THIRD AMENDED AND RESTATED CREDIT AGREEMENT

(a)

to Funding LP, the Operating Facility in the maximum amount of Cdn.$80,000,000 (or the Equivalent Amount in US Dollars), convertible to a two year non-revolving term facility; and

(b)

to Pope & Talbot Canada, the Acquisition Facility in the maximum amount of Cdn.$70,000,000 (or the Equivalent Amount in US Dollars), convertible to a one year non-revolving term facility;

(a)

remove Funding LP as the sole Operating Borrower and replace it with Factoring LP and Pope & Talbot Canada, as joint and several Operating Borrowers;

(b)

provide for the grant by Factoring LP to the Administration Agent of security for its obligations as an Operating Borrower and a guarantor of the obligations of Pope & Talbot Canada as Acquisition Borrower; and

(c)

make certain other consequential amendments to the Original Credit Agreement; and

(a)

“ Acceptance Purchase Price ” has the meaning ascribed to that term in Section 4.6.

(b)

“ Accommodation ” means the making of any Advance by a Lender, the creation of a Bankers’ Acceptance by a Lender and the issuance of a Letter of Credit or Guarantee Letter by the Issuing Lender, and includes an Advance and a Bankers’ Acceptance resulting from a Rollover or Conversion (whether requested or deemed to have been requested hereunder).

(c)

“ Accounts Receivable ” means, collectively, Eligible Insured Accounts Receivable and Eligible Uninsured Accounts Receivable.

(d)

“ Acquisition Borrower ” means Pope & Talbot Canada.

(e)

“ Acquisition Facility ” means the Credit Facility described in Section 2.1(b) of this Agreement.

(f)

“ Acquisition Facility Maturity Date ” means, as of any date, the date that is one year after the then current Conversion Date for the Acquisition Facility.

(g)

“ Administration Agent ” means The Toronto-Dominion Bank as agent for the Lenders in respect of the Credit Facilities hereunder, and any successor appointed in accordance with the provisions of this Agreement.

(h)

“ Advances ” means advances made or deemed to have been made by a Lender hereunder, including any Advance resulting from a Rollover or Conversion; Advances may be denominated in Canadian Dollars (a “Canadian Dollar Advance”) or in US Dollars (a “US Dollar Advance”); a Canadian Dollar Advance shall be designated as a “Prime Rate Advance” and a US Dollar Advance may from time to time, by election of the applicable Borrower, be designated as a “Base Rate Advance” or a “Libor Advance”; each of a Prime Rate Advance, a Base Rate Advance and a Libor Advance is a “Type” of Advance.

(i)

“ Affiliate ” of any designated person means any other person that, directly or indirectly, controls or is controlled by or is under common control with such designated person; provided that in any event any person that beneficially owns directly or indirectly securities having 50% or more of the voting power for the election of directors or other governing body or 50% or more of the partnership or other ownership interests of any other person will be deemed to control such corporation or other person; for the purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities or by contract or otherwise.

(j)

“ Amalco Confirmation ” means the instrument dated January 1, 2004 executed and delivered by Pope & Talbot Canada confirming that it is bound by and will observe and perform the obligations of Original Pope & Talbot Canada, under the Original Credit Agreement and the other Credit Facility Documents.

(k)

“ Application ” has the meaning ascribed to that term in Section 5.1.

(l)

“ Assignee ” means a Canadian chartered bank which accepts an assignment of all or any part of a Lender’s interest in the Credit Facilities in accordance with the terms of this Agreement.

(m)

“ Authorized Officer ” means:

(i)

with respect to Pope & Talbot Canada, the chairman, the president, the chief executive officer, the chief financial officer, the chief legal officer, the secretary, the assistant secretary, the treasurer or the assistant treasurer of Pope & Talbot Canada; and

(ii)

with respect to Factoring LP, the chairman, the president, the chief executive officer, the chief financial officer, the chief legal officer, the secretary, the assistant secretary, the treasurer or the assistant treasurer of the Managing General Partner.

(n)

“ BA Equivalent Loan ” means, in relation to a Drawing, a loan in Canadian Dollars made to a Borrower by a Non-Acceptance Lender as part of the Drawing in accordance with the provisions of Section 4.15.

(o)

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

(p)

“ Base Rate ” on any day means the greater of:

(i)

the rate of interest per annum then in effect (based on a year of 365 days) established by TD Bank from time to time as the reference rate of interest for the determination of interest rates that TD Bank charges to customers of varying degrees of creditworthiness for US Dollar loans made by it in Canada; and

(ii)

the sum of (A) the Federal Funds Rate in effect on that day multiplied by 365 and divided by 360, plus (B) 75 basis points per annum;

(q)

“ Base Rate Advances ” means Advances on which interest is determined by reference to the Base Rate in effect from time to time.

(r)

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

(s)

“ Beneficiary ” means, in respect of any Letter of Credit or Guarantee Letter, the beneficiary specified therein or any other person to whom payments may be required to be made pursuant to such Letter of Credit or Guarantee Letter.

(t)

“ Beneficiary Authorization and Charge ” means the instrument dated as of December 31, 2001 executed by Original Pope & Talbot Canada in respect of the Land Trustee and Original Pope & Talbot Canada’s beneficial interest in property held by the Land Trustee.

(u)

“ Borrowers ” means the Operating Borrowers and the Acquisition Borrower, and “ Borrower ” means either one of them.

(v)

“ Borrowing ” means a utilization by the Acquisition Borrower of the Acquisition Facility, or by an Operating Borrower of the Operating Facility, in each case by

way of Prime Rate Advances, Base Rate Advances, Libor Advances, Bankers’ Acceptances, Letters of Credit or Guarantee Letters, and “ Borrowings ” means the aggregate of such utilizations.

(w)

“ Borrowing Base ” means, as at any particular date, the sum of the following:

(i)

90% of Eligible Insured Accounts Receivable which are insured by the Export Development Corporation of Canada, as set out in the most recent Margin Report;

(ii)

85% of other Eligible Insured Accounts Receivable, as set out in the most recent Margin Report;

(iii)

80% of Eligible Uninsured Accounts Receivable, as set out in the most recent Margin Report;

(iv)

50% of Inventory, as set out in the most recent Margin Report;

(x)

“ Borrowing Notice ” means a notice by a Borrower to the Administration Agent substantially in the form attached as Schedule 1 hereto.

