---

CPC and the Supporting Parties shall cooperate to structure and negotiate the terms of an additional component of the Plan under which certain of the Shares not held by the Supporting Parties that have executed this Agreement on the Agreement Date would be exchanged for cash consideration payable by CPC or otherwise repurchased by CPC, subject to certain conditions, including so as to permit CPC to cease to be a reporting issuer under applicable securities Laws. The completion of any such Take-Private would not be a condition to the implementation of the Plan.

2.2

Treatment of Other Indebtedness of CPC

With respect to the other indebtedness of CPC (aside from the Notes), CPC and the Supporting Parties agree that it is their intention that, in the event of the occurrence of an Alternative Recapitalization Triggering Event, on the Closing Date:

(a)

the revolving asset-based loan facility due July 2017, which: (i) has a maximum amount of credit available thereunder of C$250.0 million; and (ii) is secured by a first lien on the working capital assets of CPC (the “ABL Credit Facility”), shall remain in place with its maturity extended to no earlier than three (3) years following the Closing Date and its terms remaining substantially the same as those in effect on the date hereof;

(b)

the term loan due July 2017, which: (i) has an aggregate principal amount outstanding of approximately C$15.1 million as of the date hereof; and (ii) is secured by a first-ranking charge on substantially all of the fixed assets and real property of CPC and a second-ranking charge on the working capital assets of CPC (the “Senior Secured Term Loan”), shall remain in place with its maturity extended to no earlier than three (3) years following the Closing Date and its terms remaining substantially the same as those in effect on the date hereof; and

(c)

trade and other obligations of CPC shall remain unaffected by the Alternative Recapitalization Transaction.

3.

REPRESENTATIONS AND WARRANTIES OF THE SUPPORTING PARTIES

Each Supporting Party hereby represents and warrants to CPC (and acknowledges that CPC is relying upon such representations and warranties) that, as of the Agreement Date (or in the case of a Joinder Agreement, the date of such Joinder Agreement):

3.1

It:

(a)

(i) either is the sole legal and beneficial owner of the principal amount of Notes set forth on its signature page hereto (or its signature page to its Joinder Agreement, as applicable) or has the sole investment and voting discretion with respect to the principal amount of Notes therein indicated as of such date (such principal amount of Notes being the “Relevant Notes”; the Relevant Notes together with all Claims held by such Supporting Party in respect of the Relevant Notes, including the Accrued Interest and any other amount that such Supporting Party is entitled to claim pursuant to the Relevant Notes, being its “Debt”); and (ii) has the power and authority to bind the beneficial owner(s) of such Notes to the terms of this Agreement with respect to the interests of such beneficial owner(s) in such Notes; and

 

(b)

if applicable, (i) either is the sole legal and beneficial owner of the number of Shares indicated on its signature page hereto (or its signature page to its Joinder Agreement, as applicable) or has the sole investment and voting discretion with respect to the number of Shares therein indicated as of such date (such number of Shares disclosed on the signature pages hereto as of such date, together with the Relevant Notes, the “Relevant Securities”); and (ii) has the power and authority to bind the beneficial owner(s) of such Shares to the terms of this Agreement with respect to the interests of such beneficial owner(s) in such Shares.

3.2

It has the sole authority to vote or direct the voting of its Debt and Shares, as applicable.

3.3

To the best of its knowledge, after due inquiry, there is no proceeding, claim or investigation pending before any court, regulatory body, tribunal, agency, government or legislative body, or threatened in writing against it or any of its properties that, individually or in the aggregate, would reasonably be expected to impair such Supporting Party’s ability to execute and deliver this Agreement and to comply with its terms.

3.4

The Debt and Shares, as applicable, held by such Supporting Party are not subject to any liens, charges, encumbrances, obligations or other restrictions or rights of others that would reasonably be expected to adversely affect its ability to perform its obligations under this Agreement.

3.5

Each Supporting Party has not deposited any of its Relevant Securities into a voting trust, or granted (or permitted to be granted) any proxy or power-of-attorney or attorney-in- fact, or entered into a voting agreement, understanding or arrangement, or granted (or permitted to be granted) any right or privilege (whether by law, pre-emptive or contractual) capable of becoming a voting trust or other agreement, with respect to the voting of its Relevant Securities, where such trust, grant, agreement, understanding or arrangement, right or privilege would restrict the ability of such Supporting Party to comply with its obligations under this Agreement affecting the Relevant Securities or the ability of any holder thereof to exercise ownership rights with respect thereto.

3.6

It (a) is a sophisticated party with sufficient knowledge and experience to properly evaluate the terms and conditions of this Agreement; (b) has conducted its own analysis and made its own decision, in the exercise of its independent judgment, to enter into this Agreement; (c) has obtained such independent advice in this regard as it deemed appropriate; and (d) has not relied on the analysis or the decision of any Person other than its own members, employees, representatives or independent advisors.

3.7

Where such Supporting Party is not an individual, it is duly organized, validly existing and in good standing under the Laws of the jurisdiction of its organization, and the execution, delivery and, subject to the approval of the Plan by the Court, performance by such Supporting Party of its obligations under this Agreement:

(a)

are within its corporate, partnership, limited partnership or similar power, as applicable;

 

 

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4.3

To the best of its knowledge, there is no proceeding, claim or investigation pending before any court, regulatory body, tribunal, agency, government or legislative body, or threatened in writing against it or any of its properties that, individually or in the aggregate, would reasonably be expected to impair CPC’s ability to execute and deliver this Agreement and to comply with its terms.

4.4

Neither CPC nor, to the knowledge of CPC, any of CPC’s directors, officers or employees, directly or indirectly, has, at any time taken any action that would reasonably be expected to result in a violation in any material respect by such Person of the Foreign Corrupt Practices Act (15 U.S.C. §§ 78m(b), 78dd-1, 78dd-2, 78ff) or any other applicable anti-corruption Law.

5.

