<PAGE>

                                    EXECUTIVE
                               SEVERANCE AGREEMENT

This Severance Agreement is made as of the 30th day of June, 2000

BETWEEN:

          FLETCHER CHALLENGE CANADA LIMITED, a company incorporated under the
          laws of the Province of British Columbia

          (the "Company")

                                                              OF THE FIRST PART,

AND:

          RUSSELL J. HORNER

          (the "Executive")

                                                             OF THE SECOND PART.

WHEREAS:

A.   The Executive is a senior executive of the Company and has made and is
     expected to continue to make significant contributions to the Company and
     its shareholders, including in particular, in connection with any proposed
     sale or disposition of the shares or assets of the Company which may be
     undertaken by the Company or its majority shareholder, Fletcher Challenge
     Limited ("FCL"); and

B.   The Company desires to assure itself of both the present and future
     continuity of management, to induce the Executive to remain with the
     Company in connection with any Proposed Transaction (as defined below) and
     to provide severance benefits for the Executive to be available only on and
     after completion of a Proposed Transaction.

NOW THEREFORE in consideration of the mutual covenants and agreements contained
in this Agreement and for other good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged by each of the parties), the
Company and the Executive agree as follows:

1.   INTERPRETATION

1.1. DEFINITIONS. In this Agreement, the following terms will have the following
     meanings unless the context otherwise requires:

     (a)  "Base Salary" means the annualized monthly base salary of the
          Executive at the date of completion of a Proposed Transaction;

     (b)  "Business Day" means any day other than a Saturday, Sunday or a day
          observed as a holiday in Vancouver, British Columbia;


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                                       2


     (c)  "Board" means the board of directors of the Company;

     (d)  "Cause" means the occurrence of any of the following:

          (i)  continued failure by the Executive to substantially perform his
               duties with the Company (other than any such failure resulting
               from his Disability) after a demand for substantial performance
               improvement has been delivered in writing to the Executive by the
               Company which specifically identifies the manner in which it is
               believed that the Executive has not substantially performed his
               duties and after allowing the Executive an opportunity to improve
               his performance; or

          (ii) engaging by the Executive in misconduct which is materially
               injurious (financially or otherwise) to the reputation or
               business of the Company;

     (e)  "Common shares" means the Class A Common shares without par value in
          the capital of the Company;

     (f)  "Constructive Dismissal" means a unilateral change by the Company,
          without the Executive's consent, of a fundamental term or condition of
          the Executive's employment including:

          (i)  a significant reduction in the Executive's responsibilities and
               duties;

          (ii) a decrease of more than 5% in the total compensation package
               provided to the Executive; and

         (iii) a transfer on a permanent basis of the Executive to an office or
               location other than within the Greater Vancouver Regional
               District;.

     (g)  "Disability" means the physical or mental illness of the Executive
          resulting in the Executive's absence from his full time duties with
          the Company;

     (h)  "Dispute" has the meaning ascribed thereto in Section 7;

     (i)  "Effective Date" means the date of termination of employment of the
          Executive specified in a notice given by the Company or the date of
          Constructive Dismissal;

     (j)  "Executive Benefits" has the meaning ascribed thereto in Subsection
          4.1(b) or Subsection 5.1(b) as applicable;

     (k)  "Normal Retirement Date" means the date, if any, as of which the
          Executive would be required to retire, determined in accordance with
          the Company's practices and policies relating to retirement generally,
          which practices and policies apply to its senior executives and are in
          effect immediately prior to the completion of a Proposed Transaction
          or at the Effective Date, whichever is more favourable to the
          Executive and, in absence of any such practices and policies, means
          the date as of which the Executive attains the age of 65;

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     (l)  "Person" means any individual, partnership, joint venture, company,
          corporation, unincorporated association or any other entity;

     (m)  "Phantom Stock Plans" mean the Fletcher Challenge Canada Limited
          Phantom Stock Option Plans as constituted at the Effective Date;

     (n)  "Proposed Transaction" means any of the following:

          (i)  the acquisition, directly or indirectly, by a Person (other than
               FCL) or group of Related Persons (not including FCL) of Common
               shares that (when taken together with any Common shares already
               owned, directly or indirectly, by such Person or group of Related
               Persons) constitute 100% of the outstanding Common shares;

          (ii) the acquisition by a Person (other than FCL) or a group of
               Related Persons (not including FCL) of all or substantially all
               of the assets of the Company resulting in a realization by the
               holders of Common shares of all or a significant part of their
               investment in the Common shares;

         (iii) a series of transactions involving the acquisition of Common
               shares and/or assets of the Company (other than by FCL) which
               results in a realization by the Shareholders of all or a
               significant part of their investment in the Common shares;

