Document:

Exhibit 10.20

 

WOOD CHIP PURCHASING AGREEMENT

 

THIS WOOD CHIP PURCHASING AGREEMENT (the
“Agreement”) dated this 10th day of April, 2002 is by and between BLUE RIDGE
PAPER PRODUCTS INC. (“BLUE RIDGE PAPER”) and LOUISANA-PACIFIC (“L-P”)

 

WITNESSETH:

 

WHEREAS, BLUE RIDGE
PAPER owns and operates a paper mill in Canton, North Carolina and wishes to
purchase wood chips from L-P.

 

WHEREAS, L-P owns
and operates a chip mill in Roaring River, North Carolina (the “L-P Mill”) and
is willing to provide wood chips to BLUE RIDGE PAPER PRODUCTS through May 19,
2004.

 

NOW, THEREFORE, in
consideration of the mutual promises contained herein, the parties agree as
follows:

 

ARTICLE I. - PURCHASE OF WOOD CHIPS

 

1.1                                 Term and Quantity.  During
the period from February 5, 2002 through May 19, 2004, BLUE RIDGE PAPER agrees
to purchase from L-P and L-P agrees to manufacture and sell to BLUE RIDGE PAPER
approximately 125,000 tons of hardwood wood chips annually on the terms and
conditions set forth in this Article and in Articles II through IV.

 

1.2                                 Delivery:

 

a)              All
Chips shall be delivered free on board rail at the L-P Mill except during
abnormal circumstances when rail service is disrupted chips may be delivered
free on board truck at the L-P Mill.

b)             Two
weeks of downtime will be scheduled each year during which time no chipping
services will be provided.  BLUE RIDGE
PAPER will make reasonable efforts to order 2,500 tons of Hardwood Chips each
week subject however to maintenance and down time at the Canton Mill.  BLUE RIDGE PAPER will confirm or modify each
week’s Chip order and schedule of delivery approximately four days before the
week in question begins.

 

1.3                                 Price and Payment:

 

a)              BLUE
RIDGE PAPER shall pay L-P weekly for Chips delivered as set forth on Schedule 1
attached hereto and incorporated herein.

 

b)             BLUE
RIDGE PAPER may deduct from payment due any overpayment, loss or adjustment due
to incorrect scaling or failure to meet specifications.

 

 

1.4                                 Minimum Volume. Except for the two
weeks of scheduled downtime, the minimum target volume of Chips to be processed
and delivered each week is 2,500 tons. 
In the event the agreed to quarterly target volume of 31,250 tons is not
met, at the end of each quarter both parties shall meet and use their best
efforts to resolve the shortfall.  This
does not relieve BLUE RIDGE PAPER of its obligation to purchase or L-P of its
obligation to produce the estimated annual amount of 125,000 tons of chips
stated here in.

 

1.5                                 Scaling. 
All Chips delivered to BLUE RIDGE PAPER shall be weight scaled at
Canton, North Carolina.  A weekly pay
statement shall be provided to L-P within one week of delivery.

 

ARTICLE II – QUALITY

 

2.1                                 Quality. 
L-P understands that high quality Chips are essential to the high
quality paper that BLUE RIDGE PAPER intends to manufacture at the Canton
Mill.  All chips delivered must meet or
exceed the specifications set forth in Exhibit A.

 

2.2                                 Measurement.  Chip quality will be measured by L-P using a Classifier
system approved by BLUE RIDGE PAPER, after the Chips have been screened and at
a location and on a schedule to be agreed upon by BLUE RIDGE PAPER and
L-P.  The Chips shall be correlated to
the same classifier sizes as BLUE RIDGE uses at its other supplier mills.  The current screen sizes are 1 3/4”, 1”,
1/2”, 3/8”, 1/8” and PAN.

 

ARTICLE III – TERMINATION

 

3.1                                 Default. 
In the event either party defaults in the prompt or full performance
of any provision of this Agreement, the other party shall give written notice
of default and the defaulting party shall have thirty (30) days after notice to
cure the default.  If the default is not
cured to the non-defaulting party’s satisfaction, the non-defaulting party
shall have the right to terminate effective immediately.

 

3.2                                 Other Reasons for Termination.  This Agreement shall immediately terminate
upon (i) the insolvency of either party or (ii) thirty (30) days after the
filing of a claim of bankruptcy by or against a party hereto, whether voluntary
or involuntary, providing such claim has not been dismissed within the thirty (30)
day period.

 

3.3                                 Termination by Mutual Agreement.  This Agreement may be terminated upon the
mutual written agreement of both parties.

 

ARTICLE IV. – MISCELLANEOUS

 

4.1                                 Insurance.  L-P shall obtain and continue in force during the term of this
Agreement the following minimum limits of insurance.

 

 

a)              Comprehensive
General Liability insurance of $1,000,000 CSL per occurrence for bodily injury
and property damage combined, $1,000,000 aggregate, with contractual liability
covering the liability of L-P assumed under paragraph 4.2.

 

b)             Workers Compensation
insurance (statutory amount) and Employer’s Liability of $500,000.

