Exhibit 10.3

PURCHASE AGREEMENT

DATED AS OF APRIL 4, 2006

AMONG

TIMBERSTAR SOUTHWEST PARENT LLC,

TIMBERSTAR SOUTHWEST LLC,

INTERNATIONAL PAPER COMPANY

AND

THE OTHER SELLING PARTIES LISTED ON SCHEDULE A

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Table of Contents

 

          Page    ARTICLE I       SALE AND PURCHASE   

Section 1.1

  

Sale and Purchase of Cash Entity Purchased Assets.

   2

Section 1.2

  

Transfer of Assets.

   4

Section 1.3

  

Transfer of Personalty and Cash Purchased Condemnations to Buyer Affiliate.

   6

Section 1.4

  

Timber Entity Interests.

   7

Section 1.5

  

Purchased Asset Conveyance.

   7

Section 1.6

  

Excluded Assets.

   7

Section 1.7

  

Permitted Exceptions.

   8

Section 1.8

  

Assumed Liabilities; Excluded Liabilities.

   10    ARTICLE II       PURCHASE PRICE; PAYMENT   

Section 2.1

  

Purchase Price.

   14

Section 2.2

  

Allocation of Purchase Price.

   14

Section 2.3

  

Purchase Price Adjustments.

   16

Section 2.4

  

Apportionments.

   25

Section 2.5

  

Payment of Purchase Price.

   26    ARTICLE III       CLOSING   

Section 3.1

  

Closing.

   26

Section 3.2

  

Closing Deliveries.

   27

Section 3.3

  

Possession.

   31

Section 3.4

  

Costs and Expenses.

   31    ARTICLE IV       BUYING PARTY ACKNOWLEDGEMENTS   

Section 4.1

  

Buying Party Acknowledgements.

   32

 

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Table of Contents

(continued)

 

          Page    ARTICLE V       REPRESENTATIONS AND WARRANTIES OF SELLER
RELATED TO THE PURCHASED ASSETS   

Section 5.1

  

Organization.

   34

Section 5.2

  

Qualification.

   34

Section 5.3

  

Authority.

   35

Section 5.4

  

No Conflict.

   35

Section 5.5

  

Consents and Approvals.

   36

Section 5.6

  

Litigation.

   36

Section 5.7

  

Taxes.

   37

Section 5.8

  

Contracts.

   37

Section 5.9

  

Brokers and Advisors.

   38    ARTICLE VI       REPRESENTATIONS AND WARRANTIES OF SELLER RELATED TO
THE PURCHASED REAL PROPERTY ASSETS   

Section 6.1

  

Title to the Timberlands.

   38

Section 6.2

  

Timber Entities.

   39

Section 6.3

  

Compliance with Laws.

   39

Section 6.4

  

Matters Relating to the Environmental Condition of the Timberlands.

   39

Section 6.5

  

No Casualty Loss.

   40

Section 6.6

  

Condemnations.

   40

Section 6.7

  

Timberland Leases and Real Property Leases.

   40

Section 6.8

  

Access to Timberlands.

   41    ARTICLE VII       REPRESENTATIONS AND WARRANTIES OF SELLER RELATED TO
THE OTHER PURCHASED ASSETS   

Section 7.1

  

Collective Bargaining Agreements.

   41

Section 7.2

  

Labor Matters.

   41

Section 7.3

  

Ownership of Purchased Personal Assets.

   42

Section 7.4

  

Employee Benefit Plans; ERISA.

   42    ARTICLE VIII       REPRESENTATIONS AND WARRANTIES OF BUYER PARENT AND
BUYER   

Section 8.1

  

Organization.

   43

Section 8.2

  

Qualification.

   43

Section 8.3

  

Authority.

   44

 

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Table of Contents

(continued)

 

          Page

Section 8.4

  

No Conflict.

   44

Section 8.5

  

Consents and Approvals.

   45

Section 8.6

  

Litigation.

   45

Section 8.7

  

Availability of Funds.

   46

Section 8.8

  

Investment Purpose.

   46

Section 8.9

  

Brokers and Advisors.

   46

Section 8.10

  

Tax Matters.

   46    ARTICLE IX       ADDITIONAL AGREEMENTS RELATING TO THE PURCHASED ASSETS
  

Section 9.1

  

Commercially Reasonable Efforts.

   47

Section 9.2

  

Maintenance of Business.

   48

Section 9.3

  

Public Announcements.

   49

Section 9.4

  

Books and Records.

   50

Section 9.5

  

Dispute Resolution.

   50

Section 9.6

  

Consents.

   52

Section 9.7

  

Continuing Agreements.

   53

Section 9.8

  

Financing.

   53

Section 9.9

  

Transition Services.

   53    ARTICLE X       ADDITIONAL AGREEMENTS RELATING TO THE TIMBERLANDS   

Section 10.1

  

Right of Entry.

   54

Section 10.2

  

Permits and Licenses.

   56

Section 10.3

  

Environmental Matters.

   56

Section 10.4

  

Special Places.

   56

Section 10.5

  

Reserved Minerals and Gases.

   56

Section 10.6

  

Reserved Easements and Buyer Easements.

   57

Section 10.7

  

Title Commitment; No Survey.

   58

Section 10.8

  

Transfer of Timber Entity Assets.

   59

Section 10.9

  

No Transfers, Etc.

   59

Section 10.10

  

Tax Matters.

   60

Section 10.11

  

Title Matters.

   60

Section 10.12

  

Note Document Assistance.

   61

 

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Table of Contents

(continued)

 

          Page    ARTICLE XI       HUMAN RESOURCES MATTERS   

Section 11.1

  

Human Resources.

   62    ARTICLE XII       CONDITIONS PRECEDENT   

Section 12.1

  

Conditions to Obligations of Each Party to Close.

   63

Section 12.2

  

Conditions to Obligations of the Buying Parties to Close.

   63

Section 12.3

  

Conditions to Obligations of the Selling Parties.

   64

Section 12.4

  

Partial Satisfaction of Conditions Precedent.

   66    ARTICLE XIII       SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION   

Section 13.1

  

Survival of Representations.

   66

Section 13.2

  

Seller’s Agreement to Indemnify.

   67

Section 13.3

  

Buyer Parent’s Agreement to Indemnify.

   69

Section 13.4

  

Third Party Claims.

   71

Section 13.5

  

Environmental Indemnity.

   72

Section 13.6

  

Prohibited Disclosure.

   76

Section 13.7

  

Accepted Buyer Title Objection Indemnification.

   76

Section 13.8

  

Adjustments to Purchase Price.

   77    ARTICLE XIV       TERMINATION AND AMENDMENT   

Section 14.1

  

Termination.

   77

Section 14.2

  

Effect of Termination.

   78    ARTICLE XV       GENERAL PROVISIONS   

Section 15.1

  

Notice.

   78

Section 15.2

  

Legal Holidays.

   80

Section 15.3

  

Further Assurances.

   80

Section 15.4

  

Assignment; Binding Effect.

   80

Section 15.5

  

Entire Agreement.

   81

Section 15.6

  

Amendments; Waivers.

   81

Section 15.7

  

Confidentiality.

   81

Section 15.8

  

No Third Party Beneficiaries.

   81

 

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Table of Contents

(continued)

 

          Page

Section 15.9

  

Severability of Provisions.

   82

Section 15.10

  

Governing Law.

   82

Section 15.11

  

Counterparts.

   83

Section 15.12

  

Headings.

   83

Section 15.13

  

Construction.

   83

Section 15.14

  

Reimbursement of Legal Fees.

   83

Section 15.15

  

Specific Performance.

   84

Section 15.16

  

Additional Buying Parties.

   84    ARTICLE XVI       DEFINITIONS   

Section 16.1

  

Definitions.

   84

 

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SCHEDULES AND EXHIBITS

 

Schedule A

  

Other Selling Parties

Schedule B

  

Partial Closing Plan

Schedule C

  

Additional Buying Parties

Exhibit A-1

  

Form of Buyer Parent Instrument of Assumption

Exhibit A-2

  

Form of Timber Entity Instrument of Assumption

Exhibit B

  

Adjustment Values

Exhibit C

  

Form of Timber Note

Exhibit D-1

  

Form of General Assignment and Assumption

Exhibit D-2

  

Form of General Timber Entity Assignment and Assumption

Exhibit D-3

  

Form of General Buyer Affiliate Assignment and Assumption

Exhibit D-4

  

Form of Assignment and Assumption of Timberland Lease

Exhibit D-5

  

Form of Assignment and Assumption of Real Property Leases

Exhibit E

  

Form of Bill of Sale

Exhibit F-1

  

Form of Pulpwood Supply Agreement

Exhibit F-2

  

Form of Log Supply Agreement

Exhibit F-3

  

Form of Pulpwood Support Agreement

Exhibit F-4

  

Form of Log Support Agreement

Exhibit G

  

Form of Title Affidavit

Exhibit H-1

  

Form of Assignment of Buyer Timber Entity Interests

Exhibit H-2

  

Form of Assignment of Buyer Parent Timber Entity Interests

Exhibit I

  

Form of Surface Use Agreement

Exhibit J

  

Timber Note Indicative Terms

Exhibit K

  

Form of Limited Liability Company Agreement of Buyer

 

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SCHEDULES AND EXHIBITS

 

Exhibit L

  

2006 Harvest Plan

Exhibit M

  

Form of Master Stumpage Agreement

Exhibit N

  

Selling Parties’ Knowledge List

 

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PURCHASE AGREEMENT

This PURCHASE AGREEMENT, dated as of April 4, 2006 (this “Agreement”), is among
TimberStar Southwest Parent LLC, a Delaware limited liability company (“Buyer
Parent”), TimberStar Southwest LLC, a Delaware limited liability company and a
wholly owned subsidiary of Buyer Parent (“Buyer”), INTERNATIONAL PAPER COMPANY,
a New York corporation (“Seller”), and the parties listed on Schedule A (the
“Other Selling Parties” and, collectively with Seller, the “Selling Parties”
and, collectively with Buyer Parent, Buyer, Seller and each other Buying Party
that becomes a party to this Agreement pursuant to Section 15.16, the
“Parties”). Unless otherwise defined herein, capitalized terms shall have the
meanings set forth in Article XVI.

RECITALS

WHEREAS, the Selling Parties are the owners or lessees of certain real property
and mineral rights which they wish to sell, assign, transfer or convey, together
with certain other assets, inventory and rights under certain continuing leases,
contracts and other agreements, to the Buying Parties in accordance with the
terms and subject to the conditions set forth in this Agreement;

WHEREAS, the Buying Parties wish to acquire and accept the Purchased Assets in
accordance with the terms and subject to the conditions set forth in this
Agreement;

WHEREAS, as a material inducement to the Selling Parties to sell the Purchased
Assets, Buyer Parent has agreed to cause the payment of the Purchase Price to
Seller on behalf of the Selling Parties and to assume the Assumed Liabilities,
and the Selling Parties have agreed to cause each Timber Entity to assume the
Timber Entity Assumed Liabilities; and

WHEREAS, Buyer Parent agreed to cause certain of its Affiliates to enter into
Fiber Supply Agreements immediately prior to the Closing and, as an inducement
to the Buying Parties to purchase the Purchased Assets, the Selling Parties have
agreed to enter into certain Ancillary Agreements as of the Closing Date;

NOW, THEREFORE, in consideration of the foregoing and their respective
representations, warranties, covenants and agreements set forth in this
Agreement, and intending to be legally bound hereby, the Parties agree as
follows:

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ARTICLE I

SALE AND PURCHASE

Section 1.1 Sale and Purchase of Cash Entity Purchased Assets.

Upon the terms and subject to the conditions set forth in this Agreement, each
of the Selling Parties hereby agrees to sell, assign, transfer and convey to the
relevant Cash Entities and the relevant Cash Entities hereby agrees to purchase,
acquire and accept from the Selling Parties, all of the rights, title and
interests of the Selling Parties in and to the following assets (collectively,
the “Cash Entity Purchased Assets”):

(a) Owned Cash Timberlands. The land identified in Section 1.1(a)(1) of the
Seller’s Disclosure Letter and identified therein as Cash Entity Purchased
Assets in accordance with Section 1.5 (it being agreed that the land identified
in Section 1.1(a)(1) of the Seller’s Disclosure Letter as land held by Blue Sky
Timber Properties LLC, together with (i) all buildings thereon, (ii) all timber
growing or standing thereon, (iii) all roads, bridges and other improvements and
fixtures thereon, (iv) all right, title and interest of the Selling Parties in
and to any creeks, ponds, lakes, streams and other waterways located on or
adjoining such land, including all of the riparian rights held by Blue Sky
Timber Properties LLC with respect thereto, (v) all right, title and interest of
Blue Sky Timber Properties LLC to vacated rights of way, streets, alleys and
roads appurtenant to such land and (vi) all other privileges, appurtenances,
easements (including the Buyer Easements in respect thereof) and other rights
appertaining thereto (the “Blue Sky Timberlands”) shall be identified as Cash
Entity Purchased Assets under Section 1.5), together with (i) all buildings
thereon, (ii) all timber growing or standing thereon, (iii) all roads, bridges
and other improvements and fixtures thereon, (iv) all right, title and interest
of the Selling Parties in and to any creeks, ponds, lakes, streams and other
waterways located on or adjoining such land, including all of the Selling
Parties’ riparian rights with respect thereto, (v) all right, title and interest
of the Selling Parties to vacated rights of way, streets, alleys and roads
appurtenant to such land and (vi) all other privileges, appurtenances, easements
(including the Buyer Easements in respect thereof) and other rights appertaining
thereto (the “Owned Cash Timberlands”), subject to the Permitted Exceptions;
provided that Seller reserves for itself and its successors and assigns the
easements with respect to the Owned Cash Timberlands described in Section 1.1(a)
of the Seller’s Disclosure Letter;

(b) Cash Leasehold Interests. The rights of the Selling Parties as lessee,
sublessee or licensee with respect to the leases, subleases and licenses
identified in Section 1.1(b) of the Seller’s Disclosure Letter and identified
therein as Cash Entity Purchased Assets in accordance with Section 1.5, which
are in effect on the Closing Date and which relate to the use and occupancy of
certain land (the “Cash Timberland Leases”), together with all purchase options,
prepaid rents and security deposits relating

 

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thereto, and together with all leasehold improvements with respect thereto,
subject to the Permitted Exceptions (collectively, the rights, interests and
improvements described above, the “Cash Leasehold Interests”);

(c) Conveyed Cash Minerals. All mineral substances in, on or under the Owned
Cash Timberlands, including any rights pertaining to biological sequestration on
or above the surface of the Owned Cash Timberlands, but excluding the Reserved
Minerals and Gases, Reserved Mineral and Gas Rights, Reserved Water Rights and
Subsurface Geosequestration Rights in respect of the Owned Cash Timberlands (the
“Conveyed Cash Minerals”);

(d) Cash Licenses. To the extent transferable under applicable Law, the rights
of the Selling Parties under the licenses, permits, authorizations, orders,
registrations, certificates, variances, approvals, franchises and consents of
Governmental Authorities or other Persons, which are in effect on the Closing
Date and (i) are held or were obtained by the Selling Parties primarily in
connection with the Cash Entity Purchased Assets or (ii) are described in
Section 1.1(d) of the Seller’s Disclosure Letter and identified therein as Cash
Entity Purchased Assets in accordance with Section 1.5 (collectively, the rights
described above, the “Cash Licenses”);

(e) Cash Purchased Contracts. The rights of the Selling Parties under the
Contracts in effect on the Closing Date that (i) primarily relate to all or any
portion of the Purchased Cash Real Property Assets or the forest operations
conducted on such Purchased Cash Real Property Assets, but excluding the rights
of the Selling Parties under (A) the Fiber Supply Agreements or any other
Ancillary Agreements and (B) any Cash Timberland Leases, Cash Real Property
Leases and Personal Property Leases, or (ii) are described in Section 1.1(e) of
the Seller’s Disclosure Letter and identified therein as Cash Entity Purchased
Assets in accordance with Section 1.5 (collectively, the rights described above,
the “Cash Purchased Contracts”);

(f) Cash Real Property Leases. The rights of the Selling Parties with respect to
any leases in effect on the Closing Date (i) that relate to all or any portion
of the Purchased Cash Real Property Assets to which any Selling Party is the
lessor and are described in Section 1.1(f)(1) of the Seller’s Disclosure Letter,
including any leases under which the Selling Parties have granted rights to a
third party with respect to the Conveyed Cash Minerals or hunting or other
recreational rights with respect to the Cash Timberlands (or, with respect to
the hunting leases in respect of the Cash Timberlands listed on
Section 1.1(f)(2) of the Seller’s Disclosure Letter that expire prior to the
Closing Date, any new hunting leases entered into with the same third party
prior to the Closing Date on substantially the same terms as the applicable
prior lease and with a term not to exceed 12 months) or (ii) under which a
Selling Party is a lessee of facilities related to the forest operations on the
Cash Timberlands (collectively, the leases described above, the “Cash Real
Property Leases”); and

 

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(g) Cash Purchased Condemnations. Except to the extent transferred pursuant to
Section 1.3, the interests of the Selling Parties in any Condemnations that
(i) exist on the date hereof or that arise between the date of this Agreement
and the Closing Date, including the Condemnations listed in Section 1.1(g) of
the Seller’s Disclosure Letter (or, if resolved prior to the Closing, the
proceeds actually received with respect thereto, net of all costs incurred by
the Selling Parties to recover such proceeds) and (ii) are attributable
primarily to the Cash Timberlands (collectively, the Condemnations described
above, the “Cash Purchased Condemnations”).

(h) Personalty. Except to the extent transferred pursuant to Section 1.3, the
following assets (the “Personalty Assets”):

(i) Lying Timber. All timber lying on the Timberlands;

(ii) Purchased Personal Assets. The machinery, equipment, motor vehicles,
appliances, tools, supplies, furnishings, inventory and other tangible personal
property, owned by the Selling Parties on the Closing Date and primarily used by
the Selling Parties in connection with the forest operations conducted on the
Timberlands, including the property described in Section 1.1(h)(ii) of the
Seller’s Disclosure Letter and identified therein as Personalty Assets in
accordance with Section 1.5 (collectively, the property described above, the
“Purchased Personal Assets”); and

(iii) Personal Property Leases. The rights of the Selling Parties with respect
to the leases in effect on the Closing Date under which a Selling Party is a
lessee and that (x) relate to any machinery, equipment, motor vehicles,
appliances, tools, supplies, furnishings, inventory and other tangible personal
property, exclusively used by the Selling Parties in connection with the forest
operations conducted on the Timberlands or (y) are described in
Section 1.1(h)(iii) of the Seller’s Disclosure Letter and identified therein as
Personalty Assets in accordance with Section 1.5 (collectively, the leases
described above, the “Personal Property Leases”).

Section 1.2 Transfer of Assets.

Upon the terms and subject to the conditions set forth in this Agreement,
immediately prior to the Closing each of the Selling Parties hereby agrees to
assign, transfer and convey to the relevant Timber Entity all the rights, title
and interests of the Selling Parties in and to the following assets
(collectively, the “Timber Entity Assets”):

(a) Owned Installment Note Timberlands. The land identified in Section 1.1(a)(1)
of the Seller’s Disclosure Letter, which land will be identified therein as
Timber Entity Assets in accordance with Section 1.5 (it being understood that
none of the

 

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Blue Sky Timberlands shall be identified as Timber Entity Assets under
Section 1.5), together with (i) all buildings thereon, (ii) all timber growing
or standing thereon, (iii) all roads, bridges and other improvements and
fixtures thereon, (iv) all right, title and interest of the Selling Parties in
and to any creeks, ponds, lakes, streams and other waterways located thereon,
including all of the Selling Parties’ riparian rights with respect thereto,
(v) all right, title and interest of the Selling Parties in and to vacated
rights of way, streets, alleys and roads appurtenant to such land, and (vi) all
other privileges, appurtenances, easements (including the Buyer Easements in
respect thereof) and other rights appertaining thereto (the “Owned Installment
Note Timberlands”), subject to the Permitted Exceptions; provided that Seller
reserves for itself and its successors and assigns the easements with respect to
the Owned Installment Note Timberlands described in Section 1.2(a) of the
Seller’s Disclosure Letter;

(b) Timber Entity Leasehold Interests. The rights of the Selling Parties as
lessee with respect to the leases, subleases and licenses identified in
Section 1.1(b) of the Seller’s Disclosure Letter, which are in effect on the
Closing Date and identified therein as Timber Entity Assets in accordance with
Section 1.5 (the “Installment Note Timberland Leases”), which relate to the use
and occupancy of certain land, including all purchase options, prepaid rents and
security deposits relating thereto, together with certain leasehold improvements
with respect thereto, subject to the Permitted Exceptions (collectively, the
rights, interests and improvements described above, the “Timber Entity Leasehold
Interests”);

(c) Conveyed Timber Entity Minerals. All mineral substances in, on or under the
Owned Installment Note Timberlands, including any rights pertaining to
biological sequestration on or above the surface of the Owned Installment Note
Timberlands, but excluding the Reserved Minerals and Gases, Reserved Mineral and
Gas Rights, Reserved Water Rights and Subsurface Geosequestration Rights in
respect of the Owned Installment Note Timberlands (the “Conveyed Timber Entity
Minerals”);

(d) Timber Entity Licenses. To the extent transferable under applicable Law, the
rights of the Selling Parties under the licenses, permits, authorizations,
orders, registrations, certificates, variances, approvals, franchises and
consents of Governmental Authorities or other Persons, which are in effect on
the Closing Date and (i) are held or were obtained by the Selling Parties
primarily in connection with the Timber Entity Assets or (ii) are described in
Section 1.1(d) of the Seller’s Disclosure Letter and identified therein as
Timber Entity Assets in accordance with Section 1.5 (collectively, the rights
described above, the “Timber Entity Licenses”);

(e) Timber Entity Purchased Contracts. The rights of the Selling Parties under
the Contracts in effect on the Closing Date that (i) primarily relate to all or
any portion of the Purchased Timber Entity Real Property Assets or the forest
operations conducted on such Purchased Timber Entity Real Property Assets, but
excluding the

 

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rights of the Selling Parties under (A) the Fiber Supply Agreements or any other
Ancillary Agreements and (B) any Installment Note Timberland Leases, Timber
Entity Real Property Leases and Personal Property Leases or (ii) are described
in Section 1.1(e) of the Seller’s Disclosure Letter and identified therein as
Timber Entity Assets in accordance with Section 1.5 (collectively, the rights
described above, the “Timber Entity Purchased Contracts”);

(f) Timber Entity Real Property Leases. The rights of the Selling Parties with
respect to any leases in effect on the Closing Date (i) that relate to all or
any portion of the Purchased Timber Entity Real Property Assets to which any
Selling Party is a lessor and identified in Section 1.1(f)(1) of the Seller’s
Disclosure Letter, including any leases under which the Selling Parties have
granted rights to a third party with respect to the Conveyed Timber Entity
Minerals or hunting or other recreational rights with respect to the Installment
Note Timberlands (or, with respect to the hunting leases in respect of the
Installment Note Timberlands listed on Section 1.1(f)(2) of the Seller’s
Disclosure Letter that expire prior to the Closing Date, any new hunting leases
entered into with the same third party prior to the Closing Date on
substantially the same terms as the applicable prior lease and with a term not
to exceed 12 months) or (ii) under which a Selling Party is a lessee of
facilities related to the forest operations on the Installment Note Timberlands
(collectively, the leases described above, the “Timber Entity Real Property
Leases”); and

(g) Installment Note Purchased Condemnations. The interests of the Selling
Parties in any Condemnations that (i) exist on the date hereof or that arise
between the date of this Agreement and the Closing Date, including the
Condemnations listed in Section 1.1(g) of the Seller’s Disclosure Letter (or if
resolved prior to the Closing, the proceeds actually received therefrom, net of
all costs incurred by the Selling Parties to recover such proceeds) and (ii) are
attributable primarily to the Installment Note Timberlands (collectively, the
Condemnations described above, the “Installment Note Purchased Condemnations”).

Section 1.3 Transfer of Personalty and Cash Purchased Condemnations to Buyer
Affiliate. Upon the terms and subject to the conditions set forth in this
Agreement, at the Closing, each of the Selling Parties hereby agrees to assign,
transfer and convey to Buyer Affiliate, and Buyer Affiliate hereby agrees to
purchase, acquire and accept from the Selling Parties, all the rights, title and
interests of the Selling Parties in and to the Cash Entity Purchased Assets (if
any) which otherwise would be conveyed to the Cash Entities pursuant to
Section 1.1(h) hereof and which Cash Entity, after consultation with the Selling
Parties, identifies in writing to the Selling Parties no later than 15 days
prior to the Closing (collectively, the “Buyer Affiliate Assets”).

 

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Section 1.4 Timber Entity Interests.

Upon the terms and subject to the conditions set forth in this Agreement,
immediately prior to the Closing, each of the Selling Parties hereby agrees to
assign, transfer and convey to Buyer all of the outstanding (a) limited
partnership interests in the Timber LP Entity, (b) membership interests in the
Timber GP and (c) membership interests in each of the Timber LLC Entities (the
interests described in (a), (b) and (c) above, collectively, the “Timber Entity
Interests”).

Section 1.5 Purchased Asset Conveyance.

Not later than ten days prior to the Closing, and following consultation in good
faith with Buyer Parent, Seller shall deliver to Buyer Parent a copy of the
schedules contained in Section 1.1 of the Seller’s Disclosure Letter marked to
indicate which of the Purchased Assets will be conveyed as Cash Entity Purchased
Assets, which will be conveyed as Timber Entity Assets. Not later than five days
prior to Closing, Buyer shall deliver to Seller Section 1.5 of the Buyer
Parents’ Disclosure Letter which shall indicate which of the Purchased Assets,
if any, will be conveyed as Buyer Affiliate Assets and which shall indicate
which of the Purchased Assets will be conveyed to each Cash Entity, Timber
Entity and Buyer Affiliate. To the extent that with respect to particular
Purchased Assets, the provisions of Sections 1.1 or 1.2 conflict or overlap,
such Purchased Assets will be designated Timber Entity Assets. With respect to
any agreement for which only a part of such agreement shall be included within
the Purchased Assets, the relevant Selling Parties and Buying Parties shall
cooperate to the extent feasible in effecting a lawful and commercially
reasonable arrangement under which the relevant Buying Party shall receive the
benefits under such agreement after Closing, and to the extent of the benefits
received, such Buying Party shall pay and perform the relevant Selling Party’s
obligations arising under such agreement from and after Closing in accordance
with the agreement’s terms.

Section 1.6 Excluded Assets.

Notwithstanding anything in this Agreement to the contrary, the following assets
of the Selling Parties shall be excluded from and shall not constitute any part
of the Purchased Assets (collectively, the “Excluded Assets”):

 

  (a) all Selling Parties’ rights of first refusal under the Contracts described
in Section 1.6(a) of the Seller’s Disclosure Letter;

 

  (b) the Reserved Minerals and Gases, the Reserved Mineral and Gas Rights, the
Reserved Water Rights and the Subsurface Geosequestration Rights;

 

  (c) the Continuing Agreements; and

 

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  (d) all accounts receivable, accrued as of the Closing Date, in respect of the
sales of timber removed from the Timberlands.

Section 1.7 Permitted Exceptions.

The Purchased Assets shall be sold, transferred, assigned and conveyed to each
Buying Party subject to the following matters (collectively, the “Permitted
Exceptions”):

(a) Restrictions on the ability of any Buying Party to build upon or use the
Purchased Assets imposed by any current or future development standards,
building or zoning ordinances or any other Law;

(b) To the extent a tract is bounded or traversed by a river, stream, branch or
lake:

(i) The rights of upper and lower riparian owners and the rights of others to
navigate such river or stream to the extent it is navigable;

(ii) The right, if any, of neighboring riparian owners and the public or others
to use any public waters or the rights, if any, of the public to use the beaches
or shores for recreational purposes;

(iii) Any claim of lack of title to the Timberlands formerly or presently
comprising the shores or bottom of navigable waters or as a result of the change
in the boundary due to accretion or avulsion; and

(iv) Any portion of the Timberlands which is sovereignty lands and other lands
which may lie beneath the ordinary high water mark of navigable rivers as
established as of the date the state in which such land is located was admitted
to the Union of the United States;

(c) To the extent any portion of the Timberlands is bounded or traversed by a
public road, the rights of others in and to any portion of the Timberlands that
lies within said road;

(d) Railroad easements or rights of way, if any, traversing the Timberlands and
the rights of railroad companies to any tracks, siding, ties and rails
associated therewith;

(e) All restrictions on the use of the Purchased Assets due to Environmental
Laws, conservation easements of record, or the habitat conservation plans or
similar agreements entered into by any of the Selling Parties as described in
Section 1.7(e) of the Seller’s Disclosure Letter (the “Habitat Conservation
Plans”), other than

 

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those which individually or in the aggregate would have a material adverse
effect on the use and enjoyment by any Buying Party of the Timberlands or any
portion thereof;

(f) As to the Timberlands, subject to the apportionment provisions of
Section 2.4, all ad valorem property Taxes for the Tax period during which the
Closing occurs and all subsequent Tax periods, including any additional or
supplemental Taxes that may result from a reassessment of the Timberlands due to
an action or inaction of the Buying Parties, and any potential roll-back or
greenbelt type Taxes related to any agricultural, forest or open space exemption
which is subject to recapture pursuant to state Laws;

(g) Liens for Taxes not yet due and payable;

(h) Easements, discrepancies or conflicts in boundary lines, shortages in area,
encroachments or any other facts which a current and accurate survey of the
Timberlands would disclose, other than those that, individually or in the
aggregate, would prevent or restrict in any material manner the continued
ability to commercially harvest timber on the affected parcel in substantially
the same manner as such harvesting is currently conducted or would materially
adversely impact the value of such parcel for the purpose of harvesting such
timber;

(i) All oil, gas and other minerals as may have been previously reserved by or
conveyed to others and any mineral leases concerning the mineral estate of the
Timberlands;

(j) Rights, if any, relating to the construction and maintenance in connection
with any public utility of wires, poles, pipes, conduits and appurtenances
thereto, on, under, above or across the Timberlands;

(k) The Reserved Easements granted to or reserved by the Selling Parties
pursuant to any provision of this Agreement;

(l) Rights of other parties under any of the Purchased Contracts, the Timberland
Leases, the Real Property Leases or the Personal Property Leases;

(m) All matters disclosed in the Seller’s Disclosure Letter;

(n) Any uncured Buyer Parent’s Title Objections pursuant to Section 2.3(b)
(other than those Seller has elected to cure pursuant to the provisions of
Section 2.3(b)(i));

(o) The terms and provisions of the Master Stumpage Agreements, the Fiber Supply
Agreements and the Support Agreements;

 

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(p) Restrictions and obligations pursuant to the Continuing Agreements;

(q) Any claim of lack of access rights to any portion of the Owned Timberlands
where (i) permission to access has been granted verbally or (ii) the Selling
Parties have otherwise historically enjoyed access and Seller has provided to
the Title Company an affidavit to such effect;

(r) Any other claim (excluding those in clause (q)) of lack of access rights to
any portion of the Timberlands, provided that such claims do not relate to
properties exceeding in the aggregate 1% of the total acreage of the
Timberlands, and provided, further that if such claims relate to the properties
exceeding, individually or in the aggregate, 1% of the total acreage of the
Timberlands, the Selling Parties shall be entitled to designate which claims
relating to properties constituting in the aggregate not more than 1% of the
total acreage of the Timberlands shall be deemed Permitted Exceptions;

(s) Any Condemnation in respect of the Timberlands;

(t) With respect to any Leasehold Interest, any covenants, obligations, use
restrictions and other terms set forth in the relevant Timberland Lease; and

(u) Any easements, covenants, use restrictions, zoning restrictions, boundary
line disputes, encroachments and other third-party rights affecting the
Timberlands not described in items (a) through (t) above and which, individually
or in the aggregate, would not prevent or restrict in any material manner the
continued ability to commercially harvest timber thereon in substantially the
same manner as such harvesting is currently conducted.

Section 1.8 Assumed Liabilities; Excluded Liabilities.

(a) At the Closing, Buyer Parent shall deliver to the Selling Parties an
instrument of assumption substantially in the form of Exhibit A-1 (the “Buyer
Parent Instrument of Assumption”) pursuant to which Buyer Parent shall
undertake, assume and agree to perform, pay, become liable for and discharge
when due, and hold the Selling Parties and their respective directors, officers,
employees, Affiliates, controlling persons, agents and representatives, and
their respective successors and assigns, harmless from any and all liabilities
and obligations arising in the ordinary course of business (subject to the
limitations described in Section 1.8(c)(xii)), whether accrued or unaccrued,
absolute or contingent, known or unknown, asserted or unasserted, resulting from
or related to the Purchased Assets or any contract, commitment or undertaking to
the extent related to the Purchased Assets, other than the Excluded Liabilities
(collectively, the “Assumed Liabilities”).

 

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(b) Immediately prior to the Closing, Seller shall cause each Timber Entity to
deliver to the Selling Parties an instrument of assumption, substantially in the
form of Exhibit A-2 (the “Timber Entity Instrument of Assumption”), pursuant to
which each Timber Entity will solely and exclusively undertake, assume and agree
to perform, pay, become liable for and discharge when due, and hold the Selling
Parties and their respective directors, officers, employees, Affiliates,
controlling persons, agents and representatives, and their respective successors
and assigns, harmless from, any and all liabilities and obligations arising in
the ordinary course of business (subject to the limitations described in
Section 1.8(c)(xii)), whether accrued or unaccrued, absolute or contingent,
known or unknown, asserted or unasserted, resulting from or related exclusively
to the Timber Entity Assets conveyed to such Timber Entity, other than the
Excluded Liabilities (collectively, the “Timber Entity Assumed Liabilities”).

(c) Notwithstanding anything in this Agreement to the contrary, no Buying Party
shall assume, and the Selling Parties shall be solely and exclusively liable
with respect to, and shall pay, perform or discharge when due, the liabilities
and obligations relating to:

(i) the Purchased Assets (including the Timber Entity Assets), or any contract,
commitment or undertaking related thereto, to the extent arising outside of the
ordinary course of business and attributable to facts and circumstances
occurring prior to the Closing Date,

(ii) Tax liabilities related to the Purchased Assets (including the Timber
Entity Assets) in respect of a Pre-Closing Tax Period (other than (A) any
property Taxes and other non-Income Taxes and assessments in respect of the
Purchased Assets (including the Timber Entity Assets) for the Tax period in
which the Closing occurs, which are governed under Section 2.4, and (B) Transfer
Taxes, which are governed under Section 3.4),

(iii) the litigation matters required to be described on Section 5.6(a) of the
Seller’s Disclosure Letter,

(iv) the Reserved Easements, the Reserved Minerals and Gases, the Reserved
Mineral and Gas Rights, the Reserved Water Rights and the Subsurface
Geosequestration Rights,

(v) the Selling Parties’ continuing liabilities and obligations under this
Agreement or the Ancillary Agreements,

(vi) any accounting, transactional, brokerage or other expenses relating to the
negotiation and consummation of the transactions contemplated in this Agreement
by or on behalf of the Selling Parties,

 

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(vii) any (A) non-governmental third-party claim in respect of any injuries
caused or suffered prior to the Closing Date in respect of (1) any pre-Closing
Adverse Environmental Condition for which the amount in controversy exceeds
$250,000 (without taking into account the proviso in the definition of
Environmental Matters set forth in Section 16.1) or (2) pre-Closing violation of
applicable Environmental Law by any third party that occurred during Seller’s
ownership of the Timberlands in question, is within the Selling Parties’
Knowledge and is not disclosed to Buyer Parent prior to the Closing, for which
the amount in controversy exceeds $250,000 (without taking into account the
proviso in the definition of Environmental Matters set forth in Section 16.1);
provided that the provisions set forth in Sections 13.5(c)(i) and (ii) shall
apply to any liability or obligation of any Selling Party in respect of the
third-party claims described in this clause (A) of this subsection (vii);
provided further that no Buying Party does, or causes any other Person to,
provide or disclose any information under any circumstances, except where
required by Law, with the intent of or for the purpose of inducing, encouraging
or soliciting any non-governmental action by a third-party claimant; and
provided further that such non-governmental third-party claims pursuant to this
subsection (vii) in respect of pre-Closing Adverse Environmental Conditions or
third-party claims caused by another party’s mining operations, which mining
operations are covered by a surface rights servitude or a mineral servitude,
shall be deemed Excluded Liabilities only (x) if for a period of not less than
two years following the Closing Date, the relevant Buying Party shall have used
its good faith efforts to recover all losses, damages, costs and expenses from
such party or from the insurers of such party under applicable insurance
policies and (y) to the extent that the losses, damages, costs or expenses
arising out of such non-governmental third-party claim exceed the damages or
insurance proceeds received from such party in respect of such loss, damage,
cost or expense and (B) any other third-party claim with respect to events
occurring prior to the Closing Date (other than any third-party claim in respect
of any accounts payable obligations incurred by a Selling Party prior to the
Closing Date) the amount in controversy of which exceeds $250,000 (without
taking into account the proviso in the definition of Environmental Matters set
forth in Section 16.1); provided, however, that the claims covered in clauses
(A) and (B) shall be deemed Excluded Liabilities only if the aggregate amount of
all such claims in excess of $250,000 exceeds $7,500,000 and, in such event,
such claims shall be deemed Excluded Liabilities only to the extent exceeding
$7,500,000 in the aggregate (it being agreed that the claims up to $7,500,000 in
the aggregate and all claims under $250,000 shall be Assumed Liabilities),

(viii) any governmental enforcement action other than those arising under
Environmental Laws with respect to events occurring prior to the Closing Date,
provided that no Buying Party does, or causes any other Person to, provide

 

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or disclose any information under any circumstances, except where required by
Law, with the intent of or for the purpose of inducing, encouraging or
soliciting such governmental action,

(ix) any governmental enforcement action arising under Environmental Laws
brought within two years of the Closing Date with respect to events occurring
prior to the Closing Date, provided that the provisions set forth in Sections
13.5(c)(i) and (ii) shall apply with respect to Seller’s liability in respect of
this subsection (ix) and provided further that no Buying Party does, or causes
any other Person to, provide or disclose any information under any
circumstances, except where required by Law, with the intent of or for the
purpose of inducing, encouraging or soliciting such governmental action,

(x) except as expressly assumed by Buyer or the Hiring Entity (as defined in
Section 11.1(b) of the Seller’s Disclosure Letter) pursuant to Section 11.1(b)
of the Seller’s Disclosure Letter, (A) any claims made by any Selling Party past
or present employee, including any Transferred Employee (as defined in
Section 11.1(b) of the Seller’s Disclosure Letter) relating to or arising out of
his or her employment by any Selling Party prior to the Closing Date, and
(B) any liabilities and obligations relating to periods prior to the Closing
Date with respect to any Plan,

(xi) any liabilities relating to or secured by any Monetary Liens created as a
result of the acts or omissions of the Seller Parties or their respective
Affiliates, agents or employees, and

(xii) any accounts payable incurred in the ordinary course of business prior to
the Closing in respect of or relating to the Purchased Assets, to the extent the
aggregate amount of such accounts payable exceeds $1,500,000 (it being agreed
that such accounts payable up to $1,500,000 shall be Assumed Liabilities) and
any other liabilities incurred in the ordinary course of business prior to the
Closing assumed under Section 1.8(a) and (b), to the extent the aggregate amount
of such liabilities exceeds $1,500,000 (it being agreed that such liabilities up
to $1,500,000 shall be Assumed Liabilities)

(the liabilities described in clauses (i) through (xii) above, collectively, the
“Excluded Liabilities”).

 

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ARTICLE II

PURCHASE PRICE; PAYMENT

Section 2.1 Purchase Price.

The aggregate purchase price payable by the Buying Parties to Seller on behalf
of the Selling Parties in consideration for the Purchased Assets shall be
$1,130,000,000 ($17,000,000 of which is contingent on delivery of certain
Conforming Title Commitments as set forth in Section 2.3(f)) (the
“Pre-Adjustment Purchase Price”), subject to adjustment as provided in Sections
2.3 and 2.4 and Article XIII (the “Purchase Price”). The Purchase Price shall be
payable as provided in Section 2.5.

Section 2.2 Allocation of Purchase Price.

(a) The Pre-Adjustment Purchase Price shall be tentatively allocated as follows:
(i) approximately 80% of the Pre-Adjustment Purchase Price shall be tentatively
allocated to the Installment Note Purchase Price, subject to adjustment as
provided in this Section 2.2(a); and (ii) the balance of the Pre-Adjustment
Purchase Price shall be allocated to the Cash Purchase Price. Not later than 10
days prior to the Closing Date, Seller shall determine and deliver to Buyer
Parent, subject to Buyer Parent’s consent (which consent shall not be
unreasonably withheld or delayed), the actual amounts of the Installment Note
Purchase Price to be paid by Buyer to Seller at the Closing and the Cash
Purchase Price to be paid by the Buying Parties to Seller at the Closing. The
Installment Note Purchase Price (prior to any adjustments made pursuant to
Sections 2.3 or 2.4) shall not exceed $800,000,000. The initial allocation
described in this Section 2.2(a) shall be further adjusted in accordance with
the Purchase Price adjustment provisions set forth in Sections 2.3 and 2.4.

(b) Not later than 10 days prior to the Closing, Seller shall determine, prepare
and submit to Buyer Parent proposed schedules of the following (which schedules
shall become final and binding on the Parties only as set forth in
Section 2.2(d)): (i) the allocation of the Installment Note Purchase Price
(together with any Timber Entity Assumed Liabilities that are considered
liabilities for Income Tax purposes and that directly relate to the Installment
Note Timberlands) among the Installment Note Timberlands (the “Installment Note
Purchase Price Allocation”) and (ii) the allocation of the Cash Purchase Price
(together with any Assumed Liabilities that are considered liabilities for
Income Tax purposes and that are directly related to the Cash Assets) among the
Cash Assets (the “Cash Purchase Price Allocation” and, together with the
Installment Note Purchase Price Allocation, the “Purchase Price Allocation”).
The Installment Note Purchase Price (together with any Timber Entity Assumed
Liabilities that are considered liabilities for Income Tax purposes and that are
directly related to the Installment Note Timberlands) shall be allocated in its
entirety to the Installment Note

 

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Timberlands. Any Cash Assets used or held for use by the Selling Parties in
connection with the ownership and operation of the Installment Note Timberlands
(including any Timber Entity Assets that do not constitute Installment Note
Timberlands and any Buyer Affiliate Assets) or any Assumed Liabilities (other
than any Timber Entity Assumed Liabilities that are directly related to the
Installment Note Timberlands) shall be allocated as a part of the Cash Purchase
Price Allocation. It is the intention of the Parties that the Installment Note
Purchase Price (in the form of Timber Notes) will be paid solely as
consideration for the sale of the Installment Note Timberlands; provided,
however, that certain post-Closing adjustments to the Purchase Price made in the
form of cash may be allocated in part to the Installment Note Timberlands.
Seller shall adjust the Purchase Price Allocation from time to time to reflect
any adjustments to the Purchase Price made pursuant to Sections 2.3 and 2.4 and
Article XIII.

(c) The Purchase Price Allocation shall be made in accordance with Section 1060
of the Code and applicable Treasury Regulations. Except to the extent such
action or inaction would cause any Person to be in violation of the final
determination of any Tax Authority, each of the Parties shall: (i) be bound by
the Purchase Price Allocation for purposes of determining any Taxes;
(ii) prepare and file, and cause their Affiliates to prepare and file, their Tax
Returns on a basis consistent with the Purchase Price Allocation; and (iii) take
no position, and cause their Affiliates to take no position, inconsistent with
the Purchase Price Allocation on any applicable Tax Return or in any proceeding
before any Tax Authority or otherwise. In the event that the Purchase Price
Allocation is disputed by any Tax Authority, the Party receiving notice of the
dispute shall promptly notify the other Parties concerning the dispute and shall
consult with the other Parties concerning the resolution of the dispute and each
Party shall cooperate in good faith in responding to such challenge in order to
preserve the effectiveness of the allocations determined pursuant to this
Section 2.2. Each Party shall cooperate in the preparation and timely filing of
Form 8594 and any comparable state or local forms or reports and, to the extent
permissible by or required by law, any corrections, amendments or supplements
(or additional forms or reports) thereto (including any supplements, amendments,
forms or reports arising as a result of any adjustments to the Purchase Price
pursuant to Sections 2.3 and 2.4 and Article XIII).

(d) If Buyer Parent does not object in writing to Seller’s proposed Purchase
Price Allocation within five days of delivery thereof, such proposed Purchase
Price Allocation shall become final and binding on the Parties. If there is a
dispute between Buyer Parent and Seller regarding the Purchase Price Allocation,
such dispute shall be resolved as follows: (i) the Parties will in good faith
attempt to negotiate a settlement of the dispute, (ii) if the Parties are unable
to negotiate a resolution of the dispute within 30 days, the dispute will be
submitted to the national office of a firm of independent accountants of
nationally recognized standing reasonably satisfactory to Seller and Buyer
Parent (the “Tax Dispute Accountants”), (iii) the Parties will present their
arguments to the Tax Dispute Accountants within 15 days after submission of the

 

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dispute to the Tax Dispute Accountants, (iv) the Tax Dispute Accountants will
resolve the dispute, in a fair and equitable manner and in accordance with the
applicable Tax law, within 30 days after the Parties have presented their
arguments to the Tax Dispute Accountants, (v) the Purchase Price Allocation (as
resolved by the Tax Dispute Accountants) shall become final and binding on the
parties and (vi) the fees and expenses of the Tax Dispute Accountants in
resolving such dispute will be borne equally by Buyer Parent and Seller.

Section 2.3 Purchase Price Adjustments.

The Purchase Price shall be subject to the following adjustments:

(a) Timber Adjustments.

(i) Within 30 days after the Closing Date, Seller shall provide to Buyer Parent
a harvest report (the “Harvest Statement”) certifying the volume, by
Merchantable Timber Category, of merchantable timber that was actually removed
from the Timberlands during the Timber Adjustment Period (the “Harvest Amount”),
together with the Weighted Average Prices for Pulpwood and the Transfer Prices
for Saw Logs and such other supporting data as Buyer Parent may reasonably
request. Buyer Parent shall have 60 days from the receipt of the Harvest
Statement to deliver to Seller written notice (an “Objection Notice”) of (i) any
objections to the calculation of any portion of such Harvest Amount and/or
(ii) any objections to the applicable Weighted Average Prices and/or Transfer
Prices, which Objection Notice shall request commencement of the procedure set
forth in Section 2.3(a)(ii). If Seller does not receive an Objection Notice
prior to the expiration of such 60-day period, Buyer Parent shall have been
deemed to have waived its right to object to Seller’s calculation of any portion
of the Harvest Amount and any applicable Weighted Average Price and/or Transfer
Price.

(ii) Within 15 days of receipt of an Objection Notice, Seller shall appoint an
independent forestry consultant reasonably satisfactory to Buyer Parent to act
as a consultant with respect to the calculation of the Harvest Amount (the
“Forestry Consultant”) and an independent appraiser, appointed by Seller, and
reasonably acceptable to Buyer Parent, to act as an arbitrator with respect to
calculation of the Weighted Average Price and/or Transfer Price. During the
period following receipt of such Objection Notice, Seller and Buyer Parent shall
negotiate in good faith to reach agreement on the Harvest Amount, Weighted
Average Price and/or Transfer Price. If Seller and Buyer Parent agree on the
calculation of such amount or such prices, then such amount and/or such prices,
as applicable, shall become final and binding on the Parties. If Seller and
Buyer Parent are unable to agree on any of the disputed calculations within 30
days after

 

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receipt of the Objection Notice, the parties shall refer outstanding matters
relating to the calculation of the Harvest Amount to the Forestry Consultant and
outstanding matters relating to the Weighted Average Prices and/or Transfer
Prices to the independent appraiser and each party will, at a mutually agreed
time within three days after referral of the matter to the Forestry Consultant
and/or independent appraiser, simultaneously submit to the (A) Forestry
Consultant their respective calculations of the disputed portions of the Harvest
Amount and any necessary supporting documentation and (B) independent appraiser
their respective calculations of the applicable Weighted Average Prices and/or
Transfer Prices. Within 30 days of such submissions, the Forestry Consultant
will select one of the two submissions (and shall not select any other amount)
as being most representative of the disputed portion of the Harvest Amount, and
the submission so selected shall be final and binding on the Parties. Within 30
days of such submissions, the independent appraiser will select one of the two
submissions (and shall not select any other price) as being most representative
of the disputed Weighted Average Price and/or Transfer Price, and the
submissions so selected shall be final and binding on the Parties. The costs and
expenses of the Forestry Consultant and the independent appraiser in connection
with the dispute resolution procedure set forth herein shall be paid by the
non-prevailing Party.

(iii) Upon a final determination of the Harvest Amount, and the applicable
Weighted Average Prices and Transfer Prices, the Purchase Price shall be
adjusted pursuant to this Section 2.3(a)(iii). If the Timber Adjustment Value is
less than zero, the Purchase Price shall be reduced by such amount and Seller
shall pay such amount in cash by wire transfer of immediately available funds to
the bank account or accounts designated by Buyer Parent. If the Timber
Adjustment Value is greater than zero, the Purchase Price shall be increased by
such amount and Buyer Parent shall pay such amount in cash by wire transfer of
immediately available funds to the bank account or accounts designated by
Seller.

(b) Buyer Parent’s Title Objections.

(i) Buyer Parent shall have until the 45th day after the date a Title Commitment
(together with any exceptions thereto) is made available to Buyer Parent
pursuant to this Agreement (provided that Buyer Parent shall review such Title
Commitment and documentary exceptions as expeditiously as practicable) (the
“Title Objection Period”) to deliver to Seller written notice of any objections
to matters reflected in such Title Commitment, which, in Buyer Parent’s
reasonable judgment, would materially adversely affect the use or enjoyment by
any Cash Entity or any Timber Entity of any parcel or portion of the Timberlands
(each, a “Buyer Parent Title Objection” and collectively, “Buyer Parent’s Title
Objections”); provided, however, that Buyer Parent shall have no right to object
to the following items pursuant to this Section 2.3(b) (and such matters will
not be

 

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considered Buyer Parent Title Objections for purposes of this Agreement):
(A) any Permitted Exceptions or (B) any title matter that otherwise would have
constituted a Buyer Parent Title Objection, unless and until, in the aggregate,
such title matters referred to in this subsection (B) affect 1% or more of the
total acreage of the FMA containing the affected Timberlands (the “Title Basket
Amount”) and, in such case, any such title matters affecting the Timberlands
exceeding 1% of such total acreage shall be eligible to be Buyer Parent Title
Objections; provided that (1) the Title Basket Amount shall not apply to any
Buyer Parent Title Objection in respect of a Title Failure, (2) Buyer Parent
shall be permitted to object to all Title Failures and (3) Buyer Parent Title
Objections in respect of Title Failures shall not be considered in the
determination of whether the Buyer Parent Title Objections exceed the Title
Basket Amount. Upon receipt of Buyer Parent’s Title Objections, Seller may elect
(but shall not be obligated) to remove or cause to be removed any such Buyer
Parent Title Objections, and Seller shall notify Buyer Parent in writing within
10 days after receipt of Buyer Parent’s Title Objections whether Seller elects
to remove the same. Failure of Seller to respond in writing within such time
period shall be deemed an election by Seller not to remove such Buyer Parent
Title Objections. Any Buyer Parent Title Objection shall be deemed to be cured
if Seller causes the Title Company to issue a Title Policy for such portion of
the Timberlands affirmatively insuring over, or not raising as an exception to
the Title Policy, such Buyer Parent Title Objection. Notwithstanding the
foregoing, Seller shall be obligated (without the need for Buyer Parent to make
any Buyer Parent Title Objection with respect thereto) to remove, on or before
the Closing Date, all Liens against the Timberlands evidencing monetary
encumbrances (other than Liens for non-delinquent general real estate Taxes or
assessments) (“Monetary Liens”) created as a result of the acts or omissions of
the Seller Parties or their respective Affiliates, agents or employees. Seller
may use any portion of the Timberlands Purchase Price to satisfy any Monetary
Liens that exist as of the Closing Date, provided that Seller shall cause the
Title Company to remove such Monetary Liens. If Seller does not receive written
notice of Buyer Parent’s Title Objections for any objection to matters reflected
in a particular Title Commitment on or before the expiration of the relevant
Title Objection Period, Buyer Parent shall be deemed to have waived its right to
object to any and all matters reflected in such Title Commitment and any Cash
Entity or any Timber Entity, as the case may be, and, except in the case of a
Title Failure or Monetary Lien, shall be deemed to accept title subject to such
matters. Except in the case of a Title Failure or Monetary Lien, any such Buyer
Parent Title Objection waived (or deemed waived) by Buyer Parent shall be deemed
to constitute a Permitted Exception, and the Closing shall occur as herein
provided without any reduction of or credit against the Timberlands Purchase
Price for such waived Buyer Parent Title Objection.

 

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(ii) Remedy for Title Failure. In the event of any Title Failure, Buyer Parent’s
sole remedy with respect to any such Title Failure shall be to receive a
Purchase Price adjustment as described in Sections 2.3(b)(iv) and (v) and the
relevant Buying Parties shall proceed to the Closing with those portions of the
Timberlands that are subject to such Title Failure excluded from the Purchased
Real Property Assets to be conveyed to any Cash Entity at the Closing or to any
Timber Entity immediately prior to the Closing (a “Title Failure Carveout”).
Notwithstanding the foregoing, each Title Failure Carveout with respect to a
Title Failure affecting a portion or portions of the Owned Timberlands shall
contain at least 20 acres and provide the Selling Parties with reasonable access
to such Title Failure Carveout and each Title Failure Carveout with respect to a
Title Failure affecting a Leasehold Interest shall contain such Leasehold
Interest in its entirety.

(iii) Remedy for Buyer Parent Title Objection. In the event Seller elects or is
deemed to have elected not to cure any Buyer Parent Title Objection (other than
Monetary Liens or Title Failures) (an “Accepted Buyer Parent Title Objection”),
then Seller, at its sole election, may either: (A) (1) in the case of any Buyer
Parent Title Objections relating to a portion or portions of the Owned
Timberlands, (x) require that the relevant Cash Entity or Buyer proceed to the
Closing with such Cash Entity accepting title to those portions of the Owned
Cash Timberlands being transferred to it that are subject to such uncured Buyer
Parent’s Title Objections, and each Timber Entity accepting title, immediately
prior to the Closing, to those portions of the Owned Installment Note
Timberlands being transferred to it that are subject to such uncured Buyer
Parent’s Title Objections and (y) indemnify such Cash Entity or such Timber
Entity, as the case may be, for any damages actually suffered by such Party as a
result of the circumstances giving rise to such Accepted Buyer Parent Title
Objections pursuant to Section 13.7 or (2) in the case of any Buyer Parent Title
Objections relating to any Leasehold Interest, (x) require that the relevant
Cash Entity or Buyer proceed to the Closing with such Cash Entity assuming the
Cash Timberland Lease that is subject to such uncured Buyer Parent’s Title
Objections, and each Timber Entity assuming, effective immediately prior to the
Closing, the Installment Note Timberland Lease that is subject to such uncured
Buyer Parent’s Title Objections and (y) indemnify such Cash Entity or such
Timber Entity, as the case may be, for any damages actually suffered by such
party as a result of the circumstances giving rise to such Accepted Buyer Parent
Title Objections pursuant to Section 13.7; provided, however, that in the event
the indemnification contemplated by this clause (A) is unacceptable to any
Lender providing debt financing to the Buying Parties, the Selling Parties will
use reasonable best efforts (including indemnifying the Title Company from and
against and against any liability in respect of any Accepted Buyer Parent Title
Objections subject to the limits set forth in Section 13.7) to provide to Buyer
Parent such Title Commitments issued by the Title Company as will be reasonably
acceptable to

 

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such Lender, or (B) require that the relevant Cash Entity or Timber Entity
accept an adjustment to the Cash Purchase Price as described in Sections
2.3(b)(iv) and (v) and require that the relevant Cash Entity or Buyer, as the
case may be, proceed to the Closing with those portions of the Owned Timberlands
or the Leasehold Interests that are subject to such uncured Buyer Parent’s Title
Objections excluded from the Purchased Real Property Assets to be conveyed to
the relevant Cash Entity at the Closing or to the relevant Timber Entity
immediately prior to the Closing, as the case may be (a “Title Objection
Carveout”); provided that (x) each Title Objection Carveout with respect to a
Buyer Parent’s Title Objection affecting a portion or portions of the Owned
Timberlands shall contain at least 20 acres and provide the Selling Parties with
reasonable access to such Title Objection Carveout and (y) each Title Objection
Carveout with respect to a Buyer Parent’s Title Objection affecting a Leasehold
Interest shall contain such Leasehold Interest in its entirety.

(iv) Value Calculation. Seller shall calculate the value of any portion of the
Timberlands subject to any Title Failure Carveout or Title Objection Carveout in
accordance with Exhibit B (it being understood that in the case of any Leasehold
Interests, such calculation will be based on the discounted cash flows
attributable to such Leasehold Interests) and shall deliver a statement of such
calculation to Buyer Parent. If, within 15 days after the receipt of Seller’s
calculation, Buyer Parent does not deliver to Seller a written notice of any
objections to Seller’s calculation, Buyer Parent and Seller shall be deemed to
have agreed to Seller’s calculation. If, within such 15-day period, Buyer Parent
objects to Seller’s calculation, Seller and Buyer Parent shall negotiate in good
faith to determine by mutual agreement the value of the portions of the
Timberlands subject to any Title Failure Carveout or Title Objection Carveout in
accordance with Exhibit B. If Seller and Buyer Parent agree (or are deemed to
have agreed) on such value, then such value will become final and binding on the
Parties. If Seller and Buyer Parent are unable to so agree within such 15-day
period, Seller and Buyer Parent will refer the matter to an independent
appraiser (the “Independent Appraiser”) selected by Seller and reasonably
acceptable to Buyer Parent, and each of Seller and Buyer Parent will, at a
mutually agreed time within three days of such referral, simultaneously submit
to the Independent Appraiser their respective calculations of the value of the
portions of the Timberlands subject to any such Title Failure Carveout or Title
Objection Carveout in accordance with Exhibit B, together with any necessary
supporting documentation. The Independent Appraiser shall determine the value of
the portions of the Timberlands subject to any Title Failure Carveout or Title
Objection Carveout in accordance with Exhibit B and, based on that
determination, shall, within 15 days of such final submissions, select one of
the two final submissions (and shall not select any other amount) as being most
representative of the value of the portions of the Timberlands subject to any
Title

 

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Failure Carveout or Title Objection Carveout, and the submission so selected
shall be final and binding on the Parties. The costs and expenses of the
Independent Appraiser in connection with the dispute resolution procedure set
forth herein shall be paid by the non-prevailing Party.

(v) At the Closing, (A) the Cash Purchase Price shall be reduced by an amount
equal to the aggregate value of the portions of the Timberlands subject to such
Title Failure Carveouts or Title Objection Carveouts, if any, and (B) the
Installment Note Purchase Price shall be reduced (in the form of a reduction to
the aggregate principal amount of the Timber Note) by an amount equal to the
aggregated value of the portions of the Installment Note Timberlands subject to
such Title Failure Carveouts or Title Objection Carveouts, if any, in each case
under clause (A) or (B) above, as calculated in accordance with
Section 2.3(b)(iv) above.

(vi) Prior to the later of (x) the date that is six months from the Closing Date
or (y) such time as the Buying Parties convert the financing obtained by the
Buying Parties at the Closing in connection with the transactions contemplated
by this Agreement to permanent financing, but in any event not later than one
year from the Closing Date, Seller, at its option, may require any Cash Entity
or any Timber Entity to accept title to any Title Failure Carveout or Title
Objection Carveout (subject to the Permitted Exceptions and Reserved Easements
affecting such Title Failure Carveout or Title Objection Carveout) for which any
Selling Party has removed or caused to be removed (A) all title defects
affecting such Title Failure Carveout or (B) Buyer Parent Title Objections
affecting such Title Objection Carveout. If Seller elects to transfer to any
Cash Entity or any Timber Entity title to any Title Failure Carveout or Title
Objection Carveout pursuant to this Section 2.3(b)(vi), then (1) Seller shall
convey or cause the Other Selling Parties to convey such Title Failure Carveout
or Title Objection Carveout to the relevant Cash Entity or the relevant Timber
Entity pursuant to an instrument of conveyance described in Section 3.2(a)(iii)
or (v), as applicable, subject to the Permitted Exceptions and (2) Buyer Parent
shall pay or caused to be paid to Seller an amount in cash equal to the amount
of the value of such Title Failure Carveout or Title Objection Carveout
determined in accordance with Section 2.3(b)(iv) above; provided, however, that
in no event will such entity be obligated to pay under this Section 2.3(b)(vi)
an amount in excess of the aggregate downward adjustment to the Purchase Price
in respect of the Title Failure Carveouts or Title Objection Carveouts pursuant
to Section 2.3(b)(v). Any payments made or caused to be made by Buyer Parent to
Seller for transfers of any Title Failure Carveouts or Title Objection Carveouts
shall be made, upon the transfer of such Title Failure Carveouts or Title
Objection Carveouts from Seller to the relevant Cash Entity or the relevant
Timber Entity, as the case may be, by wire transfer of immediately available
funds to a bank account designated by Seller. Each Buying

 

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Party and their respective Affiliates shall cooperate in any effort that may be
necessary for Seller to transfer title to any Title Failure Carveout or Title
Objection Carveout or to establish, vest or confirm title to any Title Failure
Carveout or Title Objection Carveout in the relevant Cash Entity or the relevant
Timber Entity, as the case may be, including executing all documents pertaining
to the Title Failure Carveouts or Title Objection Carveouts as are reasonably
requested by the Selling Parties. Any sales, use, excise, documentary, stamp
duty, registration, transfer, conveyance, economic interest transfer or other
similar Taxes related to the conveyance to any Cash Entity or any Timber Entity,
as the case may be, of any Title Failure Carveout or Title Objection Carveout
pursuant to this Section 2.3(b)(vi) shall be payable as Transfer Taxes in
accordance with Section 3.4.

(c) Casualty Loss.

(i) Notification of Casualty Loss. From the date of this Agreement until the
Closing Date, Seller shall promptly give notice to Buyer Parent upon obtaining
any Selling Parties’ Knowledge of any Casualty Loss involving damaged or lost
timber on the Timberlands occurring between January 1, 2006 and the Closing Date
and having a fair market value in excess of $5,000,000, as determined in good
faith by Seller, together with a written estimate of the fair market value of
the damaged or lost timber, as determined in good faith by Seller, resulting
from such Casualty Loss. Buyer Parent shall have until the 60th day after the
Closing Date to deliver to Seller written notice of any Casualty Loss involving
damaged or lost timber having a fair market value in excess of $5,000,000 that
was not identified by Seller in accordance with the previous sentence of this
Section 2.3(c)(i) and that Seller would have been required to so identify if
such Casualty Loss were within the Selling Parties’ Knowledge, together with a
written estimate of the fair market value of the damaged or lost timber, as
determined in good faith by Buyer Parent, resulting from such Casualty Loss. If
Seller does not receive notice of such Casualty Loss from Buyer Parent prior to
the expiration of such 60-day period, Buyer Parent shall be deemed to have
waived its right to receive a Purchase Price adjustment in respect of such
Casualty Loss, apart from any Purchase Price adjustment for any portion of such
Casualty Loss that was identified by Seller prior to the Closing pursuant to the
first sentence of this Section 2.3(c)(i), and the relevant Cash Entity, the
relevant Timber Entities or Buyer Affiliate as the case may be, shall be deemed
to accept the Timberlands, as the case may be, subject to such Casualty Loss.

(ii) Post-Closing Purchase Price Adjustment for Casualty Loss. If Buyer Parent
objects to any of Seller’s estimates of the fair market value of the damaged or
lost timber made prior to the Closing pursuant to Section 2.3(c)(i) or if Seller
objects to any of Buyer Parent’s estimates of the fair market value of the

 

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damaged or lost timber made post-Closing pursuant to Section 2.3(c)(i), and, in
either case, Buyer Parent reasonably determines that such damaged or lost timber
had a fair market value in excess of $5,000,000, Seller and Buyer Parent shall
negotiate in good faith to determine by mutual agreement the fair market value
of the damaged or lost timber in accordance with Section 2.3(c)(iv). If Seller
and Buyer Parent agree on the amount of such value, then such value will become
final and binding on the Parties. If Seller and Buyer Parent are unable to agree
on the amount of such value within 30 days of Buyer Parent’s delivery of a
notice of objection to Seller’s pre-Closing estimate or Seller’s delivery of a
notice of objection to Buyer Parent’s post-Closing estimate, Seller and Buyer
Parent will refer the matter to an independent appraiser, appointed by Seller
and reasonably acceptable to Buyer Parent, and each will, at a mutually agreed
time within three days after such referral, simultaneously submit to the
independent appraiser their respective calculations of the fair market value of
such damaged or lost timber. Within 30 days of such final submissions, the
independent appraiser shall determine the fair market value of the damaged or
lost timber in accordance with this Section 2.3(c) and shall select one of the
two final submissions of the Parties (and shall not select any other amount) as
being most representative of the fair market value of such damaged or lost
timber, and the submission so selected shall be final and binding on the
Parties. Upon a final determination of the fair market value of such damaged or
lost timber, if the fair market value is finally determined to exceed
$5,000,000, the Purchase Price shall be reduced by such amount and Seller shall
pay such amount in cash by wire transfer of immediately available funds to the
bank account or accounts designated by Buyer Parent. The costs and expenses of
the independent appraiser in connection with the dispute resolution procedure
set forth herein shall be paid by the non-prevailing Party.

(iii) Casualty Loss with FMV of less than $5,000,000. If Seller estimates in
good faith, or it is determined in accordance with this Section 2.3(c), that the
damaged or lost timber in connection with Casualty Losses affecting any portion
of the Timberlands has an aggregate fair market value of less than $5,000,000,
the relevant Cash Entities, the relevant Timber Entities or the relevant Buyer
Affiliates, as the case may be, shall be deemed to accept such portion of the
Timberlands (and the timber thereon) in its condition as of the Closing Date,
with no reduction in the Purchase Price.

(iv) Determination of FMV of Timber Related to a Casualty Loss. For the purpose
of determining the fair market value of the damaged or lost timber resulting
from a Casualty Loss, the fair market value for damaged or lost timber shall be
deemed to equal the value of the timber, determined in accordance with Exhibit
B, net of the actual salvage value of such timber received by the relevant Cash
Entities, the relevant Timber Entities or Buyer Affiliate, as the case may be,
after deducting the cost of harvesting and delivering such timber.

 

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(d) Non-Assignable Leases.

(i) Identification of Excluded Leases. Seller shall notify Buyer Parent at least
15 days prior to Closing to the extent it is reasonably apparent that any
required consent or approval in respect of any Timberland Lease or Real Property
Lease will not be obtained prior to Closing. Not later than three days following
receipt of such notification, Buyer Parent may elect, by written notice to
Seller, to exclude such Timberland Lease or Real Property Lease from the
Purchased Assets (an “Excluded Lease”). If Buyer Parent does not so elect, any
such Timberland Lease or Real Property Lease shall be considered a Purchased
Asset.

(ii) Determination of FMV Related to Excluded Lease. If Buyer Parent elects to
require Seller to exclude any Excluded Lease pursuant to Section 2.3(d)(i),
Seller shall deduct from the Purchase Price an amount equal to the value of the
Excluded Lease based on the discounted cash flows attributable to such Excluded
Lease. Seller shall calculate the amount of such adjustment and deliver a
statement of such calculation to Buyer Parent. If, within five days after the
receipt of Seller’s calculation of the amount of such adjustment, Buyer Parent
does not deliver to Seller a written notice of any objections to Seller’s
calculation, Buyer Parent and Seller shall be deemed to have agreed on the
amount of such adjustment. If Buyer Parent objects to Seller’s calculation of
the amount of such adjustment within such five-day period, Seller and Buyer
Parent shall negotiate in good faith to determine by mutual agreement the amount
of such adjustment. If Seller and Buyer Parent agree (or are deemed to have
agreed) on the amount of such adjustment, then such amount will become final and
binding on the Parties. If Seller and Buyer Parent are unable to agree on the
amount of such adjustment, Seller and Buyer Parent shall proceed to the Closing
and Seller and Buyer Parent shall refer the matter to an independent appraiser
(the “Excluded Lease Independent Appraiser”) selected by Seller and reasonably
acceptable to Buyer Parent to determine the appropriate amount of a post-Closing
adjustment in respect of each Excluded Lease. Each of Seller and Buyer Parent
shall, at a mutually agreed time within ten days of such referral,
simultaneously submit to the Excluded Lease Independent Appraiser their
respective calculations of the aggregate amount of the Purchase Price adjustment
in respect of all Excluded Leases. The Excluded Lease Independent Appraiser
shall determine the amount of the Purchase Price adjustment and, based on that
determination, shall, within 30 days of such final submissions, select one of
the two final submissions (and shall not select any other amount) as being most
representative of the amount of the post-Closing Purchase Price adjustment, and
the submission so selected shall be final and binding on the Parties. The costs
and expenses of the Excluded Lease Independent Appraiser in connection with the
dispute resolution procedure set forth herein shall be paid by the
non-prevailing Party.

 

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(e) Adjustment of Master Harvest Plans. In the event of a material reduction in
the total acreage of the Timberlands transferred to the Buying Parties pursuant
to this Agreement resulting from Title Failure Carveouts, Excluded Leases, Title
Objection Carveouts and Environmental Carveouts, the Parties will negotiate in
good faith to agree upon appropriate adjustments to the harvest plans associated
with the Fiber Supply Agreements in order to take account of such reduction.

