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                                   BOARD PAPER

                        SPECIAL BONUS PROGRAM - SYNERGIES

GOVERNANCE AND HUMAN RESOURCES COMMITTEE MEETING
APRIL 23, 2001

BACKGROUND

Should Project Deliver proceed, the focus of the Investment Community will
quickly shift to the promised synergies between the two companies. Capturing
these synergies will require the Executive and Key Operating Personnel of the
new company to work as a team to quickly and efficiently implement new operating
strategies. In addition to the usual operating challenges, managing
relationships with key stakeholders such as governments, communities, customers,
trade unions, special interest groups and our employees will be vital to the
success of the new Company. To achieve the transaction/reorganization-related
synergy goals, it is recommended that a Special Synergy Incentive Plan be
implemented.

MARKET PRACTICE

Our Executive Compensation Consultants - Towers Perrin, have found evidence that
companies do adopt compensation programs specifically designed to support the"
achievement of synergy goals. Since merger and acquisition transactions are all
unique, synergy compensation plans vary. Three plans have been implemented in
our industry recently - Abitibi-Consolidated Inc, Nexfor Inc., and Smurfit Stone
Container. All have the following elements in common:

DESIGN ELEMENT                 RECOMMENDATION

Eligibility:                   Careful selection of employees who have a
                               material impact on synergy results.

Pay for Performance:           Minimal payments for achieving normal synergies.

                               Rapidly increasing payments for achieving
                               extraordinary/stretch synergies.

                               Consider a total process time multiplier that
                               provides higher payments if synergies are
                               achieved in less time than anticipated.

Time Frame:                    Generally capped at two years.

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                                                                     NORSKE SKOG

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For example, when Abitibi acquired Stone Consolidated, a Synergy Achievement
Compensation Plan was implemented to reward employees who played a strategic
implementation role in achieving annualized synergies as part of the
amalgamation of the two companies. Approximately 300 employees were eligible to
earn significant bonuses if the Company achieved annualized synergies in excess
of $100 million, in increasing amounts until the stretch target of $200 million
was achieved. Synergy compensation payments were made on the basis of total
synergies achieved by the Company during the period June 1997 to August 1999. By
April 1999, the Company had achieved its stretch target of $200 million in
annualized savings. Total payments made under the plan were $33.3 million.

RECOMMENDATION

It is recommended that the Board approve a Special Synergy Incentive Plan which
will be in addition to the Base Salaries, Short Term Incentive Plan and Long
Term Incentive Plan that currently comprise Executive Compensation.
Approximately twenty executive and key management employees would participate in
the plan based on their ability to contribute to capturing the synergies. Key
aspects of the plan would be as follows:

         Target Payment:                 60% of Base Salary as of payment date

         Target Synergy:                 $60 million per annum

         Starting Date:                  Date of deal closure

         Payment:                        50% Cash
                                         50% Options

In addition to the base amount shown above, the plan would pay an additional 15%
of target for every additional $10 million per annum in synergies achieved, to a
maximum of twice Base Salary. The earliest a payout would be made is one year
after the inception of the plan. The calculation of synergies would be based on
cost savings to the Company as demonstrated in monthly run rates prior to the
payout.

The incentive plan is based on the payment of a base amount which is larger or
smaller depending on how quickly the "base" $60 million in synergies is
achieved. The size of the base payment is fixed based on when $60 million is
achieved. If it takes more than 18 months, the base is zero. If it takes 18
months the base is 60% of target; if it takes 12 months, then the base is 100%
of target (or 60% of salary). Synergies in excess of $60 will trigger additional
payments of 15% of target per $10 million per annum additional synergy value
achieved by the end of 24 months. Hitting the target $60 million by 12 months
would also trigger the 100% payment at 12

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                                                                     NORSKE SKOG

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months, rewarding the speedy achievement of the company's goals with a quicker
payment of the base incentive. The plan would be capped at 200% of target. A
table showing the potential payouts is attached.

100% of the cash portion of the incentive payment would be eligible for
application to the stock purchase plan and would be pensionable earnings.

