Document:

Exhibit 10.4.3

Exhibit 10.4.3

PORTIONS OF THIS EXHIBIT DENOTED WITH THREE ASTERISKS (***) HAVE BEEN

OMITTED AND WILL BE SUBJECT TO A REQUEST FOR CONFIDENTIAL TREATMENT

WITH THE SECURITIES AND EXCHANGE COMMISSION.

LOG SUPPLY OPTION AGREEMENT

THIS AGREEMENT made as of the 1st day of January, 2008.

BETWEEN:

CATALYST PAPER CORPORATION, 2nd Floor, 3600
Lysander Lane, Richmond, British Columbia, as managing partner for
and on behalf of CATALYST PAPER, a general partnership of
Catalyst Paper Corporation and Catalyst Pulp Operations Limited

(“Catalyst”)

AND:

TIMBERWEST FOREST CORP. and TIMBERWEST FOREST
COMPANY, a general partnership of TimberWest Forest Corp. and
TimberWest Holdings Ltd., 2300 — 1055 West Georgia Street,
Vancouver, British Columbia

(collectively “TimberWest”)

WHEREAS:

	A.	 	TimberWest supplies chips and pulplogs to Catalyst pursuant to an agreement dated June 23,
1997 entitled “Amended and Restated Chip and Pulplog Supply Agreement” as amended to the date
hereof (the “Chip and Pulplog Supply Agreement”) now between Catalyst (as successor to 3264891
Canada Limited and 3264912 Canada Limited) and TimberWest (as successor to TimberWest Forest
Limited); and

	B.	 	TimberWest and Catalyst have agreed to modify the Chip and Pulplog Supply Agreement by
replacing certain of the chip supply obligations of TimberWest under that Agreement with the
obligations of TimberWest under this Agreement;

THEREFORE in consideration of the premises and the mutual covenants hereafter set out and other
good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the
parties agree as follows:

	1.	 	INTERPRETATION

	 
	1.1.	 	Definitions. In this Agreement:

	 	(a)	 	“2008 AAC” has the meaning set out in Section 1.2;

	 
	 	(b)	 	“AAC” means, with respect to any year, the aggregate allowable annual cut (as
defined in the British Columbia Forest Act) for the Crown Tenures as at the first day
of the year;

 

 

 

	 	(c)	 	“Affiliate” has the meaning set out in the British Columbia Business
Corporations Act;

	 	(d)	 	“Business Day” means a day that is not a Saturday, Sunday or statutory holiday
in British Columbia;

	 
	 	(e)	 	“Closure Date” means May 9, 2008;

	 	(f)	 	“Crown Tenures” means Tree Farm Licence 47, Forest Licence A20913 and Forest
Licence A29159 and any extensions or replacements thereof;

	 	(g)	 	“Delivery Notice” means an Initial Delivery Notice or a Supplemental Delivery
Notice;

	 	(h)	 	“Elk Falls Sawmill” means the Elk Falls sawmill facility located at Campbell
River, British Columbia adjacent to Catalyst’s Elk Falls pulp and paper mill;

	 	(i)	 	“Fibre Supplier” means a supplier that provides wood chips to Catalyst in
exchange for logs;

	 
	 	(j)	 	“Initial Delivery Notice” has the meaning set out in Section 3.3;

	 
	 	(k)	 	“Initial Production Notice” has the meaning set out in Section 3.1;

	 
	 	(l)	 	“Logs” means:

	 	(i)	 	second growth fir standard
(15"+) sawlogs, second growth
hemlock/balsam (hembal) standard (15"+) sawlogs, second growth fir gang sawlogs
(8"+), second growth hembal gang (8"+) sawlogs and old growth hembal gang
(8"-14") sawlogs (“Standard/Gang Logs”); and

	 	(ii)	 	second growth fir peewee (5" to 7" tops) sawlogs and second
growth hembal 5" to 7" tops) sawlogs (“Peewee Logs”);

	 	(m)	 	“m3” means a cubic metre of logs, British Columbia metric scale as
determined under the Forest Act;

	 	(n)	 	“Option Volume” means, subject to adjustment under Section 2.2, (***) of Logs
divided into the following two components:

	 	(i)	 	(***) of Standard/Gang Logs; and

	 
	 	(ii)	 	(***) of Pee Wee Logs;

	 	(o)	 	“Parcel” means a raft, boom, bag, barge, bundle, group of bundles or other
grouping of Logs commonly offered for sale as a unit;

 

2

 

	 	(p)	 	“Point of Sale” means a suitable water storage area for Logs 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 Barnston Island; or

	 
	 	(iii)	 	such other location that the parties may agree upon;

	 	(q)	 	“Production Notice” means an Initial Production Notice or a Revised Production
Notice in the form attached as Schedule A;

	 	(r)	 	“Residual Chips” means hemlock/balsam, coastal Douglas fir, sitka spruce, red
cedar or yellow cedar wood chips produced as a by-product of wood manufacturing but
excluding wood chips produced from whole log chipping;

	 
	 	(s)	 	“Revised Production Notice” has the meaning set out in Section 3.2;

	 
	 	(t)	 	“Shortfall” has the meaning set out in Section 3.5;

	 
	 	(u)	 	“Supplemental Delivery Notice” has the meaning set out in Section 3.3;

	 	(v)	 	“Timber Harvesting Management Agreement” means the amended and restated timber
harvesting management agreement dated January 1, 1998 between Fletcher Challenge Canada
Limited (now Catalyst Paper Corporation) and TimberWest as amended, replaced or
restated from time to time;

	 	(w)	 	“Vancouver Log Market Price” means, at any time 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 such Parcel;

	 	(ii)	 	the competitive prices for equivalent volumes of Logs of the
volume, type and quality included in such Parcel 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

	 	(x)	 	“year” means a calendar year.

	1.2.	 	Confirmation of 2008 AAC. The parties acknowledge and confirm that the AAC in effect as of
January 1, 2008 is 698,662 m3 (the “2008 AAC”).

	 
	1.3.	 	Currency. All dollar amounts referred to in this Agreement are Canadian dollars.

	1.4.	 	Construction. References 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.
The 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 Law. This Agreement shall be governed by and construed in accordance with the laws
of the Province of British Columbia and the laws of Canada applicable therein.

 

3

 

	2.	 	SUPPLY COMMITMENT

	2.1.	 	Option Volume. During each year of the term of this Agreement, TimberWest will offer to sell
such volume of Logs to Fibre Suppliers and Catalyst as Catalyst specifies from time to time up
to the Option Volume plus any Shortfall in accordance with and subject to the terms and
conditions of this Agreement.

	2.2.	 	Adjustments. The Option Volume will be adjusted, upwards or downwards, in accordance with the
following adjustments:

	 	(a)	 	for 2008, the Option Volume will be (***);

	 	(b)	 	for any other year, the Option Volume will be a quantity of Logs determined by
multiplying (***) by a fraction, the numerator of which is the AAC for that year and
the denominator of which is the 2008 AAC and will also be adjusted upwards or downwards
to reflect other changes in harvest levels under the Crown Tenures imposed by
government regulation but no such adjustments will be made as a result of:

	 	(i)	 	reductions in the AAC of the Crown Tenures resulting from
removal of private land from Tree Farm Licence 47; or

	 	(ii)	 	voluntary agreement by TimberWest to reduce the AAC of the
Crown Tenures; or

	 	(iii)	 	reductions in the harvest level of the Crown Tenures due to
the failure of TimberWest to comply with the terms and conditions of the Crown
Tenures or applicable laws and regulations.

