EXHIBIT 1.2 DEBT UNDERWRITING AGREEMENT

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 1.2

$310 million principal amount of 9.25% Senior Notes dues 2013

MERCER INTERNATIONAL INC.

DEBT UNDERWRITING AGREEMENT

February 8, 2005

RBC Capital Markets Corporation
Credit Suisse First Boston LLC
As the Representatives of the
        several underwriters named in Schedule I hereto

c/o RBC Capital Markets Corporation
One Liberty Plaza, 165 Broadway
New York, NY 10006-1404

Ladies and Gentlemen:

        Mercer International Inc., a business trust organized and existing under the laws of Washington (the " Company "), proposes, subject to the terms and conditions stated herein, to issue and sell to the several underwriters (the " Underwriters ") named on Schedule I hereto for whom you are acting as the representatives (the " Representatives ") $310 million aggregate principal amount (the " Securities ") of its 9.25% Senior Notes due 2013 as set forth below, all to be issued under an indenture, dated as of December 10, 2004 (the "Base Indenture "), between the Company and Wells Fargo, N.A., as trustee (the "Trustee" ), as supplemented by a First Supplemental Indenture, to be dated February 14, 2005 (the "First Supplemental Indenture" , and together with the Base Indenture, the "Indenture" ), between the Company and Trustee. The respective principal amount of Securities to be purchased by the several Underwriters are set forth opposite their names in Schedule I hereto.

        As the Representatives, you have represented to the Company (a) that you are authorized to enter into this Agreement on behalf of the several Underwriters, and (b) that the several Underwriters are willing, acting severally and not jointly, to purchase the aggregate principal amount of Securities set forth opposite their respective names in Schedule I . The offering of the Securities pursuant to this Agreement is hereinafter referred to as the " Offering ." This Agreement, the Securities and the Indenture are hereinafter sometimes referred to collectively as the " Operative Documents ."

        The Company has filed with the Securities and Exchange Commission (the " Commission ") a registration statement on Form S-3 (file no. 333-121172 filed on December 10, 2004. Such registration statement, as amended at the date hereof, including the exhibits thereto, schedules thereto, the documents incorporated or deemed to be incorporated by reference therein is herein referred to as the " Registration Statement. " The Registration Statement also includes a prospectus, which incorporated all of the documents noted therein by reference (the " Basic Prospectus "), prepared in accordance with Rule 415 of the Securities Act of 1933, as amended, (the " Securities Act ") relating to certain debt and equity securities of the Company, as the case may be, and the offering thereof from time to time and the Prospectus Supplement (as hereinafter defined). The Registration Statement was declared effective by the Commission on December 23, 2004. As provided herein, the Company shall hereafter file with or transmit for filing with the Commission, a final prospectus supplement specifically relating to the Securities (the " Final Prospectus Supplement " and together with the preliminary prospectus supplement, the " Prospectus Supplement ") pursuant to Rule 424 under the Securities Act in compliance with the timing requirements of the relevant subsection of Rule 424. The term " Prospectus " means the Basic Prospectus together with the Prospectus Supplement. As used herein, the terms "Basic Prospectus," "Prospectus," and "Prospectus Supplement" shall include in each case the documents incorporated or deemed to be incorporated by reference therein. The terms "supplement," "amendment" and "amend" as used herein shall include all documents deemed to be incorporated by reference in the Prospectus that are filed subsequent to the date of the Basic Prospectus by the Company with the Commission pursuant to the Securities Exchange Act of 1934, as amended (the " Exchange Act ").

