Document:

EX-4.31

TRUST INDENTURE

between

PRODUITS FORESTIERS CANADIEN PACIFIQUE LIMITEE -

CANADIAN PACIFIC FOREST PRODUCTS LIMITED

and

COMPAGNIE MONTREAL TRUST -

MONTREAL TRUST COMPANY

In respect of

10.85% Debentures Due 2014

Bearing formal date of December 12, 1989

 

 

CONTENTS

	 	 	 	 	 	 	 
	ARTICLE	 	Title	 	Page	 
	ONE	 	Definitions and Other Provisions of General Application
	 	 	2	 
	 	 	 
	 	 	 	 
	TWO	 	Security Forms
	 	 	23	 
	 	 	 
	 	 	 	 
	THREE	 	The Securities
	 	 	41	 
	 	 	 
	 	 	 	 
	FOUR	 	Satisfaction and Discharge
	 	 	50	 
	 	 	 
	 	 	 	 
	FIVE	 	Remedies
	 	 	53	 
	 	 	 
	 	 	 	 
	SIX	 	The Trustee
	 	 	66	 
	 	 	 
	 	 	 	 
	SEVEN	 	Consolidation, Merger, Conveyance or Transfer
	 	 	76	 
	 	 	 
	 	 	 	 
	EIGHT	 	Supplemental Indentures
	 	 	78	 
	 	 	 
	 	 	 	 
	NINE	 	Meetings of Holders of Securities
	 	 	82	 
	 	 	 
	 	 	 	 
	TEN	 	Covenants
	 	 	87	 
	 	 	 
	 	 	 	 
	ELEVEN	 	Redemption and Purchase of Securities
	 	 	99	 
	 	 	 
	 	 	 	 
	TWELVE	 	Counterparts
	 	 	105	 
	 	 	 
	 	 	 	 
	 	 	Testimonium
	 	 	 	 

 

 

     THIS INDENTURE dated as of December 12, 1989 between PRODUITS FORESTIERS CANADIEN PACIFIQUE
LIMITEE — CANADIAN PACIFIC FOREST PRODUCTS LIMITED, a corporation amalgamated under the Canada
Business Corporations Act (herein called the “Corporation”) having its principal executive office
at 1155 Metcalfe Street, Montreal, Quebec, H3B 2X1 and MONTREAL TRUST COMPANY — COMPAGNIE MONTREAL
TRUST, a Quebec corporation duly authorized to carry on the business of a trust company (herein
called the “Trustee”).

Recitals of the Corporation

     The Corporation has duly authorized the creation of an issue of its 10.85% Debentures Due 2014 of
substantially the tenor and amount herein set forth, and to provide therefor the Corporation has
duly authorized the execution and delivery of this Indenture.

     All things necessary to make the Securities, when executed by the Corporation and authenticated and
delivered by the Trustee hereunder and duly issued by the Corporation, the valid obligations of the
Corporation, and to make this Indenture a valid agreement of the Corporation, in accordance with
their and its terms, have been done.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

     For and in consideration of the premises and the acquisition of the Securities by the Holders
thereof, it is mutually covenanted and agreed, for the benefit of all Holders of the Securities, as
follows:

 

 

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ARTICLE ONE

Definitions and Other Provisions of

General Application

     Section 101. Definitions.

     (a) For all purposes of this Indenture, except as otherwise expressly provided or unless the
context otherwise requires:

     “This Indenture” means this instrument as originally executed or as it may from time to time be
supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the
applicable provisions hereof.

     All references in this instrument to designated “Articles”, “Sections” and other subdivisions are
to the designated Articles, Sections and other subdivisions of this instrument as originally
executed. The words “herein”, “hereof”, “hereunder” and “herewith” and other words of similar
import refer to this Indenture as a whole and not to any particular Article, Section or other
subdivision.

     (b) All accounting terms not otherwise defined herein have the meanings assigned to them in
accordance with generally accepted accounting principles in Canada and, except as otherwise herein
expressly provided, the term “generally accepted accounting principles” with respect to any
computation required or permitted hereunder shall mean such accounting principles as are generally
accepted in Canada at the date or time of such computation;

 

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     (c) The terms defined in this Article have the meanings assigned to them in this Article, and
include the plural as well as the singular.

          “Act” when used with respect to any Securityholder has the meaning specified in Section 103.

          “Acting jointly or in concert”, when used in relation to a Person, has the meaning assigned to such
term in the Ontario Act.

          “Affiliate” of any Person has the meaning assigned to such term in the Ontario Act.

          “Associate” of any Person has the meaning assigned to such term in the Ontario Act.

          “Beneficial Owner” or “Beneficial Ownership”, when used in relation to shares, includes the meaning
assigned to such terms in the Ontario Act.

          “Board of Directors” means the board of directors of the Corporation or, when the context otherwise
permits, any duly authorized committee or member of the board.

          “Board Resolution” means a copy of a resolution certified by the Secretary or an Assistant
Secretary of the Corporation or by another officer of the Corporation acceptable to the Trustee as
having been duly adopted by the Board of Directors and to be in full force and effect on the date
of such certification, and delivered to the Trustee.

          “Branch Security Register” and “Branch Security Registrar” have the respective meanings specified
in Section 305.

 

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          “Business Day”, when used with respect to any Place of Payment, means each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which banking institutions in that Place of
Payment are authorized or obligated by law to close for the entire day.

          “CBRS” means Canadian Bond Rating Service Limited.

          “Canada Yield Price” shall mean, in effect, a price equal to the price of the Securities calculated
to provide a yield to maturity equal to the Government of Canada Yield plus 0.50% on the business
day preceding the date of the resolution authorizing the redemption or if such price is being
calculated for the purpose of Section 1109, on the business day preceding the date of purchase.

          “Central Security Register” has the meaning specified in Section 305.

          “Continuing Director” at any date means an individual who is a member of the Board of Directors on
such date and who either was a member of the Board of Directors on the date of this Indenture or
shall have become a member thereof subsequent to such date (i) with the approval of at least a
majority of the Continuing Directors then members of the Board of Directors or (ii) following the
election of such member at an annual general meeting of shareholders to replace a director who has
died or who has resigned or otherwise retired in the ordinary course, provided that the number of
directors that may be so elected to replace a director who has resigned or otherwise retired, shall
not exceed 20% of the number of directors in office immediately prior to the previous annual
general meeting of shareholders.

 

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          “Corporation” means the Person named as the “Corporation” in the first paragraph of this instrument
until a successor corporation shall have become such pursuant to the applicable provisions of this
Indenture, and thereafter “Corporation” shall mean such successor corporation.

          “Corporation Request”, “Corporation Order” and “Corporation Consent” mean, respectively, a written
request, order or consent delivered to the Trustee after having been signed in the name of the
Corporation by its Chairman of the Board, President or a Vice-President, and by its Secretary, an
Assistant Secretary, its Treasurer, an Assistant Treasurer, its Controller or an Assistant
Controller or by any two officers of the Corporation duly authorized for the purpose by a Board
Resolution and acceptable to the Trustee.

          “DBRS” means Dominion Bond Rating Service Limited.

          “Debt” means any undischarged indebtedness for money borrowed, whether or not evidenced by any
note, bond, debenture or other instrument; provided, however, that Debt shall not include any Debt
for the payment or redemption of which money in the necessary amount shall have been deposited in
trust either at or before the maturity or redemption date thereof.

          “Designated Event” shall be deemed to have occurred each time:

	 	(i)	 	a Person, alone or with its Affiliates, Associates or Persons with whom such Person is acting
jointly or in concert, becomes the Beneficial Owner of more than 30% of the total voting rights
attaching to all outstanding Voting Shares of the Corporation or subsequently increases

 

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	 	 	 	such Beneficial Ownership from 50% or less to a majority of the total voting rights attaching to
all Voting Shares of the Corporation; provided that this clause (i) shall not apply to the
acquisition of shares of the Parent Company; or
	 
	 	(ii)	 	the individuals who are Continuing Directors shall cease for any reason to constitute at
least two-thirds of the Board of Directors; or
	 
	 	(iii)	 	the Corporation consolidates or amalgamates with or merges into another corporation or
conveys, transfers or leases all or substantially all of its assets to any Person, or any
corporation consolidates or  amalgamates with or merges into the Corporation, in any such event
pursuant to a transaction in which outstanding Voting Shares of the Corporation are changed into or
exchanged for cash, securities or other property, provided that there shall be excluded from the
application of this clause (iii) such transactions (a) between the Corporation and its Subsidiaries
or between Subsidiaries, (b) involving solely the establishment of a public holding company for the
Corporation, or (c) involving the exchange of the Corporation’s Voting Shares as consideration in
the acquisition of another business or businesses (without change or exchange of the Corporation’s
outstanding Voting Shares into or for cash, securities or other property); or
	 
	 	(iv)	 	the Corporation or any Subsidiary of the
Corporation purchases or otherwise

 

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	 	 	 	acquires, directly or indirectly, Beneficial Ownership of Voting Shares of the Corporation if,
after giving effect to such purchase or acquisition, the Corporation (together with its
Subsidiaries) shall have acquired 30% or more of the Corporation’s Voting shares within any
12-month period calculated by reference to the Voting Shares outstanding at the beginning of such
period; or
	 
	 	(v)	 	on any date (a “Calculation Date”) the Corporation makes any distribution or distributions
of cash, property or securities (excluding regular dividends and distributions of shares of the
Corporation that are not Redeemable Shares) to holders of Voting Shares of the Corporation or
purchases or otherwise acquires Beneficial Ownership of Voting Shares of the Corporation and the
sum of the fair market value of such distribution or purchase, plus the fair market value of all
other such distributions and purchases which have occurred during the preceding 12-month period,
is at least 30% of the fair market value of the outstanding Voting Shares of the Corporation;
this last percentage is calculated on each Calculation Date by dividing (x) the fair market value
of the distributions and purchases which have occurred on such Calculation Date by (y) the fair
market value of the Corporation’s outstanding Voting Shares immediately prior to such distributions
or purchases, and adding to that percentage all of the percentages which have been similarly
calculated on the dates of all such distributions and purchases during the preceding 12-month
period.

 

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          “Event of Default” has the meaning specified in Section 501.

          “Extraordinary Resolution” means any Act by the Holders of Securities which has been (a) signed by
or for the Holders of not less than two-thirds in principal amount of the Outstanding Securities;
or (b) adopted by the Holders of two-thirds in principal amount of the Outstanding Securities
voting thereon at a meeting of the Holders of Securities duly held pursuant to the provisions of
Article Nine.

          “Full Rating Category” means (i) with respect to CBRS, any of the following categories: B+, B, C++,
C+ and C, (ii) with respect to DBRS, any of the following categories: BB, B, CCC, CC and C and
(iii) with respect to any other Rating Agency, the equivalent of any such category of
CBRS or DBRS used by such other Rating Agency. In determining whether the rating of the Securities
has decreased by the equivalent of one Full Rating Category, gradation within Full Rating
Categories (high and low for CBRS and for DBRS or the equivalent gradation for another Rating
Agency) shall constitute one-third of a Full Rating Category. Thus, with respect to DBRS, a decline
in a rating from BB (high) to B (high) will constitute a decline of one Full Rating Category, and a
decline in a rating from BB (high) to BB or BB (low) will constitute a decline of less than one
Full Rating Category.

          “Government of Canada Yield” on any date shall mean, in effect, the yield to maturity on such date
compounded semi-annually which a non-callable Government of Canada Bond would carry if issued, in
Canadian dollars in Canada, at 100% of its principal amount on such date with a term to maturity
equal to the remaining term to maturity of the Securities; the Government of Canada Yield will

 

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be provided by two Canadian investment dealers, RBC Dominion Securities Inc. and Wood Gundy Inc. or
such other Canadian investment dealer or dealers as the Corporation may determine from time to time
and as may be acceptable to the Trustee.

          “Holder” when used with respect to any Security means a Securityholder.

          “Interest Payment Date” means the Stated Maturity of an instalment of interest on the Securities.

          “Investment Grade” means B++ (low) or higher by CBRS or BBB (low) or higher by DBRS or the
equivalent of such ratings by CBRS or DBRS or by any other Rating Agency.

          “Maturity” when used in respect to any Security means the date on which the principal of such
Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or
by declaration of acceleration, call for redemption or otherwise.

          “Mortgage” means any mortgage, hypothec, privilege, pledge, security interest, floating charge,
conditional sale or other title retention agreement or other similar lien or encumbrance.

          “Officers’ Certificate” means a certificate signed by the Chairman of the Board, the President or a
Vice-President, and by the Secretary, an Assistant Secretary, the Treasurer, an Assistant
Treasurer, the Controller or an Assistant Controller of the Corporation (or by any two officers of
the Corporation duly authorized for the purpose by a Board Resolution and acceptable to the
Trustee), and delivered to the Trustee.

 

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          “Ontario Act” means the Securities Act (Ontario), R.S.O. 1980, c. 466, as amended to the date of
this Indenture.

          “Opinion of Counsel” means a written opinion of counsel, who may (except as otherwise expressly
provided in this Indenture) be counsel for the Corporation (whether or not in the employ of the
Corporation), and shall be appointed by Corporation Order and acceptable to the Trustee.

          “Outstanding”, when used with respect to Securities, means, as of the date of determination, all
Securities theretofore authenticated and delivered under this Indenture, except:

	 	(i)	 	Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation;
	 
	 	(ii)	 	Securities for whose payment or redemption money in the necessary amount has been theretofore
deposited with the Trustee or any Paying Agent (other than the Corporation) in trust or set aside
and segregated in trust by the Corporation (if the Corporation shall act as a Paying Agent) for the
Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made; and
	 
	 	(iii)	 	Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of
which other Securities have been authenticated and delivered pursuant to this Indenture, other than
any such Securities in respect of which there

 

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	 	 	 	shall have been presented to the Trustee proof satisfactory to it that such Securities are held by
a bona fide purchaser in whose hands such Securities are valid obligations of the Corporation;

provided, however, that in determining which Persons are entitled to vote at a meeting of Holders
of Securities or whether the Holders of the requisite principal amount of Outstanding Securities
are present at a meeting of Holders of Securities for quorum purposes or have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the
Corporation, or any other obligor upon the Securities or any Affiliate of the Corporation, or such
other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such determination as to the entitlement
to vote, the presence of a quorum or upon any such request, demand, authorization, direction,
notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so
disregarded. Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to
act with respect to such Securities and that the pledgee is not the Corporation or any other
obligor upon the Securities or any Affiliate of the Corporation or such other obligor.

          “Parent Company” means the company which, on the date of this Indenture, owns all of the
outstanding shares of the Corporation’s current majority shareholder.

 

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          “Paying Agent” means any Person, which may be the Corporation, authorized by the Corporation to pay
the principal of and interest on any Securities on behalf of the Corporation.

          “Person” means an individual, body corporate, partnership, unincorporated association,
unincorporated syndicate, unincorporated organization, trust, trustee, executor, administrator, or
other legal representative.

          “Place of Payment” means any municipality referred to in Section 301.

          “Place of Registration” means and includes the principal office of the Trustee in each of the
Cities of Halifax, Montreal, Toronto, Winnipeg, Calgary or Vancouver or any other office or agency
appointed by the Corporation pursuant to Section 1002.

          “Predecessor Securities” of any particular Security means every previous Security evidencing all or
a portion of the same debt as that evidenced by such particular Security; and, for the purposes of
this definition, any Security authenticated and delivered under Section 306 in lieu of a lost,
destroyed or stolen Security shall be deemed to evidence the same debt as the lost, destroyed or
stolen Security.

          “Principal Subsidiary” at any time means a Subsidiary:

	 	(a)	 	whose total assets or gross revenues (both calculated on a proportionate consolidation basis)
represent not less than 15% of the consolidated total assets or, as the case may be, consolidated
gross revenues of the Corporation and its

 

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	 	 	 	Subsidiaries taken as a whole, all as calculated by reference to the then latest financial
statements (consolidated or, as the case may be, unconsolidated, in accordance with generally
accepted accounting principles) of such Subsidiary and the then
latest consolidated audited financial statements of the Corporation and its Subsidiaries, after deducting from either of such
amounts, as the case may be, the proportion thereof related to minority interests, if any, in the
Subsidiary under consideration; or
	 
	 	(b)	 	to which is transferred the whole or substantially the whole of the assets and undertaking of a
Subsidiary which immediately prior to such transfer is a Principal Subsidiary;

provided, however, that no Subsidiary shall be a Principal Subsidiary unless it shall have been a
Subsidiary for a period of at least 90 days, unless it has no voting shares traded on a stock
exchange and unless its assets and liabilities are, on the basis of the accounting practice and
principles applied by the Corporation’s auditors, consolidated with those of the Corporation for
the purpose of the preparation from time to time of the Corporation’s balance sheet.

          “Purchase Money Obligation” means any indebtedness of the Corporation, of a Subsidiary or of or
related to any joint venture, partnership or similar arrangement in which the Corporation or a
Subsidiary has an interest, incurred in respect of the cost of acquisition of any property
(including shares of capital stock or Debt) or of the cost of construction or improvement of any
property acquired, constructed or improved after the date of this Indenture, which indebtedness
existed at the time of acquisition or was created, issued,

 

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incurred, assumed or guaranteed contemporaneously with the acquisition, construction or improvement
or within 120 days after the completion thereof and includes any extension, renewal or refunding of
any such indebtedness if the principal amount thereof outstanding on the date of such extension,
renewal or refunding is not increased.

          “Put Price” on any date means a price equal to the price of the Securities calculated to provide a
yield to maturity equal to the Government of Canada Yield plus 0.75% on the business day preceding
such date.

          “Rating Agency” means CBRS and its successors or DBRS and its successors or, if CBRS or DBRS or
both shall not make a rating on the Securities publicly available, a recognized securities rating
agency or agencies, as the case may be, selected by the Corporation which shall be substituted for
CBRS or DBRS or both, as the case may be.

          “Rating Date” means the date which is 120 days prior to public disclosure of the occurrence of a
Designated Event.

          “Rating Decline” shall be deemed to have occurred if on any date within the 90-day period following
public disclosure of the occurrence of a Designated Event (which period shall be extended so long
as the rating of the Securities is under publicly announced consideration for possible downgrade by
a Rating Agency):

	 	(a)	 	where the Securities were rated by a Rating Agency on the Rating Date as Investment Grade, the
rating of the Securities by such Rating Agency is below Investment Grade; or

 

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	 	(b)	 	where the Securities were rated by a Rating Agency on the Rating Date below Investment Grade,
the rating of the Securities by such Rating Agency is at least one Full Rating Category below the
rating of the Securities by such Rating Agency on the Rating Date.

          “Rating Decline Date” shall be the date on which a Rating Decline is deemed to have occurred after
a Designated Event.

          “Rating Recovery” shall be deemed to have occurred if the rating of the Securities by each Rating
Agency which has effected a Rating Decline is re-established to at least the rating existing at the
Rating Date.

          “Record Date” for the interest payable on any Interest Payment Date means the date specified in
Section 301.

          “Redeemable Share” means a share issued by the Corporation that the Corporation (a) may purchase or
redeem on the demand of the Corporation or (b) is required by its articles to purchase or redeem at
a specified time or on the demand of a shareholder.

          “Redemption Date” when used with respect to any Security to be redeemed means the date fixed for
such redemption by or pursuant to this Indenture.

          “Redemption Price” when used with respect to any Security to be redeemed means the higher of (a)
the Canada Yield Price and (b) 100% of the principal amount
thereof, together in each case with
accrued and unpaid interest to the Redemption Date.

 

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          “Registered Holder” when used with respect to any Registered Security means the Person in whose
name such Security is registered in the Central Security Register.

          “Registered Security” means any Security registered in the Central Security Register.

          “Repayment Date” shall be a date which is 120 days following a Rating Decline Date or, if the
Corporation has given to the Securityholders a notice of increased interest rate on the Securities
pursuant to paragraph (c) of Section 1007, the 30th day following the giving of such notice (or if
either such date is not a Business Day at any Place of Payment, then the Business Day next
succeeding such date).

          “Responsible Officer” when used with respect to the Trustee means the chairman or vice-chairman of
the board of directors, the chairman or vice-chairman of the executive committee of the board of
directors, the president, any vice-president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or
assistant trust officer, the controller and any assistant controller or any other officer of the
Trustee customarily performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his knowledge of and familiarity with the particular
subject.

          “Security” or “Securities” means any or all of the 10.85% Debentures Due 2014 authenticated and
delivered pursuant to this Indenture.

 

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          “Securityholder” means a Registered Holder of a Registered Security.

          “Security Registers” has the meaning specified in Section 305.

          “Stated Maturity” when used with respect to any Security or any instalment of interest thereon
means the date specified in such Security as the fixed date on which the principal of such Security
or such instalment of interest is due and payable and includes the Redemption Date and the
Repayment Date.

          “Subsidiary”
means any corporation of which more than 50% of the Voting Shares is owned, directly
or indirectly, by or for the Corporation or by or for any corporation in like relation to the
Corporation and includes any corporation in like relation to a Subsidiary.

          “Trustee” means the Person named as the “Trustee” in the first paragraph of this instrument until a
successor Trustee shall have become such pursuant to the applicable provisions of this Indenture,
and thereafter “Trustee” shall mean such successor Trustee.

          “Voting Shares” means shares of capital stock of any class or classes of a corporation having under
all circumstances or under some circumstances that have occurred and are continuing the right to
elect members of the board of directors of such corporation, and includes securities currently
convertible into such shares and currently exercisable rights to acquire such shares or convertible
securities, provided that, for the purposes hereof, shares which only carry the right to vote
conditionally on the happening of an event which has not yet occurred shall not be considered
Voting Shares nor shall any shares be deemed to cease to be Voting Shares solely by

 

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reason of a right to vote accruing to shares of another class or classes by reason of the happening
of such event.

     Section 102. Form of Documents Delivered to Trustee.

     In any case where several matters are required to be certified by, or covered by an opinion of, any
specified Person, it is not necessary that all such matters be certified by, or covered by the
opinion of, only one such Person, or that they be so certified or covered by only one document, but
one such Person may certify or give an opinion with respect to some matters and one or more other
such Persons as to other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.

     Any certificate or opinion of an officer of the Corporation may be based, insofar as it relates to
legal matters, upon a certificate or opinion of, or representations by, counsel, unless such
officer knows, or in the exercise of reasonable care should know, that the certificate or opinion
or representations with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by, an officer or officers of
the Corporation stating that the information with respect to such factual matters is in the
possession of the Corporation, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to such matters are
erroneous.

     Where any Person is required to make, give or execute two or more applications, requests, con-

 

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sents, certificates, statements, opinions or other instruments under this Indenture, they may, but
need not, be consolidated and form one instrument.

     Section 103. Acts of Holders of Securities.

     (a) Any request, demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by Holders of Securities may be embodied in and
evidenced by (1) one or more instruments of sub- stantially similar tenor signed by such Holders
in person or by agent or proxy duly appointed in writing, (2) a resolution duly adopted by the
Holders of Securities at a meeting of Holders of Securities duly called and held in accordance with
the provisions of Article Nine. Except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments or resolution are delivered to the Trustee
and, where it is hereby expressly required, to the Corporation. Such instrument or instruments and
resolution (and the action embodied therein and evidenced thereby) are herein sometimes referred to
as the “Act” of the Holders of Securities signing such instrument or instruments or so voting on
such resolution. Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive
in favor of the Trustee and the Corporation if made in the manner provided in this Section. Proof
of the due adoption of any such resolution by the appropriate percentage of Holders of Securities
at a meeting thereof shall be sufficient for any purpose of this Indenture if such resolution forms
part of and its due adoption by such appropriate percentage is evident from the record of such
meeting prepared, signed and verified in the manner provided in Section 906.

 

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     (b) The fact and date of the execution by any Person of any such instrument or writing may be
proved by the affidavit of a witness of such execution or by the certificate of any notary or other
officer authorized by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such execution is by
an officer of a corporation or a member of a partnership, on behalf of such corporation or
partnership, such certificate or affidavit shall also constitute sufficient proof of his authority.

     (c) The fact and date of execution of any such instrument or writing may also be proved in any
other manner which the Trustee deems sufficient; and the Trustee may in any instance require
further proof with respect to any of the matters referred to in this Section.

     (d) The holding of Registered Securities shall be proved by the Central Security Register.

     (e) Any request, demand, authorization, direction, notice, consent, waiver or other action by
the Holder of any Security shall bind every future Holder of the same Security and the Holder of
every Security issued upon the transfer thereof or in exchange therefor or in lieu thereof, in
respect of anything done or suffered to be done by the Trustee or the Corporation in reliance
thereon, whether or not notation of such action is made upon such Security.

     Section 104. Notices, Etc., to Trustee and Corporation.

     Any request, demand, authorization, direction, notice, consent, waiver or Act of
Securityholders or other document provided or permitted by this

 

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Indenture to be made upon, given or furnished to, or filed with,

     (1) the Trustee by any Securityholder or by the Corporation shall be sufficient for
every purpose hereunder if made, given, furnished or filed in writing to or with the
Trustee at its principal office in the City of Montreal or at any other address previously
furnished by notice in writing to the Corporation by the Trustee and notified to the
Securityholders in accordance with Section 105, or

     (2) the Corporation by the Trustee or by any Securityholder shall be sufficient for
every purpose hereunder if in writing and either mailed, first-class postage prepaid, or
telexed or telecopied and confirmed by first-class mail postage prepaid, to the
Corporation addressed to it at the address of its principal office specified in the first
paragraph of this instrument, to the attention of its Secretary, or at any other address
or to the attention of any other Person previously furnished in writing to the Trustee by
the Corporation and notified to the Securityholders in accordance with Section 105.

     Section 105. Notices to Securityholders; Waiver.

     Except as otherwise expressly provided herein, where this Indenture provides for notice to
Securityholders of any event, such notice shall be sufficiently given to any Holder of Securities
if in writing and mailed, first-class postage prepaid, to such Holder of such Security, at his
address as it appears on the Central Security Register, not later than the latest date, and not
earlier than

 

- 22 -

the earliest date, prescribed for the giving of such notice.

     In any case where notice to Holders of Securities is given by mail, neither the failure to
mail such notice, nor any defect in any notice so mailed, to any particular Holder of a Security
shall affect the sufficiency of such notice with respect to other Holders of Securities given as
provided above.

     In case by reason of the suspension of regular mail service or by reason of any other cause it
shall be impracticable to give such notice by first-class postage prepaid mail, then such
notification to Holders of Securities as shall be made with the approval of the Trustee shall
constitute sufficient notice to such Holders for every purpose hereunder.

     Where this Indenture provides for notice to any Person in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before or after the event,
and such waiver shall be the equivalent of such notice. Waivers of notice by Securityholders shall
be filed with the Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.

     Section 106. Effect of Headings and Table of Contents.

     The Article and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.

 

- 23 -

     Section 107. Successors and Assigns.

     All covenants and agreements in this Indenture
by the Corporation shall bind its successors and
assigns, whether so expressed or not.

     Section 108. Separability Clause.

     In case any provision in this Indenture or in the Securities shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.

     Section 109. Benefits of Indenture.

     Nothing in this Indenture or in the Securities, express or implied, shall, except as may be
required by any applicable law, give to any Person, other than the parties hereto and their
successors hereunder and the Holders of Securities, any benefit or any legal or equitable right,
remedy or claim under this Indenture.

     Section 110. Governing Law.

     This Indenture and each of the Securities shall be construed in accordance with and governed
by the laws of the Province of Quebec and the laws of Canada applicable therein. Any reference
herein to a “trust”, an “express trust” or the “holding in trust” is to a trust validly created in
accordance with the laws of any jurisdiction that recognizes that ownership of the property of the
trust belongs irrevocably to the beneficiary of the trust.

 

- 24 -

     Section 111. Legal Holidays.

     In any case where any Interest Payment Date or date of Maturity of any Security shall not be a
Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture
or of the Securities) payment of interest or principal need not be made at such Place of Payment on
such day, but may be made on the next succeeding Business Day at such Place of Payment with the
same force and effect as if made on such Interest Payment Date or such date of Maturity, provided
that if such payment is duly made on such next succeeding Business Day, no interest shall accrue on
the amount so payable for the period from and after such Interest Payment Date or such date of
Maturity, as the case may be, to and including such next succeeding Business Day.

     Section 112. Language of Notices, Etc.

     Any request, demand, authorization, direction, notice, consent, election or waiver required or
permitted under this Indenture shall be in the English or French language.

ARTICLE TWO

Security Forms

     Section 201. General.

     The Securities and the Trustee’s certificate of authentication shall be in substantially the
forms set forth in this Article, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture and may have such letters, numbers

 

- 25 -

or other marks of identification and such legends or endorsements placed thereon as may,
consistently herewith, be determined by the officers executing such Securities, as evidenced by
their signing of the Securities. Any portion of the text of any Security may be set forth on the
reverse thereof.

     Section 202. Form of Security

CANADIAN PACIFIC FOREST PRODUCTS LIMITED

10.85% Debenture Due 2014

			
	 	 	 
	$                    
	 	No.                     

     CANADIAN PACIFIC FOREST PRODUCTS LIMITED, a corporation incorporated under the Canada Business
Corporations Act (hereinafter called the “Corporation”, which term includes any successor
corporation under the Indenture hereinafter referred to), for value received, hereby promises to
pay to                                                             , or registered assigns, on November 30, 2014 the principal sum of
                                         DOLLARS and to pay
interest thereon from and including the later of December 12, 1989 and the most recent Interest
Payment Date to which interest has been paid or duly provided for, calculated and payable
semiannually in arrears on May 31 and November 30 in each year commencing on May 31, 1990 (each
such date being an “Interest Payment Date”), at the rate of 10.85% per annum. The interest so
payable and punctually paid or duly provided for, on any Interest Payment Date will, as provided
in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor
Securities, as defined in the Indenture) is registered at the close of business on the Record Date
for such interest, which shall be the 15th day (whether or

 

- 26 -

not a business day) of the same calendar month as such Interest Payment Date. Payment of the
principal of and interest on this Security will be made in lawful money of Canada at any branch in
Canada of The Royal Bank of Canada, at the option of the Holder, or at such other place as may be
designated by the Corporation for such purpose and approved by the Trustee. Payment of interest on
this Security may be made at the option of the Corporation by warrant or cheque mailed to the
address of the Person or Persons entitled thereto as such address shall appear on the Central
Security Register. In the event that the Corporation is in default of its obligation to pay any
amount of principal or interest, the Corporation shall pay interest on the amounts in default at
the same rate, at the same places and on the same dates, to the extent such is permitted by law.

     This Security is one of a duly authorized issue of Securities of the Corporation designated
as its 10.85% Debentures Due 2014 (herein called the “Securities”), limited in aggregate principal
amount to $125,000,000, issued and to be issued under an indenture bearing formal date of December
12, 1989 (herein called the “Indenture”), between the
Corporation and Compagnie Montréal Trust
- Montreal Trust Company, Trustee (herein called the “Trustee”, which term includes any successor
trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights thereunder of the Corporation, the Trustee
and the Holders of the Securities, and the terms upon which the Securities are, and are to be,
authenticated and delivered. The Securities will be direct unsecured obligations of the
Corporation and will rank pari passu with all other unsecured indebtedness of the Corporation.

 

- 27 -

     All terms used in this Security which are defined in the Indenture shall have the respective
meanings assigned to them in the Indenture except as otherwise expressly provided or unless the
context otherwise requires.

     The Securities will be redeemable, at the Corporation’s option, in whole at any time or in
part from time to time, on not more than 60 and not less than 30 days’ prior notice, at the higher
of the Canada Yield Price (as defined in the Indenture) and the principal amount thereof plus
accrued and unpaid interest to the date fixed for redemption. Where less than all of the
outstanding Securities are to be redeemed, the Securities so to be redeemed will be selected by
the Trustee in such a manner as it shall deem equitable.

     The Corporation, commencing January 1, 1997, will make all reasonable efforts to purchase for
cancellation in the open market during each
calendar quarter, 1% of the aggregate principal amount of the Securities at prices below 100% of
the principal amount thereof plus accrued and unpaid interest and costs of purchase. If in any of
the first three calendar quarters of a calendar year, the Corporation is unable to purchase such
principal amount of Securities for any reason, including the fact that the Securities did not trade
below their principal amount, such purchase fund obligation for such quarter, to the extent
unfulfilled, will be carried forward for the succeeding quarter or quarters of the said calendar
year. All purchase fund obligations which the Corporation has been unable to fulfill during any
calendar year shall become extinguished as at the end of such year. The Securities which the
Corporation is obligated to purchase during any calendar quarter pursuant to this provision will be
reduced by the aggregate principal amount of the Securities redeemed or purchased by the
Corporation

 

- 28 -

in the same quarter otherwise than pursuant to this provision.

     When not in default under the Indenture, the Corporation shall also have the right to
purchase for cancellation the Securities in the market, by tender or private contract, at
any price. The Securities purchased or redeemed by the Corporation shall be cancelled and
shall not be reissued.

     Upon the occurrence of both a Designated Event
and a Rating Decline (as such terms are defined in the Indenture), each Holder of Securities may
require the Corporation to purchase, on the Repayment Date (as defined in the Indenture), all or
any portion of its Securities at a price equal to the Put Price (as defined in the
Indenture) in effect on the 30th day preceding the Repayment Date, together with accrued interest
to the Repayment Date. If, prior to the 30th day preceding a Repayment Date, a Rating Recovery (as
defined in the Indenture) shall occur, the Holders of the Securities shall no longer have the right
to require the Corporation to purchase their Securities on such Repayment Date. At any time prior
to the 90th day following a Rating Decline Date (as defined in the Indenture), the Corporation
shall have the right to increase the interest rate borne by the Securities and shall notify the
Securityholders of such increased rate. Following the giving of such notice, each Securityholder
shall have the right to require the Corporation to purchase, on the Repayment Date, all or any
portion of its Securities at a price equal to the Put Price in effect on the date of such notice
(which Put Price shall be set forth in the notice), together with accrued interest to such
Repayment Date. If any Holder of Securities does not exercise its right to require the Corporation
to so purchase its Securities, then its Securities shall bear interest at the increased rate set
forth in such notice by

 

- 29 -

the Corporation, as and from the Rating Decline Date. If 90% or more in aggregate principal
of the Securities outstanding on the 30th day preceding a Repayment Date have been tendered
for purchase on such Repayment Date, the Corporation shall have the right to purchase all of
the remaining Securities on such date at the Put Price, together with accrued interest to
such date. The Indenture contains various notification provisions concerning the foregoing
rights.

     If an Event of Default, as defined in the Indenture, shall occur, the principal of all the
Securities may be declared due and payable prior to the Stated Maturity thereof in the manner and with
the effect provided in the Indenture.

     The Indenture permits, with certain exceptions as therein provided, the amendment
thereof and the modification of the rights and obligations of the Corporation and the rights
of the Holders of the Securities under the Indenture at any time by the Corporation with the
consent of the Holders expressed by Extraordinary Resolution, as defined in the Indenture.
The Indenture also contains provisions permitting the Holders of specified percentages in
aggregate principal amount of the Securities at the time Outstanding, on behalf of the
Holders of all the Securities, to waive compliance by the Corporation with certain
provisions of the Indenture and of this Security and certain past defaults under the
Indenture and under this Security and their consequences. Any such consent or waiver by the
Holder of this Security shall be conclusive and binding upon such Holder and upon all future
Holders of this Security and of any Security issued upon the transfer hereof or in exchange
hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this
Security.

 

- 30 -

     As provided in the Indenture and subject to certain limitations therein set forth, this
Security is transferable by the registered Holder hereof on the Security Registers of the
Corporation, upon surrender of this Security for transfer at the principal office of the Trustee in
the Cities of Halifax, Montreal, Toronto, Winnipeg, Calgary and Vancouver, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the Corporation and the
Trustee or other Branch Security Registrar, if any, duly executed by the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to the designated
transferee or transferees.

     The Corporation, the Trustee and any agent of the Corporation or of the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all purposes whether or
not this Security be overdue.

     The Securities are issuable as fully registered Securities in denominations of $1,000 and any
integral multiple thereof. As provided in the Indenture and subject to certain limitations therein
set forth, Securities are exchangeable at the principal office of the Trustee in the Cities above
mentioned for a like aggregate principal amount of Securities of a different authorized
denomination, as requested by the Holder surrendering the same.

     Unless the certificate of authentication hereon has been executed by the Trustee by the
manual signature of one of its authorized officers, this Security shall not be entitled to any
benefit under the Indenture, or be valid or obligatory for any purpose.

 

- 31 -

     IN WITNESS WHEREOF, the Corporation has caused this Security to be executed by its duly
authorized officers.

	 	 	 	 	 
	Dated:

	 	December 12, 1989
	 	CANADIAN PACIFIC FOREST
	 

	 	 	 	PRODUCTS LIMITED
	 
	 	 	 	 
	 

	 	 	 	By          
               
                 
               
            
	 

	 	 	 	Chairman, President and Chief Executive
Officer
	 
	 	 	 	 
	 

	 	 	 	         
               
                  
                  
          
    
	 

	 	 	 	Secretary

Trustee’s Certificate of Authentication

     This is one of the Debentures referred to in the within-mentioned Indenture.

	 	 	 	 	 	 	 
	 	 	MONTREAL TRUST COMPANY Trustee	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 

	 	 
	 

	 	 	 	Authorized Officer	 	 

     Notice of Exercise of Put Right by Holder

     Pursuant to the within-mentioned Indenture, upon the occurrence of a Designated Event and a
Rating Decline (as defined in the Indenture), the Holder of this Security hereby exercises the
right to require the Corporation to purchase, on the applicable Repayment Date (as defined in the
Indenture), the total principal amount hereof or the portion thereof indicated below (being a

 

- 32 -

multiple of $1,000), at the applicable Put Price (as defined in the Indenture), together
with accrued interest to the said Repayment Date and hereby delivers this Security to the
Trustee for such purpose, the whole subject to the Indenture.

	 	 	 	 	 
	 

	 	Partial purchase:
	 	$                                                             
	 

	 	 	 	  (multiple of $1,000 only)

principal amount.

DATE:

	 	 	 	 	 	 	 	 	 
	 
Witness	 	 
  (Signature of Holder)	 	 

Paragraphe 202.      Formule des titres

PRODUITS FORESTIERS CANADIEN PACIFIQUE LIMITEE

Débenture 10,85 % échéant en 2014

	 	 	 
	No         
                   
                  
               

	 	$               
                   
                   
        

     PRODUITS FORESTIERS CANADIEN PACIFIQUE LIMITEE, société constituée en vertu de la Loi sur les
sociétés par actions (appelée dans les pré-sentes “Société”, terme qui comprend toute société
remplasante aux termes de 1’acte de fiducie mentionné
ci-aprés), contre valeur resue, promet
par les présentes de payer à               
                   
                   
        , ou à ses
ayants droit inscrits, le 30 novembre 2014 la somme en capital de                                         
                   
 DOLLARS et de payer
les intérêts s’y rapportant a compter du 12
décembre 1989 ou à compter de la dernière date de
paiement des intérêts à l’égard de laquelle des intérêts ont été versés ou dûment mis de côté,
selon celle de ces dates qui tombera la dernière, et ce,
calculés et payables semestriellement
terme

 

- 33 -

échu le 31 mai et le 30 novembre de chaque année à compter du 31 mai 1990 (chacune de ces dates
étant une “date de paiement des intérêts”), au taux annuel de 10,85%. Les intérêts ainsi payables,
qui sont payés ponctuellement ou dûment mis de côté, à toute date de paiement des intérêts seront,
tel qu’il est prévu dans l’acte de fiducie, versés à la personne au nom de laquelle le présent
titre (ou un ou plusieurs titres remplacés, selon la définition de “Predecessor Securities” qui
est donnée dans la version anglaise dudit acte de fiducie) est immatriculé à la fermeture des
bureaux à la date de clôture des registres se rapportant à ces intérêts, laguelle est le 15e jour
(qu’il s’agisse ou non d’un jour ouvrable) du même mois civil que celui de cette date de paiement
des intérêts. Le paiement du capital et des intérêts sur le présent titre sera effectué en monnaie
légale du Canada à toute succursale au Canada de La Banque Royale du Canada, au gré du porteur, ou
à tout autre endroit que la Société peut désigner à cette fin et qui est approuvé par le
fiduciaire. Le paiement des intérêts sur le présent
titre peut être effectué, au gré de la Société,
par mandat ou par chéque posté à l’adresse de la personne ou des personnes y ayant droit, telle que
cette adresse apparait dans le registre central des porteurs de titres. Si la Société est en défaut
aux termes de son obligation de payer une somme à l’égard du capital ou des intérêts, la Société
paiera des intérêts sur les sommes en défaut, et ce, au même taux, aux mêmes endroits et aux
mêmes dates, dans la mesure autorisée par la loi.

