SC 13D/A

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MzvawEu1XbHwdQEaq0UzzfIAfvrBEoFmcFLJuaK5ngynPZpLko0xa7d59lsrM7ED kb75tWgRteaoH9N8o+IpxA== 0000950123-08-001560.txt : 20080213 0000950123-08-001560.hdr.sgml : 20080213 20080213121336 ACCESSION NUMBER: 0000950123-08-001560 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20080213 DATE AS OF CHANGE: 20080213 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CATALYST PAPER CORP CENTRAL INDEX KEY: 0001144906 STANDARD INDUSTRIAL CLASSIFICATION: PAPER MILLS [2621] IRS NUMBER: 980138030 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-79409 FILM NUMBER: 08602499 BUSINESS ADDRESS: STREET 1: 2ND FLOOR STREET 2: 3600 LYSANDER LANE CITY: RICHMOND BC CANADA STATE: A1 ZIP: V7B 1C3 BUSINESS PHONE: 604-247-4017 MAIL ADDRESS: STREET 1: 2ND FLOOR STREET 2: 3600 LYSANDER LANE CITY: RICHMOND BC CANADA STATE: A1 ZIP: V7B 1C3 FORMER COMPANY: FORMER CONFORMED NAME: NORSKE SKOG CANADA LTD DATE OF NAME CHANGE: 20010713 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: THIRD AVENUE MANAGEMENT LLC CENTRAL INDEX KEY: 0001099281 IRS NUMBER: 010690900 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 622 THIRD AVENUE STREET 2: 32ND FLOOR CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2128885222 MAIL ADDRESS: STREET 1: 622 THIRD AVENUE STREET 2: 32ND FLOOR CITY: NEW YORK STATE: NY ZIP: 10017 FORMER COMPANY: FORMER CONFORMED NAME: EQSF ADVISERS INC DATE OF NAME CHANGE: 19991118 SC 13D/A 1 y48681sc13dza.htm AMENDMENT NO. 6 TO SCHEDULE 13D SC 13D/A

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

(Amendment No. 6)
Under the Securities Exchange Act of 1934

Catalyst Paper Corporation

(Name of Issuer)

Common Shares

(Title of Class and Securities)

14888T104

(CUSIP Number of Class of Securities)

Third Avenue Management LLC
Attn: Mr. David Barse
622 Third Avenue, 32nd Floor
New York, NY 10017
(212) 888-2290

(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)

February 10, 2008

(Date of Event which Requires

Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this Schedule because of Sections 240.13d-1(e), 240.13d-1(f), or 240.13d-1(g), check the following box: o.

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).


CUSIP No.		14888T104	13D

NAMES OF REPORTING PERSONS

Third Avenue Management LLC I .D. No. 01-0690900

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP

(a) o

(b) o

SEC USE ONLY

SOURCE OF FUNDS

n/a

CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

70,942,586 shares

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

0 shares

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

76,117,734 shares

WITH

SHARED DISPOSITIVE POWER

0 shares

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

76,117,734 shares

CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11

35.46%

TYPE OF REPORTING PERSON

Note: All shares identified above are the Company’s common shares, and the percentage in Row 13 above relates to such common shares.

Explanatory Note

This Amendment No. 6 amends and supplements the Schedule 13D filed on July 28, 2006 by Third Avenue Management LLC (“TAM”), as amended by Amendment No. 1 to the Schedule 13D filed on August 15, 2006 by TAM, Amendment No. 2 to the Schedule 13D filed on October 27, 2006 by TAM, Amendment No. 3 to the Schedule 13D filed on November 14, 2007 by TAM, Amendment No. 4 to the Schedule 13D filed on December 19, 2007 by TAM and Amendment No. 5 (“Amendment No. 5”) to the Schedule 13D filed on January 9, 2008 by TAM (the “Statement”) relating to the common shares of (“Common Shares”) of Catalyst Paper Corporation, a Canada corporation (the “Company”).

Unless otherwise indicated, all capitalized terms used herein shall have the meanings given to them in the Statement, and unless amended or supplemented hereby, all information previously filed remains in effect.

Item 4. Purpose of Transaction

Item 4 of the Statement is hereby amended in its entirety to read as follows:

On February 11, 2008, the Company announced that it had entered into a definitive agreement with a subsidiary of Abitibi Bowater to acquire its Snowflake Arizona recycled newsprint mill for a total consideration of U.S.$161 million in cash. The acquisition is subject to the consent of the U.S. Department of Justice, other customary conditions and completion of a rights offering and is expected to close in the second quarter of 2008. The Company announced that the acquisition will be financed through a combination of debt and equity.

The Company intends to raise the equity portion of the financing through a rights offering in an amount equal to C$125 million. The rights offering, which is subject to regulatory approval, will be made pursuant to a prospectus to be filed in each of the provinces of Canada and a registration statement to be filed with the U.S. Securities and Exchange Commission. In connection with the rights offering, the Company has entered into an oversubscription agreement with Third Avenue Trust, on behalf of Third Avenue International Value Fund (“TAVIX”), an investment company formed under the Investment Company Act of 1940, as amended, for which TAM serves as investment adviser. Pursuant to the oversubscription agreement, TAVIX will exercise rights to subscribe for up to C$62.5 million of subscription receipts not otherwise subscribed for under the rights offering. As contemplated by the oversubscription agreement, the Company also has entered into a registration rights agreement with Third Avenue Trust, on behalf of TAVIX, pursuant to which TAVIX and certain other holders of Common Shares that are advised by TAM will have registration rights with respect to shares issued upon conversion of the subscription receipts, as described below, for a period of 10 years.

Under the terms of the rights offering, common shareholders of the Company as of a record date (which date has yet to be determined) will receive rights to subscribe for subscription receipts of the Company. Each subscription receipt will be exchanged automatically for one Common Share without additional consideration on completion of the Snowflake mill acquisition. The subscription price under the rights offering will be a 40% discount to the theoretical ex-rights price based on the five-day volume weighted average price of the Common Shares on the Toronto Stock Exchange (“TSX”) prior to filing the final prospectus. Application will be made to list the rights for trading on the TSX. The rights will be exercisable for at least 21 days following the date of mailing of the final prospectus.

As previously reported, TAM may, in its capacity as a registered investment adviser to certain investment companies and separately managed accounts, from time to time acquire control or direction over additional Common Shares, sell Common Shares or cease to exercise control or direction over Common Shares.

Other than the aforementioned transaction, TAM has no present plans or proposals which relate to or would result in any of the actions specified in clause (a) through (j) of Item 4 of Schedule 13D.

Item 5. Interest in Securities of the Issuer

Item 5 of the Statement is hereby amended in its entirety to be replaced by the following:

(a-b) The aggregate number and percentage of Common Shares to which this Schedule 13D relates is 76,117,734 Common Shares, constituting approximately 35.46% of the 214,684,100 Common Shares outstanding as of February 8, 2008.

A. Third Avenue International Value Fund

(a) Amount beneficially owned: 40,080,245 Common Shares.
(b) Percent of class: 18.67%
(c) Number of Common Shares as to which TAM has:

(i) Sole power to vote or direct the vote: 40,080,245
(ii) Shared power to vote or direct the vote: 0
(iii) Sole power to dispose or direct the disposition: 40,080,245
(iv) Shared power to dispose or direct the disposition: 0

B. Third Avenue Management Separately Managed Accounts

(a) Amount beneficially owned: 22,891,792 Common Shares.
(b) Percent of class: 10.66%
(c) Number of Common Shares as to which TAM has:

(i) Sole power to vote or direct the vote: 17,716,644
(ii) Shared power to vote or direct the vote: 0
(iii) Sole power to dispose or direct the disposition: 22,891,792
(iv) Shared power to dispose or direct the disposition: 0

C. Third Avenue Small-Cap Value Fund

(a) Amount beneficially owned: 12,107,879 Common Shares.
(b) Percent of class: 5.64%
(c) Number of Common Shares as to which TAM has:

(i) Sole power to vote or direct the vote: 12,107,879
(ii) Shared power to vote or direct the vote: 0
(iii) Sole power to dispose or direct the disposition: 12,107,879
(iv) Shared power to dispose or direct the disposition: 0

D. Third Avenue Variable Series Trust

(a) Amount beneficially owned: 1,037,818 Common Shares.
(b) Percent of class: 0.48%
(c) Number of Common Shares as to which TAM has:

(i) Sole power to vote or direct the vote: 1,037,818
(ii) Shared power to vote or direct the vote: 0
(iii) Sole power to dispose or direct the disposition: 1,037,818
(iv) Shared power to dispose or direct the disposition: 0

Amount of

Price per

Common Shares

Common

Transaction Effected By:

Date of Transaction

Involved

Where and How Effected

Separately managed accounts

1/08/08

135,100

1.5279

Sold on open market

Separately managed accounts

1/28/08

35,700

1.5085

Sold on open market

Separately managed accounts

1/28/08

93,300

1.5420

Sold on open market

Separately managed accounts

1/31/08

644,003

1.5827

Sold on open market

Amount of

Price per

Common Shares

Common

Transaction Effected By:

Date of Transaction

Involved

Where and How Effected

Separately managed accounts

2/01/08

235,100

1.5834

Sold on open market

Separately managed accounts

2/04/08

216,357

n/a

Closed account

Separately managed accounts

2/04/08

111,300

1.5255

Sold on open market

(d) No other person is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, such Common Shares other than the funds and accounts identified above.

(e) Not applicable.

Item 7. Material to be Filed as an Exhibit

Item 7 of the Statement hereby amended and supplemented by the filing of the following exhibits herewith:


Exhibit
No.		Description
	1	Company Press Release dated February 11, 2008.


	2	Oversubscription Agreement by and between the Company and TAM, on behalf of TAVIX, dated as of February 10, 2008.

	3	Registration Rights Agreement between the Company and TAM, on behalf of TAVIX, dated as of February 10, 2008.

SIGNATURES

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: February 13, 2008


THIRD AVENUE MANAGEMENT LLC

/s/ W. James Hall Name: W. James Hall
Title: General Counsel

EX-99.1 2 y48681exv99w1.htm EX-1: PRESS RELEASE EX-99.1

Exhibit 1


Catalyst Paper Corporation 2nd Floor, 3600 Lysander Lane Richmond, British Columbia Canada V7B 1C3

Tel: 604 247 4400 Fax: 604 247 0512

News Release

February 11, 2008

Catalyst to acquire Snowflake mill from AbitibiBowater and to proceed with C$125 million Rights Offering

Vancouver, BC – Catalyst Paper Corporation (TSX:CTL) today announced that it has entered into a definitive agreement with a subsidiary of AbitibiBowater to acquire its Snowflake Arizona recycled newsprint mill for a total consideration of US$161 million in cash. The purchase price excludes trade receivables of approximately US$19 million that are being retained by AbitibiBowater. The acquisition will be financed through a combination of Catalyst Paper’s revolving credit facilities and a proposed C$125 million rights offering.

