**10.21**

 

**EXECUTIONCOPY**

 

 

**STUMPAGEAGREEMENT**

 

**Between**

 

 

**SCIOTOLAND COMPANY, LLC**

 

 

**and**

 

**WICKLIFFEPAPER COMPANY**

 

 

December 16, 2005

 

----

 

**STUMPAGE AGREEMENT**

 

This Agreement is made as of December 16,2005, by and between SCIOTO LAND COMPANY, LLC, a Delaware limited liabilitycompany (“Seller”) and WICKLIFFE PAPER COMPANY, a Delaware corporation (“Buyer”).

 

**Recitals**

 

Seller desires to sell and Buyer desires topurchase, on the terms and conditions hereinafter set forth, certain quantitiesand types of wood fiber located on certain timberlands owned by Seller.

 

Therefore, in consideration of the mutualcovenants and agreements set forth herein, the parties hereto agree as follows:

 

**Agreement**

** **

1.             Definitions.  For the purposes of this Agreement thecapitalized terms set forth below shall have the meanings set forth after them.

 

1.1           “Affiliate”shall mean with respect to any Person, any Person controlling, controlled by,or under common Control with, such Person.

 

1.2           “AnnualBuyer Harvesting Notice” shall mean a written notice from Buyer to Seller to begiven not later than October 1 of the year preceding each Harvesting Yearduring the Term of this Agreement (beginning with Harvesting Year 2006)specifying which of the Actual Designated Tracts Buyer will harvest during theupcoming calendar year.

 

----

 

1.3           “AnnualPurchase Amount” shall mean the volumes of Qualifying Timber as set forth in Section 2.2of this Agreement.

 

1.4           “AnnualSeller Notice” shall mean the annual notice provided by Seller to Buyer inaccordance with the provisions of Section 3.1.2.1 of this Agreement.

 

1.5           “ApplicableLaws” shall mean, with respect to any Person, all laws, ordinances, judgments,decrees, injunctions, writs, orders, rules, regulations, determinations,licenses and permits of any Governmental Authority applicable to or bindingupon such Person or any of its property.

 

1.6           “BasePrice Adjustment Date” shall mean January 1, 2006, and each subsequentsecond anniversary from such date during the Term of this Agreement.

 

1.7           “BusinessDay” shall mean any day other than a Saturday, Sunday, or other day on which banks are authorized to be closed in Kentucky.

 

1.8           “Control”shall mean, with respect to any Person, the power to direct or cause thedirection of the management of such Person, directly or indirectly, whetherthrough the ownership of voting securities or otherwise.

 

1.9           “Eventof Default” shall have the meaning set forth in Section 9.3 hereof.

 

1.10         “FairMarket Timber Value” shall mean the then current fair market value of a Productas mutually determined by Buyer and Seller. If Buyer and Seller are unable to reach mutual determination, then theapplicable Fair Market Timber Value shall be determined in accordance with theFair Market Timber Value Mechanism.

 

1.11         “FairMarket Timber Value Mechanism” shall mean the following procedure used todetermine the Fair Market Timber Value of each type of Qualifying Timberhereunder.  Either Seller or Buyer mayinitiate commencement of the Fair Market Timber Value

 

----

 

Mechanism by notice to the other (a “MechanismNotice”). Not later than ten (10) days following receipt of a MechanismNotice, Seller and Buyer shall agree on the Valuation Consultant.  Not later than thirty (30) days followingselection of the Valuation Consultant, each of Seller, Buyer and the ValuationConsultant shall submit to the others not less than six (6) QualifyingSales relating to the then applicable Fair Market Timber Valuedetermination.  The Fair Market TimberValue of the Qualifying Timber at issue shall be (a) the sum of (i) theaverage price per ton of all Qualifying Sales submitted by Seller, plus (ii) theaverage price per ton of all Qualifying Sales submitted by Buyer, plus (iii) theaverage price per ton of all Qualifying Sales submitted by the Valuation Consultant,(b) divided by three.

 

1.12         “ForceMajeure Event” shall mean any act, omission or circumstance occasioned by orresulting from any acts of God, acts of the public enemy, wars, blockades,insurrections, riots, epidemics, infestation, disease, landslides, lightning,earthquakes, tornadoes, windstorms, volcanoes, fires, storms, floods,disasters, civil disturbances, explosions, sabotage, governmental actions, thefailure to act of any Governmental Authority, strikes or other labor disputes,failures or partial failures of any equipment, failure of transportation, aninvoluntary ceasing of operations at the Mill for a minimum of thirty (30)consecutive days, or any other events or circumstances not within the controlof a party hereto which prevents such party from performing its obligationshereunder; provided, however, that “Force Majeure Event” shall not include (i) aparty’s financial inability to perform, or (ii) an act, omission orcircumstance arising from the negligence or willful misconduct of the partyclaiming that a Force Majeure Event has occurred.

 

1.13         “GovernmentalAuthority” shall mean any federal, state, local or foreign government,political subdivision, agency, board, court, regulatory body or commission, any

 

----

 

arbitrator withauthority to bind a party at law, or any Person acting lawfully on behalf ofany of the foregoing.

 

1.14         “HardwoodPulpwood” shall mean pulpwood from hardwood species of timber.

 

1.15         “HarvestingPlan” shall mean a description of the type of harvest (such as clear cuts orthins), together with diameter limits and residual basal area, as applicable.

 

1.16         “HarvestingYear” shall mean the period from January 1, 2006 through December 31,2006 for calendar year 2006 and January 1 through December 31 of eachyear thereafter during the Term of this Agreement.

 

1.17         “NaturalHardwood” means Hardwood Pulpwood from timber stands that are naturallyregenerated.

 

1.18         “MarketRegion” shall mean all areas which are located within one hundred forty (140)miles of the Mill.