          (iv) the sale or disposition (other than a sale or disposition by way
               of a secondary public offering) by FCL, directly or indirectly,
               of all or part of the outstanding Common shares owned directly or
               indirectly by FCL, such that any other Person or group of Related
               Persons becomes the owner, directly or indirectly, of 40% or more
               of the outstanding Common shares; or

          (v)  the acquisition, directly or indirectly, by the Company or one or
               more of its subsidiaries of Common shares or other securities as
               a result of which FCL no longer owns, directly or indirectly, or
               exercises control or direction over, any Common shares,

          and for these purposes, the term "acquisition" includes a transaction
          or series of transactions by way of purchase, amalgamation, merger,
          reorganization, arrangement, recapitalization, liquidation or other
          business combination.

     (o)  "Protection Period" means the period commencing on the date of the
          completion of a Proposed Transaction and ending on the second
          anniversary of that date;

     (p)  "Related Person" means in relation to any Person participating in a
          Proposed Transaction, any Affiliate (as defined in the COMPANY ACT
          (British Columbia)) of that Person and any other Person which,
          pursuant to any agreement, commitment or understanding, acts jointly
          or in concert with that Person in connection with the completion of a
          Proposed Transaction;

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     (q)  "Retirement" means the retirement of the Executive from employment by
          the Company on or after the Normal Retirement Date;

     (r)  "SAR" means any right granted pursuant to and in accordance with the
          terms of any of the Phantom Stock Plans;

     (s)  Selling Price Per Share" means the purchase price or value of the
          consideration paid for each Common share of the Company purchased or
          otherwise acquired pursuant to a Proposed Transaction and which, in
          the case of a Proposed Transaction involving the sale of all or
          substantially all of the assets of the Company, will be equal to the
          aggregate purchase price (after deduction of debt retired by the
          Company or assumed by the purchaser in connection with the Proposed
          Transaction and transaction costs) for all of such assets in the
          Proposed Transaction divided by the number of outstanding Common
          shares of the Company on the date of completion of the Proposed
          Transaction;

     (t)  "Short Term Incentive Plan" means the Fletcher Challenge Canada
          Limited Short Term Incentive Plan as constituted and administered at
          the Effective Date;

     (u)  "Stock Option" means any right to subscribe for Common shares issued
          pursuant to the Stock Option Plan;

     (v)  "Stock Option Plan" means the Fletcher Challenge Canada Limited 1995
          Stock Option Plan as constituted and administered at the Effective
          Date;

     (w)  "Term" means the period commencing as of the date hereof and ending on
          June 30, 2001 or such later date as the Company may from time to time
          by notice to the Executive specify;

     (x)  "Termination Date" means the earliest of:

          (i)  the date immediately following the expiry of 24 months from the
               Effective Date;

          (ii) the date of commencement of alternate employment by the Executive
               as contemplated by Section 4.2;

         (iii) the date of the termination of the Executive's employment with
               the Company by reason of his death or for Cause;

     (y)  "Termination Leave" means the period commencing on the Effective Date
          and ending on the Termination Date.

1.2. DATE OF COMPLETION - For the purposes of this Agreement, the term "date of
     completion" where used in connection with a Proposed Transaction means the
     date on which the actual transfer of the Common shares or assets of the
     Company comprising the Proposed Transaction takes effect.

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1.3. GENDER AND NUMBER. Unless otherwise expressly provided for in this
     Agreement or unless the context otherwise requires, words importing the
     singular include the plural and VICE VERSA and words importing gender
     include all genders.

2.   OPERATION OF AGREEMENT.

2.1. Subject to Subsection 2.2, this Agreement will be effective and binding on
     the parties hereto immediately upon its execution but, anything in this
     Agreement to the contrary notwithstanding, this Agreement will not be
     operative unless and until the completion of a Proposed Transaction occurs.
     Upon and concurrently with the completion of a Proposed Transaction at any
     time during the Term, without further action on the part of any party, this
     Agreement shall become immediately operative. For the avoidance of doubt,
     this Agreement will not be applicable in respect of the termination of the
     Executive's employment with the Company for any reason whatsoever at any
     time prior to the commencement of the Protection Period, in which case the
     Executive's then existing terms of employment and legal rights in
     connection with any such termination will apply.

2.2. Section 3 of this Agreement will not apply to any termination by the
     Company of the Executive's employment in connection with the completion
     of any Proposed Transaction if:

     (a)  the Executive has accepted employment with the purchaser (the
          "Purchaser"); and

     (b)  the Purchaser has agreed to be bound by and has assumed all of the
          obligations of the Company under this Agreement.

