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TimberWest Forest Corp. Capital/Financing Update 2003

Sep 23, 2003

44488_rns_2003-09-23_26ef2659-a923-473f-9437-622a99ae8d2a.pdf

Capital/Financing Update

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UNDERWRITING AGREEMENT

September 15, 2003

TimberWest Forest Corp. Suite 2300, 1055 West Georgia Street P.O. Box 11101 Vancouver, BC V6E 3P3

Attention: Beverlee F. Park, Vice President, Chief Financial Officer and Secretary

Dear Sirs/Mesdames:

Merrill Lynch Canada Inc. (“ Merrill Lynch ”), BMO Nesbitt Burns Inc., Scotia Capital Inc., HSBC Securities (Canada) Inc. and National Bank Financial Inc. (collectively, the “ Underwriters ” and individually an “ Underwriter ”) understand from TimberWest Forest Corp. (the “ Company ”) that the Company proposes to issue and sell to the Underwriters $65 million principal amount of 7.0% senior unsecured debentures of the Company due October 1, 2007 (the “ Debentures ”).

On the basis of the representations, warranties, covenants and agreements contained herein, but subject to the terms and conditions herein set forth, the Underwriters offer to purchase from the Company, severally and not jointly and in the respective percentages set forth in paragraph 14 and, by its acceptance hereof, the Company agrees to issue and sell to the Underwriters, $65 million principal amount of the Debentures at a purchase price equal to 101.28% of the principal amount thereof, for an aggregate purchase price of $65,832,000 plus accrued interest from April 1, 2003 to the Closing Date.

In addition to the terms defined above, in this agreement:

(a) “ Business Day ” means a day which is not a Saturday, a Sunday or a statutory or civic holiday in the City of Vancouver;

(b) “ Canadian Securities Laws ” means all applicable securities laws in each of the Qualifying Provinces and the respective rules and regulations made thereunder together with applicable published policy statements, notices, blanket orders and rulings of the securities regulatory authorities in such provinces, all as the same are in effect at the date hereof and as amended, supplemented or replaced from time to time during the period of Distribution;

(c) “ Closing ” means the completion of the issue and sale by the Company of the Debentures and the purchase by the Underwriters of the Debentures pursuant to this agreement;

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(d) “ Closing Date ” means the third Business Day following the day on which receipts have been obtained in all Qualifying Provinces from the relevant securities regulatory authorities for the Final Prospectus (which Business Day is expected to be September 26, 2003) or such other date as the Company and the Underwriters may agree upon in writing, provided that in no event shall such Closing Date be later than October 10, 2003;

(e) “ Closing Time ” means 7:00 a.m. (Vancouver time) on the Closing Date or such other time on the Closing Date as the Company and the Underwriters may agree;

(f) “ Distribution ” means “distribution” of the Debentures or “distribution to the public” of the Debentures as those terms are defined in Canadian Securities Laws;

(g)

“ Exchange ” means The Toronto Stock Exchange;

(h) “ Final Prospectus ” means the final short form prospectus of the Company relating to the offering of the Debentures in the Qualifying Provinces;

(i) “ Indenture ” means the trust indenture dated October 1, 2002 among the Company, the Subsidiaries and the Trustee, as amended by a first supplemental indenture to be dated the Closing Date pursuant to which the Debentures will be created and issued;

(j) “ misrepresentation ”, “ material fact ”, “ material change ”, “ person ” and “ company ” means, with respect to circumstances to which the Canadian Securities Laws of a particular Qualifying Province are applicable, a misrepresentation, material fact, material change, person and company as defined under the Canadian Securities Laws of that Qualifying Province and, if not so defined or in circumstances in which no particular Canadian Securities Laws are applicable, a misrepresentation, material fact, material change, person and company as defined under the Securities Act (Ontario);

(k) “ Preliminary Prospectus ” means the preliminary short form prospectus of the Company dated September 15, 2003 relating to the offering of the Debentures in the Qualifying Provinces;

(l) “ Prospectus ” means collectively the Preliminary Prospectus and the Final Prospectus;

(m) “ Qualifying Provinces ” means all the provinces of Canada;

(n) “ Selling Firms ” means the Underwriters together with such other investment dealers and brokers through which the Underwriters may sell Debentures to the public under the terms of this agreement;

(o) “ Subsidiaries ” means TFL Forest Ltd., Pacific Forest Products Limited and PFP Forest Ltd. and “ Subsidiary ” means any of the foregoing;

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(p) “ Supplementary Material ” has the meaning ascribed thereto in paragraph 3;

(q) “ this agreement ” means the agreement resulting from the acceptance by the Company of the offer made by the Underwriters by this letter;

(r) “ Trustee ” means Computershare Trust Company of Canada; and

(s) “ United States ” means the United States of America.

TERMS AND CONDITIONS

1. Qualification of the Debentures

The Company shall, as soon as possible and in any event by the times and dates specified in this paragraph 1, fulfil and comply with, to the satisfaction of the Underwriters, all legal requirements to be fulfilled or complied with by the Company to qualify the Distribution of the Debentures in the Qualifying Provinces by or through the Underwriters and other investment dealers or brokers registered as such in the Qualifying Provinces who have complied with the relevant provisions of applicable Canadian Securities Laws. In furtherance of the foregoing:

  • (a) the Company shall on the date hereof file the Preliminary Prospectus (in the English and French languages) in form and substance satisfactory to the Underwriters together with all other documents and certificates required to be filed under Canadian Securities Laws in each of the Qualifying Provinces and obtain a receipt therefor from each of the Qualifying Provinces (evidenced by the issuance by the British Columbia Securities Commission in its capacity as principal regulator of a preliminary MRRS decision document) by 5:00 p.m. (Vancouver time) on the date hereof or such later date to which the Company and the Underwriters may agree. The Company shall promptly inform Merrill Lynch and counsel for the Underwriters that the aforesaid MRRS decision document has been obtained and promptly provide copies thereof to them;

  • (b) as soon as possible after comments have been satisfied with respect to the Preliminary Prospectus and in any event by not later than 5:00 p.m. (Vancouver time) on September 23, 2003 or such later date to which the Company and the Underwriters may agree, the Company shall file the Final Prospectus (in the English and French languages) in form and substance satisfactory to the Underwriters together with all other documents and certificates required to be filed under Canadian Securities Laws in each of the Qualifying Provinces and obtain a receipt therefor from each of the Qualifying Provinces (evidenced by the issuance by the British Columbia Securities Commission in its capacity as principal

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regulatory of a final MRRS decision document). The Company shall promptly inform Merrill Lynch and counsel for the Underwriters that the aforesaid MRRS decision document has been obtained and promptly provide copies thereof to them;

  • (c) prior to the filing of the Preliminary Prospectus, the Final Prospectus and any Supplementary Material, the Company shall allow the Underwriters access to the Company’s management and to participate fully in the preparation of the Preliminary Prospectus, the Final Prospectus and any Supplementary Material and shall allow the Underwriters to conduct all “due diligence” investigations which the Underwriters may reasonably require to conduct in order to fulfil the Underwriters’ obligations as underwriters and in order to enable the Underwriters responsibly to execute any certificate required to be executed by the Underwriters in such documents.

