Exhibit 10.10


 


EXECUTION COPY


 




 


LONG-TERM
FIBER SUPPLY AGREEMENT





 


by and between


 


MEADWESTVACO FORESTRY, LLC


 


and


 


KAPSTONE CHARLESTON KRAFT LLC


 


July 1, 2008




 





 





















 


TABLE OF
CONTENTS


 


	
  ARTICLE 1. DEFINITIONS

  	
  1

  
	
   

  	
   

  
	
  ARTICLE 2. PURCHASE OF PRODUCTS

  	
  7

  
	
   

  	
   

  
	
  Section 2.1

  	
  Purchase
  of Pine Pulpwood

  	
  7

  
	
  Section 2.2

  	
  Purchase
  of Pine Sawtimber

  	
  9

  
	
  Section 2.3

  	
  Purchase
  of Hardwood

  	
  12

  
	
  Section 2.4

  	
  Modification
  of Specifications

  	
  12

  
	
  Section 2.5

  	
  Annual
  Plan

  	
  12

  
	
  Section 2.6

  	
  Additional
  Delivery Locations

  	
  15

  
	
  Section 2.7

  	
  Dempsey Wood
  Products

  	
  16

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3. FAILURE TO PURCHASE OR DELIVER

  	
  16

  
	
   

  	
   

  
	
  Section 3.1

  	
  Purchaser’s
  Obligation to Take or Pay

  	
  16

  
	
  Section 3.2

  	
  Purchaser’s
  Failure to Purchase Amounts Not Subject to Take or Pay

  	
  18

  
	
  Section 3.3

  	
  Seller’s
  Failure to Supply

  	
  20

  
	
  Section 3.4

  	
  Scheduling
  Shortfall Volume

  	
  22

  
	
  Section 3.5

  	
  Required
  Notices

  	
  22

  
	
  Section 3.6

  	
  Force
  Majeure

  	
  22

  
	
  Section 3.7

  	
  Mitigation
  of Damages

  	
  23

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4. PRICE AND TERMS

  	
  24

  
	
   

  	
   

  
	
  Section 4.1

  	
  Price

  	
  24

  
	
  Section 4.2

  	
  Emergency
  Pine Sawtimber Pricing

  	
  25

  
	
  Section 4.3

  	
  Delivery
  Terms

  	
  25

  
	
  Section 4.4

  	
  Payment

  	
  25

  
	
  Section 4.5

  	
  Loggers

  	
  26

  
	
  Section 4.6

  	
  Taxes and
  Fees

  	
  26

  
	
  Section 4.7

  	
  Warranty

  	
  26

  
	
  Section 4.8

  	
  Limitation
  of Warranties

  	
  27

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  5. TERM

  	
   

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6. REPRESENTATIONS, WARRANTIES AND COVENANTS

  	
  28

  
	
   

  
	
  Section 6.1

  	
  Seller
  Power and Authority; Enforceability

  	
  28

  
	
  Section 6.2

  	
  Purchaser
  Power and Authority; Enforceability

  	
  28

  
	
  Section 6.3

  	
  Management
  of the Timberlands and Sustainable Forest Practice Standards

  	
  28

  
	
  Section 6.4

  	
  Continued
  Supply Upon Sale of Timberlands

  	
  29

  



 


i





















 


	
  Section 6.5

  	
  Independent
  Contractors

  	
  30

  
	
  Section 6.6

  	
  Compliance
  with Laws

  	
  31

  
	
  Section 6.7

  	
  Insurance

  	
  31

  
	
  Section 6.8

  	
  Limitation
  of Liability and Indemnity

  	
  33

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7. TERMINATION

  	
  33

  
	
   

  	
   

  
	
  Section 7.1

  	
  General
  Termination

  	
  33

  
	
  Section 7.2

  	
  Termination
  if Kraft Mill Will Cease Manufacturing

  	
  34

  
	
  Section 7.3

  	
  Termination
  if the SLM Sawmill Will Cease Operating

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8. MISCELLANEOUS

  	
  35

  
	
   

  	
   

  
	
  Section 8.1

  	
  Assignment
  by Seller

  	
  35

  
	
  Section 8.2

  	
  Assignment
  by Purchaser

  	
  36

  
	
  Section 8.3

  	
  Notices

  	
  37

  
	
  Section 8.4

  	
  Amendment;
  Waiver

  	
  38

  
	
  Section 8.5

  	
  Entire
  Agreement

  	
  38

  
	
  Section 8.6

  	
  Governing
  Law

  	
  38

  
	
  Section 8.7

  	
  Binding
  Agreement

  	
  39

  
	
  Section 8.8

  	
  Headings

  	
  39

  
	
  Section 8.9

  	
  Counterparts

  	
  39

  
	
  Section 8.10

  	
  Annexes

  	
  39

  
	
  Section 8.11

  	
  Severability,
  etc

  	
  39

  
	
  Section 8.12

  	
  No
  Presumption Against Drafter

  	
  39

  
	
  Section 8.13

  	
  Dispute
  Resolution

  	
  39

  



 


	
  ANNEXES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Annex
  A-1

  	
   

  	
  Pine
  Pulpwood Quality Specifications

  
	
  Annex
  A-2

  	
   

  	
  Pine
  Sawtimber Quality Specifications

  
	
  Annex
  A-3

  	
   

  	
  Pine
  Chip Quality Specifications

  
	
  Annex
  B-1

  	
   

  	
  Hardwood
  Pulpwood Quality Specifications

  
	
  Annex
  B-2

  	
   

  	
  Hardwood
  Chip Quality Specifications

  
	
  Annex
  C

  	
   

  	
  Pine
  Pulpwood Committed Volume and Take or Pay Volume

  
	
  Annex
  D

  	
   

  	
  Pine
  Sawtimber Committed Volume and Take or Pay Volume

  
	
  Annex
  E

  	
   

  	
  Initial
  Delivery Locations

  
	
  Annex
  F

  	
   

  	
  Logging
  Fee Components and Initial Logging Fees

  
	
  Annex
  G

  	
   

  	
  Calculation
  of Productive Acres and Average Freight Premium

  



 


ii





















 


LONG-TERM
FIBER SUPPLY AGREEMENT


 


THIS AGREEMENT (this “Agreement”)
is made this 1st day of July, 2008 by and between MEADWESTVACO FORESTRY, LLC, a
Delaware limited liability company (“Seller”),
and KAPSTONE CHARLESTON KRAFT LLC, a Delaware limited liability company (“Purchaser”), under the following
circumstances:


 


A.  An
affiliate of Seller and Purchaser are parties to the Asset Purchase Agreement
dated as of April 4, 2008 (the “Asset Purchase Agreement”).


 


B. 
Pursuant to the Asset Purchase Agreement, Purchaser is purchasing from
Seller a kraft mill located in North Charleston, South Carolina (the “Kraft Mill”), a lumber and chip mill
located in Summerville, South Carolina (the “Summerville
Lumber Mill”), other chip mills located in South Carolina and
other assets of Seller’s unbleached saturating kraft, unbleached uncoated kraft
folding carton board and unbleached linerboard business (collectively, the “Business”).


 


C. 
Seller controls timber that is a source of wood fiber for the operation
of the Kraft Mill and the Summerville Lumber Mill, consisting of pine pulpwood
(“Pine Pulpwood”), pine chips (“Pine Chips”), pine sawtimber (in the
form of pine “chipnsaw” and pine “sawtimber” stems) (“Pine
Sawtimber”), hardwood pulpwood (“Hardwood
Pulpwood”) and hardwood chips (“Hardwood
Chips”)  (Pine Pulpwood,
Pine Chips, Pine Sawtimber, Hardwood Pulpwood and Hardwood Chips are referred
to collectively as the “Products”).  Purchaser desires to obtain a long-term
source of supply of the Products, and Seller is willing to supply the Products,
on the terms and conditions set forth in this Agreement.


 


NOW, THEREFORE, in consideration of the mutual
covenants described in this Agreement, and other good and valuable
consideration the receipt and sufficiency of which are acknowledged, Purchaser
and Seller hereby agree as follows:


 


ARTICLE
1.




DEFINITIONS


 


Whenever used in this Agreement, the following terms
shall have the respective meanings given to them in the provisions thereof
indicated below:


 


“AAA” means
the American Arbitration Association.


 


“Affiliate”
of a Person means any other Person directly, or indirectly through one or more
intermediaries, controlling, controlled by or under common control with the
first Person.  As used in this definition
and elsewhere in this Agreement with respect to any Affiliate of a Person, “control”
(including the terms “controlled by” and “under common control with”) means the



 





















 


possession, directly or
indirectly, of the power to direct or cause the direction of the management
policies of a Person, whether through the ownership of voting securities, by
voting trust, contract or similar arrangement, as trustee or executor, or
otherwise.


 


“Agreement”
shall have the meaning provided in the opening paragraph of this Agreement.


 


“Annual Plan”
shall have the meaning provided in Section 2.5(b).


 


“Annual Plan Pulpwood
Volume” shall have the meaning provided in Section 2.1(f).


 


“Annual Plan Sawtimber
Volume” shall have the meaning provided in Section 2.2(d).


 


“Annual Pulpwood Base
Volume” shall have the meaning provided in Section 2.1(b).


 


“Annual Pulpwood Non-Take
or Pay Volume” shall have the meaning provided in Section 2.1(f).


 


“Annual Pulpwood Take or
Pay Volume” shall have the meaning provided in Section 2.1(f).


 


“Annual Sawtimber Non-Take
or Pay Volume” shall have the meaning provided in Section 2.2(d).


 


“Annual Sawtimber Take or
Pay Volume” shall have the meaning provided in Section 2.2(b).


 


“Arbitrator”
shall have the meaning provided in Section 8.13(b).


 


“Asset Purchase Agreement”
shall have the meaning provided in the recitals to this Agreement.


 


“Base Average Pulpwood
Freight Premium” shall have the meaning provided in Section 6.4(b)(i).


 


“Base Average Sawtimber
Premium” shall have the meaning provided in Section 6.4(b)(ii).


 


“Base Weighting Units for
Pine Pulpwood” shall have the meaning provided in Section 6.4(b)(i).


 


“Base Weighting Units for
Pine Sawtimber” shall have the meaning provided in Section 6.4(b)(ii).


 


“Business”
shall have the meaning provided in the recitals to this Agreement.


 


“Calendar Monthly Average
RLSPCL Price” shall have the meaning provided in Section 4.2.


 


2





















 


“Calendar Year”
means a full year beginning on January 1 and continuing through the
following December 31.


 


“Commencement of One-Shift
Operation” shall have the meaning provided in Section 2.2(e).


 


“Committed Volume of Pine
Products” shall have the meaning provided in Section 6.4(a).


 


“Contract Manager”
shall have the meaning provided in Section 8.13.


 


“Contract Year”
means a one-year period beginning on the date of this Agreement or on an annual
anniversary of such date.


 


“Default Rate”
means a fixed rate equal to:  (i) the
three month London interbank offered rate (LIBOR) as of the date of
determination, as reported in the Wall Street Journal
Money Rate column (or, in the event the Wall Street Journal
no longer is published, or no longer publishes such rate, such other similarly
determined rate as Purchaser and Seller mutually agree), plus (ii) [****]
percent ([****]%) per annum.


 


“Delivery Locations”
means the locations listed on Annex E, as the same may be changed from
time to time by written agreement of the parties to this Agreement, and such
other Delivery Locations as may be specified pursuant to Section 2.7.


 


“Derived Stumpage Price”
means the delivered price at which Products are sold by Seller to a Person or
Persons other than Purchaser, less an amount equal to the Logging Fees that
would have been payable by Purchaser with respect to such sale if such sale had
been made by Seller to Purchaser pursuant to this Agreement with delivery to
the location of such other Person or Persons.


 


“Dispute”
shall have the meaning provided in Section 8.13.


 


“DOB” means
diameter outside bark.


 


“Dollar(s)”
means United States Dollar(s).


 


“East Edisto District”
means those Timberlands of Seller situated to the east of the Edisto River and
Four Hole Swamp and to the south of I-26.


 


“Effective Date”
means 12:01 a.m. on July 1, 2008.


 


“Fee Stumpage Reserve”
means the quantity of Products to be harvested from the Timberlands pursuant to
the Annual Plan during a Calendar Year by Purchaser Assumed Contract Loggers,
as provided in Section 2.5(d).


