Document:

<PAGE>   1
                                                                    EXHIBIT 4.13

                         CURRENT ASSETS SECURED PARTIES
                            OBLIGOR PLEDGE AGREEMENT

         THIS CURRENT ASSETS SECURED PARTIES OBLIGOR PLEDGE AGREEMENT (as
amended, supplemented, amended and restated or otherwise modified from time to
time, this "Pledge Agreement"), dated as of July 19, 2001, among Sterling
Chemicals, Inc., a Delaware corporation (the "Company"), and each of the Persons
(such capitalized term and all other capitalized terms not otherwise defined
herein shall have the meanings provided for or incorporated by reference in
Article I below) identified on the signature pages hereto and each other Person
that may from time to time become a party to this Pledge Agreement (each a
"Pledgor" and collectively the "Pledgors"), and The CIT Group/Business Credit,
Inc., as Administrative Agent for each of the Current Assets Secured Parties.

                                    RECITALS:

         A. The Company, Sterling Canada, Inc., a Delaware corporation, Sterling
Pulp Chemicals US, Inc., a Delaware corporation, Sterling Pulp Chemicals, Inc.,
a Georgia corporation, Sterling Fibers, Inc., a Delaware corporation, Sterling
Chemicals Energy, Inc., a Delaware corporation, and Sterling Chemicals
International, Inc., a Delaware corporation, (collectively, the "Borrowers") are
Wholly-Owned Subsidiaries of Sterling Chemicals Holdings, Inc., a Delaware
corporation (the "Parent").

         B. The Parent and the Borrowers have elected to file voluntary
petitions with the United States Bankruptcy Court for the Southern District of
Texas and have continued in possession of their respective assets and in the
management of their respective businesses pursuant to Sections 1107 and 1108 of
the Bankruptcy Code.

         C. Pursuant to a Revolving Credit Agreement, dated as of even date
herewith (as amended, supplemented, amended and restated or otherwise modified
from time to time, the "Credit Agreement"), among the Borrowers, the various
financial institutions as are, or may from time to time become, parties thereto
(the "Lenders") and the Administrative Agent, the Lenders and the Issuer have
extended Commitments to make Credit Extensions to the Borrowers.

         D. As a condition precedent to the making of any Credit Extension under
the Credit Agreement, the Pledgors are required to execute and deliver this
Pledge Agreement.

         E. Each Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement.

         F. It is in the best interest of the Pledgors to execute this Pledge
Agreement inasmuch as the Pledgors will derive substantial direct and indirect
benefits from the Credit Extensions made from time to time to the Borrowers by
the Lenders pursuant to the Credit Agreement.

<PAGE>   2

         NOW THEREFORE, for good and valuable consideration the receipt of which
is hereby acknowledged, and in order to induce the Current Assets Lenders to
make Current Assets Loans (including the initial Current Assets Loans) to the
Borrowers pursuant to the Credit Agreement, each of the Pledgors and the
Administrative Agent, for the ratable benefit of each Current Assets Secured
Party, agrees as follows:

                                    ARTICLE I
                                   DEFINITIONS

         SECTION 1.1 Certain Terms. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):

         "Administrative Agent" is defined in the preamble.

         "Borrowers" is defined in the recital A.

         "Capital Securities" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's equity (including any instruments
convertible into equity), whether now outstanding or issued after the Effective
Date.

         "Collateral" is defined in Section 2.1.

         "Company" is defined in the preamble.

         "Credit Agreement" is defined in the recital A.

         "Current Assets Termination Date" means the date on which all Current
Assets Obligations have been paid in full in cash, all Letters of Credit have
been terminated, expired or Cash Collateralized, all Rate Protection Agreements
where the counterparty is a Current Assets Lender (or its Affiliate) have been
terminated and the Current Assets Loan Commitment shall have terminated.

         "Distributions" means all stock dividends, liquidating dividends,
Capital Securities resulting from (or in connection with the exercise of) stock
splits, reclassifications, warrants, options, non-cash dividends, mergers or
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other Capital
Securities constituting Collateral, but shall not include Dividends.

         "Dividends" means cash dividends and cash distributions with respect to
any Pledged Shares or other Pledged Property made in the ordinary course of
business, but shall not include liquidating dividends.

         "Lenders" is defined in the recital C.

         "Pledge Agreement" is defined in the preamble.

                                       2
<PAGE>   3

         "Pledge Notes" means all promissory notes, bonds or debt instruments at
any time issued to any Pledgor.

         "Pledged Property" means all Pledged Shares, all other pledged Capital
Securities, all other equity securities, all Pledged Notes, all assignments of
any amounts due or to become due with respect thereto and all other instruments
which are now being delivered by any Pledgor to the Administrative Agent or may
from time to time hereafter be delivered by any Pledgor to the Administrative
Agent for the purpose of pledge under this Pledge Agreement or any other Loan
Document, and all proceeds of any of the foregoing.

         "Pledged Securities" means all Pledged Notes and all Capital Securities
which are now being or may hereafter be delivered by any Pledgor to the
Administrative Agent hereunder.

         "Pledged Share Issuer" means each Person identified in Attachment 1
hereto as the issuer of the Pledged Shares identified opposite the name of such
Person and each other Person whose Capital Securities are required to be pledged
hereunder and under the Credit Agreement from time to time.

         "Pledged Shares" means the Capital Securities of any Pledged Share
Issuer in the amounts and percentages listed in Attachment I hereto.

         "Pledgor" and "Pledgors" are defined in the preamble.

         "Securities Act" is defined in clause (a) of Section 6.2.

         SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined
herein or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.

         SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or in
the Credit Agreement or the context otherwise requires, terms for which meanings
are provided in the U.C.C. are used in this Pledge Agreement, including its
preamble and recitals, with such meanings; provided, that, (a) in the event any
term that is used herein is not defined in Article 9 of the U.C.C., as in effect
on the date hereof, but is thereafter defined in Article 9 of the U.C.C., such
term shall have the meaning ascribed to such term in Article 9 of the U.C.C. as
thereafter defined, and (b) in the event that any term that is used herein is
defined in both Article 9 of the U.C.C., as in effect on or after the date
hereof and Article 9 of the U.C.C. as in force at any relevant time hereafter,
the meaning to be ascribed to such term herein shall be the most encompassing of
such definitions.

                                   ARTICLE II
                                     PLEDGE

         SECTION 2.1. Grant of Security Interest. Effective upon entry of the
Interim Order, each Pledgor hereby pledges, hypothecates, assigns, charges,
delivers and transfers to the Administrative Agent, for the ratable benefit of
each of the Current Assets Secured Parties, and hereby grants to the
Administrative Agent, for the ratable benefit of the Current Assets Secured

                                       3
<PAGE>   4

Parties, a continuing security interest in, all of the following property
(collectively, the "Collateral"):

                  (a) all issued and outstanding Pledged Shares of each Pledged
         Share Issuer identified in Attachment 1 hereto;

                  (b) all other Capital Securities of any Pledged Share Issuer
         issued from time to time to such Pledgor;

                  (c) all Pledged Notes identified in Attachment 1 hereto and
         all other Pledged Notes, whether now or hereafter delivered to the
         Administrative Agent in connection with this Pledge Agreement;

                  (d) all other Pledged Property, whether now or hereafter
         delivered to the Administrative Agent in connection with this Pledge
         Agreement;

                  (e) all Dividends, Distributions and other payments and rights
         with respect to any Pledged Property; and

                  (f) all proceeds of any of the foregoing.

         SECTION 2.2. Security for Current Assets Obligations. This Pledge
Agreement secures the payment in full and in cash of all Current Assets
Obligations.

         SECTION 2.3. Delivery of Pledged Property. All certificates or
instruments representing or evidencing any Collateral, including all Pledged
Securities, shall be delivered to and held by or on behalf of the Administrative
Agent pursuant hereto (or to a party who will hold such Pledged Securities
pursuant to arrangements satisfactory to the Administrative Agent in its sole
discretion), shall be in suitable form for transfer by delivery and shall be
accompanied by all necessary endorsements, instruments of transfer or
assignment, duly executed in blank.

         SECTION 2.4. Dividends, Distributions or Payment on Pledged Securities.
In the event that any Dividend, Distribution or other payment is to be paid on
any Pledged Security at a time when no Event of Default has occurred and is
continuing, such Dividend, Distribution or other payment may be paid directly to
the applicable Pledgor; provided, however, that all amounts so received shall be
immediately deposited by such Pledgor into the applicable Lockbox Account. If
any such Default or Event of Default has occurred and is continuing, then any
such Dividend, Distribution or other payment shall be paid directly to the
Administrative Agent.

         SECTION 2.5. Continuing Security Interest. This Pledge Agreement shall
create a continuing security interest in the Collateral and shall:

                  (a) remain in full force and effect until the Current Assets
         Termination Date;

                  (b) be binding upon each Pledgor and its successors,
         transferees and assigns; and

                  (c) inure, together with the rights and remedies of the
         Administrative Agent hereunder, to the benefit of the Current Assets
         Secured Parties.

                                       4
<PAGE>   5

Without limiting the foregoing clause (c), any Current Assets Lender may assign
or otherwise transfer (in whole or in part) any Current Assets Loan Commitment
or any Current Assets Loan held by it to any other Person or entity, and such
other Person or entity shall thereupon become vested with all the rights and
benefits in respect thereof granted to such Current Assets Lender under any Loan
Document (including this Pledge Agreement) or otherwise, subject, however, to
any contrary provisions in such assignment or transfer, and to the provisions of
Section 10.11 of the Credit Agreement. The security interest granted herein
shall terminate and all rights to the Collateral shall revert to each Pledgor on
the Current Assets Termination Date. Upon any such termination or release of
Collateral, the Administrative Agent will, at each Pledgor's sole expense,
deliver to such Pledgor, without any representations, warranties or recourse of
any kind whatsoever, all certificates and instruments representing or evidencing
all Pledged Shares, together with all other Collateral held by the
Administrative Agent hereunder, and execute and deliver to such Pledgor such
documents as such Pledgor shall reasonably request to evidence such termination
or release.

         SECTION 2.6. Security Interest Absolute. All rights of the
Administrative Agent and the Liens granted to the Administrative Agent
hereunder, and all obligations of each Pledgor hereunder, shall be absolute and
unconditional, irrespective of

                  (a) any lack of validity or enforceability of any Loan
         Document,

                  (b) the failure of any Current Assets Secured Party

                           (i) to assert any claim or demand or to enforce any
                  right or remedy against any Pledgor, any other Obligor or any
                  other Person under the provisions of the Loan Documents or
                  otherwise, or

                           (ii) to exercise any right or remedy against any
                  guarantor of, or collateral securing, any Current Assets
                  Obligations of any Pledgor or any other Obligor,

                  (c) any change in the time, manner or place of payment of, or
         in any other term of, all or any of the Current Assets Obligations or
         any other extension, compromise or renewal of any Obligation of any
         Pledgor or any other Obligor,

                  (d) any reduction, limitation, impairment or termination of
         any Current Assets Obligation of any Pledgor or any other Obligor for
         any reason (other than the repayment in full and in cash of all Current
         Assets Obligations), including any claim of waiver, release, surrender,
         alteration or compromise, and shall not be subject to (and each Pledgor
         hereby waives any right to or claim of) any defense or set-off,
         counterclaim, recoupment or termination whatsoever by reason of the
         invalidity, illegality, nongenuineness, irregularity, compromise or
         unenforceability of, or any other event or occurrence affecting, any
         Current Assets Obligation of any Pledgor, any other Obligor or
         otherwise,

                  (e) any amendment to, rescission, waiver, or other
         modification of, or any consent to departure from, any of the terms of
         the Loan Documents,

                                       5
<PAGE>   6

                  (f) any addition, exchange, release, surrender or
         non-perfection of any collateral (including the Collateral), or any
         amendment to or waiver or release of or addition to or consent to
         departure from any guaranty, for any of the Current Assets Obligations,
         or

                  (g) any other circumstances which might otherwise constitute a
         defense available to, or a legal or equitable discharge of, any
         Pledgor, any other Obligor, any surety or any guarantor.

         SECTION 2.7. Postponement of Subrogation, etc. No Pledgor will exercise
any rights which it may acquire by reason of any payment made hereunder, whether
by way of subrogation, reimbursement or otherwise, until the Current Assets
Termination Date. Any amount paid to any Pledgor on account of any payment made
hereunder prior to the Current Assets Termination Date shall be held in trust
for the benefit of the Current Assets Secured Parties and shall immediately be
paid to the Administrative Agent, for the ratable benefit of the Current Assets
Secured Parties, and credited and applied against the Current Assets
Obligations, whether matured or unmatured, in accordance with the terms of the
Credit Agreement; provided, however, that if

                  (a) any Pledgor has made payment to the Administrative Agent
         for the ratable benefit of the Current Assets Secured Parties of all or
         any part of the Current Assets Obligations, and

                  (b) the Current Assets Termination Date has occurred,

each Current Assets Secured Party agrees that, at such Pledgor's request, the
Administrative Agent, on behalf of the Current Assets Secured Parties, will
execute and deliver to such Pledgor appropriate documents (without recourse and
without representation or warranty) necessary to evidence the transfer by
subrogation to such Pledgor of an interest in the Current Assets Obligations
resulting from such payment by such Pledgor. In furtherance of the foregoing,
prior to the Current Assets Termination Date, each Pledgor shall refrain from
taking any action or commencing any proceeding against any other Obligor (or its
successors or assigns, whether in connection with a bankruptcy proceeding or
otherwise) to recover any amounts in respect of payments made under this Pledge
Agreement to the Administrative Agent or any other Current Assets Secured Party.

                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

         SECTION 3.1. Warranties, etc. Each Pledgor represents and warrants unto
each Current Assets Secured Party, as at the date of each pledge and delivery
hereunder (including each pledge and delivery of Pledged Securities) by such
Pledgor to the Administrative Agent of any Collateral, as set forth in this
Article.

         SECTION 3.2. Ownership, No Liens, etc. Each Pledgor is the legal and
beneficial owner of, and has good and valid title to (and has full right and
authority to pledge and assign) the Collateral, free and clear of all Liens
other than the Lien granted pursuant hereto in favor of the Administrative
Agent, the Lien granted to the Trustee under the Senior Secured Note

                                       6
<PAGE>   7

Indenture and the Lien granted to pursuant to the Obligor Pledge Agreement of
even date herewith in favor of the Administrative Agent securing the Fixed
Assets Secured.

         SECTION 3.3. Valid Security Interest. Upon the entry of the Interim
Order, this Pledge Agreement will create a valid and perfected security interest
in the Collateral senior to all Liens other than the then applicable Priority
Liens.

         SECTION 3.4. As to Pledged Shares. In the case of any Pledged Shares
constituting Collateral, all such Pledged Shares are duly authorized and validly
issued, fully paid and nonassessable, and constitute all of the issued and
outstanding Capital Securities of each Pledged Share Issuer. No Pledgor has any
Subsidiaries (other than Unrestricted Subsidiaries) of which it directly owns
any Capital Securities that are not pledged hereunder. All Pledged Shares are
certificated, have been delivered to the Administrative Agent (or to a party who
will hold such shares pursuant to arrangements satisfactory to the
Administrative Agent in its sole discretion) with stock powers, accompanied by
undated instruments of transfer duly executed in blank and the Administrative
Agent has "control" (as defined in the U.C.C.) of such Pledged Shares.

         SECTION 3.5. Authorization, Approval, etc. Upon entry of the Interim
Order, no authorization, approval or other action by, and no notice to or filing
with, any Governmental Authority, regulatory body or other Person (other than,
prior to the entry of the Interim Order, approval of the Bankruptcy Court) is
required either

                  (a) for the pledge by such Pledgor of any Collateral pursuant
         to this Pledge Agreement or for the execution, delivery and performance
         of this Pledge Agreement by such Pledgor, or

                  (b) for the exercise by the Administrative Agent of the voting
         or other rights provided for in this Pledge Agreement, or, except with
         respect to any Pledged Shares as may be required in connection with a
         disposition of such Pledged Shares by laws affecting the offering and
         sale of securities generally, the remedies in respect of the Collateral
         pursuant to this Pledge Agreement,

provided, however, that in order to exercise the voting and certain other rights
provided for in this Pledge Agreement, the Pledged Shares must be transferred
into the name of the Administrative Agent on the books and records of the
Pledged Share Issuer prior to the exercise of such voting or other rights.

         SECTION 3.6. Compliance with Laws. Each Pledgor is in compliance with
the requirements of all applicable laws (including, the provisions of the Fair
Labor Standards Act), rules, regulations and orders of every Governmental
Authority, the non-compliance with which could have a Material Adverse Effect or
adversely affect the value of the Collateral.

                                   ARTICLE IV
                                    COVENANTS

         SECTION 4.1. Protect Collateral; Further Assurances, etc. Except for
the Liens described in Section 3.2 above, no Pledgor will sell, assign,
transfer, pledge, or encumber in any other manner the Collateral (except in
favor of the Administrative Agent hereunder or as

                                       7
<PAGE>   8

permitted under Section 7.2.3 and 7.2.11 of the Credit Agreement). Each Pledgor
will warrant and defend the right and title herein granted unto the
Administrative Agent in and to the Collateral (and all right, title and interest
represented by the Collateral) against the claims and demands of all Persons
whomsoever. Each Pledgor agrees that at any time, and from time to time, at the
expense of such Pledgor, such Pledgor will promptly execute and deliver all
further instruments, and take all further action, that may be necessary or
desirable, or that the Administrative Agent may reasonably request, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Administrative Agent to exercise and enforce its rights
and remedies hereunder with respect to any Collateral. No Pledgor will permit
any Pledged Share Issuer to issue any Capital Securities unless the same are
immediately delivered and pledged to the Administrative Agent hereunder.

         SECTION 4.2. Stock Powers, etc. Each Pledgor agrees that all Pledged
Securities delivered by such Pledgor pursuant to this Pledge Agreement will be
accompanied by duly executed, undated endorsements, stock powers or other
equivalent instruments of transfer reasonably acceptable to the Administrative
Agent. Each Pledgor will, from time to time upon the reasonable request of the
Administrative Agent, promptly deliver to the Administrative Agent such
endorsements, stock powers, instruments and similar documents, reasonably
satisfactory in form and substance to the Administrative Agent, with respect to
the Collateral as the Administrative Agent may reasonably request and will, from
time to time upon the request of the Administrative Agent after the occurrence
of any Event of Default, promptly cause each Pledged Share Issuer and each maker
of each Pledge Note, as applicable, to transfer any Pledged Securities
constituting Collateral into the name of any nominee designated by the
Administrative Agent.

         SECTION 4.3. Continuous Pledge. Subject to Section 2.4, each Pledgor
will, at all times, keep pledged to the Administrative Agent pursuant hereto all
Pledged Securities constituting Collateral, all Dividends and Distributions with
respect thereto, and all other Collateral and other Capital Securities,
instruments, proceeds and rights from time to time received by or distributable
to such Pledgor in respect of any Collateral. Any Distributions on Pledged
Shares consisting of Capital Securities will be certificated.

         SECTION 4.4. Voting Rights; Dividends, etc. Each Pledgor agrees:

                  (a) if any Event of Default shall have occurred and be
         continuing, promptly upon receipt thereof by such Pledgor and without
         any request therefor by the Administrative Agent, to deliver (properly
         endorsed where required hereby or requested by the Administrative
         Agent) to the Administrative Agent all Dividends, Distributions and all
         proceeds of the Collateral, all of which shall be held by the
         Administrative Agent as additional Collateral for use in accordance
         with Section 6.4; and

                  (b) if any Event of Default shall have occurred and be
         continuing and the Administrative Agent shall have notified such
         Pledgor of the Administrative Agent's intention to exercise its voting
         power under this Section:

                           (i) the Administrative Agent may exercise, without
                  further application to or order of the Bankruptcy Court, (to
                  the exclusion of such Pledgor) the voting

                                       8
<PAGE>   9

                  power and all other incidental rights of ownership with
                  respect to any Pledged Securities constituting Collateral and
                  such Pledgor hereby grants the Administrative Agent an
                  irrevocable proxy, exercisable under such circumstances, to
                  vote, without further application to or order of the
                  Bankruptcy Court the Pledged Securities; and

                           (ii) promptly to deliver to the Administrative Agent
                  such additional proxies and other documents as may be
                  necessary to allow the Administrative Agent to exercise such
                  voting power.

All Dividends, Distributions and proceeds which may at any time and from time to
time be held by any Pledgor but which such Pledgor is then obligated to deliver
to the Administrative Agent, shall, until delivery to the Administrative Agent,
be held by such Pledgor separate and apart from its other property in trust for
the Administrative Agent. The Administrative Agent agrees that unless an Event
of Default shall have occurred and be continuing and the Administrative Agent
shall have given the notice referred to in this Section, each Pledgor has the
exclusive power to exercise all voting and other consensual rights with respect
to any Pledged Securities and the Administrative Agent shall, upon the written
request of such Pledgor, promptly deliver such proxies and other documents, if
any, as shall be reasonably requested by such Pledgor which are necessary to
allow such Pledgor to exercise such powers with respect to any such Pledged
Securities; provided, however, that no vote shall be cast, or consent, waiver or
ratification given, or action taken by any Pledgor that would materially impair
the value of any Collateral or be inconsistent with or violate any provision of
the Loan Documents (including, without limitation, any action to foreclose any
Liens securing any Pledged Note or to otherwise enforce any Pledged Note).

                                    ARTICLE V
                            THE ADMINISTRATIVE AGENT

         SECTION 5.1. Administrative Agent Appointed Attorney-in-Fact. Each
Pledgor hereby irrevocably appoints the Administrative Agent as such Pledgor's
attorney-in-fact, with full authority and in the name, place and stead of the
Pledgor or in its own name, from time to time in the Administrative Agent's
discretion, upon the occurrence and during the continuance of any Event of
Default, without further application to or order of the Bankruptcy Court, to
take any action and to execute any instrument which the Administrative Agent may
deem necessary or advisable to accomplish the purposes of this Pledge Agreement,
including without limitation:

                  (a) to ask, demand, collect, sue for, recover, compromise and
         receive and give acquittance and receipts for moneys due and to become
         due under or in respect of any of the Collateral;

                  (b) to receive, endorse and collect any drafts or other
         instruments, documents and chattel paper, in connection with clause (a)
         above; and

                  (c) to file any claims or take any action or institute any
         proceedings which the Administrative Agent may deem necessary or
         desirable for the collection of any of the

                                       9
<PAGE>   10

         Collateral or otherwise to enforce the rights of the Administrative
         Agent with respect to any of the Collateral.

Each Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.

         SECTION 5.2. Administrative Agent May Perform. If any Pledgor fails to
perform any agreement contained herein, the Administrative Agent may itself
perform, or cause performance of, such agreement, and the expenses of the
Administrative Agent incurred in connection therewith shall be payable by such
Pledgor pursuant to Section 6.5.

         SECTION 5.3. Administrative Agent Has No Duty. The powers conferred on
the Administrative Agent hereunder are solely to protect its interest (on behalf
of the Current Assets Secured Parties) in the Collateral and shall not impose
any duty on it to exercise any such powers. Except for reasonable care of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, the Administrative Agent shall have no duty as to any Collateral
or responsibility for

                  (a) ascertaining or taking action with respect to calls,
         conversions, exchanges, maturities, tenders or other matters relative
         to any Pledged Property, whether or not the Administrative Agent has or
         is deemed to have knowledge of such matters, or

                  (b) taking any necessary steps to preserve rights against
         prior parties or any other rights pertaining to any Collateral.

         SECTION 5.4. Reasonable Care. The Administrative Agent is required to
exercise reasonable care in the custody and preservation of any of the
Collateral in its possession; provided, however, the Administrative Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
any of the Collateral, if it takes such action for that purpose as the relevant
Pledgor reasonably requests in writing from time to time, but failure of the
Administrative Agent to comply with any such request at any time shall not in
itself be deemed a failure to exercise reasonable care. If an Event of Default
has occurred and is continuing, the Administrative Agent shall not be required
to comply with any request of the Pledgor with respect to the matters described
in this Section.

                                   ARTICLE VI
                                    REMEDIES

         SECTION 6.1. Certain Remedies. Without further application to or order
of the Bankruptcy Court, but subject to any applicable requirements of the
Financing Order, the Credit Agreement and the Revolver Intercreditor Agreement,
if any Event of Default shall have occurred and be continuing:

                  (a) The Administrative Agent may exercise in respect of the
         Collateral, in addition to other rights and remedies provided for
         herein or otherwise available to it, all the rights and remedies of a
         secured party on default under the U.C.C. (whether or not the U.C.C.
         applies to the affected Collateral) and also may, without notice except
         as specified below, sell the Collateral or any part thereof in one or
         more parcels at public or private

                                       10
<PAGE>   11

         sale, at any of the Administrative Agent's offices or elsewhere, for
         cash, on credit or for future delivery, and upon such other terms as
         the Administrative Agent may deem commercially reasonable. Each Pledgor
         agrees that, to the extent notice of sale shall be required by law, at
         least ten days' prior notice to such Pledgor of the time and place of
         any public sale or the time after which any private sale is to be made
         shall constitute reasonable notification. The Administrative Agent
         shall not be obligated to make any sale of Collateral regardless of
         notice of sale having been given. The Administrative Agent may adjourn
         any public or private sale from time to time by announcement at the
         time and place fixed therefore, and such sale may, without further
         notice, be made at the time and place to which it was so adjourned.

                  (b) The Administrative Agent may

                           (i) transfer all or any part of the Collateral into
                  the name of the Administrative Agent or its nominee, with or
                  without disclosing that such Collateral is subject to the Lien
                  and security interest hereunder,

                           (ii) notify the parties obligated on any of the
                  Collateral to make payment to the Administrative Agent of any
                  amount due or to become due thereunder,

                           (iii) enforce collection of any of the Collateral by
                  suit or otherwise, and surrender, release or exchange all or
                  any part thereof, or compromise or extend or renew for any
                  period (whether or not longer than the original period) any
                  obligations of any nature of any party with respect thereto,

                           (iv) endorse any checks, drafts or other writings in
                  each Pledgor's name to allow collection of the Collateral,

                           (v) take control of any proceeds of the Collateral
                  and

                           (vi) execute (in the name, place and stead of any
                  Pledgor) endorsements, assignments, stock powers and other
                  instruments of conveyance or transfer with respect to all or
                  any of the Collateral.

         SECTION 6.2. Securities Laws. If the Administrative Agent shall
determine to exercise its right to sell all or any of the Collateral pursuant to
Section 6.1, each Pledgor agrees that, upon request of the Administrative Agent,
such Pledgor will use commercially reasonable efforts to, at its own expense:

                  (a) execute and deliver, and cause each issuer of the
         Collateral contemplated to be sold and the directors and officers
         thereof to execute and deliver, all such instruments and documents, and
         do or cause to be done all such other acts and things, as may be
         necessary or, in the opinion of the Administrative Agent, advisable to
         register such Collateral under the provisions of the Securities Act of
         1933, as from time to time amended (the "Securities Act"), and to cause
         the registration statement relating thereto to become effective and to
         remain effective for such period as prospectuses are required by law to
         be furnished, and to make all amendments and supplements thereto and to
         the related prospectus which, in the opinion of the Administrative
         Agent, are necessary or advisable,

                                       11
<PAGE>   12

         all in conformity with the requirements of the Securities Act and the
         rules and regulations of the Securities and Exchange Commission
         applicable thereto;

                  (b) use its best efforts to qualify the Collateral under the
         state securities or "Blue Sky" laws and to obtain all necessary
         governmental approvals for the sale of the Collateral, as requested by
         the Administrative Agent;

                  (c) cause each such issuer to make available to its security
         holders, as soon as practicable, an earnings statement that will
         satisfy the provisions of Section 11(a) of the Securities Act; and

                  (d) do or cause to be done all such other acts and things as
         may be necessary to make such sale of the Collateral or any part
         thereof valid and binding and in compliance with applicable law.

Each Pledgor further acknowledges the impossibility of ascertaining the amount
of damages that would be suffered by the Administrative Agent or the Current
Assets Secured Parties by reason of the failure by such Pledgor to perform any
of the covenants contained in this Section and, consequently, agrees that, if
such Pledgor shall fail to perform any of such covenants, it shall pay, as
liquidated damages and not as a penalty, an amount equal to the value (as
determined by the Administrative Agent) of the Collateral on the date the
Administrative Agent SHALL demand compliance with this Section.

         SECTION 6.3. Compliance with Restrictions. Each Pledgor agrees that in
any sale of any of the Collateral whenever an Event of Default shall have
occurred and be continuing, the Administrative Agent is hereby authorized,
without further application to or order of the Bankruptcy Court, to comply with
any limitation or restriction in connection with such sale as it may be advised
by counsel is necessary in order to avoid any violation of applicable law
(including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications and restrict such prospective bidders and
purchasers to persons who will represent and agree that they are purchasing for
their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any Governmental Authority, and the Pledgor further
agrees that such compliance shall not result in such sale being considered or
deemed not to have been made in a commercially reasonable manner, nor shall the
Administrative Agent be liable nor accountable to any Pledgor for any discount
allowed by reason of the fact that such Collateral is sold in compliance with
any such limitation or restriction.

         SECTION 6.4. Application of Proceeds. Subject to any applicable
requirements of the Financing Order, the Credit Agreement and the Revolver
Intercreditor Agreement, all cash proceeds received by the Administrative Agent
in respect of any sale of, collection from or other realization upon, all or any
part of the Collateral may, in the discretion of the Administrative Agent, be
held by the Administrative Agent as additional collateral security for, or then
or at any time thereafter be applied (after payment of any amounts payable to
the Administrative Agent pursuant to Section 10.4 of the Credit Agreement and
Section 6.5 below) in whole or in part by the Administrative Agent against, all
or any part of the Current Assets Obligations in such order

                                       12
<PAGE>   13

as the Administrative Agent shall elect. Any surplus of such cash or other
proceeds held by the Administrative Agent and remaining after the Current Assets
Termination Date, shall be paid over to the applicable Pledgor or to whomsoever
may be lawfully entitled to receive such surplus. The Pledgors shall remain
liable on a joint and several basis for any deficiency.

         SECTION 6.5. Indemnity and Expenses. Each Pledgor hereby jointly and
severally indemnifies and holds harmless the Administrative Agent from and
against any and all claims, losses and liabilities arising out of or resulting
from this Pledge Agreement (including enforcement of this Pledge Agreement),
except claims, losses or liabilities resulting from the Administrative Agent's
gross negligence or willful misconduct, and each Pledgor will pay to the
Administrative Agent the amount of any and all reasonable expenses, including
the reasonable fees and disbursements of its counsel and of any experts and
agents, which the Administrative Agent may incur, in each case, in connection
with:

                  (a) the administration of this Pledge Agreement;

                  (b) the custody, preservation, use or operation of, or the
         sale of, collection from or other realization upon, any of the
         Collateral;

                  (c) the exercise or enforcement of any of the rights of the
         Administrative Agent hereunder; or

                  (d) the failure by any Pledgor to perform or observe any of
         the provisions hereof.

                                   ARTICLE VII
                            MISCELLANEOUS PROVISIONS

         SECTION 7.1. Loan Document. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.

         SECTION 7.2. Amendments, etc. No amendment to or waiver of any
provision of this Pledge Agreement nor consent to any departure by any Pledgor
herefrom shall in any event be effective unless the same shall be in writing and
signed by the Administrative Agent (on behalf of the Lenders or the Required
Lenders, as the case may be) and each Pledgor, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which it is given.

         SECTION 7.3. Protection of Collateral. The Administrative Agent may
from time to time, at its option, and at the expense of the Pledgors, perform
any act which any Pledgor agrees hereunder to perform and which such Pledgor
shall fail to perform after being requested in writing so to perform (it being
understood that no such request need be given after the occurrence and during
the continuance of an Event of Default) and the Administrative Agent may from
time to time take any other action which the Administrative Agent reasonably
deems necessary for the maintenance, preservation or protection of any of the
Collateral or of its security interest therein.

                                       13
<PAGE>   14

         SECTION 7.4. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing and addressed,
delivered or transmitted, if to any Pledgor, at the address or facsimile number
of the Company provided for in the Credit Agreement, and, if to the
Administrative Agent, at the address or facsimile number provided for in the
Credit Agreement, or as to any such party at such other address or facsimile
number as shall be designated by such party in a written notice to each other
party complying as to delivery with the terms of this Section. Any notice,
(a)(i) if mailed and properly addressed with postage prepaid or (ii) if properly
addressed and sent by pre-paid courier service, shall be deemed given when such
notice has been received or (b) if transmitted by facsimile, shall be deemed
given when transmitted (and telephonic confirmation of receipt thereof has been
received).

         SECTION 7.5. Headings. The various headings of this Pledge Agreement
are inserted for convenience only, and shall not affect the meaning or
interpretation of this Pledge Agreement or any provisions hereof.

