##### 



GOVERNMENT OF THE PROVINCE OF ALBERTA FORESTS ACT FOREST MANAGEMENT AGREEMENT (O.C. 281/2002) Approved and OrderedLois HoleLieutenant Governor
    
    Edmonton, June 25, 2002
 Upon the recommendation of the Honourable Minister of Sustainable Resource
Development, the Lieutenant Governor in Council, pursuant to section 16 of the
Forests Act, approves the entry by the Minister of Sustainable Resource
Development into a forest management agreement with Tolko Industries Ltd. and
Footner Forest Products Ltd. in accordance with the attached Appendix. Shirley McClellan (Acting Chair) MEMORANDUM OF AGREEMENT BETWEEN: HER MAJESTY THE QUEENin the right of the Province of Alberta, as represented
by the Minister of Sustainable Resource Development, (hereinafter referred to
as the Minister), OF THE FIRST PART and TOLKO INDUSTRIES LTD.a body corporate, registered under the laws of Alberta,
with a business office in High Level, Alberta (Tolko) OF THE SECOND PART and FOOTNER FOREST PRODUCTS LTD,a body corporate, registered under the laws of
Alberta, with a business office in High Level, Alberta (Footner) OF THE THIRD PART WHEREASTolko owns and operates a sawmill complex (the Sawmill) located
in the town of High Level, Alberta with an annual production capacity of
250,000,000 board feet of lumber; and WHEREASFootner owns and operates a major oriented strandboard production
facility (the Plant) located near the Town of High Level, Alberta for the




---



##### 



manufacture of oriented strandboard with a rated annual capacity of
860,000,000 square feet of oriented strand board measured on a 3/8 inch basis;
and WHEREASthe Minister, recognizing the Companies needs for a forest
management agreement to warrant the continued operations of their respective
facilities, desires to provide for a perpetual sustained yield of timber for
each of the Companies respective operations; and WHEREASit has been mutually agreed by all of the parties hereto that it
is a convenient time to enter into a forest management agreement that will
supply a portion of both Tolkos and Footners respective timber needs for the
Sawmill and the Plant, and WHEREASthe Minister desires to provide for sustainable development of all
resources and to provide for the fullest possible economic utilization of
timber from the forest management area and stable employment in local
communities by maximizing the value of the timber resource base while
maintaining a forest environment of high quality. NOW THEREFORE THIS AGREEMENT WITNESSETHthat in consideration of the
premises, terms, conditions, covenants, stipulations, agreements and provisions
herein contained, the Minister, Tolko and Footner hereby agree as follows: DEFINITIONS 1.
    
    
    (1
    )
    
    In this Agreement
  (a)
    
    Agreement means this Forest Management
Agreement including all appendices or schedules attached
hereto, and any written amendments made hereto from time to
time by agreement of all of the parties;(b)
    
    annual allowable cut is the amount of timber
that may be harvested in any one year as stipulated in the
pertinent forest management plan approved by the Minister;(c)
    
    commencement date has that meaning provided
for in paragraph 2(1);(d)
    
    Companies means, collectively, Tolko and
Footner and Company means either of them;(e)
    
    coniferous timber means all coniferous
species of trees growing on the forest management area,
including, but not limited to, all species of pine, spruce,
fir and larch;(f)
    
    Crown means Her Majesty the Queen in right of
Alberta; 2




---



##### 



(g)
    
    cubic metre shall have the same meaning as
that prescribed by the Timber Management Regulation;(h)
    
    cut control period means a period of five
consecutive forest management operating years;(i)
    
    deciduous timber means all deciduous species
of trees growing on the forest management area, excluding
birch;(j)
    
    Department means the Department of
Sustainable Resource Development;(k)
    
    designate has that meaning provided for in
paragraph 44;(l)
    
    dollar means Canadian currency of the value
of one Canadian dollar, or the equivalent value in any other
currency;(m)
    
    Footner means Footner Forest Products Ltd.;(n)
    
    forest management area refers to the tract of
forest land as specifically defined in paragraph 3, over
which the Companies are hereby given rights for establishing,
growing and harvesting timber on a perpetual sustained yield
basis for a defined period of time;(o)
    
    Periodic Allowable Cut is the total of the
annual allowable cuts approved for a five-year cut control
period;(p)
    
    Plant has that meaning provided for in the
recitals to this Agreement;(q)
    
    Sawmill has that meaning provided for in the
recitals to this Agreement;(r)
    
    Scaling Regulation means Alberta Regulation
336/79 authorized by Ministerial Order 40/79;(s)
    
    Surface Materials Regulation means Alberta
Regulation 11/78;(t)
    
    Timber Management Regulation means Alberta
Regulation 60/73 authorized under Order-in-Council 309/73;(u)
    
    Timber Regulation means Alberta Regulation
268/78; and(v)
    
    Tolko means Tolko Industries Ltd.  (2)
    
    The Forests Act, the Public Lands Act, and the regulations
made thereunder shall mean for the purposes of this Agreement, those
Alberta Statutes and the regulations as each may from time to time
be amended respectively or such Acts or regulations as may from time
to time be 3




---



##### 



substituted therefor, and terms defined by the Forests Act, the
Public Lands Act, and the regulations made thereunder shall for
the purpose of this Agreement, have the meaning given to them by
those Acts and regulations as each may be amended or substituted
from time to time. 2.
    
    
    (1
    )
    
    This Agreement shall commence on the 11th day of September, 2002,
(hereinafter referred to as the commencement date), and shall expire on
the 10th day of September, 2022, unless renewed under the provisions of
subparagraph (3).
  (2)
    
    It is the intention of the parties hereto to continue the
respective rights of the Companies under paragraph 7 to establish,
grow, harvest and remove timber on the forest management area for
terms of twenty years if, pursuant to subparagraph (3), mutual
agreement thereon can be reached by the Minister and the Companies
and such agreement is approved by the Lieutenant Governor in
Council.(3)
    
    Subject to the approval of the Lieutenant Governor in Council
and provided that both Companies are not in default as to any of the
terms, conditions, stipulations, covenants, agreements and
provisions of this Agreement, the Companies, or Company who is not
then in default of any of the provisions of this Agreement, shall be
entitled to a renewal of this Agreement whereby its rights under
paragraph 7 to establish, grow harvest and remove timber are
continued on condition that:  (a)
    
    the Companies, or Company who is not then in
default of any of the terms, conditions, stipulations,
covenants, agreements and provisions of this Agreement, gives
notice to the Minister within nine years following the
commencement date of this Agreement of its desire to renew
this Agreement; and(b)
    
    mutually acceptable terms, conditions,
stipulations, covenants, agreements and provisions including
further renewal provisions or other requirements can be
renegotiated at the time of renewal.  (4)
    
    Where the Companies or Company gives a notice under
subparagraph (3)(a), the Companies or Company, as the case may be,
and the Minister shall carry out good faith negotiations in an
attempt to agree on a renewal Agreement with a term of twenty years
and have it approved by the Lieutenant Governor in Council prior to
the tenth anniversary of this Agreement.(5)
    
    The parties may agree to commence negotiations earlier than
provided for in subparagraph (3)(a). 4




---



##### 



FOREST MANAGEMENT AREA  3.
    
    The Minister and the Companies hereby enter into this forest management
agreement in respect of the forest management area comprising, subject to
paragraphs 4, 5, and 6, public lands within the boundaries shown outlined
on a map registered in the Department, a copy of which is annexed hereto
as Appendix A.4.
    