 

Certificates
of insurance shall be provided to BLUE RIDGE PAPER and kept current as evidence
of the above coverages and shall provide that at least thirty (30) days notice
shall be given to BLUE RIDGE PAPER at the address set forth in paragraph 4.6
before any material change or cancellation of the policy.

 

Failure by L-P
to perform the requirements of this paragraph shall be a material default.

 

4.2                                 Indemnification.  Each party assumes responsibility for and shall indemnify,
defend and hold the other party harmless from and against claims, demands,
suits, judgments, actions or liability, including fees and costs of attorneys,
arising out of (i) breach of warranty of title (ii) personal or bodily injury
to or death of any person (including, but not limited to the employees of the
indemnitor) or (iii) damage, loss or destruction of property sustained by any
person when such injury, death, damage, loss or destruction is caused by the
intentional misconduct or negligent act or omission of the indemnitor, its
employees, agents, contractors or subcontractors or when such act or omission
is the kind for which one is made strictly liable.  When such injury, death, damage, loss, or destruction is caused
by the joint or concurrent negligence of the indemnitor or those for whom the
indemnitor has assumed responsibility and the indemnitee, then the indemnitor’s
liability under this clause shall be equal to the degree that its negligence
together with the negligence of those for whom the indemnitor has assumed
responsibility contributed to the cause of the injury, death, damage, loss or
destruction, provided, however, that under these circumstances each party shall
bear its own defense costs.

 

4.3                                 Force Majeure

 

a)              Either parties’
performance of the duties set forth in this Agreement shall be excused or
reduced when the party is prevented from such performance due to events of
Force Majeure such as Acts of God, acts or omissions of public authorities
including federal, state, or local governments, fire or other casualty, labor
disputes, wars, fuel shortage and/or any other similar event beyond that
party’s control.

 

b)             In the event that
either party is prevented by an event of Force Majeure from performance of its
duties, the party seeking excuse shall promptly notify the other party of the
event which gives rise to the excuse of performance, the anticipated duration
of the interruption of performance and its extent.

 

 

4.4                                 Independent Contractor Relationship.  The status of L-P under this Agreement is
that of an independent contractor.  The
parties in no way stand in the relationship of master and servant, principal
and agent, or employer and employee. 
Except as herein provided, L-P shall be and remain free from the
direction and control of BLUE RIDGE PAPER in all particulars in the performance
of this agreement.

 

4.5                                 Assignment, Governing Law, Entire Agreement.  This Agreement shall (a) be construed under the
laws of the State of North Carolina; (b) may be assigned by BLUE RIDGE PAPER
upon written notice to L-P; and  (c) may
not be modified except by a writing signed by both parties.  All prior or contemporaneous agreements
regarding the subject matter of this Agreement among the parities, whether
written or oral, are merged herein and shall be of no force or effect.  There are no representations or warranties
related to the subject matter hereof other than those set forth in this
Agreement.

 

4.6                                 Notices.  All notices or other communications which are required or
permitted hereunder shall be sufficient if delivered personally or by
registered or certified mail, postage prepaid as follows:

 

	
  If to BLUE RIDGE PAPER:

  	
   

  	
  BLUE RIDGE PAPER PRODUCTS INC.

  
	
   

  	
   

  	
  Chip Procurement

  
	
   

  	
   

  	
  P.O. Box 4000

  
	
   

  	
   

  	
  Canton, North Carolina 28716-35618

  
	
   

  	
   

  	
  ATTENTION:  JERRY SMATHERS

  
	
   

  	
   

  	
  (828) 646-2271

  
	
   

  	
   

  	
  (828) 646-2266 (FAX)

  
	
   

  	
   

  	
   

  
	
  If to L-P:

  	
   

  	
  LOUISANA-PACIFIC

  
	
   

  	
   

  	
  Highway 268

  
	
   

  	
   

  	
  P.O. Box 98

  
	
   

  	
   

  	
  Roaring River, NC 28669

  
	
   

  	
   

  	
  ATTENTION:  MARK WISEMAN

  
	
   

  	
   

  	
  (336) 696-3418

  
	
   

  	
   

  	
  (336) 696-3439 (FAX)

  

 

4.7                                 Limitation of Damages.  Under no circumstances shall either party be
liable to the other at any time for consequential damages, punitive damages or
the reimbursement of expenses incurred in connection with its performance under
this Agreement.

 

4.8                                 No Third Party Benefits.  This Agreement is made for the sole benefit
of BLUE RIDGE PAPER and L-P and no other person shall have any right or remedy
or other legal interest of any kind under or by reason of this Agreement.

 

4.9                                 Waiver.  No waiver of any of the terms and conditions of this Agreement
shall be considered or construed to be a continuing waiver.  Failure to enforce any provision of this
Agreement shall not operate as a waiver of such provision or any other provision.

 

 

4.10                           Construction.  All provisions for this Agreement have been negotiated at arm’s
length and this Agreement shall not be construed for or against any party by
reason of the authorship or alleged authorship of any provision hereof.

