EXHIBIT 10.1

PURCHASE AND SALE AGREEMENT

DATED AS OF AUGUST 3, 2007

BETWEEN

WELLS TIMBERLAND ACQUISITION, LLC

AS PURCHASER

AND

MEADWESTVACO COATED BOARD, INC.

AS SELLER

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Table of Contents

 

ARTICLE I  

SALE AND PURCHASE

   1 Section 1.1  

Timberlands II, LLC Interests

   1 Section 1.2  

Transfer of Purchased Assets

   2 Section 1.3  

Permitted Exceptions

   3 ARTICLE II  

PURCHASE PRICE; PAYMENT

   4 Section 2.1  

Purchase Price

   4 Section 2.2  

Cash Assets and Installment Note Assets

   5 Section 2.3  

Allocation of Purchase Price

   5 Section 2.4  

Apportionments

   5 Section 2.5  

Payment of Purchase Price

   6 Section 2.6  

Earnest Money

   7 ARTICLE III  

CLOSING

   7 Section 3.1  

Closing

   7 Section 3.2  

Closing Deliveries

   7 Section 3.3  

Possession

   10 Section 3.4  

Costs and Expenses

   10 ARTICLE IV  

PURCHASER’S ACKNOWLEDGEMENTS

   11 Section 4.1  

Purchaser’s Acknowledgements

   11 ARTICLE V  

REPRESENTATIONS AND WARRANTIES OF SELLER

   13 Section 5.1  

Organization

   13 Section 5.2  

Qualification

   13 Section 5.3  

Authority

   13 Section 5.4  

No Conflict

   14 Section 5.5  

Consents and Approvals

   14 Section 5.6  

Litigation

   14 Section 5.7  

Taxes

   14 Section 5.8  

Contracts

   14 Section 5.9  

Membership Interests

   15 Section 5.10  

Securities Laws Registration Requirements Exemptions

   15 ARTICLE VI  

REPRESENTATIONS AND WARRANTIES OF SELLER RELATED TO TIMBERLANDS II, LLC

   15 Section 6.1  

Organization and Good Standing

   15 Section 6.2  

Noncontravention

   16 Section 6.3  

Taxes

   16 Section 6.4  

Operations History

   16 ARTICLE VII  

REPRESENTATIONS AND WARRANTIES OF SELLER RELATED TO THE SELLER LAND

   16 Section 7.1  

Title to the Seller Land

   17

 

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Section 7.2  

Compliance with Laws

   17 Section 7.3  

Matters Relating to the Environmental Condition of the Seller Land

   17 Section 7.4  

Condemnations

   18 Section 7.5  

Timberlands II, LLC Real Property Leases

   18 Section 7.6  

Disposition of Assets

   18 Section 7.7  

Casualty

   18 Section 7.8  

Endangered Species

   19 Section 7.9  

Boundary Disputes

   19 Section 7.10  

Mining Activity

   19 Section 7.11  

Unresolved Access Claims

   19 Section 7.12  

Timber Volumes

   19 Section 7.13  

Roll-back Taxes

   19 ARTICLE VIII  

REPRESENTATIONS AND WARRANTIES OF SELLER RELATED TO LEASEHOLD INTERESTS

   20 Section 8.1  

Title to Leasehold Interests

   20 Section 8.2  

Underlying Leases

   20 Section 8.3  

Compliance with Laws

   20 Section 8.4  

Matters Relating to the Environmental Condition of the Leasehold Property

   21 Section 8.5  

Condemnation

   21 Section 8.6  

Disposition of Assets

   21 Section 8.7  

Casualty

   21 Section 8.8  

Endangered Species

   21 Section 8.9  

Mining Activity

   22 Section 8.10  

Unresolved Access Claims

   22 ARTICLE IX  

REPRESENTATIONS AND WARRANTIES OF PURCHASER

   22 Section 9.1  

Organization

   22 Section 9.2  

Qualification

   22 Section 9.3  

Authority

   23 Section 9.4  

No Conflict

   23 Section 9.5  

Consents and Approvals

   23 Section 9.6  

Litigation

   23 Section 9.7  

Investment Purpose

   24 Section 9.8  

Tax Matters

   24 Section 9.9  

Financing Commitment

   24 ARTICLE X  

ADDITIONAL AGREEMENTS RELATING TO THE PURCHASED ASSETS

   25 Section 10.1  

Commercially Reasonable Efforts

   25 Section 10.2  

Maintenance of Purchased Assets

   26 Section 10.3  

Public Announcements

   27 Section 10.4  

Books and Records

   27 Section 10.5  

Dispute Resolution

   27 Section 10.6  

Consents

   28 Section 10.7  

Commissions

   29 Section 10.8  

Casualty and Condemnation

   29

 

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ARTICLE XI  

ADDITIONAL AGREEMENTS RELATING TO SELLER LAND

   31 Section 11.1  

Right of Entry

   31 Section 11.2  

Permits and Licenses

   32 Section 11.3  

Easements

   32 Section 11.4  

Title Insurance; No Surveys

   33 Section 11.5  

Title Objections

   33 Section 11.6  

Environmental Due Diligence

   35 Section 11.7  

No Transfers, Etc.

   37 Section 11.8  

Tax Matters

   38 Section 11.9  

Note Document Assistance

   38 Section 11.10  

Credit Support for Timber Note

   39 Section 11.11  

Underlying Leases; Timberlands II, LLC Contracts and Timberlands II, LLC Real
Property Leases

   40 Section 11.12  

Sale of Timberlands II, LLC

   41 ARTICLE XII  

HUMAN RESOURCES MATTERS

   42 Section 12.1  

Human Resources

   42 ARTICLE XIII  

CONDITIONS PRECEDENT

   42 Section 13.1  

Conditions to Obligations of Each Party to Close

   42 Section 13.2  

Conditions to Obligations of the Purchaser to Close

   43 Section 13.3  

Conditions to Obligations of Seller

   44 ARTICLE XIV  

SURVIVAL OF REPRESENTATIONS

   44 Section 14.1  

No Survival

   44 Section 14.2  

Purchaser’s Agreement to Indemnify

   45 Section 14.3  

Seller’s Agreement to Indemnify

   46 Section 14.4  

Environmental Indemnity

   47 Section 14.5  

Exclusive Remedy

   48 ARTICLE XV  

TERMINATION AND AMENDMENT

   49 Section 15.1  

Termination

   49 Section 15.2  

Effect of Termination

   49 ARTICLE XVI  

GENERAL PROVISIONS

   50 Section 16.1  

Notice

   50 Section 16.2  

Legal Holidays

   51 Section 16.3  

Further Assurances

   51 Section 16.4  

Entire Agreement

   51 Section 16.5  

Amendments: Waivers

   52 Section 16.6  

Confidentiality

   52 Section 16.7  

No Third Party Beneficiaries

   52 Section 16.8  

Severability of Provisions

   52 Section 16.9  

Governing Law

   52 Section 16.10  

Counterparts

   53 Section 16.11  

Headings

   53 Section 16.12  

Construction

   53

 

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Section 16.13  

Reimbursement of Legal Fees

   54 Section 16.14  

Specific Performance

   54 Section 16.15  

Assignment

   54 Section 16.16  

Exclusive Dealing

   54 Section 16.17  

Transfer of Purchaser Prior to Closing

   54 ARTICLE XVII  

DEFINITIONS

   54 Section 17.1  

Definitions

   54

 

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SCHEDULES AND EXHIBITS

 

Schedule A   

GIS Maps

Exhibit A   

Seller Land and Reserved Easements

Exhibit B   

Leasehold Interests

Exhibit C   

Timberlands II, LLC Purchased Contracts

Exhibit D   

Timberlands II, LLC Real Property Leases

Exhibit E   

Personal Property

Exhibit F   

Harvest Plan

Exhibit G   

Form of Timber Note

Exhibit H   

Environmental Reports

Exhibit I   

Form of Landlord Estoppel

Exhibit J   

Form of Limited Liability Company Operating Agreement of Purchaser, LLC

Exhibit K   

Deductible/Damages Cap

Exhibit L   

Form of Contribution Agreement

Exhibit M   

Seller’s Knowledge List/Seller’s Environmental Knowledge List

Exhibit N   

Timber Note Indicative Terms

 

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PURCHASE AND SALE AGREEMENT

This PURCHASE AND SALE AGREEMENT (this “Agreement”), entered into this         
day of August, 2007, by and between MEADWESTVACO COATED BOARD, INC. a Delaware
corporation (“Seller”), and WELLS TIMBERLAND ACQUISITION, LLC (hereinafter
referred to as “Purchaser” and, collectively with Seller, Purchaser, LLC and
Timberlands II, LLC, the “Parties”). Unless otherwise defined herein,
capitalized terms shall have the meanings set forth in Article XVII
“Definitions”.

RECITALS

WHEREAS, Seller is the owner or lessee of certain real property which it will
contribute, assign, transfer or convey, together with certain other assets and
rights under certain continuing leases, contracts and other agreements, to a
newly formed single member limited liability company, Timberlands II, LLC, in
accordance with the terms and subject to the conditions set forth in this
Agreement and the Contribution Agreement (as hereinafter defined); and

WHEREAS, Purchaser wishes to acquire and accept 100% of the outstanding
membership interests in Timberlands II, LLC being transferred to it in
accordance with the terms and subject to the conditions set forth in this
Agreement; and

WHEREAS, as a material inducement to Seller to transfer the Purchased Assets to
Timberlands II, LLC and to sell the ownership interests in Timberlands II, LLC,
Purchaser has agreed to cause Purchaser, LLC to issue a Timber Note and transfer
cash together totaling the amount of the Purchase Price to Seller; and

WHEREAS, Purchaser agrees to acquire the ownership of Timberlands II, LLC, which
will own the Purchased Assets in Alabama and Georgia and will enter into the
Master Stumpage Agreement at Closing, and, as an inducement to Purchaser to
purchase the membership interests in Timberlands II, LLC, Seller has 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:

ARTICLE I

SALE AND PURCHASE

Section 1.1 Timberlands II, LLC Interests.

Upon the terms and subject to the conditions set forth in this Agreement, at the
Closing, Seller hereby agrees to assign, transfer and convey to Purchaser, LLC
all of the membership interests outstanding as of the Closing Date in
Timberlands II, LLC (collectively, the “Timberlands II, LLC Interests”).

 

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Section 1.2 Transfer of Purchased Assets.

Upon the terms and subject to the conditions set forth in this Agreement and the
Contribution Agreement, prior to the Closing Seller hereby agrees to assign,
transfer and convey to Timberlands II, LLC all the rights, title and interests
of Seller in and to the following assets (collectively, the “Purchased Assets”),
and that at the Closing the sole assets of Timberlands II, LLC shall be:

(a) Seller Land. The land owned and held by Seller in fee simple described in
Exhibit A and identified therein as Purchased Assets, together with (i) all
buildings, structures or other improvements thereon, (ii) all trees and timber
lying, growing, standing or located thereon, (iii) roads, bridges, and other
improvements and fixtures owned by Seller thereon, if any, and (iv) all other
privileges, hereditaments, tenements, appurtenances, easements, rights of way
(including the Purchaser Easements in respect thereof) and other rights
appertaining thereto, including without limitation, Seller’s interest in and to
all development, air and water rights and water stock related to said land and
any strips and gores (the “Seller Land”), subject to the Permitted Exceptions;
provided that Seller reserves for itself and its successors and assigns the
easements with respect to the Seller Land described in Exhibit A;

(b) Leasehold Interests. Subject to the provisions of Section 11.11 hereof, the
rights of Seller as lessee with respect to the leases, subleases and licenses
described in Exhibit B, which are in effect on the Closing Date and identified
therein as Leasehold Interests, 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 “Leasehold Interests”);

(c) Conveyed Minerals. All owned mineral substances in, on or under Seller Land
(the “Conveyed Minerals”);

(d) Timberlands II, LLC Purchased Contracts. Subject to the provisions of
Section 11.11 hereof, the rights of Seller under the Contracts in effect on the
Closing Date that primarily relate to all or any portion of the Seller Land or
the forest operations conducted thereon, but excluding the rights of Seller
under the Master Stumpage Agreement and Fiber Supply Agreement, and are
described in Exhibit C and identified therein as Purchased Assets (collectively,
the rights described above, the “Timberlands II, LLC Purchased Contracts”);

(e) Timberlands II, LLC Real Property Leases. Subject to the provisions of
Section 11.11 hereof, the rights of Seller with respect to any leases in effect
on the Closing Date (i) that relate to all or any portion of the Seller Land to
which Seller is a lessor and are described in Exhibit D including any leases
under which Seller has granted rights to a third party with respect to the
Conveyed Minerals or other recreational rights with respect to the Seller Land
or (ii) under which Seller is a lessee of facilities related to the forest
operations on the Seller Land and are described in Exhibit D (collectively, the
leases described above, the “Timberlands II, LLC Real Property Leases”); and

 

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(f) Personal Property. The personal property listed in Exhibit E attached hereto
and hereby made a part hereof, including, without limitation, Seller’s maps
(including backup data), books, records, surveys, aerial photos, title policies,
deeds, property books, plans, drawings, specifications, renderings, engineering
studies, biological studies particular to the Seller Land and Leasehold
Property, grading or drainage studies, environmental and hazardous waste studies
and reports and related data and materials in Seller’s possession relating to
the Seller Land and Leasehold Property (“Books and Records”), furniture or
office equipment located within any buildings or structures, machinery,
equipment, appliances, supplies, tools, and other personal property used by
Seller in its operations related to the Seller Land and Leasehold Property,
timber inventory, GIS data and software (to the extent assignable and
transferable and not including proprietary software) and all licenses,
certificates, permits, carbon credits or other similar credits, franchises,
approvals, exemptions, and registrations (to the extent assignable and
transferable) with respect to the Seller Land and Leasehold Property
(collectively, the “Personal Property”).

Section 1.3 Permitted Exceptions.

The Purchased Assets shall be assigned, transferred and conveyed to Timberlands
II, LLC subject to the following matters (collectively, the “Permitted
Exceptions”):

(a) Restrictions on the ability of the Purchasing Parties 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 any of the Seller Land is bounded or traversed by a river,
stream, branch or lake:

(i) All rights of flowage of record including 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 Seller Land 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 Seller Land 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 Seller Land is bounded or traversed by a
public road, the rights of others in and to any portion of the Seller Land that
lies within said road;

 

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(d) Railroad tracks and related facilities, if any, located on any portion of
the Seller Land and related railroad easements or rights of way, if any,
traversing the Seller Land and the rights of railroad companies to any tracks,
siding, ties and rails associated therewith;

(e) As to the Seller Land, Timberlands II, LLC Real Property Leases and
Leasehold Interests, 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 Seller Land, Timberlands II, LLC Real
Property Leases or Leasehold Interests after the Closing, 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.

(f) Liens for Taxes not yet due and payable, or being contested in good faith by
appropriate proceedings;

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

(h) 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 Seller Land which would be visible upon
an inspection of the Seller Land or would be revealed by an accurate survey of
the Seller Land;

(i) The terms and provisions of the Master Stumpage Agreement;

(j) Any claim of lack of access rights to any portion of the Seller Land where
Seller has historically enjoyed access;

(k) Any cemeteries or burial grounds; and

(l) Any easements, discrepancies, strips and gores or conflicts in boundary
lines, shortages in area, covenants, use restrictions, zoning restrictions,
encroachments or any other facts which a current and accurate survey of the
Seller Land would disclose.

ARTICLE II

PURCHASE PRICE; PAYMENT

Section 2.1 Purchase Price.

The aggregate purchase price payable by Purchaser, LLC to Seller in
consideration for the Timberlands II, LLC Interests shall be Four-Hundred
Million and No/100ths ($400,000,000.00) Dollars (the “Purchase Price”). The
Purchase Price shall be allocated between the Installment Note Assets and the
Cash Assets. The purchase price in consideration of the Installment Note Assets
shall be Three-Hundred Ninety-Seven Million Nine-Hundred Seventy-Nine Thousand
and No/100ths ($397,979,000.00) Dollars (the “Installment Note Purchase Price”).
The purchase price in consideration of the Cash Assets shall be Two Million and
Twenty-One Thousand and

 

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No/100ths ($2,021,000.00) Dollars (the “Cash Purchase Price”). The Installment
Note Purchase Price shall be payable as provided in Section 2.5(a). The Cash
Purchase Price shall be payable as provided in Section 2.5(b).

Section 2.2 Cash Assets and Installment Note Assets.

The “Installment Note Assets” consist of all the Seller Land and Leasehold
Interests. The “Cash Assets” consist of the Conveyed Minerals, the Timberlands
II, LLC Purchased Contracts, the Timberlands II, LLC Real Property Leases,
Personal Property and any other Purchased Assets that are not Installment Note
Assets.

Section 2.3 Allocation of Purchase Price.

The Installment Note Purchase Price shall be allocated in its entirety to the
Installment Note Assets. The Installment Note Purchase Price shall be allocated
among the Installment Note Assets as of the Closing Date, and the Cash Purchase
Price shall be allocated among the Cash Assets as of the Closing Date, all in
accordance with a schedule to be prepared by Seller, subject to the consent of
Purchaser and Purchaser, LLC, which shall not be unreasonably withheld,
conditioned or delayed, using the allocation method provided by Section 1060 of
the Code and the regulations thereunder. The Parties shall cooperate to comply
with all substantive and procedural requirements of Section 1060 of the Code and
the regulations thereunder. Purchaser and Seller agree that they will not take
nor will they permit any Affiliate to take, for Income Tax purposes, any
position inconsistent with such allocation; provided, however, that
(i) Purchaser’s cost may differ from the total amount allocated hereunder to
reflect the inclusion in the total cost of items (for example, capitalized
acquisition costs) not included in the total amount so allocated, and (ii) the
amount realized by Seller may differ from the amount allocated to reflect
transaction costs that reduce the amount realized for federal Income Tax
purposes.

