Document:

<PAGE>   1
                                                                   EXHIBIT 10.9e

                             FIFTH AMENDMENT TO THE
                             STERLING CHEMICALS ESOP

                  WHEREAS, there is reserved to the Company the right to amend
the Sterling Chemicals ESOP (the "Plan"); and

                  WHEREAS, the Company deems it advisable to amend the Plan in
the manner hereafter set forth;

                  NOW, THEREFORE, the Plan is hereby amended effective as of
December 31, 1998 as follows:

                  "Notwithstanding anything in the Plan to the contrary, with
                  respect to a participant who attains age 70 1/2 after 1998
                  (other than an owner, within the meaning of IRC Section 318),
                  benefits shall not be paid or begin prior to the participant's
                  termination of employment with the Company and all members of
                  its controlled group of employers. Except to the extent
                  required by IRC Section 401(a)(9), the Plan shall not preclude
                  such a participant from receiving benefits in any of the same
                  optional forms (except for the difference in the timing of the
                  commencement of payments) that would have been available had
                  the participant retired in the calendar year in which the
                  participant attained age 70 1/2."

                  All terms used herein that are defined in the Plan shall have
the same meanings given to such terms in the Plan, except as otherwise expressly
provided herein.

                  Except as amended and modified hereby, the Plan shall continue
in full force and effect and the Plan and this instrument shall be read, taken
and construed as one and the same instrument.

                  This instrument may be executed in several counterparts, each
of which shall be deemed an original, but all of which shall constitute but one
and the same instrument which may be evidenced by any one counterpart.

                  IN WITNESS WHEREOF, the Company has caused this instrument to
be executed effective for all purposes as provided above.

                                    STERLING CHEMICALS, INC.

                                    By:
                                       ---------------------
                                    Name:
                                         -------------------
                                    Title:
                                          ------------------<PAGE>   1
                                                                   EXHIBIT 10.11

                                AGREEMENT BETWEEN

                          STERLING PULP CHEMICALS LTD.

                                 NORTH VANCOUVER

                                BRITISH COLUMBIA

                                       AND

                           PULP, PAPER AND WOODWORKERS
                                    OF CANADA

                                     LOCAL 5

                                BRITISH COLUMBIA

                                    EFFECTIVE
                      DECEMBER 1, 1997 to NOVEMBER 30, 2000

<PAGE>   2

                                TABLE OF CONTENTS

ARTICLE

<TABLE>
<S>             <C>                                                                                      <C>
1               PURPOSE                                                                                     1

2               RECOGNITION                                                                                 1

3               MANAGEMENT FUNCTIONS                                                                        1

4               UNION SECURITY                                                                              2

5               TERMS OF AGREEMENT AND CHANGES IN AGREEMENT                                                 2

6               STRIKES AND LOCKOUTS                                                                        3

7               HOLIDAYS                                                                                    3

8               CALL TIME                                                                                   5

9               HOURS OF WORK                                                                               5

10              DEFINITIONS                                                                                 7

11              ALLOWANCE FOR FAILURE TO PROVIDE WORK                                                       7

12              UNION NOTICES                                                                               8

13              SAFETY                                                                                      8

14              SENIORITY                                                                                   9

15              GRIEVANCE PROCEDURE                                                                         15

16              ARBITRATION                                                                                 16

17              DAYS OFF AND SCHEDULE OF SHIFTS                                                             17

18              VACATIONS                                                                                   17

19              TEMPORARY EMPLOYEES                                                                         20

20              JOB CLASSIFICATIONS AND JOB RATES                                                           21

21              WAGE RATE ADJUSTMENTS                                                                       21
</TABLE>

                                                                               i
<PAGE>   3

                           TABLE OF CONTENTS (CONT'D)

<TABLE>
<S>             <C>                                                                                      <C>
22              OVERTIME AND PREMIUM TIME                                                                   22

23              JURY DUTY PAY                                                                               23

24              BEREAVEMENT LEAVE                                                                           23

25              MAINTENANCE DEPARTMENT APPRENTICES                                                          24

26              SUSPENSION AND/OR DISCHARGE                                                                 24

27              LEAVE OF ABSENCE                                                                            24

28              COMMITTEES                                                                                  25

29              TRAINING                                                                                    25

30              TECHNOLOGICAL CHANGE AND TERMINATION PAY                                                    26

31              CONTINUOUS 12-HOUR SHIFTS                                                                   27

32              HEALTH AND WELFARE                                                                          27

33              PENSION PLAN                                                                                27

                EARLY RETIREMENT PROVISION                                                                  28

34              BANKING OF OVERTIME                                                                         29

                APPENDIX "A"                                                                                30

                MULTI SKILL/DUAL TRADES                                                                     30

                APPENDIX "B"                                                                                32

                APPENDIX "C"

                BENEFITS OF HOURLY-PAID EMPLOYEES

                       NORTH VANCOUVER PLANT                                                                34

                SUPPLEMENTARY PENSION FUND                                                                  35

                APPENDIX "D"

                PRODUCTION SCHEDULE                                                                         36
</TABLE>

         Changes from previous contract (November 1997) are indicated by SHADING
& BOLDING.

                                                                              ii
<PAGE>   4

                                AGREEMENT BETWEEN
                          STERLING PULP CHEMICALS LTD.
                              NORTH VANCOUVER, B.C.
                   (HEREINAFTER REFERRED TO AS "THE COMPANY")

                                       AND

                                     LOCAL 5
                           PULP, PAPER AND WOODWORKERS
                                    OF CANADA
                    (HEREINAFTER REFERRED TO AS THE "UNION")

                                    Article 1
                                     PURPOSE

1.01     The purpose of the Agreement is to provide for orderly collective
         bargaining, prompt disposition of grievances, wages, hours of work and
         other terms and working conditions to the extent and in the manner
         provided herein.

                                    Article 2
                                   RECOGNITION

2.01     The Company recognizes the Union as the sole and exclusive bargaining
         agent for its employees employed in production and maintenance except
         those excluded by the Labour Relations Code of British Columbia (1993),
         foreman, those above the rank of foreman, sales staff, office and
         clerical staff test and quality control staff, laboratory technicians,
         draftsmen, security guards and those engaged in office janitor work.

2.02     The terms "employee" and "employees" when used in this agreement shall
         mean persons in the employ of the Company within the bargaining unit
         described herein above and covered by this Agreement.

                  Gender: The use of "he", "his" and "him" refer to both the
         masculine and feminine genders.

2.03     The Company recognizes the Union's right to communicate with its
         members on the Company's property so that the Union, through its
         elected officials, may fairly represent the employees.

                                    Article 3
                              MANAGEMENT FUNCTIONS

3.01     All functions, powers, or authority which the Company has not
         specifically abridged, delegated or modified by this Agreement will be
         recognized by the Union as being retained by the Company.

                                                                               1
<PAGE>   5

                                    Article 4
                                 UNION SECURITY

4.01     Any employee who is now a member in good standing or who becomes or is
         reinstated as a member of the Union shall, as a condition of
         employment, maintain such membership in good standing throughout the
         term of this Agreement. Any new employee hired shall become a member of
         the Union thirty (30) days after his or her employment. In the event of
         a Local Union intending to suspend a member for non-maintenance of
         membership, the Company shall be notified by the local, in writing at
         least seven (7) days before suspension.

4.02     No employee shall be subject to any penalties against his application
         for membership or reinstatement, except as may be provided for in the
         Constitution of the Pulp, Paper and Woodworkers of Canada.

4.03     There shall be no discrimination against any employee or employees in
         any manner whatsoever because of race, colour, creed, nationality,
         Union membership, and non-Union membership.

4.04     In case a dispute arises as to whether or not an employee has failed to
         maintain his Union membership in good standing, the Union agrees to
         save harmless from and indemnify the Company for any liability that may
         arise from any acts of the Company taken under provisions of ARTICLE 4,
         as a result of its reliance on a representation of facts by the Union.

4.05     The Company will deduct a Union initiation fee and monthly Union dues
         in amounts authorized by individual employees and presented in writing
         to the Company. Any Union dues passed in compliance with Local 5 of the
         Pulp, Paper and Woodworkers of Canada by-laws shall be applied and
         deducted upon notification from the Secretary of Local 5 sent to the
         Company. Such deductions shall be remitted to the Local Secretary -
         Treasurer as soon as possible after the first pay period of each month
         and any adjustments will be made the following month. The Union shall
         advise the Company of the address of the Local Treasurer and of any
         changes in this address. Deductions of Union dues from an employee's
         pay shall be discontinued when written authorization furnished the
         Company by the employee is revoked, in writing by the employee.

4.06     There shall be no solicitation for membership, meetings, etc., during
         working hours and/or on Company premises except with the permission of
         the Company.

4.07     For the purpose of this Agreement, a member of the Union in good
         standing shall mean an employee who has paid or tendered an amount
         equivalent to the regular monthly Union dues and assessments.

                                    Article 5
                               TERMS OF AGREEMENT
                            AND CHANGES IN AGREEMENT

5.01     This Agreement shall be in effect until the 30TH OF NOVEMBER, 2000 and
         shall continue thereafter from year to year unless during the four
         months immediately preceding the expiry date either party has given
         written notice to the other party that desires revision of this
         Agreement and its expiry date.

5.02     If notice of desire for changes has been given the parties shall, as
         soon as agreeable, meet for collective bargaining. If such negotiations
         cannot be completed prior to December 1st following the October 1st on
         which such notice was given, any changes in compensation to employees
         shall be retroactive to December 1st.

                                                                               2
<PAGE>   6

                                    Article 6
                              STRIKES AND LOCKOUTS

6.01     The Union and its members agree that it will not cause, authorize or
         sanction any strike or stoppage of any of the Company's operations or
         any Curtailment of work or restriction of or interference with
         production during the terms of this Agreement.

6.02     The Company agrees that it will not cause or sanction a lockout during
         the terms of this Agreement.

                                    Article 7
                                    HOLIDAYS

7.01              Recognized Holidays

         (a)      New Year's Day     Canada Day              Remembrance Day
                  Good Friday        1st Monday In August    Christmas Day
                  Easter Monday      Labour Day              Boxing Day
                  Victoria Day       Thanksgiving Day

         (b) In the event that Heritage Day is declared as a Statutory Holiday
         by the Federal Government it will be included in the above list of
         holidays.

