Exhibit 10.19


 


WOOD CHIP SUPPLY AGREEMENT


 


THIS AGREEMENT is
made as of this 14th day of May, 1999 by and between CHAMPION INTERNATIONAL CORPORATION, a New York corporation
(“Seller”) and BLUE RIDGE PAPER PRODUCTS
INC., a Delaware corporation (“Buyer”).


 


WITNESSETH:


 


WHEREAS, under that
certain Asset Purchase Agreement dated as of March 29, 1999 between the
Buyer and Seller, (the “Asset Purchase Agreement’), Buyer has purchased the
pulp and paper mill formerly owned by Seller in Canton, North Carolina (the “Canton
Paper Mill”) and desires to purchase certain volumes of Chips (as defined
below) from Seller, and Seller desires to sell the Chips to Buyer;


 


NOW, THEREFORE, in
consideration of the above premises and mutual covenants and agreements
contained herein, the parties agree as follows:


 


1. Definitions.  For
purposes of this Agreement, the following terms shall have the meanings set
forth below:


 


(a)                                  “Average
Log Cost” shall mean the average price paid by Seller for pine logs and
hardwood logs purchased from third parties and delivered to each respective
Chip Mill during each calendar month. 
Buyer acknowledges that Seller shall use logs from its own lands and
from long-term contracts held by Seller to supply the Chip Mills and that all
such logs shall be valued at Average Log Cost.


 


(b)                                 “Chip
Mills” shall mean Seller’s chip producing facilities at Royal Blue, Tennessee
and Newberry, South Carolina (the “Chip Mills”).


 


(c)                                  “Chip
Specifications” shall mean the wood chip specifications set forth on
Schedule A.


 


(d)                                 “Chips”
shall mean Hardwood Chips and Pine Chips purchased by Buyer hereunder.


 


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(e)                                  “Contract
Year” shall mean each twelve month period during the term of this Agreement
with the first Contract Year beginning on the Closing Date and ending on the
first anniversary.


 


(f)                                    “FOB”
shall mean free on board.


 


(g)                                 “Hardwood
Chips” shall mean hardwood chips purchased by Buyer hereunder meeting the
specifications set forth on Schedule A.


 


(h)                                 “Pine
Chips” shall mean pine wood chips purchased by Buyer hereunder meeting the
specifications set forth on Schedule A.


 


(i)                                     “Ton”
shall mean 2,000 pounds.


 


(j)                                     “Transition
Period” shall mean the first Contract Year.


 


2.  Purchase and Sale.  Each Contract Year, Seller agrees to sell
and Buyer agrees to purchase five hundred and fifty thousand (550,000) Tons of Pine Chips and one
hundred ninety thousand (190,000) Tons of Hardwood Chips on the terms and
conditions stated herein.  Buyer may
increase the volume of Hardwood Chips to be produced by Seller at the Royal
Blue Chip Mill and sold to Buyer by providing Seller with six (6) months prior
notice.  Seller shall produce such
additional volume and sell same to Buyer on the terms and conditions set forth
herein unless Seller is unable to do so because of contracts to sell hardwood
chips to third parties or lack of capacity. 
Seller shall notify Buyer whether it can meet Buyer’s request for
additional volume within ten (10) business days after receipt of Buyer’s
notice.


 


3.  Term.  This Agreement shall commence on May 14,
1999 and shall terminate on May 14, 2004 (five (5) years thereafter), provided,
however, that so long as Buyer is not in material default hereunder, Buyer may
elect to extend this Agreement for an additional five (5) years on the terms
and conditions set forth herein by giving Seller written notice of extension on
or before November 14, 2004.  If
Buyer exercises its option for the five-year term commencing May 14, 2004 date]
and Buyer is not in material default hereunder, Buyer may elect to extend this
Agreement for an additional five (5) years on the terms and conditions set
forth herein by giving Seller written notice of extension on or before
November 14, 2008.