     Le présent titre est l’un des
titres d’une émission dûment autorisée de titres de la Société
désignés comme étant ses débentures 10,85 % échéant en 2014 (appelées dans les présentes
“titres”), dont la somme en capital globale est
limitée à 125 000 000 $, lesquelles sont ou
doivent être émises en vertu d’un acte de fiducie portant la

 

- 34 -

date officielle du 12 décembre 1989 (appelé dans les présentes “acte de fiducie”) et passé entre la
Société et Compagnie Montréal Trust — Montreal Trust Company, à titre de fiduciaire (appelée dans
les présentes “fiduciaire”, terme qui comprend tout fiduciaire remplaçant aux termes de
l’acte de fiducie); il y a lieu de se reporter à cet acte de fiducie et à tout acte de fiducie
supplémentaire pour obtenir l’énoncé des droits respectifs que possèdent en vertu de ceux-ci la
Société, le fiduciaire et les porteurs de titres, de même que l’énoncé des conditions selon
lesquelles les titres sont et doivent être authentifiés et livrés. Les titres constitueront des
obligations non garanties directes de la Société et seront d’un rang égal à celui de toutes les
dettes non garanties de la Société.

     Tous les termes utilisés dans le présent titre qui sont la version française de termes anglais
définis dans la version anglaise de l’acte de fiducie ont le sens qui est attribué à ces termes
anglais dans ladite version anglaise de l’acte de fiducie, sauf si une disposition dans les
présentes prévoit expressément le contraire ou si le contexte l’exige autrement.

     Les titres seront remboursables par anticipation, au gré de la Société, en totalité en tout
temps ou en partie de temps à autre, sur préavis d’au plus 60 jours et d’au moins 30 jours, à un
prix égal au plus éleve des montants suivants, à savoir le prix de rendement Canada (selon la
définition de “Canada Yield Price” donnée dans la version anglaise de l’acte de
fiducie) ou la somme en capital de ceux-ci plus les intérêts courus et impayés jusqu’à la date
fixée pour le remboursement par anticipation. Si moins que la totalité des titres en circulation
doivent être remboursés par anticipation, les titres devant etre ainsi

 

- 35 -

remboursés seront choisis par le fiduciaire d’une manière qu’il jugera équitable.

     La Société, à compter du ler Janvier 1997, fera tous les efforts raisonnables pour
acheter à des fins d’annulation sur le marché libre, au cours de chaque trimestre civil, des
titres représentant 1% de la somme en capital globale des titres, et ce, à des prix inférieurs à
leur valeur nominale plus les intérêts courus et impayés et les frais d’achat. Si, au cours de l’un
des trois premiers trimestres civils d’une année civile quelconque, la Société est dans
l’impossibilité d’acheter des titres représentant cette somme en capital pour quelque raison que ce
soit, y compris le fait que les titres ne se sont pas négociés à des prix inférieurs à leur valeur
nominale, cette obligation à l’égard du fonds d’achat quant à ce trimestre, dans la mesure où elle
n’aura pas été exécutée, sera reportée sur le ou les trimestres subséquents de l’année civile en
question. Toutes les obligations à l’égard du fonds d’achat que la Société n’aura pu exécuter au
cours de toute année civile s’éteindront à la fin d’une telle année. La somme en capital globale
des titres que la Société remboursera par anticipation ou achètera autrement que conformément à
cet engagement pendant un trimestre civil quelconque réduira d’autant l’obligation d’achat de la
Société conformément à cet engagement à l’égard du trimestre civil en question.

     Si elle n’est pas en défaut aux termes de l’acte de fiducie, la Société a également le droit
d’acheter à des fins d’annulation les titres sur le marché, par voie d’appel d’offres ou de gré à
gré, et ce, à n’importe quel prix. Les titres achetés ou remboursés par anticipation
par la Société seront annulés sans possibilité de réémission.

 

- 36 -

     Advenant la survenance d’un
événement désigné et d’une baisse de la cote (selon la définition
de “Designated Event” et de “Rating Decline” qui est donnée dans la version anglaise de
l’acte de
fiducie), chaque porteur de titres peut exiger que la
Société lui rembourse, à la date de
remboursement (selon la définition de “Repayment Date” qui est donnée dans la version anglaise de
l’acte de fiducie), la totalité ou une partie de ses titres à un prix égal au prix de
remboursement (selon la définition de “Put Price” qui est donnée dans la version anglaise de l’acte
de fiducie) en vigueur le 30e jour précédant
la date de remboursement, majoré des intérêts courus
jusqu’à la date de remboursement. Si, avant le 30e
jour précédant une date de remboursement, il se
produit un rétablissement de la cote (selon la définition de “Rating Recovery”
qui est donnée dans
la version anglaise de l’acte de fiducie), les porteurs de titres n’auront plus le droit
d’exiger que la Société leur rembourse leurs titres à cette date de remboursement . En
tout temps avant le 90e
jour suivant une date de baisse de la cote (selon la définition
de “Rating Decline Date” qui est donnée dans la version anglaise de l’acte de fiducie), la Société
aura le droit d’augmenter le taux d’intérêt des titres et elle avisera les porteurs de titres
d’une telle augmentation du taux. Lorsqu’un tel avis aura été donné,
chaque porteur de titres aura
le droit d’exiger que la Société lui rembourse, à la date de remboursement, la totalité ou une
partie de ses titres à un prix égal au prix de remboursement en vigueur à la date de l’avis en
question (ledit prix de remboursement devant être indiqué
dans l’avis), majoré des intérêts courus
jusqu’à cette date de remboursement. Si le porteur de titres n’exerce pas le droit qu’il a
d’exiger que la Société lui rembourse ainsi ses titres, alors ses titres porteront
intérêt au taux augmenté indiqué dans l’avis donné par la Société, et ce, à compter de la date de
baisse de la cote. Si des titres

 

- 37 -

représentant au moins 90% de la somme en capital globale des titres en circulation le 30e jour
précédant une date de remboursement ont été
déposés à des fins de remboursement à cette date de
remboursement, la Société aura le droit d’acheter la totalité des autres titres à cette date, et
ce, au prix de remboursement, moajoré des intêréts courus jusqu’à cette date. L’acte de fiducie
contient des dispositions relativement aux avis à être donnés concernant les droits précités.

     S’il survient un cas de défaut, selon la définition de “Event of Default” qui est donnée dans
la version anglaise de l’acte de fiducie, le capital de tous les
titres peut être déclaré dû et
payable avant l’échéance prévue de la maniére et avec l’effet prévus dans l’acte de fiducie.

     L’acte de fiducie permet, à quelques exceptions prés qui y sont prévues, la modification en
tout temps par la Société dudit acte de fiducie, de même que des droits et des obligations de la
Société et des droits des porteurs des titres, en vertu de l’acte de fiducie, avec le consentement
des porteurs exprimê par voie de Résolution Extraordinaire, selon la définition de “Extraordinary
Resolution qui est donnée dans la version anglaise de l’acte de fiducie. L’acte de
fiducie comporte également des dispositions permettant aux porteurs de pourcentages spécifiés de la
somme en capital globale des titres alors en circulation, au nom des porteurs de tous les titres,
de renoncer à exiger que la Société se conforme à certaines dispositions de l’acte de fiducie et du
présent titre, de renoncer à leurs recours à l’égard de certains cas de défaut antérieurs en vertu
de l’acte de fiducie et du présent titre. Un tel consentement ou une telle renonciation de la part
du porteur du présent titre sera concluant et liera ce porteur et tous les porteurs futurs du
présent titre et de tout titre émis au moment du transfert du présent titre

 

- 38 -

ou en échange ou en remplacement de celui-ci, qu’un tel
consentement ou qu’une telle renonciation
soit ou non indiqué sur le présent titre.

     Comme il est prévu dans
l’acte de fiducie et sous réserve de certaines restrictions qui y sont
énoncées, le présent titre est transférable par le porteur inscrit dudit titre;
l’inscription du transfert se fait dans les registres des porteurs de titres de la
Société, sur remise du présent titre a des fins de
transfert à l’un des bureaux principaux du
fiduciaire dans les villes de Halifax, Montréal, Toronto,
Winnipeg, Calgary et Vancouver; à cette
fin, ledit titre doit étre dûment endossé par le porteur dudit titre ou par son fondé de pouvoir
dûment autorisé par écrit, ou il doit étre accompagné d’un instrument de trans-fert écrit dont le
libellé est acceptable par la Société et par le fiduciaire ou tout agent chargé de la tenue d’un
registre local des porteurs de titres, dûment signé par le porteur du titre ou par son fondé de
pouvoir dûment autorisé par écrit. Sur ce, un ou plusieurs nouveaux titres, en coupures autorisées
et d’une somme en capital globale équivalente, seront émis au ou aux cession-naires désignés.

     La Société,
le fiduciaire et tout autre mandataire de la Société ou du fiduciaire peuvent
traiter la personne au nom de laquelle le présent titre est
immatriculé comme le propriétaire
dudit titre, et ce, à toutes fins, que le présent titre soit ou non échu.

     Les titres sont émissibles
sous forme de titres immatriculés, capital et intérêts, en
coupures de 1 000 $ et de multiples de cette somme. Comme il est
prévu dans l’acte de fiducie et
sous réserve de certaines restrictions qui y sont énoncées, les titres sont échangeables aux
bureaux principaux du fiduciaire dans les villes

 

- 39 -

mentionnées ci-dessus contre des titres de coupures différentes autorisées d’une somme en capital
globale équivalente, selon les instructions du porteur remettant un tel titre.

     A moins que l’attestation d’authenticité apparaissant sur les présentes n’ait été signée par
le fiduciaire au moyen de la signature manuscrite de l’un de ses représentants autorisés, le
présent titre ne donne droit a aucun avantage en vertu de l’acte de fiducie et il n’est ni valide
ni obligatoire à quelque fin que ce soit.

     EN FOI DE QUOI, la Société a fait signer le present titre par ses dirigeants dûment autorisés.

Daté du 12 décembre 1989 PRODUITS FORESTIERS

	 	 	 	 	 	 	 
	 	 	CANADIEN PACIFIQUE LIMITEE	 	 
	 
	 	 	 	 	 	 
	 

	 	Par	 	 	 	 
	 	 	Le Président du conseil,

président et chef de la direction	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 

Le Secrétaire
	 	 

   Attestation d’authenticité par le fiduciaire

     Le présent titre est l’une des débentures visées par l’acte de fiducie mentionné dans
les présentes.

	 	 	 	 	 	 	 
	 	 	COMPAGNIE MONTREAL TRUST

fiduciaire	 	 
	 
	 	 	 	 	 	 
	 

	 	Par	 	 	 	 
	 

	 	 	 	 

dirigeant autorisé
	 	 

 

- 40 -

Avis d’exercice du droit au remboursement par anticipation du porteur

     Aux termes de l’acte de fiducie mentionné dans les présentes, advenant la survenance d’un
événement désigné et d’une baisse de la cote (selon la définition de “Designated Event” et de
“Rating Decline” qui est donnée dans la version anglaise de l’acte de fiducie), le porteur du
présent titre exerce par les présentes le droit qu’il a d’exiger que la Société lui rembourse, à
la date de remboursement pertinente (selon la définition de “Repayment Date” qui est donnée dans
la version anglaise de l’acte de fiducie), la somme en capital globale des présentes ou la
partie de celle-ci indiquée ci-dessous (soit un multiple de 1 000 $), et ce, au prix de
remboursement pertinent (selon la définition de “Put Price” qui est donnée dans la version
anglaise de l’acte de fiducie), majoré des intérêts courus jusqu’à la date de remboursement et à
cette fin le porteur soussigné livre le présent titre au fiduciaire, le tout sous réserve des
dispositions de l’acte de fiducie.

     Remboursement partiel: Somme en capital de                                          $.

(multiple de 1 000 $ seulement)

	 	 	 	 	 	 	 
	DATE:
	 	 	 	 	 	 
	 
	 

     Témoin

	 	 
	 	 

(Signature du porteur)
	 	 

 

- 41 -

ARTICLE THREE

The Securities

     Section 301. Title and Terms.

     The aggregate principal amount of Securities which may be authenticated and delivered under
this Indenture is limited to $125,000,000, except for Securities authenticated and delivered upon
transfer of, or in exchange for, or in lieu of other Securities pursuant to Sections 304, 305, 306,
805 or 1108.

     The Securities shall be known and designated as the “10.85% DEBENTURES DUE 2014” of the
Corporation. Their Stated Maturity shall be November 30, 2014 and they shall bear interest from and
including the later of December 12, 1989 and the most recent Interest Payment Date to which
interest has been paid or duly provided for, but excluding the date of their Stated Maturity,
payable semi-annually in arrears on May 31 and November 30 in each year commencing on May 31, 1990,
at the rate of 10.85% per annum until the principal thereof is paid or made available for payment,
as more fully described in the form of Securities set forth in Section 202 of this Indenture.

     The principal of and interest on the Securities shall be payable at any branch in Canada of
The Royal Bank of Canada, at the option of the Holder, or at such other place as may be designated
by the Corporation for such purpose and approved by the Trustee (any municipality in which any
such branch or place is located being herein called a “Place of Payment”).

     The Record Date referred to in Section 307 for the payment of the interest payable and
punctually

 

- 42 -

paid or duly provided for on any Interest Payment Date in respect of the Securities shall be the
15th day (whether or not a business day) of the same calendar month as said Interest Payment Date.

     The Securities shall be redeemable as provided in Article Eleven.

			
	      Section 302.	 	Denominations.

     The Securities may be issued in denominations of $1,000 and integral multiples thereof.

			
	      Section 303.	 	Execution, Authentication Delivery and Dating.

     The Securities shall be executed on behalf of the Corporation by its Chairman of the Board,
its President or one of its Vice-Presidents and by its Secretary or one of its Assistant
Secretaries. Any such signature may be manual or printed or otherwise mechanically reproduced and
may, but need not be, under or accompanied by the corporate seal of the Corporation or a
reproduction thereof.

     Securities bearing the printed or otherwise mechanically reproduced signatures of any Person
who was at any time the proper officer of the Corporation shall bind the Corporation,
notwithstanding that such Person has ceased to hold such office prior to the authentication and
delivery of such Securities.

     At any time and from time to time after the execution and delivery of this Indenture, the
Corporation may deliver Securities executed by the Corporation to the Trustee, together with a
Corporation Order for the authentication and delivery of such Securities; and the Trustee in
accordance with

 

- 44 -

substitutions and other variations as the officers executing such Securities may determine, as
evidenced by their signing of such Securities.

     If temporary Securities are issued, the Corporation will cause definitive Securities to be
prepared without unreasonable delay. After the preparation of definitive Securities, the temporary
Securities shall be exchangeable for definitive Securities upon surrender of the temporary
Securities at any Place of Registration, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities (accompanied by any unmatured coupons
appertaining thereto) the Corporation shall execute and the Trustee shall authenticate and deliver
in exchange therefor a like principal amount of definitive Securities of authorized denominations.
Until so exchanged the temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities, and interest thereon, when and as payable, shall be
paid to the registered Holders of temporary Securities upon presentation thereof for notation of
such payment thereon, unless such temporary Securities shall be Fully Registered Securities or
shall bear coupons for such interest.

			
	     Section 305.	 	Registration, Registration of Transfer and Exchange.

     The Corporation shall cause to be kept by the Trustee at its principal office in the City of
Montreal (or at such other Place of Registration in Canada maintained by the Trustee as may be
requested by the Corporation with the approval of the Trustee) a central Security register (herein
referred to as the “Central Security Register”) and at each other Place of Registration, a branch
Security register (herein collectively referred to

 

- 45 -

as the “Branch Security Registers” and the Branch Security Registers together with the Central
Security Register are herein sometimes collectively referred to as the “Security Registers”) in
which, subject to such reasonable regulations as it may prescribe, the Corporation shall provide
for the registration of Securities and the registration of transfers of Securities. A Branch
Security Register shall at least contain particulars of the registration of Securities and the
registration of transfers of Securities made at the Place of Registration where such Branch
Security Register is being maintained and the Central Security Register shall contain particulars
of registrations of Securities and registrations of transfers of Securities made at all Places of
Registration. The Trustee is hereby appointed registrar for the purpose of registering Securities
and transfers of Securities as herein provided on the Central Security Register and a “Branch
Security Registrar” for the purpose of registring Securities and transfers of Securities as herein
provided on the Branch Security Registers expressly provided for on the date hereof. Each Branch
Security Registrar (if other than the Trustee) shall provide the Trustee with the particulars of
each registration of Securities and of transfers of Securities made on the Branch Security Register
for which it has been appointed Branch Security Registrar immediately following any such
registration.

     Any office or agency appointed pursuant to Section 1002 after the date hereof shall, by its
appointment as such, also be deemed to have been appointed a “Branch Security Registrar” for the
purpose of registering Securities and transfers of Securities as herein provided on the Branch
Security Register for which it has been appointed Branch Security Registrar.

 

- 46 -

     Upon surrender for transfer of any Security at any Place of Registration, the Corporation
shall execute, and the Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Securities of a like aggregate principal amount, all as
requested by the transferor.

     At the option of the Holder, Securities may be exchanged for Securities in any other
authorized denominations of a like aggregate principal amount, upon surrender of the Securities to
be exchanged at any Place of Registration, and upon payment, if the Corporation shall so require,
of the charges hereinafter provided. Whenever any Securities are so surrendered for exchange, the
Corporation shall execute, and the Trustee shall authenticate and deliver, the Securities which the
Securityholder making the exchange is entitled to receive.

     Every Security presented or surrendered for registration of transfer, shall (if so required by
the Corporation or the Trustee) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Corporation and the Trustee or other Branch Security
Registrar, if any, duly executed, by the Holder thereof or his attorney duly authorized in writing.

     All Securities issued upon any registration of transfer or exchange of Securities shall be
the valid obligations of the Corporation, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Securities surrendered upon such registration of transfer or
exchange.

     The Corporation may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any transfer or exchange of
Securities.

 

- 47 -

     All Securities surrendered upon any exchange or transfer provided for in this Indenture shall
be promptly cancelled by the Trustee and thereafter disposed of as directed by a Corporation Order.

     The
Corporation shall not be required (i) to issue, register the transfer of or exchange any
Security during a period beginning at the opening of business 15 days before the date of any
selection of Securities to be redeemed and ending at the close of business on the day of the
mailing of the relevant notice of redemption, or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part.

			
	     Section 306.	 	Mutilated, Destroyed, Lost and Stolen Securities.

     If any mutilated Security is surrendered to the Trustee, the Corporation shall execute and the
Trustee shall thereupon authenticate and deliver in exchange therefor a new Security of like
principal amount, bearing a number not contemporaneously outstanding.

     If there be delivered to the Corporation and to the Trustee

     (i) evidence to their satisfaction of the destruction, loss or theft of any
Security, and

     (ii) such security or indemnity as may be required by them to save each of them and
any agent of each of them harmless,

then, in the absence of notice to the Corporation or the Trustee that such Security has been
acquired by a bona fide purchaser, the Corporation shall execute and upon its request (in the
form of a

 

- 48 -

Corporation Request) the Trustee shall authenticate and deliver in lieu of any such destroyed,
lost or stolen Security, a new Security of like principal amount, bearing a number not
contemporaneously outstanding.

     In case any such mutilated, destroyed, lost or stolen Security has become or is about to
become due and payable, the Corporation in its discretion may, instead of issuing a new Security,
pay such Security with accrued and unpaid interest thereon.

     Upon the issuance of any new Security under this Section, the Corporation may require the
payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the Trustee) connected
therewith.

     Every new Security issued pursuant to this Section in lieu of any destroyed, lost or stolen
Security shall constitute an original additional contractual obligation of the Corporation, whether
or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall
be entitled to all the benefits of this Indenture equally and proportionately with any and all
other Securities duly issued hereunder.

     The provisions of this Section are exclusive and shall preclude (to the extent lawful) all
other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost
or stolen Securities.

 

- 49 -

			
	    Section 307.	 	Payment of Interest; Interest Rights Preserved.

     Subject to Section 1007 and to Article Eleven, interest on any Security which is payable, and
is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person
in whose name that Security (or one or more Predecessor Securities) is registered at the close of
business on the Record Date for such interest.

     Each Security delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and
to accrue, which were carried by such other Security.

			
	     Section 308.	 	Persons Deemed Owners.

     Prior to due presentment of a Security for registration of transfer, the Corporation, the
Trustee and any agent of the Corporation or the Trustee may treat the Person in whose name such
Security is registered as the owner of such Security for the purpose of receiving payment of
principal of, and interest on, such Security and for all other purposes whatsoever (except the
payment of interest payable on presentation of any temporary Security) whether or not such
Security be overdue.

			
	      Section 309.	 	Cancellation and Disposal of Securities.

     All Securities surrendered for payment, exchange or redemption shall, if surrendered to the
Corporation or any agent of the Corporation, be delivered to the Trustee and, if not already
cancelled, shall be promptly cancelled by it. The

 

- 50 -

Corporation may at any time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder, which the Corporation may have acquired in any manner
whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee. No
Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as
provided in this Section, except as expressly permitted by this Indenture. All cancelled Securities
held by the Trustee shall be disposed of as directed by a Corporation Order.

			
	     Section 310.	 	Authentication and Delivery of Original Issue.

     Forthwith upon the execution and delivery of this Indenture, or from time to time thereafter,
Securities up to the aggregate principal amount provided for in Section 301 may be executed by the
Corporation and delivered to the Trustee for authentication, and shall thereupon be authenticated
and delivered by the Trustee upon Corporation Order, without any further action by the Corporation.

ARTICLE FOUR

Satisfaction and Discharge

			
	     Section 401.	 	Satisfaction and Discharge of Indenture.

     Subject as hereinafter in this Section provided, this Indenture shall cease to be of further
effect and the Trustee, on demand of and at the expense of the Corporation, shall execute

 

- 51 -

proper instruments acknowledging satisfaction and discharge of this Indenture, when

     (1) either

     (A) all Securities theretofore authenticated and delivered (other than (i)
Securities which have been destroyed, lost or stolen and which have been replaced or paid
as provided in Section 306 and (ii) Securities money for whose payment has theretofore
been deposited in trust or segregated and held in trust by the Corporation and thereafter
repaid to the Corporation or discharged from such trust, as provided in Section 1003)
have been delivered to the Trustee cancelled or for cancellation; or

     (B) the Corporation has deposited, or caused to be deposited, or made due provision
as hereinafter provided for the payment of, an amount (in cash or, in the case of due
provision, by way of securities or instruments as hereinafter in this Section provided)
sufficient to pay the entire indebtedness on the Securities (other than those referred to
in (i) and (ii) of Clause (A) above) not theretofore delivered to the Trustee cancelled
or for cancellation, whether or not the same has become due and payable, for principal
and interest to the date of such deposit (in the case of Securities which have become due
and payable), or to the Stated Maturity or Redemption Date, as the case may be, any such
amount to be deposited with the Trustee as trust funds in trust for the purpose of such
payment and discharge;

(2) the Corporation has paid or caused to be paid, or made due provision as hereinafter

 

- 52 -

provided for the payment of, all other sums payable hereunder by the Corporation; and

(3) the Corporation has delivered to the Trustee an Officers’ Certificate and an
Opinion of Counsel each stating that all conditions precedent herein provided for
relating to the satisfaction and discharge of this Indenture have been complied with.

Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the
Corporation to the Trustee under Section 606 shall survive.

     For the purposes of Clause (B) and notwithstanding the satisfaction and discharge of this
Indenture, the rights of registration, registration of transfer or exchange of Securities herein
expressly provided for shall survive the satisfaction and discharge of this Indenture until the
earlier of (a) all Securities theretofore authenticated and delivered (other than as referred to in
subclauses (i) and (ii) of Clause (A) have been delivered to the Trustee cancelled or for
cancellation and (b) all such Securities not theretofore delivered to the Trustee cancelled or for
cancellation have become due and payable and for whose payment moneys in the necessary amount have
been theretofore deposited with the Trustee as provided in Clause (B).

     For the purposes of this Section 401, the Corporation shall be deemed to have made such due
provision for payment if it shall have deposited or caused to be deposited with the Trustee
securities issued or guaranteed by the Government of Canada or by any province of Canada or other
securities or instruments acceptable to the Trustee, provided such securities at the time of
deposit have been rated at least AA by DBRS or A+ by CBRS or have received an equivalent or higher
rating by another

 

- 53 -

Rating Agency, the proceeds from which will provide moneys which will be sufficient to pay the
indebtedness referred to in Clause (B) above, and all other moneys payable hereunder by the
Corporation.

     Section 402. Application of Trust Funds.

     All securities, instruments or money deposited with the Trustee pursuant to Section 401 shall,
subject to the provisions of the last paragraph of Section 1003, be held in trust and applied by
it, in accordance with the provisions of the Securities, to the payment, either directly or through
any Paying Agent (including the Corporation acting as its own Paying Agent), as the Trustee may
determine, to the Holders of the Securities for whose payment or redemption such securities,
instruments or money have been deposited with the Trustee, of all sums due and to become due
thereon for principal and interest; but such securities, instruments or money need not be
segregated from other funds except to the extent required by law.

ARTICLE FIVE

Remedies

     Section 501. Events of Default.

     “Event of Default”, wherever used herein means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body):

 

- 54 -

     (1) default in the payment of any instalment of interest upon any Security when it
becomes due and payable, and continuance of such default for a period of 30 days; or

     (2) default in the payment of the principal of any Security at its Maturity or default
in the payment, on a Repayment Date, of the Put Price and accrued and unpaid interest due and
payable on such date; or

     (3) default in the performance, or breach, of any covenant, agreement, undertaking or
warranty of the Corporation in this Indenture (other than a covenant, agreement, undertaking or
warranty a default in whose performance or whose breach is elsewhere in this Section specifically
dealt with), and continuance of such default or breach for a period of 30 days, in the case of the
covenant set forth in Section 1006, and for a period of 60 days, in any other case, after there
has been given to the Corporation by the Trustee or to the Corporation and the Trustee by the
Holders of at least 25% in principal amount of the Outstanding Securities, a written notice
specifying such default or breach and requiring it to be remedied and stating that such notice is
a “Notice of Default” hereunder; or

     (4) a default under any one or more
indentures or instruments evidencing or under
which the Corporation or a Principal
Subsidiary has at the time outstanding
indebtedness for borrowed money in an
aggregate principal amount of at least
$10,000,000 shall happen and be continuing and
(i) shall consist of a failure to make any
payment of principal at maturity or (ii) shall
have resulted in the acceleration of such

 

- 55 -

indebtedness so that the same shall be or become due and payable prior to the date on which the
same would otherwise have become due and payable or (iii) shall have resulted in the enforcement of
any security for such indebtedness; provided, however, that if such default under such indentures
or instruments shall be remedied or cured by the Corporation or such Principal Subsidiary or waived
by the holders of such indebtedness, then the Event of Default hereunder by reason thereof shall be
deemed likewise to have been thereupon remedied, cured or waived without further action upon the
part of either the Trustee or any of the Securityholders; and provided, further, that, subject to
the provisions of Section 601, the Trustee shall not be charged with knowledge of any default
unless written notice thereof shall have been given to the Trustee by the Corporation (which notice
the Corporation is hereby obligated to give), by such Principal Subsidiary, by the holder or an
agent of the holder of any such indebtedness, by the trustee then acting under any indenture or
other instrument under which such default shall have occurred, or by the Holders of not less than
5% of the principal amount of the Outstanding Securities; or

     (5) the making by the Corporation or a Principal Subsidiary of an assignment for the benefit
of its creditors, the filing by it of a petition for the declaration of its own bankruptcy, the
consenting by it to the institution of, or the granting by a court of, bankruptcy or other
insolvency proceedings against it, the filing by any other Person of a petition for the
declaration of the bankruptcy of the Corporation or a Principal Subsidiary which is not contested
in good faith by the Corporation or such Principal

 

- 56 -

Subsidiary within 30 days of its filing, the admission by the Corporation or a Principal
Subsidiary to some or all of its creditors at a meeting or by other means of communication that
it is insolvent or the passing of a resolution by the Corporation or a Principal Subsidiary or
the commencement by the Corporation or a Principal Subsidiary of any proceeding, relative to the
indebtedness of the Corporation or such Principal Subsidiary under any reorganization,
arrangement, compromise, adjustment or postponement of debt, dissolution, winding-up, composition
or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or

     (6) the making of an order or judgment by a court having jurisdiction adjudging the
Corporation or a Principal Subsidiary bankrupt or insolvent or ordering the winding-up,
dissolution or liquidation or rearrangement of its affairs, or the seizure or attachment of all
or a substantial part of the undertaking or property of the Corporation or of a Principal
Subsidiary at the instance of a creditor, or the appointment of a Person to take possession or
control under an agreement
Subjecting property of the Corporation or of a Principal Subsidiary to a security interest or
pursuant to an order of any court having jurisdiction or pursuant to execution or other
process being levied or enforced upon all or a substantial part of the property or undertaking or
all or a substantial part of the inventory of the Corporation or of a Principal Subsidiary,
such Person to include a receiver, a receiver-manager, an agent, a sequestrator, a trustee
under a trust indenture, a creditor in possession or any person or corporation authorized to
act on their behalf; provided that such order,
judgment, seizure or attach-

 

- 57 -

ment remains in force or such taking of possession or control continues in effect for a
period of 60 days.

			
	      Section 502.	 	Acceleration of Maturity; Rescission and Annulment.

     If an Event of Default occurs and is continuing, then and in every such case the Trustee may,
in its discretion and shall, if so requested by the Holders of not less than 25% in principal
amount of the Securities Outstanding declare the principal of all the Securities to be due and
payable immediately, by a notice in writing to the Corporation, and upon any such declaration such
principal shall become immediately due and payable.

     At any time after such a declaration of acceleration has been made and before a judgment or
decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article
provided, the Securityholders may by an Extraordinary Resolution delivered to the Corporation and
the Trustee, rescind and annul such declaration and its consequences if

     (1) the Corporation has paid or deposited with the Trustee a sum sufficient to pay

     (A) all overdue instalments of interest on all Securities,

     (B) the principal of any Securities which have become due otherwise than
by such declaration of acceleration and interest thereon at the rate borne by
the Securities,

 

- 58 -

     (C) to the extent that payment of such interest is lawful, interest upon
overdue instalments of interest at the rate borne by the Securities, and

     (D) all sums paid or advanced by the Trustee hereunder and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents and
counsel;

and

     (2) all Events of Default, other than the non-payment of the principal of Securities
which has become due solely by such acceleration, have been cured or waived as provided in
Section 512.

No such rescission or annulment shall affect any subsequent default or impair any right consequent
thereon.

			
	    Section 503.	 	Collection of Indebtedness and Suits for Enforcement by Trustee.

The Corporation covenants that if

     (1) default is made in the payment of any instalment of interest on any Security
when such interest becomes due and payable and such default continues for a period of 30
days, or

     (2) default is made in the payment of the principal of any Security at the Maturity
thereof,

 

- 59 -

the Corporation will, upon demand of the Trustee, pay to it forthwith, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such Securities for principal
and interest, with interest upon the overdue principal and, to the extent that payment of such
interest shall be legally enforceable, upon overdue instalments of interest, at the rate borne by
the Securities; and in addition thereto, such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel.

     If the Corporation fails to pay such amounts forthwith upon such demand, the Trustee, in its
own name on behalf of all the Holders of Securities and as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and unpaid, and may prosecute
such proceeding to judgment or final decree, and may enforce the same against the Corporation or
any other obligor upon the Securities and collect the moneys adjudged or decreed to be payable in
the manner provided by law out of the property of the Corporation or of any other obligor upon the
Securities, wherever situated.

     If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to
protect and enforce its rights and the rights of the Holders of the Securities by such appropriate
judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such
rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in
aid of the exercise of any power granted herein, or to enforce any other proper remedy.

 

- 60 -

     Section 504. Trustee May File Proofs of Claim.

     In case of the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the
Corporation or any other obligor upon the Securities or the property of the Corporation or of such
other obligor or their creditors, the Trustee (irrespective of whether the principal of the
Securities shall then be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand on the Corporation for the payment
of overdue principal or interest) shall be entitled and empowered, by intervention in such
proceeding or otherwise,

     (i) to file and prove a claim for the whole amount of principal and interest owing
and unpaid in respect of the Securities and to file such other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee (including any claim
for the reasonable compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel) and of the Holders of the Securities allowed in such judicial
proceeding, and

     (ii) to collect and receive any moneys or other property payable or deliverable on
any such claims and to distribute the same;

and any receiver, assignee, trustee, liquidator, sequestrator (or other similar official) in any
such judicial proceeding is hereby authorized by each Securityholder to make such payments to the
Trustee, and if the Trustee shall so consent, to the making of such payments directly to the
Holders

 

- 61 -

of the Securities, to pay to the Trustee any amount due to it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts
due the Trustee under Section 606.

     Subject to Article Seven and Section 802, nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder of a
Security any plan or reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of
the claim of any such Holder in any such proceeding.

     Section 505. Trustee May Enforce Claims Without Possession of Securities.

     All rights of action and claims under this Indenture or the Securities may be prosecuted and
enforced by the Trustee without the possession of any of the Securities or the production thereof
in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be
brought in its own name on behalf of the Securityholders and as trustee of an express trust, and
any recovery of judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable
benefit of the Holders of the Securities in respect of which such judgment has been recovered.

     Section 506. Application of Money Collected.

     Any money collected by the Trustee pursuant to this Article shall be applied in the
following

 

- 62 -

order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on
account of principal or interest, upon presentation of the Securities and the notation thereon of
the payment if only partially paid and upon surrender thereof if fully paid:

     FIRST: To the payment of all amounts due the Trustee under Section 606; and

     SECOND: To the payment of the amount then due and unpaid upon the Securities for principal and
interest, in respect of which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due and payable on such
Securities, for principal and interest, respectively.

     Section 507. Limitation on Suits.

     No Holder of any Security shall have any right to institute against the Corporation or any
other obligor upon the Securities any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder,
unless

     (1) an Event of Default shall have occurred and be continuing and written notice to
the Trustee of such continuing Event of Default shall have been given;

     (2) the Holders of not less than 25% in principal amount of the Outstanding
Securities shall have made written request to the Trustee to institute proceedings in
respect of such Event of Default in its own name as Trustee hereunder;

 

- 63 -

     (3) such Holder or Holders have offered to the Trustee reasonable indemnity against
the costs, expenses and liabilities to be incurred in compliance with such request;

     (4) the Trustee for 45 days after its receipt of such notice, request and offer of
indemnity has failed to institute any such proceeding; and

     (5) no direction inconsistent with such written request has been given to the
Trustee during such 45 day period by an Extraordinary Resolution;

it being understood and intended that no one or more Holders of Securities shall have any right in
any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect,
disturb or prejudice the rights of any other Holder of Securities, or to obtain or to seek to
obtain priority or preference over any other such Holder or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable benefit of all the
Holders of the Securities.

     Section 508. Restoration of Rights and Remedies.

     If the Trustee or any Holder of a Security has instituted any proceeding to enforce any right
or remedy under this Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder then and in every such
case the Corporation, the Trustee and the Holders of such Securities shall, subject to any
determination in such proceeding, be restored severally and respectively to their former positions
hereunder,

 

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and thereafter all rights and remedies of the Trustee and such Holders shall continue as though
no such proceeding had been instituted.

     Section 509. Rights and Remedies Cumulative.

     Except as provided in the last paragraph of Section 306, no right or remedy herein conferred
upon or reserved to the Trustee or to the Holders of Securities is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.

     Section 510. Delay or Omission Not Waiver.

     No delay or omission of the Trustee or of any Holder of any Security to exercise any right or
remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by
this Article or by law to the Trustee or to the Securityholders may be exercised from time to time,
and as often as may be deemed expedient, by the Trustee or by the Securityholders, as the case may
be.

     Section 511. Control by Securityholders.

     The Securityholders, by way of an Extraordinary Resolution, shall have the right to

 

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direct the time, method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee, provided that

     (1) such direction shall not be in conflict with any rule of law or this Indenture,

     (2) the Trustee shall not determine that the action so directed would be unjustly
prejudicial to the Holders not taking part in such direction, and,

     (3) the Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.

     Section 512. Waiver of Past Defaults.

     The Securityholders, by way of an Extraordinary Resolution, may on behalf of the Holders of
all the Securities waive any past default hereunder and its consequences, except a default in
respect of a covenant or provision hereof which under Article Eight cannot be modified or amended
without the consent of the Holder of each Outstanding Security affected.

     Upon any such waiver, such default shall cease to exist, and any Event of Default arising
from such default shall be deemed to have been cured, for every purpose of this Indenture; but no
such waiver shall extend to any subsequent or other default or impair any right consequent
thereon.

     Section 513. Undertaking for Costs.

     All parties to this Indenture agree, and each Holder of any Security by his acceptance
thereof

 

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shall be deemed to have agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any
action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee
or to any suit instituted by any Securityholder, or group of Securityholders, holding more than 10%
in principal amount of the Outstanding Securities.

ARTICLE SIX

The Trustee

     Section 601. Certain Duties and Responsibilities.

     (a) The Trustee shall in the exercise of such of the rights and powers vested in it by, and
in the performance of its duties under, this Indenture, act honestly and in good faith with a
view to the best interests of the Holders of the Securities and shall exercise the care,
diligence and skill of a reasonably prudent trustee.

     (b) The Trustee shall not be liable for any act, or omission or failure in the exercise of
such rights or powers or in the performance of such duties if in doing so it has relied in good
faith upon statements contained in any Board Resolution, Corporation Request, Corporation Order,
Corporation

 

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Consent, Officers’ Certificate, Opinion of Counsel or in any other statutory declaration,
certificate, opinion or report that complies with this Indenture or with applicable law.

     (c) No provision of this Indenture shall be construed to relieve the Trustee from liability
for its own negligent action, its own negligent failure to act, or its own wilful misconduct,
except that, subject to any applicable provision of law,

     (1) this Subsection shall not be construed to limit the effect of Subsections (a)
and (b) of this Section;

     (2) the Trustee shall not be liable for any error of judgment made in good faith by
a Responsible Officer, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;

     (3) the Trustee shall not be liable with respect to any action taken or omitted to
be taken by it in good faith in accordance with the directions set forth in an
Extraordinary Resolution relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising or refraining from the
exercise of any trust or power conferred upon the Trustee, under this Indenture; and

     (4) no provision of this Indenture shall require the Trustee to expend or risk its
own funds or otherwise incur any financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it.

 

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     (d) Whether or not therein expressly so provided, every provision of this Indenture relating
to the conduct or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.

     Section 602. Certain Rights of Trustee.