7.02     The period of time recognized as a holiday is the twenty- four (24)
         hour period from 0001 hrs to 2400 hrs on the date recognized as the
         holiday. However for those employees working the 12 hour shift
         schedule, the holiday will commence at 1830 hours immediately preceding
         such 12:01am and will end twenty-four (24) hours later. (i.e. 1830
         hours on the day of the holiday) .

7.03     The hours of commencing and ending specified above may be varied by
         mutual agreement of the Management and the Union Standing committee.
         The specified hours of commencing or ending will be adjusted to
         coincide with regular hours for changing shifts.

7.04     a) It is understood that day workers will not be required to work on a
         holiday except to meet the needs of the continued uninterrupted
         operation of the plant.

         b) Further, and with special reference to the Christmas holiday the
         parties recognized that shift workers will be held to absolute
         reasonable minimum and that only those activities required to maintain
         the necessary efficient operation of the plant shall be performed.

7.05     a) When any of the holidays listed in the Agreement falls on a Saturday
         or Sunday, shift workers should observe the holiday on the day which it
         falls. Day workers, scheduled Monday to Friday, will observe the
         holiday on such a day as will provide them with a long weekend. The
         determination of such day or days shall be determined by the Company
         consistent with operational requirements.

         b) In the event a holiday falls on a day when a day worker would
         otherwise be scheduled off, then said employee will take the holiday on
         the Thursday before or the Tuesday following the holiday whichever is
         applicable and is mutually agreed.

                                                                               3
<PAGE>   7

         c) In the event the holiday falls on the day when a shift worker would
         otherwise be scheduled off, he has the option of banking the time
         and/or the money.

         d) For shift workers, holiday pay is calculated as 8 hours pay at
         straight time, and in the case of banking, 8 hours will be banked for
         each holiday that falls on a scheduled day off, and 12 hours for each
         holiday worked.

7.06     Overtime shall be paid for all work performed during holidays at the
         rates hereinafter specified.

7.07     In addition to any other compensation earned, all employees who are on
         the payroll of the Company on any of the forgoing recognized holidays
         will be granted eight (8) hours pay on the straight time rate of the
         employee's regular job, provided however, that:

         (a) Any new employee must have been on the payroll for not less than
         thirty (30) days just preceding the holiday and must have worked a
         minimum of eighty five (85) hours during that thirty (30) day
         qualifying period.

         b) The employees must have worked his scheduled work day before and his
         scheduled work day after the holiday unless failure to work was due to
         any of the following events.

                  (1) When the employee is on his regular authorized vacation.

                  (2) When the employee's absence is due to bonafide sickness or
                  occupational or non-occupational accident provided however,
                  that payment for such holiday is not being covered by W.C.B.
                  or sick benefit insurance. Payment for such holiday will not
                  be extended beyond the time limit of W.C.B. or sick benefit
                  insurance.

                  (3) When a trade in shifts agreed upon between employees, and
                  approved in advance by Management, results in temporary change
                  of the scheduled work day after the holiday, provided the
                  employee works the shift agreed upon.

                  (4) When the employee's absence is due to an approved leave of
                  absence granted by the Company; provided however that such
                  leave of absence does not exceed ten (10) days prior to or ten
                  (10) days following such holiday.

                  (5) When the employee's absence is due to Jury Duty,
                  subpoenaed witness or bereavement leave as provided by this
                  Agreement.

                  (6) When the operation in which the employee is engaged is
                  curtailed or discontinued by the decision of management and
                  which curtailment of discontinuance changes or eliminates the
                  employee's scheduled work day before, or his scheduled work
                  day after, such holiday.

7.08     An employee whose work schedule conflicts with the normal observance of
         a specified holiday may elect to bank the holiday, and take the time
         off and pay thereof, provided the following conditions are met:

         (a) The holiday(s) and holiday(s) pay shall be taken at a time
         convenient to the employee and management consistent with the
         continued, economic and efficient operation of the plant.

             It is understood that requests for time off received and granted
         thirty (30) days in advance will be honoured.

                                                                               4
<PAGE>   8

         (b) Employees must notify their supervisor in writing at least one week
         in advance of the holiday of his intent to bank that holiday.

         (c) It is also agreed and understood that the employee will take such
         banked holidays within one year of banking. If the employee does not
         arrange to take the holiday within the given delay, the Company will
         schedule time off at its own discretion in lieu thereof or
         alternatively, if mutually agreed, reimburse any banked holiday pay and
         forfeit the banked time.

7.09     Employees working temporarily at a higher job rate will be paid at the
         higher job rate for a statutory holiday providing they work at that
         higher job rate on either side of said statutory holiday, otherwise
         they will be paid for the statutory holiday based on their regular job
         rate. If the employee is scheduled off on either side of the statutory
         holiday, then his last scheduled day on before, or his first scheduled
         day on after the statutory holiday, will satisfy this section.

7.10     In the event that an employee is called in, or is scheduled to work, on
         a recognized statutory holiday on a job paying a higher rate than his
         regular job, he will be paid for the statutory holiday at the higher
         rate of pay.

                                    Article 8
                                    CALL TIME

8.01     Call time is an occasion when an employee, after leaving the premises,
         is called in to work before his next regularly scheduled reporting
         time. In such cases, the Company will pay an additional amount over and
         above pay for hours worked, equal to three (3) hours pay at the
         employee's straight time hourly rate, which shall be known as call
         time. Such call time shall not be payable when the employee, before
         leaving the premises, is notified to report for work before his next
         regularly scheduled reporting time.

8.02     When the hours worked on call time are extended to the employee's
         regularly scheduled starting time, overtime rates as called for by this
         section, shall cease at the employee's regularly scheduled starting
         time unless such call-in was of such duration as to give the employee a
         full shift prior to his regular starting time consistent with article
         22.10.

                                    Article 9
                                  HOURS OF WORK

9.01     Hours of work shall be scheduled by the Company in accordance with the
         requirements of the plant.

9.02     Employees shall be at their work place and ready to assume their duties
         at the commencement of their work day.

9.03     Shift workers will not leave their work place until 0630 HRS (or 1830
         HRS) unless relieved by the employee assigned to the same position on
         the following shift.

9.04     Employees are expected to co-operate in the execution of necessary
         overtime work. The Company will make every effort to keep overtime to a
         minimum consistent with the continued efficient operation of the plant.

9.05     The normal hours of work shall be:

                                                                               5
<PAGE>   9

                  a) For Day Workers - from 0700 Hrs. to 1200 Hrs. and from 1230
                  Hrs. to 1650 Hrs. A ten minute wash up period will be provided
                  prior to lunch and at the completion of the work day.

                           Labourers and Relief Brine Operators assigned to the
                  Maintenance Department (for a period of a week or more), will
                  be classified as Day Workers.

                  b) For Shift Workers - from 0630 Hrs. to 1830 Hrs., and 1830
                  Hrs. to 0630 Hrs. - as per Article 31.

                  c) For Labourers and Relief Brine Operators assigned to the
                  Production Department - Two different workday formats are
                  available:

                           i)  From 0630 Hrs. (or 0730 Hrs.) to 1600 Hrs. (or
                               1700 Hrs.), and 1600 Hrs. (or 1700 Hrs.) to
                               0130 Hrs. (or 0230 Hrs.).

                               A one-half hour lunch break is included, with a
                               ten minute wash up period prior to lunch and at
                               the completion of the work day.

                           ii)  From 0630 Hrs. to 1830 Hrs., and 1830 Hrs. to
                                0630 Hrs. - similar to a shift worker.

9.06     The regular schedule of hours of work shall be:

              a)  For Day Workers - 9 1/3 hours per day and 37 1/3 hours per
                  week. The normal work week will be either Monday to Thursday,
                  or Tuesday to Friday.

              b)  For Shift Workers - 12 hours per day and 36 or 48 hours per
                  week with compensating scheduled time off to average 37 1/3
                  hours/week - as per Article 31. Compensating time off for
                  Shift Workers shall be covered by the Senior Relief Operators
                  and taken in blocks of three (3) day shifts as outlined in the
                  shift schedule in Appendix D. When ever the Senior Relief
                  Operator is scheduled as a spare operator, he may be
                  rescheduled to provide relief on dayshift or nightshift as
                  required.

              c)  For Labourers & Relief Brine Operators assigned to the
                  Production Department - either:

                      i)   Four workdays of 9 hours per day, with compensation
                           to allow averaging of 37 1/3 hours/week over a 9 week
                           period, or

                      ii)  Three workdays of 12 hours per day, with compensation
                           to allow averaging of 37 1/3 hours/week over a 9 week
                           period.

                           Labourers and Relief Brine Operators assigned to the
                           Production Department will receive shift premiums
                           (when working the evening shift(s) outlined in
                           Article 9.05(c) as per Article 22.09, & statutory
                           holiday compensation as per Article 7.05(c) & (d).

                           Every effort shall be made to schedule consecutive
                           days off in each work week when ever possible.

         This article is for the purpose of providing a basis for calculating
         overtime and shall not be construed as a guarantee of hours of work.

                                                                               6
<PAGE>   10

                                   Article 10
                                   DEFINITIONS

10.01    The words "shift workers" means employees assigned to a job on a
         regularly rotating shift schedule. All other employees are considered
         day workers.

10.02    The word "day" shall mean a calendar day and shall be a period of
         twenty-four (24) hours beginning at 0001 hours. However, in the case of
         the work schedule a shift worker working the 12 hour schedule, and only
         in such cases, the day shall deem to have commenced at 0630 HRS.

10.03    The word "week" means a period of seven (7) days beginning at 0001
         hours Monday. However, in the case of the work schedule of a shift
         worker working the 12 hour schedule, and only in such cases, the week
         shall deem to have commenced at 0630 HRS Monday.

10.04    Further to Article 18:

         (a) The word "week", when used to define a length of vacation, and for
         the purposes of calculating vacation pay, shall mean 37 1/3 average
         working hours.

         (b) The word "day", when used to define a length of a vacation, shall
         mean 9 1/3 working hours.

10.05    Bargaining Unit Work

         It is the policy of the Company not to use non-bargaining unit
         personnel to do work normally performed by hourly paid employees.

         It is recognized by the parties that there may be exceptions to the
         above, such as:

              (a) in emergency situations

              (b) when no qualified hourly employee is available

         It is recognized by both parties, however, that for the practical and
         efficient operation of the plant, there are occasions when a supervisor
         must help. These occasions will be temporary in nature and will not
         result in the displacement or exclusion of hourly rated employees.