(f) Conforming Title Commitment Adjustment. If Conforming Title Commitments
representing at least 75% of the Estimated Timberland Acreage have not been made
available to Buyer Parent on or before the 90th day after the date of this
Agreement, the Purchase Price shall be reduced by $17,000,000.

(g) Delivery of Title Commitments. For purposes of this Agreement, a Title
Commitment (together with any exceptions thereto) posted in the online data room
established by Seller prior to the date hereof shall be deemed to have been made
available to Buyer Parent on the day notice thereof has been given by Seller to
Buyer Parent and its legal counsel in accordance with Section 15.1(b).

Section 2.4 Apportionments.

Except as provided in Section 3.4, the following shall be apportioned between
Buyer Parent, Buyer, the Cash Entities or Buyer Affiliates, as the case may be,
and the Selling Parties on and as of the Closing Date (on a per diem basis):
(i) rents due from Seller or any of the Selling Parties under the Timberland
Leases, Real Property Leases or Personal Property Leases; (ii) property and
other non-Income Taxes and assessments in respect of the Purchased Assets and
any Timberland Leases or Real Property Leases for which a Selling Party has the
obligation to pay property or other non-Income Taxes and assessments or where
such property and other non-Income Taxes are assessed directly against the
property (including property or other non-Income Taxes and assessments, if any,
payable in respect of the Timber Entity Assets), in each case, with respect to
the Tax period in which the Closing Date occurs; (iii) revenue from the Real
Property Leases, excluding hunting and other recreational lease revenue; and
(iv) payments, applying to the period beginning on the Closing Date, made by any
Selling Party in respect of any Timberland Leases, Real Property Leases,
Personal Property Leases or Purchased Contracts (collectively,
“Apportionments”). Not later than five days prior to the Closing Date, Seller
and Buyer Parent shall determine the Apportionments, and the Installment Note
Purchase Price shall be increased or reduced, as applicable (in the form of an
increase or reduction of the aggregate principal amount of the Timber Notes), by
the aggregate amount of such Apportionments relating to the Installment Note
Timberlands, and the Cash Purchase Price shall be increased or reduced, as
applicable, by the aggregate amount of such Apportionments relating to the Cash
Assets. If the Closing Date occurs before the applicable Tax rate is fixed for
the applicable Tax period, then property Taxes and other non-Income Taxes and
assessments shall be apportioned on the basis of the Tax

 

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rate in effect for the immediately preceding Tax period. Seller and Buyer Parent
agree to furnish each other with such documents and other records as may be
reasonably requested in order to confirm all Apportionment calculations made
pursuant to this Section 2.4. Except for the estimated adjustment set forth
hereinabove, there shall be no proration of property Taxes or other non-Income
Taxes and assessments and, as between Buyer Parent and Seller, Buyer Parent
agrees that it shall be solely responsible for all such property Taxes and other
non-Income Taxes and assessments due and payable in respect of any Purchased
Assets after the Closing. If Buyer Parent and Seller cannot agree as to
Apportionments, the dispute will be resolved pursuant to Section 9.5.

Section 2.5 Payment of Purchase Price.

The Purchase Price shall be payable at the Closing as follows:

(a) The Installment Note Purchase Price shall be payable by Buyer to Seller on
behalf of the Selling Parties, or to those parties designated in writing by
Seller on behalf of the Selling Parties, in the form of one or more installment
notes issued by Buyer, substantially in the form of Exhibit C (each, a “Timber
Note”), in an aggregate principal amount equal to the Installment Note Purchase
Price, as adjusted pursuant to Sections 2.3 or 2.4. Each Timber Note shall be
issued in the denomination requested by Seller on behalf of the Selling Parties
not later than the Closing Date. Each Timber Note shall be fully secured by an
irrevocable standby letter of credit in form and substance reasonably
satisfactory to Seller (each, a “Letter of Credit”), issued by a Credit
Enhancement Bank for the account of Buyer. Buyer Parent and Buyer will be
responsible for all fees and expenses associated with the Letters of Credit
(other than any extension fees).

(b) Buyer Parent shall cause the Cash Purchase Price, as adjusted pursuant to
Sections 2.2(a), 2.3(b)(v), 2.3(d) and 2.4, to be paid to Seller, on behalf of
the Selling Parties, in cash by wire transfer of immediately available funds to
the bank account or accounts designated by Seller on behalf of the Selling
Parties.

ARTICLE III

CLOSING

Section 3.1 Closing.

The closing of the transactions contemplated by this Agreement (the “Closing”)
shall take place, subject to the satisfaction, or waiver by the Party or Parties
entitled to the benefit thereof, of the conditions set forth in Article XII, at
a place designated by Seller, at 9:00 a.m., New York City time, on or as of the
later of (i) five days after all of the conditions set forth in Article XII have
been satisfied or waived by the Party or Parties

 

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entitled to the benefit thereof (other than those conditions that by their
nature are to be satisfied at the Closing), in accordance with this Agreement,
or (ii) 50 days after Seller has made available to Buyer Parent the final Title
Commitment available with respect to the Timberlands and the receipt by Buyer
Parent of notice thereof in accordance with Section 2.3(g) (the date on which
the Closing occurs, the “Closing Date”). Except as specifically provided herein,
time is of the essence for this Agreement for all purposes.

Section 3.2 Closing Deliveries.

(a) Closing Deliveries by the Selling Parties. The Selling Parties shall deliver
the following items to Buyer Parent at the Closing:

(i) a certificate from a duly authorized officer of Seller attesting to the
matters set forth in Sections 12.2(b) and 12.2(c);

(ii) a duly executed (A) counterpart of an assignment and assumption agreement
under which the Selling Parties assign and each Cash Entity assumes all of the
Selling Parties’ right, title and interest in and to the Cash Purchased
Contracts, Licenses and Cash Purchased Condemnations being conveyed to it,
substantially in the form of Exhibit D-1 (the “General Assignment and
Assumption”), (B) counterparts of the assignment and assumption agreements under
which, immediately prior to the Closing, the Selling Parties assigned and each
Timber Entity assumed all of the Selling Parties’ right, title and interest in
and to the Timber Entity Purchased Contracts and the Timber Entity Purchased
Condemnations being conveyed to it, substantially in the form of Exhibit D-2
(the “General Timber Entity Assignment and Assumption”) and (C) counterpart of
an assignment and assumption agreement under which the Selling Parties assign
and each Buyer Affiliate assumes all of the Selling Parties’ right, title and
interest in and to the Personal Property Leases, substantially in the form of
Exhibit D-3 (the “General Buyer Affiliate Assignment and Assumption”);

(iii) duly executed counterparts of (A) an assignment and assumption agreement,
in recordable form, for each Cash Timberland Lease, under which the applicable
Selling Party assigns and the relevant Cash Entity assumes all of such Selling
Party’s right, title and interest in and to such Cash Timberland Lease being
conveyed to it and (B) assignment and assumption agreements, in recordable form,
for each Installment Note Timberland Lease, under which, immediately prior to
the Closing, the applicable Selling Party assigned and the relevant Timber
Entity assumed all of such Selling Party’s right, title and interest in and to
such Installment Note Timberland Lease, in each case substantially in the form
of Exhibit D-4 (each, an “Assignment and Assumption of Timberland Lease”);

 

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(iv) duly executed counterparts of (A) an assignment and assumption agreement
under which the applicable Selling Party assigns and each Cash Entity assumes
all of the Selling Parties’ right, title and interest in and to the Cash Real
Property Leases being conveyed to it and (B) an assignment and assumption
agreement under which, immediately prior to the Closing, the applicable Selling
Party assigned and the relevant Timber Entity assumed all of the Selling
Parties’ right, title and interest in and to the Timber Entity Real Property
Leases being conveyed to it, in each case substantially in the form of Exhibit
D-5 (together, the “Assignment and Assumption of Real Property Leases”);

(v) limited or special warranty deeds (or their local equivalent), warranting
only against parties claiming by, through or under the Selling Parties, in
recordable form and subject only to the Permitted Exceptions, and such other
Conveyance Instruments as are reasonably necessary to vest in the relevant Cash
Entity title to the Owned Cash Timberlands and the Buyer Easements in respect
thereof, excluding the Conveyed Minerals and the Reserved Minerals and Gases,
the Reserved Mineral and Gas Rights, the Reserved Water Rights and the
Subsurface Geosequestration Rights in respect thereof;

(vi) limited or special warranty deeds (or their local equivalent), warranting
only against parties claiming by, through or under the Selling Parties, in
recordable form and subject only to the Permitted Exceptions, and such other
Conveyance Instruments as were reasonably necessary immediately prior to Closing
to vest in the relevant Timber Entity title to the Owned Installment Note
Timberlands being conveyed to it and the Buyer Easements in respect thereof,
excluding the Conveyed Minerals, the Reserved Minerals and Gases, the Reserved
Mineral and Gas Rights, the Reserved Water Rights and the Subsurface
Geosequestration Rights in respect thereof;

(vii) quitclaim deeds, in recordable form, to the Conveyed Minerals in respect
of the Owned Cash Timberlands (excluding the Reserved Minerals and Gases, the
Reserved Mineral and Gas Rights, the Reserved Water Rights and the Subsurface
Geosequestration Rights in respect thereof) by the appropriate Selling Party to
the relevant Cash Entity;

(viii) quitclaim deeds, in recordable form, to the Conveyed Minerals in respect
of the Owned Installment Note Timberlands (excluding the Reserved Minerals and
Gases, the Reserved Mineral and Gas Rights, the Reserved Water Rights and the
Subsurface Geosequestration Rights in respect thereof) by the appropriate
Selling Party to the relevant Timber Entity (the deeds contemplated by this
subparagraph and subparagraphs (v) through (viii) above are referred to in this
Agreement as the “Deeds”);

 

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(ix) a bill of sale with respect to the Purchased Personal Assets, substantially
in the form of Exhibit E;

(x) duly executed counterparts of the pulpwood supply agreements, each
substantially in the form of Exhibit F-1 (the “Pulpwood Supply Agreements”), the
log supply agreements, each substantially in the form of Exhibit F-2 (the “Log
Supply Agreements” and, collectively with the Pulpwood Supply Agreements, the
“Fiber Supply Agreements”) and the support agreement in respect of the Pulpwood
Supply Agreements, substantially in the form of Exhibit F-3 (the “Pulpwood
Support Agreement”), and the support agreement in respect of the Log Supply
Agreements, substantially in the form of Exhibit F-4 (the “Log Support
Agreement” and, collectively with the Pulpwood Support Agreements, the “Support
Agreements”);

(xi) an affidavit stating the taxpayer identification number of Seller and that
Seller is not a “foreign person” for purposes of Section 1445 of the Code and
the regulations thereunder;

(xii) affidavits stating the taxpayer identification number of each of the Other
Selling Parties and that none of the Other Selling Parties is a “foreign person”
for purposes of Section 1445 of the Code and the regulations thereunder;

(xiii) such title affidavits as are reasonably requested by the Title Company
substantially in the form of Exhibit G;

(xiv) a duly executed counterpart of an assignment agreement transferring to
Buyer the Buyer Timber Entity Interests, substantially in the form of Exhibit
H-1 (the “Assignment of Buyer Timber Entity Interests”) and a duly executed
counterpart of an assignment agreement transferring to Buyer Parent the Buyer
Parent Timber Entity Interests, substantially in the form of Exhibit H-2 (the
“Assignment of Buyer Parent Timber Entity Interests”);

(xv) such assignments, bills of sale, certificates of title and other
instruments of assignment and conveyance, all in form reasonably satisfactory to
Buyer Parent, as are necessary to convey fully and effectively to Buyer Parent,
Buyer, the Cash Entities, the Timber Entities or Buyer Affiliate, as the case
may be, the Purchased Assets (other than the Purchased Real Property Assets and
the Timber Entity Interests) in accordance with the terms hereof;

(xvi) a duly executed counterpart of the Surface Use Agreement.

 

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(b) Closing Deliveries by Buyer Parent. At the Closing, Buyer Parent or Buyer
shall deliver or cause the following items to be delivered to Seller:

(i) the Purchase Price (subject to all pre-Closing adjustments as provided in
Article II), including the Timber Notes issued by Buyer in respect of the
Installment Note Purchase Price;

(ii) the Letters of Credit securing the Timber Notes issued by Buyer in respect
of the Installment Note Purchase Price;

(iii) certificates of a duly authorized officer of Buyer Parent attesting to the
matters set forth in Sections 12.3(b) and 12.3(c);

(iv) a duly executed counterpart of the General Assignment and Assumption;

(v) a duly executed counterpart of an Assignment and Assumption of Timberland
Lease with respect to each of the Cash Timberland Leases;

(vi) a duly executed counterpart of the Assignment and Assumption of Cash Real
Property Leases;

(vii) a duly executed Buyer Parent Instrument of Assumption in respect of the
Assumed Liabilities;

(viii) any Conveyance Instruments in respect of the Purchased Assets to which
any Buyer Parent, Buyer, Cash Entity, Timber Entity or Buyer Affiliate is a
Party;

(ix) one or more easements to the extent necessary to evidence the right of
Seller, the Selling Parties, or such other parties as shall be designated by
Seller to use the Reserved Easements;

(x) duly executed counterparts of the Master Stumpage Agreements, the Fiber
Supply Agreements and the Support Agreements;

(xi) duly executed counterparts of the Assignments of Buyer Timber Entity
Interests and the Buyer Parent Timber Entity Interests;

(xii) all such other instruments of assumption necessary, in the reasonable
opinion of Seller, for Buyer Parent to assume the Assumed Liabilities; and

(xiii) a duly executed counterpart of the Surface Use Agreement.

 

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(c) Deliveries by the Timber Entities.

Immediately prior to the Closing, Seller shall cause the Timber Entities to
deliver to Seller (with copies to Buyer Parent):

(i) duly executed counterparts of the Timber Entities’ Instruments of Assumption
in respect of the Timber Entities’ Assumed Liabilities;

(ii) duly executed counterparts of the General Timber Entities’ Assignment and
Assumption; and

(iii) any other conveyance documents described in Section 3.2(a) to which any
Timber Entity will be a party, immediately prior to or at the Closing.

(d) Other Closing Deliveries. The Parties shall each execute and deliver (and,
prior to the Closing, Seller shall cause the relevant Timber Entity to execute
and deliver, and, from and after Closing, Buyer shall cause the relevant Timber
Entity to execute and deliver) such other and further certificates, assurances
and documents as may reasonably be required by the other Parties in connection
with the consummation of the transaction contemplated by this Agreement.

Section 3.3 Possession.

Possession of the Purchased Real Property Assets being transferred at the
Closing shall be delivered to the Cash Entities at the Closing (or, in the case
of the Installment Note Timberlands, to the Timber Entities immediately prior to
the Closing), subject to the Permitted Exceptions.

Section 3.4 Costs and Expenses.

Each Party shall be responsible for its own attorneys’ fees and expenses. The
Selling Parties shall prepare the Deeds at the Selling Parties’ expense. Buyer
Parent shall pay all other costs associated with filing any documents, including
the Deeds and each Assignment and Assumption of Timberland Lease (other than
those associated with recording of documents relating to Reserved Minerals and
Gases, Reserved Mineral and Gas Rights, Reserved Water Rights and Subsurface
Geosequestration Rights). Buyer Parent shall be responsible for any recapture,
reassessment, roll-back Taxes or changes in Tax assessments in respect of the
Purchased Assets that may become due and payable after the Closing caused by any
action or inaction of any Buying Party with respect to the removal of the
Purchased Assets after the Closing from their present classifications, or
changes in use after the Closing. Each of Buyer Parent, on the one hand, and the
Selling Parties, on the other hand, shall bear one-half of (i) all sales, use,
excise, documentary, stamp duty, registration, transfer, conveyance, economic
interest transfer and other similar Taxes related to the conveyance of the
Purchased Assets (including the Timber

 

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Entity Assets) from the Selling Parties to the Buying Parties arising in
connection with the transactions contemplated by this Agreement (collectively,
“Transfer Taxes”), and the Party having primary responsibility under applicable
Law shall timely prepare and file Tax Returns in respect of such Transfer Taxes
with the applicable Tax Authority and (ii) the costs incurred by the Parties
with respect to any dispute resolution conducted pursuant to Section 9.5 hereof.
Each of Buyer Parent, on the one hand, and the Selling Parties, on the other
hand, shall pay one-half of all filing fees incurred with respect to all filings
made under the HSR Act in connection with this Agreement. All other costs shall
be paid by the Party incurring such costs.

ARTICLE IV

BUYING PARTY ACKNOWLEDGEMENTS

Section 4.1 Buying Party Acknowledgements.

(a) Each Buying Party acknowledges that, except as is specifically set forth
herein or in the certificate, agreements and other documents delivered at
Closing pursuant to Sections 3.2(a)(i), (x), (xi), (xii) and (xiii), no Selling
Party has made, does make or has authorized anyone else to make, any
representations, warranties or promises of any kind, including as to: (i) the
existence or non-existence of access to or from the Purchased Real Property
Assets or any portion thereof; (ii) the location of the Purchased Real Property
Assets or any portion thereof within any flood plain, flood prone area,
watershed or the designation of any portion thereof as “wetlands”; (iii) the
availability of water, sewer, electrical, gas or other utility services at or on
the Purchased Real Property Assets; (iv) the number of acres or square footage
in the Purchased Real Property Assets; (v) the present or future physical
condition or suitability of the Purchased Assets for any purpose; (vi) the
actual amount and type of timber on the Purchased Real Property Assets, if any;
or (vii) any other matter or thing affecting or relating to the Purchased Assets
or this Agreement.

(b) Each Buying Party acknowledges that (i) the Selling Parties have not
obtained mineral title searches and will not provide a title commitment for the
Conveyed Minerals; and (ii) it will be Buyer Parent’s responsibility, at Buyer
Parent’s cost, if Buyer Parent desires, to confirm the exact Conveyed Mineral
interest and title being conveyed.

(c) EACH BUYING PARTY ACKNOWLEDGES THAT, EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES SET FORTH IN ARTICLES V, VI AND VII, IN THE CERTIFICATES DELIVERED BY
SELLER AT THE CLOSING PURSUANT TO SECTIONS 3.2(A)(I) AND 3.2(A)(XI) AND IN THE
DEEDS DELIVERED BY SELLER PURSUANT TO SECTIONS 3.2(A)(V), 3.2(A)(VI),
3.2(A)(VII) AND 3.2(A)(VIII) OR THE CERTIFICATES DELIVERED BY

 

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THE OTHER SELLING PARTIES PURSUANT TO SECTION 3.2(A)(XII): (I) NO
REPRESENTATIONS, WARRANTIES OR PROMISES, EXPRESS OR IMPLIED, HAVE BEEN OR ARE
BEING MADE BY OR ON BEHALF OF ANY SELLING PARTY OR ANY OTHER PERSON, INCLUDING
WITH RESPECT TO THE CONDITION OR VALUE OF THE PURCHASED ASSETS AND EACH OF THE
SELLING PARTIES HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES RELATING TO THE
PURCHASED ASSETS, EITHER EXPRESS OR IMPLIED, INCLUDING MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE AND SUITABILITY FOR ITS INTENDED USE, AND (II) IN
ENTERING INTO THIS AGREEMENT, NO BUYING PARTY HAS RELIED ON OR DOES RELY ON ANY
SUCH REPRESENTATIONS, WARRANTIES OR PROMISES, EXPRESS OR IMPLIED, BY OR ON
BEHALF OF ANY SELLING PARTY OR ANY OTHER PERSON. BUYER PARENT, BUYER, EACH CASH
ENTITY, EACH TIMBER ENTITY AND EACH BUYER AFFILIATE SHALL TAKE THE PURCHASED
ASSETS IN “AS IS, WHERE IS, AND WITH ALL FAULTS” CONDITION ON THE CLOSING DATE,
EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT.

UPON THE CLOSING, SUBJECT TO SECTION 1.8 AND ARTICLE XIII, EACH BUYING PARTY
SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING ADVERSE ENVIRONMENTAL
CONDITIONS, MAY NOT HAVE BEEN REVEALED BY SELLER’S OR BUYER PARENT’S
INVESTIGATIONS, AND, UPON THE CLOSING, EACH BUYING PARTY SHALL BE DEEMED TO HAVE
WAIVED, RELINQUISHED AND RELEASED SELLER AND THE SELLING PARTIES FROM AND
AGAINST ANY AND ALL CLAIMS, DEMANDS, CAUSES OF ACTION (INCLUDING CAUSES OF
ACTION IN TORT), LOSSES, DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING
ATTORNEYS’ FEES AND COURT COSTS) OF ANY AND EVERY KIND OR CHARACTER, KNOWN OR
UNKNOWN, WHICH ANY BUYING PARTY MIGHT HAVE ASSERTED OR ALLEGED AGAINST SELLER
AND THE OTHER SELLING PARTIES AT ANY TIME BY REASON OF OR ARISING OUT OF
PHYSICAL CONDITIONS, VIOLATIONS OF ANY APPLICABLE LAWS (INCLUDING ANY
ENVIRONMENTAL LAWS) AND ANY AND ALL OTHER ACTS, OMISSIONS, EVENTS, CIRCUMSTANCES
OR MATTERS REGARDING THE PURCHASED REAL PROPERTY ASSETS. EACH BUYING PARTY
AGREES THAT, SUBJECT TO SECTION 1.8 AND ARTICLE XIII BELOW, SHOULD ANY
INVESTIGATION, CLEANUP, REMEDIATION, CORRECTIVE ACTION OR REMOVAL OF HAZARDOUS
SUBSTANCES OR OTHER ADVERSE ENVIRONMENTAL CONDITIONS ON THE PURCHASED REAL
PROPERTY ASSETS BE REQUIRED AFTER THE CLOSING, SUCH INVESTIGATION, CLEAN-UP,
REMOVAL, CORRECTIVE ACTION OR REMEDIATION SHALL BE THE RESPONSIBILITY OF AND
SHALL BE PERFORMED AT THE SOLE COST AND EXPENSE OF BUYER PARENT.

 

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(d) Buyer Parent acknowledges that any materials provided to any Buying Party,
including any cost or other estimates, projections, acreage, and timber
information, the Confidential Information Memorandum dated November 2005, the
management presentations and the materials and information provided on data
disks or in the data room, are not and shall not be deemed representations or
warranties by or on behalf of any Selling Party or any other Person and are not
to be relied upon by any Buying Party.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF SELLER RELATED TO THE

PURCHASED ASSETS

Except as otherwise disclosed to Buyer Parent in the disclosure letter (the
“Seller’s Disclosure Letter”) delivered to Buyer Parent by Seller on the date
hereof (except for those sections of the Seller’s Disclosure Letter that
contemplate delivery on a date other than the date hereof), Seller represents
and warrants to Buyer Parent, as of the date hereof and as of the Closing Date,
as follows:

Section 5.1 Organization.

(a) Seller is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of New York and has all requisite corporate
power and authority to: (i) own, lease and operate its properties and assets and
to carry on its business as now being conducted; (ii) execute this Agreement and
all other agreements, instruments and documents to be executed by it in
connection with the consummation of the transactions contemplated by this
Agreement and such other agreements (the “Ancillary Agreements”); and
(iii) perform its obligations and consummate the transactions contemplated
hereby and by the Ancillary Agreements.

(b) Each of the Other Selling Parties is duly organized or incorporated, validly
existing and in good standing under the laws of the state in which it is
organized or incorporated and has all requisite corporate power and authority or
limited liability company power and authority, as the case may be, to: (i) own,
lease and operate its properties and assets and to carry on its business as now
being conducted; (ii) execute this Agreement and all Ancillary Agreements to
which it is a party; and (iii) perform its obligations and consummate the
transactions contemplated hereby and by the Ancillary Agreements to which it is
a party.

Section 5.2 Qualification.

(a) Seller is qualified or registered as a foreign corporation for the
transaction of business and is in good standing under the laws of each
jurisdiction in

 

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which the location of its properties makes such qualification necessary, other
than those jurisdictions as to which the failure to be so qualified or
registered would not, individually or in the aggregate, have a Material Adverse
Effect or a material adverse effect on Seller’s ability to perform its
obligations under this Agreement and the Ancillary Agreements.

(b) Each of the Other Selling Parties is qualified or registered as a foreign
corporation, limited liability company or other organization for the transaction
of business and is in good standing under the Laws of each jurisdiction in which
the location of its properties makes such qualification necessary, other than
those jurisdictions as to which the failure to be so qualified or registered
would not, individually or in the aggregate, have a Material Adverse Effect or a
material adverse effect on such Other Selling Party’s ability to perform its
obligations under this Agreement or any Ancillary Agreement to which it is a
party.

Section 5.3 Authority.

The execution, delivery and performance of this Agreement by the Seller and the
consummation of transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of Seller are necessary for it to authorize this Agreement or to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement by the other Selling Parties and the consummation
of transactions contemplated hereby have been, or will be as of the Closing
Date, duly and validly authorized by all necessary corporate, limited liability
company or partnership action, as the case may be, and no other corporate,
limited liability company or partnership proceedings, as the case may be, on the
part of any of the Other Selling Parties are necessary for any of the Other
Selling Parties to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Selling Parties and, assuming due authorization, execution and
delivery by each Buying Party, is a legal, valid and binding obligation of each
Selling Party, enforceable against each Selling Party in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar Laws of general applicability relating to or affecting
creditors’ rights and to general equity principles.

Section 5.4 No Conflict.

None of the execution, delivery or performance of this Agreement by the Selling
Parties will result in a breach or violation of, or default under, (i) the
terms, conditions or provisions of any Selling Party’s articles of
incorporation, bylaws or any standing resolution of its board of directors or
any organizational document, standing resolution or analogous document of any
Selling Party; (ii) any material Contract to which any Selling

 

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Party is a party or by which any Selling Party or any of the assets of any
Selling Party may be bound; (iii) any Law applicable to any Selling Party or any
of its assets; or (iv) any permit, license, order, judgment or decree of any
Governmental Authority by which any Selling Party or the assets of any Selling
Party is or may be bound, excluding from the foregoing clauses (ii), (iii) and
(iv) such breaches, violations or defaults that would not be reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect or a
material adverse effect on any Selling Party’s ability to perform its respective
obligations under this Agreement and the Ancillary Agreements.

Section 5.5 Consents and Approvals.

There are no approvals, consents or filing or registration requirements with
respect to any Governmental Authority or any other Person that are or will be
necessary for the valid execution and delivery by any Selling Party of this
Agreement and the Ancillary Agreements, or the consummation of the transactions
contemplated hereby and thereby, other than (i) those described on Section 5.5
of the Seller’s Disclosure Letter and (ii) those which (a) have been obtained,
(b) are of a routine nature and not customarily obtained or made prior to
execution of purchase and sale agreements in transactions similar in nature to
those contemplated hereby and where the failure to obtain the same would not,
individually or in the aggregate, have a Material Adverse Effect or a material
adverse effect on Seller’s ability to perform its obligations under this
Agreement and the Ancillary Agreements, or (c) are required under the HSR Act.

Section 5.6 Litigation.

(a) Except as set forth in Section 5.6(a) of the Seller’s Disclosure Letter, as
of the date hereof, (i) there are no Claims or, to the Selling Parties’
Knowledge, threatened Claims which (A) either (x) seek to restrain or enjoin the
execution and delivery of this Agreement or any Ancillary Agreement or the
consummation of any of the transactions contemplated hereby or thereby or
(y) affect or relate to any of the Purchased Assets and (B) would be reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect or a
material adverse effect on Seller’s ability to perform its obligations under
this Agreement and the Ancillary Agreements and (ii) there is no litigation
that, to the Selling Parties’ Knowledge, is pending as of the Closing Date and
that affects or relates to any of the Purchased Assets (except those pending
litigation matters related to boundary disputes, title matters, trespass,
easement matters or similar matters). From time to time prior to the Closing,
Seller shall supplement or amend Section 5.6(a) of the Seller’s Disclosure
Letter with respect to any Claim or litigation hereafter arising that, if
existing or being within the Selling Parties’ Knowledge at the date of this
Agreement, would have been required to be set forth or described therein (except
that Seller shall have no such obligation to supplement with respect to any
Claim or litigation related to boundary disputes, title matters, trespass,
easement matters or

 

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similar matters) and any such supplemental or amended disclosure shall be deemed
to be part of the Seller’s Disclosure Letter for all purposes of this Agreement.

(b) As of the date hereof, there are no judgments or outstanding orders,
injunctions, decrees, stipulations or awards (whether rendered by a Governmental
Authority or by an arbitrator) against any Selling Party (or affecting any of
their respective assets, including the Purchased Real Property Assets) which
prohibit or restrict or could reasonably be expected to result in any material
delay of the consummation of the transactions contemplated by this Agreement or
the Ancillary Agreements.

Section 5.7 Taxes.

Except for such Liens as are reflected in the Title Commitments or are not
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect, there are no Liens or other encumbrances, other than the Permitted
Exceptions, on any of the Purchased Assets that arose in connection with any
failure or alleged failure by Seller or any Selling Party to pay any Tax. All
material Taxes related to the Purchased Assets required to be withheld and paid
have been withheld and have been paid, except for (i) such Taxes the failure to
pay which would not be reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect and (ii) any Taxes being contested in good faith.

Section 5.8 Contracts.

(a) Section 5.8 of the Seller’s Disclosure Letter contains a list, and the
Selling Parties have made available to Buyer Parent copies, of:

(i) each Purchased Contract and Personal Property Lease that is in effect on the
date of this Agreement and that (A) requires expenditures or receipts,
performance of services or delivery of goods or materials by or to any Selling
Party in an amount or of value in excess of $250,000 per year or $1,000,000 over
the term of such Purchased Contract or Personal Property Lease and (B) is not
terminable by the Selling Party thereto or its successors and assigns without
penalty of any kind upon notice of 180 days or less;

(ii) each Purchased Contract for capital expenditures or the acquisition or
construction of fixed assets which requires aggregate future payments in excess
of $250,000 and is not terminable by the Selling Party thereto or its successors
and assigns without penalty of any kind upon notice of 180 days or less; and

(iii) each material amendment, supplement, and modification in respect of any of
the foregoing.

 

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(b) Each Purchased Contract or Personal Property Lease not listed in Section 5.8
of the Seller’s Disclosure Letter that is in effect on the date of this
Agreement has been entered into by the Selling Party that is a party thereto (or
its predecessors) in the ordinary course of business consistent with past
practice, except for those Purchased Contracts and Personal Property Leases that
would not be reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect.

Section 5.9 Brokers and Advisors.

Except for fees payable to Goldman Sachs & Co. Inc., UBS Securities LLC and
Lazard Frères & Co., no broker, investment banker, financial advisor or other
Person is entitled to any broker’s, finder’s, financial advisor’s or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made on or behalf of any of the Selling
Parties, and Seller is responsible for the payment of all such fees due to
Goldman Sachs & Co. Inc., UBS Securities LLC and Lazard Frères & Co.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF SELLER RELATED TO THE

PURCHASED REAL PROPERTY ASSETS

Except as otherwise disclosed to Buyer Parent in the Seller’s Disclosure Letter
delivered to Buyer Parent by Seller on the date hereof (except for those
sections of the Seller’s Disclosure Letter that contemplate delivery on a date
other than the date hereof), Seller represents and warrants to Buyer Parent, as
of the date hereof and as of the Closing Date, as follows:

Section 6.1 Title to the Timberlands.

Except as set forth in Section 6.1 of the Seller’s Disclosure Letter, to the
Selling Parties’ Knowledge, as of the time of the Closing (or, in the case of
Installment Note Timberlands, immediately prior to the Closing), the Selling
Parties own (i) fee simple title to the Owned Timberlands and (ii) leasehold
title to the Leasehold Interests, in each case free and clear of all Liens, but
subject to the Permitted Exceptions. At the Closing, the Cash Entities will
receive (i) fee simple title to the Owned Cash Timberlands and (ii) leasehold
title to the Cash Leasehold Interests, in each case free and clear of all Liens,
but subject to the Permitted Exceptions. In the case of the Installment Note
Timberlands, immediately prior to the Closing, the Timber Entities will receive
(i) fee simple title to the Owned Installment Note Timberlands and
(ii) leasehold title to the Timber Entity Leasehold Interests, in each case free
and clear of all Liens, but subject to the Permitted Exceptions.

 

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Section 6.2 Timber Entities.

Immediately prior to the Closing, each Timber Entity will be a newly formed
limited liability company or a newly formed limited partnership, validly
existing and in good standing under the Laws of the state of its formation and
no Timber Entity will have conducted any operations other than acquiring the
Timber Entity Assets and assuming the Timber Entity Assumed Liabilities
immediately prior to the Closing, and will have no liabilities prior to
acquiring the Timber Entity Assets. Immediately prior to the Closing Date, the
Selling Parties will own of record and beneficially all of the Timber Entity
Interests and, immediately after the Closing, Buyer will own of record and
beneficially all of the Timber Entity Interests.

Section 6.3 Compliance with Laws.

(a) The Selling Parties hold all material licenses, certificates, permits,
franchises, approvals, exemptions, registrations and rights of any Governmental
Authority which are necessary to conduct operations on the Timberlands as
presently conducted, except for those licenses, certificates, permits,
franchises, approvals, exemptions, registrations and rights the failure to hold
which would not be reasonably likely, individually or in the aggregate, to have
a Material Adverse Effect.

(b) The Selling Parties are presently operating the Timberlands in substantial
compliance with applicable Laws, other than Environmental Laws which are covered
by Section 6.4 and except for those violations, if any, that would not be
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect.

Section 6.4 Matters Relating to the Environmental Condition of the Timberlands.

Except as described in Section 6.4 of the Seller’s Disclosure Letter, as set
forth in the Phase I Reports or as would not be reasonably likely, individually
or in the aggregate, to have a Material Adverse Effect, (i) to the Selling
Parties’ Knowledge, there is no condition existing on the Timberlands that
constitutes a violation of any applicable Environmental Law, (ii) to the Selling
Parties’ Knowledge, there is no existing Adverse Environmental Condition on the
Timberlands, (iii) to the Selling Parties’ Knowledge, the Selling Parties are
operating the Timberlands in compliance with all applicable Environmental Laws
and the requirements of all applicable Environmental Permits, (iv) no Selling
Party has received any written notice of any violation of, or liability under,
any Environmental Law in connection with the Selling Parties’ operations on the
Purchased Assets during the past five years and (v) there are no material writs,
injunctions, decrees, orders or judgments outstanding or any actions, suits,
proceedings or investigations pending or, to the Selling Parties’ Knowledge,
threatened relating to the Selling Parties’ compliance with or liability under
any Environmental Law affecting the Purchased Assets.

 

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Section 6.5 No Casualty Loss.

Except as described in Section 6.5 of the Seller’s Disclosure Letter, from
January 1, 2006 to the date hereof, to the Selling Parties’ Knowledge, there has
been no Casualty Loss in excess of $5,000,000.

Section 6.6 Condemnations.

Except as described in Section 1.1(g) of the Seller’s Disclosure Letter, there
are no Condemnations and no Condemnations have been concluded between January 1,
2006 and the date hereof.

Section 6.7 Timberland Leases and Real Property Leases.

Except as described in Section 6.7 of the Seller’s Disclosure Letter, with
respect to each Timberland Lease and Real Property Lease or except as would not
be reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect: (i) such Timberland Lease or Real Property Lease is legal,
valid, binding, enforceable and in full force and effect; (ii) the transactions
contemplated by this Agreement or the Ancillary Agreements will not result in a
breach or default under such Timberland Lease or Real Property Lease, or
otherwise cause such Timberland Lease or Real Property Lease to cease to be
legal, valid, binding, enforceable and in full force and effect on identical
terms following the Closing; (iii) no Selling Party, or to the Selling Parties’
Knowledge, any other Party to such Timberland Lease or Real Property Lease is in
breach or default under such Timberland Lease or Real Property Lease; and
(iv) no event has occurred or failed to occur or circumstances exist which, with
the delivery of notice, the passage of time or both, would constitute a breach
or default under such Timberland Lease or Real Property Lease or permit the
termination, modification or acceleration of rent under such Timberland Lease or
Real Property Lease.

 

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Section 6.8 Access to Timberlands. Not more than 6% of the total acreage of the
Owned Timberlands is accessible by verbal access only. In recent years, the
Selling Parties have obtained sufficient access to such Owned Timberlands to
conduct the operations of the business consistent with past practice.

ARTICLE VII

REPRESENTATIONS AND WARRANTIES OF SELLER RELATED TO THE

OTHER PURCHASED ASSETS

Except as otherwise disclosed to Buyer Parent in the Seller’s Disclosure Letter
delivered to Buyer Parent by Seller on the date hereof (except for those
sections of the Seller’s Disclosure Letter that contemplate delivery on a date
other than the date hereof), Seller represents and warrants to Buyer Parent, as
of the date hereof and as of the Closing Date, as follows:

Section 7.1 Collective Bargaining Agreements.

Except as set forth in Section 7.1 of the Seller’s Disclosure Letter, no Selling
Party is a party to any collective bargaining agreement with respect to any of
its Eligible Employees.

Section 7.2 Labor Matters.

(a) Except as set forth in Section 7.2(a) of the Seller’s Disclosure Letter,
(i) there is no material labor strike, dispute, slowdown, stoppage or lockout
ongoing or, to the Selling Parties’ Knowledge, threatened against or affecting
the Purchased Assets; (ii) there is no unfair labor practice charge or complaint
against any Selling Party (relating to the Purchased Assets) pending (for which
written notice has been provided) or, to the Selling Parties’ Knowledge,
threatened before the National Labor Relations Board; and (iii) to the Selling
Parties’ Knowledge, no Selling Party has received written notice of the intent
of any Governmental Authority responsible for the enforcement of labor or
employment laws to conduct an investigation with respect to or relating to the
Purchased Assets and no such investigation is in progress, other than, with
respect to clauses (i), (ii) and (iii), such strikes, disputes, slowdowns,
stoppages, lockouts, charges, complaints or investigations as would not be
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect.

(b) Section 7.2(b) of the Seller’s Disclosure Letter contains a schedule
listing, as of the date set forth therein, all names, employee positions,
annualized pay rates and target bonus opportunities, where applicable, for all
Selling Party employees whose duties are performed primarily for the benefit of
any of the Purchased Assets (the “Eligible Employees”).

 

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Section 7.3 Ownership of Purchased Personal Assets.

The Selling Parties have title to all of the Purchased Personal Assets, free and
clear of any Liens, except for (i) Permitted Exceptions and (ii) other
encumbrances that in the aggregate are not substantial in amount, do not
materially detract from the value of the assets subject thereto, and do not
materially interfere with the present use thereof.

Section 7.4 Employee Benefit Plans; ERISA.

(a) Section 7.4(a) of the Seller’s Disclosure Letter lists all material benefit
and compensation plans and contracts, including “employee benefit plans” within
the meaning of Section 3(3) of ERISA, and all deferred compensation, stock
option, stock purchase, stock appreciation rights, stock-based incentive and
bonus plans maintained or contributed to by any Selling Party for the benefit of
any Eligible Employee (collectively, the “Plans”). True and complete copies of
all material Plans, including any trust instruments and insurance contracts
forming a part of any Plans, and all amendments thereto have been provided or
made available to Buyer Parent.

(b) Each of the Plans has been administered in accordance with its terms and in
substantial compliance with applicable Law (including, where applicable, ERISA
and the Code), except where the failure to so administer such Plan is not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect.

(c) Each of the Plans intended to be “qualified” within the meaning of
Section 401(a) of the Code has been determined by the Internal Revenue Service
to be so qualified, and Seller knows of no fact or set of circumstances that has
adversely affected, or is reasonably likely to affect adversely, the
qualification of such Plan prior to the Closing.

(d) Except as set forth in Section 7.4(d) of the Seller’s Disclosure Letter, no
Plan provides medical, surgical, hospitalization, death or similar benefits
(whether or not insured) for any Eligible Employee for periods extending beyond
their termination of service (by retirement or otherwise), other than
(i) coverage mandated by applicable Law, (ii) death benefits under any “pension
plan,” as that term is defined in Section 3(2) of ERISA, or (iii) benefits the
full cost of which is borne by the Eligible Employee (or his beneficiary).

(e) There are no pending or, to the Selling Parties’ Knowledge, threatened
claims (other than routine claims for benefits) by, on behalf of or against any
of the Plans or any trusts related thereto, except for those claims that are
not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect.

 

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ARTICLE VIII

REPRESENTATIONS AND WARRANTIES OF BUYER PARENT AND BUYER

Except as otherwise disclosed to Seller in a disclosure letter (the “Buyer
Parent’s Disclosure Letter”) delivered to Seller by Buyer Parent on the date
hereof (except for those sections of the Buyer Parent’s Disclosure Letter that
contemplate delivery on a date other than the date hereof), each of the Buying
Parties represent and warrant to Seller, as of the date hereof and as of the
Closing Date, as follows:

Section 8.1 Organization.

Each of Buyer Parent and Buyer is a limited liability company duly organized,
validly existing and in good standing under the laws of its state of
organization. Upon its formation, each of the other Buying Parties will be a
limited liability company duly organized, validly existing and in good standing
under the laws of its state of organization, a corporation duly incorporated,
validly existing and in good standing under the laws of its state of
incorporation or a limited partnership duly organized, validly existing and in
good standing under the laws of its state of formation. Each of (a) Buyer
Parent, Buyer and those other Buying Parties that will be formed as limited
liability companies has or will have upon its formation all requisite limited
liability company power, (b) upon its formation, each of those other Buying
Parties that will be formed as corporations will have all corporate power and
authority, and (c) upon their formation, each of those other Buying Parties
formed as limited partnerships will have all limited partnership power and
authority, to: (i) own, lease and operate its properties and assets and to carry
on its business as now being conducted; (ii) execute this Agreement and the
Ancillary Agreements to be executed by it in connection with the consummation of
the transactions contemplated hereby and thereby; and (iii) perform its
obligations and consummate the transactions contemplated hereby and thereby.
Buyer will be formed as a limited liability company in connection with the
transactions contemplated by this Agreement and, immediately prior to the
Closing, will not have conducted any operations or engaged in any activities
other than those related to the acquisition of the Buyer Timber Entity
Interests, the issuance of the Timber Notes and obtaining the Letters of Credit,
as contemplated by the Transaction Documents. Timber GP will be formed as a
limited liability company in connection with the transactions contemplated by
this Agreement, immediately prior to Closing, and will not have conducted any
operations or engaged in any activities. Immediately prior to the Closing, Buyer
will own all of the outstanding membership interests of Timber GP.

Section 8.2 Qualification.

Each of Buyer Parent and Buyer is, and, upon its formation, each of the other
Buying Parties that will be formed as a limited liability company will be
qualified or registered as a foreign limited liability company. Upon its
formation, each of the other

 

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Buying Parties that will be formed as a corporation will be qualified or
registered as a foreign corporation. Following its formation, each of the other
Buying Parties that will be formed as a limited partnership will be qualified or
registered as a foreign limited partnership. Each of Buyer Parent, Buyer, and
each other Buying Party is or, following its formation, will be in good standing
under the laws of each jurisdiction in which the location of its properties
makes such qualification necessary, other than those jurisdictions as to which
the failure to be so qualified or registered would not, individually or in the
aggregate, have a material adverse effect on the financial condition or results
of the operations of Buyer Parent, Buyer or any other Buying Party, or on the
ability of Buyer Parent, Buyer or any other Buying Party to perform its
obligations under this Agreement and the Ancillary Agreements to be executed by
it.

Section 8.3 Authority.

The execution, delivery and performance of this Agreement and the consummation
of transactions contemplated hereby have been, or will be as of the Closing
Date, duly and validly authorized by all limited liability company action of
each of Buyer Parent and Buyer, and no other corporate, limited liability
company or limited partnership proceedings on the part of any of Buyer Parent,
Buyer or any other Buying Party are necessary, or will be necessary, for Buyer
Parent, Buyer or any such other Buying Party to authorize this Agreement or
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will be as of the Closing Date, duly and validly authorized
by all corporate action, limited partnership action or limited liability company
action, as the case may be, of each of the Buying Parties. No other corporate,
limited partnership or limited liability company proceedings on the part of any
Buying Party will be necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Buyer Parent and Buyer and will be duly and
validly executed and delivered by each other Buying Party in accordance with
Section 15.16 and, assuming due authorization, execution and delivery by the
Selling Parties, is, or will be, a legal, valid and binding obligation of each
of Buyer Parent, Buyer and each other Buying Party enforceable against it in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar Laws of general applicability
relating to or affecting creditors’ rights and to general equity principles.

Section 8.4 No Conflict.

The execution, delivery, and performance by each of Buyer Parent, Buyer and each
other Buying Party of this Agreement or any of the Ancillary Agreements to which
it is a party will not result in a breach or violation of, or default under,
(i) the terms, conditions or provisions of the (A) certificate of formation or
limited liability company agreement of Buyer Parent, Buyer or any Buying Party
that will be formed as a limited

 

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liability company, (B) the certificate of incorporation of any Buying Party that
will be formed as a corporation or (C) the limited partnership agreement of any
Buying Party that will be formed as a limited partnership, or any material
Contract to which any of Buyer Parent, Buyer or other Buying Party is a party,
or by which any of Buyer Parent, Buyer or any other Buying Party or any of their
respective assets may be bound; (ii) any Law applicable to it; or (iii) any
permit, license, order, judgment or decree of any Governmental Authority by
which any of Buyer Parent, Buyer, any other Buying Party or any of their
respective assets is or may be bound, excluding from the foregoing clauses (i),
(ii) or (iii), such breaches, violations or defaults that would not be
reasonably likely, individually or in the aggregate, to have a material adverse
effect on the financial condition or results of operations of any of Buyer
Parent, Buyer or any other Buying Party or on the ability of any of Buyer
Parent, Buyer or any other Buying Party to perform its obligations under this
Agreement and the Ancillary Agreements to be executed by it.

Section 8.5 Consents and Approvals.

There are no approvals, consents or registration requirements with respect to
any Governmental Authority that are or will be necessary for the valid execution
and delivery by any of Buyer Parent, Buyer or any other Buying Party of this
Agreement and the Ancillary Agreements, or the consummation of the transactions
contemplated hereby and thereby, other than those which (i) have been obtained,
(ii) are of a routine nature and not customarily obtained or made prior to
execution of purchase and sale agreements in transactions similar in nature to
those contemplated hereby and where the failure to obtain the same would not,
individually or in the aggregate, have a material adverse effect on the
financial condition or results of operations of Buyer Parent, Buyer or any other
Buying Party or on the ability of any of Buyer Parent, Buyer or any other Buying
Party to perform its obligations under this Agreement and the Ancillary
Agreements to be executed by it, (iii) may be required to be obtained by any
Cash Entity or any Timber Entity to conduct operations on the Purchased Real
Property Assets, or (iv) may be required under the HSR Act.

Section 8.6 Litigation.

(a) As of the date hereof, there are no claims against any of the Buying Parties
or, to the knowledge of any of the Buying Parties, any threatened claims against
any Buying Party, which either alone or in the aggregate seek to restrain or
enjoin the execution and delivery of this Agreement or the Ancillary Agreements
or the consummation of any of the transactions contemplated hereby or thereby.

(b) As of the date hereof, there are no judgments or outstanding orders,
injunctions, decrees, stipulations or awards (whether rendered by a Governmental
Authority or by an arbitrator) against any Buying Party (or affecting any of
such parties’

 

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respective assets) which prohibit or restrict or could reasonably be expected to
result in any delay of the consummation of the transactions contemplated by this
Agreement or the Ancillary Agreements.

Section 8.7 Availability of Funds.

Buyer Parent currently has available, and will at the Closing (or at such other
time as any such amounts shall become due and payable) have available,
sufficient funds to pay the Purchase Price and to pay any and all other amounts
payable by any of the other Buying Parties pursuant to this Agreement and to
effect the transactions contemplated hereby.

Section 8.8 Investment Purpose.

Each of Buyer Parent and Buyer represents and warrants that Buyer shall acquire
the Timberlands and the Timber Entity Interests for its own account and not as
nominee, agent or intermediary for any other Person. As of the date of this
Agreement, none of the Buying Parties has entered into any plan, agreement or
other arrangement to transfer or otherwise dispose of any interest in the
Timberlands (except as contemplated by the Master Stumpage Agreements) or any
plan, agreement or other arrangement to transfer or otherwise dispose of any
interest in any Timber Entity to any other Person, and Buyer Parent has not
entered into any plan, agreement or other arrangement to transfer or otherwise
dispose of any interest in Buyer to any other Person, and none of the Buying
Parties shall enter into any such plan, agreement or other arrangement prior to
the Closing; provided that Buyer Parent (i) may designate one or more Affiliates
to acquire all or a portion of the Cash Timberlands and (ii) may assign all or a
portion of its rights and obligations prior to Closing as permitted by
Section 15.4.

Section 8.9 Brokers and Advisors.

Except for fees payable to Merrill Lynch, Pierce, Fenner & Smith Incorporated,
no broker, investment banker, financial advisor or other Person is entitled to
any broker’s, finder’s, financial advisor’s or other similar fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made on or behalf of any of the Buying Parties.

Section 8.10 Tax Matters.

Subject to any changes in applicable Law that occur after the Closing Date
having retroactive effect, Buyer is treated as a “disregarded entity” of Buyer
Parent for U.S. federal Income Tax purposes and all applicable state and local
Income Tax purposes in state and local jurisdictions following the U.S. federal
Income Tax treatment of entities for such purposes.

 

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ARTICLE IX

ADDITIONAL AGREEMENTS RELATING TO THE PURCHASED ASSETS

Section 9.1 Commercially Reasonable Efforts.

(a) Subject to the terms and conditions herein provided, each of the Selling
Parties and each of the Buying Parties agree to use all commercially reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
as promptly as practicable the transactions contemplated by this Agreement and
to cooperate with each other in connection with the foregoing, including using
all commercially reasonable efforts:

(i) to obtain all necessary waivers, consents, releases and approvals, including
all consents, approvals and authorizations that are required to be obtained
under any applicable Law;

(ii) to lift or rescind any injunction or restraining order or other order
adversely affecting the ability of the Parties to consummate the transactions
contemplated hereby or by the Ancillary Agreements;

(iii) to effect all necessary registrations and filings and submissions of
information requested by Governmental Authorities; and

(iv) to fulfill all conditions to this Agreement.

(b) In furtherance and not in limitation of the foregoing, each of the Selling
Parties and each of the Buying Parties agrees to make, or cause to be made, all
necessary filings required pursuant to the HSR Act and any other Regulatory Law
with respect to the transactions contemplated hereby as promptly as practicable
after the date of this Agreement, but in no event later than 30 days after the
date hereof, and to supply as promptly as practicable any additional information
and documentary material that may be requested pursuant to the HSR Act and any
other Regulatory Law and to request early termination of the waiting period
under the HSR Act and to use all commercially reasonable efforts to cause the
expiration or early termination of the applicable waiting periods under the HSR
Act in the most expeditious manner practicable.

(c) If necessary to obtain any consents, approvals, permits or authorizations or
to remove any impediments to the transactions contemplated hereby or by any
Ancillary Agreement relating to any Regulatory Law or to avoid the entry of, or
to effect the dissolution of, any injunction, temporary restraining order or
other order in any suit or proceeding relating to Regulatory Law, each of the
Selling Parties and each of the Buying Parties shall cooperate with each other
and take such lawful steps as shall be necessary or appropriate to secure such
end, including, an agreement by each or any of the Buying Parties to hold
separate or divest any of the Purchased Assets.

 

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(d) The Selling Parties shall cooperate, at Buyer Parent’s sole expense and
without the Selling Parties’ incurring any liability, with the Buying Parties
and their respective lenders and prospective lenders in connection with the
syndication of certain loans to be made to the Buying Parties or the placement
of certain debt securities to finance the acquisition of the Purchased Assets.

Section 9.2 Maintenance of Business.

(a) Subject to the terms and conditions of this Agreement, and except as
otherwise contemplated hereby, the Selling Parties, from the date hereof through
the Closing Date, shall use commercially reasonable efforts to maintain the
Purchased Assets and to conduct the business with respect to the Purchased
Assets in the ordinary course in all material respects, and shall pay when due
all accounts payable in respect of the Purchased Assets in a manner consistent
with past practice; provided, however, that it is understood and agreed that if
the Selling Parties harvest timber in accordance with the 2002-2004 Sustainable
Forestry Initiative Standard, as amended or updated from time to time, such
harvest activity will be deemed not to violate this Section 9.2(a). It is the
intention of the Selling Parties to conduct the business with respect to the
Purchased Assets substantially in accordance with the 2006 Harvest Plan.

(b) Subject to the terms and conditions of this Agreement, and except as Seller
may otherwise agree in writing, each Buying Party shall use, all commercially
reasonable efforts not to interfere with the Selling Parties’ conduct of
business with respect to the Purchased Assets pending the Closing and not to
take any action that might reasonably be expected to impair any Selling Party’s
relationships with customers, suppliers or employees of the businesses and
operations of any Selling Party, whether or not associated with the Purchased
Assets.

(c) From the date hereof until the Closing Date, except as set forth in
Section 9.2(c) of the Seller’s Disclosure Letter or as required by Law, or with
the prior written consent of Buyer Parent (which shall not be unreasonably
withheld or delayed), the Selling Parties: (i) shall use commercially reasonable
efforts to maintain the employment of all Eligible Employees; and (ii) shall
not, except in the ordinary course of business in accordance with existing
personnel policies and practices, (A) take any action that would increase the
wages, salary, target bonus, severance, or other benefits payable to (or that
could become payable to) any of the Eligible Employees before or after the
Closing (except for increases in wages that are in the ordinary course of
business consistent with past practice) or (B) enter into any new agreement or
amend any existing agreement with any of the Eligible Employees.

 

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Section 9.3 Public Announcements.

(a) This Agreement (or a memorandum thereof) may not be recorded by any Buying
Party. In the event that this Agreement (or a memorandum thereof) is recorded by
any Buying Party, Seller may, at its option, terminate this Agreement.

(b) Notwithstanding anything to the contrary set forth in Section 15.7 or the
Confidentiality Agreement, except as required by applicable Law, stock exchange
rules or rules and regulations promulgated by the SEC, the Selling Parties and
the Buying Parties shall consult with each other before issuing, and will
provide each other the opportunity to review, comment upon and concur with, and
use commercially reasonable efforts to agree on, any press releases and other
public announcements with respect to the transactions contemplated by this
Agreement, including the time, form and content of such press release or public
announcement, and shall not issue any such press release or make any such public
announcement prior to such consultation, provided that any disclosure required
to be made under applicable Law or stock exchange rule may be made without such
mutual agreement if a Party required to make such disclosure has determined in
good faith that it is necessary to do so and has used commercially reasonable
efforts, prior to the issuance of the disclosure, to provide the other Parties
with a copy of the proposed disclosure and to discuss the proposed disclosure
with the other Parties, and provided, further, that any Party may make any
filings required by any or rule or regulation promulgated by the SEC without
consultation with any other Party. Notwithstanding anything to the contrary in
this Agreement, to the extent that Buyer Parent is required under applicable
securities Laws to file any part of any Fiber Supply Agreement as an exhibit to
any report, registration statement, annual report, quarterly report, proxy
statement or other filing made pursuant to such securities Laws (including
reports on Form 8-K), then Buyer Parent shall (i) notify Seller at least four
business days in advance of such requirement and (ii) upon request from Seller,
request confidential treatment of all portions of the Fiber Supply Agreement
reasonably identified by Seller as confidential. Buyer Parent will make all
requests for confidential treatment in accordance with all applicable securities
Laws and the rules and regulations of the SEC, will provide Seller (and its
counsel) with an opportunity to review and comment on such request, and will not
file the portions of any Fiber Supply Agreement identified as confidential by
Seller unless required by the SEC after seeking confidential treatment of such
portions. Buyer Parent shall (i) notify Seller promptly upon receipt of any
comments or requests from the SEC (and provide Seller with copies of all written
correspondence received from and sent to the SEC) with respect to such
confidential treatment request, (ii) cooperate with Seller and use commercially
reasonable efforts to minimize to the extent permitted under applicable Law
disclosure of the portions of any Fiber Supply Agreement that Seller identified
as confidential, and (iii) respond promptly (in coordination with Seller) to all
SEC comments or requests.

 

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Section 9.4 Books and Records.

(a) At the Closing, Seller shall use commercially reasonable efforts to provide
to Buyer Parent (except for those items which are stored at locations included
in the Purchased Assets) with copies of all maps (including backup data),
surveys, drawings, deeds, timber harvest records and other property records, in
each case, primarily related to the Purchased Assets or the Assumed Liabilities,
that are in the Selling Parties’ possession or control and are not subject to
the attorney-client or other legal privilege (as reasonably and in good faith
determined by the Selling Parties) (the “Books and Records”); provided, however,
that Seller shall have no obligation to provide (i) any information to Buyer
Parent regarding the pricing of timber, internal appraisals of the Purchased
Assets, other valuations or similar pricing or financial records, or any other
information that is confidential and proprietary to any Selling Party, (ii) any
files, records, data (including seismic data and related information) or other
documentary information maintained in the normal course of business by any
Selling Party pertaining exclusively to the Reserved Minerals and Gases, the
Reserved Mineral and Gas Rights, the Reserved Water Rights or the Subsurface
Geosequestration Rights, or (iii) any document or item that any Selling Party is
contractually or otherwise bound to keep confidential, (x) unless, in the case
of documents, files, records or data described in clauses (i) or (ii) of this
sentence, such documents, files, records or data constitute Purchased Assets or
Assumed Liabilities and (y) provided Seller furnishes to Buyer Parent summary
descriptions of all documents, files, records or data withheld pursuant to
clause (ii) of this sentence. Notwithstanding the foregoing, the Selling Parties
may retain a copy of the Books and Records for legal compliance or regulatory
purposes or in accordance with their internal document retention policies.

(b) For a period of seven years after the Closing, (i) Seller shall provide
Buyer Parent with reasonable access, at Buyer Parent’s cost, to any books and
records in Seller’s possession to the extent such books and records relate to
the Purchased Assets or the Assumed Liabilities (subject to the provisos set
forth in Section 9.4(a)), and (ii) Buyer Parent will provide Seller with
reasonable access, at Seller’s cost, to any books and records in the possession
of any Buying Party to the extent such books and records relate to the Excluded
Assets or the Excluded Liabilities (other than any books and records that any
such party is contractually or otherwise bound to keep confidential).

Section 9.5 Dispute Resolution.

(a) In the event of any dispute, claim, question, disagreement or controversy
arising from or relating to this Agreement or the breach thereof, or the
Purchased Assets, other than those disputes, claims, questions, disagreements or
controversies for which dispute resolution procedures are set forth in Sections
2.3(a), 2.3(b), 2.3(c) and 2.3(d), Seller, on behalf of the Selling Parties,
Buyer Parent, on behalf of the Buying Parties shall use their reasonable efforts
to settle the dispute, claim,

 

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question or disagreement. To this effect, they shall consult and negotiate with
each other in good faith and, recognizing their mutual interests, attempt to
reach a just and equitable solution satisfactory to the Parties.

(b) If Seller and Buyer Parent do not reach such a solution within a period of
30 days after written notice by either Seller or Buyer Parent requesting that
such discussions be initiated, the Parties agree that any and all disputes,
claims, questions, disagreements or controversies arising from or relating to
this Agreement or the breach thereof, or the Purchased Assets, shall be
submitted to non-binding, voluntary mediation. Either Seller or Buyer Parent may
commence mediation by providing Buyer Parent (in the case of Seller) or Seller
(in the case of Buyer Parent) with a written request for mediation, setting
forth the subject of the dispute and the relief requested. The Parties will
cooperate with one another in selecting a single mediator, and in promptly
scheduling the mediation proceedings.

(c) If the Parties cannot agree upon a mediator, they shall appoint the American
Arbitration Association as a mediation body (which shall in turn select a single
mediator), and shall implement the Commercial Mediation Rules.

(d) All settlement offers, promises, conduct and statements, whether oral or
written, made in the course of the settlement and mediation process by either
Seller or Buyer Parent, their agents, employees, experts and attorneys, and by
the mediator, are confidential, privileged and inadmissible for any purpose,
including impeachment, in any arbitration or other proceeding involving the
Parties; provided that evidence that is otherwise admissible or discoverable
shall not be rendered inadmissible or non-discoverable as a result of its
disclosure during settlement or mediation efforts.

(e) During the pendency of the settlement and mediation process, the Parties
agree to forebear from filing or otherwise proceeding with litigation; provided,
however, that either Seller, on the one hand, or Buyer Parent, on the other
hand, shall be entitled to seek a temporary restraining order or preliminary
injunction to prevent the breach of the Selling Parties’ or Buyer Parent’s
obligations, as the case may be, under this Agreement or the Ancillary
Agreements. If the agreement of the Parties to use mediation breaks down and a
later litigation is commenced or application for an injunction is made, the
Parties will not assert a defense of laches or statute of limitations based upon
the time spent in mediation.

(f) Either Seller or Buyer Parent may initiate litigation with respect to the
matters submitted to mediation at any time following 60 days after the initial
mediation session or 90 days after the date of sending the written request for
mediation, whichever occurs first. The mediation may continue after the
commencement of litigation if Seller and Buyer Parent so mutually elect in
writing.

 

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(g) The provisions of this Section 9.5 may be enforced by any court of competent
jurisdiction, and the Party seeking enforcement shall be entitled to an award of
all costs, fees and expenses, including attorneys’ fees, to be paid by the Party
against whom enforcement is ordered.

Section 9.6 Consents.

(a) Each of the Selling Parties and the Buying Parties shall cooperate, and use
all commercially reasonable efforts, to make all filings and obtain all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of Governmental Authorities and other third parties necessary to
consummate the transactions contemplated by this Agreement. In addition to the
foregoing, Buyer Parent agrees to provide such assurances as to financial
capability, resources and creditworthiness as may be reasonably requested by any
third party whose consent or approval is sought hereunder or in connection
herewith. Notwithstanding the foregoing, nothing herein shall obligate or be
construed to obligate any Party to make any payment to any third party in order
to obtain the consent or approval of such third party or to transfer any
Purchased Contract, Timberland Lease, Real Property Lease, Personal Property
Lease or License in violation of its terms.

(b) With respect to any agreements for which any required consent or approval is
not obtained prior to the Closing, each of the Selling Parties and Buying
Parties shall use all commercially reasonable efforts to obtain any such consent
or approval after the Closing until either such consent or approval has been
obtained or the Selling Parties determine in good faith that such consent cannot
reasonably be obtained. In addition, to the extent that any Purchased Contract,
Timberland Lease, Real Property Lease, Personal Property Lease or License may
not be assigned without the consent or approval of any third party, and such
consent is not obtained prior to the Closing, the Selling Party that is party
thereto shall use all commercially reasonable efforts to provide the relevant
Buying Party with the same benefits (and the relevant Buying Party shall be
responsible for all corresponding obligations) arising under such Purchased
Contract, Timberland Lease, Real Property Lease, Personal Property Lease or
License, including performance by such Selling Party (or the relevant Buying
Party, if applicable) as agent, if legally permissible and commercially
feasible; provided that the relevant Buying Party (or such Selling Party, if
applicable) shall provide such Selling Party (or the relevant Buying Party, if
applicable) with such commercially reasonable access to the premises, books and
records and personnel as is reasonably necessary to enable such Selling Party
(or the relevant Buying Party, if applicable) to perform its obligations under
such Purchased Contracts, Timberland Leases, Real Property Leases, Personal
Property Leases or Licenses, and Buyer Parent shall pay or satisfy the
corresponding liabilities for the enjoyment of such benefits to the extent the
relevant Buying Party would have been responsible therefor if such consent or
approval had been obtained.

 

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Section 9.7 Continuing Agreements.

Each Buying Party acknowledges that the Purchased Assets are and will continue
to be subject to certain oil, gas and mineral leases and other Contracts
affecting the Timberlands and relating to the Reserved Minerals and Gases,
including the Contracts listed in Section 9.7 of the Seller’s Disclosure Letter
(collectively, the “Continuing Agreements”). Section 9.7 of the Seller’s
Disclosure Letter sets forth all of the Continuing Agreements in effect as of
the date of this Agreement, except for those Continuing Agreements that would
not be reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect. Buyer Parent has been provided with copies of or access to the
Continuing Agreements set forth in Section 9.7 of the Seller’s Disclosure
Letter. Each Buying Party further acknowledges that from the date of this
Agreement to the Closing Date, the Selling Parties may enter into additional
Continuing Agreements in respect of the Purchased Assets subject to the prior
approval of Buyer Parent (such approval not to be unreasonably withheld or
delayed) and that the entry into such Continuing Agreements shall be deemed not
to breach this Agreement; provided that such Continuing Agreements shall not be
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect. For so long as any of the Continuing Agreements remains in effect from
and after the Closing Date, the relevant Buying Party shall comply (and shall
assist the Selling Parties in their compliance) with the obligations thereunder
that apply to the Selling Parties as surface owner as if such Buying Party were
a party thereto.

Section 9.8 Financing.

Buyer Parent shall keep available, and shall not modify in a manner adverse to
Seller, the Merrill Lynch Debt Commitment until the earliest of (i) the
consummation of the transaction contemplated by this Agreement, (ii) the
Termination Date or (iii) the 210th day from the date hereof.

Section 9.9 Transition Services.

During the period between the date of this Agreement and the Closing Date, the
Parties will negotiate in good faith to execute (i) a transition services
agreement in a form reasonably acceptable to Seller and each Buyer Parent and,
(ii) if necessary, a non-exclusive technology license in a form reasonably
acceptable to Seller and Buyer Parent.

 

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ARTICLE X

ADDITIONAL AGREEMENTS RELATING TO THE TIMBERLANDS

Section 10.1 Right of Entry.

(a) Upon reasonable prior written notice to Seller, but in no event less than
three days prior notice, and receipt of written authorization from Seller, prior
to the Closing Date or termination of this Agreement in accordance with Article
XIV, Buyer Parent, through its authorized agents or representatives, may
(i) enter upon and inspect the Timberlands at all reasonable times for the
purposes of making inspections and other studies, provided that neither Buyer
Parent nor its agents or representatives shall (A) enter upon the Timberlands
for the purpose of preparing Phase II Reports or making any soil borings or
other invasive or other subsurface environmental investigations relating to all
or any portion of the Timberlands, or (B) prepare or instruct its agents or
representatives to prepare Phase II Reports or make any soil borings or other
invasive or other subsurface environmental investigations relating to all or any
portion of the Timberlands, or (C) contact any official or representative of any
Governmental Authority regarding Hazardous Substances on or the environmental
condition of the Timberlands, in each case without Seller’s prior written
consent thereto, and (ii) interview employees of the Selling Parties, in the
presence and under the supervision of appropriate officers of the Selling
Parties, for transition planning purposes, provided that in no event shall any
officers or employees of the Selling Parties participate, and Buyer Parent shall
not seek the participation of any officers or employees of the Selling Parties,
in any decisions of any of the Buying Parties with respect to hiring or
termination of the employment of any present of former employees of any of the
Selling Parties. Upon the completion of the inspections and studies described in
clause (i) of this Section 10.1(a), Buyer Parent, at its expense, shall repair
any physical damage caused to the Purchased Assets and remove all debris
resulting from and all other material placed on the Timberlands in connection
with Buyer Parent’s inspections and studies.

(b) At any Selling Party’s request, Buyer Parent shall disclose the results of
such inspections and studies, and shall deliver copies of all such reports and
test results, to Seller. The results of such inspections and studies (as well as
any information and documents that any Selling Party delivered or caused to be
delivered to Buyer Parent concerning the Timberlands) shall be treated as
strictly confidential by the Parties and the same shall not be disclosed to any
third party or Governmental Authority (provided that such results, information
and documents may be disclosed to consultants, attorneys, insurers, accountants,
investors and lenders of Buyer Parent for use solely in connection with the
transactions contemplated by this Agreement, who shall be required by Buyer
Parent to similarly treat such results, information and documents as strictly
confidential) except to the extent required by any Law or court order or in
connection with any legal proceeding filed to enforce a Party’s rights under
this Agreement. In the event that

 

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disclosure of the results of any such inspections or studies or any such
information or documents that any Selling Party delivered or caused to be
delivered to Buyer Parent concerning the Timberlands is required by applicable
law, regulation or court order, Buyer Parent shall notify Seller promptly in
writing so that Seller may seek a protective order (at its own cost and expense)
or other appropriate remedy or, in its sole discretion, waive compliance with
the terms of this Section 10.1(b). Buyer Parent shall cooperate with Seller, at
Seller’s sole cost and expense, to obtain a protective order or other
appropriate remedy. In the event that no such protective order or other
appropriate remedy is obtained, or Seller waives compliance with the terms of
this Section 10.1(b), Buyer Parent shall give Seller written notice of the
information to be disclosed as far in advance of its disclosure as practicable.

(c) Buyer Parent shall indemnify, defend and hold each Selling Party harmless
from and against any and all claims, demands, losses, expenses, damages, costs
and liabilities, suffered or incurred by any Selling Party as a result of any
physical damage to the Timberlands or any death or personal injury to any person
caused by or attributable to the acts or omissions of any Buying Party or the
employees, contractors, representatives or agents of any Buying Party arising in
connection with inspections or studies performed by or on behalf of any Buying
Party. In addition, Buyer Parent agrees that each Buying Party and its
respective contractors, representatives and agents who enter upon the
Timberlands shall maintain general liability insurance, naming the Selling
Parties as additional insureds, in an amount not less than $1,000,000 and, prior
to any such entry upon the Timberlands, shall provide, if requested by Seller,
the Selling Parties with written evidence of such insurance.

