Sample Business Contracts

Strategic Alliance Agreement - Pulp & Paper of America LLC and Crown Paper Co.

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                          STRATEGIC ALLIANCE AGREEMENT

     This Agreement dated March 24, 1999, by and between Pulp & Paper of America
LLC, a New York limited liability company, or its designee ("PPA"), having its
principal place of business at 135 Engineers Road, Hauppauge, New York, and
Crown Paper Co., a Virginia corporation ("Crown"), having its principal place of
business at 300 Lakeside Drive, Oakland, California.

                                 R E C I T A L S

     The parties hereto are parties to that certain Asset Purchase Agreement,
dated as of even date herewith, by and among Crown, Crown Vantage New Hampshire
Electric, Inc. and Berlin Mills Railway, Inc., as Seller and American Tissue
Holdings Inc. and PPA, as Buyer (the "Asset Purchase Agreement") pursuant to
which Buyer will purchase from Seller and subsequently will own and operate a
pulp and paper mill located in Berlin and Gorham, New Hampshire ("B/G").

     Crown has historically manufactured certain Publishing Grades (as defined
in Section 1 below) of papers at B/G (as defined in Section 1 below) and at its
paper mills located in Massachusetts, Michigan and New Jersey.

     Following the closing of the sale and purchase transactions under the Asset
Purchase Agreement (the "Closing"), Crown and PPA desire to create a strategic
alliance whereby PPA will continue to manufacture those Publishing Grades that
were manufactured by B/G prior to the Closing (the "B/G Publishing Grades") for
a specified period to continue Crown's existing Publishing Grades business and
permit Crown's other mills to commence the manufacture of the B/G Publishing
Grades in an orderly manner.

     PPA is willing to continue to manufacture the B/G Publishing Grades at B/G
upon the terms and subject to the conditions hereinafter set forth.

     Accordingly, in consideration of the foregoing recitals and the mutual
covenants set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, PPA and Crown agree as

     1. Definitions. The following terms, as used herein, have the following

     "B/G" means the pulp and paper mills located in Berlin and Gorham, New
Hampshire, respectively, currently owned by Crown and proposed to be sold to PPA
pursuant to the Asset Purchase Agreement.


     "B/G Publishing Grades" means the Publishing Grades manufactured at B/G
prior to the Closing.

     "Confidential Information" has the meaning set forth in Section 12 hereof.

     "Closing" means the closing of the transactions contemplated by the Asset
Purchase Agreement.

     "Crown" means Crown Paper Co.

     "Crown Orders" has the meaning set forth in Section 5(b).

     "Crown Trademarks" means Crown's trademarks, tradenames, logos and trade
styles used in the sale and marketing of B/G Publishing Grades.

     "Marketing Period" means the three year period ending on the third
anniversary of the Closing.

     "PPA" means Pulp & Paper of America LLC, or its designee.

     "Publishing Grades" means all text and cover grade papers and all
lightweight opaque papers, whether or not such papers carry or are sold under
one of Crown's registered trademarks, listed on Schedule A annexed hereto and
made a part hereof.

     "Services" means the services to be rendered by Crown to PPA, as set forth
in Section 2(b) of this Agreement.

     2. Obligations of Crown.

     (a) Subject to Section 8(b), for each 12 month period during the Marketing
Period, Crown will submit purchase orders to PPA for a minimum of 20,000 tons of
B/G Publishing Grades at the applicable market prices determined pursuant to
Section 5(a) hereof, and to the extent PPA accepts such orders, PPA will sell to
Crown and Crown will purchase from PPA a minimum of 20,000 tons of B/G
Publishing Grades during the applicable 12-month period.

     (b) During the Marketing Period, Crown will use its best efforts to provide
the following marketing and sales services to PPA ("Services"), at Crown's sole
cost and expense (including, without limitation, the sales and marketing
expenses), including, without limitation:

          (i) maintain and upgrade sales to Crown customers of the historic mix
     of B/G Publishing Grades;

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          (ii) advise PPA regarding periodic B/G Publishing Grades production
     decisions regarding tonnage, distribution by grade and by type within any
     grade, customer base, freight costs, and other strategic considerations;

          (iii) coordinate customer shipments and assist PPA and customers with
     pick up appointments, freight rates, and delivery times required consistent
     with customer service responsibilities;

          (iv) advise PPA of market developments, competitive activity, and
     customer reports, including customer observations and feedback related to
     B/G Publishing Grades quality and service;

          (v) service all Crown customers consistent with normal industry
     practices, including, without limitation, market development, complaint
     investigation and resolution, and quality issues.