 

4.11                           Sustainable Forestry Initiative.  Upon execution of this agreement, L-P is
acknowledging that L-P wood procurement personnel and such subcontractors as
deemed necessary to fulfill this agreement, shall be trained in appropriate SFI
State Implementation Committee approved training and will encourage suppliers
to adhere to all Forestry Best Management Practices (BMP’s) in the states where
they perform the activities of this agreement. 
L-P hereby acknowledges that it has achieved SFI third party
certification and has an ongoing SFI program meeting AF&PA standards.  Documentation is maintained and available
for inspection.

 

 

	
   

  	
  BLUE RIDGE
  PAPER PRODUCTS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jerry C.
  Smathers

  	
   

  
	
   

  	
   

  	
  Jerry C.
  Smathers

  
	
   

  	
   

  	
  JoAnn
  Messer, C.P.M

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LOUISANA-PACIFIC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark S.
  Wiseman

  	
   

  

 

 

SCHEDULE 1

 

Intention

The intention
of this schedule is to provide a mechanism for adjusting price quarterly if
roundwood costs fluctuates up or down. 
Annually, a baseline for roundwood and processing cost as well as a roundwood
cost range is determined.  Any quarterly
price adjustment will be plus or minus the change in roundwood cost as long as
it is within the roundwood cost range established.

 

Base Line for Processing                                  $7.00
per chip ton

(Price does not change)

 

Base
Line Roundwood Cost in Chip Tons

•                       Hardwood                  $27.00/Ton
of Delivered Chips

 

Movement
From The Base Line Cost Within A Year

•                       Hardwood                  $
26.50/Ton - $27.50/Ton

 

Cost
Review – Quarterly

•                       During a
quarterly review, the parties shall review the rates paid under this Agreement,
and if market conditions have changed, may renegotiate the rate for the
upcoming quarter within the stated annual brackets.

•                       The parties
intend that the rate to be paid for each Product shall be no greater than fair
market value for the designated Product for similar contract term, volume,
quality and species.

 

Cost
Review – Annually

•                       The base
rate and cost limits will be reviewed and agreed to, every year before December
1st for each year of this contract.

 

Unable
to Agree

•                       In the
event Seller and Blue Ridge Paper’s representative are unable to agree upon the
rate for the upcoming quarter or year, Seller shall be entitled to meet with
the appropriate Blue Ridge Paper’s Management Team to discuss and attempt to
resolve such rate.

•                       Deliveries
shall continue pending the Management Team’s decision at the then-current rate,
and adjustments shall be retroactive to the beginning of the quarter or year.

•                       If
agreement still is not met, an agreed to third party arbitrator will be used to
establish the price within the quarter in question.

•                       If the
parties fail to agree upon an arbitrator, then each party may select an
arbitrator and the arbitrators so chosen shall appoint a third to act as an
umpire.  The majority opinion of the
three shall be the binding decision upon the parties.

 

 

Exhibit H

 

BLUE RIDGE PAPER PRODUCTS INC.

 

CHIP SPECIFICATIONS

CANTON, NC MILL

 

	
   

  	
   

  	
  TARGET

  	
   

  	
  MAXIMUM

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SIZE (PINE & HARDWOOD)

  	
   

  	
  3/4”

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BARK

  	
  SUMMER

  	
  LESS THAN

  	
   

  	
  1

  	
  %

  	
  1

  	
  %

  
	
   

  	
  WINTER

  	
  LESS THAN

  	
   

  	
  2

  	
  %

  	
  2

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  OVERSIZE (RETAINED ON 1 3/4” SCREEN)

  	
   

  	
  1

  	
  %

  	
  3

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PINS (RETAINED ON 1/8” SCREEN)

  	
   

  	
  7

  	
  %

  	
  10

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FINES (PASS THROUGH 1/8” SCREEN)

  	
   

  	
  0.5

  	
  %

  	
  1

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  RETAINED ON 1” SCREEN

  	
   

  	
  15

  	
  %

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  RETAINED ON 1/2” SCREEN

  	
   

  	
  65

  	
  %

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  RETAINED ON 3/8” SCREEN

  	
   

  	
  10

  	
  %

  	
   

  	
   

  

 

OTHER:

 

ALL CHIPS WILL BE SCREENED.
STANDARD SCREEN SIZES ARE:

TOP
SCREEN - 1 3/4” ROUND

BOTTOM
SCREEN - 3/8” ROUND

 

PINE AND HARDWOOD CHIPS WILL BE
COMPLETELY SEPARATED.

 

NO CONTAMINATION IS ALLOWED
FROM PLASTICS, SOIL, METAL, STYROFOAM, OIL, ETC.

 

“BEETLE KILLED” OR DEAD AND
STAINED WOOD WILL BE NO MORE THAN 25% OF A LOAD. ALL OTHER WOOD IS EXPECTED TO
BE “GREEN”AVERAGING BETWEEN 40 TO 50% MOISTURE CONTENT.

