Northeast Roundwood Supply Agreement - John Hancock Mutual Life Insurance Co. and Crown Paper Co.
NORTHEAST ROUNDWOOD SUPPLY AGREEMENT
This Agreement is made as of the 30th day of October, 1997 between JOHN
HANCOCK MUTUAL LIFE INSURANCE COMPANY, a Massachusetts Corporation ("Hancock"),
and CROWN PAPER Co., a Virginia corporation ("Crown").
Recitals
A. As of the date hereof, Hancock acquired certain real property interests
in timberlands from Crown Paper Co. pursuant to a Timberland Acquisition
Agreement (the "Purchase Agreement") dated as of October 21st, 1997 by and
between Crown and Hancock.
B. The timberlands acquired by Hancock in the State of New Hampshire are
described on Exhibit A hereto (the "Timberlands").
C. Crown owns a pulp mill located at Berlin, New Hampshire (the "Berlin
Mill").
D. The New Hampshire Timberlands constitute a material source of roundwood
supply for the Berlin Mill and the parties hereto intend to utilize this
Agreement to continue a long term relationship with respect thereto.
E. The Purchase Agreement provides for an agreement embodying substantially
the terms hereof.
Now, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and intending to be legally bound, the parties agree as
follows:
1. Quantities of Hardwood Pulpwood to be Supplied.
(a) During the period commencing on the date hereof and ending on Dec 1,
1997 (the "Initial Period") and during each six month period thereafter
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commencing on December 1 or June 1 (the Initial Period and each such six
month period being a "Six-Month Period"), until the supply obligations
under this Section of this Agreement are terminated in accordance with the
provisions of Section 6, Hancock shall supply to Crown at the Berlin Mill
from any timberland owned by Hancock at such time, and Crown shall purchase
from Hancock, the quantity of Hardwood Pulpwood set forth in Exhibit B. The
quantities of Hardwood Pulpwood to be delivered during the Initial Period
shall be prorated based upon the actual number of days within the Initial
Period in relation to a 365-day year.
(b) Hancock shall deliver such Hardwood Pulpwood so that the total quantity
of Hardwood Pulpwood to be purchased by Crown and supplied by Hancock in
each Six-Month Period shall be delivered substantially in accordance with
Exhibit B.
(c) The quantity of Hardwood Pulpwood to be supplied hereunder shall be
purchased according to the specifications and the scaling rules set forth
in Exhibit C hereto in accordance with the usual business practice of the
timber industry in the State of New Hampshire.
2. Prices.
(a) The price at which Hardwood Pulpwood supplied hereunder is to be
purchased by Crown shall be established by the parties hereto for each
Six-Month Period during the term of this Agreement. Crown shall make
payment no later than Friday for Hardwood Pulpwood delivered during the
previous week (Monday through Sunday).
(b) The prices for the Hardwood Pulpwood for each Six-Month Period shall be
market price in the vicinity. The parties shall use their best efforts to
agree on such market prices for each Six-Month Period at least 15 days
prior to the beginning of each such period, but if the parties are unable
to do so by such time, then neither party shall have any obligation to
supply or purchase Hardwood Pulpwood pursuant to this Agreement for such
Six-Month Period. Hancock shall have available for sale to Crown at the
beginning of each such Six-Month Period sufficient quantities of Hardwood
Pulpwood to satisfy the volumes provided for in Exhibit B.
(c) The price for Hardwood Pulpwood supplied hereunder shall be f.o.b. the
Berlin Mill or other point of delivery designated by Crown and shall be
determined on the basis of green tons of delivered wood.
(d) In addition to the payment provided for in paragraph 2(a), Crown shall
pay to Hancock, within 30 days after the end of each Six-Month Period, a
performance premium of four percent (4%) of the agreed price of the
Products delivered to the Berlin Mill during such Six-Month Period,
provided Hancock has delivered no less
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than 95% of the volume specified in Exhibit B for such Product during such
period and provided such premium shall be paid on not less than 95% of such
volume and on not more than 110% of such volume.
