20-F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 20-F

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

or

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED

MARCH 31, 2007

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

or

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-33161

North American Energy Partners Inc.

(Exact Name of the Registrant as Specified in its Charter)

Canada

(Jurisdiction of Incorporation or Organization)

Zone 3, Acheson Industrial Area, 2-53016 Hwy 60, Acheson, Alberta T7X 5A7

(Address of Principal Executive Offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title Common Shares, No Par Value	Name of Exchange on which Registered New York Stock Exchange Toronto Stock Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Act:	NONE
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:	NONE
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 35,604,660 Common Shares at March 31, 2007

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    YES  ¨    NO  x

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    YES  ¨    NO  x

Indicate by check mark whether the Company: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨            Accelerated filer  ¨            Non-accelerated filer  x

Indicate by check mark which financial statement item the Company has elected to follow. Item 17  ¨    Item 18  x

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  x

TABLE OF CONTENTS

			Page
PART I
	ITEM 1:	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	5
	ITEM 2:	OFFER STATISTICS AND EXPECTED TIMETABLE	5
	ITEM 3:	KEY INFORMATION	5
	ITEM 4:	INFORMATION ON THE COMPANY	21
	ITEM 5:	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	34
	ITEM 6:	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	56
	ITEM 7:	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	64
	ITEM 8:	FINANCIAL INFORMATION	67
	ITEM 9:	THE OFFER AND LISTING	68
	ITEM 10:	ADDITIONAL INFORMATION	68
	ITEM 11:	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	69
	ITEM 12:	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	70
PART II
	ITEM 13:	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	71
	ITEM 14:	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	71
	ITEM 15:	CONTROLS AND PROCEDURES	71
	ITEM 16:	[RESERVED]	72
	ITEM 16A	AUDIT COMMITTEE FINANCIAL EXPERT	72
	ITEM 16B	CODE OF ETHICS	72
	ITEM 16C	PRINCIPAL ACCOUNTANT FEES AND SERVICES	72
	ITEM 16D	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	73
	ITEM 16E	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	73
PART III
	ITEM 17:	FINANCIAL STATEMENTS	73
	ITEM 18:	FINANCIAL STATEMENTS	73
	ITEM 19:	EXHIBITS	73

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As used in this annual report on Form 20-F, unless the context otherwise indicates, the terms “we,” “us,” “our,” and the “Company” mean North American Energy Partners Inc. and its consolidated subsidiaries.

EXCHANGE RATE INFORMATION

The following tables set forth the exchange rates for one Canadian dollar, expressed in U.S. dollars, based on the inverse of the noon buying rate in the city of New York for cable transfers in Canadian dollars as certified for customs purposes by the Bank of Canada (the “Noon Buying Rate”). On May 31, 2007, the Noon Buying Rate was $1.00 = US$ 0.9347.

	2006 December	2007
		January	February	March	April	May
High for period	0.8787	0.8598	0.8467	0.8696	0.9051	0.9376
Low for period	0.8569	0.844	0.8419	0.8462	0.8621	0.8958

	Year Ended March 31,
	2003	2004	2005	2006	2007
Average for period	0.6455	0.7412	0.7836	0.8378	0.8738

STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This document contains forward-looking statements. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management, based on information currently available to management. Forward-looking statements are those that do not relate strictly to historical or current facts, and can be identified by the use of the future tense or other forward-looking words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “should,” “may,” “objective,” “projection,” “forecast,” “continue,” “strategy,” or the negative of those terms or other variations of them or by comparable terminology. In particular, statements, express or implied, concerning future operating results or the ability to generate income or cash flow are forward-looking statements. Forward-looking statements include the information concerning possible or assumed future results of our operations set forth under “Item 4: Information on the Company,” “Item 5: Operating and Financial Review and Prospects,” “Item 11: Quantitative and Qualitative Disclosures About Market Risk,” and elsewhere in this annual report on Form 20-F.

Forward-looking statements are not guarantees of performance. They involve risks, uncertainties, and assumptions. Future actions, conditions, or events and future results of operations may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results are beyond management’s ability to control or predict. Specific factors that could cause actual results to vary from those in the forward-looking statements include:

• the timing and success of business development efforts;

• changes in oil and gas prices;

• our ability to hire and retain a skilled labor force;

• our ability to bid successfully on new projects and accurately forecast costs associated with unit-price or lump-sum contracts;

• our ability to establish and maintain effective internal controls;

• our substantial debt, which could make us more vulnerable to adverse economic conditions and affect our ability to comply with the terms of the agreements governing our indebtedness;

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• restrictive covenants in our debt agreements, which may restrict the manner in which we operate our business;

• foreign currency exchange rate fluctuations, capital markets conditions and inflation rates;

• weather conditions;

• our ability to obtain surety bonds as required by some of our customers;

• decreases in outsourcing work by our customers or shut-downs or cutbacks at major businesses that use our services;

• our ability to purchase or lease equipment;

• changes in laws or regulations, third-party relations and approvals, and decisions of courts, regulators and governmental bodies that may adversely affect our business or the business of the customers we serve;

• our ability to successfully identify and acquire new businesses and assets and integrate them into our existing operations; and

• those other factors discussed in Item 3.D “Risk Factors.”

We believe the forward-looking statements in this document are reasonable; however, you should not place undue reliance on any forward-looking statements, which are based on our current expectations. Further, forward-looking statements speak only as of the date they are made, and, other than as required by applicable law, we undertake no obligation to update publicly any of them in light of new information or future events.

NON-GAAP FINANCIAL MEASURES

The body of generally accepted accounting principles applicable to us is commonly referred to as “GAAP.” A non-GAAP financial measure is generally defined by the Securities and Exchange Commission, or SEC, and by the Canadian securities regulatory authorities as one that purports to measure historical or future financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable GAAP measures. EBITDA is calculated as net income (loss) before interest expense, income taxes, depreciation and amortization. Consolidated EBITDA is defined as EBITDA, excluding the effects of foreign exchange gain or loss, realized and unrealized gain or loss on derivative financial instruments, non-cash stock-based compensation expense, gain or loss on disposal of plant and equipment and certain other non cash items included in the calculation of net income (loss). We believe that EBITDA is a meaningful measure of the performance of our business because it excludes items, such as depreciation and amortization, interest and taxes, which are not directly related to the operating performance of our business. Management reviews EBITDA to determine whether capital assets are being allocated efficiently. In addition, our revolving credit facility requires us to maintain a minimum interest coverage ratio and a maximum senior leverage ratio, which includes the reference to Consolidated EBITDA. Non-compliance with this financial covenant could result in our being required to immediately repay all amounts outstanding under our revolving credit facility. EBITDA and Consolidated EBITDA are not measures of performance under Canadian GAAP or U.S. GAAP and our computations of EBITDA and Consolidated EBITDA may vary from others in our industry. EBITDA and Consolidated EBITDA should not be considered as alternatives to operating income or net income as measures of operating performance or cash flows as measures of liquidity. EBITDA and Consolidated EBITDA have important limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of our results as reported under Canadian GAAP or US GAAP. Our methods of calculating EBITDA and Consolidated EBITDA may vary from others in our industry.

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PART I

ITEM 1: IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2: OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3: KEY INFORMATION

A. SELECTED FINANCIAL DATA

We were initially formed in October 2003 in connection with the acquisition on November 26, 2003 (the “Acquisition”) of certain businesses from Norama Ltd. as discussed under Item 4.A “History and Development of the Company”. As a result, the selected financial data presented below as of and for the fiscal year ended March 31, 2003 and for the period from April 1, 2003 to November 25, 2003 is derived from the audited consolidated financial statements of Norama Ltd., our predecessor. The selected financial data presented below for the period from November 26, 2003 to March 31, 2004 and as of and for each of the fiscal years ended March 31, 2005, 2006 and 2007 is derived from our audited consolidated financial statements. As a result of the Acquisition, the consolidated financial data for the periods before November 26, 2003 is not necessarily comparable to the consolidated financial data for periods after November 25, 2003.

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The information presented below should be read in conjunction with Item 5 “Operating and Financial Review and Prospects” and our audited consolidated financial statements and related notes included at Item 17. All of the financial information presented below has been prepared in accordance with Canadian GAAP, which differs in certain respects from U.S. GAAP. For a discussion of the principal differences between Canadian GAAP and U.S. GAAP as they pertain to us for the years ended March 31, 2007, 2006 and 2005, see note 27 to our consolidated financial statements included at Item 17.

										November 26, 2003 to March 31, 2004			Predecessor (a)
	Year Ended March 31,												April 1, 2003 to November 25, 2003			Year Ended March 31, 2003
	2007			2006			2005
	(Dollars in thousands except shares and per share amounts)
Statement of operations data:
Revenue (b)	$	629,446		$	492,237		$	357,323		$	127,611		$	250,652		$	344,186
Project costs		363,930			308,949			240,919			83,256			156,976			219,979
Equipment costs		122,306			64,832			52,831			13,686			43,484			55,871
Equipment operating lease expense		19,740			16,405			6,645			1,430			10,502			16,357
Depreciation		31,034			21,725			20,762			6,674			6,566			10,974
Gross profit		92,436			80,326			36,166			22,565			33,124			41,005
General and administrative costs		39,769			30,903			22,873			6,065			7,783			12,233
Loss (gain) on sale of plant and equipment		959			(733	)		494			131			(49	)		(2,265	)
Amortization of intangible assets		582			730			3,368			12,928			—			—
Operating income		51,126			49,426			9,431			3,441			25,390			31,037
Management fee (c)		—			—			—			—			41,070			8,000
Interest expense (d)		37,249			68,776			31,141			10,079			2,457			4,162
Foreign exchange gain		(5,044	)		(13,953	)		(19,815	)		(661	)		(7	)		(234	)
Gain on repurchase of NACG Preferred Corp. Series A preferred shares (e)		(9,400	)		—			—			—			—			—
Loss on extinguishment of debt (e)		10,935			2,095
Other income		(904	)		(977	)		(421	)		(230	)		(367	)		—
Realized and unrealized (gain) loss on derivative financial instruments		(196	)		14,689			43,113			12,205			—			—
Income (loss) before income taxes		18,486			(21,204	)		(44,587	)		(17,952	)		(17,763	)		19,109
Income taxes (benefit)		(2,593	)		737			(2,264	)		(5,670	)		(6,622	)		6,620
Net income (loss) (f)	$	21,079		$	(21,941	)	$	(42,323	)	$	(12,282	)	$	(11,141	)	$	12,489
Earnings Per Share
Basic	$	0.87		$	(1.18	)	$	(2.28	)	$	(0.66	)		N/A			N/A
Diluted	$	0.83		$	(1.18	)	$	(2.28	)	$	(0.66	)		N/A			N/A
Weighted average number of common shares
Basic		24,352,156			18,574,800			18,539,720			18,500,000			N/A			N/A
Diluted		25,443,907			18,574,800			18,539,720			18,500,000			N/A			N/A
Balance sheet data (end of period):
Cash	$	7,895		$	42,804		$	17,924		$	36,595					$	651
Property, plant and equipment, net		255,963			184,562			177,089			167,905						76,234
Total assets		710,736			568,682			540,155			489,974						158,584
Total debt (g)		260,789			314,959			310,402			313,798						63,401
Other long-term financial liabilities (g)		60,863			141,179			86,723			46,266						—
Total long-term financial liabilities (g)		297,957			453,092			395,354			352,027						40,342
NACG Preferred Corp. Series A preferred shares (e)		—			35,000			35,000			35,000						—
NAEPI Series A preferred shares (e)		—			375			—			—						—
NAEPI Series B preferred shares (e)		—			42,193			—			—						—
Total shareholder’s equity (e)		244,278			18,111			38,829			80,355						29,818
Other financial data:
EBITDA (h)	$	87,351		$	70,027		$	10,684		$	11,729		$	(8,740	)	$	34,245
Consolidated EBITDA (h)		90,235			72,422			34,448			23,462			(8,789	)		31,980

(a) The historical balance sheet and statement of operations and other financial data as at and for the years ended March 31, 2003 and the period from April 1 to November 25, 2003 have been derived from the historical financial statements of Norama Ltd. The financial statements for periods ended before November 26, 2003 are not necessarily comparable in all respects to the financial statements for periods ended after November 25, 2003.

(b) Effective April 1, 2005, we changed our accounting policy regarding the recognition of revenue on claims. This change in accounting policy has been applied retroactively. Prior to this change, revenue from claims was included in total estimated contract revenue when awarded or received. After this change, claims are included in total estimated contract revenue, only to the extent that contract costs related to the claim have been incurred and when it is probable that the claim will result in a bona fide addition to contract value and can be reliably estimated. Those two conditions are satisfied when:

(1) the contract or other evidence provides a legal basis for the claim or a legal opinion is obtained providing a reasonable basis to support the claim,

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(2) additional costs incurred were caused by unforeseen circumstances and are not the result of deficiencies in our performance,

(3) costs associated with the claim are identifiable and reasonable in view of work performed and

(4) evidence supporting the claim is objective and verifiable. No profit is recognized on claims until final settlement occurs.

This can lead to a situation where costs are recognized in one period and revenue is recognized when customer agreement is obtained or claim resolution occurs, which can be in subsequent periods. Historical claim recoveries should not be considered indicative of future claim recoveries.

Claims revenue recognized was $14.5 million for the year ended March 31, 2007 (2006 – $12.9 million; 2005 – $nil), $8.4 million of which is included in unbilled revenue and remains uncollected at the end of the year (2005 – $nil). Of the amount included in unbilled revenue at March 31, 2007, $6.6 million was collected subsequent to year end.

The asset entitled “unbilled revenue” represents revenue recognized in advance of amounts invoiced. The liability entitled “billings in excess of costs incurred and estimated earnings on uncompleted contracts” represents amounts invoiced in excess of revenue recognized.

(c) Management fees paid to the corporate shareholder of our predecessor company, Norama Ltd., represented fees for services rendered and were determined with reference to taxable income. Subsequent to the Acquisition on November 26, 2003, these fees are no longer paid.

(d) Interest expense consists of the following:

									Predecessor
	Year Ended March 31,						November 26, 2003 to March 31, 2004		April 1, 2003 to November 25, 2003
	2007		2006		2005
	(Dollars in thousands)
Interest on senior notes	$	27,417	$	28,838	$	23,189	$	8,096	$	—
Interest on capital lease obligations		725		457		230		—		—
Interest on senior secured credit facility		—		564		3,274		1,089		599
Interest on NACG Preferred Corp. Series A preferred shares		1,400		—		—		—		—
Accretion and change in redemption value of NAEPI Series B preferred shares		2,489		34,668		—		—		—
Accretion of NAEPI Series A preferred shares		625		54		—		—		—
Interest on long-term debt		32,656		64,581		26,693		9,185		599
Amortization of deferred financing costs		3,436		3,338		2,554		814		—
Other interest		1,157		857		1,894		80		1,858
Interest expense	$	37,249	$	68,776	$	31,141	$	10,079	$	2,457

(e) On November 28, 2006, prior to the consummation of the initial public offering (“IPO”) discussed below, NACG Holdings Inc. (“Holdings”) amalgamated with its wholly-owned subsidiaries, NACG Preferred Corp. and North American Energy Partners Inc. (“NAEPI”). The amalgamated entity continued under the name North American Energy Partners Inc. The voting common shares of the new entity, North American Energy Partners Inc., were the shares sold in the IPO.

On November 28, 2006, prior to the amalgamation:

• Holdings acquired the NACG Preferred Corp. Series A preferred shares with a carrying value of $35.0 million together with related accrued and subsequently forfeited dividends of $1.4 million in exchange for a promissory note in the amount of $27.0 million. The Company recorded a gain of $9.4 million on the repurchase of the NACG Preferred Corp. Series A preferred shares.

• Holdings repurchased the NAEPI Series A preferred shares for their redemption value of $1.0 million. Holdings also cancelled the consulting and advisory services agreement with The Sterling Group, L.P., Genstar Capital, L.P., Perry Strategic Capital Inc., and SF Holding Corp. (collectively, the “Sponsors”), under which Holdings had received ongoing consulting and advisory services with respect to the organization of the companies, employee benefit and compensation arrangements and other matters. The consideration paid for the cancellation of the consulting and advisory services agreement on the closing of the offering was $2.0 million, which was recorded as general and administrative expense in the consolidated statement of operations. Under the consulting and advisory services agreement, the Sponsors also received a fee of $0.9 million, 0.5% of the aggregate gross proceeds to the Company from the offering, which was recorded as a share issue cost.

• Each holder of NAEPI Series B preferred shares received 100 common shares of Holdings for each NAEPI Series B preferred share held as a result of Holdings exercising a call option to acquire the NAEPI Series B preferred shares. Upon exchange, the carrying value in the amount of $44.7 million for the NAEPI Series B preferred shares on the exercise date was transferred to share capital.

On November 28, 2006, the Company completed an IPO of 8,750,000 common voting shares for total gross proceeds of $158.5 million. Net proceeds from the IPO, after deducting underwriting fees and offering expenses, were $140.9 million. Subsequent to the IPO, the underwriters exercised their overallotment option to purchase 687,500 additional voting common shares of the Company for gross proceeds of $12.6 million. Net proceeds from the overallotment, after deducting underwriting fees and offering expenses, were $11.7 million. Total net proceeds from the IPO and subsequent overallotment were $152.6 million.

The net proceeds from the IPO and subsequent overallotment were used:

• to repurchase all of the Company’s outstanding 9% senior secured notes due 2010 for $74.7 million plus accrued interest of $3.0 million. The notes were redeemed at a premium of 109.26% resulting in a loss on extinguishment of $6.3 million. The loss on extinguishment, along with the write-off of deferred financing fees of $4.3 million and other costs of $0.3 million, was recorded as a loss on extinguishment of debt in the consolidated statement of operations;

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• to repay the promissory note in respect of the repurchase of the NACG Preferred Corp. Series A preferred shares for $27.0 million as described above;

• to purchase certain equipment leased under operating leases for $44.6 million;

• to cancel the consulting and advisory services agreement with the Sponsors for $2.0 million; and

• for general corporate purposes.

(f) Our financial statements have been prepared in accordance with Canadian GAAP, which differs in certain respects from U.S. GAAP. If U.S. GAAP were employed, the Company’s net income (loss) would be adjusted as follows:

										November 26, 2003 to March 31, 2004			Predecessor
	Year Ended March 31,												April 1, 2003 to November 25, 2003			Year Ended March 31, 2003
	2007			2006			2005
	(Dollars in thousands)
Net income (loss)—Canadian GAAP	$	21,079		$	(21,941	)	$	(42,323	)	$	(12,282	)	$	(11,141	)	$	12,489
Capitalized interest(1)		249			847			—			—			—			—
Depreciation of capitalized interest(1)		(143	)		—			—			—			—			—
Amortization using effective interest method(2)		1,246			590			—			—			—			—
Realized and unrealized loss on derivative financial instruments(3)		348			(484	)		—			—			—			—
Difference between accretion of Series B Preferred Shares(4)		249			—			—			—			—			—
Income (loss) before income taxes		23,028			(20,988	)		(42,323	)		(12,282	)		(11,141	)		12,489
Income taxes: Deferred income taxes		(954	)		—			—			—			—			—
Net income (loss)—U.S. GAAP	$	22,074		$	(20,988	)	$	(42,323	)	$	(12,282	)	$	(11,141	)	$	12,489
Net income (loss) per share—Basic—U.S. GAAP	$	0.91		$	(1.13	)	$	(2.28	)	$	(0.66	)
Net income (loss) per share—Diluted—U.S. GAAP	$	0.87		$	(1.13	)	$	(2.28	)	$	(0.66	)

The cumulative effect of material differences between Canadian and U.S. GAAP on the consolidated shareholders’ equity of the Company is as follows:

	March 31, 2007			March 31, 2006			March 31, 2005
	(Dollars in thousands)
Shareholders’ equity (as reported)—Canadian GAAP	$	244,278		$	18,111		$	38,829
Capitalized interest(1)		1,096			847			—
Depreciation of capitalized interest(1)		(143	)
Amortization using effective interest method(2)		1,836			590			—
Realized and unrealized loss on derivative financial instruments(3)		(136	)		(484	)		—
Excess of fair value of amended Series B preferred shares over carrying value of original series B preferred shares(4)		—			(3,707	)		—
Deferred income taxes		(954	)		—			—
Shareholders’ equity—U.S. GAAP	$	245,977		$	15,357		$	38,829

(1) U.S. GAAP requires capitalization of interest costs as part of the historical cost of acquiring certain qualifying assets that require a period of time to prepare for their intended use. This is not required under Canadian GAAP. Accordingly, the capitalized amount is subject to depreciation in accordance with the Company’s policies when the asset is placed into service.

(2) Under Canadian GAAP, the Company defers and amortizes debt issue costs on a straight-line basis over the stated term of the related debt. Under U.S. GAAP, the Company is required to amortize financing costs over the stated term of the related debt using the effective interest method resulting in a consistent interest rate over the term of the debt in accordance with Accounting Principles Board Opinion No. 21 (“APB 21”).

(3) Statement of Financial Accounting Standard No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”) establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts and debt instruments) be recorded in the balance sheet as either an asset or liability measured at its fair value. On November 26, 2003, the Company issued 8 ³/4% senior notes for US$200 million (Canadian $263 million). On May 19, 2005 the Company issued 9% senior secured notes for US$60.4 million (Canadian $76.3 million), subsequently retired on November 28, 2006. Both of these issues included certain contingent embedded derivatives which provided for the acceleration of redemption by the holder at a premium in certain instances. These embedded derivatives met the criteria for bifurcation from the debt contract and separate measurement at fair value. The embedded derivatives have been measured at fair value and classified as part of the carrying amount of the Senior Notes on the consolidated balance sheet, with changes in the fair value being recorded in net income as realized and unrealized (gain) loss on derivative financial instruments for the period under U.S. GAAP. Under Canadian GAAP, separate accounting of embedded derivatives from the host contract is not permitted by EIC-117.

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(4) Prior to the modification of the terms of the NAEPI Series B preferred shares, there were no differences between Canadian GAAP and U.S. GAAP related to the NAEPI Series B preferred shares. As a result of the modification of terms of NAEPI’s Series B preferred shares on March 30, 2006, under Canadian GAAP, the Company continued to classify the NAEPI Series B preferred shares as a liability and was accreting the carrying amount of $42.2 million on the amendment date (March 30, 2006) to their December 31, 2011 redemption value of $69.6 million using the effective interest method. Under U.S. GAAP, the Company recognized the fair value of the amended NAEPI Series B preferred shares as minority interest as such amount was recognized as temporary equity in the accounts of NAEPI in accordance with EITF Topic D-98 and recognized a charge of $3.7 million to retained earnings for the difference between the fair value and the carrying amount of the Series B preferred shares on the amendment date. Under U.S. GAAP, the Company was accreting the initial fair value of the amended NAEPI Series B preferred shares of $45.9 million recorded on their amendment date (March 30, 2006) to the December 31, 2011 redemption value of $69.6 million using the effective interest method, which was consistent with the treatment of the NAEPI Series B preferred shares as temporary equity in the financial statements of NAEPI. The accretion charge was recognized as a charge to minority interest (as opposed to retained earnings in the accounts of NAEPI) under US GAAP and interest expense in the Company’s financial statements under Canadian GAAP.

(g) Total Debt as of March 31, 2007 consists of the following (in thousands):

Revolving line of credit	$	20,500
Obligations under capital leases, including current portion		9,709
8 3/4% senior notes due 2011		230,580
Total debt	$	260,789

Our 8 ³/4% senior notes are stated at the current exchange rate at each balance sheet date. We have entered into cross-currency and interest rate swaps, which represent an economic hedge of the 8 ³/4% senior notes. At maturity, we will be required to pay $263 million in order to retire these senior notes and the swaps. This amount reflects the fixed exchange rate of C$1.315=US$1.00 established as of November 26, 2003, the date of inception of the swap contracts.

Other long-term financial liabilities consist of derivative financial instruments and redeemable preferred shares.

Total long-term financial liabilities consists of total debt, excluding current portion, plus our redeemable shares and the value of the cross-currency and interest rate swaps recognized on our balance sheet.

(h) EBITDA is calculated as net income (loss) before interest expense, income taxes, depreciation and amortization. Consolidated EBITDA is defined as EBITDA, excluding the effects of foreign exchange gain or loss, realized and unrealized gain or loss on derivative financial instruments, non-cash stock-based compensation expense, gain or loss on disposal of plant and equipment and certain other non cash items included in the calculation of net income (loss). We believe that EBITDA is a meaningful measure of the performance of our business because it excludes items, such as depreciation and amortization, interest and taxes, that are not directly related to the operating performance of our business. Management reviews EBITDA to determine whether capital assets are being allocated efficiently. In addition, our revolving credit facility requires us to maintain a minimum interest coverage ratio and a maximum senior leverage ratio, which are calculated using Consolidated EBITDA. Non-compliance with these financial covenants could result in our being required to immediately repay all amounts outstanding under our revolving credit facility. EBITDA and Consolidated EBITDA are not measures of performance under Canadian GAAP or U.S. GAAP and our computations of EBITDA and Consolidated EBITDA may vary from others in our industry. EBITDA and Consolidated EBITDA should not be considered as alternatives to operating income or net income as measures of operating performance or cash flows as measures of liquidity. EBITDA and Consolidated EBITDA have important limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of our results as reported under Canadian GAAP or U.S. GAAP. A reconciliation of net income (loss) to EBITDA and Consolidated EBITDA is as follows:

										November 26, 2003 to March 31, 2004			Predecessor
	Year Ended March 31,												April 1, 2003 to November 25, 2003			Year Ended March 31, 2003
	2007			2006			2005
	(Dollars in thousands)
Net income (loss)	$	21,079		$	(21,941	)	$	(42,323	)	$	(12,282	)	$	(11,141	)	$	12,489
Adjustments:
Interest expense		37,249			68,776			31,141			10,079			2,457			4,162
Income taxes (benefit)		(2,593	)		737			(2,264	)		(5,670	)		(6,622	)		6,620
Depreciation		31,034			21,725			20,762			6,674			6,566			10,974
Amortization of intangible assets		582			730			3,368			12,928			—			—
EBITDA	$	87,351		$	70,027		$	10,684		$	11,729		$	(8,740	)	$	34,245

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A reconciliation of EBITDA to Consolidated EBITDA is as follows:

										November 26, 2003 to March 31, 2004			Predecessor
	Year Ended March 31,												April 1, 2003 to November 25, 2003			Year Ended March 31, 2003
	2007			2006			2005
	(Dollars in thousands)
EBITDA	$	87,351		$	70,027		$	10,684		$	11,729		$	(8,740	)	$	34,245
Adjustments:
Unrealized foreign exchange gain on senior notes	$	(5,017	)		(14,258	)		(20,340	)		(740	)		—			—
Realized and unrealized (gain) loss on derivative financial instruments	$	(196	)		14,689			43,113			12,205			—			—
Loss (gain) on disposal of plant and equipment	$	959			(733	)		494			131			(49	)		(2,265	)
Stock-based compensation expense	$	2,101			923			497			137			—			—
Write-off of deferred financing costs	$	4,342			1,774			—			—			—			—
Write down of other assets to replacement cost	$	695			—			—			—			—			—
Consolidated EBITDA	$	90,235		$	72,422		$	34,448		$	23,462		$	(8,789	)	$	31,980

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EXCHANGE RATE DATA

The following tables set forth the exchange rates for one Canadian dollar, expressed in U.S. dollars, based on the inverse of the noon buying rate in the city of New York for cable transfers in Canadian dollars as certified for customs purposes by the Bank of Canada (the “Noon Buying Rate”). On May 31, 2007, the Noon Buying Rate was $1.00 = US$ 0.9347.

	2006 December	2007
		January	February	March	April	May
High for period	0.8787	0.8598	0.8467	0.8696	0.9051	0.9376
Low for period	0.8569	0.844	0.8419	0.8462	0.8621	0.8958

	Year Ended March 31,
	2003	2004	2005	2006	2007
Average for period	0.6455	0.7412	0.7836	0.8378	0.8738

B. CAPITALIZATION AND INDEBTEDNESS

Not applicable.

C. REASONS FOR THE OFFER AND USE OF PROCEEDS

Not applicable.

D. RISK FACTORS

Risk Factors

Anticipated major projects in the oil sands may not materialize.

Notwithstanding the National Energy Board’s estimates regarding new investment and growth in the Canadian oil sands, planned and anticipated projects in the oil sands and other related projects may not materialize. The underlying assumptions on which the projects are based are subject to significant uncertainties, and actual investments in the oil sands could be significantly less than estimated. Projected investments and new projects may be postponed or cancelled for any number of reasons, including among others:

• changes in the perception of the economic viability of these projects;

• shortage of pipeline capacity to transport production to major markets;

• lack of sufficient governmental infrastructure to support growth;

• shortage of skilled workers in this remote region of Canada; and

• cost overruns on announced projects.

Changes in our customers’ perception of oil prices over the long-term could cause our customers to defer, reduce or stop their investment in oil sands projects, which would, in turn, reduce our revenue from those customers.

Due to the amount of capital investment required to build an oil sands project, or construct a significant expansion to an existing project, investment decisions by oil sands operators are based upon long-term views of the economic viability of the project. Economic viability is dependent upon the anticipated revenues the project will produce, the anticipated amount of capital investment required and the anticipated cost of operating the project. The most important consideration is the customer’s view of the long-term price of oil which is influenced by many factors, including the condition of developed and developing economies and the resulting demand for

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oil and gas, the level of supply of oil and gas, the actions of the Organization of Petroleum Exporting Countries, governmental regulation, political conditions in oil producing nations, including those in the Middle East, war or the threat of war in oil producing regions and the availability of fuel from alternate sources. If our customers believe the long-term outlook for the price of oil is not favorable, or believe oil sands projects are not viable for any other reason, they may delay, reduce or cancel plans to construct new oil sands projects or expansions to existing projects. Delays, reductions or cancellations of major oil sands projects could have a material adverse impact on our financial condition and results of operations.

Insufficient pipeline, upgrading and refining capacity could cause our customers to delay, reduce or cancel plans to construct new oil sands projects or expand existing projects, which would, in turn, reduce our revenue from those customers.

For our customers to operate successfully in the oil sands, they must be able to transport the bitumen produced to upgrading facilities and transport the upgraded oil to refineries. Some oil sands projects have upgraders at mine site and others transport bitumen to upgraders located elsewhere. While current pipeline and upgrading capacity is sufficient for current production, future increases in production from new oil sands projects and expansions to existing projects will require increased upgrading and pipeline capacity. If these increases do not materialize, whether due to inadequate economics for the sponsors of such projects, shortages of labor or materials or any other reason, our customers may be unable to efficiently deliver increased production to market and may therefore delay, reduce or cancel planned capital investment. Such delays, reductions or cancellations of major oil sands projects would adversely affect our prospects and could have a material adverse impact on our financial condition and results of operations.

Lack of sufficient governmental infrastructure to support the growth in the oil sands region could cause our customers to delay, reduce or cancel their future expansions, which would, in turn, reduce our revenue from those customers.

The development in the oil sands region has put a great strain on the existing government infrastructure, necessitating substantial improvements to accommodate growth in the region. The local government having responsibility for a majority of the oil sands region has been exceptionally impacted by this growth and is not currently in a position to provide the necessary additional infrastructure. In an effort to delay further development until infrastructure funding issues are resolved, the local governmental authority has intervened in two recent hearings considering applications by major oil sands companies to the EUB for approval to expand their operations. Similar action could be taken with respect to any future applications. The EUB has issued conditional approval for the expansion in respect of one of the hearings despite the intervention by the local government authority, and a decision in the second hearing is pending. The EUB has indicated that it believes that additional infrastructure investment in the oil sands region is needed and that there is a short window of opportunity to make these investments in parallel with continued oil sands development. If the necessary infrastructure is not put in place, future growth of our customers’ operations could be delayed, reduced or canceled which could in turn adversely affect our prospects and could have a material adverse impact on our financial condition and results of operations.

Shortages of qualified personnel or significant labor disputes could adversely affect our business.

Alberta, and in particular the oil sands area, has had and continues to have a shortage of skilled labor and other qualified personnel. New mining projects in the area will only make it more difficult for us and our customers to find and hire all the employees required to work on these projects. We are continuously exploring innovative ways to hire the people we need, which include project managers, trades people and other skilled employees. We have expanded our efforts to find qualified candidates outside of Canada who might relocate to our area. In addition, we have undertaken more extensive training of existing employees and we are enhancing our use of technology and developing programs to provide better working conditions. We believe the labor shortage, which affects us and all of our major customers, will continue to be a challenge for everyone in the

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mining and oil and gas industries in western Canada for the foreseeable future. If we are not able to recruit and retain enough employees with the appropriate skills, we may be unable to maintain our customer service levels, and we may not be able to satisfy any increased demand for our services. This, in turn, could have a material adverse effect on our business, financial condition and results of operations. If our customers are not able to recruit and retain enough employees with the appropriate skills, they may be unable to develop projects in the oil sands area.

Substantially all of our hourly employees are subject to collective bargaining agreements to which we are a party or are otherwise subject. Any work stoppage resulting from a strike or lockout could have a material adverse effect on our business, financial condition and results of operations. In addition, our customers employ workers under collective bargaining agreements. Any work stoppage or labor disruption experienced by our key customers could significantly reduce the amount of our services that they need.

Cost overruns by our customers on their projects may cause our customers to terminate future projects or expansions which could adversely affect the amount of work we receive from those customers.

Oil sands development projects require substantial capital expenditures. In the past, several of our customers’ projects have experienced significant cost overruns, impacting their returns. If cost overruns continue to challenge our customers, they could reassess future projects and expansions which could adversely affect the amount of work we receive from our customers.

Our ability to grow our operations in the future may be hampered by our inability to obtain long lead time equipment and tires, which are currently in limited supply.

Our ability to grow our business is, in part, dependent upon obtaining equipment on a timely basis. Due to the long production lead times of suppliers of large mining equipment, we must forecast our demand for equipment many months or even years in advance. If we fail to forecast accurately, we could suffer equipment shortages or surpluses, which could have a material adverse impact on our financial condition and results of operations.

Global demand for tires of the size and specifications we require is exceeding the available supply. For example, two of our trucks are currently not in service because we cannot get tires for these particular trucks. We expect the supply/demand imbalance for certain tires to continue for several years. Our inability to procure tires to meet the demands for our existing fleet as well as to meet new demand for our services could have an adverse effect on our ability to grow our business.

Our customer base is concentrated, and the loss of or a significant reduction in business from a major customer could adversely impact our financial condition.

Most of our revenue comes from the provision of services to a small number of major oil sands mining companies. Revenue from our five largest customers represented approximately 65%, 70% and 68% of our total revenue for 2007, 2006 and 2005, respectively, and those customers are expected to continue to account for a significant percentage of our revenues in the future. In addition, the majority of our Pipeline revenues in previous fiscal years resulted from work performed for one customer. If we lose or experience a significant reduction of business from one or more of our significant customers, we may not be able to replace the lost work with work from other customers. Our long-term contracts typically allow our customers to unilaterally reduce or eliminate the work which we are to perform under the contract. Our contracts generally allow the customer to terminate the contract without cause. The loss of or significant reduction in business with one or more of our major customers, whether as a result of completion of a contract, early termination or failure or inability to pay amounts owed to us, could have a material adverse effect on our business and results of operations.

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Because most of our customers are Canadian energy companies, a downturn in the Canadian energy industry could result in a decrease in the demand for our services.

Most of our customers are Canadian energy companies. A downturn in the Canadian energy industry could cause our customers to slow down or curtail their current production and future expansions which would, in turn, reduce our revenue from those customers. Such a delay or curtailment could have a material adverse impact on our financial condition and results of operations.

Lump-sum and unit-price contracts expose us to losses when our estimates of project costs are lower than actual costs.

Approximately 66%, 58% and 51% of our revenue for 2007, 2006 and 2005, respectively, was derived from lump-sum and unit-price contracts. See “Critical Accounting Policies and Estimates—Revenue Recognition.” Lump-sum and unit-price contracts require us to guarantee the price of the services we provide and thereby expose us to losses if our estimates of project costs are lower than the actual project costs we incur. Our profitability under these contracts is dependent upon our ability to accurately predict the costs associated with our services. The costs we actually incur may be affected by a variety of factors beyond our control. Factors that may contribute to actual costs exceeding estimated costs and which therefore affect profitability include, without limitation:

• site conditions differing from those assumed in the original bid;

• scope modifications during the execution of the project;

• the availability and cost of skilled workers;

• the availability and proximity of materials;

• unfavorable weather conditions hindering productivity;

• inability or failure of our customers to perform their contractual commitments;

• equipment availability and productivity and timing differences resulting from project construction not starting on time; and

• the general coordination of work inherent in all large projects we undertake.

When we are unable to accurately estimate the costs of lump-sum and unit-price contracts, or when we incur unrecoverable cost overruns, the related projects result in lower margins than anticipated or may incur losses, which could adversely impact our results of operations, financial condition and cash flow.

Until we establish and maintain effective internal controls over financial reporting, we cannot assure you that we will have appropriate procedures in place to eliminate future financial reporting inaccuracies and avoid delays in financial reporting.

We have financial reporting obligations arising from our listings on the New York Stock Exchange and the Toronto Stock Exchange. We have had continuing problems providing accurate and timely financial information and reports and restated NAEPI’s financial statements three times since the beginning of our 2005 fiscal year. In April of 2005, we had to restate NAEPI’s financial statements for the first and second quarters of 2005 to properly account for costs incurred in those quarters. During 2006, we had to restate NAEPI’s financial statements for each period after November 26, 2003 to the quarter ended December 31, 2004 and the quarter ended June 30, 2005 to eliminate the impact of hedge accounting with respect to the derivative financial instruments. We also had to restate NAEPI’s financial statements for the first quarter of 2006 to correct the accounting for various aspects of the refinancing transactions which occurred in May 2005. Each of these restatements resulted in our inability to file NAEPI’s financial statements within the deadlines imposed by covenants in the indentures governing our 8 ³/4% senior notes and 9% senior secured notes.

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We have identified a number of significant weaknesses (as defined under Canadian auditing standards) in our financial reporting processes and internal controls. See “Significant Weaknesses in Financial Reporting and Internal Controls.” As a result, there can be no assurance that we will be able to generate accurate financial reports in a timely manner. Failure to do so would cause us to breach the U.S. and Canadian securities regulations with respect to reporting requirements in the future as well as the covenants applicable to our indebtedness. This could, in turn, have a material adverse effect on our business and financial condition. Until we establish and maintain effective internal controls and procedures for financial reporting, we may not have appropriate measures in place to eliminate financial statement inaccuracies and avoid delays in financial reporting.

If, as of the end of our 2008 fiscal year, we are unable to assert that our internal control over financial reporting is effective, or if our auditors are unable to confirm our assessment, investors could lose confidence in our reported financial information, and the trading price of our common shares and our business could be adversely affected.

We are in the process of documenting, and plan to test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, commencing with our year ending March 31, 2008. Effective March 31, 2008 the Sarbanes-Oxley Act requires an annual assessment by management of the effectiveness of internal control over financial reporting and an attestation report by independent auditors on the effectiveness of internal control over financial reporting. We cannot be certain that we will be able to comply with all of our reporting obligations and successfully complete the procedures, certification and attestation requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner. During the course of our testing we may identify deficiencies that we may not be able to remedy in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. Effective internal control over financial reporting is important to help produce reliable financial reports and to prevent financial fraud. If, as of the end of fiscal 2008, we are unable to assert that our internal control over financial reporting is effective, or if our independent auditors are unable to attest that our internal control over financial reporting is effective, we could be subject to heightened regulatory scrutiny, investors could lose confidence in our reported financial information and the trading price of our common shares and our ability to maintain confidence in our business could be adversely affected.

Our substantial debt could adversely affect us, make us more vulnerable to adverse economic or industry conditions and prevent us from fulfilling our debt obligations.

We have a substantial amount of debt outstanding and significant debt service requirements. As of March 31, 2007, we had outstanding $240.3 million of debt, including $9.7 million of capital leases. We also had cross-currency and interest rate swaps with a balance sheet liability of $60.9 million as of March 31, 2007. These swaps are secured equally and ratably with our revolving credit facility. We also had $25.0 million of outstanding, undrawn letters of credit, which reduce the amount of available borrowings under our revolving credit facility. Our substantial indebtedness could have serious consequences, such as:

• limiting our ability to obtain additional financing to fund our working capital, capital expenditures, debt service requirements, potential growth or other purposes;

• limiting our ability to use operating cash flow in other areas of our business;

• limiting our ability to post surety bonds required by some of our customers;

• placing us at a competitive disadvantage compared to competitors with less debt;

• increasing our vulnerability to, and reducing our flexibility in planning for, adverse changes in economic, industry and competitive conditions; and

• increasing our vulnerability to increases in interest rates because borrowings under our revolving credit facility and payments under some of our equipment leases are subject to variable interest rates.

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The potential consequences of our substantial indebtedness make us more vulnerable to defaults and place us at a competitive disadvantage. Further, if we do not have sufficient earnings to service our debt, we would need to refinance all or part of our existing debt, sell assets, borrow more money or sell securities, none of which we can guarantee we will be able to achieve on commercially reasonable terms, if at all.

The terms of our debt agreements may restrict our current and future operations, particularly our ability to respond to changes in our business or take certain actions.

Our revolving credit facility and the indenture governing our notes limit, among other things, our ability and the ability of our subsidiaries to:

• incur or guarantee additional debt, issue certain equity securities or enter into sale and leaseback transactions;

• pay dividends or distributions on our shares or repurchase our shares, redeem subordinated debt or make other restricted payments;

• incur dividend or other payment restrictions affecting certain of our subsidiaries;

• issue equity securities of subsidiaries;

• make certain investments or acquisitions;

• create liens on our assets;

• enter into transactions with affiliates;

• consolidate, merge or transfer all or substantially all of our assets; and

• transfer or sell assets, including shares of our subsidiaries.

Our revolving credit facility and some of our equipment lease programs also require us, and our future credit facilities may require us, to maintain specified financial ratios and satisfy specified financial tests, some of which become more restrictive over time. Our ability to meet these financial ratios and tests can be affected by events beyond our control, and we may be unable to meet those tests.

As a result of these covenants, our ability to respond to changes in business and economic conditions and to obtain additional financing, if needed, may be significantly restricted, and we may be prevented from engaging in transactions that might otherwise be considered beneficial to us. The breach of any of these covenants could result in an event of default under our revolving credit facility or any future credit facilities or under the indenture governing our notes. Under our revolving credit facility, our failure to pay certain amounts when due to other creditors, including to certain equipment lessors, or the acceleration of such other indebtedness, would also result in an event of default. Upon the occurrence of an event of default under our revolving credit facility or future credit facilities, the lenders could elect to stop lending to us or declare all amounts outstanding under such credit facilities to be immediately due and payable. Similarly, upon the occurrence of an event of default under the indenture governing our notes, the outstanding principal and accrued interest on the notes may become immediately due and payable. If amounts outstanding under such credit facilities and indenture were to be accelerated, or if we were not able to borrow under our revolving credit facility, we could become insolvent or be forced into insolvency proceedings and you could lose your investment in us.

Between March 31, 2004 and May 19, 2005, it was necessary to obtain a series of waivers and amend our then-existing credit agreement to avoid or to cure our default of various covenants contained in that credit agreement. We ultimately replaced that credit agreement with a new credit agreement on May 19, 2005, which was amended and restated on July 19, 2006, which we replaced with our current amended and restated credit agreement dated as of June 7, 2007.

Our inability to file NAEPI’s financial statements for the periods ended December 31, 2004, March 31, 2005 and September 30, 2005 with the SEC within the deadlines imposed by the regulators caused us to be out of

16

compliance with the covenants in the indentures governing our 8 ³/4% senior notes and our 9% senior secured notes (the latter indenture having been subsequently repaid and terminated on November 28, 2006). In each case, we filed these financial statements before the lack of compliance became an event of default under the indentures.

We may not be able to generate sufficient cash flow to meet our debt service and other obligations due to events beyond our control.

For 2005, we had negative operating cash flow of $5.7 million. Our ability to generate sufficient operating cash flow to make scheduled payments on our indebtedness and meet other capital requirements will depend on our future operating and financial performance. Our future performance will be impacted by a range of economic, competitive and business factors that we cannot control, such as general economic and financial conditions in our industry or the economy generally.

A significant reduction in operating cash flows resulting from changes in economic conditions, increased competition, reduced work or other events could increase the need for additional or alternative sources of liquidity and could have a material adverse effect on our business, financial condition, results of operations, prospects and our ability to service our debt and other obligations. If we are unable to service our indebtedness, we will be forced to adopt an alternative strategy that may include actions such as selling assets, restructuring or refinancing our indebtedness, seeking additional equity capital or reducing capital expenditures. We may not be able to effect any of these alternative strategies on satisfactory terms, if at all, or they may not yield sufficient funds to make required payments on our indebtedness.

Currency rate fluctuations could adversely affect our ability to repay our 8 ³/4% senior notes and may affect the cost of goods we purchase.

We have entered into cross-currency and interest rate swaps that represent economic hedges of our 8 ³/4% senior notes, which are denominated in U.S. dollars. The current exchange rate between the Canadian and U.S. dollars as compared to the rate implicit in the swap agreement has resulted in a large liability on the balance sheet under the caption “derivative financial instruments.” If the Canadian dollar increases in value or remains at its current value against the U.S. dollar, then if we repay the 8 ³/4% senior notes prior to their maturity in 2011, we will have to pay this liability.

Exchange rate fluctuations may also cause the price of goods to increase or decrease for us. For example, a decrease in the value of the Canadian dollar compared to the U.S. dollar would proportionately increase the cost of equipment which is sold to us or priced in U.S. dollars. Between January 1, 2007 and May 31, 2007, the Canadian dollar/U.S. dollar exchange rate varied from a high of 0.9376 Canadian dollars per U.S. dollar to a low of 0.8419 Canadian dollars per U.S. dollar.

If we are unable to obtain surety bonds or letters of credit required by some of our customers, our business could be impaired.

We are at times required to post a bid or performance bond issued by a financial institution, known as a surety, to secure our performance commitments. The surety industry experiences periods of unsettled and volatile markets, usually in the aftermath of substantial loss exposures or corporate bankruptcies with significant surety exposure. Historically, these types of events have caused reinsurers and sureties to reevaluate their committed levels of underwriting and required returns. If for any reason, whether because of our financial condition, our level of secured debt or general conditions in the surety bond market, our bonding capacity becomes insufficient to satisfy our future bonding requirements, our business and results of operations could be adversely affected.

Some of our customers require letters of credit to secure our performance commitments. Our second amended and restated revolving credit facility provides for the issuance of letters of credit up to $125.0 million,

17

and at March 31, 2007, we had $25.0 million of issued letters of credit outstanding. One of our major contracts allows the customer to require up to $50.0 million in letters of credit. If we were unable to provide letters of credit in the amount requested by this customer, we could lose business from such customer and our business and cash flow would be adversely affected. If our capacity to issue letters of credit under our revolving credit facility and our cash on hand are insufficient to satisfy our customers, our business and results of operations could be adversely affected.

A change in strategy by our customers to reduce outsourcing could adversely affect our results.

Outsourced mining and site preparation services constitute a large portion of the work we perform for our customers. For example, our mining and site preparation project revenues constituted approximately 74% to 75% of our revenues in each of 2007, 2006 and 2005. The election by one or more of our customers to perform some or all of these services themselves, rather than outsourcing the work to us, could have a material adverse impact on our business and results of operations.

Our operations are subject to weather-related factors that may cause delays in our project work.

Because our operations are located in western Canada and northern Ontario, we are often subject to extreme weather conditions. While our operations are not significantly affected by normal seasonal weather patterns, extreme weather, including heavy rain and snow, can cause delays in our project work, which could adversely impact our results of operations.

We are dependent on our ability to lease equipment, and a tightening of this form of credit could adversely affect our ability to bid for new work and/or supply some of our existing contracts.

A portion of our equipment fleet is currently leased from third parties. Further, we anticipate leasing substantial amounts of equipment to perform the work on contracts for which we have been engaged in the upcoming year, particularly the overburden removal contract with CNRL. Other future projects may require us to lease additional equipment. If equipment lessors are unable or unwilling to provide us with the equipment we need to perform our work, our results of operations will be materially adversely affected.

Our business is highly competitive and competitors may outbid us on major projects that are awarded based on bid proposals.

We compete with a broad range of companies in each of our markets. Many of these competitors are substantially larger than we are. In addition, we expect the anticipated growth in the oil sands region will attract new and sometimes larger competitors to enter the region and compete against us for projects. This increased competition may adversely affect our ability to be awarded new business.

Approximately 80% of the major projects that we pursue are awarded to us based on bid proposals, and projects are typically awarded based in large part on price. We often compete for these projects against companies that have substantially greater financial and other resources than we do and therefore can better bear the risk of underpricing projects. We also compete against smaller competitors that may have lower overhead cost structures and, therefore, may be able to provide their services at lower rates than we can. Our business may be adversely impacted to the extent that we are unable to successfully bid against these companies. The loss of existing customers to our competitors or the failure to win new projects could materially and adversely affect our business and results of operations.

A significant amount of our revenue is generated by providing non-recurring services.

More than 66% of our revenue for 2007 was derived from projects which we consider to be non-recurring. This revenue primarily relates to site preparation and piling services provided for the construction of extraction, upgrading and other oil sands mining infrastructure projects.

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Demand for our services may be adversely impacted by regulations affecting the energy industry.

Our principal customers are energy companies involved in the development of the oil sands and in natural gas production. The operations of these companies, including their mining operations in the oil sands, are subject to or impacted by a wide array of regulations in the jurisdictions where they operate, including those directly impacting mining activities and those indirectly affecting their businesses, such as applicable environmental laws. As a result of changes in regulations and laws relating to the energy production industry, including the operation of mines, our customers’ operations could be disrupted or curtailed by governmental authorities. The high cost of compliance with applicable regulations may cause customers to discontinue or limit their operations, and may discourage companies from continuing development activities. As a result, demand for our services could be substantially affected by regulations adversely impacting the energy industry.

Environmental laws and regulations may expose us to liability arising out of our operations or the operations of our customers.

Our operations are subject to numerous environmental protection laws and regulations that are complex and stringent. We regularly perform work in and around sensitive environmental areas such as rivers, lakes and forests. Significant fines and penalties may be imposed on us or our customers for noncompliance with environmental laws and regulations, and our contracts generally require us to indemnify our customers for environmental claims suffered by them as a result of our actions. In addition, some environmental laws impose strict, joint and several liability for investigative and remediation costs in relation to releases of harmful substances. These laws may impose liability without regard to negligence or fault. We also may be subject to claims alleging personal injury or property damage if we cause the release of, or any exposure to, harmful substances.

We own or lease, and operate, several properties that have been used for a number of years for the storage and maintenance of equipment and other industrial uses. Fuel may have been spilled, or hydrocarbons or other wastes may have been released on these properties. Any release of substances by us or by third parties who previously operated on these properties may be subject to laws which impose joint and several liability for clean-up, without regard to fault, on specific classes of persons who are considered to be responsible for the release of harmful substances into the environment.

Failure by our customers to obtain required permits and licenses may affect the demand for our services.

The development of the oil sands requires our customers to obtain regulatory and other permits and licenses from various governmental licensing bodies. Our customers may not be able to obtain all necessary permits and licenses that may be required for the development of the oil sands on their properties. In such a case, our customers’ projects will not proceed, thereby adversely impacting demand for our services.

Our projects expose us to potential professional liability, product liability, warranty or other claims.

We install deep foundations, often in congested and densely populated areas, and provide construction management services for significant projects. Notwithstanding the fact that we generally will not accept liability for consequential damages in our contracts, any catastrophic occurrence in excess of insurance limits at projects where our structures are installed or services are performed could result in significant professional liability, product liability, warranty or other claims against us. Such liabilities could potentially exceed our current insurance coverage and the fees we derive from those services. A partially or completely uninsured claim, if successful and of a significant magnitude, could result in substantial losses.

We may not be able to achieve the expected benefits from any future acquisitions, which would adversely affect our financial condition and results of operations.

We intend to pursue selective acquisitions as a method of expanding our business. However, we may not be able to identify or successfully bid on businesses that we might find attractive. If we do find attractive acquisition

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opportunities, we might not be able to acquire these businesses at a reasonable price. If we do acquire other businesses, we might not be able to successfully integrate these businesses into our then-existing business. We might not be able to maintain the levels of operating efficiency that acquired companies will have achieved or might achieve separately. Successful integration of acquired operations will depend upon our ability to manage those operations and to eliminate redundant and excess costs. Because of difficulties in combining operations, we may not be able to achieve the cost savings and other size-related benefits that we hoped to achieve through these acquisitions. Any of these factors could harm our financial condition and results of operations.

Aboriginal peoples may make claims against our customers or their projects regarding the lands on which their projects are located.

Aboriginal peoples have claimed aboriginal title and rights to a substantial portion of western Canada. Any claims that may be asserted against our customers, if successful, could have an adverse effect on our customers which may, in turn, negatively impact our business.

Unanticipated short term shutdowns of our customers’ operating facilities may result in temporary cessation or cancellation of projects in which we are participating.

The majority of our work is generated from the development, expansion and ongoing maintenance of oil sands mining, extraction and upgrading facilities. Unplanned shutdowns of these facilities due to events outside our control or the control of our customers, such as fires, mechanical breakdowns and technology failures, could lead to the temporary shutdown or complete cessation of projects in which we are working. When these events have happened in the past, our business has been adversely affected. Our ability to maintain revenues and margins may be affected to the extent these events cause reductions in the utilization of equipment.

Many of our senior officers have either recently joined the company or have just been promoted and have only worked together as a management team for a short period of time.

We recently made several significant changes to our senior management team. In May 2005, we hired a new Chief Executive Officer and promoted our Vice President, Operations to Chief Operating Officer. In January 2005 we hired a new Treasurer, who is now our Vice President, Supply Chain. In June 2006, we hired a new Vice President, Human Resources, Health, Safety and Environment. In September 2006, we hired a new Chief Financial Officer. Our Chief Operating Officer has resigned effective July 31, 2007. As a result of these and other recent changes in senior management, many of our officers have only worked together as a management team for a short period of time and do not have a long history with us. Because our senior management team is responsible for the management of our business and operations, failure to successfully integrate our senior management team could have an adverse impact on our business, financial condition and results of operations.

We will incur significantly higher costs as a result of being a public company.

As a public company, we will incur significantly higher legal, accounting and other expenses than we did as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as similar or related rules adopted by the Securities and Exchange Commission, Canadian securities regulatory authorities, the New York Stock Exchange and the Toronto Stock Exchange, have imposed substantial requirements on public companies, including requiring changes in corporate governance practices and requirements relating to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act. We expect these rules and regulations will increase our legal and financial compliance costs and make some activities more time-consuming and costly.

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ITEM 4: INFORMATION ON THE COMPANY

A. HISTORY AND DEVELOPMENT OF THE COMPANY

NACG Holdings Inc. (“Holdings”) was formed in October 2003 in connection with the Acquisition discussed below. Prior to the Acquisition, NACG Holdings Inc. had no operations or significant assets and the Acquisition was primarily a change of ownership of the businesses acquired.

On October 31, 2003, two wholly-owned subsidiaries of Holdings, as the buyers, entered into a purchase and sale agreement with Norama Ltd. and one of its subsidiaries, as the sellers. On November 26, 2003, pursuant to the purchase and sale agreement, Norama Ltd. sold to the buyers the businesses comprising North American Construction Group in exchange for total consideration of approximately $405.5 million, net of cash received and including the impact of certain post-closing adjustments. The businesses we acquired from Norama Ltd. have been in operation since 1953. Subsequent to the Acquisition, we have operated the businesses in substantially the same manner as prior to the Acquisition.

On November 28, 2006, prior to the consummation of the initial public offering (“IPO”) discussed below, Holdings amalgamated with its wholly-owned subsidiaries, NACG Preferred Corp and North American Energy Partners Inc. The amalgamated entity continued under the name North American Energy Partners Inc. The voting common shares of the new entity, North American Energy Partners Inc., were the shares sold in the IPO and related secondary offering. On November 28, 2006, we completed the IPO in the United States and Canada of 8,750,000 voting common shares and a secondary offering of 3,750,000 voting common shares for $18.38 per share (U.S. $16.00 per share).

On November 22, 2006 our common shares commenced trading on the New York Stock Exchange and on the Toronto Stock Exchange on an “if, as and when issued” basis. On November 28, 2006, our common shares became fully tradable on the Toronto Stock Exchange.

Net proceeds from the IPO were $140.9 million (gross proceeds of $158.5 million, less underwriting discounts and costs and offering expenses of $17.6 million). On December 6, 2006, the underwriters exercised their option to purchase an additional 687,500 common shares from us. The net proceeds from the exercise of the underwriters’ option were $11.7 million (gross proceeds of $12.6 million, less underwriting fees of $0.9 million). Total net proceeds were $152.6 million (total gross proceeds of $171.1 million less total underwriting discounts and costs and offering expenses of $18.5 million). As of March 31, 2007, our authorized capital consists of an unlimited number of voting and non-voting common shares, of which 35,192,260 voting and 412,400 non voting common shares were issued and outstanding.

Our head office is located at Zone 3, Acheson Industrial Area, 2 – 53016 Hwy 60, Acheson, Alberta, T7X 5A7. Our telephone and facsimile numbers are (780) 960-7171 and (780) 960-7103, respectively.

B. BUSINESS OVERVIEW

General

We are a leading resource services provider to major oil and natural gas and other natural resource companies, with a primary focus in the Alberta oil sands. We provide a wide range of mining and site preparation, piling and pipeline installation services to our customers across the entire lifecycle of their projects. We are the largest provider of contract mining services in the oil sands area, and we believe we are the largest piling foundations installer in western Canada. In addition, we believe that we operate the largest fleet of equipment of any contract resource services provider in the oil sands. Our total fleet includes 690 pieces of diversified heavy construction equipment supported by over 660 ancillary vehicles. While our expertise covers heavy earth moving, piling and pipeline installation in any location, we have a specific capability operating in the harsh climate and difficult terrain of the oil sands and northern Canada. By understanding the terrain, having skilled personnel and a diverse, well-maintained and well-positioned fleet, we are able to meet the demands of a growing customer base.

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Our core market is the Alberta oil sands, where we generated 72% of our fiscal 2007 revenue. The oil sands are located in three regions of northern Alberta: Athabasca, Cold Lake and Peace River. According to the Alberta Energy and Utilities Board, or EUB, Canada’s oil sands are estimated to hold 315 billion barrels of ultimately recoverable oil reserves, with established reserves of almost 174 billion barrels, second only to Saudi Arabia. According to the Canadian National Energy Board, or NEB, oil sands production of bitumen is expected to increase from 1.1 million barrels per day, or “bpd,” in 2005 to approximately 3.0 million bpd by 2015 and account for 75% of total Canadian oil output, compared to approximately 50% of output today. In order to achieve this increase in production, the NEB estimates that over $95 billion of capital expenditures by companies operating in the oil sands will be required through 2015.

Our significant knowledge, experience, equipment capacity and scale of operations in the oil sands differentiates us from our competition. Our principal customers are the major operators in the oil sands, including all three of the producers that currently mine bitumen, being Syncrude Canada Ltd., Suncor Energy Inc. and Albian Sands Energy Inc. (a joint venture among Shell Canada Limited, Chevron Canada Limited and Western Oil Sands Inc.). Canadian Natural Resources Limited, or CNRL, another significant customer, is developing a bitumen-mining project in the oil sands. We provide services to every company in the oil sands that uses surface mining techniques for its production. These surface mining techniques account for over 70% of total oil sands production. We have also provided site construction services for in-situ producers, which use horizontally drilled wells to inject steam into deposits and pump bitumen to the surface.

We have long-term relationships with most of our customers. For example, we have been providing services to Syncrude and Suncor since they pioneered oil sands development over 30 years ago. We believe our customers’ leases have an average remaining productive life of over 35 years. In addition, 34% of our revenues in fiscal 2007 were derived from recurring, long-term contracts, which assists in providing stability in our operations.

Our Operations

We provide our services through three interrelated yet distinct business units: mining and site preparation, piling and pipeline. Over the past 50 years, we have developed an expertise operating in the difficult working conditions created by the climate and terrain of western Canada. We provide our services primarily to oil and gas and other natural resource companies.

The chart below shows the revenues generated by each operating segment for the fiscal years ended March 31, 2005 through March 31, 2007:

	Year Ended March 31,
	2007				2006				2005
	(Dollars in thousands)
Mining and site preparation	$	473,179	75.2	%	$	366,721	74.5	%	$	264,835	74.1	%
Piling		109,266	17.3			91,434	18.6			61,006	17.1
Pipeline installation		47,001	7.5			34,082	6.9			31,482	8.8
Total	$	629,446	100.0	%	$	492,237	100.0	%	$	357,323	100.0	%

Mining and site preparation

Our mining and site preparation segment encompasses a wide variety of services. Our contract mining business represents an outsourcing of the equipment and labor component of the oil and gas and other natural resources mining business. Our site preparation services include clearing, stripping, excavating and grading for mining operations and other general construction projects, as well as underground utility installation for plant, refinery and commercial building construction. This business unit utilizes the vast majority of our equipment fleet and employs over 900 people. The majority of the employees and equipment associated with this business unit are located in the Alberta oil sands area.

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For the fiscal years ended March 31, 2005, 2006 and 2007, revenues from this segment accounted for 74%, 75% and 75% of our total revenues, respectively.

Many oil sands and natural resource mining companies utilize contract services for mine site operations. Our mining services consist of overburden removal; the hauling of sand and gravel; mining of the ore body and delivery of the ore to the crushing facility; supply of labor and equipment to support the owners’ mining operations; construction of infrastructure associated with mining operations; and reclamation activities, which include contouring of waste dumps and placement of secondary materials and muskeg. The major producers outsource mine site operations to contractors such as our company to allow them to focus their resources on exploration and property development and to benefit from a variety of cost efficiencies that we can provide. We believe mining contractors typically have wage rates lower than those of the mining company and more flexible operating arrangements with personnel allowing for improved uptime and performance.

Oil sands operators use our services to prepare their sites for the construction of the mining infrastructure, including extraction plants and upgrading facilities, and for the eventual mining of the oil sands ore located on their properties. Outside of the oil sands, our site preparation services are used to assist in the construction of roads, natural resource mines, plants, refineries, commercial buildings, dams and irrigation systems. In order to successfully provide these types of services in the oil sands, our operators are required to use heavy equipment to transform barren terrain and difficult soil or rock conditions into a stable environment for site development. Our extensive fleet of equipment is used for clearing the earth of vegetation and removing topsoil that is not usable as a stable subgrade and site grading, which includes grading, leveling and compacting the site to provide a solid foundation for transportation or building. We also provide utility pipe installation for the private and public sectors in western Canada. We are experienced in working with piping materials such as HDPE, concrete, PVC and steel. This work involves similar methods as those used for field, transmission and distribution pipelines in the oil and gas industry, but is generally more intricate and time consuming as the work is typically performed in existing plants with numerous tie-ins to live systems.

Piling

Our capabilities include the installation of all types of driven and drilled piles, caissons and earth retention and stabilization systems for commercial buildings; private industrial projects, such as plants and refineries; and infrastructure projects, such as bridges. Our piling business employs approximately 150 people. Oil and gas companies developing the oil sands and related infrastructure represented approximately 50% of our piling clients for fiscal 2007. The remaining 50% of our piling clients were primarily commercial construction builders operating in the Edmonton, Calgary, Regina and Vancouver areas.

In providing piling services, we currently operate a variety of crawler-mounted drill rigs, a fleet of 25- to 100-ton capacity piling cranes and pile driving hammers of all types from our Edmonton, Calgary, Regina, Vancouver and Fort McMurray locations. Piles and caissons are deep foundation systems that extend up to 30 meters below a structure. Piles are long narrow shafts that distribute a load from a supported structure (such as a building or bridge) throughout the underlying soil mass and are necessary whenever the available footing area beneath a structure is insufficient to support the load above it. The foundation chosen for any particular structure depends on the strength of the rock or soil, magnitude of structural loads and depth of groundwater level.

For the fiscal years ended March 31, 2005, 2006 and 2007, revenues from this segment accounted for 17%, 19% and 17% of our total revenues, respectively.

Pipeline Installation

We install field, transmission and distribution pipe made of steel, plastic and fiberglass materials. We employ our fleet of construction equipment and skilled technical operators to build and test the pipelines for the

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delivery of oil and natural gas from the producing field to the consumer. Our pipeline teams have expertise in hand welding selected grade pipe and in operating in the harsh conditions of remote regions in western and northern Canada.

Prior to fiscal 2007 virtually all of our revenues in our pipeline business resulted from work performed for EnCana. During fiscal 2007 we expanded our client base in the pipeline division performing work for Canadian Natural Resources Limited, Suncor Energy Inc. and Husky Energy Inc. We believe there are significant opportunities to further increase our market share by capitalizing on the projected pipeline expansion in Canada.

For the fiscal years ended March 31, 2005, 2006 and 2007, revenues from this segment accounted for 9%, 7% and 8% of our total revenues, respectively.

Our Markets

Our business is primarily driven by the demand for our services from the development, expansion and operation of oil sands projects. Decisions by oil sands operators to make capital investments are driven by a number of factors, with one of the most important being the expected long-term price of oil.

Canadian Oil Sands

Oil sands are grains of sand covered by a thin layer of water and coated by heavy oil, or bitumen. Bitumen, because of its structure, does not flow, and therefore requires non-conventional extraction techniques to separate it from the sand and other foreign matter. There are currently two main methods of extraction: open pit mining, where bitumen deposits are sufficiently close to the surface to make it economically viable to recover the bitumen by treating mined sand in a surface plant; and in-situ, where bitumen deposits are buried too deep for open pit mining to be cost effective, and operators instead inject steam into the deposit so that the bitumen can be separated from the sand and pumped to the surface. We currently provide most of our services to companies operating open pit mines to recover bitumen reserves. These customers utilize our services for surface mining, site preparation, piling, pipe installation, site maintenance, equipment and labor supply and land reclamation.

According to the EUB, the oil sands contained almost 174 billion barrels of established oil reserves as of the end of 2005, approximately 32 billion barrels of which is recoverable by open pit mining techniques. This is second only to Saudi Arabia’s 264 billion barrels and approximately six times the recoverable reserves in the United States. Beginning in the mid-1990’s, increasing global energy demand and improvements in mining and in-situ technology resulted in a significant increase in oil sands investments. This increased level of investment was also driven by a revised royalty regime adopted by the Government of Alberta in 1997, which was designed to accelerate investment in the oil sands. Under the revised royalty structure, oil sands operators pay a royalty of 1% of gross revenue until the operator has recovered all its allowed costs in respect of a project plus a return allowance, after which the royalty increases to the greater of 25% of net revenue or 1% of gross revenue.

Outlook

According to the Canadian Association of Petroleum Producers, or CAPP, approximately $42 billion was invested in the oil sands from 1998 through 2005. Oil sands production has grown four-fold since 1990 and exceeded one million barrels per day in 2005. The NEB expects oil sands production to reach approximately 3.0 million barrels per day and account for over 75% of total Canadian oil production by 2015. By comparison, the Ghawar field in Saudi Arabia currently produces 5.0 million barrels per day, representing over 6% of the world’s total production and over 50% of Saudi Arabia’s production.

According to the NEB’s 2006 Energy Market Assessment, between 2006 and 2015, $8.5 billion to $10.9 billion of annual capital expenditures, for a total of $95 billion, will be required to achieve expected increases in production. According to the NEB, as of June 2006, there were 21 mining and upgrader projects in various

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stages, ranging from announcement to construction, with start-up dates through 2010. If all of these projects proceed as scheduled, the planned investment in new projects for 2006 through 2010 will exceed $38 billion and an additional $17 billion will be invested in project additions or existing projects over the same period. Beyond 2010, several new multibillion dollar projects and a number of smaller multimillion dollar projects are being considered by various oil sands operators. We intend to pursue business opportunities from these projects.

Pipeline Infrastructure and Construction

To transport the increased production expected from the oil sands and to provide natural gas as an energy source to the oil sands region, significant investment will be required to expand pipeline capacity. To date, there have been significant greenfield and expansion projects announced, including:

• Kinder Morgan Canada’s proposal to expand the TransMountain pipeline system, which transports oil from the oil sands area to Burnaby, British Columbia.

• Enbridge Inc.’s proposed Gateway pipeline, which will transport oil from the oil sands area to Kitimat, British Columbia.

• The proposed Access Pipeline (a joint venture between MEG Energy Corp. and Devon ARL Canada Corp.), which will transport bitumen from the oil sands to refineries in Edmonton, Alberta and diluent from Edmonton, Alberta to the oil sands area.

• TransCanada Corporation’s proposed Keystone pipeline project, which will transport oil from Hardisty, Alberta to the Chicago area.

• The proposed Spirit pipeline system (a joint venture between Kinder Morgan Canada and Pembina Pipeline Corporation), which will transport condensate from Kitimat, British Columbia to Edmonton, Alberta.

We are in various stages of discussions to provide services for some of these projects. We believe that our service offerings and pipeline construction experience position us well to compete for additional sizeable pipeline opportunities required for the expected growth in oil sands production.

