Document:

exv10w15

Exhibit 10.15

AMENDMENT NO. 4 TO LEASE AGREEMENT

     This Amendment No. 4 to Lease Agreement, dated as of December 31, 2008 (this “Amendment”), is
entered into by and between CATALYST PAPER (SNOWFLAKE) INC., a Delaware corporation (“Landlord” or
“Facility Operator”) an indirect wholly-owned subsidiary of Catalyst Paper Corporation, a Canadian
corporation, and SNOWFLAKE WHITE MOUNTAIN POWER, LLC, an Arizona limited liability company
(“Tenant” or “Facility Owner”).

RECITALS

     A. Landlord and Tenant have entered into that certain Lease Agreement, dated as of September
14, 2005 (as amended, amended and restated, supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof, the “Lease”). Capitalized terms used herein but not
defined herein have the meaning given in the Lease.

     B. Landlord, CoBank, ACB and Tenant have entered into that certain Consent and Agreement,
dated as of September 1, 2006 (the “Consent”), pursuant to which the Lease was amended as described
in the Consent.

     C. Landlord and Tenant have entered into that certain Amendment No. 2 to Lease Agreement,
dated as of August 2, 2007 (“Amendment No. 2”), pursuant to which the Lease was amended as
described in Amendment No. 2.

     D. Landlord and Tenant have entered into that certain Amendment No. 3 to Lease Agreement,
dated as of August 23, 2007 (“Amendment No. 3”), pursuant to which the Lease was amended as
described in Amendment No. 3.

     E. Landlord and Tenant wish to further amend the Lease as set forth herein.

     F. Renegy Holdings, Inc., the sole member of Tenant (“Renegy”), and AZ Biomass LLC, a Delaware
limited liability company (“State Street”), contemplate entering into that certain Membership
Interest Purchase Agreement to be dated as of January 1, 2009 (the “MIPA”) pursuant to which State
Street will acquire from Renegy all the Class A membership interests in Tenant (the “Class A
Interest”) for the consideration and on the terms as set forth in the MIPA.

     G. Pursuant to Section 22 of the Lease, Tenant has agreed not to assign, sublease, or
otherwise transfer all or any portion of its interest under the Lease without the prior written
consent of Landlord.

     H. The sale of the Class A Interest to State Street pursuant to the MIPA may be considered to
be a “Transfer” of Tenant’s interest in the Lease, as such term is defined in paragraphs 3 and 4 of
Section 22 thereof, and therefore Tenant has requested that Landlord consent to such Transfer of
Tenant’s interest in the Lease.

 

     NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:

AGREEMENT

     1. 2009 Annual Budget. Facility Owner and Facility Operator agree that the Annual
Budget (as defined in the Operations Provisions) for the Lease Year commencing January 1, 2009 and
ending December 31, 2009 (the “2009 Lease Year”) shall be the budget attached to this Amendment as
Exhibit A (the “2009 Annual Budget”).

     2. Amendment of Lease. Landlord and Tenant agree that the Lease shall be amended as
follows (with capitalized terms not otherwise defined herein having the meaning given in the Lease
and section references referring to sections of the Lease):

          (a) Section 4.3 is hereby deleted in its entirety and replaced with the following:

     4.3 Paper Sludge Supply and Removal. Landlord currently operates the Paper Mill on
property that is adjacent to the Real Property. For so long as the Paper Mill remains open
and operating, Landlord shall allow Tenant to obtain without cost or charge as much of the
paper sludge produced by the Paper Mill as Tenant can use at the Power Facility. Tenant
will use commercially reasonable efforts to utilize the paper sludge as a fuel source for
the Power Facility, but Tenant does not guarantee that the paper sludge will be a viable
fuel source for the Power Facility. At no cost to Tenant, Landlord shall process the sludge
to reduce the moisture content of such sludge to the lowest practical moisture content (in
no event greater than approximately 50% moisture content) and shall be responsible for all
waste water treatment in connection with the production and processing of such sludge. At
no cost to Landlord, Tenant shall install equipment to transport the paper sludge from the
wastewater treatment plant to the Power Facility, and shall add screw presses or other
equipment necessary to allow Landlord to reduce the moisture content of the sludge. Tenant
shall reimburse Landlord as an “Operational Cost” under the “Operations Provisions” the cost
of transporting all such processed sludge to the Power Facility. In the event Tenant wishes
to terminate its use of any or all of the paper sludge at the Power Facility, Tenant shall
provide Landlord at least 30 days advance written notice of such termination. Any portion
of paper sludge produced at the Paper Mill that is not taken by Tenant, including any sludge
that Tenant discontinues using, may be sold or otherwise conveyed by Landlord to any third
party; provided, however, that if Landlord desires to sell, transfer or convey any paper
sludge to a third party (other than a transporter for purposes of disposal of the paper
sludge in a landfill), Landlord shall first provide Tenant with 60 days’ notice of such
desire and Tenant shall have the right to take possession and ownership of all the paper
sludge produced by the Paper Mill. In the event Tenant fails to utilize at least 75% of the
paper sludge (at current levels) produced at the Paper Mill within two (2) years after the
Commencement Date, or thereafter fails to maintain such minimum usage, Tenant shall pay an
annual rent of $400,000 in equal monthly installments. Any rent being paid under this
Section 4.3 shall be suspended if the Paper Mill’s production of paper sludge falls below
25% of current levels, and shall resume when the production rises above 25% of current
levels. Landlord

