Letters, the Borrower shall request, and the Issuing Lender
shall make or create, as the case may be, Advances and/or Bankers' Acceptances
under the Acquisition Facility in the aggregate amount of all such Contingent
Payment Letters then maturing.

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ARTICLE 6
CLOSING CONDITIONS

6.1   Closing Conditions.

    The Borrowers shall only be entitled to an initial Borrowing under the
Credit Facilities if, on the Closing Date, the following conditions have been
fulfilled to the reasonable satisfaction of the Lenders:

(a)the Credit Facility Documents shall have been executed and delivered to the
Lenders (and, in the case of the Security Documents, to the Administration
Agent) by Pope & Talbot Canada, the Limited Partnership, Mackenzie Pulp and the
Land Trustee and the Postponement Agreements shall have been executed and
delivered to the Lenders by the Trust and Pope & Talbot US, and all
registrations, filings and recordings necessary or desirable to preserve,
protect or perfect the enforceability of the security created by the Security
Documents shall have been completed;

(b)all of the representations and warranties of Pope & Talbot Canada and the
Limited Partnership contained in this Agreement are true and correct as of the
Closing Date as though made on and as of such date, and each of Pope & Talbot
Canada and the Limited Partnership shall have delivered to the Lenders a
certificate executed by an Authorized Officer thereof to that effect;

(c)no event has occurred and is continuing which constitutes a Default or an
Event of Default, and each of Pope & Talbot Canada and the Limited Partnership
shall have delivered to the Lenders a certificate executed by an Authorized
Officer thereof to that effect;

(d)the Lenders shall have received copies:

(i)certified by the Secretary or an Assistant Secretary of each of Pope & Talbot
Canada, Mackenzie Pulp and the Land Trustee of its charter documents,
resolutions of its board of directors approving the Credit Facility Documents to
which it (or, in the case of the General Partner, the Limited Partnership) is a
party, and all documents evidencing any other necessary corporate action of it
with respect to the Credit Facility Documents;

(ii)certified by the Secretary or an Assistant Secretary of the General Partner
of the Limited Partnership Agreement and the Limited Partnership's certificate
of limited partnership, resolutions of the board of directors of the General
Partner approving the Credit Facility Documents to which the Limited Partnership
is a party, and all documents evidencing any other necessary action under the
Limited Partnership Agreement with respect to the Credit Facility Documents;

(iii)certified by the trustees of the Trust of the trust agreement creating the
Trust (the "Trust Agreement"), resolutions of the trustees of the Trust
approving the Credit Facility Documents to which the Trust is a party, and all
documents evidencing any other necessary action under the Trust Agreement with
respect to the Credit Facility Documents; and

(iv)certified by the Secretary or an Assistant Secretary of Pope & Talbot US of
its charter documents, resolutions of its board of directors approving the
execution and delivery of the Credit Facility Documents to which it is a party,
and all documents evidencing any other necessary corporate action of it with
respect to the Credit Facility Documents;

(e)the Lenders shall have received:

(i)a certificate of the Secretary or an Assistant Secretary of each of Pope &
Talbot Canada, the General Partner, Mackenzie Pulp, the Land Trustee and Pope &
Talbot US certifying the names and true signatures of its officers authorized to
sign the Credit Facility

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Documents to which it (or, in the case of the General Partner, the Limited
Partnership) is a party and any other documents to be delivered by it hereunder;
and

(ii)a certificate of the trustees of the Trust certifying the names and true
signatures of the persons authorized to sign the Credit Facility Documents to
which the Trust is a party and any other documents to be delivered by it
hereunder.

(f)the Lenders shall have received a recently-dated certificate of good standing
or like certificate of each of Pope & Talbot Canada, the Limited Partnership,
Mackenzie Pulp, the Land Trustee and Pope & Talbot US issued by appropriate
government officials of the jurisdiction of its incorporation;

(g)the Lenders shall have received:

(i)copies of the unaudited consolidated balance sheets of each of Pope & Talbot
Canada and Mackenzie Pulp as of December 31, 2000 and March 31, 2001, and the
related unaudited consolidated statements of income and retained earnings and
statements of cash flow of each of Pope & Talbot Canada and Mackenzie Pulp for
the fiscal year and fiscal quarter then ended and, since the dates of such
financial statements, there shall have occurred no Material Adverse Effect, as
determined by the Lenders acting reasonably;

(ii)copies of consolidated and consolidating balance sheets of Pope & Talbot
Canada as at March 31, 2001, prepared on a pro forma basis after giving effect
to all transactions to be completed on or before the Closing Date as
contemplated by this Agreement, including without limitation the making of the
initial Accommodations to the Borrowers; and

(iii)a certificate of a senior officer of the Land Trustee certifying that on
the Closing Date the Land Trustee has no assets other than an interest as bare
trustee in and to certain real property which it holds as bare trustee for
Mackenzie Pulp, and no liabilities except as a Guarantor under this Agreement;

(h)the Lenders shall have received a certificate of the chief financial officer
or other Authorized Officer of each of the Borrowers setting forth computations
in reasonable detail showing full compliance with the financial covenants in
Section 8.1(x) and (y) on a pro forma basis after giving effect to all
transactions to be completed on the Closing Date as contemplated by this
Agreement, including without limitation the making of the initial Accommodations
to the Borrowers, provided that, for the computations in respect of the
financial covenant in Section 8.1(y), all such transactions shall be deemed to
have been completed on April 1, 2000;

(i)the Lenders shall have received a Margin Report, in form satisfactory to the
Lenders, signed by a senior financial officer of Pope & Talbot Canada and
setting out the Borrowing Base (including the applicable amounts in respect of
Mackenzie Pulp) as at April 30, 2001;

(j)the Lenders shall have received a certificate executed by an Authorized
Officer of each of Pope & Talbot Canada and the Limited Partnership:

(i)attaching copies of all Governmental Approvals (if any) necessary to permit
Pope & Talbot Canada, the Limited Partnership and the Guarantors to enter into
and perform their obligations under this Agreement and the other Credit Facility
Documents, and to permit Pope & Talbot Canada to complete the transactions
contemplated by the Mackenzie Pulp Share Purchase Agreement;

(ii)certifying that no material Governmental Approval held by Pope & Talbot
Canada, the Limited Partnership or the Guarantors will be revoked or materially
amended as a

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consequence of the transactions contemplated under this Agreement or by the
Mackenzie Pulp Share Purchase Agreement; and

(iii)certifying that all material Timber Tenures held by Pope & Talbot Canada,
the Limited Partnership and Mackenzie Pulp are in good standing and none of
Pope & Talbot Canada, the Limited Partnership or Mackenzie Pulp are in material
breach of any such Timber Tenures nor have they received any notice from the
Ministry of Forests cancelling or suspending or threatening to cancel or suspend
or materially impair any of the rights of Pope & Talbot Canada, the Limited
Partnership or Mackenzie Pulp under any such Timber Tenures, including without
limitation any reduction in the allowable annual cut under such Timber Tenures;

(k)the Lenders shall have received satisfactory certificates of insurance issued
by the relevant insurer or its agent in respect of all insurance maintained by
Pope & Talbot Canada, the Limited Partnership, Mackenzie Pulp and the Land
Trustee;

(l)the Lenders shall be satisfied with the results of their due diligence of
Mackenzie Pulp;

(m)the Lenders shall have received satisfactory evidence of the continuation of
Mackenzie Pulp under the laws of the Province of Alberta;

(n)the representations and warranties of the Vendor set forth in the Mackenzie
Pulp Share Purchase Agreement shall be true and correct on and as of the Closing
Date as if made on and as of such date, and Pope & Talbot Canada shall have
delivered to the Lenders a certificate executed by an Authorized Officer of
Pope & Talbot Canada to that effect;

(o)the transactions contemplated by the Mackenzie Pulp Share Purchase Agreement,
on the terms set out in the Mackenzie Pulp Share Purchase Agreement or on other
terms satisfactory to the Lenders, shall be completed concurrently with the
initial Borrowings by the Borrowers under this Agreement;

(p)arrangements satisfactory to the Lenders shall have been made relating to the
funding of Mackenzie Pulp and the making of a loan by Mackenzie Pulp to the
Vendor pursuant to the Mackenzie Pulp Share Purchase Agreement, with such loan
to be repayable by the Vendor upon the redemption of the Mackenzie Pulp
Preferred Shares;

(q)the Lenders shall have received a copy, certified by an Authorized Officer of
Pope & Talbot Canada, of the Pope & Talbot Canada Financing Agreement, in form
and content satisfactory to the Lenders;

(r)the Lenders shall have received a copy, certified by an Authorized Officer of
each of Pope & Talbot Canada and the Limited Partnership, of the Inventory and
Receivables Sale Agreement, in form and content satisfactory to the Lenders;

(s)the Lenders shall have received:

(i)an opinion of counsel for Pope & Talbot Canada, the Limited Partnership,
Mackenzie Pulp, the Land Trustee and the Trust; and

(ii)an opinion of counsel for Pope & Talbot US regarding due authorization,
execution and delivery of the Pope & Talbot US Postponement Agreement by Pope &
Talbot US, the validity of the choice of British Columbia law as the governing
law of the Pope & Talbot US Postponement Agreement, the corporate capacity of
Pope & Talbot US and other matters relevant to the Pope & Talbot US Postponement
Agreement,

in each case addressed to the Lenders and counsel for the Lenders and in form
and content satisfactory to the Lenders;

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(t)all fees required to be paid by Pope & Talbot Canada and the Limited
Partnership pursuant to Sections 2.26 or 14.5 on or before the Closing Date
shall have been paid;

(u)Pope & Talbot Canada and the Limited Partnership shall have irrevocably
directed the Lenders to apply sufficient proceeds from the initial Borrowings
under the Credit Facilities to repay in full all amounts owed to TD Bank under
the credit agreement (the "Existing Credit Agreement") dated as of March 17,
2000 between Pope & Talbot Canada and TD Bank, as Lender and Agent, and the
Lenders shall have received a notice from TD Bank and Pope & Talbot Canada that
the credit facilities under the Existing Credit Agreement have been repaid in
full by Pope & Talbot Canada and cancelled by TD Bank; and

(v)the Lenders or the Administration Agent shall have received such other
certificates and documentation as the Lenders or the Administration Agent may
reasonably request.

If all of the conditions set forth above have not been satisfied by the
Borrowers or waived by the Lenders on or before the Closing Date, the
obligations of the Lenders to make any Advance or any other Accommodation and
all other obligations of the Lenders hereunder shall, at the option of the
Lenders, terminate without prejudice to any rights or remedies available to the
Lender under this Agreement or otherwise.

6.2   Conditions Precedent to Subsequent Borrowings.

    It shall be a condition of each Borrowing (other than a Rollover or
Conversion) that the representations and warranties contained in Article 7
hereof shall be true in all material respects on and as of the date of each
Borrowing (other than a Rollover or Conversion). It shall be a condition of each
Borrowing (including a Rollover or Conversion) that no Default or Event of
Default shall exist on the date of the Borrowing or be created by such
Borrowing. The applicable Borrower will, at the request of the Administration
Agent, deliver to the Administration Agent a certificate or certificates of a
Responsible Officer of such Borrower to that effect.

ARTICLE 7
REPRESENTATIONS AND WARRANTIES

7.1   Representations and Warranties by the Borrowers.

    The Borrowers represent and warrant to the Lenders (and acknowledge that the
Lenders are relying thereon without independent inquiry in entering into this
Agreement and providing Accommodations from time to time) as follows:

(a)Organization and Qualification. (i)Pope & Talbot Canada and each of the
Material Subsidiaries is a corporation duly incorporated and organized, is
validly subsisting and is in good standing under the laws of its jurisdiction of
incorporation.

(ii)The Limited Partnership has been formed and is existing as a limited
partnership under the Partnership Act (British Columbia).

(b)Corporate and Partnership Power. (i)Pope & Talbot Canada and each of the
Material Subsidiaries has full corporate right, power and authority to enter
into and perform its obligations under each of the Credit Facility Documents to
which it is or will be a party and has full corporate power and authority to own
and operate its properties and to carry on its business as now conducted or as
herein contemplated.

(ii)The Limited Partnership Agreement grants to the General Partner all
necessary power and authority to enter into and perform the obligations of the
Limited Partnership under

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each of the Credit Facility Documents to which the Limited Partnership is or
will be a party, to own and operate its properties and to carry on its business
as now conducted or as herein contemplated.

(c)Material Subsidiaries. Attached hereto as Schedule 5 is a complete list, as
at the date hereof, of all Material Subsidiaries of each of the Borrowers,
setting out in respect of each such Material Subsidiary:

(i)its jurisdiction of incorporation; and

(ii)the number of issued shares of each class owned directly or indirectly by
such Borrower; and

(iii)the total number of issued shares of each class of such Material
Subsidiary.

(d)Conflict with Other Instruments. The execution and delivery by each of the
Borrowers and the Material Subsidiaries of each of the Credit Facility Documents
and the performance by each of the Borrowers and the Material Subsidiaries of
its obligations thereunder, do not and will not:

(i)conflict with or result in a breach of any of the terms, conditions or
provisions of:

(A)the charter documents of such Borrower or Material Subsidiary (including, in
the case of the Limited Partnership, the Limited Partnership Agreement);

(B)any Law applicable to such Borrower or Material Subsidiary;

(C)any contractual restriction binding on or affecting such Borrower or Material
Subsidiary or their properties; or

(D)any writ, judgment, injunction, determination or award which is binding on
such Borrower or Material Subsidiary; or

(ii)result in, require or permit:

(A)the imposition of any Lien other than as provided for herein; or

(B)the acceleration of the maturity of any Indebtedness of such Borrower or
Material Subsidiary under any contractual provision binding on or affecting such
Borrower or Material Subsidiary.

(e)Authorization and Governmental Approvals. The execution and delivery of each
of the Credit Facility Documents and the performance by each of the Borrowers
and the Material Subsidiaries of its obligations thereunder have been duly
authorized by all necessary corporate or partnership action on the part of each
Borrower and Material Subsidiary and no permit, licence or approval under any
applicable Law, and no registration (other than registrations of or in respect
of the Security Documents in public offices of record), qualification,
designation, declaration or filing with any Governmental Body having
jurisdiction over the Borrowers or the Material Subsidiaries, is or was
necessary therefor or to preserve the benefit thereof to the Lender.

(f)Execution and Binding Obligation. This Agreement has been duly executed and
delivered by each of the Borrowers, Mackenzie Pulp and the Land Trustee, and
this Agreement constitutes, and the remaining Credit Facility Documents when
duly executed by the Borrowers and the Material Subsidiaries pursuant to and in
accordance with this Agreement and delivered will constitute, legal, valid and
binding obligations of the Borrowers and the Material Subsidiaries enforceable
against them in accordance with their respective terms, subject to Laws relating
to bankruptcy, insolvency and the enforcement of creditors' rights generally and
to the

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qualification that equitable remedies are in the discretion of a court, and
subject to any other qualifications as may be expressed in their counsels'
opinions delivered to the Lenders on the Closing Date pursuant to
Section 6.1(s).

(g)Permits. All permits, licences and approvals which are necessary in
connection with the business, properties or assets of the Borrowers and the
Material Subsidiaries have been issued and are in full force and effect except
where the failure so to possess any such permit, licence or approval would not
in the aggregate have a Material Adverse Effect, and there is no default
thereunder or any failure to observe or perform any condition thereof which
would have or result in a Material Adverse Effect. No action is pending or, to
the knowledge of the Borrowers, threatened which has as its object the
revocation or amendment of any such permit, licence or approval which would have
or result in a Material Adverse Effect.

(h)Material Disclosure. The Borrowers have not failed to disclose to the Lenders
in writing any fact (other than facts which are a matter of public knowledge or
record) of which the Borrowers are aware which will result in a Material Adverse
Effect, or so far as they can now reasonably foresee may result in a Material
Adverse Effect. None of the Credit Facility Documents contained at the time
furnished any untrue statement of a material fact.

(i)Title to Assets. Each of the Borrowers and the Material Subsidiaries have
good and marketable title to or the right to use or good, valid and subsisting
leases in respect of all of the assets (other than motor vehicles owned or
leased by Pope & Talbot US) necessary for the operation of its business, free
and clear of any Liens other than Permitted Liens, and no person has any
agreement or right to acquire any of such properties out of the ordinary course
of business.

(j)No Defaults. None of the Borrowers or the Material Subsidiaries is in breach
of or in default under:

(i)its charter documents (including, in the case of the Limited Partnership, the
Limited Partnership Agreement); or

(ii)any applicable Law, any material contract or agreement binding on or
affecting it or its assets (including without limitation the Credit Facility
Documents) or any writ, judgment, injunction, determination or award binding on
or affecting it, which in any such case could reasonably be expected to result
in a Material Adverse Effect.

(k)Current Financial Statements. The Borrowers have delivered to the Lenders
copies of each of the financial statements and certificate referred to in
Section 6.1(g) of this Agreement. Such financial statements (including the
related notes) have been prepared in accordance with GAAP consistently applied
throughout the period involved, and such financial statements and certificate
fairly present the financial position of each of Pope & Talbot Canada, the
Limited Partnership, Mackenzie Pulp and the Land Trustee as of the date thereof
and, in the case of Pope & Talbot Canada and Mackenzie Pulp, the results of its
operations for the period covered by such statements of income and retained
earnings and statements of cash flow.

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There are no material liabilities, contingent or otherwise, of either of Pope &
Talbot Canada or Mackenzie Pulp as of March 31, 2001 not reflected in the
balance sheet of Pope & Talbot Canada or Mackenzie Pulp, respectively, as of
such date. Since March 31, 2001, there have been no changes in the assets,
liabilities or financial position of Pope & Talbot Canada or Mackenzie Pulp from
that set forth in the balance sheet of Pope & Talbot Canada or Mackenzie Pulp as
of that date, except for such changes in the ordinary course of business and for
the transactions contemplated by the Mackenzie Pulp Share Purchase Agreement,
all of which have not, in the aggregate, had a Material Adverse Effect.

(l)Subsequent Financial Statements. Any financial statements of the Borrowers
subsequently delivered to the Lenders pursuant to this Agreement (including in
each case any related schedules and notes) will have been prepared in accordance
with GAAP consistently applied through the period involved, and will fairly
present on a consolidated basis the financial position of Pope & Talbot Canada
(including without limitation the Limited Partnership) and on an unconsolidated
basis the financial position of the Limited Partnership, as of the respective
dates of such financial statements and the results of their operations for the
respective periods covered by such financial statements.

(m)Litigation. There are no actions, suits or proceedings (including
counterclaims) pending or, to the knowledge of the Borrowers, threatened against
or affecting the Borrowers or any of their Subsidiaries or any property of the
Borrowers or any of their Subsidiaries in any court or before any arbitrator of
any kind or before or by any Governmental Body which, individually or in the
aggregate, if adversely determined, could reasonably be expected to have a
Material Adverse Effect (taking into account applicable insurance coverage and
related deductibles with respect to such matters).

(n)Taxes. Each of the Borrowers and the Material Subsidiaries have filed all tax
returns which are required to have been filed in any jurisdiction, except for
tax returns the failure of which to file would not, in the aggregate, have a
Material Adverse Effect. Each of the Borrowers and the Material Subsidiaries
have paid all taxes shown to be due and payable on any tax return filed by them
and all other taxes and assessments payable by them, to the extent the same have
become due and payable and before they have become delinquent, except for any
taxes or assessments:

(i)the amount, applicability or validity of which is currently being contested
in good faith by appropriate proceedings,

(ii)the execution of any judgment with respect thereto has been stayed, and

(iii)with respect to which such Borrower or Material Subsidiary has set aside on
its books reserves (segregated to the extent required by GAAP) deemed by it to
be adequate.

The Borrowers are not aware of any proposed material tax assessment against any
of the Borrowers or the Material Subsidiaries, and in the opinion of the
Borrowers all tax liabilities likely to be due and payable in the current fiscal
year are adequately provided for on the books of the Borrowers in accordance
with GAAP.

(o)Remittances. Each of the Borrowers and the Material Subsidiaries have
remitted all amounts required to be remitted by it to any Governmental Body,
including without limitation all employee source deductions for income taxes,
unemployment insurance and Canada Pension Plan remittances, sales taxes, excise
taxes, goods and services taxes, payroll taxes, workers' compensation
assessments and stumpage fees.

(p)Existing Indebtedness; No Default. None of the outstanding Indebtedness of
the Borrowers (other than Indebtedness to be repaid from the initial Borrowing
pursuant to Section 6.1(u))

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is secured by any Lien other than a Permitted Lien. Neither of the Borrowers is
in default in the payment of any amounts due under any instrument evidencing any
Indebtedness (without regard to any waiver of any such default), nor in default
in the performance or observance of any of the terms, covenants or conditions
contained in any indenture, mortgage, deed of trust, bank loan or credit
agreement or any other agreement or instrument relating to Indebtedness to which
such Borrower is a party or by which it or its properties may be bound or
affected and no event has occurred and is continuing which, with notice or the
lapse of time or both, would become such a default.