Conventional Oil and Gas

We provide services to conventional oil and gas producers, in addition to our work in the oil sands. The Canadian Energy Pipeline Association estimates that over $20 billion of pipeline investment in Canada will be required for the development of new long haul pipelines, feeder systems and other related pipeline construction. Conventional oil and gas producers require pipeline installation services in order to connect producing wells to nearby pipeline systems. According to CAPP, Canada is one of the world’s largest producers of oil and gas, producing approximately 2.5 million barrels of oil per day and approximately 17.1 billion cubic feet of natural gas per day. Canadian natural gas production is expected to increase with the development of arctic gas reserves. A producer group has been formed by Imperial Oil Limited, ConocoPhillips Canada Limited, Shell Canada and the Aboriginal Pipeline Group for the purpose of bidding for work on construction of a pipeline proposed to extend 1,220 kilometers (758 miles) from the MacKenzie River delta in the Beaufort Sea to existing natural gas pipelines in northern Alberta. Under the group’s proposal, Imperial Oil will lead the construction and operate the pipeline. We are actively working with Imperial Oil and have provided it with constructability and planning reviews. We hope to repeat our history of providing initial engineering assistance on projects and then subsequently being awarded contracts on these projects.

Minerals Mining

According to the government agency Natural Resources Canada, Canada is also one of the largest mining nations in the world, producing more than 60 different minerals and metals. In 2006, the mining and minerals processing industries contributed $40 billion to the Canadian economy, an amount equal to approximately 3.7% of GDP. The value of minerals produced (excluding petroleum and natural gas) reached $33.6 billion in 2006.

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According to the EUB, Canada ranks tenth in the world in total proven coal reserves. Alberta contains 70% of Canada’s coal reserves and, by volume, produces approximately half of the coal mined in Canada annually.

The diamond mining industry in Canada is relatively new, having extracted diamonds for only eight years. According to Natural Resources Canada, the industry has grown from 2.6 million carats of production in 2000 to an estimated 13.2 million carats of production in 2006, representing a compounded annual growth rate of approximately 38%, and establishing Canada as the third largest diamond producing country in the world by value after Botswana and Russia. We believe Canadian diamond mining will continue to grow as existing mines increase production and new mine projects are developed. Outside the oil sands, we have identified the growing Canadian diamond mining industry as a primary target for new business opportunities.

Canada is the world leader in uranium mining. The two largest high-grade deposits in the world have been discovered in Canada. According to Natural Resources Canada, 80% of Canada’s recoverable reserve base is categorized as “low-cost”. Historically, exploration and production have taken place primarily in Saskatchewan. Recently, however, significant exploration efforts are underway in the Northwest Territories, Yukon, Nunavut, Quebec, Newfoundland and Labrador, Ontario, Manitoba and Alberta, with as many as 90 junior exploration companies involved.

We intend to build on our core services and strong regional presence to capitalize on the opportunities in the minerals mining industries of Canada. According to Natural Resources Canada’s 2007 estimate, the capital and repair expenditures needed to support the minerals mining industry would be over $8 billion in 2007.

Commercial and Public Construction

According to the government agency, Statistics Canada, the Canadian commercial and public construction market was approximately $25 billion in 2006. According to the Alberta government, the commercial and public construction market in Alberta is expected to grow 3% annually through 2009. As a result of the significant activity in the energy sector, western Canada has experienced and is expected to continue to experience strong economic and population growth. The Alberta government has responded to the potential strain that this growth will have on public facilities and infrastructure by allocating approximately $18.2 billion to improvement and expansion projects from 2008 to 2010. This need for infrastructure to support growth, along with historic under investment in infrastructure, provides for a strong infrastructure spending outlook.

The success of the energy industry in western Canada is also leading to increased commercial development in many urban centers in British Columbia and Alberta. According to the Alberta government, as of May 2007, the inventory of commercial, retail and residential projects in Alberta was valued at approximately $14.1 billion. These large expenditures will be further supplemented by the 2010 Olympic Winter Games, which will be held in the Vancouver area. The City of Vancouver estimates that the 2010 Olympic Winter Games will require an additional $4.0 billion in infrastructure and construction spending. The significant resources and capital intensive nature of the core infrastructure and construction services required to meet these demands, along with our strong local presence and significant regional experience, position us to implement our business model to capitalize on the large and growing infrastructure and construction demands of western Canada.

Contracts

We complete work under the following types of contracts: cost-plus, time-and-materials, unit-price and lump-sum. Each contract contains a different level of risk associated with its formation and execution.

Cost-plus. A cost-plus contract is where all work is completed based on actual costs incurred to complete the work. These costs include all labor, equipment, materials and any subcontractor’s costs. In addition to these direct costs, all site and corporate overhead costs are charged to the job. An agreed upon fee in the form of a fixed percentage is then applied to all costs charged to the project. This type of contract is utilized where the project involves a large amount of risk or the scope of the project cannot be readily determined.

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Time-and-materials. A time-and-materials contract involves using the components of a cost-plus job to calculate rates for the supply of labor and equipment. In this regard, all components of the rates are fixed and we are compensated for each hour of labor and equipment supplied. The risk associated with this type of contract is the estimation of the rates and incurring expenses in excess of a specific component of the agreed-upon rate. Therefore, any cost overrun must come out of the fixed margin included in the rates.

Unit-price. A unit-price contract is utilized in the execution of projects with large repetitive quantities of work and is commonly utilized for site preparation, mining and pipeline work. We are compensated for each unit of work we perform (for example, cubic meters of earth moved, lineal meters of pipe installed or completed piles). Within the unit-price contract, there is an allowance for labor, equipment, materials and any subcontractor’s costs. Once these costs are calculated, we add any site and corporate overhead costs along with an allowance for the margin we want to achieve. The risk associated with this type of contract is in the calculation of the unit costs with respect to completing the required work.

Lump sum. A lump-sum contract is utilized when a detailed scope of work is known for a specific project. Thus, the associated costs can be readily calculated and a firm price provided to the customer for the execution of the work. The risk lies in the fact that there is no escalation of the price if the work takes longer or more resources are required than were estimated in the established price. The price is fixed regardless of the amount of work required to complete the project.

The mix of contract types varies year-by-year. For the fiscal year ended March 31, 2007, our contracts consisted of 6% cost-plus, 28% time-and-materials, 53% unit-price and 13% lump sum.

In addition to the contracts listed above, we also use master service agreements for work in the oil and gas sector where the scope of the project is not known and timing is critical to ensure the work gets completed. The master service agreement is a form of a time-and-materials agreement that specifies what rates will be charged for the supply of labor and equipment to undertake work. The agreement does not identify any specific scope or schedule of work. In this regard, the customer’s representative establishes what work is to be done at each location. We use master service agreements with the work we perform for Syncrude, Suncor and Albian.

We also do a substantial amount of work as a subcontractor where we are governed by the contracts with the general contractor to which we are not a party. Subcontracts vary in type and conditions with respect to the pricing and terms and are governed by one specific prime contract that governs a large project generally. In such cases, the contract with the subcontractors contains more specific provisions regarding a specified aspect of a project.

Seasonality

We generally experience a decline in revenues during our first quarter of each fiscal year due to seasonality, as weather conditions make operations in our operating regions difficult during this period. The level of activity in our mining and site preparation and pipeline installation segments declines when frost leaves the ground and many secondary roads are temporarily rendered incapable of supporting the weight of heavy equipment. The duration of this period is referred to as “spring breakup” and has a direct impact on our activity levels. Our fourth-quarter revenues are typically our highest as ground conditions are best and customers often begin spending their new capital expenditure budgets. As a result, full-year results are not likely to be a direct multiple of any particular quarter or combination of quarters.

Joint Venture

We are party to a joint venture operated through a corporation called Noramac Ventures Inc., or Noramac, with Fort McKay Construction Ltd. This joint venture was created for the purpose of performing contracts for the construction, development and operation of open-pit mining projects within a 50-kilometre radius of Fort McKay,

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Alberta, which require the provision of heavy construction equipment. The affairs of Noramac are managed, and all decisions and determinations with respect to Noramac are made, by a management committee equally represented by us and our partner. The management committee is responsible for determining the percentage of work in relation to each contract that will be performed by us and by our partner, provided that contracts for a duration of less than two years and of a tender value between $10.0 million and $100.0 million, which require a parent guarantee or performance bond, will be subcontracted to us. The joint venture agreement provides that if the management committee does not tender for a contract, or fails to reach agreement on the terms upon which Noramac will tender for a contract, we or our partner may pursue the contract in our respective capacities without hindrance, interference or participation by the other party. The joint venture agreement does not prohibit or restrict us from undertaking and performing, for our own account, any work for existing customers other than work to be performed by Noramac pursuant to an existing contract between Noramac and such customer. The joint venture is accounted for as a variable interest entity and consolidated in our financial statements.

Major Suppliers

We have long-term relationships with the following equipment suppliers: Finning International Inc. (45 years), Wajax Income Fund (20 years) and Brandt Tractor Ltd. (30 years). Finning is a major Caterpillar heavy equipment dealer for Canada. Wajax is a major Hitachi equipment supplier to us for both mining and construction equipment. We purchase or rent John Deere equipment, including excavators, loaders and small bulldozers, from Brandt Tractor. In addition to the supply of new equipment, each of these companies is a major supplier for equipment rentals, parts and service labor.

We obtain tires for our equipment from local distributors. Tires of the size and specifications we require are generally in short supply. We expect the supply/demand imbalance for certain tires to continue for some time.

Competition

Our business is highly competitive in each of our markets. Historically, the majority of our new business was awarded to us based on past client relationships without a formal bidding process, in which, typically, a small number of pre-qualified firms submit bids for the project work. Recently, in order to generate new business with new customers, we have had to participate in formal bidding processes. As new major projects arise, we expect to have to participate in bidding processes on a meaningful portion of the work available to us on these projects. Factors that impact competition include price, safety, reliability, scale of operations, availability and quality of service. Most of our clients and potential clients in the oil sands area operate their own heavy mining equipment fleet. However, these operators have historically outsourced a significant portion of their mining and site preparation operations and other construction services.

Our principal competitors in the mining and site preparation segment include Cow Harbour, Cross Construction Ltd., Klemke Mining Corporation, Ledcor Construction Limited, Neegan Development Corporation Ltd., Peter Kiewit Sons Co., Tercon Contractors Ltd., Sureway Construction Ltd. and Thompson Bros. (Constr) Ltd. The main competition to our deep foundation piling operations comes from Agra Foundations Limited and Double Star Co. The primary competitors in the pipeline installation business include Ledcor Construction Limited, Washcuk Pipe Line Construction Ltd. and Midwest Management (1987) Ltd. Voice Construction Ltd. and I.G.L. Industrial Services are the major competitors in underground utilities installation.

In the public sector, we compete against national firms, and there is usually more than one competitor in each local market. Most of our public sector customers are local governments that are focused on serving only their home regions. Competition in the public sector continues to increase, and we typically choose to compete on projects only where we can utilize our equipment and operating strengths to secure profitable business.

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Law and Regulations and Environmental Matters

Many aspects of our operations are subject to various federal, provincial and local laws and regulations, including, among others:

• permitting and licensing requirements applicable to contractors in their respective trades,

• building and similar codes and zoning ordinances,

• laws and regulations relating to consumer protection and

• laws and regulations relating to worker safety and protection of human health.

We believe we have all material required permits and licenses to conduct our operations and are in substantial compliance with applicable regulatory requirements relating to our operations. Our failure to comply with the applicable regulations could result in substantial fines or revocation of our operating permits.

Our operations are subject to numerous federal, provincial and municipal environmental laws and regulations, including those governing the release of substances, the remediation of contaminated soil and groundwater, vehicle emissions and air and water emissions. These laws and regulations are administered by federal, provincial and municipal authorities, such as Alberta Environment, Saskatchewan Environment, the British Columbia Ministry of Environment, and other governmental agencies. The requirements of these laws and regulations are becoming increasingly complex and stringent, and meeting these requirements can be expensive. The nature of our operations and our ownership or operation of property expose us to the risk of claims with respect to environmental matters, and there can be no assurance that material costs or liabilities will not be incurred with such claims. For example, some laws can impose strict, joint and several liability on past and present owners or operators of facilities at, from or to which a release of hazardous substances has occurred, on parties who generated hazardous substances that were released at such facilities and on parties who arranged for the transportation of hazardous substances to such facilities. If we were found to be a responsible party under these statutes, we could be held liable for all investigative and remedial costs associated with addressing such contamination, even though the releases were caused by a prior owner or operator or third party. We are not currently named as a responsible party for any environmental liabilities on any of the properties on which we currently perform or have performed services. However, our leases typically include covenants which obligate us to comply with all applicable environmental regulations and to remediate any environmental damage caused by us to the leased premises. In addition, claims alleging personal injury or property damage may be brought against us if we cause the release of, or any exposure to, harmful substances.

Capital expenditures relating to environmental matters during the fiscal years ended March 31, 2005, 2006 and 2007 were not material. We do not currently anticipate any material adverse effect on our business or financial position as a result of future compliance with applicable environmental laws and regulations. Future events, however, such as changes in existing laws and regulations or their interpretation, more vigorous enforcement policies of regulatory agencies or stricter or different interpretations of existing laws and regulations may require us to make additional expenditures which may be material.

Employees and Labor Relations

As of March 31, 2007, we had over 200 salaried and over 1,500 hourly employees. We also utilize the services of subcontractors in our construction business. Approximately 10% to 15% of the construction work we do is done through subcontractors. Approximately 1,300 employees are members of various unions and work under collective bargaining agreements. The majority of our work is done through employees governed by a collective bargaining agreement with the International Union of Operating Engineers Local 955, the primary term of which expires on October 31, 2009, and under a collective bargaining agreement with the Alberta Road Builders and Heavy Construction Association and the International Union of Operating Engineers Local 955, the primary term of which expired. This contract is currently being negotiated. Additionally, we recently signed a 10-year labor agreement for mining work at the CNRL site in the oil sands. We are subject to other industry and

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specialty collective agreements under which we complete work, and the primary terms of all of these agreements are currently in effect. We believe that our relationships with all our employees, both union and non-union, are satisfactory. We have never experienced a strike or lockout.

Capital Expenditures

The following table sets out capital expenditures for our main operating segments for the periods indicated, excluding new capital leases:

	Year Ended March 31,
	2007		2006		2005
	(Dollars in thousands)
Mining & Site Preparation	$	95,829	$	25,090	$	16,888
Piling		8,940		880		202
Pipeline		1,918		82		774
Other		3,332		2,800		6,975
Total	$	110,019	$	28,852	$	24,839

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C. ORGANIZATIONAL STRUCTURE

North American Energy Partners Inc. is the parent company of North American Construction Group Inc. and its operating subsidiaries. All of the entities in the chart are wholly-owned by their respective parents as at the date of filing of this Form 20-F.

(1) Midwest Foundations Technologies Ltd. purchased September 1, 2006 dissolved January 25, 2007.

D. PLANT AND EQUIPMENT

We operate and maintain 690 pieces of diversified heavy equipment, including crawlers, graders, loaders, mining trucks, compactors, scrapers and excavators, as well as over 660 ancillary vehicles, including various service and maintenance vehicles. The equipment is in good condition, normal wear and tear excepted. Our revolving credit facility is secured by liens on substantially all of our equipment. We lease some of this equipment under lease terms that include purchase options.

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The following table sets forth our heavy equipment fleet as at March 31, 2007:

Category	Capacity Range	Horsepower Range	Number in Fleet	Number Leased
Mining and site preparation:
Articulating trucks	30-42 tons	305-460	54	—
Mining trucks	50-330 tons	650-2,700	128	13
Shovels	36-58 cubic yards	2,600-3,760	5	2
Excavators	1-20 cubic yards	94-1,350	135	3
Crawler tractors	N/A	120-1,350	113	8
Graders	14-24 feet	150-500	25	3
Scrapers	28-31 cubic yards	450	14	—
Loaders	1.5-16 cubic yards	110-690	52	—
Skidsteer loaders	1-2.25 cubic yards	70-150	47	—
Packers	44,175-68,796 lbs	216-315	25	—
Pipeline:
Snow cats	N/A	175	4	—
Trenchers	N/A	165	2	—
Pipelayers	16,000-140,000 lbs	78-265	35	—
Piling:
Drill rigs	60-135 feet (drill depth)	210-1,500	37	—
Cranes	25-100 tons	200-263	14	—
Total			690	29

For the fiscal years ended March 31, 2005, 2006 and 2007 we incurred expenses of $52.8 million, $64.8 million and $122.3 million respectively, to maintain our equipment in good working condition.

Many of these units are among the largest pieces of equipment in the world and are designed for use in the largest earthmoving and mining applications globally. Our large, diverse fleet gives us flexibility in scheduling jobs and allows us to be responsive to our customers’ needs. A well-maintained fleet is critical in the harsh climatic and environmental conditions we encounter. We operate four significant maintenance and repair centers, which are capable of accommodating the largest pieces of equipment in our fleet, on the sites of the major oil sands projects. These factors help us to be more efficient, thereby reducing costs to our customers to further improve our competitive edge, while concurrently increasing our equipment utilization and thereby improving our profitability.

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Facilities

We own and lease a number of buildings and properties for use in our business. Our administrative functions are located at our headquarters near Edmonton, Alberta, which also houses a major equipment maintenance facility. Project management and equipment maintenance are also performed at regional facilities in Calgary and Fort McMurray, Alberta; Vancouver, Fort Nelson and New Westminister, British Columbia; and Regina and Martensville, Saskatchewan. We occupy office and shop space in British Columbia, Alberta and Saskatchewan under leases which expire between late 2007 and 2011, subject to various renewal and termination rights. We expect to renew our office lease, which expires in 2007, with rates that are competitive with the prevailing markets rates at that time. We also occupy, without charge, some customer-provided lands. Our revolving credit facility is secured by liens on substantially all of our properties. The following table describes our primary facilities.

Location	Function	Owned or Leased	Lease Expiration Date
Acheson, Alberta	Corporate Headquarters and major equipment repair facility	Leased	11/30/2007
Calgary, Alberta	Regional office and major equipment repair facility—piling operations	Building Owned Land Leased	12/31/2010
Syncrude Mine Site South End	Regional office and major equipment repair facility—earth works and mining operations	Building Owned Land Provided	N/A
Fort McMurray, Alberta Syncrude Plant Site	Satellite office and minor repair facility—all operations	Building Owned Land Leased	11/30/2009
Fort McMurray, Alberta CNRL Plant Site	Site office and maintenance facility	Facility Owned Land Provided	N/A
Fort McMurray, Alberta Aurora Mine Site	Satellite office and equipment facility—all operations	Building Leased Land Provided	month-to-month
Fort McMurray, Alberta Albian Sands Mine Site	Satellite office and equipment facility—all operations	Building Leased Land Provided	month-to-month
New Westminster, British Columbia	Regional office and equipment repair facility piling operations	Building Owned Land Leased	3/31/2010
Fort Nelson, British Columbia	Satellite office—pipeline operations	Leased	7/10/2008
Regina, Saskachewan	Regional office and equipment repair facility—piling operations	Leased	3/14/2008
Martensville, Saskachewan	Regional office and equipment repair facility—piling operations	Leased	5/31/2012
Calgary, Alberta	Satellite office and shop for micropile division	Leased	month-to-month
Edmonton, Alberta	Satellite office and warehouse storage facility	Leased	3/31/2017
Edmonton, Alberta	Termporary satellite office	Leased	month-to-month

Our locations were chosen for their geographic proximity to our major customers. We believe our facilities are sufficient to meet our needs for the foreseeable future.

ITEM 4A: UNRESOLVED STAFF COMMENTS

None

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ITEM 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A. OPERATING RESULTS

Reorganization and Initial Public Offering (“IPO”)

On November 28, 2006, prior to the consummation of the IPO discussed below, NACG Holdings Inc. (“Holdings”) amalgamated with its wholly-owned subsidiaries, NACG Preferred Corp. and North American Energy Partners Inc. (“NAEPI”). The amalgamated entity continued under the name North American Energy Partners Inc. The voting common shares of the new entity, North American Energy Partners Inc., were the shares sold in the IPO.

On November 28, 2006, prior to the amalgamation, the following transactions took place:

• Holdings repurchased the Series A preferred shares issued by NAEPI for their redemption value of $1.0 million and terminated the advisory services agreement (the “Advisory Services Agreement”) with The Sterling Group, L.P., Genstar Capital, L.P., Perry Strategic Capital Inc., and SF Holding Corp. (collectively, the “Sponsors”), under which we had received ongoing consulting and advisory services with respect to the organization of the companies, employee benefit and compensation arrangements, and other matters. We paid the Sponsors a fee of $2.0 million to terminate the agreement, which was charged to income in 2007. Under the consulting and advisory services agreement, the Sponsors also received a fee of $0.9 million, equal to 0.5% of our aggregate gross proceeds from the IPO, which was included in share issue costs.

• The $35.0 million of Series A preferred shares issued by NACG Preferred Corp. were acquired by Holdings for a $27.0 million promissory note issued to the holders of such shares and the forfeiture of accrued dividends of $1.4 million.

• Each holder of the Series B preferred shares issued by NAEPI received 100 Holdings common shares for each Series B preferred share held.

On November 28, 2006 we completed our IPO in the United States and Canada of 8,750,000 voting common shares for $18.38 per share (U.S. $16.00 per share). On November 22, 2006 our common shares commenced trading on the New York Stock Exchange and on an “if, as and when issued” basis on the Toronto Stock Exchange. On November 28, 2006, our common shares became fully tradable on the Toronto Stock Exchange. Net proceeds from the IPO were $140.9 million (gross proceeds of $158.5 million, less underwriting discounts and costs and offering expenses of $17.6 million). In addition, on December 6, 2006, the underwriters exercised their option to purchase an additional 687,500 common shares from us. The net proceeds from the exercise of the underwriters’ option were $11.7 million (gross proceeds of $12.6 million, less underwriting fees of $0.9 million). Total net proceeds were $152.6 million (total gross proceeds of $171.1 million less total underwriting discounts and costs and offering expenses of $18.5 million).

We used the net proceeds from the IPO:

• to repurchase all of our outstanding 9% senior secured notes due 2010 for $74.7 million plus accrued interest of $3.0 million on November 28, 2006. The notes were repurchased at a premium of 109.26%, resulting in a loss on extinguishment of $6.3 million and the write-off of deferred financing fees of approximately $4.3 million and third-party transaction costs of $0.3 million. These items were charged to income in 2007;

• to repay the $27.0 million promissory note issued in respect of the repurchase of the NACG Preferred Corp. Series A preferred shares;

• to purchase certain leased equipment for $44.6 million;

• to pay the $2.0 million fee required to terminate the Advisory Services Agreement with the Sponsors; and

• $1.3 million for general corporate purposes.

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Following the offering and the above noted transactions the number of issued and outstanding common shares of the Company was 35,604,660.

The impact of the reorganization and IPO on income before income taxes and EBITDA (as defined below) for the year ended March 31, 2007 is as follows:

	Income before income taxes			EBITDA
	(in thousands)
Accretion of NAEPI Series A preferred shares	$	(625	)	$	(625	)
Termination of Advisory Services Agreement		(2,000	)		(2,000	)
Loss on retirement of 9% senior secured notes		(10,935	)		(6,338	)
Gain on repurchase NACG Preferred Corp. Series A preferred shares		9,400			9,400
	$	(4,160	)	$	437

Consolidated Financial Highlights

	Year Ended March 31,
	2007				2006					2005
	(in thousands)
Revenue	$	629,446			$	492,237				$	357,323
Gross profit		92,436	14.7	%		80,326		16.3	%		36,166		10.1	%
General & administrative costs		39,769	6.3	%		30,903		6.3	%		22,873		6.4	%
Operating income		51,126	8.1	%		49,426		10.0	%		9,431		2.6	%
Net income (loss)		21,079	3.3	%		(21,941	)	(4.3	%)		(42,323	)	(11.8	%)
Per unit/share information
Net Income (loss)—basic		0.87				(1.18	)				(2.28	)
Net income (loss)—diluted		0.83				(1.18	)				(2.28	)
EBITDA(1)		87,351	13.9	%		70,027		14.2	%		10,684		3.0	%
Consolidated EBITDA(1)		90,235	14.3	%		72,422		14.7	%		34,448		9.6	%

(1) EBITDA is calculated as net income (loss) before interest expense, income taxes, depreciation and amortization. Consolidated EBITDA is defined as EBITDA, excluding the effects of foreign exchange gain or loss, realized and unrealized gain or loss on derivative financial instruments, non-cash stock-based compensation expense, gain or loss on disposal of plant and equipment and certain other non cash items included in the calculation of net income (loss). We believe that EBITDA is a meaningful measure of the performance of our business because it excludes items, such as depreciation and amortization, interest and taxes, that are not directly related to the operating performance of our business. Management reviews EBITDA to determine whether capital assets are being allocated efficiently. In addition, our revolving credit facility requires us to maintain a minimum interest coverage ratio and a maximum senior leverage ratio, which are calculated using Consolidated EBITDA. Non-compliance with these financial covenants could result in our being required to immediately repay all amounts outstanding under our revolving credit facility. EBITDA and Consolidated EBITDA are not measures of performance under Canadian GAAP or U.S. GAAP and our computations of EBITDA and Consolidated EBITDA may vary from others in our industry. EBITDA and Consolidated EBITDA should not be considered as alternatives to operating income or net income as measures of operating performance or cash flows as measures of liquidity. EBITDA and Consolidated EBITDA have important limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of our results as reported under Canadian GAAP or US GAAP. A reconciliation of net income (loss) to EBITDA is as follows:

	Year ended March 31,
	2007			2006			2005
	(in thousands)
Net income (loss)	$	21,079		$	(21,941	)	$	(42,323	)
Adjustments:
Interest expense		37,249			68,776			31,141
Income taxes		(2,593	)		737			(2,264	)
Depreciation		31,034			21,725			20,762
Amortization of intangible assets		582			730			3,368
EBITDA	$	87,351		$	70,027		$	10,684

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A reconciliation of EBITDA to Consolidated EBITDA is as follows:

	Year ended March 31,
	2007			2006			2005
	(in thousands)
EBITDA	$	87,351		$	70,027		$	10,684
Adjustments:
Unrealized foreign exchange (gain) loss on senior notes		(5,017	)		(14,258	)		(20,340	)
Realized and unrealized loss on derivative financial instruments		(196	)		14,689			43,113
Loss (gain) on disposal of plant and equipment		959			(733	)		494
Stock-based compensation		2,101			923			497
Write-off of deferred financing costs		4,342			1,774			—
Write-down of other assets to replacement cost		695			—			—
Consolidated EBITDA	$	90,235		$	72,422		$	34,448

For Year Ended March 31, 2007 Compared to March 31, 2006

For the year ended March 31, 2007, our consolidated revenue increased to $629.4 million, from $492.2 million in 2006. While gains were achieved in all operating segments, the $137.2 million, or 27.9%, improvement was primarily due to increased project work in the Mining and Site Preparation segment, most notably at Albian’s Jackpine Mine.

Gross profit increased by 15.1% to $92.4 million in 2007, from $80.3 million in 2006 as a result of the increased revenue. As a percentage of revenue, gross profit declined to 14.7% in 2007, from 16.3% in 2006 resulting from losses on three pipeline projects. Gross profit was also reduced by a $3.6 million impairment charge recognized on a major piece of construction equipment and higher operating expenses. The increase in operating expenses reflects higher equipment, repair and maintenance, and shop overhead costs related to our fleet expansion, increased activity and escalating tire costs. Operating lease expense also increased in 2007 reflecting the addition of new leased equipment to support new projects, including the 10-year CNRL overburden removal project. The impact of higher operating costs and reduced Pipeline profitability was partially offset by improved project performance in the Mining & Site Preparation and Piling segments.

Operating income for 2007 increased to $51.1 million, from $49.4 million in 2006. This $1.7 million, or 3.4%, improvement was primarily due to the $12.1 million increase in gross profit discussed above, partially offset by a $8.9 million, or 28.7%, increase in general and administrative costs. The increase in general and administrative costs reflects increased employee costs related to our growing employee base, the payment of fees to the Sponsors for termination of the Advisory Services Agreement and higher professional fees for audit, legal and general consulting services. We recorded a loss of $1.0 million on the disposal of plant and equipment as a result of the sale and write down of certain heavy equipment, compared to a gain of $0.7 million in 2006.

For Year Ended March 31, 2006 Compared to March 31, 2005

Consolidated 2006 revenue increased to $492.2 million from $357.3 million in 2005. This $134.9 million, or 37.8%, improvement was due to increased project work in the Mining and Site Preparation segment, as well as growth in our Piling division.

Gross profit in 2006 increased to $80.3 million from $36.2 million in 2005, and as a percentage of revenue, gross profit increased to 16.3%, from 10.1% in 2005. The increase in gross profit reflects improved project performance in the Mining and Site Preparation and Piling segments and the recognition of $12.9 million of revenue from claims and unapproved change orders, in 2006 for which corresponding costs were recognized in 2005. These favorable impacts were partially offset by an increase in equipment costs, operating lease expense and depreciation. The increase in equipment costs and depreciation was primarily due to increased fleet size and activity levels, higher repair and maintenance costs caused by increased usage of larger equipment, increased

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cost of parts, primarily tires, and overhead and shop costs. The increase in operating lease expense for 2006 primarily relates to the addition of new leased equipment to support new projects, including the 10-year CNRL overburden removal project.

Operating income for 2006 increased to $49.4 million, from $9.4 million in 2005. This $40.0 million, or 424.1%, increase reflects the $44.1 million increase in gross profit discussed above, partially offset by higher general and administrative costs. General and administrative costs increased by $8.0 million, or 35.1%, as a result of increased professional fees relating to financing transactions in 2006, increased employee costs and higher bonuses. We also recorded a gain of $0.7 million on disposal of plant and equipment in 2006, compared to a loss of $0.5 million in 2005.

Segment Operations

Segment profit is determined based on internal performance measures used to assess the performance of each business in a given period. Segmented profit includes revenue earned from the performance of our projects, including amounts arising from change orders and claims, less all direct projects expenses, including direct labour, short-term equipment rentals, materials, payments to subcontractors, indirect job costs and internal charges for use of capital equipment.

	Year ended March 31,
	2007					2006				2005
	(in thousands)
Revenue by operating segment:
Mining and site preparation	$	473,179		75.2	%	$	366,721	74.5	%	$	264,835	74.1	%
Piling		109,266		17.3			91,434	18.6			61,006	17.1
Pipeline		47,001		7.5			34,082	6.9			31,482	8.8
Total	$	629,446		100.0	%	$	492,237	100.0	%	$	357,323	100.0	%
Segment profit:
Mining and site preparation	$	71,062		74.9	%	$	50,730	61.7	%	$	11,617	38.9	%
Piling		34,395		36.2			22,586	27.4			13,319	44.6
Pipeline		(10,539	)	(11.1	)		8,996	10.9			4,902	16.5
Total	$	94,918		100.0	%	$	82,312	100.0	%	$	29,838	100.0	%
Equipment hours by operating segment:
Mining and site preparation		909,361		91.6	%		811,891	93.0	%		673,613	88.2	%
Piling		47,965		4.8			37,300	4.3			56,460	7.4
Pipeline		35,588		3.6			24,197	2.8			33,847	4.4
Total		992,914		100.0	%		873,388	100.0	%		763,920	100.0	%

Mining and Site Preparation

For Year Ended March 31, 2007 Compared to March 31, 2006

Mining and Site Preparation revenue increased 29.0% to $473.2 million in 2007, from $366.7 million in 2006. The growth in revenue was primarily due to higher oil sands activity relating to large site preparation projects at Albian’s Jackpine Mine and Birch Mountain Resources, combined with the continued ramp up on the CNRL overburden removal project and the De Beers Victor Mine project in northern Ontario.

Segment profit from our Mining and Site Preparation activities increased 40.1%, to $71.1 million, from $50.7 million in 2006, reflecting increased revenues. Segment profit in 2007 also benefited from the

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recognition of $12.7 million in claims revenue related to two large site preparation project completed in 2006 and 2005. The corresponding costs of these projects were recognized in fiscal years 2006 and 2005.

For Year Ended March 31,2006 compared to March 31, 2005

Mining and Site Preparation revenue increased 38.5% to $366.7 million in 2006, from $264.8 million in 2005. This increase primarily reflects our involvement in large site preparation, underground utility installation and overburden removal at the CNRL oil sands project in Fort McMurray. We also provided significant mining services for Grande Cache Coal Corporation during the year. In addition, we recognized $12.9 million of revenue from claims and unapproved change orders for 2006 in which corresponding costs were recognized in previous years.

Mining and Site Preparation segment profit for 2006 increased 336.7% to $50.7 million, from $11.6 million in 2005, reflecting increased project activity, more efficient use of equipment and a loss incurred on a large steam-assisted gravity drainage site project in 2005. Our segment profit also benefited from claims revenue being recognized in 2006 for which corresponding costs were recognized in previous years.

Piling

For Year Ended March 31, 2007 Compared to March 31, 2006

Piling revenue increased 19.5% to $109.3 million, from $91.4 million in 2006. This increase was primarily due to strong economic conditions, which supported a higher volume of construction projects in the Fort McMurray and Calgary regions, and to a single large project in the Edmonton region.

Piling segment profit increased 52.3% to $34.4 million, from $22.6 million in 2006, resulting from increased volume and our execution of higher-margin projects.

For Year Ended March 31, 2006 Compared to March 31, 2005

Piling revenue increased 49.9% to $91.4 million, from $61.0 million in 2005. The increase was driven by a higher volume of projects in the Fort McMurray, Vancouver and Regina regions as a result of the strong economic environment and an increase in construction activities.

Piling segment profit increased 69.6% to $22.6 million, from $13.3 million in 2005, as a result of increased volumes and higher-margin work.

Pipeline

For Year Ended March 31, 2007 Compared to March 31, 2006

Pipeline revenue for 2007 increased 37.9% to $47.0 million, from $34.1 million in 2006, as a result of our involvement in three significant pipeline projects. The increase in 2007 revenue was partially offset by reduced work from Encana.

Our Pipeline segment recorded a loss of $10.5 million in 2007, compared to a profit of $9.0 million in 2006. The 2007 result relates primarily to losses on three large pipeline projects, which were caused primarily by increased scope and condition changes not recovered from our clients. We are currently working through several unapproved change orders and claims as a result of these losses.

For Year Ended March 31, 2006 Compared to March 31, 2005

Our Pipeline revenue increased 8.3% to $34.1 million, from $31.5 million in 2005, primarily as a result of increased work for EnCana and CNRL.

Pipeline profit increased 83.5% to $9.0 million, from $4.9 million in 2005, reflecting the combination of increased volume and higher-margin work during the 2006 period.

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Non-operating expenses (income)

	Year ended March 31,
	2007			2006			2005
	(in thousands)
Interest expense
Interest on long term debt	$	29,542		$	29,295		$	23,419
Accretion and change in redemption value of mandatorily redeemable preferred shares		3,114			34,722			—
Interest on senior secured credit facility		—			564			3,274
Amortization of deferred financing costs		3,436			3,338			2,554
Other interest		1,157			857			1,894
Total interest expense	$	37,249		$	68,776		$	31,141
Foreign exchange loss (gain)	$	(5,044	)	$	(13,953	)	$	(19,815	)
Realized and unrealized (gain) loss on derivative financial instruments		(196	)		14,689			43,113
Gain on repurchase of NACG Preferred Corp. Series A preferred shares		(9,400	)		—			—
Loss on extinguishment of debt		10,935			2,095			—
Other income		(904	)		(977	)		(421	)
Income tax (recovery) expense		(2,593	)		737			(2,264	)

Non-operating expenses (income): For Year Ended March 31, 2007 Compared to March 31, 2006

Total interest expense decreased by $31.5 million in 2007 compared to 2006, primarily due to the amendment to the terms of NAEPI’s mandatorily redeemable Series B preferred shares on March 30, 2006 (as described in note 17(a) to the 2007 annual consolidated financial statements). Changes in the redemption value of the Series B preferred shares were charged to interest expense prior to the amendment date. In 2007, the accretion of redeemable preferred shares amounted to $2.5 million of interest expense, compared to $34.7 million in 2006 which related to both accretion and change in redemption value of mandatory redeemable preferred shares. In addition, as a result of the repurchase of NAEPI’s Series A preferred shares, $0.6 million of additional interest expense was recognized for 2007, in order to accrete up to the full redemption value of $1.0 million for these preferred shares. On November 28, 2006, each Series B preferred share was exchanged for 100 common shares of Holdings. On exchange, the carrying amount of the preferred shares, $44.7 million, was reclassified to common stock.

Substantially all of the $5.0 million foreign exchange gain recognized in 2007 relates to the exchange difference between the Canadian and U.S. dollar on conversion of the US$60.5 million of 9% senior secured notes (subsequently retired on November 28, 2006) and the US$200.0 million of 8 ³/4% senior notes.

We recorded a $0.2 million realized and unrealized gain on derivative financial instruments in 2007, compared to a $14.7 million realized and unrealized loss in 2006. We employ derivative financial instruments to provide an economic hedge for our 8 ³/4% senior notes. The subsequent gain or loss reflects changes in the fair value of these derivatives. See “Liquidity and Capital Resources—Liquidity Requirements” for further information regarding these derivative financial instruments.

We recognized a 2007 gain of $9.4 million on the repurchase of $27.0 million of the $35.0 million of NACG Preferred Corp. Series A preferred shares and related forfeited dividends of $1.4 million. Upon retiring NAEPI’s 9% senior secured notes, we recorded a loss of $10.9 million, which includes a $6.3 million loss on extinguishment of the notes, a $4.3 million write-off of deferred financing fees and related transaction costs of $0.3 million.

We recorded an income tax recovery of $2.6 million in 2007, compared to an income tax expense of $0.7 million for 2006. The effective rate is significantly lower than the statutory tax rate primarily due to the impact of the enacted rate changes during the year, the reversal of the valuation allowance that existed at March 31, 2006 and the net impact of permanent differences relating to various income (charges) recognized for accounting

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purposes related to mandatorily redeemable shares and other financing transactions which were non-taxable. Income tax expense in the prior year primarily reflects the federal large corporation tax, which is a form of minimum tax, as a full valuation allowance was recorded against our net future tax asset given the uncertainty of recognizing the benefit of the net future tax asset at the end of 2006.

Non-operating expenses (income): For Year Ended March 31, 2006 Compared to March 31, 2005

Our total interest expense increased by $37.6 million in 2006 compared to 2005, primarily due to interest charges of $34.7 million resulting from the issuance in May 2005 of NAEPI’s mandatorily redeemable Series B preferred shares and a $5.9 million increase in interest on long-term debt resulting from the issuance in May 2005 of NAEPI’s 9% senior secured notes. These increases in interest expense were partially offset by decreased interest expense resulting from the full repayment in May 2005 of the borrowings under NAEPI’s senior secured credit facility.

Substantially all of the $14.0 million foreign exchange gain recognized in 2006 relates to the exchange difference between the Canadian and U.S. dollar on conversion of the US$60.5 million of 9% senior secured notes and the US$200.0 million of 8 ³/4% senior notes. By comparison, our 2005 foreign exchange gain related only to the US$200.0 million of 8 ³/4% senior notes.

In 2006, we recorded a $14.7 million realized and unrealized loss on derivative financial instruments relating to the change in the fair value of these derivatives. By comparison, we recorded a realized and unrealized loss of $43.1 million on our derivative financial instruments in 2005. See “Liquidity and Capital Resources—Liquidity requirements” for further information regarding the derivative financial instruments.

We recognized a loss on extinguishment of debt of $2.1 million in 2006 as a result of $0.3 million of issue costs related to NAEPI’s Series A preferred shares and the write off of deferred financing fees of $1.8 million resulting from the May 2005 repayment of NAEPI’s previous senior secured credit facility.

We recorded an income tax expense of $0.7 million in 2006, compared to a net income tax recovery of $2.3 million in 2005. Income tax expense primarily reflects only the federal large corporation tax, which was a form of minimum tax, as a full valuation allowance was recorded against our net future tax asset given the uncertainty of recognizing the benefit of the net future tax asset at the end of 2006.

Comparative Quarterly Results

A number of factors contribute to variations in our quarterly results between periods, including weather, customer capital spending on large oil sands and natural gas related projects, our ability to manage our project related business so as to avoid or minimize periods of relative inactivity and the strength of the western Canadian economy.

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We generally experience a decline in revenues during the first quarter of each fiscal year due to seasonality, as weather conditions make operating during this period difficult. The level of activity in the Mining and Site Preparation and Pipeline segments declines when frost leaves the ground and many secondary roads are temporarily rendered incapable of supporting the weight of heavy equipment. The duration of this period is referred to as “spring breakup” and it has a direct impact on our activity levels. Revenues during the fourth quarter of each fiscal year are typically highest as ground conditions are most favourable in our operating regions. As a result, full-year results are not likely to be a direct multiple of any particular quarter or combination of quarters.

	Fiscal Year 2007									Fiscal Year 2006
	Q4		Q3		Q2			Q1		Q4		Q3		Q2		Q1
	( dollars in millions, except per share amounts)
Revenue	$	205.3	$	155.9	$	130.1		$	138.1	$	142.3	$	121.5	$	124.0	$	104.4
Gross profit		13.6		26.0		20.2			32.6		31.7		13.8		21.9		12.9
Operating income		4.5		13.8		9.7			23.1		22.4		5.9		15.9		5.2
Net income(loss)		1.4		6.6		(4.8	)		17.9		13.7		2.1		11.5		(49.2	)
EPS—basic(1)		0.04		0.27		(0.26	)		0.96		0.73		0.11		0.62		(2.65	)
EPS—diluted(1)		0.04		0.26		(0.26	)		0.71		0.73		0.11		0.47		(2.65	)
Equipment hours		268,565		239,341		236,711			248,297		231,633		221,355		234,649		185,751

(1) Net income (loss) per share for each quarter has been computed based on the weighted average number of shares issued and outstanding during the respective quarter; therefore, quarterly amounts may not add to the annual total. Per share calculations are based on full dollar and share amounts.

Consolidated Fourth Quarter Results: For Three Months Ended March 31, 2007 Compared to March 31, 2006

For the fourth quarter ended March 31, 2007, our consolidated revenue increased to $205.3 million, from $142.3 million in 2006. This $63.0 million, or 44.3%, increase was primarily due to increased project work at Albian’s Jackpine Mine in the Mining and Site Preparation segment, as well as growth in our Pipeline division.

Gross profit decreased by 56.9% to $13.6 million in 2007, from $31.7 million in 2006, as a result of project losses in the Pipeline segment, a $3.6 million asset impairment charge and higher equipment operating expenses. Equipment costs were driven by higher activity levels, significant increases in tire costs and increased shop labour and overhead. Operating lease expense decreased in the fourth quarter of 2007 due to the buy out of numerous leases as part of the proceeds from the IPO. As a result of the pipeline losses, asset impairment charge and higher equipment operating costs, gross profit as a percentage of revenue, was 6.6% in 2007, compared to 22.3% in 2006.

Operating income for the fourth quarter ended March 31, 2007 decreased to $4.5 million, from $22.4 million in 2006. This $17.9 million, or 79.9%, decrease was due to the reduction in gross profit discussed above. General and administrative costs remained largely unchanged in the fourth quarter ended March 31, 2007 as increased stock compensation expense was offset by decreased employee costs.

Segmented Fourth Quarter Results: For Three Months Ended March 31, 2007 Compared to March 31, 2006

Mining and Site Preparation revenue for the fourth quarter ended March 31, 2007 increased 48.9% to $150.1 million in 2007, from $100.9 million in 2006. The growth in revenue was primarily due to higher oil sands and mining activity relating to large site preparation projects at Albian, continued ramp up on the CNRL overburden removal project and increased project work at the De Beers Canada Victor Diamond Mine in northern Ontario. Piling revenue for the fourth quarter ended March 31, 2007 increased 6.2% to $29.9 million, from $28.1 million in 2006. This increase was primarily due to higher volume of construction projects in the Fort McMurray region and a large project in the Edmonton region. Pipeline revenue increased 91.0% to $25.4 million, from $13.3 million in 2006, as a result of a large pipeline project for Suncor.

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Segment profit from our Mining and Site Preparation activities decreased 0.6%, to $23.5 million, from $23.6 million in 2006. Increased revenues and a claim settlement related to a large site preparation project completed in fiscal 2006, was entirely offset by margin reductions on a large site preparation project in the fourth quarter of 2007. Challenging soil and water conditions on this project resulted in the recognition of $4.7 million in additional costs, with no associated revenue. We are actively negotiating change orders with the client relating to these changed conditions. Fourth quarter Piling segment profit increased 6.1% to $8.8 million in 2007, from $8.3 million in 2006, reflecting the impact of increased volume. Our Pipeline segment recorded a loss of $9.8 million for the fourth quarter ended March 31, 2007, compared to a profit of $3.9 million in 2006. This change in profitability reflects the negative impact of increased scope, condition changes and difficult weather conditions on a large pipeline project that resulted in $8.0 million of additional costs being recognized during the quarter without any associated revenue. We are in the process of requesting change orders from our customers to recover all or a portion of these additional costs, but did not meet the criteria to recognize this revenue for the fourth quarter ended March 31, 2007.

Consolidated Financial Position

	March 31, 2007			March 31, 2006			% Change
	(in thousands)
Current assets	$	229,061		$	161,628		41.7	%
Current liabilities		(148,789	)		(92,096	)	61.6	%
Working capital		80,272			69,532		15.4	%
Plant and equipment		255,963			184,562		38.7	%
Total assets		710,736			568,682		25.0	%
Capital Lease obligations (including current portion)		(9,709	)		(10,952	)	(11.3	%)
Total long-term financial liabilities		(297,957	)		(453,092	)	(34.2	%)

At March 31, 2007, we had net working capital (current assets less current liabilities) of $80.3 million, compared to $69.5 million at March 31, 2006. The increase in working capital resulted from an increase in accounts receivable and unbilled revenue as a result of increased projects in process, partially offset by a reduction of cash due to capital equipment purchases and an increase in borrowings from our secured credit facility.

Plant and equipment, net of depreciation, increased by $71.4 million from March 31, 2006 to March 31, 2007 primarily as a result of the acquisition of several large mining trucks and the buy-out of certain leased equipment using the proceeds of the IPO.

Capital lease obligations, including the current portion, decreased by $1.2 million from March 31, 2006 to March 31, 2007 due to required repayments, the sale of a drill rig and repayment of the associated obligations, partially offset by the addition of new vehicles acquired by means of capital lease.

Total long-term financial liabilities are determined as non-current liabilities, excluding current portion of capital lease obligations and future income taxes. The decrease in 2007 is primarily as a result of the amalgamation and the IPO, as described in “Reorganization and Initial Public Offering”.

Backlog

Backlog is a measure of the amount of secured work we have outstanding and as such is an indicator of future revenue potential. Backlog is not a GAAP measure and as a result, the definition and determination will vary among different organizations ascribing a value to backlog. Although backlog reflects business that we consider to be firm, cancellations or reductions may occur and may reduce backlog and future income. We did not measure this amount in the prior year.

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We define backlog as that work that has a high certainty of being performed as evidenced by the existence of a signed contract or work order specifying job scope, value and timing. We have also set a policy that our definition of backlog will be limited to contracts or work orders with values exceeding $500,000 and work that will be performed in the next five years, even if the related contracts extend beyond five years.

We work with our customers using cost-plus, time-and-materials, unit-price and lump-sum contracts, and the mix of contract types varies year-by-year. For 2007, our contract revenue consisted of 6% cost-plus, 28% time-and-materials, 53% unit-price and 13% lump-sum. Our definition of backlog results in the exclusion of cost-plus and time-and-material contracts performed under master service agreements. While contracts exist for a range of services to be provided, the work scope and value are not clearly defined under those contracts. For 2007, the total amount of all cost-plus and time-and-material based revenue was $220.9 million (34% of total revenues).

Our estimated backlog as at March 31, 2007 was (in millions):

By Segment			By Contract Type
Mining & Site Preparation	$	732.0	Unit-Price	$	778.0
Piling		40.0	Lump-Sum		10.0
Pipeline		16.0	Time & Material, Cost-Plus		—
Total	$	788.0	Total	$	788.0

A contract with a single customer represented approximately $680 million of the March 31, 2007 backlog. It is expected that approximately $255 million of the backlog will be performed and realized in 2008.

Claims and Unapproved Change Orders

Due to the complexity of the projects we undertake, changes often occur after work has commenced. These changes include, but are not limited to:

• Client requirements, specifications and design

• Materials and work schedules

• Changes in anticipated ground and weather conditions

Contract change management processes require that we prepare and submit change orders to the client requesting approval of scope and/or price adjustments to the contract. Accounting guidelines require that management consider changes in cost estimates that have occurred up to the release of the financial statements and reflect the impact of these changes in the financial statements. Conversely, potential revenue associated with increases in cost estimates is not included in financial statements until an agreement is reached with the client or specific criteria for the recognition of revenue from unapproved change orders and claims are met. This can, and often does, lead to costs being recognized in one period and revenue being recognized in subsequent periods.

Occasionally, disagreements arise regarding changes, their nature, measurement, timing, and other characteristics that impact costs and revenue under the contract. If a change becomes a point of dispute between our customer and us, we then consider it as a claim. Historical claim recoveries should not be considered indicative of future claim recoveries.

As a result of changed conditions discussed above, we have recognized $18 million in additional contract costs from a number of contracts for the year ended March 31, 2007, with no associated increase in contract value. We are working with our customers to come to resolution on the amounts, if any, to be paid to us in respect to these additional costs.

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Outstanding Share Data

We are authorized to issue an unlimited number of common voting shares and an unlimited number of common non-voting shares. As at June 8, 2007, 35,292,260 common voting shares were outstanding and 412,400 common non-voting common shares were outstanding compared to 18,207,600 and 412,400, respectively, as at March 31, 2006. We had no outstanding preferred shares at March 31, 2007.

Stock-Based Compensation

Some of our directors, officers, employees and service providers have been granted options to purchase common shares under the Amended and Restated 2004 Share Option Plan. In June and September 2006 we granted 127,760 and 187,760 options, respectively, with an exercise price of $5.00 and $16.75 per share, respectively. In September 2006, we had a valuation performed by an unrelated valuation specialist, which valued our common shares at $16.10 per share. The plan and outstanding balances are disclosed in note 25 to our consolidated financial statements for 2007.

Impairment of Goodwill

In accordance with Canadian Institute of Chartered Accountants’ Handbook Section 3062, “Goodwill and Other Intangible Assets”, we review our goodwill for impairment annually or whenever events or changes in circumstances suggest that the carrying amount may not be recoverable. We are required to test our goodwill for impairment at the reporting unit level and we have determined that we have three reporting units. The test for goodwill impairment is a two-step process:

• Step 1—We compare the carrying amount of each reporting unit to its fair value. If the carrying amount of a reporting unit exceeds its fair value, we have to perform the second step of the process. If not, no further work is required.

• Step 2—We compare the implied fair value of each reporting unit’s goodwill to its carrying amount. If the carrying amount of a reporting unit’s goodwill exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess.

We completed Step 1 of this test during the quarter ended December 31, 2006 and were not required to record an impairment loss on goodwill. We conduct our annual assessment of goodwill in December of each year.

Accounting Policies

Critical Accounting Estimates

Certain accounting policies require management to make significant estimates and assumptions about future events that affect the amounts reported in our financial statements and the accompanying notes. Therefore, the determination of estimates requires the exercise of management’s judgment. Actual results could differ from those estimates, and any differences may be material to our financial statements.

Revenue recognition

Our contracts with customers fall under the following contract types: cost-plus, time-and-materials, unit-price and lump-sum. While contracts are generally less than one year in duration, we do have several long-term contracts. The mix of contract types varies year-by-year. For the year ended March 31, 2007, our contracts consisted of 6% cost-plus, 28% time-and-materials, 53% unit-price and 13% lump-sum.

Profit for each type of contract is included in revenue when its realization is reasonably assured. Estimated contract losses are recognized in full when determined. Claims and unapproved change orders are included in

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total estimated contract revenue, only to the extent that contract costs related to the claim or unapproved change order have been incurred, when it is probable that the claim or unapproved change order will result in a bona fide addition to contract value and the amount of revenue can be reliably estimated.

The accuracy of our revenue and profit recognition in a given period is dependent, in part, on the accuracy of our estimates of the cost to complete each unit-price and lump-sum project. Our cost estimates use a detailed “bottom up” approach. We believe our experience allows us to produce materially reliable estimates. However, our projects can be highly complex, and in almost every case, the profit margin estimates for a project will either increase or decrease to some extent from the amount that was originally estimated at the time of the related bid. Because we have many projects of varying levels of complexity and size in process at any given time, these changes in estimates can offset each other without materially impacting our profitability. However, sizable changes in cost estimates, particularly in larger, more complex projects, can have a significant effect on profitability.

Factors that can contribute to changes in estimates of contract cost and profitability include, without limitation:

• site conditions that differ from those assumed in the original bid, to the extent that contract remedies are unavailable;

• identification and evaluation of scope modifications during the execution of the project;

• the availability and cost of skilled workers in the geographic location of the project;

• the availability and proximity of materials;

• unfavorable weather conditions hindering productivity;

• equipment productivity and timing differences resulting from project construction not starting on time; and

• general coordination of work inherent in all large projects we undertake.

The foregoing factors, as well as the stage of completion of contracts in process and the mix of contracts at different margins, may cause fluctuations in gross profit between periods, and these fluctuations may be significant.

Plant and equipment

The most significant estimate in accounting for plant and equipment is the expected useful life of the asset and the expected residual value. Most of our property, plant and equipment have long lives which can exceed 20 years with proper repair work and preventative maintenance. Useful life is measured in operated hours, excluding idle hours, and a depreciation rate is calculated for each type of unit. Depreciation expense is determined monthly based on daily actual operating hours.

Another key estimate is the expected cash flows from the use of an asset and the expected disposal proceeds in applying Canadian Institute of Chartered Accountants Handbook Section 3063 “Impairment of Long-Lived Assets” and Section 3475 “Disposal of Long-Lived Assets and Discontinued Operations.” These standards require the recognition of an impairment loss for a long-lived asset when changes in circumstances cause its carrying value to exceed the total undiscounted cash flows expected from its use. An impairment loss, if any, is determined as the excess of the carrying value of the asset over its fair value.

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Goodwill

Impairment is tested at the reporting unit level by comparing the reporting unit’s carrying amount to its fair value. The process of determining fair values is subjective and requires us to exercise judgment in making assumptions about future results, including revenue and cash flow projections at the reporting unit level, and discount rates.

Derivative financial instruments

Our derivative financial instruments are not designated as hedges for accounting purposes and are recorded on the balance sheet at fair value, which is determined based on values quoted by the counterparties to the agreements. The primary factors affecting fair value are the changes in the interest rate term structures in the US and Canada, the life of the swap and the CAD/USD foreign exchange spot rate.

Recently Adopted Canadian Accounting Pronouncements

Conditional asset retirement obligations

In November 2005, the CICA issued Emerging Issues Committee Abstract No. 159, “Conditional Asset Retirement Obligations” (“EIC-159”) to clarify the accounting treatment for a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. Under EIC-159, an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the obligation can be reasonably estimated. The guidance is effective April 1, 2006, although early adoption is permitted and is to be applied retroactively, with restatement of prior periods. The Company adopted this standard in fiscal 2006 and the adoption did not have a material impact on the Company’s consolidated financial statements.

Stock-based compensation for employees eligible to retire before the vesting date

In July 2006, the CICA Emerging Issues Committee issued Abstract No. 162, ‘‘Stock-Based Compensation for Employees Eligible to Retire Before the Vesting Date’’ (‘‘EIC-162’’). EIC-162 requires that the compensation cost attributable to awards granted to employees eligible to retire at the grant date should be recognized on the grant date if the award’s exercisability does not depend on continued service. Additionally, awards granted to employees who will become eligible to retire during the vesting period should be recognized over the period from the grant date to the date the employee becomes eligible to retire. The Company adopted this standard for the interim period ended December 31, 2006 retroactively, with restatement of prior periods for all stock-based compensation awards. The adoption of this standard had no impact on the Company’s consolidated financial statements.

Determining the variability to be considered in applying the VIE standards

In September 2006, the CICA issued Emerging Issues Committee Abstract No. 163, “Determining the Variability to be Considered in Applying AcG-15” (“EIC-163”). This guidance provides additional clarification on how to analyze and consolidate a VIE. EIC-163 concludes that the “by-design” approach should be the method used to assess variability (that is created by risks the entity is designed to create and pass along to its interest holders) when applying the VIE standards. The “by-design” approach focuses on the substance of the risks created over the form of the relationship. The guidance may be applied to all entities (including newly created entities) with which an enterprise first becomes involved and to all entities previously required to be analyzed under the VIE standards when a reconsideration event has occurred and is effective for interim and annual periods beginning on or after January 1, 2007. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

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Recent Canadian accounting pronouncements not yet adopted

Financial instruments

In January 2005, the CICA issued Handbook Section 3855, “Financial Instruments—Recognition and Measurement”, Handbook Section 1530, “Comprehensive Income”, and Handbook Section 3865, “Hedges”. The new standards are effective for interim and annual financial statements for fiscal years beginning on or after October 1, 2006, specifically April 1, 2007 for the Company. The new standards will require presentation of a separate statement of comprehensive income under specific circumstances. Foreign exchange gains and losses on the translation of the financial statements of self-sustaining subsidiaries previously recorded in a separate section of shareholder’s equity will be presented in comprehensive income. Derivative financial instruments will be recorded in the balance sheet at fair value and the changes in fair value of derivatives designated as cash flow hedges will be reported in comprehensive income. The Company is currently assessing the impact of the new standards.

Effective April 1, 2007, the Company will also be required to adopt CICA Handbook Section 3861, “Financial Instruments—Disclosure and Presentation” (“CICA 3861”), which requires entities to provide disclosures in their financial statements that enable users to evaluate: (1) the significance of financial instruments on the entity’s financial performance; and (2) the nature and extent of risks arising from the use of financial instruments by the entity during the period and at the balance sheet date, and how the entity manages those risks. The Company is currently assessing the impact of this standard.

In March 2007, the CICA issued Handbook Section 3862, “Financial Instruments—Disclosures”, which replaces CICA 3861 and provides expanded disclosure requirements that provide additional detail by financial assets and liability categories. This standard harmonizes disclosures with International Financial Reporting Standards. The standard applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2007, specifically April 1, 2008 for the Company. The Company is currently evaluating the impact of this standard.

In March 2007, the CICA issued Handbook Section 3863, “Financial Instruments—Presentation” to enhance financial statement users’ understanding of the significance of financial instruments to an entity’s financial position, performance and cash flows. This Section establishes standards for presentation of financial instruments and non-financial derivatives. It deals with the classification of financial instruments, from the perspective of the issuer, between liabilities and equity, the classification of related interest, dividends, gains and losses, and the circumstances in which financial assets and financial liabilities are offset. This standard harmonizes disclosures with International Financial Reporting Standards and applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2007, specifically April 1, 2008 for the Company. The Company is currently evaluating the impact of this standard.

Equity

On April 1, 2007, the Company will adopt CICA Handbook Section 3251, “Equity”, which establishes standards for the presentation of equity and changes in equity during the reporting period. The requirements in this section are in addition to those of CICA Handbook Section 1530 and recommend that an enterprise should present separately the following components of equity: retained earnings, accumulated other comprehensive income, and the total for retained earnings and accumulated other comprehensive income, contributed surplus, share capital and reserves. The Company is currently evaluating the impact of this standard.

Accounting changes

In July 2006, the CICA revised Handbook Section 1506, “Accounting Changes”, which requires that: (1) voluntary changes in accounting policy are made only if they result in the financial statements providing reliable and more relevant information; (2) changes in accounting policy are generally applied retrospectively;

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and (3) prior period errors are corrected retrospectively. This revised standard is effective for fiscal years beginning on or after January 1, 2007, specifically April 1, 2007 for the Company, and is not expected to have a material impact on the Company’s consolidated financial statements.

Capital disclosures

In December 2006, the CICA issued Handbook Section 1535, “Capital Disclosures”. This standard requires that an entity disclose information that enables users of its financial statements to evaluate an entity’s objectives, policies and processes for managing capital, including disclosures of any externally imposed capital requirements and the consequences of non-compliance. The new standard applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2007, specifically April 1, 2008 for the Company. The Company is currently evaluating the impact of this standard.

Inventories

In June 2007, the CICA issued Handbook Section 3031, “Inventories” to harmonize accounting for inventories under Canadian GAAP with International Financial Reporting Standards. This standard requires the measurement of inventories at the lower of cost and net realizable value and includes guidance on the determination of cost, including allocation of overheads and other costs to inventory. The standard also requires the consistent use of either first-in, first out (FIFO) or weighted average cost formula to measure the cost of other inventories and requires the reversal of previous write-downs to net realizable value when there is a subsequent increase in the value of inventories. The new standard applies to interim and annual financial statements relating to fiscal years beginning on or after January 1, 2008, specifically April 1, 2008 for the Company. The Company is currently evaluating the impact of this standard.

U.S. Generally Accepted Accounting Principles

Our consolidated financial statements have been prepared in accordance with Canadian GAAP, which differs in certain material respects from U.S. GAAP. The nature and effect of these differences are set out in note 27 to our consolidated financial statements.

United States accounting pronouncements recently adopted

Statement of Financial Accounting Standards No. 123R, “Share-Based Payment” (“SFAS 123R”) requires companies to recognize in the income statement, the grant-date fair value of stock options and other equity-based compensation issued to employees. The fair value of liability-classified awards is remeasured subsequently at each reporting date through the settlement date, while the fair value of equity-classified awards is not subsequently remeasured. The revised standard is effective for non-public companies beginning with the first annual reporting period that begins after December 15, 2005, which in our case is the period beginning April 1, 2006. We have used the fair value method under Statement 123 since its inception. We adopted SFAS 123R prospectively since we use the minimum value method for purposes of complying with Statement 123. The adoption of this standard did not have a material impact on our consolidated financial statements.

In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections” (“SFAS 154”) which replaces Accounting Principles Board Opinion No. 20 “Accounting Changes” and Statement of Financial Accounting Standards No. 3, “Reporting Accounting Changes in Interim Financial Statements—An Amendment of APB Opinion No. 28.” SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application, or the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS 154 was effective for the Company for accounting changes and corrections of errors made by the Company in its fiscal year beginning on April 1, 2006. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

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In September 2006, the U.S. Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. It establishes an approach that requires quantification of financial statements misstatements based on the effects of the misstatements on each of the Company’s financial statements and the related financial statement disclosures. SAB 108 was effective for the Company’s annual financial statements for the fiscal year ending March 31, 2007. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

Recent United States accounting pronouncements not yet adopted

Statement of Financial Accounting Standards No. 155, “Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 and 140” (“SFAS 155”) was issued February 2006. This Statement is effective for all financial instruments acquired, issued, or subject to a remeasurement (new basis) event occurring after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The fair value election provided for in paragraph 4(c) of this Statement may also be applied upon adoption of this Statement for hybrid financial instruments that had been bifurcated under paragraph 12 of Statement 133 prior to the adoption of this Statement. This states that an entity that initially recognizes a host contract and a derivative instrument may irrevocably elect to initially and subsequently measure that hybrid financial instrument, in its entirety, at fair value with changes in fair value recognized in earnings. SFAS 155 is applicable for all financial instruments acquired or issued in the Company’s 2008 fiscal year although early adoption is permitted. The Company is currently reviewing the impact of this statement.

In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—An Interpretation of FASB Statement No. 109” (“FIN 48”) which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes”. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition requirements. FIN 48 is effective for the Company’s 2008 fiscal year. The Company is currently reviewing the impact of this Interpretation.

In May 2007, the FASB issued FASB Staff Position No. FIN 48-1, “Definition of Settlement in FASB Interpretation No. 48”, which provides guidance on how an enterprise should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. This FASB Staff Position is effective upon the initial adoption of FIN 48 and the Company is currently assessing the impact of this guidance.

Statement of Financial Accounting Standards No. 157, “Fair Value Measurement” (“SFAS 157”) was issued September 2006. The Statement provides guidance for using fair value to measure assets and liabilities. The Statement also expands disclosures about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurement on earnings. This Statement applies under other accounting pronouncements that require or permit fair value measurements. This Statement does not expand the use of fair value measurements in any new circumstances. Under this Statement, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the entity transacts. SFAS 157 is effective for the Company for fair value measurements and disclosures made by the Company in its fiscal year beginning on April 1, 2008. The Company is currently reviewing the impact of this statement.

Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”) was issued in February 2007. The statement permits entities to choose to measure many financial instruments and certain other items at fair value, providing the opportunity to mitigate

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volatility in reported earnings caused by measuring related assets and liabilities differently without the need to apply hedge accounting provisions. SFAS 159 is effective for fiscal years beginning after November 15, 2007, specifically April 1, 2008 for the Company, with earlier adoption permitted. The Company is currently reviewing the impact of this pronouncement.

B. LIQUIDITY AND CAPITAL RESOURCES

	Year Ended March 31,
	2007			2006			2005
	(in thousands)
Cash provided by (used in) operating activities	$	10,052		$	35,092		$	(5,673	)
Cash used in investing activities		(107,972	)		(23,396	)		(24,215	)
Cash provided by financing activities		63,011			13,184			11,217
Net increase (decrease) in cash and cash equivalents	$	(34,909	)	$	24,880		$	(18,671	)

Operating activities

Operating activities in 2007 resulted in a net increase in cash of $10.1 million, compared to an increase of $35.1 million in 2006 and a decrease of $5.7 million in 2005. The lower cash generated in 2007 compared to 2006 is the result of movements in net non-cash working capital from increased accounts receivable balances and tire purchases including deposits on tire purchases. The higher cash generated in 2006 compared to 2005 reflects improved earnings performance and the increased add back of non-cash items related to unrealized gains or losses on financial instruments and movements in future income taxes.

Investing activities

Sustaining capital expenditures are those that are required to keep our existing fleet of equipment at its optimal useful life through capital maintenance or replacement. Growth capital expenditures relate to equipment additions required to perform larger or a greater number of projects.

During 2007, we invested $7.6 million in sustaining capital expenditures (2006 – $7.4 million; 2005 – $7.5 million) and invested $102.4 million in growth capital expenditures (2006 – $21.5 million; 2005 – $17.3 million), for total capital expenditures of $110.0 million (2006 – $28.9 million; 2005 – $24.8 million). The significant increase in 2007 growth capital expenditures compared to the previous two years reflects the purchase of certain leased equipment for $44.6 million using a portion of the net IPO proceeds and the purchase of several large trucks to accommodate the increasing volume of available work.

Financing activities

Financing activities in 2007 resulted in a cash inflow of $63.0 million primarily provided by the net proceeds of our IPO as described in the following paragraph, partially offset by the repayment of our 9% senior secured notes. Financing activities during 2006 resulted in net cash inflow of $13.2 million. This inflow reflects proceeds received from our May 19, 2005 issuance of the US$60.5 million of 9% senior secured notes and $7.5 million of Series B preferred shares of NAEPI. A portion of the proceeds from these issues was used to repay the amount outstanding under our senior secured credit facility at the time. Financing activities during 2005 resulted in a net cash inflow of $11.2 million, which related primarily to net borrowings under our revolving credit facility and repayment of capital lease obligations.

In connection with our IPO on November 28, 2006, which was completed after the transactions and amalgamation described above under the heading “Initial Public Offering and Reorganization,” we received net proceeds of $152.6 million (gross proceeds of $171.2 million, less underwriting discounts and commissions and

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offering expenses of $18.5 million). We used net proceeds from the offering to purchase certain equipment under operating leases for $44.6 million, to repurchase all of our outstanding 9% senior secured notes due in 2010 for $74.7 million plus accrued interest of $3.0 million, to repay the $27.0 million promissory note issued in respect of the repurchase of the NACG Preferred Corp. Series A preferred shares and to pay the $2.0 million fee to terminate the Advisory Services Agreement with the Sponsors.

Liquidity Requirements

Our primary uses of cash are for plant and equipment purchases, to fulfill debt repayment and interest payment obligations and to finance working capital requirements.

Our long-term debt includes US$200 million of 8 ³/4% senior notes due in 2011. The foreign currency risk relating to both the principal and interest payments on these senior notes has been managed with a cross-currency swap and interest rate swaps, which went into effect concurrent with the issuance of the notes on November 26, 2003. Interest totaling $13.0 million on the 8 ³/4% senior notes and the swap is payable semi-annually in June and December of each year until the notes mature on December 1, 2011. The swap agreements are an economic hedge, but has not been designated as a hedge for accounting purposes. There are no principal repayments required on the 8 ³/4% senior notes until maturity.

On November 28, 2006, we repurchased all of the outstanding 9% senior secured notes due in 2010 with a portion of the net proceeds from our IPO as described above.

One of our major customer contracts allows the customer to require that we provide up to $50 million in letters of credit. As at March 31, 2007, we had provided $25.0 million in letters of credit in connection with this contract. Any increase in the value of the letters of credit required by this customer must be requested by November 1, 2007 for an issue date of January 1, 2008.

We maintain a significant equipment and vehicle fleet comprised of units with various remaining useful lives. Once units reach the end of their useful lives, they are replaced as it becomes cost prohibitive to continue to maintain them. As a result, we are continually acquiring new equipment to replace retired units and to support growth as new projects are awarded to us. It is important to adequately maintain a large revenue-producing fleet in order to avoid equipment downtime which can impact our revenue stream and inhibit our ability to satisfactorily perform on our projects. In order to maintain a balance of owned and leased equipment, we have financed a portion of our large pieces of heavy construction equipment through operating leases. In addition, we continue to lease our motor vehicle fleet.

Our cash requirements during 2007 increased due to continued growth and additional operating and capital expenditures associated with new projects. Our cash requirements for 2008 include funding operating lease obligations, debt and interest repayment obligations and working capital.

We expect our sustaining capital expenditures to range from $35.0 million to $45.0 million per year over the next two years. We expect our total capital expenditures in 2008 to range from $75.0 million to $85.0 million. It is our belief that working capital will be sufficient to meet these requirements.