 


4.                                       Delivery.


 


4.1                                 Annual
Volumes.  The parties shall make
reasonable efforts to order and deliver the annual volumes of Hardwood Chips
and Pine Chips required hereunder in fifty (50)
equal weekly installments (the parties contemplate scheduling two weeks of
maintenance and down time at the Chip Mills and Canton Paper Mill).  Deliveries required in any week may be
decreased due to weather conditions as provided in Sections 12 and 13.  A tentative weekly delivery schedule through
June 30, 1999 is attached as Schedule B.  At least two weeks prior to July 1, 1999 and each
October 1, January 1, April 1 and July 1 thereafter, the
parties shall establish a tentative delivery schedule for the upcoming
three month period.  Scheduled
maintenance and down time at both the Chip Mills and the Canton Paper Mill
shall be taken into


 


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account in determining the schedule. 
The parties shall confirm each week’s tentative delivery
schedule prior to the start of such week and shall make reasonable efforts
to accommodate changes to such weekly schedule.


 


4.2                                 Delivery
Point.  Chips shall be delivered by
rail or truck FOB the Chip Mill.


 


4.3                                 Scaling.  Chips shall be weight-scaled at the Canton
Paper Mill.  Buyer shall provide Seller
with a copy of all weight-scale tickets.


 


4.4                                 Unloading.  Buyer shall use commercially reasonable
efforts to receive and unload trucks and rail cars promptly.


 


4.5                                 Title.  Except as set forth in Section 4.6,
title and risk of loss shall pass to Buyer when the Chips -re loaded onto
carriers at the Chip Mills.


 


4.6                                 Non-Conforming
Loads.


 


(a)                                  Buyer
shall promptly provide Seller with written notice (“Buyer’s Notice”) of any
load of Chips that does not meet the applicable Chip Specifications and Seller
shall use its best efforts to correct the problem with respect to future
deliveries within twenty-four (24) hours (the “Correction Period”).  Buyer shall take delivery of all loads that
are out of specification shipped prior to the expiration of the Correction
Period, provided, however, that if Seller is unable to cure an identified
problem within the Correction Period, Buyer may elect to reject future
deliveries that are out of compliance due to the identified problem, and
further provided that Buyer may immediately reject any load contaminated with
plastic or other non-wood contaminants affecting the paper making process.  Upon Buyer’s rejection or revocation of
acceptance of any delivery of Chips, title to such Chips shall revert to Seller
and all costs of disposal and removal of such Chips shall be borne by Seller.


 


(b)                                 Notwithstanding
the foregoing, (i) nothing in this Section will relieve Seller of its
obligation under this Agreement to sell and deliver Chips meeting the Chip
Specifications and the failure of Buyer to reject a delivery of Chips not
meeting the Chip Specifications shall not constitute a waiver of Buyer’s rights
hereunder, including, without limitation, the right to reject, or revoke
acceptance of, future deliveries not meeting the Chip Specifications and (ii)
any Buyer’s Notice made in good faith shall not (A) be deemed to be a
repudiation of this Agreement and (B) give any right to Seller to cancel or
otherwise terminate this Agreement.


 


4.7                                 Transportation.  During the Transition Period, Seller shall
continue to enter into and administer truck and rail transportation contracts
for the delivery of Chips from the Chip Mills to the Canton Mill, and at
Buyer’s request, Seller shall in good faith assist Buyer in establishing
Buyer’s own transportation arrangements. 
The costs of transportation, as described in Section 6.1(c),
incurred during the Transition Period shall be charged to Buyer on a
pass-through basis.


 


4.8                                 Specifications.  On the second and fourth anniversaries
hereof, Buyer shall


 


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have the right to propose reasonable changes to the specifications of
the Chips and Seller shall use commercially reasonable efforts, using its
existing equipment, to meet such proposed specifications.


 


5.                                       Price.
The purchase price for Chips shall be the sum of the following costs:


 


(a)                                  all
processing costs associated with the processing of chips at the Chip Mills
(whether or not related to chips produced for Buyer’s account);


 


(b)                                 an
overhead fee of five percent (5%) of the processing costs which shall include running
the scale house, accounting services, human resources, safety training,
purchasing support and Chip quality consultation services;


 


(c)                                  the
wood procurement costs (e.g., salaries, benefits, equipment and expenses);


 


(d)                                 the
cost of all logs converted into Chips; and


 


(e)                                  an
inventory carrying cost of .5% per month (of the cost of the month end log and
chip inventory).