COVENANTS AND AGREEMENTS OF THE SUPPORTING PARTIES

Each Supporting Party covenants and agrees as follows (subject, in each case, to Legal Requirements and Section 15.27):

5.1

Each Supporting Party agrees:

(a)

to vote (or cause to be voted) all of its Debt in all votes and in each vote:

(i)

in favor of the approval, consent, ratification and adoption of the Alternative Recapitalization Transaction and the Plan, as the case may be (and any resolutions or actions required in furtherance of the foregoing which are, in each case, consistent in all material respects with the terms and conditions of this Agreement and the Plan); and

(ii)

against the approval, consent, ratification and adoption of any action or transaction that, if approved, consented to, ratified or adopted could reasonably be expected to delay, challenge, frustrate or hinder the consummation, consideration, acceptance or implementation of the Alternative Recapitalization Transaction and the Plan, as the case may be (and any resolutions or actions required in furtherance of the foregoing),

and to cause such Debt (which has a right to vote) to be counted as present for the purposes of establishing a quorum, to the extent applicable;

(b)

if such a vote is required, vote (or cause to be voted) all of its Shares in all votes and in each vote:

(i)

in favor of the approval, consent, ratification and adoption of the Alternative Recapitalization Transaction and the Plan as soon as practicable after the solicitation of consents with respect to the Plan, as the case may be (and any resolutions or actions required in furtherance of the foregoing which are, in each case, consistent in all material respects with the terms and conditions of this Agreement and the Plan); and

(ii)

against the approval, consent, ratification and adoption of any matter or transaction that, if approved, consented to, ratified or adopted could reasonably be expected to delay, challenge, frustrate or hinder the consummation, consideration, acceptance or implementation of the Alternative Recapitalization Transaction or the Plan, as the case may be (and any resolutions or actions required in furtherance of the foregoing),

 

 

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6.3

CPC shall regularly update and keep the Supporting Parties apprised of the progress of all material discussions with any regulatory authorities responsible for granting approvals of the Alternative Recapitalization Transaction, and, as appropriate, CPC shall, to the extent reasonably requested, allow Representatives of the Supporting Parties to participate in material discussions with such regulatory authorities if permitted by such regulatory authorities and shall promptly provide a reasonably detailed written notice to the Supporting Parties with respect to any material developments relating to such discussions and the status of any required approvals.

6.4

CPC shall regularly update and keep the Supporting Parties apprised of the progress of all material discussions with the holders of the ABL Credit Facility and the Senior Secured Term Loan with respect to the refinancing or extensions thereof contemplated by this Agreement.

6.5

CPC shall negotiate in good faith all Transaction Documents, which Transaction Documents shall contain provisions consistent in all material respects with this Agreement and shall contain such other provisions as are reasonably satisfactory to the Supporting Parties and CPC.

6.6

CPC shall pay all of the Supporting Parties’ reasonable documented out-of-pocket fees and expenses (including reasonable documented out-of-pocket legal fees and expenses, it being understood and agreed that summary statements shall be sufficient evidence of such fees and expenses for all purposes hereunder and that such statements may be appropriately redacted for any privileged and confidential information) directly to the applicable Supporting Party or service provider promptly upon presentation of reasonably detailed invoices by each Supporting Party or service provider for such expenses and fees, provided that such invoices are issued directly to CPC by such Supporting Party or service provider.

7.

CBCA PROCEEDINGS AND CHAPTER 15 CASES; ALTERNATIVE PROCEEDINGS

7.1

CPC and the Supporting Parties agree to use reasonable best efforts to pursue the completion of the Alternative Recapitalization Transaction by way of the Plan pursued through CBCA Proceedings and entry of the U.S. Recognition Order in the Chapter 15 Cases on a timely basis and consistent with the terms and conditions of this Agreement, and to use reasonable best efforts (including using reasonable best efforts to obtain any regulatory approvals and material third party approvals for the Alternative Recapitalization Transaction) to achieve the following timeline:

(a)

the initiation of the CBCA Proceedings, as evidenced by filing the application seeking the Preliminary Order with the Court by no later than October 31, 2016, or such other date as CPC and the Supporting Parties may agree in writing, each acting reasonably;

(b)

the initiation of the Chapter 15 Cases, as evidenced by filing by CPC and its subsidiaries of Chapter 15 petitions with the U.S. Bankruptcy Court, and the filing of a motion seeking entry of the U.S. Recognition Order by no later than November 2, 2016, or such other date as CPC and the Supporting Parties may agree in writing, each acting reasonably;

 

 

(c)

approval of the Preliminary Order by the Court by no later than November 4, 2016, or such other date as CPC and the Supporting Parties may agree in writing, each acting reasonably;

(d)

entry of the U.S. Provisional Relief Order by the U.S. Bankruptcy Court by no later than November 10, 2016, or such other date as CPC and the Supporting Parties may agree in writing, each acting reasonably;

(e)

filing of the application seeking the Interim Order with the Court by no later than November 14, 2016, or such other date as CPC and the Supporting Parties may agree in writing, each acting reasonably;

(f)

approval of the Interim Order by the Court by no later than November 17, 2016, or such other date as CPC and the Supporting Parties may agree in writing, each acting reasonably;

(g)

meeting of the Shareholders, the Noteholders and any other creditors entitled to vote on the Plan by no later than December 16, 2016, or such other date as CPC and the Supporting Parties may agree in writing, each acting reasonably;

(h)

approval of the Final Order by the Court by no later than December 19, 2016, or such other date as CPC and the Supporting Parties may agree in writing, each acting reasonably;

(i)

entry of the U.S. Recognition Order by the U.S. Bankruptcy Court by no later than December 23, 2016, or such other date as CPC and the Supporting Parties may agree in writing, each acting reasonably; and

(j)

Closing Date to have occurred by no later than the latest to occur between (i) December 31, 2016 and (ii) 10 days after an Alternative Recapitalization Trigger Event has occurred, or such other date as CPC and the Supporting Parties may agree in writing.

Notwithstanding anything to the contrary in this Section 7.1, in the event that the timeline in Section 7.1 of the KGI Support Agreement is extended by mutual written agreement of the parties thereto (any such extension, a “KGI Timeline Extension”), the dates set forth in section 7.1(e), (f), (g), (h), (i) and (j) automatically shall be extended by a period of time commensurate with the KGI Timeline Extension.