2. Documents to be Delivered

The Company shall deliver or cause to be delivered to the Underwriters and the Underwriters’ counsel the documents set out below at the times indicated:

  • (a) as soon as practicable after the execution and delivery of this agreement:

  • (i) a copy of the Preliminary Prospectus in the English language signed as required by the laws of each of the Qualifying Provinces;

  • (ii) a copy of the Preliminary Prospectus in the French language signed as required by the laws of the Province of Quebec;

  • (b) forthwith when available:

  • (i) a copy of the Final Prospectus in the English language signed as required by the laws of each of the Qualifying Provinces; and

  • (ii) a copy of the Final Prospectus in the French language signed as required by the laws of the Province of Quebec;

  • (c) at the time of delivery to the Underwriters of the Final Prospectus, a comfort letter of its auditors, KPMG LLP, addressed to the Underwriters and to the board of directors of the Company, in form and substance satisfactory to the Underwriters and their counsel, verifying the financial and accounting information relating to the Company and other numerical data in the Final Prospectus, which letter shall be based on a review by the auditors having a cut-off

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date of not more than two Business Days prior to the date of the letter and shall be in addition to the auditors’ reports contained in the Final Prospectus and the auditors’ comfort letter addressed to the securities regulatory authorities in the Qualifying Provinces; and

  • (d) at the time of delivery to the Underwriters of the Preliminary Prospectus and the Final Prospectus, in each case in the French language:

  • (i) an opinion of its auditors, KPMG LLP, addressed to the Underwriters, in form and substance satisfactory to the Underwriters and their counsel, to the effect that the French language version of the financial statements of the Company, consisting of the audited consolidated financial statements for the years ended December 31, 2002 and 2001 together with the notes thereto and the auditors’ report thereon and the unaudited comparative consolidated financial statements for the three months and the six months ended June 30, 2003 and June 30, 2002 and the notes thereto and all other financial information (all of the foregoing collectively known as the “Financial Information”) contained in the Preliminary Prospectus and the Final Prospectus are, in all material respects, complete and accurate translations of the English language version thereof and are not susceptible to any materially different interpretation with respect to any material matter contained therein; and

  • (ii) an opinion of its counsel, McCarthy Tétrault LLP, addressed to the Underwriters in form and substance satisfactory to the Underwriters and their counsel, to the effect that, except for the Financial Information, the French language version of each of the Preliminary Prospectus and the Final Prospectus is, in all material respects, a complete and accurate translation of the English language versions thereof, and such French and English language versions are not susceptible to any materially different interpretation with respect to any matter contained therein.

The Company shall also deliver to the Underwriters promptly after the filing of the Final Prospectus in the Qualifying Provinces, but in any event prior to the Closing Time, a copy of any other document required to be filed by the Company under the laws of each of the Qualifying Provinces in compliance with Canadian Securities Laws applicable therein.

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3. Supplementary Material

The Company shall promptly deliver to the Underwriters and Underwriters’ counsel duly signed copies of all amendments or supplements or any other supplemental documents to the Final Prospectus required to be prepared and/or filed by the Company under Canadian Securities Laws (collectively, the “Supplementary Material”) or any other document required to be filed under paragraph 6. The Supplementary Material shall be in form and substance satisfactory to the Underwriters. Concurrently with the delivery of any Supplementary Material, the Company shall deliver to the Underwriters and Underwriters’ counsel with respect to such Supplementary Material, letters and opinions similar to those referred to in clauses 2(c) and 2(d)(i) (if any financial, accounting or numerical data is contained in such Supplementary Material) and 2(d)(ii).

4. Delivery Constitutes Representation and Consent

Delivery of the Preliminary Prospectus, the Final Prospectus and any Supplementary Material shall constitute a representation and warranty by the Company to the Underwriters that, at the time of delivery thereof, all information and statements (except information and statements furnished by or relating solely to the Underwriters) contained in the Preliminary Prospectus, the Final Prospectus and any Supplementary Material are true and correct in all material respects and contain no misrepresentation and constitute full, true and plain disclosure of all material facts relating to the Company, the Subsidiaries and the Debentures and that no material fact or information has been omitted therefrom (except facts or information furnished by or relating solely to the Underwriters) which is required to be stated therein or is necessary to make any statement or information contained therein not false or misleading in light of the circumstances in which it was made; and that the Preliminary Prospectus, the Final Prospectus and any Supplementary Material comply in all material respects with Canadian Securities Laws. Such delivery shall also constitute the Company’s consent to the use of the Preliminary Prospectus, the Final Prospectus and any Supplementary Material by the Underwriters and the Selling Firms for the Distribution of the Debentures in the Qualifying Provinces in compliance with the provisions of this agreement and Canadian Securities Laws.

5. Commercial Copies

The Company shall cause commercial copies of the Preliminary Prospectus and the Final Prospectus in the English and French languages to be delivered to the Underwriters, without charge, in such numbers and in such cities as the Underwriters may reasonably request by oral instructions to the printer given from time to time. Such delivery shall be effected as soon as possible and, in any event on or before 11:00 a.m. (local time) one Business Day after any such request. The Company shall similarly cause to be delivered commercial copies of any Supplementary Material required to be delivered, on request or otherwise, to the Underwriters or to any purchaser of Debentures.

6.

Material Changes

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Commencing on the date hereof and until the completion of the Distribution, the Company shall, promptly after becoming aware thereof, notify the Underwriters in writing of:

  • (a) any change (actual, anticipated, contemplated or threatened, financial or otherwise) in the business, affairs, operations, assets, liabilities (contingent or otherwise), capital or control of the Company or any of the Subsidiaries that would be material to the Company and the Subsidiaries taken as a whole; and

  • (b) any change in any material fact or any misstatement of any material fact contained in the Preliminary Prospectus, the Final Prospectus or any Supplementary Material, or the existence of any new material fact,

which change, misstatement or new material fact is, or may be, of such a nature as to render the Preliminary Prospectus, the Final Prospectus or any Supplementary Material misleading or untrue or would result in a misrepresentation therein or would result in the Preliminary Prospectus, the Final Prospectus or any Supplementary Material not complying with any Canadian Securities Laws or would reasonably be expected to have a significant effect on the market price or value of the Debentures.

The Company shall promptly, and in any event within any applicable time limitation, comply, to the satisfaction of counsel to the Underwriters, with all applicable filing and other requirements under Canadian Securities Laws and the rules and by-laws of the Exchange as a result of such change, misstatement or new material fact; provided, however, that the Company shall not file any Supplementary Material or other document without first obtaining the approval of the Underwriters (which approval shall not be unreasonably withheld and which will be considered as expeditiously as possible) after consulting with the Underwriters with respect to the form and content thereof. The Company shall cooperate in all respects with the Underwriters to allow and assist the Underwriters to participate fully in the preparation of any Supplementary Material and shall allow the Underwriters to conduct all “due diligence” investigations which in the opinion of the Underwriters are required in order to enable the Underwriters responsibly to execute any certificate required to be executed by the Underwriters in any Supplementary Material. The Company shall in good faith discuss with the Underwriters any fact or change in circumstances (actual, anticipated, contemplated or threatened, financial or otherwise) which is of such a nature that there may be a reasonable question as to whether notice in writing need be given to the Underwriters pursuant to this paragraph 6.