Section 2.4 Apportionments.

Except as provided in Section 3.4, the following shall be apportioned between
the Purchasing Parties, on the one hand, and Seller, on the other hand, on and
as of the Closing Date (on a per diem basis): (i) rents due from Seller under
the Leasehold Interests and Timberlands II, LLC Real Property Leases; (ii) real
property Taxes and assessments imposed on a periodic basis in respect of the
Purchased Assets, in each case, with respect to the Tax period in which the
Closing Date occurs; (iii) rents paid under and other revenue from the
Timberlands II, LLC Real Property Leases, including hunting and other
recreational lease revenue; (iv) payments, applying to the period beginning on
the Closing Date, made by Seller in respect of any Leasehold Interests,
Timberlands II, LLC Real Property Leases or Timberlands II, LLC Purchased
Contracts; and (v) any credit for timber harvested to which Purchaser is
entitled in accordance with this Section 2.4 (collectively, “Apportionments”).
For timber that is harvested and delivered prior to Closing pursuant to the
harvest plan attached hereto as Exhibit F (the “Harvest Plan”), all revenue
therefrom shall go to Seller. Purchaser shall receive a credit against the Cash
Purchase Price for all timber which is harvested and delivered prior to Closing
and not included in the attached Harvest Plan equal to the sum of the products
of the volume of timber harvested (as determined by load and scale tickets for
each load of timber harvested) in each product class included in the Fiber
Supply Agreement (each a “Product Class”) multiplied by the applicable initial
unit price for such Product

 

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Class in the Fiber Supply Agreement. Within thirty (30) days following the
Closing Date, Seller shall deliver to Purchaser a report certifying the total
volume of additional timber per Product Class harvested prior to the Closing
Date, which volumes were not included in the credit to the Purchase Price
received by Purchaser at Closing, and the Purchase Price shall be further
adjusted by an amount equal to the sum of the products of the additional volume
of timber harvested (as determined by load and scale tickets for each load of
timber harvested) in each Product Class prior to Closing multiplied by the
applicable initial unit price for such Product Class in the Fiber Supply
Agreement less any revenue actually received by Purchaser or Timberlands II, LLC
for such timber under the any of the Timberlands II, LLC Purchased Contracts by
payment by Seller of such amount in cash by wire transfer of immediately
available funds to the bank or bank accounts designated by Purchaser. For timber
that is harvested and delivered after Closing, whether pursuant to the Harvest
Plan or not, all revenue therefrom shall go to Purchaser. Not later than five
days prior to the Closing Date, Seller and Purchaser 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 Note), by the aggregate amount of such
Apportionments relating to the Installment Note Assets, 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 is assessed for the applicable Tax period, then real
property Taxes and assessments imposed on a periodic basis shall be apportioned
on the basis of the Tax assessed for the immediately preceding Tax period.
Seller and Purchaser 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. Notwithstanding anything to the
contrary contained herein, Seller shall be responsible for (i) any fines,
penalties or other assessments imposed as a result of Seller’s failure to pay
any Taxes due and payable prior to the Closing Date and (ii) any roll-back or
greenbelt type Taxes related to any agricultural, forest or open-space exemption
which is subject to recapture pursuant to state Laws (collectively, hereinafter
“Roll-back Taxes”), but only to the extent that any such Roll-back Taxes relate
to a pre-acquisition Tax period and result from (A) any failure by Seller to
take actions required to avoid such Roll-back Taxes, prior to the transactions
contemplated by this Agreement, (B) actions taken by Seller prior to Closing
which result in the removal of any of the Purchased Assets from their current
classification or any program or special exemption available under state Laws,
(C) the change in use by Seller of any of the Purchased Assets prior to the
transactions contemplated by this Agreement or (D) as a result of the
consummation of the transfer of the Purchased Assets to Timberlands II, LLC
described in Section 1.2. Purchaser shall otherwise be responsible for any
Roll-back Taxes. Seller’s obligations with regard to Roll-back Taxes in this
Section 2.4 shall survive Closing. If Purchaser and Seller cannot agree as to
Apportionments, the dispute will be resolved pursuant to Section 10.5.

Section 2.5 Payment of Purchase Price.

At the Closing, the Purchase Price shall be payable as follows:

(a) At the Closing, the Installment Note Purchase Price shall be payable by
Purchaser, LLC to Seller or to those parties designated in writing by Seller, in
the form of an installment note issued by Purchaser, LLC (substantially in the
form of Exhibit G with only the changes necessary to complete missing
information or as agreed upon by the parties) in an aggregate principal amount
equal to the Installment Note Purchase Price, on terms and conditions that are
consistent with the

 

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Timber Note Indicative Terms (a “Timber Note”). The Timber Note shall be fully
secured by an irrevocable standby letter of credit in form and substance
reasonably satisfactory to Seller, issued by a Credit Enhancement Bank selected
with the prior written consent of Seller, on terms and conditions that are
consistent with the Timber Note Indicative Terms (a “Letter of Credit”). The
Purchasing Parties will be solely responsible for all fees and expenses
associated with the Letter of Credit with respect to the Initial Term. Seller
will be solely responsible for all fees and expenses associated with the Letter
of Credit for any Extension Period. It is the intention of the Parties that the
Installment Note Purchase Price (in the form of the Timber Note) shall be paid
solely in consideration for the sale of the Installment Note Assets.

(b) At the Closing, the Cash Purchase Price shall be payable by Purchaser, LLC
to Seller or to those parties designated in writing by Seller, in the form of
cash by wire transfer of immediately available funds to the bank account or
accounts designated by Seller.

Section 2.6 Earnest Money.

Within three (3) business days after date of this Agreement, Purchaser, LLC
shall deliver to Title Company, as escrow agent hereunder (in such capacity
Title Company shall be hereinafter referred to as “Escrow Agent”), an earnest
money deposit (hereinafter referred to as the “Earnest Money”) in the amount of
Five Million and No/100ths ($5,000,000.00) Dollars, payable to the order of
Escrow Agent, and Escrow Agent agrees to hold and disburse the Earnest Money in
an interest bearing account for the benefit of the Party who is entitled to
disbursement of the Earnest Money under this Agreement and in accordance with
the terms hereof. The Earnest Money, and all interest thereon, shall be applied
toward the Cash Purchase Price at Closing.

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 XIII, at
such place as mutually agreed upon by the Parties at 9:00 a.m., Eastern Daylight
Savings Time, on the later of (i) September 6, 2007 or (ii) subject to the
provisions of Section 15.1(b) hereof, the date upon which all of the conditions
set forth in Article XIII shall have been satisfied, or waived by the Party or
Parties entitled to the benefit thereof (other than those conditions that by
their nature are to be satisfied at the Closing) but in no event later than the
Termination Date (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 Seller. Seller shall deliver the following items to
Purchaser at the Closing:

(i) the Contribution Agreement;

 

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(ii) a certificate from a duly authorized officer of Seller attesting to the
matters set forth in Sections 13.2(b), 13.2(c) and 13.2(e);

(iii) duly executed counterparts of the assignment and assumption agreement
under which, immediately prior to the Closing, Seller assigned and Timberlands
II, LLC assumed all of Seller’s right, title and interest in and to the
Timberlands II, LLC Purchased Contracts, in a form mutually agreed upon by
Seller and Purchaser within 15 days after the date of this Agreement (the
“Assignment and Assumption of Purchased Contracts”);

(iv) duly executed counterparts of the assignment and assumption agreement under
which, immediately prior to the Closing, Seller assigned and Timberlands II, LLC
assumed all of Seller’s right, title and interest in and to the Leasehold
Interests, in a form mutually agreed upon by Seller and Purchaser within 15 days
after the date of this Agreement (the “Assignment and Assumption of Leasehold
Interests”);

(v) duly executed counterparts of the assignment and assumption agreement under
which, immediately prior to the Closing, Seller assigned and Timberlands II, LLC
assumed all of Seller’s right, title and interest in and to the Timberlands II,
LLC Real Property Leases being conveyed to it, in each case in a form mutually
agreed upon by Seller and Purchaser within 15 days after the date of this
Agreement (the “Assignment and Assumption of Real Property Leases”);

(vi) one limited or special warranty deed per county (or its local equivalent)
warranting only against parties claiming by, through or under Seller in
recordable form and subject only to the Permitted Exceptions and in a form for
each state in which the Seller Land is located mutually agreed upon by Seller
and Purchaser within 15 days after the date of this Agreement;

(vii) one quitclaim deed per county (or its local equivalent), in recordable and
mutually agreeable form for each state in which the Seller Land is located, to
the Conveyed Minerals in respect of Seller Land by Seller to the Timberlands II,
LLC to whom the Seller Land is being conveyed (the deeds contemplated by this
subparagraph and subparagraph (vi) above are referred to in this Agreement as
the “Deeds”);

(viii) duly executed counterparts of the Master Stumpage Agreement in a form
mutually agreed upon by Seller and Purchaser within 15 days after the date of
this Agreement (the “Master Stumpage Agreement”);

(ix) duly executed counterparts of the Fiber Supply Agreement in a form mutually
agreed upon by Seller and Purchaser within 15 days after the date of this
Agreement (the “Fiber Supply Agreement”);

(x) 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;

(xi) a duly executed counterpart of an assignment agreement transferring to
Purchaser, LLC the Timberlands II, LLC Interests being conveyed to Purchaser,
LLC in a form mutually agreed upon by Seller and Purchaser within 15 days after
the date of this Agreement (the “Assignment of Timberlands II, LLC Interests”);

 

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(xii) affidavits reasonably required by the Title Company (as hereinafter
defined), including without limitation, any affidavits necessary for Title
Company to include the “non-imputation” endorsement described in Section 11.4(a)
of this Agreement in the Title Policies, but only to the extent the same are
consistent with Seller’s limited warranty of title to be provided in the Deeds;

(xiii) duly executed landlord estoppel certificates substantially in the form of
Exhibit I attached hereto (the “Landlord Estoppels”) from at least 75% (based on
number of acres) of the landlords or lessors under the Underlying Leases;

(xiv) one or more Purchaser Easements, each in a form and upon such terms to
which Purchaser and Seller agree pursuant to Section 11.3 of this Agreement;

(xv) a closing statement showing the agreed upon Apportionments and costs and
expenses to be paid at Closing by Seller and Purchaser respectively (the
“Closing Statement”); and

(xvi) such further assignments, certificates of title and other instruments of
assignment and conveyance, all in form reasonably satisfactory to Purchaser, as
are necessary to convey fully and effectively to Timberlands II, LLC the
Purchased Assets and the membership interests in and to Timberlands II, LLC to
Purchaser, LLC in accordance with the terms hereof.

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

(i) the Timber Note issued by Purchaser, LLC in respect of the Installment Note
Purchase Price;

(ii) the cash wire transfer in respect of the Cash Purchase Price;

(iii) the Letter of Credit securing the Timber Note issued by Purchaser, LLC in
respect of the Installment Note Purchase Price;

(iv) certificates of a duly authorized officer of the Purchasing Parties
attesting to the matters set forth in Sections 13.3(b) and 13.3(c);

(v) duly executed counterparts of the Assignment of Timberlands II, LLC
Interests;

(vi) duly executed counterparts of the Closing Statement;

(vii) a legal opinion that if Purchaser, Timberlands II, LLC or any Affiliate of
such Party 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 Purchaser, LLC with those of such Person; and

 

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(viii) such further assignments, certificates of title and other instruments of
assumption, all in form reasonably satisfactory to Seller, as are necessary to
convey fully and effectively to Timberlands II, LLC the Purchased Assets and the
membership interests in and to Timberlands II, LLC to Purchaser, LLC.

(c) Deliveries by Timberlands II, LLC. Immediately prior to the Closing, Seller
shall cause Timberlands II, LLC to deliver to Seller:

(i) duly executed counterparts of the Assignment and Assumption of Purchased
Contracts, the Assignment and Assumption of Leasehold Interest and the
Assignment and Assumption of Real Property Leases, whereby Timberlands II, LLC
agrees to assume subject to the Assumed Liabilities as defined in the
Contribution Agreement;

(ii) duly executed counterparts of the Master Stumpage Agreement and Fiber
Supply Agreement;

(iii) one or more Reserved Easements, each in a form and upon such terms to
which Purchaser and Seller agree pursuant to Section 11.3 of this Agreement; and

(iv) any other conveyance documents described in Section 3.2(a) to which
Timberlands II, LLC will be a party.

(d) Other Closing Deliveries. The Parties shall each execute and deliver (and,
prior to the Closing, Seller shall cause Timberlands II, LLC to execute and
deliver, and, from and after Closing, Purchaser and Purchaser, LLC shall cause
Timberlands II, LLC 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 Seller Land, the Leasehold Property and Conveyed Minerals
shall be delivered to Timberlands II, LLC immediately prior to Closing, subject
to the Permitted Exceptions.

Section 3.4 Costs and Expenses.

Each Party shall be responsible for its own attorneys’ fees and expenses. Seller
shall prepare the Deeds at Seller’s expense. Purchaser shall pay all recording
fees and costs associated with filing any documents, including the Deeds.
Purchaser shall be responsible for premiums payable in connection with the
issuance of the final Title Policies. Seller shall be responsible for the cost
of any title search and examination fees or other costs incurred in connection
with the preparation and delivery of the Title Commitments for the Seller Land.
Purchaser, on the one hand, and Seller, on the other, shall each be responsible
for fifty percent (50%) of the cost of any title search and examination fees or
other costs incurred in connection with the preparation and delivery

 

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of the Title Commitments for the Leasehold Interests. Subject to the provisions
of Section 2.4 hereof, Purchaser 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 Purchasing Party after the Closing with respect to the
removal of the Purchased Assets from their present classifications, or changes
in use after the Closing. The real estate transfer tax payable pursuant to
O.C.G.A. § 48-6-1 and the recordation tax payable pursuant to ALA. CODE
§ 40-22-1 (1975) arising in connection with the transactions contemplated by
this Agreement (collectively, “Transfer Taxes”) shall be paid fifty percent
(50%) by Seller and fifty percent (50%) by Purchaser. Seller shall timely
prepare and file Tax Returns in respect of such Transfer Taxes with the
applicable Tax Authority. Subject to the terms and conditions of Section 10.5,
the Parties shall split the costs incurred by the Parties with respect to any
dispute resolution conducted pursuant to Section 10.5 hereof equally. Seller and
Purchaser shall each pay fifty percent (50%) of any filing fees incurred with
respect to all filings made under the HSR Act (to the extent such filing is
necessary) in connection with this Agreement. All other costs shall be paid by
the Party incurring such costs.

ARTICLE IV

PURCHASER’S ACKNOWLEDGEMENTS

Section 4.1 Purchaser’s Acknowledgements.

(a) Purchaser, on behalf of itself, on behalf of Purchaser, LLC and on behalf of
Timberlands II, LLC, upon and after the Closing Date, acknowledges that, except
as is otherwise specifically set forth herein or in the certificate, agreements
and other documents delivered at Closing pursuant to Sections 3.2(a)(ii), (vi),
(vii), (x) and (xii), Seller has not made, or 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 Seller Land or
Leasehold Interests, or any portion thereof; (ii) the location of the Seller
Land or Leasehold Interests 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 Seller Land or Leasehold Interests; (iv) the number of
acres or square footage in the Seller Land or Leasehold Interests; (v) the
present or future physical condition or suitability of the Seller Land or
Leasehold Interests for any purpose; (vi) the actual amount and type of timber
on the Seller Land or Leasehold Interests; or (vii) any other matter or thing
affecting or relating to the Purchased Assets or this Agreement.

(b) Purchaser, on behalf of itself, on behalf of Purchaser, LLC and on behalf of
Timberlands II, LLC upon and after the Closing Date acknowledges that (i) Seller
has not obtained mineral title searches and will not provide a title commitment
for the Conveyed Minerals; and (ii) it will be Purchaser’s responsibility, at
Purchaser’s cost, if Purchaser desires, to confirm the exact Conveyed Minerals
interest and title being conveyed.

(c) PURCHASER, ON BEHALF OF ITSELF, ON BEHALF OF PURCHASER, LLC AND ON BEHALF OF
TIMBERLANDS II, LLC, UPON AND AFTER THE CLOSING DATE, ACKNOWLEDGES THAT, EXCEPT
FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN ARTICLES V, VI, VII AND VIII
OF THIS AGREEMENT, IN ARTICLES VI

 

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AND VII OF THE CONTRIBUTION AGREEMENT, IN THE CERTIFICATES DELIVERED BY SELLER
AT THE CLOSING PURSUANT TO SECTION 3.2(A)(II) IN THE DEEDS DELIVERED BY SELLER
PURSUANT TO SECTIONS 3.2(A)(VI) AND 3.2(A)(VII) AND IN ANY AFFIDAVITS DELIVERED
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 SELLER OR ANY
OTHER PERSON, INCLUDING WITH RESPECT TO THE CONDITION OR VALUE OF THE PURCHASED
ASSETS AND SELLER 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, PURCHASER HAS NOT RELIED ON OR DOES NOT RELY ON
ANY SUCH REPRESENTATIONS, WARRANTIES OR PROMISES, EXPRESS OR IMPLIED, BY OR ON
BEHALF OF SELLER OR ANY OTHER PERSON. PURCHASER, PURCHASER, LLC AND TIMBERLANDS
II, LLC, 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 OR THE CONTRIBUTION AGREEMENT.