(d) During the period between the date of this Agreement and the Closing, and
subject to the Confidentiality Agreement and applicable Law, Seller shall
provide Buyer Parent, and its respective officers, employees, accountants,
counsel, financial advisors and other representatives, with (i) access at all
reasonable times upon reasonable prior written notice to Seller, but in no event
less than five days prior written notice, to its Books and Records primarily
related to the Purchased Assets or the Assumed Liabilities, provided that such
access shall not unreasonably interfere with the business or operations of any
Selling Party and (ii) access to the online data room established by Seller
prior to the date hereof. Nothing in this Section 10.1(d) shall require Seller
to provide any access or to disclose any information: (x) relating to its
employees, except as required under Section 11.1 or Section 11.1(b) of the
Seller’s Disclosure Letter, (y) that is not in the possession or control of a
Selling Party or (z) if permitting such access or disclosing such information
would (A) violate applicable Law, (B) violate any of its obligations with
respect to confidentiality, (C) result in the loss of attorney-client privilege
or (D) be adverse to the interests of any Selling Party or any of their
respective Affiliates in any pending or threatened litigation between the
Parties in respect of the terms of this Agreement.

 

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Section 10.2 Permits and Licenses.

Buyer Parent shall be solely responsible for obtaining all permits and licenses,
if any, required by any Buying Party to carry on its intended operations at the
Timberlands.

Section 10.3 Environmental Matters.

Seller has provided a copy of each of the Phase I Reports described on
Section 10.3 of the Seller’s Disclosure Letter to Buyer Parent upon the
following terms and conditions: (i) the Phase I Reports are provided for
informational purposes only, without any representation or warranty by or on
behalf of any of the Selling Parties as to the accuracy or completeness of the
information contained therein; (ii) the Phase I Reports are subject to the terms
and conditions of the Confidentiality Agreement; and (iii) no information
contained in the Phase I Reports shall be deemed to obligate any Selling Party
to take any action, including action to investigate, correct, remediate or
address any condition described in the Phase I Reports, except as required by
Section 13.5. Buyer Parent acknowledges receipt of the Phase I Reports and
accepts delivery of the Phase I Reports upon the terms and conditions set forth
herein. Seller shall provide, within 60 days of execution of this Agreement, a
customary reliance letter from the party preparing each of the Phase I Reports,
addressed to Buyer Parent and Lender, certifying that Buyer Parent and Lender
may rely upon such Phase I Reports upon and subject to the terms and conditions
set forth in such reliance letter and upon and subject to the terms and
conditions set forth in this Section 10.3.

Section 10.4 Special Places.

Buyer Parent acknowledges that the Timberlands include certain areas referred to
as “Special Places in the Forest,” which areas are described in Section 10.4 of
the Seller’s Disclosure Letter. Buyer Parent further acknowledges that the
Timberlands are subject to certain Habitat Conservation Plans, including those
set forth on Section 10.4 of the Seller’s Disclosure Letter. At the Closing,
each Buying Party shall assume those obligations set forth in the Habitat
Conservation Plans being conveyed to it.

Section 10.5 Reserved Minerals and Gases.

(a) At Closing, Seller, each Cash Entity and each Timber Entity shall enter into
a surface use agreement with respect to the Reserved Minerals and Gases,
Reserved Mineral and Gas Rights, Reserved Water Rights and Subsurface
Geosequestration Rights, substantially in the form set forth in Exhibit I (the
“Surface Use Agreement”).

(b) To the extent affirmative action is necessary for the Selling Parties to
reserve the ownership of the Reserved Minerals and Gases, Reserved Mineral and
Gas Rights, Reserved Water Rights or Subsurface Geosequestration Rights or to
establish or

 

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confirm title to the Reserved Minerals and Gases, Reserved Mineral and Gas
Rights, Reserved Water Rights or Subsurface Geosequestration Rights in the
Selling Parties, each Buying Party and their respective Affiliates shall
cooperate with the Selling Parties in such efforts, including executing all
documents pertaining to the Reserved Minerals and Gases, Reserved Mineral and
Gas Rights, Reserved Water Rights or Subsurface Geosequestration Rights as are
reasonably requested by the Selling Parties.

(c) In the event that any Cash Entity or Timber Entity intends to sell to any
third party (other than an Affiliate of such Cash Entity or Timber Entity) any
Owned Timberlands in compliance with the terms of this Agreement and free and
clear of all obligations under the applicable Support Agreement (a “Third Party
Sale”), such Cash Entity or Timber Entity may request in writing that Seller
sell to such Cash Entity or Timber Entity the non-producing Reserved Mineral and
Gas Rights, Reserved Water Rights and Subsurface Geosequestration Rights
exclusively pertaining to such Owned Timberlands (collectively, “Mineral
Rights”) and, in such case, (i) Seller and such Cash Entity or Timber Entity, as
the case may be, shall negotiate in good faith for a period of not less than 45
days the price and other terms upon which such Cash Entity or Timber Entity
would purchase such Mineral Rights, and (ii) such Cash Entity or Timber Entity
shall provide such information as may be reasonably requested by Seller
regarding the proposed Third Party Sale. If Seller and such Cash Entity or
Timber Entity, as the case may be, reach agreement upon the price and other
terms upon which a Mineral Sale would be effected (a “Mineral Sale Agreement”),
any purchase of Mineral Rights thereunder shall become effective upon
consummation of the Third Party Sale, provided that any Mineral Sale Agreement
shall expire 120 days after the date thereof if the Third Party Sale has not by
then been consummated, unless otherwise expressly agreed in the Mineral Sale
Agreement.

Section 10.6 Reserved Easements and Buyer Easements.

(a) To the extent affirmative action is necessary for the Selling Parties to
acquire or reserve the easement ownership of the Reserved Easements or to
establish or confirm easement title to the Reserved Easements in the Selling
Parties, each Buying Party and their respective Affiliates shall cooperate with
the Selling Parties in such efforts at Seller’s sole cost and expense, including
by executing all documents pertaining to the Reserved Easements as are
reasonably requested by the Selling Parties. To the extent affirmative action is
necessary for any Cash Entity or any Timber Entity to acquire the easement
ownership of the Buyer Easements or to establish or confirm easement title to
the Buyer Easements in any Cash Entity or any Timber Entity, the Selling Parties
shall cooperate with the relevant Cash Entity or the relevant Timber Entity in
such efforts, at Buyer Parent’s sole cost and expense, and shall use
commercially reasonable efforts to assist the relevant Cash Entity or the
relevant Timber Entity in acquiring such ownership, including by executing all
documents pertaining to Buyer Easements as are reasonably requested by the Buyer
Parent.

 

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(b) For a period of one year following the Closing, in the event that Seller
identifies any portion of the Timberlands which should have been identified as a
Reserved Easement, but was not disclosed to Buyer Parent prior to the Closing (a
“Post-Closing Reserved Easement”), so long as such Post-Closing Reserved
Easement relates to a use or access right that existed as of the Closing (taking
into account the change of ownership of Seller’s various properties and assets)
and does not have a material adverse effect on the use and enjoyment by any Cash
Entity or any Timber Entity of the Timberlands, each Buying Party and its
respective Affiliates shall cooperate with the Selling Parties, at Seller’s sole
cost and expense, in any efforts that may be necessary for the Selling Parties
or any third parties who may acquire facilities not included in the Purchased
Assets from Seller to acquire easement ownership in any Post-Closing Reserved
Easements or to establish or confirm easement title to the Post-Closing Reserved
Easements in the Selling Parties or such third parties, including executing all
documents pertaining to the Post-Closing Reserved Easements as are reasonably
requested by the Selling Parties on behalf of themselves or such third parties.

(c) For a period of one year following the Closing, in the event that Buyer
Parent identifies property owned by any of the Selling Parties in the vicinity
of any of the Timberlands which should have been identified as a Buyer Easement,
but was not disclosed to the Selling Parties prior to the Closing (a
“Post-Closing Buyer Easement”), so long as such Post-Closing Buyer Easement
relates to a use or access right that existed as of the Closing and does not
have a material adverse effect on the use and enjoyment by Selling Parties of
such property, the Selling Parties and their respective Affiliates shall
cooperate with Buyer Parent, at Buyer Parent’s sole cost and expense, in any
efforts that may be necessary for the relevant Cash Entity or the relevant
Timber Entity or its respective Affiliates to acquire ownership in any
Post-Closing Buyer Easements or to establish or confirm title to the
Post-Closing Buyer Easements in the relevant Cash Entity, the relevant Timber
Entity or its respective Affiliates, including executing all documents
pertaining to the Post-Closing Buyer Easements as are reasonably requested by
the relevant Cash Entity, the relevant Timber Entity or its respective
Affiliates.

(d) No Buying Party or any of their respective Affiliates shall interfere with
or oppose the Selling Parties Reserved Easements or any Post-Closing Reserved
Easements. None of the Selling Parties shall interfere with or oppose the Buyer
Easements or any Post-Closing Buyer Easements.

Section 10.7 Title Commitment; No Survey.

(a) The Selling Parties shall make available to Buyer Parent Title Commitments
from the Title Company with respect to the Owned Timberlands and the Leasehold
Interests. At the Closing, the Cash Entities and Buyer shall purchase the Title
Policies. The Selling Parties and their respective Affiliates shall cooperate
with the Buying Parties in their efforts to purchase Title Policies containing a
non-imputation

 

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endorsement with respect to the Timber Entities, in a form reasonably acceptable
to Buyer Parent, including providing such affidavits as may be reasonably
requested by the Title Company.

(b) Other than in accordance with Section 9.4(a), Seller shall not provide any
surveys of the Timberlands to Buyer Parent. Neither Buyer Parent nor any of its
Affiliates intends to obtain any new surveys of the Timberlands.

Section 10.8 Transfer of Timber Entity Assets.

(a) Immediately prior to the Closing, each Selling Party shall transfer to the
relevant Timber Entity all of its outstanding interests in the Timber Entity
Assets, subject to the Permitted Exceptions; provided that Seller reserves for
itself and its successors and assigns the easements with respect to the Timber
Entity Assets described in Section 1.2(a) of the Seller’s Disclosure Letter.

(b) Immediately prior to the Closing, Seller shall cause the relevant Timber
Entities to enter into the Support Agreements.

Section 10.9 No Transfers, Etc.

(a) Buyer shall not distribute, transfer or otherwise dispose of any Timber
Entity Interests, and neither Buyer Parent nor Buyer shall cause or permit any
Timber Entity to distribute, transfer or otherwise dispose of any of the Timber
Entity Assets (except as contemplated by the Master Stumpage Agreements), in
each case to Buyer Parent (or any other Person related to Buyer Parent or
Buyer), or commit to do any of the foregoing, in each case until a period of one
year has elapsed from the Closing Date.

(b) Buyer Parent shall not transfer or otherwise dispose of its interest in
Buyer or commit to do so, (i) to a Credit Enhancement Bank or any Affiliate
thereof, at any time or (ii) to any other Person, until a period of one year has
elapsed from the Closing Date. Any transfer or other disposition by Buyer Parent
(or any subsequent transferee) of its interest in Buyer following such one
year-period shall be made only in compliance with the Support Agreements and the
Fiber Supply Agreements and shall be made only upon such transferee delivering
to Seller (A) such evidence as Seller may reasonably require to verify that such
transferee has satisfied all requirements for transfer under the limited
liability company agreement of Buyer, including any required net worth, and
(B) a written agreement of such transferee in favor of Seller to (x) comply with
the obligations of Buyer Parent under the limited liability company agreement of
Buyer and under Sections 10.9, 10.10 and 15.7 of this Agreement as if such
transferee were Buyer Parent and (y) cause Buyer to comply with all of its
respective obligations,

 

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covenants and representations under the limited liability company agreement of
Buyer and the Transaction Documents.

(c) (i) For so long as Buyer Parent owns all of the outstanding interests in
Buyer, Buyer Parent shall comply and shall cause Buyer to comply, and (ii) Buyer
shall comply, in each case, with all of its obligations, covenants and
representations under the limited liability company agreement of Buyer and the
Transaction Documents.

(d) Prior to payment in full of the Timber Notes at maturity, no amendment,
modification or waiver of any provision of the limited liability company
agreement of Buyer may be made without the prior written consent of Seller.

(e) Notwithstanding anything herein to the contrary, Landowner may grant
mortgage liens on the Timberlands to banks, insurance companies, pension or
benefit plans, investment funds that are in the business of making mortgage
loans, or similar institutional lenders subject to the requirements and
restrictions set forth in the Support Agreements and the Fiber Supply
Agreements, including the requirement that such mortgage liens be subject to and
subordinate to the Support Agreements and the Fiber Supply Agreements.

Section 10.10 Tax Matters.

Neither Buyer Parent nor Buyer shall (i) make any election under Treasury
Regulations Section 301.7701-3 (or any corresponding provision of state and
local Tax law) to treat Buyer as an association taxable as a corporation or
(ii) take any action that would cause Buyer to have more than one owner for U.S.
federal (or any applicable state and local) Income Tax purposes. For so long as
Buyer Parent owns all of the outstanding interests in Buyer, Buyer Parent shall
treat each Timber Note as indebtedness of Buyer Parent for all applicable Income
Tax purposes.

Section 10.11 Title Matters.

Each Buying Party acknowledges that prior to signing, certain Affiliates of the
Selling Parties who are not Selling Parties may be identified as the record
owner or lessee of portions of the Timberlands pursuant to the Title Commitments
provided by the Selling Parties. Prior to the Closing, the Selling Parties shall
cause such Affiliates to convey such Timberlands to the appropriate Selling
Party, who at the Closing (or immediately prior to the Closing with respect to
the Installment Note Timberlands) shall convey such Timberlands to the Cash
Entities or the Timber Entities, as applicable, in accordance with the terms of
this Agreement. Nothing in this Section 10.11 shall be deemed to modify any of
the representations or warranties given by any Selling Party in this Agreement
or to affect the ability of any of the Buying Parties to enforce such
representations and warranties.

 

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Section 10.12 Note Document Assistance.

(a) Buyer shall do, execute, acknowledge, deliver, record, re-record, file,
re-file, register and re-register any and all such further acts, deeds,
certificates, assurances and other instruments as may be necessary or reasonably
desirable from time to time in order to (i) carry out more effectively the
purposes of the Timber Notes, the Letters of Credit and all documents related
thereto (collectively, the “Note Documents”) and (ii) at Seller’s sole cost and
expense, assure, convey, grant, assign, transfer, preserve, protect and confer
more effectively unto Seller (or any assignee of the Timber Notes) the rights
granted or now or hereafter intended to be granted to Seller (or such assignee)
under any Note Document or under any other instrument executed in connection
with any Note Document to which Buyer is or is to be a party, provided that
nothing in the foregoing shall create any additional liabilities or obligations
on Buyer or Buyer Parent or change any of the terms of the Note Documents.

(b) Buyer shall cooperate in connection with any transaction relating to the
Timber Notes as may be reasonably requested by Seller, its Affiliates and any
holder of the Timber Notes (the “Note Parties”), at the cost and expense of the
Note Parties, including (i) furnishing the Note Parties with copies of the
financial information regarding Buyer that Buyer is required to deliver to the
holders of the Timber Note, pursuant to the terms of the Timber Note, and
(ii) using reasonable best efforts to obtain a legal opinion to the effect that
if a Buyer Parent, a Cash Entity, a Buyer Affiliate, a Timber Entity were to
become a debtor in a case under Title 11 of the United States Code, the
bankruptcy court would not order the substantive consolidation of the assets and
liabilities of Buyer with those of such Person, and such customary corporate law
opinions as may be reasonably requested by Seller. Notwithstanding anything
herein to the contrary, no Buyer or Buyer Parent shall take any steps designed
to create or encourage the making of a market in the Timber Notes or the listing
or trading of the Timber Notes on an “established securities market” or
otherwise take any actions designed to render the Timber Notes “readily tradable
in an established securities market” within the meaning of Treasury Regulation §
15A.453-1(e)(4). No Buying Party shall be required to incur any liability to any
Person that is not a Note Party in connection with its performance of its
obligations under this Section 10.12(b), except in the event of any material
misstatements or omissions contained in the financial information supplied by
any Buying Party in writing pursuant to this Section 10.12. In connection with
any transaction relating to the Timber Notes, the Selling Parties will request
that each person to whom they disclose (i) the identity of Buyer Parent and/or
(ii) any nonpublic information provided by Buyer pursuant to Section 10.12(b),
agree to maintain the confidentiality of such information, in such manner and to
such extent, if any, as is customary in a transaction of such nature; provided,
that, that if the Selling Parties reasonably believe that it is necessary to
disclose such nonpublic information in connection with a registered public
offering or a private placement, the Selling Parties’ obligation to maintain the
confidentiality of such nonpublic information will not apply to

 

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such disclosure; provided, that any information concerning the Buying Parties
contained in any offering document for such public offering or private placement
shall be subject to the approval of Buyer Parent, which shall not be
unreasonably withheld, conditioned or delayed. Nothing in this Section 10.12(b)
shall be deemed to require Buyer to assume any obligation or perform any action
that would have the effect of changing the terms of the transactions
contemplated by this Agreement and the Transaction Documents.

(c) Buyer shall use its best efforts to arrange for the Credit Enhancement Banks
to issue the Letters of Credit in an aggregate amount of not less than the
Installment Note Purchase Price plus one interest payment on the Timber Notes
(the “L/C Amount”), including using best efforts (i) as soon as practicable to
obtain firm commitments (the “L/C Commitment Letters”), in form and substance
reasonably satisfactory to Seller, to provide such Letters of Credit, (ii) to
negotiate definitive agreements with respect thereto on the terms and conditions
contained therein or on other terms not materially less beneficial to Seller,
(iii) to satisfy on a timely basis all conditions applicable to Buyer in such
definitive agreements that are within its control, and (iv) to consummate the
issuance of the Letters of Credit at Closing.

(d) In the event any portion of the Letters of Credit becomes unavailable to
Buyer on the terms and conditions contemplated in the L/C Commitment Letters,
Buyer shall use its best efforts to arrange to obtain alternative financing,
including from alternative sources, on terms that are not materially less
beneficial to Seller as promptly as practicable following the occurrence of such
event. Buyer shall give Seller prompt notice upon becoming aware of any material
breach by any party to any L/C Commitment Letter or any termination of any L/C
Commitment Letter. Buyer shall keep Seller informed on a reasonably current
basis in reasonable detail of the status of its efforts to arrange the Letters
of Credit and shall not permit any material amendment or modification to be made
to, or any waiver of any material provision or remedy under, the L/C Commitment
Letters without the prior written consent of Seller (such consent not to be
unreasonably withheld or delayed).

ARTICLE XI

HUMAN RESOURCES MATTERS

Section 11.1 Human Resources.

(a) Except as otherwise expressly set forth herein, the provisions of the
Confidentiality Agreement governing solicitation for employment, inducing or
attempting to induce to leave the employ of any Selling Party or any Affiliate
of a Selling Party, and employing or hiring any employees of any Selling Party
shall remain in effect after the date hereof until the termination of such
provisions in accordance with their terms under the Confidentiality Agreement.

 

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(b) The Parties shall comply with the provisions set forth in Section 11.1(b) of
the Seller’s Disclosure Letter with respect to Eligible Employees.

ARTICLE XII

CONDITIONS PRECEDENT

Section 12.1 Conditions to Obligations of Each Party to Close.

The obligations of the Parties to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction or waiver, on or before the
Closing Date, of the following conditions:

(a) Any waiting periods (and any extension thereof) applicable to the
transactions contemplated by this Agreement, under Regulatory Law, including
under the HSR Act, shall have expired or been earlier terminated and neither the
Department of Justice nor the Federal Trade Commission shall have taken any
action to enjoin or delay (for a period of longer than 120 days) the
consummation of the transactions contemplated by this Agreement.

(b) There shall be no injunction, restraining order or decree of any nature of
any court or Governmental Authority that is in effect that restrains or
prohibits the consummation of the transactions contemplated hereunder or imposes
conditions on such consummation not otherwise provided for herein.

(c) No Party shall have been advised by any United States state or federal
government agency (which advisory has not been officially withdrawn on or prior
to the Closing Date) that such government agency is investigating the
transactions contemplated by this Agreement to determine whether to file or
commence any litigation which seeks or would seek to enjoin, restrain or
prohibit the consummation of the transactions contemplated by this Agreement and
the Ancillary Agreements.

Section 12.2 Conditions to Obligations of the Buying Parties to Close.

The obligation of each of the Buying Parties to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction or waiver,
on or before the Closing Date of the following conditions:

(a) All material consents, authorizations, registrations or approvals of or with
any Governmental Authority or other Person required in connection with the
consummation of the transactions contemplated by this Agreement, each of which
is set forth in Section 12.2(a) of the Seller’s Disclosure Letter, to have been
filed, made, given or obtained by the Selling Parties shall have been filed,
made, given or obtained and

 

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copies thereof shall have been delivered to Buyer Parent; provided, however,
that the obligation of any Buying Party to consummate the transactions
contemplated by this Agreement shall not be subject to the satisfaction or
waiver of the condition set forth in this Section 12.2(a) if any Buying Party
fails to satisfy its obligations under Section 9.1(c).

(b) Each of the representations and warranties of Seller contained in this
Agreement that is qualified as to materiality shall be true and correct, and
each of the representations and warranties of Seller that is not so qualified
shall be true and correct in all material respects, in each case as of the date
of this Agreement and as of the Closing Date with the same effect as though made
as of the Closing Date (except to the extent expressly made as of an earlier
date, in which case as of such date), except where the failure of such
representations and warranties to be true and correct as so made does not have
and would not be reasonably likely to have, in each case individually or in the
aggregate, a Material Adverse Effect.

(c) The Selling Parties shall have performed or complied with, in all material
respects, all agreements and covenants required by this Agreement to be
performed or complied with by the Selling Parties prior to Closing.

(d) The Selling Parties shall have delivered or caused to be delivered to Buyer
Parent the items set forth in Section 3.2(a).

(e) The Selling Parties shall have caused the relevant Timber Entity to deliver
to the Selling Parties the items set forth in Section 3.2(c).

(f) The Selling Parties shall have delivered the notice contemplated by
Section 3.1 and the Title Company shall have made available to Buyer Parent
Title Commitments, in the form the Buying Parties are required to accept under
the terms of this Agreement, with respect to Timberlands representing at least
75% of all Timberlands subject to this Agreement.

Section 12.3 Conditions to Obligations of the Selling Parties.

The obligation of the Selling Parties to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction or waiver,
on or before the Closing Date, of the following conditions:

(a) The consents, authorizations, registrations or approvals of or with
Governmental Authorities or any other Person required in connection with the
consummation of the transactions contemplated by this Agreement, each of which
is set forth in Section 12.3(a) of the Seller’s Disclosure Letter, to have been
filed, made, given or obtained by any Buying Party shall have been filed, made,
given or obtained and copies thereof shall have been delivered to Seller,
provided that the obligation of the

 

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Selling Parties to consummate the transactions contemplated by this Agreement
shall not be subject to the satisfaction or waiver of the condition set forth in
this Section 12.3(a) if any of the Selling Parties fails to satisfy its
obligations under Section 9.1(c).

(b) Each of the representations and warranties of any Buying Party contained in
this Agreement that is qualified as to materiality shall be true and correct,
and each of the representations and warranties of any Buying Party that is not
so qualified shall be true and correct in all material respects, in each case as
of the date of this Agreement and as of the Closing Date with the same effect as
though made as of the Closing Date (except to the extent expressly made as of an
earlier date, in which case as of such date), except where the failure of such
representations and warranties to be true and correct as so made does not have
and would not be reasonably likely to have, in each case individually or in the
aggregate, a material adverse effect on any Buying Party or on their ability to
perform their obligations under this Agreement or the Ancillary Agreements to be
executed by them.

(c) Each Buying Party shall have performed or complied with, in all material
respects, all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing.

(d) Buyer Parent shall have delivered or caused to be delivered to Seller the
items set forth in Section 3.2(b).

(e) The Letter(s) of Credit securing the Timber Notes issued by Buyer in respect
of the Installment Note Purchase Price shall have been delivered to Seller by
one or more Credit Enhancement Banks in such maximum aggregate amounts per
Credit Enhancement Bank as is satisfactory to Seller and on terms and conditions
that are consistent with the Timber Note Indicative Terms attached as Exhibit J.

(f) Buyer Parent shall have entered into an amended and restated limited
liability company agreement in respect of Buyer substantially in the form of
Exhibit K.

(g) Buyer shall have entered into a services agreement (the “Services
Agreement”), in form and substance reasonably satisfactory to Buyer Parent and
Seller, with a third party Trustee reasonably satisfactory to Buyer Parent and
Seller pursuant to which the Trustee will make payments of amounts due and
payable under the Timber Notes, hold and invest Buyer’s excess cash and provide
other customary services.

(h) The Cash Entities and the Timber Entities shall have purchased the Title
Policies from the Title Company in respect of the Owned Timberlands being
transferred at (or, in the case of any Timber Entity, immediately prior to) the
Closing and

 

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shall have provided Seller with written evidence that the Cash Entities and the
Timber Entities obtained such Title Policies.

(i) The Selling Parties shall have delivered the notice contemplated by
Section 3.1 and the Title Company shall have made available to Buyer Parent
Title Commitments, in the form the Buying Parties are willing to accept under
the terms of this Agreement, with respect to the Timberlands representing at
least 75% of all Timberlands subject to this Agreement.

Section 12.4 Partial Satisfaction of Conditions Precedent.

If the conditions to the Parties’ obligations to consummate the transactions
contemplated by the Agreement have been satisfied or waived (with the exception
of the condition set forth in Section 12.2(f)) and Title Commitments, in the
form the Buying Parties are required to accept under the terms of this
Agreement, have been made available with respect to Timberlands representing at
least 75% of all Timberlands subject to this Agreement (provided that Title
Failure Carveouts, Title Objection Carveouts and Environmental Carveouts are not
considered), then Buyer Parent, at its sole election, may require the Parties to
consummate the Closing with respect to all Purchased Assets, other than the
Timberlands as to which Title Commitments have not been made available (the
“Initial Closing”), on the terms set forth in the Partial Closing Plan attached
hereto as Schedule B (the “Partial Closing Plan”).

ARTICLE XIII

SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION

Section 13.1 Survival of Representations.

Except as otherwise set forth in this Article XIII, all (i) representations and
warranties made in this Agreement and (ii) all agreements or covenants made in
this Agreement and to be performed prior to or at Closing shall survive for a
period of one year after the Closing Date; provided, that Sections 3.4, 5.7 and
8.10 shall survive for the applicable statute of limitations plus 60 days,
Sections 10.9 and 10.10 shall survive indefinitely and Sections 6.1 and 6.4
shall not survive the Closing (the “Indemnity Period”). Notwithstanding the
foregoing, except as set forth in Section 14.2, no representation, warranty,
covenant or agreement shall survive any termination of this Agreement. After the
Indemnity Period or, except as provided in Section 14.2, the Parties agree that
no claims or causes of action may be brought against any Party or any of their
respective directors, officers, employees, Affiliates, controlling persons,
agents or representatives based upon, directly or indirectly, any of the
representations and warranties contained in this Agreement. This Section 13.1
shall not limit any covenant or agreement of the Parties that contemplates
performance after the Closing.

 

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Section 13.2 Seller’s Agreement to Indemnify.

(a) Subject to the terms and conditions set forth herein, from and after the
Closing, Seller shall indemnify and hold harmless each Buying Party and its
directors, officers, employees, Affiliates, controlling persons, agents,
partners, members and representatives and their successors and assigns
(collectively, the “Buyer Indemnitees”) from and against all liability, demands,
claims, actions or causes of action, assessments, damages, costs and expenses
(including reasonable attorneys’ fees and expenses, but excluding all punitive,
incidental, indirect, special or consequential damages (unless payable to a
third party)) (collectively, the “Buyer Damages”) asserted against or incurred
by any Buyer Indemnitee as a result of or arising out of (i) the Excluded
Liabilities, provided that any Third Party Claims related to the Excluded
Liabilities shall be subject to the terms and conditions of Section 13.4, (ii) a
breach of any representation or warranty contained in Articles V, VI (excluding,
for the avoidance of doubt, Sections 6.1 and 6.4, which do not survive the
Closing, as set forth above) or VII of this Agreement, (iii) a breach of any
agreement or covenant of any Selling Party or any Timber Entity in this
Agreement that contemplates performance or compliance on or prior to the Closing
Date, except for a breach of Section 10.3 or Section 10.7(a), (iv) a breach of
any other agreement or covenant of any Selling Party or (v) any Accepted Buyer
Parent Title Objection determined in accordance with Section 2.3(b)(iii). Buyer
Parent agrees that, except as contemplated by Section 15.15, (A) the
indemnification provided in this Section 13.2 is the exclusive remedy for a
breach by any Selling Party of any representation, warranty, agreement or
covenant contained in this Agreement and is in lieu of any and all other rights
and remedies that any Buying Party may have under this Agreement or otherwise
for monetary relief or equitable relief with respect to the matters described in
clauses (i), (ii), (iii), (iv) and (v) above, (B) the indemnification
contemplated by Section 13.5 shall be the exclusive remedy in respect of Adverse
Environmental Conditions and shall be in lieu of any and all other rights and
remedies that any Buying Party may have under this Agreement or otherwise for
monetary or equitable relief with respect to Adverse Environmental Conditions
and (C) the indemnification contemplated by Section 13.7 in respect of any
Accepted Buyer Parent Title Objection shall be the exclusive remedy in respect
of Accepted Buyer Parent Title Objections and shall be in lieu of any and all
other rights and remedies that any Buying Party may have under this Agreement or
otherwise for monetary or equitable relief with respect to Accepted Buyer Parent
Title Objections. There shall be no indemnification for a breach of any
representation, warranty, agreement or covenant for which (x) a Purchase Price
adjustment has been made pursuant to Section 2.3, or (y) a decree of specific
performance has been issued pursuant to Section 15.15.

(b) Seller’s obligations to indemnify Buyer Indemnitees pursuant to
Section 13.2(a) are subject to the following limitations:

 

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(i) No indemnification shall be made by Seller with respect to any claim made
pursuant to Section 13.2(a)(ii) or (iii) unless (A) the amount of such claim
exceeds $250,000 (the “Minimum Claim Amount”), and (B) the aggregate amount of
Buyer Damages under all claims in excess of the Minimum Claim Amount made
pursuant to Section 13.2(a)(ii) or (iii) exceeds an amount equal to 1.5% of the
Purchase Price (the “Basket Amount”) and, in such event, indemnification shall
be made by Seller only to the extent Buyer Damages exceed, in the aggregate, the
Basket Amount.

(ii) In no event shall Seller’s aggregate obligation to indemnify Buyer
Indemnitees pursuant to Section 13.2(a)(ii) or (iii) exceed an amount equal to
30% of the Purchase Price (the “Cap”).

(iii) The amount of any Buyer Damages shall be reduced by any amount received by
a Buyer Indemnitee with respect thereto under any third party insurance coverage
or from any other party alleged to be responsible therefor. If a Buyer
Indemnitee makes a claim for indemnification under this Section 13.2, Buyer
Indemnitees shall use commercially reasonable efforts to collect any amounts
available under such insurance coverage and from such other party alleged to
have responsibility. If a Buyer Indemnitee receives an amount under insurance
coverage or from such other party with respect to Buyer Damages at any time
subsequent to any indemnification provided by Seller pursuant to this
Section 13.2, then such Buyer Indemnitee shall promptly reimburse Seller for any
payment made or expense incurred by Seller in connection with providing such
indemnification up to such amount received by Buyer Indemnitee, but net of any
expenses incurred by such Buyer Indemnitee in collecting such amount.

(iv) Seller shall be obligated to indemnify Buyer Indemnitees only for those
claims giving rise to Buyer Damages as to which Buyer Indemnitees have given
Seller written notice prior to the end of the pertinent Indemnity Period, in the
event that the Indemnity Period applies to such Buyer Damages. Any written
notice delivered by a Buyer Indemnitee to Seller with respect to Buyer Damages
shall set forth, with as much specificity as is reasonably practicable, the
basis of the claim for Buyer Damages and, to the extent reasonably practicable,
a reasonable estimate of the amount thereof.

(v) Any indemnity amounts payable by Seller to or on behalf of a Buyer
Indemnitee pursuant to this Agreement (including any indemnity payment made
under this Article XIII) shall be reduced by any Tax benefit arising from the
claim, loss or damage for which the indemnity is being paid, including any
increase in deductions, credits or losses of Buyer Indemnitee (or any
Affiliate). In the case of Tax benefits consisting of depreciation,
amortization, depletion or other similar deductions, the Tax benefit amount will
be based on the net present

 

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value of such deductions using a discount rate equal to the mid-term applicable
federal rate in effect on the day on which the indemnification payments are due.
Any calculations of the Tax benefit under this Section 13.2(b)(v) shall be
determined assuming the Buyer Indemnitee (or its Affiliate, as the case may be)
pays Taxes at the highest combined marginal Tax rate for applicable U.S.
federal, foreign, state and local Income Taxes.

(vi) If on the Closing Date, any Buying Party knows of any information that
would cause one or more of the representations and warranties made by Seller to
be inaccurate as of the date made or as of the Closing Date, no Buying Party
shall have any right or remedy after the Closing with respect to such inaccuracy
and shall be deemed to have waived its rights to indemnification in respect
thereof.

Section 13.3 Buyer Parent’s Agreement to Indemnify.

(a) Subject to the terms and conditions set forth herein, from and after the
Closing Date, Buyer Parent shall indemnify and hold harmless each of the Selling
Parties and each of the Selling Parties’ directors, officers, employees,
Affiliates, controlling persons, agents and representatives and their successors
and assigns (collectively, the “Seller Indemnitees”) from and against all
liability, demands, claims, actions or causes of action, assessments, damages,
costs and expenses (including reasonable attorneys’ fees and expenses, but
excluding all punitive, incidental, indirect, special or consequential damages
(unless payable to a third party)) (collectively, the “Seller Damages”) asserted
against or incurred by any Seller Indemnitee as a result of or arising out of
(i) the Assumed Liabilities, (ii) a breach of any representation or warranty
contained in Article VIII of this Agreement, (iii) a breach of any other
agreement or covenant of any Buying Party contained herein that contemplates
performance or compliance on or prior to the Closing Date, except for a breach
of Section 10.3 or 10.7(a), (iv) a breach of any other agreement or covenant of
any Buying Party contained herein, to the extent such agreement or covenant is
required by this Agreement to be performed or complied with after the Closing ,
(v) the use, operation or ownership of any of the Purchased Assets after the
Closing or (vi) any hiring activities of Buyer Parent in respect of the Eligible
Employees as described in Section 11.1(b) of the Seller’s Disclosure Letter.
Seller agrees that, except as provided in Section 15.15, the indemnification
provided in this Section 13.3 is (A) the exclusive remedy for a breach by any
Buying Party of any representation or warranty or covenant contained in this
Agreement, (B) is in lieu of any and all other rights and remedies which Seller
may have under this Agreement or otherwise for monetary or equitable relief with
respect to (i), (ii), (iii), (iv), (v) and (vi) above. There shall be no
indemnification for a breach of any representation, warranty, agreement or
covenant for which a decree of specific performance has been issued pursuant to
Section 15.15.

 

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(b) Subject to the terms and conditions set forth herein, from and after the
Closing Date, Buyer shall indemnify and hold harmless each of the Seller
Indemnitees from and against all Seller Damages asserted against or incurred by
any Seller Indemnitee as a result of or arising out of any material breach of
Section 10.9 or 10.10 by Buyer.

(c) Buyer Parent’s obligations to indemnify Seller Indemnitees pursuant to
Section 13.3(a) hereof are subject to the following limitations:

(i) No indemnification shall be made by Buyer Parent with respect to any claim
made pursuant to Section 13.3(a)(ii) or (iii) unless (A) the amount of such
claim exceeds the Minimum Claim Amount, and (B) the aggregate amount of Seller
Damages under all claims in excess of the Minimum Claim Amount made pursuant to
Section 13.3(a)(ii) or (iii) exceeds the Basket Amount and, in such event,
indemnification shall be made by Buyer Parent only to the extent Seller Damages
exceed, in the aggregate, the Basket Amount.

(ii) In no event shall Buyer Parent’s aggregate obligation to indemnify the
Seller Indemnitees pursuant to

Section 13.3(a)(ii) or (iii), together with any indemnification paid pursuant to
any other provisions of this Agreement, exceed the Cap.

(iii) The amount of any Seller Damages shall be reduced by any amount received
by a Seller Indemnitee with respect thereto under any third party insurance
coverage or from any other party alleged to be responsible therefor. If a Seller
Indemnitee makes a claim for indemnification under this Section 13.3, Seller
Indemnitees shall use commercially reasonable efforts to collect any amounts
available under such insurance coverage and from such other party alleged to
have responsibility. If a Seller Indemnitee receives an amount under insurance
coverage or from such other party with respect to Seller Damages at any time
subsequent to any indemnification provided by Buyer Parent pursuant to this
Section 13.3, then such Seller Indemnitee shall promptly reimburse Buyer Parent
for any payment made or expense incurred by Buyer Parent in connection with
providing such indemnification up to such amount received by the Seller
Indemnitee, but net of any expenses incurred by such Seller Indemnitee in
collecting such amount.

(iv) Buyer Parent shall be obligated to indemnify the Seller Indemnitees only
for those claims giving rise to Seller Damages as to which the Seller
Indemnitees have given Buyer Parent written notice prior to the end of the
Indemnity Period, in the event that the Indemnity Period applies to such Seller
Damages. Any written notice delivered by a Seller Indemnitee to Buyer Parent
with respect to Seller Damages shall set forth, with as much specificity as is
reasonably practicable, the basis of the claim for Seller Damages and, to the
extent reasonably practicable, a reasonable estimate of the amount thereof.

 

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(v) Any indemnity amounts payable by Buyer Parent to or on behalf of a Seller
Indemnitee pursuant to this Agreement (including any indemnity payment made
under this Article XIII) shall be reduced by any Tax benefit arising from the
claim, loss or damage for which the indemnity is being paid, including any
increase in deductions, credits or losses of Seller Indemnitee (or any
Affiliate). In the case of Tax benefits consisting of depreciation,
amortization, depletion or other similar deductions, the Tax benefit amount will
be based on the net present value of such deductions using a discount rate equal
to the mid-term applicable federal rate in effect on the day on which the
indemnification payments are due. Any calculations of the Tax benefit under this
Section 13.3(c)(v) shall be determined assuming the Seller Indemnitee (or its
Affiliate, as the case may be) pays Taxes at the highest combined marginal Tax
rate for applicable U.S. federal, foreign, state and local Income Taxes.

(vi) Buyer shall be solely responsible for the performance of its obligations
under the Timber Note, and Buyer Parent shall not be required to indemnify the
Seller Indemnitees under this Section 13.3 for any Seller Damages resulting from
or arising out of any breach by Buyer of its obligations under the Timber Note.

Section 13.4 Third Party Claims.

The obligations of any indemnifying Party to indemnify any indemnified party
under this Article XIII with respect to Buyer Damages or Seller Damages, as the
case may be, resulting from the assertion of liability by third parties (a
“Third Party Claim”), will be subject to the following terms and conditions:

(a) Any Party against whom any Third Party Claim is asserted will give the Party
which may be required to provide indemnity hereunder written notice of any such
Third Party Claim promptly after learning of such Third Party Claim, and the
indemnifying Party may at its option undertake the defense thereof by
representatives of its own choosing. Failure to give prompt notice of a Third
Party Claim hereunder shall not affect the indemnifying party’s obligations
under this Article XIII, except to the extent that the indemnifying party is
actually prejudiced by such failure to give prompt notice. If the indemnifying
party, within 30 days after notice of any such Third Party Claim, fails to
assume the defense of such Third Party Claim, the indemnified party against whom
such claim has been made will (upon further notice to the indemnifying party)
have the right to undertake the defense, compromise or settlement of such claim
on behalf of and for the account and risk, and at the expense, of the
indemnifying party, subject to the right of the indemnifying party to assume the
defense of such Third Party Claim at any time prior to settlement, compromise or
final determination thereof.

 

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(b) Notwithstanding anything in this Section 13.4 to the contrary, (i) the
indemnified party shall not settle a claim for which it is indemnified without
the prior written consent of the indemnifying party, which consent shall not be
unreasonably withheld, conditioned or delayed, and (ii) the indemnifying party
shall not enter into any settlement or compromise of any action, suit or
proceeding or consent to the entry of any judgment for other than monetary
damages to be borne by the indemnifying party without the prior written consent
of the indemnified party, which consent shall not be unreasonably withheld,
conditioned or delayed.

Section 13.5 Environmental Indemnity.

(a) From and after the Closing, Seller shall indemnify, defend and hold harmless
Buyer Indemnitees from and against damages, costs and expenses incurred by any
Buying Party in connection with any required Remediation under applicable
Environmental Law as such Law existed on the Closing Date in respect of Adverse
Environmental Conditions, on any portion of the Timberlands, that existed on the
Closing Date (the “Affected Land”), excluding, in each case, all those matters
disclosed in the Phase I Reports, and in each case in accordance with this
Section 13.5. Not later than 24 months following the Closing, Seller may, at its
option, require any Cash Entity or Timber Entity to transfer to Seller
(i) ownership of any portion of the Affected Land, (ii) ownership of additional
surrounding buffer land of up to 20 acres identified by Seller for each portion
of Affected Land transferred pursuant to clause (i) above, and (iii) reasonable
access rights for each portion of Affected Land transferred pursuant to clause
(i) above (an “Environmental Carveout”). If Seller elects to require any Cash
Entity or any Timber Entity to transfer ownership of an Environmental Carveout
pursuant to the previous sentence, Seller shall pay such Cash Entity or such
Timber Entity, as the case may be, an amount in cash equal to the value of the
Environmental Carveout calculated in accordance with Section 2.3(b)(iv) and,
notwithstanding any other Buyer Indemnitee right to indemnification set forth in
this Agreement, a Buyer Indemnitee’s right to indemnification with respect to
any Environmental Carveout shall be limited to the actual out-of-pocket costs
and expenses such Buyer Indemnitee incurred in connection with the transfer of
the Environmental Carveout (it being understood that Seller shall indemnify,
defend and hold harmless the applicable Buyer Indemnitees from and against any
damages, costs and expenses otherwise subject to indemnification under this
Section 13.5 that are incurred by such Buyer Indemnitees in connection with
(x) any required Remediation of the Environmental Carveout performed by such
Buyer Indemnitees prior to the transfer of the Environmental Carveout to Seller
pursuant to this Section 13.5(a) or (y) any third-party claims with respect to
the Environmental Carveout arising out of the ownership of the Environmental
Carveout by such Buyer Indemnitees during the period between the Closing Date
and the transfer of the Environmental Carveout to Seller

 

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pursuant to this Section 13.5(a), other than any such claims arising out of
actions or omissions of any of the Buying Parties). Any payments by Seller to
such Cash Entity or such Timber Entity, as the case may be, for transfers of
Environmental Carveouts shall be made by wire transfer of immediately available
funds to a bank account designated by such Cash Entity or such Timber Entity, as
the case may be, upon the transfer of such Environmental Carveouts from such
Cash Entity or such Timber Entity, as the case may be, to Seller. Each Buying
Party and their respective Affiliates shall cooperate with the Selling Parties,
at no cost or liability to any of the Buying Parties, in any efforts that may be
necessary for the Selling Parties to acquire ownership in any Environmental
Carveout or to establish or confirm title to the Environmental Carveouts,
including executing all documents pertaining to the Environmental Carveouts as
are reasonably requested by the Selling Parties. Buyer Parent agrees that the
remedies provided in this Section 13.5 are the exclusive remedy for the matters
addressed in this Section 13.5 and these remedies are in lieu of any and all
other rights and remedies which any Buying Party may have under this Agreement
or otherwise for monetary or injunctive relief with respect to matters addressed
in this Section 13.5. There shall be no indemnification for matters addressed in
this Section 13.5 if, and to the extent, in respect of such matters, a Purchase
Price adjustment has been made pursuant to Section 2.3.

(b) Seller’s obligation to indemnify, defend and hold harmless Buyer Indemnitees
for the matters addressed in

Section 13.5(a) shall be limited to those matters as to which Buyer Parent
provides Seller with written notice (such notice to be in conformance with other
relevant provisions of this Agreement and to contain, to the extent available,
reasonable details of the claim for which indemnity is sought) within two years
after the Closing Date.

(c) With respect to claims to defend, indemnify and hold harmless Buyer
Indemnitees pursuant to Section 13.5(a):

(i) Seller shall be required to defend, indemnify and hold harmless Buyer
Indemnitees only to the extent that: (A) investigation, containment or
Remediation of the Hazardous Substances associated with the matters impacting
the Affected Land are required by any Governmental Authority having and
asserting jurisdiction pursuant to an applicable Environmental Law that is in
effect as of and is enforceable as of the Closing Date; (B) the Remediation
Standards applicable to the matters impacting the Affected Land that must be met
in order to satisfy the requirements of the applicable Environmental Law (1) are
no more stringent than the Remediation Standards that were in effect as of and
were enforceable as of the Closing Date under the applicable Environmental Law
that is the source of the obligation to conduct a Remediation, or, where no such
Remediation Standards had been promulgated and were enforceable as of the
Closing Date, Remediation Standards (including institutional and engineering
controls) that were applied, within one year prior to the Closing Date, on a

 

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case-by-case basis, to properties that are most similar to and in the same
jurisdiction as the portions of the affected Timberlands subject to a
Remediation, and (2) are those Remediation Standards applicable to such
Timberlands that would be the least stringent Remediation Standards (including
institutional and engineering controls), taking into account that the normal
operating condition at the affected Timberlands shall be maintained at all
times, that would be applicable given the use of the property as of the day
before the Closing Date; (C) such investigation, containment and/or Remediation
is conducted using the most cost effective methods, taking into account that the
normal operating condition at the affected Timberlands shall be maintained at
all times, for investigation, Remediation and/or containment consistent with
applicable Environmental Law; and (D) Seller has reasonable right and access to
the Affected Land to perform any such investigation, containment and/or
Remediation. At Seller’s option, Seller shall notify Buyer Parent in writing
that Seller chooses not to perform any such investigation, containment and/or
Remediation and, in such event, (1) Buyer Parent shall be responsible for such
investigation, containment and/or Remediation consistent with the provisions of
this Section 13.5(c) and, in such case, Seller shall indemnify Buyer Parent to
the extent required by this Section 13.5. and (2) Seller shall deliver to Buyer
Parent a Remediation Standard for such investigation, containment and/or
Remediation, which Remediation Standard will satisfy the provisions in this
Agreement. To the extent that the Buyer Indemnitee incurs Buyer Damages in
connection with an investigation, containment or Remediation associated with
matters impacting the Affected Land that are in excess of the Buyer Damages that
would be incurred for an investigation, containment or Remediation meeting the
conditions set forth in this subsection, Seller shall have no obligation to
indemnify any Buyer Indemnitees for such excess Buyer Damages. Notwithstanding
anything herein to the contrary, Seller shall not be obligated to pay Buyer
Parent or otherwise indemnify any Buyer Indemnitee, from indirect or
consequential damages, business interruptions or lost profits of any Buying
Party or any third party or diminution in value of property whatsoever as a
result of or arising out of any investigation, containment, Remediation or other
activities performed under this Section 13.5(c).

(ii) If the costs of an investigation, containment or Remediation at any of the
Affected Land that is subject to an indemnity by Seller hereunder are increased
due to an act of God or an act or omission (after the Closing) by a Person other
than any Selling Party or a Subsidiary, Affiliate, agent, representative or
contractor of any Selling Party, Seller shall not be responsible for any such
increase in costs incurred. Seller shall not be responsible for any increased
costs or increased Buyer Damages under this subsection to the extent they arise
by reason of (A) the voluntary closure or reduction of logging operations at the
affected Timberlands, or (B) a material change in use of any of affected
Timberlands from the use of such affected Timberlands as of the Closing,

 

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including use for residential or recreational homes, developments or enterprises
or other higher or better use opportunities pursued by any Buying Party or any
other Person on the Timberlands.

(iii) No indemnification shall be made by Seller with respect to any claim under
this Section 13.5 unless the amount of such claim (without taking into account
the proviso to the definition of Environmental Matters set forth in Article XVI)
exceeds $250,000 (the “Environmental Minimum Claim Amount”).

(iv) Seller’s obligation to indemnify Buyer Indemnitees pursuant to
Section 13.5(a) shall not be subject to the Cap.

(d) Notwithstanding anything to the contrary herein:

(i) the matters listed on Section 13.5(d) of the Seller’s Disclosure Letter and
identified with a “B,” “C” or “D” shall be subject to indemnification under this
Section 13.5 despite being disclosed in the Phase 1 Reports;

(ii) the “Environmental Minimum Claim Amount” for matters listed on Schedule
13.5(d) and identified with a “B,” “C” or “D” shall be $50,000;

(iii) Buyer Parent may require, by notice delivered to Seller not later than the
74th day after the date hereof, to remove any land affected by the matters
listed on Schedule 13.5(d) and identified by Seller and reasonably agreed to by
Buyer with a “C,” together with a reasonable amount of additional surrounding
buffer land as identified by Seller, from the Timberlands being transferred
pursuant to this Agreement, provided that Buyer Parent shall cause the relevant
Buying Party to provide Seller with reasonable access rights for each portion of
land so removed, and provided, further that the aggregate amount of land removed
from the Timberlands shall be at least 20 acres;

(iv) Buyer Parent may require, by notice to Seller delivered not later than the
second anniversary of the Closing Date, Seller to treat any land affected by the
matters listed on Schedule 13.5(d) and identified with a “C,” but not removed
from the Timberlands prior to the Closing pursuant to clause (iii) above,
together with a reasonable amount of additional surrounding buffer land as
identified by Seller and reasonably agreed to by Buyer, as an Environmental
Carveout in accordance with Section 13.5(a), without regard to any Environmental
Minimum Claim Amount; and

(v) prior to the Closing, Seller shall remove the land affected by the matters
listed on Schedule 13.5(d) and identified with a “D,” together with a reasonable
amount of additional surrounding buffer land as identified by Seller

 

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and reasonably agreed to by Buyer, from the Timberlands being transferred
pursuant to this Agreement, provided that Buyer Parent shall cause the relevant
Buying Party to provide Seller with reasonable access rights for each portion of
land so removed, and provided, further that the aggregate amount of land removed
from the Timberlands shall be at least 20 acres.

(e) Claims brought pursuant to this Section 13.5 that constitute Third Party
Claims shall be subject to the terms and conditions for indemnification set
forth in Section 13.4.

Section 13.6 Prohibited Disclosure.

No Buying Party shall, or shall cause any other Person to provide or disclose to
any Person or Governmental Authority, any information in any form, including
reports, analyses, sampling results or data, relating to any Adverse
Environmental Condition which Section 13.5 requires Seller to investigate,
remediate, or indemnify against, unless (i) requested or consented to by Seller,
(ii) Seller is in default (after notice and a reasonable opportunity to cure) of
obligations imposed by this Section 13.6, (iii) Buyer Parent has agreed in
writing that Seller has completed the obligations imposed by this Section 13.6
or (iv) such disclosure is required by applicable Law. To the extent Buyer
Parent believes in good faith that such Person is required by applicable Law to
disclose such information, such Person shall timely inform Seller of any such
belief and, in the event Seller declines to consent to the disclosure of such
information, Seller shall indemnify and hold harmless each Buying Party,
pursuant to this Section 13.6, from any claim of violation of applicable Law for
failure to disclose such information, provided that where such applicable Law
provides criminal sanctions for failure to disclose such information, such
Person may disclose such information to the extent required by such applicable
Law, but only after providing Seller prompt notice of such intent to disclose
such information. Buyer Parent shall not, and shall not cause any other Person
to, provide or disclose any such information under any circumstances with the
intent of or for the purpose of inducing, encouraging or soliciting any
(A) Governmental Authority to require investigation, remediation or corrective
action or (B) Third Party Claim indemnifiable under this Section 13.6.

Section 13.7 Accepted Buyer Title Objection Indemnification.

Notwithstanding anything in this Agreement to the contrary, Seller shall
indemnify and hold harmless the Buyer Indemnitees from and against any liability
for Accepted Buyer Parent Title Objections pursuant to Section 2.3(b)(iii);
provided that Seller’s obligation to indemnify the Buyer Indemnitees in respect
of any Accepted Parent Buyer Title Objection shall not exceed the fair market
value of the portion of the Owned Timberlands subject to such Accepted Buyer
Parent Title Objections (which fair market value shall be calculated in
accordance with the first sentence of Section 2.3(b)(iv)). To

 

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the extent that an indemnification obligation pursuant to this Section 13.7 may
overlap with any other indemnification obligation pursuant to this Article XIII,
the provisions of this Section 13.7 shall control.

Section 13.8 Adjustments to Purchase Price.

Any payments made pursuant to the indemnification provisions of this Article
XIII shall be deemed to be adjustments to the Purchase Price and the Parties
shall treat them as such for all purposes.

ARTICLE XIV

TERMINATION AND AMENDMENT

Section 14.1 Termination.

This Agreement may be terminated and the transactions contemplated hereby may be
abandoned at any time prior to the Closing:

(a) by mutual written consent of Seller and Buyer Parent; or

(b) by either Seller or Buyer Parent, if the Closing has not occurred within 90
days of the date of this Agreement; provided, however, that (i) the termination
date may be extended, at the option of Seller, for up to two additional periods
of 60 days each, and (ii) Seller shall exercise its option to extend the
termination date pursuant to clause (i) of this Section 14.1(b) if, at the date
this Agreement would otherwise be terminable pursuant to this Section 14.1(b),
the Title Company, following inquiry by Seller, advises Seller that additional
Title Commitments will be made available with respect to the Timberlands (such
date, including any such permitted extensions thereof, the “Termination Date”);
and provided, further, that the right to terminate this Agreement pursuant to
this Section 14.1(b) shall not be available to any Party whose failure to
perform any of its obligations under this Agreement primarily contributes to the
failure of the Closing to have occurred by such time;

(c) by Seller pursuant to Section 9.3;

(d) by Seller upon a breach or violation of any representation, warranty,
covenant or agreement on the part of any Buying Party set forth in this
Agreement, which breach or violation would result in the failure to satisfy the
conditions set forth in Section 12.3(b) or Section 12.3(c) and, in any such
case, such breach or violation shall be incapable of being cured by the
Termination Date, or Buyer Parent shall not be using on a continuous basis all
commercially reasonable efforts to cure in all material respects such breach or
violation after the giving of written notice thereof by any of the Selling
Parties to Buyer Parent of such violation or breach; and

 

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(e) by Buyer Parent upon a breach or violation of any representation, warranty,
covenant or agreement on the part of the Selling Parties set forth in this
Agreement, which breach or violation would result in the failure to satisfy the
conditions set forth in Section 12.2(b) or Section 12.2(c) and, in any such
case, such breach or violation shall be incapable of being cured by the
Termination Date, or Seller shall not be using on a continuous basis all
commercially reasonable efforts to cure in all material respects such breach or
violation after the giving of written notice thereof by Buyer Parent to Seller
of such violation or breach.

Section 14.2 Effect of Termination.

In the event of any termination of this Agreement as provided in Section 14.1,
the obligations of the Parties hereunder shall terminate and there shall be no
liability on the part of any Party hereto with respect thereto, except for the
provisions of Section 3.4, Section 10.1, this Section 14.2, Article XV and the
final sentence of Section 9.4(a); provided, however, that in no case shall any
Party be relieved or released from any liability or damages arising from a
willful breach of any provision of this Agreement (including any failure to
consummate the transactions contemplated by this Agreement unless an express
condition to such Party’s obligation to consummate such transactions has not
been satisfied).

ARTICLE XV

GENERAL PROVISIONS

Section 15.1 Notice.

(a) Any notice given pursuant to this Agreement shall be given in writing and
delivered in person, by overnight courier, by facsimile (with a copy sent by
regular mail) or by registered or certified mail, postpaid, return receipt
requested, addressed as follows:

If to the Selling Parties, to:

International Paper Company

6400 Poplar Avenue, Tower III

Memphis, Tennessee 38197

Attention:    General Counsel

Facsimile:     (901) 419-3818

 

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with copies to:

Debevoise & Plimpton LLP

919 Third Avenue

New York, New York 10022

Attention:   Jeffrey J. Rosen, Esq.

                   William D. Regner, Esq.

Facsimile:  (212) 909-6836

If to any Buying Party to:

Timberstar Southwest Parent LLC

c/o iStar Financial Inc.

1114 Avenue of the Americas

27th Floor

New York, NY 10036

Attention:      President and CEO

Facsimile:       (212) 930-9494

with a copy to:

Timberstar Southwest Parent LLC

c/o TimberStar Operating Partnership, L.P.

1600 River Edge Parkway

Suite 810

Atlanta, Georgia 30328

Attention:      Jerrold Barag

Facsimile:      (678) 339-2071

with a copy to:

Katten Muchin Rosenman LLP

525 West Monroe Street

Chicago, IL 60661-3693

Attention:        Kenneth M. Jacobson, Esq.

Facsimile:        (312) 577-8646

Such notices, if delivered personally or by overnight courier service, shall be
deemed given at the time of delivery; if sent by registered or certified mail,
shall be deemed given two days after the time of mailing; and if sent by
facsimile, shall be deemed given on the next day following the day on which such
facsimile was sent, provided that a copy is also sent by regular mail.

 

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(b) Notwithstanding the foregoing, solely for the purpose of giving Title
Commitment notices under this Agreement, such notices shall be delivered by
electronic mail to the electronic addresses set forth below:

JBarag@timberstar.com

NMatis@iStarfinancial.com

MPottorff@SGRlaw.com

Leta.Principe@kattenlaw.com

Any notice delivered by electronic mail pursuant to this Section 15.1(b) shall
be deemed given on the date sent.

Section 15.2 Legal Holidays.

If any date herein set forth for the performance of any obligation by any Party,
or for the delivery of any instrument or notice as herein provided, should be a
Saturday, Sunday or legal holiday, the compliance with such obligation or
delivery shall be deemed acceptable on the next day which is not a Saturday,
Sunday or legal holiday. As used herein, the term “legal holiday” means any
state or federal holiday for which financial institutions or post offices are
generally closed in the State of New York for observance thereof.

Section 15.3 Further Assurances.

Each of the Parties shall execute such further Conveyance Instruments and such
other documents, instruments of transfer or assignment (including a real estate
excise Tax affidavit) and do such other acts or things as may be reasonably
required or desirable to carry out the intent of the Parties hereunder and the
provisions of this Agreement and the transactions contemplated hereby.

Section 15.4 Assignment; Binding Effect.

This Agreement shall not be assignable or otherwise transferable (a) by Buyer
Parent without the prior written consent of Seller (other than a collateral
assignment to any Lender), and (b) by any of the Selling Parties without the
prior written consent of Buyer Parent; provided, however, that (x) any of the
Selling Parties may, by written notice to Buyer Parent, assign all or any
portion of its rights and obligations under this Agreement to any Affiliate
thereof (provided that no such assignment shall relieve Seller of its
obligations under Article XIII) and (y) any Lender may succeed to the rights and
obligations of Buyer Parent upon foreclosure of the Timberlands subject to the
requirements and restrictions set forth in the Support Agreements and the Fiber
Supply Agreements. Any attempt to assign this Agreement without the prior
written consent required by this Section 15.4 shall be void. This Agreement
shall be binding upon and inure to the benefit of the Parties and their
respective successors and permitted assigns.

 

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Section 15.5 Entire Agreement.

This Agreement (including the Exhibits and schedules hereto), the Seller’s
Disclosure Letter and the Confidentiality Agreement (each of which is
incorporated herein by reference) and the other Transaction Documents constitute
the entire agreement and understanding of the Parties and supersede any prior
agreements or understandings, whether written or oral, among the Parties with
respect to the subject matter hereof.

Section 15.6 Amendments; Waivers.

This Agreement may not be amended or modified in any manner other than by an
agreement in writing signed by Seller and Buyer Parent or their respective
successors or permitted assigns. No waiver under this Agreement shall be valid
or binding unless set forth in a writing duly executed and delivered by the
Party against whom enforcement of such waiver is sought. Neither the waiver by
any of the Parties of a breach of or a default under any of the provisions of
this Agreement, nor the failure by any of the Parties, on one or more occasions,
to enforce any of the provisions of this Agreement or to exercise any right or
privilege hereunder, shall be construed as a waiver of any other breach or
default of a similar nature, or as a waiver of any of such provisions, rights or
privileges hereunder.

Section 15.7 Confidentiality.

Except as otherwise provided or permitted in Section 9.3, each Party will hold,
and will cause its respective officers, employees, accountants, counsel,
financial advisors and other representatives and Affiliates to hold, any
nonpublic information confidential in accordance with the terms of the
Confidentiality Agreement. Except with Seller’s prior written approval, but
subject to the exceptions set forth in the Confidentiality Agreement, no Buying
Party shall disclose to any third party any non-public information regarding the
Timber Notes, Buyer or the structure for issuance of the Timber Notes and the
Letters of Credit. Seller will not unreasonably withhold its consent under this
paragraph to the extent the lead arrangers of the syndication referenced under
section 9.1(d) reasonably deem such information necessary in connection with
such syndication.

Section 15.8 No Third Party Beneficiaries.

Nothing in this Agreement or any Ancillary Agreements, whether express or
implied, is intended or shall be construed to confer upon or give to any Person,
other than the Parties hereto, the Buyer Indemnitees and the Seller Indemnitees
(with respect to Article XIII), any rights, remedies or other benefits under or
by reason of this Agreement.

 

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Section 15.9 Severability of Provisions.

If any provision of this Agreement (including any phrase, sentence, clause,
Section or subsection) is inoperative, invalid, illegal or unenforceable for any
reason, all other provisions of this Agreement shall remain in full force and
effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any Party. Upon any
such determination, the Parties shall negotiate in good faith to modify this
Agreement so as to give effect to the original intent of the Parties as closely
as possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.

Section 15.10 Governing Law.

(A) THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY,
CONSTRUCTION, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE
EXTENT SUCH PRINCIPLES OR RULES WOULD REQUIRE OR PERMIT THE APPLICATION OF THE
LAWS OF ANOTHER JURISDICTION. EACH OF THE PARTIES HEREBY (I) IRREVOCABLY SUBMITS
TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE FEDERAL
COURTS OF THE UNITED STATES OF AMERICA LOCATED IN THE STATE, CITY AND COUNTY OF
NEW YORK FOR THE PURPOSE OF ANY ACTION OR PROCEEDING ARISING OUT OF THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (II) AGREES
THAT IT WILL NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION
OR OTHER REQUEST FOR LEAVE FROM ANY SUCH COURT, AND (III) AGREES THAT IT WILL
NOT BRING ANY ACTION RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT IN ANY COURT OTHER THAN A NEW YORK STATE COURT OR
FEDERAL COURT LOCATED IN THE STATE, CITY AND COUNTY OF NEW YORK. EACH OF THE
PARTIES HEREBY CONSENTS TO AND GRANTS ANY SUCH COURT JURISDICTION OVER THE
PERSON OF SUCH PARTY AND OVER THE SUBJECT MATTER OF ANY SUCH DISPUTE AND AGREES
THAT MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION WITH ANY SUCH ACTION OR
PROCEEDING IN THE MANNER PROVIDED IN SECTION 15.1, OR IN SUCH OTHER MANNER AS
MAY BE PERMITTED BY LAW, SHALL BE VALID AND SUFFICIENT SERVICE THEREOF ON SUCH
PARTY.

(b) EACH PARTY HEREBY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND

 

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THEREFORE SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT
SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE ANCILLARY
AGREEMENTS, OR THE BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT OR ANY
ANCILLARY AGREEMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH
PARTY HEREBY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER, (II) SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS
WAIVER, (III) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) SUCH PARTY HAS
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND EACH OF THE ANCILLARY AGREEMENTS
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS SET FORTH IN THIS
SECTION.

Section 15.11 Counterparts.

This Agreement may be signed in any number of counterparts, each of which shall
be deemed an original and, when taken together, shall constitute one agreement.

Section 15.12 Headings.

Section headings in this Agreement are included herein for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.

Section 15.13 Construction.

This Agreement shall not be construed more strictly against one Party than
against any other merely by virtue of the fact that it may have been prepared by
counsel for one of the Parties, it being recognized that both the Selling
Parties and Buyer Parent have contributed substantially and materially to the
preparation of this Agreement. When appearing in this Agreement, the term
“including” shall be deemed to be immediately followed by the term “but not
limited to.”

Section 15.14 Reimbursement of Legal Fees.

In the event any legal proceeding should be brought to enforce the terms of this
Agreement or for breach of any provision of this Agreement, the non-prevailing
Party shall reimburse the prevailing Party for all reasonable actual costs and
expenses of the prevailing Party (including its attorneys’ fees and
disbursements).

 

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Section 15.15 Specific Performance.

The Parties acknowledge that money damages would not be a sufficient remedy for
any breach of this Agreement and that irreparable harm would result if this
Agreement were not specifically enforced. Therefore, the rights and obligations
of the Parties under this Agreement shall be enforceable by a decree of specific
performance issued by any court of competent jurisdiction, and appropriate
injunctive relief may be applied for and granted in connection therewith.

Section 15.16 Additional Buying Parties.

Not later than 30 days prior to the Closing Date, Buyer Parent shall form the
Cash Entities and Buyer Affiliates and shall cause each of the Cash Entities and
Buyer Affiliates to execute, and to deliver to Seller, an instrument or
instruments duly executed by each of the Cash Entities and Buyer Affiliates, in
form and substance reasonably satisfactory to Seller and Buyer, pursuant to
which each of the Cash Entities and Buyer Affiliates will become a Party to this
Agreement. Upon execution and delivery of such instruments, each Cash Entity and
Buyer Affiliate shall be deemed a “Buying Party” for all purposes under this
Agreement.

ARTICLE XVI

DEFINITIONS

Section 16.1 Definitions.

The terms set forth below shall have the following meanings:

“2006 Harvest Plan” means the harvest plan for the Timberlands set forth in
Exhibit L.

“Accepted Buyer Parent Title Objections” has the meaning specified in
Section 2.3(b)(iii).

“Adverse Environmental Condition” means, with respect to any of the Timberlands,
the existence of an Environmental Matter.

“Affected Land” has the meaning specified in Section 13.5(a).

“Affiliate” of any Person means another Person which, directly or indirectly,
controls, is controlled by, or is under common control with, the first Person.

“Aggregate Excess Harvest Value” means the sum of the Excess Harvest Values, if
any, for each Merchantable Timber Category relating to the Timberlands.

 

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“Aggregate Reduced Harvest Value” means the sum of the Reduced Harvest Values,
if any, for each Merchantable Timber Category relating to the Timberlands.

“Agreement” has the meaning specified in the Preamble.

“Ancillary Agreements” has the meaning specified in Section 5.1(a)(ii).

“Apportionments” has the meaning specified in Section 2.4.

“Assignment and Assumption of Real Property Leases” has the meaning specified in
Section 3.2(a)(iv).

“Assignment and Assumption of Timberland Lease” has the meaning specified in
Section 3.2(a)(iii).

“Assignment of Buyer Parent Timber Entity Interests” has the meaning specified
in Section 3.2(a)(xiv).

“Assignment of Buyer Timber Entity Interests” has the meaning specified in
Section 3.2(a)(xiv).

“Assumed Liabilities” has the meaning specified in Section 1.8(a).

“Basket Amount” has the meaning specified in Section 13.2(b)(i)(B).

“Blue Sky Timberlands” has the meaning specified in Section 1.1(a).

“Books and Records” has the meaning specified in Section 9.4(a).

“Buyer” has the meaning specified in the preamble.

“Buyer Affiliate” means each entity to be formed by the Buyer Parent pursuant to
Section 15.16 for the purposes described in Section 1.3, and any successor to
each such entity. Each Buyer Affiliate will be wholly owned by Buyer Parent.

“Buyer Affiliate Assets” has the meaning specified in Section 1.3.

“Buyer Damages” has the meaning specified in Section 13.2(a).

“Buyer Easements” means such access easements across property owned by the
Selling Parties as may be reasonably necessary to allow any Cash Entity or any
Timber Entity and their respective Affiliates, successors and assigns to use any
portion of the Timberlands for its intended purposes.

“Buyer Indemnitees” has the meaning specified in Section 13.2(a).

 

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“Buyer Parent” has the meaning specified in the Preamble.

“Buyer Parent Instrument of Assumption” has the meaning specified in
Section 1.8(a).

“Buyer Parent Title Objection” or “Buyer Parent’s Title Objections” has the
meaning specified in Section 2.3(b)(i).

“Buyer Parent’s Disclosure Letter” has the meaning specified in the preamble to
Article VIII.

“Buying Party” means, (i) as of the date of this Agreement, any of Buyer Parent
or Buyer (ii) as of the date the Cash Entities, Timber Entities and Buyer
Affiliates are added as parties to the Agreement pursuant to Section 15.16, any
of Buyer Parent, Buyer, any Cash Entity or any Buyer Affiliate, and (iii) on and
after the Closing, any of Buyer Parent, Buyer, any Cash Entity, any Buyer
Affiliate or any Timber Entity.

“Cap” has the meaning specified in Section 13.2(b)(ii).

“Cash Assets” means all of the Purchased Assets in respect of which Buyer shall
pay to Seller the Cash Purchase Price and which are identified in Section 2.2(b)
of the Seller’s Disclosure Letter.

“Cash Entities” means each limited liability company or limited partnership to
be formed by the Buyer Parent pursuant to Section 15.16 for the purposes of
acquiring ownership of the property described in Section 1.1, and any successor
to each such entity. Each Cash Entity will be wholly owned by Buyer Parent.

“Cash Entity Purchased Assets” has the meaning specified in Section 1.1.