                                   Article 11
                      ALLOWANCE FOR FAILURE TO PROVIDE WORK

11.01    An employee who reports for work at his regularly scheduled time and
         who has not been notified by the Company not to report, shall receive
         not less than one half his regular shifts work at his regular straight
         time hourly rate, or pay in lieu thereof at the discretion of the
         Company.

11.02    A telephone call to the number on record in the employee's name in the
         plant personnel files will be considered as proof of notification. An
         employee who leaves no telephone number by which he can be contacted
         forfeits the right to the one half shift or pay in lieu there of as
         mentioned in 11.01 above.

                                                                               7
<PAGE>   11

                                   Article 12
                                  UNION NOTICES

12.01    The Company will provide the Union with a secured bulletin board in the
         plant for the purpose of posting official Union notices and papers.
         Notices will be posted and initialed by a member of the Union Standing
         Committee, or the authorized representative of the Bargaining Agent.

                                   Article 13
                                     SAFETY

13.01    Employees and the Company are to comply with established Safety Rules
         as amended by the Joint Occupational Health and Safety Committee from
         time to time. Employees will not be expected to operate with unsafe
         equipment or under unsafe working conditions. Employees are expected to
         report immediately any unsafe equipment or condition to the Production
         or Maintenance Manager using where appropriate the Safety Work Order
         System.

13.02    The Union will elect three of its members to serve on the Joint
         Occupational Health and Safety Committee preferably with representation
         from each Department. The Plant Manager will appoint three Company
         representatives.

         The Occupational Health and Safety Committee will meet monthly to
         develop and promote the safety program. It is agreed that the Committee
         will appoint a Chairman with the responsibility alternating between the
         Company and the Union. Where the Chairman is a Union employee, the
         Secretary shall be a Company representative and vice versa.

13.03    The Union undertakes to encourage its members to cooperate in the
         execution of the Plant Safety Program and Safety Education.

13.04    FIRST AID ATTENDANTS

         As of September 1st, 1994, the Occupational First Aid Regulations
         require that the First Aid Attendants only require a Level II
         certificate.

         First Aid Attendants currently holding a Level III equivalent
         certificate, (i.e.: an Industrial First Aid 'A' or 'B' certificate) and
         who desires to renew at that level may do so.

         All new candidates will only be given necessary training to acquire a
         Level II certificate.

         If a person lapses in renewing his First Aid certificate and then wants
         to renew, he will be treated as a new candidate.

         Wages during training and exams will be paid as for scheduled hours of
         work:

                  - During the training period.

                  - On the day before the exam.

                  - On the exam or re-exam day.

         THE COMPANY WILL PAY FOR ASSOCIATED COSTS OF CERTIFICATION WITH PRIOR
         AUTHORIZATION OF THE SUPERVISOR. AN EMPLOYEE HOLDING A LEVEL II OR III
         W.C.B. OCCUPATIONAL FIRST AID CERTIFICATE WILL BE PAID $1.00 PER HOUR
         OVER AND ABOVE THE EMPLOYEE'S REGULAR RATE.

                                                                               8
<PAGE>   12

                                   Article 14
                                    SENIORITY

14.01    General Principles

         (a)      The company recognizes the principles of seniority in the
                  administration of promotions, demotions, transfers, layoffs
                  and recalls. In the application of seniority, provided an
                  employee has the necessary qualifications and ability to
                  perform the work in accordance with job requirements,
                  seniority shall prevail.

         Definitions

         (b)      Plant seniority shall mean the length of continuous service in
                  the employ of the signatory Company in the North Vancouver
                  Bargaining Unit.

         (c)      Departmental seniority shall mean the length of continuous
                  service in a permanent position within the recognized
                  departments.

14.02    Establishing Seniority

         (a)      Plant seniority shall be established from the original date of
                  hire, after completion of a probationary period. A
                  probationary period consists of 40 working days and may be
                  extended by mutual agreement between the company and the
                  union.

         (b)      During the probationary period defined in 14.02(a), a new
                  employee will not have any seniority rights and shall be
                  subject to transfer, demotion, promotion, layoff or discharge
                  at the sole discretion of the Company without recourse to the
                  grievance procedure of this Agreement.

         (c)      The Company will appraise each probationary employee at the
                  end of his first thirty (30) working days in his presence. A
                  Shop Steward or Union Standing Committee Member shall be
                  present if requested by the employee. Copy of the appraisal to
                  be sent to the employee and the Union Standing Committee.

         (d)      An employee who exercises his seniority to promote or bump
                  into another job within the Bargaining Unit, shall be
                  probationary in the new job for a period of two (2) weeks
                  after training is completed. In such instance, the employee
                  shall be formally appraised in his presence and within the
                  stipulated probationary period. A Shop Steward or Union
                  Standing Committee Member shall be present if requested by the
                  employee.

14.03    Loss of Seniority

         (a)      Plant or Departmental

                  An employee shall cease to have Plant seniority or
                  Departmental seniority if the employee:

                  1)       quits or resigns, or

                  2)       is discharged

                  3)       Is laid off for a period exceeding recall provisions.

                                                                               9
<PAGE>   13

                  4)       Is absent from work for three (3) consecutive days on
                           which he is scheduled to work without notifying his
                           immediate supervisor, giving satisfactory reasons.

                  5)       When recalled to work, once notice by registered mail
                           to the address on record with the company has been
                           made, fails to indicate his intent to return to
                           company service within three (3) days or fails to
                           report to work within seven (7) days.

                  6)       Is absent without cause, to the satisfaction of
                           Management, beyond the time limit of a sick leave or
                           an authorized leave of absence granted by the
                           Company.

         However, Plant and Departmental seniority shall continue to accrue:

                  i)       If absent due to illness or injury provided the
                           absence does not exceed the period provided for in
                           the L.T.D. program, unless seniority would have
                           otherwise been lost.

                  ii)      If absent due to industrial illness or accident at
                           work (recognized by the Worker's Compensation Board)
                           which occurs while working for the Company, unless
                           seniority would have otherwise been lost.

         (b)      Departmental Seniority

                  An employee shall cease to have Departmental seniority in the
                  Department from which he was displaced, if the employee is:

                  1)       Laid off or demoted out of the Department, because of
                           cutbacks, for a period exceeding the recall rights as
                           set out in 14.05(a).

                  2)       Permanently transferred to another Department for a
                           period exceeding six (6) months.

                  3)       Is demoted outside the recognized Departments either
                           voluntarily or for inability to perform the work. If
                           the cause for the demotion has been corrected the
                           employees' previous Departmental seniority will be
                           reinstated.

14.04    Layoffs

         In the event of departmental layoff resulting from cutbacks, employees
         affected will be re-classified to Relief Brine Operator or Labourer
         positions. Layoff from these positions will be on the basis of Plant
         seniority.
         (Refer to diagram in 14.06)

14.05   Recall Provisions

         (a)      In the event of a layoff, recall rights shall be established
                  according to:

                  1)       An employee who is laid off with more than the
                           probationary period, but less than one (1) year of
                           continuous service, shall be entitled to recall
                           rights according to his accumulated Plant seniority
                           for six (6) months from the date of layoff.

                  2)       An employee with one or more years of continuous
                           service shall be entitled to recall rights according
                           to his accumulated Plant seniority for twelve (12)
                           months from the date of layoff, plus one (1)
                           additional month for each year's service up to an
                           additional six (6) months.

                                                                              10
<PAGE>   14

         (b)      Departmental Recall Rights

                  An employee shall have recall rights to the Department from
which he was displaced as follows:

                  1)       Less than one (1) year of Departmental seniority:

                           - six (6) months recall rights from date of
                           displacement.

                  2)       One (1) or more years of Departmental seniority:

                           - twelve (12) months recall rights plus one (1) month
                           for each year of service up to a maximum of six (6)
                           additional months.

                  However, departmental recall rights shall decrease from the
                  time of displacement and ultimately expire, unless the
                  affected employee is permanently recalled to or promoted to
                  his former position. In such instance the employee affected
                  will be reinstated with his previous accumulated Departmental
                  seniority.

         (c)      Employees shall be recalled to the plant on the basis of
                  Departmental or Plant seniority, subject to Article 14.01(a)
                  depending on where the vacancy occurs.

         (d)      Benefits

                  All benefit plans shall immediately be reinstated upon the
                  recall of an employee.

         (e)      It shall be the duty of all employees to notify the Company
                  promptly of any change in their address or phone number. If an
                  employee fails to do this, the Company will not be responsible
                  for failure to contact the employee.

14.06    Departmental Organization

                  The parties recognize the following two departments for
                  seniority purposes in matters of permanent promotions,
                  demotions, layoffs, recalls and transfers:

                           1)       Production Department

                           2)       Maintenance Department

                                                                              11
<PAGE>   15

The lines of progression shall be as follows:

                                  [FLOW CHART]

14.07    Promotions

         (a) Permanent promotions in established lines of progression will take
         place with Departmental seniority governing subject to Article
         14.01(a). The positions outlined in Article 14.06 that are excluded
         from lines of progression shall be subject to posting provisions. (See
         Article 14.08)

         (b) It is understood that promotion to the position of Tradesman can
         only be done through the apprenticeship program as outlined in Article
         25, or through the promotion of a qualified person.

         (c) In the event that an employee declines to exercise his Departmental
         seniority to step up to the next position in his Department, whether
         permanently or temporarily, to which he would otherwise have been
         entitled by virtue of Departmental seniority, ability and
         qualifications, he will no longer be able to exercise his Departmental
         seniority to obtain a job senior to the employee who bypassed him. A
         refusal to step up to the next position in the line of progression
         shall be recorded and a copy sent to the Union.

         (d) 4th Class Stationary Engineer's Certificate (Permanent 4th Class
         Certificate)

                  1) Upon permanent shutdown of the current boiler and temporary
                  low pressure boiler, a permanent certificate is not a
                  requirement for the purpose of promotion in the production
                  department. It is understood and agreed that production
                  department seniority as of the boiler(s) shutdown date
                  prevails, in accordance with Article 14.07(c).

                  2) Present Brine Operators and Relief Brine Operators have the
                  option to obtain their permanent 4th Class certificate as per
                  Article 14.07(d)3 iv). Upon successful completion of a
                  permanent 4th Class certificate the Brine Operator / Relief
                  Brine Operator will receive the steam ticket rate when working
                  as a Brine Operator.