UPON THE CLOSING, PURCHASER, PURCHASER, LLC AND TIMBERLANDS II, LLC SHALL ASSUME
THE RISK THAT ADVERSE MATTERS MAY NOT HAVE BEEN REVEALED BY SELLER’S OR
PURCHASER’S INVESTIGATIONS, AND, UPON THE CLOSING, PURCHASER, PURCHASER, LLC AND
TIMBERLANDS II, LLC SHALL BE DEEMED TO HAVE WAIVED, RELINQUISHED AND RELEASED
SELLER 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 PURCHASER, PURCHASER, LLC OR TIMBERLANDS II, LLC MIGHT
HAVE ASSERTED OR ALLEGED AGAINST SELLER 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 SELLER LAND OR LEASEHOLD INTERESTS, EXCEPT FOR ANY
CLAIMS PURCHASER, PURCHASER, LLC OR TIMBERLANDS II, LLC MAY HAVE AGAINST SELLER
FOR THE BREACH OF ANY REPRESENTATION OR WARRANTY MADE BY SELLER UNDER ARTICLES
V, VI, VII OR VIII OF THIS AGREEMENT OR IN ARTICLES VI AND VII OF THE
CONTRIBUTION AGREEMENT OR FOR ANY ENVIRONMENTAL CLAIMS WHICH ARE BROUGHT BY
PURCHASER IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF SECTIONS 14.3 OR 14.4
OR SECTIONS 9.2 OR 9.3 OF THE CONTRIBUTION AGREEMENT RESPECTIVELY OR THE DEFAULT
BY SELLER IN THE PERFORMANCE OF ANY OF SELLER’S OBLIGATIONS UNDER THIS AGREEMENT
OR THE CONTRIBUTION AGREEMENT WHICH CLAIMS PURCHASER, PURCHASER, LLC AND
TIMBERLANDS II, LLC DO NOT WAIVE.

(d) The Purchasing Parties acknowledge that any materials provided to the
Purchasing Parties, including any cost or other estimates, projections, acreage,
and timber information, the Confidential Information Memorandum dated February
2007, 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 Seller or any other Person and are not to be
relied upon by the Purchasing Parties.

 

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ARTICLE V

REPRESENTATIONS AND WARRANTIES OF SELLER

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

Section 5.1 Organization.

Seller is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Delaware 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 in connection
with the consummation of the transactions contemplated by this Agreement (the
“Ancillary Agreements”) and (iii) perform its obligations and consummate the
transactions contemplated hereby and by the Ancillary Agreements.

Section 5.2 Qualification.

Seller is qualified or registered as a foreign corporation for the transaction
of business and is in good standing under the laws of the states of Alabama and
Georgia.

Section 5.3 Authority.

The execution, delivery and performance of this Agreement 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 and the consummation of transactions contemplated hereby have
been 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 Seller are necessary for Seller to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Seller and, assuming due authorization,
execution and delivery by Purchaser, is a legal, valid and binding obligation of
Seller, enforceable against Seller 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.

 

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Section 5.4 No Conflict.

None of the execution, delivery or performance of this Agreement by Seller will
result in a breach or violation of, or default under, (i) the terms, conditions
or provisions of Seller’s articles of incorporation, bylaws or any standing
resolution of its board of directors or any organizational document of Seller;
(ii) any material Contract to which Seller is a party or by which Seller or any
of the assets of Seller may be bound; (iii) any Law applicable to Seller or any
of its assets; or (iv) any permit, license, order, judgment or decree of any
Governmental Authority by which Seller or the assets of Seller is or may be
bound.

Section 5.5 Consents and Approvals.

There are no approvals, consents 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 Seller of this Agreement and the Ancillary
Agreements, or the consummation of the transactions contemplated hereby and
thereby, other than (i) those described in Section 5.5 of 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 or
(c) may be required under the HSR Act.

Section 5.6 Litigation.

(a) Except as set forth in Section 5.6(a) of Seller’s Disclosure Letter, as of
the date hereof, there are no written Claims which either (i) 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 (ii) to the best of Seller’s Knowledge, affect or relate to any of
the Purchased Assets.

(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 Seller (or affecting any of its assets,
including the Seller Land or Leasehold Interests) 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.

There are no material Liens or other encumbrances, other than Permitted
Exceptions, on any of the Purchased Assets that arose in connection with any
failure or alleged failure by Seller to pay any material Tax. All material Taxes
related to the Purchased Assets required to be withheld and paid have been
withheld and have been paid, except for any Taxes being contested in good faith
or listed in Section 5.7 of Seller’s Disclosure Letter.

Section 5.8 Contracts.

(a) Section 5.8(a) of Seller’s Disclosure Letter contains an accurate and
complete list, and Seller has made available to Purchaser true, accurate and
complete copies, of each Timberlands II, LLC Purchased Contract that is in
effect on the date of this Agreement.

 

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(b) Except as provided in Section 5.8(b) of Seller’s Disclosure Letter, (i) each
such Timberlands II, LLC Purchased Contract 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 any such Timberlands II, LLC Purchased Contract, or otherwise
cause any such Timberlands II, LLC Purchased Contract to cease to be legal,
valid, binding, enforceable and in full force and effect on identical terms
following the Closing; (iii) neither Seller, nor to Seller’s Knowledge, any
other party to any such Timberlands II, LLC Purchased Contract is in breach or
default under such Timberlands II, LLC Purchased Contract; 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
any such Timberlands II, LLC Purchased Contract.

Section 5.9 Membership Interests.

Immediately prior to the Closing Date, Seller will own of record and
beneficially all of the Timberlands II, LLC Interests and, immediately after the
Closing, Purchaser, LLC will own of record and beneficially all of the
Timberlands II, LLC Interests.

Section 5.10 Securities Laws Registration Requirements Exemptions.

Seller understands that the Timber Note is not and will not be registered under
the Securities Act of 1933, as amended, or any state securities laws; the Timber
Note is being issued to Seller in reliance upon federal and state exemptions for
transactions not involving a public offering; and Seller is acquiring the Timber
Note solely for its own account and not with a view to the distribution thereof.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES

OF SELLER RELATED TO TIMBERLANDS II, LLC

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

Section 6.1 Organization and Good Standing.

At Closing, Timberlands II, LLC will be a limited liability company duly formed
and organized, validly existing and in good standing under the laws of the State
of Delaware and Seller will provide true, correct and complete copies of the
certificate of formation and the limited liability company agreement of
Timberlands II, LLC. At Closing, Timberlands II, LLC will be qualified to
conduct business and will be in good standing in the States of Georgia and
Alabama.

 

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Section 6.2 Noncontravention.

Neither the execution and delivery of this Agreement by Seller nor the
consummation of the transactions contemplated herein will constitute a violation
of the certificate of formation, limited liability company agreement, or other
organizational agreements of Timberlands II, LLC, or will result in the breach
of, or the imposition of any lien on any assets of Timberlands II, LLC pursuant
to, or constitute a default under, any indenture or bank loan or credit
agreement or other agreement to which Timberlands II, LLC will be a party at
Closing or by which any of the Purchased Assets may be bound or affected. Except
for any consents, releases, approvals or authorizations that will have been
obtained on or prior to the Closing Date, no consent, approval, authorization or
action by any governmental authority or any person or entity having legal rights
against or jurisdiction over Timberlands II, LLC will be required in connection
with the execution and delivery by Seller of this Agreement or for consummation
of the transactions contemplated herein.

Section 6.3 Taxes.

As a newly-formed entity at Closing, (i) Timberlands II, LLC will not have been
required to file any Tax Returns and no material Taxes will have become due and
payable, (ii) Timberlands II, LLC will not have been required to withhold or pay
any Taxes as no amounts will have been paid or owing to any employee,
independent contractor, or other third party, and no Forms W-2 or 1099 will have
been required with respect thereto, and (iii) there will be no pending dispute
with any Governmental Authority over the liability of Timberlands II, LLC for
Taxes. Seller has not made any election nor taken any action that would cause
Timberlands II, LLC to be taxable as a corporation for U.S. federal Income Tax
purposes.

Section 6.4 Operations History.

Immediately prior to the Closing, Timberlands II, LLC will not have conducted
any operations other than acquiring the Purchased Assets, will not have had any
employees and will have no liabilities prior to acquiring the Purchased Assets.
The only liabilities of Timberlands II, LLC at Closing will be the “Assumed
Liabilities” as defined in the Contribution Agreement. Upon delivery by Seller
of the Assignment of Timberlands II, LLC Interests to Purchaser pursuant to
Section 3.2(a)(xi) herein, the obligations of Seller under the Contribution
Agreement shall be no less or greater than the obligations set forth in this
Agreement.

ARTICLE VII

REPRESENTATIONS AND WARRANTIES

OF SELLER RELATED TO THE SELLER LAND

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

 

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Section 7.1 Title to the Seller Land.

Except as disclosed in the Title Commitments, Seller owns and, as of the
Closing, Timberlands II, LLC will own fee simple title to the Seller Land, free
and clear of all Liens, but subject to the Permitted Exceptions.

Section 7.2 Compliance with Laws.

(a) Seller holds all licenses, certificates, permits, franchises, approvals,
exemptions, registrations and rights of any Governmental Authority which are
necessary to conduct timber management and harvesting operations on the Seller
Land.

(b) Seller presently is operating the Seller Land in substantial compliance with
(i) applicable Laws, other than Environmental Laws which are covered by Sections
7.3 and 8.4; (ii) in conformity with the guidelines of the Sustainable Forestry
Initiative Program (“SFI”); and (iii) applicable state forestry Best Management
Practices.

(c) Except as disclosed in Section 7.2(c) of Seller’s Disclosure Letter, Seller
has not received written notification from any Governmental Authority during the
last three (3) years alleging that either the Seller Land, or any portion
thereof is not in compliance with applicable Laws. To Seller’s Knowledge, except
as disclosed in Section 7.2(c) of Seller’s Disclosure Letter, Seller has not
received written notification from any Governmental Authority during the last
five (5) years alleging that either the Seller Land, or any portion thereof is
not in compliance with applicable Laws. To Seller’s Knowledge and except as
disclosed in Section 7.2(c) of Seller’s Disclosure Letter, there are no
violations on the Seller Land, or any portion thereof.

Section 7.3 Matters Relating to the Environmental Condition of the Seller Land.

(a) Seller has provided a true and correct copy of each of the Phase I Reports
on Seller Land and any other document relating in any way to Hazardous
Substances or Remediation in, at, on or about the Seller Land (the
“Environmental Reports”) as described in Exhibit H attached hereto, to Purchaser
upon the following terms and conditions: (i) the Environmental Reports are
provided for informational purposes only, without any representation or warranty
by or on behalf of any of Seller as to the accuracy or completeness of the
information contained therein; (ii) the Environmental Reports are subject to the
terms and conditions of the Confidentiality Agreement; and (iii) no information
contained in the Environmental Reports shall be deemed to obligate Seller to
take any action, including action to investigate, correct, remediate or address
any condition described in the Environmental Reports. Purchaser acknowledges
receipt of the Environmental Reports and accepts delivery of such Environmental
Reports upon the terms and conditions set forth herein.

(b) Except as set forth in the Environmental Reports, (i) to Seller’s
Environmental Knowledge, there is no condition or matter existing on the Seller
Land that constitutes a violation of, or creates an obligation under, any
applicable Environmental Law or Environmental Permit; (ii) to Seller’s
Environmental Knowledge, Seller is operating the Seller Land in compliance with
all applicable Environmental Laws and the requirements of all applicable
Environmental Permits; (iii) to Seller’s Environmental Knowledge, Seller has not
received any written notice of any violation of, obligation under, or liability
or clean-up or Remediation required under, any

 

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Environmental Law in connection with Seller’s operations on the Purchased Assets
during the past five (5) years; (iv) there are and have been no writs,
injunctions, decrees, orders or judgments outstanding or any actions, suits,
proceedings or investigations pending or threatened in writing relating to
Seller’s compliance with or liability under any Environmental Law or
Environmental Permit affecting the Purchased Assets, (v) to Seller’s
Environmental Knowledge, no portion of the Seller Land has been used by Seller
for the Disposal, Release or deposit of any Hazardous Substances or fill (or
other material) containing Hazardous Substances in violation of levels allowed
under applicable Environmental Laws; and (vi) to Seller’s Environmental
Knowledge, there are and have been no Releases of Hazardous Substances from any
underground storage tanks on the Seller Land; and (vii) to Seller’s
Environmental Knowledge, there are no above-ground or underground storage tanks,
whether in use or closed, in, at, on or under the Seller Land.

Section 7.4 Condemnations.

Except as described in Section 7.4 of Seller’s Disclosure Letter, there are no
Condemnations and no Condemnations have been concluded between January 1, 2007
and the date hereof with respect to the Seller Land.

Section 7.5 Timberlands II, LLC Real Property Leases.

Except as described in Section 7.5 of Seller’s Disclosure Letter, with respect
to each Timberlands II, LLC Real Property Lease: (i) such Timberlands II, LLC
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 Timberlands II, LLC
Real Property Lease, or otherwise cause such Timberlands II, LLC Real Property
Lease to cease to be legal, valid, binding, enforceable and in full force and
effect on identical terms following the Closing; (iii) neither Seller, nor to
Seller’s Knowledge, any other party to such Timberlands II, LLC Real Property
Lease is in breach or default under such Timberlands II, LLC 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 Timberlands II, LLC Real Property
Lease or permit the termination, modification or acceleration of rent under such
Timberlands II, LLC Real Property Lease.

Section 7.6 Disposition of Assets.

Except as disclosed in Section 7.6 of Seller’s Disclosure Letter or in
accordance with the Harvest Plan, since January 1, 2007, Seller has not
(i) harvested, nor has Seller knowingly permitted the harvest of any trees or
timber located on any portion of the Seller Land; or (ii) disposed or contracted
for the disposal or sale of any portion of the Seller Land or any trees or
timber located thereon.

Section 7.7 Casualty.

To Seller’s Knowledge, and except as set forth in Section 7.7 of Seller’s
Disclosure Letter, since January 1, 2007, there has been no loss or damage to
timber on the Seller Land exceeding $100,000 in value in the aggregate due to
any casualty, insect infestation, disease, theft, or other unauthorized cutting.

 

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Section 7.8 Endangered Species.

Except as disclosed in Section 7.8 of Seller’s Disclosure Letter, to Seller’s
Environmental Knowledge, there are no areas of the Seller Land with respect to
which Seller has a legal obligation under the federal Endangered Species Act or
any similar state or local law relating to the protection of endangered species
(“Endangered Species”), and there are no pending legal proceedings against
Seller or relating to the Seller Land, or any portion thereof, based upon the
presence of Endangered Species on the Seller Land. None of the Seller Land has
been designated as “critical habitat” as that term is defined by 16 U.S.C.
§ 1532(6).

Section 7.9 Boundary Disputes.

Except as set forth in Section 7.9 of Seller’s Disclosure Letter, to Seller’s
Knowledge, there are no unresolved boundary disputes, and no unresolved disputes
with respect to encroachments, between Seller and any third party affecting any
of the Seller Land, nor is any Person adversely possessing any material portion
of the Seller Land.

Section 7.10 Mining Activity.

Except as disclosed in Section 7.10 of Seller’s Disclosure Letter, to Seller’s
Knowledge, during the three (3) years immediately preceding the date hereof,
there has been no mining or other mineral extraction or processing activity on
any portion of the Seller Land.

Section 7.11 Unresolved Access Claims.

Except as disclosed in the Title Commitments, to Seller’s Knowledge there are no
unresolved material claims or disputes relating to access to any portion of the
Seller Land.

Section 7.12 Timber Volumes.

To Seller’s Knowledge, there are no currently existing facts or conditions with
respect to the Purchased Assets that would prevent an owner of the entirety of
the Purchased Assets from growing and making available for harvest such
quantities of timber as are contemplated under the Fiber Supply Agreement, but
subject to the provisions thereof regarding shortfalls in volume both contained
therein, provided that such owner operates the Purchased Assets in the normal
course and excluding the effect of future weather conditions, casualty, insect
infestations, and other causes beyond the control of the owner.

Section 7.13 Roll-back Taxes.

Seller has not taken any action that would, or failed to take any action which
failure would, reasonably be expected to cause a change in the classification of
the Seller Land for Roll-back Tax purposes.

 

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ARTICLE VIII

REPRESENTATIONS AND WARRANTIES OF

SELLER RELATED TO LEASEHOLD INTERESTS

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

Section 8.1 Title to Leasehold Interests.

Except as disclosed in the Title Commitments or Section 8.1 of Seller’s
Disclosure Letter, to Seller’s Knowledge, Seller owns and, as of the time of the
Closing, Timberlands II, LLC will own, leasehold title to the Leasehold
Interests, in each case free and clear of all Liens, but subject to the
Permitted Exceptions.

Section 8.2 Underlying Leases.

Except as described in Section 8.2 of Seller’s Disclosure Letter, with respect
to each lease agreement granting, creating or relating to a Leasehold Interest
(each an “Underlying Lease”): (i) such Underlying Lease is legal, valid,
binding, enforceable and in full force and effect; (ii) the transactions
contemplated by this Agreement will not result in a breach or default under such
Underlying Lease, or otherwise cause such Underlying Lease to cease to be legal,
valid, binding, enforceable and in full force and effect on identical terms
following the Closing; (iii) neither Seller, nor to Seller’s Knowledge, any
other party to such Underlying Lease is in breach or default under such
Underlying 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 Underlying Lease or permit
the termination, modification or acceleration of rent under such Underlying
Lease.