     Except as otherwise provided in Section 601 or as may be required by applicable law:

     (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, coupon or other paper or document believed by it to be genuine and
to have been signed or presented by the proper party or parties;

     (b) any request or direction of the Corporation mentioned herein shall be sufficiently
evidenced by a Corporation Request or Corporation Order or Corporation Consent and any resolution
of the Board of Directors may be sufficently evidenced by a Board Resolution;

     (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that
a matter be proved or established prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith
on its part, rely upon an Officers’ Certificate;

     (d) the Trustee may consult with counsel and the written advice of such counsel or any
Opinion of Counsel shall be full and complete authorization and protection in respect of any action
taken,

 

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suffered or omitted by it hereunder in good faith and in reliance thereon;

     (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in
it by this Indenture at the request or direction of any of the Securityholders pursuant to this
Indenture, unless such Securityholders shall have offered to the Trustee reasonable security and
indemnity against the costs, charges, expenses and liabilities which might be incurred by it in
compliance with such request or direction;

     (f) the Trustee shall not be bound to make any investigation into the facts or matters stated
in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, coupon or other paper or document but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts or matters as it may see
fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Corporation, personally or by agent or
attorney; and

     (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties
hereunder either directly or by or through agents or attorneys and the Trustee shall not be
responsible for any misconduct or negligence on the part of any agent or attorney appointed with
due care by it hereunder.

     Section 603. Not Responsible for Recitals or Issuance of Securities.

     The recitals contained herein (other than the description of the Trustee) and in the
Securities

 

 

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(except the Trustee’s certificate of authentication) shall be taken as the statements of the
Corporation, and the Trustee assumes no responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the Securities. The
Trustee shall not be accountable for the use or application by the Corporation of Securities or the
proceeds thereof.

     Section 604. May Hold Securities.

     The Trustee, any Paying Agent, any Branch Security Registrar or any other agent of the
Corporation may, in its own right or in any other capacity, become the owner or pledgee of
Securities and may, subject to the provision of any law which may at the time be applicable,
otherwise deal with the Corporation with the same rights it would have if it were not Trustee,
Paying Agent, Branch Security Registrar or such other agent.

     Subject to the provisions of any law which may at the time be applicable, the Trustee may act
as trustee under or as any other party to any indenture or agreement to which the Corporation may
be a party or in which the Corporation may have an interest in the same manner as if it were not
Trustee hereunder.

     Section 605. Money Held in Trust.

     Money held by the Trustee in trust hereunder need not be segregated from other funds
except to the extent required by law. The Trustee shall be under no liability for interest on
any money received by it hereunder except as otherwise agreed with the Corporation.

 

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     Section 606. Compensation and Reimbursement.

     The Corporation agrees

     (1) to pay to the Trustee from time to time reasonable compensation for all services
rendered by it hereunder (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);

     (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its
request for all reasonable expenses, disbursements and advances incurred or made by the
Trustee in accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents, consultants and counsel),
except, any such expense, disbursement or advance as may be attributable to its negligence
or bad faith; and

     (3) to indemnify the Trustee for, and to hold it harmless against, any loss,
liability or expense incurred without negligence or bad faith on its part, arising out of
or in connection with the acceptance or administration of this trust, including the costs
and expenses of defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder.

All such payments and reimbursements shall be made with interest at the rate herein provided to be
paid on the Securities at the relevant time or times.

 

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     Section 607. Disqualification; Conflicting Interests.

     (a) The Trustee represents and warrants that it is not aware of any material conflict of
interest between its role as Trustee hereunder and its role in any other capacity.

     (b) The Trustee shall, within 90 days after it becomes aware that any material conflict
exists between its role as Trustee hereunder and its role in any other capacity, either eliminate
such conflict of interest or resign in the manner and with the effect specified in this Article.

     Section 608. Corporate Trustee Required; Eligibility.

     There shall at all times be a Trustee hereunder which shall be a corporation incorporated
under the laws of Canada or a province thereof and authorized to carry on the business of a trust
company and having a combined capital and surplus of at least $5,000,000, and having a principal
office in the City of Montreal or the City of Toronto. If such corporation publishes financial
statements at least annually, for the purposes of this section, the combined capital and surplus of
such corporation shall be deemed to be its combined capital and surplus as set forth in its most
recent financial statements so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in the manner and with
the effect specified in this Article.

 

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     Section 609. Resignation and Removal; Appointment of Successor.

     (a) No resignation or removal of the Trustee and no appointment of a successor Trustee
pursuant to this Article shall become effective until the acceptance of appointment by the
successor Trustee under Section 610.

     (b) The Trustee may resign at any time by giving written notice thereof to the Corporation. If
an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee
within 30 days after the giving of such notice of resignation, the resigning Trustee may petition
any court of competent jurisdiction for the appointment of a successor Trustee.

     (c) The Trustee may be removed and/or a successor Trustee may be appointed at any time by an
Extraordinary Resolution delivered to the Trustee and to the Corporation.

     (d) If at any time:

     (1) the Trustee shall fail to comply with Section 607(b) after written
request therefor by the Corporation (in the form of a Corporation Request) or
by any Securityholder who has been a bona fide Holder of a Security for at
least six months, or

     (2) the Trustee shall cease to be eligible under Section 608 and shall
fail to resign after written request therefor by the Corporation (in the form
of a Corporation Request) or by any such Securityholder, or

 

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     (3) the Trustee shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or a receiver of the Trustee or of its property shall
be appointed or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,

then, in any such case, (i) the Corporation by a Board Resolution may remove the Trustee, or (ii)
subject to Section 513, any Securityholder who has been a bona fide Holder of a Security for at
least six months may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.

     (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy
shall occur in the office of Trustee for any cause, the Corporation, by a Board Resolution, shall
promptly appoint a successor Trustee who shall comply with the applicable provisions of Section
610. If, within twelve months after such resignation, removal or incapability, or the occurrence of
such vacancy, a successor Trustee shall be appointed by an Extraordinary Resolution delivered to
the Corporation and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon
its acceptance of such appointment in accordance with the applicable provisions of Section 610,
become the successor Trustee and supersede any successor Trustee appointed by the Corporation. If
no successor Trustee shall have been appointed by the Corporation or the Securityholders and
accepted in the manner required by Section 610, any Securityholder who has been a bona fide Holder
of a Security for at least six months may, on behalf of himself and all others

 

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similarly situated, and the retiring Trustee may petition any court of competent
jurisdiction for the appointment of the successor Trustee.

     (f) The Corporation shall give notice of each resignation and each removal of the Trustee and
each appointment of a successor Trustee to the Securityholders in accordance with Section 105 and
each such notice shall include the name and address of the principal and other relevant corporate
trust offices of the successor Trustee.

     Section 610. Acceptance of Appointment by Successor.

     Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the
Corporation and to the retiring Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the rights, powers,
trusts and duties of the retiring Trustee; but, on request of the Corporation (in the form of a
Corporation Request) or the successor Trustee, such retiring Trustee shall, upon payment of its
charges, execute and deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such
successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of
any such successor Trustee, the Corporation shall execute any and all instruments for more fully
and certainly vesting in and confirming to such successor Trustee all such rights, powers and
trusts.

     No successor Trustee shall accept its appointment unless at the time of such acceptance such

 

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successor Trustee shall be qualified and eligible under this Article.

     Section 611. Merger or Consolidation.

     Any corporation into which the Trustee may be merged, amalgamated or converted or with which
it may be consolidated, or any corporation resulting from any amalgamation, merger or consolidation
to which the Trustee shall be a party, or any corporation succeeding to all or substantially
all of the corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of any of the parties
hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee
then in office, any successor by amalgamation, merger or consolidation to such authenticating
Trustee may adopt such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.

ARTICLE SEVEN

Consolidation, Merger, Conveyance or Transfer

     Section 701. Corporation May Consolidate, Etc. only on Certain Terms.

     The Corporation shall not consolidate or amalgamate with or merge into another corporation or
convey, transfer or lease all or substantially all of its assets to any Person, or shall any
corporation consolidate or amalgamate with or merge into the Corporation, unless:

 

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     (1) the corporation formed by such consolidation or amalgamation or into which the Corporation
is merged or the Person which acquires by operation of law or by conveyance or transfer or lease
all or substantially all of the assets of the Corporation shall be a corporation organized or
existing under the laws of Canada or any Province or Territory thereof, and shall (except in any
case where such assumption is deemed to have occurred by the sole operation of law), expressly
assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, the due and punctual payment of the principal of and interest on all
the Securities and the performance of every covenant of this Indenture on the part of the
Corporation to be performed or observed;

     (2) immediately after giving effect to such transaction, no Event of Default, and no event
which, after notice or lapse of time, or both, would become an Event of Default, shall have
happened and be continuing; and

     (3) the Corporation shall have delivered to the Trustee an Officers’ Certificate and an
Opinion of Counsel each stating that such consolidation, merger, amalgamation, conveyance,
transfer or lease and such supplemental indenture, if any, comply with this Article and that all
conditions precedent herein provided for relating to such transaction have been complied with.

 

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     Section 702. Successor Corporation Substituted.

     Upon any consolidation, amalgamation or merger, or any conveyance, transfer or lease of all or
substantially all of the assets of the Corporation in accordance with Section 701, the successor
corporation formed by such consolidation or amalgamation or into which the Corporation is merged or
to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and
may exercise every right and power of, the Corporation under this Indenture with the same effect as
if such successor corporation had been named as the Corporation herein; provided, however, that no
such conveyance or transfer shall have the effect of releasing the Person named as the
“Corporation” in the first paragraph of this instrument or any successor corporation which shall
theretofore have become such in the manner prescribed in this Article from its liability as obligor
and maker on any of the Securities unless such conveyance or transfer or lease is followed by the
complete liquidation of the Corporation and substantially all the assets of the Corporation.

ARTICLE EIGHT

Supplemental Indentures

     Section 801. Supplemental Indentures Without Consent of Securityholders.

     Without the consent of the Holders of any Securities, the Corporation, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more
indentures supplemental hereto, in form

 

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satisfactory to the Trustee, for any of the following purposes:

     (1) for the benefit of the Holders of the Securities to provide for any additional
covenant or covenants of the Corporation or any security for or guarantee of the
Securities or to surrender any right or power herein conferred upon the Corporation; or

     (2) to cure any ambiguity, to correct or supplement any provision herein which may be
inconsistent with any other provision herein, or to make any other provisions with respect
to matters or questions arising under this Indenture which shall not be inconsistent with
the provisions of this indenture, provided such action pursuant to this Clause shall not,
in the judgment of the Trustee, adversely affect the interests of the Holders of the
Securities in any material respect; or

     (3) to modify, eliminate or add to the provisions of this Indenture to such extent as
shall be necessary to effect the qualifications of this Indenture under any applicable law
of Canada or of any Province or Territory thereof heretofore or hereafter enacted; or

     (4) as required by the provisions of Section 701 (1) or paragraph (c) of Section
1007.

			
	      Section 802.	 	Supplemental Indentures With Consent of Securityholders.

     When authorized or permitted by an Extraordinary Resolution
delivered to the Corporation and the Trustee, the Corporation, when
authorized by a Board Resolution, and the Trustee

 

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may enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders of the
Securities under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of
each Outstanding Security affected thereby,

     (1) reduce the requirements of Section
904 for quorum or voting or reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is
required for any such supplemental indenture,
or the consent of whose Holders is required
for any Extraordinary Resolution, or

     (2) modify any of the provisions of this
Section or Section 512 or Section 1008, except
to increase any such requirements or percentage or to provide that certain other provisions of this Indenture cannot be modified
or waived without the consent of the Holder of each Security affected thereby.

     It shall not be necessary for any Act of Securityholders under this Section to approve the
particular form of any proposed supplemental indenture, but it shall be sufficient if such Act
shall approve the substance thereof.

			
	     Section 803.	 	Execution of Supplemental Indentures.

     In executing, or accepting the additional trusts created by, any supplemental indenture
permitted by this Article or the modifications thereby of the trusts created by this Indenture the
Trustee shall be entitled to receive, and (subject to

 

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Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating that the
execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee
may, but shall not be obligated to, enter into any such supplemental indenture which affects the
Trustee’s own rights, duties or immunities under this Indenture or otherwise.

			
	     Section 804.	 	Effect of Supplemental Indentures.

     Upon the execution of any supplemental indenture under this Article, this Indenture shall be
modified in accordance therewith, and such supplemental indenture shall form a part of this
Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated
and delivered hereunder shall be bound thereby.

			
	     Section 805.	 	Reference in Securities to Supplemental Indentures.

     Securities authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article may, and shall if required by the Trustee, bear a notation in form
approved by the Trustee as to any matter provided for in such supplemental indenture. If the
Corporation shall so determine by Board Resolution, new Securities so modified as to conform, in
the opinion of the Trustee, to any such supplemental indenture may be prepared and executed by the
Corporation and authenticated and delivered by the Trustee in exchange for Outstanding Securities.

 

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ARTICLE NINE

Meetings of Holders of Securities

			
	     Section 901.	 	Purposes for Which Meetings May Be Called.

     A meeting of Holders of Securities may be called at any time and from time to time pursuant to
this Article to make, give or take any request, demand, authorization, direction, notice, consent,
waiver or other action authorized by this Indenture to be made, given or taken by Holders of
Securities.

			
	     Section 902.	 	Call, Notice and Place of Meetings.

     (a) The Trustee may at any time call a meeting of Holders of Securities for any
purpose specified in Section 901, to be held at such time and at such place in the City
of Montreal or the City of Toronto as the Trustee or, in case of its failure to act, the
Corporation or the Securityholders calling the meeting, shall determine. Notice of every
meeting of Holders of Securities, setting forth the time and the place of such meeting
and in general terms the action proposed to be taken at such meeting, shall be given to
each Holder of Outstanding Securities in the manner provided in this Indenture not less
than 21 nor more than 50 days prior to the date fixed for the meeting.

     (b) In case at any time the Corporation, pursuant to a Board Resolution, or the
Holders of at least 10% in principal amount of the Outstanding Securities shall have
requested

 

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the Trustee to call a meeting of the Holders of Securities for any purpose specified in
Section 901, by written request setting forth in reasonable detail the action proposed to
be taken at the meeting, and the Trustee shall not have given the notice of such meeting
within 21 days after receipt of such request or shall not thereafter proceed to cause the
meeting to be held as provided herein, then the Corporation, or the Holders of Outstanding
Securities in the amount above specified, as the case may be, may determine the time and
the place in the City of Montreal or the City of Toronto for such meeting and may call such
meeting for such purposes by giving notice thereof as provided in subsection (a) of this
Section.

			
	     Section 903.	 	Persons Entitled to Vote at Meetings.

     To be entitled to vote at any meeting of Holders of Securities, a Person shall be (1) a Holder
of one or more Outstanding Securities, or (2) a Person appointed by an instrument in writing as
proxy for a Holder or Holders of one or more Outstanding Securities by such Holder or Holders. The
only Persons who shall be entitled to be present or to speak at any meeting of Holders shall be the
Persons entitled to vote at such meeting and their counsel, any representatives of the Trustee and
its counsel and any representatives of the Corporation and its counsel.

			
	     Section 904.	 	Quorum; Action.

     The Persons entitled to vote 25% in principal amount of the Outstanding Securities shall
constitute a quorum. In the absence of a quorum

 

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within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the
request of Holders of Securities, be dissolved. In any other case the meeting may be adjourned for
a period of not less than 10 days as determined by the chairman of the meeting prior to the
adjournment of such meeting. Notice of the reconvening of such adjourned meeting shall be given as
provided in Section 902(a), except that such notice may be given not less than five days prior to
the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of such
adjourned meeting shall state expressly the principal amount of the Outstanding Securities which
shall constitute a quorum.

     At the reconvening of any meeting adjourned for a lack of a quorum, the Persons then present
and entitled to vote shall constitute a quorum for the taking of any action set forth in the notice
of the original meeting.

     At a meeting or an adjourned meeting duly reconvened and at which a quorum is present as
aforesaid, any resolution and all matters (except as limited by the proviso to Section 802 which
requires the consent of each Securityholder and except where, pursuant to this Indenture, an
Extraordinary Resolution is required) shall be effectively passed and decided if passed or decided
by the Persons entitled to vote a majority in principal amount of Outstanding Securities
represented and voting at such meeting.

     Any resolution passed or decision taken at any meeting of Holders of Securities duly held in
accordance with this Section shall (except as limited by the proviso to Section 802 which requires
the consent of each Securityholder) be binding on all the Holders of Securities, whether or not
present or represented at the meeting.

 

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	     Section 905.	 	Determination of Voting Rights; Conduct and Adjournment of Meetings.

     (a) Notwithstanding any other provisions of this indenture, the Trustee and the Person
nominated by the Trustee to act as chairman of the meeting, or either of them, may make such
reasonable regulations as it or he may deem advisable for any meeting or adjourned meeting of
Holders of Securities in regard to proof of the holding of Securities and of the appointment of
proxies and in regard to the appointment and duties of scrutineers, the submission and examination
of proxies, certificates and other evidence of the right to vote, and such other matters concerning
the conduct of the meeting as it or he shall deem appropriate. Except as otherwise permitted or
required by any such regulations, the holding of any Securities shall be proved in the manner
specified in Section 103 and the appointment of any proxy shall be proved in the manner specified
in said Section 103. Such regulations may provide that written instruments appointing proxies,
regular on their face, may be presumed valid and genuine without the proof specified in said
Section 103 or other proof.

     (b) The Trustee shall, by an instrument
in writing, nominate a chairman of the meeting, unless the meeting shall have been called
by the Corporation or by Holders of Securities
as provided in Section 902(b), in which case
the Corporation, or the Holders of Securities
calling the meeting, as the case may be, shall
in like manner nominate a chairman.

     (c) At any meeting each Holder of a Security, whether present in person or represented by proxy,
shall be entitled to one vote

 

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for each $1,000 principal amount of Securities held by him; provided, however, that no vote
shall be cast or counted at any meeting in respect of any Security challenged as not
Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of
the meeting shall have no right to vote, except as a Holder of a Security or as the proxy of
a Holder of a Security.

     (d) Any meeting of Holders of Securities duly called pursuant to Section 902 at which a
quorum is present may be adjourned from time to time by a resolution passed at such meeting
and the meeting may be held as so adjourned without further notice.

			
	     Section 906.	 	Counting Votes and Recording Action of Meetings.

     The vote upon any resolution submitted to any meeting of Holders of Securities shall be by
written ballots on which shall be subscribed the signatures of the Holders of Securities or of
their representatives by proxy and such other information as may be required by the regulations
made for the meeting. The chairman of the meeting shall appoint a secretary and may appoint a
scrutineer or scrutineers to act at the meeting. A record, at least in triplicate, of the
proceedings of each meeting of Holders of Securities shall be prepared by the secretary of the
meeting and there shall be attached to said record the original reports of the scrutineers and
affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice
of the meeting and showing that said notice was given as provided in Section 902 and, if
applicable, Section 904. Each copy shall be signed and verified by the affidavits of the chairman
and secretary of the meeting and one such copy shall be

 

 - 87 - 

delivered to the Corporation and another to the Trustee to be preserved by the Trustee, the latter
to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall
be conclusive evidence of the matters therein stated.

ARTICLE TEN

Covenants

			
	     Section 1001.	 	Payment of Principal and Interest. Other Acts or Things.

     The Corporation will duly and punctually pay the principal of and interest on the Securities
in accordance with the terms of the Securities and this Indenture. Generally, the Corporation will
duly and punctually perform and carry out all of the acts or things to be done by it as provided in
this Indenture.

			
	     Section 1002.	 	Maintenance of Places of Registration.

     The Corporation will cause the Central Security Register to be maintained by the Trustee at
its principal office in the City of Montreal (or at such other Place of Registration in Canada
maintained by the Trustee as may be requested by the Corporation with the approval of the Trustee)
and, subject as hereinafter in this Section provided, will cause Branch Security Registers to be
maintained by the Trustee at each of the other Places of Registration.

     The Corporation hereby appoints each Place of Registration where notices and demands to or
upon

 

 - 88 - 

the Corporation in respect of the Securities and this Identure may be served.

     The Corporation may at any time and from time to time, with the approval of the Trustee, vary
or terminate the appointment of any Branch Security Registrar or appoint other offices or agencies
as Branch Security Registrars where Securities may be presented or surrendered for registration,
registration of transfer or exchange or where notices or demands to or upon the Corporation in
respect of the Securities and this Indenture may be served or for any one or more of such purposes;
provided however that the Corporation will maintain an office or agency for all such purposes in
each of the Cities of Halifax, Montreal, Toronto, Winnipeg, Calgary and Vancouver. The Corporation
will give prompt written notice to the Trustee of the location of, or of any change in the location
of, any Branch Security Registrar.

			
	     Section 1003.	 	Money for Security Payments to be Held in Trust.

     If the Corporation shall at any time act as its own Paying Agent, it will, on or before each
due date of the principal of or interest on, any of the Securities (including the Repayment Date
and the Redemption Date), segregate and hold in trust for the benefit of the Holders of such
Securities a sum sufficient to pay the principal or interest so becoming due until such sums shall
be paid to such Holders or otherwise disposed of as herein provided, and will promptly notify the
Trustee of its action or failure so to act.

     Whenever the Corporation shall have one or more Paying Agents, it will, prior to each due
date of the principal of or interest on, any Securities (including the Repayment Date and the
Redemption

 

 - 89 - 

Date), deposit with a Paying Agent a sum sufficient to pay the principal or interest, so becoming
due, such sum to be held in trust for the benefit of the Holders of such Securities and (unless
such Paying Agent is the Trustee) the Corporation will promptly notify the Trustee of its action or
failure so to act.

     The Corporation will cause each Paying Agent other than the Trustee to execute and deliver to
the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the
provisions of this Section, that such Paying Agent will

     (1) hold all sums held by it for the
payment of the principal of or interest on
Securities in trust for the benefit of the
Holders of such Securities until such sums
shall be paid to such Holders or otherwise
disposed of as herein provided;

     (2) give the Trustee notice of any
default by the Corporation (or any other
obligor upon the Securities) in the making of
any payment of principal or interest; and

     (3) at any time during the continuance
of any such default, upon the written request
of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying
Agent.

     The Corporation may at any time, for the purpose of obtaining the satisfaction and discharge
of this Indenture or for any other purpose, pay, or by Corporation Order direct any Paying Agent
to pay, to the Trustee all sums held in trust by the Corporation or such Paying Agent, such sums
to be held by the Trustee upon the same trusts as those upon which such sums were held by the
Corporation

 

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or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent
shall be released from all further liability with respect to such money.

     Any money deposited with the Trustee or any Paying Agent or then held by the Corporation, in
trust for the payment of the principal of or interest on any Security and remaining unclaimed for
six years after the later of the date of the original deposit or holding in trust of such money by
the Corporation and the date when such principal or interest has become due and payable shall be
paid to the Corporation on Corporation Request, or (if then held by the Corporation) shall be
discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured
general creditor, look only to the Corporation for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all liability of the Corporation
as trustee thereof, shall thereupon cease.

			
	     Section 1004.	 	Payment of Taxes and Other Claims.

     The Corporation will pay or discharge or cause to be paid or discharged, before the same
become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon it
or upon its income, profits or property, and (2) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon its property; provided, however, that
the Corporation shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim whose amount, applicability or validity is being contested
in good faith by appropriate proceedings.

 

 - 91 - 

			
	     Section 1005.	 	Maintenance of Properties.

     The Corporation will cause all its properties used or useful in the conduct of its business to
be maintained and kept in good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Corporation may be necessary so that the
business carried on in connection therewith may be properly and advantageously conducted at all
times; provided, however, that nothing in this Section shall prevent the Corporation from
discontinuing the operation and maintenance of any of its properties if such discontinuance is, in
the judgment of the Corporation, desirable in the conduct of its business and not disadvantageous
in any material respect to the Securityholders.

			
	     Section 1006.	 	Negative Pledge.

     The Corporation will not, and will not permit any Subsidiary to, create after the date of this
Indenture any Mortgage upon any property of the Corporation or of any Subsidiary, whether owned at
the date of this Indenture or hereafter acquired by the Corporation or by any Subsidiary, to secure
any Debt, without making effective provision concurrently with the creation of any such Mortgage
whereby the Securities (together with, if the Corporation shall so determine, any other Debt of the
Corporation ranking equally with or in priority to the Securities and then existing or thereafter
created in the case where the Corporation is required by contract to do so) shall be secured by a
Mortgage equally and ratably with such Debt, so long as such Debt shall be so secured; provided,
however, that the foregoing restrictions shall not be applicable to

 

 - 92 - 

	 	(i)	 	any Mortgage to secure any present or future indebtedness of or related to the affairs or activities of Ponderay Newsprint
Company or of Gold River Newsprint Limited Partnership, being joint ventures in which
the Corporation or a Subsidiary has an interest, or of their respective successors and
assigns, to the extent that such Mortgage affects the property or interests in property
in said joint ventures;
	 
	 	(ii)	 	any Mortgage (except on fixed assets and on shares of a Subsidiary or Affiliate) given to
banks or others to secure any Debt issued, assumed or guaranteed by the Corporation or a
Subsidiary, which is payable on demand or which matures by its terms less than twelve months
from the date of issuance, assumption or guarantee thereof;
	 
	 	(iii)	 	any Mortgage to secure a Purchase Money Obligation; provided that (A) in the case of any
construction or improvement of
property, the Mortgage shall only apply to the property to be constructed or improved,
to the real or immoveable property which is substantially unimproved for the purposes
of the Corporation or a Subsidiary and on which the property so constructed or the
improvement is located, and to any machinery or equipment installed at any time so as
to constitute immoveable property or a fixture on the real property on which the
property so constructed, or the improvement, is located and (B) in the case of any
acquisition of property, the Mortgage shall only apply to the property to be

 

 - 93 - 

	 	 	 	acquired by the Corporation or a Subsidiary;
	 
	 	(iv)	 	any Mortgage to secure indebtedness
issued, assumed or guaranteed for the construction of townsites, employees’
housing, warehouses or office premises;
	 
	 	(v)	 	any Mortgage on any non-producing resource property to secure any
indebtedness issued, assumed or guaranteed for the development or improvement of
non-producing resource property;
	 
	 	(vi)	 	any Mortgage in favour of a Government in Canada or the United States of America;
	 
	 	(vii)	 	any Mortgage in favour of the Corporation or any wholly-owned Subsidiary;
	 
	 	(viii)	 	any Mortgage required to be given or
granted by any Subsidiary pursuant to the terms of any trust deed or similar
document entered into by such Subsidiary prior to the date it became a Subsidiary;
	 
	 	(ix)	 	any renewal, replacement or extension (or successive renewals, replacements or
extensions) of any Mortgage referred to in clauses (i) to (viii) inclusive above provided,
however, that the principal amount of the indebtedness secured thereby shall not exceed
the principal amount of the indebtedness so secured at the time of such renewal,
replacement or extension; except that this proviso shall not apply to any indebtedness
referred to in clause (i) or clause (ii) above nor to any indebtedness of or related to
the affairs or activities of any joint

 

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	 	 	 	venture, partnership or similar arrangement in which the Corporation or a
Subsidiary has an interest but does not alone have the power to effect any such
renewal, replacement or extension; and
	 
	 	(x)	 	a Mortgage not excepted by clauses (i) through (ix) above, provided that
after giving effect thereto the aggregate amount of Debt secured by such Mortgage and
other Mortgages created under this clause (x) does not exceed 10% of the consolidated
shareholders’ equity of the Corporation as at the end of the then last completed
financial quarter of the Corporation.

			
	     Section 1007.	 	Repayment Rights of Holders in Certain Events.

     (a) Upon the occurrence of both a Designated
Event and a Rating Decline, each Holder of
Securities shall have the right to require the
Corporation to purchase, on the Repayment Date, all
or any portion of its Securities at a price equal
to the Put Price in effect on the 30th day
preceding the Repayment Date, together with accrued
and unpaid interest to the Repayment Date, subject
to the provisions of paragraphs (b) and (c) below.

     (b) If, prior to the 30th day preceding a
Repayment Date, a Rating Recovery shall occur, the
Holders of the Securities shall no longer have the
right to require the Corporation to purchase their
Securities on such Repayment Date, as provided in
paragraph (a) above.

     (c) At any time prior to the 90th day
following a Rating Decline Date, the Corporation
shall have the right to increase the interest rate

 

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borne by the Securities and shall thereafter notify the Securityholders of such increased rate.
Following the giving of such notice, each Securityholder shall have the right to require the
Corporation to purchase, on the Repayment Date, all or any portion of its Securities at a price
equal to the Put Price in effect on the date of such notice (which Put Price shall be set forth in
the notice), together with accrued and unpaid interest to such Repayment Date. If any Holder of
Securities does not exercise its right to require the Corporation to so purchase its Securities,
then its Securities shall bear interest at the increased rate set forth in such notice by the
Corporation, as and from the Rating Decline Date, subject to the purchase of such Securities by the
Corporation on such Repayment Date, as provided in paragraph (h) below. The increase in the
interest rate shall be evidenced by a Board Resolution and as soon as possible after the adoption
of such resolution, the Corporation and the Trustee shall, in accordance with Section 801, execute
an indenture supplemental hereto to record such increased rate.

     (d) The Corporation shall promptly give written notice to the Trustee of the occurrence of
any Designated Event and Rating Decline and the Trustee, forthwith following receipt of such
notice, shall give to the Securityholders a notice setting forth in reasonable detail (including
all relevant dates) the Designated Event, the Rating Decline, the repayment right of the
Securityholders as provided in paragraph (a) above, the right of the Corporation to give a notice
of an increased interest rate as provided in paragraph (c) above, the termination of all such
rights upon the occurrence of a Rating Recovery as provided in paragraph (b) above and the right
of the Corporation to purchase all Outstanding Securities as provided in paragraph (h) below.

 

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     (e) If a Rating Recovery has occurred as
provided in paragraph (b) above, the Corporation
shall forthwith give notice thereof to the Trustee
and the Trustee shall thereafter promptly notify
the Securityholders of such occurrence and the
consequences thereof.

     (f) If the Corporation has not increased the
interest rate borne by the Securities in accordance
with paragraph (c) above, the Trustee shall, on the
90th day following a Rating Decline Date, give
notice to the Securityholders of their right to
require the Corporation to purchase their
Securities, which notice shall set forth the Put
Price in effect on the date of such notice.

     (g) To exercise the right to require the
Corporation to purchase its Securities as provided
in paragraph (a) or (c) above, a Securityholder shall deliver to the Trustee, not more than 30
days and not less than four Business Days prior to the
Repayment Date, written notice of the holder’s
exercise of such right, together with the
Securities with respect to which the right is being
exercised.

     (h) If, prior to any Repayment Date, Securities representing at least 90% of the principal
amount of the Securities Outstanding on the 30th day preceding such Repayment Date have been
delivered to the Trustee pursuant to paragraph (g) above, the Corporation shall have the right, by
giving to the Trustee written notice to that effect prior to such Repayment Date, to purchase on
such Repayment Date all of the undelivered Outstanding Securities at the same Put Price as is
payable on such date to Holders of Securities who have delivered their Securities pursuant to
paragraph (g) above; forthwith following the giving of such notice by the Corporation, the Trustee
shall forthwith give notice to the Holders of Securities

 

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of the exercise of the right by the Corporation to so purchase all Outstanding Securities, which
notice shall state, in addition to the Put Price, that on the Repayment Date such price is due and
payable upon all Securities, that interest thereon will cease to accrue on and after said date and
that the Holders must surrender their Securities for payment at the place indicated in such notice.

     (i) At least one Business Day prior to a Repayment Date, the Corporation shall, pursuant to
Section 1003, deposit with the Trustee or with a Paying Agent (or, if the Corporation is acting as
its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money
sufficient to pay the Put Price of all the Securities which are to be purchased on such Repayment
Date (including those referred to in paragraph (h) above if the Corporation has exercised its right
referred to therein), plus accrued and unpaid interest to such date.

     (j) The Securities to be purchased on a Repayment Date shall, on such date, become due and
payable at the Put Price, plus accrued and unpaid interest to such date, and on and after such
date (unless the Corporation shall default in the payment of the Put Price plus accrued and unpaid
interest to such date), such Securities shall cease to bear interest. Upon surrender of any such
Security for purchase, such Security shall be paid by the Corporation at the Put Price together
with accrued and unpaid interest to the Repayment Date, provided, however, that instalments of
interest on Securities whose Stated Maturity is on or prior to the Repayment Date shall be payable
to the Holders of such Securities, or one or more Predecessor Securities, registered as such on
the relevant Record Date according to their terms and the provisions of Section 307.

 

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     (k) If the Put Price plus accrued and unpaid interest of any Security to be purchased on a
Repayment Date shall not be so paid upon surrender thereof, the principal shall, until paid, bear
interest from the Repayment Date at the rate borne by such Security or, if a notice was given by
the Corporation of an increased rate as provided in paragraph (c) above, then at such increased
rate from the Rating Decline Date.

     (1) The provisions of Section 1108 relating to the redemption by the Corporation of Securities
in part shall apply mutatis mutandis to the purchase of Securities in part pursuant to this
Section 1007.

			
	     Section 1008.	 	Waiver of Certain Covenants.

     The Corporation may omit in any particular instance to comply with any covenant or condition
set forth in this Article Ten (except such covenants as relate to the payment of the principal or
interest on the Securities) if before or after the time for such compliance the Securityholders
shall, by an Extraordinary Resolution, either waive such compliance in such instance or generally
waive compliance with such covenant or condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived, and, until such waiver shall become
effective, the obligations of the Corporation and the duties of the Trustee in respect of any such
covenant or condition shall remain in full force and effect.

 

 

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ARTICLE ELEVEN

Redemption and Purchase of Securities

     Section 1101. Right of Redemption.

     The Securities will be redeemable, at the Corporation’s option, in whole at any time or in part
from time to time, on not more than 60 and not less than 30 days prior notice at the Redemption
Price.

     Section 1102. Applicability of Article.

     Redemption of Securities by the Corporation shall be made in accordance with this Article.

     Section 1103. Election to Redeem; Notice to Trustee.

     The election of the Corporation to redeem any Securities shall be evidenced by a Board Resolution.
In case of any redemption at the election of the Corporation of less than all of the Securities,
the Corporation shall, at least 45 days prior to the Redemption Date fixed by the Corporation
(unless a shorter notice shall be satisfactory to the Trustee) notify the Trustee of such
Redemption Date and of the principal amount of Securities to be redeemed.

Section 1104. Selection by Trustee of Securities to be Redeemed.

     If less than all the Securities are to be redeemed, the particular Securities to be redeemed
shall be selected not more than 60 days prior to

 

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the Redemption Date by the Trustee from the Outstanding Securities not previously called for
redemption by such method as it shall deem equitable and which may provide for the selection for
redemption of portions (equal to $1,000 or a multiple thereof) of the principal of Securities of a
denomination larger than $1,000.

     The Trustee shall promptly notify the Corporation in writing of the Securities selected for
redemption and, in the case of any Security selected for partial redemption, the principal
amount thereof to be redeemed.

     For all purposes of this Indenture, unless the context otherwise requires, all provisions
relating to the redemption of Securities shall relate, in the case of any Security which has been
or is to be redeemed only in part, to the portion of the principal of such Security which has
been or is to be redeemed.

     Section 1105. Notice of Redemption.

     Notice of the proposed redemption shall be given in the manner provided in this Indenture to
each Holder of Securities to be redeemed not less than 30 nor more
than 60 days prior to the
Redemption Date.

     All notices of redemption shall state:

     (1) the Redemption Date,

     (2) the Redemption Price,

     (3) if less than all Outstanding
Securities are to be redeemed, the identification (and, in the case
of partial redemption,

 

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the respective principal amounts) of the Securities to be redeemed,

     (4) that on the Redemption Date the Redemption Price will become due and payable upon
each such Security, and that interest thereon shall cease to accrue on and after said
date, and

     (5) the place where such Securities are to be surrendered for payment of the Redemption Price.

     Notice of redemption of Securities to be redeemed at the election of the Corporation shall be
given by the Corporation or, at the Corporation’s request, by the Trustee in the name of and at the
expense of the Corporation.

     Section 1106. Deposit of Redemption Price.

     At least one business day prior to any Redemption Date, the Corporation shall, pursuant to
Section 1003, deposit with the Trustee or with a Paying Agent (or, if the Corporation is acting as
its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money
sufficient to pay the Redemption Price of all the Securities which are to be redeemed on such
Redemption Date.

     Section 1107. Securities Payable on Redemption Date.

     Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall,
on the Redemption Date, become due and payable at
the Redemption Price therein specified and on and after such date (unless the Corporation
shall

 

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default in the payment of the Redemption Price) such Securities shall cease to bear interest. Upon
surrender of any such Security for redemption in accordance with said notice, such Security shall
be paid by the Corporation at the Redemption Price, provided, however, that instalments of interest
on Securities whose Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered as such on the
relevant Record Date according to their terms and the provisions of Section 307.

     If any Security called for redemption shall not be so paid upon surrender thereof for
redemption, the principal shall, until paid, bear interest from the Redemption Date at the rate
borne by such Security.

     Section 1108. Securities Redeemed in Part.

     Any Security which is to be redeemed only in part may, at the option of the Holder,

     (1) be presented to the Trustee or Paying Agent for notation thereon of the payment
as of the Redemption Date of the redeemed portion of the principal thereof, or

     (2) be surrendered (with, if the Corporation or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the Corporation and the Trustee duly executed by, the Holder thereof or his attorney duly authorized
in writing) and the Corporation shall execute and the Trustee shall authenticate and
deliver to the Holder of such Security without service charge, a new Security or
Securities, of any authorized denomination or denominations as

 

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     requested by such Holder in aggregate principal amount equal to the unredeemed portion of
the principal of the Security so surrendered.

     Section 1109. Purchase of Securities.

     At any time when the Corporation is not in default hereunder it may purchase for cancellation
all or any Securities in the market or by tender or by private contract at any price. All
Securities so purchased shall be delivered to the Trustee and shall be cancelled by it and no
Securities shall be issued in substitution therefor.

     Section 1110. Purchase Fund.

     In each calendar quarter commencing with the quarter beginning on January 1, 1997, the
Corporation will make all reasonable efforts to purchase in the open market in Canada, at such time
or times as the Corporation in its discretion shall determine, at prices below the principal amount
thereof plus accrued and unpaid interest and costs of purchase, up to 1% of the aggregate principal
amount of the Securities originally issued hereunder which Securities so purchased shall be
promptly surrendered by the Corporation to the Trustee for cancellation.

     If in any of the first three calendar quarters of a calendar year the Corporation shall, for
any reason, including the fact that the Securities did not trade below their principal amount, be
unable, by the exercise of all reasonable efforts, to purchase as aforesaid, the maximum principal
amount of Securities which it is obliged by this Section 1110 to endeavour to purchase during such
quarter, then the Corporation shall not be in default

 

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hereunder, but in each such case the maximum principal amount of the Securities which it shall be
obliged to make all reasonable efforts to purchase as aforesaid during the next succeeding calendar
quarter or quarters of the said calendar year, if any, shall be increased by that amount which is
equal to the difference between the maximum principal amount of Securities which the Corporation
was obliged to endeavour to purchase during such first mentioned quarter and the principal amount
of Securities actually purchased during such first mentioned quarter in discharge of that
obligation.

     Provided that:

     (a) Where the Corporation was unable to fully discharge an obligation to endeavour to purchase
Securities in respect of any calendar quarter of a calendar year as at the end of such calendar
year by purchases of the maximum principal amount of the Securities which it was obliged to
endeavour to purchase, then the amount of the aggregate obligation of the Corporation in respect of
the four calendar quarters of such calendar year shall be deemed to have been discharged and shall
be extinguished; and

     (b) The Corporation may, in the discharge of its obligation under this Section 1110 in respect
of any calendar quarter, surrender to the Trustee in respect of that quarter, Securities which may
have been redeemed or purchased by it during such quarter otherwise than pursuant to such
obligation, and upon any such surrender, the principal amount of the Securities which the
Corporation is by this Section obliged to endeavour to purchase during such calendar quarter shall
be deemed to have been reduced by an amount equal to the aggregate principal amount of the
Securities so surrendered.