“Cash Leasehold Interests” has the meaning specified in Section 1.1(b).

“Cash Licenses” has the meaning specified in Section 1.1(d).

“Cash Purchase Price” means the portion of the Purchase Price payable by Buyer
Parent to Seller on behalf of the Selling Parties in consideration for the Cash
Assets.

“Cash Purchase Price Allocation” has the meaning specified in
Section 2.2(b)(ii).

“Cash Purchased Condemnations” has the meaning specified in Section 1.1(g).

“Cash Purchased Contracts” has the meaning specified in Section 1.1(e).

“Cash Real Property Leases” has the meaning specified in Section 1.1(f).

 

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“Cash Timberland Leases” has the meaning specified in Section 1.1(b).

“Cash Timberlands” means, collectively, the Owned Cash Timberlands and the Cash
Leasehold Interests.

“Casualty Losses” means any physical damage to or loss of the timber on any
portion of the Timberlands by fire, earthquake, flood or other casualty
occurring prior to the Closing.

“Claims” means, with respect to the Purchased Assets, all claims, demands,
investigations, causes of action, suits, defaults, assessments, litigation or
other proceedings, including administrative proceedings, third party actions,
arbitral proceedings and proceedings by or before any Governmental Authority.

“Closing” has the meaning specified in Section 3.1.

“Closing Date” has the meaning specified in Section 3.1.

“Code” means the Internal Revenue Code of 1986, as amended.

“Commercial Mediation Rules” means the commercial mediation rules of the
American Arbitration Association, as in effect from time to time.

“Condemnation” means any condemnation proceeding filed or threatened in writing
by any Governmental Authority or any exercise, by a Governmental Authority, of
eminent domain powers (or notice of the exercise thereof) with respect to the
Timberlands.

“Confidentiality Agreement” means the confidentiality agreement dated
November 16, 2005 among Seller, TimberStar GP, LLC and iStar Financial Inc.

“Conforming Title Commitment” means any Title Commitment in respect of the
Timberlands that does not contain the following exceptions: (i) a Title Failure,
(ii) a Monetary Lien (subject to Seller’s right to cure), (iii) a timber deed
under which a Selling Party has conveyed to a third party title to a material
amount of the timber on a portion or parcel of the Timberlands covered by such
Title Commitment or title to a material portion or parcel of the Timberlands
covered by such Title Commitment or (iv) an option or right of a third party to
purchase a material portion of the timber or a material portion or parcel of the
Timberlands covered by such Title Commitment; other than, in the case of
subsections (iii) and (iv), timber deeds or options of their parties associated
with the Purchased Contracts described in Section 1.1(e) of the Seller’s
Disclosure Letter.

“Continuing Agreements” has the meaning specified in Section 9.7.

 

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“Contract” means any agreement, lease, license, evidence of debt, mortgage, deed
of trust, note, bond, indenture, security agreement, commitment, instrument,
understanding or other contract, obligation or arrangement of any kind.

“Conveyance Instruments” means such deeds, assignments of leases, and/or other
instruments necessary or appropriate under applicable Laws to convey (i) to the
Cash Entities fee simple title to the Owned Cash Timberlands and (ii) to the
Timber Entities fee simple title to the Owned Installment Note Timberlands, in
each case with covenants of limited or special warranty as to title, or (x) to
the Cash Entities leasehold title to the Cash Leasehold Interests and (y) to the
Timber Entities leasehold title to the Timber Entity Leasehold Interests, in
each case subject to the Permitted Exceptions.

“Conveyed Cash Minerals” has the meaning specified in Section 1.1(c).

“Conveyed Minerals” means, collectively, the Conveyed Cash Minerals and the
Conveyed Timber Entity Minerals.

“Conveyed Timber Entity Minerals” has the meaning specified in Section 1.2(c).

“Credit Enhancement Banks” means one or more banks or other financial
institutions selected by Buyer Parent having credit ratings of not less than
AA-/Aa3 (and reasonably acceptable to Seller) to provide the standby Letters of
Credit required by

Section 2.5(a) as credit enhancement for the Timber Notes.

“Deeds” has the meaning specified in Section 3.2(a)(viii).

“Eligible Employees” has the meaning specified in Section 7.2(b).

“Environmental Carveout” has the meaning specified in Section 13.5(a).

“Environmental Laws” means any United States federal, state or local Laws and
the regulations promulgated thereunder, in existence on the date hereof,
relating to pollution or protection of the environment or to threatened or
endangered species, including the federal Endangered Species Act, Laws relating
to wetlands protection, Laws relating to reclamation of land and waterways and
Laws relating to emissions, discharges, disseminations, releases or threatened
releases of Hazardous Substances into the environment (including ambient air,
surface water, ground water, soil, land surface or subsurface strata) or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Substances.

“Environmental Matters” means any violation of any applicable Environmental Law
by Seller, any Other Selling Party or any Affiliate of a Selling Party (provided
such Other Selling Party or Affiliate was an Affiliate of Seller at the time of
the violation) at or on the Timberlands existing as of (x) the date hereof and
as of the Closing Date, for

 

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purposes of Section 6.4, and (y) the Closing Date, for purposes of Sections 13.5
and 13.6, relating to (i) emissions, discharges, disseminations, releases or
threatened releases of Hazardous Substances into air, surface water, ground
water, soil, land surface or subsurface strata, buildings or facilities or
(ii) otherwise arising out of, relating to, or resulting from the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances by Seller, any Other Selling Party or any
Affiliate of a Selling Party (provided such Other Selling Party or Affiliate was
an Affiliate of Seller at the time of the violation) at the Timberlands prior to
the date hereof, provided that only such violations that cannot be reasonably
cured by any Buying Party for $500,000 or less will be deemed “Environmental
Matters.”

“Environmental Minimum Claim Amount” has the meaning specified in
Section 13.5(c)(iii).

“Environmental Permits” means all permits approvals, identification numbers,
licenses and other authorizations required under any applicable Environmental
Law.

“ERISA” means Employee Retirement Income Security Act of 1974, as amended.

“Estimated Timberland Acreage” means the total acreage of all Timberlands
(excluding any portion of the Timberlands that is reasonably expected to
constitute a Title Failure Carveout or Environmental Carveout) that, from time
to time, Seller estimates in good faith will be included in the Timberlands
delivered under this Agreement.

“Excess Harvest” means a harvest of any merchantable timber described in a
Merchantable Timber Category during the Timber Adjustment Period exceeding the
Harvest Range (prorated for any portion of a calendar year) for such
Merchantable Timber Category set forth in the applicable annual harvest plan.

“Excess Harvest Value” means, for each Merchantable Timber Category for which
there was an Excess Harvest, the product of (i) the difference between the
Harvest Amount for such Merchantable Timber Category and the highest timber
volume in the Harvest Range for such Merchantable Timber Category and
(ii) (a) in the case of Pulpwood, the Weighted Average Price for such
Merchantable Timber Category or (b) in the case of Saw Logs, the Transfer Price
for such Merchantable Timber Category.

“Excluded Assets” has the meaning specified in Section 1.6.

“Excluded Lease” has the meaning specified in Section 2.3(d)(i).

“Excluded Lease Independent Appraiser” has the meaning specified in
Section 2.3(d)(ii).

 

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“Excluded Liabilities” has the meaning specified in Section 1.8(c).

“Fiber Supply Agreements” has the meaning specified in Section 3.2(a)(x).

“FMAs” means the following three distinct forest management areas of the
Timberlands: Nacogdoches, Texarkana and West Louisiana.

“Forestry Consultant” has the meaning specified in Section 2.3(a)(ii).

“General Assignment and Assumption” has the meaning specified in
Section 3.2(a)(ii)(A).

“General Buyer Affiliate Assignment and Assumption” has the meaning specified in
Section 3.2(a)(ii)(C).

“General Timber Entity Assignment and Assumption” has the meaning specified in
Section 3.2(a)(ii)(B).

“Governmental Authority” means any federal, state, local or foreign government
or any court or any administrative, regulatory or other governmental agency,
commission or authority or any non-governmental self-regulatory agency,
commission or authority.

“Habitat Conservation Plans” has the meaning specified in Section 1.7(e).

“Harvest Amount” has the meaning specified in Section 2.3(a)(i).

“Harvest Range” means the range 10% above and below the volume of timber set
forth on the 2006 Harvest Plan attached as Exhibit K that the Selling Parties
shall be permitted to remove from the Timberlands during the Timber Adjustment
Period by FMA and Merchantable Timber Category.

“Harvest Statement” has the meaning specified in Section 2.3(a)(i).

“Hazardous Substances” means any chemical, compound, constituent, material,
waste, contaminant (including petroleum, crude oil or any fraction thereof) or
other substance, defined as hazardous or toxic, or otherwise regulated by any of
the following Laws and regulations promulgated thereunder as amended from time
to time prior to the Closing Date: (i) the Comprehensive Environmental Response,
Compensation and Liability Act (as amended by the Superfund Amendments and
Reauthorization Act), 42 U.S.C. § 9601 et seq.; (ii) the Resource Conservation
and Recovery Act of 1976, 42 U.S.C. § 6901 et seq.; (iii) the Hazardous
Materials Transportation Act, 49 U.S.C. § 1801 et seq.; (iv) the Toxic
Substances Control Act, 15 U.S.C. § 2601 et seq.; (v) the Clean Water Act,
33 U.S.C. § 1251 et seq.; (vi) the Clean Air Act, 42 U.S.C. § 1857 et seq.; and
(vii) with respect to the Timberlands located in such state[s], all Laws of the
state[s] based on, or substantially similar to, the federal statutes listed in
parts (i) through (vi) of this subparagraph.

 

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“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.

“Income Tax” or “Income Taxes” means all Taxes based upon, measured by, or
calculated with respect to (i) gross or net income or gross or net receipts or
profits (including any capital gains, minimum taxes and any Taxes on items of
preference, but not including sales, use, goods and services, real or personal
property transfer or other similar Taxes), (ii) net worth, capital, or capital
stock (including any corporate franchise, business activity, doing business or
occupation Taxes), (iii) multiple bases (including corporate franchise, doing
business or occupation Taxes) if one or more of the bases upon which such Tax
may be based upon, measured by, or calculated with respect to, is described in
(i) above, or (iv) withholding taxes measured by, or calculated with respect to,
any payments or distributions (other than wages).

“Indemnity Period” has the meaning specified in Section 13.1.

“Independent Appraiser” has the meaning specified in Section 2.3(b)(iv).

“Initial Closing” has the meaning specified in Section 12.4.

“Installment Note Purchase Price” means the portion of the Purchase Price
payable by Buyer to Seller in consideration for the Installment Note
Timberlands.

“Installment Note Purchase Price Allocation” has the meaning specified in
Section 2.2(b)(i).

“Installment Note Purchased Condemnations” has the meaning specified in
Section 1.2(g).

“Installment Note Timberland Leases” has the meaning specified in
Section 1.2(b).

“Installment Note Timberlands” means those portions of the Timberlands
(including all timber growing thereon), described in Section 2.2(b) of the
Seller’s Disclosure Letter, provided, that any buildings, roads, bridges or
other improvements and fixtures thereon and any other assets or rights
appurtenant thereto shall be treated as Cash Assets and shall not be included
within the definition of Installment Note Timberlands.

“L/C Amount” has the meaning specified in Section 10.12(c).

“L/C Commitment Letter” has the meaning specified in Section 10.12(c).

 

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“Landowner” means, collectively, each Timber Entity and each Cash Entity.

“Law” means any rule, regulation, statute, order, ordinance, guideline, code or
other legally enforceable requirement, including common law, state and federal
laws or securities laws and laws of foreign jurisdictions.

“Leasehold Interests” means, collectively, the Cash Leasehold Interests and the
Timber Entity Leasehold Interests.

“Lender” means any of the following:

(i) a real estate investment trust, bank, saving and loan association,
investment bank, insurance company, trust company, commercial credit
corporation, pension plan, pension fund or pension advisory firm, mutual fund,
government entity or plan;

(ii) an investment company, money management firm or “qualified institutional
buyer” within the meaning of Rule 144A under the Securities Act of 1933, as
amended, or an institutional “accredited investor” within the meaning of
Regulation D under the Securities Act of 1933, as amended;

(iii) an institution substantially similar to any of the entities described in
clauses (i) or (ii) of this definition;

(iv) any entity controlled by, controlling or under common control with any of
the entities described in clauses (i) or (ii) of this definition; or

(v) any trustee in connection with a securitization of, the creation of
collateralized debt obligations secured by, or a financing through an “owner
trust” of, a note or loan.

“Letters of Credit” means the standby letters of credit in support of Buyer’s
payment obligations under the Timber Notes.

“Licenses” means, collectively, the Cash Licenses and the Timber Entity
Licenses.

“Lien” means any mortgage, lien, charge, pledge, hypothecation, assignment,
deposit, arrangement, encumbrance, security interest, assessment, adverse claim,
levy, preference or priority or other security agreement of any kind or nature
whatsoever (whether voluntary or involuntary, affirmative or negative (but
excluding all negative pledges), and whether imposed or created by operation of
law or otherwise) in, on or with respect to, or pledge of, any Purchased Assets,
or any other interest in the Purchased Assets, designed to secure the repayment
of debt or any other obligation, whether arising by Contract, operation of law
or otherwise.

 

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“Log Supply Agreement” has the meaning specified in Section 3.1(a)(x).

“Log Support Agreement” has the meaning specified in Section 3.1(a)(x).

“Master Stumpage Agreements” means the agreements to sell timber on the stump
between the relevant Buying Party, as seller, and Supply Designee, as purchaser,
which will provide for the sale of stumpage sufficient to permit Supply Designee
to meet the volume requirements set forth in the Supply Agreements. The form of
the Master Stumpage Agreement is attached as Exhibit M.

“Material Adverse Effect” means any event, occurrence, condition, fact or change
that has a material and adverse effect on the Purchased Assets taken as a whole;
provided, that (i) any changes in economic conditions in the timber industry,
the forest products industry, the pulp and paper industry or the United States
generally, (ii) any continuation of an adverse trend or condition, (iii) any
change in Law, rule or regulation or interpretations thereof applicable to any
Selling Party or Buying Party or (iv) any effect resulting from actions to be
taken pursuant to this Agreement or any Ancillary Agreement, or which are
primarily attributable to the announcement of this Agreement and the
transactions contemplated hereby, shall not be considered when determining
whether a “Material Adverse Effect” has occurred.

“Merchantable Timber Category” means a category of merchantable timber
identified by type and FMA and further divided into Installment Note Timberlands
or Cash Timberlands as described on Exhibit K.

“Merrill Lynch Debt Commitment” means the debt commitment letter from Merrill
Lynch to iStar Financial Inc. dated as of the date hereof to provide Buyer
Parent $702,000,000 in debt financing in connection with the transactions
contemplated by this Agreement.

“Mineral Rights” has the meaning specified in Section 10.5(c).

“Mineral Sale Agreement” has the meaning specified in Section 10.5(c).

“Minimum Claim Amount” has the meaning specified in Section 13.2(b)(i)(A).

“Monetary Liens” has the meaning specified in Section 2.3(b)(i).

“Note Documents” has the meaning specified in Section 10.12.

“Note Parties” has the meaning specified in Section 10.12.

 

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“Objection Notice” has the meaning specified in Section 2.3(a)(i).

“Other Selling Parties” has the meaning specified in the Preamble.

“Owned Cash Timberlands” has the meaning specified in Section 1.1(a).

“Owned Installment Note Timberlands” has the meaning specified in
Section 1.2(a).

“Owned Timberlands” means, collectively, the Owned Cash Timberlands and the
Owned Installment Note Timberlands.

“Partial Closing Plan” has the meaning specified in Section 12.4.

“Parties” has the meaning specified in the Preamble.

“Permitted Exceptions” has the meaning specified in Section 1.7.

“Person” means an individual, partnership, limited partnership, corporation
(including a business trust), limited liability company, joint stock company,
trust, unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency thereof.

“Personalty Assets” has the meaning specified in Section 1.1(h).

“Personal Property Leases” has the meaning specified in Section 1.1(h).

“Phase I Report” means an environmental site assessment with respect to the
Timberlands prepared in general accordance with a modified version of ASTM
1527-00, 1527-05 or ASTM 1528-00 and environmental site assessments prepared in
general accordance with ASTM E 2247-02 Standard Practice for Environmental Site
Assessments: Phase I Environmental Site Assessment Process for Forestland or
Rural Property, and as limited by such conditions or other qualifying statements
as set forth in such assessment.

“Phase II Report” means an investigation and written report conducted by an
environmental professional that further evaluates an REC identified in a Phase I
Report or other transaction screen process for the purpose of proving additional
information regarding the nature and extent of environmental contamination
associated with an REC conducted in general accordance with ASTM Standard E1903
(2002) “Standard Guide for Environmental Site Assessments: Phase II
Environmental Site Assessment Process.”

“Plans” has the meaning specified in Section 7.4(a).

 

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“Post-Closing Buyer Easement” has the meaning specified in Section 10.6(c).

“Post-Closing Reserved Easement” has the meaning specified in Section 10.6(b).

“Pre-Adjustment Purchase Price” has the meaning specified in Section 2.1.

“Pre-Closing Tax Period” means a Tax period (or any portion thereof) ending on
or prior to the Closing Date.

“Pulpwood” means roundwood intended to be chipped, shredded, flaked, ground, or
otherwise converted to make pulp, paper or composite panel products.

“Pulpwood Supply Agreement” has the meaning specified in Section 3.1(a)(x).

“Pulpwood Support Agreement” has the meaning specified in Section 3.1(a)(x).

“Purchase Price” has the meaning specified in Section 2.1.

“Purchase Price Allocation” has the meaning specified in Section 2.2(b).

“Purchased Assets” means, collectively, the Cash Entity Purchased Assets, the
Timber Entity Interests, the Timber Entity Assets and the Buyer Affiliate
Assets.

“Purchased Cash Real Property Assets” means, collectively, the Conveyed Cash
Minerals and the Cash Timberlands.

“Purchased Condemnations” means, collectively, the Cash Purchased Condemnations
and the Installment Note Purchased Condemnations.

“Purchased Contracts” means the Contracts in effect on the Closing Date that
(i) exclusively relate to all or any portion of the Purchased Real Property
Assets or the forest operations conducted on such Purchased Real Property
Assets, but excluding the rights of the Selling Parties under(A) the Fiber
Supply Agreements or any other Ancillary Agreements and (B) any Timberland
Leases, Real Property Leases and Personal Property Leases or (ii) are described
in Section 1.1(f) of the Seller’s Disclosure Letter.

“Purchased Personal Assets” has the meaning specified in Section 1.1(h)(ii).

“Purchased Real Property Assets” means, collectively, the Purchased Cash Real
Property Assets and Purchased Timber Entity Real Property Assets.

“Purchased Timber Entity Real Property Assets” means, collectively, the Conveyed
Timber Entity Minerals and the Installment Note Timberlands.

 

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“Real Property Leases” means, collectively, the Cash Real Property Leases and
the Installment Note Real Property Leases.

“REC” means the presence or likely presence of any Hazardous Substance or
petroleum products on a property under conditions that indicated an existing
release, a past release, or a material threat of a release of any Hazardous
Substance or petroleum product into structures on the property or in the ground,
groundwater or surface water of the property.

“Reduced Harvest” means a harvest of any merchantable timber described in a
Merchantable Timber Category during the Timber Adjustment Period which is less
than the Harvest Range (pro-rated for any portion of a calendar year) for such
Merchantable Timber Category.

“Reduced Harvest Value” means, for each Merchantable Timber Category for which
there was a Reduced Harvest, the product of (i) the difference between the
Harvest Amount for such Merchantable Timber Category and the lowest timber
volume in the Harvest Range for such Merchantable Timber Category and
(ii) (a) in the case of all Pulpwood, the Weighted Average Price for such
Merchantable Timber Category or (b) in the case of Saw Logs, the Transfer Price
for such Merchantable Timber Category.

“Regulatory Law” means the Sherman Antitrust Act of 1890, as amended, the
Clayton Antitrust Act of 1914, as amended, the HSR Act, the Federal Trade
Commission Act of 1914, as amended, and all federal, state and foreign, if any,
statutes, rules, regulations, orders, decrees, administrative and judicial
doctrines and other Laws that are designed or intended to prohibit, restrict or
regulate (i) foreign investment, (ii) foreign exchange or currency control or
(iii) actions having the purpose or effect of monopolization or restraint of
trade or lessening of competition.

“Remediation” means any investigation, removal, cleanup or remediation that is
required by any Governmental Authority having and asserting jurisdiction
pursuant to any Environmental Law, with respect to any Environmental Matter.

“Remediation Standard” means a numerical standard (whether resulting from an
enacted statute, promulgated regulation, guidance or policy document issued by a
regulatory agency, or developed on a case-by-case basis through a risk
assessment or other methodology authorized pursuant to an applicable
Environmental Law and acceptable to the applicable Governmental Authority) that
defines the concentrations of Hazardous Substances that may be permitted to
remain in any environmental media after an investigation, Remediation or
containment of a release of Hazardous Substances.

“Reserved Easements” means, collectively, the easements in respect of the Owned
Cash Timberlands described in

Section 1.1(a)(2) of the Seller’s Disclosure Letter, together with the easements
in respect of the Owned Installment Note Timberlands described in Section 1.1(b)
of the Seller’s Disclosure Letter.

 

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“Reserved Mineral and Gas Rights” means:

(i) all executory rights, including the right to convey or execute leases, and
other rights presently owned or held by the Selling Parties or any of their
Affiliates with respect to the interests of any parties in any and all Reserved
Minerals and Gases, together with full rights of ingress and egress and use of
the surface to the extent reasonably necessary for the purposes of exploring,
drilling, mining (including shaft, in situ, open pit, surface or strip mining),
developing, producing, storing, removing, treating, transporting and owning all
of the Reserved Minerals and Gases;

(ii) all rights in and to all personal property, fixtures and improvements
appurtenant to the Reserved Minerals and Gases and used or obtained in
connection with the operation of the wells, or leases, or with the production,
sale or disposal of hydrocarbons or water produced thereby or attributable
thereto, including pipelines, pipeline systems, gathering systems or compression
facilities;

(iii) all property, rights, privileges, benefits in any way belonging,
incidental to, or pertaining to the Reserved Minerals and Gases, and to the
extent transferable, all exploration agreements, letter agreements, product
purchase and sale contracts, surface gathering contracts, processing agreements,
compression agreements, equipment leases, permits, gathering lines,
rights-of-way, licenses, farmouts and farmins, options, orders, pooling, spacing
agreements, operating agreements, and all other agreements related to oil and
gas exploration or production; and

(iv) the right to sequester carbon dioxide or other greenhouse gas emissions in
the surface soils and subsurface of the Owned Timberlands, including oil and gas
reservoirs, coal seams, and other geological formations, together with the
rights of ingress and egress necessary to field test and employ carbon
sequestration technology in the surface soils and the subsurface of the Owned
Timberlands, and to separate, transport and store carbon dioxide and greenhouse
gas emissions prior to sequestration in surface soils or the subsurface of the
Owned Timberlands.

“Reserved Minerals and Gases” means:

(i) the oil and gas and associated hydrocarbons and any and all gaseous
hydrocarbons, as well as their constituent products (including condensate,
casinghead gas, distillate and natural gas liquids) on, in or under the Owned
Timberlands located in the States of Arkansas, Louisiana and Texas;

(ii) coal and lignite on, in or under the Owned Timberlands located in the
States of Arkansas, Louisiana and Texas;

 

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(iii) coalbed methane and coalseam gas on, in or under the Owned Timberlands
located in the States of Arkansas, Louisiana and Texas; and

(iv) geothermal energy resources (including hydropressured reservoirs,
geopressured reservoirs, steam and other gases, hot water, hot brine, heat,
natural gas dissolved in formation water and any associated energy found in such
formation water) and other fissionable materials on, in or under the Owned
Timberlands located in the States of Arkansas, Louisiana and Texas.

“Reserved Water Rights” means all rights to withdraw groundwater from the Gulf
Coast Aquifer appurtenant to the Timberlands located in the State of Texas and
all rights to reasonable access to the Gulf Coast Aquifer appurtenant to the
Timberlands located in the State of Texas for the production, use, commercial
development and sale of such groundwater, including the use of existing roads
and the right to construct future roads and pipelines.

“Saw Logs” means all large sawtimber, medium sawtimber, small sawtimber,
plyblocks, chip-n-saw, canterwood, or other timber used to manufacture lumber or
other wood products.

“SEC” means the Securities and Exchange Commission.

“Seller” has the meaning specified in the Preamble.

“Seller Damages” has the meaning specified in Section 13.3(a).

“Seller Indemnitees” has the meaning specified in Section 13.3(a).

“Seller’s Disclosure Letter” has the meaning specified in Article V.

“Selling Parties” has the meaning specified in the Preamble.

“Selling Parties’ Knowledge” means actual knowledge possessed by any or all of
the Persons set forth on Exhibit N, without any duty on the part of such
individuals to investigate or inquire into any particular matter.

“Services Agreement” has the meaning specified in Section 12.3(g).

“Special Places in the Forest” has the meaning specified in Section 10.4.

“Subsidiary” means, with respect to any Person, any other Person of which (i) a
majority of the outstanding share capital, voting securities or other equity
interests are owned, directly or indirectly, by such Person or (ii) such Person
is entitled, directly or indirectly, to appoint a majority of the board of
directors or managers or comparable supervisory body of the other Person.

 

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“Subsurface Geosequestration Rights” means the subsurface geosequestration
rights set forth in subsection (iv) of the definition of Reserved Mineral and
Gas Rights with respect to the Owned Timberlands, but excluding any rights
pertaining to biological sequestration above the surface of the Owned
Timberlands.

“Supply Designee” means the purchaser party in the Master Stumpage Agreements.

“Support Agreements” has the meaning specified in Section 3.2(a)(x).

“Surface Use Agreement” has the meaning specified in Section 10.5(a).

“Tax” or “Taxes” means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security (or similar, including FICA),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other Tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.

“Tax Authority” means the Internal Revenue Service and any other domestic or
foreign Governmental Authority responsible for the administration or collection
of any Taxes.

“Tax Dispute Accountants” has the meaning specified in Section 2.2(d)(ii).

“Tax Return” means any return, report or similar statement (including the
attached schedules) required to be filed with respect to Taxes, including any
information return, claim for refund, amended return, or declaration of
estimated Taxes.

“Termination Date” has the meaning specified in Section 14.1(b).

“Third Party Claim” has the meaning specified in Section 13.4.

“Third Party Sale” has the meaning specified in Section 10.5(c).

“Timber Adjustment Period” means the period from January 1, 2006 through the
Closing Date.

“Timber Adjustment Value” means the amount equal to the Aggregate Reduced
Harvest Value less the Aggregate Excess Harvest Value.

 

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“Timber Entity” means each Delaware limited liability company or limited
partnership to be formed by the Selling Parties immediately prior to the Closing
for the purposes described in Section 1.2, and any successor to each such
entity. Each Timber Entity will be wholly owned by Buyer.

“Timber Entity Assets” has the meaning specified in Section 1.2.

“Timber Entity Assumed Liabilities” has the meaning specified in Section 1.8(b).

“Timber Entity Instrument of Assumption” or “Timber Entities’ Instruments of
Assumption” has the meaning specified in Section 1.8(b).

“Timber Entity Interests” has the meaning specified in Section 1.4.

“Timber Entity Leasehold Interests” has the meaning specified in Section 1.2(b).

“Timber Entity Licenses” has the meaning specified in Section 1.2(d).

“Timber Entity Purchased Contracts” has the meaning specified in Section 1.2(e).

“Timber Entity Real Property Leases” has the meaning specified in
Section 1.2(f).

“Timber GP” means the Delaware limited liability company to be formed by the
Selling Parties prior to the Closing, pursuant to organizational documents
reasonably satisfactory to the Selling Parties and the Buying Parties, which
will be the general partner of Timber LP Entity, and any successor to such
entity.

“Timber LLC Entity” means each Delaware limited liability company to be formed
by the Selling Parties prior to the Closing, pursuant to organizational
documents reasonably satisfactory to the Selling Parties and the Buying Parties,
for the purposes described in Section 1.2, and any successor to such entity.

“Timber LP Entity” means the Delaware limited partnership to be formed by the
Selling Parties prior to the Closing, pursuant to organizational documents
reasonably satisfactory to the Selling Parties and the Buying Parties, for the
purposes described in Section 1.2, and any successor to such entity.

“Timber Note” has the meaning specified in Section 2.5(a).

“Timber Note Indicative Terms” has the meaning specified in Section 12.3(e).

“Timberland Leases” means, collectively, the Cash Timberland Leases and the
Installment Note Timberland Leases.

“Timberlands” means the Owned Timberlands and the Leasehold Interests.

 

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“Timberlands Purchase Price” means the sum of (i) the Installment Note Purchase
Price and (ii) the portion of the Cash Purchase Price allocated to the Cash
Timberlands pursuant to Section 2.2(b).

“Title Basket Amount” has the meaning specified in Section 2.3(b)(i).

“Title Commitment” means a commitment for issuance of a Title Policy by the
Title Company.

“Title Company” means First American Title Insurance Company.

“Title Failure” means any portion of the Timberlands (i) which is not or
immediately prior to the Closing will not be owned by a Selling Party in fee, in
the case of any Owned Timberlands, or (ii) in which a Selling Party does not or
immediately prior to the Closing will not have a Leasehold Interest, in the case
of any Timberland Leases.

“Title Failure Carveout” has the meaning specified in Section 2.3(b)(ii).

“Title Objection Carveout” has the meaning specified in Section 2.3(b)(iii).

“Title Objection Period” has the meaning specified in Section 2.3(b)(i).

“Title Policies” means, collectively, those standard 1992 ALTA owner’s title
policies insuring that, as of the Closing Date, each Cash Entity and each Timber
Entity holds fee title (with respect to the Owned Timberlands) or leasehold
title (with respect to the Leasehold Interests) in the Timberlands being
acquired by such Cash Entity or Timber Entity, as the case may be, in each case
subject only to the Permitted Exceptions, and in an amount not less that the
amount of the Purchase Price allocated to such Owned Timberlands or Leasehold
Interests, as applicable.

“Transaction Documents” means this Agreement, the Timber Notes, the Letters of
Credit and any exhibits or schedules thereto or other documents referred to
therein, the Fiber Supply Agreements and the Ancillary Agreements.

“Transfer Price” means, for a Saw Log of a given specification, the average
price obtained by Seller’s forest resource division for sales of Saw Logs with
similar specifications to Seller’s wood products divisions (i) for the period
beginning on the date of this Agreement and ending 10 days prior to each date on
which any calculation that the Agreement contemplates will be made prior to
Closing is made or (ii) for the period beginning on the date of this Agreement
and ending on the Closing Date for calculations that the Agreement contemplates
will be made after the Closing Date.

“Transfer Taxes” has the meaning specified in Section 3.4(i).

 

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“Treasury Regulations” means the treasury regulations (including temporary
regulations) promulgated by the United States Department of Treasury with
respect to the Code.

“Trustee” means the trustee party to the Services Agreement.

“Weighted Average Price” has the meaning specified in the Pulpwood Fiber Supply
Agreement.

 

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IN WITNESS WHEREOF, the Selling Parties and the Buying Parties have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.

 

INTERNATIONAL PAPER COMPANY By:  

/s/ David A. Liebetreu

Name:   David A. Liebetreu Title:   Vice President SUSTAINABLE FORESTS L.L.C.
By:  

/s/ David A. Liebetreu

Name:   David A. Liebetreu Title:   President SP FORESTS L.L.C. By:  

/s/ David A. Liebetreu

Name:   David A. Liebetreu Title:   President BLUE SKY TIMBER PROPERTIES LLC By:
 

/s/ David A. Liebetreu

Name:   David A. Liebetreu Title:   President

 

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TIMBERSTAR SOUTHWEST PARENT LLC

By:  

/s/ Jay Nydick

Name:   Jay Nydick Title:   President

TIMBERSTAR SOUTHWEST LLC

By:  

/s/ Jay Nydick

Name:   Jay Nydick Title:   President

 

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iStar

Exhibit A-1

FORM OF BUYER PARENT INSTRUMENT OF ASSUMPTION

THIS INSTRUMENT OF ASSUMPTION (this “Assumption”) is made on this          day
of                             , 2006, to be effective as of 9:00 a.m., New York
City time, on the date hereof, by TimberStar Southwest Parent LLC, a Delaware
limited liability company (“Buyer Parent”), in favor of International Paper
Company (“Seller”) and the “Other Selling Parties” (as such term is defined in
that certain Purchase Agreement, dated as of                             , 2006
(the “Purchase Agreement”), among Buyer Parent, Seller, the Other Selling
Parties and the other parties named therein or thereafter becoming party thereto
in accordance with Section 15.16). All capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to such terms in the Purchase
Agreement.

WHEREAS, pursuant to the Purchase Agreement, the Selling Parties have agreed to
sell to Buyer Parent or its Affiliate, and Buyer Parent or its Affiliate agreed
to purchase from the Selling Parties, the Purchased Assets described in the
Purchase Agreement, and pursuant to Section 1.8(a) of the Purchase Agreement,
Buyer Parent agreed to deliver an instrument of assumption to assume the Assumed
Liabilities to the extent related to the Purchased Assets.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Buyer Parent agrees as follows:

1. Buyer Parent, hereby undertakes, assumes and agrees to perform, pay, become
liable for and discharge when due, and hold the Selling Parties and their
respective directors, officers, employees, Affiliates, controlling persons,
agents and representatives, and their respective successors and assigns,
harmless from, any and all Assumed Liabilities to the extent related to the
Purchased Assets.

2. Nothing in this Assumption shall be deemed to supersede, enlarge or modify
any of the provisions of the Purchase Agreement, including without limitation,
Sections 1.8(a) and 1.8(c). If any conflict exists between the terms of this
Assumption and the terms of the Purchase Agreement, the terms of the Purchase
Agreement shall govern and control.

3. This Assumption shall be binding upon the successors and permitted assigns of
Buyer Parent and shall inure to the benefit of the successors and permitted
assigns of Selling Parties.

4. This Assumption shall be governed by and construed in accordance with the
laws of the State of New York, without giving effect to any of the conflict of
law rules thereof.

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IN WITNESS WHEREOF, Buyer Parent has caused this Assumption to be duly executed
and delivered as the          day of                     2006 by its officer
thereunto duly authorized.

 

TIMBERSTAR SOUTHWEST PARENT LLC By:  

 

  Name:   Title:

 

-2-

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iStar

Exhibit A-2

FORM OF TIMBER ENTITY INSTRUMENT OF ASSUMPTION1

THIS INSTRUMENT OF ASSUMPTION (this “Assumption”) is made on this [•] day of
[•], 2006, to be effective as of 9:00 a.m., New York City time, on the date
hereof, by [Timber Entity] (“Timber Entity”), in favor of International Paper
Company (“Seller”) and the “Other Selling Parties” (as such term is defined in
that certain Purchase Agreement, dated as of [•], 2006 (the “Purchase
Agreement”), among Timber Entity, Seller, the Other Selling Parties and the
other parties named therein or thereafter becoming party thereto in accordance
with Section 15.16). All capitalized terms used but not otherwise defined herein
shall have the meanings ascribed to such terms in the Purchase Agreement.

WHEREAS, pursuant to the Purchase Agreement, the Selling Parties have agreed to
transfer to Timber Entity the Timber Entity Assets described in Section 1.2 of
the Purchase Agreement and conveyed in accordance with Section 1.5 of the
Purchase Agreement; and

WHEREAS, in partial consideration therefor, Section 1.8(b) of the Purchase
Agreement requires that, upon the Closing, Timber Entity will solely and
exclusively undertake, assume and agree to perform, pay, become liable for and
discharge when due, and hold the Selling Parties and their respective directors,
officers, employees, Affiliates, controlling persons, agents and
representatives, and their respective successors and assigns, harmless from the
Timber Entity Assumed Liabilities resulting from or related exclusively to the
Timber Entity Assets conveyed to Timber Entity.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and pursuant to the terms and conditions of
the Purchase Agreement, the parties agree as follows:

1. Timber Entity hereby solely and exclusively undertakes, assumes and agrees to
perform, pay, become liable for and discharge when due, and holds the Selling
Parties and their respective directors, officers, employees, Affiliates,
controlling persons, agents and representatives, and their respective successors
and assigns, harmless from, the Timber Entity Assumed Liabilities resulting from
or related exclusively to the Timber Entity Assets conveyed to Timber Entity.
For the avoidance of doubt, Timber Entity shall not be deemed to have assumed
any of the Excluded Liabilities.

2. This Assumption is made pursuant to and subject to the terms of the Purchase
Agreement, and nothing in this Assumption shall be deemed to supersede, enlarge
or modify any of the provisions of the Purchase Agreement, including, without
limitation, Sections 1.8(b) and 1.8(c). If any conflict exists between the terms
of this Assumption and the terms of the Purchase Agreement, the terms of the
Purchase Agreement shall govern and control.

3. This Assumption shall be binding upon Timber Entity and its successors and
assigns and shall inure to the benefit of the Selling Parties and their
respective successors and assigns.

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1 Each Timber Entity shall execute a separate agreement.

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4. This Assumption shall be governed by and construed in accordance with the
laws of the State of New York, without giving effect to any of the conflict of
law rules thereof.

 

2

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IN WITNESS WHEREOF, Timber Entity has caused this Assumption to be duly executed
and delivered as of the date first above written by its officer thereunto duly
authorized.

 

[TIMBER ENTITY]

By:

 

 

 

Name:

 

Title:

 

3

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Exhibit B

ADJUSTMENT VALUES

See Section 2.3(i) of the Seller’s Disclosure Letter.

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Exhibit C

Form of Timber Note

PURCHASE NOTE NO. P-[ 1-    ]

 

[$                    ]

  [            , 2006]

FOR VALUE RECEIVED, the undersigned, [BUYER], LLC, a Delaware limited liability
company (the “Maker”), hereby promises to pay to the order of [SF, LLC], a
Delaware limited liability company (the “Initial Holder”), or its successors,
assigns or transferees (the Initial Holder and any such successor, assign or
transferee being referred to herein as the “Holder”), in immediately available
funds, the principal amount of [                    ] Dollars, together with
interest thereon at the Interest Rate (as defined below), such interest payable
in arrears on each Interest Payment Date (as defined below) from and including
the date hereof to but excluding the date this Purchase Note is paid in full.
The principal amount of this Purchase Note is due and payable on
[                    ] (the “Original Stated Maturity Date”), subject to
extension of maturity as hereinafter provided. In certain events hereinafter
described, this Purchase Note may become due and payable prior to its stated
maturity.

This Purchase Note is not subject to redemption or prepayment at the election of
the Maker prior to maturity, in whole or in part.

This Purchase Note is one of [                    ] Purchase Notes numbered P-1
to P-[    ],1 inclusive, [each in the principal amount of $                    ]
(the “Purchase Notes”), delivered by the Maker to the Holder pursuant to the
Purchase Agreement.

All payments of principal and interest in respect of this Purchase Note and
other amounts owed by the Maker hereunder shall be made in U.S. Dollars in
immediately available funds to the order of the Holder by wire transfer to such
account as may be specified from time to time by the Holder to the Maker in
writing or, at the option of the Holder hereof, by check to such address as the
Holder shall have designated to the Maker in writing. If any payment of
principal of, or interest on, or any other amount owed by the Maker under this
Purchase Note becomes due and payable on a day other than a Business Day (as
defined below), the maturity thereof shall be extended to the next succeeding
Business Day (unless such Business Day falls in another calendar month, in which
case the date for payment thereof shall be the next preceding Business Day). If
the date for any payment of principal is extended by operation of law or
otherwise, interest thereon shall be payable for such extended time.

 

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1 Drafting Note: Insert references to the Timber Notes issued pursuant to the
Purchase Agreement that are supported by letters of credit issued by the same
Bank that is the issuer of the letter of credit supporting this Note.

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This Purchase Note is entitled to the benefits of the Irrevocable Standby Letter
of Credit No.    (the “Letter of Credit”) of [                    ] (the “Bank”)
2, in the initial stated amount of [                    ] and subject to
periodic increase and decrease as provided therein. The Letter of Credit expires
on [insert date that is [15] days after the Original Stated Maturity Date in
paragraph 1 above] unless earlier extended or terminated as set forth therein.

At any time that the long-term unsecured senior debt obligations of the Bank or
any Substitute LC Bank (as defined below), as applicable, are no longer rated at
least A+ by Standard & Poor’s and A1 by Moody’s (a “Substitution Event”)3,
(i) the Holder shall have the right, but not the obligation, to require that the
Maker provide a substitute standby letter of credit (the “Substitute LC,” which
term shall include any substitute letter of credit issued to renew, extend or
replace any Letter of Credit or Substitute LC) issued by a bank or other
financial institution (the “Substitute LC Bank”) designated by Holder to replace
the Letter of Credit (a Substitute LC provided as contemplated in this
clause (i), a “Holder Requested Substitute LC”) and (ii) if the Holder has not
exercised its right to require that the Maker provide a Holder Requested
Substitute LC within thirty (30) days of receipt of notice from the Maker of the
occurrence of a Substitution Event, the Maker shall have the right, but not the
obligation, by delivering not less than forty five (45) days prior written
notice to the Holder, to provide a Substitute LC issued by a Substitute LC Bank
reasonably satisfactory to the Holder (a Substitute LC provided as contemplated
in this clause (ii), a “Maker Provided Substitute LC”). If (i) the Holder
exercises its right to require that the Maker provide a Holder Requested
Substitute LC, (ii) the Holder requires the Maker to provide a Substitute LC on
the Original Stated Maturity Date or any Extended Maturity Date (as defined
below) or (iii) the Maker exercises its right to provide a Maker Provided
Substitute LC:

(a) the Maker shall execute a reimbursement agreement (the “Substitute
Reimbursement Agreement”) with the Substitute LC Bank substantially similar in
all material respects to that certain Reimbursement Agreement, dated as of
[                    ], 2006 (the “Reimbursement Agreement”), between the Maker
and the Bank relating to the Letter of Credit (except that the Maker shall be
entitled to require the language appearing in Section              of the
Reimbursement Agreement and Section          of the Pledge Agreement without
modification)4 and execute such

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2 Drafting Note: Letter of Credit shall be issued by a high credit quality
provider, with a senior unsecured rating of at least AA-/Aa3.

3 Drafting Note: Substitution Rights to be conformed to Timber Note Indicative
Terms as contained in Exhibit J to the Purchase Agreement.

4 Drafting Note: Add references to the relevant provisions of the Reimbursement
Agreement and the Pledge Agreement stating that the reimbursement obligations of
the Bank against the Maker are recourse only against the Collateral Notes.

 

2

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other documents in such form as the Holder or the Substitute LC Bank shall
reasonably request, including, without limitation, a pledge agreement (the
“Substitute Pledge Agreement”) pursuant to which the Maker shall assign and
pledge to the Substitute LC Bank, and grant a security interest to the
Substitute LC Bank in, among other things, the Substitute Collateral Note (as
defined below), as security for the obligations of the Maker under the
Substitute Reimbursement Agreement and the Substitute Pledge Agreement; and

(b) the Maker shall cause the Bank or Substitute LC Bank, as applicable, to
release its security interest in the collateral pledged pursuant to the Pledge
Agreement (the “Collateral”), and the Maker shall apply the proceeds of the
Collateral to acquire a Collateral Note from the Substitute LC Bank (a
“Substitute Collateral Note”), in a principal amount equal to the principal
amount of this Purchase Note.

If the Letter of Credit is replaced with a Substitute LC, references herein to
the Letter of Credit shall be deemed to refer to such Substitute LC, references
herein to the Reimbursement Agreement and the Pledge Agreement shall mean the
related Substitute Reimbursement Agreement and the related Substitute Pledge
Agreement, respectively, and references to the Bank shall be deemed to refer to
the related Substitute LC Bank, as the context requires or permits.

If the Holder has exercised its right to require that the Maker provide a Holder
Requested Substitute LC and if the Maker is unable to acquire such a Substitute
LC on the terms described above (including the acquisition of a Substitute
Collateral Note described above), the Holder shall have the right to require the
Maker to procure some other form of credit enhancement satisfactory to the
Holder (a “Substitute Credit Enhancement”) in lieu of a Substitute LC.

The Holder shall pay all costs and reasonable out-of-pocket expenses incurred by
the Maker in connection with (i) the provision by the Maker of a Holder
Requested Substitute LC, (ii) the provision by the Maker of a Substitute Credit
Enhancement, (iii) the provision by the Maker of a Substitute LC on the Original
Stated Maturity Date or any Extended Maturity Date (as defined below) and
(iv) the extension or renewal of the Letter of Credit on the Original Stated
Maturity Date or any Extended Maturity Date; provided, however, that, the Holder
shall only be required to reimburse fees and commissions payable to the
Substitute LC Bank or to the provider of Substitute Credit Enhancement, as the
case may be, to the extent the net present value of such fees and commissions
exceeds the net present value of the fees and commissions remaining to be paid,
if any, to the issuer of the Letter of Credit so substituted and provided
further that, the amount of costs and expenses to be reimbursed by the Holder
shall be reduced by the amount standing to the credit of the Replacement Reserve
Account, if any. The Maker shall bear all costs and expenses incurred in
connection with the provision of a Maker Provided Substitute LC.

 

3

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Notwithstanding that the Original Stated Maturity Date is
[                    ], such maturity date shall automatically, and without any
action of the Maker or the Holder, be extended for an additional five years to
[insert date that is five years after Original Stated Maturity Date] if (i) on
or before [insert date that is 30 days before the Original Stated Maturity
Date], (x) the Bank extends or renews the Letter of Credit for an additional
five years to [insert date that is five years after LC Maturity Date] and
delivers an amendment to the Holder so stating or (y) the Maker provides, or
provides for the issuance of, a Substitute LC issued by a Substitute LC Bank or
a Substitute Credit Enhancement, expiring no earlier than [insert a date that is
five years after LC Maturity Date] and (ii) the Holder does not, prior to
[insert date that is 1 year prior to date in clause (i)], deliver to the Maker a
notice stating that the Holder elects that the maturity date of this Note not be
extended. If the maturity date of this Note is extended pursuant to the
preceding sentence, in like manner the maturity date may be extended on each
fifth anniversary of the Original Stated Maturity Date for an additional
five-year period or until [                    ] whichever is earlier, subject
to (i) (x) the Letter of Credit being extended or renewed on or before the date
that is 30 days before such anniversary for an additional five years or (y) the
Maker providing, or providing for the issuance of, a Substitute LC issued by a
Substitute LC Bank or a Substitute Credit Enhancement on or before the date that
is 30 days before such anniversary for an additional five years and (ii) no
notice being delivered by the Holder on or before one year prior to such
anniversary stating that it elects that the maturity date not be so extended. In
no event shall the maturity date of this Note be extended beyond the 30th
(thirtieth) anniversary of the date of this Purchase Note. The Maker agrees to
request the Bank to extend or renew the Letter of Credit within an adequate
period, and, in any event, no less than 90 days, prior to the relevant maturity
date described in the preceding two sentences. In the event that the Bank is not
willing to extend or renew the Letter of Credit on the same terms as those on
which the Letter of Credit was originally provided, the Holder shall have the
right to require that the Maker provide a Substitute LC issued by a Substitute
LC Bank or a Substitute Credit Enhancement in the manner provided above.

If any of the following events (each, an “Event of Default”) occurs and is
continuing for any reason (and whether such occurrence is voluntary or
involuntary or comes about or is effected by operation of law or otherwise):

(i) default in the payment when due (whether at maturity, by acceleration, upon
notice of termination of the Letter of Credit or otherwise) of any principal of
or interest on any of the Purchase Notes and, in the case of interest only,
continuance of such default for 3 Business Days;

(ii) the filing by the Maker of a petition or answer or consent seeking relief
under Title 11 of the United States Code, as now or hereafter in effect, or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or the consent by the Maker to the institution of proceedings under such Title
11

 

4

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or any such other law or to the filing of any such petition or to the
appointment of a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) with respect to the Maker or any part
of its property, or the making by the Maker of any assignment for the benefit of
creditors, or the failure of the Maker generally to pay its debts as they become
due, or the taking of corporate action to authorize any of the foregoing;

(iii) the entry of a decree or order by a court having jurisdiction for relief
in respect of the Maker under Title 11 of the United States Code, as now or
hereafter in effect, or any other applicable federal or state bankruptcy,
insolvency or other similar law, or appointing a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the Maker or any part of
its properties, or ordering the winding-up or liquidation of the affairs of the
Maker;

(iv) commencement of an involuntary case or other proceeding against the Maker
under Title 11 of the United States Code, as now or hereafter in effect, or any
other applicable federal or state bankruptcy, insolvency or other similar law
which is not dismissed within 60 days of the commencement of the case or other
proceeding;

(v) receipt of notice from the Bank of repudiation or termination of the Letter
of Credit prior to payment in full of this Purchase Note (other than termination
of the Letter of Credit upon issuance of a Substitute LC to replace such Letter
of Credit);

(vi) failure by the Maker to comply with any other covenant or agreement
contained herein (including failure of the Maker to provide a Substitute LC in
accordance with the terms hereof after designation of a Substitute LC Bank by
the Holder), if such failure shall continue unremedied for 30 days after actual
knowledge of such failure by the Maker;

(vii) the occurrence of an Event of Default under any other Note; or

(viii) the insolvency, receivership, conservatorship, reorganization,
winding-up, liquidation or other similar occurrence in respect of the Bank under
any applicable law;

then, and in every such Event of Default and at any time thereafter during the
continuance of such Event of Default, the Holder may, at its option and in
addition to any other available remedy, by notice in writing to the Maker,
declare this Purchase Note to be immediately due and payable, together with all
interest accrued hereon and any other amounts owed by the Maker hereunder, and
on delivery of such a notice, the unpaid principal amount of this Purchase Note
and all interest accrued to such date, and any other amounts owed by the Maker
hereunder, shall forthwith become immediately due

 

5

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and payable without the necessity of any presentment, demand, protest or any
other notice of any kind, all of which are hereby expressly waived by the Maker;
provided, however, that if any Event of Default specified in paragraph (ii),
(iii) or (iv) above occurs, this Purchase Note shall forthwith automatically
become immediately due and payable, both as to principal and interest, and as to
any such other amounts, without any action on the part of the Holder; and
provided further, however, that if the Event of Default specified in paragraph
(v) above occurs, this Purchase Note shall forthwith automatically become due
and payable, both as to principal and interest, and as to any such other
amounts, on the fifteenth (15th) calendar day following delivery of the notice
referred to in paragraph (v) without any action on the part of the Holder unless
such notice is rescinded by the Bank prior to such fifteenth (15th) calendar
day.

If the Maker shall default in the payment of the principal of or interest on
this Purchase Note or any other amount becoming due hereunder, by acceleration
or otherwise, the Maker shall, on demand from the Holder, from time to time, pay
interest on such defaulted principal and, to the extent permitted by law,
defaulted interest and any other amounts due hereunder, up to the date of actual
payment (after as well as before judgment) at a per annum rate equal to the
Interest Rate then in effect plus 2% per annum. In addition, the Maker shall pay
to the Holder hereof on demand such additional amounts as shall be sufficient to
pay the Holder’s costs and expenses of collection, including without limitation
reasonable attorneys’ fees.

In the event of surrender of this Purchase Note to the Bank upon a drawing under
the Letter of Credit, if such a surrender is required, any claim for unpaid
interest following the honoring of such drawing shall survive such surrender.

The Maker shall deliver to the Holder:

(x) as soon as available and in any event within 60 days after the end of each
fiscal quarter of the Maker, an unaudited balance sheet of the Maker as of the
end of such fiscal quarter and the related statements of income and cash flows
for such fiscal quarter, setting forth in each case in comparative form the
figures for the corresponding fiscal quarter in the previous fiscal year or the
required period, all certified as to fairness of presentation, preparation in
accordance with generally accepted accounting principles and consistency by the
chief financial officer, treasurer or chief accounting officer of the Maker or
of the controlling member of the Maker; and

(y) as soon as available and in any event within 120 days after the end of each
fiscal year of the Maker, an unaudited balance sheet of the Maker as of the end
of such fiscal year and the related statements of income and cash flows for such
fiscal year, setting forth in each case in comparative form the figures for the
preceding fiscal year or other required period, all certified as to fairness of
presentation, preparation in accordance with generally accepted accounting

 

6

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principles and consistency by the chief financial officer, treasurer or chief
accounting officer of the Maker or of the controlling member of the Maker.

For so long as Maker Parent owns all of the outstanding interests in the Maker,
Maker Parent shall treat this Purchase Note as indebtedness of Maker Parent for
all applicable income tax purposes.

The Maker shall do or cause to be done all things necessary to preserve, renew
and keep in full force and effect its legal existence.

The Maker shall take all steps required by the LLC Agreement to continue the
Maker’s identity as a separate legal entity and to make it apparent to other
Persons that the Maker is an entity with assets and liabilities distinct from
those of any other Person and shall comply with all of its other obligations
under the LLC Agreement and the Purchase Agreement.

The Maker will not create, incur, assume or permit to exist any indebtedness,
except for (i) indebtedness hereunder and incurred in connection with the Letter
of Credit, (ii) other promissory notes (the “Other Notes”) delivered pursuant to
the Purchase Agreement as well as indebtedness incurred in connection with any
letter of credit related to such Other Notes and (iii) any indebtedness incurred
pursuant to interest rate protection agreements, if any, entered in respect of
interest payable under this Purchase Note or any Other Note.

The Maker will not take any action to create or encourage the making of a market
in this Purchase Note or the listing or trading of this Purchase Note on an
“established securities market” or otherwise take any action to render this
Purchase Note “readily tradable in an established securities market” within the
meaning of Treasury Regulation § 15A.453-1(e)(4).

This Purchase Note may, without restriction, be assigned, pledged, hypothecated
or otherwise transferred by the Holder by endorsement or assignment and
delivery. The Holder shall promptly notify the Maker of the name and address of
any assignee or other transferee.

No delay, omission or waiver on the part of the Holder in exercising any right
hereunder shall operate as a waiver of such right or any other right of the
Holder, nor shall any delay, omission or waiver on any one occasion be deemed a
bar to or waiver of the same or any other right on any future occasion. Except
as otherwise set forth herein, the rights and remedies of the Holder are
cumulative and not exclusive of any rights or remedies the Holder would
otherwise have.

 

7

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The Maker hereby waives diligence, presentment, demand, protest, notice of
dishonor and notice of any kind whatsoever, other than those notices
specifically required by this Purchase Note.

The Maker’s obligations hereunder are absolute and unconditional and shall not
be affected by any circumstance whatsoever, and the Maker hereby agrees to make
all payments hereunder in full and when due, whether in respect to principal,
interest or any other amount owed by the Maker hereunder, without notice,
demand, counterclaim, setoff, deduction, defense, abatement, suspension,
limitation, deferment, diminution, recoupment or other right that the Maker may
have against the Holder hereof or any other person or entity, and the Maker
hereby waives and agrees not to assert any defense (other than payment in
accordance with the terms hereof), right of counterclaim, setoff or recoupment,
or other right which it may have against the Holder hereof or any other person
or entity.

The Maker shall not take any action which would cause any Letter of Credit to
terminate prior to the LC Maturity Date.

As used in this Purchase Note, the following terms shall have the following
meanings:

“Affiliate” means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person.

“Business Day” means any day except (i) a Saturday, Sunday or other day on which
commercial banks in New York, New York are required or authorized by law to
close, and (ii) a day on which commercial banks are not open for international
business (including dealings in dollar deposits) in London.

“Collateral Note” means a collateral note, deposit or similar instrument issued
by the Bank or Substitute LC Bank, as applicable, or an Affiliate of the Bank or
Substitute LC Bank, as applicable, which (i) bears interest based on the LIBO
Rate for an interest period of six months set [two] Business Days prior to the
commencement of the relevant interest period, and (ii) provides for payment of
interest 15 days prior to the dates set forth for payment of interest under this
Purchase Note.

“Interest Payment Date” means the last day of each Interest Period and any other
date on which the principal and interest on this Purchase Note is due and
payable in full.

 

8

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“Interest Period” means (i) initially, the period commencing on the date hereof
and ending on [            ] and (ii) thereafter, each period commencing on the
last day of the next preceding Interest Period and ending six months thereafter.
The determination of Interest Periods shall be subject to the following
provisions:

(i) if any Interest Period would otherwise expire on a day which is not a
Business Day, such Interest Period shall expire on the next succeeding Business
Day; provided, however, that if any Interest Period would otherwise expire on a
day which is not a Business Day but is a day of the month after which no further
Business Day occurs in such month, such Interest Period shall expire on the next
preceding Business Day;

(ii) if any Interest Period begins on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period), such Interest Period shall end on the
last Business Day of a calendar month; and

(iii) no Interest Period shall extend beyond the stated maturity date hereof.

“Interest Rate” means (i) for the first Interest Period     % per annum and
(ii) for each Interest Period thereafter a rate per annum equal to the LIBO Rate
for such Interest Period plus the Margin. Interest shall be computed based on
the actual number of days in an Interest Period divided by 360.

“LIBO Rate” means, for any Interest Period, an interest rate per annum appearing
on page 3750 on the Moneyline Telerate Inc. (“Page 3750”) (or any other page
that may replace such page from time to time for the purpose of displaying
offered rates of leading banks for London interbank deposits in Dollars) at
approximately 11:00 a.m., London time, on the day that is [two] Business Days
prior to the commencement of such Interest Period for United States dollar
deposits having a tenor equal to the duration of such Interest Period, or in the
event such offered rate is not available from Page 3750, the average of the rate
per annum at which United States dollar deposits are offered to the Bank, as
determined by the Bank in accordance with its usual procedures, in the London
interbank market at approximately 11:00 a.m., London time, on the day that is
[two] Business Days prior to the commencement of such Interest Period for a
period equal to such Interest Period; provided, however, that, if a rate cannot
be determined pursuant to the foregoing provisions, the LIBO Rate for such
Interest Period shall be equal to the rate of interest announced publicly by the
Bank in New York, New York from time to time as the Bank’s base rate.

“LLC Agreement” means the Limited Liability Company Agreement of the Maker dated
as of [            ].

“Maker Parent” means [            ].

“Margin” means [    .        ]%, provided that if the maturity date of this Note
is extended beyond the Original Stated Maturity Date as contemplated herein, on
the date of such extension, the Margin will be recomputed and will equal (i) if
the Maker has

 

9

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provided a Substitute LC, the margin with respect to the LIBO Rate payable on
the Substitute Collateral Notes supporting such Substitute LC (which may be a
negative number) and (ii) if the Maker has provided a Substitute Credit
Enhancement, such margin as agreed between the Holder and the Maker at the time
to reflect the rate of return on the collateral supporting such Substitute
Credit Enhancement.

“Moody’s” means Moody’s Investors Service, Inc., and any successor thereto.

“Person” means any individual, corporation, partnership, joint stock company,
association, trust, joint venture or any other entity or organization, including
a government or political subdivision or any agency or instrumentality thereof.

“Purchase Agreement” means the Purchase Agreement dated as of [            ],
2006 among [Buyer], [Buyer], [Buyer Parent], [Buyer Parent], [Buyer Affiliate],
[the Other Selling Parties] and International Paper Company.

“Replacement Reserve Account” means the escrow account of the Maker into which
the Maker shall deposit, or cause to be deposited, an amount equal to the cash
flow generated by any Collateral Note in excess of the cash flow required to pay
interest on this Purchase Note, if any.5

“Standard & Poor’s” means Standard & Poor’s Ratings Service, a division of The
McGraw-Hill Companies, Inc., and any successor thereto.

All notices, requests, demands and other communications required or permitted
hereunder shall be given in writing and delivered by hand or by registered or
certified mail, or by recognized overnight delivery service, if to the Maker,
to:

Buyer, LLC

c/o [Insert Address]

and if to the Holder hereof, to such address as may be furnished by such Holder
to the Maker in writing with copies to:

SF, LLC

c/o International Paper Company

6400 Poplar Avenue, Tower III

Memphis, Tennessee 38197

Attention:                      General Counsel

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5 Drafting Note: Definition may be modified to refer to specific account
maintained pursuant to the Trust Agreement or otherwise.

 

10

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Facsimile:

with copies to:                  Treasurer

Facsimile:

or to such other address as may be designated in writing by the Maker or the
Holder hereof.

In case any one or more of the provisions hereof should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.

This Purchase Note shall bind the Maker and the successors of the Maker, and the
term “Maker” herein shall include the successors of the Maker.

The terms of this Purchase Note may be amended from time to time only by the
written agreement of the Maker and the Holder.

Notwithstanding anything to the contrary contained in this Purchase Note, but
subject to the last sentence of this paragraph, in any action or proceeding
brought to enforce any obligation of the Maker under this Purchase Note or to
exercise any right or remedy contained in this Purchase Note, no judgment,
decree or other remedy shall be enforceable against, nor shall there be any
recourse to, nor shall any such judgment or decree be subject to the execution
or lien on, (i) any assets of any affiliate of the Maker, (ii) any assets of any
manager, trustee, administrator, officer, director, agent or other
representative, stockholder, equity holder, or member (whether direct or
indirect) of the Maker or any of their respective successors or assigns (each, a
“Maker Party”) or (iii) any assets of any manager, trustee, administrator,
officer, director, agent, other representative, stockholder, equity holder, or
member (whether direct or indirect) of any Maker Party or any of their
respective successors or assigns, nor shall the Holder seek any other relief
with respect to Persons described in clauses (i) through (iii) of this
paragraph, it being specifically understood and agreed that such Persons shall
have no personal liability for the payment of any obligations of the Maker under
this Purchase Note. Notwithstanding anything to the contrary contained in this
Purchase Note, but subject to the last sentence of this paragraph, the Holder
agrees that neither it, nor any Person acting on its behalf, may assert any
claim or cause of action for payment of any of the obligations of the Maker
hereunder against any Maker Party or any manager, trustee, administrator,
officer, director, agent, other representative, stockholder, equity holder,
member (whether direct or indirect) of any Maker Party or any of their
respective successors or assigns. Nothing in this paragraph shall limit the
Holder’s rights and remedies with respect to the Member Note or Transferee
Member Note (each as defined in the LLC Agreement).

This Purchase Note and the rights and the duties of the Maker and the Holder
hereunder shall be governed by, and construed and enforced in accordance with,
the laws of the State of New York.

 

11

--------------------------------------------------------------------------------

[BUYER], LLC

By:

 

[                    ], LLC,

 

its sole member

 

By:

 

[            ], LLC, as Agent

 

By:

 

 

   

Name:

   

Title:

 

12

--------------------------------------------------------------------------------

iStar

Exhibit D-1

FORM OF GENERAL ASSIGNMENT AND ASSUMPTION1

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (the “Agreement”) is entered into on
            , 2006, to be effective as of 9:00 a.m., New York City time, on the
date hereof (the “Effective Date”), by and among [CASH ENTITY], a [•] limited
liability company (“Cash Entity”), INTERNATIONAL PAPER COMPANY, a New York
corporation (“Seller”), the Other Selling Parties (as such term is defined in
that certain Purchase Agreement, dated as of                         , 2006 (the
“Purchase Agreement”), among Cash Entity, Seller, the Other Selling Parties and
the other parties named therein or thereafter becoming party thereto in
accordance with Section 15.16. Seller and the Other Selling Parties are herein
collectively referred to as the “Selling Parties”).

WHEREAS, pursuant to the Purchase Agreement, the Selling Parties have agreed to
assign to Cash Entity, and Cash Entity has agreed to assume from the Selling
Parties, for the consideration and upon the terms and conditions set forth in
the Purchase Agreement, all of the Selling Parties’ right, title and interest in
and to, and liabilities and obligations in connection with, the Cash Purchased
Contracts, Cash Licenses and Cash Purchased Condemnations described in
Section 1.1 and conveyed to such Cash Entity as described in Section 1.5 of the
Purchase Agreement, as such terms are defined in the Purchase Agreement
(collectively, the “Assigned Assets”).

WHEREAS, the Selling Parties have agreed to deliver to Cash Entity such
instruments of sale, transfer, conveyance, assignment and delivery as are
required to vest in Cash Entity all of the Selling Parties’ right, title and
interest in and to the Assigned Assets; and

WHEREAS, Cash Entity desires to deliver to the Selling Parties such instruments
as are required in order to effectuate and evidence the assumption by Cash
Entity of the liabilities and obligations in connection with the Assigned
Assets;

NOW, THEREFORE, pursuant to the Purchase Agreement and in consideration of the
mutual promises contained therein, and for other good and valuable
consideration, the receipt and sufficiency of which the Selling Parties and Cash
Entity each acknowledge, the parties agree as follows:

 

  1. Each capitalized term used but not defined in this Agreement shall have the
meaning ascribed to it in the Purchase Agreement.

 

  2. Effective as of the Effective Date, the Selling Parties hereby sell,
transfer, assign, convey and deliver to Cash Entity, and Cash Entity hereby
accepts the sale, transfer, assignment, conveyance and delivery of, all of the
Selling Parties’ right, title and interest in, to and under all of the Assigned
Assets.2

--------------------------------------------------------------------------------

1 Form to be modified to include such non-substantive revisions as may be
required to comply with local law.

2 Issue re: proper entity conveying relevant assets to be revisited prior to
closing if such issue is problematic to Buyer’s lenders.

--------------------------------------------------------------------------------

  3. Effective as of the Effective Date, and subject to the provisions of the
Purchase Agreement, Cash Entity hereby assumes and agrees to undertake, assume,
perform, pay, become liable for and discharge when due, all of the Selling
Parties’ liabilities and obligations, whether accrued or unaccrued, absolute or
contingent, known or unknown, asserted or unasserted, resulting from or related
to the Assigned Assets, other than the Excluded Liabilities.

 

  4. Nothing in this Agreement shall be deemed to supersede, enlarge or modify
any of the provisions of the Purchase Agreement. If any conflict exists between
the terms of this Agreement and the terms of the Purchase Agreement, the terms
of the Purchase Agreement shall govern and control.

 

  5. This Agreement shall be binding upon and inure to the benefit of Cash
Entity and Selling Parties and their respective successors and permitted
assigns.

 

  6. This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same instrument.

 

- 2 -

--------------------------------------------------------------------------------

iStar

IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.

 

INTERNATIONAL PAPER COMPANY By:  

 

Name:   Title:   OTHER SELLING PARTIES By:  

 

Name:   Title:   [CASH ENTITY] By:  

 

Name:   Title:  

Signature Page to General Assignment and Assumption

--------------------------------------------------------------------------------

iStar

Exhibit D-2

FORM OF GENERAL TIMBER ENTITY ASSIGNMENT AND ASSUMPTION1

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (the “Agreement”) is entered into on
                    , 2006, to be effective as of 9:00 a.m., New York City time,
on the date hereof (the “Effective Date”), by and among [TIMBER ENTITY], a [•]
limited liability company (“Timber Entity”), INTERNATIONAL PAPER COMPANY, a New
York corporation (“Seller”), the Other Selling Parties (as such term is defined
in that certain Purchase Agreement, dated as of                     , 2006 (the
“Purchase Agreement”), among Timber Entity, the Other Selling Parties and the
other parties named therein or thereafter becoming party thereto in accordance
with Section 15.16. Seller and the Other Selling Parties are herein collectively
referred to as the “Selling Parties”).

WHEREAS, pursuant to the Purchase Agreement, the Selling Parties have agreed to
assign to Timber Entity and Timber Entity has agreed to assume from the Selling
Parties, for the consideration and upon the terms and conditions set forth in
the Purchase Agreement, all of the Selling Parties’ right, title and interest in
and to, and liabilities and obligations in connection with, the Timber Entity
Purchased Contracts, Timber Entity Licenses and the Installment Note Purchased
Condemnations described in Section 1.2 of the Purchase Agreement and conveyed to
such Timber Entity as described in Section 1.5 of the Purchase Agreement, as
such terms are defined in the Purchase Agreement (collectively, the “Assigned
Assets”).

WHEREAS, the Selling Parties have agreed to deliver to Timber Entity such
instruments of sale, transfer, conveyance, assignment and delivery as are
required to vest in Timber Entity all of the Selling Parties’ right, title and
interest in and to the Assigned Assets; and

WHEREAS, Timber Entity desires to deliver to the Selling Parties such
instruments as are required in order to effectuate and evidence the assumption
by Timber Entity of the liabilities and obligations in connection with the
Assigned Assets;

NOW, THEREFORE, pursuant to the Purchase Agreement and in consideration of the
mutual promises contained therein, and for other good and valuable
consideration, the receipt and sufficiency of which the Selling Parties and
Timber Entity each acknowledge, the parties agree as follows:

 

  1. Each capitalized term used but not defined in this Agreement shall have the
meaning ascribed to it in the Purchase Agreement.

 

  2. Effective as of the Effective Date, the Selling Parties hereby sell,
transfer, assign, convey and deliver to Timber Entity, and Timber Entity hereby
accepts the sale, transfer, assignment, conveyance and delivery of, all of the
Selling Parties’ right, title and interest in, to and under all of the Assigned
Assets.2

 

--------------------------------------------------------------------------------

1 Form to be modified to include such non-substantive revisions as may be
required to comply with local law.

2 Issue re: proper entity conveying relevant assets to be revisited prior to
closing if such issue is problematic to Buyer’s lenders.

--------------------------------------------------------------------------------

  3. Effective as of the Effective Date, and subject to the provisions of the
Purchase Agreement, Timber Entity hereby assumes and agrees to undertake,
assume, perform, pay, become liable for and discharge when due, all of the
Selling Parties’ liabilities and obligations, whether accrued or unaccrued,
absolute or contingent, known or unknown, asserted or unasserted, resulting from
or related to the Assigned Assets, other than the Excluded Liabilities.

