**CATALYST PAPER CORPORATION****2007 RESTRICTED SHARE UNIT PLAN**1. PURPOSE 1.1 This Plan has been established by the Corporation to provide long-term incentives toexecutives of the Corporation and its Subsidiaries for the success of the Corporation and itsSubsidiaries, to support the objectives of employee ownership, to foster a responsible balancebetween short term and long term results, and to build and maintain a strong spirit ofperformance and entrepreneurship. 2. PLAN DEFINITIONS AND INTERPRETATIONSIn this Plan, the following terms have the following meanings: (a) “Account” means the bookkeeping account established and maintained by theCorporation for each Participant in which the number of Share Units of the Participantare recorded; (b) “Applicable Law” means any applicable provision of law, domestic or foreign,including, without limitation, applicable securities legislation, together with allregulations, rules, policy statements, rulings, notices, orders or other instrumentspromulgated thereunder and Stock Exchange Rules; (c) “Beneficiary” means any person designated by the Participant as his or herbeneficiary under the Plan in accordance with Section 13.1 or, failing any sucheffective designation, the Participant’s estate; (d) “Board” mean the Board of Directors of the Corporation; (e) “Committee” means the Governance and Human Resources Committee of the Board orany other committee or person designated by the Board to administer the Plan; (f) “Corporation” means Catalyst Paper Corporation and its respective successorsand assigns, and any reference in the Plan to action by the Corporation means action byor under the authority of the Board or any person or committee that has been designatedfor the purpose by the Board including, without limitation, the Committee; (g) “Director” means a director of the Corporation;
 
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 (h) “Disability” means, with respect to a Participant, any physical or mental stateof the Participant such that as a result of illness, disease, mental or physicaldisability or similar cause, the Participant is unable to fulfill the Participant’sobligations as a director of the Corporation or under the Participant’s employmentagreement with the Participant’s Employer, either for any consecutive six monthperiod or for any six month period (whether or not consecutive) in any consecutivetwenty-four (24) month period; (i) “Employee” means an employee of the Corporation or any of its Subsidiaries orany combination or partnership of such corporations; (j) “Employer” means, with respect to a Participant who is a Director, theCorporation, and with respect to a Participant who is an Employee, the Corporation, theSubsidiary or the combination or partnership of such corporations that employs theParticipant or that employed the Participant immediately prior to the Participant’sTermination Date; (k) “Expiry Date” means, with respect to Share Units granted to a Participant, thedate which is two years after the Participant’s Termination Date; (l) “Fiscal Year” means a fiscal year of the Corporation; (m) “Grant Agreement” means an agreement between the Corporation and a Participantunder which Share Units are granted, together with such amendments, deletions orchanges thereto as are permitted under the Plan; (n) “Grant Date” of a Share Unit means the date a Share Unit is granted to aParticipant under the Plan; (o) “Insider” has the meaning provided for purposes of the TSX relating to SecurityBased Compensation Arrangements; (p) “Market Value” with respect to a Share as at any date means the arithmeticaverage of the closing price of the Shares traded on the TSX for the five (5) tradingdays on which a board lot was traded immediately preceding such date (or, if the Sharesare not then listed and posted for trading on the TSX, on such stock exchange on whichthe Shares are then listed and posted for trading as may be selected for such purposeby the Corporation). In the event that the Shares are not listed and posted fortrading on any stock exchange, the Market Value shall be the Market Value of the Sharesas determined by the Board in its discretion, acting reasonably and in good faith; (q) “Participant” means a Director of the Corporation or an individual who is abona fide full time Employee who has been designated by the Corporation forparticipation in the Plan; (r) “Payout Date” means a date selected by the Corporation, in accordance with andas contemplated by Section 3.3 and Section 6.1; (s) “Plan” means this Catalyst Paper Corporation 2007 Restricted Share Unit Plan;
 