 


“Force Majeure Event”
means any cause, condition or event beyond either party’s reasonable control
that delays or prevents that party’s performance of its obligations hereunder,
including war, acts of government, acts of public enemy, riots, civil strife,
lightning, fires, 


 






“[****] indicates
confidential treatment” 


 


3





















 


explosions, storms and
floods (which storms and floods, in the case of Seller, makes logging in
accordance with Section 6.3 commercially impracticable or, in the case of
Purchaser, makes its operations at the Kraft Mill or the SLM Sawmill,
respectively, commercially impracticable), power failures, other acts of God or
nature, labor strikes or lockouts by either party’s employees and other similar
events or circumstances; provided, however, that adverse financial or market
conditions shall not constitute a Force Majeure Event.


 


“Hardwood Chips”
shall have the meaning provided in the recitals to this Agreement.


 


“Hardwood Chips Quality
Specifications” shall have the meaning provided in Section 2.3.


 


“Hardwood Products”
means Hardwood Pulpwood and Hardwood Chips.


 


“Hardwood Pulpwood”
shall have the meaning provided in the recitals to this Agreement.


 


“Hardwood Pulpwood Quality
Specifications” shall have the meaning provided in Section 2.3.


 


“Kraft Mill”
shall have the meaning provided in the recitals to this Agreement.


 


“Logging Fee Components”
shall have the meaning provided in Section 4.1(b).


 


“Logging Fees”
shall have the meaning provided in Section 4.1(a).


 


“Losses”
means any and all claims, liabilities, obligations, losses, fines, costs,
proceedings, deficiencies or damages (whether absolute, accrued, conditional or
otherwise and whether or not resulting from third party claims), including
out-of-pocket expenses and reasonable attorneys’ and accountants’ fees incurred
in the investigation or defense of any of the same or in enforcing any rights
under this Agreement.


 


“Market Related Downtime at the Kraft Mill” means a
shutdown of one or more paper machines at the Kraft Mill on a temporary basis
because of market conditions.


 


“Market Related Downtime at
the SLM Sawmill” means a shutdown of the SLM Sawmill on a
temporary basis because of market conditions.


 


“Non-Take or Pay Shortfall”
shall have the meaning provided in Section 3.2(c).


 


“Notice Period”
has the meaning given that term in Section 7.2.


 


“One-Shift Purchase Floor”
means [****] tons of Pine Sawtimber during the first five years of the Term; [****]
tons of Pine Sawtimber during the second five years of the Term; and [****]
tons of Pine Sawtimber during the last five years of the Term.


 


“Payment Date”
shall have the meaning provided in Section 3.1(b).


 






“[****] indicates
confidential treatment” 


4





















 


“Person”
means any individual, sole proprietorship, trust, estate, executor, legal
representative, unincorporated association, association, institution,
corporation, company, partnership, limited liability company, limited liability
partnership, joint venture, government (whether national, federal, state,
county, city, municipal or otherwise, including any instrumentality, division,
agency, body or department thereof) or other entity.


 


“Pine Chips”
shall have the meaning provided in the recitals to this Agreement.


 


“Pine Chip Quality
Specifications” shall have the meaning provided in Section 2.1(a).


 


“Pine Products”
means Pine Pulpwood, Pine Chips and Pine Sawtimber.


 


“Pine Pulpwood”
shall have the meaning provided in the recitals to this Agreement.


 


“Pine Pulpwood Committed
Volume” shall have the meaning provided in Section 2.1(b).


 


“Pine Pulpwood Maximum Take
or Pay Volume” shall have the meaning provided in Section 2.1(b).


 


“Pine Pulpwood Quality
Specifications” shall have the meaning provided in Section 2.1(a).


 


“Pine Sawtimber”
shall have the meaning provided in the recitals to this Agreement.


 


“Pine Sawtimber Maximum Committed
Volume” shall have the meaning provided in Section 2.2(c).


 


“Pine Sawtimber Quality
Specifications” shall have the meaning provided in Section 2.2(a).


 


“Products”
shall have the meaning provided in the recitals to this Agreement.


 


“Product Specifications”
means the Pine Pulpwood Quality Specifications, the Pine Chips Quality
Specifications, the Pine Sawtimber Quality Specifications, the Hardwood
Pulpwood Quality Specifications and the Hardwood Chips Quality Specifications.


 


“Pulpwood Non-Take or Pay
Purchase Shortfall” shall have the meaning provided in Section 3.2(a).


 


“Pulpwood Supply Shortfall”
shall have the meaning provided in Section 3.3(a).


 


“Purchaser Assumed Contract
Loggers” means the logging contractors who entered into master
cut and haul agreements covering purchased stumpage which were assigned to
Purchaser as an Assumed Contract (as defined in the Asset Purchase Agreement)
pursuant to the Asset Purchase Agreement.


 


“Purchaser Requested
Additional Pulpwood Volume” shall have the meaning provided in Section 2.1(c).


 


5





















 


“Quantities”
means the respective quantities of Products required to be supplied by Seller
and purchased by Purchaser under this Agreement.


 


“Reported Diesel Fuel Price”
means the weekly Retail On-Highway Diesel Price (including taxes) reported by
the U.S. Department of Energy, Energy Information Administration for the Lower
Atlantic States (or, in the event such information is no longer published, or
otherwise is not available from such source, such other reasonably similar
information, from the same or another source, as the parties mutually determine
in writing).


 


“Rules”
shall have the meaning provided in Section 8.13(b).


 


“Sawmill Notice Period”
shall have the meaning provided in Section 7.3.


 


“Sawtimber Supply Shortfall”
shall have the meaning provided in Section 3.3(b).


 


“Sawtimber Non-Take or Pay
Purchase Shortfall” shall have the meaning provided in Section 3.2(b).


 


“Seller Offered Additional
Pulpwood Volume” shall have the meaning provided in Section 2.1(d).


 


“Seller’s Harvest Plan”
shall have the meaning provided in Section 2.5(b).


 


“SLM Sawmill”
shall mean the sawmill located at the Summerville Lumber Mill.


 


“Stumpage Price”
means a Dollar per ton “stumpage price” which shall be determined based on
[****] plus or minus the adjustment indicated:


 


	
   

  	
   

  	
  Product

  	
   

  	
  Price Category

  	
   

  	
  Adjustment

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  Pine Sawtimber (other than pine “chipnsaw”)

  	
   

  	
  [****]

  	
   

  	
  [****]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Pine “Chipnsaw” (6 inch)

  	
   

  	
  [****]

  	
   

  	
  [****]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Pine Pulpwood

  	
   

  	
  [****]

  	
   

  	
  [****]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Hardwood Pulpwood

  	
   

  	
  [****]

  	
   

  	
  [****]

  



 


The Stumpage Price for Pine Chips and
Hardwood Chips shall be the same as the Stumpage Price for Pine Pulpwood
and Hardwood Pulpwood, respectively, calculated as set forth above.


 


“Summerville Lumber Mill”
has the meaning given that term in the recitals to this Agreement.


 






“[****] indicates
confidential treatment” 


 


6





















 


“Supply Shortfall”
shall mean a Pulpwood Supply Shortfall or a Sawtimber Supply Shortfall.


 


“Sustainable Forest
Practice Standards” means standards substantially similar to the
Sustainable Forestry Initiative of SFI, Inc. (including, without
limitation, the American Tree Farm System of the American Forest Foundation),
as that standard may be modified by SFI, Inc. from time to time.


 


“Take or Pay Shortfall”  shall have the meaning provided in Section 3.1(a).


 


“Term” shall
have the meaning provided in Article 5.


 


“Timberlands”
means the timberlands located in any of the following counties of South
Carolina which are now or hereafter owned by Seller or an Affiliate or on which
Seller or an Affiliate controls the timber or from which Seller otherwise has
the right to acquire the timber: 
Allendale, Bamberg, Barnwell, Beaufort, Berkeley, Calhoun, Charleston,
Clarendon, Colleton, Dorchester, Florence, Georgetown, Hampton, Horry, Jasper,
Marion, Orangeburg and Williamsburg.


 


“ton” means
two thousand pounds.


 


“Weighted Average Stumpage Price”
shall have the meaning provided in Section 3.1(a).


 


“Weighting Units”
means acres of productive planted and natural pine stands, adjusted by stand
age and thinned status, as determined in accordance with the methodology set
forth in Annex G.


 


ARTICLE
2.


 


PURCHASE
OF PRODUCTS


 


Section 2.1             Purchase of Pine Pulpwood.  (a)  Seller shall sell and deliver to
Purchaser at the Delivery Locations determined in accordance with Sections 2.5
and 2.6, and Purchaser shall purchase, receive and pay for, in each Calendar
Year, an amount of Pine Pulpwood from the Timberlands determined as provided in
this Section 2.1.  All Pine Pulpwood
purchased and sold pursuant to this Agreement shall comply with the quality
specifications set forth in Annex A-1, as such specifications may
be modified from time to time in accordance with Section 2.4 (the “Pine Pulpwood Quality Specifications”).  Seller, in its sole discretion, may deliver
Pine Chips in lieu of Pine Pulpwood to fulfill a portion of its obligation to
deliver Pine Pulpwood under this Agreement; however, Purchaser acknowledges
that the volume of Pine Chips provided by Seller pursuant to this Agreement
likely will decrease substantially, and may be eliminated, during the
Term.  Notwithstanding anything in this
Agreement to the contrary, Seller acknowledges that all such Pine Chips so
purchased by Purchaser hereunder shall be deemed purchases of Pine Pulpwood
hereunder for purposes of satisfying Purchaser’s obligations to purchase Pine
Pulpwood hereunder.  All Pine Chips
purchased and sold pursuant to this Agreement shall comply with the quality
specifications set forth in Annex A-3, as such 


 


7





















 


specifications may be modified from time to
time in accordance with Section 2.4 (the “Pine
Chip Quality Specifications”).


 


(b)           Seller’s
Harvest Plan submitted in accordance with Section 2.5 shall specify the
quantity of Pine Pulpwood that Seller is willing to supply during the Calendar
Year, which shall be not less than the amount set forth opposite such Calendar
Year under the heading “Committed Volume and
Minimum Take or Pay Volume” on Annex C (the “Pine Pulpwood Committed Volume”).  Seller shall be required to sell and
Purchaser shall be required to purchase: 
(i) the quantity of Pine Pulpwood specified in Seller’s Harvest Plan,
up to the maximum aggregate volume for that Calendar Year set forth under the
heading “Maximum Take or Pay Volume” on Annex
C (the “Pine Pulpwood Maximum Take
or Pay Volume”), and (ii) to the extent Seller’s Harvest
Plan provides for the harvest of Pine Pulpwood in excess of the Pine Pulpwood
Maximum Take or Pay Volume, such portion of such excess Pine Pulpwood as
Purchaser, in its sole discretion, elects in writing to purchase.  The amount of Pine Pulpwood which Purchaser
is required to purchase from Seller pursuant to clause (i) of the
preceding sentence, and the excess that Purchaser elects to purchase pursuant
to clause (ii) of the preceding sentence, are collectively referred to as
the “Annual Pulpwood Base Volume”
for the Calendar Year.  The price to be
paid by Purchaser to Seller for the Annual Pulpwood Base Volume shall be
determined as provided in Article 4.


 


(c)           In
connection with the preparation of the Annual Plan or subsequently at any time
during the Calendar Year, Purchaser may request in writing that Seller sell to
Purchaser during the Calendar Year a greater quantity of Pine Pulpwood than was
specified in Seller’s Harvest Plan for the Calendar Year.  Seller may, in its sole discretion, agree in
writing to supply all or part of the additional amount requested by Purchaser
at such price or prices as Seller and Purchaser may agree (the aggregate
additional amount of Pine Pulpwood that Purchaser so requests and Seller agrees
to supply to Purchaser during a Calendar Year is referred to as the “Purchaser Requested Additional Pulpwood
Volume”).  To the extent
that (and only to the extent that) the price of Purchaser Requested Additional
Pulpwood agreed upon by the parties is equal to or less than the price payable
for Pine Pulpwood pursuant to Article 4 at the time Seller and Purchaser
agree on the price to be paid by Purchaser for such additional Pine Pulpwood,
the Pine Pulpwood “Committed Volume and
Minimum Take or Pay Volume” amounts set forth on Annex C for
each Calendar Year during the remainder of the Term shall be reduced evenly by
a pro rata portion of such Purchaser Requested Additional Pulpwood Volume.