The Acquisition

The Snowflake mill, a leading recycled newsprint producer with annual production capacity of 375,000 metric tonnes on two modern paper machines, is regarded as one of the lowest cost newsprint mills in North America. The acquisition of the Snowflake mill will increase Catalyst Paper’s total newsprint production capacity to approximately 980,000 metric tonnes. The mill also houses a corrugating medium machine owned by Smurfit Stone Container Corporation, which is operated by the Snowflake mill. The Apache Railway Company, a short-line railroad operating freight service between Snowflake, AZ and Holbrook, AZ is also included in the transaction.

In 2006, the Snowflake mill generated earnings before interest, taxes, depreciation and amortization (“EBITDA”) of US$58 million on net revenues of US$195 million. For the last 12 months ending September 30, 2007, the Snowflake mill generated EBITDA of US$30 million on net revenues of US$185 million. These EBITDA figures exclude AbitibiBowater corporate charges.

The acquisition of the Snowflake mill assets will provide the company with:

•		one of the lowest-cost newsprint mills in North America;

•		geographic, fibre and currency diversification;

•		the opportunity to expand into one of North America’s fastest growing metropolitan regions, with no other newsprint mill operating within a 1,600 kilometre radius;

•		an energy self-sufficient asset with the potential to sell excess electricity onto the power grid;

•		expected annual synergies of at least US$10 million through increased scale which will provide general overall cost reduction in purchasing, sales, marketing and other services, and optimization of product distribution networks; and

•		favourable business environment and industry hosting conditions.

“Snowflake is a first-class newsprint mill,” noted Richard Garneau, president and chief executive officer of Catalyst Paper. “We are very pleased to announce this transaction as the Snowflake mill will improve our cost-competitiveness, strengthen our presence on the west coast of North America

Page 2

and provide us with a more freight logical way to serve existing as well as new customers. In addition, this acquisition will provide Catalyst with a natural hedge against Canadian dollar fluctuations and is particularly timely in the current environment of virgin fibre supply constraints.”

The acquisition of the Snowflake mill is subject to the consent of the U.S. Department of Justice, other customary conditions and completion of the rights offering financing and is expected to close in the second quarter of 2008. The transacting parties have also agreed to a three-year supply contract under which AbitibiBowater will provide approximately 40% of the Snowflake mill’s recycled fibre supply in the first year, decreasing in proportion over the life of the agreement. Catalyst Paper intends to source the remainder of the mill’s fibre requirements directly from the recycled fibre market in western North America.

Financing the Acquisition

The acquisition will be funded through a combination of debt and equity. Catalyst Paper intends to raise the equity portion by way of a C$125 million rights offering. Catalyst Paper has entered into an oversubscription agreement with Third Avenue International Value Fund (“TAVIX”), a fund related to Third Avenue Management LLC, under which TAVIX has agreed to exercise rights to subscribe for up to C$62.5 million of subscription receipts not otherwise subscribed for under the rights offering. TAVIX, along with other client accounts for which Third Avenue Management LLC serves as investment adviser, is Catalyst Paper’s largest shareholder.

In addition, Catalyst Paper has entered into a standby purchase agreement for the remaining C$62.5 million with BMO Capital Markets and Genuity Capital Markets, pursuant to which the standby purchasers have agreed to take up any subscription receipts not otherwise subscribed for under the rights offering. The remainder of the purchase price consideration will be financed using availability under Catalyst Paper’s revolving credit facilities. The rights offering, which is subject to regulatory approval, will be made pursuant to a prospectus to be filed in each of the provinces of Canada. A registration statement will also be filed with the U.S. Securities and Exchange Commission. Further details of the distribution of the rights will be provided in the prospectus and registration statement.

Under the terms of the rights offering, common shareholders of Catalyst Paper as of a record date which is yet to be determined, will receive rights to subscribe for subscription receipts of Catalyst Paper. Each subscription receipt will be automatically exchanged for one Catalyst Paper common share without additional consideration on completion of the Snowflake mill acquisition. The subscription price under the rights offering will be a 40% discount to the theoretical ex-rights price based on the five-day volume weighted average price of the common shares of the Company on the TSX prior to filing the final prospectus. Application will be made to list the rights for trading on the TSX. The rights will be exercisable for at least 21 days following the date of mailing of the final prospectus.

Board Approval and Financial Advisor

The Board of Directors of Catalyst Paper has approved these transactions. BMO Capital Markets acted as exclusive financial advisor to Catalyst Paper on the acquisition.

Additional Information and Conference Call for Investors

Additional details on the proposed acquisition can be found on the Catalyst Paper website at www.catalystpaper.com. Catalyst Paper will release its annual financial results for the fourth quarter and year-end December 31, 2007 on Wednesday, February 13, 2008. Catalyst Paper’s senior management team will provide summary remarks on the fourth quarter 2007 and additional background on the Snowflake acquisition during a conference call for analysts and investors which

Page 3

will take place on Thursday, February 14, 2008 at 8:00 a.m. Pacific, 11:00 a.m. Eastern. If you wish to participate and are calling from within North America, dial (800) 732-0232. If you are calling from either the Toronto area or outside North America, dial (416) 644-3418. Please place your call 10 minutes prior to the start of the conference, provide the conference administrator with your name and company name, and ask for the Catalyst Paper fourth quarter 2007 earnings conference call or quote reservation number 21260314 followed by the pound sign. Initially, all participants will be in a listen-only mode for a short recap of quarterly results followed by a question and answer session. You will be queued by the conference administrator and polled individually during this portion of the conference. Media and other interested people may listen to the live broadcast at www.catalystpaper.com/conferencecall.asp.

About Catalyst Paper

Catalyst is a leading producer of mechanical printing papers in North America, headquartered in Richmond, British Columbia. The company also produces market kraft pulp and owns western Canada’s largest paper recycling facility. With five mills at sites within a 160-kilometre radius on the south coast of BC, Catalyst Paper has a combined annual capacity of 2.4 million tonnes of product. Catalyst’s common shares trade on the Toronto Stock Exchange under the symbol CTL.

Forward-Looking Statements

Certain of the matters set forth in this news release including statements with respect to the anticipated acquisition of the Snowflake mill, production capacity, the achievement of synergies, cost reductions and business efficiencies which may result from the acquisition of the Snowflake mill and the completion of the proposed rights offering are forward looking statements and are subject to risks and uncertainties that may cause such transactions not to be completed or actual results to differ materially from those contained in these statements. In particular, the closing of the acquisition of the Snowflake mill is subject to the fulfilment of various conditions beyond the control of Catalyst including the receipt of required regulatory approvals and the successful completion of the proposed rights offering.

This press release does not constitute an offer to sell nor the solicitation of an offer to purchase, the rights, subscription receipts or common shares of Catalyst Paper. Any offer of these securities in Canada will be made only by way of prospectus and in the United States will be made by way of a registration statement that will be filed by Catalyst Paper with the United States Securities and Exchange Commission. No offer to sell, solicitation of an offer to purchase, or sale will be made in any jurisdiction in which such offer, solicitation or sale would be unlawful.

For more information:



Investors		Media
David Smales, Vice President, Finance		Lyn Brown, Vice President
& Chief Financial Officer		Corporate Relations & Social Responsibility
(604) 247-4011		(604) 247-4713

EX-99.2 3 y48681exv99w2.htm EX-2: OVERSUBSCRIPTION AGREEMENT EX-99.2

Exhibit 2

OVERSUBSCRIPTION AGREEMENT

THIS AGREEMENT (the “Agreement”) has been entered into as of February 10, 2008, by and between:

CATALYST PAPER CORPORATION, a corporation governed under the laws of Canada

(“Catalyst”)

- and -

THIRD AVENUE TRUST, a Delaware business trust on behalf of THIRD AVENUE INTERNATIONAL VALUE FUND, a registered investment company under the U.S. Investment Company Act of 1940, as amended

(“TAVIX”).

WHEREAS, Catalyst or an affiliate of Catalyst is contemporaneously entering into the Snowflake Purchase Agreement to acquire certain newsprint assets located in the State of Arizona and the issued and outstanding shares of capital stock of The Apache Railway Company (the “Snowflake Acquisition”) from Abitibi Consolidated Sales Corporation;

AND WHEREAS, Catalyst proposes to effect an offering of transferable rights (“Rights”) to acquire subscription receipts of Catalyst (“Subscription Receipts”), each Subscription Receipt being convertible into one common share of Catalyst (“Common Shares”) upon the closing of the Snowflake Acquisition, to the holders of record of its Common Shares pursuant to a short form prospectus to raise proceeds of not less than $125,000,000 and not greater than $126,000,000 (the "Offering Amount”) to be used to fund a portion of the purchase price for the Snowflake Acquisition (the “Rights Offering”);

AND WHEREAS, BMO Nesbitt Burns Inc. and Genuity Capital Markets (together, the “Standby Purchasers”) have entered into a standby purchase agreement of even date herewith (the “Standby Purchase Agreement”) pursuant to which the Standby Purchasers have severally (and not jointly and severally) agreed to purchase up to an aggregate of 50% of the Offering Amount of Subscription Receipts that are not otherwise purchased under the Rights Offering (whether by other shareholders or by TAVIX pursuant to the terms and conditions set forth in this Agreement);

AND WHEREAS, TAVIX is prepared to agree to exercise its Basic Subscription Privilege and its Additional Subscription Privilege to subscribe for up to an aggregate of 50% of the Offering Amount of Subscription Receipts under the Rights Offering pursuant to, and subject to the limitations contained in, this oversubscription agreement (this “Agreement”);

NOW THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto have agreed as set forth below.

- 2 -

ARTICLE 1
INTERPRETATION

1.1		Definitions. In this Agreement, unless something in the subject matter is inconsistent therewith, terms used as defined terms herein shall have the respective meanings ascribed thereto in the preamble or recital clauses of this Agreement, or in Section 1.1 or elsewhere in Standby Purchase Agreement, a complete copy of which is annexed hereto.

1.2		Headings, etc. The division of this Agreement into articles, sections, paragraphs and clauses and the provision of headings are for the convenience of reference only and shall not affect the construction or interpretation of this Agreement. The terms “this Agreement”, “hereof”, “hereunder” and similar expressions refer to this Agreement as a whole and not to any particular article, section, paragraph, clause or other portion hereof and include any agreement or instrument supplemental or ancillary hereto. Unless something in the subject matter or context is inconsistent therewith, references herein to articles, sections, paragraphs or clauses are to articles, sections, paragraphs or clauses of this Agreement.

1.3		Plurality and Gender. Words importing the singular number only shall include the plural and vice versa, words importing the masculine gender shall include the feminine and neuter genders and vice versa and the words importing persons shall include individuals, partnerships, trusts, corporations, governments and governmental authorities and vice versa.

