Document:

exv4w2

 

EXHIBIT 4.2

FIRST SUPPLEMENTAL INDENTURE

AMONG

MERCER INTERNATIONAL INC.,

MERCER INTERNATIONAL REGCO INC.

AND

WELLS FARGO BANK, N.A.

AS TRUSTEE

 

DATED AS OF

MARCH 1, 2006

TO INDENTURE DATED AS OF OCTOBER 10, 2003

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	ARTICLE ONE CONVERSION RIGHTS	 	 
	 
	 	 	 	 
	 

	 	SECTION 101 Conversion Rights	 	 
	 
	 	 	 	 
	ARTICLE TWO ASSUMPTION OF OBLIGATIONS	 	 
	 
	 	 	 	 
	 

	 	SECTION 201 Assumption of Obligations	 	 
	 
	 	 	 	 
	ARTICLE THREE MISCELLANEOUS PROVISIONS	 	 
	 

	 	SECTION 301 Integral Part	 	 
	 

	 	SECTION 302 General Definitions	 	 
	 

	 	SECTION 303 Adoption, Ratification and Confirmation	 	 
	 

	 	SECTION 304 Trust Indenture Act Controls	 	 
	 

	 	SECTION 305 Governing Law	 	 
	 

	 	SECTION 306 Severability	 	 
	 

	 	SECTION 307 Counterpart Originals	 	 
	 

	 	SECTION 308 Successors	 	 
	 

	 	SECTION 309 Table of Contents, Headings, etc	 	 
	 

	 	SECTION 310 Benefit of Second Supplemental Indenture	 	 
	 

	 	SECTION 311 Acceptance by Trustee	 	 

 

 

     THIS FIRST SUPPLEMENTAL INDENTURE, dated as of March 1, 2006, among Mercer International Inc.,
a Massachusetts Trust organized under the laws of the State of Washington (“Mercer”), Mercer
International Regco Inc., a corporation organized under the laws of the State of Washington
(“Mercer WA”), and Wells Fargo Bank, N.A. (the “Trustee”).

RECITALS OF THE COMPANY

     WHEREAS, Mercer has heretofore executed and delivered to the Trustee an Indenture (the
“Indenture”), dated as of October 10, 2003, providing for the issuance of 8.5% convertible senior
subordinated notes due 2010 (the “Notes”);

     WHEREAS, pursuant to the Agreement and Plan of Merger dated as of December 14, 2005 (the
“Merger Agreement”) among Mercer WA, Mercer Delaware Inc., a Delaware corporation and a wholly
owned subsidiary of Mercer WA (“Mercer DE”), and Mercer, Mercer has agreed to merge with and into
Mercer DE (the “Merger”), with Mercer DE being the surviving corporation in the Merger, following
which Mercer DE will merge with and into Mercer WA with Mercer WA being the surviving corporation
in that merger;

     WHEREAS, pursuant to the Merger Agreement, as of the effective time of the Merger (the
“Effective Time”), each outstanding Share of Beneficial Interest of Mercer shall be converted into
the right to receive one validly issued, fully paid and nonassessable common share of Mercer WA
(“Mercer WA Common Shares”);

     WHEREAS, pursuant to Sections 4.12 and 7.01 of the Indenture, as a result of the Merger,
Mercer WA is required to execute and deliver to the Trustee a supplemental indenture providing that
(i) the Holder of each Note then outstanding shall have the right to convert such Note into that
number of Mercer WA Common Shares receivable upon such Merger by a Holder of the number of shares
of beneficial interest deliverable upon such conversion of such Note immediately prior to such
Merger assuming such Holder failed to exercise such Holders rights of election, if any, as to the
number of Mercer WA Common Shares receivable upon such Merger; and (ii) Mercer WA assumes all the
Obligations of Mercer under the Registration Rights Agreement, the Notes and the Indenture;

     WHEREAS, Section 11.01(c) of the Indenture permits the execution of supplemental indentures
without the consent of any Holders to make provision with respect to the assumption of Mercer’s
Obligations to the holders of the Notes by a successor to the Company;

     WHEREAS, Mercer and Mercer WA, pursuant to the foregoing authority, propose in and by this
First Supplemental Indenture to supplement and amend the Indenture in certain respects; and

     WHEREAS, all things necessary have been done to make this First Supplemental Indenture a valid
agreement of Mercer and Mercer WA, in accordance with its terms.

     NOW THEREFORE:

     In consideration of the premises provided for herein, Mercer, Mercer WA and the Trustee
mutually covenant and agree as follows:

 

 

ARTICLE ONE

CONVERSION RIGHTS

     SECTION 101 Conversion Rights.

     Mercer WA hereby agrees, in accordance with Section 4.12 of the Indenture that the Holder of
each Note outstanding at the effective time of the Merger shall have the right to convert such Note
into the number of Mercer WA Common Shares equal to the number of Shares of Beneficial Interest of
Mercer which would have been deliverable upon conversion of such Note immediately prior to the
effective time of the Merger. Mercer WA hereby agrees, in accordance with Section 4.12 of the
Indenture, to issue and deliver certificates evidencing such shares and make any subsequent
adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided
for in the Notes and, to the extent relevant thereto, Article IV of the Indenture, and for such
purpose (a) from and after the effective time of the Merger all references in Article IV of the
Indenture to “Shares of Beneficial Interest”, or to actions taken by or in respect of Mercer (in
respect of the Shares of Beneficial Interest or otherwise) that require adjustment of the number of
shares of such Shares of Beneficial Interest issuable upon conversion of Notes and/or the
Conversion Price, or change of the securities or other property into which Notes shall be
convertible shall, insofar as the same relate to or affect the convertibility, or conversion, of
Notes, or the terms thereof, or the securities or other property into which Notes shall be
convertible, be deemed to mean and refer to Mercer WA Common Shares or actions taken by or in
respect of Mercer WA (in respect of Mercer WA Common Shares or otherwise), as the case may be,
mutatis mutandis, and (b) Mercer WA shall assume all of the obligations of Mercer under Article IV
of the Indenture.

ARTICLE TWO

ASSUMPTION OF OBLIGATIONS

SECTION 201 Assumption of Obligations

     Mercer WA hereby agrees, in accordance with Section 7.01 of the Indenture, that Mercer WA
shall assume all of the Obligations of Mercer under the Registration Rights Agreement, the Notes
and the Indenture and Mercer WA shall succeed to, and be substituted for so that from the Effective
Time of the Merger, the provisions of the Indenture referring to Mercer shall refer instead to
Mercer WA and not Mercer, and Mercer WA may exercise every right and power of Mercer under the
Indenture with the same effect as if Mercer WA had been named in the Indenture as Mercer.

 

 

ARTICLE THREE

MISCELLANEOUS PROVISIONS

     SECTION 301 Integral Part.

     This First Supplemental Indenture constitutes an integral part of the Indenture.

     SECTION 302 General Definitions.

     For all purposes of this First Supplemental Indenture, capitalized terms used herein without
definition shall have the meanings specified in the Indenture.

     SECTION 303 Adoption, Ratification and Confirmation.

     The Indenture, as supplemented and amended by this First Supplemental Indenture, is in all
respects hereby adopted, ratified and confirmed, and this First Supplemental Indenture shall be
deemed part of the Indenture in the manner and to the extent herein and therein provided. The
provisions of this First Supplemental Indenture shall, subject to the terms hereof, supersede the
provisions of the Indenture to the extent the Indenture is inconsistent herewith.

     SECTION 304 Trust Indenture Act Controls.

     If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by
operation of TIA Section 318(c), the imposed duties shall control.

     SECTION 305 Governing Law.

     THIS FIRST SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.

     SECTION 306 Severability.

     In case any provision in this First Supplemental Indenture shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining provisions shall, to the
fullest extent permitted by applicable law, not in any way be affected or impaired thereby.

     SECTION 307 Counterpart Originals.

     The parties may sign any number of copies of this First Supplemental Indenture. Each signed
copy shall be an original, but all of them together represent the same agreement.

     SECTION 308 Successors.

     All agreements of the Company or the Successor in this First Supplemental Indenture shall bind
its respective successors. All agreements of the Trustee in this First Supplemental Indenture
shall bind its successors.

 

 

     SECTION 309 Table of Contents, Headings, etc.

     The table of contents, cross-reference table and headings of the Articles and Sections of this
First Supplemental Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict any of the terms or provisions
hereof.

     SECTION 310 Benefit of First Supplemental Indenture.

     Nothing in this Fist Supplemental Indenture, express or implied, shall give to any Person,
other than the parties hereto, any Security Registrar, any Paying Agent and their successors
hereunder, and the Holders of the Securities, any benefit or any legal or equitable right, remedy
or claim under this First Supplemental Indenture.

     SECTION 311 Acceptance by Trustee.

     This Trustee accepts the amendments to the Indenture effected by this First Supplemental
Indenture and agrees to execute the trusts created by the Indenture as hereby amended, but only
upon the terms and conditions set forth in this First Supplemental Indenture and the Indenture.
Without limiting the generality of the foregoing, the Trustee assumes no responsibility for the
correctness of the recitals contained herein, which shall be taken as the statements of the Company
and except as provided in the Indenture the Trustee shall not be responsible or accountable in any
way whatsoever for or with respect to the validity or execution or sufficiency of this First
Supplemental Indenture and the Trustee makes no representation with respect thereto.

     IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be
duly executed as of the day and year first written above.

	 	 	 	 	 
	 	

MERCER INTERNATIONAL INC.

 	 
	 	By:  	/s/ David M. Gandossi
 	 
	 	 	Name:  	David M. Gandossi 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	MERCER INTERNATIONAL REGCO INC.

 	 
	 	By:  	/s/ David M. Gandossi
 	 
	 	 	Name:  	David M. Gandossi 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	WELLS FARGO BANK, N.A.

 	 
	 	By:  	/s/ Timothy P. Mowdy
 	 
	 	 	Name:  	Timothy P. Mowdy 	 
	 	 	Title:  	Vice Presidentexv10w17

 

EXHIBIT
10.17

FIRST AMENDED AND RESTATED

OPERATING CREDIT AGREEMENT

(US$30,000,000)

among

ZELLSTOFF CELGAR LIMITED PARTNERSHIP

as Borrower

and

EACH OF THE LENDERS NAMED

IN THIS AGREEMENT

and

ROYAL BANK OF CANADA

as Administrative Agent

Dated for reference February 11, 2005

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	PART 1 - INTERPRETATION	 	 	2	 
	 
	 	 	 	 	 	 
	1.1
	 	Defined Terms	 	 	 2	 
	1.2
	 	Accounting Terms	 	 	 2	 
	1.3
	 	General	 	 	 2	 
	1.4
	 	References to Agreements and Enactments	 	 	 2	 
	1.5
	 	Law of Agreement	 	 	 3	 
	1.6
	 	Attornment	 	 	 3	 
	1.7
	 	Time	 	 	 3	 
	1.8
	 	Communications with Lenders	 	 	 3	 
	1.9
	 	Schedules	 	 	 3	 
	 
	 	 	 	 	 	 
	PART 2 - THE FACILITY	 	 	4	 
	 
	 	 	 	 	 	 
	2.1
	 	Establishment of Facility	 	 	 4	 
	2.2
	 	Purpose	 	 	 4	 
	2.3
	 	Utilization of the Facility	 	 	 4	 
	2.4
	 	Availability	 	 	 5	 
	2.5
	 	Extension of 364 Day Tranche Repayment Date	 	 	 5	 
	2.6
	 	Conversion into Term Tranche	 	 	 6	 
	2.7
	 	Swingline Drawings	 	 	 6	 
	2.8
	 	Conversions	 	 	 7	 
	2.9
	 	Drawing Amount	 	 	 7	 
	2.10
	 	Lenders’ Obligations Several	 	 	 8	 
	 
	 	 	 	 	 	 
	PART 3 - GENERAL PROVISIONS REGARDING DRAWINGS	 	 	8	 
	 
	 	 	 	 	 	 
	3.1
	 	General Conditions to Each Drawing	 	 	 8	 
	3.2
	 	Notices	 	 	 9	 
	3.3
	 	Administrative Agent to Notify Lenders	 	 	 9	 
	3.4
	 	Advances to Administrative Agent and Borrower	 	 	 9	 
	3.5
	 	Notices Irrevocable	 	 	10	 
	3.6
	 	Administrative Agent’s Records	 	 	10	 
	 
	 	 	 	 	 	 
	PART 4 - INTEREST AND FEES	 	 	10	 
	 
	 	 	 	 	 	 
	4.1
	 	Interest, Stamping Fees and Other Fees	 	 	10	 
	4.2
	 	Additional Fees	 	 	11	 
	4.3
	 	Adjustments	 	 	11	 
	4.4
	 	Authorized Debit	 	 	13	 
	4.5
	 	Overdue Payments	 	 	13	 
	4.6
	 	General Interest Provisions	 	 	13	 
	4.7
	 	Agency Fee	 	 	14	 
	 
	 	 	 	 	 	 
	PART 5 - BANKERS’ ACCEPTANCE DRAWINGS	 	 	14	 
	 
	 	 	 	 	 	 
	5.1
	 	Features of Bankers’ Acceptances	 	 	14	 
	5.2
	 	BA Stamping Fees	 	 	15	 
	5.3
	 	Power of Attorney	 	 	15	 
	5.4
	 	Provision of Instruments on Request	 	 	16	 
	5.5
	 	BA Marketing	 	 	16	 
	5.6
	 	Completion of Funding	 	 	17	 
	5.7
	 	BA Equivalent Drawings	 	 	17	 
	5.8
	 	Rollover, Conversion or Payment of Bankers’ Acceptances	 	 	18	 
	5.9
	 	Waiver	 	 	18	 
	5.10
	 	Depository Bills	 	 	19	 

 

 

- 3 -

	 	 	 	 	 	 	 
	PART 6 - LIBOR DRAWINGS	 	 	19	 
	6.1
	 	LIBOR Interest Periods	 	 	19	 
	6.2
	 	Notification of Rate	 	 	19	 
	6.3
	 	Rollover, Conversion or Payment of LIBOR Drawing	 	 	19	 
	 
	 	 	 	 	 	 
	PART 7 – LETTERS OF CREDIT/GUARANTEE DRAWINGS	 	 	20	 
	7.1
	 	Letters of Credit and Letters of Guarantee	 	 	20	 
	7.2
	 	Procedures Applicable for Fronted LCG	 	 	20	 
	7.3
	 	Procedures Applicable for Several LCG	 	 	21	 
	7.4
	 	Administrative Agent to Execute As Attorney	 	 	22	 
	7.5
	 	Records	 	 	23	 
	7.6
	 	Time for Honour	 	 	23	 
	7.7
	 	Issue	 	 	23	 
	7.8
	 	Payment of Amounts Drawn Under Several LCG	 	 	23	 
	7.9
	 	Reimbursement	 	 	25	 
	7.10
	 	Obligations Absolute	 	 	25	 
	 
	 	 	 	 	 	 
	PART 8 - PAYMENTS	 	 	26	 
	 
	 	 	 	 	 	 
	8.1
	 	Currency Fluctuations - Repayment of Excess	 	 	26	 
	8.2
	 	Reduction or Repayment of the Facility	 	 	27	 
	8.3
	 	Mandatory Prepayments	 	 	28	 
	8.4
	 	Maturity Date Payments	 	 	28	 
	8.5
	 	Place and Manner of Payments	 	 	28	 
	8.6
	 	Administrative Agent to Transfer Payments to Lenders	 	 	28	 
	8.7
	 	Receipt in Proportion	 	 	28	 
	8.8
	 	Net Payments, etc	 	 	29	 
	8.9
	 	Prepayment of BAs, Letters of Credit and Letters of Guarantee	 	 	30	 
	8.10
	 	Application of Payments Prior to Event of Default	 	 	30	 
	 
	 	 	 	 	 	 
	PART 9 - CHANGES IN CIRCUMSTANCES	 	 	31	 
	 
	 	 	 	 	 	 
	9.1
	 	Increased Costs	 	 	31	 
	9.2
	 	Form of Demand	 	 	32	 
	9.3
	 	Consultation	 	 	32	 
	9.4
	 	Illegality	 	 	32	 
	 
	 	 	 	 	 	 
	PART 10 - CONDITIONS OF LENDERS’ OBLIGATIONS	 	 	33	 
	 
	 	 	 	 	 	 
	10.1
	 	Conditions Precedent	 	 	33	 
	 
	 	 	 	 	 	 
	PART 11 - REPRESENTATIONS AND WARRANTIES	 	 	36	 
	 
	 	 	 	 	 	 
	11.1
	 	Representations and Warranties	 	 	36	 
	 
	 	 	 	 	 	 
	PART 12 - COVENANTS	 	 	40	 
	 
	 	 	 	 	 	 
	12.1
	 	Affirmative Covenants	 	 	40	 
	12.2
	 	Negative Covenants	 	 	42	 
	12.3
	 	Financial Covenants	 	 	44	 
	12.4
	 	Reporting Covenants	 	 	45	 
	12.5
	 	Sufficient Copies	 	 	46	 
	 
	 	 	 	 	 	 
	PART 13 – SECURITY AGREEMENTS	 	 	46	 
	 
	 	 	 	 	 	 
	13.1
	 	Security Agreements	 	 	46	 
	13.2
	 	Securing Treasury Contracts	 	 	47	 
	13.3
	 	Registration	 	 	48	 
	13.4
	 	Discharges	 	 	48	 
	 
	 	 	 	 	 	 
	PART 14 - DEFAULT AND ENFORCEMENT	 	 	48	 

 

 

- 4 -

	 	 	 	 	 	 	 
	14.1
	 	Events of Default	 	 	48	 
	14.2
	 	Rights upon Default	 	 	51	 
	14.3
	 	Judgment Currency	 	 	52	 
	14.4
	 	Indemnity	 	 	52	 
	 
	 	 	 	 	 	 
	PART 15 - ASSIGNMENT	 	 	52	 
	 
	 	 	 	 	 	 
	15.1
	 	Assignment	 	 	52	 
	15.2
	 	Assignment Agreement	 	 	53	 
	15.3
	 	Further Assurances	 	 	53	 
	15.4
	 	Release of Information	 	 	54	 
	15.5
	 	Assignment by Borrower	 	 	54	 
	15.6
	 	Enurement	 	 	54	 
	 
	 	 	 	 	 	 
	PART 16 - THE ADMINISTRATIVE AGENT AND THE LENDERS	 	 	54	 
	 
	 	 	 	 	 	 
	16.1
	 	Authorization	 	 	54	 
	16.2
	 	Notices, etc	 	 	55	 
	16.3
	 	Action by Administrative Agent	 	 	55	 
	16.4
	 	No Reliance	 	 	55	 
	16.5
	 	Liability of Administrative Agent	 	 	56	 
	16.6
	 	Dealings by Administrative Agent	 	 	57	 
	16.7
	 	Dealings by Lenders	 	 	57	 
	16.8
	 	Termination of Agency	 	 	57	 
	16.9
	 	Notice of Default by Administrative Agent	 	 	58	 
	16.10
	 	Reliance by Administrative Agent on Notices	 	 	58	 
	16.11
	 	Action by Lenders	 	 	58	 
	16.12
	 	Special Determinations	 	 	59	 
	16.13
	 	Unanimity	 	 	59	 
	16.14
	 	Enforcement	 	 	60	 
	16.15
	 	Apportionment of Drawings	 	 	60	 
	16.16
	 	Inter-Lender Payments	 	 	60	 
	16.17
	 	Failure of Borrower to Repay	 	 	60	 
	16.18
	 	Failure of Lender to Advance	 	 	61	 
	16.19
	 	Payment of Swingline Lender and Fronting Lender	 	 	61	 
	16.20
	 	Overpaid Lender	 	 	64	 
	16.21
	 	Adjustments Among Lenders	 	 	64	 
	16.22
	 	Indemnity	 	 	65	 
	16.23
	 	Certain Provisions for Benefit of Administrative Agent and Lenders	 	 	65	 
	 
	 	 	 	 	 	 
	PART 17 - MISCELLANEOUS	 	 	66	 
	 
	 	 	 	 	 	 
	17.1
	 	Payment of Expenses	 	 	66	 
	17.2
	 	Rights and Waivers	 	 	66	 
	17.3
	 	Communication	 	 	66	 
	17.4
	 	Confidentiality	 	 	67	 
	17.5
	 	Survival of Representations, Warranties and Covenants	 	 	67	 
	17.6
	 	Further Assurances	 	 	67	 
	17.7
	 	Severability	 	 	68	 
	17.8
	 	Counterparts	 	 	68	 
	17.9
	 	No Partnership, etc	 	 	68	 
	17.10
	 	No Novation/Rescission	 	 	68	 

 

 

- 5 -

Schedules

Schedule A – Definitions

Schedule B – Lenders

Schedule C – Pricing Schedule

Schedule D – Drawing Notice

Schedule E – Rollover Notice

Schedule F – Conversion Notice

Schedule G – Quarterly Compliance Certificate

Schedule H – Monthly Borrowing Base Certificate

Schedule I – 364 Day Tranche Conversion Notice

Schedule J – Lender Assignment Agreement

Schedule K – Form of Letter of Credit

 

 

FIRST AMENDED AND RESTATED

OPERATING CREDIT AGREEMENT

     THIS FIRST AMENDED AND RESTATED OPERATING CREDIT AGREEMENT dated for reference February 11,
2005 (and executed March 1, 2006) is entered into:

AMONG:

ZELLSTOFF CELGAR LIMITED PARTNERSHIP

(the “Borrower”)

– and –

The Financial Institutions Listed In

Schedule B Hereto

(the “Lenders”)

– and –

Royal Bank of Canada

(the “Administrative Agent”)

     WHEREAS pursuant to the terms of a credit agreement (the “Original Agreement”) dated for
reference February 11, 2005, as amended by letter agreement dated February 6, 2006, among 0706906
B.C. Ltd. (the “Original Borrower”), the Lenders and the Administrative Agent, the Lenders
established a credit facility in favour of the Original Borrower having a 364 day revolving
extendible tranche which is convertible to a one year non-revolving term tranche.

     AND WHEREAS pursuant to the terms of an agreement (the “Consent and Assignment Agreement”)
dated the date hereof among the Original Borrower (which subsequent to the date of the Original
Agreement changed its name to Zellstoff Celgar Limited), Zellstoff Celgar Holdings Ltd.
(“Holdings”), the Borrower, the Guarantor, the Lenders and the Administrative Agent, the Lenders
consented to:

	 	(a)	 	Holdings acquiring all of the assets of the Original Borrower and assuming all
of the Original Borrower’s rights and obligations under the Original Agreement and the
Security Agreements; and
	 
	 	(b)	 	the Borrower acquiring all of the assets of Holdings and assuming all of the
Holdings’s rights and obligations under the Original Agreement and the Security

 

 

- 2 -

          Agreements.

     AND WHEREAS the Borrower, the Lenders and the Administrative Agent have agreed that as of the
Effective Date all indebtedness incurred and obligations of the Borrower arising under the Original
Agreement shall be repaid, secured and carried out in accordance with the terms and conditions set
forth in this Agreement.

     NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency of which are
hereby conclusively acknowledged by each of the parties hereto, the parties hereto agree as
follows:

PART 1  — INTERPRETATION

1.1 Defined Terms.

     In this Agreement, unless the context otherwise requires, the defined terms herein shall have
the meanings set out in Schedule A.

1.2 Accounting Terms.

     All accounting terms not otherwise defined herein have the meanings assigned to them in
accordance with GAAP. Where the character or amount of any asset or liability or item of revenue
or expense is required to be determined, or any consolidation or other accounting computation is
required to be made for the purpose of this Agreement, such determination or calculation shall, to
the extent applicable and except as otherwise specified herein or as otherwise agreed in writing by
the parties, be made in accordance with GAAP applied on a basis consistent with those principles at
the time in effect.

1.3 General.

     The division of this Agreement into sections and the insertion of headings are for convenience
of reference only and shall not affect the interpretation of this Agreement. Words importing the
singular number include the plural and vice versa. Any reference in this Agreement to a party to
this Agreement shall include the permitted successors and assigns of such party.

1.4 References to Agreements and Enactments.

     Reference herein to any agreement, instrument, license or other document shall be deemed to
include reference to such agreement, license or other document as the same may from time to time be
amended, supplemented or restated and reference herein to any enactment shall be deemed to include
reference to such enactment as reenacted, amended or extended from time to time and to any
successor enactment.

 

 

- 3 -

1.5 Law of Agreement.

     This Agreement shall be deemed to be made pursuant to the laws of the Province of British
Columbia and the laws of Canada applicable therein and shall be governed by and construed in
accordance with such laws.

1.6 Attornment.

     For the purposes of any legal actions or proceedings brought by any party hereto against any
other party, the parties hereby irrevocably submit to the non-exclusive jurisdiction of the courts
of the Province of British Columbia and acknowledge their competence and the convenience and
propriety of the venue and agree to be bound by any judgment thereof and not to seek, and hereby
waive, review of its merits by the courts of any other jurisdiction.

1.7 Time.

     Time shall be of the essence in this Agreement.

1.8 Communications with Lenders.

     All communications and deliveries between the Borrower and the Lenders in connection with this
Agreement shall be made between the Borrower and the Administrative Agent on behalf of the Lenders
at the Designated Branch and payments shall be made by the Borrower to the Lenders as set out
herein, and without limiting the generality of the foregoing, any communication, payment or
delivery by the Borrower to the Administrative Agent shall be deemed to be a communication, payment
or delivery to all Lenders and any communication or delivery by the Administrative Agent to the
Borrower shall be deemed to be a communication or delivery by all Lenders to the Borrower, in each
case binding on the Borrower and the Lenders.

1.9 Schedules.

     The schedules hereto and the terms set out therein shall be deemed fully a part of this
Agreement. The following are the Schedules.

Schedule A – Definitions

Schedule B – Lenders

Schedule C – Pricing Schedule

Schedule D – Drawing Notice

Schedule E– Rollover Notice

Schedule F – Conversion Notice

Schedule G – Quarterly Compliance Certificate

Schedule H – Monthly Borrowing Base Certificate

Schedule I – 364 Day Tranche Conversion Notice

Schedule J – Lender Assignment Agreement

Schedule K – Form of Letter of Credit

 

 

- 4 -

PART 2  — THE FACILITY

2.1 Establishment of Facility.

     The Lenders hereby severally establish in favour of the Borrower, and otherwise on the terms
and conditions hereof, a credit facility (the “Facility”) in the maximum principal amount, in US
Dollars and/or Cdn. Dollars of the US Dollar Equivalent of US$30,000,000. The Facility shall
comprise a:

	 	(a)	 	364 Day Tranche: a revolving extendible 364 day credit maturing on the 364 Day
Tranche Repayment Date, not to exceed the US Dollar Equivalent of US$30,000,000; or
	 
	 	(b)	 	Term Tranche: upon conversion of the 364 Day Tranche as provided in Section
2.6 below, a non-revolving one year term credit maturing on the Term Tranche Repayment
Date in an amount equal to the principal amount outstanding on the date of conversion.

     Pursuant to Section 8.3 and Section 12.3(c), at no time shall outstanding principal amounts
under the 364 Day Tranche or Term Tranche plus Breakage Costs exceed the Borrowing Base. The
Borrower and the Lenders acknowledge and agree that as of the Effective Date: (i) all amounts of
principal, interest, the face amount of Bankers’ Acceptances, BA Stamping Fees, LCG Fees, 364 Day
Commitment Fees, expenses and other liabilities payable in respect of the 364 Day Tranche under the
Original Agreement shall be deemed outstanding under the 364 Day Tranche under this Agreement; and
(ii) all rights and obligations of the parties to the Original Agreement are expressly replaced and
superseded in their entirety by the provisions of this Agreement.

2.2 Purpose.

     The Facility shall be utilized for the Borrower’s general corporate purposes, including
ongoing operating and working capital requirements, but specifically excluding acquisitions and
investments.

2.3 Utilization of the Facility.

     Subject to the terms and conditions hereof, the Borrower may utilize the Facility by way of
Prime Rate Drawings, Base Rate Drawings, LIBOR Drawings, Bankers’ Acceptance Drawings (including BA
Equivalent Drawings) and/or Letter of Credit/Guarantee Drawings provided that the obligation of the
Lenders to provide Bankers’ Acceptance Drawings and LIBOR Drawings shall, notwithstanding any other
provisions contained in this Agreement, be subject to the condition that if the Lenders, acting
reasonably, shall have determined and advised the Borrower in writing that by reasons affecting the
money markets, the BA Period or LIBOR Interest Period requested is not available, or if it becomes
unlawful for the Lenders to fund a Bankers’ Acceptance Drawing or LIBOR Drawing, then the Lenders
shall not be obliged to provide a

 

 

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Bankers’ Acceptance Drawing or LIBOR Drawing, as the case may be, for the requested
BA Period or LIBOR Interest Period, until such circumstances cease to prevail.

2.4 Availability.

     The Borrower may borrow, repay and reborrow up to the maximum amount of the 364 Day Tranche,
subject to the terms and conditions of this Agreement. The Term Tranche shall not revolve, and any
repayment of Drawings under a Term Tranche in accordance with a notice of repayment pursuant to
Section 8.2(b) (excluding, for greater certainty, any Rollover or Conversion) or pursuant to
Section 8.3 shall be permanent and may not be reborrowed.

2.5 Extension of 364 Day Tranche Repayment Date.

     The Borrower may, not earlier than 90 days or later than 60 days prior to the then applicable
364 Day Tranche Repayment Date, deliver to the Administrative Agent a notice in writing requesting
the extension of the 364 Day Tranche Repayment Date for a further period of 364 days and confirming
that the representations and warranties set out in Section 11.1 are true and correct in all
material respects and no Default or Event of Default has occurred and is continuing. Each Lender
will notify the Administrative Agent in writing not later than 30 days prior to the 364 Day Tranche
Repayment Date whether or not it agrees to so extend the 364 Day Tranche Repayment Date. Failure by
a Lender to notify the Administrative Agent by such time will be deemed to be a refusal by such
Lender of such request. The Lenders will consider such extension and, if all Lenders in their sole
discretion agree, the Administrative Agent will advise the Borrower and the 364 Day Tranche
Repayment Date will be extended in accordance with the request of the Borrower. Otherwise the
Administrative Agent shall deliver to the Borrower a notice advising the Borrower of the refusal to
extend the 364 Day Tranche Repayment Date and the names of each Lender (each a “Dissenting Lender”)
which did not, or was deemed to not, agree to such request. If Lenders holding aggregate Lender’s
Proportions of less than all, but equal to or in excess of 66 2/3 %, agree to such
extension, the Borrower may elect to do any one or more of the following:

	 	(a)	 	request the Administrative Agent, at the expense of the Borrower, to invite the
Lenders (other than Dissenting Lenders) and other financial institutions approved by
both the Borrower and Administrative Agent who agree with such extension of the 364 Day
Tranche Repayment Date to acquire on or before the 364 Day Tranche Repayment Date,
without discount, all or a portion (subject to Section 15.1(b)) of a Dissenting
Lender’s rights under this Agreement in accordance with Part 15 and in the event such
an offer (or offers) is received, such Dissenting Lender shall accept such offer (or
offers); or
	 
	 	(b)	 	elect to repay (including, for greater certainty, repay portions of any
outstanding Bankers’ Acceptance Drawing or Letter of Credit/Guarantee Drawing in
accordance with Section 8.9 if the remaining Lenders do not assume the Dissenting
Lender’s obligations to third parties thereunder), on or before the 364 Day Tranche
Repayment Date in effect at the time of the request for extension, all

 

 

- 6 -

	 	 	 	amounts owing to
a Dissenting Lender (including for greater certainty, those
Dissenting Lenders not bought out under (a) above), cancel such Dissenting Lender’s
interest in the 364 Day Tranche and reduce the then current maximum amount of the
364 Day Tranche and the Facility by an amount equal to the US Dollar Equivalent of
the principal amount of the commitment cancelled. The Lender’s Proportions of each
remaining Lender shall be recalculated according to the ratio which each remaining
Lender’s maximum commitment under the 364 Day Tranche and the Facility immediately
prior to repayment bears to the reduced maximum amount of the 364 Day Tranche and
Facility after repayment.