If the Option Volume differs from (***) in any year, then the (***) Standard/Gang Log
component and the (***) Peewee Log component of the Option Volume will increase or decrease
in the same proportion as the increase or decrease in the Option Volume from (***).

	2.3.	 	Variations in End Use Sort and Species Requirements. The actual volume available from each of
the five end use sorts included in the Standard/Gang Log component of the Option Volume and
from each of the two end use sorts included in the PeeWee Log component of the Option Volume
will vary from year to year in accordance with the species, size and volume mix of the actual
harvest from the Crown Tenures in such year. Despite any such variation in volume from end
use sorts, not less than 75% of the Option Volume is to be available as hemlock/balsam
(hembal) Logs in any year that TimberWest harvests 100% or more of the AAC of the Crown
Tenures and not less than 66 2/3% of the Option Volume is to be available as hembal Logs in
any year that TimberWest harvests less than 100% of the AAC of the Crown Tenures except as
otherwise agreed between TimberWest and Catalyst. TimberWest will accommodate special sorting
requests as long as pricing keeps TimberWest whole (as determined by TimberWest acting
reasonably) with regard to the selling price for the entire package, including any additional
handling costs.

 

4

 

	2.4.	 	Source of Option Volume. Logs made available by TimberWest under this Agreement will be
harvested from the Crown Tenures and flow in the normal course of TimberWest’s harvesting
activities on the Crown Tenures subject to the following:

	 	(a)	 	Logs purchased by TimberWest through existing TimberWest dryland sorts in the
normal course of business in the vicinity of the Crown Tenures may be substituted for
Logs from the Crown Tenures;

	 	(b)	 	rafted volume purchased by TimberWest from third parties shall not be included
in the Option Volume except to the extent remaining in TimberWest’s inventory for the
Elk Falls Sawmill as at the Closure Date;

	 	(c)	 	TimberWest may in its sole discretion substitute Logs originating from
TimberWest’s private lands for timber from the Crown Tenures; and

	 	(d)	 	if acceptable to TimberWest in its sole discretion, Logs originating from
TimberWest’s private lands may be substituted for timber from the Crown Tenures at the
request of Catalyst.

	2.5.	 	Use of Logs by Catalyst. Catalyst will not be restricted in any way in directing Logs or
reselling the Logs it purchases under this Agreement except as follows:

	 	(a)	 	Catalyst will not, without the prior written consent of TimberWest, export Logs
it purchases under this Agreement from British Columbia and will require third parties
who acquire the Logs through direction or purchase from Catalyst, to agree not to
export the Logs from British Columbia; and

	 	(b)	 	Logs directed to Fibre Suppliers under this Agreement cannot be used to replace
volumes offered to Fibre Suppliers under the Timber Harvesting Management Agreement
except to the extent used to access a New Supply of Chips. For this purpose “New
Supply of Chips” means, with respect to a Fibre Supplier, the availability of milling
or chipping capacity not available as of January 1, 2008, so as to provide a new supply
of Residual Chips, examples of which include:

	 	(i)	 	the construction of a new facility, the expansion of an exiting
facility, or an increase in production (whether from improvements or additional
shifting); and

	 	(ii)	 	the release of such Fibre Supplier from an existing supply
obligation with respect to Residual Chips produced at its facility, other than
a supply obligation to Catalyst.

	2.6.	 	Term. This Agreement shall commence on the date hereof and continue in effect until
terminated by either party on not less than two years’ prior written notice to the other
party, except that TimberWest cannot give such notice any earlier than January 1, 2016.

	3.	 	PRODUCTION NOTICES AND VOLUME REQUESTS

	3.1.	 	Production Notices. By September 30 of each year, TimberWest will provide Catalyst with a
statement as to the Option Volume for the next year together with particulars of the
calculation thereof and a Production Notice (an “Initial Production Notice”) which states:

	 	(a)	 	the anticipated AAC of the Crown Tenures for the next year, the Option Volume
for the next year as calculated in accordance with Section 2.2 and the volume of the
total planned harvest from the Crown Tenures for the next year;

 

5

 

	 	(b)	 	the projected production of Logs by end use sort from the Crown Tenures for the
next year based on the total planned harvest volume, including monthly production of
Logs; and

	 	(c)	 	if the projected production of Logs for the next year is less than the Option
Volume, the production of Logs by end use sort from the Crown Tenures had sufficient
harvesting occurred for the full Option Volume to be available, including monthly
production of Logs, calculated by multiplying the projected production of Logs from
each end use sort by a fraction, the numerator of which is the Option Volume and the
denominator of which is the planned production of Logs from the Crown Tenures.

An Initial Production Notice for 2008 is to be provided to Catalyst on or before the
execution and delivery of this Agreement.

	3.2.	 	Revised Production Notices. TimberWest will provide a revised Production Notice (a “Revised
Production Notice”) to Catalyst within 5 Business Days before the commencement of any calendar
quarter if TimberWest anticipates that there will be a material change (“material change” in
this Section meaning an increase or decrease in total available volumes of more than 15%) in
the production of Logs for the remaining calendar quarters in the year. A Revised Production
Notice cannot operate so as to reduce the volume to be made available pursuant to a request
made by Catalyst based on a previous Production Notice before receipt of the Revised
Production Notice except where available volume is reduced due to shutdowns or curtailments of
TimberWest’s logging operations under the Crown Tenures under Section 7.4.

	3.3.	 	Volume Requests. By October 31 of each year, Catalyst will provide to TimberWest, a notice
(an “Initial Delivery Notice”) specifying the volume of Logs and applicable end use sorts that
Catalyst wishes to access on a monthly basis in the following year, commencing in January of
the following year, based on the Initial Production Notice. After providing an Initial
Delivery Notice, Catalyst may provide further notices (each a “Supplemental Delivery Notice”)
requesting an increase in or decrease to volumes of Logs from specific end use sorts subject
to the following:

	 	(a)	 	Supplemental Delivery Notices must specify the volume of Logs requested,
applicable end use sort(s) and the month that delivery of any additional volume is to
commence or the month in which any increase or decrease in volumes set out in a
previous Delivery Notice is to take effect;

	 	(b)	 	a Supplemental Delivery Notice must be provided to TimberWest at least 3 months
prior to the month in which any increase or decrease in volume under such Supplemental
Delivery Notice is to take effect;

 

6

 

	 	(c)	 	the volume that Catalyst may request from a particular end use sort during the
remainder of a year cannot exceed the remaining volume for that end use sort per the
most recent Production Notice less volume that is to be delivered in the remainder of
the year from prior requests for that sort (for example, if Catalyst issued an Initial
Delivery Notice requesting 60,000 m3 of a 100,000 m3 sort
described in an Initial Production Notice to be delivered evenly over the year such
that 30,000 m3 was to be delivered in the last six months of the year, then
the maximum additional volume that Catalyst could request from such sort in a
Supplemental Delivery Notice to take effect July 1 would be 20,000 m3
(50,000 m3 — 30,000 m3); and

	 	(d)	 	if a Revised Production Notice indicates the availability of Logs that Catalyst
specified for delivery in its Initial Delivery Notice that were not indicated as being
available in prior Production Notices for that year (in this Section, the “Additional
Volume”):

	 	(i)	 	TimberWest may, concurrently with delivery of the Revised
Production Notice advise Catalyst of a reduction in the amount of notice
required to provide Supplemental Delivery Notices under Subsection (b) in
respect of the Additional Volume;

	 	(ii)	 	delivery of all or any part of the Additional Volume under this
Agreement will be limited to the volume of Logs that Catalyst is able to
utilize in the current year and will be conditional on Catalyst including such
Logs in a Supplemental Delivery Notice issued by Catalyst subsequent to receipt
of the Revised Production Notice identifying the Additional Volume; and

	 	(iii)	 	a Shortfall under Section 3.5 will be reduced only to the
extent that the Logs included in the Additional Volume are delivered by
TimberWest pursuant to Supplemental Delivery Notices.