1.4		Currency. Unless otherwise specifically stated, all references to dollars and cents in this Agreement are to the lawful currency of Canada.

1.5		Governing Law. This Agreement shall be governed by, interpreted and enforced in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein. Each party hereby unconditionally and irrevocably submits to the non-exclusive jurisdiction of the courts of the Province of Ontario and to the non-exclusive jurisdiction of the Federal and State courts situated in New York County, New York, in respect of all matters arising out of this Agreement.

1.6		Severability. If any provision of this Agreement is determined to be invalid or unenforceable in whole or in part, such invalidity or unenforceability shall attach only to such provision or part thereof and the remaining part of such provision and all other provisions hereof shall continue in full force and effect. The parties hereto agree to negotiate in good faith a substitute provision which shall be as close as possible to the intention of any invalid or unenforceable provision as may be valid or enforceable. The invalidity or unenforceability of any provision in any particular jurisdiction shall not affect its validity or enforceability in any other jurisdiction where it is valid or enforceable.

1.7		Statutes. Any reference to a statute, act or law shall include and shall be deemed to be a reference to such statute, act or law and to the regulations, instruments and policies made pursuant thereto, with all amendments made thereto and in force from time to

- 3 -

time, and to any statute, act or law that may be passed which has the effect of supplementing or superseding such statute, act or law so referred to.

ARTICLE 2
OVERSUBSCRIPTION COMMITMENT

2.1		Conduct of Rights Offering. Subject to and in accordance with the terms hereof, Catalyst intends to offer, in accordance with Securities Laws, the Rights, the Subscription Receipts issuable upon the exercise of the Rights and the Common Shares underlying the Subscription Receipts pursuant to the Prospectus to Persons that are the holders of record of Common Shares in the Qualifying Jurisdictions.

2.2		Oversubscription Commitment; Catalyst’s Information. Subject to and in accordance with the limitation set out in this Section 2.2 and the other terms hereof, if Catalyst proceeds with the Rights Offering, TAVIX agrees to fully exercise its Basic Subscription Privilege prior to the Last Day (as defined below) to subscribe for and purchase its pro rata share of the Subscription Receipts, and to exercise its Additional Subscription Privilege to subscribe for an additional number of Subscription Receipts that are not otherwise subscribed for in the Rights Offering by holders of Rights prior to the Expiry Time, at the Exercise Price, up to but in no event exceeding such number of Subscription Receipts as have an aggregate purchase price of $62,500,000, subject to adjustment as described herein. For purposes of clarification, TAVIX will not oversubscribe for Subscription Receipts in an amount which, when combined with Subscription Receipts acquired by TAVIX pursuant to exercise of its Basic Subscription Privilege, together with the aggregate amount of Subscription Receipts subscribed for by Other TAM Clients (as defined below) through their respective exercise of their separate Basic Subscription Privilege and Additional Subscription Privilege, would cause the total subscriptions by TAVIX and such Other TAM Clients to exceed $62,500,000, or fifty percent (50%) of the Rights Offering, whichever is less.

From time to time during the Rights Offering at the request by or on behalf of TAVIX, and by 10:00 a.m., Toronto time, on the final Business Day during the term of the Rights Offering on which subscriptions and payment may be effected by holders of Rights (the “Last Day”), Catalyst will obtain from the depositary for the Rights Offering, and promptly shall provide to TAVIX, in writing, true and complete information regarding the then-current tally of subscriptions by Rights holders for Subscription Receipts of Catalyst. In the event that the lesser of the final Offering Amount and $125,000,000 exceeds the aggregate dollar value of all subscriptions (including oversubscriptions other than that of TAVIX provided for herein) received by Catalyst’s depositary as notified by the depositary on the Last Day (such difference herein called the “Shortfall”) , TAVIX will validly exercise its Additional Subscription Privilege and subscribe for an additional amount of Subscription Receipts which, subject to adjustment as provided herein, when added to its basic subscription for its pro rata share of the Rights Offering, will cause the aggregate subscription by TAVIX to equal the lesser of $62,500,000 and the sum of its basic subscription for its pro rata share and such Shortfall.

Notwithstanding anything to the contrary contained herein or to be inferred herefrom, the aggregate value of additional Subscription Receipts for which TAVIX shall be required to

- 4 -

subscribe under the circumstances described in the preceding paragraph will be reduced by crediting against the oversubscription obligation of TAVIX the aggregate dollar value of all other subscriptions for Subscription Receipts (pursuant to the Basic Subscription Privilege and the Additional Subscription Privilege) tendered by other shareholders of Catalyst for which Third Avenue Management LLC (“TAM”) acts as the investment adviser (such other clients of TAM are referred to herein as “Other TAM Clients”). Attached hereto as Annex A, and made a part of this Agreement, is a detailed example of how the parties intend and agree that this Section 2.2 is intended to operate under various circumstances. TAVIX agrees to deliver to Catalyst by 10:00 a.m. (Vancouver time) on the Last Day a certificate setting forth by account number the dollar value of the subscriptions for Subscription Rights tendered by Other TAM Clients, which certificate will be used to calculate TAVIX’s oversubscription obligation under this Section 2.2.

2.3		Price Determination. The Exercise Price shall be calculated and determined in accordance with the terms of Section 2.3 of the Standby Purchase Agreement.

2.4		Timing of Rights Offering. Catalyst shall effect the Rights Offering in accordance with the terms and timing requirements set forth in Section 2.4 of the Standby Purchase Agreement.

2.5		United States Filings. Catalyst shall effect the United States Filings with respect to the Rights Offering in accordance with the terms and timing requirements set forth in Section 2.5 of the Standby Purchase Agreement. Catalyst and TAVIX shall enter into a registration rights agreement having the principal terms and conditions set forth in Annex B with respect to the Common Shares underlying any Subscription Receipts purchased by TAVIX hereunder. Simultaneously with, or as soon as is practicable following execution of this Agreement, Catalyst and TAVIX shall effect any filings necessary or appropriate for the consummation of the transactions contemplated hereby including, without limitation, filing Notification and Report forms required to be filed with the Antitrust Division of the United States Department of Justice and the Premerger Notification Office of the United States Federal Trade Commission under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”). All costs and fees, including filing fees, reasonable legal fees and related disbursements, incurred by or on behalf of either party in connection with any such filings, including any filings made under the HSR Act, shall be borne by Catalyst.

2.6		Payment for Subscription Receipts. TAVIX shall pay the aggregate purchase price that is payable for the Subscription Receipts to be purchased by it hereunder (both its pro rata portion and the amount for which it oversubscribes) prior to the Expiry Time in accordance with the terms of the Rights Offering.

2.7		Omitted.

2.8		Omitted.

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ARTICLE 3
COVENANTS OF CATALYST

3.1

Subject to and in accordance with the terms hereof, Catalyst undertakes and agrees with and in favour of TAVIX to discharge each and all of its covenants set forth in Article 3 of the Standby Purchase Agreement as if fully set forth herein, mutatis mutandis; provided that Catalyst shall not owe to TAVIX independent obligations arising under any of subsections 3.1(l), 3.1(m), 3.1(n) or 3.1(p) of the Standby Purchase Agreement, the parties agreeing that such obligations arise between Catalyst and the Standby Purchasers and are for the benefit of the latter.

ARTICLE 4
CHANGES

4.1

Material Change During Distribution. Catalyst shall notify TAVIX in writing if any of the circumstances described or contemplated in subsections 4.1(a) through 4.1(c) of the Standby Purchase Agreement shall occur or arise during the period from the date of this Agreement to the earlier of the completion of the distribution by the Standby Purchasers of the Standby Subscription Receipts and the underlying Common Shares (as notified by the Standby Purchasers pursuant to Section 4.4 of the Standby Purchase Agreement) and ninety (90) days after the Closing Date (the “Qualification Period”).

Catalyst shall promptly, and in any event within any applicable time limitation, comply, to the reasonable satisfaction of TAVIX, with all applicable filings and other requirements under the Securities Laws as a result of such fact or change. However, Catalyst shall not file any Prospectus Amendment or other document without first obtaining approval from TAVIX, after consultation with TAVIX with respect to the form and content thereof, which approval by TAVIX will not be unreasonably withheld or delayed; provided, however, that in the event that the Standby Purchasers agree to any such Prospectus Amendment or other document, TAVIX shall withhold its consent only if such changed circumstances pose a material risk to TAVIX different from the consequences to the Standby Purchasers of such change. Catalyst shall in good faith discuss with TAVIX any fact or change in circumstances (actual, anticipated, contemplated or threatened, financial or otherwise) which is of such a nature that there is reasonable doubt whether written notice need be given under this Section 4.1.

4.2		Omitted.

4.3		Omitted.

4.4		Omitted.

ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF CATALYST

5.1

Representations and Warranties; Covenants. Catalyst hereby affirms directly to TAVIX each of the representations and warranties that Catalyst made or is deemed to

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		have made to the Standby Purchasers pursuant to Section 5.1 of the Standby Purchase Agreement, mutatis mutandis. To the extent that certain of the representations and warranties made by Catalyst pursuant to Section 5.1 of the Standby Purchase Agreement constitute covenants, Catalyst hereby covenants to TAVIX to satisfy and discharge the same in accordance the terms thereof as if such covenants were made directly to TAVIX herein. In addition, Catalyst hereby agrees that if, as a result of the Rights Offering or at any time thereafter, Catalyst is deemed to be a “controlled foreign corporation” for U.S. tax purposes, Catalyst shall cooperate (at its own expense) with TAVIX and TAM and provide such additional financial reporting and information, on a timely basis and in such form, as may be required to enable TAVIX to satisfy its obligations under U.S. tax law relating to its interest in Catalyst.

5.2		Survival. All representations, warranties and covenants of Catalyst contained herein or contained in any document delivered pursuant to this Agreement or in connection with the Rights Offering herein contemplated, shall survive the completion of the purchase of Securities by TAVIX and shall continue in full force and effect notwithstanding any investigation, inquiry or other steps which may be taken by or on behalf of the TAVIX.

ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF TAVIX

6.1

Representations. Third Avenue Trust, on behalf of TAVIX, hereby represents and warrants to Catalyst, solely with respect to itself or TAVIX, that:

	(a)		Third Avenue Trust is a Delaware Business Trust and that it has the power to enter into and perform its obligations under this Agreement on behalf of TAVIX, a registered investment company under the Investment Company Act of 1940, as amended.

	(b)		The execution, delivery and performance by such TAVIX of this Agreement:

	(i)		has been duly authorized by all necessary action on its part;

	(ii)		does not (or would not with the giving of notice, the lapse of time or the happening of any other event or condition) result in a breach or a violation of, or conflict with, any of the terms or provisions of which it is a party or pursuant to which any of its assets or property may be affected; and

	(iii)		will not result in the violation of any applicable Law.

