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                       MILLAR WESTERN FOREST PRODUCTS LTD.

                    7.75% SENIOR NOTES DUE NOVEMBER 15, 2013

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                               PURCHASE AGREEMENT

                                                               November 20, 2003

Goldman, Sachs & Co.,
   As representatives of the several Purchasers
   named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004

Ladies and Gentlemen:

         Millar Western Forest Products Ltd., a corporation established under
the laws of the Province of Alberta (the "Company"), proposes, subject to the
terms and conditions stated herein, to issue and sell to the Purchasers named in
Schedule I hereto (the "Purchasers") an aggregate of US$190,000,000 principal
amount of the Senior Notes of the Company specified above (the "Notes").

         The Notes will be offered and sold to the Purchasers without being
registered under the United States Securities Act of 1933, as amended (the
"Act"), in reliance on an exemption therefrom. The holders of the Notes will be
entitled to the benefits of an exchange and registration rights agreement,
substantially in the form attached hereto as Annex III (the "Registration Rights
Agreement"), pursuant to which the Company will file a registration statement
(the "Registration Statement") with the United States Securities and Exchange
Commission (the "Commission"), registering the Notes or the Exchange Notes (as
defined in the Registration Rights Agreement) under the Act.

         1. The Company represents and warrants to, and agrees with, each of the
Purchasers that:

         (a) A preliminary offering circular, dated November 7, 2003 (the
"PRELIMINARY OFFERING CIRCULAR") and an offering circular, dated November 20,
2003 (the "OFFERING CIRCULAR"), in each case including the Canadian supplement
thereto, have been prepared in connection with the offering of the Notes. The
Offering Circular and any amendments or supplements thereto did not and will
not, as of their respective dates, contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance

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upon and in conformity with information furnished in writing to the Company by
the Purchasers through Goldman, Sachs & Co. expressly for use therein;

         (b) The Company has not sustained since the date of the latest audited
financial statements included in the Offering Circular any material loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Offering Circular; and, since the respective dates as of
which information is given in the Offering Circular, there has not been any
change in the capital stock or long-term debt, other than any change resulting
from a change in foreign currency exchange rates, of the Company or any material
adverse change, or any development involving a prospective material adverse
change, in or affecting the general affairs, management, financial position,
shareholders' equity or results of operations of the Company, otherwise than as
set forth or contemplated in the Offering Circular;

         (c) The Company has good and marketable title in fee simple to all real
property and good and marketable title to all personal property it owns free and
clear of all liens, encumbrances and defects except such as are described in the
Offering Circular or such as would not, individually or in the aggregate, have
or reasonably be expected to have a Material Adverse Effect (as defined below);
and any real property and buildings held under lease by the Company are held by
it under valid, subsisting and enforceable leases except as would not,
individually or in the aggregate, have a Material Adverse Effect; As used in
this Agreement, the term "Material Adverse Effect" means any change in, or
effect on, the Company which is, or would reasonably be expected to be,
materially adverse to the general affairs, management, business, condition
(financial or otherwise) or results of operations of the Company.

         (d) The Company has been duly incorporated and is validly existing as a
corporation under the laws of the Province of Alberta, and has all corporate
power and authority necessary to own or lease its properties and conduct its
business as described in the Offering Circular. The Company is duly qualified to
do business as a foreign or extra-provincial corporation in all jurisdictions in
which it owns or leases properties or conducts any business so as to require
such qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction, except where
the failure to be so qualified would not, individually or in the aggregate,
result in a Material Adverse Effect;

         (e) The Company has no subsidiaries and does not own, directly or
indirectly, any capital stock or other equity or long-term debt securities of or
have any equity interest in any other person, other than the Company's 17%
ownership interest in Interex Forest Products Ltd;

         (f) The Company has an authorized capitalization as set forth in the
Offering Circular, and all of the issued shares in the capital of the Company
have been duly and validly authorized and issued, are fully paid and
non-assessable, were not issued in violation of any pre-emptive or similar
rights, and are owned by Millar Western Industries Ltd., a corporation
established under the laws of the Province of Alberta; and there are no
restrictions on subsequent transfers of the Notes under the laws of Canada or of
the United States (other than those imposed by applicable Canadian securities
laws, the Securities Act and state securities and "Blue Sky" laws);

         (g) No options, warrants or other rights to purchase from the Company,
agreements or other obligations of the Company to issue or other rights to
convert any obligation into, or exchange any securities for, common shares in
the capital of or ownership interests in the Company are outstanding; and except
as set forth in the Offering Circular, there is no agreement, understanding or
arrangement among the Company and any of its shareholders or any other person
relating to the ownership or disposition of any common shares in the

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capital of the Company or the election of directors of the Company or the
governance of the Company's affairs, and such agreements, understandings and
arrangements, if any, will not be breached or violated as a result of the
execution and delivery of, or the consummation of the transactions contemplated
by this Agreement;

         (h) The Notes have been duly authorized by the Company and, when
executed by the Company and authenticated by the Trustee and when delivered to
and paid for by the Purchasers, will have been duly executed, issued and
delivered and will constitute valid and legally binding obligations of the
Company entitled to the benefits provided by the Indenture (the "Indenture") to
be dated as of the Date of Delivery (as defined herein) between the Company and
The Bank of New York, as trustee (the "Trustee"), under which they are to be
issued, which will be substantially in the form previously delivered to you, and
enforceable against the Company in accordance with their terms, subject, as to
enforcement, as to the effect of any applicable bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and subject to the effect of general principles of
equity, including, without limitation, concepts of materiality, reasonableness,
good faith and fair dealing (regardless of whether enforcement is considered in
a proceeding in equity or at law); the Indenture has been duly authorized by the
Company and, when executed and delivered by the Company and the Trustee, the
Indenture will constitute a valid and legally binding instrument of the Company,
enforceable against the Company in accordance with its terms, subject, as to
enforcement, to any applicable bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and subject to the effect of general principles of equity, including,
without limitation, concepts of materiality, reasonableness, good faith and fair
dealing (regardless of whether enforcement is considered in a proceeding in
equity or at law); and the Notes and the Indenture will conform in all material
respects to the descriptions thereof in the Offering Circular and will be in
substantially the form previously delivered to you;

         (i) The Registration Rights Agreement has been duly authorized by the
Company, and when executed and delivered by the Company pursuant to this
Agreement (assuming the execution and delivery of the Registration Rights
Agreement by the Purchasers) will constitute a valid and legally binding
instrument of the Company, enforceable against the Company in accordance with
its terms, subject, as to enforcement, to any applicable bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and subject to the effect of general principles of
equity, including, without limitation, concepts of materiality, reasonableness,
good faith and fair dealing (regardless of whether enforcement is considered in
a proceeding in equity or at law), and except as the enforcement of
indemnification and contribution provisions thereof may be limited by federal,
state or provincial securities laws or the public policy considerations
underlying such laws; and the Registration Rights Agreement will conform in all
material respects to the description thereof in the Offering Circular;

         (j) This Agreement has been duly authorized, executed and delivered by
the Company;

         (k) None of the transactions contemplated by this Agreement (including,
without limitation, the use of the proceeds from the sale of the Notes) will
violate or result in a violation of Section 7 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or any regulation promulgated thereunder,
including, without limitation, Regulations T, U, and X of the Board of Governors
of the Federal Reserve System;

         (l) The Company is a "foreign issuer" within the meaning of Rule 902(e)
under the Act, and there is no "Substantial U.S. market interest" in its debt
securities within the meaning of Rule 902(j)(2) under the Act;

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         (m) The issue and sale of the Notes and the compliance by the Company
with all of the provisions of the Notes, the Indenture, the Registration Rights
Agreement and this Agreement (collectively referred to as the "Basic Documents")
and the consummation of the transactions herein and therein contemplated will
not result in (i) a conflict, breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company is a
party or by which the Company is bound or to which any of the property or assets
of the Company is subject, except as would not, individually or in the
aggregate, have a Material Adverse Effect, (ii) any violation of the provisions
of the articles of incorporation (or any other constituent documents) and
by-laws of the Company or (iii) (assuming compliance with all state securities
or Blue Sky laws) any breach or violation of any statute or any order, rule or
regulation of any court, central bank, stock exchange or governmental agency or
body ("Governmental Agency") having jurisdiction over the Company or any of
their properties, except where such breach or violation would not, individually
or in the aggregate, result in a Material Adverse Effect;

         (n) No consent, approval, authorization, order, registration, clearance
or qualification ("Governmental Authorization") of or with any such Governmental
Agency is required for the issue and sale of the Notes, the execution and
delivery of the Indenture, the Registration Rights Agreement or this Agreement
or the consummation by the Company of the transactions contemplated by the Basic
Documents, except for such Governmental Authorizations as may be required under
state securities or Blue Sky laws in connection with the purchase and
distribution of the Notes by the Purchasers, and state or foreign securities or
Blue Sky laws in connection with the exchange offer or resale registration
statement described in the Offering Circular and contemplated by the
Registration Rights Agreement and such as have been obtained or made;

         (o) The Company is not (i) in violation of its articles of
incorporation (or any other constituent documents) or by-laws, (ii) in breach or
violation of any statute, judgment, decree, order, rule or regulation applicable
to it or any of its properties or assets, which breach or violation would,
individually or in the aggregate, result in a Material Adverse Effect, or (iii)
in default in the performance or observance of any obligation, covenant or
condition contained in any indenture, mortgage, deed of trust, loan agreement,
lease or other agreement or instrument to which it is a party or by which it or
any of its properties may be bound, which default would, individually or in the
aggregate, result in a Material Adverse Effect;

         (p) The statements set forth in the Offering Circular under the
captions "Description of the Notes", insofar as they purport to constitute a
summary of the terms of the Notes, and under the captions "Income Tax
Considerations", "Related Party Transactions", "Description of Our Revolving
Credit Facility" and "Underwriting", insofar as they purport to describe the
provisions of the laws and documents referred to therein, are accurate and fair;

         (q) Other than as set forth in the Offering Circular, there are no
legal or governmental proceedings pending to which the Company is a party or of
which any property of the Company is the subject which could individually or in
the aggregate reasonably be expected to result in a Material Adverse Effect or
that seeks to restrain, enjoin, prevent the consummation of or otherwise
challenge the issuance or sale of the Notes to be sold hereunder or the
application of the proceeds therefrom or the other transactions described in the
Offering Circular; and, to the Company's knowledge, no such proceedings are
threatened or contemplated by Governmental Authorities or threatened by others;

         (r) Except as disclosed in the Offering Circular, the Company is in
compliance in all material respects with all applicable plans maintained or
contributed to in respect of employees (the "Plans") and to the Company's
knowledge, after due inquiry, there are no unfunded liabilities in respect of
the Plans for which the Company is or will be liable;

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         (s) The Company has filed all necessary Canadian federal, provincial,
municipal and foreign income and franchise tax returns, except where the failure
to so file such returns would not, individually or in the aggregate, result in a
Material Adverse Effect, and has paid all taxes shown as due thereon; and there
is no tax deficiency that has been asserted against the Company that would,
individually or in the aggregate, result in a Material Adverse Effect;

         (t) No Governmental Authorization is required to effect payments of
principal, premium, if any, and interest on the Notes;

         (u) No stamp or other issuance or transfer taxes or duties and no
capital gains, income, withholding or other taxes are payable by or on behalf of
the Purchasers under the federal or provincial laws of Canada or to any
political subdivision or taxing authority thereof or therein in connection with
(A) the issuance, sale and delivery by the Company to or for the respective
accounts of the Purchasers of the Notes or (B) the initial resale sale and
delivery outside Canada by the Purchasers of the Notes to the purchasers
thereof;

         (v) The Company owns or possesses adequate licenses or other rights to
use all patents, trademarks, service marks, trade names, copyrights and trade
secrets that are necessary to conduct its business now or proposed to be
conducted as described in the Offering Circular. The Company has not received
any notice of infringement of or conflict with (or knows of any such
infringement of or conflict with) asserted rights of others with respect to any
patents, trademarks, service marks, trade names, copyrights or trade secrets
that, if such assertion of infringement or conflict were sustained, would,
individually or in the aggregate, result in a Material Adverse Effect;

         (w) The Company, (i) possesses all licenses, permits, certificates,
consents, orders, approvals and other authorizations from, and has made all
declarations and filings with, all Canadian federal, provincial, local and other
governmental authorities, all self-regulatory organizations and all courts and
other tribunals, presently required or necessary to own or lease, as the case
may be, and to operate its respective properties and to carry on its business as
now or proposed to be conducted as set forth in the Offering Circular
("Permits"), except where the failure to obtain such Permits would not,
individually or in the aggregate, result in a Material Adverse Effect; (ii) is
in compliance with all of its obligations with respect to such Permits except
where the failure to so be in compliance would not, individually or in the
aggregate, result in a Material Adverse Effect; (iii) no event has occurred
which allows, or after notice or lapse of time would allow, revocation or
termination of any such Permit, except where the revocation or termination would
not, individually or in the aggregate, result in a Material Adverse Effect; and
(iv) has not received any notice of any proceeding relating to revocation or
modification of any such Permit, except as described in the Offering Circular
and except where such revocation or modification would not, individually or in
the aggregate, result in a Material Adverse Effect;

         (x) Neither the Company nor any of its directors, officers, partners,
members, employees, agents (other than the Purchasers or any director, officer,
partner, member, employee, agent or controlling person thereof, as to which no
representation is made) or controlling persons has taken, directly or
indirectly, any action which was designed to or which has constituted or which
might reasonably be expected to cause or result in stabilization or manipulation
of the price of any security of the Company or facilitate the sale or resale of
the Notes;

         (y) When the Notes are issued and delivered pursuant to this Agreement,
the Notes will not be of the same class (within the meaning of Rule 144A under
the Act) as securities that are listed on a national securities exchange
registered under Section 6 of the Exchange Act or quoted in a U.S. automated
inter-dealer quotation system;

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         (z) The Company is not, and after giving effect to the offering and
sale of the Notes, will not be required to register as an "investment company",
as such term is defined in the United States Investment Company Act of 1940, as
amended (the "Investment Company Act");

         (aa) Neither the Company, nor any affiliate of the Company, nor any
person acting on its or their behalf (other than the Purchasers, as to which no
representation is made) has offered or sold the Notes by means of any general
solicitation or general advertising within the meaning of Rule 502(c) under the
Act or, with respect to Notes sold outside the United States to non-U.S. persons
(as defined in Rule 902 under the Act), by means of any directed selling efforts
within the meaning of Rule 902 under the Act and the Company, any affiliate of
the Company and any person acting on its or their behalf (other than the
Purchasers, as to which no representation is made) has complied with, and will
comply with, Rule 903 under the Act;

         (bb) Within the preceding six months, neither the Company nor any other
person acting on behalf of the Company has offered or sold to any person any
Notes, or any securities of the same or a similar class as the Notes, other than
Notes offered or sold to the Purchasers hereunder. The Company will take
reasonable precautions designed to insure that any offer or sale, direct or
indirect, in the United States or to any U.S. person (as defined in Rule 902
under the Act) of any Notes or any substantially similar security issued by the
Company, within six months subsequent to the date on which the distribution of
the Notes has been completed (as notified to the Company by Goldman, Sachs &
Co.), is made under restrictions and other circumstances reasonably designed not
to affect the status of the offer and sale of the Notes in the United States and
to U.S. persons contemplated by this Agreement as transactions exempt from the
registration provisions of the Act;

         (cc) (i) Neither the Company nor any of its subsidiaries has conducted
any transactions with the government of Cuba, Libya, Iran, Iraq, Sudan, Angola,
North Korea, Syria, or Myanmar (Burma) (the "Prohibited Countries") or with any
person or entity located in any of the Prohibited Countries; and (ii) the net
proceeds from the sale of the Notes (as described in the Offering Circular under
the caption "Use of Proceeds") have not been and will not be, directly or
indirectly, invested in or committed to any business activities in any of the
Prohibited Countries;

         (dd) (i) Immediately after the consummation of the transactions
contemplated by the Basic Documents the fair value of the assets of the Company
will exceed the sum of its stated liabilities and identified contingent
liabilities; and (ii) the Company is not, after giving effect to the execution,
delivery and performance of the Indenture, the Registration Rights Agreement and
this Agreement, and the consummation of the transactions contemplated hereby and
thereby, (a) left with unreasonably small capital with which to carry on its
business as it is proposed to be conducted, (b) unable to pay its debts
(contingent or otherwise) as they mature or (c) otherwise insolvent;

         (ee) PricewaterhouseCoopers LLP, who have audited and certified certain
financial statements of the Company, are independent public accountants as
required by the Act and the rules and regulations of the Commission thereunder
and are independent with respect to the Company within the meaning of the
Business Corporations Act (Alberta) and the Alberta Securities Commission and
regulations and policies thereunder;

         (ff) The financial statements of the Company, together with the Notes,
included in the Offering Circular present fairly, in all material respects, the
financial position of the Company as of the dates indicated and the results of
operations and cash flows of the Company for the periods specified. Such
financial statements have been prepared in conformity with Canadian generally
accepted accounting principles ("CANADIAN GAAP") applied on a consistent basis,
except as may be expressly stated in the notes thereto, and have been reconciled
to

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U.S. generally accepted accounting principles ("U.S. GAAP") in accordance with
Item 18 of Form 20-F under the Exchange Act, throughout the periods involved;

         (gg) The selected historical financial data and the summary historical
financial data included in the Offering Circular present fairly, in all material
respects, the information shown therein and have been compiled on a basis
consistent with that of the audited and unaudited financial statements included
in the Offering Circular, except as otherwise stated therein;

         (hh) The Company does not have any unionized employees and no labor
dispute with the employees of the Company exists or, to the knowledge of the
Company, is imminent;

         (ii) The Company carries insurance in such amounts and covering such
risks as in its reasonable determination is adequate for the conduct of its
business and the value of its properties;

         (jj) The statistical and market and industry-related data included in
the Offering Circular are based on or derived from sources which the Company
reasonably believes to be reliable and accurate or represent the Company's good
faith estimates based upon data derived from such sources;

         (kk) Except as stated in the Offering Circular, the Company does not
know of any claims for services, either in the nature of a finder's fee or
financial advisory fee, with respect to the offering of the Notes and the
transactions contemplated by the Offering Circular;

         (ll) Except as disclosed in the Offering Circular or as would not
individually or in the aggregate have a Material Adverse Effect, (A) the Company
is in compliance with all applicable Environmental Laws, (B) the Company has all
permits, authorizations and approvals required under any applicable
Environmental Laws and is in compliance with their requirements, (C) there are
no pending or threatened Environmental Claims against the Company, and (D) there
are no circumstances with respect to any property or operations of the Company
that could reasonably be anticipated to form the basis of an Environmental Claim
against the Company.

For purposes of this Agreement, the following terms shall have the following
meanings: "Environmental Law" means any United States or Canadian (or other
applicable jurisdiction's) federal, provincial, state, local or municipal
statute, law, rule, regulation, ordinance, code or rule of common law and any
judicial or administrative interpretation thereof including any applicable and
binding judicial or administrative order, consent decree or judgment relating to
the environment, health, safety or any chemical, material or substance, exposure
to which is prohibited, limited or regulated by any governmental authority.
"Environmental Claims" means any and all administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of noncompliance
or violation, investigations or proceedings relating in any way to any
Environmental Law;

         (mm) Neither the registration of the Notes under the Act nor
qualification, by prospectus or otherwise, of the Notes under the securities
laws of any jurisdiction of Canada, nor the qualification of any indenture under
the Trust Indenture Act or under the Business Corporations Act (Alberta) or any
rules or regulations thereunder, is required for (i) the offer, sale and
delivery of the Notes by the Company to the Purchasers or (ii) initial offers,
sales and delivery of the Notes purchased from the Company by the Purchasers, in
each case in the manner contemplated by this Agreement and the Offering
Circular;

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         (nn) None of the Company, any of its affiliates or any person acting on
its or their behalf (other than the Purchasers) has engaged in any directed
selling efforts (as that term is defined in Regulation S under the Act
("Regulation S")) with respect to the Notes and the Company, and its affiliates
and any person acting on its or their behalf (other than the Purchasers) have
acted in accordance with the offering restrictions requirement of Regulation S.

         2. Subject to the terms and conditions herein set forth, the Company
agrees to issue and sell to each of the Purchasers, and each of the Purchasers
agrees, severally and not jointly, to purchase from the Company, at a purchase
price of 100% of the principal amount thereof, plus accrued interest, if any,
from November 25, 2003 to the Time of Delivery hereunder, the principal amount
of Notes set forth opposite the name of each such Purchaser in Schedule I
hereto.

         As compensation to the Purchasers for their respective commitments
hereunder, the Company at the Time of Delivery hereunder will pay to Goldman,
Sachs & Co. for the accounts of the several Purchasers, an underwriting
commission equal to 2.125% of the principal amount of the Notes.

         3. Upon the authorization by you of the release of the Notes, the
several Purchasers propose to offer the Notes for sale upon the terms and
conditions set forth in this Agreement and the Offering Circular and each
Purchaser hereby represents and warrants to, and agrees with the Company that:

         (a) It will offer and sell the Notes only to: (i) persons who it
reasonably believes are "qualified institutional buyers" ("QIBs") within the
meaning of Rule 144A under the Act in transactions meeting the requirements of
Rule 144A and are "accredited investors" in the Province of Alberta under
Multilateral Instrument 45-103-Capital Raising Exemptions or, (ii) upon the
terms and conditions set forth in Annex I to this Agreement;

         (b) It is an institutional "accredited investor" within the meaning of
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Act;

         (c) It is an "accredited investor" as defined under the securities laws
of the Province of Alberta pursuant to Multilateral Instrument 45-103, being an
entity organized in a foreign jurisdiction which is analogous (in form and
function) to a company registered under securities legislation in Canada as an
adviser or dealer other than a limited market dealer registered under the
Securities Act (Ontario); and

         (d) It will not offer or sell the Notes by any form of general
solicitation or general advertising (as those terms are defined in Regulation D
under the Act), including but not limited to the methods described in Rule
502(c) under the Act.

         4. (a) The Notes to be purchased by each Purchaser hereunder will be
represented by one or more definitive global Notes in book-entry form which will
be deposited by or on behalf of the Company with The Depository Trust Company
("DTC") or its designated custodian. The Company will deliver the Notes to
Goldman, Sachs & Co., for the respective accounts of each Purchaser, against
payment by or on behalf of such Purchaser of the purchase price therefor by wire
transfer of Federal (same-day) funds to the account specified by the Company to
Goldman, Sachs & Co. at least forty-eight hours in advance, by causing DTC to
credit the Notes to the account of Goldman, Sachs & Co. at DTC. The Company will
cause the certificates representing the Notes to be made available to Goldman,
Sachs & Co. for examination at least twenty-four hours prior to the Time of
Delivery (as defined below) at the office of the Company's counsel or its
counsel (the "Designated Office"). The time and date of such delivery and
payment shall be 8:30 a.m., New York City time, on

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November 25, 2003 or such other time and date as Goldman, Sachs & Co. and the
Company may agree upon in writing. Such time and date are herein called the
"Time of Delivery"; and

         (b) The documents to be delivered at the Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Notes and payment therefor and any additional documents
requested by the Purchasers pursuant to Section 7(i) hereof, will be delivered
at such time and date at the offices of Shearman & Sterling LLP (the Closing
Location"), and the Notes will be delivered at the Designated Office, all at the
Time of Delivery. A meeting will be held at the Closing Location at 3:30 p.m.,
New York City time, on the New York Business Day next preceding the Time of
Delivery, at which meeting the final drafts of the documents to be delivered
pursuant to the preceding sentence will be available for review by the parties
hereto. For the purposes of this Section 4, "New York Business Day" shall mean
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in New York, New York, Toronto, Ontario, or Edmonton,
Alberta are generally authorized or obligated by law or executive order to
close.

         5. The Company agrees with each of the Purchasers:

         (a) To prepare the Offering Circular in a form approved by you; to make
no further amendment or any supplement to the Offering Circular which shall be
disapproved by you promptly after reasonable notice thereof; and to furnish you
with copies thereof;

         (b) Promptly from time to time to take such action as you may
reasonably request to qualify the Notes for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of
the Notes, provided that in connection therewith the Company shall not be
required to qualify as a foreign or extra-provincial corporation or to file a
general consent to service of process in any jurisdiction or subject itself to
taxation in excess of a nominal amount in any jurisdiction in which it is not
then otherwise subject;

         (c) To furnish the Purchasers with as many copies of the Offering
Circular and each amendment or supplement thereto with the independent
accountants' reports in the Offering Circular, and any amendment or supplement
containing amendments to the financial statements covered by such report, signed
by the accountants, prior to 4:00 p.m. New York City time on the Business Day
next succeeding the date of this Agreement, and additional written and
electronic copies thereof in such quantities as you may from time to time
reasonably request, and if, at any time prior to the expiration of nine months
after the date of the Offering Circular, any event shall have occurred as a
result of which the Offering Circular as then amended or supplemented would
include an untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such Offering Circular is
delivered, not misleading, or, if for any other reason it shall be necessary or
desirable during such same period to amend or supplement the Offering Circular,
to notify you and upon your request to prepare and furnish without charge to
each Purchaser and to any dealer in securities as many written and electronic
copies as you may from time to time reasonably request of an amended Offering
Circular or a supplement to the Offering Circular which will correct such
statement or omission or effect such compliance;

         (d) During the period beginning from the date hereof and continuing to
the date 120 days after the date of the Offering Circular, not to offer, sell,
contract to sell or otherwise dispose of, except as provided hereunder or under
the Registration Rights Agreement any securities of the Company that are
substantially similar to the Notes without the prior written consent of Goldman,
Sachs & Co.;

                                       9
<PAGE>

         (e) None of the Company or any of its affiliates will sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any
"security" (as defined in the Act) which could be integrated with the sale of
the Notes in a manner which would require the registration under the Act of the
Notes;

         (f) Not to be or become, at any time prior to the expiration of three
years after the Time of Delivery, an open-end investment company, unit
investment trust, closed-end investment company or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act;

         (g) To furnish to the Commission the information required by Rule
12g3-2(b) under the Act; provided, however, if at any time when the Company is
not exempt from registration under Section 12(b) of the Exchange Act nor subject
to Section 13 or 15(d) of the Exchange Act, for the benefit of holders from time
to time of Notes, to furnish at its expense, upon request, to holders of Notes
and prospective purchasers of securities information (any such information
furnished pursuant to Rule 12g3-2(b) or Rule 144A(d)(4)(i) is referred to herein
as the "Additional Issuer Information") satisfying the requirements of
subsection (d)(4)(i) of Rule 144A under the Act;

         (h) To use reasonable efforts to cause the Notes to be eligible for the
PORTAL(TM) trading system of the National Association of Securities Dealers,
Inc. and to cause the Notes to be eligible for delivery through the facilities
of The Depository Trust Company;

         (i) To furnish to the holders of the Notes so long as any Notes are
outstanding, whether or not required by the Commission and within the time
periods specified in the Commission's rules and regulations, all quarterly and
annual financial information that the Company would have been required to file
with the Commission (a) on Forms 10-Q or 10-K if the Company were required to
file on such Forms, or (b) on Forms 6-K, 20-F or 40-F, including in each case a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report on the
annual financial statements by the Company's certified independent accountants;

         (j) During a period of two years from the effective date of the
Offering Circular, to furnish to you, as soon as practicably, copies of all
reports or other communications (financial or other) furnished to the Trustee or
the holders of the Notes, and to deliver to you (i) as soon as they are
available, copies of any reports and financial statements furnished to or filed
with the Commission or any securities exchange on which any class of securities
of the Company is listed; and (ii) such additional information concerning the
business and financial condition of the Company as you may from time to time
reasonably request;

         (k) During the period of two years after the Time of Delivery, the
Company will not, and will not permit any of its "Affiliates" (as defined in
Rule 144 under the Act) to, resell any of the Notes which constitute "restricted
securities" under Rule 144 that have been reacquired by any of them;

         (l) The Company shall file and use its reasonable efforts to cause to
be declared effective under the Act a registration statement relating to the
exchange offer or resale registration, as applicable, as described in the
Offering Circular and in accordance with the Registration Rights Agreement;

         (m) Not to solicit any offer to buy or sell the Notes by means of any
form of general solicitation or general advertising (as those terms are defined
in Regulation D under the Act), or by means of any directed selling efforts (as
defined in Rule 902 under the Act and the Commission's Release No. 33-6863) in
the United

                                       10
<PAGE>

States in connection with any Notes being offered and sold pursuant to
Regulation S, prior to the effectiveness of a registration statement described
in the preceding paragraph;

         (n) In connection with Notes offered and sold in an offshore
transaction (as defined in Regulation S), the Company will not register any
transfer of such Notes not made in accordance with the provisions of Regulation
S;

         (o) Not to take, directly or indirectly, any action which is designed
to or which constitutes or which might reasonably be expected to cause or result
in stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Notes;

         (p) To use the net proceeds received by it from the sale of the Notes
pursuant to this Agreement in the manner specified in the Offering Circular
under the caption "Use of Proceeds";

         (q) The Company will use its reasonable best efforts to do and perform
all things required to be done and performed by it under the Basic Documents
prior to or after the Time of Delivery and to satisfy all conditions precedent
on its part to the obligations of the Purchasers to purchase and accept delivery
of the Notes; and

         (r) During the period beginning from the date of this Agreement and
continuing to and including the Time of Delivery, the Company will not offer,
sell, contract to sell or otherwise dispose of any debt securities of the
Company which mature more than one year after the Time of Delivery and which are
substantially similar to the Notes, without the prior written consent of the
Purchasers.

         6. The Company covenants and agrees with the several Purchasers that
the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the issue of the Notes and all other expenses in connection with
the preparation, printing and filing of the Preliminary Offering Circular and
the Offering Circular and any amendments and supplements (including the Canadian
supplements) thereto and the mailing and delivering of copies thereof to the
Purchasers and dealers; (ii) the cost of printing or producing any Agreement
among Purchasers, this Agreement, the Indenture, the Registration Rights
Agreement, the Blue Sky and Legal Investment Memoranda, closing documents
(including any compilations thereof) and any other documents in connection with
the offering, purchase, sale and delivery of the Notes; (iii) all expenses in
connection with the qualification of the Notes for offering and sale under state
securities laws as provided in Section 5(b) hereof, including the fees and
disbursements of counsel for the Purchasers in connection with such
qualification and in connection with the Blue Sky and legal investment surveys;
(iv) all expenses and fees in connection with the issue and sale of the Notes on
a private placement basis pursuant to Canadian securities laws as required by
each Canadian provincial securities commission; (v) any fees charged by
securities rating services for rating the Notes; (vi) the cost of preparing the
Notes; (vii) the fees and expenses of the Trustee and any agent of the Trustee
and the fees and disbursements of counsel for the Trustee in connection with the
Indenture and the Notes; (viii) all expenses and taxes arising as a result of
the issuance, sale and delivery of the Notes, of the sale and delivery outside
of Canada of the Notes by the Purchasers to the initial purchasers thereof in
the manner contemplated under this Agreement, including, in any such case, any
Canadian income, capital gains, withholding, transfer or other tax asserted
against a Purchaser by reason of the purchase and sale of the Notes pursuant to
this Agreement; (ix) any costs incurred in connection with the designation of
the Notes for trading in PORTAL and (x) all other costs and expenses incident to
the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section. It is understood, however, that,
except as provided in this Section, and Sections 8 and 11 hereof, the Purchasers
will pay all of their own costs and expenses, including the fees of their
counsel,

                                       11
<PAGE>

transfer taxes on resale of any of the Notes by them, and any advertising
expenses connected with any offers they may make.