    Out of the forest management area the following are excepted:  (a)
    
    areas which are the subject of any existing
timber dispositions issued pursuant to the Forests Act, to
parties other than the Companies, prior to the date of this
Agreement;(b)
    
    lands which are the subject of a disposition
issued pursuant to the Public Lands Actprior to the date of
this Agreement or lands in respect of which a disposition
under the Public Lands Acthas been approved but which
issuance is pending prior to the date of this Agreement;(c)
    
    lands which have been reserved under section
18(c) of the Public Lands Actor in respect of which a
reservation has been approved but which has not been granted
prior to the date of this Agreement;(d)
    
    the beds and shores of all permanent and
naturally occurring bodies of water and all naturally
occurring rivers, streams, watercourses and lakes; and(e)
    
    lands within any Provincial Park, Forest
Recreation area, Natural Area or Ecological Reserve prior to
the date of this Agreement;  5.
    
    Whenever any of the productive or potentially productive land excepted
under paragraph 4 or subsequently withdrawn from the forest management
area becomes available for disposition and where such land is intended to
be returned to timber production by the Minister, the Minister shall
notify the Companies when such land becomes available and where the
Companies request that such land be returned to timber production by the
Minister, the Minister shall return these lands back to the forest
management area in a productive or potentially productive state. WITHDRAWALS 6.
    
    
    (1
    )
    
    The Minister may, at any time in his discretion, after consultation
with the Companies with respect to the effect any such withdrawal may have
on the forest management area, either permanently or for a specified term,
withdraw from the forest management area:
  (a)
    
    any land which cannot be logged without causing
substantial harm to the water table or to lakes, rivers,
streams or other bodies of water, to the margins of water
courses or to roads; 5




---



##### 



(b)
    
    any lands required for rights-of-way, water
resource and agricultural development or for any other
purposes deemed by the Minister to be required for the human
or physical resource development of the Province;(c)
    
    any lands required for commercial and
industrial purposes, provided that such withdrawal shall not
be in favour of one of the Companies for a purpose that will
conflict or compete directly with the operations of the other
Company; and(d)
    
    any lands which are not capable of producing
timber.  (2)
    
    A withdrawal shall take effect  (a)
    
    on the date that a joint notice of withdrawal
is given by the Minister to the Companies, or(b)
    
    where the joint notice given states that the
withdrawal shall take effect at a future date, on the date
stated in the joint notice.  (3)
    
    In the event from time to time, after consultation with the
Companies, of any withdrawal or withdrawals of land from the forest
management area by the Minister under subparagraph (1):  (a)
    
    for disposition to be issued to users other
than the Crown, the Companies, or either of them, shall be
entitled to reasonable compensation from the users of the
area withdrawn for any loss of profit or other damage or loss
suffered by the Companies, or either of them, including by
way of example, but without limitation, damage to timber,
improvements, regeneration, forest growth or to their
operations on the forest management area resulting from such
withdrawal;(b)
    
    for use by the Crown wherein the cumulative net
aggregate productive area withdrawn does not exceed 2% of the
net productive area of the forest management area, the
Minister shall determine the compensation and arrange for
reimbursement to the Companies, or either of them, for the
actual loss or damage resulting from such withdrawal to any
improvements created by the Companies efforts, or either of
them, but not for any loss of profit, inconvenience nor
increased costs reasonably incurred by the Companies in
harvesting an equivalent volume of timber elsewhere;(c)
    
    for use by the Crown wherein the cumulative net
aggregate productive area withdrawn does exceed 2% of the net
productive area of the forest management area, the Minister
shall determine the compensation in respect of such excess
and arrange for 6




---



##### 



reimbursement to the Companies for any increased costs
reasonably incurred by the Companies in replacing the lost
volume of timber and for any loss or damage suffered by the
Companies including damage to timber, improvements,
regeneration, forest growth, or to its operations on the
forest management area;(d)
    
    in the event that any or all of subparagraphs
(a), (b) or (c) should apply, only the Company which has
actually suffered the loss or damage shall be entitled to the
prescribed compensation as set forth in this subparagraph
(3).  (4)
    
    The Minister may, from time to time add available public land
to the forest management area as full or partial compensation to the
Company or Companies, as the case may be, under subparagraph (3)(b)
or (c).(5)
    
    If the administration and control of any of the lands
comprising the forest management area is transferred to the Crown in
right of Canada, the Company or Companies, as the case may be, shall
be entitled to compensation under subparagraph (3) as if the lands
were withdrawn for use by the Crown.(6)
    
    For the purposes of applying subparagraphs (3)(b) and (c),  (a)
    
    the net productive area for the initial forest
management area shall be established and agreed upon by all
of the parties to be effective on the commencement date of
this Agreement, and(b)
    
    the cumulative net aggregate productive area
withdrawn shall be calculated taking into consideration all
exceptions and additions to the forest management area under
subparagraph (4) and paragraphs 4 and 5 and all withdrawals
under subparagraph (1) for use by the Crown.  (7)
    
    Monetary compensation received by the Companies under
subparagraph (3)(a) and paragraph 8(1)(b) shall only be used to
offset damage to improvements such as plantations, roads, bridges or
other facilities or to replace timber resources.(8)
    
    The Companies shall maintain complete and accurate records of
the receipt and use of all compensation funds received under this
paragraph and paragraph 8(1)(b).(9)
    
    The Minister may from time to time at his discretion request
verifiable documentation of the use of compensation funds received
under this paragraph and paragraph 8(1)(b) and the Companies shall
comply with any such request. 7




---



##### 



RIGHTS OVER THE LAND 7.
    
    
    (1
    )
    
    Subject to all the terms and conditions of this Agreement the
Minister grants:
  (a)
    
    to Tolko, the right, during the term of this
Agreement, to enter upon the forest management area to:  (i)
    
    establish, grow, harvest and
remove all coniferous timber thereon on a perpetual
sustained yield basis; and(ii)
    
    harvest and remove deciduous
timber on behalf of Footner where such deciduous
timber has been approved for harvest under the
approved annual operating plan; and  (b)
    
    to Footner, the right during the term of this
Agreement, to enter upon the forest management area to:  (i)
    
    establish, grow, harvest and
remove all deciduous timber thereon on a perpetual
sustained yield basis; and(ii)
    
    harvest and remove coniferous
timber on behalf of Tolko where such coniferous timber
has been approved for harvest under the approved
annual operating plan.  (c)
    
    to the Companies, the right to enter upon the
forest management area for the purposes of the construction,
operation and maintenance of camps, roads, wood concentration
yards and other installations necessary and incidental to the
Companies respective logging and silvicultural operations.  (2)
    
    For the purpose of interpreting the Surface Rights Act, as
amended, the Companies are each an occupant of the public lands
comprising the forest management area.(3)
    
    The Minister shall cause land dispositions required within
the forest management area for work such as roads, bridges, camps,
timber processing operations and other necessary works incidental to
the Companies respective harvesting and silvicultural operations to
be issued to the Companies, or either of them, without any dues,
fees or rental charges under the Public Lands Actbeing paid but
such dispositions shall otherwise be subject to any pertinent
regulations.(4)
    
    Notwithstanding subparagraph (3), the Companies may each
obtain sand and gravel needed for their respective operations under
this Agreement from any vacant public land on the forest management
area pursuant to the Surface Materials Regulation, subject to the
payment by the Companies, or either of them, as the case may be, of
all required fees and royalties. In no case, however, shall the
Companies have to pay fees or royalties for in 8




---



##### 



situ right-of-way material located and used where it is found
within the right-of-way. 8.
    