(c)

This Agreement has been duly executed and delivered by or on behalf of TAVIX and, assuming due execution by Catalyst, constitutes a legal, valid and binding obligation of TAVIX, enforceable against it in accordance with its terms, subject only to (i) any limitation under applicable Laws relating to bankruptcy, insolvency, arrangement or other laws of general application affecting the enforcement of creditors’ rights, and (ii) the discretion that a court may exercise in the granting of equitable remedies such as specific performance and injunction.

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	(d)		No consent, approval, order or authorization of, or declaration with, any Governmental Entity is required by or with respect to TAVIX or any of its affiliates in connection with the execution and delivery of this Agreement or the consummation of the transactions by TAVIX contemplated hereby, other than consents, approvals, or authorizations that may be required by any Securities Commissions.

	(e)		TAVIX has, and on the Closing Date will have (regardless of the number of Rights that are exercised by the holders of Rights prior to the Expiry Time) sufficient funds to make and complete the payment for the Oversubscription Receipts in the amount set out in Section 2.2 and the availability of such funds is not and will not be subject to the consent, approval or authorization of any other Person(s), and TAVIX acknowledges that it may, if required by the Securities Commissions, in conjunction with Catalyst, be required in accordance with Section 6.1 of National Instrument 45-101 — Rights Offerings, to deliver evidence of the foregoing to the Securities Commissions at or prior to the time of filing of the Preliminary Prospectus with the Securities Commissions.

6.2

Survival. All representations and warranties of TAVIX contained herein or contained in any document delivered pursuant to this Agreement or in connection with the Rights Offering herein contemplated, shall survive the completion of the purchase of Securities by TAVIX and shall continue in full force and effect notwithstanding any investigation, inquiry or other steps which may be taken by or on behalf of Catalyst.

ARTICLE 7
CLOSING AND CONDITIONS

7.1		The closing of the purchase by TAVIX of the Securities shall be completed in accordance with the terms and conditions of the Rights Offering.

7.2		The obligation of TAVIX to subscribe for Subscription Receipts hereunder is subject to the following conditions being satisfied in full at the time such subscription is required under Section 2.2:

	(a)		Catalyst shall have entered into the Snowflake Purchase Agreement in the form provided to TAVIX, which agreement shall remain in full force and effect, unamended, as at the Closing Time (except for non-material amendments or amendments made with the consent of TAVIX, such consent not to be unreasonably withheld);

	(b)		The Standby Purchasers shall have entered into the Standby Purchase Agreement in the form provided to TAVIX, which agreement shall remain in full force and effect, unamended, as at the Closing Time (except for non-material amendments or amendments made with the consent of TAVIX, such consent not to be unreasonably withheld) and the Standby Purchasers shall remain contractually obligated and financially able to purchase and fully pay for any Subscription Receipts required to be purchased by the Standby Purchasers under the Standby Purchase Agreement;

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	(c)		there shall not be any claims, litigation, investigations or proceedings, including appeals and applications for review, in progress, or to the knowledge of Catalyst, pending, commenced or threatened, including, without limitation before any Governmental Entity, that would reasonably be expected, if determined adverse to Catalyst, to have a material adverse effect on the power or ability of Catalyst to consummate the Rights Offering;

	(d)		Catalyst will have made and/or obtained all necessary filings, approvals, orders, rulings and consents of all relevant securities regulatory authorities and other governmental and regulatory bodies required in connection with the Rights Offering and the purchase of Standby Subscription Receipts by the Standby Purchasers as contemplated by the Standby Purchase Agreement;

	(e)		the Rights being listed on the TSX; and

	(f)		the TSX having conditionally approved the listing of the Standby Subscription Receipts and the Common Shares underlying the Standby Subscription Receipts, subject to the filing of customary documents with the TSX.

7.3

Catalyst agrees it will use its reasonable commercial efforts to cause the conditions set out in Section 7.2 to be fulfilled or complied with on or before the Closing Date.

ARTICLE 8
CONFIDENTIALITY AND PUBLIC ANNOUNCEMENT

8.1		Confidentiality. Neither of the parties hereto shall, without the prior consent of the other party, disclose the terms of this Agreement, except that such disclosure may be made: (i) by Catalyst to the extent necessary in connection with the entering into of the Snowflake Purchase Agreement, or by TAVIX to satisfy any regulatory requirements applicable to registered investment companies in the United States; (ii) to any party’s officers, directors, partners, advisors and employees who require such information for the purpose of consummating the transactions contemplated by this Agreement; (iii) in the Preliminary Prospectus and Prospectus; or (iv) as may otherwise be required by Law or the rules of the TSX, it being acknowledged that a copy of this Agreement will be required to be filed on SEDAR and EDGAR.

8.2		Public Announcement. Catalyst will make a public announcement regarding this Agreement (in a form satisfactory to TAVIX, acting reasonably) contemporaneously with (or that shall be included within) the public announcement to be made by Catalyst regarding the Snowflake Acquisition and/or the Rights Offering.

ARTICLE 9
TERMINATION

9.1

Termination by Catalyst. Subject to Section 9.3, if Catalyst, at any time and in its sole discretion, decides not to proceed with the Rights Offering it shall be entitled, by giving written notice to TAVIX, to terminate and cancel this Agreement.

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9.2

Termination by TAVIX. Subject to Section 9.3, TAVIX shall be entitled, by giving written notice to Catalyst at any time prior to the time at which it is required to subscribe for Subscription Receipts hereunder, to terminate and cancel, without any liability on its part, its obligations under this Agreement, if the Standby Purchase Agreement is terminated by Catalyst or either of the Standby Purchasers..

The rights of termination contained in this Section 9.2 may be exercised by TAVIX and, subject to Section 9.3, are in addition to any other rights or remedies that TAVIX may have in respect of any default, act or failure to act of Catalyst in respect of any matters contemplated by this Agreement.

9.3

Notwithstanding any other provision hereof, should Catalyst or TAVIX validly terminate this Agreement pursuant to, and in accordance with, this Article 9, the obligations of Catalyst and TAVIX under this Agreement shall terminate and there shall be no further liability on the part of TAVIX to Catalyst or on the part of Catalyst to TAVIX hereunder (except for any liability of either party that exists at such time or that may arise thereafter pursuant to Section 12.1 hereof).

ARTICLE 10
OMITTED

ARTICLE 11
NOTICE

11.1

Notice. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be personally delivered or sent by facsimile transmission or other means of electronic transmission as set forth below, or to such other address, facsimile number or person as may be designated by notice.

	(a)		In the case of Catalyst:

			Catalyst Paper Corporation 2nd Floor, 3600 Lysander Lane Richmond, British Columbia V7B 1C3

			Attention: Chief Financial Officer Fax: (604) 247-4145

			With copies (which shall not constitute notice) to:

			Blake, Cassels & Graydon LLP Suite 2600, Three Bentall Centre 595 Burrad Street, P.O. Box 49314 Vancouver, British Columbia V7X 1L3 Canada Attention: Peter C. Kalbfleisch Fax: (604) 631-3309

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			and

			Fried Frank One New York Plaza New York, New York 10004

			Attention: Jeffrey Bagner Fax: (212) 859-4000

	(b)		In the case of TAVIX:

			Third Avenue International Value Fund 622 Third Avenue, 32^nd floor New York, NY 10017

			Attention: General Counsel Fax: (212) 735-0003

			With a copy (which shall not constitute notice) to:

			Torys LLP 79 Wellington Street, Suite 3000 Box 270, TD Center Toronto, Ontario M5K 1N2

			Attention: Philip D.A. Symmonds Fax: (416) 865-7380

11.2

Receipt of Notice. Notice shall be deemed to be given on the day of actual delivery or the day of facsimile transmission or other means of electronic transmission, as the case may be, or if not a Business Day, on the next Business Day.

ARTICLE 12
MISCELLANEOUS

12.1

Expenses. Catalyst will be responsible for all expenses related to the Rights Offering, whether or not it is completed, including, without limitation, all fees and disbursements of its legal counsel, fees and disbursements of its accountants and auditors, all expenses related to roadshows and marketing activities and any marketing documents or materials (including, without limitation, slide presentations and videos, if any), printing costs, translation fees and filing fees. In addition, Catalyst shall reimburse TAVIX for all reasonable fees and disbursements of its U.S. and Canadian legal counsel and for other reasonable out-of-pocket expenses incurred by TAVIX in connection with the

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		underlying commitment letter of TAVIX relating to, and for the preparation, negotiation, execution and effectuation of, this Agreement.

12.2		Further Assurances. The parties hereto agree to do all such things and take all such actions as may be necessary or desirable to give full force and effect to the matters contemplated by this Agreement.

12.3		Assignment. This Agreement may not be assigned by any party hereto, by operation of law or otherwise, without the prior written consent of the other party hereto.

12.4		Enurement. This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.

12.5		Waiver. The failure by a party hereto to insist in any one or more instances upon the strict performance of any one of the covenants or rights contained herein shall not be construed as a waiver or relinquishment of such covenant. No waiver by either party hereto of any such covenant or right shall be deemed to have been made unless expressed in writing and signed by the party against which enforcement of such waiver is sought.

12.6		Amendments. No term or provision hereof may be amended, discharged or terminated except by an instrument in writing signed by the party against which the enforcement of the amendment, discharge or termination is sought.

12.7		Counterparts. This Agreement may be signed in one or more counterparts, each of which once signed shall be deemed to be an original. All such counterparts together shall constitute one and the same instrument. Notwithstanding the date of execution of any counterpart, each counterpart shall be deemed to bear the effective date first written above. This Agreement, any and all agreements and instruments executed and delivered in accordance herewith, along with any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine or other means of electronic transmission, shall be treated in all manner and respects and for all purposes as an original signature, agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person.

12.8		Time. Time shall be of the essence of this Agreement.

12.9		Entire Agreement. This Agreement and any other agreements and other documents referred to herein and delivered in connection herewith, constitute the entire agreement between the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, between the parties with respect to the subject matter hereof.

12.10		Language. The parties hereby confirm their express wish that this document and all documents and agreements directly or indirectly related thereto be drawn up in English. Les parties aux présentes reconnaissent qu’à leur demande le présent document ainsi que tous les documents et conventions qui s’y rattachent directement ou indirectement sont rédigés en langue anglaise.

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February 10, 2008

IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly executed and delivered by their authorized officers as of the date first written above.


