CHIP AND PULPLOG SUPPLY AGREEMENT AMENDMENT
Exhibit 10.4.2
CHIP AND PULPLOG SUPPLY AGREEMENT AMENDMENT
THIS AGREEMENT made as of the 1st day of January, 2008.
BETWEEN:
CATALYST PAPER CORPORATION, 2nd Floor, 3600
Xxxxxxxx Xxxx, 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 — 0000 Xxxx Xxxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
(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 “Existing Agreement”) now between Catalyst (as successor to 3264891 Canada Limited
and 3264912 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 Existing Agreement as amended by
this Agreement and as further amended, replaced or restated from time to time; |
| (c) | “Closure Date” means May 9, 2008; |
| (d) | “Elk Falls Sawmill” means the Elk Falls sawmill facility located at Xxxxxxxx
River, British Columbia adjacent to Catalyst’s Elk Falls pulp and paper mill; |
| (e) | “Log Supply Option Agreement” means the agreement between the parties dated the
date of this Agreement and entitled “Log Supply Option Agreement” as amended, replaced
or restated from time to time; |
| (f) | “TFL 46 Supply Agreement” means the agreement made as of the 5th day
of May, 2004 entitled “Chip and Residual Fibre Delivery Agreement” now between
TimberWest Forest Corp. (as successor to TFL Forest Ltd.) and Xxxx-Xxxxx Group, as
amended, replaced or restated from time to time; and |
| (g) | “Timber Harvesting Management Agreement Amendment” means the agreement between
the parties dated the date of this Agreement amending the Amended and Restated Timber
Harvesting Management Agreement dated the 1st day of January, 1998 now
between Catalyst (as successor to Xxxxxxxx Challenge Canada Limited and TimberWest (as
successor to TimberWest Forest Limited). |
| 2. | Modifications to Chip Commitment |
| 2.1. | Change to Chip Commitment. Effective upon the Closure Date: |
| (a) | TimberWest’s obligation under Section 2.1 of the Existing Agreement to supply
Catalyst with Chips produced from TimberWest Facilities shall cease and be replaced
with the obligations of TimberWest under the Log Supply Option Agreement and Section
2.2 of this Agreement; |
| (b) | the term “TimberWest Facilities” in the Chip and Pulplog Supply shall be
replaced with the following: |
“TimberWest Facilities” means all facilities in the Coastal Area in which
any of TimberWest or any of its Affiliates acquires an interest subsequent
to January 1, 2008 and which produces Chips;
| (c) | Sections 2.3, 2.4 and 2.5 below shall apply in lieu of Section 2.2 of the
Existing Agreement; and |
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| (d) | the Existing Agreement will be amended as set out in Article 3. |
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| 2.2. | TFL 46 Supply Agreement. TimberWest will direct Teal Xxxxx Group to deliver to Catalyst the
maximum volume of Chips available for sale and delivery to Catalyst under the TFL 46 Supply
Agreement in accordance with the terms and conditions of the TFL 46 Supply Agreement (the
“Xxxx-Xxxxx Direction”) and will, if so requested by Catalyst, assign TimberWest’s rights
under the TFL 46 Supply Agreement to Catalyst. TimberWest hereby represents and warrants to
Catalyst that, to the knowledge of TimberWest as of the date hereof, the TFL 46 Supply
Agreement is in full force and effect, unamended and there is no default by TimberWest or Teal
Xxxxx Group thereunder and hereby agrees that: |
| (a) | until TimberWest has assigned its rights under the TFL 46 Supply Agreement to
Catalyst, TimberWest will perform its obligations and, at the request of Catalyst, use
commercially reasonable efforts to enforce performance of Teal Xxxxx Group’s
obligations under the TFL 46 Supply Agreement; |
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| (b) | TimberWest will not revoke or withdraw the Xxxx-Xxxxx Direction; and |
| (c) | TimberWest will not amend or agree to amend the TFL 46 Supply Agreement without
the consent of Catalyst, such consent not to be unreasonably withheld. |
| 2.3. | Priority Rights. TimberWest will not sell, transfer or otherwise dispose of any Chips
produced from TimberWest Facilities unless: |
| (a) | TimberWest provides Catalyst with the following: |
| (i) | a first opportunity to negotiate an agreement for the purchase
and sale of such Chips; and |
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| (ii) | if TimberWest receives a third party offer to purchase any such