    
    (1
    )
    
    It is recognized by the Minister that the Companies use of the forest
management area for establishing, growing, harvesting and removing timber
is to be the primary use thereof and that it is to be protected therein in
keeping with the principles of sustainable forest management. In keeping
with public values and recognizing that certain portions of the forest
management area may have other resource values, the Minister reserves all
land rights on the forest management area not specifically given hereby,
including by way of example, but without limiting the generality of the
foregoing:
  (a)
    
    the right of others to travel, hunt, fish and
otherwise use the said lands for recreational purposes,
subject only to any necessary restrictions approved by the
Minister for the purpose of prevention of accidents, fire
control, protection of wildlife and seasonal protection of
roads;(b)
    
    the right to authorize any person to conduct
any work in connection with or incidental to geological or
geophysical exploration pursuant to the Mines and Minerals
Act, or the Exploration Regulations; provided that the
Companies or either of them shall be entitled to receive
reasonable compensation from the person or company which
holds the authorization to conduct the exploration, for any
loss or damage suffered by the Companies or either of them
and resulting from such exploration including by way of
example but without limitation, for any damage to timber,
forest growth, regeneration, improvements or to any of their
operations on the forest management area; and provided
further that the Companies or either of them shall not be
entitled to compensation for damage to timber or forest
growth caused by any such geological or geophysical
exploration where the right to cut such timber has been
granted to a third party under a timber licence or permit;(c)
    
    the right to maintain and enhance forest
resources, including fish and wildlife resources; and(d)
    
    the right to authorize trapping and, after
consultation with the Companies, to authorize domestic stock
grazing provided, however, that the growth performance of the
managed timber species is not impaired and the regeneration
will not be damaged by domestic stock grazing to the point
where the overall stocking is reduced below the reforestation
standard as set out in the Timber Management Regulation and
provided the Companies right to 9




---



##### 



establish, grow, harvest and remove timber is not
significantly impaired.  (2)
    
    The Minister also reserves the following rights to the timber
on the forest management area:  (a)
    
    the right, after consulting with the Companies,
to issue timber dispositions from within the forest
management area to provide timber  (i)
    
    for local use in construction and
maintenance of public works by any local authority,
municipality, county, the Crown in right of Alberta or
Canada, and(ii)
    
    for a Community Timber Use
program  provided that in each five-year cut control period the
total combined volume for these dispositions does not
exceed 20,000 cubic metres of coniferous timber (of which
not more than 4,000 cubic metres shall be disposed of to
any one third party) or 32,890 cubic metres of deciduous
timber,(b)
    
    the right, after consulting with the Companies,
to issue deciduous timber allocations and deciduous timber
dispositions to third parties listed in Appendix C for the
harvest and removal of deciduous timber but shall not
increase the annual allowable cut of those deciduous timber
allocations beyond normal volume increases under the
provisions which exist in the deciduous timber allocations
and provided for by legislation, but shall not issue any new
or additional deciduous timber allocations except as provided
for in subparagraph (c);(c)
    
    after consultation with the Companies, the
right to issue deciduous timber allocations and deciduous
timber dispositions for that percentage of the deciduous
annual allowable cut which was the subject of a deciduous
timber allocation listed in Appendix C but which ceases to
be the subject of a deciduous timber allocation, whether
listed in Appendix C or not;(d)
    
    the right, after consulting with the Companies,
to manage and reforest tree species on those lands which are
subject to the allocations and timber dispositions referred
to in subparagraphs (a) and (b) which may be required to
maintain the annual allowable cut as set out in the approved
detailed forest management plan; and(e)
    
    the right, after consultation with the
Companies, to issue timber dispositions for birch timber. 10




---



##### 



(3)
    
    The Minister and the Companies shall provide each other such
available information as the Minister and the Companies may
reasonably request concerning the operations authorized under permit
and licence. The Minister shall consult with the Companies on an
ongoing basis as may be required to minimize any conflict between
the operations authorized under the permits and licences issued
pursuant to subparagraph (2) and the respective operations of the
Companies. FOREST MANAGEMENT  A.
    
    GENERAL PROVISIONS9.
    
    On the forest management area, the Companies shall, in accordance with
the approved forest management plan follow sound forestry practices in
managing the land base for the purpose of achieving and maintaining a
perpetual sustained yield of timber from the productive forest land, while
not reducing the productivity of the land. 10.
    
    
    (1
    )
    
    Before the Companies submit a plan referred to in subparagraphs (3),
(4) and (5) to the Minister for his review and approval, the Companies
shall
  (a)
    
    develop the requisite forest management plan so
as to ensure that the objectives and principles of
sustainable forest management are maintained in keeping with
the requirements as specified in the forest management
planning manual and as set forth in Appendix B,(b)
    
    make reasonable arrangements required for and
shall conduct public presentations and reviews of the
proposed forest management plans; and(c)
    
    provide the opportunity for third parties
holding timber dispositions on the forest management area to
participate in the formulation of the Companies detailed
forest management plans to ensure that the long term
sustainable objectives and principles of forest management
are maintained.  (2)
    
    After these public presentations and reviews, the Companies
shall incorporate in the forest management plan their response to
the concerns raised by the public respecting the proposed forest
management plan and shall submit this plan to the Minister within
the time specified in subparagraphs (3), (4) or (5), as the case may
be, for the Ministers review and approval.(3)
    
    No later than December 31, 2002, the Companies shall submit
for the Ministers approval a single joint detailed forest
management plan. Prior to approval of a single detailed forest
management plan, the Companies shall continue their respective
timber harvesting operations in accordance 11




---



##### 



with the Crowns approved forest management unit plans and the
terms of the Companies approved annual operating plans.(4)
    
    Not later than the fifth anniversary of the commencement date
of this Agreement, the Companies shall submit for the Ministers
approval a single detailed forest management plan, and this plan
when approved will replace that plan approved under subparagraph
(3).(5)
    
    Not later than the fifteenth anniversary of the commencement
date of this Agreement, the Companies shall submit for the
Ministers approval, a single revised detailed forest management
plan, and this revised plan when approved will replace that plan
approved under subparagraph (4).(6)
    
    The Companies shall prepare the forest management plans
referred to in subparagraphs (3), (4) and (5) in accordance with the
forest management planning manual prepared by the Minister, as
amended from time to time, and having regard to the management,
harvesting and reforestation requirements set forth in Appendix B.(7)
    
    The management strategies in the detailed forest management
plan under subparagraphs (4) and (5) shall:  (a)
    
    provide for the maintenance of the annual
allowable cut for both the coniferous and deciduous tree
species, subject only to the occurrence of natural disasters;
and(b)
    
    account for both the coniferous and deciduous
growing stock in all stands in the forest management area,
and shall ensure that these components are being replaced
through strategies outlined in the approved forest management
plans and annual operating plans.  (8)
    
    The Minister may require the Companies, after discussing any
proposed changes with the Companies, to alter any of the methods
described in the forest management plans before approving such
plans. Without limiting the generality of the foregoing, if there
is any dispute as between the Companies concerning finalization of
the detailed forest management plans required to be submitted in
accordance with this paragraph 10, the Minister may, in his sole
discretion, direct that the Companies proceed to binding arbitration
to resolve such dispute, which arbitration, if so directed by the
Minister, shall occur in accordance with the provisions set forth in
paragraph 45.(9)
    
    The Minister agrees that so long as a plan required under
this paragraph 10 has been submitted by the Companies within the
time periods herein specified and provided such plan complies with
the requirements of this Agreement, unless the Minister has sent a
notice under paragraph 12, the Companies are hereby authorized to
continue to carry on their respective 12




---



##### 



operations pursuant to the existing approved plan, pending
approval being granted by the Minister to the newly submitted
plan.  11.
    
    Subject to paragraphs 10(3) and 10(9) the Companies may not commence or
carry on any construction project or any operation on the forest
management area until the relevant plans which are required to be
submitted pursuant to this Agreement have been submitted by the Companies
and approved in writing by the Minister. The Companies may not digress
from the approved plans without the Ministers consent in writing, with
the understanding that the Minister shall provide a full explanation
whenever consent is withheld.12.
    
    When, in the opinion of the Minister, any plan approved by him becomes
obsolete or inadequate, he may, by reasonable notice in writing, require
the Companies to submit a revised plan for his approval within a specified
time, or within any extended time he may subsequently allow. 13.
    