        In addition to sales in the United States pursuant to the Registration Statement, the Company will offer and sell the Securities in British Columbia and Ontario (the " Qualifying Provinces ") and in other countries selected by the Underwriters, subject to Section 3 hereof. As such, the Company has also prepared and filed with the Canadian securities regulatory authorities (the " Canadian Securities Commissions ") in each of the Qualifying Provinces, a Canadian preliminary MJDS Prospectus dated January 11, 2005 (the " Canadian Preliminary MJDS Prospectus ") under National Instrument 71-101 —  The Multijurisdictional Disclosure System (" NI 71-101 ") and National Instrument 52-107 —  Acceptable Accounting Principles, Auditing Standards and Reporting Currency ( " NI 52-107" ), which includes the Basic Prospectus (with such deletions therefrom and additions thereto as are permitted or required by NI 71-101), in order to qualify the offering and sale of the Securities in the Qualifying Provinces. The British Columbia Securities Commission, on behalf of itself and the other Canadian Securities Commission, issued a decision document dated January 12, 2005 in accordance with the procedures established by National Policy 43-201 of the Canadian Securities Administrators confirming that receipts have been issued for the Canadian Preliminary MJDS Prospectus in each of the Qualifying Provinces. We understand that the Company shall also promptly hereafter file a final MJDS prospectus (the " Canadian Final MJDS Prospectus ") with the Canadian Securities Commissions under NI 71-101 and NI 52-107, which includes the Prospectus Supplement (with such deletions therefrom and additions thereto as are permitted or required by NI 71-101), in order to qualify the Securities for distribution in each of the Qualifying Provinces. The term " Canadian MJDS Prospectus " means the Canadian Preliminary MJDS Prospectus and the Canadian Final MJDS Prospectus and in each case, the documents, if any, incorporated by reference therein. The Representatives for and on behalf of the Underwriters have represented to the Company that the Underwriters will only make offers of the Securities on the terms and conditions set forth herein, in the Prospectus Supplement and in the Canadian MJDS Prospectus.

2

        Concurrently with this offering of Securities, the Company is also offering to the public 9,416,196 shares of beneficial interest (the " Shares ") pursuant to the Registration Statement and a prospectus supplement thereto. The public offering of the Shares is being underwritten by a syndicate of investment banks for which RBC Capital Markets Corporation is the representative. The closing of this offering of Securities is conditional upon the Representatives being satisfied as to the concurrent closing of the Shares offering.

        The Company intends to use the proceeds of the offerings of Securities and Shares to pay a portion of the $210 million purchase price for substantially all of the assets of Stone Venepal (Celgar) Pulp Inc. (" Celgar " and such transaction, the " Acquisition "). At or around the same time of the Shares and Notes offerings, the Company will also issue 4,210,526 new shares of beneficial interest in a private placement directly to KPMG Inc., as receiver of Celgar, Royal Bank of Canada and/or National Westminster Bank plc, or such affiliates of such parties as may be directed by them, to satisfy a portion of the purchase price of the Acquisition. The Company expects the Acquisition to be completed on or around the Closing Date (as defined herein), and the closing of this offering and the closing of the Shares offering is contingent upon all of the conditions to the Acquisition, other than those conditions that will be satisfied upon the closing of the Acquisition pursuant to the acquisition agreement, including satisfactory financing and finalization of the pending registrations of land title, being satisfied or waived.

1.

Representations and Warranties of the Company .    The Company represents and warrants to, and agrees with each Underwriter that:

        (a)   The Registration Statement has become effective; no stop order suspending the effectiveness of the Registration Statement is in effect; and no proceedings for such purpose are pending before or threatened by the Commission.

        (b)   (i) The Company meets the requirements for use of Form S-3 under the Securities Act, (ii) each document filed or to be filed pursuant to the Exchange Act and incorporated by reference in the Registration Statement and the Prospectus complied, or will comply when so filed, in all material respects with the Exchange Act and the applicable rules and regulations thereunder, (iii) the Registration Statement, when it became effective, did not contain, and as amended or supplemented will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (iv) the Registration Statement and the Prospectus comply and, as amended or supplemented, if applicable, will comply in all material respects with the Securities Act, the Trust Indenture Act of 1939, as amended (the " Trust Indenture Act ") and the applicable rules and regulations of such Acts, and (v) the Prospectus as of the date of the Preliminary Prospectus Supplement and the Final Prospectus Supplement as of its date and as of the Closing Date (as defined herein), does not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties in the preceding sentence do not apply to statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by the Underwriters through the Representative expressly for use therein; it being agreed and understood that the only such information is that described as such in Section 7(b) hereof.