(q)Environmental Matters. Each of the Borrowers and the Material Subsidiaries
are, to the best of the Borrowers' knowledge, in compliance in all material
respects with all Environmental Laws applicable to their business and
operations, and the properties of each of the Borrowers and the Material
Subsidiaries comply in all material respects with all applicable requirements of
Environmental Laws relating to the environmental condition or their use of such
properties. To the best of the Borrowers' knowledge, none of the properties of
the Borrowers or the Material Subsidiaries incurred any material environmental
damage or contamination to a degree, concentration or extent that is contrary to
applicable Environmental Laws prior to such Borrower or Material Subsidiary
acquiring ownership or control of any such property. Excepted from the
immediately preceding sentence are:

(i)minor noncompliances or minor contamination that have occurred in the
ordinary course of business for industrial operations similar in nature to those
of the Borrowers and the Material Subsidiaries;

(ii)in respect of Pope & Talbot Canada's Castlegar sawmill, contaminants were
initially created by a prior owner in regard to the mill and its associated
landfill, and now have been dealt with by Pope & Talbot Canada pursuant to a
British Columbia Ministry of Environment approved remediation plan for the mill
property which has been completed or will be dealt with in the ordinary course
as part of the regulatory process upon closure of the landfill; and

(iii)noncompliances and contamination disclosed in the Envirochem Report.

(r)Partners. Pope & Talbot Canada is the sole general partner of the Limited
Partnership and the Trust is the sole limited partner of Limited Partnership.

7.2   Reaffirmation of Representations and Warranties.

    The representations and warranties of the Borrowers set out in Section 7.1
shall be deemed to be reaffirmed as at the last day of each fiscal quarter of
Pope & Talbot Canada and the Limited Partnership and on the date any
Accommodation (other than a Rollover or Conversion) is made by a Lender under
this Agreement as if made on and as of each such date.

ARTICLE 8
POSITIVE COVENANTS

8.1   Positive Covenants.

    The Borrowers covenant and agree to and with each of the Lenders that so
long as an Advance, Bankers' Acceptance or other obligation of the Borrowers
under this Agreement is outstanding or the Commitment of any of the Lenders has
not been wholly terminated:

(a)Payment when Due. The Borrowers will duly and punctually pay or cause to be
paid all amounts required to be paid by them to the Lenders pursuant to this
Agreement or any of the other Credit Facility Documents or any Treasury
Contract, including principal, interest,

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stamping fees, fees for Contingent Payment Letters, Commitment Fees, other fees
and expenses and any other amounts, at the times, in the currencies and in the
manner set forth herein or therein.

(b)Observance of Covenants. The Borrowers will observe and perform, and will
cause the Material Subsidiaries to perform, all of the covenants, agreements,
terms and conditions to be observed and performed thereby in this Agreement and
the other Credit Facility Documents.

(c)Conduct of Business. The Borrowers will, and will cause the Material
Subsidiaries to, continue to carry on the lumber, forest products and pulp mill
businesses currently carried on by the Borrowers and the Material Subsidiaries.
The Borrowers will keep, and will cause the Material Subsidiaries to keep, all
of their assets in a good state of repair and in proper condition in accordance
with forest products industry standards, reasonable wear and tear excepted, and
will keep proper books of record and account and set aside appropriate reserves
in accordance with GAAP.

(d)Maintenance of Corporate Existence. The Borrowers and the Material
Subsidiaries will maintain their corporate or partnership existence, as the case
may be, and will maintain all registrations in those jurisdictions in which they
carry on business where the nature of their business or the title to their
properties makes such registration necessary.

(e)Maintenance of Licences and Permits. The Borrowers will maintain, and will
cause the Material Subsidiaries to maintain, all material licences and permits
required to carry on their business and will not transfer, surrender or
otherwise dispose of any such licences or permits.

(f)Defend Legal Proceedings. The Borrowers will actively and diligently contest
or cause to be contested in good faith, by appropriate and timely proceedings,
or effect a timely and provident settlement of, any action, suit, litigation or
other proceeding the result of which could reasonably be expected to have a
Material Adverse Effect.

(g)Settlement or Stay of Execution. Each of the Borrowers will effect, and will
cause each of the Material Subsidiaries to effect, a timely and provident
settlement of or bring an application to stay any writ of execution, attachment
or similar process issued or levied against all, or a substantial portion of,
its property in connection with any judgment against it.

(h)Observance of Environmental Laws. The Borrowers will observe and comply, and
will cause the Material Subsidiaries to observe and comply, in all material
respects at all times with the provisions of all Environmental Laws, and from
time to time upon request by the Lenders through the Administration Agent shall
provide to the Administration Agent evidence satisfactory to the Lenders that
the Borrowers and the Material Subsidiaries are not in breach in any material
way of any Environmental Laws. The Borrowers will use, and will cause the
Material Subsidiaries to use, reasonable commercial efforts to conduct their
business and use their properties so as not to cause material environmental
damage.

(i)Notice of Environmental Events. Each of the Borrowers will, and will cause
each of the Material Subsidiaries to, as soon as practicable after it becomes
aware thereof, provide the Administration Agent with prompt notice of:

(i)any material spills of Hazardous Materials which are required to be reported
to any Governmental Body; and

(ii)any material (1) enforcement actions, (2) special investigations,
(3) control orders, (4) stop orders, (5) injunctions, (6) prosecutions or
(7) civil proceedings under any Environmental Law or based on any allegation of
material environmental damage or material release of Hazardous Materials.

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(j)Maintenance of Property Insurance. The Borrowers will cause (i) all of the
property and assets of the Borrowers, Mackenzie Pulp and the Land Trustee
comprising the Mackenzie pulp mill, and (ii) any other property and assets of
the Borrowers and the Material Subsidiaries which are of a character usually
insured by companies operating like businesses, to be insured and kept insured
against loss or damage from any cause which is customarily insured against
(including business interruption) by companies carrying on like businesses, in
such amounts and with such deductibles as are in accordance with good business
practice and with financially sound and reputable insurers. The Borrowers will
pay or cause to be paid all premiums necessary for such purpose as the same
shall become due and will provide particulars of all such policies and all
renewals thereof to the Administration Agent upon request, and, at the request
of the Administration Agent, will add the Administration Agent as first loss
payee on such policies with respect to any insurance proceeds relating to
Inventory and, in the case of Mackenzie Pulp and the Land Trustee prior to the
repayment of the Acquisition Facility in full, with respect to any insurance
proceeds relating to real property, together with a mortgage endorsement on
terms satisfactory to the Administration Agent.

(k)Maintenance of Liability Insurance. The Borrowers will maintain, and will
cause the Material Subsidiaries to maintain, public liability and other
liability insurance in such amounts as are in accordance with good business
practice and with financially sound and reputable insurers, will pay or cause to
be paid all premiums necessary for such purpose as the same shall become due and
will provide particulars of all such policies and all renewals thereof to the
Administration Agent upon request.

(l)Payment of Taxes. The Borrowers will from time to time pay or cause to be
paid all rents, taxes, rates, levies or assessments, ordinary or extraordinary,
and governmental fees or dues levied, assessed or imposed upon either of the
Borrowers, the Material Subsidiaries or their assets capable of forming a Lien
on any of the assets of either of the Borrowers or any of the Material
Subsidiaries, as and when the same become due and payable, unless the validity
thereof is disputed in good faith by such Borrower or such Material Subsidiary,
such Borrower or such Material Subsidiary has taken an appropriate reserve in
accordance with GAAP and, if required by the Administration Agent, has provided
cash collateral or other security satisfactory to the Administration Agent in an
amount acceptable to the Administration Agent for the payment of the same.

(m)Use of Proceeds. All Borrowings by the Borrowers will be used for the
purposes described in Section 2.2.

(n)Financial Statements. The Borrowers shall furnish to the Administration
Agent, for delivery to the Lenders:

(i)as soon as available and in any event within 120 days after the end of each
fiscal year of the Borrowers, copies of:

(A)a consolidated balance sheet of Pope & Talbot Canada; and

(B)an unconsolidated balance sheet of the Limited Partnership,

as of the end of such fiscal year and the related statements of income and
retained earnings and statement of cash flow for such fiscal year, all prepared
without audit in accordance with GAAP and stating in comparative form the
respective figures as of the end of and for the previous fiscal year, and
certified by the chief financial officer of Pope & Talbot Canada, in its own
capacity and as the General Partner, as presenting fairly, in all material
respects, the financial position of Pope & Talbot Canada and the Limited
Partnership as of the end of such fiscal year and the results of operations and
changes in financial position for such fiscal year in accordance with GAAP
consistently applied;

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(ii)as soon as available and in any event within 60 days after the end of each
of the quarterly fiscal periods in each fiscal year of the Borrowers, copies of:

(A)a consolidated balance sheet of Pope & Talbot Canada; and

(B)an unconsolidated balance sheet of the Limited Partnership,

as of the end of such period and the related statements of income and retained
earnings and statement of cash flow for the portion of the fiscal year ended
with the last day of such quarterly fiscal period, all prepared without audit in
accordance with GAAP and stating in comparative form the respective figures as
of the end of and for the corresponding period in the previous fiscal year, and
certified by the chief financial officer of Pope & Talbot Canada, in its own
capacity and as the General Partner as presenting fairly, in all material
respects, the financial position of Pope & Talbot Canada and the Limited
Partnership as of the end of such period and the results of operations and
changes in financial position for such period in accordance with GAAP
consistently applied; and

(iii)within 60 days after the Closing Date, a consolidated unaudited balance
sheet of Pope & Talbot Canada as at the close of business on the Closing Date.

(o)Quarterly Compliance Certificate. Concurrently with the financial statements
furnished pursuant to paragraph (n) of this Section 8.1, the Borrowers shall
furnish to the Lender a Quarterly Compliance Certificate duly executed by the
chief financial officer or other Authorized Officer of each of the Borrowers:

(i)stating that, based upon such examination or investigation and review of this
Agreement as in the opinion of the signer is necessary to enable the signer to
express an informed opinion with respect thereto, no Default, Event of Default
or Other Default has occurred during such period or as at the date of such
certificate or, if any Default, Event of Default or Other Default shall have
occurred, specifying all such Defaults, Events of Default and Other Defaults,
the nature and period of existence thereof and what action the Borrowers have
taken, are taking or propose to take with respect thereto;

(ii)confirming that the Outstandings did not exceed the Borrowing Base as at the
most recent date for which the Borrowers were required to provide a Margin
Report pursuant to paragraph (p) of this Section 8.1; and

(iii)at all times during which the Borrowers are required to be in compliance
with the financial ratios described in paragraphs (x) and (y) of this
Section 8.1, setting forth computations in reasonable detail showing as of the
end of the period covered by such financial statements such financial ratios.

(p)Margin Reports. Within 30 days after each month end, the Borrowers will
provide Margin Reports to the Administration Agent, for delivery to the Lenders,
substantially in the form attached as Schedule 4, showing, for each of Pope &
Talbot Canada, the Limited Partnership and Mackenzie Pulp, Eligible Insured
Accounts Receivable (on an aged basis, and indicating whether any claim has been
made under any insurance provided by the Export Development Corporation, Foreign
Credit Insurance Association or Great American Insurance Co.), Eligible
Uninsured Accounts Receivable (on an aged basis) and Inventory as at such month
end. The Operating Borrower acknowledges that it will not be entitled to any
Accommodation under the Operating Facility if, on the requested date of the
Accommodation, the Administration Agent and the Lenders have not received a
Margin Report for the most recent month end.

(q)Annual Business and Capital Expenditure Plans. The Borrowers will provide the
Administration Agent with their annual Business Plan and Capital Expenditure
Plan within

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60 days after the commencement of the year to which such plans relate, for
delivery by the Administration Agent to the Lenders.

(r)Notice of Material Changes in Capital Expenditure or Business Plan. The
Borrowers will promptly advise the Administration Agent of any material change
to any Business Plan or Capital Expenditure Plan previously provided to the
Administration Agent, and will as soon as reasonably practicable provide the
Administration Agent with an updated Business Plan or Capital Expenditure Plan,
as the case may be, for delivery to the Lenders.

(s)Notice of Inventory Locations. The Borrowers will promptly give written
notice to the Administration Agent of any jurisdiction other than British
Columbia where either of the Borrowers or any of the Material Subsidiaries owns
inventory, and will execute such documents and take such other action as the
Administration Agent or the Lenders may require for the purpose of perfecting a
security interest over inventory owned by either of the Borrowers or any of the
Material Subsidiaries and located in the relevant jurisdiction from time to
time.

(t)Notice of Default or Material Adverse Event. Each of the Borrowers will
promptly, and in any event within three Business Days after a Responsible
Officer of such Borrower becomes aware of the existence of a Default, Event of
Default or Other Default or an event which could reasonably be expected to
result in a Material Adverse Effect, deliver to the Administration Agent a
certificate duly executed by an Authorized Officer of such Borrower specifying
the nature and period of existence thereof and what action such Borrower has
taken, is taking or proposes to take with respect thereto.

(u)Other Information. The Borrowers shall promptly provide the Administration
Agent with:

(i)written notice of any demand for payment or other action taken by the holder
of any other Indebtedness of either of the Borrowers exceeding $500,000 to
recover such Indebtedness;

(ii)written notice of any other agreement or arrangement from time to time
entered by either of the Borrowers under which such Borrower has incurred or may
incur Indebtedness for borrowed money (other than Indebtedness secured by a
Permitted Lien), but excluding changes in the intercompany Indebtedness owed by
such Borrower to Pope & Talbot US;

(iii)written notice of any actual or probable material litigation or other legal
proceeding affecting either of the Borrowers or any of the Material Subsidiaries
(including any proceeding before an arbitrator, quasi-judicial tribunal or other
Governmental Body) which could reasonably be expected to have a Material Adverse
Effect, including copies of relevant legal documentation;

(iv)written notice of any taxes or other amounts the validity of which is
disputed by a Borrower or a Material Subsidiary pursuant to Section 8.1(l) or
any other claim or matter in respect of which a Borrower or a Material
Subsidiary would be required to reserve an amount in accordance with GAAP, if
the amount of such taxes or other claim or matter exceeds or could reasonably be
expected to exceed $1,000,000; and

(v)such other information, including financial statements and computations,
relating to the performance of the provisions of this Agreement and the affairs
of the Borrowers and the Material Subsidiaries as the Administration Agent or
the Lenders may from time to time reasonably request.

(v)Inspection of Properties and Books. The Lenders and the Administration Agent
shall have the right to visit and inspect any of the properties of the Borrowers
and the Material Subsidiaries

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and to discuss the affairs, finances and accounts of the Borrowers and the
Material Subsidiaries with, and to be advised as to the same by, the officers
and employees of the Borrowers and the Material Subsidiaries, all upon
reasonable notice and at such reasonable times and intervals and to such
reasonable extent as the Lenders or the Administration Agent may desire. The
Lenders and the Administration Agent shall have the right to examine the books
of account and records of the Borrowers and the Material Subsidiaries and to
make or be provided with extracts therefrom, upon reasonable notice to the
Borrowers. The Borrowers agree to pay all out-of-pocket expenses incurred by any
Lender or the Administration Agent in connection with the exercise of rights
pursuant to this paragraph at any time when a Default or Event of Default has
occurred and is continuing.

(w)Maintenance of Timber Tenures. The Borrowers will maintain, and will cause
the Material Subsidiaries to maintain, in good standing and not be in material
breach of any of the terms or conditions of any of their material Timber
Tenures, and the Borrowers will forthwith upon receipt thereof deliver to the
Administration Agent, for delivery to the Lenders, a copy of any notice from the
Minister of Forests cancelling or suspending or purporting to cancel or suspend
or impair the rights of either of the Borrowers or any Material Subsidiary
(including any reduction of allowable annual cut) pursuant to any of such Timber
Tenures.

(x)Funded Debt Ratio. For so long as any amount remains outstanding under the
Acquisition Facility, and from and after the Conversion Date, the Borrowers
shall ensure that the ratio of Funded Debt to Total Capitalization as at each
fiscal quarter end of the Borrowers shall not exceed 0.5 to 1.

(y)Normalized EBITDA to Interest Ratio. For so long as any amount remains
outstanding under the Acquisition Facility, and from and after the Conversion
Date, the Borrowers shall ensure that as at each fiscal quarter end of the
Borrowers the ratio of Normalized EBITDA to Interest Expense for the four fiscal
quarters then ended shall not be less than 2 to 1, provided that, for the first
four fiscal quarters ending after the Closing Date:

(i)Normalized EBITDA shall be calculated based on the actual earnings of each of
the Borrowers and of Mackenzie Pulp during the four fiscal quarters then ended;
and

(ii)Interest Expense shall be calculated as though the initial Accommodations
under this Agreement had been extended on April 1, 2000 and had remained
outstanding until the Closing Date.

(z)Redemption of Mackenzie Pulp Preferred Shares. Pope & Talbot Canada will
cause Mackenzie Pulp to redeem the Mackenzie Pulp Preferred Shares on or before
September 3, 2001.

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ARTICLE 9
NEGATIVE COVENANTS

9.1   Negative Covenants.

    The Borrowers covenant and agree to and with each of the Lenders that,
unless the Lenders consent in writing, so long as an Advance, Bankers'
Acceptance or other obligation of either of the Borrowers is outstanding or the
Commitment of any of the Lenders has not been wholly terminated:

(a)Restriction on Liens. None of the Borrowers, Mackenzie Pulp or the Land
Trustee will grant, create, assume or permit to exist any Lien upon any of their
properties or assets, other than:

(i)the security constituted by the Security Documents;

(ii)Permitted Liens; and

(iii)any other Lien (a "New Lien") securing Indebtedness of a Borrower,
Mackenzie Pulp or the Land Trustee (the "New Lien Grantor"), provided that:

(A)if such New Lien creates a security interest in any assets of the New Lien
Grantor which are then the subject of the Lien created by the Security Documents
in favour of the Administration Agent (collectively, the "Charged Assets"), the
holder of the New Lien executes a subordination and intercreditor agreement on
terms satisfactory to the Lenders; and

(B)if such New Lien:

    (1)   creates a security interest in any assets of a New Lien Grantor other
than the Charged Assets (the "Other Assets"); and     (2)   secures (i) all or
any portion of any Indebtedness owed to Pope & Talbot US or any Affiliate of
Pope & Talbot US, (ii) all or any portion of such Indebtedness assigned by
Pope & Talbot US or such Affiliate to any other person, or (iii) any
Indebtedness incurred to refinance, directly or indirectly, all or any portion
of such Indebtedness,

the New Lien Grantor also creates a Lien in favour of the Administration Agent
over the Other Assets, ranking subsequent to the New Lien, provided that, in the
event of any inconsistency between this paragraph (B) and the terms of the
Pope & Talbot US Postponement Agreement, the terms of the Pope & Talbot US
Postponement Agreement will govern.

(b)Restriction on Amalgamations and Reorganizations. Except for the proposed
amalgamation or winding up of Mackenzie Pulp into Pope & Talbot Canada on or
about December 31, 2001 (provided that the Borrowers have delivered to the
Administration Agent upon such amalgamation or winding up appropriate
confirmations of security, legal opinions, certificates and other documentation
in respect thereof, all in form and content satisfactory to the Lenders),
neither of the Borrowers will, directly or indirectly, consolidate, amalgamate
or merge with any person, or sell, lease or otherwise dispose of all or
substantially all of its assets (whether now owned or hereafter acquired)
whether in one transaction or a series of transactions, or enter into any
arrangement or reorganization having a similar effect to any of the foregoing,
unless:

(i)the person resulting from such transaction is a person organized and existing
under the laws of Canada, any province thereof, the United States, any state
thereof, or the District of Columbia;

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(ii)each of Dominion Bond Rating Service Limited and Standard & Poor's Ratings
Services shall have accorded a credit rating of BBB flat (or its equivalent), or
better, to the person resulting from such transaction;

(iii)the person resulting from such transaction expressly assumes, on terms and
conditions satisfactory to the Lenders, all obligations of such Borrower under
this Credit Agreement and the other Credit Facility Documents to which such
Borrower is a party; and

(iv)no Default or Event of Default has occurred and is continuing or would
result from such transaction.

