Exhibit 10.8
 
 CHIP AND PULPLOG SUPPLY AGREEMENT
 BETWEEN
 NORSKECANADA
 AND
 TEAL-JONES GROUP
 July 1, 2004




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TABLE OF CONTENTS
 1. INTERPRETATION
    
    
    11.1. Definitions
    
    
    11.2. Currency
    
    
    41.3. References
    
    
    41.4. Construction
    
    
    41.5. Governing Law
    
    
    42. FIBRE COMMITMENT
    
    
    42.1. Committed Volume
    
    
    42.2. Log for Chip Exchange
    
    
    52.3. Exchange Ratio
    
    
    52.4. Term
    
    
    52.5. Relationship with Prior Agreements
    
    
    53. PRODUCTION CONSIDERATIONS AND PRIORITIES
    
    
    63.1. Anticipated Volume
    
    
    63.2. Changes in Anticipated Volume
    
    
    63.3. Chip Production Priorities
    
    
    73.4. Adjustments and Shortfalls
    
    
    73.5. First Rights Transactions
    
    
    83.6. Custom Cutting at Other Locations
    
    
    84. PRICE AND PAYMENT FOR CHIPS
    
    
    84.1. Chip Price
    
    
    84.2. Payment
    
    
    84.3. Production Costs
    
    
    85. CHIP MEASUREMENT, TESTING AND SPECIFICATIONS
    
    
    95.1. Optimization of Chip Quality
    
    
    95.2. Measurement of Volume
    
    
    95.3. Application
    
    
    95.4. Classification Tests
    
    
    95.5. Variation of Chip Specifications
    
    
    95.6. Inspection of Testing
    
    
    95.7. Rejection of Individual Loads
    
    
    105.8. Costs of Disposal
    
    
    105.9. No Waiver
    
    
    105.10. Prompt Inspection
    
    
    105.11. Time for Dispute
    
    
    106. DELIVERY OF CHIPS
    
    
    106.1. Loading Facilities
    
    
    106.2. Current Manufacture
    
    
    106.3. Rate of Delivery
    
    
    116.4. Transportation
    
    
    116.5. Seller Responsibilities
    
    
    116.6. Species Segregation
    
    
    127. PRICE AND PAYMENT FOR PULPLOGS
    
    
    127.1. Pulplog Price
    
    
    127.2. Dispute of Purchase Price
    
    
    127.3. Payment
    
    
    137.4. Vancouver Log Market
    
    
    137.5. Custom Chipping of Buyers Logs
    
    
    138. PULPLOG SALE PROCEDURES
    
    
    138.1. Notice of Availability
    
    
    13
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8.2. Inspection and Acceptance
    
    
    138.3. Agreement on Price
    
    
    148.4. Deemed Refusal
    
    
    148.5. Use of Telephone
    
    
    148.6. Delivery of Pulplogs
    
    
    148.7. Availability
    
    
    148.8. Costs up to Delivery
    
    
    148.9. Boomsticks
    
    
    148.10. Boomgear Deposit
    
    
    158.11. Pulplog Specifications
    
    
    158.12. Scaling
    
    
    158.13. Checkscaling
    
    
    158.14. Condition of Parcels
    
    
    168.15. Log Sale Practices
    
    
    169. TITLE AND RISK
    
    
    169.1. Title
    
    
    1610. COVENANTS
    
    
    1610.1. Covenants of Buyer
    
    
    1610.2. Covenants of Seller
    
    
    1710.3. Certificate of Officer
    
    
    1711. DEFAULT
    
    
    1811.1. Event of Default
    
    
    1811.2. Remedies
    
    
    1811.3. Consequential Damages
    
    
    1812. DISPOSITIONS
    
    
    1812.1. Dispositions by Seller
    
    
    1812.2. Material Part
    
    
    1912.3. Lender Status
    
    
    2012.4. Breach
    
    
    2012.5. Release of Seller
    
    
    2012.6. Assignment by Buyer
    
    
    2013. FORCE MAJEURE AND CURTAILMENT
    
    
    2113.1. Affecting Buyer
    
    
    2113.2. Market Conditions
    
    
    2113.3. Proportionate Curtailment
    
    
    2113.4. No Cumulative Obligation
    
    
    2213.5. Alternative Disposition
    
    
    2213.6. Credit to Volume Commitments (Buyer Curtailment)
    
    
    2213.7. Affecting Seller
    
    
    2313.8. Credit to Volume Commitments (Seller Curtailment)
    
    
    2313.9. Advance Warning
    
    
    2414. ARBITRATION
    
    
    2414.1. Arbitration
    
    
    2414.2. Timely Decisions
    
    
    2414.3. Period of Exclusivity
    
    
    2415. MISCELLANEOUS
    
    
    2515.1. Custom Cutting
    
    
    2515.2. Custom Chipping
    
    
    2515.3. Hog Fuel
    
    
    2515.4. Sawdust
    
    
    2515.5. Periodic Review
    
    
    25
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16. GENERAL
    
    
    2616.1. Maintenance of Records
    
    
    2616.2. No Other Representations
    
    
    2616.3. Waiver and Consent
    
    
    2616.4. Amendments
    
    
    2716.5. Notices
    
    
    2716.6. Time
    
    
    2716.7. Further Assurances
    
    
    2716.8. Confidentiality
    
    
    2816.9. Enurement
    
    
    28
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CHIP AND PULPLOG SUPPLY AGREEMENT
 st
  NORSKE SKOG CANADA LIMITED NORSKECANADA NORSKE SKOG
CANADA LIMITED NORSKE SKOG CANADA PULP OPERATIONS
LIMITED
   TEAL-JONES GROUP TEAL CEDAR PRODUCTS LTD. COLUMBIA RIVER SHAKE & SHINGLE LTD.
   A.
    