         7. The obligations of the Purchasers hereunder shall be subject, in
their discretion, to the condition that all representations and warranties and
other statements of the Company herein are, at and as of the Time of Delivery,
true and correct, the condition that the Company shall have performed all of its
obligations hereunder theretofore to be performed, and the following additional
conditions:

         (a) Skadden, Arps, Slate, Meagher & Flom LLP, United States counsel for
the Purchasers, shall have furnished to you such opinion or opinions, dated the
Time of Delivery, with respect to such matters as you may reasonably request,
and such counsel shall have received such papers and information as they may
reasonably request to enable them to pass upon such matters;

         (b) Shearman & Sterling LLP, United States counsel for the Company,
shall have furnished to you their written opinion, dated the Time of Delivery,
in form and substance satisfactory to you, to the effect that:

                  (i) Assuming the due authorization, execution and delivery of
         this Agreement by the Company under the laws of the Province of Alberta
         ("Alberta Laws") and the federal laws of Canada applicable therein
         ("Federal Canadian Law", and together with the Alberta Laws, "Canadian
         Law"), this Agreement (to the extent execution and delivery are
         governed by the laws of the State of New York), has been executed and
         delivered by the Company;

                  (ii) Assuming the due authorization, execution and delivery of
         the Indenture by the Company under Canadian Law, and assuming due
         authorization, execution, and delivery of the Indenture by the Trustee,
         the Indenture (to the extent execution and delivery are governed by the
         laws of the State of New York) has been executed and delivered by the
         Company and constitutes a valid and binding instrument of the Company,
         enforceable against the Company in accordance with its terms, subject,
         as to enforcement, as to the effect of any applicable bankruptcy,
         insolvency (including, without limitation, all laws relating to
         fraudulent transfers), reorganization, moratorium or similar laws
         affecting the enforcement of creditors' rights generally and subject to
         the effect of general principles of equity, including, without
         limitation, concepts of materiality, reasonableness, good faith and
         fair dealing (regardless of whether enforcement is considered in a
         proceeding in equity or at law);

                  (iii) Assuming the due authorization, execution and delivery
         of the Notes by the Company under Canadian Law, and assuming the due
         authentication of the Notes by the Trustee in the manner described in
         its certificate (which fact such counsel need not have determined by an
         inspection of the Notes), the Notes (to the extent execution and
         delivery are governed by the laws of the State of New York) have been
         executed and delivered and constitute valid and binding obligations of
         the Company, enforceable against the Company in accordance with their
         terms and entitled to benefits of the Indenture, subject, as to
         enforcement, as to the effect of any applicable bankruptcy, insolvency
         (including, without limitation, all laws relating to fraudulent
         transfers), reorganization, moratorium or similar laws affecting the
         enforcement of creditors' rights generally and subject to the effect of
         general principles of equity, including, without limitation, concepts
         of materiality, reasonableness, good faith and fair dealing (regardless
         of whether enforcement is considered in a proceeding in equity or at
         law);

                  (iv) Assuming the due authorization, execution and delivery of
         the Registration Rights Agreement by the Company under Canadian Law,
         the Registration Rights Agreement (to the extent execution and delivery
         are governed by the laws of the State of New York) has been executed

                                       12
<PAGE>

         and delivered by the Company and constitutes a valid and binding
         instrument of the Company, enforceable against the Company in
         accordance with its terms, subject, as to enforcement, as to the effect
         of any applicable bankruptcy, insolvency (including, without
         limitation, all laws relating to fraudulent transfers), reorganization,
         moratorium or similar laws affecting the enforcement of creditors'
         rights generally and subject to the effect of general principles of
         equity, including, without limitation, concepts of materiality,
         reasonableness, good faith and fair dealing (regardless of whether
         enforcement is considered in a proceeding in equity or at law) and
         subject to the further qualification that any rights to indemnity and
         contribution may be limited by federal and state securities laws and
         public policy considerations underlying such laws;

                  (v) The statements set forth in the Offering Circular under
         the caption (a) "Description of Notes", insofar as they purport to
         constitute a summary of the terms of the Notes, the Indenture and the
         Registration Rights Agreement described therein, fairly summarize such
         terms in all material respects, and (b) "Income Tax Considerations -
         U.S. Federal Income Tax Considerations", and "Plan of Distribution"
         insofar as they purport to summarize the provisions of the laws or
         documents referred to therein, fairly summarize such laws or documents
         in all material respects;

                  (vi) No consent, approval, authorization, order, registration
         or qualification of or with any United States federal of New York State
         court or governmental agency or body is required for the issue and sale
         of the Notes by the Company, the resale of the Notes by the Purchasers
         or the consummation by the Company of the transactions contemplated by
         the Purchase Agreement, the Indenture or the Registration Rights
         Agreement, except as required under the Securities Act and the Trust
         Indenture Act in connection with the Registration Rights Agreement and
         applicable state securities or blue sky laws;

                  (vii) The issuance, sale and delivery of the Notes to the
         Purchasers, pursuant to and in accordance with this Agreement, the
         execution, delivery and performance by the Company of this Agreement,
         the Registration Rights Agreement and the Indenture, the consummation
         by the Company of the transactions contemplated thereby and in the
         Offering Circular and the compliance by the Company with the terms of
         the foregoing (a) do not conflict with, or result in the acceleration
         of any obligation under or in a breach of, or constitute a default
         under, any of the provisions of the Indenture, dated as of May 13, 1998
         between the Company and IBJ Schroder Bank & Trust Company, as trustee,
         as supplemented by the First Supplemental Indenture to be dated on or
         before the Date of Delivery between the Company and the Trustee,
         relating to the Company's US$160,000,000 of aggregate principal amount
         9 7/8% Senior Notes due 2008, or (b) contravene any United States
         federal or New York law, rule or regulation applicable to the Company,
         or any order identified to us by the Company applicable to the Company
         of any United States federal or New York State court, governmental body
         or instrumentality having jurisdiction over the Company or any of its
         property (it being understood that for the purpose of the opinion in
         this paragraph (vii), we are not passing upon compliance with respect
         to antifraud or similar provisions of any law, rule or regulation).

                  (viii) Assuming (a) the accuracy of and compliance with the
         representations, warranties and covenants of the Company in this
         Agreement and (b) the accuracy of and compliance with the
         representations, warranties and covenants of the Purchasers in the
         Purchase Agreement, no registration of the Notes under the Act and no
         qualification of an indenture under the Trust Indenture Act with
         respect thereto, is required in connection with the offer, sale and
         delivery of the Notes to the Purchasers and the initial resale of the
         Notes by the Purchasers in the manner contemplated by this Agreement
         and the Offering Circular;

                                       13
<PAGE>

                  (ix) Assuming the due authorization, execution and delivery of
         this Agreement, the Indenture and the Registration Rights Agreement by
         the Company under Canadian Law, the submission by the Company to the
         non-exclusive jurisdiction of the courts of the State of New York
         pursuant to Section 14 of this Agreement, pursuant to Section 12.13 of
         the Indenture and Section 9(l) of the Registration Rights Agreement is
         effective, and the appointment of the Authorized Agent (as defined
         herein) for service of process pursuant to Section 14 of this
         Agreement, Section 12.13 of the Indenture and Section 9(l) of the
         Registration Rights Agreement is binding on the Company. Such counsel
         shall note that a court of the State of New York or the United States
         of America sitting in New York County has the power to decline to hear
         an action based on this Agreement, the Indenture or the Registration
         Rights Agreement on the ground that the State of New York is an
         inconvenient forum;

                  (x) The Company is not or, after giving effect to the offering
         and sale of the Notes, will not be required to be registered as an
         "investment company", as such term is defined in the Investment Company
         Act.

In addition, such counsel has no reason to believe that the Offering Circular,
dated the date hereof, (other than the financial statements and other financial
data included therein or omitted therefrom, as to which such counsel has not
been requested to comment), as of its date or the Date of Delivery, contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.

         (c) Fraser Milner Casgrain LLP, Canadian counsel for the Company, shall
have furnished to you their written opinion, dated the Time of Delivery, in form
and substance satisfactory to you, to the effect that:

                  (i) The Company has been duly incorporated and is validly
         existing as a corporation under the laws of the Province of Alberta and
         has all corporate power and authority necessary to own or lease its
         properties and conduct the business as described in the Offering
         Circular. The Company is duly qualified to do business as a foreign or
         extra-provincial corporation in all other jurisdictions where the
         ownership or leasing of its properties or the conduct of its business
         requires such qualification, or is subject to no material liability or
         disability by reason of the failure to be so qualified in any such
         jurisdiction;

                  (ii) The Company has an authorized capitalization as set forth
         in the Offering Circular, and all of the issued shares in the capital
         of the Company have been duly and validly authorized and issued, are
         fully paid and non-assessable, were not issued in violation of any
         pre-emptive or similar rights and are registered in the name of Millar
         Western Industries Ltd., a corporation established under the laws of
         the Province of Alberta; to the best of such counsel's knowledge, the
         Company does not own, directly or indirectly, any capital stock or
         other equity or long-term debt securities of or have any equity
         interest in any other person (except for an equity ownership of Interex
         Forest Products Ltd. which counsel has been advised represents 17% of
         the outstanding equity), and, except as set forth in the Offering
         Circular, no options, warrants or other rights to purchase from the
         Company, agreements or other obligations of the Company to issue or
         other rights to convert any obligation into, or exchange any securities
         for, common shares in the capital of or ownership interests in the
         Company are outstanding; and to the best of our knowledge, except as
         set forth in the Offering Circular, there is no agreement,
         understanding or arrangement among the Company and any of its
         shareholders or any other person relating to the ownership or
         disposition of any common shares in the capital of the Company or the
         election of directors of the Company or the governance of the Company's
         affairs;

                                       14
<PAGE>

                  (iii) Based upon and relying upon the certified copies of
         certificates of title issued by the Registrar of the North Alberta Land
         Registration District, to be dated November 21, 2003 (the "Titles"),
         copies of which are attached to this letter, the Company is the
         registered owner in fee simple of the lands described in the Titles
         (the "Lands"), free and clear of all liens, encumbrances and defects
         except for: (a) the liens, encumbrances and defects that are noted on
         the Titles; and (b) the implied conditions contained in Section 61(1)
         of the Land Titles Act, R.S.A. 2000, c.L-4, and, to the best of such
         counsel's knowledge, the Company is the beneficial owner in fee simple
         of the Lands;

                  (iv) To the best of such counsel's knowledge and other than as
         set forth in the Offering Circular, there are no legal or governmental
         proceedings pending to which the Company is a party or of which any
         property of the Company is the subject which could individually or in
         the aggregate reasonably be expected to result in a Material Adverse
         Effect; and, to the best of such counsel's knowledge, no such
         proceedings are threatened or contemplated by governmental authorities
         or threatened by others;

                  (v) This Agreement has been duly authorized by the Company and
         (to the extent execution and delivery are governed by Canadian Law)
         executed and delivered by the Company;

                  (vi) The Notes have been duly authorized by the Company and
         (to the extent execution and delivery are governed by Canadian Law)
         executed, authenticated, issued and delivered by the Company;

                  (vii) The Registration Rights Agreement has been duly
         authorized by the Company and (to the extent execution and delivery are
         governed by Canadian Law) executed and delivered by the Company;

                  (viii) The Indenture has been duly authorized by the Company
         and (to the extent execution and delivery are governed by Canadian Law)
         executed and delivered by the Company;

                  (ix) The Indenture and the issuance of the Notes thereunder
         are exempt from the Business Corporations Act (Alberta) pursuant to a
         determination of the Alberta Securities Commission obtained under the
         provisions of the Business Corporations Act (Alberta); and no
         registration, filing or recording of the Indenture under the federal
         laws of Canada or the laws of the Province of Alberta is necessary in
         order to preserve or protect the validity or enforceability of the
         Indenture or the Notes issued thereunder;

                  (x) None of the issue and sale of the Notes, the resale of the
         Notes by the Purchasers in accordance with the terms of this Agreement,
         the execution and delivery of the Indenture, the Registration Rights
         Agreement and this Agreement, and the compliance by the Company with
         all of the provisions of the Basic Documents and the consummation of
         the transactions herein and therein contemplated will conflict with or
         result in a breach or violation of any of the terms or provisions of,
         or constitute a default under, any of the agreements or instruments
         identified in Schedule A (collectively, the "MATERIAL AGREEMENTS") to
         the Company's Officer's Certificate prepared in support of such
         counsel's opinion and delivered in draft form to counsel for the
         Purchasers prior to the execution of this Agreement nor will such
         actions result in any violation of the provisions of its articles of
         incorporation (or any other constituent documents) and by-laws of the
         Company or, to the best of such counsel's knowledge, any consent,
         approval, authorization, order, registration, clearance or
         qualification of or with any court, central bank, stock exchange or
         governmental agency or body in Canada;

                                       15
<PAGE>

                  (xi) To the best of such counsel's knowledge, the Company
         possesses all licenses, permits, certificates, consents, orders,
         approvals and other authorizations from, and has made all declarations
         and filings with, all governmental authorities, all self-regulatory
         organizations and all courts and other tribunals of Canada and the
         Province of Alberta, presently required or necessary to own or lease,
         as the case may be, and to operate its respective properties and to
         carry on its business as now or proposed to be conducted as set forth
         in the Offering Circular ("Permits"), except where the failure to
         obtain such Permits would not, individually or in the aggregate, result
         in a Material Adverse Effect; and to the best of such counsel's
         knowledge, the Company has fulfilled and performed all of its
         obligations with respect to such Permits and no event has occurred
         which allows, or after notice or lapse of time would allow, revocation
         or termination thereof, except as disclosed in the Offering Circular,
         or results in any other material impairment of the rights of the holder
         of any such Permit;

                  (xii) No consent, approval, authorization, order,
         registration, clearance or qualification of or with any court, central
         bank, stock exchange or governmental agency or body in Canada is
         required for the issue and sale of the Notes, the resale of the Notes
         by the Purchasers or the consummation by the Company of the
         transactions contemplated by this Agreement, the Registration Rights
         Agreement or the Indenture, except for: (a) any filings required by
         Canadian Law in connection with the exemptions from the prospectus
         requirements of such laws; and (b) as may be required to be obtained or
         made to exempt the Indenture from the applicable Canadian Law relating
         to trust indentures in connection with the purchase and distribution of
         the Notes by the Purchasers;

                  (xiii) It is not necessary in connection with the offer, sale
         and delivery of the Notes to the Purchasers under this Agreement or in
         connection with the initial resale of the Notes by the Purchasers to
         qualify the distribution of the Notes by way of prospectus under
         applicable securities laws of Canada or the Province of Alberta
         assuming such securities are sold in accordance with the Offering
         Circular, it being understood that no opinion is expressed as to any
         subsequent resale of any of the Notes;

                  (xiv) To the best of such counsel's knowledge, the Company is
         not in violation of the provisions of its articles of incorporation (or
         any other constituent documents) and by-laws or in default in the
         performance or observance of any material obligation, covenant or
         condition contained in any of the Material Agreements;

                  (xv) The statements set forth in the Offering Circular under
         the captions "Risk Factors -- Risks Related to the Notes -- Your
         ability to enforce civil liabilities in Canada under U.S. securities
         laws may be limited", "Description of the Notes -- Enforceability of
         Judgments" and "Income Tax Considerations -- Canadian Federal Income
         Tax Considerations", insofar as they purport to describe the provisions
         of the federal laws of Canada or the laws of the Province of Alberta,
         and under the captions "Related Party Transactions" and "Description of
         Our Revolving Credit Facility", insofar as they purport to describe the
         provisions of the laws and documents referred to therein, are accurate,
         fair and complete;

                  (xvi) No stamp or other issuance, goods and services or
         transfer taxes or duties and no capital gains, income, withholding or
         other taxes are payable by or on behalf of the Purchasers to the
         Canadian federal government or to the Province of Alberta in connection
         with (A) the issuance, sale and delivery by the Company of the Notes to
         or for the respective accounts of the Purchasers or (B) the sale and
         delivery outside Canada by the Purchasers of the Notes to the initial
         purchasers thereof in the manner contemplated in this Agreement,
         provided that such Purchasers are neither residents nor deemed to be
         residents of Canada for purposes of the Income Tax Act (Canada) (the
         "TAX ACT"), deal at arm's length

                                       16
<PAGE>

         with the Company and each of its subsidiaries for purposes of the Tax
         Act and do not use or hold and are not deemed to use or hold the Notes
         in carrying on business in Canada for the purposes of the Tax Act and
         further provided that the Notes are not "taxable Canadian property" (as
         defined in the Tax Act) of the Purchasers;

                  (xvii) No withholding tax imposed under the federal laws of
         Canada or the laws of the Province of Alberta will be payable in
         respect of the payment or crediting of the commissions contemplated by
         this Agreement by the Company to a Purchaser that is not a resident of
         Canada for the purposes of the Tax Act, or on any interest or deemed
         interest on the resale of Notes by a Purchaser to U.S. residents
         provided that the Purchaser deals at arm's length with the Company (as
         such term is understood for purposes of the Tax Act), and that such
         commissions are payable in respect of services rendered by the
         Purchaser wholly outside of Canada that are performed in the ordinary
         course of business carried on by the Purchaser that includes the
         performance of such services for a fee, and only to the extent such
         commissions are reasonable in the circumstances;

                  (xviii) No goods and services tax imposed under the federal
         laws of Canada or provincial transfer taxes under the laws of the
         Province of Alberta will be payable by the Company or collectable by a
         Purchaser in respect of the payment of commissions as contemplated by
         this Agreement to a Purchaser that is a non-resident of Canada,
         provided that such commissions are in respect of services performed by
         a Purchaser wholly outside of Canada;

                  (xix) A court of competent jurisdiction in the Province of
         Alberta (an "Alberta Court") would give effect to the choice of the law
         of the State of New York ("New York law") as the proper law governing
         this Agreement, the Registration Rights Agreement, the Indenture and
         the Notes, provided that such choice of law is bona fide (in the sense
         that it was not made with a view to avoiding the consequences of the
         laws of any other jurisdiction) and provided that such choice of law is
         not contrary to public policy as that term is applied by an Alberta
         Court ("Public Policy"). In such counsel's opinion, there are no
         reasons under Alberta Law for avoiding the choice of New York law to
         govern this Agreement, the Registration Rights Agreement, the Indenture
         and the Notes;

                  (xx) In an action on a final and conclusive judgment in
         personam of any federal or state court in the State of New York (a "New
         York Court") that is not impeachable as void or voidable under New York
         law for a sum certain, an Alberta Court would give effect to the
         appointment by the Company of CT Corporation System as its agent to
         receive service of process in the United States of America under this
         Agreement, the Registration Rights Agreement, and the Indenture and to
         the provisions in this Agreement, the Registration Rights Agreement,
         and the Indenture in the sense that the Alberta Court would recognize
         that the New York Court had jurisdiction over the Company for the
         purpose of paragraph (xxi) below. The Company has the power (corporate
         or other) to submit and has taken all necessary action (corporate or
         other) to submit to the non-exclusive jurisdiction of a New York Court;

                  (xxi) If this Agreement, the Registration Rights Agreement,
         the Indenture or the Notes are sought to be enforced in the Province of
         Alberta in accordance with the laws applicable thereto as chosen by the
         parties, namely New York law, an Alberta Court would, subject to
         paragraph (xx) above, recognize the choice of New York law and, upon
         appropriate evidence as to such law being adduced as a fact by expert
         evidence, apply such law to all issues that under the conflict of laws
         rules of an Alberta Court are to be determined in accordance with the
         proper or general law of contract, provided that none of the provisions
         of this Agreement, the Registration Rights Agreement, the Indenture or
         the Notes, or

                                       17
<PAGE>

         of applicable New York law, are contrary to Public Policy, provided,
         however, that, in matters of procedure, Alberta Law will be applied,
         and an Alberta Court will retain discretion to decline to hear such
         action if it is contrary to Public Policy for it to do so, or if it is
         not the proper forum to hear such an action, or if concurrent
         proceedings are being brought elsewhere or if it characterizes the New
         York law as being of a revenue, penal or public law in nature;

                  (xxii) Alberta Law permits an action to be brought in an
         Alberta Court on a final and conclusive judgment in personam of a New
         York Court that is subsisting and unsatisfied respecting the
         enforcement of this Agreement, the Indenture or the Notes, that is not
         impeachable as void or voidable under New York law and that is for a
         sum certain if: (A) the New York Court that rendered such judgment had
         jurisdiction over the judgment debtor, as recognized by an Alberta
         Court (and submission by the Company in this Agreement and the
         Indenture to the jurisdiction of the New York Court will be deemed
         sufficient for such purpose); (B) such judgment was not obtained by
         fraud or in a manner contrary to natural justice and the enforcement
         thereof would not be inconsistent with Public Policy or contrary to any
         order made by the Attorney General of Canada under the Foreign
         Extraterritorial Measures Act (Canada) or the Competition Tribunal
         under the Competition Act (Canada) in respect of certain judgments,
         laws and directives having effects on competition in Canada; (C) the
         enforcement of such judgment in Canada does not constitute, directly or
         indirectly, the enforcement of foreign revenue, expropriatory or penal
         laws; (D) no new admissible evidence relevant to the action is
         discovered prior to the rendering of judgment by an Alberta Court; and
         (E) the action to enforce such judgment is commenced within the
         applicable limitations period, except that an Alberta Court may stay an
         action to enforce a foreign judgment if an appeal is pending or the
         time for appeal has not expired; provided that the enforceability of
         such judgment may be limited by applicable bankruptcy, insolvency,
         fraudulent conveyance, reorganization and other similar laws affecting
         creditors' rights generally and provided that under the Currency Act
         (Canada), a Canadian Court may only give judgment in Canadian dollars
         and, subject to the Alberta Court's equitable discretion, the amount
         payable in U.S. dollars under an order of the New York Court which is
         enforceable in Alberta will be converted, for the purpose of payment
         under an order by the Alberta Court, into Canadian dollars on the basis
         of the rate of exchange prevailing on the date of the breach of duty,
         contractual right or obligation;

                  (xxiii) Such counsel has no reason to believe that the Alberta
         Courts would consider the enforcement of a judgment given by a court of
         competent jurisdiction for payment of principal, interest and premium,
         if any, under the Notes to be inconsistent with Public Policy or
         constitute, directly or indirectly, the enforcement of foreign revenue,
         expropriatory or penal laws;

                  (xxiv) The form of global certificate representing the Notes
         has been duly approved and adopted by the Company and complies with the
         applicable provisions of the Business Corporations Act (Alberta)
         relating thereto;

                  (xxv) No consent, approval, authorization, order,
         registration, clearance or qualification of or with any court, central
         bank, stock exchange or governmental agency or body in Canada is
         required to effect payments of principal, premium, if any, and interest
         on the Notes; and

                  (xxvi) Such counsel have no reason to believe that the
         Offering Circular and any further amendments or supplements thereto
         made by the Company prior to the Time of Delivery (other than the
         financial statements and other financial data included therein or
         omitted therefrom, as to which such counsel have not been requested to
         comment), contained as of its date or contains as of the Time of
         Delivery an untrue statement of a material fact or omitted or omits, as
         the case may be, to state a

                                       18
<PAGE>

         material fact necessary in order to make the statements made therein,
         in the light of the circumstances under which they were made, not
         misleading;

         (d) On the date of the Offering Circular prior to the execution of this
Agreement and also at the Time of Delivery, PricewaterhouseCoopers LLP shall
have furnished to you a letter or letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to you, to the effect set
forth in Annex II hereto;

         (e) (i) The Company has not sustained since the date of the latest
financial statements included in the Offering Circular any loss or interference
with its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the Offering
Circular, and (ii) since the respective dates as of which information is given
in the Offering Circular there shall not have been, in the sole judgment of
Goldman, Sachs & Co., any event or development, and no information shall have
become known, that, individually or in the aggregate, has resulted or would
result in a Material Adverse Effect, otherwise than as set forth or contemplated
in the Offering Circular, the effect of which, in any such case described in
clause (i) or (ii), is in the judgment of the Purchasers so material and adverse
as to make it impracticable or inadvisable to proceed with the offering or the
delivery of the Notes on the terms and in the manner contemplated in the
Offering Circular;

         (f) On or after the date hereof (i) no downgrading shall have occurred
in the rating accorded the Company's debt securities by any "nationally
recognized statistical rating organization", as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such
organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any of the Company's
debt securities;

         (g) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange (the "NYSE"), the NASDAQ National
Market ("NASDAQ") or the Toronto Stock Exchange (the "TSX"); (ii) a general
moratorium on commercial banking activities in New York or Canada declared by
the relevant authorities or a material disruption in commercial banking or
securities settlement or clearance services in the United States; (iii) a change
or development involving a prospective change in Canadian taxation affecting the
Company, the Notes or the transfer thereof or the imposition of exchange
controls by the United States or Canada; (iv) the outbreak or escalation of
hostilities involving the United States or Canada or the declaration by the
United States or Canada of a national emergency or war or (v) the occurrence of
any other calamity or crisis or any change in financial, political or economic
conditions or currency exchange rates or controls in the United States or
Canada, if the effect of any such event specified in these clauses (iv) or (v)
in the judgment of Goldman, Sachs & Co. makes it impracticable or inadvisable to
proceed with the offering or the delivery of the Notes on the terms and in the
manner contemplated in the Offering Circular;

         (h) On or before the Date of Delivery, the Purchasers shall have
received an amendment to the Credit Facility as defined in and upon the terms as
described in the Offering Memorandum under "Description of Our Revolving Credit
Facility" and such agreement, as amended shall be in full force and effect at
all times from and after the Date of Delivery. All conditions with respect to
the closing of the amendment to the Credit Facility shall have occurred and
there shall exist at and as of the Date of Delivery no condition that would
constitute a default (or an event that, with notice or lapse of time, or both,
would constitute a default) under the Credit Facility;

                                       19
<PAGE>

         (i) The Company shall have furnished or caused to be furnished to you
at the Time of Delivery certificates of officers of the Company reasonably
satisfactory to you as to the accuracy of the representations and warranties of
the Company herein at and as of such Time of Delivery, as to the performance by
the Company of all of its obligations hereunder to be performed at or prior to
such Time of Delivery, as to the matters set forth in subsections (e) and (f) of
this Section and as to such other matters as you may reasonably request; and

         (j) On or before the Time of Delivery, the Purchasers shall have
received the Registration Rights Agreement, substantially in the form of Annex
III hereto, duly executed by the Company and such agreement shall be in full
force and effect at all times from and after the Time of Delivery.

         8. (a) The Company will indemnify and hold harmless each Purchaser
against any losses, claims, damages or liabilities, joint or several, to which
such Purchaser may become subject, under the Act, Canadian securities
legislation or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Offering Circular or the Offering Circular, or any amendment or
supplement thereto (including any Canadian supplement), or arise out of or are
based upon the omission or alleged omission to state therein a material fact
necessary to make the statements therein not misleading, and will reimburse each
Purchaser for any legal or other expenses reasonably incurred by such Purchaser
in connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any Preliminary Offering Circular or the
Offering Circular or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Purchaser
through Goldman, Sachs & Co. expressly for use therein;

         (b) Each Purchaser will indemnify and hold harmless the Company against
any losses, claims, damages or liabilities to which the Company may become
subject, under the Act, Canadian securities legislation or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Offering Circular or the
Offering Circular, or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in any Preliminary Offering
Circular or Offering Circular or any such amendment or supplement in reliance
upon and in conformity with written information furnished to the Company by such
Purchaser through Goldman, Sachs & Co. expressly for use therein; and will
reimburse the Company for any legal or other expenses reasonably incurred by the
Company in connection with investigating or defending any such action or claim
as such expenses are incurred;

         (c) Promptly after receipt by an indemnified party under subsection
8(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under subsection (a) or (b) hereof. In case
any such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such

                                       20
<PAGE>

indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and, after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under such subsection for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such indemnified party, in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written consent of the
indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (ii) does not include a statement as to, or an
admission of, fault, culpability or a failure to act, by or on behalf of any
indemnified party, and, no indemnified party shall effect the settlement or
compromise of, or consent to the entry of any judgment with respect to any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder without the consent of the indemnifying
party from which indemnification or contribution may be sought, which consent
shall not be unreasonably withheld;

         (d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Purchasers on
the other from the offering of the Notes. If, however, the allocation provided
by the immediately preceding sentence is not permitted by applicable law or if
the indemnified party failed to give the notice required under subsection (c)
above, then each indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company on the one hand and the Purchasers on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Purchasers on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total commissions received by the
Purchasers, in each case as set forth in this Agreement. The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company on the
one hand or the Purchasers on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Purchasers agree that it would not be
just and equitable if contribution pursuant to this subsection (d) were
determined by pro rata allocation (even if the Purchasers were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Purchaser shall be required to contribute
any amount in excess of the amount by which the total price at which the Notes
underwritten by it and distributed to investors were offered to investors
exceeds the amount of any damages which such Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. The Purchasers' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint; and

                                       21
<PAGE>

         (e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Purchaser within the meaning of the Act; and the obligations of the Purchasers
under this Section 8 shall be in addition to any liability which the respective
Purchasers may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each person, if
any, who controls the Company within the meaning of the Act.

         9. (a) If any Purchaser shall default in its obligation to purchase the
Notes which it has agreed to purchase hereunder, you may in your discretion
arrange for you or another party or other parties to purchase such Notes on the
terms contained herein. If within thirty-six hours after such default by any
Purchaser you do not arrange for the purchase of such Notes, then the Company
shall be entitled to a further period of thirty-six hours within which to
procure another party or other parties satisfactory to you to purchase such
Notes on such terms. In the event that, within the respective prescribed
periods, you notify the Company that you have so arranged for the purchase of
such Notes, or the Company notifies you that it has so arranged for the purchase
of such Notes, you or the Company shall have the right to postpone the Time of
Delivery for a period of not more than seven days, in order to effect whatever
changes may thereby be made necessary in the Offering Circular, or in any other
documents or arrangements, and the Company agrees to prepare promptly any
amendments to the Offering Circular which in your opinion may thereby be made
necessary. The term "Purchaser" as used in this Agreement shall include any
person substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Notes;

         (b) If, after giving effect to any arrangements for the purchase of the
Notes of a defaulting Purchaser or Purchasers by you and the Company as provided
in subsection (a) above, the aggregate principal amount of such Notes which
remains unpurchased does not exceed one-eleventh of the aggregate principal
amount of all the Notes, then the Company shall have the right to require each
non-defaulting Purchaser to purchase the principal amount of Notes which such
Purchaser agreed to purchase hereunder and, in addition, to require each
non-defaulting Purchaser to purchase its pro rata share (based on the principal
amount of Notes which such Purchaser agreed to purchase hereunder) of the Notes
of such defaulting Purchaser or Purchasers for which such arrangements have not
been made; but nothing herein shall relieve a defaulting Purchaser from
liability for its default; and

         (c) If, after giving effect to any arrangements for the purchase of the
Notes of a defaulting Purchaser or Purchasers by you and the Company as provided
in subsection (a) above, the aggregate principal amount of Notes which remains
unpurchased exceeds one-eleventh of the aggregate principal amount of all the
Notes, or if the Company shall not exercise the right described in subsection
(b) above to require non-defaulting Purchasers to purchase Notes of a defaulting
Purchaser or Purchasers, then this Agreement shall thereupon terminate, without
liability on the part of any non-defaulting Purchaser or the Company, except for
the expenses to be borne by the Company and the Purchasers as provided in
Section 6 hereof and the indemnity and contribution agreements in Section 8
hereof; but nothing herein shall relieve a defaulting Purchaser from liability
for its default.

         10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Purchasers, as set forth in
this Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Purchaser or any controlling person of any Purchaser, or the Company, or
any officer or director or controlling person of the Company, and shall survive
delivery of and payment for the Notes.

                                       22
<PAGE>

         11. If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company shall not then be under any liability to any Purchaser except as
provided in Sections 6 and 8 hereof; but, if for any other reason, the Notes are
not delivered by or on behalf of the Company as provided herein, the Company
will reimburse the Purchasers through you for all out-of-pocket expenses
approved in writing by you, including fees and disbursements of U.S. and
Canadian legal counsel, reasonably incurred by the Purchasers in making
preparations for the purchase, sale and delivery of the Notes, but the Company
shall then be under no further liability to any Purchaser except as provided in
Sections 6 and 8 hereof.

         12. In all dealings hereunder, you shall act on behalf of each of the
Purchasers, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Purchaser made or given
by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representative.

         All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Purchasers shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the Offering
Circular, Attention: Chief Financial Officer; provided, however, that any notice
to a Purchaser pursuant to Section 8(c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Purchaser at its address set forth
in its Purchasers' Questionnaire, or telex constituting such Questionnaire,
which address will be supplied to the Company by you upon request. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.

         13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Purchasers, the Company and, to the extent provided in Sections
8 and 10 hereof, the officers and directors of the Company and each person who
controls the Company or any Purchaser, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Notes from any Purchaser shall be deemed a successor or assign by reason merely
of such purchase.