 

NOTE: BOTH RESIDUAL AND PRIMARY
CHIP SUPPLIERS ARE EXPECTED TO ADHERE TO THESE CHIP SIZE SPECIFICATIONS.
FAILURE TO DO SO WILL RESULT IN TERMINATION
OF DELIVERIES.

 

REVISION DATE: MARCH, 1997Exhibit 10.21

 

EXTENSION OF CHIP PURCHASE AGREEMENT

 

This Extension of Wood Chip Purchasing Agreement (the “Extension
Agreement”) made this 17 day of December, 2002, by and between Blue Ridge Paper
Products Inc., a Delaware corporation with offices in Canton, North Carolina
(“Blue Ridge”) and Suncrest Land and Timber Company, a North Carolina
corporation with offices in Haywood County, North Carolina (“Suncrest”).

 

RECITALS:

 

WHEREAS, Blue Ridge, as successor to Champion International, desires to
amend and extend that certain Wood Chip Purchasing Agreement by and between
Suncrest and Champion International dated April, 1998 (the “Champion
Agreement”) and Suncrest agrees to amend and extend the Champion Agreement.

 

NOW THEREFORE, in consideration of the mutual promises contained
herein, the parties contract and agree as follows:

 

1.                                       The
Champion Agreement and all of its terms and conditions be and hereby is
extended to and until May 14, 2004, subject to the following changes:

 

(a)                                  Article I,
Chipping Services, is deleted in its entirety as that portion of the Champion
Agreement had previously expired March 31, 1998, and was neither renewed
nor extended.

 

(b)                                 The next to last
sentence of the Champion Agreement is deleted and in lieu thereof is the
following sentence: “The chips shall be tested using the classifier sizes as
determined by Blue Ridge.”

 

(c)                                  Section 4.4 of
the Champion Agreement is deleted as being no longer applicable.

 

(d)                                 Section 5.6
Notices in the Champion Agreement is changed as follows:

 

Notices.  All notices or other communications which
are required or permitted hereunder shall be sufficient if delivered personally
or by registered or certified mail, postage prepaid, as follows:

 

	
  If to Blue Ridge:

  	
  Blue Ridge Paper Products Inc.

  
	
   

  	
  P.O. Box 4000

  
	
   

  	
  Canton, North Carolina 28716

  
	
   

  	
  Attention: Jerry Smathers

  
	
   

  	
  828-646-2271

  
	
   

  	
  828-646-2266 (facsimile)

  

 

1

 

	
  If to Suncrest:

  	
  Suncrest Land and Timber Company

  
	
   

  	
  Highway 276, Jonathan’s Creek

  
	
   

  	
  P.O. Box 65

  
	
   

  	
  Waynesville, North Carolina 28786

  
	
   

  	
  Attention:  Bruce Powell

  
	
   

  	
  828-926-9144

  
	
   

  	
  828-926-9117 (facsimile)

  

 

(e)                                  Wherever the name
“Champion International” appears in the Champion Agreement it shall read “Blue
Ridge Paper Products Inc.” and wherever the word “Champion” appears it shall
read “Blue Ridge.

 

(f)                                    Schedule 1 of
the Champion Agreement is deleted and is replaced by the Schedule 1
attached to this Extension Agreement.

 

IN WITNESS WHEREOF the parties hereto have set their hands and seals
the day and year first above written.

 

 

	
   

  	
  BLUE RIDGE PAPER PRODUCTS INC.

  
	
   

  
	
   

  
	
   

  	
  By:

  	
  /s/ Jerry C. Smathers

  
	
   

  	
  Name:

  	
  JERRY C. SMATHERS

  
	
   

  	
  Title:

  	
  District Procurement Manager

  
	
   

  
	
   

  
	
   

  	
  SUNCREST LAND AND TIMBER COMPANY

  
	
   

  
	
   

  	
  By:

  	
  /s/ Carl B. Powell Jr.

  
	
   

  	
  Name:

  	
  Carl B. Powell Jr.

  
	
   

  	
  Title:

  	
  President

  
							

 

2

 

SUNCREST CHIP MILL

 

CHIP COST REVIEW

 

Replaces Schedule 1 of Original Contract

 

	
  Processing and freight

  	
   

  	
   

  	
   

  
	
  Both Species

  	
   

  	
  7.25/ton

  	
   

  
	
  Freight

  	
   

  	
  3.00/ton

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Rate

  	
   

  	
  10.25/ton

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  No escalation

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Roundwood cost chip tons

  	
   

  	
   

  	
   

  
	
  Pine

  	
   

  	
  26.72/ton del.chips

  	
   

  
	
  Hardwood

  	
   

  	
  27.80/ton del.Chips

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Delivered Cost

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  *New Qtr. pricing

  	
   

  	
   

  	
   

  
	
  Pine

  	
   

  	
  36.56

  	
   

  
	
  Hardwood

  	
   

  	
  38.05

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Annual cost rate to April 2001 *

  	
   

  	
   

  	
   

  
	
  Pine

  	
   

  	
  35.50

  	
   

  
	
  * Hardwood

  	
   

  	
  37.85

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Movement from delivered cost in a year

  	
   

  	
   

  	
   

  
	
  Pine

  	
   

  	
  34.47/ton to 37.56/ton

  	
   

  
	
  Hardwood

  	
   

  	
  36.71/ton to 38.98/ton

  	
   

  

 

*This rate represents a 3% increase over 1998 rates or 1.5% increase
per year.

