SAPPI LIMITED

Program. On June 27, 2006, Sappi Southern Africa issued ZAR 1 billion (US$ 146 million) senior
unsecured fixed rate notes (the ‘‘First Tranche’’) under its Initial Program at a fixed interest rate of 9.34%
payable semi-annually on December 27, and June 27, of each year, commencing on June 27, 2006. The
securities issued under the First Tranche mature on June 27, 2013. On September 25, 2007, Sappi
Southern Africa issued a second tranche of ZAR 1 billion (US$ 146 million) senior unsecured fixed rate
notes (the ‘‘Second Tranche’’) under the Initial Program at a fixed interest rate of 10.64%. The interest on
the securities issued under the Second Tranche is payable semi-annually on April 14 and October 14 of
each year, commencing on April 14, 2008. The securities issued under the Second Tranche mature on
October 14, 2011. On June 30, 2009, Sappi Southern Africa issued ZAR 325 million (US$ 41 million) and
on July 13, 2009, issued ZAR 175 million (US$ 21 million) senior unsecured fixed rate notes (collectively
the ‘‘Third Tranche’’) under the DMTN Program at a fixed interest rate of 12.13%, payable semi-annually
on June 30 and December 30 of each year, commencing on June 30, 2009. The securities issued under
the Third Tranche mature on June 30, 2012. Sappi Southern Africa has agreed to observe certain
undertakings with respect to the securities including limitations on encumbrances (other than permitted
encumbrances) over its assets. For further information, see ‘‘Item 10—Additional Information—Material
Contracts’’, ‘‘Item 19—Exhibits’’, and note 20 to our Group Annual Financial Statements included
elsewhere in this Annual Report.
2002 Guaranteed Notes. In June 2002, Sappi Papier Holding GmbH (then organized as an AG)
issued US$ 500 million 6.75% unsecured guaranteed notes due 2012 and US$ 250 million 7.50%
unsecured guaranteed notes due 2032 (together, the ‘‘2002 Notes’’), guaranteed by Sappi Limited and
Sappi International S.A. Interest on the 2002 Notes is payable semi-annually. The indentures governing
the 2002 Notes provide for an optional redemption of the 2002 Notes, in whole or in part, at any time at a
redemption price of the greater of (i) the principal amount of the notes to be redeemed and (ii) the sum of
the present values of the applicable remaining scheduled payments discounted at a rate as determined
under the indentures, together with, in each case, accrued interest. The indentures governing the 2002
Notes contain events of default customary for investment grade debt, including failure to pay principal or
interest, a default in any other indebtedness, certain enforcement actions against our property and
certain bankruptcy events. The indentures also contain certain customary covenants, which restrict our
ability to create liens, to enter into sale and leaseback transactions and to undertake mergers or
consolidations. US$ 29 million of the US$ 250 million 2002 Notes became available for repurchase
during fiscal 2010 and were repurchased by the Group at a discount. For further information, see
‘‘Item 19—Exhibits’’ and note 20 to our Group Annual Financial Statements included elsewhere in this
Annual Report.
US Municipal Bonds. During fiscal 2010, US Municipal Bonds with an average interest rate of
6.75% and an average time to maturity of 7 years were redeemed at their par value of US$ 106 million.
Covenants
Financial covenants apply to approximately US$ 912 million of our non-South African debt and our
unutilized e 209 million Revolving Credit Facility. This debt is supported by among others a Sappi
Limited guarantee. For this reason the first two of the three covenants mentioned below are measured on
a consolidated Group level. The covenants also differ from measurement period to period, as they are
set in line with the long term forecast of Group results. Our financial covenants require that:
(i) At the end of each quarter the mean average of the ratios of EBITDA to consolidated net interest
expense for that quarter and each of the three preceding quarters be not less than 2.00 to 1 for
all quarters ending to July 2011, 2.25 to 1 for all quarters ending from October 2011 to April
2012 and 2.50 to 1 for the quarters ending July 2012 and September 2012;
(ii) The ratio of net debt to EBITDA be not greater than 5.00 to 1 for all quarters ending from
September 2010 to July 2011, 4.50 to 1 for the quarter ending October 2011, 4.25 to 1 for all
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