 


(d)           At
any time during the Calendar Year prior to December 1, Seller may propose
in writing to sell to Purchaser additional quantities of Pine Pulpwood that
Seller determines to harvest, at prices determined as provided in Article 4.  Purchaser may, in its sole discretion, accept
all or a portion of Seller’s proposal by giving written notice of such
acceptance to Seller within 10 business days after receipt of Seller’s proposal
(the aggregate additional amount of Pine Pulpwood that Seller so proposes to
supply, and Purchaser so accepts, during a Calendar Year is referred to as the “Seller Offered Additional Pulpwood Volume”).  The Pine Pulpwood Committed Volume for future
Calendar Years shall not be reduced by the Seller Offered Additional Pulpwood
Volume.


 


(e)           Seller
shall not sell any Pine Pulpwood from the Timberlands meeting the Pine Pulpwood
Quality Specifications to any Person other than Purchaser unless Seller has
first either:


 


8




















 


(x) offered such Pine
Pulpwood to Purchaser in Seller’s Harvest Plan for the Calendar Year pursuant
to Section 2.1(b) as quantities in excess of the Pine Pulpwood
Maximum Take or Pay Volume, and Purchaser has not accepted such offer, or (y) offered
such Pine Pulpwood to Purchaser pursuant to Section 2.1(d), and Purchaser
has not agreed to purchase such Pine Pulpwood within the time period specified
in Section 2.1(d).  Notwithstanding
the foregoing, this Section 2.1(e) shall not apply to sales by Seller
of (i) stems with a butt diameter outside bark of less than 8 inches for
use in the production of posts, and (ii) stems with a butt diameter
outside bark of 8 inches or more, in either case that are sold for a stumpage price
or a Derived Stumpage Price (as the case may be) higher than the stumpage price
then payable for Pine Pulpwood as determined in accordance with Article 4.


 


(f)                                    The “Annual
Plan Pulpwood Volume” for a Calendar Year shall be the sum
of:  (i) the Annual Pulpwood Base
Volume for the Calendar Year, (ii) the Purchaser Requested Additional
Volume, if any, for the Calendar Year, and (iii) the Seller Offered
Additional Volume, if any for the Calendar Year.  The “Annual
Pulpwood Take or Pay Volume” for the Calendar Year shall be the
lesser of:  (x) the Annual Plan
Pulpwood Volume for the Calendar Year, or (y) the Pine Pulpwood Maximum
Take or Pay Volume for the Calendar Year. 
The “Annual Pulpwood Non-Take or
Pay Volume” for the Calendar Year shall be the amount, if any,
by which the Annual Plan Pulpwood Volume for the Calendar Year exceeds the
Annual Pulpwood Take or Pay Volume for the Calendar Year.


 


(g)                                 In Calendar Year 2015 and in each Calendar Year thereafter
through Calendar Year 2022, Seller shall review its projected harvests of Pine
Pulpwood from the Timberlands for each Calendar Year remaining in the period
from 2018 through the end of the Term and determine, in its sole discretion, if
it is able to increase the Pine Pulpwood Committed Volume for any of those
subsequent Calendar Years and remain in compliance with its obligations to
maintain the Timberlands in accordance with Section 6.3 and shall notify
Purchaser in writing if Seller is able to increase the Pine Pulpwood Committed
Volume for any such subsequent Calendar Year. 
If Seller notifies Purchaser in writing that Seller is able so to
increase the Pine Pulpwood Committed Volume from the Timberlands for any of
those subsequent Calendar Years and Purchaser accepts the increased commitment
in writing, such increased commitment shall become the Pine Pulpwood Committed
Volume for the specified subsequent Calendar Years.


 


Section 2.2                                      Purchase of
Pine Sawtimber.  (a)  Seller shall
sell and deliver to Purchaser, and Purchaser shall purchase, receive and pay
for, in each Calendar Year, an amount of Pine Sawtimber determined as provided
in this Section 2.2 at prices determined as provided in Article 4
(except as otherwise provided in Section 2.2(d)).  All Pine Sawtimber purchased and sold
pursuant to this Agreement shall comply with the quality specifications set
forth in Annex A-2, as such specifications may be modified from time to
time in accordance with Section 2.4 (the “Pine
Sawtimber Quality Specifications”).  The Pine Sawtimber delivered by Seller in
each Calendar Year pursuant to this Agreement shall include all Pine Sawtimber
harvested by Seller within a [****]mile haul radius of the SLM Sawmill (other
than stems for use in the production of poles and pilings and stems greater
than 20 inches DOB butt), up to the Annual Plan Sawtimber Volume, and shall
consist of the following percentages of “Chipnsaw” 6 inch and Pine Sawtimber
volume:


 






“[****] indicates confidential treatment” 


 


9

















 


	
   

  	
   

  	
  2008-2012

  	
   

  	
  2013-2017

  	
   

  	
  2018-2022

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  “Chipnsaw” 6 inch

  	
   

  	
  [****]%-[****]%

  	
   

  	
  [****]%-[****]%

  	
   

  	
  [****]%-[****]%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pine Sawtimber

  	
   

  	
  [****]%-[****]%

  	
   

  	
  [****]%-[****]%

  	
   

  	
  [****]%-[****]%

  



 


(b)                                 Except as provided in Section 2.2(c) and Section 2.2(e),
the number of tons of Pine Sawtimber Seller is required to supply to Purchaser,
and Purchaser is required to purchase, under this Agreement during each
Calendar Year of the Term shall be the amount set forth under the heading “Take or Pay Volume (and Minimum Committed Volume)” opposite
such Calendar Year on Annex D (such amount, as adjusted pursuant to Section 2.2(e),
is referred to herein as the “Annual
Sawtimber Take or Pay Volume”).


 


(c)                                  Except as otherwise provided in Section 2.2(e), if
during any Calendar Year Purchaser purchases Pine Sawtimber for the SLM Sawmill
in quantities in excess of the Annual Sawtimber Take or Pay Volume for the
Calendar Year, Purchaser shall purchase from Seller, and Seller shall sell to
Purchaser, such additional quantities (up to [****] tons per Calendar Year or a
pro rata proportion thereof in the initial and final Calendar Years of this
Agreement) (such amount is referred to herein as the “Additional Annual Sawtimber Volume”) at the price
determined as provided in Article 4; provided, however, that except as
provided in Section 2.2(d) or as provided in Article 3 with
respect to amounts carried over from a prior Calendar Year, Seller shall not be
required to sell to Purchaser, and Purchaser shall not be required to purchase
from Seller, more than the sum of the Annual Sawtimber Take or Pay Volume and
the Additional Annual Sawtimber Volume (collectively, the “Pine Sawtimber Maximum Committed Volume”)
during the Calendar Year.


 


(d)                                 Purchaser and Seller may agree in writing, in their
respective sole discretion, that Seller will sell to Purchaser, and Purchaser
will purchase from Seller, during a Calendar Year Pine Sawtimber in quantities
in excess of the Pine Sawtimber Maximum Committed Volume at such price or
prices as Seller and Purchaser may agree (any such additional volume plus any
volume required to be purchased and sold for the Calendar Year under Section 2.2(c) is
referred to collectively as the “Annual
Sawtimber Non-Take or Pay Volume”) (the Annual Sawtimber Take or
Pay Volume for the Calendar Year plus any Sawtimber Non-Take or Pay Volume for
the Calendar Year are referred to collectively as the “Annual Plan Sawtimber Volume” for the Calendar Year).


 


(e)                                  If from time to time during the Term the SLM Sawmill reduces
its operation to only one shift (or if on the Effective Date of this Agreement
the SLM Sawmill is operating with only one shift) then, notwithstanding the
other provisions of this Section 2.2, from the date of commencement of
such one-shift operation (or from the date of the Asset Purchase Agreement, if
the SLM Sawmill was operating with only one shift on the Effective Date) (the
applicable date being the “Commencement
of One-Shift Operation”) and while such one-shift operation
continues:  (i) the aggregate
quantity of Pine Sawtimber that Purchaser shall be required to purchase, and
Seller shall be required to sell, under this Agreement (which shall become the
Annual Sawtimber Take or Pay Volume for the period of such one-shift operation)
shall be the greater of:  (x) the
applicable One-Shift Purchase Floor (pro-rated for the period of such one-shift
operation), and (y) the total quantity of Pine Sawtimber then being
consumed by the SLM 


 






“[****] indicates confidential treatment” 


 


10

















 


Sawmill
less [****] tons, (ii) Purchaser
shall have no obligation to take any Additional Annual Sawtimber Volume, and (iii) the
requirement in Section 2.2(a) to deliver all Pine Sawtimber within a [****]mile haul radius of the SLM Sawmill shall not apply.  During any period of one-shift operation of
the SLM Sawmill, Purchaser shall deliver to Seller, promptly following the end
of each month, a written report showing the total quantity of Pine Sawtimber
consumed by the SLM Sawmill during such month. 
If the one-shift operation of the SLM Sawmill continues for more than 24
months after the Commencement of One-Shift Operation and the quantity of Pine
Sawtimber purchased by Purchaser while operating on such one-shift operation
during the Calendar Year ending immediately following the end of such 24 month
period is less than [****]
tons in years 1 to 10 of this Agreement, or less than [****] tons in years 11 to 15 of this Agreement (in each case,
proportionately reduced to reflect only that portion of the Calendar Year
during which Purchaser is operating the SLM Sawmill on a one shift operation
and further proportionately reduced, in the case of the Calendar Year in which
such 24 month period ends, to reflect only the portion of such Calendar Year
falling after the end of such 24 month period), the Pine Pulpwood Committed
Volume for the immediately following Calendar Year shall be proportionately
reduced by the percentage by which the quantity of Pine Sawtimber so purchased
by Purchaser in the Calendar Year of determination (or portion thereof falling
after the end of such 24 month period) is less than [****] tons or [****]
tons (or, in each case, the proportionate amount thereof determined as
described above), as the case may be. 
The calculation set forth in the immediately preceding sentence shall
apply to each Calendar Year following the end of such 24-month period so long
as Purchaser continues to operate on such one-shift operation at the SLM
Sawmill during all or a portion of such Calendar Year.  At such time as the SLM Sawmill returns to
two-shift operation, the Annual Sawtimber Take or Pay Volume and the Additional
Annual Sawtimber Volume shall revert to the amounts determined as provided in
Sections 2.2(b) and 2.2(c) (proportionately adjusted, in the case of
the Calendar Year in which such return to two-shift operation occurs, to
reflect only the portion of the Calendar Year falling after such return to
two-shift operation).


 


(f)  During Market Related Downtime at the SLM
Sawmill, Seller shall limit deliveries of Pine Sawtimber to the SLM Sawmill, to
the extent requested by Purchaser, and the parties shall work together and use
commercially reasonable efforts to minimize and mitigate the impact of such
Market Related Downtime on Seller’s loggers (which may include, without
limitation, maximizing the use of Purchaser’s wet storage capacity and, if the
parties so agree, increasing the volume of Pine Pulpwood that is harvested by
Seller and delivered to Purchaser during such Market Related Downtime at the
SLM Sawmill and use of Seller’s loggers to log stumpage controlled by
Purchaser); provided, however, that:  (i) if
the parties determine to increase the volume of Pine Pulpwood to be harvested
by Seller and delivered to Purchaser during such Market Related Downtime at the
SLM Sawmill, the Pine Pulpwood “Committed Volume and Take
or Pay Volume” amounts set forth on Annex C for each Calendar
Year during the remainder of the Term shall be reduced evenly by a pro rata
portion of such additional volume so delivered, (ii) the provisions of
this Section 2.2(f) shall not apply to more than one period of Market
Related Downtime in any Calendar Year, or to any period of Market Related
Downtime to the extent it exceeds two months in duration, and (iii) nothing
in this Section 2.2(f) shall limit any of the rights or obligations
of the parties under Article 3.