     For greater certainty, if the Executive remains employed by the Purchaser
     for the duration of the Protection Period, all rights of the Executive
     under this Agreement as against the Purchaser will cease immediately
     following the last day of that Period.

3.   TERMINATION AFTER COMPLETION OF A PROPOSED TRANSACTION

3.1. In the event during the Protection Period of either (i) the receipt by the
     Executive of notice of termination of his employment by the Company (other
     than by reason of his Disability or Retirement or for Cause) or (ii) the
     Executive's Constructive Dismissal, the Executive may, within seven days
     after receipt of notice of termination or the Executive's Constructive
     Dismissal, whichever is applicable, elect by written notice to the Company
     to accept Termination Leave in accordance with section 4 of this Agreement
     or receive a Lump Sum Settlement in accordance with section 5 of this
     Agreement.

3.2. If no election is made by the Executive within the period specified in
     section 3.1, the Executive shall be deemed to have elected to accept
     Termination Leave in accordance with section 4.

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4.   TERMINATION LEAVE ELECTION

4.1. Subject to subsection 4.2, during the Termination Leave the Executive will
     remain an employee of the Company and will be entitled to a leave of
     absence from work on the following terms:

     (a)  the Company will on the last Business Day of each month during the
          Termination Leave pay to the Executive an amount equal to one-twelfth
          (1/12) of the Base Salary, less all deductions provided for in
          Schedule A or as required of the Company by law;

     (b)  all benefits and perquisites to which the Executive was entitled
          immediately prior to the Effective Date will terminate on that Date,
          except that the Company will provide to, continue or maintain for the
          Executive, as applicable, the benefits and perquisites described in
          Schedule A (the "Executive Benefits"); provided that, despite Schedule
          A, the Executive's interest free housing loan, if any, shall not be
          repayable in full until the earlier of the date of commencement of
          alternate employment as contemplated in subsection 4.2 and the third
          anniversary of the date of the drawing of funds;

     (c)  the Executive will continue to participate in the Short Term Incentive
          Plan on the following terms:

          (i)  subject to paragraph (ii) of this subsection, payments to the
               Executive of any bonus awards under the Short Term Incentive Plan
               will continue to be made to the Executive in accordance with the
               Plan's terms;

          (ii) bonus awards payable to the Executive under the Short Term
               Incentive Plan will be based solely on the corporate financial
               performance portion of the awards payable under the Plan and the
               Executive will not be entitled to receive any awards which may be
               payable under the Plan based on achievement of individual
               objectives;

         (iii) in the event that at any time during the Termination Leave a
               determination of bonus awards cannot be made under the Short Term
               Incentive Plan as a result of a material change in the Company's
               business, any merger or other corporate reorganization involving
               the Company or the disposition of all or some of its assets, the
               Company will pay a bonus award to the Executive based on an
               amount equal to 75% of the Executive's target bonus amount for
               the fiscal year of the Company in which the Effective Date
               occurred, which amount will be paid to the Executive in
               accordance with the terms of the Plan and this Agreement; and

          (iv) any payment to the Executive under the Short Term Incentive Plan
               for the fiscal year in which the Termination Date occurs will be
               pro-rated to the Termination Date;

     (d)  to the extent that the Executive has at the Effective Date any
          rights in respect of the Company for obligations of the Company in
          respect of stock options issued on

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          or prior to the Effective Date by FCL in respect of shares of FCL,
          all such rights will, notwithstanding anything to the contrary in
          this Agreement, continue in full force and effect and be determined
          in accordance with the terms of such stock options, but all other
          obligations, if any, of the Company to the Executive in respect of
          stock options in respect of shares of FCL shall terminate on the
          Effective Date; and

     (e)  all obligations, if any, of the Company to the Executive in respect
          of the granting of any SAR or Stock Option shall terminate on the
          Effective Date.

4.2. If, after the Effective Date, the Executive commences alternate employment
     (of which the Executive shall promptly notify the Company) which is
     comparable as to aggregate annual compensation and authority, duties and
     responsibilities to the position held by the Executive immediately prior to
     the Effective Date, the obligations of the Company pursuant to section 4.1
     will upon the commencement of such alternate employment immediately be
     altered as follows:

     (a)  all rights of the Executive to receive monthly payments pursuant to
          subsection 4.1(a) will cease and the Company will forthwith pay to the
          Executive a cash lump sum comprised of an amount equal to one half of
          the amount which the Executive would have been entitled to receive
          pursuant to Subsection 4.1(a) for each month (or portion thereof)
          remaining in the Termination Leave had it continued for a period of 24
          months from the Effective Date;

     (b)  the Executive's entitlement to participate in any of the Executive
          Benefits will cease effective from the date of commencement of that
          employment (unless otherwise expressly stated in Schedule A); and

     (c)  the Executive's entitlement to participate in the Short Term Incentive
          Plan will cease, subject to any payment to which the Executive would
          have been entitled if the Termination Date were the date of
          termination of his employment by the Company (without Cause) as
          contemplated by the Plan.