     If the Borrower exercises its rights under Sections 2.5(a) or 2.5(b), the 364 Day Tranche
Repayment Date will be deemed extended for all Lenders, other than Dissenting Lenders, in
accordance with the original request of the Borrower set out in the notice.

2.6 Conversion into Term Tranche.

     The Borrower may, not later than five (5) Banking Days prior to the 364 Day Tranche Repayment
Date, by delivery of a 364 Day Tranche Conversion Notice to the Administrative Agent on behalf of
the Lenders, convert Drawings outstanding on the 364 Day Tranche Repayment Date into Drawings
outstanding under the Term Tranche as of such date and the provisions hereof applicable to the Term
Tranche shall thereafter apply.

2.7 Swingline Drawings.

     The Swingline Lender hereby establishes a committed revolving operating credit facility as
part of the 364 Day Tranche in favour of the Borrower, up to the Swingline Amount, to finance the
day-to-day requirements of the Borrower for general corporate purposes. The following shall apply
to the Swingline:

	 	(a)	 	each provision of credit under the Swingline (a “Swingline Drawing”) shall be
provided by the Swingline Lender by way of a Prime Rate Drawing (if requested in
Canadian Dollars) or a Base Rate Drawing (if requested in US Dollars) on the same day’s
notice if given to the Swingline Lender before noon (Toronto time) or on an overdraft
basis by debiting such account or accounts of the Borrower as shall be established by
agreement of the Borrower and the Swingline Lender. The amount of any such overdraft
from time to time shall be deemed to be a Prime Rate Drawing (to the extent of such
debit balance in Canadian Dollars) and a Base Rate Drawing (to the extent of such debit
balance in US Dollars). Any utilization of the Swingline shall be in minimum amounts of
C$100,000 or US$100,000, as the case may be. The Borrower shall ensure that the
aggregate Canadian Dollar Equivalent of the principal amount of all Swingline Drawings
does not exceed the Swingline Amount at any time
	 
	 	(b)	 	if, on the last Banking Day of each week, the outstanding Swingline Drawings is
equal to or greater than C$1,000,000 or US$1,000,000, as the case may be, and at

 

 

- 7 -

	 	 	 	such other times as the Administrative Agent may determine in its sole discretion, the
Administrative Agent may notify the Lenders of the requirement for a Prime
Rate Drawing or Base Rate Drawing, or both, as applicable, to be made available by
each of them to the Borrower in an amount equal to the advances by the Swingline
Lender outstanding under this Section 2.7 and the amount of any such Drawing shall
be applied as a repayment of advances made available by the Swingline Lender to the
Borrower under this Section 2.7;
	 
	 	(c)	 	except as otherwise provided in Section 16.19(a), for the purposes of each
other provision of this Agreement, the commitment of the Swingline Lender under the 364
Day Tranche shall be reduced by the Swingline Amount and the rateable shares of the 364
Day Lenders in each Drawing made under the 364 Day Tranche (excluding the Swingline)
shall be adjusted proportionately;
	 
	 	(d)	 	if the commitment of the Swingline Lender under 364 Day Tranche determined in
accordance with Section 2.7(c) is reduced to nil, each further reduction of the
commitment of the Swingline Lender determined without regard for Section 2.7(c) will
reduce the Swingline Amount by the amount of such reduction; and
	 
	 	(e)	 	if the Borrower utilizes the credit made available under the Swingline, both
immediately before and immediately after each such utilization or Drawing the Borrower
shall be deemed to have expressly confirmed and represented to Royal and the Lenders
that:

	 	(i)	 	all representations and warranties of the Borrower in Part 11
of this Agreement are true and correct;
	 
	 	(ii)	 	all covenants of the Borrower in this Agreement been complied
with;
	 
	 	(iii)	 	no Default or Event of Default has occurred and is continuing;
and
	 
	 	(iv)	 	since the date of execution of this Agreement no Material
Adverse Change has occurred.

2.8 Conversions.

     Any Conversion hereunder will be effected by the Borrower repaying when due the outstanding
Drawing (in the currency of such Drawing) and the Lenders providing in replacement thereof the
requested Drawing.

2.9 Drawing Amount.

     Except in respect of Swingline Drawings (and in particular, subject to Section 2.7(a)) and
Letter of Credit/Guarantee Drawings (which may be in any amount), no Drawing under the 364 Day
Tranche or Term Tranche shall be in an amount less than C$1,000,000 or US$1,000,000, as the case
may be. All Drawings, Rollovers and Conversions in respect of Bankers’ Acceptance

 

 

- 8 -

Drawings will be
in integral multiples of C$100,000 and LIBOR Drawings will be in integral multiples of US$100,000,
as the case may be.

2.10 Lenders’ Obligations Several.

     Subject to the terms and conditions hereof, each Lender shall participate in the 364 Day
Tranche and Term Tranche and in each Drawing thereunder (and Rollovers and Conversions thereof) in
its respective Lender’s Proportion. The rights and obligations of the Lenders under this Agreement
are several. The failure of a Lender to perform its obligations under this Agreement shall
neither:

	 	(a)	 	result in the Administrative Agent or any other Lender incurring any additional
liability whatsoever; nor
	 
	 	(b)	 	relieve the Borrower, the Administrative Agent or any other Lender of any of
their respective obligations under this Agreement.

PART 3  — GENERAL PROVISIONS REGARDING DRAWINGS

3.1 General Conditions to Each Drawing.

     In addition to the conditions set out in Part 10 and in this Part 3, the obligation of the
Lenders to provide a new Drawing (as opposed to a Rollover or Conversion of an outstanding Drawing)
under the 364 Day Tranche or Term Tranche is subject to fulfillment of the following conditions
(which are established for the sole benefit of the Administrative Agent and the Lenders and may be
waived in whole or in part, with or without conditions) on the Drawing Date:

	 	(a)	 	all representations and warranties of the Borrower contained in Part 11 and the
Guarantor contained in the Guarantee and Postponement Agreement shall be true and
correct on and as of such date both before and after giving effect to the proposed
Drawing;
	 
	 	(b)	 	all covenants of the Borrower contained in Part 12 and the Guarantor contained
in the Guarantee and Postponement Agreement shall have been complied with on and as of
such date both before and after giving effect to the proposed Drawing;
	 
	 	(c)	 	no Default or Event of Default shall have occurred and be continuing, or would
occur after giving effect to the proposed Drawing;
	 
	 	(d)	 	since the date of this Agreement, no Material Adverse Change shall have
occurred; and

 

 

- 9 -

	 	(e)	 	with respect to a Drawing, the Administrative Agent shall have received a
Drawing Notice signed by a senior financial officer or other authorized Person of the
Borrower within the time specified in Section 3.2.

     The obligation of the Lenders to provide a Rollover or Conversion is subject to fulfillment of
the matters referred to in (b), (c), (d) and (e) above, with such provision being
deemed modified to refer to Rollovers and Rollover Notices, or Conversion and Conversion
Notices, as the case may be. The foregoing conditions shall not apply to a Drawing request pursuant
to Section 2.7(b) or Section 16.19(a) or (b).

3.2 Notices.

     Except as agreed to between the Lenders and the Borrower from time to time, the Borrower shall
deliver a Drawing Notice, Rollover Notice or Conversion Notice (signed by a senior financial
officer or other authorized Person) to the Administrative Agent at the Designated Branch:

	 	(a)	 	with respect to Prime Rate Drawings or Base Rate Drawings, no later than 12:00
noon (Toronto time) one Banking Day prior to the day on which the Borrower wishes to
obtain, or make a Conversion into, a Prime Rate Drawing or Base Rate Drawing;
	 
	 	(b)	 	with respect to Bankers’ Acceptance Drawings, no later than 12:00 noon (Toronto
time) two Banking Days prior to the day on which the Borrower wishes to obtain,
Rollover or make a Conversion into, a Bankers’ Acceptance Drawing;
	 
	 	(c)	 	with respect to LIBOR Drawings, no later than 12:00 noon (Toronto time) three
LIBOR Banking Days prior to the day on which the Borrower wishes to obtain, Rollover or
make a Conversion into, a LIBOR Drawing; and
	 
	 	(d)	 	with respect to Letter of Credit/Guarantee Drawings, no later than 12:00 noon
(Toronto time) three Banking Days prior to the day on which the Borrower wishes to
obtain a Letter of Credit/Guarantee Drawing.

3.3 Administrative Agent to Notify Lenders.

     Upon receipt of a Drawing Notice, Rollover Notice or Conversion Notice, the Administrative
Agent shall promptly notify each of the Lenders of the amount and particulars of the proposed
Drawing, Rollover or Conversion and the date on which it is to be made.

3.4 Advances to Administrative Agent and Borrower.

     Where a Drawing, Rollover or Conversion results in the delivery of funds to the Borrower, each
Lender shall (subject to the provisions of this Agreement) make available to the Administrative
Agent not later than 1:00 p.m. (Toronto time) on the appropriate date its Lender’s

 

 

- 10 -

Proportion of such funds in immediately available funds for same day value at the Designated Branch to the credit
of the Borrower’s Account.

3.5 Notices Irrevocable.

     Each Drawing Notice, Rollover Notice and Conversion Notice delivered to the Administrative
Agent by the Borrower shall be irrevocable by the Borrower.

3.6 Administrative Agent’s Records.

     The Administrative Agent shall open and maintain on its books accounts evidencing all amounts
owing by the Borrower to each Lender under the 364 Day Tranche and the Term Tranche. The
Administrative Agent shall enter in the foregoing accounts details of all amounts from time to time
owing, paid or repaid by the Borrower to each Lender hereunder. The information entered in the
foregoing accounts shall, in the absence of manifest error, constitute prima facie evidence of the
obligations of the Borrower to each Lender hereunder with respect to its Lender’s Proportion of any
Drawings and any other amounts owing by the Borrower to each Lender hereunder.

PART 4  — INTEREST AND FEES

4.1 Interest, Stamping Fees and Other Fees.

     Subject to Sections 4.3 and 4.5, the Borrower shall pay interest and BA Stamping Fees on
Drawings as follows:

	 	(a)	 	Prime Rate Drawings shall bear interest at a rate of interest per annum (based
on a 365 day year) equal to the Prime Rate plus the Applicable Margin in effect from
time to time, calculated up to and including the last day of each month and payable in
Canadian Dollars on the first Banking Day of the following month;
	 
	 	(b)	 	Base Rate Drawings shall bear interest at a rate of interest per annum (based
on a 365 day year) equal to the Base Rate plus the Applicable Margin in effect from
time to time, calculated up to and including the last day of each month and payable in
U.S. Dollars on the first Banking Day of the following month;
	 
	 	(c)	 	Bankers’ Acceptance Drawings shall be subject to a stamping fee (the “BA
Stamping Fee”), payable in Canadian Dollars at the time of acceptance of the Bankers’
Acceptances in connection therewith, equal to the BA Stamping Fee Rate in effect from
time to time (based on a 365 day year) multiplied by the face amount of each such
Bankers’ Acceptance, calculated for the actual number of days of the term of such
Bankers’ Acceptance Drawing;
	 
	 	(d)	 	a LIBOR Drawing shall bear interest at the rate of interest per annum (based on
a 360 day year) equal to the LIBO Rate plus the Applicable Margin in effect from

 

 

- 11 -

	 	 	 	time to time, payable in US Dollars on the last day of the LIBOR Interest Period with
respect to such LIBOR Drawing, provided that if the LIBOR Interest Period exceeds 90
days, interest shall be payable every 90 days and then on the last day of such LIBOR
Interest Period;
	 
	 	(e)	 	a Letter of Credit/Guarantee Drawing shall be subject to a fee (the “LCG Fee”),
equal to the LCG Fee Rate in effect from time to time (based on a 365 day year)
multiplied by the maximum amount of the Letter of Credit/Guarantee Drawing
from time to time outstanding, calculated up to and including the last day of each
calendar quarter and payable on the first Banking Day of the following calendar
quarter. The LCG Fee shall be payable in the currency of the Letter of Credit or
Letter of Guarantee.

4.2 Additional Fees.

     The Borrower shall pay to the Administrative Agent, for the account of the Lenders, a fee (the
“364 Day Commitment Fee”) at the 364 Day Commitment Fee Rate in effect from time to time (based on
a 365 day year) on the unutilized maximum commitment of the Lenders in respect of the 364 Day
Tranche calculated daily, in arrears, without compounding, provided that utilization under the
Swingline shall not be considered utilization for the purpose of determining the 364 Day Commitment
Fee. The 364 Day Commitment Fee will be calculated up to and including the last day of each
calendar quarter and payable on the first Banking Day of the following calendar quarter in US
Dollars and the Administrative Agent will promptly provide the Borrower with a statement setting
out the amount thereof for the applicable quarter and containing reasonable details of each
calculation. In the event of any error in such statement, the Administrative Agent will advise the
Lenders and the Borrower and Lenders will adjust the payment accordingly.

4.3 Adjustments.

     The following shall apply in respect of the determination of, and adjustments to, interest, BA
Stamping Fees, LCG Fees and 364 Day Commitment Fees payable by the Borrower hereunder:

	 	(a)	 	the Pricing Level shall be determined from time to time based on the Quarterly
Compliance Certificate delivered pursuant to Section 12.4(c), provided that Pricing
Level 1 will have effect until the later of the first 90 days after the date hereof or
receipt of the first Quarterly Compliance Certificate;
	 
	 	(b)	 	with respect to all Drawings outstanding under the Term Tranche:

	 	(i)	 	the Applicable Margin in respect of outstanding Prime Rate
Drawings, Base Rate Drawings and LIBOR Drawings;
	 
	 	(ii)	 	the BA Stamping Fee Rate; and

 

 

- 12 -

	 	(iii)	 	the LCG Fee,
	 
	 	 	 	will be 50 basis points higher than that set out in Schedule C hereto;

	 	(c)	 	a change in interest, BA Stamping Fees, LCG Fees and 364 Day Commitment Fees
prescribed in Section 4.1 and Section 4.2 resulting from changes, if any, to the Total
Funded Debt to EBITDA Ratio shall be effective and payable from and including the
Interest and Fee Rate Adjustment Date for the fiscal quarter covered
by the Quarterly Compliance Certificate (but only for that portion of the BA Period,
LIBOR Interest Period or term of the Letter of Credit or Letter of Guarantee
remaining from and after such date). Each Lender recognizes that changes to
interest, BA Stamping Fees, LCG Fees and 364 Day Commitment Fees resulting from the
calculation of the Total Funded Debt to EBITDA Ratio for a fiscal quarter may not be
determined until the completion of the Borrower’s quarterly or annual financial
statements, as the case may be. The Borrower and the Lenders agree that no
adjustments shall be made to interest, BA Stamping Fees, LCG Fees and 364 Day
Commitment Fees following the end of a fiscal quarter of the Borrower until the
Calculation Date. Such adjustments, if any, shall be retroactive to the Interest and
Fee Rate Adjustment Date. The Borrower agrees to pay to each Lender its due share
of, and each Lender agrees to credit the Borrower its due share of, the Retroactive
Amount. The Retroactive Amount shall be paid by the Borrower or credited by each
Lender, as the case may be, on or before the sixth day following the applicable
Calculation Date;
	 
	 	(d)	 	a change in the Prime Rate or Base Rate shall have effect as regards Prime Rate
Drawings and Base Rate Drawings then outstanding on the date such change is quoted or
published, all without the necessity of any notice thereof to the Borrower or any other
Person;
	 
	 	(e)	 	a change in the 364 Day Commitment Fee Rate necessitated by the change in
Utilization of the 364 Day Tranche shall have effect on the day of such change;
	 
	 	(f)	 	for the period from the fifth Banking Day after any notice is delivered by the
Administrative Agent to the Borrower advising that the Borrower is in default of its
obligation to deliver a Quarterly Compliance Certificate pursuant to Section 12.4(c),
until the date of delivery of such Quarterly Compliance Certificate, Pricing Level III
shall apply to all Drawings; and
	 
	 	(g)	 	if any Quarterly Compliance Certificate proves to be inaccurate or incorrect
when delivered:

	 	(i)	 	the Borrower shall as soon as reasonably practicable upon
discovering same deliver an amended Quarterly Compliance Certificate;
	 
	 	(ii)	 	the appropriate pricing set out in Schedule C shall take effect
from the applicable Interest and Fee Rate Adjustment Date; and

 

 

- 13 -

	 	(iii)	 	the Borrower and the Lenders shall pay to each other any
amounts owing as a result of such amended Quarterly Compliance Certificate.

4.4 Authorized Debit.

     The Borrower authorizes the Administrative Agent to debit the Borrower’s accounts with the
amounts required to pay interest, BA Stamping Fees, LCG Fees or 364 Day Commitment

     Fees required to be paid by the Borrower in connection with Drawings, Rollovers and
Conversions hereunder.

4.5 Overdue Payments.

     Any monies payable by the Borrower to the Lenders hereunder, if not paid when due, shall bear
interest:

	 	(a)	 	in the case of Canadian Dollar amounts not paid, in Canadian Dollars at the
rate of interest per annum applicable at the time to a Prime Rate Drawing; and
	 
	 	(b)	 	in the case of US Dollar amounts not paid, in US Dollars at the rate of
interest per annum applicable at the time to a Base Rate Drawing;

in each case for the period such overdue amounts are outstanding, calculated up to and including
the last day of each month and payable on the first Banking Day of the following month.

4.6 General Interest Provisions.

     The following shall apply in respect of interest payable hereunder:

	 	(a)	 	in the event of any dispute, disagreement or adjudication involving or
pertaining to the determination of the Prime Rate, Base Rate, BA Stamping Fee Rate or
LIBO Rate in effect at any time, the certificate of the Administrative Agent as to such
rate shall be accepted, in the absence of manifest error, as prima facie evidence
thereof for all purposes of this Agreement;
	 
	 	(b)	 	each determination by the Administrative Agent of the amount of interest, BA
Stamping Fees, LCG Fees, 364 Day Commitment Fees or other amounts due from the Borrower
hereunder shall, in the absence of manifest error or other error of which the Borrower
shall give notice to the Administrative Agent within a period of 60 days from the date
of entry of the relevant information, be prima facie evidence of the accuracy of such
determination;
	 
	 	(c)	 	all interest and other amounts payable shall accrue daily, be computed as
described herein, and be payable both before and after demand, maturity, default and,
subject to Section 4.6(d), judgment;

 

 

- 14 -

	 	(d)	 	to the maximum extent permitted by law, the covenant of the Borrower to pay
interest at rates provided herein shall not merge in any judgment relating to any
obligation of the Borrower to the Lenders or the Administrative Agent;
	 
	 	(e)	 	in no event shall any interest, fees or other amounts payable hereunder exceed
the maximum permitted by law. In the event any such interest or fee exceeds such
maximum rate, such interest or fee shall be reduced to the maximum rate recoverable
under law and the Lenders and the Borrower shall be deemed to have agreed to such rate
by contract;
	 
	 	(f)	 	for the purposes of the Interest Act (Canada):

	 	(i)	 	the annual rate of interest which is equivalent to the interest
rate determined by reference to the LIBO Rate hereunder shall be the determined
rate multiplied by a fraction, the numerator of which is the total number of
days in such year and the denominator of which is 360;
	 
	 	(ii)	 	unless otherwise stated, the rates of interest specified in
this Agreement are to be calculated on the basis of a year of 365 days and the
annual rate of interest which is equivalent to the interest rate determined by
reference to such 365 day period hereunder shall be the determined rate
multiplied by a fraction, the numerator of which is the total number of days in
such year and the denominator of which is 365;
	 
	 	(iii)	 	the principle of deemed reinvestment of interest shall not
apply to any interest calculation under this Agreement; and
	 
	 	(iv)	 	the rates of interest specified in this Agreement are intended
to be nominal rates and not effective rates.

4.7 Agency Fee.

     The Borrower shall pay the Administrative Agent a yearly fee in respect of its duties
hereunder as agreed to from time to time. The Lenders shall have no claim to any portion of the
said agency fee.

PART 5  — BANKERS’ ACCEPTANCE DRAWINGS

5.1 Features of Bankers’ Acceptances.

     The following provisions shall apply to each Bankers’ Acceptance Drawing hereunder:

	 	(a)	 	for determining from time to time amounts outstanding hereunder, the face
amount of each Bankers’ Acceptance shall be included as an amount outstanding;

 

 

- 15 -

	 	(b)	 	the BA Period selected by the Borrower for each Bankers’ Acceptance in respect
of a Bankers’ Acceptance Drawing shall be the same and each such Bankers’ Acceptance
shall be payable and mature on the same BA Maturity Date selected by the Borrower for
such Bankers’ Acceptance Drawing, provided that, subject to Section 2.8, nothing herein
shall restrict the Borrower from dividing a Bankers’ Acceptance Drawing into separate
Drawings of smaller amounts;
	 
	 	(c)	 	unless the Power of Attorney contained in Section 5.3 in respect of a
particular Lender is then in effect, each Bankers’ Acceptance presented by the Borrower
for acceptance by such Lender shall be drawn on the appropriate form of such Lender;
provided, however, that the Administrative Agent may, after consultation
with the Lenders, require the Lenders to use a generic form of Bankers’ Acceptance
provided by the Administrative Agent for such purpose in place of the Lenders’ own
forms; and
	 
	 	(d)	 	unless the Power of Attorney contained in Section 5.3 in respect of a
particular Lender is then in effect, Bankers’ Acceptances presented by the Borrower for
acceptance by such Lender shall be signed by duly authorized officers of the Borrower
or, alternatively, the signatures of such officers may be mechanically reproduced in
facsimile and Bankers’ Acceptances bearing such facsimile signatures shall be binding
on the Borrower as if they had been manually executed and delivered by it and
notwithstanding that any Person whose manual or facsimile signature appears on any
Bankers’ Acceptance as one of such officers may no longer hold office at the date of
issue of any Bankers’ Acceptance.

5.2 BA Stamping Fees.

     Upon the acceptance by the Lenders of any Bankers’ Acceptances, the Borrower shall pay or
cause to be paid to the Administrative Agent on behalf of the Lenders the BA Stamping Fee in
accordance with Section 4.1(c). BA Stamping Fees shall be calculated on the basis of the face
amount of the relevant Bankers’ Acceptances and the actual number of days in the relevant BA
Period.

5.3 Power of Attorney.

     In order to facilitate the issuance of Bankers’ Acceptances (including without limitation
depository bills that comply with the Depository Bills and Notes Act (Canada)), the Borrower
authorizes each of the Lenders, in accordance with particulars provided under Section 3.3, to
complete, sign, endorse, negotiate and deliver Bankers’ Acceptances on behalf of the Borrower in
handwritten form, or by facsimile or mechanical signature or otherwise and, once so completed,
signed, endorsed or delivered, to accept them as Bankers’ Acceptances under this Agreement in
accordance with the provisions hereof and then to purchase, discount or negotiate such Bankers’
Acceptances in accordance with the provisions of this Agreement. Bankers’ Acceptances so

 

 

- 16 -

completed, signed, endorsed, purchased, discounted, negotiated or delivered on behalf of the
Borrower by a Lender shall bind the Borrower as fully and effectively as if so completed, signed,
endorsed, purchased, discounted, negotiated or delivered by an authorized officer of the Borrower.
Each Bankers’ Acceptance completed, signed, endorsed, purchased, discounted, negotiated or
delivered by a Lender shall mature on the due date set out on such Bankers’ Acceptance.

     The Borrower hereby agrees to indemnify each of the Lenders and its respective directors,
officers, employees, affiliates and agents and to hold it and them harmless from and against any
loss, liability, expense or claim of any kind or nature whatsoever incurred by any of them as a
result of any action or inaction in any way relating to or arising out of the power of attorney
(the “Power of Attorney”) contained in this Section 5.3 or the acts contemplated hereby; provided
that this indemnity shall not apply to any such loss, liability, expense or claim which
results from the negligence or willful misconduct of a Lender or any of its directors,
officers, employees, affiliates or agents.

     The Power of Attorney may be revoked by the Borrower at any time upon not less than five
Banking Days’ prior written notice served upon the Administration Agent, provided that no such
revocation shall reduce, limit or otherwise affect the obligations of the Borrower in respect of
any Bankers’ Acceptances executed, completed, endorsed, purchased, discounted, negotiated or
delivered in accordance herewith prior to the time at which such revocation becomes effective.

5.4 Provision of Instruments on Request.

     The Borrower shall, upon request by the Administrative Agent from time to time, provide to the
Administrative Agent, and the Administrative Agent shall in turn provide to each Lender at its
Lending Branch, pre-signed Bankers’ Acceptances drawn in blank (pre-endorsed and otherwise in fully
negotiable form) by duly authorized representatives of the Borrower in quantities sufficient for
each Lender to fulfil its obligations hereunder. Any such pre-signed Bankers’ Acceptances which
are delivered by the Borrower to the Administrative Agent, or by the Administrative Agent to a
Lender, shall be held in safekeeping by such holder with the same degree of care as if they were
such holder’s property, and shall only be dealt with by the Lenders and the Administrative Agent in
accordance herewith. Neither the Administrative Agent nor any Lender shall be responsible or
liable for its failure to make its share of any Bankers’ Acceptance Drawing as required hereunder
if the cause of such failure is, in whole or in part, due to the failure of the Borrower to provide
such pre-signed Bankers’ Acceptances to the Administrative Agent or such Lender on a timely basis.
Neither the Administrative Agent nor any Lender shall make any request of the Borrower pursuant to
this Section so long as the Power of Attorney is in effect.

5.5 BA Marketing.

     Each Schedule I Lender shall purchase all Bankers’ Acceptances accepted by it on the relevant
Drawing Date, Rollover Date or Conversion Date at the BA Discount Rate equal to the CDOR Rate for
bankers’ acceptances in Canadian Dollars having comparable issue dates and maturity dates to the
Bankers’ Acceptances purchased by such Schedule I Lender. Each Schedule II Lender and Schedule III
Lender shall purchase all Bankers’ Acceptances accepted by

 

 

- 17 -

it on the relevant Drawing Date,
Rollover Date or Conversion Date at the BA Discount Rate which is the sum of (a) the CDOR Rate for
bankers’ acceptances in Canadian Dollars having a comparable issue dates and maturity dates to the
Bankers’ Acceptances purchased by such Schedule II Lender and Schedule III Lender; plus (b) 10
basis points. Nothing in this Agreement shall limit a Lender’s right to sell any Bankers’
Acceptances purchased under this Section 5.5.

5.6 Completion of Funding.

     With respect to the funding of a Drawing, Rollover or Conversion pursuant to Section 5.5
above:

	 	(a)	 	each Lender is hereby authorized by the Borrower to make available its share of
such Bankers’ Acceptance Drawing by completing Bankers’ Acceptances in accordance with
the Power of Attorney, or (if applicable) by completing pre-signed Bankers’ Acceptances
held by it pursuant to Section 5.4, as to the issue date and the BA Maturity Date and
in amounts which in the aggregate for such Lender are equal to the aggregate face
amount of the Bankers’ Acceptances to be accepted by such Lender in connection with
such Drawing, Rollover or Conversion and by endorsing such Bankers’ Acceptances;
	 
	 	(b)	 	each Lender shall make available its share of such Drawing, Rollover or
Conversion by funding internally the BA Discount Proceeds due on the sale of such
Bankers’ Acceptances; and
	 
	 	(c)	 	on the relevant Drawing Date, Rollover Date or Conversion Date each Lender
shall remit the BA Discount Proceeds or BA Equivalent Drawing proceeds referred to in
Section 5.7, as the case may be, payable by such Lender (net of the BA Stamping Fee
payable to such Lender) to the Administrative Agent in immediately available funds for
same day value at the Designated Branch to the credit of the Borrower’s Account.

5.7 BA Equivalent Drawings.

     Notwithstanding the foregoing provisions of this Part 5, a Non-Acceptance Lender shall, in
lieu of accepting Bankers’ Acceptances, provide a BA Equivalent Drawing. The amount of each BA
Equivalent Drawing shall be equal to the BA Discount Proceeds which would be realized from a
hypothetical sale of those Bankers’ Acceptances which, but for this Section 5.7, such Lender would
otherwise be required to accept as part of such Bankers’ Acceptance Drawing. To determine the
amount of such BA Discount Proceeds, the hypothetical sale shall be deemed to take place at a BA
Discount Rate equal to the rate paid by Schedule II Lenders and Schedule III Lenders set out in
Section 5.6. Any BA Equivalent Drawing shall be made on the relevant Drawing Date, Rollover Date or
Conversion Date as the case may be and shall remain outstanding for the term of the relevant
Bankers’ Acceptance Drawing. Concurrent with the making of a BA Equivalent Drawing, a
Non-Acceptance Lender shall be entitled to deduct therefrom an amount equal to the BA Stamping Fee
which, but for this Section 5.7, such Lender

 

 

- 18 -

would otherwise be entitled to receive as part of such
Bankers’ Acceptance Drawing. Upon the BA Maturity Date for such Bankers’ Acceptance Drawing, the
Borrower shall pay to each Non-Acceptance Lender an amount equal to the face value of the Bankers’
Acceptances which are the subject of the hypothetical sale referred to above.

5.8 Rollover, Conversion or Payment of Bankers’ Acceptances.

     In anticipation of the maturity of each Bankers’ Acceptance Drawing, the Borrower shall do one
or a combination of the following:

	 	(a)	 	subject to Section 2.8, request a Rollover of all or part of such Bankers’
Acceptance Drawing by delivering a Rollover Notice to the Administrative Agent in
accordance with Section 3.2;
	 
	 	(b)	 	subject to Section 2.8, request a Conversion of all or part of such Bankers’
Acceptance Drawing by delivering a Conversion Notice to the Administrative Agent in
accordance with Section 3.2; or
	 
	 	(c)	 	repay all or part of such Bankers’ Acceptance Drawing in accordance with
Section 8.2(b) on the relevant BA Maturity Date for such Bankers’ Acceptance Drawing by
paying the maturing Bankers’ Acceptances or, if the maturing Bankers’ Acceptances are
paid by the relevant Lender, by paying the Administrative Agent (for the account of the
relevant Lender) an amount equal to the face amount of the relevant Bankers’
Acceptances.

     The Borrower shall provide full cash cover to the Administrative Agent on behalf of the
Lenders for each Bankers’ Acceptance Drawing in immediately available funds for same day value at
the Designated Branch on the applicable BA Maturity Date except where a Rollover is requested in
respect of such Bankers’ Acceptance Drawing, in which case the Borrower shall provide full cash
cover as aforesaid less the amount to be provided by the Lenders pursuant to Section 5.6(c) in
respect of such Rollover and which the Borrower has directed be applied to such maturing Bankers’
Acceptance. If there is no Rollover or Conversion of a Banker’s Acceptance Drawing pursuant to the
terms hereof, or no repayment of the relevant Bankers’ Acceptances in accordance with the
foregoing, there shall be deemed to be a Conversion of the Bankers’ Acceptance Drawing to a Prime
Rate Drawing and the provisions hereof relating to Prime Rate Drawings shall be applicable thereto.