         SECTION 7.6. Severability. Any provision of this Pledge Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such provision
and such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability, without invalidating the remaining provisions of this Pledge
Agreement or affecting the validity or enforceability of such provision in any
other jurisdiction.

         SECTION 7.7. Governing Law. THIS PLEDGE AGREEMENT SHALL BE DEEMED TO BE
A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW
YORK, EXCLUDING THE LAW OF CONFLICTS BUT GIVING EFFECT TO FEDERAL LAWS
APPLICABLE TO NATIONAL BANKS.

         SECTION 7.8. Counterparts. This Pledge Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original (whether such counterpart is originally executed or an electronic copy
of an original) and all of which shall constitute together but one and the same
agreement. This Pledge Agreement shall become effective and binding upon any
Pledgor when a counterpart hereof executed on behalf of such Pledgor shall have
been received by the Administrative Agent.

         SECTION 7.9. Additional Pledgors. Upon the execution and delivery by
any other Person of an instrument in the form of Annex I hereto, together with
the Schedule thereto, such Person shall become a "Pledgor" hereunder with the
same force and effect as if originally named as a Pledgor herein. The execution
and delivery of any such instrument shall not require the consent of any other
Pledgor hereunder. The rights and obligations of each Pledgor hereunder shall
remain in full force and effect notwithstanding the addition of any new Pledgor
as a party to this Pledge Agreement.

         SECTION 7.10. Agreement Subject to Revolver Intercreditor Agreement
Notwithstanding anything to the contrary contained herein, it is expressly
understood and agreed by the parties that this Agreement shall be subject to the
terms of the Revolver Intercreditor Agreement.

                                       14
<PAGE>   15

         IN WITNESS WHEREOF, the parties hereto have caused this Current Assets
Secured Parties Obligor Pledge Agreement to be duly executed and delivered by
their respective officers thereunto duly authorized as of the day and year first
above written.

                                       STERLING CHEMICALS, INC.

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

                                       STERLING CANADA, INC.

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

                                       STERLING PULP CHEMICALS US, INC.

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

                                       THE CIT GROUP/BUSINESS CREDIT, INC.,
                                       as Administrative Agent

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

                                       15
<PAGE>   16

                                                                    ATTACHMENT 1
                                               to Current Assets Secured Parties
                                                        Obligor Pledge Agreement

STERLING CHEMICALS, INC.

<Table>
<Caption>
Pledged Shares

Pledged Share Issuer                                          Capital Securities

                                     Authorized Shares           Outstanding Shares           % of Share Pledged
                                     -----------------           ------------------           ------------------
<S>                                  <C>                         <C>                          <C>
Sterling Canada, Inc.                      1,000                          100                        100%

Sterling Chemicals Energy,                 1,000                        1,000                        100%
Inc.

Sterling Chemicals,                        1,000                        1,000                        100%

International, Inc.

Sterling Fibers, Inc.                      1,000                        1,000                        100%
</Table>

<Table>
<Caption>
Pledged Notes
                                                                                          Aggregate Principal Amount
                                           Maker                     Description                  Outstanding
                                           -----                     -----------          --------------------------
<S>                                        <C>                       <C>                  <C>
None.
</Table>

STERLING PULP CHEMICALS US, INC.

<Table>
<Caption>
Pledged Shares

Pledged Share Issuer                                             Capital Securities

                                     Authorized Shares           Outstanding Shares           % of Share Pledged
                                     -----------------           ------------------           ------------------
<S>                                  <C>                         <C>                          <C>
Sterling Pulp Chemicals, Inc.             10,000                       10,000                        100%
</Table>

<Table>
<Caption>
Pledged Notes
                                                                                          Aggregate Principal Amount
                                           Maker                     Description                  Outstanding
                                           -----                     -----------          --------------------------
<S>                                        <C>                       <C>                  <C>
None.
</Table>

STERLING CANADA, INC.

<Table>
<Caption>
Pledged Shares

Pledged Share Issuer                                             Capital Securities

                                     Authorized Shares           Outstanding Shares           % of Share Pledged
                                     -----------------           ------------------           ------------------
<S>                                  <C>                         <C>                          <C>
Sterling Pulp Chemicals US,                1,000                        1,000                        100%
Inc.
</Table>

<Table>
<Caption>
Pledged Notes
                                                                                          Aggregate Principal Amount
                                           Maker                     Description                  Outstanding
                                           -----                     -----------          --------------------------
<S>                                   <C>                      <C>                        <C>
                                      Valdosta-Lowndes         Industrial Revenue Bonds        $59,000,000.00
                                      Industrial Authority     (Sterling Pulp Chemicals
                                                               US, Inc. Project) Series
                                                               1995
</Table>

                                    Annex-1
<PAGE>   17

                                                                         ANNEX 1
                                               to Current Assets Secured Parties
                                                        Obligor Pledge Agreement

                  SUPPLEMENT TO CURRENT ASSETS SECURED PARTIES
                            OBLIGOR PLEDGE AGREEMENT

         This SUPPLEMENT NO. ___, dated as of __________, ____ (this
"Supplement"), to the Current Assets Secured Parties Obligor Pledge Agreement,
dated as of July ___, 2001 (as amended, supplemented, amended and restated or
otherwise modified from time to time, the "Pledge Agreement"), among the initial
signatories thereto and each other Person which from time to time thereafter
became a party thereto pursuant to Section 7.9 thereof (each, individually, a
"Pledgor", and, collectively, the "Pledgors"), in favor of THE CIT
GROUP/BUSINESS CREDIT INC., as Administrative Agent for each of the Current
Assets Secured Parties (such term and all other capitalized terms being used
herein with the meanings provided, or incorporated by reference, in the Pledge
Agreement), is made by the undersigned.

                                   WITNESSETH:

         WHEREAS, pursuant to a Revolving Credit Agreement, dated as of July
___, 2001 together with all amendments, supplements, restatements and other
modifications, if any, from time to time thereafter made thereto, the "Credit
Agreement"), among Sterling Chemicals, Inc., a Delaware corporation, Sterling
Canada, Inc., a Delaware corporation, Sterling Pulp Chemicals US, Inc., a
Delaware corporation, Sterling Pulp Chemicals, Inc., a Georgia corporation,
Sterling Fibers, Inc., a Delaware corporation, Sterling Chemicals Energy, Inc.,
a Delaware corporation, and Sterling Chemicals International, Inc., a Delaware
corporation, (collectively, the "Borrowers"), the various financial institutions
as are, or may from time to time become, parties thereto (the "Lenders"), and
the Administrative Agent, the Lenders and the Issuer have extended Commitments
to make Credit Extensions to the Borrowers;

         WHEREAS, as a condition precedent to the making and maintenance of
Current Assets Loans under the Credit Agreement, the undersigned is required to
execute and deliver this Supplement;

         WHEREAS, the undersigned has duly authorized the execution, delivery
and performance of this Supplement and the Pledge Agreement;

         WHEREAS, the Pledge Agreement provides that additional parties may
become Pledgors under the Pledge Agreement by execution and delivery of an
instrument in the form of this Supplement;

         WHEREAS, pursuant to the provisions of Section 7.9 of the Pledge
Agreement, the undersigned is becoming a Pledgor under the Pledge Agreement; and

                                    Annex-1
<PAGE>   18

         WHEREAS, the undersigned desires to become a Pledgor under the Pledge
Agreement in order to induce the Current Assets Lenders to continue to make and
maintain Current Assets Loans under the Credit Agreement as consideration
therefor;

         NOW, THEREFORE, the undersigned agrees, for the benefit of each Current
Assets Secured Party, as follows:

         SECTION 1. In accordance with the Pledge Agreement, the undersigned by
its signature below becomes a Pledgor under the Pledge Agreement with the same
force and effect as if it were an original signatory thereto as a Pledgor and
Attachment I hereto shall be deemed to be part of Attachment I thereto. In
furtherance of the foregoing, each reference to a "Pledgor" in the Pledge
Agreement shall be deemed to include the undersigned.

         SECTION 2. The undersigned hereby represents and warrants that this
Supplement has been duly authorized, executed and delivered by the undersigned
and constitutes a legal, valid and binding obligation of the undersigned,
enforceable against it in accordance with its terms, except as such enforcement
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally and general equitable
principles.

         SECTION 3. Except as expressly supplemented hereby, the Pledge
Agreement shall remain in full force and effect in accordance with its terms.

         SECTION 4. In the event any one or more of the provisions contained in
this Supplement should be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein and in the Pledge Agreement shall not in any way be affected or impaired.

         SECTION 5. Without limiting the provisions of the Credit Agreement (or
any other Loan Document, including the Pledge Agreement), the undersigned agrees
to reimburse the Administrative Agent for its reasonable out-of-pocket expenses
in connection with this Supplement, including reasonable attorneys' fees and
expenses of the Administrative Agent.

         SECTION 6. THIS SUPPLEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER
AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK, EXCLUDING THE LAW OF
CONFLICTS BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

         SECTION 7. This Supplement hereby incorporates by reference the
provisions of the Pledge Agreement, which provisions are deemed to be a part
hereof, and this Supplement shall be deemed to be a part of the Pledge
Agreement.

         SECTION 8. This Supplement may be executed by the parties hereto in
several counterparts, each of which shall be deemed to be an original (whether
such counterpart is originally executed or an electronic copy of an original)
and all of which shall constitute together but one and the same agreement. This
Supplement shall become effective and binding upon the

                                    Annex-2
<PAGE>   19

Pledgor when a counterpart hereof executed on behalf of the Pledgor shall have
been received by the Administrative Agent.

         IN WITNESS WHEREOF, the undersigned has caused this Supplement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.

                                       [NAME OF ADDITIONAL PLEDGOR]

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

ACKNOWLEDGED AND ACCEPTED BY:

THE CIT GROUP/BUSINESS CREDIT INC.,
as Administrative Agent

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

                                    Annex-3
<PAGE>   20

                                                                    ATTACHMENT 1
                                                            to Supplement No. __
                                                                Pledge Agreement

[NAME OF PLEDGOR]

<Table>
<Caption>
Pledged Shares

Pledged Share Issuer                                             Capital Securities
                                     ----------------------------------------------------------------------------
                                     Authorized Shares           Outstanding Shares           % of Shares Pledged
                                     -----------------           ------------------           -------------------
<S>                                  <C>                         <C>                          <C>

</Table>

                                    Annex-4<PAGE>   1
                                                                    EXHIBIT 4.14

                         CIT BUSINESS CREDIT CANADA INC.

                               as Agent and Lender

                                       and

                          STERLING PULP CHEMICALS, LTD.

                                   as Borrower

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

                               FINANCING AGREEMENT

                                  JULY 11, 2001

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

<PAGE>   2

                                TABLE OF CONTENTS

<Table>
<S>             <C>                                                        <C>
Section 1       Definitions and Interpretation...............................1

Section 2       Conditions Precedent........................................23

Section 3       Revolving Loans.............................................29

Section 4       Term Loan...................................................35

Section 5       Letters of Credit...........................................36

Section 6       Acceptances and Drafts......................................39

Section 7       Representations, Warranties and Covenants...................42

Section 8       Interest, Fees and Expenses.................................61

Section 9       Powers......................................................69

Section 10      Events of Default and Remedies..............................70

Section 11      Termination.................................................76

Section 12      Miscellaneous...............................................76

Section 13      Agreement between the Lenders...............................80

Section 14      Agency......................................................84
</Table>

EXHIBIT

Exhibit A - Form of Term Loan Promissory Note
Exhibit B - Form of Revolving Loan Promissory Note

SCHEDULES

Schedule 1 - Collateral Information
Schedule 2 - Permitted Liens
Schedule 3 - Leases
Schedule 4 - Owned Properties
Schedule 5 - Litigation
Schedule 6 - Permitted Debt
Schedule 7 - Environmental Liabilities
Schedule 8 - Contravention and Consents
Schedule 9 - Material Agreements
Schedule 10 - Bowater Project Assets
Schedule 11 - Australia Project

                                      (i)
<PAGE>   3
                                      -1-

                               FINANCING AGREEMENT

         CIT BUSINESS CREDIT CANADA INC., a Canada corporation, with offices
located in Toronto, Ontario (hereinafter "CIT"), and CIT as agent for the
lenders (the "AGENT"), and any other party which now or hereafter becomes a
lender hereunder pursuant to Section 13 hereof (individually a "LENDER" and
collectively the "LENDERS") are pleased to confirm the terms and conditions
under which the Agent and the Lenders shall make Revolving Loans, the Term Loan
and other financial accommodations to STERLING PULP CHEMICALS, LTD., an Ontario
corporation with a principal place of business at 302 The East Mall, Suite 200,
Toronto, Ontario M9B 6C7 (herein the "COMPANY").

SECTION 1     DEFINITIONS AND INTERPRETATION

         ACCOUNTS shall mean, with respect to a Person, all now existing and
         future: (a) accounts (as defined in the PPSA), and any and all other
         receivables (whether or not specifically listed on schedules furnished
         to the Agent), including, without limitation, all accounts created by,
         or arising from, all sales, leases, rentals of goods or renditions of
         services to its customers, including but not limited to, those accounts
         arising under any trade names or styles, or through any divisions; (b)
         any and all instruments, documents of title, chattel paper (all as
         defined in the PPSA) (including electronic chattel paper); (c) unpaid
         seller's or lessor's rights (including rescission, replevin,
         reclamation, repossession and stoppage in transit) relating to the
         foregoing or arising therefrom; (d) rights to any goods represented by
         any of the foregoing, including rights to returned, reclaimed or
         repossessed goods; (e) reserves and credit balances arising in
         connection with or pursuant hereto; (f) guarantees, supporting
         obligations, intangibles and letter of credit rights (all as defined in
         the PPSA); (g) insurance policies or rights relating to any of the
         foregoing; (h) intangibles pertaining to any and all of the foregoing
         (including all rights to payment, including those arising in connection
         with bank and non-bank credit cards), and including books and records
         and any electronic media and software thereto; (i) notes, deposits or
         property of account debtors securing the obligations of any such
         account debtors; and (j) cash and non-cash proceeds (as defined in the
         PPSA) of any and all of the foregoing:

         ADMINISTRATIVE MANAGEMENT FEE shall mean the fee which shall be paid to
         the Agent in accordance with Section 8(8) hereof.

         AFFILIATE shall have the meaning ascribed thereto in the Canada
         Business Corporations Act.

         ANNIVERSARY DATE shall mean the date occurring three (3) years from the
         Closing Date, and thereafter shall mean the date occurring one (1) year
         from

<PAGE>   4
                                      -2-

         the three (3) year anniversary date of the Closing Date, and the same
         date in every year thereafter.

         APPLICABLE DRAWING FEE means, with respect to each Draft drawn by the
         Company and purchased by any Person on any Drawing Date, an amount
         equal to (i) with respect to Revolving Loans, 3.5% or (ii) with respect
         to the Term Loan, 4%, in each case, of the aggregate Face Amount of the
         Draft, calculated on the basis of the term to maturity of the Draft and
         a year of 365 days.

         AUSTRALIA PROJECT shall mean the project more specifically described on
         Schedule 11 with respect to the construction and operation of an
         Australian sodium chlorate facility to be built in the Hunter Valley,
         New South Wales, Australia and owned by Sterling Australia, which shall
         be a wholly-owned subsidiary of the Company, its successors and
         assigns, together with all rights relating thereto.

         ASSIGNMENT AND TRANSFER AGREEMENT shall mean the Assignment and
         Transfer Agreement to be entered into between the Agent and an assignee
         pursuant to Section 13.

         AVAILABILITY shall mean at any time the amount by which: (a) the
         Borrowing Base exceeds (b) the outstanding aggregate amount of all
         Obligations, including without limitation, all Obligations with respect
         to Revolving Loans (excluding the Letters of Credit) but excluding the
         Term Loan.

         AVAILABILITY RESERVE shall mean the sum of: (a) (i) two (2) months
         rental payments or similar charges for any of the Company's leased
         premises or other Collateral locations for which the Company has not
         delivered to the Agent a landlord's waiver or subordination in form and
         substance reasonably satisfactory to the Agent, plus (ii) two (2)
         months estimated payments plus any other fees or charges owing by the
         Company to any applicable warehousemen or third party processor (as
         determined by the Agent in its reasonable business judgement), provided
         that any of the foregoing amounts shall be (x) eliminated from time to
         time hereafter upon delivery to the Agent of any such acceptable waiver
         or subordination, (y) adjusted or eliminated, as the case may be, from
         time to time upon the opening or closing of a Collateral location
         and/or (z) adjusted from time to time with respect to any change in the
         amount of rental, storage or processor payments or similar charges; (b)
         any reserve which the Agent may reasonably require from time to time
         pursuant to this Financing Agreement, including without limitation, for
         Letters of Credit pursuant to Section 5(2) hereof; and (c) such other
         reserves as the Agent deems necessary in its commercially reasonable
         judgment as a result of (x) negative forecasts and/or trends in the
         Company's business,

<PAGE>   5
                                      -3-

         industry, prospects, profits, operations or financial condition or (y)
         other issues, circumstances or facts that could otherwise negatively
         impact the Company, its business, prospects, profits, operations,
         industry, financial condition or assets.

         BA EQUIVALENT NOTE has the meaning specified in Section 6(7).

         BA INSTRUMENTS means, collectively, Bankers' Acceptances, Drafts and BA
         Equivalent Notes, and, in the singular, any one of them.

         BA LOAN shall mean either a Revolving Loan or the Term Loan made in
         accordance with the procedures set forth in Section 6.

         BANKERS' ACCEPTANCE has the meaning specified in Section 6(1).

         BANKRUPTCY COURT shall mean the United States Bankruptcy Court,
         Southern District of Texas, Houston Division.

         BORROWING BASE shall mean the sum of (a) eighty-five percent (85%) of
         the Company's aggregate outstanding Eligible Accounts Receivable, plus
         (b) the lesser of (i) sixty-five percent (65%) of the aggregate value
         of the Company's Eligible Inventory, valued at the lower of cost or
         market, on a first in, first out basis, and (ii) the Inventory Loan
         Cap, less (c) the sum of (x) any applicable Availability Reserves and
         (y) Priority Accounts Payable.

         BOWATER shall mean Bowater Pulp and Paper Canada Inc., its successors
         and assigns.

         BOWATER PROJECT means the lease and related agreements to be entered
         into by the Company with Bowater pursuant to which the Company will
         lease from Bowater the chlorine dioxide chemical plant located at
         Bowater's Thunder Bay, Ontario, pulp mill and the Company will supply
         chlorine dioxide to the Bowater Thunder Bay mill.

         BUSINESS DAY shall mean any day on which the Agent and CIBC are open
         for business in Toronto, Ontario.

         CANADIAN DOLLARS AND CDN.$ each means lawful money of Canada.

         CAPITAL EXPENDITURES shall mean, for any period, the aggregate
         expenditures of the Company during such period on account of, property,
         plant, equipment or similar fixed assets that, in conformity with GAAP,
         are required to be reflected in the balance sheet of the Company.

<PAGE>   6
                                      -4-

         CAPITAL IMPROVEMENTS shall mean operating Equipment and facilities
         (other than land) acquired or installed for use in the Company's
         business operations.

         CAPITAL LEASE shall mean any lease of property (whether real, personal
         or mixed) which, in conformity with GAAP, is accounted for as a capital
         lease or a Capital Expenditure in the balance sheet of the Company.

         CHANGE OF CONTROL means the occurrence of any of the following events
         with respect to the Company: (i) any Person (or any successor to it
         continuing from any amalgamation, merger or other reorganization) other
         than the Parent becoming the owner, directly or indirectly,
         beneficially or of record, of shares representing (x) a majority or
         more of the aggregate ordinary voting power represented by the
         outstanding share capital of the Company, or (y) a majority or more of
         the votes attached to the Company's securities entitled to vote for the
         election of the Company's board of directors, as applicable, (ii) any
         sale, lease, exchange or other transfer (in one transaction or series
         of related transactions) of all or substantially all of the Company's
         property and assets, or (iii) the Company's shareholders approve any
         plan or proposal for the liquidation or dissolution of the Company.

         CHAPTER 11 PROCEEDINGS means the jointly administered cases pursuant to
         the provisions of sections 101 et seq. of Chapter 11 of title 11 of the
         United States Commercial Code commenced in the United States Bankruptcy
         Court, Southern District of Texas, Houston Division, in which Sterling
         Chemicals Holdings Inc. and certain of its U.S. subsidiaries are
         debtors and debtors-in-possession.

         CIBC shall mean the Canadian Imperial Bank of Commerce and its
         successors.

         CIBC BANK RATE shall mean, at any time, the rate of interest per annum
         announced by CIBC from time to time as its prime rate in effect at its
         principal office in Toronto, Ontario as the rate of interest for loans
         in Canadian dollars (the prime rate is not intended to be the lowest
         rate of interest charged by Canadian Imperial Bank of Commerce to its
         borrowers).

         CIBC BANK RATE LOANS shall mean any loans or advances pursuant to this
         Financing Agreement made or maintained at a rate of interest based upon
         the CIBC Bank Rate.

         CIBC BASE RATE shall mean, at any time, the rate of interest per annum
         announced by CIBC from time to time as the reference rate of interest
         for loans in U.S. Dollars to its Canadian borrowers.

<PAGE>   7
                                      -5-

         CIBC BASE RATE LOANS shall mean any loans or advances pursuant to this
         Financing Agreement made or maintained at a rate of interest based upon
         the CIBC Base Rate.

         CLOSING DATE shall mean the date that this Financing Agreement has been
         duly executed by the parties hereto and delivered to the Agent, or such
         other date as the parties hereto may mutually agree.

         COLLATERAL shall mean all present and future Accounts, Equipment,
         Inventory, Documents of Title, General Intangibles, Real Estate, stock
         of the Company's subsidiaries and Other Collateral of the Company and
         its subsidiaries except for (a) all present and future property and
         assets of the Company solely dedicated to the Bowater Project, as set
         forth in Schedule 10, and (b) all present and future property and
         assets of Sterling Australia; provided, however, that any issued stock
         of Sterling Australia and any promissory note issued by Sterling
         Australia in favour of the Company shall constitute a part of the
         Collateral, subject only to a prior Lien in favour of any financier to
         the Australia Project, the priority of which, if so requested, the
         Agent for itself and on behalf of the Lenders, agrees to acknowledge in
         an agreement in form and content satisfactory to the Agent and its
         counsel acting reasonably.

         COMMITMENT shall mean each Lender's commitment in accordance with this
         Financing Agreement to make Revolving Loans (the "REVOLVING CREDIT
         COMMITMENT") and the Term Loan funding (the "TERM LOAN COMMITMENT"), in
         the amount of their respective pro rata share set forth in schedules
         prepared by the Agent or the Assignment and Transfer Agreement executed
         by each such Lender.

         CONSOLIDATED BALANCE SHEET shall mean a consolidated or compiled, as
         applicable, balance sheet for the Company and the subsidiaries of the
         Company (other than Sterling Australia) eliminating all inter-company
         transactions and prepared in accordance with GAAP.

         CONSOLIDATING BALANCE SHEET shall mean a Consolidated Balance Sheet
         plus individual balance sheets for the Company and the subsidiaries of
         the Company (other than Sterling Australia), showing all eliminations
         of inter-company transactions, including a balance sheet for the
         Company exclusively, all prepared in accordance with GAAP.

         COPYRIGHTS shall mean (i) all present and hereafter acquired
         copyrights, copyright registrations, recordings, applications, designs,
         styles, licenses, marks, prints and labels bearing any of the
         foregoing, (ii) goodwill, general intangibles, intellectual property
         and rights pertaining thereto, and (iii) all cash and non-cash proceeds
         thereof.

<PAGE>   8
                                      -6-

         CURRENT ASSETS shall mean those assets of the Company which, in
         accordance with GAAP, are classified as current.

         CURRENT LIABILITIES shall mean those liabilities of the Company which,
         in accordance with GAAP, are classified as "CURRENT", provided however,
         that, notwithstanding GAAP, the Revolving Loans and the current portion
         of Permitted Debt shall be considered "CURRENT LIABILITIES".

         DEBT of any Person means (i) all Debt of such Person for borrowed
         money, including borrowings of commodities, bankers' acceptances,
         letters of credit or letters of guarantee, (ii) all Debt of such Person
         for the deferred purchase price of property or services represented by
         a note, bond, debenture or other evidence of Debt, (iii) all Debt
         created or arising under any conditional sale or other title retention
         agreement with respect to property acquired by such Person (even though
         the rights and remedies of the seller or lender under such agreement in
         the event of default are limited to repossession or sale of such
         property, (iv) all obligations under leases which have been or should
         be, in accordance with GAAP, recorded as capital leases in respect of
         which such Person is liable as lessee, (v) all reimbursement or other
         obligations of such Person, contingent or otherwise, in respect of
         letters of credit, letters of guarantee or the borrowing of any
         commodity, (vi) the aggregate amount at which any shares in the capital
         of the Person which are retractable at the option of the holder may be
         retracted provided all conditions precedent for such retraction have
         been met, (vii) all obligations of the Person under any interest rate
         cap or collar arrangements or similar arrangements, (viii) all current
         liabilities of such Person represented by a note, bond, debenture or
         other evidence of Debt, and (ix) Debt of the kinds referred to in (i)
         through (viii) above which is directly or indirectly guaranteed by such
         Person.

         DEFAULT shall mean any event specified in Section 10 hereof, whether or
         not any requirement for the giving of notice, the lapse of time, or
         both, or any other condition, event or act, has been satisfied.

         DEFAULT RATE OF INTEREST shall mean a rate of interest per annum on any
         Obligations hereunder, equal to the sum of: (a) two percent (2%) and
         (b) the applicable increment over the CIBC Bank Rate plus the CIBC Bank
         Rate, the applicable increment over the CIBC Base Rate plus the CIBC
         Base Rate, in each case, as set forth in Section 8(1) hereof, the
         applicable increment over the LIBOR Rate (as set forth in Section 8(14)
         hereof) plus the LIBOR Rate, and the Applicable Drawing Fee in respect
         of a BA Loan, which the Agent shall be entitled to charge the Company
         on all Obligations due the Agent on behalf of the Lenders by the
         Company, as further set forth in Section 10(2) of this Financing
         Agreement.

<PAGE>   9
                                      -7-

         DEPOSITORY ACCOUNTS shall mean the collection accounts, which are
         subject to the Agent's instructions, as specified in Section 3(4) of
         this Financing Agreement.

         DOCUMENTATION FEE shall mean all amounts necessary to reimburse and
         compensate the Agent for the use of the Agent's in-house Legal
         Department and facilities and external legal counsel in documenting, in
         whole or in part, the initial transaction solely on behalf of the
         Agent, exclusive of Out-of-Pocket Expenses, and subsequent to the
         Closing Date, the Agent's standard fees relating to any and all
         modifications, waivers, releases, amendments or additional collateral
         with respect to this Financing Agreement, the Collateral and/or the
         Obligations.

         DOCUMENTS OF TITLE shall mean, with respect to a Person, all present
         and future documents of title (as defined in the PPSA), and any and all
         warehouse receipts, bills of lading, shipping documents, chattel paper,
         instruments and similar documents, all whether negotiable or not and
         all goods and Inventory relating thereto and all cash and non-cash
         proceeds of the foregoing.

         DRAFT means, at any time, either a depository bill within the meaning
         of the Depository Bills and Notes Act, or a bill of exchange within the
         meaning of the Bills of Exchange Act (Canada), drawn by the Company on
         the Agent or a Lender and bearing such distinguishing letters and
         numbers as the Agent or a Lender may determine, but which at such time
         has not been completed as the payee or accepted by the Agent or a
         Lender.

         DRAWING means (i) the creation and purchase of Bankers' Acceptances by
         the Agent or a Lender pursuant to Section 6, or (ii) the purchase of
         completed Drafts by the Agent or Lender pursuant to Section 6.

         DRAWING DATE means any Business Day fixed for a Drawing pursuant to
         Section 6.

         DRAWING PRICE means, in respect of Bankers' Acceptances or Drafts to be
         purchased by the Agent or a Lender, the difference between (i) the
         result (rounded to the nearest whole cent, with one-half of one cent
         being rounded up) obtained by dividing the aggregate Face Amount of the
         Bankers' Acceptances or Drafts by the sum of one plus the product of
         (x) the Reference Discount Rate multiplied by (y) a fraction the
         numerator of which is the number of days in the term of maturity of the
         Bankers' Acceptances or Drafts and the denominator of which is 365, and
         (ii) the aggregate Applicable Drawing Fee.

<PAGE>   10
                                      -8-

         EARLY TERMINATION DATE shall mean the date on which the Company
         terminates this Financing Agreement or the Revolving Line of Credit
         which date is prior to an Anniversary Date.

         EARLY TERMINATION FEE shall: (a) mean the fee the Agent on behalf of
         the Lenders is entitled to charge the Company in the event the Company
         terminates the Line of Credit or this Financing Agreement on a date
         prior to an Anniversary Date; and (b) be determined by multiplying the
         Line of Credit by (x) one and one quarter percent (1.25%) if the Early
         Termination Date occurs on or before one (1) year from the Closing
         Date, (y) one half of one percent (0.5%) if the Early Termination Date
         occurs after one (1) year from the Closing Date but on or before two
         (2) years from the Closing Date; and (z) one quarter of one percent
         (0.25%) if the Early Termination Date occurs after two (2) years from
         the Closing Date but prior to an Anniversary Date.

         EBITDA shall mean, in any period, all earnings of the Company and its
         subsidiaries (other than Sterling Australia) for said period before all
         interest, tax, depreciation and amortization obligations of the Company
         and its subsidiaries (other than Sterling Australia) for said period,
         determined in accordance with GAAP on a consistent basis with the
         latest consolidated audited financial statements of the Company and its
         subsidiaries, (other than Sterling Australia) but excluding the effect
         of extraordinary or non-reoccurring gains or losses for such period.

         ELIGIBLE ACCOUNTS RECEIVABLE shall mean the gross amount of the
         Company's Trade Accounts Receivable that are subject to a valid,
         exclusive, first priority and fully perfected security interest in
         favour of the Agent, on behalf of the Lenders, which conform to the
         warranties contained herein and which, at all times, continue to be
         acceptable to the Agent in the exercise of its reasonable business
         judgment, less, without duplication, the sum of: (a) any returns,
         discounts, claims, credits and allowances of any nature (whether
         issued, owing, granted, claimed or outstanding), and (b) reserves for
         any such Trade Accounts Receivable that arise from or are subject to or
         include: (i) sales to the United States of America, any state or other
         governmental entity or to any agency, department or division thereof,
         except for any such sales as to which the Company has complied with the
         Assignment of Claims Act of 1940 or any other applicable statute, rules
         or regulation, or to Canada, any province or other governmental entity,
         or any agency, department or division thereof, except for any such
         sales in relation to which the Company has complied with any applicable
         financial administration legislation as is needed to ensure the Agent
         holds a valid and perfected security interest in such account
         receivable, to the Agent's satisfaction in the exercise of its
         reasonable business judgment; (ii) foreign sales (i.e., sales outside
         of Canada or the United States), other than sales which otherwise
         comply with all of the other criteria for

<PAGE>   11
                                      -9-

         eligibility hereunder and are secured by letters of credit (in form and
         substance satisfactory to the Agent and assigned to the Agent) issued
         or confirmed by, and payable at, banks having a place of business in
         the United States of America or Canada, or to the extent covered by
         Export Development Corporation insurance in form and content acceptable
         to the Agent with proceeds payable to the Agent and the Lenders; (iii)
         Accounts that remain unpaid more than thirty (30) days from due date
         (except for certain customer accounts agreed to by the Agent in
         writing); (iv) contra accounts; (v) sales to Parent, any subsidiary, or
         to any company affiliated with the Company or Parent in any way; (vi)
         bill and hold (deferred shipment) or consignment sales; (vii) sales to
         any customer which is: (A) insolvent, (B) the debtor in any bankruptcy,
         insolvency, arrangement, restructuring, reorganization, receivership,
         liquidation or similar proceedings under any federal or state law, (C)
         negotiating, or has called a meeting of its creditors for purposes of
         negotiating, a compromise of its debts, or (D) financially unacceptable
         to the Agent or has a credit rating unacceptable to the Agent, acting
         reasonably; (viii) all sales to any customer if fifty percent (50%) or
         more of the aggregate dollar amount of all outstanding invoices to such
         customer are unpaid more than thirty (30) days from due date (except
         for certain customer accounts agreed to by the Agent in writing); (ix)
         pre-billed receivables and receivables arising from progress billing;
         (x) an amount representing, historical returns, discounts, claims,
         credits, allowances and applicable terms; (xi) sales not payable in
         United States or Canadian currency; and (xii) any other reasons deemed
         necessary by the Agent in its reasonable judgment, including without
         limitation those which are customary either in the commercial finance
         industry or in the lending practices of the Agent and/or the Lenders;
         provided that the Agent reserves the right to change the criteria set
         forth under (iii) and (viii) above from 30 days from due date to 90
         days from the invoice date.

