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AMENDED AND RESTATED
CHIP AND PULPLOG SUPPLY AGREEMENT
BETWEEN
3264891 CANADA LIMITED
3264912 CANADA LIMITED
AND
TIMBERWEST FOREST LIMITED
JUNE 23, 1997
AMENDED AND RESTATED
CHIP AND PULPLOG SUPPLY AGREEMENT
TABLE OF CONTENTS
ARTICLE 1. INTERPRETATION..................................................................................2
1.1. Definitions.....................................................................................2
1.2. Currency........................................................................................5
1.3. References......................................................................................6
1.4. Construction....................................................................................6
1.5. Governing Law...................................................................................6
1.6. Schedules.......................................................................................6
ARTICLE 2. FIBRE COMMITMENT................................................................................6
2.1. Committed Volume................................................................................6
2.2. Exclusions......................................................................................6
2.3. Term............................................................................................7
2.4. Out of Province Opportunities...................................................................7
ARTICLE 3. PRODUCTION NOTICES..............................................................................7
3.1. Anticipated Volume..............................................................................7
3.2. Notice of Further Volume........................................................................7
ARTICLE 4. MINIMUM VOLUME REQUIREMENTS.....................................................................8
4.1. Minimum Annual Volume...........................................................................8
4.2. Annual Volume Shortfall.........................................................................8
4.3. Shortfall Notice................................................................................9
4.4. Immediate Remedy................................................................................9
4.5. Failure to Deliver Notice......................................................................10
4.6. Make-Up Notice.................................................................................11
4.7. No Shortfall...................................................................................11
4.8. Minimum Five-Year Volume.......................................................................11
4.9. Five-Year Shortfall............................................................................11
4.10. Final Five-Year Adjustment.....................................................................12
4.11. Shortfall Mitigation...........................................................................12
ARTICLE 5. PRICE AND PAYMENT FOR CHIPS....................................................................13
5.1. Chip Price.....................................................................................13
5.2. Payment........................................................................................13
5.3. Production Costs...............................................................................13
ARTICLE 6. CHIP MEASUREMENT, TESTING AND SPECIFICATIONS...................................................13
6.1. Optimization of Chip Quality...................................................................13
6.2. Measurement of Volume..........................................................................14
6.3. Interim Measurement............................................................................14
6.4. Measurement of Chip Volume.....................................................................14
6.5. Conversion Factors.............................................................................14
6.6. Application....................................................................................14
6.7. Variation of Chip Specifications...............................................................14
6.8. Inspection of Testing..........................................................................15
6.9. Rejection of Individual Loads..................................................................15
6.10. Costs of Disposal..............................................................................15
6.11. No Waiver......................................................................................15
6.12. Third Party Deliveries.........................................................................15
ARTICLE 7. DELIVERY OF CHIPS..............................................................................16
7.1. Loading Facilities.............................................................................16
7.2. Elk Falls Chip Conveying System................................................................16
7.3. Current Manufacture............................................................................16
7.4. Rate of Delivery...............................................................................16
7.5. Transportation.................................................................................16
7.6. TimberWest Responsibilities....................................................................17
7.7. Species Segregation............................................................................18
ARTICLE 8. PRICE AND PAYMENT FOR PULPLOGS.................................................................18
8.1. Pulplog Price..................................................................................18
8.2. Dispute of Purchase Price......................................................................18
8.3. Payment........................................................................................18
8.4. Vancouver Log Market...........................................................................19
8.5. Interfor Log Supply Agreement..................................................................19
ARTICLE 9. PULPLOG SALE PROCEDURES........................................................................19
9.1. Notice of Availability.........................................................................19
9.2. Inspection and Acceptance......................................................................20
9.3. Agreement on Price.............................................................................20
9.4. Use of Telephone...............................................................................20
9.5. Delivery of Pulplogs...........................................................................20
9.6. Availability...................................................................................20
9.7. Costs up to Delivery...........................................................................20
9.8. Boomsticks.....................................................................................20
9.9. Boomgear Deposit...............................................................................20
9.10. Pulplog Specifications.........................................................................21
9.11. Scaling........................................................................................21
9.12. Checkscaling...................................................................................21
9.13. Condition of Parcels...........................................................................22
9.14. Log Sale Practices.............................................................................22
ARTICLE 10. CUSTOM CHIPPING................................................................................22
10.1. Custom Chipping................................................................................22
10.2. Pulplogs.......................................................................................22
10.3. Other Arrangements.............................................................................22
ARTICLE 11. TITLE AND RISK.................................................................................23
11.1. Title..........................................................................................23
ARTICLE 12. COVENANTS......................................................................................23
12.1. Covenants of FCCL..............................................................................23
12.2. Covenants of TimberWest........................................................................24
12.3. Certificate of Officer.........................................................................24
ARTICLE 13. DEFAULT........................................................................................25
13.1. Event of Default...............................................................................25
13.2. Remedies.......................................................................................25
13.3. Consequential Damages..........................................................................25
ARTICLE 14. DISPOSITIONS BY TIMBERWEST.....................................................................26
14.1. Dispositions by TimberWest.....................................................................26
14.2. Material Part..................................................................................26
14.3. Excepted Timberlands...........................................................................27
14.4. Lender Status..................................................................................27
14.5. Breach.........................................................................................28
14.6. Release of TimberWest..........................................................................28
ARTICLE 15. FORCE MAJEURE AND CURTAILMENT..................................................................28
15.1. Affecting FCCL.................................................................................28
15.2. Market Conditions..............................................................................29
15.3. Proportionate Curtailment......................................................................29
15.4. No Cumulative Obligation.......................................................................30
15.5. Alternative Disposition........................................................................30
15.6. Affecting TimberWest...........................................................................30
15.7. Credit to Volume Commitments (TimberWest Curtailment)..........................................31
15.8. Advance Warning................................................................................31
15.9. Reasonable Estimate............................................................................31
15.10. FCCL Estimate Notice...........................................................................32
15.11. TimberWest Estimate Notice.....................................................................32
ARTICLE 16. ARBITRATION....................................................................................32
16.1. Arbitration....................................................................................32
16.2. Timely Decisions...............................................................................33
ARTICLE 17. GENERAL........................................................................................33
17.1. Maintenance of Records.........................................................................33
17.2. Notices........................................................................................33
17.3. Time...........................................................................................34
17.4. Further Assurances.............................................................................34
17.5. Waivers........................................................................................34
17.6. Assignment by FCCL.............................................................................34
17.7. Confidentiality................................................................................35
17.8. Action by FCCL.................................................................................35
17.9. Nature of Obligations..........................................................................35
17.10. Restatement of Original Agreement..............................................................35
17.11. Enurement......................................................................................36
SCHEDULE A PART I - CHIP SPECIFICATIONS
PART II - PULPLOGS
SCHEDULE B TIMBERWEST FACILITIES
SCHEDULE C TIMBER TENURES
SCHEDULE D MINIMUM VOLUME CALCULATIONS
AMENDED AND RESTATED
CHIP AND PULPLOG SUPPLY AGREEMENT
THIS AGREEMENT made as of the 23rd day of June, 1997,
BETWEEN:
3264891 CANADA LIMITED and 3264912 CANADA LIMITED, each a
Canadian corporation with an office at 9th Floor, 000 Xxxx
Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx
(collectively "FCCL")
OF THE FIRST PART,
AND:
TIMBERWEST FOREST LIMITED, a
British Columbia company with an
office at 7th Floor, 000 Xxxx Xxxxxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxx Xxxxxxxx
("TimberWest")
OF THE SECOND PART.
WHEREAS:
A. By an agreement dated the 16th day of December, 1993 entitled "Chip and
Pulplog Supply Agreement" among Xxxxxxxx Challenge Canada Limited, Elk
Falls Forest Industries Limited and TimberWest as amended by an
agreement dated January 19, 1996 among the same parties and TimberNorth
Forest Limited (collectively the "Original Agreement") TimberWest
agreed to sell and Xxxxxxxx Challenge Canada Limited and Elk Falls
Forest Industries Limited agreed to purchase wood chips and pulplogs,
produced, directly or indirectly, by TimberWest;
B. On October 25, 1996, 3264891 Canada Limited acquired the Crofton pulp
mill from Xxxxxxxx Challenge Canada Limited and 3264912 Canada Limited
acquired the Elk Falls pulp mill from Elk Falls Forest Industries
Limited;
C. By an assignment made October 25, 1996 Xxxxxxxx Challenge Canada
Limited and Elk Falls Forest Industries Limited assigned their right,
title and interest in the Original Agreement to FCCL;
D. TimberWest has on the date of this agreement transferred its Xxxxxxxx
Lake facilities and related operations to a third party;
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E. The parties have agreed to amend the Original Agreement as at the date
of this Agreement by restating that agreement as amended as set forth
in this Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and
the mutual covenants hereafter set out, the parties agree as follows:
ARTICLE 1.
INTERPRETATION
1.1. DEFINITIONS
In this Agreement:
(A) "AFFILIATE" means with respect to any party, an affiliate of
the party within the meaning of the COMPANY ACT (
British
Columbia), a joint venture in which that party holds at least
a one-half interest and a corporation where the shares thereof
carrying at least one-half of the votes for the election of
directors are held for the benefit of that party;
(B) "BDU" means bone dry unit which, in reference to Chips, means
a quantity of Chips that when oven-dried would weigh 2,400
pounds as determined using standard test sampling, drying and
weighing procedures adhered to in the North American pulp
industry;
(C) "BUSINESS DAY" means a day that is not a Saturday, Sunday or
statutory holiday in
British Columbia;
(D) "CHIP SPECIFICATIONS" means the specifications for Chips set
out in Part II of Schedule A as varied from time to time
pursuant to Section 6.7;
(E) "CHIPS" means coniferous wood chips produced as a by-product
of wood manufacturing, including those produced from log yard
debris, but excluding pulpwood chips produced from whole-log
chipping;
(F) "COAST CHIP PRICE" means, for a Fiscal Quarter, a price equal
to the most common market price actually paid per Volumetric
Unit of Chips during that Fiscal Quarter, on an F.O.B. scow
(at seller's mill located in the southern coastal region of
British Columbia) basis or equivalent, by pulp xxxxx located
in the southern coastal region of
British Columbia for their
own consumption under arm's length long term contracts (being
contracts that have a term of not less than three consecutive
years and contracts having a term of not less than one year
which are renewable and which have been in force, in
substantially the same form, for not less than three
consecutive years) for volumes, specifications, quality and
species of Chips similar to those being sold under this
Agreement during the terms of such long term contracts
calculated on a net to seller basis, including the deduction
of any portion of such price attributable to the
transportation of such Chips to the Purchaser's mill, which
was, in the last Fiscal Quarter of 1993:
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(i) $58.00 per Volumetric Unit of hemlock Chips;
(ii) $55.00 per Volumetric Unit of sitka spruce Chips;
(iii) $53.00 per Volumetric Unit of Xxxxxxx fir Chips;
(iv) $30.00 per Volumetric Unit of red cedar Chips;
(v) $35.00 per Volumetric Unit of yellow cedar Chips;
(G) "COASTAL AREA" means that part of
British Columbia located
west of the Cascade Mountains;
(H) "CONTRACT YEAR" means a calendar year;
(I) "COWICHAN FACILITY" means the TimberWest Facility referred to
in Item 1 of Schedule B;
(J) "CROWN FOREST TENURES" means the forest tenures described in
Part I of Schedule C and any supplements to, or substitutes
for, such tenures and any other tenures or rights to harvest
Crown timber in
British Columbia held, directly or indirectly,
by TimberWest or its Subsidiaries from time to time;
(K) "ELK FALLS CHIP CONVEYING SYSTEM" means the conveyor system
and all ancillary equipment together with all additions,
replacements or reconstructions thereof from time to time used
to transport Chips from the Elk Falls Facility to the Pulp
Mill adjacent thereto;
(L) "ELK FALLS FACILITY" means the TimberWest Facility referred to
in Item 2 of Schedule B;
(M) "FISCAL QUARTER" means any of the four calendar quarters;
(N) "FIVE YEAR PERIOD" means the period beginning on January 1,
1994 and ending on December 31, 1998 and each succeeding five
year period thereafter;
(O) "FULLY LOADED" means, with respect to a scow, that the scow
has been loaded:
(i) by gravity to its capacity with Chips in a manner that
will minimize voids and air spaces and as well achieve
the maximum degree of density of Chips for such scow as
is usually achieved by proper loading of Chips;
(ii) following the limitations that a prudent person
exercising reasonable care would observe; and
trimmed in such a manner as will render it to remain in a
seaworthy condition throughout its voyage to its destination
in the judgment of the master of the vessel of the towing
agent;
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(P) "m(3)" means a cubic metre of logs,
British Columbia metric
scale as determined under the FOREST ACT (
British Columbia)
and, with respect to Chips, also means the solid wood
equivalent;
(Q) "MINIMUM ANNUAL VOLUME" means, with respect to a Minimum
Volume Facility, the minimum annual volume applicable thereto
determined in accordance with Schedule D;
(R) "MINIMUM FIVE-YEAR VOLUME" means, with respect to a Minimum
Volume Facility, the minimum volume for a Five Year Period
applicable thereto determined in accordance with Schedule D;
(S) "MINIMUM VOLUME FACILITIES" means the Cowichan Facility and
the Elk Falls Facility and "MINIMUM VOLUME FACILITY" means
either of them;
(T) "ORIGINAL PULP XXXXX" means the Crofton Pulp and Paper Mill
currently owned by Xxxxxxxx Challenge Canada Limited and
3264891 Canada Limited located at Crofton,
British Columbia
and the Elk Falls Pulp and Paper Mill currently owned by Elk
Falls Forest Industries Limited and 3264912 Canada Limited
located at Xxxxxx Bay, British Columbia and "ORIGINAL PULP
MILL" means either of them;
(U) "PARCEL" means a raft, boom, bag, barge, bundle, group of
bundles or other grouping of logs commonly offered for sale as
a unit;
(V) "POINT OF SALE" means a suitable water storage area for
Parcels of Pulplogs located at one of the following locations:
(i) in Xxxx Sound in the vicinity of Gambier Island;
(ii) at a point on the Fraser River between the mouth of the
north arm and Barnston Island;
(iii)a pulp or pulp and paper mill which consumes Pulplogs
which is owned by FCCL or any of its Affiliates (other
than TimberWest and its Subsidiaries); or
(iv) such other location that the parties may agree upon;
(W) "PULPLOG" means a log which is described as a pulplog in Part
II of Schedule A;
(X) "PULPLOG SPECIFICATIONS" means the specifications for pulplogs
set out in Part II of Schedule A;
(Y) "PULP XXXXX" means the Original Pulp Xxxxx and any other pulp
and paper xxxxx designated from time to time by FCCL by notice
to TimberWest that are owned by any or all of FCCL, an
Affiliate of FCCL and a purchaser of any material interest in
any of the foregoing pulp and paper xxxxx that is an assignee
of an interest in this Agreement and "PULP MILL" means any one
of them;
5
(Z) "SUBSIDIARY" has the meaning set out in the COMPANY ACT
(British Columbia);
(AA) "TIMBERLANDS" means the lands described in Part II of Schedule
C and any other fee simple lands in British Columbia held,
directly or indirectly, by TimberWest or its Subsidiaries from
time to time for timber production or timber harvesting
purposes;
(BB) "TIMBER TENURES" means:
(i) the Crown Forest Tenures, the Timberlands and all other
timber harvesting or equivalent rights in the Coastal
Area of British Columbia held, directly or indirectly,
by TimberWest or its Subsidiaries from time to time;
(ii) such other timber harvesting or equivalent rights as
the parties may agree;
(CC) "TIMBERWEST FACILITIES" means:
(i) the sawmilling, planer and other wood processing or
converting facilities described in Schedule B and any
additions to, or substitutions for, such facilities;
(ii) all facilities in the Coastal Area of British Columbia
acquired subsequent to the date of this Agreement by
TimberWest or one of its Subsidiaries, or by a joint
venture (corporate or otherwise) in which TimberWest or
one of its Subsidiaries has a direct or indirect
interest which produces Chips; and
(iii)all other facilities, operations and interests in the
Coastal Area of British Columbia at or from which
TimberWest produces, receives or is entitled to receive
Chips;
(iv) such other facilities, operations and interests as the
parties may agree;
(DD) "VANCOUVER LOG MARKET PRICE" means, with respect to a Parcel
of Pulplogs, the fair market value of such Parcel of Pulplogs
determined with reference to:
(i) the volume, type and quality of Pulplogs included in
such Parcel;
(ii) the competitive prices for equivalent volumes of
Pulplogs of the volume, type and quality included in
such Parcel prevailing in the Vancouver log market at
such time without regard to non-arm's length sales,
distress sales or sales for export from British
Columbia;
(EE) "VOLUMETRIC UNIT" means 200 cubic feet of Chips as compacted
in a scow when fully loaded or 2.039 m(3) of solid wood
equivalent of Chips.