 

  4. Nothing in this Agreement shall be deemed to supersede, enlarge or modify
any of the provisions of the Purchase Agreement. If any conflict exists between
the terms of this Agreement and the terms of the Purchase Agreement, the terms
of the Purchase Agreement shall govern and control.

 

  5. This Agreement shall be binding upon and inure to the benefit of Timber
Entity and Selling Parties and their respective successors and permitted
assigns.

 

  6. This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same instrument.

 

- 2 -

--------------------------------------------------------------------------------

iStar

IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.

 

INTERNATIONAL PAPER COMPANY By:  

 

Name:   Title:   OTHER SELLING PARTIES By:  

 

Name:   Title:   [TIMBER ENTITY] By:  

 

Name:   Title:  

Signature Page to General Timber Entity Assignment and Assumption

--------------------------------------------------------------------------------

iStar

Exhibit D-3

FORM OF GENERAL BUYER AFFILIATE ASSIGNMENT AND ASSUMPTION1

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (the “Agreement”) is entered into on
                    , 2006, to be effective as of 9:00 a.m., New York City time,
on the date hereof (the “Effective Date”), by and among [[BUYER AFFILIATE], a
[•] corporation (“Buyer Affiliate”)] [[CASH ENTITY], a [•] limited liability
company], INTERNATIONAL PAPER COMPANY, a New York corporation (“Seller”), the
Other Selling Parties (as such term is defined in that certain Purchase
Agreement, dated as of                     , 2006 (the “Purchase Agreement”),
among TimberStar Southwest Parent LLC, a Delaware limited liability company
(“Buyer Parent”), TimberStar Southwest LLC, a Delaware limited liability company
and a wholly owned subsidiary of Buyer Parent, Seller, the Other Selling Parties
and the other parties named therein or thereafter becoming party thereto in
accordance with Section 15.16. Seller and the Other Selling Parties are herein
collectively referred to as the “Selling Parties”).

WHEREAS, pursuant to the Purchase Agreement, the Selling Parties have agreed to
assign to [Buyer Affiliate] [Cash Entity], and [Buyer Affiliate] [Cash Entity]
has agreed to assume from the Selling Parties, for the consideration and upon
the terms and conditions set forth in the Purchase Agreement, all of the Selling
Parties’ right, title and interest in and to, and liabilities and obligations in
connection with, the [Personal Property Leases] [Cash Purchased Condemnations]
conveyed to such [Buyer Affiliate] [Cash Entity] as described in Section 1.5 of
the Purchase Agreement, as such terms are defined in the Purchase Agreement
(collectively, the “Assigned Assets”).

WHEREAS, the Selling Parties desire to deliver to [Buyer Affiliate] [Cash
Entity] such instruments of sale, transfer, conveyance, assignment and delivery
as are required to vest in [Buyer Affiliate] [Cash Entity] all of the Selling
Parties’ right, title and interest in and to the Assigned Assets; and

WHEREAS, [Buyer Affiliate] [Cash Entity] desires to deliver to the Selling
Parties such instruments as are required in order to effectuate and evidence the
assumption by [Buyer Affiliate] [Cash Entity] of the liabilities and obligations
in connection with the Assigned Assets;

NOW, THEREFORE, pursuant to the Purchase Agreement and in consideration of the
mutual promises contained therein, and for other good and valuable
consideration, the receipt and sufficiency of which the Selling Parties and
[Buyer Affiliate] [Cash Entity] each acknowledge, the parties agree as follows:

 

  1. Each capitalized term used but not defined in this Agreement shall have the
meaning ascribed to it in the Purchase Agreement.

 

--------------------------------------------------------------------------------

1 Form to be modified to include such non-substantive revisions as may be
required to comply with local law.

--------------------------------------------------------------------------------

  2. Effective as of the Effective Date, the Selling Parties hereby sell,
transfer, assign, convey and deliver to [Buyer Affiliate] [Cash Entity], and
[Buyer Affiliate] [Cash Entity] hereby accepts the sale, transfer, assignment,
conveyance and delivery of, all of the Selling Parties’ right, title and
interest in, to and under all of the Assigned Assets.2

 

  3. From and after the date hereof and subject to the provisions of the
Purchase Agreement, [Buyer Affiliate] [Cash Entity] hereby assumes and agrees to
undertake, assume, perform, pay, become liable for and discharge when due, all
of the Selling Parties’ liabilities and obligations, whether accrued or
unaccrued, absolute or contingent, known or unknown, asserted or unasserted,
resulting from or related to the Assigned Assets, other than the Excluded
Liabilities.

 

  4. Nothing in this Agreement shall be deemed to supersede, enlarge or modify
any of the provisions of the Purchase Agreement. If any conflict exists between
the terms of this Agreement and the terms of the Purchase Agreement, the terms
of the Purchase Agreement shall govern and control.

 

  5. This Agreement shall be binding upon and inure to the benefit of [Buyer
Affiliate] [Cash Entity] and Selling Parties and their respective successors and
permitted assigns.

 

  6. This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same instrument.

 

--------------------------------------------------------------------------------

2 Issue re: proper entity conveying relevant assets to be revisited prior to
closing if such issue is problematic to Buyer’s lenders.

 

- 2 -

--------------------------------------------------------------------------------

iStar

IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.

 

INTERNATIONAL PAPER COMPANY By:  

 

Name:   Title:   OTHER SELLING PARTIES By:  

 

Name:   Title:   [BUYER AFFILIATE] [CASH ENTITY] By:  

 

Name:   Title:  

Signature Page to General Buyer Affiliate Assignment and Assumption

--------------------------------------------------------------------------------

iStar

Exhibit D-4

[TEXAS FORM]

FORM OF ASSIGNMENT AND ASSUMPTION OF TIMBERLAND LEASE1

THIS ASSIGNMENT AND ASSUMPTION OF TIMBERLAND LEASE (the “Assignment”) is made
and entered into as of this                      day of                     ,
2006, by and among                     , a                      (“Assignor”),
and [CASH ENTITY] [TIMBER ENTITY], a [•] limited liability company (“Assignee”).

W I T N E S S E T H

WHEREAS, in conjunction with that certain Purchase Agreement, dated as of
                    , 2006 (the “Purchase Agreement”), among TimberStar
Southwest Parent LLC, a Delaware limited liability company (“Buyer Parent”),
TimberStar Southwest LLC, a Delaware limited liability company and a wholly
owned subsidiary of Buyer Parent, the other Buying Parties becoming party
thereto in accordance with Section 15.16 thereof, Assignor and the other Selling
Parties, Assignor has agreed to sell, assign, transfer and convey to Assignee
all of Assignor’s right, title and interest in and to that certain [Cash
Timberland Lease] [Installment Note Timberland Lease] described on Exhibit A
attached hereto (the “Subject Timberland Lease”), and Assignee has agreed to
undertake, assume and agree to perform, pay, become liable for and discharge
when due any and all liabilities and obligations under the Subject Timberland
Lease. Capitalized terms used but not defined in this Assignment shall have the
meanings ascribed to them in the Purchase Agreement.

NOW, THEREFORE, for good and valuable consideration, receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:

 

  1. Assignor hereby sells, assigns, transfers and conveys all of Assignor’s
right, title and interest in and to the Subject Timberland Lease and the [Cash
Leasehold Interest] [Timber Entity Leasehold Interest] associated with the
Subject Timberland Lease (the “Subject Leasehold Interest”).

 

  2. Subject to the terms of the Purchase Agreement, Assignee hereby purchases,
acquires and accepts from Assignor all of Assignor’s rights, title and interests
in and to the Subject Timberland Lease and the Subject Leasehold Interest, and,
effective as of the date hereof, Assignee hereby undertakes, assumes and agrees
to perform, pay and become liable for and discharge when due any and all
liabilities and obligations, whether accrued or unaccrued, absolute or
contingent, known or unknown, asserted or unasserted, resulting from or related
to or arising under, the Subject Timberland Lease and the Subject Leasehold
Interest.

 

--------------------------------------------------------------------------------

1 Form to be modified to include such non-substantive revisions as may be
required to comply with local law.

--------------------------------------------------------------------------------

  3. This Assignment is subject to the indemnification provisions of Article
XIII of the Purchase Agreement.

 

  4. The rights and obligations of the parties under this Assignment with
respect to the Subject Timberland Lease and the Subject Leasehold Interest are
subject to the terms of the Purchase Agreement, and such rights and obligations
shall survive the Closing.

 

  5. Nothing in this Assignment shall be deemed to supersede, enlarge or modify
any of the provisions of the Purchase Agreement. If any conflict exists between
the terms of this Assignment and the terms of the Purchase Agreement, the terms
of the Purchase Agreement shall govern and control.

 

  6. This Assignment may not be amended or modified in any manner other than by
an agreement in writing signed by the parties or their respective successors or
permitted assigns. No waiver under this Assignment shall be valid or binding
unless set forth in a writing duly executed and delivered by the party against
whom enforcement of such waiver is sought. Neither the waiver by any of the
parties of a breach or default under any of the provisions of this Agreement,
nor the failure by any of the parties, on one or more occasions, to enforce any
of the provisions of this Assignment or to exercise any right or privilege
hereunder, shall be construed as a waiver of any other breach or default of a
similar nature, or as a waiver of any of such provisions, rights or privileges
hereunder.

 

  7. THIS ASSIGNMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY,
CONSTRUCTION, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF TEXAS,
WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE
EXTENT SUCH PRINCIPLES OR RULES WOULD REQUIRE OR PERMIT THE APPLICATION OF THE
LAWS OF ANOTHER JURISDICTION.

 

  8. This Assignment shall not be assignable or otherwise transferable (a) by
Assignee without the prior written consent of Assignor, to the extent required
pursuant to the Purchase Agreement, and (b) by Assignor without the prior
written consent of Assignee to the extent permitted pursuant to the Purchase
Agreement; provided, however, that Assignor may, by written notice to Assignee,
assign all or any portion of its rights and obligations under this Assignment to
any Affiliate thereof to the extent permitted pursuant to the Purchase
Agreement. Any attempt to assign this Assignment without the prior written
consent required by this Section 8 shall be void. This Assignment shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns.

 

  9. This Assignment and the Purchase Agreement constitutes the entire agreement
and understanding of the parties, and supersedes any prior agreements or
understandings, whether written or oral, among the parties, with respect to the
subject matter hereof.

 

  10. This Assignment may be executed in any number of counterparts, each of
which shall be deemed an original and, when taken together, shall constitute one
agreement.

 

- 2 -

--------------------------------------------------------------------------------

  11. Any notice given pursuant to this Assignment shall be given in writing and
delivered in person, by overnight courier, by facsimile (with a copy sent by
regular mail) or by registered or certified mail, postpaid, return receipt
requested, addressed as follows:

If to Assignor, to:

International Paper Company

6400 Poplar Avenue, Tower III

Memphis, Tennessee 38197

Attention: General Counsel

Facsimile:

with copies to:

Debevoise & Plimpton LLP

919 Third Avenue

New York, New York 10022

Attention:  Jeffrey J. Rosen, Esq.

                    William D. Regner, Esq.

Facsimile: (212) 909-6836

If to Assignee to:

[•]

with a copy to:

[•]

Such notices, if delivered personally or by overnight courier service, shall be
deemed given at the time of delivery; if sent by registered or certified mail,
shall be deemed given two days after the time of mailing; and if sent by
facsimile, shall be deemed given on the next day following the day on which such
facsimile was sent, provided that a copy is also sent by regular mail.

[Signatures appear on next page]

 

- 3 -

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment and
Assumption of Timberland Lease, effective as the date first stated above.

ASSIGNOR:

 

                                                 , a
                                

By:

 

 

Name:

 

 

Title:

 

 

STATE OF                     , COUNTY OF                     

Before me, the undersigned, a Notary Public of the State and County aforesaid,
duly commissioned and qualified, personally appeared
                                                                      with whom
I am personally acquainted, (or proved to me on the basis of satisfactory
evidence) and who, upon oath, acknowledged himself to be the
                             of                                  the within
named bargainor, a corporation, and that he as such
                                , executed the foregoing instrument for the
purposes therein contained by signing the name of the corporation by himself as
                                        .

WITNESS my hand and Official Seal this      day of                     , 20    .

 

 

Notary Public

 

My Commission expires:

 

 

- 4 -

--------------------------------------------------------------------------------

ASSIGNEE:

 

[CASH ENTITY] [TIMBER ENTITY] By:  

 

Name:  

 

Title:  

 

STATE OF                     , COUNTY OF                     

Before me, the undersigned, a Notary Public of the State and County aforesaid,
duly commissioned and qualified, personally appeared
                                                                             
with whom I am personally acquainted, (or proved to me on the basis of
satisfactory evidence) and who, upon oath, acknowledged himself to be the
                     of                              the within named bargainor,
a corporation, and that he as such                                     ,
executed the foregoing instrument for the purposes therein contained by signing
the name of the corporation by himself as
                                                 .

WITNESS my hand and Official Seal this          day of                     ,
20    .

 

 

Notary Public

My Commission expires:

 

 

 

- 5 -

--------------------------------------------------------------------------------

EXHIBIT A

DESCRIPTION OF TIMBERLAND LEASE

 

- 6 -

--------------------------------------------------------------------------------

[LOUISIANA FORM]2

STATE OF LOUISIANA

PARISH OF                     

FORM OF ASSIGNMENT AND ASSUMPTION OF TIMBERLAND LEASE3

THIS ASSIGNMENT AND ASSUMPTION OF TIMBERLAND LEASE (the “Assignment”) is made
and entered into as of this                      day of                     ,
2006, by and among                     , a                      (“Assignor”),
and [CASH ENTITY] [TIMBER ENTITY], a [•] [limited liability company]
(“Assignee”).

W I T N E S S E T H

WHEREAS, in conjunction with that certain Purchase Agreement, dated as of
                        , 2006 (the “Purchase Agreement”), among TimberStar
Southwest Parent LLC, a Delaware limited liability company (“Buyer Parent”),
TimberStar Southwest LLC, a Delaware limited liability company and a wholly
owned subsidiary of Buyer Parent, the other Buying Parties becoming party
thereto in accordance with Section 15.16 thereof, Assignor and the other Selling
Parties, Assignor has agreed to sell, assign, transfer and convey to Assignee
all of Assignor’s right, title and interest in and to that certain [Cash
Timberland Lease] [Installment Note Timberland Lease] described on Exhibit A
attached hereto (the “Subject Timberland Lease”), and Assignee has agreed to
undertake, assume and agree to perform, pay, become liable for and discharge
when due any and all liabilities and obligations under the Subject Timberland
Lease. Capitalized terms used but not defined in this Assignment shall have the
meanings ascribed to them in the Purchase Agreement.

NOW, THEREFORE, for good and valuable consideration, receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:

 

  1. Assignor hereby sells, assigns, transfers and conveys all of Assignor’s
right, title and interest in and to the Subject Timberland Lease and the [Cash
Leasehold Interest] [Timber Entity Leasehold Interest] associated with the
Subject Timberland Lease (the “Subject Leasehold Interest”).

 

  2. Subject to the terms of the Purchase Agreement, Assignee hereby purchases,
acquires and accepts from Assignor all of Assignor’s rights, title and interests
in and to the Subject Timberland Lease and the Subject Leasehold Interest, and,
effective as of the date hereof, Assignee hereby undertakes, assumes and agrees
to perform, pay and become liable for

 

--------------------------------------------------------------------------------

2 Subject to changes to satisfy Louisiana law and other customs and laws.

3 Form to be modified to include such non-substantive revisions as may be
required to comply with local law.

--------------------------------------------------------------------------------

and discharge when due any and all liabilities and obligations, whether accrued
or unaccrued, absolute or contingent, known or unknown, asserted or unasserted,
resulting from or related to or arising under, the Subject Timberland Lease and
the Subject Leasehold Interest.

 

  3. This Assignment is subject to the indemnification provisions of Article
XIII of the Purchase Agreement.

 

  4. The rights and obligations of the parties under this Assignment with
respect to the Subject Timberland Lease and the Subject Leasehold Interest are
governed by the terms of the Purchase Agreement, and nothing in this Assignment
shall be deemed to supersede, enlarge or modify any of the provisions of the
Purchase Agreement. If any conflict exists between the terms of this Assignment
and the terms of the Purchase Agreement, the terms of the Purchase Agreement
shall govern and control.

 

  5. This Assignment may not be amended or modified in any manner other than by
an agreement in writing signed by the parties or their respective successors or
permitted assigns. No waiver under this Assignment shall be valid or binding
unless set forth in a writing duly executed and delivered by the party against
whom enforcement of such waiver is sought. Neither the waiver by any of the
parties of a breach or default under any of the provisions of this Agreement,
nor the failure by any of the parties, on one or more occasions, to enforce any
of the provisions of this Assignment or to exercise any right or privilege
hereunder, shall be construed as a waiver of any other breach or default of a
similar nature, or as a waiver of any of such provisions, rights or privileges
hereunder.

 

  6. THIS ASSIGNMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY,
CONSTRUCTION, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF LOUISIANA,
WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE
EXTENT SUCH PRINCIPLES OR RULES WOULD REQUIRE OR PERMIT THE APPLICATION OF THE
LAWS OF ANOTHER JURISDICTION.

 

  7. This Assignment shall not be assignable or otherwise transferable (a) by
Assignee without the prior written consent of Assignor, to the extent required
pursuant to the Purchase Agreement, and (b) by Assignor without the prior
written consent of Assignee to the extent permitted pursuant to the Purchase
Agreement; provided, however, that Assignor may, by written notice to Assignee,
assign all or any portion of its rights and obligations under this Assignment to
any Affiliate thereof to the extent permitted pursuant to the Purchase
Agreement. Any attempt to assign this Assignment without the prior written
consent required by this Section 7 shall be void. This Assignment shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns.

 

  8. This Assignment and the Purchase Agreement constitutes the entire agreement
and understanding of the parties, and supersedes any prior agreements or
understandings, whether written or oral, among the parties, with respect to the
subject matter hereof.

 

- 2 -

--------------------------------------------------------------------------------

  9. This Assignment may be signed in any number of counterparts, each of which
shall be deemed an original and, when taken together, shall constitute one
agreement.

 

  10. Any notice given pursuant to this Assignment shall be given in writing and
delivered in person, by overnight courier, by facsimile (with a copy sent by
regular mail) or by registered or certified mail, postpaid, return receipt
requested, addressed as follows:

If to Assignor, to:

International Paper Company

6400 Poplar Avenue, Tower III

Memphis, Tennessee 38197

Attention: General Counsel

Facsimile:

with copies to:

Debevoise & Plimpton LLP

919 Third Avenue

New York, New York 10022

Attention: Jeffrey J. Rosen, Esq.

                    William D. Regner, Esq.

Facsimile: (212) 909-6836

If to Assignee to:

[•]

with a copy to:

[•]

Such notices, if delivered personally or by overnight courier service, shall be
deemed given at the time of delivery; if sent by registered or certified mail,
shall be deemed given two days after the time of mailing; and if sent by
facsimile, shall be deemed given on the next day following the day on which such
facsimile was sent, provided that a copy is also sent by regular mail.

[Signatures appear on next page]

 

- 3 -

--------------------------------------------------------------------------------

THUS DONE AND PASSED in                     ,                     , on the     
day of                     , 2006, in the presence of the undersigned competent
witnesses and Notary Public.

 

WITNESSES:   ASSIGNOR:                                         
                      , a                         

 

  By:  

 

Printed Name:   Name:  

 

  Title:  

 

 

    Printed Name:    

 

 

NOTARY PUBLIC Printed Name:                                                  
Notary No.                                                  

THUS DONE AND PASSED in                                 ,
                                , on the                          day of
                        , 2006, in the presence of the undersigned competent
witnesses and Notary Public.

 

WITNESSES:   ASSIGNEE:   [CASH ENTITY][TIMBER ENTITY], a [•]

 

  By:  

 

Printed Name:   Name:  

 

  Title:  

 

 

    Printed Name:    

 

NOTARY PUBLIC Printed Name:                                                  
Notary No.                                                  

 

- 4 -

--------------------------------------------------------------------------------

EXHIBIT A

DESCRIPTION OF TIMBERLAND LEASE

 

- 5 -

--------------------------------------------------------------------------------

iStar

Exhibit D-5

Form of Assignment and Assumption of Real Property Leases

--------------------------------------------------------------------------------

iStar

ASSIGNMENT AND ASSUMPTION OF REAL PROPERTY LEASES1

THIS ASSIGNMENT AND ASSUMPTION OF REAL PROPERTY LEASES (the “Assignment”) is
made and entered into as of this      day of             , 2006, by and among
INTERNATIONAL PAPER COMPANY, a New York corporation (“Assignor”), the parties
listed on the signature pages hereto (the “Other Assigning Parties”, and,
collectively with Assignor, the “Assigning Parties”), and [CASH ENTITY] [TIMBER
ENTITY], a [·] limited liability company (“Assignee”).

W I T N E S S E T H

WHEREAS, in conjunction with that certain Purchase Agreement dated as of
                    , 2006 (the “Purchase Agreement”), among TimberStar
Southwest Parent LLC, a Delaware limited liability company (“Buyer Parent”),
TimberStar Southwest LLC, a Delaware limited liability company and a wholly
owned subsidiary of Buyer Parent, the other Buying Parties becoming party
thereto in accordance with Section 15.16 thereof, Assignor and the Other Selling
Parties, the Assigning Parties have agreed to sell, assign, transfer and convey
to Assignee all of the Assigning Parties’ rights, title and interests in, to and
under the [Cash Real Property Leases] [Timber Entity Real Property Leases] (the
“Subject Real Property Leases”), and Assignee has agreed to undertake, assume
and agree to perform, pay, become liable for and discharge when due any and all
liabilities and obligations under the Subject Real Property Leases. Capitalized
terms used but not defined in this Assignment shall have the meanings ascribed
to them in the Purchase Agreement.

NOW, THEREFORE, for good and valuable consideration, receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:

 

1. The Assigning Parties hereby sell, assign, transfer and convey all of the
Assigning Parties’ right, title and interest in and to the Subject Real Property
Leases and purchase options, prepaid rents, security deposits and leasehold
improvements relating thereto in accordance with the Purchase Agreement
(collectively, the “Lease Rights”).

 

2. Subject to the terms of the Purchase Agreement, Assignee hereby purchases,
acquires and accepts from the Assigning Parties all of the Assigning Parties’
rights, title and interests in and to the Subject Real Property Leases and the
Lease Rights and, effective as of the date hereof, undertakes, assumes and
agrees to perform, pay and become liable for and discharge when due any and all
liabilities and obligations, whether accrued or unaccrued, absolute or
contingent, known or unknown, asserted or unasserted, resulting from or related
to or arising under, the Subject Real Property Leases.

 

3. This Assignment is subject to the indemnification provisions of Article XIII
of the Purchase Agreement.

 

--------------------------------------------------------------------------------

1 Form to be modified to include such non-substantive revisions as may be
required to comply with local law.

--------------------------------------------------------------------------------

4. The rights and obligations of the parties under this Assignment with respect
to the Subject Real Property Leases and the Lease Rights are subject to the
terms of the Purchase Agreement, and such rights and obligations shall survive
the Closing.

 

5. Nothing in this Agreement shall be deemed to supersede, enlarge or modify any
of the provisions of the Purchase Agreement. If any conflict exists between the
terms of this Agreement and the terms of the Purchase Agreement, the terms of
the Purchase Agreement shall govern and control.

 

6. This Assignment may not be amended or modified in any manner other than by an
agreement in writing signed by the parties or their respective successors or
permitted assigns. No waiver under this Assignment shall be valid or binding
unless set forth in a writing duly executed and delivered by the party against
whom enforcement of such waiver is sought. Neither the waiver by any of the
parties of a breach or default under any of the provisions of this Agreement,
nor the failure by any of the parties, on one or more occasions, to enforce any
of the provisions of this Assignment or to exercise any right or privilege
hereunder, shall be construed as a waiver of any other breach or default of a
similar nature, or as a waiver of any of such provisions, rights or privileges
hereunder.

 

7. This Assignment shall not be assignable or otherwise transferable (a) by
Assignee without the prior written consent of Assignor, to the extent required
pursuant to the Purchase Agreement, and (b) by any of the Assigning Parties
without the prior written consent of Assignee to the extent permitted pursuant
to the Purchase Agreement; provided, however, that any of the Assigning Parties
may, by written notice to Assignee, assign all or any portion of its rights and
obligations under this Assignment to any Affiliate thereof to the extent
permitted pursuant to the Purchase Agreement. Any attempt to assign this
Assignment without the prior written consent required by this Section 8 shall be
void. This Assignment shall be binding upon and inure to the benefit of the
parties and their respective successors and permitted assigns.

 

8. This Assignment and the Purchase Agreement constitutes the entire agreement
and understanding of the parties, and supersedes any prior agreements or
understandings, whether written or oral, among the parties, with respect to the
subject matter hereof.

 

9. This Assignment may be signed in any number of counterparts, each of which
shall be deemed an original and, when taken together, shall constitute one
agreement.

 

10. Any notice given pursuant to this Assignment shall be given in writing and
delivered in person, by overnight courier, by facsimile (with a copy sent by
regular mail) or by registered or certified mail, postpaid, return receipt
requested, addressed as follows:

If to the Assigning Parties, to:

International Paper Company

6400 Poplar Avenue, Tower III

Memphis, Tennessee 38197

Attention: General Counsel

Facsimile:

--------------------------------------------------------------------------------

with copies to:

Debevoise & Plimpton LLP

919 Third Avenue

New York, New York 10022

Attention: Jeffrey J. Rosen, Esq.

        William D. Regner, Esq.

Facsimile: (212) 909-6836

If to Assignee to:

[·]

with a copy to:

[·]

Such notices, if delivered personally or by overnight courier service, shall be
deemed given at the time of delivery; if sent by registered or certified mail,
shall be deemed given two days after the time of mailing; and if sent by
facsimile, shall be deemed given on the next day following the day on which such
facsimile was sent, provided that a copy is also sent by regular mail.

[Signatures appear on next page]

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment and
Assumption of Real Property Leases, effective as the date first stated above.

 

ASSIGNOR:  

INTERNATIONAL PAPER COMPANY, a

New York corporation

  By:  

 

 

  Name:  

 

 

  Title:  

 

 

OTHER ASSIGNING PARTIES:   _______________, a   _________________   By:  

 

 

  Name:  

 

 

  Title:  

 

 

  _______________, a   _______________   By:  

 

 

  Name:  

 

 

  Title:  

 

 

ASSIGNEE:     [CASH ENTITY] [TIMBER ENTITY], a [·]   By:  

 

 

  Name:  

 

 

  Title:  

 

 

--------------------------------------------------------------------------------

iStar

Exhibit E

FORM OF BILL OF SALE1

THIS BILL OF SALE (“Bill of Sale”) is made on this      day of             ,
2006, to be effective as of 9:00 a.m., New York City time, on the date hereof
(the “Effective Date”), by and among INTERNATIONAL PAPER COMPANY, a New York
corporation (“Seller”), the Other Selling Parties and [Cash Entity (the “Cash
Entity”)] [(Buyer Affiliate (“Buyer Affiliate”)].2

WHEREAS, pursuant to that certain Purchase Agreement, dated as of
                    , 2006 (the “Purchase Agreement”), among TimberStar
Southwest Parent LLC, a Delaware limited liability company (“Buyer Parent”),
TimberStar Southwest LLC, a Delaware limited liability company and a wholly
owned subsidiary of Buyer Parent, the other Buying Parties becoming party
thereto in accordance with Section 15.16 thereof, Seller and the Other Selling
Parties, the Selling Parties have agreed to sell to [the Cash Entity] [Buyer
Affiliate], and [the Cash Entity] [Buyer Affiliate] has agreed to purchase from
the Selling Parties, for the consideration and upon the terms and conditions set
forth in the Purchase Agreement, certain personal property defined therein as
the [Purchased Personal Assets] [Buyer Affiliate Assets] and identified as such
in Section 1.5 of the Seller’s Disclosure Letter (the “Subject Personalty
Assets”); and

WHEREAS, the Selling Parties have agreed to deliver to [the Cash Entity] [Buyer
Affiliate] such instruments of sale, transfer, conveyance, assignment and
delivery as are required to vest in Buyer all of the right, title and interest
of the Selling Parties in and to the Subject Personalty Assets;

NOW, THEREFORE, pursuant to the Purchase Agreement and in consideration of the
mutual promises it contains, and for other good and valuable consideration, the
receipt and sufficiency of which the parties hereby acknowledge, the parties
agree as follows:

 

  1. Capitalized terms used herein but not otherwise defined in this Bill of
Sale shall have the meanings ascribed to such terms in the Purchase Agreement.

 

  2. Effective as of the [Effective Date], the Selling Parties hereby sell,
transfer, assign, convey and deliver to [the Cash Entity] [Buyer Affiliate] all
of the right, title and interest of the Selling Parties in and to all of the
Subject Personalty Assets, free and clear of all Liens.

 

  3. Nothing in this Bill of Sale shall be deemed to supersede, enlarge or
modify any of the provisions of the Purchase Agreement. If any conflict exists
between the terms of this Bill of Sale and the terms of the Purchase Agreement,
the terms of the Purchase Agreement shall govern and control.

 

--------------------------------------------------------------------------------

1 Form to be modified to include such non-substantive revisions as may be
required to comply with local law.

2 Party dependent on the entity to which the subject assets are transferred.

--------------------------------------------------------------------------------

  4. This Bill of Sale shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.

 

  5. This Bill of Sale may be executed in any number of counterparts, each of
which shall be deemed an original and all of which together shall constitute one
and the same instrument.

 

- 2 -

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties have caused this Bill of Sale to be executed and
delivered as of the date first above written.

 

Seller:

INTERNATIONAL PAPER COMPANY

By:

 

 

 

Name:

 

Title:

 

Other Selling Parties:

SUSTAINABLE FORESTS L.L.C.

By:

 

 

 

Name:

 

Title:

 

SP FORESTS L.L.C.

By:

 

 

 

Name:

 

Title:

 

BLUE SKY TIMBER PROPERTIES LLC

By:

 

 

 

Name:

 

Title:

 

[Timber Entity:] [Buyer Affiliate:]

[                             ]

By:

 

 

 

Name:

 

Title:

 

Signature Page to Bill of Sale

--------------------------------------------------------------------------------

iStar

Exhibit F-1

PULPWOOD SUPPLY AGREEMENT

BY AND BETWEEN

INTERNATIONAL PAPER CO (“BUYER”)

AND

[                    ] (“SELLER”)

--------------------------------------------------------------------------------

INDEX

 

PARAGRAPH

        PAGE

1.      Definitions

   3

2.      Term

   5

3.      Volumes

   5

4.      Specifications

   6

5.      Price Schedule

   6

6.      Delivery, Scaling and Weighing

   8

7.      Defaults; Limitation of Damages

   8

8.      Payment

   9

9.      Assignment and Termination

   9

10.    Independent Contractor Status

   10

11.    Indemnity

   11

12.    Attorneys’ Fees and Costs

   11

13.    Management Obligation

   11

14.    Insurance

   12

15.    Warranty and Taxes

   13

16.    Compliance with Laws, Rules and Regulations

   13

17.    Force Majeure

   13

18.    Succession

   14

19.    Notices

   14

20.    Dispute Resolution

   14

21.    Confidentiality

   15

22.    Sale of Timberlands

   16

23.    Complete Agreement

   16

24.    Governing Law

   16

25.    Miscellaneous

   16

26.    Right to Access and Audit

   16

SCHEDULES

 

Schedule 1    Minimum Harvest Plan Schedule 1(t)    Zones Schedule 3(f)    2006
Harvest Plan Schedule 4    Specifications Schedule 5    Freight Adjustment Table
EXHIBITS    Exhibit A    Timberlands Description Exhibit A-Annex 1    Mill
Locations Exhibit A-Annex 2    Former Blue Sky Timberlands Exhibit A-Annex 3   
Timberlands in Other iStar FMAs Exhibit B    Stumpage Agreement Exhibit C   
Support Agreement Exhibit D    Memorandum of Agreement

 

2

--------------------------------------------------------------------------------

Pulpwood Supply Agreement

INTERNATIONAL PAPER COMPANY, a New York corporation (“BUYER”) with an address at
6400 Poplar Ave., Memphis, Tennessee, and                     , a [Delaware]
corporation (“SELLER”) with an address at
                                        , do enter into and execute this
Pulpwood Supply Agreement (this “Agreement”) as of this      day of
            , 2006.

RECITALS

WHEREAS: BUYER is desirous of acquiring, and SELLER is desirous of providing,
Pulpwood (as defined herein) and biomass from the timberlands described in
Exhibit A (the “Timberlands”), to service for a period of years paper mills
located at the locations set forth in Exhibit A – Annex 1 (the “Mills”) and such
other facilities, locations, or end users as BUYER may, in its sole discretion,
from time to time designate;

WHEREAS:                     , a              (“PARENT”),             , a
Delaware limited partnership (“TIMBER LP”), and             , Delaware limited
liability company (“TIMBER LLC” and, together with Parent and Timber LP,
“LANDOWNER”), and SELLER are simultaneously entering into a master stumpage
agreement in substantially the form set forth in Exhibit B (as in effect and as
from time to time amended, the “Stumpage Agreement”), pursuant to which, among
other things, LANDOWNER is required to make available to SELLER cutting rights
on the Timberlands sufficient to permit SELLER to satisfy its obligations under
this Agreement; and

WHEREAS: BUYER and LANDOWNER are simultaneously entering into a support
agreement in substantially the form set forth in Exhibit C (as in effect and as
from time to time amended, the “Support Agreement”), pursuant to which, among
other things, LANDOWNER provides certain assurances and agreements with respect
to the availability of the cutting rights referred to above and agrees to
certain restrictions on transfers of the Timberlands and assignment of this
Agreement.

NOW, THEREFORE, in consideration of the foregoing and the terms and conditions
forth herein and other good and valuable consideration, the parties hereto agree
as follows:

1. DEFINITIONS:

When used in this Agreement, the words and phrases set forth below shall have
the following meanings:

 

  a. “Affiliate” means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with such Person.
For purposes of this definition, “control” when used with respect to any Person
means the ownership of not less than 50% of the ownership interests in such
Person and the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms “controlling” and “controlled” have
meanings correlative to the foregoing.

 

  b. “Annual Harvest Plan” means the annual harvest plan established from year
to year as described in paragraph 3(c).

 

3

--------------------------------------------------------------------------------

  c. “Base Volume” means the minimum volume of each Product from the
Timberlands, based on a percentage of Minimum Harvest Plan volume of each
Product from the Timberlands, that SELLER is required to deliver to BUYER and
BUYER is required to purchase pursuant to paragraph 3(a), which percentages are
set out in Schedule 1.

 

  d. “Biomass” means standing trees and/or vegetation that can be preharvested,
or standing and down woody material and/or debris from a post harvesting
operation. Typically, it is chipped on site and then taken to a utilizing mill
where it is ground, pulverized or otherwise processed to be used as alternative
fuel source.

 

  e. “Delivery Point” means the location at which the Wood is delivered by
SELLER, as shall be designated by BUYER in BUYER’s sole discretion.

 

  f. “Effective Date” means                     , 2006.

 

  g. “Elected Excess Option Volume” means that portion of the Excess Harvest
Volume which BUYER elects to purchase pursuant to paragraph 3(d).

 

  h. “Elected Option Volume” means that portion of the Option Volume which BUYER
elects to purchase pursuant to paragraph 3(b).

 

  i. “Ending Date” means                     , 2056.

 

  j. “Excess Harvest Volume” is defined in paragraph 3(d) and represents the
volumes of Product from the Timberlands, that BUYER may elect to purchase
pursuant to paragraph 3(d)

 

  k. “Harvest Year” means a calendar year beginning on January 1 and ending on
December 31. The first full “Harvest Year” of this Agreement shall begin on
January 1, 2007 and end on December 31, 2007. The periods from the Effective
Date to December 31, 2006 and from January 1, 2055 to the Ending Date shall be
deemed partial “Harvest Years.”

 

  l. “Minimum Harvest Plan” means, (i) for the first 30 years, the harvest plans
for the Timberlands set out in Schedule 1, which harvest plans set forth the
minimum volumes of Product to be harvested by SELLER on the Timberlands during
such period and (ii) thereafter, the harvest plans for the Timberlands agreed
upon in good faith by the parties prior to the expiration of such period, which
harvest plans shall set forth the minimum volumes of Product to be harvested by
SELLER on the Timberlands during the remainder of the Term.

 

  m. “Option Volume” means the volumes of each Product from the Timberlands,
based on a percentage of Minimum Harvest Plan volume of each Product from the
Timberlands, that BUYER may elect to purchase pursuant to paragraph 3(b), which
percentages are set out in Schedule 1.

 

  n. “Person” means any individual, general partnership, limited partnership,
corporation, limited liability company, joint venture, trust, business trust,
cooperative or association.

 

  o. “Product” means the products set out in Schedule 1.

 

  p. “Pulpwood” means roundwood intended to be chipped, shredded, flaked,
ground, or otherwise converted to make pulp, paper, or composite panel products.

 

4

--------------------------------------------------------------------------------

  q. “Term” means the period of time from and including the Effective Date
through and including the Ending Date as described in paragraph 2, including any
extensions pursuant to paragraph 2.

 

  r. “Termination Date” means the date of termination of this Agreement in
accordance with its terms by BUYER or SELLER at any time other than the Ending
Date.

 

  s. “Wood”, unless otherwise indicated, means Base Volume, Elected Option
Volume and Elected Excess Option Volume.

 

  t. “Yard Transactions” means Mill deliveries from a woodyard system.

 

  u. “Zone” means those common areas, based on geographical or mileage
characteristics, as set out on Schedule 1(t).

2. Term:

Unless sooner terminated as hereinafter provided, the term of this Agreement
shall commence on the Effective Date and extend for fifty (50) years, ending on
the Ending Date.

3. Volumes:

(a) Over the Term, BUYER covenants and agrees to purchase and accept from SELLER
and SELLER covenants and agrees to sell and deliver to BUYER at the Delivery
Point(s) specified by BUYER for the prices set out herein and at the times
hereinafter provided, the Base Volume as established by the Minimum Harvest Plan
applicable for each Harvest Year.

(b) BUYER may, at its option, elect to purchase all or part of the Option Volume
for any Product for any Harvest Year during the Term by notifying SELLER in
writing of such election no later than October 1 of the year preceding such
Harvest Year. Such election notice shall specify the percentage, for each
Product, of Option Volume that BUYER is electing to purchase. Except as
otherwise provided herein, upon such election, the Elected Option Volume shall
be treated in the same manner as Base Volume for that Harvest Year.

(c) SELLER shall provide to BUYER a written Annual Harvest Plan for each Harvest
Year detailing the planned harvest volume and tract locations for each of the
Products no later than one hundred twenty (120) days prior to January 1 of such
Harvest Year. Each Annual Harvest Plan shall include stand data and a map of
each tract, it being understood that such stand data represents SELLER’s best
estimates at the time and that Wood may eventually come from stands and tracts
other than those indicated in such Annual Harvest Plan. BUYER and SELLER shall
mutually agree upon the Delivery Plan (as defined in paragraph 6) for each
Harvest Year. The Annual Harvest Plan harvest volumes for each Product for each
Harvest Year of the Term shall be in amounts not less than those set forth in
the Minimum Harvest Plan.

(d) In the event that (i) SELLER submits an Annual Harvest Plan providing for
planned harvest volume for any Product in excess of the Minimum Harvest Plan
harvest volume for such Product, or (ii) during any Harvest Year, SELLER
harvests in excess of such Minimum Harvest Plan harvest volume for any Product
(in either case, the volume of any such Product exceeding Minimum Harvest Plan
harvest volume, the “Excess Harvest Volume”), BUYER shall have the option to
purchase any and all of such Excess Harvest Volume. SELLER shall give BUYER
thirty (30) days advance notice of any expected Excess Harvest Volume under
clause (ii) above. BUYER shall notify SELLER of its election to purchase any
portion of the

 

5

--------------------------------------------------------------------------------

Excess Harvest Volume no later than (A) thirty (30) days after receipt of the
Annual Harvest Plan, in the case of clause (i) above, or (B) fifteen (15) days
after receipt of notice of any expected Excess Harvest Volume, in the case of
clause (ii) above. Any election made pursuant to this paragraph 3(d) shall be
treated as Elected Option Volume. The parties shall work together to adjust the
Delivery Plan to accommodate the additional volume.

(e) BUYER and SELLER acknowledge that the ability of SELLER to deliver to BUYER
a portion of the Base Volume as chips depends on the availability of the
necessary machinery, facilities and work forces (collectively, “Chip Crews;”
individually “Chip Crew”). To the extent a Chip Crew is readily and reasonably
available to the Tracts being harvested and the engagement of such Chip Crew is
mutually agreeable to SELLER and such Chip Crew, SELLER shall deliver that
portion of the Base Volume as chips as is requested by BUYER in writing, with
the commencement of such delivery occurring no earlier than thirty (30) days
after SELLER’s receipt of BUYER’s request for chips, unless otherwise agreed to
by SELLER and BUYER. In the event BUYER requests in writing that a portion of
the Base Volume be delivered to BUYER as chips and a Chip Crew is not readily or
reasonably available to the Tracts being harvested or SELLER cannot reach a
mutually agreeable engagement with such Chip Crew, SELLER shall use commercially
reasonable efforts to establish a new Chip Crew, and, upon establishment of said
Chip Crew, deliver that portion of the Base Volume as chips as requested by
BUYER in writing, with such delivery commencing no earlier than one hundred
eighty (180) days after SELLER’s receipt of BUYER’s request for chips, unless
otherwise agreed to by SELLER. The parties shall negotiate in good faith to
establish mutually agreeable pricing, delivery and other applicable terms for
chips pursuant to this paragraph (collectively, the “Chipping Terms”). In the
event SELLER is to deliver chips pursuant to this paragraph, BUYER agrees to
honor the Chipping Terms until all such terms have been satisfied, and BUYER
shall not have the right to change the Chipping Terms without SELLER’s prior
written consent.

(f) It is understood and agreed that BUYER’s harvest plan for 2006, as set out
in Schedule 3(f), pro-rated to adjust for harvest occurring through the
Effective Date, shall serve as the Delivery Plan for the partial Harvest Year
beginning on the Effective Date and ending on December 31, 2006. The parties
will work together to effectuate a smooth and orderly transition and continual
and even wood flow to BUYER.

4. Specifications:

SELLER agrees that all Wood delivered shall meet BUYER’s specifications (for
each Delivery Point) as may be applicable from time to time. Attached as
Schedule 4 are current specifications. BUYER shall provide at least thirty
(30) days prior notice to SELLER of any changes to such specifications, provided
that no such change shall materially adversely affect SELLER’s ability to comply
with its obligations hereunder. BUYER has the right to reject any or all Wood
not meeting BUYER’s specifications at the time of delivery, provided SELLER has
received notification of such specifications at least thirty (30) days prior to
delivery. Wood rejected for failure to meet specifications shall not be included
in calculating whether SELLER met its required Base Volume and Option Volumes.
In the event BUYER rejects any or all Wood not meeting BUYER’s specifications,
BUYER may reload, or cause to be reloaded, the rejected Wood onto SELLER’s
trailer. SELLER shall remove and dispose of any rejected Wood at SELLER’s sole
cost, risk and expense.

5. Price Schedule:

(a) Except as set forth in subparagraphs (b), (c) and (d) below, pricing for all
Products shall be equal to the previous calendar quarter’s weighted average
delivered cost, FOB the relevant Mill or Delivery Point specified on Exhibit A –
Annex 1 (excluding Yard Transactions, transactions with SELLER, internal
transactions with Buyer or its Affiliates, timber deeds and supply agreements in
excess of one year

 

6

--------------------------------------------------------------------------------

containing pricing based on a mill weighted average cost, index, or other such
indicator), by Product, Zone and transportation method. This calculation, which
shall establish the price to be paid to SELLER for all Wood for the upcoming
quarter, shall be determined using a mid-month time frame to allow sufficient
time to calculate and implement the changed price. For example, pricing for the
period July 1 through September 30 will be based on deliveries from March 15 to
June 15. Pricing shall be applicable to all Wood. In the event BUYER constructs,
purchases or leases any mill, yard or facility, the parties shall negotiate in
good faith to establish a zone structure for such mill or Delivery Point.

(b) Pricing for all Biomass Products shall be at such prices, set quarterly, as
the parties mutually agree. The biomass price for the upcoming quarter shall be
established by the parties no later than fifteen (15) days prior to the start of
such quarter.

(c) In the event that (i) a minimum of two thousand five hundred (2,500) tons of
quarterly comparable sales information, representing not less than four
transactions with different suppliers, is not available for a particular quarter
for deliveries of softwood Pulpwood to a Mill or Delivery Point specified on
Exhibit A – Annex 1 from a particular Zone, or (ii) a minimum of one thousand
(1,000) tons of quarterly comparable sales information is not available for a
particular quarter for deliveries of hardwood Pulpwood to a Mill or Delivery
Point specified on Exhibit A – Annex 1 from a particular Zone, pricing for the
next closest Zone meeting such minimum threshold shall be used and adjusted for
freight according to the Freight Adjustment Table set out in Schedule 5. In the
event the delivery destination is not a Mill, but is instead another facility,
location or end user as BUYER may designate from time to time, then pricing for
the Zone closest to the shipping zone that meets the minimum threshold shall be
used and adjusted for freight according to the Freight Adjustment Table set out
in Schedule 5.

(d) Pricing for any Products supplied from the Timberlands described on Exhibit
A – Annex 2 or from the Timberlands set forth on Exhibit A – Annex 3 (to the
extent permitted under paragraph 22) shall be equal to the volume weighted
average price paid to SELLER hereunder for Wood supplied from the Timberlands
(other than under this subparagraph (d)) during the Mill’s previous calendar
quarter, determined by Product. This calculation shall also be determined using
a mid-month time frame to allow sufficient time to calculate and implement the
changed price as described above. The parties agree that the intent of this
provision is to ensure that the inclusion of Wood from the lands described on
Exhibit A – Annex 2 or Exhibit A – Annex 3 does not increase BUYER’s average
cost for Wood, and in the event sufficient sales are not available to make the
calculations contemplated hereunder the price shall instead be BUYER’s weighted
average cost for the Product in question hereunder, exclusive of freight, plus
BUYER’s weighted average cost of freight deliveries of such Product hereunder to
the Delivery Point (exclusive of sales described in this subparagraph (d)).

(e) BUYER shall provide to SELLER such documentation supporting the calculations
described in this paragraph 5 as SELLER may from time to time reasonably
request, provided, however, such requests shall be made no more frequently than
quarterly.

(f) SELLER shall make every commercially reasonable attempt to eliminate
unnecessary freight cost to BUYER by first dispatching Wood from forest
operations that are closest to the designated Delivery Point. The parties shall
work together to mutually resolve costs relating to extraordinary requirements
or unusual circumstances, including any such costs incurred by SELLER as a
result of the redirection by BUYER of Wood to additional Delivery Points.

 

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6. Delivery, Scaling and Weighing:

(a) The parties recognize a mutual benefit to produce and accept Wood on an even
flow basis, with appropriate consideration given to weather limitations on
harvesting and trucking, and mill inventory constraints. BUYER and SELLER shall
work together to develop quarterly delivery schedules for each upcoming Harvest
Year (the “Delivery Plan”) based on the parameter set out herein, which Delivery
Plan shall be mutually agreed upon no later than sixty (60) days prior to the
beginning of such Harvest Year. SELLER shall make every commercially reasonable
attempt to proportion deliveries by season for the various products as follows
or as otherwise mutually agreed to by the parties:

 

January – March

   __ %

April – June

   __ %

July – September

   __ %

October – December

   __ %

(b) Deliveries shall be dispatched on a relatively even flow basis within each
quarter. It is understood and agreed that material deviations to the Delivery
Plan may occur due to weather conditions or other unforeseen events. In such
event, quarterly deliveries may vary from the Delivery Plan by up to twenty
(20) percent of the quarterly plan, provided, however, that the annual variance
does not exceed five (5) percentage of the annual Delivery Plan. If the annual
negative variance is five (5) percentage points or less at the end of any
Harvest Year, SELLER shall be required, if requested by BUYER, to deliver such
variance (the “Carryover Volume”) in the first quarter of the following Harvest
Year, at a price equal to the lowest quarterly price for all quarters during the
previous Harvest Year in which there was a negative variance, excluding the
price for any such quarter in such year prior to a quarter in which all prior
negative variances were brought current. Any deliveries in the following Harvest
Year will first be counted towards meeting the Carryover Volume requirement.
Deliveries during the fourth quarter shall only be applied against the then
current Harvest Year’s delivery requirements. The parties shall work together to
adjust delivery schedules to accommodate temporary or unforeseen hardships for
either party. Each party shall notify the other party of any anticipated delays
as soon as such delay is anticipated.

(c) All Wood delivered hereunder by SELLER shall be scaled or weighed by BUYER,
or its designee, upon delivery at the respective Delivery Points, which data
shall be recorded by the scaler (or weigher) on scale or weight tickets and a
copy of each ticket shall be given to SELLER or its designated representative.
Additional information reasonably required by the parties from time to time or
by state law, including but not limited to origin of delivered Wood, shall also
be included on the scale ticket or provided in such other format as may be
reasonably requested by BUYER. SELLER shall (i) adhere to BUYER’s requirements
for delivery as are established from time to time to conform with changes in
law, forestry practices and BUYER’s operational requirements, provided such
adjustments are comparable to industry standards and are similar to those
required by BUYER of its other suppliers and (ii) comply with all applicable
laws, rules and regulations.

7. Default; Limitation of Damages:

(a) A party shall be in default under this Agreement if such party fails to
comply with its obligations under this Agreement in any material respect after
written notice thereof (i) within a period of 15 days after such notice if
compliance is commercially practicable within 15 days, or (ii) within a
reasonable period after such written notice if compliance is not commercially
practicable within 15 days and such party begins to comply within 15 days

 

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(b) In the event of a default in payment for delivered Wood, SELLER’s remedy
shall be limited to the unpaid Agreement price, together with such incidental
damages, if any, as allowed by section 2-710 of the Uniform Commercial Code;
provided, however, that (i) SELLER may terminate this Agreement by written
notice to BUYER if BUYER shall have failed to make when due four (4) consecutive
weekly payments and shall not have cured such failure within 15 days of notice
thereof and (ii) in the event BUYER fails to make any payment due hereunder and
shall not have cured such failure within 15 days of notice thereof, SELLER may,
during the continuation of any such failure, suspend deliveries of Wood
hereunder.

(c) In the event of any default other than as set out in paragraph 7(b) above,
the non-defaulting party’s damages shall be limited to the difference between
the market or cover price and the unpaid Agreement price, provided, however,
that such damages shall not be in excess of $25.00 per ton of Wood delivered
during the first year of the Term. Thereafter, the maximum damage amount of
$25.00 per ton of Wood delivered will be adjusted annually by the percentage
increase in the Producer Price Index (“PPI”) for Industrial Commodities (not
seasonally adjusted) as published by the United States Department of Labor,
Bureau of Labor Statistics. Under no circumstances shall BUYER be liable to
SELLER, or SELLER be liable to BUYER, for any other form of damages, including
consequential damages, punitive damages or the reimbursement of expenses, other
than attorney fees as set out in paragraph 12, incurred in connection with such
party’s performance under this Agreement.

(d) Notwithstanding anything in the foregoing to the contrary, in the event
SELLER shall fail to perform any of its material obligations under this
Agreement and such failure shall remain uncured for thirty (30) days after
notice thereof, SELLER shall, not later than five (5) days after receiving a
written request from BUYER (unless SELLER shall have cured such breach within
five (5) days), assign to BUYER all of SELLER’s rights, interests and
obligations in and under the Stumpage Agreement, provided, however, that SELLER
shall remain responsible (and BUYER shall not be responsible) for any
obligations of SELLER thereunder arising prior to such assignment.
Notwithstanding the foregoing, BUYER may, at BUYER’s option, elect to pay any
outstanding invoices payable by SELLER under the Stumpage Agreement, in which
event BUYER shall have recourse against SELLER for any amounts so paid,
including, without limitation, the right to offset any such amounts against
amounts payable by BUYER to SELLER hereunder.

(e) SELLER acknowledges and agrees that BUYER would be damaged irreparably in
the event the provisions of paragraph 7(d) of this Agreement requiring
assignment of the Stumpage Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, SELLER agrees that BUYER
shall be entitled to enforce specifically such provisions of paragraph 7(d) in
any action instituted in any court of the United States or any state thereof
having jurisdiction over the parties and the matter, in addition to any other
remedy to which BUYER may be entitled at law or in equity.

8. Payment:

Payments by BUYER to SELLER shall be made within ten (10) days after the date of
delivery of Products delivered to BUYER.

9. Assignment and Termination:

(a) Except as otherwise provided herein or in the Support Agreement, neither
party may assign this Agreement without the prior written consent of the other
party. Upon any assignment permitted hereunder or under the Support Agreement,
(i) all of 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, provided, however, the assignee shall
assume in writing the obligations of the assigning party, and (ii) the assigning
party shall be released from all further obligations hereunder, and the other
party shall thereafter look only to such assignee for performance under this
Agreement.

 

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(b) Notwithstanding anything herein to the contrary, it is understood and agreed
that BUYER’s Wood usage requirements would be greatly diminished in the event of
(i) a closing of a Mill or an operating line within a Mill, (ii) a change in the
species of Wood used by BUYER at a Mill or (iii) a material decrease in BUYER’s
requirements for Wood as a result of a material change of manufacturing process
(each of the foregoing, a “Change Event”, and the amount of reduction in Wood
usage resulting from a Change Event, a “Wood Reduction”). If a Change Event
occurs and BUYER has not redirected the Wood Reduction amount to another
Delivery Point, SELLER or BUYER may, at its option and upon at least sixty
(60) days prior written notice, terminate its rights and obligations under this
Agreement as relates to all or a portion of the Wood Reduction and SELLER and
BUYER shall be released from all future obligations hereunder for such portion
of the Wood Reduction.

(c) Notwithstanding the terms of subparagraph 9(b), in the event of the sale of
a Mill, BUYER shall, at its option, either (i) redirect the Wood Reduction
amount to another Delivery Point or (ii) transfer all of its rights and
obligations under this Agreement relative to the Wood Reduction, together with
the ownership of a Mill, provided such transferee (“New Buyer”) (x) has the same
or better financial capacity as the present financial capacity of BUYER, (y) has
experience in operating a paper mill of the size and type of the Mill being sold
and (z) assumes in writing all of BUYER’s duties and obligations hereunder
arising after such transfer. Upon such assumption in writing by such New Buyer
of BUYER’s duties and obligations hereunder relative to the Wood Reduction
applicable to the Mill being sold, BUYER shall be released from all such future
obligations hereunder, and SELLER shall thereafter look only to such New Buyer
for such future performance under this Agreement. BUYER shall provide SELLER
with written notice of any such proposed transfer not less than sixty (60) days
prior to the transfer, which notice shall include reasonably detailed
information concerning the financial capacity and experience of the New Buyer,
and shall provide such other information as SELLER may reasonably request.
SELLER shall make any objection that such transfer does not comply herewith not
later than twenty (20) days after SELLER’s receipt request of such notice. If
BUYER so requests under this subparagraph and under Section 4.8 of the Support
Agreement, SELLER and LANDOWNER shall subdivide the Stumpage Agreement and the
Support Agreement, and shall negotiate with BUYER and New Buyer in good faith to
prepare and execute a new master stumpage agreement and a new support agreement
relating in each case to the portion of this Agreement that has been assigned
and the related Timberlands; provided, that no such subdivision of the Stumpage
Agreement and Support Agreement shall have the effect of increasing the volume
requirements included in this Agreement.

(d) In the event LANDOWNER grants a mortgage, deed of trust or other similar
lien on the Timberlands to any financial institution in conformity with
Section 3.2(a) of the Support Agreement in connection with any mortgage loan,
SELLER may, to further secure such loan, make a collateral assignment of this
Agreement to such financial institution.

10. Independent Contractor Status:

No relationship of employer-employee or master and servant is intended, nor
shall it be construed, to exist between BUYER and any other party, or between
BUYER and any servant, agent, employee or supplier of any other party, by reason
of this Agreement. SELLER shall select and pay its own servants, agents,
employees, and suppliers and neither SELLER nor its servants, agents, employees
or suppliers shall be subject to any orders, supervision or control of BUYER.

 

10

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11. Indemnity:

SELLER shall indemnify, reimburse and hold BUYER harmless from and against any
and all claims, losses, demands, liens, causes of action or suits, judgments,
fines, assessments, liabilities, damages and injuries (including death) of
whatever kind or nature, including to all persons or property, arising out of,
on account of, or as a result of, directly or indirectly, SELLER’s or its agents
or subcontractors’ operations, performance or nonperformance under this
Agreement, whether or not caused or alleged to have been caused, in whole or in
part, by the negligence of BUYER. At BUYER’s request, SELLER shall afford to
BUYER, at SELLER’s expense, a complete defense of any such claim, demand, cause
of action or suit; and (whether or not SELLER undertakes said defense) SELLER
shall bear all attorneys’ fees, costs of preparation and maintenance of the
defense, all court costs and expert, discovery and investigative fees, and any
associated appeal costs, to the end that BUYER shall incur no cost whatsoever as
a result of such claim, demand, cause of action or suit, or ensuring compliance
with this indemnity provision. BUYER expressly reserves the right to be
represented by counsel of its own selection, at SELLER’S expense. The exercise
of BUYER’s right to select its own attorneys shall in no way detract from or
release SELLER from SELLER’S obligation to indemnify and hold BUYER harmless
hereunder.

BUYER agrees to indemnify, reimburse and hold SELLER harmless from and against
any and all claims, losses, demands, liens, causes of action or suits,
judgments, fines, assessments, liabilities, damages and injuries (including
death) of whatever kind or nature, including to all persons or property, arising
out of, on account of, or as a result of, directly or indirectly, BUYER’s or its
agents or subcontractors’ operations, performance or nonperformance under this
Agreement, whether or not caused or alleged to have been caused, in whole or in
part, by the negligence of SELLER. At SELLER’S request, BUYER shall afford to
SELLER, at BUYER’s expense, a complete defense of any such claim, demand, cause
of action or suit; and (whether or not BUYER undertakes said defense) BUYER
shall bear all attorneys’ fees, costs of preparation and maintenance of the
defense, all court costs and expert, discovery and investigative fees, and any
associated appeal costs, to the end that SELLER shall incur no cost whatsoever
as a result of such claim, demand, cause of action or suit, or ensuring
compliance with this indemnity provision. SELLER expressly reserves the right to
be represented by counsel of its own selection, at BUYER’s expense. The exercise
of SELLER’S right to select its own attorneys shall in no way detract from or
release BUYER from BUYER’s obligation to indemnify and hold SELLER harmless
hereunder.

12. Attorneys’ Fees and Costs:

In the event that any suit, action or other proceeding is instituted, pursuant
to paragraph 20, by any of the parties hereto to enforce or interpret any of the
terms or provisions of this Agreement, the prevailing party shall be entitled to
reimbursement from the other party for its reasonable attorneys’ fees, court
costs and litigation expenses therein.

13. Management Obligation:

SELLER shall be responsible for the timing of harvesting, logging and
transportation to each Delivery Point and for all other activities associated
therewith. SELLER conduct harvesting activities in accordance with applicable
state Best Management Practices for Forestry and in a manner that meets the
minimum requirements for compliance with Sustainable Forestry Initiative
Standard 2005-2009, (SFIS), or such other successor standard to the extent
commercially reasonable, including providing third party certification of same,
or such other third party certification program as is approved in writing from
time to time by BUYER. SELLER hereby certifies that logging professionals which
produce and deliver Wood under this Agreement shall maintain logger training and
continuing education requirements in accordance with Sustainable Forestry
Initiative State Implementation Committee (SIC) standards, or such other third
party certification

 

11

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organization standards approved in writing by BUYER, and shall be in compliance
with applicable state Best Management Practices for Forestry. When requested by
BUYER, SELLER shall collect and provide BUYER wood source information. SELLER
shall keep evidence of compliance of the terms of this paragraph 13 during the
Term, which shall include, as applicable, copies of education certificates and
self assessment checklists as agreed to between BUYER and SELLER, and any other
appropriate evidence of compliance.

14. Insurance:

SELLER shall procure and shall maintain, during the Term, the following
insurance coverages:

(a) Commercial General Liability (CGL) insurance on an Occurrence Form with
limits not less than one million dollars ($1,000,000.00) per occurrence, one
million dollars ($1,000,000.00) Personal and Advertising Injury, and one million
dollars ($1,000,000.00) Products/Completed Operations aggregate. The CGL policy
shall be endorsed to: (i) name BUYER, including all subsidiaries, as Additional
Insureds for all losses in whole or in part arising out of SELLER’S services,
operations or products; (ii) make the SELLER’S CGL policy primary for all losses
for the full limits of insurance purchased by SELLER, regardless of the minimum
limits included in this Agreement, recognizing any insurance purchased by BUYER
as excess and non-contributory; and (iii) include an unconditional waiver of
subrogation in favor of BUYER and all subsidiaries.

(b) Commercial Auto Liability insurance with limits not less than one million
dollars ($1,000,000.00) combined single limit insuring Any Auto or All Owned
Autos plus Hired Autos plus Non-owned Autos.

(c) Worker’s Compensation insurance covering all employees, including owners,
partners and executive officers, with limits not less than the statutory limits
of the state where the work is being performed and/or where the products are
being delivered. The Worker’s Compensation policy shall be endorsed to waive all
rights of subrogation against BUYER and all subsidiaries where allowed by law,
and policies shall include excess and stop-gap Worker’s Compensation coverage
for all contractors and subcontractors of SELLER.

(d) Employer’s Liability Insurance with limits not less than one hundred
thousand dollars ($100,000.00) each accident, five hundred thousand dollars
($500,000.00) disease – policy limits, and one hundred thousand dollars
($100,000.00) disease – each employee.

SELLER shall provide to BUYER acceptable evidence of all insurance required
hereunder, and evidence of all renewals or replacements shall be provided at
least fifteen (15) days prior to the expiration. SELLER shall require its
insurance agent or broker to provide written notice to BUYER immediately upon
receipt of any notice of cancellation or non-renewal of any required coverages
by the insurers.

Notwithstanding the provisions of paragraph 20, BUYER shall have the right to
withhold any and all payments for Wood provided hereunder if SELLER does not
procure the insurance coverage required hereunder, allows coverage required
hereunder to lapse or be cancelled, or does not upon BUYER’s request provide
evidence of insurance required hereunder satisfactory to BUYER.

BUYER may, at its option and upon at least ninety (90) days written notice to
SELLER, amend the terms of this paragraph 14 without the consent of SELLER,
provided, however that such amended terms are substantially similar to the
coverage requirements imposed generally in BUYER’s then current pulpwood supply
agreements.

 

12

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15. Warranty and Taxes:

SELLER warrants to BUYER, as of each delivery of Wood hereunder, that (i) it
owns and is delivering good and marketable title to the Wood; and (ii) it is
legally entitled to sell the Wood delivered and that all Wood is free from all
liens and encumbrances. SELLER DISCLAIMS ALL OTHER WARRANTIES OF ANY KIND
INCLUDING (WITHOUT LIMITATION) THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE. SELLER shall pay, or cause to be paid, all
severance taxes or other levies upon or incident to the production and delivery
of Wood hereunder which will or may constitute a lien thereon or on any products
manufactured therefrom.

16. Compliance with Laws, Rules and Regulations:

SELLER shall secure and keep in effect all necessary licenses and permits
incident to its operations in the performance of this Agreement, and shall cause
all Wood sold and delivered to BUYER hereunder to be produced in compliance with
all applicable state, federal and local laws, rules and regulations.

17. Force Majeure:

(a) In the event that either BUYER or SELLER shall be prevented from performing
its respective obligations hereunder by reason of fire, flood, riots, civil
commotion, war, labor strikes or work stoppages, contingencies of
transportation, embargoes or any cause or causes (whether or not of a similar
nature) beyond the reasonable control of such party, or an act of God (each of
the foregoing a “Force Majeure Event”), such party shall not be held in breach
hereof, but shall be excused for such nonperformance to the extent and during
such time that such Force Majeure Event exists. Each party shall use
commercially reasonable 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 notice of the occurrence of a Force Majeure Event
as soon as commercially practicable after the occurrence thereof, which notice
shall include the time when the party affected by such Force Majeure Event is no
longer anticipated to be affected thereby.

(b) Notwithstanding anything herein to the contrary, if, as a result of a Force
Majeure Event pursuant to which a delay in SELLER’S performance is excused
hereunder, or for any other reason deliveries from SELLER are reduced to the
extent the BUYER cannot maintain its scheduled Wood inventory at any of the
Mills, BUYER shall have the right to obtain Wood, or substitutes therefor (in
either case “Substitute Products”), from sources other than SELLER until such
time as SELLER is again able to commence the delivery of Wood to BUYER. After
SELLER gives notice to BUYER that it is again able to commence delivery of Wood
to BUYER pursuant to the terms of this Agreement, BUYER shall notify SELLER of
any commitments for Substitute Products that BUYER has entered into. BUYER shall
not be required to accept delivery from SELLER of the amount by which the
delivery was reduced until such time as BUYER has accepted delivery of all
Substitute Products contracted by BUYER, provided that no such Agreement for
Substitute Products shall be for a term longer than two (2) months without
consent of SELLER, which consent shall not be unreasonably withheld, conditioned
or delayed. BUYER’s obligation to accept Wood hereunder (and SELLER’S obligation
to deliver such Wood) shall be reduced, at BUYER’s election, by the quantity of
all such Substitute Products.

 

13

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(c) Notwithstanding anything herein to the contrary, if, as a result of a Force
Majeure Event pursuant to which BUYER cannot accept the quantity of Wood
provided for herein, BUYER shall promptly so notify SELLER, and SELLER shall
thereafter have the right to Agreement for the sale of any such Wood BUYER is
unable to accept. Upon notice from BUYER to SELLER that BUYER is again able to
accept delivery of such Wood, SELLER will notify BUYER of any commitments for
the sale of Wood that SELLER has entered into and SELLER shall not be required
to again deliver such Wood to BUYER until SELLER has delivered all Wood
contracted by SELLER, provided that no such Agreement shall be entered into for
a term longer than two (2) months without the written consent of BUYER, which
consent shall not be unreasonably withheld, conditioned or delayed. SELLER’S
obligation to deliver Wood hereunder (and BUYER’s obligation to accept such
Wood) shall be reduced, at SELLER’S election, by the quantity of all such Wood
contracted by SELLER to alternate buyers.

(d) If a Force Majeure Event prevents operation of a Mill or any portion
thereof, BUYER will use commercially reasonable efforts, within sixty (60) days
of such event or as soon thereafter as reasonably practicable, to notify SELLER
of whether BUYER intends to continue operations of the Mill and the anticipated
date such operations will begin. In the event BUYER has not reassigned some or
all of the Wood Reduction, as defined in paragraph 9(b), applicable to a Mill to
another location, then, within six (6) months after the shutdown of such Mill or
portion thereof, either BUYER or SELLER may terminate its rights and obligations
under this Agreement as relates to the applicable Wood Reduction upon 30 days
written notice.

(e) In the event BUYER is required to reduce its purchases of wood as a result
of a Force Majeure Event it will use commercially reasonable efforts to allocate
such reduction among long term suppliers in a manner that reflects its relative
purchase commitments with such suppliers.

(f) Notwithstanding anything herein to the contrary, a “Force Majeure Event”
shall not include (i) adverse financial or market conditions, (ii) a party’s
financial inability to perform, or (iii) an act, omission or circumstance
arising from the negligence or willful misconduct of the party claiming that a
Force Majeure Event has occurred.

18. Succession:

Wherever the word SELLER or BUYER occurs in this Agreement, it shall be deemed
to refer to its successors and, when assignable, to the permitted assigns of
such party, as the case may be.

19. Notices:

Any notices sent by the parties to this Agreement shall be in writing and sent
by hand delivery, nationally recognized overnight courier service or U.S. Mail
(postage prepaid, return receipt requested), directed to the street address
listed below, or to such other address as the parties may designate in writing.
For purposes of this Agreement, such notices shall be deemed to have been
received as follows: (A) if sent by hand delivery, when sent; and (B) if sent by
nationally recognized overnight courier service, the day after notice is sent
and (C) if by U.S. Mail (postage prepaid, return receipt requested), upon actual
receipt. Notices sent to BUYER shall be sent to: President, International Paper
Company, International Place Towers, 6400 Poplar, Memphis, TN 38197, with copy
to Senior Vice-President, General Counsel, International Place Towers, 6400
Poplar, Memphis, TN 38197, ATTN: Legal Department. Notices sent to SELLER shall
be sent to:                                         , ATTN:
                    .

 

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20. Dispute Resolution:

(a) In the event of any dispute, claim, question or disagreement arising from or
relating to this Agreement or the breach thereof, each party shall use its
commercially reasonable efforts to settle the dispute, claim, question or
disagreement. To this effect, they shall consult and negotiate with each other
in good faith and, recognizing their mutual interests, attempt to reach a just
and equitable solution satisfactory to the parties. If the parties do not reach
such a solution within a period of thirty (30) days after written notice by
either party requesting that such discussions be initiated, the parties agree
that any and all disputes, claims or controversies arising out of or relating to
this Agreement shall be submitted to resolution in the following manner:

(i) The parties shall endeavor to resolve the dispute through the use of
non-binding mediation or an acceptable alternative dispute resolution procedure.
Senior managers of each party shall meet within twenty (20) days after written
notice from any party that mediation is desired to discuss the issues and
propose solutions.