 

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ARTICLE TWELVE

Counterparts

     Section 1201.
Counterparts.

     This instrument may be executed in any number of counterparts, each of which so executed shall
be deemed to be an original, but all such counterparts shall together constitute but one and the
same instrument.

     IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and
their respective corporate seals to be hereunto affixed, all as of the day and year first above
written.

	 	 	 
	 

	 	PRODUITS FORESTIERS

CANADIEN PACIFIQUE LIMITEE/

CANADIAN PACIFIC

FOREST PRODUCTS LIMITED
	 
	 	 
	 

	 	(signed) 
	 

	 	Paul E. Gagne
	 
	 	 
	 

	 	(signed) 
	 

	 	Jacques Beauchamp
	 
	 	 
	 

	 	COMPAGNIE MONTREAL TRUST -

MONTREAL TRUST COMPANY
	 
	 	 
	 

	 	(signed) 
	 

	 	Antonietta De Luca
	 
	 	 
	 

	 	(signed) 
	 

	 	Guy O’Reilly

 

 

This short form prospectus constitutes a public offering of these securities only in those jurisdictions where they may be lawfully offered for sale and therein only by persons permitted
to sell such securities. No securities commission or any similar authority in Canada has
in any way passed upon the merits of the securities offered hereunder and any
representation to the contrary is an offence.

Information has been incorporated by reference in this short form prospectus from documents
filed with securities commissions or similar authorities in Canada (the permanent information
record in Quebec). Copies of the documents incorporated herein by reference may be obtained
on request without charge from the Secretary of Canadian Pacific Forest Products Limited at
1155 Metcalfe Street, 14th Floor, Montreal, Quebec. H3B 2X1. telephone (514) 878-4811.

New Issue

Canadian Pacific Forest Products Limited

$125,000,000

10.85% Debentures Due 2014

(Unsecured)

	 	 	 
	To be dated December 12, 1989

	 	To mature November 30, 2014

Interest on the Debentures will be payable in equal semi-annual installments on May 31 And
November 30 in each year commencing May 31, 1990. The Debentures may be redeemed at any time at
the higher of the Canada Yield Price (as defined) and par. Commencing January 1, 1997, the
Corporation will make all reasonable efforts to purchase for cancellation during each calendar
quarter (cumulative within each calendar year) 1% of the aggregate principal amount of the
Debentures, at prices below par. If the Corporation purchases such percentage of Debentures
during each quarter, the average life of the Debentures would be approximately 18.5 years.
Reference is made to “Details of the Offering”.

In the opinion of counsel, the Debentures will qualify for investment under certain
statutes as set out under “Eligibility for Investment”.

Price: 100

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Underwriters’	 	Net Proceeds to
	 	 	Price to public (1)	 	fees	 	the Corporation (2)
	Per Unit

	 	 	100%	 	 	 	0.95%	 	 	 	99.05%	 
	Total

	 	$	125,000,000	 	 	$	1,187,500	 	 	$	123,812,500	 

 

			
	(1)	 	Plus accrued interest, if any, from December 12, 1989 to the date of delivery.
	 
	(2)	 	Before deducting expenses of issue estimated at $200,000.

We, as principals, conditionally offer the Debentures, subject to prior sale, if, as and
when issued by the Corporation and accepted by us in accordance with the conditions
contained in the Underwriting Agreement referred to under “Plan of Distribution” and
subject to the approval of certain legal matters on behalf of the
Corporation by Ogilvy
Renault, Montreal, and on our behalf by Stikeman, Elliott, Montreal.

Subscriptions will be received subject to rejection or allotment in whole or in part and
the right is reserved to close the subscription books at any time without notice. It is
intended that the closing of the offering will take place on December 12, 1989 or such
other date as may be agreed upon, but not later than December 28, 1989.

November 21, 1989.

 

 

 

SUMMARY OF THE OFFERING

	 	 	 
	Issue:

	 	10.85% Debenture Due 2014.
	 
	 	 
	Amount:

	 	$125 million. 
	 
	 	 
	Issue Price:

	 	100 plus accrued interest, if any.
	 
	 	 
	Interest:

	 	10.85% per annum payable
semi-annually on May 31 and November 30, commencing May 31, 1990. 
	 
	 	 
	Redemption:

	 	Redeemable at any time at the higher of the Canada Yield Price
and par.
	 
	 	 
	Purchase for 

Cancellation:

	 	Debentures may be purchased for cancellation at any time in
the market or by tender or private contract at any price.
	 
	 	 
	Purchase Funds:

	 	Commencing January 1, 1997, the Corporation will make all
reasonable efforts to purchase for cancellation during each
calendar quarter (cumulative within the same calendar year) 1% of the aggregate principal amount of the Debentures, at
prices below par. If the Corporation purchases such percentage
of Debentures during each quarter, the average life of the
Debentures would be approximately 18.5 years.
	 
	 	 
	Rank:

	 	The Debentures will be direct unsecured obligations of the
Corporation.
	 
	 	 
	Negative Pledge:

	 	The Debentures will have the benefit of a negative pledge.
	 
	 	 
	Put Right of
Holders:

	 	Upon the occurrence of both a Designated Event and a Rating
Decline, each holder of Debentures may require the Corporation
to purchase, on the Repayment Date, all or any portion of its
Debentures at a price equal to the Put Price, unless a Rating
Recovery has occurred.
	 
	 	 
	Use of Proceeds:

	 	The net proceeds to the Corporation from the sale of the
Debentures will be used to reimburse long-term bank
indebtedness primarily incurred to finance the Corporation’s
capital expenditure program.
	 
	 	 
	Interest and Asset
Coverages:

	 	Interest coverage on consolidated long-term debt, including
this issue,
for the 12 months ended September 30, 1989: 13.1 times.
	 
	 	 
	 

	 	Consolidated net tangible asset coverage of long-term debt,
including this issue, as at September 30, 1989:
	 
	 	 
	 

	 	—       before deduction of deferred income taxes: 7.2 times; and
	 
	 	 
	 

	 	—       after deduction of deferred income taxes: 5.9 times.

The
above information is a summary only and is qualified by the more detailed
information appearing elsewhere in this short form prospectus or incorporated by
references herein.

3

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	Production Facilities

	 	 	2	 
	Summary of the Offering

	 	 	3	 
	Documents Incorporated by Reference

	 	 	4	 
	Eligibility
for Investment

	 	 	5	 
	The Corporation

	 	 	6	 
	Use of Proceeds

	 	 	6	 
	Details
of the Offering

	 	 	6	 
	Plan of Distribution

	 	 	12	 
	Material Changes in Loan Capital in 1989

	 	 	12	 
	Interest and Asset Coverages

	 	 	12	 
	Transfer Agent and Registrar

	 	 	12	 
	Purchaser’s Statutory Rights

	 	 	13	 
	Certificates

	 	 	14	 

DOCUMENTS INCORPORATED BY REFERENCE

     The
following documents filed by the Corporation with the various securities commissions or
similar authorities in each of the provinces of Canada, are specifically incorporated by reference
in and form an integral part of this short form prospectus:

	 	(1)	 	the Corporation’s Annual Information Form dated June 13, 1989, including the
audited consolidated financial statements of the Corporation for the year ended December
31,1988 together with the auditors’ report thereon;
	 
	 	(2)	 	The Corporation’s Management Proxy Circular dated February 17, 1989; and
	 
	 	(3)	 	the Corporation’s first, second and third quarter reports to shareholders which
include the unaudited consolidated financial statements for each of the periods ended
March 31, June 30 and September 30, 1989, respectively.

     Any documents of the type referred to in the preceding paragraph and any material change
report (excluding confidential material change reports) filed by the Corporation with a securities
commission or any similar authority in Canada after the date of this short form prospectus and
prior to the termination of the offering shall be deemed to be incorporated by reference herein.

     Any statement contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this short form prospectus to
the extent that a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this short form prospectus.

4

 

ELIGIBILITY FOR INVESTMENT

     In the opinion of Ogilvy Renault, counsel for the Corporation, and Stikeman, Elliott, counsel
for the Underwriters, the Debentures offered hereby will be, at the date of original delivery,
eligible investments without resort to the so-called “basket” provisions, but subject to general
investment provisions:

	 	(a)	 	for insurance companies registered or licensed under the Canadian and British
Insurance Companies Act (Canada) or the Foreign Insurance Companies Act (Canada); and
	 
	 	(b)	 	for pension funds registered under the Pension Benefits Standards Act, 1985
(Canada) or An Act respecting supplemental pension plans (Quebec).

     In
the opinion of such counsel, the provisions of the Pension Benefits
Act, 1987 (Ontario)
and the Regulations thereunder would not, subject to compliance with the prudent investment
criteria contained therein and the general investment provisions thereof, preclude the funds of a
pension plan registered thereunder from being invested in the Debentures at the date of original
delivery, provided that where a statement of investment policies and goals is required to be filed
under that Act or Regulations for such plan, such a statement has
been filed, such statement has been established in accordance with the prudent investment criteria contained therein and further
provided that the Debentures are within a category of investment specifically permitted and for
which guidelines are established in such statement.

     In
the opinion of such counsel, the provisions of the Loan and Trust Corporations Act, 1987
(Ontario) and the Regulations thereunder would not, subject to compliance with the prudent
investment standards and the general investment provisions of that Act, preclude the funds received
as deposits by loan corporations or trust corporations registered under that Act from being
invested in the Debentures at the date of original delivery, without resort to the so-called
“basket” provisions thereof.

     In the opinion of such counsel, the provisions of An Act respecting insurance (Quebec) would
not, subject to compliance with the prudent investment standards and the general investment
provisions of that Act, preclude an investment in the Debentures at the date of original delivery
by an insurer governed by that Act, other than a mutual association or professional corporation.

     In
the opinion of such counsel, the Debentures will also be, at the date of original
delivery, qualified investments under the Income Tax Act (Canada) for
trusts governed by
registered retirement savings plants, registered retirement income funds and deferred profit
sharing plans other than trusts governed by deferred profit sharing plans for which any of the
employers is the Corporation or is a corporation which does not deal with the Corporation at arm’s
length.

5

 

THE CORPORATION

     Canadian Pacific
Forest Products Limited is a corporation existing under the laws of Canada.
It was incorporated by Certificate of amalgamation dated
January 1, 1989 as a result of the
amalgamation of CIP Inc. and Canadian Pacific Forest Products Limited (formerly known as Great
Lakes Forest Products Limited). The Corporation is owned 79.68% by Canadian Pacific Limited through
Canadian Pacific Enterprises Limited.

     References in this document to the “Corporation” refer to Canadian Pacific Forest Products
Limited. References to “CP Forest” refer to the Corporation
and its subsidiaries and affiliated
operations including partnerships unless the context otherwise requires.

     The Corporation’s
registered office is at Suite 800, Citibank Place, 123 Front Street West,
Toronto, Ontario, M5J 2M8. The Corporation maintains its principal executive office at 1155
Metcalfe Street, Montreal, Quebec, H3B 2X1, and has other executive offices in Thunder Bay,
Ontario and Vancouver, British Columbia.

     CP Forest
is one of the world’s largest integrated forest products
companies. It participates,
directly and through its subsidiaries and affiliates, in six principal business segments:
newsprint; market pulp; paperboard and packaging; white paper; tissue products; and lumber and
other solid wood products. CP Forest has 16 primary integrated operations, one tissue mill and 11
converting operations across Canada. It employs approximately 15,200 people.

     In
1988, CP Forest’s sales reached $3 billion and year-end assets were $2.8 billion. About
70% of these sales were denominated in currencies other than Canadian dollars, principally in U.S.
dollars. Newsprint and market pulp are CP Forest’s two largest business segments accounting for
40% and 26% of total 1988 sales respectively. CP Forest exports to more than 40 countries, with
its largest market being the United States. It has a network of offices providing marketing and
customer services in Canada, with additional offices in New York,
Chicago, Atlanta, Seattle, Indianapolis, London, Tokyo, and Zurich.

USE OF PROCEEDS

     The estimated net proceeds to the Corporation from the sale of the Debentures offered hereby
will be $123,612,500 after payment of expenses. The proceeds will be used to reimburse long-term
bank indebtedness primarily incurred to finance the Corporation’s capital expenditure program.

DETAILS OF THE OFFERING

     The following is a brief summary of the material attributes and characteristics of the 10.85%
Debentures Due 2014 (the “Debentures”). This summary does not purport to be complete and is
qualified in its entirety by reference to the Trust Indenture referred to below.

Tbe Trust Indenture

     The Debentures will be issued pursuant to the provisions of a Trust Indenture to be dated as
of December 12, 1989 between the Corporation and Montreal Trust Company, as Trustee. The
Debentures will be direct obligations of the Corporation but will not be secured by any mortgage,
pledge, hypothec or other charge. The aggregate principal amount of Debentures that may be issued
by the Corporation under the Trust Indenture is limited to $125,000,000 and Debentures may only be
issued upon the terms and subject to the conditions provided in the Trust Indenture.

6

 

The Debentures

     The
Debentures will be dated December 12, 1989, will mature on November 30, 2014 and will bear
interest at the rate of 10.85% per annum payable in equal semi-annual installments on May 31 and
November 30 in each year with the first payment of interest to
be payable on May 31, 1990. The
principal of and interest on the Debentures will be payable in lawful money of Canada at any
branch, at the holder’s option, in Canada of the chartered bank to be specified in the Trust
Indenture.

     The Debentures will be issued as fully registered Debentures in denominations of $1,000 and
integral multiples thereof.

Negative Pledge

     The
Trust Indenture will include a covenant of the Corporation to the effect that, so long as
any of the Debentures are outstanding, the Corporation will not and will not permit any subsidiary
to create any mortgage, charge, hypothec, pledge or other security or
encumbrance on any of their assets to secure any indebtedness for borrowed money without
at the same time securing equally and
rateably with such obligations all of the Debentures then outstanding
under the Trust Indenture
provided that such covenant shall not be applicable to:

	 	(i)	 	any security on assets or interests in the assets in
Ponderay Newsprint Company or
Gold River Newsprint Limited Partnership, being joint ventures in
which the Corporation
or a subsidiary has an interest, to secure any present or future indebtedness of or
related to such joint ventures;
	 
	 	(ii)	 	any security (except on fixed assets and shares of a subsidiary or affiliate) given
to banks or others to secure any indebtedness for borrowed money payable on demand or
maturing within 12 months of the date that such indebtedness is incurred;
	 
	 	(iii)	 	any purchase money mortgage (which will be defined in the Trust Indenture to include
a mortgage on property purchased to secure all or part of the purchase price thereof or
the cost of improvement thereof);
	 
	 	(iv)	 	any security to secure indebtedness assumed or incurred
for the construction of
townsites, employees’ housing, warehouses and/or office premises;
	 
	 	(v)	 	any security on any non-producing resource property to secure any indebtedness
incurred for the development or improvement of non-producing resource property;
	 
	 	(vi)	 	security in favour of a government in Canada or the United States;
	 
	 	(vii)	 	any security in favour of the Corporation or any wholly-owned subsidiary;
	 
	 	(viii)	 	any security required to be given or granted by any
subsidiary pursuant to the terms of
any trust deed or similar document entered into prior to the date it became a subsidiary;
	 
	 	(ix)	 	any renewal, replacement or extension of any of the
foregoing, provided that the
principal amount of the indebtedness secured thereby is not increased
except in the case
of indebtedness referred to in (i) and (ii) above and any indebtedness of or related to
joint ventures or partnerships in which the Corporation or a
subsidiary has an interest
but does not alone have the power to effect such renewal, replacement or extension; or
	 
	 	(x)	 	any other security if, after giving effect thereto, the aggregate principal amount
of indebtedness secured thereby and by other security created pursuant to this clause
(x) would not be greater than 10% of consolidated shareholders’ equity of the
Corporation.

7

 

Put Right of Holders upon a Designated Event and a Rating Decline

Put Right

     Upon the occurrence of both a Designated Event and a Rating Decline, each holder of
Debentures may
require the Corporation to purchase, on the Repayment Date all or any portion of its Debentures at
a price
equal to the Put Price in effect on the 30th day preceding the Repayment Date, together with
accrued
interest to the Repayment Date.

     If, prior to the 30th day preceding a Repayment Date, a Rating Recovery shall occur, the
holders of the Debentures shall no longer have the right to require the Corporation to
purchase their Debentures on such Repayment Date.

     At any time prior to the 90th day following a Rating Decline Date, the Corporation shall
have the right to increase the interest rate borne by the Debentures and shall notify the
Debentureholders of such increased rate. Following the giving of each notice each
Debentureholder shall have the right to require the Corporation to purchase, on the Repayment
Date, all or any portion of its Debentures at a price equal to the Put Price in effect on the
date of such notice (which Put Price shall be set forth in the notice), together with accrued
interest to such Repayment Date. If any holder of Debentures does not exercise its right to
require the Corporation to so purchase its Debentures, then its Debentures shall bear interest
at the increased rate set forth in such notice by the Corporation, as and from the Rating
Decline Date, unless the Corporation has exercised its right set forth in the paragraph below.

     If 90% or more in aggregate principal amount of the Debentures outstanding on the 30th
day preceding a Repayment Date have been tendered for purchase on such Repayment Date, the
Corporation shall have the right to purchase all of the remaining Debentures at such date at
the Put Price, together with accrued interest to such date. Notice of such purchase shall be
given to the Trustee prior to the said Repayment Date and as soon as possible thereafter by
the Trustee to the holders of the Debentures.

Notices

     The Trust Indenture will contain the following notification provisions:

	 	(i)	 	The Corporation shall promptly give written notice to the Trustee of the
occurrence of any Designated Event and Rating Decline and the Trustee shall
thereafter give to the Debentureholders a notice setting forth in reasonable detail
the Designated Event, the Rating Decline, the repayment right of the
Debentureholders, the right of the Corporation to give a notice of an increased
interest rate, the termination of all such rights upon the occurrence of a Rating
Recovery and the right of the Corporation to purchase untendered Debentures under
certain circumstances;
	 
	 	(ii)	 	If a Rating Recovery has occurred, the Corporation shall so notify the Trustee
who shall promptly notify the Debentureholders of such occurrence and the
consequences thereof;
	 
	 	(iii)	 	If the Corporation has not increased the interest rate borne by the Debentures in
accordance with
the foregoing, the Trustee shall, on the 90th day following a Rating Decline Date, give
notice to
the Debentureholders of their right to require the Corporation to purchase their
Debentures, which notice shall set forth the Put Price in effect on the date of such
notice; and
	 
	 	(iv)	 	To exercise the right to require the Corporation to purchase its Debentures, a
Debentureholder shall deliver to the Trustee, not more than 30 days and not less
than four business days prior to the Repayment Date, written notice of the holder’s
exercise of such right, together with the Debentures with respect to which the right
is being exercised, duly endorsed for transfer.

8

 

Definition

     For purposes of the foregoing rights, the Trust Indenture will define the following terms substantially as follows:

     “Continuing Director”
at any date shall mean an individual who was a member of the Board of Directors
of the Corporation on the date of the Trust Indenture or who shall
have become a member thereof
subsequent to such date (i) with the approval of at least a majority of the Continuing
Directors then
members of the Board of Directors of the Corporation or
(ii) following the election of such
member at an
annual general meeting of shareholders to replace a director who has died or who has
resigned or otherwise
retired in the ordinary course, provided that the number of directors that may be so
elected to replace a director who has resigned or otherwise retired, shall not
exceed 20% of the number of directors in office immediately prior to the previous
annual general meeting of shareholders.

     “Designated Event” shall be deemed to have occurred each time:

	 	(i)	 	a person (within the meaning of the Securities Act (Ontario) as enacted on the date of the Trust
Indenture (the “Act”)), alone or with its affiliates, associates or persons with
whom such person
is acting jointly or in concert (all within the meaning of the Act), becomes
the beneficial owner (within the meaning of the Act) of more than 30% of the total voting rights
attaching to all classes of shares then outstanding of the Corporation
having under all circumstances the right to elect directors (the “Voting
Shares”) or subsequently increases such beneficial ownership from
50% or less to a majority of the Voting Shares of the Corporation;
provided that this clause(i)
shall not apply to the acquisition of shares of the Parent Company; or
	 
	 	(ii)	 	the individuals who are Continuing Directors shall cease for any reason to
constitute at least
two-thirds of the Board of Directors of the Corporation; or
	 
	 	(iii)	 	the Corporation consolidates or amalgamates with or merges into another corporation or
conveys,
transfers or leases all or substantially all of its assets to any person, or any
corporation consolidates
or amalgamates with or merges into the Corporation, in any such event pursuant to
a transaction
in which outstanding Voting Shares of the Corporation are changed into or
exchanged for cash, securities or other property, provided that there shall be excluded from
the application of this
clause (iii) such transactions (a) between the Corporation
and its subsidiaries or between
subsidiaries, (b) involving solely the establishment of a public holding
company for the Corporation, or (e) involving the exchange of the
Corporation’s Voting Shares as consideration in
the acquisition of another business or businesses (without change or
exchange of the
Corporation’s outstanding Voting Shares into or for cash, securities or other property); or
	 
	 	(iv)	 	the Corporation or any subsidiary of the Corporation purchases or otherwise
acquires, directy or
indirectly, beneficial ownership of Voting Shares of the Corporation
if, after giving effect to such
purchase or acquisition, the Corporation (together with its subsidiaries) shall have acquired 30%
or more of the Corporation’s Voting Shares within any 12-month period calculated by reference
to the Voting Shares outstanding at the beginning of such period; or
	 
	 	(v)	 	on any date (a “Calculation Date”) the Corporation makes any distribution or distributions of
cash, property or securities (excluding regular dividends and distributions of
non-redeemable and non-retractable shares of the Corporation) to holders of Voting
Shares of the Corporation or
purchases or otherwise acquires beneficial ownership of Voting Shares of the Corporation and the
sum of the fair market value of such distribution or purchase, plus the fair market value
of all other
such distributions and purchases which have occurred during the preceding 12-month period, is
at least 30% of the fair market value of the outstanding Voting Shares of the Corporation. This last
percentage is calculated on each Calculation Date by dividing (x) the fair market value of the
distributions and purchases which have occurred on such Calculation Date by (y) the fair market
value of the Corporation’s outstanding Voting Shares immediately
prior to such distributions or purchases, and adding to that percentage all of the percentages which have
been similarly calculated on the dates of all such distributions and
purchases during the preceding 12-month
period.

     “Full
Rating Category” shall mean (i) with respect to CBRS, any of the following
categories: B+, B, C++, C+ and C, (ii) with respect to DBRS,
any of the following categories: BB, B,
CCC, CC and C and (iii) with respect to any other Rating Agency, the equivalent of
any such category of CBRS or DBRS used by
such other Rating Agency. In determining whether the rating of the Debentures has decreased by
the

9

 

equivalent
of one Full Rating Category, gradation within Full Rating Categories (high and low for
CBRS and for DBRS or the equivalent gradation for another Rating Agency) shall constitute one-third
of a Full Rating Category. Thus, with respect to DBRS, a decline in a
rating from BB (high) to B
(high) will constitute a decline of one Full Rating Category,
and a decline in a rating from BB
(high) to BB or BB (low) will constitute a decline of less than one Full Rating Category.

     “Investment
Grade” shall mean B++ (low) or higher by CBRS or BBB
(low) or higher by DBRS or the equivalent of such ratings by
CBRS or DBRS or by any other Rating Agency.

     “Parent
Company” shall mean the company which, on the date of the Trust
Indenture, owns
all of the outstanding shares of the Corporation’s current majority shareholder.

     “Put Price” on any date shall mean a price equal to the price of the Debentures calculated to
provide a yield to maturity equal to the Government of Canada Yield (as defined under
“Redemption”) plus 0.75% on the business day preceding such date.

     “Rating
Agency” shall mean Canadian Bond Rating Service Limited and its
successors (“CBRS”)
or Dominion Bond Rating Service Limited and its successors (“DBRS”) or, if CBRS or DBRS or both
shall not make a rating on the Debentures publicly available, a recognized securities rating agency
or agencies, as the case may be, selected by the Corporation which shall be substituted for CBRS
or DBRS or both, as the case may be.

     “Rating Date” shall mean the date which is 120 days prior to public disclosure of the
occurrence of a Designated Event.

     “Rating Decline” shall be deemed to have occurred if on any date within the 90-day period
following public disclosure of the occurrence of a Designated Event (which period shall be
extended so long as the rating of the Debentures is under publicly
announced consideration for possible downgrade by a Rating Agency):

	 	(a)	 	where the Debentures were rated by a Rating Agency on the Rating Date as Investment
Grade, the rating of the Debenture by such Rating Agency is below
Investment Grade; or
	 
	 	(b)	 	where the Debentures were rated by a Rating Agency on the Rating Date below
Investment Grade, the rating of the Debentures by such Rating Agency
is at least one Full
Rating Category below the rating of the Debentures by such Rating Agency on the Rating
Date.

     “Rating Decline Date” shall be the date on which a Rating Decline is deemed to have occurred
after a Designated Event.

     “Rating Recovery” shall be deemed to have occurred if the rating of the Debentures by each
Rating Agency which has effected a Rating Decline is re-established
to at least the rating existing
at the Rating Date.

     “Repayment Date” shall be a date which is 120 days following a Rating Decline Date
or, if the Corporation has given to the Debentureholders a notice of increased interest rate on
the Debentures, the 30th day following the giving of such notice (or if either such date is not a
business day, then the business day next succeeding such date).

Redemption

     The Debentures will be redeemable, at the Corporation’s option, in whole at any time or in
part from time to time, on not more than 60 and not less than 30 days’ prior notice, at the higher
of the Canada Yield Price (as defined below) and par, together with accrued and unpaid interest to
the date fixed for redemption.

     “Canada Yield Price” shall mean, in effect, a price equal to the price of the Debentures
calculated to provide a yield to maturity equal to the Government of Canada Yield plus 0.50% on
the business day preceding the date of the resolution authorizing the redemption. “Government of
Canada Yield” on any date shall mean, in effect, the yield to maturity on such date compounded
semi-annually which a non-callable Government of Canada Bond would carry if issued, in Canadian
dollars in Canada, at 100% of its principal amount on such date with
a term to maturity equal to
the remaining term to maturity of the Debentures; the

10

 

Government of Canada Yield will be provided by two major Canadian investment dealers selected in
accordance with the terms of the Trust Indenture.

     Where less than all of the outstanding Debentures are to be redeemed, the Debentures so to
be redeemed will be selected by the Trustee in such a manner as it shall deem equitable.

Purchase

     The Debentures
may be purchased by the Corporation in the open market or by tender or
private contract at any price. Debentures purchased or redeemed by the Corporation shall be
cancelled and may not be reissued.

Purchase Fund

     The Corporation
will covenant in the Trust Indenture that, commencing January 1, 1997, it
will make all reasonable efforts to purchase for cancellation in the open market during each
calendar quarter an amount equal to 1% of the aggregate principal amount of the Debentures
outstanding on the date of their issue, at prices below par plus accrued and unpaid interest and
costs of purchase.

     If, in any of the first three calendar quarters of a calendar year, the Corporation is
unable to purchase such principal amount of the Debentures for any reason, including the fact
that the Debentures did not trade below par, such purchase fund obligation for any such calendar
quarter, to the extent unfulfilled, will be carried forward for the succeeding quarter or
quarters of the said calendar year. All purchase fund obligations which the Corporation has been
unable to fulfill during any calendar year shall become extinguished as at the end of such year.

     The Debentures which the Corporation is obligated to purchase during any calendar quarter
pursuant to this provision will be reduced by the aggregate principal amount of the Debentures
redeemed or purchased by the Corporation in the same calendar quarter otherwise than pursuant to
this provision.

Consolidation, Merger, Conveyance and Transfer

     The Corporation
shall not consolidate with, amalgamate with or merge into any other
corporation or convey, transfer or lease all or substantially all of its assets as an entirety to
any person, unless (a) the corporation formed by such consolidation or amalgamation or into which
the Corporation is merged or the person which acquires by operation of law or by conveyance or
by transfer the assets of the Corporation substantially as an entirety shall be a corporation
organized or existing under the laws of Canada or any Province or Territory thereof and shall
(except where such assumption is deemed to have occurred by the sole operation of law) expressly
assume, by a supplemental trust indenture, the due and punctual payment of the principal of and
interest on all the Debentures and the performance of every covenant of the Corporation under the
Trust Indenture and (b) after giving effect to such transaction, no event of default, and no event
which, after notice or lapse of time, or both, would become an event of default, shall have
happened and be continuing under the Trust Indenture.

Modification

     The Trust Indenture will provide that modifications of such Trust Indenture and of the
Debentures may be made if authorized by extraordinary resolution. The term “extraordinary
resolution” will be defined in the Trust Indenture to mean, in effect, a resolution passed by the
affirmative vote of the holders of 662⁄3% of the principal amount of the Debentures represented at a
meeting of Debentureholders or an instrument or instruments in writing signed by the holders of
662⁄3% of the principal amount of the Debentures.

11

 

PLAN OF DISTRIBUTION

     Under an agreement
dated November 21, 1989 (the “Underwriting Agreement”) between the
Corporation and RBC Dominion Securities Inc., Wood Gundy Inc., Burns
Fry Limited, ScotiaMcLeod
Inc. and Toronto Dominion Securities Inc. (the “Underwriters”), the Corporation has agreed to sell
and the Underwriters have agreed to purchase all but not less than all of the $125,000,000
principal amount of Debentures on or about December 12, 1989 or
such later date not later than December 28, 1989 as may be agreed
upon, at an aggregate price of $125,000,000 plus accrued
interest, if any, from December 12, 1989 to the closing date, upon and subject to the terms and
conditions contained therein. The Corporation has agreed to pay a fee of $1,187,500 to the
Underwriters for their services in connection with the issue which will be paid out of the
general corporate funds of the Corporation.

     The obligations of the Underwriters under the Underwriting Agreement may be terminated at
their discretion upon the occurrence of certain stated events. The
Underwriters are obligated,
however, to take up and pay for all the Debentures if any of the Debentures are purchased under
the Underwriting Agreement.

     In connection with
this offering, the Underwriters may over-allot or effect transactions
which stabilize or maintain the market price of the Debentures offered hereby at a level above that which might
otherwise prevail in the open market. Such transactions, if commenced, may be discontinued at any
time.

MATERIAL CHANGES IN LOAN CAPITAL IN 1989

     Since December 31, 1988, the consolidated long-term debt of the Corporation has increased by
$189.9 million to $304.6 million as at September 30, 1989. The increase was incurred primarily
to finance its existing capital expenditure program and was obtained from the various long-term
bank lines of credit available to the Corporation. In addition, since December 31, 1988, the
Corporation’s share of the long-term bank debt of Ponderay Newsprint Company and Gold River
Newsprint Limited Partnership has increased by $86.8 million to $232.0 million as at September
30, 1989. The increase was incurred to finance the construction projects of these joint ventures.

INTEREST AND ASSET COVERAGES

     The following
financial ratios are calculated as at September 30, 1989 or for 12 months then
ended, after giving effect to this issue and the use of proceeds thereof:

	 	 	 	 	 
	Interest coverage on consolidated long-term debt of the Corporation
	 	13.1 times
	Consolidated net tangible asset coverage of long-term debt:
	 	 	 	 
	— before deduction of deferred income taxes
	 	7.2 times
	— after deduction of deferred income taxes
	 	5.9 times

TRANSFER AGENT AND REGISTRAR

     Montreal Trust Company at its principal office in the cities of Halifax, Montreal, Toronto,
Winnipeg, Calgary and Vancouver will be the transfer agent and registrar for the Debentures.

12

 

Date: November 21, 1989

CERTIFICATE OF THE CORPORATION

     The foregoing, together with the documents incorporated herein by reference, constitutes full,
true and plain disclosure of all material facts relating to the securities offered by this short
form prospectus as required by the securities laws of British
Columbia, Alberta, Saskatchewan,
Manitoba, Ontario, New Brunswick and Nova Scotia. For the purpose of the Securities Act (Quebec),
this short form prospectus, as supplemented by the documents incorporated herein by reference,
contains no misrepresentation that is likely to affect the value or the market price of the
securities to be distributed.

	 	 	 
	
	 	
	Cecil S. Flenniken	 	Paul
E.  Gagné

	Chairman, President and
	 	Executive Vice-President.
	Chief Executive Officer
	 	Finance, Accounting and Logistics,
	 
	 	(Chief Financial Officer)

On behalf of the Board of Directors

	 	 	 
	
	 	
	R. C. Meech	 	Michel
Bélanger 
	Director
	 	Director

CERTIFICATE OF THE UNDERWRITERS

     To the best of our knowledge, information and belief, the foregoing, together with the
documents incorporated herein by reference, constitutes full, true and plain disclosure of all
material facts relating to the securities offered by this short form prospectus as required by the
securities laws of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick and
Nova Scotia. For the purpose of the Securities Act (Quebec), to our knowledge, this short form
prospectus, as supplemented by the documents incorporated herein by reference, contains no
misrepresentation that is likely to affect the value or the market price of the securities to be
distributed.

	 	 	 	 	 	 	 	 	 
	 	 	RBC Dominion Securities Inc.	 	Wood Gundy Inc. 
	 
	 	 	 	 	 	 	 	 
	 

	 	Per:
	 	
	 	Per:
	 	
	 

	 	 	 	T. T. Pepper
	 	 	 	Conrad H. Harrington

	 	 	 	 	 	 	 	 	 	 	 
	Burns Fry Limited	 	ScotiaMcleod inc.	 	Toronto Dominon Securities Inc.
	 
	 	 	 	 	 	 	 	 	 	 
	Per:

	 	
	 	Per:
	 	
	 	Per:
	 	
	 

	 	G. A. Edwards
	 	 	 	P. Matuszewski
	 	 	 	Robert J. Keating

     The following includes the names of every person having an interest, either directly or
indirectly, to the extent of not less than 5% in the capital of:

RBC
Dominion Securities Inc.: RBC Dominion Securities Limited, a majority-owned subsidiary
of a Canadian chartered bank;

Wood
Gundy Inc.: a wholly-owned subsidiary of The CIBC Wood Gundy Corporation, a
majority-owned subsidiary of a Canadian chartered bank;

Burns
Fry Limited: wholly-owned by Burns Fry Holdings Corporation;

ScotiaMcleod
Inc.: a wholly-owned subsidiary of a Canadian chartered bank; and

Toronto
Dominion Securities Inc.: a wholly-owned subsidiary of a Canadian chartered
bank.

14EX-4.32

 

CANADIAN PACIFIC FOREST PRODUCTS LIMITED

 

NOTE AGREEMENT

 

Dated as of November 1, 1990

Re:

U.S. $70,000,000 10.60% Senior Notes, Series C, Due January 15, 2011

and
 U.S. $22,000,000 10.26% Senior Notes, Series D, Due January 15, 2011

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	SECTION 1.
	 	DESCRIPTION OF NOTES AND COMMITMENT	 	 	1	 
	 
	 	 	 	 	 	 
	1.1.
	 	Description of Notes	 	 	1	 
	1.2.
	 	Commitment, Closing Date	 	 	2	 
	1.3.
	 	Other Agreements	 	 	2	 
	 
	 	 	 	 	 	 
	SECTION 2.
	 	PREPAYMENT OF NOTES	 	 	3	 
	 
	 	 	 	 	 	 
	2.1.
	 	Required Prepayments	 	 	3	 
	2.2.
	 	Optional Prepayments	 	 	3	 
	2.3.
	 	Notice of Prepayments	 	 	3	 
	2.4.
	 	Allocation of Prepayments	 	 	4	 
	2.5.
	 	Direct Payment	 	 	4	 
	2.6.
	 	Amortization Schedules	 	 	4	 
	2.7.
	 	No Setoff, Counterclaim or Withholding; Gross-Up	 	 	5	 
	2.8.
	 	Notes to Rank Pari Passu	 	 	5	 
	2.9.
	 	Defeasance	 	 	5	 
	2.10.
	 	Interest Rate Adjustment and Repurchase of Notes Upon Occurrence of Certain Events	 	 	8	 
	 
	 	 	 	 	 	 
	SECTION 3.
	 	REPRESENTATIONS	 	 	10	 
	 
	 	 	 	 	 	 
	3.1.
	 	Representations of the Company	 	 	10	 
	3.2.
	 	Representations of the Purchaser	 	 	10	 
	 
	 	 	 	 	 	 
	SECTION 4.
	 	CLOSING CONDITIONS	 	 	12	 
	 
	 	 	 	 	 	 
	4.1.
	 	Closing Certificate	 	 	12	 
	4.2.
	 	Legal Opinions	 	 	12	 
	4.3.
	 	Company’s Existence and Authority	 	 	12	 
	4.4.
	 	Consent of Holders of Other Securities	 	 	12	 
	4.5.
	 	Legality of Investment	 	 	12	 
	4.6.
	 	Related Transactions	 	 	12	 
	4.7.
	 	Private Rating	 	 	13	 
	4.8.
	 	Satisfactory Proceedings	 	 	13	 
	4.9.
	 	Waiver of Conditions	 	 	13	 
	 
	 	 	 	 	 	 
	SECTION 5.
	 	COMPANY COVENANTS	 	 	13	 
	 
	 	 	 	 	 	 
	5.1.
	 	Corporate Existence, Etc.	 	 	13	 
	5.2.
	 	Insurance	 	 	13	 
	5.3.
	 	Taxes, Claims for Labor and Materials, Compliance with Laws	 	 	13	 
	5.4.
	 	Maintenance, Etc.	 	 	14	 
	5.5.
	 	Payment of Principal, Premium and Interest	 	 	14	 
	5.6.
	 	Negative Pledge	 	 	14	 

-i-

 

	 	 	 	 	 	 	 
	 	 	 	 	Page
	5.7.
	 	Limitation on Sale and Leaseback Transactions	 	 	16	 
	5.8.
	 	Consolidation, Amalgamation, Merger or Conveyance, Transfer or Lease of Assets	 	 	17	 
	5.9.
	 	Repurchase of Notes	 	 	17	 
	5.10.
	 	Transactions with Affiliates	 	 	17	 
	5.11.
	 	Reports and Rights of Inspections	 	 	18	 
	 
	 	 	 	 	 	 
	SECTION 6.
	 	EVENTS OF DEFAULT AND REMEDIES THEREFOR	 	 	21	 
	 
	 	 	 	 	 	 
	6.1.
	 	Events of Default	 	 	21	 
	6.2.
	 	Acceleration of Maturities	 	 	23	 
	6.3.
	 	Rescission of Acceleration	 	 	23	 
	 
	 	 	 	 	 	 
	SECTION 7.
	 	AMENDMENTS, WAIVERS AND CONSENTS	 	 	24	 
	 
	 	 	 	 	 	 
	7.1.
	 	Consent Required	 	 	24	 
	7.2.
	 	Solicitation of Noteholders	 	 	24	 
	7.3.
	 	Effect of Amendment or Waiver	 	 	24	 
	 
	 	 	 	 	 	 
	SECTION 8.
	 	INTERPRETATION OF AGREEMENT; DEFINITIONS	 	 	24	 
	 
	 	 	 	 	 	 
	8.1.
	 	Definitions	 	 	24	 
	8.2.
	 	Accounting Principles	 	 	32	 
	8.3.
	 	Directly or Indirectly	 	 	32	 
	 
	 	 	 	 	 	 
	SECTION 9.
	 	MISCELLANEOUS	 	 	32	 
	 
	 	 	 	 	 	 
	9.1.
	 	Note Register	 	 	32	 
	9.2.
	 	Exchange of Notes	 	 	33	 
	9.3.
	 	Loss, Theft, Etc. of Notes	 	 	33	 
	9.4.
	 	Expenses, Stamp Tax Indemnity	 	 	33	 
	9.5.
	 	Powers and Rights Not Waived; Remedies Cumulative	 	 	34	 
	9.6.
	 	Submission to Jurisdiction	 	 	34	 
	9.7.
	 	Notices	 	 	34	 
	9.8.
	 	Reproduction of Documents	 	 	34	 
	9.9.
	 	Successors and Assigns	 	 	35	 
	9.10.
	 	Survival of Covenants and Representations	 	 	35	 
	9.11.
	 	Severability	 	 	35	 
	9.12.
	 	Governing Law	 	 	35	 
	9.13.
	 	Captions	 	 	35	 

-ii-

 

ATTACHMENTS TO NOTE AGREEMENT:

	 	 	 	 	 
	SCHEDULE I

	 	—
	 	Names and Addresses of Purchasers
	 
	 	 	 	 
	SCHEDULE II

	 	—
	 	Subsidiaries of the Company, Description of Debt and Leases
	 
	 	 	 	 
	EXHIBIT A-l

	 	—
	 	Form of 10.60% Senior Note, Series C, Due January 15, 2011
	 
	 	 	 	 
	EXHIBIT A-2

	 	—
	 	Form of 10.26% Senior Note, Series D, Due January 15, 2011
	 
	 	 	 	 
	EXHIBIT B

	 	—
	 	Closing Certificate of the Company
	 
	 	 	 	 
	EXHIBIT C

	 	—
	 	Description of Closing Opinion of Special Counsel to Purchasers
	 
	 	 	 	 
	EXHIBIT D

	 	—
	 	Description of Closing Opinion of United States Counsel to the Company
	 
	 	 	 	 
	EXHIBIT E

	 	—
	 	Description of Closing Opinion of Canadian Counsel to the
Company

-iii-

 

CANADIAN PACIFIC FOREST PRODUCTS LIMITED

1155 Metcalfe Street

Montreal, Quebec

Canada H3B 2X1

NOTE AGREEMENT

Re: U.S. $70,000,000 10.60% Senior Notes, Series C, Due January 15, 2011

and

U.S. $22,000,000 10.26% Senior Notes, Series D, Due January 15, 2011

Dated as of

November 1, 1990

To the Purchaser named in

     Schedule I hereto which is a

     signatory to this Agreement

Gentlemen:

          The undersigned, CANADIAN
PACIFIC FOREST PRODUCTS LIMITED, a corporation incorporated under
the Canada Business Corporations Act (the “Company”), agrees with you as follows:

SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT.