 

1.19         “MechanismNotice” shall have the meaning set forth in Section 1.11 hereof.

 

1.20         “Mill”shall mean Buyer’s pulp and paper mill located in Wickliffe, Kentucky.

 

1.21         “Person”means any individual, corporation, partnership, limited liability company, jointventure, association, joint-stock company, trust, unincorporated organizationor Governmental Authority.

 

1.22         “PinePulpwood” shall mean pulpwood from pine species of timber.

 

1.23         “PlantationHardwood” means Hardwood Pulpwood from timber stands that are artificiallyregenerated.

 

1.24         “PreliminaryDesignated Tract” shall have the meaning set forth in Section 3.1.2.1hereof.

 

1.25         “Product”shall mean the individual types of Timber listed in Section 1.33  below.

 

----

 

1.26         “ProductPrice” shall mean the per ton price for each Productas set forth on Schedule 1.26(a) attached hereto (the “Base Price”)adjusted up or down on a quarterly basis beginning January 1, 2006.  An example of the quarterly price adjustmentmechanism is set forth on Schedule 1.26(b) to this Agreement.  On each Base Price Adjustment Date during theTerm of this Agreement, the Base Price for the applicable Product shall beadjusted to equal the Fair Market Timber Value for such Product on the applicableBase Price Adjustment Date.  On each suchBase Price Adjustment Date a new “Base Price” shall be used in determining theProduct Price with respect to each Product until the Base Price is adjusted onthe next Base Price Adjustment Date.

 

1.27         “Pulpwood”shall mean Hardwood Pulpwood and Pine Pulpwood.

 

1.28         “QualifyingSales” shall mean per unit (as opposed to lump sum) sales of the type ofQualifying Timber at issue made during the six months immediately prior to thesix month period in which the applicable Base Price Adjustment Date occurs,provided such sales (i) are made within the Market Region, and (ii) involvenot less than 2,000 tons of the type of Qualifying Timber at issue as to eachsuch sale.

 

1.29         “QualifyingTimber” shall mean Timber which meets or exceeds the specifications set forthin Schedule 1.29 to this Agreement.

 

1.30         “SMZ’s”shall mean Streamside ManagementZones, designated as such by Seller, and any similar environmentally protectedzones so designated during the Term of this Agreement.

 

1.31         “SawLogs” means logs cut to be made into solid wood products from hardwood and pinespecies of timber that do not include Pulpwood.

 

----

 

1.32         “SustainableForest Practice Standards” shall mean practices substantially in compliancewith standards substantially similar to the Sustainable Forestry Initiative ofthe American Forest and Paper Association (the “AF&PA”) and as thatstandard may be modified by AF&PA from time to time.

 

1.33         “Timber”shall mean the following types of timber now or hereafter located on theTimberlands**:**Hardwood Pulpwood, Pine Pulpwood, Saw Logs.

 

1.34         “Timberlands” shall meanall timberland properties acquired by Seller from Escanaba Timber LLC on thedate hereof and located in the State of Tennessee.

 

1.35         “TMS”shall mean the publication known as Timber Mart-South, or in the event TMS isno longer published, a comparable publication mutually acceptable to Seller andBuyer.

 

1.36         “ValuationConsultant” shall mean either Sizemore & Sizemore of Tallassee,Alabama or Larson & McGowin of Mobile, Alabama, or if such firms areno longer in existence, another reputable, professionally qualified Personmeeting all of the following criteria. Such person (i) is not an Affiliate of either Seller or Buyer, (ii) duringthe past two (2) years has not transacted substantial business with eitherSeller or Buyer, and (iii) does not have less than five (5) yearsexperience relating to sales of Timber within the Market Region.  If Seller and Buyer are unable to agreewithin thirty (30) days, then an arbitrator selected pursuant to Subsection 10(b) belowshall select such reputable, professionally qualified Person meeting theforegoing criteria.  Seller and Buyershall provide to the Valuation Consultant such information as the ValuationConsultant shall reasonably request to facilitate the determinations to be madeby the Valuation Consultant hereunder.

 

1.37         “Zones”shall mean the Zone designated in TMS as Tennessee Area 2.

 

----

 

2.             Agreement to Selland Purchase.

 

2.1           Quantitiesto be Sold and Purchased.  Subject tothe terms and conditions of this Agreement, Seller agrees to sell and Buyeragrees to purchase for each Harvesting Year during the Term of this Agreementall Qualifying Timber harvested from the Actual Designated Tracts (ashereinafter defined).

 

2.2           RequiredProduct Mix.  With respect to theTimber to be purchased by Buyer hereunder, Seller shall make available to Buyerthe following product mix for each Harvesting Year during the Term of thisAgreement:

 

2.2.1        2006– 2016.  For the Harvesting Yearsbeginning January 1, 2006 and ending December 31, 2016, the mix ofTimber Seller shall make available to Buyer shall be not less than the volumesin thousands of tons by year in the following table:

 
| **Year****Source**       | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** ** | **2014** | ** ** | **2015** | ** ** | **2016** | ** ** |
|--------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| (i)Hardwood  Pulpwood    |       | 50       |       | 50       |       | 50       |       | 50       |       | 50       |       | 40       |       | 30       |       | —   |       | —   |       | —   |       | —   |       |
| (ii) Pine  Pulpwood |       | 35       |       | 35       |       | 35       |       | 35       |       | 35       |       | 35       |       | 35       |       | 35       |       | 35       |       | 35       |       | 35       |       |

 

2.2.2        2017– 2019 - To the extent Buyer exercises its option to extend the Termpursuant to Section 9.2 below, for Harvesting Years beginning January 1,2017 and ending December 31, 2019, the mix of Timber Seller shall makeavailable to Buyer shall be as follows:  

 
| (a)    | Pine Pulpwood:      |   | not less than 35,000 tons |
|--------|---------------------|--------|---------------------------|
|   |                |   |                      |
| (b)    | All Other Products: |   | no minimum requirement    |

 

----

 

3.             Designation ofTracts and Determination of Volumes.

 

3.1           Designationof Tracts to Be Harvested.  Duringthe Term of this Agreement, Seller shall designate the portions of theTimberlands which Seller shall make available to Buyer for harvesting duringeach of the next two Harvesting Years.  Asufficient number of tracts shall be made available so as to satisfy theobligations of Seller herein to sell to Buyer and Buyer to purchase from Sellerthe applicable Annual Purchase Amount. Seller shall follow the procedure for designating such tractshereinafter set forth in this Section 3.