7.2

In the event that completion of the Alternative Recapitalization Transaction pursuant to the Plan through CBCA Proceedings and the Chapter 15 Cases is mutually determined by the Parties to be impracticable or impermissible under applicable Law, then the Parties shall consider and negotiate in good faith and if practicable consummate an alternative means of implementing the Alternative Recapitalization Transaction or another transaction containing, to the maximum degree practicable and permissible under  applicable Law, the terms contemplated to be included in the Alternative Recapitalization Transaction, including, without limitation, extending the Outside Date to a date that such transaction can be completed, as agreed by CPC and the Supporting Parties that have executed this Agreement on the Agreement Date, each acting reasonably, and provided that the Outside Date shall be extended no later than the latest to occur between (i) February 28, 2017 and (ii) 10 days after the Alternative Recapitalization Triggering Event.

 

 

8.

CONDITIONS

8.1

This Agreement shall not be effective, and none of the Supporting Parties shall have any obligations hereunder, unless CPC has paid, directly to the applicable Supporting Party or service providers, all of the Supporting Parties’ reasonable and documented out-of-pocket fees and expenses (including reasonable and documented out-of-pocket legal fees and expenses, it being understood and agreed that summary statements shall be sufficient evidence of such fees and expenses for all purposes hereunder and that such statements may be appropriately redacted for any privileged and confidential information), as set forth in any invoices issued to CPC by the applicable Supporting Party or service providers at least two (2) Business Days in advance of the date on which payment is sought.

8.2

Consummation of the Alternative Recapitalization Transaction shall be subject to the satisfaction in all material respects of the following terms prior to and/or concurrently with the Closing Date, each of which are for the benefit of CPC and the Supporting Parties, and each of which, as applicable, may be waived by CPC and by unanimous consent of the Supporting Parties that have executed this Agreement on the Agreement Date:

(a)

an Alternative Recapitalization Triggering Event shall have occurred;

(b)

the Closing Date shall occur on or before the Outside Date;

(c)

all disclosure documents on or after the Agreement Date and definitive agreements in respect of the Alternative Recapitalization Transaction (including all Transaction Documents) shall be in a form agreed to in advance by CPC and the Supporting Parties, each acting reasonably;

(d)

any amendments to the structure of the Alternative Recapitalization Transaction and the steps required to complete the Alternative Recapitalization Transaction from those provided for in this Agreement shall be in form and substance satisfactory to CPC and the Supporting Parties, each acting reasonably;

(e)

(i) the Plan, the Final Order, the U.S. Recognition Order, all other orders and all materials filed by or on behalf of CPC and its subsidiaries in the CBCA Proceedings or the Chapter 15 Cases shall be in a form reasonably agreed to in advance by CPC and the Supporting Parties when filed and as supplemented, amended or modified, as applicable, and with respect to any and all orders, shall have been entered in form and substance acceptable to CPC and the Supporting Parties, each acting reasonably; (ii) the Plan shall have been approved by the requisite majorities of all applicable stakeholder groups of CPC and its subsidiaries as and to the extent required by the Court in the Interim Order or otherwise and as required by Law or stock exchange rules; and (iii) the Plan shall have been approved by the Court pursuant to the Final Order; (iv) the U.S. Recognition Order shall have been entered by the U.S. Bankruptcy Court; and (v) the Final Order, all other orders granted by the Court, and the U.S. Recognition Order each shall be in full force and effect, final and executory notwithstanding appeal, in each case in form and substance acceptable to CPC and the Supporting Parties, each acting reasonably;

 

 

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(d)

each right and privilege of any kind of the Supporting Parties contemplated in Schedule C (“Supporting Parties’ Rights”) shall have been memorialized in duly executed and delivered definitive documentation that comports in all material respects with the terms set forth in this Agreement and in Schedule C, in each case acceptable to CPC and each of the Supporting Parties, each acting reasonably, which documentation shall provide, among other things, that in no event shall such documentation be amended, supplemented or otherwise modified in any way to modify, amend or waive compliance with any of the provisions or terms (or to add new provisions that contravene or impair any such provisions or terms) thereof providing for (or otherwise governing) any Supporting Parties’ Rights except with the unanimous consent of all of the Supporting Parties that have executed this Agreement on the Agreement Date;

(e)

CPC shall have paid, to the applicable Supporting Party or service providers, in cash in full all of the Supporting Parties’ reasonable and documented out-of- pocket fees and expenses (including reasonable and documented out-of-pocket legal fees and expenses, it being understood and agreed that summary statements shall be sufficient evidence of such fees and expenses for all purposes hereunder and that such statements may be appropriately redacted for any privileged and confidential information), outstanding as of the Closing Date for which CPC was issued an invoice by the applicable Supporting Party or service provider; and

(f)

the Supporting Parties shall have received from counsel to the Company customary forms of legal opinion with respect to (i) the creation and validity of the mortgages, charges and security interests (collectively, the “Refinanced Loan Security”) granted by CPC and the applicable subsidiary guarantors as security for their obligations under the Refinanced Loan, (ii) the enforceability against CPC and the applicable subsidiary guarantors of the instruments and agreements creating the Refinanced Loan Security and (iii) the making of all filings and registrations in all public registries necessary to perfect the Refinanced Loan Security in accordance with applicable law.

8.4

Consummation of the Alternative Recapitalization Transaction shall be subject to the satisfaction in all material respects of the following terms prior to and/or concurrently with the Closing Date, each of which are for the benefit of CPC and may be waived by the consent of CPC:

(a)

Each Supporting Party shall have performed or complied with, in all material respects, its obligations and covenants under this Agreement; and

(b)

the representations and warranties of each Supporting Party set forth in this Agreement shall be true and correct in all respects (and for this purpose, any reference to materiality in such representations and warranties shall be disregarded) at the Closing Date with the same force and effect as if made at and as of such time, except (i) as such representations and warranties may be affected by the occurrence of events or transactions contemplated and permitted by this Agreement, (ii) that representations and warranties that are given as of a specified date shall be true and correct in all respects (and for this purpose, any reference to materiality in such representations and warranties shall be disregarded) as of such date, and (iii) as such failure to be true and correct would not reasonably be expected to have a material adverse effect on the ability of such Supporting Party to consummate the transactions contemplated by this Agreement in a timely manner.