         ELIGIBLE INVENTORY shall mean the gross amount of the Company's
         Inventory that is subject to a valid, exclusive, first priority and
         fully perfected security interest in favour of the Agent, on behalf of
         the Lenders, and which conforms to the warranties contained herein and
         which, at all times, continues to be acceptable to the Agent in the
         exercise of its reasonable business judgment, less, without
         duplication, any (a) Inventory which has been delivered to the Company
         within 30 days before such time, (b) Inventory in respect of which
         payment has not been made or the supplier has not waived or lost its
         rights to repossession under the Bankruptcy and Insolvency Act (Canada)
         or any similar legislation or law of general application including,
         without limitation, in connection with rights of revindication, (c)
         work-in-process, (d) supplies (other than raw materials), (e) Inventory
         not present in the United States of America or Canada, (f) Inventory
         returned or rejected by the Company's

<PAGE>   12
                                      -10-

         customers (other than goods that are undamaged and resaleable in the
         normal course of business) and goods to be returned to the Company's
         suppliers, (f) Inventory in transit to third parties (other than the
         Company's agents or warehouses), or in the possession of a
         warehouseman, bailee, third party processor, or other third party,
         unless such warehouseman, bailee or third party has executed a notice
         of security interest agreement (in form and substance reasonably
         satisfactory to the Agent) and/or the Agent shall otherwise have a
         first priority perfected security interest in such Inventory and (g)
         less any reserves required by the Agent in its reasonable discretion,
         including without limitation for special order goods, discontinued,
         slow-moving and obsolete Inventory, market value declines, bill and
         hold (deferred shipment), consignment sales, shrinkage and any
         applicable customs, freight, duties and Taxes.

         ENVIRONMENTAL LAWS shall mean all applicable laws, regulations, orders,
         judgments, decisions of and agreements with a governmental entity and
         all other statutory requirements relating to public health or the
         protection of the environment and all authorizations, permits,
         consents, registrations and approvals issued pursuant to such laws,
         agreements or statutory requirements.

         ENVIRONMENTAL LIABILITIES shall mean all liabilities imposed by, under
         or pursuant to Environmental Laws or which relate to the existence of
         contaminants on, under or about the Subject Properties.

         EQUIPMENT shall mean, with respect to a Person, all present and
         hereafter acquired equipment (as defined in the PPSA) including,
         without limitation, all machinery, equipment, furnishings and fixtures,
         and all additions, substitutions and replacements thereof, wherever
         located, together with all attachments, components, parts, equipment
         and accessories installed thereon or affixed thereto and all proceeds
         thereof of whatever sort.

         EQUIVALENT U.S.$ AMOUNT shall mean, on any day with respect to any
         amount of Canadian Dollars, the amount of U.S. Dollars which would be
         required to buy such amount of Canadian Dollars using the rate quoted
         by CIBC in accordance with its opening daily rate for that day, and if
         that is not a Business Day on the immediately preceding Business Day.

         EVENT(S) OF DEFAULT shall have the meaning provided for in Section 10
         of this Financing Agreement.

         FACE AMOUNT means in respect of a BA Instrument, the amount payable to
         the holder on its maturity.

<PAGE>   13
                                      -11-

         FIELD/VERIFICATION FEE means $750 per Person per day plus all travel,
         lodging, food and other out of pocket expenses of representatives of
         the Agent in connection with monitoring and inspecting the Collateral
         and the books and records of the Company from time to time.

         FINAL ORDER means an order or judgment of the Bankruptcy Court in form
         and substance acceptable to the Agent, the Lenders and their counsel
         approving, inter alia, the transactions contemplated by this Financing
         Agreement and other the Loan Documents which has not been reversed,
         stayed or otherwise rendered ineffective or modified in any manner, and
         if such order is the subject of a pending appeal in any respect, such
         Bankruptcy Court has made a finding in favour of the Agent and the
         Lenders pursuant to 11 U.S.C. Section 363(m) and neither the making
         available of the Line of Credit nor the performance by the Company of
         any of its obligations under this Financing Agreement or any of the
         other Loan Documents or under any other instrument or agreement
         referred to herein shall be subject of a presently effective stay
         pending appeal.

         FISCAL QUARTER shall mean, with respect to the Company, each three (3)
         month period ending on December 31, March 31, June 30, and September 30
         of each Fiscal Year.

         FISCAL YEAR shall mean each twelve (12) month period commencing on
         October 1 of each year and ending on the following September 30.

         FIXED CHARGES shall mean the sum of (i) Interest Charges, (ii) the
         amount of principal repaid to the Agent on the Term Loan for the then
         applicable last four Fiscal Quarters, (iii) any dividends or management
         fees paid by the Company for the then applicable last four Fiscal
         Quarters, (iv) Capital Expenditures actually incurred and (v) all
         federal, provincial, state and local cash taxes paid by the Company.

         GAAP shall mean generally accepted accounting principles in the United
         States of America as in effect from time to time and for the period as
         to which such accounting principles are to apply, provided that in the
         event the Company modifies its accounting principles and procedures as
         applied as of the Closing Date, the Company shall provide to the Agent
         and the Lenders such statements of reconciliation as shall be in form
         and substance) acceptable to the Agent.

         GENERAL INTANGIBLES shall mean, with respect to a Person, all present
         and hereafter acquired intangibles (as defined in the PPSA), and shall
         include, without limitation, all present and future right, title and
         interest in and to: (a) all Trademarks, trade names, corporate names,
         business names, logos and

<PAGE>   14
                                      -12-

         any other designs or sources of business identities, (b) Patents,
         together with any improvements on said Patents, utility models,
         industrial models, and designs, (c) Copyrights, (d) trade secrets, (e)
         licenses, permits and franchises, (f) all applications with respect to
         the foregoing, (g) all right, title and interest in and to any and all
         extensions and renewals, (h) goodwill with respect to any of the
         foregoing, (i) any other forms of similar intellectual property, (j)
         all customer lists, distribution agreements, supply agreements,
         blueprints, indemnification rights and tax refunds, together with all
         monies and claims for monies now or hereafter due and payable in
         connection with any of the foregoing or otherwise, and all cash and
         non-cash proceeds thereof, including, without limitation, the proceeds
         or royalties of any licensing agreements between the Company and any
         licensee of any of the Company's General Intangibles.

         INSURANCE PROCEEDS shall mean proceeds or payments from an insurance
         carrier with respect to any loss, casualty or damage to Collateral.

         INTEREST CHARGES means with respect to the Company for the then
         applicable four Fiscal Quarter periods, the sum of (i) the aggregate
         amount of interest expense (including imputed interest with respect to
         capitalized lease obligations) accrued during such period on a
         consolidated basis in accordance with GAAP, (ii) the net amount payable
         (or less the net amount receivable) by the Company under any interest
         rate cap or collar arrangements or similar arrangements during such
         period, and (iii) the aggregate of all purchase discounts relating to
         the sale of accounts receivable in connection with any asset
         securitization program, all as adjusted to reflect the impact of
         proceeds received from discontinued operations (including, without
         limitation, operations disposed of or closed during such period whether
         or not the operations were classified as discontinued).

         INTEREST PERIOD shall mean:

         (a)      with respect to any initial request by the Company for a LIBOR
                  Loan, a one month, two month or three month period commencing
                  on the borrowing or conversion date with respect to a LIBOR
                  Loan and ending one, two or three months thereafter, as
                  applicable; and

         (b)      thereafter with respect to any continuation of, or conversion
                  to, a LIBOR Loan, at the option of the Company, any one month,
                  two month or three month period commencing on the last day of
                  the immediately preceding Interest Period applicable to such
                  LIBOR Loan and ending one, two or three months thereafter, as
                  applicable;

<PAGE>   15
                                      -13-

                  provided that, the foregoing provisions relating to Interest
                  Periods are subject to the following:

                  (i)      if any Interest Period would otherwise end on a day
                           which is not a Working Day, that Interest Period
                           shall be extended to the next succeeding Working Day,
                           unless the result of such extension would extend such
                           payment into another calendar month in which event
                           such Interest Period shall end on the immediately
                           preceding Working Day;

                  (ii)     any Interest Period that begins on the last Working
                           Day of a calendar month (or on a day for which there
                           is no numerically corresponding day in the calendar
                           month, at the end of such Interest Period) shall end
                           on the last Working Day of a calendar month; and

                  (iii)    for purposes of determining the availability of
                           Interest Periods, such Interest Periods shall be
                           deemed available if (x) CIBC quotes an applicable
                           rate or the Agent determines LIBOR, as provided in
                           the definition of LIBOR, (y) the LIBOR determined by
                           CIBC or the Agent will adequately and fairly reflect
                           the cost of maintaining or funding its loans bearing
                           interest at LIBOR, for such Interest Period, and (z)
                           such Interest Period will end on or before the
                           earlier of Anniversary Date or the last day of the
                           then current term of this Financing Agreement. If a
                           requested Interest Period shall be unavailable in
                           accordance with the foregoing sentence, the Company
                           shall continue to pay interest on the Obligations at
                           the applicable per annum rate based upon the CIBC
                           Bank Rate.

         INTERIM ORDER means an interim order of the Bankruptcy Court in form
         and substance acceptable to the Agent and its counsel approving, inter
         alia, the transactions contemplated by this Financing Agreement and the
         other Loan Documents.

         INVENTORY shall mean, with respect to a Person, present and hereafter
         acquired inventory (as defined in the PPSA) and including, without
         limitation, all merchandise, inventory and goods, and all additions,
         substitutions and replacements thereof, wherever located, together with
         all goods and materials used or usable in manufacturing, processing,
         packaging or shipping same in all stages of production from raw
         materials through work-in-process to finished goods - and all proceeds
         thereof of whatever sort.

<PAGE>   16
                                      -14-

         INVENTORY LOAN CAP shall mean 50% of the aggregate amount of the
         Obligations outstanding under the Revolving Loans after giving effect
         to an outstanding request for an advance of the Revolving Loans.

         ISSUING BANK shall mean the bank issuing Letters of Credit for the
         Company.

         LEASED PROPERTIES means, collectively, the real properties forming the
         subject matter of the Leases.

         LEASES means the leases, subleases, rights to occupy and licences of
         real property or buildings and fixtures to which the Company is a party
         at the date of this Agreement as listed on Schedule 3.

         LETTERS OF CREDIT shall mean all letters of credit issued with the
         assistance of the Agent on behalf of the Lenders in accordance with
         Section 5 hereof by the Issuing Bank for or on behalf of the Company.

         LETTER OF CREDIT GUARANTEE shall mean the guarantee delivered by the
         Agent, on behalf of the Lenders, to the Issuing Bank of the Company's
         reimbursement obligations under the Issuing Bank's reimbursement
         agreement, application for Letter of Credit or other like document.

         LETTER OF CREDIT GUARANTEE FEE shall mean the fee the Agent, on behalf
         of the Lenders, may charge the Company under Section 8(3) of this
         Financing Agreement for: (a) issuing a Letter of Credit Guarantee,
         and/or (b) otherwise aiding the Company in obtaining Letters of Credit,
         all pursuant to Section 5 hereof.

         LETTER OF CREDIT SUB-LINE shall mean the commitment of the Lenders to
         assist the Company in obtaining Letters of Credit, pursuant to Section
         5 hereof, in an aggregate amount of $5,000,000.

         LIBOR shall mean, at any time of determination, and subject to
         availability, for each applicable Interest Period, a variable rate of
         interest equal to: (a) at the Agent's election (i) the applicable LIBOR
         quoted to the Agent by CIBC (or any successor thereof), or (ii) the
         rate of interest determined by the Agent at which deposits in U.S.
         dollars are offered for the relevant Interest Period based on
         information presented on Telerate Systems at Page 3750 as of 11:00 A.M.
         (London time) on the day which is two (2) Business Days prior to the
         first day of such Interest Period, provided that, if at least two such
         offered rates appear on the Telerate System at Page 3750 in respect of
         such Interest Period, the arithmetic mean of all such rates (as
         determined by the Agent) will be the rate used.

<PAGE>   17
                                      -15-

         LIBOR LENDING OFFICE with respect to the Agent, shall mean the office
         of CIBC, or any successor thereof, maintained at Toronto, Ontario.

         LIBOR LOAN shall mean any loans made pursuant to this Financing
         Agreement which are made or maintained at a rate of interest based upon
         LIBOR, provided that (i) no Default or Event of Default has occurred
         hereunder, which has not been waived in writing by the Required
         Lenders, and (ii) no LIBOR Loan shall be made with an Interest Period
         that ends subsequent to an Anniversary Date or any applicable Early
         Termination Date.

         LIEN means any mortgage, charge, pledge, hypothecation, security
         interest, assignment, encumbrance, lien (statutory or otherwise), title
         retention agreement or arrangement, restrictive covenant or other
         encumbrance of any nature or any other arrangement or condition that in
         substance secures payment or performance of an obligation.

         LINE OF CREDIT shall mean the aggregate commitment of the Lenders to
         (a) make Revolving Loans pursuant to Section 3 of this Financing
         Agreement (b) assist the Company in opening Letters of Credit pursuant
         to Section 5 of this Financing Agreement and (c) make the Term Loan
         pursuant to Section 4 of this Financing Agreement, in the aggregate
         amount equal to $45,000,000 or the Equivalent U.S.$ Amount ;provided
         that nothing herein shall be deemed to increase any Lender's commitment
         hereunder, and which commitment shall be set forth in the applicable
         schedules maintained by the Agent or the Assignment and Transfer
         Agreements executed by such Lender.

         LINE OF CREDIT FEE shall: (a) mean the fee due the Agent at the end of
         each month for the Line of Credit, and (b) be determined by multiplying
         the difference between (i) the Revolving Line of Credit and (ii) the
         sum, for said month, of (x) the average daily balance of Revolving
         Loans plus (y) the average daily balance of Letters of Credit
         outstanding for said month, by three quarters of one percent (0.75%)
         per annum for the number of days in said month.

         LOAN DOCUMENTS shall mean this Financing Agreement, the Promissory
         Notes, the debenture, debenture pledge agreement, hypothec, blocked
         account agreements and the other closing documents and any other
         ancillary loan and security agreements executed from time to time in
         connection with this Financing Agreement, all as may be renewed,
         amended, extended, increased or supplemented from time to time.

         LOAN FACILITY FEE shall mean the fee payable to the Agent and the
         Lenders (as applicable) in accordance with, and pursuant to, the
         provisions of Section 8(7) of this Financing Agreement.

<PAGE>   18
                                      -16-

         MANDATORY PREPAYMENT shall: (a) mean the amount by which the Company
         must prepay the Term Loan on or before the 90th day after the end of
         each Fiscal Year of the Company; and (b) be determined as set forth in
         Section 4(5) of this Financing Agreement.

         MATERIAL ADVERSE EFFECT means a material adverse effect on the
         business, operations, results of operations, prospects, assets,
         liabilities or financial condition of the Company.

         MATERIAL AGREEMENTS means any agreement, contract or similar instrument
         to which the Company is a party or to which any of its property or
         assets may be subject for which breach, non-performance, cancellation
         or failure to renew could reasonably be expected to have a Material
         Adverse Effect, as set forth on Schedule 9.

         NET WORTH shall mean, at any date of determination, an amount equal to
         (a) Total Assets minus (b) Total Liabilities, and shall be determined
         in accordance with GAAP, on a consistent basis with the latest audited
         financial statements of the Company.

         OBLIGATIONS shall mean all loans, advances and extensions of credit
         made or to be made by the Agent and/or the Lenders to the Company or to
         others for the Company's account (including, without limitation, all
         Revolving Loans, Letter of Credit Guarantees, the aggregate Face Amount
         of all outstanding Bankers' Acceptances, completed Drafts and BA
         Equivalent Notes which the Agent or a Lender has purchased, and the
         Term Loan) and all other amounts owing, including, without limitation,
         interest, fees, costs, expenses or otherwise by the Company to the
         Agent and the Lenders in connection with, or pursuant to or under this
         Financing Agreement and the other Loan Documents.

         OPERATING CASH FLOW shall mean EBITDA less the sum of (i) Capital
         Expenditures determined in accordance with GAAP consistently applied,
         and (ii) cash taxes paid by the Company.

         OPERATING LEASES shall mean all leases of property (whether real,
         personal or mixed) other than Capital Leases.

         OTHER COLLATERAL shall mean all now owned and hereafter acquired
         lockbox, blocked account and any other deposit accounts maintained with
         any bank or financial institutions into which the proceeds of
         Collateral are or may be deposited; all cash and other monies and
         property in the possession or control of the Agent and/or any of the
         Lenders; all books, records, ledger cards, disks and related data
         processing software at any time evidencing or

<PAGE>   19
                                      -17-

         containing information relating to any of the Collateral described
         herein or otherwise necessary or helpful in the collection thereof or
         realization thereon; and all cash and non-cash proceeds of the
         foregoing.

         OWNED PROPERTIES means, collectively, the land and premises owned by
         the Company on the date of this Financing Agreement as listed on
         Schedule 4.

         OUT-OF-POCKET EXPENSES shall mean, without duplication of any other
         fees and expenses provided for herein or in any other Loan Document,
         all of the Agent's (and the Lenders upon the occurrence of an Event of
         Default which is not waived by the Required Lenders) present and future
         reasonable costs and expenses incurred relative to this Financing
         Agreement or any other Loan Document, whether incurred heretofore or
         hereafter, which expenses shall include, without being limited to: the
         cost of retaining external legal counsel, external financial advisers
         and the Trustee, record searches, all costs and expenses incurred by
         the Agent in opening bank accounts, depositing checks, receiving and
         transferring funds, and wire transfer charges, any charges imposed on
         the Agent due to returned items and "INSUFFICIENT FUNDS" of deposited
         checks and the Agent's standard fees relating thereto, any amounts paid
         by, incurred by or charged to, the Agent and/or the Lenders by the
         Issuing Bank under a Letter of Credit Guarantee or the Company's
         reimbursement agreement, application for Letters of Credit or other
         like document which pertain either directly or indirectly to such
         Letters of Credit, the filing of financing statements, all expenses,
         costs and fees set forth in Section 10(3) of this Financing Agreement,
         and title insurance premiums, real estate survey costs, costs of
         preparing and recording debentures and hypothecs against the Real
         Estate.

         OVERADVANCE RATE shall mean a rate equal to one-half of one percent
         (1/2%) per annum in excess of the applicable contract rate of interest
         determined in accordance with Section 8(1)(a) of this Financing
         Agreement.

         OVERADVANCES shall mean the amount by which (a) the sum of all
         outstanding Revolving Loans, the face amount of BA Loans outstanding
         and Letters of Credit and advances made hereunder exceed (b) the
         Borrowing Base.

         PARENT shall mean Sterling Chemicals, Inc. a Delaware Corporation.

         PARENT CREDIT AGREEMENT means the debtor-in-possession credit agreement
         dated July 16, 2001 among the Parent, certain of its subsidiaries as
         borrowers, The CIT Group/Business Credit, Inc. as agent and lender and
         the other lenders, as amended, supplemented, or restated, refinanced or
         replaced from time to time;

<PAGE>   20
                                      -18-

         PATENTS shall mean all of the Company's present and hereafter acquired
         patents, patent applications, registrations, any reissues or renewals
         thereof, licenses, any inventions and improvements claimed thereunder,
         and all general intangible, intellectual property and patent rights
         with respect thereto of the Company, and all income, royalties, cash
         and non-cash proceeds thereof.

         PERMITTED DEBT shall mean: (a) current indebtedness maturing in less
         than one year and incurred in the ordinary course of business for raw
         materials, supplies, equipment, services, Taxes or labour; (b) Debt
         secured by Purchase Money Liens in an aggregate amount not to exceed
         $2,000,000 and any Debt arising out of the refinancing, extension,
         renewal or refunding of such Debt, provided such Debt is not secured by
         additional property or assets and the total amount of such Debt is not
         increased; (c) Debt arising under the Letters of Credit in an aggregate
         amount not to exceed $5,000,000; (d) Debt under this Financing
         Agreement; (e) deferred Taxes and other expenses incurred in the
         ordinary course of business; (f) Debt arising in the ordinary course of
         business for the sale, purchase or exchange or for future delivery of
         foreign currency (whether or not the subject currency is to be
         delivered or exchanged), or any currency swap agreements, option
         contracts, futures contracts, options on futures contracts, spot or
         forward contracts or other agreements to purchase or sell currency or
         any other arrangements related to movements in the rates of exchange of
         currencies or other similar derivatives transactions in an aggregate
         notional amount (as determined by the Agent) not to exceed $20,000,000
         (provided the Company shall forthwith provide the Agent with notice
         upon the mark to market value of the swap position being greater than
         negative $10 million in the aggregate with respect to all such
         contracts and arrangements); (g) other Debt existing on the date of
         execution of this Financing Agreement and listed in the most recent
         financial statement delivered to the Agent and the Lenders or otherwise
         disclosed to the Agent and the Lenders in Schedule 6 hereto; and (h)
         process and performance guarantees to the extent permitted under
         Section 7(12)(g).

         PERMITTED LIENS shall mean: (a) Liens existing on the date hereof and
         which are listed on Schedule 2 and other Liens expressly permitted, or
         consented to in writing by the Agent and the Required Lenders; (b)
         Purchase Money Liens and any Liens arising out of the refinancing,
         extension, renewal or refunding of any indebtedness secured by a
         Purchase Money Lien provided such indebtedness is not secured by
         additional property or assets and the total amount of such indebtedness
         is not increased; (c) statutory Liens of landlords and Liens of
         carriers, warehousemen, bailees, mechanics, materialmen and other like
         Liens imposed by law, created in the ordinary course of business and
         for amounts not yet due (or which are being contested in good faith, by

<PAGE>   21
                                      -19-

         appropriate proceedings or other appropriate actions which are
         sufficient to prevent imminent foreclosure of such Liens) and with
         respect to which adequate reserves or other appropriate provisions are
         being maintained by the Company in accordance with GAAP; (d) deposits
         made (and the Liens thereon) in the ordinary course of business of the
         Company (including, without limitation, security deposits for leases,
         indemnity bonds, surety bonds and appeal bonds) in connection with
         workers' compensation, employment insurance and other types of social
         security benefits or to secure the performance of tenders, bids,
         contracts (other than for the repayment or guarantee of borrowed money
         or purchase money obligations), statutory obligations and other similar
         obligations arising as a result of progress payments under government
         contracts; (e) easements (including, without limitation, reciprocal
         easement agreements and utility agreements), site plans, subdivision
         and other municipal agreements, encroachments, minor defects or
         irregularities in title, variation and other restrictions, charges or
         encumbrances (whether or not recorded) affecting the Real Estate, if
         applicable, and which in the aggregate (A) do not materially interfere
         with the occupation, use or enjoyment by the Company of its business or
         property so encumbered and (B) in the reasonable business judgment of
         the Agent do not materially and adversely affect the value of such Real
         Estate; (f) Liens granted in favour of the Agent and the Lenders by the
         Company; (g) Liens of judgment creditors provided such Liens do not
         exceed, in the aggregate, at any time, $1,000,000 (other than Liens
         bonded or insured to the reasonable satisfaction of the Agent); and (h)
         tax Liens securing obligations of the Company which are not yet due and
         payable or which are being diligently contested in good faith by the
         Company by appropriate proceedings and for which adequate reserves have
         been provided for by the Company in accordance with GAAP.

         PERSON means a natural Person, partnership, corporation, joint stock
         company, trust, unincorporated association, joint venture or other
         entity or governmental entity or court, and pronouns have a similarly
         extended meaning.

         PPSA shall mean the Personal Property Security Act (Ontario) and the
         regulations promulgated thereunder as the same may be amended and in
         effect from time to time.

         PRIORITY ACCOUNTS PAYABLE means, at any time, the amount past due and
         owed by the Company which it has an obligation to remit to a
         governmental entity pursuant to any applicable law, rule or regulation
         in respect of pension fund obligations, employment insurance, goods and
         services taxes, sales taxes and other taxes payable or to be remitted
         or withheld, workers' compensation and other like charges and demands,
         in respect of which any governmental

<PAGE>   22
                                      -20-

         entity may claim a security interest or other claim ranking or capable
         of ranking in priority to the security held by the Agent and the
         Lenders.

         PROMISSORY NOTES shall mean the notes, in the form of Exhibits A and B
         attached hereto, delivered by the Company to the Agent to evidence the
         Term Loan and the Revolving Loans.

         PURCHASE MONEY LIENS shall mean Liens on any item of Equipment acquired
         after the date of this Financing Agreement provided that (a) each such
         Lien shall attach only to the property to be acquired, (b) a
         description of the Equipment so acquired is furnished to the Agent, and
         (c) Debt incurred in connection with such acquisitions shall not
         exceed, in the aggregate, $2,000,000 in any Fiscal Year.

         REAL ESTATE shall mean, with respect to a Person, fee and/or leasehold
         interests in the real property, including any such real property which
         has been, or will be, encumbered, mortgaged, pledged or assigned to the
         Agent or its designee except for any such property or assets leased or
         otherwise derived by or through Bowater in connection with the Bowater
         Project and listed in Schedule 10 and except for any present or future
         real property owned or leased by Sterling Australia in connection with
         the Australia Project.

         REFERENCE DISCOUNT RATE means, in respect of any Bankers' Acceptances
         or Drafts to be purchased by the Agent or a Lender pursuant to Section
         6, the arithmetic average of the discount rates (calculated on an
         annual basis and rounded to the nearest one-hundredth of 1%, with
         five-thousandths of 1% being rounded up) quoted by CIBC at 9:30 a.m.
         (Toronto time) as the discount rate at which CIBC would purchase, on
         the relevant Drawing Date, its own Bankers' Acceptances or Drafts
         having an aggregate Face Amount equal to and with a term to maturity
         the same as the Bankers' Acceptances or Drafts to be acquired by the
         Agent or a Lender on the Drawing Date. If the discount rates cannot be
         calculated on any Business Day on which they are required to be
         calculated the applicable discount rate shall be the CDOR rate in
         effect on such day for bankers' acceptances having a term to maturity
         the same as the applicable Bankers' Acceptances.

         REQUIRED LENDERS shall mean the Lenders holding aggregate commitments
         under this Financing Agreement in an amount of 66 2/3% or more.

         REVOLVING LINE OF CREDIT shall mean the aggregate commitment of the
         Lenders to make loans and advances pursuant to Section 3 of this
         Financing Agreement and issue Letters of Credit Guaranties pursuant to
         Section 5

<PAGE>   23
                                      -21-

         hereof to the Company, in the aggregate amount of up to $25,000,000 or
         the Equivalent U.S.$ Amount.

         REVOLVING LOAN ACCOUNT shall mean the account on the Agent's books, in
         the Company's name, in which the Company will be charged with all
         Obligations under this Financing Agreement.

         REVOLVING LOANS shall mean the loans and advances made, from time to
         time, to or for the account of the Company by the Agent, on behalf of
         the Lenders, pursuant to Section 3 of this Financing Agreement.

         REVOLVING LOAN PROMISSORY NOTE shall mean the promissory note
         substantially in the form of Exhibit B hereto executed by the Company
         to evidence the Revolving Loans made by the Agent under Section 3
         hereof.

         SETTLEMENT DATE shall mean the date, weekly, and more frequently, at
         the discretion of the Agent, upon the occurrence of an Event of Default
         or a continuing decline or increase of the Revolving Loans that the
         Agent and the Lenders shall settle amongst themselves so that (a) the
         Agent shall not have, as the Agent, any money at risk and (b) on such
         Settlement Date the Lenders shall have a pro rata amount of all
         outstanding Revolving Loans and Letters of Credit, provided that each
         Settlement Date for a Lender shall be a Business Day on which such
         Lender and its bank are open for business.

         STERLING AUSTRALIA means Sterling Pulp Chemicals (Australia) Pty
         Limited, its successors and assigns.

         SUBJECT PROPERTIES means collectively, the Owned Properties and the
         Leased Properties.

         SUBSIDIARY has the meaning ascribed thereto in the Business
         Corporations Act (Ontario).

         SURPLUS CASH shall mean for any Fiscal Year (a) the sum of (i) EBITDA
         and (ii) other non-cash charges of the Company (excluding depreciation
         and amortization to the extent already included in EBITDA) less (b) the
         sum of (i) all interest obligations paid or due by the Company, (ii)
         the amount of principal repaid to the Agent on the Term Loan, (iii)
         Capital Expenditures actually incurred, (iv) all federal, provincial,
         state and local tax obligations of the Company and (v) any dividends or
         management fees permitted by the Agent and the Lenders to be included
         in this definition of Surplus Cash.

         TAXES shall mean all federal, state, provincial, municipal and other
         governmental taxes, levies, charges, claims and assessments which are
         or may

<PAGE>   24
                                      -22-

         be due by the Company with respect to its business, operations,
         Collateral or otherwise.

         TERM LOAN PROMISSORY NOTE shall mean the promissory note substantially
         in the form of Exhibit A hereto executed by the Company to evidence the
         Term Loan made by the Agent under Section 4 hereof.

         TERM LOAN shall mean the term loan in the principal amount of up to
         $20,000,000 made by the Lenders pursuant to, and repayable in
         accordance with, the provisions of Section 4 of this Financing
         Agreement.

         TOTAL ASSETS shall mean total assets determined in accordance with
         GAAP, on a basis consistent with the latest audited financial
         statements of the Company.

         TOTAL LIABILITIES shall mean total liabilities determined in accordance
         with GAAP, on a basis consistent with the latest audited financial
         statements of the Company.

         TRADE ACCOUNTS RECEIVABLE shall mean that portion of the Company's
         Accounts which arises from the sale of Inventory or the rendition of
         services in the ordinary course of the Company's business.

         TRADEMARKS shall mean all present and hereafter acquired trademarks,
         trademark registrations, recordings, applications, trade names, trade
         styles, service marks, prints and labels (on which any of the foregoing
         may appear), licenses, reissues, renewals, and any other intellectual
         property and trademark rights pertaining to any of the foregoing,
         together with the goodwill associated therewith, and all cash and
         non-cash proceeds thereof.

         U.S. DOLLARS AND U.S. $ each means lawful money of the United States of
         America.

         WORKING CAPITAL shall mean Current Assets in excess of Current
         Liabilities.

         WORKING DAY shall mean any Business Day on which dealings in foreign
         currencies and exchanges between banks may be transacted.

(2)      Any reference in the Loan Documents to gender includes all genders and
         words importing the singular number only include the plural and vice
         versa.

(3)      The provision of a Table of Contents, the division of this Financing
         Agreement into Sections and the insertion of headings are for
         convenient reference only and are not to affect the interpretation of
         this Financing Agreement.

<PAGE>   25
                                      -23-

(4)      All references in the Loan Documents to dollars, unless otherwise
         specifically indicated, are expressed in Canadian Dollars.

(5)      In any Loan Document (i) (y) the words "INCLUDING" and "INCLUDES" mean
         "INCLUDING (OR INCLUDES) WITHOUT LIMITATION" and (z) the phrase "THE
         AGGREGATE OF", "THE TOTAL OF", "THE SUM OF", or a phrase of similar
         meaning means "THE AGGREGATE (OR TOTAL OR SUM), WITHOUT DUPLICATION,
         OF", and (ii) in the computation of periods of time from a specified
         date to a later specified date, unless otherwise expressly stated, the
         word "FROM" means "FROM AND INCLUDING" and the words "TO" and "UNTIL"
         each mean "TO BUT EXCLUDING".

(6)      All accounting terms not specifically defined in this Financing
         Agreement shall be interpreted in accordance with GAAP.

(7)      The schedules attached to this Financing Agreement shall, for all
         purposes of this Financing Agreement, form an integral part of it.

(8)      The provisions of this Financing Agreement prevail in the event of any
         conflict or inconsistency between its provisions and the provisions of
         any of the other Loan Documents.

SECTION 2     CONDITIONS PRECEDENT

(1)      The obligation of the Agent and the Lenders to make the initial loans
         hereunder is subject to the satisfaction of, extension of or waiver of
         in writing (or as otherwise waived in the closing undertaking of the
         Company), on or prior to, the Closing Date, the following conditions
         precedent:

         (a)      LIEN SEARCHES. The Agent shall have received tax, judgment,
                  real property, title, PPSA and other personal property
                  searches satisfactory to the Agent for all locations presently
                  occupied or used by the Company.

         (b)      INSURANCE. The Company shall have delivered to the Agent
                  evidence satisfactory to the Agent that insurance policies
                  listing the Agent as additional insured, loss payee or
                  mortgagee, as the case may be, are in full force and effect,
                  all as set forth in Section 7(5) of this Financing Agreement.