          1.1. Description of Notes. The Company will authorize the issue and sale of:

     (a) U.S. $70,000,000 aggregate principal amount of its 10.60% Senior
Notes, Series C, Due January 15, 2011 (the “Series C Notes”) to be dated the date of
issue, to bear interest from such date at the rate of 10.60% per annum, payable
semiannually on the fifteenth day of each January and July in each year (each such
date being referred to as an “Interest Payment Date”) (commencing July 15, 1991) and
at maturity and to bear interest on overdue principal (including any overdue optional
prepayment of principal) and premium, if any, and (to the extent legally enforceable)
on any overdue installment of interest at the rate of 12.60% per annum after the due
date thereof, whether by acceleration or otherwise, until paid, to be expressed to
mature on January 15, 2011, and to be substantially in the form attached hereto as
Exhibit A-1; and

     (b) U.S. $22,000,000 aggregate principal amount of its 10.26% Senior
Notes, Series D, Due January 15, 2011 (the “Series D Notes”) to be dated the date of
issue, to bear interest from such date at the rate of 10.26% per annum, payable
semiannually on each Interest Payment Date (commencing

 

 

July 15, 1991) and at maturity and to bear interest on overdue principal (including
any overdue required or optional prepayment of principal) and premium, if any, and
(to the extent legally enforceable) on any overdue installment of interest at the
rate of 12.26% per annum after the due date thereof, whether by acceleration or
otherwise, until paid, to be expressed to mature on January 15, 2011, and to be
substantially in the form attached hereto as Exhibit A-2.

The Series C Notes and the Series D Notes are hereinafter collectively referred to as the “Notes”.
Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months.
Reference is made to the provision of the Notes with respect to the statement of the interest rate
for the purposes of compliance with the Interest Act (Canada). The Notes are not subject to
prepayment or redemption at the option of the Company prior to their expressed maturity dates
except on the terms and conditions and in the amounts and with the premium, if any, set forth in
Section 2 of this Agreement. The term “Notes” as used herein shall include each Note delivered
pursuant to this Agreement and the separate agreements with the purchasers named in Schedule I
hereto. You and the other purchasers named in Schedule I hereto are hereinafter sometimes referred
to as the “Purchasers”. The terms which are capitalized herein shall have the meanings set forth
in Section 8.1 hereof unless the context shall otherwise require.

          1.2. Commitment, Closing Date. Subject to the terms and conditions hereof and on the basis
of the representations and warranties hereinafter set forth, the Company agrees to issue and sell
to you, and you agree to purchase from the Company, the Notes of the Company at a price of 100% of
the principal amount thereof set forth opposite your name in
Schedule I.

          Delivery of the Notes will be made at the offices of Chapman and Cutler, 111 West Monroe,
Chicago, Illinois 60603, against payment therefor in U.S. Federal or other funds current and
immediately available at The First National Bank of Chicago, Chicago, Illinois, ABA No. 071000013
for the account of Canadian Pacific Forest Products Limited Concentration Account No. 58-10647 in
the amount of the purchase price at 10:00 A.M., Chicago,
Illinois time, on November 15, 1990 or
such later date (not later than December 31, 1990) as the Company shall specify by not less than
five Business Days’ prior written notice to you (the “Closing Date”). The Notes delivered to you
on the Closing Date will be delivered to you in the form of a single registered Note for the full
amount of your purchase (unless different denominations are specified by you), registered in your
name or in the name of such nominee as may be specified in Schedule I and in substantially the
form attached hereto as Exhibit A-1 or A-2, as the case may be.

          1.3. Other Agreements. Simultaneously with the execution and delivery of this Agreement, the
Company is entering into similar agreements with the other Purchasers under which such other
Purchasers agree to purchase from the Company the principal amount of Notes set opposite such
Purchasers’ names in Schedule I, and your obligation and the obligations of the Company hereunder
are subject to the execution and delivery of the similar agreements by the other Purchasers. This
Agreement and said similar agreements with the other Purchasers are herein collectively referred to
as the “Agreements”. The obligations of each Purchaser shall be several and not joint and no
Purchaser shall be liable or responsible for the acts of any other Purchaser.

-2-

 

SECTION 2. PREPAYMENT OF NOTES.

     No prepayment of the Notes may be made except to the extent and in the manner
expressly provided in this Agreement.

     2.1. Required Prepayments.

     (a) Series C
Notes. The Series C Notes will not be subject to required
prepayment at any time.

     (b) Series D
Notes. In addition to paying the entire outstanding principal
amount and the interest due on the Series D Notes on the maturity date thereof, the
Company agrees that on the fifteenth day of January, in each year commencing January
15, 2002 and ending January 15, 2010, both inclusive (herein called “Fixed Payment Dates”), it will prepay and apply and there shall become due and payable the sum
of U.S. $2,200,000 on the principal indebtedness evidenced by the Series D Notes.

     No premium shall be payable in connection with any required prepayment
made pursuant to this Section 2.1. Any payment of less than all of the Series D Notes
pursuant to the provisions of Section 2.2 shall not relieve the Company of the obligation to
make required payments or prepayments on the Series D Notes in accordance with the
terms of this Section 2.1 after giving effect to the application of such payments made
pursuant to Section 2.2 in accordance with Section 2.4. To the extent that any purchase of
Series D Notes by the Company pursuant to the provisions of Section 2.10 does not result
in the purchase of all of the Series D Notes, then the principal amount of the prepayments
required to be made pursuant to the provisions of this Section 2.1(b) shall, after
the occurrence of each such purchase pursuant to Section 2.10, be reduced in the
same proportion that the principal amount of the Series D Notes outstanding immediately
preceding such partial purchase pursuant to said Section 2.10 has been reduced by such
partial purchase, to the end that the remaining prepayments required to be made pursuant
to the provisions of this Section 2.1(b) on each of the Series D Notes remaining
outstanding will result in the same proportionate rate of prepayment as if the Series D
Notes had not been purchased pursuant to Section 2.10.

     2.2.
Optional Prepayments. In addition to the prepayments required by
Section 2.1, upon compliance with Section 2.3, the Company shall have the privilege at any
time and from time to time of prepaying the outstanding Series C Notes and/or the Series
D Notes, either in whole or in part (but if in part then only in units in excess of U.S.
$1,000,000) by payment of the principal amount of such series of Notes, or portion
thereof to be prepaid, and accrued interest thereon to the date of such prepayment,
together with a premium equal to the Make Whole Premium, determined 5 Business Days
prior to the date of such prepayment.

     2.3.
Notice of Prepayments. The Company will give written notice of any
prepayment of the Notes pursuant to Section 2.2 to each holder thereof not less than 30
days nor more than 60 days before the date fixed for such optional prepayment specifying
(a) such prepayment date, (b) the principal amount of the holder’s Notes to be prepaid on
such date, and (c) the estimated premium (including a description of the calculation to be
made thereof), if any, and accrued interest applicable to the prepayment. Such notice of
prepayment shall also certify all facts which are conditions precedent to any such
prepayment. Notice of prepayment having been so given, the aggregate principal amount
of the Notes specified in such notice, together with the premium, if any, and accrued

-3-

 

interest thereon shall become due and payable on the prepayment date specified in the written
notice described above. In the event that the Company shall elect to prepay only one series of the
Notes, the Company shall also give written notice of the prepayment of such series of Notes to
each holder of the series of Notes not being prepaid at such time specifying (i) the prepayment
date of such other series of Notes, (ii) the principal amount of such other series of Notes being
prepaid, and (iii) the outstanding principal amount of such other series of Notes remaining after
such proposed prepayment. The Company will also give written notice to each holder of the Notes
then being prepaid by telecopy or other same day written communication setting forth the
computation and amount of any premium payable in connection with such prepayment at least 3
Business Days prior to the date of such prepayment.

          2.4. Allocation of Prepayments. All partial prepayments shall be allocated pro
rata among all of the holders of such series of Notes being prepaid at the time outstanding, and
shall be credited, in the case of the Series C Notes, against the final maturities of the Series C
Notes being prepaid and, in the case of the Series D Notes, ratably against the payment due at
final maturity and the required prepayments provided for by Section 2.1(b) hereof on a pro rata
basis.

          2.5. Direct Payment. Notwithstanding anything to the contrary in this Agreement or the
Notes, in the case of any Note owned by the Purchaser or its nominee or owned by any other
institutional holder who has given written notice to the Company requesting that the provisions of
this Section shall apply, the Company will promptly and punctually pay when due the principal
thereof and premium, if any, and interest thereon, without any presentment thereof directly to the
Purchaser or such subsequent holder at the address of the Purchaser set forth in Schedule 1 or at
such other address as the Purchaser or such subsequent holder may from time to time designate in
writing to the Company or, if a bank account is designated for the Purchaser on Schedule I hereto
or in any written notice to the Company from the Purchaser or any such subsequent holder, the
Company will make such payments in immediately available funds to such bank account, marked for
attention as indicated, or in such other manner or to such other account of the Purchaser or such
holder in any bank in the United States as the Purchaser or any such subsequent holder may from
time to time direct in writing. The holder of any Notes to which this Section applies agrees that
in the event it shall sell or transfer any such Notes it will, prior to the delivery of such Notes
(unless it has already done so), make a notation thereon of all principal, if any, prepaid on such
Notes and will also note thereon the date to which interest has been paid on such Notes. With
respect to Notes to which this Section applies, the Company shall be entitled to presume
conclusively that the original or such subsequent institutional holder as shall have requested the
provisions hereof to apply to its Notes remains the holder of such Notes until (1) the Company
shall have received notice of the transfer of such Notes, and of the name and address of the
transferee, or (2) such Notes shall have been presented to the Company as evidence of the transfer.

          2.6. Amortization Schedules. On the date of any partial prepayment of any Note, the Company
shall deliver to each holder of the Notes two copies of an amortization schedule with respect to
such Note setting forth, in the case of the Series C Notes, the principal balance of such Series C
Note remaining unpaid after the date of such partial prepayment, and in the case of the Series D
Notes, the amount of the required payments or prepayments to be made on such Series D Note after
the date of such partial prepayment and the unpaid principal balance of such Series D Note after
each such required payment or prepayment.

-4-

 

          2.7. No Setoff, Counterclaim or Withholding; Gross-Up. Each payment by the Company
under this Agreement or the Notes shall be made without setoff or counterclaim and
without withholding for or on account of any present or future taxes imposed by or within
Canada or any political subdivision or taxing authority thereof or
therein. If any such withholding is so required, the Company shall make the withholding,
pay the amount withheld to the appropriate governmental authority before penalties
attach thereto or interest accrues thereon and forthwith pay such additional amount as
may be necessary to ensure that the net amount actually received by the holder or
holders of the Notes free and clear of such taxes (including such taxes on such
additional amount) is equal to the amount which such holder or holders would have
received had such withholding not been made. If any holder or holders shall pay any
amount in respect of any such taxes, penalties or interest, the Company shall reimburse
said holder or holders in U.S. Dollars for that payment on demand, which reimbursement
shall be made in accordance with the preceding sentence of this Section 2.7. If pursuant
to this Section 2.7 the Company pays any amount in respect of taxes, or any penalty, or
interest which could not have been avoided by the expeditious payment of such taxes, the
holder or holders of the Notes shall, at the sole expense of the Company, use their best
efforts to provide the Company with such information concerning the nationality,
residence or identity of such holder or holders of the Notes and make such declarations
or fulfill such reporting
requirements as may be required by any statute, treaty or regulation of Canada or the
Provinces of Ontario or Quebec as a precondition to exemption from or refund of such
tax,
penalty or interest. The obligations of the holder or holders of the Notes pursuant to this
Section 2.7 shall specifically not include any obligation to provide access to the books,
records, personnel, or agents of such holder or holders of the Notes.

          Any payment made by the Company to any holder of the Notes or for the account of any such
holder in respect of any amount payable by the Company in lawful
currency of the United States of America, which payment is made in any foreign currency, whether pursuant to any judgment or order of the court or tribunal or otherwise, shall
constitute a discharge of the obligations of the Company only to the extent of the
amount
of lawful currency of the United States of America which may be purchased with such foreign
currency on the day of payment. The Company covenants and agrees that it shall,
as a separate independent obligation which shall not be merged in any such judgment or
order, pay or cause to be paid the amount payable in lawful currency of the United States of
America and not so discharged in accordance with the foregoing. It is understood and
agreed that notwithstanding the provisions of Section 2.9 to the contrary, the obligations
of the Company under this Section 2.7 shall survive the Defeasance (as defined in
Section 2.9) of the Notes pursuant to and in accordance with the terms and conditions of
Section 2.9.

          2.8. Notes to Rank Pari Passu. The Company covenants and agrees that all Notes and
all other obligations hereunder are direct and unsecured obligations of the
Company ranking pari passu as against the assets of the Company with all other Notes
from time to time issued and outstanding hereunder without any preference among
themselves and pari passu with all other present and future unsecured and unsubordinated
Indebtedness of the Company.

          2.9. Defeasance. The Company shall have the right and
option at any time to defease either or both series of the Notes in whole but not in
part through the deposit with the Defeasance Trustee of U.S. Dollars or non-callable
U.S. Government Obligations
(hereinafter referred to as the “Defeasance”). Such deposit shall be made pursuant to a
declaration or other appropriate instrument of trust satisfactory in scope, form and

-5-

 

content to the Defeasance Trustee and to the holders of at least 66-2/3% in aggregate principal
amount of all outstanding Notes then being defeased; shall be absolute and irrevocable and the
instrument of trust shall expressly provide that the Company shall have no further title to or
interest in or power to direct the use or application of the obligations so deposited or any of the
proceeds arising therefrom; such instrument shall state that the trust created thereby and the
obligations deposited pursuant thereto are for the sole and exclusive benefit of the holders from
time to time of the outstanding Notes then being defeased and shall expressly provide that the
Defeasance Trustee shall apply payments of principal and/or interest on such obligations to, and
only to, the punctual payment and prepayment of the principal and interest on the Notes then being
defeased as and when such payments become due (such declaration or instrument to contain
appropriate provisions for the recording of transfers of such Notes and the names and addresses of
the holders from time to time of such Notes). All fees, costs and charges of the Defeasance Trustee
under such instrument of trust, including those which may become payable after the date of the
making of such deposit, shall be paid by the Company. The Company shall have the option of electing
either to fully defease the Notes and thereby, upon satisfaction of the conditions set forth in
this Section 2.9, the Company shall on the Defeasance Date described below be discharged from its
obligations contained in this Agreement with respect to and only with respect to such series of
Notes then being defeased (the “Full Defeasance”) or defease the Notes solely with respect to
certain covenants and thereby, upon satisfaction of the conditions set forth in this Section 2.9,
the Company shall on the Defeasance Date described below be released from its obligations to comply
with Sections 2.10, 5.6, 5.7 and 5.8 hereof with respect to and only with respect to such series of
Notes then being defeased (the “Covenant Defeasance”). Upon Defeasance of either or both series of
the Notes in whole and not in part, the Company, on and as of the 91st day after the deposit of
U.S. Dollars or U.S. Government Obligations herein provided for has been duly made (the “Defeasance
Date”), shall, in the case of the Full Defeasance, be discharged from its obligations contained in
this Agreement with respect to such series of Notes then being defeased, and, in the case of the
Covenant Defeasance, be discharged from its obligations to comply with Sections 2.10, 5.6, 5.7 and
5.8 hereof with respect to such series of Notes then being defeased; provided that, in the
event of any such defeasance and after giving effect thereto, the following conditions (together
with any such other conditions as may be imposed by such holders of the Notes then being defeased)
have been satisfied:

     (a) the Company shall have deposited with the Defeasance Trustee absolutely and
irrevocably (irrespective of whether the conditions in paragraphs (b), (c), (d) and
(e) below have been satisfied): (i) U.S. Dollars in an amount, or (ii) non-callable
U.S. Government Obligations, not payable or redeemable prior to their expressed
maturities, which through the payment of principal and interest in respect thereof
in accordance with their terms, without any reinvestment or further investment of
the principal of or interest earned on such obligations, will absolutely and
unconditionally provide in any and all circumstances not later than one day before
each date on which any prepayment or payment of principal of or payment of interest
on the Notes then being defeased is then due and payable, or (iii) a combination
thereof in an amount, to sufficiently pay and discharge the principal of the Notes
outstanding then being defeased, together with interest accrued thereon, on each
date on which any prepayment or payment of principal and/or interest is due;

-6-

 

     (b) no Default or Event of Default shall have occurred and be continuing on each of the date
of the final deposit, and after giving effect thereto, and on the Defeasance Date;

     (c) the Company shall have delivered to the Defeasance Trustee and to the holders of the Notes
then being defeased written confirmation by the auditors of the Company provided such auditors are
a major Canadian firm of independent chartered accountants or such other firm of independent public
accountants of recognized national standing selected by the Company and approved by the holders of
at least 66-2/3% in aggregate principal amount of all Notes then outstanding then being defeased
that the U.S. Government Obligations deposited for payment of the Notes then being defeased,
together with any U.S. Dollars deposited by the Company, are sufficient to satisfy the requirements
of the preceding paragraph (a);

     (d) the Company shall have delivered to the Defeasance Trustee and the holders of the Notes an
opinion of counsel dated as of the Defeasance Date which counsel shall be reasonably satisfactory
to the holders of at least 66-2/3% in aggregate principal amount of each series of the Notes then
being defeased to the effect that (i) the trust declaration or other instrument, as the case may
be, is legal, valid, binding and enforceable in accordance with its terms for the sole benefit and
use of the holders of the Notes then being defeased, is irrevocable and the obligations
deposited thereby and the proceeds thereof and therefrom are held by the Defeasance
Trustee thereunder in trust solely for the benefit of the holders of the Notes then being defeased
and will not be subject to any valid interest, lien, claim or encumbrance of any other Person,
including the Company or any Person claiming by, through, under or in the name or on behalf of the
Company or any creditor or shareholder of the Company, or by any court or trustee in bankruptcy,
(ii) neither the final deposit nor any other deposit will constitute a preferential transfer or a
fraudulent conveyance under any bankruptcy or other similar law and (iii) the holders of the Notes
then being defeased will not recognize income, gain or loss for United States Federal or Canadian
income tax purposes as a result of such deposit and Defeasance and will be subject to United States
Federal or Canadian income tax on the same amount and in the same manner and at the same times, as
would have been the case if such final deposit and Defeasance had not occurred and such opinion
shall cover such other matters as the holders of the Notes then being defeased may reasonably
require in connection with such final deposit and matters relating thereto shall be otherwise in
form and substance reasonably satisfactory to the Defeasance Trustee and to the holders of at least
66-2/3% in aggregate principal amount of outstanding Notes then being defeased and the opinions
described above shall take into account and give effect to the covenant of the holders set forth in
the final paragraph of this Section 2.9; and

     (e) the Company shall have delivered to the Defeasance Trustee an Officers’ Certificate
stating that all conditions precedent herein provided for relating to the Defeasance of the Notes
then being defeased contemplated by this Section 2.9 have been complied with.

-7-

 

          Upon payment in full of all amounts payable on and with respect to the Notes from the sums
on deposit described in paragraph (a) above and all amounts payable by the Company under this
Agreement, the holders of the Notes hereby agree to direct the Defeasance Trustee to remit any
funds remaining on deposit with the Defeasance Trustee after all applications of such funds
have been made pursuant to this Section 2.9 to the Company so long as no Default or Event of
Default has occurred and is continuing.

          2.10. Interest Rate Adjustment and Repurchase of Notes Upon Occurrence of Certain
Events.

               (a) Designated Events. In the event that a Designated Event shall occur, the Company will
give written notice (a “Designated Event Notice”) of such fact not more than 5 days after any
such Designated Event to all holders of the Notes. The Designated Event Notice shall (i) describe
the facts and circumstances of the Designated Event in reasonable detail, (ii) set forth in
reasonable detail the computation of the Debt Ratio determined as of the date of the occurrence
of the Designated Event, and (iii) refer to this Section 2.10 and state that the holders may
acquire the right to require the Company to purchase all of the Notes held by such holder and
that the Company may be obligated to adjust the interest rate borne by the Notes if the terms and
conditions provided for herein
are satisfied.

               (b) Continuing Debt Ratio. In the event that on any date during the period beginning with
the occurrence of a Designated Event to and including the 90th day following the occurrence of
said Designated Event, the Debt Ratio shall exceed 70% and shall continue to exceed 70% for a
period of 90 consecutive days thereafter without being remedied or cured by the Company, then in
that event on and as of the first day following the expiration of such 90 consecutive day period
( the “Put Right Acquisition Date”) (i) each holder of Notes shall irrevocably acquire the right
(the “Put Right”) to require the Company to purchase all of the Notes held by such holder on the
applicable Repayment Date (exercisable as hereinafter provided) and (ii) if the Put Right
Acquisition Date occurs prior to November 16, 1995, then as and from the Put Right Acquisition
Date to the Repayment Date, the interest rate on the Series C Notes and the Series D Notes shall
be automatically adjusted upward to (1) in the event that the Debt Ratio on such Put Right
Acquisition Date exceeds 70% but is less than 75%, the rate of 12.50% per annum, and (2) in the
event that the Debt Ratio on such Put Right Acquisition Date equals or exceeds 75%, the rate of
14.00% per annum.

               (c) Adjusted Interest Calculation. In the event that the interest rates borne by the Notes
are adjusted pursuant to this Section 2.10, such adjustment shall be effective as of the Put
Right Acquisition Date and the amount of the payment of interest on and with respect to the Notes
shall on any Interest Payment Date occurring after the Put Right Acquisition Date be determined
by weighting the average of the applicable rates of interest borne by the Notes during the
immediately preceding Interest Period. The rates of interest shall be weighted by multiplying
each applicable rate of interest borne by the Notes by the number of days such rate was in effect
during each month of such Interest Period, adding the sum of such products and dividing such sum
by the actual number of days in such Interest Period. Interest on the Notes shall be computed on
the basis of a 360-day year of twelve 30-day months. Without limiting the foregoing, whether or
not the Company gives any notice required by this Section 2.10, the interest rate payable in
respect of the Series C Notes and the Series D Notes shall be irrevocably deemed to have been
adjusted as and to the extent herein provided.

-8-

 

               (d) Exercise of Put Right. The Put Right of a holder of Notes may be exercised by
such holder as follows:

     (i) if the Put Right Acquisition Date occurs prior to November 16,
1995, then a holder of Notes may exercise its Put Right between November
16, 1995 and December 21, 1995 (the “Exercise Period”) and, in such event,
the Repayment Date shall be December 28, 1995; or

     (ii) if the Put Right Acquisition Date occurs on or after November 16,
1995, then a holder of Notes may exercise its Put Right within a period of
35 days following the Put Right Acquisition Date (the “Exercise Period”)
and, in such event, the Repayment Date shall be the fifth Business Day
following the expiry of such Exercise Period.

In order to exercise its Put Right, a holder must give a written notice to that effect
to the Company during the applicable Exercise Period. If the holder of any Note gives
such a notice, the Company shall, within five Business Days of receipt of such notice,
give written notice thereof to all other holders of the Notes.

               (e) Put Right Notice. Not more than five Business Days after the Put Right
Acquisition Date, the Company will give to all holders of Notes a written notice (the
“Put Right Notice”) of the happening of such date, which notice shall:

     (i) contain a copy of the Designated Event Notice;

     (ii) set forth in reasonable detail the computation of the Debt Ratio
determined as of the Put Right Acquisition Date;

     (iii) confirm that the holders of Notes have irrevocably acquired the
Put Right and shall set forth in reasonable detail the manner in which such
Put Right may be exercised;

     (iv) designate the Repayment Date; and

     (v) if the Put Right Acquisition Date occurs before November 16,
1995, confirm that the interest rate on the Notes has been adjusted and
stating the new rate of interest and the period during which such interest rate
shall be applicable.

               (f) Reminder Notice. If the Put Right Acquisition Date occurs prior to
November 16, 1995, the Company, in addition to delivering the Put Right Notice referred
to above, will give to all holders of the Notes a written notice (a “Reminder Notice”)
between November 16, 1995 and November 23, 1995 enclosing a copy of the Put Right
Notice and reminding all holders of the Notes of their Put Right and of the manner in
which such right may be exercised.

               (g) Repayment Date. On the applicable Repayment Date, the Company shall purchase all
Notes held by the holders who have exercised their Put Right for a purchase price equal
to the outstanding principal amount thereof together with accrued
interest thereon to the Repayment Date.

-9-

 

          As used in this Section 3.2, the terms “separate account,” “party-in-interest,” “employer
securities,” and “employee benefit plan” shall have the respective meanings assigned to them in
ERISA.

               (c) You further represent that you are not a resident of Canada nor are you purchasing the
Notes for or on behalf of a resident of Canada.

SECTION 4. CLOSING CONDITIONS.

          Your obligation to purchase the Notes on the Closing Date shall be subject to the performance
by the Company of its agreements hereunder which by the terms hereof are to be performed at or
prior to the time of delivery of the Notes and to the following further conditions precedent:

          4.1. Closing Certificate. Concurrently with the delivery of Notes to you on the Closing
Date, you shall have received a certificate dated the Closing Date, signed by the President or a
Vice President of the Company substantially in the form attached hereto as Exhibit B, the truth and
accuracy of which shall be a condition to your obligation to purchase the Notes proposed to be sold
to you.

          4.2. Legal Opinions. Concurrently with the delivery of Notes to you on the Closing Date, you
shall have received from (a) Chapman and Cutler, who are acting as your special counsel in this
transaction, (b) Bell, Boyd & Lloyd, United States counsel to the Company, and (c) Ogilvy Renault,
Canadian counsel to the Company, their respective opinions dated the Closing Date, in form and
substance satisfactory to you, and covering the matters set forth in Exhibits C, D and E,
respectively, hereto.

          4.3. Company’s Existence and Authority. On or prior to the Closing Date, you shall have
received, in form and substance reasonably satisfactory to you and your
special counsel, such documents and evidence with respect to the Company as you may reasonably
request in order to establish the existence and good standing of the Company and the authorization
of the transactions contemplated by this Agreement.

          4.4. Consent of Holders of Other Securities. Any consents or approvals required to be
obtained from any holder or holders of any outstanding Security of the Company and any amendments
of agreements pursuant to which any Securities may have been issued which shall be necessary to
permit the consummation of the transactions contemplated hereby on the Closing Date shall have been
obtained and all such consents or amendments shall be satisfactory in form and substance to you and
your special counsel.

          4.5. Legality of Investment. The Notes to be purchased by you shall qualify as a legal
investment for you under the laws and regulations of each jurisdiction to which you may be subject
(without resort to any so-called “basket” provision which permits
the making of an investment without restrictions as to the character of the particular
investment being made) and you shall have received such information as you shall reasonably request
from the Company to establish such fact.

          4.6. Related Transactions. Concurrently with the issuance and sale of the Notes to you on the
Closing Date, the Company shall have consummated the sale of Notes scheduled to be sold to the
other Purchasers on such Closing Date; provided that so long as all other conditions
precedent set forth in this Section 4 shall have been fulfilled by the

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Company or waived by the Purchasers in accordance with Section 4.9, the Company shall not be
required to proceed with the sale and purchase of the Notes if the Purchasers of more than
$25,000,000 of the principal amount of the Notes scheduled to be sold on the Closing Date shall
fail to purchase such Notes.

          4.7. Private Rating. On or prior to the Closing Date, the Company shall have provided to you
a copy of the private rating letter delivered by Standard & Poor’s Corporation (“S&P”) which letter
shall indicate that S&P has assigned a private rating of “A” to the Notes.

          4.8. Satisfactory Proceedings. All proceedings taken in connection with the transactions
contemplated by this Agreement, and all documents necessary to the consummation thereof, shall be
satisfactory in form and substance to you and your special counsel, and you shall have received a
copy (executed or certified as may be appropriate) of all legal documents or proceedings taken in
connection with the consummation of said transactions.

          4.9. Waiver of Conditions. If on the Closing Date the Company fails to tender to you the
Notes to be issued to you on such date or if the conditions specified in this Section 4 have not
been fulfilled, you may thereupon elect to be relieved of all further obligations under this
Agreement. Without limiting the foregoing, if the conditions specified in this Section 4 have
not been fulfilled, you may waive compliance by the Company with any such condition to such extent
as you may in your sole discretion determine. Nothing in this Section 4.9 shall operate to relieve
the Company of any of its obligations hereunder or to waive any of your rights against the Company.

SECTION
5. COMPANY COVENANTS.

          From and after the Closing Date and continuing so long as any amount remains unpaid on any
Note:

          5.1. Corporate Existence, Etc. The Company will preserve and keep in force and effect, and
will cause each Subsidiary to preserve and keep in force and effect, its corporate existence and
all material franchises, licenses, rights, privileges and permits necessary to the proper conduct
of its business as are customarily maintained by corporations of established reputation engaged in
the same or a similar business and owning and operating similar properties, provided that the
foregoing shall not prevent any transaction permitted by Section 5.8.

          5.2. Insurance. The Company will maintain, and will cause each Subsidiary to maintain,
self-insurance programs or insurance coverage by financially sound and reputable insurers against
such risks the failure to insure against could have a Material Adverse Effect, in such forms and
amounts as are customary for corporations of established reputation engaged in the same or a
similar business and owning and operating similar properties.

          5.3. Taxes, Claims for Labor and Materials, Compliance with Laws. (a) The Company will
promptly pay and discharge, and will cause each Subsidiary promptly to pay and discharge, all
lawful taxes, assessments and governmental charges or levies imposed upon the Company or such
Subsidiary, respectively, or upon or in respect of all or any part of the property or business of
the Company or such Subsidiary, all trade accounts

-13-

 

payable in accordance with usual and customary business terms, and all claims for work, labor or
materials, which if unpaid might become a lien or charge upon any property of the Company or
such Subsidiary; provided the Company or such Subsidiary shall not be required to pay any such tax, assessment, charge, levy, account payable or claim if (i) the validity, applicability or
amount thereof is being contested in good faith by appropriate actions or proceedings which will
prevent the forfeiture or sale of any material property of the Company or such Subsidiary or any
material interference with the use thereof by the Company or such Subsidiary, and (ii) the
Company or such Subsidiary shall set aside on its books, reserves deemed by it to be adequate
with respect thereto.

               (b) The Company will promptly comply and will cause each Subsidiary to comply with all
laws, ordinances or governmental rules and regulations to which it is subject, the violation of
which would have a Material Adverse Effect or would result in any lien or charge upon any
material property of the Company or any Subsidiary.

          5.4. Maintenance, Etc. The Company will maintain, preserve and keep, and will
cause each Subsidiary to maintain, preserve and keep, its material properties which are used or
useful in the conduct of its business (whether owned in fee or a leasehold interest) in good
repair and working order in all material respects and from time to time will make all necessary
repairs, replacements, renewals and additions as determined in the good faith judgment of the
Company to be necessary to enable the Company to conduct its business substantially as currently
conducted or as may be conducted hereafter in
compliance with this Agreement, provided that nothing in this Section 5.4 shall prevent
the Company from discontinuing the operation and maintenance of any of its properties if such
discontinuance is in the good faith judgment of the Company no longer useful or desirable in the conduct of the business of the Company.

          5.5. Payment of Principal, Premium and Interest. The Company will duly and punctually pay
the principal of, premium, if any, and interest on the Notes in accordance with their terms and
this Agreement and will duly and punctually pay all other sums due and payable under and
pursuant to this Agreement.

          5.6. Negative Pledge. The Company will not, and will not permit any Subsidiary to, create
after the date of this Agreement any Mortgage upon any property of the Company or of any
Subsidiary, whether owned at the date of this Agreement or hereafter acquired by the Company or
by any Subsidiary, to secure any Indebtedness, without making effective provision concurrently
with the creation of any such Mortgage whereby the Notes (together with, if the Company shall
so determine, any other Indebtedness of the Company ranking equally with or in priority to the
Notes and then existing or thereafter created in the case where the Company is required by
contract to do so) shall be secured by a Mortgage equally and ratably with such Indebtedness, so
long as such Indebtedness shall be so secured; provided, however, that the foregoing
restrictions shall not be applicable to:

     (a) any Mortgage to secure any present or future Indebtedness of or related to
the affairs or activities of Ponderay Newsprint Company or of Gold River Newsprint
Limited Partnership, being joint ventures in which the Company or a Subsidiary has
an interest, or of their respective successors and assigns, to the extent that such
Mortgage affects the property or interests in property in said joint ventures;

-14-

 

     (b) any Mortgage (except on fixed assets and on shares of a Subsidiary or Affiliate) given to
banks or others to secure any Indebtedness issued, assumed or guaranteed by the Company or a
Subsidiary, which is payable on demand or which matures by its terms less than twelve months from
the date of issuance, assumption or guarantee thereof;

     (c) any Mortgage to secure a Purchase Money Obligation; provided that (i) in the case
of any construction or improvement of property, the Mortgage shall only apply to the property to
be constructed or improved, to the real or immovable property which is substantially unimproved for
the purposes of the Company or a Subsidiary and on which the property so constructed or the
improvement is located, and to any machinery or equipment installed at any time so as to constitute
immovable property or a fixture on the real property on which the property so constructed, or the
improvement, is located, and (ii) in the case of any acquisition of property, the Mortgage shall
only apply to the property to be acquired by the Company or a Subsidiary;

     (d) any Mortgage to secure Indebtedness issued, assumed or guaranteed for the
construction of townsites, employees’ housing, warehouses or office premises;

     (e) any Mortgage on any non-producing resource property to secure any Indebtedness issued,
assumed or guaranteed for the development or improvement of non-producing resource property;

     (f) any Mortgage in favor of a government in Canada or the United States of America;

     (g) any Mortgage in favor of the Company or any Wholly-owned Subsidiary;

     (h) any Mortgage required to be given or granted by any Subsidiary pursuant to the terms of
any trust deed or similar document entered into by such Subsidiary prior to the date it became a
Subsidiary;

     (i) any renewal, replacement or extension (or successive renewals, replacements or
extensions) of any Mortgage referred to in clauses (a) to (h) inclusive above; provided,
however, that the principal amount of the Indebtedness secured thereby shall not exceed the
principal amount of the Indebtedness so secured at the time of such renewal, replacement or
extension, except that this proviso shall not apply to any Indebtedness referred to in clause (a)
or clause (b) above nor to any Indebtedness of or related to the affairs or activities of any
joint venture, partnership or similar arrangement in which the Company or a Subsidiary has an
interest but does not alone have the power to effect any such renewal, replacement or extension;
and

     (j) a Mortgage not excepted by clauses (a) through (i) above; provided that after
giving effect thereto the sum of (i) the aggregate amount of Indebtedness secured by such Mortgage
and other Mortgages created under this clause (j), and (ii) Attributable Debt, does not exceed 10%
of the Consolidated Shareholders’ Equity of the Company as at the end of the then last completed
financial quarter of the Company.

-15-

 

          5.7. Limitation on Sale and Leaseback Transactions.

          The Company will not, and will not permit any Subsidiary to enter into any arrangement,
directly or indirectly, whereby the Company or any Subsidiary shall in one or more related
transactions sell, transfer or otherwise dispose of any property owned by the Company or any
Subsidiary to any Person and more than 180 days after the later of the date of initial acquisition
of such property or completion or occupancy thereof, as the case may be, by the Company or such
Subsidiary, the Company or such Subsidiary shall lease or rent, as lessee, under a lease the term
of which (including the initial term and any period for which the lease may be renewed or extended)
exceeds thirty-six (36) months, the same property (a “Sale and Leaseback Transaction”),
provided that the foregoing restriction shall not apply to any Sale and Leaseback
Transaction if the following conditions are met:

     (a) the sale of such property is for cash consideration which (before deduction
of any expenses incurred by the Company or such Subsidiary in connection with such
Sale and Leaseback Transaction and any other applicable expenses) equals or exceeds
the fair market value of the property so sold (as determined in good faith by the
Board of Directors); and

     (b) immediately after the consummation of the Sale and Leaseback Transaction and
after giving effect thereto, no Default or Event of Default would exist; and

     (c) at least one of the following conditions with respect to such Sale and
Leaseback Transaction shall have been satisfied:

     (i) within 90 days after such sale the Company or such Subsidiary
applies all, but not less than all, of the net proceeds from the sale
relating to such Sale and Leaseback Transaction to the prepayment
(including the premium where due and payable upon such prepayment), of
the unsubordinated Funded Debt of the Company and its Subsidiaries all
in accordance with and pursuant to the provisions of the agreements and
instruments under which such Funded Debt was issued; or

     (ii) the Company or such Subsidiary applies the net proceeds from
the sale relating to such Sale and Leaseback Transaction to the
acquisition (and, in the case of real property, the construction) within
90 days thereafter of capital assets useful and intended to be used in
carrying on the business of the Company or such Subsidiary and having a
fair market value (as determined in good faith by the Board of Directors
of the Company) at least equal to such net sale proceeds,
provided such newly acquired assets shall be free from all liens
to the extent that the assets which are subject of the Sale and
Leaseback Transaction were free from all liens at the time of such sale;
or

     (iii) immediately prior to the consummation of such Sale and
Leaseback Transaction, the Company would be permitted by the provisions
of Section 5.6(j) to create a Mortgage on the property which was the
subject of such Sale and Leaseback

-16-

 

Transaction to secure additional Funded Debt in a principal
amount equal to the Attributable Debt relating to such Sale and
Leaseback Transaction.