         14. The Company irrevocably (i) agrees that any legal suit, action or
proceeding against the Company brought by any Purchaser or by any person who
controls any Purchaser arising out of or based upon this Agreement or the
transactions contemplated hereby may be instituted in any New York Court, (ii)
waives, to the fullest extent it may effectively do so, any objection which it
may now or hereafter have to the laying of venue of any such proceeding and
(iii) submits to the non-exclusive jurisdiction of such courts in any such suit,
action or proceeding. The Company has appointed CT Corporation System, 111
Eighth Avenue, New York, New York, 10011 as its authorized agent (the
"Authorized Agent") upon whom process may be served in any such action arising
out of or based on this Agreement or the transactions contemplated hereby which
may be instituted in any New York Court by any Purchaser or by any person who
controls any Purchaser, expressly consents to the jurisdiction of any such court
in respect of any such action, and waives any other requirements of or
objections to personal jurisdiction with respect thereto. Such appointment shall
be irrevocable. The Company represents and warrants that the Authorized Agent
has agreed to act as such agent for service of process and agrees to take any
and all action, including the filing of any and all documents and instruments,
that may be necessary to continue such appointment in full force and effect as
aforesaid. Service of process upon the Authorized Agent and written notice of
such service to the Company shall be deemed, in every respect, effective service
of process upon the Company.

         15. In respect of any judgment or order given or made for any amount
due hereunder that is expressed and paid in a currency (the "judgment currency")
other than United States dollars, the Company will

                                       23
<PAGE>

indemnify each Purchaser against any loss incurred by such Purchaser as a result
of any variation as between (i) the rate of exchange at which the United States
dollar amount is converted into the judgment currency for the purpose of such
judgment or order and (ii) the rate of exchange at which an Purchaser is able to
purchase United States dollars with the amount of judgment currency actually
received by such Purchaser. The foregoing indemnity shall constitute a separate
and independent obligation of the Company and shall continue in full force and
effect notwithstanding any such judgment or order as aforesaid. The term "rate
of exchange" shall include any premiums and costs of exchange payable in
connection with the purchase of or conversion into United States dollars.

         16. Time shall be of the essence of this Agreement.

         17. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.

         18. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such respective counterparts shall together constitute one and
the same instrument.

         19. The Company is authorized, subject to applicable law, to disclose
any and all aspects of this potential transaction that are necessary to support
any U.S. federal income tax benefits expected to be claimed with respect to such
transaction, and all materials of any kind (including tax opinions and other tax
analyses) related to those benefits, without the Purchasers imposing any
limitation of any kind.

                                       24
<PAGE>

         If the foregoing is in accordance with your understanding, please sign
and return to us counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Purchasers, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Purchasers and the Company.
It is understood that your acceptance of this letter on behalf of each of the
Purchasers is pursuant to the authority set forth in a form of Agreement among
Purchasers, the form of which shall be submitted to the Company for examination
upon request, but without warranty on your part as to the authority of the
signers thereof.

                                       Very truly yours,

                                       Millar Western Forest Products Ltd.

                                       By:  /s/ H. MacKenzie Millar
                                            ------------------------------------
                                            Name:   H. MacKenzie Millar
                                            Title:  President, Chief
                                                    Executive Officer

                                       By:  /s/ Joseph R. Concini
                                            ------------------------------------
                                            Name:   Joseph R. Concini
                                            Title:  Chief Financial Officer

Accepted as of the date hereof:

Goldman, Sachs & Co.
CIBC World Markets Corp.
Harris Nesbitt Corp.
HSBC Securities (USA) Inc.

By:  /s/ Goldman, Sachs & Co.
     -----------------------------------
           (Goldman, Sachs & Co.)

     On behalf of each of the Purchasers

                                       25
<PAGE>

                                   SCHEDULE I

<TABLE>
<CAPTION>
                                                                     PRINCIPAL
                                                                     AMOUNT OF
                                                                       NOTES
                                                                       TO BE
                                  PURCHASER                          PURCHASED

<S>                                                               <C>
Goldman, Sachs & Co.............................................  US$133,000,000
CIBC World Markets Corp.........................................      19,000,000
Harris Nesbitt Corp. ...........................................      19,000,000
HSBC Securities (USA) Inc. .....................................      19,000,000
      TOTAL.....................................................  US$190,000,000
</TABLE>

                                       26
<PAGE>

                                                                         ANNEX I

         (1) The Notes have not been and will not be registered under the Act
and may not be offered or sold within the United States or to, or for the
account or benefit of, U.S. persons except in accordance with Regulation S under
the Act or pursuant to an exemption from the registration requirements of the
Act. Each Purchaser represents that it has offered and sold the Notes, and will
offer and sell the Notes (i) as part of their distribution at any time and (ii)
otherwise until 40 days after the later of the commencement of the offering and
the Time of Delivery, only in accordance with Rule 903 of Regulation S or Rule
144A under the Act. Accordingly, each Purchaser agrees that neither it, its
affiliates nor any persons acting on its or their behalf has engaged or will
engage in any directed selling efforts with respect to the Notes, and it and
they have complied and will comply with the offering restrictions requirement of
Regulation S. Each Purchaser agrees that, at or prior to confirmation of sale of
Notes (other than a sale pursuant to Rule 144A), it will have sent to each
distributor, dealer or person receiving a selling concession, fee or other
remuneration that purchases Notes from it during the restricted period a
confirmation or notice to substantially the following effect:

                  "The Securities covered hereby have not been registered under
         the U.S. Securities Act of 1933 (the "Securities Act") and may not be
         offered and sold within the United States or to, or for the account or
         benefit of, U.S. persons (i) as part of their distribution at any time
         or (ii) otherwise until 40 days after the later of the commencement of
         the offering and the closing date, except in either case in accordance
         with Regulation S (or Rule 144A if available) under the Securities Act.
         Terms used above have the meaning given to them by Regulation S."

Terms used in this paragraph have the meanings given to them by Regulation S.

         Each Purchaser further agrees that it has not entered and will not
enter into any contractual arrangement with respect to the distribution or
delivery of the Notes, except with its affiliates or with the prior written
consent of the Company.

         (2) Notwithstanding the foregoing, Notes in registered form may be
offered, sold and delivered by the Purchasers in the United States and to U.S.
persons pursuant to Section 3 of this Agreement without delivery of the written
statement required by paragraph (1) above.

         (3) Each Purchaser agrees that it will not offer, sell or deliver any
of the Notes in any jurisdiction outside the United States except under
circumstances that will result in compliance with the applicable laws thereof,
and that it will take at its own expense whatever action is required to permit
its purchase and resale of the Notes in such jurisdictions. Each Purchaser
understands that no action has been taken to permit a public offering in any
jurisdiction outside the United States where action would be required for such
purpose. Each Purchaser agrees not to cause any advertisement of the Notes to be
published in any newspaper or periodical or posted in any public place and not
to issue any circular relating to the Notes, except in any such case with
Goldman, Sachs & Co.'s express written consent and then only at its own risk and
expense.

<PAGE>

                                                                        ANNEX II

PURSUANT TO SECTION 7(d) OF THE PURCHASE AGREEMENT, THE ACCOUNTANTS SHALL
FURNISH THE FOLLOWING LETTER TO THE PURCHASERS, TO THE EFFECT THAT:

                   [Letterhead of PricewaterhouseCoopers LLP]

We have audited the financial statements of Millar Western Forest Products Ltd.
(the "Company") as of December 31, 2002 and 2001 and for each of the years in
the three year period ended December 31, 2002 included in the offering
memorandum dated November 7, 2003 (the "Offering Memorandum") relating to the
sale of US$190,000,000 of Senior Notes due November 15, 2013. Our report dated
February 21, 2003 with respect thereto is also included in the Offering
Memorandum.

This letter is being furnished in reliance upon your representation to us that:

(a)      You are knowledgeable with respect to the due diligence review process
         that would be performed if this placement of securities were being
         registered pursuant to the Securities Act of 1933 (the Act); and

(b)      In connection with the offering of the Senior Notes, the review process
         you have performed is substantially consistent with the due diligence
         review process that you would have performed if this placement of
         securities were being registered pursuant to the Act.

         In connection with the Offering Memorandum we confirm that:

         1.       We are the auditors of the Company and are objective within
                  the meaning of the Rules of Professional Conduct of the
                  Institute of Chartered Accountants of Alberta and are
                  independent with respect to the Company within the meaning of
                  the Act and the applicable rules and regulations adopted by
                  the Securities and Exchange Commission. ("SEC").

         2.       In our opinion, the financial statements audited by us and
                  included in the Offering Memorandum comply in all material
                  respects with the applicable accounting requirements of the
                  Act and the related rules and regulations adopted by the SEC.

         3.       We have not audited any financial statements of the Company as
                  of any date or for any period subsequent to December 31, 2002.
                  Although we have conducted an audit for the year ended
                  December 31, 2002, the purpose (and therefore the scope) of
                  the audit was to enable us to express an opinion on the
                  financial statements as of December 31, 2002 and for the year
                  then ended, but not on the financial statements for any
                  interim period within that year. Therefore, we are unable to
                  and do not express any opinion on the unaudited consolidated
                  balance sheet as at September 30, 2003, and the unaudited
                  statements of earnings, retained earnings and cash flows for
                  the nine-month periods ended September 30, 2003 and 2002
                  included in the Offering Memorandum, or on the financial
                  position, results of operations, or cash flows as of any date
                  or for any period subsequent to December 31, 2002.

         4.       For purposes of this letter we have read the 2003 minutes of
                  the meetings of the shareholder, the Board of Directors and
                  the Audit Committee of the Company as set forth in minute
                  books as of November 18, 2003, officials of the Company having
                  advised us that the minutes of all such meetings through that
                  date were set forth therein, and have carried out other
                  procedures to November 18, 2003 (our work did not extend to
                  the period from November 18, 2003 to November 20, 2003,
                  inclusive), as follows:

<PAGE>

                  a)       For the nine-month periods ended September 30, 2003
                           and 2002, we have:

                           i.       Performed a review in accordance with
                                    Canadian and U.S. generally accepted
                                    standards for a review of interim financial
                                    statements by an entity's auditor including
                                    the procedures (completed on October 31,
                                    2003) specified by the American Institute of
                                    Certified Public Accountants for a review of
                                    interim financial information as described
                                    in SAS No. 100, Interim Financial
                                    Information, on the unaudited balance sheet
                                    as of September 30, 2003 and the unaudited
                                    statements of earnings, retained earnings
                                    and cash flows for the nine-month periods
                                    ended September 30, 2003 and 2002; and

                           ii.      made enquiries of certain officials of the
                                    Company who have responsibility for
                                    financial and accounting matters as to
                                    whether the unaudited interim consolidated
                                    financial statements referred to under item
                                    4a.(i) comply as to form in all material
                                    respect with the published accounting
                                    requirements of the Act and the related
                                    rules and regulations adopted by the SEC.

                  b)       For the period from October 1, 2003 to November 18,
                           2003, officials of the Company have advised us that
                           no such financial data as of any date or for any
                           period subsequent to September 30, 2003 were
                           available.

                           The foregoing procedures do not constitute an audit
                           conducted in accordance with generally accepted
                           auditing standards. Also, they would not necessarily
                           reveal matters of significance with respect to the
                           comments in the following paragraph. Accordingly, we
                           make no representations regarding the sufficiency of
                           the foregoing procedures for your purposes.

         5.       Based on the results of the foregoing procedures:

                  a)       Nothing came to our attention that caused us to
                           believe that:

                           i.       any material modifications should be made to
                                    the unaudited interim financial statements
                                    described in 4a. included in the Offering
                                    Memorandum for them to be in conformity with
                                    generally accepted accounting principles; or

                           ii.      that the unaudited interim financial
                                    statements described in item 4a.(i) do not
                                    comply as to form in all material respects
                                    with the applicable accounting requirements
                                    of the Act and the related rules and
                                    regulations adopted by the SEC.

         6.       As mentioned in 4b, Company officials have advised us that no
                  financial data as of any date or for any period subsequent to
                  September 30, 2003, are available; accordingly, the procedures
                  carried out by us with respect to changes in financial
                  statement items after September 30, 2003, have, of necessity,
                  been more limited than those with respect to the period
                  referred to in 4. We have inquired of certain officials of the
                  Company who have responsibility for financial and accounting
                  matters whether:

                  a)       at October 31, 2003 there was any change in the share
                           capital, increase in long-term debt or decrease in
                           net current assets (working capital) or shareholder's
                           equity of the Company as compared with amounts shown
                           on the September 30, 2003 unaudited interim balance
                           sheet included in the Offering Memorandum; or

<PAGE>

                  b)       for the period from October 1, 2003 to October 31,
                           2003, there were any decreases, as compared with the
                           corresponding period in the preceding year, in total
                           net revenue, operating earnings or net earnings.

                           On the basis of these inquiries and our reading of
                           the minutes as described in 4, we did not find that
                           there was any such increase or decrease, except in
                           all instances that the Offering Memorandum discloses
                           have occurred or may occur.

         7.       For purposes of this letter, we have also read the items
                  identified by you on the attached copy of the Offering
                  Memorandum and have performed the following procedures, which
                  were applied as indicated with respect to the symbols
                  explained below.

--------------------------------------------------------------------------------
REFERENCE                         PROCEDURES PERFORMED
--------------------------------------------------------------------------------

    A             We compared the descriptions and the dollar amounts (rounded
                  where appropriate), and percentages, as appropriate, with the
                  corresponding descriptions and dollar amounts in the audited
                  financial statements of the Company as at December 31, 2002
                  and 2001 and 2000 and for the years ended December 31, 2002,
                  2001 and 2000 and found them to be in agreement.

--------------------------------------------------------------------------------
REFERENCE                          PROCEDURES PERFORMED
--------------------------------------------------------------------------------

    B             We compared the descriptions and the dollar amounts (rounded
                  where appropriate), and percentages as appropriate, with the
                  corresponding descriptions and dollar amounts in the unaudited
                  interim financial statements of the Company for the nine-month
                  periods ending September 30, 2003 and 2002 (included in the
                  Offering Memorandum) and found them to be in agreement.

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

    C             (1) We agreed the description and dollar amounts (rounded
                  where appropriate), and percentages, as appropriate, to
                  supporting schedules prepared by the Company and found them to
                  be in agreement;

                  (2) We determined that the supporting schedules prepared by
                  the Company can be reconciled to the Company's accounting
                  records; and

                  (3) We determined that the supporting schedules are
                  mathematically accurate.

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

    D             We recomputed the dollar amounts, the dollar amount changes,
                  and percentages, based on data set forth as follows:

                  (1) In the audited financial statements referred to in A
                  above;

                  (2) In the unaudited interim financial statements referred to
                  in B above;

                  (3) In supporting schedules prepared by the Company described
                  in C above;

                  (4) In the audited financial statements referred to in E
                  below.

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

    E             We compared the descriptions and the dollar amounts (rounded
                  where appropriate), and percentages, as appropriate, with the
                  corresponding descriptions and dollar amounts in the audited
                  financial statements of the Company as at and for the years
                  ended December 31, 1999 and 1998 and found them to be in
                  agreement.

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

<PAGE>

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

    F             We recomputed from the actual column for the unaudited balance
                  sheet as at September 30, 2003 adjusted for the proposed use
                  of proceeds of the notes to be offered as described in this
                  Offering Memorandum under "Use of Proceeds" and found the
                  amount to be calculated correctly.

--------------------------------------------------------------------------------
REFERENCE                          PROCEDURES PERFORMED
--------------------------------------------------------------------------------

    G             We recomputed the dollar amounts (rounded where applicable),
                  and percentages as appropriate, with the corresponding dollar
                  amounts in the audited financial statement of the Company for
                  the year ended December 31, 2002 and the unaudited interim
                  financial statements of the Company for the nine-month periods
                  ending September 30, 2003 and 2002 (included in the Offering
                  Memorandum) and found them to be in agreement.

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

    H             We compared the descriptions and the dollar amounts (rounded
                  where appropriate), and percentages as appropriate, with the
                  corresponding descriptions and dollar amounts in the Company's
                  accounting records (general ledger) and found them to be in
                  agreement.

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

    J             We agreed the description and dollar amounts (rounded where
                  appropriate) to the listing of outstanding letters of credit
                  at September 30, 2003 prepared by the Company and to
                  information provided by the financial institution and found
                  them to be in agreement.

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

    K             We agreed the face value of the note to the audited financial
                  statements at December 31, 2002. We reviewed the calculation
                  of interest, premiums and fees prepared by the Company and
                  found the calculation to be in accordance with the terms of
                  the 9 7/8 % Senior Notes due in 2008.

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

    L             We recalculated the exchange rate from US Dollars to Canadian
                  dollars at approximately 1.332.

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

    M             We recalculated the number or percentage from the information
                  in the applicable table or column and found the number or
                  percentage to have been calculated correctly.

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

         8.       Our audit of the financial statements for the periods referred
                  to in the introductory paragraph of this letter comprised
                  audit tests and procedures deemed necessary for the purpose of
                  expressing an opinion on such financial statements taken as a
                  whole. For none of the periods referred to therein, or any
                  other period, did we perform audit tests for the purpose of
                  expressing an opinion on individual balances of accounts or
                  summaries of selected transactions such as those enumerated
                  above, and, accordingly, we express no opinion thereon.

         9.       It should be understood that we make no representations
                  regarding questions of legal interpretation or regarding the
                  sufficiency for your purposes of the procedures enumerated in
                  the preceding paragraphs; also, such procedures would not
                  necessarily reveal any material misstatement of the amounts or
                  percentages listed above. Further, we have addressed ourselves
                  solely to the foregoing data as set forth in the Offering
                  Memorandum and make no representations regarding the adequacy
                  of disclosure or regarding whether any material facts have
                  been omitted.

<PAGE>

                                                                       ANNEX III

                         [Registration Rights Agreement]<PAGE>

                       MILLAR WESTERN FOREST PRODUCTS LTD.
                                   AS BORROWER

                                     - and -

                       CANADIAN IMPERIAL BANK OF COMMERCE,
                       HSBC BANK CANADA, BANK OF MONTREAL
                      AND THE OTHER FINANCIAL INSTITUTIONS
                         FROM TIME TO TIME PARTY HERETO,
                                   AS LENDERS

                                     - and -

                       CANADIAN IMPERIAL BANK OF COMMERCE
                                    AS AGENT

                                CREDIT AGREEMENT

                            DATED AS OF JUNE 27, 2001

<PAGE>

                                CREDIT AGREEMENT

         THIS CREDIT AGREEMENT dated as of June 27, 2001 is made by and among
MILLAR WESTERN FOREST PRODUCTS LTD., as Borrower (the "Borrower"), CANADIAN
IMPERIAL BANK OF COMMERCE, HSBC BANK CANADA, BANK OF MONTREAL AND THE OTHER
FINANCIAL INSTITUTIONS which from time to time pursuant to and in accordance
with the provisions hereof have entered into an Assignment Agreement amending
Schedule F and become party hereto as Lenders (collectively, the "Lenders") and
CANADIAN IMPERIAL BANK OF COMMERCE, as Agent for the Lenders;

         WHEREAS the Borrower has requested and the Lenders have agreed to
establish certain credits in favour of the Borrower;

         NOW THEREFORE it is agreed by the parties hereto as follows:

                                    ARTICLE 1

                                 INTERPRETATION

1.1      DEFINITIONS

         In this Agreement, unless the context otherwise requires:

         "ACCOMMODATION" means accommodation obtained under the Credits as
         applicable by way of Prime Rate Loans, US Base Rate Loans, LIBOR Loans,
         Bankers' Acceptances, Letters of Credit, or sundry Accommodation as is
         available under the Swingline Credit, or any combination thereof;

         "ACCOUNT DEBTOR" means a Person obligated under an Account Receivable;

         "ACCOUNT RECEIVABLE" means any right of the Borrower to receive payment
         for goods sold or for services rendered;

         "AGENT" means CIBC;

         "AGREEMENT" means this Credit Agreement as originally executed
         (including all Schedules and Exhibits hereto), as it may be amended,
         supplemented, modified, replaced or restated from time to time, and the
         expressions "HEREOF", "HEREIN", "HERETO", "HEREUNDER", "HEREBY" and
         similar expressions refer to this Agreement and not to any particular
         Article, Section, other portion hereof or Schedule or Exhibit hereto;

         "APPLICABLE LAW" means all international, federal, provincial, state,
         municipal, local and foreign statutes, laws, regulations, treaties,
         ordinances, orders, judgements and decrees, which are applicable to,
         and all applicable official

<PAGE>
                                      - 2 -

         directives, rules, guidelines, orders and policies of any Official Body
         having jurisdiction over, any specified Person, property, transaction
         or event;

         "APPLICABLE MARGIN" means for each Lender the applicable fee or margin
         amount from time to time agreed between the Borrower and such Lender as
         the applicable fee or margin amount for Accommodation under the
         Credits;

         "ASSIGNMENT AGREEMENT" means an agreement substantially in the form of
         Exhibit A pursuant to which a financial institution assumes a
         Commitment and becomes a Lender;

         "AUDITORS" means, at any time, the firm of chartered accountants who at
         the relevant time (i) are duly appointed as the auditors of the
         Borrower and (ii) are in fact independent of the Borrower;

         "AVAILABILITY PERIOD" means the period commencing from the Closing Date
         to and including the Maturity Date;

         "BA DISCOUNT RATE" means with respect to any Bankers' Acceptance
         purchased by a:

         (i)      Schedule 1 (under the Bank Act Canada), Lender, CDOR; and

         (ii)     Non-Schedule 1 (under the Bank Act Canada), Lender, the lower
                  of (a) the bid rate quoted by such Lender for its own bankers'
                  acceptance of a like term with effect as at about 10:00 a.m.
                  on the applicable drawdown, rollover or switch date; and (b)
                  CDOR plus 10.0 basis points;

         "BA EQUIVALENT NOTE" has the meaning specified therefor in Section
         2.9(2);

         "BANKERS' ACCEPTANCE" means a draft of the Borrower denominated in
         Canadian Dollars which has been accepted by a Lender as described in
         Article 5 (and shall include BA Equivalent Notes unless otherwise
         specified);

         "BANKING DAY" means:

         (a)      with respect to Prime Rate Loans or Bankers' Acceptances, any
                  day, other than a Saturday or a Sunday, on which financial
                  institutions are open for domestic and foreign exchange
                  business in Toronto, Ontario;

         (b)      with respect to LIBOR Loans, any day, other than a Saturday or
                  a Sunday, on which financial institutions are open for
                  domestic and foreign exchange business in Toronto, Ontario,
                  New York, New York and which is also a day on which dealings
                  are carried out in the London Interbank Eurocurrency Market;
                  and

<PAGE>
                                     - 3 -

         (c)      with respect to US Base Rate Loans, any day, other than a
                  Saturday or a Sunday, on which financial institutions are open
                  for domestic and foreign exchange business in Toronto, Ontario
                  and New York, New York;

         "BORROWER" means Millar Western Forest Products Ltd., a corporation
         incorporated under the laws of Alberta;

         "BORROWING BASE" means:

         (a)      during the months of June to and including November in each
                  year an amount equal to the lesser of (a) the amount of the
                  Revolving Credit and (b) the sum of (i) Eligible Accounts
                  Receivable as margined pursuant to subparagraph (c), and (ii)
                  50% of Eligible Inventory provided that the amount
                  attributable to Eligible Inventory shall not exceed 50% of the
                  Borrowing Base, and less 100% of estimated Priority Payables;
                  and

         (b)      during the months of December to and including May in each
                  year, the above Borrowing Base will apply except that the
                  amount of Eligible Inventory which may comprise the Borrowing
                  Base will be 50% of Eligible Inventory, provided that such
                  amount does not exceed 60% of the Borrowing Base;

         (c)      the margin for Eligible Accounts Receivable shall be as
                  follows:

                  (i)      95% of Eligible Accounts Receivable which are insured
                           by the Export Development Corporation in favour of
                           the Borrower in form and substance satisfactory to
                           the Agent and the Lenders;

                  (ii)     95% of Eligible Accounts Receivable which are
                           supported by a letter of credit in form and substance
                           satisfactory to the Agent and the Lenders and issued
                           by a counterparty rated at least (A High) by S&P or
                           the equivalent rating by Moody's;

                  (iii)    95% of Eligible Accounts Receivable which are owing
                           by the Government of Canada or by any Canadian
                           province; and

                  (iv)     75% of remaining Eligible Accounts Receivable.

         "CANADIAN DOLLARS", "CDN. DOLLARS", "DOLLARS", "$", "CDN.$", and "$
         CDN." means lawful currency of Canada;

         "CANADIAN DOLLAR AMOUNT" means that any time with respect to
         outstanding Accommodation under a Credit, the aggregate of (i) the
         amount in Cdn. Dollars of all such Accommodation that is denominated in
         Cdn. Dollars, and (ii) the Exchange Equivalent at such time of all such
         Accommodation that is denominated in a currency other than Cdn.
         Dollars;

<PAGE>
                                     - 4 -

         "CAPITAL EXPENDITURE" means, for any particular period, those
         expenditures of the Borrower which would, in accordance with GAAP, on a
         consolidated basis, be considered Capital Expenditures of the Borrower,
         for such period (including Capitalized Leased Obligations, provided
         that notwithstanding the requirements of GAAP, the amount attributable
         to Capitalized Leased Obligations for such period shall be the amount
         recorded during such period on the cash flow statement of the Borrower
         as principal lease payments on Capital Leases;

         "CAPITAL LEASE" means, with respect to any Person, any lease of
         personal property or other arrangement relating to personal property or
         assets which would be required to be accounted for as a capital lease
         obligation on a balance sheet of such Person if such balance sheet were
         prepared in accordance with GAAP;

         "CAPITALIZED LEASED OBLIGATIONS" means with respect to any Person, any
         payment obligation of such Person, under a Capital Lease that, in
         accordance with GAAP, is required to be capitalized;

         "CDOR" means the average annual rate (rounded upward to the nearest two
         decimal places, calculated on the basis of a 365 day year for bankers'
         acceptances denominated in Dollars for a specified term that appears on
         the Reuters Screen CDOR page as of 10:00 a.m. Toronto time on the date
         of determination), provided that if such rate does not appear on the
         Reuters Screen CDOR page at such time on such date, the rate for such
         date will be determined as of 10:00 a.m. on the next preceding Banking
         Day and if there is no available rate for such date, the CDOR will be
         the discount rate quoted by the applicable Lender for Canadian Dollar
         bankers' acceptances for such specified term, at such time and on such
         date;

         "CIBC" means Canadian Imperial Bank of Commerce;

         "CLOSING DATE" means June 28, 2001 or such other date as the parties
         may agree to in writing;

         "COMMITMENT" means with reference to any Lender, the aggregate amount
         of Credits which that Lender has severally agreed to make available to
         the Borrower on the terms of this Agreement, expressed as a percentage
         of the Commitments of all the Lenders, which amount is set forth in
         Schedule D or in an Assignment Agreement amending Schedule D executed
         by such Lender;

         "COMPLIANCE CERTIFICATE" means the officer's certificate described in
         Section 10.4(2)(iii);

         "CONSTATING DOCUMENTS" means, with respect to any Person, the articles
         and by-laws of such Person or other organizing documents of such
         Person, as the same may heretofore or hereafter be amended, together
         with all other governing

<PAGE>
                                     - 5 -

         documents of such Person, including all shareholder agreements, of or
         relating to such Person;

         "CONTAMINANT" means any hazardous or non-hazardous substance, matter,
         waste, radioactivity or thing, subject to or regulated by Environmental
         Law, including petroleum products, asbestos and polychlorinated
         byphenyls;

         "CREDITS" means, collectively, the Revolving Credit and the Swingline
         Credit which forms part of the Revolving Credit and "APPLICABLE CREDIT"
         means one or more of the Credits as the context requires;

         "DEFAULT" means any event which, with the giving of notice or the lapse
         of time, or both, and/or a determination being made under the relevant
         provisions hereof, would constitute an Event of Default;

         "DEFAULTING LENDER" has the meaning specified therefor in Section
         2.5(2);

         "DOCUMENTS" means, collectively, this Agreement, Bankers' Acceptances,
         the Security and all agreements with respect to Accommodation under the
         Swingline Credit, and any certificate delivered hereunder;

         "EBITDA" means, for any period, the sum of: (a) Net Income for such
         period (excluding unusual and/or extraordinary gains or losses of a
         non-cash nature for such period), plus (b) Interest Expense for such
         period, plus (c) consolidated income taxes, whether paid or deferred,
         which are deducted in determining Net Income for such period, plus (d)
         consolidated depreciation and amortization expense and other non-cash
         charges for such period, all (unless otherwise defined) as defined by
         and determined in accordance with GAAP, consistently applied;

         "ELIGIBLE ACCOUNT RECEIVABLE" means an Account Receivable which meets
         each of the following requirements:

         (a)      it arises from the sale or lease of goods, and such goods have
                  been shipped or delivered to the Account Debtor under such
                  Account Receivable;

         (b)      it is a valid and legally enforceable obligation of the
                  Account Debtor thereunder, and is not subject to any offset,
                  counterclaim or other defence on the part of such Account
                  Debtor, or to any claim on the part of such Account Debtor
                  denying liability thereunder in whole or in part; provided
                  that the net amount of the obligation of the Government of
                  Canada with respect to Goods and Services Tax rebates may be
                  included;

         (c)      it is not subject to any Security Interest whatsoever other
                  than the Security, except (i) Permitted Liens which are
                  subordinate in priority to the interests of the Lenders and
                  (ii) any statutory Liens in respect of Priority Payables;

<PAGE>
                                     - 6 -

         (d)      it is evidenced by an invoice (dated not later than the date
                  of shipment or performance and having payment terms in
                  accordance with the usual practice of the industry) rendered
                  to such Account Debtor, and is not evidenced by any instrument
                  or chattel paper unless all necessary steps have been taken to
                  perfect the Security Interest contained in the instrument or
                  chattel paper;

         (e)      it is not owing by an Account Debtor who, in the opinion of
                  the Agent, and the Lenders acting reasonably, may at any time
                  be unable to meet its obligations as they fall due;

         (f)      no invoice evidencing such Account Receivable is unpaid ninety
                  (90) days after the date of invoicing; provided this
                  subparagraph does not apply to those Accounts Receivable
                  referred to in subparagraph (c)(i) and (ii) of the Borrowing
                  Base;

         (g)      such Account Receivable is not owing by an Account Debtor who
                  has failed to pay in full any invoice evidencing another
                  Account Receivable within ninety (90) days after the date of
                  invoicing (except for, with the written consent of the Agent
                  in response to a written request by the Borrower for such
                  consent (the Agent agreeing that it will respond promptly,
                  whether in the affirmative or in the negative, to each such
                  request), invoices which are being contested in good faith, as
                  determined by the Agent, acting reasonably); provided this
                  subparagraph does not apply to those Accounts Receivable
                  referred to in subparagraph (c)(i) and (ii) of the Borrowing
                  Base;

         (h)      the Account Debtor under such Account Receivable has been
                  invoiced in good faith by the Borrower to an address in a
                  Canadian Province or in the case of Kimberly Clark Inc., an
                  American State, in which public notice of the Security over
                  Accounts Receivable (i) is required by law to be registered or
                  recorded in accordance with the law of that Province or State
                  in order to perfect the Security in such Account Receivable,
                  and (ii) has been registered or recorded to the extent
                  necessary to perfect the Security in such Account Receivable;
                  provided that the foregoing does not apply to any Account
                  Debtor to the extent that such Account Receivable is insured
                  by the Export Development Corporation in favour of the
                  Borrower in form and substance satisfactory to the Agent and
                  the Lenders or is supported by a letter of credit or other
                  credit enhancement satisfactory to the Agent and the Lenders;

         (i)      the Account Debtor is at arm's length (as that term is used in
                  the Income Tax Act (Canada)) with the Borrower; and

         (j)      it is validly and effectively charged by the Security;

<PAGE>
                                     - 7 -

         Any Account Receivable which at any time is an Eligible Account
         Receivable but which subsequently fails to meet any of the foregoing
         requirements shall forthwith cease to be an Eligible Account
         Receivable;

         "ELIGIBLE INVENTORY" means any Inventory which meets each of the
         following requirements:

         (a)      it is owned by the Borrower;

         (b)      it is not subject to any Security Interest whatsoever other
                  than the Security except Permitted Liens which are subordinate
                  in priority to the interests of the Lenders;

         (c)      it is located within any of those Provinces of Canada in which
                  public notice of the Security over Inventory (i) is required
                  by law to be registered or recorded in accordance with the law
                  of that Province in order to perfect the Security in such
                  Inventory, and (ii) has been registered or recorded to the
                  extent necessary to perfect the Security over such Inventory;

         (d)      it is validly and effectively charged by the Security; and

         (e)      Inventory at any time consisting of logs located other than at
                  the mill, if such logs are insured as required by Section
                  10.1(7), may comprise Eligible Inventory but only to the
                  extent that the aggregate gross value of such logs does not
                  exceed $20,000,000.