3

        (c)   There are no contracts or documents that are required to be filed as exhibits to the Registration Statement or described in the Registration Statement or the Prospectus which are not so filed or described as required, and such contracts and documents as are summarized in the Registration Statement or the Prospectus are fairly summarized in all material respects.

        (d)   The Company has been duly organized and is validly existing as a business trust in good standing under the laws of the State of Washington with power and authority (corporate and other) to own its properties and conduct its business in all material respects as described in the Registration Statement, the Prospectus and the Canadian MJDS Prospectus; and the Company is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the character or location of its properties (owned, leased or licensed) or the nature or conduct of its business makes such qualification necessary, except for those failures to be so qualified or in good standing which will not in the aggregate have a material adverse effect on the business, properties, operations, condition (financial or otherwise), earnings or results of operations of the Company and its subsidiaries, taken as a whole, on the acceptance, development or planned operation of the pulp mill owned, directly or indirectly, through Zellstoff Stendal GmbH near the town of Stendal, Germany (the " Stendal Mill "), or on the planned operation of the Celgar assets to be acquired in the Acquisition (the " Celgar Mill "), (a " Material Adverse Effect ").

        (e)   Each subsidiary of the Company has been duly incorporated or organized and is an existing corporation, partnership or limited partnership in good standing under the laws of the jurisdiction of its incorporation or organization, with power and authority (corporate and other) to own its properties and conduct its business as described in the Registration Statement, the Prospectus and the Canadian MJDS Prospectus; and each significant subsidiary of the Company is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except in each case to the extent that the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect; all of the issued and outstanding capital stock of each subsidiary of the Company has been duly authorized and validly issued and is fully paid and nonassessable; and the capital stock of each subsidiary owned by the Company, directly or through subsidiaries, is owned free from liens, encumbrances and defects, other than liens and encumbrances granted pursuant to the terms of the Stendal Loan Facility, the Rosenthal Loan Facility (as such terms are defined in the Registration Statement and the Prospectus), and the working capital facilities for the Rosenthal mill and the Celgar Mill (such facilities as described under "Description of Certain Indebtedness — New Working Capital Facilities" in the Registration Statement and the Prospectus).

        (f)    Except as described in the Registration Statement and the Prospectus, since the date on which information is given in the Registration Statement and the Prospectus, (i) there has been no material adverse change or any development involving a prospective material adverse change in the business, properties, operations, condition (financial or otherwise) earnings or results of operations of the Company and its subsidiaries taken as whole, the acceptance, development or planned operation of the Stendal Mill, or to the best of the Company's knowledge regarding the Celgar Mill, on the planned operation of the Celgar Mill, whether or not arising from transactions in the ordinary course of business, (ii) neither the Company nor its subsidiaries (taken as a whole) has incurred or undertaken any material liabilities or obligations, direct or contingent, or entered into any material transactions other than the Acquisition and other than in the ordinary course pursuant to the Stendal Loan Facility, or (iii) the Company has not declared or paid any dividends or made any distribution of any kind with respect to its capital stock and, except as described in the Prospectus and the Registration Statement, there has not been any change in the capital stock, or any material change in the short-term or long-term debt other than in the ordinary course pursuant to the Stendal Loan Facility, or any issuance of options, warrants, convertible securities or other rights to purchase the capital stock, of the Company or any of its subsidiaries.

4

        (g)   This Agreement and the transactions contemplated herein have been duly authorized by the Company, and this Agreement has been duly executed and delivered by the Company.

        (h)   The Indenture has been duly qualified under the Trust Indenture Act with respect to the Securities registered pursuant to the Registration Statement.

        (i)    The Indenture has been duly authorized by the Company, and, when duly executed and delivered by the Company and duly authorized, executed and delivered by the Trustee, will constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, moratorium, reorganization or similar laws relating to or affecting the rights of creditors generally and subject to general principles of equity.