(e) If Crown shall fail to make a payment for Hardwood Pulpwood delivered
by Hancock to Crown hereunder when due, and such failure shall continue for
fifteen (15) days after Crown receives written notice of such failure, then
until such payment has been made (i) such unpaid amount shall bear interest
from the original due date of such payment at one percent over the prime
rate of Citibank, N.A. (New York City) in effect from time to time and (ii)
Hancock shall be under no obligation to make further Hardwood Pulpwood
deliveries hereunder until such delinquent payment is made.
3. Deliveries.
Title to the Hardwood Pulpwood shall pass to Crown at the point of delivery
and the risk of loss or damage shall be borne by Hancock until delivery.
4. Force Majeure.
Hancock and Crown shall not be liable to each other for any failure or
delay in delivery or acceptance of delivery of Hardwood Pulpwood where such
failure or delay is due to circumstances beyond that party's control,
including, without limitation, extraordinary weather conditions, fires,
labor disputes, acts of God and acts of any governmental body or, as to
Crown, in the event Crown, with at least 90 days notice to Hancock,
substantially curtails operations at the Berlin Mill (collectively referred
to herein as a "force Majeure Event"), nor shall any such failure or delay
give either party the right to terminate this Agreement except as provided
in Section 6. Each party shall use its best efforts to minimize the
duration and consequences of any failure or delay in delivery or acceptance
of delivery resulting from a Force Majeure Event and shall give the other
party immediate notice of the occurrence of a Force Majeure Event and of
the time when the party affected by such Force Majeure Event is no longer
affected thereby. Notwithstanding the foregoing, if, as a result of a Force
Majeure Event pursuant to which a delay in Hancock's performance is excused
hereunder, or for any other reason deliveries from Hancock are reduced to
the extent that Crown cannot maintain its scheduled production level at the
Berlin Mill, Crown shall thereafter have the right to obtain the Hardwood
Pulpwood, or substitutes therefor (in either case, "Substitute Hardwood
Pulpwood"), from sources other than Hancock until such time as Hancock is
again able to commence delivery of Hardwood Pulpwood to Crown hereunder.
After Hancock gives notice to Crown that it is again able to commence
delivery of Hardwood Pulpwood to Crown hereunder, Crown will notify Hancock
of any commitments for Substitute Hardwood Pulpwood that Crown has
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entered into and Crown shall not be required to again accept delivery from
Hancock until it has accepted delivery of all Substitute Hardwood Pulpwood
contracted by Crown, provided that no such contract shall be entered into
for a term longer than three months without the consent of Hancock, which
consent shall not be unreasonably withheld, and Crown's obligation to take
Hardwood Pulpwood hereunder (and Hancock's obligation to deliver such)
shall be reduced, at Crown's election, by the quantity of all such
Substitute Hardwood Pulpwood. Notwithstanding the foregoing, if as a result
of a Force Majeure Event Crown cannot accept the quantity of Hardwood
Pulpwood determined hereunder, Crown shall promptly notify Hancock of the
same, and Hancock shall thereafter have the right to contract for the sale
of any such Hardwood Pulpwood Crown is unable to accept. After Crown gives
notice to Hancock that it is again able to accept delivery of Hardwood
Pulpwood to Crown hereunder, Hancock will notify Crown of any commitments
for the sale of Hardwood Pulpwood that Hancock has entered into and Hancock
shall not be required to again deliver Hardwood Pulpwood to Crown until it
has delivered all Hardwood Pulpwood contracted by Hancock, provided that no
such contract shall be entered into for a term longer than three months
without the consent of Crown, which consent shall not be unreasonably
withheld, and Hancock's obligation to deliver Hardwood Pulpwood hereunder
(and Crown's obligation to accept such Hardwood Pulpwood) shall be reduced,
at Hancock's election, by the quantity of all such Hardwood Pulpwood.