5.9 Waiver.

     To the maximum extent permitted by law, the Borrower waives presentment for payment and any
defence to payment (other than those based on the negligence or willful misconduct of a Lender)
which might otherwise exist if for any reason a Bankers’ Acceptance is, at the maturity thereof,
held by a Lender as holder in its own right, and the Borrower agrees not to claim any days of grace
for the payment at maturity of any Bankers’ Acceptance.

 

 

- 19 -

5.10 Depository Bills.

     The Borrower agrees with each Lender that, at the request of a Lender, all Bankers’
Acceptances for utilization by such Lender will conform with the required characteristics of a
“depository bill” as described in the Depository Bills and Notes Act (Canada). It is the intention
of the Lenders that the amended Bankers’ Acceptances (if requested) shall be deposited with a

     “clearing house” as defined in such Act. Each Lender, in consultation with the Borrower,
shall establish and notify the Borrower of the procedures, consistent with the terms of this
Agreement and the Depository Bills and Notes Act (Canada) as are reasonably necessary to
accomplish each Lender’s intentions. All depository bills so issued shall be governed by this Part
5.

PART 6  — LIBOR DRAWINGS

6.1 LIBOR Interest Periods.

     The Borrower shall select a single LIBOR Interest Period for each LIBOR Drawing provided that,
subject to Section 2.8, nothing herein shall restrict the Borrower from dividing a LIBOR Drawing
into separate Drawings of smaller amounts.

6.2 Notification of Rate.

     After the Borrower has selected a LIBOR Interest Period, the Administrative Agent shall advise
the Borrower and the Lenders of the LIBO Rate on the second LIBOR Banking Day before the relevant
Drawing Date, Rollover Date or Conversion Date which shall apply to the calculation of the interest
rate payable pursuant to such LIBOR Drawing, promptly after the Administrative Agent shall have
ascertained the applicable rate; provided, however, that any failure by the Administrative Agent to
so notify the Borrower of any applicable rate shall not affect the obligation of the Borrower to
pay interest at the rate provided for herein.

6.3 Rollover, Conversion or Payment of LIBOR Drawing.

     In anticipation of the maturity of each LIBOR Drawing, the Borrower shall do one or a
combination of the following:

	 	(a)	 	subject to Section 2.8, request a Rollover of all or part of such LIBOR Drawing
by delivering a Rollover Notice to the Administrative Agent in accordance with Section
3.2;
	 
	 	(b)	 	subject to Section 2.8, request a Conversion of all or part of such LIBOR
Drawing by delivering a Conversion Notice to the Administrative Agent in accordance
with Section 3.2; or
	 
	 	(c)	 	repay all or part of such LIBOR Drawing in accordance with Section 8.2(b) on
the last day of the relevant LIBOR Interest Period

 

 

- 20 -

provided, however, that if there is no Rollover or Conversion of a LIBOR Drawing in accordance
with the terms hereof, or no payment of the LIBOR Drawing in accordance with the foregoing, there
shall be deemed to be a Conversion of such LIBOR Drawing to a Base Rate Drawing and the provisions
hereof relating to Base Rate Drawings shall be applicable thereto.

PART 7 – LETTERS OF CREDIT/GUARANTEE DRAWINGS

7.1 Letters of Credit and Letters of Guarantee.

     The Borrower may, by delivery of a Drawing Notice, request a Letter of Credit/Guarantee
Drawing in the following forms:

	 	(a)	 	a Letter of Credit/Guarantee Drawing may be provided by the Fronting Lender
issuing a single Letter of Credit or Letter of Guarantee (“Fronted LCG”) for the full
amount of the Letter of Credit/Guarantee Drawing; or
	 
	 	(b)	 	a Letter of Credit/Guarantee Drawing may be provided by the Administrative
Agent issuing a single Letter of Credit or Letter of Guarantee (“Several LCG”)
severally on behalf the Lenders for the full amount of the Letter of Credit/Guarantee
Drawing.

     The Borrower shall make all reasonable efforts to utilize a Several LCG before requesting
issuance of a Fronted LCG.

     At no time shall the Letter of Credit/Guarantee Drawings exceed the US Dollar Equivalent of
US$10,000,000.

7.2 Procedures Applicable for Fronted LCG.

     If the Borrower requests the issuance of a Fronted LCG the following procedure shall apply:

	 	(a)	 	in consideration of the capital requirements of maintaining such Fronted Letter
of Credit, the Borrower shall pay to the Fronting Lender (for its own account and not
of the account of the other Lenders) a fee (the “Fronting Fee”) equal to .25% per annum
(based on a 365 day year) of the face amount of the Fronted Letter of Credit,
calculated up to and including the last day of each calendar quarter and payable on the
first Banking Day of the following calendar quarter;
	 
	 	(b)	 	prior to issuance the Borrower shall pay to the Fronting Lender (for its own
account and not of the account of the other Lenders) a non-refundable document
processing fee of C$250 in connection with the preparation of each Fronted LCG issued;
and
	 
	 	(c)	 	each Lender hereby agrees to indemnify and save harmless the Fronting Lender in

 

- 21 -

	 	 	 	respect of any loss or payment under a Fronted LCG in an amount equal to its Lender’s
Proportion of any such loss or payment. For greater certainty, if the Borrower fails
to provide full cash cover to the Fronting Lender in respect of payment of drafts drawn
under any Fronted LCG, each Lender shall, upon the request of the Administrative Agent
as required by the Fronting Lender, purchase portions of the deemed Prime Rate Drawing
or Base Rate Drawing, as the case may be, referred to in Section 7.9 and make any other
adjustments which may be necessary or appropriate to ensure each Lender is owed its
Lender’s Proportion of each such deemed Prime Rate Drawing or Base Rate Drawing by the
Borrower.

7.3 Procedures Applicable for Several LCG.

     If the Borrower requests the issuance of a Several LCG the following procedure shall apply:

	 	(a)	 	upon receipt of a Drawing Notice in respect of the Letter of Credit/Guarantee
Drawing, the Administrative Agent shall issue on behalf of each Lender (on a several
basis with the other Lenders, up to the amount of such Lender’s Proportion), on the
terms and subject to the conditions herein set forth, Letters of Credit or Letters of
Guarantee for the account of the Borrower from time to time on any Banking Day prior to
the 364 Day Tranche Repayment Date or Term Tranche Repayment Date, as the case may be;
	 
	 	(b)	 	prior to issuance the Borrower shall pay to the Administrative Agent (for its
own account and not of the account of the other Lenders) a non-refundable document
processing fee of C$250 in connection with the preparation of each Several LCG issued;
	 
	 	(c)	 	if any Lender (in this paragraph, a “Non-Qualifying Lender”) has a rating of
Baa1/BBB+ (or equivalent) or less assigned to its senior unsecured public debt by a
rating agency, at the request of the Borrower made to the Administrative Agent (and in
such circumstance the Administrative Agent shall have no duty to confirm, or enquire as
to, such rating) such Non-Qualifying Lender will not be included as a Lender issuing a
Letter of Credit or Letter of Guarantee and all references to Lenders in other
provisions of this Part 7, other than as they relate to a Fronted LCG, shall be deemed
to exclude such Non-Qualifying Lender. In such event, the portion of the face amount of
a Letter of Credit or Letter of Guarantee that would otherwise have been issued by the
Non-Qualifying Lender (in this paragraph, the “Non-Qualifying Portion”) shall be issued
by the other Lenders pro rata in accordance with their respective Lender’s Proportion
and the Non-Qualifying Lender’s share of Drawings other than such Letter of
Credit/Guarantee Drawings shall be increased (and the other Lenders’ shares decreased
pro rata in accordance with their respective Lender’s Proportion) by the amount of the
Non-Qualifying Portion. The Administrative Agent is authorized by the Borrower and
each Lender
to make such re-allocations of Drawings as the Administrative Agent

 

- 22 -

	 	 	 	determines in
its sole and unfettered discretion may be equitable in the circumstances;
	 
	 	(d)	 	promptly upon receipt of a Drawing Notice, the Administrative Agent shall
notify each Lender thereof, which notice from the Administrative Agent shall also
specify each Lender’s rateable amount of such Letter of Credit or Letter of Guarantee;
	 
	 	(e)	 	each Drawing Notice shall be irrevocable and binding on the Borrower and the
Borrower shall indemnify the Administrative Agent and the Lenders against any loss or
expense incurred by the Administrative Agent or the Lenders as a result of any failure
by the Borrower to fulfil or honour the Drawing Notice;
	 
	 	(f)	 	each Several LCG to be issued by the Administrative Agent on behalf of the
Lenders under this Section 7.3: (i) shall be dated the issue date; (ii) shall comply
with the definition of Letter of Credit or Letter of Guarantee; and (iii) shall be
substantially in the form of Schedule K, with any such change to such form as the
Borrower may request and the Administrative Agent may determine in good faith and on a
commercially reasonable basis, does not materially increase the obligations, or
diminish the rights, of any Lender relative to such form, or all of the Lenders shall
approve; provided that, without the prior written consent of each Lender, no Several
LCG may be issued that would vary the several nature of the obligations of the Lenders
thereunder.

7.4 Administrative Agent to Execute As Attorney.

     Each Several LCG shall be executed and delivered by the Administrative Agent in the name of
and on behalf of, and as attorney-in-fact for, each Lender. The Administrative Agent shall act
under each Several LCG as the agent of each Lender to:

	 	(a)	 	receive drafts, other demands for payment and other documents presented by the
beneficiary thereunder (and the Administrative Agent shall forward a copy of such
documents to the Borrower promptly upon receipt thereof);
	 
	 	(b)	 	determine whether such drafts, demands and documents are in compliance with the
terms and conditions of such Several LCG; and
	 
	 	(c)	 	notify such Lender and the Borrower that a valid drawing has been made and the
date that the related payment by a Lender thereunder is to be made; provided that the
Administrative Agent shall have no obligation or liability for any such payment under
any Several LCG, and each Several LCG shall expressly so provide;

     Each Lender hereby irrevocably appoints and designates the Administrative Agent as its
attorney-in-fact, acting through any duly authorized officer of the Administrative Agent, to
execute and deliver in the name and on behalf of such Lender at any time prior to the 364 Day

 

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Tranche Repayment Date in respect of such Lender each Several LCG to be issued by such Lender
hereunder. Promptly upon the request of the Administrative Agent, each Lender will
furnish to the Administrative Agent such powers of attorney or other evidence as any
beneficiary thereunder may reasonably request in order to demonstrate that the Administrative Agent
has the power to act as attorney-in-fact for such Lender to execute and deliver such Several LCG.
The Borrower and the Lenders agree that each Several LCG shall provide that all drafts and other
documents presented thereunder shall be delivered to the Administrative Agent and that all payments
thereunder shall be made by the Lenders obligated thereon through the Administrative Agent. Each
Lender shall be severally liable under each Several LCG in proportion to its Lender’s Proportion of
such Several LCG, and each Several LCG shall specify each Lender’s Proportion of the amount payable
thereunder.

7.5 Records.

     The Administrative Agent shall maintain records showing the undrawn and unexpired amount of
Several LCGs outstanding hereunder and each Lender’s share of such amount and showing for each
Several LCG issued hereunder: (a) the issuance date and expiration date thereof; (b) the amount
thereof; (c) the date and amount of all payments made thereunder; and (d) each Lender’s share of
the amount of each Several LCG issued hereunder. The Administrative Agent shall make copies of
such records available to the Borrower or any Lender upon request. In the event of a conflict
between the Administrative Agent’s record of the applicable terms of any Issuance and an Issue
Notice, the Administrative Agent’s record shall prima facie prevail, absent demonstrated error.

7.6 Time for Honour.

     No Several LCG shall require payment against a conforming draft to be made thereunder on the
same Banking Day upon which such draft is presented, if such presentation is made after 11:00 a.m.
(local time) on such Banking Day.

7.7 Issue.

     Not later than 1:00 p.m. (Toronto time) on an applicable issue date, the Administrative Agent,
as attorney-in-fact for the Lenders, will complete and issue or arrange to have completed and
issued the relevant Several LCG: (a) dated the issue date; (b) in favour of the beneficiary; (c) in
the face amount requested; and (d) with the expiration date; all as specified by the Borrower in
its Drawing Notice. Upon issuance of a Several LCG, the Administrative Agent shall give prompt
notice thereof to the Borrower and each Lender.

7.8 Payment of Amounts Drawn Under Several LCG.

	 	(a)	 	Review. The Borrower and each Lender hereby authorize the Administrative Agent
to review on behalf of each Lender each draft and other document presented under each
Several LCG. The determination of the Administrative Agent as to the conformity of any
documents presented under a Several LCG to the requirements of such Several LCG shall,
in the absence of the Administrative Agent’s gross negligence or wilful misconduct, be
conclusive and binding on the Borrower and each Lender. The Administrative

 

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	 	 	 	Agent shall, within a reasonable time following
its receipt thereof, examine all documents purporting to represent a demand for
payment under any Several LCG. The Administrative Agent shall promptly after such
examination: (i) notify each of the Lenders obligated under such Several LCG and the
Borrower by telephone (confirmed in writing) of such demand for payment and of each
Lender’s rateable share of such payment; (ii) promptly deliver to each such Lender
and the Borrower a copy of each document purporting to represent a demand for
payment under such Several LCG; and (iii) notify each Lender and the Borrower
whether said demand for payment was properly made under the Several LCG. The
responsibility of the Administrative Agent and the Lenders in connection with any
draft presented for payment under any Several LCG shall, in addition to any payment
obligation expressly provided for in such Several LCG, be limited to determining
that the documents (including each draft) delivered under such Several LCG in
connection with such presentment are in conformity with the requirements of such
Several LCG, it being understood that the Administrative Agent shall make such
determination on behalf of the Lenders.
	 
	 	(b)	 	Payment. With respect to any drawing determined by the Administrative Agent to
have been properly made under a Several LCG, each Lender will make its Lender’s
Proportion of the applicable payment in respect of such Several LCG in accordance with
its liability under such Several LCG and this Agreement, such payment to be made to the
Administrative Agent. The Administrative Agent will make any payments made available
to it by the Lenders to the beneficiary of such Several LCG by promptly crediting the
amounts so received, in like funds, to the account identified by such beneficiary in
connection with such demand for payment. Promptly following any payment by any Lender
in respect of any Several LCG, the Administrative Agent will notify the Borrower of
such payment; provided that any failure to give or delay in giving such notice shall
not relieve the Borrower of its obligations to reimburse the Lenders with respect to
any such payment.
	 
	 	(c)	 	Administrative Agent Not Required to Pay. The Administrative Agent shall not
be required to make any payment under a Several LCG in excess of the amount received by
it from the Lenders for such payment. Promptly after making a payment under a Several
LCG on behalf of the Lenders liable thereunder, the Administrative Agent shall remit to
each Lender that remitted funds to the Administrative Agent in respect of such payment
such Lender’s share of the payments received by the Administrative Agent from the
Borrower in respect of such payment.

 

- 25 -

7.9 Reimbursement.

     The Borrower agrees to immediately reimburse the Administrative Agent, Fronting Lender and
each Lender, as the case may be, on demand, for each payment made by any of them under any Letter
of Credit or Letter of Guarantee. The Borrower shall make such reimbursement by paying to the
Administrative Agent, for its account or for the account of the Fronting Lender and
each Lender, the full amount of each such payment made. The Borrower shall also pay and
reimburse the Administrative Agent, Fronting Lender and each Lender for all taxes, fees, charges
and other costs and expenses incurred by any of them in connection with such payment, as notified
by the Administrative Agent, Fronting Lender and each Lender to the Borrower through the
Administrative Agent. Each reimbursement payment shall be due and taxable on the date on which the
Administrative Agent notifies the Borrower of the amount of such reimbursement obligation. Without
limiting any other provisions of this Agreement, if the Borrower shall fail to reimburse the
Administrative Agent, Fronting Lender and each Lender in respect of any payments made by them as
contemplated in this Section 7.9, the amount that the Borrower fails to reimburse shall, if a
Canadian Dollar amount, be deemed to be a Prime Rate Drawing and, if a US Dollar amount, shall be
deemed to be a Base Rate Drawing, in each case as of the date on which the Administrative Agent
notified the Borrower of the amount of such obligation, and the provisions applicable to Prime Rate
Drawings and Base Rate Drawings shall apply thereto.

7.10 Obligations Absolute.

     The reimbursement obligation of the Borrower under Section 7.9 shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all
circumstances, including:

	 	(a)	 	any lack of validity or enforceability of a Letter of Credit or Letter of
Guarantee;
	 
	 	(b)	 	the existence of any claim, set off, defence or other right which the Borrower
may have at any time against a beneficiary, the Administrative Agent, a Lender or any
other person, whether in connection with this Agreement or any other transaction
(including any underlying transaction between such Borrower and the beneficiary);
	 
	 	(c)	 	any certificate or other document presented with a Letter of Credit or Letter
of Guarantee proving to be forged, fraudulent or invalid or any statement in it being
untrue or inaccurate;
	 
	 	(d)	 	the existence of any act or omission or any misuse of, a Letter of Credit or
Letter of Guarantee or misapplication of proceeds by the beneficiary, including any
fraud in any certificate or other document presented with a Letter of Credit or Letter
of Guarantee in each case unless, before payment of a Letter of Credit or Letter of
Guarantee:

	 	(i)	 	the Borrower has delivered to the Administrative Agent and the
applicable Lenders a written notice of the fraud together with a written
request that it

 

- 26 -

	 	 	 	refuse to honour such drawing,
	 
	 	(ii)	 	the fraud by the beneficiary has been established to the
knowledge of the applicable Lender so as to make the fraud clear or obvious to
the Lender; and
	 
	 	(iii)	 	in the case of fraud in the underlying transaction between
such Borrower
and the beneficiary, the fraud is of such character as to make the demand
for payment by the Beneficiary under the Letter of Credit or Letter of
Guarantee a fraudulent one;

	 	(e)	 	payment by the Lender under the Letter of Credit or Letter of Guarantee against
presentation of a certificate or other document which does not comply with the terms of
the Letter of Credit or Letter of Guarantee (provided that such payment does not
constitute gross negligence or wilful misconduct, in the case of a standby Letter of
Credit or Letter of Guarantee, or in the case of a commercial letter of credit breach
of the standards of reasonable care specified in the Uniform Customs and Practice for
Letter of Credits (1993 Revision), ICC Publication 500 (or any replacement
publication); or
	 
	 	(f)	 	the existence of a Default or Event of Default.

     For greater certainty, the indemnity set out in Section 14.4 shall apply in respect of any
liability arising out of the actions of the Administrative Agent and the Lenders under this Part 7,
including any failure to pay under any Letter of Credit or Letter of Guarantee in the circumstances
set out in (d) of this Section 7.10.

PART 8 — PAYMENTS

8.1 Currency Fluctuations — Repayment of Excess.

     Except where the US Dollar Equivalent of principal amounts owing under the Facility exceeds
the maximum amount thereof then in effect by 5% or less due to currency fluctuations, if at any
time the US Dollar Equivalent of principal amounts owing under the 364 Day Tranche or Term Tranche
exceed the maximum amount set out in Section 2.1 (as reduced from time to time in accordance with
Section 8.2), the Borrower shall immediately repay to the Lenders or the Lenders, as the case may
be, on demand, such excess together with accrued interest thereon as provided for herein to the
date of such repayment. If to make such repayment it is necessary to repay a Bankers’ Acceptance
Drawing or LIBOR Drawing, the Borrower shall not be required to repay such Bankers’ Acceptance
Drawing or LIBOR Drawing until the BA Maturity Date or end of the LIBOR Interest Period, as the
case may be, provided that the Borrower has deposited with the Administrative Agent funds equal to
such excess to be held in trust to be applied against payment of such excess. In any event,
Drawings shall be brought within the maximum amount permitted under the 364 Day Tranche or Term
Tranche on the next succeeding Drawing Date, Conversion Date or Rollover Date.

 

- 27 -

8.2 Reduction or Repayment of the Facility.

     The Borrower may:

	 	(a)	 	upon not less than three Banking Days’ prior notice in writing delivered to the
Administrative Agent by 12:00 noon (Toronto time), reduce the maximum amount available
under the 364 Day Tranche, provided that:

	 	(i)	 	any reduction shall be in an amount equal to or greater than
the US Dollar Equivalent of US$5,000,000 plus integral multiples of the US
Dollar Equivalent of US$1,000,000;
	 
	 	(ii)	 	any notice of reduction given by the Borrower pursuant hereto
shall be irrevocable and the Borrower shall be bound to reduce the 364 Day
Tranche in accordance with such notice;
	 
	 	(iii)	 	once reduced, the 364 Day Tranche may not be subsequently
increased; and/or

	 	(b)	 	upon not less than three Banking Days’ prior notice in writing delivered to the
Administrative Agent by 12:00 noon (Toronto time), repay all or any part of the
principal amounts outstanding under the 364 Day Tranche or Term Tranche, provided that:

	 	(i)	 	any partial repayment shall be in an amount equal to or greater
than the US Dollar Equivalent of C$5,000,000 plus integral multiples of the US
Dollar Equivalent of C$1,000,000;
	 
	 	(ii)	 	the Borrower pays concurrently with such repayment all interest
accrued on the amount thereof;
	 
	 	(iii)	 	subject to Section 8.9 with respect to repayment of any
Bankers’ Acceptance Drawings, the repayment is on the applicable BA Maturity
Date and with respect to any LIBOR Drawing, repayment is on the last day of the
relevant LIBOR Interest Period unless in respect of such repaid LIBOR Drawing
the Borrower indemnifies the Lenders for breakage and other such costs;
	 
	 	(iv)	 	once repaid, Drawings under the Term Tranche may not be
subsequently reborrowed or redrawn; and/or
	 
	 	(v)	 	any notice of repayment given by the Borrower pursuant hereto
shall be irrevocable and the Borrower shall be bound to repay in accordance
with such notice.

 

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8.3 Mandatory Prepayments.

     Borrower will from time to time be required to make mandatory prepayments with respect to the
364 Day Tranche and Term Tranche to the extent that principal amounts outstanding thereunder plus
the amount of any Breakage Costs exceed the Borrowing Base, and in the case of the Term Tranche, if
any principal amounts are required to be repaid in order to comply with such limitation, the Term
Tranche shall be deemed permanently reduced by the amount of such prepayment.

8.4 Maturity Date Payments.

     The Borrower shall, on the 364 Day Tranche Repayment Date or, if the 364 Day Tranche is
converted to the Term Tranche pursuant to Section 2.6, on the term Tranche Repayment Date, as the
case may be, pay in full to the Administrative Agent, for the account of the Lenders, all amounts
of principal, interest, the face amount of Bankers’ Acceptances, BA Stamping Fees, LCG Fees, 364
Day Commitment Fees, expenses and other liabilities payable in respect of the Facility.

8.5 Place and Manner of Payments.

     All payments to be made by the Borrower hereunder shall be made to the Administrative Agent.
Subject to Section 8.9, all such payments shall be made in immediately available funds and received
by the Administrative Agent for same day value on the due date at the Designated Branch prior to
12:00 noon. Payment of any amount by the Borrower to the Administrative Agent for the account of
the Lenders shall, as between the Borrower and the Lenders, constitute payment of such amount by
the Borrower to the Lenders. Whenever any payment hereunder is due on a day which is not a Banking
Day the due date thereof shall be extended to the next succeeding Banking Day unless such payment
is in respect of a LIBOR Drawing and such Banking Day falls in the next calendar month, in which
event the due date for such LIBOR Drawing shall be the next preceding Banking Day.

8.6 Administrative Agent to Transfer Payments to Lenders.

     Subject to Section 8.9, the Administrative Agent shall, for same day value on the date of
receipt, remit to each Lender or Lender, as the case may be, in same day funds, such Lender’s
Proportion or Lender’s Proportion, as the case may be, of the payment so made by the Borrower on
that day by remitting it to such Lender at the Lender’s Lending Branch. In the event that any
payment hereunder is received by the Administrative Agent later than as required under Section 8.5,
such payment shall be deemed for the purposes of interest and fee computations as between the
Administrative Agent and such Lenders to have been received by the Administrative Agent on the next
following Banking Day and the Borrower shall indemnify the Administrative Agent or such Lenders, as
the case may be, for any loss incurred thereby.

8.7 Receipt in Proportion.

     Except as otherwise provided herein or in any other agreement in writing among the

 

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Lenders, each and every payment of principal, interest and other amounts for the account of
the Lenders or Lenders shall be made to the Administrative Agent for the account of each such
Lender or Lender pro rata according to its Lender’s Proportion or Lender’s Proportion, as the case
may be. Without limiting the generality of the foregoing, the parties hereto agree that the
payments to be made by the Borrower pursuant to Section 4.7 shall be retained by the Administrative
Agent for its own benefit, and shall not be received on the account of the Lenders in accordance
with this Section 8.7, and shall be received by the Administrative Agent without prejudice to any
right that the Administrative Agent may have to share proportionately in any other payments
received from the Borrower under the terms hereof arising in its capacity as Lender hereunder.

8.8 Net Payments, etc.

     All payments by the Borrower hereunder (whether in respect of principal, interest, fees or any
other item) shall be made in full without any deduction or withholding (whether in respect of
set-off, counterclaim, duties, taxes, charges or otherwise whatsoever) unless the Borrower is
prohibited by law from doing so, in which event the Borrower shall:

	 	(a)	 	ensure that the deduction or withholding does not exceed the minimum amount
legally required;
	 
	 	(b)	 	forthwith pay to the Administrative Agent for the account of each Lender such
additional amount so that the net amount received by such Lender shall equal the full
amount which would have been received by it had no such deduction or withholding been
made, except where such withholding tax is exigible as a result of a Lender being or
becoming a non-resident or assigning or granting a participation in all or a portion of
its rights under this Agreement to a non-resident as that term is defined in the Income
Tax Act (Canada), in which case no such payment shall be required;
	 
	 	(c)	 	pay to the relevant taxation or other authorities within the period for payment
permitted by applicable law the full amount of the deduction or withholding (including,
without limitation, the full amount of any deduction or withholding from any additional
amount paid pursuant to this Section 8.8); and
	 
	 	(d)	 	furnish to the Administrative Agent for delivery to such Lender, when received,
an official receipt of the relevant taxation or other authorities involved for all
amounts deducted or withheld as aforesaid.

     Each Schedule III Lender listed in Schedule B hereby (i) certifies that it is exempt from
non-resident withholding tax under the Income Tax Act (Canada); (ii) agrees to notify the Borrower
forthwith if it ceases to be so exempt; and (iii) agrees to indemnify and save the Borrower
harmless from all loss, expense and liability incurred by the Borrower if such Schedule III Lender
is not exempt from non-resident withholding tax at the date of this Agreement or if it fails to
notify the Borrower forthwith after it ceases to be so exempt.

 

- 30 -

     Each Person which becomes a Lender after the date of this Agreement shall forthwith notify the
Borrower if it is, or becomes, a non-resident of Canada for the purpose of the Income Tax Act
(Canada), and each Person which becomes a Schedule III Lender after the date of this Agreement
shall certify to the Borrower whether it is or is not exempt from non-resident withholding tax
under the Income Tax Act (Canada) and shall forthwith notify the Borrower of any change in such
status. Any Person which becomes a Lender or a Schedule III Lender after the date of this
Agreement shall indemnify and save the Borrower harmless from all loss, expense and liability
incurred by the Borrower as a result of such Person’s failure to give any notice or certification
required by this paragraph.

     If after the date of this Agreement a Lender ceases to be so exempt, the Borrower may elect to
do any one or more of the following (i) pay all amounts owing to such Lender, cancel such Lender’s
interest in the 364 Day Tranche or Term Tranche, as the case may be, and the Facility and reduce
the then current maximum amount of the 364 Day Tranche or Term Tranche, as the case may be, and the
Facility by an amount equal to the Canadian Dollar Equivalent of the principal amount of the
commitment cancelled; or (ii) request the Administrative Agent, at the expense of the Borrower, to
invite the other Lenders, or the other Lenders, as the case may be, or such other financial
institutions approved by both the Borrower and the Administrative Agent, to acquire, without
discount, all or a portion (subject to Section 15.1(b)) of the rights under this Agreement of any
Lender who ceases to be so exempt and such acquisition shall be in accordance with Part 15, and in
the event that such an offer is received, such Lender who ceases to be so exempt shall accept such
offer.

8.9 Prepayment of BAs, Letters of Credit and Letters of Guarantee.

     If for whatever reason a Bankers’ Acceptance Drawing is prepaid or otherwise becomes due and
payable on a date which is not the BA Maturity Date relevant to such Drawing or a Letter of
Credit/Guarantee Drawing is prepaid by the Borrower prior to its expiry or otherwise becomes due
and payable on a date which is not its maturity date, then such Bankers’ Acceptance Drawing or
Letter of Credit/Guarantee Drawing shall be paid by the Borrower paying the face amount of the
maturing Bankers’ Acceptance, Letter of Credit or Letter of Guarantee to the Administrative Agent,
which amount shall be held in an interest bearing trust account for future set-off against such
maturing Bankers’ Acceptance, Letter of Credit or Letter of Guarantee and the interest accrued
thereon shall be for the account of the Borrower.

8.10 Application of Payments Prior to Event of Default.

     Prior to the occurrence of an Event of Default, all payments hereunder made by or on behalf of
the Borrower shall be applied in the following order:

	 	(a)	 	firstly, to any amounts due hereunder from the Borrower as recoverable costs
and expenses, for distribution to the Administrative Agent and relevant Lenders;

 

- 31 -

	 	(b)	 	secondly, to any amounts due hereunder from the Borrower as agency fees and
other amounts due to the Administrative Agent in its capacity as such, for distribution
to the Administrative Agent;
	 
	 	(c)	 	thirdly, to any amounts due hereunder from the Borrower as interest, BA
Stamping Fees, LCG Fees, 364 Day Commitment Fees and other Indebtedness hereunder other
than principal; and
	 
	 	(d)	 	fourthly, to any amounts due hereunder from the Borrower as principal.

     After the occurrence of an Event of Default, payments hereunder made by or on behalf of the
Borrower shall be applied in such manner as the Lenders in their sole discretion may determine.

PART 9 — CHANGES IN CIRCUMSTANCES

9.1 Increased Costs.

     If at any time a Lender determines in good faith (which determination shall be conclusive) and
notifies the Borrower through the Administrative Agent that any future law, regulation, guideline,
interpretation bulletin, order, treaty or official directive (whether or not having the force of
law), or any change in any present law, regulation, guideline, interpretation bulletin, order,
treaty or official directive or in the interpretation or application thereof by any authority
charged with administration thereof or by any court or any compliance by such Lender with any
request or directive of any applicable monetary, fiscal or other governmental agency or authority
(whether or not having the force of law), but specifically excluding any change in capital taxes,
the rate of taxation applicable to the general income of such Lender or change in the manner of
calculation of the general income of such Lender, has the effect in respect of any Drawing of:

	 	(a)	 	increasing the cost (including the cost of allocating additional capital) of
such Lender of making, maintaining or funding its participation in such Drawing; or
	 
	 	(b)	 	reducing the amount of principal, interest or other amount received or
receivable by such Lender hereunder or its effective return hereunder; or
	 
	 	(c)	 	causing such Lender to make any payment not required to be made prior to such
change or event, or to forego any interest or other return on or calculated by
reference to any sum received or receivable by it hereunder not required prior to such
change or event;

then, in any such case, upon demand being made to the Borrower by such Lender through the
Administrative Agent within 90 days of the occurrence from time to time of (a), (b) or (c), the
Borrower shall either (i) within 30 days of receipt of such demand pay to the Administrative Agent
for the account of such Lender such amount as shall compensate such Lender for such

 

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additional cost, reduction, payment, foregone interest or other reduced return, or (ii) repay as
permitted in Section 8.2(b) hereof the portion of the Facility giving rise to such additional cost,
reduction, payment, foregone interest or other reduced return to such Lender, provided that the
minimum repayment amounts referred to in Section 8.2(b)(i) shall not apply. For greater certainty,
if the Borrower elects to pay the amounts demanded as provided in (i) and such additional cost,
reduction, payment, foregone interest or other reduced return continues beyond the said 90 day
period, the Lender may from time to time make additional demands in connection therewith.
Notwithstanding the foregoing, each Lender agrees that it will not demand payment of the aforesaid
amounts if it is not at the same time passing similar amounts on to customers of the Lender in
Canada on to whom the Lender is by agreement entitled to pass such amounts.