    
    (1
    )
    
    The Minister shall consult with the Companies concerning proposed
areas and methods of harvesting by timber licensees and permittees in the
forest management area before designating the areas in which timber
licensee and permittee operations may be carried on.
  (2)
    
    The Companies shall, through sustainable forest management
planning, integrate and coordinate the management of the forest
resources with all timber licensees and permittees operating within
the forest management area. 14.
    
    
    (1
    )
    
    The Minister shall require timber licensees and permittees operating
within the forest management area to conduct all harvesting operations in
accordance with the approved plans submitted hereunder and to refrain from
hindering or obstructing the lawful operations of the Companies.
  (2)
    
    The Companies shall have the right to negotiate the purchase
of timber quota certificates or negotiate other arrangements with
holders of certificates, licences and permits in order to combine
timber harvesting operations from stands for maximum utilization of
timber resources. 15.
    
    
    (1
    )
    
    The Companies shall conduct such forest inventories of the forest
management area as are necessary to prepare the plans required by this
Agreement.
  (2)
    
    The Companies shall maintain a reasonably complete and
accurate forest inventory of the forest management area collected to
Alberta Vegetation Inventory Standards version 2.1, or as otherwise
mutually agreed to by the Companies and the Minister, and shall
update all depletions and reforestation.(3)
    
    By December 31, 2002, the Companies shall establish and
implement a growth and yield program consistent with prevailing
standards and 13




---



##### 



policies and acceptable to the Minister on lands within the forest
management area.(4)
    
    The growth and yield program will include the establishment
of a system of permanent sample plots which will be used to monitor
the results of different silvicultural systems during the term of
this Agreement so as to provide accurate information for the
preparation of reliable yield tables.(5)
    
    All information and data related to the forest management
area that has been or will be collected by the Companies or the
Minister relating to forest inventory, other resource uses, the
inventory referred to in subparagraph (2), growth and yield data,
reforestation results, and operational and detailed planning maps
shall be made available from the Companies to the Minister, or from
the Minister to the Companies, whichever is the case, free of charge
upon request and on a timely and confidential basis. 16.
    
    
    (1
    )
    
    The Companies shall conduct their timber harvesting and reforestation
operations in accordance with the approved Alberta Timber Harvest
Planning and Operating Ground Rules until such time as they are replaced
by the established set of ground rules under subparagraphs (2) or (3).
  (2)
    
    Within six (6) months following the approval of the detailed
forest management plan under paragraph 10(4), the Minister and the
Companies shall jointly develop a new set of ground rules consistent
with the detailed forest management plan, for the preparation of
operating plans and to guide harvesting and reforestation
operations.(3)
    
    If a set of ground rules cannot be established by mutual
agreement of the Minister and the Companies, the Minister may
establish new ground rules which are consistent with the approved
detailed forest management plan, but only with the approval of the
Lieutenant Governor in Council.(4)
    
    At the initiative of any party to this Agreement, the ground
rules shall be reviewed jointly by the Minister and the Companies.
These ground rules may be altered by mutual agreement of the
Minister and the Companies. 17.
    
    
    (1
    )
    
    The term of this Agreement shall be divided into four cut control
periods each with a duration of five years or as otherwise agreed to by
the Minister.
  (2)
    
    If either of the Companies over cuts the periodic allowable
cut the Minister shall reduce the allowable cut for the coniferous
or deciduous, as the case may be, during the subsequent cut control
period by an amount equivalent to the entire overcut volume, except
to the extent that the overeat results from the salvage of dead,
damaged, endangered, diseased, decadent or fire killed timber. 14




---



##### 



(3)
    
    Where production is lower than the periodic allowable cut,
the Company responsible for any reduced production may submit a
program satisfactory to the Minister making up the undercut volume
in the subsequent cut control period, or such other period as may be
approved by the Minister. 18.
    
    
    (1
    )
    
    The Companies shall forthwith upon the commencement of this Agreement
establish a forest management operating year that shall commence and end
on dates approved by the Minister.
  (2)
    
    Subject to paragraph 10(3), the Companies shall annually
submit to the Minister a single integrated annual operating plan in
accordance with the ground rules referred to in paragraph 16.(3)
    
    Each annual operating plan shall be prepared in accordance
with the approved forest management plan and shall provide for the
establishment, growing, harvesting and removal of timber in the
forest management area in accordance with the guidelines set forth
in Appendix B and shall include an operating projection showing
the proposed harvesting operation intended by each of the Companies.
Such operating projection shall be in accordance with the standards
and shall cover the period of time specified in the ground rules
referred to in paragraph 16.(4)
    
    The Minister may approve such plan as submitted, or may
require the Companies, after discussing any proposed changes with
the Companies, to alter any harvesting operations described in the
plans, provided that the Minister shall not thereby alter the ground
rules and acts promptly so as to avoid delay in the Companies
respective operations.(5)
    
    When the annual operating plan does not provide for the
salvage of dead, damaged, endangered, diseased or decadent or fire
killed timber, the Minister may give notice to the Companies that he
requires provision for its salvage in such plan. The Companies shall
have thirty (30) days from the date on which such notice is given to
them by the Minister within which to amend the plan, or to justify
the exclusion of such timber from the plan, but if they fail or
elect not to do either within such period, they shall not be deemed
to be in default and the Minister may dispose of such timber to any
person by license or permit not exceeding one year in duration
without compensating the Companies and the volume of timber so
disposed will be charged by the Minister as production against the
annual volume of either deciduous production or coniferous
production, as the case may be, in the forest management area. 19.
    
    
    (1
    )
    
    Tolko shall use reasonable effort to purchase coniferous roundwood if
required by Tolko and if offered to Tolko at prevailing market prices,
provided that the coniferous roundwood possesses a standard of quality
suitable in the opinion of Tolko for use in its Sawmill.
 15




---



##### 



(2)
    
    Footner shall use reasonable effort to purchase deciduous
roundwood if required by Footner and if offered to Footner at
prevailing market prices, provided that the deciduous roundwood
possesses a standard of quality suitable in the opinion of Footner
for use in its Plant. 20.
    
    
    (1
    )
    
    Tolko shall utilize all merchantable coniferous timber cut in road
construction and other incidental operations of the Companies unless
otherwise permitted in writing by the Minister.
  (2)
    
    Footner shall utilize all merchantable deciduous timber cut
in road construction and other incidental operations of the
Companies unless otherwise permitted in writing by the Minister.  21.
    
    The Companies shall not hinder or obstruct the lawful timber operations
of licensees, permittees or respective operations of each other. 22.
    
    
    (1
    )
    
    It is recognized that during their operations, licensees and
permittees may cause some incidental damage to timber. No claim shall be
made by either of the Companies against any licensee, permittee or the
Minister for reasonably unavoidable incidental damage to timber.
  (2)
    
    The Minister shall ensure that all timber licences and
permits issued on the forest management area after the commencement
date of this Agreement shall include a provision preventing a claim
against either of the Companies for reasonably unavoidable
incidental damage to timber.  B.
    
    REFORESTATION 23.
    