7. Representations, Warranties and Covenants of the Company

The Company represents and warrants to the Underwriters that (it being understood that any certificate signed by any officer of the Company and delivered to the Underwriters shall be deemed a representation and warranty by the Company to the Underwriters as to matters covered thereby):

  • (a) each of the Company and the Subsidiaries has been duly incorporated or amalgamated, as the case may be, and organized and is validly

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subsisting under the laws of its respective jurisdiction of incorporation or amalgamation and has all requisite corporate power and authority to carry on its business as now conducted and to own its property and assets and, in the case of the Company, to carry out its obligations hereunder;

  • (b) the Company’s direct or indirect ownership interest in each Subsidiary is held free and clear of all mortgages, liens, charges, pledges, security interests, encumbrances, claims or demands whatsoever; no person, firm, or company has any agreement or option or right or privilege (whether pre-emptive or contractual) capable of becoming an agreement for the purchase of all or any part of the securities representing such ownership interest, and all such securities have been validly issued and are outstanding as fully paid and non-assessable; each Subsidiary specifically named in the definition of that term is directly or indirectly wholly-owned by the Company;

  • (c) neither the Company nor any of the Subsidiaries is in violation of any law, rule or regulation applicable to it or is not in compliance with any term or condition of, or has failed to obtain or retain any licence, permit, franchise, certificate, registration or authorization necessary to the conduct of its business and ownership of its property, which violation, non-compliance or failure to obtain or retain would individually or in the aggregate have a material adverse effect on the business of the Company and the Subsidiaries taken as a whole as now conducted, and none of such licences, permits, franchises, certificates, registrations or authorizations contains any term, provision, condition or limitation which has or is likely to have any material adverse effect on the business of the Company and the Subsidiaries considered as a whole as now conducted, and neither the Company nor any of its Subsidiaries has received any notice of proceedings relating to the revocation or modification of any such licence, permit, franchise, certificate, registration or authorization which, if the subject of an unfavourable decision, ruling or finding, would individually or in the aggregate have a material adverse effect on the business of the Company and its Subsidiaries taken as a whole;

  • (d) the authorized and issued capital of the Company is as set out in the Prospectus and all the securities of the Company described in the Prospectus as having been issued are validly issued and outstanding and are fully paid and non-assessable;

  • (e) the Company has full power and authority to authorize, create and issue the Debentures in accordance with their terms;

  • (f) the Trustee at its principal office in the City of Vancouver has been duly appointed as trustee under the Indenture;

  • (g) at the Closing Time, the issuance of the Debentures by the Company to the Underwriters in accordance with the terms hereof will have been duly authorized and, when issued and delivered pursuant to this agreement

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and the Indenture, the Debentures will have been duly executed, certified, issued and delivered and will constitute legal, valid and binding obligations of the Company enforceable in accordance with their terms except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and except as limited by the application of equitable principles when equitable remedies are sought;

  • (h) the execution and delivery by the Company of this agreement and the Indenture and by the Subsidiaries of the Indenture, and the performance of and compliance with the terms of this agreement and the Indenture by the Company and the Indenture by the Subsidiaries, do not and will not result in any breach of, or be in conflict with, or constitute a default under or create a state of facts which after notice or lapse of time or both, constitutes a default under, any term or provision of the constating documents or resolutions of the Company or the Subsidiaries or any mortgage, note, indenture, contract, agreement (written or oral), instrument, lease, licence or other document, to which any of the Company or any Subsidiary is a party or to which any of them is subject or by which any of them is bound or any judgment, decree, order, statute, rule or regulation applicable to any of them, which breach, conflict or default would have a material adverse effect on the condition (financial or otherwise), earnings, business affairs or business prospects of the Company and the Subsidiaries taken as a whole;

  • (i) neither the Company nor any Subsidiary is in violation of its respective governing statute or constating documents or in default in the performance of any indenture, mortgage, contract, deed of trust, loan agreement or other agreement or instrument to which any of them is a party or by which any of them is bound or to which the property or assets of any of them is subject, which default or defaults individually or in the aggregate would have a material adverse effect on the financial position, unitholders’ equity or results of operations of the Company and the Subsidiaries taken as a whole;

  • (j) the Company has the necessary power and authority to execute and deliver this agreement and the Indenture and to perform its obligations hereunder and thereunder and this agreement has been, and on or before the Closing Time the Indenture will be, duly authorized, executed and delivered by the Company and this agreement is, and on or before the Closing Time, the Indenture will be, a legal, valid and binding obligation of the Company, enforceable in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and except as limited by the application of equitable principles when equitable remedies are sought and, with respect to this agreement, except as enforcement of indemnification and contribution provisions hereof may be limited by applicable law;

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  • (k) each of the Subsidiaries has the necessary power and authority to execute and deliver the Indenture and to perform its obligations thereunder and, on or before the Closing Time, the Indenture will be duly authorized, executed and delivered by each of the Subsidiaries and will be a legal, valid and binding obligation of each Subsidiary, enforceable in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and except as limited by the application of equitable principles when equitable remedies are sought;

  • (l) the Company has the necessary power and authority to execute and deliver the Prospectus and all necessary action has been taken by the Company to authorize the execution and delivery by it of the Prospectus and all ancillary documentation and the filing thereof in the Qualifying Provinces;

  • (m) no securities commission, stock exchange or comparable authority has issued any order preventing or suspending the use of the Prospectus or the Distribution of the Debentures and the Company is not aware of any investigation, order, inquiry or proceeding which has been commenced or which is pending, contemplated or threatened by any such authority;

  • (n) no person, firm, or company (except for the Underwriters hereunder) has any agreement, option, right or privilege (whether preemptive or contractual) capable of becoming an agreement for the purchase, subscription or issuance of any of the unissued securities (including convertible securities) of the Company or any of the Subsidiaries, other than outstanding options granted pursuant to the Company’s stapled unit option and incentive plans or other instruments in place at the date hereof;

  • (o) the consolidated financial statements consisting of the audited consolidated financial statements for the years ended December 31, 2002 and 2001 and the notes thereto and the unaudited interim comparative consolidated financial statements for the three months and the six months ended June 30, 2003 and June 30, 2002 and the notes thereto, included in the Prospectus, present fairly the consolidated financial position of the Company as of the dates and for the periods indicated. Such financial statements have been prepared in conformity with Canadian generally accepted accounting principles on a basis consistent throughout the periods indicated;

  • (p) except as disclosed in the Prospectus, there is no action, suit or proceeding before or by any federal, provincial, state, municipal government or other governmental department, commission, board, bureau, agency or other governmental instrumentality (including any stock exchange, securities commission or regulatory authority) or court, domestic or foreign, now pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary that (i) is required to be disclosed in the Prospectus; (ii) could result in any material

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adverse change in the condition (financial or otherwise), earnings, business affairs or business prospects of the Company and the Subsidiaries taken as a whole; (iii) could materially and adversely affect the properties or assets of the Company and the Subsidiaries taken as a whole; or (iv) could materially and adversely affect the consummation of the transactions contemplated in this agreement;

  • (q) except as shall have been made or obtained at or before the Closing Time under Canadian Securities Laws, no consent, approval, authorization, order, filing, registration or qualification of or with any court, governmental agency or body or regulatory authority is required for the execution, delivery and performance by the Company of this agreement or the Indenture or by the Subsidiaries of the Indenture, or the issuance and sale of the Debentures as contemplated herein or the consummation of the transactions contemplated herein or therein;

  • (r) the aggregate of all pending legal or governmental proceedings to which the Company or any Subsidiary is a party or which affect any of their properties or assets that are not described in the Prospectus, including ordinary routine litigation incidental to its business, would not have a material adverse effect on the condition (financial or otherwise), earnings, business affairs or business prospects of the Company and the Subsidiaries taken as a whole;

  • (s) all income tax returns of the Company and the Subsidiaries required by law to be filed in any jurisdiction have been filed and all taxes shown on such returns or otherwise assessed which are due and payable have been paid, except tax assessments against which appeals have been or will be promptly taken and as to which adequate reserves have been provided. All other tax returns of the Company and the Subsidiaries required to be filed pursuant to any applicable law have been filed, and all taxes shown on such returns or otherwise assessed which are due and payable have been paid, except for such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided;

  • (t) except as may be required by Canadian Securities Laws or as may be otherwise required by law and except for marketing brochures or similar documents used by the Company in the ordinary course of its business, the Company and its officers, directors and employees will not distribute or otherwise make available to the public prior to the end of the period of Distribution of the Debentures any document describing the affairs of the Company, other than the Prospectus or any Supplementary Material, without the prior written consent of the Underwriters;

  • (u) except as disclosed in the Prospectus, the Company and the Subsidiaries do not have any contingent liabilities which are material to the business operations, properties or assets of the Company and the Subsidiaries taken as a whole;