9.2 Form of Demand.

     Any demand for payment made pursuant to Section 9.1 shall include an explanatory statement by
such Lender as to the events resulting in the relevant effect upon such Lender as described in
Section 9.1 (a), (b) and (c) together with a reasonably detailed outline of the calculation of the
resulting payment by the Borrower demanded by such Lender. Absent manifest error, such statement
and calculation shall be binding and conclusive, provided however that the Lenders shall determine
such amounts owing in good faith using reasonable averaging and attribution methods.

9.3 Consultation.

     For a period of 30 days after demand is made under Section 9.1 the Borrower, the Lender and
the Administrative Agent shall consult with a view to the Lender taking such steps, including the
transfer of the obligations of the Lender to another jurisdiction, to avoid the circumstances
giving rise to such event, provided that such steps do not, in the opinion of the Lender acting
reasonably, prejudice the Lender. If such consultation does not within such time result in
agreement on the steps to be taken to avoid the circumstances concerned, the Administrative Agent
shall, at the Borrower’s request and for 30 days thereafter and at the expense of the Borrower,
invite the other Lenders (if any) and other banks approved by the Borrower which are not affected
by such event or circumstances to acquire, without discount, all or a portion (subject to Section
15.1(b)) of the said Lender’s rights under this Agreement in accordance with Part 15 and in the
event such an offer (or offers) is received, the said Lender shall either waive its right to
receive payments under Section 9.1 or accept the said offer (or offers).

9.4 Illegality.

     Notwithstanding anything herein contained, if at any time any Lender determines in good faith
(which determination shall be conclusive) and notifies the Borrower through the Administrative
Agent that, by reason of any future law, regulation, guideline, interpretation bulletin, order,
treaty or official directive, or any future change to any existing law, regulation, guideline,
interpretation bulletin, order, treaty or official directive or in the interpretation or
application thereof by any authority charged with the administration thereof or by any court, that
it is unlawful or contrary to the direction of any competent authority for such Lender to make or

 

- 33 -

maintain any Drawing, then such Lender and the Borrower shall negotiate in good faith means by
which such Drawing may be legally maintained by the Lender, including converting such Drawing
to another form of Drawing or assigning all or part of such Lender’s Proportion of the Facility to
another Person determined by the Borrower. If the Borrower and such Lender fail to agree on a
solution, such outstanding Drawing and all other amounts payable to or for the account of such
Lender hereunder in connection therewith shall be forthwith repaid by the Borrower to the
Administrative Agent for the account of such Lender.

PART 10 — CONDITIONS OF LENDERS’ OBLIGATIONS

10.1 Conditions Precedent.

     The obligation of the Lenders and the Administrative Agent to provide the initial Drawing
under the Facility after March 1, 2006 is subject to the fulfillment of the following conditions
(which are established for the sole benefit of the Administrative Agent and the Lenders) to the
satisfaction of the Administrative Agent and the Lenders, which conditions may be waived in whole
or in part by the Administrative Agent and the Lenders, with or without conditions (any decision
by the Lenders in respect thereof to be delivered through the Administrative Agent):

	 	(a)	 	Corporate Proceedings. All partnership proceedings to be taken by the Borrower
and corporate proceedings to be taken by the Guarantor in connection with the
transactions contemplated by this Agreement, the Security Agreements and the Guarantee
and Postponement Agreement shall be satisfactory in form and substance to the Lenders
and Lenders’ Counsel, acting reasonably, and the Administrative Agent shall have
received certified copies of all documents which it may reasonably request in
connection with such transactions and of the records of all corporate proceedings in
connection therewith.
	 
	 	(b)	 	Delivery of Documentation. The Borrower shall have delivered, or caused to be
delivered, to the Lenders this Agreement and the Security Agreements required as of the
Effective Time, duly executed. The Borrower and Guarantor shall have further executed
and delivered to the Administrative Agent and each Lender such other documentation
concerning the administration of this Agreement and the Drawings as the Administrative
Agent, the Lenders or Lenders’ Counsel may reasonably request.
	 
	 	(c)	 	Representations, Warranties and Defaults. The representations and warranties
of the Borrower contained in this Agreement and the Security Agreements to which it is
a party, and of the Guarantor contained in the Guarantee and Postponement Agreement,
shall be true and correct and no Defaults or Events of Default shall exist, and both
the Borrower and Guarantor shall have delivered to the Administrative Agent a
certificate to such effect, signed on its behalf by a senior officer.

 

- 34 -

	 	(d)	 	No Conflict. The Lenders shall have received written confirmation from the
Borrower and Guarantor, to the Lenders’ satisfaction acting reasonably, that none of
this Agreement, the Security Agreements, the Guarantee and Postponement Agreement or
the Acquisition will conflict with, or cause a default in:

	 	(i)	 	any material obligation of the Borrower or any Subsidiary,
including for greater certainty, any material obligation under the Significant
Agreements; or
	 
	 	(ii)	 	any obligation of the Guarantor under the Guarantor Notes or
any other material obligation of the Guarantor or any of its Affiliates.

	 	(e)	 	Environmental Matters. The Lenders shall have received written confirmation
from the Borrower, to the Lenders’ satisfaction acting reasonably, that none of the
Borrower or any Subsidiary has any material environmental liabilities, except as
disclosed in a disclosure certificate provided to the Lender on or before the initial
Drawing.
	 
	 	(f)	 	Insurance. That the Lenders shall have received written confirmation from the
Borrower, to the Lenders’ satisfaction acting reasonably, that insurance in respect of
the assets of the Borrower and the Subsidiaries as required under Section 12.1(b) has
been obtained and is in full force and effect and the Borrower shall have delivered
copies of all insurance policies or binders covering the assets of the Borrower subject
to the Security Agreements showing Royal Bank of Canada as first loss payee and
containing a mortgage clause acceptable to the Lenders.
	 
	 	(g)	 	Capex Plan and Other Information. The Borrower shall have made arrangements
satisfactory to the Lenders for delivery of a Capex Plan and the Borrower shall have
further delivered such other financial and other information in respect of the Borrower
and its assets as requested by the Lenders.
	 
	 	(h)	 	No Material Adverse Change. There has been no circumstance which has resulted
in, or could reasonably be expected to result in, a Material Adverse Change and the
Borrower shall have delivered to the Administrative Agent a certificate to such effect,
signed on its behalf by a senior officer.
	 
	 	(i)	 	Financial Statements. The Lenders shall have received:

	 	(i)	 	the most recent unaudited quarterly consolidated financial
statements of the Guarantor;
	 
	 	(ii)	 	the most recent unaudited financial statements of the Original
Borrower;
	 
	 	(iii)	 	a pro-forma opening balance sheet for the Borrower accompanied
by a certificate signed on its behalf by a senior officer confirming that such
pro-forma opening balance sheet is based on reasonable commercial

 

- 35 -

	 	 	 	assumptions; and
	 
	 	(iv)	 	such other financial information in respect of the Guarantor,
Borrower and their respective assets as requested by the Lenders.

	 	(j)	 	Compliance Certificate. The Lenders shall have received a certificate,
substantially in the form and substance as the Quarterly Compliance Certificate signed
by a senior officer of the Borrower, reflecting the fiscal circumstances of the
Borrower for the period of its corporate existence prior to the initial Drawing after
March 1, 2006.
	 
	 	(k)	 	Payment of Fees and Expenses. The Borrower shall have paid, or made
arrangements satisfactory to the Administrative Agent for the payment of, all fees
payable to the Administrative Agent and/or Lenders in connection with the Facility and
all expenses to be paid or reimbursed hereunder.
	 
	 	(l)	 	Governmental Approvals. The Lenders shall have received written confirmation
from the Borrower that all Governmental Approvals required in connection with the
Acquisition and the Facility (if any) have been obtained and the basis for such
Governmental Approvals shall be acceptable to the Lenders, acting reasonably.
	 
	 	(m)	 	Closing of Reorganization. The Lenders shall have received certified true
copies of the duly executed First Asset Purchase Agreements and Second Asset Purchase
Agreements.
	 
	 	(n)	 	Opinion of Borrower’s Counsel. The Lenders shall have received from Borrower’s
Counsel an opinion in a form satisfactory to the Lenders and Lenders’ Counsel, in each
case acting reasonably, which opinion will also address the matters required under the
Consent and Assignment Agreement.
	 
	 	(o)	 	Opinion of Guarantor’s Counsel. The Lenders shall have received from
Guarantor’s Counsel an opinion in a form satisfactory to the Lenders and Lenders’
Counsel, in each case acting reasonably.
	 
	 	(p)	 	Opinion of Lenders’ Counsel. The Lenders shall have received from Lenders’
Counsel an opinion in form and substance satisfactory to the Lenders with respect to
such matters relating to the transactions contemplated hereby as the Administrative
Agent may reasonably request.

10.2 Constating Documents of Guarantor

     The Borrower will cause the Guarantor to deliver a certified true copy of its constating
documents to the Administrative Agent as soon as reasonably practicable but no later than five
Banking Days after the Effective Date.

 

- 36 -

PART 11 — REPRESENTATIONS AND WARRANTIES

11.1 Representations and Warranties.

     To induce the Administrative Agent and the Lenders to enter into this Agreement and establish
the Facility, the Borrower hereby represents and warrants to the Administrative Agent and Lenders,
upon each of which representations and warranties the Administrative Agent and Lenders specifically
rely, as follows:

	 	(a)	 	Organization of Borrower. The Borrower is a duly formed and validly existing
limited partnership in good standing under the laws of the Province of British
Columbia. The General Partner is a corporation duly incorporated, validly existing, in
good standing with respect to the filing of corporate filings under the laws of the
Province of British Columbia. The Borrower and General Partner are duly qualified, in
good standing and authorized to do business in all jurisdictions where the character of
the properties owned by it or the nature of the business transacted by it makes such
qualification necessary. The Borrower has all requisite power and authority to own its
properties and has obtained, or will obtain, all Governmental Approvals required to
carry on its business as now conducted and proposed to be conducted and to enter into
and perform its obligations under this Agreement, the Security Agreements to which it
is a party and all instruments and agreements delivered pursuant hereto and thereto.
	 
	 	(b)	 	Subsidiaries. As of the date of this Agreement there are no Subsidiaries.
	 
	 	(c)	 	Authorization, Enforceability. This Agreement, the Security Agreements to
which it is a party and every instrument or agreement delivered pursuant hereto has
been duly and validly authorized by all requisite actions by the Borrower and each of
such documents has been duly executed by the Borrower and when delivered will be a
legal, valid and binding obligation the Borrower, enforceable in accordance with its
respective terms, save as enforcement may be limited by:

	 	(i)	 	applicable bankruptcy, insolvency, moratorium, reorganization
and similar laws at the time in effect affecting the rights of creditors
generally;
	 
	 	(ii)	 	equitable principles which may limit the availability of
certain remedies, including the remedy of specific performance; and
	 
	 	(iii)	 	the inability of the courts of Canada to give judgment for
payment in foreign currencies.

	 	(d)	 	Governmental Approvals. None of:

	 	(i)	 	the nature of the Borrower, the General Partner, the Guarantor
or any Subsidiary, or their respective businesses or property;

 

- 37 -

	 	(ii)	 	any relationship between or among the Borrower, the General
Partner, the Guarantor, any Subsidiary and any other Person; or
	 
	 	(iii)	 	any circumstances in connection with the entering into and
performance of this Agreement,

	 	 	 	is such as to require any Governmental Approval that has not yet been obtained on
the part of the Borrower, the General Partner or the Guarantor in connection with
the execution, delivery and performance of this Agreement, the Security Agreements,
the Guarantee and Postponement Agreement or the completion of the Acquisition.

	 	(e)	 	Compliance with Requirement of Law. None of the Borrower, the General Partner
or any Subsidiary is in default with respect to any Requirement of Law (including, for
greater certainty, under the Workers Compensation Act (British Columbia) and similar
legislation in other provinces in which business is carried on) relating to its or
their respective businesses to the extent that the sanctions, consequences and
penalties resulting from such defaults, if applied individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Change.
	 
	 	(f)	 	Environmental Compliance. Without limiting the generality of paragraph (e) of
this Section 11.1, none of the Borrower, the General Partner or any Subsidiary:

	 	(i)	 	is in violation of, or has any liability under, any applicable
Environmental Law;
	 
	 	(ii)	 	knows of the presence, release or disposal of any hazardous
substances at any of its prior or currently owned, leased or operated property;
	 
	 	(iii)	 	is subject to any litigation, investigation, order or
proceeding in connection with hazardous substances or Environmental Laws; or
	 
	 	(iv)	 	is subject to any environmental, health or safety condition,

	 	 	 	which individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Change.
	 
	 	(g)	 	Leases and Licences. The Borrower and each of its Subsidiaries has all leases,
licences, permits and consents as are essential for the due carrying on of its business
in the manner in which its business is carried on and all such leases, licences,
permits and consents are in full force and effect and no proceedings relating thereto
are pending or known to the Borrower to be threatened in any way which, if applied
individually or in the aggregate, could reasonably be expected to result in a Material
Adverse Change.

 

- 38 -

	 	(h)	 	No Defaults. No event has occurred and no condition exists which would
constitute a Default or an Event of Default and none of the Borrower, the General
Partner or any Subsidiary is in default, nor is there in existence any event which with
the giving of notice or passage of time would be a default:

	 	(i)	 	under any of its charter documents, notice of articles or
articles;
	 
	 	(ii)	 	under any guarantee, bond, debenture, note or other instrument
evidencing any indebtedness or under the terms of any instrument pursuant to
which any of the foregoing has been issued or made and delivered; or
	 
	 	(iii)	 	under any Significant Agreement or other material agreement,
material licence or permit or material instrument to which it is a party or by
which it or its property may be bound,

	 	 	 	to the extent that such defaults, if applied individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Change.
	 
	 	(i)	 	No Pending Litigation or Proceedings. There are no actions, suits, claims,
investigations or proceedings pending or, to the knowledge of the Borrower, threatened
against the Borrower, the General Partner, the Guarantor or any Subsidiary, at law or
in equity or before or by any Governmental Authority, which have a reasonable
likelihood of being decided adversely and, as a result, individually or in the
aggregate, if adversely determined, could reasonably be expected to result in a
Material Adverse Change.
	 
	 	(j)	 	Financial Statements. The audited and unaudited financial statements of the
Borrower provided to the Lenders from time to time are prepared in accordance with GAAP
consistently applied throughout the period involved (except as otherwise noted therein)
and present fairly the financial condition, results of operations and changes in
financial position of the Borrower, as the case may be, on a consolidated basis or
otherwise, for and as of the end of the period involved.
	 
	 	(k)	 	No Contingent Liabilities. None of the Borrower, the General Partner or any
Subsidiary has any contingent liabilities which are material to the Borrower, the
General Partner and the Subsidiaries taken as a whole excluding guarantees or similar
assurances given by the Borrower in respect of the obligations of Subsidiaries or by
Subsidiaries in respect of the obligations of the Borrower or other Subsidiaries other
than as indicated on the financial statements including the notes thereto delivered
pursuant to the terms hereof or as otherwise advised to the Lenders in writing.
	 
	 	(l)	 	Title to Assets. Each of the Borrower and its Subsidiaries has good and
marketable title to its assets, free of all Liens except for Permitted Liens, and each
of the Borrower and its Subsidiaries or the right to use all of the assets necessary

 

- 39 -

	 	 	 	for the operation of its respective business.
	 
	 	(m)	 	Pension and Employee Matters. All contributions or premiums required to be made
by the Borrower and its Subsidiaries under the terms of any pension plan or employee
plan have been made in a timely fashion in accordance with all Requirements of Law and
the terms of such plans and there are no material liabilities outstanding in connection
therewith.
	 
	 	(n)	 	Labour Matters. None of the Borrower or any Subsidiary has any material labour
disputes or strikes existing or pending, other than has been advised to the
Administrative Agent.
	 
	 	(o)	 	Taxes. Each of the Borrower, the General Partner and the Subsidiaries have:

	 	(i)	 	filed all tax returns required to be filed in any jurisdiction
and all taxes, assessments, fees and other governmental charges upon it or upon
any of its property, income or franchises, which are due and payable, have been
paid timely or within appropriate extension periods or are being contested in
good faith by appropriate proceedings;
	 
	 	(ii)	 	collected, deducted, withheld and remitted to the proper taxing
authorities when due all taxes required to be collected, deducted, withheld and
remitted; and
	 
	 	(iii)	 	made adequate provision on its books for any proposed
additional tax assessments against it,

	 	 	 	to the extent that failure to do any of the foregoing, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Change.
	 
	 	(p)	 	Disclosure of Material Facts. The Borrower has disclosed to the Administrative
Agent in writing all matters (other than matters which are a matter of public knowledge
or record) which materially adversely affect, or will materially adversely affect, its
business and the prospects, financial or otherwise of its business or the ability of
the Borrower to perform its obligations under this Agreement or any other instrument
delivered pursuant hereto to which it is a party.
	 
	 	(q)	 	No Material Adverse Change. Since the date of execution of this Agreement
there has been no material adverse change in respect of the target assets which are the
subject of the Acquisition and since September 30, 2004 there has been no Material
Adverse Change in respect of the Guarantor.
	 
	 	(r)	 	Consent and Assignment Agreement. With respect to the Consent and Assignment
Agreement, the First Asset Purchase Agreements and the Second Asset Purchase
Agreements, the transactions contemplated thereby have been

 

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	 	 	 	completed and all representations and warranties made by the Borrower, Holdings,
the Original Borrower and the Guarantor therein are true and correct in all material
respects and all obligations of such parties set out therein have been complied with
in all material respects.
	 
	 	(s)	 	Deemed EBITDA. The deemed EBITDA set out in Sections 12.3(e)(i), (ii), (iii)
and (iv) is, to the best of the knowledge of the Borrower, an accurate reflection of
the results of Stone Venepal (Celgar) Pulp Inc. as of the dates referred to therein.

PART 12 — COVENANTS

12.1 Affirmative Covenants.

     The Borrower hereby covenants with the Administrative Agent and each Lender that until the
Facility is cancelled and there is outstanding no principal, interest or other amounts payable
hereunder:

	 	(a)	 	Corporate Existence. The Borrower shall maintain and preserve its partnership
existence and right to carry on its business, and the Borrower shall cause the General
Partner each Subsidiary to maintain and preserve its corporate existence and right to
carry on its business, to the extent that failure to do so by a Subsidiary,
individually or in the aggregate, could reasonably be expected to result in a Material
Adverse Change.
	 
	 	(b)	 	Insurance. The Borrower will cause all its property, and property of the
Subsidiaries, which is of a character usually insured by companies operating like
businesses, to be properly insured and kept insured with reputable insurers against
loss or damage by fire or other hazards of the nature and to the extent that such
properties are usually insured by companies operating like businesses and the Borrower
will forthwith notify the Administrative Agent upon the happening of any significant
loss and shall duly and punctually pay all premiums and other sums of money for
maintaining such insurance. The Borrower will comply with its obligation under Section
13.1(e).
	 
	 	(c)	 	Maintenance of Books and Records. The Borrower shall keep proper and adequate
records and books of account in which true and complete entries will be made in a
manner sufficient to enable the preparation of financial statements in accordance with
GAAP and, upon the request of the Administrative Agent, make the same available for
confidential inspection and report by an independent auditor to the Lenders and the
Administrative Agent at all reasonable times.

 

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	 	(d)	 	Taxes. The Borrower shall, and shall cause the General Partner and each
Subsidiary to, pay and discharge when due:

	 	(i)	 	all taxes, assessments and governmental charges or levies
imposed upon it, its income or its property or assets prior to the date on
which penalties attach thereto; and
	 
	 	(ii)	 	all lawful claims which, if unpaid, might become a Lien (other
than a Permitted Lien) upon its property or assets,

	 	 	 	to the extent that failure to do so, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Change.
	 
	 	(e)	 	Legal Action. The Borrower shall, and shall cause each Subsidiary to, actively
and diligently contest or cause to be contested in good faith by appropriate and timely
proceedings or effect a timely and provident settlement of:

	 	(i)	 	any action, suit, litigation or other proceeding; or
	 
	 	(ii)	 	any writ of execution, attachment or similar process issued or
levied against all, or a substantial portion of its property or the property,

	 	 	 	the result of which, if adversely determined, could reasonably be expected to
result in a Material Adverse Change.
	 
	 	(f)	 	Compliance with Laws. The Borrower shall, and shall cause each Subsidiary to,
comply with all Requirements of Law (including for greater certainty all Environmental
Laws) relating to its or their respective businesses to the extent that failure to
comply, individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Change.
	 
	 	(g)	 	Environmental Indemnity. The Borrower hereby agrees to indemnify and hold
harmless the Administrative Agent and each of the Lenders and their respective
directors, officers, employees and agents in respect of any costs (including for
greater certainty legal costs), losses, damages, expenses, judgments, suits, claims,
awards, fines, sanctions and liabilities whatsoever (including any costs or expenses of
preparing any environmental assessment report or such other reports) arising out of or
in respect of:

	 	(i)	 	the release of any hazardous or toxic waste or other substance
into the environment from or on to the Borrower’s or any Subsidiary’s property
or otherwise by the Borrower or any Subsidiary; and
	 
	 	(ii)	 	the remedial action (if any) taken by the Administrative Agent
and/or Lenders in respect of such release.

 

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	 	 	 	This indemnity shall survive repayment of the Facility and termination of this
Agreement.

	 	(h)	 	Governmental Approvals. The Borrower shall obtain, and cause each Subsidiary
to obtain (to the extent not in existence on the reference date hereof), all
Governmental Approvals necessary for the operation of its business as presently
conducted and comply in all material respects with the covenants, terms and conditions
set out in such Governmental Approvals to the extent that failure to so obtain or
non-compliance, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Change.
	 
	 	(i)	 	Business. The Borrower shall:

	 	(i)	 	maintain its property, perform its obligations under all
material contracts, licences and permits, including for greater certainty the
Significant Agreements, to which it is a party and carry on and conduct its
business in accordance with sound business practices; and
	 
	 	(ii)	 	cause each Subsidiary to maintain its property, perform its
obligations under all material contracts to which it is a party and carry on
and conduct its business in accordance with sound business practices,

	 	 	 	to the extent that failure to do so, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Change. The Borrower shall
not make capital expenditures which exceed the amounts set out in the annual
Business Plan and Capex Plan referred to in Sections 10.1(g) and 12.4(e);.
	 
	 	(j)	 	Use of Facility. The Borrower shall use all Drawings under the Facility for
the purposes set forth in Section 2.2 and for no other purpose.
	 
	 	(k)	 	Covenant to Pay. The Borrower shall duly and punctually pay or cause to be
paid all amounts required to be paid by it to the Administrative Agent and the Lenders,
as the case may be, pursuant to this Agreement, including principal, interest, the face
amount of Bankers’ Acceptances, BA Stamping Fees, LCG Fees, 364 Day Commitment Fees,
expenses and other liabilities, at the place, in the currency, at the time and in the
manner set forth herein.

12.2 Negative Covenants.

     The Borrower hereby covenants with the Administrative Agent and each Lender that until the
Facility is cancelled and there is outstanding no principal, interest or other amounts payable
hereunder:

	 	(a)	 	Negative Pledge. Without the prior written consent of Lenders, the Borrower
shall not, and will cause each of its Subsidiaries not to, grant, create, assume,
suffer or permit any Lien on any of its assets or operations except for Permitted

 

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	 	 	 	Liens.
	 
	 	(b)	 	Restriction on Borrowing. Without the prior written consent of Lenders, the
Borrower will not, and the Borrower will cause each Subsidiary not to, borrow money or
otherwise incur debt or enter into any credit arrangement, except for:

	 	(i)	 	normal day-to-day trade credit arrangements;
	 
	 	(ii)	 	normal indebtedness incurred in the ordinary course of business
in respect of amounts due or accruing due to Governmental Authorities;
	 
	 	(iii)	 	loans from the Guarantor which are postponed to the Facility
pursuant to the Guarantee and Postponement Agreement;
	 
	 	(iv)	 	borrowings under the Facility;
	 
	 	(v)	 	Breakage Costs on Treasury Contracts not to exceed the US
Dollar Equivalent of US$5 million; and
	 
	 	(vi)	 	other Indebtedness (including Indebtedness secured by Liens)
not to exceed in aggregate 5% of the total tangible assets of the Borrower.

	 	(c)	 	Contingent Obligations. Without the prior written consent of the Lenders, the
Borrower will not make or suffer to exist any Contingent Obligation except by
endorsement of instruments for deposit or collection in the ordinary course of
business.
	 
	 	(d)	 	Reorganizations. Without the prior written consent of Lenders, the Borrower
will not merge, amalgamate, enter into any partnership or corporate reorganization or
otherwise modify its corporate structure in any way which would materially adversely
affect its asset base or cash flow or impair the Lenders’ rights under the Security
Agreements.
	 
	 	(e)	 	Sale and Disposals. Without the prior written consent of Lenders, the Borrower
will not sell (including sale and lease-back transactions), alienate, lease or
otherwise dispose of or part with possession (“Disposal”) of any of its property or
assets except for:

	 	(i)	 	Disposals of inventory or current assets in the ordinary course
of business;
	 
	 	(ii)	 	net Disposals of property or assets in any Fiscal Year (after
adjusting for the acquisition of replacement property or assets) not exceeding
C$5,000,000 for individual assets and in aggregate C$20,000,000 based on net
book value;
	 
	 	(iii)	 	Disposals of worn out or obsolete assets; and

 

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	 	(iv)	 	Disposals of assets in exchange for assets of a similar nature
to be used in the business of the Borrower.

12.3 Financial Covenants.

     The Borrower hereby covenants with the Administrative Agent and each Lender that until the
Facility is cancelled and there is outstanding no principal, interest or other amounts payable
hereunder:

	 	(a)	 	Financial Ratios. The Borrower will maintain the following financial ratios:

	 	(i)	 	a Current Ratio of not less than 1.25 to 1.0;
	 
	 	(ii)	 	a Total Funded Debt to EBITDA Ratio of no greater than 2.0 to
1.0;
	 
	 	(iii)	 	an Interest Coverage Ratio for any period of four consecutive
fiscal quarters of the Borrower ending after the date hereof of no less than
2.25 to 1.0;
	 
	 	(iv)	 	a Distribution Coverage Ratio for any period of four
consecutive fiscal quarters of the Borrower ending after the date hereof of
greater than 1.0 to 1.0;

	 	(b)	 	Minimum Consolidated Net Worth. The Borrower will maintain Consolidated Net
Worth of at least C$220,923,000.
	 
	 	(c)	 	Principal Amounts Outstanding. The Borrower will not permit the principal
amount outstanding under the Facility plus Breakage Costs to at any time exceed the
Borrowing Base. The Borrowing Base will be calculated within 15 days following the end
of each calendar month and such amount shall apply for the next succeeding period,
until the Borrowing Base is re-calculated within 15 days following the end of the next
succeeding calendar month.
	 
	 	(d)	 	Annualized Fiscal Period. Subject to Section 12.3(e), during the initial 12
months of the term of this Agreement, if a financial covenant of the Borrower or a
financial ratio applicable to the Borrower requires a calculation based upon the most
recent four completed consecutive fiscal quarters of the Borrower, then such financial
covenant or financial ratio will be deemed amended to refer to a calculation based upon
an annualized fiscal period determined by reference to the partial period prior to the
date upon which the covenant or ratio is determined or calculated; and
	 
	 	(e)	 	EBITDA. During the initial 12 months of the term of this Agreement, whenever a
calculation of EBITDA is required to be made based upon the most recent four completed
consecutive fiscal quarters of the Borrower, the following shall be the deemed EBITDA
as of the following dates:

 

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	 	(i)	 	March 31, 2004 – C$5,733,000;
	 
	 	(ii)	 	June 30, 2004 – C$16,886,000;
	 
	 	(iii)	 	September 30, 2004 – C$3,386,000;
	 
	 	(iv)	 	December 31, 2004 – (C$1,912,000); and
	 
	 	(v)	 	March 31, 2005 – C$6,000,000.

Where any of the foregoing financial covenants require historical financial information, the
financial information of the Original Borrower shall be used.

12.4 Reporting Covenants.

     The Borrower hereby covenants with the Administrative Agent and each Lender that until the
Facility is cancelled and there is outstanding no principal, interest or other amounts payable
hereunder the Borrower shall furnish to the Lenders by delivery to the Administrative Agent the
following (in a form and scope acceptable to the Lenders, acting reasonably):

	 	(a)	 	Annual Reports. Within 90 days after the end of its Fiscal Year, the audited
annual financial statements of (a) the Guarantor and the Borrower on a consolidated
basis; and (b) the Borrower on an unconsolidated basis;
	 
	 	(b)	 	Quarterly Reports. Within 45 days after the end of each of the first three
fiscal quarters, the unaudited quarterly consolidated financial statements of (a) the
Guarantor and the Borrower on a consolidated basis; and (b) the Borrower on an
unconsolidated basis;
	 
	 	(c)	 	Quarterly Compliance Certificate. Together with the financial statements
referred to in (a) and (b) above, a Quarterly Compliance Certificate;
	 
	 	(d)	 	Borrowing Base Certificate. Within 15 days after the end of each calendar
month, a Monthly Borrowing Base Certificate;
	 
	 	(e)	 	Business Plan / Capex Plan. No later than 60 days prior to the end of each
Fiscal Year:

	 	(i)	 	a Business Plan, and
	 
	 	(ii)	 	a Capex Plan;

	 	(f)	 	Notice of Material Events. As soon as practicable upon occurrence, notice of
any:

	 	(i)	 	Default or Event of Default;

 

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	 	(ii)	 	default under any other Indebtedness or any material agreement,
including under any Significant Agreement (other than a Significant Agreement
or Significant Agreements relating to fibre supply that in aggregate constitute
less than 3% of the aggregate fibre supply requirements of the Borrower);
	 
	 	(iii)	 	material litigation, material environmental matters and
material operational matters or issues;
	 
	 	(iv)	 	Material Adverse Change; and

	 	(g)	 	Organizational Change. Prior notice of any merger, amalgamation, corporate
reorganization or other modification to the corporate structure of the Borrower.
	 
	 	(h)	 	Additional Information. Such additional information as the Lenders may
reasonably request concerning the Borrower, the Guarantor and the Subsidiaries.

12.5 Sufficient Copies.

     The Borrower shall furnish to the Administrative Agent either sufficient copies of the
financial statements and other deliverables set out above, as the case may be, for each of the
Lenders for distribution by the Administrative Agent to the Lenders; or send to the Administrative
Agent complete electronic versions of such financial statements and other deliverables set out
above, as the case may be, for transmittal by the Administrative Agent to the Lenders.