          (vi) develop and implement a communication strategy for announcing new
     B/G Publishing Grades focus and marketing arrangements;

          (vii) establish and monitor market trials of B/G Publishing Grades,
     including provision of feedback to PPA and recommendations to PPA for
     further products development by PPA, if advisable;

          (viii) adjust sales and marketing efforts as reasonably requested by
     PPA to align with future B/G operating capacity fluctuations effected by
     PPA consistent with the terms and conditions of this Agreement;

          (ix) maintain personnel and expenditures sufficient to fulfill Crown's
     obligations under this Agreement;

          (x) provide PPA quarterly with B/G Publishing Grades anticipated sales
     and consult with PPA regarding same;

          (xi) maintain communications with PPA to assist PPA in coordinating
     its manufacturing efforts with Crown's selling efforts with respect to B/G
     Publishing Grades;

          (xii) forward immediately to PPA all purchase orders for B/G
     Publishing Grades provided such orders shall be subject to review and
     approval by PPA;

          (xiii) maintain complete and accurate books and records concerning all
     orders for B/G Publishing Grades, as well as order tracking, sales and
     shipments of B/G Publishing Grades and provide PPA with monthly reports
     with respect thereto and permit PPA and its auditors to review such
     records, from time to time;

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          (xiv) advise PPA with respect to rejection or quality problems by
     Crown customers as to B/G Publishing Grades to maintain strong relations
     with such customers and resolve problems efficiently and with the least
     possible cost to all parties; and

          (xv) bear and maintain at levels sufficient to fulfill Crown's
     obligations hereunder all marketing, promotional and selling expenses
     relating to sales of B/G Publishing Grades to Crown customers.

     (c) At the end of the Marketing Period, PPA will sell to Crown and Crown
will purchase from PPA at the then current market prices all B/G Publishing
Grades which (i) were manufactured by PPA during the Marketing Period, (ii) are
held in inventory by PPA at the end of the Marketing Period, and (iii) are
identified by, or contain, Crown Trademarks (as defined in Section 3 below). The
parties will cooperate and plan production and inventory levels in order to
minimize the quantity of papers subject to the foregoing sale and purchase

     3. Tradenames; Marks.

     Crown grants to PPA, only during the Marketing Period, a limited,
non--exclusive, royalty-free license to use Crown's trademarks, tradenames,
logos and trade styles used in the sale and marketing of B/G Publishing Grades
(collectively, "Crown Trademarks"), which license shall be used only in
furtherance of the goals and objectives of this Agreement.

     4. Obligations of PPA.

     (a) PPA agrees to use its best efforts to manufacture B/G Publishing
Grades; to use its best efforts to have, as and when required, sufficient
quality and quantities of B/G Publishing Grades to support Crown's purchase
requirements; and to arrange for delivery of the B/G Publishing Grades as
provided in each Crown Order (as defined below) accepted by PPA. PPA shall be
responsible for the payment of manufacturing and warehousing expenses,
including, but not limited to, the acquisition of all raw materials, the
provision of labor by PPA's employees, and the maintenance and repair of PPA's
plant, machinery and related equipment.

     (b) PPA will use reasonable best efforts to support Crown's efforts to
market B/G Publishing Grades to its customers.

     (c) To the extent Crown incurs any costs in warehousing B/G Publishing
Grades, PPA shall pay its allocable portion of such warehousing expenses with
respect to such B/G Publishing Grades, to be determined on a tonnage basis. PPA
will use commercially reasonable efforts to pay such warehousing expenses within
ten (10) days of the date of invoice, but shall in any event pay such
warehousing expenses within fifteen (15) days of the date of invoice. Freight
charges to ship B/G Publishing Grades to warehouses shall be for the account of

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     5. Pricing and Order Processing.