 






“[****] indicates
confidential treatment” 


 


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Section 2.3                                      Purchase of Hardwood.  Seller shall sell and deliver to Purchaser,
and Purchaser shall purchase from Seller, receive and pay for, in each Calendar
Year at the prices determined as provided in Article 4, all Hardwood
Pulpwood and Hardwood Chips harvested by Seller during the Calendar Year (or
portion of the Calendar Year in which this Agreement is in effect) from Seller’s
Timberlands.  Seller shall, in its
commercially reasonable judgment, make the determination of whether hardwood
products produced from such Timberlands will be classified as Hardwood Pulpwood
or as higher value hardwood products which shall not be subject to this
Agreement (all of which higher value hardwood products Seller may sell to third
parties, provided that the stumpage price or Derived Stumpage Price
thereof, as the case may be, exceeds the Stumpage Price that Seller would
have received from Purchaser pursuant to Article 4 for such
products).  All Hardwood Pulpwood and
Hardwood Chips purchased pursuant to this Agreement shall comply with,
respectively, the quality specifications for Hardwood Pulpwood set forth in Annex
B-1, as such specifications may be modified from time to time in accordance
with Section 2.4 (the “Hardwood Pulpwood Quality
Specifications”), and the quality specifications for Hardwood
Chips set forth in Annex B-2, as such specifications may be modified
from time to time in accordance with Section 2.4 (the “Hardwood Chips Quality Specifications”).


 


Section 2.4                                      Modification of
Specifications.  Purchaser
and Seller shall use commercially reasonable efforts to agree from time to time
upon any modifications to the Product Specifications and any price adjustments
or required volume reductions for the Products covered by the modified Product
Specifications.  All Products sold by
Seller to Purchaser following the date any mutually agreed upon modifications
to the Product Specifications become effective shall comply with such modified
Product Specifications.


 


Section 2.5                                      Annual Plan.  (a)  Prior to the Effective Date, the
parties agreed upon an Annual Plan for the portion of Calendar Year 2008 after
the Effective Date which sets forth the Quantities of Pine Pulpwood and
Sawtimber to be delivered to each Delivery Location under this Agreement during
the remainder of Calendar Year 2008 (which Quantities are not less than a pro
rata portion of the Committed Volume of Pine Products for the initial Contract
Year, based on the number of days in the Calendar Year after the Effective
Date), the portion of the Pine Pulpwood which Seller anticipates furnishing
during such period in the form of Pine Chips, the portion of the Products to be
delivered pursuant to the Annual Plan which shall constitute the Fee Stumpage Reserve
to be made available for harvesting by Purchaser Assumed Contract Loggers and
the other provisions required to be contained in an Annual Plan pursuant to Section 2.5(b).


 


(b)                                 By not later than July 1 of each year during the Term,
Seller shall submit to Purchaser Seller’s plan for supplying Products of each
type to Purchaser from the Timberlands during the following Calendar Year in at
least the minimum amounts required by this Agreement (“Seller’s Harvest Plan”). 
Seller’s Harvest Plan shall specify: 
(x) the quantity of Pine Pulpwood and Pine Sawtimber that will be
available for sale to Purchaser in accordance with Sections 2.1 and 2.2, the
proposed quantities of Pine Pulpwood and Pine Sawtimber to be delivered to each
Delivery Location and the portion of the Pine Pulpwood which Seller anticipates
furnishing during the Calendar Year in the form of Pine Chips pursuant to Section 2.1(a),
(y) the quantity of Hardwood Pulpwood that will be available for sale to
Purchaser in accordance with Section 2.3, the proposed quantities of
Hardwood Pulpwood to be 


 


12

















 


delivered
to each Delivery Location and the portion of the Hardwood Pulpwood which Seller
anticipates furnishing in the form of Hardwood Chips, and (z)  if a Fee
Stumpage Reserve will be in effect for the following Calendar Year in
accordance with Section 2.5(d), the portion of Products to be delivered
pursuant to the Annual Plan which shall constitute the Fee Stumpage Reserve
and made available for harvesting by Purchaser Assumed Contract Loggers as
provided in Section 2.5(d) (which portion shall be reasonable and
based on the aggregate harvesting capacity of the logging contractors who entered
into master cut and haul agreements covering fee stumpage with Seller
which were Excluded Contracts (as defined in the Asset Purchase Agreement)
under the Asset Purchase Agreement and Seller’s total harvesting
requirements).  By not later than July 21
of the same Calendar Year, Purchaser shall submit to Seller in writing a
proposed plan with respect to the quantities of Pine Pulpwood, Pine Sawtimber
and Hardwood Pulpwood to be purchased from Seller during the following Calendar
Year and Purchaser’s estimated weekly delivery targets by Delivery
Location.  The quantities of Pine
Pulpwood and Pine Sawtimber specified in the proposed plan shall be the amounts
provided in Sections 2.1(b), 2.2(b) and 2.2(c) (to the extent
specified in that section); provided, however, that consistent with Sections
2.1(c) and 2.2(d), Purchaser may request in its proposed plan that Seller
sell more than the amounts provided in Sections 2.1(b), 2.2(b) and 2.2(c) during
the Calendar Year covered by the Plan, and Seller, in its sole discretion, may
either agree to sell, or decline to sell, such increased amounts.  The parties shall work together in good faith
to agree, by no later than the September 1 following delivery of Purchaser’s
proposed plan, upon a mutually acceptable weekly delivery schedule for each
Delivery Location for Products to be purchased and sold pursuant to this
Agreement for the Calendar Year covered by Purchaser’s proposal (which delivery
schedule shall, except for the delivery of Pine Chips to the Kraft Mill and
except as otherwise contemplated by Section 2.6, generally provide for the
delivery of Pine Products in approximately equal weekly volumes to the nearest
Delivery Location to the tract from which the Pine Products are
harvested).  The Quantities of Products
to be purchased and sold during the Calendar Year, the targeted weekly delivery
schedule for each Delivery Location and the Fee Stumpage Reserve for the
Calendar Year (if a Fee Stumpage Reserve is in effect for the Calendar
Year) as agreed upon in writing by Seller and Purchaser in accordance with the
foregoing procedure, shall constitute the “Annual Plan” for such Calendar Year except as otherwise
subsequently changed by written agreement of Seller and Purchaser.


 


(c)                                  The parties acknowledge that variations from the Annual Plan
(including timing and volumes of Products to be delivered to each Delivery
Location) will occur; however, each party shall use commercially reasonable
efforts to implement each Annual Plan in accordance with its terms.  Seller shall use commercially reasonable
efforts to deliver weekly to, and Purchaser shall use commercially reasonable
efforts to accept and purchase weekly at, each Delivery Location the quantity
of each Product specified in the Annual Plan for such Delivery Location for
such week (as adjusted pursuant to this Section 2.5(c) and Section 2.6).  Purchaser shall provide to Seller by Friday
of each week during the Calendar Year a projection of Purchaser’s weekly
requirements for Seller’s Products at each Delivery Location for the following
six weeks, which shall take into account Seller’s average weekly deliveries of
each Product by Delivery Location for the Calendar Year to date, Purchaser’s
requirements for and capacity to process each Product at such Delivery Location,
Seller’s logger and forestry management requirements and ability to supply each
Product at each Delivery Location and whether the average weekly deliveries as
so determined are:  (i) below the
targeted amount set 


 


13

















 


forth
in the Annual Plan for such Delivery Location and Product for such period, as
previously adjusted pursuant to this Section 2.5(c) (in which case
the projected weekly delivery requirements shall (subject to Section 2.6
hereof) be increased to make up for the shortfall to the extent commercially
reasonable for both Seller and Purchaser), or (ii) above the targeted
amount set forth in the Annual Plan for such Delivery Location and Product for
such period, as previously adjusted pursuant to this Section 2.5(c) (in
which case the projected weekly delivery requirements shall (subject to Section 2.6
hereof) be decreased to make up for the overage to the extent commercially
reasonable for both Seller and Purchaser). 
Subject to the other provisions of this Section 2.5(c), during any
Calendar Year, with reasonable notice to the other party, Seller may vary its
deliveries, and Purchaser may vary its purchases, of Products so long as such
variations in delivery and purchase are immaterial and will not materially
impair the operations of the Kraft Mill or the SLM Sawmill, or the operations
at the respective Delivery Locations, or the operations at Seller’s Timberlands
from which the Products are supplied. 
Notwithstanding any change in deliveries of Products during any period
pursuant to this Section 2.5(c), no such change shall limit any of the
rights or obligations of the parties under Article 3.


 


(d)                                 During each of the first three Contract Years, Seller shall
make available as a Fee Stumpage Reserve for harvesting by Purchaser
Assumed Contract Loggers the quantity of Products specified in the Annual Plan
or Annual Plans covering such Contract Year (or, in the case of the remainder
of Calendar Year 2008 after the Effective Date, the amount agreed upon prior to
the Effective Date as provided in Section 2.5(a)).  Except as provided in Section 2.5(b),
Seller shall solely determine and control the tracts within the Timberlands
from which the Fee Stumpage Reserve shall be harvested, the Quantities of
Products to be harvested from such tracts, the type and method of logging to be
used in harvesting such tracts and the other logging processes to be used in
harvesting such tracts; however, a reasonable portion of such tracts shall be
reasonably accessible for harvesting during wet weather.  Seller from time to time shall advise
Purchaser when it has Fee Stumpage Reserve tracts available for harvesting
by the Purchaser Assumed Contract Loggers, and Purchaser from time to time
shall advise Seller when there is excess harvesting capacity available among
the Purchaser Assumed Contract Loggers to harvest Fee Stumpage Reserve
tracts.  When Seller has Fee Stumpage Reserve
tracts available for harvesting by the Purchaser Assumed Contract Loggers,
Purchaser may direct one or more Purchaser Assumed Contract Loggers to Seller
for the purpose of harvesting such tracts; however, in the absence of such
direction, Seller may select the Purchaser Assumed Contract Loggers to harvest
such tracts.  Purchaser shall make
sufficient Purchaser Assumed Contract Logger capacity available to Seller on a
consistent basis for Seller to meet its delivery requirements with respect to
the portion of the Annual Plan consisting of the Fee Stumpage Reserve.  Regardless of whether a Purchaser Assumed
Contract Logger is directed to Seller by Purchaser or is selected by Purchaser,
Seller shall be responsible for contracting with such Purchaser Assumed
Contract Logger to harvest available Fee Stumpage Reserve tracts at such
prices, reimbursement and adjustments, with such specifications and on such
other terms and conditions, as Seller and such Purchaser Assumed Contract
Logger may agree.  Nothing in this
Agreement shall restrict (i) the right of Seller from time to time to
enter into agreements with Purchaser Assumed Contract Loggers or other logging
contractors regularly engaged by Purchaser to harvest Products from the
Timberlands not in connection with the Fee Stumpage Reserve at such
prices, which such reimbursements and adjustments, with such specifications and
on such other terms and conditions, as Seller and any such Purchaser Assumed
Contract 


 


14

















 


Logger
may agree, or (ii) the right of Purchaser from time to time to enter into
agreements with logging contractors regularly engaged by Seller to harvest
Products from the Timberlands to harvest third party stumpage purchased by
Purchaser at such prices, with such reimbursements and adjustments, with such
specifications and on such other terms and conditions, as Purchaser and any
such logging contractor may agree. 
Seller and Purchaser shall review the Fee Stumpage Reserve program
at the end of the third Contract Year of this Agreement to determine whether
they mutually desire to continue the program and, if so, the terms on which the
program shall be continued by them.


 


Section 2.6                                      Additional Delivery
Locations.  (a) 
From time to time during the Term, Purchaser may designate additional Delivery
Locations controlled by Purchaser by written notice given to Seller.