 

 

 

10.2

CPC Termination Events

This Agreement may be terminated by the delivery to each Supporting Party, by CPC of a written notice in accordance with Section 15.14, in the exercise of its sole discretion, upon the occurrence and continuation of any of the following events:

(a)

failure of each and every Supporting Party (as distinguished from a failure of less than all of the Supporting Parties, which is the subject matter of Section 10.2(x)) to perform or comply in all material respects with, or default by all of them in the performance or observance of, any material covenant set forth in this Agreement, in each case, which is not cured within ten (10) Business Days after the receipt of written notice of such failure or default;

(b)

any representation, warranty or other statement of each and every Supporting Party made in this Agreement shall prove untrue as to each such Supporting Party (as distinguished from any representation, warranty or other statement of less than all of the Supporting Parties proving to be untrue in any respect, which is the subject matter of Section 10.2(y) below) in any respect as of the date when made, in each case, which is not cured within ten (10) Business Days after the receipt of written notice of such untrue representation, warranty or other statement, except where the failure of such representation, warranty or other statement to be so true and correct in any respect, individually or in the aggregate, would not reasonably be expected to have a material adverse effect on the ability of such Supporting Party to consummate the transactions contemplated by this Agreement in a timely manner;

(c)

the issuance of any final decision, order or decree by a Governmental Entity which restrains or impedes in any material respect or prohibits the Alternative Recapitalization Transaction or any material part thereof or requires a material variation of the Alternative Recapitalization Transaction;

(d)

if at any given time the Supporting Parties party to this Agreement (including by way of Joinder Agreements) represent less than 66-2/3% of the aggregate principal amount of outstanding Notes or less than 66-2/3% of the outstanding Shares;

(e)

the Alternative Recapitalization Transaction has not been consummated on or before the Outside Date; provided that, the right to terminate this Agreement under this Section 10.2(e) shall not be available to CPC if the failure of CPC to fulfill any of its obligations and covenants under this Agreement or the breach by CPC of any of its representations and warranties under this Agreement has been the primary cause of, or the principal event that has resulted in, the failure of the Closing Date to be able to occur by the Outside Date; or

(f)

the Board has determined that, as a result of its fiduciary duties or other Legal Requirements, it does not intend to, and/or will not, approve or cause or permit CPC to pursue or consummate the Alternative Recapitalization Transaction.

 

 

 

 

15.3

At any time, a Securityholder that is not a Supporting Party may agree to become a Party to this Agreement by executing and delivering to CPC and each Supporting Party, an executed Joinder Agreement.

15.4

The headings of the Sections of this Agreement 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.

15.5

Unless the context otherwise requires, words importing the singular shall include the plural and vice versa and words importing any gender shall include all genders. The word “including” shall be deemed to be followed by the words “, without limitation,” whether or not so expressly provided herein.

15.6

All sums of money referred to in this Agreement are expressed in the lawful money of the United States or Canada, as provided herein.

15.7

Other than the KGI Support Agreement and as set forth in the Transaction Documents, this Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both oral and written, among the Parties with respect to the subject matter hereof.

15.8

The agreements, representations and obligations of the Supporting Parties under this Agreement are, in all respects, several (and not joint). Accordingly, (i) if any agreement, representation or obligation of any Supporting Party under this Agreement is breached by such Supporting Party and no other Supporting Parties, then such breaching Supporting Party alone shall be responsible for any liability resulting from such breach and no other Supporting Party shall bear any responsibility therefor, and (ii) if any agreement, representation or obligation of the Supporting Parties under this Agreement is breached by more than one Supporting Party, then such breaching Supporting Parties shall be responsible for any liability resulting from such breach on a several (in proportion to the value that the Relevant Securities held by each breaching Supporting Party bear to one another, asdetermined on the basis of the consideration contemplated to be received in respect thereof on the Closing Date pursuant to the terms of this Agreement), and not joint and several, basis.

15.9

Any Person signing this Agreement in a representative capacity (a) represents and warrants that he/she is authorized to sign this Agreement on behalf of the Party he/she represents and that his/her signature upon this Agreement will bind the represented Party to the terms hereof, and (b) acknowledges that the other Parties hereto have relied upon such representation and warranty.

15.10

Except as otherwise expressly provided herein, for the purposes of this Agreement, any matter requiring the agreement, waiver, consent or approval under this Agreement of the Supporting Parties shall, at the time of such action, require the unanimous agreement, waiver, consent or approval of the Supporting Parties that have executed this Agreement on the Agreement Date.

 

 

15.11

Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Securities have agreed, approved or consented to any amendment, waiver or consent to be given under this Agreement or under any documents related thereto, or have directed the taking of any action provided herein or in any of the documents related thereto to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Securities, Securities directly or indirectly owned by CPC or its subsidiaries shall be deemed not to be outstanding.

15.12

This Agreement may be modified, amended or supplemented as to any matter by an instrument in writing signed by CPC and each of the Supporting Parties that have executed this Agreement on the Agreement Date.

15.13

Time is of the essence in the performance of the Parties’ respective obligations. Any date, time or period referred to in this Agreement shall be of the essence, except to the extent to which the Parties agree in writing to vary any date, time or period, in which event the varied date, time or period shall be of the essence.

15.14

All notices and other communications which may be or are required to be given pursuant to any provision of this Agreement shall be given or made in writing and shall be deemed to be validly given if served personally, by electronic mail or facsimile transmission, in each case addressed to the particular Party:

(a)

if to the Supporting Parties, at the address set forth for each Supporting Party beside its signature hereto

 

with a copy by email or fax (which shall not be deemed notice) to:

 

Milbank, Tweed, Hadley & McCloy LLP

2029 Century Park East

33rd Floor

Los Angeles, CA 90067

Fax:      (213) 892-4777 / (213) 892-4765

(b)

if to CPC:

Catalyst Paper Corporation

2nd Floor

3600 Lysander Lane

Richmond, British Columbia

V7B 1C3

 

 

 

 

with a copy by email or fax (which shall not be deemed notice) to:

 

Stikeman Elliott LLP

1155 Rene-Levesque Boulevard West, 40Th Floor

Montreal, Quebec

H3B 3V2

Fax:           (514) 397-3222

and

Sidley Austin LLP

One South Dearborn

Chicago, Illinois 60603

Email:          kblatchford@sidley.com and dtwomey@sidley.com

or at such other address of which any Party may, from time to time, advise the other Parties by notice in writing given in accordance with the foregoing. The date of receipt of any such notice shall be deemed to be the date of delivery or transmission thereof.