Catalyst will advise TimberWest, at least 20 Business Days before the commencement of each
month, as to the buyers of the volume of Logs that Catalyst requested for that month and the
allocation of that volume of Logs among those buyers.

	3.4.	 	Delivery of Actual Volume. TimberWest will offer Logs to Fibre Suppliers or Catalyst each
year pursuant to requests made by Catalyst in accordance with Section 3.3 to the extent that
the volume and end use sort requested by Catalyst is in accordance with the projected Log
production by end use sort specified in the Production Notice that is in effect when the
request is made.

 

7

 

	3.5.	 	Shortfalls. Subject to the limitations in Section 3.3, Catalyst may request in a Delivery
Notice up to the entire Option Volume (and up to the entire volume of Logs from particular end
use sorts) in any year based on the entire Option Volume being available in accordance with
the Initial Production Notice regardless of whether the Initial Production Notice or any
subsequent Revised Production Notice indicates that TimberWest does not expect to produce the
entire Option Volume or the entire volume of Logs from a particular end use sort that year. If
the volume of Logs requested by Catalyst in a Delivery Notice in respect of a year exceeds the
volume made available by TimberWest during the year (as permitted by Section 3.6), the
following shall apply to the difference (the “Shortfall”):

	 	(a)	 	the Shortfall must be made available by TimberWest, in addition to the Option
Volume, in the two years following the year which resulted in the Shortfall;

	 	(b)	 	Logs used to make up a Shortfall must, unless otherwise agreed by the parties,
be of the same end use sort as the Logs making up the Shortfall (for example, a
Shortfall in second growth hembal standard sawlogs would have to be made up with second
growth hembal standard sawlogs); and

	 	(c)	 	any outstanding Shortfalls are to be made up prior to the expiration or
termination of this Agreement, failing which the term of this Agreement will be
automatically extended for an additional year from the date that it would otherwise
expire to allow for the delivery of the Shortfalls. Log deliveries during such
extension shall be limited to the outstanding Shortfalls and Catalyst will not be
entitled to request any additional Option Volume during such extension.

	3.6.	 	Volume Requirements. TimberWest may, for bona fide business reasons, make less than the
Option Volume requested by Catalyst available in any year subject to the following:

	 	(a)	 	except as a result of the circumstances referred to Subsection 3.6(c) below,
the total Shortfalls at any time cannot exceed 50% of the then current Option Volume;

	 	(b)	 	subject to subsection 3.6(c), a minimum of 50% of the Standard/Gang Log and
PeeWee Log components of the Option Volume is to be available each year (for example,
assuming the Option Volume for 2009 is (***), TimberWest must make a minimum of (***)
of Standard/Gang Logs and (***) of Peewee Logs available in 2009); and

	 	(c)	 	for one year every five years, TimberWest may due to Economic Hardship make
available less than the volume otherwise required by this Section 3.6 as long as
TimberWest advises of the pending reduction by September 30 of the year preceding the
reduction and any Shortfall arising from this relief is made up in the following two
years. For this purpose “Economic Hardship: means economic conditions in the British
Columbia coastal forest industry which result in shutdown of timber harvesting
operations by the industry generally.

	3.7.	 	Failure to Provide Initial Production Notice. If TimberWest fails to provide an Initial
Production Notice to Catalyst for any year in accordance with Section 3.1, TimberWest will be
deemed to have provided an Initial Production Notice to Catalyst in respect of that year
specifying an Option Volume of (***) allocated among the end use sorts for the Logs in the
proportions specified in the previous Initial Production Notice.

3.8. Particulars from TimberWest. TimberWest will provide to Catalyst:

	 	(a)	 	within 20 Business Days after the end of each month, a statement setting out
the following in respect of that month:

	 	(i)	 	the volume, end use sort and price of Logs sold to each Fibre
Supplier in that month pursuant to this Agreement; and

	 	(ii)	 	the volume, end use sort and price of any Logs which Catalyst
directed to be offered to any Fibre Supplier during that month which the Fibre
Supplier refused to purchase and the reasons for that refusal; and

 

8

 

	 	(b)	 	if requested by Catalyst on a month-to month basis, copies of invoices to Fibre
Suppliers in respect of Log sales made to Fibre Suppliers by TimberWest under this
Agreement at the same time such invoices are provided to Fibre Suppliers.

	3.9.	 	Relationship with Fibre Suppliers. The parties acknowledge and agree that this Agreement is
solely for the benefit of the parties, and will not confer or be deemed to confer any right or
remedy upon any Fibre Supplier. Catalyst’s agreement with each Fibre Supplier will obligate
the Fibre Supplier to purchase the Logs offered to the Fibre Supplier by TimberWest as
specified by Catalyst pursuant to this Agreement (except in the circumstances where Section
7.2 would apply) pursuant to pricing, payment and other terms and conditions of sale
consistent with Sections 4.1, 4.2, 5.1, 5.2 and 5.3 and dispute resolution provisions
consistent with Sections 8.1 and 8.2 with respect to disputes over the price or quality of
Logs or other matters relating to Logs offered by TimberWest. If requested by TimberWest,
Catalyst shall assign, without recourse to Catalyst, the Fibre Supplier’s obligation to
purchase and pay for Logs offered to the Fibre Supplier by TimberWest (including the ability
of TimberWest to conduct any arbitration in respect of the price or quality of Logs) in order
for TimberWest to enforce the Fibre Supplier’s purchase and payment obligation directly
against the Fibre Supplier. If TimberWest proceeds with an arbitration with a Fibre Supplier
with respect to the price or quality of Logs or other matters relating to Logs and such
arbitration results in any costs or expenses being awarded against Catalyst, then payment of
such costs and expenses shall be the responsibilty of TimberWest.

	4.	 	PRICING

	4.1.	 	Price of Logs. Logs will be offered to Fibre Suppliers or Catalyst as the case may be in
accordance with this Agreement at the Vancouver Log Market Price calculated on a F.O.B. Point
of Sale basis.

	4.2.	 	Payment. Payment for Logs is to be made by the buyer per normal industry practice at the time
of sale, which the parties acknowledge is currently 10 days after delivery at the Point of
Sale and invoicing with title passing to the purchaser only upon receipt of payment.