 


(b)                                 Purchaser also may designate one or more additional third
party Delivery Locations not controlled by Purchaser for delivery of Products;
provided, however, that unless the parties otherwise agree in writing:  (i) the aggregate volume of Pine Pulpwood
delivered to all such third party locations (other than Dempsey Wood Products)
during any Calendar Year shall not exceed: 
(x) during any of the first five Calendar Years of the Term, [****]% of the Annual Plan Pulpwood Volume for such Calendar Year;
(y) during any of the second five Calendar Years of the Term, [****]% of the Annual Plan Pulpwood Volume for such Calendar Year
and (z) during any of the last five Calendar Years of the Term, [****]% of the Annual Plan Pulpwood Volume for such Calendar Year,
(ii) the aggregate volume of Pine Sawtimber delivered to all such third
party locations during a Calendar Year shall not exceed [****]% of the Annual Plan Sawtimber Volume for such Calendar
Year, and (iii) in any event, Purchaser shall not sell any Products
delivered by Seller to a third party Delivery Location at a price higher than
the price paid by Purchaser to Seller for such Products under Article 4.  Notwithstanding the foregoing, during any
Market Related Downtime at the Kraft Mill, Purchaser may increase the portion
of the Annual Plan Pulpwood Volume that is being delivered to third party
Delivery Locations; however, the aggregate volume of Pine Pulpwood so delivered
to all third party Delivery Locations (other than Dempsey Wood Products) while
such Market Related Downtime at the Kraft Mill continues shall not exceed an
amount determined by multiplying the aggregate volume of Pine Pulpwood to be
supplied by Seller to Purchaser pursuant to the Annual Plan during such Market
Related Downtime at the Kraft Mill by a fraction, the numerator of which is the
amount of the reduction in the volume of Pine Pulpwood to be supplied by Seller
pursuant to the Annual Plan that will be consumed by the Kraft Mill as a result
of such Market Related Downtime at the Kraft Mill and the denominator of which
is the aggregate volume of Pine Pulpwood to be supplied by Seller to Purchaser
pursuant to the Annual Plan during such Market Related Downtime at the Kraft
Mill.


 


(c)                                  Notwithstanding Sections 2.6(a) and 2.6(b), if Purchaser
specifies delivery of any Products to any additional Delivery Location
specified pursuant to Section 2.6(a) or Section 2.6(b) and
Seller would be required to deliver Products to a Delivery Location more than [****] miles away from the tract from which such Products are
harvested, Seller shall have no obligation to deliver such Products to such
additional Delivery Location unless the parties have agreed, through good faith
negotiations to the additional costs of Seller, if any, to be reimbursed by Purchaser
as a result of deliveries to such additional Delivery Location.


 






“[****] indicates confidential treatment” 


 


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Section 2.7                                      Dempsey Wood Products.  The Annual Plan shall provide for the
quantity of Pine Pulpwood, if any, to be delivered by Seller to the Dempsey
Wood Products Delivery Location, and Pine Pulpwood delivered to the Dempsey
Wood Products Delivery Location in accordance with the Annual Plan in any
Calendar Year shall be counted towards the Annual Plan Pulpwood Volume for that
Calendar Year.  If, in connection with
the preparation of the Annual Plan in any Calendar Year, Purchaser notifies
Seller that Purchaser does not intend to purchase Pine Chips from Dempsey Wood
Products during the following Calendar Year, then: (i) the Annual Plan
shall not provide for the delivery of Pine Pulpwood by Seller to Dempsey Wood
Products during such following Calendar Year, and (ii) in any subsequent
Calendar Year, Seller shall not be required to deliver Pine Pulpwood to Dempsey
Wood Products unless Seller determines in good faith that the price payable to
Seller by Dempsey Wood Products for such Pine Pulpwood represents an acceptable
market price in the area for products similar to the Products delivered to
Dempsey Wood Products by Seller.  The
purchase price for Pine Pulpwood delivered by Seller to Dempsey Wood Products
in accordance with the Annual Plan shall be the price negotiated between Seller
and Dempsey Wood Products and shall be paid to Seller by Dempsey Wood
Products.  The purchase price payable by
Purchaser for pine chips or other products processed by Dempsey Wood Products
for Purchaser shall be the price negotiated by Purchaser with Dempsey Wood
Products and shall be paid by Purchaser.


 


ARTICLE
3.


 


FAILURE
TO PURCHASE OR DELIVER


 


Section 3.1                                      Purchaser’s Obligation to
Take or Pay.  (a) 
Except as provided in Sections 3.1(b) and 3.6, Purchaser shall be required
to pay for the entire Annual Pulpwood Take or Pay Volume and the entire Annual
Sawtimber Take or Pay Volume with respect to each Calendar Year even if
Purchaser fails to purchase such quantities of Products.  Except as otherwise expressly provided in
Sections 3.1(b) and 3.6, if Purchaser fails to purchase the Annual
Pulpwood Take or Pay Volume or the Annual Sawtimber Take or Pay Volume in any
Calendar Year, Purchaser shall, as Seller’s sole and exclusive remedy for any
such shortfall, pay to Seller an amount equal to the number of tons by which
Purchaser’s purchases of Pine Pulpwood and Pine Chips, or Pine Sawtimber, as
the case may be, during the Calendar Year were less than the Annual Pulpwood
Take or Pay Volume or the Annual Sawtimber Take or Pay Volume, respectively,
for the Calendar Year (a “Take or Pay Shortfall”),
multiplied by the weighted average Stumpage Price of Pine Pulpwood or of
Pine Sawtimber of the type(s) for which there was a Take or Pay Shortfall,
as the case may be, sold to Purchaser pursuant to this Agreement during the
Calendar Year (the “Weighted Average Stumpage Price”).  In determining the Weighted Average Stumpage Price
for Pine Sawtimber, the parties shall use the actual Stumpage Prices and
the midpoint of the range of the type of Pine Sawtimber (chipnsaw 6 inch or
pine sawtimber) that was to have been delivered during the Calendar Year, as
specified in Section 2.2(a).  Except
as otherwise provided in Section 3.1(b), Seller shall calculate and
invoice such amount to Purchaser by not later than January 15 of the
Calendar Year following the Calendar Year in which the Take or Pay Shortfall
occurs, and Purchaser shall pay the invoice by not later than January 31
of such Calendar Year.


 


16
















 


(b)           Notwithstanding
the provisions of Sections 3.1(a) or (c), to the extent a Take or Pay
Shortfall exists on the last day of a Calendar Year prior to the last full
Calendar Year during the Term, then, unless Purchaser otherwise elects in
writing to pay the Take or Pay Shortfall to Seller in accordance with Section 3.1(a),
the amount of the Take or Pay Shortfall so existing on such last day of the
Calendar Year automatically shall be added to the Annual Pulpwood Take or Pay
Volume or the Annual Sawtimber Take or Pay Volume, as the case may be, for the
following Calendar Year in lieu of making the payment required by Section 3.1(a) with
respect to the Take or Pay Shortfall so existing on such last day of the
Calendar Year; provided, however, that in no event shall the sum of the amount
of the Take or Pay Shortfall so carried over plus the amount of any Non-Take or
Pay Shortfall for comparable Products carried over pursuant to Section 3.2(c) exceed
[****]% of the Annual Plan Pulpwood Volume or [****]% of the Annual Plan
Sawtimber Volume, as the case may be, for the Calendar Year in which the
shortfall(s) occurred.  In the event
that there is both a Take or Pay Shortfall and a Non-Take or Pay Shortfall in a
Calendar Year with respect to comparable Products and the sum of such amounts
exceeds the [****]% limitation described in the preceding sentence, amounts
deferred to the following Calendar Year in accordance with this Agreement shall
apply to the Take or Pay Shortfall in its entirety prior to applying to the Non-Take
or Pay Shortfall.  If the amount of such
a Take or Pay Shortfall is carried over and added to the Annual Pulpwood Take
or Pay Volume or the Annual Sawtimber Take or Pay Volume, as the case may be,
for the subsequent Calendar Year in accordance with this Section 3.1(b),
Purchaser must then (subject to Seller’s ability to deliver such volumes)
either (i) purchase the entire Annual Pulpwood Take or Pay Volume or the
entire Annual Sawtimber Take or Pay Volume, as the case may be, scheduled in
the Annual Plan to be purchased during the first half of such subsequent
Calendar Year (including, without limitation, the amount of the Take or Pay
Shortfall so carried over from the preceding Calendar Year) by June 30 of
such subsequent Calendar Year (or such later date as is agreed to by the
parties pursuant to Section 3.4 or September 30 of such subsequent
Calendar Year, in the event Seller extends the delivery schedule as provided in
Section 3.4) (the “Payment
Date”), or (ii) pay Seller for the entire amount of any
cumulative shortfall from such required purchases that exists on the Payment
Date of such subsequent Calendar Year (with the amount of the payment
calculated in the same manner as provided in Section 3.1(a), but using the
Weighted Average Stumpage Price of the respective Products sold to
Purchaser during the first half of such subsequent Calendar Year).  In determining the Weighted Average Stumpage Price
for Pine Sawtimber, the parties shall use the actual Stumpage Prices of
Pine Sawtimber actually delivered to Purchaser during such Calendar Year and
the midpoint of the range of the type of Pine Sawtimber (chipnsaw 6 inch or
pine sawtimber) that was to have been delivered during the Calendar Year, as
specified in Section 2.2(a).  If
Purchaser is required to make any such payment with respect to a cumulative
shortfall in required purchases existing on the Payment Date in such subsequent
Calendar Year, Seller shall calculate the amount of the payment due from
Purchaser and invoice such amount to Purchaser by not later than 15 days after
the Payment Date in such Calendar Year, and Purchaser shall pay such invoice by
not later than 15 days after such invoice date. 
Purchaser may not exercise the right to defer a Take or Pay Shortfall
existing on the last day of a Calendar Year into the subsequent Calendar Year
as provided in this Section 3.1(b) in any two consecutive Calendar
Years.


 


(c)           If
Purchaser fails to purchase the full Annual Pulpwood Take or Pay Volume or the
full Annual Sawtimber Take or Pay Volume in any Calendar Year, Seller shall
have the right,


 






“[****] indicates confidential treatment”


 


17

















 


in its
sole discretion, to sell the volume of Products which Purchaser failed to
purchase to any other Person or Persons without any obligation to offer such
Products to Purchaser under this Agreement and without any reduction in the
amounts payable to Purchaser pursuant to this Section 3.1.


 


Section 3.2             Purchaser’s Failure to Purchase
Amounts Not Subject to Take or Pay.  (a) 
Except as provided in Sections 3.2(c) and 3.6, if Purchaser fails to
purchase any Annual Pulpwood Non-Take or Pay Volume for a Calendar Year, then
Seller shall use commercially reasonable efforts to sell all the shortfall
volume (a “Pulpwood Non-Take or Pay Purchase Shortfall”),
at market prices, to one or more other Person(s) in the subsequent
Calendar Year; provided, however, that Seller may sell all or a portion of the
Pulpwood Non-Take or Pay Purchase Shortfall, at market prices, in the same
Calendar Year:  (i) to the extent
that Purchaser so directs in writing, or (ii) if, after reasonable
consultation by Purchaser and Seller during the annual planning process
provided for in Section 2.5 for the subsequent Calendar Year and at such
other times during the remainder of such Calendar Year as Seller may request,
Purchaser consents in writing (which consent shall not unreasonably be
withheld) to a request by Seller to sell during such Calendar Year to other
Person(s) such portion of the Annual Pulpwood Non-Take or Pay Volume which
it is reasonably apparent that Purchaser cannot accept from Seller during the
remainder of the Calendar Year or carry over to the subsequent Calendar Year
pursuant to Section 3.2(c).  If the
stumpage price or Derived Stumpage Price (as the case may be) of any
such sale of the Pulpwood Non-Take or Pay Purchase Shortfall to other Persons
is less than the Weighted Average Stumpage Price of Pine Pulpwood sold to
Purchaser pursuant to this Agreement during the Calendar Year, Purchaser shall,
as Seller’s sole and exclusive remedy for any such shortfall, pay to Seller,
for each such sale, the amount by which the Weighted Average Stumpage Price
of Pine Pulpwood sold pursuant to this Agreement during the Calendar Year
exceeded the stumpage price or Derived Stumpage Price (as the case
may be) at which such sale was made multiplied by the number of tons so
sold.  Seller shall calculate such amount
and invoice such amount to Purchaser by not later than January 15 of the
Calendar Year following the Calendar Year in which Seller sells the Pulpwood
Non-Take or Pay Purchase Shortfall, and Purchaser shall pay such invoice by not
later than 30 days after receipt of the invoice.