(ii) If within 30 days after one party notifies the others in writing of the
existence of a dispute, either party may, at its option, provide written notice
of the intent to arbitrate. Arbitration shall be according to the rules of the
American Arbitration Association (but shall not be administered by the American
Arbitration Association), except as herein modified by the parties or otherwise
as agreed to by the parties. Within 10 days of receipt of such notice of intent
to arbitrate, each party will select an arbitrator, and notify the other party
of its selection. Within 15 days after such notice, the respective arbitrators
shall select a third arbitrator as the Chairman of the panel. Such arbitrators
shall have experience in the business of producing, procuring and selling forest
products in the state in which the Wood was or is to be delivered. The parties
will use commercially reasonable efforts to cause a hearing by the arbitration
panel to be held within 30 days after the selection of the Chairman and a
majority decision of the panel and resolution to be reached within 30 days of
such hearing. Decisions of the panel must be in writing and will be final and
binding upon the parties, and judgment may be entered thereon by any court
having jurisdiction.

(b) Each party shall bear its own cost of presenting its case, and each party
shall bear one-half of the cost incurred by the arbitration panel, the
mediation, or an alternative dispute resolution procedure, as the case may be.

(c) Except as otherwise described in paragraph 7 or actions brought to enforce
an arbitral award or the provisions of this paragraph 20, the dispute resolution
process set out herein shall be the sole mechanism for dispute resolution.

21. Confidentiality:

(a) It is recognized that neither party may disclose to any other party the
terms of this Agreement or any other information that the non-disclosing party
considers to be confidential and proprietary. The parties agree to maintain the
confidentiality of such confidential and proprietary information and to use such
information solely for the use, sale and pricing of Wood under this Agreement,
and to use commercially reasonable 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 government authority) to
third parties without prior written consent of the affected party, unless
disclosure is required by law.

(b) Notwithstanding anything to the contrary herein, any party may make any such
disclosure necessary in connection with a legal action to enforce its rights
hereunder, to the extent permitted by this Agreement. Any party may make any
such disclosure necessary to a prospective purchaser of the Mills in the case of
BUYER or the Timberlands in the case of the SELLER, provided such prospective
purchaser enters into a

 

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confidentiality agreement requiring it to use commercially reasonable 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 government authority) to third parties without prior written consent of the
affected party unless disclosure is required by law.

(c) No party shall, without prior notice to and consultation with the other
party, issue any press release or otherwise make any public announcements
pertaining to this Agreement and the transactions contemplated hereby, subject
to any applicable disclosure requirements mandated by law or by any regulatory
agency under which any party is subject.

22. Sale of Timberlands:

It is mutually understood and agreed that the Wood contemplated to be delivered
by SELLER to BUYER will be supplied from the Timberlands subject to the Stumpage
Agreement. It is the intent of the parties that this Agreement should run with
the land up to the earlier of the Termination Date or the Ending Date, except to
the extent otherwise provided in the Support Agreement. In the event of any
Transfer (as defined in the Support Agreement) permitted under the Support
Agreement, the parties shall cooperate and work in good faith to facilitate the
entry into a new pulpwood supply agreement or other arrangements contemplated by
Section 3.2 or 3.3(c) of the Support Agreement. In the event SELLER wishes to
supply wood hereunder from a source other than the Timberlands, SELLER must
obtain the prior written consent of BUYER which may be granted, conditioned or
withheld by BUYER in its sole discretion, provided, however, that SELLER may,
without the prior written consent of BUYER, substitute Wood from the timberlands
set forth on Exhibit A – Annex 3 for so long as Landowner and such timberlands
are owned directly or indirectly by [iStar].

23. Complete Agreement:

This Agreement, including any exhibits, schedules, attachments, purchase orders
or addendums hereto, and the Stumpage Agreement and the Support Agreement
constitute the entire contractual relationship between the parties relating to
the purchase of Wood by BUYER from SELLER, all previous negotiations, contracts
and representations having been merged herein. This Agreement may be amended
only by a written instrument signed by both parties hereto.

24. Governing Law:

This Agreement shall be construed and enforced in accordance with the laws of
the state within which the Wood was or is to by delivered, without regard to the
principles of conflict of laws thereof.

25. Miscellaneous

Any party may record a Memorandum of Agreement in substantially the form set
forth in Exhibit D in connection herewith, provided that such Memorandum of
Agreement is limited to the following information: (a) notice of the existence
of this Agreement and such other agreements as are disclosed herein,
(b) identification of the parties to this Agreement, (c) identification of the
real property subject to this Agreement, and (d) identification of the time
period of this Agreement.

26. Right to Access and Audit

(a) Each party shall have the right to audit the other party’s compliance with
the terms of this Agreement, including but not limited to the terms of
paragraphs 3, 4, 5, 6, and 13, by notifying the other party of its

 

16

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exercise of such right within six (6) months after the end of the Harvest Year
for which the requesting party intends to exercise such right. Each party will
provide the other reasonable access during normal business hours to all records
and other information necessary to complete such audit as are commercially
reasonable.

(b) BUYER shall have reasonable rights of ingress and egress to the Timberlands
for purposes of monitoring the performance of SELLER’s obligations pursuant to
the terms herein, including but not limited to the right to audit.

(The remainder of this page is left blank intentionally)

IN WITNESS WHEREOF, the parties have executed or caused this Agreement to be
executed by persons authorized to sign on their respective behalf, all as of the
day and date first above set out.

 

“BUYER”      “SELLER” INTERNATIONAL PAPER COMPANY     

 

 

By:  

 

 

     By:   

 

 

Its:  

 

 

     Its:   

 

 

 

 

17

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SCHEDULE 1

Minimum Harvest Plan

--------------------------------------------------------------------------------

SCHEDULE 1(t)

Zones

Zones will be unique to each FMA.

--------------------------------------------------------------------------------

SCHEDULE 3(f)

2006 Harvest Plan

(2006 Harvest Plan includes tracts in certain Blue Sky Timberlands. It is
anticipated these tracts will be subject to this Agreement for the remainder of
the 2006 Harvest Year. They will not be subject to the terms of this Agreement
after harvest of the tracts. The applicable tracts will be specified in the
Agreement.)

--------------------------------------------------------------------------------

SCHEDULE 4

Specifications

--------------------------------------------------------------------------------

SCHEDULE 5

 

Incremental

miles to

Destination

   Freight Adjustment Table cost per ton    Diesel fuel cost per gallon    Range
   Range    Range    Range    Range    Range    Range    Range    Range    $
1.13-$1.37    $ 1.38-$1.62    $ 1.63-$1.87    $ 1.88-$2.12    $ 2.13-$$2.37    $
2.38-$2.62    $ 2.63-$2.87    $ 2.88-$3.12    $ 3.13-$3.37     

Mid

Point

  

Mid

Point

  

Mid

Point

  

Mid

Point

  

Mid

Point

  

Mid

Point

  

Mid

Point

  

Mid

Point

  

Mid

Point

Miles

     $1.25      $1.50      $1.75      $2.00      $2.25      $2.50      $2.75   
  $3.00      $3.25

-41-50

     -$3.98      -$4.17      -$4.35      -$4.54      -$4.73      -$4.91     
-$5.10      -$5.28      -$5.47

-31-40

     -$3.10      -$3.24      -$3.39      -$3.53      -$3.68      -$3.82     
-$3.96      -$4.11      -$4.25

-21-30

     -$2.05      -$2.19      -$2.34      -$2.48      -$2.63      -$2.77     
-$2.91      -$3.06      -$3.20

-11-20

     -$1.33      -$1.39      -$1.45      -$1.51      -$1.58      -$1.64     
-$1.70      -$1.76      -$1.82

-0-10

     -$0.44      -$0.46      -$0.48      -$0.50      -$0.53      -$0.55     
-$0.57      -$0.59      -$0.61

0

     $0.00      $0.00      $0.00      $0.00      $0.00      $0.00      $0.00   
  $0.00      $0.00

0-10

     $0.44      $0.46      $0.48      $0.50      $0.53      $0.55      $0.57   
  $0.59      $0.61

11-20

     $1.33      $1.39      $1.45      $1.51      $1.58      $1.64      $1.70   
  $1.76      $1.82

21-30

     $2.21      $2.32      $2.42      $2.52      $2.63      $2.73      $2.83   
  $2.93      $3.04

31-40

     $3.10      $3.24      $3.39      $3.53      $3.68      $3.82      $3.96   
  $4.11      $4.25

41-50

     $3.98      $4.17      $4.35      $4.54      $4.73      $4.91      $5.10   
  $5.28      $5.47

Note: This table shall be reviewed annually by SELLER and BUYER and adjusted per
mutual agreement to reflect the prevailing market for transportation costs. In
the event of longer distances or extraordinary shipping methods, SELLER and
BUYER shall negotiate in good faith any necessary extrapolation or adjustments
to the foregoing.

--------------------------------------------------------------------------------

EXHIBIT A

Timberlands Description

[Timberland descriptions will be attached utilizing legal descriptions

and Timberlands and will include Blue Sky lands.]

--------------------------------------------------------------------------------

EXHIBIT A – ANNEX 1

Mill Locations

--------------------------------------------------------------------------------

EXHIBIT A – ANNEX 2

Blue Sky Timberlands

--------------------------------------------------------------------------------

EXHIBIT A – ANNEX 3

Timberlands in Other iStar FMAs

--------------------------------------------------------------------------------

EXHIBIT B

Stumpage Agreement

--------------------------------------------------------------------------------

EXHIBIT C

Support Agreement

--------------------------------------------------------------------------------

EXHIBIT D

Memorandum of Agreement

--------------------------------------------------------------------------------

iStar

Exhibit F-2

LOG SUPPLY AGREEMENT

BY AND BETWEEN

INTERNATIONAL PAPER CO (“BUYER”)

AND

[                    ] (“SELLER”)

--------------------------------------------------------------------------------

INDEX

 

PARAGRAPH

        PAGE

1. Definitions    3 2. Term    4 3. Volumes    4 4. Specifications    5 5. Price
Schedule    6 6. Delivery, Scaling and Weighing    6 7. Defaults; Limitation of
Damages    7 8. Payment    8 9. Assignment and Termination    8 10. Independent
Contractor Status    9 11. Indemnity    9 12. Attorneys’ Fees and Costs    9 13.
Management Obligation    10 14. Insurance    10 15. Warranty and Taxes    11 16.
Compliance with Laws, Rules and Regulations    11 17. Force Majeure    11 18.
Succession    12 19. Notices    12 20. Dispute Resolution    13 21.
Confidentiality    14 22. Sale of Timberlands    14 23. Complete Agreement    14
24. Governing Law    15 25. Miscellaneous    15 26. Right to Access and Audit   
15

 

SCHEDULES    Schedule 1    Master Harvest Plan Schedule 3(c)    2006 Harvest
Plan EXHIBITS    Exhibit A    Timberlands Description Exhibit A-Annex 1    Mill
Locations Exhibit B    Stumpage Agreement Exhibit C    Support Agreement Exhibit
D    Memorandum of Agreement

 

2

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Log Supply Agreement

INTERNATIONAL PAPER COMPANY, a New York corporation (“BUYER”) with an address at
6400 Poplar Ave., Memphis, Tennessee, and                     , a [Delaware]
corporation (“SELLER”) with an address at                                 , do
enter into and execute this Log Supply Agreement (this “Agreement”) as of this
     day of             , 2006.

RECITALS

WHEREAS: BUYER is desirous of acquiring, and SELLER is desirous of providing,
Logs (as defined herein) from the timberlands described in Exhibit A (the
“Timberlands”), to service for a period of years saw mills and other wood
product facilities located at the locations set forth in Exhibit A – Annex 1
                                         (the “Mills”) and such other
facilities, locations, or end users as BUYER may, in its sole discretion, from
time to time designate;

WHEREAS:                     , a              (“PARENT”),                 , a
Delaware limited partnership (“TIMBER LP”), and             , Delaware limited
liability company (“TIMBER LLC” and, together with Parent and Timber LP,
“LANDOWNER”), and SELLER are simultaneously entering into a master stumpage
agreement in substantially the form set forth in Exhibit B (as in effect and as
from time to time amended, the “Stumpage Agreement”), pursuant to which, among
other things, LANDOWNER is required to make available to SELLER cutting rights
on the Timberlands sufficient to permit SELLER to satisfy its obligations under
this Agreement; and

WHEREAS: BUYER and LANDOWNER are simultaneously entering into a Support
Agreement in substantially the form set forth in Exhibit C (as in effect and as
from time to time amended, the “Support Agreement”), pursuant to which, among
other things, LANDOWNER provides certain assurances and agreements with respect
to the availability of the cutting rights referred to above and agrees to
certain restrictions on transfers of the Timberlands and assignment of this
Agreement.

NOW, THEREFORE, in consideration of the foregoing and the terms and conditions
forth herein and other good and valuable consideration, the parties hereto agree
as follows:

1. DEFINITIONS:

When used in this Agreement, the words and phrases set forth below shall have
the following meanings:

 

  a. “Annual Harvest Plan” means the annual harvest plan established from year
to year as described in paragraph 3(b).

 

  b. “Delivery Point” means the location at which Logs are delivered by SELLER,
as shall be designated by BUYER in BUYER’s sole discretion; provided, however,
that BUYER shall not designate a Delivery Point other than a facility, yard or
location owned or leased by BUYER, or supplied by BUYER under a supply
arrangement preexisting at the time of designation, unless the delivery of Logs
to such other Delivery Point is reasonably related to BUYER’s procurement
activities for facilities owned, leased or supplied by BUYER.

 

3

--------------------------------------------------------------------------------

  c. “Effective Date” means                     , 2006.

 

  d. “Ending Date” means                     , 2036.

 

  e. “Harvest Year” means a calendar year beginning on January 1 and ending on
December 31. The first full “Harvest Year” of this Agreement shall begin on
January 1, 2007 and end on December 31, 2007. The periods from the Effective
Date to December 31, 2006 and from January 1, 2036 to the Ending Date shall be
deemed partial “Harvest Years.”

 

  f. “Logs” means the following: all large sawtimber, medium sawtimber, small
sawtimber, plyblocks, chip-n-saw, canterwood, and any other timber produced from
either harvest or thinnings operations and used to manufacture lumber or other
wood products (excluding poles).

 

  g. “Master Harvest Plan” means the harvest plans for the Timberlands set out
in Schedule 1, which harvest plans shall set forth the total volumes of Logs to
be harvested by Seller on the Timberlands during the Term.

 

  h. “Obligated Tract” means a Tract that SELLER is obligated to deliver and
sell all Logs meeting BUYER’ specifications, and BUYER is obligated to accept
and purchase such Logs from SELLER.

 

  i. “Obligated Volume” means the total Log volume on all Obligated Tracts for a
Harvest Year that SELLER is obligated to deliver and sale to BUYER and that
BUYER is obligated to accept and purchase from SELLER.

 

  j. “Person” means any individual, general partnership, limited partnership,
corporation, limited liability company, joint venture, trust, business trust,
cooperative or association.

 

  k. “Term” means the period of time from and including the Effective Date
through and including the Ending Date as described in paragraph 2, including any
extensions pursuant to paragraph 2.

 

  l. “Termination Date” means the date of termination of this Agreement in
accordance with its terms by BUYER or SELLER at any time other than the Ending
Date.

 

  m. “Tract” means a specific area of the Timberlands designated for harvesting
Logs during any Harvest Year, pursuant to paragraph 3(b).

 

  n. “Tract Selection” means the process by which the Obligated Tracts are
determined.

2. Term:

Unless sooner terminated as hereinafter provided, the term of this Agreement
shall commence on the Effective Date and extend for thirty (30) years, ending on
the Ending Date.

3. Volumes:

(a) Over the Term, BUYER covenants and agrees to purchase and accept from SELLER
and SELLER covenants and agrees to sell and deliver to BUYER at the Delivery
Point(s) specified by BUYER for the prices set out herein and at the times
hereinafter provided, the Logs harvested from each Obligated Tract for each
Harvest Year.

 

4

--------------------------------------------------------------------------------

(b) SELLER shall provide to BUYER a written Annual Harvest Plan for each Harvest
Year detailing the planned harvest volume for Logs no later than September 1 of
the year preceding such Harvest Year. The Annual Harvest Plan will contain
information for each individual Tract on the Timberlands that is scheduled for
the harvest of Logs during the Harvest year, including average Diameter at
Breast Height (“DBH”) of Logs, volume of Logs, and a map showing Tract location.
The Annual Harvest Plan for each Harvest Year shall be in substantially the same
amounts as in the Master Harvest Plan set out in Schedule 1, provided, however,
that in no event shall the actual amount made available for harvest in any given
Harvest Year be less than eighty percent (80%) of the Master Harvest Plan
volumes. SELLER and BUYER shall meet no sooner than thirty (30) days after
receipt of the Annual Harvest Plan, but in no event later than forty-five days
(45) prior to January 1 of each Harvest Year, for Tract Selection. From the
written Annual Harvest Plan of all Tracts submitted by SELLER, BUYER shall first
designate an individual Tract to be included as an Obligated Tract, with SELLER
next designating an individual Tract to be excluded as an Obligated Tract. BUYER
and SELLER shall continue to take turns designating Tracts for inclusion and
exclusion as Obligated Tracts until the total Log volume on all Obligated Tracts
designated by BUYER collectively equals (i) for the 2007 Harvest Year, not less
than 30%, and not more than 60%, of the Annual Harvest Plan for such year (as
determined by Buyer in its sole discretion), and (ii) for each Harvest Year
after 2007, a percentage of the Annual Harvest Plan volume (as determined by
Buyer in its sole discretion) that is within a range of 15 percentage points
above or below the percentage of Annual Harvest Plan volume selected by Buyer in
the previous Harvest Year, provided that the volume determined by Buyer shall be
not less than 30%, and not more than 60%, of the Annual Harvest Plan for the
current Harvest Year. If the list of all Tracts in the Annual Harvest Plan is
exhausted and the total Log volume of all Obligated Tracts designated by BUYER
is not equal to the maximum volume percentage available for selection for the
applicable Harvest Year, then BUYER may request SELLER to selectively designate
additional Tracts from its previously excluded list to be added to BUYER’s list
of designated Tracts until the total Log volume on all of BUYER’s designated
Obligated Tracts equals the maximum volume percentage available for selection.
The total Log volume on all Obligated Tracts for a Harvest Year is the Obligated
Volume of Logs of that Harvest Year that SELLER must deliver to BUYER and that
BUYER must accept from SELLER, except that in the event the total Log volume on
all Obligated Tracts exceeds the Obligated Volume for such Harvest Year, then
SELLER may prorate Log deliveries from the last Tract selected so that the total
Log volume delivered to BUYER equals the Obligated Volume for such Harvest Year.
In the event that the total Log volume from all Obligated Tracts delivered to
BUYER does not equal the total Log volume represented by SELLER to exist on all
of the Obligated Tracts, then BUYER may request SELLER to deliver the additional
volume of Logs from other Tract(s) on the Timberlands to BUYER necessary to
fulfill the total Log volume represented by BUYER to exist on all of the
Obligated Tracts. Such additional Log volume shall be substantially similar in
size, quality, and distance from the mill as the original volume.

(c) It is understood and agreed that BUYER’s harvest plan for 2006, as set out
in Schedule 3(c), pro-rated to adjust for harvest occurring through the
Effective Date, shall serve as the Delivery Plan for the partial Harvest Year
beginning on the Effective Date and ending on December 31, 2006. All Tracts in
such Delivery Plan shall be deemed to be Obligated Tracts. The parties will work
together to effectuate a smooth and orderly transition and continual and even
wood flow to BUYER.

4. Specifications:

SELLER agrees that all Logs delivered shall meet BUYER’s specifications (for
each Delivery Point) as are established in conjunction with Tract Selection. All
deliveries shall include the “butt cut” from the tree, provided such meets
BUYER’s specifications. BUYER has the right in its reasonable discretion to
reject any or

 

5

--------------------------------------------------------------------------------

all Logs not meeting BUYER’s specifications at the time of delivery. Logs
rejected for failure to meet specifications shall not be included in calculating
whether SELLER met its required Obligated Volume commitments. In the event BUYER
rejects any or all Logs not meeting BUYER’s specifications, BUYER may reload, or
cause to be reloaded, the rejected Logs onto SELLER’s trailer. SELLER shall
remove and dispose of any rejected Logs at SELLER’s sole cost, risk and expense.

5. Price Schedule:

The parties shall meet no later than thirty (30) days prior to the start of each
calendar quarter to negotiate delivered prices for each Obligated Tract, or
portion thereof, which could be delivered during the quarter to meet the
Delivery Plan. The parties shall negotiate in good faith to mutually agree upon
pricing. In the event an agreement on pricing has not been reached within
fifteen (15) days, pricing shall be determined in accordance with the dispute
resolution process set out in paragraph 20(b) below. SELLER shall be obligated
to continue to deliver and BUYER shall be obligated to accept Logs pending the
resolution of quarterly pricing. During such period as pricing is undetermined,
BUYER shall pay SELLER for such delivered Logs the mid point between the pricing
proposed by BUYER and SELLER. Upon completion of the arbitration process set out
in paragraph 20(b)(iii), BUYER shall add or deduct from the next scheduled
payment to SELLER such amounts of over or under payment that may be applicable.

6. Delivery, Scaling and Weighing:

(a) Immediately upon conclusion of Tract Selection, BUYER and SELLER shall
mutually develop and agree upon appropriate quarterly delivery schedules (the
“Delivery Plan”) of the Obligated Volume based upon the Annual Harvest Plan. The
parties recognize a mutual benefit to produce and accept Logs as consistently as
possible with such delivery schedules, with appropriate consideration given to
weather limitations on harvesting, trucking, and mill inventory constraints. In
the event the parties are unable to agree upon the Delivery Plan prior to the
start of the Harvest Year, Logs shall be delivered in equal installments on a
quarterly basis until such time as a Delivery Plan is mutually agreed upon or
arrived at pursuant to the dispute resolution process set out in paragraph 20.

(b) Deliveries shall be dispatched on a relatively even flow basis within each
quarter. It is understood and agreed that material deviations to the Delivery
Plan may occur due to weather conditions or other unforeseen events. In such
event, quarterly deliveries may vary from the Delivery Plan by up to twenty
(20) percent of the quarterly plan, provided, however, that the annual variance
does not exceed five (5) percent of the annual Delivery Plan. If the annual
negative variance is five (5) percentage points or less at the end of any
Harvest Year, SELLER shall be required, if requested by BUYER, to deliver such
variance (the “Carryover Volume”) in the first quarter of the following Harvest
Year, at a price equal to the lowest negotiated quarterly price for such Tract
during the previous Harvest Year. Any deliveries in the following Harvest Year
will first be counted towards meeting the Carryover Volume requirement.
Deliveries during the fourth quarter shall only be applied against the then
current Harvest Year’s delivery requirements. The parties shall work together to
adjust delivery schedules to accommodate temporary or unforeseen hardships for
either party. Each party shall notify the other party of any anticipated delays
as soon as such delay is anticipated.

(c) All Logs delivered hereunder by SELLER shall be scaled or weighed by BUYER,
or its designee, upon delivery at the respective Delivery Points, which data
shall be recorded by the scaler (or weigher) on scale or weight tickets and a
copy of each ticket shall be given to SELLER or its designated representative.
Each load shall be identified by giving the scaler (or weigher) at the Delivery
Point the contract number shown at

 

6

--------------------------------------------------------------------------------

the top of this Agreement for insertion on the scale or weight ticket.
Additional information reasonably required by the parties from time to time or
by state law, including but not limited to origin of delivered Logs, shall also
be included on the scale ticket or provided in such other format as may be
reasonably requested by BUYER. SELLER shall (i) adhere to BUYER’s requirements
for delivery as are established from time to time to conform with changes in
law, forestry practices and BUYER’s operational requirements, provided such
adjustments are comparable to industry standards and are similar to those
required by BUYER of its other suppliers and (ii) comply with all applicable
laws, rules and regulations.

7. Default; Limitation of Damages:

(a) A party shall be in default under this Agreement if such party fails to
comply with its obligations under this Agreement in any material respect after
written notice thereof (a) within a period of 15 days after such notice if
compliance is commercially practicable within 15 days, or (b) within a
reasonable period after such written notice if compliance is not commercially
practicable within 15 days and such party begins to comply within 15 days.

(b) In the event of a default in payment for delivered Logs, SELLER’s remedy
shall be limited to the unpaid contract price, together with such incidental
damages, if any, as allowed by section 2-710 of the Uniform Commercial Code;
provided, however, that (i) SELLER may terminate this Agreement by written
notice to BUYER if BUYER shall have failed to make when due four (4) consecutive
weekly payments and shall not have cured such failure within 15 days of notice
thereof and (ii) in the event BUYER fails to make any payment due hereunder and
shall not have cured such failure within 15 days of notice thereof, SELLER may,
during the continuation of any such failure, suspend deliveries of Logs
hereunder.

(c) In the event of any default other than as set out in paragraph 7(b) above,
the non-defaulting party’s damages shall be limited to the difference between
the market or cover price and the unpaid contract price for the Logs as to which
the other party is in default, provided, however, that such damages shall not be
in excess of $25.00 per ton of Logs delivered during the first year of the Term.
Thereafter, the maximum damage amount of $25.00 per ton of Logs delivered will
be adjusted annually by the percentage increase in the Producer Price Index
(“PPI”) for Industrial Commodities (not seasonally adjusted) as published by the
United States Department of Labor, Bureau of Labor Statistics. Under no
circumstances shall BUYER be liable to SELLER, or SELLER be liable to BUYER, for
any other form of damages, including consequential damages, punitive damages or
the reimbursement of expenses, other than attorney fees as set out in paragraph
12, incurred in connection with such party’s performance under this Agreement.

(d) Notwithstanding anything in the foregoing to the contrary, in the event
SELLER shall fail to perform any of its material obligations under this
Agreement and such failure shall remain uncured for thirty (30) days after
notice thereof, SELLER shall, not later than five (5) days after receiving a
written request from BUYER (unless SELLER shall have cured such breach within
five (5) days), assign to BUYER all of SELLER’s rights, interests and
obligations in and under the Stumpage Agreement, provided, however, that SELLER
shall remain responsible (and BUYER shall not be responsible) for any
obligations of SELLER thereunder arising prior to such assignment.
Notwithstanding the foregoing, BUYER may, at BUYER’s option, elect to pay any
outstanding invoices payable by SELLER under the Stumpage Agreement, in which
event BUYER shall have recourse against SELLER for any amounts so paid,
including, without limitation, the right to offset any such amounts against
amounts payable by BUYER to SELLER hereunder.

(e) SELLER acknowledges and agrees that BUYER would be damaged irreparably in
the event the provisions of paragraph 7(d) of this Agreement requiring
assignment of the Stumpage Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, SELLER agrees that BUYER
shall be entitled to enforce specifically such provisions of paragraph 7(d) in
any action instituted in any court of the United States or any state thereof
having jurisdiction over the parties and the matter, in addition to any other
remedy to which BUYER may be entitled at law or in equity.

 

7

--------------------------------------------------------------------------------

8. Payment:

Payments by BUYER to SELLER shall be made weekly within ten (10) days after the
date of delivery of Products delivered to BUYER.

9. Assignment and Termination:

(a) Except as otherwise provided herein or in the Support Agreement, neither
party may assign this Agreement without the prior written consent of the other
party. Upon any assignment permitted hereunder or under the Support Agreement,
(i) all of 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, provided, however, the assignee shall
assume in writing the obligations of the assigning party, and (ii) the assigning
party shall be released from all further obligations hereunder, and the other
party shall thereafter look only to such assignee for performance under this
Agreement.

(b) Notwithstanding anything herein to the contrary, it is understood and agreed
that BUYER’s Logs usage requirements would be greatly diminished in the event of
(i) a closing of a Mill or an operating line within a Mill, (ii) a change in the
species of Logs used by BUYER at a Mill or (iii) a material decrease in BUYER’s
requirements for Logs as a result of a material change of manufacturing process
(each of the foregoing, a “Change Event”, and the amount of reduction in Logs
usage resulting from a Change Event, a “Logs Reduction”). If a Change Event
occurs and BUYER has not redirected the Logs Reduction amount to another
Delivery Point, BUYER or SELLER may, at its option and upon at least sixty
(60) days prior written notice, terminate its rights and obligations under this
Agreement as relates to all or a portion of the Logs Reduction and BUYER and
SELLER shall be released from all future obligations hereunder for such portion
of the Logs Reduction.

(c) Notwithstanding the terms of subparagraph 9(b), in the event of the sale of
a Mill, BUYER shall, at its option, either (i) redirect the Logs Reduction
amount to another Delivery Point or (ii) transfer all of its rights and
obligations under this Agreement relative to the Logs Reduction, together with
the ownership of a Mill, provided such transferee (“New Buyer”) (x) has the same
or better financial capacity as the present financial capacity of BUYER, (y) has
experience in operating sawmill or wood product facility of the size and type of
the Mill being sold, and (z) assumes in writing all of BUYER’s duties and
obligations hereunder arising after such transfer. Upon such assumption in
writing by such New Buyer of BUYER’s duties and obligations hereunder relative
to the Logs Reduction applicable to the Mill being sold, BUYER shall be released
from all such future obligations hereunder, and SELLER shall thereafter look
only to such New Buyer for such future performance under this Agreement. BUYER
shall provide SELLER with written notice of any such proposed transfer not less
than sixty (60) days prior to the transfer, which notice shall include
reasonably detailed information concerning the financial capacity and experience
of the New Buyer, and shall provide such other information as SELLER may
reasonably request. SELLER shall make any objection that such transfer does not
comply herewith not later than twenty (20) days after SELLER’s receipt request
of such notice. If BUYER so requests under this subparagraph and under
Section 4.8 of the Support Agreement, SELLER and LANDOWNER shall subdivide the
Stumpage Agreement and the Support Agreement, and shall negotiate with BUYER and
New Buyer in good faith to prepare and execute a new master stumpage agreement
and a new support agreement relating in each case to the portion of this
Agreement that has been assigned and the related Timberlands; provided, that no
such subdivision of the Stumpage Agreement and Support Agreement shall have the
effect of increasing the volume requirements included in this Agreement.

 

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(d) In the event LANDOWNER grants a mortgage, deed of trust or similar lien on
the Timberlands to any financial institution in conformity with Section 3.2(a)
of the Support Agreement in connection with any mortgage loan, SELLER may, to
further secure such loan, make a collateral assignment of this Agreement to such
financial institution.

10. Independent Contractor Status:

No relationship of employer-employee or master and servant is intended, nor
shall it be construed, to exist between BUYER and any other party, or between
BUYER and any servant, agent, employee or supplier of any other party, by reason
of this Agreement. SELLER shall select and pay its own servants, agents,
employees, and suppliers and neither Seller nor its servants, agents, employees
or suppliers shall be subject to any orders, supervision or control of BUYER.

11. Indemnity:

SELLER shall indemnify, reimburse and hold BUYER harmless from and against any
and all claims, losses, demands, liens, causes of action or suits, judgments,
fines, assessments, liabilities, damages and injuries (including death) of
whatever kind or nature, including to all persons or property, arising out of,
on account of, or as a result of, directly or indirectly, SELLER’s or its agents
or subcontractors’ operations, performance or nonperformance under this
Agreement, whether or not caused or alleged to have been caused, in whole or in
part, by the negligence of BUYER. At BUYER’s request, SELLER shall afford to
BUYER, at SELLER’s expense, a complete defense of any such claim, demand, cause
of action or suit; and (whether or not SELLER undertakes said defense) SELLER
shall bear all attorneys’ fees, costs of preparation and maintenance of the
defense, all court costs and expert, discovery and investigative fees, and any
associated appeal costs, to the end that BUYER shall incur no cost whatsoever as
a result of such claim, demand, cause of action or suit, or ensuring compliance
with this indemnity provision. BUYER expressly reserves the right to be
represented by counsel of its own selection, at SELLER’s expense. The exercise
of BUYER’s right to select its own attorneys shall in no way detract from or
release SELLER from SELLER’s obligation to indemnify and hold BUYER harmless
hereunder.

BUYER agrees to indemnify, reimburse and hold SELLER harmless from and against
any and all claims, losses, demands, liens, causes of action or suits,
judgments, fines, assessments, liabilities, damages and injuries (including
death) of whatever kind or nature, including to all persons or property, arising
out of, on account of, or as a result of, directly or indirectly, BUYER’s or its
agents or subcontractors’ operations, performance or nonperformance under this
Agreement, whether or not caused or alleged to have been caused, in whole or in
part, by the negligence of SELLER. At SELLER’s request, BUYER shall afford to
SELLER, at BUYER’s expense, a complete defense of any such claim, demand, cause
of action or suit; and (whether or not BUYER undertakes said defense) BUYER
shall bear all attorneys’ fees, costs of preparation and maintenance of the
defense, all court costs and expert, discovery and investigative fees, and any
associated appeal costs, to the end that SELLER shall incur no cost whatsoever
as a result of such claim, demand, cause of action or suit, or ensuring
compliance with this indemnity provision. SELLER expressly reserves the right to
be represented by counsel of its own selection, at BUYER’s expense. The exercise
of SELLER’s right to select its own attorneys shall in no way detract from or
release BUYER from BUYER’s obligation to indemnify and hold SELLER harmless
hereunder.

12. Attorneys’ Fees and Costs:

In the event that any suit, action or other proceeding is instituted, pursuant
to paragraph 20, by any of the parties hereto to enforce or interpret any of the
terms or provisions of this Agreement, the prevailing party shall be entitled to
reimbursement from the other party for its reasonable attorneys’ fees, court
costs and litigation expenses therein.

 

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13. Management Obligation:

SELLER shall be responsible for the timing of harvest, logging and
transportation to each Delivery Point and for all other associated activities.
SELLER shall conduct harvesting activities in accordance with applicable state
Best Management Practices for Forestry and in a manner that meets the minimum
requirements for compliance with Sustainable Forestry Initiative Standard
2005-2009, (SFIS), or such other successor standard to the extent commercially
reasonable, including providing third party certification of same, or such other
third party certification program as is approved in writing from time to time by
BUYER. SELLER hereby certifies that logging professionals which produce and
deliver Logs under this Agreement shall maintain logger training and continuing
education requirements in accordance with Sustainable Forestry Initiative State
Implementation Committee (SIC) standards, or such other third party
certification organization standards approved in writing by BUYER, and shall be
in compliance with applicable state Best Management Practices for Forestry. When
requested by BUYER, SELLER shall collect and provide BUYER wood source
information. SELLER shall keep evidence of compliance of the terms of this
paragraph 13 during the Term, which shall include, as applicable, copies of
education certificates and self assessment checklists as agreed to between BUYER
and SELLER, and any other appropriate evidence of compliance.

14. Insurance:

SELLER shall procure and shall maintain, during the Term, the following
insurance coverages:

(a) Commercial General Liability (CGL) insurance on an Occurrence Form with
limits not less than one million dollars ($1,000,000.00) per occurrence, one
million dollars ($1,000,000.00) Personal and Advertising Injury, and one million
dollars ($1,000,000.00) Products/Completed Operations aggregate. The CGL policy
shall be endorsed to: (i) name BUYER, including all subsidiaries, as Additional
Insureds for all losses in whole or in part arising out of SELLER’s services,
operations or products; (ii) make the SELLER’s CGL policy primary for all losses
for the full limits of insurance purchased by SELLER, regardless of the minimum
limits included in this Agreement, recognizing any insurance purchased by BUYER
as excess and non-contributory; and (iii) include an unconditional waiver of
subrogation in favor of BUYER and all subsidiaries.

(b) Commercial Auto Liability insurance with limits not less than one million
dollars ($1,000,000.00) combined single limit insuring Any Auto or All Owned
Autos plus Hired Autos plus Non-owned Autos.

(c) Worker’s Compensation insurance covering all employees, including owners,
partners and executive officers, with limits not less than the statutory limits
of the state where the work is being performed and/or where the products are
being delivered. The Worker’s Compensation policy shall be endorsed to waive all
rights of subrogation against BUYER and all subsidiaries where allowed by law,
and policies shall include excess and stop-gap Worker’s Compensation coverage
for all contractors and subcontractors of SELLER.

(d) Employer’s Liability Insurance with limits not less than one hundred
thousand dollars ($100,000.00) each accident, five hundred thousand dollars
($500,000.00) disease – policy limits, and one hundred thousand dollars
($100,000.00) disease – each employee.

SELLER shall provide to BUYER acceptable evidence of all insurance required
hereunder, and evidence of all renewals or replacements shall be provided at
least fifteen (15) days prior to the expiration. SELLER shall require its
insurance agent or broker to provide written notice to BUYER immediately upon
receipt of any notice of cancellation or non-renewal of any required coverages
by the insurers.

 

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Notwithstanding the provisions of paragraph 20, BUYER shall have the right to
withhold any and all payments for Logs provided hereunder if and for so long as
SELLER does not procure the insurance coverage required hereunder, allows
coverage required hereunder to lapse or be cancelled, or does not upon BUYER’s
request provide evidence of insurance required hereunder satisfactory to BUYER.

BUYER may, at its option and upon at least ninety (90) days written notice to
SELLER, amend the terms of this paragraph 14 without the consent of SELLER,
provided, however that such amended terms are substantially similar to the
coverage requirements imposed generally in BUYER’s then current log supply
agreements.

15. Warranty and Taxes:

SELLER warrants to BUYER, as of each delivery of Logs hereunder, that (i) it
owns and is delivering good and marketable title to the Logs; and (ii) it is
legally entitled to sell the Logs delivered and that all Logs are free from all
liens and encumbrances. SELLER DISCLAIMS ALL OTHER WARRANTIES OF ANY KIND
INCLUDING (WITHOUT LIMITATION) THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE. SELLER shall pay, or cause to be paid, all
severance taxes or other levies upon or incident to the production and delivery
of Logs hereunder which will or may constitute a lien thereon or on any products
manufactured therefrom.

16. Compliance with Laws, Rules and Regulations:

SELLER shall secure and keep in effect all necessary licenses and permits
incident to its operations in the performance of this Agreement, and shall cause
all Logs sold and delivered to BUYER hereunder to be produced in compliance with
all applicable state, federal and local laws, rules and regulations.

17. Force Majeure:

(a) In the event that either BUYER or SELLER shall be prevented from performing
its respective obligations hereunder by reason of fire, flood, riots, civil
commotion, war, labor strikes or work stoppages, contingencies of
transportation, embargoes or any cause or causes (whether or not of a similar
nature) beyond the reasonable control of such party, or an act of God (each of
the foregoing a “Force Majeure Event”), such party shall not be held in breach
hereof, but shall be excused for such nonperformance to the extent and during
such time that such Force Majeure Event exists. Each party shall use
commercially reasonable 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 notice of the occurrence of a Force Majeure Event
as soon as commercially practicable after the occurrence thereof, which notice
shall include the time when the party affected by such Force Majeure Event is no
longer anticipated to be affected thereby.

(b) Notwithstanding anything herein to the contrary, if, as a result of a Force
Majeure Event pursuant to which a delay in SELLER’s performance is excused
hereunder, or for any other reason deliveries from SELLER are reduced to the
extent the BUYER cannot maintain its scheduled Logs inventory at any of the
Mills, BUYER shall, upon notice to SELLER, have the right to obtain Logs, or
substitutes therefor (in either case “Substitute Products”), from sources other
than SELLER until such time as SELLER is again able to commence the delivery of
Logs to BUYER. After SELLER gives notice to BUYER that it is again able to
commence delivery of Logs to BUYER pursuant to the terms of this Agreement,
BUYER shall notify SELLER of any commitments

 

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for Substitute Products that BUYER has entered into. BUYER shall not be required
to accept delivery from SELLER of the amount by which the delivery was reduced
until such time as BUYER has accepted delivery of all Substitute Products
contracted by BUYER, provided that no such contract for Substitute Products
shall be for a term longer than two (2) months without consent of SELLER, which
consent shall not be unreasonably withheld, conditioned or delayed. BUYER’s
obligation to accept Logs hereunder (and SELLER’s obligation to deliver such
Logs) shall be reduced, at BUYER’s election, by the quantity of all such
Substitute Products.

(c) Notwithstanding anything herein to the contrary, if, as a result of a Force
Majeure Event pursuant to which BUYER cannot accept the quantity of Logs
provided for herein, BUYER shall promptly so notify SELLER, and SELLER shall
thereafter have the right to contract for the sale of any such Logs BUYER is
unable to accept. Upon notice from BUYER to SELLER that BUYER is again able to
accept delivery of such Logs, SELLER will notify BUYER of any commitments for
the sale of Logs that SELLER has entered into and SELLER shall not be required
to again deliver such Logs to BUYER until SELLER has delivered all Logs
contracted by SELLER, provided that no such Agreement shall be entered into for
a term longer than two (2) months without the written consent of BUYER, which
consent shall not be unreasonably withheld, conditioned or delayed. SELLER’s
obligation to deliver Logs hereunder (and BUYER’s obligation to accept such
Logs) shall be reduced, at SELLER’s election, by the quantity of all such Logs
contracted by SELLER to alternate buyers.

(d) If a Force Majeure Event prevents operation of a Mill or any portion
thereof, BUYER will use commercially reasonable efforts, within sixty (60) days
of such event or as soon thereafter as reasonably practicable, to notify SELLER
of whether BUYER intends to continue operations of the Mill and the anticipated
date such operations will begin. In the event BUYER has not reassigned some or
all of the Logs Reduction, as defined in paragraph 9(b), applicable to a Mill to
another location, then, within six (6) months after the shutdown of such Mill or
portion thereof, either BUYER or SELLER may terminate its rights and obligations
under this Agreement as relates to the applicable Logs Reduction upon 30 days
written notice.

(e) In the event BUYER is required to reduce its purchases of logs as a result
of a Force Majeure Event it will use commercially reasonable efforts to allocate
such reduction among long term suppliers in a manner that reflects its relative
purchase commitments with such suppliers.

(f) Notwithstanding anything herein to the contrary, a “Force Majeure Event”
shall not include (i) adverse financial or market conditions, (ii) a party’s
financial inability to perform, or (iii) an act, omission or circumstance
arising from the negligence or willful misconduct of the party claiming that a
Force Majeure Event has occurred.

18. Succession:

Wherever the word SELLER or BUYER occurs in this Agreement, it shall be deemed
to refer to its successors and, when assignable, to the permitted assigns of
such party, as the case may be.

19. Notices:

Any notices sent by the parties to this Agreement shall be in writing and sent
by hand delivery, nationally recognized overnight courier service or U.S. Mail
(postage prepaid, return receipt requested), directed to the street address
listed below, or to such other address as the parties may designate in writing.
For purposes of this Agreement, such notices shall be deemed to have been
received as follows: (A) if sent by hand delivery, when sent; and (B) if sent by
nationally recognized overnight courier service, the day after notice is sent
and (C) if by U.S. Mail (postage prepaid, return receipt requested), upon actual
receipt. Notices sent to BUYER shall be sent to: President, International Paper
Company, International Place Towers, 6400 Poplar, Memphis, TN 38197, with copy
to Senior Vice-President, General Counsel, International Place Towers, 6400
Poplar, Memphis, TN 38197, ATTN: Legal Department. Notices sent to SELLER shall
be sent to:                                         
                                                         , ATTN:
                    .

 

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20. Dispute Resolution:

(a) In the event of any dispute, claim, question or disagreement arising from or
relating to this Agreement or the breach thereof, each party shall use
commercially reasonable efforts to settle the dispute, claim, question or
disagreement. To this effect, they shall consult and negotiate with each other
in good faith and, recognizing their mutual interests, attempt to reach a just
and equitable solution satisfactory to the parties. If the parties do not reach
such a solution within a period of thirty (30) days after written notice by
either party requesting that such discussions be initiated, the parties agree
that any and all disputes, claims or controversies arising out of or relating to
this Agreement shall be submitted to resolution in the following manner:

(i) The parties shall endeavor to resolve the dispute through the use of
non-binding mediation or an acceptable alternative dispute resolution procedure.
Senior managers of each party shall meet within twenty (20) days after written
notice from any party that mediation is desired to discuss the issues and
propose solutions.

(ii) If within 30 days after one party notifies the others in writing of the
existence of a dispute, either party may, at its option, provide written notice
of the intent to arbitrate. Arbitration shall be according to the rules of the
American Arbitration Association (but shall not be administered by the American
Arbitration Association), except as herein modified by the parties or otherwise
as agreed to by the parties. Within 10 days of receipt of such notice of intent
to arbitrate, each party will select an arbitrator, and notify the other party
of its selection. Within 15 days after such notice, the respective arbitrators
shall select a third arbitrator as the Chairman of the panel. Such arbitrators
shall have experience in the business of producing, procuring and selling forest
products in the state in which the Logs were or are to be delivered. The parties
will use their diligent efforts to cause a hearing by the panel to be held
within 30 days after the selection of the Chairman and a majority decision of
the panel and resolution to be reached within 30 days of such hearing. Decisions
of the panel must be in writing and will be final and binding upon the parties,
and judgment may be entered thereon by any court having jurisdiction.

(b) Notwithstanding the above, in the event arbitration is a result of the
parties’ inability to agree upon quarterly pricing pursuant to paragraph 5, the
following process will be followed:

(i) Within 15 days following the appointment of the panel, each party will
submit to the panel the price that such party desires to apply to the Logs
involved and any materials such party wishes to submit supporting the use of the
proposed price. This documentation shall be kept confidential by the panel with
respect to any third party.

(ii) Within 15 days following the submission of the prices by each party, the
panel will choose between the two submitted prices based upon the panel’s
determination of the price that better reflects the actual market price for the
subject Logs. If only one proposed price is submitted, the panel will choose
such price.

(iii) The panel will deliver the decision in writing to each if the parties
within 3 days following the date of its determination and shall assess the costs
of the arbitration and reasonable attorney fees against the party whose prices
was not chosen or who did not submit a price.

 

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(c) Other than as set forth in paragraph 20(b)(iii), each party shall bear its
own cost of presenting its case, and each party shall bear one-half of the cost
incurred by the panel, the mediation, or an alternative dispute resolution
procedure, as the case may be.

(d) Except as otherwise described in paragraph 7 or actions brought to enforce
an arbitral award or the provisions of this paragraph 20, the dispute resolution
process set out herein shall be the sole mechanism for dispute resolution.

21. Confidentiality:

(a) It is recognized that neither party may disclose to any other party the
terms of this Agreement or any other information that the non-disclosing party
considers to be confidential and proprietary. The parties agree to maintain the
confidentiality of such confidential and proprietary information and to use such
information solely for the use, sale and pricing of Logs under this Agreement,
and to use their diligent 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 government authority) to third parties
without prior written consent of the affected party, unless disclosure is
required by law.

(b) Notwithstanding anything to the contrary herein, any party may make any such
disclosure necessary in connection with a legal action to enforce its rights
hereunder, to the extent permitted by this Agreement. Any party may make any
such disclosure necessary to a prospective purchaser of the Mills in the case of
BUYER or the Timberlands in the case of the SELLER, provided such prospective
purchaser enters into a confidentiality agreement requiring it to use
commercially reasonable 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 government authority) to third parties
without prior written consent of the affected party unless disclosure is
required by law.

(c) No party shall, without prior notice to and consultation with the other
party, issue any press release or otherwise make any public announcements
pertaining to this Agreement and the transactions contemplated hereby, subject
to any applicable disclosure requirements mandated by law or by any regulatory
agency under which any party is subject.

22. Sale of Timberlands:

It is mutually understood and agreed that the Logs contemplated to be delivered
by SELLER to BUYER will be supplied from the Timberlands subject to the Stumpage
Agreement. It is the intent of the parties that this Agreement should run with
the land up to the earlier of the Termination Date or the Ending Date, except to
the extent otherwise provided in the Support Agreement. In the event of any
Transfer (as defined in the Support Agreement) permitted under the Support
Agreement, the parties shall cooperate and work in good faith to facilitate the
entry into a new log supply agreement or other arrangements contemplated by
Section 3.2 or 3.3(c) of the Support Agreement. In the event SELLER wishes to
supply logs hereunder from a source other than the Timberlands, SELLER must
obtain the prior written consent of BUYER which may be granted, conditioned or
withheld by BUYER in its sole discretion.

23. Complete Agreement:

This Agreement, including any exhibits, schedules, attachments, purchase orders
or addendums hereto, and the Stumpage Agreement and the Support Agreement
constitute the entire contractual relationship between the parties relating to
the purchase of Logs by BUYER from SELLER, all previous negotiations, contracts
and representations having been merged herein. This Agreement may be amended
only by a written instrument signed by both parties hereto.

 

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24. Governing Law:

This Agreement shall be construed and enforced in accordance with the laws of
the state within which the Log were or are to be delivered, without regard to
the principles of conflict of laws thereof.

25. Miscellaneous

Any party may record a Memorandum of Agreement in substantially the form set
forth in Exhibit D in connection herewith, provided that such Memorandum of
Agreement is limited to the following information: (a) notice of the existence
of this Agreement and such other agreements as are disclosed herein,
(b) identification of the parties to this Agreement, (c) identification of the
real property subject to this Agreement, and (d) identification of the time
period of this Agreement.

26. Right to Access and Audit

(a) Each party shall have the right to audit the other party’s compliance with
the terms of this Agreement, including but not limited to the terms of
paragraphs 3, 4, 5, 6, and 13, by notifying the other party of its exercise of
such right within six (6) months after the end of the Harvest Year for which the
requesting party intends to exercise such right. Each party will provide the
other reasonable access during normal business hours to all records and other
information necessary to complete such audit as are commercially reasonable.

(b) BUYER shall have reasonable rights of ingress and egress to the Timberlands
for purposes of monitoring the performance of SELLER’s obligations pursuant to
the terms herein, including but not limited to the right to audit.

(The remainder of this page is left blank intentionally)

 

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IN WITNESS WHEREOF, the parties have executed or caused this Agreement to be
executed by persons authorized to sign on their respective behalf, all as of the
day and date first above set out.

 

“BUYER”     “SELLER” INTERNATIONAL PAPER COMPANY    

 

By:  

 

    By:  

 

Its:  

 

    Its:  

 

 

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SCHEDULE 1

Master Harvest Plan

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SCHEDULE 3(c)

2006 Harvest Plan

(2006 Harvest Plan includes tracts in certain Blue Sky Timberlands. It is
anticipated these tracts will be subject to this Agreement for the remainder of
the 2006 Harvest Year. They will not be subject to the terms of this Agreement
after harvest of the tracts. The applicable tracts will be specified in the
Agreement.)

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EXHIBIT A

Timberlands Description

Timberland descriptions will be attached utilizing legal descriptions.

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EXHIBIT A – ANNEX 1

Mill Locations

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EXHIBIT B

Stumpage Agreement

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EXHIBIT C

Support Agreement

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EXHIBIT D

Memorandum of Agreement

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iStar

Exhibit F-3

PULPWOOD SUPPORT AGREEMENT

This SUPPORT AGREEMENT, dated as of             , 2006, by and between
                    , a                     (“Buyer Cash Landowner”),
                    , a Delaware limited liability company (“Timber LLC”),
                        , a Delaware limited partnership (“Timber LP” and,
together with Buyer Cash Landowner and Timber LLC, “Landowner”), and
International Paper Company, a New York corporation (“IP”).

W I T N E S S E T H:

WHEREAS, pursuant to the Purchase Agreement dated as of                     ,
2006 by and between IP, Buyer Cash Landowner and             (as in effect and
as from time to time amended, the “Purchase Agreement”), IP has on or prior to
the date hereof conveyed to Buyer Cash Landowner, Timber LLC and Timber LP the
Timberlands described on Exhibit A hereto (the “Timberlands”);

WHEREAS, pursuant to the Purchase Agreement, IP has on the date hereof conveyed
to an Affiliate of Buyer Cash Landowner all of the ownership interests in Timber
LLC and Timber LLP;

WHEREAS, IP and                     , a [Delaware] corporation and an Affiliate
of Buyer Cash Landowner (“TimberCo”), are simultaneously entering into a
pulpwood supply agreement (as in effect and as from time to time amended, the
“Pulpwood Supply Agreement”) pursuant to which, among other things, TimberCo is
obligated to sell to IP pulpwood harvested from the Timberlands in the amounts
and on the terms therein set forth;

WHEREAS, Landowner and TimberCo, are simultaneously entering into a master
stumpage agreement (as in effect and as from time to time amended, the “Stumpage
Agreement”) pursuant to which, among other things, Landowner is required to make
available to TimberCo cutting rights on the Timberlands sufficient to permit
TimberCo to satisfy its obligations under the Pulpwood Supply Agreement;

WHEREAS, IP wishes to obtain certain assurances and agreements from Landowner
with respect to the availability of the cutting rights referred to above; and

WHEREAS, Landowner is willing to provide such assurances;

NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements contained in the Purchase Agreement and in
this Agreement, the parties hereto hereby agree as follows:

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ARTICLE I

DEFINITIONS

Section 1.1 Definitions. As used in this Agreement:

“Affiliate” means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with such Person.
For purposes of this definition, “control” when used with respect to any Person
means the ownership of not less than 50% of the ownership interests in such
Person and the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms “controlling” and “controlled” have
meanings correlative to the foregoing.

“Aggregate Adverse Effect” means any Change that might reasonably be expected to
make it materially more difficult for IP to purchase pulpwood in the volumes,
from the lands and at the prices contemplated, and as otherwise contemplated, by
the Pulpwood Supply Agreement as in effect immediately prior to such Change,
including any Change that could reasonably expected adversely to affect the
sufficiency (including any excess amount or “cushion” to such sufficiency) of
the cutting or other rights available following such Change to Persons obligated
to provide pulpwood under the Pulpwood Supply Agreement, or any successor
agreement, to IP.

“Agreement” means this Support Agreement as in effect and as from time to time
amended.

“Blue Sky Lands” means the Timberlands identified on Exhibit A – Annex 1 hereof.

“Buyer Cash Landowner” has the meaning set forth in the Preamble hereto.

“Change” means any event, change, circumstance, impact or consequence.

“IP” has the meaning set forth in the Preamble hereto.

“Landowner” has the meaning set forth in the Preamble hereto.

“Lender” means any of the following: (i) a real estate investment trust, bank,
saving and loan association, investment bank, insurance company, trust company,
commercial credit corporation, pension plan, pension fund or pension advisory
firm, mutual fund, government entity or plan; (ii) an investment company, money
management firm or “qualified institutional buyer” within the meaning of
Rule 144A under the Securities Act of 1933, as amended, or an institutional
“accredited investor” within the meaning of Regulation D under the Securities
Act of 1933, as amended; (iii) an institution substantially similar to any of
the foregoing entities described in clauses (i) or (ii) of this definition;
(iv) any entity controlled by, controlling or under common control

 

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with any of the foregoing entities described in clauses (i) or (ii) of this
definition; or (v) any trustee in connection with a securitization of, the
creation of collateralized debt obligations secured by, or a financing through
an “owner trust” of, a note or loan.

“Maximum Saleable Acreage” means, for any year, the cumulative number of acres
of Timberlands set forth on Exhibit B for such year.

“Minimum Dividable Acreage” means, during the period from             , 2006
through             , 2031, 100,000 acres and during the period from
            , 2031 through             , 2056, 75,000 acres.

“Person” means any individual, general partnership, limited partnership,
corporation, limited liability company, joint venture, trust, business trust,
cooperative or association.

“Pulpwood Supply Agreement” has the meaning set forth in the Recitals hereto.

“Purchase Agreement” has the meaning set forth in the Preamble hereto.

“Stumpage Agreement” has the meaning set forth in the Recitals hereto.

“TimberCo” has the meaning set forth in the Recitals hereto.

“Timber LLC” has the meaning set forth in the Preamble hereto.

“Timber LP” has the meaning set forth in the Preamble hereto.

“Transfer” means, with respect to any asset, including any Timberlands, any
direct or indirect transfer, sale, assignment, pledge, hypothecation or other
disposition of ownership or control thereof; provided that immaterial transfers
of interests in property such as hunting leases and ordinary course easements
shall not be deemed Transfers.

Section 1.2 Other Capitalized Terms. Capitalized terms used but not otherwise
defined herein shall have the respective meanings ascribed to such terms in the
Pulpwood Supply Agreement.

Section 1.3 Other Definitional Provisions.

(a) The words “hereof”, “herein” and “hereunder” and words of similar import,
when used in this Agreement, shall refer to this Agreement as a whole and not to
any particular provision of this Agreement.

(b) Terms defined in the singular shall have a comparable meaning when used in
the plural, and vice versa.

 

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(c) Whenever the context so requires, gender-specific pronouns include the
neuter, masculine and feminine.

(d) The term “including” shall be deemed to be immediately followed by the term
“but not limited to”.

(e) References to a Person include such Person and its successors and assigns.

ARTICLE II

GENERAL UNDERTAKINGS OF LANDOWNER

Section 2.1 Compliance with Stumpage Agreement. Landowner shall comply with all
of its obligations under the Stumpage Agreement including (i) providing TimberCo
with the right to sever and remove timber sufficient to permit TimberCo to
satisfy its obligations to supply Wood under the Pulpwood Supply Agreement; and
(ii) managing the Timberlands and harvesting operations in accordance with
applicable state Best Management Practices for Forestry and in a manner that
meets the minimum requirements for compliance with Sustainable Forestry
Initiative Standard 2005-2009, or such other successor standard approved by IP
to the extent commercially reasonable and reasonably consistent with this
Agreement and the Pulpwood Supply Agreement, including providing to IP third
party certification of such compliance.

Section 2.2 Access to Information. Landowner shall provide IP with such
information as IP shall request (to the extent such information is reasonably
pertinent to IP’s rights under this Agreement or the Pulpwood Supply Agreement)
with respect to the Timberlands, Landowner’s silviculture and harvesting
activities or the Annual Harvest Plan. Landowner shall promptly inform IP of the
occurrence of any Change that could constitute an Aggregate Adverse Effect.

Section 2.3 Access to Timberlands.

(a) Landowner shall provide IP with such rights to inspect the Timberlands and
operations thereon as IP may reasonably request for the purpose of monitoring
(i) Landowner’s compliance with this Agreement and (ii) TimberCo’s compliance
with the Pulpwood Supply Agreement and the Stumpage Agreement.

(b) In the event of any breach by Landowner of this Agreement or by TimberCo of
the Pulpwood Supply Agreement, Landowner hereby consents to the assignment to IP
of such rights of TimberCo under the Stumpage Agreement as IP requests, in each
case when and as contemplated by paragraph [    ] of the Pulpwood Supply
Agreement.

 

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ARTICLE III

RESTRICTIONS ON TRANSFER

Section 3.1 In General. Landowner shall not Transfer the Timberlands, any
portion thereof, or any interest therein, except as expressly permitted in this
Agreement. Any attempt to Transfer the Timberlands not in compliance with all
applicable provisions of this Agreement shall be null and void.

Section 3.2 Permitted Transfers. The foregoing notwithstanding,

(a) Landowner may grant mortgage, deed of trust or other similar liens on the
Timberlands to any Lender to secure indebtedness for borrowed funds incurred by
Landowner or its Affiliates, so long as (i) such liens are expressly subject and
subordinate to this Agreement and the Stumpage Agreement, (ii) any subsequent
Transfer of Timberlands upon the execution by any such Lender of any rights
under such liens would be subject and subordinate to this Agreement and the
Stumpage Agreement and the transferee would therefore take the Timberlands
subject to such agreements and (iii) Landowner gives written notice of such
proposed liens at least ten days prior to the effective date thereof. No advance
notice to, or consent from, IP with respect to an acquisition of the
Timberlands, the Pulpwood Supply Agreement or this Agreement by any Lender
through foreclosure, deed in lieu of foreclosure or other remedial actions (or
transfers in lieu of such remedial actions) shall be required; provided that
such Lender shall take the Timberlands subject to the terms of this Agreement
and the Stumpage Agreement and may thereafter assign them consistent herewith.
Ownership interests in Landowner or any entity that directly or indirectly owns
an interest in the Timberlands may be pledged to any Lender to secure
indebtedness for borrowed funds incurred by Landowner or its Affiliates, so long
as such pledge is permitted under the terms of the Purchase Agreement.

(b) Landowner may, without any correlative assignment of all or any portion of
this Agreement or the Stumpage Agreement, Transfer [20,444 acres] [West
Louisiana] [59,903 acres] [Nacogdoches] [90,322 acres] [Texarkana] of the
Timberlands; provided that (i) as a result of such Transfer the total acreage of
all Timberlands that are not Blue Sky Lands Transferred under this subparagraph
on or prior to the date of Transfer would not exceed the Maximum Saleable
Acreage for the year in which the Transfer takes place; and (ii) such sale shall
not materially impair TimberCo’s ability to comply with its obligations under
the Pulpwood Supply Agreement or (except with respect to the Blue Sky Lands)
otherwise constitute an Aggregate Adverse Effect. In the event of any Transfer
under this subparagraph, Landowner shall give IP not less than 20 days prior
written notice of the Transfer specifying the parcels and acreage to be
Transferred, the aggregate number of acres of Timberlands theretofore
Transferred under this subparagraph, the aggregate number of acres included
therein that were not Blue Sky Lands and the identity of the proposed
transferee.

(c) In the event of a Wood Reduction under Section 9(b) of the Pulpwood Supply
Agreement that results in the termination of the rights and obligations

 

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under such agreement as it relates to all or a portion of the Wood Reduction,
Landowner may, without any correlative assignment of all or any portion of this
Agreement or the Stumpage Agreement, Transfer those specific Timberlands or that
acreage of Timberlands that the parties agree, after good faith negotiations,
would, as a result of such termination of rights and obligations relating to
such Wood Reduction, no longer be required to fulfill Landowner’s obligations
under the Stumpage Agreement.

(d) Landowner may Transfer all of the Timberlands in a single transaction to a
single transferee who shall as part of such transaction either (i) assume all of
Landowner’s obligations under this Agreement and the Stumpage Agreement, in
which case the Pulpwood Supply Agreement shall remain in full force and effect;
(ii) assume all of Landowners obligations under this Agreement and enter into a
new stumpage agreement substantially identical to the Stumpage Agreement with a
Person who shall (x) enter into a new pulpwood supply agreement substantially
identical to the Pulpwood Supply Agreement with IP and (y) have the financial
and operational resources and capacity to meet the obligations of TimberCo
thereunder; or (iii) make other arrangements reasonably satisfactory to IP to
permit IP to continue to purchase pulpwood in the volumes, from the lands and at
the prices contemplated, and as otherwise contemplated, by the Pulpwood Supply
Agreement as in effect immediately prior to such Transfer.

(e) Landowner may Transfer Timberlands to an Affiliate of Landowner so long as
such Affiliate assumes and agrees to become jointly and severally liable, with
Landowner, for all of Landowners obligations under this Agreement and the
Stumpage Agreement and so long as such Transfer is permitted by Section 10.9 of
the Purchase Agreement.

(f) Landowner may Transfer Timberlands with the consent of IP, which, except as
provided in Section 3.3, may be granted or withheld in IP’s sole discretion.

Section 3.3 Consent. Unless IP reasonably determines that a Transfer of the
Timberlands would constitute an Aggregate Adverse Effect, IP shall consent to a
Transfer that meets all of the following conditions:

(a) Following such Transfer each separately owned parcel of Timberlands would
exceed the Minimum Dividable Acreage.

(b) Landowner and Landowner’s transferee agree (following consultation with IP)
to subdivide the Minimum Harvest Plan (and, on such basis, to subdivide the
Stumpage Agreement) between the retained Timberlands and the Transferred
Timberlands in a manner that would not constitute an Aggregate Adverse Effect;
it being understood that, following the Transfer, Landowner’s remaining
obligations under the Stumpage Agreement shall relate only to the Timberlands
retained by Landowner.

 

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(c) Landowner and Landowner’s transferee agree (following consultation with IP)
to subdivide this Agreement between the retained Timberlands and the Transferred
Timberlands and to divide between themselves the unused Maximum Saleable Acreage
in a manner consistent with subparagraph (b) above; it being understood that,
following the Transfer, Landowner’s remaining obligations under this Agreement
shall relate only to the Timberlands retained by Landowner.

(d) As part of such Transfer, the transferee would enter into (x) a new stumpage
agreement with TimberCo substantially identical to the Stumpage Agreement but
relating to the pertinent portion of the Minimum Harvest Plan determined under
subparagraph (b) above, as well as all Excess Option Volume and (y) a new
support agreement with IP substantially similar to this Agreement (except as
provided in subparagraph (c) above) with respect to such new stumpage agreement;
and the Pulpwood Supply Agreement shall remain in full force and effect;

(e) No more than two Transfers described in this Section 3 have been consented
to and consummated.

Section 3.4 Procedural Matters Relating to Transfers.

(a) The restrictions set forth in this Agreement shall be recorded and filed in
a Memorandum of Agreement in substantially the form set forth in Exhibit C
hereof.

(b) Landowner shall provide IP with all information reasonably requested by IP
regarding any proposed Transfer and related arrangements.

(c) In connection with any Transfer permitted hereunder, (i) IP shall provide
Landowner with such documentation, if necessary in recordable form, as shall be
reasonably required to effectuate the Transfer, and (ii) the parties shall
cooperate in good faith to negotiate, prepare and execute the stumpage, support
and related agreements contemplated hereunder, including the release of any
Memorandum of Agreement filed in connection with this Agreement, provided that
IP shall have no obligation to agree to any arrangement or provision that would
constitute an Aggregate Adverse Effect.

ARTICLE IV

MISCELLANEOUS

Section 4.1 Termination. This Agreement shall terminate upon the termination of
the Stumpage Agreement and the Pulpwood Supply Agreement.

Section 4.2 Direct and Indirect Transfers. The parties acknowledge and agree, on
behalf of themselves and their Affiliates, that the restrictions on Transfer
contained herein are intended to prohibit, restrict or permit, as the case may
be, Transfers of direct interests in the Timberlands and also Transfers of the
entities that directly or indirectly own interests in the Timberlands. To that
end, no Transfer of any entity that directly or indirectly owns an interest in
the Timberlands shall be permitted if the result

 

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of such Transfer is a Transfer of Timberlands not permitted hereunder. In no
event shall anything in this Section 4.2 prohibit either (a) Transfers of direct
or indirect interests in TimberStar Southwest Holdco LLC (the parent of
TimberStar Southwest Parent LLC) or (b) Transfers among parent and subsidiary
entities.

Section 4.3 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of              applicable to agreements
to be performed entirely within such state, including all matters of
construction, validity and performance, without regard to principles of
conflicts of law thereof.

Section 4.4 Notices. All notices, requests, permissions, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (a) five Business Days following sending by registered or certified
mail, postage prepaid, (b) (b) when delivered, if delivered personally to the
intended recipient and (c) one Business Day following sending by overnight
delivery via a national courier service (two Business Days following sending by
overnight international delivery via international courier service), in each
case addressed to a party at the following address for such party:

[                        ]

Section 4.5 Entire Agreement. This Agreement, the Stumpage Agreement and the
Pulpwood Supply Agreement contain the entire understanding of the parties hereto
and thereto with respect to the subject matters contained herein and therein,
supersede and cancel all prior agreements, negotiations, correspondence,
undertakings and communications of the parties, oral or written, respecting such
subject matter.

Section 4.6 Amendment; Waiver. This Agreement can be amended, supplemented or
changed, and any provision hereof can be waived, only by a written instrument
making specific reference to this Agreement signed by the party against whom
enforcement of any such amendment, supplement, modification or waiver is sought.
No action taken pursuant to this Agreement, including any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party taking
such action of compliance with any covenant or agreement contained herein. Any
of the parties hereto may: (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto or (b) waive compliance by
the other party with any of the agreements contained herein. Any such extension
or waiver shall be valid only if set forth in a written instrument. The failure
of a party to assert any of its rights hereunder shall not constitute a waiver
of such rights nor in any way affect the validity of this Agreement or any part
hereof or the right of such party thereafter to enforce each and every provision
of this Agreement. No waiver of any breach of or non-compliance with this
Agreement shall be held to be a waiver of any other or subsequent breach or
non-compliance.

Section 4.7 Headings; References. The article, section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect

 

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in any way the meaning or interpretation of this Agreement. All references
herein to “Articles”, “Sections” or “Exhibits” shall be deemed to be references
to Articles or Sections hereof or Exhibits hereto, unless otherwise indicated.

Section 4.8 Counterparts. This Agreement may be executed in multiple
counterparts (including via facsimile), and each counterpart shall be deemed to
be an original, but all of which shall constitute one and the same original.

Section 4.9 Assignment. This Agreement may be assigned (i) by IP to any party to
whom IP’s rights under the Pulpwood Supply Agreement are assigned, in whole or
in part, or any Affiliate thereof and (ii) by Landowner as expressly
contemplated by Article III hereof. Otherwise this Agreement may not be assigned
without the written consent of the parties. In the event of any partial
assignment of the Pulpwood Supply Agreement by IP under Section 9(c) thereof, if
IP so requests under this subparagraph and under Section 9(c) of the Pulpwood
Supply Agreement, TimberCo and Landowner shall subdivide the Stumpage Agreement
and this Agreement, and shall negotiate with IP and New Buyer in good faith to
prepare and execute a new stumpage agreement and a new supply agreement relating
in each case to the portion of the Pulpwood Supply Agreement that has been
assigned and the related Timberlands.

Section 4.10 Severability; Enforcement. The invalidity of any portion of this
Agreement shall not affect the validity, force or effect of the remaining
portions hereof. If it is ever held that any restriction hereunder is too broad
to permit enforcement of such restriction to its fullest extent, each party
agrees that a court of competent jurisdiction may enforce such restriction to
the maximum extent permitted by law, and each party hereby consents and agrees
that such scope may be judicially modified accordingly in any proceeding brought
to enforce such restriction.