 

3.1.1        InitialDesignation of Tracts to be Harvested.  Schedule 3.1.1 attached heretoand made a part hereof sets forth the portions of the Timberlands which Sellershall make available to Buyer for the Harvesting Year commencing January 1,2006 and the Harvesting Year commencing January 1, 2007.

 

3.1.2        SubsequentDesignation of Tracts to be Harvested.  For the Harvesting Year commencing January 1,2007, and for all subsequent Harvesting Years during the Term of thisAgreement, the portions of the Timberlands which Seller shall make availablefor harvesting shall be determined in accordance with the following procedure.

 

3.1.2.1     Designationof Potential Harvesting Areas.  On orbefore the November 1 prior to the applicable Harvesting Year (e.g. November 1,2006 for the Harvesting Year commencing January 1, 2007), Seller shalldesignate in a notice to Buyer those portions of the Timberlands which itproposes to make available to Buyer for harvesting during the subsequent twoHarvesting Years (the “Preliminary Designated Tracts”).  To the extent practicable and notinconsistent with the silvicultural and long-term management objectives ofSeller, the land which Seller designates as the Preliminary Designated Tractsshall be distributed relatively uniformly over the four geographical quadrants(north, south, east and west) of the Timberlands.

 

----

 

3.1.2.2     Selectionof Actual Harvesting Areas.  Duringthe thirty (30) day period following receipt by Buyer of the applicable AnnualSeller Notice, Seller and Buyer shall meet to discuss any proposed modificationto the Preliminary Designated Tracts which may be reasonably requested byBuyer.  At the end of said thirty (30)day period, Seller shall notify Buyer of the actual tracts which Seller willharvest to satisfy the volume requirements of this Agreement for the applicableHarvesting Year, taking into account said proposed modifications reasonablyrequested by Buyer, to the extent practicable (the “Actual Designated Tracts”),and Seller shall simultaneously therewith deliver to Buyer a Harvesting Planfor each of the Actual Designated Tracts.

 

3.2           Boundaryand Timber Markings.  Within fifteen(15) Business Days prior to the scheduled commencement of harvesting activitieson the applicable Actual Designated Tract, Seller and Buyer will proceed withthe designation of boundary lines consistent with past practices ofMeadWestvaco Corporation, but Seller reserves the right to designate on theground (using bright timber-marking paint) the boundary lines of all suchActual Designated Tracts.  The boundarylines shall clearly delineate the boundaries of the Actual Designated Tractsfrom the boundaries of adjacent land not owned or leased by Seller, and fromthe boundaries of other Timberlands not constituting Actual Designated Tractsfor such Harvesting Year.  Seller shallalso designate on the ground (using bright timber-marking paint) all SMZ’swithin the Actual Designated Tracts and any Timber to be removed from suchdesignated SMZ’s.

 

4.             HarvestingProcedures. 

 

4.1           HarvestingSchedule.  Following determination ofthe Actual Designated Tracts, Buyer shall provide a harvesting schedule toSeller setting forth approximate start and completion dates relating toharvesting Timber within each of the Actual Designated Tracts.

 

----

 

Buyer shall modify saidharvesting schedule based upon any reasonable objections raised by Sellerwith respect to any of said harvesting dates, said reasonable objections may befor reasons which include, but are not limited to, (a) a violation ofSustainable Forestry Certification Requirements, (b) potential loggingdamage to the site, such as rutting, or (c) failure to comply withSustainable Forestry Initiative regeneration requirements applicable toharvesting on adjacent lands. Notwithstanding the foregoing, Buyer shall harvest the Actual DesignatedTracts on the basis of the Annual Buyer Harvesting Notices provided by Buyer toSeller each calendar year during the Term of this Agreement, subject to a ForceMajeure Event, and subject to the provisions of Section 4.3 below.

 

4.2           TimberRoads.  Seller shall construct, or cause to beconstructed, at Seller’s sole cost and expense, haul roads (includingtemporary, winter haul roads when appropriate) to the Actual Designated Tractsnecessary to provide Buyer in a timely manner with proper access to such ActualDesignated Tracts for its harvesting operations.  Construction of such roads shall beaccomplished in a good and workmanlike manner in compliance with all ApplicableLaws so that Buyer is provided with effective and functional access to allActual Designated Tracts for its logging practices.  Following the construction of said roads,Buyer shall at its sole cost and expense maintain and repair said roads for solong as it is harvesting on the relevant Actual Designated Tracts.  Upon completion of harvesting on the relevantActual Designated Tracts, Buyer shall leave such roads in a condition equal toor better than their condition prior to the start of the operation.  All such road maintenance and repair shall beperformed in a manner so as not to violate any Applicable Laws, or with respectto SMZ’s, so as to comply with best management practices sanctioned by theState of Tennessee.