 


(b)           Except
as provided in Sections 3.2(c) and 3.6, if Purchaser fails to purchase any
Annual Sawtimber Non-Take or Pay Volume during a Calendar Year, then Seller
shall use commercially reasonable efforts to sell all of the shortfall volume
(a “Sawtimber Non-Take or Pay
Purchase Shortfall”), at market prices, to one or more other
Persons in the subsequent Calendar Year; provided, however, that Seller may
sell all or a portion of the Sawtimber Non-Take or Pay Purchase Shortfall, at
market prices, in the same Calendar Year: 
(i) to the extent that Purchaser so directs in writing, or (ii) if,
after reasonable consultation by Purchaser and Seller during the annual
planning process provided for in Section 2.5 for the subsequent Calendar
Year and at such other times during the remainder of such Calendar Year as
Seller may request, Purchaser consents in writing (which consent shall not
unreasonably be withheld) to a request by Seller to sell during such Calendar
Year to other Person(s) such portion of the Annual Sawtimber Non-Take or
Pay Volume which it is reasonably apparent that Purchaser cannot accept from
Seller during the remainder of the Calendar Year or carry over to the
subsequent Calendar Year pursuant to Section 3.2(c).  If the stumpage price or Derived Stumpage Price
(as the case may be) of any such sale of the Sawtimber Non-Take or Pay Purchase
Shortfall to other


 


18

















 


Persons
is less than the Weighted Average Stumpage Price of Pine Sawtimber (of the
type(s) for which there was a Sawtimber Non-Take or Pay Purchase Shortfall)
sold pursuant to this Agreement during the Calendar Year, Purchaser shall, as
Seller’s sole and exclusive remedy for any such shortfall, pay to Seller, for
each such sale, the amount by which the Weighted Average Stumpage Price of
Pine Sawtimber (of the type(s) for which there was a Sawtimber Non-Take or
Pay Purchase Shortfall) sold pursuant to this Agreement during the Calendar
Year exceeded the stumpage price or Derived Stumpage Price (as the
case may be) at which such sale was made multiplied by the number of tons so
sold.  Seller shall calculate such amount
and invoice such amount to Purchaser by not later than January 15 of the
Calendar Year following the Calendar Year in which Seller sells the Sawtimber
Non-Take or Pay Shortfall, and Purchaser shall pay such invoice by not later
than 30 days after receipt of the invoice.


 


(c)           Notwithstanding
the provisions of Sections 3.2(a) or (b), to the extent a Pulpwood
Non-Take or Pay Purchase Shortfall or a Sawtimber Non-Take or Pay Purchase
Shortfall (each, a “Non-Take
or Pay Shortfall”) exists on the last day of a Calendar Year
prior to the last full Calendar Year during the Term, then, unless Purchaser
otherwise elects in writing to pay the applicable Non-Take or Pay Shortfall to
Seller in accordance with Section 3.2(a) or (b) as applicable,
the amount of the applicable Non-Take or Pay Shortfall so existing on the last
day of the Calendar Year automatically shall be added to the Annual Pulpwood
Take or Pay Volume or the Annual Sawtimber Take or Pay Volume, as the case may
be, for the following Calendar Year in lieu of making the payment required by Section 3.2(a) or
(b) with respect to the Non-Take or Pay Shortfall so existing at the end
of the Calendar Year; provided, however, that in no event shall the sum of the
amount of the Non-Take or Pay Shortfall so carried over plus the amount of any
Take or Pay Shortfall for comparable Products carried over pursuant to Section 3.1(c) exceed
[****]% of the Annual Plan Pulpwood Volume or [****]% of the Annual Plan Sawtimber
Volume, as the case may be, for the Calendar Year in which the shortfall(s) occurred.  In the event that there is both a Take or Pay
Shortfall and a Non-Take or Pay Shortfall in a Calendar Year with respect to
comparable Products and the sum of such amounts exceeds the [****]% limitation
described in the preceding sentence, amounts deferred to the following Calendar
Year in accordance with this Agreement shall apply to the Take or Pay Shortfall
in its entirety prior to applying to the Non-Take or Pay Shortfall.  If the amount of such a Non-Take or Pay
Shortfall is carried over and added to the Annual Pulpwood Take or Pay Volume
or the Annual Sawtimber Take or Pay Volume, as the case may be, for the
subsequent Calendar Year in accordance with this Section 3.2(c), Purchaser
must then (subject to Seller’s ability to deliver such volumes) either (i) purchase
the entire Annual Pulpwood Take or Pay Volume or the entire Annual Sawtimber
Take or Pay Volume, as the case may be, scheduled in the Annual Plan to be
purchased during the first half of such subsequent Calendar Year (including,
without limitation, the amount of the Non-Take or Pay Shortfall so carried over
from the preceding Calendar Year) by the Payment Date of such subsequent
Calendar Year, or (ii) pay Seller for the entire amount of any cumulative
shortfall from such required purchases that exists on the Payment Date of such
subsequent Calendar Year (with the amount of the payment calculated in the same
manner as provided in Section 3.2(a) or (b), but using the Weighted
Average Stumpage Price of the respective Products sold to Purchaser during
the first half of such subsequent Calendar Year).  In such event, Seller shall use commercially
reasonable efforts to sell all of such cumulative shortfall in volume to third
parties during the balance of the Calendar Year at market prices.  If Purchaser is required to make any such
payment with respect to a cumulative shortfall in


 






“[****] indicates confidential treatment”


 


19

















 


required
purchases existing on the Payment Date of such subsequent Calendar Year, Seller
shall calculate the amount of the payment due from Purchaser and invoice such
amount to Purchaser by not later than January 15 of the following Calendar
Year, and Purchaser shall pay such invoice by not later than 30 days after
receipt of the invoice.  Purchaser may
not exercise the right to defer a Non-Take or Pay Shortfall existing on the
last day of a Calendar Year into the subsequent Calendar Year as provided in
this Section 3.2(c) in any two consecutive Calendar Years.


 


Section 3.3             Seller’s Failure to Supply.  (a)  Except as otherwise provided in
Sections 3.3(c) and 3.6, if during any Calendar Year Seller fails to
supply to Purchaser the entire Annual Plan Pulpwood Volume for that Calendar
Year, then Purchaser shall use commercially reasonable efforts to purchase all
of the shortfall volume (a “Pulpwood Supply Shortfall”),
at market prices, from one or more other Persons in the subsequent Calendar Year;
provided, however, that Purchaser may purchase all or a portion of the Pulpwood
Supply Shortfall, at market prices, in the same Calendar Year:  (i) to the extent that Seller so directs
in writing, or (ii) if, after reasonable consultation by Purchaser and
Seller during the annual planning process provided for in Section 2.5 for
the subsequent Calendar Year and at such other times during the remainder of
such Calendar Year as Purchaser may request, Seller consents in writing (which
consent shall not unreasonably be withheld) to a request by Purchaser to
purchase during such Calendar Year from other Person(s) such portion of
the Annual Plan Pulpwood Volume which it is reasonably apparent that Seller
cannot supply to Purchaser during the remainder of the Calendar Year or carry
over to the subsequent Calendar Year pursuant to Section 3.3(c).  If the weighted average purchase price
(including Logging Fees) of Pine Pulpwood sold to Purchaser pursuant to this
Agreement during the Calendar Year in which the Pulpwood Supply Shortfall
occurred was less than the average price (including Logging Fees) paid by
Purchaser for Pine Pulpwood purchased by Purchaser as roundwood to make up such
shortfall in the same or subsequent Calendar Year from Persons other than Seller
for delivery at the Delivery Location(s) with respect to which the
Pulpwood Supply Shortfall occurred, Seller shall, as Purchaser’s exclusive
remedy for such shortfall, pay to Purchaser an amount equal to the number of
tons of the Pulpwood Supply Shortfall multiplied by the amount by which such
average price (including Logging Fees) paid by Purchaser for such roundwood
Pine Pulpwood purchased from Persons other than Seller exceeded such weighted
average purchase price (including Logging Fees) paid by Purchaser to
Seller.  Except as otherwise provided in Section 3.3(c),
Purchaser shall calculate such amount and invoice such amount to Seller by not
later than January 15 of the Calendar Year following the Calendar Year in
which Purchaser purchases the Pulpwood Supply Shortfall, and Seller shall pay
such invoice by not later than 30 days after receipt of the invoice.


 


(b)           Except
as otherwise provided in Sections 3.3(c) and 3.6, if during any Calendar
Year Seller fails to supply to Purchaser the entire Annual Plan Sawtimber
Volume for that Calendar Year, then Purchaser shall use commercially reasonable
efforts to purchase all of the shortfall volume (a “Sawtimber Supply Shortfall”), at market prices, from one
or more other Persons in the subsequent Calendar Year; provided, however, that
Purchaser may purchase all or a portion of the Sawtimber Supply Shortfall, at
market prices, in the same Calendar Year: 
(i) to the extent that Seller so directs in writing, or (ii) if,
after reasonable consultation by Purchaser and Seller during the annual
planning process provided for in Section 2.5 for the subsequent Calendar
Year and at such other times during the remainder of such Calendar Year as
Purchaser 


 


20

















 


may
request, Seller consents in writing (which consent shall not unreasonably be
withheld) to a request by Purchaser to purchase during such Calendar Year from
other Person(s) such portion of the Annual Plan Sawtimber Volume which it
is reasonably apparent that Seller cannot supply to Purchaser during the
remainder of the Calendar Year or carry over to the subsequent Calendar Year
pursuant to Section 3.3(c).  If the
weighted average purchase price (including Logging Fees) of Pine Sawtimber (of
the same type as to which there was a Sawtimber Supply Shortfall) sold to
Purchaser pursuant to this Agreement during the Calendar Year was less than the
average price (including Logging Fees) paid by Purchaser for Pine Sawtimber of
the same type purchased by Purchaser to make up such shortfall in the same or
subsequent Calendar Year from Persons other than Seller and delivered to the
SLM Sawmill, Seller shall, as Purchaser’s exclusive remedy for such shortfall,
pay to Purchaser, for each type of Pine Sawtimber, an amount equal to the number
of tons of Pine Sawtimber of such type included in the Sawtimber Supply
Shortfall multiplied by the amount by which such average price (including
Logging Fees) paid by Purchaser for that type of roundwood Pine Sawtimber
purchased from Persons other than Seller exceeded such weighted average
purchase price (including Logging Fees) for that type of Pine Sawtimber paid to
Seller.  Except as otherwise provided in Section 3.3(c),
Purchaser shall calculate such amount(s) and invoice such amount(s) to
Seller by not later than January 15 of the Calendar Year following the
Calendar Year in which Purchaser purchases the Sawtimber Supply Shortfall, and
Seller shall pay such invoice by not later than 30 days after receipt of the
invoice.


 


(c)           Notwithstanding
the provisions of Section 3.3(a) or Section 3.3(b), to the
extent a Pulpwood Supply Shortfall and/or a Sawtimber Supply Shortfall exists
at the end of the fourth quarter of a Calendar Year prior to the last full
Calendar Year during the Term, then, unless Seller otherwise elects in writing
to pay the applicable Pulpwood Supply Shortfall or Sawtimber Supply Shortfall
in accordance with Section 3.3(a) or (b) as applicable, the
amount of such Pulpwood Supply Shortfall or Sawtimber Supply Shortfall, as the
case may be, so existing on the last day of the Calendar Year shall
automatically be added to the Annual Plan Pulpwood Volume or the Annual Plan
Sawtimber Volume, as the case may be, for the following Calendar Year in lieu
of making the payment required by Section 3.3(a) or Section 3.3(b),
respectively, with respect to the Pulpwood Supply Shortfall or the Sawtimber
Supply Shortfall so existing at the end of the Calendar Year; provided,
however, that in no event shall the amount of the Pulpwood Supply Shortfall or
Sawtimber Supply Shortfall, as the case may be, so carried over exceed [****]%
of the Annual Plan Pulpwood Volume or [****]%
of the Annual Plan Sawtimber Volume, as the case may be, for the Calendar Year
in which the shortfall occurred.  If the
amount of such a Pulpwood Supply Shortfall or Sawtimber Supply Shortfall is
carried over and added to the Annual Plan Pulpwood Volume or the Annual Plan
Sawtimber Volume, as the case may be, for the subsequent Calendar Year in
accordance with the previous sentence, Seller must then (subject to Purchaser’s
ability to accept such volumes) either (i) sell to Purchaser the entire
Annual Plan Pulpwood Volume or the entire Annual Plan Sawtimber Volume, as the
case may be, scheduled in the Annual Plan to be purchased during the first half
of such subsequent Calendar Year (including, without limitation, the amount of
the Pulpwood Supply Shortfall or Sawtimber Supply Shortfall so carried over
from the preceding Calendar Year) by the Payment Date of such subsequent
Calendar Year, or (ii) pay Purchaser with respect to the entire amount of
any cumulative shortfall from such required sales that exists on the Payment
Date of such subsequent Calendar Year (with the amount of the payment
calculated in the same manner as provided in Section 3.3(a) or Section 3.3(b),
respectively, but using the weighted average


 






“[****]
indicates confidential treatment” 


 


21

















 


purchase
prices paid during the first half of such subsequent Calendar Year).  In such event, Purchaser shall use
commercially reasonable efforts to purchase all of such cumulative shortfall in
volume from third parties during the balance of the Calendar Year at market
prices.  If Seller is required to make
any such payment with respect to a cumulative shortfall existing on the Payment
Date in such subsequent Calendar Year, Purchaser shall calculate the amount of
the payment due from Seller and invoice such amount to Seller by not later than
January 15 of the following Calendar Year, and Seller shall pay such
invoice by not later than 30 days after receipt of the invoice.  Seller may not exercise the right to defer a
Supply Shortfall existing on the last day of a Calendar Year into the
subsequent Calendar Year as provided in this Section 3.3(c) in any
two consecutive Calendar Years.