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 (t) “Reorganization” means any (i) capital reorganization, (ii) merger,(iii) amalgamation, (iv) offer for Shares of the Corporation which if successful wouldentitle the offeror to acquire all of the Shares of the Corporation or all of one ormore particular class(es) of securities of the Corporation to which the offer relates,(v) sale of a material portion of the assets of the Corporation, or (vi) arrangement orother scheme of reorganization; (u) “Retirement” means the retirement of a Participant from employment with his orher Employer in accordance with the normal retirement policy of his or her Employer; (v) “Security Based Compensation Arrangement” has the meaning defined in theprovisions of the TSX Company Manual relating to security based compensationarrangements; (w) “Shareholders” means the holders of Shares; (x) “Shares” mean Common Shares of the Corporation and includes any securities ofthe Corporation into which such units may be converted, reclassified, redesignated,subdivided, consolidated, exchanged or otherwise changed, pursuant to a Reorganizationor otherwise; (y) “Share Unit” means a unit credited by means of an entry on the books of theCorporation to a Participant pursuant to the Plan, representing the right to receive,subject to and in accordance with the Plan, for each Vested Share Unit one Share, atthe time, in the manner, and subject to the terms, set forth in the Plan and theapplicable Grant Agreement; (z) “Stock Exchange Rules” means the applicable rules of any stock exchange uponwhich Shares are listed; (aa) “Subsidiary” means an entity (including a partnership) in which the Corporationholds, directly or indirectly, a majority voting interest; (bb) “Termination Date” means the date on which a Participant ceases, for anyreason, to be an active Director or an active Employee, and, in the case of aParticipant who is a Director and who ceases to be a Director as a result of any actiontaken by the Board of Directors or the Shareholders of the Corporation, such date shallbe the date the Director ceases to be a Director; and in the case of a Participant whois an Employee, where the employment is terminated by the Employer, whether wrongful orfor cause or otherwise, such date shall be the date notice of termination is provided; (cc) “TSX” means the Toronto Stock Exchange; and (dd) “Vested Share Units” shall mean Shares in respect of which all vesting termsand conditions set forth in the Plan and the applicable Grant Agreement have beeneither satisfied or waived in accordance with the Plan.
 
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2.2 In this Plan, unless the context requires otherwise, words importing the singular number maybe construed to extend to and include the plural number, and words importing the plural numbermay be construed to extend to and include the singular number.3. GRANT OF SHARE UNITS AND TERMS3.1 The Corporation may grant Share Units to such Participant or Participants in such number andat such times as the Corporation may, in its sole discretion, determine, as a bonus or similarpayment in respect of services rendered by the Participant for a Fiscal Year or otherwise ascompensation.3.2 At the option of the Participant, the amount payable to the Participant under any bonus,profit sharing or gain-sharing program by the Corporation, or a Subsidiary in respect of aFiscal Year, or a portion thereof, may be provided in the form of Share Units in lieu thereof,provided the Participant so elects prior to the completion of the relevant Fiscal Year.3.3 In granting any Share Units pursuant to Section 3.1 or Section 3.2, the Corporation shalldesignate: (a) the number of Share Units which are being granted to the Participant; (b) any time or performance based or other conditions as to vesting of the ShareUnits to become Vested Share Units; and (c) the Payout Date, which shall in no event be later than the Expiry Date and,unless otherwise determined on the Grant Date, shall be the third anniversary of theGrant Date.which shall be set out in the Grant Agreement.3.4 Subject to the terms of the Plan, the Corporation may determine any other terms or conditionswith respect to the vesting of Share Units granted pursuant to Section 3.1, in whole or inpart, to become Vested Share Units or the provision of Shares under the Plan, includingwithout limitation:(a) length of time of service to the Employer by a Participant;(b) the market price of the Shares; (c) the return to Shareholders, with or without reference to other comparablebusinesses;
 
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 (d) the financial performance or results of the Corporation, a Subsidiary, orbusiness share thereof; (e) other performance criteria relating to the Corporation, a Subsidiary, orbusiness share thereof; (f) ownership of Shares by a Participant; (g) restrictions on the re-sale of Shares acquired under the Plan including escrowarrangements; and (h) any other terms and conditions the Corporation may in its discretion determinewith respect to vesting;which shall be set out in the Grant Agreement.The conditions may relate to all or a portion of the Share Units in a grant and may begraduated such that different percentages (which may be greater or lesser than 100%) of theShare Units in a grant will become Vested Share Units depending on the extent ofsatisfaction of one or more such conditions.The Corporation may, in its discretion, subsequent to the Grant Date of a Share Unit, waiveany such terms or conditions or determine that they have been satisfied.4. GRANT AGREEMENT4.1 Each grant of a Share Unit will be set forth in a Grant Agreement containing terms andconditions required under the Plan and such other terms and conditions not inconsistentherewith as the Corporation may, in its sole discretion, deem appropriate.5. SHARE UNIT GRANTS AND ACCOUNTS5.1 An Account shall be maintained by the Corporation for each Participant. On the Grant Date,the Account will be credited with the Share Units granted to a Participant on that date.5.2 A Participant’s Account shall, unless otherwise determined by the Corporation, from time totime until the Participant’s Termination Date, be credited with additional Share Units, thenumber of which shall be the quotient determined by dividing: one hundred per cent (100%) ofthe cash distributions that would have been paid to the Participant if the Share Units in hisor her Account on the relevant record date for a cash distribution on the Shares had beenShares by the Market Value of a Share on the payment date of such cash distribution, withfractions computed to three decimal places. Share Units credited to a Participant’s Accountpursuant to this Section 5.2 shall vest, and be payable, in accordance with Section 6.1 to theextent that they are in respect of Share Units granted to the Participant that have becomeVested Share Units.
 