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  • (v) except as disclosed in the Prospectus, the Company and the Subsidiaries (i) are in compliance with any and all applicable federal, provincial and local laws and regulations relating to the protection of human health and safety or the environment or hazardous or toxic substances or wastes, pollutants or contaminants (collectively “ Environmental Laws ”), (ii) have received all permits, licences or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, licence or approval, except where such non-compliance with Environmental Laws, failure to receive required permits, licences or other approvals or failure to comply with the terms and conditions of such permits, licences or approvals would not, individually or in the aggregate, have a material adverse effect on the Company and the Subsidiaries, taken as a whole;

  • (w) the minute books and corporate records of the Company and its Subsidiaries made available to Bull, Housser & Tupper, counsel to the Underwriters, in connection with due diligence investigations of the Company for the periods from their respective dates of incorporation or amalgamation, as the case may be, to the date of examination thereof are the original minute books and records of the Company and the Subsidiaries and contain copies of all proceedings (or certified copies thereof) of the shareholders, the board of directors and all committees of the board of directors of the Company and the Subsidiaries and there have been no other meetings, resolutions or proceedings of the shareholders, board of directors or any committee of the board of directors of the Company or the Subsidiaries to the date of review of such corporate records and minute books not reflected in such minute books and other corporate records other than those which have been disclosed to the Underwriters and which are not material in the context of the Company;

  • (x) the Prospectus and any Supplementary Material will contain the disclosure required by Canadian Securities Laws;

  • (y) other than the Underwriters and the Selling Firms, there is no person acting or purporting to act at the request of the Company who is entitled to any brokerage or agency fee in connection with the sale of the Debentures;

  • (z) the Company’s auditors, KPMG LLP, are independent public accountants as required under Canadian Securities Laws and there has not been any disagreement (within the meaning of National Policy Statement No. 31) with the present or any former auditors of the Company;

  • (aa) the Company shall use the net proceeds from the sale of the Debentures in the manner described in the Prospectus; and

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  • (bb) other than the Subsidiaries, the Company has no subsidiaries which conduct any business, own any assets or have any liabilities or contingent liabilities which are material to the Company.

8. Distribution of Debentures

(1) The Underwriters will not directly or indirectly solicit offers to purchase or sell the Debentures so as to require registration thereof or filing of a prospectus or other similar document with respect thereto under the laws of any jurisdiction (other than the Qualifying Provinces) and will require each Selling Firm to agree with the Underwriters not to so solicit or sell. For purposes of this paragraph 8, the Underwriters shall be entitled to assume that the Debentures are qualified for Distribution in any Qualifying Province where a receipt (evidenced by the issuance of a final MRRS decision document by the British Columbia Securities Commission in its capacity as principal regulator) for the Final Prospectus shall have been obtained from the applicable securities regulatory authority following the filing of the Final Prospectus and that the Debentures may not be offered for sale in the United States.

(2) The Debentures will be offered for sale in the Qualifying Provinces subject to the terms and conditions of this agreement, at an offering price per Unit specified on the cover page of the Prospectus. Each agreement of the Underwriters establishing a banking, selling or other group in respect of the Distribution shall contain a similar covenant by each Selling Firm.

(3) The Underwriters shall:

  • (a) notify the Company when the Distribution of the Debentures shall have ceased and shall use their respective best efforts to complete, and to cause each Selling Firm to complete, the Distribution of the Debentures under the Final Prospectus as promptly as possible;

  • (b) promptly notify the Company of sales in each Qualifying Province and provide a breakdown of the total proceeds realized in each of the Qualifying Provinces in which a filing fee for a prospectus is based on the proceeds realized in the Qualifying Province from the sale of securities offered therein;

  • (c) promptly notify each provincial securities commission, where required, of the number of Debentures offered under the Final Prospectus sold in that Qualifying Jurisdiction; and

  • (d) execute and deliver to the Company the Underwriters’ certificate required to be executed by them under Canadian Securities Laws in connection with the Prospectus and any Supplementary Materials.

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9. Closing

The Closing shall occur at the Closing Time at the offices of the Company’s counsel or such other place as the Company and the Underwriters may agree. At the Closing Time:

  • (i) a global debenture certificate or certificates in definitive form representing the Debentures in the principal amount of $65 million, duly registered in the name of CDS & Co. together with a direction to CDS & Co. to credit the respective accounts of the Underwriters at CDS & Co. in the respective principal amounts set forth in paragraph 14 of this agreement or such other accounts or in such other amounts as the Underwriters may respectively direct CDS & Co. in writing, shall be delivered by or on behalf of the Company to Merrill Lynch on behalf of the Underwriters, against payment by Merrill Lynch on behalf of the Underwriters of the aggregate purchase price therefor by certified cheque or bank draft, payable to the order of the Company in Canadian funds payable at par in Vancouver; and

  • (ii) the Company shall contemporaneously deliver to Merrill Lynch, on behalf of the Underwriters, a commission equal to $11.25 per $1,000 principal amount of the first $50 million aggregate principal amount of the Debentures sold and $7.50 per $1,000 aggregate principal amount of the next $15 million of the Debentures sold, being an aggregate fee of $675,000 for their services in connection with the issuance and sale of such Debentures, by certified cheque or bank draft of the Company, payable to the order of Merrill Lynch in Canadian funds payable at par in Vancouver.

Each party shall deliver to the other a receipt for any payment or certificate so delivered to it.

The Company acknowledges and agrees that the Debentures will be offered to the public at prices to be negotiated between each purchaser and the Underwriters and that, accordingly, the Underwriters’ overall compensation will increase or decrease by the amount by which the aggregate price paid for the Debentures by purchasers exceeds, or is less than, the aggregate price paid by the Underwriters to the Company for the Debentures.

10. Closing Conditions

(1) The Underwriters' obligation to purchase the Debentures at the Closing Time shall be subject to the following conditions, which conditions are for the sole benefit of the Underwriters and may be waived in writing in whole or in part by the Underwriters in their discretion:

  • (a) the Underwriters shall have received at the Closing Time favourable legal opinions, addressed to the Underwriters and to their counsel, in form and substance satisfactory to the Underwriters and their counsel, dated the Closing Date from the Company’s counsel, McCarthy Tétrault LLP, who in

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turn may rely upon the opinions of local counsel acceptable to the Underwriters’ counsel, as to the laws other than those of Canada and the Provinces of British Columbia, Alberta, Ontario and Quebec and may also rely, as to matters of fact, on certificates of public officials and senior officers of the Company or its Subsidiaries, with respect to the following:

  • (i) the Company has been duly incorporated and is validly subsisting under the laws of the Province of British Columbia and is duly qualified to carry on its business in each jurisdiction in which it currently carries on business and has all requisite corporate power and authority to carry on its business and to own, lease and operate its property and assets and to execute, deliver and perform its obligations hereunder;

  • (ii) the authorized and issued capital of the Company;

  • (iii) each Subsidiary specifically named in the definition of that term has been incorporated or amalgamated, as the case may be, and is validly subsisting under the laws of its jurisdiction of incorporation, and has all requisite corporate power and authority to carry on its business and to own, lease and operate its property and assets and all of the issued shares in the capital of each such company have been duly and validly authorized and issued, are fully paid and non-assessable and are registered on a basis consistent with what is described in the Final Prospectus;

  • (iv) all necessary corporate action has been taken by the Company to authorize the execution and delivery of this agreement and the Indenture and the performance of the Company’s obligations hereunder and thereunder and this agreement and the Indenture have been duly authorized, executed and delivered by the Company and constitute legal, valid and binding agreements of the Company, enforceable against it in accordance with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally or by the application of equitable principles when equitable remedies are sought; provided, however, that no opinion need be expressed on the enforceability of the indemnity and contribution provisions herein or therein;

  • (v) all necessary corporate action has been taken by the Subsidiaries to authorize the execution and delivery of the Indenture and the performance of the Subsidiaries’ obligations thereunder and the Indenture has been duly authorized, executed and delivered by the Subsidiaries and constitutes a legal, valid and binding agreement of each Subsidiary, enforceable against it in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or