 


Section 3.4             Scheduling
Shortfall Volume.  If under Section 3.2(b),
Section 3.2(c) or Section 3.3(c) all or a portion of a Take
or Pay Shortfall, a Non-Take or Pay Shortfall, a Pulpwood Supply Shortfall or a
Sawtimber Supply Shortfall is carried over to the following Calendar Year, the
parties shall work together in good faith to agree, by January 15 of such
following Calendar Year, on a schedule for delivery of the volume so carried
over, which generally shall be consistent with the volumes and Delivery
Locations set forth in the Annual Plan for such following Calendar Year;
provided, however, that if Seller determines, in its sole discretion, that it
will not be able to supply the entire volume so carried over by June 30 of
such following Calendar Year, Seller shall so notify Purchaser in writing by April 1
of such following Calendar Year, and the date by which such carried over volume
must be supplied and purchased (and the date by which such carried over volume must
be invoiced) automatically shall be extended by 90 days.


 


Section 3.5             Required Notices.  Purchaser shall give Seller not less than the
number of days prior written notice specified below for each of the following
events:


 


(i)            60 days prior
written notice of any Market Related Downtime at the Kraft Mill of 14 days or
less;


 


(ii)           90 days prior
written notice of:  (A) any Market
Related Downtime at the Kraft Mill of more than 14 days, or (B) any
closure of the Kraft Mill for more than 14 days but not more than six months;


 


(iii)          30 days prior
written notice of:  (A) any Market
Related Downtime at the SLM Sawmill of more than 14 days, (B) any
elimination or addition of an operating shift at the SLM Sawmill or (C) any
closure of the SLM Sawmill for more than 14 days but not more than six months;
and


 


(iv)          the written notice specified in
Sections 7.2 and 7.3, respectively, upon any closure of the Kraft Mill for six
months or more or any closure of the SLM Sawmill for six months or more.


 


Section 3.6             Force Majeure.  (a)  Notwithstanding anything in this
Agreement to the contrary and subject to the provisions of this Section 3.6,
neither party shall be liable to the other party under this Agreement for any
delay in or failure of performance by that party of its obligations hereunder
resulting from a Force Majeure Event if that party has used commercially 


 


22

















 


reasonable efforts to perform notwithstanding
the occurrence of the Force Majeure Event. 
Each party shall use commercially reasonable efforts to mitigate or
remedy the effects of a Force Majeure Event, and if the cause of the Force
Majeure Event can be minimized or remedied, the parties shall use their
respective commercially reasonable efforts to do so promptly.  If a Force Majeure Event occurs, the
Quantities which Seller is required to sell to Purchaser, and which Purchaser
is required to purchase, under this Agreement (including the amounts subject to
Purchaser’s obligations under Sections 2.2(c), 3.1 and 3.2 and the amounts
subject to Seller’s obligations under Section 3.3), shall be reduced on a
proportionate basis based on the Timberlands (in the case of Seller) or the
facility or facilities (in the case of Purchaser) affected by the Force Majeure
Event, the weekly delivery schedules during the period in which such party’s
ability to perform is adversely affected as a result of the Force Majeure Event
and the reasonable opportunities of the Parties to mitigate the effect of the
Force Majeure Event, and Section 2.2(c) shall not apply during the
duration of the Force Majeure Event to the extent that Seller is unable to
supply the volumes of Pine Sawtimber set forth therein.  The parties shall not be required to make up
any reduction in the Quantities occurring as a result of a Force Majeure Event.


 


(b)           Each
party shall give notice to the other of the occurrence of a Force Majeure Event
applicable to it as soon as commercially practicable after the occurrence
thereof (which notice shall specify the Timberlands (in the case of Seller) or
the facility or facilities (in the case of Purchaser) of such party that are
affected by the Force Majeure Event, the degree to which such facility or
facilities are affected and the time when the facility or facilities affected by
the Force Majeure Event are anticipated to be no longer affected thereby) and
shall keep the other party apprised by written notice of all significant
matters affecting such Force Majeure Event and the extent of the delay caused
thereby.


 


(c)           If
a Force Majeure Event in the form of a catastrophic hurricane damages Seller’s
Timberlands to such an extent that Seller is unable to provide the Quantities
of Products required under Article 2, Seller and Purchaser shall work
together in good faith to determine the impact on Seller’s ability to continue
to provide such Quantities during each Calendar Year of the remainder of the
Term and shall reduce the Quantities to be delivered accordingly.  In such event, Purchaser’s obligations under Section 2.2(c) hereof
shall not apply to the extent that Seller is unable to supply the volumes of
Pine Sawtimber set forth therein.


 


(d)           No
Force Majeure Event shall justify or excuse Purchaser from its obligation to
timely pay for Products delivered under this Agreement, or to pay other amounts
payable pursuant to Sections 3.1 and 3.2 of this Agreement, in each case unless
Purchaser’s obligation to accept delivery of such Products is excused under Section 3.6(a)).


 


Section 3.7             Mitigation of Damages.  Seller shall use commercially reasonable
efforts to mitigate damages with respect to Non-Take or Pay Shortfalls pursuant
to Section 3.2, and Purchaser shall use commercially reasonable efforts to
mitigate damages with respect to Pulpwood Supply Shortfalls and Sawtimber
Supply Shortfalls pursuant to Section 3.3.


 


23

















 


ARTICLE
4.


 


PRICE
AND TERMS


 


Section 4.1             Price.  (a) Except as otherwise provided in
Sections 2.2(d) and 4.2, the price to be paid by Purchaser to Seller for
Products (other than Purchaser Requested Additional Pulpwood Volume) purchased
and sold pursuant to this Agreement shall be, for each ton of Products
purchased, the Stumpage Price for such Product plus logging and
hauling fees (collectively, the “Logging Fees”)
calculated as provided in Section 4.1(b). 
For purposes of this Agreement, the weight of Products shall be
determined by Purchaser at the time of delivery of each load by subtracting the
tare weight of the truck from the gross loaded weight of the same load, as
measured on scales certified by the South Carolina Department of Agriculture,
Division of Weights and Measures, and maintained by Purchaser within the
variation tolerances required by the Department and any applicable law or
regulations.


 


(b)           The
Logging Fees shall be calculated based on the type of Product and the type of
logging used to harvest the Product, as specified on Annex F, for each
ton of such Product purchased, by computing the sum of the following amounts
(the “Logging Fee Components”):  (i) the applicable “Stump to Truck”
amount, plus (ii) the “Base Haul” amount, plus (iii) for each mile
the Product was hauled to the applicable Delivery Point over the mileage
specified as the “Base Haul” amount, the applicable “Rate per Additional Mile,”
plus (iv) the applicable “Fuel Adjustment” amount based on the Reported
Diesel Fuel Price (with a new Fuel Adjustment amount from the chart on Annex
F being substituted whenever there has been a cumulative change in the
Reported Diesel Fuel Price of $[****] per gallon or more since the last change
in the Fuel Adjustment amount).  The
Logging Fee Components in effect on the Effective Date are set forth on Annex
F.  On May 1 (or on such later
date on which the U.S. Department of Labor, Bureau of Labor Statistics issues its
final, unadjusted Producer Price Index data for December of the prior
Calendar Year) of each year during the Term, each of the Logging Fee Components
other than the Fuel Adjustment amount shall be increased from the amount in
effect immediately prior to such date by a percentage equal to [****].  During the annual planning process provided
for in Section 2.5 in Calendar Year 2011 (and at such other time or times
as the parties may agree), the parties shall review the adjustments to the
Logging Fee Components provided for in the preceding sentence during the
initial three years of this Agreement and shall consider whether they mutually
desire to amend the manner in which such adjustments are calculated to more
accurately reflect changes in the cost of “Stump to Truck” logging fees payable
in the area of South Carolina in which the Timberlands are located.  Any such amendment shall be made only in
accordance with the requirements of Section 8.4.


 






“[****]
indicates confidential treatment” 


 


24

















 


Section 4.2             Emergency Pine Sawtimber Pricing.  If during the Term the simple average of the
published weekly Southern Pine Composite Lumber prices for the immediately
preceding calendar month, as reported in Random Lengths, The Weekly
Report on North American Forest Products Markets (the “Calendar Monthly Average RLSPCL Price”),
falls below $[****] per thousand board feet, then effective on the second
Monday following the Friday on which the final weekly prices for the last week
of such immediately preceding calendar month are published, the Stumpage Prices
determined as otherwise provided in Section 4.1(a) shall be
discounted as follows, based on the Calendar Monthly Average RLSPCL Price:


 


	
  Calendar Monthly Average RLSPCL Price

  	
   

  	
  Discount on Pine Sawtimber Stumpage Price

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  $[****]-$[****]

  	
   

  	
  [****]%

  	
   

  
	
  $[****]-$[****]

  	
   

  	
  [****]%

  	
   

  
	
  $[****]-$[****]

  	
   

  	
  [****]%

  	
   

  
	
  $[****] or less

  	
   

  	
  [****]%

  	
   

  



 


The discounts shall cease, and the Stumpage Price
of Pine Sawtimber shall revert to the full Stumpage Price determined as
provided in Section 4.1(a), on the second Monday following the next Friday
on which the final weekly prices for the last week of a calendar month are
published showing that the Calendar Monthly Average RLSPCL Price is $300 per
thousand board feet or more.  As an
example only, the Stumpage Price calculated as provided in this Section 4.2
for December, 2007 would have been as follows:


 


	
  Report Date

  	
   

  	
  11/02/07

  	
   

  	
  11/09/07

  	
   

  	
  11/16/07

  	
   

  	
  11/23/07

  	
   

  	
  11/20/07

  	
   

  	
  November

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  RLSPCL

  	
   

  	
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  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  



 






November Calendar Monthly Average RLSPCL of $[****] indicates a [****]%
discount on Stumpage Price for Pine Sawtimber for December, 2007.


 


Section 4.3             Delivery Terms.  All Products covered by this Agreement shall
be delivered to Purchaser F.O.B. to the Delivery Locations.  Risk of loss and title shall pass to
Purchaser when Products are weighed in at the designated Delivery Locations.  Deliveries of Products to the Delivery
Locations shall be made as reasonably directed by Purchaser, consistent with
the provisions of Sections 2.5 and 2.6.


 


Section 4.4             Payment.  Purchaser shall pay Seller for Products
delivered by Seller the price determined as provided in Section 4.1 on
Wednesday of each week for deliveries made during the period from Monday of the
prior week through Sunday of that week. 
Amounts not paid when due shall bear interest at a fixed rate per annum
equal to the Default Rate (determined as of the date the amount was due).  Purchaser
shall report to Seller the information required by Section 48-23-97
of the South Carolina Code of Laws (or any successor provision) in an


 






“[****]
indicates confidential treatment” 


 


25

















 


electronic format reasonably
acceptable to both parties in substantially the same manner as the current
practice as of the Effective Date.


 


Section 4.5             Loggers.  Seller shall be responsible for paying all
loggers who log Products being delivered to Purchaser pursuant to this
Agreement.


 


Section 4.6             Taxes
and Fees.  Any taxes or fees now or
hereafter assessed with respect to Products processed or sold under this
Agreement shall be allocated between Seller and Purchaser as provided by
applicable law.  For purposes of clarity,
the South Carolina Forest Renewal Tax, as in effect on the Effective Date, is a
tax paid by the processor of primary forest products and, therefore, shall
continue to be paid by Purchaser as long as applicable law provides that such
tax shall be paid by the processor of primary forest products.