Section 8.3 Compliance with Laws.

(a) Seller holds all licenses, certificates, permits, franchises, approvals,
exemptions, registrations and rights of any Governmental Authority which are
necessary to conduct timber management and harvesting operations on the
Leasehold Property.

(b) Seller presently is operating the Leasehold Property in substantial
compliance with (i) applicable Laws, other than Environmental Laws which are
covered by Sections 7.3 and 8.4; (ii) in conformity with the guidelines of SFI;
and (iii) applicable state forestry Best Management Practices.

(c) Seller has not received written notification from any Governmental Authority
during the last three (3) years alleging that either the Leasehold Property, or
any portion thereof is not in compliance with applicable Laws. To Seller’s
Knowledge, except as disclosed in Section 8.3(c) of Seller’s Disclosure Letter,
Seller has not received written notification from any Governmental Authority
during the last five (5) years alleging that either the Leasehold Property or
any portion

 

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thereof, is not in compliance with applicable Laws. To Seller’s Knowledge and
except as disclosed in Section 8.3(c) of Seller’s Disclosure Letter, there are
no violations on the Leasehold Property, or any portion thereof.

Section 8.4 Matters Relating to the Environmental Condition of the Leasehold
Property.

(i) To Seller’s Environmental Knowledge, Seller is operating the Leasehold
Property in compliance with all applicable Environmental Laws and the
requirements of all applicable Environmental Permits; (ii) to Seller’s
Environmental Knowledge, Seller has not received any written notice of any
violation of, obligation under or liability or clean-up or Remediation required
under, any Environmental Law in connection with Seller’s operations on the
Leasehold Property during the past five (5) years; (iii) there are no writs,
injunctions, decrees, orders or judgments outstanding or any actions, suits,
proceedings or investigations pending or threatened in writing relating to
Seller’s compliance with or liability under any Environmental Law or
Environmental Permit affecting the Leasehold Property; (iv) to Seller’s
Environmental Knowledge, no portion of the Leasehold Property has been used by
Seller for the Disposal, Release or deposit of any Hazardous Substances or fill
or other material containing Hazardous Substances in violation of levels allowed
under applicable Environmental Laws; (v) to Seller’s Environmental Knowledge,
there are no Releases of Hazardous Substances from any underground storage tanks
on the Leasehold Property; and (vi) to Seller’s Environmental Knowledge, there
are no above-ground or underground storage tanks owned or operated by Seller,
whether in use or closed, in, at, on or under the Leasehold Property.

Section 8.5 Condemnation.

Except as described in Section 8.5 of Seller’s Disclosure Letter, Seller has not
received notice of, and to the best of Seller’s Knowledge, there are no
Condemnations with respect to the Leasehold Property.

Section 8.6 Disposition of Assets.

Except as disclosed in Section 8.6 of Seller’s Disclosure Letter or in
accordance with the Harvest Plan, since January 1, 2007, Seller has not
(i) harvested, nor has Seller knowingly permitted the harvest of any trees or
timber located on any portion of the Leasehold Property; or (ii) disposed or
contracted for the disposal or sale of any Leasehold Interest or any trees or
timber located on the Leasehold Property.

Section 8.7 Casualty.

To Seller’s Knowledge, and except as set forth in Section 8.7 of Seller’s
Disclosure Letter, since January 1, 2007, there has been no loss or damage to
timber on the Leasehold Property exceeding $100,000 in value in the aggregate
due to any casualty, insect infestation, disease, theft, or other unauthorized
cutting.

Section 8.8 Endangered Species.

Except as disclosed in Section 8.8 of Seller’s Disclosure Letter, to Seller’s
Environmental Knowledge, there are no areas of the Leasehold Property with
respect to which Seller has a legal

 

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obligation under the federal Endangered Species Act or any similar state or
local law relating to the protection of Endangered Species, and there are no
pending legal proceedings against Seller or relating to the Leasehold Property,
or any portion thereof, based upon the presence of Endangered Species on the
Leasehold Property. None of the Leasehold Property has been designated as
“critical habitat” as that term is defined by 16 U.S.C. § 1532(6).

Section 8.9 Mining Activity.

Except as disclosed in Section 8.9 of Seller’s Disclosure Letter, to Seller’s
Knowledge, during the three (3) years immediately preceding the date hereof,
there has been no mining or other mineral extraction or processing activity on
any portion of the Leasehold Property.

Section 8.10 Unresolved Access Claims.

Except as disclosed in the Title Commitments, to Seller’s Knowledge there are no
unresolved material claims or disputes relating to access to any portion of the
Leasehold Property.

ARTICLE IX

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser, on behalf of itself and on behalf of Purchaser, LLC, represents and
warrants to Seller, as of the date hereof and as of the Closing Date as follows:

Section 9.1 Organization.

Purchaser is a limited liability company duly organized and in good standing
under the laws of the State of Delaware. Purchaser, LLC is a limited liability
company duly organized and validly existing and in good standing under the laws
of the State of Delaware. Purchaser and Purchaser, LLC have all requisite
limited liability company power and authority to: (i) own, lease and operate its
properties and assets and to carry on its business; (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. Immediately prior to the Closing, Purchaser, LLC will be a
newly formed limited liability company and will not have conducted any
operations or engaged in any activities other than those related to the
acquisition of the Timberlands II, LLC, the issuance of the Timber Note and
obtaining the Letter of Credit, as contemplated by the Transaction Documents.

Section 9.2 Qualification.

Each of Purchaser and Purchaser, LLC is qualified or registered as a foreign
limited liability company for the transaction of business and each of Purchaser
and Purchaser, LLC is in good standing under the laws of each jurisdiction in
which the location of its properties makes such qualification necessary.

 

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Section 9.3 Authority.

The execution, delivery and performance of this Agreement and the consummation
of transactions contemplated hereby have been duly and validly authorized by all
necessary corporate, limited liability company action or limited partnership
action, as the case may be, and no other corporate, limited liability company or
limited partnership proceedings on the part of a Purchasing Party is necessary
for the Purchasing Parties to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Purchaser, and, assuming due authorization, execution
and delivery by Seller, is a legal, valid and binding obligation of the
Purchasing Parties 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 9.4 No Conflict.

The execution, delivery, and performance by the Purchasing Parties of this
Agreement or any of the Ancillary Agreements to which any Purchasing Party is a
party will not result in a breach or violation of, or default under, (i) the
terms, conditions or provisions of the certificate of formation or limited
liability company agreement of the Purchasing Parties, or any material Contract
to which a Purchasing Party is a party or by which a Purchasing Party or any of
its 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 a
Purchasing Party or any of its assets is or may be bound.

Section 9.5 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 Purchaser 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, (iii) may be
required to be obtained by Timberlands II, LLC to conduct operations on the
Seller Land, Leasehold Interests or Timberlands II, LLC Real Property Leases, or
(iv) may be required under the HSR Act.

Section 9.6 Litigation.

(a) As of the date hereof, there are no claims against Purchaser or Purchaser,
LLC, or, to the knowledge of Purchaser or Purchaser, LLC, any threatened claims
against Purchaser or Purchaser, LLC, 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 Purchaser or Purchaser, LLC (or affecting
their 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.

 

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Section 9.7 Investment Purpose.

(a) Purchaser, LLC is acquiring the Timberlands II, LLC Interests being
transferred to it for its own account and not as nominee, agent or intermediary
for any other Person.

(b) Except as otherwise permitted under Section 11.7 of this Agreement, neither
Purchaser nor Purchaser, LLC have entered into any plan, agreement or other
arrangement to transfer or otherwise dispose of any interest in the Purchased
Assets to any other Person, and neither Purchaser nor Purchaser, LLC will enter
into any such plan, agreement or other arrangement prior to the Closing.

(c) Neither Purchaser nor Purchaser, LLC have entered into any plan, agreement
or other arrangement to transfer or otherwise dispose of any interest in
Timberlands II, LLC to any other Person, and neither Purchaser nor Purchaser,
LLC will enter into any such plan, agreement or other arrangement prior to the
Closing.

(d) Purchaser has not entered into any plan, agreement or other arrangement to
directly or indirectly transfer or dispose of, or permit the transfer or
disposition of, any interest in Purchaser, LLC, or otherwise cause or permit
Purchaser, LLC to fail to be a “disregarded entity” for U.S. federal Income Tax
purposes, including but not limited to as a result of the transfer of Purchaser,
to any other Person, and neither Purchaser nor Purchaser, LLC will enter into
any such plan, agreement or other arrangement prior to the Closing.

Section 9.8 Tax Matters.

At Closing Purchaser, LLC will be qualified as and treated as a “disregarded
entity” of Purchaser 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.

Section 9.9 Financing Commitment.

(a) Concurrently with the execution of this Agreement, Purchaser has delivered a
complete copy of an executed commitment letter, dated the date hereof (the
“Equity Commitment Letter”), from Wells Real Estate Funds, Inc. to provide
equity financing to Purchaser in the amount noted therein (the “Equity
Financing”).

(b) Concurrently with the execution of this Agreement, Purchaser has delivered a
complete copy of an executed commitment letter, dated the date hereof (the “Debt
Commitment Letter”), from Wachovia Bank, National Association or an affiliate
(the “Lender”) to provide Purchaser debt financing in the amount noted therein
(the “Debt Financing”).

(c) The Equity Commitment Letter in the form so delivered is and shall remain
valid, enforceable according to its terms and in full force and effect and no
event has occurred which, with or without notice, lapse of time or both, would
constitute a default or breach on the part of

 

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Purchaser under any term or condition of the Equity Commitment Letter. The Debt
Commitment Letter (together with the Equity Commitment Letter, the “Commitment
Letters”) in the form so delivered is valid, enforceable according to its terms
and in full force and effect and no event has occurred which, with or without
notice, lapse of time or both, would constitute a default or breach on the part
of Purchaser under any term or condition of the Debt Commitment Letter.

(d) Purchaser has no reason to believe that any of the conditions to the Debt
Financing or to Equity Financing will not be satisfied on a timely basis.
Purchaser has fully paid any and all commitment fees or other fees required by
any of the Commitment Letters to be paid as of the date hereof and will pay any
and all additional commitment fees or other fees required by any of the
Commitment Letters.

ARTICLE X

ADDITIONAL AGREEMENTS RELATING TO THE PURCHASED ASSETS

Section 10.1 Commercially Reasonable Efforts.

(a) Subject to the terms and conditions herein provided, Seller and the
Purchasing 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, during the twenty
(20) day period following the date of this Agreement, the Parties agree to
cooperate together in determining whether an exemption is available under the
HSR Act and any other applicable Regulatory Law, for the transactions
contemplated hereby, which cooperation by Seller shall include the delivery at
the request of Purchaser of information relating to timber sales and harvesting
in and about the Seller Land and the Leasehold Property for the previous
thirty-six months prior to the Closing Date. If Purchaser and Seller determine
that no such exemption is available, then Purchaser and Seller agree further 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 Parties have made their
determination that filings are necessary,

 

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but in no event later than twenty (20) business days after the expiration of
initial twenty (20) day period, 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 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, the Parties shall cooperate with each
other and take such lawful steps as shall be necessary or appropriate to secure
such end.

(d) Seller shall use its commercially reasonable efforts to (i) obtain prior to
Closing a Landlord Estoppels from at least 75% (based on number of acres) of the
landlords or lessors under any of the Underlying Leases creating the Leasehold
Interests and (ii) formalize any access arrangements for which there are no
written agreements prior to Closing.

Section 10.2 Maintenance of Purchased Assets.

(a) Subject to the terms and conditions of this Agreement, Seller, from the date
hereof through the Closing Date, shall, and shall cause Timberlands II, LLC to,
(i) operate and maintain the Purchased Assets consistent with the manner in
which Seller has historically managed its forestry operations related to such
Purchased Assets, including without limitation, site preparation, seedling
plantings, chemical treatments, and road and culvert maintenance; (ii) pay when
due all accounts payable in respect of the Purchased Assets in a manner
consistent with past practice; (iii) not sell any portion of the Seller Land or
any Leasehold Interest or any trees or timber located on any portion of the
Seller Land or Leasehold Property except in accordance with the Harvest Plan or
in connection with the transfer of the same to Timberlands II, LLC; (iv) not
enter into any new logging contracts, log sale agreements or timber cutting
contracts except in accordance with the Harvest Plan; (v) neither voluntarily
place, nor take any action which would result in, any Lien on or against any of
the Purchased Assets; and (vi) not enter into any new Contract or agreement
related to the Purchased Assets; provided, however, that Seller may enter into
such new Contracts which are cancelable on thirty (30) days notice by Seller and
its successors and assigns.

(b) Subject to the terms and conditions of this Agreement, and except as Seller
may otherwise agree in writing, Purchaser shall use, and Purchaser shall cause
Purchaser, LLC to use, all commercially reasonable efforts not to intentionally
interfere with Seller’s conduct of business with respect to the Purchased Assets
pending the Closing in accordance with paragraph (a) of this Section 10.2 above,
and not to take any action that might reasonably be expected to impair Seller’s
relationships with customers, suppliers or employees of the businesses and
operations of Seller, whether or not associated with the Purchased Assets.

(c) From the date hereof through the Closing Date, except in accordance with the
Contribution Agreement, Seller shall not sell, transfer, assign, convey or
otherwise dispose of any portion of the Seller Land or any Leasehold Interest
that is to be transferred pursuant to this Agreement without the prior written
consent of Purchaser, which may be withheld in Purchaser’s sole discretion.

 

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Section 10.3 Public Announcements.

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

(b) Notwithstanding anything to the contrary set forth in Section 16.6 or the
Confidentiality Agreement, except as required by applicable Law, stock exchange
rules or rules and regulations promulgated by the SEC, Seller and Purchaser
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 by
any Party, 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 maybe 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 Seller and Purchaser may
make any filings required by any or rule or regulation promulgated by the SEC
without consulting another Party.

Section 10.4 Books and Records.

(a) Prior to the Closing, Seller shall convey to Timberlands II, LLC the
Personal Property, and at the Closing, Seller shall provide to Purchaser (except
for those items which are stored at locations included in or are part of the
Purchased Assets conveyed to Timberlands II, LLC) copies of the Books and
Records that are in Seller’s possession or control and are not subject to the
attorney-client or other privilege (as reasonably and in good faith determined
by Seller).

(b) For a period of seven years after the Closing, for the purpose of enabling
Seller to maintain compliance with the installment sale provisions of the Code
or any successor thereto, and to defend any Claim by a Tax Authority and
Governmental Authority, Purchaser shall provide Seller with reasonable access
upon reasonable prior written notice, at Seller’s sole cost and expense, to
(i) the Books and Records in the possession of Purchaser, Purchaser, LLC or
Timberlands II, LLC relating to the operations of the Purchased Assets and
(ii) tax and financial records in the possession of Purchaser or Purchaser, LLC
relating to Purchaser, LLC.

Section 10.5 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, Seller and Purchaser 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.

 

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(b) Except for disputes involving adjustments to the Purchase Price as a result
of a Casualty Carve Out, a Deleted Parcel, an Environmental Carve Out or an
Excluded Parcel which shall be governed by Sections 10.8, 11.5, 11.6 and 11.11
respectively, if Seller and Purchaser do not reach such a solution within a
period of 30 days after written notice by either Seller or Purchaser 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 Purchaser may
commence mediation by providing Purchaser (in the case of Seller) or Seller (in
the case of Purchaser) 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 the Purchaser, 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 or Purchaser shall be entitled to seek a temporary
restraining order or preliminary injunction to prevent the breach of Seller’s or
Purchaser’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 statute of limitations based upon the time spent in
mediation.

(f) Either Seller or Purchaser 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 Purchaser so mutually elect in writing.

(g) The provisions of this Section 10.5 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. Each Party shall bear its own
attorneys’ and other professional fees and all related costs.

Section 10.6 Consents.

(a) The Parties shall cooperate, and use all commercially reasonable efforts, to
make all filings and obtain all licenses, permits, consents, approvals,
authorizations, qualifications and

 

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orders of Governmental Authorities and other third parties necessary to
consummate the transactions contemplated by this Agreement. In addition to the
foregoing, Purchaser and Purchaser, LLC agree 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; provided that such third party agrees in writing to keep
such information confidential. 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 Leasehold Interest, Timberlands II, LLC Purchased Contract or
Timberlands II, LLC Real Property Lease 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, the 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 Seller determines in
good faith that such consent cannot reasonably be obtained. In addition, to the
extent that any Leasehold Interest, Timberlands II, LLC Purchased Contract or
Timberlands II, LLC Real Property Lease may not be assigned without the consent
or approval of any third party, and such consent is not obtained prior to the
Closing, Seller shall elect to either (i) use all commercially reasonable
efforts to provide Purchaser with the same benefits (and Purchaser shall be
responsible for all corresponding obligations) arising under such Leasehold
Interest, Timberlands II, LLC Purchased Contract or Timberlands II, LLC Real
Property Lease, including performance by Seller (or Purchaser) as agent, if
legally permissible and commercially feasible; provided Purchaser (or Seller, if
applicable) shall provide Seller (or Purchaser) with such access to the
premises, books and records and personnel as is reasonably necessary to enable
Seller (or Purchaser) to perform its obligations under the Leasehold Interests,
Timberlands II, LLC Purchased Contracts and Timberlands II, LLC Real Property
Leases and the Purchasing Parties (other than Purchaser, LLC) shall pay or
satisfy the corresponding liabilities for the enjoyment of such benefits to the
extent any Purchasing Party would have been responsible therefor if such consent
or approval had been obtained, or (ii) exclude such Leasehold Interest,
Timberlands II, LLC Purchased Contract or Timberlands II, LLC Real Property
Lease from the Purchased Assets and reduce the Installment Note Purchase Price
or Cash Purchase Price accordingly, as the case may be.