Sources of Liquidity

Our principal sources of cash are funds from operations and borrowings under our revolving credit facility. On June 7, 2007, our amended and restated revolving credit facility was modified to provide for borrowings of up to $125.0 million under which revolving loans and letters of credit may be issued. Our previous revolving credit facility was subject to borrowing base limitations, under which revolving loans and letters of credit up to a limit of $55.0 million may have been issued. As of March 31, 2007, we had approximately $9.5 million of available borrowings under the revolving credit facility after taking into account $20.5 million of borrowings and

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$25.0 million of outstanding and undrawn letters of credit to support performance guarantees associated with customer contracts. The indebtedness under the revolving credit facility is secured by a first priority lien on substantially all of our existing and after-acquired property.

Our revolving credit facility contains covenants that restrict our activities, including, but not limited to, incurring additional debt, transferring or selling assets, making investments including acquisitions. Under the revolving credit facility, Consolidated Capital Expenditures during any applicable period cannot exceed 120% of the amount in the capital expenditure plan. In addition, we are also required to satisfy certain financial covenants, including a minimum interest coverage ratio and a maximum senior leverage ratio, both of which are calculated using Consolidated EBITDA, as well as a minimum current ratio.

Consolidated EBITDA is defined in the credit facility as the sum, without duplication, of (1) consolidated net income, (2) consolidated interest expense, (3) provisions for taxes based on income, (4) total depreciation expense, (5) total amortization expense, (6) costs and expenses incurred by us in entering into the credit facility, (7) accrual of stock-based compensation expense to the extent not paid in cash or if satisfied by the issue of new equity, and (8) other non-cash items (other than any such non-cash item to the extent it represents an accrual of or reserve for cash expenditures in any future period), but only, in the case of clauses (2)-(8), to the extent deducted in the calculation of consolidated net income, less other non-cash items added in the calculation of consolidated net income (other than any such non-cash item to the extent it will result in the receipt of cash payments in any future period), all of the foregoing as determined on a consolidated basis for us in conformity with Canadian GAAP.

Interest coverage is determined based on a ratio of Consolidated EBITDA to consolidated cash interest expense, and the senior leverage is determined as a ratio of senior debt to Consolidated EBITDA. Measured as of the last day of each fiscal quarter on a trailing four-quarter basis, Consolidated EBITDA shall not be less than 2.5 times consolidated cash interest expense (2.35 times at June 30, 2007). Also, measured as of the last day of each fiscal quarter on a trailing four-quarter basis, senior leverage shall not exceed 2 times Consolidated EBITDA. We believe Consolidated EBITDA as defined in the credit facility is an important measure of our liquidity.

C. RESEARCH AND DEVELOPMENT

Not applicable.

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D. TREND INFORMATION

The following charts show our Revenue, Growth in Segment Revenue, Gross Profit, Net Income and Consolidated EBITDA for the three fiscal years 2007, 2006 and 2005.

(1) The compound annual growth rate (“CAGR”)

(2) Refer to “Consolidated Financial Highlights” for a reconciliation of Net income (loss) to Consolidated EBITDA

Our consolidated financial results over the last three years reflect the positive impact of rising natural resource commodity prices on the western Canadian natural resource sector. In particular, our business has benefited from increased oil sands development in Northern Alberta.

According to the Alberta Energy and Utilities Board (“EUB”), Canadian oil sands are estimated to contain nearly 315 billion barrels of oil with established reserves of almost 174 billion barrels as of the end of 2004, however the extraction of oil from bitumen is significantly more complex and costly than in conventional oil operations. In recent years, higher oil prices have made oil sands production economically viable, and a diverse range of oil companies and consortiums are moving swiftly to develop this resource. Interest in the oil sands has been further bolstered by political unrest in the Middle East and the subsequent desire of Western economies to seek oil supplies from more stable regions.

As a leading supplier of construction and mining services to oil sands operators, our business has benefited from these developments. We have significantly grown our equipment fleet and employee base over the past three years to serve the needs of existing oil sands producers like Syncrude Canada Ltd. (“Syncrude”), Suncor

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Energy Inc. (“Suncor”) and Albian Sands Energy Inc. (“Albian”) (a joint venture of Shell Canada Limited, Chevron Canada Limited and Western Oil Sands Inc.). We have also been expanding our relationships with newer operators including Canadian Natural Resources Ltd. (“CNRL”), which is currently developing a bitumen-mining project in the Fort McMurray region of the oil sands.

In 2007, we recorded record revenue of $629.4 million, up from $492.2 million in 2006 and $357.3 million in 2005. This represents a compound annual growth rate of 32.7%. The higher revenues, together with a focus on higher-margin projects led to an even more significant improvement in profitability. Gross profit from our consolidated operations increased to $92.4 million in 2007, from $80.3 million in 2006 and $36.2 million in 2005, representing a compound annual growth rate of 59.8%.

Of our three operating segments, Mining and Site Preparation (74.7% and 64.4% of total three-year consolidated revenues and total three-year segment profits, respectively) has benefited most from oil sands development. This segment has enjoyed significant growth in revenue and gross profit since 2005 as a result of our expanding relationships with oil sands customers, as well as the positive impact of our contract with De Beers Canada at their Victor Diamond Mine in northern Ontario, where we are providing winter road construction and maintenance and overburden removal services. All of the growth in this segment has been achieved organically. Segment profit has increased from $11.6 million in 2005 to $71.1 million in 2007, representing a compound annual growth rate of 147.3%.

Growth in our Piling business (17.7% and 34.0% of total three-year consolidated revenues and total three-year segment profits, respectively) has been driven both by oil sands development and by western Canada’s strong economy, which has supported a high level of commercial and industrial construction activity. In addition, the Piling segment has realized benefits from the acquisition of Midwest Foundation Technologies Inc. (“Midwest Micropile”) in 2007, which has helped us expand into niche, higher-margin segments of the piling industry. Segment profit has increased from $13.3 million in 2005 to $34.4 million in 2007, representing a compound annual growth rate of 60.8%.

Our Pipeline business (7.6% and 1.6% of total three-year consolidated revenues and total three-year segment profits, respectively) has also achieved revenue growth in the past three years. Revenues increased to $47.0 million in 2007, from $34.1 million in 2006 and $31.5 million in 2005 as a result of large contracts with CNRL, Husky Energy Inc. and Suncor. However, profitability in this segment has been negatively affected by cost overruns related to poor weather and challenging ground conditions. Segment profit increased from $4.9 million in 2005 to $9.0 million in 2006. However, due to the conditions described above, we have incurred a segment loss of $10.5 million in 2007. To reduce the potential for similar impacts on future projects, we are revising our Pipeline contract strategy. Going forward, our Pipeline segment will primarily focus on cost-reimbursable contracts and we will only undertake fixed-price contracts on rare occasions when we perceive the risk to be very low. The new $170 million contract for the construction of Kinder Morgan Canada Inc.’s (“Kinder Morgan”) TMX pipeline will not be a fixed-price contract.

Our outlook for 2008 is positive. With world economic growth continuing to positively impact oil demand and price, we expect to experience increasing project activity in our core market, the Canadian oil sands. Activity in the Fort McMurray area remains very strong with a number of high-profile projects underway including the CNRL expansion, Albian’s Jackpine Mine, Suncor’s Voyageur project and the planned Fort Hills project (a partnership between Petro-Canada Oil Sands Inc., UTS Energy Corp., Teck Cominco Ltd. and Fort Hills Energy Corp.). Our 2007 acquisition of new equipment ideally suited to heavy earth moving in the oil sands area has strengthened our ability to bid competitively and profitably into this expanding market, and we have secured contract wins on many of these new projects.

In our Mining and Site Preparation operating segment, we are actively pursuing a strategy of retaining our leading position as a provider of mining and construction services in the Fort McMurray oil sands area, while concurrently expanding our order backlog by bidding on Canadian opportunities in resource areas outside the oil

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sands. Our significant involvement with De Beers Canada at their Victor Diamond Mine project in northern Ontario is the first of such projects for our Company. We anticipate that our Piling business will continue to enjoy strong demand in 2008 as a result of the oil sands development and continued strong construction activity in western Canada. Our outlook for our Pipeline segment is also very positive with the $170 million Kinder Morgan TMX project which is scheduled to commence construction in the summer of 2007.

Overall, we expect our operating performance will continue to improve in 2008 as a result of the strong market demand for our services and a number of internal initiatives undertaken and/or completed in 2007. These include the restructuring of our management team, the strengthening of our financial and operating controls, and the implementation of a major business improvement project aimed at increasing productivity and equipment utilization.

E. OFF-BALANCE SHEET ARRANGEMENTS

The Company has no off-balance sheet arrangements in place at this time.

F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

Our principal contractual obligations relate to our long-term debt and capital and operating leases. The following table summarizes our future contractual obligations, excluding interest payments unless otherwise noted, as of March 31, 2007.

	Payments Due by Fiscal Year
	Total		2008		2009		2010		2011		2012 and After
	(In millions)
Senior notes (a)	$	230.6	$	—	$	—	$	—	$	—	$	230.6
Capital leases (including interest)		10.7		3.9		3.1		2.1		1.4		0.2
Operating leases		40.6		13.9		13.3		10.3		3.0		0.1
Total contractual obligations	$	281.9	$	17.8	$	16.4	$	12.4	$	4.4	$	230.9

(a) We have entered into cross-currency and interest rate swaps, which represent an economic hedge of the 8 ³/4% senior notes. At maturity, we will be required to pay $263.0 million in order to retire these senior notes and the swaps. This amount reflects the fixed exchange rate of C$1.315=US$1.00 established as of November 26, 2003, the inception of the swap contracts. At March 31, 2007 the carrying value of the derivative financial instruments was $60.9 million, inclusive of the interest components.

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ITEM 6: DIRECTORS, SENIOR MANAGEMENT, AND EMPLOYEES

A. DIRECTORS AND SENIOR MANAGEMENT

Directors and Executive Officers

The following sets forth information about our directors and executive officers. Ages reflected are as of May 31, 2007. Each director is elected for a one-year term or until such person’s successor is duly elected or appointed, unless his office is earlier vacated. Unless otherwise indicated below, the business address of each of our directors and executive officers is Zone 3, Acheson Industrial Area, 2-53016 Highway 60, Acheson, Alberta, T7X 5A7.

Name and Municipality of Residence	Age	Position
Rodney J. Ruston     Edmonton, Alberta	56	Director, President and Chief Executive Officer
Douglas A. Wilkes     Surrey, British Columbia	52	Vice President, Finance and Chief Financial Officer
Robert G. Harris     Edmonton, Alberta	59	Vice President, Human Resources, Health, Safety & Environment
Christopher J. Hayman     St. Albert, Alberta	44	Vice President, Supply Chain
William M. Koehn     Spruce Grove, Alberta	45	Vice President, Operations and Chief Operating Officer
Miles W. Safranovich     Spruce Grove, Alberta	42	Vice President, Business Development and Estimating
Ronald A. McIntosh     Calgary, Alberta	65	Chairman of the Board
George R. Brokaw     Southampton, New York	39	Director
John A. Brussa     Calgary, Alberta	50	Director
Peter W. Tomsett     Vancouver, British Columbia	49	Director
John D. Hawkins     Houston, Texas	43	Director
William C. Oehmig     Houston, Texas	57	Director
Richard D. Paterson     San Francisco, California	64	Director
Allen R. Sello     West Vancouver, British Columbia	67	Director
Rick K. Turner     Little Rock, Arkansas	49	Director

Rodney J. Ruston became President and Chief Executive Officer of NAEPI on May 9, 2005 and took the company public with a listing on both the NYSE and TSX on November 22, 2006. Previously, Mr. Ruston was Managing Director and Chief Executive Officer of Ticor Limited, a publicly-listed, Australian natural resources company with operations in Australia, South Africa, and Madagascar. He was a Principal with Ruston Consulting Services Pty. Ltd., a management consultant company providing business advice to the natural resources industry, from September 1999 to June 2000. Mr. Ruston has spent his entire career in the natural resources industry, holding management positions with Pasminco Limited, Savage Resources Limited, Wambo Mining Corporation, Oakbridge Limited, and Kembla Coal & Coke Pty. Limited. He was Chairman of the Australian Minerals Tertiary Education Council from July 2003 until May 2005 and received his Masters of Business

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Administration from the University of Wollongong and Bachelor of Engineering (Mining) from the University of New South Wales in Australia.

Douglas A. Wilkes became our Vice President, Finance and Chief Financial Officer on September 18, 2006. From January 2005 to September 2006, Mr. Wilkes was a self-employed consultant. During this period, Mr. Wilkes also served as Chief Financial Officer of Liberty Copper Corporation from June 2005 to December 2005. From April 2004 to December 2004, he served as Chief Financial Officer for Canfor Corporation. Mr. Wilkes was Chief Financial Officer of Slocan Forest Products Ltd. between April 2002 and March 2004 and of BCR Group of Companies between May 2000 and March 2002. Mr. Wilkes was also Chief Financial Officer of Tolko Industries from 1992 to 2000. His early career experiences include financial leadership roles with Weyerhaeuser Company and BC Hydro after serving five years with a major global audit accounting firm. He is a Chartered Accountant and holds a Bachelor of Commerce from the University of British Columbia.

Robert G. Harris joined us in June 2006 as Vice President, Human Resources, Health, Safety & Environment. Mr. Harris began his career in 1969 with Chrysler Canada in various personnel and human resources positions before taking on the role of Environmental Health & Safety Manager and subsequently the Labour Relations Supervisor role. In 1982, he accepted a position with IPSCO Inc. where he was responsible for human resources over 6 facilities in Canada and the United States. Since 1987, he has held senior human resources roles at Labatt Breweries of Canada including National Manager, Industrial Relations & Training and Director, Human Resources at both regional and national levels. Mr. Harris graduated in 1969 from the University of Windsor with a Bachelor of Arts in Sociology/Psychology and has received his Certified Human Resources Professional designation.

Christopher J. Hayman joined us in January 2005 as Treasurer, a position he held until being appointed Vice President, Finance in June 2005 and Vice President, Supply Chain on September 18, 2006. Previously he worked for Finning Canada, from November 1998 to January 2005, initially as Assistant Controller and eventually becoming Vice President and Controller. Prior to this he held positions at Enbridge, Telus and Thorne, Ernst and Whinney. Mr. Hayman received his Bachelor of Commerce with an Accounting major from the University of Alberta and is a Canadian Chartered Accountant.

William M. Koehn has announced his resignation, effective July 31, 2007. Mr. Koehn became our Vice President, Operations on November 26, 2003 and our Chief Operating Officer on December 8, 2004. Previously, he served as Vice President, Operations for our predecessor company since 2002. He joined our predecessor company in 1989 and became the Fort McMurray Regional Manager in 1997. Prior to this he was a Senior Civil Engineer with Quintette Coal Ltd. Mr. Koehn attended the University of Alberta and received his Bachelor of Science in Civil Engineering and has completed his Masters in Construction Engineering and Management.

Miles W. Safranovich joined us in November 2004 and held the position of General Manager, Industrial and Heavy Civil until he was appointed Vice President, Contracts and Technical Services in July 2005 and Vice President, Business Development and Estimating in July 2006. He has extensive experience in the construction industry, spending most of his career at Voice Construction Ltd. where he held a variety of positions between 2000 and October 2004, including Operations Manager and Construction Manager. Mr. Safranovich attended the University of Alberta and obtained a Bachelor of Science in Biology in 1986 and a Bachelor of Science in Civil Engineering specializing in Construction Management in 1992.

Ronald A. McIntosh became the Chairman of our Board of Directors on May 20, 2004. Mr. McIntosh was chairmen of NAV Energy Trust, a Calgary-based oil and natural gas investment fund from January 2004 to August 2006. Between October 2002 and January 2004, he was President and Chief Executive Officer of Navigo Energy Inc. and was instrumental in the conversion of Navigo into NAV Energy Trust. From July 2002 to October 2002, Mr. McIntosh managed his personal investments. He was Senior Vice President and Chief Operating Officer of Gulf Canada Resources Limited from December 2001 to July 2002 and Vice President, Exploration and International of Petro-Canada from April 1996 through November 2001. Mr. McIntosh’s

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significant experience in the energy industry includes the former positions of Chief Operating Officer of Amerada Hess Canada and Director of Crispin Energy Inc. Mr. McIntosh is on the Board of Directors of Advantage Oil & Gas Ltd. and C1 Energy Ltd.

George R. Brokaw became one of our Directors on June 28, 2006. Mr. Brokaw joined Perry Capital, L.L.C., an affiliate of Perry Corp., in August 2005 as a Managing Director. Investment entities controlled by Perry Corp. are holders of common shares of North American Energy Partners Inc. See Item 7 “Major Shareholders and Related Party Transactions.” From January 2003 to May 2005, Mr. Brokaw was Managing Director (Mergers & Acquisitions) of Lazard Frères & Co. LLC, which he joined in 1996. Between 1994 and 1996, he was an investment banking associate for Dillon Read & Co. Mr. Brokaw received a Bachelor of Arts degree from Yale University and a J.D. and M.B.A. from the University of Virginia.

John A. Brussa became one of our Directors on November 26, 2003. Mr. Brussa is a senior partner and head of the Tax Department at the law firm of Burnet, Duckworth & Palmer LLP, a leading natural resource and energy law firm located in Calgary. He has been a partner since 1987 and has worked at the firm since 1981. Mr. Brussa is Chairman of Penn West Energy Trust, Crew Energy Inc. and Divestco Inc. Mr. Brussa also serves as a director of a number of natural resource and energy companies and mutual fund trusts. He is a member and former Governor of the Executive Committee of the Canadian Tax Foundation. Mr. Brussa attended the University of Windsor and received his Bachelor of Arts in History and Economics in 1978 and his Bachelor of Laws in 1981.

John D. Hawkins became one of our Directors on October 17, 2003. Mr. Hawkins joined The Sterling Group, L.P. in 1992 and has been a Partner since 1999. An investment entity affiliated with The Sterling Group is a holder of common shares of North American Energy Partners Inc. See “Item 7 “Major Shareholders and Related Party Transactions.” Before joining Sterling he was on the professional staff of Arthur Andersen & Co. from 1986 to 1990. He received a Bachelor of Science in Business Administration in Accounting from the University of Tennessee and his M.B.A. from the Owen Graduate School of Management at Vanderbilt University.

William C. Oehmig served as Chairman of our Board of Directors from November 26, 2003 until passing off this position and assuming the role of Director on May 20, 2004. He is a Partner with The Sterling Group, L.P., a private equity investment firm. An investment entity affiliated with The Sterling Group is a holder of common shares of North American Energy Partners Inc. See “Item 7 “Major Shareholders and Related Party Transactions.” Prior to joining Sterling in 1984, Mr. Oehmig worked in banking, mergers and acquisitions, and represented foreign investors in purchasing and managing U.S. companies in the oilfield service, manufacturing, distribution, heavy equipment and real estate sectors. He began his career in Houston in 1974 at Texas Commerce Bank. Mr. Oehmig currently serves on the boards of Propex Fabrics Inc. and Panolam Industries International Incorporated. In the past he has served as Chairman of Royster-Clark, Purina Mills, and as a director of Exopack and Sterling Diagnostic Imaging. Mr. Oehmig received his B.B.A. in economics from Transylvania University and his M.B.A. from the Owen Graduate School of Management at Vanderbilt University.

Richard D. Paterson became one of our Directors on August 18, 2005. Mr. Paterson has been a Managing Director of Genstar Capital since 1988. Certain investment entities controlled by Genstar are holders of common shares of North American Energy Partners Inc. See “Item 7 “Major Shareholders and Related Party Transactions.” Before founding Genstar Capital, Mr. Paterson served as Senior Vice President and CFO of Genstar Corporation, a NYSE company, where he was responsible for finance, tax, information systems and public reporting. He has been active in corporate acquisitions for more than 25 years. Mr. Paterson started his career in 1964 as an auditor with Coopers & Lybrand in Montreal. He is currently a Director of INSTALLS Inc. LLC, American Pacific Enterprises LLC, Propex Inc., Woods Equipment Company and Altra Industrial Motion, Inc. Mr. Paterson earned a Bachelor of Commerce from Concordia University and is a Chartered Accountant.

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Allen R. Sello became one of our Directors on January 26, 2006. His career began at Ford Motor Company of Canada in 1964, where he held numerous finance and marketing management positions, including Treasurer. In 1979 Mr. Sello joined Gulf Canada Limited, at which he held various senior financial positions, including Vice President and Controller. He was appointed Vice President, Finance of successor company Gulf Canada Resources Limited in 1987 and Chief Financial Officer in 1988. Mr. Sello then joined International Forest Products Ltd. in 1996 as Chief Financial Officer. From 1999 until his retirement in 2004 he held the position of Senior Vice President and Chief Financial Officer for UMA Group Limited. Mr. Sello is currently Chair of the Vancouver Board of Trade Government Budget and Finance Committee, a trustee of Sterling Shoes Income Fund and a director of Infowave Software Inc. Mr. Sello received his Bachelor of Commerce from the University of Manitoba and his M.B.A. from the University of Toronto.

Peter W. Tomsett became one of our Directors in September 2006. From September 2004 to January 2006, Mr. Tomsett was President & Chief Executive Officer of Placer Dome Inc. based in Vancouver. He joined the Placer Dome Group in 1986 as a Mining Engineer with the Project Development group in Sydney, Australia. After various project and operating postions, he assumed the role of Executive Vice President, Asia-Pacific for Placer Dome Inc. in 2001. In 2004, Mr. Tomsett also took on responsibility for Placer Dome Africa which included mines in South Africa and Tanzania. Mr. Tomsett has been a Director of the Minerals Council of Australia, the World Gold Council, and the International Council for Mining & Metals. He is a member of the Australian Institute of Company Directors, the Australian Institute of Mining and Metallurgy, and the Canadian Institute of Mining, Metallurgy and Petroleum. Mr. Tomsett graduated with a Bachelor of Engineering (Honours) in Mining Engineering from the University of New South Wales and also attained a Master of Science (Distinction) in Mineral Production Management from Imperial College, London. He is also a director of Silver Standard Resources Inc.

K. Rick Turner became one of our Directors on November 26, 2003. Mr. Turner has been employed by Stephens’ family entities since 1983. An investment entity controlled by SF Holding Corp. is a holder of common shares of North American Energy Partners Inc. See “Item 7 “Major Shareholders and Related Party Transactions.” Mr. Turner is currently Senior Managing Principal of The Stephens Group, LLC. He first became a private equity principal in 1990 after serving as the Assistant to the Chairman, Jackson T. Stephens. His areas of focus have been oil and gas exploration, natural gas gathering, processing industries and power technology. He currently serves on the board of three publicly-held companies: Energy Transfer Partners, Energy Transfer Equity and North American Construction Group. He also serves on numerous private company boards, including JV Industrial; SmartSignal Corporation; BTEC Turbines, LP; Spitzer Industries, Inc.; JEBCO Seismic, LP; Seminole Energy Services, LLC; Multi-Shot, LLC; and Vestcom International, Inc. Mr. Turner earned his B.S.B.A. from the University of Arkansas and is a non-practicing CPA.

B. COMPENSATION

Director Compensation

Our directors, other than Messrs. McIntosh and Ruston, each receive an annual aggregate retainer of $32,500 and a fee of $1,500 for each meeting of the board or any committee of the board that they attend, and are reimbursed for reasonable out-of-pocket expenses incurred in connection with their services pursuant to our policies. The chairman of our audit committee receives an additional annual retainer of $10,000. Mr. McIntosh, our Chairman of the Board, receives an annual retainer of $150,000. In addition, Mr. McIntosh received bonuses of $205,000 in June 2005, $163,733 in July 2006 and $106,543 in March 2007. Mr. Ruston does not receive director compensation.

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In addition, our directors have received grants of stock options under the 2004 Share Option Plan. Effective November 2003, each director, excluding Messrs. Brokaw, Tomsett, McIntosh, Paterson, Sello and Ruston, received options to purchase 27,760 common shares. Mr. McIntosh received options to acquire 70,000 common shares in May 2004, Mr. Paterson received options to purchase 27,760 common shares in November 2005, Mr. Sello received options to purchase 27,760 common shares in February 2006 and Mr. Brokaw received options to purchase 27,760 common shares in June 2006. All the options have an exercise price of $5 per share, vest at the rate of 20% per year over five years and expire ten years after their grant date. The vesting of the options granted to Brokaw and Paterson has been accelerated as if they had been issued effective November 2003. Mr. Tomsett was granted options to acquire 27,760 common shares in September 2006. These options have an exercise price of $16.75 per share, vest at the rate of 20% per year over five years and expire ten years after their grant date.

On June 29, 2006, NACG Holdings Inc. offered each director holding stock options, excluding Messrs. McIntosh and Ruston, the option to have all of his options become immediately exercisable on the condition that he exercise all such options by September 30, 2006. One director, Mr. Oehmig, accepted this option. The stock options of the other directors remained unchanged.

Executive Compensation

The following summary compensation table sets forth the total value of compensation earned by our Chief Executive Officer, Chief Financial Officer and each of the other three most highly compensated officers as of March 31, 2007, collectively called the named executive officers, for services rendered in all capacities to us for the fiscal years ended March 31, 2005, 2006 and 2007.

Summary Compensation Table

	Annual Compensation								Long-Term Compensation
Name and Principal Position	Fiscal Year	Salary		Bonus			Other Annual Compensation		Securities Underlying Options (a)
Rodney J. Ruston President and Chief Executive Officer (Hired May 2005)	2007 2006 2005	$ $	500,000 536,539 —	$	300,000 —	(d)	(c (c —	) )	—   550,000 —
Douglas A. Wilkes Vice President Finance and Chief Financial Officer (Hired September 2006)	2007 2006 2005	$	134,615 —   —		—   —	(d)	(c —   —	)	100,000 —   —
William M. Koehn Vice President, Operations and Chief Operating Officer	2007 2006 2005	$	249,000 240,000 224,000		241,385 —	(d) (b)	(c (c (c	) ) )	—   —   —
Miles W. Safranovich Vice President, Business Development & Estimating (Hired November 2004)	2007 2006 2005	$	218,000 195,808 61,385		210,384 —	(d) (b)	(c (c (c	) ) )	—   40,000 60,000
Christopher J. Hayman Vice President, Finance (Hired January 2005)	2007 2006 2005	$	207,100 183,641 56,250		186,910 —	(d) (b)	(c (c (c	) ) )	—   40,000 60,000

(a) Consists of options to purchase our common shares. The options granted to Mr. Ruston expire on May 8, 2015. The options granted in fiscal 2007 to Mr. Wilkes expire on September 18, 2016. The options granted to Mr. Koehn expire on November 26, 2013. The options granted in fiscal 2005 and 2006 to Mr. Safranovich expire on November 17, 2004 and November 2, 2015, respectively. The options granted in fiscal 2005 and 2006 to Mr. Hayman expire on February 17, 2015 and November 2, 2015, respectively.

(b) Bonus pursuant to our Annual Incentive Plan.

(c) The amount of other annual compensation does not exceed the lesser of $50,000 and 10% of the salary and bonus for the fiscal year.

(d) Fiscal 2007 bonuses have not been calculated as at the filing date of this Form 20-F. The Company will disclose fiscal 2007 executive bonuses through a Form 6-K filing subsequent to the calculation of such bonuses.

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Option Grants in Fiscal 2007

Name	Number of Securities Underlying Options Granted	Percentage of Total Options Granted to Employees and Directors in Fiscal Year		Exercise Price (a)		Expiration Date	Grant Date Value (b)
Robert G. Harris	100,000	32	%	$	5.00	28-Jun-16	1,238,671
Peter W. Tomsett	27,760	9	%	$	16.75	20-Sep-16	214,807
Douglas A. Wilkes	100,000	32	%	$	16.75	20-Sep-16	808,576
George R. Brokaw	27,760	9	%	$	5.00	28-Jun-13	341,469

(a) In September 2006, we had a valuation performed by an unrelated valuation specialist, which valued our common shares at $16.10 per share. The plan and outstanding balances are disclosed in note 25 to our consolidated financial statements for 2007.

(b) Value estimated using the Black-Scholes option-pricing model. For assumptions used, see note 25 to our consolidated financial statements included at Item 17.

Aggregated Option Exercises in Fiscal 2007 and Fiscal Year End Option Values

Name	Shares Acquired on Exercise	Value Realized	Number of Securities Underlying Unexercised Options at March 31, 2007 (Exercisable/ Unexercisable)	Value of Unexercised In-The-Money Options at March 31, 2007 (Exercisable/ Unexercised) (a)
Rod Ruston	—	—	110,000/440,000	$2,090,000/$8,360,000
William Koehn	—	—	60,000/40,000	$1,140,000/$760,000
Miles Safranovich	—	—	32,000/68,000	$608,000/$1,292,000
Christopher Hayman	—	—	32,000/68,000	$608,000/$1,292,000
Douglas A. Wilkes	—	—	—/100,000	$—/$725,000
Robert G. Harris	—	—	—/100,000	$—/$1,900,000

(a) March 31, 2007 option values are determined using the Friday, March 30, 2007 closing price on the Toronto stock Exchange.

Retirement Benefits for Executive Officers and Directors

For the fiscal year ended March 31, 2007, the total amount we set aside for pension, retirement and similar benefits for our executive officers and directors was $50,015 consisting of employer matching contributions to our executive officers’ Registered Retirement Savings Plan, a Canadian tax-deferred retirement savings plan, of up to 5% of salary.

Annual Incentive Plan

We have established a management incentive plan. The incentive plan is administered by the Compensation Committee. The plan has established an annual bonus pool to be paid to participants if a target level of financial performance is achieved. If our actual financial performance exceeds or falls short of the targeted level of performance, the amount of the pool available to be paid will increase or decrease, respectively. The Compensation Committee will recommend to the board of directors the amount of the total pool, the target financial performance, the eligible participants and each participant’s share of the potential pool.

Share Option Plan

Our board has approved the Amended and Restated 2004 Share Option Plan. The amended plan was approved by our shareholders on November 3, 2006 and became effective on November 28, 2006. The amended

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option plan is administered by the Compensation Committee. Option grants under the amended option plan may be made to our directors, officers, employees and consultants selected by the Compensation Committee. The amended option plan provides for the discretionary grant of options to purchase common shares. Options granted under the amended plan will be evidenced by an agreement, which will specify the vesting, exercise price and expiration of such options. Options to be granted under the amended option plan will have an exercise price of not less than the volume weighted average trading price of the common shares on the Toronto Stock Exchange or the New York Stock Exchange at the time of grant. The amended option plan provides that up to 10% of our issued and outstanding common shares from time to time may be reserved for issuance or issued from treasury.

In the event of certain change of control events as defined in the amended option plan, all outstanding options will become immediately vested and exercisable. The amended option plan provides that our board can make certain specified amendments to the option plan subject to receipt of shareholder and regulatory approval, and further authorizes the board to make all other amendments to the plan, subject only to regulatory approval but without shareholder approval. The amendments the board may make without shareholder approval include:

• amendments of a housekeeping nature,

• changes to the vesting provisions of an option or the option plan,

• changes to the termination provisions of an option or the option plan which do not entail an extension beyond the original expiry date,

• the discontinuance of the option plan, and

• the addition of provisions relating to phantom share units, such as restricted share units and deferred share units which result in participants receiving cash payments, and the terms governing such features.

The amended option plan provides that each option includes a cashless exercise alternative which provides a holder of an option with the right to elect to receive cash in lieu of purchasing the number of shares under the option. Notwithstanding such right, the amended option plan provides that we may elect, at our sole discretion, to net settle the option with stock.

As of March 31, 2007 there were 837,352 shares issuable upon exercise of outstanding share options.

Profit Sharing Plan

Our board has established a profit sharing plan covering all full-time salaried and certain hourly employees, excluding executive officers. The profit sharing plan is administered by the Compensation Committee. Amounts paid under the profit sharing plan will constitute taxable income in the year received and will be based on our financial performance over a period of time to be determined by the Compensation Committee. The Compensation Committee will recommend to the board of directors for approval a target level of financial performance to be achieved and an amount to be set aside for profit sharing if the target is met. If financial performance exceeds this minimum level, we may make distributions to employees. The Compensation Committee may change the amount set aside for profit sharing and the proportion of such amount allocated to an individual employee or group of employees.

C. BOARD PRACTICES

The Board and Board Committees

Our board supervises the management of our business as provided by Canadian law. The listing requirements of the NYSE applicable to domestic listed companies require that our board of directors be composed of a majority of independent directors within one year of the listing of our common shares on the NYSE. Accordingly, we have adjusted the board membership to comply with this requirement.

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Our board has established the following committees:

• The Audit Committee recommends independent public accountants to the board, reviews the quarterly and annual financial statements and associated audit reports and reviews the fees paid to our auditors. The Audit Committee reviews the audit findings report, approves quarterly financial statements and recommends annual financial statements for approval to the board. Rule 10A-3 under the Securities Exchange Act of 1934, as amended, and the listing requirements of the NYSE and the requirements of the Canadian securities regulatory authorities require that our audit committee be composed solely of independent directors within one year of the effectiveness date of the registration statement. Accordingly, we have adjusted the composition of the audit committee so that all members are now independent. One member of the audit committee is designated as the audit committee financial expert, as defined by Item 401(h) of Regulation S-K of the Exchange Act. Our board of directors has adopted a written charter for the audit committee that is available on our website. The Audit Committee is currently composed of Messrs. Brokaw, Hawkins, McIntosh, Sello and Turner, with Mr. Sello serving as Chairman.

• The Compensation Committee is charged with the responsibility for supervising executive compensation policies for us and our subsidiaries, administering the employee incentive plans, reviewing officers’ salaries, approving significant changes in executive employee benefits and recommending to the board such other forms of remuneration as it deems appropriate. The listing requirements of the NYSE applicable to domestic listed companies require that our compensation committee be composed of a majority of independent directors within 90 days of the listing of our common shares on the NYSE and that it be composed solely of independent directors within one year of such listing. Accordingly, we have adjusted the composition of the compensation committee so that all members are now independent. Our board of directors has adopted a written charter for the compensation committee that is available on our website. The Compensation Committee is currently composed of Messrs. Brussa, Oehmig, Paterson and Sello, with Mr. Paterson serving as Chairman.

• The Governance Committee is responsible for recommending to the board of directors proposed nominees for election to the board of directors by the shareholders at annual meetings, including an annual review as to the renominations of incumbents and proposed nominees for election by the board of directors to fill vacancies that occur between shareholder meetings, and making recommendations to the board of directors regarding corporate governance matters and practices. The listing requirements of the NYSE applicable to domestic listed companies require that we establish a nominating and corporate Governance Committee composed of a majority of independent directors within 90 days of the listing of our common shares on the NYSE and that it be composed solely of independent directors and have at least three members within one year of such listing. Accordingly, we have adjusted the composition of the governance committee so that all members are now independent. Our board of directors has adopted a written charter for the Governance Committee that is available on our website. The Governance Committee is currently composed of Messrs. Brussa, Hawkins, Paterson, Tomsett and Turner, with Mr. Tomsett serving as Chairman.

• The Risk Committee is responsible for overseeing all of our non-financial risks, approving our risk management policies and reviewing the risks and related risk mitigation plans within our strategic plan. The Risk Committee is currently composed of Messrs. Brokaw, McIntosh, Oehmig and Tomsett, with Mr. Oehmig serving as Chairman.

The board may also establish other committees.

D. EMPLOYEES

As of March 31, 2007 we had over 200 salaried and over 1,500 hourly employees.

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E. SHARE OWNERSHIP

The following presents information regarding the beneficial ownership of our voting common shares and options to purchase common shares by our executive officers and directors as of March 31, 2007.

Name of Beneficial Owner	Number of Common Shares	Options (1)	% of Outstanding Common Shares	Exercise Price
Rodney J. Ruston	16,700	110,000	*	$	5.00
Douglas A. Wilkes	7,500	—	*		—
Robert G. Harris	—	—	—		—
Miles W. Safranovich	14,100	32,000	*	$	5.00
William M. Koehn	100,000	60,000	*	$	5.00
Christopher J. Hayman	28,100	32,000	*	$	5.00
George R. Brokaw	—	16,656	*	$	5.00
John A. Brussa	112,400	16,656	*	$	5.00
John D. Hawkins	—	16,656	*	$	5.00
Ronald A. McIntosh	56,200	28,000	*	$	5.00
William C. Oehmig	205,460	—	*		—
Richard D. Paterson	—	16,656	*	$	5.00
Allen R. Sello	28,100	5552	*	$	5.00
Rick K. Turner	—	16,656	*	$	5.00
Peter W. Tomsett	—	—	—		—

 * Less than 1%

(1) Amount represents the number of options which had vested as of March 31, 2007. All options entitle the holder to purchase one common share per option and expire 10 years from date of issue.

ITEM 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. MAJOR SHAREHOLDERS

The following presents information regarding the beneficial ownership of each person who was the beneficial owner of more than 5% of our outstanding voting common shares based on information available at the time of filing this Form 20-F.

Name of Beneficial Owner	Number of Common Shares	% of Outstanding Common Shares
Sterling Group Partners I, L.P. (a)	6,351,265	17.8
Genstar Capital Partners III, L.P. (b)	4,439,233	12.5
Richard Perry (c)	4,598,466	12.9
MFS Investment Management	3,748,290	10.5
Stephens - NACG LLC. (d)	3,065,409	8.6
FMR Corp.	2,986,800	8.4
Perry Partners L.P. (c)	2,161,361	6.1

(a) Sterling Group Partners I GP, L.P. is the sole general partner of Sterling Group Partners I, L.P. Sterling Group Partners I GP, L.P. has five general partners, each of which is wholly-owned by one of Frank J. Hevrdejs, William C. Oehmig, T. Hunter Nelson, John D. Hawkins and C. Kevin Garland. Each of these individuals disclaims beneficial ownership of the shares owned by Sterling Group Partners I, L.P. Sterling Group Partners I, L.P. is an affiliate of The Sterling Group, L.P.

(b) Genstar Capital Partners III, L.P. directly holds 4,439,233 common shares. Stargen III, L.P. directly holds 159,249 common shares. Genstar Capital III, L.P. is the sole general partner of each of Genstar Capital Partners III, L.P. and Stargen III, L.P., and Genstar III GP LLC is the sole general partner of Genstar Capital III, L.P. Jean-Pierre L. Conte, Richard F. Hoskins and Richard D. Paterson are the managing members of Genstar III GP LLC. In such capacity, Messrs. Conte, Hoskins and Paterson may be deemed to beneficially own common shares beneficially owned, or deemed to be beneficially owned, by Genstar III GP LLC, but disclaim such beneficial ownership. Genstar Capital Partners III, L.P. and Stargen III, L.P. are affiliates of Genstar Capital, L.P.

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(c) Perry Partners, L.P. directly holds 2,161,361 common shares. Perry Luxco S.A.R.L. directly holds 1,718,443 common shares. Perry Partners International, Inc. directly holds 718,662 common shares. Richard Perry is the President and sole shareholder of Perry Corp., which is the investment manager of Perry Partners International, Inc. and the managing general partner of Perry Partners, L.P. Perry Partners International, Inc. is the indirect sole shareholder of the class of securities owned by Perry Luxco S.A.R.L. As such, Mr. Perry may be deemed to have beneficial ownership over the respective common shares owned by Perry Luxco S.A.R.L., Perry Partners, L.P. and Perry Partners International, Inc.; however, Mr. Perry disclaims such beneficial ownership, except to the extent of his pecuniary interest, if any, therein. Perry Corp. is an affiliate of Perry Strategic Capital Inc.

(d) Stephens-NACG LLC directly holds 3,065,409 common shares. SF Holding Corp. is the sole manager of Stephens-NACG LLC. Warren A. Stephens and W.R. Stephens, Jr. each own a substantial portion of the capital shares of SF Holding Corp. and are co-chairmen of the board of SF Holding Corp. In such capacity, each may be deemed to have shared voting and investment power over the common shares which are or may be deemed to be beneficially owned by Stephens-NACG LLC and SF Holding Corp., but each disclaims such beneficial ownership. Additionally, Warren A. Stephens may be deemed to have shared voting and investment power over the following: (i) 37,947 common shares owned by Stephens Inc., a registered broker-dealer of which Warren A. Stephens is president and sole owner, (ii) 7,593 common shares owned by Stephens Investments Holdings LLC, a private holding company of which Warren A. Stephens is the sole manager, and (iii) 5,631 common shares held by Stephens Inc. in discretionary trading accounts for investment advisory customers, as to which Warren A. Stephens disclaims beneficial ownership.

MFS Investment Management and FMR Corp. acquired such shares after our initial public offering on November 28, 2006. Each of the other beneficial owners in the table above acquired such shares on November 26, 2003. With the exception of Sterling Group Partners I, L.P., from which we repurchased 348,160 shares in January 2004, there was no significant change in the percentage ownership held by such beneficial owners between November 26, 2003 and November 28, 2006, the date of our initial public offering, when such beneficial owners sold significant portions of their respective shareholdings.

B. RELATED PARTY TRANSACTIONS

Advisory Services Agreement

We were party to an advisory services agreement, dated November 26, 2003, with The Sterling Group, L.P., Genstar Capital, L.P., Perry Strategic Capital Inc., and SF Holding Corp. (collectively, the “Sponsors”). The advisory services agreement was terminated upon the completion of our IPO.

Voting and Corporate Governance Agreement

We were party to a voting agreement, dated November 26, 2003, with affiliates of the sponsors. The voting agreement was terminated upon the completion of our IPO.

We have entered into a letter agreement with each sponsor pursuant to which we have engaged such sponsor to provide their expertise and advice to us for no fee, which is in their interest because of their investment in us. In order for the sponsors to provide such advice, we have agreed to

• provide them copies of all documents, reports, financial data and other information regarding us,

• permit them to consult with and advise our management on matters relating to our operations,

• permit them to discuss our company’s affairs, finances and accounts with our officers, directors and outside accountants,

• permit them to visit and inspect any of our properties and facilities, including but not limited to books of account,

• permit them to attend, to the extent that a director is not related to the sponsor, to designate and send a representative to attend all meetings of our board of directors in a non-voting observer capacity,

• provide them copies of certain of our financial statements and reports, and

• provide them copies of all materials sent by us to our board of directors, other than materials relating to transactions in which the sponsor has an interest.

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We may terminate a sponsor’s letter agreement in certain circumstances.

All the foregoing rights are subject to customary confidentiality requirements and subject to security clearance requirements imposed by applicable government authorities.

Shareholders Agreements

All holders of our common shares who were also our employees or employees of any of our subsidiaries were parties to an employee shareholders agreement. All other holders of our common shares were parties to an investor shareholders agreement. Both shareholders agreements were terminated upon the completion of our IPO.

Registration Rights Agreement

We are party to a registration rights agreement with certain shareholders, including affiliates of each of the sponsors, Paribas North America, Inc. and Mr. William Oehmig, one of our directors. After our IPO, the shareholders party to the agreement and their permitted transferees are entitled, subject to certain limitations, to include their common shares in a registration of common shares we initiate under the Securities Act of 1933, as amended. In addition, after the 120th day following our IPO, any one or more shareholders party to the agreement has the right to require us to effect the registration of all or any part of such shareholders’ common shares under the Securities Act, referred to as a “demand registration,” so long as the amount of common shares to be registered has an aggregate fair market value of at least US$5.0 million and, at such time, the SEC has ordered or declared effective fewer than four demand registrations initiated by us pursuant to the registration rights agreement. In the event the aggregate number of common shares which the shareholders party to the agreement request us to include in any registration, together, in the case of a registration we initiate, with the common shares to be included in such registration, exceeds the number which, in the opinion of the managing underwriter, can be sold in such offering without materially affecting the offering price of such shares, the number of shares of each shareholder to be included in such registration will be reduced pro rata based on the aggregate number of shares for which registration was requested. The shareholders party to the agreement have the right to require, after four demand registrations, one registration in which their common shares will not be subject to pro rata reduction with others entitled to registration rights.

We may opt to delay the filing of a registration statement required pursuant to any demand registration for:

• up to 120 days if we have

• decided to file a registration statement for an underwritten public offering of our common shares, the net proceeds of which are expected to be at least US$20.0 million, or

• initiated discussions with underwriters in preparation for a public offering of our common shares as to which we expect to receive net proceeds of at least US$20.0 million and the demand registration, in the underwriters’ opinion, would have a material adverse effect on the offering or

• up to 90 days following a request for a demand registration if we are in possession of material information that we reasonably deem advisable not to disclose in a registration statement.

Our right to delay the filing of a registration statement if we possess information that we deem advisable not to disclose does not obviate any disclosure obligations which we may have under the Exchange Act or other applicable laws; it merely permits us to avoid filing a registration statement if our management believes that such a filing would require the disclosure of information which otherwise is not required to be disclosed and the disclosure of which our management believes is premature or otherwise inadvisable.

The registration rights agreement contains customary provisions whereby we and the shareholders party to the agreement indemnify and agree to contribute to each other with regard to losses caused by the misstatement of any information or the omission of any information required to be provided in a registration statement filed

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under the Securities Act. The registration rights agreement requires us to pay the expenses associated with any registration other than sales discounts, commissions, transfer taxes and amounts to be borne by underwriters or as otherwise required by law.

Properties and Facilities

Pursuant to several office lease agreements, in 2007 we paid $572,000 (2006 – $836,000; 2005 – $824,000) to a company owned, indirectly and in part, by one of our directors. Effective November 28, 2006, the director resigned from the board.

C. INTERESTS OF EXPERTS AND COUNSEL

Not applicable.

ITEM 8: FINANCIAL INFORMATION

A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

See Item 17 “Financial Statements.”

Legal Proceedings

In February 2005, Renée Gouin and Elaine Busch commenced a claim against their brothers, Martin Gouin and Roger Gouin, their father, Jean Yvon Gouin, and a number of companies, including our subsidiary, North American Construction Group Inc. The plaintiffs allege that they maintain beneficial ownership interests in the Gouin “family business.” The assets of certain of those businesses were sold to us in the Acquisition. The plaintiffs further allege that the proceeds of such ownership interests, including cash and preferred shares of NACG Preferred Corp., our former subsidiary, are being wrongfully held by the Gouin brothers and that certain management fees paid by North American Construction Group Inc. to the corporate shareholder of our predecessor company, Norama Ltd., were excessive. The plaintiffs seek, among other things: damages in the amount of $57.8 million each; a declaration that they hold a beneficial interest in the “family business;” a constructive trust over the “family business;” an accounting and tracing of the sale proceeds, assets and shares; and rectification of share registers.

Pursuant to the purchase agreement relating to the Acquisition, Martin Gouin, Roger Gouin, Norama Ltd., and North American Equipment Ltd. have agreed to indemnify North American Construction Group Inc. We have notified Martin Gouin, Roger Gouin, Norama Ltd., and North American Equipment Ltd. that we are seeking indemnity from them under the purchase agreement for the cost of our defense and any damages arising out of the lawsuit. We have taken the position that North American Construction Group Inc. is not a properly named defendant in the lawsuit. Discoveries are ongoing and we will continue to assess our position as the matter proceeds.

From time to time, we are a party to litigation and legal proceedings that we consider to be a part of the ordinary course of business. While no assurance can be given, we believe that, taking into account reserves and insurance coverage, none of the litigation or legal proceedings, in which we are currently involved, including the litigation described above, could reasonably be expected to have a material adverse effect on our business, financial condition or results of operations. We may, however, become involved in material legal proceedings in the future.

B. SIGNIFICANT CHANGES

Not applicable.

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ITEM 9: THE OFFER AND LISTING

A. OFFER AND LISTING DETAILS

Not applicable.

B. PLAN OF DISTRIBUTION

Not applicable.

C. MARKETS

Not applicable.

D. SELLING SHAREHOLDERS

Not applicable.

E. DILUTION

Not applicable.

F. EXPENSES OF THE ISSUE

Not applicable.

ITEM 10: ADDITIONAL INFORMATION

A. SHARE CAPITAL

Not applicable.

B. MEMORANDUM AND ARTICLES OF ASSOCIATION

See Exhibits 3.3 and 3.4 to our Form F-1 (Registration No. 333-135943), filed with the SEC and incorporated herein by reference.

C. MATERIAL CONTRACTS

We are party to the following contracts, other than contracts entered into in the ordinary course of business, all of which are filed as exhibits to this Form 20-F:

Employment Arrangements with Executive Officers

Amended and Restated Credit Agreement

Indenture Governing Our 8 ³/4% Senior Notes due 2011

D. EXCHANGE CONTROLS

There are currently no limitations imposed by Canadian laws, decrees, or regulation that restrict the import or export of capital, including foreign exchange controls, or that affect the remittance of dividends, and interest or other payments to nonresident holders of the Company’s securities.

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E. TAXATION

The following information is general and security holders are urged to seek the advice of their own tax advisors, tax counsel, or accountants with respect to the applicability or effect on their own individual circumstances of not only the matters referred to herein, but also any state or local taxes.

Canadian federal tax legislation generally requires a 25% withholding from dividends paid or deemed to be paid to the Company’s nonresident shareholders. However, shareholders resident in the United States will generally have this rate reduced to 15% through the tax treaty between Canada and the United States. The amounts withheld will generally be creditable for United States income tax purposes.

F. DIVIDENDS AND PAYING AGENTS

Not applicable.

G. STATEMENTS BY EXPERTS

Not applicable.

H. DOCUMENTS ON DISPLAY

For more complete information about us you should read our disclosure documents that we have filed with the SEC and the CSA. You may obtain these documents for free by visiting EDGAR on the SEC website at www.sec.gov or SEDAR on the CSA website at www.sedar.com.

I. SUBSIDIARY INFORMATION

Not applicable.

ITEM 11: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign currency risk

We are subject to currency exchange risk as our 8 ³/4% senior notes are denominated in U.S. dollars and all of our revenues and most of our expenses are denominated in Canadian dollars. To manage the foreign currency risk and potential cash flow impact on our $200 million in U.S. dollar-denominated notes, we have entered into currency swap and interest rate swap agreements. These financial instruments consist of three components: a U.S. dollar interest rate swap; a U.S. dollar-Canadian dollar cross-currency basis swap; and a Canadian dollar interest rate swap. The cross currency and interest rate swap agreements can be cancelled at the counterparty’s option at any time after December 1, 2007 if the counterparty pays a cancellation premium. The premium is equal to 4.375% of the US$200 million if exercised between December 1, 2007 and December 1, 2008; 2.1875% if exercised between December 1, 2008 and December 1, 2009; and repurchased at par if cancelled after December 1, 2009.

Interest rate risk

We are exposed to interest rate risk on the revolving credit facility, capital lease obligations and certain operating leases with a variable payment that is tied to prime rates. We do not use derivative financial instruments to reduce our exposure to these risks. The estimated financial impact as a result of fluctuations in interest rates is not significant.

69

Inflation

Inflation has not had a material impact on our operations as many of our contracts contain a provision for annual price increases. Inflation is not expected to have a material impact on our operations in the foreseeable future provided the rate of inflation remains consistent with recent levels and we are able to continue passing costs increases along to our customers.

ITEM 12: DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

70

PART II

ITEM 13: DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

ITEM 14: MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

None.

ITEM 15: CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Under the supervision and with the participation of management, including our President and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2007, as defined in Canada by Multilateral Instrument 52-109, “Certification of Disclosure in Issuer’s Annual and Interim Fillings” and in the United States by Rule 13(a)-15(e) under the Securities Exchange Act of 1934, as amended, as of March 31, 2007. Based on this evaluation, our President and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures were effective.

Internal Control over Financial Reporting (“ICFR”)

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and of the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Management is responsible for establishing and maintaining adequate internal controls appropriate to the nature and size of the business to provide reasonable, but not absolute, assurance regarding the reliability of financial reporting for the Company.

In the course of preparing our 2007 financial statements, we identified a number of material weaknesses in our ICFR. A control deficiency is a material weakness in ICFR if the deficiency, or a combination of control deficiencies is such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim consolidated financial statements will not be prevented or detected.

We noted the following material weaknesses in ICFR as at March 31, 2007:

• Revenue recognition—a formal process to track claims and unapproved change orders and sufficient monitoring controls over the completeness and accuracy of forecasts, including the consideration within project changes subsequent to the end of each reporting period were not effectively implemented. The accounts that could potentially be affected by these deficiencies are revenue, project costs and their related accounts.

• Income taxes—there was a lack of review and monitoring controls as well as a lack of segregation of duties of the income tax function. The accounts that could potentially be affected by these deficiencies are future income tax assets, future income tax liabilities and future income tax expense.

• Accounts payable and procurement—The Company did not have an effectively implemented procurement process to track purchase commitments, reconcile vendor accounts and accurately accrue costs not invoiced by vendors at each reporting date. The accounts that could potentially be affected by these deficiencies are accounts payable, accrued liabilities, project costs, unbilled revenue, equipments costs, general and administrative costs and other expenses.

• IT General Controls (“ITGCs”)—a number of deficiencies in ITGCs existed, including appropriate controls around spreadsheets and end user computing, controls over access and accuracy of one of our systems, as well as general maintenance of access rights and nominal program change controls. When aggregated, these deficiencies represented a material weakness in ICFR.

71

In anticipation of providing an annual report on ICFR by March 31, 2008, management is currently evaluating the effectiveness of our system of internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Changes in Internal Control over Financial Reporting

We are currently addressing these deficiencies through the implementation of the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 in the United States and Multilateral Instrument 52-109 in Canada. We are in the remediation phase of a procurement project in which we implemented the purchase order functionality in our financial systems and trained our staff in the effective use of purchase orders to track our commitments and to record our expenses in a timely manner. We are implementing and testing a project controls improvement initiative over the claims and unapproved change orders process, as well as the completeness and accuracy of project forecasts. We are also in the final stages of upgrading our enterprise resource management software, which includes addressing the ITGC deficiencies noted above.

We have added to our finance staff, and in particular we now have in-house Canadian GAAP expertise and a working knowledge of U.S. GAAP, which is supplemented by outside expertise. We have created a Corporate Controller position and added a Corporate Accounting Manager and Tax Manager. In addition, we have instituted standardized procedures for financial reporting and review, including the procedures by which general ledger transactions are closed, reviewed and consolidated.

Other than the continuing impact of the corrective actions discussed above, there were no changes in our ICFR since March 31, 2006 that have materially affected, or are reasonably likely to affect, our ICFR.

ITEM 16: [RESERVED]

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Our board of directors has determined that Allen Sello is an audit committee financial expert, as that term is defined by Item 16A of Form 20-F and that Mr. Sello is independent, as that term is defined in the New York Stock Exchange listing standards.

ITEM 16B. CODE OF ETHICS

Our board of directors has adopted a code of ethics that applies to all employees including our President and Chief Financial Officer. Our code of ethics is available on our website at www.naepi.ca

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Our auditors are KPMG LLP. Our Audit Committee pre-approved the engagement of KPMG to perform the audit of our financial statements for the fiscal year ended March 31, 2007.

Audit Fees

KPMG billed us $2,375,000 in 2007, $2,617,000 in 2006 and $1,330,000 in 2005 for audit services. Audit fees were incurred for the audit of our annual financial statements, related audit work in connection with registration statements and other filings with various regulatory authorities, and quarterly interim reviews of the consolidated financial statements.

72

Audit Related Fees

KPMG billed us $52,000 in 2007, $62,000 in 2006 and $31,000 in 2005 for planning and scoping work and advice relating to compliance and internal controls over financial reporting.

Tax Fees

KPMG billed us $16,640 in 2007, $15,000 in 2006 and $25,000 in 2005 for tax compliance services.

All Other Fees

KPMG did not perform any other services for us.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Not applicable.

ITEM 17. FINANCIAL STATEMENTS

Not applicable.

ITEM 18. FINANCIAL STATEMENTS

The Auditors’ Report and Financial Statements for the Company are attached hereto as itemized under Item 19(a) and are incorporated herein by reference. Such Financial Statements have been prepared on the basis of Canadian GAAP. A reconciliation to U.S. GAAP appears in Note 27 thereto.

ITEM 19. EXHIBITS

(a) Financial Statements (see attached pages F-1 through F-44)

(i) Auditors’ Report.

(ii) Balance Sheets as at March 31, 2006 and 2007.

(iii) Statements of Operations and Deficit for the years ended March 31, 2005, 2006 and 2007.

(iv) Statements of Cash Flows for the years ended March 31, 2005, 2006 and 2007.

(v) Notes to the Financial Statements.

(b) Schedule of Valuation and Qualifying Accounts (see attached page S-1).

73

(c) Exhibits

1.1	Form of Articles of Amalgamation of North American Energy Partners Inc. (filed as Exhibit 3.3 to Amendment No. 3 to Form F-1 (Registration No. 333-135943), filed on October 23, 2006 and incorporated herein by reference).
1.2	Form of By-Law No. 2 of NACG Holdings Inc. (filed as Exhibit 3.4 to Amendment No. 4 to Form F-1 (Registration No. 333-135943), filed on November 3, 2006 and incorporated herein by reference).
2.1	Registration Rights Agreement, dated as of November 26, 2003, among NACG Holdings Inc. and the shareholders party thereto (filed as Exhibit 4.1 to Form F-1 (Registration No. 333-135943), filed on July 21, 2006 and incorporated herein by reference).
2.2	Form of Amended and Restated 2004 Share Option Plan (filed as Exhibit 4.2 to Amendment No. 3 to Form F-1 (Registration No. 333-135943), filed on October 23, 2006 and incorporated herein by reference).
2.3	Form of Letter Agreement between North American Energy Partners Inc. and its sponsors (filed as Exhibit 4.3 to Amendment No. 3 to Form F-1 (Registration No. 333-135943), filed on October 23, 2006 and incorporated herein by reference).
4.1	Second Amended and Restated Credit Agreement, dated as of June 7, 2007, among North American Energy Partners Inc., the lenders named therein and Canadian Imperial Bank of Commerce, as Administrative Agent.
4.2	Indenture, dated as of November 26, 2003, among North American Energy Partners Inc., the guarantors named therein and Wells Fargo Bank, N.A., as Trustee (filed as Exhibit 4.1 to Form F-4 (Registration No. 333-111396), filed on December 19, 2003 and incorporated herein by reference).
4.3	Employment Agreement with Rodney J. Ruston (filed as Exhibit 10.6 to Amendment No. 3 to Form F-1 (Registration No. 333-135943), filed on October 23, 2006 and incorporated herein by reference).
4.4	Employment Agreement with Robert G. Harris (filed as Exhibit 10.8 to Amendment No. 3 to Form F-1 (Registration No. 333-135943), filed on October 23, 2006 and incorporated herein by reference).
4.5	Employment Agreement with Christopher J. Hayman (filed as Exhibit 10.9 to Amendment No. 3 to Form F-1 (Registration No. 333-135943), filed on October 23, 2006 and incorporated herein by reference).
4.6	Employment Agreement with William M. Koehn (filed as Exhibit 10.10 to Amendment No. 3 to Form F-1 (Registration No. 333-135943), filed on October 23, 2006 and incorporated herein by reference).
4.7	Employment Agreement with Miles W. Safranovich (filed as Exhibit 10.11 to Amendment No. 3 to Form F-1 (Registration No. 333-135943), filed on October 23, 2006 and incorporated herein by reference).
4.8	Employment Agreement with Douglas A. Wilkes (filed as Exhibit 10.19 to Amendment No. 3 to Form F-1 (Registration No. 333-135943), filed on October 23, 2006 and incorporated herein by reference).
4.9	Overburden Removal and Mining Services Contract, dated November 17, 2004, between Canadian Natural Resources Limited and Noramac Ventures Inc. (filed as Exhibit 10.12 to Amendment No. 6 to Form F-1 (Registration No. 333-135943), filed on November 17, 2006 and incorporated herein by reference).
4.10	Amended and Restated Joint Venture Agreement, dated September 30, 2004, among North American Construction Group Inc., Fort McKay Construction Ltd. and Noramac Ventures Ltd., including the assignment of contract from Noramac Ventures Ltd. to North American Construction Group Inc., dated February 27, 2006 (filed as Exhibit 10.13 to Amendment No. 1 to Form F-1 (Registration No. 333-135943), filed on September 8, 2006 and incorporated herein by reference).

74

4.11	Office Lease, as amended as of November 26, 2003, between Acheson Properties Ltd. and North American Construction Group Inc. (filed as Exhibit 10.14 to Amendment No. 1 to Form F-1 (Registration No. 333-135943), filed on September 8, 2006 and incorporated herein by reference).
4.12	Office Lease, dated as of March 15, 2003, between Acheson Properties Ltd. and North American Construction Group Inc. (filed as Exhibit 10.15 to Amendment No. 1 to Form F-1 (Registration No. 333-135943), filed on September 8, 2006 and incorporated herein by reference).
4.13	Office Lease, dated as of July 1, 2003, between Acheson Properties Ltd. and North American Construction Group Inc. (filed as Exhibit 10.16 to Amendment No. 1 to Form F-1 (Registration No. 333-135943), filed on September 8, 2006 and incorporated herein by reference).
8.1	Subsidiaries of North American Energy Partners Inc. (included in Item 4.C of this report).
12.1	Section 13a-14(a)/15d-14(a) Certification of Principal Executive Officer.
12.2	Section 13a-14(a)/15d-14(a) Certification of Principal Financial Officer.
13.1	Section 1350 Certification of Principal Executive Officer and Principal Financial Officer.
15.1	Report and Consent of Independent Registered Public Accounting Firm.

75

SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

	NORTH AMERICAN ENERGY PARTNERS INC.
Date: June 19, 2007	By:	/s/    DOUGLAS A. WILKES
	Name:	Douglas A. Wilkes
	Title:	Vice President, Finance & Chief Financial Officer

76

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

CONSOLIDATED FINANCIAL STATEMENTS

For the years ended March 31, 2007, 2006 and 2005

(Expressed in thousands of Canadian dollars)

INDEX TO FINANCIAL STATEMENTS

Audited Consolidated Financial Statements of North American Energy Partners Inc.

(formerly NACG Holdings Inc.)

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as at March 31, 2007 and 2006	F-3
Consolidated Statements of Operations and Deficit for the years ended March 31, 2007, 2006 and 2005	F-4
Consolidated Statements of Cash Flows for the years ended March 31, 2007, 2006 and 2005	F-5
Notes to the Consolidated Financial Statements	F-6

F-1

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors

We have audited the consolidated balance sheets of North American Energy Partners Inc. (formerly NACG Holdings Inc.) as at March 31, 2007 and 2006 and the consolidated statements of operations and deficit and cash flows for each of the years in the three-year period ended March 31, 2007. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. We also conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our audit opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of North American Energy Partners Inc. (formerly NACG Holdings Inc.) as of March 31, 2007 and 2006 and the results of its operations and its cash flows for each of the years in the three-year period ended March 31, 2007 in accordance with Canadian generally accepted accounting principles.

As discussed in Note 2(r) to the consolidated financial statements, the Company adopted new accounting pronouncements related to the accounting for stock-based compensation for employees eligible to retire before the vesting date and determining the variability to be considered in applying the variable interest entities standards in 2007.

Canadian generally accepted accounting principles vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in note 27 to the consolidated financial statements.

/s/    KPMG LLP

Chartered Accountants

Edmonton, Canada

June 19, 2007

F-2

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

CONSOLIDATED BALANCE SHEETS

As at March 31

(in thousands of Canadian dollars)

	2007			2006
Assets
Current assets:
Cash and cash equivalents	$	7,895		$	42,804
Accounts receivable (note 5)		93,220			67,235
Unbilled revenue (note 6)		82,833			43,494
Inventory		156			57
Asset held for sale (note 8)		8,268			—
Prepaid expenses and deposits (note 7)		11,932			1,796
Other assets		10,164			1,004
Future income taxes (note 16)		14,593			5,238
		229,061			161,628
Future income taxes (note 16)		14,364			5,383
Plant and equipment (note 9)		255,963			184,562
Goodwill (note 4)		199,392			198,549
Intangible assets, net of accumulated amortization of $17,608 (March 31, 2006 – $17,026) (note 10)		600			772
Deferred financing costs, net of accumulated amortization of $7,595 (March 31, 2006 – $6,004) (notes 2 and 11)		11,356			17,788
	$	710,736		$	568,682
Liabilities and Shareholders’ Equity
Current liabilities:
Revolving credit facility (notes 12 and 28)	$	20,500		$	—
Accounts payable		94,548			54,085
Accrued liabilities (note 13)		23,393			24,603
Billings in excess of costs incurred and estimated earnings on uncompleted contracts (note 6)		2,999			5,124
Current portion of capital lease obligations (note 14)		3,195			3,046
Future income taxes (note 16)		4,154			5,238
		148,789			92,096
Capital lease obligations (note 14)		6,514			7,906
Senior notes (note 15)		230,580			304,007
Derivative financial instruments (note 22(b))		60,863			63,611
Redeemable preferred shares (notes 2 and 17(a))		—			77,568
Future income taxes (note 16)		19,712			5,383
		466,458			550,571
Shareholders’ equity:
Common shares (authorized—unlimited number of voting and non-voting common shares; issued and outstanding—March 31, 2007 – 35,192,260 voting common shares and 412,400 non-voting common shares (March 31, 2006 – 18,207,600 voting common shares and 412,400 non-voting common shares)) (notes 2 and 17(b))		296,198			93,100
Contributed surplus (notes 17(c) and 25)		3,606			1,557
Deficit		(55,526	)		(76,546	)
		244,278			18,111
Commitments (note 23)
United States generally accepted accounting principles (note 27)
Subsequent events (note 28)
	$	710,736		$	568,682

See accompanying notes to consolidated financial statements.

F-3

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT

For the years ended March 31

(in thousands of Canadian dollars, except per share amounts)

	2007			2006			2005
Revenue	$	629,446		$	492,237		$	357,323
Project costs		363,930			308,949			240,919
Equipment costs		122,306			64,832			52,831
Equipment operating lease expense		19,740			16,405			6,645
Depreciation (note 8)		31,034			21,725			20,762
Gross profit		92,436			80,326			36,166
General and administrative costs (note 21)		39,769			30,903			22,873
Loss (gain) on disposal of plant and equipment		959			(733	)		494
Amortization of intangible assets		582			730			3,368
Operating income before the undernoted		51,126			49,426			9,431
Interest expense (note 18)		37,249			68,776			31,141
Foreign exchange gain (note 22(b))		(5,044	)		(13,953	)		(19,815	)
Realized and unrealized (gain) loss on derivative financial instruments (note 22(b))		(196	)		14,689			43,113
Gain on repurchase of NACG Preferred Corp. Series A preferred shares (notes 2 and 17(a))		(9,400	)		—			—
Loss on extinguishment of debt (notes 2, 11 and 15)		10,935			2,095			—
Other income		(904	)		(977	)		(421	)
Income (loss) before income taxes		18,486			(21,204	)		(44,587	)
Income taxes (note 16):
Current income taxes		(2,975	)		737			2,711
Future income taxes		382			—			(4,975	)
Net income (loss)		21,079			(21,941	)		(42,323	)
Deficit, beginning of year		(76,546	)		(54,605	)		(12,282	)
Premium on repurchase of common shares (note 17(b))		(59	)		—			—
Deficit, end of year	$	(55,526	)	$	(76,546	)	$	(54,605	)
Net income (loss) per share—basic (note 17(d))	$	0.87		$	(1.18	)	$	(2.28	)
Net income (loss) per share—diluted (note 17(d))	$	0.83		$	(1.18	)	$	(2.28	)

See accompanying notes to consolidated financial statements

F-4

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended March 31

(in thousands of Canadian dollars)

	2007			2006			2005
Cash provided by (used in):
Operating activities:
Net income (loss) for the period	$	21,079		$	(21,941	)	$	(42,323	)
Items not affecting cash:
Depreciation		31,034			21,725			20,762
Write-down of other assets to replacement cost (note 3(g))		695			—			—
Amortization of intangible assets		582			730			3,368
Amortization of deferred financing costs		3,436			3,338			2,554
Loss (gain) on disposal of plant and equipment		959			(733	)		494
Unrealized foreign exchange gain on senior notes (note 22(b))		(5,017	)		(14,258	)		(20,340	)
Unrealized (gain) loss on derivative financial instruments (note 22(b))		(2,748	)		11,888			40,457
Stock-based compensation expense (note 25)		2,101			923			497
Gain on repurchase of NACG Preferred Corp. Series A preferred shares (notes 2 and 17(a))		(8,000	)		—			—
Loss on extinguishment of debt (notes 2, 11 and 15)		10,680			2,095			—
Change in redemption value and accretion of redeemable preferred shares		3,114			34,722			—
Future income taxes		382			—			(4,975	)
Net changes in non-cash working capital (note 19(b))		(48,245	)		(3,397	)		(6,167	)
		10,052			35,092			(5,673	)
Investing activities:
Acquisition, net of cash acquired (note 4)		(1,517	)		—			—
Purchase of plant and equipment		(110,019	)		(28,852	)		(24,839	)
Proceeds on disposal of plant and equipment		3,564			5,456			624
		(107,972	)		(23,396	)		(24,215	)
Financing activities:
Increase in revolving credit facility		20,500			—			—
Issue of 9% senior secured notes (note 15)		—			76,345			—
Repayment of 9% senior secured notes (note 15)		(74,748	)		—			—
Repayment of senior secured credit facility (note 11)		—			(61,257	)		(7,250	)
Issue of Series B preferred shares (note 17(a))		—			8,376			—
Repurchase of Series B preferred shares (notes 2 and 17(a))		—			(851	)		—
Repurchase of NAEPI Series A preferred shares (notes 2 and 17(a))		(1,000	)		—			—
Repurchase of NACG Preferred Corp. Series A preferred shares (notes 2 and 17(a))		(27,000	)		—			—
Financing costs (note 11)		(1,346	)		(7,546	)		(642	)
Repayment of capital lease obligations		(6,033	)		(2,183	)		(1,198	)
Increase in senior secured credit facility		—			—			20,007
Issue of common shares (note 2 and 17(b))		171,304			300			300
Share issue costs (notes 2 and 17(b))		(18,582	)		—			—
Repurchase of common shares for cancellation (note 17(b))		(84	)		—			—
		63,011			13,184			11,217
(Decrease) increase in cash and cash equivalents		(34,909	)		24,880			(18,671	)
Cash and cash equivalents, beginning of year		42,804			17,924			36,595
Cash and cash equivalents, end of year	$	7,895		$	42,804		$	17,924

See accompanying notes to consolidated financial statements

F-5

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

1. Nature of operations

NACG Holdings Inc. (the “Company”) was incorporated under the Canada Business Corporations Act on October 17, 2003. On November 26, 2003, the Company purchased all the issued and outstanding shares of North American Construction Group Inc. (“NACGI”), including subsidiaries of NACGI, from Norama Ltd. which had been operating continuously in Western Canada since 1953. The Company had no operations prior to November 26, 2003. The Company undertakes several types of projects including contract mining, industrial and commercial site development, pipeline and piling installations in Canada.