                                                                              12
<PAGE>   16

                  3) Should the need arise in the future for a permanent 4th
                  Class certificate because of physical plant changes, the
                  following will apply:

                           i) A permanent 4th Class certificate is required for
                           the permanent positions of Cell Operator & Crystal
                           Operator. The Relief & Temporary Crystal Operators
                           will also require a permanent 4th Class certificate.

                           ii) In order to assist an employee who is promoted to
                           the position of temporary or permanent Cell Operator,
                           he will be supported in his application for a
                           temporary 4th Class certificate. He will be required
                           to obtain a permanent 4th Class certificate within 12
                           months. This may be extended to 15 months if he has
                           attempted and failed his exam in the first 12 months.
                           This also applies to Relief, Temporary, or Permanent
                           Crystal Operators.

                           iii) If after the 15 months, or after 12 months if no
                           attempt is made to write the exam, he shall be
                           demoted to a position not requiring a permanent 4th
                           Class certificate.

                           iv) In order to assist a production employee to
                           obtain a permanent 4th Class certificate (to study
                           and write the necessary material and exam) he will be
                           allowed paid time off to a maximum of 84 hours. This
                           will also include employees who, prior to 1994, have
                           previously been given the opportunity to write the
                           exam for a permanent 4th Class certificate.

14.08    Postings

         Permanent vacancies in the following job classifications will be posted
         and shall be filled on the basis of Plant seniority subject to 14.01(a)
         and Article 14.07.

                  (1)      Brine Operator

                  (2)      Maintenance Helper

                  (3)      Storesperson

                  (4)      Tradesperson

         Notice of permanent vacancies within the scope of the agreement will be
         posted for twelve (12) days, on the bulletin boards. During this time,
         applications may be made to the Administration Manager.

14.09    Temporary Openings

         Temporary openings in the Production Department will be divided into
         two (2) categories, namely:

                  Type "A" having a duration in excess of three (3) months, and
                           will be applicable only in cases of extended leave of
                           absence and long term sickness or disability.

                  Type "B" having a duration of up to three (3) months to cover
                           vacation relief, short term illness and short term
                           absence.

         Type "A" openings will be filled in the same manner as that outlined in
         Article 14.06 for permanent openings. However, in the event that the
         circumstances which caused the opening, return to normal, then the
         temporary position will cease to exist. The accrual of Departmental
         seniority in such cases will be governed by Article 14.01.

                                       13
<PAGE>   17

         Type "B" openings may be filled by employees in the lowest
         classification within the respective Department, out of line of
         Departmental seniority and subject to Article 14.01(a), to meet the
         continued and efficient operation of the Plant.

         The Company, in administering Type "A" openings, will estimate the
         expected duration of an opening without prejudice, from the information
         available.

14.10    Transfers

         (a) In the case of permanent transfer from one Department to another,
         Plant seniority shall govern subject to the provision of Article
         14.01(a).

14.11    Demotions

         (a) Demotions resulting in bumping in the recognized Departments for
         whatever reason inclusive of layoffs, shall take place in reverse
         progression to that outlined in Article 14.06 with accumulated
         Departmental seniority governing subject to Article 14.01(a). It is
         understood that Maintenance employees in such instance shall exercise
         Departmental seniority to displace only those employees in the
         Maintenance Helper and Storesperson positions.

         (b) An employee who is demoted, within his Department, either
         voluntarily or for inability to perform the work shall not be entitled
         to exercise Departmental seniority to move up to a higher job
         classification. If the cause for the demotion has been corrected the
         employees' previous Departmental seniority will be reinstated.

14.12    Seniority Lists

         The company shall, within thirty (30) days of the date on which this
         Agreement is signed, furnish the Union with two (2) copies of a list
         showing the Plant and Departmental seniority of each employee then on
         the payroll and will thereafter revise such list each six (6) months.

14.13    Any employee promoted to a supervisory or staff position which removes
         him from the Bargaining Unit shall retain and accumulate his Plant and
         Departmental seniority within the Bargaining Unit for a period of up to
         twelve (12) months following this promotion. The employee will continue
         to pay the prescribed union dues while he maintains his seniority
         within the Bargaining Unit. If during this twelve (12) month period
         such employee is transferred back to the Bargaining Unit, he shall
         exercise his accumulated Plant and Departmental seniority in returning
         his to his former job. Any extension of the above shall be by mutual
         agreement and limited to two (2) month intervals.

                                                                              14
<PAGE>   18

                                   Article 15
                               GRIEVANCE PROCEDURE

15.01    A grievance is any difference of opinion or dispute with respect to the
         interpretation, application or alleged violation of this Agreement. A
         grievance must be presented in the following manner.

15.02    Step No. One (1)

         If an employee has a complaint, that employee alone or accompanied by a
         shop steward shall submit the complaint to his Department Manager. The
         Department Manager shall render his decision to the employee within the
         following ten (10) calendar days. If the decision is not satisfactory
         the complaint shall be reduced to writing as a grievance.

15.03    Step No. Two (2)

         If a settlement is not reached as outlined above, the grievance,
         reduced to writing, shall be submitted to the employee's Department
         Manager within fourteen (14) calendar days following receipt of the
         Department Manager's step one (1) decision. A meeting between the Union
         Standing Committee, the grievor and the Department Manager shall take
         place within fourteen (14) calendar days following the submission of
         the written grievance. The Department Manager shall render his written
         decision within fourteen (14) calendar days following the step two (2)
         meeting.

15.04    Step No. Three (3)

         If the written decision of the Department Manager is not accepted, the
         Union Standing Committee may within fourteen (14) calendar days submit
         the grievance to the Plant Manager. A further meeting shall be held
         between the Union Counsellor and/or an officer of the National Union,
         the Union Standing Committee and the Plant Manager or his designate.
         The Plant Manager shall render his written decision within fourteen
         (14) days following the step three (3) meeting.

15.05    If the decision of the Plant Manager is not accepted the Union may
         refer the grievance to arbitration.

15.06    Notice of reference to arbitration specifying the matter or matters to
         be arbitrated shall be given in writing to the other party within
         forty-five (45) calendar days after the rendering of the decision by
         the Plant Manager.

15.07    The Company or Union may submit a Policy Grievance which directly
         affects the interests of the party to the Collective Agreement and
         shall not be administered as an employee grievance.

         The Policy Grievance may be submitted within thirty (30) working days
         from the date of occurrence of the incident giving rise to the
         grievance. The recipient of the grievance shall render a decision in
         writing within thirty (30) working days of receipt of the grievance.

         The Policy Grievance shall be submitted at Step No. Three (3) of the
         Grievance Procedure.

15.08    In the event that either of the parties does not take a grievance to
         the next higher step within the time limits set out above the grievance
         shall be deemed to have been withdrawn. If the recipient of the
         grievance fails to respond within the time limits set out above, the
         grievance shall be deemed resolved in favor of the grieving party.

                                                                              15
<PAGE>   19

15.09    A grievance shall be presented as soon as practicable after the
         occurrence causing the grievance

15.10    When an agreement has been reached between the Company and the Union at
         any stage of the grievance procedure it shall be put in writing and it
         shall be final and binding on both parties.

15.11    Nothing in this agreement shall be construed to prevent any employee
         from presenting any complaints on his own behalf directly to the
         Company or to prevent the Company from making adjustments in respect of
         such individual complaints not inconsistent with the terms and
         provisions of this agreement.

15.12    The time limit between steps may be extended by mutual consent. All
         time extensions must be confirmed in writing.

                                   Article 16
                                   ARBITRATION

16.01    A grievance which has not been settled after being carried through the
         steps of the Grievance Procedure may be referred to Arbitration in
         accordance with the following procedure.

16.02    When notice is given in accordance with Article 15.06 the party giving
         the notice shall, at the same time, in writing, nominate an arbitrator.

16.03    Within seven (7) days thereafter the other party shall nominate an
         arbitrator and so advise the other party in writing within the said
         delay.

16.04    The two nominees shall endeavour to select a third person who shall act
         as chairman.

16.05    In all matters of procedure not covered by the provisions of this
         section, including alternating procedures for the selection of a third
         arbitrator the provisions of the Labour Relations Code of British
         Columbia (1993) shall apply.

16.06    The Arbitration Board shall have jurisdiction to interpret the
         provision of this Agreement in so far as shall be necessary to the
         determination of the grievance, but shall not have jurisdiction or
         authority to alter in any way, add to, subtract from or modify any of
         the terms hereof, nor make any decision inconsistent with the
         provisions of this agreement.

16.07    The decision of the Arbitration Board shall be final and binding upon
         the parties hereto and the employee or employees concerned.

16.08    Each of the parties shall bear equally the expense of the Chairman of
         the Arbitration Board.

16.09    The parties hereby request the Arbitration Board to render its decision
         as expeditiously as possible.

16.10    The award of the Arbitration Board shall not be made retroactive to a
         date prior to the date on which the grievance was submitted in writing
         as provided for in the Grievance Procedure.

                                                                              16
<PAGE>   20

16.11    The Company and the Union may be mutual agreement, elect a single
         arbitrator instead of a three-man arbitration board, and the powers of
         the single arbitrator shall be the same as those of the board of
         arbitration pursuant to this article.

                                   Article 17
                         DAYS OFF AND SCHEDULE OF SHIFTS

17.01    The employer will normally designate consecutive regular days off for
         each regular employee.

17.02    When extensive changes to the schedule are necessary the Company will
         so notify the Union in advance whenever practical, and will welcome
         discussion with the Union Standing Committee.

17.03    Employees may change their day or days off by mutual agreement with the
         supervisor of the department concerned provided such change shall not
         involve additional cost to the company.

17.04    Employees will normally not be scheduled to work six (6) consecutive
         days in a two week period. The exception being that if the shift
         schedule is altered significantly as a result of layoff, plant
         shutdown, etc., this may not always be possible.

         (a) Relief Brine Operators/Labourers (assigned to the Production
         Department) shifts may be changed at anytime provided the employee is
         given 24 hour notice prior to shift change. Every effort will be made
         to give the employee as much notice as possible.

                                   Article 18
                                    VACATIONS

18.01    It is hereby understood and agreed that in the application of the
         following provisions governing vacations and vacation pay, no employee
         shall be treated less favourably than is provided for under the "Annual
         Holidays Act". (R.S.B.C. 1980) SBC Chap.10 - #36.