		CATALYST PAPER CORPORATION

		Per:		/s/ Richard Garneau
				Name: Richard Garneau
				Title: President and CEO

		THIRD AVENUE TRUST, *on behalf of* THIRD AVENUE INTERNATIONAL VALUE FUND

		Per:		/s/ Vincent J. Dugan
				Name: Vincent J. Dugan
				Title: CFO

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ANNEX A

Explaining the Operation of Section 2.2 of the Agreement

For purposes of clarification, if the basic or pro rata share of TAVIX of the Rights Offering amount were to be $25,000,000, such that its oversubscription obligation pursuant to this Agreement were to be an additional $37,500,000 ($62,500,000 — $25,000,000 = $37,500,000), then before being obligated to subscribe or tender payment for such additional amount:

	(i)		TAVIX will be advised by Catalyst on the Last Day whether the Rights Offering is fully subscribed, oversubscribed, or undersubscribed. If as of the Last Day Catalyst’s notice to TAVIX indicates that the Rights Offering is undersubscribed, Catalyst will report in writing to TAVIX the extent (in Canadian dollars) to which the Rights Offering is not fully subscribed (the “Aggregate Undersubscription”). If the Rights Offering is fully subscribed or oversubscribed before the inclusion of any oversubscription offer that TAVIX might make, TAVIX shall be released from any specific oversubscription obligation hereunder and shall be free to offer to purchase none or any additional amount of Subscription Receipts in the Rights Offering. If an Aggregate Undersubscription exists on the Last Day, and such Aggregate Undersubscription equals or exceeds the difference between TAVIX’s pro rata subscription obligation and $62,500,000 (the “Oversubscription Obligation”) ($37,500,000 in this example), TAVIX will be obligated hereunder to subscribe for additional Subscription Rights equal to the full amount of such Oversubscription Obligation. In the event that the Aggregate Undersubscription is less than the Oversubscription Obligation, TAVIX will subscribe for additional Subscription Rights equal to the full amount of the Aggregate Undersubscription. Thus, in all instances where an Aggregate Undersubscription exists on the Last day, TAVIX will subscribe for the lesser of the Aggregate Undersubscription or the Oversubscription Obligation, further adjusted as described in item (ii) below.

	(ii)		Without regard to any reduction effected by application of item (i) above, TAVIX shall be permitted to reduce the amount of its Oversubscription Obligation by the aggregate dollar amount of Subscription Receipts subscribed for by Other TAM Clients.

Thus, in this example, if the Aggregate Undersubscription on the Last Day were $40,000,000 (exceeding this example’s $37,500,000 Oversubscription Obligation of TAVIX), and none of the Other TAM Clients offered to purchase Subscription Receipts, TAVIX would be required to subscribe and pay for the entire Oversubscription Obligation. If, however, Other TAM Clients subscribed and paid for an aggregate of $10,000,000 of

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Subscription Receipts, the Oversubscription Obligation of TAVIX would be reduced by such $10,000,000, and TAVIX would be required to subscribe for an aggregate of $27,500,000 of additional Subscription Receipts ($62,500,000 - $25,000,000 = $37,500,000 - $10,000,000 = $27,500,000).

In this example, if the Aggregate Undersubscription on the Last Day were $20,000,000 (less than this example’s $37,500,000 Oversubscription Obligation), and no other TAM Client offered to purchase Subscription Receipts, TAVIX would be required to subscribe and pay for the entire Aggregate Undersubscription (the lesser of the Oversubscription Amount or the Aggregate Undersubscription). If, however, Other TAM Clients subscribed and paid for an aggregate of $10,000,000 of Subscription Receipts, the Oversubscription Obligation of TAVIX would be reduced by such $10,000,000, and TAVIX would be required to subscribe for an aggregate of $10,000,000 of additional Subscription Receipts over its pro rata share ($62,500,000 - $25,000,000 = $37,500,000; $20,000,000 < $37,500,000; $20,000,000 - $10,000,000 = $10,000,000).

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ANNEX B

January 31, 2008

Project Snowflake
Registration Rights Agreement
Summary of Terms


TAVIX:		Third Avenue Trust, on behalf of Third Avenue International Value Fund

Company:		Catalyst Paper Corporation

Registrable Securities:		Common Shares of the Company held by TAVIX (and, if and to the extent required under US securities law, the Common Shares of the Company held by Other TAM Clients (as defined in the Oversubscription Agreement by and between TAVIX and the Company)) immediately after the closing of the Snowflake Acquisition, including all shares acquired in the Rights Offering as well as all shares owned prior thereto.

Demand Registration:		Subject to satisfying the Minimum Required Securities requirement set forth below, TAVIX shall have the right to require the Company to facilitate an underwritten offering of the Company’s Common Shares pursuant to a short form Canadian prospectus and a US Securities Act registration statement under an applicable MJDS form; provided, however, if at the time of any demand for registration and for any reason the Company is ineligible (or declines) to utilize such a short form Canadian prospectus and a US Securities Act registration statement under an applicable MJDS form, the Company shall effect registration of such Common Shares in the US on such form or forms as shall be available to enable TAVIX and the Other TAM Clients to sell such Common Shares in compliance with US Securities Laws. TAVIX will participate, at least to some meaningful degree, in any Demand Registration made hereunder if Other TAM Clients also will be selling Common Shares of the Company pursuant to such a registration.

Number of Demand Registrations:		TAVIK shall be entitled to a total of 6 Demand Registrations; provided that the Company shall not be required to file any prospectus or registration statement within 6 months of the effective date of any other prospectus, registration statement or the closing of the Snowflake Acquisition.

Minimum Required Securities:		The right to require a Demand Registration shall be subject to satisfying the lesser of the following limitation:
		§ at least 20%. of the Common Shares held by TAVIX and the Other TAM Clients at the time of the closing of the Snowflake Acquisition are covered by the Demand Registration; or

		§ the Common Shares covered by the Demand Registration have an aggregate market price at the time of the demand of at least C$20 million.


Piggy-Back Registration:		If the Company proposes to file a registration statement with respect to an underwritten offering of its Common Shares, for its own account or for the account of any holder of the Common Shares, the Company will give written notice of the proposed filing to TAVIX. TAVIX shall have the option to participate in that offering on the same terms.

Number of Piggy-Back Registrations:		TAVIX shall be entitled to unlimited Piggy-Back Registrations.

Underwriter’s Cutback:		If the lead underwriter of the offering informs the Company in good faith and in writing that the success of the offering could be materially and adversely affected by the inclusion of all the shares required to be included, then the Company may reduce the number of Common Shares proposed to be offered by TAVIX (and, if applicable, by the Other TAM Clients) and any other shareholder exercising such rights on a pro-rata basis.

Cost:		All offerings covered by the Registration Rights Agreement will be at the expense of the Company, including the reasonable fees and expenses of TAVIX’s legal and other advisors), except that the underwriting commissions relating to TAVIX’s (and, if applicable, the Other TAM Clients’) Common Shares shall be borne by TAVIX (and, if applicable, by such Other TAM Clients), by netting from the proceeds of the sale of such Common Shares any underwriting commissions before payment of the net proceeds to the selling shareholder(s). The Company shall not be obligated to reimburse TAVIX (and, if applicable, the Other TAM Clients) for the reasonable fees and expenses of more than one U.S. and one Canadian law firm in connection with any of the activities arising under or related to the Registration Rights Agreement.

Indemnification:		If TAVIX participates in an offering (a) it will indemnify the Company for any liability arising from material mis-statements or omissions in any information provided in writing by TAVIX for inclusion in the prospectus and/or registration statement, and (b) the Company will indemnify TAVIX for any liability arising from material misstatements or omissions in the prospectus and/or registration statement, other than with respect to information by TAVIX.

Termination:		TAVIX’s right to Demand Registrations or Piggy-Back Rights will terminate upon the earlier of (a) ten (10) years after the closing of the Snowflake Acquisition, (b) TAVIX no longer being an affiliate of the Company, and (c) all the Common Shares held by TAVIX being able to sold under Rule 144 of the US Securities Act within any 3 month period.

Blackout Periods:		Customary blackout periods for material events and similar situations.

EX-99.3 4 y48681exv99w3.htm EX-3: REGISTRATION RIGHTS AGREEMENT EX-99.3

Exhibit 3

REGISTRATION RIGHTS AGREEMENT

Between

CATALYST PAPER CORPORATION

(the “Corporation”)

And

THIRD AVENUE TRUST, ON BEHALF OF
THIRD AVENUE INTERNATIONAL VALUE FUND

(the “Holder”)

February 10, 2008

TABLE OF CONTENTS


ARTICLE 1 INTERPRETATION			2
1.1 Definitions			2
1.2 Interpretation Not Affected by Headings, etc.			5
1.3 Accounting References			5
1.4 Number, etc.			6
1.5 Statutory References			6
1.6 Date for Any Action			6
ARTICLE 2 REGISTRATION RIGHTS			6
2.1 Required Qualification			6
2.2 Qualification			8
2.3 Selection of Underwriters			8
2.4 Qualification Expenses			8
ARTICLE 3 REGISTRATION PROCEDURES			9
3.1 Procedures			9
3.2 Obligations of the Holder			12
ARTICLE 4 DUE DILIGENCE; INDEMNIFICATION			13
4.1 Preparation; Reasonable Investigation			13
4.2 Indemnification			13
ARTICLE 5 GENERAL			15
5.1 No Inconsistent Agreements			15
5.2 Remedies			15
5.3 Amendments			15
5.4 Assignment			15
5.5 Term			15
5.6 Severability			15
5.7 Delays or Omissions			15
5.8 Descriptive Headings			16
5.9 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial			16
5.10 Notices			16

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement is made the 10^th day of February, 2008 between Catalyst Paper Corporation (the “Corporation”), a corporation governed by the laws of Canada, and Third Avenue Trust, a Delaware business trust on behalf of Third Avenue International Value Fund, a registered investment company under the United States Investment Company Act of 1940 as amended (the “Holder”).

WHEREAS the parties desire to enter into this Agreement to provide inter alia for the right of the Holder to require the Corporation to prepare and file a preliminary prospectus and a final prospectus with the Commissions (as hereinafter defined), and, in conjunction therewith, to prepare and file a registration statement with the United States Securities and Exchange Commission (the “SEC”) on Form F-10 or other form permitted under MJDS or Securities Laws, covering the Designated Qualifiable Securities (as hereinafter defined) to permit the sale thereof in such manner as the Holder may designate on the terms and conditions of this Agreement.

NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the respective covenants, agreements, representations, warranties and indemnities of the parties herein contained and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged by each party), the parties agree as follows:

ARTICLE 1
INTERPRETATION

1.1 Definitions

In this Agreement, unless there is something in the subject matter or context inconsistent therewith, the following terms shall have the respective meanings set out below and grammatical variations of such terms shall have corresponding meanings:

	(a)		“1933 Act” means the United States Securities Act of 1933, as amended, including the rules and regulations adopted by the SEC thereunder.

	(b)		“Affiliate” has the meaning ascribed thereto in the 1933 Act.

	(c)		“Business Day” means a day, other than a Saturday, Sunday or statutory holiday, when banks are generally open in the City of Vancouver, British Columbia, for the transaction of banking business and the SEC is open for business.