(y)

“ Business Day ” means any day of the year, other than a Saturday, Sunday or other day on which:

(i)

major commercial banks are closed in Toronto or Vancouver;

(ii)

where used in the context of a Base Rate Advance, major commercial banks are closed in Toronto, Vancouver or New York City; or

(iii)

where used in the context of a Libor Advance, major commercial banks are closed in Toronto, Vancouver or New York City, or which is not a day for trading by and between banks in US Dollar deposits in the London Eurodollar market.

(z)

“ Business Plan ” means a business plan prepared by Pope & Talbot Canada in respect of the business and financial activities of the Canadian Group Entities for the ensuing year, containing financial forecasts, an operating budget and other matters typically included in an annual business plan.

(aa)

“ Canadian Dollars ” and “ Cdn.$ ” each mean lawful money of Canada.

(ab)

“ Canadian Group Entities ” means, collectively, Pope & Talbot Canada, Factoring LP, the Land Trustee and Finance LP, and all Subsidiaries of each of Pope & Talbot Canada, Factoring LP, the Land Trustee and Finance LP, and “ Canadian Group Entity ” means any one of them.

(ac)

“ Capital Expenditure Plan ” means a detailed financial plan prepared by Pope & Talbot Canada for the ensuing fiscal year covering, inter alia, planned capital expenditures, including maintenance capital expenditures (which need not be separately identified), for the Canadian Group Entities for the ensuing fiscal year, together with proposed sources for financing such capital expenditures and such additional details as the Lenders may reasonably request.

(ad)

“ Capital Lease Obligations ” means, for any person, all obligations of such person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) property, to the extent such obligations are required to be classified and accounted for as capital lease obligations or finance lease obligations on a balance sheet of such person in accordance with GAAP.

(ae)

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

(af)

“ CDS ” means The Canadian Depository for Securities Limited.

(ag)

“ Commitment ” means, as to any Lender, the obligation of that Lender to make Accommodations to the Operating Borrowers under the Operating Facility and to the Acquisition Borrower under the Acquisition Facility in an aggregate principal amount not exceeding the amount set forth opposite such Lender’s name on

Appendix 1 to this Agreement (or the Equivalent Amount in US Dollars), and with such aggregate amount being allocated rateably between the Operating Facility and the Acquisition Facility, as such amounts may be reduced from time to time in accordance with the provisions of this Agreement.

(ah)

“ Commitment Fees ” has the meaning ascribed to that term in Section 2.25.

(ai)

“ Compensation ” has the meaning ascribed to that term in Section 14.7.

(aj)

“ Confirmation ” means the confirmation of the Security Documents dated June 6, 2003 executed by Original Pope & Talbot Canada, Funding LP and the Land Trustee.

(ak)

“ Contingent Payment Letters ” has the meaning ascribed to that term in Section 5.1.

(al)

“ Conversion ” means, in respect of any Drawing or type of Advance, the conversion of the method for calculating interest or fees thereon from one method to another pursuant to Sections 3.8 or 4.9, without increasing the Outstandings under the Credit Facilities.

(am)

“ Conversion Date ” means:

(i)

in respect of the Operating Facility, July 30, 2005, subject to further extension by the Lenders pursuant to Section 2.9(a); and

(ii)

in respect of the Acquisition Facility, July 30, 2005, subject to further extension by the Lenders pursuant to Section 2.9(a).

(an)

“ corporation ” includes a corporation incorporated under the Business Corporations Act (British Columbia) or the Canada Business Corporations Act , and any other corporation wherever or however incorporated.

(ao)

“ Credit Facilities ” means the Operating Facility and the Acquisition Facility to be made available hereunder to the Operating Borrowers and the Acquisition Borrower, respectively, as set out in Section 2.1, and “ Credit Facility ” means either one of them.

(ap)

“ Credit Facility Documents ” means this Agreement, the Security Documents, the Pope & Talbot US Postponement Agreement, the Distribution Agreements and all other documents executed and delivered, or to be executed and delivered, to the Lenders or the Administration Agent by Original Pope & Talbot Canada, Pope & Talbot Canada, Factoring LP, the Land Trustee, Pulp Sales, Pope & Talbot US, Finance LP, Finance One LP or Penn Timber pursuant to this Agreement.

(aq)

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

(ar)

“ Distribution Agreements ” means the Factoring LP Distribution Agreement and the Finance LP Distribution Agreement.

(as)

“ Documents against Payment Transaction ” means a transaction under which a bill of lading or other negotiable document representing title to goods, an invoice and related shipping documents (collectively, the “documents”) are delivered to a bank designated by the buyer of the goods (the “recipient bank”), on the condition that the recipient bank not release the documents to the buyer or any other person unless the recipient bank immediately makes payment of the invoice price to a Lender for credit to a Borrower.

(at)

“ Drawing ” means the creation of Bankers’ Acceptances by a Lender in accordance with the provisions of this Agreement.

(au)

“ Drawing Date ” means any Business Day fixed in accordance with the provisions of this Agreement for a Drawing.

(av)

“ Effective Date ” means the date upon which all conditions set out in Section 6.1 have been fulfilled to the reasonable satisfaction of, or waived by, the Lenders.

(aw)

“ Eligible Insured Accounts Receivable ” means trade accounts receivable of Pope & Talbot Canada or Factoring LP which are insured as to at least 90% under a customary comprehensive accounts receivable insurance policy issued by the Export Development Corporation of Canada or at least 85% under a customary comprehensive accounts receivable insurance policy issued by the Foreign Credit Insurance Association (“FCIA”), Great American Insurance Co. (“GAI”), a wholly owned subsidiary of American Financial Group, Inc., or AIG Global Trade & Political Risk Insurance Company (“AIG”); provided that:

(iii)

any accounts receivable insurance policy issued by FCIA in favour of Pope & Talbot Canada or Factoring LP is backed by GAI; and

(iv)

GAI or AIG, as the case may be, has an Insurer Financial Strength Rating of at least A- or higher by Standard & Poor’s Rating Services;

(ax)

“ Eligible Uninsured Accounts Receivable ” means trade accounts receivable of Pope & Talbot Canada or Factoring LP which:

(i)

are not outstanding more than 95 days (or, in the case of a Letter of Credit Transaction, 180 days) after the invoice date;