         Any Inventory which is at any time Eligible Inventory, but which
         subsequently fails to meet any of the foregoing requirements, shall
         forthwith cease to be Eligible Inventory;

         "ENVIRONMENTAL ACTIVITY" means any past, present or future activity,
         event or circumstances in respect of a Contaminant, including its
         storage, use, holding, collection, purchase, accumulation, assessment,
         generation, manufacture, construction, processing, treatment,
         stabilization, disposition, handling or transportation or its Release,
         emission, escape, leaching, dispersal or migration into the natural
         environment including the movement through or in the air, soil,
         subsoil, surface water or groundwater;

         "ENVIRONMENTAL LAW" means any Applicable Law relating to the
         environment, public health or safety, or any Environmental Activity;

         "EVENT OF DEFAULT" means an event specified in Section 11.1;

         "EXCHANGE EQUIVALENT" in respect of one currency (the "ORIGINAL
         CURRENCY"), being Cdn. Dollars or US Dollars, as the case may be,
         means, at the date of determination, the amount of currency expressed
         in the other currency, based on

<PAGE>
                                     - 8 -

         the Bank of Canada noon rate which is applicable for any settlement
         made on the date of determination, with the specified amount of the
         original currency on such date;

         "EXISTING CREDIT AGREEMENT" means the Credit Agreement dated as of May
         7, 1998 between the Borrower, CIBC and the other financial institutions
         from time to time party thereto and CIBC as Agent as amended by
         Amending Agreement No. 1 dated December 1, 1998 and Amending Agreement
         No. 2 dated August 15, 2000;

         "FEDERAL FUNDS RATE" shall mean, for any day, the weighted average of
         the rates on overnight federal funds transactions with members of the
         Federal Reserve System arranged by federal funds brokers, as published
         on the next succeeding Banking Day by the Federal Reserve Bank of New
         York, or, if such rate is not so published for any day which is a
         Banking Day, the average of the quotations for the day of such
         transactions received by the Agent from three federal funds brokers of
         recognized standing selected by it;

         "FINANCIAL COVENANTS" means those covenants of the Borrower referred to
         in Section 10.4;

         "FIXED CHARGE COVERAGE RATIO" means the ratio of (a) EBITDA less the
         amount of (i) Maintenance Capital Expenditures and (ii) income taxes
         paid in cash to (b) Interest Expense and payments of principal for
         borrowed money, all calculated on a rolling four quarter basis;

         "FOREIGN EXCHANGE CONTRACT" means any foreign exchange contract
         established by a Lender in favour of the Borrower which has a duration
         of the lesser of thirteen months and the Maturity Date and is supported
         by the Lender's standard documentation for such foreign exchange
         contract including an ISDA agreement, if applicable;

         "GAAP" means generally accepted accounting principles in Canada,
         consistently applied, including the statements and interpretations (if
         applicable) issued by the Canadian Institute of Chartered Accountants
         or any successor body in effect from time to time;

         "GUARANTEE" by any Person means:

         (i)      any guarantee, sale with recourse, endorsement (other than for
                  collection or deposit in the ordinary course of business) or
                  other obligation (contingent or otherwise) to pay, purchase,
                  repurchase or otherwise acquire or become liable upon or in
                  respect of any Indebtedness of another; and

<PAGE>
                                     - 9 -

         (ii)     without limiting the generality of the foregoing, any
                  obligation (contingent or otherwise) to make a payment to
                  another for goods, property or services regardless of the
                  non-delivery or non-furnishing thereof, or to make an
                  investment in another, or to maintain the capital, working
                  capital, solvency or general financial condition of another,
                  or to indemnify another Person against and hold such Person
                  harmless from damage, loss or liability, all under
                  circumstances intended to enable another to incur or pay any
                  Indebtedness or to comply with agreements relating thereto or
                  otherwise to assure or protect creditors against loss in
                  respect of Indebtedness;

         The amount of each Guarantee will be deemed to be the amount of all
         Indebtedness of the obligor to which the Guarantee relates, unless the
         Guarantee is limited to a determinable amount in which case the amount
         of such Guarantee will be deemed to be such determinable amount;

         "INDEBTEDNESS" of a Person means, without duplication:

         (i)      all indebtedness, obligations and liabilities of such Person
                  which, in accordance with GAAP, would be included in
                  determining total liabilities as shown in the liability
                  section of the balance sheet of such Person, including,
                  without limitation, indebtedness, obligations and liabilities
                  for borrowed money or in respect of any bankers' acceptance
                  credit facility;

         (ii)     all indebtedness and liabilities of such Person under
                  outstanding forward exchange contracts, interest rate swaps
                  and other hedging products;

         (iii)    all indebtedness, obligations and liabilities of such Person
                  secured by any Lien on any property or asset owned or held by
                  such Person, whether or not any other Person has assumed or is
                  liable for the indebtedness, obligations, or liabilities so
                  secured and whether or not the rights and remedies of the
                  secured party thereunder are limited to repossession or sale
                  of property or assets covered thereby;

         (iv)     any Capital Lease;

         (v)      any Guarantee by such Person;

         (vi)     all liabilities of such Person as a partner or venturer in any
                  partnership, joint venture or other enterprise but only to the
                  extent of the amount of such liability if such liability is
                  limited;

         (vii)    all items of indebtedness convertible into, or exchangeable
                  for, shares in the capital of such Person, any other
                  debentures, notes, other evidences of Indebtedness and similar
                  instruments which may be issued by a Person from time to time;

<PAGE>
                                     - 10 -

         (viii)   all shares in the capital of, or partnership units in, such
                  Person which are redeemable or retractable at the option of
                  any other Person; and

         (ix)     all liabilities of such Person, contingent or otherwise, under
                  any letter of credit or letter of guarantee issued on behalf
                  of such Person;

         "INTEREST EXPENSE" means, in respect of any particular period, the
         aggregate amount payable by the Borrower on a consolidated basis,
         during such period on account of interest, fees or discount for
         borrowed money including Capital Leases, all as calculated in
         accordance with GAAP;

         "INVENTORY" means all lumber, log and pulp inventory owned by the
         Borrower and consisting of finished goods and raw materials which are
         acceptable to the Agent and the Lenders and valued in each case at the
         lower of cost or net realizable value;

         "LENDERS" means, collectively CIBC, HSBC Bank Canada, Bank of Montreal
         and any other financial institution which has entered into an
         Assignment Agreement amending Schedule F, and their respective
         successors and permitted assigns;

         "LETTER OF CREDIT" means any letter of credit or letter of guarantee
         issued by a Lender at the request of the Borrower pursuant to the
         Letter of Credit Swingline Credit;

         "LETTER OF CREDIT SWINGLINE CREDIT" has the meaning set out in Section
         2.1(3);

         "LIBOR" means, with respect to each LIBOR Period for each LIBOR Loan,
         the annual interest rate (calculated on the basis of a 360 day year)
         for deposits of US Dollars for a period most nearly comparable to such
         LIBOR Period to be the arithmetic average, rounded upward to the
         nearest 1/16th of 1%, at which deposits in US Dollars in amounts
         comparable to the amount of such LIBOR Loan, for value on the first day
         of such LIBOR Period and for a term equal to the requested LIBOR
         Period, are offered to the applicable Lender in accordance with its
         normal practice in the London Interbank Eurocurrency Market at or about
         11:00 a.m. (London time) on the second Banking Day prior to the
         commencement of such LIBOR Period, as determined by such Lender;

         "LIBOR LOAN" means a borrowing in US Dollars which bears interest
         calculated on the basis of LIBOR;

         "LIBOR PERIOD" means a period of 1, 2 or 3 months ending on a Banking
         Day, determined in accordance with the provisions of this Agreement and
         readily available in the London Interbank Eurocurrency Market;

<PAGE>
                                     - 11 -

         "LIEN" means any mortgage, charge, pledge, lien (statutory or
         otherwise), hypothecation, assignment intended as security, title
         retention agreement or arrangement, security interest or other
         encumbrance;

         "MAINTENANCE CAPITAL EXPENDITURES" means Capital Expenditures incurred
         for the purpose of maintaining, repairing or replacing an existing
         asset of the Borrower;

         "MATERIAL ADVERSE CHANGE" means, with respect to the Borrower, a
         material adverse change in the financial condition or business or
         operations of the Borrower which has the effect of making it reasonably
         likely that the Borrower will be unable to perform its obligations with
         respect to its Indebtedness;

         "MATERIAL ADVERSE EFFECT" means, with respect to any Person, an effect
         which:

         (a)      materially impairs the Borrower's ability to perform its
                  obligations under any Document to which it is a party,

         (b)      materially prejudices, restricts or renders unenforceable or
                  ineffective any of the rights intended or purported to be
                  granted to any Lender under any Document, or

         (c)      results in a Material Adverse Change;

         "MATERIAL AGREEMENTS" means the agreements referred to in Schedule G;

         "MATURITY DATE" means June 27, 2002 or such later date as may be agreed
         by all of the Lenders and the Borrower pursuant to Section 7.7;

         "MOODY'S" means Moody's Investors Service and its successors;

         "NET INCOME" means, for any period, the amount which would, in
         accordance with GAAP be classified on the consolidated income statement
         of the Borrower for such period as net income of the Borrower;

         "NOTICE OF BORROWING" means a notice of the Borrower in substantially
         the form of Exhibit B;

         "NOTICE OF ROLLOVER/SWITCH" means a notice of the Borrower in
         substantially the form of Exhibit C;

         "OFFERING MEMORANDUM" means the offering memorandum dated May 7, 1998
         issued by the Borrower in connection with a private placement of the
         Senior Notes;

<PAGE>
                                     - 12 -

         "OFFICIAL BODY" means any government of a country or any political
         subdivision thereof, any agency, authority, bureau, central bank,
         commission, department or instrumentality of any such government or
         political subdivision thereof, or any regulatory authority, court,
         tribunal, grand jury or arbitrator, whether foreign or domestic having
         jurisdiction over the property, business or assets of the applicable
         Person;

         "PARTICIPANT" has the meaning specified therefor in Section 14.7(2);

         "PARTICIPATION" has the meaning specified therefor in Section 14.7(1);

         "PERMITTED LIENS" means, as at any time, the Liens listed in Schedule
         A, as such Schedule may be amended from time to time by agreement
         between the Required Lenders and the Borrower;

         "PERSON" will be broadly interpreted and includes an individual, a
         corporation, a limited liability company, a partnership, a trust, a
         joint venture, a co-ownership, an association, an unincorporated
         organization or an Official Body and the heirs, executors,
         administrators or other legal representatives of an individual;

         "PRIME INTEREST RATE" means the rate of interest per annum (calculated
         on the basis of a 365 or 366 day year) that is the greater of (a) the
         rate of interest per annum from time to time declared by the applicable
         Lender as its prime interest rate for Cdn. Dollar commercial loans made
         in Canada and (b) 1.0% above the average of the discount rates from
         time to time quoted on the CDOR page of Reuters, rounded up to the
         second decimal place, at approximately 10:00 a.m. (Toronto time) for
         30-day Canadian Dollar bankers' acceptances; provided that any change
         in the Prime Interest Rate shall be effective on the effective day of
         any change in the reference rate referred to in (a) above or (b) above,
         respectively;

         "PRIME RATE LOAN" means a borrowing in Canadian Dollars which bears
         interest at a rate based on the Prime Interest Rate;

         "PRIORITY PAYABLES" means all statutory Liens, deemed trusts and
         preferred claims of any Person, including claims for employee wages,
         vacation pay, termination or severance pay, employee withholdings,
         pension plan contributions, workers' compensation assessments, goods
         and services taxes, retail sales taxes and municipal Taxes, and claims
         by public utilities, which rank in priority to the Security over any
         Eligible Accounts Receivable;

         "PURCHASE MONEY LIEN" means any Lien created upon any personal property
         of the Borrower to secure or securing the whole or any part of the
         purchase price of such property or to secure or securing the repayment
         of money borrowed to pay the whole or any part of such purchase price
         or cost or any vendor's privilege or lien on such property securing all
         or any part of such purchase price or cost and

<PAGE>
                                     - 13 -

         any Lien to which any property acquired by the Borrower is subject at
         the time of such acquisition; provided that any such Lien is limited to
         the property so acquired;

         "RELEASE" includes discharge, spray, inject, inoculate, abandon,
         deposit, spill, leak, seep, pour, emit, empty, throw, dump, place and
         exhaust, and when used as a noun has a similar meaning;

         "REQUIRED LENDERS" means with respect to the Credits, any two or more
         Lenders who have in the aggregate at least 66-2/3% of the then maximum
         available Commitments under the Credits;

         "REVOLVING CREDIT" has the meaning specified in Section 2.1(1);

         "RIGHTS" has the meaning specified therefor in Section 14.7(1);

         "S&P" means Standard & Poor's Rating Group and its successors;

         "SECURITY" means the secured referred to in Section 8.1;

         "SECURITY INTEREST" means any mortgage, hypothec, title retention,
         pledge, right of set-off, lien, charge, security interest or other
         encumbrance whatsoever, whether fixed or floating and howsoever created
         or arising;

         "SENIOR NOTES" means the 9-7/8% Senior Notes due 2008 issued by the
         Borrower pursuant to the Offering Memorandum;

         "SHAREHOLDERS' EQUITY" means with respect to a Person, at any time, the
         aggregate of all common, preferred and other share capital in and all
         warrants of such Person, which would in accordance with GAAP be
         reflected as equity on the balance sheet of such Person at such time,
         together with retained earnings and contributed surplus of, such
         Person, which would, in accordance with GAAP, be reflected on the
         balance sheet of such Person at such time;

         "SHORT NOTICE SWINGLINE CREDIT" has the meaning setting out in Section
         2.1(2);

         "SHORT NOTICE SWINGLINE LENDER" means the Agent;

         "SUBORDINATED DEBT" means indebtedness of the Borrower for borrowed
         money which is fully subordinated as to principal, interest, fees or
         other amounts and as to any security interest such that no payments to
         the subordinate creditor may be made or accepted and no actions may be
         taken by the subordinate creditor to enforce its security until all
         indebtedness and liability of the Borrower to the Agent and the Lenders
         under this Agreement have been repaid and the Credits have been
         cancelled or otherwise terminated;

<PAGE>
                                     - 14 -

         "SWINGLINE CREDIT" means the Letter of Credit Swingline Credit and the
         Short Notice Swingline Credit collectively;

         "SUBSIDIARY" has the meaning ascribed to a "subsidiary body corporate"
         in the Business Corporations Act (Alberta);

         "TAXES" includes all taxes, levies, imposts, stamp taxes, duties,
         including property taxes, business taxes, corporations taxes, fees,
         deductions, withholdings and any restrictions or conditions resulting
         in a charge to tax and all penalty, interest and other payments on or
         in respect thereof;

         "US" means the United States of America;

         "US BASE RATE" means the rate of interest per annum (calculated on the
         basis of a 365 or 366 day year) that is the greater of (a) the rate of
         interest per annum from time to time declared by the applicable Lender
         as its reference rate of interest for determining interest chargeable
         by it on US Dollar commercial loans made in Canada and (b) 0.50% above
         the Federal Funds Rate in effect at the time of determination; provided
         that if for any reason, such Lender shall have determined (which
         determination shall be conclusive, absent manifest error) that it is
         unable to ascertain the Federal Funds Rate for any reason, (including
         the inability of such Lender to obtain sufficient quotations in
         accordance with the terms set out in the definition of Federal Funds
         Rate herein), the US Base Rate shall be determined without regard to
         clause (b) above until the circumstances giving rise to such inability
         no longer exist; provided further that any change in the US Base Rate
         shall be effective on the effective day of such change in the reference
         rate referred to in (a) above or the Federal Funds Rate, respectively;

         "US BASE RATE LOAN" means a borrowing in US Dollars which bears
         interest at a rate based on the US Base Rate;

         "US DOLLARS" and "US $" means lawful currency of the United States of
         America;

         "UTILIZED PORTION OF THE REVOLVING CREDIT" means, at the date of
         determination, the Canadian Dollar Amount of all Accommodation
         outstanding under the Revolving Credit including under the Swingline
         Credit; and

         "WORKING CAPITAL RATIO" means at any time, the ratio of the Borrower's
         consolidated current assets to its consolidated current liabilities
         calculated in each case in accordance with GAAP, but in any event,
         including in current liabilities all amounts outstanding under the
         Credits other than for Letters of Credits which are issued in support
         of current liabilities, and excluding from current assets all prepaid
         expenses;

<PAGE>
                                     - 15 -

1.2      HEADINGS, ETC.

         The division of this Agreement into Articles, Sections and other
portions thereof and the insertion of headings and captions are for convenience
of reference only and will not affect the construction or interpretation of this
Agreement. Unless something in the subject matter or context is inconsistent
therewith, references herein to Articles, Sections, other portions thereof,
Schedules or Exhibits are to Articles, Sections, other portions thereof,
Schedules or Exhibits of or to this Agreement.

1.3      NUMBER, GENDER AND EXPRESSIONS

         Words importing the singular number only will include the plural and
vice versa, words importing the masculine gender will include the feminine and
neuter genders and vice versa and words importing natural persons will include
Persons and vice versa. Where any term or expression is defined herein,
derivations of such term or expression will have a corresponding meaning.

1.4      TIME

         Unless otherwise expressly stated, any reference herein to a time will
mean Toronto, Ontario local time.

1.5      NON-BANKING DAYS

         Whenever any payment hereunder is stated to be due on a day other than
a Banking Day, the payment will be made on the immediately following Banking
Day. In the case of interest payable pursuant to the terms of this Agreement,
the extension or contraction of time will be considered in determining the
amount of interest. Whenever any action to be taken hereunder is stated or
scheduled to be required to be taken on, or any period of time stated or
scheduled herein to commence or terminate on, a day other than a Banking Day,
the action will be taken or the period of time will commence or terminate, as
the case may be, on the immediately following Banking Day.

1.6      CALCULATIONS

         Except as otherwise expressly provided herein, all accounting
calculations required or permitted under this Agreement will be made on the
basis of GAAP using accounting policies and standards of disclosure with respect
to the business operations similar to those of the Borrower, which are applied
in accordance with recommendations from time to time of the Canadian Institute
of Chartered Accountants, or any successors thereof, as at the date on which
such generally accepted accounting principles are applied.

1.7      STATUTORY REFERENCES

         Unless otherwise expressly stated, any reference in this Agreement or
any of the other Documents to any act or statute or section thereof will be
deemed to be a reference to such

<PAGE>
                                     - 16 -

act or statute or section as amended, renamed, restated or re-enacted or
replaced from time to time (and includes all regulations from time to time made
under such act or statute).

1.8      SEVERABILITY

         Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such prohibition or unenforceability and shall be severed from the balance of
this Agreement, all without affecting the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.

1.9      ENTIRE AGREEMENT

         This Agreement and all agreements herein contemplated to be entered
into among, by or with the parties hereto constitutes the entire agreement
between the parties hereto with respect to the Credits and the other matters
contemplated in this Agreement as of the date hereof.

<PAGE>
                                     - 17 -

                                   ARTICLE II
                                   THE CREDITS

2.1      ESTABLISHMENT OF CREDITS

         1) The Revolving Credit: Subject to the terms and conditions hereof
(including the restrictions contained in this Article), the Lenders hereby
establish in favour of the Borrower a revolving credit in the maximum principal
amount of $50,000,000 or the Exchange Equivalent thereof in U.S.$.

         2) Short Notice Swingline Credit: As part of the Revolving Credit, the
Short Notice Swingline Lender hereby establishes in favour of the Borrower a
revolving credit in the maximum principal amount of $5,000,000 or the Exchange
Equivalent thereof in U.S. Dollars. Accommodation obtained under this Credit
will be considered an availment of the Revolving Credit so that the maximum
principal amount under the Revolving Credit, the Letter of Credit Swingline
Credit and the Short Notice Swingline Credit shall not exceed $50,000,000 or the
Exchange Equivalent thereof in U.S. Dollars. Subject to the terms and conditions
hereof, the Borrower may from time to time obtain Accommodation under the Short
Notice Swingline Credit by way of overdrafts in Cdn. and U.S. Dollars and other
types of sundry Accommodation as agreed upon. Fees for such Accommodation other
than overdrafts shall be as agreed from time to time, and Prime Rate Loans and
U.S. Base Rate Loans by way of overdraft will bear interest as set out in
Sections 3.2(1) and (2).

         3) Letter of Credit Swingline Credit: As part of the Revolving Credit,
the Lenders hereby establish in favour of the Borrower a revolving credit in the
maximum amount of $15,000,000 or the exchange equivalent in US Dollars.
Accommodation obtained under the Letter of Credit Swingline Credit will be
considered an availment of the Revolving Credit so that the maximum amount under
the Revolving Credit, the Short Notice Swingline Credit and the Letter of Credit
Swingline Credit shall not exceed $50,000,000 or the exchange equivalent thereof
in US Dollars. Subject to the terms and conditions hereof, the Borrower may from
time to time obtain Accommodation under the Letter of Credit Swingline Credit by
way of letters of credit and letters of guarantee to be provided by one or more
of the Lenders as the Borrower in its sole discretion may sole select. Fees for
such Accommodation shall be as agreed by the Borrower separately with each
Lender by agreement in the form attached hereto as Exhibit F.

2.2      UTILIZATION OF PROCEEDS

         The Borrower will use Accommodation obtained under the Credits for the
Borrower's general corporate and working capital purposes (including to
refinance the amount outstanding under the Existing Credit Agreement on the
Closing Date) other than to finance any asset acquisition out of the ordinary
course of business or any investment in any Person.

<PAGE>
                                     - 18 -

2.3      TYPES OF ACCOMMODATION AVAILABLE UNDER THE REVOLVING CREDIT

         1) The Revolving Credit. Subject to the terms and conditions hereof,
the Borrower may from time to time obtain the following types of Accommodation
under the Revolving Credit:

                  Prime Rate Loans
                  US Base Rate Loans
                  LIBOR Loans
                  Bankers' Acceptances

         2) The Revolving Credit Borrowing Base. The Borrower may not request
Accommodation under the Revolving Credit (including under the Swingline Credit)
if the Utilized Portion of the Revolving Credit (including the maximum amount of
the Swingline Credit), after giving effect to the proposed Accommodation, is
greater than the Borrowing Base then in effect. At no time shall the Utilized
Portion of the Revolving Credit exceed the Borrowing Base then in effect.

2.4      DRAWDOWN, ROLLOVERS AND SWITCHES OF ACCOMMODATION. Subject to the terms
and conditions hereof, the Borrower will have the right at all times to
determine the manner and the proportions in which it will draw down the
Revolving Credit and until the Revolving Credit has been cancelled, the Borrower
may, at its option, subject to the terms and conditions hereof, rollover or
switch its methods of utilizing the Revolving Credit, provided that:

         (a)      each drawdown which is not by way of Prime Rate Loan or US
                  Base Rate Loan shall involve a minimum of Cdn.$3,000,000 or
                  US$3,000,000, as applicable, or any whole multiple of
                  Cdn$100,000 or US$100,000, as applicable, thereafter;

         (b)      each drawdown which involves a Prime Rate Loan or a US Base
                  Rate Loan shall involve a minimum of Cdn$1,000,000 or
                  US$1,000,000, as applicable, or any whole multiple of
                  Cdn$100,000 or US$100,000, as applicable, thereafter;

         (c)      all switches shall involve at least Cdn.$3,000,000 or
                  US$3,000,000, as applicable;

         (d)      no switch out of Bankers' Acceptances or LIBOR Loans shall be
                  made except upon the maturity of a corresponding amount of
                  Bankers' Acceptances or LIBOR Loans; and

         (e)      the date on which a drawdown, rollover or switch is to be made
                  hereunder shall be a Banking Day.

2.5      PRO RATA ACCOMMODATION

         1) Requirement to Advance Accommodation. Subject to the terms and
conditions of this Agreement, all Accommodation requested under the Revolving
Credit other than the Swingline Credit will be made available contemporaneously
by the Lenders, on a pro rata basis in the same proportions as their respective
Commitments (except that for this purpose, the Commitments of the Short Notice
Swingline Lender shall be reduced by the maximum amount of the Short Notice
Swingline Credit); provided that the Agent will be entitled at any time to

<PAGE>
                                     - 19 -

request Accommodation from the Lenders otherwise than in accordance with their
respective Commitments if the same is required by, or consistent with, the
traditional treasury management practices of the Agent or normal money market
practices. No Lender will be responsible for any default by any other Lender in
its obligation to make its proportionate share of requested Accommodation
available nor will the Commitment of any Lender be increased as a result of the
default by any other Lender in its obligation to make Accommodation available,
except as provided in Section 2.5(2).

         2) Reset Mechanism. If at any time, because of utilization of the
Swingline Credit, the ratio of the indebtedness of the Borrower to any Lender
under the Credits to the aggregate indebtedness of the Borrower to the Lenders
under the Credits is not in the same proportion as such Lenders' Commitment
bears to the aggregate Commitments of all Lenders then the Agent, shall at the
request of any Lender, make such adjustments of Accommodation among the Lenders
as may be necessary or appropriate in order that the outstanding Accommodation
of the Lenders is proportional to their respective Commitments. Each Lender
agrees to execute any documentation reasonably required by the Agent to
accomplish the required adjustments.

         3) Failure to Advance Accommodation. In the event that any Lender fails
to make available its portion of any Accommodation as required (a "DEFAULTING
LENDER"), the Agent will forthwith give notice thereof to each of the other
Lenders, and any other Lender, upon notice to the Borrower, the Agent and the
other Lenders and acknowledgement by the Agent, may advance to the Borrower the
amount (or if more than one Lender so elects, its pro rata share of the amount
based upon the Commitments of such electing Lenders) of the Defaulting Lender's
portion of such Accommodation. Upon the making of such advance(s), the Lender or
Lenders making such advance(s) will have the right to forthwith recover the same
from the Defaulting Lender(s) or, if required by any Lender making any such
advance, the Lenders, the Agent and the Borrower will enter into such
documentation, in form and substance satisfactory to the parties, as may be
appropriate to evidence the adjustment of the Commitments of the Lenders
necessitated by the advance made by such Lender(s). Nothing herein contained
will be deemed to relieve any Lender from its obligation to fulfil its
respective Commitments in respect of the Credits or to prejudice any rights
which a Borrower may have against any Lender as a result of any default by such
Lender hereunder.

2.6      DRAWDOWN OF CREDITS

         1) Notice of Borrowing. The Borrower will give to the Agent, in
accordance with the following schedule, a Notice of Borrowing prior to each
proposed draw under the Revolving Credit:

         Type of Accommodation Requested         Notice Required
         -------------------------------         ---------------
         Prime Rate Loans                        1 Banking Day
         US Base Rate Loans                      1 Banking Day
         LIBOR Loans                             3 Banking Days
         Bankers' Acceptances                    1 Banking Day
         Swingline Credit Accommodation          As agreed

<PAGE>
                                     - 20 -

Each Notice of Borrowing shall be delivered on a Banking Day by the Borrower on
or prior to noon Toronto time to the Agent on the date on which the Notice of
Borrowing is required. Any Notice of Borrowing delivered after such time shall
be deemed to have been delivered on the next Banking Day.

         2) Irrevocability. Each Notice of Borrowing given to the Agent by a
Borrower shall be irrevocable, and the Borrower shall borrow the stated amount
on the stated date in accordance with the Notice of Borrowing; provided,
however, that if any Default or Event of Default shall have occurred and be
continuing, the Agent and the Lenders may refuse to give effect to any Notice of
Borrowing.

         3) Notification of Lenders. Upon receipt of each duly completed Notice
of Borrowing, the Agent shall promptly notify by facsimile transmission each
Lender of (i) the proposed draw, (ii) the amount and type of Accommodation to be
made available by such Lender, and (iii) the particulars of the account (as
designated by the Borrower to the Agent) to which the proceeds of any
Accommodation are to be credited.

2.7      ROLLOVERS AND SWITCHES OF ACCOMMODATION

         1) Timing of Notices. Subject to Section 2.7(4), the Borrower shall
deliver on a Banking Day to the Agent, in accordance with the schedule set out
for Notices of Borrowing in Section 2.6(1), a duly completed Notice of
Rollover/Switch prior to a proposed switch or rollover of Accommodation under
the Revolving Credit.

         2) Irrevocability. Each Notice of Rollover/Switch delivered to the
Agent by the Borrower shall be irrevocable, and the Borrower shall rollover or
switch the stated Accommodation on the stated date in accordance with the Notice
of Rollover/Switch.

         3) Notification of Lenders. Upon receipt of a Notice of
Rollover/Switch, the Agent shall promptly notify by facsimile transmission each
Lender of (i) the proposed rollover/switch, (ii) the amount and type of
Accommodation to be made available by such Lender under the Revolving Credit on
the rollover/switch date, and (iii) the particulars of the account (as
designated by the Borrower to the Agent) to which the proceeds of any
Accommodation to be effected on the rollover/switch are to be credited.

         4) Failure to Provide Notice of Rollover/Switch. In the event that the
Borrower does not provide the Agent with the required Notice of Rollover/Switch
in accordance with Section 2.7(1) for any rollover/switch of Accommodation, then
a duly completed Notice of Rollover/Switch shall be deemed to have been given
pursuant to Section 2.7(1) and such Accommodation shall be switched to (i) a
Prime Rate Loan for any amounts outstanding in Canadian Dollars on the
rollover/switch date or (ii) a US Base Rate Loan for all amounts outstanding in
US Dollars on the rollover/switch date.

<PAGE>
                                     - 21 -

2.8      DISBURSEMENT - PRIME RATE LOANS, US BASE RATE LOANS AND LIBOR LOANS

         Each Prime Rate Loan, US Base Rate Loan and LIBOR Loan made by a Lender
under the Revolving Credit will be made by such Lender crediting the applicable
funds to such account of the Agent as the Agent shall have designated to the
Lenders and the Agent will credit the applicable funds to the account of the
Borrower as the Borrower shall have designated to the Agent in same day funds
for same day value on the applicable drawdown, rollover or switch date.

2.9      DISBURSEMENT - BANKERS' ACCEPTANCES

         1) Discounting. Each Banker's Acceptance (other than BA Equivalent
Notes) issued under the Revolving Credit shall be deemed to be discounted at the
BA Discount Rate applicable to such Lender plus the Applicable Margin in effect
at the time such Bankers' Acceptance is discounted. The Borrower shall provide
the Agent with written advice of the amounts of Banker's Acceptance proceeds to
be received from each Lender and each Lender will credit or transfer, as the
case may be, its proportionate share of the Banker's Acceptance proceeds so
determined to such account as is designated by the Agent and the Agent shall
credit the Bankers' Acceptance proceeds so determined to such account of the
Borrower as the Borrower shall have designated to the Agent in same day funds on
the applicable drawdown, rollover or switch date.

         2) Non-Bank Lender. If a Lender is not a chartered bank under the Bank
Act (Canada) or if a Lender notifies the Agent in writing that it is unable or
unwilling to accept Bankers' Acceptances, such Lender will, instead of
discounting Bankers' Acceptances, purchase from the Borrower a non-interest
bearing note (a "BA EQUIVALENT NOTE"), in the form of Exhibit D, issued by the
Borrower in the amount and for the same term as the draft which such Lender
would otherwise have been required to discount hereunder, at a purchase price
calculated on the same basis as Bankers' Acceptances are discounted by the
Lender pursuant to Section 2.9(1). Each such Lender will credit or transfer, as
the case may be, the purchase price to such account as is designated by the
Agent and the Agent shall credit such amount to such account of the Borrower as
the Borrower shall have designated in same day funds on the applicable drawdown,
rollover or switch date.