On November 28, 2006, immediately prior to the closing of the initial public offering (“IPO”) of common shares in Canada and the United States (note 2), the Company amalgamated with its wholly-owned subsidiaries, NACG Preferred Corp., and North American Energy Partners Inc. (“NAEPI”). The amalgamated entity was continued as North American Energy Partners Inc. The voting common shares of the new entity, North American Energy Partners Inc., include the shares offered in the IPO and outstanding common shares in North American Energy Partners Inc. that were not sold in the concurrent secondary offering.

2. Reorganization and initial public offering

On November 28, 2006, prior to the amalgamation referred to in note 1, the Company acquired the NACG Preferred Corp. Series A preferred shares with a carrying value of $35,000 in exchange for a promissory note in the amount of $27,000 and the forfeiture of accrued dividends of $1,400 (note 17(a)). The Company recorded a gain of $9,400 on the repurchase of the NACG Preferred Corp. Series A preferred shares.

On November 28, 2006, prior to the amalgamation referred to in note 1, the Company repurchased the NAEPI Series A preferred shares for their redemption value of $1,000. The Company also cancelled the consulting and advisory services agreement with The Sterling Group, L.P., Genstar Capital, L.P., Perry Strategic Capital Inc., and SF Holding Corp. (collectively, the “Sponsors”), under which the Company had received ongoing consulting and advisory services with respect to the organization of the companies, employee benefit and compensation arrangements and other matters. The consideration paid for the cancellation of the consulting and advisory services agreement on the closing of the offering was $2,000, which was recorded as general and administrative expense in the consolidated statement of operations. Under the consulting and advisory services agreement, the Sponsors also received a fee of $854, 0.5% of the aggregate gross proceeds to the Company from the offering, which was recorded as a share issue cost.

On November 28, 2006, prior to the amalgamation referred to in note 1, each holder of NAEPI Series B preferred shares received 100 common shares of NACG Holdings Inc. for each NAEPI Series B preferred share held as a result of the Company exercising a call option to acquire the NAEPI Series B preferred shares (note 17(a)). Upon exchange, the carrying value in the amount of $44,682 for the NAEPI Series B preferred shares on the exercise date was transferred to share capital.

On November 28, 2006, the Company completed an IPO for the sale of 8,750,000 common voting shares for total gross proceeds of $158,549. Net proceeds from the IPO, after deducting underwriting fees and offering expenses, were $140,850. Subsequent to the IPO, the underwriters exercised their overallotment option to purchase 687,500 additional voting common shares of the Company for gross proceeds of $12,616. Net proceeds from the overallotment, after deducting underwriting fees and offering expenses, were $11,733. Total net proceeds from the IPO and subsequent overallotment were $152,583 (note 17(b)).

F-6

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

The net proceeds from the IPO and subsequent overallotment were used:

• to repurchase all of the Company’s outstanding 9% senior secured notes due 2010 for $74,748 plus accrued interest of $3,027. The notes were redeemed at a premium of 109.26% resulting in a loss on extinguishment of $6,338. The loss on extinguishment, along with the write-off of deferred financing fees of $4,342 and other costs of $255, was recorded as a loss on extinguishment of debt in the consolidated statement of operations;

• to repay the promissory note in respect of the repurchase of the NACG Preferred Corp. Series A preferred shares for $27,000 as described above;

• to purchase certain equipment leased under operating leases for $44,623;

• to cancel the consulting and advisory services agreement with the Sponsors for $2,000; and

• for general corporate purposes.

3. Significant accounting policies

a) Basis of presentation

These consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles (“GAAP”). Material inter-company transactions and balances are eliminated on consolidation. Material items that give rise to measurement differences to the consolidated financial statements under United States GAAP are outlined in note 27.

These consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary, North American Construction Group Inc. (“NACGI”), the Company’s joint venture, Noramac Ventures Inc. and the following 100% owned subsidiaries of NACGI:

•     North American Caisson Ltd.	•     North American Pipeline Inc.
•     North American Construction Ltd.	•     North American Road Inc.
•     North American Engineering Ltd.	•     North American Services Inc.
•     North American Enterprises Ltd.	•     North American Site Development Ltd.
•     North American Industries Inc.	•     North American Site Services Inc.
•     North American Mining Inc.	•     Griffiths Pile Driving Inc.
•     North American Maintenance Ltd.	•     Midwest Foundation Technologies Ltd.

b) Use of estimates

The preparation of financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and disclosures reported in these consolidated financial statements and accompanying notes.

Significant estimates made by management include the assessment of the percentage of completion on unit-price or lump-sum contracts (including estimated total costs and provisions for estimated losses) and the recognition of claims and change orders on contracts, assumptions used to value derivative financial instruments, assumptions used to determine the redemption value of redeemable securities, assumptions used in periodic impairment testing, and estimates and assumptions used in the determination of the

F-7

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

allowance for doubtful accounts and the useful lives of plant and equipment. Actual results could differ materially from those estimates.

c) Revenue recognition

The Company performs its projects under the following types of contracts: time-and-materials; cost-plus; unit-price; and lump sum. For time-and-materials and cost-plus contracts, revenue is recognized as costs are incurred. Revenue on unit-price and lump sum contracts is recognized using the percentage-of-completion method, measured by the ratio of costs incurred to date to estimated total costs. Excluded from costs incurred to date, particularly in the early stages of the contract, are the costs of items that do not relate to performance of contracted work.

The length of the Company’s contracts varies from less than one year for typical contracts to several years for certain larger contracts. Contract project costs include all direct labour, material, subcontract and equipment costs and those indirect costs related to contract performance such as indirect labour, supplies, and tools. General and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in project performance, project conditions, and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and income that are recognized in the period in which such adjustments are determined. Profit incentives are included in revenue when their realization is reasonably assured.

Once a project is underway, the Company will often experience changes in conditions, client requirements, specifications, designs, materials and work schedule. Generally, a “change order” will be negotiated with the customer to modify the original contract to approve both the scope and price of the change. Occasionally, however, disagreements arise regarding changes, their nature, measurement, timing and other characteristics that impact costs and revenue under the contract. When a change becomes a point of dispute between the Company and a customer, the Company will then consider it as a claim.

Costs related to change orders and claims are recognized when they are incurred. Revenues related to change orders are included in total estimated contract revenue when it is probable that the change order will result in a bona fide addition to contract value and can be reliably estimated.

Revenues related to claims are included in total estimated contract revenue only to the extent that contract costs related to the claim have been incurred and when it is probable that the claim will result in (1) a bona fide addition to contract value and (2) revenues can be reliably estimated. These two conditions are satisfied when (1) the contract or other evidence provides a legal basis for the claim or a legal opinion is obtained providing a reasonable basis to support the claim, (2) additional costs incurred were caused by unforeseen circumstances and are not the result of deficiencies in our performance, (3) costs associated with the claim are identifiable and reasonable in view of work performed and (4) evidence supporting the claim is objective and verifiable. No profit is recognized on claims until final settlement occurs. This can lead to a situation where costs are recognized in one period and revenue is recognized when customer agreement is obtained or claim resolution occurs, which can be in subsequent periods. Historical claim recoveries should not be considered indicative of future claim recoveries.

Claims revenue recognized was $14.5 million for the year ended March 31, 2007 (2006 – $12.9 million; 2005 – $nil), $8.4 million of which is included in unbilled revenue and remains uncollected at the end of the year (2005 – $nil). Of the amount included in unbilled revenue at March 31, 2007, $6.6 million was collected subsequent to year end.

F-8

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

The asset entitled “unbilled revenue” represents revenue recognized in advance of amounts invoiced. The liability entitled “billings in excess of costs incurred and estimated earnings on uncompleted contracts” represents amounts invoiced in excess of revenue recognized.

d) Cash and cash equivalents

Cash and cash equivalents include cash on hand, bank balances net of outstanding cheques, and short-term investments with maturities of three months or less when purchased.

e) Allowance for doubtful accounts

The Company evaluates the probability of collection of accounts receivable and records an allowance for doubtful accounts, which reduces accounts receivable to the amount management reasonably believes will be collected. In determining the amount of the allowance, the following factors are considered: the length of time the receivable has been outstanding, specific knowledge of each customer’s financial condition, and historical experience.

f) Inventory

Inventory is carried at the lower of cost (on a first-in, first-out basis) and replacement cost, and consists primarily of job materials.

g) Other assets

Other assets consist of tires and spare component parts, and are stated at the lower of weighted average cost or replacement cost. Other assets are charged to earnings when they are put into use. Included in equipment costs for the year ended March 31, 2007 is a $695 write-down of other assets to their replacement cost at March 31, 2007.

h) Plant and equipment

Plant and equipment are recorded at cost. Major components of heavy construction equipment in use such as engines and transmissions are recorded separately. Equipment under capital lease is recorded at the present value of minimum lease payments at the inception of the lease. Depreciation is not recorded until an asset is available for service. Depreciation for each category is calculated based on the cost, net of the estimated residual value, over the estimated useful life of the assets on the following bases and annual rates:

Asset	Basis	Rate
Heavy equipment	Straight-line	Operating hours
Major component parts in use	Straight-line	Operating hours
Other equipment	Straight-line	10-20%
Licensed motor vehicles	Declining balance	30%
Office and computer equipment	Straight-line	25%
Buildings	Straight-line	10%
Leasehold improvements	Straight-line	Over shorter of estimated useful life and lease term
Assets under construction	N/A	N/A

F-9

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

The costs for periodic repairs and maintenance are expensed to the extent the expenditures serve only to restore the assets to their normal operating condition without enhancing their service potential or extending their useful lives.

i) Goodwill

Goodwill represents the excess purchase price paid by the Company over the fair value of tangible and identifiable intangible assets and liabilities acquired as a result of purchasing a business entity. Goodwill is not amortized but instead is tested for impairment annually or more frequently if events or changes in circumstances indicate that it may be impaired. The impairment test is carried out in two steps. In the first step, the carrying amount of the reporting unit, including goodwill, is compared to its fair value. When the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered to be impaired and the second step of the impairment test is unnecessary. The second step is carried out when the carrying amount of a reporting unit exceeds its fair value, in which case the implied fair value of the reporting unit’s goodwill, determined in the same manner as the value of goodwill is determined in a business combination, is compared with its carrying amount to measure the amount of the impairment loss, if any.

The Company tested goodwill for impairment at December 31, 2006 and December 31, 2005 and determined that there was no impairment in carrying value. The Company conducts its annual impairment test of goodwill on December 31 of each year.

j) Intangible assets

Intangible assets include: customer contracts in progress and related relationships, which are being amortized based on the net present value of the estimated period cash flows over the remaining lives of the related contracts; trade names, which are being amortized on a straight-line basis over their estimated useful life of 10 years; non-competition agreements, which are being amortized on a straight-line basis between the three and five-year terms of the respective agreements; and employee arrangements, which are being amortized on a straight-line basis over the three-year term of the arrangements.

k) Deferred financing costs

Costs relating to the issue of the senior notes and the revolving credit facility have been deferred and are being amortized on a straight-line basis over the term of the related debt. Deferred financing costs related to debt that has been extinguished are written-off in the period of extinguishment.

l) Impairment of long-lived assets

Long-lived assets and identifiable intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is assessed by a comparison of the carrying value of the asset to future undiscounted cash flows expected to be generated by the asset. If the value of such asset is considered to be impaired, the impairment loss is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset, and is charged to depreciation expense.

Long-lived assets are classified as held for sale when certain criteria are met, which include: management’s commitment to a plan to sell the assets; the assets are available for immediate sale in their present condition; an active program to locate buyers and other actions to the sell the assets have been

F-10

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

initiated; the sale of the assets is probable and their transfer is expected to qualify for recognition as a completed sale within one year; the assets are being actively marketed at reasonable prices in relation to their fair value; and it is unlikely that significant changes will be made to the plan to sell the assets or that the plan will be withdrawn. Assets to be disposed of by sale are reported at the lower of their carrying amount or fair value less costs to sell and are included in current assets. These assets are not depreciated.

m) Foreign currency translation

The functional currency of the Company is Canadian dollars. Transactions denominated in foreign currencies are recorded at the rate of exchange on the transaction date. Monetary assets and liabilities, including long-term debt denominated in U.S. dollars, are translated into Canadian dollars at the rate of exchange prevailing at the balance sheet date.

n) Derivative financial instruments

The Company uses derivative financial instruments to manage financial risks from fluctuations in exchange rates and interest rates. These instruments include cross-currency swap agreements and interest rate swap agreements. All such instruments are only used for risk management purposes. The Company does not hold or issue derivative financial instruments for trading or speculative purposes. Derivative financial instruments are subject to standard credit terms and conditions, financial controls, management and risk monitoring procedures.

A derivative financial instrument must be designated and effective, at inception and on at least a quarterly basis, to be accounted for as a hedge. For cash flow hedges, effectiveness is achieved if the changes in the cash flows of the derivative financial instrument substantially offset the changes in the cash flows of the related hedged item and if the timing of the cash flows is similar. Effectiveness for fair value hedges is achieved if changes in the fair value of the derivative financial instrument substantially offset changes in the fair value of the hedged item attributable to the risk being hedged. In the event that a derivative financial instrument does not meet the designation or effectiveness criteria, the derivative financial instrument is accounted for at fair value and realized and unrealized gains and losses on the derivative are recognized in the Consolidated Statement of Operations and Deficit in accordance with the Canadian Institute of Chartered Accountants (“CICA”) Emerging Issues Committee Abstract No. 128, “Accounting for Trading, Speculative or Non-Hedging Derivative Financial Instruments” (“EIC-128”). If a derivative financial instrument that previously qualified for hedge accounting no longer qualifies or is settled or de-designated, the fair value on that date is deferred and recognized when the corresponding hedged transaction is recognized in earnings. Premiums paid or received with respect to derivatives that are hedges are deferred and amortized to income over the term of the hedge.

o) Income taxes

The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, future income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future income tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on future income tax assets and liabilities from a change in tax rates is recognized in income in the period of enactment or substantive enactment. A valuation allowance is recorded against any future income tax asset if it is more likely than not that the asset will not be realized.

F-11

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

p) Stock–based compensation plan

The Company accounts for all stock-based compensation payments in accordance with a fair value based method of accounting. Under this fair value based method, compensation cost is measured using the Black-Scholes model at the grant date and is expensed over the award’s vesting period, with a corresponding increase to contributed surplus. Upon exercise of a stock option, share capital is recorded at the sum of proceeds received and the related amount of contributed surplus.

q) Net income (loss) per share

Basic net income (loss) per share is computed by dividing net earnings (loss) available to common shareholders by the weighted average number of shares outstanding during the year (see note 17(d)). Diluted per share amounts are calculated using the treasury stock and if-converted methods. The treasury stock method increases the diluted weighted average shares outstanding to include additional shares from the assumed exercise of stock options, if dilutive. The number of additional shares is calculated by assuming that outstanding in-the-money stock options were exercised and that the proceeds from such exercises, including any unamortized stock-based compensation cost, were used to acquire shares of common stock at the average market price during the year. The if-converted method assumes the conversion of convertible securities at the later of the beginning of the reported period or issue date, if dilutive.

r) Recently adopted Canadian accounting pronouncements

i. Consolidation of variable interest entities

Effective January 1, 2005, the Company prospectively adopted CICA Accounting Guideline 15, “Consolidation of Variable Interest Entities” (“AcG-15”). Variable interest entities (“VIEs”) are entities that have insufficient equity at risk to finance their operations without additional subordinated financial support and/or entities whose equity investors lack one or more of the specified essential characteristics of a controlling financial interest. AcG-15 provides specific guidance for determining when an entity is a variable interest entity (“VIE”) and who, if anyone, should consolidate the VIE. The Company has determined the joint venture in which it has an investment (note 19(c)) qualifies as a VIE and began consolidating this VIE effective January 1, 2005.

ii. Arrangements containing a lease

Effective January 1, 2005, the Company adopted the CICA Emerging Issues Committee Abstract No. 150, “Determining Whether an Arrangement Contains a Lease” (EIC-150”). EIC-150 addresses a situation where an entity enters into an arrangement, comprising a transaction that does not take the legal form of a lease but conveys a right to use a tangible asset in return for a payment or series of payments. The implementation of this standard did not have a material impact on the Company’s consolidated financial statements.

iii. Vendor rebates

In April 2005, the Company adopted the CICA Emerging Issues Committee Abstract No. 144, “Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor” (“EIC-144”). EIC-144 requires companies to recognize the benefit of non-discretionary rebates for achieving specified cumulative purchasing levels as a reduction of the cost of purchases over the relevant period, provided the rebate is probable and reasonably estimable. Otherwise, the rebates would be

F-12

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

recognized as purchasing milestones are achieved. The implementation of this new standard did not have a material impact on the Company’s consolidated financial statements.

iv. Non-monetary transactions

Effective January 1, 2006, the Company adopted the requirements of CICA Handbook Section 3831, “Non-monetary Transactions”. The new standard requires that an asset exchanged or transferred in a non-monetary transaction must be measured at its fair value except when: the transaction lacks commercial substance; the transaction is an exchange of production or property held for sale in the ordinary course of business for production or property to be sold in the same line of business to facilitate sales to customers other than the parties to the exchange; neither the fair value of the assets or services received nor the fair value of the assets or services given up is reliably measurable; or the transaction is a non-monetary, non-reciprocal transfer to owners that represents a spin-off or other form of restructuring or liquidation. In these cases, the transaction must be measured at carrying value. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

v. Implicit variable interests under AcG-15

Effective January 1, 2006, the Company adopted the CICA Emerging Issues Committee Abstract No. 157, “Implicit Variable Interests Under AcG-15” (“EIC-157”). EIC-157 requires a company to assess whether it has an implicit variable interest in a VIE or potential VIE when specific conditions exist. An implicit variable interest acts the same as an explicit variable interest except it involves the absorbing and/or receiving of variability indirectly from the entity (rather than directly). The identification of an implicit variable interest is a matter of judgment that depends on the relevant facts and circumstances. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

vi. Conditional asset retirement obligations

In November 2005, the CICA issued Emerging Issues Committee Abstract No. 159, “Conditional Asset Retirement Obligations” (“EIC-159”) to clarify the accounting treatment for a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. Under EIC-159, an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the obligation can be reasonably estimated. The guidance is effective April 1, 2006 although early adoption is permitted and is to be applied retroactively, with restatement of prior periods. The Company adopted this standard in fiscal 2006 and the adoption did not have a material impact on the Company’s consolidated financial statements.

vii. Stock-based compensation for employees eligible to retire before the vesting date

In July 2006, the CICA Emerging Issues Committee issued Abstract No. 162, ‘‘Stock-Based Compensation for Employees Eligible to Retire Before the Vesting Date’’ (‘‘EIC-162’’). EIC-162 requires that the compensation cost attributable to awards granted to employees eligible to retire at the grant date should be recognized on the grant date if the award’s exercisability does not depend on continued service. Additionally, awards granted to employees who will become eligible to retire during the vesting period should be recognized over the period from the grant date to the date the employee becomes eligible to retire. The Company adopted this standard for the interim period ended December 31, 2006 retroactively, with restatement of prior periods for all stock-based compensation awards. The adoption of this standard had no impact on the Company’s consolidated financial statements.

F-13

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

viii. Determining the variability to be considered in applying the VIE standards

In September 2006, the CICA issued Emerging Issues Committee Abstract No. 163, “Determining the Variability to be Considered in Applying AcG-15” (“EIC-163”). This guidance provides additional clarification on how to analyze and consolidate a VIE. EIC-163 concludes that the “by-design” approach should be the method used to assess variability (that is created by risks the entity is designed to create and pass along to its interest holders) when applying the VIE standards. The “by-design” approach focuses on the substance of the risks created over the form of the relationship. The guidance may be applied to all entities (including newly created entities) with which an enterprise first becomes involved and to all entities previously required to be analyzed under the VIE standards when a reconsideration event has occurred and is effective for interim and annual periods beginning on or after January 1, 2007. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

s) Recent Canadian accounting pronouncements not yet adopted

i. Financial instruments

In January 2005, the CICA issued Handbook Section 3855, “Financial Instruments—Recognition and Measurement”, Handbook Section 1530, “Comprehensive Income”, and Handbook Section 3865, “Hedges”. The new standards are effective for interim and annual financial statements for fiscal years beginning on or after October 1, 2006, specifically April 1, 2007 for the Company. The new standards will require presentation of a separate statement of comprehensive income under specific circumstances. Foreign exchange gains and losses on the translation of the financial statements of self-sustaining subsidiaries previously recorded in a separate section of shareholder’s equity will be presented in comprehensive income. Derivative financial instruments will be recorded in the balance sheet at fair value and the changes in fair value of derivatives designated as cash flow hedges will be reported in comprehensive income. The Company is currently assessing the impact of the new standards.

Effective April 1, 2007, the Company will also be required to adopt CICA Handbook Section 3861, “Financial Instruments—Disclosure and Presentation” (“CICA 3861”), which requires entities to provide disclosures in their financial statements that enable users to evaluate: (1) the significance of financial instruments on the entity’s financial performance; and (2) the nature and extent of risks arising from the use of financial instruments by the entity during the period and at the balance sheet date, and how the entity manages those risks. The Company is currently assessing the impact of this standard.

In March 2007, the CICA issued Handbook Section 3862, “Financial Instruments—Disclosures”, which replaces CICA 3861 and provides expanded disclosure requirements that provide additional detail by financial assets and liability categories. This standard harmonizes disclosures with International Financial Reporting Standards. The standard applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2007, specifically April 1, 2008 for the Company. The Company is currently evaluating the impact of this standard.

In March 2007, the CICA issued Handbook Section 3863, “Financial Instruments—Presentation” to enhance financial statement users’ understanding of the significance of financial instruments to an entity’s financial position, performance and cash flows. This Section establishes standards for presentation of financial instruments and non-financial derivatives. It deals with the classification of financial instruments, from the perspective of the issuer, between liabilities and equity, the classification of related interest, dividends, gains and losses, and the circumstances in which financial assets and financial liabilities are

F-14

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

offset. This standard harmonizes disclosures with International Financial Reporting Standards and applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2007, specifically April 1, 2008 for the Company. The Company is currently evaluating the impact of this standard.

ii. Equity

On April 1, 2007, the Company will adopt CICA Handbook Section 3251, “Equity”, which establishes standards for the presentation of equity and changes in equity during the reporting period. The requirements in this section are in addition to those of CICA Handbook Section 1530 and recommend that an enterprise should present separately the following components of equity: retained earnings, accumulated other comprehensive income, and the total for retained earnings and accumulated other comprehensive income, contributed surplus, share capital and reserves. The Company is currently evaluating the impact of this standard.

iii. Accounting changes

In July 2006, the CICA revised Handbook Section 1506, “Accounting Changes”, which requires that: (1) voluntary changes in accounting policy are made only if they result in the financial statements providing reliable and more relevant information; (2) changes in accounting policy are generally applied retrospectively; and (3) prior period errors are corrected retrospectively. This revised standard is effective for fiscal years beginning on or after January 1, 2007, specifically April 1, 2007 for the Company, and is not expected to have a material impact on the Company’s consolidated financial statements.

iv. Capital disclosures

In December 2006, the CICA issued Handbook Section 1535, “Capital Disclosures”. This standard requires that an entity disclose information that enables users of its financial statements to evaluate an entity’s objectives, policies and processes for managing capital, including disclosures of any externally imposed capital requirements and the consequences of non-compliance. The new standard applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2007, specifically April 1, 2008 for the Company. The Company is currently evaluating the impact of this standard.

v. Inventories

In June 2007, the CICA issued Handbook Section 3031, “Inventories” to harmonize accounting for inventories under Canadian GAAP with International Financial Reporting Standards. This standard requires the measurement of inventories at the lower of cost and net realizable value and includes guidance on the determination of cost, including allocation of overheads and other costs to inventory. The standard also requires the consistent use of either first-in, first out (FIFO) or weighted average cost formula to measure the cost of other inventories and requires the reversal of previous write-downs to net realizable value when there is a subsequent increase in the value of inventories. The new standard applies to interim and annual financial statements relating to fiscal years beginning on or after January 1, 2008, specifically April 1, 2008 for the Company. The Company is currently evaluating the impact of this standard.

4.    Acquisition

On September 1, 2006, the Company acquired all of the shares of Midwest Foundation Technologies Ltd., a piling company specializing in the design and installation of micropile foundations in western Canada, for cash

F-15

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

consideration and acquisition costs totalling $1,646. The transaction has been accounted for by the purchase method with the results of operations included in the financial statements from the date of acquisition. The final purchase price allocation is as follows:

Net assets acquired at fair values:
Working capital (including cash of $129)	$	170
Plant and equipment		554
Intangible assets
Customer relationships		210
Non-competition agreement		200
Goodwill (assigned to the Piling segment)		843
Future income tax liability		(194	)
Capital lease obligations		(137	)
	$	1,646

5.    Accounts receivable

	March 31, 2007			March 31, 2006
Accounts receivable—trade	$	69,320		$	55,666
Accounts receivable—holdbacks		19,496			10,748
Income and other taxes receivable		3,034			—
Accounts receivable—other		1,458			891
Allowance for doubtful accounts		(88	)		(70	)
	$	93,220		$	67,235

Accounts receivable—holdbacks represent amounts up to 10% under certain contracts that the customer is contractually entitled to withhold until completion of the project or until certain project milestones are achieved.

6.    Costs incurred and estimated earnings net of billings on uncompleted contracts

	March 31, 2007			March 31, 2006
Costs incurred and estimated earnings on uncompleted contracts	$	742,186		$	610,006
Less: billings to date		(662,352	)		(571,636	)
	$	79,834		$	38,370

Costs incurred and estimated earnings net of billings on uncompleted contracts is presented in the consolidated balance sheets under the following captions:

	March 31, 2007			March 31, 2006
Unbilled revenue	$	82,833		$	43,494
Billings in excess of costs incurred and estimated earnings on uncompleted contracts		(2,999	)		(5,124	)
	$	79,834		$	38,370

F-16

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

7.    Prepaid expenses and deposits

	March 31, 2007		March 31, 2006
Prepaid insurance and property taxes	$	916	$	345
Prepaid lease payments		3,934		—
Deposits for tires		7,082		1,451
	$	11,932	$	1,796

8.    Asset held for sale

Included in depreciation expense for the year ended March 31, 2007 is an impairment charge of $3,582 (2006 – $nil; 2005 – $nil) relating to a decision to dispose of a heavy construction asset in the Mining & Site Preparation segment. The impairment charge is the amount by which the carrying value of the asset exceeded its fair value less costs to sell. The asset has been reclassified from plant and equipment to current assets as the sale of the asset is expected to occur in fiscal 2008.

9.    Plant and equipment

March 31, 2007	Cost		Accumulated depreciation		Net book value
Heavy equipment	$	254,107	$	46,609	$	207,498
Major component parts in use		7,884		2,489		5,395
Other equipment		16,001		5,651		10,350
Licensed motor vehicles		23,345		12,121		11,224
Office and computer equipment		4,841		2,249		2,592
Buildings		16,443		716		15,727
Leasehold improvements		2,992		664		2,328
Assets under construction		849		—		849
	$	326,462	$	70,499	$	255,963
March 31, 2006	Cost		Accumulated depreciation		Net book value
Heavy equipment	$	174,042	$	31,347	$	142,695
Major component parts in use		5,088		2,091		2,997
Other equipment		13,074		4,186		8,888
Licensed motor vehicles		18,223		8,410		9,813
Office and computer equipment		3,362		1,493		1,869
Leasehold improvements		2,959		247		2,712
Assets under construction		15,588		—		15,588
	$	232,336	$	47,774	$	184,562

F-17

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

The above amounts include $15,422 (March 31, 2006 – $14,559) of assets under capital lease and $7,302 (March 31, 2006 – $4,479) of related accumulated depreciation. During the year ended March 31, 2007 additions to plant and equipment included $4,653 of assets that were acquired by means of capital leases (2006 – $5,910; 2005 – $5,385). Depreciation of equipment under capital lease of $1,481 (2006 – $2,545; 2005 – $1,659) is included in depreciation expense.

10.    Intangible assets

March 31, 2007	Cost		Accumulated amortization		Net book value
Customer contracts in progress and related relationships	$	15,533	$	15,360	$	173
Other intangible assets		2,675		2,248		427
	$	18,208	$	17,608	$	600

March 31, 2006	Cost		Accumulated amortization		Net book value
Customer contracts in progress and related relationships	$	15,323	$	15,323	$	—
Other intangible assets		2,475		1,703		772
	$	17,798	$	17,026	$	772

Amortization of intangible assets of $582 was recorded for the year ended March 31, 2007 (2006 – $730; 2005 – $3,368).

The estimated amortization expense for the next five years is as follows:

For the year ending March 31,
2008	$	156
2009		134
2010		78
2011		49
2012 and thereafter		183
	$	600

11.    Deferred financing costs

For the year ended March 31, 2007, fees of $275 were paid to the holders of the 8 ³/4% senior notes in connection with an amendment of the indenture governing the 8 ³/4% senior notes (note 15). The amendment has been accounted for as a modification, and the fees paid to the note holders, together with the existing unamortized deferred financing costs, were deferred and will be amortized on a straight-line basis over the remaining term of the 8 ³/4% senior notes.

During the year ended March 31, 2007, financing fees totaling $1,071 paid in connection with amendment of the revolving credit facility (note 12) were recorded as deferred financing costs. These costs, together with the

F-18

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

existing unamortized deferred financing costs, were deferred and will be amortized on a straight-line basis over the term of the amended revolving credit facility consistent with accounting for the amendment of the revolving credit facility as a modification.

In connection with the retirement of the 9% senior secured notes on November 28, 2006, the Company wrote off deferred financing costs of $4,342 (notes 2 and 15) during the year ended March 31, 2007.

For the year ended March 31, 2006, financing costs of $7,546 were incurred in connection with the issue of the 9% senior secured notes and revolving credit facility and were recorded as deferred financing costs. In addition, financing costs of $321 were incurred in connection with the issue of the NAEPI Series A redeemable preferred shares and expensed in the year ended March 31, 2006.

On May 19, 2005, the Company repaid its entire indebtedness under a previous revolving credit facility and term loan using the net proceeds from the issue of the 9% senior secured notes (note 15) and the NAEPI Series B preferred shares (note 17(a)). In connection with the repayment of the senior secured credit facility on May 19, 2005, the Company wrote off deferred financing costs of $1,774 during the year ended March 31, 2006.

Amortization of deferred financing costs of $3,436 was recorded for the year ended March 31, 2007 (2006 – $3,338; 2005 – $2,554).

12.    Revolving credit facility

On May 19, 2005, NAEPI entered into a revolving credit facility with a syndicate of lenders. In connection with the revolving credit facility, NAEPI was required to amend its existing swap agreements to increase the effective rate of interest on its 8 ³/4% senior notes from 9.765% to 9.889% (note 22(c)) and issue to one of the counterparties to the swap agreements $1.0 million of NAEPI Series A redeemable preferred shares (note 17(a)).

On July 19, 2006, the Company amended and restated its credit agreement to provide for borrowings of up to $55.0 million (previously $40.0 million), subject to borrowing base limitations, under which revolving loans and letters of credit may be issued (previously up to a limit of $30.0 million). Prime rate revolving loans under the amended and restated agreement bear interest at the Canadian prime rate plus 2.0% per annum and swing line revolving loans bear interest at the Canadian prime rate plus 1.5% per annum. Canadian bankers’ acceptances have stamping fees equal to 3.0% per annum and letters of credit are subject to a fee of 3.0% per annum.

Advances under the July 19, 2006 amended and restated agreement are margined with a borrowing base calculation defined as the aggregate of 60.0% of the net book value of the Company’s plant and equipment, 75.0% of eligible accounts receivable and un-pledged cash in excess of $15.0 million. The sum of all borrowings (including issued letters of credit) and the fair value of the Company’s liability under existing swap agreements must not exceed the borrowing base. The amended and restated credit facility is secured by a first priority lien on substantially all of the Company’s existing and after-acquired property.

The facility contains certain restrictive covenants including, but not limited to, incurring additional debt, transferring or selling assets, making investments (including acquisitions), paying dividends or redeeming shares of capital stock. The Company is also required to meet certain financial covenants. Other terms of the agreement, including the expiry date, did not change. The expiry date of the amended and restated revolving credit facility is March 1, 2010.

F-19

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

As of March 31, 2007, the Company had outstanding borrowings of $20.5 million (2006 – $nil) under the revolving credit facility and had issued $25.0 million in letters of credit to support performance guarantees associated with customer contracts. As of March 31, 2006, the Company had issued $18.0 million in letters of credit to support bonding requirements and performance guarantees associated with customer contracts and operating leases. The Company’s borrowing availability under the facility was $9.5 million at March 31, 2007 (2006 – $9.3 million).

The Company entered into an amended and restated credit agreement on June 6, 2007 (note 28).

13.    Accrued liabilities

	March 31, 2007		March 31, 2006
Accrued interest payable	$	8,669	$	10,878
Payroll liabilities		7,484		7,423
Liabilities related to equipment leases		7,039		5,061
Income and other taxes payable		201		1,241
	$	23,393	$	24,603

14.    Capital lease obligations

The Company leases a portion of its licensed motor vehicles for which the minimum lease payments due in each of the next five fiscal years are as follows:

2008	$	3,795
2009		3,133
2010		2,121
2011		1,395
2012		242
		10,686
Less: amount representing interest—weighted average rate of 9.14%		977
Present value of minimum lease payments		9,709
Less: current portion		3,195
	$	6,514

15.    Senior notes

	March 31, 2007		March 31, 2006
8 3/4% senior unsecured notes due 2011	$	230,580	$	233,420
9% senior secured notes due 2010		—		70,587
	$	230,580	$	304,007

F-20

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

The 8 ³/4% senior notes were issued on November 26, 2003 in the amount of US$200 million (Canadian $263 million). These notes mature on December 1, 2011 with interest payable semi-annually on June 1 and December 1 of each year.

The 8 ³/4% senior notes are unsecured senior obligations and rank equally with all other existing and future unsecured senior debt and senior to any subordinated debt that may be issued by the Company or any of its subsidiaries. The notes are effectively subordinated to all secured debt to the extent of the outstanding amount of such debt.

The 8 ³/4% senior notes are redeemable at the option of the Company, in whole or in part, at any time on or after: December 1, 2007 at 104.375% of the principal amount; December 1, 2008 at 102.188% of the principal amount; December 1, 2009 at 100.00% of the principal amount; plus, in each case, interest accrued to the redemption date.

If a change of control occurs, the Company will be required to offer to purchase all or a portion of each holder’s 8 ³/4% senior notes, at a purchase price in cash equal to 101% of the principal amount of the notes offered for repurchase plus accrued interest to the date of purchase.

On December 21, 2006, the indenture governing the 8 ³/4% senior notes was amended to remove the requirement to provide a reconciliation from Canadian GAAP to United States GAAP in the Company’s interim consolidated financial statements.

The 9% senior secured notes were issued on May 19, 2005 in the amount of US$60.481 million (Canadian $76.345 million). In connection with the IPO (note 2), the Company repurchased the 9% senior secured notes for $74,748 plus accrued interest of $3,027 on November 28, 2006. These notes were redeemed at a premium of 109.26% on November 28, 2006 resulting in a loss on extinguishment of $6,338. The loss on settlement, along with the write-off of deferred financing fees of $4,342 and third party transaction costs of $255, was recorded as a loss on extinguishment of debt in the consolidated statement of operations for the year ended March 31, 2007.

F-21

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

16.    Income taxes

Income tax provision (recovery) differs from the amount that would be computed by applying the Federal and provincial statutory income tax rate to income from continuing operations. The reasons for the differences are as follows:

	Year ended March 31,
	2007			2006			2005
Income (loss) before income taxes	$	18,486		$	(21,204	)	$	(44,587	)
Statutory tax rate		32.12	%		33.62	%		33.62	%
Expected provision (recovery) at statutory tax rate	$	5,938		$	(7,129	)	$	(14,990	)
Increase (decrease) related to:
Change in future income tax liability, resulting from enacted change in future statutory income tax rates		(2,106	)		—			—
Change in redemption value and accretion of redeemable preferred shares		1,000			11,674			—
Change in future income tax liability, resulting from valuation allowance		(5,858	)		(4,097	)		12,189
Non-taxable gain on repurchase of NACG Preferred Corp. Series A preferred shares		(3,019	)		—			—
Non-deductible financing transactions		1,196			—			—
Large corporations tax		(136	)		716			871
Other		392			(427	)		(334	)
Income tax provision (recovery)	$	(2,593	)	$	737		$	(2,264	)

Classified as:

	Year ended March 31,
	2007			2006		2005
Current income taxes	$	(2,975	)	$	737	$	2,711
Future income taxes		382			—		(4,975	)
	$	(2,593	)	$	737	$	(2,264	)

The income tax effects of temporary differences that give rise to future income tax assets and liabilities are as follows:

	March 31, 2007		March 31, 2006
Future income tax assets:
Non-capital losses carried forward	$	23,875	$	22,312
Deferred share issue costs		4,547		—
Deferred premium on senior notes		1,614		—
Derivative financial instruments		4,787		6,843
Unrealized foreign exchange loss on senior notes		1,730		2,299
Billings in excess of costs on uncompleted contracts		963		1,723
Capital lease obligations		1,713		1,631
Total future income tax assets		39,229		34,808
Less valuation allowance		—		(5,858	)
Net future income tax assets		39,229		28,950

F-22

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

	March 31, 2007		March 31, 2006
Future income tax liabilities:
Unbilled revenue and uncertified revenue included in accounts receivable		3,751		1,970
Asset held for sale		1,878		—
Accounts receivable—holdbacks		6,262		3,613
Plant and equipment		20,897		20,263
Deferred financing costs		1,176		1,038
Intangible assets		174		130
Unrealized foreign exchange gain on senior notes		—		1,936
Total future income tax liabilities		34,138		28,950
Net future income taxes	$	5,091	$	—

Classified as:

	March 31, 2007			March 31, 2006
Current asset	$	14,593		$	5,238
Long-term asset		14,364			5,383
Current liability		(4,154	)		(5,238	)
Long-term liability		(19,712	)		(5,383	)
	$	5,091		$	—

Future income tax expense for the year ended March 31, 2007 includes a recovery of $5,858 resulting from the elimination of the valuation allowance. Management considers the scheduled reversals of future income tax liabilities, the character of income tax assets and available tax planning strategies of the Company and its subsidiaries when evaluating the expected realization of future income tax assets. Based on management’s estimate of the expected realization of future income tax assets during the current period, the Company eliminated the valuation allowance recorded against future income tax assets to reflect that it is more likely than not that the future income tax assets will be realized.

At March 31, 2007, the Company has non-capital losses for income tax purposes of approximately $75,087 which expire as follows:

2015	$	45,888
2026		9,000
2027		20,199

17.    Shares

a) Redeemable preferred shares

	March 31, 2007		March 31, 2006
NACG Preferred Corp. Series A preferred shares (i)	$	—	$	35,000
NAEPI Series A preferred shares (ii)		—		375
NAEPI Series B preferred shares (iii)		—		42,193
	$	—	$	77,568

F-23

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

i. NACG Preferred Corp. preferred shares

Issued and outstanding:

	Number of Shares		Amount
Issued and outstanding at March 31, 2004, 2005 and 2006	35,000		$	35,000
Repurchased and cancelled	(35,000	)		(35,000	)
Issued and outstanding at March 31, 2007	—		$	—

NACG Preferred Corp. was authorized to issue an unlimited number of Series A preferred shares. The NACG Preferred Corp. Series A preferred shares accrued dividends at a rate of $80.00 per share annually if earnings before interest, taxes, depreciation and amortization (“EBITDA”) for NAEPI was in excess of $75.0 million for the year. The dividends were payable in cash, additional NACG Preferred Corp. Series A preferred shares, or any combination of cash and shares as determined by the Company. The number of shares issuable was .001 of a whole NACG Preferred Corp. Series A preferred share for each $1.00 of dividend declared.

The NACG Preferred Corp. Series A preferred shares, which were issued in connection with the acquisition described in note 1 and were recorded at their guaranteed redemption amount, were redeemable at any time at the option of the Company, and were required to be redeemed on or before November 26, 2012. The redemption price was $1,000.00 per share plus all accrued and unpaid dividends. In the event of a change in control, each holder of NACG Preferred Corp. Series A preferred shares had the right to require the Company to redeem all or any part of such holder’s shares.

On November 28, 2006, the Company acquired the NACG Preferred Corp. Series A preferred shares for a promissory note in the amount of $27,000 and accrued dividends of $1,400 at that time were forfeited resulting in a gain on settlement of $9,400. The promissory note was subsequently repaid with the proceeds from the IPO (note 2).

ii. NAEPI Series A preferred shares

Issued and outstanding:

	Number of Shares		Amount
Issued and outstanding at March 31, 2004 and 2005	—			—
Issued	1,000			321
Accretion	—			54
Issued and outstanding at March 31, 2006	1,000		$	375
Accretion	—			625
Repurchased and cancelled	(1,000	)		(1,000	)
Issued and outstanding at March 31, 2007	—		$	—

NAEPI was authorized to issue an unlimited number of Series A preferred shares. The NAEPI Series A preferred shares were non-voting and were not entitled to any dividends. The NAEPI Series A preferred shares were mandatorily redeemable at $1,000 per share on the earlier of (1) December 31, 2011 and (2) an

F-24

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

Accelerated Redemption Event, specifically (i) the occurrence of a change of control, or (ii) if there is an initial public offering of common shares, the later of (a) the consummation of the initial public offering or (b) the date on which all of the Company’s 8 ³/4% senior notes and the Company’s 9% senior secured notes are no longer outstanding. NAEPI had the right to redeem the NAEPI Series A preferred shares, in whole or in part, at $1,000 per share at any time.

The NAEPI Series A preferred shares were issued to one of the counterparties to NAEPI’s swap agreements on May 19, 2005 in connection with obtaining a new revolving credit facility. These shares were not entitled to dividends.

The NAEPI Series A preferred shares were initially recorded at their fair value on the date of issue, which was estimated to be $321 based on the present value of the required cash flows using the discount rate implicit at inception. Each reporting period, the accretion of the carrying value to the present value of the redemption amount at each balance sheet date was recorded as interest expense. For the year ended March 31, 2007, the Company recognized $625 of accretion as interest expense (2006 – $54).

On October 6, 2006, the Board of Directors approved the purchase of the NAEPI Series A preferred shares for $1,000 effective with the consummation of the IPO, and these shares were purchased on November 28, 2006 pursuant to an affiliate purchase right under the terms of the NAEPI Series A preferred shares. Accordingly, the Company recorded the additional accretion charge and the extinguishment of the obligation in the year ended March 31, 2007.

iii. NAEPI Series B preferred shares

Issued and outstanding:

	Number of Shares		Amount
Issued and outstanding at March 31, 2004 and 2005	—			—
Issued	83,462			8,376
Repurchased	(8,218	)		(851	)
Change in redemption amount	—			34,668
Issued and outstanding at March 31, 2006	75,244		$	42,193
Accretion	—			2,489
Transferred to common shares on conversion	(75,244	)		(44,682	)
Issued and outstanding at March 31, 2007	—		$	—

NAEPI was authorized to issue an unlimited number of Series B preferred shares. The NAEPI Series B preferred shares were non-voting and were entitled to cumulative dividends at an annual rate of 15% of the issue price of each share. No dividends were payable on NAEPI common shares or other classes of preferred shares (defined as Junior Shares) unless all cumulative dividends had been paid on the NAEPI Series B preferred shares and NAEPI declared a NAEPI Series B preferred share dividend equal to 25% of the Junior Share dividend (except for dividends paid as part of employee and officer arrangements, intercompany administrative charges of up to $1 million annually and tax sharing arrangements). The payment of dividends and the redemption of the NAEPI Series B preferred shares were prohibited by the Company’s revolving credit facility agreement. The payment of dividends and the redemption of the NAEPI Series B preferred shares was also restricted by the indenture agreements governing the Company’s 9% senior secured notes and 8 ³/4% senior notes.

F-25

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

7,500 NAEPI Series B preferred shares were issued to non-employee shareholders of the Company for cash proceeds of $7.5 million on May 19, 2005. The NAEPI Series B preferred shares were initially issued to certain non-employee shareholders with the agreement that an offer to purchase these NAEPI Series B preferred shares would also be extended to other shareholders of the Company on a pro rata basis to their interest in the common shares of the Company.

On June 15, 2005, the NAEPI Series B preferred shares were split 10-for-1.

On August 31, 2005, NAEPI issued 8,218 NAEPI Series B preferred shares for cash consideration of $851 to certain shareholders of the Company as a result of this offer. On November 1, 2005, NAEPI repurchased and cancelled 8,218 of the NAEPI Series B preferred shares held by the original non-employee shareholders for cash consideration of $851.

On October 6, 2005, an additional 244 NAEPI Series B preferred shares were issued for cash consideration of $25.

Initially, the redemption price of the NAEPI Series B preferred shares was an amount equal to the greatest of (i) two times the issue price, less the amount, if any, of dividends previously paid in cash on the NAEPI Series B preferred shares; (ii) an amount, not to exceed $100 million which, after taking into account any dividends previously paid in cash on such NAEPI Series B preferred shares, provides the holder with a 40% rate of return, compounded annually, on the issue price from the date of issue; and (iii) an amount, not to exceed $100 million, which is equal to 25% of the arm’s length fair market value of NAEPI’s common shares without taking into account the NAEPI Series B preferred shares.

On March 30, 2006, the terms of the NAEPI Series B preferred shares were amended to eliminate option (iii) from the calculation of the redemption price of the shares.

Prior to the amendment to the terms of the NAEPI Series B preferred shares on March 30, 2006, the NAEPI Series B preferred shares were considered mandatorily redeemable and the Company was required to measure the NAEPI Series B preferred shares at the amount of cash that would be paid under the conditions specified in the contract if settlement occurred at each reporting date prior to the amendment. At March 30, 2006, management estimated the redemption amount to be $42,193. As a result, the Company has recognized the increase of $34,668 in the carrying value as an increase in interest expense for the year ended March 31, 2006.

Concurrent with the amendment to the NAEPI Series B preferred shares, the Company entered into a Put/Call Agreement with the holders of the NAEPI Series B preferred shares. The Put/Call Agreement granted to each holder of the NAEPI Series B preferred shares the right (the “Put/Call Right”) to require the Company to exchange each of the holder’s NAEPI Series B preferred shares for 100 common shares (on a post-split basis—note 17(b)) of the Company. The Put/Call Right could only be exercised upon delivery by the Company of an “Event Notice”, being either: (i) a redemption or purchase call for the redemption or purchase of the NAEPI Series B preferred shares in connection with (A) a redemption on December 31, 2011, or (B) an Accelerated Redemption Event (as defined in note 17(a)(ii)); or (ii) a notice in connection with a Liquidation Event (defined as a liquidation, winding-up or dissolution of NAEPI, whether voluntary or involuntary).

The Put/Call Agreement also granted the Company the right to require the holders of the NAEPI Series B preferred shares to exchange each of their NAEPI Series B preferred shares for 100 common shares (on a post-split basis—note 17(b)) of the Company upon delivery of a call notice to shareholders within five business days of an Event Notice.

F-26

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

As a result of the March 30, 2006 amendment to the terms of the NAEPI Series B preferred shares and the concurrent execution of the Put/Call Agreement, the Company accounted for the amendment as a related party transaction at the carrying amount. No value was ascribed to the equity classified Put/Call Right as it was a related party transaction. The NAEPI Series B preferred shares were being accreted from their carrying value of $42.2 million on the date of amendment to their redemption value of $69.6 million on December 31, 2011 through a charge to interest expense using the effective interest method over the period to December 31, 2011. For the year ended March 31, 2007, the Company recognized $2,489 of interest expense for this accretion.

On October 6, 2006, the Board of Directors approved the exercise of the call option to acquire all of the issued and outstanding NAEPI Series B preferred shares in exchange for 7,524,400 common shares of the Company and the option was exercised on November 28, 2006. The Company recorded the exchange by transferring the carrying value of the Series B preferred shares on the exercise date of $44,682 to common shares.

b) Common shares

On November 3, 2006, the Board of Directors and common shareholders approved a 20-for-1 share split of the Company’s voting and non-voting common shares. All information relating to the exchange of the NAEPI Series B preferred shares (note 17(a)), the issued and outstanding common shares (below), basic and diluted net income (loss) per share data (note 17(d)), stock options (note 25), and basic and diluted net income (loss) per share data under U.S. GAAP (note 27) have been adjusted retroactively to reflect the impact of the share split in these financial statements. The share split was effective November 3, 2006.

Authorized:

Unlimited number of common voting shares

Unlimited number of common non-voting shares

Issued and outstanding:

	Number of Shares(1)		Amount
Common voting shares
Issued and outstanding at March 31, 2004	18,087,600		$	90,438
Issued	60,000			300
Issued and outstanding at March 31, 2005	18,147,600			90,738
Issued	60,000			300
Issued and outstanding at March 31, 2006	18,207,600			91,038
Issued upon exercise of stock options	27,760			139
Transferred from contributed surplus on exercise of stock options	—			52
Repurchased and cancelled prior to initial public offering	(5,000	)		(25	)
Conversion of NAEPI Series B preferred shares	7,524,400			44,682
Initial public offering	9,437,500			171,165
Share issue costs (net of future income tax recovery of $5,667)	—			(12,915	)
Issued and outstanding at March 31, 2007	35,192,260		$	294,136
Common non-voting shares
Issued and outstanding at March 31, 2004, 2005, 2006 and 2007	412,400		$	2,062
Total common shares at March 31, 2007	35,604,660		$	296,198

(1) The issued and outstanding common shares have been retroactively adjusted to reflect the Company’s 20-for-1 share split effected on November 3, 2006.

F-27

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

During the year ended March 31, 2005, 60,000 common voting shares were issued for cash consideration of $300. During the year ended March 31, 2006, 60,000 common voting shares were issued for cash consideration of $300. During the year ended March 31, 2007, 5,000 common shares were repurchased for cancellation at a cost of $84, of which $25 reduced share capital and $59 increased the Company’s deficit.

c) Contributed surplus

Balance, March 31, 2004	$	137
Stock-based compensation (note 25)		497
Balance, March 31, 2005		634
Stock-based compensation (note 25)		923
Balance, March 31, 2006		1,557
Stock-based compensation (note 25)		2,101
Transferred to common shares on exercise of stock options		(52	)
Balance, March 31, 2007	$	3,606

d) Net income (loss) per share

	Year ended March 31,
	2007		2006			2005
Basic net income (loss) per share
Net income (loss) available to common shareholders	$	21,079	$	(21,941	)	$	(42,323	)
Weighted average number of common shares		24,352,156		18,574,800			18,539,720
Basic net income (loss) per share	$	0.87	$	(1.18	)	$	(2.28	)
Diluted net income (loss) per share
Net income (loss) available to common shareholders	$	21,079	$	(21,941	)	$	(42,323	)
Weighted average number of common shares		24,352,156		18,574,800			18,539,720
Dilutive effect of:
Stock options		1,091,751		—			—
Weighted average number of diluted common shares		25,443,907		18,574,800			18,539,720
Diluted net income (loss) per share	$	0.83	$	(1.18	)	$	(2.28	)

For the year ended March 31, 2007, average stock options of 98,767 were excluded from the calculation of diluted net income per share as the options’ average exercise price was greater than the average market price of the common shares for the year.

For the years ending March 31, 2006 and March 31, 2005, the effect of outstanding stock options and convertible securities on net loss per share was anti-dilutive. As such, the effect of outstanding stock options and convertible securities used to calculate the diluted net loss per share has not been disclosed for these years.

F-28

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

18. Interest expense

	Year ended March 31,
	2007		2006		2005
Interest on senior notes	$	27,417	$	28,838	$	23,189
Interest on capital lease obligations		725		457		230
Interest on senior secured credit facility		—		564		3,274
Interest on NACG Preferred Corp. Series A preferred shares		1,400		—		—
Accretion and change in redemption value of NAEPI Series B preferred shares		2,489		34,668		—
Accretion of NAEPI Series A preferred shares		625		54		—
Interest on long-term debt		32,656		64,581		26,693
Amortization of deferred financing costs		3,436		3,338		2,554
Other interest		1,157		857		1,894
	$	37,249	$	68,776	$	31,141

19. Other information

a) Supplemental cash flow information

	Year ended March 31,
	2007		2006		2005
Cash paid during the year for:
Interest	$	34,061	$	29,978	$	31,398
Income taxes		342		617		3,588
Cash received during the year for:
Interest		1,156		530		362
Income taxes		160		2		—
Non-cash transactions:
Acquisition of plant and equipment by means of capital leases		4,653		5,910		5,385
Issue of Series A preferred shares		—		321		—

b) Net change in non-cash working capital

	Year ended March 31,
	2007			2006			2005
Accounts receivable	$	(25,278	)	$	(9,396	)	$	(24,029	)
Allowance for doubtful accounts		18			(94	)		(69	)
Unbilled revenue		(39,339	)		(2,083	)		(13,735	)
Inventory		(99	)		77			1,475
Prepaid expenses and deposits		(10,133	)		66			(590	)
Other assets		(9,855	)		(163	)		(840	)
Accounts payable		39,995			(5,005	)		29,789
Accrued liabilities		(1,429	)		9,402			507
Billings in excess of costs incurred and estimated earnings on uncompleted contracts		(2,125	)		3,799			1,325
	$	(48,245	)	$	(3,397	)	$	(6,167	)

F-29

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

c) Investment in joint venture

The Company has determined that the joint venture in which it participates is a variable interest entity as defined by AcG-15 and that the Company is the primary beneficiary. Accordingly, the joint venture has been consolidated on a prospective basis effective January 1, 2005. During the fourth quarter of 2005, the arrangement of this joint venture was amended such that the Company is responsible for all of its activities and revenues. As a result, no minority interest has been recorded.

The Company’s transactions with the joint venture eliminate on consolidation.

Details of the Company’s proportionate share of the results of operations and cash flows of the joint venture, prior to its consolidation, that are included in the consolidated financial statements are as follows:

	Year ended March 31, 2005
Revenue	$	7,631
Project costs		(8,840	)
General and administrative		—
Net income (loss)	$	(1,209	)
	Year ended March 31, 2005
Cash provided by:
Operating activities	$	(4,668	)
Investing activities		—
Financing activities		5,061
	$	393

20.    Segmented information

a) General overview

The Company conducts business in three business segments: Mining and Site Preparation, Piling and Pipeline.

• Mining and Site Preparation:

The Mining and Site Preparation segment provides mining and site preparation services, including overburden removal and reclamation services, project management and underground utility construction, to a variety of customers throughout Canada.

• Piling:

The Piling segment provides deep foundation construction and design build services to a variety of industrial and commercial customers throughout Western Canada.

• Pipeline:

The Pipeline segment provides both small and large diameter pipeline construction and installation services to energy and industrial clients throughout Western Canada.

F-30

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

b) Results by business segment:

For the year ended March 31, 2007	Mining and Site Preparation		Piling		Pipeline			Total
Revenues from external customers	$	473,179	$	109,266	$	47,001		$	629,446
Depreciation of plant and equipment		21,855		2,949		946			25,780
Segment profits		71,062		34,395		(10,539	)		94,918
Segment assets		467,315		93,703		66,118			627,136
Expenditures for segment plant and equipment		95,829		8,940		1,918			106,687
For the year ended March 31, 2006	Mining and Site Preparation		Piling		Pipeline			Total
Revenues from external customers	$	366,721	$	91,434	$	34,082		$	492,237
Depreciation of plant and equipment		10,118		2,543		1,352			14,013
Segment profits		50,730		22,586		8,996			82,312
Segment assets		327,850		84,117		48,804			460,771
Expenditures for segment plant and equipment		25,090		880		82			26,052
For the year ended March 31, 2005	Mining and Site Preparation		Piling		Pipeline			Total
Revenues from external customers	$	264,835	$	61,006	$	31,482		$	357,323
Depreciation of plant and equipment		10,308		2,335		218			12,861
Segment profits		11,617		13,319		4,902			29,838
Segment assets		315,740		74,975		48,635			439,350
Expenditures for segment plant and equipment		16,888		202		774			17,864

c) Reconciliations:

i. Income (loss) before income taxes

	Year ended March 31,
	2007			2006			2005
Total profit for reportable segments	$	94,918		$	82,312		$	29,838
Unallocated corporate expenses		(73,950	)		(102,190	)		(80,219	)
(Unallocated) over allocated equipment costs		(2,482	)		(1,326	)		5,794
Income (loss) before income taxes	$	18,486		$	(21,204	)	$	(44,587	)

ii. Total assets:

	March 31, 2007		March 31, 2006
Total assets for reportable segments	$	621,636	$	460,771
Corporate assets		89,100		107,911
Total assets	$	710,736	$	568,682

F-31

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

The Company’s goodwill is assigned to the Mining and Site Preparation, Piling and Pipeline segments in the amounts of $125,447, $41,192, and $32,753, respectively.

All of the Company’s assets are located in Canada and activities are carried out throughout the year.

d) Customers:

The following customers accounted for 10% or more of total revenues:

	Year ended March 31,
	2007		2006		2005
Customer A	17	%	32	%	12	%
Customer B	16	%	5	%	8	%
Customer C	12	%	16	%	26	%
Customer D	10	%	6	%	4	%
Customer E	10	%	2	%	0	%
Customer F	4	%	10	%	9	%
Customer G	1	%	6	%	10	%
Customer H	1	%	2	%	11	%

Revenue by major customer was earned in all three segments: Mining and Site Preparation, Pipeline and Piling.

21.    Related party transactions

Prior to the reorganization and IPO described in Note 2, the Company had a consulting and advisory services agreement with the Sponsors, under which the Company and certain of its subsidiaries received consulting and advisory services with respect to the organization of the companies, employee benefit and compensation arrangements, and other matters. An advisory fee of $400 for the year ended March 31, 2007 (2006 – $400; 2005 – $400) was paid for these services and was recorded as part of general and administrative costs in the consolidated statement of operations.

On November 28, 2006, upon closing of the IPO described in Note 2, the consulting and advisory services agreement was cancelled. The consideration paid by the Company on the closing of the offering to cancel the agreement was $2,000, which was recorded as part of general and administrative expense during the year ended March 31, 2007. In addition, the Sponsors also received a fee of $854, 0.5% of the aggregate gross proceeds to the Company from the IPO, which was recorded as a share issue cost.

During the year ended March 31, 2006, 75,000 NAEPI Series B preferred shares (on a post-split basis—note 17(a)(iii)) were issued to the above Sponsor group in exchange for cash of $7.5 million (note 17(a)).

Pursuant to several office lease agreements, for the year ended March 31, 2007 the Company paid $572 (2006 – $836; 2005 – $824) to a company owned, indirectly and in part, by one of the directors. Effective November 28, 2006 the director resigned from the board. Accordingly, the lease agreement is no longer considered to be with a related party.

F-32

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

All related party transactions described above were measured at the exchange amount, being the consideration established and agreed to by the related parties.

22.    Financial instruments and risk management

a) Fair value of financial instruments

The fair values of the Company’s cash and cash equivalents, accounts receivable, unbilled revenue, accounts payable and accrued liabilities approximate their carrying amounts due to the relatively short periods to maturity for the instruments.

The fair value of amounts due under the revolving credit facility and capital lease obligations (collectively “the debt”) are based on management estimates which are determined by discounting cash flows required under the debt at the interest rate currently estimated to be available for loans with similar terms. Based on these estimates, the fair value of amounts due under the revolving credit facility and the Company’s capital lease obligations as at March 31, 2007 and March 31, 2006 are not significantly different than their carrying values. The fair value of the 8 ³/4% notes, based upon their year end trading value as at March 31, 2007, is $239,803 (March 31, 2006 – $228,752) compared to their carrying value of $230,580 (March 31, 2006 – $233,420). The fair value of the 9% senior secured notes, based upon their year end trading value as at March 31, 2006, was $74,646 compared to their carrying value of $70,587.

b) Risk management

The Company is exposed to market risks related to interest rate and foreign currency fluctuations. To mitigate these risks, the Company uses derivative financial instruments such as foreign currency and interest rate swap contracts.

i. Foreign currency risk and derivative financial instruments

The Company has 8 ³/4% senior notes denominated in U.S. dollars in the amount of US$200 million. In order to reduce its exposure to changes in the U.S. to Canadian dollar exchange rate, the Company entered into a cross-currency swap agreement to manage this foreign currency exposure for both the principal balance due on December 1, 2011 as well as the semi-annual interest payments through the whole period beginning from the issue date to the maturity date. In conjunction with the cross-currency swap agreement, the Company also entered into a U.S. dollar interest rate swap and a Canadian dollar interest rate swap with the net effect of converting the 8.75% rate payable on the 8 ³/4% senior notes into a fixed rate of 9.765% for the duration that the 8 ³/4% senior notes are outstanding. On May 19, 2005 in connection with the Company’s new revolving credit facility at that time, this fixed rate was increased to 9.889%. These derivative financial instruments were not designated as a hedge for accounting purposes. At March 31, 2007, the Company’s derivative financial instruments are carried on the consolidated balance sheets at their fair value of $60,863 (March 31, 2006 – $63,611). The fair values of the Company’s cross-currency and interest rate swap agreements are based on values quoted by the counterparties to the agreements.

At March 31, 2007, the notional principal amount of the cross-currency swap was US$200 million. The notional principal amounts of the interest rate swaps were US$200 million and Canadian $263 million.

The Company is also exposed to foreign currency risk on U.S. dollar operating lease commitments as the Company has not entered into a cross-currency swap agreement to hedge this foreign currency exposure.

F-33

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

ii. Interest rate risk

The Company is exposed to interest rate risk on the revolving credit facility and its capital lease obligations. The Company also leases equipment with a variable lease payment component that is tied to prime rates. The Company does not use derivative financial instruments to reduce its exposure to these risks.

iii. Credit risk

Reflective of its normal business, a majority of the Company’s accounts receivable are due from large companies operating in the resource sector. The Company regularly monitors the activities and balances in these accounts to manage its credit risk and to assess the need for an allowance for any doubtful accounts.

At March 31, 2007 and March 31, 2006, the following customers represented 10% or more of accounts receivable and unbilled revenue:

	March 31, 2007		March 31, 2006
Customer A	15	%	6	%
Customer B	10	%	5	%
Customer C	10	%	1	%
Customer D	9	%	21	%
Customer E	7	%	11	%

23. Commitments

The annual future minimum lease payments in respect of operating leases for the next five years and thereafter are as follows:

For the year ending March 31,
2008	$	13,787
2009		13,331
2010		10,298
2011		3,016
2012 and thereafter		135
	$	40,567

24. Employee contribution plans

The Company and its subsidiaries match voluntary contributions made by the employees to their Registered Retirement Savings Plans to a maximum of 5% of base salary for each employee. Contributions made by the Company during the year ended March 31, 2007 were $645 (2006 – $409; 2005 – $305).

F-34

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

25. Stock-based compensation plan

Under the 2004 Amended and Restated Share Option Plan, directors, officers, employees and certain service providers to the Company are eligible to receive stock options to acquire voting common shares in the Company. Each stock option provides the right to acquire one common share in the Company and expires ten years from the grant date or on termination of employment. Options may be exercised at a price determined at the time the option is awarded, and vest as follows: no options vest on the award date and twenty percent vest on each subsequent anniversary date.

	Number of options(1)		Weighted average exercise price $ per share(1)
Outstanding at March 31, 2004	1,082,600		$	5.00
Granted	482,240			5.00
Exercised	—			—
Forfeited	(40,000	)		(5.00	)
Outstanding at March 31, 2005	1,524,840			5.00
Granted	745,520			5.00
Exercised	—			—
Forfeited	(204,000	)		(5.00	)
Outstanding at March 31, 2006	2,066,360			5.00
Granted	315,520			11.99
Exercised	(27,760	)		(5.00	)
Forfeited	(207,280	)		(5.00	)
Outstanding at March 31, 2007	2,146,840		$	6.03

(1) The number of options and the weighted average exercise price per share have been retroactively adjusted to reflect the impact of the 20-for-1 share split disclosed in note 17(b).

The following table summarizes information about stock options outstanding at March 31, 2007:

	Options outstanding				Options exercisable
Exercise price	Number	Weighted average remaining life	Weighted average exercise price ($)		Number	Weighted average exercise price ($)
$5.00	1,959,080	7.6 years	$	5.00	837,352	$	5.00
$16.75	187,760	9.5 years	$	16.75	—		—
	2,146,840		$	6.03	837,352	$	5.00

At March 31, 2007, the weighted average remaining contractual life of outstanding options is 7.7 years (March 31, 2006 – 8.2 years). The Company recorded $2,101 of compensation expense related to stock options in the year ended March 31, 2007 (2006 – $923; 2005 – $497) with such amount being credited to contributed surplus.

F-35

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

The fair value of each option granted by the Company was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:

	Year ended March 31,
	2007		2006		2005
Number of options granted(1)	315,520		745,520		482,240
Weighted average fair value per option granted ($)(1)	9.91		3.41		3.43
Weighted average assumptions
Dividend yield	nil	%	nil	%	nil	%
Expected volatility	24.73	%	nil	%	nil	%
Risk-free interest rate	4.30	%	4.13	%	4.25	%
Expected life (years)	6.4		10		10

(1) The number of options and the weighted average fair value per option granted have been retroactively adjusted to reflect the impact of the 20-for-1 share split disclosed in note 17(b).

As a result of the filing of a preliminary prospectus on July 21, 2006 with the various Canadian and U.S. securities commissions in preparation for the public sale of common shares, the Company is no longer eligible to use the minimum value method for measuring stock-based compensation. Accordingly, the Company considered the effect of expected volatility in its assumptions using the Black-Scholes option pricing model for options granted after this date. The Company determined its expected volatility based on a statistical analysis of historical volatility for a peer group of companies, which was prepared by an independent valuation firm.

During the year ended March 31, 2007, the Company offered to accelerate the vesting of 222,080 options held by certain members of its Board of Directors, providing for the options to become immediately exercisable on the condition that such options be exercised by September 30, 2006. On July 31, 2006, 27,760 options were exercised pursuant to this offer resulting in additional compensation cost of $24 for the year ended March 31, 2007. The vesting period remained unchanged for stock options held by Directors who did not accept the Company’s offer.

On October 6, 2006, the Company approved the Amended and Restated 2004 Share Option Plan. The amended plan was approved by the shareholders on November 3, 2006 and became effective on the closing of the IPO described in note 2. Option grants under the amended option plan may be made to directors, officers, employees and service providers selected by the Compensation Committee of the Company’s Board of Directors. The Compensation Committee may provide that any options granted will vest immediately or in increments over a period of time. Options to be granted under the amended option plan will have an exercise price of not less than the volume weighted average trading price of the common shares on the Toronto Stock Exchange or the New York Stock Exchange at the time of grant. The amended option plan provides that up to 10% of the Company’s issued and outstanding common shares from time to time may be reserved for issue or issued from treasury under the amended option plan.

In the event of certain change of control events as defined in the amended option plan, all outstanding options will become immediately vested and exercisable. The amended option plan provides that the Company’s Board of Directors can make certain specified amendments to the option plan subject to receipt of shareholder and regulatory approval, and further authorizes the Board of Directors to make all other amendments to the plan, subject only to regulatory approval but without shareholder approval. The amendments the Board of Directors

F-36

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

may make without shareholder approval include amendments of a housekeeping nature, changes to the vesting provisions of an option or the option plan, changes to the termination provisions of an option or the option plan which do not entail an extension beyond the original expiry date, the discontinuance of the option plan, and the addition of provisions relating to phantom share units, such as restricted share units and deferred share units which result in participants receiving cash payments, and the terms governing such features.

The amended option plan provides that each option includes a cashless exercise alternative which provides a holder of an option with the right to elect to receive cash in lieu of purchasing the number of shares under the option. Notwithstanding such right, the amended option plan provides that the Company may elect, at its sole discretion, to net settle the option in common stock.

All outstanding options granted under the 2004 Stock Option Plan remained outstanding after the amended and restated plan became effective.

26. Comparative figures

Certain of the prior year figures have been reclassified to conform with the current year’s presentation.

27. United States generally accepted accounting principles

These consolidated financial statements have been prepared in accordance with Canadian GAAP, which differs in certain respects from U.S. GAAP. If U.S. GAAP were employed, the Company’s net income (loss) would be adjusted as follows:

	Year ended March 31,
	2007			2006			2005
Net income (loss)—as reported	$	21,079		$	(21,941	)	$	(42,323	)
Capitalized interest (a)		249			847			—
Depreciation of capitalized interest (a)		(143	)		—			—
Amortization using effective interest method (b)		1,246			590			—
Difference between accretion of NAEPI Series B preferred shares under Canadian GAAP and U.S. GAAP (f)		249			—			—
Realized and unrealized loss on derivative financial instruments (e)		348			(484	)		—
Income (loss) before income taxes		23,028			(20,988	)		(42,323	)
Income taxes:
Deferred income taxes (h)		(954	)		—			—
Net income (loss)—U.S. GAAP	$	22,074		$	(20,988	)	$	(42,323	)
Net income (loss) per share—basic—U.S. GAAP (1)	$	0.91		$	(1.13	)	$	(2.28	)
Net income (loss) per share—diluted—U.S. GAAP (1)	$	0.87		$	(1.13	)	$	(2.28	)

(1) Basic net income (loss) per share—U.S. GAAP and diluted net income (loss) per share—U.S. GAAP have been retroactively adjusted to reflect the Company’s 20-for-1 share split effected on November 3, 2006 (see note 17(a)).