(ii)

result from a Documents against Payment Transaction, a North American Open Account Transaction or a Letter of Credit Transaction, or which consist of trade accounts receivable not exceeding Cdn.$5,000,000 in aggregate (or the equivalent thereof in any other currency) resulting from sales of goods on credit to a buyer in Japan;

(iii)

are owed by entities which are not Affiliates of either Borrower, other than such Affiliates as may from time to time be approved by the Lenders, provided that any such approved Affiliate is meeting normal trade terms of credit;

(iv)

are owed by entities which are not bankrupt or insolvent or have not suspended operations (excluding temporary shutdowns or curtailments), other than trade accounts receivable owed by the owner or operator of the Celgar Pulp Mill in the vicinity of Castlegar, British Columbia, provided such owner or operator is meeting normal trade terms of credit;

(v)

are not subject to any mortgage, charge, lien, security interest or other encumbrance, other than Permitted Liens;

(vi)

are not subject to a material claim or assertion of a right of set-off by the account debtor; and

(vii)

would not be required to be treated as doubtful accounts receivable.

(ay)

“ Envirochem Report ” means the report of Envirochem Services Inc. dated December 18, 2000 entitled “Pre-Acquisition Environmental Due Diligence Review of Norske Skog Mackenzie Pulp Operations”.

(az)

“ Environmental Laws ” means all applicable Laws, Governmental Approvals and guidelines or requirements of any Governmental Body (whether or not having the force of Law, and including consent decrees as to which any of the Canadian Group Entities is a party or otherwise subject, and administrative orders which may affect a Canadian Group Entity) relating to public health and safety, protection of the environment, the release of Hazardous Materials or occupation health and safety.

(ba)

“ Equivalent Amount ” means, on a particular date in respect of any amount expressed in a particular currency (the “first currency”), the equivalent amount expressed in a second designated currency (the “second currency”) determined by reference to the Bank of Canada noon rate at which the first currency may be exchanged into the second currency as published on the Reuters Screen page BOFC. In the event that such rate does not appear on such Reuters page, such rate shall be ascertained by reference to any other means (as selected by the Administration Agent) by which such rate is quoted or published from time to time by the Bank of Canada; provided that if, at the time of any such determination, for any reason, no such exchange rate is being quoted or published, the Administration Agent may use such reasonable method as it considers appropriate to ascertain such rate, and the resulting determination shall be conclusive absent manifest error.

(bb)

“ Event of Default ” means any of the events specified in Section 12.1.

(bc)

“ Face Amount ” means, in respect of:

(i)

a Bankers’ Acceptance, the amount payable to the holder thereof on its maturity; and

(ii)

a Letter of Credit or Guarantee Letter, the maximum amount payable to the Beneficiary.

(bd)

“ Factoring LP ” means P&T Factoring Limited Partnership, a limited partnership formed under the Partnership Act (British Columbia), and its successors.

(be)

“ Factoring LP Distribution Agreement ” means a distribution agreement executed by Factoring LP, Pulp Sales, Pope & Talbot Canada and Pope & Talbot US with the Administration Agent, in form and content satisfactory to the Lenders.

(bf)

“ Factoring LP Documents ” means, together, the Factoring LP Security Agreement and the Factoring LP Distribution Agreement.

(bg)

“ Factoring LP Limited Partnership Agreement ” means the limited partnership agreement dated November 10, 2004 made among Pulp Sales, Pope & Talbot Canada and Pope & Talbot US in respect of Factoring LP.

(bh)

“ Factoring LP Security Agreement ” means a general security agreement executed by Factoring LP in favour of the Administration Agent granting to and creating in favour of the Administration Agent, for the benefit of the Lenders, a security interest over all present and after-acquired personal property of Factoring LP, in form and content satisfactory to the Lenders.

(bi)

“ Federal Funds Rate ” means, for any day, an interest rate per annum expressed on the basis of a 360 day year equal to the weighted average (rounded upwards if necessary to the next 0.01%) of the rates on overnight federal funds transactions with members of the United States Federal Reserve System arranged by federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York; or, if such rate is not so published for any day which is a Business Day, the average (rounded upwards if necessary to the next 0.01%) of the quotations at approximately 11:00 a.m. (New York time) for such day for such transactions received by the Administration Agent from three federal funds brokers of recognized standing selected by the Administration Agent in its sole discretion.

(bj)

“ Finance LP ” means P&T Finance Two Limited Partnership, a limited partnership formed under the Partnership Act (British Columbia), and its successors.

(bk)

“ Finance LP Distribution Agreement ” means the agreement dated as of April 2, 2004 among the Administration Agent, Finance LP, Finance One LP and Penn Timber.

(bl)

“ Finance LP Security Agreement ” means the security agreement dated as of April 2, 2004 executed by Finance LP granting to and creating in favour of the Administration Agent, for the benefit of the Lenders, a security interest over all present and after-acquired personal property of Finance LP.

(bm)

“ Finance One LP ” means P&T Finance One Limited Partnership, a limited partnership formed under the Partnership Act (British Columbia), and its successors.

(bn)

“ Forest Act ” means the Forest Act (British Columbia) in effect on the Effective Date, all amendments and supplements thereto, all regulations and rules made pursuant thereto and all Ministry of Forests policy statements, guidelines, orders or decisions relating thereto.

(bo)

“ Funded Debt ” means, without duplication, all Indebtedness of the Canadian Group Entities, on a combined basis (excluding (i) Indebtedness described in paragraph (v) of the definition thereof, and (ii) the first Cdn.$20,000,000 of reforestation Obligations), provided that, in the case of Indebtedness under Treasury Contracts, an amount shall be included in respect thereof only to the extent such amount represents the net obligation of a Canadian Group Entity under a terminated Treasury Contract.

(bp)

“ Funding LP ” means P&T Funding Limited Partnership, a limited partnership formed under the Partnership Act (British Columbia).

(bq)

“ GAAP ” means, in relation to any person at any time, accounting principles generally accepted in Canada as recommended in the Handbook of the Canadian Institute of Chartered Accountants, applied on a basis consistent with the most recent financial statements of such person (except for changes resulting from a change in Canadian generally accepted accounting principles), provided only that revenue will be recognized in accordance with generally accepted accounting principles in the United States of America as per Securities Exchange Commission Staff Accounting Bulletin No. 101.

(br)

“ General Partners ” means the Managing General Partner and Penn Timber, in its capacity as the general partner of Finance LP, and any successor or other general partner of Finance LP, and “ General Partner ” means either one of them.