 

 

CHIPPING SERVICES

AND WOOD CHIP PURCHASING AGREEMENT

 

 

THIS CHIPPING SERVICES AND WOOD CHIP
PURCHASING AGREEMENT (the “Agreement”) dated this 1
day of April, 1998 is by and between CHAMPION
INTERNATIONAL CORPORATION (“CHAMPION”) and SUNCREST LAND AND TIMBER COMPANY (“SUNCREST”).

 

W I T N E S S E T H:

 

WHEREAS, CHAMPION
owns and operates a paper mill in Canton, North Carolina and wishes to supply
logs to SUNCREST for processing into wood chips for delivery to CHAMPION
through March 31, 1998 and thereafter wishes to purchase wood chips from
SUNCREST;

 

WHEREAS, SUNCREST
owns and operates a chip mill in Maggie Valley, North Carolina (the “SUNCREST
Mill”) and is willing to provide wood chipping services to CHAMPION through
March 31, 1998, and thereafter to supply CHAMPION with wood chips;

 

NOW, THEREFORE, in
consideration of the mutual promises contained herein, the parties agree as
follows:

 

I. 
CHIPPING SERVICES

 

1.1                                 Term and Quantity.  During the period from November 1, 1997
through March 31, 1998, CHAMPION agrees to purchase from SUNCREST and
SUNCREST agrees to provide to CHAMPION chipping services for 121,980 tons of
wood.

 

1.2                                 Procurement.  CHAMPION shall deliver hardwood and pine logs (the “Logs”) to
SUNCREST in a quantity sufficient to enable SUNCREST to meet the delivery
schedule set forth below.

 

1.3                                 Process.  SUNCREST shall process the Logs into wood chips meeting the
specifications set forth on Exhibit A (the “Chips”).

 

1.4                                 Delivery.

 

a)                                      All Chips shall
be loaded in trucks and hauled at SUNCREST’s expense.

 

b)                                     Two
weeks of downtime will be scheduled each year during which time no chipping
services will be provided.  CHAMPION
will make reasonable efforts to order 5,700 tons of chips each week, comprised
of 20% pine and 80% hardwood, subject, however, to maintenance

 

 

and downtime at the Canton Mill. 
CHAMPION will confirm or modify each week’s chip order and
schedule of delivery approximately seven (7) days before the week in
question begins.

 

1.5                                 Price and Payment.

 

a)                                      CHAMPION
shall pay SUNCREST weekly a service fee of $10.25/ton for the Chips processed,
hauled and delivered each week.

 

b)                                     CHAMPION
may deduct from payment due any overpayment, loss or adjustment due to
incorrect scaling or failure to meet specifications.

 

1.6                                 Minimum Volume.  Except for the two weeks of scheduled
downtime, the minimum target volume of Chips to be processed and delivered each
week is 5,700 tons.  In the event the
agreed to quarterly target volume of 71,250 tons is not met, at the end of each
quarter both parties shall meet and use their best efforts to resolve the
shortfall.  If no agreement is reached,
and CHAMPION is responsible for the shortfall, a charge $4.00/ton on the
shortfall volume will be paid by CHAMPION to SUNCREST.  If no agreement is reached and SUNCREST is
responsible for the shortfall, CHAMPION in its discretion may elect (1) to have
SUNCREST later provide the shortfall volume or (2) to reduce the annual
contract volume by the shortfall amount.

 

1.7                                 Scaling.

 

a)                                      All
Chips shall be weight scaled on CHAMPION’s scales at Canton, North
Carolina.  A pay statement shall be
delivered to SUNCREST within one (I) week of delivery.

 

b)                                     All
Logs delivered by CHAMPION shall be weight scaled by a CHAMPION representative
at the SUNCREST Mill.  SUNCREST shall
accept no deliveries unless they have been weighed by a CHAMPION
representative.

 

c)                                      Each
party shall have fourteen (14) days to review and object to scaling
determinations.  Unless the party
objects, in writing, to such scale determinations, the determinations shall be
binding and conclusive.

 

1.8                                 Ownership.  All Logs delivered to the SUNCREST Mill and all Chips shall
remain the property of CHAMPION while at the SUNCREST Mill.  SUNCREST shall not enter into any agreement
whereby the Logs and Chips or other property of CHAMPION are used or
represented as collateral for SUNCREST’s benefit, nor shall SUNCREST enter into
any agreement that could otherwise cause a lien against CHAMPION’s
property.  SUNCREST shall cure any liens
encumbering the Logs and Chips at the SUNCREST Mill within ten (10) days of the
earlier of SUNCREST’s receipt of notice or knowledge thereof, whether actual or
constructive notice.  SUNCREST
represents that the following entities have a security interest in the SUNCREST
Mill or assets situated at the
mill:                    .  SUNCREST shall notify in writing all
entities with an interest in the SUNCREST Mill or the equipment situated
thereon, whether or not recorded, of CHAMPION’s ownership of the Logs and Chips
located at the SUNCREST Mill.