	(d)		“Commissions” means the securities commissions or other securities regulatory authorities in each of the provinces of Canada.

	(e)		“Corporation” means Catalyst Paper Corporation and any corporation resulting from the amalgamation or merger of the Corporation with another corporation or other corporations.

	(f)		“Demand Qualifiable Securities” shall have the meaning set out in subsection 2.1(a).

	(g)		“Demand Qualification” shall have the meaning set out in subsection 2.1(a).

	(h)		“Designated Qualifiable Securities” shall have the meaning set out in subsection 2.1(c).

	(i)		“Distribution Period” has the meaning ascribed thereto in subsection 3.1(c).

	(j)		“Holder” means Third Avenue Trust, on behalf of Third Avenue International Value Fund.

	(k)		“misrepresentation” means (i) an untrue statement of material fact, or (ii) an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made.

	(l)		“MJDS” means the multijurisdictional disclosure system adopted by the Commissions through National Instrument 71-101 — The Multijurisdictional Disclosure System and adopted by the SEC or any successor multijurisdictional disclosure system adopted by the Commissions and the SEC from time to time.

	(m)		“Other TAM Clients” means those shareholders of the Corporation for which Third Avenue Management LLC acts as an investment adviser and which are listed by account number on Schedule A hereto.

	(n)		“Person” means an individual, body corporate with or without share capital, partnership, joint venture, unincorporated association, syndicate, sole proprietorship, trust, pension corporation, union, governmental agency, board, tribunal, ministry, commission or department and the heirs, beneficiaries, executors, legal representatives or administrators of an individual.

	(o)		“Piggy Back Qualifiable Securities” shall have the meaning set out in subsection 2.1(c).

	(p)		“Piggy Back Qualification” shall have the meaning set out in subsection 2.1(c).

	(q)		“POP Issuer” means an issuer eligible to use the POP System or equivalent system established from time to time by the Commissions.

	(r)		“POP System” means the prompt offering prospectus qualification system under National Instrument 44-101 of the Canadian Securities Administrators entitled “Short Form Prospectus Distributions” or any successor policy, rule, regulation or similar instrument.

	(s)		“Qualifiable Securities” means (x) any Shares and any securities of the Corporation issued on conversion of, in exchange for or in replacement of such Shares, owned by the Holder at the date hereof or which the Holder may acquire as a result of the deemed exercise of Subscription Receipts acquired by the Holder under the Rights Offering, and (y), to the extent the filing of a registration statement is required under the Securities Laws of the United States to permit the resale of such securities by the Other TAM Clients over the facilities of the

			Toronto Stock Exchange, the Qualifiable Securities shall also include any Shares and any securities of the Corporation issued on conversion, in exchange for or in replacement of such Shares owned by the Other TAM Clients at the date hereof and which the Other TAM Clients may acquire as a result of the deemed exercise of Subscription Receipts acquired by the Other TAM Clients under the Rights Offering.

	(t)		“Qualification” means the qualification of securities under the Securities Laws so as to permit the distribution of such securities to the public in any or all of the provinces of Canada and in the United States subject to the limitations contained herein.

	(u)		“Qualification Expenses” means all expenses in connection with any Qualification pursuant to this Agreement including, without limitation, the following:

	(i)		all fees or commissions payable to an underwriter, investment banker, manager or agent and fees, disbursements and expenses payable to counsel and auditors of the Holder in connection with the distribution of the Qualifiable Securities;

	(ii)		all fees, disbursements and expenses of counsel and auditors to the Corporation;

	(iii)		all expenses in connection with the preparation, translation, printing and filing of any preliminary prospectus, prospectus, registration statement or any other offering document and any amendments and supplements thereto and the mailing and delivering of copies thereof to any underwriters and dealers;

	(iv)		all filing fees of any Commission, of the SEC and of any applicable U.S. state regulator;

	(v)		all transfer agents’, depositaries’ and registrars’ fees and the fees of any other agent appointed by the Corporation;

	(vi)		all expenses relating to the preparation of certificates;

	(vii)		all fees and expenses of any securities exchange or over-the-counter market on which the Shares are then listed; and

	(viii)		all expenses relating to “road shows” and marketing activities and all travel and lodging expenses in connection with such “road shows” and marketing activities.

(v)

“Qualification Period” means the period commencing on the closing date of the Snowflake Acquisition and terminating on the earlier of: (i) the tenth anniversary of such closing date; (ii) the date on which the Holder ceases to be an Affiliate of

			the Corporation; and (iii) the date on which all of the Qualifiable Securities are able to be sold under Rule 144 of the 1933 Act within any three month period.

	(w)		“Rights Offering” means the issue by the Corporation to the holders of record of its Shares of transferable rights to acquire Subscription Receipts to raise proceeds to fund a portion of the purchase price for the Snowflake Acquisition.

	(x)		“SEC” means the United States Securities and Exchange Commission.

	(y)		“Secondary Qualification” shall have the meaning set out in subsection 2.1(c).

	(z)		“Secondary Securities” shall have the meaning set out in subsection 2.1(c).

	(aa)		“Securities Laws” means the applicable securities legislation of each of the provinces of Canada, as well as the applicable federal and state securities legislation of the United States, and all published rules, regulations, instruments, policy statements, orders, rulings, communiqués and interpretation notes issued thereunder or in relation thereto, as the same may hereafter be amended or replaced.

	(bb)		“Share” means a common share in the capital of the Corporation.

	(cc)		“Snowflake Acquisition” means the acquisition by the Corporation of certain newsprint assets located in the State of Arizona and the issued and outstanding shares of capital stock of The Apache Railway Company from Abitibi Consolidated Sales Corporation pursuant to the asset and stock purchase agreement dated February 10, 2008 between Abitibi Consolidated Sales Corporation (as seller) and the Corporation (as purchaser), as amended from time to time.

	(dd)		“Subscription Receipts” means the subscription receipts of the Corporation being offered pursuant to the Rights Offering, each whole Subscription Receipt entitling the holder to acquire one Share upon the closing of the Snowflake Acquisition without additional consideration.

1.2 Interpretation Not Affected by Headings, etc.

The division of this Agreement into Articles, sections and other portions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation hereof. Unless otherwise indicated, all references to “section” or “subsection” followed by a number and/or a letter refer to the specified section of this Agreement. The terms “this Agreement”, “hereof”, “herein” and “hereunder” and similar expressions refer to this Agreement and not to any particular Article, section or other portion hereof and include any agreement or instrument supplementary or ancillary hereto.

1.3 Accounting References

All accounting terms not expressly defined herein shall be construed in accordance with Canadian generally accepted accounting principles, except where the context otherwise requires.

1.4 Number, etc.

Unless the context otherwise requires, words importing the singular shall include the plural and vice versa and words importing any gender shall include all genders.

1.5 Statutory References

Except as otherwise expressly provided in this Agreement, any references to a statute or regulation shall be construed as a reference to such statute or regulation in effect on the date of this Agreement as it may be amended, re-enacted or superseded from time to time.

1.6 Date for Any Action

In the event that any date on which any action is required to be taken hereunder by any of the parties hereto is not a Business Day, such action shall be required to be taken on the next succeeding day that is a Business Day.

ARTICLE 2
REGISTRATION RIGHTS

2.1 Required Qualification

	(a)		Subject to the provisions hereof, at any time and from time to time during the Qualification Period, the Holder may request the Corporation to effect a Qualification of all or part of the Qualifiable Securities (such Qualification being hereinafter referred to as a “Demand Qualification”). Such a request shall be in writing and shall specify the number and the description of Qualifiable Securities to be sold (the “Demand Qualifiable Securities”), the intended method of disposition and the jurisdictions in which the Holder, acting reasonably, requests that the Demand Qualification be effected (which shall, unless the Corporation agrees, include at least one province of Canada). The Corporation shall not be obligated to file a prospectus or registration statement in connection with a Demand Qualification until six months following the closing of the Snowflake Acquisition and thereafter shall not be obliged to file a prospectus or a registration statement within six months of the date of the receipt issued by the Commissions for any other final prospectus or the effective date of any other registration statement. In addition, the Corporation shall not be obligated to effect more than six Demand Qualifications in total under this Agreement. For the purposes of this subsection, a Demand Qualification will not be considered as having been effected until a receipt has been issued for the final prospectus by the Commissions or the registration statement has been declared effective by the SEC, as applicable, pursuant to which the Demand Qualifiable Securities are to be sold.

	(b)		The obligation of the Corporation pursuant to subsection 2.1(a) to comply with the request of the Holder for a Demand Qualification is subject to each of the following: (i) the Corporation shall be entitled to postpone for a reasonable period of time (not to exceed 90 days) the filing of such prospectus or registration statement otherwise required to be prepared and filed by it pursuant hereto if, at

			the time it receives the Demand Qualification request, the Corporation determines, in its reasonable judgment, that the Qualification and sale of the Demand Qualifiable Securities would be seriously detrimental to the Corporation or its shareholders and gives prompt notice of such determination to the Holder; (ii) the Corporation shall not be required to effect a Demand Qualification which includes Qualifiable Securities held by one or more Other TAM Clients unless the Holder also participates to a meaningful degree in such Demand Qualification; and (iii) the Corporation shall not be required to effect a Demand Qualification unless the Demand Qualifiable Securities either (A) constitute at least 20% of the Qualifiable Securities held by the Holder and the Other TAM Clients, together, at the time of the closing of the Snowflake Acquisition or (B) have an aggregate market price of at least CDN$20 million. Market price for the payment of the foregoing shall be calculated on the basis of the volume weighted average trading price of the Shares over the Toronto Stock Exchange on the 10 trading days immediately preceding the delivery to the Corporation of the request for the Demand Qualification.

	(c)		If during the Qualification Period the Corporation proposes to file a prospectus in Canada and/or a registration statement in the United States in order to permit the Qualification of its securities from treasury pursuant to an underwritten offering for its own account or for the account of any holder of Shares, in a form and manner that, with appropriate changes, would permit the Qualification of Qualifiable Securities under such prospectus and/or registration statement, the Corporation shall give prompt notice of its intention to do so to the Holder and shall use all reasonable efforts to include in the proposed distribution such number of Qualifiable Securities (the “Piggy Back Qualifiable Securities”, and together with the Demand Qualifiable Securities, the “Designated Qualifiable Securities”) as the Holder shall request (such Qualification hereinafter referred to as a “Piggy Back Qualification”, and together with a Demand Qualification, a “Secondary Qualification”) within twenty days (except in the case of a “bought deal” where the Holder shall have only three hours to make such request if given two days advance notice of such transaction) after the giving of such notice, upon the same terms (including the method of distribution) as such distribution; provided that (i) the Corporation shall not be required to include all such Piggy Back Qualifiable Securities in any such distribution by the Corporation if the Corporation is advised in good faith and in writing by its managing underwriter or underwriters that the inclusion of any such Piggy Back Qualifiable Securities may, in their opinion, materially and adversely interfere with the orderly sale and distribution of the securities being offered by the Corporation, in which case the number of Piggy Back Qualifiable Securities and the number of Shares of any other shareholder exercising such rights shall be reduced as necessary on a pro-rata basis, and (ii) the Corporation may at any time prior to the issuance of a receipt for such final prospectus or the effectiveness of any such registration statement pursuant to which the securities are to be sold, at its sole discretion and without the consent of the Holder, withdraw such prospectus and registration statement and abandon the proposed distribution in which the Holder has requested to participate, provided that the Corporation will pay, to the extent not prohibited by the Securities Laws, the Qualification Expenses in connection with

such withdrawn prospectus or registration statement. No Qualification of Qualifiable Securities under this subsection 2.1(c) shall relieve the Corporation of its obligations to effect Demand Qualifications pursuant to subsection 2.1(a) hereof. The Holder shall be entitled to unlimited Piggy Back Qualifications.