15.15

If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that the intended purposes of this Agreement originally contemplated are embodied in such modification to the fullest extent possible.

15.16

This Agreement shall be binding upon and inure to the benefit of the Parties hereto and each of their respective successors, permitted assigns, heirs and personal representatives, provided that no Party may assign, delegate or otherwise transfer any of its rights, interests or obligations under this Agreement without the prior written consent of the other Parties hereto, except that each Supporting Party is permitted to assign, delegate or otherwise transfer any of its rights, interests or obligations under this Agreement as set forth in Section 5.2.

15.17

This Agreement shall be governed by and construed in accordance with the laws of the Province of British Columbia and the federal laws of Canada applicable in the Province of British Columbia, without regard to principles of conflicts of law. Each Party submits to the jurisdiction of the courts located in Vancouver, British Columbia in any action or proceeding arising out of or relating to this Agreement.

 

 

15.18

The Parties waive any right to trial by jury in any proceeding arising out of or relating to this Agreement or any of the transactions contemplated by this Agreement, present or future, and whether sounding in contract, tort or otherwise. Any Party may file a copy of this provision with any court as written evidence of the knowing, voluntary and bargained for agreement between the Parties irrevocably to waive trial by jury, and that any proceeding whatsoever between them relating to this Agreement or any of the transactions contemplated by this Agreement shall instead be tried by a judge or judges sitting without a jury.

15.19

It is understood and agreed by the Parties that money damages would be an insufficient remedy for any breach of this Agreement by any Party and each non-breaching Party shall be entitled to specific performance and injunctive or other equitable relief as a remedy of any such breach (in each case, without any requirement to post any bond or security) including, without limitation, an order of a court of competent jurisdiction requiring any Party to comply promptly with any of its obligations hereunder. Such remedies will not be the exclusive remedies for any breach of this Agreement but will be in addition to all other remedies available to each of the Parties at law or in equity.

15.20

All rights, powers, and remedies provided under this Agreement or otherwise in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise of any right, power, or remedy in respect hereof by any Party shall not preclude the simultaneous or later exercise of any other such right, power, or remedy by such Party.

15.21

No condition or right in this Agreement shall be enforceable by a Party if any failure to satisfy such condition results from an action, error or omission by or within the control of such Party; provided that, with respect to conditions or rights for the benefit of the Supporting Parties, no failure to satisfy such conditions or rights that results primarily from an action or omission by, or within the control of, a Supporting Party shall preclude any other Supporting Party whose actions or omissions were not the primary cause of such failure from enforcing the applicable condition or right.

15.22

Unless expressly stated herein, this Agreement shall be solely for the benefit of the Parties, and no other person or entity shall be a third-party beneficiary hereof (except that, in the event that any Party executes this Agreement in a representative capacity, each Party which it represents shall be an express third-party beneficiary hereof with the right to enforce the terms hereof as though itself a Party hereto).

15.23

This Agreement may be signed in counterparts, each of which, when taken together, shall be deemed an original. Execution of this Agreement is effective if a signature is delivered by facsimile transmission or electronic (e.g., pdf) transmission.

15.24

It is understood and agreed that no Supporting Party has any fiduciary duty or other duty of trust or confidence in any form with any other Supporting Party, and, except as provided in this Agreement, there are no commitments among or between them. In this regard, it is understood and agreed that any Supporting Party may trade in the Securities or other debt or equity securities of CPC (or any Affiliate thereof) without the consent of any other Supporting Party, subject to the terms of this Agreement; provided, however, that no Supporting Party shall have any responsibility for any such trading by any other Person by virtue of this Agreement.

 

 

15.25

Except as otherwise provided herein, this Agreement applies only to each Supporting Party’s Securities (and not, for greater certainty, to any other types or classes of securities, loans or obligations that may be held, acquired or sold by such Supporting Party or any client of such Supporting Party whose funds or accounts are managed by such Supporting Party or managed by a different investment advisor) and, without limiting the generality of the foregoing, shall not apply to: (i) any securities, loans or other obligations (including Securities) that may be held, acquired or sold by, or any activities, services or businesses conducted or provided by, any group or business unit within or any Affiliate of, a Supporting Party that (A) has not been involved in and is not acting at the direction of or with knowledge of CPC’s affairs provided by any person involved in the Alternative Recapitalization Transaction discussions or (B) is on the other side of an information firewall with respect to the officers, partners and employees of such Supporting Party who have been working on the Alternative Recapitalization Transaction and is not acting at the direction of or with knowledge of CPC’s affairs provided by any officers, partners and employees of such Supporting Party who have been working on the Alternative Recapitalization Transaction; and (ii) any securities, loans or other obligations that may be beneficially owned by clients of a Supporting Party, including accounts or funds managed by the Supporting Party, that are not, in each case, Securities.

15.26

Regardless of whether the Alternative Recapitalization Transaction is consummated, CPC shall pay, directly to the applicable Supporting Party and service providers, all reasonable and documented out-of-pocket costs and expenses, incurred at any time in connection with any proceeding of any kind and/or negotiating, pursuing and completing the Alternative Recapitalization Transaction for which CPC was issued an invoice by the applicable Supporting Party or service provider in accordance with the terms hereof, including, for greater certainty, the reasonable and documented out-of-pocket fees and expenses of the Supporting Parties (including attorney fees and disbursements, it being understood and agreed that summary statements shall be sufficient evidence of such fees and expenses for all purposes hereunder), and any other such costs, payments, fees and expenses contemplated by this Agreement.