PART 13 – SECURITY AGREEMENTS

13.1 Security Agreements.

     As general and continuing security for the payment of all amounts owing by the Borrower to the
Lenders hereunder and to any Lenders under any Treasury Contracts and the performance of all other
obligations of the Borrower to the Lenders, the Borrower:

	 	(a)	 	acknowledges that the assets being transferred to it under the Second Asset
Purchase Agreements are transferred subject to the lien of the general security
agreement delivered under the Original Agreement providing for a first priority Lien in
all of the Original Borrower’s present and after acquired inventory, securities,
instruments, documents of title, chattel paper, intangibles (which include accounts)
and money (as each is defined in the British Columbia Personal Property Security Act)
and the Borrower further agrees that such assets, and all future assets the Borrower
may own, shall remain subject to the Lien of such general security agreement. The
Borrower further agrees to, from and after the date of completion of the transactions
referred to in the Consent and Assignment Agreement, be bound by and liable under all
of the terms of such general security agreement in the same manner and in the same
extent as if the Borrower had been original party to the Original Agreement and such
general security agreement in

 

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	 	 	 	place of the Original Borrower;
	 
	 	(b)	 	will deliver, or cause to be delivered, the following agreements to the
Administrative Agent to be held for the benefit of the Lenders:

	 	(i)	 	at the time of execution hereof, security under Section 427 of
the Bank Act (Canada), duly executed by the Borrower;
	 
	 	(ii)	 	at the time of execution hereof, in addition to the security
referred to in Section 13.1(a) above, an amended and restated general security
agreement duly executed by the Borrower;
	 
	 	(iii)	 	at the time set out in the Consent and Assignment Agreement,
an amended and restated Guarantee and Postponement Agreement, duly executed by
the Guarantor;
	 
	 	(iv)	 	from time to time a guarantee and postponement agreement from
each Subsidiary of the Borrower in respect of the Borrower’s obligations to the
Lenders, along with such collateral security for such guarantee and
postponement agreement as the Lenders may require; and
	 
	 	(v)	 	at the time of execution hereof, copies of all insurance
policies or binders covering the assets of the Borrower subject to the Security
Agreements showing Royal Bank of Canada as first loss payee and containing a
mortgage clause acceptable to the Lenders.

The agreements and documents referred to in this Section 13.1 are herein referred to as the
“Security Agreements”.

13.2 Securing Treasury Contracts.

     Any Breakage Costs under a Treasury Contract will also be secured by the Security Agreements
(for greater certainty, no Person other than the Borrower will be required to deliver instruments
or agreements additional to the Security Agreements in connection with Treasury Contracts). The
Lenders and the Borrower acknowledge and agree that the Facility and all Treasury Contracts will
rank pari passu in all respects and the proceeds derived from any realization on any collateral in
which the Lenders are granted a Lien pursuant to the Security Agreements and the proceeds derived
from the Guarantee and Postponement Agreement will be distributed pro rata to such parties in
proportion to their respective claims against the Borrower in connection with this Agreement and
Breakage Costs under Treasury Contracts. Notwithstanding the foregoing, no Lender may enforce its
respective rights under any Security Agreement in connection with obligations owing under Treasury
Contracts unless and until an Event of Default has occurred and the Lenders have commenced
enforcement proceedings under the Security Agreements.

 

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13.3 Registration.

     The Administrative Agent will, at the expense of the Borrower, register, file or record the
Security Agreements in all offices where such registration, filing, or recording is necessary or of
advantage to the creation, perfection and preserving of the Liens arising pursuant thereto. The
Administrative Agent will renew such registrations, filings and recordings from time to time as and
when required to keep them in full force and effect. The Borrower acknowledges that the forms of
the Security Agreements have been prepared based upon the laws in effect at the date of this
Agreement and that such laws may change. The Borrower agrees that the Administrative Agent or the
Lenders will have the right to require that the forms of the Security Agreements be amended or
supplemented to reflect any changes in such laws, whether arising as a result of statutory
amendments, court decisions or otherwise, in order to confer upon the Administrative Agent and the
Lenders (both in their capacities as parties to this Agreement and parties to any Treasury
Contract) the Liens intended to be created thereby.

13.4 Discharges.

     Upon payment in full of all amounts owing hereunder and termination of this Agreement, the
Administrative Agent and the Lenders will, on request by and at the expense of the Borrower,
provide to the Borrower registerable discharges of the Security Agreements and any security
interests related thereto.

PART 14 — DEFAULT AND ENFORCEMENT

14.1 Events of Default.

     The occurrence of any one or more of the following events shall constitute an Event of Default
under this Agreement:

	 	(a)	 	if the Borrower shall fail to pay any sum on account of principal, interest,
the face amount of Bankers’ Acceptances, BA Stamping Fees, LCG Fees, 364 Day Commitment
Fees, expenses and other liabilities when due and such failure shall have continued for
a period of one Banking Day after notice has been given by the Administrative Agent to
the Borrower;
	 
	 	(b)	 	if the Borrower shall fail to pay any sum on account of Breakage Costs owing in
respect of a Treasury Contract when due and such failure shall have continued for a
period of one Banking Day after notice has been given by the Administrative Agent or
applicable Lender to the Borrower;
	 
	 	(c)	 	if the Borrower fails to perform or observe any term, condition, covenant or
undertaking:

	 	(i)	 	contained in Section 12.3 (Financial Covenants) of this
Agreement and fails to cure such default within five Banking Days after notice
has been

 

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	 	 	 	given by the Administrative Agent to the Borrower;
	 
	 	(ii)	 	contained in Section 12.2 (Negative Covenants) of this Agreement;
	 
	 	(iii)	 	except as otherwise provided for in (a), (b) and (c)(i) and
(ii) of this Section 14.1, contained in this Agreement or any Security
Agreement or any representation or warranty made by the Borrower in this
Agreement or any Security Agreement (or in any certificate, statement or notice
issued related hereto or thereto) is incorrect when made or deemed made, and
the Borrower fails to cure such default or incorrect representation or warranty
within 15 Banking Days after notice has been given by the Administrative Agent
to the Borrower;

	 	(d)	 	if the Guarantor fails to perform or observe any term, condition, covenant or
undertaking contained in:

	 	(i)	 	Part 4 of the Guarantee and Postponement Agreement and fails to
cure such default within one Banking Days after notice has been given by the
Administrative Agent to the Borrower;
	 
	 	(ii)	 	Section 4.2(c) (Negative Covenants) of the Guarantee and
Postponement Agreement;
	 
	 	(iii)	 	except as provided for in (i) and (ii) of this Section
14.1(d), if the Guarantor fails to perform or observe any other term,
condition, covenant or undertaking contained in the Guarantee and Postponement
Agreement or any representation or warranty made by the Guarantor in the
Guarantee and Postponement Agreement (or in any certificate, statement or
notice issued related hereto or thereto) is incorrect when made or deemed made,
and the Guarantor fails to cure such default or incorrect representation or
warranty within five Banking Days after notice has been given by the
Administrative Agent to the Guarantor;

	 	(e)	 	if a default shall occur under any Indebtedness in excess of the Canadian
Dollar Equivalent of C$10,000,000 of the Borrower or any Subsidiary, other in respect
of the Facility;
	 
	 	(f)	 	if a default shall occur under any Indebtedness in excess of the Canadian
Dollar Equivalent of C$10,000,000 of the Guarantor, including, for greater certainty,
under the terms of the Guarantor Notes as are in effect as of the date of this
Agreement;
	 
	 	(g)	 	if any application is made by the Borrower, the General Partner or the
Guarantor under the Bankruptcy and Insolvency Act (Canada), Companies’ Creditors
Arrangement Act (Canada) or similar legislation in Canada, the United States or any
other jurisdiction or the Borrower, the General Partner or the Guarantor shall

 

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	 	 	 	commit any act of bankruptcy or shall become insolvent or shall make an assignment
or proposal under the bankruptcy legislation of any jurisdiction or make a general
assignment in favour of its creditors;
	 
	 	(h)	 	if any application is made by a Subsidiary or Subsidiaries under the Bankruptcy
and Insolvency Act (Canada), Companies’ Creditors Arrangement Act (Canada) or similar
legislation or if such Subsidiary or Subsidiaries shall commit any act of bankruptcy or
shall become insolvent or shall make an assignment or proposal under the bankruptcy
legislation of any jurisdiction or make a general assignment in favour of its creditors
and which foregoing events, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Change;
	 
	 	(i)	 	if a receiver or receiver-manager is appointed of any material part of the
assets of the Borrower, the General Partner or the Guarantor or if a proceeding is
instituted for the winding up of the Borrower, the General Partner or the Guarantor or
a bankruptcy petition shall be filed or presented against the Borrower, the General
Partner or the Guarantor, unless such application, appointment, proceeding or petition
is being contested in good faith by the Borrower, the General Partner or the Guarantor
in connection therewith, dismissed, stayed or withdrawn within 30 days of the Borrower,
the General Partner or the Guarantor receiving notice, or otherwise having knowledge,
of the institution thereof;
	 
	 	(j)	 	if a receiver or receiver-manager is appointed of any material part of the
assets of a Subsidiary or Subsidiaries or if a proceeding is instituted for the winding
up of such Subsidiary or Subsidiaries or a bankruptcy petition shall be filed or
presented against such Subsidiary or Subsidiaries, unless such application,
appointment, proceeding or petition is being contested in good faith by such Subsidiary
or Subsidiaries and in connection therewith, dismissed, stayed or withdrawn within 30
days of such Subsidiary or Subsidiaries receiving notice, or otherwise having
knowledge, of the institution thereof, and which foregoing events, individually or in
the aggregate, could reasonably be expected to result in a Material Adverse Change;
	 
	 	(k)	 	if any execution or any other process of any court for an amount or amounts in
aggregate in excess of the Canadian Dollar Equivalent of C$5,000,000 shall become
enforceable against the Borrower, the General Partner or the Guarantor at any one time
or if a distress or analogous process for an amount or amounts in aggregate in excess
of the Canadian Dollar Equivalent of C$5,000,000 shall be levied upon the property of
the Borrower, the General Partner or the Guarantor or any part thereof at any one time,
unless the same is either paid or is being contested in good faith and in connection
therewith, dismissed, stayed or withdrawn within 30 days of the Borrower, the General
Partner or the Guarantor receiving notice or otherwise having knowledge of the
institution thereof;

 

- 51 -

	 	(l)	 	if any execution or any other process of any court for an amount or amounts in
aggregate in excess of the Canadian Dollar Equivalent of C$5,000,000 shall become
enforceable against a Subsidiary or Subsidiaries at any one time or if a distress or
analogous process for an amount or amounts in aggregate in excess of the Canadian
Dollar Equivalent of C$5,000,000 shall be levied upon the property of such Subsidiary
or Subsidiaries or any part thereof at any one time, unless the same is either paid or
is being contested in good faith and in connection therewith, dismissed, stayed or
withdrawn within 30 days of such Subsidiary or Subsidiaries receiving notice or
otherwise having knowledge of the institution thereof, and which foregoing event could,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Change;
	 
	 	(m)	 	if there is an event of default under any of the Significant Agreements which
could reasonably be expected to result in a Material Adverse Change and such event of
default is not remedied within 30 days following notice of such event of default given
by the Administrative Agent to the Borrower;
	 
	 	(n)	 	if this Agreement or any Security Agreement to which the Borrower is a party
ceases to be an enforceable obligation of the Borrower or if the Borrower disputes its
enforceability;
	 
	 	(o)	 	if the Guarantee and Postponement Agreement ceases to be an enforceable
obligation of the Guarantor or if the Guarantor disputes its enforceability;
	 
	 	(p)	 	if a Material Adverse Change shall occur; or
	 
	 	(q)	 	if a Change of Control shall occur.

14.2 Rights upon Default.

     Upon the occurrence of an Event of Default and for so long as such Event of Default shall
continue, the Majority Lenders may immediately upon written notice to the Borrower, cancel the
Facility and declare the entire outstanding principal amount of all Drawings, all unpaid accrued
interest and all fees and other amounts required to be paid by the Borrower hereunder to be
immediately due and payable without the necessity of presentment for payment, notice of non-payment
and of protest (all of which are hereby expressly waived) and proceed to exercise any and all
rights and remedies hereunder, provided that in the case of any of the Events of Default specified
in Sections 14.1(g) or (i), without any notice to the Borrower or any other act by the
Administrative Agent or the Lenders, the Facility shall thereupon terminate and the entire
outstanding principal amount of all Drawings, all unpaid accrued interest and all fees and other
amounts required to be paid by the Borrower hereunder shall be immediately due and payable without
the necessity of presentment for payment, notice of non-payment and of protest (all of which are
hereby expressly waived) and the Administrative Agent and the Lenders may proceed to exercise any
and all rights and remedies hereunder.

 

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14.3 Judgment Currency.

     Unless judgment in connection herewith is rendered against the Borrower pursuant to the
Foreign Money Claims Act (British Columbia), if for the purpose of obtaining judgment in any court
it is necessary to convert a sum due hereunder in US Dollars into Canadian Dollars, the rate of
exchange which shall be applied shall be the Spot Buying Rate for the conversion of US Dollars into
Canadian Dollars on the business day preceding that on which final judgment is given. The
obligation of the Borrower in respect of any sum due from it hereunder in US Dollars shall,
notwithstanding any judgment in Canadian Dollars, be discharged only to the extent that on the
business day following receipt by the Lenders of any sum adjudged to be due hereunder in Canadian
Dollars the Lenders may purchase US Dollars with Canadian Dollars at the Spot Buying Rate and, if
the amount of US Dollars so purchased falls short of the sum originally due to the Lenders in US
Dollars, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to
indemnify the Lenders against such shortfall.

14.4 Indemnity.

     The Borrower shall fully indemnify and hold the Administrative Agent, the Lenders and their
respective directors, officers, employees and agents harmless from and against any and all costs,
expenses, claims, obligations, losses, penalties, actions, judgments, suits, causes or
disbursements (as to the amount of which the certificate of the Administrative Agent shall be prima
facie evidence) of any nature or kind whatsoever which may be imposed on, incurred by, or asserted
against such indemnified party directly or indirectly as a result of the entry into and performance
of this Agreement, the use of the Facility proceeds or any Event of Default, provided that the
foregoing indemnity will not apply to any such loss, expense, damage or liability resulting from
the willful misconduct or gross negligence of such indemnified party. Without limiting the
generality of the foregoing, the foregoing indemnity shall extend to reasonable legal costs as well
as any interest, fees or other sums whatsoever paid or payable on account of any funds borrowed by
the Lenders in order to carry any unpaid amount and to any loss, premium, penalty or expense which
may be incurred by the Lenders in liquidating or employing deposits from third parties acquired to
make, maintain or fund a Drawing or any part thereof or any amount due or to become due under this
Agreement.

PART 15 — ASSIGNMENT

15.1 Assignment.

     Except for an assignment or transfer to an Affiliate, a Lender shall not be entitled to assign
or otherwise transfer all or a portion of its rights under this Agreement except as follows:

	 	(a)	 	a Lender shall be entitled to assign all or a portion of its rights and
obligations under this Agreement to any (i) Canadian financial institution, or (ii)
foreign bank listed under Schedule III to the Bank Act (Canada), with the consent of
the Administrative Agent and the Borrower, such consent not to be unreasonably withheld
or delayed, provided that it is agreed that it shall not be unreasonable for

 

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	 	 	 	the Borrower to withhold consent for reasons concerning the creditworthiness of a
financial institution. The consent of the Borrower or the Administrative Agent to
an assignment by a Lender shall not be required if a Default or Event of Default has
occurred and is continuing;
	 
	 	(b)	 	unless a Lender assigns all of its rights and obligations under this Agreement:

	 	(i)	 	it shall not make an assignment of less than C$5,000,000 plus
integral multiples of C$1,000,000 of its maximum commitment hereunder; and
	 
	 	(ii)	 	after any assignment neither the assignor’s nor the assignee’s
maximum commitment hereunder shall be less than C$5,000,000;

	 	 	 	provided that this Section 15.1(b) shall not apply if an Event of Default has
occurred and is not waived by the Lenders.
	 
	 	(c)	 	no assignment shall, in connection therewith, result in increased costs to the
Borrower under Sections 8.8 and 9.1; and
	 
	 	(d)	 	any Lender who assigns any interest hereunder shall pay to the Administrative
Agent for the Administrative Agent’s account a fee of C$5000 at the time of transfer.

     Notwithstanding the provisions of this Section 15.1, a Lender shall be entitled to allow a
participation in all or any portion of its rights and obligations under this Agreement without
notice to or the consent of the Administrative Agent or Borrower provided, however, that such
Lender shall remain responsible for all of its obligations under this Agreement and neither the
Administrative Agent nor the Borrower shall have any obligation to, or be required to communicate
with or otherwise recognize or deal with, such participant.

15.2 Assignment Agreement.

     Any assignee contemplated in Section 15.1(a) shall execute, together with the assignor, the
Borrower and the Administrative Agent, a Lender Assignment Agreement and thereupon shall be deemed
to be a “Lender” and a “Lender” or “Lender”, as the case may be, for all purposes of this
Agreement, and shall be responsible for all obligations herein and entitled to the full benefit
hereof to the same extent as if it was an original party in respect of the rights and obligations
assigned to it. Upon any such assignment, each Lender’s Proportion, Lender’s Proportion and/or
Lender’s Proportion, as the case may be, shall be deemed adjusted to reflect each Lender’s
respective percentage interest in the Facility.

15.3 Further Assurances.

     The Borrower will, at the expense (other than the Borrower’s legal expenses) of the assignee,
execute such further documents and do such other things as the assignee,

 

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Administrative Agent or
other Lenders may reasonably request for the purpose of any such assignment.

15.4 Release of Information.

     The Borrower hereby authorizes and consents to the release of financial and other information,
including the details of this Agreement, to prospective assignees hereunder, and the Borrower
agrees, upon reasonable request, to provide prospective assignees with current financial and other
information as is available to the Borrower and customarily provided by it to financial
institutions in connection with financing transactions of this type provided, however, that in each
case the prospective assignee has previously agreed in writing to be bound by the provisions of
Section 17.4 with respect to such information.

15.5 Assignment by Borrower.

     The Borrower shall not assign all or any portion of its rights or obligations under this
Agreement without the prior written consent of the Lenders, which consent may be arbitrarily
withheld.

15.6 Enurement.

     Subject to the foregoing provisions of this Part 15, this Agreement shall be binding upon and
enure to the benefit of each of the parties and their respective permitted successors and assigns.

PART 16 — THE ADMINISTRATIVE AGENT AND THE LENDERS

16.1 Authorization.

     Subject to Section 16.8, each Lender hereby irrevocably designates and appoints the
Administrative Agent as its agent and each such Lender hereby irrevocably authorizes the
Administrative Agent to take such action on its behalf and to exercise such rights and powers as
are specifically delegated to it by this Agreement and such other rights and powers as are
incidental thereto. The Administrative Agent shall not have any responsibilities or be required to
exercise any right or power or take any action as to any matters not expressly provided for by and
specified in this Agreement and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or otherwise exist against the
Administrative Agent. For greater certainty, the Administrative Agent shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement on the part of the Borrower or the Guarantor, to inspect the property
(including the books and records) of the Borrower or the Guarantor or to see to the satisfaction of
any condition precedent, due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement. The Administrative Agent shall never be required to take
any action that is contrary to this Agreement or applicable law or which may, in the Administrative
Agent’s sole discretion, expose it to liability. In connection with its rights,

 

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responsibilities
and powers under this Agreement, the Administrative Agent shall act solely as the agent of each of
the Lenders and the Administrative Agent shall not assume, and shall not be
deemed to have assumed, any obligations to, or fiduciary relationship with, the Lenders, the
Borrower or the Guarantor other than as specifically provided in this Agreement.

16.2 Notices, etc.

     The Administrative Agent shall, by original delivery, facsimile, electronic communication or
otherwise, forthwith provide to each Lender a copy of all notices and documents served or delivered
by the Borrower under this Agreement. For greater certainty, notices permitted or required under
the terms hereof between the Borrower and the Administrative Agent on behalf of the Lenders will be
given in accordance with Section 17.3. The Administrative Agent and the Lenders may provide each
other with such information concerning the financial position and operation of the Borrower as the
Administrative Agent and the Lenders may see fit.

16.3 Action by Administrative Agent.

     The Administrative Agent shall not be obliged:

	 	(a)	 	to take any steps to ascertain whether any Default or Event of Default has
occurred, so that until the Administrative Agent has received express written notice to
the contrary from the Borrower or a Lender, it shall be entitled to assume that no
Default or Event of Default has occurred; or
	 
	 	(b)	 	to transmit to the Lenders any information in any way relating to the Borrower
or this Agreement which the Administrative Agent may have acquired otherwise than in
connection with the performance of its duties under this Agreement;

	 	 	and the Administrative Agent at its sole discretion may refrain from exercising any right or
taking any action against the Borrower for the recovery of any sum due hereunder until it
has been fully indemnified against any and all costs, losses, expenses or liabilities
(including legal fees) which it would or might sustain or incur as a result of such exercise
or action, by each Lender in its respective Lender’s Proportion. If any indemnity furnished
to the Administrative Agent for any purpose shall, in the opinion of the Administrative
Agent, be insufficient or become impaired, the Administrative Agent may call for additional
indemnity and not commence or cease to do the acts indemnified against until such additional
indemnity is furnished.

16.4 No Reliance.

     Each Lender hereby acknowledges in favour of the Administrative Agent:

	 	(a)	 	that neither the Administrative Agent nor any of its directors, officers,
employees, agents, legal counsel or affiliates has made any representations or
warranties to it and that no act by the Administrative Agent hereafter taken, including
any review of the affairs of the Borrower, the Guarantor or any Subsidiary, shall be
deemed to

 

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	 	 	 	constitute any representation or warranty by the Administrative Agent to such
Lender;
	 
	 	(b)	 	that it has made such enquiries and taken such care on its own behalf as would
have been the case had its participation in the Facility been made directly by such
Lender to the Borrower without the intervention of the Administrative Agent or any
other Person and that it has not relied, and does not rely, upon any information or
advice provided, or any appraisal of, or investigation into the financial condition,
creditworthiness, affairs, status or nature of the Borrower effected by the
Administrative Agent in such capacity;
	 
	 	(c)	 	that it shall, independently and without reliance upon the Administrative Agent
or any Person other than the Borrower and the Guarantor, and based upon such documents
and information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under this
Agreement and to make such investigation as it deems necessary to inform itself as to
the business, operations, property, financial and other condition and creditworthiness
of the Borrower; the Guarantor or any Subsidiary; and
	 
	 	(d)	 	that the Administrative Agent shall not be obliged either before or at any time
after the signing of this Agreement to provide such Lender with any information or
advice or to make any investigation or appraisal into the financial condition,
creditworthiness, operations, property, affairs, status or nature of the Borrower, the
Guarantor or any Subsidiary.

16.5 Liability of Administrative Agent.

     Neither the Administrative Agent nor any of its directors, officers, employees or agents shall
be responsible or liable:

	 	(a)	 	for the execution, legality, validity, sufficiency, enforceability or
effectiveness of this Agreement;
	 
	 	(b)	 	for any failure of the Borrower, the Guarantor or any Lender to duly and
punctually observe and perform any of their respective obligations under this
Agreement;
	 
	 	(c)	 	for any statement, representation or warranty made or referred to in this
Agreement or in any certificate, report, statement, or document given to any of the
Lenders;
	 
	 	(d)	 	for any action taken or omitted by any of them under or in connection with this
Agreement unless such action is directly due to their own negligence or willful
misconduct;

 

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	 	(e)	 	for the consequences of relying on any communication or document believed by
any of them to be genuine and correct and to have been communicated or signed by the
Person by whom it purports to be communicated or signed;
	 
	 	(f)	 	for the financial condition of the Borrower, the Guarantor or any Subsidiary;
or
	 
	 	(g)	 	for the consequences of relying in good faith on the advice of any professional
advisers selected by any of them in connection with this Agreement.

16.6 Dealings by Administrative Agent.

     With respect to its own participation in the Facility and the borrowings hereunder, the
Administrative Agent, in its capacity as a Lender, shall have the same rights and powers under this
Agreement as any other Lender and may exercise them as though it was not also acting as agent for
the Lenders. The Administrative Agent and its Affiliates may, without liability to disclose or
account, engage in any kind of financial, trust or commercial business with, or acquire or dispose
of any kind of security of, the Borrower, the Guarantor or any of their respective affiliates as if
the Administrative Agent was not the agent for the Lenders and neither the Administrative Agent nor
any of its Affiliates shall have any obligation to disclose or account for any dealings which it
may have had with the Borrower, the Guarantor or any of their respective Affiliates prior to or
after the date of this Agreement.

16.7 Dealings by Lenders.

     Subject to the provisions of this Agreement, each Lender may deal with the Borrower in all
transactions and generally may engage in any banking business with or provide any financial
services to the Borrower or the Guarantor without any liability to account to any other Lender
therefor.

16.8 Termination of Agency.

	 	(a)	 	The Administrative Agent may, as hereinafter provided, resign at any time by
giving 30 days written notice thereof to the Lenders and Borrower. Upon such
resignation, the Borrower, with the consent of the Majority Lenders, such consent not
to be unreasonably withheld or delayed, shall have the right to appoint from among the
Lenders a successor agent. No such resignation shall be effective until a successor
agent has been appointed. If no successor agent shall have been appointed, and shall
have accepted such appointment, within 30 days after delivery of the retiring
Administrative Agent’s notice of resignation, then the retiring Administrative Agent
may within a further 30 days appoint, on behalf of the Lenders, a successor, which
shall be a Canadian chartered bank with an office in Toronto and Vancouver.

 

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	 	(b)	 	Upon the written acceptance by the successor agent of its appointment as
Administrative Agent:

	 	(i)	 	as regards the Borrower, the Guarantor and each of the Lenders,
such successor shall become bound by all the obligations of the Administrative
Agent and become entitled to all the rights, privileges, powers, authorities
and discretions of the Administrative Agent hereunder;
	 
	 	(ii)	 	the agency of the retiring Administrative Agent shall terminate
but without prejudice to any liabilities which the retiring Administrative
Agent may have incurred prior to the termination of its agency; and
	 
	 	(iii)	 	the retiring Administrative Agent shall be discharged from any
further liability or obligation under this Agreement.

     The provisions of this Agreement shall continue in effect for the benefit of any retiring
Administrative Agent in respect of any actions taken or omitted to be taken by it or any event
occurring before the termination of its agency.

16.9 Notice of Default by Administrative Agent.

     In the event that the Administrative Agent receives express written notice from the Borrower
of the occurrence of any Default or Event of Default, the Administrative Agent shall give prompt
notice thereof to the Lenders and consult with the Lenders with respect to the action to be taken.
The Administrative Agent shall take such action with respect to such Default or Event of Default as
shall be reasonably directed in writing by the Majority Lenders (subject to Section 16.13);
provided that unless and until the Administrative Agent shall have received such directions, the
Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Lenders.

16.10 Reliance by Administrative Agent on Notices.

     The Administrative Agent shall be entitled to rely upon any writing, letter, notice,
certificate, telex, cable, statement, order or other document believed by the Administrative Agent
to be genuine and correct and to have been signed, sent or made by the proper Person or Persons
and, with respect to legal matters, to act upon advice of legal advisers selected by the
Administrative Agent (including, without limitation, in-house counsel of the Administrative Agent)
concerning all matters pertaining to this Agreement and the Administrative Agent’s duties
hereunder.

16.11 Action by Lenders.

     Except as provided otherwise in Section 16.12 or Section 16.13, where the terms of this
Agreement refer to any action to be taken hereunder or thereunder by the Lenders or to any such
action that requires the consent, approval, satisfaction, agreement or other determination of the

 

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Lenders, the action taken by and consent, approval, satisfaction, agreement or other determination
given or made by the Majority Lenders shall constitute the action, consent, approval, agreement or
other determination of the Lenders herein or therein referred to. Any Default or Event of Default
may be waived before or after it occurs only if consented to by the Majority Lenders.

16.12 Special Determinations.

     Any extension of the 364 Day Tranche Repayment Date shall be made in accordance with Section
2.5 and otherwise any amendment of any obligation between the Borrower and Lenders, shall be made
by agreement between the Borrower and Majority Lenders;

16.13 Unanimity.

     Any amendment, extension or waiver of, or consent to, the terms of this Agreement which
changes or relates to:

	 	(a)	 	the amount of the Facility or any Lender’s Proportion thereof (except for the
permanent reductions and assignments expressly contemplated hereby);
	 
	 	(b)	 	the rate or dates or order of payment of interest, reductions in the Applicable
Margins or any BA Stamping Fees, LCG Fees, 364 Day Commitment Fees or other fees
payable hereunder;
	 
	 	(c)	 	subject to Section 2.5, the definition of the 364 Day Tranche Repayment Date;
	 
	 	(d)	 	the definition of Term Tranche Repayment Date;
	 
	 	(e)	 	any adjustment of the Lender’s Proportions or of the Lender’s Proportions;
	 
	 	(f)	 	any alteration of the amount, currency or mode of calculation or computation of
any principal, interest or other amounts owing hereunder;
	 
	 	(g)	 	the definition of Majority Lenders;
	 
	 	(h)	 	the types of drawings available under the Facility;
	 
	 	(i)	 	any amendment to any provision of this Agreement that requires unanimous
consent of the Lenders;
	 
	 	(j)	 	any release of, or materially adverse change to, any Security Agreement unless
permitted under the terms hereof or thereof, provided that if the Lenders’ Counsel
provides an opinion to the effect that a change to any such Security Agreement is not
materially adverse, such determination will be binding on the Lenders;
	 
	 	(k)	 	the assignment or transfer by the Borrower of any or all of its rights and
obligations under this Agreement; and

 

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	 	(l)	 	this Part 16 or any amendment hereof;

     shall require the consent, approval or agreement of all Lenders.

16.14 Enforcement.

     Each Lender hereby acknowledges that, to the extent permitted by law, the remedies provided in
this Agreement to the Lenders are for the benefit of the Lenders collectively and acting together
and not severally and further acknowledges that its rights hereunder are to be exercised not
severally, but collectively by the Administrative Agent upon the decision of the Lenders as
provided in this Part 16. Accordingly, each of the Lenders hereby covenants and agrees that it
shall not be entitled to take any action hereunder including, without limitation, any
declaration of an Event of Default, but that any such action shall be taken only by the
Administrative Agent with the prior agreement of the Lenders as provided in this Part 16.

16.15 Apportionment of Drawings.

     If the apportionment of a Drawing or Drawings among any Lenders cannot be evenly made in the
Lender’s Proportions or Lender’s Proportions, as the case may be, the Administrative Agent shall
round allocations among such Lenders consistent with the Administrative Agent’s money market
practices.

16.16 Inter-Lender Payments.

     Promptly upon receipt of any payment from the Borrower under this Agreement, the
Administrative Agent shall remit to each Lender entitled thereto its share of such payment, as
determined by the Administrative Agent in accordance herewith, by payment to such Lender’s Lending
Branch.

16.17 Failure of Borrower to Repay.

     Unless the Administrative Agent has been notified in writing by the Borrower at least one
Banking Day prior to the date on which any payment to be made by the Borrower hereunder is due that
the Borrower does not intend to remit all or any part of such payment, the Administrative Agent
may, in its discretion (and absolutely without obligation) assume that the Borrower has remitted
such payment when so due and the Administrative Agent may, in its discretion and in reliance upon
such assumption, make available to each Lender on such payment date an amount equal to the amount
of such payment which is due to such Lender pursuant to this Agreement. If the Borrower does not
in fact remit such payment to the Administrative Agent, the Administrative Agent shall promptly
notify each Lender and each Lender shall forthwith on demand by the Administrative Agent repay to
the Administrative Agent the amount of such assumed payment made available to such Lender, together
with interest thereon until the date of repayment thereof at a rate determined by the
Administrative Agent (such rate to be conclusive and binding on such Lender) in accordance with the
Administrative Agent’s usual banking practice for such advances to financial institutions of like
standing to such Lender.