 

----

 

4.3           TimberHarvesting.  Buyer shall harvest(i.e. cut and remove) in each Harvesting Year, all merchantable Timber asidentified in the Harvesting Plan for the Actual Designated Tracts for suchHarvesting Year, subject to a Force Majeure Event.  Such harvesting operations shall be conductedin accordance with all Applicable Laws, in a manner consistent with establishedindustry logging practices, and in compliance with any reasonable additionalguidelines which may be established from time to time by Seller.  Buyer shall repair all fences or structuresdamaged by its harvesting operations and shall leave all roads, fire breaks,property lines, lakes, streams, and drainage ditches clear of logs, timber,limbs or other debris.  All oil drums,cans, bottles, cartons, delimbing bars, loading decks, abandoned equipment andother debris resulting from Buyer’s operations shall be removed from theapplicable portions of the Timberlands upon completion of the harvestingoperations at Buyer’s expense.  Ifrepairs are not made or if the debris is not removed and cleared within thirty(30) days after notice from Seller to Buyer, then Seller may undertake suchrepair or removal for Buyer’s account, and Buyer shall be liable to Seller forany expense incurred in repairing or removing same.  Buyer shall not, under any circumstance, buryany material underground nor discharge, release orotherwise cause the Timberlands or any portion thereof to be affected byhazardous wastes or hazardous substances. Buyer shall use normal and customary care while conducting itsharvesting operations so as not to materially damage the Timberlands.  Buyer acknowledges that a higher degree ofcare is required when the site is abnormally wet and that such circumstances mayrequire Buyer to halt all harvesting activities.  Seller reserves the right to suspend Buyer’sharvesting operations when Seller deems site damage will result from continuedoperations; provided, however, that in the event of such suspension, Buyershall be entitled to an extension of the time allotted for its harvestingoperations equal to the number of

 

----

 

daysthat the suspension continues.  Selleralso reserves the right to suspend Buyer’s harvesting operations on an ActualDesignated Tract when Seller determines, in the exercise of its reasonablediscretion, that Buyer is not conducting harvesting operations on the ActualDesignated Tract in accordance with the relevant Harvesting Plan.  In the event Buyer conducts harvestingoperations in violation of the relevant Harvesting Plan or outside the scope ofthe relevant Harvesting Plan, then Seller shall be entitled to pursue allremedies available at law for timber trespass.

 

4.4           SawLog Disposition.  Buyer willcoordinate the harvest of Saw Log timber from Actual Designated Tracts inconjunction with its Pulpwood harvesting operations and will separate Saw Logsfrom Buyer’s harvested Pulpwood.  Sellershall be responsible for the merchandising and delivery ofsuch Saw Logs and bear the expenses and be entitled to all proceedsassociated therewith.  Buyer and Sellershall cooperate to ensure that Saw Log removal is accomplished in an efficientmanner without undue interference with Buyer’s Pulpwood harvesting operations.

 

5.             Prices andPayment.  

 

5.1           Prices.  Buyer shall pay Seller for all Timberpurchased by Buyer in an amount equal to the then current applicable ProductPrice.

 

5.2           Payment.  Promptly after harvest all Qualifying Timbershall be weighed at the Mill or at one of Buyer’s remote woodyards.  Buyer shall provide Seller on a weekly basiswith a settlement statement that shows the date, species and net tonnage foreach load, and shall pay Seller each week for all Timber weighed-in or scaledduring the previous week.  The equipmentused for the weighing of Timber shall be maintained by Buyer in good andaccurate working order in accordance with all applicable laws and regulationsand prudent practice.  Seller shall

 

----

 

havethe right to check and audit said equipment at any time upon reasonable noticeto Buyer.  Payments made after twenty(20) days from the date of delivery shall be considered past due (“Past Due”).  For payments that are Past Due, Buyer shallpay interest at a rate per annum equal to the daily prime rate as reported inthe Wall Street Journal plus four percent (4%) for each day that the paymentsare Past Due.  Such interest shall becalculated daily on the basis of a year of 365 days and the actual number ofdays for which interest is due.  If atany time during the Term there are any payments outstanding to Seller that arePast Due, then, in addition to any other remedies it may have hereunder, Sellermay suspend harvesting by Buyer (or deliveries by Seller to the Mill, ifapplicable) until such time as all Past Due payments have been paid in full.

 

6.             Indemnity.

 

6.1           Indemnificationby Seller.  Seller shall defend,indemnify and hold Buyer harmless from and against any and all claims,liabilities, costs or damages (including without limitation reasonableattorneys fees and court costs through all appeals) arising out of personalinjury, death or property damage arising from (i) Seller’s ownership,operation and/or maintenance of the Timberlands, and (ii) the performanceor non-performance by Seller of its obligations hereunder.

 

6.2           Indemnificationby Buyer.  Buyer shall defend,indemnify and hold Seller harmless from and against any and all claims,liabilities, costs or damages (including without limitation reasonableattorneys fees and court costs through all appeals) arising out of personalinjury, death or property damage arising from (i) Buyer’s harvestingoperations on the Timberlands, and (ii) the performance or non-performanceby Buyer of its obligations hereunder.

 

(a)           Survival.  The provisions of this Section 6 shallsurvive the expiration or earlier termination of this Agreement.

 

----

 

7.             Force Majeure.

 

7.1           Effectof Force Majeure.  Except for theobligation of a party to make payments required hereunder, the parties shall beexcused from performing any of their respective obligations under thisAgreement and shall not be liable in damages or otherwise on account of thenon-performance of any such obligation, for so long as and to the extent thatsuch party is unable to perform such obligation as a result of any ForceMajeure Event.