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similar laws affecting the rights of creditors generally or by the application of equitable principles when equitable remedies are sought; provided, however, that no opinion need be expressed on the enforceability of the indemnity and contribution provisions therein;

  • (vi) the compliance by the Company with all of the provisions of this agreement and the Indenture, the consummation of the transactions herein and therein contemplated and the issuance, sale and delivery of the Debentures will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under any of the terms, conditions or provisions of the constating documents or the resolutions of the directors or unitholders of the Company or, to the knowledge of such counsel, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company is a party or by which it is bound or to which any of its property or assets is subject, nor will such action result in any violation of the provisions of any statute or any order, rule or regulation known to such counsel of any Canadian court or governmental agency or body having jurisdiction over the Company or any of its property;

  • (vii) the compliance by the Subsidiaries with all of the provisions of the Indenture will not conflict with or result in a breach of violation of any of the terms or provisions of, or constitute a default under, any of the terms, conditions or provisions of the constating documents or the resolutions of the directors or shareholders of any of them, or, to the knowledge of such counsel, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which any of the Subsidiaries is a party or by which any of them is bound or to which any of the property or assets of any of them is subject, nor will such action result in any violation of the provisions of any statute or any order, rule or regulation known to such counsel of any Canadian court or governmental agency or body having jurisdiction over any of them or any of their respective property;

  • (viii) the provisions of the Company Act have been complied with by the Company in respect of the issue, certification and delivery of the Debentures and no registration, filing or recording of the Indenture under the laws of the Province of British Columbia or the laws of Canada is necessary in order to preserve or protect the validity or enforceability of the Indenture or the Debentures issued thereunder;

  • (ix) the global certificate for the Debentures conforms with the provisions of the Indenture, has been duly authorized, executed and delivered by the Company and has been registered in the name of CDS & Co.;

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  • (x) each covenant, condition or other requirement of the Company under the Indenture relating to the authorization, issue, execution and delivery of the Debentures has been satisfied or complied with, and, assuming the due certification of the global certificate for the Debentures by the Trustee, the Debentures are legal, valid and binding obligations of the Company enforceable against the Company in accordance with their terms, and the holders of the Debentures are entitled to the benefits of the Indenture;

  • (xi) the provisions of the Indenture and the attributes and characteristics of the Debentures conform in all material respects with the statements relating thereto contained in the Prospectus;

  • (xii) the Debentures are qualified investments for trusts governed by registered retirement savings plans, registered retirement income funds, registered education savings plans and deferred profit sharing plans under the Income Tax Act (Canada);

  • (xiii) Computershare Trust Company of Canada at its principal offices in the cities of Toronto and Vancouver has been duly appointed as the Trustee under the Indenture;

  • (xiv) all documents have been filed and all requisite proceedings have been taken and all approvals, permits, consents and authorizations of appropriate regulatory authorities under Canadian Securities Laws have been obtained to qualify the Debentures for sale to the public in each of the Qualifying Provinces and to permit the offering of the Debentures to the public in each of the Qualifying Provinces through investment dealers or brokers duly registered under the applicable laws of each such province who have complied with the relevant provisions of applicable Canadian Securities Laws of such province;

  • (xv) all necessary corporate action has been taken by the Company to authorize the execution and delivery of the Prospectus and the filing thereof under Canadian Securities Laws in each of the Qualifying Provinces;

  • (xvi) subject to general investment provisions, the Debentures will, upon their issue, be eligible investments or will not be precluded as investments under the statutes listed under the heading “Eligibility for Investment” in the Prospectus;

  • (xvii) the statements in the Prospectus under the heading “Canadian Federal Income Tax Considerations” have been reviewed by such counsel and are correct; and

  • (xviii) such other matters as the Underwriters may reasonably request.

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To the extent the foregoing opinions are expressed as being limited to counsel’s knowledge, such opinions may be based upon actual knowledge (and without independent inquiry) of the lawyers who sign the opinion letters, the lawyers who have been actively involved in the preparation of the Prospectus and/or closing documents herein and any lawyer who, as to information relevant to a particular opinion issue or confirmation regarding a particular factual matter, is primarily responsible for providing the response concerning that particular opinion issue or confirmation.

  • (b) the Underwriters shall have received at the Closing Time a favourable legal opinion to be delivered by the Company’s counsel, McCarthy Tétrault LLP, addressed to the Underwriters, in form and substance satisfactory to the Underwriters and their counsel, regarding compliance with all the laws of the Province of Québec relating to the use of the French language in connection with the documents (including the Final Prospectus, any Supplementary Material, forms of order and confirmation and certificates representing the Debentures) to be delivered to purchasers of the Debentures in the Province of Québec;

  • (c) the Underwriters shall have received at the Closing Time a favourable legal opinion dated the Closing Date from the Underwriters' counsel, Bull, Housser & Tupper, with respect to such matters relating to the sale of the Debentures as the Underwriters may require; provided that the Underwriters' counsel providing such opinion shall be entitled to rely on the opinions of local counsel as to matters governed by the laws of jurisdictions other than the federal laws of Canada and the Province of British Columbia and provided further that Underwriters' counsel shall be entitled to rely upon the opinion of McCarthy Tétrault LLP, counsel to the Company, with respect to all matters other than items (xii) and (xiv) of clause 10(1)(a);

  • (d) the Underwriters shall have received at the Closing Time a comfort letter dated the Closing Date from the Company's auditors, KPMG LLP, addressed to the Underwriters and their counsel, in form and substance satisfactory to the Underwriters, similar to the comfort letter to be delivered to the Underwriters pursuant to subparagraph 2(c) with such changes as may be necessary to bring the information therein forward to a date not less than two Business Days prior to the Closing Date, which changes shall be acceptable to the Underwriters;

  • (e) the Underwriters shall have received at the Closing Time certificates dated the Closing Date, signed by appropriate officers of the Company, addressed to the Underwriters and their counsel, with respect to the constating documents of the Company and the Subsidiaries, all resolutions of the board of directors of the Company and the Subsidiaries and other corporate action relating to this agreement and the Indenture and to the creation, issuance and sale of the Debentures, the incumbency

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and specimen signatures of signing officers and with respect to such other matters as the Underwriters may reasonably request;

  • (f) the Underwriters shall have received at the Closing Time a certificate or certificates dated the Closing Date and signed on behalf of the Company and not in their personal capacities by the Chief Executive Officer and Chief Financial Officer of the Company or any other officer acceptable to the Underwriters addressed to the Underwriters certifying, to the best of the information, knowledge and belief of each person so signing, after having made due inquiry and after having carefully examined the Final Prospectus and any Supplementary Material, that except as disclosed in the Final Prospectus or any Supplementary Material:

  • (i) since the date of the Final Prospectus:

    • (A) there has been no material change (actual, anticipated, contemplated or threatened, whether financial or otherwise) in the business, affairs, operations, assets, liabilities (contingent or otherwise), capital or control of the Company or any of the Subsidiaries, and

    • (B) no transaction out of the ordinary course of business has been entered into or is pending by the Company or any of the Subsidiaries,

which is material to the Company and the Subsidiaries taken as a whole;

  • (ii) other than as disclosed in the Final Prospectus or any Supplementary Material, there are no contingent liabilities affecting the Company or any of the Subsidiaries which are material to the Company and the Subsidiaries taken as a whole;

  • (iii) no order, ruling or determination having the effect of suspending the sale or ceasing the trading of the Debentures or any other securities of the Company has been issued or made by any stock exchange, securities commission or other regulatory authority and is continuing in effect and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Company, contemplated or threatened by any stock exchange, securities commission or other regulatory authority;

  • (iv) there are no actions, suits, proceedings or inquiries, formal or informal, pending or threatened against or affecting the Company or any of the Subsidiaries, at law or in equity, before or by any federal, provincial, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality in Canada, the United States or elsewhere, which may in any way

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materially and adversely affect the Company and the Subsidiaries taken as a whole;

  • (v) no failure or default on the part of the Company or any of the Subsidiaries exists under any law or regulation applicable to the Company or any of the Subsidiaries or under any licence, permit or other instrument granted or issued to the Company or any of the Subsidiaries or under any contract, agreement or other instrument to which the Company or any of the Subsidiaries is a party or by which the Company or any of the Subsidiaries is bound, which may in any way materially and adversely affect the Company and the Subsidiaries on a consolidated basis, and the execution, delivery and performance of this agreement and the creation, issue and sale of the Debentures will not result in any such default;

  • (vi) the Company has duly complied in all material respects with all the terms and conditions of this agreement on its part to be complied with prior to the Closing Time;

  • (vii) the representations and warranties of the Company contained in this agreement are true and correct as of the Closing Time with the same force and effect as if made at and as of the Closing Time; and

  • (viii) such other matters as the Underwriters may reasonably request.