F-37

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

The cumulative effect of material differences between Canadian and U.S. GAAP on the consolidated shareholder’s equity of the Company is as follows:

	March 31, 2007			March 31, 2006
Shareholders’ equity (as reported)—Canadian GAAP	$	244,278		$	18,111
Capitalized interest (a)		1,096			847
Depreciation of capitalized interest (a)		(143	)		—
Amortization using effective interest method (b)		1,836			590
Realized and unrealized loss on derivative financial instruments (e)		(136	)		(484	)
Excess of fair value of amended NAEPI Series B preferred shares over carrying value of original NAEPI Series B preferred shares (f)		—			(3,707	)
Deferred income taxes		(954	)		—
Shareholders’ equity—U.S. GAAP	$	245,977		$	15,357

A continuity schedule of each component of the Company’s shareholders’ equity under U.S. GAAP for the year ended March 31, 2007 is as follows:

	Common shares			Contributed surplus			Deficit			Total
April 1, 2004—U.S. GAAP	$	92,500		$	137		$	(12,282	)	$	80,355
Net loss		—			—			(42,323	)		(42,323	)
Stock based compensation (d)		—			497			—			497
Share issue		300			—			—			300
March 31, 2005	$	92,800		$	634		$	(54,605	)	$	38,829
Net loss		—			—			(20,988	)		(20,988	)
Stock based compensation (d)		—			923			—			923
Share issue		300			—			—			300
Excess of fair value of amended NAEPI Series B preferred shares over carrying value of original NAEPI Series B preferred shares (f)		—			—			(3,707	)		(3,707	)
March 31, 2006	$	93,100		$	1,557		$	(79,300	)	$	15,357
Net income		—			—			22,074			22,074
Stock based compensation		—			2,101			—			2,101
Issued upon exercise of stock options		139			—			—			139
Share issues		171,165			—			—			171,165
Share issue costs		(12,915	)		—			—			(12,915	)
Repurchase of common shares		(25	)		—			(59	)		(84	)
Conversion of NAEPI Series B preferred shares		48,140			—			—			48,140
Reclassification on exercise of stock options		52			(52	)		—			—
March 31, 2007—U.S. GAAP	$	299,656		$	3,606		$	(57,285	)	$	245,977

F-38

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

The areas of material difference between Canadian and U.S. GAAP and their impact on the Company’s consolidated financial statements are described below:

a) Capitalization of interest

U.S. GAAP requires capitalization of interest costs as part of the historical cost of acquiring certain qualifying assets that require a period of time to prepare for their intended use. This is not required under Canadian GAAP. Accordingly, the capitalized amount is subject to depreciation in accordance with the Company’s policies when the asset is placed into service.

b) Deferred charges

Under Canadian GAAP, the Company defers and amortizes debt issue costs on a straight-line basis over the stated term of the related debt. Under U.S. GAAP, the Company is required to amortize financing costs over the stated term of the related debt using the effective interest method resulting in a consistent interest rate over the term of the debt in accordance with Accounting Principles Board Opinion No. 21 (“APB 21”).

c) Reporting comprehensive income

Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive Income” (“SFAS 130”) establishes standards for the reporting and display of comprehensive income and its components in a full set of general purpose financial statements. Comprehensive income equals net income (loss) for the period as adjusted for all other non-owner changes in shareholders’ equity. SFAS 130 requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement. The only component of comprehensive income (loss) is the net income (loss) for the period.

d) Stock-based compensation

Up until April 1, 2006, the Company followed the provisions of Statement of Financial Accounting Standards No. 123, “Stock-Based Compensation” for U.S. GAAP purposes. As the Company uses the fair value method of accounting for all stock-based compensation payments under Canadian GAAP there were no differences between Canadian and U.S. GAAP prior to April 1, 2006. On April 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment” (“SFAS 123R”). As the Company used the minimum value method for purposes of complying with Statement of Financial Accounting Standards No. 123, it was required to adopt SFAS 123(R) prospectively.

The methodology for determining the expense to be recognized in each period that is prescribed by SFAS 123(R) differs from that prescribed by Canadian GAAP. Canadian GAAP permits accounting for forfeitures of share-based payments as they occur while U.S. standards require an estimate of forfeitures to be made at the date of grant and thereafter until the requisite service period has been completed or the awards are cancelled. The required adjustment under U.S. GAAP to account for estimated forfeitures was not significant for all periods presented.

During the year ended March 31, 2007, the Company granted 315,520 stock options to employees and a director prior to the completion of the IPO. In determining the grant-date fair value of these stock options, the Company included an expected volatility of 40%. The additional compensation cost for these stock options under U.S. GAAP was not significant.

F-39

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

e) Derivative financial instruments

Statement of Financial Accounting Standard No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”) establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts and debt instruments) be recorded in the balance sheet as either an asset or liability measured at its fair value. On November 26, 2003, the Company issued 8 ³/4% senior notes for US$200 million (Canadian $263 million) and on May 19, 2005 the Company issued 9% senior secured notes for US$60.4 million (Canadian $76.3 million). Both of these issues included certain contingent embedded derivatives which provided for the acceleration of redemption by the holder at a premium in certain instances. These embedded derivatives met the criteria for bifurcation from the debt contract and separate measurement at fair value. The embedded derivatives have been measured at fair value and classified as part of the carrying amount of the Senior Notes on the consolidated balance sheet, with changes in the fair value being recorded in net income as realized and unrealized (gain) loss on derivative financial instruments for the period under U.S. GAAP. Under Canadian GAAP, separate accounting of embedded derivatives from the host contract is not permitted by EIC-117.

f) NAEPI Series B Preferred Shares

Prior to the modification of the terms of the NAEPI Series B preferred shares, there were no differences between Canadian GAAP and U.S. GAAP related to the NAEPI Series B preferred shares. As a result of the modification of terms of NAEPI’s Series B preferred shares on March 30, 2006, under Canadian GAAP, the Company continued to classify the NAEPI Series B preferred shares as a liability and was accreting the carrying amount of $42.2 million on the amendment date (March 30, 2006) to their December 31, 2011 redemption value of $69.6 million using the effective interest method. Under U.S. GAAP, the Company recognized the fair value of the amended NAEPI Series B preferred shares as minority interest as such amount was recognized as temporary equity in the accounts of NAEPI in accordance with EITF Topic D-98 and recognized a charge of $3.7 million to retained earnings for the difference between the fair value and the carrying amount of the Series B preferred shares on the amendment date. Under U.S. GAAP, the Company was accreting the initial fair value of the amended NAEPI Series B preferred shares of $45.9 million recorded on their amendment date (March 30, 2006) to the December 31, 2011 redemption value of $69.6 million using the effective interest method, which was consistent with the treatment of the NAEPI Series B preferred shares as temporary equity in the financial statements of NAEPI. The accretion charge was recognized as a charge to minority interest (as opposed to retained earnings in the accounts of NAEPI) under US GAAP and interest expense in the Company’s financial statements under Canadian GAAP.

On November 28, 2006, the Company exercised a call option to acquire all of the issued and outstanding NAEPI Series B preferred shares in exchange for 7,524,400 common shares of the Company. For Canadian GAAP purposes, the Company recorded the exchange by transferring the carrying value of the NAEPI Series B preferred shares on the exercise date of $44,682 to common shares. For U.S. GAAP purposes, the conversion has been accounted for as a combination of entities under common control as all of the shareholders of the NAEPI Series B preferred shares are also common shareholders of the Company resulting in the reclassification of the carrying value of the minority interest on the exercise date of $48,140 to common shares.

F-40

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

g) Investment in joint venture

The Company has determined that the joint venture in which it participates is a VIE and that the Company is the primary beneficiary. Accordingly the joint venture has been consolidated on a prospective basis effective January 1, 2005. Prior to its consolidation, the joint venture was accounted for using the proportionate consolidation method under Canadian GAAP. Under U.S. GAAP, investments in joint ventures are accounted for using the equity method. The different accounting treatment affects only the display and classification of financial statement items and not net earnings or shareholders’ equity. Rules prescribed by the Securities and Exchange Commission of the United States permit the use of the proportionate consolidation method in the reconciliation to U.S. GAAP provided the joint venture is an operating entity and the significant financial operating policies are, by contractual agreement, jointly controlled by all parties having an interest in the joint venture. In addition, the Company disclosed in note 19(c) the major components of its financial statements resulting from the use of the proportionate consolidation method to account for its interest in the joint venture prior to its consolidation.

h) Other matters

The tax effects of temporary differences under Canadian GAAP are described as future income taxes in these financial statements whereas such amounts are described as deferred income taxes under U.S. GAAP.

i) United States accounting pronouncements recently adopted

Statement on Financial Accounting Standards No. 150 “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” was issued in May 2003. This Statement establishes standards for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. The Statement also includes required disclosures for financial instruments within its scope. For the Company, the Statement was adopted as of January 1, 2004, except for certain mandatorily redeemable financial instruments. For certain mandatorily redeemable financial instruments, the Statement was adopted by the Company on January 1, 2005. The adoption of the standard required the Company to reclassify the carrying value of the NACG Preferred Corp. Series A preferred shares from minority interest to redeemable preferred shares. After the adoption of the standard, the Company issued other mandatorily redeemable preferred shares that were within the scope of the standard, which have been disclosed in note 17(a) to the consolidated financial statements.

In November 2004, the FASB issued Statement on Financial Accounting Standards No. 151, “Inventory Costs”. This standard requires the allocation of fixed production overhead costs be based on the normal capacity of the production facilities and unallocated overhead costs recognized as an expense in the period incurred. In addition, other items such as abnormal freight, handling costs and wasted materials require treatment as current period charges rather than being considered an inventory cost. This standard was effective for fiscal 2006 for the Company. The adoption of this standard did not have a material impact on the Company’s financial statements.

In March 2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143” (“FIN 47”), which requires an entity to recognize a liability for the fair value of a conditional asset retirement obligation when incurred if the liability’s fair value can be reasonably estimated. FIN 47 is effective for fiscal years ending after December 15, 2005. The adoption of this standard did not have a material impact on the Company’s financial statements.

F-41

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

Statement on Financial Accounting Standards No. 153, “Exchanges of Non-monetary Assets – an Amendment of APB Opinion 29” (“SFAS 153”), was issued in December 2004. Accounting Principles Board (“APB”) Opinion 29 is based on the principle that exchanges of non-monetary assets should be measured based on the fair value of assets exchanged. SFAS 153 amends APB Opinion 29 to eliminate the exception for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. The standard is effective for the Company for non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005, being July 1, 2005 for the Company. The adoption of this standard did not have a material impact on the Company’s financial statements.

In March 2005, FASB Staff Position FIN 46R-5, “Implicit Variable Interests under FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities”, to address whether a company has an implicit variable interest in a VIE or potential VIE when specific conditions exist. The guidance describes an implicit variable interest as an implied financial interest in an entity that changes with changes in the fair value of the entity’s net assets exclusive of variable interests. An implicit variable interest acts the same as an explicit variable interest except that it involves the absorbing and/or receiving of variability indirectly from the entity (rather than directly). This guidance was adopted in 2006 and did not have a material impact on the Company’s consolidated financial statements.

The impact of the adoption of SFAS 123(R) is described in note 27(d).

In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections” (“SFAS 154”) which replaces Accounting Principles Board Opinion No. 20 “Accounting Changes” and Statement of Financial Accounting Standards No. 3, “Reporting Accounting Changes in Interim Financial Statements—An Amendment of APB Opinion No. 28.” SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application, or the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS 154 was effective for the Company for accounting changes and corrections of errors made by the Company in its fiscal year beginning on April 1, 2006. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In September 2006, the U.S. Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. It establishes an approach that requires quantification of financial statements misstatements based on the effects of the misstatements on each of the Company’s financial statements and the related financial statement disclosures. SAB 108 was effective for the Company’s annual financial statements for the fiscal year ending March 31, 2007. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

j) Recent United States accounting pronouncements not yet adopted

Statement of Financial Accounting Standards No. 155, “Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 and 140” (“SFAS 155”) was issued February 2006. This Statement is effective for all financial instruments acquired, issued, or subject to a remeasurement (new basis) event occurring after the beginning of an entity’s first fiscal year that begins

F-42

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

after September 15, 2006. The fair value election provided for in paragraph 4(c) of this Statement may also be applied upon adoption of this Statement for hybrid financial instruments that had been bifurcated under paragraph 12 of Statement 133 prior to the adoption of this Statement. This states that an entity that initially recognizes a host contract and a derivative instrument may irrevocably elect to initially and subsequently measure that hybrid financial instrument, in its entirety, at fair value with changes in fair value recognized in earnings. SFAS 155 is applicable for all financial instruments acquired or issued in the Company’s 2008 fiscal year although early adoption is permitted. The Company is currently reviewing the impact of this statement.

In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109” (“FIN 48”) which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes”. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition requirements. FIN 48 is effective for the Company’s 2008 fiscal year. The Company is currently reviewing the impact of this Interpretation.

In May 2007, the FASB issued FASB Staff Position No. FIN 48-1, “Definition of Settlement in FASB Interpretation No. 48”, which provides guidance on how an enterprise should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. This FASB Staff Position is effective upon the initial adoption of FIN 48 and the Company is currently assessing the impact of this guidance.

Statement of Financial Accounting Standards No. 157, “Fair Value Measurement” (“SFAS 157”) was issued September 2006. The Statement provides guidance for using fair value to measure assets and liabilities. The Statement also expands disclosures about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurement on earnings. This Statement applies under other accounting pronouncements that require or permit fair value measurements. This Statement does not expand the use of fair value measurements in any new circumstances. Under this Statement, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the entity transacts. SFAS 157 is effective for the Company for fair value measurements and disclosures made by the Company in its fiscal year beginning on April 1, 2008. The Company is currently reviewing the impact of this statement.

Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”) was issued in February 2007. The statement permits entities to choose to measure many financial instruments and certain other items at fair value, providing the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without the need to apply hedge accounting provisions. SFAS 159 is effective for fiscal years beginning after November 15, 2007, specifically April 1, 2008 for the Company, with earlier adoption permitted. The Company is currently reviewing the impact of this pronouncement.

28. Subsequent events

a) On June 7, 2007, the Company modified its amended and restated credit agreement to provide for borrowings of up to $125 million (previously $55.0 million) under which revolving loans and letters of credit

F-43

NORTH AMERICAN ENERGY PARTNERS INC.

(formerly NACG Holdings Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended March 31, 2007, 2006 and 2005

(Amounts in thousands of Canadian dollars, except per share amounts or unless otherwise specified)

may be issued. At the current credit rating, prime rate and swing line revolving loans under the agreement will bear interest at the Canadian prime rate plus 0.5% per annum. At the current credit rating, Canadian bankers’ acceptances have stamping fees equal to 2.0% per annum and letters of credit are subject to a fee of 1.5% per annum.

The credit facility is secured by a first priority lien on substantially all the Company’s existing and after-acquired property and contains certain restrictive covenants including, but not limited to, incurring additional debt, transferring or selling assets, making investments including acquisitions or to pay dividends or redeem shares of capital stock. The Company is also required to meet certain financial covenants under the new credit agreement.

b) On June 13, 2007, the Company secured financing of $22.3 million for a new piece of heavy equipment. Progress draws under the agreement commenced on June 13, 2007 and the 7.5 year operating lease will be fully funded when the equipment is commissioned, which is expected to be December 31, 2007. During the progress funding period, interest will accrue at the Canadian prime rate plus 1.25% per annum and will be capitalized into the lease. Once fully funded, the Company will choose between a fixed rate (determined as the June 2015 Government of Canada Bond rate plus 3.0% per annum) and a variable rate, being the one-month Canadian bankers’ acceptance rate plus 2.85% per annum.

F-44

Schedule I

SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS

(In thousands of Canadian dollars)

Allowance for doubtful accounts receivable

	Balance, Beginning of Period	Charged to Costs and Expense (1)	Deductions (2)		Balance, End of Period
April 1, 2004 to March 31, 2005	233,000	40,376	(109,789	)	163,587
April 1, 2005 to March 31, 2006	163,587	93,830	(187,661	)	69,756
April 1, 2006 to March 31, 2007	69,756	18,105	—		87,861

(1) Represents increase (decrease) in allowance for doubtful accounts receivable charged to expense.

(2) Represents the accounts receivable written-off against the allowance for doubtful accounts receivable.

Future income tax asset valuation allowance

	Balance, Beginning of Period	Charged to Costs and Expense (1)		Deductions	Balance, End of Period
April 1, 2004 to March 31, 2005	—	9,955,000		—	9,955,000
April 1, 2005 to March 31, 2006	9,955,000	(4,097,000	)	—	5,858,000
April 1, 2006 to March 31, 2007	5,858,000	(5,858,000	)	—	—

(1) Represents increase (decrease) in valuation allowance charged to provision for future income taxes.

S-1

EX-4.1

Exhibit 4.1

Execution Copy

CDN. $125,000,000 CREDIT FACILITY

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

DATED AS OF JUNE 7, 2007

AMONG

NORTH AMERICAN ENERGY PARTNERS INC.

as Borrower,

THE LENDERS PARTY HERETO FROM TIME TO TIME,

as Lenders,

CANADIAN IMPERIAL BANK OF COMMERCE,

as Administrative Agent, Collateral Agent, Sole Lead Arranger and Sole Bookrunner

and

BANK OF MONTREAL,

as Syndication Agent

TABLE OF CONTENTS

		Page
ARTICLE 1	INTERPRETATION	2
1.1	Definitions	2
1.2	Headings; Articles and Sections	29
1.3	Number; persons; including	29
1.4	Accounting Principles	30
1.5	References to Agreements and Enactments	30
1.6	Amendment and Restatement	31
1.7	Schedules	31
ARTICLE 2	THE CREDIT FACILITY	32
2.1	Establishment of Credit Facility	32
2.2	Extensions of Maturity Date	33
2.3	Drawdowns – Notices and Limitations	35
2.4	Rollovers and Conversions – Notices and Limitations	36
2.5	Reduction of Total Commitment	38
2.6	Advances – General	39
2.7	Advances: Inter-Lender Arrangements	39
2.8	Swing Line Advances	39
2.9	Lender Hedge Agreements	41
ARTICLE 3	CONDITIONS PRECEDENT TO DRAWDOWNS	41
3.1	Conditions for All Drawdowns	41
3.2	Closing Conditions	42
3.3	Waiver	43
ARTICLE 4	PAYMENTS OF INTEREST AND FEES	44
4.1	Interest on Prime Loans	44
4.2	Interest on USBR Loans	44
4.3	Interest on Libor Loans	44
4.4	Stamping Fees	44
4.5	Fees Relating to Letters of Credit	45
4.6	Standby Fees	45
4.7	Interest on Overdue Amounts	46
4.8	Agent’s Fees	46
4.9	Set-up Fees	46
4.10	General Interest Provisions	46
ARTICLE 5	BANKERS’ ACCEPTANCES	47
5.1	Form and Execution of Bankers’ Acceptances	47
5.2	Power of Attorney; Provision of Bankers’ Acceptances to Lenders	48
5.3	Mechanics of Issuance	51
5.4	Rollovers	52
5.5	Conversion into Bankers’ Acceptances	52
5.6	Conversion from Bankers’ Acceptances	52
5.7	BA Equivalent Advances	52
5.8	Termination of Bankers’ Acceptances	53
ARTICLE 6	LETTERS OF CREDIT	53
6.1	Availability	53

i

6.2	Currency, Type and Expiry	53
6.3	General Provisions	53
6.4	Reimbursement or Conversion on Presentation	55
6.5	Fronting Lender Indemnity	55
6.6	Uniform Customs and Practice	55
ARTICLE 7	PAYMENTS	56
7.1	Mandatory Repayment of Credit Facility	56
7.2	Optional Repayment of Credit Facility	57
7.3	Excess	57
7.4	Additional Repayment Terms	57
7.5	Payments – General	59
7.6	Application of Payments after Default and Application of Proceeds of Collateral	60
7.7	Margin Changes; Adjustments for Margin Changes	61
ARTICLE 8	REPRESENTATIONS AND WARRANTIES	62
8.1	Representations and Warranties of Borrower	62
8.2	Deemed Repetition	69
8.3	Other Loan Documents	69
8.4	Effective Time of Repetition	70
8.5	Nature of Representations and Warranties	70
8.6	Disclosure Schedule	70
ARTICLE 9	GENERAL COVENANTS	70
9.1	Reporting Covenants of Borrower	70
9.2	General Positive Covenants of Borrower	75
9.3	Negative Covenants of Borrower	78
9.4	Insurance Covenants	82
9.5	Financial Covenants	83
9.6	New Subsidiaries	84
9.7	Agent May Perform Covenants	85
ARTICLE 10	SECURITY	85
10.1	Security	85
10.2	Registration	85
10.3	Sharing Security	86
10.4	Form of Security	86
10.5	After-Acquired Property	87
10.6	Continuing Security	87
10.7	Dealing with Security	87
10.8	Effectiveness	88
10.9	Release and Discharge of Security	88
10.10	Transfer of Security	88
10.11	Release of Subsidiary Guarantee	88
10.12	Release of Security Interest on Asset Disposition	89
ARTICLE 11	EVENTS OF DEFAULT AND REMEDIES	89
11.1	Events of Default	89
11.2	Acceleration	93
11.3	Suspension of Lenders’ Obligations	94

ii

11.4	Conversion on Default	94
11.5	Cash Collateral Accounts	94
11.6	Set Off	94
11.7	Remedies Cumulative and Waivers	95
ARTICLE 12	CHANGE OF CIRCUMSTANCES	95
12.1	Market Disruption	95
12.2	Change in Law	97
12.3	Assignment of Affected Loan	99
12.4	Illegality	99
ARTICLE 13	COSTS, EXPENSES AND INDEMNIFICATION	100
13.1	Costs and Expenses	100
13.2	General Indemnity	100
13.3	Environmental Indemnity	101
13.4	Judgment Currency	102
ARTICLE 14	THE AGENT AND ADMINISTRATION OF THE CREDIT FACILITY	103
14.1	Authorization and Action	103
14.2	Procedure for Making Loans	104
14.3	Remittance of Payments	105
14.4	Adjustments Among Lenders	105
14.5	Duties and Obligations	106
14.6	Prompt Notice to the Lenders	108
14.7	Agent’s and Lenders’ Authorities	108
14.8	Lender Credit Decision	108
14.9	Indemnification of Agent	108
14.10	Successor Agent	109
14.11	Taking and Enforcement of Remedies	109
14.12	Reliance Upon Agent	110
14.13	No Liability of Agent	111
14.14	Article for Benefit of Agent and Lenders	111
ARTICLE 15	GENERAL	111
15.1	Exchange and Confidentiality of Information	111
15.2	Nature of Obligation under this Agreement	112
15.3	Notices; Effectiveness; Electronic Communication	113
15.4	Governing Law	114
15.5	Benefit of the Agreement	114
15.6	Assignment	114
15.7	Participations	115
15.8	Severability	115
15.9	Whole Agreement	115
15.10	Amendments and Waivers	115
15.11	Further Assurances	117
15.12	Attornment	117
15.13	Marketing	117
15.14	Time of the Essence	118
15.15	Paramountcy; Credit Agreement Governs	118
15.16	Counterparts	118

iii

Schedule A	-	Lenders and Commitments
Schedule B	-	Compliance Certificate
Schedule C	-	Conversion/Rollover/Repayment Notice
Schedule D	-	Discount Note
Schedule E	-	Drawdown Notice
Schedule F	-	Extension Request
Schedule G	-	Lender Assignment Agreement
Schedule H	-	Global Consent and Confirmation
Schedule I	-	Disclosure Schedule
I -1	-	Corporate Chart and Information Regarding Subsidiaries
I-2	-	Employee Matters
I-3	-	Real Property
I-4	-	Material Contracts
I-5	-	Existing Lender Hedge Agreements
I-6		Existing Letters of Credit
I-7	-	Existing Permitted Debt
I-8	-	Existing Permitted Liens
I-9	-	Existing Permitted Investments
1-10	-	Existing Contingent Obligations

iv

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT is made as of the 7^th day of June, 2007.

AMONG:

NORTH AMERICAN ENERGY PARTNERS INC., a corporation formed under the laws of Canada as Borrower,

OF THE FIRST PART

- and -

THE PERSONS PARTY HERETO FROM TIME TO TIME, in their capacities as Lenders

OF THE SECOND PART

- and -

CANADIAN IMPERIAL BANK OF COMMERCE, a Canadian chartered bank, as administrative agent and collateral agent

OF THE THIRD PART

WHEREAS the Borrower previously entered into the credit agreement (the “Original Credit Agreement”) dated as of May 19, 2005 (the “Original Closing Date”) between the Borrower, the lenders party thereto, BNP Paribas (Canada), as administrative agent, and GE Canada Finance Holdings, as collateral agent.

AND WHEREAS the Original Credit Agreement was amended and restated by the First Amended and Restated Credit Agreement dated as of July 19, 2006 between the Borrower, the lenders party thereto, and BNP PARIBAS (CANADA), as administrative agent and collateral agent (the “Existing Credit Agreement”).

AND WHEREAS the parties hereto desire to amend and restate the Existing Credit Agreement in its entirety as set forth herein.

AND WHEREAS, subject to the terms hereof, the Borrower will continue to secure all of its Obligations hereunder and under the Loan Documents with a First Priority Lien granted to the Agent, for the benefit of the Lenders, Swap Lenders and Agents, on all of its present and after acquired real and personal property, including a pledge of the Capital Stock of each of its Subsidiaries;

AND WHEREAS, subject to the terms hereof, each of the Subsidiaries of the Borrower will continue to guarantee the Obligations of the Borrower hereunder and under the Loan Documents, and to secure their respective guarantees with a First Priority Lien granted to the Agent, for the benefit of the Lenders and Swap Lenders, on all of their respective present and after acquired real and personal property, including a pledge of the Capital Stock of each of their Subsidiaries.

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby conclusively acknowledged by each of the parties hereto, the parties hereto covenant and agree as follows:

ARTICLE 1

INTERPRETATION

1.1 Definitions

In this Credit Agreement (including in the recitals hereto), unless something in the subject matter or context is inconsistent therewith:

“Additional Compensation” has the meaning set out in Section 12.2.

“Advance” means the extension of credit hereunder to the Borrower by the Lenders by way of the making of a Prime Loan, a USBR Loan, a Libor Loan, a BA Equivalent Advance or the acceptance of Bankers’ Acceptances, or a Letter of Credit.

“Affected Loan” has the meaning attributed thereto in Section 12.3.

“Affiliate” means any Person which, directly or indirectly, controls, is controlled by or is under common control with any Lender; and, for the purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” or “under common control with”) means the power to direct or cause the direction of the management and policies of any Person, whether through the ownership of shares or by contract or otherwise.

“Agent” means CIBC in its capacity as administrative agent and collateral agent for the Lenders hereunder or any successor agent appointed pursuant to Section 14.10.

“Agent’s Accounts” means the accounts maintained by the Agent at the Agent’s Branch, to which payments and transfers under this Agreement are to be effected as the Agent may from time to time advise the Borrower and the Lenders in writing.

“Agent’s Branch” means the branch of the Agent at Main Branch, Commerce Court, Toronto or such other branch in Canada as the Agent may from time to time designate by notice to the Borrower and the Lenders.

“Agreement” or “Credit Agreement” means this agreement, as amended, modified, supplemented or restated from time to time in accordance with the provisions hereof.

“Applicable Laws” means, in relation to any Person, transaction or event:

(a) all applicable provisions of laws, statutes, rules and regulations from time to time in effect; and

- 2 -

(b) all Governmental Authorizations to which the Person is a party or by which it or its property is bound or having application to the transaction or event.

“Applicable Pricing Margin” means, with respect to the Loans or the standby fees payable under Section 4.6, the applicable rate per annum set forth in the table below opposite the applicable S&P Rating:

Level	S&P Rating	Prime Loans/ USBR Loans (in bps)	Libor Loans/ Bankers’ Acceptances (in bps)	Letters of Credit (in bps)	Standby fees (in bps)
1	B- (or unrated)	100	250	200	50
2	B	50	200	150	40
3	B+	25	175	125	30
4	BB- or better	0	150	100	20

provided that changes in Applicable Pricing Margin shall be effective and adjusted upon any change in the S&P Rating in accordance with Section 7.7.

“Assigned Interests” has the meaning attributed thereto in Section 2.2(e).

“BA Discount Proceeds” means, in respect of any Bankers’ Acceptance, the amount obtained by multiplying (a) the aggregate face amount of such Bankers’ Acceptance by (b) the amount (rounded up or down to the fifth decimal place with .000005 being rounded up) determined by dividing one by the sum of one plus the product of (i) the BA Discount Rate, and (ii) a fraction, the numerator of which is the number of days in the Interest Period of such Bankers’ Acceptance and the denominator of which is 365.

“BA Discount Rate” means:

(a) in relation to a Bankers’ Acceptance accepted by a Schedule I Lender, the CDOR Rate on the date on which Bankers’ Acceptances are to be issued pursuant hereto;

(b) in relation to a Bankers’ Acceptance accepted by a Schedule II Lender or Schedule III Lender, the lesser of:

(i) the Discount Rate then applicable to bankers’ acceptances accepted by such Schedule II Lender or Schedule III Lender; and

(ii) the CDOR Rate on the date on which Bankers’ Acceptances are to be issued pursuant hereto, plus 0.10% per annum;

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provided that if both such rates are equal, then the “BA Discount Rate” applicable thereto shall be the rate specified in (b)(i) above; and

(c) in relation to a BA Equivalent Advance:

(i) made by a Schedule I Lender, the CDOR Rate on the date on which Bankers’ Acceptances are to be issued pursuant hereto; and

(ii) made by a Schedule II Lender or Schedule III Lender, the rate determined in accordance with subparagraph (b) of this definition; and

(iii) made by any other Lender, the CDOR Rate on the date on which Bankers’ Acceptances are to be issued pursuant hereto, plus 0.10% per annum.

“BA Equivalent Advance” means, in relation to a Drawdown of, Conversion into or Rollover of Bankers’ Acceptances, an Advance in Cdn. Dollars made by a Non-Acceptance Lender as part of such Loan.

“Bankers’ Acceptance” means a non-interest bearing draft drawn by the Borrower in Cdn. Dollars, accepted by a Lender and issued for value pursuant to this Agreement and includes a depository bill under the DBNA and a bill of exchange under the Bills of Exchange Act (Canada).

“Banking Day” means:

(a) in relation to a Libor Loan, a day on which banks are open for business in Calgary (Alberta), Toronto (Ontario), New York (New York) and London (England), and

(b) for all other purposes, a day on which banks are open for business in Calgary (Alberta) and Toronto (Ontario);

but does not, in any event, include a Saturday or a Sunday.

“Bankruptcy Law” means (i) the Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act (Canada) and the Winding-Up and Restructuring Act (Canada), (ii) Title 11 of the United States Code entitled “Bankruptcy”, and (iii) any analogous laws relating to bankruptcy and insolvency, each as now and hereafter in effect, or any successor statute.

“Bonding Program” means one or more agreements with one or more bonding companies under which bonding companies provide, for the account of the Borrower and/or its Subsidiaries, bid bonds, performance bonds, labour and material payment bonds, maintenance bonds and other bonds used in the ordinary course of business of the Borrower and the Subsidiaries, as the same may be amended, modified or replaced (including with another bonding company) from time to time.

“Borrower” means North American Energy Partners Inc., and its successors and permitted assigns.

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“Borrower Guarantee” means the Borrower Guarantee executed and delivered by the Borrower, on the Original Closing Date, guaranteeing Secured Swap Obligations of the Subsidiaries, as such Borrower Guarantee may be amended, supplemented, replaced or otherwise modified from time to time in accordance herewith.

“Borrower Pledge Agreement” means the Securities Pledge Agreement executed and delivered by the Borrower on the Original Closing Date, substantially in the form of Exhibit XV attached to the Original Credit Agreement, as such Borrower Pledge Agreement may thereafter be amended, supplemented, replaced or otherwise modified from time to time in accordance herewith, including by the further pledge of Capital Stock from time to time in accordance herewith.

“Borrower’s Accounts” means the accounts of the Borrower maintained at the Agent’s Branch or such other branch or office in Canada as the Borrower may from time to time designate with notice to the Agent.

“bps” or “basis points” means one one-hundredth of one percent (0.01%).

“Canadian Dollars”, “Cdn. Dollars” and “Cdn. $” mean lawful money of Canada for the payment of public and private debts.

“Capital Lease”, as applied to any Person, means any lease of any property (whether real or personal) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person.

“Capital Lease Obligations” means, as to any Person, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real and/or personal property which obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof.

“Capital Stock” means the capital stock or other equity interests of a Person.

“Cash Equivalents” means, as at any date of determination,

(a) marketable securities (i) issued or directly and unconditionally guaranteed as to interest and principal by the Government of Canada or the United States Government, or (ii) issued by any agency of Canada or the United States, the obligations of which are guaranteed by the Government of Canada or backed by the full faith and credit of the United States, respectively, in each case maturing within one year after such date;

(b) marketable direct obligations issued by any province of Canada or state of the United States of America, or any political subdivision of either, or any public instrumentality thereof, in each case maturing within one year after such date and having, at the time of the acquisition thereof, one of the three highest ratings obtainable from either S&P or Moody’s;

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(c) commercial paper maturing no more than one year from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P, at least P-1 from Moody’s, or at least R-1 from Dominion Bond Rating Service Limited;

(d) deposits at or financial instruments issued by any Canadian chartered bank;

(e) certificates of deposit or bankers’ acceptances maturing within one year after such date and issued or accepted by any Lender, or by any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia, if such commercial bank (a) is at least “adequately capitalized” (as defined in the regulations of its primary federal banking regulator) and (b) has Tier 1 capital (as defined in such regulations) of not less than U.S.$100,000,000; and

(f) shares of any money market mutual fund that (i) has at least 95% of its assets invested continuously in one or more of the types of investments referred to in clauses (a) through (e) above, and (ii) has net assets of not less than Cdn. $500,000,000.

“Cash Management Indebtedness” means all indebtedness and other amounts owing by the Borrower or any Subsidiary to any Lender from time to time for cash management services provided by such Lender including, without limitation, electronic funds transfer services or wire transfer services.

“CDOR Rate” means, on the date of determination, the per annum rate of interest which is the rate determined as being the arithmetic average of the annual yield rates applicable to Cdn. Dollar bankers’ acceptances having identical issue and comparable maturity dates as the Bankers’ Acceptances proposed to be issued by the Borrower displayed and identified as such on the display referred to as the “CDOR Page” (or any display substituted therefor) of Reuters Monitor Money Rates Service as at approximately 10:00 a.m. (Toronto time) on such day, or if such day is not a Banking Day, then on the immediately preceding Banking Day (as adjusted by the Agent in good faith after 10:00 a.m. (Toronto time) to reflect any error in a posted rate or in the posted average annual rate); provided, however, if such a rate does not appear on such CDOR Page, then the CDOR Rate, on any day, shall be the BA Discount Rate quoted by the Agent (determined as of 10:00 a.m. (Toronto time) on such day) which would be applicable in respect of an issue of bankers’ acceptances in a comparable amount and with comparable maturity dates to the Bankers’ Acceptances proposed to be issued by the Borrower on such day, or if such day is not a Banking Day, then on the immediately preceding Banking Day.

“Change in Control” means any of the following:

(a) circumstances arising after the date hereof in which a Person or combination of Persons acting jointly or in concert (within the meaning of the Securities Act (Alberta)) acquires Voting Securities of the Borrower which, together with all other Voting Securities of the Borrower held by such Persons, constitute in the aggregate more than 50% of all outstanding Voting Securities of the Borrower; or

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(b) the failure at any time of the Borrower to legally and beneficially own and control 100% of the issued and outstanding shares of capital stock of NACG.

“CIBC” means Canadian Imperial Bank of Commerce, a Canadian chartered bank.

“Closing Date” means the date of execution of this Agreement or such other day as may be agreed upon by the Borrower and the Agent.

“Collateral” means, collectively, all of the real and personal property (including Capital Stock) in which Liens are purported to be granted pursuant to the Collateral Documents as security for the Obligations and the Secured Swap Obligations.

“Collateral Agent”, in its capacity as collateral agent, means the Agent, or any successor Agent appointed as collateral agent by the Lenders pursuant to Section 14.10.

“Collateral Documents” means the security and related agreements executed and delivered, or required to be executed and delivered, in favour of the Collateral Agent by the Borrower and the Subsidiary Guarantors pursuant to Article 10 and Section 9.6, in each case as amended, supplemented, replaced or otherwise modified from time to time.

“Commitment” means the commitment by each Lender under the Credit Facility to provide the amount of Cdn. Dollars (or the Equivalent Amount thereof) set forth opposite its name in the applicable column of Schedule A attached hereto, subject to any reduction in accordance with the provisions hereof.

“Compliance Certificate” means a certificate of the Borrower signed on its behalf by a senior officer of the Borrower, substantially in the form of Schedule B, to be given to the Agent and the Lenders by the Borrower pursuant hereto.

“Consolidated Capital Expenditures” means, for any period, the sum of the aggregate of all expenditures paid in cash by Borrower and its Subsidiaries during that period that, in conformity with GAAP, are included in “additions to property, plant or equipment” or comparable items reflected in the consolidated statement of cash flows of Borrower and its Subsidiaries. For purposes of this definition, the purchase price of equipment that is purchased (a) simultaneously with the trade-in of existing equipment, or (b) with insurance proceeds, shall be included in Consolidated Capital Expenditures only to the extent of the gross amount of such purchase price less the credit granted by the seller of such equipment for the equipment being traded in at such time or the amount of such proceeds, as the case may be. The aggregate of the net cash proceeds of dispositions of assets by Borrower and its Subsidiaries during the period that, in conformity with GAAP, were included in “dispositions of property, plant or equipment” or comparable items reflected in the consolidated statement of cash flows of Borrower and its Subsidiaries, will be deducted from Consolidated Capital Expenditures for the period.

“Consolidated Cash Interest Expense” means, for any period, Consolidated Interest Expense for such period, excluding any interest expense not payable in cash (such as non-cash amortization and write-off of discount and debt issuance costs).

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“Consolidated EBITDA” means, for any period, the sum, without duplication, of the amounts for such period of (i) Consolidated Net Income, (ii) Consolidated Interest Expense, (iii) provisions for taxes based on income, (iv) total depreciation expense, (v) total amortization expense, (vi) costs and expenses incurred by the Borrower in entering into this Agreement, (vii) accrual of stock based compensation expense to the extent not paid in cash or if satisfied by the issue of new equity, and (viii) other non-cash items (other than any such non-cash item to the extent it represents an accrual of or reserve for cash expenditures in any future period), but only, in the case of clauses (ii)-(viii), to the extent deducted in the calculation of Consolidated Net Income, less other non-cash items added in the calculation of Consolidated Net Income (other than any such non-cash item to the extent it will result in the receipt of cash payments in any future period), all of the foregoing as determined on a consolidated basis for the Borrower and the Subsidiaries in conformity with GAAP.

“Consolidated Interest Expense” means, for any period, total interest expense (including that portion attributable to Capital Leases in accordance with GAAP and capitalized interest) of the Borrower and the Subsidiaries on a consolidated basis with respect to all outstanding Debt of the Borrower and its Subsidiaries, including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing, net costs under Interest Rate Agreements and amounts referred to in Article 4 payable to the Agent and Lenders that are considered interest expense in accordance with GAAP.

“Consolidated Net Income” means, for any period, the net income (or loss) of the Borrower and the Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP, provided that there shall be excluded:

(a) the income (or loss) of any Person (other than a Subsidiary of the Borrower) in which any other Person (other than the Borrower or any of the Subsidiaries) has a joint interest, except in the case of income to the extent of the amount of dividends or other distributions actually paid to the Borrower or any of the Subsidiaries by such Person during such period,

(b) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of the Borrower or is merged into or consolidated with the Borrower or any of the Subsidiaries or that Person’s assets are acquired by the Borrower or any of the Subsidiaries,

(c) the income of any Subsidiary of the Borrower that is not a Subsidiary Guarantor to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its constating documents (including by-laws, if applicable) or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary,

(d) any after-tax gains or losses attributable to asset sales or returned surplus assets of any pension plan,

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(e) to the extent not included in clauses (i) through (iv) above, any net extraordinary gains or net non-cash extraordinary losses, and

(f) the impact of currency translation gains and losses and mark-to-market gains and losses on any Hedge Agreement.

“Contingent Obligation”, as applied to any Person, means any direct or indirect liability, contingent or otherwise, of that Person (but without duplication):

(a) with respect to any Debt, lease, dividend or other obligation of another if the primary purpose or intent thereof by the Person incurring the Contingent Obligation is to provide assurance to the obligee of such obligation of another that such obligation of another will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected (in whole or in part) against loss in respect thereof,

(b) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings, or

(c) under Hedge Agreements.

Contingent Obligations shall include (i) the direct or indirect guarantee, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another, (ii) the obligation to make take-or-pay or similar payments if required regardless of non-performance by any other party or parties to an agreement, and (iii) any liability of such Person for the obligation of another through any agreement (contingent or otherwise) (A) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (B) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclauses (A) or (B) of this sentence, the primary purpose or intent thereof is as described in the preceding sentence. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if less, the amount to which such Contingent Obligation is specifically limited.

“Conversion” means a conversion or deemed conversion of a Loan under the Credit Facility into another type of Loan under the Credit Facility pursuant to the provisions hereof; provided that, subject to Section 2.4 and to Article 5 with respect to Bankers’ Acceptances, the conversion of a Loan denominated in one currency to a Loan denominated in another currency shall be effected by repayment of the Loan or portion thereof being converted in the currency in which it was denominated and readvance to the Borrower of the Loan into which such conversion was made.

“Conversion Date” means the date specified by the Borrower as being the date on which the Borrower has elected to convert, or this Agreement requires the conversion of, one type of Loan into another type of Loan and which shall be a Banking Day.

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“Conversion/Rollover/Repayment Notice” means a notice substantially in the form of Schedule C to be given to the Agent by the Borrower pursuant hereto.

“Credit Facility” means the revolving credit facility in the maximum principal amount of up to Cdn. $125,000,000 or the Equivalent Amount in United States Dollars to be made available to the Borrower by the Lenders in accordance with the provisions hereof, subject to adjustment in accordance with the provisions hereof.

“Currency Agreement” means any foreign exchange contract or any currency swap agreement, futures contract, option contract, synthetic cap or other similar agreement or arrangement, in each case to which the Borrower or any of its Subsidiaries is a party.

“Current Assets” means all amounts shown as current assets on the consolidated balance sheet of the Borrower prepared in accordance with GAAP, except for amounts for future income taxes.

“Current Liabilities” means all amounts shown as current liabilities on the consolidated balance sheet of the Borrower prepared in accordance with GAAP, except for amounts for future income taxes and the current portions of long-term debt and Capital Lease Obligations; provided, for certainty, that the undrawn amount of Letters of Credit will not be included as Current Liabilities.

“DBNA” means the Depository Bills and Notes Act (Canada).

“Debentures” means the Fixed and Floating Charge Debentures executed and delivered by the Borrower and each Subsidiary Guarantor on the Original Closing Date, substantially in the form of Exhibit XIII attached to the Original Credit Agreement, as such Debentures may thereafter be amended, supplemented, replaced or otherwise modified from time to time and such new Fixed and Floating Charge Debentures to be issued by new Subsidiary Guarantors in favour of the Collateral Agent in substantially the same form, as amended, supplemented, replaced or otherwise modified from time to time.

“Debt”, as applied to any Person, means:

(a) all indebtedness for borrowed money,

(b) that portion of obligations with respect to Capital Leases that is properly classified as a liability on a balance sheet in conformity with GAAP,

(c) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money,

(d) any obligation owed for all or any part of the deferred purchase price of property or services which purchase price is (i) due more than six months from the date of incurrence of the obligation in respect thereof or (ii) evidenced by a note or similar written instrument,

(e) the monetary obligation of a Person under (i) a so-called synthetic, off-balance sheet or tax retention lease, or (ii) an agreement for the use or possession of

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property creating obligations that do not appear on the balance sheet of such Person but which, for both clause (i) and (ii) above, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness for borrowed money or Capital Lease Obligations of such Person (without regard to accounting treatment); which, for greater certainty, does not include any obligations under or in connection with an Operating Lease; and

(f) all indebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person.

Obligations under Interest Rate Agreements and Currency Agreements constitute (1) in the case of Hedge Agreements, Contingent Obligations, and (2) in all other cases, Investments, and in neither case constitute Debt.

“Default” means any event or condition which, with the giving of notice, lapse of time or upon a declaration or determination being made (or any combination thereof), would constitute an Event of Default.

“Deposit Instruments” means the deposit instruments executed and delivered by the Borrower and each Subsidiary Guarantor, substantially in the form of Exhibit XIV attached to the Original Credit Agreement, as such Deposit Instruments may thereafter be amended, supplemented, replaced, or otherwise modified from time to time and such new Fixed and Floating Charge Debentures to be issued by new Subsidiary Guarantors in favour of the Collateral Agent in substantially the same form, as amended, supplemented, replaced or otherwise modified from time to time.

“Disclosure Schedule” means the disclosure schedule attached hereto as Schedule I.

“Discount Note” means a non-interest bearing promissory note of the Borrower, denominated in Cdn. Dollars, issued by the Borrower to a Non-Acceptance Lender as part of Bankers’ Acceptances substantially in the form attached as Schedule D or such other form as may be agreed to by the Agent, the Borrower and such Non-Acceptance Lender.

“Discount Rate” means, with respect to the issuance of a bankers’ acceptance, the rate of interest per annum, calculated on the basis of a year of 365 days, (rounded upwards, if necessary, to the nearest whole multiple of 1/100th of one percent) which is equal to the discount exacted by a purchaser taking initial delivery of such bankers’ acceptance, calculated as a rate per annum and as if the issuer thereof received the discount proceeds in respect of such bankers’ acceptance on its date of issuance and had repaid the respective face amount of such bankers’ acceptance on the maturity date thereof.

“Domestic Subsidiary” means any Subsidiary of the Borrower that is incorporated or organized under the laws of Canada or any province of territory thereof.

“Drawdown” means any Advance which results in an increase in the Outstanding Principal.

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“Drawdown Date” means the date on which a Drawdown is made by the Borrower pursuant to the provisions hereof and which shall be a Banking Day.

“Drawdown Notice” means a notice substantially in the form attached hereto as Schedule E to be given to the Agent by the Borrower pursuant hereto.

“Election Date” has the meaning attributed thereto in Section 2.2(b).

“Environmental Claims” means any and all administrative, regulatory or judicial actions, suits, demands, claims, liens, notices of non-compliance or violation, investigations, inspections, inquiries or proceedings relating in any way to any Environmental Laws or to any permit issued under any such Environmental Laws including, without limitation:

(a) any claim by a Governmental Authority for enforcement, clean-up, removal, response, remedial or other actions or damages pursuant to any Environmental Laws; and

(b) any claim by a person seeking damages, contribution, indemnification, cost recovery, compensation or injunctive or other relief resulting from or relating to Hazardous Materials, including any Release thereof, or arising from alleged injury or threat of injury to human health or safety (arising from environmental matters) or the environment.

“Environmental Laws” means all Applicable Laws with respect to the environment or environmental or public health and safety matters contained in statutes, regulations, rules, ordinances, orders, judgments, approvals, notices, permits or policies, guidelines or directives having the force of law.

“Equivalent Amount” means, on any date, the equivalent amount in Cdn. Dollars or U.S. Dollars, as the case may be, after giving effect to a conversion of a specified amount of U.S. Dollars to Cdn. Dollars or of Cdn. Dollars to U.S. Dollars, as the case may be, at the Noon Rate.

“Event of Default” has the meaning set out in Section 11.1.

“Existing Credit Agreement” has the meaning attributed thereto in the recitals above.

“Existing Letters of Credit” means the letters of credit described on the Disclosure Schedule.

“Extension Request” means a written request from the Borrower to the Agent, in substantially the form attached as Schedule F, requesting an extension of the Maturity Date under the Credit Facility.

“Federal Funds Rate” means, for any day, the rate of interest per annum set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Board (including any such successor, the “H.15(519)”) for such day opposite the caption “Federal Funds (Effective)”. If on any relevant day such rate is not yet published in H.15(519), the rate for such day will be the rate of interest per annum set forth in the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government

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securities, or any successor publication, published by the Federal Reserve Bank of New York (including any successor, the “Composite 3:30 p.m. Quotations”) for such day under the caption “Federal Funds Effective Rate”. If on any relevant day the appropriate rate per annum for such day is not yet published in either H.15(519) or the Composite 3:30 p.m. Quotations, the rate for such day will be the arithmetic mean of the rates per annum for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York time) on that day by each of three major brokers of Federal funds transactions in New York City, selected by the Agent, acting reasonably.

“Federal Reserve Board” or “Federal” means the Board of Governors of the Federal Reserve System of the United States of America or any successor thereof.

“Financial Statements” means the financial statements (including the notes thereto) of the Borrower or a Subsidiary, as the context requires, which shall be consolidated unless expressly provided otherwise and shall include a balance sheet, a statement of operations and a statement of cash flows, together with comparative figures in each case (where a comparative period on an earlier statement exists), all prepared, maintained and stated in accordance with GAAP applied consistently.

“First Priority” means, with respect to any Lien purported to be created in any Collateral pursuant to any Collateral Document, that (a) such Lien is perfected and has priority over any other Lien on, or adverse claim against, such Collateral, other than Permitted Liens, and (b) such Lien is the only Lien (other than Permitted Liens) to which such Collateral is subject.

“Fiscal Quarter” means the three (3) month period commencing on the first day of each Fiscal Year, and each successive three (3) month period thereafter during such Fiscal Year.

“Fiscal Year” means the Borrower’s fiscal year which presently commences on April 1 of each calendar year and ends on March 31 of each calendar year.

“Fronting Lender” means CIBC or any replacement administrative agent appointed hereunder who assumes in writing, with the Borrower and the Agent, the obligation of issuing Letters of Credit on behalf of the Lenders under the Credit Facility.

“GAAP” or “generally accepted accounting principles” has the meaning set out in Section 1.4.

“Global Consent and Confirmation” means the Global Consent and Confirmation executed and delivered by each of the Borrower and the Subsidiary Guarantors on the Closing Date, substantially in the form of Schedule H attached hereto.

“Governmental Authority” means:

(a) any government, parliament or legislature, any regulatory or administrative authority, agency, commission or board and any other statute, rule or regulation making entity having jurisdiction in the relevant circumstances;

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(b) any Person acting under the authority of any of the foregoing or under a statute, rule or regulation thereof; and

(c) any judicial, administrative or arbitral court, authority, tribunal or commission having jurisdiction in the relevant circumstances.

“Governmental Authorization” means, in respect of any transaction, Person or event, any authorization, exemption, license, permit, franchise or approval from, or any filing or registration with, any Governmental Authority applicable to such transaction, Person or event or to any of such Person’s business, undertaking or property, including those required under any Environmental Law, and “Governmental Authorizations” means any and all of the foregoing.

“Guarantees” means, collectively, the Borrower Guarantee, the Subsidiary Guarantee and any other guarantee executed and delivered, or required to be executed and delivered, in favour of the Collateral Agent pursuant to Article 10 and Section 9.6, in each case as amended, supplemented, replaced or otherwise modified from time to time.

“Hazardous Materials” means any substance or mixture of substances defined as or determined to be a pollutant, contaminant, waste, hazardous waste, hazardous chemical, hazardous substance, toxic substance or dangerous good under any Environmental Law.

“Hedge Agreement” means an Interest Rate Agreement or a Currency Agreement designed to hedge against fluctuations in interest rates or currency values, respectively.

“Intellectual Property” means all patents, trademarks, tradenames, copyrights, technology, software, know-how and processes used in or necessary for the conduct of the business of the Borrower and its Subsidiaries.

“Interest Payment Date” means:

(a) with respect to each Prime Loan and USBR Loan, the first Banking Day of each calendar month; and

(b) with respect to each Libor Loan, the last day of each applicable Interest Period and, if any Interest Period is longer than 3 months, the last Banking Day of each 3 month period during such Interest Period;

provided that, in any case, the applicable Maturity Date or, if applicable, any earlier date on which the Credit Facility is fully cancelled or permanently reduced in full, shall be an Interest Payment Date with respect to all Loans then outstanding under the Credit Facility.

“Interest Period” means:

(a) with respect to each Bankers’ Acceptance, the period selected by the Borrower hereunder and being of 1, 2, 3 or 6 months’ duration, subject to market availability (or, subject to the agreement of the Lenders, a longer or shorter period) commencing on the Drawdown Date, Rollover Date or Conversion Date of such Loan;

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(b) with respect to each Libor Loan, the period selected by the Borrower and being of 1, 2, 3 or 6 months’ duration (or, subject to the agreement of the Lenders, a longer or shorter period) commencing on the applicable Drawdown Date, Rollover Date or Conversion Date, as the case may be; and

(c) with respect to each Letter of Credit, the period commencing on the date of issuance of such Letter of Credit and terminating on the last day the Letter of Credit is outstanding;

provided that in any case: (i) the last day of each Interest Period shall be also the first day of the next Interest Period in the case of a Rollover; (ii) the last day of each Interest Period shall be a Banking Day and if the last day of an Interest Period selected by the Borrower is not a Banking Day the Borrower shall be deemed to have selected an Interest Period the last day of which is the Banking Day next following the last day of the Interest Period selected unless such next following Banking Day falls in the next calendar month in which event the Borrower shall be deemed to have selected an Interest Period the last day of which is the Banking Day next preceding the last day of the Interest Period selected by the Borrower; and (iii) the last day of all Interest Periods for Loans outstanding under the Credit Facility shall expire on or prior to the Maturity Date.

“Interest Rate Agreement” means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement to which the Borrower or any of its Subsidiaries is a party.

“Investment” means:

(a) any direct or indirect purchase or other acquisition by Borrower or any of its Subsidiaries of, or of a beneficial interest in, any securities of any other Person (including any Subsidiary of the Borrower),

(b) any direct or indirect redemption, retirement, purchase or other acquisition for value, by any Subsidiary of the Borrower from any Person other than the Borrower or any of its Subsidiaries, of any equity securities of such Subsidiary,

(c) any direct or indirect loan, advance (other than advances to employees for moving, entertainment and travel expenses, drawing accounts and similar expenditures in the ordinary course of business) or capital contribution by the Borrower or any of its Subsidiaries to any other Person, including all indebtedness and accounts receivable from that other Person that are not current assets or did not arise from sales or services to that other Person in the ordinary course of business, or

(d) Interest Rate Agreements or Currency Agreements not constituting Hedge Agreements.

Except for Investments specified in paragraph (d) above, which such Investments shall be valued at their mark-to-market value at the time of any such valuation, the amount of any Investment

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shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment (other than adjustments for the repayment of, or the refund of capital with respect to, the original principal amount of any such Investment).

“Knowledge” means, in respect of the Borrower, the knowledge of any director or senior officer who has current knowledge of the relevant facts or circumstances after due enquiry by such Person.

“LC Fee” means the fee charged by the Lenders for issuing a Letter of Credit which shall be calculated by the Fronting Lender in accordance with Section 4.5(a).

“Lender Assignment Agreement” means a lender assignment agreement substantially in the form of Schedule G, with such amendments thereto as may be reasonably required by the Agent from time to time.

“Lender Hedge Agreements” means (a) the Existing Hedge Agreements described on the Disclosure Schedule and (b) any other Hedge Agreement entered into between a Lender or its Affiliate while the Lender has a Commitment hereunder (regardless of whether the Lender subsequently ceases to be a Lender) and the Borrower or its Subsidiary from time to time.

“Lenders” means the Persons named on the signature pages hereto as Lenders and any other Persons which become party to this Agreement as Lenders pursuant to Section 15.6 and their respective successors, and “Lender” means any one of them, as the context requires.

“Lenders’ Counsel” means the firm of Macleod Dixon LLP or such other firm of legal counsel as the Agent may from time to time designate.

“Letter of Credit” or “LC” means Canadian Dollar or US Dollar financial or non-financial standby letters of credit or documentary letters of credit issued by and in a form satisfactory to the Fronting Lender on behalf of the Lenders, which Letters of Credit shall be issued at the request of and for the account of the Borrower pursuant to Article 6 for the purpose of supporting the Borrower’s and its Subsidiaries ordinary course business operations.

“Libor Loan” means an Advance in, or Conversion into, United States Dollars made by the Lenders to the Borrower with respect to which the Borrower has specified that interest is to be calculated by reference to the Libor Rate, and each Rollover in respect thereof.

“Libor Rate” means, for each Interest Period applicable to a Libor Loan, the rate of interest per annum, expressed on the basis of a year of 360 days (as determined by the Agent):

(a) appearing on the display referred to as “Telerate Page 3750” (or any display substituted therefor of Telerate-The Financial Information Network published by Telerate-Systems, Inc. (or its successors) as of 11:00 a.m. (London, England time) on the second Banking Day prior to the first day of such Interest Period; or

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(b) if such rate does not appear on such Telerate display, or if such display or rate is not available for any reason, the rate per annum at which United States Dollars are offered by the principal lending office in London, England of the Agent (or of its affiliates if it does not maintain such an office) in the London interbank market at approximately 11:00 a.m. (London, England time) on the second Banking Day prior to the first day of such Interest Period,

in each case in an amount similar to such Libor Loan and for a period comparable to such Interest Period.

“Liens” means mortgages, charges, pledges, hypothecs, assignments by way of security, conditional sales or other title retentions, security created under the Bank Act (Canada), liens, encumbrances, security interests or other interests in property, howsoever created or arising, whether fixed or floating, perfected or not, which secure payment or performance of an obligation and, including, in any event, (a) rights of set-off created for the purpose of securing (directly or indirectly) any Debt, and (b) the rights of lessors under Capital Leases and any other lease financing included as Debt.

“Loan” means a Prime Loan, USBR Loan, Libor Loan, Bankers’ Acceptance or BA Equivalent Advance or Letter of Credit outstanding hereunder.

“Loan Documents” means this Agreement, Bankers’ Acceptances, Discount Notes, Letters of Credit (and any applications for, or reimbursement agreements or other documents executed by the Borrower relating to, the Letters of Credit), the Guarantees, the Collateral Documents and the Global Consent and Confirmation.

“Majority Lenders” means those Lenders holding, in the aggregate, at least 66 2/3% of the Commitments of all Lenders hereunder.

“Material Adverse Effect” means any of (a) a material adverse effect upon the business, operations, properties, assets or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole, or (b) the impairment of the ability of the Borrower or a Subsidiary, taken as a whole, to perform the Obligations in any material way, or (c) the impairment of the ability of the Agent or the Lenders to enforce the Obligations.

“Material Contract” means any contract or other arrangement to which the Borrower or the Subsidiaries is a party (other than the Loan Documents) for which breach, nonperformance, cancellation or failure to renew, as at the date of determination, could reasonably be expected to have a Material Adverse Effect.

“Maturity Date” means the third anniversary of the Closing Date subject to extension in accordance with Section 2.2 and provided that (a) in the event of any Partial Extension, there will be different Maturity Dates among the Lenders as provided for in Section 2.2(f) and (b) in no event will the Maturity Date be extended beyond June 1, 2011 (which is the date six month prior to the maturity of the Senior Notes).

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“Minor Subsidiary” means a Subsidiary of the Borrower which has consolidated assets of less than Cdn. $1,000,000 (or the Equivalent Amount in United States Dollars) and consolidated revenues on an annual basis of less than Cdn. $1,000,000 (or the Equivalent Amount in United States Dollars) and is designated as a Minor Subsidiary by the Borrower pursuant to Section 9.6(c); provided that, in no event shall the Minor Subsidiaries have consolidated assets on an aggregate basis greater than Cdn. $10,000,000 (or the Equivalent Amount in United States Dollars) or annual consolidated revenues on an aggregate basis of greater than Cdn. $15,000,000.

“Moody’s” means Moody’s Investors Service, Inc., and its successors.

“NACG” means North American Construction Group Inc., a Canadian corporation.

“Net Asset Sale Proceeds”, with respect to any asset sales contemplated under clauses (b) or (e) of the definition of Permitted Dispositions, means cash payments (including any cash received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) received from such asset sale, net of any bona fide direct costs (including professional fees and costs) incurred in connection with such asset sale, including (a) income taxes reasonably estimated to be actually payable within two years of the date of such asset sale as a result of any gain recognized in connection with such asset sale and (b) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Debt (other than the Loans) that is secured by a Lien on the stock or assets in question and that is required to be repaid under the terms thereof as a result of such asset sale.

“Net Insurance/Condemnation Proceeds” means any cash payments or proceeds received by the Borrower or any of its Subsidiaries (a) under any business interruption or casualty insurance policy in respect of a covered loss thereunder or (b) as a result of the taking of any assets of the Borrower or any of its Subsidiaries by any Person pursuant to expropriation or otherwise, or pursuant to a sale of any such assets to a purchaser with such power under threat of such a taking, in each case net of any actual and reasonable documented costs incurred by the Borrower or any of its Subsidiaries in connection with the adjustment or settlement of any claims of the Borrower or such Subsidiary in respect thereof.

“Net Securities Proceeds” means the cash proceeds (net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including reasonable legal fees and expenses) from the issuance of Capital Stock of or incurrence of Debt by the Borrower or any of its Subsidiaries.

“Non-Acceptance Lender” means (a) a Lender which does not accept bankers’ acceptances in the ordinary course of its business or (b) in respect of Lenders which are not Canadian chartered banks or Schedule III Lenders, a Lender who, by notice in writing to the Agent and the Borrower, elects thereafter to make BA Equivalent Advances in lieu of accepting Bankers’ Acceptances.

“Non-Extending Lenders” has the meaning attributed thereto in Section 2.2(c).

“Noon Rate” means, in relation to the conversion of one currency into another currency, the spot rate of exchange for such conversion as quoted by the Bank of Canada (or, if not so quoted, the

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spot rate of exchange quoted for wholesale transactions by the Agent in Toronto, Ontario in accordance with its normal practice) at approximately 12:00 noon (Toronto, Ontario time) on the Banking Day that such conversion is to be made (or, if such conversion is to be made before noon, then at approximately noon on the immediately preceding Banking Day).

“Obligations” means, at any time and from time to time, all of the obligations, indebtedness and liabilities (present or future, absolute or contingent, matured or not) of the Borrower and its Subsidiaries to the Lenders or the Agent under, pursuant or relating to the Loan Documents or the Credit Facility and whether the same are from time to time reduced and thereafter increased or entirely extinguished and thereafter incurred again and including, without limitation, all principal, interest, fees, legal and other costs, charges and expenses, and other amounts payable by the Borrower under this Agreement; provided that, for purposes of Article 10 and the Security and the Collateral Documents but for no other purposes, “Obligations” shall also include any Cash Management Indebtedness.

“Officer’s Certificate” means a certificate or notice (other than a Compliance Certificate) signed by a senior officer of the Borrower; provided, however, that Drawdown Notices and Conversion/Rollover/Repayment Notices shall be executed on behalf of the Borrower by any one of the foregoing persons or such other persons as may from time to time be designated by written notice by the Borrower to the Agent.

“Operating Lease”, as applied to any Person, means any lease (including leases that may be terminated by the lessee at any time) of any property (whether real or personal) that is not a Capital Lease other than any such lease under which that Person is the lessor.

“Original Closing Date” has the meaning attributed thereto in the recitals above.

“Original Credit Agreement” has the meaning attributed thereto in the recitals above.

“Outstanding Principal” means, at any time, the aggregate of (a) the principal amount of all outstanding Prime Loans (including Swing Line Advances) and Overdrafts in Cdn. Dollars, (b) the Equivalent Amount in Cdn. Dollars of the principal of all outstanding USBR Loans and Libor Loans, (c) the amounts payable at maturity of all outstanding Bankers’ Acceptances and BA Equivalent Advances, (d) the maximum amount available to be drawn under all outstanding Letters of Credit denominated in Cdn. Dollars, and (e) the Equivalent Amount in Cdn. Dollars of the maximum amount available to be drawn under all outstanding Letters of Credit denominated in United States Dollars.

“Overdrafts” has the meaning attributed thereto in Section 2.8(a).

“Partial Extension” has the meaning attributed thereto in Section 2.2(f).

“Permitted Acquisitions” means:

(a) any acquisition funded solely with the proceeds of an equity offering of the Borrower or Capital Stock of the Borrower; provided that (i) in the case of the purchase of a Person’s Capital Stock, such purchase is for 100% of all of the

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issued and outstanding Capital Stock of such Person, and (ii) such acquisition does not result in a Material Adverse Effect and no Default or Event of Default is continuing at the time of such acquisition or would result therefrom; or

(b) acquisitions, by purchase or otherwise, of all or substantially all of the business, property or fixed assets of, or Capital Stock or other ownership interest of any Person or any division or line of business of any Person (not covered by clause (a) above); provided that (i) the purchase price of any such acquisition does not exceed Cdn. $25,000,000, (ii) the aggregate purchase price of all such acquisitions made during any Fiscal Year does not exceed Cdn. $25,000,000, (iii) in the case of the purchase of a Person’s Capital Stock, such purchase is for 100% of all of the issued and outstanding Capital Stock of such Person, and (iv) such acquisition does not result in a Material Adverse Effect and no Default or Event of Default is continuing at the time of such acquisition or would result therefrom.

“Permitted Contingent Obligations” means:

(a) Contingent Obligations of the Subsidiary Guarantors in respect of the Subsidiary Guarantee;

(b) Contingent Obligations of the Borrower under Currency Agreements with respect to Debt under the Senior Notes;

(c) Contingent Obligations of the Borrower under the Lender Hedge Agreements;

(d) Contingent Obligations of the Borrower in respect of other Hedge Agreements (that are not Lender Hedge Agreements) in an amount not to exceed Cdn.$5,000,000;

(e) Contingent Obligations of the Borrower and the Subsidiaries in respect of customary indemnification and purchase price adjustment obligations incurred in connection with a sale of assets;

(f) Contingent Obligations in respect of any obligations of the Borrower or any Subsidiary Guarantor in respect of Permitted Debt;

(g) existing Contingent Obligations of the Borrower and the Subsidiaries described in the Disclosure Schedule;

(h) Contingent Obligations of Subsidiary Guarantors arising under their guarantees of the Senior Notes;

(i) Contingent Obligations of the Borrower and the Subsidiaries under the Bonding Program;

(j) any obligation of the Borrower or any Subsidiary Guarantor incurred in the ordinary course of its business (the “Direct Obligation”) (for certainty, excluding obligations that are dealt with in the preceding clauses (a) through (i) of this

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definition) if the primary purpose or intent of the Borrower or Subsidiary Guarantor incurring the Contingent Obligation is to provide assurance to the obligee of the Direct Obligation that the Direct Obligation will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such Direct Obligation will be protected (in whole or part) against loss in respect thereof;

(k) other Contingent Obligations of the Borrower and the Domestic Subsidiaries, provided that the maximum aggregate liability, contingent or otherwise, of the Borrower and its Domestic Subsidiaries in respect of all such other Contingent Obligations shall at no time exceed Cdn. $10,000,000; and

(l) Contingent Obligations relating to obligations under operating leases entered into in the ordinary course of business by the Borrower or any Subsidiary.

“Permitted Debt” means:

(a) the Obligations;

(b) Permitted Contingent Obligations of the Borrower and its Domestic Subsidiaries and, upon any matured obligations actually arising pursuant thereto, the Debt corresponding to the Contingent Obligations so extinguished;

(c) Debt in respect of Capital Leases of the Borrower and its Domestic Subsidiaries aggregating not in excess of Cdn. $30,000,000 at any one time;

(d) Debt of the Borrower to a Subsidiary Guarantor or from a Subsidiary Guarantor to another Subsidiary Guarantor or to the Borrower;

(e) existing Permitted Debt described in the Disclosure Schedule;

(f) Debt evidenced by the Senior Notes in an aggregate principal amount not to exceed U.S.$200,000,000;

(g) Permitted Purchase Money Debt; and

(h) other Debt of the Borrower and its Domestic Subsidiaries in an aggregate principal amount not to exceed Cdn. $5,000,000 at any time outstanding.

“Permitted Dispositions” means, in respect of the Borrower or any Subsidiary, each of the following:

(a) a sale or disposition of assets by a Subsidiary to the Borrower or a Subsidiary Guarantor or by the Borrower to a Subsidiary Guarantor;

(b) a sale or disposition by the Borrower or such Subsidiary in the ordinary course of business and in accordance with sound industry practice of property that is obsolete, no longer useful for its intended purpose or being replaced in the ordinary course of business;

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(c) a sale or disposition of inventory of the Borrower or such Subsidiary in the ordinary course of business at fair market value to a Person at arm’s length from the Borrower and its Subsidiaries;

(d) in order to resolve disputes (or to settle with non-paying account debtors) that occur in the ordinary course of business, the Borrower and its Subsidiaries may discount or otherwise compromise for less than the face value thereof, notes or accounts receivable; and

(e) a sale of assets in the normal course of business and in accordance with sound industry practice, provided that (i) such disposition does not result in a Material Adverse Effect and no Default or Event of Default is continuing at the time of such disposition or would result therefrom, (ii) the consideration received for such assets shall be in an amount at least equal to the fair market value thereof, (iii) at least 75% of the consideration received shall be cash or trade-in on replacement assets, (iv) such sale is not otherwise restricted under the Credit Agreement, and (v) the Net Asset Sale Proceeds of such disposition shall be applied to either immediately purchase replacement property or assets or, if the proceeds are not so applied, such Net Asset Sale Proceeds shall be deposited into the Borrower’s Account or applied to repay the Obligations in accordance with Section 7.1.