 


The costs and fees under Section 5(b) (overhead fee),
Section 5(c) (procurement costs) and Section 5(e) (inventory costs)
shall be pro-rated based on the weight of Chips delivered to Buyer each month
in proportion to the total weight of chips delivered to Buyer, Seller and third
parties during such month.


 


6.                                       Payment.


 


6.1                                 Invoice.  Each week Seller shall invoice Buyer for:


 


(a)                                  Estimated
Production and Procurement Costs. 
Prior to the start of each Contract Year, Seller shall in good faith
reasonably determine its projected total cost of chip production (including a
five percent (5%) overhead charge) and log procurement at each Chip Mill for
the Contract Year and divide that amount by 52.  The result shall be the weekly invoiced amount for chip
production and log procurement.


 


(b)                                 Log
Cost.  Log costs related to Chips
delivered to the Canton Mill the previous week.  Log costs shall be calculated as follows:


 


(i)  
pine: the number of Tons of Pine Chips delivered shall be divided by
..8700 (pine conversion).  The result
shall be multiplied by the Average Wood Cost for pine for the prior calendar
month.


 


(ii)  
hardwood: the number of Tons of hardwood chips delivered shall be


 


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divided by .8621 (hardwood conversion).  The result shall be multiplied by the Average Wood Cost for
hardwood for the prior calendar month.


 


(c)                                  Transportation
Costs.  During the Transition
Period, the actual transportation costs for Chips delivered to Buyer during the
prior week plus the $. 10/Ton administration fee.


 


(d)                                 The inventory carrying
cost.


 


6.2                                 Payment.  The amount of each invoice shall be paid by
Buyer in immediately available funds within seven (7) days from the date of
invoice.


 


6.3                                 Reconciliation.


 


(a)                                  Processing
Costs.  At the end of each month,
Seller shall determine its actual processing costs plus the pro-rated five
percent (5%) overhead, pro-rated procurement and pro-rated inventory costs for
such month.  This amount shall be
reconciled to the invoiced amounts for such month.  Any difference shall be credited to Buyer or Seller, as the case
may be, on the next week’s invoice.


 


(b)                                 Log
Costs.  The parties recognize that
the conversion factors used to establish log costs in section 6.1 are
estimates only.  Every six months, the
parties shall compare and reconcile the total weight of logs delivered to the
Chip Mills to the weight of Chips delivered to Buyer and chips delivered for
Seller’s account.  Beginning and ending
log and chip inventories at the Chip Mill shall also be taken into
account.  Log Costs, including logs
delivered from Seller’s lands, shall be adjusted to reflect bark and other
by-product sales and then prorated based on the chips produced for each party’s
account.  If the reconciliation
establishes that an adjustment should be made, a credit or debit shall be made
in favor of Seller or Buyer, as the case may be.


 


6.4                                 Audit.  Buyer and its attorneys and accountants
shall, upon reasonable written notice and during business hours, have the right
to audit the books and records of the Chip Mills to review the costs charged
hereunder.  Buyer’s right to audit costs
charged during a Contract Year shall terminate on the one-year anniversary of
such Contract Year.  Unless Buyer
provides Seller with a notice of claim prior to the end of such one-year
period, any claim regarding the price charged during such period shall be
extinguished.


 


6.5                                 Historical
Informational and Hypothetical Example. 
The information provided to Purchaser by Seller set forth in
Schedule C hereto illustrates how Seller developed its transfer price in
1998 for pine and hardwood primary chips to the Canton Mill and contains actual
historical costs and estimated allocations. 
Such historical costs are accurate in all material respects and the
estimated allocations are reasonable in all material respects.  The example provided under the heading
“Royal Blue Hardwood Chips, 1998 Re-Stated Using Proposed Contract” however,
uses a hypothetical volume to the Canton Mill of 190,000 Tons and a


 


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hypothetical sale of chips to third parties of 36,442 Tons and is
presented for illustrative purposes only.


 


7.                                       Use
of Wood By Seller.


 


7.1                                 Payment.  Provided Seller can meet the volume
commitments set forth herein, Seller may produce chips for its own account.