         (c)      SECURITY FILINGS. Any financing or other registration
                  statements required to be filed in order to create, in favour
                  of the Agent, on behalf of the Lenders, a first perfected
                  security interest in the Collateral, subject only to the
                  Permitted Liens, shall have been properly filed in each office
                  in each jurisdiction required in order to create in favour of
                  the Agent for the benefit of the Lenders a perfected lien on
                  the

<PAGE>   26
                                      -24-

                  Collateral. The Agent shall have received evidence
                  satisfactory to the Agent that all such filings have been made
                  and the Agent shall have received evidence that all necessary
                  filing fees and all taxes or other expenses related to such
                  filings have been paid in full.

         (d)      RESOLUTION. The Agent shall have received a copy of the
                  resolutions of the sole shareholder of the Company authorizing
                  the execution, delivery and performance of (i) this Financing
                  Agreement, (ii) the Loan Documents and (iii) all transactions
                  contemplated thereby, including the repayment of indebtedness
                  owing to Sterling NRO, Ltd., certified by the Secretary or
                  Assistant Secretary of the Company as of the date hereof,
                  together with a certificate of the Secretary or Assistant
                  Secretary of the Company as to the incumbency and signature of
                  the officers of the Company executing such Loan Documents and
                  any certificate or other documents to be delivered by them
                  pursuant hereto, together with evidence of the incumbency of
                  such Secretary or Assistant Secretary.

         (e)      CORPORATE ORGANIZATION. The Agent shall have received (i) a
                  copy of the constating documents of the Company certified by
                  the Secretary or Assistant Secretary thereof, and (ii) a copy
                  of the By-Laws of the Company certified by the Secretary or
                  Assistant Secretary thereof, all as amended through the date
                  hereof.

         (f)      OFFICER'S CERTIFICATE. The Agent shall have received an
                  executed Officer's Certificate of the Company, satisfactory in
                  form and substance to the Agent, certifying that (i) the
                  representations and warranties contained herein are true and
                  correct in all material respects on and as of the Closing
                  Date; (ii) the Company is in compliance with all of the terms
                  and provisions set forth herein; and (iii) no Default or Event
                  of Default has occurred.

         (g)      OPINIONS. Counsel for the Company and the Parent and Sterling
                  NRO, Ltd. shall have delivered to the Agent on behalf of the
                  Lenders opinions satisfactory to the Agent.

         (h)      ABSENCE OF DEFAULT. No Default or Event of Default shall have
                  occurred and no material adverse change shall have occurred in
                  the financial condition, business, prospects, profits,
                  operations or assets of the Company since November 5, 2000.

         (i)      LEGAL RESTRAINTS/LITIGATION. As of the Closing Date, and
                  except as set out in Schedule 5 there shall be no: (x)
                  litigation, investigation or proceeding (judicial or
                  administrative) pending or, to the best of the

<PAGE>   27
                                      -25-

                  knowledge of the Company, threatened against the Company or
                  its assets, by any agency, division or department of any
                  county, city, state, province or federal government arising
                  out of this Financing Agreement; (y) injunction, writ or
                  restraining order restraining or prohibiting the financing
                  arrangements or transactions contemplated under this Financing
                  Agreement; or (z) suit, action, investigation or proceeding
                  (judicial or administrative) pending against the Company or
                  its assets, which, in the opinion of the Agent, if adversely
                  determined, could have a material adverse effect on the
                  business, operation, assets, prospects, financial condition or
                  Collateral of the Company.

         (j)      CASH BUDGET PROJECTIONS. The Agent shall have received,
                  reviewed and been satisfied with a twelve (12) month cash
                  budget projection prepared by the Company on the form provided
                  by the Agent.

         (k)      ADDITIONAL DOCUMENTS. The Company shall have executed and
                  delivered to the Agent all Loan Documents necessary to
                  consummate the lending arrangement contemplated between the
                  Company, the Agent and the Lenders, including blocked account
                  agreements contemplated herein, and a subordination agreement
                  between the Company, Sterling NRO, Ltd. and the Agent, in each
                  case, satisfactory to the Agent and its counsel.

         (l)      COLLATERAL. The Company shall have obtained all discharges,
                  subordination agreements, waivers and confirmations as may be
                  required to ensure that all obligations under the Loan
                  Documents are secured by first priority Liens on the
                  Collateral with such exceptions as are permitted pursuant to
                  this Financing Agreement or any of the other Loan Documents,
                  including Permitted Liens.

         (m)      DISBURSEMENT AUTHORIZATION. The Company shall have delivered
                  to the Agent all information necessary for the Agent and the
                  Lenders to issue wire transfer instructions on behalf of the
                  Company for the initial and subsequent loans and/or advances
                  to be made under this Financing Agreement including, but not
                  limited to, disbursement authorizations in form acceptable to
                  the Agent.

         (n)      EXAMINATION & VERIFICATION. The Agent and each of the Lenders
                  shall have completed, to their respective satisfaction, an
                  examination and verification of the Collateral and of the
                  Accounts, Inventory, financial statements, books and records
                  of the Company which such latter examination shall indicate
                  that, after giving effect to all Revolving Loans, advances and
                  extensions of credit to be made at closing, the

<PAGE>   28
                                      -26-

                  Company shall have an opening additional Availability of at
                  least $10,000,000, as evidenced by a Borrowing Base
                  certificate delivered by the Company to the Agent as of the
                  Closing Date. It is understood that such requirement
                  contemplates that all debts and obligations are current, and
                  that all payables are being handled in the normal course of
                  the Company's business and consistent with its past practice.

         (o)      DEPOSITORY ACCOUNTS. The Company shall have established a
                  system of blocked accounts and bank accounts with respect to
                  the collection of Accounts and the deposit of proceeds of
                  Collateral as shall be acceptable to the Agent in all
                  respects. Such accounts shall be subject to three party
                  agreements (between the Company, the Agent and the depository
                  bank), which shall be in form and substance satisfactory to
                  the Agent.

         (p)      DEBENTURES/HYPOTHECS. The Company shall have executed and
                  delivered to the Agent such debentures, debenture pledge
                  agreements and hypothecs as the Agent on behalf of the Lenders
                  may reasonably require to obtain first priority Liens on the
                  Real Estate (subject to Permitted Liens), and the Company
                  shall have obtained and delivered to the Agent all necessary
                  landlord consents and waivers in connection with such
                  documents.

         (q)      MATERIAL AGREEMENTS. The Agent and each of the Lenders shall
                  have completed, to their respective reasonable satisfaction,
                  an examination and review of all Material Agreements of the
                  Company and such other agreements of the Company as the Agent
                  believes is necessary.

         (r)      SURVEYS. The Agent shall have received surveys with respect to
                  the Subject Properties in form and substance and dated a date
                  satisfactory to the Agent.

         (s)      APPRAISALS. The Agent shall have received satisfactory
                  appraisals by Chem Systems on the Company's plant, Equipment
                  and Real Estate.

         (t)      ENVIRONMENTAL REPORT. The Agent shall have received final
                  environmental audit reports on (i) the Company's leasehold and
                  fee interests on the properties located in North Vancouver,
                  British Columbia, Grand Prairie, Alberta, Thunder Bay, Ontario
                  and Buckingham, Quebec as listed in Schedule 4, and (ii) the
                  Company's waste disposal practices. The reports must (x) be
                  satisfactory to the Agent and (y) except as set out on
                  Schedule 7, not disclose or indicate any material liability
                  (real or potential) stemming from the Company's

<PAGE>   29
                                      -27-

                  premises, its operations, its waste disposal practices or
                  waste disposal sites used by Company.

         (u)      ABSENCE OF MATERIAL CHANGE. The Agent shall be satisfied that
                  no event, condition or state of affairs exists which has
                  caused or which may cause a material adverse change in the
                  business, operations, assets, financial condition, business
                  prospects, profitability or Collateral of the Company.

         (v)      CONSENTS. The Company shall have obtained all necessary
                  consents and approvals from all necessary Persons (including
                  all landlord waivers and consents, but excluding the consent
                  referred to in Section 10(1)(n) hereof) authorizing the
                  Company to execute and deliver the Financing Agreement and the
                  other Loan Documents and to consummate the transaction
                  contemplated thereby.

         (w)      INDEMNITY. The Agent shall have received an indemnity in form
                  and content satisfactory to the Agent, the Lenders and their
                  counsel from the Parent and certain of its Affiliates in
                  respect of the entering into of this Financing Agreement and
                  the other Loan Documents and the consummation of the
                  transaction contemplated thereby.

         (x)      CHAPTER 11 PROCEEDINGS. The Agent and its counsel shall have
                  received a copy (or such other evidence satisfactory to the
                  Agent and its counsel) of the Interim Order of the Bankruptcy
                  Court in the Chapter 11 Proceedings and the Agent and its
                  counsel shall be satisfied with all aspects of the Chapter 11
                  Proceedings, including that appropriate orders have been
                  obtained pursuant to the Chapter 11 Proceedings permitting (a)
                  the Company to enter into the Financing Agreement and the
                  other Loan Documents and to grant the security contemplated
                  thereby, (b) the Company to repay indebtedness owing to
                  Sterling NRO, Ltd., and (c) Sterling NRO, Ltd. to advance the
                  proceeds it has received from the Company pursuant to (b) to
                  Sterling Canada, Inc.

         (y)      DEPOSIT. The Company shall have provided a good faith deposit
                  of U.S.$200,000 to cover due diligence costs, fees and
                  expenses of the Agent, its counsel and other professional
                  advisers in respect of the preparation of the Loan Documents.

         (z)      MANAGEMENT AND SERVICES. The Agent shall have (i) received
                  satisfactory results of background checks on key management;
                  and (ii) performed a review of essential key services
                  performed by the Parent

<PAGE>   30
                                      -28-

                  or any of its subsidiaries for the Company which shall be
                  satisfactory to the Agent.

         (aa)     DIP FACILITY. All conditions precedent to the Parent Credit
                  Agreement (other than the execution and delivery of this
                  Financing Agreement and other than the making of the advance
                  from Sterling NRO, Ltd. to Sterling Canada, Inc. referred to
                  in subclause (x)(c) above) shall have been satisfied or waived
                  and funding pursuant thereto shall be available to the Parent.

(2)      Upon the execution of this Financing Agreement and the initial
         disbursement of loans hereunder, all of the above Conditions Precedent
         shall have been deemed satisfied except as otherwise set forth
         hereinabove or as the Company and the Agent shall otherwise agree in
         writing.

(3)      Subject to the terms of this Financing Agreement, including, without
         limitation, the Agent's rights pursuant to Section 10(2) hereof, the
         agreement of the Agent on behalf of the Lenders to make any extension
         of credit requested to be made by it to the Company on any date
         (including without limitation, the initial extension of credit) is
         subject to the satisfaction of the following conditions precedent:

         (a)      REPRESENTATIONS AND WARRANTIES - Each of the representations
                  and warranties made by the Company in or pursuant to this
                  Financing Agreement shall be true and correct in all material
                  respects on and as of such date as if made on and as of such
                  date, other than representations and warranties that relate
                  specifically to an earlier date (which shall be true and
                  correct in all material aspects on and as of such earlier
                  date).

         (b)      NO DEFAULT - No Default or Event of Default shall have
                  occurred and be continuing on such date or after giving effect
                  to the extension of credit requested to be made on such date.

         (c)      BORROWING BASE - Except as may be otherwise agreed to from
                  time to time by the Agent and the Company in writing, after
                  giving effect to the extension of credit requested to be made
                  by the Company on such date, the aggregate outstanding balance
                  of the Revolving Loans and outstanding Letters of Credit owing
                  by the Company will not exceed the lesser of (i) the Revolving
                  Line of Credit or (ii) the Borrowing Base.

(4)      Each borrowing by the Company hereunder shall constitute a
         representation and warranty by the Company as of the date of such loan
         or advance that each of the representations, warranties and covenants
         contained in the

<PAGE>   31
                                      -29-

         Financing Agreement have been satisfied and are true and correct in all
         material aspects on and as of such date other than representations and
         warranties that relate specifically to an earlier date (which shall be
         true and correct in all material respects as of such earlier date),
         except as the Company and the Agent and/or the Required Lenders shall
         otherwise agree herein or in a separate writing.

SECTION 3     REVOLVING LOANS

(1)      The Agent and the Lenders agree, subject to the terms and conditions of
         this Financing Agreement, from time to time (but subject to the Agent's
         and the Lenders' right to make "OVERADVANCES"), to make loans and
         advances to the Company on a revolving basis (i.e. subject to the
         limitations set forth herein, the Company may borrow, repay and
         reborrow Revolving Loans). Such requests for loans and advances shall
         be in amounts not to exceed the lesser of (a) the Availability or (b)
         the Revolving Line of Credit. All requests for loans and advances must
         be received by an officer of the Agent no later than (i) 12:00 p.m.,
         Toronto time, of the Business Day on which any such CIBC Bank Rate
         Loans, CIBC Base Rate Loans and advances are required or, (ii) three
         Business Days prior to any requested LIBOR Loan, or (iii) the time
         specified in Section 6(5) in respect of any required BA Loan. Should
         the Agent for any reason honour requests for Overadvances, any such
         Overadvances shall be made in the Agent's reasonable discretion and
         subject to any additional terms the Agent and/or the Required Lenders
         deem necessary.

         (a)      Whenever the Company requests the Agent, on behalf of the
                  Lenders, to make a Revolving Loan pursuant to this Section 3,
                  it shall give the Agent notice in writing or irrevocable
                  telephonic notice confirmed promptly in writing, specifying
                  (A) the amount to be borrowed, and (B) the requested borrowing
                  date (which shall be a Business Day) and shall be prior to:
                  the Anniversary Date, and if applicable, any Early Termination
                  Date, or prior to any effective termination date of this
                  Financing Agreement, all as further set forth herein), and (C)
                  specify whether the requested Revolving Loan shall bear
                  interest at the applicable rates set forth in Section 8
                  herein. All requests for loans and advances must be received
                  by an officer of the Agent no later than 12:00 P.M. Toronto
                  time on any borrowing date. The procedure for Revolving Loans
                  to be made on a requested borrowing date may be such other
                  procedure as is mutually satisfactory to the Company, the
                  Agent and/or the Lenders. The proceeds of the Revolving Loans
                  shall be used solely (i) to repay existing indebtedness owing
                  to Sterling NRO, Ltd. in a maximum amount, together with the
                  proceeds of the Term Loan as provided under Section 4(4), not
                  to exceed $30,000,000 in

<PAGE>   32
                                      -30-

                  the aggregate; (ii) for general corporate purposes of the
                  Company which, for the purposes of this subclause (ii), shall
                  not include repayment of indebtedness owing to Sterling NRO,
                  Ltd.; and (iii) as permitted under Section 7(12)(n)(ii)
                  hereof.

         (b)      Subject to Section 14(10) hereof, should the Agent, on behalf
                  of the Lenders, for any reason honour requests for
                  Overadvances, such Overadvance shall be made in the Agent's
                  reasonable discretion, subject to any additional terms the
                  Agent and/or the Required Lenders deem necessary. Requests for
                  loans and advances shall be made solely by the Company and
                  shall be directed solely to the Agent.

         (c)      The Agent shall on any Settlement Date, and upon notice given
                  by the Agent no later than 2:00 p.m. Toronto time, request
                  each Lender to make, and each Lender hereby agrees to make, a
                  Revolving Loan in an amount equal to such Lender's Revolving
                  Credit Commitment percentage (calculated with respect to the
                  aggregate Revolving Credit Commitments then outstanding) of
                  the aggregate amount of the Revolving Loans made by the Agent
                  from the preceding Settlement Date to the date of such notice,
                  and to reimburse the Agent for the amount of the Revolving
                  Loans made by the Agent to the Company. Each Lender's
                  obligation to make the Revolving Loans pursuant to this
                  subsection (c) shall be absolute and unconditional and shall
                  not be affected by any circumstance, including without
                  limitation (i) any set-off, counterclaim, recoupment, defense
                  or other right which any such Lender or the Company may have
                  against the Agent, the Company, any other Lender or any other
                  Person for any reason whatsoever; (ii) the occurrence or
                  continuance of a Default or an Event of Default; (iii) any
                  adverse change in the condition (financial or otherwise) of
                  the Company; (iv) any breach of this Financing Agreement or
                  any other Loan Document by the Company or any other Lender; or
                  (v) any other circumstance, happening or event whatsoever,
                  whether or not similar to any of the foregoing. Without
                  limiting the liability and obligation of each Lender to make
                  such advances, the Company authorizes the Agent to charge the
                  Company's Revolving Loan Account with the Agent to the extent
                  amounts received from the Lenders are not sufficient to repay
                  in full the amount of any such deficiency.

         (d)      The Company's Revolving Loan Obligations hereunder shall be
                  evidenced by the Revolving Loan Promissory Note in the form of
                  Exhibit B attached hereto.

(2)      In furtherance of the continuing assignment and security interest in
         the Company's Accounts and Inventory, the Company will provide to the
         Agent

<PAGE>   33
                                      -31-

         various reports and information as may be requested by the Agent,
         including, without limitation: (a) monthly, within ten (10) days of the
         last day of each month (i) detailed monthly accounts receivable aging
         (including both summary and detail format), (ii) detail monthly
         accounts payable aging, (iii) a Borrowing Base certificate as at the
         month end, (iv) a reconciliation of accounts receivable aging to the
         general ledger and to the financial statements as at the month end, (v)
         a calculation of the Trade Accounts Receivable which would not meet the
         criteria of an Eligible Account Receivable, (vi) a copy of the
         internally generated month end cash receipts and collections journal,
         (vii) a listing of the ten largest accounts for the month, (viii) a
         Company prepared reconciliation of the cash receipts journal to the
         blocked depository account; and (b) weekly, on the second Business Day
         of each week for the prior week (i) a weekly Borrowing Base
         certificate, (ii) a copy of the internally generated weekly sales
         journal and invoice register, (iii) a copy of the internally generated
         credit memo journal (or sales journal if included there), (iv) a copy
         of the internally generated debit memo journal (or sales journal if
         included there), and (v) a copy of the internally generated weekly cash
         receipts and collections journal. At the Company's discretion, the
         Company may report on a daily basis. The Company will, upon creation of
         the Accounts and purchase or acquisition of Inventory, execute and
         deliver to the Agent in such form and manner as the Agent may
         reasonably require, solely for the Agent's convenience in maintaining
         records of Collateral, such confirmatory schedules of Accounts as the
         Agent may reasonably request, including, without limitation, weekly
         schedules of Accounts and monthly schedules of Inventory, all in form
         and substance satisfactory to the Agent, and such other reports
         designating, identifying and describing the Accounts and Inventory
         including, without limitation, the following reports and information:
         (a) monthly, within 10 days of the last day of each month, (i) a
         detailed monthly Inventory perpetual listing, (ii) a reconciliation of
         the monthly Inventory perpetual listing to the general ledger and to
         the financial statements of the Company as at the month end, and (iii)
         a calculation of the Inventory which would not meet the criteria of
         Eligible Inventory; and (b) weekly, a summary total age of the
         Inventory perpetual listing which the Agent may request weekly if the
         Agent, in its sole discretion, determines such weekly listing is
         necessary, and including such other reports as the Agent may reasonable
         request, and provided further that the Agent may request any such
         information more frequently, from time to time, upon its reasonable
         prior request. In addition, upon the Agent's request, the Company shall
         provide the Agent with copies of agreements with, or purchase orders
         from, the Company's customers, and copies of invoices to customers,
         proof of shipment or delivery, access to its computers, electronic
         media and software programs associated therewith (including any
         electronic records, contracts and signatures) and such other
         documentation and information relating to said

<PAGE>   34
                                      -32-

         Accounts and other Collateral as the Agent may reasonably require,
         provided that such access does not constitute a violation of the
         Personal Information Protection and Electronic Documents Act (Canada)
         any similar provincial privacy legislation from time to time. The
         Company hereby authorizes the Agent to regard the Company's printed
         name or rubber stamp signature on assignment schedules or invoices as
         the equivalent of a manual signature by one of the Company's authorized
         officers or agents.

(3)      The Company hereby represents and warrants that: (i) each Trade Account
         Receivable is based on an actual and bona fide sale and delivery of
         Inventory or rendition of services to its customers, made by the
         Company in the ordinary course of its business; (ii) the Inventory
         being sold, and the Trade Accounts Receivable created, are the
         exclusive property of the Company and are not and shall not be subject
         to any lien, consignment arrangement, encumbrance, security interest or
         financing statement whatsoever, other than the Permitted Liens; (iii)
         the invoices evidencing such Trade Accounts Receivable are in the name
         of the Company; and (iv) the customers of the Company have accepted the
         Inventory or services, owe and are obligated to pay the full amounts
         stated in the invoices according to their terms, without dispute,
         offset, defense, counterclaim or contra, except for disputes and other
         matters arising in the ordinary course of business and disputes and
         other matters arising out of the ordinary course of business with
         respect to which the Company has complied with the notification
         requirements of Section 3(5). The Company confirms to the Agent that
         any and all Taxes or fees relating to its business, its sales, the
         Accounts or Inventory relating thereto, are its sole responsibility and
         that same will be paid by the Company when due, subject to its right to
         appeal such amounts by proper proceedings, if adequate reserves have
         been set aside by the Company in accordance with GAAP and that none of
         said Taxes or fees represent a lien on or claim against the Accounts.
         The Company hereby further represents and warrants that it shall not
         acquire any Inventory on a consignment basis, nor comingle its
         Inventory with any of its customers or any other Person, including
         pursuant to any bill and hold sale or otherwise, and that its Inventory
         is marketable to its customers in the ordinary course of business of
         the Company, except as it may otherwise report in writing to the Agent
         pursuant to Section 3(5) hereof from time to time. The Company agrees
         to maintain such books and records regarding Accounts and Inventory as
         the Agent may reasonably require and agrees that the books and records
         of the Company will reflect the Agent's interest in the Accounts and
         Inventory. All of the books and records of the Company will be
         available to the Agent at normal business hours, on reasonable notice
         by the Agent, including any records handled or maintained for the
         Company by any other company or entity.

<PAGE>   35
                                      -33-

(4)

         (a)      Until the Agent has advised the Company to the contrary after
                  the occurrence of an Event of Default, the Company, at its
                  expense, will enforce, collect and receive all amounts owing
                  on the Accounts in the ordinary course of its business and any
                  proceeds it so receives shall be subject to the terms hereof,
                  and held on behalf of and in trust for the Agent on behalf of
                  the Lenders. Such privilege shall terminate at the election of
                  the Agent, upon the occurrence of an Event of Default, until
                  such Event of Default is waived in writing by the Required
                  Lenders or cured to the Agent's and/or the Required Lender's
                  satisfaction. Any checks, cash, credit card sales and
                  receipts, notes or other instruments or property received by
                  the Company with respect to any Collateral, including
                  Accounts, shall be held by the Company in trust for the Agent,
                  on behalf of the Lenders, separate from the Company's own
                  property and funds, and promptly turned over to the Agent with
                  proper assignments or endorsements by deposit to the
                  Depository Accounts. The Company shall, at the option of the
                  Agent, (i) indicate on all of its invoices that funds should
                  be delivered to and deposited in a Depository Account; and
                  (ii) direct all of its account debtors to deposit any and all
                  proceeds of Collateral into the Depository Accounts. The
                  Company shall (i) irrevocably authorize and direct any banks
                  which maintain the Company's initial receipt of cash, checks
                  and other items to promptly wire transfer all available funds
                  to a Depository Account; and (ii) advise all such banks of the
                  Agent's security interest in such funds. The Company shall
                  provide the Agent with prior written notice of any and all
                  deposit accounts opened or to be opened subsequent to the
                  Closing Date. All amounts received by the Agent in payment of
                  Accounts will be credited to the Revolving Loan Account when
                  the Agent is advised by its bank of its receipt of "COLLECTED
                  FUNDS" at the Agent's bank account in Toronto, Ontario on the
                  Business Day of such advise if advised no later than 1:00 p.m.
                  (Toronto time) or on the next succeeding Business Day if so
                  advised after 1:00 p.m. (Toronto time). No checks, drafts or
                  other instrument received by the Agent shall constitute final
                  payment to the Agent and/or the Lenders unless and until such
                  instruments have actually been collected.

         (b)      The Company shall establish and maintain, in its name and at
                  its expense, deposit accounts with such banks as are
                  acceptable to the Agent (the "BLOCKED ACCOUNTS") into which
                  the Company shall promptly cause to be deposited (i) all
                  proceeds of Collateral received by the Company, including all
                  amounts payable to the Company from

<PAGE>   36
                                      -34-

         credit card issuers and credit card processors, and (ii) all amounts on
         deposit in deposit accounts used by the Company at each of its
         locations, all as further provided in Section 3(4)(a) above. The banks
         at which the Blocked Accounts are established shall enter into an
         agreement, in form and substance satisfactory to the Agent (the
         "BLOCKED ACCOUNT AGREEMENTS"), providing that all cash, checks and
         items received or deposited in the Blocked Accounts are the property of
         the Agent, that the depository bank has no lien upon, or right of set
         off against, the Blocked Accounts and any cash, checks, items, wires or
         other funds from time to time on deposit therein, except as otherwise
         provided in the Blocked Account Agreements, and that automatically, on
         a daily basis the depository bank will wire, or otherwise transfer, in
         immediately available funds, all funds received or deposited into the
         Blocked Accounts to such bank account as the Agent may from time to
         time designate for such purpose. The Company hereby confirms and agrees
         that all amounts deposited in such Blocked Accounts and any other funds
         received and collected by the Agent, whether as proceeds of Inventory
         or other Collateral or otherwise, shall be the property of the Agent.

(5)      Except with respect to non-material matters arising in the ordinary
         course of business and except with respect to matters not forming a
         part of the then applicable Borrowing Base, the Company agrees to
         notify the Agent (a) of any matters affecting the value, enforceability
         or collectability of any Account and of all customer disputes, offsets,
         defenses, counterclaims, returns, rejections and all reclaimed or
         repossessed merchandise or goods, and of any adverse effect in the
         value of its Inventory, in its weekly and monthly collateral reports
         (as applicable) provided to the Agent hereunder, in such detail and
         format as the Agent may reasonably require from time to time; and (b)
         promptly of any such matters which are material, as a whole, to the
         Accounts and/or the Inventory. The Company agrees to issue credit
         memoranda promptly (with duplicates to the Agent upon request after the
         occurrence and during the continuance of an Event of Default) upon
         accepting returns or granting allowances. Upon the occurrence and
         during the continuance of an Event of Default (which is not waived in
         writing by the Required Lenders) and on notice from the Agent, the
         Company agrees that all returned, reclaimed or repossessed merchandise
         or goods shall be set aside by the Company, marked with the Agent's
         name (as secured party) and held by the Company for the Agent's
         account.

(6)      The Agent shall maintain a Revolving Loan Account on its books in which
         the Company will be charged with all loans and advances made by the
         Agent to it or for its account, and with any other Obligations,
         including any and all
<PAGE>   37
                                      -35-

         costs, expenses and reasonable legal fees which the Agent may incur in
         connection with the exercise by or for the Agent of any of the rights
         or powers herein conferred upon the Agent, or in the prosecution or
         defense of any action or proceeding to enforce or protect any rights of
         the Agent in connection with this Financing Agreement, the other Loan
         Documents or the Collateral assigned hereunder, or any Obligations
         owing by the Company. The Company will be credited with all amounts
         received by the Agent and/or the Lenders from the Company or from
         others for the Company's account, including, as above set forth, all
         amounts received by the Agent in payment of Accounts, and such amounts
         will be applied to payment of the Obligations as set forth herein. In
         no event shall prior recourse to any Accounts or other security granted
         to or by the Company be a prerequisite to the Agent's right to demand
         payment of any Obligation. Further, it is understood that the Agent
         and/or the Lenders shall have no obligation whatsoever to perform in
         any respect any of the Company's contracts or obligations relating to
         the Accounts.

(7)      After the end of each month commencing October 1, 2001, and, with
         respect to the period from July 16, 2001 to September 30, 2001, as the
         case may be, the Agent shall promptly send the Company a statement
         showing the accounting for the charges, loans, advances and other
         transactions occurring between the Agent and the Company during that
         month or period, as the case may be. The monthly statements shall be
         deemed correct and binding upon the Company and shall constitute an
         account stated between the Company and the Agent unless the Agent
         receives a written statement of the exceptions within sixty (60) days
         of the date of the monthly statement.

(8)      In the event that any requested advance exceeds Availability or that
         (a) the sum of (i) the outstanding balance of Revolving Loans and (ii)
         outstanding balance of Letters of Credit exceeds (b)(x) the Borrowing
         Base or (y) the Revolving Line of Credit, any such non-consensual
         Overadvance shall be due and payable to the Agent on behalf of the
         Lenders immediately upon the Agent's demand therefor.

SECTION 4     TERM LOAN

(1)      The Company hereby agrees to execute and deliver to the Agent, on
         behalf of the Lenders, the Term Loan Promissory Note, to evidence the
         Term Loan to be extended by the Agent. The Term Loan shall be provided
         by way of either a CIBC Bank Rate Loan or a BA Loan, as requested by
         the Company. A request for the Term Loan must be received by an officer
         of the Agent no later than 12:00 p.m. Toronto time on the Business Day
         on which any such CIBC Bank Rate Loan or is required or no later than
         the time specified in Section 6(5) in respect of any required BA Loan.

<PAGE>   38
                                      -36-

(2)      The Term Loan shall be evidenced by the Term Loan Promissory Note. The
         proceeds of the Term Loan shall only be used solely (i) to repay
         existing indebtedness owing to Sterling NRO, Ltd. in a maximum
         aggregate amount, together with the proceeds of the Revolving Loan as
         provided for under Section 3(1)(a), not to exceed $30,000,000, and (ii)
         for general corporate purposes, which for the purposes of this
         subclause (ii), shall not include repayment of indebtedness owing to
         Sterling NRO, Ltd.

(3)      The principal amount of Term Loan shall be repaid to the Agent on
         behalf of the Lenders by the Company by: (i) thirty (30) equal monthly
         principal installments of $238,095.23 each, followed by (ii) one (1)
         installment of $12,857,143.10, on July 11, 2004. The first installment
         shall be due and payable on February 1, 2002 and the subsequent
         installments shall be due and payable on the first Business Day of each
         month thereafter until paid in full.

(4)      In the event this Financing Agreement, the Line of Credit or the
         Revolving Loan is terminated by either the Agent or the Company for any
         reason whatsoever, the Term Loan shall become due and payable on the
         effective date of such termination notwithstanding any provision to the
         contrary in the Promissory Notes or this Financing Agreement.

(5)      In the event the Company has Surplus Cash in any Fiscal Year beginning
         on October 1, 2001, the Company must make a Mandatory Prepayment of the
         Term Loan by an amount equal to fifty percent (50%) of said Surplus
         Cash on or before the 90th day after the end of each Fiscal Year of the
         Company before the Anniversary Date.

(6)      Each voluntary prepayment (which may be made at any time without
         penalty or fee to the Company) shall be applied to the then last
         maturing installments of principal of the Term Loan.

(7)      The Company hereby authorizes the Agent to charge its Revolving Loan
         Account with the amount of all Obligations owing under this Section 4
         as such amounts become due. The Company confirms that any charges which
         the Agent may so make to its Revolving Loan Account as herein provided
         will be made as an accommodation to the Company and solely at the
         Agent's discretion. The Agent shall promptly advise the Company with
         all particulars when the Agent has charged the Company's Revolving Loan
         Account.

SECTION 5     LETTERS OF CREDIT

(1)      In order to assist the Company in establishing or opening Letters of
         Credit with an Issuing Bank, the Company has requested the Agent, on
         behalf of the Lenders, to join in the applications for such Letters of
         Credit, and/or

<PAGE>   39
                                      -37-

         guarantee payment or performance of such Letters of Credit and any
         drafts or acceptances thereunder through the issuance of the Letters of
         Credit Guarantee, thereby lending the Agent's credit to the Company and
         the Agent has agreed to do so. These arrangements shall be handled by
         the Agent subject to the terms and conditions set forth below.

(2)      Within the Revolving Line of Credit and Availability, the Agent on
         behalf of the Lenders shall assist the Company in obtaining Letter(s)
         of Credit in an amount not to exceed the outstanding amount of the
         Letter of Credit Sub-Line. The Agent's assistance for amounts in excess
         of the limitation set forth herein shall at all times and in all
         respects be in the Agent's reasonable discretion. It is understood that
         the Issuing Bank, the term, form and purpose of each Letter of Credit
         and all documentation in connection therewith, and any amendments,
         modifications or extensions thereof, must be mutually acceptable to the
         Agent, the Issuing Bank and the Company, provided that Letters of
         Credit shall not be used for the purchase of domestic Inventory or to
         secure present or future debt of domestic Inventory suppliers. Any and
         all outstanding Letters of Credit shall be reserved dollar for dollar
         from Availability as an Availability Reserve.