18.02    The Vacation year shall be the twelve (12) months commencing on May 1st
         and ending the following April 30th. However, for the purposes of
         calculating vacation pay only May 1st shall be interpreted as being the
         end of the last pay period in April.

18.03    Management will co-operate in arranging vacation time to suit each
         employee. However, the scheduling of vacation time is to be decided by
         Management. Management will give consideration to requests for vacation
         dates on the basis of plant seniority, provided such requests are made
         before March 1st for the current year. However, it is understood that
         no employee can exercise seniority rights over less senior employees in
         the scheduling of more than two (2) weeks vacation during the period
         June 15th to September 15th.

18.04    Vacations are not cumulative and must be taken annually within the
         vacation year as defined in 18.02. However, the Company may extend the
         vacation year due to extenuating circumstances and as mutually agreed
         at the request of an employee.

18.05    No employee may continue to work and draw vacation pay in lieu of
         taking his vacation.

                                                                              17
<PAGE>   21

18.06    Vacation pay will be paid by direct deposit to an employee's account on
         a weekly basis as vacation is taken. The company may grant vacation pay
         in advance due to extenuating circumstances and as mutually agreed at
         the request of the employee.

18.07    Employees of the Company shall receive their vacation with pay
         entitlement exclusive of recognized holidays to which they are entitled
         under Article 7 of this Agreement.

18.08    When services of an employee are terminated for any reason, he shall
         receive vacation pay for the vacation earned but not taken, computed as
         4% of his total earnings for the period during which vacation was
         earned. An employee who qualifies for vacation under 18.12 will be paid
         6% of his total earnings on termination, those who qualify for
         vacations under 18.13 will be paid 8% of their total earnings on
         termination, and those who qualify for vacation under 18.14 will be
         paid 10% of their total earnings on termination, those who qualify for
         vacation under 18.15 will be paid 12% of total earnings on termination,
         and those who qualify under 18.16 will be paid 14% of total earnings on
         termination.

18.09    The following shall be considered as time worked (maximum 9 1/3 hours
         per day and 37 1/3 hours per week) for the purpose of qualifying for a
         vacation.

         (a)      Time lost as a result of an accident as recognized by the
                  Worker's Compensation Board.

         (b)      Time, not exceeding one year, lost as a result of a
                  non-occupational accident or illness, provided that the
                  employee has completed the probationary period as outlined in
                  Article 14.02, and that he returns to his employment.

         (c)      Time spent on earned vacations.

         (d)      Time spend on holidays as defined in Article 7 of this
                  Agreement.

         (e)      Time absent from work because of Jury Duty or as a subpoenaed
                  witness.

         (f)      Time absent from work because of a death in family.

         (g)      Time absent from work on approved leaves of absence.

18.10    Employees employed by the Company on May 1st of any year and who have:

         (a) Less than twelve (12) months continuous service and do not qualify
         under 18.11 below will be granted one quarter (1/4) of a day's vacation
         with pay for each full week of work performed in the immediately
         preceding vacation period. No vacation of less than one (1) day, nor
         more than eight (8) days will be granted under this provision.
         Fractional entitlements will be rounded off to the nearest full day;
         e.g.: an employee with three and one-quarter (3 1/4) days vacation
         credit will be granted three (3) days vacation; whereas, an employee
         with three and one-half (3 1/2) or three and three quarters (3 3/4)
         days vacation credit will be granted four (4) days vacation. Pay for
         such vacations will be computed at four per cent (4%) of the employee's
         actual earnings during the vacation period in which the vacation was
         earned.

                                                                              18
<PAGE>   22

18.11    Employees on the payroll of the Company on May 1st who have 1400 hours
         continuous service have qualified for a first vacation and shall be
         granted two (2) weeks vacation with pay. Pay for such two-week vacation
         shall be four per cent (4%) of the employee's actual earnings during
         the vacation period in which the vacation was earned, or two weeks base
         pay computed on the basis of the employee's regular job rate at the
         time he goes on vacation, whichever is greater.

18.12    Employees on the payroll of the Company on May 1st who qualify for a
         second vacation shall be granted three (3) weeks vacation with pay. Pay
         for such three-week vacation shall be six per cent (6%) of the
         employee's actual earnings during the immediately preceding vacation
         period, or three weeks base pay computed on the basis of the employee's
         regular job rate at the time he goes on vacation, whichever is greater.

18.13    Employees on the payroll of the Company on May 1st who qualify for a
         7th vacation shall be granted four (4) weeks vacation with pay. Pay for
         such four-week vacation shall be eight per cent (8%) of the employee's
         actual earnings during the immediately preceding vacation period, or
         four weeks base pay computed on the basis of the employee's regular job
         rate at the time he goes on vacation, whichever is greater.

18.14    Employees on the payroll of the Company on May 1st who qualify for a
         15th vacation shall be granted five (5) weeks vacation with pay. Pay
         for such five-week vacation shall be ten per cent (10%) of the
         employee's actual earnings during the immediately preceding vacation
         period, or five weeks base pay computed on the basis of the employee's
         regular job rate at the time he goes on vacation, whichever is greater.

18.15    Employees on the payroll of the Company on May 1st who qualify for a
         24th vacation shall be granted six (6) weeks vacation with pay. Pay for
         such six week vacation shall be twelve per cent (12%) of the employee's
         actual earnings during the immediately preceding vacation period, or
         six weeks base pay computed on the basis of the employee's regular job
         rate at the time he goes on vacation, whichever is greater.

18.16    Employees on the payroll of the Company on May 1st who qualify for a
         30th vacation shall be granted seven (7) weeks vacation with pay. Pay
         for such seven week vacation shall be fourteen per cent (14%) of the
         employee's actual earnings during the immediately preceding vacation
         period, or seven weeks base pay computed on the basis of the employee's
         regular job rate at the time he goes on vacation, whichever is greater.

18.17    For the purpose of calculating vacation pay, actual earnings shall not
         include profit sharing earnings.

                                                                              19
<PAGE>   23

18.18    After completing the necessary period of continuous service with the
         Company, an employee shall, in addition to the regular vacation to
         which he is entitled, become eligible to receive a Supplementary
         Vacation with pay as set forth below:

<TABLE>
<CAPTION>
                  Year of Completed Continuous Service                          Supplementary Vacation
                  ------------------------------------                          ----------------------
<S>                                                                             <C>
                           After  5 years                                               1 week
                           After 10 years                                               2 weeks
                           After 15 years                                               2 weeks
                           After 20 years                                               2 weeks
                           After 25 years                                               2 weeks
                           After 30 years                                               2 weeks
</TABLE>

                  (a)      The Supplementary Vacation must be taken within five
                           (5) years of the employee's becoming eligible or
                           before his becoming eligible for his next earning
                           period of Supplementary Vacation as above, whichever
                           comes first.

                  (b)      For the purpose of determining eligibility for
                           Supplementary Vacation, an employee's service shall
                           be calculated from the date of his joining the
                           Company.

                  (c)      The Supplementary Vacation may be taken in
                           conjunction with the regular vacation to which the
                           employee is entitled, subject to Article 18.03.

                  (d)      One week's Supplementary Vacation pay shall be equal
                           to 37 1/3 hours at the straight time hourly rate of
                           the employee's regular job.

                  (e)      At retirement or termination from the Company an
                           employee who has qualified for Supplementary Vacation
                           shall be entitled to that portion of Supplementary
                           Vacation Pay proportionate to the number of years of
                           service completed subsequent to his last five-year
                           entitlement period.

                                   Article 19
                               TEMPORARY EMPLOYEES

19.01    A temporary employee shall be an employee who is hired to fill a
         temporary labour need, be it skilled or unskilled.

19.02    He shall be considered a temporary employee for up to one year.

19.03    The company will notify the Union when a temporary employee is being
         hired.

19.04    All articles, with the exception of Article 14, will apply to temporary
         employees.

                                                                              20
<PAGE>   24

                                   Article 20
                        JOB CLASSIFICATIONS AND JOB RATES

20.01    Job classification during the term of this Agreement shall be in
         accordance with Appendix "A" appended hereto.

20.02    Job rates as detailed in Appendix "A" will be made effective December
         1, 1997 and will remain in effect until November 30, 2000.

                                   Article 21
                              WAGE RATE ADJUSTMENTS

21.01    Job rate shall be defined as the wage rate for any job classification
         as listed in Appendix "A", "Job Classifications and Job Rates" and
         excludes all premium pay, bonuses, shift differentials and allowances
         of any type or kind.

21.02    Should the Company introduce a change(s) that will affect job content
         during the term of the Agreement, the following procedure shall apply:

              (a) The Company shall notify the Union as far in advance of the
                  change(s) as is practicable.

              (b) The Company shall describe the change(s) and provide an
                  estimate of the effect on Union members' jobs.

              (c) After an appropriate period from commissioning the change(s),
                  up to SIXTY (60) DAYS, a new rate will be settled by
                  discussion between the Company and Union Standing Committee.

              (d) The Company agrees that failure to resolve any differences
                  there may be after discussions, may result in the Union filing
                  a grievance, as herein provided, alleging that the new rate is
                  incompatible with relevant internal and external comparisons.

         The company agrees that any change in the new rate that may result from
         grievance procedure, discussions, or from an arbitration decision will
         be made retroactive to the date on which the new rate was first applied
         or the date on which the job changed, whichever first occurs.

21.03    If an employee is temporarily transferred to a job paying a higher rate
         he shall be paid the higher rate.

21.04    It is understood that when an employee is being trained for a higher
         paying job he shall receive this regular job rate.

                                                                              21
<PAGE>   25

                                   Article 22
                            OVERTIME AND PREMIUM TIME

22.01    Overtime

         Overtime shall be either all authorized time worked in excess of nine
         and one third (9-1/3) hours in a twenty-four (24) consecutive hour
         period, starting when an employee reports for work; or, all hours
         worked in excess of thirty seven and one third (37-1/3) hours in any
         one week except in the case of those employees assigned to the 12-hour
         shifts when overtime shall be all hours worked in excess of 12 hours in
         a 24 consecutive hour period, starting when an employee reports for
         work, or all hours worked in excess of 36 or 48 hours per week
         depending on whether such 36 or 48 hours per week fall into the regular
         schedule of 3 days on and 3 days off.