        (j)    The Securities have been duly authorized by the Company for issuance and sale to the Underwriters pursuant to this Agreement, and when issued and authenticated in accordance with the terms of the Indenture and delivered against payment therefor in accordance with the terms thereof and hereof, assuming the due authorization, execution and delivery of the Indenture by the Trustee, will be a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with their terms and entitled to the benefits of the Indenture, subject to applicable bankruptcy, insolvency, fraudulent conveyance, moratorium, reorganization or similar laws relating to or affecting the rights of creditors generally and subject to general principles of equity. The Securities and the Indenture will conform in all material respects to the descriptions thereof contained in the Prospectus.

        (k)   The authorized, issued and outstanding shares of beneficial interest of the Company are as set forth in the Prospectus in the column entitled "September 30, 2004 — Actual" under the caption "Capitalization" (except for issuances pursuant to the concurrent underwriting agreement in respect of the Shares or pursuant to reservations, agreements or option plans described in the Prospectus or the Registration Statement) and have been duly and validly authorized and issued, are fully paid and non-assessable and were not issued in violation of or subject to any preemptive or similar rights that entitle or will entitle any person to acquire any shares of beneficial interest from the Company.

5

        (l)    The execution, delivery and performance of the Operative Documents, the consummation of the transactions contemplated therein and the issuance and delivery of the Securities do not and will not (i) as at the Closing Date, and assuming the application of funds as set forth in the "Use of Proceeds" section of the Prospectus and the Registration Statement, conflict with or result in a breach of any of the terms and provisions of, or constitute a default (or an event which with notice or lapse of time, or both, would constitute a default) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement, instrument, franchise, license or permit to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or their respective properties or assets may be bound except as would not have a Material Adverse Effect or (ii) violate or conflict with any provision of the constituent documents of the Company or any of the governing instruments of its subsidiaries or (iii) violate or conflict with any judgment, decree, order, statute, rule or regulation of any court or any public, governmental or regulatory agency or body having jurisdiction over the Company or any of its significant subsidiaries or any of their respective properties or assets, and the Company has full corporate power and authority to authorize, issue and sell the Securities as contemplated by this Agreement.

        (m)  No consent, approval, authorization, order, registration, filing, qualification, license or permit of or with any court or any public, governmental or regulatory agency or body having jurisdiction over the Company or any of its subsidiaries or any of their respective properties or assets is required for the execution, delivery and performance of the Operative Documents or the consummation of the transactions contemplated therein, including, the issuance, sale and delivery of the Securities to be issued, sold and delivered by the Company hereunder, except the filing of such consents, approvals, authorizations, orders, registrations, filings, qualifications, licenses and permits as may be required under state securities or blue sky laws in connection with the purchase and distribution of the Securities by the Underwriters in the manner contemplated herein and in the Prospectus, the Registration Statement and the Canadian MJDS Prospectus.

        (n)   Except as disclosed in the Prospectus and the Registration Statement, or as would not have a Material Adverse Effect, each of the Company and its significant subsidiaries (i) possesses all grants, subsidies, guarantees, consents, approvals and other authorizations from appropriate government agencies (" State Aid Grants ") and all permits, licenses, consents and other authorizations (collectively, the " Government Licenses ") issued by, and has made all filings with, the appropriate regulatory entities necessary to own, lease and operate its properties and to conduct businesses now operated or, in the case of the Celgar Mill (to the best of the Company's knowledge) and the Stendal Mill, proposed to be operated by it, and (ii) all such Government Licenses are valid and in full force and effect. Except as will be described in the Prospectus and the Registration Statement, or as would not have a Material Adverse Effect: (i) each of the Company and its subsidiaries is in compliance with the terms and conditions of all such Government Licenses; (ii) neither the Company nor any significant subsidiary has received any notice from any regulatory entity that allows, or after notice or lapse of time or both, would allow revocation, modification, suspension or termination of any Government License including any claim against the Company or any of the subsidiaries for repayment of any benefit received under State Aid Grants or would result in any other material impairment of the rights of the holder of any such Government License; and (iii) to the knowledge of the Company and its subsidiaries, no regulatory entity is considering limiting, suspending or revoking any Government License or is investigating any of them, other than ordinary course administrative and covenant compliance reviews.