 

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16.18 Failure of Lender to Advance.

     Unless the Administrative Agent has been notified in writing by a Lender at least one Banking
Day prior to a Drawing Date, Rollover Date or Conversion Date that such Lender does not intend to
make available the portion of the Drawing due to be made available by such Lender pursuant to this
Agreement on such date, the Administrative Agent may, in its discretion, assume that such Lender
has remitted funds to the Administrative Agent in an amount equal to the amount required to be made
available by such Lender pursuant to this Agreement and the Administrative Agent may, in its
discretion (and absolutely without obligation) assume that the Lenders have remitted such funds
when so due and the Administrative Agent may in reliance upon such assumption make available to the
Borrower on such Drawing Date, Rollover Date or Conversion Date an amount equal to the amount
required to be made available by such Lender
pursuant to this Agreement. If a Lender does not remit such funds to the Administrative Agent
        , the Administrative Agent shall promptly notify such Lender and such Lender shall forthwith remit
such funds to the Administrative Agent, failing which the Borrower shall forthwith on demand by the
Administrative Agent repay to the Administrative Agent (without prejudice to the Borrower’s rights
against the Lender that has not remitted funds to the Administrative Agent ) the amount made
available by the Administrative Agent on behalf of such Lender, together with interest thereon
until the date of repayment thereof at a rate determined by the Administrative Agent (such rate to
be conclusive and binding on such Lender or the Borrower, as the case may be) in accordance with
the Administrative Agent’s usual banking practice for advances to financial institutions of like
standing to such Lender, which rate shall not exceed the rate applicable hereunder.

16.19 Payment of Swingline Lender and Fronting Lender.

     Notwithstanding Section 14.2 and without limiting the generality of Section 16.20 and Section
16.21, upon the occurrence of an Event of Default, adjustments shall be made among the Swingline
Lender, Fronting Lender and Lenders as set forth in this Section 16.19:

	 	(a)	 	unless the Swingline Lender and the Majority Lenders agree otherwise, if an
Event of Default occurs, then the Swingline Lender will promptly request the
Administrative Agent on behalf of the Borrower (and for this purpose the Swingline
Lender is irrevocably authorized by the Borrower to do so) for a Prime Rate Drawing and
Base Rate Drawing (as applicable) from the Lenders pursuant to Part 3 to repay to the
Swingline Lender the outstanding Swingline Drawings. The Lenders are irrevocably
directed by the Borrower to make a Prime Rate Drawing and Base Rate Drawing (as
applicable) if so requested by the Swingline Lender and pay the proceeds thereof
directly to the Administrative Agent for the account of the Swingline Lender. At all
times thereafter the commitment of the Swingline Lender to provide Swingline Drawings
under Section 2.7 shall be terminated and the Lenders shall make such adjusting
payments amongst themselves in the manner contemplated by Section 16.20 as may be
required to ensure their respective participations in outstanding Drawings under the
364 Day Tranche reflect their respective Lender’s Proportions;

 

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	 	(b)	 	if any Letter of Credit or Letter of Guarantee is thereafter drawn upon which
results in a payment by the Fronting Lender thereunder (in this Section 16.19(b), an
“LCG Payment”), the Fronting Lender will promptly request the Administrative Agent on
behalf of the Borrower (and for this purpose the Fronting Lender is irrevocably
authorized by the Borrower to do so) for a Prime Rate Drawing or Base Rate Drawing (as
applicable) from the Lenders pursuant to Part 3 to reimburse the Fronting Lender for
such LCG Payment and the foregoing provisions of this Section 16.19(a) shall equally
apply to each such further drawing;
	 
	 	(c)	 	if for any reason a Drawing may not be made pursuant to 16.19(a) or 16.19 (b)
to
reimburse the Swingline Lender or the Fronting Lender as contemplated thereby, then
promptly upon receipt of notification of such fact from the Administrative Agent,
each Lender shall deliver to the Administrative Agent for the account of the
Swingline Lender or the Fronting Lender in immediately available funds the purchase
price for such Lender’s participation interest in the relevant unreimbursed
Swingline Drawings or LCG Payments (including interest then accrued thereon and
unpaid by the Borrower). Without duplication, each Lender shall, upon demand by the
Swingline Lender or the Fronting Lender made to the Administrative Agent, deliver to
the Administrative Agent for the account of the Swingline Lender or the Fronting
Lender interest on such Lender’s rateable portion from the date of payment by the
Swingline Lender or the Fronting Lender of such unreimbursed LCG Payments until the
date of delivery of such funds to the Swingline Lender or the Fronting Lender by
such Lender at a rate per annum equal to the Federal Funds Rate (if reimbursement is
to be made in US Dollars) or the one month CDOR (if reimbursement is to be made in
Canadian Dollars) for such period. Such payment shall only, however, be made by the
Lenders in the event and to the extent the Swingline Lender or the Fronting Lender
has not been reimbursed in full by the Borrower for interest on the amount of such
unreimbursed Swingline Drawings or LCG Payments;
	 
	 	(d)	 	each Lender unconditionally agrees to pay to the Administrative Agent for the
account of the Swingline Lender or the Fronting Lender:

	 	(i)	 	such Lender’s rateable portion of each Drawing requested by the
Swingline Lender or the Fronting Lender on behalf of the Borrower pursuant to
Section 16.19(a) or (b) to repay Swingline Drawings or LCG Payments made by the
Swingline Lender or the Fronting Lender; and
	 
	 	(ii)	 	the purchase price for such Lender’s participation interest in
any relevant unreimbursed Swingline Drawings or LCG Payments (including
interest then accrued thereon and unpaid by the Borrower) pursuant to Section
16.19(c);

	 	(e)	 	the Swingline Lender or the Fronting Lender shall, forthwith upon its receipt
of

 

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	 	 	 	any reimbursement (in whole or in part) by the Borrower for any unreimbursed
Swingline Drawings or LCG Payments in relation to which other Lenders have purchased a
participation interest pursuant to Section 16.19(c), or of any other amount from the
Borrower or any other Person in respect of such payment, transfer to such other Lender
such other Lender’s rateable share of such reimbursement or other amount. In the event
that any receipt by the Swingline Lender or the Fronting Lender of any reimbursement or
other amount is found to have been a transfer in fraud of creditors or a preferential
payment under any applicable insolvency legislation or is otherwise required to be
returned, such Lender shall promptly return to the Swingline Lender or the Fronting
Lender any portion thereof previously transferred to it by the Swingline Lender or the
Fronting Lender, without interest to the extent that interest is not payable by the
Swingline Lender or the Fronting Lender in connection therewith;
	 
	 	(f)	 	the obligations of each Lender under section 16.19(a), (b), (c) and (d) are
unconditional, shall not be subject to any qualification or exception whatsoever and
shall be performed in accordance with the terms and conditions of this Agreement under
all circumstances including:

	 	(i)	 	any lack of validity or enforceability of the Borrower’s
obligations;
	 
	 	(ii)	 	the occurrence of any Default or Event of Default or the
exercise of any rights by the Administrative Agent under Section 14.2; and
	 
	 	(iii)	 	the absence of any demand for payment being made, any proof of
claim being filed, any proceeding being commenced or any judgment being
obtained by the Swingline Lender or the Fronting Lender against the Borrower;

	 	(g)	 	if a Lender (a “Defaulting Lender”) fails to make payment on the due date
therefor of any amount due from it for the account of the Swingline Lender or the
Fronting Lender pursuant to this Section 16.19 (the balance thereof for the time being
unpaid being referred to in this Section 16.19(g) as an “overdue amount”) then, until
the Swingline Lender or the Fronting Lender has received payment of that amount (plus
interest as provided below) in full (and without in any way limiting the rights of the
Swingline Lender or the Fronting Lender in respect of such failure):

	 	(i)	 	the Swingline Lender or the Fronting Lender shall be entitled
to receive any payment which the Defaulting Lender would otherwise have been
entitled to receive under this Agreement, including in respect of the Guarantee
and Postponement Agreement; and
	 
	 	(ii)	 	the overdue amount shall bear interest payable by the
Defaulting Lender to the Fronting Lender at a rate per annum equal to the one
month CDOR (if

 

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	 	 	 	reimbursement is to be made in Canadian Dollars) or the Federal
Funds Rate (if reimbursement is to be made in US Dollars) until paid.

16.20 Overpaid Lender.

     If a Lender (an “Overpaid Lender”) shall obtain any payment, whether voluntary, involuntary or
otherwise (other than any amounts expressly permitted to be paid solely to such Lender pursuant to
this Agreement), to be applied on account of any portion of the Drawings owed to under the 364 Day
Tranche or Term Tranche, as the case may be, which is in excess of its Lender’s Proportion (such
excess portion is the “Excess Payment”) then:

	 	(a)	 	such Overpaid Lender shall immediately pay to the Administrative Agent an
amount equal to the Excess Payment, together with interest thereon at the rate
specified in Section 16.19(f)(ii) above, whereupon the Administrative Agent shall
notify the Borrower of its receipt by the Administrative Agent;
	 
	 	(b)	 	the Administrative Agent shall remit to each Lender or Lender, as the case may
be, (other than the Overpaid Lender) its share of such Excess Payment (calculated
without reference to the share of the Overpaid Lender); and
	 
	 	(c)	 	as between the Borrower and the Overpaid Lender, the Excess Payment shall be
treated as not having been paid and as between the Borrower and each Lender or Lender,
as the case may be (other than the Overpaid Lender), the applicable share of the Excess
Payment shall be treated as having been paid to each such Lender on the date such
Excess Payment was made to the Overpaid Lender;

provided that if all or any portion of such Excess Payment is subsequently required to be repaid by
the Overpaid Lender to the Borrower each Lender or Lender, as the case may be, shall promptly repay
to the Administrative Agent for the account of such Overpaid Lender an amount equal to any amount
which such other Lender had received pursuant to this Section 16.20.

16.21 Adjustments Among Lenders.

	 	(a)	 	After the occurrence of an Event of Default and acceleration of all or any
portion of the Drawings and other amounts outstanding hereunder, each Lender shall, at
any time and from time to time upon the request of the Administrative Agent as required
by any Lender, purchase portions of the Drawings and other amounts made available by
the other Lenders which remain outstanding and make any other adjustments which may be
necessary or appropriate to ensure each Lender is owed its Lender’s Proportion of the
364 Day Tranche or the Term Tranche, as the case may be, and other amounts owing
hereunder.
	 
	 	(b)	 	After the occurrence of an Event of Default and acceleration of all or any
portion of the Drawings outstanding and other amounts owing hereunder, the amount of
any repayment made by the Borrower under this Agreement, and the amount of any proceeds
from the exercise of any rights or remedies of the Lenders under this

 

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	 	 	 	Agreement, which
are to be applied against such Drawings and amounts, shall be so applied in a manner so
that to the extent possible each Lender is owed its Lender’s Proportion of the 364 Day
Tranche or the Term Tranche, as the case may be, and other amounts owing hereunder.
	 
	 	(c)	 	Notwithstanding anything contained in this Agreement, there shall not be taken
into account for the purposes of computing any amount payable to any Lender pursuant to
this Section 16.21 any amount which a Lender receives as a result of any payment
(whether voluntary, involuntary or otherwise) on account of any
	 
	 	 	 	monies owing by the Borrower to such Lender other than on account of Drawings or
other amounts owing hereunder.

16.22 Indemnity.

     Each of the Lenders does hereby agree to fully indemnify the Administrative Agent (to the
extent not reimbursed by the Borrower), its directors, officers, employees and agents rateably
according to its respective Lender’s Proportion, from and against any and all costs, expenses,
claims, obligations, losses, penalties, actions, judgments, suits, causes or disbursements of any
nature or kind whatsoever which may be imposed on, incurred by, or asserted against the
Administrative Agent (unless directly due to negligence or willful misconduct on the part of the
Administrative Agent) and which in any way relate to or arise out of this Agreement or transactions
contemplated herein or any action taken or omitted by the Administrative Agent under or in
connection with this Agreement or in enforcing or preserving, or in attempting to preserve, any of
the rights of the Administrative Agent or the Lenders under this Agreement; provided, however, that
the foregoing indemnity shall not extend to any overhead or salary expenses incurred by the
Administrative Agent in connection with this Agreement. If the Administrative Agent makes
available to the Borrower, in accordance with this Agreement, an amount which has not been made
unconditionally available to the Administrative Agent by a Lender, then such Lender shall indemnify
the Administrative Agent upon demand by the Administrative Agent against any loss which the
Administrative Agent suffers or incurs as a result; provided that such Lender shall not be liable
for any portion of such loss resulting from the Administrative Agent’s gross negligence or willful
misconduct.

16.23 Certain Provisions for Benefit of Administrative Agent and Lenders.

     The provisions of this Part 16 which relate to the rights and obligations of the Lenders to
each other or to the rights and obligations between the Administrative Agent and the Lenders shall
be for the exclusive benefit of the Administrative Agent and the Lenders, and the Borrower shall
not have any rights or obligations thereunder or be entitled to rely for any purpose upon such
provisions. Any Lender may waive in writing any right or rights which it may have against the
Administrative Agent or the other Lenders hereunder without the consent of or notice to the
Borrower.

 

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PART 17- MISCELLANEOUS

17.1 Payment of Expenses.

     Whether or not the transactions contemplated by this Agreement shall be consummated, the
Borrower shall on demand by the Administrative Agent pay to the Administrative Agent for its own
account or for the account of the Lenders, as the case may be:

	 	(a)	 	all reasonable out-of-pocket expenses of the Administrative Agent, incurred in
its capacity as agent hereunder (including, without limitation, the reasonable fees and
disbursements of any lawyers, accountants and independent consultants, which
consultants are agreed to by the Borrower, retained by the Administrative Agent on
behalf of the Lenders) incurred in connection with the negotiation and preparation
of this Agreement, the administration of the Facility, any amendment, modification
or waiver of any of the provisions of this Agreement and also in connection with the
protection and enforcement of the rights of the Administrative Agent and each of the
Lenders provided for in this Agreement; and
	 
	 	(b)	 	all reasonable out-of-pocket expenses incurred in connection with the initial
syndication of the Facility, provided that subsequent to the initial syndication, no
Lender shall be entitled to claim from the Borrower expenses incurred in any subsequent
assignment of an interest in this Agreement.

17.2 Rights and Waivers.

     The respective rights and remedies of the Administrative Agent and each Lender under this
Agreement are cumulative, may be exercised as often as considered appropriate, are in addition to
all other rights and remedies under the general law, and shall not be capable of being waived or
varied except by virtue of an express waiver or variation in writing signed by an authorized
officer of the Administrative Agent or such Lender (as the case may be); and in particular any
failure to exercise or any delay in exercising any of such rights and remedies shall not operate as
a waiver or variation of that or any other such right or remedy; any defective or partial exercise
of any of such rights shall not preclude any other or future exercise of that or any other such
right or remedy; and no act or course of conduct or negotiation on the part of the Administrative
Agent or a Lender or on its behalf shall in any way preclude it from exercising any such right or
remedy or constitute a suspension or variation of any such right or remedy.

17.3 Communication.

     Subject to the express provisions of this Agreement, all communications provided for or
permitted hereunder shall be in writing, personally delivered to an officer or other responsible
employee of the addressee or sent by facsimile to the address set forth below the name of the
applicable party in the execution pages of this Agreement or in Schedule B or to such other address
as the recipient hereto may from time to time designate to the other in such manner. Any
communication so personally delivered or sent by facsimile shall be deemed to have been validly and
effectively given on the date of such delivery or facsimile, as the case may be.

 

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17.4 Confidentiality.

     The Administrative Agent and the Lenders agree to treat any information obtained from the
Borrower as confidential; provided, however, that nothing herein contained shall limit or impair
the right or obligation of the Administrative Agent or any Lender to disclose such information:

	 	(a)	 	to its Affiliates, directors, auditors, lawyers, employees or agents who would
have access to such information in the normal course of the performance of such
Person’s duties;
	 
	 	(b)	 	when required by any Requirement of Law;
	 
	 	(c)	 	as may be requested by any Governmental Authority having or claiming to have
jurisdiction over such Lender;
	 
	 	(d)	 	in connection with the enforcement of the terms and conditions of this
Agreement;
	 
	 	(e)	 	which is publicly available or readily ascertainable from public sources, or
which is received by any Lender from a Person who or which is not bound to keep the
same confidential;
	 
	 	(f)	 	in connection with any proceeding, case or matter pending (or on its face
purported to be pending) before any Governmental Authority;
	 
	 	(g)	 	to the extent permitted by Section 15.4 in connection with any contemplated
transfer of any of a Lender’s rights and/or obligations under this Agreement; or
	 
	 	(h)	 	to the Administrative Agent or any Lender.

17.5 Survival of Representations, Warranties and Covenants.

     All agreements, representations, warranties and covenants made by the Borrower and the
Guarantor in this Agreement and any certificate hereunder are material, shall be considered to have
been relied upon by the Administrative Agent and each Lender and shall survive the execution and
delivery of this Agreement or any investigation made at any time by or on behalf of the Agents and
each Lender and, subject to Section 12.1(g), until repayment in full of the Drawings and of all
other amounts owing under this Agreement and cancellation in full of the Facility.

17.6 Further Assurances.

     The Borrower and the Guarantor shall do, execute and deliver, or shall cause to be done,
executed and delivered, all such further acts, documents (including certificates, declarations,
affidavits, reports and opinions) and things as the Administrative Agent may reasonably request

 

- 68 -

for
the purpose of giving effect to this Agreement or for the purpose of establishing compliance with
the representations, warranties and conditions of this Agreement.

17.7 Severability.

     Any provision in this Agreement which is prohibited or unenforceable shall be ineffective to
the extent of such prohibition or unenforceability without invalidating the remaining provisions
hereof or affecting the validity or enforceability of such provision in any other jurisdiction.

17.8 Counterparts.

     This Agreement may be simultaneously executed in any number of counterparts, each of which
shall be deemed to be an original, and it shall not be necessary in making proof of this Agreement
to produce or account for more than one such counterpart.

17.9 No Partnership, etc.

     Nothing contained in this Agreement nor any action taken pursuant hereto or thereto shall be
deemed to constitute the Lenders and Borrower a partnership, joint venture or any other similar
such entity.

17.10 No Novation/Rescission.

     The parties hereto hereby acknowledge and agree that it is their intention that this Agreement
amend and restate the Original Agreement, that the Original Agreement, as amended and restated by
this Agreement, continues in full force and effect, and that this Agreement does not constitute a
rescission or novation thereof. The parties hereto hereby acknowledge and agree that the amendments
to the Original Agreement set forth herein could have been effected through an agreement or
instrument amending the Original Agreement, and for convenience, the parties hereto have agreed to
restate the terms and provisions of the Original Agreement, as amended hereby, pursuant to this
Agreement. This Agreement, including the Schedules hereto, constitutes the entire agreement between
the parties, expressly superseding all prior agreements (including the mandate letter and term
sheet dated January 13, 2005) and communications (both oral and written) between any of the parties
hereto with respect to all matters contained herein, and except as stated herein or the instruments
and documents to be executed and delivered pursuant hereto, contain all the representations and
warranties of the respective parties. In the event of any conflict between the terms of this
Agreement and any Security Agreement, the terms of this Agreement shall prevail. Notwithstanding
the foregoing, the terms of the Consent and Assignment Agreement shall not merge with this
Agreement and shall remain enforceable obligations of the parties thereto.

 

- 69 -

     IN WITNESS WHEREOF the parties hereto have executed this First Amended and Restated Credit
Agreement as of the 1st day of March, 2006.

	 	 	 	 	 	 	 	 	 	 	 
	ZELLSTOFF CELGAR LIMITED	 	ROYAL BANK OF CANADA in its capacity
	PARTNERSHIP, by its General Partner,	 	as Administrative Agent
	ZELLSTOFF CELGAR LIMITED	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	per:	 	/s/ Jimmy S.H. Lee	 	per:	 	/s/ David Wheatley
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	per:

	 	 	 	 	 	per:	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Address:	 	Suite 2840, PO Box 11576	 	Address:	 	Agency Services Group, 12th Floor,
	 

	 	 	 	650 West Georgia Street
	 	 	 	 	 	South Tower, Royal Bank Plaza,
	 

	 	 	 	Vancouver, BC V6B 4N8
	 	 	 	 	 	200 Bay Street, Toronto, Ontario,
	 

	 	 	 	 	 	 	 	 	 	M5J2W7
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	Attention: Chief Financial
	 	 	 	 	 	Attention: Manager, Agency
	 

	 	 	 	Officer
	 	 	 	 	 	Services Group
	 
	 	 	 	 	 	 	 	 	 	 
	Facsimile no.: (604) 684-1094	 	Facsimile no.: (416) 842-4023

	 	 	 	 	 
	ROYAL BANK OF CANADA, in its capacity as Lender	 	 
	 
	 	 	 	 
	per:

	 	/s/ Gerald W. Derbyshire	 	 
	 

	 	 	 	 
	 

	 	Gerald W. Derbyshire	 	 
	 

	 	Attorney In Fact	 	 
	 
	 	 	 	 
	per:

	 	/s/ Baljit S. Mann	 	 
	 

	 	 	 	 
	 

	 	Baljit S. Mann	 	 
	 

	 	Attorney In Fact	 	 

 

- 70 -

	 	 	 	 	 
	HSBC BANK CANADA, in its capacity as Lender	 	 
	 
	 	 	 	 
	per:

	 	/s/ Bruce Clarke	 	 
	 

	 	 	 	 
	 

	 	Bruce Clarke	 	 
	 

	 	Vice President,	 	 
	 

	 	Commercial Financial Services	 	 
	 
	 	 	 	 
	per:

	 	/s/ Paul Mathieson	 	 
	 

	 	 	 	 
	 

	 	Paul Mathieson	 	 
	 

	 	Assistant Vice President,	 	 
	 

	 	Commercial Financial Services	 	 

 

- 71 -

SCHEDULE A

DEFINITIONS

“Acquisition” means the acquisition by the Borrower of substantially all of the assets and
undertaking used in connection with and relating to the Northern Bleached Softwood Kraft pulp mill
located at or near Castlegar, BC, as more particularly described in an asset purchase agreement
made the 22nd day of November, 2004 between Mercer International Inc., the Borrower, and
KPMG Inc., in its capacity as the receiver of Stone Venepal (Celgar) Pulp Inc.”

“Acquisition Agreements” shall have the meaning set out in Section 10.1(m)

“Administrative Agent” means Royal in its capacity as administrative agent of the Lenders as
set out herein, or any other Canadian chartered bank appointed as a successor administrative agent
of the Lenders under this Agreement.

“Affiliate” means, in relation to a specified Person, any other Person which directly (or
indirectly through one or more intermediaries) controls, or is controlled by, or is under common
control with, the specified Person or any subsidiary of the specified Person. The term “control”
(including the phrases “controlled by” or “under common control with”) means the possession,
directly or indirectly, of the effective power to direct or cause the direction of the management
and policies of such Person, whether through ownership of voting securities or by contract or
otherwise.

“Agreement” means this First Amended and Restated Operating Credit Agreement, as amended,
supplemented or modified from time to time.

“Applicable Margin” means, with respect to interest payable on a Prime Rate Drawing, Base Rate
Drawing or LIBOR Drawing, a margin, expressed as a rate per annum, payable to the Lenders with
respect to such Drawing, which shall vary with changes to the Total Funded Debt to EBITDA Ratio, as
set forth in Schedule C hereto and adjusted pursuant to Section 4.3.

“BA Discount Proceeds” means, in respect of any Bankers’ Acceptance, an amount (rounded to the
nearest full cent, with one-half of one cent being rounded up) calculated on the applicable Drawing
Date, Rollover Date or Conversion Date which is equal to the face amount of such Bankers’
Acceptance multiplied by the price, where the price is calculated by dividing one by the sum of one
plus the product of (i) the BA Discount Rate applicable thereto expressed as a decimal fraction
multiplied by (ii) a fraction, the numerator of which is the term of such Bankers’ Acceptance in
days and the denominator of which is 365, which calculated price will be rounded to the nearest
multiple of 0.001%.

“BA Discount Rate” means the discount rate transacted by the Borrower and the purchaser (whether or
not a Lender) for the purchase of a Bankers’ Acceptance on the date of issuance and

 

- 72 -

acceptance
thereof, as determined in respect of Bankers’ Acceptance Drawings pursuant to Section 5.5.

“BA Equivalent Drawing” means, in relation to a Bankers’ Acceptance Drawing, a Drawing in Canadian
Dollars made by a Non-Acceptance Lender as part of such Bankers’ Acceptance Drawing in accordance
with Section 5.7.

“BA Maturity Date” means, in relation to a Bankers’ Acceptance Drawing, the stated maturity date of
each Bankers’ Acceptance which forms part of such Bankers’ Acceptance Drawing, which shall be the
same date for each such Bankers’ Acceptance.

“BA Period” means, in relation to a Bankers’ Acceptance Drawing, the term to maturity selected by
the Borrower hereunder, commencing on the date that the relevant Bankers’ Acceptances are issued in
connection with such Bankers’ Acceptance Drawing; provided, however, that:

	 	(a)	 	each BA Period in respect of a Bankers’ Acceptance Drawing shall have a term of
1, 2, 3 or 6 months (or such other term agreed to by the Lenders) and shall be subject
to the availability of a market for such term;
	 
	 	(b)	 	if the last day of a BA Period selected by the Borrower is not a Banking Day,
such BA Period shall end on the next following Banking Day;
	 
	 	(c)	 	no BA Period with respect to Drawings under the 364 Day Tranche may extend
beyond the 364 Day Tranche Repayment Date (as from time to time extended pursuant to
Section 2.5); and
	 
	 	(d)	 	no BA Period with respect to Drawings under any Term Tranche may extend beyond
the applicable Term Tranche Repayment Date.

“BA Stamping Fee” shall have the meaning set out in Section 4.1(c).

“BA Stamping Fee Rate” means the rate per annum (based on a 365 day year) at which the BA Stamping
Fee is calculated, which rate shall vary with changes to the Total Funded Debt to EBITDA Ratio, as
set forth in Schedule C hereto and adjusted pursuant to Section 4.3.

“Bankers’ Acceptance” means a depository bill as defined by the Depository Bills and Notes Act
(Canada) or a blank non-interest bearing bill of exchange as defined by the Bills of Exchange Act
(Canada), in either case drawn by the Borrower, denominated in Canadian Dollars and accepted by a
Lender as a bankers’ acceptance, as evidenced by such Lender’s endorsement thereof at the request
of the Borrower pursuant to a Drawing Notice, Rollover Notice or Conversion Notice. Any depository
bill may be made payable to “CDS & Co.” and be deposited with The Canadian Depository for
Securities Limited.

“Bankers’ Acceptance Drawing” means a Drawing of Canadian Dollars made available by way of Bankers’
Acceptances or a BA Equivalent Drawing.

 

- 73 -

“Banking Day” means any day on which banks are open for business in both Vancouver, British
Columbia and Toronto, Ontario.

“Base Rate” means a fluctuating rate of interest per annum, expressed on the basis of a year of 365
days, which is equal at all times to the greater of: (i) the rate of interest most recently
announced by the Administrative Agent as its base rate for lending US Dollars in Canada; and (ii)
the Federal Funds Rate (adjusted to reflect a 365 day year) in effect from time to time, plus .75%.

“Base Rate Drawing” means a Drawing in US Dollars in respect of which interest is payable by
reference to the Base Rate.

“basis point” means one one-hundredth of one percent, or 0.01%.

“Borrower” means Zellstoff Celgar Limited Partnership and its permitted successors.

“Borrower’s Account” means such account of the Borrower at the Designated Branch as the
Administrative Agent, with the approval of the Borrower, may specify to the Lenders.

“Borrower’s Counsel” means Sangra Moller, or any replacement counsel appointed by the Borrower.

“Borrowing Base” means, without duplication, the sum of:

	 	(a)	 	75% of the Eligible Accounts Receivable which are not otherwise included in (b)
or (c) below;
	 
	 	(b)	 	90% of accounts receivable which are insured by Export Development Corporation
(or other insurance institution acceptable to the Lenders) and which are not otherwise
included in (c) below;
	 
	 	(c)	 	100% of accounts receivable supported by letters of credit issued by financial
institutions rated not less than A- by Standard & Poors or A3 by Moodys Investor
Service; and
	 
	 	(d)	 	50% of the Eligible Inventory up to an aggregate amount not to exceed 50% of
maximum amount of the Facility in effect at the date of calculation;

less

	 	(e)	 	100% of the aggregate amount of any Preferred Claims.

“Breakage Costs” means the aggregate of all costs and liabilities owing by the Borrower that could
result from the termination of all Treasury Contracts to which the Borrower is a party. In
calculating Breakage Costs (a) the costs and entitlements arising out of Treasury Contracts with a
single Lender may be netted out against each other; and (b) there shall be no netting between
Treasury Contracts held by different Lenders.

 

- 74 -

“Business Plan” means the business plan to be prepared by the Borrower and the Guarantor for each
Fiscal Year or Fiscal Years for submission to the Administrative Agent, which business plan shall
include a forecast of operating results and of cash flow for the relevant Fiscal Year together
with a pro forma consolidated balance sheet for the Borrower and the Guarantor as at the Fiscal
Year end of the forecast period.

“Calculation Date” means that day which is the first day of the third month following a fiscal
quarter end except for the year end fiscal quarter in which case it shall be the first day of the
fourth month following such year end fiscal quarter.

“Canadian Dollar Equivalent” means, at any time:

	 	(a)	 	in relation to an amount in US Dollars, the amount obtained by converting such
amount into Canadian Dollars at the Spot Buying Rate; and
	 
	 	(b)	 	in relation to any amount in Canadian Dollars, such amount.

“Canadian Dollars” or “C$” means lawful currency of Canada.

“Capex Plan” means the financial plan in a form satisfactory to the Administrative Agent prepared
for the next ensuing Fiscal Year or Fiscal Years covering planned capital expenditures, normal
maintenance capital expenditures, discretionary capital expenditures and contingency allowances
with such other details as the Administrative Agent may reasonably request including the proposed
sources of financing for such expenditures.

“Capital Lease” means a lease of which all or a portion of the rents payable thereunder would be
included in total liabilities on a balance sheet prepared in accordance with GAAP.

“CDOR Rate” means, on any day, the annual rate of discount determined by the Administrative Agent
which is equal to the simple average of the yield rates per annum (calculated on the basis of a
year of 365 days and calculated to two decimal places, with 0.005 or more being rounded upward)
applicable to bankers’ acceptances denominated in Canadian Dollars having, where applicable,
comparable issue dates and maturity dates as the Bankers’ Acceptances proposed to be issued by the
Borrower, displayed and identified as such on the CDOR Page (or any display substituted therefor)
of Reuters Monitor Money Rates Service at approximately 10:00 a.m. (Toronto time) on that day or,
if that day is not a Banking Day, then on the immediately preceding Banking Day (as adjusted by the
Administrative Agent after 10:00 a.m. (Toronto time) to reflect any error in the posted average
annual rate of discount); provided, however, if those rates do not appear on the CDOR Page (or the
display substituted therefor), then the CDOR Rate shall be the annual rate of discount determined
by the Administrative Agent which is equal to the simple average of the yield rates per annum
(calculated on the basis of a year of 365 days and calculated to two decimal places, with 0.005 or
more being rounded upward) applicable to those bankers’ acceptances in a comparable amount to the
Bankers’ Acceptances proposed to be issued by the Borrower, quoted by three of the five largest (as
to total assets) Canadian chartered banks listed in Schedule I to the Bank Act (Canada) (as
selected by the Administrative Agent) as of

 

- 75 -

10:00 a.m. (Toronto time) on that day or, if that day
is not a Banking Day, on the immediately preceding Banking Day. Unless the Borrower and the
Administrative Agent otherwise agree, such banks will be Royal Bank of Canada, Bank of Montreal and
Bank of Nova Scotia. Each determination
of the CDOR Rate by the Administrative Agent shall be conclusive and binding, absent demonstrated
error.