 

7.2           Mitigationand Notice.  The occurrence of aForce Majeure Event shall not relieve a party of its obligations and liabilityhereunder to the extent such party fails to use commercially reasonable effortsto remove the cause and remedy or mitigate the effects of the Force MajeureEvent if, with commercially reasonable efforts, such party could have removedsuch cause or remedied or mitigated such effects.  In addition, no Force Majeure Event shallrelieve a party of its obligations or liability hereunder unless such partyshall give notice (including a reasonable description of such Force MajeureEvent) to the other party as soon as reasonably possible and in any eventwithin twenty (20) days of the occurrence of such Force Majeure Event. Upon request,the party whose obligations were suspended shall provide the other party with aplan for remedying the effects of such Force Majeure Event.

 

7.3           Failureto Give Notice.  A failure to givenotice under Section 7.2 above “as soon as reasonably possible” will notaffect the rights and obligations of the party whose obligations are suspendedexcept if, and only to the extent that, the party which was entitled to receivesuch notice was actually and materially prejudiced as a result of such failure.

 

7.4           ForceMajeure Event Affecting Actual Designated Tracts.  If either party becomes aware of a ForceMajeure Event that makes a portion of any Actual Designated Tract unavailablefor harvesting by Buyer in accordance with the schedule contemplated bythe

 

----

 

parties,then it shall promptly notify the other party and Seller shall promptlydesignate and make available for harvesting such other portions of theTimberlands as shall be necessary to satisfy its obligations under thisAgreement.  If the Seller is unable todesignate sufficient portions of the Timberlands to satisfy its obligationsunder this Agreement, then the provisions of Section 7.5 shall apply tothe unsatisfied obligations occasioned by such Force Majeure Event.

 

7.5           VolumeReduction Based on Force Majeure Event. If the party that becomes subject to a Force Majeure Event (the “AffectedParty”) reduces the volume of Timber to be purchased or sold due to a ForceMajeure Event (the amount of such reduction, the “Reduction Amount”), theAffected Party shall give written notice to the other party (the “Non-AffectedParty”) of such reduction and the effective date thereof.  If such reduction continues in effect for aperiod of sixty (60) days or more, the Non-Affected Party shall then have theright, in the case of Seller, to sell all or part of the Reduction Amount ofsuch Timber not purchased by Buyer to another buyer or buyers, and in the caseof Buyer, to purchase all or part of the Reduction Amount of Timber not sold bySeller from another seller or sellers, subject to the following:

 

(i)                                     TheNon-Affected Party shall not enter into any contract for any such sale orpurchase for a term longer than one (1) year’s duration.

 

(ii)                                  TheNon-Affected Party shall give the Affected Party written notice of each suchcontract, including the volume sold or purchased thereunder and the termthereof.

 

----

 

(iii)                               Theannual volume commitment of the Non-Affected Party for Timber as specifiedherein shall be reduced by such volume sold or purchased under such contractfor the duration thereof.

 

7.6           HarvestVolume Variances.  Following thedetermination by Seller and Buyer of the Actual Designated Tracts for a givenHarvesting Year in accordance with Section 3.1.2.2, Seller and Buyer shallbe deemed to have satisfied the volume requirements of Section 2.2 inrespect of such Harvest Year regardless of whether Buyer actually harvests thevolumes contemplated by Section 2.2 where harvesting shortfalls arise from(i) variances between actual timber volume and the inventory volumes ofsuch Actual Designated Tracts; or (ii) operational constraints associatedwith Buyer’s adherence to Sustainable Forestry Practice Standards or applicableForestry Best Management Practices as promulgated by the Tennessee Departmentof Agriculture Division of Forestry or any successor agency or standardsthereto.  In the event that Buyer’sharvest volumes exceed the minimum volume requirements for any Harvest Year asspecified in Section 2.2, such excess harvest volume shall directly offsetthe corresponding volume requirement for the subsequent Harvest Year.

 

----

 

8.             Pay or Take

 

8.1           Seller Responsibility.   Seller agrees to sell ,subject to Force Majeure, and Buyer agrees to purchase, subject to ForceMajeure, the Annual Volumes of Products to be produced under the direction ofSeller during each Calendar Year as determined in Section 2.3 (c).  If for any Calendar Year, Seller fails forany reason other than Force Majeure to tender to Buyer at least ninety percent(90%) of the designated Annual Volumes of Products, Seller will pay Buyer at arate of $15.00 per ton multiplied by the difference between (x) ninety percent(90%) of the Annual Volumes of Products for the applicable Calendar Year minus(y) the volume of Products actually tendered by Seller during such CalendarYear, as liquidated damages and not as a penalty, and Buyer shall have nofurther claim for damages on account of such shortfall in the delivery of theAnnual Volumes.  Payment shall be made bySeller to Buyer on demand no later than fifteen (15) days from Buyer’s writtenrequest for such payment. Notwithstanding the foregoing, :  (i) ifadverse weather conditions during the last ninety (90) days of any CalendarYear prevent Buyer from purchasing the Annual Volumes of Natural Hardwood or PinePulpwood for said Calendar Year, the payments provided for in this Section 8.1shall not apply unless and to the extent said volumes (together with anyvolumes required with respect to the first quarter of the following CalendarYear) are not purchased on or before March 31 of the following CalendarYear.

 

8.2           BuyerResponsibility.  If for any CalendarYear, Buyer fails for any reason other than Force Majeure to purchase at leastninety percent (90%) of the Annual Volumes of Products from Seller, then Buyershall pay Seller for the shortage at a rate of $15.00 per ton multiplied by thedifference between (x) ninety percent (90%) of the Annual Volumes of

 

----

 

Products for the applicableCalendar Year minus (y) the volume of Products actually purchased by Buyerhereunder during such Calendar Year, as liquidated damages and not as apenalty, and Seller shall have no further claim for damages on account of Buyer’sfailure to purchase the Annual Volumes. Payment shall be made by Buyer to Seller on demand no later than fifteen(15) days from Seller’s written request for such payment.