 


7.2                                 Rebate.  For each Ton of chips sold by Seller to
third parties or consumed by Seller for its own account, Buyer shall be
entitled to a rebate of:


 


(a)                                  $1.50/Ton
for each Ton of chips exceeding 190,000 Tons of Chips produced by Seller at the
Royal Blue Chip Mill.


 


(b)                                 $2.50/Ton
for each Ton of chips exceeding 240,000 Tons produced at the Royal Blue Chip
Mill.


 


(c)                                  $.50/Ton
for each Ton of chips exceeding 550,000 Tons produced at the Newberry Chip
Mill.


 


(d)                                 $.75/Ton
for each Ton of chips exceeding 650,000 Tons produced at the Newberry Chip
Mill.


 


(e)                                  Example:  Seller produces 250,000 Tons of hardwood
chips at Royal Blue Chip Mill in the second Contract Year.  Buyer purchases 190,000 Tons and 60,000 Tons
are shipped to Courtland, Alabama for use at Seller’s paper mill.  Buyer is entitled to rebates totaling
$100,000.


 


	
  50,000 Tons (240,000-190,000) x $1.50 =

  	
   

  	
  $

  	
  75,000

  	
   

  
	
  10,000 Tons (250,000-240,000) x $2.50 =

  	
   

  	
  $

  	
  25,000

  	
   

  
	
   

  	
   

  	
  $

  	
  100,000

  	
   

  



 


(f)                                    The
Rebate shall be credited against the invoice to be issued the week after the
chips produced for Seller’s account are delivered to and weighed at their destination.


 


8.                                       Bark
and other By-Products.  Seller shall
use commercially reasonable efforts to sell, or if sale is impractical, to
otherwise dispose of bark and other byproducts of the chipping process and
shall credit or debit Buyer’s account for the prorated revenues or expenses
connected therewith.  The pro-ration
shall be in the ratio of the weight of Chips delivered to Buyer to the weight
of Chips delivered to Buyer, Seller and third parties during the relevant period.  No more than one week’s supply of bark or
by-products shall be stored at the Chip Mills.


 


9.                                       Quality.  Chip quality shall conform to the Chip
Specifications.  Chip quality will be
measured by Seller at the Chip Mills and, subject to Buyer’s rights under this
Section, such measurements shall be presumed correct.  Buyer may rebut such presumption based upon statistically valid
sampling performed on the same classifier system.  During the Transition


 


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Period, Seller shall measure Chip quality using the Williams Classifier
chip system.  The parties acknowledge
that Seller is in the process of implementing the “Chip Class” chip classifier
system at its Chip Mills.  Seller agrees
to fully convert to such system to measure Chip quality hereunder and to
purchase an automatic Chip classifying system as soon as practicable, but in no
event later than the expiration of the Transition Period.  During the Transition Period, the Seller
shall make reasonable efforts to provide Buyer with the measurement results on
a daily basis and after the expiration of the Transition Period, Seller shall
provide measurement results on a daily basis, in each case to be delivered by
means of a legible facsimile transmission. 
The Chips shall be tested using the following screen sizes: 1 3/4”, 1”,1/2”,
3/8”, 1/8” and PAN.  Buyer may, through
its employees and other agents (“Buyer’s Representatives”), make such
investigations of Seller’s Chip testing equipment, records and procedures as
Buyer may reasonably request from time to time.  Any investigation or examination by Buyer pursuant to this
Section 9 shall be conducted upon reasonable prior notice, at reasonable
times during regular business hours, and if Buyer’s Representative reasonably
concludes that Seller’s measurement process is not being performed properly,
Buyer may request Seller to remedy such problem (the “Measurement
Objection”).  If after such Measurement
Objection, the parties cannot agree as to whether the measurements made at the
Chip Mill are being performed correctly, the parties shall mutually appoint an
experienced regionally recognized independent chip measurement consultant to
measure the Chips and recommend a process for measuring Chips, using Seller’s
then existing equipment, in the future. 
Such consultant’s measurement findings will be binding and
conclusive.  The parties shall use good
faith efforts to implement the consultant’s recommendations.  Each party shall bear one half of the
consultant’s fees.


 


10.                                 Warranty.  Seller warrants that it has good title to
the Chips and that the Chips are merchantable and free and clear of all liens
and encumbrances.