6

        (o)   Except as disclosed in the Prospectus and the Registration Statement, there is no legal or governmental proceeding to which the Company or any of its subsidiaries is a party, or of which any property of the Company or any of its subsidiaries is the subject which, singularly or in the aggregate, if determined adversely to the Company or any of its subsidiaries, would reasonably be expected to have a Material Adverse Effect or would materially and adversely affect the ability of the Company to perform its obligations under the Operative Documents, and to the knowledge of the Company, no such proceeding is threatened or contemplated by governmental authorities or threatened by others.

        (p)   Neither the Company nor any of its affiliates has taken, directly or indirectly, any action designed to cause or result in, or which constitutes or which might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the Company or any of its subsidiaries to facilitate the sale or resale of the Securities.

        (q)   The Company has not distributed and will not distribute any prospectus or other offering material (including, without limitation, content on the Company's website that may be deemed to be a prospectus or other offering material) in connection with the offering and sale of the Securities other than (i) the Prospectus, (ii) the Canadian MJDS Prospectus, (iii) other materials permitted by the Securities Act and the Trust Indenture Act to be distributed by the Company, or (iv) other materials permitted by any applicable securities laws and the respective regulations made thereunder, together with applicable published policy statements, rules, orders of the securities regulatory authorities in each of the Qualifying Provinces, including for greater certainty, NI 71-101, NI 52-107, Companion Policy 71-101CP and Companion Policy 52-107CP (collectively, the " Canadian Securities Laws ") to be distributed in Canada by the Company.

        (r)   Peterson Sullivan P.L.L.C., who have audited the financial statements and supporting schedules until the fiscal year ended December 31, 2002 as set forth or incorporated by reference in the Prospectus and the Registration Statement, are, to the Company's knowledge, independent public accountants as required by the Securities Act and the rules and regulations of the Commission promulgated thereunder (the " Rules and Regulations "), and have not engaged in any non-audit activities that are prohibited by Section 201(a) of the Sarbanes-Oxley Act of 2002 during the time periods specified in such section.

        (s)   Deloitte & Touche LLP, who have audited the financial statements and supporting schedules after the fiscal year ended December 31, 2002, and who have performed the procedures specified by the Public Company Accounting Oversight Board (United States) for a review of interim financial information as described in Statement of Accounting Standards No. 100 with respect to the nine month periods ended September 30, 2003 and September 30, 2004 as set forth or incorporated by reference in the Prospectus and the Registration Statement, are, to the Company's knowledge, independent registered chartered accountants as required by the Securities Act, the Rules and Regulations, National Instrument 52-108 —  Auditor Oversight (" NI 52-108 ") and the Rules of Professional Conduct of the Institute of Chartered Accountants of British Columbia, and are not and have not engaged in any non-audit activities that are prohibited by Section 201(a) of the Sarbanes-Oxley Act of 2002.

7

        (t)    Deloitte & Touche LLP, who have audited the financial statements and supporting schedules for Celgar through December 31, 2003, and who have performed the procedures specified by the Public Company Accounting Oversight Board (United States) for a review of interim financial information as described in Statement of Accounting Standards No. 100 with respect to the nine month periods ended September 30, 2003 and September 30, 2004 as set forth or incorporated by reference in the Prospectus and the Registration Statement, are, to the Company's knowledge, independent registered chartered accountants as required by the Securities Act, the Rules and Regulations, NI 52-108 and the Rules of Professional Conduct of the Institute of Chartered Accountants of British Columbia.

        (u)   The financial statements, including the notes thereto, and supporting schedules as set forth or incorporated by reference in the Prospectus and the Registration Statement present fairly in all material respects the financial condition, results of operations and cash flows of the Company, its consolidated subsidiaries and (to the best of the Company's knowledge) Celgar and as of the dates indicated and for the periods specified; except as otherwise stated in the Prospectus and the Registration Statement, such financial statements comply to form with the applicable accounting requirements of the Securities Act and have been prepared in conformity with United States generally accepted accounting principles (" U.S. GAAP ") applied on a consistent basis throughout the periods involved, other than the Celgar financial statements which have been prepared in accordance with Canadian GAAP and reconciled to U.S. GAAP in the note thereto in the Prospectus Supplement.