 

8.3           AdditionalTerms.  Subject to the terms of Section 7above, any payments made pursuant to this Section 8.3 shall be calculatedseparately for Pine Pulpwood and Hardwood Pulpwood.  If this Agreement is in termination at a timeother than the beginning or end of a calendar year, the Annual Volumes forpurposes of calculating such shortage payment for either party will be proratedequitably.

 

9.             Term andTermination.

 

9.1           Term.  This Agreement shall expire on December 31,2016, unless this Agreement is sooner terminated for cause pursuant to Section 9.3hereof, or unless this Agreement is extended as provided in Section 9.2(the “Term”).

 

9.2           Extensionof Term.               Provided that Buyer shall not then be indefault under this Agreement, the Term of this Agreement may be extended at theoption of Buyer for one (1) additional three (3) year term, whichextension term shall commence concurrently with the expiration of the initialterm, upon the same terms and conditions as contained in this Agreement.  In the event that Buyer desires to extendthis Agreement pursuant to the above extension option, it shall give writtennotice of such desire to extend the Term to Seller no later than January 1,2016.

 

9.3           Terminationfor Cause.  This Agreement shallimmediately terminate if any one of the following events (each, a “default”)has occurred and is continuing on the tenth (10th) day

 

----

 

afterreceipt of notice of an intent to cancel by reason of such default (each, an “Eventof Default”):

 

(a)           Breachof any other term of this Agreement, which breach is not cured within twenty(20) days after receipt of written notice thereof; or

 

(b)           Insolvencyor the filing by or against Seller or Buyer of a petition in bankruptcy (which,in the event of an involuntary bankruptcy, is not dismissed within sixty (60)days from the date of its commencement), or appointment by a court of atemporary or permanent receiver, trustee or custodian.

 

9.4           Effectof Termination.  Termination shallnot relieve a defaulting party of any liability to the nondefaulting party forbreach of its obligations hereunder.

 

10.           Dispute Resolution.  Disputes under this Agreement shall beresolved as follows, it being understood that each party shall work in goodfaith at each step of the process to try to resolve the dispute asexpeditiously and fairly as possible:

 

(a)           Theappropriate responsible persons from Seller and Buyer shall meet and seekamicably to resolve all differences.

 

(b)           Ifany material difference remains unresolved ten (10) Business Days afterthe start of the process referenced in Subsection 10(a), or such longerperiod as the persons referenced in Subsection 10(a) shall haveagreed, then the parties shall submit such matter to arbitration, pursuant tothe Rules of Commercial Arbitration of the American ArbitrationAssociation.  Any such arbitration shallbe conducted by a single arbitrator, whose decision shall be final.  The parties shall first attempt to agree onthe selection of the arbitrator, and, if they

 

----

 

cannot agreewithin fourteen (14) days after it becomes necessary to submit the dispute toarbitration, either party may request the American Arbitration Association toappoint the arbitrator.  In all cases,the arbitrator shall be a person knowledgeable about sales of timber in theMarket Region.  The arbitrator shall beinstructed to schedule all proceedings so that, if possible, a decisionmay be reached and communicated to the parties within forty-five (45) days afterthe appointment of the arbitrator.  Allexpenses of the arbitration shall be divided equally between the parties,except that each party shall bear the expense of its own counsel and theexpense of the preparation of its presentation. Seller and Buyer shall provide to the arbitrator such information as thearbitrator shall reasonably request to facilitate the determinations to be madeby the arbitrator hereunder.

 

(c)           Notwithstandingthe existence of a dispute or the progress of the arbitration proceeding, butsubject to the terms of Section 5.2 above, the parties shall continue toperform their respective obligations under this Agreement during suchperiod.  To the extent that thisAgreement provides for specific performance or other equitable remedies for aparticular violation, and with respect to the ability of Seller to suspendBuyer’s harvesting operations pursuant to Section 4.3 and the ability ofSeller to suspend Buyer’s harvesting operations (or deliveries by Seller to theMill, if applicable) pursuant to Section 5.2, this Section 10 shallnot apply, it being the intent that the aggrieved party be able to bring thematter to court to seek enforcement as soon as possible.  Further, this Section 10 shall notpreclude any party from seeking injunctive relief or such other interimequitable remedies as may be required to preserve any claims hereunder.

 

----

 

11.           Assignment.

 

11.1         Assignmentby Seller.

 

(a)           Exceptas provided in this Section 11.1, this Agreement may not be assigned bySeller in whole or in part. Notwithstanding the foregoing, at any time during the Term, Seller mayassign this Agreement (i) to any lender or lenders as security forobligations to such lender or lenders in respect to financing arrangements ofSeller or any Affiliate thereof with such lender or lenders, or (ii) uponprior written notice to Buyer, to any Person that is and at all times remainsan Affiliate of Seller or that merges or consolidates with or into Seller orthat acquires all or substantially all of the Timberlands.