2

 

shall notify Tenant at least 90 days prior to permanently closing the Paper Mill or
permanently ceasing production or processing of paper sludge. For purposes of this Section
4.3, current levels of paper sludge production shall refer to sludge production of 250 bone
dry tons per day of Paper Mill operation. So long as the Operations Provisions remain in
effect, any rent being paid under this Section 4.3 shall be suspended for any period during
which Landlord, as Facility Operator, fails to use commercially reasonable efforts to
utilize paper sludge taken by Tenant, consistent with Prudent Operating and Maintenance
Practices.

          (c) Section 4.6 is hereby deleted in its entirety and replaced with the following:

     4.6 Utilities; Disposal of Facility Waste Other Than Fly Ash. Landlord
shall provide utilities necessary to operate the Power Facility as described in this
Section 4.6 so long as the Paper Mill is operating. The scope of such utilities
shall be the same as those provided as of November 2008. Electricity shall be
provided as described in Section 4.5 above. Natural gas will be provided as
available at the metered cost. Water, boiler feedwater, compressed air, sewage and
waste water treatment, and removal and disposal of Facility Waste will be provided
to Tenant for a fixed rate of $375,000 per year. Landlord shall arrange for the
transportation and disposal of all Hazardous Waste generated at the Power Facility
in accordance with applicable law, and all costs associated therewith shall be
considered an “Operational Cost” to be paid by Tenant. Landlord shall take
possession of, transport and dispose of all Facility Waste in a location other than
on the Real Property in accordance with applicable law, including, without
limitation, all “Environmental Laws”. Tenant shall not have any financial
responsibility with respect to the Facility Waste except as otherwise provided
herein. Except as they relate to Tenant’s obligations under this Section
4.6, any and all claims, demands, notices, damages, costs, fees, judgments,
suits, causes of action, losses, liabilities and expenses, including attorneys’ fees
and court costs, that result from or relate to the Facility Waste shall be
considered Excluded Claims and shall be covered under Landlord’s indemnification
obligations set forth in Section 12.3. The rate charged Tenant for the
foregoing services shall be adjusted on January 1, 2010, and on January 1 of each
year thereafter, by the same percentage change as occurs during the prior calendar
year in the cost to Landlord of providing utilities at the usage rates listed in
Exhibit B attached hereto. The parties understand and agree that if the Paper Mill
or any portion thereof is not operating for some temporary or indefinite period (but
excluding a permanent closure) such that Landlord is not able to provide all of the
utilities described herein during such period, Landlord and Tenant shall consult
with one another in good faith to determine an acceptable means to supply the
interrupted utilities. To the extent the interrupted utilities are provided by
Landlord, the added costs incurred by Landlord shall be considered an “Operational
Cost” to be paid by Tenant. The parties further understand and agree that the rate
for the utilities described herein is based on the operations and efficiencies of
the Power Facility as existing during November 2008. Should physical changes or
changes in the method of operation of the Power Facility result in an increase in
the demand for any of the utilities provided hereunder in

3

 

any Lease Year by more than 10% above the levels reflected in Exhibit B, the added
cost to Landlord for providing utilities above the Exhibit B levels shall be
considered an “Operational Cost” to be paid by Tenant. Should such changes result
in a decrease in the demand for any of such utilities in any Lease Year by more than
10% below the levels reflected in Exhibit B, the decrease in the cost to Landlord
for providing utilities below the Exhibit B levels shall be refunded to Tenant.

          (d) Section 4.7 is hereby deleted in its entirety and replaced with the following:

     4.7 Fly Ash Disposal.

     4.7.1 During the Lease Term, Landlord shall take possession of, transport and
dispose of all Fly Ash in a location other than on the Real Property in accordance
with applicable law, including, without limitation, all “Environmental Laws”. Tenant
shall (i) reimburse Landlord, as an Operational Cost under the Operations
Provisions, for all transportation costs incurred in removing and disposing of any
Fly Ash, whether disposed of onsite or offsite of the Paper Mill, (ii) reimburse
Landlord, as an Operational Cost under the Operations Provisions, for all disposal
costs for Fly Ash disposed of offsite of the Paper Mill, and (iii) pay to Landlord
an amount equal to $4.50 per ton of Fly Ash, having a moisture content of no more
than 20%, disposed of onsite of the Paper Mill, provided that in no event shall
Tenant be obligated to make any payments hereunder for any fees under this
subsection (iii) that exceed $490 on any given day during the Lease Year. The
foregoing rates charged to Tenant shall be adjusted effective January 1 of each year
by the same percentage change as occurs in Landlord’s actual landfill costs during
the prior calendar year. In the event the costs referenced in subsection “(i)” above
are increased as the result of changes in the costs for services being provided to
Landlord by a third party, Tenant shall have the option (exercisable no later than
30 days after receiving notice from Landlord of the adjustment) to assume the
obligation to perform such services directly, subject to compliance with termination
provisions in Landlord’s agreement with the third party, and subject to Tenant being
able to perform such services at or exceeding the standards being met by such third
party. To the maximum extent permitted by applicable law, (a) Tenant, and not
Landlord, shall be considered the generator of the Fly Ash, and (b) the Power
Facility, and not the Paper Mill, shall be considered the source of the Fly Ash.