(c) Seller shall not enter into any new logging contracts, log sale agreements
or timber cutting contracts after the date of this Agreement without the prior
written consent of Purchaser except in accordance with the Harvest Plan.

Section 10.7 Commissions.

Seller, on the one hand, and Purchaser, on the other, agree to indemnify, defend
and hold each other harmless for any claims by any broker, agent or finder for
commissions due in connection with this transaction as the result of any of its
dealings or acts.

Section 10.8 Casualty and Condemnation.

(a) If prior to Closing, any Condemnation affecting 100,000 acres or more
occurs, or any such Condemnation is threatened, then Seller shall advise
Purchaser thereof by written notice and within ten (10) days after such written
notice from Seller, Purchaser may by written notice to Seller elect to terminate
this Agreement prior to Closing, in which event Escrow Agent shall return

 

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the Earnest Money, together with all interest or other return thereon, to
Purchaser and both Parties shall be relieved and released of and from any and
all further liability hereunder (other than any liability or indemnity that by
the express terms hereof survives any termination of this Agreement). If
Purchaser makes no such election to cancel this Agreement or such Condemnation
affects less than 100,000 acres, then (i) this Agreement shall remain in full
force and effect, (ii) the Purchased Assets shall be assigned, transferred and
conveyed to Timberlands II, LLC exclusive of the portion affected by the
Condemnation or threatened Condemnation, (iii) there shall be no adjustments to
the Purchase Price because of the Condemnation or threatened Condemnation and
(iv) at Closing, Seller shall pay over to Timberlands II, LLC any and all
proceeds paid by any Governmental Authority prior to the Closing Date and shall
assign, transfer and set over to Timberlands II, LLC all of the right, title and
interest of Seller in and to any awards that may thereafter be made for any such
Condemnation of any portion of the Seller Land or the Leasehold Interests.

(b) Prior to Closing, the risk of loss from “casualty” (which term, for purposes
of this Agreement, shall include but not be limited to any loss, damage or
destruction caused by fire, windstorm, insect infestation, disease, theft, or
other unauthorized cutting) shall be upon Seller. Seller agrees to advise
Purchaser by written notice of any loss, damage or destruction or other casualty
event to any portion of the Seller Land or Leasehold Property within five
(5) days of the occurrence thereof. Within ten (10) days after such written
notice from Seller and in the event that such casualty has resulted in damage to
25,000 acres or more, Purchaser may by written notice to Seller elect to
terminate this Agreement prior to Closing, in which event Escrow Agent shall
return the Earnest Money, together with all interest or other return thereon, to
Purchaser and both Parties shall be relieved and released of and from any and
all further liability hereunder (other than any liability or indemnity that by
the express terms hereof survives any termination of this Agreement). If
Purchaser makes no such election to cancel this Agreement or the casualty
affected less than 25,000 acres, then this Agreement shall remain in full force
and effect and should Purchaser so elect, in lieu of any remedies available to
it under Article XIV of this Agreement, Purchaser may either (i) proceed to
Closing and purchase the Timberlands II, LLC Interests with no adjustment to the
Purchase Price because of the casualty (and Seller shall, at Closing, pay over
to Timberlands II, LLC any and all insurance proceeds paid in connection with
such casualty and all revenue received from any sales of salvageable timber from
the affected portion of the Seller Land or Leasehold Property prior to the
Closing Date and assign, transfer and set over to Timberlands II, LLC all right,
title and interest of Seller in and to (A) any insurance proceeds that may
thereafter be paid in connection with such casualty and (B) any log sale
agreements, logging contracts or timber cutting contracts or similar agreements
entered into by Seller for the harvest of any salvageable timber from the
portion of the Seller Land or Leasehold Property affected by the casualty), or
(ii) proceed to Closing and purchase the Timberlands II, LLC Interests following
the assignment, transfer and conveyance of the Seller Land and Leasehold
Interests to Timberlands II, LLC in accordance with the Contribution Agreement
exclusive of such portion of the Seller Land or Leasehold Interests affected by
the casualty (a “Casualty Carve Out”) and with a reduction in the Purchase Price
as determined in accordance with this paragraph (c) of this Section 10.8. Any
casualty loss not disclosed under this section that is discovered by Purchaser
after Closing will be subject to the provisions on indemnification contained in
Section 14.3.

(c) For any Casualty Carve Out which is comprised of the Seller Land, Purchaser
shall be entitled to a reduction in the Installment Note Purchase Price equal to
the fair market value of such Casualty Carve Out prior to the casualty
determined in accordance with this paragraph. For

 

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any Casualty Carve Out which is comprised of Leasehold Property, Purchaser shall
be entitled to a reduction in the Installment Note Purchase Price equal to the
discounted cash flows attributable to the applicable Leasehold Interest
determined in accordance with this paragraph. Promptly after Purchaser’s
delivery of written notice of Purchaser’s election to exclude the Casualty Carve
Out from the Purchased Assets, the Parties shall consult and negotiate with each
other in good faith regarding the appropriate reduction in the Installment Note
Purchase Price for said Casualty Carve Out. If the Parties are unable to
mutually agree on the fair market value of the Casualty Carve Out, or if
applicable, the discounted cash flows with respect to the applicable Leasehold
Interest, within thirty (30) days after Purchaser’s delivery of notice of
Purchaser’s election to exclude the Casualty Carve Out from the Purchased
Assets, then the Casualty Carve Out shall determined by an Independent Appraiser
in accordance with Section 11.5(c) below as though the Casualty Carve Out were a
Deleted Parcel.

ARTICLE XI

ADDITIONAL AGREEMENTS RELATING TO SELLER LAND

Section 11.1 Right of Entry.

(a) Prior to the Closing Date or termination of this Agreement in accordance
with Article XV, upon reasonable prior written notice to Seller, Purchaser,
through its authorized agents or representatives, may enter upon the Seller Land
and the Leasehold Property at all reasonable times for the purposes of making
inspections and other studies.

(b) The results of such inspections and studies (as well as any information and
documents that Seller delivered or caused to be delivered to Purchaser
concerning Seller Land or the Leasehold Property) 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, advisors, attorneys, investors and
lenders of Purchaser for use solely in connection with the transactions
contemplated by this Agreement, who shall be required by Purchaser 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 disclosure of the results of any such inspections or studies or any such
information or documents that Seller delivered or caused to be delivered to
Purchaser concerning Seller Land or the Leasehold Property is required by
applicable law, regulation or court order, Purchaser 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 11.1(b). Purchaser shall cooperate
with Seller 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 11.1(b), Purchaser shall
give Seller written notice of the information to be disclosed as far in advance
of its disclosure as practicable.

(c) Purchaser shall indemnify, defend and hold Seller harmless from and against
any and all claims, demands, losses, expenses, damages, costs and liabilities,
suffered or incurred by Seller as a result of any physical damage to the Seller
Land or Leasehold Property or any death or personal injury to any person caused
by or attributable to the acts or omissions of Purchaser, or the

 

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employees, contractors, representatives or agents of Purchaser or Purchaser, LLC
arising in connection with inspections or studies performed by or on behalf of
Purchaser. In addition, Purchaser agrees that Purchaser and the contractors,
representatives and agents of Purchaser or Purchaser, LLC who enter upon the
Seller Land or Leasehold Property shall maintain general liability insurance,
naming Seller (and the owner of any Leasehold Property) as additional insured,
in an amount not less than $1,000,000 and, prior to any such entry upon the
Seller Land or the Leasehold Property, shall provide Seller with an insurance
certificate as 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 Purchaser, 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 to its Books and Records
primarily related to the Purchased Assets, provided that such access shall not
unreasonably interfere with the business or operations of Seller and (ii) access
to the online data room established by Seller prior to the date hereof. Nothing
in this Section 11.1(d) shall require Seller to provide any access or to
disclose any information: (i) relating to its employees (except as required
under Section 12.1), (ii) that is not in the possession or control of Seller or
(iii) if permitting such access or disclosing such information would (A) violate
applicable Law, (B) violate any of Seller’s binding obligations with respect to
confidentiality, (C) result in the loss of attorney-client privilege or (D) be
adverse to the interests of Seller or any of their respective Affiliates in any
pending or threatened litigation between the Parties in respect of the terms of
this Agreement.

Section 11.2 Permits and Licenses.

The Purchasing Parties shall be solely responsible for obtaining all permits and
licenses, if any, required by any Purchasing Party to carry on its intended
operations at the Seller Land, the Leasehold Interests or the Timberlands II,
LLC Real Property Leases; provided, however that Seller shall transfer and
assign to Timberlands II, LLC (to the extent the same are assignable) prior to
Closing all current permits and licenses held by Seller to carry own its timber
management and harvesting operations on the Seller Land and the Leasehold
Property.

Section 11.3 Easements.

To the extent affirmative action is necessary for Seller to acquire or reserve
the easement ownership of the Reserved Easements or to establish or confirm
easement title to the Reserved Easements in Seller, prior to Closing, Purchaser
and Purchaser, LLC and their respective Affiliates shall cooperate with Seller
in such efforts, including negotiating in good faith the form and substance of
all documents pertaining to the Reserved Easements as are reasonably requested
by Seller. Seller shall not reserve from the conveyance of the Seller Land to
Timberlands II, LLC nor shall Seller cause Timberlands II, LLC to execute any
such documents granting, establishing or confirming easement title to the
Reserved Easements unless and until Seller, Purchaser and Purchaser, LLC have
agreed upon the location and terms of and the form of all such documents
creating the Reserved Easements. To the extent affirmative action is necessary
for Timberlands II, LLC to acquire the easement ownership of the Purchaser
Easements or to establish or confirm easement title to the Purchaser Easements
in Timberlands II, LLC, prior to Closing, Seller shall

 

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cooperate with Purchaser and Purchaser, LLC in such efforts and shall use
commercially reasonable efforts to assist Timberlands II, LLC in acquiring such
ownership, including executing all documents pertaining to the Purchaser
Easements as are reasonably requested by Purchaser or Purchaser, LLC on behalf
of Timberlands II, LLC.

Section 11.4 Title Insurance; No Surveys.

(a) Seller shall provide Purchaser Title Commitments from First American Title
Insurance Company (the “Title Company”) on the Seller Land being conveyed to
Timberlands II, LLC and shall prior to Closing and for a period of one (1) year
following Closing, use it best efforts to provide Title Commitments from the
Title Company on the Leasehold Interests being conveyed to Timberlands II, LLC
for which leases or memoranda of such leases have been recorded. At the Closing,
Purchaser shall purchase from the Title Company an aggregate amount of title
insurance on the Seller Land and, using its best efforts, on the Leasehold
Interests being conveyed to Timberlands II, LLC in amounts not less than the
amount of the purchase price of the Seller Land and Leasehold Interests,
allocated by county and/or state, as applicable and allocated to the Purchased
Assets being conveyed to Timberlands II, LLC using the standard 2006 ALTA
owner’s title insurance policy (or such other comparable form of title insurance
policy as is available in the jurisdictions in which the Seller Land and
Leasehold Interests are located) which title insurance policy includes the
so-called “non-imputation” endorsement which protects Timberlands II, LLC from
title matters known to Seller but not included in Schedule B to such title
policy (the “Title Policies”).

(b) Other than in accordance with Section 10.4(a) and Section 11.1(d), Seller
shall not provide any surveys of the Seller Land to Purchaser.

(c) If requested by Purchaser, Seller and its Affiliates shall cooperate with
Purchaser in its efforts to purchase title insurance covering portions of the
Seller Land or the Leasehold Interest. Upon Purchaser’s request, Seller shall
provide to Purchaser the information in Seller’s possession and control
regarding the access rights to the Seller Land or the Leasehold Interest which
Seller enjoys as of the date of this Agreement and as of the Closing Date.

Section 11.5 Title Objections.

(a) Purchaser shall have forty-five (45) days from the later of (1) the date of
the receipt of any Title Commitment and copies of all underlying documents for
the Schedule B-2 exceptions listed in such Title Commitment, including any Title
Commitment delivered post-Closing and receipt of and opportunity to inspect such
maps as are in Seller’s possession referenced in such Title Commitment; or
(2) the date of this Agreement (the “Title Review Period”) to object to any
matter set forth in such Title Commitment with regard to the Seller Land or the
Leasehold Interest which is either (i) not a Permitted Exception pursuant to
Section 1.3 or (ii) a matter which as to the tract or parcel of land which is
encumbered by such matter would materially impair, in Purchaser’s reasonable
judgment, the value of such tract or parcel of land, in either case by giving
written notice to Seller (collectively, any such matter, a “Title Defect”) on or
before the last day of the Title Review Period. Purchaser shall also have the
right to object to any title exceptions suffered by Seller, or first made known
to Purchaser, between the date of the applicable Title Commitment obtained by
Seller and the Closing Date which is either (i) not a Permitted Exception
pursuant to

 

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Section 1.3 or (ii) a matter which as to the tract or parcel of land which is
encumbered by such matter would materially impair, in Purchaser’s reasonable
judgment, the value of such tract or parcel of land, in either case by giving
written notice to Seller (which will be deemed to be a Title Defect). Seller
shall have the right, but not the obligation, to cure or remove at or prior to
Closing all objections to Seller’s title to Seller Land or Leasehold Interests;
provided, however, that Seller will cause any deed to secure debt, any deed of
trust, any mortgage or any monetary lien by, through or under Seller encumbering
Seller Land or Leasehold Interests to be satisfied or otherwise released on or
before the Closing. In the event Purchaser failed to give notice to Seller on or
before the expiration of the applicable Title Review Period (or the Closing Date
for any matter suffered by Seller, or first made known to Purchaser, between the
date of the applicable Title Commitment obtained by Seller and the Closing Date)
of Purchaser’s objection to any exception to Seller’s title to the Seller Land
or Leasehold Interests, such exception will be deemed to be a Permitted
Exception and title to the Seller Land or Leasehold Interests shall be conveyed
to Timberlands II, LLC subject to such exception.

(b) In the event that Purchaser gives such written notice of objection to any
such exception that is a Title Defect and describing and giving the location of
the defective parcel to the extent that Purchaser can reasonably identify the
same (the “Defective Parcel”) and Seller fails to cure or remove such exception
at or prior to the Closing, Purchaser shall have the option of: (i) waiving the
Title Defect and accepting title to the Defective Parcel on behalf of
Timberlands II, LLC with no adjustment to the Purchase Price therefore, or
(ii) by written notice to Seller prior to Closing, excluding the Defective
Parcel from the Seller Land or Leasehold Interests from the Purchased Assets
(the “Deleted Parcel”) and reducing the Installment Note Purchase Price as
provided in Section 11.5(c) below. Notwithstanding anything to the contrary
contained herein, in the event that Purchaser shall give timely written notice
of any Title Defect affecting a portion of the Seller Land or the Leasehold
Property for which the applicable Title Review Period expired post-Closing, and
Seller is unable or unwilling to cure such Title Defect within sixty (60) days
following Purchaser’s delivery of written notice thereof, then Purchaser shall
have the right to cause Timberlands II, LLC to convey, assign or transfer the
Defective Parcel back to Seller (at which time the same shall be considered a
“Deleted Parcel”) in which case, Seller shall either (i) convey, assign or
otherwise transfer a leasehold interest or fee simple interest owned by Seller
with respect to real property which is not included in the transactions
described herein (“Substitution Property”); provided that such Substitution
Property has a value calculated in accordance with paragraph (c) of this
Section 11.5 and other characteristics substantially similar to the Deleted
Parcel and is otherwise acceptable to Purchaser or (ii) in the event that no
such Substitution Property is available, Seller shall upon the conveyance of the
Deleted Parcel by Timberlands II, LLC remit to Purchaser (or Timberlands II,
LLC) the value of the Deleted Parcel calculated in accordance with paragraph (c)
of this Section 11.5.

(c) For any Deleted Parcel which is comprised of the Seller Land, Purchaser
shall be entitled to a reduction in the Installment Note Purchase Price equal to
the fair market value of such Deleted Parcel if such Deleted Parcel were not
affected by the Title Defect determined in accordance with this paragraph. For
any Deleted parcel which is comprised of Leasehold Property, Purchaser shall be
entitled to a reduction in the Installment Note Purchase Price equal to the
discounted cash flows attributable to the applicable Leasehold Interest
determined in accordance with this paragraph. Promptly after Purchaser’s
delivery of written notice of Purchaser’s election to exclude the Deleted Parcel
from the Purchased Assets, the Parties shall consult and negotiate

 

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with each other in good faith regarding the appropriate reduction in the
Installment Note Purchase Price for said Deleted Parcel. If the Parties are
unable to mutually agree on the fair market value of the Deleted Parcel, or if
applicable, the discounted cash flows with respect to the applicable Leasehold
Interest, within thirty (30) days after Purchaser’s delivery of notice of
Purchaser’s election to exclude the Deleted Parcel from the Purchased Assets,
Seller and Purchaser will refer the matter to independent third party appraiser
with at least ten (10) years’ experience in appraising timber and timberland
properties selected by Seller and reasonably acceptable to Purchaser (the
“Independent Appraiser”), and each of Seller and Purchaser will, at a mutually
agreed time within three (3) business days of such referral, simultaneously
submit to the Independent Appraiser their respective calculations of the fair
market value of such Deleted Parcel, or if applicable, the discounted cash flows
with respect to the applicable Leasehold Interest. The Independent Appraiser
shall within thirty (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 fair market value of such Deleted Parcel, or if
applicable, the discounted cash flows with respect to the applicable Leasehold
Interest, 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.