(bs)

“ Governmental Approval ” means any permit, licence, approval, consent, order, right, certificate, judgment, writ, injunction, award, determination, direction, decree, authorization, franchise, privilege, grant, waiver, exemption and other similar concession or by-law, rule or regulation, whether or not having the force of Law, of, by or from any Governmental Body.

(bt)

“ Governmental Body ” means any government (including without limitation any federal, provincial, state, municipal or local government) or political subdivision or any agency, authority, bureau, central bank, monetary authority, commission, department or instrumentality thereof, or any court or tribunal, whether foreign or domestic, having jurisdiction over the Canadian Group Entities.

(bu)

“ Guarantee ” means, with respect to any person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such person guaranteeing or in effect guaranteeing any Indebtedness, dividend or other financial obligation of any other person in any manner, whether directly or indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by such person:

(i)

to purchase such Indebtedness or any property constituting security therefor;

(ii)

to advance or supply funds for the purchase or payment of such Indebtedness or to maintain any working capital or other balance sheet condition or any income statement condition of any other person or otherwise to advance or make available funds for the purchase or payment of such Indebtedness;

(iii)

to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such Indebtedness of the ability of any other person to make payment of the Indebtedness; or

(iv)

otherwise to assure the owner of such Indebtedness against loss in respect of payment thereof;

(bv)

“ Guarantee Letters ” means letters of guarantee issued by the Issuing Lender pursuant to Article 5.

(bw)

“ Guarantors ” means, collectively:

(i)

the Land Trustee;

(ii)

Finance LP;

(iii)

Pope & Talbot Canada in its capacity as a guarantor of the obligations of Factoring LP pursuant to Article 10 hereof; and

(iv)

Factoring LP in its capacity as a guarantor of the obligations of Pope & Talbot Canada pursuant to Article 10 hereof.

(bx)

“ Harmac Mill ” means the pulp mill and related facilities and operations located in Nanaimo, British Columbia.

(by)

“ Hazardous Materials ” means:

(i)

any oil, flammable substances, explosives, radioactive materials, hazardous wastes or substances, toxic wastes or substances or any other wastes, contaminates, materials or pollutants which:

(A)

pose a hazard to any real property, or to persons on or about any real property; or

(B)

cause any real property to be in violation of any Law;

(ii)

asbestos in any form which is or could become friable, urea formaldehyde foam insulation, transformers or other equipment which contain dielectric fluid containing levels of polychlorinated biphenyls in excess of limits prescribed by Law, or radon gas;

(iii)

any chemical, material or substance defined as or included in the definition of “dangerous goods”, “deleterious substance”, “hazardous substances”, “hazardous wastes”, “hazardous materials”, “extremely hazardous wastes”, “restricted hazardous waste”, “toxic substances”, “waste” or words of similar import under any Law, including the Canadian Environmental Protection Act (Canada), Fisheries Act (Canada), Transportation of Dangerous Goods Act (Canada), Canada Water Act (Canada) and any applicable provincial legislation; and

(iv)

any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any Governmental Body or which may or could pose a hazard to the occupants of any real property or any other person coming upon any real property or adjacent or surrounding property;

(bz)

“ Indebtedness ” means, with respect to any person at any time, the sum of the following (without duplication):

(i)

all Obligations of such person for borrowed money, including without limitation all Obligations for borrowed money which are convertible into shares of stock or other equity interests of such person (whether at the option of such person or of the holder) until such conversion is actually made;

(ii)

all Obligations of such person evidenced by bonds, debentures, notes or similar instruments;

(iii)

all Capital Lease Obligations of such person;

(iv)

all Obligations in respect of which interest charges are customarily paid by such person;

(v)

all shares of stock or other equity interests of such person that are required to be redeemed or repurchased by such person at the option of the holder thereof, whether upon the happening of any event or contingency or otherwise;

(vi)

all Obligations of such person for the deferred purchase price of property or services acquired by such person or any predecessor and all Obligations of such person under any conditional sale or other title retention agreement with respect to any property;

(vii)

all Obligations secured by any Lien upon or in any property owned by such person whether or not such person has assumed or become liable for the payment of such Obligations;

(viii)

all Obligations of such person in respect of letters of credit, letters of guarantee, bankers’ acceptances or similar credit instruments;

(ix)

all Obligations of such person under Treasury Contracts, including termination liabilities;

(x)

all reforestation Obligations of such person; and

(xi)

any Guarantee by such person of any Obligation of a type described in any of clauses (i) through (x) above.

(ca)

“ Insurer Financial Strength Rating ” means the Insurer Financial Strength Rating of Standard & Poor’s Rating Services, representing the current opinion of Standard & Poor’s Rating Services of the financial security characteristics of an insurance organization with respect to its ability to pay under its insurance policies and contracts in accordance with their terms.

(cb)

“ Intercompany Receivables Sale Agreement ” means the agreement dated November 29, 2004 between Pope & Talbot Canada and Factoring LP providing for, inter alia , the sale of accounts receivable by Pope & Talbot Canada to Factoring LP.

(cc)

“ Interest Expense ” means, for any period, all amounts that would, in accordance with GAAP consistently applied, be deducted in computing Net Income on account of interest on Indebtedness, including imputed interest in respect of Capital Leases, accrued interest (whether or not paid) and amortization of debt discount and expense.

(cd)

“ Interest Period ” means, for each Libor Advance, a period commencing:

(i)

in the case of the initial Interest Period for such Advance, on the date of such Advance; and

(ii)

in the case of any subsequent Interest Period for such Advance, on the last day of the immediately preceding Interest Period;

(ce)

“ Inventory ” means inventory of Pope & Talbot Canada comprising finished goods, work-in-progress consisting of rough lumber (pre-planed), and raw materials, provided such inventory is located in a jurisdiction where the security interest constituted by the Security Documents in respect of such inventory has been perfected, and provided further that such inventory is not subject to any mortgage, charge, lien, consignment, title retention arrangement, security interest or other encumbrance, other than Liens described in clauses (i), (ii), (iii) and (xi) of the definition of Permitted Liens.

(cf)

“ Inventory and Receivables Sale Agreement ” means the agreement dated June 15, 2001 among Original Pope & Talbot Canada, Mackenzie Pulp and Funding LP providing for, inter alia , the sale of inventory and accounts receivable by Pope & Talbot Canada to Funding LP.