1.2. CURRENCY
All dollar amounts referred to in this Agreement are Canadian dollars.
6
1.3. REFERENCES
References to the singular or masculine used in this Agreement will be
deemed to include references to the plural, feminine or body corporate
as the context may require.
1.4. CONSTRUCTION
The division of this Agreement into articles and the insertion of
headings are for convenience of reference only and are not to affect
the construction or interpretation of this Agreement.
1.5. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the Province of British Columbia and the federal laws of
Canada applicable therein.
1.6. SCHEDULES
The following are the Schedules to this Agreement:
Schedule A Chip and Pulplog Specifications
Schedule B TimberWest Facilities
Schedule C Timber Tenures
Schedule D Minimum Volume Calculations
ARTICLE 2.
FIBRE COMMITMENT
2.1. COMMITTED VOLUME
TimberWest will sell to FCCL and FCCL will purchase from TimberWest in
each Contract Year during the term of this Agreement in accordance with
and subject to the terms and conditions of this Agreement, all Chips
produced from TimberWest Facilities and all Pulplogs harvested by or on
behalf of TimberWest from the Timber Tenures or acquired by TimberWest
as part of its log acquisition program in the Coastal Area, in each
case free and clear of all liens, charges, encumbrances and third party
rights.
2.2. EXCLUSIONS
Where a facility or operation becomes a TimberWest Facility or part of
its related operations subsequent to the date of this Agreement and
existing commitments to third parties regarding the sale of Chips or
Pulplogs produced from that facility or operation are assumed, and are
required to be assumed, by TimberWest as part of that acquisition, the
commitment by TimberWest in Section 2.1 shall exclude the volume of
Chips or Pulplogs produced from that facility or operation which are
subject to any such commitment until the expiration of that commitment.
TimberWest will use all reasonable efforts to minimize the term and
extent of such commitments and:
7
(ff) will not agree to extend their term by way of amendment,
renewal or replacement or otherwise unless the other party to
such commitment has the unconditional right to such an
extension which does not require TimberWest to agree to such
an extension or any term or condition during such extension;
and
(gg) where TimberWest is entitled to terminate any such commitment
without incurring any additional liability to the other party
to such commitment, TimberWest will exercise such termination
right promptly after it becomes entitled to do so.
2.3. TERM
The term of this Agreement, which commenced on December 16, 1993 under
the Original Agreement, shall continue in effect until terminated by
FCCL by notice to TimberWest to that effect on a date specified in such
notice that is not less than 24 months from the date of such notice or
until terminated by a party pursuant to Section 13.2.
2.4. OUT OF PROVINCE OPPORTUNITIES
If TimberWest acquires any wood processing facilities or operations or
timber harvesting or equivalent rights outside British Columbia, or an
interest therein, TimberWest will offer FCCL the first opportunity to
negotiate the terms and conditions upon which Chips and Pulplogs which
are surplus to the maintenance of such operations or facilities would
be made available for sale to FCCL under this Agreement.
ARTICLE 3.
PRODUCTION NOTICES
3.1. ANTICIPATED VOLUME
Not later than 20 Business Days before the beginning of each Contract
Year, TimberWest will provide to FCCL a schedule (a "Production
Notice") of the anticipated production of Chips and Pulplogs for the
Contract Year, including an estimate of species breakdown and monthly
production, broken down, in the case of Chips, on a mill by mill basis
for each TimberWest Facility.
3.2. NOTICE OF FURTHER VOLUME
If at any time after the Production Notice is given in respect of a
Contract Year:
(a) TimberWest anticipates that:
(i) the volume of Chips or Pulplogs that will be produced
by TimberWest during the balance of the Contract Year
will vary by more than 15 percent from the volume
stated in the applicable Production Notice or most
recent notice under this Section for the balance of
such Contract Year; or
8
(ii) the volume of Chips that will be produced from a
Minimum Volume Facility during the balance of the
Contract Year will vary by more than 15 percent from
the volume in respect of that Minimum Volume Facility
stated in the applicable Production Notice or most
recent notice under this Section for the balance of
such Contract Year; or
(b) the volume of Chips or Pulplogs actually delivered by
TimberWest to FCCL during such Contract Year varies by more
than 15 percent from the schedule of all deliveries, or the
schedule of deliveries anticipated in respect of Chips from a
particular Minimum Volume Facility, anticipated under the
applicable Production Notice or most recent notice under this
Section and, as a result, FCCL, acting reasonably, requests a
revised notice in respect of the balance of such Contract
Year;
TimberWest will promptly deliver a notice (a "Revision Notice") to FCCL
in the form of a revised quarterly schedule of Chip or Pulplog
production, as the case may be, for the balance of such Contract Year.
ARTICLE 4.
MINIMUM VOLUME REQUIREMENTS
4.1. MINIMUM ANNUAL VOLUME
The volume of Chips sold by TimberWest and purchased by FCCL under this
Agreement during a Contract Year produced from each Minimum Volume
Facility, subject to Section 4.11, will not be less than the Minimum
Annual Volume applicable thereto.
4.2. ANNUAL VOLUME SHORTFALL
At the end of each Fiscal Quarter of a Contract Year in respect of
which a Production Notice or a Revision Notice indicates that the
volume of Chips produced from a Minimum Volume Facility that TimberWest
will deliver to FCCL under this Agreement in such Contract Year will be
less than the applicable Minimum Annual Volume (taking into account
Section 4.11) for such Contract Year, or at the end of any other Fiscal
Quarter in which:
(a) TimberWest fails to meet its production estimates for Chips in
respect of the applicable Minimum Volume Facility set out in
the most recent Production or Revision Notice; and
(b) on the basis of TimberWest meeting its estimates of production
for the remainder of the Contract Year as set out in such
Notice, TimberWest will deliver to FCCL less than the
applicable Minimum Annual Volume for such Contract Year,
TimberWest will, within 20 Business Days after the end of such Fiscal
Quarter deliver to FCCL either:
9
(c) a notice (a "Shortfall Notice") confirming that TimberWest
reasonably anticipates that TimberWest will deliver to FCCL
less than such Minimum Annual Volume for such Contract Year
and confirming the extent of the anticipated volume shortfall
(the "Volume Shortfall") for such Contract Year and including,
at TimberWest's option, a statement as to how TimberWest
proposes to make up such Volume Shortfall, including any
source from which, and price at which, Chips meeting the
conditions described in Subsection 4.4(b) are available for
outright purchase by FCCL; or
(d) a notice (a "Make-Up Notice") confirming that TimberWest
reasonably anticipates that a Volume Shortfall will not arise
in respect of such Contract Year,
failing which, TimberWest will be deemed to have delivered a Shortfall
Notice and the extent of the Volume Shortfall will be determined by
applying the estimates described in Subsection 4.2(b).
4.3. SHORTFALL NOTICE
If TimberWest delivers, or is deemed to deliver, to FCCL a Shortfall
Notice, FCCL may, at any time before the end of the first Fiscal
Quarter after the Contract Year in which the Shortfall Notice is given,
deliver a notice (a "Remedy Notice") to TimberWest confirming that FCCL
requires a remedy to make up for the Volume Shortfall and including an
invoice or other reasonable evidence of the cost to FCCL F.O.B. the
Original Pulp Xxxxx of a volume of Chips equal to the Volume Shortfall
actually purchased by FCCL in an arm's length bona fide sale at any
time during the 10 Business Days immediately preceding the date on
which the Remedy Notice is delivered in excess of the cost of such
volume calculated at the Chip Price and F.O.B. the Original Pulp Xxxxx
at such time (the "Excess Cost").
4.4. IMMEDIATE REMEDY
If the Remedy Notice is delivered to TimberWest within 10 Business Days
after the day on which FCCL receives the Shortfall Notice, TimberWest
will, within five Business Days after the date on which TimberWest
receives the Remedy Notice, pay to FCCL:
(a) an amount equal to such Excess Cost; or
(b) if, within two Business Days after such Remedy Notice is
given, TimberWest delivers to FCCL reasonable evidence of a
lower cost source of Chips of similar volume, species and
quality and which:
(i) are available to FCCL for outright purchase or
through arrangements facilitated by TimberWest,
including the production of Chips by TimberWest from
the Minimum Volume Facility which was the subject of
such shortfall; or
10
(ii) were purchased at any time during the 10 Business
Days immediately preceding the date on which the
Remedy Notice is delivered on an arm's length bona
fide, spot market basis,
an amount equal to the Excess Cost calculated on the basis of
such lower cost,
and when such payment is made, TimberWest will be credited, for the
purposes of the applicable Minimum Annual Volume as having delivered to
FCCL, during the Fiscal Quarter in respect of which the Volume
Shortfall arose, a volume of Chips equal to the Volume Shortfall.