(d) Purchaser shall cause Timberlands II, LLC to grant to Seller, without costs,
access easements over and across the Seller Land or Leasehold Interests upon
reasonable terms and over reasonable routes as may be necessary for Seller’s
access to any Deleted Parcels, and Seller shall grant to Timberlands II, LLC,
without costs, access easements over and across the Deleted Parcels upon
reasonable terms and over reasonable routes as may be necessary for Timberlands
II, LLC’s access to the Seller Land or Leasehold Interests.

(e) If within one year after the Closing, Seller cures the Title Defect on a
Deleted Parcel in accordance with applicable law and to Purchaser’s reasonable
satisfaction, and notifies Purchaser thereof in writing, Purchaser shall cause
Timberlands II, LLC to purchase the Deleted Parcel from Seller at a price equal
to the value by which the Purchase Price was reduced because of the Deleted
Parcel (and otherwise on the terms set forth in this Agreement), provided that
the Deleted Parcel is in substantially the same conditions, reasonable wear and
tear excluded, as it was as of the date of Closing. The Parties shall close the
purchase and sale of any such Deleted Parcel on a date sixty days after Seller
so notifies Purchaser that the cure or remediation has been completed (or on
such other date as Purchaser and Seller may agree), and at such closing the
Parties shall take the actions (and bear the costs) with respect to the purchase
and sale of such Deleted Parcel that would have been taken (or borne) by such
Party under this Agreement had the Deleted Parcel been included in the Seller
Land or Leasehold Interests, and such closing thereafter shall be considered the
“Closing” with respect to such parcel for all purposes of this Agreement. This
Section 11.5(e) shall survive the Closing.

Section 11.6 Environmental Due Diligence.

(a) Upon prior reasonable notice to Seller, Purchaser shall have the right, at
any time and from time to time prior to Closing, to make such environmental site
assessments (including obtaining a reasonable number of soil samples) in regard
to the Seller Land (and Leasehold Property to the extent the fee owner consents
to the same) as Purchaser shall desire and to employ engineers and other
personnel to perform such environmental site assessments at its sole expense.

 

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Purchaser may at any time prior to the date which is ten (10) days prior to the
Closing Date, give to Seller written notice of any matter which may be a
violation of Environmental Laws, impose a notification obligation on Purchaser
or Timberlands II, LLC following Closing, or require Remediation or further
investigation under applicable Environmental Laws, and in connection therewith
Purchaser shall furnish to Seller a copy of any report or preliminary report
received by Purchaser with respect to any such environmental site assessment. If
Seller fails prior to the Closing Date to cure or satisfy any such matter of
which Purchaser gives Seller timely written notice to Purchaser’s reasonable
satisfaction (but in no event beyond the Remediation standards established by
applicable Environmental Law), then Purchaser may either (i) proceed to Closing
subject to such uncured or unsatisfied matter, with no reduction in the Purchase
Price, or (ii) if Purchaser’s environmental consultant determines that the
condition affects only a portion of the Seller Land or Leasehold Property,
proceed to Closing in which case the Purchased Assets shall be conveyed,
assigned and transferred to Timberlands II, LLC pursuant to the Contribution
Agreement exclusive of such objectionable portion (an “Environmental Carve Out”)
with such reduction in the Installment Note Purchase Price determined in
accordance with paragraph (c) of this Section 11.6.

(b) If within one year after the Closing, Seller cures or satisfies any such
objectionable environmental matter to the extent required by applicable
Remediation Standards of Environmental Law and notifies Purchaser thereof in
writing, Purchaser shall cause Timberlands II, LLC to purchase the Environmental
Carve Out from Seller at a price equal to the value by which the Purchase Price
was reduced because of the Environmental Carve Out (and otherwise on the terms
set forth in this Agreement), provided that the Environmental Carve Out is in
substantially the same conditions, reasonable wear and tear excluded, as it was
as of the date of Closing. The Parties shall close the purchase and sale of any
such Environmental Carve Out on a date sixty days after Seller so notifies
Purchaser that the cure or Remediation has been completed, subject to
Purchaser’s reasonable approval (or on such other date as Purchaser and Seller
may agree), and at such closing the Parties shall take the actions (and bear the
costs) with respect to the purchase and sale of such Environmental Carve Out
that would have been taken (or borne) by such Party under this Agreement had the
Environmental Carve Out been included in the Seller Land or Leasehold Interests,
and such closing thereafter shall be considered the “Closing” with respect to
such parcel for all purposes of this Agreement. This Section 11.6(b) shall
survive the Closing.

(c) For any Environmental Carve Out which is comprised of the Seller Land,
Purchaser shall be entitled to a reduction in the Installment Note Purchase
Price equal to the fair market value of such Environmental Carve Out if such
Environmental Carve Out were not affected by an objectionable environmental
matter determined in accordance with this paragraph. For any Environmental Carve
Out which is comprised of Leasehold Property, Purchaser shall be entitled to a
reduction in the Installment Note Purchase Price equal to the discounted cash
flows attributable to the applicable Leasehold Interest determined in accordance
with this paragraph. Promptly after Purchaser’s delivery of written notice of
Purchaser’s election to exclude the Environmental Carve Out from the Purchased
Assets, the Parties shall consult and negotiate with each other in good faith
regarding the appropriate reduction in the Installment Note Purchase Price for
said Environmental Carve Out. If the Parties are unable to mutually agree on the
fair market value of the Environmental Carve Out, or if applicable, the
discounted cash flows with respect to the applicable Leasehold Interest, within
thirty (30) days after Purchaser’s delivery of notice of Purchaser’s election to
exclude the Environmental Carve Out from the Purchased Assets, then the
Environmental Carve Out shall determined by an Independent Appraiser in
accordance with Section 11.5 (c) above as though the Environmental Carve Out
were a “Deleted Parcel.”

 

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(d) Notwithstanding any other Purchaser right to indemnification set forth in
Section 14.4, Purchaser shall have no indemnification rights with respect to any
Environmental Carve Out.

Section 11.7 No Transfers, Etc.

(a) Until a period of one year has elapsed from the Closing Date, Purchaser, LLC
shall not (i) distribute, transfer or otherwise dispose of any Timberlands II,
LLC Interest to Purchaser or an Affiliate of Purchaser; or (ii) cause or permit
Timberlands II, LLC to distribute, transfer or otherwise dispose of any of the
Purchased Assets held by Timberlands II, LLC to Purchaser, Purchaser, LLC or an
Affiliate of either, or commit to do any of the foregoing. Notwithstanding the
foregoing, Timberlands II, LLC may (1) engage in sales of timber contemplated by
the Master Stumpage Agreement, and (2) transfer any real property that may be
sold pursuant to the Master Stumpage Agreement to a taxable REIT subsidiary.

(b) Purchaser shall not, directly or indirectly, transfer or dispose of, or
permit the transfer or disposition of, any interest in Purchaser, LLC, or
otherwise cause or permit Purchaser, LLC to fail to be a “disregarded entity”
for U.S. federal Income Tax purposes, including but not limited to as a result
of the transfer of Purchaser, or commit to do so to any Person, until the
earlier of:

(i) the first business day following the second anniversary of the Closing Date;
or

(ii) the first business day following both (I) the first anniversary of the
Closing Date; and (II) the delivery to Seller of a certificate of Purchaser
representing that Purchaser and its tax advisors have determined that the
retention by Purchaser of the membership interests in Purchaser LLC would result
in a more than insubstantial risk that an Affiliate of Purchaser would fail to
secure or preserve its qualification as a real estate investment trust as
defined in Section 856 of the Code.

(c) Notwithstanding anything to the contrary in Section 11.7(b), Purchaser shall
not at any time transfer or otherwise dispose of any interest in Purchaser, LLC
to a Credit Enhancement Bank or any Affiliate thereof.

(d) Any transfer or other disposition by Purchaser (or any subsequent
transferee) of any interest in Purchaser, LLC shall require (i) the prior
written agreement of any transferee in favor of Seller to comply with the
obligations of Purchaser under the limited liability company agreement of
Purchaser, LLC and under Sections 11.7 and 11.8 of this Agreement as if such
transferee were Purchaser, and to cause Purchaser, LLC to comply with all of its
obligations, covenants, representations and warranties under the limited
liability company agreement of Purchaser, LLC and the Transaction Documents; and
(ii) the prior written consent of Seller, such consent not to be unreasonably
withheld and with the discretion to withhold consent to be exercised solely with
regard to transferee’s ability to comply with all of its obligations, and to
cause Purchaser, LLC to comply with all of Purchaser, LLC’s obligations,
covenants, representations and warranties under the limited liability company
agreement of Purchaser, LLC and the Transaction Documents.

 

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(e) Purchaser and Purchaser, LLC shall comply with all of their respective
obligations, covenants and representations under the Transaction Documents.

(f) Purchaser and Purchaser, LLC shall (i) comply with all of their respective
obligations, covenants, and representations under Sections 1.6(xi), 2.6(c), and
4.4 of the limited liability company agreement of Purchaser, LLC, and
(ii) notwithstanding the foregoing, Purchaser and Purchaser, LLC shall comply
with all of their respective obligations, covenants and representations under
the limited liability company agreement of Purchaser, LLC.

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

(h) The ownership interests in Purchaser shall not be sold, transferred, or
otherwise disposed of prior to the date the ownership interests in Purchaser,
LLC may be transferred pursuant to this Agreement.

Section 11.8 Tax Matters.

(a) Purchasing Parties shall not (i) make any election under Treasury
Regulations Section 301.7701-3 (or any corresponding provision of state and
local Tax law) to treat Purchaser, LLC as an association taxable as a
corporation, (ii) take any action that would cause Purchaser, LLC to have more
than one owner for U.S. federal (or any applicable state and local) Income Tax
purposes, and (iii), for so long as Purchaser owns the interests in Purchaser,
LLC, make any election under Treasury Regulations Section 301.7701-3 (or any
corresponding provision of state and local Tax law) to treat Purchaser as an
association taxable as a corporation or take any action that would cause
Purchaser to have more than one owner for U.S. federal (or any applicable state
and local) Income Tax purposes. The obligation of Purchaser pursuant to
Section 11.8(a)(ii) shall only apply to any Purchaser or transferee thereof for
so long as such Purchaser or any transferee thereof owns all the outstanding
interests in Purchaser, LLC. For so long as Operating Partnership owns, directly
or indirectly, the interests in Purchaser, LLC, Operating Partnership and
Purchaser, LLC shall treat the Timber Note issued by Purchaser, LLC as
indebtedness of Operating Partnership for all applicable federal Income Tax
purposes. For so long as Purchaser owns the interests in Purchaser, LLC,
Purchaser shall treat the Timber Note issued by Purchaser, LLC as indebtedness
of Operating Partnership for all applicable federal Income Tax purposes.

(b) In the event that Purchasing Parties take any action following the Closing
that results in a change in the classification of the Seller Land for Roll-back
Tax purposes, Purchasing Parties (other than Purchaser, LLC) shall be liable for
all resulting Roll-back Taxes as provided in Section 2.4.

Section 11.9 Note Document Assistance.

(a) Purchaser and Purchaser, LLC 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 Note, the Letter of Credit and all
documents related thereto (collectively, the “Note Documents”) and (ii) assure,
convey, grant,

 

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assign, transfer, preserve, protect and confer more effectively unto Seller (or
any assignee of the Timber Note) 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
Purchaser, LLC is or is to be a party.

(b) As of the Closing and thereafter, Purchaser and Purchaser, LLC shall
cooperate in connection with any transaction relating to the Timber Note as may
be reasonably requested by Seller, its Affiliates and any holder of the Timber
Note (the “Note Parties”), at the expense of the Note Parties, including
(i) furnishing the Note Parties with such financial and other pertinent
information regarding Purchaser, LLC as may reasonably be requested by Seller
and (ii) using reasonable best efforts, at Seller’s sole cost and expense, to
obtain such customary corporate law opinions concerning Purchaser, LLC as may
reasonably be requested by Seller. Notwithstanding anything herein to the
contrary, Purchaser or Purchaser, LLC shall not take any steps designed to
create or encourage the making of a market in the Timber Note or the listing or
trading of the Timber Note on an “established securities market” or otherwise
take any actions designed to render the Timber Note “readily tradable in an
established securities market” within the meaning of Treasury Regulations
Section 15A.453-l(e)(4).

Section 11.10 Credit Support for Timber Note.

(a) Purchaser shall use its best efforts to arrange the Debt Financing on the
terms and conditions described in the Debt Commitment Letter, including using
best efforts to (i) negotiate definitive agreements with respect thereto on the
terms and conditions contained therein or on other terms not materially less
beneficial to Purchaser, (ii) satisfy on a timely basis all conditions
applicable to Purchaser in such definitive agreements that are within its
control, and (iii) consummate the Debt Financing contemplated by the Debt
Commitment Letter at Closing. Purchaser shall provide notice to Seller promptly
upon receiving the Debt Financing.

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

(c) Purchaser and Purchaser, LLC shall use their best efforts to arrange for
Credit Enhancement Bank to issue a Letter of Credit on terms and conditions that
are consistent with the Timber Note Indicative Terms in an amount of not less
than the Installment Note Purchase Price plus one interest payment on the Timber
Note (the “L/C Amount”), including using best efforts (i) as soon as practicable
to obtain a firm commitment (each, an “L/C Commitment Letter”), in form and
substance satisfactory to Seller, to provide such Letter of Credit, (ii) to
negotiate definitive agreements with respect to the Letter of Credit on the
terms and conditions contained in the L/C

 

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Commitment Letter or on other terms not materially less beneficial to Purchaser,
Purchaser, LLC or Seller, (iii) to satisfy on a timely basis all conditions
applicable to Purchaser, LLC in such definitive agreements that are within its
control, and (iv) to consummate the issuance of the Letter of Credit at Closing.

(d) In the event any portion of the Letter of Credit becomes unavailable to
Purchaser, LLC on the terms and conditions contemplated in the L/C Commitment
Letter, Purchaser and Purchaser, LLC shall use their best efforts to arrange to
obtain a letter of credit, including from alternative sources, on terms and
conditions that are not materially less beneficial to Seller and that are
consistent with the Timber Note Indicative Terms, promptly following the
occurrence of such event. Purchaser and Purchaser, LLC 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. Purchaser and
Purchaser, LLC shall keep Seller informed on a reasonably current basis in
reasonable detail of the status of its efforts to arrange the Letter 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 Letter
without the prior written consent of Seller (such consent not to be unreasonably
withheld or delayed). Purchaser, LLC and Seller shall consult in good faith and
cooperate with respect to the terms of the Letter of Credit documentation.

(e) Notwithstanding any other provision of this Section 11.10, the terms of the
Collateral Notes may differ from those specified in the Timber Note Indicative
Terms, as reasonably necessary to enable an Affiliate of Purchaser to secure or
preserve its qualification as a “real estate investment trust” within the
meaning of Section 856 of the Code, by means of the substitution of debt
securities (i) the interest on which is characterized as interest on an
obligation secured by a mortgage on real property or on an interest in real
property, (ii) that constitute “regular interests” in a “real estate mortgage
investment conduit” (as those terms are defined in Sections 860D and 860G of the
Code), and (iii) that shall be any of the following: (a) mortgage-backed
certificates guaranteed by the Government National Mortgage Association,
(b) mortgage certificates issued by the Federal Home Loan Mortgage Corporation,
(c) mortgage certificates guaranteed by the Federal National Mortgage
Association, or (d) other such securities with a credit rating of at least AA by
two or more “nationally recognized statistical rating organizations” (the
“Substitute Collateral Notes”). Notwithstanding the foregoing, the terms of the
Substitute Collateral Notes shall not be materially less beneficial to Seller
than the terms of the Collateral Notes, and the income generated by the
Substitute Collateral Notes shall, for each accrual period on the Timber Note,
equal or exceed the income that would be generated by the Collateral Notes, and
such income shall be paid in a manner that permits timely payments on the Timber
Note. To the extent that debt securities other than those described above are
substituted, such a substitution may not be made without the consent of Seller
(Seller’s consent not to be unreasonably withheld or delayed, with reasonable
grounds to withhold consent to include, but not be limited to, Seller’s
determination that such change may affect any Tax benefit of Seller with respect
to installment method treatment under section 453 of the Code).

Section 11.11 Underlying Leases; Timberlands II, LLC Contracts and Timberlands
II, LLC Real Property Leases.

(a) Seller shall within ten (10) days after the date of this Agreement provide
Purchaser with true, correct and complete copies of all Underlying Leases,
Timberlands II, LLC Purchased

 

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Contracts and Timberlands II, LLC Real Property Leases. Purchaser may at any
time prior to the Closing give to Seller written notice of any Underlying
Leases, Timberlands II, LLC Purchased Contracts or Timberlands II, LLC Real
Property Leases to which Purchaser objects. If Seller fails to terminate or
cause to be terminated at or prior to Closing any such Underlying Leases,
Timberlands II, LLC Contract or Timberlands II, LLC Real Property Leases to
which Purchaser gives Seller notice that it objects, then Purchaser may either
(i) proceed to Closing subject to such uncured or unsatisfied objection, with no
reduction in the Purchase Price, or (ii) if Purchaser determines that such
Underlying Leases, Timberlands II, LLC Purchased Contracts or Timberlands II,
LLC Real Property Leases affects only a portion of the Seller Land or Leasehold
Property, proceed to Closing and the Purchased Assets shall be conveyed,
assigned and transferred to Timberlands II, LLC pursuant to the Contribution
Agreement exclusive of such objectionable portion, with such reduction in the
Installment Note Purchase Price as determined in accordance with paragraph
(b) of this Section 11.11.