        (v)   The summary and selected financial and statistical data set forth in the Prospectus and Registration Statement fairly present in all material respects, on the basis stated in the Prospectus and the Registration Statement, the information included therein. The statistical and market-related data included or incorporated by reference in the Prospectus and the Registration Statement are based on or derived from sources that the Company reasonably believes to be reliable and accurate.

        (w)  The pro forma financial statements included in the Prospectus and the Registration Statement include assumptions that provide a reasonable basis for presenting the significant effects directly attributable to the transactions and events described therein, the related pro forma adjustments give appropriate effect to those assumptions, and the pro forma adjustments reflect the application of those adjustments to the historical financial statement amounts in the pro forma financial statements included in the Prospectus and the Registration Statement. The pro forma financial statements included in the Prospectus and the Registration Statement comply as to form in all material respects with the applicable accounting requirements of Regulation S-X under the Securities Act and the pro forma adjustments have been properly applied to the historical amounts in the compilation of those statements.

        (x)   Except as disclosed in the Prospectus, there are no relationships, direct or indirect, nor has any transaction been entered into since December 31, 2003, between or among the Company or any of its subsidiaries on the one hand, and the Trustee for the Securities or the trustees, directors, officers, stockholders, customers or suppliers of the Company or any of its subsidiaries on the other hand which are required to be described in the Prospectus by the Securities Act, by the Rules and Regulations or by the Trust Indenture Act which have not been described in the Prospectus.

8

        (y)   Except as disclosed in the Prospectus and the Registration Statement, no holder of securities of the Company has any rights to the registration of securities of the Company either now or as a result of the execution of the Operative Documents or the consummation of the transactions contemplated therein, and any such rights so disclosed have either been fully complied with by the Company or effectively waived by the holders thereof.

        (z)   The information contained in the Registration Statement and the Prospectus regarding the Company's expectations, plans and intentions, and any other information that constitutes "forward-looking" information within the meaning of the Securities Act and the Exchange Act were made by the Company on a reasonable basis and reflect the Company's good faith belief and/or estimate of the matters described therein.

        (aa) The Company is not, and after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the Prospectus will not be, an "investment company" under the Investment Company Act of 1940, as amended.

        (bb) The Company and its significant subsidiaries have good and marketable title in fee simple to all real property owned by the Company and its significant subsidiaries and have good and marketable title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects, and after the Acquisition, will have good and marketable title to the assets of Celgar acquired in the Acquisition, free and clear of all liens, encumbrances and defects, and any real property and buildings held under lease by the Company or any of its significant subsidiaries are held by them under valid, subsisting and enforceable leases, except such as: (i) are described in the Prospectus and Registration Statement; or (ii) would not singularly or in the aggregate result in a Material Adverse Effect.

        (cc) Except as would not have a Material Adverse Effect, the Company and each of its subsidiaries have accurately prepared and timely filed all federal, state, provincial and other tax returns that are required to be filed by it and has paid or made provision for the payment of all taxes, assessments, governmental or other similar charges, including without limitation, all sales and use taxes and all taxes that the Company and each of its subsidiaries is obligated to withhold from amounts owing to employees, creditors and third parties, with respect to the periods covered by such tax returns (whether or not such amounts are shown as due on any tax return). Except as would not have a Material Adverse Effect, no deficiency assessment with respect to a proposed adjustment of the Company's or any of its subsidiaries' federal, state, provincial or other taxes is pending or, to the knowledge of the Company, threatened. There is no tax lien, whether imposed by any federal, state, provincial or other taxing authority, outstanding for amounts overdue against the assets, properties or business of the Company or any of its subsidiaries.