     4.7.2 Notwithstanding anything to the contrary herein, in the event the
Operations Provisions terminate prior to the termination of the Lease: (A) the cost
for disposal of Fly Ash disposed of onsite of the Paper Mill shall increase to $7.50
per ton of Fly Ash having a moisture content of no more than 20% subject to a daily
fee limitation of $818 (instead of $490); (B) Landlord shall continue to be
obligated to take possession of, transport and dispose of the Fly Ash having a
moisture content of no more than 20% as described above in Section 4.7.1 and any
reimbursements required to be made by Tenant to Landlord described under subsections
“i” and “ii” thereof shall continue to be required and shall be paid in

4

 

a manner consistent with Section 7.1.3 of the Operations Provisions
(notwithstanding the termination thereof); (C) Tenant may elect upon 30 days notice
to Landlord to assume all of Landlord’s obligations to take possession of, transport
and dispose of the Fly Ash, in which case Tenant shall pay to Landlord the disposal
costs listed in subsection “(A)” above, Landlord shall be relieved of its
obligations under the foregoing subsection “(B)”; and the Fly Ash may continue to be
disposed of on Landlord’s property (unless subsection “(D)” applies); (D) in the
event (i) Tenant makes the election described in the foregoing subsection “(C)”, and
(ii) the disposal of the Fly Ash on Landlord’s property is not commercially
reasonable for Landlord, Tenant shall make arrangements to dispose of the Fly Ash
offsite of Landlord’s property, and the disposal costs listed in subsection “A”
would not apply. The foregoing rates charged to Tenant for disposal on Landlord’s
property shall be adjusted effective January 1 of each year by the same percentage
change as occurs in Landlord’s actual landfill costs during the prior calendar year.
In the event the costs referenced in subsection “(i)” of Section 4.7.1 above are
increased as the result of changes in the costs for services being provided to
Landlord by a third party, Tenant shall have the option (exercisable no later than
30 days after receiving notice from Landlord of the adjustment) to assume the
obligation to perform such services directly, subject to compliance with termination
provisions in Landlord’s agreement with the third party, and subject to Tenant being
able to perform such services at or exceeding the standards being met by such third
party. Landlord may reject any Fly Ash having a moisture content of greater than
20%, in which case Tenant shall be responsible for disposing of the Fly Ash offsite
of Landlord’s property in accordance with applicable law. If Tenant makes the
election to assume Landlord’s obligations as described in this Section 4.7.2, any
and all claims, demands, notices, damages, costs, fees, judgments, suits, causes of
action, losses, liabilities and expenses, including attorneys’ fees and court costs,
that result from or relate to the Fly Ash shall be covered under Tenant’s
indemnification obligations set forth in Section 12.1;

     4.7.3 Tenant shall not have any financial responsibility with respect to the
Fly Ash except as otherwise provided herein. Except as they relate to Tenant’s
obligations under this Section 4.7, any and all claims, demands, notices,
damages, costs, fees, judgments, suits, causes of action, losses, liabilities and
expenses, including attorneys’ fees and court costs, that result from or relate to
the Fly Ash shall be considered Excluded Claims and shall be covered under
Landlord’s indemnification obligations set forth in Section 12.3.

     4.7.4 Tenant shall be responsible for any and all improvements, including,
without limitation, pollution control equipment and structural changes, reasonably
necessary to ensure that the handling and loading of the Fly Ash at the Power
Facility can be and is accomplished in accordance with applicable law.

     4.7.5 Landlord acknowledges that, to the extent Landlord is required to dispose
of Fly Ash pursuant to the Lease, it will dispose of Fly Ash on Landlord’s

5

 

property so long as commercially reasonable. This provision shall not obligate
Landlord to expand Landlord’s existing landfill to accommodate the disposal of Fly
Ash.

          (e) Section 13 “Tenant’s Insurance” is hereby revised as follows:

     (i) The lead-in paragraph shall be deleted in its entirety and replaced by the
following:

“13. Tenant’s Insurance. Tenant shall obtain and maintain the
following insurance during the Term:”.

     ii) The policy limits in subsection 13.1.2 shall be revised to read:

“...general aggregate-not less than $5,000,000.00, and per
occurrence-not less than $5,000,000.00.”

          (f) Section 14(b) is hereby revised to read:

“(b) name Tenant as named insured and Landlord as additional insured...”

     (g) The amendment to Section 4.6 with respect to the fixed fee for Utilities and the
amendment to Section 4.7 with respect to the payment for the disposal of Fly Ash onsite of
the Paper Mill at the rate of $4.50 per ton shall be effective as of October 1, 2008. The
parties hereto agree to make any necessary payments or adjustments to invoices as soon as
reasonably practicable to effect the intent of the foregoing amendments as of the effective
date thereof.