    In 1993, predecessors to Seller and/or its Affiliates acquired the Boston Bar sawmill
facility and associated timber tenures from Fletcher Challenge Canada Limited (a predecessor
to Buyer and entered into various fibre supply agreements, including an agreement (the Boston
Bar Agreement) entitled Chip and Pulplog Supply Agreement (Boston Bar Operation) and an
agreement (the Pitt Lake Agreement) entitled the Stag/Pitt Lake Fibre Supply Agreement for
the sale of wood chips and pulplogs to Fletcher Challenge Canada Limited in order for it to
maintain the ability to utilize the wood chips and pulplogs produced from that sawmill and
associated timber tenures;
 B.
    
    Buyer and Seller are the current parties to the Boston Bar Agreement and Pitt Lake Agreement
and have agreed to enter into this Agreement to replace the wood chip and pulplog supply
arrangements under the Boston Bar Agreement and Pitt Lake Agreement with a more workable
arrangement having regard to the closure of the Boston Bar sawmill and the start up of
Sellers new small log mill;
  1.
    
    INTERPRETATION1.1.
    
    Definitions
  (a)
    
    Affiliatemeans with respect to any party, an affiliate of the party (or a
partner of the party) within the meaning of the Business Corporations Act(British
Columbia), a joint venture in which that party holds at least a one-half interest
and a corporation where the shares thereof carrying at least one-half of the votes
for the election of directors are held for the benefit of that party;
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(b)
    
    Business Daymeans a day that is not a Saturday, Sunday or statutory holiday
in British Columbia;
 (c)
    
    Chip Specificationsmeans the specifications for Chips set out in Schedule A
as varied from time to time pursuant to Section 5.5;
 (d)
    
    Chipsmeans coniferous wood chips produced as a by-product of wood
manufacturing but excluding pulpwood chips produced from whole-log chipping;
 (e)
    
    Coast Chip Pricemeans, for a Fiscal Quarter, a price equal to the most
common open-market price actually paid per Volumetric Unit of Chips during that Fiscal
Quarter, on an F.O.B. scow ( at sellers mill located in the southern coastal region of
British Columbia) basis or equivalent, by pulp mills located in the southern coastal
region of British Columbia for their own consumption under arms length long term
contracts (being contracts that have a term of not less than one year or that have an
indefinite term and have been in force, in substantially the same form and on
substantially the same terms, for not less than one year) for volumes, specifications,
quality and species of Chips similar to those being sold under this Agreement during
the terms of such long term contracts calculated on a net-to-seller basis, including
the deduction of any portion of such price attributable to the transportation of such
Chips to the purchasers mill, which was, in the 3rd Fiscal Quarter of 2004:
 (i)
    
    (***) Volumetric Unit of hemlock Chips;(ii)
    
    (***) Volumetric Unit of Douglas fir Chips; and(iii)
    
    (***) Volumetric Unit of cedar Chips;
 (f)
    
    Contract Yearmeans a calendar year;
 (g)
    
    First Rights Agreement means the agreement entitled First Rights Agreement
dated April 5, 1993 among Fletcher Challenge Canada Limited (as assigned and assumed by
Buyer) and Columbia River Shake & Shingle Ltd. and J.S. Jones Holdings Ltd., J.S. Jones
Timber Ltd., Teal Cedar Products (1977) Ltd. and Teal Cedar Products Ltd (the rights
and obligations of Columbia River Shake & Shingle Ltd. and Teal Cedar Products Ltd.
thereunder having been assumed by Seller);(h)
    
    Fiscal Quartermeans any of the four calendar quarters;(i)
    
    fully loadedmeans, with respect to a scow, that the scow has been loaded:
 (i)
    
    in accordance with loading instructions supplied from time to
time by Buyer;
 (ii)
    
    by gravity to its capacity with Chips in a manner that will
minimize voids and air spaces and as well achieve the maximum degree of density
of Chips for such scow as is usually achieved by proper loading of Chips; and
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(iii)
    
    following the limitations that a prudent person exercising
reasonable care would observe; and
  (j)
    
    m3means a cubic metre of logs, British Columbia metric scale as
determined under the Forest Act(British Columbia) and, with respect to Chips, also
means the solid wood equivalent;
 (k)
    
    Major Dispute means a dispute with respect to a breach, or anticipated
breach, of this Agreement that would result in the suffering of harm by a party for
which that party could not adequately be compensated by a monetary award;
 (l)
    
    Millsmeans the Elk Falls pulp and paper mill, Crofton pulp and paper mill,
Powell River paper mill and Port Alberni paper mill and any other pulp and/or paper
mills designated from time to time by Buyer by notice to Seller that are owned by any
or all of Buyer an Affiliate of Buyer and a purchaser of any material interest in any
of the foregoing mills that is an assignee of an interest in this Agreement and Mill
means any one of them;
 (m)
    
    Parcelmeans a raft, boom, bag, barge, bundle, group of bundles or other
grouping of logs commonly offered for sale as a unit;
 (n)
    
    Point of Salemeans a suitable water storage area for Parcels of Pulplogs
located at one of the following locations:
 (i)
    
    in Howe Sound in the vicinity of Gambier Island; or
 (ii)
    
    at a point on the Fraser River between the mouth of the north
arm and the location of the Stag Mill at the date of this Agreement; or
 (iii)
    
    such other location that the parties may agree upon;
 (o)
    
    Pulplogmeans a log which is described as a pulplog in Part II of Schedule A;
 (p)
    
    Pulplog Specificationsmeans the specifications for pulplogs set out in
Schedule B;
 (q)
    