 

2

 

1.9                                 Protection of Property.  SUNCREST, using the same degree of care that
it uses to protect its property, shall protect all of CHAMPION’s property,
including Logs and Chips at the SUNCREST Mill from theft, vandalism, fire and
spoilage.

 

1.10                           Access.  SUNCREST grants CHAMPION free and unrestricted access to any
areas of the SUNCREST Mill property where Logs and Chips are stored.

 

II. PURCHASE OF WOOD CHIPS

 

2.1                                 Term and Quantity.  During the period from April 1, 1998
through December 31, 1998, CHAMPION agrees to purchase from SUNCREST and
SUNCREST agrees to manufacture and sell to CHAMPION approximately 212,040 tons
of wood chips on the terms and conditions set forth in this Article and in
Articles III through V. During the period from January 1, 1999 through
December 31, 2002.  CHAMPION agrees
to purchase from SUNCREST and SUNCREST agrees to manufacture and sell to
CHAMPION 285,000 tons of wood chips annually on the terms and conditions set
forth in this Article and in Articles III through V.

 

2.2.                              Delivery.

 

a)                                      All
Chips shall be delivered free on board rail, truck or both (per CHAMPION’s
instruction) at the Canton Mill.

 

b)                                     Two
weeks of downtime will be scheduled each year during which time no chipping
services will be provided.  CHAMPION
will make reasonable efforts to order 5,700 tons of Chips each week, comprised
of 20% pine and 80% hardwood, subject however to maintenance and down time at
the Canton Mill.  CHAMPION will confirm
or modify each week’s Chip order and schedule of delivery approximately
seven days before the week in questions begins.

 

2.3                                 Price and Payment.

 

a)                                      CHAMPION shall
pay SUNCREST weekly for Chips delivered as set forth on Schedule One
attached hereto and incorporated herein.

 

b)                                     CHAMPION may
deduct from payment due any overpayment, loss or adjustment due to incorrect
scaling or failure to meet specifications.

 

2.4                                 Minimum Volume.  Except for the two weeks of scheduled
downtime, the minimum target volume of Chips to be processed and delivered each
week is 5,700 tons.  In the event the
agreed to quarterly target volume of 71,250 tons is not met, at the end of each
quarter both parties shall meet and use their best efforts to resolve the
shortfall.  This does not relieve
CHAMPION of it’s obligation to purchase or SUNCREST obligation to produce the
annual amount of 285,000 tons of chips stated here in.

 

3

 

2.5                                 Scaling.  All Chips delivered to CHAMPION shall be weight scaled at Canton,
North Carolina.  A pay statement shall
be provided to SUNCREST within one week of delivery.

 

ARTICLE III - QUALITY

 

3.1                                 Quality.  SUNCREST understands that high quality Chips are essential to the
high quality paper that CHAMPION intends to manufacture at the Canton
Mill.  All chips delivered must meet or
exceed the specifications set forth in Exhibit A.

 

3.2                                 Measurement.  Chip quality will be measured by SUNCREST using the Williams
Classifier chip system, or other system approved by CHAMPION, after the Chips
have been screened and at a location and on a schedule to be agreed upon
by CHAMPION and SUNCREST.  The Chips
shall be tested using the same classifier sizes as CHAMPION uses at its own
chipping facilities and mills.  The
current screen sizes are 1 3/4”, 1”, 1/2”, 3/8”, 1/8” and PAN.

 

ARTICLE IV - TERMINATION

 

4.1                                 Default.  In the event either party defaults in the prompt or full
performance of any provision of this Agreement, the other party shall give
written notice of default and the defaulting party shall have thirty (30) days
after notice to cure the default.  If
the default is not cured to the non-defaulting party’s satisfaction, the
non-defaulting party shall have the right to terminate effective immediately.

 

4.2                                 Other Reasons for Termination.  This Agreement shall immediately terminate
upon (i) the insolvency of either party or (ii) thirty (30) days after the
filing of a claim of bankruptcy by or against a party hereto, whether voluntary
or involuntary, providing such claim has not been dismissed within the thirty
(30) day period.

 

4.3                                 Termination by Mutual Agreement.  This Agreement may be terminated upon the
mutual written agreement of both parties.

 

4.4                                 Right to Remove.  CHAMPION shall have sixty (60) days from the
date of termination to remove its property from the SUNCREST Mill.

 

V. MISCELLANEOUS

 

5.1                                 Insurance.  SUNCREST shall obtain and continue in force during the term of
this Agreement the following minimum limits of insurance:

 

a)              Comprehensive General Liability insurance
for $1,000,000 CSL per occurrence for bodily injury and property damage
combined, $1,000,000 aggregate, with contractual liability covering the
liability of SUNCREST assumed under paragraph 5.2.

 

4

 

b)             Workers Compensation insurance (statutory
amount) and Employer’s Liability of $500,000.