2.2 Qualification

	(a)		The Corporation will effect a Secondary Qualification in Canada by way of a short-form prospectus prepared pursuant to the POP System if, at the time of such Secondary Qualification, the Corporation is a POP Issuer and is able to do so in all of the jurisdictions in which the Secondary Qualification is to be effected, it being acknowledged that the Corporation shall only be required to effect a Secondary Qualification in the provinces of Canada. For greater certainty, it is acknowledged that in the event that the Corporation is not a POP Issuer or is unable to utilize the POP System in one or more jurisdictions in which the Demand Qualification is to be effected, the Corporation shall proceed by way of long-form prospectus. Notwithstanding the foregoing, the Corporation shall not be obligated to proceed by way of a long-form prospectus if it agrees to effect a Secondary Qualification of such Designated Qualifiable Securities in the United States on a form other than Form F-10 as permitted under MJDS or the 1933 Act in accordance with the provisions of subsection 2.2(b).

	(b)		The Corporation will effect a Secondary Qualification in the United States by way of a registration statement on Form F-10 or on such other form as is utilized under MJDS from time to time; provided, however, that if at the time of such Secondary Qualification, the Corporation is ineligible to effect a registration statement in the United States on Form F-10 or under another applicable MJDS form, the Corporation shall effect the Secondary Qualification in the United States on such form or forms as shall be available to enable the Holder (and, if applicable, the Other TAM Clients) to sell the Designated Qualifiable Securities in compliance with the Securities Laws of the United States.

2.3 Selection of Underwriters

Upon requesting a Demand Qualification, the Corporation shall, with the approval of the Holder (not to be unreasonably withheld), select the investment banker(s) and manager(s) to effect the distribution in connection with such Demand Qualification, it being acknowledged by the Holder that the participation of a registrant shall be required in connection with each Secondary Qualification hereunder.

2.4 Qualification Expenses

Except as expressly provided below, the Corporation will pay all Qualification Expenses in connection with a Secondary Qualification, including the reasonable fees and expenses of the Holder’s (and, if applicable, the Other TAM Clients’) legal counsel. The Holder shall be solely responsible for the underwriting commissions and fees payable in respect of the sale of the Designated Qualifiable Securities by netting from the proceeds of the sale of such Designated Qualifiable Securities any underwriting commissions or fees before payment of the net proceeds to the selling shareholder(s). The Corporation shall not be obligated to reimburse the Holder for

the fees and expenses of more than one U.S. and one Canadian law firm in connection with any Secondary Qualification and the fees of any other counsel or any other advisors to the Holder or any Other TAM Clients shall be the sole responsibility of the Holder.

ARTICLE 3
REGISTRATION PROCEDURES

3.1 Procedures

Upon receipt of a request from the Holder pursuant to section 2.1, the Corporation will, subject to section 2.1, effect the Secondary Qualification as requested. In particular, the Corporation will:

	(a)		to effect a Secondary Qualification in one or more Canadian jurisdictions, prepare and file (in any event within 60 days after the request for Secondary Qualification has been delivered to the Corporation) in the English language and, if required, French language, a preliminary prospectus under and in compliance with the Securities Laws of each jurisdiction in which the Secondary Qualification is to be effected and such other related documents as may be necessary to be filed in connection with any such preliminary prospectus and shall, as soon as possible after any comments of the Commissions have been satisfied with respect thereto, prepare and file under and in compliance with the Securities Laws a prospectus in the English language and, if required, French language, and obtain receipts therefor and use its commercially reasonable efforts to cause a receipt to be issued for such prospectus as soon as possible and shall take all other steps and proceedings that may be necessary in order to permit the Qualification of the Designated Qualifiable Securities for distribution by registrants who comply with the relevant provisions of the Securities Laws (provided that, before filing all such documents referred to in this subsection 3.1(a), the Corporation will furnish the counsel to the Holder copies thereof and otherwise comply with section 4.1 hereof);

	(b)		to effect a Secondary Qualification in the United States, prepare and file (in any event within 60 days after the request for Secondary Qualification has been delivered to the Corporation) with the SEC a registration statement on Form F-10 or such other form as is permitted under MJDS or the 1933 Act from time to time, covering the distribution of all of the Designated Qualifiable Securities and such other related documents as may be necessary to be filed in connection with any such registration statement or other form and take all other steps and proceedings that may be necessary in order to permit the Qualification of the Designated Qualifiable Securities for distribution (provided that, before filing all such documents referred to in this subsection 3.1(b), the Corporation will furnish to the counsel to the Holder copies thereof and otherwise comply with section 4.1 hereof);

	(c)		prepare and file with the applicable Commissions in the Canadian jurisdictions in which the Secondary Qualification is to be effected and with the SEC such amendments and supplements to such preliminary prospectus, final prospectus and registration statement, as may be reasonably necessary to comply with the

			provisions of the applicable Securities Laws with respect to the Qualification of Designated Qualifiable Securities, and take such steps as are reasonably necessary to maintain the effectiveness of such prospectus and registration statement, as applicable, until the time at which the distribution of the Designated Qualifiable Securities is completed but such requirement will only extend for a maximum period of 90 days (the “Distribution Period”);

	(d)		use commercially reasonable efforts to (i) register and qualify, unless an exemption from registration and qualification applies, the resale by the Holders of the Designated Qualifiable Securities covered by a registration statement under such other securities or “blue sky” laws of such jurisdictions of the United States as designated by the Holder, acting reasonably, in the request for Demand Qualification, (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Distribution Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Distribution Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Designated Qualifiable Securities for sale in such jurisdictions; provided, however, that the Corporation shall not be required in connection therewith or as a condition thereto to (A) qualify to do business as a foreign corporation or dealer in any jurisdiction where it would not otherwise be required to qualify but for this subsection 3.1(d), (B) subject itself to any general taxation in any such jurisdiction, or (C) file a general consent to service of process in such jurisdiction. The Corporation shall promptly notify the Holder of the receipt by the Corporation of any notification with respect to the suspension of the registration or qualification of any of the Designated Qualifiable Securities for sale under the securities or “blue sky” laws of any jurisdiction of the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose;

	(e)		furnish to the Holder and the underwriter or underwriters of any such distribution such number of copies of such preliminary prospectus, final prospectus, registration statement and any amendment and supplement thereto (including any documents incorporated therein by reference) and such other relevant documents as the Holder may reasonably request in order to facilitate the distribution of the Designated Qualifiable Securities;

	(f)		furnish to the Holder (and, if applicable, the Other TAM Clients), the underwriter or underwriters of any such distribution and such other persons as the Holder (and, if applicable, the Other TAM Clients) may reasonably specify:

(i)

an opinion of counsel to the Corporation addressed to the Holder (and, if applicable, any of the Other TAM Clients) and the underwriter or underwriters of such distribution and dated the closing date of the distribution any opinion reasonably requested by the underwriters, including, without limitation, as to the Corporation’s legal status and capacity, the Corporation’s authorized capital, the validity of the Designated Qualifiable Securities, the “eligibility for investment” of the

			Designated Qualifiable Securities, the enforceability of any underwriting agreement to which the Corporation is a party, and the Qualification of the Designated Qualifiable Securities;

	(ii)		a non-statutory “comfort” letter addressed to the Holder (and, if applicable, any of the Other TAM Clients and the underwriter or underwriters dated the date of the prospectus and the closing date of the distribution signed by the auditors of the Corporation and providing comfort in relation to financial information contained in the prospectus;

	(iii)		if a prospectus is filed in Quebec, opinions of Quebec counsel to the Corporation and the auditors of the Corporation addressed to the Holder (and, if applicable, any of the Other TAM Clients) and the underwriter or underwriters of such distribution relating to the translation of the preliminary prospectus and the prospectus, such opinions being dated the dates of the preliminary prospectus, prospectus and closing; and

	(iv)		such corporate certificates as are customarily furnished in securities offerings, and, in each case, covering substantially the same matters as are customarily covered in such documents in the relevant jurisdictions and such other matters as the Holder (and, if applicable, the Other TAM Clients) may reasonably request;

	(g)		immediately notify the Holder (and, if applicable, the Other TAM Clients) of the happening of any event during the period in subsection 3.1(c) as a result of which the preliminary prospectus, final prospectus or the registration statement, as then in effect, would include a misrepresentation (insofar as such misrepresentation relates to or was made by the Corporation);

	(h)		otherwise use its best efforts to comply with all applicable published policies, rules and regulations of the applicable Commissions and any stock exchange and over-the-counter market on which the Shares are then listed or quoted;

	(i)		provide a transfer agent and registrar for such Shares no later than the closing date of the offering;

	(j)		cause all such Designated Qualifiable Securities to be listed on each securities exchange or over-the-counter market on which the Shares are then listed;

	(k)		enter into an underwriting agreement with the underwriter or underwriters for the such distribution, such agreement to contain such representations and warranties by the Corporation and such other terms and provisions as are customarily contained in underwriting agreements with respect to secondary distributions and indemnification agreements consistent with section 4.2 and such other documents on such terms and conditions as are customary in secondary offerings and take all such other actions as permitted by law as the Holder or the underwriter or underwriters, if any, reasonably request in order to expedite or facilitate the distribution of the Designated Qualifiable Securities; and

(l)

in the event of the issuance of any order or ruling suspending the effectiveness of a prospectus receipt or registration statement or any order suspending or preventing the use of any prospectus or registration statement or suspending the Qualification of any of the Designated Qualifiable Securities by such prospectus or registration statement in any applicable province of Canada or in the United States, the Corporation will notify the Holder of such event and use its commercially reasonable efforts promptly to obtain the withdrawal of such order or ruling.