    Sellers Facilitiesmeans:
 (i)
    
    the Small Log Mill and the Stag Mill; and
 (ii)
    
    such other facilities, operations and interests as the parties
may agree;
 (r)
    
    Small Log Mill means the small log sawmill currently owned by Seller or an
Affiliate of Seller located at 17897 Triggs Road, Surrey, British Columbia and any
additions to, or substitutions or replacements for, that sawmill;
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(s)
    
    Stag Mill means the sawmill facility currently owned by Seller located at
17835 Triggs Road, Surrey, British Columbia and any additions to, or substitutions or
replacements to that sawmill facility;
 (t)
    
    Timber Tenuresmeans Forest Licence A18699, Forest Licence A19201 and Timber
Licence T0822 and any subdivisions of such licences, successor licences resulting from
consolidations of all or any of such licences and any replacements for, supplements to,
or substitutes for, such forest tenures; and
 (u)
    
    Vancouver Log Market Pricemeans, with respect to a Parcel of logs, the fair
market value of such Parcel of logs determined with reference to:
 (i)
    
    the volume, type and quality of logs included in the Parcel;
 (ii)
    
    the competitive prices for equivalent volumes of logs of the
volume, type and quality that are to be purchased prevailing in the Vancouver
log market at such time without regard to non-arms length sales, distress
sales or sales for export from British Columbia; and
 (v)
    
    Volumetric Unitmeans 200 cubic feet of Chips as compacted in a scow when
fully loaded or 2.039 m3 of solid wood equivalent of Chips.
 1.2.
    
    CurrencyAll dollar amounts referred to in this Agreement are Canadian dollars.1.3.
    
    ReferencesReferences to the singular or masculine used in this Agreement will be deemed to include
references to the plural, feminine or body corporate as the context may require.1.4.
    
    ConstructionThe division of this Agreement into articles and the insertion of headings are for
convenience of reference only and are not to affect the construction or interpretation of
this Agreement.1.5.
    
    Governing LawThis Agreement shall be governed by and construed in accordance with the laws of the
Province of British Columbia and the federal laws of Canada applicable therein.2.
    
    FIBRE COMMITMENT2.1.
    
    Committed VolumeSeller will sell to Buyer and Buyer will purchase from Seller in each Contract Year during
the term of this Agreement in accordance with and subject to the terms and conditions of
this Agreement:
 (a)
    
    (***) Volumetric Units of Chips produced from the Stag Mill;
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(b)
    
    (***) Volumetric Units of Chips produced from the Small Log Mill; and(c)
    
    (***) Pulplogs harvested by or on behalf of Seller from the Timber Tenures;
  2.2.
    
    Log for Chip Exchange
 
  2.3.
    
    Exchange Ratio
  2.4.
    
    Term
  2.5.
    
    Relationship with Prior Agreements
  (a)
    
    the commitment for the purchase and sale of (***) Volumetric Units of Chips
from the Stag Mill under Subsection 2.1(a) replaces the commitment for the purchase and
sale of Stag Lumber Chips pursuant to the Pitt Lake Agreement;
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(b)
    
    the commitment for the purchase and sale of (***) Volumetric Units of Chips
from the Small Log Mill under Subsection 2.1(b) replaces the commitment for the
purchase and sale of Boston Bar Chips pursuant to the Boston Bar Agreement;
 (c)
    
    the commitment for the purchase and sale of Pulplogs produced from the Timber
Tenures under Subsection 2.1(c) replaces the commitment for the purchase and sale of
Boston Bar Pulplogs under the Boston Bar Agreement and Pitt Lake Pulplogs under the
Pitt Lake Agreement; and(d)
    
    for the purposes of the First Rights Agreement:
 (i)
    
    the reference to the term of the Boston Bar Agreement in the
First Rights Agreement shall be considered to be a reference to the term of
this Agreement; and
 (ii)
    
    this Agreement constitutes a Supply Agreement under the First
Rights Agreement in replacement of the Boston Bar Agreement and the Pitt Lake
Agreement.
 3.
    
    PRODUCTION CONSIDERATIONS AND PRIORITIES3.1.
    
    Anticipated Volume
 st
 (a)
    
    Seller will provide to Buyer a schedule of the anticipated production for the
Contract Year, of Chips from the Stag Mill and Small Log Mill and Pulplogs for the
Contract Year, including an estimate of species breakdown and monthly production; and
 (b)
    
    Buyer will provide to Seller with an estimate of the anticipated volume of
sawlogs that will be made available to Seller during the Contract Year under Section
2.2, including an estimate of species breakdown.
 3.2.
    
    Changes in Anticipated Volume
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3.3.
    
    Chip Production Priorities
  (a)
    
    with respect to Chips produced from the Stag Mill:
 (i)
    
    Buyers right to purchase (***) Volumetric Units of Chips from
the Stag Mill under Subsection 2.1 (a) of this Agreement will be in priority to
any sale of Chips from the Stag Mill to third parties and any sale of Chips to
Buyer under Section 2.2;
 (ii)
    
    any Chips produced from the Stag Mill which are not sold to
Buyer under Subsection 2.1(a) or Section 2.2 will be subject to the First
Rights Agreement;
 (b)
    
    with respect to Chips produced from the Small Log Mill:
 (i)
    
    Buyers right to purchase (***) Volumetric Units of Chips from
the Small Log Mill under Subsection 2.1(b) will be in priority to any sale of
Chips from the Small Log Mill to third parties, including without limitation
any delivery of Chips pursuant to Sellers chip delivery obligations with
TimberWest Forest Limited described in paragraph 3.3(b)(ii);
 (ii)
    
    a volume of Chips of up to the volume of Chips derived from
applying the chip recovery factor of the Small Log Mill to 1/3 of the actual
harvest of Tree Farm Licence 46 may be delivered to Buyer to the extent
necessary to permit Seller to comply with its chip delivery obligations to
TimberWest Forest Limited;
 (iii)
    
    any Chips produced from the Small Log Mill which are not sold
to Buyer under Subsection 2.1(b) or the subject of the Chip delivery
arrangements referenced in paragraph 3.3(b) (ii) will be subject to the First
Rights Agreement.
 3.4.
    