4.5. FAILURE TO DELIVER NOTICE
If TimberWest delivers, or is deemed to deliver, to FCCL a Shortfall
Notice in respect of a Fiscal Quarter, and FCCL delivers a Remedy
Notice containing the particulars specified in Section 4.3 to
TimberWest after the time period described in Section 4.4, TimberWest
will, within five Business Days after the date on which TimberWest
receives the Remedy Notice, pay to FCCL an amount equal to the lower
of:
(a) the Excess Cost calculated on the basis of the spot market
price of Chips at the time of delivery of the Shortfall Notice
which will not be greater than the price, if any, stated in
the Shortfall Notice as described in Subsection 4.2(c);
(b) the Excess Cost calculated on the basis of the cost of Chips
set out in the Remedy Notice; and
(c) if, within two Business Days after such Remedy Notice is
given, TimberWest delivers to FCCL reasonable evidence of a
lower cost source of Chips of similar volume, species and
quality and which:
(i) are available to FCCL for outright purchase,
including the production of Chips by TimberWest from
the Minimum Volume Facility which was the subject of
such shortfall; or
(ii) were purchased at any time during the 10 Business
Days immediately preceding the date on which the
Remedy Notice is delivered on an arm's length bona
fide, spot market basis;
an amount equal to the Excess Cost calculated on the basis of
such lower cost,
and when such payment is made, TimberWest will be credited, for the
purposes of the applicable Minimum Annual Volume as having delivered to
FCCL, during the Fiscal Quarter in respect of which the Volume
Shortfall arose, a volume of Chips equal to the Volume Shortfall.
11
4.6. MAKE-UP NOTICE
If TimberWest delivers to FCCL a Make-Up Notice, FCCL may confirm, by
notice (a "Pricing Notice") delivered to TimberWest at any time before
the end of the first Fiscal Quarter after the Contract Year in which
the Make-Up Notice is delivered, that FCCL intends to establish, as of
the date of the Pricing Notice, the prices that will be applicable in
respect of any Volume Shortfall that may arise in respect of such
Contract Year, and any Excess Cost payable by TimberWest in respect of
such Contract Year will be determined by reference to prevailing prices
of Chips on the date of delivery of the Pricing Notice.
4.7. NO SHORTFALL
If, at the end of a Contract Year, the Volume Shortfall in respect of
which the Make-Up Notice was given does not arise, this Article will
impose no additional obligation on TimberWest.
4.8. MINIMUM FIVE-YEAR VOLUME
The total volume of Chips sold by TimberWest and purchased by FCCL
under this Agreement during a Five Year Period produced from each
Minimum Volume Facility, subject to Section 4.11, will not be less than
the Minimum Five Year Volume applicable thereto.
4.9. FIVE-YEAR SHORTFALL
If, at any time during a Five Year Period, a shortfall in a Minimum
Five-Year Volume (a "Volume Shortfall") would arise in respect of a
Minimum Volume Facility (taking into account Section 4.11), calculated
on the assumptions that:
(a) during each remaining Contract Year of the Five -Year Period,
TimberWest would harvest the maximum volume available to it
under the Crown Timber Tenures associated with the Minimum
Volume Facility; and
(b) the proportion of the total harvest of the Crown Timber
Tenures associated with the Minimum Volume Facility comprised
of sawlogs and the chip recovery factor for the Minimum Volume
Facility would be the same as those for the current Contract
Year;
FCCL may, at any time before the end of the first Fiscal Quarter after
the fourth Contract Year of any Five Year Period, deliver a notice
containing the particulars specified in Section 4.3 for a Remedy Notice
(a "Five-Year Remedy Notice") to TimberWest in respect of all or any
part of such Volume Shortfall and TimberWest will, within five Business
Days after the date on which TimberWest receives the Five-Year Remedy
Notice, pay to FCCL:
(c) an amount equal to the Excess Cost of the Volume Shortfall; or
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(d) if, within two Business Days after such Five-Year Remedy
Notice is given, TimberWest delivers to FCCL reasonable
evidence of a lower cost source of Chips of similar volume,
species and quality and which:
(i) are available to FCCL for outright purchase,
including the production of Chips by TimberWest from
the Minimum Volume Facility which was the subject of
such shortfall; or
(ii) were purchased at any time during the 10 Business
Days immediately preceding the date on which the
Remedy Notice is delivered on an arm's length bona
fide, spot market basis;
an amount equal to the Excess Cost calculated on the basis of
such lower cost,
and when such payment is made, TimberWest will be credited, for the
purposes of the applicable Minimum Five Year Volume, as having
delivered to FCCL, during the Five Year Period, the volume of Chips in
respect of which the Five-Year Remedy Notice was given.
4.10. FINAL FIVE-YEAR ADJUSTMENT
If, at the end of a Five-year Period, after taking into account any
volumes credited under Section 4.9:
(a) a Volume Shortfall exists, TimberWest will, before the end of
the first Fiscal Quarter after the Five-year Period, pay to
FCCL an amount equal to the Excess Cost of such Volume
Shortfall calculated in a manner consistent with Section 4.9;
or
(b) any amounts paid by TimberWest to FCCL under Section 4.9 were,
except for Section 4.9, in excess of what TimberWest would
have been required to pay to FCCL, FCCL will, before the end
of the first Fiscal Quarter after the Five Year Period, pay to
TimberWest an amount equal to such excess.
4.11. SHORTFALL MITIGATION
Volume Shortfalls for a Contract Year or Five Year Period with respect
to a Minimum Volume Facility may be made up with Chips produced from
the other Minimum Volume Facility. For the purposes of this Article,
Xxxxx made up under this Section will be credited towards the volume of
Chips produced by the Minimum Volume Facility with the Shortfall and
deducted from the volume of Chips produced by the other Minimum Volume
Facility.
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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 406 OF THE SECURITIES ACT OF
1933, AS AMENDED, AND THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE
COMMISSION - CONFIDENTIAL SECTION HAS BEEN MARKED WITH A STAR (*)
ARTICLE 5.
PRICE AND PAYMENT FOR CHIPS
5.1. CHIP PRICE
The purchase price payable by FCCL to TimberWest for Chips purchased by
FCCL under this Agreement will be the Coast Chip Price for the Fiscal
Quarter in which such Chips are delivered to FCCL in accordance with
this Agreement, plus in the case of TMP - quality hemlock balsam Chips
produced at the Elk Falls Facility from small hemlock and balsam
sawlogs and consumed at the Elk Falls Pulp Mill, *.
5.2. PAYMENT
FCCL will pay to TimberWest, not later than the 11th Business Day
following FCCL's monthly cut-off time (currently 8:00 a.m. on the
Sunday immediately preceding the second-to-last Tuesday of each month)
the applicable purchase price for all Chips delivered to and purchased
by FCCL up to that cut-off time since the previous cut-off time.
5.3. PRODUCTION COSTS
TimberWest will be responsible for all costs associated with the
production, movement and delivery up to the time of transfer of title
described in Section 12.1 of all Chips sold pursuant to this Agreement
including the acquisition, debarking and sawing of logs and chipping,
screening and loading of Chips but excluding demurrage and other
transportation charges relating to FCCL's obligations under Section
11.1.
ARTICLE 6.
CHIP MEASUREMENT, TESTING AND SPECIFICATIONS
6.1. OPTIMIZATION OF CHIP QUALITY
TimberWest will:
(a) use all reasonable efforts in the barking of logs and the
manufacture and screening of Chips to ensure that the Chip
Specifications are met;
(b) maintain all barking, chipping and screening facilities at the
TimberWest Facilities in good operating condition at all
times, including replacement and repair of equipment as
necessary, in order to produce Chips conforming to the Chip
Specifications; and
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(c) maintain the chipper knives, faceplates, knife holders and
anvils in such a condition as to produce cleanly cut Chips.
6.2. MEASUREMENT OF VOLUME
The volume of Chips supplied by TimberWest under this Agreement will be
measured by or on behalf of FCCL at its expense in BDU's or Volumetric
Units consistent with normal industry practice or in such other volume
measurement as may be adopted as a normal industry practice in the
applicable region subsequent to the date of this Agreement.
6.3. INTERIM MEASUREMENT
Until a conveyor belt weightometer or other means of measuring Chips
delivered by way of the Elk Falls Chip Conveying System has been
installed, the volume of Chips delivered by way of the Elk Falls Chip
Conveying System will be determined on a formula basis which estimates
on a reasonable basis a volume of Chips contained within a volume of
sawlogs consumed in the Elk Falls Facility taking into account solid
wood equivalent volume for sawlogs, lumber output and sawdust, hog fuel
and Chip production. Any dispute between the parties as to the use of a
particular formula will be determined by arbitration.
6.4. MEASUREMENT OF CHIP VOLUME
FCCL will determine the oven dry weight by standard moisture test
sampling and will notify TimberWest of all such measurements of Chips
at the time that FCCL pays for such Chips.
6.5. CONVERSION FACTORS
Conversion from bone dry measure to Volumetric Units shall be
determined using conversion factors of 1,850 bone dry pounds of
hemlock/balsam Chips per Volumetric Unit and 2,000 bone dry pounds of
Xxxxxxx fir Chips per Volumetric Unit. If either party believes that
the applicable conversion factor differs from the conversion factor
being utilized, it shall so advise the other party and the parties
shall then use all reasonable efforts to agree on the appropriate
conversion factor and failing agreement within 30 days of the request,
will be determined by arbitration.
6.6. APPLICATION
The Chip Specifications and procedures for measuring and monitoring
Chip Specifications set forth in this Article will apply to all Chips
to which this Agreement applies. FCCL will conduct the necessary and
appropriate classification tests according to procedures generally
employed in the British Columbia pulp industry and in a manner
consistent with present practices in order to determine whether such
Chips conform to the Chip Specifications.
6.7. VARIATION OF CHIP SPECIFICATIONS
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If FCCL wishes to vary any or all of the Chip Specifications from time
to time after the date of this Agreement as required to meet its
production requirements it will deliver to TimberWest notice of such
required variation whereupon TimberWest will, at its expense if such
revised specifications fall within normal industry standards in the
area in which the applicable TimberWest Facility is located, or at the
expense of FCCL if otherwise, modify the applicable TimberWest
Facilities as soon as reasonably possible in order to produce Chips
meeting the revised Chip Specifications within a reasonable time. Such
variations may be made on a mill by mill basis if required by FCCL.
6.8. INSPECTION OF TESTING
TimberWest may, at any reasonable time, inspect and evaluate FCCL's
testing procedures and practices. If TimberWest discovers any material
error in FCCL's testing procedures and practices, FCCL will make such
changes as are necessary in order that such procedures and practices
conform to those generally employed in the British Columbia pulp
industry.
6.9. REJECTION OF INDIVIDUAL LOADS
In recognition that an individual railcar, truck or scow load of Chips
that fails to conform to the applicable Chip Specifications or species
mix requirements may cause handling, production or quality problems in
the manufacture of pulp or paper, if any individual railcar, truck or
scow load of Chips that is sampled fails to conform in a material way
to the Chip Specifications or species mix requirements and as a result
is likely to cause unacceptable handling, production or quality
problems in the manufacturing of pulp or paper, then FCCL may reject
such railcar, truck or scow load and will immediately notify TimberWest
of the rejection.
6.10. COSTS OF DISPOSAL
All original transportation, including barge hire costs where
applicable, related to rejected Chips and all costs of disposal of
rejected Chips, including transportation and, where applicable, barge
hire costs to return the rejected Chips to TimberWest, will be for the
account of TimberWest.
6.11. NO WAIVER
Failure to reject a railcar, truck or scow load that fails to meet the
Chip Specifications will not constitute a waiver of FCCL's right to
reject future railcar, truck or scow loads.
6.12. THIRD PARTY DELIVERIES
TimberWest acknowledges that FCCL may from time to time direct the
delivery of Chips to third parties as part of FCCL's Chip sales and
trading program and in each such case the procedures employed by such
third party concerning measurement and testing of Chips will apply
except that such third party procedures will be consistent with
standard industry practices and will not be more onerous than similar
procedures employed by FCCL.
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ARTICLE 7.
DELIVERY OF CHIPS
7.1. LOADING FACILITIES
TimberWest will, at all times, maintain or cause to be maintained in
good condition and working order at each of the TimberWest Facilities
(other than the Elk Falls Facility so long as Chips are delivered by
way of the Elk Falls Chip Conveying System), loading facilities as
follows:
(a) with respect to the Cowichan Facility, loading facilities
suitable for loading railcars or trucks of the capacity
delivered by FCCL;
(b) with respect to TimberWest Facilities, other than the Minimum
Volume Facilities, facilities suitable for loading railcars or
trucks or loading and mooring scows of the capacity utilized
by FCCL consistent with normal industry practice having regard
to the location of the TimberWest Facility.
7.2. ELK FALLS CHIP CONVEYING SYSTEM
The parties will, at all times, cause the Elk Falls Chip Conveying
System to be maintained in good condition and working order, TimberWest
being responsible for maintaining and repairing at its expense that
part located within the Elk Falls Facility and FCCL being responsible
for maintaining and repairing at its expense that part located within
the Pulp Mill adjacent to the Elk Falls Facility.
7.3. CURRENT MANUFACTURE
TimberWest will use all commercially reasonable efforts to ensure that
Chips to be sold hereunder are made available for loading as
manufactured and will not include any Chips that have been stockpiled,
except Chips that are piled as a result of normal loading practices or
as provided in Subsection 15.5(c).
7.4. RATE OF DELIVERY
So far as is reasonably practicable, TimberWest will make Chips
available for delivery to FCCL, and FCCL will accept and arrange for
the removal of such Chips, on a regular and even basis throughout each
Contract Year.