        (dd) Each of the Company and its subsidiaries (i) makes and keeps accurate books and records and (ii) maintains internal accounting controls that provide reasonable assurance that (A) transactions are executed in accordance with management's general or specific authorization, (B) transactions are recorded as necessary to permit preparation of its financial statements and to maintain accountability for its assets, (C) access to its assets is permitted only in accordance with management's authorization, direction or policies and (D) the reported accountability for its assets is compared with existing assets at reasonable intervals. Since December 31, 2003, neither the Company nor any of its subsidiaries has made any change in its internal controls that would be reportable in any filing under the Exchange Act pursuant to Item 307 of Regulation S-K. The Company maintains disclosure controls and procedures (as defined in Rule 13a-14 under the Exchange Act) sufficient to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms.

9

        (ee) Based on the evaluation of its internal control over financial reporting, the Company believes that it will be in material compliance, on a timely basis, with Section 404, entitled "Management's Assessment of Internal Controls," of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder or any successor provisions.

        (ff)  The Company has adopted a written code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. Since the adoption of its code of ethics, the Company has not made any amendment to or granted any waiver thereunder.

        (gg) The Company's shares of beneficial interest are registered pursuant to Section 12(g) of the Exchange Act and are quoted on the Nasdaq National Market (the " Nasdaq National Market ") and posted and listed for trading on the Toronto Stock Exchange (the " TSX "). The Company has taken no action designed to, or likely to have the effect of, terminating the registration of its shares of beneficial interest under the Exchange Act or de-listing its shares of beneficial interest from the Nasdaq National Market or the TSX, nor has the Company received any notification that the Commission, the Nasdaq National Market or the TSX is contemplating terminating such registration or listing.

        (hh) The Company (i) is a reporting issuer, or its equivalent, under the securities laws of British Columbia, Alberta, Ontario and Québec (the " Reporting Issuer Provinces "), (ii) is in compliance with its obligations under Sections 85 and 117 of the Securities Act (British Columbia) and Sections 144 and 145 of the Rules thereunder and under the equivalent provisions of the remaining applicable Canadian Securities Laws, (iii) is not included in the list of defaulting reporting issuers maintained by any of the relevant securities commissions in the Reporting Issuer Provinces, (iv) is a "foreign issuer" and a "US issuer" within the meaning of NI 71-101, and (v) the Company meets and at the Closing Date will continue to meet the general eligibility criteria for offering of the Securities under section 3.1(c) of NI 71-101 and section 5.1(a) of NI 52-107.

        (ii)   Neither the Company nor any of its significant subsidiaries (i) is in violation of its constituent or governing documents or (ii) is in default (and no event has occurred which, with notice or lapse of time or both, would constitute such a default) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject, except in the case of (i) and (ii) above any violation or default that would not have a Material Adverse Effect and would not materially and adversely affect the ability of the Company to perform its obligations under the Operative Documents. None of the Company, its subsidiaries or to the best of the Company's knowledge, Celgar, except as disclosed in the Prospectus and the Registration Statement, is in violation in any respect of any statute or any judgment, decree, order, rule or regulation of any court or governmental or regulatory agency or body having jurisdiction over the Company, any of its subsidiaries or Celgar or any of their properties or assets, except any violation or default that would not have a Material Adverse Effect and would not materially and adversely affect the ability of the Company to perform its obligations under the Operative Documents. Without limitation of the foregoing, the Company's subsidiaries are in material compliance with all covenants applicable to them in the Stendal Loan Facility and the Rosenthal Loan Facility (as such terms are defined in the Registration Statement and the Prospectus).

10

        (jj)    No labor disturbance with the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is imminent that would reasonably be expected to have a Material Adverse Effect. To the best of the Company's knowledge, no labor disturbance has been threatened by the employees of Celgar that would reasonably be expected to have a Material Adverse Effect.

        (kk)    The Company and each of its significant subsidiaries carry, or are covered by, and following the Acquisition, the assets acquired from Celgar pursuant to the Acquisition will be covered by, insurance in such amounts and covering such risks as in the Company's reasonable determination is adequate for the conduct of their respective businesses and the value of their respective properties.