Section 4.11 Specific Performance. The parties hereto agree that the remedy at
law for any breach of this Agreement will be inadequate and that any party by
whom this Agreement is enforceable shall be entitled to specific performance in
addition to any other appropriate relief or remedy. Such party may, in its sole
discretion, apply to a court of competent jurisdiction for specific performance
or injunctive or such other relief as such court may deem just and proper in
order to enforce this Agreement or prevent any violation hereof and, to the
extent permitted by applicable law, each party waives any objection to the
imposition of such relief.

[Signature Pages to Come]

 

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EXHIBIT A

Timberlands

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EXHIBIT A – ANNEX 1

Blue Sky Lands

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EXHIBIT B

Maximum Saleable Acreage

West Louisiana

 

Year

  

Cumulative Acres

1-5

   16,347

Thereafter

   20,444

Nacogdoches

 

Year

  

Cumulative Acres

1-5

   10,341

6-10

   20,682

11-15

   31,023

Thereafter

   59,903

Texarkana

 

Year

  

Cumulative Acres

1-5

   11,716

6-10

   23,432

11-15

   35,148

Thereafter

   90,322

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EXHIBIT C

Memorandum of Agreement

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iStar

Exhibit F-4

LOG SUPPORT AGREEMENT

This SUPPORT AGREEMENT, dated as of                     , 2006, by and between
                        , a                         (“Buyer Cash Landowner”),
                    , a Delaware limited liability company (“Timber LLC”),
                    , a Delaware limited partnership (“Timber LP” and, together
with Buyer Cash Landowner and Timber LLC, “Landowner”), and International Paper
Company, a New York corporation (“IP”).

W I T N E S S E T H:

WHEREAS, pursuant to the Purchase Agreement dated as of                     ,
2006 by and between IP, Buyer Cash Landowner and             (as in effect and
as from time to time amended, the “Purchase Agreement”), IP has on or prior to
the date hereof conveyed to Buyer Cash Landowner, Timber LLC and Timber LP the
Timberlands described on Exhibit A hereto (the “Timberlands”);

WHEREAS, pursuant to the Purchase Agreement, IP has on the date hereof conveyed
to an Affiliate of Buyer Cash Landowner all of the ownership interests in Timber
LLC and Timber LLP;

WHEREAS, IP and                     , a [Delaware] corporation and an Affiliate
of Buyer Cash Landowner (“TimberCo”), are simultaneously entering into a log
supply agreement (as in effect and as from time to time amended, the “Log Supply
Agreement”) pursuant to which, among other things, TimberCo is obligated to sell
to IP logs harvested from the Timberlands in the amounts and on the terms
therein set forth;

WHEREAS, Landowner and TimberCo, are simultaneously entering into a master
stumpage agreement (as in effect and as from time to time amended, the “Stumpage
Agreement”) pursuant to which, among other things, Landowner is required to make
available to TimberCo cutting rights on the Timberlands sufficient to permit
TimberCo to satisfy its obligations under the Log Supply Agreement;

WHEREAS, IP wishes to obtain certain assurances and agreements from Landowner
with respect to the availability of the cutting rights referred to above; and

WHEREAS, Landowner is willing to provide such assurances;

NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements contained in the Purchase Agreement and in
this Agreement, the parties hereto hereby agree as follows:

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ARTICLE I

DEFINITIONS

Section 1.1 Definitions. As used in this Agreement:

“Affiliate” means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with such Person.
For purposes of this definition, “control” when used with respect to any Person
means the ownership of not less than 50% of the ownership interests in such
Person and the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms “controlling” and “controlled” have
meanings correlative to the foregoing.

“Aggregate Adverse Effect” means any Change that might reasonably be expected to
make it materially more difficult for IP to purchase logs in the volumes, from
the lands and at the prices contemplated, and as otherwise contemplated, by the
Log Supply Agreement as in effect immediately prior to such Change, including
any Change that could reasonably expected adversely to affect the sufficiency
(including any excess amount or “cushion” to such sufficiency) of the cutting or
other rights available following such Change to Persons obligated to provide
logs under the Log Supply Agreement, or any successor agreement, to IP.

“Agreement” means this Support Agreement as in effect and as from time to time
amended.

“Buyer Cash Landowner” has the meaning set forth in the Preamble hereto.

“Change” means any event, change, circumstance, impact or consequence.

“IP” has the meaning set forth in the Preamble hereto.

“Landowner” has the meaning set forth in the Preamble hereto.

“Lender” means any of the following: (i) a real estate investment trust, bank,
saving and loan association, investment bank, insurance company, trust company,
commercial credit corporation, pension plan, pension fund or pension advisory
firm, mutual fund, government entity or plan; (ii) an investment company, money
management firm or “qualified institutional buyer” within the meaning of
Rule 144A under the Securities Act of 1933, as amended, or an institutional
“accredited investor” within the meaning of Regulation D under the Securities
Act of 1933, as amended; (iii) an institution substantially similar to any of
the foregoing entities described in clauses (i) or (ii) of this definition;
(iv) any entity controlled by, controlling or under common control with any of
the foregoing entities described in clauses (i) or (ii) of this definition; or
(v) any trustee in connection with a securitization of, the creation of
collateralized debt obligations secured by, or a financing through an “owner
trust” of, a note or loan.

 

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“Person” means any individual, general partnership, limited partnership,
corporation, limited liability company, joint venture, trust, business trust,
cooperative or association.

“Log Supply Agreement” has the meaning set forth in the Recitals hereto.

“Pulpwood Support Agreement” means the Pulpwood Support Agreement, dated as of
the date hereof, by and between Landowner and IP (as in effect and as from time
to time amended).

“Purchase Agreement” has the meaning set forth in the Preamble hereto.

“Stumpage Agreement” has the meaning set forth in the Recitals hereto.

“TimberCo” has the meaning set forth in the Recitals hereto.

“Timber LLC” has the meaning set forth in the Preamble hereto.

“Timber LP” has the meaning set forth in the Preamble hereto.

“Transfer” means, with respect to any asset, including any Timberlands, any
direct or indirect transfer, sale, assignment, pledge, hypothecation or other
disposition of ownership or control thereof; provided that immaterial transfers
of interests in property such as hunting leases and ordinary course easements
shall not be deemed Transfers.

Section 1.2 Other Capitalized Terms. Capitalized terms used but not otherwise
defined herein shall have the respective meanings ascribed to such terms in the
Log Supply Agreement.

Section 1.3 Other Definitional Provisions.

(a) The words “hereof”, “herein” and “hereunder” and words of similar import,
when used in this Agreement, shall refer to this Agreement as a whole and not to
any particular provision of this Agreement.

(b) Terms defined in the singular shall have a comparable meaning when used in
the plural, and vice versa.

(c) Whenever the context so requires, gender-specific pronouns include the
neuter, masculine and feminine.

(d) The term “including” shall be deemed to be immediately followed by the term
“but not limited to”.

(e) References to a Person include such Person and its successors and assigns.

 

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ARTICLE II

GENERAL UNDERTAKINGS OF LANDOWNER

Section 2.1 Compliance with Stumpage Agreement. Landowner shall comply with all
of its obligations under the Stumpage Agreement including (i) providing TimberCo
with the right to sever and remove timber sufficient to permit TimberCo to
satisfy its obligations to supply Logs under the Log Supply Agreement; and
(ii) managing the Timberlands and harvesting operations in accordance with
applicable state Best Management Practices for Forestry and in a manner that
meets the minimum requirements for compliance with Sustainable Forestry
Initiative Standard 2005-2009, or such other successor standard approved by IP
to the extent commercially reasonable and reasonably consistent with this
Agreement and the Log Supply Agreement, including providing to IP third party
certification of such compliance.

Section 2.2 Access to Information. Landowner shall provide IP with such
information as IP shall request (to the extent such information is reasonably
pertinent to IP’s rights under this Agreement or the Log Supply Agreement) with
respect to the Timberlands, Landowner’s silviculture and harvesting activities
or the Annual Harvest Plan. Landowner shall promptly inform IP of the occurrence
of any Change that could constitute an Aggregate Adverse Effect.

Section 2.3 Access to Timberlands.

(a) Landowner shall provide IP with such rights to inspect the Timberlands and
operations thereon as IP may reasonably request for the purpose of monitoring
(i) Landowner’s compliance with this Agreement and (ii) TimberCo’s compliance
with the Log Supply Agreement and the Stumpage Agreement.

(b) In the event of any breach by Landowner of this Agreement or by TimberCo of
the Log Supply Agreement, Landowner hereby consents to the assignment to IP of
such rights of TimberCo under the Stumpage Agreement as IP requests, in each
case when and as contemplated by paragraph [    ] of the Log Supply Agreement.

ARTICLE III

RESTRICTIONS ON TRANSFER

Section 3.1 In General. Landowner shall not Transfer the Timberlands, any
portion thereof, or any interest therein, except as expressly permitted in this
Agreement. Any attempt to Transfer the Timberlands not in compliance with all
applicable provisions of this Agreement shall be null and void.

Section 3.2 Permitted Transfers. The foregoing notwithstanding,

(a) Landowner may grant mortgage, deed of trust or other similar liens on the
Timberlands to any Lender to secure indebtedness for borrowed funds incurred by
Landowner or its Affiliates, so long as (i) such liens are expressly subject and
subordinate

 

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to this Agreement and the Stumpage Agreement, (ii) any subsequent Transfer of
Timberlands upon the execution by any such Lender of any rights under such liens
would be subject and subordinate to this Agreement and the Stumpage Agreement
and the transferee would therefore take the Timberlands subject to such
agreements and (iii) Landowner gives written notice of such proposed liens at
least ten days prior to the effective date thereof. No advance notice to, or
consent from, IP with respect to an acquisition of the Timberlands, the Pulpwood
Supply Agreement or this Agreement by any Lender through foreclosure, deed in
lieu of foreclosure or other remedial actions (or transfers in lieu of such
remedial actions) shall be required; provided that such Lender shall take the
Timberlands subject to the terms of this Agreement and the Stumpage Agreement
and may thereafter assign them consistent herewith. Ownership interests in
Landowner or any entity that directly or indirectly owns an interest in the
Timberlands may be pledged to any Lender to secure indebtedness for borrowed
funds incurred by Landowner or its Affiliates, so long as such pledge is
permitted under the terms of the Purchase Agreement.

(b) In the event of a Logs Reduction under Section 9(b) of the Log Supply
Agreement that results in the termination of the rights and obligations under
such agreement as it relates to all or a portion of the Logs Reduction,
Landowner may, without any correlative assignment of all or any portion of this
Agreement or the Stumpage Agreement, Transfer those specific Timberlands or that
acreage of Timberlands that the parties agree, after good faith negotiations,
would, as a result of such termination of rights and obligations relating to
such Logs Reduction, no longer be required to fulfill Landowner’s obligations
under the Stumpage Agreement.

(c) Landowner may Transfer all of the Timberlands in a single transaction to a
single transferee who shall as part of such transaction either (i) assume all of
Landowner’s obligations under this Agreement and the Stumpage Agreement, in
which case the Log Supply Agreement shall remain in full force and effect;
(ii) assume all of Landowners obligations under this Agreement and enter into a
new stumpage agreement substantially identical to the Stumpage Agreement with a
Person who shall (x) enter into a new log supply agreement substantially
identical to the Log Supply Agreement with IP and (y) have the financial and
operational resources and capacity to meet the obligations of TimberCo
thereunder; or (iii) make other arrangements reasonably satisfactory to IP to
permit IP to continue to purchase logs in the volumes, from the lands and at the
prices contemplated, and as otherwise contemplated, by the Log Supply Agreement
as in effect immediately prior to such Transfer.

(d) Landowner may Transfer Timberlands to an Affiliate of Landowner so long as
such Affiliate assumes and agrees to become jointly and severally liable, with
Landowner, for all of Landowners obligations under this Agreement and the
Stumpage Agreement and so long as such Transfer is permitted by Section 10.9 of
the Purchase Agreement.

(e) Landowner may, without any correlative assignment of all or any portion of
this Agreement or the Stumpage Agreement, Transfer Timberlands provided that
such Transfer (i) takes place without any correlative assignment of all or any
portion

 

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of the Pulpwood Support Agreement or the Stumpage Agreement pursuant to the
terms of the Pulpwood Support Agreement and (ii) would not constitute an
Aggregate Adverse Effect.

(f) Landowner may Transfer Timberlands with the consent of IP, which, except as
provided in Section 3.3, may be granted or withheld in IP’s sole discretion.

Section 3.3 Consent. IP shall consent to a Transfer that meets all of the
following conditions:

(a) Landowner and Landowner’s transferee agree (following consultation with IP)
to subdivide the Master Harvest Plan (and, on such basis, to subdivide the
Stumpage Agreement) between the retained Timberlands and the Transferred
Timberlands in a manner that would not constitute an Aggregate Adverse Effect;
it being understood that, following the Transfer, Landowner’s remaining
obligations under the Stumpage Agreement shall relate only to the Timberlands
retained by Landowner.

(b) Landowner and Landowner’s transferee agree (following consultation with IP)
to subdivide this Agreement between the retained Timberlands and the Transferred
Timberlands; it being understood that, following the Transfer, Landowner’s
remaining obligations under this Agreement shall relate only to the Timberlands
retained by Landowner.

(c) As part of such Transfer, the transferee would enter into (x) a new master
stumpage agreement with TimberCo substantially identical to the Stumpage
Agreement but relating to the pertinent portion of the Master Harvest Plan
determined under subparagraph (b) above and (y) a new support agreement with IP
substantially similar to this Agreement (except as provided in subparagraph
(b) above) with respect to such new stumpage agreement, in which case the Log
Supply Agreement shall remain in full force and effect;

Section 3.4 Procedural Matters Relating to Transfers.

(a) The restrictions set forth in this Agreement shall be recorded and filed in
a Memorandum of Agreement in substantially the form set forth in Exhibit B.

(b) Landowner shall provide IP with all information reasonably requested by IP
regarding any proposed Transfer and related arrangements.

(c) In connection with any Transfer permitted hereunder, (i) IP shall provide
Landowner with such documentation, if necessary in recordable form, as shall be
reasonably required to effectuate the Transfer, and (ii) the parties shall
cooperate in good faith to negotiate, prepare and execute the stumpage, support
and related agreements contemplated hereunder, including the release of any
Memorandum of Agreement filed in connection with this Agreement, provided that
IP shall have no obligation to agree to any arrangement or provision that would
constitute an Aggregate Adverse Effect.

 

6

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(d) No Transfer of Timberlands hereunder, whether permitted under this Agreement
or with the consent of IP, shall be deemed to relieve Landowner of its
obligations to provide cutting rights under the Master Stumpage Agreement
sufficient to permit TimberCo to fulfill its obligations under the Log Supply
Agreement.

ARTICLE IV

MISCELLANEOUS

Section 4.1 Termination. This Agreement shall terminate upon the termination of
the Log Supply Agreement.

Section 4.2 Direct and Indirect Transfers. The parties acknowledge and agree, on
behalf of themselves and their Affiliates, that the restrictions on Transfer
contained herein are intended to prohibit, restrict or permit, as the case may
be, Transfers of direct interests in the Timberlands and also Transfers of the
entities that directly or indirectly own interests in the Timberlands. To that
end, no Transfer of any entity that directly or indirectly owns an interest in
the Timberlands shall be permitted if the result of such Transfer is a Transfer
of Timberlands not permitted hereunder. In no event shall anything in this
Section 4.2 prohibit either (a) Transfers of direct or indirect interests in
TimberStar Southwest Holdco LLC (the parent of TimberStar Southwest Parent LLC)
or (b) Transfers among parent and subsidiary entities.

Section 4.3 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of                      applicable to
agreements to be performed entirely within such state, including all matters of
construction, validity and performance, without regard to principles of
conflicts of law thereof.

Section 4.4 Notices. All notices, requests, permissions, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (a) five Business Days following sending by registered or certified
mail, postage prepaid, (b) (b) when delivered, if delivered personally to the
intended recipient and (c) one Business Day following sending by overnight
delivery via a national courier service (two Business Days following sending by
overnight international delivery via international courier service), in each
case addressed to a party at the following address for such party:

[                    ]

Section 4.5 Entire Agreement. This Agreement, the Stumpage Agreement and the Log
Supply Agreement contain the entire understanding of the parties hereto and
thereto with respect to the subject matters contained herein and therein,
supersede and cancel all prior agreements, negotiations, correspondence,
undertakings and communications of the parties, oral or written, respecting such
subject matter.

Section 4.6 Amendment; Waiver. This Agreement can be amended, supplemented or
changed, and any provision hereof can be waived, only by a written

 

7

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instrument making specific reference to this Agreement signed by the party
against whom enforcement of any such amendment, supplement, modification or
waiver is sought. No action taken pursuant to this Agreement, including any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any covenant or
agreement contained herein. Any of the parties hereto may: (a) extend the time
for the performance of any of the obligations or other acts of the other parties
hereto or (b) waive compliance by the other party with any of the agreements
contained herein. Any such extension or waiver shall be valid only if set forth
in a written instrument. The failure of a party to assert any of its rights
hereunder shall not constitute a waiver of such rights nor in any way affect the
validity of this Agreement or any part hereof or the right of such party
thereafter to enforce each and every provision of this Agreement. No waiver of
any breach of or non-compliance with this Agreement shall be held to be a waiver
of any other or subsequent breach or non-compliance.

Section 4.7 Headings; References. The article, section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. All references
herein to “Articles”, “Sections” or “Exhibits” shall be deemed to be references
to Articles or Sections hereof or Exhibits hereto, unless otherwise indicated.

Section 4.8 Counterparts. This Agreement may be executed in multiple
counterparts (including via facsimile), and each counterpart shall be deemed to
be an original, but all of which shall constitute one and the same original.

Section 4.9 Assignment. This Agreement may be assigned (i) by IP to any party to
whom IP’s rights under the Log Supply Agreement are assigned, in whole or in
part, or any Affiliate thereof and (ii) by Landowner as expressly contemplated
by Article III hereof. Otherwise this Agreement may not be assigned without the
written consent of the parties. In the event of any partial assignment of the
Log Supply Agreement by IP under Section 9(c) thereof, if IP so requests under
this subparagraph and under Section 9(c) of the Log Supply Agreement, TimberCo
and Landowner shall subdivide the Stumpage Agreement and this Agreement, and
shall negotiate with IP and New Buyer in good faith to prepare and execute a new
master stumpage agreement and a new supply agreement relating in each case to
the portion of the Log Supply Agreement that has been assigned and the related
Timberlands.

Section 4.10 Severability; Enforcement. The invalidity of any portion of this
Agreement shall not affect the validity, force or effect of the remaining
portions hereof. If it is ever held that any restriction hereunder is too broad
to permit enforcement of such restriction to its fullest extent, each party
agrees that a court of competent jurisdiction may enforce such restriction to
the maximum extent permitted by law, and each party hereby consents and agrees
that such scope may be judicially modified accordingly in any proceeding brought
to enforce such restriction.

Section 4.11 Specific Performance. The parties hereto agree that the remedy at
law for any breach of this Agreement will be inadequate and that any party by

 

8

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whom this Agreement is enforceable shall be entitled to specific performance in
addition to any other appropriate relief or remedy. Such party may, in its sole
discretion, apply to a court of competent jurisdiction for specific performance
or injunctive or such other relief as such court may deem just and proper in
order to enforce this Agreement or prevent any violation hereof and, to the
extent permitted by applicable law, each party waives any objection to the
imposition of such relief.

[Signature Pages to Come]

 

9

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EXHIBIT A

Timberlands

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EXHIBIT B

Memorandum of Agreement

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iStar

Exhibit G

Form of Title Affidavit

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iStar

SELLER/OWNER AFFIDAVIT1

                    , 2006

I,                     , as                      of                     
(“Owner”), the owner2 of the property3 listed on Exhibit A (the “Property”)
certify that the following statements are true to the best of the knowledge of
the undersigned:

A. POSSESSION: As of today, to the knowledge of the undersigned, there are no
tenants or other persons who are in possession or, have a right to possession of
the Property unless listed on Exhibit B attached and none of those tenants has a
purchase option, right of first refusal or other similar right or option.

B. MECHANICS’ LIENS: Except as set forth on Exhibit C attached hereto, for more
than eight (8) months prior to the date hereof, no material or labor has been
furnished under the authority and on behalf of the Owner in connection with said
Property, other than those for which the bills have been paid or will be paid
prior to Closing.

C. PENDING LITIGATION: To the best of the knowledge of the undersigned, there is
no pending litigation or outstanding judgments against the Owner that could give
rise to a lien or charge against the Property, unless listed on Exhibit B
attached.

D. MUNICIPAL ASSESSMENTS: The undersigned, to the best of its knowledge, is
unaware of any outstanding municipal assessments against the Property,
subsequent to the effective date of the title commitment issued by First
American Title Insurance Company and identified on Exhibit A hereof (“the Title
Commitment”).

 

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1 Form may be modified to include such revisions and additions as are reasonably
required by the Title Company in connection with the issuance of the coverages
contemplated by Section 10.7 of the Purchase Agreement.

2 The undersigned’s certification that Owner is the owner of the Property is
based solely on the title commitment(s) covering the Property and prepared by
First American Title Insurance Company and the undersigned’s knowledge that no
conveyances of the property by Owner have occurred subsequent to the date of
such commitment(s).

3 The certifications and statements made herein relate to the surface of the
Property only and do not relate to the oil, gas or other minerals (as defined by
the law of the state where the Property lies) lying in, on or under the Property
or any mineral leases.

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iStar

E. UNRECORDED MATTERS: To the best of the knowledge of the undersigned, there
are no unrecorded instruments, facts, matters or conditions affecting title to
the Property other than those (i) set out in Exhibit B attached hereto, or
(ii) set out in the Title Commitment.

 

F. ACCESS ISSUES: To the best of its knowledge, Owner discloses the following as
it relates to access issues:

(a) No Access: Tracts With No Legal, Historic or Verbal Access: The properties
so designated on Exhibit D hereof do not front on a public road, are not
benefited by a recorded easement providing ingress or egress to and from a
public road or to and from another easement owned by the undersigned that
provides access to a public road, are not contiguous to another parcel owned by
the undersigned, are not subject to Historic or Prescriptive Access (as defined
below), and are not subject to Verbal Access (as defined below).

(b) Uncontested Historic Access: The properties so designated on Exhibit D
hereof and described or shown on the corresponding plats attached thereto do not
front on a public road, are not benefited by a recorded easement providing
ingress or egress to and from a public road and are not contiguous to another
Tract owned by the undersigned, but are subject to “Historic or Prescriptive
Access.” As used herein the term “Historic or Prescriptive Access” shall mean
that Owner and/or its predecessors-in-title to the Property: (i) has obtained
ingress and egress to and from the tract by way of the road identified on the
plat attached for at least the past              (            ) years, with that
road having a point of beginning (“POB”) at an intersection of a public road,
another Tract owned by the undersigned, or another easement owned by the
undersigned that provides access to a public road, and a point of terminus
(“POT”) on the Tract having Historic or Prescriptive Access; and, (ii) has
utilized uncontested access to said properties during the last             
(            ) years by way of the applicable road identified on the plat
attached.

(c) Verbal Access: The properties so designated on Exhibit D hereof do not front
on a public road, are not benefited by a recorded easement providing ingress or
egress to and from a public road, are not contiguous to another Tract owned by
the undersigned, and are not subject to Historic or Prescriptive Access, but are
subject to “Verbal Access.” As used herein, the term “Verbal Access” shall mean
that the undersigned seeks verbal permission for all use of such Tract by Owner
prior to accessing the Tract by way of the road identified on the plat attached
hereto, with that road having a point of beginning (“POB”) at an intersection of
a public road, another Tract owned by the undersigned, or another easement owned
by the undersigned that provides access to a public road, and a point of
terminus (“POT”) on said properties having Verbal Access.

G. AD VALOREM TAXES: To the knowledge of the undersigned, there are no
delinquent ad valorem taxes or assessments for the Property for the assessment
year as of                     .

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iStar

H. CLAIMS TO TITLE: To the knowledge of the undersigned, there has been no claim
made or dispute with respect to the title of the Property during the twenty
(20) year period prior to the date of this Affidavit, except as may be set forth
on Exhibit B attached.

The phrase “to the best of the knowledge of the undersigned” or “to the
knowledge of the undersigned” or “to the best of its knowledge” means actual
knowledge of an officer holding the position of Vice President or higher, and is
based on representations made to such officer by selected employees involved in
the due diligence process described in the following paragraph.

Owner designed and undertook a due diligence process for the purpose of
gathering factual information of interest to Purchasers of the Property
including tracts that may lack legal access. Information concerning the Property
was collected from selected employees of Owner or Owner’s affiliates
knowledgeable about the Property and is the basis of this affidavit.

The undersigned understands that First American Title Insurance Company and any
other title company providing reinsurance with respect to such policy, will rely
upon the truth of the statements made in this certificate when it issues its
policy or policies of title insurance insuring the title to this Property.

 

                                                                    By:    
Title:  

 

STATE OF                      )

 

COUNTY (PARISH) OF                     )

I,                     , a Notary Public in and for said County (Parish), in
said State, hereby certify that                     , whose name as
                     of                     , is signed to the foregoing
instrument, and who is known to me, acknowledged before me on this day that
being informed of the contents of said instrument, he/she, in such capacity and
with full authority, executed the same voluntarily for and as the act of said
                    .

Given under my hand and seal of office this, the                      day of
            , 2006.

 

 

Notary Public

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iStar

Exhibit A

Those certain tracts or parcels of land that are particularly described in the
following title commitment or commitments issued by First American Title
Insurance Company:

[List commitments that apply, with reference number; may want to also include
State and County, Effective Date, etc.]

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iStar

Exhibit B

[This exhibit will pull and list from the Allforms, under separate headings:
Rent-Lease; 3rd Party Uses; Hunt Club Leases; Disputes-Encroachments; Bulk Sale
Timber Contracts; Cemeteries; Plantation Contracts; Cell Tower Leases; and
Research Studies. It relates to Paragraphs A, C, E and H of the Affidavit.]

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iStar

Exhibit C

[Labor or Materials Furnished; Unpaid; Paragraph B of Affidavit]

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Exhibit D

[Access Issues, relating to Paragraph F of the Affidavit]

 

(a) No Access: Tracts With No Legal, Historic or Verbal Access:

[Tracts will be identified as per the listing on the Allforms detail sheet so
that a title exception can be made in the same way; no plats will be attached.]

 

(b) Uncontested Historic Access:

[Tracts will be identified as per the listing on the Allforms detail sheet and
plats will be attached, as described in the Affidavit. It is anticipated that
buyer will request title insurance coverage for this category.]

 

(c) Verbal Access:

[Tracts will be identified as per the listing on the Allforms detail sheet so
that a title exception can be made in the same way; no plats will be attached.]

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iStar

Exhibit H-1

FORM OF ASSIGNMENT OF BUYER TIMBER ENTITY INTERESTS

THIS ASSIGNMENT OF BUYER TIMBER ENTITY INTERESTS AGREEMENT (this “Agreement”) is
entered into as of [•], 2006, by and among TimberStar Southwest LLC, a Delaware
limited liability company (“Buyer”) and [•], a [•] (“Selling Party”).

W I T N E S S E T H

WHEREAS, the Selling Party is a party to that certain limited liability company
agreement or limited partnership agreement, in each case dated as of [•], 2006,
pursuant to which the Selling Party formed the [Timber Entities, the partnership
and/or membership interests of which are being assigned and transferred pursuant
to this Agreement] (collectively, the “Timber Entities”), the partnership and/or
membership interests of which are being assigned and transferred pursuant to
this Agreement;

WHEREAS, the Selling Party is the sole member of, and owns all of the
outstanding partnership interests and membership interests, as applicable, of
the Timber Entities;

WHEREAS, Buyer, International Paper Company, the Other Selling Parties (as
defined in the Purchase Agreement) and the other parties named therein or
thereafter becoming party thereto in accordance with Section 15.16 have entered
into a Purchase Agreement, dated as of [•], 2006 (the “Purchase Agreement”),
providing for the sale by the Selling Parties (as defined in the Purchase
Agreement) of, inter alia, certain real property and mineral rights, certain
other assets, inventory and rights under certain continuing leases, contracts
and other agreements to the Timber Entities and the purchase and assumption of
such property, rights and assets by Buyer;

WHEREAS, in partial consideration therefor, the Purchase Agreement requires that
at the Closing, the Selling Party will transfer to Buyer all of the outstanding
limited partnership interests and membership interests, as applicable, in the
Timber Entities;

WHEREAS, the parties hereto wish to provide for the assignment to Buyer of all
of the outstanding limited partnership interests and membership interests, as
applicable in the Timber Entities; and

WHEREAS, capitalized terms used and not otherwise defined in this Agreement have
the respective meanings given in the Purchase Agreement.

NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and in the Purchase Agreement, Buyer and the Selling Party
hereby agree as follows:

1. Assignment of Timber Entity Interests. The Selling Party hereby assigns,
transfers, conveys and delivers to Buyer all of the Selling Party’s right, title
and interest in, to and under all of the outstanding partnership interests and
membership interests, as applicable, in the Timber Entities.

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2. Acceptance and Assumption of Timber Entity Interests Subject to the
provisions of the Purchase Agreement, Buyer hereby accepts the assignment,
transfer, conveyance and delivery of such limited partnership interests and
membership interests, as applicable, in the Timber Entities and expressly
assumes and covenants in favor of the Selling Party to discharge and perform, as
and when due, all obligations of the Selling Party accruing, arising out of, or
relating to events or occurrences on and after the Closing Date with respect to
such limited partnership interests and membership interests, as applicable, in
the Timber Entities.

3. Purchase Agreement Controls. Nothing in this Agreement shall be deemed to
supersede, enlarge or modify the scope of the rights of any party to the
Purchase Agreement that are contained in the Purchase Agreement. If there is a
conflict or an apparent conflict between the provisions of this Agreement and
the provisions of the Purchase Agreement, the provisions of the Purchase
Agreement shall control.

4. Counterparts; Facsimile Signatures. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument. Facsimile signatures on
this Agreement shall be deemed to be original signatures.

5. Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.

[Remainder of the page intentionally left blank]

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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement to be effective as of the date first above written.

 

TIMBERSTAR SOUTHWEST LLC By:  

 

Name:   Title:   [SELLING PARTY] By:  

 

Name:   Title:  

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iStar

Exhibit H-2

FORM OF ASSIGNMENT OF BUYER PARENT TIMBER ENTITY INTERESTS

THIS ASSIGNMENT OF BUYER PARENT TIMBER ENTITY INTERESTS AGREEMENT (this
“Agreement”) is entered into as of [•], 2006, by and among TimberStar Southwest
Parent LLC, a Delaware limited liability company (“Buyer Parent”) and [•], a [•]
(“Selling Party”).

W I T N E S S E T H

WHEREAS, the Selling Party is a party to that certain limited liability company
agreement or limited partnership agreement, in each case dated as of [•], 2006,
pursuant to which the Selling Party formed the [Timber Entities, the partnership
and/or membership interests of which are being assigned and transferred pursuant
to this Agreement] (collectively, the “Timber Entities”), the partnership and/or
membership interests of which are being assigned and transferred pursuant to
this Agreement;

WHEREAS, the Selling Party is the sole member of, and owns all of the
outstanding partnership interests and membership interests, as applicable, of
the Timber Entities;

WHEREAS, Buyer Parent, International Paper Company, the Other Selling Parties
(as defined in the Purchase Agreement) and the other parties named therein or
thereafter becoming party thereto in accordance with Section 15.16 have entered
into a Purchase Agreement, dated as of [•], 2006 (the “Purchase Agreement”),
providing for the sale by the Selling Parties (as defined in the Purchase
Agreement) of, inter alia, certain real property and mineral rights, certain
other assets, inventory and rights under certain continuing leases, contracts
and other agreements to the Timber Entities and the purchase and assumption of
such property, rights and assets by Buyer Parent;

WHEREAS, in partial consideration therefor, the Purchase Agreement requires that
at the Closing, the Selling Party will transfer to Buyer Parent all of the
outstanding limited partnership interests and membership interests, as
applicable, in the Timber Entities;

WHEREAS, the parties hereto wish to provide for the assignment to Buyer Parent
of all of the outstanding limited partnership interests and membership
interests, as applicable in the Timber Entities; and

WHEREAS, capitalized terms used and not otherwise defined in this Agreement have
the respective meanings given in the Purchase Agreement.

NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and in the Purchase Agreement, Buyer Parent and the Selling
Party hereby agree as follows:

1. Assignment of Timber Entity Interests. The Selling Party hereby assigns,
transfers, conveys and delivers to Buyer Parent all of the Selling Party’s
right, title and interest in, to and under all of the outstanding partnership
interests and membership interests, as applicable, in the Timber Entities.

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2. Acceptance and Assumption of Timber Entity Interests. Subject to the
provisions of the Purchase Agreement, Buyer Parent hereby accepts the
assignment, transfer, conveyance and delivery of such limited partnership
interests and membership interests, as applicable, in the Timber Entities and
expressly assumes and covenants in favor of the Selling Party to discharge and
perform, as and when due, all obligations of the Selling Party accruing, arising
out of, or relating to events or occurrences on and after the Closing Date with
respect to such limited partnership interests and membership interests, as
applicable, in the Timber Entities.

3. Purchase Agreement Controls. Nothing in this Agreement shall be deemed to
supersede, enlarge or modify the scope of the rights of any party to the
Purchase Agreement that are contained in the Purchase Agreement. If there is a
conflict or an apparent conflict between the provisions of this Agreement and
the provisions of the Purchase Agreement, the provisions of the Purchase
Agreement shall control.

4. Counterparts; Facsimile Signatures. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument. Facsimile signatures on
this Agreement shall be deemed to be original signatures.

5. Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.

[Remainder of the page intentionally left blank]

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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement to be effective as of the date first above written.

 

TIMBERSTAR SOUTHWEST PARENT LLC By:  

 

Name:   Title:   [SELLING PARTY] By:  

 

Name:   Title:  

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Exhibit I

Surface Use Agreement

SURFACE USE AGREEMENT

This SURFACE USE AGREEMENT (this “Agreement”), dated as of
[                    ], 2006 (“Effective Date”), is among [BUYER], a [•]
[corporation] (“Buyer”), [TIMBER LLC], a [•] limited liability company (“Timber
LLC”), and INTERNATIONAL PAPER COMPANY, a New York corporation (“Seller” and,
collectively with Buyer and Timber LLC, the “Parties”).

RECITALS

WHEREAS, pursuant to that certain Purchase Agreement dated as of
                            , 2006 (the “Purchase Agreement”) among Buyer,
[BUYER PARENT], a [•] [corporation], Seller and the Other Selling Parties (as
defined therein), the Selling Parties (as defined in the Purchase Agreement)
have sold, assigned and transferred to Buyer and/or Timber LLC, among other
assets and properties, the property described on Exhibit A attached hereto (the
“Property”);

WHEREAS, the Selling Parties have retained and reserved to Seller the Reserved
Minerals and Gases and the Reserved Mineral and Gas Rights, which are located in
and under the Property, the foregoing rights being more particularly defined on
Exhibit B attached hereto;

WHEREAS, the Parties desire to enter into this Surface Use Agreement in order to
set forth the Parties’ rights and obligations with respect to the Property and
the Reserved Minerals and Gases and Reserved Mineral and Gas Rights;

NOW, THEREFORE, in consideration of the foregoing, and intending to be legally
bound hereby, the Parties agree as follows:

(1) Definitions. Capitalized terms used but not defined in this Agreement shall
have the meanings ascribed to such terms in the Purchase Agreement. “Mineral
Owner” as used herein shall mean Seller and Seller’s successors and assigns.
“Mineral Operator” as used herein shall mean Seller, its successors and assigns,
Seller’s lessees and their successors and assigns, and Seller’s operators and
their successors and assigns, but only, in each instance, if and to the extent
any such entities are conducting Operations on all or any portion of the
Property. “Operations” as used herein shall mean all operations after the
Effective Date by Mineral Operator on the Property in connection with the
Reserved Minerals and Gases and Reserved Mineral and Gas Rights, including,
without limitation: (a) surveying, inspecting, reconnaissance, drilling, mining,
exploring, developing, producing, pumping, processing, cleaning, storing,
removing, treating, transporting, conducting seismic activities, excavating
pits, constructing and maintaining roads, pipelines and locations, gathering
line construction, drilling water wells, using sand and gravel for the purposes
of constructing and maintaining roads and locations, and all other related
activities; and (b) without limiting the foregoing in any way, with respect to
coal and lignite, to make and use openings, to dispose of, use and pile up the
overburden and other substances removed in surface mining, to store in and upon
the Property coal and lignite mined and overburden removed from the Property, to
erect, use and maintain on the Property such buildings, reservoirs, engines,
machinery, railroad tracks, conveyors, shops, ditches, power and communications
lines and other equipment and facilities necessary for the mining and sale of
coal and lignite, but specifically excluding any plants, equipments or
facilities designed for the burning of coal for power generation, or other
ultimate use of

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coal on the Property. “Surface Owner” as used herein shall mean the Buyer, its
successors and assigns with respect to the Property on Exhibit A designated as
being owned by Buyer, and Timber LLC, its successors and assigns with respect to
the Property on Exhibit A designated as being owned by Timber LLC.

(2) General. Except as expressly contemplated by this Agreement, Mineral Owner
and Surface Owner shall conduct their respective operations on the Property so
as not to unreasonably interfere with the operations or activities of the other
Party. Mineral Operator shall conduct all Operations in full compliance with all
applicable laws, rules, regulations and orders of any governmental authority
having jurisdiction over the Property, including, but not limited to those laws,
rules, regulations and orders for protection of the environment, prevention of
water pollution and prevention and suppression of forest fires. Mineral Operator
shall protect and prevent the Property from being contaminated or damaged by
hazardous substances in such manner as may be required by governmental
regulations. Unless first consented to in writing by Surface Owner, no new oil
or gas well shall be drilled nearer than 200 feet to any then inhabited
structure now or hereafter placed on the Property.

(3) Reserved Water Rights. Surface Owner and Mineral Owner acknowledge and agree
that the Reserved Water Rights apply only to those portions of the Property
located within the State of Texas (the “Texas Property”). Without limiting
anything in the Section (2) above, with respect to Reserved Water Rights,
Surface Owner agrees that Surface Owner shall not: (a) unreasonably interfere
with or oppose Mineral Operator’s Reserved Water Rights; (b) sell or donate
groundwater from any portion of the Texas Property to any third party; (c) cause
or permit any third party to transport captured or collected groundwater from
any portion of the Texas Property; (d) intentionally take or permit any action
reasonably expected to cause damage to any underground water formation on the
Texas Property other than damages that may occur in connection with Surface
Owner’s reasonable silviculture operations or Surface Owner’s drilling of water
wells for non-commercial on-site use on the Texas Property; and (e) inject (or
expressly permit Surface Owner’s Affiliates or any third party to inject)
wastewater or waste material, Hazardous Substances or salt water into any
formation on the Texas Property. Surface Owner shall not authorize its
Affiliates or third parties to inject wastewater or waste material, Hazardous
Substances or salt water into any underground formation on the Texas Property.
Surface Owner acknowledges that future operations related to Mineral Operator’s
Reserved Water Rights and the Operations on the Texas Property with respect to
the Reserved Water Rights may interfere with surface activities on the Texas
Property, provided, such interference shall not unreasonably and adversely
interfere with surface activities on the Texas Property. Mineral Owner hereby
agrees that Surface Owner and its assigns, shall be permitted to: (x) use the
groundwater of the Texas Property for silviculture operations in compliance with
all applicable laws, including Environmental Laws, including the right to drill
water wells and maintain such wells and ancillary equipment necessary for
groundwater withdrawal; (y) with respect to any portion of the Texas Property
transferred in accordance with the terms of the Support Agreement by and between
the Parties of even date herewith (the “Support Agreement”), the New Owner (as
defined in the Support Agreement) may use the groundwater under such portion of
the Texas Property for its own agricultural operations, provided such use shall
comply with best water management practices and with all applicable laws,
including Environmental Laws, including the right to drill water wells and
maintain such wells and ancillary equipment necessary for groundwater
withdrawal, (subsections (x) and (y) collectively referred to as “Permitted
Uses”) and (z) use the groundwater of the Texas Property for non-commercial
on-site use in compliance with all applicable law, including Environmental Laws,
including the right to drill water wells and maintain such wells and ancillary
equipment necessary for groundwater withdrawal; provided, however, that Surface
Owner, on its behalf and on behalf of its Affiliates, agrees that Mineral
Owner’s Reserved Water Rights supersede Surface Owner’s permitted uses of
groundwater on the Texas Property hereunder and that, in the event all

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available groundwater resources are needed for the full exercise of Mineral
Operator’s Reserved Water Rights, the authorized uses by Surface Owner and its
Affiliates (and New Owner, if applicable) of groundwater on the Texas Property
hereunder, other than Permitted Uses, may be terminated, either temporarily or
permanently, by Mineral Operator, upon forty-five (45) days advance written
notice to Surface Owner. The foregoing shall not be deemed to waive any rights
of Surface Owner under Texas Law. Surface Owner shall indemnify, defend and hold
Mineral Owner harmless from and against any and all claims, demands, losses,
expenses, damages, costs and liabilities, suffered or incurred by any third
party or by Mineral Operator or Mineral Operator’s employees, agents, Affiliates
or representatives that are attributable to the acts or omissions of Surface
Owner and its employees, agents, Affiliates or representatives arising in
connection with the permitted uses by Surface Owner and its Affiliates of
groundwater on the Texas Property as described in this Agreement. “Affiliate” as
used herein shall mean, with respect to any individual, general partnership,
limited partnership, corporation, limited liability company, joint venture,
trust, business trust, cooperative or association (“Person”), any other Person
directly or indirectly controlling, controlled by or under common control with
such Person. “Control” when used with respect to any Person means the ownership
of not less than 50% of the ownership interest in such Person and the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms “controlling” or “controlled” have meanings correlative to the
foregoing.

(4) Subsurface Geosequestration Rights. Surface Owner and Mineral Owner
acknowledge that the Subsurface Geosequestration Rights (as defined hereinafter)
apply only to those portions of the Property located within the States of
Arkansas, Louisiana, and Texas. Mineral Operator shall have the right to use,
inject and sequester carbon dioxide and other greenhouse gases in the surface
soils and subsurface of the Property, including, without limitation, oil and gas
reservoirs, coal seams, and other geological formations, together with the
access rights of ingress and egress necessary to utilize these rights,
including, without limitation, the right to field test and employ these rights
in the surface soils or the subsurface of the Property and to separate,
transport and store carbon dioxide and greenhouse gas emissions in surface soils
or the subsurface of the Property. These rights also shall include all property,
rights, privileges, and benefits in any way belonging, incidental or pertaining
to these rights, including, without limitation, the right to any past, present
and future tax or other credits related to carbon dioxide or other greenhouse
gas use, injection and sequestration. Mineral Operator acknowledges and agrees
that Surface Owner has the rights to any biological sequestration above the land
surface with respect to the Property. Surface Owner shall not (a) sequester
carbon dioxide or other greenhouse gas emissions in the surface soils or
subsurface of the Property; (b) engage in field testing relating to carbon
dioxide or other greenhouse gas emissions in the surface soils or subsurface of
the Property; (c) employ carbon sequestration technology in the surface soils or
subsurface of the Property; or (d) separate, transport or store carbon dioxide
or other greenhouse gas emissions on the Property.

(5) Notice. Mineral Operator shall give at least thirty (30) days prior written
notice to Surface Owner for all new Operations to be conducted on the Property.
During such 30-day period, Surface Owner has the opportunity, but not the
obligation, to salvage timber on the portion of the Property that may be
harvested or damaged as the result of such Operations. Each such notice shall
contain a map or plat showing the location on the Property of the Operations to
be conducted, including, but not limited to, the location of any existing or
proposed roads and pipelines that will be used in connection with such
Operations, a full description of such Operations, a description of any timber
that may be cut and removed from the Property in connection therewith and a
timetable showing the anticipated dates on which Operations are expected to
commence. It is understood and agreed that activities associated with, related
to, in furtherance or continuance of or resulting from operations previously
noticed to Surface Owner shall not be considered a new Operation for purposes of
this paragraph.

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(6) Roads and Pipelines. With respect to Operations under oil, gas and mineral
leases executed after the Effective Date, Mineral Operator shall build and use
only such roads and pipelines as are reasonably necessary to conduct its
Operations on the Property, with the understanding that the Mineral Operator
shall use commercially reasonable efforts to minimize damage to the Property,
and the Roads must be built and maintained to applicable road construction and
maintenance standards (the “Road Standards”), including but not limited to
compliance with best management practices of the state in which the roads are
located. During such Operations, Mineral Operator shall maintain such roads at
its sole cost and expense to the Road Standards. Surface Owner shall have the
right in common with Mineral Operator to use any such roads in such a manner so
as not to interfere unreasonably with the Operations of Mineral Operator. All
roads constructed by Mineral Operator shall become the property of Surface Owner
and Surface Owner accepts responsibility for the road maintenance following
completion of the Operations of Mineral Operator. With respect to Operations
under oil, gas and mineral leases executed before the Effective Date, roads and
pipelines shall be built and maintained as required under the applicable
agreement and as required by law. When requested by Surface Owner, with respect
to Operations under oil, gas and mineral leases executed after the Effective
Date, Mineral Operator shall bury pipelines to below ordinary plow depth or to
such greater depth that Surface Owner deems necessary for its timber operations.
With respect to Operations under oil, gas and mineral leases executed after the
Effective Date, all pipelines buried after the Effective Date shall be marked at
road crossings and constructed with sufficient strength to permit the passing of
heavy equipment over the road without damage to the pipeline.

(7) Payments.

Mineral Owner shall promptly pay to Surface Owner the following:

(i) With respect to damages to lands and appurtenances of the Property as a
result of Operations under leases or other agreements executed before the
Effective Date, Surface Owner shall be entitled to damages as provided under
such agreements. Mineral Owner shall pay for all damages to lands and
appurtenances of the Property caused by or arising out of Operations on the
Property under oil, gas and mineral leases executed after the Effective Date, as
set forth below.

(ii) Mineral Owner shall pay for all damage to timber and for loss of use by
Surface Owner for timber growing purposes of the Property used by Mineral Owner
or Mineral Operator in their Operations: (a) related to oil, gas, and liquid
hydrocarbons as more fully described in subsection (i) on Exhibit B in an amount
as determined pursuant to clauses (iv) and (v) below, and (b) related to coal,
lignite, coalbed methane, coalseam gas and geothermal energy resources as more
fully described in subsections (ii), (iii), and (iv) on Exhibit B in an amount
as determined pursuant to clauses (iv) and (vi) below.

(iii) If Mineral Owner or Mineral Operator conducts any seismic operations on
the Property, Mineral Owner or Mineral Operator shall pay Surface Owner in
respect of any seismic operation $5,000 per square mile in the case of a 3-D
seismic operation and $2,500 per linear mile in the case of a 2-D seismic
operation.

(iv) In the event Operations result in injury or damage to any standing or down
timber, and/or crops thereon, Mineral Owner shall pay to Surface Owner, as its
sole remedy and compensation for the loss of such timber and/or crops the fair
market value of such timber/crops at the time of damage. If the Mineral Owner
and the Surface Owner cannot agree upon such fair market value within thirty
(30) days after the damage, then fair market value shall be determined by a
qualified independent timber appraiser mutually acceptable to both Mineral Owner
and Surface Owner with costs of such appraisal to be split equally between the
Parties. In the event that the Mineral Owner and Surface Owner cannot agree upon
a

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qualified independent timber appraiser, then the Mineral Owner and the Surface
Owner shall each appoint a qualified independent timber appraiser at each
party’s own cost and the two appraisers thus appointed shall appoint a third
qualified independent timber appraiser who shall determine the fair market value
at the time of the damage with costs of such appraisal to be split equally
between the parties. Upon the payment by Mineral Owner to the Surface Owner of
damages as contemplated by this section, the timber/crops so damaged shall
become the property of the Mineral Owner. With respect to merchantable timber,
fair market value shall be determined by calculating the net present value of
the expected future operating cash flow from the then existing crop, if any,
using fair market prices, costs and discount rates. With respect to
pre-merchantable timber, fair market value shall be determined by calculating
the net present value of the expected future operating cash flow from the then
existing crop, if any, using fair market prices, costs and discount rates.

(v) For loss of use by Surface Owner for timber growing purposes of the Property
used by Mineral Owner or Mineral Operator in its Operations related to oil, gas,
and hydrocarbons as more fully described in subsection (i) on Exhibit B
(excluding seismic operations which are covered by clause (iii) above), Mineral
Owner shall pay $5,000 for the surface area used by Mineral Owner or Mineral
Operator plus, if the area used exceeds five acres, $1,000 for each acre or
portion of an acre in excess of five acres. The payment due pursuant to this
clause for use of land for pipelines and utility lines shall be calculated based
upon the area used. With respect to any surface area, the sum payable under this
clause is a one-time sum and no additional payment under this clause (v) shall
be required either periodically or for an additional or different use of the
same surface area.

(vi) For loss of use by Surface Owner for timber growing purposes of the
Property used by Mineral Owner or Mineral Operator in its Operations related to
coal, lignite, coalbed methane, coalseam gas and geothermal energy resources as
more fully described in subsections (ii), (iii) and (iv) on Exhibit B (excluding
seismic operations which are covered by clause (iii) above), Mineral Owner shall
pay Surface Owner the amount set forth below:

For loss of use commencing within five (5) years following the Effective Date, a
one time payment of $500.00 per acre for each acre that is actually disturbed
and unavailable for use by Surface Owner for timber growing purposes;

For loss of use commencing more than five (5) years following the Effective
Date, the one time payment of $500.00 per acre set forth above shall be adjusted
if at all as per clause (vii) below.

Upon the payment by Mineral Owner to the Surface Owner of damages as
contemplated by this Paragraph (7), any timber/crops damaged shall become the
property of the Mineral Owner. With respect to any surface area, the sum payable
under this clause (vi) is a one-time sum and no additional payment under this
clause (vi) shall be required either periodically or for an additional or
different use of the same surface area.

(vii) For damages in clauses (iii) and (v) above incurred more than five
(5) years following the Effective Date, the payment amount specified shall be
increased or decreased annually on the anniversary of the Effective Date by
multiplying the then current value by the percent of change in the Producer
Price Index. For damages in clause (vi) above commencing more than five
(5) years following the Effective Date, the payment amount specified shall be
increased or decreased annually on the anniversary of the Effective Date by
multiplying the then current value by the percent of change in the Producer
Price Index. The percent of change in the Producer Price Index will be computed
by comparing the Producer Price Index published for the month prior to the
beginning of the annual period with the Producer Price Index published for the
month prior to the end of such annual period. The Producer Price Index will be
measured by the U.S. Department of Labor revised Producer Price Index for for
all

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commodities as published by the Bureau of Labor Statistics. If the Producer
Price Index shall hereafter be converted to a different standard base or
otherwise revised, the determination of the Producer Price Index shall be made
with the use of such conversion factor, formula or table for converting the
Producer Price Index as may be published by the Bureau of Labor Statistics or,
if such Bureau shall not publish the same, then with the use of such conversion
factor, formula or table as may be published by any nationally recognized
publisher of similar statistical information chosen by Surface Owner and Mineral
Owner.

(viii) All damage payments by Mineral Owner required under this Agreement shall
be delivered to the Surface Owner at the address set forth in Paragraph
(12) below.

(8) Conduct of Operations by Third Parties. Mineral Owner agrees to use
reasonable efforts to cause each Mineral Operator to conduct its Operations in
accordance with the terms and conditions of this Agreement; provided, however,
that nothing contained herein shall relieve Mineral Owner from the obligations
of Mineral Operator hereunder.

(9) Taxes. Mineral Owner and Mineral Operator shall be responsible for and shall
pay any and all taxes that may be levied or assessed against the Reserved
Minerals and Gases and the Reserved Mineral and Gas Rights.

(10) Insurance. Before conducting any Operations, Mineral Owner shall obtain and
maintain, or shall cause the Mineral Operator to obtain and maintain, insurance
policies as may be reasonable and customary for the industry, which policies
shall name Surface Owner as an additional insured thereunder.

(11) Dispute Resolution. In the event of any dispute, claim, question,
disagreement or controversy arising from or relating to this Agreement or the
breach thereof, Mineral Owner and Surface Owner shall use their reasonable
efforts to settle the dispute, claim, question or disagreement. To this effect,
they shall consult and negotiate with each other in good faith and, recognizing
their mutual interests, attempt to reach a just and equitable solution
satisfactory to the parties. If Mineral Owner and Surface Owner do not reach
such a solution within a period of 30 days after written notice by either
Mineral Owner or Surface Owner requesting that such discussions be initiated,
the parties agree that any and all disputes, claims, questions, disagreements or
controversies arising from or relating to this Agreement or the breach thereof,
shall be submitted to non-binding, voluntary mediation. Either Mineral Owner or
Surface Owner may commence mediation by providing Surface Owner (in the case of
Mineral Owner) or Mineral Owner (in the case of Surface Owner) with a written
request for mediation, setting forth the subject of the dispute and the relief
requested. The parties will cooperate with one another in selecting a single
mediator, and in promptly scheduling the mediation proceedings. If the parties
cannot agree upon a mediator, they shall appoint the American Arbitration
Association as a mediation body (which shall in turn select a single mediator),
and shall implement the Commercial Mediation Rules. All settlement offers,
promises, conduct and statements, whether oral or written, made in the course of
the settlement and mediation process by either Mineral Owner or Surface Owner,
their agents, employees, experts and attorneys, and by the mediator, are
confidential, privileged and inadmissible for any purpose, including
impeachment, in any arbitration or other proceeding involving the parties;
provided that evidence that is otherwise admissible or discoverable shall not be
rendered inadmissible or non-discoverable as a result of its disclosure during
settlement or mediation efforts. During the pendency of the settlement and
mediation process, the parties agree to forebear from filing or otherwise
proceeding with litigation; provided, however, that either Mineral Owner, on the
one hand, or Surface Owner, shall be entitled to seek a temporary restraining
order or preliminary injunction to prevent the breach of the Mineral Owner’s or
Surface Owner’s obligations, as the case may be, under this Agreement. If the
agreement of the parties to use mediation breaks down and a later litigation is
commenced or application for an injunction is made, the parties will not assert
a defense of laches or

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statute of limitations based upon the time spent in mediation. Either Mineral
Owner or Surface Owner may initiate litigation with respect to the matters
submitted to mediation at any time following 60 days after the initial mediation
session or 90 days after the date of sending the written request for mediation,
whichever occurs first. The mediation may continue after the commencement of
litigation if Mineral Owner and Surface Owner so mutually elect in writing. The
provisions of this Section 11 may be enforced by any court of competent
jurisdiction, and the party seeking enforcement shall be entitled to an award of
all costs, fees and expenses, including attorneys’ fees, to be paid by the party
against whom enforcement is ordered.

(12) Notice. Any notice given pursuant to this Agreement shall be given in
writing and delivered in person, by overnight courier, by facsimile (with a copy
sent by regular mail) or by registered or certified mail, postpaid, return
receipt requested, addressed as follows:

If to the Mineral Owner, to:

International Paper Company

6400 Poplar Avenue, Tower III

Memphis, Tennessee 38197

Attention: General Counsel

Facsimile:

with copies to:

If to Surface Owner to:

[•]

with a copy to:

[•]

Such notices, if delivered personally or by overnight courier service, shall be
deemed given at the time of delivery; if sent by registered or certified mail,
shall be deemed given two days after the time of mailing; and if sent by
facsimile, shall be deemed given on the next day following the day on which such
facsimile was sent, provided that a copy is also sent by regular mail.

(13) Further Assurances. Each of the parties shall execute such further
conveyance instruments and such other documents or instruments and do such other
acts or things as may be reasonably required or desirable to carry out the
intent of the parties hereunder and the provisions of this Agreement and the
transactions contemplated hereby.

(14) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the Parties and their respective successors and permitted
assigns.

(15) Amendment and Waiver. This Agreement may not be amended or modified in any
manner other than by an agreement in writing signed by Mineral Owner and Surface
Owner or their respective successors or assigns. No waiver under this Agreement
shall be valid or binding unless set forth in a writing duly executed and
delivered by the party against whom enforcement

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of such waiver is sought. Neither the waiver by any of the parties of a breach
of or a default under any of the provisions of this Agreement, nor the failure
by any of the parties, on one or more occasions, to enforce any of the
provisions of this Agreement or to exercise any right or privilege hereunder,
shall be construed as a waiver of any other breach or default of a similar
nature, or as a waiver of any of such provisions, rights or privileges
hereunder.

(16) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING
VALIDITY, CONSTRUCTION, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF
NEW YORK, WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS
TO THE EXTENT SUCH PRINCIPLES OR RULES WOULD REQUIRE OR PERMIT THE APPLICATION
OF THE LAWS OF ANOTHER JURISDICTION. EACH OF THE PARTIES HEREBY (I) IRREVOCABLY
SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE IN WHICH THE PROPERTY IS
LOCATED (THE “SUBJECT STATE”) AND THE FEDERAL COURTS OF THE UNITED STATES OF
AMERICA LOCATED IN THE SUBJECT STATE FOR THE PURPOSE OF ANY ACTION OR PROCEEDING
ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT, (II) AGREES THAT IT WILL NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL
JURISDICTION BY MOTION OR OTHER REQUEST FOR LEAVE FROM ANY SUCH COURT, AND (III)
AGREES THAT IT WILL NOT BRING ANY ACTION RELATING TO THIS AGREEMENT IN ANY COURT
OTHER THAN A SUBJECT STATE COURT OR FEDERAL COURT LOCATED IN THE SUBJECT STATE.
EACH OF THE PARTIES HEREBY CONSENTS TO AND GRANTS ANY SUCH COURT JURISDICTION
OVER THE PERSON OF SUCH PARTY AND OVER THE SUBJECT MATTER OF ANY SUCH DISPUTE
AND AGREES THAT MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION WITH ANY SUCH
ACTION OR PROCEEDING IN THE MANNER PROVIDED IN SECTION 12, OR IN SUCH OTHER
MANNER AS MAY BE PERMITTED BY LAW, SHALL BE VALID AND SUFFICIENT SERVICE THEREOF
ON SUCH PARTY.

EACH PARTY HEREBY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT
SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE ANCILLARY
AGREEMENTS, OR THE BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT OR ANY
ANCILLARY AGREEMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH
PARTY HEREBY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER, (II) SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS
WAIVER, (III) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) SUCH PARTY HAS
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS SET FORTH IN THIS SECTION.

(17) Counterparts. This Agreement may be signed in any number of counterparts,
each of which shall be deemed an original and, when taken together, shall
constitute one agreement.

(18) Legal Fees. In the event any legal proceeding should be brought to enforce
the terms of this Agreement or for breach of any provision of this Agreement,
the non-prevailing party shall reimburse the prevailing party for all reasonable
costs and expenses of the prevailing party (including its attorneys’ fees and
disbursements).

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IN WITNESS WHEREOF, the Mineral Owner and Surface Owner, have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.

 

INTERNATIONAL PAPER COMPANY By:  

 

Name:   Title:   [BUYER] By:  

 

Name:   Title:   [TIMBER LLC] By:  

 

Name:   Title:  

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Exhibit J

International Paper:

Timber Note Indicative Terms

Pursuant to the Purchase Agreement, dated April 4, 2006, between International
Paper Company and certain of its affiliates (collectively, “IP”), and TimberStar
Southwest Parent LLC (“Buyer Parent”), TimberStar Southwest LLC (“Buyer”) and
the other parties named therein, IP will convey certain timberlands to Buyer in
exchange for one or more long-term notes of Buyer (each, a “Timber Note”). IP
will first convey such timberlands to newly formed, wholly owned, special
purpose subsidiaries (collectively, “Timber LLC”) and convey the ownership
interests in Timber LLC to Buyer in exchange for the Timber Notes. Each Timber
Note will be credit-enhanced by an irrevocable standby letter of credit (the
“L/C”) from an issuer with a credit rating of at least AA-/Aa3 (the “L/C
Issuer”). Buyer will be required to provide the L/C Issuer with acceptable
collateral (the “Collateral Notes”) to secure the L/C in the form of debt
securities of the L/C Issuer, which may include certificates of deposit. Buyer
will acquire such Collateral Notes with equity funds contributed from Buyer
Parent. It will be the responsibility of Buyer Parent and Buyer to arrange terms
of the L/C with the Bank(s) engaged by Buyer Parent/Buyer.

Timber Note:

 

  •   Interest:

 

  •   For the first 10 years: six month LIBOR + [    ] bps (same margin as
Collateral Notes).

 

  •   Payable semi-annually in arrears 15 days after payment dates on the
Collateral Notes (e.g., July 15 and January 15).

 

  •   The applicable six month LIBOR rate shall be set [2] days prior to the
beginning of the relevant six month accrual period.

 

  •   If the maturity is extended (see “Term / Maturity Date”), interest rate
will be reset at the end of year 10 and every fifth anniversary thereafter to a
market rate of interest based on the market rate of interest associated with the
Collateral Notes held by Buyer (reduced by any L/C fees if not paid directly by
IP).

 

  •   Term/Maturity Date:

 

  •   An initial term of 10 years, subject to extension for up to 4 five-year
periods; resulting in a maximum term of 30 years.

 

  •   Credit Enhancement:

 

1

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  •   The holder of the Timber Notes (the “Holder”) will benefit from an L/C
issued by a high credit quality provider (i.e., with a senior unsecured rating
of at least “AA-/Aa3”) with respect to each Timber Note.

 

  •   The Holder will agree for the benefit of Buyer Parent and its senior
lenders (for so long as Buyer Parent owns Buyer) that, following a payment
default under the Timber Note, it will first request a draw on the L/C prior to
asserting any enforcement or foreclosure action with respect to the Buyer Parent
promissory note described below or Buyer’s interest in Timber LLC.

 

  •   No Prepayability:

 

  •   The Timber Notes may not be prepaid in whole or in part prior to maturity.

Letter of Credit:

 

  •   Description:

 

  •   The L/C guarantees timely payment of all principal and interest payable on
the relevant Timber Note.

 

  •   Collateral:

 

  •   Buyer’s reimbursement obligations to the L/C Issuer will be secured by a
pledge of and limited in recourse to the Collateral Notes and all proceeds
thereon and the L/C Escrow.

 

  •   At the maturity of the Timber Note, the Collateral Notes will be released
and repaid to an account of Buyer maintained by a trustee (as described below)
in order to enable Buyer to repay the Timber Note. Interest paid on the
Collateral Notes will also be released and repaid to such account of Buyer in
order to enable Buyer to pay interest on the Timber Note; provided, however,
that if Buyer elects to enter into a LIBOR hedging arrangement (the “Interest
Rate Arrangement”) to match the LIBOR applicable to the Collateral Notes to the
LIBOR applicable to the Timber Note, then interest on the Collateral Notes will
be released to such account of Buyer to make payments to the Interest Rate
Arrangement counterparty, and payments made to such account of Buyer under the
Interest Rate Arrangement will be used by Buyer to pay interest on the Timber
Note.

 

  •   Fees:

 

  •   At closing, Buyer Parent will contribute to Buyer funds sufficient to pay
the L/C fees (and related expenses) for the initial 10-year term. Such funds
shall be placed in escrow (the “L/C Escrow”) as security for the L/C Issuer and
invested in debt securities agreed to by Buyer and L/C Issuer, which may be
certificates of deposit.

 

2

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  •   Right of Substitution:

 

  •   The Holder shall have the right, but not the obligation, to terminate the
L/C if the credit rating of the L/C Issuer drops below A+ or A1 (a “Substitution
Event”).

 

  •   If a Substitution Event occurs, the Holder will have the right to
designate a replacement L/C Issuer. Following such a substitution of L/C
Issuers, the original L/C Issuer shall thereafter not be entitled to receive any
L/C fees and any funds in the L/C Escrow can thereafter be used to fund L/C fees
payable to the replacement L/C Issuer.

 

  •   Buyer shall also have the right to request a replacement of the L/C Issuer
if the Holder has not done so within 30 days following notice to the Holder of
the occurrence of a Substitution Event, subject to obtaining a replacement L/C
on terms and conditions reasonably satisfactory to the Holder.

 

  •   Notwithstanding the foregoing, for so long as Buyer is owned directly or
indirectly by TimberStar Southwest Holdco LLC, Buyer shall have the right during
the 14 day period following the occurrence of a Substitution Event to designate
a replacement L/C Issuer that is reasonably satisfactory to the Holder and not
prohibited by the terms of any financing document relating to the Timber Note to
which the Holder is a party.

 

  •   Any cost or expense incurred in obtaining a replacement L/C Issuer shall
be for the account of the person requesting such replacement.

Collateral Notes:

 

  •   Amount:

 

  •   Principal amount of the Timber Note.

 

  •   The Collateral Notes will have the same rating as the rating of the
relevant L/C Issuer.

 

  •   Interest:

 

  •   Six month LIBOR + [ ] bps (same margin as Timber Note). Interest margin
for the particular L/C Issuer will be set forth in the relevant L/C commitment
letter.

 

  •   Payable semi-annually in arrears (e.g., June 30 and December 31).

 

  •   The applicable six month LIBOR rate shall be set [2] days prior to the
beginning of the relevant six month accrual period.

 

  •   Term:

 

  •   The Collateral Notes are expected to be 6 month certificates of deposit.
L/C Issuer will agree to renew the Collateral Notes at the fixed margin provided
above, and Buyer will agree to reinvest, during the 10 year term of the L/C. The
Collateral Notes may not be prepaid in whole or in part prior to maturity except
in connection with a replacement of the L/C as described above.

 

3

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  •   No Direct Payment Arrangement:

 

  •   Buyer will not be allowed to instruct the L/C Issuer to apply interest or
principal on the Collateral Notes to satisfy interest or principal on the Timber
Notes. Instead, such interest or principal payments will be made directly to a
third-party trustee that will act on behalf of Buyer in paying amounts due under
the Timber Notes.

Buyer:

 

  •   Initial Contribution:

 

  •   Buyer Parent shall contribute to Buyer (A) cash funds equal to the sum of
(i) 101% of the principal amount of the Timber Notes and (ii) the cost of the
L/C for the initial ten-year term and (B) a promissory note of Buyer Parent
bearing a market rate of interest in an amount equal to 2% of the principal
amount of the Timber Notes. The Buyer Parent note will be a demand note and will
not contain financial or operating covenants.

 

  •   The contributed proceeds will be invested by Buyer as follows: (i) an
amount equal to the principal amount of each Timber Note will be invested in
Collateral Notes and (ii) all remaining funds will be invested in Permitted
Investments.

 

  •   “Permitted Investments” shall include U.S. Government obligations or other
high-quality debt securities.

 

  •   Covenants:

 

  •   Buyer shall agree (i) not to distribute or otherwise dispose of its equity
in Timber LLC (or cause or permit Timber LLC to distribute or otherwise dispose
of its timber assets) to Buyer Parent or a related party for at least 1 year
following closing, (ii) not to incur any liabilities or liens other than in
connection with the Timber Notes and L/Cs, and (iii) to observe standard
separateness covenants, including to maintain one independent member of its
board of managers.

 

  •   Buyer Parent shall agree (i) to observe standard separateness covenants,
(ii) not to dispose of its interest in or equity of Buyer to L/C Issuer or an
affiliate thereof at any time after closing, (iii) not to permit Buyer to elect
to be taxed as a corporation and (iv) not to dispose of its interest in or
equity of Buyer for at least 1 year following closing.

 

  •   Additional covenants of Buyer Parent and Buyer are as set forth in the
Purchase Agreement and form of Buyer LLC agreement.

 

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  •   Replacement of L/C:

 

  •   If the Holder requests an extension or replacement of the L/C upon a
Substitution Event, Buyer will agree to negotiate in good faith to accomplish
such extension or replacement and will agree to execute an extension or
replacement on terms substantially similar to the original L/C arrangements so
long as such extension or replacement does not result in additional cost to
Buyer that the Holder is unwilling to bear.

 

  •   Trustee Arrangement:

 

  •   Buyer will engage a third-party trustee to make payments of amounts due
and payable under the Timber Notes (and to provide such other services as the
parties agree) pursuant to a customary trust arrangement for so long as the
Timber Notes and L/Cs remain outstanding, provided that the annual trustee fees
shall not exceed .002% of the aggregate principal amount of the Timber Notes.
The trustee fees beyond the initial ten-year maturity of the Timber Notes shall
be for the account of the Holder.

 

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EXHIBIT K

LIMITED LIABILITY COMPANY AGREEMENT

OF

TIMBERSTAR SOUTHWEST LLC1

This Limited Liability Company Agreement (together with the schedules attached
hereto, this “Agreement”) of TIMBERSTAR SOUTHWEST LLC (the “Company”), is
entered into by TIMBERSTAR SOUTHWEST PARENT LLC, a Delaware limited liability
company, as the sole equity member (the “Initial Member” and together with its
successors and assigns that are admitted to the Company as a member, the
“Member”), and                     , as the Independent Manager (as defined on
Schedule A hereto). Capitalized terms used and not otherwise defined herein have
the meanings set forth on Schedule A hereto.

The Initial Member, by execution of this Agreement, hereby forms the Company as
a limited liability company pursuant to and in accordance with the Delaware
Limited Liability Company Act (6 Del. C. § 18-101 et seq.), as amended from time
to time (the “Act”), and this Agreement, and the Member and the Independent
Manager hereby agree as follows:

Section 1. Name.

The name of the limited liability company formed hereby is TIMBERSTAR SOUTHWEST
LLC, and its business shall be carried on in such name with such variations and
changes as the board of managers of the Company (each member of which, a
“Manager” and collectively, the “Managers” or the “Board of Managers”) shall
determine or deem necessary to comply with requirements of the jurisdictions in
which the Company’s operations are conducted.

Section 2. Principal Business Office.