 

Certificates of insurance shall be provided to CHAMPION and kept
current as evidence of the above coverages, and shall provide that at least
thirty (30) days notice shall be given to CHAMPION at the address set forth in
paragraph 5.6 before any material change or cancellation of the policy.

 

Failure by SUNCREST to perform the requirements of this paragraph shall
be a material default.

 

CHAMPION shall obtain and continue in force during the term Workers’
Compensation insurance (statutory amount) and automobile insurance and shall
provide a certificate of insurance to SUNCREST as evidence of such coverage.

 

5.2                                 Indemnification.  Each party assumes responsibility for and
shall indemnify, defend and hold the other party harmless from and against
claims, demands, suits, judgments, actions or liability, including fees and
costs of attorneys, arising out of (i) breach of warranty of title, (ii)
personal or bodily injury to or death of any person (including, but not limited
to the employees of the indemnitor) or (iii) damage, loss or destruction of
property sustained by any person when such injury, death, damage, loss or
destruction is caused by the intentional misconduct or negligent act or
omission of the indemnitor, its employees, agents, contractors or
subcontractors or when such act or omission is the kind for which one is made
strictly liable.  When such injury,
death, damage, loss, or destruction is caused by the joint or concurrent negligence
of the indemnitor or those for whom the indemnitor has assumed responsibility
and the indemnitee, then the indemnitor’s liability under this clause shall be
equal to the degree that its negligence together with the negligence of those
for whom the indemnitor has assumed responsibility contributed to the cause of
the injury, death, damage, loss or destruction, provided, however, that under
these circumstances each party shall bear its own defense costs.

 

5.3                                 Force Majeure.

 

a)              Either parties’ performance of the duties
set forth in this Agreement shall be excused or reduced when the party is
prevented from such performance due to events of Force Majeure such as Acts of
God, acts or omissions of public authorities including federal, state, or local
governments, fire or other casualty, labor disputes, wars, fuel shortage and/or
any other similar event beyond that party’s control.

 

b)             In the event that either party is
prevented by an event of Force Majeure from performance of its duties, the
party seeking excuse shall promptly notify the other party of the event which
gives rise to the excuse of performance, the anticipated duration of the
interruption of performance and its extent.

 

5.4                                 Independent Contractor Relationship.  The status of SUNCREST under this Agreement
is that of an independent contractor. 
The parties in no way stand in the relationship of master and servant,
principal and agent, or employer and employee. 
Except as herein provided,

 

5

 

SUNCREST shall be and remain free from the direction and control of
CHAMPION in all particulars in the performance of this Agreement.

 

5.5                                 Assignment, Governing Law, Entire Agreement.  This Agreement shall (a) be construed under
the laws of the State of North Carolina; (b) may be assigned by CHAMPION upon
written notice to SUNCREST; and (c) may not be modified except by a writing
signed by both parties.  All prior or
contemporaneous agreements regarding the subject matter of this Agreement among
the parties, whether written or oral, are merged herein and shall be of no
force or effect.  There are no
representations or warranties related to the subject matter hereof other than
those set forth in this Agreement.

 

5.6                                 Notices.  All notices or other communications which are required or
permitted hereunder shall be sufficient if delivered personally or by
registered or certified mail, postage prepaid, as follows:

 

 

	
  If to CHAMPION:

  	
  CHAMPION INTERNATIONAL CORPORATION

  
	
   

  	
  Forest Products - Forest Resources

  
	
   

  	
  P. O. Box 1289

  
	
   

  	
  Canton, North Carolina 28716 35618

  
	
   

  	
  ATTENTION: OPERATIONS MANAGER

  
	
   

  	
  (704) 646-2800

  
	
   

  	
  (704) 646-2266 FAX

  
	
   

  	
   

  
	
  If to SUNCREST:

  	
  SUNCREST LAND AND TIMBER COMPANY

  
	
   

  	
  Highway 276, Jonathan’s Creek

  
	
   

  	
  P. O. Box 65

  
	
   

  	
  Waynesville, NC 28786

  
	
   

  	
  ATTENTION: BRUCE POWELL

  
	
   

  	
  (704) 926-9114

  
	
   

  	
  (704) 926-9117 FAX

  

 

5.7                                 Limitation of Damages.  Under no circumstances shall either party be
liable to the other at any time for consequential damages, punitive damages or
the reimbursement of expenses incurred in connection with its performance under
this Agreement.

 

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

 

5.9                                 Waiver.  No waiver of any of the terms and conditions of this Agreement
shall be considered or construed to be a continuing waiver.  Failure to enforce any provision of this
Agreement shall not operate as a waiver of such provision or any other provision.

 

6

 

5.10                           Construction.  All provisions of this Agreement have been negotiated at arm’s
length and this Agreement shall not be construed for or against any party by
reason of the authorship or alleged authorship of any provision hereof.