              (a) IN THE EVENT THAT AN EMPLOYEE IS REQUIRED TO WORK OVERTIME
                  HOURS THAT RUN CONTINUOUSLY FROM THE END OF HIS SHIFT, HE MUST
                  BE GIVEN A MINIMUM OF EIGHT (8) HOURS OFF, BEFORE STARTING HIS
                  NEXT SHIFT. ANY STRAIGHT TIME EARNINGS LOST AS A RESULT WILL
                  BE PAID TO THE EMPLOYEE AFFECTED.

              (b) In the event an employee is called in to work overtime hours
                  that occur in, or extend into, the period between 2330 Hrs.
                  and 0700 Hrs. (or 0630 Hrs) when such employee is scheduled to
                  report for work at 0700 Hrs. (or 0630 Hrs), when the time
                  worked in this period is one or more hours the employee will
                  not be required to report for work for a period past 0700 Hrs.
                  (or 0630 Hrs) equivalent to the hours worked during the 2330
                  Hrs. to 0700 Hrs. (or 0630 Hrs) period, straight time earnings
                  lost as a result will be paid the employee affected.

22.02    In those weeks when a day worker works a scheduled 37 1/3 hour week,
         hours in excess of 37 1/3 hours shall be paid at overtime rates.

22.03    All authorized overtime shall be paid at double time.

22.04    For the purpose of avoiding pyramiding of overtime, hours compensated
         for at overtime or premium time rates shall not be counted further for
         any purpose in determining overtime liability under the same or any
         other provision.

22.05    Shift Premiums shall not be included when computing pay for overtime.
         Sunday Premiums shall not be included when computing pay for overtime.

22.06    Time exchanged between employees, hours worked as a result of shift
         change, shall be paid for at the regular straight time hourly rate of
         the employee scheduled to work at that time plus shift differential
         applicable to the time worked. Such changes must have the approval of
         the supervisor concerned.

22.07    Where an employee's shift schedule is changed with less than 48 hours
         notice then the employee will be paid overtime for the first shift
         worked (except as noted in 17.04(a)).

22.08    Sunday Premium

         A premium of $1.68 per hour shall be paid to all workers for work
         performed on Sunday which shall be known as "Sunday Premium".

                                                                              22
<PAGE>   26

22.09    Shift Differentials

         (a)   A differential of One Dollar and Forty Four cents ($1.52) per
               hour for all hours worked on scheduled evening night shifts
               between the hours of 1830 hrs. and 0630 hrs.

         (b)   An employee working on a regularly scheduled night shift shall
               continue to receive the shift differential for overtime worked
               beyond 0630 hrs.

22.10    In the event that an employee is called in and reports to work at least
         one full shift before his regular starting time he shall continue to
         receive overtime rates if he is asked to continue on into this regular
         shift.

22.11    A hot meal, value of $12.50 shall be provided for any employee called
         in to work four (4) hours or more on a scheduled day off or if less
         than 24 hours notice is given, or for two (2) hours or more if these
         overtime hours are continuous with his regular scheduled hours, and
         every four hours thereafter.

         In the latter case, depending on the urgency of the work involved, the
         meal may be taken prior to or during the overtime period provided the
         actual time worked is two (2) hours or more.

         When a maintenance employee is called in to work, he will receive the
         hot meal allowance after four (4) hours of work and every (4) hour
         hours thereafter, until the completion of the work.

         Meal vouchers will be included on the pay cheque and be a taxable
         benefit.

                                   Article 23
                                  JURY DUTY PAY

23.01    The Company will pay an employee called for Jury Duty or as a
         subpoenaed witness, the difference between the jury duty or witness pay
         and his straight time pay, provided he works his regular shift when not
         performing such jury or witness service. The employee will be required
         to furnish proof of performing such service and such duty pay received.

                                   Article 24
                                BEREAVEMENT LEAVE

24.01    In the event of a death of a member of an employee's immediate family,
         the employee will be allowed a reasonable time off. The Company will
         pay such employee his straight time pay for any of his scheduled
         working days lost immediately following the death, up to a maximum of
         three (3) days to attend the funeral. If the employee is unable to
         attend such funeral, he will be allowed one (1) day off for personal
         reasons for which he will be reimbursed, at this straight time rate for
         any wages lost during such absence.

         "Immediate Family" means Father, Mother, Child, Spouse, Brother,
         Sister, SPOUSE'S Father, SPOUSE'S Mother, Step-Father, Step-Mother,
         Step-Children, Grand Parents and Grand Children, SON'S SPOUSE and
         DAUGHTER'S SPOUSE.

                                                                              23
<PAGE>   27

                                   Article 25
                       MAINTENANCE DEPARTMENT APPRENTICES

25.01 Appendix "B" attached hereto and entitled "Maintenance Apprenticeship"
shall be part of this agreement.

                                   Article 26
                           SUSPENSION AND/OR DISCHARGE

26.01    When in the opinion of the Company disciplinary action involving
         suspension or discharge become necessary the Union shall be notified of
         that intent and the reasons therefore, prior to the action, if such
         prior notification is practicable. Further the Company welcomes
         pertinent discussion with the Union about the suspension or the
         discharge prior to that action when practicable.

26.02    In the event that an employee has been discharged and it is alleged
         that he has been unjustly dealt with the grievance procedure may be
         used. The grievance must be submitted to the Company in writing within
         seven (7) days of the discharge and in such cases steps one and two of
         the grievance procedure shall be omitted.

                                   Article 27
                                LEAVE OF ABSENCE

27.01    The Company will consider granting a leave of absence to employees for
         personal reasons consistent with the continued and efficient operation
         of the plant, and provided there is a minimum of disruption to fellow
         employees.

27.02    The length of such leave of absence in any one year shall be:

              (a) Those employees with more than one year's service but less
                  than five year's service - up to one week.

              (b) Those employee with more than five year's service - up to one
                  month.

         However under extenuating circumstances, the Plant Manager may alter
         the above conditions at his sole discretion.

27.03    Such leave of absence shall be without remuneration.

27.04    A leave of absence must be applied for in writing.

27.05    It will be the responsibility of the employee to arrange with the
         Company for the payment, suspension, or other disposition, of the
         Company sponsored welfare plans at the time of applying for such leave
         of absence.

27.06    No employee will be granted a leave of absence to accept other
         employment. It is understood, however, that other employment does not
         include duties as elected union officers, elected political
         representative, (i.e.: M.L.A., M.P., Councillor, Mayor, etc.), or other
         such assignments, for which remuneration may be paid.

                                                                              24
<PAGE>   28

27.07    The following specific exceptions will be made to the above were a
         leave of absence is granted by the Company to an employee in order that
         he may accept an elected Union or political office (as in 27.06 above).

         (a)  It is agreed that an employee who is elected or appointed to Union
              office shall be granted sufficient leave in order to perform the
              duties of the position. The length of such leave of absence may be
              up to one year or for the elected term.

         (b)  The employee will continue to accumulate seniority.

27.08    Parental leave as outlined in the Employment Standards Act.

                                   Article 28
                                   COMMITTEES

28.01    The Company shall appoint a Company Standing Committee of three (3)
         individuals which shall represent the Company.

28.02    The Union shall elect from its membership of employees at Sterling Pulp
         Chemical's North Vancouver plant a Union Standing Committee of three
         (3) which shall represent the Union for the purpose stated in this
         Agreement.

28.03    (a) The Company and Union Standing Committee shall meet quarterly to
         discuss items of mutual interest. The agenda for each meeting shall
         consist of the following items.

               i)     Safety

               ii)    Changes to the plant that will affect Union members. Where
                      the change(s) is significant. Workers for the affected
                      areas will be included to provide their input in
                      subsequent discussions.

               iii)   Other items.

         (b) Minutes of these meetings shall be distributed for signatures
         within one (1) week after the meeting.

                                   Article 29
                                    TRAINING

29.01    The Company recognizes its responsibility to ensure that its employees
         are adequately trained to perform their jobs in a satisfactory manner.
         The Company will institute a training program for all Production
         employees under the direction of the Production Manager or his
         appointee so that the opportunity will be given to each employee to
         perform his job satisfactorily and to satisfactorily perform the duties
         of the next higher job classification. The Union recognizes that it is
         to the mutual benefit of both parties to have an adequately trained
         workforce.

                                                                              25
<PAGE>   29

                                   Article 30
                    TECHNOLOGICAL CHANGE AND TERMINATION PAY

30.01    The Company will endeavour to give as much prior notice of
         technological change however, not less than 90 days before the date on
         which the technological change is to be effected.

         The notice of technological change shall be in writing and shall state:

              (a)    Nature of the technological change.

              (b)    Date of which technological change will be effected.

              (c)    Approximate number and type of employees likely to be
                     affected by the technological change.

         If the Company and Union are unable to resolve their differences
         regarding technological change, final and conclusive settlement,
         without work stoppage, shall be by arbitration or another method agreed
         to by the parties.

30.02    The Company agrees to pay termination pay to employees permanently laid
         off because of plant closure, automation, technological change,
         modernization or for economic reasons at the rate of pay of two (2)
         weeks pay per year of service. In the event of plant closure the
         Company agrees to negotiate with the Union the termination payout. The
         Company also agrees to cooperate with the Government to minimize the
         impact of plant closure.

         The terms of payout shall be defined as:

              (a)    Initial payment conforming to provisions of the Employment
                     Standards Act.

              (b)    Remainder, if applicable, on expiry of recall rights.

              (c)    A laid off employee may request in writing payment of his
                     termination pay after three (3) months on layoff providing
                     the employee agrees in writing to waive his remaining
                     recall rights.

30.03    When an employee is terminated as a direct result of plant closure,
         automation, and/or technological change, Management will assist the
         Union in communicating with Canada Manpower to advise them of the
         suitability of the employee for re-training and re-location in another
         job, and request that they use their facilities for this purpose.

         In the event of plant closure, the company will endeavor to give as
         much prior notice as possible, however, not less than 90 days.

30.04    The Company agrees to retrain those employees whose jobs cease to exist
         due to Modernization or Expansion, for other jobs within the plant.

         This excludes employees who are laid off or terminated and does not
         obligate the Company under the Maintenance Apprenticeship program.

                                                                              26
<PAGE>   30

                                   Article 31
                            CONTINUOUS 12-HOUR SHIFTS

         The parties hereto agree to the following terms and conditions relating
         to the continuous rotating shift schedule, as hereafter defined.