	4.3.	 	Disputes with Catalyst. If there is a dispute between TimberWest and Catalyst regarding the
price or quality of Logs or other matters relating to Logs offered to Catalyst under this
Agreement, the dispute will be referred to arbitration under this Agreement for determination
and TimberWest will be paid the amount that TimberWest considers is the Vancouver Log Market
Price for such Logs at the time of purchase pending the arbitrator’s determination. Any change
to that amount determined by arbitration or otherwise agreed by the parties to the dispute
shall be adjusted between the parties by the 5th Business Day after such determination or
agreement.

 

9

 

	4.4.	 	Price Disputes with Fibre Supplier. If there is a dispute between TimberWest and the Fibre
Supplier or between Catalyst and the Fibre Supplier regarding the price or quality of Logs or
other matters relating to Logs offered to the Fibre Supplier pursuant to this Agreement,
Catalyst may, and shall if requested by TimberWest, refer the dispute to arbitration under its
agreement with the Fibre Supplier and have TimberWest conduct the arbitration on behalf of
Catalyst. If the arbitration results in any costs or expenses being awarded against Catalyst,
then payment of such costs and expenses shall be the responsibility of TimberWest.

	4.5.	 	Vancouver Log Market. If a material change occurs in respect of the Vancouver log market to
an extent that renders such market an unreliable indicator of the fair market value of logs
traditionally purchased and sold thereon, the parties will use all reasonable efforts to agree
upon a different pricing basis that more closely conforms with their mutual intentions in
entering into this Agreement, and failing such agreement, the different pricing basis will be
determined by arbitration.

	4.6.	 	No Fee. No timber harvesting management fee or other fee will be payable to TimberWest in
addition to the purchase price for Logs sold under this Agreement.

	5.	 	TERMS AND CONDITIONS

	5.1.	 	Availability of Logs. Where Catalyst purchases Logs or directs the sale of Logs to Fibre
Suppliers, TimberWest will advise the designated buyer of the availability of Logs, including:

	 	(a)	 	the applicable Point of Sale;

	 
	 	(b)	 	the volume, species and specifications of Logs in each Parcel of Logs;

	 
	 	(c)	 	the location of such Parcels; and

	 
	 	(d)	 	the price for such Parcels determined in accordance with this Agreement.

	5.2.	 	Inspection and Acceptance. The buyer of the Logs will be entitled to inspect any Parcels of
Logs made available hereunder and will have a period of 10 Business Days after receipt of
advice under Section 5.1 to accept such Parcels.

	5.3.	 	Terms and Conditions of Sale. The purchase and sale of Logs under this Agreement will be made
on the following terms and conditions (or such other terms and conditions consistent with
industry practice in coastal British Columbia as Catalyst and TimberWest may mutually agree
from time to time):

	 	(a)	 	Logs will be of the quality and sort specifications which conform in all
respects to industry standards in coastal British Columbia;

	 	(b)	 	the buyer of the Logs will be required to purchase boomsticks at their fair
market value upon payment for a Parcel of Logs and to otherwise comply with boomgear
practices and procedures in accordance with generally accepted industry practices in
effect at the relevant time;

	 	(c)	 	advice of availability of Logs under this Agreement and acceptance or rejection
thereof may be communicated by telephone;

 

10

 

	 	(d)	 	scaling will be done in accordance with the applicable policies and industry
standards of the Ministry of Forests and Range, scaling expenses will be shared equally
by TimberWest and the buyer of the Logs (being Catalyst or a Fibre Supplier, as the
case may be); if TimberWest or the buyer 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:

	 	(i)	 	such party (for the purposes of this Section 5.3(d), 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;

	 	(ii)	 	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, licensed scaler to also perform a checkscaling, failing which the
checkscaling will be performed by the scaler named by the Disputing Party;

	 	(iii)	 	each party will take all reasonable steps to ensure that the
checkscaling is carried out in a prompt and efficient manner;

	 	(iv)	 	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;

	 	(v)	 	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;

	 	(vi)	 	if clause (v) 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 (v) will be shared
equally by the parties;

	 	(e)	 	TimberWest will be responsible for the payment of all stumpage, royalty and
other charges in connection with the Logs sold to the buyer and all transportation and
other costs incurred in order to deliver such Logs to the Point of Sale;

	 	(f)	 	Catalyst or the Fibre Supplier as applicable will be solely responsible at its
expense for taking delivery of and transporting any Logs from the Point of Sale for
those Logs and making arrangements for transportation to ensure that such Logs are
removed from Points of Sale on an even and regular basis;

	 	(g)	 	Logs will be properly and securely bundled in intact Parcels which are fit for
safe coastal towing; and

 

11

 

	 	(h)	 	except as expressly varied in this Agreement, the sale of Logs to Catalyst or a
Fibre Supplier under this Agreement will be in accordance with generally accepted log
sale practices in coastal British Columbia.

	5.4.	 	Availability. To the extent that the normal course of Timber West’s harvesting activities on
the Crown Tenures permit, TimberWest will offer Parcels of Logs in the order of time of
harvest in a regular and systematic manner during each year.

	5.5.	 	Encumbrances. All Logs sold pursuant to this Agreement will be free and clear of all liens,
charges and encumbrances of any nature whatsoever.

	6.	 	DEFAULT

	6.1.	 	Default by TimberWest or Catalyst. An Event of Default will exist with respect to a party if
such party has committed a material default in the performance of its obligations hereunder
(for the purposes of this Section, the failure by a party to make two successive payments
required under this Agreement, other than a failure arising from a bona fide dispute over the
requirement to make such payment, will be deemed to be a material default), notice has been
given to such party by the other party specifying the default and such default remains
unremedied:

	 	(a)	 	in respect of a failure to make two successive payments required under this
Agreement, more than 5 Business Days have elapsed since the date that the notice is
delivered to such party;

	 	(b)	 	in any other case, more than 15 Business Days have elapsed since the expiration
of such period following the giving of such notice during which such party might by the
exercise of reasonable diligence have remedied the default;

	 	(c)	 	in the case of a default that could not, by the exercise of reasonable
diligence, be remedied within the period described in Subsection (b), the earlier of:

	 	(i)	 	the day on which the 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.

	6.2.	 	Remedies. At any time while an Event of Default exists with respect to a party, the other
party may exercise any right or remedy available to it, at law or in equity, and may, without
prejudice to any other right or remedy, terminate this Agreement by notice to the other party
to that effect, effective on a date specified in such notice, which date shall be not earlier
than the date on which such notice is given.

	6.3.	 	Consequential Damages. Any liability of either party to the other for breach of this
Agreement or for negligence of its directors, officers, employees, agents and contractors will
not extend to, or include liability for, loss of profits or contribution, loss of use of
property or other consequential damages.