(c)Restriction on Dispositions. None of the Borrowers or the Material
Subsidiaries will, directly or indirectly, sell, lease, assign, transfer,
abandon, convey or otherwise dispose of any of its assets (including any capital
stock of any Subsidiary or other corporation, any accounts receivable or
Indebtedness owed to such Borrower and any leasehold interests), except as
follows:

(i)a Borrower or a Material Subsidiary may sell inventory in the ordinary course
of business;

(ii)a Borrower or a Material Subsidiary may, in the ordinary course of business,
sell equipment, materials or supplies that are no longer required in the
business of such Borrower or Material Subsidiary or that are worn-out or
obsolete or trade in equipment in connection with the acquisition of replacement
equipment;

(iii)a Borrower or a Material Subsidiary may dispose of accounts receivable
which are in default for collection purposes and may dispose of accounts
receivable to Pope & Talbot US in the ordinary course of business;

(iv)a Borrower or a Material Subsidiary may apply cash to acquire other assets
and may dispose of marketable securities or other cash-equivalent assets for
cash or other cash-equivalent assets;

(v)the Borrowers and the Material Subsidiaries, collectively, may dispose of
property or assets not otherwise permitted under clauses (i) to (iv) above in
any fiscal year not exceeding Cdn.$10,000,000 for individual assets and
Cdn.$30,000,000 in aggregate based on net book value; and

(vi)Pope & Talbot Canada and Mackenzie Pulp may sell inventory and accounts
receivable to the Limited Partnership pursuant to the Inventory and Receivables
Sale Agreement, subject to the Liens created by the Security Documents.

Nothing in this paragraph (c) shall restrict:

(vii)Pope & Talbot Canada from making any payment in respect of Indebtedness,
from redeeming any shares in its capital or from paying cash dividends to any
shareholder; or

(viii)the Limited Partnership from making any payment in respect of Indebtedness
or from distributing any income or returning any capital to the Trust,

provided that no Default has occurred, and that any such payment would not
otherwise result in the occurrence of an Event of Default.

(d)Restriction on Ownership. (i)Pope & Talbot Canada shall not issue to or
permit any person to hold any shares in the capital of, or other ownership
interest of, Pope & Talbot Canada or any right to acquire any such shares, other
than Pope & Talbot US or a wholly-owned Subsidiary thereof.

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(ii)The Limited Partnership shall have no general partner other than Pope &
Talbot Canada and no limited partners other than the Trust, which shall have no
beneficiaries other than Subsidiaries of Pope & Talbot US and such charitable
organizations as may be designated by the trustees of the Trust from time to
time.

(e)Ceasing to Carry on Business. Neither of the Borrowers shall cease to carry
on the business currently being carried on by such Borrower at the date of this
Agreement.

(f)Change in Fiscal Year. Neither of the Borrowers will change its fiscal year.

ARTICLE 10
GUARANTEES

10.1   Guarantees.

(a)Pope & Talbot Canada hereby absolutely, unconditionally and irrevocably
guarantees to the Administration Agent and the Lenders the due and punctual
performance, satisfaction, payment and discharge of the following:

(i)all payment obligations (whether at stated maturity, by acceleration or
otherwise) of the Limited Partnership hereunder under the Operating Facility,
whether for principal, interest, fees, expenses, indemnity or otherwise;

(ii)all covenants and other obligations of the Limited Partnership on its part
to be performed or observed under this Agreement; and

(iii)all obligations of the Limited Partnership to the Lenders under Treasury
Contracts (including Treasury Contract Breakage Costs).

(b)The Limited Partnership hereby absolutely, unconditionally and irrevocably
guarantees to the Administration Agent and the Lenders the due and punctual
performance, satisfaction, payment and discharge of the following:

(i)all payment obligations (whether at stated maturity, by acceleration or
otherwise) of Pope & Talbot Canada hereunder under the Acquisition Facility,
whether for principal, interest, fees, expenses, indemnity or otherwise;

(ii)all covenants and other obligations of Pope & Talbot Canada as the
Acquisition Borrower on its part to be performed or observed under this
Agreement; and

(iii)all obligations of Pope & Talbot Canada to the Lenders under Treasury
Contracts (including Treasury Contract Breakage Costs).

(c)Each of Mackenzie Pulp and the Land Trustee hereby absolutely,
unconditionally and irrevocably guarantees to the Administration Agent and the
Lenders the due and punctual performance, satisfaction, payment and discharge of
the following:

(i)all payment obligations (whether at stated maturity, by acceleration or
otherwise) of the Borrowers hereunder under the Credit Facilities, whether for
principal, interest, fees, expenses, indemnity or otherwise;

(ii)all covenants and other obligations of each of Pope & Talbot Canada and the
Limited Partnership on their part to be performed or observed under this
Agreement; and

(iii)all obligations of each of Pope & Talbot Canada and the Limited Partnership
to the Lenders under Treasury Contracts (including Treasury Contract Breakage
Costs).

(d)In this Article 10, Pope & Talbot Canada, the Limited Partnership, Mackenzie
Pulp and the Land Trustee are collectively called the "Guarantors", and the
obligations guaranteed by each

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of the Guarantors as set out in paragraphs (a), (b) and (c) above are called the
"Guaranteed Obligations".

10.2   Guarantee Absolute and Unconditional.

    The obligations of each Guarantor under this Article 10 shall be absolute
and unconditional, shall not be subject to any counterclaim, set-off, deduction
or defence based upon any claim such Guarantor may have against either Borrower
or any other person, whether in connection with this Article 10 or any other
transaction, and shall remain in full force and effect without regard to, and
shall not be released, discharged or in any way affected or impaired by any
occurrence, matter, circumstance or condition whatsoever (whether or not such
Guarantor has any knowledge or notice thereof or has consented thereto), other
than the complete performance of the Guaranteed Obligations, including without
limitation:

(a)any amendment or modification of any provision of this Agreement, any of the
other Credit Facility Documents or any of the Guaranteed Obligations or any
assignment or transfer thereof, including without limitation any extension of
the time for payment of or compliance with any of the Guaranteed Obligations;

(b)any waiver, consent, extension, granting of time, forbearance, indulgence,
renewal or other action or inaction under or in respect of this Agreement, the
other Credit Facility Documents or any of the Guaranteed Obligations, or any
exercise or nonexercise of any right, remedy or power in respect thereof;

(c)any dealings with any security or other guarantee which the Administration
Agent or the Lenders hold or may hold pursuant to this Agreement or otherwise,
including the taking and giving up of security or any other guarantee, the
accepting of compositions and the granting of releases and discharges;

(d)any bankruptcy, receivership, insolvency, reorganization, amalgamation,
arrangement, readjustment, composition, liquidation or similar proceedings with
respect to either Borrower or any other person or the properties or creditors of
any of them;

(e)any informality in, omission from, invalidity or unenforceability of, or any
misrepresentation, irregularity or other defect in, this Agreement, the other
Credit Facility Documents, any of the Guaranteed Obligations or any other
agreement or instrument;

(f)any lack or limitation of capacity, status, power or authority of either of
the Borrowers or any of their respective directors, officers, employees,
partners or agents acting or purporting to act on their behalf, and any defect
or any failure to comply with a formal legal requirement in the execution or
delivery of any document;

(g)any transfer of any assets to or from either of the Borrowers, any
consolidation, amalgamation or merger of either of the Borrowers with or into
any person, or any change whatsoever in the name, objects, capital structure,
corporate existence, membership, constitution or business of either of the
Borrowers;

(h)any failure on the part of either of the Borrowers or any other person to
perform or comply with any term of this Agreement, the other Credit Facility
Documents, any of the Guaranteed Obligations or any other agreement or
instrument;

(i)any action or other proceeding brought by any beneficiaries or creditors of,
or by, either of the Borrowers or any other person for any reason whatsoever,
including without limitation any action or proceeding in any way attacking or
involving any issue in respect of this Agreement, the other Credit Facility
Documents, any of the Guaranteed Obligations or any other agreement or
instrument;

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(j)any lack or limitation of status or of power of either of the Borrowers or
any incapacity or disability of either of the Borrowers; or

(k)the assignment of all or any part of the benefits of this Article 10 in
accordance with the terms of this Agreement, any other agreement in respect of
the Guaranteed Obligations, or any other agreement or instrument.

10.3   Demand.

    If either of the Borrowers shall fail to pay or cause to be paid all or any
portion of the Guaranteed Obligations as and when the same shall become due and
payable pursuant to this Agreement or otherwise, then the Administration Agent
for and on behalf of the Lenders shall be entitled, by notice to a Guarantor, to
make a demand upon such Guarantor for the payment of the Guaranteed Obligations
of such Guarantor or that portion thereof which such Borrower has failed to pay.
The Guaranteed Obligations or any portion thereof in respect of which demand
shall have been made pursuant hereto shall become immediately due and payable by
such Guarantor hereunder upon such demand for payment being made, and shall bear
interest from the date of such demand at the rate or rates provided in this
Agreement or otherwise in respect of the Guaranteed Obligations or that portion
thereof which such Borrower has failed to pay. The Guarantors hereby expressly
acknowledge that any demand for payment hereunder shall be made on behalf of all
of the Lenders by the Administration Agent. Any such demand given in conformity
with this Section 10.3 shall be deemed validly given for all purposes hereunder
and shall be binding upon the Guarantor, the Administration Agent and the
Lenders to the same extent as if signed individually by each Lender.

10.4   Remedies.

    The Administration Agent may, at its option, proceed against any Guarantor
under this Article 10 to enforce any of the Guaranteed Obligations when due
without first proceeding against either of the Borrowers or any other person and
without first resorting to any direct or indirect security, any other guarantee
or any other remedy. Each Guarantor hereby unconditionally waives diligence,
presentment, demand for payment, protest and all notices whatsoever, renounces
the benefit of division and discussion, and unconditionally waives any
requirement that the Administration Agent and the Lenders exhaust any right,
power or remedy against the Borrowers under this Agreement, the other Credit
Facility Documents, any other Guaranteed Obligations or any other agreement or
instrument referred to herein or therein, or against any other person under any
other guarantee of, or security for, any of the Guaranteed Obligations, before
proceeding against such Guarantor under this Article 10. Each Guarantor hereby
waives any duty on the part of the Administration Agent or any of the Lenders to
disclose to such Guarantor anything which the Administration Agent or such
Lender may now or hereafter know concerning either of the Borrowers, any other
person or any other matter whatsoever, even if the Administration Agent or such
Lender has reason to believe any such information materially increases the risk
beyond that which such Guarantor intends to assume hereunder.

10.5   Set-Off.

    Following a declaration of acceleration under Section 12.2, the
Administration Agent and the Lenders may at any time set-off and apply any
deposits (general or special, time or demand, provisional or final) or other
indebtedness owing by the Administration Agent or any Lender to or for the
credit of any Guarantor against any and all of the Guaranteed Obligations, and
the Administration Agent or such Lender shall promptly notify such Guarantor of
any such set-off or application, provided that the failure to do so shall not
affect the validity thereof. The rights of the Administration Agent and the
Lenders under this Section 10.5 are in addition to any other rights and
remedies, including any other rights of set-off, that they may have.

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10.6   Amount of Guaranteed Obligations.

    Any account settled or stated by or between the Administration Agent and a
Borrower or, if any such account has not been so settled or stated immediately
before demand for payment under this Article 10, any account thereafter stated
by the Administration Agent shall, in the absence of demonstrable error, fraud,
dishonesty or improper conduct, be accepted by each Guarantor as conclusive
evidence of the amount of the Guaranteed Obligations which at the date of the
account so settled or stated is due by such Borrower to the Administration Agent
or the Lenders or remains unpaid by such Borrower to the Administration Agent or
the Lenders.

10.7   Payment Free and Clear of Taxes.

    Any and all payments by each Guarantor hereunder shall be made free and
clear of and without deduction or withholding for Taxes unless such Taxes are
required by applicable Law to be deducted or withheld. If a Guarantor shall be
required by applicable Law to deduct or withhold any Taxes from or in respect of
any sum payable hereunder:

(a)the sum payable shall be increased as may be necessary so that after making
all required deductions or withholdings (including deductions or withholdings
applicable to additional amounts paid under this Section 10.7) the
Administration Agent or the Lenders receive an amount equal to the sum they
would have received if no deduction or withholding had been made;

(b)such Guarantor shall make such deductions or withholdings; and

(c)such Guarantor shall pay the full amount deducted or withheld to the relevant
taxation or other authority in accordance with applicable Law.

Each Guarantor shall indemnify and save harmless the Administration Agent and
the Lenders for the full amount of Taxes levied by any jurisdiction in Canada or
the United States of America on, or in relation to, any amount payable by such
Guarantor hereunder (other than Taxes imposed on the income or capital of the
Lenders). Payment under this indemnity shall be made within 30 days from the
date the Administration Agent makes written demand therefor. A certificate as to
the amount of such Taxes submitted to such Guarantor by the Administration Agent
shall be conclusive evidence, absent manifest demonstrable error, of the amount
due from such Guarantor to the Administration Agent and the Lenders. Any such
certificate shall refer to the provision of Law under which such Taxes are
levied and shall contain an explanation relating to and a calculation of the
amount due from such Guarantor.

    Notwithstanding the foregoing, no Guarantor shall be required to pay any
Taxes or indemnify a Lender in respect of Taxes payable to any Governmental Body
in Canada which are levied, withheld, deducted or paid on payments to such
Lender by reason of the fact that such Lender is a Non-Resident of Canada.

10.8   Subrogation and Repayment.

    Upon receipt by the Administration Agent of any payments by any Guarantor on
account of its liability hereunder, such Guarantor shall not be entitled to
claim repayment of such amount against either of the Borrowers until the
Guaranteed Obligations and all other amounts due to the Administration Agent and
the Lenders under this Agreement have been paid or repaid in full. In the case
of the liquidation, winding-up or bankruptcy of either of the Borrowers (whether
voluntary or compulsory) or in the event that either of the Borrowers shall make
a bulk sale of any of its assets within the provisions of any bulk sales
legislation or any composition with creditors or scheme of arrangement, the
Administration Agent shall have the right to rank in priority to each Guarantor
for the full claims of the Administration Agent and the Lenders in respect of
the Guaranteed Obligations and receive all dividends or other payments in
respect thereof until the Guaranteed Obligations have

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been paid in full, and the Guarantors shall continue to be liable for any
balance of the Guaranteed Obligations which may be owing to the Administration
Agent or the Lenders by either of the Borrowers. If any amount shall be paid to
any Guarantor on account of any subrogation rights at any time when all the
Guaranteed Obligations have not been paid in full, such amount shall be held in
trust for the benefit of the Administration Agent and the Lenders and shall
forthwith be paid to the Administration Agent to be credited and applied against
the Guaranteed Obligations, whether matured or unmatured.

10.9   Postponement and Assignment.

    As security for the performance of its obligations hereunder, each Guarantor
assigns to the Administration Agent all claims of such Guarantor against the
Borrowers and any other guarantors, and, except as otherwise expressly permitted
under this Agreement, subordinates and postpones the payment of all such claims
to the payment of the Guaranteed Obligations. Following the occurrence of an
Event of Default, each Guarantor shall hold all of its claims against each
Borrower and any other guarantors as agent and trustee of the Administration
Agent and shall collect, enforce and prove all such claims in accordance with
this Agreement and this Article 10. Any monies received by any Guarantor in
respect thereof shall, upon the occurrence of any Event of Default, be paid over
to the Administration Agent. Without the prior written consent of the
Administration Agent, no Guarantor shall release or discharge any of its claims
against either of the Borrowers or any other guarantor, permit the prescription
of any such claims pursuant to any Law, assign any such claims to any person
other than the Administration Agent, or ask for or obtain any security or
negotiable paper for or other evidence of any such claims except for the purpose
of delivering the same to the Administration Agent.

10.10  Rights on Subrogation.

    If any Guarantor acquires any right of subrogation by reason of a payment
under or pursuant to this Article 10, such Guarantor shall not be entitled to
vote as a Lender under the provisions of this Agreement or otherwise until the
Guaranteed Obligations and all other amounts due to the Administration Agent and
the Lenders under this Agreement have been paid or repaid in full to the
Administration Agent or the Lenders.

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10.11  Continuing Guarantee.

    The obligations of each Guarantor under this Article 10 constitute a
continuing guarantee and shall remain in full force and effect until payment in
full of all of the Guaranteed Obligations. The obligations of any Guarantor
shall be reinstated if at any time any payment of any of the Guaranteed
Obligations is rescinded or must otherwise be returned by the Administration
Agent or the Lenders upon the insolvency, bankruptcy or reorganization of either
of the Borrowers or otherwise, all as though such payment had not been made.

10.12  Third Party Beneficiaries.

    Except as otherwise expressly set forth in this Agreement, nothing herein is
intended or shall be construed to confer upon or to give any person other than
the Administration Agent and the Lenders any right, remedy or claim under or by
reason of the obligations of the Guarantors hereunder.

10.13  Additional Guarantee.

    This Article 10 is in addition and supplemental to, and not in substitution
for, all other guarantees, assignments and postponement agreements, whether or
not in the same form as this Article 10, now or hereafter held by the
Administration Agent or the Lenders.

10.14  Remedies Cumulative.

    The rights, remedies and recourses of the Administration Agent and the
Lenders under this Article 10 and any other Credit Facility Documents are
cumulative and do not exclude any other rights, remedies and recourses that they
may have.

ARTICLE 11
SECURITY

11.1   Security.

    As continuing collateral security for the performance of all obligations of
the Borrowers and the Guarantors to the Lenders under this Agreement and the
payment when due of all Outstandings under the Credit Facilities and all other
amounts from time to time owing to the Lenders by the Borrowers, including
interest, interest on overdue interest, stamping fees, fees for Contingent
Payment Letters and other fees and expenses, and as continuing collateral
security for the performance of all obligations of the Borrowers to any of the
Lenders under Treasury Contracts (including Treasury Contract Breakage Costs),
the Borrowers and the Guarantors shall execute and deliver to the Administration
Agent the following documents:

(a)the Security Documents; and

(b)such other agreements, assignments, certificates, undertakings, declarations
and other supporting documentation (including consents of third parties to any
hypothec, assignment, mortgage, charge or security interest) as the
Administration Agent may reasonably require in furtherance of the above.

11.2   Continued Perfection of Security.

    Each of the Borrowers and the Guarantors shall take such action and execute
and deliver to the Administration Agent such agreements, conveyances, deeds and
other documents and instruments as the Administration Agent may request for the
purpose of establishing, perfecting, preserving and protecting the security
constituted by the Security Documents, in each case forthwith upon request by

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the Administration Agent and in form and substance satisfactory to the
Administration Agent, acting reasonably.

11.3   Set-Off.

    In addition to any rights now or hereafter available under applicable Law
and not by way of limitation of any such rights, each Lender is authorized at
any time or from time to time after a declaration of acceleration under
Section 12.2, without prior notice to the Borrowers or the Guarantors, to
set-off, compensate and to appropriate and to apply any and all money deposits,
matured or unmatured, general or special, held for or in the name of a Borrower
or Guarantor and any other indebtedness or liability at any time owing or
payable by such Lender to or for the credit of or the account of such Borrower
or Guarantor against and on account of the obligations and liabilities of such
Borrower or Guarantor due and payable to such Lender under this Agreement,
irrespective of currency and whether or not obligations, liabilities or claims
of such Borrower or Guarantor are contingent or unmatured.

11.4   Discharges.

    The Administration Agent will, at the request and expense of the Borrowers,
execute such discharges and other instruments as may be required to discharge
the Security Documents upon (i) payment in full of all principal, interest
(including interest on overdue interest), stamping fees, fees for Contingent
Payment Letters and all other amounts payable by the Borrowers under this
Agreement and the termination of all Commitments under this Agreement,
(ii) satisfaction in full of all other obligations of the Borrowers and the
Guarantors under the Credit Facility Documents, and (iii) termination of all
Treasury Contracts with the Lenders and payment of all Treasury Contract
Breakage Costs (if any). When a Borrower or a Guarantor makes permitted
dispositions of assets from time to time, the Administration Agent will, at the
request and expense of the Borrowers, execute and deliver partial discharges or
releases of the Security Documents over the assets disposed of. In addition,
after the repayment in full of the Acquisition Facility, the Administration
Agent will release and discharge the Mackenzie Pulp Debenture, the Land Trustee
Debenture and the Beneficiary Authorization and Charge.

11.5   Conflict.

    In the event of a conflict between the provisions of this Agreement and the
provisions of any Security Document, the provisions of this Agreement shall
prevail. The Administration Agent agrees that it will not make demand under or
enforce the Security Documents prior to:

(a)a declaration of acceleration under Section 12.2 of this Agreement, or

(b)the failure of any Borrower to pay any amount payable to a Lender under or as
a result of the termination of a Treasury Contract within three Business Days
after notice from such Lender.

11.6   Principal Amount and Interest Rate.

    Notwithstanding the principal amount of any Security Document, or the rate
of interest specified therein, the Administration Agent agrees that it will not
demand or attempt to enforce payment under the Security Documents of:

(a)any principal amount in excess of all amounts payable by the Borrowers or
either of them to the Administration Agent or the Lenders under this Agreement
or under Treasury Contracts; or

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(b)any interest or fees at a rate or rates in excess of the applicable rate or
rates provided for under this Agreement.