5. Confidentiality.
(a) It is recognized that both parties may disclose to each other certain
information regarding the subject of this Agreement which they consider to
be private and confidential, the disclosure of which could prove injurious
to either party. Therefore, the parties agree to use such information
solely for the use, sale and pricing of the Hardwood Pulpwood, and to use
their best efforts to prevent the disclosure of such information (other
than information which is a matter of public knowledge or which has been
filed as public information with any governmental authority) to third
parties without the prior written consent of the affected party, unless
such disclosure is required by law.
(b) Notwithstanding the provisions of paragraph 5(a), either party may make
any such disclosure necessary in connection with a legal action to enforce
its rights hereunder and, in the event there is a material breach by
Hancock of its obligations pursuant to Section 7, Crown may disclose to any
third party purchaser of Timberlands involved in such breach the terms of
Section 7 as they relate to such Timberlands.
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6. Termination of Supply Obligations.
(a) Although it is the intent of the parties that this Agreement shall
result in a long term, mutually beneficial supply relationship, the wood
supply obligations pursuant to Section 1 of this Agreement may be
terminated by either party, at its option exercisable by written notice to
the other party, but only under any one of the following circumstances:
(i) As of November 1st, 2009 (the "Initial Termination Date") or as of
any November 1st thereafter which is a multiple of three years after
the Initial Termination Date, provided (A) such notice is given not
less than three years prior to such termination date, and (B) such
notice is accompanied by a certificate of an officer of the party
providing such notice to the effect that the notice is being given due
to a change in management practices of the terminating party such
that, if Hancock is the terminating party, the Hardwood Pulpwood is no
longer available and, if Crown is the terminating party, the Hardwood
Pulpwood can no longer be utilized at the Berlin mill; or
(ii) Through no default by either party, no Hardwood Pulpwood has been
delivered pursuant to the terms of this Agreement during the initial
twelve year term or any subsequent three year term; or
(iii) By either party if the other party shall default in the
performance of any of its agreements or obligations herein, and such
default continues unremedied for a period of sixty (60) days after
written notice from the non-defaulting party; or
(iv) In the event Crown sells the Berlin Mill, then by either party,
as to the supply obligations associated as provided in Exhibit B, (A)
on 30 days prior written notice if such supply obligations were not
assigned to the purchaser of such mill or (B) upon one year's prior
written notice effective as of any November 1st following such sale if
such supply obligations were assigned to the purchaser of such mill.
(b) Any such termination of the supply obligations shall not constitute a
waiver by either party of its rights to any damages or other remedies for
any breach of this Agreement by the other party.
7. Transfer of Timberlands.
(a) Transfer. In the event Hancock desires to sell, assign or otherwise
transfer all or any part of the Timberlands, other than Exempt Property as
described below,
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transfers shall be made subject to this Agreement and Hancock shall submit
to Crown for its approval, not to be unreasonably withheld or delayed, a
proposal for equitable allocation of Hancock's obligations to provide the
Hardwood Pulpwood volumes set forth in Exhibit B for each Annual Period of
the remaining term of this Agreement to which property transferred shall be
subject, with the overall objective of ensuring that such volumes are
provided to Crown during the term of this Agreement and taking into
consideration the following factors for determining such reduction: (i)
species and product mix; (ii) site index (productivity); and (iii) time
remaining under this Agreement. Cutting contracts, easements (including
conservation easements), mineral leases and recreational leases shall not
be considered a sale or transfer for purposes of this section.
(b) Exempt Property. Notwithstanding anything to the contrary set forth
above, the sale of any Timberlands shall be exempt from the obligations of
this Wood Supply Agreement herein; provided (A) the aggregate of all such
exempt property ("Exempt Property") shall not exceed 4,650 acres, and (B)
until such 4,650 acre limit has been reached, any parcel containing 500
acres or less which is sold or otherwise transferred shall be deemed Exempt
Property. The transfer of any Exempt Property pursuant to the provisions of
this subsection (a) shall relieve the Exempt Property from the obligations
under this Agreement, but shall not relieve Hancock of its obligations
under this Agreement including the obligations to make available to Crown
the Hardwood Pulpwood volumes in Exhibit B.