4.3. The employment of the Executive with the Company will terminate on the
     Termination Date.

5.   LUMP SUM SETTLEMENT ELECTION

5.1. On the Effective Date, the Executive will cease to be an employee of the
     Company on the following terms:

     (a)  within fourteen days after the Effective Date, the Company will pay to
          the Executive, in addition to salary due to the Executive for the
          period ending on the Effective Date, the sum of:

          (i)  an amount representing all of the Executive's accrued regular and
               extended vacation entitlement, if applicable, to the Effective
               Date; and

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          (ii) an amount equal to 80% of the amount calculated by multiplying
               two times the Base Salary;

     (b)  all benefits and perquisites to which the Executive was entitled
          immediately prior to the Effective Date will terminate on the
          Effective Date, except that the Company will provide to, continue or
          maintain for the Executive, as applicable, the benefits and
          perquisites described in Schedule B (the "Executive Benefits"); and

     (c)  the Executive's entitlement to participate in the Short Term Incentive
          Plan will cease on the Effective Date, and in lieu of any cash award
          for the fiscal year in which the Effective Date occurs, the Company
          will pay a bonus award to the Executive based on an amount equal to
          75% of the Executive's target bonus amount for the fiscal year of the
          Company in which the Effective Date occurred, which amount will be
          pro-rated to the Effective Date and paid to the Executive in
          accordance with the terms of the Short Term Incentive Plan;

     (d)  to the extent that the Executive has at the Effective Date any rights
          in respect of the Company for obligations of the Company in respect of
          stock options issued on or prior to the Effective Date by FCL in
          respect of shares of FCL, all such rights will, notwithstanding
          anything to the contrary in this Agreement, continue in full force and
          effect and be determined in accordance with the terms of such stock
          options, but all other obligations, if any, of the Company to the
          Executive in respect of stock options in respect of shares of FCL
          shall terminate on the Effective Date; and

     (e)  all obligations, if any, of the Company to the Executive in respect of
          the granting of any SAR or Stock Option shall terminate on the
          Effective Date.

5.2. For greater certainty, the employment of the Executive with the Company
     will terminate on the Effective Date.

6.   DUTY TO MITIGATE

6.1. The Executive will not be subject to any duty or obligation to seek
     alternate employment or other sources of income or benefits, or to mitigate
     his damages, or to any similar duty or obligation, following or as a result
     of any termination of his employment by the Company either expressly by
     notice without Cause or by Constructive Dismissal and, except as
     specifically provided in Section 4.2, no payments or other obligations of
     the Company under this Agreement will be subject to any rights of set-off,
     duty to mitigate or other reduction, and all such payments and obligations
     will be paid and performed in full notwithstanding any alternate employment
     or other sources of income or benefits obtained or received or receivable
     by the Executive.

7.   DISPUTE RESOLUTION REGARDING CONSTRUCTIVE DISMISSAL AND OTHER BENEFITS

7.1. If any dispute or question (a "Dispute") arises between the Company and the
     Executive concerning the determination as to whether a Constructive
     Dismissal of the Executive has occurred (including with respect to the date
     of such dismissal), the entitlement of the

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     Executive to any Executive Benefits under this Agreement or whether the
     Executive has been terminated for Cause, the Company and the Executive will
     attempt in good faith to resolve the Dispute. If the Company and the
     Executive have not agreed to a settlement of the Dispute within 30 days
     from the date on which the Dispute first became known to both parties, then
     the Company and the Executive agree that the Dispute will be submitted to
     arbitration in Vancouver, British Columbia before a sole arbitrator agreed
     to by both parties. The parties agree that the Rules of the British
     Columbia International Commercial Arbitration Centre for the conduct of
     domestic commercial arbitrations do not apply. However, the arbitrator may
     be guided by Rules 1, 3, 6, 8, 9, 13, 15, 16, 19-36, and 39-45, in
     establishing the rules for the arbitration. In the event that the parties
     are unable to agree on the appointment of a sole arbitrator in accordance
     with this section 7 within 45 days from the date on which the Dispute first
     became known to both parties, a sole arbitrator for this purpose will be
     determined for the parties in accordance with section 17 of the Commercial
     Arbitration Act, R.S.B.C. 1996, c.55.