“Change of Control” means any transaction which results in the Borrower not being a Wholly-Owned
Subsidiary of the Guarantor.

“Conflicted Lender” shall have the meaning set out in Section 2.10(c).

“Consent and Assignment Agreement” has the meaning set out in the recitals hereto.

“Consolidated Net Income” means the consolidated net income of the Borrower and its
Subsidiaries taken as a whole determined in accordance with GAAP, excluding:

	 	(a)	 	extraordinary items as determined in accordance with GAAP;
	 
	 	(b)	 	gains resulting from any reappraisal, revaluation or write-up of assets, and
	 
	 	(c)	 	undistributed income of the Borrower.

“Consolidated Net Worth” means the consolidated net worth of the Borrower and its Subsidiaries
taken as a whole determined in accordance with GAAP, plus, at any time, the sum of preferred stock
(other than mandatory redeemable preferred stock), consolidated capital, surplus and retained
earnings of the Borrower and its Subsidiaries less any Intangibles (other than existing Intangibles
and additional Intangibles for timber harvesting rights, prepaid royalties, patents and other
intellectual property). For greater clarity, loans from the Guarantor which are postponed to the
Facility pursuant to the Guarantee and Postponement Agreement shall be included in Consolidated Net
Worth.

“Consolidated Total Assets” means the total assets of the Borrower and its Subsidiaries taken as a
whole determined on a consolidated basis in accordance with GAAP less any Intangibles (except for
existing Intangibles and additional Intangibles for timber harvesting rights, prepaid royalties,
patents and other intellectual property which shall be included).

“Contingent Obligation” means any agreement, undertaking or arrangement by which a Person assumes,
guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or
otherwise becomes or is contingently liable upon the obligation or liability of any other Person,
or agrees to maintain the net worth or working capital or other financial condition of any other
Person, or otherwise assures any creditor of such other Person against loss, including any comfort
letter, operating agreement, take-or-pay contract or application for letter of credit which is not
a Letter of Credit or letter of guarantee which is not a Letter of Guarantee.

“Conversion” means the conversion of a Drawing to another form of Drawing hereunder.

 

- 76 -

“Conversion Date” means the date notified to the Administrative Agent by the Borrower in accordance
with Section 3.2 as being the date (which shall be a Banking Day) on which a requested Conversion
be made.

“Conversion Notice” means a notice substantially in the form of Schedule F, duly executed by a
senior officer of the Borrower.

“Corporate Distribution” means:

	 	(a)	 	Dividends or other distributions of capital stock of the Borrower, (except for
dividends or other distributions payable solely in shares of capital stock), and
	 
	 	(b)	 	the redemption, retirement or acquisition of such stock or of warrants, rights
or other options to purchase such stock (except when solely in exchange for such
stock).

“Current Assets” means those assets, which on a consolidated basis, are determined to be current
assets of the Borrower and its Subsidiaries taken as a whole in accordance with GAAP;

“Current Liabilities” means those liabilities, which on a consolidated basis, are determined to be
current liabilities of the Borrower and its Subsidiaries taken as a whole in accordance with GAAP.

“Current Ratio” means the ratio of Current Assets to Current Liabilities;

“Default” means an event which, with the giving of notice or the passage of time or both, would
constitute an Event of Default.

“Defaulting Lender” shall have the meaning set out in Section 16.19(g).

“Designated Branch” means Royal Bank of Canada, Loan Syndications, South Tower, Royal Bank Plaza,
200 Bay Street, Toronto, Ontario, M5J 2W7, Facsimile no.: (416) 842-4023, or such other branch in
Toronto as the Administrative Agent may from time to time designate.

“Disposal” shall have the meaning set out in Section 12.2(e).

“Dissenting Lender” shall have the meaning set out in Section 2.5.

“Distribution Coverage Ratio” means a ratio of:

	 	(a)	 	EBITDA, less maintenance capital expenditures and cash taxes; divided by
	 
	 	(b)	 	the sum of the Borrower’s:

	 	(i)	 	Interest Expense;
	 
	 	(ii)	 	Interest paid on amounts owing to the Guarantor or any
Affiliate of the Guarantor; and

 

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	 	(iii)	 	all Dividends, Corporate Distributions and other fees or
distributions of any kind paid to the Guarantor or any Affiliate of the
Guarantor,

calculated, subject to Section 4.3(i), for the four consecutive fiscal quarters ending at the end
of the said fiscal quarter.

“Dividends” means dividends paid on capital stock (cash or property) but does not include stock
dividends.

“Drawing” means any of a Prime Rate Drawing, Bankers’ Acceptance Drawing, Base Rate Drawing, LIBOR
Drawing or Letter of Credit/Guarantee Drawing and includes a BA Equivalent Drawing.

“Drawing Date” means the date notified to the Administrative Agent by the Borrower in accordance
with Section 3.2 as being the date (which shall be a Banking Day) on which a requested Drawing be
made.

“Drawing Notice” means a notice substantially in the form of Schedule D.

“EBITDA” means, with respect to the Borrower and its Subsidiaries taken as a whole, the sum of:

	 	(a)	 	Consolidated Net Income;
	 
	 	(b)	 	all taxes paid and payable including income tax, value added goods and services
taxes, sales taxes, business transfer and other like taxes;
	 
	 	(d)	 	Interest Expense paid and payable on Indebtedness of the Borrower and its
Subsidiaries taken as a whole;
	 
	 	(e)	 	depreciation and amortization as shown on the consolidated financial statements
of the Borrower and its Subsidiaries taken as a whole; and
	 
	 	(f)	 	non-cash charges not to exceed C$10 million per annum (excluding the amount of
any non-cash charges reported in the prior fiscal period that become reported as cash
items in the current fiscal period).

“Effective Date” means the date on which the conditions set out in Part 10 have been satisfied by
the Borrower or waived by the Lenders.

“Eligible Accounts Receivable” means unencumbered (except pursuant to the Security) North American,
European Union and Japan domiciled trade accounts receivable owing to the Borrower by Persons in
respect of whom no trade accounts receivable are owing to the Borrower for more than 90 days and
with whom the Borrower deals at arm’s length, as such term is defined in the Income Tax Act
(Canada).

 

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“Eligible Inventory” means unencumbered (except pursuant to the Security) inventory including:
finished goods, pulp, logs and chips owned by the Borrower which are located in British
Columbia, or in such other jurisdictions in which the Lenders have registered security over such
inventory, supplies or spare parts in a form satisfactory to such Lenders in their sole discretion,
but excluding work in process inventory, supplies and spare parts.

“Environmental Law” means any Requirement of Law relating to public health, safety or the
environment, including, without limitation, those relating to the protection of the environment,
health or safety of Persons, natural resources, conservation, wildlife, waste management, hazardous
substance management, removal and remedial cost recovery, and pollution, including, without
limitation, regulation of releases and disposals to air, land, water and groundwater.

“Equity Securities” means “equity security” or “equity securities” as defined in the Securities Act
(British Columbia).

“Excess Payment” shall have the meaning set out in Section 16.20.

“Event of Default” shall have the meaning set out in Section 14.1.

“Facility” shall have the meaning set out in Section 2.1.

“Federal Funds Rate” means, for each day, a fluctuating interest rate per annum equal to the
weighted average of the rates for overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers as published for such day or, if such day is not a
Banking Day, for the next preceding Banking Day, by the Federal Reserve Bank of New York or if such
rates are not so published for such day, the average of the quotations for such transactions
received by the Administrative Agent from three federal funds brokers of nationally recognized
standing reasonably selected by the Administrative Agent.

“First Asset Purchase Agreements” has the meaning set out in the Consent and Assignment Agreement

“Fiscal Year” means a fiscal year of the Borrower or the Guarantor being that yearly period ending
on December 31 of each year or such other date determined by the Borrower or Guarantor and agreed
to by the Lenders from time to time.

“Fronted LCG” shall have the meaning set out in Section 7.1(a).

“Fronting Fee” shall have the meaning set out in Section 7.2(a).

“Fronting Lender” means Royal, or any other replacement fronting lender.

“GAAP” means Canadian generally accepted accounting principles.

“General Partner” means Zellstoff Celgar Limited.

 

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“Governmental Approvals” means all licenses, permits, consents, authorizations or approvals from;
withholding of objection on the part of, or filing, registration or qualification with; any and all
Governmental Authorities required for any particular decision, act or event.

“Governmental Authority” means the government of Canada or the United States, the government of any
province, state, municipality or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions, and any corporation or
other entity owned or controlled (through stock or capital ownership or otherwise) by any of the
foregoing.

“Guarantee and Postponement Agreement” means the guarantee agreement dated the date hereof whereby
the Guarantor guarantees the Borrower’s obligations hereunder, and provides other agreements and
covenants to the Lenders, and includes the amended and restated Guarantee and Postponement
Agreement contemplated in Section 13.1.

“Guarantor” means Mercer International Inc., and its permitted successors.

“Guarantor Notes” means the US $310,000,000 high yield senior notes of the Guarantor bearing
interest at 9.25% per annum and maturing February 15, 2013.

“Guarantor’s Counsel” means such member or members of Sandra Moller, called to the Washington State
Bar, or any replacement counsel appointed by the Guarantor.

“Holdings” has the meaning set out in the recitals hereto.

“Indebtedness” means, with respect to any Person, without duplication, (a) all obligations for
borrowed money, (b) all obligations evidenced by bonds, debentures, notes or similar instruments,
or upon which interest payments are customarily made, (c) all obligations under conditional sale or
other title retention agreements relating to property purchased (other than customary reservations
or retentions of title under agreements with suppliers entered into in the ordinary course of
business), (d) all obligations (including, without limitation, earnout obligations) incurred,
issued or assumed as the deferred purchase price of property or services purchased (other than
trade debt incurred in the ordinary course of business) that would appear as liabilities on a
balance sheet, (e) the principal portion of all obligations under Capital Leases, (f) all breakage
cost obligations under treasury contracts, excluding any portion thereof that would be accounted
for as interest expense under GAAP, (g) the maximum amount of all letters of credit issued or
bankers’ acceptances facilities created and, without duplication, all drafts drawn and unreimbursed
thereunder (excluding performance based letters of credit issued to the Person’s customers in
connection with certain long-term contracts), (h) all preferred capital stock or other equity
interests and which by the terms thereof could be (at the request of the holders thereof or
otherwise) subject to mandatory sinking fund payments, redemption or other acceleration, (i) the
principal balance outstanding under any synthetic lease, tax retention operating lease, off-balance
sheet loan or similar off-balance sheet financing product, (j) all Indebtedness of others of the
type described in clauses (a) through (i) hereof secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be

 

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secured by) any Lien on, or
payable out of the proceeds of production from, property owned or acquired, whether or not the
obligations secured thereby have been assumed, (k) all guarantee obligations with respect to
Indebtedness of another Person of the type described in clauses (a) through (i) hereof, and (l) all
Indebtedness of the type described in clauses (a) through (j) hereof of any partnership or
unincorporated joint venture in which the Person is a general partner or a joint venturer in
proportion the ownership percentage in such partnership or joint venture.

“Intangibles” means prepaid royalties, patent and other intellectual property and any other item
(other than goodwill) qualifying as an intangible under GAAP.

“Interest and Fee Rate Adjustment Date” means that date which is the first day of the month which
immediately follows the relevant fiscal quarter end.

“Interest Coverage Ratio” means, with respect to the Borrower and its Subsidiaries taken as a whole
for the relevant period, the ratio resulting from dividing the sum of:

	 	(a)	 	Consolidated Net Income;
	 
	 	(b)	 	all taxes paid and payable including income tax, value added goods and services
taxes, sales taxes, business transfer and other like taxes;
	 
	 	(c)	 	Interest Expense paid and payable by the Borrower and its Subsidiaries taken as
a whole;
	 
	 	(d)	 	depreciation and amortization as shown on the consolidated financial statements
of the Borrower and its Subsidiaries taken as a whole;
	 
	 	(e)	 	non-cash charges not to exceed C$10 million per annum (provided they do not
subsequently become cash charges)

by the amount of interest paid and payable on Indebtedness of the Borrower and Subsidiaries, taken
as a whole. Interest Coverage Ratio will be calculated, subject to Section 12.3(h), for the four
consecutive fiscal quarters ending at the end of the said fiscal quarter.

"Interest Expense” means, with respect to the Borrower and its Subsidiaries for any particular
period, without duplication, the aggregate expense incurred by the Borrower and its Subsidiaries
taken as a whole for interest and equivalent costs of borrowing (taking into account the effect of
any relevant Treasury Contracts), including but not limited to (i) bankers’ acceptance fees, (ii)
discounts on bankers’ acceptances, (iii) the interest portion of any Capital Lease obligations, and
(iv) all fees and other compensation paid to any Person that has extended credit to the Borrower
and its Subsidiaries, but excluding the interest capitalized in accordance with GAAP on new capital
projects, including interest capitalized up to completion. For greater clarity, interest expense on
loans from the Guarantor which are postponed to the Facility pursuant to the Guarantee and
Postponement Agreement shall not be included in Interest Expense.

“Investment” means any investment, made in cash or by delivery of property, by a Person:

 

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	 	(a)	 	in any other Person, whether by acquisition of stock, indebtedness, or other
obligation or security of such Person, or by loan, guarantee, advance, capital
contribution or otherwise; or
	 
	 	(b)	 	in any property.

“LCG Fee” shall have the meaning set out in Section 4.1(e).

“LCG Fee Rate” means the rate per annum at which the LCG Fee is calculated, which rate shall vary
with changes to the Total Funded Debt to EBITDA Ratio, as set forth in Schedule C hereto and
adjusted pursuant to Section 4.3.

“LCG Payment” shall have the meaning set out in Section 16.19(b).

“Lender Assignment Agreement” means an instrument in the form set out as Schedule J.

“Lenders” means the financial institutions listed in Schedule B hereto, subject to adjustment for
assignment of an interest in the Facility and this Agreement in accordance with Section 15.1 and
“Lender” means any one of them, as the context so requires.

“Lenders’ Counsel” means Davis & Company or any replacement counsel appointed by the Lenders.

“Lender’s Proportion” means, in respect of each Lender:

	 	(a)	 	if no Event of Default has occurred and is continuing, that percentage of the
maximum principal amount of the Facility which a Lender has committed to fund or has
funded; and
	 
	 	(b)	 	if an Event of Default has occurred and is continuing, that percentage of the
principal amount of the Facility outstanding which a Lender has funded at the time of
determination,

as amended from time to time in the event of any assignment in accordance with Section 15.1 hereof
or cancellation in accordance with Section 8.2.

“Lending Branch” means the branch or office designated in writing from time to time by each Lender
to the Administrative Agent as the branch or office from which such Lender funds its Lender’s
Proportion and Lender’s Proportion, as the case may be, of Drawings and to which the Administrative
Agent is to forward payments made by the Borrower hereunder, the initial branch or offices being
those set forth in Schedule B.

“Letter of Credit” means a standby letter of credit or commercial letter of credit issued for the
account of the Borrower.

“Letter of Credit/Guarantee Drawing” means a Drawing in Canadian Dollars or U.S. Dollars

 

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by way of the issuance of a Letter of Credit or Letters of Guarantee for the account of the
Borrower.

“Letter of Guarantee” means a letter of guarantee of performance of financial obligations of the
Borrower issued for the account of the Borrower.

“LIBOR Banking Day” means any day on which banks are open for business in Vancouver, British
Columbia, Toronto, Ontario, New York, New York and London, England.

“LIBOR Drawing” means a Drawing in US Dollars to be outstanding for a specified LIBOR Interest
Period in respect of which interest is payable by reference to the LIBO Rate.

“LIBOR Interest Period” means, in relation to a LIBOR Drawing, the term to maturity selected by the
Borrower hereunder, commencing on the date that the relevant LIBOR Drawing is made; provided,
however, that:

	 	(a)	 	each LIBOR Interest Period shall have a term of 1, 2, 3 or 6 months and shall
be subject to the availability of a market for such term;
	 
	 	(b)	 	the first LIBOR Interest Period for a LIBOR Drawing shall commence on the date
it is advanced by the Lenders and, in the case of a Rollover, each subsequent LIBOR
Interest Period relative thereto shall commence on and include the last day of such
immediately preceding LIBOR Interest Period;
	 
	 	(c)	 	if the last day of a LIBOR Interest Period selected by the Borrower is not a
LIBOR Banking Day, such LIBOR Interest Period shall end on the next following LIBOR
Banking Day unless such LIBOR Banking Day falls in the next calendar month in which
case such LIBOR Interest Period shall end on the next preceding LIBOR Banking Day;
	 
	 	(d)	 	no LIBOR Interest Period with respect to Drawings under the 364 Day Tranche may
extend beyond the 364 Day Tranche Repayment Date (as from time to time extended
pursuant to Section 2.5); and
	 
	 	(e)	 	no LIBOR Interest Period with respect to Drawings under the Term Tranche may
extend beyond the applicable Term Tranche Repayment Date.

“LIBO Rate “ means, for any LIBOR Interest Period:

	 	(a)	 	the rate of interest (expressed as an annual rate on the basis of a 360 day
year) determined by the Administrative Agent to be the arithmetic mean (rounded upwards
if necessary to the next 0.00001%) of the offered rates for deposits in US Dollars for
a period equal to the particular LIBOR Interest Period, which rates appear on the
Reuters screen LIBO page or, if such Reuters screen page is not readily available to
the Administrative Agent, page 3750 of the Telerate screen, in

 

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	 	 	 	either case as of 11:00 a.m. (London time) on the second LIBOR Banking Day before
the first day of that LIBOR Interest Period; or
	 
	 	(b)	 	if neither the Reuters screen LIBO page nor page 3750 of the Telerate screen is
readily available to the Administrative Agent for any reason, the rate of interest
determined by the Administrative Agent which is equal to the simple average of the
rates of interest (expressed as a rate per annum on the basis of a year of 360 days and
rounded upwards if necessary to the next 0.00001%) at which three of the five largest
(as to total assets) Schedule I banks (as selected by the Administrative Agent) would
be prepared to offer leading banks in the London interbank market a deposit in US
Dollars for a term coextensive with that LIBOR Interest Period in an amount
substantially equal to the relevant LIBOR Drawing at or about 10:00 a.m. (Toronto time)
on the second Banking Day before the first day of such LIBOR Interest Period.

“Lien” means any mortgage, lien, charge, pledge, hypothecation, security interest or other
encumbrance or title retention agreement and any other agreement or arrangement having
substantially the same economic effect.

“Majority Lenders” means, at any time, any Lender or combination of Lenders whose aggregate
Lender’s Proportions exceed 66 2/3 %.

“Material Adverse Change” means the occurrence of any transaction, event, condition, change or
effect with respect to the Borrower or Guarantor that could reasonably be expected to materially
adversely affect:

	 	(a)	 	the business or financial condition of either the Borrower or Guarantor;
	 
	 	(b)	 	the ability of the Borrower to meet its obligations under this Agreement; or
	 
	 	(c)	 	the ability of the Guarantor to meet its obligations under the Guarantee and
Postponement.

“Monthly Borrowing Base Certificate” means a certificate of a senior officer of the Borrower in the
form set out in Schedule H.

“Non-Acceptance Lender” means a Lender other than a Schedule I Lender, a Schedule II Lender, or a
Schedule III Lender.

“Non-Qualifying Lender” shall have the meaning set out in Section 7.3(c).

“Non-Qualifying Portion” shall have the meaning set out in Section 7.3(c).

“Non-Takeover Lender” shall have the meaning set out in Section 2.11.

“Original Agreement” shall have the meaning set out in the recitals hereto.

 

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“Overpaid Lender” shall have the meaning set out in Section 16.20.

“Permitted Liens” means:

	 	(a)	 	Liens for taxes, assessments or governmental charges or levies not at the time
due and delinquent or the validity of which is being contested at the time by the
Borrower or any of its Subsidiaries in good faith provided that the Lenders are
satisfied and have been provided with such security as they may have required to ensure
that such contestation will involve no forfeiture of any property of the Borrower or
any of its Subsidiaries;
	 
	 	(b)	 	the Lien of any judgment rendered or claim filed against the Borrower or any of
its Subsidiaries which it shall be contesting in good faith, provided that the Lenders
are satisfied or security has been provided to ensure that contestation will involve no
forfeiture of any of the property of the Borrower or any of its Subsidiaries;
	 
	 	(c)	 	undetermined or inchoate Liens and charges, including construction Liens, Liens
under the Woodworker Lien Act, Liens incidental to the operations of the Borrower or
any of its Subsidiaries which have not at such time been filed pursuant to law against
the Borrower or any of its Subsidiaries or which relate to obligations neither due nor
delinquent;
	 
	 	(d)	 	restrictions, including land use contracts and covenants, easements,
rights-of-way and mortgages thereof, servitudes, undersurface rights or other similar
rights in land granted to or reserved by any Persons or minor defects or irregularities
in title, all of which in the aggregate do not, in the opinion of the Lenders, acting
reasonably, materially impair the usefulness of the property to the business of the
Borrower subject to any such restriction, easement, right-of-way, servitude or other
similar rights in land;
	 
	 	(e)	 	security given to a public utility or any Governmental Authority in connection
with the operations of the Borrower or any of its Subsidiaries in the ordinary course
of their respective businesses;
	 
	 	(f)	 	the reservations, limitations, provisos and conditions, if any, expressed in
any original grants from the Crown and all statutory exceptions to title to real
property;
	 
	 	(g)	 	claims of right, title or jurisdiction which may be made or established by any
aboriginal peoples by virtue of their status as aboriginal peoples to or over any
lands, waters or products harvested therefrom;
	 
	 	(h)	 	lease or conditional sale obligations which are not Capital Leases entered into
by the Borrower or any Subsidiaries with arm’s length third parties in respect of
machinery and equipment (including motor vehicles, office equipment,

 

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	 	 	 	photocopiers,
telephones and telecopier machines) used in the ordinary course of
business by the Borrower or any Subsidiaries;
	 
	 	(i)	 	Liens securing Indebtedness permitted under Section 12.2(b)(vi);
	 
	 	(j)	 	such other non-financial rights, liens, charges and encumbrances which are
granted or arise in the ordinary course of business and do not individually, or as a
whole, give rise to a Material Adverse Change; and
	 
	 	(k)	 	Liens securing the Facility or created under any Security Agreements granted in
connection therewith.

“Person” means an individual, the heirs, executors, administrators or other legal representatives
of an individual, partnership, corporation, limited liability company, association, trust,
unincorporated organization, or a government or agency or political subdivision thereof.

“Power of Attorney” shall have the meaning set out in Section 5.3.

“Preferred Claims” means any liabilities of the Borrower which for whatever reason would have
priority over the Lenders for payment in the event of insolvency of the Borrower including, without
limitation, purchase money security interests, statutory liens and crown priority claims for unpaid
taxes and Liens under the Woodworker Lien Act.

“Pricing Level” means the “Pricing Levels” applicable to pricing of the Facility set out in
Schedule C.

“Prime Rate” means a fluctuating rate of interest per annum, expressed on the basis of a year of
365 days, which is equal at all times to the greater of: (i) the rate of interest most recently
announced by Royal as its prime rate for lending Canadian Dollars in Canada; and (ii) the average
rate for 30 day Canadian Dollar Banker’s Acceptances which appears on the Reuters’ Screen CDOR page
at 10:00 a.m. Toronto Time, plus 1.0%.

“Prime Rate Drawing” means a Drawing in Canadian Dollars in respect of which interest is payable by
reference to the Prime Rate.

“Quarterly Compliance Certificate” means a certificate of a senior officer of the Borrower in the
form set out in Schedule G.

“Reporting Issuer” means “reporting issuer” as defined in the Securities Act (British Columbia) or
a Person having similar status under the securities legislation of any other jurisdiction, but does
not include the Borrower or any Affiliate of the Borrower.

“Requirement of Law” means, as to any Person, the charter documents, by-laws or other
organizational or governing documents of such Person, and any present or future international,
Canadian or United States federal, provincial, state or local statute, law, regulation, order,
consent, decree, judgment, permit, license, code, covenant, deed restriction, common law, treaty,

 

- 86 -

convention, ordinance or determination of an arbitrator or a court or other competent authority, in
each case applicable to or binding upon such Person or any of the property of such Person.

“Retroactive Amount” means that amount of interest, BA Stamping Fees, LCG Fees and 364 Day
Commitment Fees equal to the difference, if any, between interest, BA Stamping Fees, LCG Fees and
364 Day Commitment Fees paid by the Borrower during the period from and including the Interest and
Fee Rate Adjustment Date following each fiscal quarter end of the Borrower to and including the
Calculation Date and the interest, BA Stamping Fees, LCG Fees and 364 Day Commitment Fees required
to be paid as a result of an adjustment to the rates and fees prescribed in Section 4.1 and 4.2
during such period.

“Rollover” means a rollover of a Drawing to a further Drawing of the same form, and for greater
certainty includes the issuance of Bankers’ Acceptances the proceeds of which are used directly or
indirectly to repay maturing Bankers’ Acceptances and the continuation of a LIBOR Drawing for a
further LIBOR Interest Period.

“Rollover Date” means the date notified to the Administrative Agent by the Borrower in accordance
with Section 3.2 as being the date (which shall be a Banking Day) on which the Borrower has
requested a Rollover be made.

“Rollover Notice” means a notice substantially in the form of Schedule E, duly executed by a senior
officer of the Borrower.

“Royal” means Royal Bank of Canada.

“Schedule I Lender” means a Lender which is a Canadian chartered bank listed under Schedule I to
the Bank Act (Canada).

“Schedule II Lender” means a Lender which is a Canadian chartered bank listed under Schedule II to
the Bank Act (Canada).

“Schedule III Lender” means a Lender which is an authorized foreign bank under Schedule III of the
Bank Act (Canada).

“Second Asset Purchase Agreements” has the meaning set out in the Consent and Assignment Agreement.

“Securities” means Equity Securities or Voting Securities.

“Security Agreements” shall have the meaning set out in Section 13.1.

“Several LCG” shall have the meaning set out in Section 7.1(b).

“Significant Agreements” means the following as from time to time amended, supplemented, extended,
renewed or replaced:

 

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	 	(a)	 	all chip and pulp log supply agreements;
	 
	 	(b)	 	all other residual fibre supply agreements; and
	 
	 	(c)	 	all pulp sales agreements.

“Spot Buying Rate” means, in relation to the conversion of one currency into another currency, the
rate of exchange for such conversion as quoted by the Bank of Canada (or if not quoted, the spot
rate of exchange quoted for wholesale transactions by the Administrative Agent in accordance with
its standard money market practices) at approximately noon (Toronto time) on the Banking Day such
conversion is to be made.

“subsidiary” means, as to any Person, any corporation, association or other business entity in
which such Person, or one or more of its subsidiaries, or such Person and one or more of its
subsidiaries, owns or has the ability to control sufficient equity or voting interests to enable it
or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the
directors (or Persons performing similar functions) of such entity, and any partnership or joint
venture if more than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its subsidiaries or such Person and one or more of its subsidiaries (unless such
partnership can and does ordinarily take major business actions without the prior approval of such
Person or one or more of its subsidiaries).

“Subsidiary” means a subsidiary of the Borrower.

“Swingline” means that portion of the 364 Day Tranche to be made available by the Swingline Lender
to the Borrower as described in Section 2.7.

“Swingline Amount” means the US Dollar Equivalent of US$5 million, to the extent not permanently
reduced, cancelled or terminated pursuant to this Agreement.

“Swingline Drawing” has the meaning set forth in said Section 2.7(a).

“Swingline Lender” means Royal acting in its capacity as the Lender of Swingline Drawings under
Section 2.7

“Term Tranche” has the meaning set out in Section 2.1.

“Term Tranche Repayment Date” means the date which is the first anniversary of the date of
conversion from the 364 Day Tranche to the Term Tranche.

“364 Day Commitment Fee” shall have the meaning set out in Section 4.2.

“364 Day Commitment Fee Rate” means the rate per annum (based on a 365 day year) at which the 364
Day Commitment Fee is calculated, which rate shall vary with changes to the Total Funded Debt to
EBITDA Ratio and Utilization as set forth in Schedule C hereto and adjusted pursuant to Section
4.3.

 

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“364 Day Tranche Conversion Notice” means a notice substantially in the form of Schedule I, duly
executed by a senior officer of the Borrower.

“364 Day Tranche” has the meaning set out in Section 2.1.

“364 Day Tranche Repayment Date” means May 14, 2006.

“this Agreement”, “herein”, “hereof”, “hereto” and similar expressions mean and refer to this
Credit Agreement and include any instrument amending, supplementing or modifying the same, and the
expression “Section” followed by a number means and refers to the specified Section of this
Agreement.

“Total Funded Debt” means, as of the date of determination, the sum of all obligations of the
Borrower and its Subsidiaries taken as a whole with respect to:

	 	(a)	 	borrowed money incurred or guaranteed by them;
	 
	 	(b)	 	any promissory notes or other negotiable instruments issued or guaranteed by
them;
	 
	 	(c)	 	Capitalized Leases;
	 
	 	(d)	 	other contingent liabilities in connection with Indebtedness, all classified as
debt in accordance with GAAP;

less

	 	(e)	 	unencumbered short term cash or cash equivalents,

provided that Total Funded Debt shall not include (i) any non-recourse debt of joint ventures,
Affiliates or Subsidiaries not wholly owned directly or indirectly by the Borrower and its
Subsidiaries and which has no recourse to the Borrower and its Subsidiaries; and (ii) loans from
the Guarantor which are postponed to the Facility pursuant to the Guarantee and Postponement
Agreement.

“Total Funded Debt to EBITDA Ratio” means Total Funded Debt at the end of a fiscal quarter of the
Borrower divided by EBITDA for the Borrower for the four consecutive fiscal quarters ending at the
end of the said fiscal quarter. During the initial 12 months of the term of this Agreement, the
calculation of Total Funded Debt to EBITDA Ratio shall be based upon a deemed annualized fiscal
period calculated in accordance with Section 12.3(d).

“Treasury Contracts” means any agreement entered into by the Borrower with a Lender Treasury
Contract relating to obligations of the Borrower under this Agreement to control, fix or regulate
currency exchange fluctuations or the rate or rates of interest and includes interest rate swaps,
interest rate agreements, caps, collars, futures or hedging agreements and other like money market
facilities and any combination thereof.

 

- 89 -

“US Dollars” or “US $” means lawful currency of the United States of America.

“US Dollar Equivalent” means, at any time:

	 	(a)	 	in relation to an amount in Canadian Dollars, the amount obtained by converting
such amount into US Dollars at the Spot Buying Rate; and
	 
	 	(b)	 	in relation to any amount in US Dollars, such amount.

“Utilization” means the percentage of the maximum amount of the 364 Day Tranche that the Borrower
has utilized.

“Voting Securities” means “voting security” or “voting securities” as defined in the Securities Act
(British Columbia).

“Wholly-Owned Subsidiary” of a Person means, any subsidiary, all of the outstanding shares of which
shall at the time be owned directly by such Person.