 


11.                                 Disclaimer.  SELLER EXPRESSLY DISCLAIMS ANY WARRANTY OF
FITNESS FOR PARTICULAR PURPOSE.


 


12.                                 Force
Majeure, Shutdowns, Allocation.


 


12.1                           Force
Majeure.  Neither Buyer nor Seller
shall be liable for inability to perform where such inability is the result of
fire, flood, natural calamity, weather, strike, governmental act or order, or
any other similar cause reasonably beyond the control of the party failing to
perform (a “Force Majeure Event”).  If a
Force Majeure Event results in a shutdown of the Canton Paper Mill or a Chip
Mill or a suspension of timber harvest operations for more than ten (10)
consecutive days, the annual volume requirements of the parties shall be
reduced on a pro rata basis.


 


12.2                           Temporary
Shutdown.  If Buyer decides to cease
operations at the Canton Mill or any individual paper machine for a period of
more than two weeks but less than one month, Buyer, upon reasonable notice, may
reduce or suspend deliveries hereunder without liability except as provided in
the following sentence.  Upon restarting
the operation of the Canton Mill or any such individual machine, Buyer shall
have one month for each week of shutdown to make up the volume lost due to such
reduction or suspension, or at Buyer’s option, to pay Seller’s costs associated
with such reduction or suspension. 
Buyer shall provide Seller


 


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with prompt notice of any planned shutdown, to be given as soon as the
decision to shut down is made by the responsible officer of Buyer.


 


12.3                           Permanent
Shutdown.  Buyer, upon at least
three months prior notice to Seller, may (i) cancel this Agreement without
further prospective obligation to purchase Chips hereunder if it permanently
ceases to operate the Canton Mill; or (ii) reduce the volume of Chips it is
obligated to purchase hereunder if it permanently ceases to operate any
individual paper machine (and does not replace such machine).  The volume reduction in clause (ii) above
shall be proportional to the decrease in Buyer’s Chip utilization capacity.


 


12.4                           Allocation.  Notwithstanding the foregoing.


 


(a)                                  in
the event a Force Majeure Event affects Seller’s ability to deliver Chips
hereunder, Seller  shall continue to
deliver to Buyer a pro rata amount of Chips based on the aggregate tonnage of
Pine Chips or Hardwood Chips, as the case may be, produced by Seller during
such Force Majeure Event and provided further that Seller shall afford Buyer
with treatment no less favorable than that provided to Seller’s other
customers, including its affiliates, during such time as the Force Majeure
Event continues.


 


(b)                                 in
the event a Force Majeure Event, or a temporary or permanent shutdown of the
Canton Mill or any paper machine affects Buyer’s ability to take delivery of
Chips hereunder, Buyer shall continue to take delivery from Seller of a pro
rata amount of Chips based on the aggregate tonnage of Pine Chips or Hardwood
Chips, as the case may be, accepted by Buyer during such Force Majeure Event,
or such temporary or permanent shutdown and provided further that Buyer shall
afford Seller with treatment no less favorable than that provided to Buyer’s
other suppliers, including its affiliates, during such time as the Force
Majeure Event, or a temporary or permanent shutdown continues.


 


(c)                                  Notwithstanding
anything in this Section 10 to the contrary, if, as a result of a Force
Majeure Event or temporary shutdown, Buyer, for a period expected to exceed one
month, cannot accept the quantity of Hardwood or Pine Chips to be delivered
hereunder, Seller shall have the right to contract with third parties for the
sale of any such Hardwood or Pine Chips that Buyer is unable to accept.  After Buyer gives notice to Seller that it
is again able to accept delivery of Hardwood or Pine Chips, Seller will notify
Buyer of any commitments for the sale of such Chips that Seller has undertaken
to sell to third parties by contract, understanding or other agreement and
Seller shall not  be required to again
deliver such volumes of Hardwood or Pine Chips to Buyer until it has delivered
all the Chips contracted by Seller to such third parties, provided that no such
contract shall be entered into for a term longer than three months without the
consent of Buyer, which consent shall not be unreasonably withheld, and
Seller’s obligation to deliver Chips hereunder (and Buyer’s obligation to
accept such Chips) shall be reduced by the quantity of all such Chips
contracted to such third party. 
Seller’s exercise of its right to contract with third parties shall not
constitute a waiver of its right to recover damages under Section 16.