ARTICLE 12
EVENTS OF DEFAULT

12.1   Events of Default.

    An Event of Default shall have occurred and be continuing (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or by operation of law or otherwise) if:

(a)Payment of Principal. The Borrowers shall fail to pay all or any part of any
Borrowing under this Agreement as and when the same shall become due and
payable, whether at stated maturity, by acceleration or otherwise;

(b)Payment of Interest and Other Amounts. The Borrowers shall fail to pay any
interest, stamping fee, Contingent Payment Letter fee or any other amount due
under this Agreement (other than a Borrowing described in paragraph (a)) as and
when the same shall become due and payable, and such default shall have
continued for a period of three Business Days after notice from the
Administration Agent;

(c)Failure to Observe Financial Covenants. The financial ratio covenants set out
in paragraph (x) or paragraph (y) of Section 8.1 are not complied with, or the
Outstandings exceed the Borrowing Base for a period exceeding seven Business
Days after written notice from the Administration Agent requiring such excess to
be repaid;

(d)Failure to Observe other Covenants. The Borrowers shall fail to perform or
observe any of their other obligations under this Agreement or any of the other
Credit Facility Documents, or there is a breach or non-performance or
non-observance of any other term or condition of this Agreement or any of the
other Credit Facility Documents, and such default shall have continued for a
period of 30 days after the earlier of the date on which a Responsible Officer
of either of the Borrowers becomes aware of such default and the date on which
written notice of such default is given to the Borrowers by the Administration
Agent;

(e)Incorrect Representation or Warranty. Any representation or warranty made by
the Borrowers in this Agreement or in any certificate or other instrument
delivered hereunder or pursuant hereto or in connection with any provision
hereof shall prove to be false or incorrect in any material respect on the date
as of which made, unless within 30 days after written notice to the Borrowers
from the Administration Agent the Borrowers shall have reconfirmed such
representation or warranty as being true and correct as of the date of such
reconfirmation and such representation or warranty is in fact true and correct
as of such date;

(f)Cross-Default. A default or event of default shall have occurred under any
agreement, indenture or other instrument relating to other Indebtedness of
either of the Borrowers or any of their Material Subsidiaries that is
outstanding in a principal amount of at least US$10,000,000 in the aggregate (or
the equivalent thereof, as of any date of determination, in any other currency)
or under any foreign exchange, currency or interest rate swap agreement having a
mark to market liability or other termination liability in an amount exceeding
US$5,000,000 (or the equivalent thereof in any other currency) beyond any
applicable grace period contained in the agreement, indenture or other
instrument relating thereto;

(g)Dissolution Proceedings. Proceedings are commenced for the dissolution,
liquidation or winding-up of either of the Borrowers, their Material
Subsidiaries or the General Partner unless such proceedings are being actively
and diligently contested in good faith by such

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Borrower, Material Subsidiary or General Partner and such proceedings are stayed
within 30 days of being commenced;

(h)Bankruptcy or Insolvency. Either of the Borrowers, any of their Material
Subsidiaries or the General Partner is adjudged or declared bankrupt or becomes
insolvent or makes an assignment for the benefit of creditors, or admits in
writing its inability to pay its debts generally as they become due, or
petitions or applies to any tribunal for the appointment of a receiver or
trustee for it or for any substantial part of its property, or commences any
proceedings relating to it under any reorganization, arrangement, readjustment
of debt, dissolution or liquidation law or statute of any jurisdiction whether
now or hereafter in effect, or by any act indicates its consent to, approval of,
or acquiescence in, any such proceeding for it or for any substantial part of
its property;

(i)Third Party Insolvency Proceedings. A court or other Governmental Body having
jurisdiction issues a decree or order for the winding up, liquidation or
dissolution of either of the Borrowers, any of their Material Subsidiaries or
the General Partner or adjudging either of the Borrowers, any of their Material
Subsidiaries or the General Partner to be insolvent, or any court or other
Governmental Body having jurisdiction issues a decree or order granting any
relief or remedy sought in any petition or other legal proceeding for the
reorganization, readjustment of debt, arrangement, composition or similar relief
in respect of either of the Borrowers, any of their Material Subsidiaries or the
General Partner under any law or statute of any jurisdiction whether now or
hereafter in effect, or any receiver, receiver and manager, custodian,
liquidator, trustee in bankruptcy (or any person with similar powers) is
appointed for all or any material part of the property of either of the
Borrowers, any of the Material Subsidiaries or the General Partner, and any such
decree or order relating only to a Material Subsidiary (and not to either of the
Borrowers or the General Partner) is not stayed or discharged within 30 days
after pronouncement;

(j)Issuance of Execution. A writ, execution or attachment or similar process is
issued or levied against all or any material portion of the property of either
of the Borrowers or any of their Material Subsidiaries in connection with any
judgment against such Borrower or Material Subsidiary, and such writ, execution,
attachment or similar process is not released, bonded, satisfied, discharged,
vacated or stayed within 30 days after its entry, commencement or levy;

(k)Action by Encumbrancer. An encumbrancer or lienor takes possession of any
substantial part of the properties or assets of either of the Borrowers or any
of their Material Subsidiaries, unless such Borrower or Material Subsidiary
disputes and continues to dispute such possession in good faith and provides to
the Administration Agent such security for the payment of such encumbrance or
lien as the Administration Agent shall require;

(l)Expropriation. An order is made or legislation enacted by any competent body
having authority for the expropriation, confiscation, forfeiture, escheating,
other taking or compulsory divestiture, whether or not with compensation, of all
or a significant portion of the assets of either of the Borrowers or any of the
Material Subsidiaries and such order or legislation remains in effect and has
not been stayed by a court of competent jurisdiction within 30 days after the
date of pronouncement of the order or enactment of the legislation, as the case
may be;

(m)Unsatisfied Judgments or Tax Assessments. Judgment in excess of US$5,000,000
(or the equivalent thereof in any other currency) is rendered against either of
the Borrowers or any of the Material Subsidiaries in respect of which such
Borrower or such Material Subsidiary does not have insurance coverage or any
income tax reassessment in excess of US$5,000,000 (or the equivalent thereof in
any other currency) is made against either of the Borrowers or any of the
Material Subsidiaries, and any such judgment or tax reassessment remains
undischarged or

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unsatisfied after the time for appeal has expired without such Borrower or
Material Subsidiary having appealed the judgment or reassessment and obtained a
stay of execution of the judgment, provided that such judgment or reassessment
shall not constitute an Event of Default if such Borrower or Material Subsidiary
provides or causes to be provided to the Administration Agent such security as
the Administration Agent shall require for the payment of such judgment or
reassessment;

(n)Unenforceable Obligation. Any material obligation or other provision of
either of the Borrowers or any Material Subsidiary in any of the Credit Facility
Documents, any material obligation of the Trust in the Trust Postponement
Agreement, or any material obligation of Pope & Talbot US in the Pope & Talbot
US Postponement Agreement, terminates or ceases to be or is declared by a court
of competent jurisdiction not to be a legally binding or enforceable obligation
of such Borrower, Material Subsidiary, or Pope & Talbot US, as the case may be;

(o)Suspension of Business. Any voluntary suspension of all or substantially all
of the business of the either of the Borrowers or any of the Material
Subsidiaries shall occur out of the ordinary course of business (other than
temporary shutdowns for market or weather reasons or as a result of labour
disputes or other temporary shutdowns for normal business reasons); or any
involuntary suspension of all or substantially all of the business of either of
the Borrowers or any of the Material Subsidiaries shall occur, unless such
Borrower or Material Subsidiary proceeds diligently to remove the cause of such
suspension and such suspension continues for no more than 30 days;

(p)Change of Control of Borrowers. Either of the Borrowers shall cease to be
100% beneficially owned, directly or indirectly, by Pope & Talbot US;

(q)Change of Control of Pope & Talbot US. Any person or group of persons acting
jointly or in concert shall acquire beneficial ownership of, or the ability to
exercise control and direction over, Voting Stock of Pope & Talbot US having the
right to cast in excess of 20% of the votes of all classes of shares for the
election of directors of Pope & Talbot US, unless such person or group of
persons consist of:

(i)Peter T. Pope or any of his descendants or any corporation or trust owned or
controlled by any of them;

(ii)Emily T. Andrews or any of her descendants or any corporation or trust owned
or controlled by any of them; or

(iii)any combination of the foregoing; or

(r)Limited Partnership. The Limited Partnership Agreement shall be amended in a
manner that has or could reasonably be expected to have a Material Adverse
Effect, or any successor or additional General Partner shall fail to execute,
concurrently upon succeeding as or becoming a General Partner, such agreements
as the Administration Agent shall reasonably request in order to preserve and
protect the rights, remedies and interests of the Lenders under the Credit
Facility Documents.

12.2   Cancellation and Acceleration.

    Upon the occurrence of an Event of Default and for so long as such Event of
Default shall continue, the Administration Agent shall at the request of the
Lenders, by notice to the Borrowers:

(a)cancel the Credit Facilities and terminate the obligations of the Lenders to
make any further Accommodations;

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(b)declare the principal amount of all outstanding Accommodations made to the
Borrowers and all interest and fees accrued thereon and all other amounts
payable under this Agreement and the other Credit Facility Documents (including
liabilities for Bankers' Acceptances which have not yet matured) to be forthwith
due and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrowers; and

(c)enforce all rights and remedies provided in the Security Documents or
otherwise legally available.

12.3   Remedies Cumulative.

    For greater certainty, it is expressly understood and agreed that the
respective rights and remedies of the Administration Agent and the Lenders under
this Agreement are cumulative and are in addition to and not in substitution for
any rights or remedies provided by law or by equity; and any single or partial
exercise by the Administration Agent or the Lenders of any right or remedy for a
default or breach of any term, covenant, condition or agreement contained in
this Agreement shall not be deemed to be a waiver of or to alter, affect or
prejudice any other right or remedy to which the Administration Agent or the
Lenders may be lawfully entitled for such default or breach.

12.4   Waivers.

    The Administration Agent may, by written instrument, at any time and from
time to time waive any breach by the Borrowers of any of the covenants or Events
of Default herein. No course of dealing between a Borrower and a Lender or the
Administration Agent nor any delay in exercising any rights under this
Agreement, the Security Documents or any of the other Credit Facility Documents
shall operate as a waiver of any rights of a Lender.

ARTICLE 13
THE ADMINISTRATION AGENT

13.1   Authorization and Action.

    Each Lender hereby appoints and authorizes the Administration Agent to take
such action as agent on its behalf and to exercise such powers under this
Agreement, the Security Documents and the other Credit Facility Documents as are
delegated to the Administration Agent by their respective terms, together with
such powers as are reasonably incidental thereto. As to any matters not
expressly provided for by this Agreement, the Security Documents or the other
Credit Facility Documents, the Administration Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the joint instructions of the Majority Lenders and such
instructions shall be binding on all Lenders. The Administration Agent shall not
be required to take any action pursuant to such instructions or otherwise which
exposes the Administration Agent to personal liability or which is contrary to
this Agreement or applicable Law.

13.2   Administration Agent's Reliance.

    Neither the Administration Agent nor any of its directors, officers, agents
or employees shall be liable to any Lender for any action taken or omitted to be
taken by it under or in connection with this Agreement, except for its own
negligence or wilful misconduct as determined by a court of competent
jurisdiction. Without limiting the generality of the foregoing, the
Administration Agent:

(a)may treat any Lender as the payee of amounts attributable to such Lender's
Commitment hereunder unless and until the Administration Agent receives written
notice of the assignment thereof signed by such Lender and the Administration
Agent receives the written agreement

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of the Assignee that such Assignee is bound hereby as it would have been if it
had been an original Lender hereunder, in each case in form satisfactory to the
Administration Agent;

(b)may consult with legal counsel (including legal counsel for the Borrowers),
independent accountants and other experts selected by it and shall not be liable
for any action taken or omitted to be taken in good faith by it in accordance
with the advice of such counsel, accountants or experts. The Administration
Agent will provide the Lenders with copies of any reports or other materials it
may receive as a result of such consultations;

(c)makes no warranty or representation to any Lender and shall not be
responsible to any Lender for the accuracy or completeness of any information or
data made available to the Lenders in connection with the negotiation of this
Agreement, or of any statements, warranties or representations (whether written
or oral) made in or in connection with this Agreement;

(d)shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement, the
Security Documents or any of the other Credit Facility Documents on the part of
the Borrowers or to inspect the property (including the books and records) of
the Borrowers;

(e)shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of any of the
Security Documents or any of the other Credit Facility Documents or any other
instrument or document furnished pursuant thereto; and

(f)shall incur no liability under or in respect of this Agreement by acting upon
any notice, consent, certificate or other instrument or writing (which may be by
facsimile transmission, by telex or by hand) believed by it to be genuine and
signed or sent by the proper party or parties or by acting upon any
representation or warranty of the Borrowers made or deemed to be made hereunder.

13.3   Administration Agent as Lender.

    With respect to its Commitment and the Accommodations made by it, the
Administration Agent which is also a Lender shall have the same rights and
powers under this Agreement as any other Lender hereunder and may exercise the
same as though it were not the Administration Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include the
Administration Agent in its capacity as Lender. The Administration Agent and its
Affiliates may accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business with the Borrowers
or their Affiliates, or any corporation or other entity owned or controlled by
the Borrowers or any person who may do business with or own securities of the
Borrowers, all as if it were not the Administration Agent and without any duty
to account therefor to the Lenders.

13.4   Lender Credit Decisions.

    Each Lender acknowledges that it has, independently and without reliance
upon the Administration Agent and based on such documents and information as it
has deemed appropriate, made its own credit analysis and decision to enter into
this Agreement. Accordingly, and without limiting the generality of the
foregoing, each Lender confirms to the Administration Agent that it has not
relied, and will not hereafter rely, on the Administration Agent to check or
inquire on its behalf into the adequacy, accuracy or completeness of any
documents, including without limitation the Credit Facility Documents, provided
by the Borrowers under or in connection with this Agreement (whether or not such
documents have been or are hereafter distributed to such Lender by the
Administration Agent). Each Lender also acknowledges that it will, independently
and without reliance upon the Administration Agent and based on such documents
and information as it shall deem appropriate at

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the time, continue to make its own credit decisions in taking or not taking
action under this Agreement. Each Lender acknowledges that a copy of this
Agreement, the Security Documents and the other Credit Facility Documents have
been made available to it for review and each Lender acknowledges that it is
satisfied with the form and substance of this Agreement, the Security Documents
and the other Credit Facility Documents.

13.5   Funds Held by the Administration Agent.

    All funds held by the Administration Agent under this Agreement for payment
to the Borrowers or to the Lenders shall be deemed to be held in trust by the
Administration Agent to be applied in accordance with this Agreement.

13.6   Application of Payments after Acceleration.

    Any sum received by the Administration Agent at any time after a declaration
of acceleration under Section 12.2 shall, notwithstanding Section 2.20, be
applied first to pay any fees or expenses incurred by the Administration Agent
in connection with the administration and enforcement of this Agreement or the
Security Documents.

13.7   Indemnification.

    Each Lender agrees to indemnify the Administration Agent (to the extent not
reimbursed by the Borrowers) rateably (according to the amount of its
Commitment) from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against the Administration Agent in any way relating to or arising out
of the Credit Facility Documents or any action taken or omitted by the
Administration Agent under the Credit Facility Documents, provided that no
Lender shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the negligence or wilful misconduct of the Administration Agent
in its capacity as a Administration Agent as determined by a court of competent
jurisdiction. Without limiting the foregoing, each Lender agrees to reimburse
the Administration Agent promptly upon demand for its rateable share of any
out-of-pocket expenses (including counsel fees and disbursements) incurred by
the Administration Agent in connection with the preparation, execution,
administration or enforcement of this Agreement or legal advice in respect of
rights or responsibilities hereunder or under the Security Documents or the
other Credit Facility Documents, to the extent that the Administration Agent is
not reimbursed for such expenses by the Borrowers.

13.8   Accommodations under the Credit Facilities.

    Unless the Administration Agent shall have received notice from a Lender
prior to the relevant date that such Lender will not make available to the
Administration Agent an amount equal to such Lender's Proportion in respect of
an Advance or Drawing, the Administration Agent may assume that such Lender has
made such amount available to the Administration Agent on such date in
accordance with this Agreement and the Administration Agent may, in reliance
upon such assumption, make available to the applicable Borrower on such date a
corresponding amount. If and to the extent such Lender shall not have so made
such amount available to the Administration Agent, such Lender shall pay such
corresponding amount to the Administration Agent forthwith on demand. If such
Lender shall pay such corresponding amount to the Administration Agent, the
amount so paid shall constitute such Lender's proportionate share of the
Accommodation. If such Lender shall not pay such corresponding amount to the
Administration Agent forthwith on demand, such Borrower shall pay such
corresponding amount to the Administration Agent forthwith on demand and the
Borrowers hereby agree and acknowledge that any such amount received and so
reimbursed would not and will not constitute an

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Accommodation hereunder. The Administration Agent shall also be entitled to
recover from such Lender, or if such Lender fails to make payment the applicable
Borrower, as the case may be, interest (without duplication of interest
otherwise payable hereunder) on such corresponding amount, for each day from the
date such amount is made available to such Borrower until the date such amount
is paid to the Administration Agent, in the case of a repayment by the Lender,
at a rate determined by the Administration Agent (such rate to be conclusive and
binding on such Lender) in accordance with the Administration Agent's usual
banking practice for such advances to financial institutions of like standing to
such Lender, but in any event at a rate no greater than the usual interbank rate
for the sale of deposits in the applicable currency and, in the case of
repayment by a Borrower, at a rate equal to the effective rate of interest being
paid by such Borrower on such amount.

13.9   Repayments by Lenders.

    Unless the Administration Agent shall have received notice from a Borrower
prior to the date on which any payment is due to the Lender hereunder that such
Borrower will not make such payment in full, the Administration Agent may assume
that such Borrower has made such payment in full to the Administration Agent on
such date and the Administration Agent may, in reliance upon such assumption,
cause to be distributed to each Lender on such date an amount equal to the
amount then due such Lender. If and to the extent such Borrower shall not have
so made such payment in full to the Administration Agent, each Lender shall
repay to the Administration Agent forthwith on demand such amount distributed to
such Lender together with interest thereon, for each day from the date such
amount is distributed to such Lender until the date such Lender repays such
amount to the Administration Agent, at a rate determined by the Administration
Agent (such rate to be conclusive and binding on such Lender) in accordance with
the Administration Agent's usual banking practice for such advances to financial
institutions of like standing to such Lender, but in any event at a rate no
greater than the usual interbank rate for the sale of deposits in the applicable
currency.

13.10  Successor Administration Agent.

    The Administration Agent may resign at any time by giving 30 days' written
notice thereof to the Lenders and the Borrowers. Upon such resignation the
Lenders shall have the right to appoint a successor Administration Agent which
successor Administration Agent shall be a Canadian chartered bank approved by
the Borrowers (such approval not to be unreasonably withheld). If no successor
Administration Agent shall have been so appointed by the Lenders and shall have
accepted such appointment within 30 days after delivery of the retiring
Administration Agent's notice of resignation, the retiring Administration Agent
may, on behalf of the Lenders, appoint a successor Administration Agent, which
shall be a Lender approved by the Borrowers (such approval not to be
unreasonably withheld). Upon the acceptance of any appointment as Administration
Agent hereunder by a successor Administration Agent, such successor
Administration Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administration Agent, the
retiring Administration Agent shall be discharged from its duties and
obligations under this Agreement, and the Lender which is such successor
Administration Agent shall thereupon become the Issuing Lender hereunder. After
any retiring Administration Agent's resignation or removal hereunder as
Administration Agent, the provisions of this Article shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Administration
Agent under this Agreement.

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ARTICLE 14
MISCELLANEOUS

14.1   Records.

    The unpaid principal amount of the Accommodations, the unpaid interest
accrued thereon, the interest rate or rates applicable to any unpaid principal
amounts, the duration of such applicability, the date of any Advance or
repayment, the date of issue, Face Amount and maturity of all Bankers'
Acceptances, the Face Amount of any Contingent Payment Letter and the amount of
the Total Commitment shall at all times be ascertained from the records of the
Administration Agent and the Issuing Lender, which shall be conclusive absent
manifest error, fraud, dishonesty or improper conduct, and a certificate of any
officer of the Administration Agent or the Issuing Lender as to such records
shall be prima facie evidence of such records.

14.2   Amendments.

(a)Any amendment or waiver of any provision of this Agreement or of any of the
other Credit Facility Documents, any consent to any departure by either of the
Borrowers therefrom, and any consent or approval contemplated to be given by the
Lenders under this Agreement, shall be effective and binding on the Lenders only
if in writing and signed by the Majority Lenders, except as provided in
paragraph (c) below. Notwithstanding the foregoing, no amendment, waiver or
consent shall, unless in writing and signed by all the Lenders:

(i)except as provided for in this Agreement, change the Commitment of any Lender
or subject any Lender to any additional obligation;

(ii)change the principal of, or interest on, the Accommodations or any fees
hereunder;

(iii)postpone any date fixed for any payment of principal of, or interest on,
the Advances or any fees hereunder or extend the time for payment of the Face
Amount of any Bankers' Acceptance or otherwise affect the terms of payment of
any Bankers' Acceptance;

(iv)amend the definition of Majority Lenders;

(v)amend this Section 14.2; or

(vi)release any property or assets from the Lien created by any of the Security
Documents, except as contemplated under this Agreement or any of the Security
Documents.