     (h) New definitions are hereby added to Section 35 as follows:

     “Fly Ash” — shall mean all “fly” ash captured by the air pollution control
equipment at the Power Facility that is generated by normal operations of the Power
Facility (and shall specifically exclude “bottom” ash). For purposes of this
definition, “normal operations” of the Power Facility shall include the burning of
paper sludge and wood waste, but not plastics, tires or other non-biomass materials

     “Hazardous Waste” shall have the meaning given in the federal Resource
Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq., and regulations of the
U.S. Environmental Protection Agency at 40 C.F.R. Part 261 and the Arizona
Department of Environmental Quality at A.A.C. R18-8-261.

     (i) The definition of “Facility Waste” in Section 35 is hereby deleted in its entirety
and replaced with the following:

     “Facility Waste” — shall mean all ash, byproducts, trash and other solid
waste generated by normal operations of the Power Facility, but shall not
include Hazardous Waste or Fly Ash.

6

 

     (j) A new Exhibit B is added as attached to this Amendment. The parties shall
have until January 31, 2009 to determine whether any changes should be made to
Exhibit B based on good faith discussions. If, by January 31, 2009, the parties are
unable to reach agreement concerning any changes to Exhibit B, the form attached to
this Amendment shall become effective.

     (k) Continued Sludge Supply and Removal. Landlord and Tenant agree and
acknowledge that, in the event the Operations Provisions terminate prior to the termination
of the Lease, Landlord shall continue to provide paper sludge pursuant to Section 4.3 of the
Lease, including without limitation, processing and transporting such sludge to the Power
Facility consistent with the provisions of Section 4.3. In such case, Tenant shall continue
to reimburse Landlord for the cost of transporting processed sludge to the Power Facility in
a manner consistent with Section 7.1.3 of the Operations Provisions (notwithstanding
the termination thereof). However, upon 30 days notice by Tenant to Landlord, Tenant may
elect to assume Landlord’s obligations to transport the paper sludge to the Power Facility,
in which case Landlord shall be relieved of its obligations with respect to the same. In
such event, Landlord shall continue to operate and maintain Tenant’s equipment and property
at the Paper Mill’s wastewater treatment plant, and to process as much of the paper sludge
produced at the Paper Mill as Tenant can use. Landlord’s maintenance costs associated with
Tenant’s property at the wastewater treatment plant shall be the responsibility of Tenant.
Except as otherwise provided in the preceding sentence, should the Operations Provisions be
terminated, Tenant shall not be subject to additional costs relating to the acquisition,
processing or transport of the sludge, access to Tenant’s screw presses and other equipment
and property at the Paper Mill’s wastewater treatment plant (including, without limitation,
the sludge press building, conveyors and loading bins), storage of such equipment at the
Paper Mill’s wastewater treatment plant as conducted as of November, 2008, use or access to
Landlord’s property for the purposes of transporting sludge pursuant to Section 4.3 as
conducted as of November, 2008, and waste water treatment in connection with the production
and processing of sludge.

     (l) Continued Access and Easement Rights of Tenant. Landlord and Tenant agree
and acknowledge that, in the event the Operations Provisions terminate prior to the
termination of the Lease, Tenant shall have the right under the Lease to access and use its
equipment and other property located on the Real Property and on Landlord’s real property
consistent with this section and Section 2(k) of this Amendment, and otherwise use
Landlord’s real property for the purposes of operating and maintaining the Power Facility
consistent with (i) this section, (ii) Section 27 of the Lease, and (iii) the operation and
maintenance of the Power Facility by Landlord and Tenant prior to the termination of the
Operations Provisions without the imposition of any new or additional costs payable by
Tenant to Landlord under the Lease. Such rights include use, access and similar rights
relating, but not limited, to the following:

          (A) equipment and property (including, without limitation, the sludge press building,
conveyors and loading bins, but excluding the right to operate screw presses and other equipment
and property located at the Paper Mill’s wastewater treatment plant) used in the performance of
Section 4.3 of the Lease with respect to paper sludge;

7

 

          (B) pumps, pipes and other equipment, whether on Tenant’s or Landlord’s real property,
relating to utilities necessary to operate the Power Facility as described in Section 4.6 of the
Lease (as identified and agreed to by Landlord and Tenant as the result of good faith discussions),
including without limitation such equipment relating to the provision of electricity, natural gas,
water, boiler feedwater, compressed air, sewage and waste water treatment, and Facility Waste
removal and disposal;

          (C) the walkway or “catwalk” connecting the Power Facility and the Paper Mill;

          (D) the transport of materials in connection with the operation and maintenance of the Power
Facility, including without limitation the transport of Fly Ash to Landlord’s onsite landfill or to
an offsite location and the delivery of materials to and from the Power Facility (e.g., fuel, parts
and other materials); and

          (E) the Interconnection Facilities and any interconnection equipment, transmission lines and
other facilities related to Tenant’s Interconnection Agreement with APS (including as may be
amended to provide for the APS-Zeniff substation), any Replacement Interconnection Agreement or any
other interconnection or similar agreement related to the Zeniff substation.