 

12

 

	6.4.	 	Failure of Fibre Supplier to Complete Purchase. If a Fibre Supplier fails to complete the
purchase of any Parcel of Logs offered to the Fibre Supplier by TimberWest pursuant to this
Agreement (including without limitation failure to pay the purchase price for the Parcel of
Logs) for any reason other than a dispute regarding the price or quality of Logs or other
matters relating to the Logs, then TimberWest may, at any time within 5 Business Days after
such failure, give notice to Catalyst specifying the volume, species and other particulars of
the Logs in such Parcel and the following shall apply:

	 	(a)	 	Catalyst may, by notice to TimberWest given no more than 5 Business Days after
its receipt of TimberWest’s notice under this Section, purchase the Parcel of Logs
itself or direct TimberWest to sell the Logs to another Fibre Supplier;

	 	(b)	 	if the Parcel of Logs is not directed to another Fibre Supplier or purchased by
Catalyst under Subsection (a), TimberWest may either claim against the Fibre Supplier
under Section 3.9 and/or dispose of the Parcel of Logs for its own account but
TimberWest will have no claim against Catalyst in connection with the Parcel of Logs;

	 	(c)	 	Logs directed to another Fibre Supplier or purchased by Catalyst pursuant to
Subsection (a) or disposed of by TimberWest pursuant to Subsection (b) will be
considered to have been offered by TimberWest under Section 3.1 for the purposes of
determining the volume of Logs offered by TimberWest in the applicable year; and

	 	(d)	 	where Catalyst directs TimberWest to move the Parcel to another Point of Sale,
the reasonable transportation costs incurred by TimberWest in doing so shall be
payable by Catalyst to TimberWest within 15 days after Catalyst’s receipt of
TimberWest’s invoice therefor.

	6.5.	 	Recurring Default by Fibre Supplier. If a Fibre Supplier (in this section a “Defaulting Fibre
Supplier”):

	 	(a)	 	has refused to purchase Logs offered by TimberWest pursuant to this Agreement
as a result of a dispute regarding the price or quality of Logs or other matters
relating to Logs on more than two occasions in any year and dispute resolution
processes conducted in respect of such disputes have been resolved in favour of
TimberWest; or

	 	(b)	 	fails to comply with any arbitration award regarding disputes over price or
quality of Logs offered by TimberWest pursuant to this Agreement; or

	 	(c)	 	fails to complete the purchase of Logs offered by TimberWest pursuant to this
Agreement (including without limitation failure to pay the purchase price for Logs) on
more than two occasions in any year for any reason other than a dispute regarding the
price or quality of Logs or other matters relating to Logs;

 

13

 

then TimberWest, may, by notice given to Catalyst prior to the next scheduled delivery date
of Logs to the Defaulting Fibre Supplier specifying the volume, particulars and scheduled
delivery date of further deliveries of Logs to such Defaulting Fibre Supplier, suspend
further deliveries of Logs to be made to the Defaulting Fibre Supplier pursuant to current
Delivery Notices until TimberWest is satisfied, acting reasonably, that the circumstances
causing such failure or failures no longer apply. During the period that TimberWest
suspends deliveries of Logs to a Fibre Supplier under this Section:

	 	(d)	 	Catalyst may, by notice to TimberWest given at least 5 Business Days prior to
the scheduled delivery date for Parcels of Logs which were to be offered to the
Defaulting Fibre Supplier (or no more than 10 Business Days after receipt of
TimberWest’s notice if the time period between the receipt of TimberWest’s notice and
the scheduled delivery date for particular Parcels of Logs is less than 15 Business
Days), direct TimberWest to sell the Parcels of Logs to other Fibre Suppliers who are
not Defaulting Fibre Suppliers or purchase such Logs itself;

	 	(e)	 	any Logs which are not directed to other Fibre Suppliers or purchased by
Catalyst under Subsection (d) may be disposed of by TimberWest for its own account and
as its sole remedy; and

	 	(f)	 	Logs directed to other Fibre Suppliers or purchased by Catalyst pursuant to
Subsection (d) or disposed of by TimberWest pursuant to Subsecton (e) will be
considered to have been offered by TimberWest under Section 3.1 for the purposes of
determining the volume of Logs offered by TimberWest in the applicable year.

	7.	 	FORCE MAJEURE AND CURTAILMENT

	7.1.	 	Affecting Catalyst. If, at any time, Catalyst ceases or curtails purchases of wood chips
from Fibre Suppliers due to the shutdown or curtailment of the operation of the pulp or paper
production facilities or wood chip unloading facilities at any pulp mill or pulp and paper
mill owned by Catalyst or any of its Affiliates due to adverse weather conditions, fire,
strike, lockout or other labour disruptions, 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
for any similar reason beyond the control of Catalyst (excluding market or economic
conditions), then Catalyst may, without liability, direct TimberWest to discontinue, in whole
or in part, sales of Logs to Fibre Suppliers pursuant to this Agreement for the period of such
shutdown or curtailment.

	7.2.	 	Affecting Fibre Suppliers. If, at any time, any Fibre Supplier ceases or curtails its sawmill
operations due to adverse weather conditions, fire, strike, lockout or other labour
disruptions, 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 for any similar reason beyond the control of
the Fibre Supplier (excluding market or economic conditions) which results in the Fibre
Supplier reducing the volume of Logs sourced under this Agreement that the Fibre Supplier
wishes to purchase, then Catalyst may, without liability, direct TimberWest to discontinue, in
whole or in part, sales of Logs to such Fibre Supplier pursuant to this Agreement for the
period of such shutdown or curtailment.

 

14

 

	7.3.	 	Credit. If Catalyst has directed a discontinuance or reduction under Section 7.1 or 7.2:

	 	(a)	 	the volume of Logs which TimberWest would have been required to sell to Fibre
Suppliers if Catalyst had not directed such discontinuance or reduction shall be
considered to have been made available to Catalyst as part of the Option Volume; and

	 	(b)	 	TimberWest may dispose of the Logs which would otherwise have been sold to
Fibre Suppliers during such discontinuance or reduction as it sees fit except that
TimberWest will not enter into any agreement concerning the disposition of Logs that
would conflict with Catalyst’s right to direct the resumption of sales of Logs to Fibre
Suppliers pursuant to this Agreement.

	7.4.	 	Affecting TimberWest. If, at any time, TimberWest ceases or curtails its logging operations
under the Crown Tenures due to adverse weather conditions, fire, strike, lockout or other
labour disruptions, 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 for any similar reason beyond its
control (but excluding market or economic conditions), then TimberWest may, without liability,
discontinue, in whole or in part, making Logs available for delivery to Fibre Suppliers or
Catalyst but only to the extent that such curtailment or shutdown prevents TimberWest from
producing the volume of Logs to be made available under this Agreement.

	7.5.	 	Advance Warning. Catalyst and TimberWest will each give to the other as much advance notice
as is reasonably possible of any event affecting its operations which might reasonably be
expected to adversely affect the availability of Logs for sale under this Agreement or the
sale of Logs to Fibre Suppliers or Catalyst pursuant to this Agreement, stating the nature,
date of commencement, anticipated duration and estimated effect of the event, but it is
acknowledged by each party that the inadvertent failure to give such notice or the inaccuracy
of any estimate contained in such notice will not preclude a party from receiving any relief
or credit provided for in this Article.