    
    (1
    )
    
    Tolko shall reforest at its own expense
  (a)
    
    all lands required for coniferous production
(including incidental coniferous cut by the holder of a
Deciduous Timber Allocation set out in Appendix C) as set
out in the approved forest management plans, cut over by or
on behalf of the Companies under this Agreement to the
required reforestation standard and shall describe its
reforestation program in the detailed forest management plan
and annual operating plans; and(b)
    
    those lands cut over by High Level Forest
Products Ltd. and Tolko Industries Ltd. prior to the
commencement date of this Agreement that comprise part of the
forest management area, the reforestation of which was the
responsibility of High Level Forest Products Ltd. and Tolko
Industries Ltd. and that have not been recognized by the
Minister as being satisfactorily regenerated and shall
reforest those lands to the required reforestation standard
and shall describe its reforestation program in its forest
management plans and annual operating plans. 16




---



##### 



(2)
    
    Footner shall reforest at its own expense  (a)
    
    all lands required for deciduous production,
including incidental deciduous, as set out in the approved
forest management plans, cut over by or on behalf of the
Companies under this Agreement to the required reforestation
standard and shall describe its reforestation program in the
detailed forest management plan and annual operating plans;
and(b)
    
    those lands cut over by Footner prior to the
commencement date of this Agreement that comprise part of the
forest management area, the reforestation of which was the
responsibility of Footner and that have not been recognized
by the Minister as being satisfactorily regenerated and shall
reforest those lands to the required reforestation standard
and shall describe its reforestation program in its forest
management plans and annual operating plans.  (3)
    
    In this Agreement the required reforestation standard means
the reforestation standard under the Timber Management Regulation as
amended from time to time or in any regulation passed in
substitution thereof.  24.
    
    As part of its operations under this Agreement the Companies shall, at
their own expense, furnish all of the seedling trees and propagules
required for their respective reforestation needs.25.
    
    Seed, seedling trees and propagules used for reforestation programs under
this Agreement shall be produced in accordance with the rules established
by the Minister governing the source and type of tree seed and species
used to reforest public land.26.
    
    Each Company shall be solely responsible for reforesting to the required
reforestation standard all productive and potentially productive lands
burned by fire within the forest management area, when the fire has been
caused by the Company, its employees, agents or contractors. For the
purposes of the foregoing, it is agreed by all of the parties to this
Agreement that neither Tolko nor Footner is the agent of the other. 27.
    
    
    (1
    )
    
    The Companies, or either of them may devise and implement enhanced
forest management practices beyond those required under this Agreement.
The Companies and the Minister may enter into an agreement which will
define the programs and conditions that, in the Ministers opinion, will
establish a sustainable increase in the allowable cut approved by the
Minister in the management plan submitted under paragraph 10.
  (2)
    
    Where the Companies, or either of them, implements enhanced
forest management practices under the terms of such an agreement,
and where 17




---



##### 



the Minister and the Companies agree on the amount of additional
allowable cut which will result from enhanced forest management
practices over and above those required under this Agreement and
the Forests Act, then such additional allowable cut shall be
offered by the Minister to the Companies, or Company, as the case
may be, that is undertaking the approved enhanced forest
management practices free of timber dues provided the Minister has
been duly authorized to do so by a regulation passed under section
4 of the Forests Act.(3)
    
    The additional allowable cut resulting from the enhanced
forest management practices will only be offered free of timber dues
after the Companies or Company, as the case may be, has fully
utilized the unenhanced annual allowable cut approved in the
management plans.  C.
    
    FOREST PROTECTION 28.
    
    
    (1
    )
    
    The Minister agrees to provide and maintain an organization of people
and equipment necessary for the protection of the forest from and
suppression of forest fires on the forest management area and, except as
herein otherwise provided, to pay the cost of fighting any forest fire
that originates on the forest management area on the understanding that
the Minister will not be liable for damages to the Companies resulting
from a failure to prevent, control or suppress any fire.
  (2)
    
    Notwithstanding subparagraph (1), each Company shall pay the
cost of suppressing any forest fire that originates on the forest
management area if the fire is caused by or arises out of any of the
operations or activities conducted on the forest management area by
the Company, their employees, agents or contractors; provided,
however, that in no event shall the liability of a Company exceed
the liability provided for in a separate Fire Control Agreement
which may be negotiated and entered into by the Minister and the
Companies. Until such time as a Fire Control Agreement has been
entered into, each Company agrees to have on hand in good working
order such fire fighting equipment and shall train such employees in
fire suppression as specified by the Minister. If the cause of any
fire is disputed by either Company, the dispute shall be resolved by
means of civil suit in the Courts of Alberta.(3)
    
    Notwithstanding anything contained in this Agreement, the
Companies shall not be liable to the Crown for loss of or damage to
Crown timber by fire that is caused by or arises out of any of the
operations or activities conducted on the forest management area by
the Companies or their respective employees, agents or contractors.(4)
    
    In the event of an occurrence of insect damage of epidemic
nature to forest growth or a disease epidemic affecting forest
growth on the forest 18




---



##### 



management area the parties hereto will co-operate in suppressing
the epidemic. RECORDS AND SCALING 29.
    
    
    (1
    )
    
    All scaling and measuring of timber weights and volumes shall be
conducted in accordance with the Timber Regulation, the Scaling Regulation
and the published instructions of the Department.
  (2)
    
    The Companies shall each maintain in the form and in the
manner approved by the Minister complete and accurate records of
their respective operations conducted on the forest management area.(3)
    
    The Minister, or any person authorized by the Minister, may
inspect the records maintained by the Companies pursuant to
subparagraph (2). 30.
    
    
    (1
    )
    
    Unless otherwise prescribed in the Timber Management Regulation,
within thirty (30) days of the termination of every calendar quarter, the
Companies shall each submit to the Minister in writing, on a form
prescribed by the Minister, a return reporting:
  (a)
    
    the volume of timber cut by and for the
Company;(b)
    
    the volume of timber or destroyed by others for
which the Company is entitled to compensation under this
Agreement; and(c)
    
    the volume of timber and primary timber
products purchased for use in its mills and timber and
primary timber products sold by the Company, from their
operations in Alberta and the land from which the timber was
cut.  (2)
    
    The Companies shall each remit to the Minister with their
respective returns the amount of all dues payable for the volume of
timber shown on such returns. CHARGES AND DUES 31.
    
    
    (1
    )
    
    Once a year during the term of this Agreement, the Companies shall
pay to the Minister on or before a date specified by the Minister a
holding and forest protection charge.
  (2)
    
    Initially, the charge in subparagraph (1) will be $700,000.00
in total.(3)
    
    Subsequent holding and forest protection charges shall be
adjusted annually on the anniversary of the commencement date of
this Agreement using the Annual Implicit Price Index for government
current expenditure in goods and service, as published by Statistics
Canada, in the following formula: 19




---



##### 



Index for YearCharge for Year =
    
    Charge for
    
    X
    
    Prior to Year of Paymentof Payment
    
    Previous Year
    
    
    
    Index for Second YearPrior to Year of Payment
 Example: 2003 Holding and Protection Charge =
    
    $
    700,000
    
    
    X
    
    2002 Index2001 Index
  In the event that the Annual Implicit Price Index is no longer
published or in the event of a change in the method used to
calculate the Index, the Minister and the Companies shall mutually
and reasonably agree on a comparable published index to be used in
the above formula.(4)
    
    Notwithstanding the foregoing provisions of this paragraph:  (a)
    
    the holding and forest protection charges
otherwise payable by the Companies shall be reduced by the
eligible expenditures actually made by the Companies in
carrying out approved forest protection plans submitted by
the Companies under subparagraph (6); and(b)
    
    eligible expenditures can only be used to
reduce the holding and protection charges otherwise payable
in the year following the year the expenditures were made and
then only to the limit of those charges.  (5)
    
    For the purposes of subparagraph (4), eligible expenditures
shall not include costs of suppressing forest fires or epidemics of
insects or disease.(6)
    
    The Companies shall submit annually a single forest
protection plan for the Ministers approval.(7)
    
    The forest protection plan shall include a description and an
estimated cost for those proposed expenditures the Companies wish
to claim under subparagraph (4). Within thirty (30) days of
submission of the forest protection plan, the Minister shall
indicate those proposed expenditures that are eligible to reduce the
holding and forest protection charges otherwise payable by the
Companies.(8)
    
    The Companies shall annually submit a joint audited financial
report detailing how much monies were spent by the Companies in
implementing the plans referred to in subparagraph (6). The audited
financial report shall be prepared by an independent, qualified
auditor and shall be prepared in accordance with the Canadian
Institute of Chartered Accountants handbook. 20




---



##### 



(9)
    
    The Companies shall maintain and retain for three (3) years,
such records of the expenditures claimed under subparagraph (4) as
would allow a proper audit of these expenditures and shall, during
normal business hours, make available to the Crown, including, but
not limited to, Crown appointed auditors, the existing records in
whatever form as relate to such eligible expenditures. 32.
    
