Exhibit 10.7
WOOD SUPPLY AGREEMENT
THIS AGREEMENT dated as of the 1st day of December, 1997, between
BEAR ISLAND TIMBERLANDS COMPANY, L.L.C., a Virginia limited liability
company (formerly, Bear Island Timberlands Company, L.P.), ("Seller") and
BEAR ISLAND PAPER COMPANY, L.L.C., a Virginia limited liability company
(formerly, Bear Island Paper Company, L.P.), ("Buyer").
A. Buyer owns and operates a paper manufacturing mill in Hanover
County, Virginia, and requires for its manufacturing operations pine
pulpwood, in the forms of either roundwood or chips, in quantities
exceeding those which can be produced from Buyer's timberlands.
B. Seller now owns approximately 130,000 acres of pine timberlands.
C. Buyer also owns timberlands from which it supplies itself with
pine pulpwood, but Buyer requires pulpwood in addition to that which it can
obtain from its own land.
D. Buyer desires to purchase from Seller, and Seller is willing to
sell to Buyer, annually, 40,000 cord equivalents of wood fiber ("Fiber")
either in form of pine roundwood or pine chips, in each case satisfying
Buyer's specifications, the current versions of which are attached hereto
as Exhibits A and B.
IN CONSIDERATION OF the premises recited above and other good and
valuable consideration, receipt of which is hereby acknowledged, the
parties agree as follows:
1. Sale and Purchase of Fiber. Seller agrees to sell and Buyer agrees
to purchase during each calendar year of the term of this Agreement
(prorated to one-twelfth of the annual amount for the month of December
1997) 40,000 cords of Fiber upon the terms and conditions set forth herein.
The term "Fiber" shall mean either (i) pine logs or roundwood ("Roundwood")
satisfying the Pulpwood Specifications outlined in Exhibit A attached
hereto and made a part hereof or (ii) pine chips ("Chips") satisfying the
Chip Specifications outlined in Exhibit B attached hereto and made a part
hereof. Buyer shall have the absolute right from time to time, and upon
reasonable prior notice to Seller, to change the Specifications contained
in Exhibit A and Exhibit B.
2. Term. The parties agree that the term of this Agreement shall be
for ten years and one month from December 1, 1997.
3. Delivery. Seller agrees to deliver all shipments of Fiber to Buyer
at Buyer's plant located in Hanover County, Virginia, or at such remote
yards as Buyer shall designate to Seller. In addition, Seller agrees to
deliver the Fiber in a manner compatible with Buyer's unloading and
handling equipment. Buyer agrees to use all reasonable manner and means to
expeditiously unload Fiber delivered by Seller. Title to the Fiber shall
belong to Seller and risk of loss shall be upon Seller until delivery to
Buyer. Buyer shall keep and maintain an accurate record of the type and
quantity of all deliveries by Seller made pursuant to this Agreement and
such records shall be subject to reasonable inspection by Seller or its
agents. Upon the request of Seller, Buyer agrees to furnish weight tickets
evidencing the weight of any deliveries made under this Agreement. At the
end of each Pricing Period (defined below) Buyer will give to Seller a
tentative delivery schedule for the next four months which is compatable
with the Buyer's needs and the requirements of this Agreement. Buyer may
require Seller to cease deliveries for reasonable periods to accommodate
Buyer's business needs and schedule.
4. Postponement of Obligations. Seller's obligations to Buyer with
respect to deliveries of Fiber for any period during the term of this
Agreement and within any such period shall be postponed to the extent
reasonably required by adverse logging conditions within Seller's scheduled
procurement areas.
5. Inspection. All deliveries of Fiber shall be subject to inspection
by Buyer or its authorized representatives.
6. Price. Buyer agrees to pay Seller the Current Market Price for the
Wood Fiber sold under this Agreement, priced separately according to
whether it is in the form of Roundwood or Chips, and as weighed at the
scales of Buyer or its designated representative at the place of delivery.
"Current Market Price" for each period of two months (a "Pricing Period")
means, for the purposes of this Agreement, that price per ton which equals
the average price per ton of Roundwood or Chips, as the case may be, paid
by Buyer for Fiber purchased by Buyer from sources other than Seller and
which are not affiliates of either Buyer or Seller during the Pricing
Period, plus Buyer's then current normal hauling rate allowance for each
ton of Fiber delivered, determined by the distance hauled. The parties
agree to accept the weights measured by the scales of Buyer or its
designated representative as conclusive.
7. Payment. All payments due to Seller from Buyer under this
Agreement for deliveries of Fiber to Buyer within a period (the "delivery
period") commencing on Thursday at 11 p.m. local time and ending on the
next following Thursday at 10:59 p.m. local time shall be at a good faith
estimate of the rate for the current Pricing Period and shall be made on
the Monday following such delivery period and shall be accompanied by
copies of scale tickets or load tally sheets to support each such payment.