	8.	 	ARBITRATION

	8.1.	 	Arbitration. Any dispute between the parties in respect of the terms or conditions of this
Agreement will be submitted for determination by arbitration in accordance with the following:

	 	(a)	 	arbitrations will be carried out by a single arbitrator agreed to by the
parties and if no agreement is reached within 2 Business Days after either party
institutes such process by notice to the other party:

	 	(i)	 	each party will, within 2 Business Days, select one arbitrator,
and a third arbitrator will promptly be agreed to by the selected arbitrators
and failing agreement, by a Justice of the Supreme Court of British Columbia;
or

	 	(ii)	 	if either party fails to select an arbitrator, the arbitrator
selected by the other party will act as the sole arbitrator;

 

15

 

	 	(b)	 	where the dispute is over the price or quality of a particular Parcel of Logs
or other matters relating to Logs offered by TimberWest under this Agreement:

	 	(i)	 	the arbitrator or arbitrators shall be independent log brokers
or individuals recognized with knowledge of prevailing prices in the Vancouver
log market (the parties may, for the purposes of selecting such individuals,
maintain a list of individuals that the parties agree are acceptable
arbitrators pursuant to this Section 8.1(b), and if such a list is maintained,
the parties may only select individuals from such list as arbitrators for such
disputes);

	 	(ii)	 	a dispute as to price will be determined by each party
submitting the price that such party has determined to be accurate and the
arbitrators or arbitrator will select one of such prices and no other;

	 	(iii)	 	where the dispute is only as to price, the costs of the
arbitration proceedings will be payable by the party which was not successful
in the arbitration proceedings;

	 	(iv)	 	where a party is wholly successful in arbitration proceedings
involving disputes over matters other than or in addition to price, the costs
of the arbitration proceedings will be awarded against the other party unless
the arbitrator or arbitrator deems it appropriate to award otherwise; and

	 	(v)	 	where there has been a dispute regarding the price or quality
of Logs or other matters relating to Logs offered by TimberWest on more than
two occasions in any year and the dispute resolution processes conducted in
respect of such disputes have all been resolved in favour of one party, the
arbitrator or arbitrators, in subsequent arbitrations resolved in favour of
such party in that year, will be entitled to award double costs of the
subsequent arbitration against the other party;

	 	(c)	 	in resolving any dispute other than a dispute as to the price of a Parcel of
Logs, the arbitrator or arbitrators shall not be constrained in the manner contemplated
by Subsection 8.1(b)(ii);

	 	(d)	 	the decision of a majority of the arbitrators or the sole arbitrator, as the
case may be, including any decision as to costs, will be final and binding on the
parties, but will not be a precedent in any subsequent arbitration under this
Agreement.

Except as expressly provided herein, all arbitrations will be conducted according to the
laws governing commercial arbitrations in British Columbia.

	8.2.	 	Timely Decisions. Any dispute referred to arbitration will be dealt with on an expeditious
basis with both parties using all commercially reasonably efforts to obtain and implement a
timely decision of the arbitrator or arbitrators who will have the authority to award costs of
the arbitration proceedings against any party which does not, in the judgment of the
arbitrator, act in accordance with this Section.

 

16

 

	9.	 	ASSIGNMENT

	9.1.	 	Assignment by TimberWest. TimberWest will not, without the prior written consent of Catalyst,
which consent Catalyst will not unreasonably withhold:

	 	(a)	 	sell, transfer, assign or otherwise dispose of all or any part of the Crown
Tenures or its interest in this Agreement except to a purchaser, transferee or assignee
that acquires all or substantially all of the assets of TimberWest and agrees with
Catalyst to assume and be bound by the obligations of TimberWest under this Agreement
(with such changes as may be required to contemplate the addition or substitution of
the assignee as a party); or

	 	(b)	 	mortgage, charge, grant a security interest in or otherwise encumber the Crown
Tenures or its interest in this Agreement except in compliance with Section 9.2.

	9.2.	 	Lender Status. Any mortgage, charge, security interest or other encumbrance (each an
“Encumbrance”) granted over any of the Crown Tenures or this Agreement will be subject to the
condition that the holder of such Encumbrance or Encumbrances, enters into an agreement with
Catalyst in a form satisfactory to it acting reasonably, that is effective to ensure that, to
the extent permitted by law, any sale or other disposition of any of the Crown Tenures arising
out of the enforcement of the Encumbrance will be made only in accordance with this Article,
and, to the extent permitted by law, pending any such disposition, any receiver,
receiver-manager or other person appointed under the Encumbrance and thereby entitled to
possession of any such Crown Tenures will be bound by the terms of this Agreement.

	9.3.	 	Assignment by Catalyst. Catalyst may not assign all or any portion of its interest in this
Agreement, without the prior written consent of TimberWest (which consent TimberWest will not
unreasonably withhold) except that Catalyst may do so without such consent in the following
circumstances:

	 	(a)	 	as a result of the granting by Catalyst of a security interest over all or
substantially all of its assets; or

	 	(b)	 	to a purchaser of any material interest in a pulp or paper mill owned by
Catalyst or one of its Affiliates if the purchaser enters into an agreement with
TimberWest 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.

	9.4.	 	Release. An assignment, transfer or other disposition (for the purposes of this Section 9.4,
an “Assignment”) made by a party under this Article (for the purposes of this Section 9.4, an
“Assignor”) will not release the Assignor from its obligations under this Agreement except
where an assignee has assumed and become bound by the obligations under this Agreement and the
party which is not the Assignor (for the purposes of this Section 9.4, the “Other Party”)
expressly consents to such a release, which consent may be withheld unless the Other Party is
satisfied, acting reasonably, of the assignee’s ability to fulfil the terms of this Agreement
on a long term basis. If the Other Party does not provide a release at the time of an
Assignment in accordance with this Section, the Assignor may, at any time after the first
anniversary of the Assignment (and not more frequently than once every 12 months), request
that the Other Party provide such a release to the Assignor and the Other Party will release
the Assignor from its obligations under this Agreement if the Other Party, acting reasonably,
is satisfied with the assignee’s ability to fulfil the terms of this Agreement on a long-term
basis.

 

17

 

	10.	 	GENERAL

	10.1.	 	Maintenance of Records. Each party will maintain detailed records of all particulars
required in order to carry out the calculations required under this Agreement and 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 and will make such records available to the other party for
inspection at all reasonable times.

	10.2.	 	Notices. Any notice, document or communication required or permitted to be given hereunder
shall be in writing and delivered by hand or facsimile transmission to the party to which it
is to be given as follows:

	 	 	 
	To Catalyst:

	 	To TimberWest:
	 
	 	 
	Catalyst Paper Corporation

	 	TimberWest Forest Corp.
	2nd Floor — 3600 Lysander Lane

	 	2300 — 1055 West Georgia Street
	Richmond, British Columbia

	 	Vancouver, British Columbia
	 
	 	 
	Attention: Director, Fibre Supply

	 	Attention: Corporate Secretary
	Facsimile No.: (604) 247-0524

	 	Facsimile No.: (604) 654-4960

or to such other address as either party may in writing advise by notice given in accordance
with this Section. Any notice, document or communication will be deemed to have been given,
if delivered, on the next Business Day after the day of delivery, and if sent by facsimile
transmission, on the first Business Day after the day of transmittal.

	10.3.	 	Time. Time shall be of the essence of this Agreement.

	10.4.	 	Further Assurances. Each of the parties shall execute and deliver all such further documents
and do such further acts and things as may be reasonably required from time to time to give
effect to this Agreement.

	10.5.	 	Waivers. Failure by either party at any time to require strict performance by the other of
any term or provision hereof shall not be deemed to constitute a waiver of breach of such or
any other term or provision hereof nor shall it constitute a waiver of any succeeding breach
of such or any other term or provision hereof.

	10.6.	 	Confidentiality. Neither party will disclose any terms or conditions of this Agreement to
any person who is not a director, officer employee or bona fide authorized representative of
the party without the prior written consent of the other party except:

	 	(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.