     (a) PPA and Crown will determine the applicable prices of each of the B/G
Publishing Grades from time-to-time, provided that in the event of any dispute
between PPA and Crown respecting the price of any B/G Publishing Grade or type
within such Grade, the determination of PPA shall prevail. Each order received
by PPA from Crown for B/G Publishing Grades must be producible by PPA on the
then existing paper machines at B/G.

     (b) Crown will, from time-to-time, during the Marketing Period, order B/G
Publishing Grades for the accounts of Crown customers by submitting the purchase
orders of Crown customers, endorsed or otherwise identified by Crown as being an
order subject to this Agreement so long as each such order (each, a "Crown
Order") complies with the requirements of the second sentence of this Section
5(b). All Crown Orders for B/G Publishing Grades shall be subject to approval by
PPA, in its sole discretion, provided that if PPA rejects a Crown Order based on
the prices of the B/G Publishing Grades specified therein or does not specify a
reason for its rejection of such Order, such Order shall, nevertheless, be
deemed to have been submitted in partial satisfaction of the 20,000 ton annual
quota specified in Section 2(a) if the prices in such Order for B/G Publishing
Grades equal or exceed the then current market prices for such B/G Publishing
Grades pursuant to Section 5(a). Any Crown Order not rejected by PPA within
three (3) business days shall be deemed to have been accepted.

     (c) Crown shall submit Crown Orders for the purchase of B/G Publishing
Grades to PPA for approval by facsimile transmission or by electronic mail,
which Orders shall set forth the following information and such additional
descriptive information regarding the goods to be sold as Crown deems
appropriate: (a) the type of B/G Publishing Grades to be purchased, described by
appropriate product code for such goods; (b) the quantity of such goods to be
purchased expressed in cartons or hundred weight; (c) the price or prices to be
paid expressed as "$/hundred weight or $/carton"; (d) the date upon which such
goods are to be shipped; (e) an order number; (f) a date; (g) shipping
information and freight charges; (h) payment terms; and (i) if the Crown Order
number specified in clause (e) is a Crown Order number, a reference to the Crown
customer's purchase order number. Except for the foregoing information required
to be contained in a Crown Order, no additional terms or conditions contained in
any such Crown Order (or any confirmation or acknowledgement thereof) shall be
terms between Crown and PPA with respect to the purchase and sale of such goods,
except as otherwise agreed in a writing signed by both parties.

     6. Invoicing; Payment; Monthly Accounting.

     (a) Invoices relating to Crown Orders will be rendered to Crown when the
goods are shipped by PPA to Crown customers reflecting the price, freight
charges, payment terms and other relevant terms contained in the relevant Crown
Order, provided, however, that the payment terms of each such invoice shall in
no event be more favorable to Crown than "2%/20, net 45". Crown shall be
entitled to deduct from the amount due on each invoice twelve percent (12%) of
the selling price (excluding freight charges for delivery to Crown's customer
and cash discount) of the B/G Publishing Grades to which the invoice pertains.

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     (b) Not later than the fifteenth (15th) day of each calendar month, PPA
will render a statement in respect of the preceding calendar month, setting
forth the aggregate amount paid by Crown during such preceding month on
outstanding PPA invoices, identifying the specific PPA invoices relating to
Crown Orders paid during such preceding month, and any adjustments in respect of
invoices submitted to Crown or amounts paid thereon by Crown that are necessary
to conform prior invoices or payments to the provisions of this Agreement. Any
amounts due to Crown reflected on such monthly statement shall be remitted
together with the statement, and any amount due to PPA shall be paid by Crown
within ten (10) days of receipt of such statement.

     7. Inspection; Warranties; Returns.

     PPA warrants to Crown that all B/G Publishing Grades meet the quality and
grade specifications as agreed from time to time between PPA and Crown and that
all grades delivered to Crown or Crown's customer will upon transfer of title to
Crown or such customer, be free of liens and other encumbrances.



     8. Exclusivity of Alliance.

     (a) During the first twenty-four (24) months of the Marketing Period, PPA
shall not, other than pursuant to this Agreement, directly or indirectly, enter
into, or in any manner take part in the manufacture or sale of Publishing
Grades. During such period, PPA shall label all B/G Publishing Grades with Crown
Trademarks (as agreed between Crown and PPA).