(b)No amendment, waiver or consent shall, unless in writing and signed by the
Administration Agent in addition to the Majority Lenders, affect the rights or
duties of the Administration Agent hereunder or the rights of the Administration
Agent to the indemnity under Section 13.7.

(c)From time to time, the Administration Agent may execute and deliver
agreements or instruments supplemental hereto for the purposes of:

(i)adding to the provisions hereof or the Security Documents such additional
covenants and enforcement provisions as are, in the opinion of the
Administration Agent, necessary or desirable and not prejudicial to the
interests of any of the Lenders;

(ii)making such provisions not inconsistent with this Agreement or the Security
Documents as may be necessary or desirable and not prejudicial to the interests
of any of the Lenders with respect to matters or questions arising hereunder;
and

(iii)for any other purpose not inconsistent with the terms of this Agreement or
the Security Documents, including, without limitation, the correction or
rectification of any ambiguities, defective or inconsistent provisions, errors,
mistakes or omissions herein

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provided where, in the opinion of the Administration Agent and its counsel,
neither the rights of the Administration Agent nor the Lenders are in any way
prejudiced thereby.

14.3   Notices.

    All notices and other communications provided for hereunder or under any
Credit Facility Document shall, except as otherwise permitted hereunder, be in
writing personally delivered:

(a)if to the Borrowers, Mackenzie Pulp or the Land Trustee:

c/o Pope & Talbot Ltd.
1500 S.W. First Avenue
Portland, Oregon
97261

Facsimile: (503) 220-2727
Attention: Vice President and Chief Financial Officer

(b)if to the Administration Agent:

The Toronto-Dominion Bank
Corporate and Investment Banking
66 Wellington Street West, 38th Floor
Toronto-Dominion Bank Tower
Toronto, Ontario
M5K 1A2

Facsimile.: (416) 982-5535
Attention: Vice President, Loan Syndications—Agency

(c)if to any Lender, to the address set forth in Appendix A;

or sent by facsimile transmission or similar means of recorded communication to
the applicable address or to such other address as a party hereto may from time
to time designate to the other parties hereto in such manner. All such notices
and communications shall, when required or permitted to be delivered or
confirmed hereunder by facsimile transmission, be effective when so delivered or
confirmed.

    All deliveries of financial statements and other documents to be made by the
Borrowers to the Lenders hereunder shall be made by making delivery of such
financial statements and documents to the Administration Agent, in sufficient
copies for each Lender, at the address specified above or to such other address
as the Administration Agent may from time to time notify to the Borrowers. All
such deliveries shall be effective only upon actual receipt.

14.4   No Waiver; Remedies.

    No failure on the part of any Lender, the Administration Agent or either
Borrower to exercise, and no delay in exercising, any right under any of the
Credit Facility Documents shall operate as a waiver thereof; nor shall any
single or partial exercise of any right under any of the Credit Facility
Documents preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by Law.

14.5   Expenses.

    The Borrowers shall promptly pay all reasonable costs and expenses of the
Administration Agent and Lenders, including without limitation all reasonable
out-of-pocket expenses and disbursements of the Administration Agent and the
Lenders and the reasonable fees and expenses of counsel for the Administration
Agent or the Lenders, incurred in connection with the preparation, negotiation,

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execution, registration and administration of this Agreement, the Security
Documents, the other Credit Facility Documents or any agreement or instrument
contemplated hereby or thereby, or in connection with any requested amendments,
waivers or consents or matters initiated by the Borrowers pursuant to or in
respect of the provisions hereof. The Borrowers shall, subject to applicable
Law, promptly pay all costs and expenses of the Administration Agent and the
Lenders, including without limitation all out-of-pocket expenses and
disbursements of the Administration Agent and the Lenders and the fees and
expenses of counsel for the Administration Agent or the Lenders (on a solicitor
and client basis), incurred in connection with the enforcement or preservation
of rights under this Agreement, the Security Documents, the other Credit
Facility Documents or any agreement or instrument contemplated hereby or thereby
or the collection of Borrowings or any litigation, proceeding or dispute to
which the Administration Agent or a Lender is a named party in any way relating
to Borrowings. The Borrowers shall pay interest on any amount due under this
Section 14.5 that remains unpaid more than two Business Days after the
Administration Agent notifies the Borrowers of such amount, at the Prime Rate
plus 2.0% per annum until such amount is paid.

14.6   Taxes.

    Any and all payments by the Borrowers under this Agreement and the other
Credit Facility Documents shall be made free and clear of and without deduction
or withholding for Taxes unless such Taxes are required by Law to be deducted or
withheld. If either Borrower is required by Law to deduct or withhold any Taxes
from or in respect of any sum payable under this Agreement or the other Credit
Facility Documents:

(a)the sum payable shall be increased as may be necessary so that after making
all required deductions or withholdings (including deductions or withholdings
applicable to additional amounts paid under this Section) each of the Lenders
receives an amount equal to the sum it would have received if no deduction or
withholding had been made;

(b)such Borrower shall make such deductions or withholdings; and

(c)such Borrower shall pay the full amount deducted or withheld to the relevant
taxation or other authority in accordance with applicable Law.

    The Borrowers shall indemnify and save harmless the Administration Agent and
the Lenders for the full amount of Taxes levied by any jurisdiction in Canada or
the United States of America on or in relation to any sum received or receivable
hereunder by the Administration Agent or the Lenders (other than taxes imposed
on the income or capital of the Administration Agent or a Lender). Payment under
this indemnification shall be made within 30 days from the date the
Administration Agent makes written demand therefor. A certificate as to the
amount of such Taxes submitted to the Borrowers by the Administration Agent
shall be conclusive evidence, absent manifest demonstrable error, of the amount
due from the Borrowers to the Administration Agent and the Lenders. Any such
certificate shall refer to the provision of Law under which such Taxes are
levied and shall contain an explanation relating to and a calculation of the
amount due from the Borrowers.

    Notwithstanding the foregoing, the Borrowers shall not be required to pay
any Taxes or indemnify a Lender in respect of Taxes payable to any Governmental
Body in Canada which are levied, withheld, deducted or paid on payments to such
Lender by reason of the fact that such Lender is a Non-Resident of Canada.

    The obligations of the Borrowers under this Section 14.6 shall survive the
payment in full of the Outstandings and interest thereon.

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14.7   Increased Costs.

    If the introduction of or any change in any Law, regulation, treaty,
official directive or regulatory requirement now or hereafter in effect (whether
or not having the force of Law) or in the interpretation or application thereof
by any court or by any judicial, governmental or administrative authority
charged with the interpretation or administration thereof, or if compliance by
any of the Lenders with any request from the Bank of Canada or any other central
bank or fiscal, monetary or other authority (whether or not having the force of
Law):

(a)subjects any of the Lenders to any tax, or causes the withdrawal or
termination of a previously granted exemption with respect to any tax, or
changes the basis of taxation of payments due to any of the Lenders, or
increases any existing tax on payments of principal, interest or other amounts
payable by the Borrowers to any of the Lenders under this Agreement (other than
taxes of application to the general income of the Lenders);

(b)imposes, modifies or deems applicable any reserve, special deposit,
regulatory or similar requirement against assets held by, or deposits in or for
the account of, or loans by, or any other acquisition of funds for loans made by
any of the Lenders or Bankers' Acceptances created by any of the Lenders;

(c)imposes on any of the Lenders or expects there to be maintained by any of the
Lenders any capital adequacy or additional capital requirement (including,
without limiting the generality of the foregoing, a requirement which affects
such Lender's allocation of capital resources to its obligations) in respect of
the obligations of such Lender hereunder or, without limiting the generality of
the foregoing, imposes any other condition or requirement with respect to this
Agreement or to the maintenance by a Lender of a contingent liability with
respect to Bankers' Acceptances created by such Lender pursuant to this
Agreement;

and the result of such occurrence is, in the sole determination of such Lender,
to increase the cost to the Lender or to reduce the income received by the
Lender in respect of any portion of the Advances or Bankers' Acceptances, the
applicable Borrower shall pay to the Lender that amount which the Lender
estimates will compensate it for such additional cost or reduction in income
(the "Compensation"). Upon a Lender having determined that it is entitled to
Compensation, the Administration Agent shall promptly notify the applicable
Borrower and shall provide such Borrower with a certificate of the Lender
setting forth the amount of the Compensation and the basis for it. In preparing
such certificate the Lender shall not be required to "match" or isolate
particular transactions or credit facilities and shall be entitled to use
estimates and averages, acting in a commercially reasonable manner. Absent
manifest error such certificate shall be conclusive and binding, and if the
amount of Compensation set forth therein shall not be paid by such Borrower to
the Lender within seven Business Days after notice thereof, such amount shall be
deemed to be a Prime Rate Advance and shall bear interest calculated and payable
as provided in this Agreement.

14.8   Environmental Indemnity.

    The Borrowers will protect, indemnify and hold the Administration Agent and
the Lenders and all directors, officers, employees and agents of the
Administration Agent or the Lenders harmless from and against any and all actual
or potential claims, liabilities, damages (including consequential damages),
losses, fines, penalties, sanctions, judgments, awards, costs and expenses
whatsoever (including, without limitation, costs and expenses of investigating,
denying or defending any of the foregoing and costs and expenses for preparing
any necessary environmental assessment report or other such reports) which arise
out of or relate in any way to:

(a)the presence, use, handling, production, transportation, storage, release,
deposit, discharge or disposal of any Hazardous Materials in, on or about any
properties or assets owned, operated

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or occupied by the Borrowers and their Subsidiaries, whether by the Borrowers,
their Subsidiaries or any other person;

(b)any remedial action taken by the Administration Agent or any Lender in
connection with any matter referred to in paragraph (a), including without
limitation any repair, clean-up, remediation or detoxification of any of such
properties or assets and the preparation of any closure or other required plans;
and

(c)any breach by the Borrowers or any of their Subsidiaries of any Environmental
Law.

    Notwithstanding anything to the contrary contained in this Agreement,
(i) the indemnity provisions set forth above in this Section 14.8 shall not
apply with respect to Hazardous Materials which the Borrowers establish were
first placed on, in, under or about the property in question after the
Administration Agent or a Lender or other indemnified party took actual and
exclusive possession of the property (either through foreclosure or otherwise),
and (ii) the indemnity provisions set forth above in this Section 14.8 are not
intended to indemnify any indemnified party for its own gross negligence or
wilful misconduct.

    If any Hazardous Materials are caused to be removed by either of the
Borrowers or any of their Subsidiaries, the Administration Agent, a Lender or
any other indemnified party, then such Hazardous Materials will be and remain
the property of such Borrower or Subsidiary, as the case may be, and such
Borrower will assume any and all liability for such removed Hazardous Materials.
The Borrowers understand that their liability to the indemnified parties under
this Section will survive the full payment and satisfaction of all amounts owing
under this Agreement as if this indemnity were separate and distinct from this
Agreement.

14.9   Judgment Currency.

    If, for the purposes of obtaining judgment in any court, it is necessary to
convert a sum due hereunder to a Lender from the Original Currency into the
Judgment Currency, the parties hereto agree, to the fullest extent that they may
effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Lender could purchase the Original
Currency with the Judgment Currency on the Business Day preceding that on which
final judgment is paid or satisfied. The obligations of the Borrowers in respect
of any sum due in the Original Currency to the Lender under any of the Credit
Facility Documents shall, notwithstanding any judgment in any Judgment Currency,
be discharged only to the extent that on the Business Day following receipt by
the Lender of any sum adjudged to be so due in such Judgment Currency, the
Lender may in accordance with normal banking procedures purchase the Original
Currency with such Judgment Currency. If the amount of the Original Currency so
purchased is less than the sum originally due to the Lender in the Original
Currency, the Borrowers agree, as a separate obligation and notwithstanding any
such judgment, to indemnify the Lender against such loss, and if the amount of
the Original Currency so purchased exceeds the sum originally due to the Lender
in the Original Currency the Lender agrees to remit such excess to the
applicable Borrower.

14.10  Governing Law.

    This Agreement and the Credit Facility Documents shall be governed by, and
construed in accordance with, the laws of the Province of British Columbia and
of Canada applicable therein and shall be treated in all respects as British
Columbia contracts.

14.11  Consent to Jurisdiction.

    The Borrowers and the Lenders hereby irrevocably submit to the jurisdiction
of any British Columbia court sitting in Vancouver, British Columbia, in any
action or proceeding arising out of or

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relating to this Agreement or any other Credit Facility Document, and each of
them hereby irrevocably agrees that all claims in respect of any such action or
proceeding may be heard and determined in such British Columbia court. Each of
them hereby irrevocably waives, to the fullest extent each may effectively do
so, the defence of an inconvenient forum to the maintenance of such action or
proceeding. Nothing in this Section shall affect the right of any Lender or the
Administration Agent to serve legal process in any other manner permitted by Law
or the right of any Lender or the Administration Agent to bring any action or
proceeding against the Borrowers or their property in the courts of other
jurisdictions.

14.12  Lenders' Several Liability

    The obligations of the Lenders hereunder are several and not joint. No
Lender shall be responsible for the failure of any other Lender to make an
Advance or accept Bankers Acceptances, and the failure of any Lender to make any
Advance or accept Bankers Acceptances shall not relieve any other Lender of its
obligations hereunder.

14.13  Reasonable Consent or Approval of the Parties.

    The parties hereto acknowledge and confirm that where any of them is
required to exercise its discretion or grant its approval or consent pursuant to
a provision in this Agreement, it shall act reasonably in the exercise of its
discretion and will not unreasonably withhold or delay the granting of its
approval or consent. This Section shall not apply to any consent or agreement by
the Lenders to extend the Conversion Date as contemplated under Section 2.9.

14.14  Successors and Assigns.

    This Agreement shall become effective when it has been executed by the
Borrowers, Mackenzie Pulp, the Land Trustee, the Administration Agent and the
Lenders and thereafter shall be binding upon and enure to the benefit of the
Borrowers, Mackenzie Pulp, the Land Trustee, the Administration Agent, the
Lenders and their respective successors and permitted assigns. The Borrowers
shall not have the right to assign their rights or obligations hereunder or any
interest herein without the prior consent of the Lenders.

14.15  Assignment.

    Following the Closing Date any Lender may assign all or any part of its
Commitment and its interest in the Outstandings to one or more Assignees upon
payment by the assigning Lender to the Administration Agent of a fee of
Cdn.$3,500 for each occurrence, provided that a Lender may not assign all or any
part of its Commitment under one of the Credit Facilities unless such Lender
also assigns a pro-rata amount of its Commitment under the other Credit Facility
to the same Assignee. Any such assignment shall be subject to the approval of
the Borrowers, such approval not to be unreasonably withheld, provided that no
such approval shall be required during the continuance of a Default or an Event
of Default. Such Lender shall deliver to the Borrowers and the Administration
Agent a Lender Assignment Agreement executed by the Assignee, the Borrowers and
the Administration Agent, under which the Assignee assumes the obligations and
agrees to be bound by all the terms and conditions of this Agreement, all as if
such Assignee had been an original party hereto. Upon any such assignment and
such assumption of the obligations of the Lender by an Assignee, the assigning
Lender and the Borrowers shall be mutually released from their respective
obligations hereunder to the extent of such assignment and assumption and shall
thenceforth have no liability or obligations to each other to such extent,
except in respect of matters which have arisen prior to such assignment. A
Lender may, on notice to the Borrowers as to the recipient, deliver a copy of
any financial statement or any other information relating to the business,
assets or condition (financial or otherwise) of the Borrowers which may be
furnished to it under this Agreement or otherwise to any

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Assignee or any prospective Assignee to the extent reasonably required by such
Assignee in connection with its interest or the proposed acquisition of an
interest in the Credit Facilities. All such Assignees or prospective Assignees
shall agree to maintain the confidential nature of such information.

14.16  Participation.

    Following the Closing Date any Lender may grant a participation in all or
any part of any Credit Facility to one or more Participants. Any such grant
shall be subject to the approval of the Borrowers, such approval not to be
unreasonably withheld, provided that no such approval shall be required during
the continuance of a Default or an Event of Default. A Participant shall not
have any rights hereunder or under the other Credit Facility Documents (the
Participant's rights against the Lender granting the participation to be those
set forth in the agreement executed by such Lender in favour of the
Participant). No Participant shall be entitled to receive under this Agreement
or pursuant to any other agreement any greater payment than the Lender which
granted such participation would have been entitled to receive. Upon notice to
the Borrowers as to the recipient, a Lender may deliver a copy of any financial
statement or any other information relating to the business, assets or condition
(financial or otherwise) of the Borrowers which may be furnished to it under
this Agreement or otherwise to any Participant or any prospective Participant to
the extent reasonably required by such Participant in connection with its
interest or the proposed acquisition of an interest in a Credit Facility. All
such Participants or prospective Participants shall agree to maintain the
confidential nature of such information. A Lender granting a participation shall
act on behalf of all of its Participants in all dealings with the Borrowers in
respect of the Credit Facilities. Notwithstanding a participation, a Lender
granting a participation shall remain liable to carry out its obligations under
this Agreement.

14.17  Severability.

    The provisions of this Agreement are intended to be severable. If any
provision of this Agreement shall be held invalid or unenforceable in whole or
in part in any jurisdiction, such provision shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without in any
manner affecting the validity or enforceability thereof in any other
jurisdiction or the remaining provisions hereof in any jurisdiction.

14.18  Prior Understandings.

    This Agreement supersedes all prior understandings and agreements, whether
written or oral, among the parties hereto relating to the transactions provided
for herein.

14.19  Time of Essence.

    Time shall be of the essence hereof.

14.20  Counterparts.

    This Agreement may be executed in counterparts, each of which shall be
deemed an original and which, taken together, shall constitute one and the same
instrument, and any executed counterpart may be delivered by facsimile.

76

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

    IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized officers, as of the date first above
written.

 
 
   
POPE & TALBOT LTD.    
By:
 
 
   

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

Name:
Title:    
By:
 
 
   

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

Name:
Title:    
P&T FUNDING LIMITED PARTNERSHIP
by its General Partner,
POPE & TALBOT LTD.
 
 
By:
 
 
   

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

Name:
Title:    
By:
 
 
   

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

Name:
Title:    
POPE & TALBOT MACKENZIE PULP OPERATIONS LTD.
 
 
By:
 
 
   

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

Name:
Title:    
By:
 
 
   

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

Name:
Title:    

77

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

MACKENZIE PULP LAND LTD.
 
 
By:
 
 
   

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

Name:
Title:    
By:
 
 
   

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

Name:
Title:    
THE TORONTO-DOMINION BANK,
as Lender
 
 
By:
 
 
   

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

Name:
Title:    
BANK OF MONTREAL,
as Lender
 
 
By:
 
 
   

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

Name:
Title:    
THE BANK OF NOVA SCOTIA,
as Lender
 
 
By:
 
 
   

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

Name:
Title:    
THE TORONTO-DOMINION BANK,
as Administration Agent
 
 
By:
 
 
   

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

Name:
Title:    

78

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

APPENDIX 1
LENDERS AND LENDERS' COMMITMENTS

Lender and Lender's Address

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

  Total
Commitment
(Cdn.$)

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

  Acquisition
Facility
Commitment
(Cdn.$)

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

  Operating
Facility
Commitment
(Cdn.$)

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

The Toronto-Dominion Bank
Suite 660, 700 West Georgia Street
Vancouver, British Columbia
V7Y 1A2
Attention:  Vice President, Investment Banking   $ 75,000,000   $ 18,103,448   $
56,896,552 Bank of Montreal
Suite 3200, 1501 McGill College Avenue
Montreal, Quebec
H3A 3M8
Attention:  Vice President, Asset Portfolio Management   $ 35,000,000   $
8,448,276   $ 26,551,724 The Bank of Nova Scotia
18th Floor, 650 West Georgia Street
Vancouver, British Columbia
V6B 4N7
Attention:  Director, Corporate Banking   $ 35,000,000   $ 8,448,276   $
26,551,724

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

SCHEDULE 1
BORROWING NOTICE

TO:   The Toronto-Dominion Bank
Corporate and Investment Banking
66 Wellington Street West, 38th Floor
Toronto-Dominion Bank Tower
Toronto, Ontario
M5K 1A2
 
 
Facsimile:  (416) 982-5535     Attention:  Vice President, Loan
Syndications—Agency

    Reference is made to the Credit Agreement dated as of June 15, 2001 between
Pope & Talbot Ltd. and P&T Funding Limited Partnership, as Borrowers, Pope &
Talbot Mackenzie Pulp Operations Ltd. and Mackenzie Pulp Land Ltd., as
Guarantors, the Lenders named therein, and The Toronto-Dominion Bank, as
Administration Agent (the "Credit Agreement"). Capitalized terms in this
Borrowing Notice have the meanings ascribed to such terms in the Credit
Agreement.