“Permitted Investments” means:

(a) Investments by the Borrower and its Subsidiaries in cash and Cash Equivalents;

(b) Investments by the Borrower and the Subsidiary Guarantors in any Subsidiary;

(c) intercompany loans to a Subsidiary Guarantor;

(d) Consolidated Capital Expenditures by the Borrower and its Subsidiaries to the extent permitted under Section 9.3(e);

(e) existing Investments described in the Disclosure Schedule;

(f) promissory notes and other non-cash consideration held by the Borrower and its Subsidiaries that are received in connection with any asset sale permitted by Section 9.3(h);

(g) Permitted Acquisitions;

(h) so long as no Default or Event of Default shall have occurred and be continuing or shall be caused thereby, Permitted Joint Venture Investments made or owned by the Borrower or any of its Domestic Subsidiaries; provided that, for greater certainty, upon and during the occurrence and continuation of a Default or an

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Event of Default, the Borrower and its Domestic Subsidiaries may own all Permitted Joint Venture Investments then owned by it and them; and

(i) so long as no Default or Event of Default shall have occurred and be continuing or shall be caused thereby, other Investments made or owned by the Borrower or any of its Domestic Subsidiaries in an aggregate amount not to exceed at any time Cdn.$10,000,000, provided that, for greater certainty, upon and during the occurrence and continuation of a Default or an Event of Default, the Borrower and its Domestic Subsidiaries may own all Investments then owned by it and them.

“Permitted Joint Venture Investment” means a joint venture or partnership in the same or substantially the same business line of the Borrower in which the Borrower or a Subsidiary Guarantor has the right to receive a percentage of the profits or distributions at least equal to the percentage of its ownership interest and its liability under such arrangement is limited to the percentage of its ownership interest.

“Permitted Liens” means, as at any particular time, any of the following on the property or any part of the property of the Borrower or any Subsidiary:

(a) Liens for taxes, assessments or governmental charges or claims the payment of which is not, at the time, required by Section 9.2(f);

(b) Liens imposed by Applicable Law, such as statutory liens and deemed trusts, carriers’ liens, builders’ liens, warehousemen’s liens, mechanics’ liens, materialmen’s liens and other liens, privileges or other charges of a similar nature in each case incurred in the ordinary course of business (i) for amounts not yet overdue or (ii) for amounts that are overdue and that (in the case of any such amounts overdue for a period in excess of 10 days) are being contested in good faith by appropriate proceedings, so long as (A) such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts, and (B) in the case of a Lien with respect to any portion of the Collateral, such contest proceedings conclusively operate to stay the sale of any portion of the Collateral on account of such Lien;

(c) Liens constituted by the delivery of bonds issued under the Bonding Program, or letters of credit, in any case provided in the ordinary course of business to secure the performance of bids, trade contracts, leases, government contracts, statutory obligations, and other similar obligations (exclusive of obligations for the payment of borrowed money), and Liens securing indemnity or reimbursement obligations in respect of the Bonding Program;

(d) Liens provided in connection with workers’ compensation, unemployment insurance and other types of social security in the ordinary course of business, so long as no foreclosure, sale or similar proceedings have been commenced with respect thereto;

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(e) Liens constituted by the delivery of an appeal bond posted with a court in connection with litigation to which the Borrower or a Subsidiary is subject, so long as no other Liens are provided (except other Permitted Liens);

(f) any attachment or judgment Lien not constituting an Event of Default under Section 11.1(h);

(g) Liens reserved in or exercisable under any real property lease for rent or otherwise to effect compliance with the terms of such lease, in respect of which the rent or other obligations (i) are not yet overdue or (ii) for amounts that are overdue and that (in the case of any such amounts overdue for a period in excess of 10 days) are being contested in good faith by appropriate proceedings, so long as (A) such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts, and (B) in the case of a Lien with respect to any portion of the Collateral, such contest proceedings conclusively operate to stay the sale of any portion of the Collateral on account of such Lien;

(h) Liens in favour of a public utility or any municipality or governmental or other public authority when required by such utility, municipality or authority in connection with the operations of the Borrower or a Subsidiary, provided that all such Liens only secure (i) amounts not yet overdue or (ii) amounts that are overdue and that (in the case of any such amounts overdue for a period in excess of 10 days) are being contested in good faith by appropriate proceedings, so long as (A) such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts, and (B) in the case of a Lien with respect to any portion of the Collateral, such contest proceedings conclusively operate to stay the sale of any portion of the Collateral on account of such Lien;

(i) Liens granted pursuant to the Collateral Documents;

(j) Liens in favour of the Borrower or a Subsidiary Guarantor on assets of any Subsidiary of the Borrower;

(k) any interest or title of a lessor under any Capital Lease, provided that such Liens do not extend to any property or assets which are not leased property subject to such Capital Lease or property ancillary thereto or the proceeds thereof;

(l) Operating Leases to the extent constituting Liens under the Personal Property Security Act (Alberta) or any equivalent legislation, or Liens granted under or in connection with Operating Leases; provided that such Liens do not extend to any property or assets which are not leased property subject to such Operating Lease or property ancillary thereto or the proceeds thereof;

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(m) Liens incidental to current operations which have not at such time been filed pursuant to Applicable Law against the Borrower’s or a Subsidiary Guarantor’s assets, or which relate to obligations not due or delinquent;

(n) the existing Liens described in the Disclosure Schedule;

(o) Liens securing Permitted Purchase Money Debt; provided that such Liens do not secure amounts in excess of the purchase price or the cost of installation, construction or improvement of the applicable property or equipment and do not extend to any property or assets other than the applicable property or equipment; and

(p) other Liens securing obligations in an aggregate amount not to exceed Cdn.$5,000,000 at any time outstanding;

provided that nothing in this Agreement shall be construed as postponing or subordinating the Liens of the Collateral Documents to any such Permitted Lien.

“Permitted Purchase Money Debt” means Debt of the Borrower and its Domestic Subsidiaries that is incurred for the purpose of financing all or any part of the purchase price of, or the cost of installation, construction or improvement of, property or equipment in an aggregate principal amount not to exceed Cdn. $25,000,000 at any time outstanding.

“Person” means an individual, a partnership, a corporation, a limited or unlimited liability company, a joint venture, a trust, an unincorporated organization, a union, a government or any department or agency thereof and the heirs, executors, administrators or other legal representatives of an individual, and words importing persons have a similar meaning.

“Pledge Agreements” means the Borrower Pledge Agreement, the Subsidiary Pledge Agreement and any other share pledge agreement in substantially similar form executed and delivered from time to time under this Agreement.

“Prime Loan” means an Advance in, or Conversion into, Cdn. Dollars made by the Lenders to the Borrower with respect to which the Borrower has specified or a provision hereof requires that interest is to be calculated by reference to the Prime Rate.

“Prime Rate” means, for any day, the greater of:

(a) the rate of interest per annum established from time to time by the Agent as the reference rate of interest for the determination of interest rates that the Agent will charge to customers in Canada for Cdn. Dollar commercial loans in Canada; and

(b) the CDOR Rate on the immediately preceding Banking Day for 30 day Canadian Dollar bankers’ acceptances, plus 1.00% per annum.

“Pro Rata Share” means, at any time and in relation to any Lender and any amount, (subject to Section 2.2(f)(iii)) the proportionate share of such amount which is calculated by multiplying

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such amount by a fraction, the numerator of which is the Commitment of such Lender at such time and the denominator of which is the Total Commitment at such time.

“Release” means any release, spill, emission, leak, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the environment including, without limitation, the movement of Hazardous Materials through ambient air, soil, surface water, ground water, wetlands, land or sub-surface strata.

“Rollover” means:

(a) with respect to any Libor Loan, the continuation of all or a portion of such Loan (subject to the provisions hereof) for an additional Interest Period subsequent to the initial or any subsequent Interest Period applicable thereto;

(b) with respect to Bankers’ Acceptances, the issuance of new Bankers’ Acceptances or the making of new BA Equivalent Advances (subject to the provisions hereof) in respect of all or any portion of Bankers’ Acceptances (or BA Equivalent Advances made in lieu thereof) maturing at the end of the Interest Period applicable thereto, all in accordance with Article 5, and

(c) with respect to Letters of Credit, the extension or replacement of an existing Letter of Credit, provided that the beneficiary thereof (including any successors or permitted assigns thereof) remains the same, the maximum amount available to be drawn thereunder is not increased, the currency in which the same is denominated remains the same and the terms upon which the same may be drawn remain the same.

“Rollover Date” means the date of commencement of a new Interest Period applicable to a Loan and which shall be a Banking Day.

“S&P” means Standard and Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and its successors.

“S&P Rating” means S&P’s corporate credit rating for the Borrower from time to time.

“Schedule I Lender” means a Lender which is a Canadian chartered bank listed on Schedule I to the Bank Act (Canada).

“Schedule II Lender” means a Lender which is a Canadian chartered bank listed on Schedule II to the Bank Act (Canada).

“Schedule III Lender” means a Lender which is an authorized foreign bank listed on Schedule III to the Bank Act (Canada).

“Secured Swap Obligations” means all indebtedness, obligations and liabilities of the Borrower or any Subsidiary Guarantor under the Lender Hedge Agreements.

“Security” means the security and Liens created under the Collateral Documents.

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“Senior Debt” means, in respect of the Borrower on a consolidated basis, without duplication, the sum of:

(a) Debt under the Credit Facility (including under Letters of Credit) and all Debt that ranks pari passu with or senior to such Debt;

(b) Debt under Capital Leases; and

(c) the mark to market liabilities of the Borrower under all Currency Agreements in respect of the Senior Notes;

but shall exclude (1) Debt under the Senior Notes and (2) Permitted Purchase Money Debt incurred for the construction phase of the particular property or equipment (to the extent applicable), provided that such exclusion shall apply only until 60 days after the purchased property or equipment is commissioned for operating use.

“Senior Note Indenture” means the indenture dated November 26, 2003 pursuant to which the Senior Notes are issued, as such indenture may be amended from time to time to the extent permitted under Section 9.3(l) .

“Senior Notes” means the U.S.$200,000,000 in initial aggregate principal amount of Senior Notes of the Borrower due December 1, 2011 issued pursuant to the Senior Note Indenture, and any exchange notes containing substantially identical terms issued as contemplated in the Senior Note Indenture (except that such exchange notes will not contain terms with respect to transfer restrictions or the accrual of liquidated damages).

“St. Paul Priority Agreement” means that certain Priority Agreement dated on or about the Original Closing Date among BNP Paribas (Canada) as administrative agent, GE Canada Finance Holdings as collateral agent, St. Paul Guarantee Insurance Company, NACG Holdings Inc. and its Subsidiaries and the other parties thereto.

“Subsidiary” means, with respect to the Borrower:

(a) any corporation of which at least a majority of the outstanding Voting Securities having by the terms thereof ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time shares of any other class or classes of such corporation might have voting power by reason of the happening of any contingency, unless the contingency has occurred and then only for as long as it continues) is at the time directly, indirectly or beneficially owned or controlled by the Borrower or one or more of its Subsidiaries, or the Borrower and one or more of its Subsidiaries;

(b) any partnership of which, at the time, the Borrower, or one or more of its Subsidiaries, or the Borrower and one or more of its Subsidiaries: (i) directly, indirectly or beneficially own or control more than 50% of the income, capital, beneficial or ownership interests (however designated) thereof; and (ii) is a

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general partner, in the case of limited partnerships, or is a partner or has authority to bind the partnership, in all other cases; or

(c) any other Person of which at least a majority of the income, capital, beneficial or ownership interests (however designated) are at the time directly, indirectly or beneficially owned or controlled by the Borrower, or one or more of its Subsidiaries, or the Borrower and one or more of its Subsidiaries.

“Subsidiary Guarantee” means the Subsidiary Guarantee executed and delivered by the Subsidiaries of the Borrower on the Original Closing Date substantially in the form of Exhibit XI attached to the Original Credit Agreement, as such Subsidiary Guarantee may thereafter be amended, supplemented (including by any joinder in respect thereof), replaced or otherwise modified from time to time in accordance herewith

“Subsidiary Guarantor” means, on the date hereof, NACG, NACG Finance LLC, North American Construction Ltd., North American Caisson Ltd., North American Engineering Inc., North American Enterprises Ltd., North American Industries Inc., North American Maintenance Ltd., North American Mining Inc., North American Pipeline Inc., North American Road Inc., North American Services Inc., North American Site Services Inc., Griffiths Pile Driving Inc., North American Site Development Ltd.; and any other Subsidiary of the Borrower that executes and delivers a counterpart of, or joinder agreement in respect of, the Subsidiary Guarantee pursuant to Section 9.6.

“Subsidiary Pledge Agreements” means the Securities Pledge Agreements executed and delivered by any Subsidiary Guarantor on or after the Original Closing Date, substantially in the form of Exhibit XVI attached to the Original Credit Agreement, as such Subsidiary Pledge Agreements may thereafter be amended, supplemented, replaced or otherwise modified from time to time in accordance herewith.

“Swap Lender” means a party to a Lender Hedge Agreement (other than the Borrower or any Subsidiary).

“Swing Line Advances” means Advances of Prime Loans or by way of Overdrafts under the Credit Facility made only by the Swing Line Lender pursuant to Section 2.8.

“Swing Line Commitment” means the commitment by the Swing Line Lender to make Swing Line Advances up to a maximum of Cdn. $10,000,000.

“Swing Line Lender” means Bank of Montreal or any other Lender selected by the Borrower (acting reasonably and in consultation with the Agent) who assumes in writing, with the Borrower and the Agent, the obligation of making Swing Line Advances under this Agreement.

“Taxes” means all taxes, levies, imposts, stamp taxes, duties, fees, deductions, withholdings, or charges which are imposed, levied, collected, withheld or assessed by any country or political subdivision or taxing authority thereof now or at any time in the future, together with interest thereon and penalties, charges or other amounts with respect thereto, if any, and “Tax” and “Taxation” shall be construed accordingly.

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“Termination Event” means an automatic early termination of obligations relating to any Lender Hedge Agreement without any notice being required from a Lender or any other financial institution which is a counterparty thereto.

“Total Commitment” means the aggregate Commitments of the Lenders.

“United States Dollars”, “U.S. Dollars” and “U.S. $” means the lawful money of the United States of America.

“U.S. Base Rate” means, for any day, the greater of:

(a) the rate of interest per annum established from time to time by the Agent as the reference rate of interest for the determination of interest rates that the Agent will charge to customers in Canada for United States Dollar commercial loans in Canada; and

(b) the rate of interest per annum for such day or, if such day is not a Banking Day, on the immediately preceding Banking Day, equal to the sum of the Federal Funds Rate plus 0.50% per annum.

“USBR Loan” means an Advance in, or Conversion into, United States Dollars made by the Lenders to the Borrower with respect to which the Borrower has specified or a provision hereof requires that interest is to be calculated by reference to the U.S. Base Rate.

“Voting Securities” means:

(a) capital stock of any class of any corporation or other equity securities of any other Person which carries voting rights to elect the board of directors (or other persons performing similar functions) under any circumstances; and

(b) an interest in a general partnership, limited partnership, joint venture or similar Person which entitles the holder of such interest to receive a share of the profits, or on dissolution or partition, of the assets, of such Person.

1.2 Headings; Articles and Sections

The division of this Agreement into Articles and Sections and the insertion of headings are for 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 and not to any particular Article, Section or other portion hereof and include any agreement supplemental hereto. Unless something in the subject matter or context is inconsistent therewith, references herein to Articles and Sections are to Articles and Sections of this Agreement.

1.3 Number; persons; including

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,

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words importing persons shall include individuals, partnerships, associations, trusts, unincorporated organizations and corporations and vice versa and words and terms denoting inclusiveness (such as “include” or “includes” or “including”), whether or not so stated, are not limited by their context or by the words or phrases which precede or succeed them.

1.4 Accounting Principles

Wherever in this Agreement reference is made to “generally accepted accounting principles” or “GAAP”, such reference shall be deemed to be to the recommendations at the relevant time of the Canadian Institute of Chartered Accountants, or any successor institute, applicable on a consolidated basis (unless otherwise specifically provided or contemplated herein to be applicable on an unconsolidated basis) as at the date on which such calculation is made or required to be made in accordance with such principles (“GAAP”). Where the character or amount of any asset or liability or item of revenue or expense or amount of equity is required to be determined, or any consolidation or other accounting computation is required to be made for the purpose of this Agreement or any other Loan Document, such determination or calculation shall, to the extent applicable and except as otherwise specified herein or as otherwise agreed in writing by the parties, be made in accordance with GAAP applied on a consistent basis.

1.5 References to Agreements and Enactments

Reference herein to any agreement, instrument, licence or other document shall, unless otherwise specified, be deemed to include reference to such agreement, instrument, licence or other document as the same may from time to time be amended, modified, supplemented or restated in accordance with the provisions of this Agreement; and reference herein to any enactment shall be deemed to include reference to such enactment as re-enacted, amended or extended from time to time and to any successor enactment.

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1.6 Amendment and Restatement

This Agreement is and shall for all purposes be deemed to be an amendment and a restatement of the provisions of the Existing Credit Agreement. This Agreement shall supersede the Existing Credit Agreement insofar as it constitutes the entire agreement between the parties concerning the subject matter of this Agreement, but does not constitute a novation of the Existing Credit Agreement or any of the Debt, liabilities or obligations of the Borrower thereunder. All Existing Letters of Credit pursuant to the Existing Credit Agreement shall be deemed to be Letters of Credit under this Agreement, and all Obligations (as defined in the Existing Credit Agreement) outstanding when this Agreement becomes effective in accordance with Section 3.2 shall be deemed to be Obligations under this Agreement. In respect of such Existing Letters of Credit for which BNP Paribas (Canada) was the fronting lender under the Existing Credit Agreement, BNP Paribas (Canada) shall be entitled to the indemnification and other rights of the Fronting Lender hereunder until such Existing Letters of Credit expire or are returned.

1.7 Schedules

The following are the Schedules attached hereto and incorporated by reference and deemed to be part hereof:

Schedule A	-	Lenders and Commitments
Schedule B	-	Compliance Certificate
Schedule C	-	Conversion/Rollover/Repayment Notice
Schedule D	-	Discount Note
Schedule E	-	Drawdown Notice
Schedule F	-	Extension Request
Schedule G	-	Lender Assignment Agreement
Schedule H	-	Global Consent and Confirmation
Schedule I	-	Disclosure Schedule
I -1	-	Corporate Chart and Information Regarding Subsidiaries
I-2	-	Employee Matters
I-3	-	Real Property
I-4	-	Material Contracts
I-5	-	Existing Lender Hedge Agreements
I-6		Existing Letters of Credit
I-7	-	Existing Permitted Debt
I-8	-	Existing Permitted Liens
I-9	-	Existing Permitted Investments
1-10	-	Existing Contingent Obligations

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ARTICLE 2

THE CREDIT FACILITY

2.1 Establishment of Credit Facility

(a) Credit Facility. Subject to this Agreement, the Credit Facility is hereby established in favour of the Borrower and each Lender hereby severally agrees to make available Advances up to its Commitment.

(b) Types of Loans. The Borrower may obtain the following types of Advances under the Credit Facility (unless expressly indicated otherwise):

(i) Prime Loans (including Swing Line Advances);

(ii) USBR Loans;

(iii) Libor Loans;

(iv) Bankers’ Acceptances; and

(v) Letters of Credit;

provided that subject to Section 7.3, at no time shall (A) the Outstanding Principal under the Credit Facility (including the Outstanding Principal of all Swing Line Advances) exceed the Total Commitment, or (B) the Outstanding Principal of all Swing Line Advances exceed the Swing Line Commitment.

(c) Nature of Credit Facility and Availability. Subject to the terms and conditions hereof, the Borrower may borrow, repay and reborrow Advances under the Credit Facility until the Maturity Date.

(d) Purpose. The proceeds of any Loans shall be applied by the Borrower for working capital and other general corporate purposes, which may include the making of intercompany loans to and equity Investments in any of the Subsidiary Guarantors for their own general corporate purposes.

(e) Several Commitments. No Lender shall be responsible for the Commitment of any other Lender. The failure of a Lender to make available its share of any Advance in accordance with this Agreement shall not release any other Lender from its obligations hereunder. Notwithstanding anything to the contrary in this Agreement, no Lender shall be obligated to make Advances in excess of its Commitment. The obligation of each Lender to make its Commitment available to the Borrower is a separate obligation between that Lender and the Borrower and such obligation is not the joint or the joint and several obligation of any other Lender.

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2.2 Extensions of Maturity Date

(a) The Borrower may, at its option, by delivering to the Agent an Extension Request, request the Lenders to extend the Maturity Date for an additional period of up to one year, provided that (i) this Extension Request cannot be made more than 90 days, or less than 60 days, before June 7 of each year (the “Anniversary Date”); and (ii) in no event will the Maturity Date be extended beyond June 1, 2011 (which is the date six months prior to the maturity date of the Senior Notes). Any Extension Request not delivered as aforesaid shall be ineffective and shall be deemed not to have been given to or received by the Agent or the Lenders for the purpose of this Section 2.2.

(b) Promptly after receipt from the Borrower of an executed Extension Request, the Agent shall deliver to each Lender a copy of such request, and each Lender shall, at least 30 days before the then current Anniversary Date (the “Election Date”), advise the Agent in writing (i) whether such Lender will agree to extend the Maturity Date, and (ii) if such Lender will agree to extend the Maturity Date, the amount, if any, by which such Lender is prepared to increase its Commitment in the event the Borrower proposes to assign the Commitment of a Non-Extending Lender (as defined below); provided that if any Lender fails to so advise the Agent by the Election Date, then such Lender shall be deemed to have advised the Agent that it will not agree to extend the Maturity Date. The Agent shall promptly notify the Borrower if any Lender advises that it will not agree to extend the Maturity Date. Subject to Section 2.2(e), the Agent shall only extend the Maturity Date upon the agreement of the Lenders holding Commitments equal to at least two-thirds of the Total Commitment at such time, and such extension shall apply only to those Lenders which provided their consent to such extension (the “Extending Lenders”). The determination of each Lender whether or not to extend the Maturity Date shall be made by each such Lender in its sole discretion.

(c) As soon as all of the Lenders have advised, or are deemed to have advised, the Agent whether or not they will be extending the Maturity Date (but in any event within five Banking Days after the Election Date), the Agent shall either:

(i) deliver to the Borrower (with a copy to each Lender) a written extension signed by the Agent; or

(ii) notify the Borrower that the request for extension has been denied.

If the extension is approved by less than all of the Lenders, then the Agent shall also advise the Borrower of those Lenders which did not agree to the requested extension (each, a “Non-Extending Lender”), each Non-Extending Lender’s Pro Rata Share of the Obligations and the amount, if any, by which each Extending Lender is prepared to increase its Commitment in the event the Borrower proposes to assign the Commitment of a Non-Extending Lender.

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(d) Upon the delivery to the Borrower of a written extension, the Maturity Date shall be extended for up to one year as specified in such written extension. The Borrower acknowledges that, at the time of any such extension, an extension fee will be payable to the Extending Lenders.

(e) If an Extension Request is approved but there are Non-Extending Lenders, then the Borrower may require any Non-Extending Lender to assign all of its rights, benefits and interests under the Loan Documents, its Commitment and all Obligations then owing to such Non-Extending Lender under the Credit Facility (collectively, the “Assigned Interests”) to (A) any Extending Lenders which have agreed to increase their Commitments and to purchase Assigned Interests, and (B) to the extent the Assigned Interests are not transferred to Extending Lenders, other Persons selected by the Borrower and acceptable to the Agent, in each case acting reasonably. Such assignments shall be effective upon:

(i) execution of a Lender Assignment Agreement;

(ii) payment to such Non-Extending Lender (in immediately available funds) by the relevant assignee of an amount equal to the relevant Outstanding Principal (and accrued and unpaid interest thereon) owed to such Non-Extending Lender under the Credit Facility together with all other amounts payable hereunder by the Borrower to such Non-Extending Lender in regard to the Assigned Interests;

(iii) payment by the relevant assignee to the Agent (for the Agent’s own account) of the transfer fee contemplated in Section 15.6; and

(iv) provision satisfactory to such Non-Extending Lender (acting reasonably) being made for payment at maturity of the face amount of outstanding Bankers’ Acceptances accepted by it in regard to the Assigned Interests and any costs, losses, premiums or expenses incurred by such Non-Extending Lender by reason of the liquidation or re-deployment of deposits or other funds in respect of Libor Loans outstanding hereunder in regard to the Assigned Interests.

Upon such assignment and transfer becoming effective, the Non-Extending Lender shall have no further right, interest, benefit or obligation hereunder to the extent of the Assigned Interests assigned by that Lender, and each assignee thereof shall succeed to the position of such Lender to the extent of the portion of the Assigned Interests acquired by such assignee as if the assignee were an original Lender hereunder in regard thereto in the place and stead of such Non-Extending Lender.

(f) If an Extension Request is approved but all of the Commitments of the Non-Extending Lenders are not assigned or repaid in accordance with Section 2.2(e) (a “Partial Extension”), the remaining Commitments of the Non-Extending Lenders shall continue until the Maturity Date applicable to such Lenders. Thereafter, any

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Drawdowns under the Credit Facility may only be obtained from the Extending Lenders in proportion to their respective Commitments, and all applicable provisions of this Agreement shall be construed accordingly. Without limiting the foregoing, in the event of any Partial Extension:

(i) the Maturity Date will only be extended in respect of the Extending Lenders and will remain unchanged in respect of the Non-Extending Lenders;

(ii) the provisions herein relating to the Maturity Date shall apply separately to the Non-Extending Lenders as a group and to each other group of Lenders having a common Maturity Date (each, a “Non-Extending Lender Group”); provided that, any such consents or decisions of the Lenders shall be made on the basis of their Pro Rata Shares without regard to whether any Lender or group of Lenders has a different Maturity Date which applies to it or them;

(iii) it the event of a Partial Extension:

(A) any Drawdowns pursuant to Section 2.3 subsequent to the Maturity Date applicable to the Non-Extending Lenders shall be allocated pro rata among the Extending Lenders in accordance with their respective Commitments;

(B) any reduction in the Total Commitment pursuant to Section 2.5 shall be allocated pro rata among the Extending Lenders and the Non-Extending Lenders in accordance with their respective Commitments; and

(C) notwithstanding Section 7.2, if the Borrower makes an optional prepayment under the Credit Facility and if there is no reduction in the Total Commitment, such prepayment shall be deemed to have been made to the Extending Lenders only and shall not be applied in repayment of Outstanding Principal owed to Non-Extending Lenders unless the Agent is expressly directed in writing by the Borrower at the time of payment to allocate such payment pro rata among the Extending Lenders and the Non-Extending Lenders in accordance with their respective Commitments.

2.3 Drawdowns – Notices and Limitations

The Borrower may request Drawdowns upon the following terms and conditions:

(a) the Borrower may request a Drawdown as follows:

(i) in the case of a Prime Loan, USBR Loan or Bankers’ Acceptances, by delivering a Drawdown Notice to the Agent before 11:00 a.m. (Toronto time) at least one Banking Day prior to the requested Drawdown Date,

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(ii) in the case of a Libor Loan, by delivering a Drawdown Notice to the Agent before 11:00 a.m. (Toronto time) at least three Banking Days prior to the requested Drawdown Date, and

(iii) in the case of issuance of a Letter of Credit, by delivering a Drawdown Notice to the Agent and a letter of credit application and indemnity to the Fronting Bank in the Fronting Bank’s customary form before 11:00 a.m. (Toronto time) at least five Banking Days prior to the requested Drawdown Date.

(b) each Drawdown (other than the issuance of a Letter of Credit) shall be requested and made available in minimum amounts of not less than:

(i) in the case of a Prime Loan or USBR Loan, Cdn. or U.S. $5,000,000,

(ii) in the case of a Libor Loan, U.S. $5,000,000 and in multiples of U.S. $1,000,000 thereafter,

(iii) in the case of Bankers’ Acceptances, Cdn. $5,000,000 and in multiples of Cdn. $100,000 thereafter, and

(iv) in the case of a Letter of Credit, Cdn. or U.S. $25,000.

(c) Drawdowns will only be made available if all applicable conditions precedent in ARTICLE 3 are or will be satisfied on or before the requested Drawdown Date.

2.4 Rollovers and Conversions - Notices and Limitations

(a) General. The Borrower may request Rollovers and Conversions upon the following terms and conditions:

(i) the Borrower may request a Rollover or Conversion by delivering a Conversion/Rollover/Repayment Notice with the same prior notice period that would apply if it was obtaining a Drawdown of the relevant type and amount of Loan;

(ii) the Borrower may request a Rollover or Conversion of part only of a Loan, provided that:

(A) each Loan resulting from such Rollover or Conversion is not less than the relevant Drawdown minimum specified in Section 2.3,

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(B) any portion of an existing Libor Loan or Bankers’ Acceptances which is not rolled over or converted shall be repaid in accordance with the provisions hereof, and

(C) the Borrower may not convert a portion only or the whole of an outstanding Loan unless both the unconverted portion and the converted portion of such Loan are equal to or exceed, in the relevant currency of each such portion, the minimum amounts required for Drawdowns of Loans of the same type as that portion as set forth in Section 2.3;

(iii) in respect of Conversions of a Loan denominated in one currency to a Loan denominated in another currency, the Borrower shall at the time of the Conversion repay the Loan or portion thereof being converted in the currency in which it was denominated;

(iv) a Rollover or Conversion shall not result in an increase in Outstanding Principal; increases in Outstanding Principal may only be effected by Drawdowns;

(v) a Rollover or Conversion of a Libor Loan may occur only on the last day of the relevant Interest Period for such Libor Loan (unless the Borrower pays the Libor breakage costs to the Lenders in accordance with Section 7.4(a)); and

(vi) a Rollover or Conversion of a Bankers’ Acceptance may occur only on the maturity date for such Bankers’ Acceptance; and

(vii) a Conversion of a Letter of Credit may occur only in accordance with Section 6.5.

(b) Libor Loans. In anticipation of the expiry of each Interest Period for each Libor Loan, the Borrower shall do one or a combination of the following:

(i) request a Rollover of all or part of such Libor Loan in accordance with Section 2.4(a);

(ii) request a Conversion of all or part of such Libor Loan in accordance with Section 2.4(a); or

(iii) repay all or part of such Libor Loan on the last day of such Interest Period with notice in accordance with Section 7.2.

If and to the extent that the Borrower fails to so notify the Agent or to so pay the relevant Libor Loan in accordance with the foregoing, the Borrower shall be deemed to have requested a Conversion into a USBR Loan on the last day of the

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relevant Interest Period in an amount equal to that portion of the Libor Loan which is not rolled over, converted or repaid.

(c) Bankers’ Acceptances. In anticipation of the maturity of any Bankers’ Acceptances, the Borrower shall, subject to and in accordance with the requirements hereof, do one or a combination of the following with respect to the aggregate face amount at maturity of all such Bankers’ Acceptances:

(i) request a Rollover of the maturing Bankers’ Acceptances in accordance with Section 2.4(a) and, on the maturity date of the maturing Bankers’ Acceptances, pay to the Agent for the account of the Lenders any amount that the Borrower is required to pay under Section 5.4;

(ii) request a Conversion of the maturing Bankers’ Acceptances to another type of Loan in accordance with Section 2.4(a) and, on the maturity date of the maturing Bankers’ Acceptances, pay to the Agent for the account of the Lenders an amount equal to the aggregate face amount of such Bankers’ Acceptances; or

(iii) on the maturity date of the maturing Bankers’ Acceptances, pay to the Agent for the account of the Lenders an amount equal to the aggregate face amount of such Bankers’ Acceptances with notice in accordance with Section 7.2.

If and to the extent that the Borrower fails to so notify the Agent or so pay the maturing Bankers’ Acceptances in accordance with the foregoing, the Borrower shall be deemed to have requested a Conversion into a Prime Loan on the last day of the relevant Interest Period in an amount equal to that portion of the maturing Bankers’ Acceptances which is not rolled over, converted or repaid.

2.5 Reduction of Total Commitment

The Borrower may, at its option, permanently reduce the Total Commitment under the Credit Facility by cancelling all or any part of the undrawn portion of the Credit Facility, provided that:

(a) the Borrower shall provide the Agent with at least three Banking Days’ prior written notice of any such cancellation;

(b) each such cancellation of the Credit Facility shall be a minimum of Cdn. $5,000,000 and in whole multiples of Cdn. $1,000,000 thereafter;

(c) any such cancellation of the Credit Facility shall be allocated among the applicable Lenders in proportion to their respective Commitments at the time of cancellation; and

(d) any cancellation notice shall be irrevocable.

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2.6 Advances - General

(a) Advances shall be made in such currency and at the time and in the manner requested by the Borrower, subject to this Agreement and upon fulfilment of all conditions precedent to the making of such Advances.

(b) No Advances need be made except on a Banking Day.

(c) All Advances by the Lenders and all payments by the Borrower hereunder shall be made at the Agent’s Branch in immediately available freely transferable funds. The Borrower shall open and maintain the Borrower’s Accounts for the purpose of receiving Advances and making payments, repayments and prepayments under this Agreement.

(d) The Agent shall open and maintain books of account evidencing all Advances and issuances of Letters of Credit and all other amounts owing by the Borrower to the Lenders hereunder. The Agent shall enter in the foregoing books of accounts details of all applicable amounts from time to time owing, paid or repaid by the Borrower hereunder. The information entered in the foregoing books of accounts shall constitute prima facie evidence of the Obligations owing from time to time by the Borrower to the Agent and the Lenders.

(e) The Agent shall be entitled to act and rely upon verbal or telephonic instructions from the Borrower or genuinely believed to be from the Borrower; provided that, if any such instructions are so given by the Borrower, the Borrower shall promptly confirm these instructions in writing.

2.7 Advances: Inter-Lender Arrangements

(a) Upon receipt by the Agent of a Drawdown Notice or Conversion/Rollover/ Repayment Notice from the Borrower, the Agent shall promptly advise each Lender of the date, amount and other particulars with respect to such Drawdown, Conversion or Rollover and the amount of each Lender’s Pro Rata Share thereof.

(b) Subject to prior satisfaction of the applicable conditions precedent set forth in Article 3, each Lender shall remit its Pro Rata Share of each requested Drawdown to the Agent’s Accounts on the relevant Drawdown Date for same day value. Subject to Section 14.2, the Agent shall make such funds available to the Borrower by crediting the Borrower’s Accounts for same day value on the relevant Drawdown Date.

2.8 Swing Line Advances

(a) Advance of Swing Line Advances. Notwithstanding Sections 2.3 and 2.7 but otherwise subject to Article 3, the Swing Line Lender agrees to make Swing Line Advances to the Borrower from time to time under the Credit Facility prior to the Maturity Date; provided that, after giving effect thereto:

(i) the aggregate Outstanding Principal of all Swing Line Advances shall not exceed the Swing Line Commitment; and

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(ii) the aggregate Outstanding Principal of all Swing Line Advances plus the Outstanding Principal of all Advances then owing to the Swing Line Lender in its capacity as Lender shall not exceed such Lender’s Commitment.

Within the limits and on the conditions herein set forth with respect to Swing Line Advances, the Borrower may from time to time borrow, repay and reborrow Swing Line Advances. All Swing Line Advances shall be made as Prime Loans and may not be converted into USBR Loans, Bankers’ Acceptances or Libor Loans. The Borrower may access Swing Line Advances from the Swing Line Lender by overdrafts (“Overdrafts”) arising from clearance of cheques or drafts drawn on the accounts of the Borrower maintained with the Swing Line Lender for such purpose.

(b) Repayment of Swing Line Advances. The Borrower may repay Swing Line Advances at any time and from time to time without notice or penalty. All interest payments and principal payments made by the Borrower in respect of Swing Line Advances shall be made directly to the Swing Line Lender at the account designated to the Borrower for such purpose and shall be for the sole account of the Swing Line Lender (except as provided otherwise in Section 2.8(d)).

(c) Purchase of Participations. If the Commitments of all of the Lenders expire or terminate at any time while Swing Line Advances are outstanding, each Lender (other than the Swing Line Lender) shall immediately purchase an undivided participating interest in the outstanding Swing Line Advances in an amount equal to its Pro Rata Share (determined on the date of, and immediately prior to, expiration or termination of the Commitments of the Lenders) of the aggregate principal amount of the outstanding Swing Line Advances by immediately paying to the Swing Line Lender, for same day value, the amount of its participation.

(d) Refund by Swing Line Lender. If a Swing Line Lender receives payment from any Lender in respect of such Lender’s participating interest in a Swing Line Advance and the Swing Line Lender thereafter receives any payment on account thereof from the Borrower, the Swing Line Lender will distribute to such Lender its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s participating interest was outstanding and funded); provided, however, that in the event that any such payment received by the Swing Line Lender is required to be returned, such Lender will return to the Swing Line Lender any portion thereof previously distributed by the Swing Line Lender to such Lender.

(e) Notice of Default. The Swing Line Lender agrees that it will not make any Swing Line Advances to the Borrower from and after the date on which it

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receives a written notice from the Borrower or any Lender referring to this Agreement and stating that a Default or an Event of Default has occurred and is continuing hereunder until the date on which such Default or Event of Default is no longer continuing. A Swing Line Lender shall be entitled to disregard any notice given by a Lender under this Section 2.8(e) in circumstances where, in the Swing Line Lender’s reasonable determination, no Default or Event of Default has occurred and is continuing.

(f) Obligations Absolute. For certainty, it is hereby acknowledged and agreed that the Lenders shall be obligated to advance their Pro Rata Shares of the Advance contemplated by Section 2.8(c) or complete the purchase contemplated by Section 2.8(c) and to disburse to the Swing Line Lender its Pro Rata Shares of the outstanding Swing Line Advances or purchase price referenced therein irrespective of:

(i) whether a Default or Event of Default is then continuing or whether any other requirements in this Agreement has been satisfied; and

(ii) in the case of any such advance, whether or not the Borrower has, in fact, actually requested such Advance (by delivery of a Drawdown Notice or otherwise).

2.9 Lender Hedge Agreements

Subject to the hedging restrictions in Section 9.3(f)(ii), each Swap Lender may elect to enter into Hedge Agreements with the Borrower or any Subsidiary, and all Secured Swap Obligations shall at all times rank pari passu with the Obligations; provided that any Lender that enters into a Hedge Agreement in good faith and without actual knowledge of a contravention of the hedging restrictions in Section 9.3(f)(ii) shall be entitled to the benefit of any Guarantee and Security regardless of any contravention of such negative covenant.

ARTICLE 3

CONDITIONS PRECEDENT TO DRAWDOWNS

3.1 Conditions for All Drawdowns

On or before each Drawdown Date hereunder, the following conditions shall be satisfied:

(a) the Agent shall have received a Drawdown Notice from the Borrower requesting the Drawdown;

(b) each of the representations and warranties contained in Section 8.1 shall be true, correct and complete in all material respects on and as of the Drawdown Date to the same extent as though made on and as of such date (except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true, correct and complete in all material respects on and as of such earlier date); provided that if a

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representation and warranty is qualified as to materiality, with respect to such representation and warranty, the materiality qualifier set forth above shall be disregarded for purposes of this representation;

(c) no Default or Event of Default shall have occurred and be continuing nor shall the Drawdown result in the occurrence of any such event; and

(d) after giving effect to the proposed Drawdown, the Outstanding Principal under the Credit Facility shall not exceed the maximum amount of the Credit Facility.

3.2 Closing Conditions

In addition to the conditions set forth in Section 3.1, the effectiveness of this Agreement and the obligation of the Lenders to make the initial Loans hereunder are subject to satisfaction of the following additional conditions:

(a) all fees previously agreed in writing between the Borrower and the Agent shall be paid by the Borrower including all fees which are then due and payable thereunder to the Agent for the first year’s agency fee;

(b) the Borrower, along with each Subsidiary Guarantor, shall have delivered to the Agent a current certificate of status, compliance or good standing, as the case may be, in respect of its jurisdiction of incorporation and certified copies of its constating documents, by-laws and the resolutions authorizing the Loan Documents to which it is a party and transactions hereunder and an Officer’s Certificate as to the incumbency of the officers of the Borrower or the Subsidiary Guarantor, as the case may be, signing the Loan Documents to which it is a party;

(c) the Loan Documents shall have been fully executed and delivered each in form and substance satisfactory to the Lenders, and all registrations, filings and recordings necessary (as determined by the Lenders’ Counsel, acting reasonably) in connection therewith shall have been made and completed;

(d) Lenders shall have received originally executed copies of one or more favourable written opinions of Borden Ladner Gervais LLP, counsel for the Borrower and its Subsidiaries, in form and substance reasonably satisfactory to the Lenders and their counsel, dated as of the Closing Date and setting forth such matters as the Agent acting on behalf of the Lenders may reasonably request;

(e) the Agent shall have received the draft audited Financial Statements of the Borrower for the Fiscal Year ending March 31, 2007, and such Financial Statements shall be satisfactory to the Agent, acting reasonably;

(f) the Financial Statements referred to in Section 3.2(e) shall be delivered with a Compliance Certificate with an effective date of March 31, 2007 that evidences (i) compliance with the financial covenants in Section 9.5 and the other matters stated therein, and (ii) a minimum Consolidated EBITDA amount for the Borrower and its Subsidiaries on a trailing four-quarter basis of no less than Cdn.$90,000,000;

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(g) the Agent shall have received a satisfactory three year consolidated financial forecast including calculations in respect of the financial covenants set forth in Section 9.5;

(h) the Agent shall have received an Officer’s Certificate certifying that (i) the Senior Note Indenture and the Senior Notes are in full force and effect, and no provision thereof has been modified or waived in any respect since the Original Closing Date, (ii) the Total Commitment constitutes “Permitted Indebtedness” under section 4.9 of the Senior Note Indenture and that the Liens created by the Collateral Documents are “Permitted Liens” thereunder, and (iii) no default has occurred under the Senior Note Indenture or will result from the increase in the Credit Facility or entering into of this Agreement;

(i) the Agent shall have received (i) a copy of the insurance certificate evidencing the insurance maintained by the Borrower and its Subsidiaries, and evidencing that the Agent has been named as additional insured and/or loss payee thereunder to the extent required under Section 9.4(a), and (ii) a certificate from the Borrower confirming that such insurance is in compliance with the requirements in Section 9.4(a);

(j) no event, circumstance or condition that could, individually or in the aggregate, be reasonably expected to have or that has had a Material Adverse Effect shall have occurred with respect to the Borrower and its Subsidiaries since December 31, 2006;

(k) BNP Paribas (Canada) shall have resigned as administrative agent and collateral agent under the Existing Credit Agreement and the other Loan Documents and shall have executed and delivered all such documents, instruments and acknowledgments necessary to transfer and assign all of the Collateral Documents to the Agent hereunder, and CIBC shall have been appointed as the successor administrative agent and collateral agent under the Existing Credit Agreement; and

(l) the Agent shall have received all such other documents and assurances as the Agent may reasonably request.

3.3 Waiver

The conditions set forth in Sections 3.1 and 3.2 are inserted for the sole benefit of the Lenders and the Agent and may be waived by the Lenders (in the case of Section 3.1) and by all of the Lenders (in the case of Section 3.2), in whole or in part (with or without terms or conditions), and unless so waived, without prejudicing the right of the Lenders or Agent at any time to assert such waived conditions in respect of any subsequent Drawdown.

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ARTICLE 4

PAYMENTS OF INTEREST AND FEES

4.1 Interest on Prime Loans

The Borrower shall pay interest on each Prime Loan outstanding from time to time at a rate per annum equal to the Prime Rate in effect from time to time plus the Applicable Pricing Margin. Such interest shall accrue daily and shall be payable monthly in arrears on each Interest Payment Date for such Loan for the period from and including the Drawdown Date or the preceding Conversion Date or Interest Payment Date, as the case may be, for such Loan to and including the day preceding such Interest Payment Date and shall be calculated on the principal amount of the Prime Loan outstanding during such period and on the basis of the actual number of days elapsed in a year of 365 or 366 days, as the case may be. Changes in the Prime Rate shall cause an immediate adjustment of the interest rate applicable to such Loans without the necessity of any notice to the Borrower.

4.2 Interest on USBR Loans

The Borrower shall pay interest on each USBR Loan outstanding from time to time at a rate per annum equal to the U.S. Base Rate in effect from time to time plus the Applicable Pricing Margin. Such interest shall be payable monthly in arrears on each Interest Payment Date for such Loan for the period from and including the Drawdown Date or the preceding Conversion Date or Interest Payment Date, as the case may be, for such Loan to and including the day preceding such Interest Payment Date and shall be calculated on the principal amount of the USBR Loan outstanding during such period and on the basis of the actual number of days elapsed in a year of 365 or 366 days, as the case may be. Changes in the U.S. Base Rate shall cause an immediate adjustment of the interest rate applicable to such Loans without the necessity of any notice to the Borrower.

4.3 Interest on Libor Loans

The Borrower shall pay interest on each Libor Loan outstanding during each Interest Period applicable thereto at a rate per annum, calculated on the basis of a 360 day year, equal to the Libor Rate with respect to such Interest Period plus the Applicable Pricing Margin. Such interest shall accrue daily and shall be payable in arrears on each Interest Payment Date for such Loan for the period from and including the Drawdown Date or the preceding Rollover Date, Conversion Date or Interest Payment Date, as the case may be, for such Loan to and including the day preceding such Interest Payment Date and shall be calculated on the principal amount of the Libor Loan outstanding during such period and on the basis of the actual number of days elapsed divided by 360.

4.4 Stamping Fees

Upon the acceptance by a Lender of a Bankers’ Acceptance, the Borrower shall pay to the Agent for the account of such Lender a stamping fee in Cdn. Dollars equal to the Applicable Pricing Margin calculated on the principal amount at maturity of such Bankers’ Acceptance and for the period of time from and including the date of acceptance to but excluding the maturity

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date of such Bankers’ Acceptance and calculated on the basis of the number of days elapsed in a year of 365 or 366 days, as the case may be.

4.5 Fees Relating to Letters of Credit

(a) The Borrower shall pay to the Agent, for the account of all Lenders in respect of Letters of Credit issued hereunder, an LC Fee payable quarterly in arrears commencing on the date of issuance, calculated at a rate per annum equal to the Applicable Pricing Margin and on the average daily amount of such Letter of Credit for the number of days such Letter of Credit was outstanding for the period from and including the date of issuance or the date of the immediately preceding determination of the LC Fee (as the case may be) to but excluding that date of determination, in each case, in a year of 365 or 366 days, as the case may be.

(b) As a condition precedent to the issuance of any Letter of Credit, the Borrower shall pay to the Agent for the account of the Fronting Lender, a fronting fee payable quarterly in arrears and calculated at a rate of 0.10% per annum (subject to a minimum fee of Cdn.$500) on the amount of such Letter of Credit for the number of days which such Letter of Credit will be outstanding in the year of 365 or 366 days, as the case may be, in which each Letter of Credit is issued.

(c) In addition, with respect to all Letters of Credit, the Borrower shall from time to time pay to the Fronting Lender its usual and customary fees and charges (at the then prevailing rates) for the amendment, delivery and administration of letters of credit such as the Letters of Credit and shall pay and reimburse the Agent, the Fronting Lender and the Lenders for any reasonable out-of-pocket costs and expenses incurred in connection with any Letter of Credit, including in connection with any payment thereunder.

4.6 Standby Fees

(a) The Borrower shall pay to the Agent for the account of each Lender a standby fee in Cdn. Dollars calculated at a rate per annum equal to the Applicable Pricing Margin on the amount, if any, by which the amount of the Outstanding Principal owing to such Lender under the Credit Facility for each day is less than the Commitment of such Lender. Fees determined in accordance with this Section shall accrue daily from and after the date hereof and be payable by the Borrower in accordance with Section 4.6(b) until the earlier of the Maturity Date or cancellation in full of the Credit Facility.

(b) The standby fee referred to in Section 4.6(a) shall accrue daily from the first day of each Fiscal Quarter until the last day of each Fiscal Quarter and be payable quarterly in arrears on the first Banking Day following the end of each Fiscal Quarter.

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(c) In order to calculate the daily Outstanding Principal under this Section 4.6, the Agent shall convert any Loans in U.S. Dollars into the Equivalent Amount thereof (based on the Noon Rate on the first day of such Fiscal Quarter).

4.7 Interest on Overdue Amounts

Notwithstanding any other provision hereof, in the event that any amount due hereunder (including, without limitation, any interest payment) is not paid when due (whether by acceleration or otherwise), the Borrower shall pay interest on such unpaid amount (including, without limitation, interest on interest), if and to the fullest extent permitted by Applicable Law, from the date that such amount is due until the date that such amount is paid in full, and such interest shall accrue daily, be calculated and compounded monthly and be payable on demand, after as well as before maturity, default and judgment, at a rate per annum that is equal to 2.0% per annum higher than is otherwise payable.

4.8 Agent’s Fees

The Borrower shall pay to the Agent, for its own account, all agency fees payable from time to time pursuant to the separate written agreement between such parties. Any unpaid agency fees shall be deemed to form part of the Obligations.

4.9 Set-up Fees

At closing and upon satisfaction of the conditions to closing set forth in Section 3.2 (other than with respect to payment of such set-up fee), the Borrower shall pay to the Agent a set-up fee of 0.25% on the amount of the Total Commitment hereunder, which fee shall be paid by the Agent to each Lender based on its Pro Rata Share of the Total Commitment.

4.10 General Interest Provisions

(a) Each determination by the Agent of the Prime Rate, USBR, Libor or CDOR Rate in effect at any time shall be prima facie evidence thereof for all purposes of this Agreement.

(b) Each determination by the Agent of the amount of interest, fees or other amounts due from the Borrower hereunder shall be prima facie evidence of the accuracy of such determination.

(c) All interest, fees and other amounts payable by the Borrower hereunder shall accrue daily, be computed as described herein, and be payable both before and after demand, maturity, default and judgment.

(d) To the extent permitted by Applicable Law, the covenant of the Borrower to pay interest at the rates provided herein shall not merge in any judgment relating to any obligation of the Borrower to the Lenders or the Agent and any provision of the Interest Act (Canada) or Judgment Interest Act (Alberta) which restricts any rate of interest set forth herein shall be inapplicable to this Agreement and is hereby waived by the Borrower.

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(e) No interest or fee to be paid hereunder shall be paid at a rate exceeding the maximum rate permitted by Applicable Law. In the event that such interest or fee exceeds such maximum rate, such interest or fees shall be reduced or refunded, as the case may be, so as to be payable at the highest rate recoverable under Applicable Law.

(f) Whenever a rate of interest hereunder is calculated on the basis of a year (the “deemed year”) which contains fewer days than the actual number of days in the calendar year of calculation, such rate of interest shall be expressed as a yearly rate for purposes of the Interest Act (Canada) by multiplying such rate of interest by the actual number of days in the calendar year of calculation and dividing it by the number of days in the deemed year.

(g) The principle of deemed reinvestment of interest shall not apply to any interest calculation under this Agreement; all interest payments to be made hereunder shall be paid without allowance or deduction for deemed reinvestment or otherwise, before and after maturity, default and judgment. The rates of interest specified in this Agreement are intended to be nominal rates and not effective rates. Interest calculated hereunder shall be calculated using the nominal rate method and not the effective rate method of calculation.

ARTICLE 5

BANKERS’ ACCEPTANCES

5.1 Form and Execution of Bankers’ Acceptances

The following provisions shall apply to each Bankers’ Acceptance hereunder:

(a) the face amount at maturity of each draft drawn by the Borrower to be accepted as a Bankers’ Acceptance shall be Cdn. $1,000 and integral multiples thereof;

(b) the term to maturity of each draft drawn by the Borrower to be accepted as a Bankers’ Acceptance shall, subject to market availability as determined by the Lenders acting reasonably, be 1, 2, 3 or 6 months (or such other longer or shorter term as agreed by the Lenders acting reasonably), as selected by the Borrower in the relevant Drawdown Notice or Conversion/Rollover/Repayment Notice, and each Bankers’ Acceptance shall be payable and mature on the last day of the Interest Period selected by the Borrower for such Bankers’ Acceptance;

(c) each draft drawn by the Borrower and presented for acceptance by a Lender shall be drawn on the standard form of such Lender in effect at the time;

(d) subject to Section 5.1(e), Bankers’ Acceptances shall be signed by duly authorized officers of the Borrower or, in the alternative, the signatures of such officers may

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be mechanically reproduced in facsimile thereon and Bankers’ Acceptances bearing such facsimile signatures shall be binding on the Borrower as if they had been manually executed and delivered by such officers on behalf of the Borrower; notwithstanding that any person whose manual or facsimile signature appears on any Bankers’ Acceptance may no longer be an authorized signatory for the Borrower on the date of issuance of a Bankers’ Acceptance, such signature shall nevertheless be valid and sufficient for all purposes as if such authority had remained in force at the time of such issuance and any such Bankers’ Acceptance shall be binding on the Borrower; and

(e) in lieu of the Borrower signing Bankers’ Acceptances in accordance with Section 5.1(d) and, for so long as the power of attorney in Section 5.2(a) is in force with respect to a given Lender, such Lender shall execute and deliver Bankers’ Acceptances on behalf of the Borrower in accordance with the provisions thereof and, for certainty, all references herein to drafts drawn by the Borrower, Bankers’ Acceptances executed by the Borrower or similar expressions shall be deemed to include Bankers’ Acceptances executed in accordance with such a power of attorney, unless the context otherwise requires.

If and for so long as the power of attorney referred to in Section 5.2(a) is in force with respect to each of the Lenders, it is intended that pursuant to the DBNA, all Bankers’ Acceptances accepted by the Lenders under this Agreement will be issued in the form of a “depository bill” (as defined in the DBNA), deposited with a “clearing house” (as defined in the DBNA including The Canadian Depository for Securities Ltd. or its nominee CDS & Co.). In order to give effect to the foregoing, the Agent will, subject to the approval of the Borrower and the Lenders, establish and notify the Borrower and the Lenders of any additional procedures, consistent with the terms of this Agreement and the DBNA, as are reasonably necessary to accomplish such intention, including:

(x) any instrument held by the Agent for the purposes of Bankers’ Acceptances will have marked prominently and legibly on its face and within its text, at or before the time of issue, the words “This is a depository bill subject to the Depository Bills and Notes Act (Canada)”;

(y) any reference to the authentication of the Bankers’ Acceptance will be removed; and

(z) any reference to the “bearer” will be removed and such Bankers’ Acceptances will not be marked with any words prohibiting negotiation, transfer or assignment of it or of an interest in it.

5.2 Power of Attorney; Provision of Bankers’ Acceptances to Lenders

(a) As a condition precedent to each Lender’s obligation to accept Bankers’ Acceptances hereunder, the Borrower hereby appoints each Lender, acting by any authorized signatory of the Lender in question, the attorney of the Borrower:

(i) to sign for and on behalf and in the name of the Borrower as drawer, drafts in such Lender’s standard form which are depository bills as defined in the DBNA, payable to a “clearing house” (as defined in the DBNA) including, without limitation, The Canadian Depository for Securities Limited or its nominee, CDS & Co. (the “clearing house”);

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(ii) for drafts which are not depository bills, to sign for and on behalf and in the name of the Borrower as drawer and to endorse on its behalf, Bankers’ Acceptances drawn on the Lender payable to the order of the undersigned or payable to the order of such Lender;

(iii) for Discount Notes, to sign for and on behalf and in the name of the Borrower as drawer and to endorse on its behalf Discount Notes payable to the order of such Lender;

(iv) to fill in the amount, date and maturity date of such Bankers’ Acceptances (or Discount Notes as applicable); and

(v) to deposit and/or deliver such Bankers’ Acceptances which have been accepted by such Lender or such Discount Notes which are payable to the order of such Lender,

provided that such acts in each case are to be undertaken by the Lender in question strictly in accordance with instructions given to such Lender by the Borrower as provided in this Section. For certainty, signatures of any authorized signatory of a Lender may be mechanically reproduced in facsimile on Bankers’ Acceptances (or Discount Notes as applicable) in accordance herewith and such facsimile signatures shall be binding and effective as if they had been manually executed by such authorized signatory of such Lender.

Instructions from the Borrower to a Lender relating to the execution, completion, endorsement, deposit and/or delivery by that Lender on behalf of the Borrower of Bankers’ Acceptances (or Discount Notes as applicable) which the Borrower wishes to submit to the Lender for acceptance by the Lender shall be communicated by the Borrower in writing to the Agent at the time of delivery to the Agent of Drawdown Notices and Conversion/ Rollover/Repayment Notices, as the case may be, in accordance with this Agreement which, in turn, shall be communicated by the Agent, on behalf of the Borrower, to the Lender.

The communication in writing by the Borrower, or on behalf of the Borrower by the Agent, to the Lender of the instructions referred to above shall constitute (a) the authorization and instruction of the Borrower to the Lender to sign for and on behalf and in the name of the Borrower as drawer the requested Bankers’ Acceptances (or Discount Notes as applicable) and to complete and/or endorse Bankers’ Acceptances (or Discount Notes as applicable) in accordance with such information as set out above and (b) the request of the Borrower to the Lender to accept such Bankers’ Acceptances and deposit the same with the clearing house or

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deliver the same, as the case may be, in each case in accordance with this Agreement and such instructions. The Borrower acknowledges that a Lender shall not be obligated to accept any such Bankers’ Acceptances except in accordance with the provisions of this Agreement.

A Lender shall be and it is hereby authorized to act on behalf of the Borrower upon and in compliance with instructions communicated to that Lender as provided herein if the Lender reasonably believes such instructions to be genuine. If a Lender accepts Bankers’ Acceptances pursuant to any such instructions, that Lender shall confirm particulars of such instructions and advise the Agent that it has complied therewith by notice in writing addressed to the Agent and served personally or sent by telecopier in accordance with the provisions hereof. A Lender’s actions in compliance with such instructions, confirmed and advised to the Agent by such notice, shall be conclusively deemed to have been in accordance with the instructions of the Borrower.

This power of attorney may be revoked by the Borrower with respect to any particular Lender at any time upon not less than 5 Banking Days’ prior written notice served upon the Lender in question and the Agent, provided that no such revocation shall reduce, limit or otherwise affect the obligations of the Borrower in respect of any Bankers’ Acceptance (or Discount Note as applicable) executed, completed, endorsed, deposited and/or delivered in accordance herewith prior to the time at which such revocation becomes effective.

(b) If the power of attorney in Section 5.2(a) is revoked with respect to any Lender, the Borrower shall, from time to time as required by the applicable Lenders, provide to each such Lender drafts drawn in blank by the Borrower (pre-endorsed and otherwise in fully negotiable form, if applicable) in quantities sufficient for each such Lender to fulfill its obligations hereunder. Any such pre-signed drafts which are delivered by the Borrower to a Lender shall be held in safekeeping by such Lender with the same degree of care as if they were such Lender’s property, and shall only be dealt with by the Lenders in accordance herewith. No Lender shall be responsible or liable for its failure to make its share of any Drawdown, Rollover or Conversion of Bankers’ Acceptances required hereunder if the cause of such failure is, in whole or in part, due to the failure of the Borrower to provide such pre-signed drafts to the applicable Lenders on a timely basis unless the Lenders have been authorized to sign as attorney.

(c) By 11:00 a.m. (Toronto time) on the applicable Drawdown Date, Conversion Date or Rollover Date, the Borrower shall (i) either deliver to each Lender in Toronto, or, if previously delivered, be deemed to have authorized each Lender to complete and accept, or (ii) where the power of attorney in Section 5.2(a) is in force with respect to a Lender, be deemed to have authorized each such Lender to sign on behalf of the Borrower, complete and accept, drafts drawn by the Borrower on such Lender in a principal amount at maturity equal to such Lender’s share of the Bankers’ Acceptances specified by the Borrower in the relevant Drawdown Notice or Conversion/Rollover/Repayment, as the case may be, as notified to the Lenders by the Agent.

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5.3 Mechanics of Issuance

(a) Upon receipt by the Agent of a Drawdown Notice or Conversion/Rollover/ Repayment Notice from the Borrower requesting the issuance of Bankers’ Acceptances, the Agent shall promptly notify the Lenders thereof and advise each Lender of the aggregate face amount of Bankers’ Acceptances to be accepted and purchased by such Lender, the date of issue and the Interest Period for such Loan; the apportionment among the Lenders of the face amounts of Bankers’ Acceptances to be accepted by each Lender shall be determined by the Agent by reference and in proportion to the respective applicable Commitments of each Lender; provided that, when such apportionment cannot be evenly made, the Agent shall round allocations amongst such Lenders consistent with the Agent’s normal money market practices.

(b) On each Drawdown Date, Rollover Date or Conversion Date involving the issuance of Bankers’ Acceptances:

(i) on or about 11:00 a.m. (Toronto time) on such date, the Agent shall determine the CDOR Rate and shall obtain quotations from each Schedule II Lender and Schedule III Lender of the BA Discount Rate then applicable to bankers’ acceptances accepted by such Schedule II Lender and Schedule III Lender in respect of an issue of bankers’ acceptances in a comparable amount and with comparable maturity to the Bankers’ Acceptances proposed to be issued on such date;

(ii) on or about 11:00 a.m. (Toronto time) on such date, the Agent shall determine the BA Discount Rate applicable to each Lender and shall advise each Lender and the Borrower of the BA Discount Rate applicable to it;

(iii) each Lender shall complete and accept, in accordance with the Drawdown Notice or Conversion/Rollover/Repayment Notice delivered by the Borrower and advised by the Agent in connection with such issue, its share of the Bankers’ Acceptances to be issued on such date and shall purchase such Bankers’ Acceptances for its own account at a purchase price which reflects the BA Discount Rate applicable to such issue; and

(iv) in the case of a Drawdown, each Lender shall, for same day value on the Drawdown Date, remit the BA Discount Proceeds or advance the BA Equivalent Advance, as the case may be, payable by such Lender (net of the stamping fee payable to such Lender pursuant to Section 4.4) to the Agent for the account of the Borrower; the Agent shall make such funds available to the Borrower for same day value on such date.

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(c) Each Lender may at any time and from time to time hold, sell, rediscount or otherwise dispose of any or all Bankers’ Acceptances accepted and purchased by it for its own account.

5.4 Rollovers

In order to satisfy the continuing liability of the Borrower to a Lender for the face amount of maturing Bankers’ Acceptances accepted by such Lender, such Lender shall receive and retain for its own account the BA Discount Proceeds of new Bankers’ Acceptances issued on a Rollover, and the Borrower shall on the maturity date of the Bankers’ Acceptances being rolled over pay to the Agent for the account of the Lenders an amount equal to the difference between the face amount of the maturing Bankers’ Acceptances and the BA Discount Proceeds from the new Bankers’ Acceptances, together with the stamping fees to which the Lenders are entitled pursuant to Section 4.4.

5.5 Conversion into Bankers’ Acceptances

In respect of Conversions into Bankers’ Acceptances, in order to satisfy the continuing liability of the Borrower to the Lenders for the amount of the converted Loan, each Lender shall receive and retain for its own account the BA Discount Proceeds of the Bankers’ Acceptances issued upon such Conversion, and the Borrower shall on the Conversion Date pay to the Agent for the account of the Lenders an amount equal to the difference between the principal amount of the converted Loan and the aggregate BA Discount Proceeds from the Bankers’ Acceptances issued on such Conversion, together with the stamping fees to which the Lenders are entitled pursuant to Section 4.4.

5.6 Conversion from Bankers’ Acceptances

In order to satisfy the continuing liability of the Borrower to the Lenders for an amount equal to the aggregate face amount of the maturing Bankers’ Acceptances converted to another type of Loan, the Agent shall record the obligation of the Borrower to the Lenders as a Loan of the type into which such continuing liability has been converted.

5.7 BA Equivalent Advances

Notwithstanding the foregoing provisions of this Article, a Non-Acceptance Lender shall, in lieu of accepting Bankers’ Acceptances, make a BA Equivalent Advance. The amount of each BA Equivalent Advance shall be equal to the BA Discount Proceeds which would be realized from a hypothetical sale of those Bankers’ Acceptances which, but for this Section, such Lender would otherwise be required to accept as part of such a Drawdown, Conversion or Rollover of Bankers’ Acceptances. To determine the amount of such BA Discount Proceeds, the hypothetical sale shall be deemed to take place at the BA Discount Rate for such Loan. Any BA Equivalent Advance shall be made on the relevant Drawdown Date, Rollover Date or Conversion Date as the case may be and shall remain outstanding for the term of the relevant Bankers’ Acceptances. Concurrent with the making of a BA Equivalent Advance, a Non-Acceptance Lender shall be entitled to deduct therefrom an amount equal to the acceptance fee which, but for this Section, such Lender would otherwise be entitled to receive as part of such Loan. Upon the maturity date

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for such Bankers’ Acceptances, the Borrower shall, unless converted or rolled over, pay to each Non-Acceptance Lender an amount equal to the face amount of the Bankers’ Acceptances which such Lender would have accepted as part of such Loan if it was not a Non-Acceptance Lender.

All references herein to “Loans” and “Bankers’ Acceptances” shall, unless otherwise expressly provided herein or unless the context otherwise requires, be deemed to include BA Equivalent Advances made by a Non-Acceptance Lender as part of a Drawdown, Conversion or Rollover of Bankers’ Acceptances.

5.8 Termination of Bankers’ Acceptances

If at any time a Lender ceases to accept bankers’ acceptances in the ordinary course of its business, such Lender shall be deemed to be a Non-Acceptance Lender and shall make BA Equivalent Advances in lieu of accepting Bankers’ Acceptances under this Agreement.

ARTICLE 6

LETTERS OF CREDIT

6.1 Availability

Subject to the provisions hereof, the Borrower may require that Letters of Credit be issued under the Credit Facility in accordance with the Drawdown Notices and Conversion/Rollover/Repayment Notices given in accordance with Section 2.3 or 2.4, as applicable. The issuance of Letters of Credit shall constitute Drawdowns or Rollovers (as applicable) hereunder and shall reduce the availability of the Credit Facility by the aggregate Outstanding Principal of Letters of Credit under the Credit Facility. For the purpose of calculating the Outstanding Principal owing to each Lender at any time, such Lender shall be deemed to have issued its Pro Rata Share of all outstanding Letters of Credit.

6.2 Currency, Type and Expiry

Letters of Credit issued pursuant hereto shall be denominated in Canadian Dollars or United States Dollars and amounts payable thereunder shall be paid in the currency in which the Letter of Credit is denominated. A Letter of Credit issued hereunder shall be issued by the Fronting Lender; provided that the Fronting Lender shall have no obligation to issue any Letter of Credit unless and until it has received such ancillary documents, including applications and indemnities, as the Fronting Lender normally requires for similar transactions. Letters of Credit shall be in a form satisfactory to the Fronting Lender, acting reasonably, and shall have an expiration date not in excess of one year from the date of issue and, in any event, not later than the Maturity Date.

6.3 General Provisions

(a) The Fronting Lender shall exercise and give the same care and attention to each Letter of Credit issued by it hereunder as it gives to its other letters of credit and similar obligations, and the Fronting Lender’s sole liability to each Lender shall be to promptly return to the Agent for the account of the Lenders, each Lender’s Pro

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Rata Share of any payments made to the Fronting Lender by the Borrower hereunder (other than the fees and amounts payable to the Fronting Lender for its own account) if the Borrower has made a payment to the Fronting Lender hereunder. Each Lender agrees that, in paying any drawing under a Letter of Credit, the Fronting Lender shall not have any responsibility to obtain any document (other than as expressly required by such Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of any person delivering any such document. Neither the Fronting Lender nor any of its representatives, officers, employees or agents shall be liable to any Lender for:

(i) any action taken or omitted to be taken in connection herewith at the request or with the approval of the Lenders;

(ii) any action taken or omitted to be taken in connection with any Letter of Credit in the absence of gross negligence or wilful misconduct; or

(iii) the execution, effectiveness, genuineness, validity, or enforceability of any Letter of Credit, or any other document contemplated thereby.

The Fronting Lender shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement or other writing (which may be a bank wire, telex, SWIFT or similar writing) believed by it in good faith to be genuine or to be signed by the proper Person or Persons.

(b) The Borrower and each Lender hereby authorize the Fronting Lender to review on behalf of each Lender each draft and other document presented under each Letter of Credit issued by the Fronting Lender. The determination of the Fronting Lender as to the conformity of any documents presented under a Letter of Credit to the requirements of such Letter of Credit shall, in the absence of the Fronting Lender’s gross negligence or wilful misconduct, be conclusive and binding on the Borrower and each Lender. The Fronting Lender shall, within a reasonable time following its receipt thereof, examine all documents purporting to represent a demand for payment under any Letter of Credit issued by the Fronting Lender. The Fronting Lender shall promptly after such examination:

(i) notify the Agent and the Borrower by telephone (confirmed in writing) of such demand for payment;

(ii) deliver to the Agent a copy of each document purporting to represent a demand for payment under such Letter of Credit; and

(iii) notify the Agent and the Borrower whether said demand for payment was properly made under such Letter of Credit.

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6.4 Reimbursement or Conversion on Presentation

Upon presentation of a Letter of Credit and payment thereunder by the Fronting Lender, the Borrower shall (at its option) either forthwith pay to and reimburse the Agent for the account of the Fronting Lender all amounts paid pursuant to such Letter of Credit or, failing such payment, the Borrower shall be deemed to have effected a Conversion of such Letter of Credit into: (a) a Prime Loan, in the case of a Letter of Credit denominated in Canadian Dollars; and (b) a USBR Loan, in the case of a Letter of Credit denominated in United States Dollars, in each case, to the extent of the payment by the Lenders or the Fronting Lender (as applicable) thereunder.