  • (g) the Debentures will have been duly and validly created and issued pursuant to the terms of the Indenture, all actions required to be taken by or on behalf of the Company and the Subsidiaries, including the passing of all requisite resolutions of the Company and the Subsidiaries and the filing of all necessary certificates, instruments and documents with governmental authorities, shall have occurred prior to the Closing Time so as to validly create and issue the Debentures, the Debentures shall have attached thereto the attributes thereof described in the Prospectus, and the Indenture shall be in such form and contain such terms as shall be appropriate and as shall have been approved by the Underwriters, acting reasonably, and shall have been executed and delivered by the Company and the Subsidiaries;

  • (h) the Company shall have provided to the Underwriters evidence as to the appointment of Computershare Trust Company of Canada as trustee under the Indenture;

  • (i) the Underwriters shall have received at the Closing Time confirmation, in a form acceptable to the Underwriters, that the Debentures are rated by Standard & Poor’s Rating Services at BB+ or better, by Dominion Bond Rating Service Limited at BBB (high) or better, and by Fitch, Inc. at BBB-

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or better, and have not been placed on credit watch or alert or other comparable downgrade warning by either such rating agency;

  • (j) the Underwriters shall have received at the Closing Time such other certificates, statutory declarations, agreements or materials, in form and substance satisfactory to the Underwriters and their counsel, as the Underwriters and their counsel may reasonably request; and

  • (k) each of the representations and warranties of the Company contained in this agreement shall be true and correct as of the Closing Time, to the satisfaction of each of the Underwriters, as if made at and as of the Closing Time and the Company shall have fulfilled each of the covenants contained in this agreement to the satisfaction of each of the Underwriters.

11. Termination

  • (1) If prior to the Closing Time:

  • (a) any inquiry, action, suit, investigation or other proceeding (whether formal or informal) is instituted or threatened or announced or any order is made by any federal, provincial, state, municipal or other governmental department, commission, board, bureau, agency or other instrumentality in Canada, the United States or elsewhere, including, without limitation, the Exchange or any securities commission or other regulatory authority having jurisdiction over the Company, any Subsidiary or their respective businesses or affairs (other than an inquiry, action, suit, investigation or proceeding or order based solely upon the activities or alleged activities of the Underwriters or the Selling Firms) which, in the opinion of the Underwriters or any of them, acting reasonably, operates to prevent or restrict the Distribution of the Debentures or any of them in any of the Qualifying Provinces or would prevent or restrict the Distribution of the Debentures under this agreement or would prevent or materially restrict trading in the Debentures or would reasonably be expected to have a significant adverse effect on the market price or value of the Debentures,

  • (b) there should occur any material change, a change in any material fact or other change such as is contemplated in paragraph 6 hereof which, in the opinion of the Underwriters or of any of them, acting reasonably, results or would reasonably be expected to result, in the purchasers of a material number of Debentures exercising their right under applicable legislation to withdraw from their purchase thereof or would reasonably be expected to have a significant adverse effect on the market price, value or marketability of the Debentures,

  • (c) there should develop, occur or come into effect or existence any event, action, state, condition or occurrence of national or international consequence or any action, law or regulation, inquiry or other occurrence of any nature whatsoever which, in the opinion of the Underwriters or any

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of them, acting reasonably, seriously adversely affects or involves or may seriously adversely affect or involve the financial markets generally or the business, operations or affairs of the Company and the Subsidiaries taken as a whole or the market price or value of the Debentures,

  • (d) there is announced any change or proposed change in the income tax laws of Canada or the interpretation or administration thereof and such change could, in the opinion of the Underwriters or any one of them, be expected to have a significant adverse effect on the market price, value or marketability of the Debentures, or

  • (e) there shall occur a downgrading in the rating of the Debentures specified in the Prospectus by one of the rating agencies referred to in paragraph 10 or if one of such agencies shall place any of the Debentures on credit watch or alert or shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of the Debentures,

then any of the Underwriters shall be entitled, at its option exercised in accordance with subparagraph 11(3), to terminate its obligations under this agreement by written notice to that effect given to the Company at any time prior to the Closing Time.

(2) All terms and conditions of this agreement shall be construed as conditions, and any material breach or failure by the Company to comply with any of such terms and conditions shall entitle the Underwriters, or any of them, to terminate their obligations to purchase the Debentures by notice to that effect given to the Company at or prior to the Closing Time. The Underwriters may waive, in whole or in part, or extend the time for compliance with, any of such terms and conditions without prejudice to their rights in respect of any other of such terms and conditions or any other or subsequent breach or non-compliance; provided, however, that to be binding on the Underwriters any such waiver or extension must be in writing and signed by all of the Underwriters.

(3) The rights of termination contained in this paragraph 11 may be exercised by any of the Underwriters and are in addition to any other rights or remedies the Underwriters or any of them may have in respect of any default, act or failure to act or non-compliance by the Company in respect of any of the matters contemplated by this agreement. In the event of any such termination, there shall be no further liability on the part of the Underwriters to the Company or on the part of the Company to such Underwriters except in respect of any liability which may have arisen or may thereafter arise under paragraphs 12, 13 and 16. A notice of termination given by an Underwriter under this paragraph 11 shall not be binding upon any other Underwriter who has not also executed such notice.

12. Indemnity and Contribution

(a) The Company (referred to herein as an “ Indemnifying Party ”) agrees to indemnify and save harmless each Underwriter and each of its directors, officers, employees and agents from and against all liabilities, claims, losses (other than loss of

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profits), costs, damages and expenses which the Underwriter or any of its directors, officers, employees and agents may suffer or incur or be subject to, including, without limitation, all amounts paid to settle actions or satisfy judgments or awards and all legal fees and expenses, in any way caused by, or arising directly or indirectly from, or in consequence of:

  • (i) any information or statement (except any statement furnished by or relating solely to the Underwriters) contained in the Preliminary Prospectus, the Final Prospectus, any Supplementary Material or in any certificate of the Company or of any officer of the Company or any of the Subsidiaries delivered hereunder or pursuant hereto which at the time and in the light of the circumstances under which it was made contains or is alleged to contain a misrepresentation;

  • (ii) any omission or alleged omission to state in the Preliminary Prospectus, the Final Prospectus, any Supplementary Material or any certificate of the Company or any officer of the Company or any of the Subsidiaries delivered hereunder or pursuant hereto any fact (except facts furnished by or relating solely to the Underwriters), whether material or not, that is required to be stated therein or is necessary to make any statement therein not misleading in light of the circumstances under which it was made;

  • (iii) any order made or any inquiry, investigation or proceedings commenced or threatened by any securities commission, stock exchange or other competent authority based upon any untrue statement or omission or alleged untrue statement or alleged omission or any misrepresentation or alleged misrepresentation (except a statement, omission or misrepresentation or alleged statement, omission or misrepresentation made by and relating solely to the Underwriters) in the Preliminary Prospectus, the Final Prospectus,or any Supplementary Material, or based upon any actual or alleged failure to comply with Canadian Securities Laws (other than any failure or alleged failure to comply by the Underwriters or Selling Firms), preventing or restricting the trading in or the Distribution of the Debentures;

  • (iv) the non-compliance or alleged non-compliance by the Company with any requirement of Canadian Securities Laws in connection with the transactions herein contemplated including the Company's noncompliance with any statutory requirement to make any document available for inspection; or

  • (v) any breach of any representation or warranty of the Company contained herein or the failure of the Company to comply with any of its obligations hereunder.