(3)      The Agent shall have the right, without prior notice to the Company, to
         charge the Company's Revolving Loan Account with the amount of any and
         all Debt, liability or obligation of any kind incurred by the Agent
         and/or the Lenders under the Letters of Credit Guarantee at the earlier
         of (a) payment by the Agent under the Letters of Credit Guarantee; or
         (b) the occurrence of an Event of Default which has not been waived in
         writing by the Required Lenders. Any amount charged to Company's
         Revolving Loan Account shall be deemed a Revolving Loan hereunder and
         shall incur interest at the rate provided in Section 8(1) of this
         Financing Agreement. The Agent shall promptly advise the Company of all
         particulars when such amount has been charged to the Company's
         Revolving Loan Account.

(4)      The Company unconditionally indemnifies the Agent and the Lenders and
         holds the Agent and the Lenders harmless from any and all loss, claim
         or liability incurred by the Agent arising from any transactions or
         occurrences relating to Letters of Credit established or opened for the
         Company's account, the collateral relating thereto and any drafts or
         acceptances thereunder, and all Obligations thereunder, including any
         such loss or claim due to any errors, omissions, negligence, misconduct
         or action taken by any Issuing Bank, other than for any such loss,
         claim or liability arising out of the gross negligence or willful
         misconduct by the Agent and/or the Lenders under the Letters of Credit
         Guarantee. This indemnity shall survive termination of this Financing
         Agreement. The Company agrees that any charges incurred by the Agent
         and/or the Lenders for the Company account by the Issuing Bank shall be

<PAGE>   40
                                      -38-

         conclusive absent manifest error and may be charged to the Company's
         Revolving Loan Account.

(5)      The Agent and the Lenders shall not be responsible for: (a) the
         existence, character, quality, quantity, condition, packing, value or
         delivery of the goods purporting to be represented by any documents;
         (b) any difference or variation in the character, quality, quantity,
         condition, packing, value or delivery of the goods from that expressed
         in the documents; (c) the validity, sufficiency or genuineness of any
         documents or of any endorsements thereon, even if such documents should
         in fact prove to be in any or all respects invalid, insufficient,
         fraudulent or forged; (d) the time, place, manner or order in which
         shipment is made; (e) partial or incomplete shipment, or failure or
         omission to ship any or all of the goods referred to in the Letters of
         Credit or documents; (f) any deviation from instructions; (g) delay,
         default, or fraud by the shipper and/or anyone else in connection with
         the goods or the shipping thereof; or (h) any breach of contract
         between the shipper or vendors and the Company.

(6)      The Company agrees that any action taken by the Agent and/or the
         Lenders, if taken in good faith, or any action taken by any Issuing
         Bank, under or in connection with the Letters of Credit, the Letter of
         Credit Guarantees, the drafts or acceptances, or the Collateral, shall
         be binding on the Company and shall not result in any liability
         whatsoever of the Agent and the Lenders to the Company. In furtherance
         thereof, the Agent shall have the full right and authority to: (a)
         clear and resolve any questions of non-compliance of documents; (b)
         give any instructions as to acceptance or rejection of any documents or
         goods; (c) execute any and all steamship or airways guaranties (and
         applications therefore), indemnities or delivery orders; (d) grant any
         extensions of the maturity of, time of payment for, or time of
         presentation of, any drafts, acceptances, or documents; and (e) agree
         to any amendments, renewals, extensions, modifications, changes or
         cancellations of any of the terms or conditions of any of the
         applications, Letters of Credit, drafts or acceptances; all in the
         Agent's sole name. The Issuing Bank shall be entitled to comply with
         and honour any and all such documents or instruments executed by or
         received solely from the Agent, all without any notice to or any
         consent from the Company. Notwithstanding any prior course of conduct
         or dealing with respect to the foregoing including amendments and
         non-compliance with documents and/or the Company's instructions with
         respect thereto, the Agent may exercise its rights hereunder in its
         sole and reasonable judgement. In addition, without the Agent's express
         consent and endorsement in writing, the Company agrees: (a) not to
         execute any and all applications for steamship or airway guaranties,
         indemnities or delivery orders; to grant any extensions of the maturity
         of, time of payment for, or

<PAGE>   41
                                      -39-

         time of presentation of, any drafts, acceptances or documents; or to
         agree to any amendments, renewals, extensions, modifications, changes
         or cancellations of any of the terms or conditions of any of the
         applications, Letters of Credit, drafts or acceptances; and (b) after
         the occurrence of an Event of Default which is not cured within any
         applicable grace period, if any, or waived by the Agent, not to (i)
         clear and resolve any questions of non-compliance of documents, or (ii)
         give any instructions as to acceptances or rejection of any documents
         or goods.

(7)      The Company agrees that: (a) any necessary import, export or other
         licenses or certificates for the import or handling of the Collateral
         will have been, or will when required be, promptly procured; (b) all
         foreign and domestic governmental laws and regulations in regard to the
         shipment and importation of the Collateral, or the financing thereof
         will have been promptly and fully complied with when required; and (c)
         any certificates in that regard that the Agent may at any time request
         will be promptly furnished when required. In connection herewith, the
         Company represents and warrants that all shipments made under any such
         Letters of Credit are in accordance with the laws and regulations of
         the countries in which the shipments originate and terminate, and are
         not prohibited by any such laws and regulations. The Company assumes
         all risk, liability and responsibility for, and agrees to pay and
         discharge, all present and future local, state, provincial, federal or
         foreign Taxes, duties, or levies in connection with the handling,
         shipment, importation or otherwise of the Collateral in connection with
         the Letters of Credit or the transactions contemplated thereby. Any
         embargo, restriction, laws, customs or regulations of any country,
         state, city, or other political subdivision, where the Collateral is or
         may be located, or wherein payments are to be made, or wherein drafts
         may be drawn, negotiated, accepted, or paid, shall be solely the
         Company's risk, liability and responsibility.

(8)      Upon any payments made to the Issuing Bank under the Letter of Credit
         Guarantee, the Agent on behalf of the Lenders shall acquire by
         subrogation, any rights, remedies, duties or obligations granted or
         undertaken by the Company to the Issuing Bank in any application for
         Letters of Credit, any standing agreement relating to Letters of Credit
         or otherwise, all of which shall be deemed to have been granted to the
         Agent on behalf of the Lenders and apply in all respects to the Agent
         and shall be in addition to any rights, remedies, duties or obligations
         contained herein.

SECTION 6     ACCEPTANCES AND DRAFTS

(1)      The Agent agrees, on the terms and conditions of this Financing
         Agreement and from time to time on any Business Day prior to the
         Anniversary Date to

<PAGE>   42
                                      -40-

         either (i) create acceptances ("BANKERS' ACCEPTANCES") by accepting
         Drafts and to purchase such Bankers' Acceptances in accordance with
         Section 6(6), or (ii) to purchase completed Drafts (which have not and
         will not be accepted by the Agent or any other Lender) in accordance
         with Section 6(6).

(2)      Each Drawing shall be in a minimum Face Amount of $1,000,000 and in an
         integral multiple of $100,000, and shall consist of the creation and
         purchase of Bankers' Acceptances or the purchase of Drafts on the same
         day, in each case for the Drawing Price, effected or arranged by the
         Agent in accordance with Section 6(5) to Section 6(8).

(3)      If the Agent determines that the Bankers' Acceptances to be created and
         purchased or Drafts to be purchased on any Drawing (upon a conversion
         or otherwise) will not be created and purchased rateably by the Lenders
         in accordance with Section 6(1) and Section 6(2), then the requested
         Face Amount of Bankers' Acceptances and Drafts shall be reduced to such
         lesser amount as the Agent determines will permit rateable sharing and
         the amount by which the requested Face Amount shall have been so
         reduced shall be converted or continued, as the case may be, as a CIBC
         Bank Rate Loan as either a Revolving Loan or as the Term Loan, as the
         case may be, to be made contemporaneously with the Drawing.

(4)      Each Draft presented by the Company shall (i) be in a minimum amount of
         $1,000,000 and in an integral multiple of $100,000, (ii) be dated the
         date of the Drawing, and (iii) mature and be payable by the Company (in
         common with all other Drafts presented in connection with such Drawing)
         on a Business Day which occurs approximately 30, 60 or 90 days at the
         election of the Company after the Drawing Date and on or prior to the
         Anniversary Date and which would not, in the opinion of the Agent,
         conflict with the repayment as provided for herein of Revolving Loans
         and the Term Loan.

(5)      Each Drawing shall be made on notice given by the Company to the Agent
         not later than 10:00 a.m. (Toronto time) on two Business Days notice.
         Each such notice shall be irrevocable and binding on the Company and
         shall specify (i) the Drawing Date, (ii) whether the Drawing is to be
         made as a Revolving Loan or the Term Loan, (iii) the aggregate Face
         Amount of Drafts to be accepted and purchased (or purchased, as the
         case may be), and (iv) the contract maturity date for the Drafts.

(6)      Not later than 2:00 p.m. (Toronto time) on an applicable Drawing Date,
         each Lender shall complete one or more Drafts in accordance with the
         Drawing notice and either (i) accept the Drafts and purchase the
         Bankers' Acceptances so created for the Drawing Price, or (ii) purchase
         the Drafts for the Drawing Price. In each case, upon receipt of the
         Drawing Price and upon fulfilment of

<PAGE>   43
                                      -41-

         the applicable conditions precedent set forth in Section 2, the Agent
         shall make funds available to the Company in accordance with Section 3
         or 4, as the case may be.

(7)      The Company shall, at the request of the Agent, issue one or more
         non-interest bearing promissory notes (each a "BA EQUIVALENT NOTE")
         payable on the date of maturity of the unaccepted Draft referred to
         below, in such form as the Agent may specify and in a principal amount
         equal to the Face Amount of, and in exchange for, any unaccepted Drafts
         which the Agent has purchased or has arranged to have purchased in
         accordance with Section 6(6).

(8)      Bankers' Acceptances purchased by a Lender may be held by it for its
         own account until the contract maturity date or sold by it at any time
         prior to that date in any relevant Canadian market in such Person's
         sole discretion.

(9)      To enable the Lenders to create Bankers' Acceptances or complete Drafts
         in the manner specified in this Section 6, the Company shall supply the
         Agent with such number of Drafts as it may reasonably request, duly
         endorsed and executed on behalf of the Company. The Agent will exercise
         such care in the custody and safekeeping of Drafts as it would exercise
         in the custody and safekeeping of similar property owned by it and
         will, upon request by the Company, promptly advise the Company of the
         number and designations, if any, of uncompleted Drafts held by it for
         the Company. The signature of any officer of the Company on a Draft may
         be mechanically reproduced and BA Instruments bearing facsimile
         signature shall be binding upon the Company as if they had been
         manually signed. Even if the individuals whose manual or facsimile
         signature appears on any BA Instrument no longer hold office at the
         date of signature, at the date of its acceptance by the Agent or at any
         time after such date, any BA Instrument so signed shall be valid and
         binding upon the Company.

(10)     Upon the maturity of a BA Instrument, the Company may (i) elect to
         issue a replacement BA Instrument by giving a Drawing notice in
         accordance with Section 6(1) and Section 6(5), (ii) elect to have all
         or a portion of the Face Amount of the BA Instrument converted to an
         advance as a CIBC Bank Rate Loan by giving a written notice in
         accordance with Section 3(1), or (iii) pay, on or before 10:00 a.m.
         (Toronto time) on the maturity date for the BA Instrument, an amount in
         Canadian Dollars equal to the Face Amount of the BA Instrument
         (notwithstanding that the Lender may be the holder of it at maturity).
         Any such payment shall satisfy the Company's obligations under the BA
         Instrument to which it relates and the relevant Lender shall then be
         solely responsible for the payment of the BA Instrument.

<PAGE>   44
                                      -42-

(11)     If the Company fails to pay any BA Instrument when due or issue a
         replacement in the Face Amount of such BA Instrument pursuant to
         Section 6(10), the unpaid amount due and payable shall be converted to
         a CIBC Bank Rate Loan made by the Lenders rateably as a Revolving Loan
         and shall bear interest calculated and payable as provided in Section
         8. This conversion shall occur as of the due date and without any
         necessity for the Company to give a borrowing notice.

(12)     If, by reason of circumstances affecting the money market generally,
         there is no market for Bankers' Acceptances (i) the right of the
         Company to request a Drawing shall be suspended until the circumstances
         causing a suspension no longer exist, and (ii) any Drawing notice which
         is outstanding shall be deemed to be a borrowing notice for a CIBC Bank
         Rate Loan.

SECTION 7     REPRESENTATIONS, WARRANTIES AND COVENANTS

(1)      The Company represents and warrants to the Agent and the Lenders,
         acknowledging and confirming that the Agent and the Lenders are relying
         on such representations and warranties without independent inquiry in
         entering into this Financing Agreement that:

         (a)      The Company is a corporation duly incorporated, organized and
                  validly existing under the laws of the Province of Ontario.
                  The Company is qualified, licensed or registered to carry on
                  business under the laws applicable to it in all jurisdictions
                  in which such qualification, licensing or registration is
                  necessary or where the failure to be so qualified would have a
                  Material Adverse Effect;

         (b)      The Company has all requisite corporate power and authority to
                  (i) own, lease and operate its properties and assets and to
                  carry on its business as now being conducted by it, and (ii)
                  enter into and perform its obligations under the Loan
                  Documents to which it is a party;

         (c)      Except as set forth in Schedule 8, the execution and delivery
                  by the Company and the performance by it of its respective
                  obligations under, and compliance with the terms, conditions
                  and provisions of, the Loan Documents to which it is a party
                  will not (i) conflict with or result in a breach of any of the
                  terms or conditions of (t) its constating documents or
                  by-laws, (u) any applicable law, rule or regulation, (v) any
                  loan agreement, mortgage, deed of trust, note, security or
                  pledge agreement, indenture or other contract or contractual
                  restriction binding on it, or the Parent or Sterling NRO, Ltd.
                  or affecting any of their respective assets or properties, or
                  (w) any judgment, injunction, determination or award which is
                  binding on it, or (ii) result in, require or permit (x) the
                  imposition of any encumbrance in, on or with respect

<PAGE>   45
                                      -43-

                  to any of its assets or property (except in favour of the
                  Agent and the Lenders), (y) the acceleration of the maturity
                  of any Debt binding on or affecting the Company, or (z) any
                  third party to terminate or acquire rights under any Material
                  Agreement;

         (d)      The execution and delivery of each of the Loan Documents by
                  the Company and the performance by the Company of its
                  obligations under the Loan Documents have been duly authorized
                  by all necessary corporate action including, without
                  limitation, the obtaining of all necessary shareholder
                  consents. Except as set forth in Schedule 8, no authorization,
                  consent, approval, registration, qualification, designation,
                  declaration or filing with any governmental entity or other
                  Person, is or was necessary in connection with the execution,
                  delivery and performance of the Company's obligations under
                  the Loan Documents except as are in full force and effect,
                  unamended, at the date of this Financing Agreement;

         (e)      This Agreement and the other Loan Documents have been duly
                  executed and delivered by the Company and constitute legal,
                  valid and binding obligations of the Company enforceable
                  against it in accordance with their respective terms, subject
                  only to any limitation under applicable laws relating to (i)
                  bankruptcy, insolvency, arrangement or creditors' rights
                  generally, and (ii) the discretion that a court may exercise
                  in the granting of equitable remedies;

         (f)      The Company possesses all material authorizations, permits,
                  consents, registrations and approvals necessary to properly
                  conduct its business at full operating capacity and all such
                  authorizations, permits, consents, registrations and approvals
                  are in good standing and in full force and effect and a
                  complete list of such authorizations, permits, consents,
                  registrations and approvals is listed in Schedule 1.

         (g)      The Company has no Debt other than Permitted Debt and without
                  limiting the generality of the foregoing the Company has not
                  guaranteed the obligations of any other Person, including
                  those of any Affiliate or those of the Parent.

         (h)      Except for Permitted Liens, the Company has good and
                  marketable title in fee simple to the Owned Properties and
                  good and merchantable title to all the tangible and intangible
                  personal property reflected as assets in its books and records
                  in each case free and clear of any Liens. The Company owns,
                  leases or has the lawful right to use all of the assets
                  necessary for the conduct of its business at full operating
                  capacity;

<PAGE>   46
                                      -44-

         (i)      The Company (i) does not own any real property other than the
                  Owned Properties, (ii) is not bound by any agreement to own or
                  lease any real property other than the Leases, or (iii) has
                  not leased any of its Owned Properties;

         (j)      Each Lease is in good standing and all amounts owing under it
                  have been paid by the Company;

         (k)      Except for matters set forth in the environmental report
                  delivered to the Agent from Golder Associates Ltd. and dated
                  July, 2001, each of the Subject Properties have been used and
                  is in use, and the Company is in material compliance with all
                  applicable laws, judgments and orders and rulings, guidelines
                  and decisions having force of law relating to the conduct of
                  its business and the ownership of its property;

         (l)      Except as set forth in Schedule 7, none of the Subject
                  Properties or other property or assets under the charge,
                  management or control of the Company (i) has ever been used by
                  any Person as a waste disposal site or a landfill, or (ii) has
                  ever had any asbestos, asbestos-containing materials, PCBs,
                  radioactive substances or aboveground or underground storage
                  systems, active or abandoned, located on, at or under it at
                  the date of this Financing Agreement; to the best knowledge of
                  the Company, no properties adjacent to any of the Subject
                  Properties are contaminated; there are no contaminants located
                  on, at or under any of the Subject Properties; and the Company
                  has not transported, removed or disposed of any waste to a
                  location outside of Canada as at the date of this Financing
                  Agreement;

         (m)      The Company is not in violation of its constating documents,
                  its by-laws or any shareholders' agreement applicable to it;

         (n)      The Company is not a party to any agreement or instrument or
                  subject to any restriction (including any restriction set
                  forth in its constating documents, by-laws or any
                  shareholders' agreement applicable to it) which has or, to the
                  best of its knowledge, in the future could reasonably be
                  expected to have a Material Adverse Effect;

         (o)      The Company is in compliance with all Material Agreements to
                  which it is a party and the Company is not, nor to the best of
                  the Company's knowledge, has any other party to any Material
                  Agreement defaulted under any of the Material Agreements. No
                  event has occurred which, with the giving of notice, lapse of
                  time or both, would constitute a default on the part of the
                  Company, and, to the knowledge of the

<PAGE>   47
                                      -45-

                  Company, on the part of the other parties to the Material
                  Agreements, under, or in respect of, any Material Agreement.
                  There is no dispute regarding any Material Agreement to which
                  the Company is a party and, to the knowledge of the Company,
                  regarding any other Material Agreement. All Material
                  Agreements of the Company are set forth in Schedule 9;

         (p)      All books and records of the Company have been fully, properly
                  and accurately kept and completed and there are no material
                  inaccuracies or discrepancies of any kind contained or
                  reflected therein. The Company's books and records and other
                  data and information are available to the Company in the
                  ordinary course of its business;

         (q)      The Company has filed all tax and information returns which
                  are required to be filed. The Company has paid all taxes,
                  interest and penalties, if any, which have become due pursuant
                  to such returns or pursuant to any assessment received by it
                  other than those in respect of which liability based on such
                  returns is being contested in good faith and by appropriate
                  proceedings where adequate reserves have been established in
                  accordance with GAAP. Adequate provision for payment has been
                  made for taxes not yet due. There are no tax disputes existing
                  or pending involving the Company which could reasonably be
                  expected to have a Material Adverse Effect;

         (r)      The Company has no subsidiaries other than, upon its creation,
                  Sterling Australia.

         (s)      The September 30, 1999 and September 30, 2000 audited
                  financial statements of the Company, copies of each of which
                  have been furnished to the Agent, fairly present the
                  consolidated financial position of the Company at such dates
                  and the consolidated results of the operations and changes in
                  financial position of the Company for such period, all in
                  accordance with GAAP;

         (t)      Except as set forth in Schedule 5, there are no actions, suits
                  or proceedings pending, taken or to the Company's knowledge,
                  threatened, before or by any governmental entity or by or
                  against any elected or appointed public official or private
                  Person in Canada or elsewhere, and, to the knowledge of the
                  Company, no law which affects the Company has been enacted,
                  promulgated or applied which (i) challenges, or to the
                  knowledge of the Company, has been proposed which may
                  challenge, the validity or propriety of the transactions
                  contemplated under the Loan Documents or the documents,
                  instruments and agreements executed or delivered in

<PAGE>   48
                                      -46-

                  connection therewith or related thereto, or (ii) could be
                  reasonably anticipated to have a Material Adverse Effect;

         (u)      All (i) forecasts and projections supplied to the Agent were
                  prepared in good faith, adequately disclosed all relevant
                  assumptions and are reasonable, and (ii) other written
                  information supplied to the Agent is true and accurate in all
                  material respects. There is no fact known to the Borrower
                  which could reasonably be expected to have a Material Adverse
                  Effect and which has not been fully disclosed to the Agent. No
                  event has occurred which could be reasonably anticipated to
                  have a Material Adverse Effect since the date of last
                  financial statements delivered to the Agent.

(2)      The Company hereby represents, warrants and covenants that as of the
         date of this Financing Agreement and after giving effect to the
         transactions contemplated hereby and to the repayment of any
         indebtedness owing by the Company to Sterling NRO, Ltd. (a) the fair
         value of the Total Assets exceeds and will exceed, as the case may be,
         the book value of the Total Liabilities; (b) the Company is and will
         be, as the case may be, generally able to pay its debts as they become
         due and payable; and (c) the Company does not and will not, as the case
         may be, have unreasonably small capital to carry on its business as it
         is currently conducted absent extraordinary and unforeseen
         circumstances. The Company further represents and warrants that (i)
         Schedule 1 hereto correctly and completely sets forth the Company's (A)
         chief executive office, (B) Collateral locations, (C) trade names, and
         (D) all the other information listed on said Schedule; (ii) except for
         the Permitted Liens, after filing of financing statements in the
         applicable registration offices at the locations set forth in Schedule
         1, the security interests granted pursuant to any of the Loan Documents
         constitute and shall at all times constitute valid, perfected first
         priority liens on the Collateral (iii) except for the Permitted Liens,
         the Company is, or will be, at the time additional Collateral is
         acquired by it, the absolute owner or lessee, as applicable, of the
         Collateral with full right to pledge, sell, consign, transfer and
         create a security interest therein, free and clear of any and all
         claims or liens in favour of others; (iv) the Company will, at its
         expense, forever warrant and, at the Agent's request, defend the same
         from any and all claims and demands of any other Person other than a
         holder of a Permitted Encumbrance; (v) the Company will not grant,
         create or permit to exist, any lien upon, or security interest in, the
         Collateral, or any proceeds thereof, in favour of any other Person
         other than the holders of the Permitted Liens; and that the Equipment
         does not comprise a part of the Inventory of the Company; and (vi) the
         Equipment is and will only be used by the Company in its business and
         will not be held for sale or lease, or removed

<PAGE>   49
                                      -47-

         from its premises, or otherwise disposed of by the Company except as
         otherwise permitted in this Financing Agreement.

(3)      The Company agrees to maintain books and records pertaining to the
         Collateral in accordance with GAAP and in such additional detail, form
         and scope as the Agent shall reasonably require. The Company agrees
         that the Agent or its agents, and any of the Lenders who may wish to
         accompany the Agent at their own cost and expense, may enter upon the
         Company's premises at any time upon reasonable notice during normal
         business hours, and from time to time in its reasonable business
         judgement, for the purpose of inspecting the Collateral and any and all
         records pertaining thereto. The Company agrees to afford the Agent
         thirty (30) days prior written notice of any change in the location of
         any Collateral, other than to locations, that as of the Closing Date,
         are known to the Agent and at which the Agent has filed financing
         statements and otherwise fully perfected its liens thereon. The Company
         is also to advise the Agent promptly, in sufficient detail, of any
         material adverse change relating to the type, quantity or quality of
         the Collateral or on the security interests granted to the Agent
         therein.

(4)      The Company agrees to (a) execute and deliver to the Agent, from time
         to time, solely for the Agent's convenience in maintaining a record of
         the Collateral, such written statements, and schedules as the Agent may
         reasonably require, designating, identifying or describing the
         Collateral; and (b) provide the Agent, on request, with an appraisal of
         the Inventory which appraisal shall be at the Company's expense and
         otherwise acceptable to the Agent; provided however, that such
         appraisal request shall be limited to one per Fiscal Year provided an
         Event of Default has not occurred and is continuing. The Company's
         failure, however, to promptly give the Agent such statements, or
         schedules shall not affect, diminish, modify or otherwise limit the
         Agent's and/or the Lenders' security interests in the Collateral.

(5)      The Company agrees to comply with the requirements of all applicable
         laws in order to grant to the Agent valid and perfected first security
         interests in the Collateral, subject only to the Permitted Liens. The
         Agent is hereby authorized by the Company to file (including pursuant
         to the applicable terms of the PPSA) from time to time any financing
         statements, continuations or amendments covering the Collateral whether
         or not the Company's signature appears thereon. The Company hereby
         consents to and ratifies any and all execution and/or filing of
         financing statements, for such purpose, on or prior to the Closing Date
         by the Agent. The Company agrees to do whatever the Agent may
         reasonably request, from time to time, by way of: (a) filing notices of
         liens, financing statements, amendments, renewals and continuations
         thereof; (b) cooperating with the Agent's agents and employees; (c)
         keeping Collateral records; (d) transferring proceeds of Collateral to
         the

<PAGE>   50
                                      -48-

         Agent's possession; and (e) performing such further acts as the Agent
         and/or the Lenders may reasonably require in order to effect the
         purposes of this Financing Agreement.

         (a)      The Company agrees to maintain (or cause to be maintained), in
                  respect of itself and each of its subsidiaries, insurance at
                  all times with responsible insurance carriers and in such
                  amounts and covering such risks as are usually carried by
                  companies engaged in similar businesses and owning similar
                  properties in the same general areas in which the Company or
                  such subsidiaries, as the case may be, operate, such policies
                  to show the Agent and the Lenders as loss payees under a
                  mortgage clause in a form approved by the Insurance Bureau of
                  Canada and the equivalent governing body of the United States
                  of America, as applicable.

         (b)      Without limiting the generality of the foregoing, the Company
                  agrees to maintain insurance (or cause to be maintained) on
                  its Real Estate, Equipment and Inventory under such policies
                  of insurance, with such insurance companies, in such
                  reasonable amounts and covering such insurable risks as are at
                  all times reasonably satisfactory to the Agent. All policies
                  covering the Real Estate, Equipment and Inventory are, subject
                  to the rights of any holders of Permitted Liens holding claims
                  senior to the Agent, to be made payable to the Agent, on
                  behalf of the Lenders, in case of loss, under a standard
                  non-contributory "MORTGAGEE", "LENDER" or "SECURED PARTY"
                  clause and are to contain such other provisions as the Agent
                  may require to fully protect the Agent's interest in the Real
                  Estate, Inventory and Equipment and to any payments to be made
                  under such policies. All original policies or true copies
                  thereof are to be delivered to the Agent, premium prepaid,
                  with the loss payable endorsement in the Agent's favour, and
                  shall provide for not less than thirty (30) days prior written
                  notice to the Agent of the exercise of any right of
                  cancellation. At the Company's request, or if the Company
                  fails to maintain such insurance, the Agent may arrange for
                  such insurance, but at the Company's expense and without any
                  responsibility on the Agent's part for: (i) obtaining the
                  insurance; (ii) the solvency of the insurance companies; (iii)
                  the adequacy of the coverage; or (iv) the collection of
                  claims. Upon the occurrence of an Event of Default which is
                  not waived in writing by the Required Lenders, the Agent
                  shall, subject to the rights of any holders of Permitted Liens
                  holding claims senior to the Agent, have the sole right and at
                  its option, in the name of the Agent or the Company, to file
                  claims under any insurance policies, to receive, receipt and
                  give acquittance for any payments that may be payable
                  thereunder, and to

<PAGE>   51
                                      -49-

                  execute any and all endorsements, receipts, releases,
                  assignments, reassignments or other documents that may be
                  necessary to effect the collection, compromise or settlement
                  of any claims under any such insurance policies.

         (c)

                  (i)      In the event of any loss or damage by fire or other
                           casualty, insurance proceeds relating to Inventory
                           shall first reduce the Company's Revolving Loans,
                           then the Term Loan. Upon the occurrence of a Default
                           or Event of Default, such Insurance Proceeds may be
                           applied to the Obligations in such order as the Agent
                           may elect;

                  (ii)     In the event any part of any of the Company's Real
                           Estate or Equipment is damaged by fire or other
                           casualty and the Insurance Proceeds for such damage
                           or other casualty is less than or equal to $100,000,
                           the Agent shall promptly apply such Proceeds to
                           reduce the Company's outstanding balance in the
                           Revolving Loan Account. Upon the occurrence of a
                           Default or Event of Default, such Insurance Proceeds
                           may be applied to the Obligations in such order as
                           the Agent may elect;

                  (iii)    Absent the occurrence of an Event of Default, and
                           provided that (x) the Company has sufficient business
                           interruption insurance to replace the lost profits of
                           such Company's facilities, and (y) the Insurance
                           Proceeds are in excess of $100,000 the Company may
                           elect (by delivering written notice to the Agent) to
                           replace, repair or restore such Real Estate or
                           Equipment to substantially the equivalent condition
                           prior to such fire or other casualty as set forth
                           herein; provided, however, that the Company may use
                           up to $1,000,000 worth of Insurance Proceeds in
                           respect of the business interruption insurance Policy
                           Number 509/EN970616 pertaining to a pre-existing
                           claim under such policy related to the Thunder Bay
                           property listed in Schedule 4 for Capital
                           Expenditures, provided such Capital Expenditures are
                           made in compliance with Section 7(13)(c). If the
                           Company does not, or cannot, elect to use the
                           Insurance Proceeds as set forth above, the Agent may,
                           subject to the rights of any holders of Permitted
                           Liens holding claims senior to the Agent, apply the
                           Insurance Proceeds to the payment of the Obligations
                           in such manner and in such order as the Agent may
                           reasonably elect; and

<PAGE>   52
                                      -50-

                  (iv)     If the Company elects to use the Insurance Proceeds
                           for the repair, replacement or restoration of any
                           Real Estate and/or Equipment, and there is then no
                           Event of Default, (x) Insurance Proceeds for any loss
                           less than or equal to $100,000 will be applied to the
                           repair, replacement or restoration of any Real Estate
                           and/or Equipment (such amount not to be included in
                           the calculation of Capital Expenditures under Section
                           7(13)(c)), (y) Insurance Proceeds for any loss in
                           excess of $100,000 on Equipment and/or Real Estate
                           will be applied to the reduction of the Revolving
                           Loans and (z) the Agent may set up an Availability
                           Reserve in an amount equal to said Insurance Proceeds
                           referred to in (y). The Availability Reserve will be
                           reduced dollar-for-dollar upon receipt of
                           noncancelable executed purchase orders, delivery
                           receipts or contracts for the replacement, repair or
                           restoration of Equipment and/or the Real Estate and
                           disbursements in connection therewith. Prior to the
                           commencement of any material restoration, repair or
                           replacement of Real Estate, the Company shall provide
                           the Agent with a restoration plan and a total budget
                           certified by an independent third party experienced
                           in construction costing. If there are insufficient
                           Insurance Proceeds to cover the cost of restoration
                           as so determined, the Company shall be responsible
                           for the amount of any such insufficiency, prior to
                           the commencement of restoration and shall demonstrate
                           evidence of such before the reserve will be reduced.
                           Completion of restoration shall be evidenced by a
                           final, unqualified certification of the design
                           architect employed, if any; an unconditional
                           Certificate of Occupancy, if applicable; such other
                           certification as may be required by law; or if none
                           of the above is applicable, a written good faith
                           determination of completion by the Company (herein
                           collectively the "COMPLETION"). Upon Completion, any
                           remaining reserve as established hereunder will be
                           automatically released.