	10.7.	 	Nature of Obligations. The obligations and liabilities of TimberWest Forest Corp. and each
of the partners of TimberWest Forest Company under this Agreement are joint and several. The
obligations and liabilities of Catalyst Paper Corporation and each of the partners of Catalyst
Paper under this Agreement are joint and several.

 

18

 

	10.8.	 	Action by Managing Partner. TimberWest Forest Corp. confirms that, as managing partner of
TimberWest Forest Company, it has full power and authority to carry out the obligations, and
exercise the rights, of TimberWest Forest Company under this Agreement and to execute and
deliver agreements, notices or other documents on behalf of TimberWest Forest Company.
Catalyst Paper Corporation confirms that, as managing partner of Catalyst Paper, it has full
power and authority to carry out the obligations, and exercise the rights, of Catalyst Paper
under this Agreement and to execute and deliver agreements, notices or other documents on
behalf of Catalyst Paper.

	10.9.	 	Counterparts and Signatures Electronically. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original and all of which taken together
will be deemed to constitute one and the same instrument. Delivery of an executed signature
page to this Agreement by any party by electronic transmission will be as effective as
delivery of a manually executed copy of this Agreement by such party.

	10.10.	 	Binding Effect. This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns.

IN WITNESS WHEREOF the parties have executed this Agreement the day and year written on the first
page hereof.

CATALYST PAPER CORPORATION

as managing partner for and on behalf of

CATALYST PAPER

	 	 	 	 	 
	Per:
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Per:
	 	 	 	 
	 

	 	 

	 	 

TIMBERWEST FOREST CORP.

on its own behalf and as managing partner

for and on behalf of TIMBERWEST FOREST COMPANY

	 	 	 	 	 
	Per:
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Per:
	 	 	 	 
	 

	 	 

	 	 

 

19

 

Schedule A

Form of Production Notice

Year:                     

AAC of Crown Tenures (m3):                     

Option Volume (m3):                     

Total Planned Harvest Volume (m3):                     

Projected Log Production (m3):

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Jan	 	 	Feb	 	 	Mar	 	 	Apr	 	 	May	 	 	June	 	 	July	 	 	Aug	 	 	Sep	 	 	Oct	 	 	Nov	 	 	Dec	 	 	Total	 
	Standard/Gang Logs
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	2nd growth fir standard (15"+)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	2nd growth hembal standard (15"+)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	2nd growth fir gang (8"+)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	2nd growth hembal gang (8"+)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	old growth hembal gang (8"-14")
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Standard/Gang Logs
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	PeeWee Logs
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	2nd growth fir peewee (5"-7" tops)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	2nd growth hembal peewee (5"-7" tops)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total PeeWee Logs
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Logs
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

Notional Log Production (m3) based on sufficient harvest for production of entire Option
Volume:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Jan	 	 	Feb	 	 	Mar	 	 	Apr	 	 	May	 	 	June	 	 	July	 	 	Aug	 	 	Sep	 	 	Oct	 	 	Nov	 	 	Dec	 	 	Total	 
	Standard/Gang Logs
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	2nd growth fir standard (15"+)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	2nd growth hembal standard (15") +
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	2nd growth fir gang (8" +)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	2nd growth hembal gang (8"+)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Old growth hembal gang (8"-14")
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Standard/Gang Logs
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(***	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	PeeWee Logs
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	2nd growth fir peewee (5"-7" tops)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	2nd growth hembal peewee (5"-7" tops)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total PeeWee Logs
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(***	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Logs
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(***	)

 

20Exhibit 10.5.1

Exhibit 10.5.1

PORTIONS OF THIS EXHIBIT DENOTED WITH THREE ASTERISKS (***) HAVE BEEN

OMITTED AND WILL BE SUBJECT TO A REQUEST FOR CONFIDENTIAL TREATMENT

WITH THE SECURITIES AND EXCHANGE COMMISSION.

TIMBER HARVESTING MANAGEMENT AGREEMENT AMENDMENT

THIS AGREEMENT made as of the 1st day of January, 2008.

BETWEEN:

CATALYST PAPER CORPORATION, 2nd Floor, 3600
Lysander Lane, Richmond, British Columbia, as managing partner for
and on behalf of CATALYST PAPER, a general partnership of
Catalyst Paper Corporation and Catalyst Pulp Operations Limited

(“Catalyst”)

AND:

TIMBERWEST FOREST CORP. and TIMBERWEST FOREST
COMPANY, a partnership of TimberWest Forest Corp. and
TimberWest Holdings Ltd., 2300 — 1055 West Georgia Street,
Vancouver, British Columbia

(collectively “TimberWest”)

WHEREAS:

	A.	 	TimberWest makes sawlogs and shingle logs available to Catalyst’s wood chip suppliers
pursuant to an agreement dated the 1st day of January, 1998 entitled “Amended and Restated
Timber Harvesting Management Agreement” (the “Existing Agreement”) now between Catalyst (as
successor to Fletcher Challenge Canada Limited) and TimberWest (as successor to TimberWest
Forest Limited); and

	B.	 	The parties have agreed to amend the Existing Agreement in consideration of certain changes
to other agreements between Catalyst and TimberWest;

THEREFORE in consideration of the premises and the mutual covenants hereafter set out and other
good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the
parties agree as follows:

	1.	 	Definitions.

In this Agreement:

	 	(a)	 	unless otherwise defined herein, terms used in this Agreement that are defined
in the Existing Agreement have corresponding meanings;

	 	(b)	 	“Chip and Pulplog Supply Agreement” means the amended and restated Chip and
Pulplog Supply Agreement made as of June 23, 1997 now between Catalyst (as successor to
3264891 Canada Limited and 3264912 Canada Limited) and TimberWest Forest Corporation
(as successor to TimberWest Forest Limited), as amended, restated or replaced from time
to time;

 

 

 

	 	(c)	 	“Chips” means Residual Chips and Whole Log Chips;

	 
	 	(d)	 	“Closure Date” means May 9, 2008;

	 	(e)	 	“Coast Chip Price” means, for a calendar quarter, a price equal to the most
common market price actually paid per Volumetric Unit of Residual Chips during that
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 and/or paper 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 three
consecutive years and contracts having a term of not less than one year which are
renewable and which have been in force, in substantially the same form, for not less
than three consecutive years) for similar volumes, specifications, quality and species
of Chips 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 buyer’s mill, which
price was, in the last calendar quarter of 2007:

	 	(i)	 	(***) per Volumetric Unit of hemlock or hemlock/balsam Chips;

	 
	 	(ii)	 	(***) per Volumetric Unit of sitka spruce Chips;

	 
	 	(iii)	 	(***) per Volumetric Unit of Douglas fir Chips;

	 
	 	(iv)	 	(***) per Volumetric Unit of red cedar Chips;

	 
	 	(v)	 	(***) per Volumetric Unit of yellow cedar Chips;

	 	(f)	 	“Elk Falls Sawmill” means the Elk Falls sawmill facility located at Campbell
River, British Columbia adjacent to Catalyst’s Elk Falls pulp and paper mill;

	 	(g)	 	“Log Supply Option Agreement” means the agreement between the parties dated the
date of this Agreement and entitled “Log Supply Option Agreement” as amended, restated
or replaced from time to time;

	 	(h)	 	“Residual Chips” means hemlock/balsam, coastal Douglas fir, sitka spruce, red
cedar or yellow cedar wood chips produced as a by-product of wood manufacturing,
including those produced from log yard debris, but excluding Whole Log Chips;

	 
	 	(i)	 	“Specifications” means the specifications for Chips set out in Schedule A;

	 	(j)	 	“Timber Harvesting Management Fee” means the fee payable by Catalyst to
TimberWest pursuant to Section 4.1 of the Existing Agreement;

	 	(k)	 	“Timber Harvesting Management Agreement” means the Existing Agreement as
amended by this Agreement and as further amended, replaced or restated from time to
time;

 

2

 

	 	(l)	 	“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 where “fully
loaded” means that the scow has been loaded:

	 	(i)	 	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;

	 
	 	(ii)	 	following the limitations that a prudent person exercising
reasonable care would observe; and

trimmed in such a manner as will render it to remain in a seaworthy condition
throughout its voyage to its destination in the judgment of the master of the vessel
of the towing agent;

	 	(m)	 	“Whole-Log Chips” means hemlock/balsam or coastal Douglas fir wood chips
produced from whole-log chipping.