7.2. The Company and the Executive agree that a Dispute will not be made the
     subject matter of an action in any court by either the Company or the
     Executive unless the Dispute has first been submitted to arbitration and
     finally determined by a sole arbitrator in accordance with this section 7,
     and that any such action will only be for the purposes of enforcing the
     decision of the arbitrator and the costs incidental to the action. In any
     such action the decision of the sole arbitrator will be conclusively deemed
     to determine the rights and liabilities between the Company and the
     Executive in respect of the matter which is the subject of the Dispute.

7.3. In the event that the Executive receives an award in any Dispute which
     exceeds the offer for settlement of such Dispute by the Company immediately
     preceding an arbitration pursuant to this section 7, the Company agrees to
     pay to the Executive any and all costs and expenses (including reasonable
     legal fees) incurred by the Executive in connection with the Dispute
     concurrently with the payment of any award made pursuant to such
     arbitration.

8.   SARS AND STOCK OPTIONS

8.1. If the Executive holds any SARs or Stock Options at the date of completion
     of a Proposed Transaction which results in a payment to holders of Common
     shares of cash or securities, the Company and the Executive agree that:

     (a)  this Agreement will constitute a notice pursuant to the applicable
          provision of each of the Phantom Stock Plans such that, on the date of
          completion of the Proposed Transaction, the Company will pay to the
          Executive an amount equal to the result obtained by multiplying the
          excess, if any, of the Selling Price Per Share over the Exercise Price
          (as defined in the respective SAR) by the number of the Common shares
          in respect of which each SAR remains unexercised (whether or not such
          SAR would then be exercisable);

     (b)  upon payment of all amounts pursuant to subsection 8.1(a), all rights
          of the Executive pursuant to the SARs, any share appreciation rights
          agreement entered

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          into between the Company and the Executive and the Phantom Stock Plans
          will terminate; and

     (c)  the provisions of sections 7.5, 7.6 and 7.7 of the Stock Option Plan
          shall apply with respect to a Proposed Transaction; provided that for
          purposes of subsection 7.5.2 thereof the Market Price (as defined in
          the Stock Option Plan) on the date of completion of the Proposed
          Transaction shall be deemed to be equal to the Selling Price Per
          Share.

9.   ACCEPTANCE OF TERMS.  The terms set out in this Agreement are in lieu of
(and not in addition to) and in full satisfaction of any and all other claims or
entitlements which the Executive has or may have upon the termination of his
employment by the Company (other than by reason of his Disability or Retirement
or for Cause) including by Constructive Dismissal. The entering into of this
Agreement by the Company will effect a full and complete release of the Company
from any and all claims which the Executive may then have for whatever reason or
cause in connection with the Executive's employment and in respect of such
termination (except for any claims arising in connection with the performance by
the Company of its obligations under this Agreement) and, as a pre-condition to
receiving any payments or benefits pursuant to this Agreement, the Executive
specifically agrees to execute and deliver to the Company a release document to
that effect in the form set out in Schedule C and resignation as an officer of
the Company and as an officer or director of any affiliate of the Company in
which the Executive is an officer or director.

10.  WITHHOLDING OF TAXES.  The Company may withhold from any amounts payable to
the Executive under this Agreement all federal, provincial, state, city or other
taxes as the Company is required to withhold pursuant to any law or government
regulation or ruling, and such other amounts as the Executive has authorized or
may authorize the Company to deduct or withhold.

11.  NOTICES.  Any notice required or permitted to be given under this Agreement
will be in writing and will be properly given if delivered by hand or mailed by
prepaid registered mail addressed as follows:

     (a)  in the case of the Company, to:

          Fletcher Challenge Canada Limited
          9th Floor, 700 W. Georgia Street
          Vancouver, B.C.
          V7Y 1J7
          Attention: President

     (b)  in the case of the Executive, to the Executive at the last address of
          the Executive on the records of the Company

     or to such other address as the parties may from time to time specify by
     notice given in accordance with the Agreement. Any notice given will be
     conclusively deemed to have been given or made on the day of delivery, if
     delivered, or if mailed by registered mail, on the date shown on the postal
     return receipt as the date upon which the envelope containing such notice
     was actually received by the addressee.

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                                       11


12.  ENTIRE AGREEMENT.  This Agreement constitutes the entire agreement between
the parties with respect to the payment to the Executive of severance benefits
in connection with any Proposed Transaction and supersedes all prior agreements,
understandings, negotiations and discussions, whether written or oral. There are
no covenants, conditions, agreements, representations, warranties or other terms
or provisions, express or implied, collateral, statutory or otherwise, relating
to the payment to the Executive of severance benefits in connection with any
Proposed Transaction except as provided in this Agreement.

13.  SEVERABILITY.  If any term or other provision contained in this Agreement
is determined to be invalid, illegal or incapable of being enforced by any rule
of law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic and
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party hereto. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties hereto as closely as possible in an
acceptable manner to the end that transactions contemplated by this Agreement
are fulfilled.