         (d)      In the event the Company fails to provide the Agent with
                  timely evidence, acceptable to the Agent, of its maintenance
                  of insurance coverage required pursuant this to Section 7(5)
                  above, the Agent may purchase, at the Company's expense,
                  insurance to protect the Agent's interests in the Collateral.
                  The insurance acquired by the Agent may, but need not, protect
                  the Company's interest in the Collateral, and therefore such
                  insurance may not pay claims which the Company may have with
                  respect to the Collateral or pay any claim which may be made
                  against the Company in connection with the Collateral. In the

<PAGE>   53
                                      -51-

                  event the Agent purchases, obtains or acquires insurance
                  covering all or any portion of the Collateral, the Company
                  shall be responsible for all of the applicable costs of such
                  insurance, including premiums, interest (at the applicable
                  CIBC Bank Rate for Revolving Loans set forth in Section 8(1)
                  hereof), fees and any other charges with respect thereto,
                  until the effective date of the cancellation or the expiration
                  of such insurance. The Agent may charge all of such premiums,
                  fees, costs, interest and other charges to the Company's
                  Revolving Loan Account. The Company hereby acknowledges that
                  the costs of the premiums of any insurance acquired by the
                  Agent may exceed the costs of insurance which the Company may
                  be able to purchase on its own. In the event that the Agent
                  purchases such insurance, the Agent will notify the Company of
                  said purchase within thirty (30) days of the date of such
                  purchase. If, within thirty (30) days after the date of such
                  notice, the Company provides the Agent with proof that the
                  Company had the insurance coverage required pursuant to 7.5(a)
                  above (in form and substance satisfactory to the Agent) as of
                  the date on which the Agent purchased insurance and the
                  Company continued at all times to have such insurance, then
                  the Agent agrees to cancel the insurance purchased by the
                  Agent and credit the Company's Revolving Loan Account with the
                  amount of all costs, interest and other charges associated
                  with any insurance purchased by the Agent, including with any
                  amounts previously charged to the Revolving Loan Account.

(6)      The Company agrees to pay, when due, all Taxes, including sales taxes,
         assessments, claims and other charges lawfully levied or assessed upon
         the Company or the Collateral unless such Taxes are being diligently
         contested in good faith by the Company by appropriate proceedings and
         adequate reserves are established in accordance with GAAP.
         Notwithstanding the foregoing, if any lien shall be filed or claimed
         thereunder (a) for Taxes due any governmental authority, or (b) which
         in the Agent's opinion might create a valid obligation having priority
         over the rights granted to the Agent herein (exclusive of Real Estate),
         such lien shall not be deemed to be a Permitted Encumbrance hereunder
         and the Company shall immediately pay such tax and remove the lien of
         record. If the Company fails to do so promptly, then at the Agent's
         election, the Agent may (i) create an Availability Reserve in such
         amount as it may deem appropriate in its reasonable business judgement,
         or (ii) upon the occurrence of a Default or Event of Default, imminent
         risk of seizure, filing of any priority lien, forfeiture, or sale of
         the Collateral, pay Taxes on the Company's behalf, and the amount
         thereof shall be an Obligation secured hereby and due on demand.

<PAGE>   54
                                      -52-

(7)      The Company (a) agrees to comply with all acts, rules, regulations and
         orders of any legislative, administrative or judicial body or official,
         which the failure to comply with would have a material and adverse
         impact on the Collateral, or any material part thereof, or on the
         business or operations of the Company, provided that the Company may
         contest any acts, rules, regulations, orders and directions of such
         bodies or officials in any reasonable manner which will not, in the
         Agent's reasonable opinion, materially and adversely effect the Agent's
         and/or the Lenders' rights or priority in the Collateral; (b) agrees to
         comply with all environmental statutes, acts, rules, regulations or
         orders as presently existing or as adopted or amended in the future,
         applicable to the Collateral, the ownership and/or use of its real
         property and operation of its business, which the failure to comply
         with would have a material and adverse impact on the Collateral, or any
         material part thereof, or on the operation of the business of the
         Company; and (c) shall not be deemed to have breached any provision of
         this Section 7(7) if (i) the failure to comply with the requirements of
         this Section 7(7) resulted from good faith error or innocent omission,
         (ii) the Company promptly commences and diligently pursues a cure of
         such breach, and (iii) such failure is cured within (30) days following
         the Company's receipt of notice of such failure, or if such cannot in
         good faith be cured within thirty (30) days, then such breach is cured
         within a reasonable time frame based upon the extent and nature of the
         breach and the necessary remediation, and in conformity with any
         applicable consent order, consensual agreement and applicable law.

(8)      The Company agrees to safeguard, protect and hold all Inventory for the
         Agent's account and make no disposition thereof except in the ordinary
         course of its business of the Company, as herein provided. The Company
         represents and warrants that Inventory will be sold and shipped by the
         Company to its customers only in the ordinary course of the Company's
         business, and then only on open account and on terms currently being
         extended by the Company to its customers, provided that, absent the
         prior written consent of the Agent, the Company shall not sell
         Inventory on a consignment basis nor retain any lien or security
         interest in any sold Inventory. Upon the sale, exchange, or other
         disposition of Inventory, as herein provided, the security interest in
         the Inventory provided for herein shall, without break in continuity
         and without further formality or act, continue in, and attach to, all
         proceeds, including any instruments for the payment of money, Trade
         Accounts Receivable, documents of title, shipping documents, chattel
         paper and all other cash and non-cash proceeds of such sale, exchange
         or disposition. As to any such sale, exchange or other disposition, the
         Agent shall have all of the rights of an unpaid seller, including
         stoppage in transit, replevin, rescission and reclamation. The Company
         hereby agrees to immediately forward any and all proceeds of

<PAGE>   55
                                      -53-

         Collateral to the Depository Account, and to hold any such proceeds
         (including any notes and instruments), in trust for the Agent, on
         behalf of the Lenders, pending delivery to the Agent. Irrespective of
         the Agent's perfection status in any and all of the General
         Intangibles, including, without limitations, any Patents, Trademarks,
         Copyrights or licenses with respect thereto, the Company hereby
         irrevocably grants the Agent a royalty free license to sell, or
         otherwise dispose or transfer, in accordance with Section 10(3) of this
         Financing Agreement, and the applicable terms hereof, of any of the
         Inventory upon the occurrence of an Event of Default which has not been
         waived in writing by the Agent.

(9)      The Company agrees at its own cost and expense to keep the Equipment in
         as good and substantial repair and condition as the same is now or at
         the time the lien and security interest granted herein shall attach
         thereto, reasonable wear and tear excepted, making any and all repairs
         and replacements when and where necessary. The Company also agrees to
         safeguard, protect and hold all Equipment in accordance with the terms
         hereof and subject to the Agent's security interest. Absent the Agent's
         prior written consent, any sale, exchange or other disposition of any
         Equipment shall be made by the Company in the ordinary course of
         business and as set forth herein. The Company may, in the ordinary
         course of its business, sell, exchange or otherwise dispose of
         obsolete, surplus, redundant, derelict or non-operational Equipment
         provided, however, that: (a) the then value of the Equipment so
         disposed of in any Fiscal Year does not exceed $250,000 in the
         aggregate; and (b) the proceeds of any such sales or dispositions shall
         be held in trust by the Company for the Agent and shall be immediately
         delivered to the Agent by deposit to the Depository Account, except
         that the Company may retain and use such proceeds to purchase forthwith
         replacement Equipment which the Company determines in its reasonable
         judgment to have a collateral value at least equal to the Equipment so
         disposed of or sold; provided, however, that the aforesaid right shall
         automatically cease upon the occurrence of a Default or an Event of
         Default which is not waived in writing by the Agent. Upon the sale,
         exchange, or other disposition of the Equipment, as herein provided,
         the security interest provided for herein shall, without break in
         continuity and without further formality or act, continue in, and
         attach to, all proceeds, including any instruments for the payment of
         money, Accounts, documents of title, shipping documents, chattel paper
         and all other cash and non-cash proceeds of such sales, exchange or
         disposition. As to any such sale, exchange or other disposition, the
         Agent and the Lenders shall have all of the rights of an unpaid seller,
         including stoppage in transit, replevin, rescission and reclamation.

<PAGE>   56
                                      -54-

(10)     The Company possesses all General Intangibles and rights thereto
         necessary to conduct its business as conducted as of the Closing Date
         and the Company shall maintain its rights in, and the value of, the
         foregoing in the ordinary course of its business, including, without
         limitation, by making timely payment with respect to any applicable
         licensed rights. The Company shall deliver to the Agent, and/or shall
         cause the appropriate party to deliver to the Agent, from time to time
         such pledge or security agreements with respect to General Intangibles
         (now or hereafter acquired) of the Company and its subsidiaries as the
         Agent shall require to obtain valid first liens thereon. In furtherance
         of the foregoing, the Company shall provide timely notice to the Agent
         of any additional Patents, Trademarks, trade names, service marks,
         Copyrights, brand names, trade names, logos and other trade
         designations acquired or applied for subsequent to the Closing Date and
         the Company shall execute such documentation as the Agent may
         reasonably require to obtain and perfect its lien thereon. The Company
         hereby confirms that it shall deliver, or cause to be delivered to the
         Agent, any stock of any subsidiaries (other than the stock of Sterling
         Australia if such stock is subject to a prior outstanding Lien in
         favour of the financier to the Australia Project) issued subsequent to
         the Closing Date together with the certificates evidencing such stock
         with duly executed stock powers (undated and in blank), in accordance
         with the applicable terms of a pledge agreement to be entered into by
         the Company in form and content satisfactory to the Agent, and prior to
         such delivery, shall hold any such stock in trust for the Agent. The
         Company hereby irrevocably grants to the Agent a royalty-free,
         non-exclusive license in the General Intangibles, including trade
         names, Trademarks, Copyrights, Patents, licenses, and any other
         proprietary and intellectual property rights and any and all right,
         title and interest in any of the foregoing, for the sole purpose, upon
         the occurrence of an Event of Default, of the right to: (i) advertise
         for sale and sell or transfer any Inventory bearing any of the General
         Intangibles, and (ii) make, assemble, prepare for sale or complete, or
         cause others to do so, any applicable raw materials or Inventory
         bearing any of the General Intangibles, including use of the Equipment
         and Real Estate for the purpose of completing the manufacture of
         unfinished goods, raw materials or work-in-process comprising
         Inventory, and apply the proceeds thereof to the Obligations hereunder,
         all as further set forth in this Financing Agreement and irrespective
         of the Agent's lien and perfection in any General Intangibles.

(11)     Until termination of this Financing Agreement and payment and
         satisfaction of all Obligations due hereunder, the Company agrees that,
         unless the Agent shall have otherwise consented in writing, the Company
         will furnish to the Agent: (a) within 90 days after the end of each
         Fiscal Year of the Company, an audited Consolidated Balance Sheet,
         with a Consolidating Balance Sheet

<PAGE>   57
                                      -55-

         attached thereto, as at the close of such year, and consolidated and
         consolidating statements of profit and loss, cash flow and
         reconciliation of surplus of the Company and all subsidiaries of the
         Company and its consolidated subsidiaries for such year, audited by
         chartered accountants selected by the Company and satisfactory to the
         Agent; (b) within sixty (60) days after the end of each Fiscal Quarter,
         a Consolidated Balance Sheet and Consolidating Balance Sheet as at the
         end of such period and consolidated and consolidating statements of
         profit and loss, cash flow and surplus of the Company and all
         subsidiaries of the Company and its consolidated subsidiaries,
         certified by an authorized financial or accounting officer of the
         Company; (c) within thirty (30) days after the end of each month, a
         Consolidated Balance Sheet as at the end of such period and statements
         of profit and loss, cash flow and surplus of the Company and all
         subsidiaries for such period, certified by an authorized financial or
         accounting officer of the Company; (d) within thirty (30) days prior to
         the beginning of each Fiscal Year, the Company shall provide to the
         Agent, in a monthly format, a consolidated balance sheet, statement of
         profit and loss, cash flow and surplus of the Company and its
         consolidated subsidiaries, certified by an authorized financial or
         accounting officer for the Company for the upcoming Fiscal Year, and
         the Fiscal Year End totals provided should also include a consolidating
         balance sheet and statement of profit and loss; and (e) from time to
         time, such further information regarding the business affairs and
         financial condition of the Company and/or any subsidiaries thereof as
         the Agent may reasonably request, including without limitation (i) the
         accountant's management practice letter and (ii) annual cash flow
         projections in form satisfactory to the Agent. Each financial statement
         which the Company is required to submit hereunder must be accompanied
         by an officer's certificate, signed by executive officer, pursuant to
         which any one such officer must certify that: (x) the financial
         statement(s) fairly and accurately represent(s) the Company's financial
         condition at the end of the particular accounting period, as well as
         the Company's operating results during such accounting period, subject
         to year-end audit adjustments; and (y) during the particular accounting
         period: (A) there has been no Default or Event of Default under this
         Financing Agreement, provided, however that if any such officer has
         knowledge that any such Default or Event of Default has occurred during
         such period, the existence of and a detailed description of same shall
         be set forth in such officer's certificate; (B) the Company has not
         received any notice of cancellation with respect to its property
         insurance policies; (C) the Company has not received any notice that
         could result in a material adverse effect on the value of the
         Collateral taken as a whole; and (D) the exhibits attached to such
         financial statement(s) constitute detailed calculations showing
         compliance with all financial covenants contained in this Financing
         Agreement. For the purposes of the financial statements to be

<PAGE>   58
                                      -56-

         delivered pursuant to this Section 7(11), the Company's subsidiaries
         shall not include Sterling Australia.

(12)     Until termination of the Financing Agreement and payment and
         satisfaction of all Obligations hereunder, the Company agrees that,
         without the prior written consent of the Agent, except as otherwise
         herein provided, the Company will not and will cause each of its
         subsidiaries (other than Sterling Australia) not to:

         (a)      Mortgage, assign, pledge, transfer or otherwise permit any
                  lien, charge, security interest, encumbrance or judgment,
                  (whether as a result of a purchase money or title retention
                  transaction, or other security interest, or otherwise) to
                  exist on (i) any of the Collateral, or (ii) all present and
                  future property and assets of the Company solely dedicated to
                  the Bowater Project as listed on Schedule 10, or (iii) any
                  other assets, whether now owned or hereafter acquired, except
                  for the Permitted Liens;

         (b)      Incur or create any Debt other than the Permitted Debt;

         (c)      Except for Inventory sold in the ordinary course of business,
                  sell, lease, assign, transfer or otherwise dispose of (i)
                  Collateral, except as otherwise specifically permitted by this
                  Financing Agreement or any other Loan Document or as consented
                  to in writing by the Agent, or (ii) either all or
                  substantially all of the Company's or such subsidiary's
                  assets, which do not constitute Collateral;

         (d)      Merge, consolidate or otherwise alter or modify its corporate
                  name, principal place of business, structure, or existence,
                  re-incorporate or re-organize or enter into or engage in any
                  operation or activity materially different from that presently
                  being conducted by the Company, except that the Company may
                  change its corporate name or address; provided that: (i) the
                  Company shall give the Agent thirty (30) days prior written
                  notice thereof and (ii) the Company shall execute and deliver,
                  prior to or simultaneously with any such action, any and all
                  documents and agreements requested by the Agent to confirm the
                  continuation and preservation of all security interests and
                  liens granted to the Agent hereunder;

         (e)      Incorporate or acquire any subsidiaries other than Sterling
                  Australia;

         (f)      Permit any asbestos, asbestos-containing materials, PCBs,
                  radioactive substances or other contaminants which could
                  reasonably be expected to have a Material Adverse Effect to be
                  located on, at or under any of
<PAGE>   59
                                      -57-

                  the Subject Properties. Permit any underground storage vessels
                  to be located or installed at any of the Subject Properties;

         (g)      Assume, guarantee, endorse, or otherwise become liable upon
                  the obligations of any Person, firm, entity or corporation,
                  except by the endorsement of negotiable instruments for
                  deposit or collection or similar transactions in the ordinary
                  course of business, except for (x) any process or performance
                  guarantees not to exceed $12,000,000 in the aggregate made by
                  the Company solely in connection with the Australia Project,
                  provided that such guarantees shall not guarantee payment or
                  performance of any Debt, and (y) process and performance
                  guarantees made by the Company in the ordinary course of
                  business;

         (h)      Declare or pay any dividend or distributions of any kind on,
                  or purchase, acquire, redeem or retire, any of the capital
                  stock or equity interest, of any class whatsoever, whether now
                  or hereafter outstanding;

         (i)      Issue shares, or any options, warrants or securities
                  convertible into shares;

         (j)      Make any advance or loan to, or any investment in, any firm,
                  entity, Person or corporation, or purchase or acquire all or
                  substantially all of the stock or assets of any entity, Person
                  or corporation, except for, provided no Default or Event of
                  Default has occurred which is continuing or would result
                  therefrom and there is Availability of no less than
                  $10,000,000 after making such equity investments and/or loans,
                  equity investments in and/or loans to Sterling Australia
                  solely in respect of the Australia Project in an aggregate
                  amount not to exceed $7,500,000 for all such loans and/or
                  equity investments, and provided that (i) any stock acquired
                  or issued in connection with any such investments shall be
                  pledged to the Agent and the Lenders, and (ii) any such loans
                  are evidenced by a promissory note in favour of the Company
                  which is assigned to the Agent and the Lenders as Collateral,
                  in each case, on terms and conditions and pursuant to
                  agreements in form and content satisfactory to the Agent,
                  subject in each case only to a prior ranking Lien in favour of
                  the financiers to the Australia Project, the priority of
                  which, if so requested, the Agent for itself and on behalf of
                  the Lenders, agrees to acknowledge in an agreement in form and
                  content satisfactory to the Agent and its counsel, acting
                  reasonably.

         (k)      Pay any management, consulting or other similar fees to any
                  Person, corporation or other entity affiliated with the
                  Company other than as is

<PAGE>   60
                                      -58-

                  consistent with past practice and which does not exceed
                  $3,000,000 in the aggregate in any Fiscal Year; or

         (l)      Change its Fiscal Year;

         (m)      Allow any amendments to any Material Agreements to which the
                  Company is a party;

         (n)      Make any repayments with respect to indebtedness owing by the
                  Company to Sterling NRO, Ltd. except (i) as provided under
                  Section 3(1)(a) and Section 4(2), and (ii) provided (x) no
                  Default or Event of Default has occurred and is continuing and
                  (y) there is Availability of at least $5,000,000 after giving
                  effect to such payment, for $1,175,000 to be paid by the
                  Company solely to fund Sterling NRO Ltd.'s withholding tax
                  liabilities payable to the Canada Customs & Revenue Agency on
                  August 15, 2001; or

         (o)      Change its historical practices in effect on the date of this
                  Financing Agreement with respect to the invoicing and
                  collection of accounts receivable.

(13)     Until termination of the Financing Agreement and payment and
         satisfaction in full of all Obligations hereunder, the Company shall:

         (a)      maintain at all times during each Fiscal Year ending below a
                  Net Worth of not less than the amount set forth below for the
                  applicable period:

<Table>
<Caption>
                                           FISCAL YEAR                         NET WORTH
<S>                                                                           <C>
                  (i)      For the Fiscal Year ending September 30, 2001      $15,000,000

                  (ii)     For the Fiscal Year ending September 30, 2002      $15,000,000

                  (iii)    For the Fiscal Year ending September 30, 2003      $15,000,000

                  (iv)     For the Fiscal Year ending September 30, 2004      $15,000,000

                  (v)      For the Fiscal Year ending September 30, 2005
                           and for each Fiscal Year thereafter                $15,000,000
</Table>

         (b)      not enter into or permit any subsidiary (other than Sterling
                  Australia) to enter into any Operating Lease if after giving
                  effect thereto the
<PAGE>   61
                                      -59-

                  aggregate obligations with respect to Operating Leases of the
                  Company during any Fiscal Year would exceed $5,000,000;

         (c)      without the prior written consent of the Agent, the Company
                  will not contract for, purchase, make expenditures for, lease
                  pursuant to a Capital Lease or otherwise incur obligations
                  with respect to Capital Expenditures (whether subject to a
                  security interest or otherwise) during any period below in the
                  aggregate amount in excess of the amount set forth for such
                  period:

                           (A)      $4,000,000 for the period from July 16, 2001
                                    to September 30, 2001;

                           (B)      $10,000,000 for the Fiscal Year ending
                                    September 30, 2002;

                           (C)      $10,000,000 for the Fiscal Year ending
                                    September 30, 2003;

                           (D)      $7,000,000 for the Fiscal Year ending
                                    September 30, 2004;

                           (E)      $7,000,000 for the Fiscal Year ending
                                    September 30, 2005;

                           (F)      $7,000,000 for the Fiscal Year ending
                                    September 30, 2006, and for each Fiscal Year
                                    ending thereafter;

                  provided that any such amounts not spent on Capital
                  Expenditures during the period in (A) or in any Fiscal Year in
                  (B) to (F), as the case may be, may be carried forward to the
                  Fiscal Year referred to in (B) or the next Fiscal Year, as the
                  case may be;

         (d)      sustain a net income loss as determined in accordance with
                  GAAP in any Fiscal Year in excess of $5,000,000;

         (e)      maintain, at all times, a minimum ratio, calculated as at the
                  end of each month, of EBITDA for the twelve month period then
                  ended to Fixed Charges as at the end of such month, of no less
                  than 1.1:1; or

         (f)      maintain, at all times, a maximum ratio, calculated as at the
                  end of each month, of Debt as at the end of such month to
                  EBITDA for the twelve month period then ended, of no greater
                  than 2.00:1.

(14)     The Company agrees to advise the Agent in writing of: (a) all
         expenditures (actual or anticipated) in excess of $1,000,000 from the
         budgeted amount

<PAGE>   62
                                      -60-

         therefor in any Fiscal Year for (i) environmental clean-up, (ii)
         environmental compliance or (iii) environmental testing and the impact
         of said expenses on the Company's Working Capital; and (b) any notices
         the Company or any subsidiary receives from any local, provincial,
         state or federal authority advising the Company of any environmental
         liability (real or potential) stemming from the Company's operations,
         its premises, its waste disposal practices, or waste disposal sites
         used by the Company and to provide the Agent with copies of all such
         notices if so required.

(15)     The Company hereby agrees to indemnify and hold harmless the Agent and
         its officers, directors, employees, attorneys and agents (each an
         "INDEMNIFIED PARTY") from, and holds each of them harmless against, any
         and all losses, liabilities, obligations, claims, actions, damages,
         costs and expenses (including legal fees) and any payments made by the
         Agent pursuant to any indemnity provided by the Agent with respect to
         or to which any Indemnified Party could be subject insofar as such
         losses, liabilities, obligations, claims, actions, damages, costs, fees
         or expenses relate to, arise from or are with respect to the Loan
         Documents, including without limitation those which may arise from or
         relate to: (a) the Depository Account, the Blocked Accounts, the
         lockbox and/or any other depository account and/or the agreements
         executed in connection therewith; and (b) any and all claims or
         expenses asserted against the Agent as a result of any environmental
         pollution, hazardous material or environmental clean-up relating to the
         Subject Properties; or any claim or expense which results from the
         Company's operations (including, but not limited to, the Company's
         off-site disposal practices) and use of the Real Estate, which the
         Agent may sustain or incur (other than solely as a result of the
         physical actions of the Agent on the Company's premises which are
         determined to constitute gross negligence or willful misconduct by a
         court of competent jurisdiction), all whether through the alleged or
         actual negligence of such Person or otherwise, except and to the extent
         that the same results solely and directly from the gross negligence or
         willful misconduct of such Indemnified Party as finally determined by a
         court of competent jurisdiction. The Company hereby agrees that this
         indemnity shall survive termination of this Financing Agreement, as
         well as payments of Obligations which may be due hereunder. The Agent
         may, in its reasonable business judgement, establish such Availability
         Reserves with respect to any claim made or threatened against or which
         the Agent reasonably believes may be made against the Agent for which
         indemnification is available hereunder as it may deem advisable under
         the circumstances and, upon any termination hereof, hold such reserves
         as cash reserves for any such contingent liabilities.

<PAGE>   63
                                      -61-

(16)     Except as permitted by Section 7(12)(j) of this Agreement, without the
         prior written consent of the Agent, the Company agrees that it will not
         enter into any transaction, including, without limitation, any
         purchase, sale, lease, loan or exchange of property with the Parent or
         any subsidiary or affiliate of either the Company or Parent, provided
         that, except as otherwise set forth in this Financing Agreement, the
         Company may enter into sale, service and other transactions in the
         ordinary course of its business and pursuant to the reasonable
         requirements of the Company, and upon standard terms and conditions and
         fair and reasonable terms, no less favorable to the Company than the
         Company could obtain in a comparable arms length transaction with an
         unrelated third party, provided further that no Default or Event of
         Default exists or will occur hereunder prior to and after giving effect
         to any such transaction.

SECTION 8     INTEREST, FEES AND EXPENSES

(1)

         (a)      Interest on the Revolving Loans shall be payable monthly in
                  arrears on the first day of the next month. Interest on
                  Revolving Loans which are (i) CIBC Bank Rate Loans shall be in
                  an amount equal to the CIBC Bank Rate plus two percent (2%)
                  per annum, and (ii) CIBC Base Rate Loans shall be in an amount
                  equal to the CIBC Base Rate plus two percent (2%), in each
                  case, calculated on the average of the net balances owing by
                  the Company to the Agent in the Revolving Loan Account at the
                  close of each day during such month. In the event of any
                  change in said CIBC Bank Rate or CIBC Base Rate, as the case
                  may be, the rate hereunder for CIBC Bank Rate Loans and CIBC
                  Base Rate Loans shall change, as of the date of such change,
                  so as to remain 2% above the CIBC Bank Rate and the CIBC Base
                  Rate, as the case may be. The rate hereunder for Revolving
                  Loans shall be calculated based on a 365-day year. The Agent
                  shall be entitled to charge the Company's Revolving Loan
                  Account at the rate provided for herein when due until all
                  Obligations have been paid in full.

         (b)      Notwithstanding any provision to the contrary contained in
                  this Section 8, in the event that the sum of (i) the
                  outstanding Revolving Loans and (ii) the outstanding Letters
                  of Credit exceed the lesser of either (x) the maximum
                  aggregate amount available under Section 3 and Section 5 of
                  this Financing Agreement or (y) the Revolving Line of Credit:
                  (A) as a result of Revolving Loans advanced by the Agent at
                  the request of the Company (herein "REQUESTED OVERADVANCES"),
                  for any one (1) or more days in any month, or (B) for any
                  other reason whatsoever (herein "OTHER OVERADVANCES") and such
                  Other

<PAGE>   64
                                      -62-

                  Overadvances continue for five (5) or more days in any month ,
                  the average net balance of all Revolving Loans for such month
                  shall bear interest at the Overadvance Rate.

         (c)      Upon and after the occurrence of an Event of Default and the
                  giving of any required notice by the Agent in accordance with
                  the provisions of Section 10(2) hereof, all Obligations shall
                  bear interest at the Default Rate of Interest.

(2)

         (a)      Interest on the Term Loan shall be payable monthly in arrears
                  on the first day of the next month on the unpaid balance or on
                  payment in full prior to maturity. Interest on the Term Loans
                  which are the CIBC Bank Rate Loans shall be in an amount equal
                  to the CIBC Bank Rate plus two and one half percent (2.5%) per
                  annum. In the event of any change in said CIBC Bank Rate, the
                  rate hereunder for said CIBC Bank Rate shall change, as of the
                  date of such change, so as to remain 2.5% above the CIBC Bank
                  Rate.

         (b)      The rate hereunder shall be calculated based on a 365 day
                  year. The Agent shall be entitled to charge the Revolving Loan
                  Account at the rate provided for herein when due until all
                  Obligations have been paid in full.

(3)      In consideration of the Letter of Credit Guarantee of the Agent, the
         Company shall pay the Agent the Letter of Credit Guarantee Fee which
         shall be an amount equal to (a) three and one half percent (3.5%) on
         the face amount of each documentary Letter of Credit payable upon
         issuance thereof and (b) three and one half percent (3.5%) per annum,
         payable monthly, on the face amount of each standby Letter of Credit
         less the amount of any and all amounts previously drawn under such
         standby Letter of Credit.

(4)      Any and all charges, fees, commissions, costs and expenses charged to
         the Agent for the Company's account by any Issuing Bank in connection
         with, or arising out of, Letters of Credit or out of transactions
         relating thereto will be charged to the Revolving Loan Account in full
         when charged to, or paid by the Agent, or as may be due upon any
         termination of this Financing Agreement hereof, and when made by any
         such Issuing Bank shall be conclusive on the Agent.

(5)      The Company shall reimburse or pay the Agent, as the case may be, for:
         (a) all Out-of-Pocket Expenses, (b) any Documentation Fee and (c) any
         Field/Verification Fee.

<PAGE>   65
                                      -63-

(6)      Upon the last Business Day of each month, commencing on July 31, 2001,
         the Company shall pay to the Agent the Line of Credit Fee. Interest
         will be computed at the rate, and in the manner, set forth in Section
         8(1) and Section 8(14) of this Financing Agreement.

(7)      To induce the Agent to enter into this Financing Agreement and to
         extend to the Company the Revolving Loan, Letters of Credit Guaranties
         and the Term Loan, the Company shall pay to the Agent a Loan Facility
         Fee in the amount of $1,125,500 payable upon execution of this
         Financing Agreement.

(8)      On the Closing Date and each anniversary of the Closing Date
         thereafter, the Company shall pay to the Agent the annual
         Administrative Management Fee in the amount of $200,000, which shall be
         deemed fully earned when paid.

(9)      The Company shall pay the Agent's standard charges and fees for the
         Agent's personnel used by the Agent for reviewing the books and records
         of the Company and for verifying, testing, protecting, safeguarding,
         preserving or disposing of all or any part of the Collateral (which
         fees shall be in addition to the Administrative Management Fee and any
         Out-of-Pocket Expenses).

(10)     The Company hereby authorizes the Agent to charge the Revolving Loan
         Account with the amount of all payments due hereunder as such payments
         become due. The Company confirms that any charges which the Agent may
         so make to the Revolving Loan Account as herein provided will be made
         as an accommodation to the Company and solely at the Agent's
         discretion.

(11)     In the event that the Agent or any Lender or any participant hereunder
         (or any financial institution which may from time to time become a
         participant or lender hereunder) shall have determined in the exercise
         of its reasonable business judgement that, subsequent to the Closing
         Date, any change in applicable law, rule, regulation or guideline
         regarding capital adequacy, or any change in the interpretation or
         administration thereof, or compliance by the Agent or such Lender or
         such participant with any new request or directive regarding capital
         adequacy (whether or not having the force of law) of any such
         authority, central bank or comparable agency, has or would have the
         effect of reducing the rate of return on the Agent's or such Lender's
         or such participant's capital as a consequence of its obligations
         hereunder to a level below that which the Agent or such Lender or such
         participant could have achieved but for such adoption, change or
         compliance (taking into consideration the Agent or such Lender's or
         such participant's policies with respect to capital adequacy) by an
         amount reasonably deemed by the Agent or such Lender or such
         participant to be material, then, from time to time, the Company shall
         pay no later than five (5) days following demand to the Agent or such
         Lender or such participant such additional amount or amounts as will

<PAGE>   66
                                      -64-

         compensate the Agent's or such Lender's or such participant's for such
         reduction. In determining such amount or amounts, the Agent or such
         Lender or such participant may use any reasonable averaging or
         attribution methods. The protection of this Section 8(11) shall be
         available to the Agent or such Lender or such participant regardless of
         any possible contention of invalidity or inapplicability with respect
         to the applicable law, regulation or condition. A certificate of the
         Agent or such Lender or such participant setting forth such amount or
         amounts as shall be necessary to compensate the Agent or such Lender or
         such participant with respect to this Section 8 and the calculation
         thereof when delivered to the Company shall be conclusive on the
         Company absent manifest error. Notwithstanding anything in this
         paragraph to the contrary, in the event the Agent or such Lender or
         such participant has exercised its rights pursuant to this paragraph,
         and subsequent thereto determines that the additional amounts paid by
         the Company in whole or in part exceed the amount which the Agent or
         such Lender or such participant actually required to be made whole, the
         excess, if any, shall be returned to the Company by the Agent or such
         Lender or such participant.

(12)     In the event that any applicable law, treaty or governmental
         regulation, or any change therein or in the interpretation or
         application thereof, or compliance by the Agent or such Lender or such
         participant with any request or directive (whether or not having the
         force of law) from any central bank or other financial, monetary or
         other authority, shall:

         (a)      subject the Agent or such Lender or such participant to any
                  tax of any kind whatsoever with respect to this Financing
                  Agreement or change the basis of taxation of payments to the
                  Agent or such Lender or such participant of principal, fees,
                  interest or any other amount payable hereunder or under any
                  other documents (except for changes in the rate of tax on the
                  overall net income of the Agent or such Lender or such
                  participant by the federal government or the jurisdiction in
                  which it maintains its principal office);

         (b)      impose, modify or hold applicable any reserve, special
                  deposit, assessment or similar requirement against assets held
                  by, or deposits in or for the account of, advances or loans
                  by, or other credit extended by the Agent or such Lender or
                  such participant by reason of or in respect to this Financing
                  Agreement and the Loan Documents; or

         (c)      impose on the Agent or such Lender or such participant any
                  other condition with respect to this Financing Agreement or
                  any other Loan Document, and the result of any of the
                  foregoing is to increase the cost to the Agent or such Lender
                  or such participant of making, renewing

<PAGE>   67
                                      -65-

                  or maintaining its loans hereunder by an amount that the Agent
                  or such Lender or such participant deems to be material in the
                  exercise of its reasonable business judgement or to reduce the
                  amount of any payment (whether of principal, interest or
                  otherwise) in respect of any of the loans by an amount that
                  the Agent or such Lender or such participant deems to be
                  material in the exercise of its reasonable business judgement,
                  then, in any case the Company shall pay the Agent or such
                  Lender or such participant, within five (5) days following its
                  demand, such additional cost or such reduction, as the case
                  may be. The Agent or such Lender or such participant shall
                  certify the amount of such additional cost or reduced amount
                  to the Company and the calculation thereof and such
                  certification shall be conclusive upon the Company absent
                  manifest error. Notwithstanding anything in this paragraph to
                  the contrary, in the event the Agent or such Lender or such
                  participant has exercised its rights pursuant to this
                  paragraph, and subsequent thereto determine that the
                  additional amounts paid by the Company in whole or in part
                  exceed the amount which the Agent or such Lender or such
                  participant actually required pursuant hereto, the excess, if
                  any, shall be returned to the Company by the Agent or such
                  Lender or such participant.