8. Representations and Covenants.
(a) Hancock hereby covenants and agrees that:
(i) it shall give Crown no less than 30 days prior notice of any
transfer of any of the Timberlands or any other transaction related
thereto which would have any effect on Hancock's obligations under
this Agreement; and
(ii) it has the right, power and authority to grant the rights hereby
purported to be granted Crown.
(b) Crown represents and warrants that it has the right, power and
authority to enter into this Agreement and consummate the transactions
contemplated hereby.
9. Relationship of Parties.
In all matters relating to this Agreement, both parties shall be acting
solely as independent contractors and shall be solely responsible for the
acts of their employees; and employees of one party shall not be considered
employees of the
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other party. Neither party shall have any right, power or authority to
create any obligation, express or implied, on behalf of the other party.
10. SFI.
Hancock agrees to manage the Timberlands in accordance with the Sustainable
Forestry Initiative of the American Forest and Paper Association ("SF1").
This commitment will last until the first occurrence of either one of the
following two scenarios: (1) the SF1 program is no longer a viable, ongoing
program, or (2) the Wood Supply Agreement between Crown and Hancock is no
longer in effect.
11. Compliance with Law.
Each party agrees to comply with all applicable laws, statutes, ordinances
and governmental rules and regulations applicable to the conduct of its
business.
12. Waiver.
No waiver shall be deemed to be made by either party of any of its rights
hereunder unless the same shall be in writing, and each waiver, if any,
shall be a waiver only with respect to the specific instance involved and
shall in no way impair the rights of the waiving party or the obligation of
the other party in any other respect at any other time.
13. Assignment.
(a) Either party may assign this Agreement to any corporation which
controls, is controlled by or is under common control with such party,
formed by consolidation of such party with another corporation or
corporations, or into which such party shall be merged, or to which
substantially all the property of such party shall be conveyed or
transferred as an entirety (the "Successor Corporation"), or to a trustee
under any deed of trust mortgaging or pledging all, or substantially all,
of such party's plants and real property. Upon any such transfer, all the
terms and provisions of this Agreement binding upon, or inuring to the
benefit of, the assigning party shall be binding upon, and inure to the
benefit of, its successor or assign, whether so expressed or not, provided,
however, in any such case the assignee shall assume in writing the
obligations of the assigning party and the assigning party shall remain
primarily liable hereunder. Except as above provided, this Agreement shall
not be assignable or transferable by either party without the consent of
the other party.
(b) In the event Crown sells the Berlin Mill, Crown may assign to any such
purchaser its supply rights under this Agreement as provided in Exhibit B,
and, in
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such event, such assignment shall also be deemed a delegation and
assumption by such purchaser of all Crown's duties and obligations
hereunder related to such supply rights, and upon the assumption in writing
by such purchaser of all Crown's duties and obligations hereunder, Crown
shall be released from all future obligations hereunder with respect to
such supply rights and Hancock shall thereafter look only to such assignee
for performance under this Agreement with respect to such rights.
14. Separability.
If any provision of this Agreement is held to be invalid, illegal or
unenforceable, the balance of this Agreement shall remain in effect.
15. Notices.
Any notices which may be required or are appropriate hereunder shall be in
writing or by electronic means producing a written record (facsimile
machine, telex, telecopier or telegraph), personally delivered or mailed by
Registered or Certified United States Mail or reputable overnight courier,
postage prepaid, return receipt requested, effective on personal delivery,
one day after mailing if by reputable overnight courier or three days after
mailing if by United States mail:
To Crown at the following address:
Mr. A. Bradford Wyman
Crown Vantage, Inc.