Tenant shall conduct its operations on the Real Property and Landlord’s real property in a manner
that (i) does not interfere with Landlord’s operations of the Paper Mill, and (ii) to the extent
such operations are conducted on Landlord’s real property, complies with the Paper Mill’s policies
and procedures, including without limitation, its safety procedures.

     (m) Zeniff Substation Interconnection Agreement. Landlord and Tenant agree that the
parties shall be responsible for 50% each of the fees charged by APS in connection with
Tenant’s submission to APS of a Request for Interconnection on November 25, 2008 (including
any additional fees that may be incurred in connection with such Request), and each party
shall promptly reimburse the other party with respect to the payment of such fees, as
applicable.

     (n) Utilities Services for Tenant Office. Landlord agrees and acknowledges
that the utilities services provided by Landlord under Section 4.6 of the Lease shall
include services to Tenant’s office facility located on or to be located on the Real
Property without any additional cost than as provided under Section 4.6, whether or not the
Operations Provisions terminate prior to the termination of the Lease, provided that such
services shall be comparable to what was provided to Tenant’s existing facility as of
November, 2008.

     (o) Emergency Services. In the event the Operations Provisions terminate prior to
termination of the Lease: (i) Landlord shall continue to maintain the Paper Mill’s fire
protection system, including such portion as installed at the Power Facility, and shall have
the right to access and use such equipment in the event of a fire whenever deemed necessary
by Landlord; (ii) Tenant shall reimburse Landlord for all reasonable fire protection system
maintenance, repair and replacement costs associated with protection

8

 

of the Power Facility; and (iii) Tenant shall be responsible for emergency response at
the Power Facility, including, without limitation, medical care of personnel, consistent
with the rights reserved herein by Landlord.

     (p) Site Personnel Costs Following Termination of Operations Provisions.
Except as otherwise provided in the Lease or this Amendment, Landlord acknowledges and
agrees that in the event the Operations Provisions terminate, Tenant shall have no liability
for Payroll Related Costs for any Site Personnel (including, for the avoidance of doubt, any
Shared Personnel, Specific Site Personnel or Home Office Personnel) or other employees or
independent contractors of Landlord for any Services provided by such persons following the
termination of the Operating Provisions, including, without limitation, any costs relating
to providing security or performing safety or environmental services for Landlord’s
property, the Real Property or the Power Facility.

     3. Amendment of Operations Provisions. Facility Owner and Facility Operator agree
that the Operations Provisions attached to the Lease shall be amended as follows (with capitalized
terms not otherwise defined herein having the meaning given in the Operations Provisions and
section references referring to sections of the Operations Provisions):

          (a) Section 7.2 “Power Facility Full Capacity Bonus” is hereby deleted in its entirety and
replaced with the following:

     7.2 Power Facility Bonus. Facility Owner shall pay Facility Operator
an incentive bonus for any Lease Year during which Facility Operator is operating
the Power Facility in an amount equal to the sum of (i) 25% of the amount by which
actual “Adjusted O&M Costs” for the Lease Year are less than projected “Adjusted O&M
Costs” for the Lease Year up to a maximum incentive bonus amount of $200,000,
provided, however, that solely with respect to the Lease Year commencing January 1,
2009 and ending December 31, 2009 (the “2009 Lease Year”), such incentive bonus
shall be equal to 50% of the amount by which actual “Adjusted O&M Costs” for the
last six months of the 2009 Lease Year are less than projected “Adjusted O&M Costs”
for the last six months of the 2009 Lease Year up to a maximum incentive bonus
amount of $100,000, plus (ii) $100,000 if the capacity factor for the Power
Facility in the Lease Year is between 94% and 96%, or $200,000 if the capacity
factor for the Power Facility in the Lease Year is 96% or greater. For purposes of
this Section 7.2, the gross electric capacity of the Power Facility shall be 24.5
megawatts.

          (b) The number “90” in subsection “(ii)” of Section 9.2 is hereby deleted
and replaced with the number “180”.

          (c) A new Section 10.2 is hereby added to read as follows:

10.2. Indemnification by Facility Owner. During the time these Operations
Provisions are in effect, should Facility Owner at any time undertake to
perform any of the Services, either with or without Facility Operator’s
consent, Facility Owner shall indemnify, defend and hold

9

 

harmless Facility Operator Parties for, from and against any and all claims,
damages, judgments, suits, causes of action, losses, liabilities and
expenses, including attorneys’ fees and court costs, for injury or death of
persons or physical loss of or damage to property claimed or asserted by a
Third Person and arising or resulting from: (a) any willful misconduct or
negligence of Facility Owner or any Facility Owner Party in conjunction with
the use of Parcel 1 or operation of the Power Facility by Facility Owner or
any Facility Owner Party; (b) any failure by Facility Owner to perform any
obligation which would otherwise be performed by Facility Operator under
these Operations Provisions with respect to the Services undertaken by
Facility Owner; or (c) any violation by Facility Owner or the Power Facility
of any law, regulation, code, judgment, order, Permit, license or government
approval, including without limitation, any Environmental Law.