	2.	 	Reduction in Timber Harvesting Management Fee

	2.1.	 	Reduction. The Timber Harvesting Management Fee is hereby reduced by (***) per year effective
January 1, 2008.

	2.2.	 	Payment of Reduction in Fee. TimberWest will pay the reduction in the Timber Harvesting
Management Fee to Catalyst by way of 4 equal quarterly instalments on or before the last day
of each calendar quarter while the Timber Harvesting Management Agreement is in effect.

	2.3.	 	Transition for 2008. In 2008, the (***) reduction in the timber harvesting management fee
will be reduced by an amount determined by multiplying (***) by the fraction (***), where
(***) is the volume of Residual Chips delivered to Catalyst from the Elk Falls Sawmill from
January 1, 2008 up to June 15, 2008 to a maximum of (***). The reduction in the Timber
Harvesting Management Fee for 2008 will be paid to Catalyst by the following payments:

	 	(a)	 	on June 30, 2008, the sum of (***); and

	 
	 	(b)	 	on September 30, 2008, the sum of (***); and

	 
	 	(c)	 	on December 31, the sum of (***).

Calculation: The Elk Falls Sawmill (other than the planar mill) closed on May 9, 2008. (***)
of Chips were supplied to Catalyst from the Elk Falls Sawmill during the period January 1,
2008 to June 15, 2008. The Timber Harvesting Management Fee reduction for 2008 will be
(***)

 

3

 

	2.4.	 	Mitigation of Reduction in Fee. TimberWest can mitigate the reduction in the Timber
Harvesting Management Fee after July 1, 2010 on the following basis:

	 	(a)	 	If TimberWest directs an alternative supply of Residual Chips or Whole Log
Chips to Catalyst pursuant to one or more commitments or agreements for a period of
more than one year that meet the requirements in this Section 2.4, then the (***)
reduction would be reduced each year by an amount calculated by multiplying (***) by
the fraction (***), where V is the volume of chips delivered to Catalyst under such
commitments in the year to a maximum of (***) (except that if V is not at
least 50% hemlock/balsam Chips then V will be adjusted downwards to the point where the
volume of delivered hemlock/balsam Chips represents 50% of V);

	 	(b)	 	the price of Chips used to mitigate cannot exceed the Coast Chip Price for
Residual Chips regardless of whether the Chips used to mitigate are Residual Chips or
Whole Log Chips;

	 
	 	(c)	 	Sourcing of Chips used to
mitigate is subject to the following restrictions:

	 	(i)	 	while the Log Supply Option
Agreement remains in effect, (***)

	 	(ii)	 	after expiration of the Log
Supply Option Agreement, (***)

	 	(d)	 	any Chips directed to Catalyst must meet the following requirements:

	 	(i)	 	the Chips must meet the Specifications; and

	 	(ii)	 	Chips produced from different species cannot be mixed except
that hemlock and balsam Chips can be mixed and coastal Douglas fir and coastal
pine Chips can be mixed; and

 

4

 

	 	(e)	 	the following Chips will not be considered as mitigating the reduction in the
Timber Harvesting Management Fee pursuant to this Section 2.4:

	 	(i)	 	Chips acquired by Catalyst using logs under the Log Supply
Option Agreement;

	 	(ii)	 	Chips acquired by Catalyst under the Chip and Residual Fibre
Delivery Agreement between TimberWest (then TFL Forest Ltd.) and the Teal Jones
Group dated May 5, 2004, as amended, restated or replaced from time to time;

	 	(iii)	 	Chips acquired by Catalyst through its own arrangements with
Chip suppliers.

	2.5.	 	Notice of Mitigation. TimberWest will provide notice to Catalyst by October 31 of each year
as to volumes of Residual Chips and Whole Logs Chips that TimberWest will use to mitigate the
reduction in the Timber Harvesting Management Fee under Section 2.4 for the following year,
including type, source, species, volume and commitment period.

	2.6.	 	Termination of Timber Harvesting Management Agreement. Without limiting the generality of
Section 3.1, if the Timber Harvesting Management Agreement is terminated pursuant to Section
2.2 thereof, expires or otherwise ceases to be in effect for any reason, the obligations of
TimberWest pursuant to this Agreement will cease effective as at the termination of the Timber
Harvesting Management Agreement.

	3.	 	General

	3.1.	 	Existing Agreement. This Agreement forms part of and is to be read together with the
Existing Agreement and the Existing Agreement as amended by this Agreement remains in full
force and effect.

	3.2.	 	Set-off. Any amount which TimberWest fails to pay when due to Catalyst under the Timber
Harvesting Management Agreement may be set-off against amounts owing to TimberWest by Catalyst
under the Log Supply Option Agreement, Timber Harvesting Management Agreement or Chip and
Pulplog Supply Agreement.

	3.3.	 	Binding Effect. This Agreement will enure to the benefit of and be binding upon the parties
hereto and their respective successors and assigns.

IN WITNESS WHEREOF the parties have executed this Agreement.

CATALYST PAPER CORPORATION

as managing partner for and on behalf of

CATALYST PAPER

	 	 	 	 	 
	Per:
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Per:
	 	 	 	 
	 

	 	 

	 	 

 

5

 

TIMBERWEST FOREST CORP. on its own behalf

and as managing partner for and on behalf of

TIMBERWEST FOREST COMPANY

	 	 	 	 	 
	Per:
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Per:
	 	 	 	 
	 

	 	 

	 	 

 

6

 

SCHEDULE A

Chip Specifications

	1.	 	Chips will be produced from sound, bark-free wastewood such as logs, log-trim, sawmill
wastewood. Chips produced from green veneer will not be included.

	2.	 	Chips will be clean, 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 polychlorobiphenyls (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.	 	All Chips will be screened before delivery unless specifically agreed to in writing by the
Purchaser.

	4.	 	Chips will be cut to a nominal length of 19 mm in order to meet the following standards:

	 	(a)	 	not more than 3% 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 89% 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.

Samples taken from any one truck load or barge load of Chips will meet the foregoing standards.

The above definition will be reviewed from time to time, but not more often than annually, and
revised to meet generally accepted industry practices for coastal British Columbia in place at that
time of the review.

 

7

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00158-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00158-of-00352.parquet"}]]