    Adjustments and Shortfalls
  (a)
    
    if there is a shortfall in the volume of Chips to be delivered from the Stag
Mill under Section 2.2, the shortfall will be made up in the following Contract Year
with additional Chips from the Stag Mill; and
 (b)
    
    Seller may make up any shortfall in volumes of Chips to be delivered from the
Stag Mill under Section 2.1 with additional Chips from the Small Log Mill and Seller
may make up any shortfall in volumes of chips to be delivered from the Small Log Mill
under Section 2.1 with additional Chips from the Stag Mill;
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3.5.
    
    First Rights Transactions
  3.6.
    
    Custom Cutting at Other Locations
  4.
    
    PRICE AND PAYMENT FOR CHIPS
 4.1.
    
    Chip Price
  4.2.
    
    Payment
  4.3.
    
    Production Costs
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5.
    
    CHIP MEASUREMENT, TESTING AND SPECIFICATIONS5.1.
    
    Optimization of Chip Quality
  (a)
    
    maintain all barking, chipping and screening equipment at the Sellers
Facilities in good operating condition at all times, including replacement and repair
of equipment as necessary, in order to produce Chips conforming to the Chip
Specifications;
 (b)
    
    maintain the chipper knives, faceplates, knife holders and anvils at the
Sellers Facilities in such a condition as to produce cleanly-cut Chips; and
 (c)
    
    otherwise use all reasonable efforts in the barking of logs and the manufacture
and screening of Chips to ensure that the Chip Specifications are met.
 5.2.
    
    Measurement of Volume
  5.3.
    
    Application
  5.4.
    
    Classification Tests
  5.5.
    
    Variation of Chip Specifications
  5.6.
    
    Inspection of Testing
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5.7.
    
    Rejection of Individual Loads
  5.8.
    
    Costs of Disposal
  5.9.
    
    No Waiver
  5.10.
    
    Prompt Inspection
  5.11.
    
    Time for Dispute
  6.
    
    DELIVERY OF CHIPS
 6.1.
    
    Loading Facilities
  6.2.
    
    Current Manufacture
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6.3.
    
    Rate of Delivery
  6.4.
    
    Transportation
  6.5.
    
    Seller Responsibilities
  (a)
    
    in loading scows for delivery to Buyer, ensure that Chips produced from
different species of wood are not mixed except that:
 (i)
    
    unless Buyer notifies Seller pursuant to section 6.6, amabilis
fir and hemlock may be mixed, Englemann spruce, lodgepole pine and subalpine
fir may be mixed and ponderosa pine and interior Douglas fir may be mixed; and
 (ii)
    
    if Sellers production schedule permits, sitka spruce will not
be mixed with any other species, but if not, sitka spruce may be mixed with
loads of hemlock Chips from the Stag Mill;
 (b)
    
    if any species are mixed in a load as permitted hereby, promptly, if required,
notify Buyer of the approximate percentage of each species in the load before delivery
to Buyer;
 (c)
    
    as soon as reasonably possible take the necessary steps to modify the chip
handling equipment and procedures at the Stag Mill and Small Log Mill in order to keep
Chips produced from the Stag Mill, Small Log Mill and Sellers other facilities
segregated from each other;
 (d)
    
    be responsible for moving scows delivered by Buyer between moorings and the
Chip loading facility and for any loss or damage to such scows, whether loaded with
Chips or empty, from the time a scow is secured to its moorings until the master of a
tug owned or operated by Buyers towing agent has placed a line aboard such scow with
the intention of removing it from its moorings, except that Seller will not be
responsible for any loaded scow:
 (i)
    
    48 hours after Buyers towing agent has been notified that such
scow is fully loaded; or
 (ii)
    
    if the scow is not seaworthy and such unseaworthiness is not
caused or contributed to by the negligence of Seller;
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(e)
    
    in the event Buyers towing agent provides Seller with an empty scow previously
used for carrying any material that may contaminate Chips, Seller will clean such scow
before loading with Chips and Seller may bill Buyer for its actual out-of-pocket costs
of cleaning, and Buyer agrees to pay Seller therefor promptly upon verification of the
billing; and
 (f)
    
    cause empty scows delivered by Buyer to be loaded within 72 hours of delivery
and will indemnify Buyer for demurrage and any other costs or charges incurred by Buyer
as a result of any delay beyond such period;
 (g)
    
    cause each scow delivered by Buyer to be fully loaded, to the capacity for
which Buyer is able to secure insurance;
 (h)
    
    notify Buyers towing agent as soon as possible of completion of loading of
each scow and of the time that each scow will be available for towing;
 (i)
    
    indemnify Buyer against all claims, demands, action and causes of action made
against Buyer, including added transportation costs, demurrage and freight charges, as
a result of the spillage or loss of Chips caused by improper loading of Chips into
scows.
 6.6.
    
    Species Segregation
  (a)
    
    substantial volumes of Chips are being sold and purchased in the southern
coastal region of British Columbia in a manner consistent with the New Species
Segregation;
 (b)
    
    substantial volumes of Chips produced by Seller or its Affiliates, other than
the Chips being sold to Buyer under this Agreement, are being sold and purchased from
Sellers Facilities or other facilities owned by Seller or its Affiliates in a manner
consistent with the New Species Segregation;
  7.
    