 

 

-90-

SCHEDULE B

LENDERS

	 	 	 	 	 	 	 	 	 
	Lender	 	Lending Branch	 	Initial	 	Initial
	 	 	 	 	Commitment	 	Lender’s
	 	 	 	 	 	 	Proportion
	 
	Royal Bank of Canada

	 	South Tower, Royal

Bank Plaza, 200 Bay

Street, Toronto,

Ontario, M5J 2W7
	 	US$15,000,000
	 	 	50	%
	 
	 	 	 	 	 	 	 	 
	 

	 	Attention:	 	 	 	 	 	 
	 

	 	Manager, Agency

Services Group	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Fax: (416) 842-4023	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	HSBC Bank Canada

	 	Suite 200, 885 West
Georgia Street,
Vancouver, BC,
V6C 3E9
	 	US$15,000,000
	 	 	50	%
	 
	 	 	 	 	 	 	 	 
	 

	 	Attention:	 	 	 	 	 	 
	 

	 	Assistant Vice

President	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Fax: (604) 641-1808	 	 	 	 	 	 
	 
	 

	 	Totals
	 	US$30,000,000
	 	 	100	%
	 

 

-91-

SCHEDULE C

PRICING SCHEDULE

(basis points per annum)

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Funded Debt to	 	Pricing Level I	 	Pricing Level II	 	Pricing Level III
	EBITDA Ratio	 	<1.0x	 	= or > 1.0x, < 2.0x	 	= or > 2.0x
	 
	Applicable Margin
Prime Rate and Base Rate Drawings

	 	 	150	 	 	 	175	 	 	 	200	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	BA Stamping Fee Rate

	 	 	250	 	 	 	275	 	 	 	300	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Applicable Margin

LIBOR Drawings

	 	 	250	 	 	 	275	 	 	 	300	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	LCG Fee Rate

	 	 	250	 	 	 	275	 	 	 	300	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	364 Day Commitment Fee Rate

< 331/3% Utilization

	 	 	75	 	 	 	82.5	 	 	 	90	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	364 Day Commitment Fee Rate

= or > 331/3%

Utilization

	 	 	62.5	 	 	 	68.75	 	 	 	75	 

The Pricing shall increase by 50 basis points if a 364 Day Tranche Conversion Notice is
delivered pursuant to Section 2.6 and is otherwise subject to adjustment pursuant to Section 4.3(b)

 

-92-

SCHEDULE D

DRAWING NOTICE

                                        

Date

	 	Re:	 	 First Amended and Restated Operating Credit Agreement (the “Agreement”)
dated for reference February 11, 2005 (and executed March 1, 2006) made among
Zellstoff Celgar Limited Partnership (the “Borrower”), the Lenders as defined
in the Agreement and Royal Bank of Canada (the “Administrative Agent”) as
administrative agent for the Lenders.

 

To: The Lenders through the Administrative Agent, Royal Bank of Canada; facsimile no.: (416)
842-4023; Attention: Manager, Agency Services Group.

We refer to the Facility constituted by the Agreement and we hereby give you notice that we wish to
make following Drawing pursuant to the <364 Day Tranche><Term Tranche> under the
Agreement:

	 	 	 	 	 
	A.

	 	PRIME RATE DRAWING	 	 
	 
	 	 	 	 
	 

	 	amount of proposed Drawing
	 	$                                        
	 
	 	 	 	 
	B.

	 	BASE RATE DRAWING	 	 
	 
	 	 	 	 
	 

	 	amount of proposed Drawing
	 	$                                        
	 
	 	 	 	 
	C.

	 	BANKERS’ ACCEPTANCE DRAWING	 	 
	 
	 	 	 	 
	 

	 	amount of proposed Drawing
	 	$                                        
	 
	 	 	 	 
	 

	 	BA Period                    days	 	 
	 
	 	 	 	 
	 

	 	BA Maturity Date                    	 	 
	 
	 	 	 	 
	D.

	 	LIBOR DRAWING	 	 
	 
	 	 	 	 
	 

	 	amount of proposed Drawing
	 	$                                        
	 
	 	 	 	 
	 

	 	LIBOR Interest Period                    	 	 
	 
	 	 	 	 
	 

	 	Due Date                    	 	 

 

-93-

	 	 	 
	E.

	 	LETTER OF CREDIT/GUARANTEE DRAWING
	 
	 	 
	 

	 	Fronted LCG                    
	 
	 	 
	 

	 	Several LCG                    
	 
	 	 
	 

	 	issue date                    
	 
	 	 
	 

	 	face amount $                    
	 
	 	 
	 

	 	expiry date                    
	 
	 	 
	 

	 	name and address of beneficiary                    

We confirm that:

	 	(a)	 	all representations and warranties of the Borrower contained in Part 11 of the
Agreement and the Guarantor contained in the Guarantee and Postponement Agreement are
true and correct date both before and after giving effect to the proposed Drawing;
	 
	 	(b)	 	all covenants of the Borrower contained in Part 12 and the Guarantor contained
in the Guarantee and Postponement Agreement have been complied with both before and
after giving effect to the proposed Drawing;
	 
	 	(c)	 	no Default or Event of Default has occurred and is continuing, or will occur
after giving effect to the proposed Drawing; and
	 
	 	(d)	 	since the date of the Agreement, no Material Adverse Change has occurred.

The Drawing requested is made in accordance with the terms and conditions set forth in the
Agreement.

All capitalized terms defined in the Agreement and used herein shall have the meaning set out in
the Agreement.

Zellstoff Celgar Limited Partnership, by its

General Partner, Zellstoff Celgar Limited

per:

 

-94-

SCHEDULE E

ROLLOVER NOTICE

                                        

Date

	 	Re:	 	 First Amended and Restated Operating Credit Agreement (the “Agreement”)
dated for reference February 11, 2005 (and executed March 1, 2006) made among
Zellstoff Celgar Limited Partnership (the “Borrower”), the Lenders as defined
in the Agreement and Royal Bank of Canada (the “Administrative Agent”) as
administrative agent for the Lenders.

 

To: The Lenders through the Administrative Agent, Royal Bank of Canada; facsimile no.: (416)
842-4023; Attention: Manager, Agency Services Group.

We refer to the Facility constituted by the Agreement and we hereby give you notice that we wish to
make following Rollover pursuant to the <364 Day Tranche><Term Tranche> under the
Agreement:

	 	(a)	 	Bankers’ Acceptance Drawing dated                    in the amount of Cdn.
$                     having a BA Period of                    and a BA Maturity Date of
                    , to a Bankers’ Acceptance Drawing in the amount of Cdn. $                    
and having a BA Period of                      and a BA Maturity Date of                    .
	 
	 	(b)	 	LIBOR Drawing dated                     , in the amount of US $                     having a
LIBOR Interest Period of                      and a maturity date of                     , to
a LIBOR Drawing in the amount of US $                    and having a LIBOR Interest Period
of                     and a maturity date of                    .

We confirm that:

	 	(a)	 	all covenants of the Borrower contained in Part 12 and the Guarantor contained
in the Guarantee and Postponement Agreement have been complied with both before and
after giving effect to the proposed Drawing;
	 
	 	(b)	 	no Default or Event of Default has occurred and is continuing, or will occur
after giving effect to the proposed Drawing; and
	 
	 	(c)	 	since the date of the Agreement, no Material Adverse Change has occurred.

 

-95-

The Rollover requested is made in accordance with the terms and conditions set forth in the
Agreement.

All capitalized terms defined in the Agreement and used herein shall have the meaning set out in
the Agreement.

Zellstoff Celgar Limited Partnership, by its

General Partner, Zellstoff Celgar Limited

per:

 

-96-

SCHEDULE F

CONVERSION NOTICE

                                        

Date

	 	Re:	 	 First Amended and Restated Operating Credit Agreement (the “Agreement”)
dated for reference February 11, 2005 (and executed March 1, 2006) made among
Zellstoff Celgar Limited Partnership (the “Borrower”), the Lenders as defined
in the Agreement and Royal Bank of Canada (the “Administrative Agent”) as
administrative agent for the Lenders.

 

To: The Lenders through the Administrative Agent, Royal Bank of Canada; facsimile no.: (416)
842-4023; Attention: Manager, Agency Services Group.

We refer to the Facility constituted by the Agreement and we hereby give you notice that we wish to
make following Conversion pursuant to the <364 Day Tranche><Term Tranche> under the
Agreement:

	 	 	 
	(a)

	 	Existing type and amount of Drawing to be converted:
	 
	 	 
	 

	 	 
	 
	 	 
	(b)

	 	Conversion Date:
	 
	 	 
	 

	 	 
	 
	 	 
	(c)

	 	Type, amount and currency of Drawing to be converted to:
	 
	 	 
	 

	 	 
	 
	 	 
	(d)

	 	LIBOR Interest Period(s) selected (if applicable):
	 
	 	 
	 

	 	 
	 
	 	 
	(e)

	 	Term of Bankers’ Acceptance (if applicable)

We confirm that:

	 	(a)	 	all covenants of the Borrower contained in Part 12 and the Guarantor contained
in the Guarantee and Postponement Agreement have been complied with both before

 

-97-

	 	 	 	and after giving effect to the proposed Drawing;
	 
	 	(b)	 	no Default or Event of Default has occurred and is continuing, or will occur
after giving effect to the proposed Drawing; and
	 
	 	(c)	 	since the date of the Agreement, no Material Adverse Change has occurred.

The Conversion requested is made in accordance with the terms and conditions set forth in the
Agreement.

All capitalized terms defined in the Agreement and used herein shall have the meaning set out in
the Agreement.

Zellstoff Celgar Limited Partnership, by its

General Partner, Zellstoff Celgar Limited

per:

 

-98-

SCHEDULE G

QUARTERLY COMPLIANCE CERTIFICATE

                                        

Date

	 	Re:	 	 First Amended and Restated Operating Credit Agreement (the “Agreement”)
dated for reference February 11, 2005 (and executed March 1, 2006) made among
Zellstoff Celgar Limited Partnership (the “Borrower”), the Lenders as defined
in the Agreement and Royal Bank of Canada (the “Administrative Agent”) as
administrative agent for the Lenders.

 

To: The Lenders through the Administrative Agent, Royal Bank of Canada; facsimile no.: (416)
842-4023; Attention: Manager, Agency Services Group.

I, [name], [insert office held], of the Borrower, in my capacity as such and not in my personal
capacity, hereby certify, to the best of my knowledge as of the date hereof, as of the last day of
the most recent fiscal quarter:

	 	 	 	 	 
	 
	 	—	 	Consolidated Net Worth is >
	 
	 	 	 	 
	 
	 	—	 	Total Funded Debt to EBITDA Ratio is >
	 
	 	 	 	 
	 
	 	—	 	Current Ratio is >
	 
	 	 	 	 
	 
	 	—	 	Interest Coverage Ratio is >
	 
	 	 	 	 
	 
	 	—	 	Distribution Coverage Ratio is >

Attached hereto is a work sheet setting out the amounts, calculations and other details in respect
of the foregoing ratios.

I confirm that, to the best of my knowledge:

	 	(a)	 	all representations and warranties of the Borrower contained in Part 11 of the
Agreement and the Guarantor contained in the Guarantee and Postponement Agreement are
true and correct date both before and after giving effect to the proposed Drawing;
	 
	 	(b)	 	all covenants of the Borrower contained in Part 12 and the Guarantor contained
in the Guarantee and Postponement Agreement have been complied with both before and
after giving effect to the proposed Drawing;

 

-99-

	 	(c)	 	no Default or Event of Default has occurred and is continuing, or will occur
after giving effect to the proposed Drawing; and
	 
	 	(d)	 	since the date of the Agreement, no Material Adverse Change has occurred.

This certificate is made in accordance with the terms and conditions set forth in the Agreement.
Except in connection with an intentional misstatement or willful misconduct, no personal liability
shall be incurred by the undersigned in connection herewith.

All capitalized terms defined in the Agreement and used herein shall have the meaning set out in
the Agreement.

                                                            

[Officer] [Title]

 

-100-

SCHEDULE H

MONTHLY BORROWING BASE CERTIFICATE

                                        

Date

	Re:	 	 First Amended and Restated Operating Credit Agreement (the “Agreement”)
dated for reference February 11, 2005 (and executed March 1, 2006) made among
Zellstoff Celgar Limited Partnership (the “Borrower”), the Lenders as defined
in the Agreement and Royal Bank of Canada (the “Administrative Agent”) as
administrative agent for the Lenders.

 

To: The Lenders through the Administrative Agent, Royal Bank of Canada; facsimile no.: (416)
842-4023; Attention: Manager, Agency Services Group.

I, [name], [insert office held], of the Borrower, in my capacity as such and not in my personal
capacity, hereby certify, to the best of my knowledge as of the date hereof, as of the last day of
the most recent calendar month:

	 	-	 	Borrowing Base is >
	 
	 	-	 	Accounts Receivable are:

	 	-	 	Eligible Accounts Receivable (75%) = $>
	 
	 	-	 	insured by Export Development Corporation (or other insurance
institution acceptable to the Lenders) (90%) = $>
	 
	 	-	 	supported by letters of credit issued by financial institutions
rated not less than A- by Standard & Poors or A3 by Moodys Investor Service
(100%) = $>

	 	-	 	Eligible Inventory (50%) = $>
	 
	 	-	 	Preferred Claims = $>

Attached hereto is a work sheet setting out the amounts, calculations and other details in respect
of the foregoing, including the identity of each trade account payee and the location of all
Eligible Inventory.

Attached hereto is a summary of outstanding Treasury Contracts and the Breakage Costs in respect
thereof.

 

-101-

This certificate is made in accordance with the terms and conditions set forth in the Agreement.
Except in connection with an intentional misstatement or willful misconduct, no personal liability
shall be incurred by the undersigned in connection herewith.

All capitalized terms defined in the Agreement and used herein shall have the meaning set out in
the Agreement.

                                                            

[Officer][Title]

 

-102-

SCHEDULE I

364 DAY TRANCHE CONVERSION NOTICE

                                        

Date

	 	Re:	 	 First Amended and Restated Operating Credit Agreement (the “Agreement”)
dated for reference February 11, 2005 (and executed March 1, 2006) made among
Zellstoff Celgar Limited Partnership (the “Borrower”), the Lenders as defined
in the Agreement and Royal Bank of Canada (the “Administrative Agent”) as
administrative agent for the Lenders.

 

To: The Lenders through the Administrative Agent, Royal Bank of Canada; facsimile no.: (416)
842-4023; Attention: Manager, Agency Services Group.

Pursuant to Section 2.6 of the Agreement, we hereby give notice that as of the 364 Day Tranche
Repayment Date we wish to convert all of the Drawings outstanding on such date under the 364 Day
Tranche into Drawings under the Term Tranche.

We confirm that:

	 	(a)	 	all representations and warranties of the Borrower contained in Part 11 of the
Agreement and the Guarantor contained in the Guarantee and Postponement Agreement are
true and correct date both before and after giving effect to the conversion;
	 
	 	(b)	 	all covenants of the Borrower contained in Part 12 and the Guarantor contained
in the Guarantee and Postponement Agreement have been complied with both before and
after giving effect to the conversion;
	 
	 	(c)	 	no Default or Event of Default has occurred and is continuing, or will occur
after giving effect to the conversion; and
	 
	 	(d)	 	since the date of the Agreement, no Material Adverse Change has occurred.

The conversion requested is made in accordance with the terms and conditions set forth in the
Agreement.

All capitalized terms defined in the Agreement and used herein shall have the meaning set out in
the Agreement.

 

-103-

Zellstoff Celgar Limited Partnership, by its

General Partner, Zellstoff Celgar Limited

per:

 

-104-

SCHEDULE J

LENDER ASSIGNMENT AGREEMENT

     THIS AGREEMENT dated l is among:

(the “Assignor”)

AND

(the “Assignee”)

AND

ZELLSTOFF CELGAR LIMITED PARTNERSHIP

(the “Borrower”)

AND

ROYAL BANK OF CANADA

(the “Administrative Agent”)

          WHEREAS the Assignor is a Lender under the First Amended and Restated Operating Credit
Agreement (the “Agreement”) dated for reference February 11, 2005 (and executed March 1, 2006) made
among Zellstoff Celgar Limited Partnership (the “Borrower”), the Lenders as defined in the
Agreement and Royal Bank of Canada (the “Administrative Agent”) as administrative agent for the
Lenders.

     AND WHEREAS the Assignor has agreed to assign and transfer to the Assignee certain rights
under the Agreement in compliance with Section 15.1 of the Agreement and the Assignee has agreed to
accept such rights and assume certain obligations of the Assignor under the Agreement.

     AND WHEREAS as a condition to the effectiveness of this assignment, Section 15.2 of the
Agreement requires the parties hereto to enter into this agreement.

NOW THEREFORE, in consideration of the premises and other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties hereby agree as follows:

 

-105-

1. DEFINITIONS AND INTERPRETATION

	 	(a)	 	In this agreement, including the recitals, capitalized terms used herein, and
not otherwise defined herein, shall have the meanings attributed thereto in the
Agreement.
	 
	 	(b)	 	This agreement shall be governed by and interpreted in accordance with the laws
of the Province of British Columbia shall be treated as a British Columbia contract.
The parties irrevocably submit to the non-exclusive jurisdiction of the courts of the
Provinces of British Columbia without prejudice to the rights of the parties to take
proceedings in any other jurisdictions.

2. ASSIGNMENT OF RIGHTS BY ASSIGNOR

     Effective as of the date hereof, the Assignor absolutely assigns and transfers to the Assignee
[all Cdn. $l and/or US $l or l%] of the <364 Day Tranche / Term Tranche>
and Drawings thereunder owing by the Borrower to the Assignor, as more particularly described in
Schedule “A” hereto, together with all of the Assignor’s other rights under the Agreement but only
insofar as such other rights relate to the interest assigned hereunder (collectively, the “Assigned
Interests”).

3. ASSUMPTION OF OBLIGATIONS BY ASSIGNEE

     The Assignee assumes and covenants and agrees to be responsible for all obligations relating
to the Assigned Interests to the extent such obligations arise or accrue on or after the date
hereof (the “Assumed Obligations”) and agrees that it will be bound by the Agreement to the extent
of the Assumed Obligations as fully as if it had been an original party to the Agreement.

4. CONSENT OF BORROWER AND ADMINISTRATIVE AGENT

     The Borrower and the Administrative Agent on behalf of the Lenders consent to the assignment
of the Assigned Interests to the Assignee and the assumption of the Assumed Obligations by the
Assignee and agree to recognize the Assignee as a Lender under the Agreement as fully as if the
Assignee had been an original party to the Agreement. The Borrower and the Administrative Agent on
behalf of the Lenders agree that the Assignor shall have no further liability or obligation in
respect of the Assumed Obligations.

5. ASSIGNEE CREDIT DECISION

     The Assignee acknowledges to the Administrative Agent and Assignor that the Assignee has
itself been, and will continue to be, solely responsible for making its own independent appraisal
of and investigations into the financial condition, creditworthiness, condition, affairs, status
and nature of the Borrower, the Guarantor and the Subsidiaries. Accordingly, the Assignee confirms
with the Administrative Agent and Assignor that it does not rely, and it will not hereafter rely,
on the Administrative Agent and Assignor and agrees:

 

-106-

	 	(a)	 	to check or inquire on its behalf into the adequacy, accuracy or completeness
of any information provided by the Borrower or any other Person under or in connection
with the Agreement or the transactions therein contemplated (whether or not such
information has been or is hereafter distributed to the Assignee by the Administrative
Agent ); or
	 
	 	(b)	 	to assess or keep under review on its behalf the financial condition, credit
worthiness, condition, affairs, status or nature of the Borrower and Subsidiaries.

     The Assignee acknowledges that a copy of the Agreement (including a copy of the Schedules) has
been made available to it for review and the Assignee acknowledges that it is satisfied with the
form and substance of the Agreement. The Assignee hereby covenants and agrees, except as
specifically contemplated by the Agreement, that it has not heretofore and shall not hereafter take
any security interest for any Indebtedness owing under the Agreement and that it will not make any
arrangements with the Borrower or any Subsidiary for the satisfaction of any such outstanding
Indebtedness without the prior written consent of all other Lenders.

6. TAX RESIDENCY OF ASSIGNEE

     If the Assignee is, or becomes, a non-resident of Canada for the purpose of the Income Tax Act
(Canada) it shall forthwith notify the Borrower of such circumstance. If the Assignee is an
authorized foreign bank listed in Schedule III to the Bank Act (Canada) it shall certify to the
Borrower whether it is or is not exempt from non-resident withholding tax under the Income Tax Act
(Canada) and shall forthwith notify the Borrower of any change in such status. The Assignee shall
indemnify and save the Borrower harmless from all loss, expense and liability incurred by the
Borrower as a result of the Assignee’s failure to give any notice or certification required by this
paragraph.

7. SETTLEMENT

     The Assignor and the Assignee acknowledge and agree that all payments under the Agreement in
respect of the Assigned Interests received by the Administrative Agent on or after the date hereof
shall be the property of the Assignee and the Administrative Agent shall be entitled to treat the
Assignee as solely entitled thereto. The Assignor and the Assignee represent and warrant to the
Administrative Agent that the Assignor and the Assignee have made satisfactory arrangements for the
settlement of any amounts owing or which may become owing by one to the other in connection with
this agreement without any action on the part of the Administrative Agent.

8. GENERAL PROVISIONS

	 	(a)	 	The Assignee designates the following office as its Lender’s Lending Branch:
	 
	 	 	 	Fax No.:          •
	 
	 	 	 	Attention:      •

 

-107-

	 	(b)	 	The parties hereto shall from time to time and at all times do all such further
acts and things and execute and deliver all such documents as are required in order to
fully perform and carry out the terms of this agreement.
	 
	 	(c)	 	The provisions of this agreement shall enure to the benefit of and shall be
binding upon the parties hereto and their respective successors and permitted assigns.
	 
	 	(d)	 	This agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, and it shall not be necessary in making proof of
this agreement to produce or account for more than one full set of counterparts.

IN WITNESS WHEREOF the parties hereto have caused this agreement to be executed by its duly
authorized representative(s) as of the date first above written.

	 	 	 
	[ASSIGNOR]	 	[ASSIGNEE]
	 
	Per:                                        

	 	Per:                                        
	 
	 	 
	Name:                                        

	 	Name:                                        
	 
	 	 
	Title:                                        

	 	Title:                                        
	 
	 	 
	Zellstoff Celgar Limited Partnership, by its

General Partner, Zellstoff Celgar Limited

	 	ROYAL BANK OF CANADA in itscapacity

as Administrative Agent
	 
	 	 
	Per:                                         

	 	Per:                                         
	 
	 	 
	Name:                                        

	 	Name:                                         
	 
	 	 
	Title:                                         

	 	Title:                                         

 

-108-

SCHEDULE K

FORM OF LETTER OF CREDIT

ROYAL BANK OF CANADA

<INSERT ADDRESS OF ISSUING BRANCH>

DATE OF ISSUE:

DATE OF EXPIRY:

PLACE OF EXPIRY:

	 	 	 
	BENEFICIARY:

	 	APPLICANT:
	 
	 	 
	NAME:

	 	NAME:
	 
	 	 
	ADDRESS:

	 	ADDRESS:
	 
	 	 
	 

	 	AMOUNT:

IRREVOCABLE STANDBY LETTER OF CREDIT NO. >

WE, THE ISSUING BANKS, HEREBY ISSUE IN YOUR FAVOUR THIS IRREVOCABLE STANDBY LETTER OF CREDIT WHICH
IS AVAILABLE BY PAYMENT AGAINST YOUR WRITTEN DEMAND ADDRESSED TO ROYAL BANK OF CANADA, <INSERT
ADDRESS OF ISSUING BRANCH>, BEARING THE CLAUSE: “DRAWN UNDER STANDBY LETTER OF CREDIT NO. ISSUED
BY ROYAL BANK OF CANADA, <INSERT ADDRESS OF ISSUING BRANCH> ON BEHALF OF THE ISSUING BANKS,
WHEN ACCOMPANIED BY THE FOLLOWING DOCUMENTS:

1. <INSERT DESCRIPTION>

2. BENEFICIARY’S SIGNED CERTIFICATE SPECIFYING AMOUNT(S) CLAIMED AND STATING THAT THE AMOUNT(S)
DRAWN IS DUE AND PAYABLE BY APPLICANT AND THAT THE APPLICANT IS IN DEFAULT OF ITS OBLIGATIONS WITH
RESPECT TO PAYMENTS RELATED TO >

3. THE ORIGINAL OF THIS LETTER OF CREDIT FOR OUR ENDORSEMENT OF ANY PAYMENT.

PARTIAL DRAWINGS ARE PERMITTED.

EACH ISSUING BANK HEREBY IRREVOCABLY UNDERTAKES, SEVERALLY ACCORDING TO THE PERCENTAGE SET FORTH
NEXT TO ITS SIGNATURE BELOW

 

-109-

(SUCH ISSUING BANK’S “APPLICABLE PERCENTAGE”) AND NOT JOINTLY WITH ANY OTHER ISSUING BANK, THAT
DOCUMENTS PRESENTED IN STRICT COMPLIANCE WITH THE TERMS OF THIS LETTER OF CREDIT WILL BE DULY
HONOURED BY PAYING TO ROYAL BANK OF CANADA AS AGENT (THE “AGENT”) SUCH ISSUING BANK’S SHARE
(ACCORDING TO ITS APPLICABLE PERCENTAGE) OF THE AMOUNT OF SUCH DRAWING. THE AGENT HEREBY
IRREVOCABLY UNDERTAKES THAT ANY AMOUNT SO RECEIVED BY IT WILL BE MADE AVAILABLE TO YOU BY PROMPTLY
CREDITING THE PAYMENT SO RECEIVED, IN LIKE FUNDS, IN ACCORDANCE WITH YOUR INSTRUCTIONS.

THE OBLIGATION OF EACH ISSUING BANK UNDER THIS LETTER OF CREDIT IS SEVERAL AND NOT JOINT AND SHALL
AT ALL TIMES BE AN AMOUNT EQUAL TO SUCH ISSUING BANK’S APPLICABLE PERCENTAGE OF THE AGGREGATE
UNDRAWN AMOUNT OF THIS LETTER OF CREDIT (AND OF EACH DRAWING UNDER THIS LETTER OF CREDIT).

THIS LETTER OF CREDIT HAS BEEN EXECUTED AND DELIVERED BY THE AGENT IN THE NAME AND ON BEHALF OF,
AND AS ATTORNEY-IN-FACT FOR, EACH ISSUING BANK. THE AGENT IS AUTHORIZED TO ACT UNDER THIS LETTER OF
CREDIT AS THE AGENT OF EACH ISSUING BANK TO (I) RECEIVE DEMANDS FOR PAYMENT AND OTHER DOCUMENTS
PRESENTED BY YOU UNDER THIS LETTER OF CREDIT, (II) DETERMINE WHETHER SUCH DEMANDS AND DOCUMENTS ARE
IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT AND (III) NOTIFY EACH ISSUING
BANK THAT A VALID DRAWING HAS BEEN MADE AND THE DATE THAT THE RELATED DISBURSEMENT IS TO BE MADE.
THE AGENT IRREVOCABLY UNDERTAKES THAT IT WILL PROMPTLY NOTIFY EACH ISSUING BANK OF ANY VALID
DRAWING UNDER THIS LETTER OF CREDIT.

BY YOUR ACCEPTANCE HEREOF, YOU AGREE THAT THE AGENT SHALL HAVE NO OBLIGATION OR LIABILITY TO HONOR
ANY DRAWING UNDER THIS LETTER OF CREDIT WITH THE EXCEPTION OF THE AMOUNT COMMITTED TO BY IT IN ITS
CAPACITY AS AN ISSUING BANK, AND THAT NEITHER ANY ISSUING BANK NOR THE AGENT SHALL BE RESPONSIBLE
FOR THE FAILURE OF ANY OTHER ISSUING BANK TO MAKE A PAYMENT TO BE MADE BY SUCH OTHER ISSUING BANK
HEREUNDER. THE OBLIGATION OF EACH ISSUING BANK UNDER THIS LETTER OF CREDIT IS THE INDIVIDUAL
OBLIGATION OF SUCH ISSUING BANK AND IS IN NO WAY CONTINGENT UPON REIMBURSEMENT OF ANY DRAWING
HEREUNDER.

THIS LETTER OF CREDIT MAY NOT BE ASSIGNED OR TRANSFERRED; PROVIDED THAT THIS LETTER OF CREDIT SHALL
ENURE TO THE BENEFIT OF ANY SUCCESSOR BY OPERATION OF LAW OF THE NAMED BENEFICIARY HEREOF,
INCLUDING, WITHOUT LIMITATION, ANY LIQUIDATOR, RECEIVER OR TRUSTEE FOR SUCH NAMED BENEFICIARY.

AN ISSUING BANK MAY, SUBJECT TO THE REPLACEMENT THEREOF WITH A NEW

 

-110-

BANK HAVING THE MINIMUM CREDIT RATING SET FORTH BELOW OR WITH YOUR CONSENT (AS APPLICABLE), CEASE
TO BE A PARTY TO, AND A NEW BANK MAY BECOME A PARTY TO, THIS LETTER OF CREDIT, AND THE APPLICABLE
PERCENTAGE OF AN ISSUING BANK MAY CHANGE; PROVIDED THAT NO SUCH EVENT WILL REDUCE THE THEN
AVAILABLE AMOUNT UNDER THIS LETTER OF CREDIT. UPON THE OCCURRENCE OF ANY SUCH EVENT, THE
ADMINISTRATIVE AGENT WILL PROVIDE PROMPT NOTICE TO YOU OF SUCH EVENT, INCLUDING ANY CHANGE IN THE
IDENTITIES OF THE ISSUING BANKS SEVERALLY BUT NOT JOINTLY LIABLE IN RESPECT OF THE AGGREGATE
UNDRAWN AMOUNT OF THIS LETTER OF CREDIT (BASED UPON THEIR RESPECTIVE APPLICABLE PERCENTAGES
THEREOF) AND ANY CHANGE IN SUCH APPLICABLE PERCENTAGES. IF A NEW BANK BECOMES A PARTY TO THIS
LETTER OF CREDIT AND THE CREDIT RATING OF SUCH NEW BANK (OR ITS PARENT) IS LOWER THAN BBB+ AS RATED
BY STANDARD AND POOR’S OR Baa1 AS RATED BY MOODY’S INVESTOR SERVICE, INC. OR THE EQUIVALENT BY ANY
OTHER RECOGNIZED RATING AGENCY, THE CONSENT OF THE BENEFICIARY TO SUCH CHANGE SHALL BE REQUIRED.

THIS LETTER OF CREDIT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE PROVINCE
OF > (WITHOUT REFERENCE TO CHOICE OF LAW DOCTRINE) AND IS SUBJECT TO THE UNIFORM CUSTOMS AND
PRACTICE FOR LETTER OF CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO.
500 (THE “UCP”). IN THE EVENT OF ANY CONFLICT BETWEEN THE LAW OF THE PROVINCE OF > AND THE UCP,
THE UCP SHALL CONTROL. EACH OF THE ISSUING BANKS HEREBY IRREVOCABLY ATTORNS TO THE NON-EXCLUSIVE
JURISDICTION OF THE > A COURTS AND WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK JURISDICTION OVER
IT.

VERY TRULY YOURS,

ROYAL BANK OF CANADA,
AS AGENT

BY:

NAME:

TITLE:

	 	 	 	 	 
	 

	 	 APPLICABLE 
	 	ISSUING 
	 

	 	 PERCENTAGE 
	 	 BANK 

 

-111-

      [NAME OF BANK]

BY: ROYAL BANK OF CANADA, ATTORNEY-IN-FACT

BY:

TITLE:

APPLICABLE

PERCENTAGE

ISSUING BANK

%

[NAME OF BANK]

BY: ROYAL BANK OF CANADA, ATTORNEY-IN-FACT

BY:

TITLE:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00099-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00099-of-00352.parquet"}]]