Chips which it intends to accept or negotiates an agreement with a third party
in respect of the purchase and sale of such Chips, the right to purchase such
Chips on terms and conditions no less favourable to Catalyst than the proposed
offer or agreement; and |
| (b) | any agreement it enters into in respect of such Chips after complying with
Subsection 2.3(a) has a term of no more than five years (taking into account any
potential renewal or evergreen replacement provisions). |
For greater certainty, any Chips delivered to Catalyst after July 1, 2010 pursuant to an
agreement with Catalyst under this Section 2.3 will mitigate the reduction in the Timber
Harvesting Management Fee (as defined in the Timber Harvesting Management Agreement
Amendment) in accordance with the Timber Harvesting Management Agreement Amendment as long
as such agreement and the Chips delivered thereunder meet all of the requirements of Section
2.4 of the Timber Harvesting Management Agreement Amendment applicable to commitments for an
alternative supply of Chips.
| 2.4. | Exclusions. The commitment by TimberWest in Section 2.3 shall exclude the volume of Chips
which is subject to commitments in respect of the sale of Chips which: |
| (a) | are in effect at the date the facility or operation becomes a TimberWest
Facility or part of its operations and are assumed, and are required to be assumed, as
part of the acquisition; or |
| (b) | are granted to the vendor thereof as a requirement of the acquisition. |
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TimberWest will use all commercially reasonable efforts to minimize the term and extent of
the commitments described in Subsections (a) and (b) (for greater certainty, foregoing a
material reduction in purchase price or other material benefit under the acquisition
agreement as a condition to minimizing the term and extent of such commitments would not be
commercially reasonable) and will not agree to extend their term by way of amendment,
renewal, replacement or otherwise unless to not agree to such extension could reasonably be
expected to have unreasonable and materially adverse consequences for TimberWest.
| 2.5. | Elk Falls Sawmill. |
| (a) | If TimberWest recommences operation of the Elk Falls Sawmill after the Closure
Date, the Elk Falls Sawmill will be a TimberWest Facility for the purposes of Section
2.3 of this Agreement. |
| (b) | If TimberWest sells the Elk Falls Sawmill to a third party purchaser which
acquires both the land and the fixtures and equipment comprising the Elk Falls Sawmill,
TimberWest will ensure that as part of such a sale that the third party purchaser
enters into an agreement with Catalyst in a form acceptable to Catalyst, acting
reasonably, granting priority rights to Catalyst to the Chips produced from the Elk
Falls Sawmill on terms and conditions corresponding to Section 2.3 of this Agreement. |
| (c) | If Catalyst enters into an agreement with TimberWest or other operator of the
Elk Falls Sawmill to purchase Chips produced from the Elk Falls Sawmill (which for the
purposes of this subsection, includes any new facility at the site of the current Elk
Falls Sawmill) pursuant to the priority rights referred to in this Section, then Chips
delivered after July 1, 2010 under such an agreement will mitigate the reduction in the
Timber Harvesting Management Fee (as defined in the Timber Harvesting Management
Agreement Amendment) in accordance with the Timber Harvesting Management Agreement
Amendment as long as such agreement and the Chips delivered thereunder meet all of the
requirements of Section 2.4 of the Timber Harvesting Management Agreement Amendment
applicable to commitments for an alternative supply of Chips. |
| 3. | Other Changes to Existing Agreement |
| 3.1. | Deletion of Inapplicable Provisions. From and after the Closure Date, Articles 3, 4, 5, 6, 7
and 10 of the Existing Agreement shall cease to apply. |
3.2. Modification to Existing Provisions. From and after the Closure Date:
| (a) | Sections 11.1 and 12.3 of the Existing Agreement shall apply only to Pulplogs; |
| (b) | Section 14.1 and Section 14.2 of the Existing Agreement shall be deleted and
replaced with the following as Sections 14.1 and 14.2: |
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| 14.1 | Dispositions by TimberWest |