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6. PAYOUTS6.1 On each Payout Date, the Participant shall be entitled to receive, and the Corporation shallissue, Shares equal in number to the Vested Share Units in the Participant’s Account to whichthe Payout Date relates.6.2 The number of Shares to be issued or provided shall be equal to the whole number of VestedShare Units. Where the number of Share Units would result in the issue of a fractional ShareUnit in the form of a fractional Share, the number of Share Units to be issued in the form ofShares shall be rounded down to the next whole number of Share Units. No fractional Sharesshall be issued or provided nor shall cash be paid at any time in lieu of any such fractionalinterest. Any such fractional interests of a Share Unit which, together with other fractionalinterests, form a whole Share Unit, shall be issued or provided in the form of a Share as partof the Share Units to be issued or provided to the Participant on the next applicable PayoutDate, if any.6.3 Shares issued by the Corporation from treasury under this Plan shall be considered fully paidin consideration of past service that is no less in value than the fair equivalent of themoney the Corporation would have received if the Shares had been issued for money.6.4 Subject to and in accordance with any Applicable Law, the Corporation may, but is notobligated to, acquire issued and outstanding Shares in the market for the purposes ofproviding Shares to Participants under the Plan. The Shares acquired for this purpose shallnot be included for the purpose of the determining the maximum number of Shares to be issuedunder the Plan in accordance with Section 10.1.6.5 If so determined by the Corporation, in lieu of the issue or provision of Shares, theCorporation may satisfy the issuance or provision of Shares under the Plan, in whole or inpart, by the payment of a cash amount to a Participant on the Payout Date. The amount of suchpayment shall be equal to the number of Shares in respect of which the Corporation makes sucha determination, multiplied by the Market Price on the Payout Date, subject to any applicablewithholding tax.7. TERMINATION OF EMPLOYMENT AND FORFEITURES7.1 Unless otherwise determined by the Corporation at any time, on a Participant’s TerminationDate, any Share Units in a Participant’s Account which are not Vested Share Units shallterminate and be forfeited.7.2 Notwithstanding section 8.1, where a Participant ceases to be a Director or Employee byreason of Retirement, death or Disability or a Director ceases to be a Director at the requestof the Board or as a result of a vote of Shareholders, then in respect of each grant of ShareUnits made to such Participant pursuant to Section 3.1, that number of Share Units equal tothe product of (i) the number of Share Units relating to that grant multiplied by (ii) afraction, the numerator of which shall be the number of months between the applicable GrantDate and the Participant’s Termination Date (rounded up to the nearest whole number of months)and the denominator of which shall be the totalnumber of months between the Grant Date and the date that all the Share Units relating tothat grant would have become fully Vested Share Units, assuming any applicable terms orconditions under Section 3.4 had been satisfied, shall become Vested Share Units, and notterminate nor be forfeited on the Participant’s Retirement, death, or termination ofemployment or directorship by reason of Disability.
 