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Should PPA sell or attempt to sell Publishing Grades in contravention of this
Agreement, Crown shall be entitled to both injunctive relief and monetary
damages as remedies.

     (b) From time to time during the twenty-fifth (25th) through thirty-sixth
(36th) month of the Marketing Period, provided Crown has received no less than
six (6) months advanced written notice, PPA may diminish the exclusivity of this
Agreement for B/G Publishing Grades and commence a transition towards production
of B/G Publishing Grades other than pursuant to this Agreement and in direct
competition with Crown. Under such circumstances, PPA may sell directly for its
own account up to 5,000 tons of B/G Publishing Grades (the "Transitional
Tonnage") during such third year in which case Crown's minimum purchase
obligation pursuant to Section 2(a) shall be reduced by the amount of such
Transitional Tonnage. PPA's sales of Transitional Tonnage shall not be subject
to Section 6 above and shall not be deemed a violation of PPA's agreement set
forth in Section 8(a) (i.e., Crown will not be entitled to compensation in
respect of any sales of Transitional Tonnage). Crown shall have no rights or
obligations with respect to the production, sales or service of the Transitional
Tonnage. The Transitional Tonnage must be labelled as a product of PPA. PPA
shall not utilize any Crown Trademarks with respect to the Transitional Tonnage.

     9. Good Faith Performance.

     Subject to terms set forth in Section 7.2 of the Purchase Agreement, PPA
acknowledges that Crown manufactures and may continue to manufacture during the
term of this Agreement and thereafter, at its other mills, Publishing Grades,
which compete with B/G Publishing Grades. In order to limit the potential for
conflicts between PPA and Crown during the term of this Agreement, Crown agrees
to exercise good faith in the performance of its obligations. Specifically,
Crown covenants and agrees that during the Marketing Period, Crown will conduct
its business consistent with the requirements that when and if Crown is
presented with a customer order for a specific Publishing Grade which can be
produced by both Crown and PPA, Crown shall not unfairly discriminate against
PPA in the placement of business for Publishing Grades between B/G and Crown's
paper mills. In this respect, Crown will use commercially reasonable efforts to
allocate orders, in the aggregate, which would be produced at B/G and other
Crown mills in reasonable proportion to past practices, allowing for variations
in grade, basis weight, color, quality, demands and customer demands, and
freight logic, but without regard for selling price. From time-to-time Crown
will review with PPA how orders for overlapping grades were allocated between
B/G and other Crown mills.

     10. Independent Parties.

     PPA and Crown are independent contracting parties. Nothing in this
Agreement will be construed to make either PPA or Crown an employee, franchisee,
joint venturer, partner or legal representative of the other. Except as
otherwise provided in this Agreement, Crown shall not represent itself to have
any authority to act on PPA's behalf.

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     11. Indemnification.

     (a) Crown shall indemnify, defend, and hold PPA, its employees and agents
harmless from and against any and all liabilities, damages, injuries, suits,
judgments, claims, causes of action, and expenses (including reasonable
attorneys' fees, court costs and out--of-pocket expenses), suffered or incurred
by PPA as a result of (i) a breach of a material covenant made by Crown
hereunder, or (ii) any act or deed, whether by way of tort or contract,
committed or omitted by Crown, its employees or agents in the performance of
this Agreement, except for acts or deeds committed or omitted by Crown in
reliance on representations and warranties made to Crown by PPA pursuant to this

     (b) Except as otherwise set forth in Section 7, PPA shall indemnify,
defend, and hold Crown, its employees and agents harmless from and against any
and all liabilities, damages, injuries, claims, suits, judgments, claims, causes
of action, and expenses (including reasonable attorneys' fees, court costs and
out-of-pocket expenses), suffered or incurred by Crown as a result of (i) a
breach of any material covenant made by PPA hereunder, or (ii) any act or deed,
whether by way of tort or contract, committed or omitted by PPA, its employees
or agents in the performance of this Agreement, except for acts or deeds
committed or omitted by PPA in reliance on representations and warranties made
to PPA by Crown pursuant to this Agreement.