14.  EXECUTION OF DOCUMENTS.  Each of the Company and the Executive agrees to
execute all such documents and to do all such acts and things as the other party
may reasonably request and as may be lawful and within its powers to do or to
cause to be done in order to carry out and/or implement the provisions or intent
of this Agreement.

15.  APPLICABLE LAW.  This Agreement shall be governed by and construed in
accordance with the laws of the Province of British Columbia and the laws of
Canada applicable therein.

16.  AMENDMENT AND WAIVERS.  No amendment or waiver of any provision of this
Agreement will be binding on any party unless consented to in writing by that
party. No waiver of any provision of this Agreement will constitute a waiver of
any other provision nor will any waiver constitute a continuing waiver unless
otherwise provided.

17.  SUCCESSORS AND ASSIGNS.  This Agreement will enure to the benefit of and be
binding upon the Executive and his heirs, executors, administrators and other
legal personal representatives and upon the Company and its successors and
assigns. This Agreement is personal to the Executive and may not be assigned by
him.

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                                       12


18.  ACKNOWLEDGEMENT.  The Executive hereby acknowledges that he has been
afforded a reasonable opportunity to obtain independent legal advice regarding
the matters contained in and contemplated by this Agreement prior to the
Executive executing this Agreement.

IN WITNESS WHEREOF this Agreement has been executed by the parties hereto.


                                        FLETCHER CHALLENGE CANADA LIMITED


                                        by: /s/ Alexander Tolte
                                            -------------------------------
                                            Chairman of the Board


                                           /s/ Russell J. Horner
                                            -------------------------------
                                            RUSSELL J. HORNER

<PAGE>

                                   SCHEDULE A

                    TREATMENT OF BENEFITS AND PERQUISITES ON
                          ELECTION OF TERMINATION LEAVE

1.   The following benefits will be provided, continued or maintained until the
     Termination Date:

     (a)  Provincial Medical Services Plan (MSP): coverage for Executive and
          dependants

     (b)  Extended Health Benefits (EHB): coverage for Executive and dependants

     (c)  Dental Benefits: coverage for Executive and dependants

     (d)  Life Insurance: the current level of coverage (up to 3x of annual
          salary) will continue until the Termination Date. The Executive will
          have 31 days from the Termination Date to convert this coverage to an
          individual life insurance policy, to a maximum of $200,000.

     (e)  Employee Share Purchase Plan: monthly contributions by way of payroll
          deduction by the Executive and matching Company contributions will
          continue to the earlier of the Termination Date, the Executive's
          election to cease contributions, or the termination of the Plan. The
          provisions of the Plan relating to termination of employment shall
          apply at the Termination Date, but the Executive shall be entitled to
          exercise his rights under the share withdrawal provision of the Plan
          prior to that time.

     (f)  Group RRSP: participation (outside of the SELECTIONS program) by way
          of payroll deduction by the Executive will continue until the
          Termination Date.

     (g)  Other Payroll Deductions: payroll deductions, such as:

          o    auto plan

          o    computer loan

          o    personal lines insurance

          o    leased vehicle driver option

          o    Canada Savings Bonds

     will continue to be deducted from the Executive's payments during the
     Termination Leave, with the full amount due and payable on the Termination
     Date. Eligibility to

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                                       2


     renew any of the above deductions will terminate as of the commencement of
     the Termination Leave.

2.   The following benefits will cease at the commencement of the Termination
     Leave as shown below:

     (a)  Life Insurance: any optional coverage for the Executive, his spouse or
          his children, will cease at the commencement of the Termination Leave.
          The Executive will have 31 days from the last day worked to convert
          all or part of his Executive and/or spousal coverages to individual
          life insurance policies, to a maximum of $200,000 each.

     (b)  Accidental Death and Dismemberment Benefits:

          (i)  All 24 hour company paid accidental death and dismemberment
               insurance benefits, will cease at the commencement of the
               Termination Leave.

          (ii) All Executive, spousal and child optional accidental death and
               dismemberment benefits will cease at the commencement of the
               Termination Leave; the Executive may elect to convert all or part
               of his Executive and/or spousal coverages to individual coverage,
               within 31 days after the commencement of the Termination Leave.

     (c)  Disability Benefits: short term and long term disability coverage will
          cease at the commencement of the Termination Leave.

     (d)  Charitable donations and social club fees will cease to be deducted at
          the commencement of the Termination Leave.