650 Main Street
Berlin, NH 03570
Telephone: (603) 342-2500
Facsimile: (603) 342-2301
Copy to: Chris McLain, Esq.
Crown Vantage, Inc.
300 Lakeside Drive, Room 1451
Oakland, CA 94612-3592
Telephone: (510) 874-3869
Facsimile: (510) 874-3939
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To Hancock at the following address:
Hancock Timber Resource Group
99 High Street, 26th Floor
Boston, Massachusetts 02117
Attn: Mr. Bruce McKnight
Telephone: (617) 747-1502
Copy to: Robert H. Golden, Esq.
John Hancock Mutual Life Insurance Company
Trinity Place - Home Office Receiving
Mortgage and Real Estate Law, T-50
Boston, Massachusetts 02117
Facsimile: (617) 572-9268
Copy to: Mr. Henry L. Whittemore
Hancock Timber Resource Group
77 Water Street
Hallowell, ME 04347
Telephone: (207) 621 -4020
Copy to: Mr. Thomas J. Colgan
Wagner Forest Management, Ltd.
P.0. Box 160
150 Orford Road
Lyme, New Hampshire 03768
Telephone: (603) 795-2002
Copy to: Karen Huber, Esq.
Eaton, Peabody, Bradford & Veague
144 Exchange Street, Fleet Center
Bangor, Maine 04402
Telephone: (207) 947-0111
16. Headings.
The headings in this Agreement are solely for convenience of reference and
shall be given no effect in the construction or interpretation of this
Agreement.
17. Counterparts.
This Agreement may be executed in several counterparts, each of which shall
be deemed an original, but all of which together shall constitute one
agreement.
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18. Governing Law.
This Agreement shall be construed and enforced in accordance with the laws
of the State of New Hampshire, without regard to the principles of conflict
of law thereof.
19. Nonrecordation.
Neither this Agreement nor a memorandum of the terms hereof shall be
recorded in the land records of any jurisdiction where any of the
Timberlands are located except in connection with a lawsuit filed by Crown
as a result of a breach by Hancock of its obligations.
IN WITNESS WHEREOF, the parties hereto each have caused this Agreement to
be duly executed as of the date first above written
WITNESSED BY: JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By: Hancock Natural Resources Group, Inc.
its Investment Manager, duly authorized
/s/ R. Carl Anderson By: /s/ John P. Lollis
------------------------------ ------------------------------------
Name John P. Lollis
Its: Account Manager,
Duly Authorized
[Execute in Black Ink]
WITNESSED BY: CROWN PAPER CO.
/s/ R. Carl Anderson By: /s/ Christopher M. McLain
------------------------------ ------------------------------------
Name: Christopher M. McLain
Its: Senior Vice President
Duly Authorized
[Execute in Black Ink]
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STATE OF NEW HAMPSHIRE
COUNTY OF MERRIMACK
The foregoing was acknowledged before me this 30th day of October, 1997, by
John P. Lollis, as Account Manager of and duly authorized to act on behalf of
Hancock Natural Resources Group, Inc., a Massachusetts corporation and
Investment Manager of John Hancock Mutual Life Insurance Company, a
Massachusetts corporation, on behalf of the corporation.
[EXECUTE IN BLACK INK] /s/ R. Carl Anderson
-----------------------------------
Notary Public
Name: R. Carl Anderson
[Print or Type Name]
My Commission expires: 3/23/99
[AFFIX SEAL]
STATE OF NEW HAMPSHIRE
COUNTY OF
The foregoing instrument was acknowledged before me this 30th day of
October, 1997, by Christopher M. McLain, Senior Vice President of Crown Paper
Co., a Virginia corporation, on behalf of the corporation.
[EXECUTE IN BLACK INK] /s/ R. Carl Anderson
-----------------------------------
Notary Public
Name: R. Carl Anderson
[Print or Type Name]
My Commission expires: 3/23/99
[AFFIX SEAL]