          5.8. Consolidation, Amalgamation, Merger or Conveyance, Transfer or
Lease of Assets. The Company shall not consolidate or amalgamate with or merge into
another Person or convey, transfer or lease all or substantially all of its assets (in a single
transaction or a series of transactions) to any Person, nor shall any Person consolidate or
amalgamate with or merge into the Company, unless:

     (a) the corporation formed by such consolidation or amalgamation or
into which the Company is merged or the Person which acquires by
operation of law or by conveyance or transfer or lease all or substantially all
of the assets of the Company shall be a corporation organized or existing
under the laws of Canada or any Province or Territory thereof or under the
laws of the United States or any State thereof, and shall (except in any case
where such assumption is deemed to have occurred by the sole operation of
law), expressly assume, by written instrument reasonably satisfactory to the
holders of at least 66 2/3% in outstanding principal amount of the Notes,
provided that if such holders shall not have objected to the form of such
written instrument within 15 Business Days of actual receipt of the final draft
form thereof from the Company, the form of such instrument shall be deemed
to be satisfactory to the holders of the Notes, the due and punctual payment
of all Indebtedness, obligations and liabilities of the Company pursuant to this
Agreement and the due and punctual performance and observance of every
covenant of this Agreement and the Notes on the part of the Company to be
performed or observed;

     (b) immediately after giving effect to such transaction, no Default
or Event of Default shall have happened and be continuing; and

     (c) the Company shall have delivered to the holders of the Notes an
Officers’ Certificate and an opinion of counsel which counsel shall be selected
by the Company and satisfactory to the holders of at least 66 2/3% in outstanding principal
amount of the Notes each stating that such consolidation, merger,
amalgamation, conveyance, transfer or lease and such assumption
agreement, comply with this Section 5.8 and that all conditions precedent
herein provided for relating to such transaction have been complied with.

          5.9. Repurchase of Notes. Except as permitted under and pursuant to
Section 2.10, neither the Company nor any Subsidiary, directly or indirectly, by or through
any entity or other means, may repurchase or make any offer to repurchase any Notes of
any series unless the offer has been made to repurchase such series of Notes, pro rata,
from all holders of the Notes of such series at the same time and upon
the same terms. In case the Company or any Subsidiary repurchases any Notes as aforementioned, such Notes shall thereafter be cancelled and no Notes shall be issued in substitution therefor.

          5.10. Transactions with Affiliates. The Company will not, and will not permit any Subsidiary to, enter into or be a party to any transaction or arrangement with any Affiliate (including, without limitation, the purchase from, sale to or exchange of property with, or the rendering of any service by or for, any Affiliate),
except in the ordinary course of and pursuant to the reasonable requirements of the Company’s or such

-17-

 

Subsidiary’s business and upon fair and reasonable terms no less favorable to the Company or such
Subsidiary than would obtain in a comparable arm’s-length transaction with a Person other than an
Affiliate.

     5.11. Reports and Rights of Inspection. The Company will keep, and will cause each Subsidiary
to keep, proper books of record and account in which full and correct entries will be made of all
dealings or transactions of or in relation to the business and affairs of the Company or such
Subsidiary, in accordance with generally accepted Canadian accounting principles consistently
maintained (except for changes disclosed in the financial statements furnished to you pursuant to
this Section 5.11 and concurred in by the independent public accountants referred to in Section
5.11(b) hereof), and will furnish to you, so long as you are the holder of any Note and to each
other institutional holder of the then outstanding Notes (in duplicate if so specified below or
otherwise requested), and, in the case of the financial statements delivered pursuant to paragraph
(b) of this Section 5.11, to the Securities Valuation Office, National Association of Insurance
Commissioners, 67 Wall Street, New York, New York 10005:

     (a) Quarterly Statements. As soon as available and in any event within the applicable
time periods prescribed by the Ontario Securities Act following the end of each quarterly
fiscal period (except the last) of each fiscal year, duplicate copies of:

     (i) consolidated balance sheets of the Company as of the close of such quarter
setting forth in comparative form the consolidated figures for the corresponding
period of the preceding fiscal year,

     (ii) consolidated statements of earnings and retained earnings of the Company
for such quarterly period, setting forth in comparative form the consolidated figures
for the corresponding period of the preceding fiscal year, and

     (iii) consolidated statements of changes in cash position of the Company for the
portion of the fiscal year ending with such quarter, setting forth in comparative
form the consolidated figures for the corresponding period of the preceding fiscal
year,

consolidating the Company and its Subsidiaries all in reasonable detail and certified as
complete and correct, by an authorized financial officer of the Company to the effect that
such consolidated financial statements present fairly in all material respects the
financial position of the Company as of such date and the results of its operations and
changes of cash position for such period in accordance with generally accepted Canadian
accounting principles; provided, that so long as the Company shall file a Quarterly
Report which contains the information set forth in this paragraph (a), the requirements of
this paragraph (a) shall be satisfied by forwarding a copy of said Quarterly Report to the
holders of the Notes;

     (b) Annual Statements. As soon as available and in any event within the applicable
time periods prescribed by the Ontario Securities Act following the close of each fiscal
year of the Company, duplicate copies of:

- 18 -

 

     (i) consolidated balance sheets of the Company as of the close of such fiscal year, and

     (ii) consolidated statements of earnings and retained earnings and changes in cash
position of the Company for such fiscal year,

consolidating the Company and its Subsidiaries in each case setting forth in comparative form the
consolidated figures for the preceding fiscal year, all in reasonable detail and accompanied by
an opinion thereon (unqualified as to scope limitations imposed by the Company) thereon of a
major Canadian firm of independent chartered accountants selected by the Company to the effect
that the consolidated financial statements have been prepared in accordance with generally
accepted Canadian accounting principles applied on a consistent basis and present fairly the
financial condition of the Company as of such date and the results of its operations and changes
of cash position for such period and that the examination of such accountants in connection with
such financial statements has been made in accordance with generally accepted Canadian auditing
standards and, accordingly, includes such tests of the accounting records and such other auditing
procedures as were considered necessary to provide a reasonable basis for the opinion expressed
in the report; provided, that so long as the Company shall file an Annual Report which
contains the information set forth in this paragraph (b), the requirements of this paragraph (b)
shall be satisfied by forwarding a copy of said Annual Report to the holders of the Notes;

     (c) Audit Reports. Promptly upon receipt thereof, one copy of each interim or special
financial audit made by independent accountants of the books of the Company and its Subsidiaries
on a consolidated basis or of the books of any Subsidiary which contributes 25% or more of the
consolidated sales of the Company, which audit results in the issuance of an opinion by such
accountants;

     (d) Ontario Securities Commission and Other Reports. Promptly upon their becoming publicly
available, one copy of each financial statement, report, notice, information circulars or proxy
statement sent by the Company to stockholders generally and of each Quarterly Report, Annual
Report and each other regular or periodic report, and any registration statement or prospectus
filed by the Company or any Subsidiary with any securities exchange including, without
limitation, the Securities and Exchange Commission and the Ontario Securities Commission or any
successor agencies, and copies of any annual information form filed with provincial securities
commissions and any material event or material change reports filed with provincial securities
commissions;

     (e) Requested Information. With reasonable promptness, such other data and information as
you or any such institutional holder may reasonably request;

     (f) Officer’s Certificates. Within the period provided in paragraph (b) above, a certificate
of an authorized financial officer of the Company stating that such officer has reviewed the
provisions of this

- 19 -

 

Agreement and setting forth: (i) the information and computations (in sufficient detail)
required in order to establish whether the Company was in compliance with the terms and
restrictions of Sections 5.6(j) and 5.7(c)(iii) at the end of the period covered by the
financial statements then being furnished, and (ii) whether there existed as of the date
of such financial statements and whether, to the best of his knowledge, there exists on
the date of the certificate or existed at any time during the period covered by such
financial statements any Default or Event of Default and, if any such condition or event
exists on the date of the certificate, specifying the nature and period of existence
thereof and the action the Company is taking or proposes to take with respect thereto; and

     (g) Notice of Default or Event of Default. Immediately (and in any event within five
Business Days) after becoming aware of the existence of any condition or event which
constitutes a Default or an Event of Default, a written notice specifying the nature and
period of existence thereof and what action the Company is taking or proposes to take with
respect thereto;

     (h) Notice of Claimed Default. Immediately upon becoming aware that the holder of any
Note or any other evidence of Indebtedness or other Security of the Company or any
Subsidiary has given notice or taken any other action with respect to a claimed default or
Event of Default, a written notice specifying the notice given or action taken by such
holder and the nature of the claimed default or Event of Default and what action the
Company is taking or proposes to take with respect thereto;

     (i) Loss of Reporting Issue or Status. With reasonable promptness, notice of loss by
the Company of its status as a reporting issuer under the Ontario Securities Act and from
time to time thereafter notice of any change, loss or sale of any franchise, license,
right, privilege or permit otherwise required to be maintained by the Company pursuant to
Section 5.1; and

     (j) Notice of Litigation. From and after the date on which the Company shall not be
required to file an Annual Report with the Ontario Securities Commission, the Company
agrees to give notice within ten Business Days of such event of any litigation, dispute or
governmental proceeding that is, in the good faith Judgment of the Company, reasonably
likely to have a Material Adverse Effect to all holders of the Notes then outstanding, such
notice to be in writing and to be sent in the manner specified in Section 9.7 of this
Agreement and thereafter to provide such other information with respect to the status of
any such litigation, dispute or governmental proceeding as any holder of the Notes may from
time to time reasonably request.

Without limiting the foregoing, the Company will permit you, so long as you are the holder of any
Note, and each institutional holder of the then outstanding Notes (or such Persons as either you
or such holder may designate), to visit and inspect, under the Company’s guidance, any of the
properties of the Company or any Subsidiary, to examine all their books of account, records,
reports and other papers, to make copies and extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective officers, employees, and independent
chartered accountants (and by this provision the Company authorizes said accountants to discuss
with you the finances and affairs of the Company and its Subsidiaries) all at such reasonable
times and as often as

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may be reasonably requested (hereinafter referred to as the “Inspection Rights”);
provided, that prior to the occurrence of a Default or an Event of Default, the holders
of the Notes hereby agree to limit the exercise of their Inspection Rights to an examination of
the books of account and records of the Company and its Subsidiaries, to discussions of the
respective affairs, finances and accounts with senior officers of the Company designated by the
Company for such purpose and the independent chartered accountants of the Company (so long as in
connection with any meeting with the independent chartered accountants of the Company, the
holders of the Notes shall forward written notice of such proposed meeting to the Company not
less than five Business Days prior to the date of such proposed meeting and such notice shall
afford the Company the opportunity to attend such meeting (it being understood that the failure
of the Company to attend such meeting shall not preclude the holders from proceeding with such
meeting)) and that such limited Inspection Rights shall be exercised no more than one time during
any calendar year by one or more representatives of the holders of the Notes which
representatives shall be appointed by the holders of at least
66-2/3% of the holders of each
series of Notes. The Company shall not be required to pay or reimburse you or any such holder for
expenses which you or any such holder or your representatives may incur in connection with any
such visitation or inspection, provided that the Company hereby agrees to pay and reimburse you
or any such holder or your representatives for expenses which may be incurred in connection with
any visitation or inspection following the occurrence and during the continuance of a Default or
Event of Default hereunder.

SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR.

          6.1. Events of Default. Any one or more of the following shall constitute an “Event of
Default” as the term is used herein:

     (a) Default shall occur in the payment of interest on any Note when the same shall
have become due and such default shall continue for more than 30 days; or

     (b) Default shall occur in the making of any required scheduled prepayment on any of
the Series D Notes as provided in Section 2.1 when the same shall have become due; or

     (c) Default shall occur in the making of any other payment or repurchase of the
principal of any Note or any Make Whole Premium thereon at the expressed or any accelerated
maturity date or at any date fixed for prepayment; or

     (d) Default shall be made in the payment of the principal of or interest on any
Indebtedness for borrowed money aggregating in excess of U.S. $10,000,000 of the Company,
as and when the same shall become due and payable by the lapse of time, by declaration, by
call for redemption or otherwise, and such default shall continue beyond the period of
grace, if any, allowed with respect thereto; or

     (e) Default or the happening of any event shall occur or any condition shall exist
under any indenture, agreement, or other instrument under which any Indebtedness for
borrowed money aggregating in excess of U.S. $10,000,000 of the Company may be issued, and
such default, event or

-21-

 

condition shall continue and the Company shall not have remedied or cured such default, such
default shall not have been waived by the holders of such Indebtedness and such default shall
result in the acceleration of the maturity of at least U.S. $10,000,000 in outstanding principal
amount of such Indebtedness of the Company; or

     (f) Default shall occur in the observance or performance of any covenant or agreement
contained in Section 5.6 which is not remedied within 30 Business Days after written notice
thereof to the Company by the holder of any Note; or

     (g) Default shall occur in the observance or performance of any other provision of this
Agreement which is not remedied within 60 Business Days after written notice thereof to the
Company by the holder of any Note; or

     (h) Any representation or warranty made by the Company herein, or made by the Company in any
statement or certificate furnished by or on behalf of the Company in connection with the
consummation of the issuance and delivery of the Notes or furnished by the Company pursuant
hereto, is untrue in any material respect as of the date of the issuance or making thereof; or

     (i) Final judgment or judgments for the payment of money aggregating in excess of
$10,000,000 is or are outstanding against the Company or against any of its property or assets
and any one of such judgments has remained unpaid, unvacated, unbonded or unstayed by appeal or
otherwise for a period of 30 days from the date of its entry; or

     (j) The Company becomes insolvent or bankrupt, is generally not paying its debts as they
become due or makes an assignment for the benefit of creditors or shall convey or transfer any of
its property with a view to delaying, defeating or hindering creditors, or the Company applies
for or consents to the appointment of a custodian, trustee, liquidator or receiver for the
Company or for the major part of its property or the Company admits to some or all of its
creditors at a meeting or by other means of communication that it is insolvent or the passing of
a resolution by the Company or the commencement by the Company of any proceeding relative to the
Indebtedness of the Company under any reorganization, arrangement, compromise, adjustment or
postponement of debt, dissolution, winding-up, composition or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; or

     (k) A custodian, trustee, liquidator, receiver or other similar official is appointed for
the Company or for the major part of its property and is not discharged within 60 days after such
appointment; or

     (1) Bankruptcy, reorganization, arrangement, liquidation, winding-up, adjustment, protection,
relief, composition or insolvency proceedings, or other proceedings for relief under any
bankruptcy or similar law or laws for the relief of debtors, are instituted by the Company or are
granted by a court, or are instituted against the Company by any other Person and, if instituted
against the Company by any Person other than the Company, are consented to

- 22 -

 

or are not contested vigorously and in good faith by the Company within 30 days after such
institution.

          6.2. Acceleration of Maturities. When any Event of Default described in paragraphs (a)
through (i), inclusive, of Section 6.1 has happened and is continuing, the holder or holders of
25% or more of the principal amount of Notes at the time outstanding may, by notice in writing
sent to the Company by any method authorized by Section 9.7, declare the entire principal of and
all interest accrued on all Notes to be, and all Notes shall thereupon become, forthwith due and
payable, without any presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived. When any Event of Default described in
paragraph (j), (k) or (l) of
Section 6.1 has occurred, then all outstanding Notes shall immediately become due and payable
without presentment, demand or notice of any kind. Upon the Notes becoming due and payable as a
result of any Event of Default as aforesaid, the Company will forthwith pay to the holders of the
Notes the entire principal of and interest accrued on the Notes and if the Event of Default which
has occurred is described in any of Sections 6.1(a) through (i), inclusive, at a time when no
Event of Default described in Sections 6.1(j), (k) or (l) and constituting involuntary
bankruptcy, reorganization or insolvency proceedings has occurred, and is continuing, to the
extent permitted by law and as liquidated damages and not as a penalty, an additional amount
equal to the then applicable Make Whole Premium. No course of dealing on the part of any
Noteholder nor any delay or failure on the part of any Noteholder to exercise any right shall
operate as a waiver of such right or otherwise prejudice such holder’s rights, powers and
remedies. The Company further agrees, to the extent permitted by law, to pay to the holder or
holders of the Notes all costs and expenses incurred by them in the collection of any Notes upon
any default hereunder or thereon, including reasonable compensation to such holder’s or holders’
attorneys for all services rendered in connection therewith.

          6.3. Rescission of Acceleration. The provisions of Section 6.2 are subject to the condition
that if the principal of and accrued interest on all or any outstanding Notes have been declared
immediately due and payable by reason of the occurrence of any Event of Default described in
paragraphs (a) through (i), inclusive, of Section 6.1, the holders of at least 66-2/3% in
aggregate principal amount of the Notes then outstanding may, by written instrument filed with
the Company, rescind and annul such declaration and the consequences thereof, provided
that at the time such declaration is annulled and rescinded:

     (a) no judgment or decree has been entered for the payment of any monies due pursuant
to the Notes or this Agreement;

     (b) all arrears of interest upon all the Notes and all other sums payable under the
Notes and under this Agreement (except any principal, interest or premium on the Notes
which has become due and payable solely by reason of such declaration under Section 6.2)
shall have been duly paid; and

     (c) each and every other Default and Event of Default shall have been made good, cured
or waived pursuant to Section 7.1;

and
provided further, that no such rescission and annulment shall extend to or affect any
subsequent Default or Event of Default or impair any right consequent thereto.

- 23 -

 

SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS.

          7.1. Consent Required. Any term, covenant, agreement or condition of this Agreement may,
with the consent of the Company, be amended or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or prospectively), if the Company
shall have obtained the consent in writing of the holders of at least 66-2/3% in aggregate
principal amount of each series of outstanding Notes; provided that without the written
consent of the holders of all of the Notes then outstanding, no such waiver, modification,
alteration or amendment shall be effective (a) which will change the time of payment (including
any prepayment required by Section 2.1) of the principal of or the interest on any Note or reduce
the principal amount thereof or change the rate of interest thereon (except in accordance with
the provisions of Section 2.10(a)) or premium thereon, or (b) which will change any of the
provisions with respect to optional prepayments, or (c) which will change the percentage of
holders of the Notes required to consent to any such amendment, alteration or modification or
change any of the provisions of Sections 2.10, 6 or 7.

          7.2. Solicitation of Noteholders. The Company will not solicit, request or negotiate for or
with respect to any proposed waiver or amendment of any of the provisions of this Agreement or
the Notes unless each holder of the Notes (irrespective of the amount of Notes then owned by it)
shall be informed thereof in writing by the Company and shall be afforded the opportunity of
considering the same and shall be supplied by the Company with sufficient information to enable
it to make an informed decision with respect thereto. Executed or true and correct copies of any
waiver or amendment effected pursuant to the provisions of this Section 7 shall be delivered by
the Company to each holder of outstanding Notes forthwith following the date on which the same
shall have been executed and delivered by the holder or holders of the requisite percentage of
outstanding Notes. The Company will not, directly or indirectly, pay or cause to be paid any
remuneration, whether by way of supplemental or additional interest, fee or otherwise, to any
holder of the Notes as consideration for or as an inducement to the entering into by any holder
of the Notes of any waiver or amendment of any of the terms and provisions of this Agreement
unless such remuneration is concurrently paid, on the same terms, ratably to the holders of all
of the Notes then outstanding.

          7.3. Effect of Amendment or Waiver. Any such amendment or waiver shall apply equally to all
of the holders of the Notes and shall be binding upon them, upon each future holder of any Note
and upon the Company, whether or not such Note shall have been marked to indicate such amendment
or waiver. No such amendment or waiver shall extend to or affect any obligation not expressly
amended or waived or impair any right consequent thereon.

SECTION
8. INTERPRETATION OF AGREEMENT; DEFINITIONS.

          8.1. Definitions. Unless the context otherwise requires, the terms hereinafter set forth
when used herein shall have the following meanings and the following definitions shall be equally
applicable to both the singular and plural forms of any of the terms herein defined:

          “Acting jointly or in concert”, when used in relation to a Person, shall have the meaning
assigned thereto in the Ontario Securities Act.

- 24 -

 

          “Adjustment Date” shall have the meaning assigned thereto in Section 2.10(a).

          “Affiliate” shall mean any Person (other than a Subsidiary) (a) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under common control
with, the Company, (b) which beneficially owns or holds 10% or more of any class of the Voting
Shares of the Company or (c) 10% or more of the Voting Shares (or in the case of a Person which
is not a corporation, 10% or more of the equity interest) of which is beneficially owned or held
by the Company or a Subsidiary. The term “control” means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of Voting Shares, by contract or otherwise.

          “Annual Report” shall mean the report containing the financial statements of the Company and
its Subsidiaries determined on an annual basis and required to be filed with the Ontario
Securities Commission in accordance with and pursuant to the requirements of Section 77(1) of the
Ontario Securities Act.

          “Associate” of any Person shall have the meaning assigned thereto in the Ontario Securities
Act.

          “Attributable Debt” shall mean in connection with a Sale and Leaseback Transaction, at any
date as of which the amount thereof is to be determined, the lesser of (a) the fair market value
of the property subject to such Sale and Leaseback Transaction (as determined in good faith by
the Board of Directors) and (b) the total net amount of rent required to be paid by such Person
under the lease which is the subject of such Sale and Leaseback Transaction during the remaining
term thereof, discounted from the respective due dates thereof to such date at the debt rate
implicit in such lease per annum compounded annually. The net amount of rent required to be paid
under any such lease for any such period shall be the amount of the rent payable by the lessee
with respect to such period, after excluding amounts required to be paid on account of
maintenance and repairs, insurance, taxes, assessments, water rates and similar charges. In the
case of any lease which is terminable by the lessee upon the payment of a penalty, such net
amount shall also include the amount of such penalty, but no rent shall be considered as required
to be paid under such lease subsequent to the first date upon which it may be so terminated.

          “Beneficial Owner” or “Beneficial Ownership”, when used in relation to shares of capital
stock, shall have the meaning assigned thereto in the Ontario Securities Act.

          “Board of Directors” shall mean the board of directors of the Company or, when the context
otherwise permits, any duly authorized committee or member of the board.

          “Board Resolution” shall mean a copy of a resolution certified by the Secretary or an
Assistant Secretary of the Company or by another officer of the Company as having been duly
adopted by the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the holders of the then outstanding Notes.

          “Business Day”" shall mean any day other than a Saturday, Sunday or other day on
which banks in Montreal or Toronto, Canada or Chicago, Illinois are required by law to close or
are customarily closed.

- 25 -

 

          “Capitalized Lease” shall mean any lease, the obligation for Rentals with respect to which
is required to be capitalized on a balance sheet of the lessee in accordance with generally
accepted Canadian accounting principles.

          “Capitalized Rentals” shall mean as of the date of any determination the amount at which the
aggregate Rentals due and to become due under all Capitalized Leases under which the Company or
any Subsidiary is a lessee would be reflected as a liability on a consolidated balance sheet of
the Company and its Subsidiaries.

          “Confidential Private Placement Memorandum” shall mean the Company’s Confidential Private
Placement Memorandum distributed by Goldman, Sachs & Co. dated April, 1990 as amended and
supplemented by a letter of the Treasurer of the Company dated October 23, 1990 addressed inter
alia to the Purchasers of the Notes enclosing copies of a Pro Forma Consolidated Capitalization
Table, the 1990 Third Quarter Report to Shareholders and the 1990 Second Quarter Report to
Shareholders.

          “Consolidated
Shareholders’ Equity” shall mean, as of any date as of which the
amount thereof is to be determined, the amount of the stated capital accounts plus (or minus in
the case of a deficit) the surplus and retained earnings of the Company and its Subsidiaries, all
determined in accordance with generally accepted Canadian accounting principles, on a
consolidated basis eliminating intercompany items.

          “Consolidated Total Capitalization” shall mean, as of the date of any determination thereof,
the sum of (a) Consolidated Funded Debt and
(b) Consolidated Shareholders’ Equity.

          “Continuing Director” at any date shall mean an individual who is a member of the Board of
Directors on such date and who either was a member of the Board of Directors on the date of this
Agreement or shall have become a member thereof subsequent to such date (a) with the approval of
at least a majority of the Continuing Directors then members of the Board of Directors, or (b)
following the election of such member at an annual general meeting of shareholders to replace a
director who has died or who has resigned or otherwise retired in the ordinary course,
provided that the number of directors that may be so elected to replace a director who
has resigned or otherwise retired, shall not exceed 20% of the number of directors in office
immediately prior to the previous annual general meeting of shareholders.

          “Current Debt” shall mean, as of the date of any determination thereof, all Indebtedness
other than Funded Debt, including all payments that are required to be made on Funded Debt within
one year from the date of any determination of Current Debt. “Consolidated” when used as a prefix
to Current Debt shall mean the aggregate amount of all such Current Debt of the Company and its
Subsidiaries on a consolidated basis eliminating intercompany items.

          “Debt Ratio” shall mean, as of the date of any determination thereof, the ratio between (a)
the sum of (i) Consolidated Funded Debt and (ii) Consolidated Current Debt, and (b) the sum of (i)
Consolidated Total Capitalization and (ii) Consolidated Current Debt.

          “Default” shall mean any event or condition, the occurrence of which would, with the lapse of
time or the giving of notice, or both, constitute an Event of Default as defined in Section 6.1.

- 26 -

 

          “Defeasance” shall have the meaning assigned thereto in Section 2.9.

          “Defeasance Trustee” shall mean a bank or trust company which shall have a combined capital,
surplus and undivided profits of not less than U.S. $750,000,000, shall be organized and doing
business under the laws of the United States of America or a State thereof or Canada or a
Province thereof, shall not be a Subsidiary or Affiliate of the Company and shall be acceptable
to the holders of at least 66-2/3% in aggregate principal amount of each series of outstanding
Notes then being defeased.

          “Delayed Purchase Date” shall have the meaning assigned thereto in Section 2.10(d).

          “Designated Event” shall be deemed to have occurred on each such date as:

     (a) a Person, alone or with its Affiliates, Associates or Persons with whom such
Person is acting jointly or in concert, becomes the Beneficial Owner of more than 30% of
the total voting rights attaching to all outstanding Voting Shares of the Company or
subsequently increases such Beneficial Ownership from 50% or less to a majority of the
total voting rights attaching to all Voting Shares of the Company; provided that
this clause (a) shall not apply to the acquisition of shares of Canadian Pacific Limited, a
corporation incorporated under the Canada Business Corporations Act; or

     (b) the individuals who are Continuing Directors shall cease for any reason to
constitute at least two-thirds of the Board of Directors; or

     (c) the Company consolidates or amalgamates with or merges into another company or
conveys, transfers or leases all or substantially all of its assets to any Person, or any
company consolidates or amalgamates with or merges into the Company, in any such event
pursuant to a transaction in which outstanding Voting Shares of the Company are changed into
or exchanged for cash, Securities or other property, provided that there shall be
excluded from the application of this clause (c) such transactions (i) between the Company
and its Subsidiaries or between Subsidiaries, (ii) involving solely the establishment of a
public holding company for the Company, or (iii) involving the exchange of the Company’s
Voting Shares as consideration in the acquisition of another business or businesses (without
change or exchange of the Company’s outstanding Voting Shares into or for cash, Securities
or other property); or

     (d) the Company or any Subsidiary purchases or otherwise acquires, directly or
indirectly, Beneficial Ownership of Voting Shares of the Company if, after giving effect to
such purchase or acquisition, the Company (together with its Subsidiaries) shall have
acquired 30% or more of the Company’s Voting Shares within any 12-month period calculated by
reference to the Voting Shares outstanding at the beginning of such period; or

     (e) on any date (a “Calculation Date”) the Company makes any distribution or
distributions of cash, property or Securities (excluding regular dividends and distributions
of shares of the Company that are not Redeemable Shares) to holders of Voting Shares of the
Company or purchases or otherwise acquires Beneficial Ownership of Voting Shares of the
Company and the sum

- 27 -

 

of the fair market value of such distribution or purchase, plus the fair market value
of all other such distributions and purchases which have occurred during the preceding
12-month period, is at least 30% of the fair market value of the outstanding Voting Shares
of the Company, provided that the percentage described in this clause (e) is
calculated on each Calculation Date by dividing (x) the fair market value of the
distributions and purchases which have occurred on such Calculation Date by (y) the fair
market value of the Company’s outstanding Voting Shares immediately prior to such
distributions or purchases, and adding to that percentage all of the percentages which have
been similarly calculated on the dates of all such distributions and purchases during the
preceding 12-month period.

          “Designated Event Notice” shall have the meaning assigned thereto in Section 2.10(a).

          “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

          “Exercise Period” shall mean the applicable period of time during which a holder of Notes
may exercise its Put Right, as more fully set forth in Section 2.10.

          “Funded Debt” of any Person shall mean (a) all Indebtedness having a final maturity of one
or more than one year from the date of origin thereof (or which is renewable or extendible at the
option of the obligor for a period or periods more than one year from the date of origin),
excluding all payments in respect thereof that are required to be made within one year from the
date of any determination of Funded Debt, whether or not included in Current Debt, (b) all
Capitalized Rentals, and (c) all Guaranties of Funded Debt of others. “Consolidated” when used as
a prefix to any Funded Debt shall mean the aggregate amount of all such Funded Debt of the
Company and its Subsidiaries on a consolidated basis eliminating intercompany items.

          “Guaranties” by any Person shall mean all obligations (other than endorsements 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 obligation of any
other Person (the “primary obligor”) in any manner, whether directly or indirectly, which in
accordance with generally accepted Canadian accounting principles shall be classified upon a
balance sheet of such Person as a liability of such Person. For the purposes of all computations
made under this Agreement, a Guaranty in respect of any Indebtedness for borrowed money shall be
deemed to be Indebtedness equal to the principal amount of such Indebtedness for borrowed money
which has been guaranteed, and a Guaranty in respect of any other obligation or liability or any
dividend shall be deemed to be Indebtedness equal to the maximum aggregate amount of such
obligation, liability or dividend.

          “Indebtedness” of any Person shall mean and include all obligations of such Person which in
accordance with generally accepted Canadian accounting principles shall be classified upon a
balance sheet of such Person as liabilities for borrowed money of such Person. For the purpose of
computing the “Indebtedness” of any Person, there shall be excluded any particular Indebtedness to
the extent that, upon or prior to the maturity thereof, there shall have been deposited with the
proper depositary in trust the necessary funds (or evidences of such Indebtedness, if permitted by
the instrument creating such Indebtedness) for the payment, redemption or satisfaction of such
Indebtedness; and

- 28 -

 

thereafter such funds and evidences of Indebtedness so deposited shall not be included in any
computation of the assets of such Person.

          “Interest Payment Date” shall have the meaning assigned thereto in Section 1.1(a).

          “Interest Period” shall mean the period from the date of original issue of the Notes to the
first Interest Payment Date and the period from an Interest Payment Date to and including the
date of the immediately succeeding Interest Payment Date.

          “Make Whole Premium” shall mean in respect of each series of Notes to be prepaid in
connection with any prepayment of the Notes under and pursuant to Section 2.2 or Section 6.2, the
excess, if any, of (a) the present value of the remaining principal and interest payments or
prepayments to become due (exclusive of accrued interest on such series of Notes through the date
of prepayment thereof) on that portion of such series of Notes to be prepaid, taking into account
the required application of such prepayment to the scheduled payments, if any, and prior
prepayments, if any, on such series of Notes, all determined by discounting semi-annually such
payments and prepayments at a rate that is equal to the Reinvestment Rate applicable to such
series of Notes over (b) the aggregate principal amount of such series of Notes then to be
prepaid. To the extent that the Reinvestment Rate applicable to the Series C Notes at the time of
such prepayment is equal to or higher than 10.60% per annum, the Make Whole Premium applicable to
the Series C Notes is zero. To the extent that the Reinvestment Rate applicable to the Series D
Notes at the time of such prepayment is equal to or higher than 10.26% per annum, the Make Whole
Premium applicable to the Series D Notes is zero.

          “Material Adverse Effect” shall mean any result which would have (a) a material adverse
effect on the financial condition of the Company and its Subsidiaries, taken as a whole, or a
material adverse effect on the ability of the Company to perform its obligations under this
Agreement and the Notes, or (b) an adverse effect on the legality, validity or enforceability of
the Company’s obligations under this Agreement and the Notes.

          “Mortgage” shall mean any mortgage, hypothec, privilege, pledge, security interest, floating
charge, conditional sale or other title retention agreement or other similar lien or encumbrance.

          “Officers’ Certificate” shall mean a certificate signed by the Chairman of the Board, the
President or a Vice-President, and by the Secretary, an Assistant Secretary, the Treasurer, an
Assistant Treasurer, the Controller or an Assistant Controller of the Company or by any two
officers of the Company duly authorized for the purpose by a Board Resolution, and delivered to
the holders of the then outstanding Notes.

          “Ontario Securities Commission” shall mean the Ontario Securities Commission and any
successor agency thereto.

          “Ontario Securities Act” shall mean the Securities Act (Ontario), R.S.O. 1980, c. 466, as
amended.

          “Person” shall mean an individual, partnership, unincorporated association, unincorporated
syndicate, unincorporated organization, trust, trustee, executor, administrator, or other legal
representative.

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          “Put Right” shall mean the right of the holder of the Notes to require the Company to
purchase its Notes as more fully set forth in Section 2.10.

          “Put Right Acquisition Date” shall have the meaning assigned thereto in Section 2.10(b).

          “Put Right Notice” shall have the meaning assigned thereto in Section 2.10(e).

          “Purchase Money Obligations” shall mean any Indebtedness of the Company, of a Subsidiary or
of or related to any joint venture, partnership or similar arrangement in which the Company or a
Subsidiary has an interest, incurred in respect of and in an amount not to exceed the cost of
acquisition of any property (including shares of capital stock or Indebtedness) or of the cost of
construction or improvement of any property acquired, constructed or improved after the date of
this Agreement, which Indebtedness existed at the time of acquisition or was created, issued,
incurred, assumed or guaranteed contemporaneously with the acquisition, construction or
improvement or within 120 days after the completion of such construction or improvement and
includes any extension, renewal or refunding of any such Indebtedness if the principal amount
thereof outstanding on the date of such extension, renewal or refunding is not increased.

          “Quarterly Report” shall mean the report containing the financial statements of the Company
and its Subsidiaries determined on a quarterly basis and required to be filed with the Ontario
Securities Commission in accordance with and pursuant to the requirements of Section 76(1) of the
Ontario Securities Act.

          “Registrar” shall have the meaning assigned thereto in Section 9.1.

          “Reinvestment Rate” shall mean in respect of each series of Notes the sum of (i) .50%, plus
(ii) the arithmetic mean of the yields under the respective
headings “This Week” and “Last Week”
published in the Statistical Release under the caption “Treasury Constant Maturities” for the
maturity (rounded to the nearest month) corresponding to the Weighted Average Life to Maturity of
such series of Notes then being prepaid. If no maturity exactly corresponds to such Weighted
Average Life to Maturity of such series of Notes, yields for the two most closely corresponding
published maturities next above and below the Weighted Average Life to Maturity of such series of
Notes shall be calculated pursuant to the immediately preceding sentence and the Reinvestment
Rate for such series of Notes shall be interpolated or extrapolated from such yields on a
straight-line basis, rounding in each of such relevant periods to the nearest month. For the
purposes of calculating the Reinvestment Rate of such series of Notes, the most recent
Statistical Release published prior to the fifth Business Day preceding the date of payment
hereunder shall be used.

          “Reminder Notice” shall have the meaning assigned thereto in Section 2.10(f).

          “Rentals” shall mean and include all fixed rents (including as such all payments which the
lessee is obligated to make to the lessor on termination of the lease or surrender of the
property) payable by the Company or a Subsidiary, as lessee or sublessee under a lease of real or
personal property, but shall be exclusive of any amounts required to be paid by the Company or a
Subsidiary (whether or not designated as rents or additional rents) on account of maintenance,
repairs, insurance, taxes and similar

- 30 -

 

charges. Fixed rents under any so-called “percentage leases” shall be computed solely on the
basis of the minimum rents, if any, required to be paid by the lessee regardless of sales volume
or gross revenues.

          “Redeemable Share” shall mean a share issued by the Company that the Company (a) may
purchase or redeem on the demand of the Company or (b) is
required by its Articles of
Incorporation to purchase or redeem at a specified time or on the demand of a shareholder.

          “Repayment Date” shall mean one of the applicable dates set forth in Section 2.10 on which
the Company shall repay the Notes held by a holder who has exercised its Put Right, as more fully
set forth in said Section 2.10.

          “Sale and Leaseback Transaction” shall have the meaning assigned thereto in Section 5.7.

          “Security” shall have the same meaning as in Section 2(1) of the Securities Act of 1933.

          “Securities Act of 1933” shall mean the Securities Act of 1933, as amended.

          “Statistical
Release” shall mean the statistical release designated “H.15(519)” or any
successor publication which is published weekly by the Federal Reserve System and which
establishes yields on actively traded U.S. Government Securities adjusted to constant maturities
or, if such statistical release is not published at the time of any determination hereunder, then
such other reasonably comparable index which shall be designated by the holders of 66-2/3% in
aggregate principal amount of the outstanding Notes.

          The
term “subsidiary” shall mean, as to any particular parent corporation, any corporation
of which more than 50% (by number of votes) of the Voting Shares shall be owned by such parent
corporation and/or one or more corporations which are themselves subsidiaries of such parent
corporation. The term “Subsidiary” shall mean a subsidiary of the Company.

          “U.S.
$” or “U.S. Dollars” shall mean lawful money of the United States of America in same
day immediately available freely transferable funds, or, if such funds are not available, the
form of money of the United States of America that is customarily used in the settlement of
international banking transactions on the day payment is due hereunder.

          “U.S. Government Obligations” shall mean any Security directly issued by the United States
of America.

          “Voting Shares” shall mean shares of capital stock of any class or classes of a corporation
having under all circumstances or under some circumstances that have occurred and are continuing
the right to elect members of the board of directors of such corporation, and includes Securities
currently convertible into such shares and currently exercisable rights to acquire such shares or
convertible Securities, provided that, for the purposes hereof, shares which only carry
the right to vote conditionally on the happening of an event which has not yet occurred shall not
be considered Voting Shares nor shall any shares be deemed to cease to be Voting Shares solely by
reason of a right to vote accruing to shares of another class or classes by reason of the
happening of such event.

- 31 -

 

          “Weighted Average Life to Maturity” in respect of each series of Notes then being prepaid
shall mean as at the time of the determination thereof the number of years obtained by dividing
the then Remaining Dollar-years of such series of Notes then being prepaid by the then
outstanding principal amount of such series of Notes then being prepaid. The term “Remaining
Dollar-years” of a series of Notes then being prepaid shall mean the amount obtained
by (a) multiplying the amount of each then remaining required principal prepayment, if any, and
the principal payment at final maturity of such series of Notes, by the number of years
(calculated at the nearest one-twelfth) which will elapse between the date of determination of
the Weighted Average Life to Maturity of such series of Notes and the date of that payment, and
(b) totalling all the products obtained in (a).

          “Wholly-owned” when used in connection with any Subsidiary shall mean a Subsidiary of which
all of the issued and outstanding shares of stock (except shares required as directors’
qualifying shares) shall be owned by the Company and/or one or more of its Wholly-owned
Subsidiaries.

          8.2. Accounting Principles. Where the character or amount of any asset or liability or item
of income or expense is required to be determined or any consolidation or other accounting
computation is required to be made for the purposes of this Agreement, the same shall be done in
accordance with generally accepted Canadian accounting principles, to the extent applicable,
except where such principles are inconsistent with the requirements of this Agreement.

          8.3. Directly or Indirectly. Where any provision in this Agreement refers to action to be
taken by any Person, or which such Person is prohibited from taking, such provision shall be
applicable whether the action in question is taken directly or indirectly by such Person.

SECTION
9. MISCELLANEOUS.