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7.3 Notwithstanding Section 8.1, where a Participant ceases to be an Employee as a result of thetermination of his or her employment without cause, then in respect of each grant of ShareUnits made to such Participant, at the Corporation’s discretion, all or a portion of suchParticipant’s Share Units may be made fully Vested Share Units or may be permitted to continueto vest, in accordance with their terms, during any statutory or common law severance periodor any period of reasonable notice required by law or as otherwise may be determined by theCorporation in its sole discretion.8. FORFEITED UNITS8.1 Notwithstanding any other provision of the Plan or a Grant Agreement, Share Units grantedhereunder shall terminate on, if not redeemed or previously terminated and forfeited inaccordance with the Plan, and be of no further force and effect after, the Expiry Date.9. ALTERATION OF NUMBER OF SHARES SUBJECT TO THE PLAN9.1 In the event that the Shares shall be subdivided or consolidated into a different number ofShares or a distribution shall be declared upon the Shares payable in Shares, the number ofShare Shares then recorded in the Participant’s Account shall be adjusted by replacing suchnumber by a number equal to the number of Shares which would be held by the Participantimmediately after the distribution, subdivision or consolidation, should the Participant haveheld a number of Shares equal to the number of Share Shares recorded in the Participant’sAccount on the record date fixed for such distribution, subdivision or consolidation.9.2 In the event there shall be any change, other than as specified in Section 9.1, in the numberor kind of outstanding Shares or of any shares or other securities into which such Sharesshall have been changed or for which they shall have been exchanged, pursuant to aReorganization or otherwise, then there shall be substituted for each Share referred to in thePlan or for each share into which such Share shall have been so changed or exchanged, the kindof securities into which each outstanding Share shall be so changed or exchanged and anequitable adjustment shall be made, if required, in the number of Share Units then recorded inthe Participant’s Account, such adjustment, if any, to be reasonably determined by theCommittee and to be effective and binding for all purposes.9.3 In the case of any such substitution, change or adjustment as provided for in this Section 9,the variation shall generally require that the aggregate Market Value of the Share Units thenrecorded in the Participant’s Account prior to such substitution, change or adjustment will beproportionately and appropriately varied so that it be equal to such aggregate Market Valueafter the variation.
 
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10. MAXIMUM NUMBER OF SHARES TO BE ISSUED10.1 Subject to adjustment, the maximum number of Shares issuable under the Plan shallbe 7,000,000 Shares.10.2 The maximum number of Shares issuable to Insiders pursuant to the Plan, together with anyShares issuable pursuant to any other Security Based Compensation Arrangement, at any time,shall not exceed 10% of the total number of outstanding Shares. The maximum number of Sharesissued to Insiders pursuant to the Plan, together with any Shares issued pursuant to any otherSecurity Based Compensation Arrangement, within any one year period, shall not exceed 10% ofthe total number of outstanding Shares.11. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN 11.1 The Board may, without notice and without Shareholder approval, at any time and from time totime, amend the Plan or any provisions thereof in such manner as the Corporation, in its solediscretion, determines appropriate (a) for the purposes of making formal minor or technical modifications to any ofthe provisions of the Plan, (b) to correct any ambiguity, defective provision, error or omission in theprovisions of the Plan,(c) to change the vesting provisions of Share Units or the Plan; and (d) to change the termination provisions of Share Units or the Plan which does notentail an extension beyond the original expiry date of the Share Units;provided, however, that: (e) no such amendment of the Plan may be made without the consent of each affectedParticipant in the Plan if such amendment would adversely affect the rights of suchaffected Participant(s) under the Plan; and (f) shareholder approval shall be obtained in accordance with the requirements ofthe Toronto Stock Exchange for any amendment that results in: (i) an increase in the maximum number of Shares issuable pursuantto the Plan; (ii) an extension of the Expiry Date for Share Units granted toInsiders under the Plan;(iii) other types of compensation through Share issuance; (iv) an expansion of the rights of a Participant to assign ShareUnits other than as set forth in Section 14.2; or (v) the addition of additional categories of participants, otherthan as contemplated by Section 9, requires the approval of Shareholders by amajority of the votes cast at a meeting of Shareholders.
 