 


13.                                 Best
Management Practices.  Buyer
recognizes that Seller manages its timberlands and stumpage rights in
accordance with the Best Management Practices applicable in the state


 


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where the timber is situated and with the Sustainable Forestry
Initiative Forest Principles and Guidelines adopted by the American Forest
& Paper Association.  In the event
Seller, reasonably believes that timber harvest operations would not comply
with Best Management Practices, Seller may temporarily cease or reduce such
harvesting.  If such reduction or
cessation impacts Seller’s ability to deliver Chips hereunder, Seller may
curtail its deliveries for up to four weeks without incurring any liability to
Buyer provided however that the curtailment shall be in accordance with the
allocation provisions set forth in Section 12.4.  In the event of curtailment, Buyer may direct Seller to make up
any volume lost as a result of such curtailment within two months of the
shortfall, at the price in effect at the time the shortfall was incurred.


 


14.                                 Default.  In the event either party defaults in the
prompt or full performance of any provision of this Agreement, the other party
shall give written notice of default and the defaulting party shall have thirty
(30) days to cure the default, provided, however, that this cure period  shall not apply to a default by Buyer with
respect to its payment obligations under Section  6.  If the default is not cured to the
non-defaulting party’s satisfaction, the non-defaulting party shall have the
right to terminate this Agreement effective immediately.


 


15.                                 Option
to Assume Wood Procurement.  During
the term of this Agreement and any extension thereof, Buyer may, upon thirty
(30) days notice to Seller, elect to assume responsibility for wood
procurement.  Upon such election, Buyer
and Seller shall convert this Agreement into a Chip Processing Agreement (the
“Chip Processing Agreement”) whereby Seller shall be responsible for converting
logs procured by Buyer into Chips and Buyer shall hire all of Seller’s
procurement foresters.  Such Chip
Processing Agreement shall provide that title to the wood shall remain in
Buyer’s name.  Customary terms found in
chip processing agreements shall be substituted for inconsistent terms
contained herein.  The parties intend
that the terms set forth herein shall be retained to the extent
practicable.  The fee for processing
shall be Seller’s processing costs for all chips manufactured at each Chip Mill
plus a pro-rated five percent (5%)
overhead and Buyer shall be afforded similar rebates as contained herein.  Seller shall have the right to purchase wood
procured by Buyer for Seller’s account or to procure wood through its own
efforts.


 


16.                                 Limitation
of Damages.


 


16.1                           Buyer
assumes no liability to Seller except to purchase and pay for Chips and Seller
assumes no liability to Buyer except to sell and deliver Chips as set forth
herein.  In the event of a default in
payment for delivered Chips, Seller’s remedy shall be limited to the unpaid
contract price, together with such incidental damages, if any, as allowed by
Section 2-710 of the Uniform Commercial Code.  In the event of any other default, the non-defaulting party’s
damages shall be limited to the difference between the market or cover price
and unpaid contract price, together with such incidental damages, if any, as
allowed by Sections 2-710 and 2-715 (1) of the Uniform Commercial Code.


 


16.2                           Notwithstanding
anything in this Agreement to the contrary, Buyer’s sole and exclusive remedy
with respect to any issue relating to the price Seller pays for wood purchased
from third parties shall be to elect to assume responsibility for wood
procurement pursuant to Section 15.


 


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16.3                           Under
no circumstances shall either party be liable to the other for any other form
of damages, including consequential damages, punitive damages, or the
reimbursement of expenses incurred in connection with its performance under
this Agreement.


 


17.                                 Right
of First Offer.  During the term of
this Agreement, and any extension hereof, Buyer, provided it is not in material
default hereunder, shall have a right of first offer with respect to a sale of
the Royal Blue Chip Mill and the Newberry Chip Mill.  In the event Seller desires to sell either Chip Mill, Seller
shall provide Buyer with written notice of its intention to sell (the “First
Offer Notice”) describing the material terms of the sale, including the
purchase price.  The First Offer Notice
shall constitute an offer by Seller to sell its interest in such Chip Mill to Buyer
on the terms and conditions set forth therein. 
Buyer, if it desires to accept such offer, shall, within thirty (30)
days after receipt of the First Offer Notice, give Seller written notice to
such effect.  If Buyer does not provide
notice of acceptance within the 30-day period, Seller may transfer its interest
in such Chip Mill covered by the First Offer Notice at any time within one year
from the First Offer Notice at a purchase price equal to or greater than the
price stated in the First Offer Notice and on material terms substantially similar
to those in the First Offer Notice.