          (d) Section 11.1 is hereby deleted in its entirety and replaced with the following:

11.1 Termination by Facility Owner. Facility Owner
shall be permitted to terminate these Operations Provisions upon
written notice if any of the following events occur: (a) bankruptcy or
insolvency of the Facility Operator; (b) payment default by Facility
Operator that is not cured within sixty (60) Business Days of notice
from Facility Owner that such payment is due; (c) failure by Facility
Operator to perform any of its duties, responsibilities and obligations
under these Operations Provisions after notice by Facility Owner,
provided Facility Operator shall have up to 30 days after such notice
was given to cure such default or make substantial progress towards
curing such default, and provided further that this subsection (c)
shall not apply in the case of a termination by Facility Owner under
subsections (d) or (e) hereof; (d) for the period commencing January 1,
2009 and ending June 30, 2009, (i) actual Adjusted O&M Costs exceed the
budgeted Adjusted O&M Costs for such period as set forth in the 2009
Annual Budget or (ii) the actual output of the Power Facility (measured
in megawatt hours) is less than the projected output of the Power
Facility provided for such period in the 2009 Annual Budget, in which
case, unless the occurrence of either subsection “i” or “ii” hereof is
attributable to an event or cause beyond the reasonable control of
Facility Operator, Facility Owner may terminate the Operations
Provisions effective August 31, 2009, provided that Facility Owner
shall provide notice to Facility Operator of its intent to terminate
the Operations Provisions under this subsection (d) not later than July
31, 2009; and (e) with respect to any Lease Year, (i) actual Adjusted
O&M Costs exceeds the projected Adjusted O&M Costs as set forth in the
Annual Budget for such Lease Year or (ii) the actual output of the
Power Facility (measured in megawatt hours)

10

 

is less than the projected output of the Power Facility provided for
such Lease Year in the Annual Budget for such Lease Year, in which
case, unless the occurrence of either subsection “i” or “ii” hereof
is attributable to an event or cause beyond the reasonable control
of Facility Operator, Facility Owner may terminate the Operations
Provisions effective February 28 of the following Lease Year,
provided that Facility Owner shall provide notice to Facility
Operator of its intent to terminate the Operations Provisions under
this subsection (e) not later than January 31 of the following Lease
Year. A termination of these Operations Provisions under this
Section 11.1 for any reason shall not terminate the Lease,
which shall continue in full force and effect unless otherwise
terminated pursuant to the terms thereof. For the avoidance of
doubt, the obligations of the parties upon termination of the
Operations Provisions as set forth therein, including without
limitation, the parties’ obligations under Section 9 of the
Operations Provisions, shall continue to apply irrespective of the
reason for termination under this Section 11.1. A default by
Landlord under the Lease is governed by Section 19 of the Lease.

          (e) Section 11.2 is hereby deleted in its entirety and replaced with the following:

11.2 Termination by Facility Operator. Facility Operator shall be
permitted to terminate these Operations Provisions upon written
notice for any reason or for no reason. A termination of these
Operations Provisions under this Section 11.2 shall not terminate
the Lease, which shall continue in full force and effect unless
other wise terminated pursuant to the terms thereof. For the
avoidance of doubt, the obligations of the parties upon termination
of the Operations Provisions as set forth therein, including with
limitation, the parties’ obligations under Section 9 of the
Operations Provisions, shall continue to apply irrespective of the
reason for termination under this Section 11.2. A default by Tenant
under the Lease is governed by Section 18 of the Lease.

          (f) New definitions are hereby added to Section 13 as follows:

     “2009 Annual Budget” — shall mean the Annual Budget for the 2009 Lease Year as
agreed to by Facility Owner and Facility Operator.

     “2009 Lease Year” — shall have the meaning set forth in Section 7.2.

     “Adjusted O&M Costs” — shall mean the line items listed in the Annual Budget
under “Cost of Sales,” less fuel, natural gas, wheeling, insurance and property tax
(each of which line items are listed in the Annual Budget), and excluding costs for
repairs and modifications to the Power Facility that result

11

 

from design deficiencies, including, without limitation, modifications identified in
2008 for the baghouse and urea injection system.

          (g) The definition of “Shared Personnel” in Section 13 is hereby deleted in its
entirety and replaced with the following:

     “Shared Personnel” shall mean those Site Personnel who, as of the Effective
Date, are employed by Facility Operator and , as part of their job
assignment, support operation of the Power Facility, but shall exclude
Facility Operator’s mechanics and trade personnel directly involved in
performance of the Services.

          (h) A new sentence is hereby inserted at the end of Section 7.1.1 as follows:

     “Facility Operator shall use its best efforts in good faith to allocate Shared
Personnel between the Power Facility and the Paper Mill such that wage rate of the
Shared Personnel working at the Power Facility and Paper Mill is as uniform as
reasonably possible (i.e., an even allocation of Shared Personnel working on
overtime rather than ordinary wages).”

          (i) A new sentence is hereby inserted at the end of Section 7.1.2 as follows:

     “Facility Operator shall use its best efforts in good faith to use Site
Personnel to the extent reasonably practicable in the performance of Services prior
to engaging consultants, subcontracts, and other outside services as described in
subsection (f) of this Section 7.1.2.