        (ll)    The Company does not maintain, contribute to, or have any obligation to contribute to, and has never maintained, contributed to or had any obligation to contribute to, any "employee pension benefit plan" (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder (" ERISA ")), which is subject to Title IV of ERISA or Section 412 of the Internal Revenue Code of 1986.

        (mm)    Except as disclosed in the Prospectus and the Registration Statement and except as would not, singularly or in the aggregate, result in a Material Adverse Effect, (i) there has been no storage, generation, transportation, handling, treatment, disposal, discharge, emission, or other release of any kind of toxic wastes or other hazardous substances by, due to, or caused by the Company (or, to the Company's knowledge, any other entity for whose acts or omissions the Company is or may be liable) or any of its subsidiaries or, to the Company's knowledge, Celgar, upon any other property now or previously owned or leased by the Company or any of its subsidiaries or (to the Company's knowledge) Celgar, or upon any other property, in violation of any statute or any ordinance, rule, regulation, order, judgment, decree or permit or which would, under any statute or any ordinance, rule (including rule of common law), regulation, order, judgment, decree or permit, give rise to any liability, and (ii) there has been no disposal, discharge, emission or other release of any kind onto such property or into the environment surrounding such property of any toxic wastes or other hazardous substances with respect to which the Company or any of its subsidiaries has knowledge in violation of any statute or any ordinance, rule (including rule of common law), regulation, order, judgment, decree or other permit.

11

        (nn)    The Company, its subsidiaries or any other person associated with or acting on behalf of the Company or its subsidiaries including, without limitation, any trustee, director, officer, agent or employee of the Company or its subsidiaries, has not, directly or indirectly, while acting on behalf of the Company or its subsidiaries (i) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; (ii) made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns from corporate funds; or (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977, as amended.

        (oo)    The Company is subject to Section 13 or Section 15(d) of the Exchange Act and is in compliance with the provisions of such Section.

        (pp)    The Canadian MJDS Prospectus conforms to the Prospectus in all material respects except for such deletions therefrom and additions thereto as are permitted under or required by NI 71-101. The Canadian MJDS Prospectus has been prepared and duly filed in compliance in all material respects with applicable Canadian Securities Laws.

        (qq)    Except as disclosed in the Prospectus and the Registration Statement, there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the Company or the Underwriters for a brokerage commission, finder's fee or other like payment in connection with the sale of the Securities.

        (rr)    None of the execution, delivery and performance of the Operative Documents, the issuance and sale of the Securities, the application of the proceeds from the issuance and sale of the Securities and the consummation of the transactions contemplated hereby and thereby as set forth in the Registration Statement and the Prospectus, will violate Regulations T, U or X promulgated by the Board of Governors of the Federal Reserve System or analogous foreign laws and regulations.

        (ss)    On or before the Closing Date, the Company shall have duly filed with the Canadian Securities Commissions such submission to jurisdiction and appointment of agent for service on Form 71-101F1 as may be required under applicable Canadian Securities Laws.

        (tt)    The Shares to be issued and sold by the Company pursuant to an underwriting agreement, dated February 8, 2005, among the several underwriters listed on Schedule I thereto and the Company (the " Equity Underwriting Agreement " ), have been duly authorized and when issued and duly paid for as contemplated therein will be validly issued, fully paid and non-assessable; and no preemptive rights of shareholders exist with respect to any of the Shares or the issue and sale thereof thereunder.

        2.     Purchase, Sale and Delivery of the Securities.

        (a)    On the basis of the representations, warranties and covenants herein contained, and subject to the conditions herein set forth, the Company agrees to sell to the Underwriters and the Underwriters agree, severally and not jointly, to purchase from the Company, at a purchase price of 97.5% of the principal amount thereof plus accrued interest, if any, the respective principal amounts of Securities set forth opposite the names of the Underwriters in Schedule I hereto, subject to adjustments in accordance with Section 12 hereof.

12

        (b)    Payment of the purchase price for, and deliver