    
    (1
    )
    
    For all coniferous timber harvested by or for Tolko, Tolko shall pay
to the Minister timber dues at the rates established under the Timber
Management Regulation.
  (2)
    
    Subject to subparagraph (4), until September 13, 2016, for
all deciduous timber harvested by or for Footner, Footner shall pay
to the Minister timber dues at the following rates:  (a)
    
    when the OSB price is less than or equal to
$300 per 1,000 square feet (7/16 inch basis): $0.53 per m3, (b)
    
    when the OSB price is greater than $300 per
1,000 square feet (7/16 inch basis):

OSB Price X $0.53
perm3($300)  (3)
    
    The OSB Price will be set quarterly based on the average of
the weekly prices for the prior quarter. The average weekly OSB
Price in a payment period is calculated by:  (a)
    
    determining for each full week ending on a
Friday of the payment period the net F.O.B. mill price for
1,000 square feet of 7/16 inch OSB for north central U.S.
mills as shown in the publication entitled Random Lengths,
published by Random Lengths Publications Inc.,(b)
    
    converting each weekly price into Canadian
dollars using the exchange rate prescribed by the Minister
for each week, and(c)
    
    calculating the average of those converted
prices.  (4)
    
    Up to and including September 13, 2016, if the Minister is
satisfied that a percentage of deciduous timber in an area is dead,
the timber dues payable by Footner for that percentage of deciduous
timber harvested from the area is $0.27 per cubic metre of
roundwood.(5)
    
    After September 13, 2016, for all deciduous timber harvested
by or for Footner, Footner shall pay to the Minister timber dues at
the rates established under the Timber Management Regulation. 21




---



##### 



(6)
    
    For all timber for which a Company is entitled to
compensation, the Company shall pay to the Minister timber dues in
accordance with the Timber Management Regulation. 33.
    
    
    (1
    )
    
    The Companies shall establish and fund a program on the commencement
date of this Agreement to enhance the management activities and level of
understanding of the forest resources and forest products within the
forest management area. The minimum annual funding for this program, will
be $0.25 per cubic metre based on all timber cut by or for the Companies
from the forest management area.
  (2)
    
    The Companies shall, as requested by the Minister, provide a
report that details the activities of the program referred to in
subparagraph (1). FACILITY OPERATION 34.
    
    
    (1
    )
    
    If, at any time the Sawmill ceases to be in production and operation
for a period of twelve (12) consecutive months, Tolko shall have no right
to and shall not harvest coniferous timber on the forest management area,
until such time as Tolko advises the Minister in writing of its intentions
to resume production and operation of the Sawmill.
  (2)
    
    If, at any time, the Plant ceases to be in production and
operation for a period of twelve (12) consecutive months, Footner
shall have no right to and shall not harvest deciduous timber on the
forest management area until such time as Footner advises the
Minister in writing of its intentions to resume production and
operation of the Plant.(3)
    
    Notwithstanding subparagraphs (1) and (2), where either
Company fails to recommence production and operation of its facility
after such period of twelve (12) consecutive months, the Minister
shall have the right to cancel this Agreement as against the Company
in default.(4)
    
    If either Company submits a proposal for a forest industry
project (the project), including an implementation timetable, as a
replacement for the Sawmill (in the case of Tolko) or the Plant (in
the case of Footner), which project is acceptable to the Minister,
the Minister shall delay exercising his right under subparagraph (3)
to cancel this Agreement as against the Company in default.(5)
    
    If either Company has submitted a proposal acceptable to the
Minister under subparagraph (4) and, in the opinion of the Minister,
the Company is not carrying out the proposal in accordance with its
terms, the Minister may cancel this Agreement as against the Company
in default.(6)
    
    The Companies will notify the Minister, in writing, of any
intended major reduction in production levels of the Sawmill or the
Plant, as the case may 22




---



##### 



be, and such notification will be submitted to the Minister at
least six (6) weeks prior to the intended reduction taking effect.(7)
    
    If there is a closure of either the Sawmill or the Plant as
contemplated in subparagraph (1) or (2), the Company that is
continuing on with its operations shall carry on harvesting
operations in such a manner so as to minimize secondary timber
production. Any secondary timber production that is necessarily
produced by virtue of the Companys ongoing harvesting operation
will be charged by the Minister as either deciduous production or
coniferous production, as the case may be, against the forest
management area. GENERAL PROVISIONS 35.
    
    
    (1
    )
    
    If either Company at any time is in default under any of the
covenants, terms, conditions, provisions, agreements and stipulations in
this Agreement, the Minister may give notice to the Company in default
setting out the default complained of and requiring that Company to remedy
the default within six (6) months of the giving of notice.
  (2)
    
    The Lieutenant Governor in Council may from time to time
extend the period during which the Company is required to remedy any
default complained of in a notice given pursuant to subparagraph
(1).  36.
    
    The Minister shall have the right to have the Companies perform all of
their respective covenants, terms, conditions, stipulations, provisions
and agreements and obligations as contained in this Agreement or to sue
the defaulting Company for damages for any breach or breaches thereof and
the Minister shall also have the right to cancel this Agreement as it
pertains to the defaulting Company as set forth in paragraph 38 provided
the remedies available to the Minister for default by a Company under
paragraph 34 shall be limited to those set out in paragraph 34.37.
    
    When any default or delay by a Company in the performance or observance
of any of the terms, conditions, provisions, agreements, covenants and
stipulations of this Agreement is occasioned in whole or in part through:  (a)
    
    industrial disputes,(b)
    
    governmental review or judicial proceedings
respecting forest management impact of woodlands operations
or the possible environmental impact of the Sawmill or Plant,
or(c)
    
    interruption which is not the result of any
wilful or negligent act or omission by the Company, such as
power failure, fire, sabotage, tempest, war or acts of God 23




---



##### 



and not avoidable by reasonable effort or foresight, that Company shall
not be deemed in default under this Agreement and the time for
performance or observance of such term, condition, provision, agreement,
covenant or stipulation shall be extended by such reasonable period of
time as the Minister may specify in writing to that Company. 38.
    
    
    (1
    )
    
    Except as otherwise provided in paragraph 34 the Minister may, by
giving a defaulting Company ninety (90) days notice in writing, cancel
this Agreement as it relates to the defaulting Company when:
  (a)
    
    any goods or chattels of the defaulting Company
which are located in or about the Town of High Level, Alberta
and which constitute a material part of that Companys assets
located thereat, are lawfully seized or taken in execution by
a creditor of that Company, and that Company has failed to
take any legal action to contest the same within ninety (90)
days after such seizure or taking, or(b)
    
    the defaulting Company makes any general
assignment for the benefit of its creditors or an assignment
in bankruptcy or takes the benefit of any Act in force for
bankrupt or insolvent debtors, or(c)
    
    the defaulting Company fails from time to time
to observe or perform any of the covenants, stipulations,
terms, conditions, provisions and agreements required to be
observed or performed by the Company under this Agreement,
and having been given notice of such failure under paragraph
35 of this Agreement, fails to remedy such failure within the
time allowed by the said paragraph for so doing, or any
extension thereof given by the Lieutenant Governor in
Council.  (2)
    
    Subparagraphs (1) (a) and (b) do not apply if a trustee for
the holders or receiver managers or the holders themselves of bonds,
debentures, or other securities of the defaulting Company exercises
any rights or remedies contained in any deed of trust or mortgage or
other agreement under which such bonds, debentures or other
securities are issued or secured, including but without restricting
the generality of the foregoing, the taking of possession by the
trustee, receiver managers or the holders themselves of the
Companys properties and assets and the operation or disposition
thereof for the benefit of the holders of the Companys bonds,
debentures or other securities.  39.
    