 

(b)           Notwithstandingany other provision of this Agreement to the contrary, Buyer and Selleracknowledge and agree that Seller shall not be prohibited from selling all orany portion of the Timberlands, provided that any such sale of the Timberlandsshall be made subject to the terms of this Agreement and the obligation tosupply the applicable portion of Timber volumes required hereunder.  Upon any sale of a portion of theTimberlands, the purchaser of said portion of the Timberlands (“New Owner”)shall assume the obligation to supply a portion of the Timber volumes to besupplied hereunder, said portion of the Timber volumes (“Assumed Volume”) to beagreed to by Seller and said New Owner, subject to Buyer’s consent to suchvolume allocation, which consent shall not be unreasonably withheld ordelayed.  Upon such assumption by saidNew Owner, Seller’s obligations to supply Timber hereunder shall be reduced bythe volumes assumed by said New Owner, and Seller shall thereafter have noobligation or liability with respect to said assumed volumes or with respect tothe portion of the Timberlands so conveyed. At the request of Seller, upon any such sale to a New Owner Buyer shallexecute an amendment to this Agreement acknowledging the foregoing.  Furthermore, upon request of Seller or Buyer,upon such sale to a New Owner, Buyer and such New Owner shall enter into aseparate Stumpage Agreement on the same terms and conditions as containedin this

 

----

 

Agreement (or such other terms as Buyer andsuch New Owner shall mutually agree) except for the portion of the Timberlandscovered thereby and the volume of Timber to be supplied thereunder.  In the event Buyer objects to any proposedAssumed Volume, Buyer shall provide written notice of the same to Seller withinfifteen (15) days of notice to Buyer of said proposed Assumed Volume (“ObjectionNotice”), said Objection Notice to include a detailed explanation of the basisfor said objection.  Failure by Buyer totimely provide said Objection Notice shall be deemed to constitute the consentof Buyer to said proposed Assumed Volume.  In the event Buyer timely provides anObjection Notice, Seller shall have the option of (i) revising saidproposed Assumed Volume, in which case Buyer shall have the further right toobject by providing a new Objection Notice as provided above or (ii) retainingthe Valuation Consultant to determine whether the proposed Assumed Volume isreasonable.  In the event the ValuationConsultant is so retained and determines that said proposed Assumed Volume isreasonable, Buyer shall be deemed to have consented to saidAssumed Volume and shall pay all costs and expenses of said ValuationConsultant.  Otherwise, said costs andexpenses shall be paid by Seller. Notwithstanding the foregoing, Seller may convey during the Term hereofup to 7,000 acres of the Timberlands free and clear of the obligations of thisAgreement (the “Exempt Acres”), provided that Seller is able to supply thevolume of Timber required to be supplied hereunder from the remaining portionof the Timberlands.  Buyer agrees toexecute any and all documentation requested by Seller in order to evidence therelease of the Exempt Acres from this Agreement.

 

11.2         Assignmentby Buyer.  Except as provided in thisSection 11.2, this Agreement may not be assigned by Buyer in whole or inpart.  Notwithstanding the foregoing, atany time during the Term, Buyer may assign this Agreement (a) to anylender or lenders as security for

 

----

 

obligations to such lender orlenders in respect of financing arrangements of Buyer or any affiliate thereofwith such lender or lenders, or (b) upon prior written notice to Seller,to any Person that is and at all times remains an affiliate of Buyer or thatmerges or consolidates with or into Buyer or that acquires all or substantiallyall of the assets or stock of Buyer.

 

12.           Publicity.  This Agreement is confidential and no partyshall issue press releases or engage in other types of publicity of any naturedealing with the commercial and legal details of this Agreement without theother party’s prior written approval. However, approval of such disclosure shall be deemed to be given to theextent such disclosure is required to comply with Applicable Laws, governmentalrules, regulations or other governmental requirements, or in connection withany financing arrangements of such party. In such event, the publishing party shall, to the extent reasonablypracticable, furnish, in advance, a copy of such proposed disclosure, to the otherparty.

 

13.           Headings.  The headings contained in this Agreement arefor convenience only and should not be construed to limit or expand any termsotherwise provided.

 

14.           Notices.  All notices, requests, demands and othercommunications provided for hereunder shall be in writing and personallydelivered or sent by regular U.S. certified mail, telecopy or Federal Express(or similar type of overnight delivery) to the applicable party at the addressindicated below:

 
| If to Buyer: |   | Wickliffe Paper Company   |
|--------------|--------|---------------------------|
|         |   | 1724 Westvaco Road        |
|         |   | Wickliffe, Kentucky 42087 |

 

----

 
|             |   |                              |
|------------------|--------|-----------------------------------|
| With a copy to:  |   | Bernie F. Coyle                   |
|             |   | 3901 Mayfield Road                |
|             |   | Wickliffe, Kentucky 42087         |
|             |   | Telecopier No.  270-335-6240 |
|             |   | Telephone No.  270-335-6241  |
|             |   |                              |
| and              |   | Greg Hansrote                     |
|             |   | 1724 Westvaco Road                |
|             |   | Wickliffe, Kentucky 42087         |
|             |   | Telecopier No.  270-335-4110 |
|             |   | Telephone No.  270-335-4587  |
|             |   |                              |
| If to  Seller:   |   |                              | Scioto Land Company, LLC |
|             |   |                              | c/o Tolleson  Land & Timber, Inc. |
|             |   |                              | P.O. Box  970 |
|             |   |                              | Perry,  Georgia 31069 |
|             |   |                              |   |
|             |   |                              | Attn.:  Robert G. Chambers |
|             |   |                              |   |
| with a copy  to: |   |
|             |   |                              |   |
|             |   |                              | Mazursky &  Dunaway LLP |
|             |   |                              | Monarch  Tower, Suite 2400 |
|             |   |                              | 3424  Peachtree Road |
|             |   |                              | Atlanta,  Georgia 30326-1118 |
|             |   |                              |   |
|             |   |                              | Attn: C. Glenn Dunaway,Esq. |

 

or, as to eachparty, at such other address as shall be designated by such party in a writtennotice to the other party complying as to delivery with the terms of thisSection.  Notice shall be deemed receivedwhen (i) hand delivered; (ii) sent, after receipt of confirmation oranswer back if sent by telecopy; (iii) five Business Days after deposit inthe U.S. mails, postage prepaid, for certified mail; and (iv) one BusinessDay after delivery to Federal Express (or similar type of overnight delivery),properly addressed to the applicable party.