     12. Confidentiality.

     (a) Each party shall regard and treat as confidential and proprietary all
of the information communicated to it by the other party in connection with this
Agreement (which information shall at all times remain the property of the
disclosing party), which information is referred to herein as "Confidential
Information." Confidential Information includes such information disclosed by a
party orally or visually, directly or indirectly. Confidential Information of a
party is also deemed to include pricing information, customer information,
identification of problems to be solved, areas for process, product and
equipment improvements, and Confidential Information of third parties, which are
observed, identified or disclosed under or as a result of this Agreement.
Nothing contained in this Agreement shall be interpreted to impose upon either
party hereto the obligation to share its Confidential Information with the other
party hereto.

     (b) During the Marketing Period and for a two year period thereafter,
neither party shall, without the other's prior written consent, at any time
disclose any portion of such Confidential Information to third parties.

     (c) Each party shall disseminate Confidential Information of the other
party to its employees, agents and subcontractors only on a "need-to-know"
basis, and shall use the

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same degree of care in protecting such Confidential Information of the other
party as it does for its own information of like kind. Each party shall cause
each of its employees, agents and subcontractors who has access to such
Confidential Information to comply with the terms and provisions of this Section
in the same manner as it is bound hereby, with it remaining responsible for the
actions and disclosures of any such employees, agents and subcontractors.

     (d) Notwithstanding the foregoing, a party's obligations under Sections
12(a),(b) and (c) shall not apply to (i) information that, at the time of
disclosure, is, or after disclosure becomes part of, public domain other than as
a consequence of a breach of this Agreement, (ii) information that was known or
otherwise available to the receiving party prior to the disclosure by the
disclosing party, (iii) information disclosed by a third party to the receiving
party after the disclosure by the disclosing party, if such third party's
disclosure does not violate any obligation of the third party to the disclosing
party, (iv) information that is independently developed by the receiving party,
(v) information required to be disclosed by the order or process of court or
other governmental authority of competent jurisdiction, or (vi) necessary to be
disclosed in the connection with the prosecution or defense of any litigation
between the parties hereto.

     13. Term; Termination. This Agreement will terminate on the first to occur

     (a) three (3) years from the effective date as set forth in Section 14
hereof; or

     (b) the occurrence of any one of the following events: (i) if the other
party shall default in the performance of any of its material agreements,
obligations or covenants herein and such default continues for (A) fifteen (15)
days in the case of a monetary default or (B) sixty (60) days as to any other
default, in each case, after receipt of written notice of default from the other
party; provided, however, in the case of a nonmonetary default, if such default
cannot be cured within such sixty (60) day period, if the defaulting party shall
promptly commence, within such sixty (60) day period, the steps necessary to
cure such default and shall thereafter proceed with due diligence to complete
the steps necessary to cure such default as expeditiously as possible, thereby
upon such cure, notice of cancellation hereof shall be deemed rescinded; or (ii)
if a party liquidates or winds up all or a material portion of its business,
dissolves or terminates its existence, becomes insolvent or unable to pay its
debts as they mature, commits any act of bankruptcy, makes an arrangement,
composition or assignment for the benefit of creditors, files, has filed against
it or consents to the filing of any petition in bankruptcy for liquidation or
reorganization, or otherwise is the subject of any insolvency proceeding of any
kind or nature, immediately upon receipt by such party of written notice of
cancellation from the other party. Any such termination of this Agreement shall
not constitute a waiver by either party of its other rights and remedies
hereunder, at law, in equity or otherwise.

     14. Effective Date of Agreement. Notwithstanding any contrary provision
herein, this Agreement shall only come into force and be effective upon, and as
of, the Closing under the Purchase Agreement, and otherwise shall have no force
or effect.

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     15. General Provisions.