          9.1. Note Register. The Company, through Montreal Trust Company, or through such other
Person appointed by the Company for such purpose from time to time and whose name and address
shall be notified by the Company to the holders of the Notes pursuant to Section 9.7 of this
Agreement (in either case, the “Registrar”) shall keep at its principal office in the City of
Montreal or such other city in the United States or Canada as the Company shall notify to the
holders of the Notes pursuant to Section 9.7 a register for the registration and transfer of the
Notes (hereinafter called the “Note Register”), and the Registrar will register or transfer or
cause to be registered or transferred, as hereinafter provided and under such reasonable
regulations as it may prescribe, any Note issued pursuant to this Agreement.

          At any time, and from time to time, the holder of any Note which has been duly registered as
hereinabove provided may transfer such Note upon surrender thereof at the principal office of the
Registrar duly endorsed or accompanied by a written instrument of transfer duly executed by the
holder of such Note or its attorney duly authorized in writing.

          The Person in whose name any Note shall be registered shall be deemed and treated as the
owner and holder thereof for all purposes of this Agreement. Payment of or on account of the
principal, premium, if any, and interest on any Note shall be made to or upon the written order of
such holder.

- 32 -

 

          9.2.
Exchange of Notes. At any time and from time to time, upon not less than ten days’ notice to that effect given by the holder of any Note initially delivered or of
any Note substituted therefor pursuant to Section 9.1, this Section 9.2 or Section 9.3, and, upon
surrender of such Note to the Registrar at its office, the Registrar will deliver in exchange
therefor, without expense to the holder, except as set forth below, Notes for the same aggregate
principal amount as the then unpaid principal amount of the Note so surrendered, in the
denomination of U.S. $1,000,000 (or such lesser amount as shall constitute 100% of the Notes of
such holder) or any multiple of U.S. $50,000 in excess thereof as such holder shall specify,
dated as of the date to which interest has been paid on the Note so surrendered or, if such
surrender is prior to the payment of any interest thereon, then dated as of the date of issue,
payable to such Person or Persons, or registered assigns, as may be designated by such holder,
and otherwise of the same form and tenor as the Notes so surrendered for exchange.

          9.3. Loss, Theft, Etc. of Notes. Upon receipt of evidence satisfactory to the Registrar of
the loss, theft, mutilation or destruction of any Note, and in the case of any such loss, theft
or destruction upon delivery of a bond of indemnity in such form and amount as shall be
reasonably satisfactory to the Registrar, or in the event of such mutilation upon surrender and
cancellation of the Note, the Registrar will make and deliver without expense to the holder
thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or mutilated Note. If
the Purchaser or any subsequent institutional holder is the owner of any such lost, stolen or
destroyed Note, then the affidavit of an authorized officer of such owner, setting forth the fact
of loss, theft or destruction and of its ownership of the Note at the time of such loss, theft or
destruction shall be accepted as satisfactory evidence thereof and no further indemnity shall be
required as a condition to the execution and delivery of a new Note other than the written
agreement of such owner to indemnify the Registrar.

          9.4. Expenses, Stamp Tax Indemnity. Whether or not the transactions herein contemplated shall
be consummated, the Company agrees to pay directly all of your out-of-pocket expenses in
connection with the preparation, execution and delivery of this Agreement and the transactions
contemplated hereby, including but not limited to the reasonable charges and disbursements of
Chapman and Cutler your special counsel, duplicating and printing costs and charges for shipping
the Notes, adequately insured to you at your home office or at such other place as you may
designate, and so long as you hold any of the Notes, all such expenses relating to any amendment,
waivers or consents pursuant to the provisions hereof (whether or not the same are actually
executed and delivered), including, without limitation, any amendments, waivers or consents
resulting from any work-out, restructuring or similar proceedings relating to the performance by
the Company of its obligations under this Agreement and the Notes. The Company also agrees that it
will pay and save you harmless against any and all liability with respect to stamp and other
taxes, if any, which may be payable or which may be determined to be payable in connection with
the execution and delivery of this Agreement or the Notes, whether or not any Notes are then
outstanding. The Company agrees to protect and indemnify you against any liability for any and all
brokerage fees and commissions payable or claimed to be payable to any Person in connection with
the transactions contemplated by this Agreement. Without limiting the foregoing, the Company
agrees to pay the cost of obtaining a private placement number for the Notes and authorizes the
submission of such information as may be required by Standard & Poor’s Corporation for the purpose
of obtaining such number.

- 33 -

 

          9.5. Powers and Rights Not Waived; Remedies Cumulative. No delay or failure on the part of
the holder of any Note in the exercise of any power or right shall operate as a waiver thereof;
nor shall any single or partial exercise of the same preclude any other or further exercise
thereof, or the exercise of any other power or right, and the rights and remedies of the holder
of any Note are cumulative to and are not exclusive of any rights or remedies any such holder
would otherwise have, and no waiver or consent, given or extended pursuant to Section 7 hereof,
shall extend to or affect any obligation or right not expressly waived or consented to.

          9.6. Submission to Jurisdiction. The Company hereby irrevocably submits to the jurisdiction
of the courts of the State of Illinois and of the courts of the United States of America having
jurisdiction in the State of Illinois for the purpose of any legal action or proceeding in any
such court with respect to, or arising out of, this Agreement or the Notes. The Company
designates and appoints CT Corporation System, 208 South LaSalle, Chicago, Illinois 60604,
U.S.A., and its successors as its lawful agent in the State of Illinois upon which may be served
and which may accept and acknowledge, for and on behalf of the Company all process in any action,
suit or proceedings that may be brought against the Company in any of the courts referred to in
this Section, and agrees that such service of process, or the acceptance or acknowledgment
thereof by said agent, shall be valid, effective and binding in every respect; provided,
however, that if said agency shall cease for any reason whatsoever, the Company
designates and appoints, without power or revocation, the Secretary of State of the State of
Illinois to serve as its agent for service of process. If any holder of any Note shall cause
process to be served upon the Company by being served upon such agent, a copy of such process
shall also be mailed to the Company by United States registered mail, first class postage
prepaid, at the Company’s address set forth in Section 9.7.

          9.7. Notices. All communications provided for hereunder shall be in writing and, if to you,
delivered or mailed by registered or certified mail, by overnight courier or by facsimile
communication (confirmed in writing by registered or certified mail or by overnight courier),
addressed to you at your address appearing in Schedule I to this Agreement or such other address
as you or the subsequent holder of any Note initially issued to you, may designate to the Company
in writing, and if to the Company, delivered or mailed by registered or certified mail, by
overnight courier or by facsimile communication (confirmed in writing by registered or certified
mail or by overnight courier), to the Company at 1155 Metcalfe Street, Montreal, Quebec, Canada
H3B 2X1, Attention: Secretary, or to such other address as the Company may in writing designate
to you or to a subsequent holder of the Note initially issued to you. Notices shall be deemed to
be delivered in accordance with this Section 9.7 if all applicable delivery requirements
(i.e., sufficient delivery address or appropriate telecopy and confirmation telephone
number provided) required by the individual delivery agent have been satisfied.

          9.8. Reproduction of Documents. This Agreement and all documents relating thereto, including,
without limitation, (a) consents, waivers and modifications which may hereafter be executed, (b)
documents received by you at the closing of your purchase of the Notes (except the Notes
themselves), and (c) financial statements, certificates and other information previously or
hereafter furnished to you, may be reproduced by you by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process and you may destroy any original
document so reproduced. The Company agrees and stipulates that any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such reproduction was made

- 34 -

 

by you in the regular course of business) and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.

          9.9. Successors and Assigns. This Agreement shall be binding upon the Company and its
successors and assigns and shall inure to your benefit and to the benefit of your successors and
assigns, including each successive holder or holders of any Notes.

          9.10. Survival of Covenants and Representations. All covenants, representations and
warranties made by the Company herein and in any certificates delivered pursuant hereto, whether
or not in connection with the Closing Date, shall survive the closing and the delivery of this
Agreement and the Notes.

          9.11. Severability. Should any part of this Agreement for any reason be declared invalid,
such decision shall not affect the validity of any remaining portion, which remaining portion
shall remain in force and effect as if this Agreement had been executed with the invalid portion
thereof 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 therein any such part,
parts, or portion which may, for any reason, be hereafter declared invalid.

          9.12. Governing Law. This Agreement and the Notes issued and sold here-under shall be
governed by and construed in accordance with the laws of Illinois.

          9.13. Captions. The descriptive headings of the various Sections or parts of this Agreement
are for convenience only and shall not affect the meaning or construction of any of the
provisions hereof.

- 35 -

 

          The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement.

	 	 	 	 	 	 	 
	 	 	CANADIAN PACIFIC FOREST PRODUCTS LIMITED	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]
	 

	 	 	 	 
	 

	 	 	 	Its Vice President — Finance, Accounting and Logistics
	 
	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]
	 

	 	 	 	 
	 

	 	 	 	Its Treasurer
	 
	 	 	 	 
	 

	 	 	 	NATIONWIDE LIFE
	 

	 	 	 	     INSURANCE COMPANY

Accepted and agreed to

as of November 1, 1990.

	 	 	 	 	 	 	 
	 

	 	By
	 	/s/ Jeffrey G. Milburn
	 

	 	 	 	 
	 

	 	 	 	Its Jeffrey G. Milburn	 	 
	 

	 	 	 	Vice President
	 

	 	 	 	Corporate Fixed-Income Securities

- 36 -

 

     The execution hereof by you shall constitute a contract between us for the uses and purposes
hereinabove set forth, and this Agreement may be executed in any number of counterparts, each
executed counterpart constituting an original but all together only one agreement.

	 	 	 	 	 	 	 
	 	 	CANADIAN PACIFIC FOREST PRODUCTS LIMITED	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its Vice President — Finance, Accounting and
Logistics	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its Treasurer	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	THE MUTUAL LIFE INSURANCE

COMPANY OF NEW YORK	 	 
	 
	 	 	 	 	 	 
	Accepted and agreed to
	 	 	 	 	 	 
	as of November 1, 1990.
	 	By
	 	/s/ SUZANNE E. WALTON	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its SUZANNE E. WALTON	 	 
	 

	 	 	 	      Managing Director	 	 

 

 

     The execution hereof by you shall constitute a contract between us for the uses and purposes
hereinabove set forth, and this Agreement may be executed in any number of counterparts, each
executed counterpart constituting an original but all together only one agreement.

	 	 	 	 	 	 	 
	 	 	CANADIAN PACIFIC FOREST PRODUCTS LIMITED	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its Vice President — Finance, Accounting and
Logistics	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its Treasurer	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	THE MINNESOTA MUTUAL LIFE

INSURANCE COMPANY	 	 
	Accepted and agreed to
	 	 	 	 	 	 
	as of November 1, 1990.
	 	By
	 	/s/ ALAN NOTVIK	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its ALAN NOTVIK, SECOND VICE PRESIDENT	 	 
	 

	 	 	 	 	 	 

 

 

     The execution hereof by you shall constitute a contract between us for the uses and
purposes hereinabove set forth, and this Agreement may be executed in any number of
counterparts, each executed counterpart constituting an original but all together only one
agreement.

	 	 	 	 	 	 	 
	 	 	CANADIAN PACIFIC FOREST PRODUCTS LIMITED	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its Vice President — Finance, Accounting and
Logistics	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its Treasurer	 	 
	 
	 	 	 	 	 	 
	Accepted and agreed to

as of November 1, 1990.	 	MELLON BANK, N.A., as Trustee for

NYNEX Master Pension Trust

(As directed by John Hancock Mutual Life

Insurance Company, Investment Adviser)
	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its ASSOCIATE COUNSEL	 	 

 

 

     The execution hereof by you shall constitute a contract between us for the
uses and purposes hereinabove set forth, and this Agreement may be executed in any
number of counterparts, each executed counterpart constituting an original but all
together only one agreement.

	 	 	 	 	 	 	 
	 	 	CANADIAN PACIFIC FOREST PRODUCTS LIMITED	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its Vice President — Finance, Accounting and
Logistics	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its Treasurer	 	 
	 
	 	 	 	 	 	 
	Accepted and agreed to

as of November 1, 1990.	 	MELLON BANK, N.A., as Trustee for

AT&T Master Pension Trust

(As directed by John Hancock Mutual Life 

Insurance Company.
Investment Adviser)
	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ [ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its ASSOCIATE COUNSEL	 	 

 

 

     The execution hereof by you shall constitute a contract between us for the uses and purposes
hereinabove set forth, and this Agreement may be executed in any number of counterparts, each
executed counterpart constituting an original but all together only one agreement.

	 	 	 	 	 	 	 
	 	 	CANADIAN PACIFIC FOREST PRODUCTS LIMITED	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its Vice President — Finance, Accounting and
Logistics	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	JOHN HANCOCK VARIABLE 
     LIFE INSURANCE COMPANY	 	 
	Accepted and agreed to
	 	 	 	 	 	 
	as of November 1, 1990.
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its Investment Vice President	 	 
	 

	 	 	 	 	 	 

 

 

     The execution hereof by you shall constitute a contract between us for the uses and purposes
hereinabove set forth, and this Agreement may be executed in any number of counterparts, each
executed counterpart constituting an original but all together only one agreement.

	 	 	 	 	 	 	 
	 	 	CANADIAN PACIFIC FOREST PRODUCTS LIMITED	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its Vice President — Finance, Accounting and
Logistics	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	JOHN HANCOCK VARIABLE MUTUAL
     
LIFE INSURANCE COMPANY	 	 
	Accepted and agreed to
	 	 	 	 	 	 
	as of November 1, 1990.
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its Senior Investment Officer	 	 
	 

	 	 	 	 	 	 

 

 

     The execution hereof by you shall constitute a contract between us for the uses and
purposes hereinabove set forth, and this Agreement may be executed in any number of
counterparts, each executed counterpart constituting an original but all together only one
agreement.

	 	 	 	 	 	 	 
	 	 	CANADIAN PACIFIC FOREST PRODUCTS LIMITED	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its Vice President — Finance, Accounting and
Logistics	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	THE FRANKLIN LIFE

     INSURANCE COMPANY	 	 
	 
	 	 	 	 	 	 
	Accepted and agreed to
	 	 	 	 	 	 
	as of November 1, 1990.
	 	By	 	/s/ ROBERT G. SPENCER	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its ROBERT G. SPENCER	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	     VICE PRESIDENT & TREASURER	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Elizabeth E. Arthur	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	     Elizabeth E. Arthur, Assistant Secretary	 	 

 

 

     The execution hereof by you shall constitute a contract between us for the uses and purposes
hereinabove set forth, and this Agreement may be executed in any number of counterparts, each
executed counterpart constituting an original but all together only one agreement.

	 	 	 	 	 	 	 
	 	 	CANADIAN PACIFIC FOREST PRODUCTS LIMITED	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its Vice President — Finance, Accounting and
Logistics	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	FIRST COLONY LIFE

     INSURANCE COMPANY	 	 
	Accepted and agreed to
	 	 	 	 	 	 
	as of November 1, 1990.
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its Senior Vice President	 	 

 

 

     The execution hereof by you shall constitute a contract between us for the uses and purposes
hereinabove set forth, and this Agreement may be executed in any number of counterparts, each
executed counterpart constituting an original but all together only one agreement.

	 	 	 	 	 	 	 
	 	 	CANADIAN PACIFIC FOREST PRODUCTS LIMITED	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its Vice President — Finance, Accounting and
Logistics	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	FEDERATED MUTUAL INSURANCE

     COMPANY	 	 
	 
	 	 	 	 	 	 
	Accepted and agreed to

	 	By:
	 	MIMLIC ASSET MANAGEMENT	 	 
	as of November 1, 1990.

	 	 	 	     COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ JOHN A. CLYMER	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its JOHN A. CLYMER, VICE PRESIDENT	 	 

 

 

     The execution hereof by you shall constitute a contract between us for the uses and purposes
hereinabove set forth, and this Agreement may be executed in any number of counterparts, each
executed counterpart constituting an original but all together only one agreement.

	 	 	 	 	 	 	 
	 	 	CANADIAN PACIFIC FOREST PRODUCTS LIMITED	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its Vice President — Finance, Accounting and
Logistics	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	FEDERATED MUTUAL INSURANCE
     COMPANY	 	 
	 
	 	 	 	 	 	 
	Accepted and agreed to

	 	By:
	 	MIMLIC ASSET MANAGEMENT	 	 
	as of November 1, 1990.

	 	 	 	     COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ JOHN A. CLYMER	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its JOHN A. CLYMER, VICE PRESIDENT	 	 

 

 

          The execution hereof by you shall constitute a contract between us for the uses and purposes
hereinabove set forth, and this Agreement may be executed in any number of counterparts, each
executed counterpart constituting an original but all together only one agreement.

	 	 	 	 	 	 	 
	 	 	CANADIAN PACIFIC FOREST PRODUCTS LIMITED	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its Vice President — Finance, Accounting and Logistics	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its Treasurer	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	AMERICAN UNITED LIFE 

     INSURANCE COMPANY	 	 
	Accepted and agreed to
	 	 	 	 	 	 
	as of November 1, 1990.
	 	 	 	 
	 
	 	 	 	 
	 

	 	By
	 	[ILLEGIBLE]
	 

	 	 	 	 
	 

	 	 	 	Its Vice President, Securities
	 

	 	 	 	     G. David Sapp

 

 

NAMES AND ADDRESSES OF PURCHASERS

	 	 	 	 	 
	 	 	Principal Amount of	 	Principal Amount of
	Name and Address	 	Series C Notes	 	Series D Notes
	of Purchasers	 	to be Purchased	 	to be Purchased
	AMERICAN UNITED LIFE

	 	-0-
	 	DR-1 $2,000,000
	     INSURANCE COMPANY

	 	 	 	DR-2 $2,000,000
	Post Office Box 368

	 	 	 	DR-3 $1,000,000
	Indianapolis, Indiana 46206
	 	 	 	 
	Attention: Securities Department
	 	 	 	 

Payments

All payments on or in respect of the

Notes to be by bank wire transfer of

Federal or other immediately available

funds (identifying each payment as

“Canadian Pacific Forest Products Limited

10.26% Senior Notes, Series D, Due

January 15, 2011, principal, interest

and/or Make Whole Premium”) to:

Bank One Indianapolis

ABA #0740-0001-0

Trust Cage

16th Floor

111 Monument Circle

Indianapolis, Indiana 46277

for credit to American United Life Insurance

Company’s Account No. 32032-50

Notices

The Notes should be sent to:

Bank One Indianapolis

111 Monument Circle, 16th Floor

Indianapolis, IN 46277

Attention: Trust Cage

All other notices and communications, including

notices with respect to payments and written

confirmation of each such payment, to be

addressed as first provided above.

Name of Nominee in which Notes are to be issued: None

Tax Identification No.: 35-0145825

SCHEDULE I

(to Note Agreement)

 

 

	 	 	 	 	 	 	 
	 	 	Principal Amount of	 	Principal Amount of
	Name and Address	 	Series C Notes	 	Series D Notes
	of Purchasers	 	to be Purchased	 	to be Purchased
	FEDERATED LIFE INSURANCE

     COMPANY

	 	 	$1,000,000	 	 	-0-
	c/o MIMLIC Asset Management Company
	 	 	 	 	 	 
	400 North Robert Street
	 	 	 	 	 	 
	St. Paul, Minnesota 55101
	 	 	 	 	 	 
	Attention: Investment Department
	 	 	 	 	 	 

Payments

All payments on or in respect of the

Notes to be by bank wire transfer of

Federal or other immediately available

funds (identifying each payment as

“Canadian Pacific Forest Products Limited

10.60% Senior Notes, Series C,

Due January 15, 2011, principal, interest

and/or Make Whole Premium”) to:

Norwest Bank Minnesota, N.A.

Trust Department

Account No. 0840-245

ABA No. 091000019

Attn: Kristen Judisch,

for credit to Federated

Life Insurance Company,

Account No. 7-23645-008

Notices

All notices and communications, including

notices with respect to payments and written

confirmation of each such payment, to be

addressed as first provided above.

Name of Nominee in which Notes are to be issued: Tour & Co.

Tax Identification No.: 41-6022443

I-2

 

	 	 	 	 	 	 	 
	 	 	Principal Amount of	 	Principal Amount of
	Name and Address	 	Series C Notes	 	Series D Notes
	of Purchasers	 	to be Purchased	 	to be Purchased
	FEDERATED MUTUAL INSURANCE 

     COMPANY

	 	 	$1,000,000	 	 	-0-
	c/o MIMLIC Asset Management Company
	 	 	 	 	 	 
	400 North Robert Street
	 	 	 	 	 	 
	St. Paul, Minnesota 55101
	 	 	 	 	 	 
	Attention: Investment Department
	 	 	 	 	 	 

Payments

All payments on or in respect of the

Notes to be by bank wire transfer of

Federal or other immediately available

funds (identifying each payment as

“Canadian Pacific Forest Products Limited

10.60% Senior Notes, Series C,

Due January 15, 2011, principal, interest

and/or Make Whole Premium”) to:

Norwest Bank Minnesota, N.A.

Trust Department

Account No. 0840-245

ABA No. 091000019

Attn: Kristen Judisch,

for credit to Federated

Mutual Insurance Company,

Account No. 7-23646-006

Notices

All notices and communications, including

notices with respect to payments and written

confirmation of each such payment, to be

addressed as first provided above.

Name of Nominee in which Notes are to be issued: Tour & Co.

Tax Identification No.: 41-0417460

I-3

 

	 	 	 	 	 	 	 
	 	 	Principal Amount of	 	Principal Amount of
	Name and Address	 	Series C Notes	 	Series D Notes
	of Purchasers	 	to be Purchased	 	to be Purchased
	FIRST COLONY LIFE INSURANCE 

     COMPANY

	 	$	10,000,000	 	 	-0-
	700 Main Street
	 	 	 	 	 	 
	Lynchburg, Virginia 24504
	 	 	 	 	 	 
	Attention: Mr. J. Alden Butler
	 	 	 	 	 	 

Payments

All payments on or in respect of the

Notes to be by bank wire transfer of

Federal or other immediately available

funds (identifying each payment as

“Canadian Pacific Forest Products Limited

10.60% Senior Notes, Series C,

Due January 15, 2011, principal, interest

and/or Make Whole Premium”) to:

Crestar Bank

Richmond, Virginia

ABA #05-10-0002-0

Attention: Barbara Crossman

                 Institutional Custody

for credit to First Colony

Life Insurance Company’s

Account No. 10765400

Notices

All notices and communications, including

notices with respect to payments and written

confirmation of each such payment, to be

addressed as first provided above.

Name of Nominee in which Notes are to be issued: None

Tax Identification No.: 54-0596414

I-4

 

	 	 	 	 	 	 	 
	 	 	Principal Amount of	 	Principal Amount of
	Name and Address	 	Series C Notes	 	Series D Notes
	of Purchasers	 	to be Purchased	 	to be Purchased
	THE FRANKLIN LIFE INSURANCE 

     COMPANY

	 	-0-
	 	 	$2,000,000	 
	Franklin Square
	 	 	 	 	 	 
	Springfield, Illinois 62713
	 	 	 	 	 	 
	Attention: Investment Department
	 	 	 	 	 	 

Payments

All payments on or in respect of the

Notes to be by bank wire transfer of

Federal or other immediately available

funds (identifying each payment as

“Canadian Pacific Forest Products Limited

10.26% Senior Notes, Series D,

Due January 15, 2011, principal, interest

and/or Make Whole Premium”) to:

Morgan Guaranty Trust Company

     of New York

23 Wall Street

New York, New York 10015

Attention: Money Transfer Department

for credit to The Franklin Life

Insurance Company’s Account

No. 022-05-988

Notices

All notices and communications, to be

addressed as first provided above, except

notices with respect to payments and

written confirmation of each such payment,

to be addressed Attention: Treasurer.

Name of Nominee in which Notes are to be issued: None

Tax Identification No.: 37-0281650

I-5

 

	 	 	 	 	 
	 	 	Principal Amount of	 	Principal Amount of
	Name and Address	 	Series C Notes	 	Series D Notes
	of Purchasers	 	to be Purchased	 	to be Purchased
	JOHN HANCOCK MUTUAL LIFE 

     INSURANCE COMPANY

John Hancock Place 

Post Office Box 111

	 	CR-4 $7,000,000

CR-5  4,000,000

CR-6  4,000,000

CR-7  3,000,000	 	 
	Boston, Massachusetts 02117
	 	 	 	 

Payments

All payments on or in respect of the

Notes to be by bank wire transfer of

Federal or other immediately available

funds (identifying each payment as

“Canadian Pacific Forest Products Limited

10.60% Senior Notes, Series C,

Due January 15, 2011, principal, interest

and/or Make Whole Premium”) to:

The First National Bank of Boston

ABA No. 011000390

100 Federal Street

Boston, Massachusetts 02110

Attention: Insurance Division

for the account of John Hancock

Mutual Life Insurance Company’s

Account No. 279-80008

Notices

Contemporaneous with the above wire

transfer, advice setting forth (1) the

full name, interest rate and maturity

date of the Notes or other obligations;

(2) allocation of payment between

principal and interest and any special

payment; and (3) name and address of Bank

(or Trustee) from which wire transfer was

sent, shall be delivered or mailed to:

John Hancock Mutual Life

     Insurance Company

John Hancock Place

P. O. Box 111

Boston, Massachusetts 02117

Attention: Securities Administration T-56

I-6

 

AD other communications shall

be delivered or mailed to:

John Hancock Mutual Life

     Insurance Company

John Hancock Place

Post Office Box 111

Boston, Massachusetts 02117

Attention: Bond and Corporate Finance

                  Department, T-57

Name of Nominee in which Notes are to be issued: None

Tax Identification No.: 04-1414660

I-7

 

	 	 	 	 	 
	 	 	Principal Amount of	 	Principal Amount of
	Name and Address	 	Series C Notes	 	Series D Notes
	of Purchasers	 	to be Purchased	 	to be Purchased
	JOHN HANCOCK MUTUAL LIFE 

INSURANCE COMPANY

	 	CR-8 $8,000,000	 	 
	John Hancock Place
	 	 	 	 
	Post Office Box 111
	 	 	 	 
	Boston, Massachusetts 02117
	 	 	 	 

Payments

All payments on or in respect of the

Notes to be by bank wire transfer of

Federal or other immediately available

funds (identifying each payment as

“Canadian Pacific Forest Products Limited

10.60% Senior Notes, Series C,

Due January 15, 2011, principal, interest

and/or Make Whole Premium”) to:

The First National Bank of Boston

ABA No. 011000390

100 Federal Street

Boston, Massachusetts 02110

Attention: Insurance Division

for the account of John Hancock

Mutual Life Insurance Company GBSA Account

Account No. 535-84164

Notices

Contemporaneous with the above wire

transfer, advice setting forth (1) the

full name, interest rate and maturity

date of the Notes or other obligations;

(2) allocation of payment between

principal and interest and any special

payment; and (3) name and address of Bank

(or Trustee) from which wire transfer was

sent, shall be delivered or mailed to:

John Hancock Mutual Life

Insurance Company

John Hancock Place

 P. O. Box 111

Boston, Massachusetts 02117

Attention: Securities Administration T-56

I-8

 

All other communications shall

be delivered or mailed to:

John Hancock Mutual Life

     Insurance Company

John Hancock Place

Post Office Box 111

Boston, Massachusetts 02117

Attention: Bond and Corporate Finance

Department, T-57

Name of Nominee in which Notes are to be issued: None

Tax Identification No.: 04-1414660

I-9

 

	 	 	 	 	 
	 	 	Principal Amount of	 	Principal Amount of
	Name and Address	 	Series C Notes	 	Series D Notes
	of Purchasers	 	to be Purchased	 	to be Purchased
	JOHN HANCOCK MUTUAL LIFE

	 	CR-9 $2,000,000	 	 
	  INSURANCE COMPANY
	 	 	 	 
	John Hancock Place
	 	 	 	 
	Post Office Box 111
	 	 	 	 
	Boston, Massachusetts 02117
	 	 	 	 

Payments

All payments on or in respect of the

Notes to be by bank wire transfer of

Federal or other immediately available

funds (identifying each payment as

“Canadian Pacific Forest Products Limited

10.60% Senior Notes, Series C,

Due January 15, 2011, principal, interest

and/or Make Whole Premium”) to:

The First National Bank of Boston

ABA No. 011000390

100 Federal Street

Boston, Massachusetts 02110

Attention: Insurance Division

for the account of John Hancock

Mutual Life Insurance Company

Private Placement Separate

Account (1Z)

Account No. 528-12598

Notices

Contemporaneous with the above wire

transfer, advice setting forth (1) the

full name, interest rate and maturity

date of the Notes or other obligations;

(2) allocation of payment between

principal and interest and any special

payment; and (3) name and address of Bank

(or Trustee) from which wire transfer was

sent, shall be delivered or mailed to:

I-10

 

John Hancock Mutual Life

  Insurance Company

John Hancock Place

P. O. Box 111

Boston, Massachusetts 02117

Attention:   Audrey Roussel

                    Group Pension Accounting Division

All other communications shall

be delivered or mailed to:

John Hancock Mutual Life

     Insurance Company

John Hancock Place

Post Office Box 111

Boston, Massachusetts 02117

Attention: Bond and Corporate Finance

                    Department, T-57

Name of Nominee in which Notes are to be issued: None

Tax Identification No.: 04-1414660

I-11

 

	 	 	 	 	 	 	 
	 	 	Principal Amount of	 	Principal Amount of
	Name and Address of	 	Series C Notes	 	Series D Notes
	Purchasers	 	to be Purchased	 	to be Purchased
	JOHN HANCOCK VARIABLE LIFE

	 	 	$4,000,000	 	 	-0-
	  INSURANCE COMPANY
	 	 	 	 	 	 
	John Hancock Place
	 	 	 	 	 	 
	Post Office Box 111
	 	 	 	 	 	 
	Boston, Massachusetts 02117
	 	 	 	 	 	 

Payments

All payments on or in respect of the

Notes to be by bank wire transfer of

Federal or other immediately available

funds (identifying each payment as

“Canadian Pacific Forest Products Limited

10.60% Senior Notes, Series C, Due

January 15, 2011, principal, interest

and/or Make Whole Premium”) to:

The First National Bank of Boston

ABA No. 011000390

100 Federal Street

Boston, Massachusetts 02110

Attention: Insurance Division

For the account of John Hancock

Variable Life Insurance Company General Account

Account No. 534-17886

Notices

Contemporaneous with the above wire

transfer, advice setting forth (1) the

full name, interest rate and maturity

date of the Notes or other obligations;

(2) allocation of payment between

principal and interest and any special

payment; and (3) name and address of Bank

(or Trustee) from which wire transfer was

sent, shall be delivered or mailed to:

John Hancock Variable Life

  Insurance Company

John Hancock Place

P. O. Box 111

Boston, Massachusetts 02117

Attention: Securities Administration T-56

I-12

 

All other communications shall be

delivered or mailed to:

John Hancock Variable Life

  Insurance Company

John Hancock Place

Post Office Box 111

Boston, Massachusetts 02117

Attention: Bond and Corporate Finance

                    Department, T-57

Name of Nominee in which Notes are to be issued: None

I-13

 

	 	 	 	 	 	 	 
	 	 	Principal Amount of	 	Principal Amount of
	Name and Address	 	Series C Notes	 	Series D Notes
	of Purchasers	 	to be Purchased	 	to be Purchased
	MELLON BANK, N.A., as Trustee

	 	 	$4,000,000	 	 	-0-
	(AT&T Master Pension Trust)
	 	 	 	 	 	 
	One Mellon Bank Center
	 	 	 	 	 	 
	Pittsburgh, Pennsylvania 15258
	 	 	 	 	 	 

Payments

All payments on or in respect of the

Notes to be by bank wire transfer of

Federal or other immediately available

funds (identifying each payment as

“Canadian Pacific Forest Products Limited

10.60% Senior Notes, Series C,

Due January 15, 2011, principal, interest

and/or Make Whole Premium”) to:

Mellon Bank, N.A.

ABA No. 043000261

Credit to: CC3971-8

Further credit to Account No. 179-168

Pittsburgh, Pennsylvania 15230

Notices

Contemporaneous with the above wire

transfer, advice setting forth (1) the

full name, interest rate and maturity

date of the Notes or other obligations;

(2) allocation of payment between

principal and interest and any special

payment; and (3) name and address of Bank

(or Trustee) from which wire transfer was

sent, shall be delivered or mailed to:

Mellon Bank, N.A.

P. O. Box 926

Pittsburgh, Pennsylvania 15230

I-14

 

All other communications shall

be delivered or mailed to:

John Hancock Mutual Life

  Insurance Company

John Hancock Place

Post Office Box 111

Boston, Massachusetts 02117

Attention: Stephen A. MacLean

Bond and Corporate Finance Department T-57

with a copy to:

Mellon Bank, N.A.

One Mellon Bank Center

Room 3425

Pittsburgh, Pennsylvania 15258

Attention: Pam Mohr

Name in which Notes are to be issued:

MELLON BANK, N.A., TRUSTEE

UNDER MASTER TRUST AGREEMENT OF AT&T

CORPORATION DATED JANUARY 1, 1984 FOR

EMPLOYEE PENSION PLANS-AT&T-JOHN

HANCOCK-PRIVATE PLACEMENT

I-15

 

	 	 	 	 	 	 	 
	 	 	Principal Amount of	 	Principal Amount of
	Name and Address	 	Series C Notes	 	Series D Notes
	of Purchasers	 	to be Purchased	 	to be Purchased
	MELLON BANK, N.A., as Trustee

	 	 	$4,000,000	 	 	-0-
	(NYNEX Master Pension Trust)
	 	 	 	 	 	 
	One Mellon Bank Center
	 	 	 	 	 	 
	Pittsburgh, Pennsylvania 15258
	 	 	 	 	 	 

Payments

All payments on or in respect of the

Notes to be by bank wire transfer of

Federal or other immediately available

funds (identifying each payment as

“Canadian Pacific Forest Products Limited

10.60% Senior Notes, Series C,

Due January 15, 2011, principal, interest

and/or Make Whole Premium”) to:

Mellon Bank, N.A.

ABA No. 043000261

Credit to: CC3971-8

Further credit to Account No. 178-333

Pittsburgh, Pennsylvania 15230

Notices

Contemporaneous with the above wire

transfer, advice setting forth (1) the

full name, interest rate and maturity

date of the Notes or other obligations;

(2) allocation of payment between

principal and interest and any special

payment; and (3) name and address of Bank

(or Trustee) from which wire transfer was

sent, shall be delivered or mailed to:

Mellon Bank, N.A.

P. O. Box 926

Pittsburgh, Pennsylvania 15230

I-16

 

All other communications shall

be delivered or mailed to:

John Hancock Mutual Life

  Insurance Company

John Hancock Place

Post Office Box 111

Boston, Massachusetts 02117

Attention: Stephen A. MacLean

Bond and Corporate Finance Department T-57

with a copy to:

Mellon Bank, N.A.

One Mellon Bank Center

Room 3425

Pittsburgh, Pennsylvania 15258

Attention: Pam Mohr

Name in which Notes are to be issued:

MELLON BANK, N.A., TRUSTEE

UNDER MASTER TRUST AGREEMENT OF NYNEX

CORPORATION DATED JANUARY 1, 1984 FOR

EMPLOYEE PENSION PLANS-NYNEX-JOHN

HANCOCK-PRIVATE PLACEMENT

I-17

 

	 	 	 	 	 	 	 
	 	 	Principal Amount of	 	Principal Amount of
	Name and Address	 	Series C Notes	 	Series D Notes
	of Purchasers	 	to be Purchased	 	to be Purchased
	THE MINNESOTA MUTUAL LIFE

	 	 	$8,000,000	 	 	-0-
	  INSURANCE COMPANY
	 	 	 	 	 	 
	400 North Robert Street
	 	 	 	 	 	 
	St. Paul, Minnesota 55101
	 	 	 	 	 	 
	Attention: Investment Department
	 	 	 	 	 	 

Payments

All payments on or in respect of the

Notes to be by bank wire transfer of

Federal or other immediately available

funds (identifying each payment as

“Canadian Pacific Forest Products Limited

10.60% Senior Notes, Series C,

Due January 15, 2011, principal, interest

and/or Make Whole Premium”) to:

The Federal Reserve Bank of Minneapolis

for the account of

First Bank National Association,

Minneapolis, Minnesota

ABA #091000022, BNF The Minnesota Mutual

Life Insurance Company, Account

No. 801-10-00600

Notices

All notices and communications, including

notices with respect to payments and written

confirmation of each such payment, to be

addressed as first provided above.

Name of Nominee in which Notes are to be issued: None

Tax Identification No.: 41-0417830

I-18

 

	 	 	 	 	 	 	 
	 	 	Principal Amount of	 	Principal Amount of
	Name and Address	 	Series C Notes	 	Series D Notes
	of Purchasers	 	to be Purchased	 	to be Purchased
	THE MUTUAL LIFE INSURANCE

	 	-0-
	 	 	$15,000,000	 
	  COMPANY OF NEW YORK
	 	 	 	 	 	 
	1740 Broadway
	 	 	 	 	 	 
	New York, New York 10019
	 	 	 	 	 	 
	Attention: MONY Capital
	 	 	 	 	 	 
	                    Management Unit
	 	 	 	 	 	 

Payments

All payments on or in respect of the

Notes to be by bank wire transfer of

Federal or other immediately available

funds (identifying each payment as

“Canadian Pacific Forest Products Limited

10.26% Senior Notes, Series D,

Due January 15, 2011, principal, interest

and/or Make Whole Premium”) to:

Chemical Bank

New York, New York

for credit to The Mutual Life

Insurance Company of New York’s

Security Remittance Account

No. 321-023803

Notices

All notices of payment, on or in respect

of the Notes to:

Telecopy Confirms and Notices:

(201) 907-6979

Attention: Securities Custody

Mailing Confirms and Notices:

Glenpointe Marketing & Operations

  Center — MONY

Glenpointe Center West

500 Frank W. Burr Blvd.

Teaneck, NJ 07666-6888

Attention: Securities Custody

I-19

 

All notices and communications other

than those in respect to payments to be

addressed as first provided above.

Name of Nominee in which Notes are to be issued: None

Tax Identification No.: 13-1632487

I-20

 

	 	 	 	 	 	 	 
	 	 	Principal Amount of	 	Principal Amount of
	Name and Address	 	Series C Notes	 	Series D Notes
	of Purchasers	 	to be Purchased	 	to be Purchased
	NATIONWIDE LIFE INSURANCE COMPANY
	 	$	10,000,000	 	 	-0-

One Nationwide Plaza — 33T

Columbus, Ohio 43216

Attention: Corporate Fixed-Income Securities

Payments

All payments on or in respect of the Notes to be by bank wire transfer of Federal or
other immediately available funds (identifying each payment as “Canadian Pacific
Forest Products Limited 10.60% Senior Notes, Series C, Due January 15, 2011,
principal, interest and/or Make Whole Premium”) to:

Ameritrust Company

900 Euclid Avenue

Cleveland, Ohio 44101

ABA #041000687

For the account of Nationwide

Life Insurance Company

Account No. 30005-2958

Notices

All notices of payment, on or in respect of the Notes and written confirmation of
each such payment to:

Nationwide Life Insurance Company

One Nationwide Plaza

Columbus, Ohio 43216

Attention: Cash Division, Money and Banking

All notices and communications other than those in respect to payments to be
addressed as first provided above.

Name of Nominee in which Notes are to be issued: None

Tax Identification No.: 31-4156830

I-21

 

PRINCIPAL AND ACTIVE SUBSIDIARIES OF THE COMPANY

	 	 	 	 	 
	 	 	 	 	Percentage of Voting Shares
	Name of	 	Jurisdiction of	 	Owned by the Company and
	Subsidiary	 	Incorporation	 	each
other Subsidiary
	Canadian Pacific Forest
Products Inc.

	 	Delaware
	 	Lake Superior Holdings, Inc. — 100%
	 
	 	 	 	 
	Lake Superior Holdings Inc.