2.10     EXISTING LETTERS OF CREDIT

         CIBC has issued letters of credit at the request of the Borrower under
the Existing Credit Agreement and which will be outstanding as of the Closing
Date. Such letters of credit shall be deemed to be Accommodation obtained by the
Borrower from CIBC under the Letter of Credit Swingline Credit.

<PAGE>
                                     - 22 -

                                  ARTICLE III
              PRIME RATE LOANS, US RATE BASE LOANS AND LIBOR LOANS

3.1      RECORDING IN BOOKS AND RECORDS

         The Borrower hereby authorizes the Agent and each Lender to record,
from time to time, in its books and records, the date and amount of
Accommodation made by it, the unpaid balance thereof, and all payments received
by the Agent on behalf of the Lender on account of the principal of such
outstanding Accommodation or interest thereon or otherwise and such other
information as it may see fit. All amounts so recorded shall be prima facie
evidence (absent manifest error) of such unpaid principal balance, interest and
other amounts owing hereunder. The failure to record, or any error in recording,
any such amount shall not, however, limit or otherwise affect the obligations of
the Borrower to repay the principal amount of the outstanding Accommodation
together with all interest accrued thereon and all other amounts owing
hereunder, nor shall the failure to record any payment result in the Borrower
owing any amount paid and not so recorded.

3.2      INTEREST

         1) Prime Rate Loans. Each Prime Rate Loan will bear interest in Cdn.
Dollars as well after as before maturity, demand, default and judgement at a
variable rate per annum (calculated on the basis of a 365 or 366 day year) equal
at all times to the Prime Interest Rate plus the Applicable Margin in effect
from time to time which applicable rate per annum shall change automatically
without notice to the Borrower.

         2) US Base Rate Loans. Each US Base Rate Loan will bear interest in US
Dollars as well after as before maturity, demand, default and judgement at a
variable rate per annum (calculated on the basis of a 365 or 366 day year) equal
at all times to the US Base Rate plus the Applicable Margin which applicable
rate per annum shall change automatically without notice to the Borrower.

         3) LIBOR Loans. Each LIBOR Loan will bear interest in US Dollars as
well after as before maturity, demand, default and judgement at LIBOR
(calculated on the basis of a 360 day year) plus the Applicable Margin in effect
at the date of such LIBOR Loan.

3.3      PAYMENT OF INTEREST

         Interest on Prime Rate Loans and US Base Rate Loans will accrue daily
and be payable by the Borrower directly to each Lender monthly in arrears on the
first Banking Day of each month following receipt of an invoice for such
interest from the applicable Lender, provided, however, that interest on each
other amount referred to in Section 3.6 and interest on overdue interest shall
be payable on demand. Interest on LIBOR Loans shall accrue daily and shall be
payable on the last Banking Day of each LIBOR Period, provided that where the
LIBOR

<PAGE>
                                     - 23 -

Period exceeds three (3) months, interest shall be payable on the expiration of
each 90 day period during the term of the LIBOR Period and on the last day of
the LIBOR Period.

3.4      MAXIMUM RATE OF RETURN

         Notwithstanding any provision to the contrary contained in this
Agreement, in no event will the aggregate "interest" (as defined in section 347
of the Criminal Code (Canada) payable under this Agreement exceed the effective
annual rate of interest on the "the credit advanced" (as defined in that
section) under this Agreement lawfully permitted under that section and, if any
payment, collection or demand pursuant to this Agreement in respect of
"interest" (as defined in that section) is determined to be contrary to the
provisions of that section, such payment, collection or demand will be deemed to
have been made by mutual mistake of the Borrower, the Agent and the Lenders and
the amount of such payment or collection will be refunded to the Borrower. For
purposes of this Agreement, the effective annual rate of interest will be
determined in accordance with generally accepted actuarial practices and
principles over the term of the Revolving Credit on the basis of annual
compounding of the lawfully permitted rate of interest and, in the event of
dispute, a certificate of a Fellow of the Canadian Institute of Actuaries
appointed by the Agent will be conclusive for the purposes of such
determination.

3.5      INTEREST ACT (CANADA)

         The parties agree that for the purposes of the Interest Act (Canada),
(i) the principle of deemed reinvestment of interest will not apply to any
interest calculation under this Agreement, (ii) the rates of interest stipulated
in this Agreement are intended to be nominal rates, and not effective rates or
yields and (iii) whenever interest to be paid under this Agreement or under any
other Document is to be calculated on the basis of a period of time that is less
than a calendar year, the yearly rate of interest to which the rate determined
pursuant to such calculation is equivalent is the rate so determined multiplied
by the actual number of days in the calendar year in which the same is to be
ascertained and divided by such period of time.

3.6      INTEREST ON AMOUNTS OWING HEREUNDER

         Notwithstanding Section 3.3, any amounts payable by the Borrower to the
Agent or any Lender under this Agreement or any other Document which are not
paid when due shall bear interest (as well after as before demand, maturity,
default or judgement), payable on demand, on the unpaid amount thereof from and
including the date of such non-payment until paid in full calculated (but not
compounded) daily at a nominal rate per annum equal to (a) the Prime Interest
Rate plus 2% for amounts due in Canadian Dollars and (b) the US Base Rate plus
2% for amounts due in US Dollars, which rates per annum shall change
automatically without notice to the Borrower as and when the Prime Interest Rate
or the US Base Rate, as applicable, shall change; provided that any amounts
disputed by the Borrower as payable may be paid by the

<PAGE>
                                     - 24 -

Borrower to the applicable Lender, and if such dispute is decided in favour of
the Borrower the amounts so paid will be returned to the Borrower, together with
interest at the rate of interest given by the applicable Lender for deposits of
a similar amount and for a similar duration, on demand.

<PAGE>
                                     - 25 -

                                   ARTICLE IV
                   GENERAL PROVISIONS RELATING TO LIBOR LOANS

4.1      GENERAL

         1) Minimum LIBOR Loan. The principal amount of each LIBOR Loan shall be
at least US$3,000,000 and shall be a whole multiple of US$100,000 thereafter.

         2) LIBOR Periods. In accordance with Sections 2.6 and 2.7, the Borrower
shall, prior to each draw by it which is to be a LIBOR Loan, notify the Agent of
the amount of such LIBOR Loan and the LIBOR Period which shall apply thereto;
provided that the Borrower shall not select LIBOR Periods which extend beyond
the Maturity Date.

4.2      EARLY TERMINATION OF LIBOR PERIODS

         1) Breakage Costs. To the extent that a Lender is required to arrange
for early termination of any LIBOR Period, the Borrower shall reimburse the
Lender for all losses and out-of-pocket expenses incurred by it as a result of
the early termination of the LIBOR Period in question or as a result of entering
into the new arrangement to the extent that such losses and expenses result from
such payment. For such purpose, a certificate of the Lender setting out the
particulars of such losses and expenses shall, in the absence of manifest error,
be prima facie evidence of such losses or expenses. If any such early
termination or new arrangement cannot be effected by the Lender, the Borrower
shall continue to pay interest to such Lender in US Dollars at the rate
specified hereunder for LIBOR Loans upon an amount of US Dollars equal to the
amount of the principal repayment for the remainder of the then current LIBOR
Period.

4.3      INABILITY TO MAKE LIBOR LOANS

         In the event that on any date a Lender determines in good faith (which
determination shall be conclusive) that its ability to make a requested LIBOR
Loan has become impracticable, unlawful or impossible, or has been materially
adversely affected because (a) of any change in Applicable Laws, or (b) of any
material adverse change in or the termination of the London Interbank
Eurocurrency Market for US Dollars, or (c) there exists no adequate and fair
means for ascertaining the LIBOR for any LIBOR Period for the LIBOR Loan, then
in any such case such Lender shall forthwith give notice thereof, including
reasonable particulars of the events or circumstances giving rise to the notice,
to the Borrower and the Agent (such notice to be given by telephone confirmed by
same day facsimile transmission), and thereafter and so long as such
circumstances continue, such Lender shall have no further obligation with
respect to such LIBOR Loan, provided that the Borrower may (i) if the requested
LIBOR Loan was requested pursuant to a Notice of Borrowing, obtain a drawdown
(other than by way of LIBOR Loan) pursuant to Section 2.6, or (ii) if the
requested LIBOR Loan was requested pursuant to a Notice of Rollover/Switch,
obtain another type of Accommodation pursuant to Section 2.7.

<PAGE>
                                     - 26 -

4.4      INABILITY TO MAINTAIN LIBOR LOANS

         In the event that on any date a Lender determines in good faith (which
determination shall be conclusive) that its ability to maintain an outstanding
LIBOR Loan has become impracticable, unlawful or impossible because (a) of any
change in Applicable Laws or (b) of any material adverse change in or the
termination of the London Interbank Eurocurrency Market for US Dollars, or (c)
the imposition of any condition, restriction or limitation upon such Lender by
an Official Body, then in any such case the Lender shall forthwith give notice
thereof, including reasonable particulars of the events or circumstances giving
rise to the notice to the Borrower and the Agent (such notice to be given by
telephone confirmed by same day facsimile transmission), and the Borrower shall,
subject to Section 4.6, forthwith repay to such Lender all outstanding LIBOR
Loans which have been made by such Lender to the Borrower together with all
unpaid interest accrued thereon to the date of repayment and all other expenses
incurred in connection with the termination (including any expenses resulting
from the termination of any LIBOR Period relating thereto in accordance with
Section 4.2(1)) provided that the Borrower may, without the requirement of a
Notice of Borrowing, upon delivery of the required Notice of Rollover/Switch,
switch such LIBOR Loan to a US Base Rate Loan, as applicable.

4.5      INCREASED COSTS

         1) If the basis of taxation to a Lender of payments to be received by
it in respect of a LIBOR Loan or interest thereon is changed or there is imposed
or made applicable any reserve, capital adequacy or special deposit requirements
against any of the assets, deposits or accounts of such Lender or there is a
change in the interpretation or administration of Applicable Laws or regulations
by an Official Body or any condition, restriction or limitation is imposed upon
such Lender and the result of any of the foregoing is to increase the cost to
such Lender of making or maintaining such LIBOR Loan or to reduce the amount of
principal or interest payable in respect of such LIBOR Loan under this
Agreement, then the Borrower shall forthwith, upon request, pay to such Lender
as interest all amounts necessary to compensate such Lender for any such
increased cost, such principal or interest reduction or such other expense. The
Lender shall make reasonable efforts to reduce or avoid the imposition of such
increased costs and, for the purposes of this Section, a certificate of the
applicable Lender setting out particulars of the events or circumstances giving
rise to the request for the additional compensation and the calculation, in
reasonable detail, of the amounts payable by the Borrower shall, in the absence
of manifest error, be prima facie evidence thereof. Such certificate shall be
delivered to the applicable Borrower within thirty (30) Banking Days of the
Lender's determination, acting reasonably, that increased costs are payable
hereunder. Failure by a Lender to provide such certificate within the stated
period shall result in such Lender disentitling itself to compensation for any
period in excess of thirty (30) Banking Days prior to the day upon which such
certificate is given.

         2) The obligation of the Borrower to pay the amounts referred to in
Section 4.5(1) will be subject to the following: (a) the Borrower will not
compensate any Lender for increased costs due to taxes on the overall net income
or capital of a Lender (otherwise than pursuant to applicable capital adequacy
rules); and (b) the Borrower will be treated no less favourably than other
customers of the Lender to whom the Lender is able to pass through such
increased costs.

<PAGE>
                                     - 27 -

4.6      INDEMNITY

         The Borrower unconditionally indemnifies each Lender against any loss
or expense (including, but not limited to, loss of profit relating to the
Lender's spread over its cost of funds) which it may sustain in employing
deposits to effect, fund or maintain a LIBOR Loan as a consequence of any
failure by the Borrower to make any payment when due. The Borrower
unconditionally further indemnifies each Lender against any loss or expense
(including but not limited to, loss of profit relating to the Lender's spread
over its cost of funds) which such Lender reasonably incurs as a result of the
failure of the Borrower to consummate any borrowing of which it has given notice
to the Agent. A certificate as to such cost, setting forth the calculations
therefor in reasonable detail, shall be promptly submitted by each such Lender
to the Borrower and shall be prima facie evidence of such costs and binding on
the Borrower save for manifest error. Such certificate shall be delivered to the
Borrower within thirty (30) Banking Days of the Lender's determination, acting
reasonably, that such costs are payable hereunder. Failure by the Lender to
provide such certificate within the stated period shall result in such Lender
disentitling itself to compensation for any period in excess of thirty (30)
Banking Days prior to the day upon which such certificate is given.

<PAGE>
                                     - 28 -

                                   ARTICLE V
                   BANKERS' ACCEPTANCES AND LETTERS OF CREDIT

5.1      GENERAL

         Each Accommodation by way of Bankers' Acceptance tendered by the
Borrower for acceptance will be payable in Canada, will be for the minimum
aggregate principal amount of Cdn.$3,000,000, will be in a principal amount
which is a whole multiple of Cdn.$100,000 and will have a term of approximately
1, 2 or 3 months; provided that the Borrower shall not select Bankers'
Acceptance maturity dates which extend beyond the Maturity Date.

5.2      ACCEPTANCE

         The Borrower will provide for each accepted draft at its maturity,
either by payment of the full principal amount thereof or through utilization of
the Revolving Credit in accordance with this Agreement or through a combination
thereof in accordance with this Agreement, provided that the Borrower is
otherwise entitled to a drawdown, rollover or conversion of Accommodation. The
obligation of the Borrower to pay the full principal amount of the maturing
Bankers' Acceptance shall not be prejudiced by the fact that the holder of any
such Bankers' Acceptance is the Lender that accepted such Bankers' Acceptance.
Any amount owing by the Borrower in respect of any Bankers' Acceptance which is
not paid in accordance with the foregoing will automatically be switched into a
Prime Rate Loan.

5.3      ACCELERATION

         If the Agent has declared the obligations of the Borrower hereunder to
be immediately due and payable pursuant to Section 11.2, the Borrower will
forthwith pay to the Agent for deposit to an escrow account maintained by the
Agent an amount equal to the Lenders' maximum potential liability under
outstanding Bankers' Acceptances. Such amount will be held by the Agent for
set-off against future indebtedness owing by the Borrower to such Lenders in
respect of such Bankers' Acceptances, and pending such application will bear
interest at the rate declared by the Agent from time to time as that payable by
it in respect of thirty-day certificates of deposit for such amount.

5.4      CHANGE IN CIRCUMSTANCES

         1) If the basis of taxation to a Lender of payments, including interest
and fees, to be received by it in respect of a Bankers' Acceptance or Letter of
Credit is changed or there is imposed or made applicable any reserve or capital
adequacy requirements or special deposit requirements against any of the assets,
deposits or accounts of a Lender or there is a change in the interpretation or
administration of Applicable Laws or regulations by competent authorities or any
condition, restriction or limitation is imposed upon a Lender and the result of
any of the foregoing is to increase the cost to a Lender of making or
maintaining such Bankers' Acceptance or Letter of Credit or to reduce the amount
of principal or any fee payable with respect to such

<PAGE>
                                     - 29 -

Bankers' Acceptance or Letter of Credit, then the Borrower shall forthwith, upon
request, pay to such Lender all amounts necessary to compensate it for any such
increased cost, such principal or fee reduction or such other expense. The
Lender shall make reasonable efforts to reduce or avoid the imposition of such
increased costs and, for the purpose of this Section, a certificate of the
Lender setting out the particulars of the calculation in reasonable detail of
the amounts payable by the Borrower will, in the absence of manifest error, be
prima facie evidence thereof. Such certificate shall be delivered within thirty
(30) Banking Days of the Lender's determination, acting reasonably, that
increased costs are payable hereunder. Failure by a Lender to provide such
certificate within the stated period shall result in such Lender disentitling
itself to compensation for any period in excess of thirty (30) Banking Days
prior to the day upon which such certificate is given.

         2) The obligation of the Borrower to pay the amounts referred to in
Section 5.4(1) will be subject to the following: (a) the Borrower will not
compensate any Lender for increased costs due to taxes on the overall net income
or capital of a Lender (otherwise than pursuant to applicable capital adequacy
rules); and (b) the Borrower will be treated no less favourably than other
customers of the Lender to whom the Lender is able to pass through such
increased costs.

5.5      PROVISIONS OF BANKERS' ACCEPTANCES

         The Borrower shall provide to each Lender an appropriate number of
executed drafts drawn by the Borrower upon the Lender and endorsed by the
Borrower as payee, in the form prescribed by the Lender for Bankers' Acceptances
denominated in Dollars. The dates, maturity dates and principal amounts of all
drafts delivered by the Borrower shall be left blank, to be completed by the
Lender as required hereby.

5.6      POWER OF ATTORNEY FOR BANKERS' ACCEPTANCES

         Notwithstanding Section 5.5, bills of exchange of the Borrower to be
accepted as Bankers' Acceptances hereunder may be signed by each Lender as the
attorney of the Borrower. In this regard, the Borrower hereby irrevocably
appoints each Lender as its attorney to sign and endorse on its behalf, manually
or by facsimile or by mechanical signature, any bills of exchange to be accepted
as Bankers' Acceptances hereunder. All Bankers' Acceptances signed or endorsed
on the Borrower's behalf by a Lender shall be binding on the Borrower as if duly
executed and issued by the Borrower.

5.7      OUTSTANDING BANKERS' ACCEPTANCES ON AN EVENT OF DEFAULT

         If any Bankers' Acceptance is outstanding at any time that an Event of
Default occurs, the Borrower shall forthwith upon demand by the Agent pay to the
Agent for the benefit of the Lenders, for the account of the holder of such
Bankers' Acceptance, Dollars in an amount equal to the face amount thereof. Such
funds (together with interest thereon) shall be held by the applicable Lender
for payment of the liability of the Borrower in respect of such Bankers'
Acceptance, and shall bear interest for such terms as are selected from time to
time by the Lender at the wholesale money market rate of the Lender for deposits
of similar amounts and maturities.

<PAGE>
                                     - 30 -

5.8      LETTERS OF CREDIT

         1) The Lenders as selected from time to time by the Borrower will issue
Letters of Credit under the Letter of Credit Swingline Credit on behalf of the
Borrower upon being satisfied as to the purpose, terms, conditions and
beneficiaries thereof and upon execution by the Borrower of the applicable
Lender's usual forms. Each Letter of Credit may be for periods of up to one year
from date of issue; provided that no such period shall extend beyond the
Maturity Date.

         2) The Borrower shall pay to each Lender issuing a Letter of Credit, an
issuance fee in respect of such Letter of Credit at the rate agreed upon between
the Borrower and such Lender. Issuance fees in respect of Letters of Credit
shall be calculated on the maximum daily liability of the Lender under the
Letter of Credit and shall be payable in advance.

         3) The Borrower shall forthwith reimburse each Lender for any payment
made by such Lender pursuant to a Letter of Credit, either by payment thereof in
full or through utilization of the Credits in accordance with this Agreement or
through a combination thereof.

         4) If any Letter of Credit is outstanding at any time that an Event of
Default occurs, the Borrower shall forthwith upon demand by the Agent pay to the
Agent for the benefit of the Lenders who have issued the outstanding Letters of
Credit, Dollars in an amount equal to the face amount of such Letters of Credit.
Such funds (together with interest thereon) shall be held by the applicable
Lender for payment of the liability of the Borrower in respect of such Letters
of Credit, and shall bear interest for such terms as are selected from time to
time by the Lender at the wholesale money market rate of the Lender for deposits
of similar amounts and maturities.

         5) Each Lender shall be entitled to honour each demand made under a
Letter of Credit in accordance with the terms thereof without inquiring as to
the propriety, sufficiency or genuineness of any such demand.

<PAGE>
                                     - 31 -

                                   ARTICLE VI
                           FEES AND INDEMNITIES, ETC.

6.1      FEES

         The Borrower will pay such fees to the Agent and to the Lenders as
agreed by the Borrower separately with the Agent and with each of the Lenders by
agreement in the form attached hereto as Exhibit F.

6.2      REGULATORY CHANGE INDEMNITY

         1) If any regulatory change imposes, modifies or deems applicable any
capital adequacy, capital maintenance or similar requirement, (a "REGULATORY
CHANGE") and as a result thereof, in the opinion of a Lender acting reasonably,
the rate of return on such Lender's capital as a consequence of its obligations
hereunder is reduced to a level below that which such Lender could have achieved
but for such circumstances, then the Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender for such reduction
in rate of return. If any Lender shall give notice pursuant to this Section, the
Agent at the request of the Borrower shall make reasonable efforts to assist the
Borrower to replace such Lender hereunder. For the purpose of this Section, a
certificate of the Lender setting out the particulars of the calculation of the
amounts payable by the Borrower and certifying that such calculation has been
applied similarly to all such Lender's customers similarly affected will, in the
absence of manifest error, be prima facie evidence thereof.

         2) The obligation of the Borrower to pay the amounts referred to in
Section 6.2(1) will be subject to the following: (a) the Borrower will not
compensate the Agent or any Lender for increased costs due to taxes on the
overall net income or capital of such Lender (otherwise than pursuant to
applicable capital adequacy rules); (b) the Borrower will only be responsible
for costs incurred after the date that written notice of capital adequacy
requirements is received, such notice to include reasonable details of the
increased costs; and (c) the Borrower will not compensate the Agent or any
Lender for costs that are already a factor in determining the basis of the
interest rates or fees charged.

6.3      CURRENCY INDEMNITY

         Any payment on account of an amount payable hereunder in a specified
currency made to or for the account of the Agent or any Lender in a currency
other than the specified currency (whether voluntarily or pursuant to a
judgement or order of a court or tribunal of any jurisdiction or otherwise)
shall constitute a discharge of the Borrower's indebtedness and liabilities to
the Agent and the Lenders only to the extent of the amount of the specified
currency which the Agent, the Lenders or any of them as the case may be, is/are
able, on the date of receipt of such payment, to purchase in Toronto, Ontario
with the amount so received by it/them. If the amount of the specified currency
which the Agent, the Lenders or any of them is/are so

<PAGE>
                                     - 32 -

able to purchase is less on such date than the amount of the specified currency
originally due to it/them, the Borrower unconditionally indemnifies and saves
the Agent and each Lender harmless from and against any loss or damage arising
as a result of such deficiency other than any loss or damage due to such
Person's gross negligence or wilful misconduct. This indemnity shall constitute
an obligation separate and independent from the other obligations contained in
this Agreement, shall give rise to a separate and independent cause of action,
shall apply irrespective of any indulgence granted by the Agent or any of the
Lenders from time to time and shall continue in full force and effect
notwithstanding any judgement or order for a liquidated sum in respect of an
amount due hereunder or under any judgement or order.

6.4      ENVIRONMENTAL INDEMNITY

         The Borrower unconditionally indemnifies and holds harmless the Agent
and each of the Lenders and their directors, officers, employees and agents in
respect of any costs, losses, damages, expenses, judgements, suits, claims,
awards, fines, sanctions and liabilities whatsoever (including any reasonable
costs or expenses of defending or denying the same and including the reasonable
costs or expenses of preparing any necessary environmental assessment report or
other such reports required for such defense) both (i) arising as a result of
the Agent and the Lenders arranging or providing the Credits to the Borrower and
(ii) arising out of, or in respect of: (a) any release, deposit, discharge or
disposal of any hazardous or toxic materials, pollutants, contaminants, waste or
other substances in violation of Environmental Laws in connection with the
Borrower's property or business; and (b) the remedial action (if any) taken by
any of the Agent or the Lenders in respect of any such release, deposit,
discharge or disposal. This indemnity will survive the repayment or cancellation
of the Credits or any termination of this Agreement.

6.5      GENERAL INDEMNITY

         The Borrower unconditionally indemnifies and holds harmless the Agent
and each of the Lenders and their directors, officers, employees and agents
(each an "Indemnified Person") in respect of any costs, losses, damages,
expenses, judgements, actions, suits, proceedings, claims, awards, fines,
sanctions and liabilities whatsoever (including reasonable costs or expenses of
investigating, defending or denying the same and including the reasonable costs
or expenses of preparing any reports for such investigation, defense or denial,
whether or not such Indemnified Person is a party to any action, suit or
proceeding out of which any such costs or expenses arise) as a result of or
arising out of or in any way related to or resulting from the establishment of
the Credits or the making of any Accommodation under the Credits, provided that
the Borrower shall not be obliged to indemnify any Indemnified Person for any
such costs, losses, damages, expenses, judgements, suits, claims, awards, fines,
sanctions and liabilities where such costs, losses, damages, expenses,
judgements, suits, claims, awards, fines, sanctions and liabilities have been
determined by a court of competent jurisdiction to have arisen as a result of or
from the gross negligence or wilful misconduct of any Indemnified Person.

<PAGE>
                                     - 33 -

6.6      NATURE OF INDEMNITIES

         1) Survival of Indemnity. Notwithstanding any other provision of this
Agreement or the other Documents, the indemnities in favour of the Agent and/or
the Lenders referred to in this Agreement and in the other Documents shall
survive the repayment, cancellation or termination of the Credits and shall
continue in full force and effect so long as the possibility of any such
liability, claim or loss exists and shall apply notwithstanding any knowledge
which the Agent or any Lender may have relating to such liabilities, claims or
losses, either now or in the future.

         2) Indemnity Separate. The indemnities in favour of the Agent and/or
the Lenders referred to in this Agreement and in the other Documents shall each
constitute an obligation separate and independent from the other obligations
contained in this Agreement, shall give rise to a separate and independent cause
of action, and shall apply irrespective of any indulgence granted by the Agent
or any Lender from time to time. A separate action or actions may be brought and
prosecuted against the Borrower in respect of each such indemnity, whether or
not any action is brought against any other Person or whether or not any other
Person is joined in such action or actions.

<PAGE>
                                     - 34 -

                                  ARTICLE VII
                            REPAYMENT AND PREPAYMENT

7.1      REPAYMENT OF CREDITS

         1) The Revolving Credit. Amounts borrowed under the Revolving Credit
may be repaid at any time upon the Borrower providing to the Agent the written
notice set out for borrowings for such Accommodation under Section 2.6(1),
provided that all of the following conditions are met:

         (i)      each repayment by the Borrower other than in respect of a
                  Prime Rate Loan or a US Base Rate Loan is in a minimum amount
                  of Cdn$3,000,000 or US$3,000,000, as applicable, and in whole
                  multiples of Cdn$100,000 or US$100,000, as applicable,
                  thereafter;

         (ii)     any repayment by the Borrower of a Prime Rate Loan or a US
                  Base Rate Loan is in a minimum amount of Cdn$1,000,000 or
                  US$1,000,000, as applicable and in whole multiples of
                  Cdn$100,000 or US$100,000, as applicable thereafter;

         (iii)    any repayment of LIBOR Loans shall be subject to Section 4.2;
                  and

         (iv)     any repayment of a Bankers' Acceptance must be made on the
                  maturity of such Bankers' Acceptance.

Amounts so repaid may be reborrowed from time to time in accordance with the
provisions of this Agreement.

         2) Maturity Date. Subject to Article 11, the Borrower will repay all
Accommodation outstanding under the Credits, together with all unpaid and
accrued interest thereon and all amounts relating thereto hereunder, on the
Maturity Date.

         3) LIBOR Loans. The Borrower shall repay to the Agent on behalf of the
Lenders all outstanding LIBOR Loans for which it is liable under the Revolving
Credit on the expiration of the relevant LIBOR Periods but shall be entitled
from time to time to obtain further LIBOR Loans or other Accommodation from the
applicable Lenders in accordance with this Agreement.

         4) Bankers' Acceptances. The Borrower shall redeem at maturity all
outstanding Bankers' Acceptances issued on its behalf but shall be entitled from
time to time to obtain further Accommodation by way of Bankers' Acceptances or
other Accommodation in accordance with this Agreement.

<PAGE>
                                     - 35 -

7.2      CURRENCY OF REPAYMENTS

         Each repayment will be made in the currency or currencies of the
Accommodation being repaid.

<PAGE>
                                     - 36 -

7.3      EXCEEDING LIMIT OF CREDIT

         If the Canadian Dollar Amount of aggregate amount of Accommodation
outstanding at any time under the Revolving Credit exceeds the maximum amount of
the Revolving Credit at such time taking into consideration Section 2.3(2)
(regardless of the manner in which such event occurred) and such excess is
outstanding for 3 Banking Days, the Borrower will immediately repay such excess
to the Agent so that the amount of all Accommodation outstanding under the
Revolving Credit does not at any time exceed the limit of such Credit at such
time.

7.4      AUTOMATIC DEBIT

         The Borrower authorizes and directs the Agent to automatically debit,
by electronic or manual means, the account of the Borrower as the Borrower shall
have designated to the Agent and any other bank account of the Borrower for any
principal, interest, fees, or other amounts from time to time payable by the
Borrower under or in respect of any and all of the Documents.

7.5      CANCELLATION OF COMMITMENT

         The Borrower may at any time and from time to time, upon five (5) days
prior written notice to the Agent, permanently cancel any undrawn portion of the
Lenders' aggregate Commitments for the Revolving Credit in a minimum amount of
$3,000,000 and in whole multiples of $1,000,000 thereafter, in which case the
Commitment of each Lender will be reduced, as of the commencement of the next
Banking Day, by an amount which equals that proportion of the sum so specified
by the Borrower which such Lender's Commitment is of the maximum principal
amount of Accommodation available under the Revolving Credit.

7.6      PAYMENTS

         Except as specifically provided in this Agreement, all payments under
the Revolving Credit will be made to the Agent on behalf of the Lenders on a pro
rata basis in accordance with each Lender's share of the total Accommodation
outstanding under such Credit immediately before such repayment.

7.7      EXTENSION OF MATURITY DATE

         At least 60 days but not more than 90 days prior to the Maturity Date,
the Borrower shall be entitled to request, by written notice to the Agent with
such notice to be accompanied by the business plan referred to in Section
10.4(3)(a)(ii), that the Maturity Date be extended by a further period of 364
days. If all Lenders confirm to the Agent, in writing, not less than 30 days
prior to the Maturity Date, that the extension is acceptable to them, the
Maturity Date shall be extended to that date which is 364 days from the date of
receipt by the Agent of the written consent to the extension from all of the
Lenders and the Agent shall so advise the Borrower.

<PAGE>
                                     - 37 -

If a Lender should fail to provide any written notice to the Agent prior to the
date which is 30 days prior to the Maturity Date, it shall be deemed to have
declined the extension. If one or more Lenders has declined or be deemed to have
declined the proposed extension, the Agent shall so advise the Borrower and the
Maturity Date shall not be extended.

<PAGE>
                                     - 38 -

                                  ARTICLE VIII
                                    SECURITY

8.1      SECURITY

         The present and future indebtedness and liability (including in respect
of fees and expenses) of the Borrower to the Agent and the Lenders under this
Agreement and under any Foreign Exchange Contracts will be secured by the
following:

         (a)      a general security agreement granting to the Agent a first
                  ranking security interest in all of the Borrower's present and
                  future inventory and accounts receivable;

         (b)      an assignment under Section 427 of the Bank Act (Canada) in
                  favour of each Lender which is chartered under such Act; and

         (c)      all policies of insurance issued to the Borrower with respect
                  to accounts receivable and inventory with loss payable clauses
                  in favour of the Agent.

8.2      FORM, SUBSTANCE AND REGISTRATION OF SECURITY

         The Security and all acknowledgements referred to in this Section will
be in such form and forms and the Security will be registered in such
jurisdictions, as the Agent may from time to time reasonably require. If
required, the Borrower will provide to the Agent security by way of a debenture
if in the reasonable opinion of the Agent such security is required to secure
inventory for the benefit of all of the Lenders in those jurisdictions which do
not have Personal Property Security Act legislation.

8.3      AFTER ACQUIRED PROPERTY AND FURTHER ASSURANCES

         The Borrower shall from time to time, execute and deliver all such
further deeds or other instruments of conveyance, assignment, transfer,
mortgage, pledge or charge in connection with its accounts receivable and
inventory acquired by the Borrower after the date hereof and intended to be
subject to the Security and shall take all other action as reasonably required
to give the Agent and the Lenders the Security contemplated hereby as the Agent
may from time to time reasonably request.