31.01    The work schedule considered herein will be applicable to The Job
         Classifications, currently on the existing continuous rotating shift
         schedule, in the Production Department.

31.02    The shift schedule is as per Appendix D.

31.03    Upon converting to a revised schedule and during the first week under
         it, no premiums will be paid to an employee for the sole reason of
         transferring from one standard work week to another standard work week.

31.04    Each employee's pay will be calculated on a weekly basis. However, if
         an employee wishes, the Company will hold back a fixed amount each week
         the employee works in excess of 36 hours, to be paid to the employee at
         the time he gets his "9 days off". It is clearly understood that this
         holdback of pay will not be flexible, and will only be paid to the
         employee when he takes his scheduled 9 days off.

31.05    Vacations will be allotted on a weekly basis and will be paid on a
         37 1/3 hr. basis.

                                   Article 32
                               HEALTH AND WELFARE

32.01    Benefits of hourly-paid employees during the term of this Agreement
         shall be in accordance with appendix "C" appended hereto. For full
         details refer to the current Sterling Pulp Chemicals Plan Texts and
         associated policies. For ease of reference, see the current Employees
         Benefits Program booklet.

32.02    E.I. Premium reduction will be applied to funding the benefits package.

32.03    For the purposes of Weekly Indemnity claims the waiting period will be
         "0" days for both illness and accidents and subsequently the claim will
         be paid on the first calendar day.

32.04    THE COMPANY WILL PAY ALL HEALTH AND WELFARE PREMIUMS FOR THE FIRST TWO
         YEARS DURING AN EMPLOYEE'S RECOVERY WHILE ON L.T.D.

                                   Article 33
                                  PENSION PLAN

33.01    a) There shall be a Pension Plan for all employees with contributions
         made by the Company, to provide for the needs of the employees upon
         retirement.

         b) PENSION BENEFITS ARE INCREASED FROM $41.00/MONTH/YEAR TO
         $43.00/MONTH/YEAR DECEMBER 1, 1998 AND BENEFIT INCREASES TO
         $45.00/MONTH/YEAR DECEMBER 1, 1999.

         c) Spousal Pension - Effective December 1st, 1994 the spousal benefit
         is 60% for all years of service.

                                                                              27
<PAGE>   31

                             LETTER OF UNDERSTANDING

Credited service for future retirees is calculated from day one, provided the
employee has satisfied the probation period (40 working days). All other terms
as per Plan Text.

                           EARLY RETIREMENT PROVISION

I   Effective September 8, 1992, retirement at 60 years of age with 20 years of
    service with no reduction.

    Effective December 1st, 1994 the following reduction from age 60 to 55 with
    20 years service apply (.41667%/month reduction to age 55)

<TABLE>
<CAPTION>
                           Age                         Years of Service                 Reduction
                           ---                         ----------------                 ---------
<S>                                                    <C>                              <C>
                           65                                 20                             0%
                           64                                 20                             0%
                           63                                 20                             0%
                           62                                 20                             0%
                           61                                 20                             0%
                           60                                 20                             0%
                           59                                 20                             5%
                           58                                 20                            10%
                           57                                 20                            15%
                           56                                 20                            20%
                           55                                 20                            25%
</TABLE>

II  Age 55-64 minimum of 10 years service -1/4 of 1% per month for each month of
    early retirement -/from 60 to 64 plus 1/2 of 1% per month prior to age of
    60 (55-60)

<TABLE>
<CAPTION>
                                    Current age of 60 (55 to 60) Schedule
<S>                                                       <C>
                                            65                 0%
                                            64                 3%
                                            63                 6%
                                            62                 9%
                                            61                12%
                                            60                15%
                                            59                21%
                                            58                27%
                                            57                33%
                                            56                39%
                                            55                45%
</TABLE>

                                                                              28
<PAGE>   32

III Age 55 to 64 - less than 10 years service - 1/2 of 1% per month for each
    month of early retirement prior to age 65.

<TABLE>
<CAPTION>
                                                  Schedule
<S>                                                           <C>
                                            65                 0%
                                            64                 6%
                                            63                12%
                                            62                18%
                                            61                24%
                                            60                30%
                                            59                36%
                                            58                42%
                                            57                48%
                                            56                54%
                                            55                60%
</TABLE>

         Bridging:

         a) Effective December 1, 1988 a bridging formula of $15.00 per month
         per year service will be available to those retiring between age 63 and
         65. A minimum of 10 years service is required for bridging.

                                   Article 34
                               BANKING OF OVERTIME

34.01    It is understood and agreed that the voluntary banking of overtime
         hours will involve no extra time or cost to the company, nor will it
         affect the smooth and efficient operation of the plant.

34.02    Time off in lieu of overtime will receive low priority and requires
         mutual agreement between supervisor and employee.

34.03    Overtime pay and/or hours may be banked.

34.04    Overtime hours may be banked to a maximum of thirty-six (36) hours at
         any one time.

34.05    Overtime pay may be banked with no maximum. Pay may be drawn out on any
         regular pay period. Balances in excess of 36 hours not withdrawn by
         September 30th of each year will be paid out in the following pay
         period.

34.06    Overtime pay may be taken when earned and hours banked.

                                                                              29
<PAGE>   33

                  APPENDIX "A" - JOB CLASSIFICATIONS AND RATES

<TABLE>
<CAPTION>
CLASSIFICATION                                         DEC. 1/96         DEC. 1/97         DEC. 1/98        DEC. 1/99
--------------                                         ---------         ---------         ---------        ---------
<S>                                                    <C>               <C>               <C>              <C>
TEMPORARY MAINTENANCE COORDINATOR (TMC)                 $28.70            $29.43            $30.22           $31.03
TRADESPERSON                                             26.69             27.42             28.21            29.02
STORESPERSON                                             23.00             23.73             24.52            25.33
MAINTENANCE HELPER                                       21.60             22.33             23.12            23.93
SENIOR RELIEF OPERATOR                                   26.69             27.42             28.21            29.02
CRYSTAL OPERATOR                                         26.69             27.42             28.21            29.02
CELL OPERATOR                                            26.57             27.30             28.09            28.90
BRINE OPERATOR (4TH CLASS STEAM TICKET)                  24.58             25.66             26.45            27.26
BRINE OPERATOR                                           24.11             25.19             25.98            26.79
RELIEF BRINE OPERATOR                                    21.60             22.33             23.12            23.93
LABOURER                                                 20.44             21.17             21.96            22.77
</TABLE>

<TABLE>
<S>                        <C>
         WAGE INCREASES:   DECEMBER 1/97  $0.73/HOUR; $0.35/HOUR RATE ADJUSTMENT FOR BRINE
                                          OPERATOR INCLUDED
                           DECEMBER 1/98  $0.79/HOUR
                           DECEMBER 1/99  $0.81/HOUR
</TABLE>

                           MULTI SKILLS / DUAL TRADES

1.       Multi Skills is defined as a plant recognized provincial TQ Ticket (as
         defined below) plus in house training for instrumentation, Level "C"
         Provincial Welding certificate or a BCIT Pipefitting Certificate
         Program (or equivalent) OR OTHER SKILLS RECOGNIZED BY THE UNION AND THE
         COMPANY AND SUPPORTED BY TQ TICKET, OR CERTIFICATE OF TRAINING, OR
         IN-HOUSE TRAINING.

2.       Dual Trades is defined as two plant recognized TQ qualifications (as
         defined below), a single plant recognized TQ ticket plus a Level "B"
         welding certificate or successful completion of a SAIT (or equivalent)
         correspondence course for instrumentation.

3.       Based on the needs of the plant, multi skills training will be provided
         to personnel meeting the necessary qualifications.

4.       Minimum qualifications is a provincial TQ ticket in at least one of the
         required trades:

                                    Electrician

                                    Instrument Mechanic

                                    Millwright

                                    Pipefitter

                                    Welder

5.       Employee must be presently active in one of the above trades.

6.       A selection board similar to Appendix "B" with a plant committee member
         representing the bargaining unit will determine who will receive the
         multi skills training.

7.       Such training does not preclude the possibility of hiring from outside
         the present bargaining unit for a dual trades person if such a
         tradesperson were required or needed at the plant.

8.       A $0.50/hr premium will be paid after successful completion of the
         training for the multi skilled position.

9.       An additional $0.50/hr premium will be paid for the dual trades
         position as defined in Section 2.

                                                                              30
<PAGE>   34

                                  APPENDIX "B"
                           MAINTENANCE APPRENTICESHIP

1.       PURPOSE

         To train Tradespersons of the highest calibre consistent with plant
         requirements.

2.       SCOPE

         The program will embrace the Electrical, Instrument Mechanic,
         Millwright, Pipefitter and Welder trades and will be run in conjunction
         with the B.C. Department of Labour Apprenticeship Training Branch.
         Other trades may be added in the future as required. It is intended
         that there will be no more than one apprentice in each trade at any one
         time.

*3.      STERLING PULP CHEMICALS APPRENTICESHIP BOARD
         (Otherwise known as "The Board")

         The Board will be established consisting of the Plant Manager,
         (Chairman), the Maintenance Manager, a member of the personnel
         function, and a Tradesperson employee of the designated trade involved
         to made the final selection of apprentices. Said Board will also review
         the progress of the apprentice from time to time and will be empowered
         to take appropriate action. The tradesperson employee member of the
         board will be appointed by the Plant Manager after due consultation
         with the Union.

4.       SELECTION OF CANDIDATES

         Candidates will be selected from interested employees, recent high
         school/technical school graduates, and graduates from accredited
         pre-apprenticeship training course. Psychological, I.Q. aptitude tests
         and other such aids may be used in assessing prospective candidates.
         Apprentices will be selected on the basis of ability, personality, and
         attitude.

5.       JOB SECURITY

         Apprenticeship training under this program does not constitute
         guaranteed employment to a graduate. He retains and accumulates
         seniority while employed as an apprentice, as spelled out in the Union
         Contract, and as such is treated as any other employee on graduation.

         Over and above any provisions in the B.C. Department of Labour
         Apprenticeship program for the termination of unsuitable candidates,
         and apprentice will be on probation for the first year and the Company
         retains the right to terminate the apprentice if, in the opinion of the
         "Board", the candidate is in any way unsuitable.