TimberWest will not, without the prior written consent of Catalyst:
| (a) | sell, transfer or otherwise dispose of a
material part of the Timber Tenures except to a purchaser, transferee
or assignee (an “Assignee”) that has agreed, as a condition of such
purchase, to be bound by the terms of this Agreement, such agreement to
be evidenced by the Assignee entering into such formal agreements as
Catalyst may reasonably require and which will give effect to an
assignment by TimberWest to the Assignee of an interest in this
Agreement to the extent required by such assignment; or |
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| (b) | grant any harvest rights in respect of the
Timber Tenures to any person other than Catalyst unless the holder of
such harvest rights enters into an agreement in such form as Catalyst
may reasonably require to ensure that the Pulplogs included in such
harvest or timber sales, or an equivalent volume, will be available to
Catalyst on the terms and conditions of this Agreement; or |
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| (c) | mortgage, charge, grant a security interest in
or otherwise encumber a material part of the Timber Tenures except in
compliance with Section 14.4; |
and TimberWest will not otherwise assign any part of its interest in this
Agreement except by way of an assignment of amounts payable to TimberWest
under this Agreement from time to time.
| 14.2 | Material Part |
For the purposes of this Article a “material part of the Timber Tenures”
means any portion of the Timber Tenures the disposition of which would
materially affect the ability of TimberWest to fulfil the terms of this
Agreement or could reasonably be expected to result in a material reduction
in the volume of Pulplogs available to Catalyst under this Agreement and,
for the purposes of determining the application of Section 14.1 to a
disposition of any part of the Timber Tenures:
| (a) | a series of transactions that could reasonably
be viewed as related will be considered as a single disposition; and |
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| (b) | any exchange of assets in which any part of the
Timber Tenures are disposed of but are replaced concurrently with other
assets that become part of the Timber Tenures will not constitute a
disposition of a material part of the Timber Tenures if, as a result of
such exchange, the ability of TimberWest to fulfil the terms of this
Agreement and the volume of Pulplogs available to Catalyst under this
Agreement is not materially affected. |
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TimberWest may, at its option, notify Catalyst of any transaction TimberWest
proposes to enter into that involves the acquisition or disposition of any
tenure or right to harvest timber that is or could be used in connection
with TimberWest’s logging operations and any notice given by TimberWest to
Catalyst under this Section may include a request that Catalyst advise
TimberWest of Catalyst’s position regarding the application of this Article
to the proposed transaction, including whether or not an asset is a material
part of the Timber Tenures and whether or not any draft agreement proposed
by TimberWest under Section 14.1 meets Catalyst’s reasonable requirements.
Catalyst agrees to respond promptly (and in any event not more than 15
Business Days after receipt of such notice) to any such request made by
TimberWest and failure of Catalyst to respond during such period will be
deemed to be confirmation that Catalyst does not consider this Article to
apply to such transaction.
(c) Articles 15 and 16 of the Existing Agreement shall apply only to Pulplogs.
| 4. | General |
| 4.1. | Existing Agreement. This Agreement forms part of and is to be read together with the
Existing Agreement. The Existing Agreement as amended by this Agreement remains in full force
and effect. |
| 4.2. | 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.
Per: |
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Per: |
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TIMBERWEST FOREST CORP. on its own behalf
and as managing partner for and on behalf of
TIMBERWEST FOREST COMPANY
and as managing partner for and on behalf of
TIMBERWEST FOREST COMPANY
Per: |
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Per: |
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