(cg)

“ Issuing Lender ” means, subject to Section 13.10, TD Bank.

(ch)

“ Judgment Currency ” means the currency in which a court of competent jurisdiction may render judgment in connection with any litigation relating to the repayment of Outstandings under this Agreement.

(ci)

“ Land Trustee ” means Mackenzie Pulp Land Ltd., a company incorporated under the Company Act (British Columbia), and its successors.

(cj)

“ Land Trustee Debenture ” means the debenture/security agreement in the principal amount of Cdn.$160,000,000 dated June 15, 2001, executed by the Land Trustee in favour of the Administration Agent for the benefit of the Lenders, containing a fixed charge over all real property interests of the Land Trustee and a floating charge and security interest over all present and after-acquired personal property of the Land Trustee, as amended by a modification of debenture/security agreement dated as of October 30, 2003 executed by the Land Trustee and the Administration Agent.

(ck)

“ Law ” means any law (including common law and equity), constitution, statute, order, treaty, regulation or rule having the force of law of any Governmental Body.

(cl)

“ Lender Assignment Agreement ” means an assignment agreement substantially in the form attached as Schedule 6.

(cm)

“ Lender’s Proportion ” means, with respect to each Lender, the percentage of the aggregate Commitments of all Lenders represented by such Lender’s individual Commitment.

(cn)

“ Lenders ” means The Toronto-Dominion Bank, Bank of Montreal, The Bank of Nova Scotia, Canadian Western Bank, HSBC Bank Canada and Caisse centrale Desjardins, and their respective successors and Assignees.

(co)

“ Letters of Credit ” means letters of credit issued by the Issuing Lender pursuant to Article 5.

(cp)

“ Letter of Credit Transaction ” means a transaction under which a negotiable letter of credit is issued by a bank designated by the buyer of goods (the “issuing bank”) under which the issuing bank agrees that, when the issuing bank receives a bill of lading or other negotiable document representing title to the goods, an invoice and related shipping documents (collectively, the “documents”) which comply with the terms of the letter of credit, the issuing bank will pay the invoice price to the holder of the letter of credit, either upon receipt of the documents by the issuing bank or on a date specified in the letter of credit which is not later than 180 days after the date of the bill of lading; provided that any such transaction will not be a Letter of Credit Transaction for purposes of this Agreement unless:

(i)

a Lender has possession of the original negotiable letter of credit;

(ii)

documents have been delivered to a Lender which comply with the terms of the letter of credit; and

(iii)

the issuing bank is acceptable to a Lender.

(cq)

“ Libor ”, with respect to any Interest Period, means:

(i)

the rate of interest (expressed as an annual rate on the basis of a 360 day year) determined by the Administration Agent to be the arithmetic mean (rounded up to the nearest 0.01%) of the offered rates for deposits in US Dollars for a period equal to the particular Interest Period, which rates appear on (A) Page 3750 of the Telerate screen, or (B) if Page 3750 of the Telerate screen is not readily available to the Administration Agent, the Reuters screen LIBO page, in either case as of 11:00 a.m. (London time) on the second Business Day before the first day of that Interest Period;

(ii)

if neither Page 3750 of the Telerate screen nor the Reuters screen LIBO page is readily available to the Administration Agent for any reason, the rate of interest determined by the Administration Agent which is equal to the simple average of the rates of interest (expressed as a rate per annum on the basis of a year of 360 days and rounded up to the nearest 0.01%) at which three of the five largest (as to total assets) Schedule I Banks (as selected by the Administration Agent) would be prepared to offer leading banks in the London interbank market a deposit in US Dollars for a term co-extensive with that Interest Period in an amount substantially equal to the relevant Libor Advance at or about 10:00 a.m. (Toronto time) on the second Business Day before the first day of such Interest Period.

(cr)

“ Libor Advances ” means Advances on which interest is determined by reference to Libor.

(cs)

“ Lien ” means, with respect to any person, any mortgage, lien, pledge, adverse claim, charge, security interest or other encumbrance, or any interest or title of any vendor, lessor, lender or other secured party to or of such person under any conditional sale or other title retention agreement or capital lease, upon or with respect to any property or asset of such person, or the signing of any security agreement authorizing any other person as the secured party to file any financing statement.

(ct)

“ Mackenzie Mill ” means the pulp mill and related facilities and operations located in Mackenzie, British Columbia.

(cu)

“ Mackenzie Pulp ” means Pope & Talbot Mackenzie Pulp Operations Ltd., a corporation continued under the laws of the Province of Alberta.

(cv)

“ Majority Lenders ” means, at any time, Lenders having in excess of 66 2/3% of the Total Commitment.

(cw)

“ Managing General Partner ” means Pulp Sales, in its capacity as managing general partner of Factoring LP, and any successor or other managing general partner of Factoring LP.

(cx)

“ Margin Report ” means a monthly report setting out the amount and containing a breakdown of Eligible Insured Accounts Receivable, Eligible Uninsured Accounts Receivable and Inventory, substantially in the form attached as Schedule 4.

(cy)

“ Material Adverse Effect ” means a material adverse effect:

(i)

on the financial condition, business or prospects of the Canadian Group Entities, taken as a whole;

(ii)

on the ability of Pope & Talbot Canada or Factoring LP to perform its obligations under this Agreement; or

(iii)

on the validity or enforceability of this Agreement, any of the Security Documents, the Pope & Talbot US Postponement Agreement, or either of the Distribution Agreements.

(cz)

“ Material Subsidiary ” means, at any time and from time to time, any of the Canadian Group Entities, other than the Borrowers, whose business or assets form a material part of the business or assets of the Canadian Group Entities taken as a whole, and shall include without limitation the Land Trustee and Finance LP.

(da)

“ Net Income ” means, for any particular period, the net income of the Canadian Group Entities in accordance with GAAP for such period, determined on a combined basis, provided that Net Income shall not include:

(i)

any loss, writedown, gain or other amount classified as an unusual or extraordinary item in accordance with GAAP; or

(ii)

any gain or loss on the disposition of fixed assets or any income or loss attributable to discontinued operations.

(db)

“ Net Worth ” means at any time the net worth of the Canadian Group Entities, on a combined basis, consisting of capital stock, contributed surplus and retained earnings (or, in the case of Factoring LP and Finance LP, contributed capital and retained earnings), less any amounts in respect of intangibles.