    The Minister does not guarantee any quality or quantity of timber on the
forest management area.40.
    
    No implied contract of any kind by or on behalf of the Minister shall
arise or be construed from anything contained in this Agreement and the
only rights, powers and privileges granted to the Companies are those
contained in this Agreement. 24




---



##### 



41.
    
    The Minister and the Companies agree that the lines on the map shown in
Appendix A hereunto annexed are intended, where those lines outline
areas that are yet unsurveyed, to be the survey lines of the townships,
sections, or half sections, as the case may be, that would exist if such
areas were surveyed under the system of township surveys prescribed by the
Surveys Act(Alberta) and any amendments or substitutions thereto.42.
    
    The Companies shall comply with and observe all the provisions and
requirements of all Acts of the Province of Alberta and the regulations
thereunder in force from time to time that apply to the Companies or to
this Agreement either specially or generally by express wording or by
implication.43.
    
    The Companies shall each during the term of this Agreement, maintain an
office in the Province of Alberta or obtain and maintain a registration
under the Business Corporations Act(Alberta), its regulations or as each
may be amended from time to time. 44.
    
    
    (1
    )
    
    On or before the commencement date of this agreement, the Companies
shall notify the Minister in writing as to the identity of the designate
(designate) appointed by the Companies who will represent the Companies
with respect to matters involving
  (a)
    
    disposition holders other than the Crown;(b)
    
    provision of consent to the activities of
disposition holders on the forest management area,(c)
    
    withdrawal of productive lands, and(d)
    
    collection of compensation from disposition
holders.  (2)
    
    The Companies shall from time to time, as soon as
practicable, notify the Minister in writing of any other matter
which has been agreed upon by them as warranting the appointment of
a designate who will represent the Companies with respect to such
matter and the identity of the designate appointed in respect to
such matter.(3)
    
    The Companies may, from time to time, on 30 days written
notice to the Minister, appoint a new designate to replace a
designate previously appointed pursuant to this paragraph. 45.
    
    
    (1
    )
    
    Where any dispute arises between all of the parties to this Agreement
or between one of the Companies and the Minister concerning the
application or interpretation of this Agreement the dispute may be
referred to arbitration pursuant to the Arbitration Act(Alberta) as may
be amended from time to time, but only upon the mutual agreement of the
parties to the dispute.
 25




---



##### 



(2)
    
    Where the parties to a dispute do not agree to refer a
dispute concerning this Agreement to arbitration as provided in
subparagraph (1), the dispute shall be resolved by means of civil
action before the Courts of the Province of Alberta.(3)
    
    If the Companies are directed to arbitration pursuant to
paragraph 10(8), then the Companies shall refer the dispute, as soon
as practicable, to binding arbitration by a single arbitrator in
accordance with the Arbitration Act.(4)
    
    With respect to any dispute that is to be resolved by
arbitration in accordance with subparagraph (3), the arbitrator used
to resolve such dispute shall be determined from the list of
arbitrators described in subparagraph (5).(5)
    
    Within six (6) months after the commencement date, the
Companies shall, for the purposes of subparagraph (3), prepare a
list of arbitrators qualified to decide forestry matters acceptable
to each of the Companies. The list of arbitrators shall be reviewed
and updated from time to time as required, but no later than five
(5) years after the commencement date and every five (5) years
thereafter. 46.
    
    
    (1
    )
    
    Neither of the Companies shall assign this Agreement or any of their
respective rights granted to them by this Agreement without the consent of
the Minister in writing and such consent may in his sole discretion be
withheld. Where the Minister refuses consent to an assignment, he shall
advise the Company in writing of his reasons for so refusing.
  (2)
    
    Subparagraph (1) does not apply to:  (a)
    
    the employment of one or more contractors in
the normal conduct of its operations; or(b)
    
    an assignment or transfer of this Agreement by
way of mortgage or charge or the grant of a security interest
in this Agreement to lenders to or trustees for lenders to
either of the Companies.  47.
    
    Any waiver by the Minister of the strict performance by the Companies or
either of them of their covenants or of any term, condition, stipulation,
agreement or provision under this Agreement is not binding upon the
Minister unless such waiver is expressed in writing under the authority of
the Minister, and any such waiver or any extension of time granted by the
Lieutenant Governor in Council hereunder shall not abrogate such or any
covenant, term, condition, stipulation, agreement or provision herein or
constitute a waiver or extension of time as to any subsequent breach of
the same or any other covenant, term, condition, stipulation, agreement or
provision herein. 26




---



##### 



48.
    
    Each Company covenants and agrees to observe, perform and keep all
covenants, terms, conditions, stipulations, agreements and provisions
herein on its part to be observed, performed and kept, and time shall be
and remain of the essence thereof and notwithstanding any binding waiver
given by the Minister as referred to in paragraph 47 or any extensions of
time given by the Lieutenant Governor in Council under this Agreement that
thereby may affect the time for performing any particular act, covenant,
term, condition, stipulation, agreement or provision of this Agreement
herein, time shall remain of the essence pertaining to all subsequent
performance by that Company of any and all acts, covenants, terms,
conditions, stipulations, agreements and provisions herein contained and
to this entire Agreement. 49.
    
    
    (1
    )
    
    Each Company assumes liability for and shall pay all claims of the
Minister for all damages to any real or personal property other than
timber of the Crown caused by that Company, its servants, agents, workmen
and contractors in the course of the exercise or purported exercise of its
rights, powers and privileges under this Agreement, whether or not the
damage so caused is due to the negligence of that Company, its servants,
agents, workmen and contractors, as the case may be; provided however,
neither of the Companies assumes liability under this subparagraph for
economic loss or incidental and consequential loss and damage.
  (2)
    
    Subparagraph (1) shall not restrict, in any manner, the
ability of the Minister to pursue the Company under the common law
for economic loss or incidental and consequential loss and damage,
which liability may be resolved by means of arbitration pursuant to
the Arbitration Actwith the mutual agreement of both parties, or
failing such agreement, by civil action before the courts of the
Province of Alberta.  50.
    
    Each Company agrees to hold the Minister harmless against any and all
third party claims, demands or action for which such Company is legally
responsible, including those arising out of negligence, wilful harm, or
crimes by the Company or their employees or agents.51.
    
    The Companies shall submit to the Minister when required, any information
or documents the Minister may reasonably request in respect of matters
relating to this Agreement for the purpose of verifying the Companys
continued compliance of the Companies with the terms of this Agreement.52.
    
    Any notice required to be given under this Agreement shall be deemed to
be well and sufficiently given if delivered to the address set out below
or if mailed at any government post office in the Province of Alberta by
prepaid registered mail addressed as follows: (a)
    
    to Tolko (with a copy to Footner):
    
    to Footner (with a copy to Tolko):11401  92 Street
    
    P.O. Box 1856High Level, Alberta
    
    High Level, AlbertaTOH 1ZO
    
    ToH 1Z0
 27




---



##### 



(b)
    
    to the Minister:Minister of Sustainable Resource DevelopmentLegislature BuildingEdmonton, AlbertaT5K 2B7
  or to such other address any party may from time to time inform
the other party in writing, and any such notice shall be deemed to
have been received on the fourth business day after the mailing
thereof, or if delivered, when delivered; provided that if mailed
should there be between the time of mailing and the actual receipt
of the notice a mail strike, slow down or other labour dispute
which might affect the delivery of such notice then such notice
shall only be effective if and when actually delivered.  53.
    
    This Agreement is made subject to its approval by the Lieutenant Governor
in Council. 54.
    