If any matter or thing contemplated by this paragraph 12 (any such matter or thing being hereinafter referred to as a “ Claim ”) is asserted against any person or company in respect of which indemnification is or might reasonably be considered to be

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provided, such person or company (the “ Indemnified Party ”) shall notify the Indemnifying Party as soon as practicable in writing of the nature of such Claim (provided, however, that failure to provide such notice shall not affect the Indemnified Party's right to indemnification hereunder unless such failure prejudices the defence of the claim or increases the liability of the Indemnifying Party under this section 12) and the Indemnifying Party shall be entitled (but not required) to assume the defence of any suit, action or proceeding brought to enforce such Claim and to assume payment of expenses in relation thereto as and when the accounts with respect thereto are received; provided, however, that the defence shall be conducted through legal counsel acceptable to the Indemnified Party, acting reasonably, and that no admission of liability or settlement of any such Claim may be made by the Indemnifying Party or the Indemnified Party without the prior written consent of the other, acting reasonably.

In any such Claim, the Indemnified Party shall have the right to retain separate counsel to act on its behalf, provided that the fees and disbursements of such counsel shall be paid by the Indemnified Party unless (i) the Indemnifying Party fails to assume the defence of such Claim on behalf of the Indemnified Party within five Business Days of receiving notice thereof or, having assumed such defence, has failed to pursue it diligently; (ii) the retention of the other counsel has been specifically authorized in writing by the Company or (iii) the Indemnified Party shall have been advised by counsel, acting reasonably, that the representation of the Indemnifying Party and the Indemnified Party by the same counsel would be inappropriate due to the actual or potential differing interests between them, in which case the Indemnifying Party shall not have the right to assume or continue, as the case may be, the defence of such suit on behalf of the Indemnified Party but shall be liable to pay the reasonable fees and expenses of counsel for the Indemnified Party on a solicitor and own client basis.

(b) In order to provide for a just and equitable contribution in circumstances in which the indemnity provided in subparagraph 12(a) would otherwise be available in accordance with its terms but is, for any reason, held to be unavailable to or unenforceable by the Underwriters or enforceable otherwise than in accordance with its terms, the Indemnifying Party and the Underwriters shall contribute to the aggregate of all claims, expenses, costs and liabilities and all losses (other than loss of profits) of a nature contemplated in subparagraph 12(a) and suffered or incurred by the Underwriters in such proportions so that the Underwriters are responsible for the portion represented by the percentage that the aggregate fee payable by the Indemnifying Party to the Underwriters bears to the aggregate offering price of the Debentures and the Indemnifying Party is responsible for the balance, whether or not they have been sued or sued separately. The Underwriters shall not in any event be liable to contribute, in the aggregate, any amounts in excess of such aggregate fee or any portion thereof actually received. However, no party who has engaged in any fraud, fraudulent misrepresentation or negligence shall be entitled to claim contribution from any person who has not engaged in such fraud, fraudulent misrepresentation or negligence.

The rights of contribution provided in this subparagraph 12(b) shall be in addition to and not in derogation of any other right to contribution which the Underwriters may have by statute or otherwise at law.

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In the event that the Indemnifying Party may be held to be entitled to contribution from the Underwriters under the provisions of any statute or at law, the Indemnifying Party shall be limited to contribution in an amount not exceeding the lesser of:

  • (i) the portion of the full amount of the loss or liability giving rise to such contribution for which the Underwriters are responsible, as determined above; and

  • (ii) the amount of the aggregate fee actually received by the Underwriters from the Indemnifying Party hereunder.

If the Underwriters have reason to believe that a claim for contribution may arise, they shall give the Indemnifying Party notice thereof in writing, but failure to notify the Indemnifying Party shall not relieve the Indemnifying Party of any obligation which it may have to the Underwriters under this subparagraph 12(b) unless such failure materially prejudices the Indemnifying Party.

(c) The rights of indemnity contained in this paragraph 12 shall not inure to the benefit of the Underwriters if the Company has complied with the provisions of paragraphs 5 (in relation to Supplementary Material) and 6 and the person asserting any claim for which indemnity would otherwise be available was not provided with a copy of any Supplementary Material which corrects any misrepresentation contained in the Prospectus which is the basis for such claim and which Supplementary Material is required under Canadian Securities Laws to be delivered to such person by the Underwriters or members of any Selling Firm.

(d) With respect to this paragraph 12, the Company acknowledges and agrees that the Underwriters are contracting on their own behalf and as agents for their respective directors, officers, employees and agents and accordingly hereby constitute the Underwriters as trustees for each person who is entitled to the covenants of the Company contained in this paragraph 12 and is not a party hereto and the Underwriters agree to accept such trust and to hold in trust for and to enforce such covenants on behalf of such persons.

(e) It is expressly acknowledged and agreed that the indemnity and contribution provisions contained in this paragraph 12 shall remain operative and in full force and effect regardless of any investigation made by or on behalf of the Underwriters, any Closing or any termination of this agreement.

13. Expenses of the Offering

Whether or not the transactions herein contemplated shall be completed, except as hereinafter specifically provided, all expenses of or incidental to the creation, authentication, issue, offering and delivery of the Debentures and all expenses of or incidental to all other matters in connection with such transactions including, without limitation: expenses payable in connection with the qualification of the Distribution of the Debentures, the fees and expenses of counsel for the Company, all fees and expenses of local counsel, all fees and expenses of the Company’s auditors, all costs and out of

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pocket expenses invoiced in the marketing of the Debentures, all costs relating to information meetings and to preparation of audio-visual and other information meetings materials and all costs incurred in connection with preparing, printing, translating and providing commercial copies of the Preliminary Prospectus, Final Prospectus, any Supplementary Material and certificates representing the Debentures, and all applicable taxes shall be borne by and be for the account of the Company. The fees and disbursements of the Underwriters’ legal counsel and any out-of-pocket expenses of the Underwriters with respect to the offering of Debentures shall be borne by the Underwriters; provided that if the sale of the Debentures is not completed as contemplated herein by reason of the failure of the Company to fulfill any covenant under this agreement, the Company agrees to assume and pay the reasonable fees and disbursements of Underwriters’ counsel and all taxes thereon and the reasonable out-ofpocket expenses of the Underwriters.

14. Underwriting Percentages

The obligation of the Underwriters to purchase the Debentures at a Closing Time shall be several only and not joint and several and shall be limited to the percentages of the aggregate number of Debentures set out opposite the name of the Underwriters respectively below:

Merrill Lynch 60%
BMO Nesbitt Burns Inc. 15%
Scotia Capital Inc. 15%
HSBC Securities (Canada) Inc. 5%
National Bank Financial Inc. 5%

If any of the Underwriters (the “ Refusing Underwriters ”) shall fail to purchase its applicable percentage of the Debentures at the Closing Time for any reason whatsoever, and the aggregate number of Debentures not purchased by the Refusing Underwriters is less than or equal to 5% of the Debentures to be purchased at the Closing Time, the other Underwriters (the “ Continuing Underwriters ”) shall continue to be obligated to take up and pay for the Debentures to be purchased by them and shall be obligated to purchase all of the Debentures which would otherwise have been purchased by the Refusing Underwriters. The Continuing Underwriters shall purchase such Debentures pro rata to their respective percentages aforesaid or in such other proportions as they may otherwise agree.