<PAGE>
                                     - 39 -

8.4      GENERAL

         Nothing herein contained or in any Security now held or hereafter
acquired by the Lenders or the Agent on behalf of the Lenders, nor any act or
omission of the Agent or the Lenders with respect to any such Security, will in
any way prejudice or affect the rights, remedies or powers of the Agent and the
Lenders with respect to any other Security at any time held by the Agent or the
Lenders.

<PAGE>
                                     - 40 -

                                   ARTICLE IX
                         REPRESENTATIONS AND WARRANTIES

9.1      REPRESENTATIONS AND WARRANTIES

         The Borrower represents and warrants to the Agent and each of the
Lenders as follows:

         1) Due Incorporation, etc. The Borrower is a corporation duly
incorporated and validly subsisting under the laws of Alberta. The Borrower is
duly qualified to carry on its business in each jurisdiction where the nature of
any material assets owned by it or where any business carried on by it that is
material to its financial condition makes such qualification necessary.

         2) Qualification, Licences etc. The Borrower has obtained, maintained
and is in good standing with respect to, all required licences, permits and
approvals from any and all Official Bodies and all applicable stock exchange and
securities commission rules required in respect of its property and operations
and the listing of its securities which are material to the financial condition
of the Borrower. The Borrower has made all filings required under Applicable
Laws which are material to the operation of its business.

         3) Corporate Power. The Borrower has the corporate power and authority
to own its properties and to carry on its businesses as presently carried on by
it and to enter into and perform its obligations under the Documents.

         4) Compliance with Laws, Regulations, etc. The Borrower is conducting
its business and operations in compliance in all material respects with all
Applicable Laws and all applicable stock exchanges and securities commission
rules.

         5) Environmental Compliance. Except as disclosed in Schedule B, as such
Schedule may be amended from time to time by written notice given by the
Borrower to the Agent and the Lenders, the Borrower has received no notice, nor,
is it aware that its business or operations are not in material compliance with
all applicable Environmental Laws and the properties of the Borrower comply in
all material respects with all Environmental Laws.

         6) Due Execution, etc. Each Document has been duly authorized, executed
and delivered by the Borrower and constitutes a legal, valid and binding
obligation of the Borrower, enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium and similar laws
affecting the rights of creditors generally, and equitable principles which may
limit the availability of certain remedies including the remedy of specific
performance.

         7) Consents etc. No consent, approval or authorization of, or
declaration, registration, filing or qualification with, or giving of notice to,
or taking of any other action in

<PAGE>
                                     - 41 -

respect of, any Official Body or stock exchange or securities commission or any
other Person is required in connection with the execution, delivery or
enforcement of the Documents or the performance thereof or the consummation of
any of the transactions contemplated thereby.

         8) No Default Caused. Neither the execution nor the delivery of any
Document, the consummation of the transactions therein contemplated, nor
compliance with the terms, conditions and provisions thereof, conflicts with, or
will conflict with, or results or will result in, any breach of, or
contravention of, or constitutes a default (or which would constitute such a
default or event of default with the giving of notice, the lapse of time, or
both) under any of the provisions of (i) the Constating Documents of the
Borrower; (ii) any material agreement or instrument to which the Borrower is a
party or by which it or any of its property or assets are bound; (iii) any
judgement or order, writ, injunction, decree or demand of any Official Body;
(iv) any licence or permit held by the Borrower; or (v) any law or rule or
regulation to which the Borrower or its property or assets are subject; or (vi)
results or will result in the creation or imposition of any Lien upon any of its
property or assets, nor will such execution or delivery constitute an event
permitting termination of any material agreement, consent, licence or instrument
to which the Borrower is a party or its property or assets are subject.

         9) No Event of Default. No event has occurred which constitutes a
Default or an Event of Default nor will any such Default or Event of Default
occur by reason of the Borrower entering into any Document to which it is a
party or performing its obligations thereunder or entitling itself to any
benefits available to it thereunder or the completion of any of the transactions
contemplated thereunder.

         10) Subsidiaries. The Borrower has no Subsidiaries.

         11) Financial Statements. The Borrower has furnished the Agent with its
most recent annual and quarterly financial statements; all such financial
statements have been prepared in accordance with GAAP applied on a consistent
basis during such period; and each balance sheet as therein contained presents
fairly the financial position of the Borrower as at the date thereof; and each
statement of profit and loss as therein contained presents fairly the results of
the Borrower's operations for the periods indicated;

         12) Material Adverse Change. Since the date of the most recent annual
and quarterly financial statements, (i) there has been no Material Adverse
Change in the financial condition of the Borrower as shown on its balance sheet
as at that date; and (ii) the business, operations and assets of the Borrower
have not been materially adversely affected as a result of any act or event
including fire, explosion, casualty, flood, drought, riot, storm, condemnation,
act of God, accident, labour trouble, expropriation or act of any government.

         13) Disclosure. Neither the financial statements referred to above, nor
any other statement or report furnished to the Agent by or on behalf of the
Borrower or in connection with the negotiation or confirmation of the
transactions contemplated herein contain, as at the time such statements were
furnished, any untrue statement of a material fact or any omission of a material
fact necessary to make the statements contained therein not misleading, and all
such

<PAGE>
                                     - 42 -

statements and reports, taken as a whole together with this Agreement and the
Security, do not contain any untrue statement of a material fact or omit a
material fact necessary to make the statements contained herein or therein not
misleading.

         14) Title to Properties. The Borrower is the sole registered, legal and
beneficial owner of all of its properties, real and personal, and has good and
marketable title (or good and marketable leasehold interest with respect to
leased property) to all of its real property (including fixtures), and good and
marketable title (or good and marketable leasehold interest with respect to
leased personal property) to all of its personal property, free of all Liens
except Permitted Liens.

         15) Intellectual Property Rights by License or Otherwise. The Borrower
has, by license or otherwise, all patents, trade-marks, trade names, service
marks, copyrights, industrial designs, inventions, technology and other similar
rights and all rights for the use of any patents, trade-marks, trade names,
service marks, copyrights, industrial designs, inventions, technology or other
similar rights which are material and necessary to carry on the business of the
Borrower.

         16) Condition of Assets. All of the material assets and material
properties of the Borrower which are necessary for the operation of its business
are, in all material respects, in good working condition for such operation,
ordinary wear and tear excepted, and are able to serve the function for which
they are currently being used.

         17) Litigation. There are no actions, suits or proceedings pending or
threatened against or affecting the Borrower at law or in equity or before or by
any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind,
which would result in any Material Adverse Change in the business, operations,
prospects, properties, assets or condition, financial or otherwise, of the
Borrower, or in the ability of the Borrower to perform its obligations under the
Documents or any agreement or instrument delivered pursuant hereto or thereto;
and the Borrower is not aware of any existing ground on which any such action,
suit or proceeding might be commenced with any reasonable likelihood of success;
and the Borrower is not in default with respect to any judgement, order, writ,
injunction, decree, award, rule or regulation of any court, arbitrator or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which, either separately or in the aggregate, would result
in any such Material Adverse Change, other than as set out in Schedule C.

         18) Truth and Accuracy. As of the respective dates that they were
furnished, no information, statement or report furnished by or on behalf of the
Borrower to the Agent or any Lender contains any untrue statement of a material
fact, or omitted as of such time, a material fact necessary to make such
information, statement or reports not misleading.

         19) Taxes. The Borrower has filed all tax returns which, to the
knowledge of the Borrower, are required to have been filed, has paid all taxes
shown to be due and payable on such returns or on any assessments made against
it or any of its property and all other taxes, fees or other charges imposed on
it or any of its property by any Official Body (other than those the

<PAGE>
                                     - 43 -

amount or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on its books) and no tax liens have been filed and, to
the knowledge of the Borrower, after due inquiry, no claims are being asserted
with respect to any such taxes, fees or other charges.

         20) Insurance. The Borrower maintains insurance for its assets and
businesses, including business interruption insurance, in such amount, against
such risks and with such deductibles as are generally maintained by companies
carrying on a business comparable to that carried on by the Borrower which
policies pertaining to the Borrower's inventory and accounts receivable contain
mortgage and loss payable clauses in favour of the Agent.

         21) Material Agreements. All of the Material Agreements are in good
standing.

9.2      SURVIVAL OF REPRESENTATIONS AND WARRANTIES

         All representations and warranties made by the Borrower in this
Agreement and in any other Document are material and shall be deemed to have
been relied upon by the Agent and the Lenders, notwithstanding any independent
investigation heretofore or hereafter made by the Agent or any of the Lenders,
and shall continue in full force and effect, notwithstanding the date any
Accommodation is made, for so long as any amount remains unpaid to any of the
Agent or any of the Lenders pursuant to the terms of this Agreement or any other
Document.

<PAGE>
                                     - 44 -

                                    ARTICLE X
                                    COVENANTS

10.1     AFFIRMATIVE COVENANTS

         The Borrower covenants and agrees with the Agent and each of the
Lenders that, so long as this Agreement is in force and except as otherwise
permitted by the prior written consent of the Required Lenders, it will:

         1) Corporate Existence. Do or cause to be done all things necessary to
keep in full force and effect its corporate existence and all properties,
rights, franchises, licenses and qualifications necessary to carry on its
business or own property in each jurisdiction in which it carries on business or
owns property.

         2) Compliance with Laws, etc. Comply with its Constating Documents and
all Applicable Laws (including Environmental Laws) and all applicable stock
exchange and securities commission rules and obtain and maintain in good
standing all licenses, permits and approvals from any and all Official Bodies
and all applicable stock exchanges and securities commissions required in
respect of its operations and the listing of its securities.

         3) Use of Credits. Use Accommodation obtained under the Credits only
for the purposes set out in Section 2.2.

         4) Payment. Duly and punctually pay or cause to be paid to the Agent
and all Lenders all principal, interest, fees and other amounts payable by it
hereunder and under the other Documents on the dates, at the places and in the
monies and manner set forth herein and therein.

         5) Maintenance of Properties, Etc. Maintain and preserve all of its
material properties, assets and undertaking necessary in the proper conduct of
its business in good working order and condition in all material respects
(ordinary wear and tear, obsolescence and redundancy excepted), and defend its
title to such property against the claims of all Persons other than holders of
Permitted Liens.

         6) Obligations and Taxes. Pay or discharge, or caused to be paid or
discharged, before the same shall become delinquent (i) all Taxes imposed upon
it or upon its income or profits or in respect of its business or property and
file all tax returns in respect thereof, (ii) all lawful claims for labour,
materials and supplies which, if unpaid, may by Applicable Law become a Lien
upon the property and assets of the Borrower, except any such tax or claim which
is being contested in good faith and by proper proceeding and with respect to
which a reserve in conformity with GAAP has been provided on its books.

         7) Insurance. Maintain insurance of such types, in such amounts and
against such risks as is prudent for a business carrying on the business carried
on by it of an established

<PAGE>
                                     - 45 -

reputation with financially sound and reputable insurers with the policies
pertaining to the Borrower's inventory containing loss payable and mortgage
clauses in favour of the Agent.

         8) Senior Notes. Comply with all of the obligation and requirements of
the Borrower under the Senior Notes.

10.2     NEGATIVE COVENANTS OF THE BORROWERS

         The Borrower covenants with the Agent and each of the Lenders that, so
long as this Agreement is in force and except as otherwise permitted by the
prior written consent of the Required Lenders, it will not:

         1) Business. Engage in any business other than as presently carried on
by the Borrower and shall continue to conduct and operate such business in a
proper, efficient and business-like manner and will not incorporate or acquire
any Subsidiaries.

         2) Liens. Create, assume or permit to exist over all or any part of its
business or assets, whether now owned or hereafter acquired, any Lien other than
Permitted Liens.

         3) Sale of Assets. Sell, lease, assign, transfer or otherwise dispose
of or enter into any agreement to sell, lease, assign, transfer or dispose of,
any assets, other than its inventory, whether now owned or hereafter acquired,
which in any fiscal year, exceeds $5,000,000.

         4) Fiscal Year. Change its fiscal year end.

         5) Reorganization. Enter into any corporate transaction (or series of
transactions) (whether by way of reconstruction, reorganization, consolidation,
amalgamation, merger or otherwise) whereby all or substantially all of its
undertaking, property and assets would become the property of any other Person
or in the case of any such amalgamation, the property of the continuing
corporation.

         6) Capital Expenditures. Incur Capital Expenditures in any consecutive
four fiscal quarters of the Borrower in excess of $6,000,000 for Maintenance
Capital Expenditures and for other capital expenditures in excess of the amount
indicated in the forecast of the Borrower dated March 13, 2001 provided by the
Borrower to the Agents and the Lenders.

         7) Investments, Etc. Make any investments, acquisitions, asset
purchases other than current assets, loans, advances or guarantees, whether
inter-company, with an affiliate, with a shareholder or otherwise which in
aggregate exceed more than $5,000,000 in any fiscal year.

         8) Additional Debt. Incur any additional Indebtedness for borrowed
money other than by way of Senior Notes outstanding at the Closing Date, by way
of Indebtedness secured by Purchase Money Liens to the extent such Purchase
Money Liens are Permitted Liens or by way of Subordinated Debt.

<PAGE>
                                     - 46 -

         9) Distributions. Pay any dividends or make any other distributions
including by way of redemption or purchase of shares, to its shareholders in any
fiscal year.

         10) Amendment. Amend any of its Constating Documents, by-laws or
Material Agreements in a manner which would be prejudicial to the interest of
the Lenders.

         11) Foreign Exchange Contracts. Have outstanding at any time Foreign
Exchange Contracts in an aggregate amount which exceeds US$80,000,000.00.

         12) Senior Notes. Not redeem, purchase or prepay any of the Senior
Notes.

10.3     FINANCIAL COVENANTS

         The Borrower covenants with the Agent and each of the Lenders that, so
long as this Agreement is in force and except as otherwise permitted by the
prior written consent of the Required Lenders, it will:

         (i)      Ensure that the Fixed Charge Coverage Ratio will be no less
                  than 1.0:1;

         (ii)     Maintain a Working Capital Ratio of no less than 1.75:1 for
                  each of its fiscal quarters.

The above tests will be calculated in each Compliance Certificate delivered to
the Agent pursuant to Section 10.4(2)(iii).

10.4     ACCOUNTING, FINANCIAL STATEMENTS AND OTHER INFORMATION

         1) Maintenance of Records. The Borrower shall maintain a system of
accounting established and administered in accordance with GAAP consistently
applied, and will set aside on its books all such proper reserves as such
accounting principles shall require. The Borrower shall permit for the purposes
of this Agreement the Agent to visit and inspect, at the expense of the Agent or
Lender, any properties of the Borrower, to examine the books, financial records
and other records thereof (whether paper, electronic or otherwise) and to
examine all or any aspect of the operations of the Borrower, all at such
reasonable times and as often as may reasonably be requested by the Agent, and
the Borrower, agrees to answer any reasonable inquiries related to such
examinations or inspections which the Agent or any Lender may have. The Agent
shall have no duty to make any such visits, inspections or examinations nor
shall it incur any liability or obligation (other than in respect of the costs
and expenses related thereto) or lose any rights for not making the same.

         2) Financial Reports. The Borrower shall furnish to the Agent with
sufficient copies for all of the Lenders:

         (i)      Annual Audited Financial Statements. Promptly upon
                  availability and in any event within 120 days after the end of
                  each fiscal year of the Borrower, the annual audited financial
                  statements of the Borrower

<PAGE>
                                     - 47 -

                  prepared on a consolidated basis in accordance with GAAP
                  applied on a consistent basis, and setting forth in
                  comparative form the corresponding figures for the preceding
                  fiscal period of the Borrower, all in reasonable detail, and
                  reported upon by the Auditors;

         (ii)     Unaudited Quarterly Financial Statements. Promptly upon
                  availability and in any event within 60 days after the end of
                  each of the first three fiscal quarters in each fiscal year of
                  the Borrower, the quarterly unaudited financial statements of
                  the Borrower (including a balance sheet and statements of
                  profit and loss and cashflows for such fiscal quarter)
                  prepared on a consolidated basis in accordance with GAAP
                  applied on a consistent basis, and setting forth in
                  comparative form the corresponding figures for the previous
                  fiscal year, all in reasonable detail and certified by a
                  senior financial officer of the Borrower; and

         (iii)    Quarterly Compliance Certificates. Together with each delivery
                  of unaudited quarterly financial statements pursuant to
                  Section 10.4(2)(ii), and with each delivery of annual audited
                  financial statements pursuant to Section 10.4(2)(i), a
                  Compliance Certificate, stating that (a) the signers have
                  reviewed the relevant terms of the Documents, (b) the signers
                  do not have knowledge of the existence, as at the date of such
                  certificate, of any condition or event which constitutes a
                  Default or an Event of Default, or if any such condition or
                  event existed or exists, specifying the nature and period of
                  existence thereof and the action which the Borrower has taken
                  or proposes to take with respect thereto, (c) the
                  representations and warranties contained in Section 9.1 are
                  true and correct in all material respects as of the date of
                  the certificate or, if untrue or incorrect as of such date,
                  providing a list of the representations and warranties which
                  are untrue or incorrect, a description in reasonable detail of
                  the circumstances or events which result in the
                  representations and warranties being untrue or incorrect and
                  an amendment to each Schedule related to the representations
                  and warranties which requires amendment in order to be
                  accurate and correct and (d) demonstrating, in reasonable
                  detail, compliance with the Financial Covenants.

         3) Notices and Other Information.

         (a)      The Borrower shall furnish to the Agent and each Lender:

                  (i)      Reports and Filings. As soon as available, copies of
                           all proxy circulars, information circulars, offering
                           circulars, material change reports and any other
                           report or information provided by it to a securities
                           commission or stock exchange, and copies of all of
                           its press releases;

<PAGE>
                                     - 48 -

                  (ii)     Annual Business Plan. At such time as required under
                           Section 7.7 an annual business plan for the following
                           fiscal year which will include, an income statement,
                           balance sheet, statement of changes in financial
                           position, the assumptions on which the business plan
                           is based and disclose in reasonable detail the
                           Borrower's projected Capital Expenditures on a
                           consolidated basis;

                  (iii)    Borrowing Base. Promptly upon availability and in any
                           event within 30 days after the end of each month, an
                           aged listing of Eligible Accounts Receivable and
                           Eligible Inventory along with the calculation of the
                           then available Borrowing Base and such other
                           supporting documents as the Lenders may reasonably
                           request;

         (b)      The Borrower shall furnish to the Agent and the Lenders:

                  (i)      Default or Event of Default. Promptly upon any senior
                           officer of the Borrower obtaining knowledge of any
                           condition or event which constitutes a Default or an
                           Event of Default, a certificate of the Borrower
                           specifying the nature and occurrence of a Default or
                           an Event of Default and what action the Borrower has
                           taken or proposes to take with respect thereto;

                  (ii)     Material Adverse Effect. Promptly upon any senior
                           officer of the Borrower obtaining knowledge of any
                           event which is a Material Adverse Effect, a
                           certificate of the Borrower specifying the nature and
                           occurrence of the Material Adverse Effect and what
                           action the Borrower has taken or proposes to take
                           with respect thereto;

                  (iii)    Other Information. Promptly, such other information
                           as the Agent on behalf of any Lender may from time to
                           time reasonably request;

                  (iv)     Change of Name. Promptly, notice of any change in the
                           name of the Borrower; and

                  (v)      EDC Insurance Policies. Promptly, upon receipt of or
                           upon any amendment thereto, copies of insurance
                           policies issued by the Export Development Corporation
                           in favour of the Borrower which policies shall have
                           loss payable clauses in favour of the Agent.

<PAGE>
                                     - 49 -

                                   ARTICLE XI
                                EVENTS OF DEFAULT

11.1     EVENTS OF DEFAULT

         Any one or more of the following events will constitute an Event of
Default hereunder:

         (a)      DEFAULT IN PRINCIPAL - If the Borrower fails to repay any
                  Indebtedness on account of principal payable under the
                  Credits, on the due date thereof;

         (b)      DEFAULT IN INTEREST, ETC. - If the Borrower fails to repay any
                  Indebtedness on account of, interest, fees, expenses or any
                  other amount (other than principal) payable under this
                  Agreement or any other Document, on the due date thereof and
                  such failure continues for three (3) Banking Days or more;

         (c)      DEFAULT IN PERFORMANCE, ETC. - Subject to Section 11.1(a) and
                  (b), if the Borrower defaults in the performance or observance
                  of any covenant contained in Article 10 of this Agreement;
                  provided with respect to the covenants contained in Article
                  10.1 such default continues unremedied for thirty (30) days
                  after notice thereof is given to the Borrower by the Agent,
                  specifying such default and requiring it to be remedied;

         (d)      REPRESENTATIONS AND WARRANTIES - If (i) any representation or
                  warranty made in this Agreement or in any of the Documents is
                  untrue or incorrect in any material respect when made or
                  deemed to have been made, (ii) any representation or warranty
                  made in any quarterly Compliance Certificate which is
                  delivered by the Borrower pursuant to Section 10.4(2)(iii) is
                  untrue or incorrect in any material respect as of the date on
                  which such quarterly compliance certificate is delivered to
                  the Agent, or (iii) any representation or warranty made in any
                  Notice of Borrowing is untrue or incorrect in any material
                  respect as of the date of such Notice of Borrowing;

         (e)      CROSS DEFAULT - If

                  (i)      the Borrower has defaulted or at any time defaults,
                           in the payment of any Indebtedness in an aggregate
                           cumulative amount of more than $1,000,000 when the
                           same becomes due, including any period of grace
                           applicable thereto; or

                  (ii)     the Borrower defaults in the observance or
                           performance of any agreement or condition relating to
                           any Indebtedness having an outstanding amount in
                           excess of $1,000,000 or its equivalent in any other
                           currency, at the time of default and any applicable
                           cure period has expired or if the Borrower defaults
                           in the performance of any other covenant contained in
                           any

<PAGE>
                                     - 50 -

                           agreement under which such obligations are created
                           and any applicable cure period has expired so that
                           the repayment of Indebtedness having an outstanding
                           amount in excess of $1,000,000 has become
                           accelerateable;

         (f)      JUDGEMENTS - If final judgements for the payment of money in
                  excess of $1,000,000 in the aggregate are rendered against the
                  Borrower and within 30 days after the date of entry has
                  expired, such judgements have not been discharged bonded,
                  stayed on appeal, paid or dismissed;

         (g)      ENCUMBRANCES - If an encumbrancer takes possession of any
                  property or asset of the Borrower with a fair market value in
                  excess of $1,000,000 in the aggregate or if distress or
                  execution or any similar process is levied or enforced
                  thereagainst and remains unsatisfied for such period as would
                  permit such property or assets to be sold thereunder;

         (h)      CONSENTS, ETC. - If any governmental or other consent,
                  license, or authorization required to make any Document legal,
                  valid, binding and enforceable or required in order to enable
                  the Borrower thereunder to perform its obligations thereunder
                  is withdrawn or ceases to be in full force and effect;

         (i)      VOLUNTARY INSOLVENCY, ETC. - If the Borrower passes a
                  resolution or institutes proceedings for its winding-up,
                  liquidation or dissolution or takes action to become a
                  voluntary bankrupt, or consents to the filing of a bankruptcy
                  proceeding against it, or files a proposal, a notice of
                  intention to make a proposal, a petition or answer or consent
                  seeking reorganization, readjustment, arrangement, composition
                  or similar relief under the Bankruptcy and Insolvency Act
                  (Canada), the Companies' Creditors Arrangement Act, the Canada
                  Business Corporations Act, the Business Corporations Act
                  (Alberta), or any other similar law or consents to the filing
                  of any such petition or proceeding, or consents to the
                  appointment of a receiver, liquidator, trustee or assignee in
                  bankruptcy or insolvency or similar officer of itself, of its
                  property, or makes an assignment for the benefit of creditors,
                  or is unable, or an officer or director of the Borrower admits
                  in writing its inability to pay its debts as they become due,
                  or otherwise acknowledges its insolvency, or commits any other
                  act of bankruptcy, or voluntarily suspends transaction of its
                  usual business or any action is taken by the Borrower in
                  furtherance of any of the foregoing;

         (j)      INVOLUNTARY INSOLVENCY, ETC. - If the Borrower is deemed for
                  the purposes of any Applicable Law to be insolvent or if any
                  application is made with respect to the Borrower under the
                  Companies Creditors Arrangement Act (Canada), the Bankruptcy
                  and Insolvency Act (Canada), or similar legislation, domestic
                  or foreign, seeking reorganization, readjustment, arrangement,
                  composition or similar relief for the Borrower under any
                  Applicable Law, or if a proceeding is instituted for the
                  winding up, liquidation or dissolution of the Borrower or
                  seeking an order adjudging the Borrower insolvent or the
                  appointment of any receiver,

<PAGE>
                                     - 51 -

                  liquidator, trustee or similar officer of the Borrower or over
                  all or a substantial part of its property, or a petition in
                  bankruptcy is presented against the Borrower under a
                  bankruptcy or similar statute, domestic or foreign, provided
                  that such application, proceeding or petition is not
                  dismissed, stayed or withdrawn within thirty (30) days after
                  the Borrower has notice or knowledge of the institution
                  thereof; provided further that an Event of Default shall have
                  occurred under this Section 11.1(j) immediately (i) upon the
                  appointment of a receiver, trustee, custodian, liquidator or
                  similar officer of the Borrower, (ii) if it is determined by
                  the Required Lenders, acting reasonably in their sole
                  discretion, that the applicable Borrower is not contesting
                  such application, proceeding or petition in good faith, or
                  (iii) if assets with an aggregate fair market value in excess
                  of $1,000,000 have been attached, in all cases whether or not
                  such application, proceeding or petition is dismissed, stayed
                  or withdrawn within thirty (30) days after the Borrower has
                  notice or knowledge of the institution thereof;

         (k)      CHANGE OF CONTROL OF THE BORROWER - If members of the Millar
                  family including their successors and assigns within the
                  Millar family, cease to hold beneficially and directly or
                  indirectly at least 50.1% of the issued and outstanding voting
                  shares in the capital of the Borrower or cease to directly or
                  indirectly effectively control the Borrower.

11.2     ACCELERATION

         1) Subject to Section 11.2(2), upon the occurrence and during the
continuance of any Event of Default, the Agent will, upon written request by the
Required Lenders, by written notice to the Borrower, take any or all of the
following actions: (a) declare the principal of and accrued interest owing in
respect of any of the Credits and all other amounts owing hereunder or under any
of the other Documents to which the Borrower is a party to be, and the same will
thereupon become, immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived by
the Borrower; (b) declare the Commitments terminated, whereupon the Commitment
of each Lender will terminate immediately; (c) realize upon any Security; and
(d) without limitation, proceed by any other action, suit, remedy or proceeding
authorized or permitted by this Agreement, by any other Document or by law or by
equity.

         2) If (i) a receiving order is issued under the Bankruptcy and
Insolvency Act (Canada) against the Borrower; (ii) the Borrower makes a
voluntary assignment into bankruptcy under the Bankruptcy and Insolvency Act
(Canada); (iii) the Borrower files a proposal or an intention to make a proposal
under the Bankruptcy and Insolvency Act (Canada), (iv) an initial order is made
in respect of the Borrower under the Companies' Creditors Arrangement Act
(Canada) declaring the Borrower to be an insolvent company, (v) an order is made
or a resolution is passed for the winding-up or voluntary dissolution of a
Borrower, whether under the Winding-Up Act (Canada) or any analogous statute, or
(vi) an application is made by the Borrower under the Canada Business
Corporations Act, the Business Corporations Act (Alberta), or under any similar
or analogous statute, for an arrangement involving the Borrower

<PAGE>
                                     - 52 -

and in connection with such application, the Borrower seeks to obtain the
benefit of a stay of proceedings which limits or restricts the enforcement by
the Lenders, or any person on behalf of the Lenders, of the remedies provided
under this Agreement, then all indebtedness owing by the Borrowers under the
Credits shall be automatically due and payable without notice, presentment,
protest, demand, notice of dishonour or any other demand or notice whatsoever,
all of which are hereby expressly waived by the Borrower.

11.3     SET OFF. Upon the occurrence of an Event of Default, notice of which
has been given in writing by the Agent to the Borrower upon written request by
the Required Lenders (other than an Event of Default described in Sections
11.1(i) or 11.1(j)) in addition to and not in limitation of any rights now or
hereafter granted under Applicable Law or the Documents, the Agent and each
Lender may, to the extent permitted by law, without notice to the Borrower at
any time and from time to time: (i) combine, consolidate or merge any or all of
the deposits or other accounts of the Borrower with the Agent or Lender (whether
term, notice, demand or otherwise and whether matured or unmatured), and the
Indebtedness of the Borrower to such Agent or Lender, and (ii) set-off, apply or
transfer any or all sums standing to the credit of any such deposits or accounts
in or towards the satisfaction of any of the Indebtedness of such Borrower or to
the Agent or Lender under the Documents, and may do so notwithstanding that the
balances on such accounts and the Indebtedness may not be expressed in the same
currency and the Agent or Lender is hereby authorized to effect any necessary
conversions at the rate of exchange of the Agent or Lender then prevailing.

11.4     REMEDIES CUMULATIVE

         The rights and remedies of the Agent and the Lenders hereunder are
cumulative and in addition to, and not in substitution for, any rights or
remedies provided by any other Document, by law or by equity.

11.5     AVAILABILITY OF ACCOMMODATION AFTER DEFAULT AND APPROPRIATION OF MONIES
         RECEIVED

         1) No Further Accommodation. The Agent and any Lender may from time to
time when a Default or an Event of Default has occurred, refuse to grant any
further Accommodation to the Borrower under the Credits or permit any
rollovers/switches thereof (except rollovers or switches to Prime Rate Loans or
US Base Rate Loans during the cure period provided for hereunder or thereafter
so long as the Lenders have not made demand of all outstanding Credits) and
appropriate any monies received under this Agreement as the Agent and each
Lender in its discretion may see fit, and the Borrower will have no right to
require any inconsistent appropriation.

         2) Payments Received by Lenders. Subject to Section 11.7, if any Lender
at any time receives payment or satisfaction of all or any part of its loans,
interest thereon or any amount payable under this Agreement by whatever means
(including by set-off) to which it is not otherwise entitled under this
Agreement, then such Lender will pay to the Agent, on behalf of

<PAGE>
                                     - 53 -

the other Lenders such amount as will ensure that each Lender will receive such
payment to which it is entitled under this Agreement.

         3) Where Refund Required by Lender. In the event that at any time any
Lender is required to refund (as a preference or otherwise) any amount which has
been paid to or received by it on account of any part of its loans, interest
thereon or any other amount payable hereunder and which has been paid to any
other Lender pursuant to this Section 11.5, such other Lender will repay a
proportionate amount of the sums so refunded without interest, or, as the case
may be, repurchase for cash from the first-mentioned Lender a proportionate part
of the Indebtedness of the Borrower to such first-mentioned Lender.

         4) Effect on Borrower's Indebtedness. If a Lender is required to make
any payment to any other Lender pursuant to this Section 11.5, it will give
notice thereof to the Agent and, subject to Section 11.5(3), the liability of
the Borrower to the Lender making such payment under this Agreement will be
treated as not having been reduced by the amount of such payment and the
liability of the Borrower to any Lender receiving such payment will be treated
as having been reduced by the amount of the payment received by such Lender.

11.6     NON-MERGER

         The taking of a judgement or judgements or any other action or dealing
whatsoever by the Agent or any Lender in respect of any Document will not
operate as a merger of any Indebtedness of the Borrower to the Agent or any of
the Lenders or in any way suspend payment or affect or prejudice the rights,
remedies and powers, legal or equitable, which the Agent or any of the Lenders
may have in connection with such liabilities and the surrender, cancellation or
any other dealings with any security for such liabilities will not release or
affect the liability of the Borrower hereunder or under any security held by or
on behalf of any of the Lenders.

11.7     PRO RATA SHARING

         After notice is given by the Agent to the Borrower pursuant to Section
11.2, all amounts received (including by way of set-off) will be shared pro rata
among the Lenders in the same proportion as is the Accommodation extended by
each Lender under the Credits and under Foreign Exchange Contracts to the total
of all outstanding Accommodation under the Credits and Foreign Exchange
Contracts.

<PAGE>
                                     - 54 -

                                  ARTICLE XII
                              CONDITIONS PRECEDENT

12.1     CLOSING

         Time is of the essence of this Agreement. The execution and delivery of
this Agreement shall take place on the Closing Date.