    
    (1
    )
    
    In the event that this Agreement is cancelled for any reason, the
Minister shall
  (a)
    
    grant to Tolko for the sum of $1.00 each,
coniferous timber quotas for the volume of coniferous timber,
including incidental coniferous timber that becomes available
as a result of the cancellation of this Agreement. Issuance
of the coniferous timber quotas shall be subject to Tolko and
La Crete Sawmills Ltd. (or its successor in title to its
sawmill) being parties to a volume supply agreement under
which Tolko has agreed to make available a certain volume of
sawlogs to La Crete Sawmills Ltd. on specified terms and
conditions.(b)
    
    grant to Footner for the sum of $1.00 each,
deciduous timber allocations for the volume of deciduous
timber, including incidental deciduous timber that becomes
available as a result of the cancellation of this Agreement.  (2)
    
    The obligation of the Minister to grant coniferous timber
quota(s) and deciduous timber allocations under subparagraph (1)
shall survive the cancellation of this Agreement.(3)
    
    If this Agreement is cancelled against one of the Companies,
this Agreement shall not be cancelled against the other party unless
for cause and then only in the manner herein provided. 28




---



##### 



55.
    
    This Agreement inures to the benefit of and is binding upon the Crown and
Her assigns, and each of Tolko and Footner and their respective successors
and assigns if approved by the Minister in accordance with the provisions
of this Agreement. 56.
    
    
    (1
    )
    
    Notwithstanding anything to the contrary in this Agreement, whether
express or implied, each of Tolko and Footner shall be separately
responsible for the performance of their respective obligations under this
Agreement and no obligations under this Agreement shall be construed or
deemed to be joint and several obligations.
  (2)
    
    The parties acknowledge that no partnership is created by
this Agreement and that nothing contained in this Agreement shall or
shall be deemed to constitute the Companies as partners nor agents
of the other nor any other relationship whereby either of the
Companies could be held liable for any act or omission of the other
nor shall either Company have any authority to act for the other or
to incur any obligation on behalf of the other save as specifically
provided by this Agreement.  57.
    
    Where any information, data or documents are provided to the Crown in
confidence under this Agreement, that confidentiality is subject to any
restriction on disclosure or obligation to disclose imposed on the Crown
by law.58.
    
    This Agreement shall be construed as having been made in the Province of
Alberta and the laws of the Province of Alberta shall be applied in the
event of any action or arbitration mutually agreed to, respecting any
dispute arising from this Agreement, its formulation, interpretation, and
each and every other aspect pertaining to or resulting from its entire
contents. IN WITNESS WHEREOFthe party of the first part executes this Agreement
under the hand of the Minister subscribed hereunder and the party of the second
part executes this Agreement by subscribing hereunder the signatures of its
duly authorized corporate officers and the party of the third part executes
this Agreement by subscribing hereunder the signatures of its duly authorized
corporate officers at Edmonton, Alberta this 11th day of September, 2002. Her Majesty the Queen
in Right of Alberta/s/ Authorized Witness
    
    
    
    /s/ Honourable MinisterWitness
    
    
    
    Minister of Sustainable Resource DevelopmentTolko Industries Ltd./s/Authorized Officer
 29




---



##### 



/s/ Authorized Witness
    
    
    
    Per: /s/ Authorized OfficerWitnessFootner Forest Products Ltd./s/ Authorized Witness
    
    
    
    Per: /s/ Authorized OfficerWitness
 30




---



##### 



TOLKO INDUSTRIES LTD. AND FOOTNER FOREST PRODUCTS LTD.
FOREST MANAGEMENT AREA
APPENDIX A [MAP] This is Appendix A to the memorandum of agreement dated Sept. 11, 2002
between HER MAJESTY, THE QUEEN, in right of the Province of Alberta and TOLKO
INDUSTRIES LTD. and FOOTNER FOREST PRODUCTS LTD. Minister of Sustainable Resource Development/s/ Honourable Minister/s/ Authorized WitnessWitnessTolko Industries Ltd./s/ Authorized Witness
    
    
    
    Per: /s/ Authorized OfficerWitnessFootner Forest Products Ltd./s/ Authorized Witness
    
    
    
    Per: /s/ Authorized OfficerWitness
 31




---



##### 



TOLKO INDUSTRIES LTD.
AND
FOOTNER FOREST PRODUCTS APPENDIX B PLANNING CRITERIA The coniferous timber and deciduous timber on the forest management area shall
be managed, harvested and reforested on a perpetual sustained yield basis in
accordance with the provisions of this Agreement including the following
guidelines:  1.
    
    Timber stands in the forest management area shall be classified in
accordance with the forest timber type classification as designated on
maps produced using Alberta Vegetation Inventory Standards version 2.1 or
such other criteria as may be mutually agreed to by all of the parties.2.
    
    All timber in the forest management area will be managed and harvested in
accordance with the following provisions:  (a)
    
    One preferred management strategy on dissolved
land base that protects or enhances each others allocation.(b)
    
    Mutual timber supply gains and losses that are
not directly affected by either Companys business decisions
will be shared.(c)
    
    In reference to subparagraphs (a) and (b)
above, the detailed forest management plan will provide for
the maintenance of mixedwood structures within the forest
management area in a manner that recognizes and addresses
biological diversity. The detailed forest management plan
will provide for the monitoring of stand composition changes
over time and for the implementation of adaptive management
strategies to ensure sustainability of supply of both
deciduous timber and coniferous timber.  3.
    
    So as to accommodate the full utilization of the timber resource growing
on the forest management area and the integration of deciduous and
coniferous harvesting  (a)
    
    the Companies shall be required to make prior
arrangements with each other for the harvest and removal of
coniferous and deciduous timber.(b)
    
    harvesting and removal of timber by either
Company shall be subject to the terms of the approved annual
operating plan submitted pursuant to this Agreement. The
deciduous timber cut by Tolko will be made available to
Footner, and the coniferous timber cut by Footner will be
made available to Tolko. 32




---



##### 



4.
    
    All coniferous and deciduous timber harvested by one Company for another
Company will be done in accordance with a mutually acceptable business
arrangement determined between the harvesting party and the receiving
party.5.
    
    Unless otherwise agreed by Tolko, Footner shall have no rights to any
coniferous timber harvested by either Company on the forest management
area.6.
    
    Unless otherwise agreed by Footner, Tolko shall have no rights to any
deciduous timber harvested by either Company on the forest management
area.7.
    
    All coniferous and deciduous timber cut by and for the Companies on the
forest management area shall be considered as production against the
forest management area. 33




---



##### 



TOLKO INDUSTRIES LTD.
AND
FOOTNER FOREST PRODUCTS LTD. APPENDIX C  A.
    
    DECIDUOUS TIMBER ALLOCATION HOLDERS WITHIN THE FOREST MANAGEMENT AREA  1.
    
    Daishowa-Marubeni International Ltd.2.
    
    Netaskinan Development Corporation3.
    
    Precision Lumber Products Ltd.4.
    
    Ridgeview Mills Ltd.5.
    
    Che Kli Enterprises Ltd.  B.
    
    DECIDUOUS TIMBER ALLOCATION HOLDERS WITHIN THE FOREST MANAGEMENT AREA  ISSUED:  DTAF240001 (AAC = 2 192 m3)DTAF240002 (AAC = 12 192 m3)DTAF240003 (AAC = 30 000 m3)DTAF240004 (AAC = 50 000 m3)DTAF910001 (AAC = 179 837 m3)  PENDING  DTAF25000 (AAC = 2 230 m3)DTAF24000 (AAC = 12 192 m3) The following clause shall apply to the list of deciduous timber allocations in
Appendix C.  (a)
    
    Where a deciduous timber allocation is merged with one or
more deciduous timber allocations, the new deciduous timber
allocation shall be deemed to be listed in Appendix C for the
purpose of paragraph 8(2)(b) of this Agreement. 34