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11.2 If the Corporation terminates the Plan, Share Units previously credited shall, at thediscretion of the Corporation, either (a) be settled immediately in accordance with the termsof the Plan in effect at such time, or (b) remain outstanding and in effect and settled in duecourse in accordance with the applicable terms and conditions.12. ADMINISTRATION12.1 Unless otherwise determined by the Board, the Plan shall be administered by the Committeesubject to Applicable Laws. The Committee shall have full and complete authority to interpretthe Plan, to prescribe such rules and regulations and to make such other determinations as itdeems necessary or desirable for the administration of the Plan. All actions taken anddecisions made by the Committee shall be final, conclusive and binding on all partiesconcerned, including, but not limited to, the Participants and their beneficiaries and legalrepresentatives, each Subsidiary and the Corporation. All expenses of administration of thePlan shall be borne by the Corporation.12.2 The Corporation shall keep or cause to be kept such records and accounts as may be necessaryor appropriate in connection with the administration of the Plan and the discharge of itsduties. At such times as the Corporation shall determine, the Corporation shall furnish theParticipant with a statement setting forth the details of his or her Share Units including theGrant Date and the Vested Share Units and unvested Share Units held by each Participant. Suchstatement shall be deemed to have been accepted by the Participant as correct unless writtennotice to the contrary is given to the Corporation within 30 days after such statement isgiven to the Participant.13. BENEFICIARIES AND CLAIMS FOR BENEFITS13.1 Subject to the requirements of Applicable Law, a Participant may designate in writing aBeneficiary to receive any benefits that are payable under the Plan upon the death of suchParticipant. The Participant may, subject to Applicable Law, change such designation fromtime to time. Such designation or change shall be in such form and executed and filed in suchmanner as the Corporation may from time to time determine.14. GENERAL14.1 The transfer of an employee from the Corporation to a Subsidiary, from a Subsidiary to theCorporation or from a Subsidiary to another Subsidiary, shall not be considered a terminationof employment for the purposes of the Plan, nor shall it be considered a termination ofemployment if a Participant is placed on such other leave of absence which is considered bythe Corporation as continuing intact the employment relationship.14.2 The Plan shall enure to the benefit of and be binding upon the Corporation, its successorsand assigns. The interest of any Participant under the Plan or in any Share Unit shall notbe transferable or assignable other than by operation of law, except, if and on such termsas the Corporation may permit, to a spouse or minor children or grandchildren or a personalholding company or family trust controlled by a Participant, the shareholders orbeneficiaries of which, as the case may be, are any combination of the Participant, theParticipant’s spouse, the Participant’s minor children or the Participant’s minorgrandchildren, and after his or her lifetime shall enure to the benefit of and be bindingupon the Participant’s Beneficiary.
 
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14.3 The Corporation’s grant of any Share Units or issuance of any Shares hereunder is subject tocompliance with Applicable Law applicable thereto. As a condition of participating in thePlan, each Participant agrees to comply with all Applicable Law and agrees to furnish to theCorporation all information and undertakings as may be required to permit compliance withApplicable Law. 14.4 The Corporation or a Subsidiary may withhold from any amount payable to a Participant, eitherunder this Plan, or otherwise, such amount as may be necessary so as to ensure that theCorporation or the Subsidiary will be able to comply with the applicable provisions of anyfederal, provincial, state or local law relating to the withholding of tax or other requireddeductions, including on the amount, if any, includable in the income of a Participant. TheCorporation shall also have the right in its discretion to satisfy any such withholding taxliability by retaining, acquiring or selling on behalf of a Participant any Shares which wouldotherwise be issued or provided to a Participant hereunder. 14.5 A Participant shall not have the right or be entitled to exercise any voting rights, receiveany distribution or have or be entitled to any other rights as a Shareholder in respect of anyShare Units. 14.6 Neither designation of an employee as a Participant nor the grant of any Share Units to anyParticipant entitles any Participant to the grant, or any additional grant, as the case maybe, of any Share Units under the Plan. Neither the Plan nor any action taken thereunder shallinterfere with the right of an Employer of a Participant to terminate a Participant’semployment at any time. Neither any period of notice, if any, nor any payment in lieuthereof, upon termination of employment, wrongful or otherwise, shall be considered asextending the period of employment for the purposes of the Plan. 14.7 Participation in the Plan shall be entirely voluntary and any decision not to participateshall not affect any employee’s employment with the Corporation or a Subsidiary. 14.8 The Plan shall be an unfunded obligation of the Corporation. Neither the establishment ofthe Plan nor the grant of any Share Units or the setting aside of assets by the Corporation(if, in its sole discretion, it chooses to do so) shall be deemed to create a trust. Theright of the Participant or Beneficiary to receive payment pursuant to the Plan shall be nogreater than the right of other unsecured creditors of the Corporation. 14.9 This Plan is established under the laws of the Province of British Columbia and the rights ofall parties and the construction of each and every provision of the Plan and any ShareUnits granted hereunder shall be construed according to the laws of the Province of BritishColumbia. 14.10 This Plan is hereby instituted this 28th day of March, 2007 and amended this29th day of April, 2009.
 
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