    Notice is hereby given pursuant to Section 3.3, 3.6, 3.7, 3.8, 4.2 or 4.9 of
the Credit Agreement (as applicable) that the undersigned requests an Advance, a
Drawing of Bankers' Acceptances, a change in the Type of an Advance, the
continuation of a Libor Advance for an additional Interest Period, a conversion
of an Advance to Bankers' Acceptances or a conversion of Bankers' Acceptances to
an Advance under the              Facility, on the following basis:

1.Advance  [complete only if applicable] (a)The date of the Advance will be
            .

(b)The Type of Advance will be              [specify Prime Rate Advance, Libor
Advance or Base Rate Advance].

(c)The principal amount of the Advance will be $             [Canadian Dollars
unless otherwise specified].

(d)If the Advance is a Libor Advance, the initial Interest Period applicable to
the Advance will be              [specify period pursuant to Section 3.11].
2.Drawing of Bankers' Acceptances [complete only if applicable] (a)The date of
the Drawing will be             .

(b)The aggregate Face Amount of Bankers Acceptances to be accepted will be
Cdn.$            .

(c)The maturity date for the Bankers' Acceptances created by the acceptance of
such Bankers Acceptances will be             , representing a term to maturity
of              [insert number of months].
3.Change in Type of Advance [complete only if applicable] (a)The relevant
Advance is currently outstanding as a              [specify one of Prime Rate
Advance, Base Rate Advance or Libor Advance].

(b)The principal amount of $             [Canadian Dollars unless otherwise
specified] of such Advance is to be changed into a              [specify one of
Prime Rate Advance, Base Rate Advance or Libor Advance] in the principal amount
of $               [Canadian Dollars unless otherwise specified].

(c)The date of the change will be             .

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

(d)If the relevant Advance is to be changed to a Libor Advance, the initial
Interest Period applicable to such Libor Advance will be              [specify
period pursuant to Section 3.11].

4.Continuation of Libor Advance [complete only if applicable] (a)The relevant
Advance is currently outstanding as a Libor Advance.

(b)The last day of the Interest Period applicable to the relevant Libor Advance
is             .

(c)The principal amount of US $ of such Libor Advance is to continue as such for
a further period of              [specify period pursuant to Section 3.11].
5.Conversion of Advance to Bankers' Acceptances [complete only if applicable]
(a)The relevant Advance is currently outstanding as a              [specify one
of Prime Rate Advance, Base Rate Advance or Libor Advance].

(b)The principal amount of $             [Canadian Dollars unless otherwise
specified] of such Advance is to be converted to Bankers' Acceptances with a
Face Amount of Cdn.$            .

(c)The date of the conversion will be             .

(d)The maturity date for the Bankers' Acceptances created by such conversion
will be             , representing a term to maturity of              [insert
number of months].
6.Conversion of Bankers' Acceptances to Advances [complete only if applicable]
(a)The maturity date for the Bankers' Acceptance to be converted and the date of
the conversion will be             .

(b)The Face Amount of Cdn.$             of such Bankers' Acceptance is to be
converted to a              [specify one of Prime Rate Advance, Base Rate
Advance or Libor Advance] in the principal amount of $             [Canadian
Dollars unless otherwise specified].

(c)If such Bankers' Acceptance is to be converted to a Libor Advance, the
initial Interest Period applicable to such Libor Advance will be             
[specify period pursuant to Section 3.11].

The undersigned confirms that the conditions to the availability of
Accommodations set forth in Sections 6.1 and 6.2 of the Credit Agreement have
been complied with or satisfied at the date hereof.

DATED:                                           
 
 
[BORROWER]
 
 
By:                                     
 
 
Title:                                      

2

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

SCHEDULE 2
NOTICE OF REPAYMENT OR CANCELLATION

TO: The Toronto-Dominion Bank
Corporate and Investment Banking
66 Wellington Street West, 38th Floor
Toronto-Dominion Bank Tower
Toronto, Ontario
M5K 1A2
 
Facsimile: (416) 982-5535
Attention: Vice President, Loan Syndications—Agency

    Reference is made to the Credit Agreement dated as of June 15, 2001 between
Pope & Talbot Ltd. and P&T Funding Limited Partnership, as Borrowers, Pope &
Talbot Mackenzie Pulp Operations Ltd. and Mackenzie Pulp Land Ltd., as
Guarantors, the Lenders named therein, and The Toronto-Dominion Bank, as
Administration Agent (the "Credit Agreement"). Capitalized terms in this Notice
have the meanings ascribed to such terms in the Credit Agreement.

    Notice is hereby given pursuant to Section 2.10, 2.11, 3.9 or 4.10 of the
Credit Agreement (as applicable) that the undersigned intends to make the
repayment described below or to cancel Commitments under the
                                 Facility as described below:

1.Repayment  [complete if applicable]

(a)The date of the repayment will be                         .

(b)The amount of the repayment will be                          [specify Cdn.$
or US$].

(c)The repayment is to be applied against                          [specify
Advance, maturing Bankers' Acceptance etc.].
2.Cancellation  [complete if applicable]

(a)The date of cancellation will be                         .

(b)The aggregate amount of Commitments of all Lenders to be cancelled is
                         [specify amount in Cdn.$ pursuant to Section 2.11 of
the Credit Agreement].

DATED:                         .

    [BORROWER]
 
 
By:
       

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

    Title:        

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

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

SCHEDULE 3
QUARTERLY COMPLIANCE CERTIFICATE

    The undersigned hereby certifies, without personal liability, as follows:

1.I am the Chief Financial Officer of Pope & Talbot Ltd. (the "Company").

2.This Certificate is delivered pursuant to Section 8.1(o) of the Credit
Agreement dated as of June 15, 2001 between the Company and P&T Funding Limited
Partnership (the "Limited Partnership"), as Borrowers, Pope & Talbot Mackenzie
Pulp Operations Ltd. and Mackenzie Pulp Land Ltd., as Guarantors, the Lenders
named therein, and The Toronto-Dominion Bank, as Administration Agent (the
"Credit Agreement"). Capitalized terms used herein have the meanings ascribed to
such terms in the Credit Agreement.

3.I am duly authorized to give this certificate for and on behalf of the Company
in its capacity as a Borrower under the Credit Agreement and as the General
Partner of the Limited Partnership, and as an officer thereof.

4.I am familiar with and have examined the provisions of the Credit Agreement
and have made such other examinations and investigations as in my opinion are
necessary to give this Certificate and express an informed opinion on the
matters set out herein. Based on such examinations and investigations, I confirm
that to the best of my knowledge no Default, Event of Default or Other Default
occurred during the period to which this Certificate relates (being the fiscal
quarter ended                          and that to the best of my knowledge
there is no Default, Event of Default or Other Default at the date of this
Certificate.

5.As at the most recent date for which a Margin Report was required under the
Credit Agreement, being                          [insert date]:

(a)Outstandings under the Operating Facility were Cdn.$                        ;
and

(b)the Borrowing Base was Cdn.$                        , calculated as required
under the Credit Agreement, as set out in the applicable Margin Report.

As required under Section 2.11 of the Credit Agreement, to the best of my
knowledge Outstandings under the Operating Facility did not exceed the Borrowing
Base as of such date or as at the date of this Certificate.

6.As of the end of the period to which this Certificate relates, being the
fiscal quarter ended                         , the financial ratios described in
Sections 8.1(x) and (y) of the Credit Agreement were as set out below:

(a)Funded Debt to Total Capitalization Ratio

(i)Funded Debt as at such fiscal quarter end was Cdn.$                        .

(ii)Total Capitalization as at such fiscal quarter end was
Cdn.$                        , consisting of the aggregate of Funded Debt of
Cdn.$                         and Net Worth of Cdn.$                        .

(iii)The ratio of Funded Debt to Total Capitalization, as referred to in
Section 8.1(x) of the Credit Agreement was                         . The maximum
permitted ratio is 0.5 to 1.

(b)Normalized EBITDA to Interest Ratio

(i)Normalized EBITDA for the four fiscal quarters ended on such fiscal quarter
end was Cdn.$                        .

(ii)Interest Expense for the four fiscal quarters ended on such fiscal quarter
end was Cdn.$                        .

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

(iii)The ratio of Normalized EBITDA to Interest Expense, as referred to in
Section 8.1(y) of the Credit Agreement, was                         . The
minimum permitted ratio is 2 to 1.

7.The foregoing calculations are correct and accurate.

8.Attached hereto are schedules setting forth the foregoing calculations in
reasonable detail.

I am aware that the Lender is entitled to rely upon the accuracy of the
information herein contained.

    DATED:                         .

    POPE & TALBOT LTD.
 
 
By:
       

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

    Title:        

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

 
 
P&T FUNDING LIMITED PARTNERSHIP
by its General Partner
POPE & TALBOT LTD.
 
 
By:
       

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

    Title:        

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

2

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

SCHEDULE 4
MARGIN REPORT

    This Margin Report is delivered pursuant to Section 8.1(p) of the Credit
Agreement dated as of June 15, 2001 between Pope & Talbot Ltd. and P&T Funding
Limited Partnership, as Borrowers, Pope & Talbot Mackenzie Pulp Operations Ltd.
and Mackenzie Pulp Land Ltd., as Guarantors, the Lenders named therein, and The
Toronto-Dominion Bank, as Administration Agent (the "Credit Agreement").
Capitalized terms used herein have the meanings ascribed to such terms in the
Credit Agreement.

    This Margin Report contains information as at                         
[specify month end].

    All figures are in Canadian Dollars. US Dollars have been converted to
Canadian Dollars at an exchange rate of                         .

 
 
 
 
  Pope & Talbot
Canada

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

  Limited
Partnership

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

  Mackenzie
Pulp

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

  Total

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

  1. Eligible EDC Insured Accounts Receivable                          
 
 
 
Amount
 
$
                            
 
$
                            
 
$
                            
 
$
                            
 
 
 
 
Margin %
 
 
 
 
 
90%
 
 
 
 
 
 
 
Net Amount
 
$
                            
 
$
                            
 
$
                            
 
$
                            
 
2.
Other Eligible Insured Accounts Receivable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount
 
$
                            
 
$
                            
 
$
                            
 
$
                            
 
 
 
 
Margin %
 
 
 
 
 
85%
 
 
 
 
 
 
 
Net Amount
 
$
                            
 
$
                            
 
$
                            
 
$
                            
 
3.
Eligible Uninsured Accounts Receivable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
less than 30 days
 
 
$
                            
 
$
                            
 
$
                            
 
$
                            
 
 
(b)
30 to 60 days
 
 
$
                            
 
$
                            
 
$
                            
 
$
                            
 
 
(c)
60 to 90 days
 
 
$
                            
 
$
                            
 
$
                            
 
$
                            
 
 
 
 
Total
 
$
                            
 
$
                            
 
$
                            
 
$
                            
 
 
 
 
Margin %
 
 
 
 
 
80%
 
 
 
 
 
 
 
Net Amount
 
$
                            
 
$
                            
 
$
                            
 
$
                            
 
4.
Inventory
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount
 
$
                            
 
$
                            
 
$
                            
 
$
                            
 
 
 
 
Margin %
 
 
 
 
 
50%
 
 
 
 
 
 
 
Net Amount
 
$
                            
 
$
                            
 
$
                            
 
$
                            
 
5.
Borrowing Base Calculation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
Net Amount of Eligible Insured Accounts Receivable per item 1 above
 
$
                            
 
$
                            
 
$
                            
 
$
                            
 
 
(b)
Net Amount of Eligible Uninsured Accounts Receivable per item 2 above
 
$
                            
 
$
                            
 
$
                            
 
$
                            
 
 
(c)
Net Amount of Inventory per item 3 above
 
$
                            
 
$
                            
 
$
                            
 
$
                            
 

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

 
(d)
Preliminary Borrowing Base ((a) + (b) + (c))
 
$
                            
 
$
                            
 
$
                            
 
$
                            
 
 
(e)
Percentage (c) represents of (d) [Note: cannot exceed 60%]
 
 
                            
%
 
                            
%
 
                            
%
 
                            
%
 
(f)
Borrowing Base
 
$
                            
 
$
                            
 
$
                            
 
$
                            
 

    Outstandings under the Operating Facility as at the month end specified
above were $                            .

    DATED:                             

    POPE & TALBOT LTD.
 
 
By:
       

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

    Title:        

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

 
 
P&T FUNDING LIMITED PARTNERSHIP
by its General Partner
POPE & TALBOT LTD.
 
 
By:
       

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

    Title:        

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

2

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

SCHEDULE 5
MATERIAL SUBSIDIARIES

Name

  Jurisdiction of
Incorporation
  Number of Shares Held
  Number of Shares
Outstanding

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

Pope & Talbot Ltd.            

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

Pope & Talbot Mackenzie Pulp Operations Ltd.   Alberta   2 common   2 common
1,620,000 Class A Preferred

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

Pope & Talbot Mackenzie Pulp Operations Ltd.            

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

Mackenzie Pulp Land Ltd.   British Columbia   1 common   1 common

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

P & T Funding Limited Partnership            

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

NIL            

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

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

SCHEDULE 6
LENDER ASSIGNMENT AGREEMENT

    THIS AGREEMENT dated the          day of                   ,           

AMONG:

    [INSERT NAME OF ASSIGNING LENDER]

    (the "Assignor")

    OF THE FIRST PART

AND:

    [INSERT NAME OF ASSIGNEE]

    (the "Assignee")

    OF THE SECOND PART

AND:

    THE TORONTO-DOMINION BANK, in its capacity as Agent under the Credit
Agreement (as herein defined)

    (the "Administration Agent")

    OF THE THIRD PART

AND:

POPE & TALBOT LTD., a company formed by amalgamation under the laws of the
Province of British Columbia

P&T FUNDING LIMITED PARTNERSHIP, a limited partnership formed under the laws of
the Province of British Columbia

(together, the "Borrowers")

    OF THE FOURTH PART

    WHEREAS the Borrowers entered into a credit agreement dated as of June 15,
2001 (the "Credit Agreement") with, inter alia, the Lenders (as therein defined)
and the Administration Agent;

    AND WHEREAS the Assignor, as a Lender under the Credit Agreement, wishes to
assign and transfer to the Assignee and the Assignee wishes to acquire and
assume the rights and obligations of the Assignor under the Credit Agreement, to
the extent set forth in this Agreement.

    NOW THEREFORE in consideration of the mutual covenants and agreements
contained herein, it is agreed by the parties hereto as follows:

1.Defined Terms. Unless otherwise defined in this Agreement, capitalized terms
used in this Agreement have the meanings ascribed to such terms in the Credit
Agreement.

2.Assignment. The Assignor hereby assigns and transfers to the Assignee, and the
Assignee hereby accepts from the Assignor, all of the Assignor's rights and
obligations in respect of $         of the total of the Assignor's Commitment
under the Credit Agreement (the Commitment so assigned representing         % of
the total of all Lenders' Commitments under the Credit Agreement), including all
rights of the Assignor to amounts now or hereafter payable by the Borrowers
under the Credit Facilities, with effect from and after         (the "Effective
Date"). The Assignee acknowledges that it is not entitled to any portion of
amounts paid to the Assignor (or to the Administration Agent on behalf of the
Assignor) prior to the Effective Date.

3.Assumption. The Assignee hereby agrees with the Assignor, the Administration
Agent (on behalf of all Lenders under the Credit Agreement) and the Borrowers to
be bound by all of the terms

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

and provisions of the Credit Agreement and the Credit Facility Documents and, to
the extent of the Commitment assigned to it, assumes and agrees to observe and
perform all of the obligations (the "Assigned Obligations") of the Assignor to
the Borrowers, the Administration Agent and the other Lenders from and after the
Effective Date.

4.Settlement. The Assignor and the Assignee acknowledge and agree that all
payments under the Credit Agreement in respect of the interests assigned to the
Assignee which are received by the Administration Agent on or after the
Effective Date will be the property of the Assignee, and the Administration
Agent will be entitled to treat the Assignee as solely entitled thereto. The
Assignor and the Assignee represent and warrant to the Administration Agent that
the Assignor and the Assignee have made satisfactory arrangements for the
settlement of any amounts owing or which may become owing by one to the other in
connection with this agreement without any action on the part of the
Administration Agent.

5.No Representations by Assignor. The Assignee acknowledges and confirms that it
has not relied upon, and that neither the Administration Agent nor the Assignor
has made, any representation or warranty whatsoever as to the due execution,
legality, effectiveness, validity or enforceability of the Credit Agreement or
any other Credit Facility Document, as to any other documentation or information
delivered by the Assignor or the Administration Agent to the Assignee in
connection therewith, as to the performance thereof by any party thereto, as to
the performance of any obligation by the Borrowers or any of their Subsidiaries
or as to the financial condition of the Borrowers or any of their Subsidiaries.

6.Representations and Agreement by Assignee. The Assignee represents and
warrants that it has itself been, and will continue to be, solely responsible
for making its own independent appraisal of and investigation into the financial
condition, creditworthiness, affairs and status of the Borrowers or any of their
Subsidiaries and that it has not relied, and will not hereafter rely, on the
Assignor or the Administration Agent to appraise, or keep under review on its
behalf, the financial condition, creditworthiness, affairs and status of the
Borrowers or any of their Subsidiaries. The Assignee acknowledges that a copy of
the Credit Agreement has been made available to it for review and the Assignee
acknowledges that it is satisfied with the form and substance of the Credit
Agreement. The Assignee hereby covenants and agrees that, except as specifically
contemplated by the Credit Agreement, it has not heretofore and shall not
hereafter take any security interest for any Indebtedness owing under the Credit
Agreement and that it will not make any arrangements with the Borrowers for the
satisfaction of any such outstanding Indebtedness without the prior consent of
all other Lenders.

7.Mutual Representations. Each of the Assignor and the Assignee represents and
warrants to the other, the Administration Agent and the other Lenders that it
has the capacity and power to enter into this Agreement, to observe and perform
its obligations under this Agreement and under the Credit Agreement, and that
all action required to authorize the execution and delivery of this Agreement
and the performance of such obligations has been duly taken.

8.Acknowledgment of Borrowers. The Borrowers acknowledge the assignment
described above to the Assignee, and agrees to recognize the Assignee as a
Lender under the Credit Agreement as fully as if the Assignee had been an
original party to the Credit Agreement. The Borrowers agree that from and after
the Effective Date the Assignor shall have no further liability or obligation in
respect of the Assigned Obligations.

9.Notices. All notices and other communications provided for under the Credit
Agreement or any other Credit Facility Document may be given to the Assignee at
the following address in accordance with the Credit Agreement:

[Insert address and facsimile number for Assignee]

2

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

10.Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Province of British Columbia.

11.Further Assurances. The parties hereto will from time to time do all such
acts and things and execute all such additional deeds, transfers and instruments
as may reasonably be necessary or desirable to give effect to this Agreement.

3

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

    IN WITNESS WHEREOF this Agreement has been executed by the parties hereto.

    [INSERT NAME OF ASSIGNOR]
 
 
By:
       

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

 
 
Title:
       

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

    [INSERT NAME OF ASSIGNOR]
 
 
By:
       

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

 
 
Title:
       

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

    THE TORONTO-DOMINION BANK
as Administration Agent
 
 
By:
       

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

 
 
Title:
       

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

    POPE & TALBOT LTD.
 
 
By:
       

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

 
 
Title:
       

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

 
 
By:
       

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

 
 
Title:
       

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

    P&T FUNDING LIMITED PARTNERSHIP,
by its General Partner
POPE & TALBOT LTD.
 
 
By:
       

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

 
 
Title:
       

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

 
 
By:
       

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

 
 
Title:
       

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

4

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

SCHEDULE 7
POPE & TALBOT US POSTPONEMENT AGREEMENT

    THIS POSTPONEMENT AGREEMENT dated as of the 15th day of June, 2001.

BETWEEN:

THE TORONTO-DOMINION BANK, in its capacity as Administration Agent under the
Credit Agreement (as herein defined)

    OF THE FIRST PART

AND:

POPE & TALBOT LTD. in its capacity as a Borrower under the Credit Agreement (as
herein defined)

    OF THE SECOND PART

AND:

POPE & TALBOT, INC., a corporation incorporated under the laws of the State of
Delaware

    OF THE THIRD PART

WHEREAS:

A.The Borrower has entered into the Credit Agreement with the Administration
Agent and the Senior Lenders, pursuant to which the Senior Lenders have agreed
to provide a credit facility to the Borrower;

B.The Borrower is an indirect wholly-owned subsidiary of the Subordinate Lender;

C.The Borrower is indebted to the Subordinate Lender and may from time to time
have other outstanding indebtedness owed to the Subordinate Lender; and

D.The parties have agreed to enter into this Agreement in order to provide for
certain matters relating to, and the respective priorities of, the obligations
of the Borrower to the Senior Lenders and the obligations of the Borrower to the
Subordinate Lender.