	 	Delaware
	 	Canadian Pacific Forest Products Limited — 100%
	 
	 	 	 	 
	Canadian Pacific Newsprint Limited

	 	United Kingdom
	 	Canadian Pacific Forest Products
Limited — 100%
	 
	 	 	 	 
	Dominion Cellulose Limited

	 	Canada
	 	Canadian Pacific Forest Products
Limited — 100%
	 
	 	 	 	 
	Facelle Company Limited

	 	Canada
	 	Dominion Cellulose Limited — 100%
	 
	 	 	 	 
	Lake Superior Forest Products
Inc.

	 	Delaware
	 	Canadian Pacific Forest Products
Inc. — 100%
	 
	 	 	 	 
	Mayo Forest Products Ltd.

	 	British Columbia
	 	Canadian Pacific Forest Products
Limited — 60%
	 
	 	 	 	 
	NBIP Forest Products Inc.

	 	New Brunswick
	 	Canadian Pacific Forest Products
Limited — 67%
	 
	 	 	 	 
	Lake Superior Construction Inc.

	 	Delaware
	 	Canadian Pacific Forest Products
Inc. — 100%

SCHEDULE II

(to Note Agreement)

 

 

DESCRIPTION OF DEBT AND LEASES

	1.	 	Current Debt of the Company and its Subsidiaries outstanding on September 30, 1990 is as follows:

	 	 	 	 	 	 	 	 	 
	 	 	(Cdn. $000’s)	 	 	 	 
	CURRENT DEBT
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	BANK INDEBTEDNESS:
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	CPFP Corporate
	 	$	22,309	 	 	 	 	 
	SUBS:
	 	 	 	 	 	 	 	 
	CP Forest Services Limited
	 	 	(65	)	 	POSITIVE
	Canadian Pacific Newsprint Limited
	 	 	1320	 	 	 	 	 
	Lake Superior Holdings Inc. & Subs
	 	 	(1778	)	 	POSITIVE
	Dominion Cellulose Ltd.
	 	 	(6	)	 	POSITIVE
	Facelle Limited
	 	 	(4624	)	 	POSITIVE
	Mayo Forest Products Ltd.
	 	 	2696	 	 	 	 	 
	NBIP Consolidated
	 	 	471	 	 	 	 	 
	Other
	 	 	(1513	)	 	POSITIVE
	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	TOTAL BANK INDEBTEDNESS
	 	$	18,810	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	LOANS FROM AN AFFILIATE:
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Canadian Pacific Securities Limited Revolving Note
	 	$	179,400	 	 	 	 	 
	Canadian Pacific Limited offset banking
	 	 	—	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	TOTAL LOANS FROM AN AFFILIATE
	 	$	179,400	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	CURRENT POTION OF LONG-TERM DEBT:
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	CPFP Corporate
	 	$	3,367	 	 	 	 	 
	SUBSIDIARIES:
	 	 	 	 	 	 	 	 
	NBIP Forest Products, Inc.
	 	 	40	 	 	 	 	 
	Lake Superior Holdings, Inc.
	 	 	518	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	 
	 	$	3,925	 	 	 	 	 

SCHEDULE II

(continued)

 

 

	 	 	 	 	 
	2.   Funded Debt of the Company and its Subsidiaries outstanding on September 30,1990 is as follows:
	 	 	(Cdn. $000’s)
	 	 	 	 	 
	LONG TERM DEBT (less current portion)
	 	 	 	 
	 	 	 	 	 
	CPFP CORPORATE:
	 	 	 	 
	CPSL
	 	$	1,400	 
	Debenture-Montreal Trust Company, Trustee
	 	 	125,000	 
	DKB Loan
	 	 	115,480	 
	L-T Bank Lines
	 	 	57,740	 
	10.625% Senior Notes, Series A
	 	 	113,170	 
	10.50% Senior Notes, Series B
	 	 	117,790	 
	Other
	 	 	15,171	 
	 
	 	 	 
	 
	 	$	545,751	 
	 	 	 	 	 
	Subsidiaries:
	 	 	 	 
	NBIP Forest Products, Inc.
	 	 	40	 
	 
	 	 	 
	TOTAL LONG TERM DEBT
	 	$	545,791	 
	 
	 	 	 
	 	 	 	 	 
	3.   Capitalized Leases of the Company and its Subsidiaries outstanding on September 30, 1990 are as follows:
	 	 	 	 	 
	CAPITAL LEASES (not included above)
	 	 	 	 
	 	 	 	 	 
	CURRENT PORTION:
	 	 	 	 
	CPFP Corporate
	 	$	      1,327	 
	Subsidiaries:
	 	 	 	 
	NBIP Forest Products, Ltd.
	 	 	312	 
	Facelle Limited
	 	 	303	 
	Other
	 	 	—	 
	 
	 	 	 
	 
	 	$	1,942	 
	 
	 	 	 	 
	LONG TERM PORTION:
	 	 	 	 
	CPFP Corporate
	 	$	1,311	 
	NBIP Forest Products, Inc.
	 	 	233	 
	Facelle Limited
	 	 	505	 
	Other
	 	 	—	 
	 
	 	 	 
	 
	 	$	2,049	 
	TOTAL CAPITAL LEASES
	 	$	3,991	 

SCHEDULE II

(continued)

 

 

CANADIAN PACIFIC FOREST PRODUCTS LIMITED 

10.60% Senior Note, Series C, Due January 15, 2011

			
	 	 	 
	No. CR-	 	 
	 
	 	_________, 19___
	U.S. $	 	 

          CANADIAN PACIFIC FOREST PRODUCTS LIMITED, a corporation
incorporated under the Canada Business Corporations Act (the “Company”), for value
received, hereby promises to pay to

or registered assigns

on the fifteenth day of January, 2011

the principal amount of

DOLLARS (U.S. $             )

and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the
principal amount from time to time remaining unpaid hereon at the rate of 10.60% per annum
(subject to adjustment as provided in Section 2.10 of the Note Agreements referred to below) from
the date hereof until maturity, payable semiannually on the fifteenth of each January and July in
each year commencing July 15, 1991, and at maturity. The Company agrees to pay interest on overdue
principal (including any overdue optional prepayment of principal) and premium, if any, and (to
the extent legally enforceable) on any overdue installment of interest, at the rate of 12.60% per
annum after maturity, whether by acceleration or otherwise, until paid. Both the principal hereof
and interest hereon are payable at the principal office of the Company in Montreal, Canada in coin
or currency of the United States of America which at the time of payment shall be legal tender for
the payment of public and private debts. If any amount of principal, premium, if any, or interest
on or in respect of this Note becomes due and payable on any date which is not a Business Day,
such amount shall be payable on the next preceding Business Day. “Business Day” means any day
other than a Saturday, Sunday or other day on which banks in Montreal or Toronto, Canada or
Chicago, Illinois are required by law to close or are customarily closed.

          For purposes of the Interest Act (Canada) and in respect of all or any portion of a calendar
year, the annual rate of interest to which the interest rate herein is equal is such 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.

          This Note is one of the 10.60% Senior Notes, Series C, Due January 15, 2011 of the Company in
the aggregate principal amount of U.S. $70,000,000 issued or to be issued under and pursuant to the
terms and provisions of the separate Note Agreements, each dated as of November 1, 1990 (the “Note
Agreements”), entered into by the Company with the original purchasers therein referred to and this
Note and the holder hereof are

EXHIBIT A-l

(to Note Agreement)

 

 

entitled equally and ratably with the holders of all other Notes outstanding under the Note
Agreements to all the benefits and security provided for thereby or referred to therein, to which
Note Agreements reference is hereby made for the statement thereof. The Notes are direct unsecured
obligations of the Company and rank pari passu with, all other unsecured indebtedness of the
Company.

          This Note and the other Notes outstanding under the Note Agreements may be declared due prior
to their expressed maturity dates, certain prepayments and repurchases are required to be made
thereon and the interest rates applicable thereto may be automatically changed and adjusted, all
in the events, on the terms and in the manner and amounts as provided in the Note Agreements.

          The Notes are not subject to prepayment or redemption at the option of the Company prior to
their expressed maturity dates except on the terms and conditions and in the amounts and with the
Make Whole Premium set forth in the Note Agreements.

          This Note is registered on the books of the Company maintained by it or by a registrar and is
transferable only by surrender thereof at the principal office of the Company duly endorsed or
accompanied by a written instrument of transfer duly executed by the registered holder of this
Note or its attorney duly authorized in writing. Payment of or on account of principal, premium,
if any, and interest on this Note shall be made only to or upon the order in writing of the
registered holder.

          This
Note and said Note Agreement is governed by and construed in accordance with the laws of
Illinois.

	 	 	 	 	 
	 	 	CANADIAN PACIFIC FOREST PRODUCTS LIMITED
	 
	 	 	 	 
	 

	 	By	 	 
	 

	 	 	 	 
	 

	 	     Its	 	 
	 

	 	 	 	 
	 

	 	By	 	 
	 

	 	 	 	 
	 

	 	     Its	 	 
	 

	 	 	 	 

THIS NOTE HAS NOT BEEN QUALIFIED FOR DISTRIBUTION IN CANADA NOR HAS IT BEEN REGISTERED PURSUANT TO
THE SECURITIES ACT OF 1933 OF THE UNITED STATES OR UNDER THE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES. THIS NOTE MAY ONLY BE OFFERED, SOLD OR DISTRIBUTED IN CANADA IN ACCORDANCE WITH
APPROPRIATE REGISTRATION AND PROSPECTUS EXEMPTIONS OR OFFERED, SOLD OR DISTRIBUTED IN THE UNITED
STATES IF REGISTERED UNDER THE APPLICABLE SECURITIES LAWS OR IF AN EXEMPTION FROM SUCH REGISTRATION
IS AVAILABLE.

A-1-2

 

CANADIAN PACIFIC FOREST PRODUCTS LIMITED

10.26% Senior Note, Series D, Due January 15, 2011

			
	 	 	 
	No. DR-	 	 
	 
	 	__________________,
19___
	U.S. $	 	 

          CANADIAN PACIFIC FOREST PRODUCTS LIMITED, a corporation incorporated under the Canada
Business Corporations Act (the “Company”), for value received, hereby promises to pay to

or registered assigns

on the fifteenth day of January, 2011

the principal amount of

DOLLARS (U.S. $                    )

and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the
principal amount from time to time remaining unpaid hereon at the rate of 10.26% per annum
(subject to adjustment as provided in Section 2.10 of the Note Agreements referred to below) from
the date hereof until maturity, payable semiannually on the fifteenth of each January and July in
each year commencing July 15, 1991, and at maturity. The Company agrees to pay interest on overdue
principal (including any overdue required or optional prepayment of principal) and premium, if
any, and (to the extent legally enforceable) on any overdue installment of interest, at the rate
of 12.26% per annum after maturity, whether by acceleration or otherwise, until paid. Both the
principal hereof and interest hereon are payable at the principal office of the Company in
Montreal, Canada in coin or currency of the United States of America which at the time of payment
shall be legal tender for the payment of public and private debts. If any amount of principal,
premium, if any, or interest on or in respect of this Note becomes due and payable on any date
which is not a Business Day, such amount shall be payable on the next preceding Business Day.
“Business Day” means any day other than a Saturday, Sunday or other day on which banks in Montreal
or Toronto, Canada or Chicago, Illinois are required by law to close or are customarily closed.

          For purposes of the Interest Act (Canada) and in respect of all or any portion of a calendar
year, the annual rate of interest to which the interest rate herein is equal is such 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.

          This Note is one of the 10.26% Senior Notes, Series D, Due January 15, 2011 of the Company in
the aggregate principal amount of U.S. $22,000,000 issued or to be issued under and pursuant to the
terms and provisions of the separate Note Agreements, each dated as of November 1, 1990 (the “Note
Agreements”) entered into by the Company

EXHIBIT A-2

(to Note Agreement)

 

 

with the original purchasers therein referred to and this Note and the holder hereof are entitled
equally and ratably with the holders of all other Notes outstanding under the Note Agreements to
all the benefits and security provided for thereby or referred to therein, to which Note
Agreements reference is hereby made for the statement thereof. The Notes are direct unsecured
obligations of the Company and rank pari passu with all other unsecured indebtedness of the
Company.

          This Note and the other Notes outstanding under the Note Agreements may be declared due prior
to their expressed maturity dates, certain prepayments and repurchases are required to be made
thereon and the interest rates applicable thereto may be automatically changed and adjusted, all
in the events, on the terms and in the manner and amounts as provided in the Note Agreements.

          The Notes are not subject to prepayment or redemption at the option of the Company prior to
their expressed maturity dates except on the terms and conditions and in the amounts and with the
Make Whole Premium set forth in the Note Agreements.

          This Note is registered on the books of the Company maintained by it or by a registrar and is
transferable only by surrender thereof at the principal office of the Company duly endorsed or
accompanied by a written instrument of transfer duly executed by the registered holder of this
Note or its attorney duly authorized in writing. Payment of or on account of principal, premium,
if any, and interest on this Note shall be made only to or upon the order in writing of the
registered holder.

          This Note and said Note Agreement is governed by and construed in accordance with the laws of
Illinois.

	 	 	 	 	 
	 	 	CANADIAN PACIFIC FOREST PRODUCTS LIMITED
	 
	 	 	 	 
	 

	 	By	 	 
	 

	 	 	 	 
	 

	 	     Its	 	 
	 

	 	 	 	 
	 

	 	By	 	 
	 

	 	 	 	 
	 

	 	     Its	 	 
	 

	 	 	 	 

THIS NOTE HAS NOT BEEN QUALIFIED FOR DISTRIBUTION IN CANADA NOR HAS IT BEEN REGISTERED PURSUANT TO
THE SECURITIES ACT OF 1933 OF THE UNITED STATES OR UNDER THE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES. THIS NOTE MAY ONLY BE OFFERED, SOLD OR DISTRIBUTED IN CANADA IN ACCORDANCE WITH
APPROPRIATE REGISTRATION AND PROSPECTUS EXEMPTIONS OR OFFERED, SOLD OR DISTRIBUTED IN THE UNITED
STATES IF REGISTERED UNDER THE APPLICABLE SECURITIES LAWS OR IF AN EXEMPTION FROM SUCH REGISTRATION
IS AVAILABLE.

A-2-2

 

CANADIAN PACIFIC FOREST PRODUCTS LIMITED 

CLOSING CERTIFICATE

To each
of the Purchasers 
named in
Schedule I to the 
Note Agreements
described below

Gentlemen:

          This certificate is delivered to you in compliance with the requirements of the separate and
several Note Agreements, each dated as of November 1, 1990 (the “Agreements”), entered into by the
undersigned, Canadian Pacific Forest Products Limited, a corporation amalgamated under the Canada
Business Corporations Act (the “Company”), with each of you, and as an inducement to and as part
of the consideration for your purchase on this date aggregating U.S. $70,000,000 principal amount
of the 10.60% Senior Notes, Series C, Due January 15, 2011 and U.S. $22,000,000 principal amount
of the 10.26% Senior Notes, Series D, Due January 15, 2011 (the “Notes”) of the Company pursuant
to the Agreements. The terms which are capitalized herein shall have the same meanings as in the
Agreements.

     The Company represents and warrants to you as follows:

          1.
Subsidiaries. Schedule II attached to the Agreements states the name
of each of the Company’s Subsidiaries which contributed in the aggregate as of September
30, 1990 at least 99% of the total assets of the Company and its Subsidiaries, its
jurisdiction of incorporation and the percentage of its Voting Shares owned by the
Company and each such Subsidiary. The Company, and each Subsidiary, has good and
marketable title to all of the shares it purports to own of the stock of each Subsidiary,
free and clear in each case of any lien, claim, charge or encumbrance. All such shares
have been duly issued and are fully paid and non-assessable.

          2. Corporate Organization and Authority. The Company

     (a)
is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation;

     (b) has all requisite power and authority and all material licenses
and permits necessary to own and operate its properties and to carry on its
business as now conducted and as presently proposed to be conducted; and

     (c) is duly licensed or qualified and is in good standing as a foreign
corporation in each jurisdiction wherein the nature of the business transacted
by it or the nature of the property owned or leased by it makes such licensing
or qualification necessary, except where the failure to be so licensed or to be
so qualified would not have a Material Adverse Effect.

The Company is subject to the relevant commercial law and civil law and is generally subject to
suit and, to the best knowledge of the Company, it is not nor does any of its properties or
revenues enjoy any right of immunity from any judicial proceedings,

EXHIBIT B

(to Note Agreement)

 

including attachment prior to judgment, attachment in aid of execution, execution of the judgment
or otherwise. The Company represents that the execution and delivery of the Note Agreements and
the Notes constitute private and commercial acts rather than governmental or public acts of the
Company.

          3.
Business and Property. You have heretofore been furnished with a
copy of the Confidential Private Placement Memorandum which generally sets forth the
business conducted and proposed to be conducted by the Company and its Subsidiaries and
the principal properties of the Company and its Subsidiaries.

          4.
Financial Statements. (a) The consolidated balance sheets of the
Company and its Subsidiaries as of December 31 in each of the years 1987 to 1989, both
inclusive, and the consolidated statements of earnings and retained earnings and changes
in cash position for the fiscal years ended on said dates accompanied by a report thereon
containing an opinion unqualified as to scope limitations imposed by the Company and
otherwise without qualification except as therein noted, by Price Waterhouse, have been
prepared in accordance with generally accepted Canadian accounting principles
consistently applied except as therein noted, are correct and complete and present fairly
the financial position of the Company and its Subsidiaries as of such dates and the results
of their operations and changes in cash position for such periods. The unaudited
consolidated balance sheet of the Company and its Subsidiaries as of September 30, 1990
and the unaudited consolidated statements of earnings and retained earnings and changes
in cash position for the nine-month period ended on said date prepared by the Company
have been prepared in accordance with generally accepted Canadian accounting principles
consistently applied, are correct and complete and present fairly the financial position of
the Company and its Subsidiaries as of said date and the results of their operations and
changes in cash position for such period subject to year-end audit and adjustments.

          (b) Since December 31, 1989, there has been no change in the condition, financial or
otherwise, of the Company and its Subsidiaries as shown on the consolidated balance sheet as of
such date except changes in the ordinary course of business, none of which individually or in the
aggregate has been materially adverse.

          5.
Indebtedness. Schedule II attached to the Agreement correctly
describes all Consolidated Current Debt, Consolidated Funded Debt and Capitalized
Leases of the Company and its Subsidiaries on a consolidated basis outstanding on
September 30, 1990.

          6.
Full Disclosure. The financial statements referred to in paragraph 4
do not, nor does the Confidential Private Placement Memorandum or any other written
statement furnished by the Company to you in connection with the negotiation of the sale
of the Notes, contain any untrue statement of a material fact or omit a material fact
necessary to make the statements contained therein or herein not misleading, provided
that the Company’s estimates and projections of the financial position and the results of
operations of the Company for, and as at the end of, certain future periods contained in
the Confidential Private Placement Memorandum were prepared in good faith by the
Company and were based on information and data known to the Company on the date such
estimates and projections were made and on assumptions that were reasonable and
consistent with such information and data. There is no fact peculiar to the Company or its
Subsidiaries which the Company has not disclosed to you in writing which has had nor, so
far as the Company can now foresee, will have a Material Adverse Effect.

B-2

 

          7. Pending Litigation. There are no proceedings pending or, to the knowledge of the
Company, threatened against or affecting the Company or any Subsidiary in any court or before
any governmental authority or arbitration board or tribunal which involve the possibility of
having a Material Adverse Effect. Neither the Company nor any Subsidiary is in default with
respect to any order of any court or governmental authority or arbitration board or tribunal.

          8. Title to Properties. The Company, and each Subsidiary, has good and marketable title
in fee simple (or its equivalent under applicable law) to all the real property and has good
title to all the other property it purports to own, including that reflected in the most
recent balance sheet referred to in paragraph 4 except as sold or otherwise disposed of in
the ordinary course of business and except for liens disclosed in notes to the financial
statements referred to in paragraph 4 hereof or otherwise permitted
by Section 5.7 of the Agreement.

          9. Sale is Legal and Authorized. The sale of the Notes and compliance by the Company
with all of the provisions of the Agreement and the Notes—

     (a) are within the corporate powers of the Company;

     (b) will not violate any provisions of any law or any order of any court or
governmental authority or agency and will not conflict with or result in any
breach of any of the terms, conditions or provisions of, or constitute a default
under the Articles of Incorporation or By-laws of the Company or any indenture or
other agreement or instrument to which the Company is a party or by which it may
be bound or result in the imposition of any liens, security interest, mortgage,
pledge, charge or other encumbrance on any property or assets of the Company; and

     (c) have been duly authorized by proper corporate action on the part of the
Company (no action by the stockholders of the Company being required by law, by
the Articles of Incorporation or By-laws of the Company or otherwise), executed
and delivered by the Company and the Agreement and the Notes constitute the
legal, valid and binding obligations, contracts and agreements of the Company
enforceable in accordance with their respective terms, except as enforcement of
such terms may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting enforcement of creditors’ rights generally and by
general equitable principles.

          The obligations of the Company under the Note Agreements and the Notes rank at least
pari passu in right of payment with all other unsecured Indebtedness (actual or contingent)
of the Company.

          10. No Defaults. No Default or Event of Default as defined in the Agreement has
occurred and is continuing. The Company is not in default in the payment of principal or
interest on any Indebtedness for borrowed money and is not in default under any instrument
or instruments or agreements under and subject to which any such Indebtedness for borrowed
money has been issued and no event has occurred and is continuing under the provisions of
any such instrument or agreement which with the lapse of time or the giving of notice, or
both, would constitute an event of default thereunder.

B-3

 

          11. Governmental Consent. No approval, consent or withholding of objection on the part of
any Canadian or United States regulatory body, state, provincial, Federal or local, is necessary in
connection with the execution and delivery by the Company of the Agreement or the Notes or
compliance by the Company with any of the provisions of the Agreement or the Notes.

          12. Taxes. All taxes, assessments, fees and other governmental charges upon the Company or
any Subsidiary or upon any of their respective properties, income or franchises, which are due and
payable have been paid except where the failure to pay such taxes, assessments, fees and other
governmental charges would not result in a Material Adverse Effect. For all taxable years ending on
or before December 31, 1983, the United States and Canadian income tax liability of the Company and
its Subsidiaries has been satisfied and either the period of limitations on assessment of
additional United States and Canadian income tax has expired or the Company and its Subsidiaries
have entered into an agreement with the Internal Revenue Service and/or Revenue Canada, Taxation
closing conclusively the total tax liability for the taxable year. The Company does not know of
any proposed additional tax assessment against it for which adequate provision has not been made in
its accounts, and no material controversy in respect of additional Federal, provincial or state
income taxes is pending or to the knowledge to the Company threatened. The provisions for taxes on
the books of the Company and each Subsidiary are adequate for all open years, and for its current
fiscal period.

          13. Use of Proceeds. The net proceeds from the sale of the Notes will be used to retire
outstanding Indebtedness and for other corporate purposes. None of the transactions contemplated
in the Agreements (including, without limitation thereof, the use of proceeds from the issuance of
the Notes) will violate or result in a violation of Section 7 of the Securities Exchange Act of
1934, as amended, or any regulation issued pursuant thereto, including, without limitation,
Regulations G, T and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter
II. Neither the Company nor any Subsidiary owns or intends to carry or purchase any “margin
stock” within the meaning of said Regulation G. None of the proceeds from the sale of the Notes
will be used to purchase, or refinance any borrowing, the proceeds of which were used to purchase
any “security” within the meaning of the Securities Exchange Act of 1934, as amended.

          14. Compliance with Law. Except as set forth in the Confidential Private Placement Memorandum,
the Company and each Subsidiary is in compliance with all laws, ordinances, governmental rules or
regulations to which it is subject, including, without limitation, any applicable United States or
Canadian law, statute or ordinance relating to public health, safety or the environment including
any law, statute or ordinance providing for financial responsibility for cleanup or remedial or
other actions with respect to the release or threatened release of hazardous or toxic materials,
substances or waste, pollutant or contaminant, the violation of which would have a Material Adverse
Effect.

          15. Private Offering. Neither the Company, directly or indirectly, nor any agent on its
behalf has offered or will offer the Notes or any similar Security or has solicited or will solicit
an offer to acquire the Notes or any similar Security from or has otherwise approached or
negotiated or will approach or negotiate in respect of the Notes or any similar Security with any
Person other than you and not more than 21 other institutional investors, each of whom was offered
a portion of the Notes at private sale for investment. Neither the Company, directly or
indirectly, nor any agent on its behalf has offered or will offer the Notes or any similar Security
or has solicited or will solicit an offer to acquire the Notes or any similar Security from any
Person so as to bring the

B-4

 

issuance and sale of the Notes within the provisions of Section 5 of the Securities Act of 1933,
as amended, or so as to violate any applicable Canadian provincial securities laws.

          16. Employee Retirement Income Security Act of 1974. The following representations and
warranties of the Company are made in reliance on the truth and accuracy of the representations of
the Purchasers set forth in Section 3.2(b) of the Agreements.

          (a) The
Company (i) is not a “party in interest” (as defined in Title I, Section 3(14) of
ERISA) or a “disqualified person” (as defined in Section 4975(e)(2) of the Code) with respect to
any employee benefit plan whose name has been disclosed to the Company pursuant to Section
3.2(b)(iv) and securities of the Company are not employer securities with respect to any such plan,
and (ii) in the case of any employee benefit plan identified pursuant to Section 3.2(b)(v), the
Company does not, nor does any “affiliate” (as defined in Section V(c) of PTE 84-14) of the
Company, have at this time, nor has it exercised in the preceding one year period, the authority to
appoint or terminate the QPAM described in said Section 3.2(b)(v) or to negotiate the terms of said
QPAM’s management agreement on behalf of any such Plan.

          (b) The consummation of the transactions provided for in the Agreements and compliance by the
Company with the provisions thereof and the Notes issued thereunder will not involve any non-exempt
prohibited transaction within the meaning of ERISA or Section 4975 of the Internal Revenue Code.
No “employee pension benefit plans”, as defined in ERISA (“Plans”), maintained by the Company or
any Person which is under common control with the Company within the meaning of Section 4001(b) of
ERISA, nor any trusts created thereunder, have incurred any “accumulated funding deficiency” as
defined in Section 302 of ERISA.

          17. Absence of Foreign or Enemy Status. Neither the Company nor its Subsidiaries, nor, to
the best of their knowledge and belief, any Affiliate, is (a) an “enemy” or an “ally of enemy”
within the meaning of Section 2 of the Trading with the Enemy Act, (b) a “national” of a foreign
country designated in Executive Order No. 8389, as amended, or of any “designated enemy country” as
defined in Executive Order No. 9095, as amended, of the President of the United States of America,
in each case within the meaning of said Executive Orders, as amended, or of any regulation issued
thereunder, or (c) a “national of any designated foreign country” within the meaning of the Foreign
Assets Control Regulations or of the Cuban Assets Control Regulations of the United States of
America (Code of Federal Regulations, Title 31, Chapter V, Part 515, Subpart B, as amended).

          18. Investment Company Act Status. The Company is not an “investment company”, or a “company
controlled” by an “investment company” as such terms are defined in the Investment Company Act of
1940, as amended.

B-5

 

          19. Employee Controversies. Except as set forth in the Confidential Private Placement
Memorandum, there are no material controversies pending or, to the knowledge of the Company,
threatened or anticipated between the Company and any of its employees and there are no labor
disputes, grievances, arbitration proceedings or any strikes, work stoppages or slowdowns pending,
or to the Company’s knowledge, threatened, between the Company and its Subsidiaries and their
respective employees and representatives which could result in a Material Adverse Effect.

          Dated:

	 	 	 	 	 
	 	 	CANADIAN PACIFIC FOREST PRODUCTS LIMITED
	 
	 	 	 	 
	 

	 	By	 	 
	 

	 	 	 	 
	 

	 	 	 	Its Senior Vice President, 
	 

	 	 	 	Finance, Accounting and Logistics
	 
	 	 	 	 
	 

	 	By	 	 
	 

	 	 	 	 
	 

	 	 	 	Its Treasurer

B-6

 

DESCRIPTION OF CLOSING OPINION

OF SPECIAL COUNSEL TO PURCHASERS

          The closing opinion of Chapman and Cutler, special counsel to the Purchasers, called for by
Section 4.2 of the Note Agreements, shall be dated the Closing Date and addressed to the
Purchasers, shall be satisfactory in form and substance to the Purchasers and shall be to the
effect that:

     (1) The Note Agreements have been duly authorized, executed and delivered by the
Company and constitute the legal, valid and binding contracts and agreements of the
Company enforceable in accordance with their terms, against the Company, except as
enforceability thereof may be limited by (i) bankruptcy, insolvency, fraudulent
conveyance or similar laws affecting the enforcement of creditors’ rights generally,
and (ii) equitable principles of general applicability (regardless of whether such
enforceability is considered in a proceeding in equity or at law);

     (2) The Notes have been duly authorized by proper corporate action on the part of
the Company, have been duly executed by an authorized officer of the Company and
delivered and constitute the legal, valid and binding obligations of the Company
enforceable in accordance with their terms, against the Company, except as
enforceability thereof may be limited by (i) bankruptcy, insolvency, fraudulent
conveyance or similar laws affecting the enforcement of creditors’ rights generally,
and (ii) equitable principles of general applicability (regardless of whether such
enforceability is considered in a proceeding in equity or at law);

     (3) No approval, consent or withholding of objection on the part of, or filing,
registration or qualification with, any United States governmental body, Federal, or
local is necessary as a condition to the lawful execution and delivery of the Note
Agreements or the Notes; and

     (4) The issuance, sale and delivery of the Notes under the circumstances
contemplated by the Note Agreements is an exempt transaction under the Securities Act
of 1933, as amended, and does not under existing law require the registration of the
Notes under the Securities Act of 1933, as amended, or the qualification of an
indenture in respect thereof under the Trust Indenture Act of 1939.

          The opinion of Chapman and Cutler shall also state that the respective opinions of Bell, Boyd
& Lloyd and Ogilvy Renault are satisfactory in scope and form to Chapman and Cutler and that, in
their opinion, the Purchasers are justified in relying thereon and shall cover such other matters
relating to the sale of the Notes as the Purchasers may reasonably request. In rendering the
opinions set forth in paragraphs (1) and (2) above with respect to the due authorization,
execution, delivery of the Note Agreements and the Notes and the legal, valid and binding nature of
the Note Agreements and the Notes, Chapman and Cutler may rely solely on the opinion of Ogilvy
Renault with respect to such matters. With respect to matters of fact upon which such opinion is
based, Chapman and Cutler may rely on appropriate certificates of public officials and officers of
the Company.

EXHIBIT C

(to Note Agreement)

 

 

DESCRIPTION OF CLOSING OPINION OF UNITED STATES

COUNSEL TO THE COMPANY

     The closing opinion of Bell, Boyd & Lloyd, United States counsel to the Company, which is
called for by Section 4.2 of the Note Agreements, shall be dated the Closing Date and addressed to
the Purchasers, shall be satisfactory in scope and form to the Purchasers and shall be to the
effect that:

     (1) The Company is duly licensed or qualified and is in good standing as a
foreign corporation in each jurisdiction in the United States in which the character
of the properties owned or leased by it or the nature of the business transacted by it
makes such licensing or qualification necessary;

     (2) The Note Agreements have been duly authorized, executed and delivered by the
Company and constitute the legal, valid and binding contracts and agreements of the
Company enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency or similar laws affecting creditors’ rights generally, and
subject, as to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law);

     (3) The Notes have been duly authorized by proper corporate action on the part of
the Company, have been duly executed by an authorized officer of the Company and
delivered and constitute the legal, valid and binding obligations of the Company
enforceable in accordance with their terms, subject to applicable bankruptcy,
insolvency or similar laws affecting creditors’ rights generally, and subject,
as to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law);

     (4) No approval, consent or withholding of objection on the part of, or filing,
registration or qualification with, any United States governmental body, Federal,
state or local, is necessary as a condition to the lawful execution, delivery and
performance of the Note Agreements or the Notes and the payment of all amounts to be
paid under the Note Agreements or the Notes in immediately available and freely
transferable United States dollars at the place of payment;

     (5) The issuance, sale and delivery of the Notes under the circumstances
contemplated by the Note Agreements is an exempt transaction under the Securities Act
of 1933, as amended, and does not under existing law require the registration of the
Notes under the Securities Act of 1933, as amended, or the qualification of an
indenture in respect thereof under the Trust Indenture Act of 1939; and

     (6) The issuance and sale of the Notes and the execution, delivery and
performance by the Company of the Note Agreements do not conflict with or result in
any breach of any of the provisions of or constitute a default under or result in the
creation or imposition of any lien or encumbrance upon any of the property of the
Company pursuant to the provisions of any charter document or By-laws of the Company
or any agreement or other instrument

EXHIBIT D

(to Note Agreement)

 

 

known to such counsel to which the Company is a party or by which the Company may be
bound or will result in the contravention of any Illinois or Federal law, rule or
regulation as to which the Company or its property and assets are subject.

          The
opinion of Bell, Boyd & Lloyd shall also state that the opinion of Ogilvy Renault is
satisfactory in scope and form to Bell, Boyd & Lloyd and that, in their opinion, the Purchasers are
justified in relying thereon and shall cover such other matters relating to the sale of the Notes
as the Purchasers may reasonably request. In rendering the opinions set forth in paragraphs (2) and
(3) above with respect to the due authorization, execution, delivery of the Note Agreements and the
Notes and the legal, valid and binding nature of the Note Agreements and the Notes, Bell, Boyd &
Lloyd may rely solely on the opinion of Ogilvy Renault with respect to such matters. With respect
to matters of fact on which such opinion is based, such counsel shall be entitled to rely on
appropriate certificates of public officials and officers of the Company.

D-2

 

DESCRIPTION OF CLOSING OPINION OF CANADIAN

COUNSEL TO THE COMPANY

          The closing opinion of Ogilvy Renault, counsel to the Company, which is called for by Section
4.2 of the Note Agreements, shall be dated the Closing Date and addressed to the Purchasers, shall
be satisfactory in scope and form to the Purchasers and shall be to the effect that:

     (1) The Company is a corporation, duly incorporated and validly subsisting under
the laws of Canada, has corporate power and authority and is duly authorized to enter
into and perform the Note Agreements and to issue the Notes and incur the Indebtedness
to be evidenced thereby;

     (2) The Company has full power and authority and is duly authorized to conduct
the activities in which it is now engaged and is duly licensed or qualified and is in
good standing as a foreign corporation in each jurisdiction in Canada in which the
character of the properties owned or leased by it or the nature of the business
transacted by it makes such licensing or qualification necessary;

     (3) The Note Agreements have been duly authorized, executed and delivered by the
Company and constitute the legal, valid and binding contracts and agreements of the
Company;

     (4) The Notes have been duly authorized by proper corporate action on the part of
the Company, have been duly executed by an authorized officer of the Company and
delivered and constitute the legal, valid and binding obligations of the Company;

     (5) No approval, consent or withholding of objection on the part of, or filing,
registration or qualification with, any governmental body of Canada or any province,
Federal, state or local, is necessary as a condition to the lawful execution, delivery
and performance of the Note Agreements or the Notes and the payment of all amounts to
be paid under the Note Agreements or the Notes in immediately available and freely
transferable United States Dollars at the place of payment;

     (6) The issuance and sale of the Notes and the execution, delivery and
performance by the Company of the Note Agreements do not conflict with or result in
any breach of any of the provisions of or constitute a default under or result in the
creation or imposition of any lien or encumbrance upon any of the property of the
Company pursuant to the provisions of the Articles of Incorporation or By-laws of the
Company or any agreement or other instrument to which the Company is a party or by
which the Company may be bound or will result in the contravention of any law, rule or
regulation as to which the Company or its property and assets are subject;

     (7) The offering, issuance, sale and delivery of the Notes under the
circumstances contemplated by the Note Agreements are in due compliance with all
securities laws of Canada and the securities laws of any Province thereof;

EXHIBIT E

(to Note Agreement)

 

 

     (8) There are no proceedings pending or, to the knowledge of such counsel, threatened against
or affecting the Company in any court or before any governmental authority or arbitration board
or tribunal which, if adversely determined, would individually or in the aggregate materially and
adversely affect the business or properties of the Company or Company’s ability to perform its
obligations under the Note Agreements or the Notes;

     (9) Any suit, action or proceeding with respect to the Note Agreements or the Notes may be
brought against the Company in any competent court in the United States or in the Province of
Ontario, provided that any claim instituted before the courts of the Province of Ontario must
express any monetary claim in the equivalent in Canadian dollars of the foreign currency claimed;

     (10) The Company is subject to the relevant
commercial law and civil law of the Province of
Ontario and is generally subject to suit in the Province of Ontario and neither the Company nor
any of its property enjoys any right of immunity from any judicial proceedings in the Province of
Ontario;

     (11) The Company has the power to submit, and pursuant to the Note Agreements, has legally,
validly, effectively and irrevocably submitted, to the jurisdiction of the courts of the State of
Illinois and of the courts of the United States of America having jurisdiction in the State of
Illinois in respect of any action or proceeding relating in any way to the Note Agreements or the
Notes;

     (12) The courts of Canada will recognize a judgment entered against the Company by a court of
competent jurisdiction in the United States based on service of process and will order execution
and enforcement thereon against the Company, subject to the right of the Company to set up, in the
courts of the Province of Quebec, any defense which was or might have been set up to the original
action;

     (13) The Note Agreements and the Notes and the performance by the Company of the transactions
contemplated by the Note Agreements and the Notes are not contrary to the public policy of Canada
or any Province thereof;

     (14) To ensure the legality, validity, enforceability or admissibility into evidence of the
Note Agreements and the Notes in the Province of Ontario, it is not necessary that said documents
or any other documents be registered, notarized, filed or recorded with any court or other
authority or that any stamp or similar tax be paid with respect thereto;

     (15) Except as hereinafter provided, neither the execution and the delivery by the Company of
the Note Agreements or the Notes nor the performance by the Company thereof (including the making
of any payments under and pursuant to the Note Agreements and the Notes) are subject to any tax,
duty, fee, withholding or other charge, including, without limitation, any registration or transfer
tax, stamp duty or similar levy, imposed by Canada or the Province of Ontario or any taxing
authority thereof or any political subdivision of the Province of Ontario; provided that
tax may be payable by

E-2

 

the recipient of any payment made by the Company pursuant to the Note Agreements or
the Notes under Part I or Part XIV of the Income Tax Act (Canada) (the “Act”) or
under the income tax legislation of the Province of Ontario on such recipient’s
taxable income as a result of such recipient being resident or being deemed to be
resident in Canada or having an establishment or permanent establishment in the
Province of Ontario or carrying on business in Canada or in such province;

     (16) Neither the acquisition of the Notes nor the receipt of payment pursuant
thereto or to the Note Agreements will, of itself, constitute carrying on a business
in Canada or in the Province of Ontario;

     (17) No tax is payable under Part XIII of that Act on any amount that the Company
pays or credits under the Note Agreements to each of the Purchasers which is a
non-resident person for purposes of that Act as, on account or in lieu of payment of,
or in satisfaction of, interest, provided that the Company is dealing at arm’s length
with each of the Purchasers for purposes of the Act at the time any such interest is
payable;

     (18) The obligations of the Company under the Note Agreements and the Notes rank
at least pari passu in right of payment with all other unsecured obligations, actual
or contingent, of the Company; and

     (19) The choice of Illinois as the governing law of the Note Agreements and
the Notes is valid and will be upheld and applied by the courts of Canada and any
Province thereof.

          The opinion of Ogilvy Renault shall cover such other matters relating to the sale of the Notes
as the Purchasers may reasonably request. With respect to matters of fact on which such opinion is
based, such counsel shall be entitled to rely on appropriate certificates of public officials and
officers of the Company.

E-3

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