 

15.           Partial Illegality.  If any provision, or part of a provision, ofthis Agreement is held to be invalid or unenforceable under any Applicable Law,then the parties shall use all commercially reasonable efforts to replace theinvalid or unenforceable provision by a provision that, to the

 

----

 

extent permittedby Applicable Law, achieves the purposes intended under the original provisionand to allow the parties to have the intended benefit of their bargain.  If it cannot be so reformed, it shall beomitted.  The balance of this Agreementshall remain valid and unchanged and in full force and effect.

 

16.           Waiver of Compliance.  Any delay or omission on the part of eitherparty to this Agreement in requiring performance by the other party hereunderor in exercising any right hereunder shall not operate as a waiver of anyprovision of this Agreement or of any right or rights hereunder.  Further, any failure by either party toenforce at any time any term or condition under this Agreement shall not beconsidered a waiver of that party’s right thereafter to enforce each and everyterm and condition of this Agreement.

 

17.           Amendments andWaivers.  This Agreement may not beterminated, amended, supplemented, waived or modified orally, but only by adocument in writing signed by the party against which the enforcement of suchtermination, amendment, supplement, waiver or modification is sought.

 

18.           Counterparts.  This Agreement may be executed by the partieshereto in separate counterparts, each of which when so executed and deliveredshall be an original, but all such counterparts shall together constitute butone and the same document.  Allsignatures need not be on the same counterpart.

 

19.           EstoppelCertificates.  Either party shall, atno cost to the requesting party, from time to time, upon twenty (20) days priorrequest by the other party, execute, acknowledge and deliver to

 

----

 

the requesting party a certificate signed by an officer of thecertifying party stating that this Agreement is unmodified and in full forceand effect (or, if there have been modifications, that this Agreement is infull force and effect as modified, and setting forth such modifications) andthe dates through which payments have been made, and either stating that to theknowledge of the signer of such certificate no default exists under thisAgreement or specifying each such default to which the signer has knowledge.

 

20.           Prevailing Party.  If either party brings any proceeding for thejudicial or other interpretation, enforcement, termination, cancellation orrescission of this Agreement, or for damages for the breach thereof, theprevailing party in any such proceeding or appeal thereon shall be entitled toits reasonable attorneys’ fees and court and other reasonable costs incurred,to be paid by the losing party as fixed by the court in the same or a separateproceeding, and whether or not such proceeding is pursued to decision orjudgment.  The terms and provisions ofthis Section 20 shall survive the expiration or earlier termination ofthis Agreement.

 

21.           Entire Agreement.  This Agreement constitutes the entire agreementand understanding between the parties with respect to the subject matter hereofand merges all prior discussions and negotiations between the parties.  None of the parties shall be bound by anyconditions, definitions, representations, or warranties with respect to thesubject matter of this Agreement other than as expressly set forth above.

 

22.           Third PartyBeneficiaries.  Except as hereinafterprovided, this Agreement is intended to be solely for the benefit of theparties thereto and their permitted assigns and is not intended to and shallnot confer any rights or benefits on any third party not a signatoryhereto.  

 

----

 

23.           Memorandum ofContract.  At the request of anyparty hereto, a Memorandum of this Agreement shall be recorded in the recordingoffices of each and every County in which the Timberlands are located.

 

24.           Insurance.  In the event that Buyer retains any thirdparty contractor to conduct harvesting operations on the Timberlands, saidthird party contractor shall, before conducting any operations, obtain andmaintain the following types of insurance, in addition to any other insurancerequired by law:  (a) Worker’sCompensation and, to the extent the same is reasonably commercially obtainable,Employer’s Liability Insurance, fully covering all operations; (b)Comprehensive Vehicle Liability Insurance, including owned, hired and non-ownedvehicles, with limits of not less than $1,000,000 single occurrence and$1,000,000 cumulative bodily injury liability; and (c) Comprehensive GeneralLiability Insurance, including all contractual liability hereunder, with limitsof not less than $1,000,000 single occurrence and $1,000,000 cumulative bodilyinjury liability.  Prior to the beginningof any harvesting operations hereunder, evidence of all such insurance shall befurnished to Seller, and such insurance shall provide for at least thirty (30)days notice to Seller of cancellation of such insurance policies.  All such insurance policies shall name Selleras an additional insured.

 

24.1         SustainableForestry Initiative.  Seller shallcontinue to manage the Timberlands in accordance with the Sustainable ForestryInitiative during the Term of this Agreement. From time to time it may be necessary to agree upon a recognizedsuccessor or alternative standard to the Sustainable Forestry Initiative, whichshall be negotiated in good faith to reflect changes or developments in theevolution of widely accepted industry standards.  In the future, Seller agrees to provide fromtime to time at Buyer’s request third-party verification of its compliance

 

----

 

with such astandard on the portion of the Actual Designated Tracts from which Timber isthen being harvested.

 

----

 

Executed underseal as of the date first set forth above.

 
|   | WICKLIFFE PAPER COMPANY |
|--------|-------------------------|
|   |                    |
|   |                    |   |
|   |                    |   |
|   |                    | By: | /s/ Peter H.Vogel |
|   |                    | Name: | Peter H. Vogel |
|   |                    | Title: | President |
|   |                    |   |
|   |                    |   |
|   | CLYNELISH, LLC          |
|   |                    |   |
|   | By:                     | SCIOTO LAND COMPANY, LLC, its sole member |
|   |                    |   |
|   | By:                     | Tolleson-Knox Land Management Company, LLC,  Manager |
|   |                    |   |
|   |                    | By: | /s/ Robert G. Chambers |
|   |                    | Name: | Robert G. Chambers |
|   |                    | Title: | Executive Vice President |
|   |                    |   |
|   |                    |   |
|   |                    |   |
|   |                    |   |

 

----