    NOW THEREFORE THIS AGREEMENT WITNESSES THAT, in consideration of the
premises and of the sum of $10.00 now paid by the Administration Agent to the
other parties hereto (the receipt and sufficiency of which are hereby
acknowledged by each party hereto) and for other good and valuable
consideration, the parties hereto agree as follows:

ARTICLE 1
INTERPRETATION

1.1   Defined Terms.

    In this Agreement (including the recitals), the following terms have the
following meanings:

(a)"Administration Agent" means The Toronto-Dominion Bank as administration
agent under the Credit Agreement, its successors and assigns permitted by the
Credit Agreement.

(b)"Agreement" means this agreement and any amendment to this agreement executed
by the Administration Agent and the Subordinate Lender.

(c)"Borrower" means Pope & Talbot Ltd., a company formed by amalgamation under
the Company Act (British Columbia), and its successors.

(d)"Credit Agreement" means the credit agreement dated as of June 15, 2001 among
the Borrower and P&T Funding Limited Partnership, as borrowers, Pope & Talbot
Mackenzie Pulp Operations Ltd. and Mackenzie Pulp Land Ltd, as guarantors, the
Administration Agent and the Senior Lenders, as the same may be amended,
modified, supplemented or restated

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

from time to time (including without limitation any amendment, modification,
supplement or restatement which increases the principal amount outstanding or
available thereunder).

(e)"Enforcement Proceeds" means all cash and non-cash proceeds received by the
Senior Lenders or the Subordinate Lender pursuant to the enforcement of their
respective rights to payment of the Senior Obligations or the Subordinate
Obligations following the occurrence and during the continuance of an Event of
Default under the Credit Agreement, a termination of a Treasury Contract or a
default in respect of any of the Subordinate Obligations, including without
limitation:

(i)all amounts paid by the Borrower to a Senior Lender or the Subordinate Lender
pursuant to a demand or court order or upon execution pursuant to any court
order;

(ii)all proceeds received upon the enforcement of, or any action taken with
respect to, the Senior Security or any Subordinate Security;

(iii)all proceeds received upon any dissolution, liquidation, winding-up,
reorganization, bankruptcy, insolvency or receivership of the Borrower, or any
other arrangement or marshalling of the assets of the Borrower that is similar
thereto;

(iv)all proceeds of any insurance claim resulting from the loss or destruction
of any assets owned or held by the Borrower or the non-payment of any
receivables, or any other insurance proceeds received; and

(v)all proceeds of any expropriation or condemnation of any assets owned or held
by the Borrower.

(f)"Receiver" means any receiver, receiver-manager, agent or other person
appointed for the purpose of enforcing a Lien or realizing on any property
subject thereto, whether appointed pursuant to the provisions of an instrument
in writing or pursuant to the order of a court.

(g)"Senior Lenders" means the Lenders under the Credit Agreement, together with
their successors and assigns permitted by the Credit Agreement.

(h)"Senior Obligations" means, at any particular time, the aggregate of:

(i)all outstanding Borrowings by the Borrower under the Credit Agreement
(including by way of Bankers' Acceptances, Letters of Credit and Guarantee
Letters);

(ii)all interest (including interest on overdue interest) owing by the Borrower
to the Senior Lenders under the Credit Agreement, including outstanding stamping
fees in respect of Bankers' Acceptances;

(iii)all other fees, costs, expenses and other amounts payable to the Senior
Lenders under or pursuant to the Credit Agreement or the Senior Security; and

(iv)all obligations of the Borrower to the Senior Lenders under Treasury
Contracts (including Treasury Contract Breakage Costs).

(i)"Senior Security" means any security provided for under the Credit Agreement
(including without limitation the Security Documents) securing any or all of the
Senior Obligations or intended to do so.

(j)"Subordinate Lender" means Pope & Talbot, Inc., a corporation incorporated
under the laws of the State of Delaware, and its successors and assigns.

2

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(k)"Subordinate Obligations" means, at any particular time, the aggregate of:

(i)the principal amount of any Indebtedness owed by the Borrower to the
Subordinate Lender;

(ii)all interest (including interest on overdue interest) owed by the Borrower
to the Subordinate Lender; and

(iii)all other fees, costs, expenses and other amounts payable by the Borrower
in connection with Indebtedness of the Borrower to the Subordinate Lender.

(l)"Subordinate Security" has the meaning ascribed to that term in Section 2.2
of this Agreement.

1.2   Incorporation of Definitions in Credit Agreement.

    All initially capitalized terms used in this Agreement which are not defined
in Section 1.1 have the respective meanings ascribed to such terms in the Credit
Agreement, provided that, at all time, Indebtedness shall include all
Obligations of Pope & Talbot Canada under the Pope & Talbot Canada Financing
Agreement.

ARTICLE 2
PRIORITY OF OBLIGATIONS AND SECURITY

2.1   Postponement of Subordinate Obligations.

    Except as otherwise expressly provided in Section 2.4, the Subordinate
Obligations shall be and are hereby postponed and made subordinate in right of
payment to the prior payment in full in cash of the Senior Obligations.

2.2   Priority of Security.

    The Liens constituted by the Senior Security shall rank in priority to any
and all Liens securing any of the Subordinate Obligations ("Subordinate
Security"), whether any such Subordinate Security is created by operation of law
or pursuant to any security instrument or arrangement executed or made by the
Borrower.

2.3   Prohibited Payments to Subordinate Lender.

    Except as otherwise expressly provided in Section 2.4, the Borrower shall
not make and shall not be entitled to make and the Subordinate Lender shall not
accept and shall not be entitled to accept any payment or prepayment of
principal, interest or other amount in respect of the Subordinate Obligations,
whether in the form of cash, securities or otherwise.

2.4   Permitted Payment to Subordinate Lender.

    Notwithstanding Section 2.3, the Borrower may make, and the Subordinate
Lender may receive:

(a)payments (but not prepayments) on account of interest owing by the Borrower
to the Subordinate Lender;

(b)payments on account of principal owing by the Borrower to the Subordinate
Lender; and

(c)prepayment by the Borrower of the Subordinate Obligations (including by way
of a refinancing of the Subordinate Obligations by another person) as permitted
pursuant to, and made in accordance with, the Credit Agreement;

3

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provided in each case that no Default has occurred and is continuing as at the
date of such payment and that any such payment would not constitute or result in
a Default or Event of Default; and provided further that after the occurrence
and during the continuance of a Default but prior to such Default having become
an Event of Default, the Borrower may make and the Subordinate Lender may
receive payments in connection with the operation of the inter-company accounts
between the Borrower and the Subordinate Lender in the ordinary course of
business (including ordinary course advances by the Subordinate Lender as well
as ordinary course payments by the Borrower).

2.5   Covenants of the Subordinate Lender.

    Without the prior written consent of the Administration Agent on behalf of
the Senior Lenders, the Subordinate Lender shall not and shall not be entitled
to:

(a)petition the Borrower into bankruptcy or initiate, or participate in the
initiation of, any similar proceeding; or

(b)commence or initiate any action or proceeding to recover or receive payment
of any of the Subordinate Obligations.

2.6   Security for Subordinate Obligations.

    Neither the Borrower nor any person on its behalf shall or shall be entitled
to grant, deliver or provide any Subordinate Security to the Subordinate Lender,
and the Subordinate Lender shall not and shall not be entitled to obtain, accept
or hold any Subordinate Security from the Borrower, or any person on its behalf,
for payment or performance of any of the Subordinate Obligations, except for
security that is expressly permitted by the Credit Agreement, subordinate to the
Senior Security and of which the Administration Agent and the Senior Lenders are
given prompt written notice.

2.7   No Challenge.

    The Subordinate Lender will not dispute or contest, or commence or initiate
any action or proceeding to dispute or contest:

(a)the validity, enforceability, priority or perfection of any Lien contained in
or created by the Senior Security;

(b)the postponement and subordination of the Subordinate Obligations to the
Senior Obligations as provided in this Agreement;

(c)the priority of any Liens constituted by the Senior Security over any Liens
constituted by Subordinate Security as provided in this Agreement;

(d)the validity or enforceability of this Agreement against the Subordinate
Lender or the validity or enforceability of the Credit Agreement;

(e)the appointment of any Receiver by or on behalf of the Senior Lenders; or

(f)any lawful act or omission of the Senior Lenders or any Receiver in the
enforcement of any of the Senior Security, other than gross negligence or wilful
misconduct.

2.8   Application of Enforcement Proceeds.

(a)All Enforcement Proceeds not in the form of cash shall be forthwith delivered
(subject to the Administration Agent's acceptance of such delivery) to the
Administration Agent on behalf of the Senior Lenders and disposed of, or
realized upon, by the Administration Agent on behalf of the Senior Lenders in a
commercially reasonable manner so as to produce proceeds in the form of cash.

4

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(b)All Enforcement Proceeds in the form of cash shall be applied and
distributed, and the Liens constituted by the Senior Security shall be deemed to
have the relative priorities which would result in the Enforcement Proceeds
being applied and distributed, as follows:

(i)firstly, to the payment of all costs and expenses (subject to applicable law)
incurred by the Administration Agent and the Senior Lenders in the exercise of
all or any of the powers granted to them under the Senior Security and in
payment of all of the remuneration of any Receiver and all costs incurred by
such Receiver in the exercise of all or any powers granted to them under the
Senior Security;

(ii)secondly, in payment of all amounts of money borrowed or advanced by the
Senior Lenders or such Receiver pursuant to the Senior Security and any interest
thereon;

(iii)thirdly, to the payment or prepayment of the Senior Obligations in full
(including holding cash collateral to be applied against Senior Obligations
which have not then matured) in such manner as the Administration Agent and the
Senior Lenders may see fit or have agreed upon; and

(iv)the balance, if any, in accordance with applicable law.

2.9   Winding Up.

    In the event of any payment or distribution of assets of the Borrower upon
or under any dissolution, winding-up, liquidation or scheme of arrangement (or
reorganization equivalent thereto) or any insolvency, receivership or bankruptcy
proceedings of the Borrower, whether pursuant to the Companies' Creditors
Arrangement Act, the Bankruptcy and Insolvency Act, the Winding-up Act or any
bankruptcy, insolvency or analogous law of Canada, any province thereof or any
other jurisdiction or any assignment for the benefit of creditors, any such
payment or distribution of assets shall be treated for all purposes of this
Article 2 as Enforcement Proceeds and shall be applied and distributed in
accordance with the provisions of Section 2.8 of this Agreement.

2.10   Application of this Agreement.

    The rights of the Administration Agent and the Senior Lenders and the
obligations of Subordinate Lender, the priority of the Senior Obligations and
the Senior Security over the Subordinate Obligations and any Subordinate
Security, the application and distribution of Enforcement Proceeds in respect of
the Senior Obligations in priority to the Subordinate Obligations in accordance
with Section 2.8, and all covenants of the Subordinate Lender contained in this
Agreement, shall in each case apply and be enforceable notwithstanding:

(a)the time or sequence in which any of the Credit Agreement, the Senior
Security, any instrument or agreement relating to the Subordinate Obligations or
any Subordinate Security are executed or delivered;

(b)the registration, filing, recording, notification or perfection of any
financing statement, mortgage, security agreement or other security instrument
or interest relating to or contained in any of the Senior Security or any
Subordinate Security or the provisions of any applicable law or decision;

(c)the time or sequence in which any Lien constituted by the Senior Security or
any Subordinate Security attaches;

(d)the time or sequence in which any of the Senior Obligations or the
Subordinate Obligations become due (whether at their stated maturity, by
acceleration or otherwise) or are incurred;

5

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(e)the time or sequence of commencement or completion of any proceedings to
enforce or collect any of the Senior Obligations or the Subordinate Obligations,
to crystallize, enforce or realize on any of the Credit Agreement, the Senior
Security, any instrument or agreement relating to the Subordinate Obligations or
any Subordinate Security or the time or sequence in which any order or judgment
in respect thereof is made or entered or any execution is obtained or registered
or any other proceeding is commenced or completed;

(f)the manner in which any of the Senior Security or any Subordinate Security
are created or whether any such security is a fixed or floating charge;

(g)the time or sequence in which the Administration Agent on behalf of the
Senior Lenders, the Subordinate Lender or any Receiver on behalf of either of
them takes possession or realizes upon any property and assets pursuant to the
Senior Security or any Subordinate Security or the nature of the remedies
available or exercised pursuant to the Senior Security or any Subordinate
Security; or

(h)any other factor of legal relevance, whether similar or dissimilar to any of
the foregoing, other than this Agreement, establishing the priority or ranking
or relative rights of enforcement between the Administration Agent, the Senior
Lenders and the Subordinate Lender.

2.11   Effect of Non-Compliance.

    In the event any non-cash Enforcement Proceeds are delivered to or received
by the Subordinate Lender in contravention of this Agreement, the Subordinate
Lender shall hold such Enforcement Proceeds in trust for the Senior Lenders and
shall forthwith deliver such Enforcement Proceeds to the Administration Agent.
In the event any cash Enforcement Proceeds, prepayments or other payments are
made to or received by the Subordinate Lender in contravention of this
Agreement, the Subordinate Lender shall hold such Enforcement Proceeds,
prepayments or other payments in trust for the Senior Lenders and shall
forthwith pay such Enforcement Proceeds, prepayments or other payments to the
Administration Agent for application pursuant to Section 2.8 of this Agreement.
Any action taken or thing done by the Subordinate Lender in contravention of
this Agreement shall be null and void and of no effect.

ARTICLE 3
ENFORCEMENT AND REALIZATION

3.1   Enforcement Proceedings.

    If any Lien constituted by the Senior Security becomes enforceable, the
Administration Agent and the Senior Lenders may exercise all rights and remedies
provided for in such Senior Security or otherwise available at law or in equity
at the discretion of the Administration Agent and the Senior Lenders, including,
without limitation, the appointment of a Receiver.

3.2   No Duty to Realize.

    Nothing in this Agreement shall require or obligate the Administration Agent
and the Senior Lenders to enforce or realize upon the Senior Security.

ARTICLE 4
GENERAL

4.1   Assignment.

    Any assignee (to the extent permitted by the Credit Agreement) of or
successor to the Administration Agent, a Senior Lender or the Subordinate Lender
shall, without the need for any

6

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further document, be entitled to the rights and benefits of the assignor or
predecessor pursuant to this Agreement, and shall be deemed to have agreed with
and shall be obligated to comply with this Agreement. At the request of the
Administration Agent, a Senior Lender or any permitted assignee or successor of
the Administration Agent or a Senior Lender, the Subordinate Lender or any
successor or assignee of the Subordinate Lender shall execute an instrument in
form satisfactory to the parties, acting reasonably, confirming and
acknowledging that the provisions of this Agreement continue to apply in favour
of the Administration Agent and the Senior Lenders and any such permitted
assignee or successor.

4.2   Representation by Subordinate Lender.

    The Subordinate Lender represents and warrants to the Administration Agent
and the Senior Lenders that all necessary action, corporate or otherwise, has
been taken to authorize the execution, delivery and performance of this
Agreement by the Subordinate Lender, and this Agreement has been duly
authorized, executed and delivered by the Subordinate Lender and constitutes a
legal, valid and binding obligation of the Subordinate Lender.

4.3   Governing Law.

    This Agreement shall be governed by and construed in accordance with the
laws of the Province of British Columbia and of Canada applicable therein and
shall be treated in all respects as a British Columbia contract.

7

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4.4   Notices.

    All notices and communications provided for hereunder shall be in writing
and sent by facsimile transmission, by first class United States or Canadian
mail (with charges prepaid) or by a recognized overnight delivery service (with
charges prepaid). Any such notice shall be addressed:

(a)if to the Administration Agent:

The Toronto-Dominion Bank
Corporate and Investment Banking
66 Wellington Street West, 38th Floor
Toronto-Dominion Bank Tower
Toronto, Ontario
M5K 1A2

Facsimile.:  (416) 982-5535
Attention:   Vice President, Loan Syndications—Agency

(b)if to the Subordinate Lender:

Pope & Talbot, Inc.
1500 S.W. First Avenue
Portland, Oregon
97201

Facsimile:  (503) 220-2727
Attention:  Vice President and Chief Financial Officer

or at such other address as the Administration Agent or the Subordinate Lender
shall have specified to the other party by notice duly given in accordance with
this Section 4.4. Notices under this Section 4.4 will be deemed given only when
actually received.

4.5   Amendments.

    This Agreement may not be amended or modified, and no provision of this
Agreement may be waived, except by an agreement in writing signed by both the
Administration Agent on behalf of the Senior Lenders and the Subordinate Lender.

4.6   Benefits of Agreement Restricted.

    Nothing herein expressed or implied is intended or shall be construed to
give anyone other than the Administration Agent on behalf of the Senior Lenders
and the Subordinate Lender, and their respective successors and permitted
assigns, any legal or equitable right, remedy or claim under or in respect
hereof or the benefit of any covenant, condition or provision contained herein;
and all such covenants, conditions and provisions are and shall be held to be
for the sole and exclusive benefit of the Administration Agent on behalf of the
Senior Lenders and the Subordinate Lender and their successors and permitted
assigns. This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns.

4.7   Non-Impairment of Senior Lenders' Rights.

    The Senior Lenders may extend, renew, modify or increase the Senior
Obligations owing to them or amend or waive any terms of the Credit Agreement or
the Senior Security or release, sell or exchange any of the Senior Security or
any property or assets subject to a Lien under any of the Senior Security, and
may otherwise deal freely with the Borrower and its Subsidiaries, all without
affecting the liabilities and obligations of the Subordinate Lender hereunder.

9

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4.8   Remedies for Breach.

    Each of the parties hereby agrees that all covenants, provisions and
restrictions contained herein are necessary and fundamental in order to
establish the respective priorities of the Senior Lenders and the Subordinate
Lender in connection with the Senior Obligations, the Senior Security, the
Subordinate Obligations and the Subordinate Security and that a breach of any
such covenant, provision or restriction would result in damages that could not
adequately be compensated by monetary award. Accordingly, it is expressly agreed
that in addition to all other remedies available to it including, without
limitation, any action for damages, the Administration Agent and the Senior
Lenders shall be entitled to the immediate remedy of a restraining order,
interim injunction, injunction or other form of injunctive or other relief as
may be decreed or issued by any court of competent jurisdiction to restrain or
enjoin such party from breaching any such covenant, provision or restriction.

4.9   Severability.

    Should any part of this Agreement for any reason be declared invalid or
unenforceable, such decision shall not affect the validity or enforceability of
any remaining portion, which remaining portion shall remain in force and effect
as if this Agreement had been executed with the invalid or unenforceable portion
hereof eliminated and it is hereby declared the intention of the parties hereto
that they would have executed the remaining portion of this Agreement without
including herein any such part which may, for any reason, be hereafter declared
invalid or unenforceable.

4.10   Duplicate Originals Execution In Counterpart.

    This Agreement may be executed in any number of counterparts, each of which
shall be an original but all of which together shall constitute one instrument.
Each counterpart may consist of a number of copies hereof, each signed by less
than all, but together signed by all, of the parties hereto.

4.11   Term of the Agreement.

    This Agreement shall remain in full force and effect until a written
agreement of the parties to the contrary is entered into or until such time as
all the Senior Obligations are satisfied and indefeasibly paid in full and the
Senior Lenders have no further obligations or commitments to the Borrower under
the Credit Agreement.

4.12   Entire Agreement.

    This Agreement constitutes the entire agreement between the parties in
respect of the subject matter hereof.

4.13   Further Assurances.

    Each of the parties hereto shall from time to time execute and deliver such
further documents and do such further acts or things as may from time to time be
necessary to carry out the full intent and purpose of this Agreement and each
part thereof.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.

    THE TORONTO-DOMINION BANK
as Administration Agent
 
 
By:
       

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

Name:
Title:
 
 
POPE & TALBOT LTD.
as Borrower
 
 
By:
       

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

Name:
Title:
 
 
By:
       

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

Name:
Title:
 
 
POPE & TALBOT, INC.
as Subordinate Lender
 
 
By:
       

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

Name:
Title:
 
 
By:
       

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

Name:
Title:

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SCHEDULE 8
TRUST POSTPONEMENT AGREEMENT

THIS POSTPONEMENT AGREEMENT dated as of the 15th day of June, 2001.

BETWEEN:

THE TORONTO-DOMINION BANK, in its capacity as Administration Agent under the
Credit Agreement (as herein defined)

    OF THE FIRST PART

AND:

P&T FUNDING LIMITED PARTNERSHIP, in its capacity as a Borrower under the Credit
Agreement (as herein defined)

    OF THE SECOND PART

AND:

P&T COMMUNITY TRUST

    OF THE THIRD PART

WHEREAS:

A.  The Borrower has entered into the Credit Agreement with the Administration
Agent and the Senior Lenders, pursuant to which the Senior Lenders have agreed
to provide a credit facility to the Borrower;

B.  The Trust is the sole limited partner of the Borrower;

C.  The Borrower has certain obligations to distribute income and return capital
to the Trust, as its limited partner; and

D.  The parties have agreed to enter into this Agreement in order to provide for
certain matters relating to, and the respective priorities of, the obligations
of the Borrower to the Senior Lenders and the obligations of the Borrower to the
Trust.