The principal business office of the Company shall be located at
                    , or such other location as may hereafter be determined by
the Board of Managers.

 

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1 The parties to the Purchase Agreement agree that, as of the date of the
attachment of this Agreement as Exhibit K to the Purchase Agreement, this
Agreement is in draft form and remains subject to further negotiation and
revision, including, without limitation, such revisions as are necessary to
address the reasonable requirements of (i) any LOC Provider, (ii) any equity
investor acquiring a direct or indirect ownership interest in the Company and/or
in the Initial Member, and (iii) the Company’s local counsel, to the extent any
revisions requested by any of the foregoing parties are consistent with the
terms of the transaction contemplated pursuant to the Purchase Agreement, as now
or hereafter amended.

 

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Section 3. Registered Office.

The address of the registered office of the Company in the State of Delaware is
c/o The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware
19801.

Section 4. Registered Agent.

The name and address of the registered agent of the Company for service of
process on the Company in the State of Delaware is The Corporation Trust
Company, 1209 Orange Street, Wilmington, Delaware 19801.

Section 5. Members.

(a) The mailing address of the Member is set forth on Schedule B attached
hereto. The Member was admitted to the Company as a member of the Company upon
its execution of a counterpart signature page to this Agreement.

(b) Subject to Section 10, the Member may approve a matter or take any action at
a meeting or without a meeting by the written consent of the Member pursuant to
subparagraph (c) below. Meetings of the Member may be called at any time by the
Member.

(c) Any action may be taken by the Member without a meeting if authorized by the
written consent of the Member. In no instance where action is authorized by
written consent of the Member will a meeting of the Member be called or notice
be given. A copy of the action taken by written consent shall be filed with the
records of the Company.

(d) Liability of the Member.

(i) Except as otherwise provided in the Act, all debts, obligations and
liabilities of the Company, whether arising in contract, tort or otherwise,
shall be solely the debts, obligations and liabilities of the Company, and the
Member shall not be obligated personally for any such debt, obligation or
liability of the Company solely by reason of being the Member.

(ii) Except as otherwise expressly required by applicable law, the Member shall
not have any liability in excess of the amount of its unpaid capital
contribution to the Company and the amount of any distributions distributed to
it in violation of this Agreement or applicable law.

(e) The Member shall not, in its capacity as a Member, take part in the
management or control of the business of the Company, transact any business in
the name of the Company, have the power or authority to bind the Company or to
sign any agreement or document in the name of the Company, or have any power or
authority with respect to the Company except as expressly provided in this
Agreement.

(f) Except as provided in Sections 24 and 25, new Members shall not be admitted
to the Company.

 

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(g) Upon the occurrence of any event that causes the Member to cease to be a
member of the Company (other than upon continuation of the Company without
dissolution upon (i) an assignment by the Member of all of its limited liability
company interest in the Company and the prior or simultaneous admission of the
transferee pursuant to Section 24, or (ii) the resignation of the Member and the
prior or simultaneous admission of an additional member of the Company pursuant
to Section 25), each Person acting as an Independent Manager pursuant to
Section 14 shall, without any action of any Person and simultaneously with the
Member ceasing to be a member of the Company, automatically be admitted to the
Company as a Special Member and shall continue the Company without dissolution.
No Special Member may resign from the Company or transfer its rights as Special
Member unless (i) a successor Special Member has been admitted to the Company as
Special Member by executing a counterpart to this Agreement, and (ii) such
successor has also accepted its appointment as Independent Manager pursuant to
Section 14; provided, however, each Special Member shall automatically cease to
be a member of the Company upon the admission to the Company of a substitute
Member. Each Special Member shall be a member of the Company that has no
interest in the profits, losses and capital of the Company and has no right to
receive any distributions of Company assets. Pursuant to Section 18-301 of the
Act, a Special Member shall not be required to make any capital contributions to
the Company and shall not receive a limited liability company interest in the
Company. A Special Member, in its capacity as Special Member, may not bind the
Company. Except as required by any mandatory provision of the Act, each Special
Member, in its capacity as Special Member, shall have no right to vote on,
approve or otherwise consent to any action by, or matter relating to, the
Company, including, without limitation, the merger, consolidation or conversion
of the Company. In order to implement the admission to the Company of each
Special Member, each Person acting as an Independent Manager pursuant to
Section 14 shall execute a counterpart to this Agreement. Prior to its admission
to the Company as Special Member, each Person acting as an Independent Manager
pursuant to Section 14 shall not be a member of the Company.

(h) Restrictions on Debt Financing.

(i) The Member shall cause each Person that lends money to, or is lending money
to another Person the repayment of which is guaranteed by, the Member to agree
in writing for the benefit of the Company that neither it nor any Person acting
on its behalf shall commence any case or proceeding against the Company under
Title 11 of the United States Code, as now or hereafter in effect, or any other
applicable federal or state bankruptcy, insolvency or similar law.

(ii) The Member shall not enter into any debt financing or other arrangement
that imposes financial or other obligations on the Company or that obligates the
Company to take any action that violates, or would, at the time that such
financing or other arrangement is entered into, reasonably be expected to result
in a violation of, the terms of this Agreement, the Purchase Agreement, the
Timber Note, the LOC or the Basic Documents.

 

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Section 6. Certificates.

The Member is hereby designated as an “authorized person” within the meaning of
the Act, and has executed, delivered and filed the Certificate of Formation of
the Company with the Secretary of State of the State of Delaware on March 30,
2006 and the Member shall continue as the designated “authorized person” within
the meaning of the Act. The Member shall execute, deliver and file any other
certificates (and any amendments and/or restatements thereof) necessary for the
Company to qualify to do business in any other jurisdiction in which the Company
may wish to conduct business.

The existence of the Company as a separate legal entity shall continue until
cancellation of the Certificate of Formation as provided in the Act.

Section 7. Purpose.

(a) The purpose to be conducted or promoted by the Company is to engage in the
following activities:

(i) acquiring, owning and disposing of the outstanding limited liability company
and/or partnership interests, as the case may be, in the Timber Entities;
provided, however, that all references in this Agreement to limited liability
company and/or partnership interests in the Timber Entities shall be deemed to
include those interests, if any, in any limited partnerships that are indirectly
wholly owned by the Company and that are organized inter alia for the purpose of
owning and/or operating the Timberlands located in the State of Texas;

(ii) serving as a member or limited partner, as the case may be, of the Timber
Entities;

(iii) entering into the Basic Documents and performing the obligations
thereunder;

(iv) acquiring and owning the Collateral Notes, cash and cash items;

(v) acquiring and owning the Member Note and the Transferee Member Note;

(vi) engaging in any lawful act or activity and exercising any powers permitted
to limited liability companies organized under the laws of the State of Delaware
that are related or incidental to and necessary, convenient or advisable for the
accomplishment of the above-mentioned purposes.

(b) The Company is hereby authorized to execute, deliver and perform, or to
cause an Affiliate of the Company to execute, deliver and perform, and the Board
of Managers is hereby authorized to execute and deliver, or cause an Affiliate
of the Company to execute and deliver, the Basic Documents and all documents,
agreements, certificates, or financing statements contemplated thereby or
related thereto, all without any further act, vote or approval of any other
Person notwithstanding any other provision of this Agreement.

 

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Section 8. Powers.

Subject to the limitations contained herein (including, without limitation,
Section 10), the Company, and the Board of Managers on behalf of the Company,
(i) shall have and exercise all powers necessary, convenient or incidental to
accomplish its purposes as set forth in Section 7, and (ii) shall have and
exercise all of the powers and rights conferred upon limited liability companies
formed pursuant to the Act, together with any powers incidental thereto,
including such powers and privileges as are necessary, appropriate or advisable
by the Board of Managers in furtherance of the Company’s business. Subject to
the limitations contained herein, the Company shall have the power to take any
and all actions incidental and necessary or desirable to engage in the following
activities:

(a) to enter into the Purchase Agreement, and to enter into and consummate the
transactions and other agreements contemplated by the Purchase Agreement;

(b) to acquire, hold and dispose of the outstanding limited liability company
and/or partnership interests, as the case may be, of the Timber Entities and to
take such actions and engage in such activities as may be necessary or
appropriate in connection therewith;

(c) to distribute to the Member (A) all cash distributions received by the
Company directly or indirectly from the Timber Entities (the “Timber Entity
Distributions”), and (B) all other available cash to the extent that such
distributions of other available cash are not prohibited by applicable law, by
this Agreement or by the Basic Documents;

(d) to execute and deliver the Timber Note;

(e) to obtain the LOC and to enter into any agreements and to execute such other
documents as may be necessary or desirable in connection therewith, including,
without limitation, the LOC Reimbursement Agreement, the Collateral Notes
Pledge, and any agreement to pledge the assets of the Company (including without
limitation funds held by the Trustee pending disbursement to the Seller on the
Timber Note) as security for the Company’s obligations to reimburse the LOC
Provider(s);

(f) to apply certain amounts of cash available to it to purchase one or more
collateral notes, certificates of deposits or similar instruments (each, a
“Collateral Note”) from the LOC Provider or an Affiliate of the LOC Provider, to
enter into one or more agreements in connection with the purchase of such
Collateral Notes and to enter into and consummate the transactions and
agreements contemplated thereby;

(g) to enter into the Trustee Agreement, and to enter into and consummate the
transactions and agreements contemplated thereby, including, without limitation,
directing the LOC Provider to pay interest and principal on the Collateral Notes
to the trustee under the Trust Agreement (“Trustee”);

 

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(h) in connection with the Trustee Agreement, to direct Trustee to pay interest
and principal on the Timber Note to Seller;

(i) to enter into that certain Escrow Agreement dated as of
                    , 2006, by and among the Company and [identify Escrow Agent]
(the “Escrow Agent”), and any amendments, supplements or restatements thereof or
replacements therefor (the “Escrow Agreement”), with respect to certain funds
contributed to the Company by the Initial Member for the purposes of paying fees
and expenses related to the LOC and the Timber Note (the “Escrowed Amount”) and
to enter into and consummate the transactions and agreements contemplated
thereby (including without limitation any pledge of the account holding the
Escrowed Amount);

(j) to invest the excess of (A) the amount contributed to the Company by the
Initial Member in cash, over (B) to the extent there is no duplication, the sum
of (i) the amount paid to the LOC Provider as consideration for the Collateral
Notes, (ii) the amount paid to the counterparty under any interest rate hedge
agreement, and (iii) the Escrowed Amount (such excess, if any, the “Excess
Capital”) in obligations of the United States government or other high-quality
securities that, so long as the Company is directly or indirectly owned by the
Initial Member or any Person that has elected to be treated as a “real estate
investment trust” under the Code, qualify as Government Securities or cash items
for purposes of Section 856 of the Internal Revenue Code of 1986, as amended,
and to hold the Member Note and the Transferee Member Note;

(k) to Transfer the limited liability company and/or partnership interests, as
the case may be, of the Timber Entities to an unrelated third party at any time
on or after the date hereof, to Transfer the limited liability company and/or
partnership interests of the Timber Entities to a related party (including the
Member) at any time after the one year anniversary of the date hereof, or to
consummate any other Timber Entity Membership Interest Transfer hereunder;

(l) to enter into that certain [identify interest rate hedge agreement] in
respect of interest payable on the Timber Note;

(m) to pay the organizational, start-up and routine transactional and
maintenance expenses of the Company, including the creation, assumption or
incurrence of obligations to pay service providers to the Company and other
ordinary course expenses of maintaining its existence and carrying out its
various purposes under this Agreement, not evidenced by a promissory note and
subject to Section 8 of this Agreement, incurred in the ordinary course of
business which does not exceed, at any time, a maximum aggregate amount equal to
$[                    ] and provided that, when incurred, such debt is
anticipated to be paid within sixty (60) days of the date invoiced to the
Company (other than amounts being disputed in good faith);

(n) to enter into and perform its obligations under this Agreement, each
document referred to in items (a) through (m) above and any other supplemental
or related document or instrument; and

 

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(o) to engage in any other lawful activities which are necessary to accomplish
the foregoing or are incidental thereto or necessary in connection therewith;
provided, however, that after the payment in full of the Timber Note at its
final maturity and the satisfaction of all obligations pursuant to the LOC and
the LOC Reimbursement Agreement (collectively, a “Timber Note Payment Event”),
the Company may engage or participate in any other lawful business activity
permitted under the Act, and this Agreement, including without limitation
Section 7, shall be thereupon deemed amended to permit all such activities.

Section 9. Management.

(a) The management of the Company is fully vested in its Board of Managers,
which shall consist of up to five (5) “managers”, which shall include, as long
as any Obligation is outstanding, an Independent Manager, and, except as
provided in this Section 9, the Company shall not have any other “managers”, as
that term is used in the Act. The powers of the Company shall be exercised by or
under the authority of, and the daily business and affairs of the Company shall
be managed under the direction of, the Board of Managers, which shall make all
decisions and take all actions for the Company. Subject to Sections 10(c) and
26(f), actions taken by the Board of Managers shall be approved by not less than
a majority of the members present and voting. In managing the business and
affairs of the Company and exercising its powers, the Board of Managers may, in
addition to those actions contemplated pursuant to Section 9(c), act through
resolutions adopted by written consents. Decisions or actions taken by the Board
of Managers in accordance with this Agreement shall constitute decisions or
actions by the Company and shall be binding on the Company. Except as otherwise
provided herein, the vote of the Independent Manager shall not be required for
any action to be taken by the Board of Managers of the Company. The Board of
Managers may authorize any one or more of its members or any other authorized
officer or officers of the Company to execute documents approved by the Board of
Managers on behalf of the Company. The Managers are “managers” of the Company
within the meaning of the Act.

(b) The Board of Managers shall mean the Board of Managers initially appointed
by this Agreement and any replacement members of the Board of Managers that are
appointed by (i) the vote of 50% or more of the then existing Board of Managers
or (ii) the Member, with the Member having priority in the event that there is a
conflict with the Board of Managers in the appointment of a replacement member
of the Board of Managers. Each member of the Board of Managers so appointed
shall serve until such Manager shall resign, be removed, be disqualified to
serve, or until such Manager’s successor shall have been appointed and
qualified. The Member shall also have the power to remove any member of the
Board of Managers, provided that, for so long as any Obligation is outstanding,
the Board of Managers shall always contain not less than one Independent
Manager. Subject to Section 14, members of the Board of Managers may resign upon
giving sixty (60) days written notice to the Member. The Board of Managers shall
initially consist of the following individuals: (i)             ,
(ii)             , (iii)             , (iv)             , and (v)             ,
as the Independent Manager.

 

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(c) Meetings and Quorum.

(i) The meetings of the Board of Managers shall be held at the offices of the
Member, unless some other place is designated in the notice of the meeting.
Meetings of the Board of Managers shall be held at such times and with such
frequency as is otherwise determined by the Board of Managers. Accurate minutes
of any meeting of the Board of Managers shall be maintained by a Manager
designated by the Board of Managers for such purpose.

(ii) Special meetings of the Board of Managers for any purpose may be called at
any time by any member of the Board of Managers. At least three (3) business
days’ notice of the time and place of a special meeting of the Board of Managers
shall be delivered personally to the members of the Board of Managers at their
last known business addresses as shown on the records of the Company or
personally communicated to them by a member of the Board of Managers by
telephone, electronic mail, facsimile or hand delivery. Such electronic mailing,
telephoning, faxing or hand delivery shall be considered due, legal and personal
notice to such member of the Board of Managers.

(iii) Subject to Sections 10(c) and 26(f), the transactions carried out at any
special meeting of the Board of Managers, however called and noticed or wherever
held, shall be as valid as though agreed to at a meeting regularly called and
noticed if: (i) all members of the Board of Managers are present at the meeting
or (ii) a majority of the members of the Board of Managers are present and if,
either before or after the meeting, those not present signed a waiver of notice
of such meeting, a consent to holding the meeting or an approval of the minutes
thereof, which waiver, consent or approval shall be filed with the other records
of the Company or made a part of the minutes of the meeting.

(iv) Any action required or permitted to be taken by the Board of Managers may
be taken without a meeting and will have the same force and effect as if taken
by a vote of the Board of Managers at a meeting properly called and noticed, if
authorized by the written consent of such number of the members of the Board of
Managers as would be required to approve such action at a meeting of the Board
of Managers. In no instance where action is authorized by written consent need a
meeting of the Board of Managers be called or noticed. A copy of the action
taken by written consent shall be filed with the records of the Company. The
written consent may be executed in one or more counterparts and by facsimile,
and each such consent so executed shall be deemed an original.

(v) A majority of incumbent members of the Board of Managers present in person
or by proxy shall be necessary to constitute a quorum for the transaction of
business at any meeting of the Board of Managers. Except as otherwise provided
in this Agreement or by the Act, the action of a

 

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majority of the members of the Board of Managers present in person or by proxy
at any meeting at which there is a quorum, when duly assembled, is valid.
Subject to Sections 10(c) and 26(f), a meeting at which a quorum is initially
present may continue to transact business, notwithstanding the withdrawal of any
of the members of the Board of Managers, if any action taken is approved by a
majority of the required quorum for such meeting.

(vi) Members of the Board of Managers may participate in a meeting of the Board
of Managers by means of a telephone conference call or similar method of
communication so long as all Persons participating in the meeting can hear one
another. Participation in a telephonic meeting of the Board of Managers
constitutes presence in person at the meeting.

(d) To the fullest extent permitted by law, including, without limitation
Section 18-1101(c) of the Act, the Board of Managers shall consider only the
interests of the Company and its creditors. Except as provided in the preceding
sentence, in exercising its rights and performing its duties under this
Agreement, each member of the Board of Managers shall have a fiduciary duty of
loyalty and care similar to that of a director of a business corporation
organized under the General Corporation Law of the State of Delaware. Any
resignation or removal of a member of the Board of Managers may be accomplished
in accordance with Section 9(b), and no appointment of a successor member shall
be effective until the successor member shall have accepted his or her
appointment by a written instrument.

Section 10. Limitations on the Company’s Activities.

(a) This Section 10 is being adopted in order to comply with certain provisions
required in order to qualify the Company as a “special purpose” entity.
Notwithstanding any other provision of this Agreement and any provision of law
that otherwise so empowers the Company, the Company shall not:

(i) transfer the limited liability company and/or partnership interests, as the
case may be, of any Timber Entity except as permitted by Section 8(k); or

(ii) except as provided in that certain [Master Stumpage Agreement], dated the
date hereof, between the Timber Entities and [Buyer TRS], cause or permit any
Timber Entity to distribute, transfer or otherwise dispose of any of its
interest in the Timberlands to the Member (or any Person related to the Member),
or commit to do so, until after the one year anniversary of the date hereof.

(b) The Member shall not, so long as any Obligation is outstanding, amend,
alter, change or repeal the definitions of “Independent Manager” or “Special
Member” or Sections 5(g) 7, 8, 9, 10, 11, 12, 13, 14, 19, 23, 24, 25, 26, 27,
28, 33 or Schedule A of this Agreement without the written consent of the
Independent Manager unless the Approval Condition is satisfied. Subject to this
Section 10, the Member reserves the right to amend, alter, change or repeal any
provisions contained in this Agreement in accordance with Section 33.

 

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(c) Notwithstanding any other provision of this Agreement and any provision of
law that otherwise so empowers the Company, the Member, any Manager or any other
Person, so long as any Obligation is outstanding, without the prior unanimous
written consent of the Board of Managers, including the Independent Manager, the
Company shall not take, nor shall the Member, any Manager, or any other Person
be authorized or empowered to cause the Company to take, any Material Action;
provided, however, that for so long as any Obligation is outstanding, the Board
of Managers may not authorize the taking of any such Material Action unless
there is at least one Independent Manager then serving in such capacity.

(d) The Company shall do or cause to be done all things necessary to preserve
and keep in full force and effect its existence, rights (charter and statutory)
and franchises. So long as any Obligation is outstanding, the Company shall at
all times:

(i) maintain its own separate books, accounting records, bank accounts, and
other entity documents and records separate from those of the Member or any
Affiliate thereof;

(ii) at all times hold itself out to the public as a legal entity separate from
the Member, any Affiliate thereof or any other Person;

(iii) file its own tax returns, if any, as may be required under applicable law,
and pay any taxes so required to be paid under applicable law;

(iv) not commingle its assets with assets of the Member, any Affiliate thereof
or any other Person and not hold itself out as being liable for the debts of
another;

(v) conduct its business in its own name and through its own authorized officers
and agents and strictly comply with all organizational formalities necessary to
maintain its existence;

(vi) maintain and provide when requested separate financial statements, (which
may be unaudited), showing its assets and liabilities separate and apart from
those of any other Person, and not to have its assets listed on the financial
statement of any other Person; provided however that the Company may report its
financial statements on a consolidated basis with one or more Affiliates as may
be required or permitted by generally accepted accounting principles;

(vii) separately manage its liabilities from those of the Member or any
Affiliate thereof and pay its own liabilities, obligations and indebtedness of
any kind, including all administrative expenses, from its own separate assets,
provided that the Initial Member or any Affiliate thereof may pay certain

 

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of the organizational costs of the Company, and the Company shall reimburse the
Member or any such Affiliate thereof for its fairly allocable portion of shared
expenses paid by the Member or such Affiliate thereof;

(viii) maintain an arm’s length relationship with its Affiliates and enter into
transactions with Affiliates only on a commercially reasonable basis;

(ix) pay the salaries of its own employees, if any, from its own assets;

(x) not hold out its credit or assets as being available to satisfy the
obligations of others;

(xi) allocate fairly and reasonably any overhead for shared office space;

(xii) use separate stationery, invoices and checks bearing its own name;

(xiii) except as contemplated by the Basic Documents, not pledge its assets for
the benefit of any other Person, or create, incur or permit to exist any lien on
its assets (including, without limitation, the limited liability company and/or
partnership interests, as the case may be, of the Timber Entities while owned by
the Company), or enter into any guarantees or otherwise become liable for the
obligations of any other Person;

(xiv) correct any known misunderstanding regarding its separate identity;

(xv) refrain from engaging in any business activities without having adequate
capital in light of its contemplated business purpose, operations, transactions
and liabilities, provided that the foregoing shall not require the Member to
make any capital contribution to the Company in excess of the capital
contributions made on the date hereof as described in Section 16;

(xvi) not acquire any securities of its Member; provided however that the
Company may hold the Member Note and the Transferee Member Note;

(xvii) maintain at least one Independent Manager in accordance with Section 14;

(xviii) not cause or permit any provision of the Trustee Agreement or, for so
long as the Company owns the limited liability company and/or partnership
interests of any Timber Entity, the organizational or governing document of such
Timber Entity to be amended, modified, waived or terminated without the prior
written consent of Seller, provided that Seller shall not unreasonably withhold
or delay its consent to an amendment, modification, waiver or termination of any
provision of the organizational or governing document of such Timber Entity
other than [identify separateness covenants];

 

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(xix) for so long as the Company owns the limited liability company and/or
partnership interests, as the case may be, of any Timber Entity, not cause or
permit such Timber Entity to make any distribution to the Company other than in
the form of cash or, subject to Section 8(k), equity interests in other Timber
Entities; and

(xx) have a Board of Managers separate from that of the Member and any other
Person and cause the Board of Managers to observe all other limited liability
company formalities, including maintenance of current minute books.

(e) The Company shall not assume the liabilities of the Member or any Affiliate
thereof and shall not guarantee the liabilities of the Member or any Affiliate
thereof.

Failure of the Company, the Member or the Board of Managers on behalf of the
Company, to comply with any of the foregoing covenants or any other covenants
contained in this Agreement shall not affect the status of the Company as a
separate legal entity or the limited liability of the Member.

(f) So long as any Obligation is outstanding, the Company shall not:

(i) except as contemplated by the Basic Documents, guarantee any obligation of
any Person, including any Affiliate;

(ii) engage, directly or indirectly, in any business other than the actions
required or permitted to be performed under Section 7, the Basic Documents or
this Section 10;

(iii) incur, create or assume any indebtedness other than (i) the loan evidenced
by the Timber Note, (ii) the Company’s obligations under the LOC Reimbursement
Agreement, (iii) the Company’s obligations under the Trustee Agreement and
Escrow Agreement (iv) filing, accounting, or attorneys’ fees, (v) the Company’s
obligations under interest rate protection agreements with respect to its
obligations under the Timber Note or (vi) such other indebtedness as may be
expressly permitted under the Basic Documents;

(iv) except in connection with the Collateral Notes, the Member Note and the
Transferee Member Note, make or permit to remain outstanding any loan or advance
to, or own or acquire any stock or securities of, any Person (other than limited
liability company and/or partnership interests, as the case may be, in the
Timber Entities), except that the Company may invest in those investments
permitted under the Basic Documents and may make any advance required or
expressly permitted to be made pursuant to any provisions of the Basic Documents
and permit the same to remain outstanding in accordance with such provisions;

 

12

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(v) engage in any dissolution, liquidation, consolidation, merger, asset sale or
transfer of ownership interests other than (1) a Timber Entity Membership
Interest Transfer permitted under Section 8(k), and (2) such other activities as
are expressly permitted pursuant to any provision of the Basic Documents;
provided, however, that the foregoing prohibition shall not apply with respect
to any dissolution arising or occurring pursuant to Section 18-802 of the Act or
otherwise required to occur pursuant to any applicable law; or

(vi) except for the Timber Entities and as otherwise contemplated or permitted
by the Basic Documents, form, acquire or hold any subsidiary (whether corporate,
partnership, limited liability company or other).

Section 11. Continuation. Subject to the provisions of Section 26 hereof, the
Company shall have perpetual existence.

Section 12. Fiscal Year. The fiscal year of the Company (the “Fiscal Year”) for
financial statement and accounting purposes shall end on the 31st day of
December in each year.

Section 13. Title to Company Property. Title to all assets owned by the Company,
whether tangible or intangible, shall be held by the Company as an entity and no
Member, individually, shall have any direct ownership of any such asset. The
Company may hold any of its assets in its own name or in the name of a nominee,
which nominee may be one or more individuals, corporations, trusts or other
entities.

Section 14. Independent Manager(s). As long as any Obligation is outstanding,
the Member shall cause the Company at all times to have at least one Independent
Manager who will be appointed by the Member. To the fullest extent permitted by
law, including Section 18-1101(c) of the Act, the Independent Manager(s) shall
consider only the interests of the Company, and its creditors, in acting or
voting with respect to any matter under this Agreement, including the matters
referred to in Sections 10(b) and 10(c). No resignation or removal of an
Independent Manager, and no appointment of a successor Independent Manager,
shall be effective unless accomplished in accordance with Sections 9(b) and 9(e)
and unless such successor Independent Manager shall have first executed a
counterpart to this Agreement as required pursuant to Section 5(g). In the event
of a vacancy in the position of Independent Manager, the Member shall, promptly
appoint a successor Independent Manager. All right, power and authority of the
Independent Manager(s) shall be limited to the extent necessary to exercise
those rights and perform those duties specifically set forth in this Agreement
and the Independent Manager(s) shall have no authority to bind the Company. No
Independent Manager shall at any time serve as trustee in bankruptcy for any
Affiliate of the Company.

Section 15. Limited Liability.

Except as otherwise expressly provided by the Act, the debts, obligations and
liabilities of the Company, whether arising in contract, tort or otherwise,
shall be the debts, obligations and liabilities solely of the Company, and
neither the Member nor the Special Member nor any

 

13

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Independent Manager shall be obligated personally for any such debt, obligation
or liability of the Company solely by reason of being a Member, Special Member
or Independent Manager of the Company.

Section 16. Capital Contributions.

On the date hereof, the Member has contributed to the capital of the Company
(i) cash in the amount of $                    2 and (ii) a promissory note of
the Member, a copy of which is attached hereto, in the amount of
$                    3 (the “Member Note”), each as listed on Schedule B
attached hereto. The Member hereby represents and warrants to the Company that
it has a net worth at least equal to the Required Net Worth and, for so long as
the Member holds its interest in the Company, the Member shall maintain the
Required Net Worth and shall deliver to the Company or Seller such information
as the Company or Seller may reasonably request from time to time to verify such
net worth. Upon any Transfer of its interest in the Company, the Member Note
shall be distributed to the Member if so requested by the Member, but only if
such transferee executes and delivers to the Company (i) a promissory note, in
form substantially identical to the Member Note and in an identical principal
amount and bearing a market rate of interest (together with any such note of any
subsequent transferee, the “Transferee Member Note”) (the principal amount of
which may be reduced by the amount of any cash contributed by the Member or
transferee to the Company in connection with such Transfer) and (ii) such
information as is reasonably sufficient to verify that such transferee has a net
worth at least equal to the Required Net Worth (such determination to be
approved by the Board of Managers) and such transferee agrees to maintain such
Required Net Worth and provide information pursuant to this Section 16 as if
such transferee were the Member. For purposes of this Agreement, (i) the
“Required Net Worth” shall equal (A) 100% of the amount of the Member Note or
Transferee Member Note if the Member (or transferee) owns the limited liability
company and/or partnership interests, as the case may be, of the Timber Entities
and (B) 110% of the amount of the Member Note or Transferee Member Note in all
other cases, and (ii) the “net worth” of the Member (or any transferee) shall be
determined without regard to the Member Note or Transferee Member Note, as the
case may be, and without regard to the value of the Member’s (or such
transferee’s) interest in the Company, except that, for so long as the Company
owns the limited liability company and/or partnership interests, as the case may
be, of the Timber Entities, the value of such Timber Entity limited liability
company and/or partnership interests shall be taken into account. In lieu of
distributing the Member Note upon a Transfer, the Member may elect to repay the
outstanding principal of and accrued interest on the Member Note in cash. If
such Member Note is repaid in cash in full prior to a Transfer, the transferee
shall not be required to certify or maintain the Required Net Worth unless such
transferee subsequently desires to cause the Company to make a loan to such
transferee in an amount equal to the original principal amount of the Member
Note. Such loan may only be made if such transferee executes and delivers (i) to
the Company, the Transferee Member Note and (ii) to the Company and Seller, such
information as is reasonably sufficient to verify that such transferee has a net
worth at least

 

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2 Equal to 101% of the Timber Notes principal amount, plus LC fee escrow and
Trustee fee escrow and cost of the Interest Rate hedge agreement, if any.

3 Equal to 2% of the Timber Notes principal amount.

 

14

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equal to the Required Net Worth (such determination to be approved by the Board
of Managers and Seller) and such transferee agrees to maintain such Required Net
Worth and provide information pursuant to this Section 16 as if such transferee
were the Member. For the avoidance of doubt, this Section 16 shall apply to all
successive Transfers and transferees, it being understood that in connection
with each such Transfer the transferring Member shall be required to comply with
the obligations of the Member set forth herein, and the successor transferee
shall be required to comply with the obligations of the transferee set forth
herein. A capital account shall be maintained for the Member, to which
contributions and profits shall be credited and against which distributions and
losses shall be charged. Neither any Special Member, in accordance with
Section 5(g), nor the Member, in accordance with Section 17, shall be required
to make any further capital contributions to the Company.

Section 17. Additional Contributions.

The Member is not required to make any additional capital contribution to the
Company. However, the Member may make additional capital contributions to the
Company at any time upon the written consent of such Member. To the extent that
the Member makes an additional capital contribution to the Company, the Member
shall revise Schedule B of this Agreement. The provisions of this Agreement,
including this Section 17, are intended to benefit the Member and the Special
Member and, to the fullest extent permitted by law, shall not be construed as
conferring any benefit upon any creditor of the Company (other than a Covered
Person) (and no such creditor of the Company shall be a third-party beneficiary
of this Agreement) and the Member and the Special Member shall not have any duty
or obligation to any creditor of the Company to make any contribution to the
Company or to issue any call for capital pursuant to this Agreement.

Section 18. Allocation of Profits and Losses.

The Company’s profits and losses shall be allocated to the Member.

Section 19. Distributions.

(a) Subject to the remainder of this Section 19 and the other provisions of this
Agreement, distributions shall be made to the Member at the times and in the
aggregate amounts determined by the Board of Managers including, without
limitation, distributions of the Timber Entity Distributions to the Member.
Notwithstanding any provision to the contrary contained in this Agreement, the
Company shall not be required to make a distribution to the Member on account of
its interest in the Company if such distribution would violate the Act or any
other applicable law or any Basic Document.

(b) The Company shall not make any distributions to the Member (other than
(i) Timber Entity Distributions, (ii) distributions of amounts paid as interest
on the Member Note, (iii) distributions of the Member Note in connection with
the contribution of the Transferee Member Note as contemplated by Section 16,
and (iv) distributions of the limited liability company and/or partnership
interests, as the case may be, of the Timber Entities as permitted by
Section 8(k)) unless, immediately after giving effect to such distributions, the
amount by which

 

15

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the fair market value of the Company’s assets (excluding, for this purpose, the
value of the Timber Entity limited liability company and/or partnership
interests, as the case may be) exceeds the amount of the Company’s liabilities
is at least 3 percent of the aggregate principal amount of the Timber Note (such
determination to be approved by the Board of Managers). For purposes of the
determination referred to in the prior sentence, the Member Note or Transferee
Member Note (as the case may be) shall be valued at face value, so long as the
Member (or any transferee) provides to the Board of Managers and Seller a
current certification of the Required Net Worth and such supporting
documentation as is reasonably sufficient for the Board of Managers and Seller
to verify such net worth and a certification that such Member or transferee is
not aware of any liabilities, claims or obligations (contingent or otherwise)
not otherwise taken into account in determining the Required Net Worth that,
individually or in the aggregate, would reasonably be expected to result in the
net worth of such Member or transferee being less than the Required Net Worth.

Section 20. Books and Records.

The Member and its duly authorized representatives shall have the right to
examine the Company’s books, records and documents during normal business hours.
The Company’s books of account shall be kept using the generally accepted
accounting principles in the United States as in effect from time to time. The
Company’s independent auditor, if any, shall be an independent public accounting
firm selected by the Member.

Section 21. Intentionally Omitted.

Section 22. Other Business.

Notwithstanding any duty otherwise existing at law or in equity, the Member, the
Special Member and any Independent Manager and any Affiliate of the Member or
the Special Member or the Independent Managers may engage in or possess an
interest in other business ventures of every kind and description, independently
or with others, provided that the Company shall insure that no violation of
Section 10(d) is thereby caused. The Company shall not have any rights in or to
such independent ventures or the income or profits therefrom by virtue of this
Agreement.

Section 23. Exculpation and Indemnification.

(a) To the fullest extent permitted by applicable law, neither the Member nor
any Special Member or Manager nor any Independent Manager nor any officer,
director, manager, employee, agent or Affiliate of the foregoing (collectively,
the “Covered Persons”) shall be liable to the Company or any other Person who is
bound by this Agreement for any loss, damage or claim incurred by reason of any
act or omission performed or omitted by such Covered Person in good faith on
behalf of the Company and in a manner reasonably believed to be within the scope
of the authority conferred on such Covered Person by this Agreement, except that
a Covered Person shall be liable for any such loss, damage or claim incurred by
reason of such Covered Person’s gross negligence or willful misconduct.

 

16

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(b) To the fullest extent permitted by applicable law, a Covered Person shall be
entitled to indemnification from the Company for any loss, damage or claim
incurred by such Covered Person by reason of any act or omission performed or
omitted by such Covered Person in good faith on behalf of the Company and in a
manner reasonably believed to be within the scope of the authority conferred on
such Covered Person by this Agreement, except that no Covered Person shall be
entitled to be indemnified in respect of any loss, damage or claim incurred by
such Covered Person by reason of such Covered Person’s gross negligence or
willful misconduct with respect to such acts or omissions; provided, however,
that any indemnity under this Section 23 by the Company shall be provided out of
and to the extent of Company assets only, and neither Member, any Manager, nor
any Special Member shall have personal liability on account thereof; and
provided further, that so long as any Obligation is outstanding, no indemnity
payment from assets of the Company (as distinct from funds from other sources,
such as insurance) of any indemnity under this Section 23 shall be payable from
assets in which any other Person has an interest pursuant to the Basic
Documents.

(c) To the fullest extent permitted by applicable law, expenses (including
reasonable legal fees) incurred by a Covered Person defending any claim, demand,
action, suit or proceeding shall, from time to time, be advanced by the Company
prior to the final disposition of such claim, demand, action, suit or proceeding
upon receipt by the Company of an undertaking by or on behalf of the Covered
Person to repay such amount if it shall be determined that the Covered Person is
not entitled to be indemnified as authorized in this Section 23.

(d) Notwithstanding anything herein to the contrary, the obligations under
Sections 23(b) and 23(c) shall be subordinated to the Company’s obligations
under the Timber Note, the LOC and the LOC Reimbursement Agreement and shall not
be paid (other than from funds available for distributions to Member pursuant to
Section 19(b)) until the Obligations have been fully paid and the LOC has been
cancelled.

(e) A Covered Person shall be fully protected in relying in good faith upon the
records of the Company and upon such information, opinions, reports or
statements presented to the Company by any Person as to matters the Covered
Person reasonably believes are within such other Person’s professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Company, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, or any other facts pertinent to the
existence and amount of assets from which distributions to the Member might
properly be paid.

(f) The provisions of this Agreement, to the extent that they restrict or
eliminate the duties and liabilities of a Covered Person to the Company or its
members otherwise existing at law or in equity, are agreed by the parties hereto
to replace such other duties and liabilities of such Covered Person.

(g) The foregoing provisions of this Section 23 shall survive any termination of
this Agreement.

 

17

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Section 24. Transfers; Assignments.

(a) The Member shall not sell, transfer, assign or otherwise dispose of (each, a
“Transfer,” with such term excluding an “Encumbrance,” which is governed by
Section 24(d)) its interest in the Company except in accordance with the
provisions of this Agreement. Any purported Transfer by the Member (including
any transferee thereof) of any interest not made strictly in accordance with the
provisions of this Agreement shall, to the fullest extent permitted by law, be
entirely null and void ab initio.

(b) So long as any Obligation is outstanding, the Member shall not Transfer its
interest in the Company to the LOC Provider or any Affiliate thereof at any
time.

(c) The Member shall not Transfer its interest in the Company to any other
Person until a period of one year has elapsed from the Closing Date. Any
Transfer by the Member (or any subsequent transferee) of its interest in the
Company following such one year period shall be of its entire interest and shall
be made only upon such transferee having executed and delivered (i) to the
Company, (x) an agreement to be bound by this Agreement reasonably satisfactory
in form and substance to the Board of Managers and (y) if the Member Note (or
the Transferee Member Note in the case of a Member other than the Initial
Member) is to be distributed to the Member in connection with such Transfer, the
Transferee Member Note as described in Section 16, together with such
information regarding such transferee’s net worth as is required by Section 16;
(ii) to Seller, pursuant to the Purchase Agreement, a written agreement,
reasonably satisfactory in form and substance, of such transferee [to cause the
Company to comply with all of its obligations, covenants and representations
under this Agreement, the Purchase Agreement and the Basic Documents and to
comply with the obligations of the Initial Member under Sections 10.9, 10.10 and
15.7 of the Purchase Agreement as if such transferee were the Initial Member][to
comply thereafter with the obligations, covenants and representations of the
Initial Member under this Agreement, and with the obligations of the Initial
Member under Sections 10.9, 10.10 and 15.7 of the Purchase Agreement applicable
to the Company and the Initial Member in its capacity as the Member],4 and such
evidence as Seller may reasonably require to confirm that such transferee has
met all of the requirements for a Transfer hereunder; and (iii) to Seller and to
the LOC Provider (A) a certificate of the transferee that it is solvent on a pro
forma basis as of the consummation of the Transfer and (B) a legal opinion in
customary form that the transferee, as a debtor in bankruptcy, would not be
substantively consolidated with the Company. Upon such execution and delivery,
such transferee shall be admitted to the Company as a member of the Company and
have all of the rights and be bound by all of the obligations hereunder of the
Member and immediately following such admission the transferring Member shall
cease to be a member of the Company.

(d) So long as any Obligation is outstanding, the Member shall not pledge, grant
a security interest in or otherwise encumber (each, an “Encumbrance”) its
interest in the Company without the prior written consent of Seller and the LOC
Provider.

 

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4 Open business issue, including as to whether Section 10.9 should be mentioned.

 

18

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(e) Notwithstanding anything to the contrary contained herein, no Transfer or
Encumbrance of any interest in the Company shall be permitted if such Transfer
or Encumbrance would cause the Company to be treated as an association taxable
as a corporation for U.S. federal income tax purposes, including pursuant to
Section 7704 of the Internal Revenue Code of 1986, as amended.

Section 25. Resignation.

So long as any Obligation is outstanding, other than in connection with a
Transfer pursuant to Section 24 of the Member’s entire limited liability company
interest, the Member may not resign, except as permitted under the Basic
Documents and if the Approval Condition and Section 26(f) are satisfied. If the
Member is permitted to resign pursuant to this Section 25, an additional member
of the Company shall be admitted to the Company upon its execution of an
instrument signifying its agreement to be bound by the terms and conditions of
this Agreement, which instrument may be a counterpart signature page to this
Agreement and satisfaction of the conditions to a Transfer of limited liability
company interests to such additional member as set forth in Section 24. Such
admission shall be deemed effective immediately prior to the resignation and,
immediately following such admission, the resigning Member shall cease to be a
member of the Company.

Section 26. Dissolution.

(a) The Company shall be dissolved, and its affairs shall be wound up upon the
first to occur of the following: (i) following a Timber Note Payment Event, the
Board of Managers, acting together, unanimously vote for dissolution; (ii) the
entry of a decree of judicial dissolution under Section 18-802 of the Act; or
(iii) the termination of the legal existence of the last remaining member of the
Company or the occurrence of any other event that terminates the continued
membership of the last remaining member of the Company in the Company unless the
Company is continued without dissolution in a manner permitted by this Agreement
(including, without limitation Section 5(g)) or the Act. Upon the occurrence of
any event that causes the last remaining member of the Company to cease to be a
member of the Company (other than upon continuation of the Company without
dissolution upon (i) an assignment by the Member of all of its limited liability
company interest in the Company and the prior or simultaneous admission of the
transferee pursuant to Section 24, or (ii) the resignation of the Member and the
prior or simultaneous admission of an additional member of the Company pursuant
to Section 25), and further provided that, if any Obligation then remains
outstanding, the Independent Manager has not been admitted to the Company as a
Special Member pursuant to Section 5(g), then, to the fullest extent permitted
by law, the personal representative of such last remaining member is hereby
authorized to, and shall, within 90 days after the occurrence of the event that
terminated the continued membership of such member in the Company, agree in
writing (i) to continue the Company and (ii) to the admission of the personal
representative or its nominee or designee, as the case may be, as a substitute
member of the Company, effective as of the occurrence of the event that
terminated the continued membership of such member in the Company.

(b) Subject to the provisions of the Act and, so long as any Obligation is
outstanding, with the affirmative vote of the Independent Manager, the Board of
Managers shall have the

 

19

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right to wind up the Company’s affairs in accordance with Section 18-803 of the
Act (and shall promptly do so upon dissolution of the Company in accordance with
Section 26(a)) and shall also have the right to act as or appoint a liquidating
trustee in connection therewith.

(c) Upon the winding up of the Company, the assets shall be distributed in the
manner provided in Section 18-804 of the Act.

(d) Upon the completion of the winding up of the Company and the distribution of
the Company’s assets, the Member shall execute and file a Certificate of
Cancellation in accordance with Section 18-203 of the Act.

(e) Notwithstanding any other provision of this Agreement, the Bankruptcy of the
Member or a Special Member shall not cause the Member or Special Member,
respectively, to cease to be a member of the Company and upon the occurrence of
such an event, the Company shall continue without dissolution. Notwithstanding
any other provision of this Agreement, each of the Member and the Special Member
waives any right it might have to agree in writing to dissolve the Company upon
the Bankruptcy of the Member or a Special Member or the occurrence of an event
that causes the Member or a Special Member to cease to be a member of the
Company.

(f) Except in the case of an assignment of its limited liability company
interest to a new Member, the Member may not resign from the Company without the
affirmative vote of all of the members of the Board of Managers, including, so
long as any Obligation is outstanding, the Independent Manager.

(g) In the event of dissolution, the Company shall conduct only such activities
as are necessary to wind up its affairs (including the sale of the assets of the
Company in an orderly manner), and the assets of the Company shall be applied in
the manner, and in the order of priority, set forth in Section 18-804 of the
Act.

(h) The Company shall terminate when (i) all of the assets of the Company, after
payment of or due provision for all debts, liabilities and obligations of the
Company shall have been distributed to the Member in the manner provided for in
this Agreement and (ii) the Certificate of Formation shall have been canceled in
the manner required by the Act.

Section 27. Waiver of Partition; Nature of Interest.

Except as otherwise expressly provided in this Agreement, to the fullest extent
permitted by law, each of the Member and each Special Member and Independent
Manager hereby irrevocably waives any right or power that such Person might have
to institute any proceeding at law or in equity to cause the dissolution,
liquidation, winding up or termination of the Company. The Member shall not have
any interest in any specific assets of the Company, and the Member shall not
have the status of a creditor with respect to any distribution pursuant to
Section 19 hereof. The interest of the Member in the Company is personal
property.

 

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Section 28. Benefits of Agreement.

None of the provisions of this Agreement shall be for the benefit of or
enforceable by any creditor of the Company (other than Seller) or by any
creditor of the Member or a Special Member. The Member acknowledges and agrees
that Covered Persons and Seller shall be intended beneficiaries of the
provisions of this Agreement and that Seller may assign its rights hereunder to
any subsequent holder of the Timber Note.

Section 29. Severability of Provisions.

Each provision of this Agreement shall be considered severable and if for any
reason any provision or provisions herein are determined to be invalid,
unenforceable or illegal under any existing or future law, such invalidity,
unenforceability or illegality shall not impair the operation of or affect those
portions of this Agreement which are valid, enforceable and legal.

Section 30. Entire Agreement.

This Agreement constitutes the entire agreement of the parties with respect to
the subject matter hereof.

Section 31. Binding Agreement.

Notwithstanding any other provision of this Agreement, the Member agrees that
this Agreement, including, without limitation, Sections 7, 8, 9, 14, 19, 23, 24,
25, 26, 27, 28, and 33, constitutes a legal, valid and binding agreement of the
Member, and is enforceable against the Member in accordance with its terms.

Section 32. Governing Law.

This Agreement shall be governed by and construed under the laws of the State of
Delaware (without regard to conflict of laws principles), all rights and
remedies being governed by said laws.

Section 33. Amendments.

Subject to Section 10, this Agreement may be modified, altered, supplemented or
amended pursuant to a written agreement executed and delivered by the Member.
Notwithstanding anything to the contrary in this Agreement, so long as any
Obligation is outstanding, this Agreement may not be modified, altered,
supplemented or amended unless the Approval Condition is satisfied except to
cure any ambiguity.

Section 34. Counterparts.

This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original of this Agreement and all of which together shall
constitute one and the same instrument.

 

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Section 35. Notices.

Any notices required to be delivered hereunder shall be in writing and
personally delivered, mailed or sent by telecopy, electronic mail or other
similar form of rapid transmission, and shall be deemed to have been duly given
upon receipt (a) in the case of the Company, to the Company at its address in
Section 2, (b) in the case of the Member, to the Member at its address as listed
on Schedule B attached hereto and (c) in the case of either of the foregoing, at
such other address as may be designated by written notice to the other party.

Section 36. Effectiveness.

Pursuant to Section 18-201(d) of the Act, this Agreement shall be effective as
of [                    ].

[SIGNATURE PAGE FOLLOWS]

 

22

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IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, have
duly executed this Limited Liability Company Agreement as of the          day of
                    , 2006.

 

MEMBER:

TIMBERSTAR SOUTHWEST PARENT LLC,

a Delaware limited liability company

By:  

 

Name:  

 

Title:  

 

INDEPENDENT MANAGER:

 

 

23

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ACCEPTING THEIR APPOINTMENT AS MANAGERS:

 

[TimberStar Board Member]

 

[MSD Board Member]

 

[Perry Board Member]

 

[York Board Member]

 

[Name of Independent Manager]

 

24

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SCHEDULE A

Definitions

A. Definitions

When used in this Agreement, the following terms not otherwise defined herein
have the following meanings:

“Act” has the meaning set forth in the preamble to this Agreement.

“Affiliate” means, with respect to any Person, any other Person directly or
indirectly Controlling or Controlled by or under direct or indirect common
Control with such Person.

“Agreement” means this Limited Liability Company Agreement of the Company,
together with the schedules attached hereto, as amended, restated or
supplemented or otherwise modified from time to time.

“Approval Condition” means (i) prior to the payment in full of all obligations
pursuant to the LOC and the LOC Reimbursement Agreement, to the extent required
by the terms and conditions of the LOC Documents, the related LOC Provider has
consented in writing to such action, and (ii) prior to payment in full of the
Timber Note, Seller has consented in writing to such action.

“Bankruptcy” means, with respect to any Person, if such Person (i) makes an
assignment for the benefit of creditors, (ii) files a voluntary petition in
bankruptcy, (iii) is adjudged a bankrupt or insolvent, or has entered against it
an order for relief, in any bankruptcy or insolvency proceedings, (iv) files a
petition or answer seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation or similar relief under any statute, law
or regulation, (v) files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against it in any
proceeding of this nature, (vi) seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator of the Person or of all or any
substantial part of its properties, or (vii) if 120 days after the commencement
of any proceeding against the Person seeking reorganization, arrangement,
composition, readjustment, liquidation or similar relief under any statute, law
or regulation, if the proceeding has not been dismissed, or if within 90 days
after the appointment without such Person’s consent or acquiescence of a
trustee, receiver or liquidator of such Person or of all or any substantial part
of its properties, the appointment is not vacated or stayed, or within 90 days
after the expiration of any such stay, the appointment is not vacated. The
foregoing definition of “Bankruptcy” is intended to replace and shall supersede
and replace the definition of “Bankruptcy” set forth in Sections 18-101(1) and
18-304 of the Act.

“Basic Documents” means, collectively, the IP Documents, and the LOC Documents.

 

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“Certificate of Formation” means the Certificate of Formation of the Company
filed with the Secretary of State of the State of Delaware on March 30, 2006, as
amended or amended and restated from time to time.

“Closing Date” shall mean the date on which the [initial] closing occurs under
the Purchase Agreement.

“Code” means the Internal Revenue Code of 1986, as amended.

“Company” means TimberStar Southwest LLC, a Delaware limited liability company.

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities or general partnership or managing
member interests, by contract or otherwise. “Controlling” and “Controlled” shall
have correlative meanings. Without limiting the generality of the foregoing, a
Person shall be deemed to Control any other Person in which it owns, directly or
indirectly, a majority of the ownership interests.

“Covered Persons” has the meaning set forth in Section 23.

“Collateral Notes” has the meaning set forth in Section 8(f).

“Collateral Notes Pledge” shall mean a pledge or pledges by the Company to the
LOC Provider of the Collateral Notes as additional security for the Company’s
obligations under the LOC Documents.

“Escrow Agent” has the meaning set forth in Section 8(i).

“Escrow Agreement” has the meaning set forth in Section 8(i).

“Escrowed Amount” has the meaning set forth in Section 8(i).

“Excess Capital” has the meaning set forth in Section 8(j).

“Independent Manager” means a natural person who shall be a duly appointed
manager who is not at such time, and shall not have been at any time during the
preceding five (5) years, (a) a director, officer or employee of the Member or
an Affiliate thereof, or of any major creditor thereof, (b) a supplier (other
than an Independent Manager provided by a corporate services company that
provides independent directors in the ordinary course of its business), an
immediate family member (i.e. parent, descendant, spouse or sibling), manager or
contractor of the Member or an Affiliate thereof, (c) the direct or indirect
beneficial owner, at the time of such person’s appointment as a Independent
Manager or at any time thereafter while serving as Independent Manager, of any
of the limited liability company interests in the Member or more than 10% of the
outstanding equity interests of an Affiliate thereof, or (d) a person who
Controls, is Controlled by or under common Control with, whether directly,
indirectly or otherwise, the Member, an Affiliate or any major creditor,
supplier, employee, officer, director, manager or contractor of the Member or an
Affiliate. The term “major creditor” shall mean a Person to

 

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which the Member or an Affiliate thereof has outstanding indebtedness for
borrowed money in a sum sufficiently large as would reasonably be expected to
influence the judgment of the proposed Independent Manager adversely to the
interests of the Member when such Person’s interests are adverse to those of the
Member or an Affiliate thereof.

“IP Documents” means, collectively, (i) the Purchase Agreement, (ii) the Timber
Note, (iii) the Trustee Agreement, and (iv) such other assignments,
certificates, instruments, agreements, or other documents as may be required to
effectuate the transactions contemplated by the Purchase Agreement.

“LOC” shall mean the letter(s) of credit to be obtained by the Company to secure
the Company’s obligations under the Timber Note and to support the timely
payment of principal and interest on the Timber Note.

“LOC Documents” shall mean any and all assignments, certificates, instruments,
agreements, or other documents that may be required by the LOC Provider in
connection with the issuance of the LOC, including, without limitation, the LOC
Reimbursement Agreement and the Collateral Notes Pledge.

“LOC Provider” shall mean any issuer of an LOC.

“LOC Reimbursement Agreement” shall mean any agreement by and between the
Company and the LOC Provider pursuant to which the Company agrees to reimburse
the LOC Provider for any draws on the LOC.

“Material Action” means to consolidate or merge the Company with or into any
Person, or sell all or substantially all of the assets of the Company, or to
institute proceedings to have the Company be adjudicated bankrupt or insolvent,
or consent to the institution of bankruptcy or insolvency proceedings against
the Company or file a petition seeking, or consent to, reorganization or relief
with respect to the Company under any applicable federal or state law relating
to bankruptcy, or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Company or a
substantial part of its property, or make any assignment for the benefit of
creditors of the Company, or admit in writing the Company’s inability to pay its
debts generally as they become due, or take action in furtherance of any such
action, or to dissolve or liquidate the Company (provided, however, that the
foregoing shall not apply with respect to any dissolution arising or occurring
pursuant to Section 18-802 of the Act or otherwise required to occur pursuant to
any applicable law), or to take any action or expressly consent to any omission
which action or omission would reasonably be expected to result in the
acceleration or early maturity of the Timber Note. For the purposes of this
Agreement, neither a Timber Entity Membership Interest Transfer nor a Collateral
Notes Pledge shall be deemed a Material Action.

“Member” means TimberStar Southwest Parent LLC, a Delaware limited liability
company, as the initial member of the Company, and includes any Person admitted
as an additional member of the Company or a substitute member of the Company
pursuant to the provisions of this Agreement, each in its capacity as a member
of the Company; provided, however, the term “Member” shall not include any
Special Member.

 

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“Member Note” has the meaning set forth in Section 16.

“Obligation” shall mean the indebtedness, liabilities and obligations of the
Company under or in connection with the Timber Note or the LOC Documents as of
any date of determination.

“Purchase Agreement” shall mean a purchase agreement to be entered into with
Seller pursuant to which the Company and/or certain Affiliates of the Company
shall agree to purchase the Timberlands and any amendments, supplements or
restatements thereof or replacements therefor 5.

“Person” means any individual, corporation, partnership, joint venture, limited
liability company, limited liability partnership, association, joint stock
company, trust, unincorporated organization, or other organization, whether or
not a legal entity, and any governmental authority.

“Required Net Worth” has the meaning set forth in Section 16.

“Seller” means [                    ], and any successor holder of the Timber
Note, provided that the Company has been given written notice by the last holder
thereof as to the identity and address of the successor holder, with the Company
being entitled to rely, without further inquiry, upon any such written notice.

“Special Member” means, upon such person’s admission to the Company as a member
of the Company pursuant to Section 5(g), a person acting as Independent Manager,
in such person’s capacity as a member of the Company. A Special Member shall
only have the rights and duties expressly set forth in this Agreement.

“Timber Entities” means the entities that are formed for the purposes described
in Section 1.2 of the Purchase Agreement, and any successor to each such entity.

“Timber Entities Distributions” has the meaning set forth in Section 8(c).

“Timber Entity Membership Interest Transfer” means any Transfer by the Company
of all or part of the limited liability company and/or partnership interests, as
the case may be, in the Timber Entities from and after the first
(1st) anniversary of the Closing Date.

“Timber Note” means one or more installment notes payable to Seller representing
a portion of the purchase price payable under the Purchase Agreement.

“Timber Note Payment Event” has the meaning set forth in Section 8(o).

 

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5 Drafting Note: Revise to refer to Purchase Agreement as executed.

 

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“Timberlands” means certain timberlands located in Arkansas, Texas, and
Louisiana and other related personal and real property to be conveyed by Seller
or its affiliates to the Timber Entities pursuant to the Purchase Agreement.

“Transfer” has the meaning set forth in Section 24(a).

“Transferee Member Note” has the meaning set forth in Section 16.

“Trustee” means [                    ].

“Trustee Agreement” shall mean that certain agreement, dated as of
                    , 2006, by and among the Company, the LOC Provider and the
Trustee, and any amendments, supplements or restatements thereof or replacements
therefor.

B. Rules of Construction

Definitions in this Agreement apply equally to both the singular and plural
forms of the defined terms. The words “include” and “including” shall be deemed
to be followed by the phrase “without limitation.” The terms “herein,” “hereof”
and “hereunder” and other words of similar import refer to this Agreement as a
whole and not to any particular Section, paragraph or subdivision. The Section
titles appear as a matter of convenience only and shall not affect the
interpretation of this Agreement. All Section, paragraph, clause, Exhibit or
Schedule references not attributed to a particular document shall be references
to such parts of this Agreement.

 

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SCHEDULE B

Member

 

Name

   Mailing Address    Capital Contribution     Membership Interest  

TimberStar

Southwest

Parent LLC

FEI #20-4615869

      [                     ]   100 %

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Exhibit L

2006 HARVEST PLAN

See Section 2.3(ii) of the Seller’s Disclosure Letter.

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iStar

Exhibit M

MASTER STUMPAGE AGREEMENT

THIS MASTER STUMPAGE AGREEMENT (the “Stumpage Agreement”) made and entered into
on this, the      day of                     , 2006, by and between TSM I, LLC,
a Delaware limited liability company (herein called the “Seller”), and
TIMBERSTAR TRS, INC., a Delaware corporation (herein called the “Buyer”).

W I T N E S S E T H:

That for and in consideration of the sum of Ten Dollars and other good and
valuable considerations exchanged the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:

SECTION 1: SALE OF MERCHANTABLE TIMBER. Seller contracts and agrees to sell to
Buyer, and Buyer contracts and agrees to buy from Seller, the merchantable
pulpwood, logs, timber and other forest products (“Timber”) in the volumes
required for Buyer to meet its obligations under the [Log Supply Agreement]
[Pulpwood Supply Agreement], dated as of the date hereof, among Buyer, Seller
and International Paper Company (the “Supply Agreement”), which Timber shall be
harvested from the timberlands set forth on Exhibit B attached hereto and
incorporated herein by reference (the “Timberlands”).

SECTION 2: CUTTING AND REMOVAL OF TREES. Seller contracts and agrees that Buyer
shall have the right to cut and remove, and Buyer contracts and agrees to so cut
and remove, the Timber in the volumes herein contemplated from the Timberlands.

SECTION 3: PER-UNIT PURCHASE PRICE AND PAYMENT PROCEDURE. The per-unit prices of
the Timber shall be as set forth on Exhibit C attached hereto and incorporated
herein by reference and as shall be adjusted from time to time. The parties
agree that the prices on Schedule C shall be adjusted to reflect market changes
not less frequently than price adjustments called for under the Supply
Agreement, and in any event, not less than once each year. To the extent the
parties are unable to agree upon the adjusted prices, the disputed items shall
be settled by binding arbitration.

(a) Retained Economic Interest by Seller. Buyer shall pay Seller for the Timber
cut by Buyer at the per-unit rates stated above as follows:

(i) Determination of Monthly Cutting. Buyer shall deliver to Seller monthly,
within seventeen (17) days of the end of the month following the month during
which cut Timber has been sold, weight tickets, scale tickets or such other
documents as shall be necessary to determine the volume of Timber cut by Buyer
under this Stumpage Agreement and sold during such month. The consideration
allocable to the Timber sold during such monthly period owing by Buyer to Seller

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shall then be computed by the parties by multiplying the per-unit prices set
forth on Exhibit C times the number of units sold for each product listed on
Exhibit A during such monthly period.

(ii) Payment Procedure. Buyer shall pay to Seller monthly, on or before the
seventeenth (17th) of such month the consideration allocable to the cut Timber
sold two months previously determined as set forth in subparagraph (i) above.
For example, payment for cut Timber sold during the month of October shall be
due on or before December 17.

SECTION 4: CUTTING SPECIFICATION. For purposes of this Stumpage Agreement, the
Timber specifications shall be as set forth on Exhibit A attached hereto and
incorporated herein by reference.

SECTION 5: CUTTING PERIOD. This Stumpage Agreement shall terminate and expire
upon the expiration or termination of the Supply Agreement unless the parties
otherwise agree in writing.

SECTION 6: FAILURE TO CUT TIMBER. In the event that Buyer fails or refuses to
cut and remove all of the timber made available to Buyer under this Stumpage
Agreement, Buyer shall pay to Seller a sum of money equal to              of the
value of all such unharvested timber, based on those prices as set forth Exhibit
C. The volume of such unharvested timber by species and products shall be
determined by timber cruise performed by Seller or its agent. The amount so
determined to be due from Buyer shall be due immediately. It is expressly
covenanted and agreed that the amount required to be paid by Buyer to Seller
under this Paragraph 6 is a reasonable estimate of the probable damages to be
suffered by Seller as a result of the failure by Buyer to cut those trees to be
sold hereunder, and it shall not be construed as or be held to be in the nature
of a penalty.

SECTION 7: FAILURE TO PAY FOR TIMBER CUT. In the event Buyer should fail to pay
to Seller any amounts due for timber cut hereunder, the volume of such timber by
species and products shall be determined by a timber cruise performed by Seller,
or its agent, the cost thereof to be paid by Buyer. The amount so determined to
be due from Buyer to Seller for such cut but unpaid for timber shall be based on
those prices as set forth on Exhibit C.

SECTION 8: RETENTION OF TITLE BY SELLER. Seller shall retain title to each tree
subject to this Stumpage Agreement until such time as such tree is severed by
Buyer. Until passage of title to Buyer hereunder, Seller shall bear all risks of
loss or damage to any tree, unless the loss or damage so such tree is caused by
Buyer or Buyer’s agent, servant, employees or independent contractors. After
severance, title to any tree so cut shall be in Buyer, except that Seller shall
retain a lien until the same shall be paid for in full as herein provided.
Without releasing the liability of any party to this Agreement, the lien, if
any, encumbering the Timber sold to Buyer shall, without further action of the
parties, be deemed automatically released with respect to any cut Timber sold to
a person or entity not affiliated with the Buyer. Buyer hereby expressly
authorizes the Seller to file, from time to time, such Uniform Commercial Code
financing statements and continuation statements as Seller may, from time to
time, determine is necessary to perfect and continue to perfect its liens.

 

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SECTION 9: RISK OF LOSS. In the event any tree for sale hereunder is damaged so
as to be unmerchantable or is destroyed by fire, wind, flood, lightening,
drought, disease, insect attacks, theft, trespass, condemnation or other
casualty, the party holding title thereto shall bear the loss resulting from
such damage or destruction. In the event such damage or destruction occurs while
title to timber so damaged or destroyed is vested in Seller, Buyer shall be
relieved of its obligations hereunder to cut and buy the tree so damaged or
destroyed and Seller shall be under no obligation to sell, or Buyer to cut and
buy, any other trees in lieu of that so damaged or destroyed.

SECTION 10: COVENANTS OF SELLER. Seller covenants (i) that it is fully
authorized and empowered to enter into this Stumpage Agreement, and to offer for
sale and to sell the Timber subject to this Stumpage Agreement, (ii) that the
Timber subject to this Stumpage Agreement is free and clear of all liens and
encumbrances, (iii) that it, and its successors and assigns, shall and will
forever defend title to the timber subject to this Stumpage Agreement.

SECTION 11: ACCESS TO TIMBER AND LANDS. During the term of this Stumpage
Agreement, Seller contracts and agrees that Buyer, its agents, employees,
licensees and invitees, shall, for purposes of entering the Timberlands and
cutting and removing the trees, and for the further purpose of Buyer meeting its
obligations with respect to the maintenance of the lands under the Supply
Agreement, have the right of reasonable access, ingress and egress to go over
and across (i) the Timberlands and (ii) other lands of Seller as may be
reasonably necessary or required by Buyer to cut and remove the trees for sale
hereunder and meet its obligations under the Supply Agreement.

SECTION 12: COVENANTS OF BUYER. Buyer covenants and agrees (i) to cut and remove
the Timber in a good and workmanlike manner, (ii) to take all reasonable
precautions against destructive logging practices and (iii) to utilize every
reasonable effort to obtain the maximum yield from each tree.

SECTION 13: FIRE SUPPRESSION AND DAMAGE. Buyer covenants and agrees to take
reasonable precautions against fire and to suppress any fire which occurs on the
land during the Buyer’s presence on the property. The Buyer shall also accept
full and prompt liability for any damages to the Seller occurring as a result of
any fire attributable to Buyer’s logging activities.

SECTION 14: ASSIGNMENT BY BUYER. Buyer may assign or transfer any portion of the
cutting rights to the Timber to a third party under the full terms and
conditions hereof, but Buyer shall, in all events, be directly responsible to
Seller for all the actions of any contracting third party, employee, assignee,
contractor or subcontractor. Buyer further contracts and agrees to assume all
liability for, and shall indemnify, protect and hold harmless the Seller
against, all claims, demands, or causes of action, including the cost of
defending the same, of every nature whatsoever arising out of or resulting from
in any manner the operation of the Buyer or any contracting third party,
employee, assignee, contractor or subcontractor under this Stumpage Agreement,
and to assume, bear and pay, or have paid, all wages, workmen’s compensation
claims, or any and all claims or obligations imposed on it by reason of the
Buyer’s operation

 

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under this Stumpage Agreement. Seller hereby consents to the assignment, under
the circumstances set forth in the Supply Agreement, of its rights hereunder to
International Paper Company.

SECTION 15: ASSIGNMENT BY SELLER. Seller may, without the consent of the Buyer,
assign this Agreement to any person or entity to whom the land described on
Exhibit B and the Timber may be mortgaged, sold or transferred.

SECTION 16: NOTICES AND PERMITS. Seller shall be responsible for providing any
notices to governmental agencies required in connection with harvesting timber
and for obtaining any necessary governmental permits to carry out the purposes
of this Agreement.

SECTION 17: INDEMNIFICATION. Buyer shall indemnify and hold Seller harmless from
any and all liability whatsoever for damages to any person or thing, and from
any loss, damage or expense, including reasonable attorneys’ fees and other
costs of litigation, arising out of or connected with the Buyer’s performance of
this Stumpage Agreement, including, but not limited to, claims arising from
Buyer’s negligence, acts or omissions, or the negligence, acts or omissions of
Buyer’s agents, employees, contractors or subcontractors.

SECTION 18: DESTRUCTIVE LOGGING OPERATIONS. If Seller determines that
destructive logging operations are occurring, or if ground conditions are such
that continued logging operations would cause excessive damage to Seller’s land
or timber unless cutting operations are suspended, then Seller shall be
entitled, at its election, to postpone cutting operations hereunder by giving a
written notice of such postponement to the Buyer.

SECTION 19: LEGAL ACTIONS. In the event that either party hereto shall breach
this Stumpage Agreement, the party required to enforce the provisions hereof in
any court of law shall be entitled to recover from the defaulting party, in
addition to any other damages allowable by law, attorney fees and other costs
and expenses incurred.

SECTION 20: ENTIRE UNDERSTANDING. This Stumpage Agreement constitutes the entire
understanding between the parties with respect to the subject matter and shall
supersede all prior agreements, options and understandings between the parties
with respect to such subject matter.

SECTION 21: HEADINGS. The headings of the paragraphs of this Stumpage Agreement,
where employed, are for the convenience of reference only and do not form a part
hereof and in no way modify, interpret or construe the meanings of the parties.

SECTION 22: This Agreement and the obligations of the parties hereunder shall be
interpreted, construed and enforced in accordance with the                     .

SECTION 23: Any notice given pursuant to or in connection with this Agreement
shall be in writing and delivered by way of (i) first class mail postage
prepaid, (ii) recognized national courier, or (iii) facsimile, in each case to
the address set forth below for the party to whom it is intended:

 

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If to Seller:

With a copy to:

With a copy to:

If to Buyer:

With a copy to:

With a copy to:

SECTION 23: SUCCESSORS AND ASSIGNS. This Agreement shall apply to, inure to the
benefit of and be binding upon and enforceable against the parties and their
respective successors and assigns as if such were specified at length throughout
this Agreement.

SECTION 24: NO THIRD PARTY BENEFICIARY. This Agreement is intended for the
exclusive benefit of the parties and their permitted successors and assigns, and
nothing herein is intended to confer on any other party any right or remedy,
whether as a third party beneficiary or otherwise. The foregoing
notwithstanding, International Paper Company is an intended beneficiary of this
Agreement.

 

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SECTION 25: COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall comprise but a single instrument. To expedite the transaction
contemplated herein, telecopied or facsimile signatures may be used in place of
original signatures on this Agreement. Seller and Purchaser intend to be bound
by the signatures on the telecopied document, are aware that the other party
will rely on the telecopied signatures, and hereby waive any defenses to the
enforcement of the terms of this Agreement based on the form of signature.

[SIGNATURES ON FOLLOWING PAGE]

 

6

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EXHIBIT A

Specifications

 

7

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EXHIBIT B

Timberlands

 

8

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EXHIBIT C

Pricing

 

9

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iStar

Exhibit N

Selling Parties’ Knowledge List

Southwest Segment

Hugh McManus