(13)     The Company may request LIBOR Loans on the following terms and
         conditions:

         (a)      The Company may elect, subsequent to the Closing Date and from
                  time to time thereafter in connection with the Revolving Loans
                  (i) to request any Revolving Loan made hereunder to be a LIBOR
                  Loan as of the date of such loan or (ii) to convert CIBC Base
                  Rate Loans to LIBOR Loans, and may elect from time to time to
                  convert LIBOR Loans to CIBC Base Rate Loans by giving the
                  Agent at least three (3) Business Days' prior irrevocable
                  notice of such election, provided that any such conversion of
                  LIBOR Loans to CIBC Base Rate Loans shall only be made,
                  subject to the second following sentence, on the last day of
                  an Interest Period with respect thereto. Should the Company
                  elect to convert CIBC Base Rate Loans which are Revolving
                  Loans to LIBOR Loans, it shall give the Agent at least three
                  (3) Business Days' prior irrevocable notice of such election.
                  If the last day of an Interest Period with respect to a loan
                  that is to be converted is not a Business Day or Working Day,
                  then such conversion shall be made on the next succeeding
                  Business Day or Working Day, as the case may be, and during
                  the period from such last day of an Interest Period to such
                  succeeding Business Day, as the case may be, such loan shall
                  bear interest as if it were an CIBC Base Rate Loan. All or any
                  part of

<PAGE>   68
                                      -66-

                  outstanding CIBC Base Rate Loans then outstanding with respect
                  to Revolving Loans may be converted to LIBOR Loans as provided
                  herein, provided that partial conversions shall be in
                  multiples of $100,000 and in an aggregate principal amount of
                  $1,000,000 or more. The aggregate amount of all such LIBOR
                  Loans shall not exceed $12,500,000 at any one time
                  outstanding.

         (b)      Any LIBOR Loans may be continued as such upon the expiration
                  of an Interest Period, provided the Company so notifies the
                  Agent, at least three (3) Business Days' prior to the
                  expiration of said Interest Period, and provided further that
                  no LIBOR Loan may be continued as such upon the occurrence of
                  any Default or Event of Default under this Financing
                  Agreement, but shall be automatically converted to a CIBC Base
                  Rate Loan on the last day of the Interest Period during which
                  occurred such Default or Event of Default. Absent such
                  notification, LIBOR Rate Loans shall convert to CIBC Base Rate
                  Loans on the last day of the applicable Interest Period. Each
                  notice of election, conversion or continuation furnished by
                  the Company pursuant hereto shall specify whether such
                  election, conversion or continuation is for a one, two, or
                  three month period. Notwithstanding anything to the contrary
                  contained herein, the Agent (or any participant, if
                  applicable) shall not be required to purchase United States
                  Dollar deposits in the London interbank market or from any
                  other applicable LIBOR Rate market or source or otherwise
                  "MATCH FUND" to fund LIBOR Rate Loans, but any and all
                  provisions hereof relating to LIBOR Rate Loans shall be deemed
                  to apply as if the Agent (and any participant, if applicable)
                  had purchased such deposits to fund any LIBOR Rate Loans.

         (c)      The Company may request a LIBOR Loan which is a Revolving
                  Loan, convert any CIBC Base Rate Loan to a LIBOR Loan or
                  continue any LIBOR Loan to a LIBOR Loan provided there is then
                  no Default or Event of Default in effect.

(14)

         (a)      The LIBOR Loans shall bear interest for each Interest Period
                  with respect thereto on the unpaid principal amount thereof at
                  a rate per annum equal to the LIBOR determined for each
                  Interest Period in accordance with the terms hereof plus 3.5%.

         (b)      If all or a portion of the outstanding principal amount of the
                  Obligations shall not be paid when due (whether at the stated
                  maturity, by acceleration or otherwise), such outstanding
                  amount, to

<PAGE>   69
                                      -67-

                  the extent it is a LIBOR Loan, shall be converted to a CIBC
                  Base Rate Loan at the end of the Interest Period therefor.

         (c)      The Company may not have more than three (3) LIBOR Loans
                  outstanding at any given time.

(15)

         (a)      Interest in respect of the LIBOR Loans shall be calculated on
                  the basis of a 365 day year and shall be payable as of the end
                  of each month on the first day of the next month.

         (b)      The Agent shall, at the request of the Company, deliver to the
                  Company a statement showing the quotations given by CIBC and
                  the computations used in determining any interest rate
                  pursuant to Section 8(14) hereof.

(16)     As further set forth in Section 8(12) above, in the event that the
         Agent (or any financial institution which may become a participant
         hereunder) shall have determined in the exercise of its reasonable
         business judgement (which determination shall be conclusive and binding
         upon the Company) that by reason of circumstances affecting the
         interbank LIBOR market, adequate and reasonable means do not exist for
         ascertaining LIBOR applicable for any Interest Period with respect to:
         (a) a proposed loan that the Company has requested be made as a LIBOR
         Loan; (b) a LIBOR Loan that will result from the requested conversion
         of a CIBC Base Rate Loan into a LIBOR Loan; or (c) the continuation of
         LIBOR Loans beyond the expiration of the then current Interest Period
         with respect thereto, the Agent shall forthwith give written notice of
         such determination to the Company at least one day prior to, as the
         case may be, the requested borrowing date for such LIBOR Loan, the
         conversion date of such CIBC Base Rate Loan or the last day of such
         Interest Period. If such notice is given (i) any requested LIBOR Loan
         shall be made as a CIBC Base Rate Loan, (ii) any CIBC Base Rate Loan
         that was to have been converted to a LIBOR Loan shall be continued as a
         CIBC Base Rate Loan, and (iii) any outstanding LIBOR Loan shall be
         converted, on the last day of then current Interest Period with respect
         thereto, to a CIBC Base Rate Loan. In such case, until such notice has
         been withdrawn by the Agent, no further LIBOR Loan shall be made nor
         shall the Company have the right to convert a CIBC Base Rate Loan to a
         LIBOR Loan.

(17)     If any payment on a LIBOR Loan becomes due and payable on a day other
         than a Business Day or Working Day, the maturity thereof shall be
         extended to the next succeeding Business Day or Working Day unless the
         result of such extension would be to extend such payment into another
         calendar month in

<PAGE>   70
                                      -68-

         which event such payment shall be made on the immediately preceding
         Business Day or Working Day.

(18)     Notwithstanding any other provisions herein, if any law, regulation,
         treaty or directive or any change therein or in the interpretation or
         application thereof, shall make it unlawful for the Agent to make or
         maintain LIBOR Loans as contemplated herein, the then outstanding LIBOR
         Loans, if any, shall be converted automatically to CIBC Base Rate Loans
         as of the end of such month, or within such earlier period as required
         by law. The Company hereby agrees promptly to pay the Agent, upon
         demand, any additional amounts necessary to compensate the Agent for
         any costs incurred by the Agent in making any conversion in accordance
         with this Section 8 including, but not limited to, any interest or fees
         payable by the Agent to lenders of funds obtained by the Agent in order
         to make or maintain LIBOR Loans hereunder.

(19)     The Company agrees to indemnify and to hold the Agent (including any
         participant) harmless from any loss or expense which the Agent or such
         participant may sustain or incur as a consequence of: (a) Default by
         the Company in payment of the principal amount of or interest on any
         LIBOR Loans, as and when the same shall be due and payable in
         accordance with the terms of this Financing Agreement, including, but
         not limited to, any such loss or expense arising from interest or fees
         payable by the Agent or such participant to lenders of funds obtained
         by either of them in order to maintain the LIBOR Loans hereunder; (b)
         default by the Company in making a borrowing or conversion after the
         Company has given a notice in accordance with Section 8(13) hereof; (c)
         any prepayment of LIBOR Loans on a day which is not the last day of the
         Interest Period applicable thereto, including, without limitation,
         prepayments arising as a result of the application of the proceeds of
         Collateral to the Revolving Loans; and (d) default by the Company in
         making any prepayment after the Company had given notice to the Agent
         thereof. The determination by the Agent of the amount of any such loss
         or expense, when set forth in a written notice to the Company,
         containing the Agent's calculations thereof in reasonable detail, shall
         be conclusive on the Company in the absence of manifest error.
         Calculation of all amounts payable under this paragraph with regard to
         LIBOR Loans shall be made as though the Agent had actually funded the
         LIBOR Loans through the purchase of deposits in the relevant market and
         currency, as the case may be, bearing interest at the rate applicable
         to such LIBOR Loans in an amount equal to the amount of the LIBOR Loans
         and having a maturity comparable to the relevant interest period;
         provided, however, that the Agent may fund each of the LIBOR Loans in
         any manner the Agent sees fit and the foregoing assumption shall be
         used only for calculation of amounts payable under this

<PAGE>   71
                                      -69-

         paragraph. In addition, notwithstanding anything to the contrary
         contained herein, the Agent shall apply all proceeds of Collateral and
         all other amounts received by it from or on behalf of the Company (i)
         initially to the CIBC Base Rate Loans and (ii) subsequently to LIBOR
         Loans; provided, however, (x) upon the occurrence of an Event of
         Default or (y) in the event the aggregate amount of outstanding LIBOR
         Rate Loans exceeds Availability or the applicable maximum levels set
         forth therefor, the Agent may apply all such amounts received by it to
         the payment of Obligations in such manner and in such order as the
         Agent may elect in its reasonable business judgment. In the event that
         any such amounts are applied to Revolving Loans which are LIBOR Loans,
         such application shall be treated as a prepayment of such loans and the
         Agent shall be entitled to indemnification hereunder. This covenant
         shall survive termination of this Financing Agreement and payment of
         the outstanding Obligations.

(20)     Notwithstanding anything to the contrary in this Agreement, in the
         event that, by reason of any Regulatory Change (for purposes hereof
         "REGULATORY CHANGE" shall mean, with respect to the Agent, any change
         after the date of this Financing Agreement in federal, state,
         provincial or foreign law or regulations or the adoption or making
         after such date of any interpretation, directive or request applying to
         a class of banks including the Agent of or under any federal, state,
         provincial or foreign law or regulations (whether or not having the
         force of law and whether or not failure to comply therewith would be
         unlawful)), the Agent either (a) incurs any material additional costs
         based on or measured by the excess above a specified level of the
         amount of a category of deposits or other liabilities of such bank
         which includes deposits by reference to which the interest rate on
         LIBOR Loans is determined as provided in this Financing Agreement or a
         category of extensions of credit or other assets of the Agent which
         includes LIBOR Loans, or (b) becomes subject to any material
         restrictions on the amount of such a category of liabilities or assets
         which it may hold, then, if the Agent so elects by notice to the
         Company, the obligation of the Agent to make or continue, or to convert
         CIBC Base Rate Loans into LIBOR Loans hereunder shall be suspended
         until such Regulatory Change ceases to be in effect.

(21)     For purposes of this Financing Agreement and Section 8 hereof, any
         reference to the Agent shall include any financial institution which
         may become a participant or co-lender subsequent to the Closing Date.

SECTION 9     POWERS

(1)      The Company hereby constitutes the Agent, or any Person or agent the
         Agent may designate, as its attorney, at the Company's cost and
         expense, to exercise

<PAGE>   72
                                      -70-

         all of the following powers, which being coupled with an interest,
         shall be irrevocable until all Obligations to the Agent have been paid
         in full:

         (a)      To receive, take, endorse, sign, assign and deliver, all in
                  the name of the Agent or the Company, any and all checks,
                  notes, drafts, and other documents or instruments relating to
                  the Collateral;

         (b)      To receive, open and dispose of all mail addressed to the
                  Company and to notify postal authorities to change the address
                  for delivery thereof to such address as the Agent may
                  designate;

         (c)      To request from customers indebted on Accounts at any time, in
                  the name of the Agent information concerning the amounts owing
                  on the Accounts;

         (d)      To request from customers indebted on Accounts at any time, in
                  the name of the Company, in the name of a chartered accountant
                  designated by the Agent or in the name of the Agent's
                  designee, information concerning the amounts owing on the
                  Accounts;

         (e)      To transmit to customers indebted on Accounts notice of the
                  Agent's interest therein and to notify customers indebted on
                  Accounts to make payment directly to the Agent for the
                  Company's account; and

         (f)      To take or bring, in the name of the Agent or the Company, all
                  steps, actions, suits or proceedings deemed by the Agent
                  necessary or desirable to enforce or effect collection of the
                  Accounts.

(2)      Notwithstanding anything hereinabove contained to the contrary, the
         powers set forth in (b), (c), (e) and (f) above may only be exercised
         after the occurrence of an Event of Default and until such time as such
         Event of Default is cured or waived in writing by the Agent; provided
         that the powers set forth in subsection (b) may only be exercised if
         the Agent has commenced to exercise its rights and remedies under its
         Collateral.

SECTION 10     EVENTS OF DEFAULT AND REMEDIES

(1)      Notwithstanding anything hereinabove to the contrary, the Agent may
         terminate this Financing Agreement immediately upon the occurrence of
         any of the following Events of Default:

         (a)      cessation of the business of the Company or the calling of a
                  meeting of the creditors of the Company for purposes of
                  compromising the debts and obligations of the Company;

<PAGE>   73
                                      -71-

         (b)      and of the Company, the Parent or any of the Parent's
                  subsidiaries fails to pay the principal of, or premium or
                  interest on, any of its Debt (excluding Debt under this
                  Financing Agreement) which is outstanding in an aggregate
                  principal amount exceeding $2,000,000 in the case of the
                  Company and U.S.$5,000,000 in the case of the Parent or any of
                  its subsidiaries (or the equivalent amount in any other
                  currency) when such amount becomes due and payable (whether by
                  scheduled maturity, required prepayment, acceleration, demand
                  or otherwise) and such failure continues after the applicable
                  grace period, if any, specified in the agreement or instrument
                  relating to the Debt or any other event occurs or condition
                  exists and continues after the applicable grace period, if
                  any, specified in any agreement or instrument relating to any
                  such Debt, if its effect is to accelerate, or permit the
                  acceleration of the Debt; or any such Debt shall be declared
                  to be due and payable prior to its stated maturity; provided,
                  however, that this Event of Default (b) shall not apply with
                  respect to the Parent and any of its subsidiaries in respect
                  of any obligations of the Parent or such subsidiaries incurred
                  prior to the Filing Date (as defined in the Parent Credit
                  Agreement);

         (c)      the commencement by the Company or the Parent of any
                  bankruptcy, insolvency, arrangement, restructuring,
                  reorganization, receivership, liquidation or similar
                  proceedings under any federal, state or provincial law; (ii)
                  the commencement against the Company or the Parent, of any
                  bankruptcy, insolvency, arrangement, restructuring,
                  reorganization, receivership, liquidation or similar
                  proceeding under any federal, state or provincial law by
                  creditors of the Company or the Parent, provided that such
                  Default shall not be deemed an Event of Default if such
                  proceeding is contested within ten (10) days and dismissed and
                  vacated within thirty (30) days of commencement, except in the
                  event that any of the actions sought in any such proceeding
                  shall occur or the Company or the Parent shall take action to
                  authorize or effect any of the actions in any such proceeding;
                  or (iii) the commencement (x) by the Company's subsidiaries
                  (other than Sterling Australia), or any one of them, of any
                  bankruptcy, insolvency, arrangement, restructuring,
                  reorganization, receivership, liquidation or similar
                  proceeding under any applicable state law, or (y) against the
                  Company's subsidiaries, or any one of them, of any involuntary
                  bankruptcy, insolvency, arrangement, restructuring,
                  reorganization, receivership, liquidation or similar
                  proceeding under applicable law, provided that such Default
                  shall not be deemed an Event of Default if such proceeding is
                  contested within ten (10) days and dismissed or vacated within
                  thirty (30) days of commencement, except in the event

<PAGE>   74
                                      -72-

                  that any of the actions sought in any such proceeding shall
                  occur or the Company's subsidiaries, or any one of them, shall
                  take action to authorize or effect any of the actions in any
                  such proceeding; provided, however, that this Event of Default
                  (c) shall only apply to the Parent in respect of matters
                  arising after entry of an order closing the Chapter 11
                  Proceedings;

         (d)      any representation or warranty of the Company, the Parent,
                  Sterling NRO, Ltd. or any other Person contained herein or in
                  any other Loan Document shall prove to be incorrect in any
                  material respect when made or deemed to be made;

         (e)      breach by the Company, the Parent, Sterling NRO, Ltd. or any
                  other Person party to a Loan Document of a covenant contained
                  herein or in any other Loan Document provided that such
                  Default by the Company, the Parent, Sterling NRO, Ltd. or any
                  other Person party to a Loan Document, as the case may be, of
                  any of such covenants (other than those contained in Section
                  7(12) and Section 7(13)) shall not be deemed to be an Event of
                  Default unless and until such Default shall remain unremedied
                  to the Agent's reasonable satisfaction for a period of ten
                  (10) days from the date of such breach;

         (f)      without limiting the generality of any other provision of this
                  Section 10, the breach by the Company or Sterling NRO, Ltd of
                  the subordination agreement entered into among the Agent,
                  Sterling NRO, Ltd. and the Company;

         (g)      failure of the Company to make any required payment of
                  principal on the Term Loan or on the Revolving Loans when due
                  and failure of the Company to pay interest, any fee or other
                  amount owing hereunder or under any Loan Document within three
                  (3) Business Days of the due date thereof, provided that
                  nothing contained herein shall prohibit the Agent from
                  charging such amounts to the Revolving Loan Account on the due
                  date thereof;

         (h)      there is a Change of Control;

         (i)      the Company fails to perform or observe any term, covenant or
                  agreement contained in any Material Agreement to which it is a
                  party on its part to be performed or observed where such
                  failure could reasonably be expected to have a Material
                  Adverse Effect; or any Material Agreement is terminated or
                  revoked or permitted to lapse (other than in accordance with
                  its terms and not as a result of default); or any party to any
                  Material Agreement delivers a notice of

<PAGE>   75
                                      -73-

                  termination or revocation (other than in accordance with its
                  terms and not as a result of default) in respect of the
                  Material Agreement;

         (j)      any judgment or order for the payment of money in excess of
                  $2,000,000 (net of insurance) (or the equivalent amount in any
                  other currency) is rendered against the Company and either (i)
                  enforcement proceedings have been commenced by a creditor upon
                  the judgment or order, or (ii) there is any period of fifteen
                  consecutive days during which a stay of enforcement of the
                  judgment or order, by reason of a pending appeal or otherwise,
                  is not in effect;

         (k)      the Company incurs any Environmental Liabilities which will
                  require expenditures, (i) for any one occurrence, in excess of
                  $2,000,000, or (ii) aggregating in any Fiscal Year on a
                  consolidated basis, $5,000,000.

         (l)      there has occurred, in the reasonable opinion of the Agent, an
                  event or development reasonably likely to have a Material
                  Adverse Effect;

         (m)      the audited consolidated financial statements of the Company
                  are qualified in any material and adverse respect by the
                  Company's independent auditor;

         (n)      a landlord consent and agreement in form and content
                  acceptable to the Agent and its counsel in respect of the
                  Thunder Bay property listed in Schedule 3 has not been
                  obtained and delivered to the Agent by August 17, 2001;

         (o)      an Event of Default (as therein defined) shall occur under the
                  Parent Credit Agreement;

         (p)      The Final Order in a form and content satisfactory to the
                  Agent, and its counsel is not issued within (30) days
                  following the granting of the Interim Order; or

         (q)      An order in form and content satisfactory to the Agent, the
                  Lenders and their counsel approving the assumption of the
                  "Inter-Sterling" Material Agreements listed in Schedule 9
                  hereto by the applicable entities is not entered by the
                  Bankruptcy Court within 45 days of the Filing Date (as defined
                  in the Parent Credit Agreement).

(2)      Upon the occurrence of a Default and/or an Event of Default, the Agent
         in its sole discretion may, or upon the written direction of the
         Required Lenders the Agent shall, declare that, all loans, advances and
         extensions of credit provided for in this Financing Agreement shall be
         thereafter in the Agent's or the Required Lenders' sole discretion, and
         the obligation of the Agent and/or

<PAGE>   76
                                      -74-

         the Lenders to make Revolving Loans, open Letters of Credit and provide
         Letters of Credit Guarantees, shall cease unless such Default or Event
         of Default is waived in writing by the Required Lenders or cured to the
         Agent's or the Required Lenders' satisfaction in the exercise of the
         Agent's and the Lenders' reasonable judgement. Upon the occurrence of
         an Event of Default, the Agent in its sole discretion may, or upon the
         written direction of the Required Lenders the Agent shall, declare
         that: (a) all Obligations shall become immediately due and payable; (b)
         the Agent may charge the Company the Default Rate of Interest on all
         then outstanding or thereafter incurred Obligations in lieu of the
         interest provided for in Section 8 of this Financing Agreement,
         provided that, with respect to this clause "(B)" the Agent has given
         the Company written notice of the Event of Default, provided further
         however, that no notice is required if the Event of Default is the
         Event listed in Section 10(1)(c); and (c) the Agent may immediately
         terminate this Financing Agreement upon notice to the Company;
         provided, however, that upon the occurrence of an Event of Default
         listed in Section 10(1)(c), this Financing Agreement shall
         automatically terminate and all Obligations shall become due and
         payable, and all obligations of the Agent or any Lender to make
         Revolving Loans or provide or arrange for Letters of Credit or Letter
         of Credit Guarantees shall immediately cease, in each case, without any
         action, declaration, notice or demand by the Agent. The exercise of any
         option is not exclusive of any other option, which may be exercised at
         any time by the Agent.

(3)      Immediately upon the occurrence of any Event of Default, the Agent may,
         to the extent permitted by law: (a) remove from any premises where same
         may be located any and all books and records, computers, electronic
         media and software programs associated with any Collateral (including
         any electronic records, contracts and signatures pertaining thereto),
         documents, instruments, files and records, and any receptacles or
         cabinets containing same, relating to the Accounts, or the Agent may
         use, at the Company's expense, such of the Company's personnel,
         supplies or space at the Company's places of business or otherwise, as
         may be necessary to properly administer and control the Accounts or the
         handling of collections and realizations thereon; (b) bring suit, in
         the name of the Company or the Agent, and generally shall have all
         other rights respecting said Accounts, including without limitation the
         right to: accelerate or extend the time of payment, settle, compromise,
         release in whole or in part any amounts owing on any Accounts and issue
         credits in the name of the Company or the Agent; (c) to the extent
         permitted by law, sell, assign and deliver the Collateral and any
         returned, reclaimed or repossessed Inventory, with or without
         advertisement, at public or private sale, for cash, on credit or
         otherwise, at the Agent's sole option and discretion, and the Agent may
         bid or become a purchaser at any

<PAGE>   77
                                      -75-

         such sale, free from any right of redemption, which right is hereby
         expressly waived by the Company; (d) foreclose the security interests
         in the Collateral created herein or by the Loan Documents by any
         available judicial procedure, or to take possession of any or all of
         the Collateral, including any Inventory, Equipment and/or Other
         Collateral without judicial process, and to enter any premises where
         any Inventory and Equipment and/or Other Collateral may be located for
         the purpose of taking possession of or removing the same; and (e)
         exercise any other rights and remedies provided in law, in equity, by
         contract or otherwise. The Agent shall have the right, without notice
         or advertisement, to sell, lease, or otherwise dispose of all or any
         part of the Collateral, whether in its then condition or after further
         preparation or processing, in the name of the Company or the Agent, or
         in the name of such other party as the Agent may designate, either at
         public or private sale or at any broker's board, in lots or in bulk,
         for cash or for credit, with or without warranties or representations,
         and upon such other terms and conditions as the Agent in its sole
         discretion may deem advisable, and the Agent shall have the right to
         purchase at any such sale. If any Inventory and Equipment shall require
         rebuilding, repairing, maintenance or preparation, the Agent shall have
         the right, at its option, to do such of the aforesaid as is necessary,
         for the purpose of putting the Inventory and Equipment in such saleable
         form as the Agent shall deem appropriate and any such costs shall be
         deemed an Obligation hereunder. The Company agrees, at the request of
         the Agent, to assemble the Inventory and Equipment and to make it
         available to the Agent at premises of the Company or elsewhere
         reasonably requested by the Agent and to make available to the Agent
         the premises and facilities of the Company for the purpose of the
         Agent's taking possession of, removing or putting the Inventory and
         Equipment in saleable form. If notice of intended disposition of any
         Collateral is required by law, it is agreed that fifteen (15) days
         notice shall constitute reasonable notification and full compliance
         with the law. The net cash proceeds resulting from the Agent's exercise
         of any of the foregoing rights, (after deducting all charges, costs and
         expenses, including reasonable legal fees) shall be applied by the
         Agent to the payment of the Obligations, whether due or to become due,
         in such order as the Agent may elect, and the Company shall remain
         liable to the Agent for any deficiencies, and the Agent in turn agrees
         to remit to the Company or its successors or assigns, any surplus
         resulting therefrom. The enumeration of the foregoing rights is not
         intended to be exhaustive and the exercise of any right shall not
         preclude the exercise of any other rights, all of which shall be
         cumulative. The Company hereby indemnifies the Agent and holds the
         Agent harmless from any and all costs, expenses, claims, liabilities,
         Out-of-Pocket Expenses or otherwise, incurred or imposed on the Agent
         by reason of the exercise of any of its rights, remedies and interests
         hereunder, including, without limitation, from any sale or transfer of
         Collateral, preserving,

<PAGE>   78
                                      -76-

         maintaining or securing the Collateral, defending its interests in
         Collateral (including pursuant to any claims brought by the Company,
         the Company as debtor-in-possession, any secured or unsecured creditors
         of the Company, any trustee or receiver in bankruptcy, or otherwise),
         and the Company hereby agrees to so indemnify and hold the Agent
         harmless, absent the Agent's gross negligence or willful misconduct as
         finally determined by a court of competent jurisdiction. The foregoing
         indemnification shall survive termination of this Financing Agreement
         until such time as all Obligations (including the foregoing) have been
         finally and indefeasibly paid in full. In furtherance thereof the
         Agent, may establish such reserves for Obligations hereunder (including
         any contingent Obligations) as it may deem advisable in its reasonable
         business judgement. Any applicable debenture(s), debenture pledge
         agreement(s), hypothec(s) or assignment(s) issued to the Agent on the
         Real Estate shall govern the rights and remedies of the Agent thereto.

SECTION 11     TERMINATION

         Except as otherwise permitted herein, the Agent may terminate this
Financing Agreement only as of the initial or any subsequent Anniversary Date
and then only by giving the Company at least sixty (60) days written notice of
termination prior to such Anniversary Date. Notwithstanding the foregoing the
Agent may terminate the Financing Agreement immediately upon the occurrence of
an Event of Default, provided, however, that if the Event of Default is an event
listed in Section 10(1)(c) of this Financing Agreement, this Financing Agreement
shall terminate in accordance with Section 10(2). This Financing Agreement,
unless terminated as herein provided, shall automatically continue from
Anniversary Date to Anniversary Date. The Company may terminate this Financing
Agreement at any time upon sixty (60) days' prior written notice to the Agent,
provided that the Company pays to the Agent immediately on demand an Early
Termination Fee. All Obligations shall become due and payable as of any
termination hereunder or under Section 10 hereof and, pending a final
accounting, the Agent may withhold any balances in the Company's account (unless
supplied with an indemnity satisfactory to the Agent) to cover all of the
Obligations, whether absolute or contingent, including, but not limited to, cash
reserves for any contingent Obligations, including an amount of 110% of the face
amount of any outstanding Letters of Credit with an expiry date on, or within
thirty (30) days of the effective date of termination of this Financing
Agreement. All of the Agent's rights, liens and security interests shall
continue after any termination until all Obligations have been paid and
satisfied in full.

SECTION 12     MISCELLANEOUS

(1)      The Company hereby waives diligence, notice of intent to accelerate,
         notice of acceleration, demand, presentment and protest and any notices
         thereof as

<PAGE>   79
                                      -77-

         well as notice of nonpayment. No delay or omission of the Agent or the
         Company to exercise any right or remedy hereunder, whether before or
         after the happening of any Event of Default, shall impair any such
         right or shall operate as a waiver thereof or as a waiver of any such
         Event of Default. No single or partial exercise by the Agent of any
         right or remedy precludes any other or further exercise thereof, or
         precludes any other right or remedy.

(2)      This Financing Agreement and the Loan Documents (including all
         confidentiality agreements previously executed by the Agent and the
         Company and by each Lender and the Company) executed and delivered in
         connection therewith constitute the entire agreement amongst the
         Company, the Agent and the Lenders; supersede any prior agreements; can
         be changed only by a writing signed by the Company, the Agent and the
         Lenders; and shall bind and benefit the Company, the Agent and the
         Lenders and their respective successors and assigns.

(3)      In no event shall the Company, upon demand by the Agent for payment of
         any Debt relating hereto, by acceleration of the maturity thereof, or
         otherwise, be obligated to pay interest and fees in excess of the
         amount permitted by law. Regardless of any provision herein or in any
         agreement made in connection herewith, the Agent shall never be
         entitled to receive, charge or apply, as interest on any Debt relating
         hereto, any amount in excess of the maximum amount of interest
         permissible under applicable law. If the Agent ever receives, collects
         or applies any such excess, it shall be deemed a partial repayment of
         principal and treated as such; and if principal is paid in full, any
         remaining excess shall be refunded to the Company. This paragraph shall
         control every other provision hereof, the Loan Documents and of any
         other agreement made in connection herewith.

(4)      If any provision hereof or of any other agreement made in connection
         herewith is held to be illegal or unenforceable, such provision shall
         be fully severable, and the remaining provisions of the applicable
         agreement shall remain in full force and effect and shall not be
         affected by such provision's severance. Furthermore, in lieu of any
         such provision, there shall be added automatically as a part of the
         applicable agreement a legal and enforceable provision as similar in
         terms to the severed provision as may be possible as agreed to between
         the parties to reflect the original intent of the parties.

(5)      No failure on the part of the Agent to exercise, and no delay in
         exercising, any right under any of the Loan Documents shall operate as
         a waiver of such right; nor shall any single or partial exercise of any
         right under any of the Loan Documents preclude any other or further
         exercise of such right or the exercise of any other right.

<PAGE>   80
                                      -78-

(6)      Except as otherwise expressly provided in this Agreement, the
         covenants, representations and warranties shall not merge on and shall
         survive the initial loans made and, notwithstanding such initial loans
         made or any investigation made by or on behalf of any party, shall
         continue in full force and effect. The closing of this transaction
         shall not prejudice any right of one party against any other party in
         respect of anything done or omitted under this Financing Agreement or
         in respect of any right to damages or other remedies.

(7)      The Debt of the Company resulting from loans made under this Financing
         Agreement shall be evidenced by the records of the Agent which shall
         constitute prima facie evidence of such Debt, absent manifest error.

(8)      Any notice, direction or other communication to be given under this
         Financing Agreement shall, except as otherwise permitted, be in writing
         and given by delivering it or sending it by facsimile or other similar
         form of recorded communication addressed:

                  (a)      to the Company at:

                           302 The East Mall
                           Suite 200
                           Toronto, Ontario
                           M9B 6C7

                           Attention:  General Counsel

                           Telephone:  (416) 239-7111

                           Facsimile:  (416) 239-8091

                  (b)      to the Agent at:

                           207 Queen's Quay West
                           Suite 700
                           Toronto, Ontario
                           M5J 1A7

                           Attention:  President

                           Telephone:  (416) 507-5216

                           Facsimile:  (416) 507-5100

<PAGE>   81
                                      -79-

         Any such communication shall be deemed to have been validly and
         effectively given if (i) personally delivered, on the date of such
         delivery if such date is a Business Day and such delivery was made
         prior to 4:00 p.m. (Toronto time), otherwise on the next Business Day,
         (ii) transmitted by facsimile or similar means of recorded
         communication on the Business Day following the date of transmission.
         Any party may change its address for service from time to time by
         notice given in accordance with the foregoing and any subsequent notice
         shall be sent to the party at its changed address.