NOW THEREFORE THIS AGREEMENT WITNESSES THAT, in consideration of the premises
and of the sum of $10.00 now paid by the Administration Agent to the other
parties hereto (the receipt and sufficiency of which are hereby acknowledged by
each party hereto) and for other good and valuable consideration, the parties
hereto agree as follows:

ARTICLE 1
INTERPRETATION

1.1   Defined Terms.

    In this Agreement (including the recitals), the following terms have the
following meanings:

(a)"Administration Agent" means The Toronto-Dominion Bank as administration
agent under the Credit Agreement, its successors and assigns permitted by the
Credit Agreement.

(b)"Agreement" means this agreement and any amendment to this agreement executed
by the Administration Agent and the Trust.

(c)"Borrower" means P&T Funding Limited Partnership, a limited partnership
formed under the Partnership Act (British Columbia), and its successors.

(d)"Credit Agreement" means the credit agreement dated as of June 15, 2001 among
the Borrower and Pope & Talbot Ltd., as borrowers, Pope & Talbot Mackenzie Pulp
Operations Ltd. and Mackenzie Pulp Land Ltd, as guarantors, the Administration
Agent and the Senior Lenders, as the same may be amended, modified, supplemented
or restated from

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

time to time (including without limitation any amendment, modification,
supplement or restatement which increases the principal amount outstanding or
available thereunder).

(e)"Enforcement Proceeds" means all cash and non-cash proceeds received by the
Senior Lenders or the Trust pursuant to the enforcement of their respective
rights to payment of the Senior Obligations or the Subordinate Obligations
following the occurrence and during the continuance of an Event of Default under
the Credit Agreement, a termination of a Treasury Contract or a default in
respect of any of the Subordinate Obligations, including without limitation:

(i)all amounts paid by the Borrower to a Senior Lender or the Trust pursuant to
a demand or court order or upon execution pursuant to any court order;

(ii)all proceeds received upon the enforcement of, or any action taken with
respect to, the Senior Security or any Subordinate Security;

(iii)all proceeds received upon any dissolution, liquidation, winding-up,
reorganization, bankruptcy, insolvency or receivership of the Borrower or the
General Partner, or any other arrangement or marshalling of the assets of the
Borrower or the General Partner that is similar thereto;

(iv)all proceeds of any insurance claim resulting from the loss or destruction
of any assets owned or held by the Borrower or the non-payment of any
receivables, or any other insurance proceeds received; and

(v)all proceeds of any expropriation or condemnation of any assets owned or held
by the Borrower.

(f)"Limited Partnership Agreement" means the limited partnership agreement dated
June 11, 2001 made between Pope & Talbot Ltd., as general partner and the Trust,
as limited partner, in respect of the Borrower.

(g)"Receiver" means any receiver, receiver-manager, agent or other person
appointed for the purpose of enforcing a Lien or realizing on any property
subject thereto, whether appointed pursuant to the provisions of an instrument
in writing or pursuant to the order of a court.

(h)"Senior Lenders" means the Lenders under the Credit Agreement, together with
their successors and assigns permitted by the Credit Agreement.

(i)"Senior Obligations" means, at any particular time, the aggregate of:

(i)all outstanding Borrowings by the Borrower under the Credit Agreement
(including by way of Bankers' Acceptances, Letters of Credit and Guarantee
Letters);

(ii)all interest (including interest on overdue interest) owing by the Borrower
to the Senior Lenders under the Credit Agreement, including outstanding stamping
fees in respect of Bankers' Acceptances;

(iii)all other fees, costs, expenses and other amounts payable to the Senior
Lenders under or pursuant to the Credit Agreement or the Senior Security; and

(iv)all obligations of the Borrower to the Senior Lenders under Treasury
Contracts (including Treasury Contract Breakage Costs).

(j)"Senior Security" means any security provided for under the Credit Agreement
(including without limitation the Security Documents) securing any or all of the
Senior Obligations or intended to do so.

(k)"Subordinate Lender" means P&T Community Trust, and its successors and
assigns.

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(l)"Subordinate Obligations" means, at any particular time, all obligations of
the Borrower for the distribution of income or the return of capital to the
Trust under the Limited Partnership Agreement.

(m)"Subordinate Security" has the meaning ascribed to that term in Section 2.2
of this Agreement.

1.2   Incorporation of Definitions in Credit Agreement.

    All initially capitalized terms used in this Agreement which are not defined
in Section 1.1 have the respective meanings ascribed to such terms in the Credit
Agreement.

ARTICLE 2
PRIORITY OF OBLIGATIONS AND SECURITY

2.1   Postponement of Subordinate Obligations.

    Except as otherwise expressly provided in Section 2.4, the Subordinate
Obligations shall be and are hereby postponed and made subordinate in right of
payment to the prior payment in full in cash of the Senior Obligations.

2.2   Priority of Security.

    The Liens constituted by the Senior Security shall rank in priority to any
and all Liens securing any of the Subordinate Obligations ("Subordinate
Security"), whether any such Subordinate Security is created by operation of law
or pursuant to any security instrument or arrangement executed or made by the
Borrower.

2.3   Prohibited Payments to Subordinate Lender.

    Except as otherwise expressly provided in Section 2.4, the Borrower shall
not make and shall not be entitled to make and the Trust shall not accept and
shall not be entitled to accept any payment or prepayment of principal, interest
or other amount in respect of the Subordinate Obligations, whether in the form
of cash, securities or otherwise.

2.4   Permitted Payment to Subordinate Lender.

    Notwithstanding Section 2.3, the Borrower may make, and the Trust may
receive payments by the Borrower of the Subordinate Obligations as permitted
pursuant to, and made in accordance with, the Credit Agreement, provided in each
case that no Default has occurred and is continuing as at the date of such
payment and that any such payment would not constitute or result in a Default or
Event of Default.

2.5   Covenants of the Trust.

    Without the prior written consent of the Administration Agent on behalf of
the Senior Lenders, the Trust shall not and shall not be entitled to:

(a)petition the Borrower or the General Partner into bankruptcy or initiate, or
participate in the initiation of, any similar proceeding; or

(b)commence or initiate any action or proceeding to recover or receive payment
of any of the Subordinate Obligations.

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2.6   Security for Subordinate Obligations.

    Neither the Borrower nor any person on its behalf shall or shall be entitled
to grant, deliver or provide any Subordinate Security to the Trust, and the
Trust shall not and shall not be entitled to obtain, accept or hold any
Subordinate Security from the Borrower, or any person on its behalf, for payment
or performance of any of the Subordinate Obligations, except for security that
is expressly permitted by the Credit Agreement, subordinate to the Senior
Security and of which the Administration Agent and the Senior Lenders are given
prompt written notice.

2.7   No Challenge.

    The Trust will not dispute or contest, or commence or initiate any action or
proceeding to dispute or contest:

(a)the validity, enforceability, priority or perfection of any Lien contained in
or created by the Senior Security;

(b)the postponement and subordination of the Subordinate Obligations to the
Senior Obligations as provided in this Agreement;

(c)the priority of any Liens constituted by the Senior Security over any Liens
constituted by Subordinate Security as provided in this Agreement;

(d)the validity or enforceability of this Agreement against the Trust or the
validity or enforceability of the Credit Agreement;

(e)the appointment of any Receiver by or on behalf of the Senior Lenders; or

(f)any lawful act or omission of the Senior Lenders or any Receiver in the
enforcement of any of the Senior Security, other than gross negligence or wilful
misconduct.

2.8   Application of Enforcement Proceeds.

(a)All Enforcement Proceeds not in the form of cash shall be forthwith delivered
(subject to the Administration Agent's acceptance of such delivery) to the
Administration Agent on behalf of the Senior Lenders and disposed of, or
realized upon, by the Administration Agent on behalf of the Senior Lenders in a
commercially reasonable manner so as to produce proceeds in the form of cash.

(b)All Enforcement Proceeds in the form of cash shall be applied and
distributed, and the Liens constituted by the Senior Security shall be deemed to
have the relative priorities which would result in the Enforcement Proceeds
being applied and distributed, as follows:

(i)firstly, to the payment of all costs and expenses (subject to applicable law)
incurred by the Administration Agent and the Senior Lenders in the exercise of
all or any of the powers granted to them under the Senior Security and in
payment of all of the remuneration of any Receiver and all costs incurred by
such Receiver in the exercise of all or any powers granted to them under the
Senior Security;

(ii)secondly, in payment of all amounts of money borrowed or advanced by the
Senior Lenders or such Receiver pursuant to the Senior Security and any interest
thereon;

(iii)thirdly, to the payment or prepayment of the Senior Obligations in full
(including holding cash collateral to be applied against Senior Obligations
which have not then matured) in such manner as the Administration Agent and the
Senior Lenders may see fit or have agreed upon; and

(iv)the balance, if any, in accordance with applicable law.

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2.9   Winding Up.

    In the event of any payment or distribution of assets of the Borrower upon
or under any dissolution, winding-up, liquidation or scheme of arrangement (or
reorganization equivalent thereto) or any insolvency, receivership or bankruptcy
proceedings of the Borrower or the General Partner, whether pursuant to the
Companies' Creditors Arrangement Act, the Bankruptcy and Insolvency Act, the
Winding-up Act or any bankruptcy, insolvency or analogous law of Canada, any
province thereof or any other jurisdiction or any assignment for the benefit of
creditors, any such payment or distribution of assets shall be treated for all
purposes of this Article 2 as Enforcement Proceeds and shall be applied and
distributed in accordance with the provisions of Section 2.8 of this Agreement.

2.10   Application of this Agreement.

    The rights of the Administration Agent and the Senior Lenders and the
obligations of Subordinate Lender, the priority of the Senior Obligations and
the Senior Security over the Subordinate Obligations and any Subordinate
Security, the application and distribution of Enforcement Proceeds in respect of
the Senior Obligations in priority to the Subordinate Obligations in accordance
with Section 2.8, and all covenants of the Trust contained in this Agreement,
shall in each case apply and be enforceable notwithstanding:

(a)the time or sequence in which any of the Credit Agreement, the Senior
Security, any instrument or agreement relating to the Subordinate Obligations or
any Subordinate Security are executed or delivered;

(b)the registration, filing, recording, notification or perfection of any
financing statement, mortgage, security agreement or other security instrument
or interest relating to or contained in any of the Senior Security or any
Subordinate Security or the provisions of any applicable law or decision;

(c)the time or sequence in which any Lien constituted by the Senior Security or
any Subordinate Security attaches;

(d)the time or sequence in which any of the Senior Obligations or the
Subordinate Obligations become due (whether at their stated maturity, by
acceleration or otherwise) or are incurred;

(e)the time or sequence of commencement or completion of any proceedings to
enforce or collect any of the Senior Obligations or the Subordinate Obligations,
to crystallize, enforce or realize on any of the Credit Agreement, the Senior
Security, any instrument or agreement relating to the Subordinate Obligations or
any Subordinate Security or the time or sequence in which any order or judgment
in respect thereof is made or entered or any execution is obtained or registered
or any other proceeding is commenced or completed;

(f)the manner in which any of the Senior Security or any Subordinate Security
are created or whether any such security is a fixed or floating charge;

(g)the time or sequence in which the Administration Agent on behalf of the
Senior Lenders, the Trust or any Receiver on behalf of either of them takes
possession or realizes upon any property and assets pursuant to the Senior
Security or any Subordinate Security or the nature of the remedies available or
exercised pursuant to the Senior Security or any Subordinate Security; or

(h)any other factor of legal relevance, whether similar or dissimilar to any of
the foregoing, other than this Agreement, establishing the priority or ranking
or relative rights of enforcement between the Administration Agent, the Senior
Lenders and the Trust.

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2.11   Effect of Non-Compliance.

    In the event any non-cash Enforcement Proceeds are delivered to or received
by the Trust in contravention of this Agreement, the Trust shall hold such
Enforcement Proceeds in trust for the Senior Lenders and shall forthwith deliver
such Enforcement Proceeds to the Administration Agent. In the event any cash
Enforcement Proceeds, prepayments or other payments are made to or received by
the Trust in contravention of this Agreement, the Trust shall hold such
Enforcement Proceeds, prepayments or other payments in trust for the Senior
Lenders and shall forthwith pay such Enforcement Proceeds, prepayments or other
payments to the Administration Agent for application pursuant to Section 2.8 of
this Agreement. Any action taken or thing done by the Trust in contravention of
this Agreement shall be null and void and of no effect.

ARTICLE 3
ENFORCEMENT AND REALIZATION

3.1   Enforcement Proceedings.

    If any Lien constituted by the Senior Security becomes enforceable, the
Administration Agent and the Senior Lenders may exercise all rights and remedies
provided for in such Senior Security or otherwise available at law or in equity
at the discretion of the Administration Agent and the Senior Lenders, including,
without limitation, the appointment of a Receiver.

3.2   No Duty to Realize.

    Nothing in this Agreement shall require or obligate the Administration Agent
and the Senior Lenders to enforce or realize upon the Senior Security.

ARTICLE 4
GENERAL

4.1   Assignment.

    Any assignee (to the extent permitted by the Credit Agreement) of or
successor to the Administration Agent, a Senior Lender or the Trust shall,
without the need for any further document, be entitled to the rights and
benefits of the assignor or predecessor pursuant to this Agreement, and shall be
deemed to have agreed with and shall be obligated to comply with this Agreement.
At the request of the Administration Agent, a Senior Lender or any permitted
assignee or successor of the Administration Agent or a Senior Lender, the Trust
or any successor or assignee of the Trust shall execute an instrument in form
satisfactory to the parties, acting reasonably, confirming and acknowledging
that the provisions of this Agreement continue to apply in favour of the
Administration Agent and the Senior Lenders and any such permitted assignee or
successor.

4.2   Representation by Subordinate Lender.

    The Trust represents and warrants to the Administration Agent and the Senior
Lenders that all necessary action, corporate or otherwise, has been taken to
authorize the execution, delivery and performance of this Agreement by the
Trust, and this Agreement has been duly authorized, executed and delivered by
the Trust and constitutes a legal, valid and binding obligation of the Trust.

4.3   Governing Law.

    This Agreement shall be governed by and construed in accordance with the
laws of the Province of British Columbia and of Canada applicable therein and
shall be treated in all respects as a British Columbia contract.

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4.4   Notices.

    All notices and communications provided for hereunder shall be in writing
and sent by facsimile transmission, by first class United States or Canadian
mail (with charges prepaid) or by a recognized overnight delivery service (with
charges prepaid). Any such notice shall be addressed:

(a)if to the Administration Agent:

The Toronto-Dominion Bank
Corporate and Investment Banking
66 Wellington Street West, 38th Floor
Toronto-Dominion Bank Tower
Toronto, Ontario
M5K 1A2

Facsimile.:  (416) 982-5535
Attention:  Vice President, Loan Syndications—Agency

(b)if to the Trust:

P&T Community Trust
c/o Pope & Talbot, Inc.
1500 S.W. First Avenue
Portland, Oregon
97201

Facsimile:  (503) 220-2727
Attention:  Vice President and Chief Financial Officer

or at such other address as the Administration Agent or the Trust shall have
specified to the other party by notice duly given in accordance with this
Section 4.4. Notices under this Section 4.4 will be deemed given only when
actually received.

4.5   Amendments.

    This Agreement may not be amended or modified, and no provision of this
Agreement may be waived, except by an agreement in writing signed by both the
Administration Agent on behalf of the Senior Lenders and the Trust.

4.6   Benefits of Agreement Restricted.

    Nothing herein expressed or implied is intended or shall be construed to
give anyone other than the Administration Agent on behalf of the Senior Lenders
and the Trust, and their respective successors and permitted assigns, any legal
or equitable right, remedy or claim under or in respect hereof or the benefit of
any covenant, condition or provision contained herein; and all such covenants,
conditions and provisions are and shall be held to be for the sole and exclusive
benefit of the Administration Agent on behalf of the Senior Lenders and the
Trust and their successors and permitted assigns. This Agreement shall enure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns.

4.7   Non-Impairment of Senior Lenders' Rights.

    The Senior Lenders may extend, renew, modify or increase the Senior
Obligations owing to them or amend or waive any terms of the Credit Agreement or
the Senior Security or release, sell or exchange any of the Senior Security or
any property or assets subject to a Lien under any of the Senior

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Security, and may otherwise deal freely with the Borrower and its Subsidiaries,
all without affecting the liabilities and obligations of the Trust hereunder.

4.8   Remedies for Breach.

    Each of the parties hereby agrees that all covenants, provisions and
restrictions contained herein are necessary and fundamental in order to
establish the respective priorities of the Senior Lenders and the Trust in
connection with the Senior Obligations, the Senior Security, the Subordinate
Obligations and the Subordinate Security and that a breach of any such covenant,
provision or restriction would result in damages that could not adequately be
compensated by monetary award. Accordingly, it is expressly agreed that in
addition to all other remedies available to it including, without limitation,
any action for damages, the Administration Agent and the Senior Lenders shall be
entitled to the immediate remedy of a restraining order, interim injunction,
injunction or other form of injunctive or other relief as may be decreed or
issued by any court of competent jurisdiction to restrain or enjoin such party
from breaching any such covenant, provision or restriction.

4.9   Severability.

    Should any part of this Agreement for any reason be declared invalid or
unenforceable, such decision shall not affect the validity or enforceability of
any remaining portion, which remaining portion shall remain in force and effect
as if this Agreement had been executed with the invalid or unenforceable portion
hereof eliminated and it is hereby declared the intention of the parties hereto
that they would have executed the remaining portion of this Agreement without
including herein any such part which may, for any reason, be hereafter declared
invalid or unenforceable.

4.10   Duplicate Originals Execution In Counterpart.

    This Agreement may be executed in any number of counterparts, each of which
shall be an original but all of which together shall constitute one instrument.
Each counterpart may consist of a number of copies hereof, each signed by less
than all, but together signed by all, of the parties hereto.

4.11   Term of the Agreement.

    This Agreement shall remain in full force and effect until a written
agreement of the parties to the contrary is entered into or until such time as
all the Senior Obligations are satisfied and indefeasibly paid in full and the
Senior Lenders have no further obligations or commitments to the Borrower under
the Credit Agreement.

4.12   Entire Agreement.

    This Agreement constitutes the entire agreement between the parties in
respect of the subject matter hereof.

4.13   Further Assurances.

    Each of the parties hereto shall from time to time execute and deliver such
further documents and do such further acts or things as may from time to time be
necessary to carry out the full intent and purpose of this Agreement and each
part thereof.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.

    THE TORONTO-DOMINION BANK
as Administration Agent
 
 
By:
       

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Name:
Title:
 
 
P&T FUNDING LIMITED PARTNERSHIP
by its General Partner
POPE & TALBOT LTD.
as Borrower
 
 
By:
       

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

Name:
Title:
 
 
By:
       

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

Name:
Title:
 
 
P&T COMMUNITY TRUST
as Subordinate Lender
 
 
By:
       

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

Name:
Title:
 
 
By:
       

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Name:
Title:

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QuickLinks

TABLE OF CONTENTS
CREDIT AGREEMENT
ARTICLE 1 INTERPRETATION
ARTICLE 2 CREDIT FACILITIES
ARTICLE 3 LOANS
ARTICLE 4 BANKERS' ACCEPTANCES
ARTICLE 5 LETTERS OF CREDIT AND GUARANTEE LETTERS
ARTICLE 6 CLOSING CONDITIONS
ARTICLE 7 REPRESENTATIONS AND WARRANTIES
ARTICLE 8 POSITIVE COVENANTS
ARTICLE 9 NEGATIVE COVENANTS
ARTICLE 10 GUARANTEES
ARTICLE 11 SECURITY
ARTICLE 12 EVENTS OF DEFAULT
ARTICLE 13 THE ADMINISTRATION AGENT
ARTICLE 14 MISCELLANEOUS
APPENDIX 1 LENDERS AND LENDERS' COMMITMENTS
SCHEDULE 1 BORROWING NOTICE
SCHEDULE 2 NOTICE OF REPAYMENT OR CANCELLATION
SCHEDULE 3 QUARTERLY COMPLIANCE CERTIFICATE
SCHEDULE 4 MARGIN REPORT
SCHEDULE 5 MATERIAL SUBSIDIARIES
SCHEDULE 6 LENDER ASSIGNMENT AGREEMENT
SCHEDULE 7 POPE & TALBOT US POSTPONEMENT AGREEMENT
ARTICLE 1 INTERPRETATION
ARTICLE 2 PRIORITY OF OBLIGATIONS AND SECURITY
ARTICLE 3 ENFORCEMENT AND REALIZATION
ARTICLE 4 GENERAL
SCHEDULE 8 TRUST POSTPONEMENT AGREEMENT
ARTICLE 1 INTERPRETATION
ARTICLE 2 PRIORITY OF OBLIGATIONS AND SECURITY
ARTICLE 3 ENFORCEMENT AND REALIZATION
ARTICLE 4 GENERAL