7.5. TRANSPORTATION
Except with respect to the operation of that part of the Elk Falls Chip
Conveying System which is the responsibility of TimberWest under
Section 7.2, FCCL will be responsible for transporting Chips from the
TimberWest Facility at which the Chips were produced and will arrange
to supply railcars and trucks, or where applicable, scows on an even
and regular basis for such purpose. TimberWest will load Chips into
railcars, trucks or, where applicable, scows in any proportions that
FCCL requires from time to time as long as such loading does not
require TimberWest to incur operating or capital costs
17
associated with such loading that are materially greater than the costs
that have previously been associated with such loading at the
applicable TimberWest Facility.
7.6. TIMBERWEST RESPONSIBILITIES
TimberWest will:
(a) provide and maintain in good condition, and regulate in a
non-discriminatory manner, the orderly use of, access routes
on the TimberWest Facilities so as to allow empty trucks and
railcars to arrive, be loaded and depart expeditiously and in
safety;
(b) where Chips are loaded on a scow at a TimberWest Facility:
(i) be responsible for moving scows delivered by FCCL
between moorings and the Chip loading facility,
whether loaded or empty, until title to the Chips on
such scows passes to FCCL as contemplated by this
Agreement except that TimberWest will not be
responsible for any loaded scow:
A. 48 hours after FCCL's towing agent has been
notified that such scow is fully loaded; or
B. if the scow is not seaworthy and such
unseaworthiness is not caused or contributed
to by the negligence of TimberWest;
(ii) if FCCL's towing agent provides TimberWest with an
empty barge or barges previously used for carrying
any material that may contaminate Chips, TimberWest
will clean such barges before loading the Chips and
may bill FCCL for its actual out-of-pocket costs of
cleaning, which will be payable by FCCL promptly upon
verification of the billing; and
(iii) cause empty scows delivered by FCCL to be loaded
within 72 hours and will indemnify FCCL for demurrage
and any other costs or charges incurred by FCCL as a
result of any delay beyond such period;
(c) ensure that, in loading Chips for delivery to FCCL under this
Agreement, Chips produced from different species are not
mixed, unless FCCL notifies TimberWest otherwise pursuant to
Section 7.7, except that with respect to Chips produced from
the Elk Falls Facility or the Cowichan Facility (or other
TimberWest Facility located in the Coastal Area), hemlock and
balsam Chips may be mixed and Xxxxxxx fir and coastal pine
Chips may be mixed;
(d) cause each railcar or scow delivered by FCCL to be fully and
properly loaded, in accordance with all applicable loading
requirements and specifications, in such manner as will
minimize voids and spaces and achieve maximum degree of
compaction;
(e) promptly notify:
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(i) FCCL of the completion of loading of Chips into
railcars including such particulars of estimated
volumes and species as FCCL may reasonably require;
and
(ii) FCCL's towing agent as soon as possible of completion
of loading of each scow and of the time that each
scow will be available for loading;
(f) indemnify FCCL against any claims, demands, action or causes
of action made against FCCL, including added transportation
costs, demurrage and freight charges, as a result of the
spillage or loss of Chips caused by improper loading of Chips
into railcars or scows.
7.7. SPECIES SEGREGATION
FCCL may vary from time to time the species mix permitted under Section
7.6 by notice to TimberWest to that effect whereupon TimberWest will,
unless the parties agree otherwise, make the modifications to the
applicable TimberWest Facility as may be necessary to achieve such
varied species mix as soon as reasonably possible after receipt of such
notice. If the varied species mix falls within normal industry
standards in the region in which the TimberWest Facility affected by
such variation is located, the cost of any modifications which may be
reasonably required to achieve such variation shall be borne by
TimberWest but shall otherwise be borne by FCCL.
ARTICLE 8.
PRICE AND PAYMENT FOR PULPLOGS
8.1. PULPLOG PRICE
The purchase price for Pulplogs purchased by FCCL under this Agreement
will be the Vancouver Log Market Price of such Parcel at the time such
Parcel is offered for sale hereunder calculated on a F.O.B. Point of
Sale basis.
8.2. DISPUTE OF PURCHASE PRICE
If FCCL disputes the price stipulated by TimberWest for any Parcel of
Pulplogs offered for sale under this Agreement, FCCL will notify
TimberWest of the dispute before the end of the period described in
Section 9.2, which dispute will be referred to arbitration under this
Agreement for determination, and the period described in Section 9.5
will be extended in order to permit completion of the arbitration
process.
8.3. PAYMENT
FCCL will pay TimberWest, not later than the 11th Business Day
following FCCL's monthly cut-off time, the purchase price for Pulplogs
invoiced and accepted up to that cut-off time since the previous
cut-off time.
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8.4. VANCOUVER LOG MARKET
If a material change occurs in respect of the Vancouver Log Market to
an extent that renders such market an unreliable indicator of the fair
market value of logs traditionally purchased and sold thereon, the
parties will use all reasonable efforts to agree upon a different
pricing basis for coastal Pulplogs that more closely conforms with
their mutual intentions in entering into this Agreement, and failing
such agreement the matter will be determined by arbitration.
8.5. INTERFOR LOG SUPPLY AGREEMENT
If TimberWest fails to offer to sell to International Forest Products
Ltd. ("Interfor") in any Contract Year the McDonald Base Volume in
accordance with (and as defined in) the log supply agreement (the "Log
Supply Agreement") among FCCL, Crown Forest Industries Limited and
Interfor dated December 30, 1991 and such failure results in a waiver
under the chip and pulplog supply agreement among the same parties
dated December 30, 1991 that creates a credit against Interfor's
obligations to sell Pulplogs to FCCL under that agreement in the
following Contract Year as contemplated by Section 3.4 of the Log
Supply Agreement (the volume of such credit referred to in this Section
as the "Pulplog Credit") then TimberWest will:
(a) to the extent it is able to do so, provide sufficient Pulplogs
to FCCL to make up the Pulplog Credit on the same terms as
this Agreement from Pulplogs which originate from outside
British Columbia or Pulplogs which originate in British
Columbia but which FCCL has waived the purchase thereof; and
(b) to the extent that TimberWest does not make up the Pulplog
Credit under Subsection 8.5(a) in the Contract Year, pay FCCL
in respect of the difference in volume between the Pulplog
Credit and the volume made up under Subsection 8.5(a), the
amount, if any, by which the price payable for Hembal J Grade
sawlogs exceeds the price payable for Pulplogs under this
Agreement.
ARTICLE 9.
PULPLOG SALE PROCEDURES
9.1. NOTICE OF AVAILABILITY
TimberWest will promptly advise FCCL of:
(a) the availability of Pulplogs for delivery and sale
under this Agreement including, where applicable, the
Point of Sale;
(b) the volume, species and specifications of Pulplogs offered
for sale;
(c) the location of such Pulplogs or Parcels of Pulplogs; and
(d) the proposed selling price for such Pulplogs or Parcels of
Pulplogs.
20
9.2. INSPECTION AND ACCEPTANCE
FCCL will be entitled to inspect any Pulplogs made available for
delivery and sale hereunder and if such Pulplogs meet the Pulplog
Specifications and such sale otherwise would comply with the terms and
conditions of this Agreement, FCCL will, not more than 15 Business Days
after receipt of advice under Section 9.1, accept such Pulplogs.
9.3. AGREEMENT ON PRICE
The parties will, in respect of any Pulplogs purchased or sold
hereunder, use reasonable efforts to reach agreement upon the purchase
price for such Pulplogs before the end of the period described in
Section 9.2, but if agreement is not reached Section 8.2 will apply.
9.4. USE OF TELEPHONE
Advice of availability of Pulplogs under this Agreement, and an
acceptance or rejection thereof, may be communicated by telephone.
9.5. DELIVERY OF PULPLOGS
FCCL will take delivery of Pulplogs which it agrees to purchase under
this Agreement at a Point of Sale within 15 Business Days after the
date of receipt of advice under Section 9.1.
9.6. AVAILABILITY
To the extent that its logging operations permit, TimberWest will offer
Pulplogs in the order of time of harvest in a regular and systematic
manner during each Contract Year.
9.7. COSTS UP TO DELIVERY
TimberWest will be responsible for the payment of all stumpage, royalty
and other charges against the title of Pulplogs sold by it, and all
transportation and other costs incurred in order to deliver such
Pulplogs to the Point of Sale.
9.8. BOOMSTICKS
Boomsticks will be provided by TimberWest for each Parcel of Pulplogs
sold under this Agreement and FCCL will purchase such boomsticks at
their fair market value concurrently with payment of the purchase price
for such Parcel of Pulplogs. TimberWest will repurchase all such
boomsticks from FCCL at the market price at the time if suitable for
coastal towing or will otherwise be disposed of by TimberWest at the
highest return and the proceeds paid or credited to FCCL.
9.9. BOOMGEAR DEPOSIT
FCCL will comply with boomgear deposit and return practices and
procedures, in accordance with generally accepted industry practices,
in effect at the time.
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9.10. PULPLOG SPECIFICATIONS
All Pulplogs, and all Parcels of Pulplogs, to which this Agreement
applies will conform to the Pulplog Specifications.
9.11. SCALING
Scaling will be done in accordance with the Ministry of Forests'
applicable policies and industry standards and scaling expenses will be
shared equally by the parties.
9.12. CHECKSCALING
If either party disputes the result of a scaling of a Parcel conducted
under Section 9.11, it may cause a checkscaling to occur in accordance
with the following provisions, the result of which will be binding on
the parties and not subject to arbitration hereunder:
(a) such party (the "Disputing Party") will notify the other
party, before the Parcel is broken down or dewatered, of its
intention to cause a checkscaling, and will name one
independent, licensed scaler to perform the checkscaling;
(b) within 2 Business Days after the date of receipt of such
notice, the other party will, by notice to the Disputing
Party, name one independent, licensed scaler to also perform a
checkscaling, failing which the checkscaling will be performed
by the scaler named by the Disputing Party;
(c) each party will take all reasonable steps to ensure that the
checkscaling is carried out in a prompt and efficient manner;
(d) each party may inspect the Parcel before breakdown or
dewatering to determine if losses occurred during
transportation or handling as well as inspect checkscaling and
log handling practices;
(e) any logs not conforming to the Pulplog Specifications will be
deemed to have no value for the purposes of determining a
value with reference to a checkscale;
(f) if the value determined with reference to any checkscale does
not differ by more than 3% of the value determined with
reference to the original scale, excluding boomsticks and gear
in both cases, no adjustment will be made and all expenses
incurred relating to the checkscale, including towing,
handling and scaling, will be paid by the Disputing Party;
(g) if Subsection 9.12(f) is not applicable, the value determined
with reference to the original scale will be adjusted to equal
the average of the two checkscales or, if only one scaler was
named, to equal the single checkscale, and the checkscale
expenses described in Subsection 9.12(f) will be shared
equally by the parties.
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9.13. CONDITION OF PARCELS
All Pulplogs delivered by TimberWest to FCCL hereunder will be properly
and securely bundled. Intact Parcels will be fit for safe coastal
towing except for those barged to and dumped at the Pulp Mill at
Crofton, British Columbia.
9.14. LOG SALE PRACTICES
Except as expressly varied herein, the sale of Pulplogs under this
Agreement will be in accordance with generally accepted log sales
practices.
ARTICLE 10.
CUSTOM CHIPPING
10.1. CUSTOM CHIPPING
If TimberWest has excess whole-log chipping capacity available at any
time and wishes to custom chip logs to utilize that excess capacity,
TimberWest will, prior to offering or committing to custom chip any
logs for any third party, offer that custom chipping capacity to FCCL
at current industry rates. If FCCL does not accept such offer or
accepts such offer only in respect of part of that chipping capacity,
TimberWest may, with respect to the portion of that chipping capacity
which FCCL does not elect to utilize, custom chip logs for third
parties for a period of not more than six months from the date of
TimberWest's offer, at which time FCCL's rights under this Section will
again apply. Custom chipping commitments which were in effect at
September 23, 1993 and were assumed by TimberWest as at the date of
this Agreement will be excluded from the operation of this Section for
their initial term but not for any extensions or renewals thereof.
Where TimberWest is entitled to terminate any such commitment without
incurring any additional liability to the other party to such
commitment, TimberWest will exercise such termination right promptly
after it becomes entitled to do so.
10.2. PULPLOGS
If FCCL intends to have Pulplogs it acquires from TimberWest under this
Agreement custom chipped, FCCL will offer such custom chipping to
TimberWest as long as TimberWest is able to perform such custom
chipping at competitive rates, at a location that is suitable to FCCL
and on other terms and conditions, including volume, regularity and
term of availability that do not result in any net disadvantage to FCCL
as determined by FCCL in its sole discretion.
10.3. OTHER ARRANGEMENTS
TimberWest will ensure that logs provided by FCCL to TimberWest for
custom chipping will not be used for any other purpose except on terms
and conditions approved by FCCL and that custom chipping of logs by
TimberWest on behalf of third parties shall not in any way result in
the reduction of the volume of Chips otherwise available to FCCL under
this Agreement.
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ARTICLE 11.