    PRICE AND PAYMENT FOR PULPLOGS
 7.1.
    
    Pulplog Price
  7.2.
    
    Dispute of Purchase Price
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7.3.
    
    Payment
 th
 7.4.
    
    Vancouver Log Market
  7.5.
    
    Custom Chipping of Buyers Logs
  8.
    
    PULPLOG SALE PROCEDURES
 8.1.
    
    Notice of Availability
  (a)
    
    the availability of Pulplogs for delivery and sale under this Agreement
including the Point of Sale;
 (b)
    
    the volume, species and specifications of Pulplogs in each Parcel of Pulplogs
offered for sale;
 (c)
    
    the location of such Parcels; and
  8.2.
    
    Inspection and Acceptance
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8.3.
    
    Agreement on Price
  8.4.
    
    Deemed Refusal
  8.5.
    
    Use of Telephone
  8.6.
    
    Delivery of Pulplogs
  8.7.
    
    Availability
  8.8.
    
    Costs up to Delivery
  8.9.
    
    Boomsticks
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8.10.
    
    Boomgear Deposit
  8.11.
    
    Pulplog Specifications
  8.12.
    
    Scaling
  8.13.
    
    Checkscaling
  (a)
    
    such party (the Disputing Party) will notify the other party, before the
Parcel is broken down or dewatered, of its intention to cause a checkscaling, and will
name one independent, licensed scaler to perform the checkscaling;
 (b)
    
    within 2 Business Days after the date of receipt of such notice, the other
party will, by notice to the Disputing Party, name one independent, licensed scaler to
also perform a checkscaling, failing which the checkscaling will be performed by the
scaler named by the Disputing Party;
 (c)
    
    each party will take all reasonable steps to ensure that the checkscaling is
carried out in a prompt and efficient manner;
 (d)
    
    each party may inspect the Parcel before breakdown or dewatering to determine
if losses occurred during transportation or handling as well as inspect checkscaling
and log handling practices;
 (e)
    
    any logs not conforming to the Pulplog Specifications will be deemed to have no
value for the purposes of determining a value with reference to a checkscale;
 (f)
    
    if the value determined with reference to any checkscale (the average of the
two checkscales or, if only one scaler was named, the result of the single checkscale)
does not differ by more than 3% of the value determined with reference to the original
scale, excluding boomsticks and gear in both cases, no adjustment will be made and all
expenses incurred relating to the checkscale, including towing, handling and scaling,
will be paid by the Disputing Party;
 (g)
    
    if Subsection 8.13(f) does not apply, the value determined with reference to
the original scale will be adjusted to equal the average of the two checkscales or, if
only one scaler was named, to equal the single checkscale, and the checkscale expenses
described in Subsection 8.13(f) will be shared equally by the parties.
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8.14.
    
    Condition of Parcels
  8.15.
    
    Log Sale Practices
  9.
    
    TITLE AND RISK
 9.1.
    
    Title
  (a)
    
    for Chips, when the Chips have been fully loaded into a scow and the master of
the tug of Buyers towing agent has placed a line aboard the fully loaded scow with the
intention of removing such scow from the scow moorings at the facility from which such
Chips are delivered; and
 (b)
    
    for Pulplogs, when the Pulplogs arrive at a Point of Sale and are invoiced and
accepted in satisfactory condition.
 10.
    
    COVENANTS10.1.
    
    Covenants of Buyer
  (a)
    
    cause its directors, officers, employees, agents and contractors, while on the
premises of Seller, to comply with all rules and regulations of Seller of general
application and, subject to Section 12.3, indemnify and hold harmless Seller and its
directors, officers, employees, agents and contractors from and against any loss,
damage, liability, claim or action incurred or sustained, to the extent attributable to
a breach of such rules and regulations or to any negligent or wilful act of Buyer or
any of its directors, officers, employees, agents or contractors;
 (b)
    
    comply with all applicable laws, regulations, rules and governmental
restrictions and maintain in good standing all licences, permits and approvals from any
and all governments, governmental commissions, boards or agencies applicable to the
performance of its obligations hereunder, and
 (c)
    
    ensure that any scows that are used to deliver Chips purchased by Buyer under
this Agreement are covered by comprehensive general liability insurance to cover loss
or damage to person, property and Chips arising from actions related to buyers duties
to arrange for the delivery of Chips under this Agreement with limits of coverage to be
not less than $2,000,000 (reviewed every five years and
adjusted for inflation and other reasonable factors) inclusive of bodily injuries or
property damage for each occurrence.
  16




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10.2.
    
    Covenants of Seller
  (a)
    
    while any director, officer, employee, agent or contractor of Buyer is on the
premises of Seller, cause the employees, agents and contractors of Seller and its
subsidiaries to comply with all rules and regulations of Seller applicable to them and,
subject to Section 12.3, indemnify and hold harmless Buyer and its directors, officers,
employees, agents and contractors from and against any loss, damage, liability, claim
or action incurred or sustained to the extent attributable to a breach of such rules
and regulations or to any negligent or wilful act of Seller or any of its directors,
officers, employees, agents or contractors;
 (b)
    
    comply with all applicable laws, regulations, rules and governmental
restrictions and maintain in good standing all licences, permits and approvals from any
and all governments, governmental commissions, boards or agencies applicable to the
performance of its obligations hereunder;
 (c)
    
    during the term of this Agreement, maintain comprehensive general liability
insurance to include its liabilities hereunder for loss or damage to persons, property
and Chips for which it is responsible with limits of coverage to be not less than
$2,000,000 (reviewed every five years and adjusted for inflation and all other
reasonable factors) inclusive of bodily injuries or property damage for each
occurrence, and will provide Buyer reasonable evidence of such insurance from time to
time upon Buyers reasonable request; and
 (d)
    
    co-operate with Buyer in providing information as reasonably required by Buyer
with respect to forest management performance on the Timber Tenures to support Buyers
fibre supply services, audits and certification standards, where applicable.
 10.3.
    