(dc)

“ Non-Acceptance Discount Proceeds ” means, for the purposes of a hypothetical sale of a Bankers’ Acceptance under Section 4.15, the amount (rounded to the nearest full cent, with one-half of one cent being rounded up) calculated on the applicable Drawing Date which is equal to the Face Amount of such Bankers’ Acceptance multiplied by the price, where the price is calculated by dividing one by the sum of one plus the product of (i) the Non-Acceptance Discount Rate expressed as a decimal fraction multiplied by (ii) a fraction, the numerator of which is the term of such Banker’s Acceptance in days and the denominator of which is 365, which calculated price will be rounded to the nearest multiple of 0.001%.

(dd)

“ Non-Acceptance Discount Rate ” means, for any day, the CDOR Rate plus seven basis points.

(de)

“ Non-Acceptance Lender ” has the meaning set forth in Section 4.15.

(df)

“ Non-Resident of Canada ” has the meaning assigned to the expression “non-resident” in the Income Tax Act (Canada).

(dg)

“ Normalized EBITDA ” means, for any particular period:

(i)

the Net Income for that period;

(ii)

all amounts deducted in computing Net Income for such period in respect of depreciation and amortization, Interest Expense and income taxes;

(iii)

wood products, marketing and administration costs, corporate administration costs and pulp marketing and administration costs charged by Pope & Talbot US (or any of its Affiliates) to a Borrower, a Guarantor or any of the Subsidiaries of Pope & Talbot Canada and deducted in computing Net Income, to a maximum of Cdn.$2,500,000 for each fiscal quarter of Pope & Talbot Canada.

(dh)

“ North American Open Account Transaction ” means a sale of goods on credit to a buyer located in the United States or Canada.

(di)

“ Notice of Repayment or Cancellation ” means a notice substantially in the form attached as Schedule 2.

(dj)

“ Obligations ” means all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

(dk)

“ Operating Borrowers ” means Pope & Talbot Canada and Factoring LP, and “ Operating Borrower ” means either one of them.

(dl)

“ Operating Facility ” means the Credit Facility described in Section 2.1(a) of this Agreement.

(dm)

“ Operating Facility Maturity Date ” means, as of any date, the date that is two years after the then current Conversion Date for the Operating Facility.

(dn)

“ Original Credit Agreement ” has the meaning ascribed to that term in the first recital to this Agreement.

(do)

“ Original Currency ” means the currency in respect of which any Outstandings are owed by a Borrower to a Lender in accordance with the provisions of this Agreement.

(dp)

“ Original Pope & Talbot Canada ” means Pope & Talbot Ltd., a company amalgamated under the Company Act (British Columbia) and subsequently continued under the Companies Act (Nova Scotia), and the predecessor by amalgamation to Pope & Talbot Canada.

(dq)

“ Other Default ” means:

(i)

a material default by a Canadian Group Entity under any material agreement relating to borrowed money in excess of Cdn.$5,000,000 (or its equivalent in any other currency); or

(ii)

a default by a Canadian Group Entity under any other agreement which would reasonably be expected to give rise to a Material Adverse Effect.

(dr)

“ Outstandings ” means, on any day, an amount calculated and expressed in Canadian Dollars (with each relevant US Dollar amount converted, for purposes of such calculation, into its Equivalent Amount in Canadian Dollars) equal to:

(i)

the aggregate principal amount of all Advances under the Credit Facilities;

(ii)

the aggregate Face Amount of all outstanding Bankers’ Acceptances under the Credit Facilities; and

(iii)

the aggregate Face Amount of all issued Letters of Credit and Guarantee Letters under the Credit Facilities.

(ds)

“ Overdraft Advances ” has the meaning ascribed to that term in Section 3.14.

(dt)

“ Participant ” means a person which accepts a grant of participation in all or any part of a Lender’s interest in a Credit Facility in accordance with Section 14.16 of this Agreement.

(du)

“ Penn Timber ” means Penn Timber, Inc., a corporation formed under the laws of the State of Oregon, and its successors.

(dv)

“ Permitted Liens ” means:

(i)

carriers’, warehousemen’s, builders’, mechanics’, woodsmen’s, landlords’ and other like Liens arising in the ordinary course of business by operation of law for sums not yet delinquent or being contested in good faith, if such reserves as are required by GAAP have been made with respect thereto and the Lenders have been provided with such security for payment of the contested amounts (and any interest, penalties or other costs) as the Lenders may require;

(ii)

Liens resulting from judgments or awards not giving rise to an Event of Default, the time for the appeal or petition for re-hearing of which shall not have expired or in respect of which a Canadian Group Entity shall in good faith be prosecuting an appeal or proceeding for review and in respect of which:

(A)

a stay of execution pending such appeal or proceeding for review shall have been obtained; or

(B)

the Lenders have been provided with such security as the Lenders may require for payment of such judgment (including interest and other costs);

(iii)

Liens or trusts for taxes, assessments and other governmental charges either not yet due and payable or being contested in good faith if such reserves as are required by GAAP have been made with respect thereto and the Lenders have been provided with such security for payment of the contested amounts (and any interest, penalties or other costs) as the Lenders may require;

(iv)

pledges or deposits made under workers’ compensation laws or similar legislation or good faith deposits or bonds or similar instruments to secure the performance of bids, tenders, leases, contracts (other than for the payment of Indebtedness) or expropriation proceedings, or deposits to secure surety and appeal bonds or deposits as security for contested taxes or export or import duties, levies, charges or surcharges;

(v)

the right reserved to or vested in any Governmental Body by the terms of any lease, licence, franchise, tenure, contract, grant or permit acquired by a Canadian Group Entity, or by any statutory provisions, to terminate any such lease, license, franchise, tenure, contract, grant or permit (provided that such right is not then being exercised), or to require annual or other periodic payments or the performance of obligations or imposition of conditions, as a condition of the continuance thereof;

(vi)

security given to a public utility or to any Governmental Body when required by such public utility or Governmental Body in connection with operations in the ordinary course of business of a Canadian Group Entity;

(vii)

the reservations, limitations, provisos and conditions, if any, expressed in any grants from the Crown in the right of Canada or in the right of any Province or Territory thereof;