April 16, 2001

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                                                                     NORSKE SKOG
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                         SPECIAL SYNERGY INCENTIVE PLAN

                              PROPOSED PAYOUT TABLE

<TABLE>
<CAPTION>
                       ------------------- ---------------    ----------------- ------------       ----------------- -------------
                       12 MONTHS           PAYOUT             18 MONTHS         PAYOUT             24 MONTHS         PAYOUT
                       ------------------- ---------------    ----------------- ------------       ----------------- -------------
<S>                    <C>                 <C>                <C>               <C>                <C>               <C>
$60m                   1.00                $1.97m             0.60              $1.18m             0.00
----------------------------------------------------------------------------------------------------------------------------------
$70m                   1.15                $2.27m             0.75              $1.48m             1.15              $.30m
----------------------------------------------------------------------------------------------------------------------------------
$80m                   1.30                $2.56m             0.90              $1.78m             0.30              $.59m
----------------------------------------------------------------------------------------------------------------------------------
$90m                   1.45                $2.86m             1.05              $2.07m             0.45              $.89m
----------------------------------------------------------------------------------------------------------------------------------
$100m                  1.60                $3.15m             1.20              $2.36m             0.60              $1.18m
----------------------------------------------------------------------------------------------------------------------------------
$110m                  1.75                $3.45m             1.35              $2.66m             0.75              $1.48m
----------------------------------------------------------------------------------------------------------------------------------
$120m                  1.90                $3.75m             1.5               $2.96m             0.90              $1.78m
----------------------------------------------------------------------------------------------------------------------------------
</TABLE><PAGE>

Norske Skog Canada Limited
9th Floor, 700 West Georgia Street
PO. Box 10058 Pacific Centre
Vancouver, British Columbia
Canada V7Y 1J7

memorandum                                                          NORSKECANADA

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to                                                  date    November 21, 2001
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from          Russell Horner                        fax     604-654-4145

email         russell.horner@norskecanada.com       phone   604-654-4000
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Dear,

Following the acquisition of Pacifica Papers, our Board of Directors approved a
SPECIAL SYNERGY INCENTIVE PLAN FOR KEY MEMBERS OF OUR MANAGEMENT TEAM WHO WOULD
BE INSTRUMENTAL IN ACHIEVING SYNERGIES, AND WHO REMAIN IN THE EMPLOY OF THE
COMPANY UNTIL THE DATE OF PAYOUT. This Plan is in addition to Base Salary and
Variable Pay Plans.
Key aspects of the Plan would be as follows:

Target Payment                             60% of Base Salary as of payment date

Target Synergies                           $60 million per annum

Starting Date                              Date of closure

Payment                                    50% Cash
                                           50% Options

In addition to the base amount shown above, the Plan would pay an additional 15%
of target for every additional $10 million per annum in synergies achieved, to a
maximum of twice Base Salary. The earliest a payout would be made is one year
after the inception of the Plan. The calculation of synergies would be based on
cost savings to the Company as demonstrated in monthly run rates prior to the
payout.

The Incentive Plan is based on the payment of a base amount which is larger or
smaller, depending on how quickly the "base" $60 million in synergies is
achieved. The size of the base payment is fixed based on when $60 million is
achieved. If it takes more than 18 months, the base is zero. If it takes 18
months the base is 60% of target; if it takes 12 months, then the base is 100%
of target (or 60% of salary). Synergies in excess of $60 will trigger additional
payments of 15% of target per $10 million per annum additional synergy value
achieved by the end of 24 months. Hitting the target $60 million by 12 months
would also trigger the 100% payment at 12

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months, rewarding the speedy achievement of the company's goals with a quicker
payment of the base incentive. The Plan would be capped at 200% of target. A
table showing the potential payouts is attached.

I am pleased to include you in this Special Synergy Incentive Plan. You have
been identified as a key member of our team responsible for delivering an
important part of the identified synergies. Please remember that this Plan is
confidential. Any Plan member who breaches the confidentiality of this Plan will
be removed from the Plan, and will forfeit receipt of any payment from the Plan.

Regards,

Russell J. Homer
President and Chief Executive Officer

Encl.

RJH/ef

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