15.27

For the avoidance of doubt and notwithstanding anything to the contrary in this Agreement, it is expressly agreed that in no event shall the performance of, or the compliance with, (i) the KGI Support Agreement, the CPC Arrangement Agreement (as defined in the KGI Support Agreement) or any document relating to the foregoing, in each case, by any Supporting Party, or all of them, or (ii) the CPC Arrangement Agreement or any document relating to the foregoing by CPC, constitute a breach or violation of the terms of this Agreement, nor give rise to any rights, privileges or entitlements of CPC or any Supporting Party, as applicable, of any kind under this Agreement.

[Remainder of this page intentionally left blank; next page is signature page]

 

 

 

Name of Supporting Party:	CYRUS OPPORTUNITIES FUND II, L.P.
	CYRUS SELECT OPPORTUNITIES FUND, L.P.
	CRESCENT 1, L.P.
	CYR FUND, L.P.
	By:	Cyrus Capital Partners, L.P.
	Its:	Investment Manager
	By:	"Jennifer M. Pulick"
		Name: Jennifer M. Pulick
		Title: Authorized Signatory
Jurisdiction of residence for legal purposes:		Delaware
Name of Supporting Party:	CYRUS OPPORTUNITIES MASTER FUND II, LTD.
	CRS MASTER FUND, L.P.
	CYRUS SELECT OPPORTUNITIES MASTER FUND LTD.
	By:	Cyrus Capital Partners, L.P.
	Its:	Investment Manager
	By:	"Jennifer M. Pulick"
		Name: Jennifer M. Pulick
		Title: Authorized Signatory
Jurisdiction of residence for legal purposes:		Cayman Islands
Email:		SNikov@cyruscapital.com
Address:		Cyrus Capital Partners, L.P.
		Attention: Svetoslav Nikov
		399 Park Avenue, 39th Floor
		New York, New York 10022
Principal amount of Notes:		$84,012,176
Number of Shares:		6,452,141

 

 

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SCHEDULE “A”

JOINDER AGREEMENT

This joinder to the Alternative Recapitalization Support Agreement (this “Joinder Agreement”) is made as of [l], 2016, by and among [l] (the “Consenting Party”), Catalyst Paper Corporation (“CPC”) and the Supporting Parties (defined below) in consideration of the mutual covenants herein contained and benefits to be derived herefrom.

WHEREAS, the Consenting Party desires to become a party to, and to be bound by the terms of, the Support Agreement; and

WHEREAS, pursuant to the terms of the Support Agreement, in order for the Consenting Party to become a party to the Support Agreement, the Consenting Party is required to execute this Joinder Agreement.

NOW, THEREFORE, in consideration of the covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Consenting Party hereby agrees as follows:

1.

Joinder and Assumption of Obligations

Effective as of the date of this Joinder Agreement, the Consenting Party hereby acknowledges that the Consenting Party has received and reviewed a copy of the Support Agreement, understands the Support Agreement and hereby:

(a)

represents and warrants that it is the sole legal and beneficial owner of the Relevant Notes and the number of Shares set forth on the signature page hereto or has the sole investment and voting discretion with respect to the principal amount of Relevant Notes and number of Shares therein indicated;

(b)

acknowledges and agrees to:

(i)

join in the execution of, and become a party to, the Support Agreement as a Supporting Party thereunder, as indicated by its signature below;

(ii)

subject to Sections 1(b)(iv) and 1(c) of this Joinder Agreement, be bound by all agreements of the Supporting Parties under the Support Agreement with the same force and effect as if such Consenting Party was a signatory to the Support Agreement as a Supporting Party and was expressly named as a party therein;

(iii)

if the Relevant Securities have been acquired from a transferor, to be bound by the vote of the transferor if cast prior to the effectiveness of the transfer of the Relevant Securities; and

 

 

(iv)

assume all rights and interests and perform all applicable duties and obligations of the Supporting Parties under the Support Agreement; and

(c)

confirms, as to itself only on a several and not joint basis, each representation and warranty of the Supporting Parties under the Support Agreement, as of the date of this Joinder Agreement, with the same force and effect as if such Consenting Party was a signatory to the Support Agreement and was expressly named as a party therein.

2.

Binding Effect

Except as specifically amended by this Joinder Agreement, all of the terms and conditions of the Support Agreement shall remain in full force and effect as in effect prior to the date hereof.

3.

Miscellaneous

(a)

This Joinder Agreement may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument. Delivery of an executed signature page to this Joinder Agreement by email or facsimile transmission will be effective as delivery of a manually executed counterpart hereof.

(b)

This Joinder Agreement expresses the entire understanding of the parties hereto with respect to the transactions contemplated hereby. No prior negotiations or discussions shall limit, modify, or otherwise affect the provisions hereof.

(c)

Any determination that any provision of this Joinder Agreement or any application hereof is invalid, illegal or unenforceable in any respect and in any instance shall not affect the validity, legality, or enforceability of such provision in any other instance, or the validity, legality or enforceability of any other provisions of this Joinder Agreement.

(d)

This Joinder Agreement shall be governed by and construed in accordance with the laws of the Province of British Columbia and the federal laws of Canada applicable in the Province of British Columbia, without regard to principles of conflicts of law. Each Party submits to the jurisdiction of the courts located in Vancouver, British Columbia in any action or proceeding arising out of or relating to this Joinder Agreement.

[Signature Pages Follow]

 

 

 

Closing Date” means the date on which the Alternative Recapitalization Transaction is consummated.

“Commissioner” means the Commissioner of Competition appointed pursuant to the Competition Act or his designee.

“Competition Act” means the Competition Act, R.S.C., 1985, c. C-34, as amended.

“Competition Act Approval” means (a) the Commissioner shall have issued an advance ruling certificate with respect to the Alternative Recapitalization Transaction under section 102 of the Competition Act; or (b) both of (i) the applicable waiting period under section 123 of the Competition Act shall have expired, been waived or been terminated, or the obligation to provide pre-merger notification in accordance with Part IX of the Competition Act shall have been waived in accordance with paragraph 113(c) of the Competition Act; and (ii) the Commissioner shall have advised in writing that the Commissioner does not at that time intend to make an application under section 92 of the Competition Act in respect of the Alternative Recapitalization Transaction, and any terms and conditions attached to such advice shall be acceptable to CPC in its sole discretion, and such advice has not been withdrawn.