 


18.                                 Arbitration.


 


(a)                                  Except
for a claim by Seller for payment for Chips delivered or a claim by Buyer
regarding the price Seller pays to third parties for the purchase of wood, any
controversy or claim arising out of or relating to this Agreement, or the
breach thereof, shall be settled by binding arbitration conducted under the
auspices of the American Arbitration Association in Greenville, South Carolina,
before one arbitrator who is a registered forester with experience in the
manufacture, purchase and sale of wood chips in the states of Tennessee, North
Carolina and South Carolina and judgment in a court having jurisdiction may be
entered on the arbitration award.


 


(b)                                 The
parties shall have two (2) weeks to conduct reasonable discovery.  One week before the hearing the parties
shall exchange any documentation each intends to submit to the arbitrator as
evidence of its position.  The arbitration
hearing shall be limited to six (6) hours (three hours for each side).


 


19.                                 Miscellaneous.


 


19.1                           Notices.  All notices or other communications which
are required or permitted hereunder may be by telephone or e-mail followed by a
writing, which shall be sufficient if delivered personally, by facsimile with a
copy by first class mail or by registered or certified mail, postage prepaid,
as follows:


 


If to Seller: Champion International Corporation


County Road 150


P.O. Box 189


Courtland, Alabama 35618-0189


 


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Telefax No. (205) 637-7214


Attention: General Manager


 


If to Buyer:                                    Blue
Ridge Paper Products Inc.


200 Park Avenue, 58th Floor


New York, New York 10166


Telefax No. (212) 867-7980


Attention: Eugene Keilin


 


Notices shall be deemed given upon receipt.  Either party may from time to time change the address or
facsimile number to which notices shall be given by giving the other party
written notice thereof.


 


19.2                           No
Third Party Benefits.  This
Agreement is made for the sole benefit of Seller and Buyer and no other person
shall have any right or remedy or other legal interest of any kind under or by
reason of this Agreement.


 


19.3                           Waiver.  The failure of either party to insist in any
one or more instances upon strict performance of any of the provisions of this
Agreement, or to take advantage of any of its rights, shall not operate as a
continuing waiver of such provisions or rights and shall not prevent such party
from insisting upon such provisions and taking advantage of such rights in the
future.


 


19.4                           Assignment.  This Agreement shall not be assigned without
the prior written consent of the other party; provided, however,


 


(a)                                  that
should the ownership of one or more of Seller’s Chip Mills change during the
term hereof, Seller may assign its rights and obligations regarding the volume
of Chips associated with such Chip Mill without the prior written consent of
Buyer.


 


(b)                                 that
Buyer shall have the right to assign, in whole or in part, its rights and
obligations hereunder to (i) any affiliate of Buyer that purchases Chips to be
used at the Canton Mill, including, without limitation, any limited partnership
of which Buyer or any affiliate of Buyer is a general partner, or any joint
venture or general partnership of which Buyer, or any affiliate of Buyer, or
any such limited partnerships is a constituent partner, (ii) to any lender of
the Buyer and (iii) following the consummation of the Closing, any successor of
Buyer in the event of a merger, consolidation or sale of stock or to any
purchaser of all or substantially all of the assets of Buyer, and to any
transferee of all or a substantial part of any of Buyer’s assets or business
and any such transferee shall be entitled to enforce Buyer’s rights on an
individual basis.


 


11

















 


19.5                           Governing
Law, Entire Agreement.  This
Agreement (a) shall be construed under the laws of the State of North Carolina;
(b) may not be modified except by a writing signed by both parties; and (c)
embodies the entire Agreement of the parties with respect to the purchase and
sale of wood fiber and cancels and supersedes any prior agreements,
representations, or purchase orders between the parties with respect to the
matters covered in this Agreement.