(9)      This Financing Agreement shall become effective when executed by the
         Company and the Agent and after that time shall be binding upon and
         enure to the benefit of the Company and the Agent and their respective
         successors and permitted assigns.

(10)     The Company shall not have the right to assign its rights or
         obligations under this Financing Agreement or any interest in this
         Financing Agreement without the prior consent of the Agent, which
         consent may be arbitrarily withheld.

(11)     Each Lender is authorized at any time and from time to time, upon and
         during the continuance of an Event of Default, to the fullest extent
         permitted by law (including general principles of common-law), to set
         off and apply any and all deposits (general or special, time or demand,
         provisional or final) at any time held and other Debt at any time owing
         by it to or for the credit or the account of the Company against any
         and all of the obligations of the Company under any of the Loan
         Documents, irrespective of whether or not the Lender has made demand
         under any of the Loan Documents and although such obligations may be
         unmatured or contingent. If an obligation is unascertained, the Lender
         may, in good faith, estimate the obligation and exercise its right of
         set-off in respect of the estimate, subject to providing the Company
         with an accounting when the obligation is finally determined. Each
         Lender shall promptly notify the Company after any set-off and
         application is made by it, provided that the failure to give notice
         shall not affect the validity of the set-off and application. The
         rights of the Lenders under this Section 12(11) are in addition to any
         other rights and remedies (including all other rights of set-off) which
         the Lenders may have.

(12)

         (a)      If, for the purposes of obtaining judgment in any court, it is
                  necessary to convert a sum due to the Agent in any currency
                  (the "ORIGINAL CURRENCY") into another currency (the "OTHER
                  CURRENCY"), the parties agree, to the fullest extent that they
                  may effectively do so, that the rate of exchange used shall be
                  that at which, in accordance with normal

<PAGE>   82
                                      -80-

                  banking procedures, the Agent could purchase the Original
                  Currency with the Other Currency on the Business Day preceding
                  the day on which final judgment is given or, if permitted by
                  applicable law, on the day on which the judgment is paid or
                  satisfied.

         (b)      The obligations of the Company in respect of any sum due in
                  the Original Currency from it to the Agent under any of the
                  Loan Documents shall, notwithstanding any judgment in any
                  Other Currency, be discharged only to the extent that on the
                  Business Day following receipt by the Agent of any sum
                  adjudged to be so due in the Other Currency, the Agent may, in
                  accordance with normal banking procedures, purchase the
                  Original Currency with such Other Currency. If the amount of
                  the Original Currency so purchased is less than the sum
                  originally due to the Agent in the Original Currency, the
                  Company agrees, as a separate obligation and notwithstanding
                  the judgment, to indemnify the Agent, against any loss, and,
                  if the amount of the Original Currency so purchased exceeds
                  the sum originally due to the Lender in the Original Currency,
                  the Agent shall remit such excess to the Company.

(13)     This Financing Agreement shall be governed by and interpreted and
         enforced in accordance with the laws of the Province of Ontario and the
         federal laws of Canada applicable therein.

(14)     This Financing Agreement may be executed in any number of counterparts
         and all of such counterparts taken together shall be deemed to
         constitute one and the same instrument.

SECTION 13     AGREEMENT BETWEEN THE LENDERS

(1)

         (a)      The Agent, for the account of the Lenders, shall disburse all
                  loans and advances to the Company and shall handle all
                  collections of Collateral and repayment of Obligations. It is
                  understood that for purposes of advances to the Company and
                  for purposes of this Section 13 the Agent is using the funds
                  of the Agent.

         (b)      Unless the Agent shall have been notified in writing by any
                  Lender prior to any advance to the Company that such Lender
                  will not make the amount which would constitute its share of
                  the borrowing on such date available to the Agent, the Agent
                  may assume that such Lender shall make such amount available
                  to the Agent on a Settlement Date, and the Agent may, in
                  reliance upon such assumption, make available to the Company a
                  corresponding amount. A certificate of the Agent

<PAGE>   83
                                      -81-

                  submitted to any Lender with respect to any amount owing under
                  this subsection shall be conclusive, absent manifest error. If
                  such Lender's share of such borrowing is not in fact made
                  available to the Agent by such Lender on the Settlement Date,
                  the Agent shall be entitled to recover such amount with
                  interest thereon at the rate per annum applicable to Revolving
                  Loans hereunder, on demand, from the Company without prejudice
                  to any rights which the Agent may have against such Lender
                  hereunder. Nothing contained in this subsection shall relieve
                  any Lender which has failed to make available its ratable
                  portion of any borrowing hereunder from its obligation to do
                  so in accordance with the terms hereof. Nothing contained
                  herein shall be deemed to obligate the Agent to make available
                  to the Company the full amount of a requested advance when the
                  Agent has any notice (written or otherwise) that any of the
                  Lenders will not advance its ratable portion thereof.

(2)      On the Settlement Date, the Agent and the Lenders shall each remit to
         the other, in immediately available funds, all amounts necessary so as
         to ensure that, as of the Settlement Date, the Lenders shall have their
         proportionate share of all outstanding Obligations.

(3)      The Agent shall forward to each Lender, at the end of each month, a
         copy of the account statement rendered by the Agent to the Company.

(4)      The Agent shall, after receipt of any interest and fees earned under
         this Financing Agreement, promptly remit to the Lenders: (a) their pro
         rata portion of all fees, provided, however, that the Lenders (other
         than CIT in its role as the Agent) shall (i) not share in the
         Administrative Management Fee or Documentation Fees; and (ii) receive
         their share of the Loan Facility Fee in accordance with their
         respective agreements with the Agent; (b) interest computed at the rate
         and as provided for in Section 8 of this Financing Agreement on all
         outstanding amounts advanced by the Lenders on each Settlement Date,
         prior to adjustment, that are subsequent to the last remittance by the
         Agent to the Lenders of the Company's interest; (c) its pro rata
         portion of all principal repaid on the Term Loan; and (d) interest on
         the Term Loan computed at the rate and as provided for in Section 8 of
         this Financing Agreement.

(5)

         (a)      The Company acknowledge that the Lenders with the prior
                  written consent of the Agent may sell participation in the
                  loans and extensions of credit made and to be made to the
                  Company hereunder. The Company further acknowledge that in
                  doing so, the Lenders may

<PAGE>   84
                                      -82-

                  grant to such participants certain rights which would require
                  the participant's consent to certain waivers, amendments and
                  other actions with respect to the provisions of this Financing
                  Agreement, provided that the consent of any such participant
                  shall not be required except for matters requiring the consent
                  of all Lenders hereunder as set forth in Section 14(10)
                  hereof.

         (b)      The Company authorize each Lender to disclose to any
                  participant or purchasing lender (each, a "TRANSFEREE") and
                  any prospective Transferee any and all financial information
                  in such Lender's possession concerning the Company and their
                  affiliates which has been delivered to such Lender by or on
                  behalf of the Company pursuant to this Agreement or which has
                  been delivered to such Lender by or on behalf of the Company
                  in connection with such Lender's credit evaluation of the
                  Company and their affiliates prior to entering into this
                  Agreement, provided that such Transferee agrees to hold such
                  information in confidence in the ordinary course of its
                  business on the same terms as if such Transferee were an
                  original party to this Agreement.

(6)      The Company hereby agree that each Lender is solely responsible for its
         portion of the Line of Credit and that neither the Agent nor any Lender
         shall be responsible for, nor assume any obligations for the failure of
         any Lender to make available its portion of the Line of Credit.
         Further, should any Lender refuse to make available its portion of the
         Line of Credit, then the other Lender may, but without obligation to do
         so, increase, unilaterally, its portion of the Line of Credit in which
         event the Company are so obligated to that other Lender.

(7)      In the event that the Agent, the Lenders or any one of them is sued or
         threatened with suit by the Company or any one of them, or by any
         receiver, trustee, creditor or any committee of creditors on account of
         any preference, voidable transfer or lender liability issue, alleged to
         have occurred or been received as a result of, or during the
         transactions contemplated under this Financing Agreement, then in such
         event any money paid in satisfaction or compromise of such suit,
         action, claim or demand and any expenses, costs and legal fees paid or
         incurred in connection therewith, whether by the Agent, the Lenders or
         any one of them, shall be shared proportionately by the Lenders. In
         addition, any costs, expenses, fees or disbursements incurred by
         outside agencies or attorneys retained by the Agent to effect
         collection or enforcement of any rights in the Collateral, including
         enforcing, preserving or maintaining rights under this Financing
         Agreement shall be shared proportionately between and among the Lenders
         to the extent not reimbursed by the Company or from the proceeds of
         Collateral. The provisions of this

<PAGE>   85
                                      -83-

         paragraph shall not apply to any suits, actions, proceedings or claims
         that (x) predate the date of this Financing Agreement or (y) are based
         on transactions, actions or omissions that predate the date of this
         Financing Agreement.

(8)      Each of the Lenders agrees with each other Lender that any money or
         assets of the Company held or received by such Lender, no matter how or
         when received, shall be applied to the reduction of the Obligations (to
         the extent permitted hereunder) after (x) the occurrence of an Event of
         Default and (y) the election by the Required Lenders to accelerate the
         Obligations. In addition, the Company authorizes after the occurrence
         and during the continuance of an Event of Default, the Lenders to,
         without notice, set-off and apply against any and all property held by,
         or in the possession of such Lender, the Obligations due such Lenders.

(9)      Each Lender shall have the right at any time to assign to one or more
         commercial banks, commercial finance lenders or other financial
         institutions all or a portion of its rights and obligations under this
         Financing Agreement (including, without limitation, its obligations
         under the Line of Credit, Term Loan, the Revolving Loans and its rights
         and obligations with respect to Letters of Credit) with the consent of
         the Company, such consent not to be unreasonably withheld; provided,
         however, that no such consent shall be required after the occurrence
         and during the continuance of a Default or Event of Default. Upon
         execution of an Assignment and Transfer Agreement, (a) the assignee
         thereunder shall be a party hereto and, to the extent that rights and
         obligations hereunder have been assigned to it pursuant to such
         assignment, have the rights and obligations of the Agent as the case
         may be hereunder and (b) the Agent shall, to the extent that rights and
         obligations hereunder have been assigned by it pursuant to such
         assignment, relinquish its rights and be released from its obligations
         under this Financing Agreement. The Company shall, if necessary,
         execute any documents reasonably required to effectuate the
         assignments. No other Lender may assign its interest in the loans and
         advances and extensions of credit hereunder without the prior written
         consent of the Agent. In the event that the Agent consents to any such
         assignment by any other Lenders (i) the amount being assigned shall in
         no event be less than the lesser of (x) $5,000,000 or (y) the entire
         interest of such Lender hereunder, (ii) such assignment shall be of a
         pro-rata portion of all of such assigning Lender's loans and
         commitments hereunder and (iii) the parties to such assignment shall
         execute and deliver to the Agent an Assignment and Transfer Agreement.

<PAGE>   86
                                      -84-

SECTION 14     AGENCY

(1)      Each Lender hereby irrevocably designates and appoints CIT as the Agent
         for the Lenders under this Financing Agreement and any Loan Documents
         and irrevocably authorizes CIT as the Agent for such Lender, to take
         such action on its behalf under the provisions of this Financing
         Agreement and all Loan Documents and to exercise such powers and
         perform such duties as are expressly delegated to the Agent by the
         terms of this Financing Agreement and all Loan Documents together with
         such other powers as are reasonably incidental thereto. Notwithstanding
         any provision to the contrary elsewhere in this Financing Agreement,
         the Agent shall not have any duties or responsibilities, except those
         expressly set forth herein, or any fiduciary relationship with any
         Lender and no implied covenants, functions, responsibilities, duties,
         obligations or liabilities shall be read into this Financing Agreement
         and the Loan Documents or otherwise exist against the Agent.

(2)      The Agent may execute any of its duties under this Financing Agreement
         and all Loan Documents by or through agents or attorneys-in-fact and
         shall be entitled to the advice of counsel concerning all matters
         pertaining to such duties.

(3)      Neither the Agent nor any of its officers, directors, employees,
         agents, or attorneys-in-fact shall be (i) liable to any Lender for any
         action lawfully taken or omitted to be taken by it or such Person under
         or in connection with this Financing Agreement and all Loan Documents
         (except for its or such Person's own gross negligence or willful
         misconduct), or (ii) responsible in any manner to any of the Lenders
         for any recitals, statements, representations or warranties made by the
         Company or any officer thereof contained in this Financing Agreement
         and all Loan Documents or in any certificate, report, statement or
         other document referred to or provided for in, or received by the Agent
         under or in connection with, this Financing Agreement and all Loan
         Documents or for the value, validity, effectiveness, genuineness,
         enforceability or sufficiency of this Financing Agreement and all Loan
         Documents or for any failure of the Company to perform their
         obligations thereunder. The Agent shall not be under any obligation to
         any Lender to ascertain or to inquire as to the observance or
         performance of any of the agreements contained in, or conditions of,
         this Financing Agreement and all Loan Documents or to inspect the
         properties, books or records of the Company.

(4)      The Agent shall be entitled to rely, and shall be fully protected in
         relying, upon any note, writing, resolution, notice, consent,
         certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
         teletype message, statement, order or
<PAGE>   87
                                      -85-

         other document or conversation believed by it in good faith to be
         genuine and correct and to have been signed, sent or made by the proper
         Person or Persons and upon advice and statements of legal counsel
         (including, without limitation, counsel to the Company), independent
         accountants and other experts selected by the Agent. The Agent shall be
         fully justified in failing or refusing to take any action under this
         Financing Agreement and all Loan Documents unless it shall first
         receive such advice or concurrence of the Lenders, or the Required
         Lenders, as the case may be, as it deems appropriate or it shall first
         be indemnified to its satisfaction by the Lenders against any and all
         liability and expense which may be incurred by it by reason of taking
         or continuing to take any such action. The Agent shall in all cases be
         fully protected in acting, or in refraining from acting, under this
         Financing Agreement and all Loan Documents in accordance with a request
         of the Lenders, or the Required Lenders, as the case may be, and such
         request and any action taken or failure to act pursuant thereto shall
         be binding upon all the Lenders.

(5)      The Agent shall not be deemed to have knowledge or notice of the
         occurrence of any Default or Event of Default hereunder unless the
         Agent has received written notice from a Lender or the Company
         describing such Default or Event of Default. In the event that the
         Agent receives such a notice, the Agent shall use reasonable efforts to
         give notice thereof to the Lenders provided that any failure by the
         Agent to do so shall not result in any liability of the Agent to the
         Lenders or any other Person. The Agent shall take such action with
         respect to such Default or Event of Default as shall be reasonably
         directed by the Lenders, or Required Lenders, as the case may be;
         provided that unless and until the Agent shall have received such
         direction, the Agent may in the interim (but shall not be obligated to)
         take such action, or refrain from taking such action, with respect to
         such Default or Event of Default as it shall deem advisable and in the
         best interests of the Lenders. In the event the Agent in its sole
         discretion, or at the request of the Required Lenders, continues to
         make Revolving Loans and advances under this Financing Agreement upon
         the occurrence of a Default or Event of Default, any such Revolving
         Loans and advances may be in such amounts (subject to Section 14(10)
         hereof) and on such additional terms and conditions as the Agent or the
         Required Lenders may deem appropriate.

(6)      Each Lender expressly acknowledges that neither the Agent nor any of
         its officers, directors, employees, agents or attorneys has made any
         representations or warranties to it and that no act by the Agent
         hereinafter taken, including any review of the affairs of the Company
         shall be deemed to constitute any representation or warranty by the
         Agent to any Lender. Each Lender represents to the Agent that it has,
         independently and without

<PAGE>   88
                                      -86-

         reliance upon the Agent or any other Lender and based on such documents
         and information as it has deemed appropriate, made its own appraisal of
         and investigation into the business, operations, property, financial
         and other condition and creditworthiness of the Company and made its
         own decision to enter into this Financing Agreement. Each Lender also
         represents that it will, independently and without reliance upon the
         Agent or any other Lender and based on such documents and information
         as it shall deem appropriate at the time, continue to make its own
         credit analysis, appraisals and decisions in taking or not taking
         action under the Financing Agreement and to make such investigation as
         it deems necessary to inform itself as to the business, operations,
         property, financial and other condition or creditworthiness of the
         Company. The Agent, however, shall provide the Lenders with copies of
         all financial statements, projections and business plans which come
         into the possession of the Agent or any of its officers, employees,
         agents or attorneys.

(7)

         (a)      The Lenders agree to indemnify the Agent in its capacity as
                  such (to the extent not reimbursed by the Company and without
                  limiting the obligation of the Company to do so), from and
                  against any and all liabilities, obligations, losses, damages,
                  penalties, actions, judgments, suits, costs, expenses or
                  disbursements (including, without limitation, all
                  Out-of-Pocket Expenses) of any kind whatsoever (including
                  negligence on the part of the Agent) which may at any time be
                  imposed on, incurred by or asserted against the Agent in any
                  way relating to or arising out of this Financing Agreement or
                  any Loan Documents or any documents contemplated by or
                  referred to herein or therein or the transactions contemplated
                  hereby or thereby or any action taken or omitted by the Agent
                  under or in connection with any of the foregoing; provided
                  that no Lender shall be liable for the payment of any portion
                  of such liabilities, obligations, losses, damages, penalties,
                  actions, judgments, suits, costs, expenses or disbursements
                  resulting solely from the Agent's gross negligence or willful
                  misconduct. The agreements in this paragraph shall survive the
                  payment of the Obligations.

         (b)      The Agent will use its reasonable business judgement in
                  handling the collection of the Accounts, enforcement of its
                  rights hereunder and realization upon the Collateral but shall
                  not be liable to the Lenders for any action taken or omitted
                  to be taken in good faith or on the written advice of counsel.
                  The Lenders expressly release the Agent from any and all
                  liability and responsibility (express or implied), for any
                  loss, depreciation of or delay in collecting or failing to
                  realize on any Collateral, the Obligations or any guarantees
                  therefor and for any

<PAGE>   89
                                      -87-

                  mistake, omission or error in judgment in passing upon or
                  accepting any Collateral or in making (or in failing to make)
                  examinations or audits or for granting indulgences or
                  extensions to the Company, any account debtor or any
                  guarantor, other than resulting from the Agent's gross
                  negligence or willful misconduct.

(8)      The Agent may make loans to, and generally engage in any kind of
         business with the Company as though the Agent were not the Agent
         hereunder. With respect to its loans made or renewed by it or loan
         obligations hereunder as Lender, the Agent shall have the same rights
         and powers, duties and liabilities under this Financing Agreement as
         any Lender and may exercise the same as though it was not the Agent and
         the terms "LENDER" and "LENDERS" shall include the Agent in its
         individual capacity.

(9)      The Agent may resign as the Agent upon 30 days' notice (a) to the
         Lenders and the Company (provided no Default or Event of Default has
         occurred and is continuing) and (b) to the Lenders (upon the occurrence
         and during the continuance of a Default or Event of Default) and, in
         each case, such resignation shall be effective upon the appointment of
         a successor Agent. If the Agent shall resign as Agent, then the Lenders
         shall appoint a successor Agent for the Lenders which, provided no
         Default or Event of Default has occurred and is continuing, must be
         consented to by the Company, acting reasonably; provided, however, that
         the consent of the Company shall not be required if the successor Agent
         is a Lender. Such successor Agent shall succeed to the rights, powers
         and duties of the Agent and the term "AGENT" shall mean such successor
         agent effective upon its appointment, and the former Agent's rights,
         powers and duties as Agent shall be terminated, without any other or
         further act or deed on the part of such former Agent or any of the
         parties to this Financing Agreement. After any retiring Agent's
         resignation hereunder as the Agent the provisions of this Section 14
         shall inure to its benefit as to any actions taken or omitted to be
         taken by it while it was the Agent.

(10)     Notwithstanding anything contained in this Financing Agreement to the
         contrary, the Agent will not, without the prior written consent of all
         Lenders: (a) amend the Financing Agreement to (i) increase the Line of
         Credit; (ii) reduce the interest rates; (iii) reduce or waive (x) any
         fees in which the Lenders share hereunder, or (y) the repayment of any
         Obligations due the Lenders; (iv) extend the maturity of the
         Obligations; or (v) alter or amend (x) this Section 14(10) or (y) the
         definitions of Eligible Accounts Receivable, Eligible Inventory,
         Inventory Loan Cap, Collateral or Required Lenders, or (vi) increase
         the advance percentages against Eligible Accounts Receivable or
         Eligible Inventory or alter or amend the Agent's criteria for
         determining compliance with such definitions of Eligible Accounts
         Receivable and/or

<PAGE>   90
                                      -88-

         Eligible Inventory if the effect thereof is to increase Availability;
         (b) except as otherwise required in this Financing Agreement, release
         any guarantee or Collateral in excess of $500,000 during any Fiscal
         Year, or (c) knowingly make any Revolving Loan or assist in opening any
         Letter of Credit hereunder if after giving effect thereto the total of
         Revolving Loans and Letters of Credit hereunder for the Company would
         exceed one hundred and ten percent (110%) of the maximum amount
         available under this Financing Agreement (the portion in excess of 100%
         of such maximum available amount shall be referred to herein as the
         "AGENT PERMITTED OVERADVANCES"), provided that the Agent shall not be
         entitled to continue to knowingly make such Agent Permitted
         Overadvances for a period in excess of ninety (90) days without the
         Lenders' consent, and provided further that the foregoing limitations
         shall not prohibit or restrict advances by the Agent to preserve and
         protect Collateral. Subject to the provisions of Section 12(2) and the
         provisions of this Section 14(10) of this Financing Agreement, in all
         other respects the Agent is authorized by each of the Lenders to take
         such actions or fail to take such actions under this Financing
         Agreement and the Loan Documents if the Agent, in its reasonable
         discretion, deems such to be advisable and in the best interest of the
         Lenders. Notwithstanding any provision to the contrary contained in
         this Financing Agreement (including the provisions of Section 12(2) and
         Section 14(10) hereof) the Agent is authorized to take such actions or
         fail to take such actions in connection with (a) the exercise of (i)
         any and all rights and remedies under this Financing Agreement
         (including but not limited to the exercise of rights and remedies under
         Section 10(2) of this Financing Agreement) and (ii) its discretion in
         (x) determining compliance with the eligibility requirements of
         Eligible Accounts Receivable and/or Eligible Inventory and establishing
         reserves against Availability in connection therewith and/or (y) the
         making of Agent Permitted Overadvances, and/or (b) the release of
         Collateral not to exceed $250,000 in the aggregate during any Fiscal
         Year, and/or (c) curing any ambiguity, defect or inconsistency in the
         terms of this Financing Agreement; provided that the Agent, in its
         reasonable discretion, deems such to be advisable and in the best
         interests of the Lenders. In the event the Agent terminates this
         Financing Agreement pursuant to the terms hereof, the Agent will cease
         making any loans or advances upon the effective date of termination
         except for any loans or advances which the Agent may deem, in its sole
         discretion, are reasonably required to maintain, protect or realize
         upon the Collateral.

(11)     In the event any Lender's consent is required pursuant to the
         provisions of this Financing Agreement and such Lender does not respond
         to any request by the Agent for such consent within 10 days after such
         request is made to such Lender, such failure to respond shall be deemed
         a refusal to consent. In addition, in the event that any Lender
         declines to give its consent to any such

<PAGE>   91
                                      -89-

         request, it is hereby mutually agreed that the Agent and/or any other
         Lender shall have the right (but not the obligation) to purchase such
         Lender's share of the Loans for the full amount thereof together with
         accrued interest thereon to the date of such purchase.

(12)     Each Lender agrees that notwithstanding the provisions of Section 11 of
         this Financing Agreement any Lender may terminate this Financing
         Agreement and the Line of Credit only as of the initial or any
         subsequent Anniversary Date and then only by giving the Agent 90 days
         prior written notice thereof. Within 30 days after receipt of any such
         termination notice, the Agent shall, at its option, either (i) give
         notice of termination to the Company hereunder or (ii) purchase, or
         arrange for the purchase of, the Lender's share of the Obligations
         hereunder for the full amount thereof plus accrued interest thereon.
         Unless so terminated and subject to Section 11, the Revolving Loans
         shall be automatically extended from Anniversary Date to Anniversary
         Date. Termination of this Financing Agreement by any of the Lenders as
         herein provided shall not affect the Lenders' respective rights and
         obligations under this Financing Agreement incurred prior to the
         effective date of termination as set forth in the preceding sentence.

(13)     If the Agent is required at any time to return to the Company or to a
         trustee, receiver, liquidator, custodian or other similar official any
         portion of the payments made by the Company to the Agent as result of a
         bankruptcy or similar proceeding with respect to the Company, any
         guarantor or any other Person or entity or otherwise, then each Lender
         shall, on demand of the Agent, forthwith return to the Agent its
         ratable share of any such payments made to such Lender by the Agent,
         together with its ratable share of interest and/or penalties, if any,
         payable by the Lenders; this provision shall survive the termination of
         this Financing Agreement.

(14)     The Lenders agree to maintain the confidentiality of any non-public
         information provided by the Company to them, in the ordinary course of
         their business, provided that the foregoing confidentiality provision
         shall terminate one (1) year after the termination date of this
         Financing Agreement, and provided further that any such Lenders may
         disclose such information (i) to any applicable bank regulatory and
         auditor Personnel and (ii) upon the advise of their counsel.

(15)     For purposes of constituting security on any of the Collateral, present
         or future, of the Company located or deemed located in the Province of
         Quebec, as security for the due payment of the demand debenture (the
         "DEMAND DEBENTURE") dated July 11, 2001 issued by the Company in favour
         of the Agent and the Lenders in connection with this Financing
         Agreement, the Company, the Lenders and the Agent hereby acknowledge,
         accept and ratify

<PAGE>   92
                                      -90-

         the appointment by the Agent (in its capacity as the holder of the
         Demand Debenture as Agent for the Lenders) of CIBC Mellon Trust Company
         (the "TRUSTEE") as the holder of an irrevocable power of attorney for
         the purposes of holding any security granted by the Company pursuant to
         the laws of the Province of Quebec for all present and future Lenders
         as contemplated in Article 2692 of the Civil Code of Quebec. Any party
         which hereafter becomes a Lender hereunder pursuant to Section 13
         hereof, shall be deemed to accept and ratify the power of attorney
         granted to the Trustee. The Trustee has agreed to act in such capacity
         for the benefit of all present and future Lenders. The Company, the
         Agent and the Lenders agree that the Demand Debenture constitutes a
         "title of indebtedness" within the meaning of such term as used in
         Article 2692 of the Civil Code of Quebec.

<PAGE>   93

         IN WITNESS WHEREOF, the parties hereto have caused this Financing
Agreement to be effective, executed, accepted and delivered by their proper and
duly authorized officers as of the date set forth above.

                                          CIT BUSINESS CREDIT CANADA
                                          INC., AS AGENT AND LENDER

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

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

                                          STERLING PULP CHEMICALS, LTD.

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

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

<PAGE>   94

                                    EXHIBIT A

                            TERM LOAN PROMISSORY NOTE

                                                                      o, [200o]

$o

         FOR VALUE RECEIVED, the undersigned, o, a o corporation (the
"COMPANY"), promises to pay to the order of CIT BUSINESS CREDIT CANADA INC. as
agent for the Lenders (herein "THE AGENT") at its office located at o, in lawful
money of Canada/ the United States of America and in immediately available
funds, the principal amount of o ($o.00) as follows: 1) o (o) equal o principal
installments of $o.00 each, followed by 2) one (1) final principal installment
of $o.00, whereof the first such installment shall be due and payable on o,
[200o] and subsequent installments shall be due and payable on the first
Business Day of each o thereafter until this Note is paid in full.

         The Company further agrees to pay interest at said office, in like
money, on the unpaid principal amount owing hereunder from time to time from the
date hereof on the date and at the rate specified in Section 8 of the Financing
Agreement, of even date herewith between the Company, the Lenders and the Agent
(the "FINANCING AGREEMENT"). Capitalized terms used herein and defined in the
Financing Agreement shall have the same meanings as set forth therein unless
otherwise specifically defined herein.

         If any payment on this Note becomes due and payable on a day other than
a Business Day, the maturity thereof shall be extended to the next succeeding
Business Day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.

         This Note is Term Loan Promissory Note referred to in the Financing
Agreement, evidence the Term Loan thereunder, and is subject to, and entitled
to, all provisions and benefits thereof and is subject to optional and mandatory
prepayment, in whole or in part, as provided therein.

<PAGE>   95

         Upon the occurrence of any Event of Default specified in the Financing
Agreement or upon termination of the Financing Agreement, all amounts then
remaining unpaid on this Note may become, or be declared to be, at the sole
election of the Agent, immediately due and payable as provided in the Financing
Agreement.

                                          COMPANY NAME

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

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

<PAGE>   96

                                    EXHIBIT B

                              REVOLVING CREDIT NOTE

                                                            Dated as of o, 200o

$o

         FOR VALUE RECEIVED, the undersigned, o (herein the "COMPANY"), a o
corporation with a principal place of business at o, hereby, absolutely and
unconditionally promises to pay to the order of CIT BUSINESS CREDIT CANADA INC.,
a Canada corporation, (hereinafter "CIT") with offices located at o, and CIT as
agent for the Lenders (the "AGENT"), and any other party which now or hereafter
becomes a lender hereunder pursuant to Section 13 of the Financing Agreement (as
herein defined) (individually a "LENDER" and collectively the "LENDERS"), in
lawful money of Canada/ the United States of America and in immediately
available funds, the principal amount of o Dollars ($o), or such other principal
amount advanced pursuant to Section 3 and Section 5 of the Financing Agreement
(as herein defined), such Revolving Loan advances shall be repaid on a daily
basis as a result of the application of the proceeds of collections of the
Accounts and the making of additional Revolving Loans as described in Section 3.
Subject to the terms of the Financing Agreement, the Revolving Loans may be
borrowed, repaid and reborrowed by the Company. A final balloon payment in an
amount equal to the outstanding aggregate balance of principal and interest
remaining unpaid, if any, under this Note as shown on the books and records of
the Agent shall be due and payable on the termination of the Financing
Agreement, as set forth in Section 11 thereof.

         The Company further absolutely and unconditionally promises to pay to
the order of the Agent at said office, interest, in like money, on the unpaid
principal amount owing hereunder from time to time from the date hereof on the
dates and at the rates specified in Section 8, of the Financing Agreement.

         If any payment on this Note becomes due and payable on a day other than
a Business Day, the maturity thereof shall be extended to the next succeeding
Business Day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.

         This Note is one of the Promissory Notes referred to in the Financing
Agreement, dated as of the date hereof, as the same may be amended and restated
and in effect from time to time, among the Company, the Agent, and the Lenders
thereto from time to time (the "FINANCING AGREEMENT"), and is subject to, and
entitled to, all of the terms, provisions and benefits thereof and is subject to
optional and mandatory prepayment, in whole or in part, as provided therein. All

<PAGE>   97

capitalized terms used herein shall have the meaning provided therefor in the
Financing Agreement, unless otherwise defined herein.

         The date and amount of the advance(s) made hereunder may be recorded on
the grid page or pages which are attached hereto and hereby made part of this
Note or the separate ledgers maintained by the Agent. The aggregate unpaid
principal amount of all advances made pursuant hereto may be set forth in the
balance column on said grid page or such ledgers maintained by the Agent. All
such advances, whether or not so recorded, shall be due as part of this Note.

         The Company confirms that any amount received by or paid to the Agent
in connection with the Financing Agreement and/or any balances standing to its
credit on any of its or their accounts on the Agent's books under the Financing
Agreement may in accordance with the terms of the Financing Agreement be applied
in reduction of this Note, but no balance or amounts shall be deemed to effect
payment in whole or in part of this Note unless the Agent shall have actually
charged such account or accounts for the purposes of such reduction or payment
of this Note.

         Upon the occurrence of any one or more of the Events of Default
specified in the Financing Agreement or upon termination of the Financing
Agreement, all amounts then remaining unpaid on this Note may become, or be
declared to be, immediately due and payable as provided in the Financing
Agreement.

                                          STERLING PULP CHEMICALS, LTD.

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

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

<PAGE>   98

                                SCHEDULE TO GRID

<Table>
<Caption>

Date                Loan                Payment             Balance
-----------------   -----------------   -----------------   -----------------
<S>                 <C>                 <C>                 <C>
-----------------   -----------------   -----------------   -----------------

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

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

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

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

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

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

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

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

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

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

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

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

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

-----------------   -----------------   -----------------   -----------------
</Table>

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00028-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00028-of-00352.parquet"}]]