    Certificate of Officer
  (a)
    
    the volume of Pulplogs harvested from the Timber Tenures for the Contract Year;
 (b)
    
    the volume of Chips and whole-log chips produced from the Stag Mill and Small
Log Mill during the Contract Year; and
 (c)
    
    a reconciliation of the sawlogs offered under Section 2.2 in the Contract Year
and the volume of Chips provided in exchange for such sawlogs in the Contract Year;
 th
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11.
    
    DEFAULT
 11.1.
    
    Event of Default
  (a)
    
    more than 15 Business Days have elapsed since the giving of such notice in the
case of a default in respect of which the defaulting party might by the exercise of
reasonable diligence have remedied the default; or
 (b)
    
    in the case of a default that could not, by the exercise of reasonable
diligence, be remedied within the period described in Subsection 11.1 (a), the earlier
of:
 (i)
    
    the day on which the defaulting party fails or refuses to act
diligently to remedy the default; and
 (ii)
    
    the day on which it becomes evident to the other party, acting
reasonably, that such default will not be remedied in a reasonably timely
manner regardless of the actions taken by such party.
 11.2.
    
    Remedies
  11.3.
    
    Consequential Damages
  12.
    
    DISPOSITIONS
 12.1.
    
    Dispositions by Seller
  (a)
    
    sell, transfer or otherwise dispose of a material part of the Sellers
Facilities except to a purchaser, transferee or assignee (an Assignee) that has
agreed, as a condition of such purchase, to be bound by the terms of this Agreement,
such agreement to be evidenced by the Assignee entering into such formal agreements as
Buyer may reasonably require and which will give effect to an assignment by Seller to
the Assignee of an interest in this Agreement to the extent required by such
assignment; or
  18




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(b)
    
    sell, transfer or otherwise dispose of any of the Timber Tenures or grant any
harvest rights in respect of the Timber Tenures or enter into any log or timber sale
arrangements with respect to the Timber Tenures which would result in a reduced volume
of logs being processed through Sellers Facilities unless the purchaser, transferee or
assignee or holder of such harvest rights or purchaser of such logs or timber enters
into an agreement in such form as Buyer may reasonably require to ensure that the
Pulplogs included in the harvest under the Timber Tenures and the Chips produced from
processing such harvest, timber or logs, or an equivalent volume, will be available to
Buyer on the terms and conditions of this Agreement; or
 (c)
    
    mortgage, charge, grant a security interest in or otherwise encumber a material
part of the Sellers Facilities or Timber Tenures except by way of an assignment of
proceeds payable to Seller under this Agreement or in accordance with Section 12.3.
  12.2.
    
    Material Part
  (a)
    
    a series of transactions that could reasonably be viewed as related will be
considered as a single disposition; and
 (b)
    
    any exchange of assets in which any part of the Sellers Facilities are
disposed of but are replaced concurrently with other assets that become part of the
Sellers Facilities will not constitute a disposition of a material part of the
Sellers Facilities if, as a result of such exchange, the ability of Seller to fulfil
the terms of this Agreement and the volume of Chips available to Buyer under this
Agreement is not materially affected.
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12.3.
    
    Lender Status
  12.4.
    
    Breach
  12.5.
    
    Release of Seller
  12.6.
    
    Assignment by Buyer
  (a)
    
    as a result of the granting by Buyer of a security interest over all or
substantially all of its assets; or
 (b)
    
    to a purchaser of any material interest in a Mill if the purchaser enters into
an agreement with Seller confirming that the purchaser is bound by this Agreement (with
such changes as may be required to contemplate the addition or substitution of the
purchaser as a party) to the extent of such assignment and upon any such assignment
Buyer will be released from its obligations under this Agreement to the extent they
relate to the subject matter of the assignment.
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13.
    
    FORCE MAJEURE AND CURTAILMENT
 13.1.
    
    Affecting Buyer
  13.2.
    
    Market Conditions
  13.3.
    
    Proportionate Curtailment
  (a)
    
    the actual volume of Chips (of the same species mix and quality as are
delivered by Seller pursuant to this Agreement) that are delivered to the Mills in such
month is divided by;
 (b)
    
    the total volume of such Chips that Buyer, acting reasonably and in good faith,
estimates would have been delivered to the Mills in such month if no curtailment had
occurred;
  (c)
    
    the average monthly volume of such Chips purchased by Buyer from Seller under
this Agreement during each of the six months preceding the period of curtailment,
excluding any previous period of curtailment;
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13.4.
    
    No Cumulative Obligation
  13.5.
    
    Alternative Disposition
  (a)
    
    Seller will, before entering into any agreement to dispose of any of such
Chips, give notice to Buyer of its intention to do so, and Seller will not dispose of
such Chips if, within 5 Business Days after the day such notice is given by Seller,
Buyer gives a notice to Seller, that Buyer will purchase such Chips upon production;
 (b)
    
    Seller will not enter into any agreement concerning the disposition of Chips
that would conflict with Buyers right to resume the purchase of Chips under this
Agreement; and
 (c)
    
    Buyer may, after the end of the discontinuance or curtailment, purchase any of
such Chips that have not been disposed of and which are stockpiled, by delivering not
less than 10 Business Days notice to Seller
 (i)
    
    stating the quantity of such stockpiled Chips that it wishes to
purchase under this Agreement,
 (ii)
    
    stipulating a rate of delivery of Chips that will not interfere
with the efficiency of the Sellers Facilities at which such Chips are located,
and
 (iii)
    
    confirming that Buyer will take the risk of any impairment of
the quality of the Chips resulting from the stipulated rate of delivery.
  13.6.
    