 

 

	
   

  	
  CHAMPION INTERNATIONAL CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ [ILLEGIBLE]

  	
   

  
	
   

  	
   

  	
  Executive Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SUNCREST LAND AND TIMBER COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ [ILLEGIBLE]

  	
   

  

 

7

 

SCHEDULE 1

 

Processing and Freight

	
  •                  Processing
  Fee

  	
   

  	
   

  	
   

  	
   

  
	
  Both Species

  	
   

  	
  $7.25/Ton of Delivered Chips

  	
   

  	
  No escalation

  
	
  •                  Freight
  Rate

  	
   

  	
   

  	
   

  	
   

  
	
  Both Species

  	
   

  	
  $3.00/Ton on Delivered Chips

  	
   

  	
  No escalation

  
	
  •                  Total
  Rate

  	
   

  	
   

  	
   

  	
   

  
	
  Both Species

  	
   

  	
  $10.25/Ton of Delivered Chips

  	
   

  	
   

  

 

Roundwood Cost in Chip Tons

	
  •                  Pine

  	
   

  	
  $25.25/Ton of Delivered Chips

  	
   

  	
   

  
	
  •     Hardwood

  	
   

  	
  $26.50/Ton of Delivered Chips

  	
   

  	
   

  

 

Total Delivered Cost

	
  •                  Pine

  	
   

  	
  $35.50/Ton of Delivered Chips

  	
   

  	
   

  
	
  •     Hardwood

  	
   

  	
  $36.75/Ton of Delivered Chips

  	
   

  	
   

  

 

Movement From The Total Delivered Cost Within
A Year

	
  •                  Pine

  	
   

  	
  $34.47/Ton - $36.56/Ton

  	
   

  	
   

  
	
  •     Hardwood

  	
   

  	
  $35.68/Ton - $37.85/Ton

  	
   

  	
   

  

 

Cost Review - Quarterly

•                  During a
quarterly review, the parties shall review the rates paid under this Agreement,
and if market conditions have change, may renegotiate the rate for the upcoming
quarter within the stated annual brackets.

•                  The parties
intend that the rate to be paid for each Product shall be fair market value for
the designated Product for similar contract term, volume, quality and species.

 

Cost Review -
Annually

•                  The base rate
and cost limits will be review and agreed to, every year before April 1st
for each year of this contract.

 

Unable to Agree

•                  In the event
Seller and Champion’s representative are unable to agree upon the rate for the
upcoming quarter or year, Seller shall be entitled to meet with Champion’s
General Manager for the region to discuss and attempt to resolve such rate.

•                  Deliveries shall
continue pending the General Manager’s decision at the then-current rate, and
adjustments shall be retroactive to the beginning of the quarter or year.

•                  If agreement
still is not met, an agreed to third party arbitrator will used to establish
the price within the quarter in question.

 

8

 

CHAMPION INTERNATIONAL CORPORATION

CHIP SPECIFICATIONS

CANTON, NC MILL

 

EXHIBIT “A”

SUNCREST

 

	
   

  	
   

  	
  TARGET

  	
   

  	
  MAXIMUM

  	
   

  
	
  SIZE (PINE & HARDWOOD)

  	
   

  	
  3/4”

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BARK

  	
  SUMMER

  	
   

  	
  LESS THAN   1

  	
  %

  	
  2

  	
  %

  
	
   

  	
  WINTER

  	
   

  	
  LESS THAN   2

  	
  %

  	
  2

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  OVERSIZE (RETAINED ON 1 3/4” SCREEN)

  	
   

  	
  1

  	
  %

  	
  3

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PINS (RETAINED ON 1/8” SCREEN)

  	
   

  	
  7

  	
  %

  	
  10

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FINES (PASS THROUGH 1/8” SCREEN)

  	
   

  	
  0.5

  	
  %

  	
  1

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  RETAINED ON 1”
  SCREEN

  	
   

  	
  15

  	
  %

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  RETAINED ON 1/2”
  SCREEN

  	
   

  	
  65

  	
  %

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  RETAINED ON 3/8”
  SCREEN

  	
   

  	
  10

  	
  %

  	
   

  	
   

  

 

OTHER:

 

ALL CHIPS WILL BE SCREENED. STANDARD SCREEN SIZES ARE:

TOP SCREEN - 1 3/4” ROUND

BOTTOM SCREEN - 1/8” ROUND

 

PINE AND HARDWOOD CHIPS WILL BE COMPLETELY SEPARATED.

 

NO CONTAMINATION IS ALLOWED FROM PLASTICS, SOIL, METAL, STYROFOAM, OIL,
ETC.

 

“BEETLE KILLED” OR DEAD AND STAINED WOOD WILL BE NO MORE THAN 25% OF A
LOAD.  ALL OTHER WOOD IS EXPECTED TO BE
“GREEN” AVERAGING BETWEEN 40 TO 50% MOISTURE CONTENT.

 

NOTE: BOTH RESIDUAL AND PRIMARY CHIP SUPPLIERS ARE EXPECTED TO ADHERE
TO THESE CHIP SIZE SPECIFICATIONS. 
FAILURE TO DO SO WILL RESULT IN TERMINATION
OF DELIVERIES.

 

9

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