(viii)

minor survey exceptions, minor encumbrances, leases, rights or options to repurchase, restrictions, easements or reservations of or rights of others for rights of way, sewers, electric lines, telegraph and telephone lines and other similar purposes, title defects or irregularities or zoning or other restrictions as to the use of real properties or Liens incidental to the conduct of business or the ownership of properties which were not incurred in connection with the incurrence of Indebtedness or other extensions of credit and which do not in the aggregate materially detract from the value of such properties or materially impair their use in the operation of the business of a Canadian Group Entity;

(ix)

Purchase Money Mortgages, Liens constituted by capital leases or finance leases which create Capital Lease Obligations, and Liens created by operation of Law in respect of leases of personal property having a term of more than one year;

(x)

any Lien renewing, extending or refunding any Permitted Lien securing Indebtedness; provided that

(A)

the principal amount of Indebtedness secured by such Lien immediately prior to such extension, renewal or refunding is not increased or the maturity thereof reduced;

(B)

such Lien is not extended to any other property; and

(C)

immediately after such extension, renewal or refunding no Default or Event of Default would exist;

(xi)

Liens created by or contained in the Security Documents and Liens (if any) created by or contained in the Pope & Talbot US Postponement

Agreement or in any postponement agreement or subordination agreement entered into by the Lenders (or the Administration Agent on their behalf) with any other lender to or creditor of a Canadian Group Entity;

(xii)

rights of set-off, consolidation and combination available to a deposit-taking institution in respect of deposit accounts of a Canadian Group Entity maintained with that institution; and

(xiii)

rights of any counterparty to a Treasury Contract with a Canadian Group Entity to net amounts payable thereto under that Treasury Contract or other Treasury Contracts therewith against amounts payable thereby to the counterparty under that Treasury Contract or other Treasury Contracts.

(dw)

“ person ” includes an individual, partnership, corporation, trust, unincorporated association, joint venture or other entity, or a foreign state or political subdivision thereof or any agency of such state or subdivision.

(dx)

“ Pope & Talbot Canada ” means Pope & Talbot Ltd., a corporation continued under the Canada Business Corporations Act , and its successors.

(dy)

“ Pope & Talbot Canada Harmac Debenture ” means a debenture/security agreement in the principal amount of Cdn.$160,000,000 executed by Pope & Talbot Canada in favour of the Administration Agent for the benefit of the Lenders, containing a fixed charge over all real property interests, and a floating charge and security interest over all present and after-acquired personal property of, the Acquisition Borrower in connection with the Harmac Mill, in form and content satisfactory to the Lenders.

(dz)

“ Pope & Talbot Canada Mackenzie Debenture ” means the debenture/security agreement in the principal amount of Cdn.$160,000,000 dated as of December 31, 2001 executed by Original Pope & Talbot Canada in favour of the Administration Agent for the benefit of the Lenders, containing a fixed charge over all real property interests, and a floating charge and security interest over all present and after-acquired personal property of, the Acquisition Borrower in connection with the Mackenzie Mill, as subsequently amended pursuant to the Second Amending Agreement.

(ea)

“ Pope & Talbot Canada Security Agreement ” means the inventory and accounts security agreement dated as of June 15, 2001 executed by Original Pope & Talbot Canada in favour of the Administration Agent granting to and creating in favour of the Administration Agent, for the benefit of the Lenders, a security interest over all accounts receivable and inventory of Original Pope & Talbot Canada, as subsequently amended pursuant to the Second Amending Agreement.

(eb)

“ Pope & Talbot US ” means Pope & Talbot, Inc., a corporation incorporated under the laws of the State of Delaware, and its successors.

(ec)

“ Pope & Talbot US Postponement Agreement ” means the postponement agreement dated as of June 15, 2001 between the Administration Agent, the Lenders, Original Pope & Talbot Canada and Pope & Talbot US, as the same may be amended, modified, supplemented, restated or replaced from time to time.

(ed)

“ Power of Attorney ” means the power of attorney regarding Bankers’ Acceptances contained in Section 4.3.

(ee)

“ Prime Rate ” on any day means the greater of:

(i)

the rate of interest per annum then in effect (based on a year of 365 days) established and reported by TD Bank to the Bank of Canada from time to time as the reference rate of interest for the determination of interest rates that TD Bank charges to customers of varying degrees of creditworthiness in Canada for Canadian Dollar loans made by it in Canada and designated by it as its “prime rate”; and

(ii)

the sum of:

(A)

the average one month bankers’ acceptance rate as quoted on Reuters Service page CDOR as at 10:00 a.m. (Toronto time) on such day, expressed as a rate per annum; plus

(B)

100 basis points;

(ef)

“ Prime Rate Advances ” means Advances on which interest is determined by reference to the Prime Rate in effect from time to time.

(eg)

“ Pulp Sales ” means Pope & Talbot Pulp Sales U.S., Inc., a corporation formed under the laws of the State of Delaware, and its successors.

(eh)

“ Purchase Money Mortgage ” means:

(i)

any Lien existing on any property acquired by a Canadian Group Entity from an arm’s-length third party after the date hereof and assumed thereby at the time of such acquisition, provided such Lien is secured only by the property so acquired and not by any other property or assets thereof; and

(ii)

any Lien created to secure all or any part of the purchase price, or to secure Indebtedness incurred or assumed to pay all or any part of the purchase price or cost of development or construction, of property (or any improvement thereof) acquired or constructed by a Canadian Group Entity, provided that:

(A)

any such Lien shall extend solely to the item or items of such property (or improvement thereof) so acquired or constructed and, if required by the terms of the instrument originally creating such Lien, other property (or any improvement thereon) which is an

improvement to or is acquired for specific use in connection with such acquired or constructed property (or improvement thereon) or which is real property being improved by such acquired or constructed property (or improvement thereon);

(B)

the principal amount of the Indebtedness secured by any such Lien shall at no time exceed an amount equal to 100% of the lesser of:

(1)

the cost to such Borrower, Guarantor or Subsidiary of the property (or improvement thereon) so acquired or constructed; and

(2)

the fair market value (as determined in good faith by the directors of such Borrower, Guarantor or Subsidiary, or the directors of the general partner thereof, as the case may be) of such property (or improvement thereon) at the time of such acquisition or construction; and

(C)

any such Lien shall be created contemporaneously with, or within 180 days after, the acquisition or completion of development or construction of such property; provided that such period may be extended for an additional 90 days if a written commitment to finance such acquisition, development, construction or improvement is provided.