TITLE AND RISK
11.1. TITLE
Delivery of Chips and Pulplogs to FCCL under this Agreement shall be
deemed to have been completed, and title to, all rights of property in,
and all risks of loss or damage or destruction to Chips or Pulplogs
shall pass to FCCL as follows:
(a) for Chips loaded into a railcar or truck, when the railcar or
truck leaves the applicable TimberWest Facility;
(b) for Chips delivered by way of the Elk Falls Chip Conveyor
System, when Chips on the Elk Falls Chip Conveyor System cross
over the boundary between the Elk Falls Facility and the
adjacent Pulp Mill;
(c) for Chips loaded into a scow, at such time as the master of
the tug of FCCL's towing agent has placed a line aboard a
fully loaded scow with the intention of removing such scow
from the scow moorings at a facility from which Chips are
delivered under this Agreement; and
(d) for Pulplogs, when the Pulplogs arrive at a Point of Sale and
such Pulplogs are invoiced and accepted in satisfactory
condition.
ARTICLE 12.
COVENANTS
12.1. COVENANTS OF FCCL
FCCL will:
(a) cause its directors, officers, employees, agents and
contractors, while on the premises of TimberWest, to comply
with all rules and regulations of TimberWest of general
application and, subject to Section 13.3, indemnify and hold
harmless TimberWest and its directors, officers, employees,
agents and contractors from and against any loss, damage,
liability, claim or action incurred or sustained, to the
extent attributable to a breach of such rules and regulations
or to any negligent or wilful act of FCCL or any of its
directors, officers, employees, agents or contractors;
(b) comply with all applicable laws, regulations, rules and
governmental restrictions and maintain in good standing all
licences, permits and approvals from any and all governments,
governmental commissions, boards or agencies applicable to the
performance of its obligations hereunder.
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12.2. COVENANTS OF TIMBERWEST
TimberWest will:
(a) while any director, officer, employee, agent or contractor of
FCCL is on the premises of TimberWest, cause the employees,
agents and contractors of TimberWest and its subsidiaries to
comply with all rules and regulations of TimberWest applicable
to them and, subject to Section 13.3, indemnify and hold
harmless FCCL and its directors, officers, employees, agents
and contractors from and against any loss, damage, liability,
claim or action incurred or sustained to the extent
attributable to a breach of such rules and regulations or to
any negligent or wilful act of TimberWest or any of its
directors, officers, employees, agents or contractors;
(b) comply with all applicable laws, regulations, rules and
governmental restrictions and maintain in good standing all
licences, permits and approvals from any and all governments,
governmental commissions, boards or agencies applicable to the
performance of its obligations hereunder; and
(c) during the term of this Agreement, maintain comprehensive
general liability insurance to include its liabilities
hereunder for loss or damage to persons, property and Chips
for which it is responsible with limits of coverage to be not
less than $2,000,000 (reviewed every five years and adjusted
for inflation and all other reasonable factors) inclusive of
bodily injuries or property damage for each occurrence, and
will provide FCCL reasonable evidence of such insurance from
time to time upon FCCL's reasonable request;
(d) not during the term of this Agreement:
(i) purchase Chips for any purpose; or
(ii) acquire Pulplogs except for resale to FCCL under this
Agreement.
12.3. CERTIFICATE OF OFFICER
FCCL may, after the end of a Contract Year, request a certificate of
the Chief Financial Officer of TimberWest or, if the Chief Financial
Officer is not available, a senior officer of TimberWest acceptable to
FCCL, acting reasonably, verifying as to whether TimberWest has
complied with its obligations under this Agreement including
confirmation of the allowable annual cut in respect of the Crown Timber
Tenures, the volume of logs harvested by and purchased and sold by
TimberWest in the Contract Year, logs processed through the TimberWest
Facilities during the Contract Year, the volume of Pulplogs produced
from the Timber Tenures during the Contract Year, the volume of Chips
produced by the TimberWest Facilities and delivered to FCCL during the
Contract Year and particulars of any acquisitions of TimberWest
Facilities. TimberWest will, not later than the 40th Business Day after
the date of receipt of such request, provide such certificate in a form
satisfactory to FCCL, acting reasonably.
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ARTICLE 13.
DEFAULT
13.1. EVENT OF DEFAULT
An event of default ("Event of Default") will exist with respect to a
party if such party has committed a material default in the performance
of its obligations hereunder (for the purposes of this Section, the
failure by a party to make two successive payments required under this
Agreement, other than a failure arising from a bona fide dispute over
the requirement to make such payment, will be deemed to be a material
default), notice has been given to such party by the other party
specifying the default and such default remains unremedied, and:
(a) in respect of a failure to make two successive payments
required under this Agreement, more than 5 Business Days have
elapsed since the date that the notice is delivered to such
party;
(b) in any other case, more than 15 Business Days have elapsed
since the expiration of such period following the giving of
such notice during which such party might by the exercise of
reasonable diligence have remedied the default;
(c) in the case of a default that could not, by the exercise of
reasonable diligence, be remedied within the period described
in Subsection 13.1(b), the earlier of:
(i) the day on which the party fails or refuses to act
diligently to remedy the default; and
(ii) the day on which it becomes evident to the other
party, acting reasonably, that such default will not
be remedied in a reasonably timely manner regardless
of the actions taken by such party.
13.2. REMEDIES
At any time while an Event of Default exists with respect to a party,
the other party may exercise any right or remedy available to it, at
law or in equity, and may without prejudice to any other right or
remedy, terminate this Agreement by notice to the other party to that
effect, effective on a date specified in such notice, which date shall
be not earlier than the date on which such notice is given.
13.3. CONSEQUENTIAL DAMAGES
Any liability of either party to the other for breach of this Agreement
or for negligence of its directors, officers, employees, agents and
contractors will not extend to, or include liability for, loss of
profits or contribution, loss of use of property or other consequential
damages.
26
ARTICLE 14.
DISPOSITIONS BY TIMBERWEST
14.1. DISPOSITIONS BY TIMBERWEST
TimberWest will not, without the prior written consent of FCCL:
(a) except as permitted by Section 14.3:
(i) sell, transfer or otherwise dispose of a material
part of the TimberWest Facilities or 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 FCCL may
reasonably require and which will give effect to an
assignment by XxxxxxXxxx to the Assignee of an
interest in this Agreement to the extent required by
such assignment; or
(ii) grant any harvest rights in respect of the Timber
Tenures or enter into any log or timber sale
arrangements which would result in a reduced volume
of logs being processed through TimberWest Facilities
unless the holder of such harvest rights or purchaser
of such logs or timber enters into an agreement in
such form as FCCL may reasonably require to ensure
that the Pulplogs included in such harvest or timber
sales and the Chips produced from processing such
harvest, timber or logs, or an equivalent volume,
will be available to FCCL on the terms and conditions
of this Agreement; or
(b) mortgage, charge, grant a security interest in or otherwise
encumber a material part of the TimberWest Facilities or
Timber Tenures except in compliance with Section 14.4;
(c) except as contemplated by Article 15, cease or curtail the
operation of any Minimum Volume Facility, unless the parties
enter into arrangements satisfactory to FCCL, acting
reasonably, to ensure the availability from alternate sources
of the Minimum Annual Volume of Chips in respect of that
Minimum Volume Facility;
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 TimberWest
Facilities or Timber Tenures" means any portion of the TimberWest
Facilities or 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 reduction in the volume
of Chips or Pulplogs available to FCCL under this Agreement and, for
the purposes of
27
determining the application of Section 14.1 to a disposition of any
part of the TimberWest Facilities or Timber Tenures:
(a) series of transactions that could reasonably be viewed as
related will be considered as a single disposition; and
(b) any exchange of assets in which any part of the TimberWest
Facilities or Timber Tenures are disposed of but are replaced
concurrently with other assets that become part of the
TimberWest Facilities or the Timber Tenures will not
constitute a disposition of a material part of the TimberWest
Facilities or Timber Tenures if, as a result of such exchange,
the ability of TimberWest to fulfil the terms of this
Agreement and the volume of Chips or Pulplogs available to
FCCL under this Agreement is not materially affected.
TimberWest may, at its option, notify FCCL of any transaction
TimberWest proposes to enter into that involves the acquisition or
disposition of any tenure, right to harvest timber, or facility that is
or could be used in connection with TimberWest's logging operations or
wood processing business and any notice given by TimberWest to FCCL
under this Section may include a request that FCCL advise TimberWest of
FCCL's position regarding the application of this Article to the
proposed transaction, including whether or not an asset is a material
part of the TimberWest Facilities or Timber Tenures and whether or not
any draft agreement proposed by TimberWest under Section 14.1 meets
FCCL's reasonable requirements. FCCL 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 FCCL to respond
during such period will be deemed to be confirmation that FCCL does not
consider this Article to apply to such transaction.
14.3. EXCEPTED TIMBERLANDS
Section 14.1 will not apply in respect of the sale of Timberlands that
were originally purchased by TimberWest from Xxxxxxxx Challenge Canada
Limited or Elk Falls Forest Industries Limited and which are not
situated within a tree farm licence (the "non-TFL Timberlands") if the
area of such non-TFL Timberlands, when added to the area of all other
non-TFL Timberlands disposed of by TimberWest:
(a) during the immediately preceding 12 months does not exceed
1,455 hectares;
(b) at any time does not exceed 7,275 hectares.
14.4. LENDER STATUS
Any mortgage, charge, security interest or other encumbrances
("Encumbrances") granted over a material part of the TimberWest
Facilities or Timber Tenures or this Agreement, or Encumbrances which
in the aggregate constitute an Encumbrance over a material part of the
TimberWest Facilities or Timber Tenures or this Agreement, will be
subject to the condition that the holder of such Encumbrance or
Encumbrances, enters into an agreement with FCCL in a form satisfactory
to it acting reasonably, which:
28
(a) ensures that, to the extent permitted by law, any sale or
other disposition of any of the TimberWest Facilities or
Timber Tenures arising out of the enforcement of the
Encumbrance will be made only in accordance with this Article;
(b) provides that the holder of such Encumbrance and any receiver,
receiver-manager or person appointed under the Encumbrance
will not take any action to impair or restrict the rights of
FCCL under this Agreement;
(c) provides that FCCL will have notice of, and a reasonable
period to cure, defaults by TimberWest under the Encumbrance;
and
(d) if required by the holder of such Encumbrance as a condition
of entering into such agreement, provides that FCCL will
provide notice to, and give such holder a reasonable time to
cure, defaults by TimberWest under this Agreement.
14.5. BREACH
A breach by TimberWest of Section 14.1 could result in irreparable harm
to FCCL for which FCCL could not adequately be compensated by monetary
award and, accordingly, TimberWest agrees that in the event of any such
breach, in addition to all other remedies available to FCCL at law or
in equity, FCCL will be entitled as a matter of right to apply to a
Court of competent jurisdiction for such relief by way of restraining
order, injunction, decree or otherwise, as may be appropriate, to
ensure compliance with Section 14.1.
14.6. RELEASE OF TIMBERWEST
Any assignment made under Section 14.1 will not release TimberWest from
any of its obligations under this Agreement unless FCCL expressly
consents in advance to an assignment to the Assignee by way of
novation, which consent may be withheld unless FCCL is satisfied, in
its absolute discretion, of the Assignee's ability to fulfil the terms
of this Agreement on a long-term basis and, in such case, the release
of TimberWest will extend only to that portion of this Agreement
assigned to the Assignee by way of novation, except that if FCCL is not
so satisfied at the time of such assignment, TimberWest may, at any
time after the first anniversary of such assignment and not more
frequently than on each anniversary date thereafter, request that FCCL
provide such a release to TimberWest and FCCL will not refuse to
provide such a release to TimberWest if it is satisfied, acting
reasonably, of the Assignee's ability to fulfil the terms of this
Agreement on a long-term basis.
ARTICLE 15.
FORCE MAJEURE AND CURTAILMENT
15.1. AFFECTING FCCL
If, at any time while this Agreement is in force, the operation of the
pulp production facilities or Chip unloading facilities at any Pulp
Mill is shut down or curtailed, or FCCL is prevented from arranging
delivery of Chips or Pulplogs, due to weather conditions, fire,
29
strike or other labour disruptions, lockout, sabotage, shipwreck, riot,
war, flood, extraordinary breakdown, explosion, laws or regulations,
Court order, act of any government body or agency, act of God,
blockade, civil commotion or disobedience (lawful or unlawful), as a
result of excessive inventories or for any reason whether similar or
dissimilar to the foregoing which FCCL considers sufficient to justify
curtailing or shutting down such operations, then FCCL may, without
liability, discontinue or curtail the purchase and acceptance of
deliveries from TimberWest for the period of such shutdown or
curtailment.
15.2. MARKET CONDITIONS
If, at any time while this Agreement is in force, market conditions in
respect of the sale of pulp or paper are such that the operation of the
pulp production facilities or Chip unloading facilities at any Pulp
Mill is shut down or curtailed, FCCL, without liability, may
discontinue or curtail the purchase and acceptance of deliveries from
TimberWest for the period of such shutdown or curtailment.