     4. Effect of Termination of Operations Provisions. A termination of the Operations
Provisions for any reason shall not terminate the Lease, which shall continue in full force and
effect unless otherwise terminated pursuant to the terms thereof. Landlord and Tenant each
acknowledge and agree that it is the intent of the parties that in the event of the termination of
the Operations Provisions prior to the termination of the Lease, notwithstanding anything to the
contrary in the Lease (including the Operations Provisions), Landlord shall continue to perform its
obligations under the Lease without imposing new or additional costs to Tenant as a result of the
termination of the Operations Provisions, including without limitation, Landlord’s obligations
under Section 4 of the Lease, except as otherwise provided in this Amendment. Notwithstanding
anything in the Lease or Operations Provisions to the contrary, upon termination of the Operations
Provisions:

          (a) Landlord shall no longer be engaged to operate the Power Facility pursuant to Section 7 of
the Lease; and

          (b) Landlord shall have no obligation to maintain and repair Tenant’s Property located on
Parcel 1 pursuant to Section 10 of the Lease and Tenant shall have no reimbursement obligation with
respect thereto, provided, however, Landlord shall retain the right to maintain the fire protection
system located at the Power Facility and to access and use such system in the event of a fire
whenever deemed necessary by Landlord.

12

 

     5. Consent. Landlord hereby acknowledges receipt of notice of the transfer of the
Class A Interest to State Street pursuant to the MIPA and consents to the transfer of Tenant’s
interest in the Lease pursuant to Section 22 thereof. Landlord further agrees that, following the
consummation of the transfer of the Class A Interest contemplated by the MIPA, the Lease shall
remain in full force and effect for the remainder of its stated term, unless otherwise terminated
in accordance with the terms and provisions set forth therein.

     6. Governing Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH, AND BE GOVERNED BY, THE LAWS OF THE STATE OF
ARIZONA (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW).

     7. Counterparts. This Amendment may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which when so executed and delivered
shall be an original, but all of which shall together constitute one and the same instrument.

     8. Headings Descriptive. The headings of the several sections and subsections of this
Amendment are inserted for convenience only and shall not in any way affect the meaning or
construction of any provision of this Amendment.

     9. Severability. In case any provision in or obligation under this Amendment shall be
invalid, illegal or unenforceable in any jurisdiction, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not
in any way be affected or impaired thereby.

     10. Amendment, Waiver. Neither this Amendment nor any of the terms hereof may be
terminated, amended, supplemented, waived or modified except by an instrument in writing signed by
Landlord and Tenant.

     11. Successors and Assigns. This Amendment shall bind and benefit Landlord and Tenant,
and their respective successors and assigns, including any of Landlord’s successors and assigns to
the Operations Provisions with respect thereto.

     12. Entire Agreement. This Amendment and any agreement, document or instrument
attached hereto or referred to herein integrate all the terms and conditions mentioned herein or
incidental hereto and supersede all oral negotiations and prior writings between the parties hereto
in respect of the subject matter hereof.

[Remainder of page intentionally left blank — signature page follows]

13

 

     IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first
written above.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	CATALYST PAPER (SNOWFLAKE) INC.	 	 	 	SNOWFLAKE WHITE MOUNTAIN POWER, LLC
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ Tom Fawcett	 	 	 	By:	 	/s/ Robert M. Worsley	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Name:
	 	Tom Fawcett
	 	 	 	 	 	Name:
	 	Robert M. Worsley	 	 
	 

	 	Title:
	 	Production Manager
	 	 	 	 	 	Title:
	 	Managerexv10w16

Exhibit 10.16

SETTLEMENT AND RELEASE AGREEMENT

     THIS SETTLEMENT AND RELEASE AGREEMENT (this “Agreement”) is made and entered into as
of December 31, 2008, by and between Catalyst Paper (Snowflake) Inc., a Delaware corporation
(“Landlord”) and indirect wholly-owned subsidiary of Catalyst Paper Corporation, a Canadian
corporation, and Snowflake White Mountain Power, LLC, and Arizona limited liability company
(“Tenant”).

RECITALS

     A. Landlord and Tenant have entered into that certain Lease Agreement, dated as of September
14, 2005 (as amended, amended and restated, supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof, including pursuant to the Amendment No. 4 to Lease
(as defined below), the “Lease”). Capitalized terms used herein but not defined herein have
the meaning given in the Lease.

     B. A dispute has arisen concerning the payment of the monthly invoices submitted to Tenant
under 7.1.3 of the Operations Provisions of the Lease for the period May 1, 2008 through September
30, 2008 with respect to Operational Costs and reimbursement or others costs payable by Tenant to
Landlord pursuant to Sections 4.5, 4.6 or 4.7 of the Lease (the “Disputed Costs”).

     C. Tenant has previously made certain payments to Landlord with respect to the Disputed Costs.

     D. The parties desire to settle and resolve their differences with respect to any balance due
from Tenant to Landlord with respect to the Disputed Costs on the terms set forth herein.

     E. Concurrently with the execution and delivery of this Agreement, Landlord and Tenant are
entering into that certain Amendment No. 4 to Lease Agreement to amend certain provisions in the
Lease (the “Amendment No. 4 to Lease”).