(ei)

“ Quarterly Compliance Certificate ” means the certificate of the chief financial officers or other Authorized Officer of each of Pope & Talbot Canada and Factoring LP, required to be delivered to the Lenders following each fiscal quarter of Pope & Talbot Canada and Factoring LP pursuant to Section 8.1(o), substantially in the form attached as Schedule 3.

(ej)

“ Receivables Sale Agreement Initial Date ” means October 30, 2003.

(ek)

“ Receivables Sale Agreements ” means, collectively:

(i)

the receivables purchase agreement dated the Receivables Sale Agreement Initial Date entered into between Original Pope & Talbot Canada, Funding LP and TD Bank, as amended by a First Amendment to Receivables Sale Agreement dated as of September 30, 2004 among Pope & Talbot Canada, Funding LP and TD Bank, and by a Second Amendment to Receivables Sale Agreement dated as of the date hereof among Pope & Talbot Canada, Funding LP, Factoring LP and TD Bank, together with the performance guarantees granted in favour of TD Bank pursuant thereto by Original Pope & Talbot Canada in respect of the obligations of Funding LP thereunder, and by Pope & Talbot Canada in respect of the obligations of Factoring LP thereunder, as all of the same may be further amended, modified, supplemented, restated or replaced from time to time; and

(ii)

any other similar agreements and guarantees entered into by a Borrower from time to time after the Receivables Sale Agreement Initial Date with any other Lender.

(el)

“ Receivables Sale Agreement Secured Portion ” means the aggregate amount of US$10,000,000 (or the Equivalent Amount in Canadian Dollars).

(em)

“ Requesting Operating Borrower ” has the meaning ascribed to that term in Section 5.1.

(en)

“ Responsible Officer ” means:

(i)

with respect to Pope & Talbot Canada, any Authorized Officer of Pope & Talbot Canada, any vice president, treasurer or controller of Pope & Talbot Canada, and any other officer of Pope & Talbot Canada responsible for monitoring compliance with, or otherwise administering, this Agreement; and

(ii)

with respect to Factoring LP, any Authorized Officer of Factoring LP, any vice president, treasurer or controller of the Managing General Partner, and any other officer of the Managing General Partner responsible for monitoring compliance with, or otherwise administering, this Agreement.

(eo)

“ Rollover ” means:

(i)

the issuance of Bankers’ Acceptances on any day in a Face Amount not exceeding the Face Amount of Bankers’ Acceptances maturing on that day, the proceeds from which are used (directly or indirectly) to pay the maturing Bankers’ Acceptances; and

(ii)

the continuation of a Libor Advance for a further Interest Period without increasing the principal amount thereof.

(ep)

“ Second Amending Agreement ” means the second amending agreement to amended and restated credit agreement dated October 30, 2003 among Original Pope & Talbot Canada, Funding LP, the Land Trustee, the Lenders and the Administration Agent.

(eq)

“ Second Confirmation ” means the confirmation of the Security Documents dated June 11, 2004 executed by Pope & Talbot Canada, Funding LP, the Land Trustee and Finance LP.

(er)

“ Security Documents ” means, collectively:

(i)

the Pope & Talbot Canada Security Agreement;

(ii)

the Pope & Talbot Canada Mackenzie Debenture;

(iii)

the Pope & Talbot Canada Harmac Debenture;

(iv)

security granted by Pope & Talbot Canada under section 427 of the Bank Act (Canada);

(v)

the Amalco Confirmation;

(vi)

the Factoring LP Security Agreement;

(vii)

the Beneficiary Authorization and Charge;

(viii)

the Land Trustee Debenture;

(ix)

the Finance LP Security Agreement;

(x)

the Confirmation;

(xi)

the Second Confirmation;

(xii)

the Third Confirmation; and

(xiii)

any other documents or instruments from time to time delivered to the Administration Agent and the Lenders to secure the obligations of any of the Borrowers or the Guarantors under this Agreement.

(es)

“ Subsidiary ” means, with respect to any person, any corporation, partnership or other entity of which or in which such person (alone or with its Subsidiaries) owns directly or indirectly more than 50% of the combined voting power of all classes of Voting Stock.

(et)

“ Taxes ” means any and all present or future taxes (including without limitation all stamp, documentary, excise or property taxes), levies, imposts, deductions, charges or withholdings and liabilities with respect thereto.

(eu)

“ TD Bank ” means The Toronto-Dominion Bank or any successor.

(ev)

“ this Agreement ”, “herein”, “hereof”, “hereto” and “hereunder” and similar expressions mean and refer to this Agreement as supplemented or amended and not to any particular Article, Section, Schedule or other portion hereof, and the expressions “Article”, “Section” and “Schedule” followed by a number mean and refer to the specified Article, Section or Schedule of this Agreement.

(ew)

“ Third Confirmation ” means a confirmation of the Security Documents executed by Pope & Talbot Canada, the Land Trustee and Finance LP, in form and content satisfactory to the Lenders.

(ex)

“ Timber Tenures ” mean all forest licences, timber sale licences, timber licences, tree farm licences, pulpwood agreements, woodlot licences, free use permits, licences to cut, road permits, road use permits, cutting permits and special use permits granted to a Borrower or a Material Subsidiary pursuant to the Forest Act and all other timber tenures or entitlements of a Borrower or a Material Subsidiary in respect of timber now owned or hereafter acquired thereby together

with all rights, authorizations and benefits connected therewith or appurtenant thereto and all renewals, replacements, amendments, subdivisions, consolidations, partitions, conversions or substitutions thereof or therefor.

(ey)

“ Total Capitalization ” means the sum of:

(i)

Funded Debt; and

(ii)

Net Worth.

(ez)

“ Total Commitment ” means the sum of the Commitments of the Lenders under the Acquisition Facility and the Operating Facility from time to time, irrespective of Borrowings.

(fa)

“ Treasury Contracts ” means:

(i)

any agreement entered into by a Borrower or a Material Subsidiary to control, fix or regulate currency exchange fluctuations or the rate or rates of interest payable on indebtedness, commodity price fluctuations or to purchase commodities under term contracts for the physical supply of commodities, and includes commodity price protection agreements, commodity price hedging arrangements, contracts for the purchase or supply of commodities, interest rate swaps, interest rate agreements, caps, collars, futures and all manner of hedging agreements and other like money or commodity market facilities; and

(ii)

Receivables Sale Agreements.