(b) Purchaser shall be entitled to a reduction in the Installment Note Purchase
Price equal to the discounted cash flows with respect to the applicable
Leasehold Interest for any Underlying Lease to which Purchaser timely objects.
With regard to any portion of the Seller Land affected by a Timberlands II, LLC
Purchased Contracts or Timberlands II, LLC Real Property Leases to which
Purchaser timely objected, and elected to exclude such portion of the Seller
Land, Purchaser shall be entitled to a reduction in the Purchase Price equal to
the fair market value of such excluded portion. Promptly after Purchaser’s
delivery of written notice of Purchaser’s election to exclude an Underlying
Lease from the Purchased Assets, the Parties shall consult and negotiate with
each other in good faith regarding the appropriate reduction in the Installment
Note Purchase Price for any portion of Seller Land or Leasehold Property which
Purchaser elects to exclude in accordance with paragraph (a) of this
Section 11.11 (an “Excluded Parcel”). If the Parties are unable to mutually
agree on the fair market value of any Excluded Parcel, or if applicable, the
discounted cash flows with respect to the applicable Leasehold Interest, within
thirty (30) days after Purchaser’s delivery of notice of Purchaser’s election to
exclude the Excluded Parcel from the Purchased Assets, then the Excluded Parcel
shall determined by an Independent Appraiser in accordance with Section 11.5(c)
above as though the Excluded Parcel were a Deleted Parcel.

Section 11.12 Sale of Timberlands II, LLC.

In the event Purchaser or Purchaser, LLC sells all of the interests in
Timberlands II, LLC to an unrelated party prior to the seventh (7th) anniversary
of the Closing Date, Purchaser agrees that it will maintain a net worth equal to
the lesser of (i) the after-tax proceeds realized on the sale (after the
repayment of any indebtedness attributable to the acquisition of the Timberlands
II, LLC Interests), or (ii) $200 million, until the seventh (7th) anniversary of
the Closing Date.

 

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ARTICLE XII

HUMAN RESOURCES MATTERS

Section 12.1 Human Resources.

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 Seller or any Affiliate of Seller,
and employing or hiring any employees of Seller shall remain in effect after the
date hereof until the termination of such provisions in accordance with their
terms under the Confidentiality Agreement. Notwithstanding the foregoing and
anything to the contrary in the Confidentiality Agreement, upon the written
request of Purchaser, Seller shall promptly provide to Purchaser a list of
employees whose current employment is related to Seller’s operations and
management of all or any portion of the Purchased Assets (hereinafter
“Identified Employees”), and Seller agrees that Purchaser may interview any such
Identified Employees and offer employment on such terms as Purchaser may
determine in Purchaser’s sole and absolute discretion, and hire such Identified
Employee(s), provided such employment with Purchaser commences on or after the
Closing Date. Seller agrees not to interfere with such employment offers to any
Identified Employees and shall not induce, dissuade or discourage such
Identified Employees from considering or accepting employment with Purchaser on
the terms and conditions offered by Purchaser.

ARTICLE XIII

CONDITIONS PRECEDENT

Section 13.1 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 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.

 

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(d) The Letter of Credit securing the Timber Note issued by Purchaser, LLC in
respect of the Installment Note Purchase Price shall have been delivered to
Seller by the Credit Enhancement Bank on terms and conditions that are
consistent with the Timber Note Indicative Terms, provided, that the obligation
of Purchaser 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 13.1(d) if the Purchaser or Purchaser, LLC have failed to satisfy their
obligations under Section 11.9.

(e) Any disputes under Section 10.5, 10.8(c), 11.5(c), 11.6(c), or 11.11(b)
shall have been resolved in accordance with the terms and conditions of said
sections.

Section 13.2 Conditions to Obligations of Purchaser to Close.

The obligation of Purchaser 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 13.2(a) of Seller’s Disclosure Letter, to have been
filed, made, given or obtained by Seller shall have been filed, made, given or
obtained and copies thereof shall have been delivered to Purchaser; provided,
however, that the obligation of Purchaser 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 13.2(a) if Purchaser fails to
satisfy its obligations under Sections 10.1(b) and 10.1(c).

(b) Each of the representations and warranties of Seller contained in this
Agreement shall be true and correct without regard to “materiality” or similar
qualifications in such representations and warranties, 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) Seller 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 Seller on or prior to the Closing.

(d) Seller shall have delivered or caused to be delivered to Purchaser the items
set forth in Section 3.2(a).

(e) Seller shall have caused Timberlands II, LLC to deliver to Seller the items
set forth in Section 3.2(c).

 

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Section 13.3 Conditions to Obligations of Seller.

The obligation of Seller 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 to have been
filed, made, given or obtained by Purchaser or Purchaser, LLC and copies thereof
shall have been delivered to Seller, provided that the obligation of Seller 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 13.3(a)
if Seller fails to satisfy its obligations under Sections 10.1(b) and 10.1(c).

(b) Each of the representations and warranties of Purchaser or Purchaser, LLC
contained in this Agreement shall be true and correct without regard to
“materiality” or similar qualifications in such representations and warranties,
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 Purchaser or
Purchaser, LLC or on their ability to perform their obligations under this
Agreement or the Ancillary Agreements to be executed by them.

(c) Purchaser and Purchaser, LLC 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) Purchaser shall have delivered or caused to be delivered to Seller the items
set forth in Section 3.2(b).

(e) Purchaser and Purchaser, LLC shall have entered into a limited liability
company operating agreement in respect of Purchaser, LLC substantially in the
form of Exhibit J.

(f) Purchaser, LLC shall have entered into a services agreement (the “Services
Agreement”), in form and substance reasonably satisfactory to Purchaser and
Seller, with a third party Trustee reasonably satisfactory to Purchaser and
Seller pursuant to which the Trustee will make payments of amounts due and
payable under Purchaser, LLC’s Timber Note.

ARTICLE XIV

SURVIVAL OF REPRESENTATIONS

Section 14.1 No Survival.

None of the representations or warranties contained in this Agreement shall
survive the Closing or the termination of this Agreement pursuant to its terms;
provided, however, that Seller’s representations and warranties contained in
Articles V, VI, VII and VIII and Purchaser’s

 

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representations and warranties contained in Article IX shall survive the Closing
for a period of one year (even if Purchaser knew or had reason to know of such
breach at Closing), and provided further that, notwithstanding the foregoing,
(i) the representations and warranties contained in Sections 5.6, 5.7, 9.6 and
9.8 shall survive until the expiration of the applicable statute of limitations
and (ii) the representations and warranties contained in Sections 5.1, 5.2, 5.3,
6.1, 6.2, 6.3, 6.4, 9.1, 9.2 and 9.3 shall survive Closing indefinitely. The
applicable survival period for a given representation or warranty shall
hereinafter be referred to as the “Survival Period”. This Section 14.1 shall not
limit any covenant or agreement of the Parties which by its terms contemplates
performance on or after the Closing (including, but not limited to, Sections
11.7 and 11.8). Nothing herein shall be construed to terminate any claim brought
before the expiration of the applicable Survival Period.

Section 14.2 Purchaser’s Agreement to Indemnify.

(a) Subject to the terms and conditions set forth herein, from and after the
Closing Date, Purchaser shall indemnify, defend and hold harmless Seller and its
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 and
actual attorneys’ fees and expenses), asserted against or incurred by Seller or
any Seller Indemnitee (collectively, the “Seller Damages”) as a result of or
arising out of (i) a breach of any representation or warranty of any Purchasing
Party contained in Article IX of this Agreement to the extent that Seller
delivers written notice of such breach to such Purchasing Party within
forty-five (45) days after the expiration of the applicable Survival Period,
(ii) a breach of any other agreement or covenant of a Purchasing Party contained
herein that contemplates performance or compliance on or prior to the Closing
Date, (iii) a breach of any other agreement or covenant of a Purchasing Party,
contained herein to the extent such agreement or covenant survives Closing, or
(iv) the use and operation after the Closing of any of the Purchased Assets
assigned, transferred or conveyed to Timberlands II, LLC.

(b) Purchaser’s obligations to indemnify Seller and Seller Indemnitees for
Seller Damages pursuant to Section 14.2(a) are subject to the following
limitations: (i) any particular claim must exceed the threshold for individual
claims set forth in Exhibit K attached hereto (with indemnification only to the
extent of such excess) and (ii) claims for indemnification must exceed, on a
cumulative basis, the floor for indemnification claims set forth in Exhibit K
attached hereto and made a part hereof (with indemnification only to the extent
of such excess) (collectively, (i) and (ii), the “Deductible”); provided,
however, and notwithstanding the foregoing, from and after the Closing Date,
Purchaser shall indemnify, defend and hold harmless each of Seller and Seller
Indemnitees from and against all Seller Damages which may be assessed against or
incurred by Seller or any Seller Indemnitee as a result of or arising out of any
breach by any Purchasing Party of Sections 9.7, 9.8, 11.7(a), (b), (c), (d),
(f)(i), (g), or (h), or 11.8(a), without regard to the Deductible, and without
regard to the Damages Cap.

(c) The amount of any Seller Damages shall be reduced by any amount actually
received by Seller or a Seller Indemnitee with respect thereto under any third
party insurance coverage or from any other party alleged to be responsible
therefor. If Seller or a Seller Indemnitee makes a valid and timely claim for
indemnification under this Section 14.2, Seller and Seller

 

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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 or 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 Purchaser pursuant to
this Section 14.2, then Seller or such Seller Indemnitee shall promptly
reimburse Purchaser for any payment made or expense incurred by Purchaser in
connection with providing such indemnification up to such amount received by
Seller or Seller Indemnitee, but net of any expenses incurred by Seller or such
Seller Indemnitee in collecting such amount.

(d) Except as otherwise provided above in paragraph (b) of this Section 14.2,
Purchaser shall not be liable for, nor shall Seller and Seller Indemnitees be
entitled to receive Seller Damages in an amount in excess of an amount equal to
the cap set forth on Exhibit K attached hereto and made a part hereof (the
“Damages Cap”).

Section 14.3 Seller’s Agreement to Indemnify.

(a) Subject to the terms and conditions set forth herein, from and after the
Closing Date, Seller shall indemnify, defend and hold each Purchasing Party
harmless and its directors, officers, employees, Affiliates, controlling
persons, agents and representatives and their successors and assigns
(collectively, the “Purchaser Indemnitees”) from and against all liability,
demands, claims, actions or causes of action, assessments, damages, costs and
expenses (including reasonable and actual attorneys’ fees and expenses) asserted
against or incurred by any Purchasing Party or Purchaser Indemnitee
(collectively, the “Purchaser Damages”) as a result of or arising out of (i) a
breach of any representation or warranty of Seller contained in Article V, VI,
VII or VIII of this Agreement to the extent that Purchaser delivers written
notice of such breach to Seller within forty-five (45) days after the expiration
of the applicable Survival Period, (ii) a breach of any other agreement or
covenant of Seller contained herein that contemplates performance or compliance
on or prior to the Closing Date, including without limitation execution and
delivery of the Deeds and other closing documents, (iii) a breach of any other
agreement or covenant of a Seller contained herein to the extent such agreement
or covenant survives Closing, or (iv) the use and operation prior to the Closing
of any of the Purchased Assets assigned, transferred or conveyed to Timberlands
II, LLC; provided, however, that Section 14.4 shall be the exclusive remedy for
Environmental Claims as defined therein.

(b) Seller’s obligations to indemnify a Purchasing Party or Purchaser Indemnitee
pursuant to Section 14.3(a) claims are subject to the following limitation: No
indemnification shall be made by Seller unless the Deductible (including amounts
received under Section 14.4) is met; provided, however, and notwithstanding the
foregoing, from and after the Closing Date, (i) Seller shall indemnify a
Purchasing Party or Purchaser Indemnitee from and against all Purchaser Damages,
which may be assessed against or incurred by a Purchasing Party or Purchaser
Indemnitee as a result of or arising out of any breach of the representations
and warranties contained in Section 5.7 or Section 6.4 without regard to the
Deductible, and without regard to the Damages Cap, (ii) the valuation of a claim
will be made without regard to any materiality qualifier contained within the
representation whose breach gives rise to the claim.

(c) The amount of any Purchaser Damages shall be reduced by any amount actually
received by a Purchasing Party or Purchaser Indemnitee with respect thereto
under any third party

 

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insurance coverage or from any other party alleged to be responsible therefor.
If a Purchasing Party or Purchaser Indemnitee makes a valid and timely claim for
indemnification under this Section 14.3, the Purchasing Party or Purchaser
Indemnitee 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 Purchasing Party or Purchaser Indemnitee receives an
amount under insurance coverage or from such other party with respect to
Purchaser Damages at any time subsequent to any indemnification provided by
Seller pursuant to this Section 14.3 then such Purchasing Party or Purchaser
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 the Purchasing Party or Purchaser Indemnitee, but net of any
expenses incurred by such Purchasing Party or Purchaser Indemnitee in collecting
such amount.

(d) Except as otherwise provided above in paragraph (b) of this Section 14.3,
Seller shall not be liable for, nor shall any Purchasing Party or Purchaser
Indemnitee be entitled to receive Purchaser Damages in an amount in excess of
the Damages Cap (including amounts received under Section 14.4).

Section 14.4 Environmental Indemnity.

(a) Except as otherwise described in the Environmental Reports or as described
in any investigative work by Purchaser or its agents in connection with
Section 11.6, from and after the Closing, Seller shall indemnify, defend, and
hold harmless a Purchasing Party or Purchaser Indemnitee from any Purchaser
Damages associated with Pre-Existing Environmental Conditions on any portion of
the Seller Land or Leasehold Property. “Pre-Existing Environmental Conditions”
means any environmental contamination or violation of Environmental Law
discovered after the Closing Date but existing as of the Closing Date that
requires Remediation or other action under applicable Environmental Law as such
Law existed on the Closing Date (but excluding any environmental contamination
or violation of Environmental Law caused by Purchaser prior to the Closing Date
or any environmental conditions caused by acts of god or natural disaster).
Purchaser’s claim for indemnity for any Pre-Existing Environmental Conditions or
any breach of the representations and warranties of Sections 7.3 and 8.4
(collectively, the “Environmental Claims”) and Seller’s obligation to indemnify
the Purchasing Party or Purchaser Indemnitee for any Environmental Claim shall
be governed in the manner provided for in this Section 14.4. In the event of any
conflict between the terms of this Section 14.4 and any other provision of
Article XIV with respect to any Environmental Claim, the terms of this
Section 14.4 shall control.

(b) Seller’s obligation to indemnify, defend and hold harmless any Purchasing
Party or Purchaser Indemnitee under this Section 14.4 shall be limited to those
matters as to which Purchaser provides Seller with written notice within one
year of the Closing Date. Further, Seller shall not be obligated to indemnify
any Purchasing Party of Purchaser Indemnitee pursuant to Section 14.4 of this
Agreement on account of any Environmental Claim unless the Deductible is met
(including amounts received under Section 14.3); provided, however, that in no
event shall Seller be liable pursuant to this Section 14.4 for Purchaser Damages
in excess of the Damages Cap (including amounts received under Section 14.3).

(c) After giving effect to the indemnification provisions in this Article XIV,
including any limitations thereon, whichever party is reasonably expected to
bear a majority of the losses

 

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relating to any Environmental Claim made pursuant to this Article XIV shall be
entitled to control the resulting defense, prosecution, investigation,
containment and/or Remediation. The party controlling the defense, prosecution,
investigation, containment and/or Remediation (the “Controlling Party”) shall
undertake such defense, prosecution, investigation, containment and/or
Remediation in a commercially reasonable fashion in accordance with
Environmental Laws for land of the type being remediated such that any
Remediation complies with only applicable Remediation Standards. The Controlling
Party shall promptly provide copies to the other party (the “Non-Controlling
Party”) of all notices, correspondence, draft reports, submissions, work plans,
and final reports and shall give the Non-Controlling Party a reasonable
opportunity (at the Non-Controlling Party’s own expense) to comment on any
submissions the Controlling Party intends to deliver or submit to the
appropriate regulatory body prior to said submission. The Non-Controlling Party
may, at their own expense, hire their own consultants, attorneys or other
professionals to monitor the defense, prosecution, investigation, containment
and/or Remediation, including any field work undertaken by the Controlling
Party, and the Controlling Party shall provide the Non-Controlling Party with
copies of the results of all such field work. Notwithstanding the above, the
Non-Controlling Party shall not take any actions that shall unreasonably
interfere with the Controlling Party’s performance of the defense, prosecution,
investigation, containment and/or Remediation.

(d) Notwithstanding anything in this Article XIV to the contrary, a Purchasing
Party or Purchaser Indemnitee shall not be entitled to recovery for Purchaser
Damages relating to, resulting from or in connection with: (i) a material change
after the Closing in any of the uses of the Purchased Assets; (ii) the cost of
removal or treatment of any Hazardous Substance that can be managed in place in
a commercially reasonably fashion while complying with the requirements of
Environmental Law for land of the type being remediated; (iii) any change in
Laws occurring after the Closing Date; or (iv) any gross negligence or willful
misconduct of Purchaser or any of its Affiliates after the Closing Date.

Section 14.5 Exclusive Remedy.