12.2     CONDITIONS PRECEDENT TO THE ESTABLISHMENT BY LENDERS OF THE CREDITS

         The establishment of the Credits by the Lenders shall be subject to the
fulfilment of each of the following conditions precedent to the satisfaction of
all of the Lenders on or prior to the Closing Date, it being understood that the
said conditions are included for the exclusive benefit of the Agent and the
Lenders and may be waived in writing by the Agent and all the Lenders, in their
sole discretion, in whole or in part from time to time:

         1)       No Default. There shall exist no Default or Event of Default
                  on the Closing Date and the Borrowers shall have delivered to
                  the Agent an Officer's Certificate to such effect.

         2)       Representations and Warranties. All representations and
                  warranties contained in Section 9.1 shall be true on and as of
                  the Closing Date with the same effect as if such
                  representations and warranties had been made on and as of such
                  date and the Borrower shall have delivered to the Agent an
                  Officer's Certificate to such effect.

         3)       Security. The Agent shall have received the Security in form
                  and substance satisfactory to the Agent which shall have been
                  registered where reasonably required by the Agent.

         4)       Compliance with Financial Covenants, etc. The Agent and the
                  Lenders shall have received a Compliance Certificate
                  demonstrating, and including calculations to evidence,
                  compliance with each of the Financial Covenants and a
                  calculation of the available Borrowing Base.

         5)       Credit Documents. The Agent and the Lenders shall have
                  received this Agreement and the other Documents duly
                  authorized, executed and delivered.

         6)       Delivery of Additional Documents. The following documents in
                  form, substance and execution acceptable to the Agent shall
                  have been delivered to and reviewed by, the Agent and the
                  Lenders:

                  (i)      Constating Documents. Certified copies of the
                           Constating Documents of the Borrower and certified
                           copies of all corporate proceedings required to

<PAGE>
                                     - 55 -

                           be taken by the Borrower to authorize the execution
                           and delivery of the Documents and the performance by
                           it of the transactions contemplated in such
                           Documents;

                  (ii)     Incumbency. Certificates of incumbency of the
                           Borrower setting forth specimen signatures of the
                           persons authorized to execute on behalf of the
                           Borrower the Documents;

                  (iii)    Borrower's Opinion. The opinion of solicitors for the
                           Borrower respecting such legal matters incidental to
                           this Agreement and the transactions provided for or
                           contemplated herein as the Agent has reasonably
                           requested (including as to the enforceability of the
                           Documents; and

                  (iv)     Agents' and Lenders' Solicitors' Opinions. The
                           opinions of counsel for the Agent and the Lenders in
                           form and substance satisfactory to the Agent.

         7)       Fees. All fees and expenses payable to the Agent and the
                  Lenders on or before the initial advance will have been paid.

         8)       No Material Adverse Change. There shall have occurred no
                  Material Adverse Change with respect to the Borrower, and the
                  Borrower shall have delivered to the Agents and the Lenders an
                  Officer's Certificate to such effect.

         9)       Delivery of Financial Information. The Agent and the Lenders
                  shall have received:

                  (i)      the audited financial statements of the Borrower for
                           the fiscal year ending December 31, 2000; and

                  (ii)     the unaudited quarterly financial statements of the
                           Borrower for the quarter ending March 31, 2001.

         10)      EDC Insurance Policies. The Agent shall have been provided
                  with copies of all existing policies issued by the Export
                  Development Corporation with loss payable clauses in favour of
                  the Agent.

12.3     CONDITIONS PRECEDENT TO THE FIRST AND EACH SUBSEQUENT DRAWDOWN UNDER A
         CREDIT

         The first and each subsequent drawdown of Accommodation under a Credit
shall be subject to the fulfilment of each of the following conditions precedent
to the satisfaction of the Agent on or prior to the date of the proposed
drawdown, it being understood that the said conditions are included for the
exclusive benefit of the Agent and the Lenders and may be waived in writing by
the Agent and all the Lenders for the first drawdown and the Agent and the
Required Lenders thereafter, in their sole discretion, in whole or in part, from
time to time:

<PAGE>
                                     - 56 -

         1)       Notice of Borrowing. The Agent and the Lenders shall have
                  received the required Notice of Borrowing in the case of a
                  drawdown under the Revolving Credit and any other
                  documentation required to be delivered by the Borrower in
                  connection with such Notice of Borrowing.

         2)       No Default. There shall exist no Default or Event of Default
                  on the applicable date of drawdown and the completion of the
                  drawdown shall not result in the occurrence of a Default or
                  Event of Default.

         3)       Representations and Warranties. All representations and
                  warranties contained in Section 9.1 shall be true in all
                  material respects on and as of the date of a Notice of
                  Borrowing and after giving effect to the proposed drawdown
                  with the same effect as if such representations and warranties
                  had been made on and as of such date.

         4)       Material Adverse Change. Since the date of this Agreement,
                  there shall have occurred no Material Adverse Change with
                  respect to the Borrower.

         5)       Initial Drawdown Conditions. All conditions specified in
                  Section 12.2, to the extent not previously satisfied for any
                  reason, shall have been satisfied and in addition, the amount
                  of the initial advance shall be sufficient to repay and shall
                  be applied in payment of all indebtedness and liability of the
                  Borrower to CIBC under the Existing Credit Agreement other
                  than amounts set out in Section 2.10.

<PAGE>
                                     - 57 -

                                  ARTICLE XIII
                                    THE AGENT

13.1     APPOINTMENTS

         The Lenders appoint CIBC to act as Agent for the Lenders in the manner
and upon the terms provided herein. Except as may be specifically provided to
the contrary herein, each of the Lenders irrevocably authorizes CIBC as the
agent for such Lender, to take such action on its behalf under the provisions of
the Documents and any other instruments and agreements referred to in them, and
to exercise such powers and to perform such duties under such documents as are
delegated to the Agent by the terms of those documents, together with such other
powers as are reasonably incidental thereto, which it may be necessary for the
Agent to exercise in order that the provisions of the Documents are carried out,
including, without limitation, such powers as are necessary to comply in all
technical aspects with the practices of the London Interbank Eurocurrency
Market. The Agent will only be required to exercise such powers and perform such
duties as agent under this Agreement as it is instructed to exercise from time
to time by the Lenders and will not be required to act upon any instructions
received directly by the Agent from a Participant under or in respect of a
Participation.

13.2     DEALING BY BORROWER WITH THE AGENT

         (a)      Except as herein expressly provided, the Borrower shall deal
                  with the Agent in lieu of the Lenders for the purposes set out
                  in this Agreement.

         (b)      The Borrower may rely, and shall be fully protected in so
                  relying, without any obligation to inquire into the
                  correctness thereof, upon any action taken, notice, direction,
                  waiver, consent, determination, communication or agreement by
                  the Agent purporting to be on behalf of the Lenders hereunder,
                  any of which shall, as regards the Borrower, be deemed to be
                  an action, notice, direction waiver, consent, determination,
                  communication or agreement of the Lenders.

13.3     DELEGATION OF DUTIES

         The Agent may perform any of its duties under any Document or any other
instruments and agreements referred to therein by or through its agents or
employees and will be entitled to the advice of counsel concerning all matters
pertaining to its duties thereunder.

13.4     INDEMNITY

         The Lenders hereby indemnify the Agent (to the extent not reimbursed by
the Borrower) rateably according to their Commitments from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgements,
suits, costs, expenses or disbursements of any nature or kind whatsoever which
may be imposed on, incurred by, or asserted against the Agent in such capacity
in any way relating to or arising out of the

<PAGE>
                                     - 58 -

Documents and any other instruments and agreements referred to in them or any
action taken or omitted by the Agent under the Documents or any other
instruments and agreements referred to in them; provided that no Lender will be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgements, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or wilful misconduct. Without
limiting the generality of the foregoing, each Lender agrees to reimburse the
Agent promptly upon demand for its rateable share as above described of
out-of-pocket expenses (including the fees and disbursements of counsel)
incurred by the Agent in connection with the determination or preservation of
any rights of the Agent or the Lenders under, or the enforcement of, or legal
advice in respect of rights or responsibilities under, the Documents or any
other instruments and agreements referred to in them, to the extent that the
Agent is not reimbursed for such expenses by the Borrowers on demand. In
addition, the Agent may refrain from exercising any right, power or discretion
or taking any action to protect or enforce the rights of the Agent or any Lender
under the Documents or any other instruments and agreements referred to in them
until it has been indemnified or secured to its satisfaction against any and all
costs, losses, expenses or liabilities (including legal fees) which it would or
might sustain or incur as a result of such exercise or action.

13.5     EXCULPATION

         The Agent will have no duties or responsibilities except those
expressly set out in this Agreement. The Agent or any of its officers,
directors, employees or agents will not be liable for any action taken or
omitted to be taken under this Agreement or in connection with it, unless caused
by its or their gross negligence or wilful misconduct. The duties of the Agent
will be mechanical and administrative in nature. The Agent will not have by
reason of this Agreement or any other Document a fiduciary relationship in
respect of any Lender and nothing herein or therein, expressed or implied, is
intended to, or will be construed so as to, impose upon the Agent any obligation
except as expressly set out herein. The Agent will not be responsible for any
recitals, statements, representations or warranties herein or therein or which
may be contained in any document subsequently received by the Agent or for the
authorization, execution, effectiveness, genuineness, validity or enforceability
of the Documents or any other instruments and agreements referred to therein and
will not be required to make any inquiry concerning the performance or
observance of any of the terms, provisions or conditions of the Documents or any
other instruments and agreements referred to therein. Each of the Lenders
severally represents and warrants to the Agent that it has made and will
continue to make such independent investigation of the financial condition and
affairs of the Borrower as such Lender deems appropriate in connection with its
entering into this Agreement and the making and continuance of borrowings under
the Credits, that such Lender has and will continue to make its own appraisal of
the creditworthiness of the Borrower and that such Lender in connection with
such investigation and appraisal has not relied upon any information provided to
such Lender by the Agent. The Agent may at any time request instructions from
the Lenders with respect to any actions or approvals which, by the terms of this
Agreement or any other Document, the Agent is permitted or required to take or
to grant, and the Agent will be absolutely entitled to refrain from taking any
action or to withhold any approval and will not be under any liability
whatsoever to any Person for refraining from taking any action or withholding
any approval under this

<PAGE>
                                     - 59 -

Agreement or any other Document until it has received such instructions from the
Required Lenders, or all Lenders, as the case may be. Except with respect to any
instructions that are specifically stated to be required of all of the Lenders,
no such Lender will have any right of action whatsoever against the Agent as a
result of the Agent acting or refraining from acting hereunder or under any
other Document in accordance with instructions received from the Required
Lenders.

13.6     RELIANCE

         The Agent will be entitled to rely upon any writing, notice, statement,
certificate, facsimile, telex, teletype message, cablegram, radiogram, order or
other document or telephone conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper person or persons,
and, with respect to all legal matters pertaining to this Agreement or any other
Document and its duties hereunder or thereunder, upon the advice of counsel
selected by it.

13.7     EXCHANGE OF INFORMATION

         The Borrower agrees that the Agent and each Lender may provide to the
other Lenders or the Agent such information concerning the financial position,
property and operations of the Borrower, which in the opinion of the Agent or
such Lender, is relevant to the ability of the Borrower to fulfil its
obligations under or in connection with this Agreement or any other Document
provided that the Agent will be under no obligation to disclose any information
to any of the Lenders in respect of the Borrower, other than providing to such
Lenders and the Agent copies of this Agreement, the financial statements and
other materials delivered by the Borrower pursuant to this Agreement and copies
of any certificates delivered by the Borrower pursuant to this Agreement. All
information supplied by the Borrower to the Agent or any Lender will be kept
strictly confidential and used only for the purpose of managing, participating,
syndicating, selling or assigning the Credits.

13.8     THE AGENT, INDIVIDUALLY

         With respect to its Commitment and the Accommodation granted by it
under the Credits, the Agent will have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it were not an
Agent, and the term "Lenders" or any similar terms will, unless the context
clearly indicates otherwise, include the Agent in its capacity as a Lender
hereunder. It is understood and agreed by all of the Lenders that the Agent may
accept deposits from, lend money to, and generally engage in banking business
with the Borrower, as if it were not an Agent under this Agreement.

13.9     RESIGNATION

         If at any time the Agent deems it advisable, in its sole discretion, it
may, as hereinafter provided, deliver to each of the Lender and the Borrower
written notification of its resignation insofar as it acts on behalf of the
Lenders pursuant to this Article 13, such resignation

<PAGE>
                                     - 60 -

to be effective upon the date of the appointment by the Required Lenders of a
successor acceptable to the Borrower, such appointment to be promptly made. If
no such appointment has been made within thirty (30) days the Agent may make
such appointment on behalf of the Lenders and will forthwith give notice of such
appointment to the Lenders and the Borrower, provided that the Person appointed
as a successor Agent is acceptable to the Borrower.

13.10    INSTRUCTIONS BY LENDERS

         1) Except with respect to any approval, instruction or other expression
that is specifically stated to be required of all of the Lenders, an approval,
instruction or other expression of the applicable Lenders may be obtained by
instrument in writing as provided in Section 13.10(2) or may be included in a
resolution that is submitted to a meeting or adjourned meeting of all Lenders
duly called and held for the purpose of considering the same as hereinafter
provided and will be deemed to have been obtained if such resolution is passed
by the affirmative vote of not less than 66-2/3% of the votes given on a poll of
such Lenders with respect to such resolution. A meeting of Lenders may be called
by the Agent or the Borrower and will be called by the Agent upon the request of
any Lender. Every such meeting will be held in the City of Toronto, or at such
other reasonable place as the Agent may approve. At least ten (10) Banking Days
notice of the time and place of any such meeting will be given to the Lenders
and will include or be accompanied by a draft of the resolution to be submitted
to such meeting, but the notice may state that such draft is subject to
amendment at the meeting or any adjournment thereof. The Lenders who are present
in person or by proxy at the time and place specified in the notice will
constitute a quorum. A person nominated in writing by the Agent will be chairman
of the meeting. Upon every poll taken at any such meeting every Lender who is
present in person or represented by a proxy duly appointed in writing (who need
not be a Lender) will be entitled to one vote in respect of each Dollar of
outstanding Accommodation calculated as applicable for a vote of Required
Lenders which it is then owed, calculated as of the Banking Day first preceding
the day of the meeting, or if no Accommodation is outstanding as at such date,
will be entitled to one vote in respect of each percentage of the Commitment
made by such Lender of the total Commitments of all Lenders. In respect of all
matters concerning the convening, holding and adjourning of Lenders' meetings,
the form, execution and deposit of instruments appointing proxies and all other
relevant matters, the Agent may from time to time make such reasonable
regulations not inconsistent with this Section as it will deem expedient and any
regulations so made by the Agent will be binding upon the Borrower, the Agent
and the Lenders. A resolution passed pursuant to this Section will be binding
upon all Lenders, and the Agent (subject to the provisions for its indemnity
herein contained) will be bound to give effect thereto accordingly.

         2) Subject to Section 13.10(3), any approval, instruction or other
expression of the Lenders may also be obtained by an instrument in writing
signed in one or more counterparts by Lenders which have made at least 66-2/3%
of the Dollar amount of the Accommodation calculated as applicable for a vote of
Required Lenders, or if no Accommodation is outstanding at such time, by Lenders
which have made Commitments which in the aggregate equal 66-2/3% or more of the
Credits.

<PAGE>
                                     - 61 -

         3) Any approval, instruction or other expression that is specifically
stated to be required of the Required Lenders or of all of the Lenders may be
obtained either by a resolution passed at a meeting of the Lenders called and
held in accordance with Section 13.10(1) (disregarding the percentage vote
referred to in such Section, in the case where the expression in question is
required of all of the Lenders) or by an instrument in writing signed in one or
more counterparts by the Required Lenders, the Lenders or all of the Lenders, as
the case may be.

13.11    ARRANGEMENTS FOR REPAYMENT OF ACCOMMODATION

         Prior to an acceleration of the payment of amounts outstanding under
this Agreement pursuant to Section 11.2, the Agent will, upon receipt by it of
payments from the Borrower on account of principal or any other payment made to
the Agent on behalf of the Lenders, pay over to each Lender the amount to which
it is entitled under this Agreement on a pro rata basis in accordance with the
then outstanding amount of each Lender's Commitment. Such payment will be made
promptly following receipt and, in any event, the Agent will use its best
efforts to pay to each Lender at the Lender's branch of account such amount on
the same Banking Day as such amount is received by the Agent.

13.12    REPAYMENT BY LENDERS TO AGENT

         1) Unless the Agent has been notified in writing by the Borrower at
least one (1) Banking Day prior to the date on which any payment to be made by
the Borrower under this Agreement is due that the Borrower does not intend to
remit such payment, the Agent may, in its discretion, assume that the Borrower
has remitted such payment when so due and the Agent may, in its discretion and
in reliance upon such assumption, make available to each Lender on such payment
date an amount equal to such Lender's rateable portion of such assumed payment.
If the Borrower does not in fact remit such payment to the Agent, without
restricting the obligation of the Borrower to make such payment, the Agent will
promptly notify each Lender and each such Lender will forthwith on demand repay
to the Agent the amount of such assumed payment made available to such Lender,
together with interest thereon until the date of repayment thereof at a rate
determined by the Agent (such rate to be conclusive and binding on such Lender)
in accordance with the Agent's usual banking practice for such advances to
financial institutions of like standing to such Lender, but in any event at a
rate no greater than the usual interbank offered rate for the sale of deposits
in the applicable currency.

         2) Unless the Agent has been notified in writing by the Lender at least
one (1) Banking Day prior to a drawdown date that such Lender does not intend to
make available its proportion of any Accommodation under the Credits, the Agent
may, in its discretion, assume that such Lender has remitted funds to the Agent
and the Agent may, in its discretion and in reliance upon such assumption, make
available to the Borrower on such drawdown date an amount equal to such Lender's
proportion of such Accommodation. If a Lender does not in fact remit such funds
to the Agent, without restricting the obligation of such Lender to make such
funds available and for damages as a result of the failure to do so, the Agent
will promptly notify such Lender and Borrower, and the Borrower will forthwith
on demand repay to the Agent the amount made available by the Agent on behalf of
such Lender, together with interest thereon

<PAGE>
                                     - 62 -

until the date of repayment thereof at a rate determined by the Agent (such rate
to be conclusive and binding on such Lender and the Borrower) in accordance with
the Agent's usual banking practice for advances to financial institutions of
like standing to such Lender, but in any event at a rate no greater than the
usual interbank offered rate for the sale of deposits in the applicable
currency.

13.13    DELIVERY OF ASSIGNMENT AGREEMENT

         The Agent undertakes and agrees to deliver to the Borrower a copy of
each Assignment Agreement executed pursuant to this Agreement forthwith after
execution thereof.

13.14    PROVISIONS FOR BENEFIT OF LENDERS ONLY

         The provision of this Article 13 relating to the rights and obligations
of the Agent and the Lenders inter se shall be operative as between the Agent
and the Lenders only, and the Borrower shall have no rights under nor be
entitled to rely for any purposes upon such provisions.

<PAGE>
                                     - 63 -

                                   ARTICLE XIV
                                  MISCELLANEOUS

14.1     PAYMENTS TO THE LENDERS

         1) Payments. All payments required to be made by a Borrower hereunder
or under any other Document will be made in immediately available funds and
amounts payable by the Borrower to the Agent for the account of the Lenders
hereunder or thereunder on account of principal will be paid by the Borrower at
the office of the Agent designed by the Agent or by the Agent debiting the same
to the account of the Borrower as such Borrower shall have designated to the
Agent, which account the Borrower will ensure is not in an unauthorized
overdraft position, provided that the foregoing shall not limit the recourse of
the Agent and the Lenders to any single source of funds.

         2) Net Payments, etc. Subject to Section 14.7(5), all payments by the
Borrower under any Document, whether in respect of principal, interest, fees or
any other item, shall be made in full without any deduction or withholding
(whether in respect of set off, counterclaim, duties, Taxes, charges or
otherwise whatsoever) unless the Borrower is prohibited by law from doing so, in
which event the Borrower shall ensure that the deduction or withholding does not
exceed the minimum amount legally required;

         (i)      forthwith pay to the applicable Lender such additional amount
                  so that the net amount received by such Lender will equal the
                  full amount which would have been received by it had no such
                  deduction or withholding been made;

         (ii)     pay to the relevant taxation or other authorities within the
                  period for payment permitted by Applicable Law the full amount
                  of the deduction or withholding (including, the full amount of
                  any deduction or withholding from any additional amount paid
                  pursuant to Section 14.1(2)(i)); and

         (iii)    furnish to the Lender, within the period for payment permitted
                  by Applicable Law, an official receipt of the relevant
                  taxation or other authorities involved for all amounts
                  deducted or withheld as aforesaid.

         3) In the event that all or any part of any payment by the Borrower
received by an Agent or a Lender is thereafter set aside, avoided or recovered
from the Agent or a Lender for any reason whatsoever (including, in connection
with any receivership, liquidation, reorganization or bankruptcy proceeding),
the applicable Lenders shall, upon demand by the Agent, contribute the amount
set aside, avoided or recovered together with interest at the rate required to
be paid by the Agent upon the amount required to be repaid by it and the
Indebtedness of the Borrower in respect of any such amounts shall be reinstated,
remain outstanding and be due and payable, all as though such payment had not
been made.

<PAGE>
                                     - 64 -

14.2     EXPENSES

         Whether or not the transactions contemplated by this Agreement shall be
consummated, the Borrower shall on demand pay to the Agent all reasonable
out-of-pocket expenses and taxes thereon incurred by the Agent including the
reasonable fees and disbursements of any experts or advisers (including lawyers
on a solicitor and client basis and independent consultants) retained by the
Agent, in connection with (i) the preparation of this Agreement and the other
Documents and any amendment, modification or waiver of any of the provisions
hereof or thereof, (ii) searches conducted, (iii) the protection and enforcement
of the rights of the Agent and the Lenders provided for in the Documents, (iv)
registrations, recordings or filings relating to the execution and delivery of,
or consummation of, any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of
the Documents, and (v) such costs and expenses in relation to the Syndication or
Participation of the Credits, including any advertising fees in relation
thereto.

14.3     AMENDMENT, WAIVER, ETC.

         No waiver or delay on the part of the Agent or any of the Lenders in
exercising any right or privilege hereunder or under any other Document will
operate as a waiver hereof or thereof unless made in writing and signed by an
authorized officer of the Agent, provided however that no amendment, waiver or
consent, unless in writing and signed by all of the Lenders, will be effective
to do any of the following: (a) reduce or forgive the payment of any principal,
interest, fees or any other amount payable by the Borrower pursuant to this
Agreement; (b) postpone any maturity date of any amount payable by the Borrower
pursuant to this Agreement; (c) increase the Commitments of the Lenders or
subject the Lenders to any additional obligations; (d) change the percentage of
the Commitments or of the aggregate unpaid principal amount of the Credits, or
the number of Lenders, which will be required for the Lenders or any of them to
take any action under this Agreement; (e) amend this Section; or (f) release any
material portion of the Security; and provided further that no amendment, waiver
or consent will, unless in writing and signed by the Agent and all of the
Lenders, affect the rights or duties of the Agent under this Agreement. No
written waiver will preclude the further or other exercise by the Agent or any
of the Lenders of any right, power or privilege hereunder or under any other
Document, or extend to or apply to any further Default or Event of Default. Each
Lender acknowledges and agrees that a waiver of a Default or an Event of Default
shall not constitute a postponement of the Maturity Date of any amount payable
hereunder or an increase in the obligations or Commitment of any Lender
hereunder.

14.4     FURTHER ASSURANCES

         The Borrower will from time to time immediately on the Agent's request
do, make and execute all such financing statements, further assignments,
documents, acts, matters and things as may reasonably be required by the Agent
with respect to this Agreement or any other Document to give effect to these
presents including any financing statements, further assignments, documents,
acts, matters or things required by the Agent or any Lender in respect of any
Syndication by a Lender.

<PAGE>
                                     - 65 -

14.5     DEALINGS BY AGENTS AND LENDERS

         Neither the Agent nor any Lender will be obligated to exhaust its
recourse against the Borrower or any other Person or against any security any of
them may hold in respect of the obligations of the Borrower to the Agent and the
Lenders before realizing upon or otherwise dealing with any other security in
such manner as the Agent and the Lenders may consider desirable. The Agent and
any of the Lenders may grant extensions of time and other indulgences, take and
give up securities, accept compositions, grant releases and discharges and
otherwise deal with the Borrower and any other Person, sureties and others and
any securities as they may see fit without prejudice to the obligations of the
Borrower under this Agreement and under any other Document or the Agents or the
Lender's right to hold and enforce this Agreement and any other Document and any
of their rights and remedies hereunder and thereunder. The powers conferred on
the Agent, the Lenders or any of them under this Agreement and under any other
Document are solely to protect their interests therein and will not impose any
duty upon the Agent or any Lender to exercise any such powers.

14.6     NOTICES

         Any notice or communication to be given under this Agreement or any of
the other Documents may be effectively given by delivering the same at the
addresses hereinafter set out or by sending the same by prepaid registered mail
or facsimile to the parties at such addresses. Any notice so mailed shall be
deemed to have been received on the third Banking Day next following the mailing
thereof provided the postal service is in operation during such time. Any notice
sent by facsimile will be deemed to have been received on transmission provided
that printed confirmation of such transmission to the correct telephone number
shall have been generated by the sender's facsimile machine. The addresses and
facsimile numbers of the parties for the purposes hereof will respectively be:

in the case of the Borrower:    Millar Western Forest Products Ltd.
                                16640-111 Avenue
                                Edmonton, Alberta
                                T5J 4W2

                                Attention: President
                                Fax No.: (780) 486-8282

with a copy to:                 Fraser Milner Casgrain
                                2900, 10180-101 Street
                                Manulife Place
                                Edmonton, Canada
                                T5J 3V5

                                Attention: R. Turner
                                Fax No.: (780) 423-7276

<PAGE>
                                     - 66 -

in the case of the Agent:       Canadian Imperial Bank of Commerce
                                Canadian Credit Capital Markets -
                                BCE Place
                                8th Floor
                                161 Bay Street
                                Toronto, Ontario
                                M5J 2S8

                                Attention: Director
                                Fax No.: (416) 956-3830

In the case of a Lender, the address and facsimile number of such Lender as set
out in Schedule E or the applicable Assignment Agreement.

         The Borrower, the Agent or any Lender may from time to time notify the
other parties hereto, in accordance with the provisions of this Agreement, of
any change of address or facsimile number which thereafter, until changed by
like notice, will be the address or facsimile number of such party for all
purposes of this Agreement.

14.7     PARTICIPATION AND SYNDICATION

         1) The rights, benefits and obligations of each of the Lenders under or
in respect of this Agreement and the other Documents (referred to in this
Section as the "RIGHTS") may in whole or in part, be participated (a
"PARTICIPATION"), or syndicated, sold or assigned (a "SYNDICATION") by a Lender
from time to time to one or more financial institutions; provided that (a) in
the case of a Syndication the Lender shall first have notified the Borrower and
the Agent, and the Agent and the Borrower shall have consented thereto in
writing, such consents not to be unreasonably withheld, (b) any Syndication of
less than all of such Lender's interests in a Credit shall be in a minimum
amount of $2,500,000 or any whole multiples of $1,000,000 thereafter, unless
such Lender is assigning to another Lender some or all of its interests in a
Credit, in which event no minimum amount shall apply, (c) the Participant in a
Syndication shall execute and deliver to the Agent a duly completed Assignment
Agreement (other than for the signature of the Agent), and (d) the syndicating,
selling or assigning Lender shall pay to the Agent an administration fee of
$3,000 with respect to each Syndication.

         2) For the purpose of such Participations or Syndications, any Lender
may provide to a potential participant, transferee or assignee (a "PARTICIPANT")
on a confidential basis access to any and all information disclosed to the Agent
or any Lenders pursuant to this Agreement or in the possession of the Agent or
any of the Lenders.

         3) In the event of a Syndication to a Participant, such Participant, to
the extent of the rights and obligations syndicated, sold or assigned to it,
shall become a "Lender" under this Agreement and shall become entitled to such
rights and obligations to the same extent as if such Participant were an
original party to this Agreement in respect thereof, and the syndicating Lender
shall be released and discharged accordingly.

<PAGE>
                                     - 67 -

         4) If the Rights are the subject of a Participation, all references in
this Agreement to a Lender will thereafter be construed as a reference to such
Lender and the Participants, provided that the Borrower and the Agent will be
entitled to deal with such Lender as if it were the sole owner of the Rights and
such Lender will not be released from any of its obligations under this
Agreement by virtue of the Participation and provided further that such
documents do not adversely modify the Borrowers' rights or increase its
obligations under this Agreement. The Borrower acknowledges and agrees that each
Lender is entitled, in its own name and on behalf of the Participants, to
enforce for the benefit of, or as agent for, any Participants, any and all
rights, claims and interests of such Participants, in respect of the Rights
subject to a Participation. A Lender granting a Participation shall not grant or
assign any Participant any rights to approve any amendment, waiver, proposed
consent to or under this Agreement or the other Documents. Neither the Agent nor
any Lender will be responsible for any default by any other Lender in its
obligation not to so grant or assign any of such rights.

         5) Notwithstanding Section 14.1(2), in the event that any Participation
or Syndication is made to a Participant that is not a resident of Canada for the
purposes of the Income Tax Act (Canada) (a "non-resident"), then any amounts
that the Borrower pays pursuant to the Income Tax Act (Canada) on account of
withholding tax in respect of monies payable by the Borrower to such
non-resident Participant shall be treated as if paid by the Borrower to the
non-resident Participant and applied against the indebtedness of the Borrower to
the non-resident under this Agreement.

14.8     ASSIGNMENT BY LENDERS AFTER EVENT OF DEFAULT

         Notwithstanding the restrictions contained in Section 14.7, upon the
occurrence of an Event of Default, the rights, benefits and obligations of each
of the Lenders under or in respect of this Agreement and the other Documents may
in whole or in part be syndicated, sold or assigned by a Lender to one or more
Persons without restriction. For the purpose of such syndication, sale or
assignment, any Lender may provide to a potential syndicate member, transferee
or assignee on a confidential basis access to any and all information disclosed
to the Agent or any Lender pursuant to this Agreement or in the possession of
the Agent or any Lender.

14.9     REPLACEMENT OF A LENDER

         If any Lender does not consent to a request of the Borrower requiring
unanimous consent of the Lenders and the Required Lenders have consented to the
request, the Borrower shall be entitled for a period of up to 30 days from the
date the decision of the Lenders was determined, to propose one or more Canadian
chartered banks or other Canadian financial institutions which, if not a Lender,
shall be acceptable to the remaining Lenders (which acceptance shall not be
unreasonably withheld) which banks or other institutions would be prepared to
accept an assignment of the Credits of the declining Lender in accordance with
Section 14.7. If, within that time period, the Borrower is able to propose such
assignees and, if applicable, the proposed assignees are acceptable to the
remaining Lenders, the declining Lender shall at the end of such period but
conditional upon such assignments having been arranged in respect of the entire
loan position of such declining Lender, assign its rights and obligations

<PAGE>
                                     - 68 -

hereunder to such proposed assignees in accordance with Section 14.7 for a price
equal to in the case of each declining Lender, the then outstanding principal
amount of all outstanding Accommodation of that declining Lender plus accrued
interest and fees on the principal amount of all outstanding Accommodation of
that declining Lender. The Agent agrees to assist the Borrower in arranging
replacement Lenders.

14.10    SURVIVAL

         This Agreement will continue in full force and effect so long as any of
the Credits are available or any Indebtedness, liability or obligation is due
and payable to the Agent or any of the Lenders in respect of the Credits unless
it is varied or terminated in writing and all agreements, representations,
warranties and covenants of the Borrower made herein or in any other Document or
otherwise, will be deemed to have been relied on by the Agent and the Lenders
notwithstanding any investigation heretofore or hereafter made by the Agent or
any of the Lenders, their respective solicitors or any representative of the
Agent or any of the Lenders and will survive the execution of this Agreement,
the other Documents and the granting of Accommodation under the Credits until
repayment in full of all amounts owing to the Agent and the Lenders.