    Credit to Volume Commitments (Buyer)
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13.7.
    
    Affecting Seller
  (a)
    
    weather conditions, fire, strike or other labour disruptions, lockout,
sabotage, shipwreck, riot, war, flood, extraordinary breakdown, explosion, laws or
regulations, Court order, act of any government body or agency, act of God, blockade,
civil commotion or disobedience (lawful or unlawful) or other reason beyond the control
of Seller; or
 (b)
    
    Buyer reducing or discontinuing its purchases of Chips under Sections 13.1 or
13.2; or
 (c)
    
    any other reason not referred to in Subsection 13.7 (a) or (b) which Seller
considers sufficient to justify curtailing or shutting down its operations,
  13.8.
    
    Credit to Volume Commitments (Seller)
  (a)
    
    where the discontinuance relates to a curtailment of the operation of the Stag
Mill, Seller will be credited with having sold Buyer a volume of Chips calculated on
the basis of a monthly average rate of delivery of 2083 Volumetric Units of Chips
during the period of curtailment except that any volume credits which arise in a
Contract Year due to a curtailment of the Stag Mill under Subsection 13.7(c) shall not
be considered to reduce the volume of Chips to be sold to Buyer under Subsection 2.1(a)
for the purpose of determining the volume of sawlogs to be offered to Seller under
Section 2.2;
 (b)
    
    where the discontinuance relates to a curtailment of the operation of the Small
Log Mill, Seller will be credited with a volume of Chips calculated on the basis of
a monthly average rate of delivery of and 2500 Volumetric Units of Chips during the
period of curtailment.
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13.9.
    
    Advance Warning
  14.
    
    ARBITRATION
 14.1.
    
    Arbitration
   14.2.
    
    Timely Decisions
  14.3.
    
    Period of Exclusivity
  (a)
    
    at any time after a dispute referred to arbitration hereunder has been
outstanding for 20 Business Days, calculated from the day the initial notice of dispute
in respect thereof is given, commence proceedings in the Supreme Court of British
Columbia to have the dispute determined therein, whereupon all arbitration proceedings
will terminate except that no such proceedings may be commenced unless such party has
determined, acting reasonably and in good faith, that such Court proceedings are
reasonably likely to resolve the matter in dispute in a manner that is more timely or
less costly, or both, than would be the case if the arbitration proceeding continued;
or
 (b)
    
    during any arbitration hereunder apply to a court of competent jurisdiction for
any remedy that is beyond the jurisdiction of the arbitrator to grant and which a party
reasonably requires in order to maintain its rights under this Agreement.
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15.
    
    MISCELLANEOUS15.1.
    
    Custom Cutting
  15.2.
    
    Custom Chipping
  15.3.
    
    Hog Fuel
  15.4.
    
    Sawdust
  15.5.
    
    Periodic Review
 rd
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th
 (a)
    
    where there is a change in the chip recovery factor of the Stag Mill, the
volume of Chips to be purchased and sold from the Stag Mill under Subsection 2.1(a)
will change to the result obtained by multiplying (***) Volumetric Units by a fraction
which has the new chip recovery factor as the numerator and the Base CRF for the Stag
Mill as the denominator;
 (b)
    
    where there is a change in the chip recovery factor of the Small Log Mill, the
volume of Chips to be purchased and sold from the Small Log Mill under Subsection
2.1(b) will change to the result obtained by multiplying (***) Volumetric Units by a
fraction which has the new chip recovery factor as the numerator and the Base CRF for
the Small Log Mill as the denominator.
  16.
    
    GENERAL
 16.1.
    
    Maintenance of Records
  (a)
    
    all measurements and tests made by it by reference to which, pursuant to this
Agreement, the performance of an obligation by either party is measured or the extent
of an obligation that either party is to perform is calculated; and
 (b)
    
    all costs incurred by it for which it is, pursuant to this Agreement, entitled
to be reimbursed in whole or in part by the other party;
  16.2.
    
    No Other Representations
  16.3.
    
    Waiver and Consent
  (a)
    
    be valid unless it is in writing an stated to be a consent or waiver pursuant
to this Section;
 (b)
    
    be relied on as a consent to or waiver of any other breach or default of the
same or any other obligation;(c)
    
    Constitute a general waiver under this Agreement
 (d)
    
    eliminate or modify the need for a specific consent or waiver pursuant to this
Section in any other or subsequent instance.
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16.4.
    
    Amendments
  16.5.
    
    Notices
  To Buyer
 
 
 To Seller
 
 
  16.6.
    
    TimeTime shall be of the essence of this Agreement.16.7.
    
    Further Assurances
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16.8.
    
    Confidentiality
  (a)
    
    if such party determines, acting reasonably, that disclosure is required by law
or during the course of its business; and
 (b)
    
    if such disclosure is not required by law it is made under terms that restrict
further disclosure to the extent necessary to protect the interests of the other party.
 16.9.
    
    Enurement
   NORSKE SKOG CANADA LIMITED
as managing partner for and on behalf of
NORSKECANADA
 Per:Per:TEAL-JONES GROUP by its partnersTEAL CEDAR PRODUCTS LTD.Per:Per:COLUMBIA RIVER SHAKE & SHINGLE LTD.Per:Per:
  28




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SCHEDULE A   CHIP SPECIFICATIONS
 1.
    