Buyer may, but shall not be required to, deduct from payments otherwise due
to Seller under this Agreement any amounts paid, at the request of Seller,
directly to any third party from whom Seller has procured Fiber for
delivery to Buyer and for which deductions Buyer accounts to Seller with
its payment to Seller. Within a reasonable time after the end of each
Pricing Period, Buyer and Seller shall determine the Current Market Price
for the Pricing Period and shall make, one to the other, such payment as is
required to correct any aggregate over-or under-payment for Fiber
delivered by Seller to Buyer during such Pricing Period. Upon Seller's
reasonable request, Buyer shall allow Seller to inspect Buyer's Fiber
procurement records at any reasonable time during business hours.
8. Measurements. For purposes of computing volumes and weights of
Fiber for purposes of this Agreement, the following conversion table shall
apply:
One (1) Cord:
Roundwood 128 cubic feet 5150 pounds
Chips 4400 pounds
9. Force Majeure. Neither of the parties hereto shall be liable to
the other for any nonperformance under this Agreement caused by strike,
walk-out, riot, civil war, acts of public enemy and/or acts of God which
prevent the performance of Buyer and Seller under this Agreement.
10. Notices. All notices required to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if
delivered personally or mailed by registered or certified mail, return
receipt requested, postage prepaid, to the parties at the following
addresses:
If to Seller
Bear Island Timberlands Company, L.L.C.
P. O. Xxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. August
If to Buyer
Bear Island Paper Company, L.L.C.
P. O. Xxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxx
11. Parties in Interest. This Agreement shall be binding upon, inure
to the benefit of, and be enforceable by, the parties hereto and their
respective successors and assigns. This Agreement shall not be assigned
without the prior written consent of the parties.
12. Entire Agreement; Amendments. This Agreement contains the entire
understanding of the parties with respect to the subject matter herein.
This Agreement may be amended only by a written instrument duly executed by
the parties.
13. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the Commonwealth of Virginia.
14. Waivers. The waiver by a party of a breach of this Agreement
shall not operate or be construed as a waiver of any subsequent breach.
15. Captions. The captions or titles to individual paragraphs of this
Agreement are intended only to facilitate reference and shall not
contribute to the interpretation of the provisions of this Agreement.
IN WITNESS WHEREOF the parties have executed this Agreement as of the
date first above written.
SELLER
BEAR ISLAND TIMBERLANDS COMPANY, L.L.C.,
a Virginia limited liability company
By: /s/ Xxxxxx X. Xxxxxxxx
_________________________________
Vice President
BUYER
BEAR ISLAND PAPER COMPANY, L.L.C.,
a Virginia limited liability company
By: /s/ Xxxxxx X. Xxxxxxxx
__________________________________
Vice President
EXHIBIT A
BEAR ISLAND PAPER COMPANY
PULPWOOD SPECIFICATIONS
All pulpwood must be prepared and delivered in accordance with the
following specifications:
1. SPECIES: Southern Yellow Pines (i.e. Lobiolly, Short
Leaf, Virginia)
2. LENGTH: Pulpwood is acceptable in three length categories:
A. Short Wood: Wood from 4.0 to 9.0 feet long. Wood must not
vary in length by more than 2.0 (two) feet in any bundle
or rack.
B. Bundle Bucker Wood: Wood from 10.0 to 18.0 feet long.
Wood must not vary in length by more than 2.0 (two) feet
in any bundle or rack and must be delivered on equipment
which allows cutting of the wood with the Bundle Bucker
saw.
C. Tree Length: Wood from 20.0 feet up to the maximum
allowable legal length.
3. DIAMETER: The minimum acceptable diameter is 3.0 inches. The
maximum acceptable diameter is 20.0 inches anywhere along the
stick of wood (including knots, limbs, xxxxx, sweep, etc.)
4. PREPARATION: All limbs should be cut as flush to the stem as
possible. Forks should be cut out.
5. UNACCEPTABLE WOOD: Pulpwood sticks exhibiting
evidence of the following are unacceptable and will be
culled.
A. Burned or charred
B. Metal
C. Tar or Asphalt
D. Excessive mud, sand or grit
E. Blue stain if penetration is greater than 1/3 of the
diameter on sticks up to 6 inches in diameter. For sticks
greater than 6 inches if penetration is greater than 2
inches.
F. Rotten Wood (i.e. soggy, crumbly wood)
6. QUALITY INSPECTION: Bear Island Paper Company
reserves the right to dispose of any wood not meeting
these specifications and will not be held accountable
for any sticks determined to be unacceptable. Truck
loads containing in excess of 1/2 cord of cull wood
are subject to rejection. All round-tip freight,
demurrage and other charges incurred by rejected
shipments shall be the responsibility of the supplier.
7. All loads must be delivered on equipment and loaded in such a
manner as to be capable of being unloaded with the equipment
available on Bear Island's xxxxxxxx.
EXHIBIT B
BEAR ISLAND PAPER COMPANY
CHIP SPECIFICATIONS
Size: Chipper to be set to cut 1" chips that, when
classified on a Xxxxxxxx Classifier, have the
following percentages retained on the indicated
screens:
Percent Screen Size
55 to 65 5/8 inch and larger
Up to Maximum of 8 3/16 and under
Bark Content: To be maintained at or below 2% by weight.
Blue Stain To be on less than 10% of chips.