15.3. PROPORTIONATE CURTAILMENT
If FCCL curtails its purchases pursuant to Section 15.1 or 15.2, it
will do so on a proportionate basis, so that the volume of Chips and
Pulplogs purchased by FCCL from TimberWest under this Agreement in any
month during such curtailment will be not less than a volume equal to
the result obtained when:
(a) the actual volume of Chips and Pulplogs (of the same species
mix and quality as are delivered by TimberWest pursuant to
this Agreement) that are delivered to the Pulp Xxxxx in such
month is divided by;
(b) he total volume of such Chips and Pulplogs that FCCL, acting
reasonably and in good faith, estimates would have been
delivered to the Pulp Xxxxx in such month if no curtailment
had occurred;
multiplied by:
(c) the average monthly volume of such Chips and Pulplogs
purchased by FCCL from TimberWest under this Agreement during
each of the six months preceding the period of curtailment,
excluding any previous period of curtailment;
and during such period of curtailment FCCL will assist and co-operate
with TimberWest to minimize the detrimental effects of such curtailment
on the TimberWest Facilities, including purchase for resale when
feasible and permitted, except that FCCL will not be required to incur
any cost in respect thereof. FCCL's determination of its proportionate
reduction or curtailment of its purchases of Chips and Pulplogs during
any period will be final and binding on TimberWest.
30
15.4. NO CUMULATIVE OBLIGATION
Where, as a result of a shutdown or curtailment pursuant to Section
15.1 or 15.2, FCCL reduces or discontinues its purchases, FCCL will not
be obliged, upon resuming its purchases, to purchase any additional
volumes to make up for such discontinuance or curtailment of purchases.
15.5. ALTERNATIVE DISPOSITION
If, as provided in Section 15.1 or 15.2, FCCL discontinues or curtails
the purchase of Chips or Pulplogs produced by TimberWest, TimberWest
may dispose of such Chips or Pulplogs during or after such
discontinuance or curtailment as it sees fit except that:
(a) TimberWest will, before entering into any agreement to dispose
of such Chips or Pulplogs, notify FCCL of its intention to do
so, and TimberWest will not dispose of such Chips or Pulplogs
if FCCL notifies TimberWest, within 5 Business Days after the
date of receipt of such notice, that FCCL will purchase such
Chips or Pulplogs upon production on condition, at FCCL's
option, that they are stored at a TimberWest Facility until
the end of the discontinuance or curtailment, except that if
Chip inventories at any TimberWest Facility at which such
Chips or Pulplogs are stored during such discontinuance or
curtailment impair TimberWest's operations, TimberWest may,
notwithstanding any commitment made by FCCL under this
Subsection, dispose of and deliver to a third party such
volume of Chips or Pulplogs as is necessary to relieve such
impairment (and promptly refund to FCCL any amounts paid by
FCCL for such Chips or Pulplogs), unless FCCL agrees to accept
delivery of such volume in a timely manner;
(b) subject to Section 15.10, TimberWest will not enter into any
agreement concerning the disposition of Chips or Pulplogs that
would conflict with FCCL's right to resume the purchase of
Chips or Pulplogs under this Agreement; and
(c) FCCL may, after the end of such discontinuance or curtailment,
purchase any Chips or Pulplogs that have not been disposed of
and which are stockpiled or stored, by delivering not less
than 10 Business Days' notice to TimberWest of the quantity of
such stockpiled Chips or stored Pulplogs that it wishes to
purchase under this Agreement stipulating a rate of delivery
of Chips or Pulplogs that will not interfere with the
efficiency of the TimberWest Facilities at which such Chips or
Pulplogs are located and confirming that FCCL will take the
risk of any impairment of the quality of the Chips or Pulplogs
resulting from the stipulated rate of delivery.
15.6. AFFECTING TIMBERWEST
If, at any time while this Agreement is in force, TimberWest shuts down
or curtails the operation of any or all of the TimberWest Facilities
due to weather conditions, fire, strike or other labour disruptions,
lockout, sabotage, shipwreck, riot, war, flood, extraordinary
breakdown, explosion, laws or regulations, Court order, act of any
government body or
31
agency, act of God, blockade, civil commotion or disobedience (lawful
or unlawful) or as a result of FCCL reducing or discontinuing its
purchases of Chips or Pulplogs under this Agreement, or for any reason
whether similar or dissimilar to the foregoing and which TimberWest
considers sufficient to justify curtailing or shutting down its
operation, then TimberWest may, without liability, discontinue or
curtail the production and delivery of Chips or Pulplogs to FCCL.
15.7. CREDIT TO VOLUME COMMITMENTS (TIMBERWEST CURTAILMENT)
For the purpose of calculating volumes of Chips sold by TimberWest to
FCCL hereunder and, in particular, for the purpose of determining
compliance with the volume commitments made herein, TimberWest will be
deemed to have sold to FCCL hereunder:
(a) during any period of discontinuance or curtailment under
Sections 15.1, 15.2 or 15.6, a volume of Chips calculated on
the basis of the average monthly rate of actual delivery
during the six months immediately preceding the discontinuance
or curtailment, normalized by eliminating the effect of any
extraordinary non-recurring events; and
(b) such volumes of Chips that TimberWest offers to sell to FCCL
under Section 15.11 during the period from the end of the
curtailment or discontinuance until the end of the period
estimated by TimberWest in the applicable Estimate Notice;
but under no circumstances will TimberWest be entitled to receive any
volume credit if the discontinuance or curtailment arises from
circumstances or events that result in a substantially similar
adjustment of such volume commitments as a result of a change in
harvest rights for that Contract Year. If the parties are unable to
agree on any matter under this Section 15.7, the matter may be referred
by either party for determination by arbitration under this Agreement.
15.8. ADVANCE WARNING
FCCL and TimberWest will give to each other as much advance notice as
is reasonably possible of scheduled shutdowns or curtailments and
prompt notice of unexpected shutdowns or curtailments affecting the
delivery or acceptance of Chips or Pulplogs hereunder, stating the
nature, date of commencement anticipated, duration and estimated effect
of the event. The inadvertent failure to give notice under this Section
will not preclude any Party from receiving any relief or credit
provided for in this Article.
15.9. REASONABLE ESTIMATE
A party exercising a right of curtailment or discontinuance under this
Article will, within 5 Business Days after the date of receipt of a
request from the other party to do so, deliver to the other party a
notice setting out a reasonable, good faith estimate of the length of
the period of such curtailment or discontinuance (an "Estimate Notice")
and a party that fails to deliver an Estimate Notice as required will
be deemed to have delivered an Estimate Notice containing a reasonable
estimate of 20 Business Days from the last day on which the Estimate
Notice could have been given. A party receiving an Estimate Notice may,
32
from time to time, reasonably request that the other party provide a
revised Estimate Notice.
15.10. FCCL ESTIMATE NOTICE
If TimberWest enters into an agreement pursuant to Subsection 15.5(b)
that has a term that is not longer than the period estimated in the
Estimate Notice, or revised Estimate Notice, in effect at the date of
such agreement delivered by FCCL, such term will be deemed not to
conflict with FCCL's right to resume the purchase of Chips and Pulplogs
under this Agreement regardless of whether the curtailment or
discontinuance ends before the end of such period.
15.11. TIMBERWEST ESTIMATE NOTICE
If a curtailment of discontinuance invoked by TimberWest ends before
the end of the period estimated by TimberWest in an Estimate Notice,
FCCL may, but will not be required to, accept delivery of Chips and
Pulplogs in excess of the volume of Chips and Pulplogs that was
delivered during the curtailment or discontinuance until after the
period estimated by TimberWest and TimberWest may dispose of any Chips
or Pulplogs that FCCL does not purchase hereunder in any manner it sees
fit.
ARTICLE 16.
ARBITRATION
16.1. ARBITRATION
Any dispute between the parties in respect of the determination of the
Xxxxxxxx Lake Chip Price or Coast Chip Price, the determination or
calculation of any price for Pulplogs purchased and sold hereunder, any
credit to volume commitments contemplated by Section 15.7 or any other
matter relating to the terms, conditions or other requirements of any
purchases and sales hereunder will be submitted for determination by
arbitration in accordance with the following:
(a) arbitrations will be carried out by a single arbitrator
agreed to by the parties but if no agreement is reached
within 2 Business Days after either party institutes such
process by notice to the other party:
(i) each party will, within 2 Business Days, select one
arbitrator, and a third arbitrator will promptly be
agreed to by the selected arbitrators and failing
agreement, by a Justice of the Supreme Court of
British Columbia; or
(ii) if either party fails to select an arbitrator, the
arbitrator selected by the other party will act as
the sole arbitrator;
(b) any dispute over the price for particular Pulplogs will be
determined by each party submitting the price that such party
has determined to be accurate and the arbitrators or
arbitrator will select one of such prices and no other;
33
(c) in resolving any dispute, other than a dispute over the price
of particular Pulplogs, the arbitrator or arbitrators shall
not be constrained in the manner contemplated by Subsection
16.1(b); and
(d) the decision of a majority of the arbitrators or the sole
arbitrator, as the case may be, including any decision as to
costs, will be final and binding on the parties, but will not
be a precedent in any subsequent arbitration under this
Agreement.
Except as expressly provided herein, all arbitrations will be conducted
according to the laws governing commercial arbitrations in British
Columbia.
16.2. TIMELY DECISIONS
Any dispute referred to arbitration will be dealt with on an
expeditious basis with both parties using all commercially reasonably
efforts to obtain and implement a timely decision of the arbitrator who
will have the authority to award treble costs of the arbitration
proceedings against any party which does not, in the judgment of the
arbitrator, act in accordance with this Section.
ARTICLE 17.
GENERAL
17.1. MAINTENANCE OF RECORDS
Each party will maintain detailed records of:
(a) all measurements and tests made by it by reference to which,
pursuant to this Agreement, the performance of an obligation
by either party is measured or the extent of an obligation
that either party is to perform is calculated; and
(b) all costs incurred by it for which it is, pursuant to this
Agreement, entitled to be reimbursed in whole or in party by
the other party;
and will make such records available to the other party for inspection
at all reasonable times.
17.2. NOTICES
Any notice, document or communication required or permitted to be given
hereunder shall be in writing and delivered by hand or facsimile
transmission to the party to which it is to be given as follows:
TO FCCL:
Xxxxxxxx Challenge Canada Limited
9th Floor - 000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
34
Attention: Corporate Secretary
Facsimile No.: (000) 000-0000
TO TIMBERWEST:
TimberWest Forest Limited
7th Floor - 000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
Attention: Corporate Secretary
Facsimile No.: (000) 000-0000
or to such other address as either party may in writing advise by
notice given in accordance with this Section. Any notice, document or
communication will be deemed to have been given, if delivered, on the
next Business Day after the day of delivery, and if sent by facsimile
transmission, on the first Business Day after the day of transmittal.
17.3. TIME
Time shall be of the essence of this Agreement.
17.4. FURTHER ASSURANCES
Each of the parties shall execute and deliver all such further
documents and do such further acts and things as may be reasonably
required from time to time to give effect to this Agreement.
17.5. WAIVERS
Failure by either party at any time to require strict performance by
the other of any term or provision hereof shall not be deemed to
constitute a waiver of a breach of such or any other term or provision
hereof nor shall it constitute a waiver of any succeeding breach of
such or any other term or provision hereof.
17.6. ASSIGNMENT BY FCCL
FCCL may assign all or any portion of its interest in this Agreement,
without the prior written consent of TimberWest, in the following
circumstances:
(a) as a result of the granting by FCCL of a security interest
over all or substantially all of its assets; or
(b) to a purchaser of any material interest in a Pulp Mill if the
purchaser enters into an agreement with TimberWest confirming
that the purchaser is bound by this Agreement (with such
changes as may be required to contemplate the addition or
substitution of the purchaser as a party) to the extent of
such assignment and upon
35
any assignment under this Subsection will be released from
its obligations to the extent they relate to the subject
matter of the assignment.
FCCL may not otherwise assign its interest in this Agreement without
the prior consent of TimberWest.
17.7. CONFIDENTIALITY
Neither party will disclose any terms or conditions of this Agreement
to any person who is not a director, officer employee or bona fide
authorized representative of the party without the prior written
consent of the other party except:
(a) if such party determines, acting reasonably, that disclosure
is required by law or during the course of its business; and
(b) if such disclosure is not required by law it is made under
terms that restrict further disclosure to the extent necessary
to protect the interests of the other party.
17.8. ACTION BY FCCL
Any action that is permitted or required to be taken by FCCL under this
Agreement may be taken by Xxxxxxxx Challenge Canada Limited as agent
for and on behalf of FCCL until such time as FCCL advises TimberWest
otherwise and a document executed and delivered by, or notice given by,
Xxxxxxxx Challenge Canada Limited pursuant to this Agreement shall
constitute delivery or notice by FCCL.
17.9. NATURE OF OBLIGATIONS
The obligations and liabilities of 3264891 Canada Limited and 3264912
Canada Limited under this Agreement shall be joint and several.
17.10. RESTATEMENT OF ORIGINAL AGREEMENT
This Agreement amends and restates the Original Agreement in its
entirety as at the date of this Agreement but the provisions of the
Original Agreement will continue in effect with respect to periods
prior to the date of this Agreement.