     (a) Notices. All notices required to be given hereunder shall be in writing
and shall be deemed to have been given if (i) delivered personally, (ii)
delivered via one-day overnight courier, (iii) transmitted by telefax, or (iv)
mailed by registered or certified mail (return receipt requested and postage
prepaid) to the following listed persons at the addresses and telefax numbers
specified below, or to such other persons, addresses or telefax numbers as a
party entitled to notice shall give, in the manner hereinabove described, to the
others entitled to notice:

                           If to Crown to:

                           Crown Paper Co.
                           300 Lakeside Drive
                           Oakland, CA 94612-3592
                           Attention:  General Counsel
                           Telefax No.:  (510) 874-3595

                           with a copy to:

                           Sulloway & Hollis, P.L.L.C.
                           9 Capitol Street, P.O. Box 1256
                           Concord, NH 03302-1256
                           Attention:  John M. Sullivan, Esq.
                           Telefax No.:  (603) 226-2404

                           If to PPA:

                           Pulp & Paper of America LLC
                           135 Engineers Road
                           Hauppauge, NY 11788
                           Attention:  Mr. Mehdi Gabayzadeh
                           Telefax No.:  (516) 435-8980

                           with a copy to:

                           Mandel & Resnik P.C.
                           220 East 42nd Street
                           New York, New York 10017
                           Attention:  Nicholas J. Kaiser, Esq.
                           Telefax No.: (212) 573-0067

If given personally or transmitted by telefax, a notice shall be deemed to have
been given when it is received. If given by one-day overnight courier, notice
shall be deemed to have been given on the next business day following delivery
to the courier. If given by mail, it shall be deemed to have been given on the
third business day following the day on which it was posted.

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Notices and other communications given by attorneys for PPA and Crown shall be
deemed given by, respectively, PPA and Crown.

     (b) Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.

     (c) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

     (d) Waiver. No waiver of any of the provisions hereof shall be effective
unless in writing and signed by the party to be charged with such waiver. No
waiver shall be deemed a continuing waiver or waiver in respect of any
subsequent breach or default, whether of similar or different nature, unless so
expressly stated in writing.

     (e) Modification. This Agreement may not be orally canceled, changed,
modified or amended, and no cancellation, change, modification or amendment
shall be effective or binding, unless in writing and signed by all of the
parties to this Agreement.

     (f) Severability. If any provision of this Agreement is found to be void or
unenforceable by a court of competent jurisdiction, the remaining provisions of
this Agreement shall nevertheless be binding upon the parties with the same
effect as though the void or unenforceable part had been severed and deleted.

     (g) Number and Gender. All terms and words used in this Agreement,
regardless of the number or gender in which they are used, shall be deemed to
include any other number and any other gender as the context may require.

     (h) Miscellaneous. This Agreement (i) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof and thereof; (ii)
is not intended to and shall not confer upon any other person or business
entity, other than the parties hereto, any rights or remedies with respect to
the subject matter hereof; (iii) shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns; (iv) shall be
binding upon and shall inure to the benefit of a person or entity acquiring all
or substantially all of Crown's Publishing Grade business or the Crown
Trademarks; and (v) shall not be assigned by operation of law or otherwise
without the prior written consent of the parties hereto, which consent shall not
be unreasonably withheld.

     (i) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York. PPA and Crown hereby
expressly consent to the jurisdiction of the Supreme Court of the State of New
York with respect to any action or proceeding between PPA and Crown with respect
to this Agreement or any rights or obligation of such party pursuant to this
Agreement and each of PPA and Crown agrees that the venue shall lie in Suffolk
County. The parties hereto waive trial by jury

                                     - 11 -

in any such action or proceeding and consent to the service of process in any
such action or proceeding in manner specified in Section 15(a).

     (j) Force Majeure. Neither party will be liable for any failure or delay in
performing an obligation under this Agreement that is due to causes beyond its
reasonable control, such as natural catastrophes, governmental acts or
omissions, laws or regulations, labor strikes or difficulties, transportation
stoppages or slowdowns or the inability to procure parts or materials. These
causes will not excuse Crown from paying accrued amounts due to PPA through any
available lawful means acceptable to PPA.

     In witness whereof, the parties hereto have caused this Agreement to be
executed as of the date first above written.

                                         PULP & PAPER OF AMERICA LLC

                                         /s/ Mehdi Gabayzadeh
                                         By:   Mehdi Gabayzadeh
                                         Its:  Manager

                                         CROWN PAPER CO.

                                         /s/ Robert A. Olah
                                         By:   Robert A. Olah
                                         Its:  President and Chief Executive

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