6.5 Fronting Lender Indemnity

(a) If the Fronting Lender makes payment under any Letter of Credit and the Borrower does not fully reimburse the Fronting Lender on or before the date of payment, then Section 6.4 shall apply to deem a Loan to be outstanding to the Borrower under this Agreement in the manner herein set out. Each Lender shall, on request by the Fronting Lender, immediately pay to the Fronting Lender an amount equal to such Lender’s Pro Rata Share of the amount paid by the Fronting Lender such that each Lender is participating in the deemed Loan in accordance with its Pro Rata Share and, for certainty, regardless of whether any Default or Event of Default is then outstanding or whether any other condition to the making of a Loan has been satisfied or not.

(b) Each Lender shall immediately on demand indemnify the Fronting Lender to the extent of such Lender’s Pro Rata Share of any amount paid or liability incurred by the Fronting Lender under each Letter of Credit issued by it to the extent that the Borrower does not fully reimburse the Fronting Lender therefor.

(c) For certainty, the obligations set out in this Section 6.5 shall continue as obligations of those Lenders who were Lenders at the time when each such Letter of Credit was issued notwithstanding that such Lender may assign its rights and obligations hereunder, unless the Fronting Lender specifically releases such Lender from such obligations in writing.

6.6 Uniform Customs and Practice

The Uniform Customs and Practice for Loan Documentary Credits as most recently published by the International Chamber of Commerce (the “Uniform Customs”) shall in all respects apply to each Letter of Credit unless expressly provided to the contrary therein and shall be deemed for such purpose to be a part of this Agreement as if fully incorporated herein. In the event of any conflict or inconsistency between the Uniform Customs and the governing law of this Agreement, the Uniform Customs shall, to the extent permitted by Applicable Law, prevail to the extent necessary to remove the conflict or inconsistency.

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ARTICLE 7

PAYMENTS

7.1 Mandatory Repayment of Credit Facility

(a) Repayment at Maturity. The Borrower shall repay all Loans under the Credit Facility on or before the Maturity Date.

(b) Repayment of Certain Proceeds. In addition, subject to Sections 11.2, 11.3, 11.5 and 11.6, the Loans shall be prepaid in the amounts and under the circumstances set forth below, all such prepayments and reductions to be applied as set forth below or as more specifically provided in Section 7.1(d) and Section 7.6:

(i) Asset Sale Proceeds: promptly, but not later than two Banking Days after the date of receipt by the Borrower or any of its Subsidiaries of any Net Asset Sale Proceeds, the Borrower shall deposit such proceeds into the Borrower’s Account in an aggregate amount equal to the amount of such Net Asset Sale Proceeds;

(ii) Insurance Proceeds: no later than the first Banking Day following the date of receipt by Agent or by the Borrower or any of its Subsidiaries of any Net Insurance/Condemnation Proceeds that are required to be applied as a prepayment pursuant to the provisions of Section 9.4(b), the Borrower shall deposit such proceeds into the Borrower’s Account in an aggregate amount equal to the amount of such Net Insurance/Condemnation Proceeds; and

(iii) Securities Proceeds: on the date of receipt of the Net Securities Proceeds, the Borrower shall deposit such proceeds into the Borrower’s Account in an aggregate amount equal to the amount of such Net Securities Proceeds (unless the use of such Net Securities Proceeds is otherwise specified or designated by the applicable offering document).

(c) Additional Information. Upon request from the Agent, the Borrower shall deliver to Agent an Officer’s Certificate or such other reasonably requested documentation demonstrating the calculation of the amount of the applicable Net Asset Sale Proceeds, Net Insurance/Condemnation Proceeds or Net Securities Proceeds so deposited into the Borrower’s Accounts.

(d) Application of Proceeds. Subject to Section 7.6, any amounts paid by the Borrower under this Section 7.1 shall be applied in the following order: first to the Swing Line Advances, and second to the other Loans.

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7.2 Optional Repayment of Credit Facility

The Borrower may, without penalty and at any time and from time to time, repay to the Agent for the account of the Lenders the whole or any part of any Loan together with accrued interest thereon to the date of such repayment; provided that:

(a) the Borrower shall give a Conversion/Rollover/Repayment Notice to the Agent at least one Banking Day prior to the date of the proposed repayment;

(b) repayments pursuant to this Section may only be made on a Banking Day;

(c) unless the Borrower pays breakage costs pursuant to Section 7.4(a), each such repayment may only be made on the last day of the applicable Interest Period with regard to a Libor Loan that is being repaid;

(d) a Bankers’ Acceptance (including a BA Equivalent Advance) may only be repaid on its maturity;

(e) a Letter of Credit may only be repaid to the extent same is drawn or returned for cancellation;

(f) except in the case of a Letter of Credit, each such repayment shall be in a minimum amount equal to the lesser of: (i) Cdn. $5,000,000 (for repayments in Cdn. Dollars) or US $5,000,000 (for repayments in U.S. Dollars) and (ii) the Outstanding Principal of all Loans outstanding under the Credit Facility immediately prior to such repayment; and

(g) the Borrower may not repay a portion only of an outstanding Loan unless the unpaid portion is equal to or exceeds, in the relevant currency, the minimum amount required pursuant to Section 2.3(b) for Drawdowns of the type of Loan proposed to be repaid.

7.3 Excess

If the Agent determines that the aggregate Outstanding Principal of the outstanding Loans under the Credit Facility exceeds the maximum amount of the Credit Facility (the amount of such excess is herein called the “Currency Excess”), then, upon written request by the Agent (which request shall detail the applicable Currency Excess), the Borrower shall repay sufficient Obligations to remove the Currency Excess and (i) if the Currency Excess exceeds 3% of the maximum amount of the Credit Facility, such repayment shall be made within three Banking Days and (ii) in all other cases, such repayment shall be made on the next Drawdown Date, Rollover Date or Conversion Date.

7.4 Additional Repayment Terms

(a) If any Libor Loan is repaid or converted on other than the last day of the applicable Interest Period, the Borrower shall, within three Banking Days after notice is given by the Agent, pay to the Agent for the account of the Lenders all

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costs, losses, premiums and expenses incurred by the Lenders by reason of the liquidation or re-deployment of deposits or other funds or for any other reason whatsoever resulting from the repayment of such Loan or any part thereof on other than the last day of the applicable Interest Period. Any Lender, upon becoming entitled to be paid such costs, losses, premiums and expenses, shall deliver to the Borrower and the Agent a certificate of the Lender certifying as to such amounts and, in the absence of manifest error, such certificate shall be conclusive and binding for all purposes.

(b) With respect to the prepayment or cash collateralization of unmatured Bankers’ Acceptances required as a result of Section 7.1 or 11.5, the Borrower shall provide for the funding in full of such unmatured Bankers’ Acceptances by paying to and depositing with the Agent cash collateral for each such unmatured Bankers’ Acceptances equal to the face amount payable at maturity thereof; such cash collateral deposited by the Borrower shall be held by the Agent in a cash collateral account with interest to be credited to the Borrower at rates prevailing at the time of deposit for similar accounts with the Agent. Such cash collateral account shall be assigned to the Agent as security for the obligations of the Borrower in relation to such Bankers’ Acceptances and the security of the Agent thereby created shall rank in priority to all other Liens and adverse claims against such cash collateral. Such cash collateral shall be applied to satisfy the obligations of the Borrower for such Bankers’ Acceptances as they mature and the Agent is hereby irrevocably directed by the Borrower to apply any such cash collateral to such maturing Bankers’ Acceptances. Amounts held in such cash collateral accounts may not be withdrawn by the Borrower without the consent of the Lenders; however, interest on such deposited amounts shall be for the account of the Borrower and may be withdrawn by the Borrower so long as no Default or Event of Default is then continuing. If after maturity of the Bankers’ Acceptances for which such funds are held and application by the Agent of the amounts in such cash collateral accounts to satisfy the obligations of the Borrower hereunder with respect to the Bankers’ Acceptances being repaid, any excess remains, such excess shall be promptly paid by the Agent to the Borrower so long as no Event of Default is then continuing.

(c) With respect to funding the cash collateralization of unexpired Letters of Credit as a result of Section 11.5, it is agreed that the Borrower shall provide for the funding in full of the unexpired Letters of Credit by paying to and depositing with the Agent cash collateral for each such unexpired Letter of Credit equal to the undrawn face amount thereof, in each case, in the respective currency which the relevant Letter of Credit is denominated; such cash collateral deposited by the Borrower shall be held by the Agent in a cash collateral account with interest to be credited to the Borrower at rates prevailing at the time of deposit for similar accounts with the Agent. Such cash collateral account shall be assigned to the Agent as security for the obligations of the Borrower in relation to such Letters of Credit and the security of the Agent thereby created in such cash collateral shall rank in priority to all other Liens and adverse claims against such cash collateral.

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Such cash collateral shall be applied to satisfy the obligations of the Borrower for such Letters of Credit if drawn upon and the Agent is hereby irrevocably directed by the Borrower to so apply any such cash collateral. Amounts held in such cash collateral accounts may not be withdrawn by the Borrower without the consent of the Lenders. If after the drawing in full or expiration of the Letters of Credit for which such funds are held and application by the Agent of the amounts in such cash collateral accounts to satisfy the obligations of the Borrower hereunder with respect thereto, any excess remains, such excess shall be promptly paid by the Agent to the Borrower so long as no Event of Default is then continuing.

7.5 Payments – General

(a) Except for fees and interest pursuant to Section 4.5(b) (which are payable to the Fronting Lender for its own account) and principal and interest for Swing Line Advances (which are payable to the Swing Line Lender for its own account), all payments of principal, interest, fees and other amounts to be made by the Borrower to the Agent and the Lenders pursuant to this Agreement shall be made to the Agent (for, as applicable, the account of the Lenders or its own account) in the currency in which the Loan is outstanding for value on the day such amount is due, and if such day is not a Banking Day on the Banking Day next following, by deposit or transfer thereof to the accounts of the Agent maintained at the Agent’s Branch and designated by the Agent for such purpose or at such other place as the Borrower and the Agent may from time to time agree. Notwithstanding anything to the contrary expressed or implied in this Agreement, the receipt by the Agent in accordance with this Agreement of any payment made by the Borrower for the account of any of the Lenders shall, insofar as the Borrower’s obligations to the relevant Lenders are concerned, be deemed also to be receipt by such Lenders and the Borrower shall have no liability in respect of any failure or delay on the part of the Agent in disbursing and/or accounting to the relevant Lenders in regard thereto.

(b) All payments of principal, interest, fees or other amounts to be made by the Agent to the Lenders pursuant to this Agreement shall be made for value on the day required hereunder, provided the Agent receives funds from the Borrower for value on such day, and if such funds are not so received from the Borrower or if such day is not a Banking Day, on the Banking Day next following, by deposit or transfer thereof at the time specified herein to the account of each Lender designated by such Lender to the Agent for such purpose or to such other place or account as the Lenders may from time to time notify the Agent.

(c) The Borrower authorizes and directs the Agent to automatically debit the Borrower’s Accounts for all amounts payable by the Borrower under this Agreement, including the repayment of principal and the payment of interest and fees and all charges agreed to by the Borrower for the maintaining of the Borrower’s Accounts. The Agent shall, as soon as is practical after making any such debit, inform the Borrower of the amount thereof and provide reasonable details of the calculation thereof.

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(d) The Borrower shall make all payments required hereunder, whether by way of principal, interest or otherwise, without regard to any defence, counterclaim or right of set-off available to the Borrower and without withholding any Taxes (excluding Taxes imposed on the income or capital of the Agent or any Lender). If the Borrower is required by Applicable Law to deduct any withholding Taxes (excluding Taxes imposed on the income or capital of the Agent or any Lender) from or in respect of any amounts payable under this Agreement (i) the amounts payable by the Borrower hereunder will be increased by the amount necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 7.5(d)) the Agent and the Lenders will receive an amount equal to the sum they would have received had no such deductions been made, (ii) the Borrower will make such deductions and (iii) the Borrower will pay the full amount deducted to the relevant taxing authority or other Governmental Authority in accordance with Applicable Law. Notwithstanding the foregoing, unless a Lender is an assignee in circumstances where an Event of Default has occurred and is continuing, the Borrower shall have no obligation to gross-up or indemnify for Taxes withheld or deducted solely because a Lender is a non-resident of Canada within the meaning of the Income Tax Act (Canada).

(e) Unless otherwise specifically provided for herein, if any payment required hereunder shall become due and payable on a day which is not a Banking Day, such payment shall be made on the next following Banking Day and any extension of time shall in such case be included in computing interest payable hereunder relating to such payment.

7.6 Application of Payments after Default and Application of Proceeds of Collateral

Except as otherwise agreed in writing by the Lenders, if any Event of Default shall occur and be continuing, all payments made by the Borrower to the Agent and the Lenders shall be applied in the following order:

(a) to amounts due hereunder as fees other than stamping fees for Bankers’ Acceptance or LC Fees;

(b) to amounts due hereunder as costs and expenses;

(c) to amounts due hereunder as default interest;

(d) to amounts due hereunder as interest, LC Fees and any other fees due hereunder; and

(e) to amounts due hereunder as principal.

All proceeds received by the Agent in respect of any sale of, collection from, or other realization upon, all or any part of the Collateral under any Collateral Document shall be applied in full or in

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part by Agent against, the applicable Obligations and Secured Swap Obligations, in each case in the following order of priority:

(i) to the payment of all costs and expenses of such sale, collection or other realization, all other expenses, liabilities and advances made or incurred by the Agent in connection therewith, and all amounts for which the Agent is entitled to compensation, reimbursement and indemnification under any Loan Document and all advances made by the Agent thereunder for the account of the Borrower or the applicable Subsidiary Guarantor, and to the payment of all costs and expenses paid or incurred by the Agent in connection with the Loan Documents, all in accordance with the terms of this Agreement and the Loan Documents;

(ii) thereafter, to the payment of all other Obligations (including all Cash Management Indebtedness and the cash collateralization of outstanding Letters of Credit) and the obligations under Secured Swap Obligations for the ratable benefit of the holders thereof on a pari passu basis as described in Section 10.3; and

(iii) thereafter, to the payment to or upon the order of the Borrower or the applicable Subsidiary Guarantor or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.

7.7 Margin Changes; Adjustments for Margin Changes

(a) The Applicable Pricing Margin shall be adjusted immediately and automatically upon any change in the S&P Rating and shall be made effective without the necessity of notice to the Borrower.

(b) For any Loans outstanding as of the effective date of a change in an Applicable Pricing Margin:

(i) in the case of increases in such rates per annum, the Borrower shall pay to the Agent for the account of the Lenders such additional interest or fees, as the case may be, as may be required to give effect to the relevant increases in the interest or fees payable on or in respect of such Loans from and as of the effective date of the relevant increase in rates; and

(ii) in the case of decreases in such rates per annum, the Borrower shall receive a credit against subsequent interest payable on Loans or stamping fees payable pursuant to Section 4.4 or LC Fees payable pursuant to Section 4.5 to the extent necessary to give effect to the relevant decreases in the interest or fees payable on or in respect of such Loans from and as of the effective date of the relevant decrease in rates.

(c) The additional payments required by Section 7.7(b)(i) shall be made on (i) the next Interest Payment Date (in the case of outstanding Prime Loans, USBR Loans

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and Libor Loans), (ii) the earlier of the next Rollover Date or Conversion Date or, if the relevant Interest Period is longer than three months, the last Banking Day of each three month period during such Interest Period (in the case of outstanding Bankers’ Acceptances) and (iii) the next quarterly payment date (in the case of outstanding Letters of Credit). The adjustments required by Section 7.7(b)(ii) shall be accounted for in successive interest and fee payments by the Borrower until the amount of the credit therein contemplated has been fully applied; provided that, upon satisfaction in full of all Obligations and cancellation of the Credit Facility in accordance herewith, the Lenders shall pay to the Borrower an amount equal to any such credit which remains outstanding.

ARTICLE 8

REPRESENTATIONS AND WARRANTIES

8.1 Representations and Warranties of Borrower

The Borrower represents and warrants as follows to the Agent and to each of the Lenders and acknowledges and confirms that the Agent and each of the Lenders is relying upon such representations and warranties:

(a) Status. The Borrower is a corporation duly formed and validly existing under the laws of Canada. The Subsidiaries are corporations duly incorporated, or partnerships duly formed, and validly existing under the laws of their respective jurisdictions of incorporation or formation, as applicable. Each of the Borrower and each of the Subsidiaries:

(i) has all necessary corporate or partnership (as applicable) capacity, power and authority to own, lease and operate its respective properties and assets and carry on its respective business as presently carried on; and

(ii) is duly licensed, registered or qualified in all jurisdictions where the character of its property owned or leased or the nature of the activities conducted by it makes such licensing, registration or qualification necessary or desirable, except to the extent a failure to be so licensed, registered or qualified could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(b) Authority. Each of the Borrower and each of the Subsidiaries that is a party to a Loan Document has full corporate or partnership (as applicable) capacity, power and authority to enter into each of the Loan Documents to which it is a party and to do all acts and execute and deliver all other documents as are required hereunder or thereunder to be done, observed or performed by it or them in accordance with their respective terms.

(c) Valid Authorization. Each of the Borrower and each of the Subsidiaries that is a party to any of the Loan Documents has taken all necessary corporate or partnership (as applicable) action to authorize the creation, execution and delivery

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of, and performance of its respective obligations under, each of the Loan Documents to which it is a party in accordance with the respective terms of each of the other Loan Documents to which it is a party, and each of the Loan Documents, when signed and delivered, have or will have been duly executed and delivered in accordance with such corporate or partnership action (as applicable).

(d) Validity and Enforceability. This Credit Agreement constitutes and, when executed and delivered, each of the other Loan Documents will constitute, valid and legally binding obligations of the Borrower and each of the Subsidiaries that is a party thereto, enforceable against it in accordance with its terms, subject only to applicable bankruptcy, insolvency and other laws of general application limiting the enforceability of creditors’ rights, and to general principles of equity, including the fact that specific performance is an equitable remedy, available only in the discretion of the court.

(e) No Violation, Breach, Conflict etc. Neither the execution and delivery of this Credit Agreement or any other Loan Document, nor compliance with the terms and conditions of any of them:

(i) has resulted, or will result, in a violation of the articles, by-laws or other constating or governing documents of the Borrower or any Subsidiary or any resolutions passed by the directors, shareholders or partners (as applicable) of the Borrower or any Subsidiary;

(ii) has resulted, or will result, in a violation of any Applicable Law, rule, regulation, order, judgment, injunction, award or decree, except to the extent such violation could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect;

(iii) has resulted, or will result, in a breach of, or constitute a default under any loan agreement, indenture, trust deed or any other agreement or instrument to which the Borrower or any Subsidiary is a party or by which it or any of its property, assets or undertaking are bound, or requires any consent thereunder other than such as has already been received, except to the extent that such breach, default or failure to have consent could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect;

(iv) has or will conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under the existing Senior Note Indenture or any Lender Hedge Agreement;

(v) requires any approval or consent of any Governmental Authority having jurisdiction, other than such as has already been obtained; or

(vi) has resulted or will result, in the creation of, or the obligation to create, any Lien on, against or in respect of any of the property, assets or undertaking of the Borrower or any Subsidiary except as expressly permitted or contemplated hereby.

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(f) Authorizations. All Governmental Authorizations, approvals, consents, licences, exemptions, filings, registrations, notarizations and other requirements of any Governmental Authority or any other Person reasonably necessary (i) in connection with, the execution and delivery by the Borrower and the Subsidiaries of, and performance of their respective obligations under, this Credit Agreement and each of the other Loan Documents to which it is a party, and (ii) to carry on the businesses and operations of the Borrower and the Subsidiaries (including any required under Environmental Laws), have been obtained and are in full force and effect, except to the extent that the failure to have or maintain the same in full force and effect could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(g) Borrower and Subsidiaries. The Disclosure Schedule (as it may be supplemented from time to time by the Borrower) sets forth (a) the corporate organizational chart of the Borrower and its Subsidiaries; (b) the names and jurisdictions of incorporation of each of the Subsidiaries, their respective share capital or other ownership interests, the percentage of the outstanding shares or ownership interests of each Subsidiary which are legally and beneficially owned (whether directly or indirectly) by the Borrower and the details of such ownership and whether or not such Subsidiary is a Minor Subsidiary, and (c) the location of the Borrowers’ and the Subsidiaries’ respective places of business and assets and (except for NACG Finance LLC) the locations of their respective chief executive offices.

(h) Title to Properties; Liens. The Borrower and its Subsidiaries have (i) good, sufficient and legal title to (in the case of fee interests in real property), (ii) valid leasehold interests in (in the case of leasehold interests in real or personal property), or (iii) good title to (in the case of all other personal property), all of their respective properties and assets reflected in the financial statements referred to in Section 8.1(m) or in the most recent financial statements delivered pursuant to Section 9.1(a) in each case except (A) for assets disposed of since the date of such financial statements pursuant to Permitted Dispositions, or (B) where failure to have such title could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. All such properties and assets are free and clear of Liens, other than Permitted Liens.

(i) Real Property. As of the Closing Date, the Disclosure Schedule contains a true, accurate and complete list of (i) all fee interests in any real property, and (ii) all leases, subleases or assignments of leases (together with all amendments, modifications, supplements, renewals or extensions of any thereof) in real property, regardless of whether the Borrower or any Subsidiary is the landlord or tenant (whether directly or as an assignee or successor in interest) under such lease, sublease or assignment. Except as specified in the Disclosure Schedule, as of the Closing Date each agreement listed in clause (ii) of the immediately

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preceding sentence is in full force and effect and no defaults by any of the Borrower or any Subsidiary currently exist thereunder, and the Borrower does not have Knowledge of any defaults by any third party currently existing thereunder, in any case where any such defaults could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(j) Intellectual Property. The Borrower and its Subsidiaries own or have the right to use all Intellectual Property used in the conduct of their business, except where the failure to own or have such right to use in the aggregate could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. No claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Borrower know of any valid basis for any such claim, except for such claims that could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The use of such Intellectual Property by the Borrower and its Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(k) Performance of Agreements; Material Contracts. Neither the Borrower nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any of its Material Contracts, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default, except in either case where the consequences, direct or indirect, of such default or defaults, if any, could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Disclosure Schedule contains a true, correct and complete list of all the Material Contracts in effect on the Closing Date. All Material Contracts are in full force and effect and no material disputes currently exist thereunder, and the Borrower does not have knowledge of any material defaults by any third party currently existing thereunder.

(l) No Default. No Default or Event of Default has occurred or is continuing.

(m) Financial Condition. The most recent audited and unaudited consolidated Financial Statements of the Borrower delivered to the Agent present fairly, in all material respects, the consolidated financial condition of the Borrower as at the date or dates thereof and the results of the consolidated operations thereof for the Fiscal Quarter or Fiscal Year then ending, all in accordance with GAAP consistently applied, and since the date of the most recent Financial Statements delivered to the Agent no event or circumstance has occurred and is continuing which could reasonably be expected to have a Material Adverse Effect.

(n) Books and Records. All books and records of the Borrower and the Subsidiaries have been fully, properly and accurately kept and completed in all material respects and there are no material inaccuracies or discrepancies of any kind contained or reflected therein.

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(o) Information Provided. All information, materials and documents, including all projections, economic models, capital and operating budgets and other information and data:

(i) prepared and provided to the Agent by the Borrower or any Subsidiary in respect of the transactions contemplated by this Agreement, or as required by the terms of this Agreement, were true, complete and correct in all material respects as of the respective dates thereof or, in the case of projections, were prepared in good faith based upon reasonable assumptions; and

(ii) prepared by Persons other than the Borrower or any Subsidiary and provided to the Agent by or on behalf of the Borrower or any Subsidiary in respect of the transactions contemplated by this Agreement or as required by the terms of this Agreement were, to the Knowledge of the Borrower, true, complete and correct in all material respects as of the respective dates thereof or, in the case of projections, were prepared in good faith based upon reasonable assumptions.

(p) No Change. Except as has been disclosed to the Agent prior to the date hereof by written notice in accordance with the provisions of this Agreement, no filing is imminent of a report of a “material change” as required to be filed by the Borrower with any securities commission or exchange or with any Governmental Authority having jurisdiction over the issuance and sale of securities of the Borrower.

(q) Litigation. Except as has been disclosed to the Agent prior to the date hereof by written notice in accordance with the provisions of this Agreement, there are no actions, suits or proceedings pending or, to the Knowledge of the Borrower, threatened against or affecting the Borrower or any Subsidiary, in respect of which there is a reasonable possibility of a determination adverse to the Borrower or any Subsidiary and which, if determined adversely to the Borrower or a Subsidiary could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(r) Compliance. The Borrower, the Subsidiaries and their respective businesses and operations are in compliance with (i) all Applicable Laws, (ii) all applicable Governmental Authorizations, (iii) all applicable directives, judgments, decrees, injunctions and orders rendered by any Governmental Authority or any court of competent jurisdiction, (iv) its and their constating or governing documents (including partnership agreements) and by-laws, and (v) all material agreements or instruments to which it is a party or by which any of its property or assets are bound; except in any case to the extent that non-compliance with any of the foregoing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

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(s) Adverse Agreements. Neither the Borrower nor any Subsidiary is a party to any agreement or instrument or subject to any restriction (including any restriction set forth in its constating or governing documents, by-laws or any shareholders’ agreement applicable to it) which could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(t) Employee Matters. The Borrower and its Subsidiaries have made full payment when due of all required contributions to any employee benefit plan except where failure to do so, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Except as set out on the Disclosure Schedule, there is no strike or work stoppage in existence or threatened involving the Borrower or any of its Subsidiaries that could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

(u) Remittances. All of the material remittances required to be made by the Borrower and its Subsidiaries to any Governmental Authority (including, without limitation, in respect of Taxes) have been made and are currently up to date, and there are no outstanding arrears other than those in an amount less than $250,000 or which are subject to a dispute that is proceeding diligently and in good faith and the Borrower has established adequate reserves therefor in accordance with GAAP.

(v) Taxes. The Borrower and each of the Subsidiaries has duly filed on a timely basis all tax returns required to be filed and have paid all Taxes which are due and payable, and have paid all assessments and reassessments and all other Taxes, governmental charges, governmental royalties, penalties, interest and fines claimed against them, other than those which are subject to a . The Borrower and each of the Subsidiaries have made adequate provision for, and all required installment payments have been made in respect of, Taxes in all material amounts payable for the current period for which returns are not yet required to be filed. There are no agreements, waivers or other arrangements providing for an extension of time with respect to the filing of any tax return by them or the payment of any Taxes. There are no actions or proceedings being taken by any Governmental Authority to enforce the payment of any Taxes by them, other than those in an amount less than $250,000 or which are subject to a dispute that is proceeding diligently and in good faith and the Borrower has established adequate reserves therefor in accordance with GAAP.

(w) Insurance. All insurance policies required to be maintained by the Borrower pursuant to Section 9.4(a) have been obtained and are in full force and effect, and such insurance policies comply with the requirements of Section 9.4(a).

(x) Obligation Debt. The Borrower and the Subsidiaries do not have outstanding any Debt except for Permitted Debt; and there exists no default by the Borrower or any Subsidiary under the provisions of any instrument or agreement relating to any such Debt.

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(y) Senior Note Loan Documents. There has been no amendment or modification to the Senior Note Indenture or the Senior Notes since the Original Closing Date. The Obligations in respect of the Loans to be made, and/or the Letters of Credit to be issued are permitted to be incurred under the Senior Note Indenture and the Liens securing the same are “Permitted Liens” under the Senior Note Indenture.

(z) Environmental Matters.

(i) The Borrower and each of the Subsidiaries and their property and assets comply in all material respects, and the businesses, activities and operations of the Borrower and each of the Subsidiaries and their property and assets comply in all material respects, with all Environmental Laws, all Governmental Authorizations and all orders related thereto; further, the Borrower does not have Knowledge of, and has no reasonable grounds to believe there exists, any facts which result in, or constitute, or are likely to give rise to, any Environmental Claim or any non-compliance with any Environmental Laws, Governmental Authorizations or orders related thereto which facts, claim or non-compliance have or could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(ii) The businesses, activities and operations of the Borrower and each of the Subsidiaries which have generated, manufactured, refined, treated, transported, stored, handled, disposed, transferred, produced or processed Hazardous Materials have done so in compliance in all respects with all Environmental Laws, Governmental Authorizations and orders, except to the extent such failure to so comply and could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(iii) The Borrower has not received written notice of any Environmental Claim or any material non-compliance by it under any Environmental Laws, any Governmental Authorizations or orders, and, except as previously disclosed to the Agent in writing, has no Knowledge of any facts which could give rise to any notice of non-compliance by it with any such Environmental Laws, Governmental Authorizations or orders, which facts or non-compliance could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, or any notice that the Borrower or any of the Subsidiaries is a potentially responsible party for a federal, provincial, regional, municipal or local clean-up or corrective action which, if not complied with, could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(iv) Neither the Borrower nor any of the Subsidiaries nor, to the Knowledge of the Borrower, any of their predecessor corporations or partnerships have,

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within the immediately preceding four (4) years, been convicted of an offence for non-compliance with any Environmental Laws, Governmental Authorizations or orders, or been fined or otherwise sentenced or settled any prosecution short of conviction, except as otherwise advised in writing to the Agent or except to the extent that any of the foregoing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(v) The Borrower and each of the Subsidiaries have in effect a management structure and policies and procedures that will permit the Borrower to effectively manage environmental risk and respond in a timely manner in compliance with the Environmental Laws, Governmental Authorizations and orders in the event of Release of Hazardous Materials in, on or under property of the Borrower or any of the Subsidiaries.

(aa) Full Disclosure. There is no information of which the Borrower has Knowledge on the Closing Date which has not been fully disclosed to the Agent which could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or cause the information referred to in Section 8.1(o) to be incorrect or misleading in any material respect.

8.2 Deemed Repetition

On the date of any Drawdown made by the Borrower pursuant thereto:

(a) each of the representations and warranties contained in Section 8.1 shall be true, correct and complete in all material respects on and as of the Drawdown Date to the same extent as though made on and as of such date (except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true, correct and complete in all material respects on and as of such earlier date); provided that if a representation and warranty is qualified as to materiality, with respect to such representation and warranty, the materiality qualifier set forth above shall be disregarded for purposes of this representation; and

(b) the Borrower shall be deemed to have represented to the Agent and the Lenders that, except as has otherwise been notified to the Agent in writing and has been waived by the Lenders in accordance herewith, no Default or Event of Default has occurred and is continuing nor will any such event occur as a result of the aforementioned Drawdown.

8.3 Other Loan Documents

All representations, warranties and statements of the Borrower or any Subsidiary contained in any other Loan Document delivered pursuant hereto or thereto shall be deemed to constitute representations and warranties made by the Borrower to the Agent and the Lenders under Section 8.1 of this Agreement.

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8.4 Effective Time of Repetition

All representations and warranties, when repeated or deemed to be repeated hereunder, shall be construed with reference to the facts and circumstances existing at the time of repetition, unless they are stated herein to be made as at the date hereof or as of the Closing Date.

8.5 Nature of Representations and Warranties

The representations and warranties set out in this Agreement or deemed to be made pursuant hereto shall survive the execution and delivery of this Agreement and the making of each Drawdown, notwithstanding any investigations or examinations which may be made by the Agent, the Lenders or Lenders’ Counsel. Such representations and warranties shall survive until this Agreement has been terminated.

8.6 Disclosure Schedule

The Borrower may from time to time supplement the Disclosure Schedule with respect to any matter arising after the date hereof which, if existing or occurring at the date hereof, would have been required to be set forth or described in the Disclosure Schedule or which is necessary to correct any information in such Schedule which has been rendered inaccurate thereby (and, in the case of any supplements to the Disclosure Schedule, such Schedule shall be appropriately marked to show the changes made therein). No such supplement to the Disclosure Schedule shall be or be deemed a waiver of any Default or Event of Default arising as a result of the information disclosed in such supplement, except as consented to by the Majority Lenders or, with the written consent of the Majority Lenders, the Agent. No supplement shall be permitted as to representations and warranties that relate solely to the date hereof. For the purpose of any requirement under the Loan Documents that the Borrower or one of its officers confirms, repeats or is deemed to have repeated, the accuracy of a representation and warranty which relies upon the Disclosure Schedule for disclosure of information as at any time after the date hereof, the Disclosure Schedule referred to in that representation and warranty shall, if so consented to by the Majority Lenders or if applicable the Agent, be deemed to be a reference to the most recent amended or supplemented Disclosure Schedule.

ARTICLE 9

GENERAL COVENANTS

9.1 Reporting Covenants of Borrower

So long as any Obligations (other than indemnity obligations for which no claim has been made) exist or the Credit Facility is available hereunder, the Borrower covenants and agrees with each of the Lenders and the Agent that:

(a) Financial Statements and Other Information. The Borrower shall deliver to the Agent, with sufficient copies for each of the Lenders:

(i) Audited Financial Statements: as soon as available and, in any event, within 120 days after the end of each of its Fiscal Years, (A) the audited

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annual Financial Statements of the Borrower on a consolidated basis, consisting of a balance sheet, a statement of operations and a statement of cash flows (as applicable) for each such Fiscal Year, together with the notes thereto, all prepared in accordance with GAAP consistently applied, together with an unqualified report of the Borrower’s auditors thereon, and (B) unaudited and unconsolidated Financial Statements for the Borrower and each of the Subsidiary Guarantors, consisting of a balance sheet, a statement of operations and a statement of cash flows (as applicable), for each such Fiscal Year, together with the notes thereto, all prepared in accordance with GAAP consistently applied;

(ii) Quarterly Financial Statements: as soon as available and, in any event, within 45 days after the end of each of its first, second and third Fiscal Quarters in each Fiscal Year, (A) the unaudited quarterly Financial Statements of the Borrower on a consolidated basis, consisting of a balance sheet, a statement of operations and a statement of cash flows (as applicable) for each such Fiscal Quarter, all in reasonable detail and stating in comparative form the figures for the corresponding date and period in the previous Fiscal Year, all prepared in accordance with GAAP consistently applied and certified by a senior officer of the Borrower to present fairly, in all material respects, the consolidated financial condition of the Borrower, and (B) the internal management report for such period;

(iii) Compliance Certificate: concurrently with furnishing the Financial Statements pursuant to Sections 9.1(a)(i) and 9.1(a)(ii), a Compliance Certificate signed by a senior officer of the Borrower together with a comparison to budget for the applicable fiscal period in accordance with the Borrower’s internal reporting practices, which Compliance Certificate shall certify (A) compliance with the financial covenants in Section 9.5 and the calculations related thereto, including a calculation of the mark to market liabilities of Borrower and its Subsidiaries under all Currency Agreements in respect of the Senior Notes, which calculations shall be in a form satisfactory to the Agent, acting reasonably, (B) the amount of Consolidated Capital Expenditures that have been incurred under the capital expenditure plan then in effect, and (C) the Borrower’s S&P Rating as of the date of such certificate;

(iv) Budget: within 30 days after the board of directors of the Borrower has approved a budget for each Fiscal Year, and in any event prior to commencement of the Fiscal Year to which such budget relates, a copy of such budget containing reasonable detail for each quarterly period and in respect of the financial covenant calculations, together with a financial plan for the subsequent two year period;

(v) Securities Filings: promptly upon transmission thereof, copies of all proxy statements, information circulars, notices and reports as the Borrower shall distribute, and copies of all prospectuses, registration

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statements and material change reports (or the equivalent) filed on a non-confidential basis by or on behalf of the Borrower with Canadian or United States regulatory authorities (except, in the case of material change reports, to the extent notice of such change has otherwise been provided pursuant to Section 9.1(b)(ii)); and

(vi) Other Information: at the request of the Agent, such other information, reports, certificates or other matters affecting the business, affairs, financial condition, property or assets of the Borrower or any of the Subsidiaries as the Agent may reasonably request.

The financial statements, budgets, descriptions, reports, notices and other documents to be delivered pursuant to this Section 9.1 may be delivered by transmitting an electronic version of the same to the Agent in accordance with Section 15.3 and confirming receipt thereof by the Agent and the ability of the Agent to access the same; provided that, in the case of Compliance Certificates, an original thereof shall be executed and delivered to the Agent promptly after such transmittal.

(b) Notice of Certain Events. The Borrower shall deliver to the Agent:

(i) Default: promptly upon becoming aware of the occurrence of a Default or the occurrence of an Event of Default, an Officer’s Certificate describing in detail such Default or such Event of Default and specifying the steps, if any, being taken to cure or remedy the same;

(ii) Notice of change in S&P Rating. The Borrower shall deliver to the Agent prompt written notice of any change of the S&P Rating, and such notice shall be accompanied by a copy of the most recent S&P Rating;

(iii) Material Adverse Change or Material Adverse Effect: prompt written notice of any event, circumstance or condition that, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect;

(iv) Insurance Matters: promptly, and in any event within ten Banking Days, written notice of (A) any material change in insurance coverage maintained by or for the Borrower and its Subsidiaries, specifying the changes and reasons therefor, and (B) its receipt of insurance proceeds in excess of Cdn $15,000,000;

(v) Asset Sales: promptly, and in any event within ten Banking Days after closing of such transaction, written notice of any sale of assets or property with a fair market value in excess of Cdn.$15,000,000 or the sale of assets or properties in any Fiscal Year with an aggregate fair market value in excess of Cdn.$45,000,000;

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(vi) Material Contracts: promptly, and in any event within five Banking Days after any officer of the Borrower has Knowledge that any Material Contract is terminated, will not be renewed, or is amended in a manner materially adverse to the Borrower and its Subsidiaries taken as a whole, or is subject to a material dispute in writing, a written statement describing such event with copies of such amendments (if applicable);

(vii) Governmental Authorization: prompt written notice of any proposed changes to, or loss or sale of, such Governmental Authorizations, franchises, rights or privileges which could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect;

(viii) Registration of Lien: prompt written notice of the registration of a financing statement or other registration of a filing or recordation document which has the effect of perfecting any Liens securing the Bonding Program or the commencement of any enforcement action in respect of any such Liens;

(ix) Lease Default: any default or claimed default under any material lease of real property or equipment that would entitle the lessor to terminate any lease in respect of such assets;

(x) Capital Expenditure Plan: prompt written notice of any new capital expenditure plan that has been approved by the Borrower’s board of directors;

(xi) Notice of New Subsidiaries: prior written notice of the creation or acquisition of any new Subsidiary as contemplated under Section 9.6;

(xii) Material Litigation: prompt written notice to the Agent of any litigation, proceeding, dispute or investigation affecting the Borrower or any of the Subsidiaries in an adverse matter involving a claim (except in the ordinary course of business) in excess of Cdn. $5,000,000, or in respect of which there is a reasonable possibility of a determination adverse to the Borrower or a Subsidiary and which, in the latter case, could, individually or in the aggregate and if adversely determined, be reasonably expected to have a Material Adverse Effect, and shall from time to time furnish to the Agent all reasonable information requested by the Agent concerning the status of any such litigation, proceeding, dispute or investigation;

(xiii) Environmental Matters: prompt written notice if the Borrower or any of the Subsidiaries shall: (A) discover any Release of Hazardous Materials into the environment from or as a result of the Borrower’s or any Subsidiary’s activities or operations or otherwise from or upon the land or property of the Borrower or any Subsidiary, if such Release could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, including a copy of such notice; (B) receive or give any

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notice that a violation of any Environmental Law, Governmental Authorization or order has or may have been committed or is about to be committed by the Borrower or any Subsidiary, if such violation could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, including a copy of such notice; (C) receive any notice of an Environmental Claim or that a complaint, proceeding or order has been filed or is about to be filed against the Borrower or any Subsidiary, alleging a violation of any Environmental Law, Governmental Authorization or order, if such violation could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, including a copy of such notice; or (D) receive any notice requiring the Borrower or any Subsidiary, to take any action in connection with the Release of Hazardous Materials into the environment or alleging that the Borrower or any Subsidiary may be liable or responsible for costs associated with a response to, or to clean-up, a Release of Hazardous Materials into the environment, or any damages caused thereby, if such action or liability could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, including a copy of such notice; and, in the case of (A) to (D), the Borrower shall furnish to the Agent details of any action taken or proposed to be taken in respect of such notice and, from time to time, all reasonable information requested by the Agent relating to the same; and

(xiv) Security Perfection Matters: prior written notice of:

(A) any name change of the Borrower or any Subsidiary, which notice shall be provided at least 15 days (or such shorter period of time agreed to by the Agent) before such name change;

(B) any change in the location of the Borrower’s or any Subsidiary’s chief executive office;

(C) any acquisition (whether by purchase, lease or otherwise) of any property or assets which are intended to be used or kept outside of Alberta, British Columbia, Saskatchewan or Ontario by the Borrower or any Subsidiary Guarantor or any relocation of existing assets outside said jurisdictions, except to the extent that all of the assets or properties outside said jurisdictions do not have an aggregate fair market value in excess of $2,500,000; and

(D) any of the Borrower or Subsidiary Guarantor acquiring (whether by purchase, lease or otherwise) an interest in real property where such property has a fair market value in excess of Cdn.$2,500,000.

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9.2 General Positive Covenants of Borrower.

So long as any Obligations (other than indemnity obligations for which no claim has been made) exist or the Credit Facility is available hereunder, the Borrower covenants and agrees with each of the Lenders and the Agent that:

(a) Payment and Performance. The Borrower shall duly and punctually pay the principal of all Loans, all interest thereon and all fees and other amounts required to be paid by the Borrower hereunder at the times and in the manner specified hereunder and the Borrower shall, and shall cause each of the Subsidiaries to, perform and observe all of their respective obligations under the Credit Agreement and under any other Loan Document to which it or a Subsidiary is a party.

(b) Existence and Conduct of Business. The Borrower shall, and shall cause each of the Subsidiaries to:

(i) except as permitted by Section 9.3(g), maintain their respective corporate or partnership existences in good standing;

(ii) preserve and keep in full force and effect any and all Governmental Authorizations, franchises, rights and privileges necessary to enable the Borrower and each of the Subsidiaries to operate and conduct their respective businesses in accordance with good industry practice, except to the extent such failure to comply or to preserve or keep in full force and effect could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect;

(iii) maintain, protect and defend title to all property and assets held by the Borrower or any Subsidiary and take all such acts and steps as are necessary or advisable at any time from time to time to maintain such property and assets in good condition, ordinary wear and tear excepted, except to the extent permitted by this Agreement or where the failure to so maintain, protect and defend or to take any such acts or steps could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and

(iv) conduct their businesses, activities and operations in a manner consistent with prudent business practice in their industry.

(c) Compliance with Applicable Laws and Government Approvals. The Borrower shall, and shall cause each Subsidiary to:

(i) carry on and conduct its business and operate its assets and properties, in accordance with all Applicable Laws; and

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(ii) observe and conform to all requirements of any Governmental Authorization relative to any of its business, operations, properties and assets;

(iii) observe and comply with all covenants, terms and conditions of all Material Contracts;

except to the extent the failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(d) Books and Records. The Borrower shall keep, and shall cause each of the Subsidiaries to keep, proper books of record and account in which full and correct entries shall be made in respect of the business, operations affairs, financial condition, property and assets of the Borrower and the Subsidiaries.

(e) Inspection. At any reasonable time and from time to time upon reasonable prior notice (but not more than once in any 12 month period unless a Default or Event of Default has occurred and is continuing), the Borrower shall permit the Agent or any representative thereof (at the expense of the Borrower) or any Lender or any representative thereof (at the expense of such Lender) to examine and make copies of and abstracts from the records and books of account of the Borrower or any of the Subsidiaries and to visit and inspect the premises and properties of the Borrower or any of the Subsidiaries and to discuss the affairs, finances and accounts of the Borrower or any of the Subsidiaries with any of the officers of the Borrower or any of the Subsidiaries.

(f) Payment of Taxes and Other Amounts. The Borrower shall, and shall cause each of the Subsidiaries to, from time to time, pay or cause to be paid, all rents, Taxes, rates, levies, assessments (ordinary or extraordinary), governmental fees and dues, wages, workers’ compensation arrangements, government royalties, pension fund obligations and any other amounts which, if unpaid, may result in a Lien on any of their assets arising under statute or regulation (any of which being a “Levy”) and to make and remit all withholdings lawfully levied, assessed or imposed upon the Borrower or any of the Subsidiaries or any of the assets of the Borrower or any of the Subsidiaries, as and when the same become due and payable, when and for so long as the validity of such Levy or withholding is subject to a dispute that is proceeding diligently and in good faith and the Borrower has established adequate reserves therefor in accordance with GAAP.

(g) Retain Ownership of Subsidiaries. The Borrower or a Subsidiary Guarantor shall at all times, directly or indirectly, be the sole registered and beneficial owner of all of the issued and outstanding shares in the capital of, or beneficial or ownership interests in, as applicable, each Subsidiary.

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(h) Environmental Matters.

(i) Compliance with Environmental Laws. Without limiting the generality of Section 9.2(c), the Borrower shall, and shall cause each of the Subsidiaries to, conduct their business and operations so as to so comply at all times with all Environmental Laws, Governmental Authorizations and orders if the consequence of a failure to comply could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect and the Borrower shall give notice to the Agent as required in Section 9.1(b).

(ii) Environmental Audit. Upon the occurrence or discovery of any circumstance, condition or event which, in the opinion of the Agent, acting reasonably, could reasonably be expected to result in any Environmental Claim or which could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, the Agent may (unless such an audit is already being undertaken by the Borrower and the Lenders are entitled to rely thereon) arrange, after consultation with the Borrower, for an environmental audit to be conducted by an independent environmental engineer or other environmental consultant at the expense of the Borrower in respect of such circumstance, condition or event. The Borrower shall, and shall cause each Subsidiary to, upon reasonable notice, provide access to its property and assets in order for such engineer or consultant to conduct such environmental and other inspections as it deems advisable and in that connection to examine the books, records, assets, affairs and business operations of the Subsidiary and to make inquiries of governmental offices concerning compliance by the Borrower or such Subsidiary with Environmental Laws and Governmental Authorizations and orders.

(i) Priority of Obligations and Liens. The Borrower shall ensure that:

(i) the Obligations of the Borrower hereunder and the obligations of each Subsidiary Guarantor under its Security rank at least pari passu in right of payment with the most senior unsubordinated indebtedness for borrowed money of the Borrower or such Subsidiary, as the case may be,

(ii) subject only to Section 9.6 and Section 9.2(i)(iii), all of its and its Subsidiaries’ present and after acquired property, both real and personal, is at all times subject to the Liens constituted by the Collateral Document, and

(iii) such Liens at all times constitute First Priority Liens with respect to all such property, other than (A) property that is, in the opinion of the Agent, acting reasonably, immaterial, both individually and in the aggregate, in terms of its value and its use in the operations of the Borrower and its Subsidiaries, (B) the failure of such Lien to constitute a First Priority Lien

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does not result in an Event of Default under Section 11.1(n)(iii) or (C) equipment which has been purchased or leased by the Borrower or a Subsidiary of the Borrower but which equipment has not yet entered the jurisdiction where the equipment will be used in the business of the Borrower or such Subsidiary, so long as the Borrower or such Subsidiary intends to bring such equipment into a jurisdiction where the Agent would have a First Priority Lien in such equipment, and the Borrower or such Subsidiary does so as soon as practicable following such acquisition by purchase or lease.

(j) Registration on Mayfield Lease. Within 60 days from the Closing Date, the Borrower, at its expense, shall: (i) cause NACG to file a caveat at the Alberta Land Titles Office in respect of its leasehold interest on its properties leased from LCHP2 Holdings Limited (the “Lessor”) in Edmonton, Alberta; (ii) cause NACG to provide a supplemental debenture in favour of the Agent supplementing NACG’s Debenture, which supplemental debenture provides a fixed charge over such leasehold interest and shall be registered in favour of the Agent at the Alberta Land Titles Office, and such other documents, certificates and opinions as reasonably requested by the Agent in connection therewith; and (iii) use reasonable commercial efforts to cause the Lessor to provide an estoppel and consent agreement in favour of the Agent on behalf of the Lenders and the Swap Lenders in respect of the leased property and on terms reasonably satisfactory to the Agent.

(k) Further Assurances. The Borrower, at its expense, shall and shall cause each Subsidiary to promptly cure any defect by it in the execution and delivery of any Loan Document to which it is a party, and after notice thereof from the Agent, promptly take all such further action, do all such further things and execute and deliver all such other and further deeds, agreements, opinions, certificates, instruments, affidavits, registration materials and other documents reasonably necessary for the Borrower’s compliance with the covenants and agreements of the Borrower hereunder or to more fully state the obligations of the Borrower as set out herein or to make any registration, recording, file any notice or obtain any consent, all as may be reasonably necessary or appropriate in connection therewith.

9.3 Negative Covenants of Borrower

So long as any Obligations (other than indemnity obligations for which no claim has been made) exist or the Credit Facility is available hereunder, the Borrower covenants and agrees with each of the Lenders and the Agent that:

(a) Debt. The Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or guarantee, or otherwise become or remain directly or indirectly liable with respect to, any Debt other than Permitted Debt.

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(b) Negative Pledge. The Borrower shall not, and shall not permit any of its Subsidiaries to:

(i) directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset of any kind (including any document or instrument in respect of goods or accounts receivable) of the Borrower or any of its Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, other than Permitted Liens; and

(ii) enter into any agreement (other than the Senior Note Indenture or any agreement prohibiting only the creation of Liens securing Debt subordinated in right of payment to the Obligations) prohibiting the creation or assumption of any Lien upon any of its properties or assets, whether now owned or hereafter acquired to secure Debt under any senior credit facility, including this Agreement, except with respect to specific property encumbered to secure payment of particular Debt or to be sold pursuant to an executed agreement with respect to an asset sale.

(c) No Restrictions on Subsidiary Distributions. The Borrower will not, and will not permit any of its wholly-owned Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any such Subsidiary to (i) pay dividends or make any other distributions on any of such Subsidiary’s Capital Stock owned by the Borrower or any other Subsidiary of the Borrower, (ii) repay or prepay any Debt owed by such Subsidiary to the Borrower or any other Subsidiary of the Borrower, (iii) make loans or advances to the Borrower or any other Subsidiary of the Borrower, or (iv) transfer any of its property or assets to the Borrower or any other Subsidiary of the Borrower, except as provided in this Agreement, as may be provided in an agreement with respect to an asset sale, or as provided in the Senior Note Indenture.

(d) Investments; Acquisitions. The Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, make or own any Investment in any Person or acquire, by purchase or otherwise, all or substantially all of the business, property or fixed assets of, or Capital Stock or other ownership interest of any Person, or any division or line of business of any Person other than Permitted Investments.

(e) Capital Expenditures. The Borrower shall not permit Consolidated Capital Expenditures during any applicable period to exceed 120% of the amount in the capital expenditure plan for such period which is approved from time to time by the Board of Directors of the Borrower.

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(f) Financial Assistance; Contingent Obligations; Hedges.

(i) The Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create or become or remain liable with respect to any Contingent Obligation other than Permitted Contingent Obligations.

(ii) The Borrower shall not, and shall not permit any Subsidiary to, enter into any Hedge Agreements other than in the normal course of business; provided that (i) each such Hedge Agreement may only be entered into with creditworthy counterparties, (ii) no Hedge Agreement shall be entered into for speculative purposes, and (iii) any Hedge Agreements which do not qualify as Secured Swap Obligations shall be unsecured.

(g) Restriction on Fundamental Changes. The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into any transaction of amalgamation, merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor or sublessor), transfer or otherwise dispose of, in one transaction or a series of transactions, all or substantially all of its assets (including its notes or receivables or Capital Stock of a Subsidiary, whether newly issued or outstanding), whether now owned or hereafter acquired, except:

(i) any Subsidiary of the Borrower may be amalgamated or merged with or into the Borrower or any Subsidiary Guarantor, or be liquidated, wound up or dissolved, provided that in such case the Borrower or such Subsidiary Guarantor shall be the continuing Person;

(ii) all or any part of the business, property or assets of any Subsidiary of the Borrower may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or a series of transactions, to the Borrower or any Subsidiary Guarantor;

(iii) in addition to clauses (i) and (ii) above, any Person may be merged with or into the Borrower or any Subsidiary of the Borrower, and the Borrower and/or Subsidiary of the Borrower may amalgamate with any such Person, if the acquisition of the Capital Stock of such Person by the Borrower or such Subsidiary would have been permitted pursuant to Section 9.3(d), provided that:

(A) in the case of a merger with or into the Borrower, the Borrower shall be the continuing Person;

(B) in the case of any other merger, if a Subsidiary is not the continuing Person, the continuing Person becomes a Subsidiary of the Borrower and complies with the provisions of Section 9.6, and

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(C) no Default or Event of Default shall have occurred or be continuing immediately after giving effect thereto;

(iv) the Borrower may split its common Capital Stock; or

(v) as otherwise expressly permitted by this Agreement.

(h) Dispositions. The Borrower shall not, and shall not permit any of its Subsidiaries to, convey, sell, lease or sub-lease, transfer or otherwise dispose of, its assets, property or undertaking (including its notes or receivables or Capital Stock of a Subsidiary, whether newly issued or outstanding), whether now owned or hereafter acquired, except for Permitted Dispositions and merger or sale transactions permitted under Section 9.3(g).

(i) Transactions with Shareholders and Affiliates. The Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with an Affiliate of the Borrower on terms that are less favourable to the Borrower or that Subsidiary, as the case may be, than those that might be obtained at the time from Persons who are not an Affiliate, provided that the foregoing restriction shall not apply:

(i) to any transaction between the Borrower and any of its wholly-owned Subsidiaries or between any of its wholly-owned Subsidiaries,

(ii) to indemnification payments to officers or directors of the Borrower or any Subsidiary, and customary board of directors fees and expenses, or

(iii) to the extent the same would otherwise be prohibited by this Section 9.3(i), for certainty, to the provision of subcontracting services to Noramac Ventures Inc. for which the Borrower or a Subsidiary, as applicable, is paid an amount equal to the amount Noramac Ventures Inc. is paid by the counterparty to its contract taking into consideration the percentage of such work performed for Noramac Ventures Inc. by such party less any fees paid to the joint venture partner in Noramac Ventures Inc.

(j) Sales and Lease-Backs. The Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, become or remain liable as lessee or as a guarantor or other surety with respect to any lease, whether an Operating Lease or a Capital Lease, of any property (whether real or personal), whether now owned or hereafter acquired,

(i) that the Borrower or any of its Subsidiaries has sold or transferred or is to sell or transfer to any other Person (other than the Borrower or any of its Subsidiaries); or

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(ii) that the Borrower or any of its Subsidiaries intends to use for substantially the same purpose as any other property that has been or is to be sold or transferred by the Borrower or any of its Subsidiaries to any Person (other than the Borrower or any of its Subsidiaries) in connection with such lease;

to the extent that the gross proceeds of any such transactions on an aggregate basis exceed Cdn.$10,000,000; provided that the foregoing restrictions shall not apply to property or equipment purchased by the Borrower or a Subsidiary with Permitted Purchase Money Debt that is incurred for the construction phase of the particular property or equipment, which property or equipment is subsequently sold to a leasing company and then leased to the Borrower or a Subsidiary.

(k) Conduct of Business. From and after the Closing Date, the Borrower shall not, and shall not permit any of its Subsidiaries to, engage in any business other than (i) the businesses engaged in by the Borrower and its Subsidiaries on the Closing Date and similar or related businesses and (ii) such other lines of business as may be consented to by Majority Lenders.

(l) Amendments or Waivers of Senior Note Loan Documents. The Borrower shall not agree to any material amendment to, or waive any of its material rights under, the Senior Note Indenture or the Senior Notes after the Closing Date without in each case obtaining the prior written consent of Majority Lenders.

(m) Fiscal Year. The Borrower shall not change its Fiscal Year end from March 31.

9.4 Insurance Covenants

(a) Insurance. The Borrower will maintain or cause to be maintained, with financially sound and reputable insurers, adequate property, liability, business interruption and environmental insurance in respect of the property, facilities, equipment, businesses and assets of the Borrower and the Subsidiaries according to prudent industry standards, and the Borrower will provide the Agent with certificates or other evidence satisfactory to the Agent, acting reasonably, of compliance with the foregoing. Each insurance policy shall (i) name the Agent for the benefit of the Agent and Lenders as an additional insured thereunder as its interests may appear and (ii) where applicable, contain a loss payable clause or endorsement, satisfactory in form and substance to the Agent, that names the Agent for the benefit of Lenders as the loss payee thereunder for any covered loss in excess of Cdn.$15,000,000 and provides for at least 30 days prior written notice to Agent of any cancellation of such policy.

(b) Application of Net Insurance/Condemnation Proceeds.

(i) Business Interruption Insurance Proceeds. Upon receipt by the Borrower or any of its Subsidiaries of any business interruption insurance proceeds constituting Net Insurance/Condemnation Proceeds, (A) so long

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as no Default or Event of Default shall have occurred and be continuing, the Borrower or such Subsidiary may retain and apply such Net Insurance/Condemnation Proceeds for working capital purposes, and (B) if a Default or Event of Default shall have occurred and be continuing, the Borrower shall deposit such proceeds into the Borrower’s Accounts as provided in Section 7.1.

(ii) Proceeds of Other Insurance. Upon receipt by the Borrower or any of its Subsidiaries of any Net Insurance/Condemnation Proceeds other than from business interruption insurance,

(A) so long as no Default or Event of Default shall have occurred and be continuing, the Borrower shall, or shall cause one or more of its Subsidiaries to, deposit such proceeds into the Borrower’s Accounts and promptly and diligently apply such Net Insurance/Condemnation Proceeds to pay or reimburse the costs of repairing, restoring or replacing the assets in respect of which such Net Insurance/Condemnation Proceeds were received; and

(B) if a Default or Event of Default shall have occurred and be continuing, the Borrower shall deposit such proceeds into the Borrower’s Accounts and apply an amount equal to such Net Insurance/Condemnation Proceeds to prepay the Loans (other than Bankers’ Acceptances and Letters of Credit) as provided in Section 7.1.

(c) Notice of Insurance Matters. The Borrower shall deliver to the Agent notice of a material change in insurance or its receipt of insurance proceeds in excess of Cdn. $15,000,000 as contemplated in Section 9.1(b)(iv).

9.5 Financial Covenants

So long as any Obligations (other than indemnity obligations for which no claim has been made) exist or the Credit Facility is available hereunder, the Borrower covenants and agrees with each of the Lenders and Agent that:

(a) Current Ratio. To be measured as of the last day of each Fiscal Quarter, the Borrower will not at any time permit the ratio of Current Assets to Current Liabilities to be less than 1.25:1.

(b) Senior Leverage Ratio. To be measured as of the last day of each Fiscal Quarter on a trailing four-quarter basis, the Borrower will not at any time permit the ratio of Senior Debt to Consolidated EBITDA shall not at any time exceed 2.00:1.

(c) Interest Cover Ratio. To be measured as of the last day of each Fiscal Quarter on a trailing four-quarter basis, the Borrower will not (i) at any time up until the last day of the Fiscal Quarter ended June 30, 2007, permit the ratio of Consolidated

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EBITDA to Consolidated Cash Interest Expense to be less than 2.35:1 and (ii) at any time thereafter, permit the ratio of Consolidated EBITDA to Consolidated Cash Interest Expense to be less than 2.50:1.

9.6 New Subsidiaries.

(a) Notice of New Subsidiaries. The Borrower shall deliver to the Agent prompt written notice upon any Person becoming a Subsidiary of the Borrower, which notice sets forth (i) the date on which such Person became a Subsidiary of the Borrower; and (ii) all of the data relating to such Subsidiary which is required to be set forth in the Disclosure Schedule attached hereto with respect to all Subsidiaries of the Borrower (it being understood that such written notice shall be deemed to supplement the Disclosure Schedule attached hereto for all purposes of this Agreement from and after the delivery of such notice).

(b) New Subsidiaries Guarantee and Security. The Borrower and will cause any new Subsidiary (other than a Minor Subsidiary designated as such in accordance with Section 9.6(c)) to execute and deliver to the Agent a counterpart of, or joinder agreement in respect of, the Subsidiary Guarantee, and to issue a new Debenture and Deposit Instrument (together with such certificates, opinion and other Loan Documents contemplated for the Subsidiary Guarantors under Sections 10.1 and Section 3.2) and to make such registrations and take all such further actions and execute all such further documents and instruments as may be necessary or, in the reasonable opinion of the Agent, desirable to create in favour of the Agent, for the benefit of the Agent and the Lenders, a valid and perfected First Priority Lien on all of the personal property and assets of such Subsidiary, subject to Section 9.3(b). In addition, (i) if the Capital Stock of such new Subsidiary is not owned directly by the Borrower or by a Subsidiary that has previously provided a Subsidiary Pledge Agreement that remains in effect, the Borrower shall cause the Subsidiary that owns the Capital Stock of such new Subsidiary, to execute and deliver to the Agent a Subsidiary Pledge Agreement, (ii) the Borrower shall deliver, or cause the Subsidiary that owns the Capital Stock of the new Subsidiary to deliver, to the Agent all certificates representing the Capital Stock of such new Subsidiary (accompanied by irrevocable undated stock powers, duly endorsed in blank), and (iii) the Borrower shall cause the new Subsidiary to become a party to the Borrower Pledge Agreement or Subsidiary Pledge Agreement, as applicable (in its capacity as the entity whose securities are the subject of such Pledge Agreement).

(c) Minor Subsidiaries. In the event that the Borrower wishes to designate a Subsidiary as a Minor Subsidiary, it shall deliver an Officer’s Certificate to the Agent so designating such Subsidiary and certifying that (i) such Subsidiary qualifies under the definition of Minor Subsidiary and (ii) the maximum asset and revenue thresholds for Minor Subsidiaries set forth in the definition of Minor Subsidiary are not exceeded at the time of such designation.

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9.7 Agent May Perform Covenants

If the Borrower fails to perform any covenants on its part herein contained, the Agent may give notice to the Borrower of such failure and if such covenant remains unperformed, the Agent may, in its discretion but need not, perform any such covenant capable of being performed by the Agent and if the covenant requires the payment or expenditure of money, the Agent may, upon having received approval of all Lenders, make such payments or expenditure and all sums so expended shall be forthwith payable by the Borrower to the Agent on behalf of the Lenders and shall bear interest at the applicable interest rate provided in Section 4.7 for amounts due in Cdn. Dollars or United States Dollars, as the case may be. No such performance, payment or expenditure by the Agent shall be deemed to relieve the Borrower of any default hereunder or under the other Loan Documents.

ARTICLE 10

SECURITY

10.1 Security

As continuing collateral security for the Obligations (including all Cash Management Indebtedness) and the Secured Swap Obligations, the Borrower has delivered or shall deliver to the Agent on behalf of the Lenders and the Swap Lenders the following Collateral Documents (unless expressly indicated otherwise):

(a) the Subsidiary Guarantee (or a joinder agreement in respect thereof) executed by each Subsidiary Guarantor;

(b) a Borrower Guarantee executed by the Borrower guaranteeing the Secured Swap Obligations of Subsidiary Guarantors;

(c) a Debenture issued by the Borrower and each Subsidiary Guarantor together with a Deposit Instrument in respect of each;

(d) the Borrower Pledge Agreement in respect of all issued and outstanding stock of NACG and NACG Finance LLC; and

(e) a Subsidiary Pledge Agreement executed by NACG and other Subsidiary Guarantors (if applicable) in respect of all issued and outstanding stock of its directly held Subsidiaries.

10.2 Registration

The Borrower shall, at its expense, register, file or record the Security in all offices where such registration, filing or recording is necessary or of advantage to the creation, perfection and preserving of the security applicable to it. The Borrower shall amend and renew such registrations, filings and recordings from time to time as and when required to keep them in full force and effect or to preserve the priority established by any prior registration, filing or

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recording thereof. To facilitate such ongoing perfection of the Collateral Documents, the Borrower shall provide the Agent with notices of the events or circumstances required under Section 9.1(b)(xiv).

10.3 Sharing Security

The Borrower and the Lenders agree and acknowledge that the Security is being held by the Agent to secure the Obligations and the Secured Swap Obligations on a pari passu basis. For purposes of the above sentence, pari passu basis means:

(a) with respect to the Lenders, (i) the Obligations (including all Cash Management Indebtedness owing to the Lenders) relative to (ii) the aggregate of the Obligations (including all Cash Management Indebtedness owing to the Lenders) plus the Secured Swap Obligations; and

(b) with respect to the Swap Lenders, (i) the Secured Swap Obligations relative to (ii) the aggregate of the Obligations (including all Cash Management Indebtedness owing to the Lenders) plus the Secured Swap Obligations.

The Swap Lenders, as amongst themselves, will share their pro rata allocation of the Security, as determined in paragraph (b) above, based on a pro rata allocation of the aggregate outstanding Secured Swap Obligations (determined, if netting is legally available to a Swap Lender, on a net basis) owing to each Swap Lender.

If requested by any of Agent, the Majority Lenders, the Fronting Lender or any Swap Lender, then each of the Agent and the Swap Lenders will enter into such further intercreditor agreements and assurances as may be reasonably requested to further evidence the sharing provisions of this section. The parties hereto agree, and such further agreements shall confirm, that Swap Lenders shall be entitled to share in the proceeds of realization as aforesaid, but shall have no vote in respect of amounts owed to them, and shall not have the right to initiate the enforcement of, or participate in any decisions in respect of the enforcement of, any of the Loan Documents unless and until there are no Obligations under the Credit Facility and this Agreement has been terminated.

10.4 Form of Security

The Security and all other agreements, documents and instruments referred to in Section 10.1 will be in substantially the forms attached to the Original Credit Agreement (where applicable) and in all other cases will be in such form or forms as will be required by the Agent acting reasonably. If the Agent, acting reasonably, determines at any time and from time to time that the form and nature of the then existing Security is deficient in any way or does not fully provide the Agent and the Lenders and the Swap Lenders with the Security and priority to which each is entitled hereunder, the Borrower will forthwith execute and deliver or cause to be executed and delivered to the Agent, at the Borrower’s expense, such amendments to the Security or provide such new security documents and instruments as the Agent may reasonably request, which shall be in the form or substantially in the form of the security documents and instruments previously provided (except to the extent the Agent reasonably deems necessary to correct such deficiency).

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The forms of Security shall have been or be prepared based upon the laws of Canada and Alberta applicable thereto in effect at the date hereof. The Agent shall have the right to require that any such Security be amended to reflect any changes in such laws, whether arising as a result of statutory amendments, court decisions or otherwise, in order to confer upon the Agent the Security intended to be created thereby.

10.5 After-Acquired Property

All property acquired by or on behalf of the Borrower or a Subsidiary Guarantor after the date of execution of the Security (hereinafter collectively referred to as “After-Acquired Property”), will be subject to the charges and security interests of the Debentures, without any further conveyance, mortgage, pledge, charge, assignment or other act on the part of such parties. Without limiting the effect of the preceding sentence, the Borrower will from time to time execute and deliver, or cause to be executed and delivered, and the Agent will register, all at the Borrower’s expense, such instruments supplemental to the Security, in form and substance satisfactory to the Agent, acting reasonably, as may be necessary or desirable to ensure that the Security as amended and supplemented constitutes in favour of the Agent and the Lenders and the Swap Lenders an effective floating charge or security interest over such After-Acquired Property as required hereunder, subject only to Permitted Liens which under Applicable Law rank in priority thereto.

10.6 Continuing Security

Each item or part of the Security shall for all purposes be treated as a separate and continuing collateral security and shall be deemed to have been given in addition to and not in place of any other item or part of the Security or any other security now held or hereafter acquired by the Agent or the Lenders. No item or part of the Security shall be merged or be deemed to have been merged in or by this Agreement or any documents, instruments or acknowledgements delivered hereunder, or any simple contract debt or any judgment, and any realization of or steps taken under or pursuant to any security, instrument or agreement shall be independent of and not create a merger with any other right available to the Lenders or the Agent under any security, instruments or agreements held by it or at law or in equity.

10.7 Dealing with Security

The Agent, with the consent of all of the Lenders, may grant extensions of time or other indulgences, take and give up securities (including, without limitation, the Security or any part or parts thereof), accept compositions, grant releases and discharges and otherwise deal with the Borrower and other parties and with security (including without limitation, the Security and each part thereof) as the Agent may see fit, and may, subject to Section 10.3, apply all amounts received from the Borrower or others or from securities (including without limitation, the Security or any part thereof) upon such part of the liabilities of the Borrower hereunder or under any of the Security as the Agent as provided herein.

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10.8 Effectiveness

The Security shall be effective, and the undertakings as to the Security herein or in any other Loan Document shall be continuing, whether any Loans are then outstanding or any amounts thereby secured or any part thereof shall be owing before or after, or at the same time as, the creation of such Security or before or after or upon the date of execution of any amendments to this Agreement.

10.9 Release and Discharge of Security

Subject to Sections 10.11 and 10.12, the Borrower and its Subsidiaries shall not be discharged from the Security or any Collateral Document except by a written release and discharge signed by the Agent (in accordance with Section 15.10(a)(viii)) and all of the Swap Lenders, or if this Agreement has terminated, the Swap Lenders. If all of the Obligations and the Secured Swap Obligations have been repaid, paid, satisfied and discharged, as the case may be, in full and the Credit Facility has been fully cancelled, then the Security shall be released and discharged by the Agent. The Agent, at the cost and expense of the Borrower, shall from time to time do, execute and deliver, or cause to be done, executed and delivered, all such agreements, instruments, certificates, financing statements, notices and other documents and all acts, matters and things as may be reasonably requested by the Borrower to give effect to, establish, evidence or record the foregoing release and discharge.

10.10 Transfer of Security.

If CIBC, in its capacity as Agent, or any successor thereto, in its capacity as Agent (the “Departing Agent”) ceases to be the Agent, the Departing Agent shall transfer and assign all of the Guarantees and Security to the replacement agent or, if the Credit Facility has been repaid and cancelled, to the Swap Lenders if there are Lender Hedge Agreements outstanding.