                                                                              31
<PAGE>   35

6.       PAY SCHEDULE

         The pay schedule for apprentices will be as follows:

<TABLE>
<S>                                 <C>
         1st 6 months      -        Labourer rate
         2nd 6 months      -        Mech. "A" Rate less 7/8 spread
                                    (Labourer rate to Tradesperson  rate)
         3rd 6 months      -        Tradesperson Rate less 6/8 spread
         4th 6 months      -        Tradesperson Rate less 5/8 spread
         5th 6 months      -        Tradesperson Rate less 4/8 spread
         6th 6 months      -        Tradesperson Rate less 3/8 spread
         7th 6 months      -        Tradesperson Rate less 2/8 spread
         8th 6 months      -        Tradesperson Rate less 1/8 spread
         On graduation     -        Tradesperson Rate
</TABLE>

         While an apprentice is in school the Company will make up his pay to
         his regular weekly pay less all government sponsored allowances
         available. Additional traveling and living expenses will not be paid.

         For the purpose of calculating the regular weekly pay for classroom
         training, the average weekly hours will be used, i.e.: 37 1/3 hours.

7.       PROGRAM

         On the job training will be done under the direction of the Maintenance
         Manager through skilled Tradesperson. The apprentice will be expected
         to perform useful tasks relating to maintenance in general and to a
         large degree his selected trade in particulate. In no circumstances is
         an apprentice to be considered a helper.

8.       TOOLS

         Apprentices will be expected to provide their own hand tools within a
         reasonable period of time.

9.       Apprentices will be considered as part of the bargaining unit and will
         become Union members as provided for in the Sterling Pulp Chemicals
         Union Contract. They shall be subject to the rights, privileges and
         responsibilities of full Union membership except as herein specified.

                                                                              32
<PAGE>   36

                                  APPENDIX "C"
                        BENEFITS OF HOURLY-PAID EMPLOYEES
                              NORTH VANCOUVER PLANT

<TABLE>
<CAPTION>
=================================================================================================================================
                                                                                                                   Extended
                         Weekly          Long Term                                            Medical               Health
                        Indemnity        Disability           Life           A D & D       Service Plan            Benefits
---------------------------------------------------------------------------------------------------------------------------------
<S>                   <C>          <C>                   <C>             <C>             <C>               <C>
Eligibility

                        3 Months          3 Months          3 Months         3 Months         1 Month             1 Month
---------------------------------------------------------------------------------------------------------------------------------
Benefits

                                            60%                                                            80% of 1st $1000/yr.
                                     Basic monthly wage                                    All medical,    100% above $1000/yr.
                           75%         DEC. 1/97 MAX.                                      Surgical and     Max. $100,000/ yr.
                       Hours lost          $5000             $85,000         $ 85,000       obstetrical     Renewable each year
---------------------------------------------------------------------------------------------------------------------------------
Deductible                                                                                                     $25/person or
                           --               --                 --              --               --            family per year
---------------------------------------------------------------------------------------------------------------------------------
Elimination Period     0-days acc.
                        0 day ill         26 weeks             --              --               --                  --
---------------------------------------------------------------------------------------------------------------------------------
Duration Period                              TO
                        26 weeks           AGE 65              --              --               --                  --
---------------------------------------------------------------------------------------------------------------------------------
Amount of Retirement                                     50% of benefit
                                                          $85000 Decr.
                           --               --           5%/Yr. min 25%        --               --                  --
---------------------------------------------------------------------------------------------------------------------------------
Retirement                 --               --                 --              --               --                  --
---------------------------------------------------------------------------------------------------------------------------------
Carrier                    SPC            SunLife           Sun Life         Sun Life         M.S.P.              M.S.A.

---------------------------------------------------------------------------------------------------------------------------------
SPC Pays                   90%              90%                96%             96%             100%                100%
---------------------------------------------------------------------------------------------------------------------------------
Employee Pays                                            First $1000 of    First $1000
                           10%              10%             coverage       of coverage          --                  --
---------------------------------------------------------------------------------------------------------------------------------
                                                                                            Last day of
Termination            Date active     As W.I. other      Death or date   Death or date     month which      Last day of month
                       employment    than sick, injury     employment       employment      employment       which employment
                         ceases       or vacation pay      terminates       terminates      terminates          terminates
---------------------------------------------------------------------------------------------------------------------------------
Vesting
                           --               --                 --              --               --                  --
=================================================================================================================================
</TABLE>

<TABLE>
<CAPTION>
========================================================================

                                  Dental                  Pension
------------------------------------------------------------------------
<S>                    <C>                      <C>
Eligibility                                              Probation
                                                       Period/40 Days
                               3 Months                then day one.
------------------------------------------------------------------------
Benefits                   100% Diagnostic          December 1, 1996
                        Preventive/Restorative       $41/Month/Year
                           75% Prosthetics            60% Spousal
                         50% Crowns, Bridges        DECEMBER 1, 1998
                           50% Orthodontics          $43/MONTH/YEAR
                             - $2,500.00            DECEMBER 1, 1999
                            Lifetime limit           $45/MONTH/YEAR
------------------------------------------------------------------------
Deductible               Amounts in excess of
                            B.C. fee guide                --
------------------------------------------------------------------------
Elimination Period
                                 --                       --
------------------------------------------------------------------------
Duration Period
                                 --                       --
------------------------------------------------------------------------
Amount of Retirement                              Benefit in effect at
                                                 retirement x years of
                                 --                     service
------------------------------------------------------------------------
Retirement                       --               Age 65; 60/20 years
------------------------------------------------------------------------
Carrier                      London Life            Standard Life /
                                                     Montreal Trust
------------------------------------------------------------------------
SPC Pays                         90%                      --
------------------------------------------------------------------------
Employee Pays
                                 10%                      --
------------------------------------------------------------------------

Termination             Last day of the month
                           which employment       Death or termination
                              terminates             of employment
------------------------------------------------------------------------
Vesting                                          After  2 years
                                 --              service in plan
========================================================================
</TABLE>

LETTER OF INTENT

Agreed to eliminate for the term of the agreement requirement for physician's
statement for absences due to non-occupational sickness or accident up to one
week. Physician's statement may be required at the discretion of the supervisor.

                                                                              33
<PAGE>   37

                             LETTER OF UNDERSTANDING

                           Supplementary Benefit Fund

The company (Sterling Pulp Chemicals) agrees to allocate the following amounts
of money to a trust fund to be set up by PPWC #5 for use as a supplementary
benefit fund for current and past members of the local.

Effective DECEMBER 1, 1997 the Company will contribute *$0.40/hour for regular
hours worked to the Fund; effective December 1, 1999 the Company will contribute
$0.42/hour for regular hours worked to the Fund.

Utilization/application of this supplementary benefit shall be at the discretion
of members of the local. The company will be kept informed as to application of
the fund.

This fund will not prejudice the Company reviewing the ad hoc increases to
retirees.

         *        Based on 37 1/3 Hrs/week. (For all employees.)

                                                                              34
<PAGE>   38

IN WITNESS WHEREOF we, the undersigned, have as the accredited representatives
                  of the respective parties to this Agreement hereunto set our
                  signatures this day of DECEMBER 1997.

For: STERLING PULP CHEMICALS, LTD.     For: PULP, PAPER & WOODWORKERS OF CANADA,
                                            LOCAL 5

----------------------------------     -----------------------------------------
         R.W. MacLeod                            D.R. Kibsey

----------------------------------     -----------------------------------------
         J.D. Kirichenko                         G.A. Hall

----------------------------------     -----------------------------------------
         T.N. Miller                             H.W. Weir

----------------------------------     -----------------------------------------
         T.Z. Szpytman,                          D. Starr

<PAGE>   39

                                LETTER OF INTENT

                                      FROM

                          STERLING PULP CHEMICALS, LTD.
                              NORTH VANCOUVER PLANT

                                       TO

                 PULP, PAPER AND WOODWORKERS OF CANADA, LOCAL 5

                      USE OF NON-BARGAINING UNIT PERSONNEL

It is the intention of Sterling Pulp Chemicals, Ltd., North Vancouver Plant not
to use non-bargaining unit personnel to perform work normally performed by
bargaining unit personnel.

It is recognized that there are occasions where contractors will be required:

a) as provided in Article 10.05 of the Labour Agreement and/or

b) when current bargaining unit crew size is not capable of handling such work
in a timely fashion.

Sterling Pulp Chemicals, Ltd. will review at quarterly Union Standing Committee
meetings the utilization of contractors performing normal bargaining unit work
to the exclusion of projects.

Sincerely,

Robert W. MacLeod
Plant Manager

Dated: November 7, 1997

<PAGE>   40

                           LETTER OF UNDERSTANDING FOR
                       TEMPORARY MAINTENANCE CO-ORDINATOR

The Company may as required need an employee to act as a Temporary Maintenance
Co-Ordinator (TMC). (The Maintenance Manager may or may not choose to utilize
the TMC.) The selection of the TMC will be offered to the maintenance employee
meeting qualifications of departmental seniority, plant recognized Provincial TQ
Ticket and ability to perform the work.

Ability to perform the work will be determined by having the employee perform
duties and evaluating his performance. Evaluation will be by the Maintenance
Manager, Production Manager and the Plant Manager with input from the Shop
Floor.

This position is not a full time position and may be implemented when the
Maintenance Manager is away from the site or as short term work load dictates.
The TMC will work on the tools only in an emergency situation.

The number of days will vary from one to five days per week with overtime paid
as per the collective agreement.

The role of the TMC is to perform work load co-ordinations and administration of
the department, so that all work is performed safely.

At no time can the TMC discipline or recommend disciplinary measures.

The regular rate of pay for the TMC will be $ 27.18/ hr effective December 1st.
1994. See Appendix "A".

------------------------                    -------------------------
Bob MacLeod                                 Dennis Kibsey
Plant Manager                               Plant Chairman

                                                                December 9, 1997

<PAGE>   41

                             LETTER OF UNDERSTANDING

                               RAIL CAR INSPECTION

The company, Sterling Pulp Chemicals Ltd., North Vancouver Plant and PPWC (Pulp,
Paper and Woodworkers of Canada) Local # 5 have agreed to transfer the
responsibilities of railcar inspections from the Maintenance Department to the
Production Department, effective January 18, 1999.

The responsibility for the repair of railcars will remain with the Maintenance
Department.

--------------------------                     ------------------------
Robert W. MacLeod, P. Eng.                     Greg Hall
Plant Manager                                  Plant Chairman

                                                                January 12, 1999

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