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17.11. ENUREMENT
This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns.
IN WITNESS WHEREOF the parties have executed this Agreement the day and year
written on the first page hereof.
3264891 CANADA LIMITED
Per: /s/ X. Xxxxxxxx c/s
-----------------------------
Per: /s/ X. Xxxxxxx
-----------------------------
3264912 CANADA LIMITED
Per: /s/ X. Xxxxxxxx c/s
-----------------------------
Per: /s/ X. Xxxxxxx
-----------------------------
TIMBERWEST FOREST LIMITED
Per: /s/ X. Xxxxxxxx c/s
-----------------------------
Per: _____________________________
SCHEDULE A
PART I - CHIP SPECIFICATIONS
A. SPECIFICATIONS (COWICHAN)
1. Chips will be manufactured only from sound, bark-free wastewood such as
logs, log-trim, sawmill wastewood or green veneer of the following
species: Xxxxxxx fir, hemlock, balsam, spruce, pine, red cedar,
cypress, or other species acceptable to FCCL.
2. Chips will be clean, of approximately uniform length and thickness,
clean-cut, and free from objectionable material of any kind that may
adversely affect either the pulp quality or the pulping process and
equipment, including, rocks, sand, silt, coal, coal dust, hog fuel, rot
or bark in excess of the amount permitted, plastic or related
materials, creosote or other treated wood, burned material, soot, char,
dried veneer or glue, or tramp metal, any toxic or hazardous chemical
including polychlorinated biphenyls (PCB's), pentachlorophenols (PCP's)
or any material linked to the formation of any dioxin or furan
compound, or any material that is likely to pose a health or safety
risk.
3. All Chips will be screened before delivery unless specifically agreed
to in writing by the purchaser.
4. All Chips delivered will conform to the following specifications:
(a) Chips will not contain more than 0.5% by green weight of bark
nor .5% by green weight of rot;
(b) the size of the Chips, as established by testing
representative samples in accordance with the Xxxxxxxx
classification method, or by such other method designed to
produce similar results, will conform to the following limits
of size:
Over 1-1/2" - Not more than 1.5% by weight
Retained on 1-1/8" screen
but not exceeding 1-1/2" - Not more than 6% by weight
Retained on 7/8" screen - Not less than 20% by weight
Retained on 5/8" screen - Not less than 30% by weight
Retained on 3/8" screen - Not more than 30% by weight
Retained on 3/16" screen - Not more than 10% by weight
Passing the 3/16" screen _ Not more than 1% by weight
(c) determination of the percentage of bark, rot and Chip size in
any load of Chips will be made on the basis of the green
weight of a representative sample of the load.
2
5. Chipper knives will be set to cut a Chip, from knife cut to knife cut,
measured on the same plane end to end, seven-eights inch (7/8") in
length.
B. SPECIFICATIONS (ELK FALLS)
1. Chips will be produced from sound, bark-free wastewood such as logs,
log-trim, sawmill wastewood or green veneer.
2. Chips will be clean, of approximately uniform length and thickness,
clean-cut, and free from objectionable material of any kind that may
adversely affect either the pulp quality or the pulping process and
equipment, including, rocks, sand, silt, coal, coal dust, hog fuel, rot
or bark in excess of the amount permitted, plastic or related
materials, creosote or other treated wood, burned material, soot, char,
dried veneer or glue, or tramp metal, any toxic or hazardous chemical
including polychlorobiphenyls (PCB's), pentachlorophenols (PCP's) or
any material linked to the formation of any dioxin or furan compound,
or any material that is likely to pose a health or safety risk.
3. All Chips will be screened before delivery unless specifically agreed
to in writing by the Purchaser.
4. Chips will be cut to a nominal length of 19 mm in order to meet the
following standards:
(a) not more than 3% true oversize consisting of Chips exceeding
45 mm in length or an unfractured thickness of 10 mm in
thickness or both ("true overs");
(b) a minimum of 89% of Chips retained on a 7 mm round hole screen
(not including true overs);
(c) a maximum of 7% Chips, pin chips, fines and sawdust passing
through a 7 mm round hole screen and retained on a 3 mm round
hole screen;
(d) a maximum of 0.5% Chips, pin chips, fines and sawdust passing
through a 3 mm round hole screen;
(e) a maximum of 0.5% bark; and
(f) a maximum of 0.5% rot.
Samples taken from any one truck load or railcar of Chips will meet the
foregoing standards.
PART II - PULPLOGS
A. DEFINITIONS
A log:
(a) which is of the hemlock, balsam, fir, spruce, cypress, red
cedar species or other species acceptable to FCCL and has a
length not less than 3.8 metres and a top
38
radius not less than 8 centimetres (subject to changes to
Ministry of Forests utilization standards or the ability of
FCCL to specify a lower length or smaller top radius); and
(b) which has less than 75% lumber recovery and of which 50% or
more of the gross scale is firm wood;
except:
(c) a log that meets the above specifications but which TimberWest
determines, acting reasonably and bona fide in a manner
consistent with the intent of this Agreement, and following
generally accepted industry practices for coastal British
Columbia forestry operations, is appropriate to be processed
as other than a Pulplog and is processed at either:
(i) a TimberWest Facility; or
(ii) some other facility from which the Chips produced are
sold or offered for sale to FCCL under this Agreement
or otherwise at a price which is no higher than the
Coast Chip Price.
The parties agree that from time to time the above definition will be
reviewed and revised to meet generally accepted industry practices for
coastal British Columbia in place at that time.
B. SPECIFICATIONS
1. All Pulplogs to be bucked at both ends and delimbed.
2. Parcels to be sorted by species:
(a) hemlock/balsam which may contain up to 5% spruce;
(b) spruce; or
(c) Xxxxxxx fir; or
(d) cypress; or
(e) red cedar;
(f) interior spruce, pine and subalpine fir;
(g) other species acceptable to FCCL.
3. Pulplogs to be free of shape defects to allow for effective debarking.
4. Hemlock/balsam Pulplogs will be sorted two ways by butt diameter as
specified by FCCL in writing from time to time which specifications may
vary by location.
SCHEDULE B
TIMBERWEST FACILITIES
I. Cowichan facility located at Youbou, British Columbia, which currently
comprises a large log sawmill, a small log sawmill and a planermill.
II. Elk Falls facility located at Xxxxxxxx River, British Columbia, which
currently comprises a small log sawmill, an integrated whole log
chipping facility and a planermill.
SCHEDULE C
TIMBER TENURES
PART I - CROWN FOREST TENURES
I. TREE FARM LICENCES
PROPERTY NO. DESCRIPTION
TFL No. 46 West Coast Tree Farm Licence
TFL No. 47 Xxxxxx Bay Tree Farm Licence
II. FOREST LICENCES
PROPERTY NO. DESCRIPTION
10-960 Forest Licence A29159
46-014 Forest Licence A16870
46-009 Forest Licence A20913
III. TIMBER LICENCES
PROPERTY NO. DESCRIPTION
02-995 Timber Licence T0012
02-996 Timber Licence T0018
02-997 Timber Licence T0020
10-957 Timber Licence T0769
10-958 Timber Licence T0883
36-889 Timber Licence T0153
39-381 Timber Licence T0414
47-895 Timber Licence T0911
47-896 Timber Licence T0910
47-897 Timber Licence T0226
47-898 Timber Licence T0257
47-899 Timber Licence T0249
47-900 Timber Licence T0238
47-901 Timber Licence T0213
47-902 Timber Licence T0205
47-903 Timber Licence T0204
47-904 Timber Licence T0196
47-905 Timber Licence T0171
47-906 Timber Licence T0158
47-907 Timber Licence T0155
47-908 Timber Licence T0142
47-909 Timber Licence T0137
47-910 Timber Licence T0129
47-911 Timber Licence T0113
47-912 Timber Licence T0091
47-913 Timber Licence T0086
47-914 Timber Licence T0077
47-915 Timber Licence T0063
47-916 Timber Licence T0058
47-917 Timber Licence T0042
47-918 Timber Licence T0034
47-919 Timber Licence T0014
Timber Licence T0153
10-001 Xxxxxx Licence T0080
46-001 Timber Licence T0024
46-002 Timber Licence T0039
46-003 Timber Licence T0184
46-004 Timber Licence T0194
46-005 Timber Licence T0206
46-006 Timber Licence T0207
46-007 Timber Licence T0228
46-008 Timber Licence T0245
46-009 Timber Licence T0250
46-010 Timber Licence T0253
46-011 Timber Licence T0264
46-012 Timber Licence T0273
46-013 Timber Licence T0279*1
49-001 Timber Licence T0008
49-002 Timber Licence T0017
49-003 Timber Licence T0029
49-004 Timber Licence T0038
49-005 Timber Licence T0049
49-006 Timber Licence T0083
49-007 Timber Licence T0085
49-008 Timber Licence T0118
49-093 Timber Licence T0532
NOTES:
*1. Subject of Cutting Rights Agreement with Xxxxx Forest Products Ltd.
PART II - TIMBERLANDS
Fee simple timberlands located outside tree farm licences and within Managed
Forest Unit Nos. 65 and 68 as at the date of this Agreement which are
beneficially owned by TimberWest.
SCHEDULE D
MINIMUM VOLUME CALCULATIONS
PART I - COWICHAN FACILITY
I. MINIMUM ANNUAL VOLUME ("MAV"):
MAV = Cr * P * (1.0 - W) * (0.50 * AAC)
For 1994,
MAV = 0.356 * 0.587 * (1.0 - 0.046) * (0.50 * 558,860)
= 55,707 cubic meters
II. MINIMUM FIVE YEAR VOLUME ("MFV") (EXAMPLE):
If Hv LESS THAN 0.9 * TAAC Then X = 0.9 * TAAC
If Hv GREATER THAN TAAC Then X = TAAC
Otherwise: X = Hv
For example, if Hv = TAAC = 2,794,300
MFV = Cr * P * (1.0 - W) * Hv
= 0.356 * 0.587 * (1.0 - 0.046) * (2,794,300)
= 557,070 cubic meters
NOTE: If the Cowichan Facility is replaced as a Minimum Volume Facility
with a facility adjacent to tidewater, 1.0 will be substituted for
0.9 in this calculation effective upon such replacement.
III. DESCRIPTION OF VARIABLES:
AAC: Annual allowable cut in effect for TFL 46 for the applicable
year. For 1994, AAC=558,860 cubic meters.
TAAC: Annual allowable cut for TFL 46 for the applicable Five Year
Period.
W: Historic levels of waste charged against the AAC and expressed
as a proportion of (harvest plus waste). For Five Year Period
commencing January 1, 1994, W=0.046.
P: Proportion of the total harvest of TFL 46 that is comprised of
fir, hemlock and balsam sawlogs. For Five Year Period
commencing January 1, 1994, P=0.587
Cr: Chip recovery factor for the Cowichan sawmill. For Five Year
Period commencing January 1, 1994, Cr=0.356 m(3) chips/m(3)
log.
Hv: Actual harvest volume (including waste) from TFL 46 for the
applicable Five Year Period.
Variables W, P and Cr to be adjusted for the Five Year Period
commencing January 1, 1999 and each subsequent Five Year Period
thereafter to reflect the immediately preceding Five Year Period.
PART II - ELK FALLS FACILITY
I. MINIMUM ANNUAL VOLUME ("MAV"):
MAV = 240 * 2 * Cr * Lc * 0.5
For 1994,
MAV = 240 * 2 * 0.46 * 1,100 * 0.5
= 121,440 cubic meters
II. MINIMUM FIVE YEAR VOLUME ("MFV") (EXAMPLE ONLY):
MFV = lesser of MFV1 or MFV2, calculated as follows:
MFV1 = 5 * (240 * 2 * Cr * Lc)
= 5 * (240 * 2 * 0.46 * 1,100)
= 1,214,400 cubic meters
or:
MFV2 = Cr * (P * (1.0 - W) * TAAC + R * P1 * TVAC)
= 0.46 * (0.305 * (1.0 - 0.042) * 4,094,660 + 0.073 *
0.187 * (5 * 21,172,000)
= 1,215,096
III. DESCRIPTION OF VARIABLES:
AAC: Annual allowable cut for the applicable year for TFL 47 and
the Coastal Forest Licences. For 1994, AAC=818,932 cubic
meters.
TAAC: Annual allowable cut for TFL 47 and the Coastal Forest
Licences for the applicable Five Year Period.
VAC: Annual allowable cut for the Vancouver Forest Region for the
applicable year. Assumed to be 21,172,000 m(3) for 1994.
TVAC: Annual allowable cut for the Vancouver Forest Region for the
applicable Five Year Period.
3
W: Historic levels of waste charged against the AAC and expressed
as a proportion of (harvest plus waste). For Five Year Period
commencing January 1, 1994, W=0.042.
P: Proportion of the total harvest of TFL 47 and the Coastal
Forest Licences that is comprised of fir, hemlock and balsam J
grade logs. For Five Year Period commencing January 1, 1994,
P=0.305.
P1: Proportion of the Vancouver Log Market volume that is
comprised of fir, hemlock and balsam J grade logs. For Five
Year Period commencing January 1, 1994, P1=0.187.