3.2 Obligations of the Holder

In connection with any Secondary Qualification, the Holder shall:

	(a)		provide, in writing, such information with respect to the Holder (and, if applicable, the Other TAM Clients) including the number of securities of the Corporation held by the Holder (and, if applicable, the Other TAM Clients) as may be reasonably required by the Corporation to comply with the applicable Securities Laws in each jurisdiction in which the Secondary Qualification is to be effected, it being understood that the Corporation will, and may reasonably, rely upon such information in connection with the preparation and filing of the prospectus and registration statement relating to such Secondary Qualification;

	(b)		if required under applicable Securities Laws, execute (and, if applicable, cause the Other TAM Clients to execute) any certificate forming part of a preliminary prospectus, final prospectus, registration statement or similar document to be filed with the applicable Commissions or the SEC;

	(c)		immediately notify the Corporation of the happening of any event during the period in subsection 3.1(a), as a result of which the preliminary prospectus, final prospectus or the registration statement, as in effect, would include a misrepresentation insofar as such misrepresentation relates to the Holder (or, if applicable, the Other TAM Clients) or relates to information provided by the Holder to the Corporation in writing for inclusion in the preliminary prospectus, final prospectus or the registration statement;

	(d)		comply with all applicable published policies, rules and regulations of the applicable Commissions and the SEC and any stock exchange and over-the-counter market on which the Shares are then listed or quoted and to otherwise comply with applicable Securities Laws; and

	(e)		not effect or permit to be effected (and, if applicable, will cause the Other TAM Clients not to effect or permit to be effected) sales of Designated Qualifiable Securities or deliver or permit to be delivered any prospectus or registration statement in respect of such sale after notification by the Corporation of any order or ruling suspending the effectiveness of the prospectus or registration statement or after notification by the Corporation under subsection 3.1(g), until the Corporation advises the Holder that such suspension has been lifted or that it has filed an amendment to such prospectus or registration statement and has provided copies of such amendment to the Holder. The Holder shall, if so directed by the

Corporation, deliver to the Corporation (at the Corporation’s expense) all copies, other than permanent file copies, then in the Holder’s (and, if applicable, the Other TAM Clients’) possession of such prospectus covering the Designated Qualifiable Securities that was in effect at the time of receipt of such notice.

ARTICLE 4
DUE DILIGENCE; INDEMNIFICATION

4.1 Preparation; Reasonable Investigation

In connection with the preparation and filing of any preliminary prospectus, final prospectus or registration statement as herein contemplated, the Corporation will give the Holder (and, if applicable, the Other TAM Clients) and the underwriter or underwriters of such distribution and their respective counsel, auditors and other representatives, the opportunity to participate in the preparation of such documents and each amendment thereof or supplement thereto, and shall insert therein such material furnished to the Corporation in writing, which in the reasonable judgment of the Holder and its counsel should be included, and will give each of them such reasonable and customary access to the Corporation’s books and records and such reasonable and customary opportunity to discuss the business of the Corporation with its officers and auditors as shall be necessary in the reasonable opinion of the Holder, the underwriter or underwriters and their respective counsel, and to conduct all reasonable and customary due diligence which the Holder (and, if applicable, the Other TAM Clients), the underwriter or underwriters and their respective counsel may reasonably require in order to conduct a reasonable investigation for purposes of establishing, to the extent permitted by law, a due diligence defence as contemplated by the Securities Laws and in order to enable such underwriters to execute any certificate required to be executed by them in Canada or the United States for inclusion in each such document.

4.2 Indemnification

	(a)		By Corporation

			The Corporation agrees to indemnify, to the extent permitted by law, the Holder, the Other TAM Clients, if applicable, and each Person who participates as an underwriter in the offering or sale of the Designated Qualifiable Securities, their respective directors, officers, employees and agents and each Person who controls such underwriter (within the meaning of any applicable Securities Laws) against all losses (excluding loss of profits), claims, damages, liabilities and expenses arising out of or based upon: (i) any information or statement contained in the preliminary prospectus, final prospectus, registration statement, any filing made in connection with the Qualification under the securities or other “blue sky” rules or any amendment thereto which at the time and in light of the circumstances under which it was made contains a misrepresentation; (ii) any order made or inquiry, investigation or proceedings commenced or threatened by any applicable Commission, court or other competent authority based upon any misrepresentation in the preliminary prospectus, the final prospectus, the registration statement or any amendment thereto or based upon any failure to comply with applicable Securities Laws (other than any failure to comply with applicable Securities Laws by the Holder, the Other TAM Clients, if applicable,

			or the underwriter or underwriters) preventing or restricting the trading in or the sale and distribution of the Designated Qualifiable Securities pursuant to a Secondary Qualification; and (iii) non-compliance by the Corporation with any of the Securities Laws in connection with a Secondary Qualification and the distribution effected thereunder, except insofar as (A) any information or statement referred to in clause (i) or (ii) of this subsection 4.2(a) has been furnished to the Corporation by the Holder pursuant to subsection 3.2(a) or the underwriter or underwriters expressly for use therein; (B) caused by the Holder (or, if applicable, the Other TAM Clients) or any underwriter’s failure to deliver to a purchaser of Designated Qualifiable Securities, a copy of the prospectus or the registration statement or any amendments or supplements thereto or to otherwise comply with applicable Securities Laws or (C) any amounts paid in settlement of any Claim have been paid if such settlement is effected without the prior written consent of the Corporation, which consent shall not be unreasonably withheld or delayed.

	(b)		Procedure

			Any Person entitled to indemnification hereunder will (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel satisfactory to the indemnified party, acting reasonably. If such defense is assumed, the indemnifying party will not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent will not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. No indemnifying party may settle any claims without the express written consent of an indemnified party (such consent not to be unreasonably withheld where such consent does not contain any admission of liability).

	(c)		Survival Contribution

			The indemnification provided for under this Agreement will survive the expiry of this Agreement and will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and will survive any transfer of securities pursuant thereto. In the event the indemnification is unavailable in whole or in part for any reason under this section 4.2, the Corporation and the Holder shall contribute to the aggregate of all losses, claims, damages, liabilities and expenses in such proportion as is appropriate to reflect the relative fault of the Corporation and the Holder (and, if applicable, the Other TAM Clients) in connection with the event giving rise to liability.

ARTICLE 5
GENERAL

5.1 No Inconsistent Agreements

The Corporation represents and warrants to the Holder that it has not entered into, and covenants with the Holder that it will not enter into, any agreement which is inconsistent with or violates the rights granted to the Holder pursuant to this Agreement.

5.2 Remedies

Any Person having rights under any provision of this Agreement will be entitled to enforce such rights specifically to recover damages caused by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or other security) for specific performance and for other injunctive relief in order to enforce or prevent violation of the provisions of this Agreement.

5.3 Amendments

This Agreement shall not be amended or varied in its terms by oral agreement or by representations or otherwise without the prior written consent of each of the Corporation and the Holder.

5.4 Assignment

This Agreement and the rights and obligations of the parties hereto shall bind and enure to the benefit of each of the parties hereto and their successors. The Holder shall not have the right to transfer or assign any of its rights or obligations under this Agreement other than to an Affiliate.

5.5 Term

This Agreement shall expire upon the end of the Qualification Period provided that in all cases the obligations of the parties under section 4.2 hereof shall survive the expiry of this Agreement.

5.6 Severability

If one or more provisions of this Agreement are held to be unenforceable under applicable law, portions of such provisions or such provisions in their entirety, to the extent necessary, shall be severed from this Agreement, and the balance of this Agreement shall be enforceable in accordance with its terms.

5.7 Delays or Omissions

No delay or omission to exercise any rights, power or remedy accruing to any party to this Agreement, upon the breach or default of the other party shall impair any such rights, power

or remedy of such non-breaching party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of the party of any provisions or conditions of this Agreement, must be made in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to the parties, shall be cumulative and not alternative.

5.8 Descriptive Headings

The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

5.9 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial

	(a)		This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein. Each of the parties hereby irrevocably attorns and submits to the jurisdiction of the courts of the Province of Ontario in respect of the interpretation and enforcement of the provisions of this Agreement and of the documents referred to in this Agreement, and in respect of the transactions contemplated hereby, and hereby waives, and agrees not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof or of any such document, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in such courts or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such courts.

	(b)		EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

5.10 Notices

All notices, requests, demands or other communications required or permitted to be given by one Party to another under this Agreement shall be given in writing and delivered by personal delivery or delivery by recognized commercial courier, sent by facsimile or delivered by registered mail, postage prepared, addressed as follows:


		(a)		For the Holder to:

				Third Avenue International Value Fund
				c/o Third Avenue Management LLC
				622 Third Avenue, 32^nd Floor
				New York, NY 10017

				Attention: General Counsel
				Fax No: (212) 735-0003

				With a copy (which shall not constitute notice) to:

				Torys LLP
				237 Park Avenue
				New York, New York 10017

				Attention: Joris M. Hogan
				Fax No: (212) 682-0200

		(b)		For the Corporation:

				Catalyst Paper Corporation
				2nd Floor, 3600 Lysander Lane
				Richmond, BC V7B 1C3

				Attention: Chief Financial Officer
				Fax No.: (604) 247-4145

				With copies (which shall not constitute notice) to:

				Blake, Cassels & Graydon LLP
				Suite 2600, Three Bentall Centre
				PO Box 49314, 595 Burrard Street
				Vancouver, BC V7X 1L3

				Attention: Peter C. Kalbfleisch
				Fax No.: (604) 631-3309

				and

				Fried, Frank, Shriver & Jacobson LLP
				One New York Plaza
				New York, NY 10004

				Attention: Jeffrey Bagner
				Fax No.: (212) 859-4000

or at such other address or fax number of which the addressee may from time to time may notify the addressor. Any notice delivered by personal delivery or by courier to the Party to whom it is

addressed as provided above shall be deemed to have been given and received on the day it is so delivered at such address. If such day is not a Business Day, or if the notice is received after 4:00 p.m. (addressee’s local time), then the notice shall be deemed to have been given and received on the next Business Day. Any notice sent by prepaid registered mail shall be deemed to have been given and received on the sixth Business Day following the date of its mailing. In the event of any disruption, strike or interruption in the Canadian or United States postal service after mailing and prior to receipt and deemed receipt of any such notice, notice will be deemed to be received on the sixth Business Day following full resumption of the postal service. Any notice transmitted by facsimile shall be deemed to have been given and received on the day in which transmission is confirmed. If such day is not a Business Day or if the facsimile transmission is received after 4:00 p.m. (addressee’s local time), then the notice shall be deemed to have been given and received on the first Business Day after its transmission.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.


		By the Corporation

		CATALYST PAPER CORPORATION

		By:		/s/ Richard Garneau

				Authorized Signatory

		By the Holder

		THIRD AVENUE TRUST, on behalf of THIRD AVENUE INTERNATIONAL VALUE FUND

		By:		/s/ Vincent J. Dugan

				Authorized Signatory

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