From and after the Closing, the remedies set forth in this Article XIV shall,
except as otherwise specifically provided in this Agreement, be the sole and
exclusive remedies of the parties hereto with respect to this Agreement,
including any and all claims arising out of, in connection with or relating to
the subject matter thereof, and are in lieu of any other remedies that may be
available to any party with respect to this Agreement. In furtherance of the
foregoing, the parties hereby waive, to the fullest extent permitted under
applicable Law, and agree not to assert in any action or proceeding of any kind,
any and all rights, claims and causes of action they may now or hereafter have
against any other party to this Agreement (including, without limitation, any
such rights, claims or causes of action arising under or based upon
Environmental Law or common law or equity) other than claims for indemnification
asserted as permitted by and in accordance with the provisions set forth in this
Article XIV.

 

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ARTICLE XV

TERMINATION AND AMENDMENT

Section 15.1 Termination.

This Agreement may only 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 Purchaser;

(b) by either Seller or Purchaser, if the Closing has not occurred by
September 14, 2007 (such date the “Termination Date”) and provided, further,
that the right to terminate the Agreement pursuant to this Section 15.1(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 10.3(a);

(d) by Seller upon a breach or violation of any representation, warranty,
covenant or agreement on the part of Purchaser or Purchaser, LLC set forth in
this Agreement or in the Equity Commitment Letter, which breach or violation
would result in the failure to satisfy the conditions set forth in
Section 13.3(b) or Section 13.3(c) and, in any such case, such breach or
violation shall be incapable of being cured by the Termination Date, or
Purchaser or Purchaser, LLC 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 Seller to Purchaser of
such violation or breach; or

(e) by Purchaser upon a breach or violation of any representation, warranty,
covenant or agreement on the part of Seller set forth in this Agreement, which
breach or violation would result in the failure to satisfy the conditions set
forth in Section 13.2(b) or Section 13.2(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 Purchaser to Seller of such violation or
breach.

Section 15.2 Effect of Termination.

In the event of any termination of this Agreement as provided in Section 15.1,
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 11.1, this Section 15.2, and Article XVI;
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). Notwithstanding the
foregoing provisions of this Section 15.2, in the event of any termination of
this Agreement as provided in (i) Section 15.1 (a), (b) or (e), upon notice of
such termination by either Party to the Escrow Agent, the Earnest Money shall be
promptly returned to

 

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Purchaser LLC, and further, if such termination is as provided in
Section 15.1(e), Purchaser shall have all rights and remedies available at law
or in equity, including the right to seek enforcement of this Agreement by
specific performance and (ii) Section 15.1 (c) or (d), upon notice of such
termination by either Party to the Escrow Agent, Seller shall have the right to
either (i) receive the Earnest Money from Escrow Agent to Seller as liquidated
damages and not a penalty, the Parties hereby acknowledging that Seller’s actual
damages in the event of default by Purchaser and such termination of this
Agreement cannot be ascertained with certainty and that the Earnest Money
represents the Parties’ best current estimate of such damages or (ii) to seek
enforcement of this Agreement by specific performance. Seller hereby waives all
other rights and remedies available at law or in equity.

ARTICLE XVI

GENERAL PROVISIONS

Section 16.1 Notice.

Any notice given pursuant to this Agreement shall be given in writing and
delivered in person by overnight courier (Fed-Ex, UPS or DHL) or by facsimile
addressed as follows:

If to Seller, to:

MeadWestvaco Corporation

180 Westvaco Road

Summerville, South Carolina 29483

Attn: Vice President Land Acquisition and Sales, Forestry Division

Tel: (843) 851-4708

Fax: (843) 875-7185

with copies to:

Nelson Mullins Riley & Scarborough LLP

Liberty Center, Suite 600

151 Meeting Street

Charleston, South Carolina 29401

Attn: John B. Hagerty

Tel: (843) 853-5200

Fax: (843) 720-4356

Corporate Secretary

MeadWestvaco Corporation

11013 West Broad Street

Glen Allen, Virginia 23060

Tel: (804) 327-6429

Fax: (203) 461-7588

 

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If to the Purchaser, to:

Timberland President

Wells Real Estate Funds

6200 The Corners Parkway

Norcross, Georgia 30092

Tel: (770) 243-8249

Fax: (770) 243-8286

with copies to:

Powell Goldstein LLP

One Atlantic Center

1201 West Peachtree Street, 14th Floor

Atlanta, Georgia 30309

Attn: C. Glenn Dunaway, Esq.

Tel: (404) 572-4545

Fax: (404) 572-6999

Such notices, if delivered by overnight courier service shall be deemed given at
the time of delivery; and if sent by facsimile, shall be deemed given on the day
on which such facsimile was sent, provided that a copy is also sent by overnight
courier for delivery the following day.

Section 16.2 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 Georgia for observance thereof.

Section 16.3 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 16.4 Entire Agreement.

This Agreement (including the Exhibits and schedules hereto), Seller’s
Disclosure Letter and the Confidentiality Agreement (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.

 

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Section 16.5 Amendments: Waivers.

This Agreement may not be amended or modified in any manner other than by an
agreement in writing signed by Seller and Purchaser 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 16.6 Confidentiality.

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.

Section 16.7 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, any rights, remedies or other benefits under or
by reason of this Agreement.

Section 16.8 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 16.9 Governing Law.

(a) THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY,
CONSTRUCTION, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF GEORGIA,
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 GEORGIA AND THE FEDERAL COURTS
OF THE UNITED STATES OF AMERICA LOCATED IN THE STATE OF GEORGIA 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

 

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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 GEORGIA STATE COURT OR FEDERAL COURT LOCATED IN THE STATE OF
GEORGIA. 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 16.1, 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 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 16.10 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 16.11 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 16.12 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 Seller and
Purchaser 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.”

 

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Section 16.13 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 costs and expenses
of the prevailing Party (including its reasonable and actual attorneys’ fees and
disbursements).

Section 16.14 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 maybe applied for and granted in connection therewith.

Section 16.15 Assignment.

Neither Party shall assign this Agreement without the prior written consent of
the other party. Any attempt to assign this Agreement without prior written
consent (which consent shall not be unreasonably withheld) shall be void. This
Agreement shall apply to and bind the heirs, executors, administrators,
successors and permitted assigns of the respective parties.

Section 16.16 Exclusive Dealing.

Seller covenants and agrees that from and after the date of this Agreement and
until September 14, 2007 or such earlier date as this Agreement may be
terminated in accordance with Section 15.1, Seller shall not (i) solicit any
sale of all or any portion of the Purchased Assets (which shall not include
timber sales otherwise permitted under the terms of this Agreement),
(ii) negotiate with any person or entity with respect to any such a sale, or
(iii) enter into any agreement or understanding with the intent to effect such a
sale.

Section 16.17 Transfer of Purchaser Prior to Closing.

Prior to Closing, the owner of the membership interests in Purchaser shall be
permitted to transfer such interests to any Affiliate of Wells Timberland REIT,
Inc. without restriction.

ARTICLE XVII

DEFINITIONS

Section 17.1 Definitions.

The terms set forth below shall have the following meanings:

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

 

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“Agreement” has the meaning specified in the Preamble.

“Ancillary Agreements” has the meaning specified in Section 5.l.

“Apportionments” has the meaning specified in Section 2.4.

“Assignment and Assumption of Leasehold Interests” has the meaning specified in
Section 3.2(a) (iv).

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

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

“Assignment of Timberlands II, LLC Interests” has the meaning specified in
Section 3.2(a)(xi).

“Assumed Liabilities” has the meaning specified in the Contribution Agreement.

“Books and Records” has the meaning specified in Section 1.2(f).

“Cash Assets” has the meaning specified in Section 2.2.

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

“Casualty Carve Out” has the meaning specified in Section 10.8(b).

“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.

“Closing Statement” has the meaning specified in Section 3.2(a)(xv).

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

“Collateral Notes” has the meaning specified in the Timber Note Indicative
Terms.

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

“Commitment Letters” has the meaning specified in Section 9.9(c).

 

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“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 hereof) with respect to the
Seller Land or Leasehold Interests.

“Confidentiality Agreement” means, collectively, the confidentiality agreement
dated _____ 2007 between Seller and Purchaser.

“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.

“Contribution Agreement” means the Contribution Agreement pursuant to which the
Purchased Assets were contributed to Timberlands II, LLC, in substantially the
form attached hereto as Exhibit L.

“Controlling Party” has the meaning specified in Section 14.4(c).

“Conveyance Instruments” means such deeds, assignments of leases, and/or other
instruments necessary or appropriate under applicable Laws to convey (i) to
Timberlands II, LLC fee simple title to the Seller Land, in each case with
covenants of limited or special warranty as to title, or (ii) to Timberlands II,
LLC leasehold title to the Leasehold Interests, in each case subject to the
Permitted Exceptions, and a quitclaim of all mineral rights.

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

“Credit Enhancement Bank” means a bank or other financial institutions selected
by Purchaser (with the prior written consent of Seller) having a credit rating
of not less than AA-/Aa3 to provide the standby Letter of Credit required by
Section 2.5 as credit enhancement for the Timber Note.

“Damages Cap” has the meaning specified in Section 14.2(d).

“Debt Commitment Letter” has the meaning specified in Section 9.9(b).

“Debt Financing” has the meaning specified in Section 9.9(b).

“Deductible” has the meaning specified in Section 14.2(b).

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

“Defective Parcel” has the meaning specified in Section 11.5(b).

“Deleted Parcel” has the meaning specified in Section 11.5(b).

“Disposal” (or “Disposed”) when used in connection with Hazardous Substances
shall have the meaning ascribed to that term in 42 U.S.C. § 9603(3).

“Earnest Money” has the meaning specified in Section 2.6.

 

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“Endangered Species” has the meaning specified in Section 7.8.

“Environmental Carve Out” has the meaning specified in Section 11.6(a).

“Environmental Claims” has the meaning specified in Section 14.4(a).

“Environmental Laws” means any United States federal, state or local Laws and
the regulations promulgated thereunder, in existence as of the Closing, relating
to pollution or protection of human health, the environment or to threatened or
endangered species, including without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, as amended (“CERCLA”),
and the Resource Conservation and Recovery Act, as amended (“RCRA”), the Toxic
Substances Control Act, as amended, the Clean Water Act, as amended, the Clean
Air Act, as amended, and the Oil Pollution Control Act of 1990, as amended, the
federal Endangered Species Act, as amended, 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 Permits” means all permits, permits-by-rule, approvals,
certifications, identification numbers, licenses and other authorizations
required under any applicable Environmental Law.

“Environmental Reports” has the meaning specified in Section 7.3(a).

“Equity Commitment Letter” has the meaning specified in Section 9.9(a).

“Equity Financing” has the meaning specified in Section 9.9(a).

“Escrow Agent” has the meaning specified in Section 2.6.

“Excluded Parcel” has the meaning specified in Section 11.11(b).

“Extension Period” means any period subsequent to the end of the Initial Term of
the Timber Note and prior to the final maturity date of the Timber Note.

“Fiber Supply Agreement” has the meaning specified in Section 3.2(a)(ix).

“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.

“Harvest Plan” has the meaning specified in Section 2.4.

“Hazardous Substances” means any chemical, compound, constituent, material,
waste, contaminant (including petroleum, crude oil or any constituent or
fraction thereof) or other substance, whether solid, liquid or gaseous, defined
as hazardous or toxic, or otherwise regulated

 

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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, IS 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 Seller Land located in such States, all Laws of the States
based on, or substantially similar to, the federal statutes listed in parts
(i) through (vi) of this subparagraph.

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

“Identified Employees” has the meaning specified in Section 12.1.

“Independent Appraiser” has the meaning specified in Section 11.5(c).

“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).

“Initial Term” means the initial twenty year term of the Timber Note.

“Installment Note Assets” has the meaning specified in Section 2.2.

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

“Landlord Estoppels” has the meaning specified in Section 3.2(a)(xiii).

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

“L/C Amount” has the meaning specified in Section 11.10(c).

“L/C Commitment Letter” has the meaning specified in Section 11.10(c).

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

“Leasehold Property” means the land and other real property which relates to the
Leasehold Interests.

“Lender” has the meaning specified in Section 9.9(b).

 

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“Letter of Credit” has the meaning specified in Section 2.5.

“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.

“Master Stumpage Agreement” has the meaning specified in Section 3.2(a)(viii).

“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 change in Law, rule or regulation or interpretations thereof
applicable to Seller or Purchaser, or (iii) 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.

“Non-Controlling Party” has the meaning specified in Section 14.4(c).

“Note Documents” has the meaning specified in Section 11.9(a).

“Note Parties” has the meaning specified in Section 11.9(b).

“Parties” has the meaning specified in the Preamble.

“Permitted Exceptions” has the meaning specified in Section 1.3.

“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.

“Personal Property” has the meaning specified in Section 1.2(f).

“Phase I Report” means an environmental site assessment with respect to Seller
Land prepared by or on behalf of Seller 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.

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

“Pre-Existing Environmental Conditions” has the meaning specified in
Section 14.4(a).

 

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“Product Class” has the meaning specified in Section 2.4.

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

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

“Purchased Assets” has the meaning specified in Section 1.2.

“Purchaser” has the meaning specified in the Preamble.

“Purchaser Damages” has the meaning specified in Section 14.3(a).

“Purchaser Easements” means such access easements across mutually agreeable
portions of property owned by Seller as may be reasonably necessary to allow
Purchaser or Timberlands II, LLC and their respective Affiliates, successors and
assigns to use any portion of Seller Land for Purchaser’s intended use as
timberlands.

“Purchaser Indemnitees” has the meaning specified in Section 14.3(a).

“Purchaser, LLC” means a direct and wholly owned Subsidiary of Purchaser.

“Purchasing Party” means, prior to the Closing, Purchaser, Purchaser, LLC, or an
Affiliate of either and, at Closing, Purchaser, Purchaser, LLC, Timberlands II,
LLC, or their Affiliates.

“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.

“Release” when used in connection with Hazardous Substances, shall have the
meaning ascribed to that term in 42 U.S.C. § 9601(22), but not subject to the
exceptions in Subsection (A), (B) and (D) of 42 U.S.C. § 9601(22).

“Remediation” means all actions required by Environmental Laws to (i) cleanup,
remove, treat or remediate Hazardous Substances in the environment; (ii) notify
any governmental agency as required by Environmental Law; (iii) perform
pre-remedial studies and investigations and post-remedial monitoring and care;
or (iv) respond to any government requests for information or documents relating
to cleanup, removal, treatment or remediation or potential cleanup, removal,
treatment or remediation of Hazardous Substances in the environment.

“Remediation Standards” means the Remediation standards applicable under the
Environmental Law that is the source of the obligation to conduct the
Remediation. Remediation Standards applicable to the Seller Land or Leasehold
Property are the least stringent Remediation Standards required by Environmental
Law, taking into account that the normal operating condition at the Seller Land
or Leasehold Property prior to the Closing Date.

 

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“Reserved Easements” means such access easements across mutually agreeable
portions of property owned by the Timberlands II, LLC as may be reasonably
necessary to allow Seller and its respective Affiliates, successors and assigns
to use any portion of the Seller Land for Seller’s intended use as timberlands.

“Roll-back Taxes” has the meaning specified in Section 2.4.

“SEC” means the Securities and Exchange Commission.

“Seller” has the meaning specified in the Preamble.

“Seller Damages” has the meaning specified in Section 14.2(a).

“Seller Indemnitees” has the meaning specified in Section 14.2(a).

“Seller Land” has the meaning specified in Section 1.2(a). Geographic
information system maps describing the Seller Land (and Leasehold Interests) are
included on Schedule A.

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

“Seller’s Environmental Knowledge” means actual knowledge possessed by the
Persons set forth on Exhibit M, without any duty on the part of such individuals
to investigate or inquire into any particular matter.

“Seller’s Knowledge” means actual knowledge possessed by the Persons set forth
on Exhibit M, 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 13.3(f).

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

“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.

“Substitute Collateral Notes” has the meaning specified in Section 11.10(e).

“Substitution Property” has the meaning specified in Section 11.5(b).

“Survival Period” has the meaning specified in Section 14.1.

“Tax” or “Taxes” means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, ad valorem, 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.

 

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“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 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 15.1(b).

“Timberlands II, LLC” means the Delaware limited liability company to be formed
by Seller prior to the Closing, pursuant to organizational documents reasonably
satisfactory to Seller and Purchaser, for the purposes described in Section 1.2,
and any successor to each such entity. Timberlands II, LLC will be wholly owned
by Seller prior to Closing and will be an indirect wholly owned Subsidiary of
Purchaser after Closing.

“Timberlands II, LLC Interests” has the meaning specified in Section 1.1.

“Timberlands II, LLC Purchased Contracts” has the meaning specified in
Section 1.2(d).

“Timberlands II, LLC Real Property Leases” has the meaning specified in
Section 1.2(e).

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

“Timber Note Indicative Terms” means the terms of the Timber Note set forth in
Exhibit N.

“Title Commitment” means a commitment for issuance of a Title Policy by First
American Title Insurance Company covering some portion of the Seller Land or a
Leasehold Interest.

“Title Company” has the meaning specified in Section 11.4(a).

“Title Defect” has the meaning specified in Section 11.5(a).

“Title Policies” has the meaning specified in Section 11.4(a).

“Title Review Period” has the meaning specified in Section 11.5(a).

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

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

“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.

“Underlying Lease” has the meaning specified in Section 8.2.

 

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

 

MEADWESTVACO COATED BOARD, INC.

By:

 

/s/ James A. Buzzard

Name:

 

James A. Buzzard

Title:

 

Chief Executive Officer

WELLS TIMBERLAND ACQUISITION, LLC

By:

 

/s/ Douglas P. Williams

Name:

 

Douglas P. Williams

Title:

 

Executive Vice President

 

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