 


 


	
  SELLER:

  
	
   

  
	
  CHAMPION INTERNATIONAL CORPORATION

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  
	
   

  
	
  BLUE RIDGE PAPER PRODUCTS INC.:

  
	
   

  
	
  By:

  	
   

  	
   

  



 


12

















 


SCHEDULE 1-A


CHIP SPECIFICATIONS


CANTON, NORTH CAROLINA MILL


 


	
   

  	
   

  	
  TARGET

  	
   

  	
  MAXIMUM

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SIZE (PINE & HARDWOOD)

  	
   

  	
  3/4”

  	
   

  	
   

  	
   

  
	
  BARK

  	
  SUMMER

  	
   

  	
  LESS THAN 1%

  	
   

  	
  2%

  	
   

  
	
   

  	
  WINTER

  	
   

  	
  LESS THAN 2%

  	
   

  	
  2%

  	
   

  
	
  OVERSIZE (RETAINED ON 1 3/4”
  SCREEN)

  	
   

  	
  1%

  	
   

  	
  3%

  	
   

  
	
  PINS (RETAINED ON 1/8” SCREEN)

  	
   

  	
  7%

  	
   

  	
  9%

  	
   

  
	
  FINES (PASS THROUGH 1/8” SCREEN)

  	
   

  	
  0.5%

  	
   

  	
  15

  	
   

  
	
  RETAINED ON 1” SCREEN

  	
   

  	
  15%

  	
   

  	
  21%

  	
   

  
	
  RETAINED ON 1/2”
  SCREEN

  	
   

  	
  65%

  	
   

  	
  56%(minimum)

  	
   

  
	
  RETAINED ON 3/8” SCREEN

  	
   

  	
  10%

  	
   

  	
  12%

  	
   

  



 


OTHER:


 


SELLER AGREES TO USE GOOD FAITH EFFORTS TO CONTINUOUSLY IMPROVE ITS
PERFORMANCE TOWARD MEETING THE TARGETS SET FORTH ABOVE, THE PARTIES RECOGNIZE
THAT THESE ARE TARGETS ONLY AND THAT SELLER HAS MET THE SPECIFICATOINS IF IT IS
UNDER THE MAXIMUMS AND OVER THE MINIMUM SET FORTH ABOVE.


 


PINE AND HARDWOOD CHIPS WILL BE COMPLETELY SEPARATED.


 


NO CONTAMINATION IS ALLOWED FROM PLASTICS, SOIL, GRAVEL, ASH, METAL,
STYROFOAM, OIL, CHLORINATED PHENOLS, PRESERVATIVES AND OTHER CHEMICALS, CHAR,
RUBBER AND OTHER FOREIGN MATERIALS.


 


WOOD IS EXPECTED TO BE “GREEN” WITH A MOISTURE CONTENT AVERAGING
BETWEEN 40 AND 50%.


 


THE PARTIES DESIGNATED REPRESENTATIVES SHALL CONFER TO DETERMINE
WHETHER TIME PERIODS SHOULD BE CHARACTERIZED AS ‘WINTER” OR ‘SUMMER” FOR PURPOSES
OF THE BANK SPECIFICATION.  THE DECISION
SHALL BE BASED ON TEMPERATURES AND HISTORICAL PRACTICES.


 


13

















 


Schedule B


 


Tentative Weekly Delivery
Schedule


for


Royal Blue and Newberry Chip
Mills


 


 




	
   

  	
   

  	
  Royal Blue

  tons/weeks

  	
   

  	
  Newberry

  tons/week

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5/22/99

  	
   

  	
   

  	
  3,800

  	
   

  	
  11,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5/22/99

  	
   

  	
   

  	
  3,800

  	
   

  	
  11,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6/4/99

  	
   

  	
   

  	
  3,800

  	
   

  	
  11,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6/11/99

  	
   

  	
   

  	
  3,800

  	
   

  	
  11,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6/25/99

  	
   

  	
   

  	
  3,800

  	
   

  	
  11,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7/2/99

  	
   

  	
   

  	
  3,800

  	
   

  	
  11,000

  	
   

  






 


Based on 50 weeks per year –
allowing two weeks for scheduled downtime


 


14