     NOW THEREFORE, in consideration of the foregoing, the parties hereby agree as follows:

AGREEMENT

     1. Incorporation by Reference. All Recitals set forth above are hereby incorporated
by reference into this Section 1 as if they were set forth in full herein.

     2. Settlement and Payment of Disputed Costs.

          a. The parties agree and acknowledge that the balance due from Tenant to Landlord for Disputed
Costs for each of the monthly periods occurring between May 1, 2008 and September 30, 2008 shall be
as set forth on Exhibit A hereto.

 

 

          b. Within thirty (30) days of the execution hereof, Tenant shall pay to Landlord the sum of
Three Hundred Ninety-Six Thousand, Nine Hundred Sixty-Three and 83/100 Dollars ($396,963.83), in
full satisfaction of Tenant’s obligation for the Disputed Costs for each of the monthly periods
occurring between May 1, 2008 and September 30, 2008.

     3. Release by Landlord. Landlord and its directors, officers, shareholders,
affiliates and other agents each hereby release Tenant (including its members and managers) and
their respective successors, assigns, affiliates and agents, from and against any and all claims,
demands, debts, liabilities, obligations, accounts, costs, expenses, liens, actions and causes of
action, of every kind and nature whatsoever, whether now known or unknown, suspected or
unsuspected, direct or derivative, presently accrued or not accrued, whether arising out of tort,
contract, statute, or any other legal theories, which such releasing parties ever had or now has
against such parties with respect to the Disputed Costs for the monthly periods occurring between
May 1, 2008 and September 30, 2008; provided, however, that the foregoing shall not constitute a
release of any claim, demand, liability, cost or obligation arising under this Agreement.

     4. Acknowledgements by Settling Parties. Each of the parties hereto represents,
acknowledges and agrees that:

          a. It has received advice from independent legal counsel selected by it prior to its execution
of this Agreement, and that it fully understands the terms and provisions of this Agreement and the
nature and effect thereof.

          b. It is aware that it or its attorneys may after the date hereof discover facts different
from or in addition to the facts that it or its attorneys now know or believe to be true with
respect to the subject matter of this Agreement but that its intention is that Tenant and its
affiliates shall be fully and finally released from any and all manner of liabilities and claims
which have arisen, are now arising, or may in the future arise in connection with or in any way
related to the Disputed Costs for the monthly periods occurring between May 1, 2008 and September
30, 2008, except as provided under this Agreement. Landlord further represents and acknowledges
that to its knowledge there are no other Operational Costs or other costs due from Tenant under
Section 4.5, 4.6 or 4.7 of the Lease for the time period May 1, 2008 through September 30, 2008
other than as set forth and included in the monthly invoices previously submitted to Tenant with
respect to the Disputed Costs and except as may otherwise be contemplated by the parties pursuant
to Section 2(g) Amendment No. 4 to Lease.

          c. It is understood and agreed that this Agreement is a compromise of disputed claims and the
payments made and consideration given hereunder are being made without any admission of liability
or responsibility whatsoever, said liability or responsibility being expressly denied by Tenant,
said Agreement being made in the spirit of compromise and settlement thereof and shall never be
treated as an admission of liability or responsibility at any time for any purpose.

          d. It is duly authorized and empowered to enter into this Agreement and to perform and observe
its agreements and obligations herein; this Agreement creates

2

 

and constitutes a binding obligation on such party and its successors and assigns; and such
party is the holder of all claims and rights compromised or released herein, and has not sold or
otherwise transferred any such claims or rights.

          e. The representations contained in this Section 4 will survive the
execution of this Agreement.

     5. Miscellaneous.

          a. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH, AND BE GOVERNED BY, THE LAWS OF THE STATE OF
ARIZONA (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW).

          b. Counterparts. This Agreement may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which when so executed and delivered
shall be an original, but all of which shall together constitute one and the same instrument.

          c. Headings Descriptive. The headings of the several sections and subsections of this
Agreement are inserted for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.

          d. Severability. In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not
in any way be affected or impaired thereby.

          e. Amendment, Waiver. Neither this Agreement nor any of the terms hereof may be
terminated, amended, supplemented, waived or modified except by an instrument in writing signed by
Landlord and Tenant.

          f. Successors and Assigns. This Agreement shall bind and benefit Landlord and Tenant,
and their respective successors and assigns, including any of Landlord’s successors and assigns to
the Operations Provisions with respect thereto.

          g. Entire Agreement. This Agreement and any agreement, document or instrument attached
hereto or referred to herein integrate all the terms and conditions mentioned herein or incidental
hereto and supersede all oral negotiations and prior writings between the parties hereto in respect
of the subject matter hereof.

[Remainder of page intentionally left blank — signature page follows]

3

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

	 	 	 	 	 	 	 	 
	CATALYST PAPER (SNOWFLAKE) INC.

 	 	SNOWFLAKE WHITE MOUNTAIN POWER, LLC

 	 
	By:  	/s/ Tom Fawcett
 	 	By:  	/s/ Robert M. Worsley
 	 
	 	Name:  	Tom Fawcett 	 	 	Name:  	Robert M. Worsley 	 
	 	Title:  	Production Manager 	 	 	Title:  	Manager 	 
	 

4

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00151-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00151-of-00352.parquet"}]]