If any of the Refusing Underwriters shall fail to purchase its applicable percentage of the Debentures at the Closing Time for any reason whatsoever, and the aggregate number of Debentures not purchased by the Refusing Underwriters is greater than 5% of the Debentures to be purchased at the Closing Time, the Continuing Underwriters shall be entitled, but shall not be obligated, to purchase all, but not less than all, of the Debentures which would otherwise have been purchased by the Refusing Underwriters; the Underwriters exercising such right shall purchase such Debentures pro rata to their respective percentages aforesaid or in such other proportions as they may otherwise agree. In the event that such right is not exercised, the Continuing Underwriters shall be relieved of all obligations to the Company.

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Nothing in this paragraph shall oblige the Company to sell to the Underwriters less than all of the Debentures or relieve from liability to the Company any Underwriter which shall be so in default. In the event of a termination by the Company of its obligations under this agreement under this subparagraph, there shall be no further liability on the part of the Company to the Underwriters except in respect of any liability which may have arisen or may thereafter arise under paragraphs 12, 13 and 16.

15. Concurrent Offering

The Company shall not, without the prior written consent (which shall not be unreasonably withheld) of Merrill Lynch, issue, agree to issue or announce its intention to issue any debt securities (other than the Debentures) or financial instruments convertible or exchangeable for or exercisable into debt securities of the Company at any time prior to 60 days after the Closing Date.

16. Survival of Representations, etc.

The representations, warranties, obligations and agreements of the Company contained herein and in any certificate delivered pursuant to this agreement or in connection with the purchase and sale of the Debentures shall survive the purchase of the Debentures and shall continue in full force and effect, unaffected by any subsequent disposition of the Debentures by the Underwriters or the termination of the Underwriters' obligations, and shall not be limited or prejudiced by any investigation made by or on behalf of the Underwriters in accordance with the preparation of the Preliminary Prospectus, the Final Prospectus or any Supplementary Material or the distribution of the Debentures or otherwise.

17. Notices

(a) Unless herein otherwise expressly provided, any notice, request, direction, consent, waiver, extension, agreement or other communication (a “Communication”) that is or may be given or made hereunder shall be in writing addressed as follows:

If to the Company, at

TimberWest Forest Corp. Suite 2300, 1055 West Georgia Street Vancouver, BC V6E 3P3

Attention: Beverlee F. Park Fax No.: (604) 654-4571

with a copy in the case of a Communication to the Company to:

McCarthy Tétrault LLP Suite 1300, 777 Dunsmuir Street Vancouver, BC

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V7Y 1K2

Attention: Richard J. Balfour Fax No.: (604) 622-5615

If to Merrill Lynch, addressed and sent to:

Merrill Lynch Canada Inc. Suite 3100, 1250 Rene-Levesque Blvd. West Montreal, Quebec H3B 4W8 Attention: Richard Dufresne Fax No.: (514) 846-3591

If to BMO Nesbitt Burns Inc., addressed and sent to:

BMO Nesbitt Burns Inc. Suite 1800, 885 West Georgia Street Vancouver, BC V6C 3E8

Attention: Bradley J. Hardie Fax No.: (604) 443-1408

If to Scotia Capital Inc., addressed and sent to:

Scotia Capital Inc. Scotia Plaza, 68th Floor 40 King Street West Toronto, Ontario M5W 2X6

Attention: John Tkach Fax No.: (416) 863-7527

If to HSBC Securities (Canada) Inc., addressed and sent to:

HSBC Securities (Canada) Inc. TD Bank Tower, TD Centre 66 Wellington Street West Suite 5300 Toronto, Ontario M5K 1E7

Attention: Patrick M. Nolan Fax No.: (416) 369-9498

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If to National Bank Financial Inc., addressed and sent to:

National Bank Financial Inc. Suite 3300, 666 Burrard Street Vancouver, BC V6C 2X8

Attention: Daniel Nocente Fax No: (604) 682-2132

with a copy in the case of a Communication to any of the Underwriters to:

Bull, Housser & Tupper Suite 3000, 1055 West Georgia Street Vancouver, BC V6E 3R3

Attention: Marion V. Shaw Fax No.: (604) 646-2510

or to such other address as any of the parties may designate by notice given to the others.

(b) Each Communication shall be personally delivered to the addressee or sent by facsimile transmission to the addressee and (a) a Communication which is personally delivered shall, if delivered before 5:00 p.m. (local time for the recipient) on a Business Day, be deemed to be given and received on that day and, in any other case, be deemed to be given and received on the first Business Day following the day on which it is delivered; and (b) a Communication which is sent by facsimile transmission shall, if sent on a Business Day and the machine on which it is sent receives the answerback code of the party to whom it is sent before 5:00 p.m. (local time for the recipient), be deemed to be given and received on that day and, in any other case, be deemed to be given and received on the first Business Day following the day on which it is sent.

(c) The Company shall be entitled to and shall act on any Communication given or agreement entered into by or on behalf of the Underwriters by Merrill Lynch, which hereby represents and warrants that it has irrevocable authority to bind the Underwriters, except in respect of any consent to a settlement pursuant to paragraph 12, which consent shall be given by the Indemnified Party, a notice of termination pursuant to subparagraph 11(1) which notice may be given by any of the Underwriters, or any waiver pursuant to subparagraph 11(2), which waiver must be signed by all of the Underwriters. Merrill Lynch shall consult fully with the other Underwriters concerning any matter in respect of which it acts as representative of the Underwriters.

18. Governing Law

This agreement shall be governed and construed in accordance with the laws of the Province of British Columbia and the laws of Canada applicable therein and

MVS/1140690.03

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shall be treated in all respects as a British Columbia contract. Each party hereby irrevocably submits to the non-exclusive jurisdiction of the courts of British Columbia with respect to any matter arising hereunder or related hereto.

19. Time

Time shall be of the essence of this agreement.

20. Headings

Headings are inserted for convenience of reference only and shall not affect the interpretation of this agreement.

21. Successors and Assigns

This agreement shall inure to the benefit of and be binding upon the parties and their respective successors (including any successor by reason of amalgamation or statutory arrangement) and permitted assigns and upon the heirs, executors, legal representatives, successors and permitted assigns of those for whom the Underwriters are contracting pursuant to paragraph 12(d). No party shall assign any of its rights or obligations hereunder without the consent of the other parties hereto.

22. Severability

If any provision of this agreement is determined to be void or unenforceable in whole or in part, such void or unenforceable provision shall not affect or impair the validity of any other provision of this agreement and shall be severable from this agreement.

23. Public Announcements

The Company agrees that it shall not make any public announcements regarding the transactions contemplated hereunder without the prior written consent of Merrill Lynch, on behalf of the Underwriters, such consent not to be unreasonably withheld.

MVS/1140690.03

  • 31 -

If the foregoing is in accordance with your understanding and is agreed to by you, please signify your acceptance on the accompanying counterparts of this letter and return it to us, whereupon it shall constitute an agreement between us.

MERRILL LYNCH CANADA INC.

By: (signed) Richard Dufresne

BMO NESBITT BURNS INC.

By: (signed) Bradley J. Hardie

SCOTIA CAPITAL INC.

By: (signed) John Tkach

HSBC SECURITIES (CANADA) INC.

By: (signed) Patrick M. Nolan

NATIONAL BANK FINANCIAL INC.

By: (signed) Daniel L. Nocente

The foregoing offer is accepted and agreed to by us as of the date first above written.

TIMBERWEST FOREST CORP.

By: (signed) Beverlee F. Park

MVS/1140690.03

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