10.11 Release of Subsidiary Guarantee

Upon the sale or other disposition of all of the Capital Stock of a Subsidiary Guarantor to any Person (other than to an Affiliate of Borrower, unless such sale or other disposition is permitted under Section 9.3(g)(i)) permitted by this Agreement, or termination of the existence of a Subsidiary Guarantor in a transaction permitted by Section 9.3(g)(i), or to which Majority Lenders have otherwise consented, for which the Borrower or a Subsidiary desires to obtain a release of the Subsidiary Guarantor from the Subsidiary Guarantee, the applicable such party shall deliver an Officer’s Certificate:

(a) specifying the Capital Stock being sold or otherwise disposed of in the proposed transaction;

(b) stating that the Capital Stock subject to such disposition is being sold or otherwise disposed of in compliance with the terms hereof; and

(c) certifying that no Event of Default exists or would result from such disposition;

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and upon the receipt of such Officer’s Certificate, the Agent shall, at such party’s expense (so long as the Agent does not have actual knowledge, without independent inquiry, that the facts stated in such Officer’s Certificate are not true and correct) execute and deliver a release of the Subsidiary Guarantor from the Subsidiary Guarantee, as may be reasonably requested by such party.

10.12  Release of Security Interest on Asset Disposition

Upon the sale or other disposition of any Collateral that is permitted by this Agreement or to which Majority Lenders have otherwise consented and for which the Borrower or any Subsidiary Guarantor desires to obtain a release from or no interest letter in respect of the Security, the Borrower or such Subsidiary Guarantor shall deliver an Officer’s Certificate:

(a) specifying the Collateral being sold or otherwise disposed of in the proposed transaction,

(b) stating that the sale is a Permitted Disposition or is otherwise permitted hereunder;

(c) certifying that no Default or Event of Default exists or would result from such disposition.

Upon the receipt of such Officer’s Certificate, Agent shall, at the Borrower’s or such Subsidiary Guarantor’s expense (so long as Agent does not have actual knowledge, without independent inquiry, that the facts stated in such Officer’s Certificate are not true and correct, and if required pursuant to Section 7.1, Agent shall have received evidence satisfactory to it in its sole discretion that satisfactory arrangements or undertakings have been made for delivery of the Net Asset Sale Proceeds if and as required by Section 7.1) execute and deliver such releases of the Security in the Collateral which is the subject of such sale, as may be reasonably requested by the Borrower or such Subsidiary.

ARTICLE 11

EVENTS OF DEFAULT AND REMEDIES

11.1 Events of Default

The occurrence of any of the following conditions or events shall be considered an Event of Default (each, an “Event of Default”) :

(a) Failure to Make Payments When Due. Failure by the Borrower to pay principal of any Loan when due, whether at stated maturity, by acceleration, by notice of voluntary prepayment, by mandatory prepayment or otherwise; failure by the Borrower to pay when due any amount payable to the Fronting Lender in reimbursement of any drawing under a Letter of Credit; failure by the Borrower to collateralize any Bankers’ Acceptance or Letter of Credit when required hereunder; or failure by the Borrower to pay any interest on any Loan or any fee or any other amount due under this Agreement, on the date due;

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(b) Default in Other Agreements.

(i) Failure to pay when due or any breach or default by the Borrower or any of its Subsidiaries with respect to any other term of (A) one or more items of Debt (other than Debt referred to in Section 11.1(a)) or Contingent Obligations in an individual principal amount of Cdn.$5,000,000 or more or with an aggregate principal amount of Cdn.$10,000,000 or more, or (B) any loan agreement, mortgage, indenture or other agreement relating to such item(s) of Debt or Contingent Obligation(s), if the effect of such failure, breach or default is to cause, or to permit the holder or holders of that Debt or Contingent Obligation(s) (or a trustee on behalf of such holder or holders) to cause, that Debt or Contingent Obligation(s) to become or be declared due and payable prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be (upon the giving or receiving of notice, lapse of time, both, or otherwise); or

(ii) breach or default by the Borrower or any of its Subsidiaries with respect to any covenant in its material equipment leases (and the expiration of any applicable grace or cure period) if the effect of such breach or default is to cause obligation(s) under such lease(s) to become or be declared due and payable prior to their stated payment dates therefor or such leases to be terminated prior to their stated termination dates;

(c) Breach of Certain Covenants. Failure of the Borrower to perform or comply with any term or condition contained in Sections 2.1(d), 9.2(b)(i), 9.3 or 9.5 of this Agreement;

(d) Breach of Warranty. Any representation, warranty, certification or other statement made by the Borrower or any of its Subsidiaries in any Loan Document or in any statement or certificate at any time given by the Borrower or any of its Subsidiaries in writing pursuant hereto or thereto or in connection herewith or therewith shall be false in any material respect on the date as of which made or deemed made (provided that if a representation and warranty is qualified as to materiality, with respect to such representation and warranty, the materiality qualifier set forth above shall be disregarded for purposes of this Section 11.1), provided that, if such false representation, warranty, certification or statement is capable of being corrected, and the Borrower or a Subsidiary, as applicable, causes such representation, warranty, certification or statement to be corrected by no later than 30 days after it is made or deemed made, the falseness of such representation, warranty, certification or statement shall not constitute an Event of Default;

(e) Other Defaults Under Loan Documents. The Borrower or a Subsidiary shall default in the performance of or compliance with any term contained in this Agreement or any of the other Loan Documents, other than any such term referred to in any other subsection of this Section 11.1, and such default shall not have been remedied or waived within 30 days after the earlier of (i) an officer of the

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Borrower or such Subsidiary becoming aware of such default or (ii) receipt by the Borrower and such Subsidiary of notice from the Agent or any Lender of such default;

(f) Involuntary Bankruptcy; Appointment of Receiver, etc. If any case, proceeding or other action shall be instituted in any court of competent jurisdiction, against the Borrower or any Subsidiary seeking in respect of such Person an adjudication in bankruptcy, reorganization of its indebtedness, dissolution, winding up, liquidation, a composition, proposal or arrangement with creditors, a readjustment of debts, the appointment of a trustee, receiver, receiver and manager, interim receiver, custodian, liquidator or any Person with similar powers with respect to such Person or of all or any substantial part of its assets, or any other like relief in respect of such Person under a Bankruptcy Law, the Partnership Act (Alberta) or any other bankruptcy, insolvency or analogous law and:

(i) such case, proceeding or other action results in an entry of an order for relief or any such adjudication or appointment; or

(ii) if such case, proceeding or other action is being contested in good faith and by appropriate proceedings and continues undismissed, or unstayed and in effect, for any period of 45 days past the commencement of such case, proceeding or action; or

(g) Voluntary Insolvency. If the Borrower or any Subsidiary:

(i) makes any assignment in bankruptcy or makes any other assignment for the benefit of creditors;

(ii) makes any proposal or seeks relief under a Bankruptcy Law or any comparable law, seeks relief under any other bankruptcy, insolvency or analogous law, or files a petition or proposal to take advantage of any act of insolvency;

(iii) consents to or acquiesces in the appointment of a trustee in bankruptcy, receiver, receiver and manager, interim receiver, custodian, sequestrator or other person with similar powers of itself or of all or any portion of its assets which is, in the opinion of the Majority Lenders, material;

(iv) files a petition or otherwise commences any proceeding seeking any reorganization, arrangement, composition, administration or readjustment under any applicable bankruptcy, insolvency, moratorium, reorganization or other similar law affecting creditors’ rights;

(v) commits an act of bankruptcy under a Bankruptcy Law;

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(vi) is adjudicated insolvent under a Bankruptcy Law, or admits in writing its inability to pay its debts as they become due; or

(vii) consents to, or acquiesces in, the filing of such assignment, proposal, relief, petition, proposal, appointment or proceeding set out in this Section 11.1(g) (excluding clause (iii)) or takes any action to authorize or effect any of the foregoing; or

(h) Judgments and Attachments. Any money judgment, writ or warrant of attachment or similar process involving (i) in any individual case an amount in excess of Cdn. $5,000,000 or (ii) in the aggregate at any time an amount in excess of Cdn. $10,000,000 (in either case not adequately covered by insurance of a solvent unaffiliated insurance company that has not denied coverage in writing) shall be entered or filed against the Borrower or any of its Subsidiaries or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of 60 days (or in any event later than five days prior to the date of any proposed sale thereunder); or

(i) Dissolution. Any order, judgment or decree of a court of competent jurisdiction shall be entered against the Borrower or any of its Subsidiaries decreeing the dissolution of the Borrower or that Subsidiary and such order shall remain undischarged or unstayed for a period in excess of 60 days; or

(j) Seizure. If property and assets of the Borrower or any Subsidiary having an aggregate fair market value in excess of Cdn.$5,000,000 are seized or otherwise attached by anyone pursuant to any legal process or other means, including distress, execution or any other step or proceeding with similar effect and such attachment, step or other proceeding shall continue in effect and not be released, discharged, bonded or stayed within 60 days; or

(k) Change in Control. A Change in Control shall have occurred; or

(l) Material Adverse Change. Any event, circumstance, occurrence or change shall occur which results, or could reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect;

(m) Qualified Auditor’s Report. If the audited Financial Statements of the Borrower are issued with a report of the Borrower’s auditors which is qualified in any material respect and such qualification is not removed in 15 Banking Days;

(n) Invalidity of Loan Documents; Failure of Security; Repudiation of Obligations. At any time after the execution and delivery thereof:

(i) any Loan Document or any provision thereof, for any reason other than the satisfaction in full of all Obligations, shall cease to be in full force and effect (other than in accordance with its terms),

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(ii) any Loan Document or any provision thereof shall be declared by a court of competent jurisdiction to be null and void,

(iii) the Agent shall not have or shall cease to have a valid and perfected First Priority Lien in Collateral purported to be covered by the Collateral Documents which has a fair market value, individually or in the aggregate, exceeding Cdn.$5,000,000, or

(iv) the Borrower or a Subsidiary shall contest the validity or enforceability of any Loan Document or any provision thereof in writing or deny in writing that it has any further liability (other than in accordance with the terms of the applicable Loan Document), including with respect to future advances by Lenders, under any Loan Document or any provision thereof to which it is a party;

unless, in the case of clause (i) above, such unenforceability is capable of remedy and the Borrower or a Subsidiary, as appropriate, remedies such unenforceability within 30 days of it being determined, or in the case of clause (ii) above such party appeals such declaration and has it finally overturned within 30 days of such declaration having been made; in which case the unenforceability, declaration or failure shall not constitute an Event of Default.

(o) Conduct of Business by NACG Finance LLC. NACG Finance LLC shall (i) engage in any business other than entering into and performing its obligations under, in accordance with, and as contemplated in, the Loan Documents, the Senior Notes or any guarantee related to the Senior Notes to which it is a party, or (ii) own any assets other than loans made to the Borrower or a Subsidiary Guarantor, and any notes evidencing the same.

11.2 Acceleration

If any Event of Default shall occur and for so long as it is continuing:

(a) the entire principal amount of all Loans then outstanding and all accrued and unpaid interest thereon,

(b) an amount equal to the face amount at maturity of all Bankers’ Acceptances issued by the Borrower which are unmatured,

(c) an amount equal to the undrawn face amount of all outstanding Letters of Credit, and

(d) all other Obligations outstanding hereunder,

shall, at the option of the Agent in accordance with Section 14.11 or upon the request of the Majority Lenders, become immediately due and payable upon written notice to that effect from the Agent to the Borrower, all without any other notice and without presentment, protest,

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demand, notice of dishonour or any other demand whatsoever (all of which are hereby expressly waived by the Borrower). In such event and if the Borrower does not immediately pay all such amounts upon receipt of such notice, either the Lenders (in accordance with the proviso in Section 14.11) or the Agent on their behalf may, in their discretion, exercise any right or recourse and/or proceed by any action, suit, remedy or proceeding against the Borrower authorized or permitted by law for the recovery of all the indebtedness and liabilities of the Borrower to the Lenders and proceed to exercise any and all rights hereunder and under the other Loan Documents and no such remedy for the enforcement of the rights of the Lenders shall be exclusive of or dependent on any other remedy but any one or more of such remedies may from time to time be exercised independently or in combination.

11.3 Suspension of Lenders’ Obligations

The occurrence of a Default or Event of Default shall relieve the Lenders of all obligations to provide any further Drawdowns, Rollovers or Conversions to the Borrower hereunder; provided that the foregoing shall not prevent the Lenders or the Agent from disbursing money or effecting any Conversion which, by the terms hereof, they are entitled to effect, or any Conversion or Rollover requested by the Borrower and acceptable to the Lenders and the Agent, acting reasonably.

11.4 Conversion on Default

Upon the occurrence of an Event of Default, the Agent on behalf of the Lenders may convert a Libor Loan to a USBR Loan (regardless of whether such conversion causes the Borrower to incur any costs pursuant to Section 7.4(a)). Interest shall accrue on each Prime Loan at the rate specified in Section 4.1 with interest on all overdue interest at the same rate, such interest to be calculated daily and payable on demand.

11.5 Cash Collateral Accounts

Upon the occurrence of an Event of Default, the Agent on behalf of the Lenders may require the Borrower to forthwith pay funds in an amount sufficient to pay the maximum aggregate amount for which the Lenders are or may become liable in respect of all outstanding Bankers’ Acceptances and Letters of Credit into a cash collateral account in accordance with Sections 7.4(b) and 7.4(c) and any amount not so paid by the Borrower may, at the option of the Majority Lenders and without notice to the Borrower, be paid by the Lenders into a cash collateral account and shall be deemed to constitute a Prime Loan (for amounts denominated in Cdn. Dollars) or a USBR Loan (for amounts denominated in U.S. Dollars).

11.6 Set Off

(a) In addition to any rights now or hereafter granted under Applicable Law and not by way of limitation of any such rights, upon the occurrence of an Event of Default which remains unremedied or unwaived (whether or not the Loans have been accelerated hereunder), the Agent and each Lender shall have the right (and are hereby authorized by the Borrower) at any time and from time to time to combine all or any of the Borrower’s accounts with the Agent or such Lender, as

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the case may be, and to set off and to appropriate and to apply any and all deposits (general or special, term or demand) including, but not limited to, indebtedness evidenced by certificates of deposit whether matured or unmatured, and any other indebtedness at any time held by the Borrower or owing by such Lender or the Agent, as the case may be, to or for the credit or account of the Borrower against and towards the satisfaction of any Obligations, and may do so notwithstanding that the balances of such accounts and the liabilities are expressed in different currencies, and the Agent and each Lender are hereby authorized to effect any necessary currency conversions at the Noon Rate on the Banking Day before the day of conversion.

(b) The Agent or the applicable Lender, as the case may be, shall notify the Borrower of any such set-off from the Borrower’s accounts within a reasonable period of time thereafter.

11.7 Remedies Cumulative and Waivers

For greater certainty, it is expressly understood and agreed that the rights and remedies of the Lenders and the Agent hereunder or under any other Loan Document are cumulative and are in addition to and not in substitution for any rights or remedies provided by law or by equity; and any single or partial exercise by the Lenders or by the Agent of any right or remedy for a default or breach of any term, covenant, condition or agreement contained in this Agreement or other Loan Document shall not be deemed to be a waiver of or to alter, affect or prejudice any other right or remedy or other rights or remedies to which any one or more of the Lenders and the Agent may be lawfully entitled for such default or breach. Any waiver by, as applicable, the Majority Lenders, the Lenders or the Agent of the strict observance, performance or compliance with any term, covenant, condition or other matter contained herein and any indulgence granted, either expressly or by course of conduct, by, as applicable, the Majority Lenders, the Lenders or the Agent shall be effective only in the specific instance and for the purpose for which it was given and shall be deemed not to be a waiver of any rights and remedies of the Lenders or the Agent under this Agreement or any other Loan Document as a result of any other default or breach hereunder or thereunder.

ARTICLE 12

CHANGE OF CIRCUMSTANCES

12.1 Market Disruption

(a) Respecting Libor Loans. In the event that at any time subsequent to the giving of a Drawdown Notice or Conversion/Rollover/Repayment Notice to the Agent by the Borrower with regard to any requested Libor Loan, but before the date of the Drawdown, Rollover or Conversion, as the case may be, the Agent (acting reasonably) makes a determination, which shall be conclusive and binding upon the Borrower, that:

(i) by reason of circumstances affecting the London interbank market, adequate and fair means do not exist for ascertaining the rate of interest

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with respect to, or deposits are not available in sufficient amounts in the ordinary course of business at the rate determined hereunder to fund, a requested Libor Loan during the ensuing Interest Period selected;

(ii) the making of the requested Libor Loan by the Lenders has been made impracticable by the occurrence of an event which materially adversely affects the London interbank market generally; or

(iii) Libor Rate shall no longer represent the effective cost to any Lender of United States Dollar deposits in such market for the relevant Interest Period,

then the Agent shall give notice thereof to the Borrower as soon as possible after such determination and the Borrower shall, within one Banking Day after receipt of such notice and in replacement of the Drawdown Notice or Conversion/Rollover/Repayment Notice, as the case may be, previously given by the Borrower, give the Agent a Drawdown Notice or a Conversion/Rollover/ Repayment Notice, as the case may be, which specifies the cancellation thereof or the Drawdown of any other Loan or the Conversion of the relevant Libor Loan on the last day of the applicable Interest Period into any other Loan which would not be affected by the notice from the Agent pursuant to this Section 12.1. In the event the Borrower fails to give, if applicable, a valid replacement Conversion/Rollover/Repayment Notice with respect to the maturing Libor Loans which were the subject of a Conversion/Rollover/Repayment Notice, such maturing Libor Loans shall be converted on the last day of the applicable Interest Period into USBR Loans as if a Conversion/Rollover/Repayment Notice had been given to the Agent by the Borrower pursuant to the provisions hereof. In the event the Borrower fails to give, if applicable, a valid replacement Drawdown Notice with respect to a Drawdown originally requested by way of a Libor Loan, then the Borrower shall be deemed to have requested a Drawdown by way of a USBR Loan in the amount specified in the original Drawdown Notice and, on the originally requested Drawdown Date, the Lenders (subject to the other provisions hereof) shall make available the requested amount by way of a USBR Loan.

(b) Respecting Bankers’ Acceptances. In the event that at any time subsequent to the giving of a Drawdown Notice or Conversion/Rollover/Repayment Notice to the Agent by the Borrower with regard to any requested Bankers’ Acceptances, but before the date of the Drawdown, Rollover or Conversion, as the case may be, the Agent (acting reasonably) makes a determination, which shall be conclusive and binding upon the Borrower, that there no longer exists an active market for bankers’ acceptances accepted by the Lenders then:

(i) the right of the Borrower to request Bankers’ Acceptances or BA Equivalent Advances from any Lender shall be suspended until the Agent determines that the circumstances causing such suspension no longer exist, and so notifies the Borrower;

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(ii) any outstanding Drawdown Notice requesting a Loan by way of Bankers’ Acceptances or BA Equivalent Advances shall be deemed to be a Drawdown Notice requesting a Loan by way of Prime Loans in the amount specified in the original Drawdown Notice;

(iii) any outstanding Conversion Notice requesting a Conversion of a Loan by way of USBR Loans or Libor Loans into a Loan by way of Bankers’ Acceptances or BA Equivalent Advances shall be deemed to be a Conversion/Rollover/Repayment Notice requesting a Conversion of such Loan into a Loan by way of Prime Loans; and

(iv) any outstanding Rollover Notice requesting a Rollover of Bankers’ Acceptances or BA Equivalent Advances shall be deemed to be a Conversion/Rollover/ Repayment Notice requesting a Conversion of such Loans into a Loan by way of Prime Loans.

The Agent shall promptly notify the Borrower and the Lenders of any suspension of the Borrower’s right to request Bankers’ Acceptances or BA Equivalent Advances and of any termination of any such suspension.

12.2 Change in Law

(a) If, after the date hereof, the adoption of any Applicable Law, treaty or official directive (whether or not having the force of law) or any change therein or in the interpretation or application thereof by any court or by any Governmental Authority or any other entity charged with the interpretation or administration thereof or compliance by a Lender with any request or direction (whether or not having the force of law) of any such authority or entity hereafter:

(i) subjects such Lender to, or causes the withdrawal or termination of a previously granted exemption with respect to, any Taxes (other than Taxes on such Lender’s overall income or capital or any franchise Taxes), or changes the basis of taxation of payments due to such Lender, or increases any existing Taxes (other than Taxes on such Lender’s overall income or capital or any franchise Taxes) on payments of principal, interest or other amounts payable by the Borrower to such Lender under this Agreement;

(ii) imposes, modifies or deems applicable any reserve, liquidity, special deposit, regulatory or similar requirement against assets or liabilities held by, or deposits in or for the account of, or loans by such Lender, or any acquisition of funds for loans or commitments to fund loans or obligations in respect of undrawn, committed lines of credit or in respect of Bankers’ Acceptances accepted by such Lender;

(iii) imposes on such Lender or requires there to be maintained by such Lender any capital adequacy or additional capital requirements (including, without limitation, a requirement which affects such Lender’s allocation of

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capital resources to its obligations) in respect of any Loan or obligation of such Lender hereunder, or any other condition with respect to this Agreement; or

(iv) directly or indirectly affects the cost to such Lender of making available, funding or maintaining any Loan or otherwise imposes on such Lender any other condition or requirement affecting this Agreement or any Loan or any obligation of such Lender hereunder;

and the result of (i), (ii), (iii) or (iv) above, in the sole determination of such Lender acting in good faith, is:

(v) to increase the cost to such Lender of performing its obligations hereunder with respect to any Loan;

(vi) to reduce any amount received or receivable by such Lender hereunder or its effective return hereunder or on its capital in respect of any Loan or any Credit Facility; or

(vii) to cause such Lender to make any payment with respect to or to forego any return on or calculated by reference to, any amount received or receivable by such Lender hereunder with respect to any Loan or any Credit Facility;

such Lender shall determine that amount of money which shall compensate the Lender for such increase in cost, payments to be made or reduction in income or return or interest foregone (herein referred to as “Additional Compensation”). Upon a Lender having determined that it is entitled to Additional Compensation in accordance with the provisions of this Section, the Lender shall promptly so notify the Borrower and the Agent. The relevant Lender shall provide the Borrower and the Agent with a photocopy of the relevant law, rule, guideline, regulation, treaty or official directive (or, if it is impracticable to provide a photocopy, a written summary of the same) and a certificate of a duly authorized officer of such Lender setting forth the Additional Compensation and the basis of calculation therefor, which shall be conclusive evidence of such Additional Compensation in the absence of manifest error. The Borrower shall pay to such Lender within 10 Banking Days of the giving of such notice such Lender’s Additional Compensation. Each of the Lenders shall be entitled to be paid such Additional Compensation from time to time to the extent that the provisions of this Section are then applicable notwithstanding that any Lender has previously been paid any Additional Compensation.

(b) Each Lender agrees that it will not claim Additional Compensation from the Borrower under Section 12.2(a) if it is not generally claiming similar compensation from its other customers in similar circumstances or in respect of a period greater than 90 days prior to notification of such claim unless, in the latter

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case, the adopted change or other event or circumstance giving rise to such claim for Additional Compensation is retroactive in effect.

12.3 Assignment of Affected Loan

In addition to the other rights and options of the Borrower hereunder and notwithstanding any contrary provisions hereof, if a Lender gives the notice provided for in Section 12.2 or Section 12.4 with respect to any Loan (an “Affected Loan”), the Borrower may, upon 2 Banking Days notice to that effect given to such Lender and the Agent (which notice shall be irrevocable), require such Lender to assign its Pro Rata Share of the Affected Loan outstanding together with accrued and unpaid interest on the principal amount so assigned up to the date of such assignment in the same manner as contemplated in Section 2.2(e) and by paying such Additional Compensation as may be applicable to the date of such payment and upon such assignment and payment being made that Lender’s obligations to make such Affected Loans to the Borrower under this Agreement shall terminate.

12.4 Illegality

If a Lender determines, in good faith, that the adoption of any Applicable Law, treaty or official directive (whether or not having the force of law) or any change therein or in the interpretation or application thereof by any court or by any Governmental Authority or any other entity charged with the interpretation or administration thereof or compliance by a Lender with any request or direction (whether or not having the force of law) of any such authority or entity, now or hereafter makes it unlawful or impossible for any Lender to make, fund or maintain a Loan under any Credit Facility or to give effect to its obligations in respect of such a Loan, such Lender may, by written notice thereof to the Borrower and to the Agent declare its obligations under this Agreement in respect of such Loan to be terminated whereupon the same shall forthwith terminate, and the Borrower shall, within the time required by such law (or at the end of such longer period as such Lender at its discretion has agreed), either effect a Conversion of such Loan in accordance with the provisions hereof (if such Conversion would resolve the unlawfulness or impossibility) or prepay the principal of such Loan together with accrued interest, such Additional Compensation as may be applicable with respect to such Loan to the date of such payment and all costs, losses and expenses incurred by such Lender by reason of the liquidation or re-deployment of deposits or other funds or for any other reason whatsoever resulting from the repayment of such Loan or any part thereof on other than the last day of the applicable Interest Period. If any such change shall only affect a portion of such Lender’s obligations under this Agreement which is, in the opinion of such Lender and the Agent, severable from the remainder of this Agreement so that the remainder of this Agreement may be continued in full force and effect without otherwise affecting any of the obligations of the Agent, the other Lenders or the Borrower hereunder, such Lender shall only declare its obligations under that portion so terminated.

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ARTICLE 13

COSTS, EXPENSES AND INDEMNIFICATION

13.1 Costs and Expenses

The Borrower shall pay promptly upon notice from the Agent all reasonable out-of- pocket costs and expenses of the Agent, in connection with the Loan Documents and the establishment, syndication and closing of the Credit Facility, including, without limitation, in connection with preparation, printing, execution and delivery of this Agreement and the other Loan Documents whether or not any Drawdown has been made hereunder, and also including, without limitation, the reasonable fees and out-of-pocket costs and expenses of Lenders’ Counsel on a solicitor and his own client basis with respect thereto and with respect to advising the Agent and the Lenders as to their rights and responsibilities under this Agreement and the other Loan Documents. Except for ordinary expenses of the Lenders and the Agent relating to the day-to-day administration of this Agreement, the Borrower further agrees to pay within 30 days of demand by the Agent all reasonable out-of-pocket costs and expenses in connection with the preparation or review of waivers, consents and amendments pertaining to this Agreement and the preservation or enforcement of rights of the Lenders and the Agent under this Agreement and other Loan Documents, including, without limitation, all reasonable out-of-pocket costs and expenses sustained by the Lenders and the Agent as a result of any failure by the Borrower to perform or observe any of its obligations hereunder or in connection with any action, suit or proceeding (whether or not an Indemnified Party (as referred to in Section 13.2 or 13.3) is a party or subject thereto), together with interest thereon from and after such 30th day if such payment is not made by such time.

13.2 General Indemnity

In addition to any liability of the Borrower to any Lender or the Agent under any other provision hereof, the Borrower shall indemnify each Lender and the Agent and their respective Affiliates, directors, officers, agents and employees (collectively, the “Indemnified Parties”) and hold each Indemnified Party harmless against any losses, claims, costs, damages or liabilities (including, without limitation, any expense or cost incurred in the liquidation and re-deployment of funds acquired to fund or maintain any portion of a Loan and reasonable out-of-pocket expenses and reasonable legal fees on a solicitor and his own client basis) incurred by the same as a result of or in connection with the Credit Facility or the Loan Documents, including, without limitation and without duplication, as a result of or in connection with:

(a) any cost or expense incurred by reason of the liquidation or re-deployment in whole or in part of deposits or other funds required by any Lender to fund any Bankers’ Acceptance or to fund or maintain any Loan as a result of the Borrower’s failure to complete a Drawdown or to make any payment, repayment or prepayment on the date required hereunder or specified by it in any notice given hereunder;

(b) subject to permitted or deemed Rollovers and Conversions, the Borrower’s failure to provide for the payment to the Agent for the account of the Lenders of the full principal amount of each Bankers’ Acceptance on its maturity date;

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(c) the Borrower’s failure to pay any other amount, including without limitation any interest or fee, due hereunder on its due date after the expiration of any applicable grace or notice periods (subject, however, to the interest obligations of the Borrower hereunder for overdue amounts);

(d) the Borrower’s repayment or prepayment of a Libor Loan otherwise than on the last day of its Interest Period;

(e) the prepayment of any outstanding Bankers’ Acceptance before the maturity date of such Bankers’ Acceptance;

(f) the Borrower’s failure to give any notice required to be given by it to the Agent or the Lenders hereunder;

(g) the failure of the Borrower to make any other payment due hereunder;

(h) any inaccuracy or incompleteness of the Borrower’s representations and warranties contained in Article 8;

(i) any failure of the Borrower to observe or fulfill its obligations under Article 9;

(j) any failure of the Borrower to observe or fulfill any other Obligation not specifically referred to above; or

(k) the occurrence of any Default or Event of Default in respect of the Borrower;

provided that this Section shall not apply to any losses, claims, costs, damages or liabilities that arise by reason of the gross negligence or willful misconduct of the Indemnified Party claiming indemnity hereunder. The provisions of this Section shall survive the repayment of the Obligations and cancellation of the Credit Facility.

13.3 Environmental Indemnity

The Borrower shall indemnify and hold harmless the Agent and the Lenders including a receiver, receiver-manager or similar person appointed under Applicable Law and their respective Affiliates, officers, directors, employees and agents (collectively in this Section, the “Indemnified Parties”) forthwith on demand by the Agent from and against any and all claims, suits, actions, debts, damages, costs, losses, liabilities, penalties, obligations, judgments, charges, expenses and disbursements (including without limitation, all reasonable legal fees and disbursements on a solicitor and his own client basis) of any nature whatsoever, suffered or incurred by the Indemnified Parties or any of them in connection with the Credit Facility, whether as beneficiaries under the Loan Documents, as successors in interest of the Borrower or any of its Subsidiaries, or voluntary transfer in lieu of foreclosure, or otherwise howsoever, with respect to any Environmental Claims relating to the property of the Borrower or any of its Subsidiaries arising under any Environmental Laws as a result of the past, present or future operations of the Borrower or any of its Subsidiaries (or any predecessor in interest to the Borrower or its Subsidiaries) relating to the property of the Borrower or its Subsidiaries, or the

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past, present or future condition of any part of the property of the Borrower or its Subsidiaries owned, operated or leased by the Borrower or its Subsidiaries (or any such predecessor in interest), including any liabilities arising as a result of any indemnity covering Environmental Claims given to any person by the Lenders or the Agent or a receiver, receiver-manager or similar person appointed hereunder or under Applicable Law (collectively, the “Indemnified Third Party”); but excluding any Environmental Claims or liabilities relating thereto to the extent that such Environmental Claims or liabilities arise by reason of the gross negligence or willful misconduct of the Indemnified Party or the Indemnified Third Party claiming indemnity hereunder. The provisions of this Section shall survive the repayment of the Obligations and cancellation of the Credit Facility.

13.4 Judgment Currency

(a) If for the purpose of obtaining or enforcing judgment against the Borrower in any court in any jurisdiction, it becomes necessary to convert into any other currency (such other currency being hereinafter in this Section referred to as the “Judgment Currency”) an amount due in Cdn. Dollars or United States Dollars under this Agreement, the conversion shall be made at the Noon Rate prevailing on the Banking Day immediately preceding:

(i) the date of actual payment of the amount due, in the case of any proceeding in the courts of any jurisdiction that will give effect to such conversion being made on such date; or

(ii) the date on which the judgment is given, in the case of any proceeding in the courts of any other jurisdiction (the date as of which such conversion is made pursuant to this Section being hereinafter in this Section referred to as the “Judgment Conversion Date”).

(b) If, in the case of any proceeding in the court of any jurisdiction referred to in Section 13.4(a)(ii), there is a change in the Noon Rate prevailing between the Judgment Conversion Date and the date of actual payment of the amount due, the Borrower shall pay such additional amount (if any) as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the Noon Rate prevailing on the date of payment, will produce the amount of Cdn. Dollars or United States Dollars, as the case may be, which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial order at the Noon Rate prevailing on the Judgment Conversion Date.

(c) Any amount due from the Borrower under the provisions of Section 13.4(b) shall be due as a separate debt and shall not be affected by judgment being obtained for any other amounts due under or in respect of this Agreement.

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ARTICLE 14

THE AGENT AND ADMINISTRATION OF THE CREDIT FACILITY

14.1 Authorization and Action

(a) Each Lender hereby authorizes the Agent, on behalf of and for the benefit of the Lenders, to be the agent for and representative of the Lenders under each Loan Document (other than this Agreement), both as administrative agent and collateral agent, and each Lender agrees to be bound by the terms of each such Loan Document, provided that the Agent shall not enter into or consent to any material amendment, modification, termination or waiver of any provision contained in any such Loan Document, except in compliance with Section 15.10, and provided further that, without further written consent or authorization from the Lenders, the Agent may execute any documents or instruments necessary to release any Collateral or any Subsidiary Guarantor from the Subsidiary Guarantee if all of the Capital Stock of such Subsidiary Guarantor is sold to any Person (other than an Affiliate of the Borrower) pursuant to a sale or other disposition permitted hereunder or to which the Majority Lenders have otherwise consented so long as, in the case of a sale of such item of Collateral or Capital Stock referred to above, the requirements of Sections 10.11 and 10.12 are satisfied.

(b) Each Lender (and by accepting the benefits thereof, each Swap Lender) hereby further authorizes the Agent, on behalf of and for the benefit of Lenders, without further authorization or consent of the Lenders, to enter into each Collateral Document as collateral agent and/or secured party, and each Lender agrees to be bound by the terms of each such Collateral Document, provided that the Agent shall not enter into or consent to any material amendment, modification, termination or waiver of any provision contained in any such Collateral Document except in compliance with Section 15.10, and provided further that, without further written consent or authorization from Lenders, Agent may execute any documents or instruments necessary to subordinate the Liens of the Agent, on behalf of Lenders, Swap Lenders and Agents, to any Permitted Liens. In addition, each Lender (and by accepting the benefits thereof, each Swap Lender) hereby further authorizes the Agent to be party to and be bound by the St. Paul Priority Agreement as agent for and representative of the Lenders, and each Lender (and by accepting the benefits thereof, each Swap Lender) agrees to be bound thereby.

(c) Anything contained in any of the Guarantees or the Collateral Documents to the contrary notwithstanding, the Borrower, the Agent and each Lender hereby agree that (i) no Lender shall have any right individually to enforce any Guarantee or realize upon any of the Collateral under any Collateral Document, it being understood and agreed that all powers, rights and remedies under the Guarantees and Collateral Documents may be exercised solely by the Agent for the benefit of Lenders in accordance with the terms thereof, and (ii) in the event of a foreclosure by the Agent on any of the Collateral pursuant to a public or private sale, the Agent, or any Lender may be the purchaser of any or all of such Collateral at any such sale and the Agent, as agent for and representative of Lenders (but not any

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Lender or Lenders in its or their respective individual capacities unless Majority Lenders shall otherwise agree in writing) shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any collateral payable by Agent at such sale.

14.2 Procedure for Making Loans

(a) The Agent shall make Loans available to the Borrower as required hereunder by debiting the Agent’s Account to which the Lenders’ Pro Rata Share of such Loans have been credited in accordance with Section 2.7(b) (or causing such account to be debited) and, in the absence of other arrangements agreed to by the Agent and the Borrower in writing, by crediting the account of the Borrower or, at the expense of the Borrower, transferring (or causing to be transferred) like funds in accordance with the instructions of the Borrower as set forth in the Drawdown Notice or Conversion/Rollover/Repayment Notice, as the case may be, in respect of each Loan; provided that the obligation of the Agent hereunder to effect such a transfer shall be limited to taking such steps as are commercially reasonable to implement such instructions, which steps once taken shall constitute conclusive and binding evidence that such funds were advanced hereunder in accordance with the provisions relating thereto and the Agent shall not be liable for any damages, claims or costs which may be suffered by the Borrower and occasioned by the failure of such Loan to reach the designated destination.

(b) Unless the Agent has been notified by a Lender at least one Banking Day prior to the Drawdown Date, Rollover Date or Conversion Date, as the case may be, requested by the Borrower that such Lender will not make available to the Agent its Pro Rata Share of such Loan, the Agent may assume that such Lender has made or will make such portion of the Loan available to the Agent on the Drawdown Date, Rollover Date or Conversion Date, as the case may be, in accordance with the provisions hereof and the Agent may, but (unless the Agent shall have received the relevant funds from the Lenders) shall be in no way obligated to, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent such Lender shall not have so made its Pro Rata Share of a Loan available to the Agent, such Lender agrees to pay to the Agent forthwith on demand such Lender’s Pro Rata Share of the Loan and all reasonable costs and expenses incurred by the Agent in connection therewith together with interest thereon (at the rate payable hereunder by the Borrower in respect of such Loan or, in the case of funds made available in anticipation of a Lender remitting proceeds of a Bankers’ Acceptance, at the rate of interest per annum applicable to Prime Loans) for each day from the date such amount is made available to the Borrower until the date such amount is paid to the Agent; provided, however, that notwithstanding such obligation if such Lender fails to so pay, the Borrower covenants and agrees that, without prejudice to any rights the Borrower may have against such Lender, it shall repay such amount to

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the Agent forthwith after demand therefor by the Agent. The amount payable to the Agent pursuant hereto shall be set forth in a certificate delivered by the Agent to such Lender and the Borrower (which certificate shall contain reasonable details of how the amount payable is calculated) and shall be prima facie evidence thereof. If such Lender makes the payment to the Agent required herein, the amount so paid shall constitute such Lender’s Pro Rata Share of the Loan for purposes of this Agreement. The failure of any Lender to make its Pro Rata Share of any Loan shall not relieve any other Lender of its obligation, if any, hereunder to make its Pro Rata Share of such Loan on the Drawdown Date, Rollover Date or Conversion Date, as the case may be, but no Lender shall be responsible for the failure of any other Lender to make the Pro Rata Share of any Loan to be made by such other Lender on the date of any Drawdown, Rollover or Conversion, as the case may be.

14.3 Remittance of Payments

Except for amounts payable to the Agent for its own account, to the Fronting Lender for its own account or to the Swing Line Lender for its own account, forthwith after receipt of any repayment pursuant hereto or payment of interest or fees pursuant to Article 4 or payment pursuant to ARTICLE 7, the Agent shall remit to each Lender its Pro Rata Share of such payment; provided that, if the Agent, on the assumption that it will receive on any particular date a payment of principal, interest or fees hereunder, remits to a Lender its Pro Rata Share of such payment and the Borrower fails to make such payment, each of the Lenders on receipt of such remittance from the Agent agrees to repay to the Agent forthwith on demand an amount equal to the remittance together with all reasonable costs and expenses incurred by the Agent in connection therewith and interest thereon at the rate and calculated in the manner applicable to the Loan in respect of which such payment is made, or, in the case of a remittance in respect of Bankers’ Acceptances, at the rate of interest applicable to Prime Loans for each day from the date such amount is remitted to the Lenders without prejudice to any right such Lender may have against the Borrower. The exact amount of the repayment required to be made by the Lenders pursuant hereto shall be as set forth in a certificate delivered by the Agent to each Lender, which certificate shall be conclusive and binding for all purposes in the absence of manifest error.

14.4 Adjustments Among Lenders

(a) Adjustments to Obligations Under Credit Facility: Each Lender agrees that, after delivery of a notice of acceleration pursuant to Section 11.2 or the occurrence of an Event of Default specified in Section 11.1(f) or 11.1(g), it will at any time and from time to time upon the request of the Agent as required by any Lender purchase portions of the Obligations owed to the other Lenders and make any other adjustments which may be necessary or appropriate, so that the amount of Obligations owed to each Lender, as adjusted pursuant to this Section 14.4(a), will be equal to its Pro Rata Share of all Obligations under the Credit Facility. For the purposes of this Section 14.4(a), any undrawn Commitments shall be deemed to have been cancelled upon delivery of such notice of acceleration or the occurrence of such specified Event of Default.

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(b) Application of Payments: The Lenders agree that, after delivery of a notice of acceleration pursuant to Section 11.2 or the occurrence of an Event of Default specified in Section 11.1(f) or 11.1(g), the amount of any repayment made by the Borrower under this Agreement, and the amount of any proceeds from the exercise of any rights or remedies of the Lenders under the Loan Documents, which are to be applied against amounts owing hereunder, will be so applied in a manner so that, to the extent possible, the amount of Obligations owed to each Lender after giving effect to such application and any adjustments made pursuant to Section 14.4(a) will be equal to its Pro Rata Share of all Obligations owed to all Lenders.

(c) Receipt of Payments other than Obligations: Each Lender agrees that, if such Lender exercises any security (other than the Security) against or right of counter-claim, set-off or banker’s lien or similar right with respect to the property of the Borrower or any Subsidiary Guarantor or if under any applicable Bankruptcy Law it receives a secured claim and collateral for which it is, or is entitled to exercise any set-off against, a debt owed by it to the Borrower, the Lender shall apportion the amount thereof proportionately between:

(i) such Lender’s Pro Rata Share of all Obligations owing by the Borrower, which amounts shall be applied in accordance with this Section 14.4; and

(ii) amounts otherwise owed to such Lender by the Borrower,

provided that (i) any cash collateral account held by such Lender as collateral for a letter of credit or bankers’ acceptance (other than a Bankers’ Acceptance or a Letter of Credit) issued or accepted by such Lender on behalf of the Borrower may be applied by such Lender to such amounts owed by the Borrower to such Lender pursuant to such letter of credit or in respect of any such bankers’ acceptance without apportionment and (ii) these provisions do not apply to a right or claim which arises or exists in respect of a loan or other debt in respect of which the relevant Lender holds a Lien which is a Permitted Lien.

(d) Further Assurances: The Borrower agrees to be bound by and, at the request of the Agent, to do all things necessary or appropriate to give effect to any and all purchases and other adjustments made by and between the Lenders pursuant to this Section 14.4, but shall incur no increased liabilities, in aggregate, by reason thereof.

14.5 Duties and Obligations

Neither the Agent nor any of its directors, officers, agents or employees (and, for purposes hereof, the Agent shall be deemed to be contracting as agent and trustee for and on behalf of such persons) shall be liable to the Lenders for any action taken or omitted to be taken by it or them under or in connection with this Agreement except for its or their own gross negligence or willful misconduct or breach of the Loan Documents. Without limiting the generality of the foregoing, the Agent:

(a) may assume that there has been no assignment or transfer by any means by the Lenders of their rights hereunder, unless and until the Agent receives written notice of the assignment thereof from such Lender and the Agent receives from the assignee an executed Lender Assignment Agreement providing, inter alia, that such assignee is bound hereby as it would have been if it had been an original Lender party hereto;

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(b) may consult with legal counsel and rely on opinions of Borrower’ counsel and Lenders’ Counsel required hereunder, independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts;

(c) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing believed by it to be genuine and signed or sent by the proper party or parties or by acting upon any representation or warranty of the Borrower made or deemed to be made hereunder;

(d) may assume that no Default or Event of Default has occurred and is continuing unless it has actual knowledge to the contrary;

(e) may rely as to any matters of fact which might reasonably be expected to be within the knowledge of any Person upon a certificate signed by or on behalf of such Person;

(f) shall not be bound to disclose to any other Person any information relating to the Borrower, any of its Subsidiaries or any other Person if such disclosure would or might in its opinion constitute a breach of any Applicable Law, be in default of the provisions hereof or be otherwise actionable at the suit of any other Person; and

(g) may refrain from exercising any right, power or discretion vested in it which would or might in its reasonable opinion be contrary to any Applicable Law or any directive or otherwise render it liable to any Person, and may do anything which is in its reasonable opinion necessary to comply with such Applicable Law.

Further, the Agent (i) does not make any warranty or representation to any Lender nor shall it be responsible to any Lender for the accuracy or completeness of the representations and warranties of the Borrower herein or the data made available to any of the Lenders in connection with the negotiation of this Agreement, or for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement; (ii) shall not have any duty to ascertain or to enquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of the Borrower or to inspect the property (including the books and records) of the Borrower or any of its Subsidiaries; and (iii) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any instrument or document furnished pursuant hereto.

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14.6 Prompt Notice to the Lenders

Notwithstanding any other provision herein, the Agent agrees to provide to the Lenders, with copies where appropriate (and which may be sent by electronic mail), all information, notices and reports required to be given to the Agent by the Borrower, promptly upon receipt of same, excepting therefrom information and notices relating solely to the role of Agent hereunder.

14.7 Agent’s and Lenders’ Authorities

With respect to its Commitments and the Drawdowns, Rollovers, Conversions and Loans made by it as a Lender, the Agent shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Agent. Subject to the express provisions hereof relating to the rights and obligations of the Agent and the Lenders in such capacities, the Agent and each Lender may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower and its Subsidiaries or any corporation or other entity owned or controlled by any of them and any person which may do business with any of them without any duties to account therefor to the Agent or the other Lenders and, in the case of the Agent, all as if it was not the Agent hereunder.

14.8 Lender Credit Decision

It is understood and agreed by each Lender that it has itself been, and will continue to be, solely responsible for making its own independent appraisal of and investigations into the financial condition, creditworthiness, condition, affairs, status and nature of the Borrower and its Subsidiaries. Each Lender represents to the Agent that it is engaged in the business of making and evaluating the risks associated with commercial revolving or term loans, or both, to business organizations similar to the Borrower, that it can bear the economic risks related to the transaction contemplated hereby, that it has had access to all information deemed necessary by it in making such decision (provided that this representation shall not impair its rights against the Borrower) and that it is entering into this Agreement in the ordinary course of its commercial lending business. Accordingly, each Lender confirms with the Agent that it has not relied, and will not hereafter rely, on the Agent (a) to check or enquire on its behalf into the adequacy, accuracy or completeness of any information provided by the Borrower or any other person under or in connection with this Agreement or the transactions herein contemplated (whether or not such information has been or is hereafter distributed to such Lender by the Agent), or (b) to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of the Borrower or any of its Subsidiaries. Each Lender acknowledges that a copy of this Agreement has been made available to it for review and each Lender acknowledges that it is satisfied with the form and substance of this Agreement. Each Lender hereby covenants and agrees that, subject to Section 14.4(a), it will not make any arrangements with the Borrower for the satisfaction of any Loans or other Obligations without the consent of all the other Lenders.

14.9 Indemnification of Agent

The Lenders hereby agree to indemnify the Agent (to the extent not reimbursed by the Borrower), on a pro rata basis in accordance with their respective Pro Rata Share from and

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against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of this Agreement or any action taken or omitted by the Agent under or in respect of this Agreement in its capacity as Agent; provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs expenses or disbursements resulting from the Agent’s gross negligence or willful misconduct or the Agent’s breach of the Loan Documents. If the Borrower subsequently repays all or a portion of such amounts to the Agent, the Agent shall reimburse the Lenders their Pro Rata Shares (according to the amounts paid by them in respect thereof) of the amounts received from the Borrower. Without limiting the generality of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its portion (determined as above) of any out-of-pocket expenses (including counsel fees) incurred by the Agent in connection with the preservation of any rights of the Agent or the Lenders under, or the enforcement of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that the Agent is not reimbursed for such expenses by the Borrower.

14.10  Successor Agent

The Agent may, as hereinafter provided, resign at any time by giving 45 days’ prior written notice thereof to the Lenders and the Borrower. Upon any such resignation, the Lenders shall, after soliciting the views of the Borrower, have the right to appoint another Lender as a successor agent (the “Successor Agent”) who shall be acceptable to the Borrower, acting reasonably. If no Successor Agent shall have been so appointed by the Lenders and shall have accepted such appointment within 30 days after the retiring Agent’s giving of notice of resignation, then the retiring Agent shall, on behalf of the Lenders, appoint a Successor Agent who shall be a Lender acceptable to the Borrower, acting reasonably. Upon the acceptance of any appointment as Agent hereunder by a Successor Agent, such Successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall thereupon be discharged from its further duties and obligations as Agent under this Agreement. After any retiring Agent’s resignation hereunder as Agent, the provisions of this Article shall continue to enure to its benefit as to any actions taken or omitted to be taken by it as Agent or in its capacity as Agent while it was Agent hereunder. Further, if at any time the Agent, in its capacity as a Lender, does not hold more Commitments than any other Lender, unless an Event of Default has occurred and is continuing, the Borrower may replace the Agent with any other Person which is a Lender or an Affiliate of a Lender.

14.11  Taking and Enforcement of Remedies

Each of the Lenders hereby acknowledges that, to the extent permitted by Applicable Law, the remedies provided hereunder to the Lenders are for the benefit of the Lenders collectively and acting together and not severally and further acknowledges that its rights hereunder are to be exercised not severally, but collectively by the Agent upon the decision of the Majority Lenders regardless of whether acceleration occurs pursuant to Section 11.2. Notwithstanding any of the provisions contained herein, each of the Lenders hereby covenants and agrees that it shall not be entitled to individually take any action with respect to the Credit Facility, including, without limitation, any acceleration under Section 11.2, but that any such

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action shall be taken only by the Agent with the prior written agreement or instructions of the Majority Lenders; provided that, notwithstanding the foregoing, if (a) the Agent, having been adequately indemnified against costs and expenses of so doing by the Lenders, shall fail to carry out any such instructions of the Majority Lenders, any one Lender only may do so on behalf of all Lenders and shall, in so doing, be entitled to the benefit of all protections given the Agent hereunder or elsewhere, and (b) in the absence of instructions from the Majority Lenders and where in the sole opinion of the Agent the exigencies of the situation warrant such action, the Agent may without notice to or consent of the Lenders or any of them take such action on behalf of the Lenders as it deems appropriate or desirable in the interests of the Lenders. Each of the Lenders hereby further covenants and agrees that upon any such written consent being given by the Majority Lenders, or upon a Lender or the Agent taking action as aforesaid, it shall co-operate fully with the Lender or the Agent to the extent requested by the Lender or the Agent in the collective realization including, without limitation, and, if applicable, the appointment of a receiver, or receiver and manager to act for their collective benefit. Each Lender covenants and agrees to do all acts and things and to make, execute and deliver all agreements and other instruments, including, without limitation, any instruments necessary to effect any registrations, so as to fully carry out the intent and purpose of this Section; and each of the Lenders hereby covenants and agrees that, subject to Sections 4.8, 9.3(b) and Section 14.4, it has not and shall not seek, take, accept or receive any security for any of the obligations and liabilities of the Borrower hereunder or under any other document, instrument, writing or agreement ancillary hereto and shall not enter into any agreement with any of the parties hereto or thereto relating in any manner whatsoever to the Credit Facility, unless all of the Lenders shall at the same time obtain the benefit of any such security or agreement.

With respect to any enforcement, realization or the taking of any rights or remedies to enforce the rights of the Lenders hereunder, the Agent shall be a trustee for each Lender, and all monies received from time to time by the Agent in respect of the foregoing shall be held in trust and shall be trust assets within the meaning of applicable Bankruptcy Laws and shall be considered for the purposes of such legislation to be held separate and apart from the other assets of the Agent, and each Lender shall be entitled to its Pro Rata Share of such monies. In its capacity as trustee, the Agent shall be obliged to exercise only the degree of care it would exercise in the conduct and management of its own business and in accordance with its usual practice concurrently employed or hereafter instituted for other substantial commercial loans. Payment by the Borrower to the Agent shall constitute payment by the Borrower to the applicable Lenders.

14.12  Reliance Upon Agent

The Borrower shall be entitled to rely upon any certificate, notice or other document or other advice, statement or instruction provided to it by the Agent pursuant to this Agreement, and the Borrower shall generally be entitled to deal with the Agent with respect to matters under this Agreement which the Agent is authorized to deal with without any obligation whatsoever to satisfy itself as to the authority of the Agent to act on behalf of the Lenders and without any liability whatsoever to the Lenders for relying upon any certificate, notice or other document or other advice, statement or instruction provided to it by the Agent, notwithstanding any lack of authority of the Agent to provide the same.

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14.13  No Liability of Agent

The Agent shall have no responsibility or liability to the Borrower on account of the failure of any Lender to perform its obligations hereunder (unless such failure was caused, in whole or in part, by the Agent’s failure to observe or perform its obligations hereunder), or to any Lender on account of the failure of the Borrower or any Lender to perform its obligations hereunder.

14.14  Article for Benefit of Agent and Lenders

The provisions of this ARTICLE 14 which relate to the rights and obligations of the Lenders to each other or to the rights and obligations between the Agent and the Lenders shall be for the exclusive benefit of the Agent and the Lenders, and except to the extent provided in Sections 14.1, 14.2, 14.6, 14.10, 14.11, 14.12, 14.13 and this Section 14.14, the Borrower shall not have any rights or obligations thereunder or be entitled to rely for any purpose upon such provisions. Any Lender may waive in writing any right or rights which it may have against the Agent or the other Lenders hereunder without the consent of or notice to the Borrower, unless otherwise specified in the Loan Documents.

ARTICLE 15

GENERAL

15.1 Exchange and Confidentiality of Information

(a) Each of the Agent and the Lenders acknowledges the confidential nature of the financial, operational and other information and data provided and to be provided to them by the Borrower pursuant hereto (the “Information”) and agrees to use all reasonable efforts to prevent the disclosure thereof, provided, however, that:

(i) with prior notice, the Agent and the Lenders may disclose all or any part of the Information if, in their reasonable opinion, such disclosure is required in connection with any actual or threatened judicial, administrative or governmental proceedings including, without limitation, proceedings initiated under or in respect of this Agreement;

(ii) the Agent and the Lenders shall incur no liability in respect of any Information required to be disclosed by any Applicable Law or regulation, or by applicable order, policy or directive having the force of law, to the extent of such requirement;

(iii) the Agent and the Lenders may provide Lenders’ Counsel and their other agents and professional advisors with any Information; provided that such persons shall be under a like duty of confidentiality to that contained in this Section;

(iv) the Agent and each of the Lenders shall incur no liability to maintain the confidentiality of the Information: (i) which is or becomes readily

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available to the public (other than by a breach hereof) or which has been made readily available to the public by the Borrower or its Subsidiaries, (ii) which the Agent or the relevant Lender can show was, prior to receipt thereof from the Borrower, lawfully in the Agent’s or Lender’s possession and not then subject to any obligation on its part to the Borrower to maintain confidentiality, or (iii) which the Agent or the relevant Lender received from a third party who was not, to the knowledge of the Agent or such Lender, under a duty of confidentiality to the Borrower at the time the information was so received;

(v) the Agent and the Lenders may disclose the Information to any actual or prospective Swap Lender (or its advisors) or any counterparty (or its advisors) to any securitization or Hedge Agreement relating to the Borrowers, any Subsidiaries or the Obligations where such prospective Swap Lender or counterparty agrees to be under a like duty of confidentiality to that contained in this Section;

(vi) the Agent and the Lenders may disclose the Information to prospective Lenders in connection with the syndication by the Agent or Lenders of the Credit Facility or the granting by a Lender of a participation in the Credit Facility where such prospective Lenders agree to be under a like duty of confidentiality to that contained in this Section; and

(vii) with prior notice to the Borrower, the Agent and the Lenders may disclose all or any part of the Information so as to enable the Agent and the Lenders to initiate any lawsuit against the Borrower or to defend any lawsuit commenced by the Borrower the issues of which touch on the Information, but only to the extent such disclosure is necessary to the initiation or defense of such lawsuit.

(b) Each of the Agent and the Lenders acknowledges and agrees that the Information cannot be used for any purposes other than in connection with matters relating to this Agreement.

15.2 Nature of Obligation under this Agreement

(a) The obligations of each Lender and of the Agent under this Agreement are several. The failure of any Lender to carry out its obligations hereunder shall not relieve the other Lenders, the Agent or the Borrower of any of their respective obligations hereunder.

(b) Neither the Agent nor any Lender shall be responsible for the obligations of any other Lender hereunder.

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15.3 Notices; Effectiveness; Electronic Communication

(a) Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in paragraph (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by registered mail or sent by telecopier to the addresses or telecopier numbers specified below or, if to a Lender, to it at its address or telecopier number specified in Schedule A attached hereto or, if to a Subsidiary Guarantor, in care of the Borrower. Notices sent by hand or overnight courier service, or mailed by registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given on a business day between 9:00 a.m. and 5:00 p.m. local time where the recipient is located, shall be deemed to have been given at 9:00 a.m. on the next business day for the recipient). Notices delivered through electronic communications to the extent provided in Section 15.3(b) below, shall be effective as provided in such section. The respective parties’ addresses and contact information shall be as follows:

To the Borrower:

North American Energy Partners Inc.

Zone 3, Acheson Industrial Area

2-53016 Highway 60

Acheson, Alberta T7X 5G7

Attention:     Chief Financial Officer

Facsimile:    (780) 960-7103

e-mail:         dwilkes@nacg.ca

copied to:     thauglum@nacg.ca

To the Agent:

Canadian Imperial Bank of Commerce

8^th Floor, BCE Place

161 Bay Street

Toronto, Ontario M5J 2S8

Attention: Agent Administration

Facsimile: (416) 956-3830

e-mail: david.evelyn@cibc.ca

To each Lender: As set forth in Schedule A attached hereto

(b) Electronic Communications. Notices and other communications to the Agent, the Lenders and the Fronting Lender hereunder may be delivered or furnished by electronic communication (including e-mail and internet or intranet websites)

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pursuant to procedures approved by the Agent, provided that the foregoing shall not apply to notices to any Lender of Loans to be made or Letters of Credit to be issued if such Lender has notified the Agent that it is incapable of receiving notices by electronic communication. The Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications. Unless the Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient, and (ii) notices or communications posted to an internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

(c) Change of Address. Any party hereto may change its address or telecopier number or, if applicable, email address for notices and other communications hereunder by notice to the other parties hereto.

15.4 Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the Province of Alberta and the laws of Canada applicable therein, without prejudice to or limitation of any other rights or remedies available under the laws of any jurisdiction where property or assets of the Borrower may be found.

15.5 Benefit of the Agreement

This Agreement shall enure to the benefit of and be binding upon the Borrower, the Lenders, the Agent and their respective successors and permitted assigns.

15.6 Assignment

(a) Any Lender may, without consent during the continuance of an Event of Default and at all other times with the prior written consent of each of the Borrower and the Agent, which consents shall not be unreasonably withheld or delayed, sell, assign, transfer or grant (an “Assignment”) an interest in any of its Commitments, its Pro Rata Share of the Loans and its rights under the Loan Documents to other Persons; provided that, (i) unless an Event of Default has occurred and is continuing, such Assignment shall be for a minimum amount not less than the lesser of Cdn. $10,000,000 and the assigned Commitment(s) of the assigning Lender and the minimum amount of any Commitment(s) retained by the assigning

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Lender shall be not less than Cdn. $10,000,000 and (ii) except in connection with the initial syndication of the Credit Facility or in the case of an Assignment to an Affiliate, it shall be a precondition to any such Assignment that the contemplated assigning Lender shall have paid to the Agent, for the Agent’s own account, a transfer fee of Cdn. $3,500. Upon the effective date of any such Assignment, the assigning Lender shall have no further obligation hereunder with respect to such interest except in case of an Assignment to an Affiliate of the assigning Lender, in which case such Lender shall remain obligated hereunder with respect to such interest. To effect any such Assignment, the assigning Lender, the new Lender, the Agent and the Borrower shall execute and deliver a Lender Assignment Agreement.

(b) The Borrower shall not assign its rights or obligations hereunder without the prior written consent of all of the Lenders.

15.7 Participations

Any Lender may, without the consent of the Borrower, grant one or more participations in its Commitments and its Pro Rata Share of the Loans to other Persons, provided that the granting of such a participation shall be at such Lender’s own cost and shall not affect the obligations of such Lender hereunder nor shall it increase the costs to the Borrower hereunder or under any of the other Loan Documents.

15.8 Severability

Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall not invalidate the remaining provisions hereof and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

15.9 Whole Agreement

This Agreement and the other Loan Documents constitute the whole and entire agreement between the parties hereto regarding the subject matter hereof and thereof and cancel and supersede any prior agreements (including, without limitation, the Summary of Indicative Terms and Conditions dated May 8, 2007 between the Borrower and CIBC), undertakings, declarations, commitments, representations, written or oral, in respect thereof.

15.10  Amendments and Waivers

Any provision of this Agreement or any other Loan Document may be amended only if the Borrower and the Majority Lenders so agree in writing and, except as otherwise specifically provided herein, may be waived only if the Majority Lenders so agree in writing, but:

(a) an amendment or waiver which changes or relates to (i) the amount of the Loans available hereunder or any Lender’s Commitment, (ii) decreases in the rates of or deferral of the dates of payment of interest, Bankers’ Acceptance stamping fees,

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LC Fees or mandatory repayments of principal, (iii) decreases in the amount of or deferral of the dates of payment of fees hereunder (other than fees payable for the account of Agent), (iv) the definition of “Majority Lenders”, (v) any provision hereof contemplating or requiring consent, approval or agreement of “all Lenders” or similar expressions or permitting waiver of conditions or covenants or agreements by “all Lenders” or similar expressions, (vi) the definition of “Event of Default” and the provisions of Section 11.2, (viii) release or discharge of any Security or any Guarantee (except as otherwise provided in Sections 10.9, 10.11, or 10.12), or (ix) this Section, shall require the agreement or waiver of all the Lenders and also (in the case of an amendment) of the other parties hereto;

(b) an amendment or waiver which changes or relates to the rights and/or obligations of the Fronting Lender shall also require the agreement of the Fronting Lender thereto;

(c) an amendment or waiver which changes or relates to the rights and/or obligations of the Swing Line Lender shall also require the agreement of the Swing Line Lender thereto;

(d) any amendment, modification, termination or waiver affecting the rights of any Swap Lender under Section 7.6 or Section 10.3 shall also require the agreement of such Swap Lender; and

(e) an amendment or waiver which changes or relates to the rights and/or obligations of the Agent shall also require the agreement of the Agent thereto.

Any such waiver and any consent by the Agent, any Lender, any Swap Lender, the Swing Line Lender, the Majority Lenders, or all of the Lenders under any provision of this Agreement must be in writing and may be given subject to any conditions deemed appropriate by the Person giving that waiver or consent. Any waiver or consent shall be effective only in the instance and for the purpose for which it is given.

If any action to be taken by the Lenders or the Agent hereunder requires the unanimous consent, authorization, or agreement of all Lenders, and a single Lender (“Holdout Lender”) fails to give its consent, authorization, or agreement, then the Agent, upon at least 5 Banking Days prior irrevocable notice to the Holdout Lender, may permanently replace the Holdout Lender with one or more substitute Lenders (each, a “Replacement Lender”), and the Holdout Lender shall have no right to refuse to be replaced hereunder. Such notice to replace the Holdout Lender shall specify an effective date for such replacement, which date shall not be later than 15 Banking Days after the date such notice is given. Prior to the effective date of such replacement, the Holdout Lender and each Replacement Lender shall execute and deliver an Lender Assignment Agreement, subject only to the Holdout Lender being repaid its share of the outstanding Obligations without any premium or penalty of any kind whatsoever. If the Holdout Lender shall refuse or fail to execute and deliver any such Lender Assignment Agreement prior to the effective date of such replacement, the Holdout Lender shall be deemed to have executed and delivered such Lender Assignment Agreement. The replacement of any Holdout Lender shall be made in accordance with the terms of Section 15.6. Until such time as the Replacement

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Lenders shall have acquired all of the Obligations, the Commitments, and the other rights and obligations of the Holdout Lender hereunder and under the other Loan Documents, the Holdout Lender shall remain obligated to make the Holdout Lender’s Pro Rata Share of Advances and to purchase a participation in each Letter of Credit, in an amount equal to its Pro Rata Share (provided that the Holdout Lender’s Loans and all of its rights in respect thereof shall continue to be governed by the credit agreement and terms in effect immediately prior to such Lender becoming a Holdout Lender).

15.11  Further Assurances

The Borrower, the Lenders and the Agent shall promptly cure any defect by it in the execution and delivery of this Agreement, the other Loan Documents or any of the agreements provided for hereunder to which it is a party. The Borrower, at its expense, shall promptly execute and deliver to the Agent, upon request by the Agent (acting reasonably), all such other and further deeds, agreements, opinions, certificates, instruments, affidavits, registration materials and other documents reasonably necessary for the Borrower’s compliance with the covenants and agreements of the Borrower hereunder or more fully to state the obligations of the Borrower as set out herein or to make any registration, recording, file any notice or obtain any consent, all as may be reasonably necessary or appropriate in connection therewith.

15.12  Attornment

The parties hereto each hereby attorn and submit to the jurisdiction of the courts of the Province of Alberta in regard to legal proceedings relating to the Loan Documents. For the purpose of all such legal proceedings, this Agreement shall be deemed to have been performed in the Province of Alberta and the courts of the Province of Alberta shall have jurisdiction to entertain any action arising under this Agreement. Notwithstanding the foregoing, nothing in this Section shall be construed nor operate to limit the right of any party hereto to commence any action relating hereto in any other jurisdiction, nor to limit the right of the courts of any other jurisdiction to take jurisdiction over any action or matter relating hereto.

15.13  Marketing

The Borrower authorizes and consents to the reproduction, disclosure and use by the Agent and the Lenders of non-confidential information about the Borrower and its Subsidiaries (including, without limitation, the Borrower’s and Subsidiaries’ names and identifying logos) and the transactions herein contemplated (all such information being called the “Information”) to enable the Agent and the Lenders to publish promotional “tombstones” and other forms of notices of the Credit Facility in any manner and in any media (including, without limitation, brochures); provided that the Agent and Lenders shall consult with the Borrower prior to any such activity. The Borrower acknowledges and agrees: that the Agent and the Lenders shall be entitled to determine, in their discretion, whether to use the Information, that no compensation will be payable by the Lenders resulting therefrom; and that the Agent and the Lenders shall have no liability whatsoever to the Borrower, the Subsidiaries or any of their employees, officers, directors, affiliates or shareholders in obtaining and using the Information in accordance with this Section.

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15.14  Time of the Essence

Time shall be of the essence of this Agreement.

15.15  Paramountcy; Credit Agreement Governs

In the event of any conflict or inconsistency between the provisions of this Agreement and the provisions of the other Loan Documents, the provisions of this Agreement, to the extent of the conflict or inconsistency, shall govern and prevail.

15.16  Counterparts

This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall be deemed to constitute one and the same instrument, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF the parties hereto have executed this Agreement.

NORTH AMERICAN ENERGY PARTNERS INC.
By:
	Name:
	Title:
By:
	Name:
	Title:

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AGENT: CANADIAN IMPERIAL BANK OF COMMERCE
By:
	Name:
	Title:
By:
	Name:
	Title:
LENDERS: CANADIAN IMPERIAL BANK OF COMMERCE
By:
	Name:
	Title:
By:
	Name:
	Title:
THE BANK OF NOVA SCOTIA
By:
	Name:
	Title:
By:
	Name:
	Title:

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BNP PARIBAS (CANADA)
By:
	Name:
	Title:
By:
	Name:
	Title:
BANK OF MONTREAL
By:
	Name:
	Title:
By:
	Name:
	Title:

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EX-12.1

Exhibit 12.1

CERTIFICATION

PURSUANT TO RULE 13a-14(a) or 15d-14(a)

OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Rodney J. Ruston, certify that:

1. I have reviewed this annual report on Form 20-F of North American Energy Partners Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: June 19, 2007

/s/ Rodney J. Ruston

Rodney J. Ruston

President and Chief Executive Officer

EX-12.2

Exhibit 12.2

CERTIFICATION

PURSUANT TO RULE 13a-14(a) or 15d-14(a)

OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Douglas A. Wilkes, certify that:

1. I have reviewed this annual report on Form 20-F of North American Energy Partners Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: June 19, 2007

/s/ Douglas A. Wilkes

Douglas A. Wilkes

Vice President, Finance and Chief Financial Officer

EX-13.1

Exhibit 13.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ENACTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned, Rodney J. Ruston, President and Chief Executive Officer, and Douglas A. Wilkes , Vice President, Finance and Chief Financial Officer, of North American Energy Partners Inc. (the “Company”), certifies, pursuant to 18 U.S.C. section 1350, as enacted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(i) the Company’s annual report on Form 20-F for the fiscal year ended March 31, 2007 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: June 19, 2007

/s/ Rodney J. Ruston

Rodney J. Ruston

President and Chief Executive Officer

/s/ Douglas A. Wilkes

Douglas A. Wilkes

Vice President, Finance and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to North American Energy Partners Inc. and will be retained by North American Energy Partners Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-15.1

Exhibit 15.1

REPORT AND CONSENT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

The Board of Directors

North American Energy Partners Inc.

The audits of North American Energy Partners Inc. (formerly NACG Holdings Inc.) (the “Company”) referred to in our report dated June 19, 2007, included the related financial statement schedules as of March 31, 2007 and 2006, and for each of the years in the three-year period ended March 31, 2007, included in Form 20-F. These financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statement schedules based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.

We consent to the incorporation by reference in the registration statement (No. 333-139386) on Form S-8 of North American Energy Partners Inc. (formerly NACG Holdings Inc.) of our audit report dated June 19, 2007 with respect to the consolidated balance sheets of North American Energy Partners Inc. as at March 31, 2007 and 2006 and the related consolidated statements of operations and deficit and cash flows for each of the years in the three-year period ended March 31, 2007 and the related financial statement schedules, which report appears in the March 31, 2007 annual report on Form 20-F of the Company.

Our report refers to changes in accounting policies by the Company as discussed in Note 2(r) to the consolidated financial statements, with respect to the accounting for stock-based compensation for employees eligible to retire before the vesting date and determining the variability to be considered in applying the variable interest entities standards in 2007.

/s/    KPMG LLP

Edmonton, Canada

June 19, 2007