“Competing Offer” has the meaning set forth in Section 5.1(k).

 

“Confidential Information” has the meaning set forth in Section 14.

 

“Confidentiality Period” has the meaning set forth in Section 14.

 

“Court” has the meaning set forth in Section 2.1.

 

“CPC” has the meaning set forth in the preamble.

“Cyrus” means funds and entities managed or controlled by Cyrus Capital Partners, L.P. that are signatories hereto.

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“Debt” has the meaning set forth in Section 3.1(a).

“Governmental Entity” or “Governmental Entities” means any government, regulatory authority, governmental department, agency, commission, bureau, official, minister, Crown corporation, court, board, tribunal or dispute settlement panel or other law, rule or regulation- making organization or entity: (a) having jurisdiction on behalf of any nation, province, territory or state or any other geographic or political subdivision of any of them; or (b) exercising, or entitled any administrative, executive, judicial, legislative, policy, regulatory or taxing authority or power.

“HSR Approval” means the waiting period applicable to the Alternative Recapitalization Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 shall have expired or been terminated, and no Governmental Entity shall have applied for an injunction or other order under the antitrust laws of the United States or any state thereof with respect to the Alternative Recapitalization Transaction.

“Interim Order” means the interim order of the Court issued in the CBCA Proceedings, which, amongst other things, calls and sets the date for a meeting to vote on the Plan.

“Investment Canada Act” means the Investment Canada Act, R.S.C., 1985, c. 28 (1st Supp.), as amended.

“Investment Canada Approval” means approval or deemed approval pursuant to the Investment Canada Act by the Minister of Industry and the Minister of Canadian Heritage, as applicable.

“Joinder Agreement” has the meaning set forth in the preamble.

“Key Consent” means any consent, approval, authorization or order listed on Schedule “D”.

 

 

“KGI” has the meaning set forth in the preamble.

“KGI Support Agreement” has the meaning set forth in the preamble.

“Law” or “Laws” means any law, statute, order, decree, consent decree, judgment, rule regulation, ordinance or other pronouncement having the effect of law whether in Canada, the United States or any other country, or any domestic or foreign state, county, province, city or other political subdivision of any Governmental Entity.

“Legacy Shares” has the meaning set forth on Schedule “C”.

“Legal Requirements” means, with respect to any Person, any requirements under applicable Law, of any stock exchange rules or listing agreement, or of any Governmental Entity having jurisdiction over such Person.

“M&A Transaction” means the transaction described in the preamble.

“Material Adverse Effect” means any event, change, circumstance or effect (each, an “Effect”) occurring up to and including the Closing Date that is, or is reasonably likely to be or become, individually or in the aggregate, materially adverse to CPC and its subsidiaries, taken as a whole, except to the extent that any such Effect directly results from: (a) changes in general economic conditions, the commodities and/or securities markets generally or debt or financing markets generally, including changes in interest rates, exchange rates, lack of liquidity or trading volumes; (b) changes that generally affect the industries in which CPC operates; (c) the commencement, occurrence, continuation or intensification of any war (whether or not declared), sabotage, armed hostilities or acts of terrorism; (d) earthquakes, hurricanes, tsunamis or any other natural disasters, any man-made disasters or any acts of God; (e) changes in applicable Law or GAAP or the interpretation or enforcement thereof; (f) the failure of CPC or any of its Affiliates to meet internal or external financial forecasts (but not the underlying cause of such failure); (g) the loss of CPC’s or any of its Affiliates’ current customers or employees, provided that CPC and its Affiliates have continued to operate their respective businesses on a going concern basis; (h) the announcement of this Agreement or the CPC Arrangement Agreement or any other related agreement and the completion of the transactions contemplated thereby; (i) any action taken (or omitted to be taken) by CPC or any of its Affiliates which is required by this Agreement or the CPC Arrangement Agreement or is consented to or requested by the Supporting Parties; or (j) any change in the market price or trading volume of the Legacy Shares or Notes.

“Mudrick” means the funds and entities managed or controlled by Mudrick Capital Management, L.P. that are signatories hereto.

“Noteholder” has the meaning set forth in the preamble, and “Noteholders” means the holders of Notes collectively.

“Notes” has the meaning set forth in the preamble.

 

 

 

“Securities” means the Notes and the Shares.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Securityholder Approval” means the approval by the Securityholders of the Plan in accordance with the terms of the Plan and/or applicable Law.

“Securityholder Claim” means any Claim of any Person (including, without limitation, any current or former Securityholder or trustee, agent or intermediary) in respect of or in relation to the Securities, including, without limitation, all principal, Accrued Interest and any other amounts payable pursuant to the Securities, the Indenture and any agreement or instrument pursuant or ancillary thereto (including any security or pledge in respect thereof), and any claims or rights of any Person against any subsidiary under, pursuant to or in respect of any guarantee, indemnity or similar agreement in respect of the Securities and any security in respect thereof.

“Securityholders” means, collectively, the holders of the Securities, and “Securityholder” means any individual holder of any of the Securities.

“Senior Secured Term Loan” has the meaning set forth in Section 2.2(b).

“Shareholder” has the meaning set forth in the preamble, and “Shareholders”  means the holders of Shares collectively.

“Shares” has the meaning set forth in the preamble.

“Superior Proposal” has the meaning set forth in Section 10.1(y).

“Supporting Parties’ Rights” has the meaning set forth in Section 8.3(d). “Take-Private” has the meaning set forth on Schedule “C”.

“Termination Date” means the date on which this Agreement is terminated in accordance with the provisions hereof.

“Transaction Documents” means this Agreement and any other agreement or instrument contemplated herein or hereby.

 

 

(b)

Term: Five years from the Closing Date.

(c)

Currency: US dollars.

(d)

Borrower: CPC.