R: Constant representing the purchased sawlogs for Elk Falls
sawmill. R=0.073.
Cr: Chip recovery factor for the Elk Falls sawmill. For Five Year
Period commencing January 1, 1994, Cr=0.46 m(3) chips/m(3)
log.
Lc: Average log consumption rate per 8 hour shift for the Elk
Falls sawmill. For Five Year Period commencing January 1,
1994, Lc=1,100 m(3).
Timber Supply Areas referred to above are the Arrowsmith, Fraser,
Kingcome, Midcoast, North Coast, Queen Charlotte, Soo, Strathcona and
Sunshine Timber Supply Areas and Coastal Forest Licences are those
forest licences in the Timber Supply Areas which are included in the
Crown Timber Tenures. Variables W, P, P1, Cr and Lc to be adjusted for
the Five Year Period commencing January 1, 1999 and each Five Year
Period thereafter to reflect the immediately preceding Five Year
Period.
PART III
1993 AAC (SELECTED FOREST TENURES)
LICENCE TIMBER SUPPLY AREA AAC (M(3))
TFL 47 711,000
TFL 46 558,860
FL A16870 Queen Charlotte 24,292
FL A20913 Strathcona 35,720
FL A29159 Strathcona 47,920
CHIP AND PULPLOG SUPPLY AGREEMENT AMENDMENT
AMONG
XXXXXXXX CHALLENGE CANADA PULP OPERATIONS LIMITED
AND
TFL FOREST LTD.
TIMBERWEST FOREST COMPANY
JANUARY 1, 1999
CHIP AND PULPLOG SUPPLY AGREEMENT AMENDMENT
THIS AGREEMENT made as of the 1st day of January, 1999.
BETWEEN:
XXXXXXXX CHALLENGE CANADA PULP OPERATIONS LIMITED, a Canadian
corporation with an office at 19th Floor, 000 Xxxx Xxxxxxx
Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx
("FCCL")
AND:
TFL FOREST LTD., a British Columbia company and TIMBERWEST
FOREST COMPANY, a partnership of TIMBERWEST FOREST CORP., TFL
FOREST LTD. and PFP FOREST LTD., each with an office at 0000 -
0000 Xxxx Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx
(collectively "TimberWest")
WHEREAS:
A. By an agreement (the "Existing Agreement") entitled "Amended and
Restated Chip and Pulplog Supply Agreement" dated the 23rd day of June,
1997 between TimberWest Forest Limited (now TFL Forest Ltd.) and
3264891 Canada Limited and 3264912 Canada Limited (both of which
subsequently amalgamated with 3264939 Canada Limited to form 3418146
Canada Limited which is now called Xxxxxxxx Challenge Canada Pulp
Operations Limited), TimberWest Forest Limited agreed to sell, and
3264891 Canada Limited and 3264912 Canada Limited agreed to purchase,
wood chips and pulplogs produced, directly or indirectly, from the
coastal facilities and related woodlands operations of TimberWest
Forest Limited;
B. Subsequent to January 1, 1998 certain of the obligations of TimberWest
Forest Limited under the Existing Agreement were assumed by TimberWest
Forest Company, a general partnership consisting of TimberWest Forest
Corp. as managing partner and TFL Forest Ltd. (formerly named
TimberWest Forest Limited) and PFP Forest Ltd. as the other partners;
C. The parties have agreed to amend the Existing Agreement and reflect the
reorganization referred to in Recital B as set out in this Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the premises
and the mutual covenants hereafter set out, the parties agree as follows:
2
DEFINITIONS
In this Agreement:
(hh) terms which are defined in the Existing Agreement shall have
the respective meanings therein specified unless the context
of this Agreement otherwise requires or unless such terms are
otherwise defined herein;
(ii) "Chip and Pulplog Supply Agreement" means the Existing
Agreement as amended by this Agreement.
MODIFICATION TO ORIGINAL AGREEMENT
Effective January 1, 1998, the Existing Agreement is hereby amended as follows:
(jj) the Five Year Period beginning on January 1, 1994 shall be
shortened to a four year period ending on December 31, 1997
and thereafter a Five Year Period shall be the period
beginning on January 1, 1998 and ending on December 31, 2002
and each succeeding five year period thereafter;
(kk) by deleting Schedule C thereto and substituting therefor the
Schedule C attached to this Agreement; and
(ll) by deleting Schedule D thereto and substituting therefor the
Schedule D attached to this Agreement.
ADDITION OF TIMBERWEST FOREST COMPANY
The parties agree that:
(mm) TimberWest Forest Company will hereby become a party to the
Existing Agreement, as a joint and several obligant with TFL
Forest Ltd.;
(nn) the term "TimberWest" in the Chip and Pulplog Supply Agreement
will hereafter mean TFL Forest Ltd. and TimberWest Forest
Company, collectively; and
(oo) the obligations and liabilities of TFL Forest Ltd. and each of
the partners of TimberWest Forest Company under the Chip and
Pulplog Supply Agreement are joint and several.
TimberWest Forest Corp., TFL Forest Ltd. and PFP Forest Ltd. confirm that
TimberWest Forest Corp. as managing partner of TimberWest Forest
Company, has full power and authority to carry out the obligations, and
exercise the rights, of TimberWest Forest Company under the Chip and
Pulplog Supply Agreement and to execute and deliver agreements, notices
or other documents on behalf of TimberWest Forest Company.
3
TimberWest's address for notices, documents or other communications under
Section 11.2 of the Chip and Pulplog Supply Agreement is currently as
follows:
TimberWest Forest Corp.
0000 - 0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
Attention: Corporate Secretary
Xxxxxxxxx Xx.: (000) 000-0000
GENERAL
This Agreement forms part of and is to be read together with the Existing
Agreement.
Except as expressly set out in this Agreement, the Existing Agreement remains in
full force and effect, unamended.
IN WITNESS WHEREOF the parties have executed this Agreement.
XXXXXXXX CHALLENGE CANADA PULP OPERATIONS LIMITED
Per: /s/ X. Xxxxxxxx
----------------------------------
Per: /s/ X. Xxxxxxxx
----------------------------------
TIMBERWEST FOREST CORP.
Per: /s/ B. Park
----------------------------------
Per: /s/ X. Xxxxxxxx
----------------------------------
TFL FOREST LTD.
Per: /s/ B. Park
----------------------------------
Per: /S/ X. Xxxxxxxx
----------------------------------
PFP FOREST LTD.
Per: /s/ B. Park
----------------------------------
Per: /s/ X. Xxxxxxxx
----------------------------------
SCHEDULE C
TIMBER TENURES
PART I - CROWN FOREST TENURES
I. TREE FARM LICENCES
PROPERTY NO. DESCRIPTION
TFL No. 46 West Coast Tree Farm Licence
TFL No. 47 Xxxxxx Bay Tree Farm Licence
II. FOREST LICENCES
PROPERTY NO. DESCRIPTION
10-960 Forest Licence A29159
46-009 Forest Licence A20913
III. TIMBER LICENCES
PROPERTY NO. DESCRIPTION
02-995 Timber Licence T0012
02-996 Timber Licence T0018
02-997 Timber Licence T0020
10-957 Timber Licence T0769
10-958 Timber Licence T0883
36-889 Timber Licence T0153
39-381 Timber Licence T0414
47-895 Timber Licence T0911
47-896 Timber Licence T0910
47-897 Timber Licence T0226
47-898 Timber Licence T0257
47-899 Timber Licence T0249
47-900 Timber Licence T0238
47-901 Timber Licence T0213
47-902 Timber Licence T0205
47-903 Timber Licence T0204
47-904 Timber Licence T0196
47-905 Timber Licence T0171
47-906 Timber Licence T0158
47-907 Timber Licence T0155
47-908 Timber Licence T0142
47-909 Timber Licence T0137
47-910 Timber Licence T0129
47-911 Timber Licence T0113
43
47-912 Timber Licence T0091
47-913 Timber Licence T0086
47-914 Timber Licence T0077
47-915 Timber Licence T0063
47-916 Timber Licence T0058
47-917 Timber Licence T0042
47-918 Timber Licence T0034
47-919 Timber Licence T0014
Timber Licence T0153
10-001 Timber Licence T0080
46-001 Xxxxxx Licence T0024
46-002 Timber Licence T0039
46-004 Timber Licence T0194
46-005 Timber Licence T0206
46-007 Timber Licence T0228
46-008 Timber Licence T0245
46-009 Timber Licence T0250
46-011 Timber Licence T0264
46-012 Timber Licence T0273
46-013 Timber Licence T0279*1
49-001 Timber Licence T0008
49-002 Timber Licence T0017
49-003 Timber Licence T0029
49-004 Timber Licence T0038
49-005 Timber Licence T0049
49-006 Timber Licence T0083
49-007 Timber Licence T0085
49-008 Timber Licence T0118
49-093 Timber Licence T0532
NOTES:
*1. Subject of Cutting Rights Agreement with Xxxxx Forest Products Ltd.
PART II - TIMBERLANDS
Fee simple timberlands located outside tree farm licences including those which,
as at the date of this Agreement, are owned beneficially by TimberWest Forest
Company or separately by one or more of TimberWest Forest Corp., TFL Forest Ltd.
or PFP Forest Ltd.
SCHEDULE D
MINIMUM VOLUME CALCULATIONS
PART I - COWICHAN FACILITY
I. MINIMUM ANNUAL VOLUME ("MAV"):
MAV = Cr * P * (1.0 - W) * 0.50 * (AAC + R)
For 1998,
MAV = 0.312 * 0.650 * (1.0 - 0.093) * 0.50 * (462,544 + 52,260)
= 47,346 cubic meters
II. MINIMUM FIVE YEAR VOLUME ("MFV") (EXAMPLE):
If Hv < 0.9 * TAAC Then X = 0.9 * TAAC
If Hv > TAAC Then X = TAAC
Otherwise: X = Hv
For example, if Hv = TAAC = 2,794,300
MFV = Cr * P * (1.0 - W) * (Hv + 5R)
= 0.312 * 0.650 * (1.0 - 0.093) * (2,574,020)
= 473,464 cubic meters
NOTE: If the Cowichan Facility is replaced as a Minimum Volume Facility with
a facility adjacent to tidewater, 1.0 will be substituted for 0.9 in this
calculation effective upon such replacement.
III. DESCRIPTION OF VARIABLES:
AAC: Annual allowable cut in effect for TFL 46 for the applicable
year. For 1998, AAC=462,544 cubic meters.
TAAC: Annual allowable cut for TFL 46 for the applicable Five Year
Period.
W: Historic levels of waste charged against the AAC and expressed
as a proportion of (harvest plus waste). For Five Year Period
commencing January 1, 1998, W=0.093.
P: Proportion of the total harvest of TFL 46 that is comprised of
fir, hemlock and balsam sawlogs. For Five Year Period
commencing January 1, 1998, P=0.650
Cr: Chip recovery factor for the Cowichan sawmill. For Five Year
Period commencing January 1, 1998, Cr=0.312 m(3) chips/m(3)
log.
2
Hv: Actual harvest volume (including waste) from TFL 46 for the
applicable Five Year Period.
R: Constant representing non-TFL sawlogs after removal of private
land from TFL 46.
Variables W, P and Cr to be adjusted for the Five Year Period
commencing January 1, 2003 and each subsequent Five Year Period
thereafter to reflect the immediately preceding Five Year Period.
PART II - ELK FALLS FACILITY
I. MINIMUM ANNUAL VOLUME ("MAV"):
MAV = 225 * 2 * Cr * Lc * 0.5
For 1998,
MAV = 225 * 2 * 0.315 * 1,050 * 0.5
= 74,419 cubic meters
II. MINIMUM FIVE YEAR VOLUME ("MFV") (EXAMPLE ONLY):
MFV = 5 * (225 * 2 * Cr * Lc)
= 5 * (225 * 2 * 0.315 * 1,050)
= 744,190 cubic meters
III. DESCRIPTION OF VARIABLES:
Cr: Chip recovery factor for the Elk Falls sawmill. For Five Year
Period commencing January 1, 1998, Cr=0.315 m(3) chips/m(3)
log.
Lc: Average log consumption rate per 8 hour shift for the Elk
Falls sawmill. For Five Year Period commencing January 1,
1998, Lc=1,050 m(3).
Variables CR and Lc are in effect for the Five Year Period commencing
January 1, 1998 and are to be adjusted for the Five Year Period
commencing January 1, 2003 and each Five Year Period thereafter to
reflect the immediately preceding Five Year Period.
PART III
1998 AAC (SELECTED FOREST TENURES)
LICENCE TIMBER SUPPLY AREA AAC (M(3))
TFL 47 599,888(1)
TFL 46 462,544(2)
FL A20913 Strathcona 28,380
FL A29159 Strathcona 42,904
3
NOTE:
(1) This AAC is calculated as if the sale of the Queen Charlotte
Island portion of TFL 47 and FL 16870 occurred on or before
January 1, 1998. No adjustment to be made to this volume when
sale occurs.
(2) TFL 46 AAC reduction based on the removal of 7,500 hectares.