14.11    SUCCESSORS AND ASSIGNS

         This Agreement will be binding upon and will enure to the benefit of
the Borrower, the Agent, the Lenders and their respective successors and
permitted assigns, provided that the Borrower will not assign any of its rights
or obligations hereunder or under any of the other Documents without the prior
written consent of all of the Lenders.

14.12    GOVERNING LAW

         1) The Documents and all certificates and other instruments delivered
to the Agent or the Lenders pursuant thereto will be construed and interpreted
in accordance with the laws of the Province of Alberta and the federal laws of
Canada applicable therein unless otherwise specifically stated therein.

         2) The Borrower, the Agent and the Lenders hereby irrevocably and
unconditionally waive, to the maximum extent not prohibited by law, any right
they may have to claim or recover in any legal action or proceeding relating to
the Credit Agreement or any of the other Documents, any special, exemplary,
punitive or consequential damages.

14.13    COUNTERPARTS

         This Agreement may be simultaneously executed in any number of
counterparts, each of which shall be deemed to be an original.

<PAGE>
                                     - 69 -

14.14    SCHEDULES AND EXHIBITS

         The Schedules and Exhibits attached hereto and forming part of this
Agreement are as follows:

                                    SCHEDULES

         Schedule A   -   Permitted Liens
         Schedule B   -   Environmental Matters
         Schedule C   -   Litigation
         Schedule D   -   Commitments
         Schedule E   -   Addresses of Lenders
         Schedule F   -   Lenders
         Schedule G   -   Material Agreements

                                    EXHIBITS

         Exhibit A    -   Assignment Agreement
         Exhibit B    -   Notice of Borrowing
         Exhibit C    -   Notice of Rollover/Switch
         Exhibit D    -   BA Equivalent Note
         Exhibit E    -   Compliance Certificate
         Exhibit F    -   Form of Arrangements Letter

14.15    PERFORMANCE BY THE AGENT OF BORROWER'S OBLIGATIONS

         If the Borrower fails to perform or comply with any of its agreements
contained in this Agreement or in any other Document to which it is a party, the
Agent shall be entitled to, but need not, perform or otherwise cause the
performance or compliance of such agreement, provided that such performance or
compliance shall not constitute a waiver, remedy or satisfaction of such
default, and expenses of the Agent incurred in connection with any such
performance or compliance will be payable by the Borrower to the Agent on
demand.

<PAGE>
                                     - 70 -

         IN WITNESS WHEREOF the parties hereto have executed this Agreement on
the date first above written.

                                       MILLAR WESTERN FOREST PRODUCTS LTD.

                                       By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                       By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                       CANADIAN IMPERIAL BANK OF
                                       COMMERCE, IN ITS CAPACITY AS AGENT

                                       By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                       By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                       CANADIAN IMPERIAL BANK OF COMMERCE IN ITS
                                       CAPACITY AS A LENDER

                                       By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                       By:
                                            ------------------------------------
                                            Name:
                                            Title:

<PAGE>
                                     - 71 -

                                       HSBC BANK CANADA

                                       By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                       By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                       BANK OF MONTREAL

                                       By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                       By:
                                            ------------------------------------
                                            Name:
                                            Title:

<PAGE>

                                   SCHEDULE A
                                 PERMITTED LIENS

         (1)      Liens for taxes not overdue, or which are being contested if
                  adequate reserves with respect thereto are maintained by the
                  Borrower in accordance with GAAP and the enforcement of any
                  related Lien is stayed;

         (2)      undetermined or inchoate Liens arising in the ordinary course
                  of business which relate to obligations not overdue or a claim
                  for which has not been filed or registered pursuant to
                  Applicable Law;

         (3)      carriers', warehousemens', mechanics', materialmens',
                  repairmens', construction or other similar Liens arising in
                  the ordinary course of business which relate to obligations
                  not overdue;

         (4)      easements, rights-of-way, restrictions and other similar
                  encumbrances or rights in property reserved by other persons
                  incurred in the ordinary course of business which, in the
                  aggregate, do not materially detract from the value of the
                  property subject thereto or interfere with the ordinary
                  conduct of the business of the Borrower;

         (5)      zoning and building by-laws and ordinances and municipal
                  by-laws and regulations so long as the same are complied with;

         (6)      statutory Liens incurred or deposits made in the ordinary
                  course of business in connection with workers' compensation,
                  unemployment insurance and other social security legislation;

         (7)      the reservations and exceptions contained in, or implied by
                  statute in, the original disposition from the Crown and grants
                  made by the Crown of interests so reserved or excepted;

         (8)      security given by the Borrower to a public utility or any
                  municipality or governmental or other public authority when
                  and to the extent required by such utility or municipality or
                  other authority in the ordinary course of business;

         (9)      the right reserved to or vested in any municipality or
                  governmental or other public authority by the terms of any
                  lease, license, franchise, grant or permit, or by any
                  statutory provision to terminate any such lease, license,
                  franchise, grant or permit or to require annual or other
                  periodic payments as conditions of the continuance thereof;
                  and

         (10)     Purchase Money Liens not exceeding $2,000,000 in aggregate at
                  any time.

<PAGE>

                                   SCHEDULE B

                              ENVIRONMENTAL MATTERS

                                       NIL

<PAGE>

                                   SCHEDULE C

                                   LITIGATION

                                       NIL

<PAGE>

                                   SCHEDULE D

                                   COMMITMENTS

<TABLE>
<CAPTION>
Name of Lender              Revolving Credit                Short Notice
                            (including Letter of Credit     Swingline Credit
                            Swingline Credit)

<S>                         <C>                               <C>
Canadian Imperial Bank      $15,000,000                       $5,000,000
of Commerce

HSBC Bank Canada            $20,000,000                       $  nil

Bank of Montreal            $10,000,000                       $  nil
</TABLE>

         NOTE:    THE SHORT NOTICE SWINGLINE CREDIT FORMS PART OF THE REVOLVING
                  CREDIT AND THE AGGREGATE COMMITMENT IS $50,000,000

<PAGE>

                                   SCHEDULE E

                              ADDRESSES OF LENDERS

Canadian Imperial Bank of Commerce
Commerce Place
10155-102 Second Street
Suite 1900
Edmonton, Alberta
T5J 4G8

Attention:  Director, Commercial Banking
Fax No.:    (780) 420-3099

HSBC BANK CANADA
885 West Georgia Street
Vancouver, British Columbia
V6C 3E9

Attention:  Vice-President, Commercial Financial Services
Fax No.:    (604) 641-1808

BANK OF MONTREAL
9th Floor, First Canadian Centre
350 - 7th Avenue, S.W.
Calgary, Alberta
T2P 3N9

Attention:  Senior Manager, Corporate Finance
Fax No.:    (403) 234-1688

<PAGE>

                                   SCHEDULE F

                                     LENDERS

Canadian Imperial Bank of Commerce

HSBC Bank Canada

Bank of Montreal

<PAGE>

                                   SCHEDULE G

                               MATERIAL AGREEMENTS

         1.       Power Syndicate Agreement dated as of January 1, 2001 between
                  Epcor PPA Management Inc., Slave Lake Pulp Partnership, the
                  Borrower, Dow Chemical Canada Inc. and ANC Power Company.

<PAGE>

                                    EXHIBIT A

                              ASSIGNMENT AGREEMENT

         THIS ASSIGNMENT AGREEMENT dated as of    o    is made among    o
(the "ASSIGNOR"), a Lender under the Credit Agreement referred to and defined
hereafter, Canadian Imperial Bank of Commerce, as Agent (the "AGENT"), Millar
Western Forest Products Ltd. (the "BORROWER") and    o    (the "ASSIGNEE").

RECITALS:

1.     Pursuant to a credit agreement dated as of June 27, 2001 (as amended,
modified, replaced, supplemented and restated from time to time, the "CREDIT
AGREEMENT") among inter alia the Borrower, the Agent, and the financial
institutions specified therein as lenders (collectively the "LENDERS"), the
Lenders have provided certain credit facilities to the Borrower.

2.     The Assignor has agreed to assign and sell to the Assignee all of its
right, title and interest in and to   o  % of the Revolving Credit (the
"ASSIGNED INTEREST") and the Assignee has agreed to accept and purchase the
Assigned Interest and to assume all liabilities and obligations of the Assignor
in respect of the Assigned Interest.

3.     The Borrower has agreed to acknowledge the release and assumption of the
Assigned Interest.

AGREEMENT:

         NOW THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

1.     DEFINITIONS. Capitalized terms defined in the Credit Agreement which
appear herein without definition shall have the meanings ascribed thereto in the
Credit Agreement.

2.     CONVEYANCE OF ASSIGNED INTEREST. Pursuant to Section 14.7 of the Credit
Agreement and subject to the terms of this Agreement, the Assignor hereby
assigns, sells, conveys and transfers to the Assignee, without recourse, all of
its undivided interest in and to the Assigned Interest.

3.     ASSUMPTION. Pursuant to Section 14.7 of the Credit Agreement and subject
to the terms of this Agreement, the Assignee hereby accepts and assumes the
Assigned Interest by payment to the Assignor of the amount set forth on Schedule
"A" hereto and the Assignee hereby agrees to be bound by the terms and
conditions of the Credit Agreement and the other Documents as if it were an
original Lender and acknowledges and expressly assumes in the name, place and
stead of the Assignor all obligations and liabilities attaching to the Assigned
Interest and agrees to perform the terms, conditions and agreements on its part
to be performed as a Lender in respect thereof under the Credit Agreement and
the other Documents.

<PAGE>

4.     REPRESENTATION AND WARRANTIES OF THE ASSIGNOR. The Assignor hereby
represents and warrants and the Borrower hereby acknowledges that, as at the
date hereof, the outstanding principal amount under the Assigned Interest and
interest accrued and unpaid in respect thereof is as set forth on Schedule "A"
hereto. The Assignor further represents and warrants that it has not previously
assigned, pledged or otherwise encumbered the Assigned Interest.

5.     REPRESENTATION AND WARRANTIES OF THE ASSIGNEE. The Assignee hereby
represents and warrants that it is a Canadian [NON-CANADIAN] resident financial
institution and the Assignee hereby indemnifies the Agent for any liability
which the Agent may incur in connection with any amount for which the Borrower
becomes liable with respect to required deduction or withholding pursuant to
Section 14.7(5) as a consequence of such assignment.

6.     RELEASE BY THE BORROWER. The Borrower hereby acknowledges the release of
the Assignor from all obligations and liabilities attaching to the Assigned
Interest and acknowledges the assumption of all such liabilities and obligations
by the Assignee.

7.     COMMITMENTS. As of and from the date hereof, and after giving effect to
this Assignment Agreement, the Commitment of the Assignee shall be $    o    and
the Commitment of the Assignor shall be reduced by $   o    and shall be $  o  .
Schedule D to the Credit Agreement setting forth the Commitments of the
Lenders is superseded and replaced effective as of the date hereof by the
revised Schedule D attached hereto as Schedule B.

8.     ASSIGNEE'S ACKNOWLEDGEMENT. The Assignee hereby acknowledges that it has
received a copy of the Credit Agreement and the Documents and takes cognizance
of the provisions thereof. The Assignee further acknowledges that it has
conducted its own independent investigation as to the financial condition of the
Borrower and the Guarantors.

9.     RECOGNITION AS LENDER. The parties hereto acknowledge that the Assignee
is, by virtue of compliance with the provisions of Section 14.7 of the Credit
Agreement, as of and from the date hereof, a Lender under and as defined in the
Credit Agreement for the purposes thereof and for the purposes of all other
Documents. Schedule F to the Credit Agreement setting forth the names of the
Lenders is superseded and replaced effective as of the date hereof by the
revised Schedule F attached hereto as Schedule C.

10.     NO REPRESENTATIONS. Except as otherwise expressly provided herein, the
Assignee confirms that this Assignment Agreement is entered into by the Assignee
without any representations or warranties by the Assignor or the Agent in any of
their respective capacities under the Credit Agreement or otherwise, on any
matter whatsoever including, without limitation, the effectiveness of the Credit
Agreement or any document delivered pursuant thereto or in connection therewith
or any of the terms, covenants and conditions therein or the financial
condition, creditworthiness, condition, affairs, status or nature of the
Borrower, any of its Subsidiaries or any other party to the Credit Agreement.
The Assignee confirms that it has relied solely on its own investigations and
analysis in connection with all such matters and all other matters incidental to
this Assignment Agreement and the transactions contemplated herein and therein
and the Assignee confirms that it has not in any way relied upon, and will not
hereafter rely upon, the Assignor or the Agent in respect of any such matters.

<PAGE>

11.     FEES, COSTS AND EXPENSES. The Assignor and the Assignee shall be
responsible for their own costs and expenses incurred in connection with the
negotiation, preparation, execution and performance of this Assignment
Agreement. Upon the execution hereof by each of the parties hereto, the
administration fee of $3,000 contemplated by Section 14.7 of the Credit
Agreement shall be paid to the Agent by the Assignor.

12.     AMENDMENTS AND WAIVERS. Any amendment or modification or waiver of any
right under any provision of this Assignment Agreement shall be in writing (in
the case of an amendment or modification, signed by the parties) and any such
waiver shall be effective only for the specific purpose for which given and for
the specific time period, if any, contemplated therein. No failure or delay by
any party in exercising any right, power or privilege under this Assignment
Agreement shall operate as a waiver thereof and any waiver of any breach of the
provisions of this Assignment Agreement shall be without prejudice to any rights
with respect to any other or further breach.

13.     NOTICES. All notices hereunder shall be given and received as provided
in Section 14.6 of the Credit Agreement and the address and facsimile number of
the Assignee for the purposes of notices shall be as set out on the execution
page of this Assignment Agreement.

14.     FURTHER ASSURANCES. The parties hereto shall at all times hereafter
execute and deliver, upon request, all such further documents and instruments,
and shall do and perform all such acts, as may reasonably be necessary to give
full effect to the intent and meaning hereof.

15.     SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All agreements,
representations, warranties, indemnities and covenants made by the Assignor or
the Assignee herein shall survive the execution and delivery of this Assignment
Agreement and continue in full force and effect without termination.

16.     TIME OF THE ESSENCE. Time shall be of the essence in this Assignment
Agreement.

17.     GOVERNING LAW. This Assignment Agreement shall be governed by and
construed in accordance with the laws of the Province of Alberta and the laws of
Canada applicable therein and shall be treated in all respects as an Alberta
contract.

18.     ENUREMENT. This Assignment Agreement shall enure to the benefit of and
be binding upon the parties hereto and their respective successors and permitted
assigns.

19.     COUNTERPARTS. This Assignment Agreement may be executed in counterparts,
each of which shall be deemed an original and which, taken together, shall
constitute one and the same instrument.

<PAGE>

         IN WITNESS WHEREOF the parties have executed this Assignment Agreement
under the hands of their proper officers duly authorized in that behalf as of
the date first above written.

                                       MILLAR WESTERN FOREST PRODUCTS LTD.

                                       By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                       By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                       [ASSIGNOR]

                                       By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                       By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                       [ASSIGNEE]

Attention:                             By:
            ------------------------        ------------------------------------
Facsimile:  o                               Name:
                                            Title:

Attention:                             By:
            ------------------------        ------------------------------------
Facsimile:  o                               Name:
                                            Title:

<PAGE>

                                       CANADIAN IMPERIAL BANK OF COMMERCE, in
                                       its capacity as Agent

                                       By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                       By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                       CANADIAN IMPERIAL BANK OF COMMERCE

                                       By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                       By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                       HSBC BANK CANADA

                                       By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                       By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                       BANK OF MONTREAL

                                       By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                       By:
                                            ------------------------------------
                                            Name:
                                            Title:

<PAGE>

                                   SCHEDULE A
                         TO ASSIGNMENT AGREEMENT DATED o

                                 PURCHASE PRICE

<PAGE>

                                   SCHEDULE B
                         TO ASSIGNMENT AGREEMENT DATED o

                                   COMMITMENTS

<PAGE>

                                   SCHEDULE C
                         TO ASSIGNMENT AGREEMENT DATED o

                                     LENDERS

<PAGE>

                                    EXHIBIT B

                               NOTICE OF BORROWING

TO:      Canadian Imperial Bank of Commerce, as Agent

This Notice of Borrowing is delivered to you pursuant to Section 2.6 of the
Credit Agreement dated as of June 27, 2001 among Millar Western Forest Products
Ltd. as Borrower, Canadian Imperial Bank of Commerce, HSBC Bank Canada, Bank of
Montreal and the financial institutions which from time to time become party
thereto, as Lenders, Canadian Imperial Bank of Commerce, as Agent (as
supplemented, amended, modified, replaced or restated from time to time, the
"CREDIT AGREEMENT"). All capitalized terms set forth herein and not otherwise
defined will have the respective meanings specified in the Credit Agreement.

1.       We hereby give you notice that on ________________________, _______, we
wish to obtain the following Accommodation under the Revolving Credit referred
to in the Credit Agreement:

                  Prime Rate Loan Amount -            Cdn.$_____________________

                  US Base Rate Loan Amount -          US$_______________________

                  LIBOR Loan Amount -                 US$_______________________

                  LIBOR Period                        __________________________

         Bankers' Acceptances:

                  Principal Amount -                  Cdn.$_____________________

                  Term & Maturity -                   __________________________

                  Person to Whom the Bankers'
                  Acceptances are to be delivered
                  (if applicable) -                   __________________________

<PAGE>

2.       We confirm that:

         (a)      there is no Default or Event of Default on the date hereof and
                  the completion of the drawdown requested herein, will not
                  result in the occurrence of a Default or Event of Default; and

         (b)      all representations and warranties contained in Section 9.1
                  are true in all material respects on and as of the date hereof
                  and after giving effect to the drawdown requested herein with
                  the same effect as if such representations and warranties had
                  been made on and as of such date.

3.       Since June 27, 2001, there has occurred no Material Adverse Change with
respect to the Borrower which has not been waived.

DATED this _______________ day of _________________________, _______.

                                       MILLAR WESTERN FOREST PRODUCTS LTD.

                                       By:  ____________________________________
                                            Name:
                                            Title:

                                       By:  ____________________________________
                                            Name:
                                            Title:

<PAGE>

                                    EXHIBIT C

                            NOTICE OF ROLLOVER/SWITCH

TO:      Canadian Imperial Bank of Commerce, as Agent

This Notice of Rollover/Switch is delivered to you pursuant to Section 2.7 of
the Credit Agreement dated as of June 27, 2001 among Millar Western Forest
Products Ltd., as Borrower, Canadian Imperial Bank of Commerce, HSBC Bank
Canada, Bank of Montreal and the financial institutions which from time to time
become party thereto, as Lenders, Canadian Imperial Bank of Commerce, as Agent
(as supplemented, amended, modified, replaced or restated from time to time, the
"CREDIT AGREEMENT"). All capitalized terms set forth herein and not otherwise
defined will have the respective meanings specified in the Credit Agreement.

1.       We hereby give you notice that on ________________________, _______ ,
we wish to undertake a rollover/switch of the following Accommodation
outstanding under the Revolving Credit into the following Accommodation:

DATED this _______________ day of _________________________, ________.

                                       MILLAR WESTERN FOREST PRODUCTS LTD.

                                       By:  ____________________________________
                                            Name:
                                            Title:

                                       By:  ____________________________________
                                            Name:
                                            Title:

<PAGE>

                                    EXHIBIT D

                               BA EQUIVALENT NOTE

                           FORM OF BA-EQUIVALENT NOTE

CDN. $ o                                                    DATE: ______________

         The undersigned refers to the Credit Agreement dated as of June 27,
2001 among Millar Western Forest Products Ltd., as Borrower, Canadian Imperial
Bank of Commerce, HSBC Bank Canada, Bank of Montreal and the financial
institutions which from time to time become party thereto, as Lenders, Canadian
Imperial Bank of Commerce, as Agent (as supplemented, amended, modified,
replaced or restated from time to time, the "CREDIT AGREEMENT"). All capitalized
terms set forth herein and not otherwise defined will have the respective
meanings specified in the Credit Agreement.

         For value received, the undersigned promises to pay on    o    or on
such earlier date as such amount may become due pursuant to the provisions of
the Credit Agreement ( the "MATURITY DATE"), to or to the order of    o    (the
"HOLDER") the sum of Cdn. $    o    , without interest until the Maturity Date,
and thereafter, with interest in accordance with the Credit Agreement.

         The undersigned hereby waives presentment, protest and notice of every
kind and waives any defence based upon indulgences which may be granted by the
Holder to the undersigned and waives any days of grace.

         Payment of this note shall be made in Cdn. Dollars in immediately
available funds. This note evidences debt incurred under, is secured as provided
in, and is subject to the terms and provisions of, the Credit Agreement
including payment of interest after the Maturity Date.

         This note shall be governed by the laws of the Province of Alberta and
the laws of Canada applicable in such Province.

DATED this _______________ day of _________________________, _______.

                                       MILLAR WESTERN FOREST PRODUCTS LTD.

                                       By:  ____________________________________
                                            Name:
                                            Title:

<PAGE>

                                    EXHIBIT E

                             COMPLIANCE CERTIFICATE

TO:      Canadian Imperial Bank of Commerce (the "Agent")

RE:      Credit Agreement dated as of June 27, 2001 among Millar Western Forest
         Products Ltd., as Borrower, Canadian Imperial Bank of Commerce, HSBC
         Bank Canada and Bank of Montreal and the financial institutions which
         from time to time become party thereto, as Lenders, Canadian Imperial
         Bank of Commerce, as Agent (as supplemented, amended, modified,
         replaced or restated from time to time, the "CREDIT AGREEMENT").

         The undersigned, the [TITLE/A SENIOR OFFICER IS REQUIRED] of the
Borrower, hereby certifies, in that capacity and not personally, as follows:

1.       I have read and am familiar with the provisions of the Credit Agreement
and I have made such examinations and investigations, including the review of
the applicable books and records of the Borrower, as I have deemed necessary to
enable me to express an informed opinion as to the matters set out herein.

2.       The Borrower is in compliance with the Financial Covenants contained in
Section 10.3 of the Credit Agreement and more particularly,

         (a)      Fixed Charge Coverage Ratio is o :1 calculated as follows:

                  (i)      EBITDA                                     $ o

                  (ii)     Maintenance Capital Expenditures  $ o

                  (iii)    income taxes paid in cash         $ o

                  (iv)     total of (ii) and (iii)                    $ o

                  (v)      difference between (i) and (iv)                   $ o

                  (vi)     Interest Expense                  $ o

                  (vii)    principal payments for borrowed
                           money                             $ o

                  (viii)   total of (vi) and (vii)                    $ o

<PAGE>

                  (ix)     (v) divided by (viii)                             $ o

(b)      Working Capital Ratio is  o :1 calculated as follows:

                  (i)      consolidated assets               $ o

                  (ii)     prepaid expenses                  $ o

                  (iii)    difference between (i) and (ii)                   $ o

                  (iv)     current liabilities               $ o

                  (v)      amount outstanding under the
                           Credits excluding amount in
                           respect of Letters of Credit
                           issued in support of
                           current liabilities               $ o

                  (vi)     total of (iv) and (v)                     $ o

                  (vii)    (iii) divided by (vi)                             $ o

3.       The aggregate amount of Foreign Exchange Contracts outstanding as of
   o   [THE MOST RECENT COMPLETED FISCAL QUARTER OF THE BORROWER] is US$   o   .

4.       Each of the representations and warranties contained in Article 9 of
the Credit Agreement is true and correct on the date hereof as if made on and as
of the date hereof.

5.       The Borrower is not in breach of any of the covenants set out in
Article 10 of the Credit Agreement on the date hereof.

6.       No Default or Event of Default has occurred.

         The certificate is delivered to you pursuant to Section 10.4(2)(iii) of
the Credit Agreement. Initially capitalized terms used in this Compliance
Certificate have the meanings given in the Credit Agreement.

         DATED: _____________________________ [within 60 days of the end of each
of the first three fiscal quarters of the Borrower and 120 days of the end of
the Borrower's fiscal year]

                                       By: _____________________________________
                                           Name:
                                           Title:

<PAGE>

                                    EXHIBIT F

                           FORM OF ARRANGEMENTS LETTER

TO:      Millar Western Forest Products Ltd.

RE:      Credit Agreement dated as of June 27, 2001 among Millar Western Forest
Products Ltd., as Borrower, Canadian Imperial Bank of Commerce, HSBC Bank
Canada, Bank of Montreal and the financial institutions which from time to time
become party thereto, as Lenders, Canadian Imperial Bank of Commerce, as Agent
(as supplemented, amended, modified, replaced or restated from time to time, the
"CREDIT AGREEMENT").

1.       APPLICABLE MARGIN:

         The undersigned Lender agrees that the applicable margins for
Accommodation under the Credits for the undersigned Lender is as follows:

Prime Rate Loans                                 o  %
US Base Rate Loans                               o  %
LIBOR Loans                                      o  %
Bankers' Acceptances                             o  %

2.       STANDBY FEE:

         The Borrower will pay to the undersigned Lender a standby fee at the
rate per annum of   o  % calculated daily on the undrawn amount of the Revolving
Credit (taking into account outstanding accommodation under the Swing Line
Credit and without taking into account any limitation resulting from the
Borrowing Base requirements). The standby fee shall be calculated commencing on
the Closing Date and shall be payable quarterly in arrears on the first banking
day following the quarter end of March, June, September and December of each
year. The first payment is due October, 2001.

3.       UPFRONT FEE:

         The Borrower will pay to the undersigned Lender on the Closing Date an
upfront fee of $   o   .

4.       ISSUANCE FEES FOR LETTERS OF CREDIT

         The Borrower shall pay to the undersigned the following issuance fees
pursuant to Section 5.8(2) of the Credit Agreement:

         Financial Letters of Credit $   o

<PAGE>

         Non-Financial Letters of Credit $   o

5.       DEPOSIT RATES:

         The undersigned Lender will pay interest at the following rates per
annum for deposits in minimum amounts of $  o   for a minimum period of   o  :

         Cdn $ deposits     Prime Interest Rate minus   o  % per annum

         US $ deposits      US Base Rate minus   o  % per annum

Executed June 27, 2001 by: [Lender]

                                       By: _____________________________________
                                           Name:
                                           Title:

                                       By: _____________________________________
                                           Name:
                                           Title:

<PAGE>

                                TABLE OF CONTENTS

                                                                            PAGE

ARTICLE I INTERPRETATION ......................................................1

1.1           Definitions......................................................1

1.2           Headings, Etc...................................................15

1.3           Number, Gender and Expressions..................................15

1.4           Time............................................................15

1.5           Non-Banking Days................................................15

1.6           Calculations....................................................15

1.7           Statutory References............................................15

1.8           Severability....................................................16

1.9           Entire Agreement................................................16

ARTICLE II    THE CREDITS.....................................................17

2.1           Establishment of Credits........................................17

2.2           Utilization of Proceeds.........................................17

2.3           Types of Accommodation Available under the Revolving Credit.....18

2.4           Drawdown, Rollovers and Switches of Accommodation...............18

2.5           Pro Rata Accommodation..........................................18

2.6           Drawdown of Credits.............................................19

2.7           Rollovers and Switches of Accommodation.........................20

2.8           Disbursement - Prime Rate Loans, US Base Rate Loans and
              LIBOR Loans.....................................................21

2.9           Disbursement - Bankers' Acceptances.............................21

2.10          Existing Letters of Credit......................................21

ARTICLE III   PRIME RATE LOANS, US RATE BASE LOANS AND LIBOR LOANS............22

3.1           Recording in Books and Records..................................22

3.2           Interest........................................................22

3.3           Payment of Interest.............................................22

3.4           Maximum Rate of Return..........................................23

3.5           Interest Act (Canada)...........................................23

3.6           Interest On Amounts Owing Hereunder.............................23

ARTICLE IV    GENERAL PROVISIONS RELATING TO LIBOR LOANS......................25

4.1           General.........................................................25

<PAGE>

                                TABLE OF CONTENTS
                                  (CONTINUED)

                                                                            PAGE

4.2           Early Termination of LIBOR Periods..............................25

4.3           Inability to Make LIBOR Loans...................................25

4.4           Inability to Maintain LIBOR Loans...............................26

4.5           Increased Costs.................................................26

4.6           Indemnity.......................................................27

ARTICLE V     BANKERS' ACCEPTANCES AND LETTERS OF CREDIT......................28

5.1           General.........................................................28

5.2           Acceptance......................................................28

5.3           Acceleration....................................................28

5.4           Change in Circumstances.........................................28

5.5           Provisions of Bankers' Acceptances..............................29

5.6           Power of Attorney for Bankers' Acceptances......................29

5.7           Outstanding Bankers' Acceptances on an Event of Default.........29

5.8           Letters of Credit...............................................30

ARTICLE VI    FEES AND INDEMNITIES, ETC.......................................31

6.1           Fees............................................................31

6.2           Regulatory Change Indemnity.....................................31

6.3           Currency Indemnity..............................................31

6.4           Environmental Indemnity.........................................32

6.5           General Indemnity...............................................32

6.6           Nature of Indemnities...........................................33

ARTICLE VII   REPAYMENT AND PREPAYMENT........................................34

7.1           Repayment of Credits............................................34

7.2           Currency of Repayments..........................................35

7.3           Exceeding Limit of Credit.......................................36

7.4           Automatic Debit.................................................36

7.5           Cancellation of Commitment......................................36

7.6           Payments........................................................36

7.7           Extension of Maturity Date......................................36

<PAGE>

                                TABLE OF CONTENTS
                                  (CONTINUED)

                                                                            PAGE

ARTICLE VIII  SECURITY........................................................38

8.1           Security........................................................38

8.2           Form, Substance and Registration of Security....................38

8.3           After Acquired Property and Further Assurances..................38

8.4           General.........................................................39

ARTICLE IX    REPRESENTATIONS AND WARRANTIES..................................40

9.1           Representations and Warranties..................................40

9.2           Survival of Representations and Warranties......................43

ARTICLE X     COVENANTS.......................................................44

10.1          Affirmative Covenants...........................................44

10.2          Negative Covenants of the Borrowers.............................45

10.3          Financial Covenants.............................................46

10.4          Accounting, Financial Statements and Other Information..........46

ARTICLE XI    EVENTS OF DEFAULT...............................................49

11.1          Events of Default...............................................49

11.2          Acceleration....................................................51

11.3          Set Off.........................................................52

11.4          Remedies Cumulative.............................................52

11.5          Availability of Accommodation After Default and Appropriation
              of Monies Received..............................................52

11.6          Non-Merger......................................................53

11.7          Pro Rata Sharing................................................53

ARTICLE XII   CONDITIONS PRECEDENT............................................54

12.1          Closing.........................................................54

12.2          Conditions Precedent to the Establishment by Lenders of the
              Credits.........................................................54

12.3          Conditions Precedent to the First and each Subsequent Drawdown
              under a Credit..................................................55

ARTICLE XIII  THE AGENT.......................................................57

13.1          Appointments....................................................57

13.2          Dealing by Borrower with the Agent..............................57

13.3          Delegation of Duties............................................57

13.4          Indemnity.......................................................57

<PAGE>

                                TABLE OF CONTENTS
                                  (CONTINUED)

                                                                            PAGE

13.5          Exculpation.....................................................58

13.6          Reliance........................................................59

13.7          Exchange of Information.........................................59

13.8          The Agent, Individually.........................................59

13.9          Resignation.....................................................59

13.10         Instructions by Lenders.........................................60

13.11         Arrangements for Repayment of Accommodation.....................61

13.12         Repayment by Lenders to Agent...................................61

13.13         Delivery of Assignment Agreement................................62

13.14         Provisions for Benefit of Lenders Only..........................62

ARTICLE XIV   MISCELLANEOUS...................................................63

14.1          Payments to the Lenders.........................................63

14.2          Expenses........................................................64

14.3          Amendment, Waiver, etc..........................................64

14.4          Further Assurances..............................................64

14.5          Dealings by Agents and Lenders..................................65

14.6          Notices.........................................................65

14.7          Participation and Syndication...................................66

14.8          Assignment by Lenders After Event of Default....................67

14.9          Replacement of a Lender.........................................67

14.10         Survival........................................................68

14.11         Successors and Assigns..........................................68

14.12         Governing Law...................................................68

14.13         Counterparts....................................................68

14.14         Schedules and Exhibits..........................................69

14.15         Performance by the Agent of Borrower's Obligations..............69

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