(e)

Rate:

(i)

during year one, 12% paid-in-kind, paid quarterly in arrears;

(i)

during year two, at the election of the borrower, either 12% cash pay, 6% cash pay plus 6% paid-in-kind or, if approved by lenders holding at least 75% in principal amount of the Refinanced Loan, 12% paid-in-kind, in each case, paid quarterly in arrears; and

(ii)

thereafter, at the election of the borrower, either 12% cash pay, or 6% cash pay plus 6% paid-in-kind, in each case, paid quarterly in arrears.

(f)

Amortization: No amortization obligation in year one; thereafter, annual cash flow sweep pursuant to which 75% of excess cash will be applied to repay indebtedness at par, subject to the terms and conditions of the ABL Credit Facility.

(g)

Security: Charge over the working and non-working capital assets of CPC, subject to the liens securing each of the ABL Credit Facility and the Senior Secured Term Loan.

(h)

Guarantors: All existing guarantors of the Notes.

(i)

Representations, Covenants and Events of Default: It is anticipated that the definitive loan agreement will generally follow the form and substance of the existing agreement governing CPC's Senior Secured Term Loan, except for changes thereto (i) contemplated herein or (ii) which are reasonably believed to be necessary or appropriate to take into account other features of the transactions contemplated herein.

(j)

Project finance: Subject to (i) the terms and conditions of the ABL Credit Facility and (ii) approval by lenders holding at least 75% in principal amount of the Refinanced Loan, CPC permitted to (x) form a wholly-owned special purpose subsidiary and (y) transfer thereto certain assets (including fixed assets) to be agreed upon (the “Specified Assets”) of CPC (which assets shall thereupon be released from the liens securing the Refinanced Loan), for the purpose of enabling CPC to cause to be incurred by such special purpose subsidiary project financing and equipment financing indebtedness to be used to fund the purchase or acquisition of assets utilized solely in furtherance of the growth of CPC business lines to be agreed upon. All of the equity interests and other assets in such special purpose subsidiary shall be pledged to secure the Refinanced Loan, subject to the liens securing each of the applicable project financing, the ABL Credit Facility and the Senior Secured Term Loan.

 

 

(k)

Governing law: New York.

(l)

Private & transferable: The Refinanced Loan will: (i) be private, (ii) carry prescribed information rights, and (iii) be transferable to “Eligible Transferees” (the definition of which term shall be agreed upon by the Parties), provided that transfers to competitors of CPC will be restricted other than during the existence of an event of default.

(m)

Administrative agent: The credit documentation governing the Refinanced Loan shall provide for the appointment of an administrative agent, subject to the consent of CPC, which consent will not be unreasonably withheld, conditioned or delayed.

(n)

Going-private transaction (the “Take-Private”): In conjunction with the foregoing transactions, CPC shall cooperate with the Supporting Parties to structure and agree on the terms of a going-private transaction which would be a component of the plan of arrangement pursuant to which the Alternative Recapitalization Transaction will be effectuated. Under such transaction, certain of the Shares not held by the Supporting Parties that have executed this Agreement on the Agreement Date would be exchanged for cash consideration payable by CPC or otherwise repurchased by CPC. Such transaction would be conditioned upon a reduction in the number of security holders of CPC sufficient to permit CPC to be a non-reporting, private company under the applicable securities law regimes of Canada and the United States.

(o)

ABL Credit Facility and the Senior Secured Term Loan: Each of the ABL Credit Facility and the Senior Secured Term Loan shall remain in place with maturity extended to no earlier than three (3) years following the Closing Date and terms remaining substantially the same as those in effect on the date hereof, except for changes thereto which are reasonably believed to be necessary or appropriate to take into account other features of the transactions contemplated herein.

(p)

Voting Agreements: It is contemplated that certain shareholders may agree to vote (or cause to be voted) pursuant to customary voting agreements all of their Shares in all votes and in each vote in favor of the approval, consent, ratification and adoption of the Alternative Recapitalization Transaction, as the case may be (and any resolutions or actions required in furtherance of the foregoing which are, in each case, consistent in all material respects with the terms and conditions of the Plan).

(q)

Tax Efficiency: Tax structure subject to continuing review and discussion. Parties to maximize the tax-efficiency of the transaction structure for the Refinanced Loan lenders, including by, among other things, modifying the terms described above (such as, without limitation, terms relating to the character and term of the Refinanced Loan) if appropriate in order to accomplish the foregoing.

 

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SCHEDULE “D”

KEY CONSENTS

 

The following are Governmental Entities and other third parties who may be required to be notified or whose approvals may be necessary depending on the structure of the transaction:

Part A – Regulatory Approvals

1.

Competition Act Approval (to the extent required);

2.

Investment Canada Approval (to the extent required);

3.

FERC (to the extent required);

4.

HSR Approval (to the extent required); and

5.

Final Order.

Part B – Other Consents

1.

Securityholder Approval;

2.

Indenture;

3.

ABL Credit Facility;

4.

Senior Secured Term Loan;

5.

Caustic Soda Sales Contract dated January 1, 2013 between Canexus Corporation and Catalyst Paper, as amended May 31, 2016;

6.

Power Purchase Agreement dated January 31, 2016 between Catalyst Paper Corporation and Powell River Energy Inc.;

7.

Paper Agreement dated January 1, 2016 between Meredith Corporation and Catalyst Paper USA;

8.

Paper Agreement dated January 1, 2016 between Trend Offset and Catalyst Paper (USA) Inc.;

9.

Paper Sales Agreement dated March 1, 2015 between the American Medical Association and Catalyst Paper Corporation, as amended November 4, 2015;

10.

Agreement dated January 1, 2007 between Yellow Book USA Inc. (now Hibu Inc.) and Catalyst Paper (USA) Inc., as last amended on May 1, 2014;

11.

Supply Agreement dated January 1, 2012 between Yellow Pages Group Corp., (now Yellow Pages Digital & Media Solutions) and Catalyst Pulp and Paper Sales Inc., as amended January 1, 2015; and

 

 

12.

Motor Contract Carrier Transportation Agreement dated July 1, 2009 between NewPage Corporation and Hartt Transportation Systems, Inc.

 

 

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