     (e)  Vacation: the accrual of regular and if applicable, extended vacation
          entitlement will cease on the commencement of the Termination Leave.
          All accrued regular and extended vacation entitlement, including
          pro-rated regular and, if applicable, extended entitlement to the
          Termination Date, will be paid to the Executive at the commencement of
          the Termination Leave.

3.   Perquisites will continue during the Termination Leave, in accordance with
     the following:

     (a)  Leased Automobile: the Company will continue to lease the automobile,
          presently leased by the Company and designated for the Executive's
          use, until the Termination Date and bear all reasonable costs
          associated with its maintenance, including insurance, but excluding
          fuel.

     The Executive is entitled to elect to purchase the automobile at any time
     during the Termination Leave, for the then current residual option price of
     the automobile. The Executive will bear all sales and other tax costs and
     any other costs and taxes which may be associated with such transfer.

<PAGE>
                                       3


     (b)  Financial Counselling: to the extent the Executive is eligible for
          this perquisite at the time of commencement of the Termination Leave,
          the current level of financial counselling will continue until the
          Termination Date.

     (c)  Company Loans (Housing): the Executive must continue to repay any
          loans at the rate not less than what is currently being deducted from
          his salary payments, but in any event shall repay the loan in full by
          the Termination Date.

     (d)  Club Memberships: to the extent the Executive has been granted a club
          membership at the time of commencement of the Termination Leave, the
          Company will continue to pay for the employee's membership until the
          Termination Date. Upon the Termination Date corporate (as opposed to
          personal) club memberships will remain with the Company.

4.   Post-Retirement Medical and Dental Benefits will apply as follows:

     If the Executive is age 51 or older as of the Effective Date, he will be
     eligible on the latter of the first of the month following the Termination
     Date or the first of the month following his 55th birth date, to apply for
     medical, extended health and dental benefits on the basis of treatment
     equivalent to that being received by an employee of the Company who retired
     on the Effective Date.

5.   Pension Benefits:

     (a)  The Executive will continue to participate in the registered pension
          plan and unfunded supplemental plan in which the Executive is enrolled
          on the date of commencement of the Termination Leave (the "Pension
          Plans") on the following terms:

          (i)  for the purposes of any contribution (notional or actual)
               provision of the Pension Plans, the amounts paid to the Executive
               pursuant to section 4.1(a) of the Agreement shall be treated in
               the same manner that payments of salary to the Executive were
               recognized prior to the date of commencement of the Executive's
               Termination Leave, and the amounts paid to the Executive pursuant
               to section 4.1(c) of the Agreement shall be treated in the same
               manner that payments under the Company's incentive compensation
               programs were recognized prior to the date of commencement of the
               Executive's Termination Leave;

          (ii) if on the Termination Date the Executive has not satisfied a
               vesting condition under the Pension Plans, the Executive will be
               deemed to have satisfied this condition;

         (iii) upon the completion of the Executive's Termination Leave, the
               Executive shall become entitled to benefits under the Pension
               Plans on the basis that the Executive terminated employment with
               the Company on that date.

     (b)  If the circumstances described in section 4.2 of the Agreement arise,
          the Executive shall immediately stop accumulating further benefits
          under the Pension

<PAGE>
                                       4


          Plans, and, without limitation, any payment the Executive becomes
          entitled to pursuant to section 4.2(a) of the Agreement shall not be
          recognized under any contribution (actual or notional) provision of
          the Pension Plans.

<PAGE>


                                   SCHEDULE B

                    TREATMENT OF BENEFITS AND PERQUISITES ON
                         ELECTION OF LUMP SUM SETTLEMENT

All benefits, privileges and perquisites the Executive might formerly have
received as a result of employment with the Company will cease as of the
Effective Date except as expressly set out below:

1.   Provincial Medical Services Plan (MSP): coverage for Executive and
     dependants will cease at the end of the month in which the Effective Date
     occurs.

2.   Life Insurance: the current level of coverage (up to 3 times annual salary)
     will continue until the Effective Date, and the Executive will have 31 days
     from the Effective Date to convert this coverage to an individual life
     insurance policy, to a maximum of $200,000.

3.   Optional Life Insurance: any executive, spousal, or child optional life
     insurance coverage the Executive had by reason of employment with the
     Company will cease on the Effective Date. The Executive may convert all or
     part of any optional executive and/or spousal insurance, up to a maximum of
     $200,000 each, within 31 days of this date, to individual life insurance
     policies at prevailing individual, as opposed to group insurance rates and
     without medical examination.

4.   Accidental Death and Dismemberment Insurance ("AD&D"):

     (a)  coverage under AD&D will cease on the Effective Date; and

     (b)  any executive, spousal, or child optional AD&D coverage the Executive
          had by reason of employment will cease on the Effective Date; the
          Executive may elect to convert all or part of any optional executive
          and/or spousal insurance, up to a maximum of $200,000 each, within 31
          days after the Effective Date.