    Chips will be produced from sound, bright, bark-free wastewood such as logs, log-trim,
sawmill wastewood or green veneer.
 2.
    
    Chips will be clean, screened, of approximately uniform length and thickness, clean-cut, and
free from objectionable material of any kind that may adversely affect either the pulp quality
or the pulping process and equipment, including, rocks, sand, silt, coal, coal dust, hog fuel,
rot or bark in excess of the amount permitted, plastic or related materials, creosote or other
treated wood, burned material, soot, char, dried veneer or glue, or tramp metal, any toxic or
hazardous chemical including polychlorobiphenylsl (PCBs), pentachlorophenols (PCPs) or any
material linked to the formation of any dioxin or furan compound, or any material that is
likely to pose a health or safety risk.
 3.
    
    Chips will be cut to a nominal length of 12.7 mm to 31.75 mm, in order to meet the following
standards:
 (a)
    
    not more than 5% true oversize consisting of Chips exceeding 45 mm in length or
an unfractured thickness of 10 mm in thickness or both (true overs)
 (b)
    
    a minimum of 87% of chips retained on a 7 mm round hole screen (not including
true overs);
 (c)
    
    a maximum of 7% Chips, pin chips, fines and sawdust passing through a 7 mm
round hole screen and retained on a 3 mm round hole screen;
 (d)
    
    a maximum of 0.5% Chips, pin chips, fines and sawdust passing through a 3 mm
round hole screen;(e)
    
    a maximum of 0.5% bark; and(f)
    
    a maximum of 0.5% rot.
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SCHEDULE B   PULPLOG SPECIFICATIONS
 A.
    
    Definitions
  (a)
    
    which is of the hemlock, balsam, fir, spruce, cypress, red cedar species or
other species acceptable to Buyer and has a length not less than 3.0 metres and a top
radius not less than 5 centimetres (subject to changes to Ministry of Forests
utilization standards or the ability of Buyer to specify a lower length or smaller top
radius); and
 (b)
    
    which has less than 75% lumber recovery and of which 50% or more of the gross
scale is firm wood;
  (c)
    
    a log that meets the above specifications but which Seller determines, acting
reasonably and bona fide in a manner consistent with the intent of this Agreement, and
following generally accepted industry practices for coastal British Columbia forestry
operations, is appropriate to be processed as other than a Pulplog and is processed at
either:
 (i)
    
    a Sellers Facility; or
 (ii)
    
    a sawmill or other wood processing facility from which the wood
chips produced are sold or offered for sale to Buyer under this Agreement at a
price which is no higher than the Coast Chip Price.
  B.
    
    Specifications1.
    
    All Pulplogs to be bucked at both ends and delimbed.2.
    
    Parcels to be sorted by species:
 (a)
    
    hemlock/balsam which may contain up to 5% spruce;(b)
    
    spruce; or(c)
    
    Douglas fir; or(d)
    
    cypress; or(e)
    
    red cedar;(f)
    
    interior spruce, pine and subalpine fir;(g)
    
    other species acceptable to Buyer.
 3.
    
    Pulplogs to be free of shape defects to allow for effective debarking.
 4.
    
    Hemlock/balsam Pulplogs will be sorted two ways by butt diameter as specified by Buyer in
writing from time to time which specifications may vary by location.
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SCHEDULE C   SAWLOG OFFER TERMS
  1.
    
    logs offered will be sawlogs of the quality and sort specifications that conform to industry
standards in coastal British Columbia;
 2.
    
    logs will be offered for sale at the Vancouver Log Market Price F.O.B. Howe Sound unless
otherwise agreed by Seller and the log seller and payment terms will be consistent with the
payment terms for Pulplogs under Section 7.3;
 3.
    
    Seller will be required to purchase boomsticks at their fair market value upon payment for a
Parcel of logs and Seller will otherwise comply with boomgear deposit and return practices and
procedures in accordance with generally accepted industry practices in effect at the relevant
time.
 4.
    
    Scaling will be done in accordance with the Ministry of Forests applicable policies and
industry standards, scaling expenses will be shared equally by Seller and the log seller and,
if either Seller or the log seller disputes the result of a scaling of a Parcel, it may cause
a checkscaling to occur in accordance with the following provisions, the result of which will
be binding on the parties and not subject to arbitration:
 (a)
    
    such party (the Disputing Party) will notify the other party, before the
Parcel is broken down or dewatered, of its intention to cause a checkscaling, and will
name one independent, licenced scaler to perform the checkscaling;
 (b)
    
    within two business days after the date of receipt of such notice, the other
party will, by notice to the Disputing Party, name one independent, licenced scaler to
also perform a checkscaling, failing which the checkscaling will be performed by the
scaler named by the Disputing Party;
 (c)
    
    each party will take all reasonable steps to ensure that the checkscaling is
carried out in a prompt and efficient manner;
 (d)
    
    each party may inspect the Parcel before breakdown or dewatering to determine
if losses occurred during transportation or handling as well as inspect checkscaling
and log handling practices;
 (e)
    
    if the value determined with reference to any checkscale does not differ by
more than 3% of the value determined with reference to the original scale, excluding
boomsticks and gear in both cases, no adjustment will be made and all expenses incurred
relating to the checkscale, including towing, handling and scaling, will be paid by the
Disputing Party;
 (f)
    
    if clause (e) does not apply, the value determined with reference to the
original scale will be adjusted to equal the average of the two checkscales or, if only
one scaler was named, to equal the single checkscale, and the checkscale expenses
described in clause (e) will be shared equally by the parties.
 5.
    
    logs will be properly and securely bundled in intact Parcels which are fit for safe coastal
towing.
  31