5.   Health Spending Account: contributions by the Executive will cease on the
     Effective Date. The Executive may submit claims against the balance accrued
     to the Effective Date, until the end of the calendar year in which the
     Effective Date occurs.

6.   Disability Benefits: short term and long term disability coverage will
     cease at the Effective Date.

7.   Vacation: all accrued regular and extended vacation entitlement, including
     pro-rated regular and, if applicable, extended entitlement to the Effective
     Date, will be paid to the Executive at the Effective Date.

8.   Share Purchase Plan: participation and/or contributions through payroll
     deduction will cease on the Effective Date. All amounts in the Executive's
     account must be withdrawn within 30 days of the Effective Date.

<PAGE>
                                       2


9.   Group RRSP: participation and/or contributions by way of payroll deduction
     by the Executive will cease at the Effective Date. Treatment of the
     Executive's fund balances will be as per the terms of the Plan.

10.  Leased Automobile: the Executive is entitled to elect to purchase the
     automobile leased by the Company, and designated for his use, at the
     Effective Date for the then current residual option price of the
     automobile. The Executive will bear all sales and other tax costs and any
     other costs and taxes which may be associated with any such transfer.

11.  Club Memberships:

     (a)  the payment by the Company of any personal club memberships held by
          the Executive will cease on the Effective Date; and

     (b)  the payment of any corporate club membership dues in respect of the
          Executive will cease on the Effective Date, and the membership will
          remain with the Company.

12.  Company Loans, i.e. housing, auto insurance, leased vehicle driver option,
     computer purchase, etc.: the balance outstanding on any and all company
     loans granted to the Executive will become due and payable in full on the
     Effective Date.

13.  Canada Savings Bonds: if the Executive was purchasing Canada Savings Bonds
     through payroll deductions, he may elect to receive a refund for the amount
     already paid, or purchase the bond in full within 5 days after the
     Effective Date.

14.  Charitable donations and social club fees: deductions will cease at the
     Effective Date.

15.  Pension: the Executive shall at the Effective Date immediately stop
     accumulating further benefits under the registered pension plan and
     unfunded supplemental plan in which the Executive is enrolled at the
     Effective Date (the "Pension Plans") and, without limitation, all payments
     the Executive becomes entitled to pursuant to Section 5.1 of the Agreement
     shall not be recognized under any contribution (actual or notional)
     provision of the Pension Plans. If on the Effective Date the Executive has
     not satisfied a vesting condition under the Pension Plans, the Executive
     will be deemed to have satisfied that condition.

16.  Post Retirement Medical and Dental Benefits: if the Executive is age 51 or
     older as of the Effective Date, he will become eligible on the later of the
     first of the month following the Effective Date or the first of the month
     following his 55th birth date, to apply for medical, extended health and
     dental benefits on the basis of treatment equivalent to that being received
     by an employee of the Company who retired on the Effective Date.

<PAGE>


                                   SCHEDULE C

                                     RELEASE

IN CONSIDERATION for the payment to me of $1.00 by FLETCHER CHALLENGE CANADA
LIMITED (the "Company") and for the entry by the Company into the Executive
Severance Agreement (the "Agreement") dated as of the 30th day of June, 2000
between the Company and me (the receipt and sufficiency of which are hereby
acknowledged), I, Russell J. Horner, HEREBY RELEASE AND FOREVER DISCHARGE the
Company, its related and affiliated companies and subsidiaries (collectively
"Fletcher Challenge"), and its officers, directors, and employees, from any and
all actions, causes of action, claims and demands, which in any way relate to my
employment and the termination of my employment with Fletcher Challenge,
including any claim arising from the provisions of the EMPLOYMENT STANDARDS ACT,
HUMAN RIGHTS ACT or other applicable legislation. I FURTHER AGREE that the
consideration I have received includes full payment for any claim I may have
under such legislation.

The terms of this release set out the entire agreement between myself and
Fletcher Challenge and are intended to be contractual and are not a mere
recital.

I declare that I fully understand the terms of this settlement, I have been
advised to seek independent professional advice before executing this document
and that I voluntarily accept the consideration, for the purpose of making a
full and final compromise and settlement of all claims.

I further understand and agree that the terms of this settlement will remain
confidential and will not be disclosed by me to third parties, except to my
professional advisors and to my family, and as may be required by law.

Dated this ______ day of __________, 20__, at ________________, in the Province
of British Columbia.

WITNESSED BY:


___________________________                   ___________________________
Witness - Signature                           RUSSELL J. HORNER

___________________________
Witness - Address

___________________________
Witness - Occupation