 


Section 4.7             Warranty.  (a)  Seller will convey to Purchaser
upon delivery good and valid title to all of the Products sold to Purchaser
under this Agreement, free and clear of all liens, charges, security interests,
mortgages and other encumbrances (other than any such liens, charges, security
interests, mortgages or encumbrances created by or through Purchaser).  The Products sold to Purchaser under this
Agreement will meet the applicable Product Specifications, if any, at the time
of delivery.


 


(b)           The
sole and exclusive remedy of Purchaser for any Pine Sawtimber that fails to
meet the applicable Product Specifications shall be as follows:


 


(i)            if the
nonconforming Pine Sawtimber on an individual truckload of Products constitutes
[****]% or less of the net load weight of the Pine Sawtimber on such truck,
Purchaser, in its discretion, may:


 


(x) reject the nonconforming Pine
Sawtimber in the load (which nonconforming Pine Sawtimber shall be returned to
Seller at Seller’s expense on the same truck and shall not count towards the
Annual Plan Sawtimber Volume for that Calendar Year), or


 


(y) reject the entire truckload of
Products (which shall be returned to Seller at Seller’s expense on the same
truck and shall not count towards the Annual Plan Sawtimber Volume or the
Annual Plan Pulpwood Volume for that Calendar Year), or


 


(z) accept the entire truckload, but
reduce the price paid for that portion of the Pine Sawtimber that is
nonconforming to the price payable under this Agreement for Pine Pulpwood (a “cull”),
and the nonconforming Pine Sawtimber shall count towards the Annual Plan
Pulpwood Volume for that Calendar Year (with the remainder of the Pine
Sawtimber on the truck counting towards the Annual Plan Sawtimber Volume for
that Calendar Year); or


 


(ii)           if the
nonconforming Pine Sawtimber on an individual truckload of Products constitutes
more than [****]% of the net load weight of the Pine Sawtimber on such truck,
Purchaser must either:


 






“[****]
indicates confidential treatment” 


 


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(x) accept the entire truckload of
Products, but reduce the price paid for [****]% (and not more than [****]%) of
the net load weight of the Pine Sawtimber on such truck to the price payable
under this Agreement for Pine Pulpwood, and such [****]% portion of the net
load weight shall count towards the Annual Plan Pulpwood Volume for that
Calendar Year (with the remainder of the Pine Sawtimber on the truck counting
towards the Annual Plan Sawtimber Volume for that Calendar Year); or


 


(y) reject the entire truckload of
Products (which shall be returned to Seller at Seller’s expense and shall not
count towards the Annual Plan Sawtimber Volume or the Annual Plan Pulpwood
Volume for that Calendar Year).


 


(c)           The
sole and exclusive remedy of Purchaser for any Pine Products (other than Pine
Sawtimber) or Hardwood Products that fail to meet the applicable Product
Specifications shall be to reject the entire truckload of Products (but only if
the nonconforming Products exceed [****]% of the net load weight of such
Products on such truck) and return such truckload of Products to Seller at
Seller’s expense.


 


(d)           Seller
shall comply with reasonable procedures, consistent with normally accepted
industry practices, established by Purchaser for assuring that Products
delivered to Purchaser comply with the Product Specifications established
pursuant to this Agreement.  Seller shall
be entitled to have a representative present at the weighing and scaling of a truckload
of Products as to which Purchaser takes any of the actions specified in Section 4.6(b) or
Section 4.6(c).


 


(e)           On
a weekly basis, Purchaser shall provide a written report to Seller’s designated
representative specifying the amount of Products delivered during the preceding
week by each logging contractor by Product class and Delivery Location and the
amount and type of deductions made by Purchaser pursuant to Sections 4.7(b)(i)(x) or
(z) or 4.7(b)(ii)(x).  In the event
Purchaser rejects a load of Products pursuant to Section 4.7(b)(i)(y), Section 4.7(b)(ii)(y) or
4.7(c), Purchaser shall promptly notify Seller’s designated representative of
the rejection, identifying the logging contractor who attempted to deliver the
rejected load and the reason for the rejection.


 


Section 4.8             Limitation of Warranties.  EXCEPT FOR THE WARRANTIES EXPRESSLY SET FORTH
IN SECTION 4.7(a) OF THIS AGREEMENT, THE PRODUCTS ARE BEING SOLD “AS
IS” AND WITH ALL FAULTS, AND SELLER IS NOT MAKING ANY OTHER WARRANTIES, WRITTEN
OR ORAL, STATUTORY, EXPRESS OR IMPLIED, INCLUDING, IN PARTICULAR, ANY WARRANTY
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE (AS DEFINED IN THE SOUTH
CAROLINA UNIFORM COMMERCIAL CODE), ALL OF WHICH ARE HEREBY EXPRESSLY
EXCLUDED AND DISCLAIMED.


 






“[****] indicates confidential treatment” 


 


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ARTICLE
5.


 


TERM


 


This Agreement shall remain in full force and effect
for the period from the Effective Date through the fifteenth anniversary of the
Effective Date (the “Term”),
unless sooner terminated as provided in Article 7 and subject to extension
by mutual written agreement of the parties.


 


ARTICLE
6.



REPRESENTATIONS, WARRANTIES AND COVENANTS


 


Section 6.1             Seller Power and Authority; Enforceability.  Seller represents and warrants to Purchaser
that:  (i) Seller is a limited
liability company duly organized and validly existing under the laws of the
State of Delaware, with the requisite authority to enter into this Agreement
and to perform its obligations hereunder, and (ii) this Agreement has been
duly authorized, executed and delivered by Seller and constitutes the legal,
valid and binding obligation of Seller, enforceable against Seller in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, reorganization, insolvency, moratorium, receivership or other
similar laws affecting or relating to the enforcement of creditors’ rights or
remedies generally and general principles of equity (whether considered at law
or in equity).


 


Section 6.2             Purchaser Power and Authority; Enforceability.  Purchaser represents and warrants to Seller
that:  (i) Purchaser is a limited
liability company duly organized and validly existing under the laws of the
State of Delaware, with the requisite authority to enter into this Agreement
and to perform its obligations hereunder, and (ii) this Agreement has been
duly authorized, executed and delivered by Purchaser and constitutes the legal,
valid and binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, reorganization, insolvency, moratorium, receivership or other
similar laws affecting or relating to the enforcement of creditors’ rights or
remedies generally and general principles of equity (whether considered at law
or in equity).


 


Section 6.3             Management of the Timberlands and Sustainable Forest
Practice Standards.  Seller (or its
designee(s)) shall be solely responsible for managing the silvicultural
activities on the Timberlands and selecting the individual tracts from the
Timberlands from which Products are supplied in accordance with the then
current Annual Plan.  All Products shall
be harvested from the Timberlands. 
Seller (or its designees) shall cultivate, manage and maintain the
Timberlands substantially in accordance with Sustainable Forest Practice
Standards (or such other sustainable forest practices program as may be agreed
upon by the parties in writing), and shall use loggers trained in such
standards to log the Timberlands in accordance with the Best Management
Practices published by the South Carolina Forestry Commission.  Seller shall supply Products under this
Agreement only from (i) portions of the Timberlands that have been
certified by a third party as being in compliance with the Sustainable Forest
Practice Standards or other agreed upon sustainable forest practices program or
(ii) Timberlands which Seller has determined in its sole discretion no
longer will be used for forestry purposes after the timber thereon is
harvested.


 


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Section 6.4             Continued Supply Upon Sale of Timberlands.  (a)  If, in connection with the sale of
Timberlands used by Seller to produce Products for sale to Purchaser (other
than Timberlands located in the East Edisto District), Seller determines that
it will not be able to continue to deliver to Purchaser the Pine Pulpwood
Committed Volume set forth on Annex C and the Pine Sawtimber Committed
Volume set forth on Annex D (together, as adjusted, the “Committed Volume of Pine Products”)
from its remaining Timberlands and remain in compliance with its obligations
under Section 6.3, Seller shall so notify Purchaser in writing and shall
condition the sale of such Timberlands upon the assumption by the purchaser(s) of
such Timberlands, on the same terms as are set forth in this Agreement,
of:  (i) Seller’s obligation to
supply all Hardwood Pulpwood and Hardwood Chips harvested from such Timberlands
(but only such Timberlands), (ii) Seller’s obligations under Section 2.1(e) with
respect to such Timberlands (but only with respect to such Timberlands), (iii) Seller’s
obligation to supply sufficient Pine Products from such Timberlands so that
Seller and all such purchaser(s) thereafter are able to sell to Purchaser,
in the aggregate, the Committed Volume of Pine Products pursuant to the terms
of this Agreement, and (iv) all other obligations of Seller under this
Agreement, to the extent related to the foregoing obligations so assumed by
such purchaser(s).  In such event, Seller
shall be obligated to comply with its remaining obligations under this
Agreement, including, without limitation, its obligation to supply its share of
the Committed Volume of Pine Products from its remaining Timberlands, its
obligations under Sections 2.1(e) and 2.3 with respect to its
remaining Timberlands and all other obligations under this Agreement relating
to the foregoing.  Notwithstanding the
foregoing, the sale by Seller of all or a portion of the Timberlands located in
the East Edisto District shall not relieve Seller from complying with all of
its obligations under this Agreement from the remaining Timberlands.


 


(b)           (i) 
Set forth on Annex G is a calculation as of the Effective Date of the
number of Pine Pulpwood Weighting Units for productive pine acres in the
Timberlands as of the date of this Agreement from which Pine Pulpwood may be
supplied during the Term (the “Base
Weighting Units for Pine Pulpwood”) and a calculation (based on
the Base Weighting Units for Pine Pulpwood) of the average freight premium for
Pine Pulpwood (the “Base
Average Pulpwood Freight Premium”), based on the freight logical
Delivery Location for the individual tracts comprising the Timberlands.  If, in connection with the sale by Seller of
any Timberlands to be used by Seller to produce Pine Pulpwood for sale to Purchaser
during the remainder of the Term, Seller determines that it will be able to
continue to deliver to Purchaser the Pine Pulpwood Committed Volume from the
remaining Timberlands and remain in compliance with its obligations under Section 6.3,
then by not later than January 31 of the year following the Calendar Year
during which such sale occurred, Seller shall in good faith calculate an
adjusted number of Weighting Units for Pine Pulpwood in the Timberlands as of December 31
of the Calendar Year in which such sale occurred by taking into account all
sales and purchases by Seller from the Effective Date through such December 31
of Timberlands to be used by Seller to produce Pine Pulpwood for sale to
Purchaser during the remainder of the Term (using the same methodology as was
used in the calculation of the Base Weighting Units for Pine Pulpwood as shown
on Annex G) and, based thereon, shall calculate an adjusted average
freight premium for Pine Pulpwood (using the same methodology as was used in
the calculation of the Base Average Pulpwood Freight Premium).  To the extent that the adjusted average
freight premium for Pine Pulpwood so determined is greater than the Base
Average Pulpwood Freight Premium, then Seller shall pay to Purchaser an amount
equal to the difference between such adjusted average


 


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Pine
Pulpwood freight premium and the Base Average Pulpwood Freight Premium
multiplied by the number of tons of Pine Pulpwood purchased by Purchaser from
Seller during the Calendar Year following the Calendar Year in which the sale
occurred, with such payment being made on or before July 31 of such
following Calendar Year (with respect to the number of tons of Pine Pulpwood
purchased during the first six months of the Calendar Year) and on or before
the following January 31 (with respect to the number of tons of Pine
Pulpwood purchased during the last six months of the Calendar Year).  Seller shall make a new calculation provided
for in this Section 6.4(b)(i) (and any payment required by such
calculation) with respect to each subsequent Calendar Year in the Term (even if
no additional sales of Timberlands occur).


 


(ii)           Also
set forth on Annex G is a calculation as of the Effective Date of the
number of Pine Sawtimber Weighting Units for productive pine acres in the
Timberlands (the “Base
Weighting Units for Pine Sawtimber”) and a calculation (based on
the Base Weighting Units for Pine Sawtimber) of the average freight premium for
Pine Sawtimber as of the date of this Agreement (the “Base Average Sawtimber Freight Premium”), based on the
freight logical Delivery Location for the individual tracts comprising the
Timberlands.  If, in connection with the
sale by Seller of any Timberlands to be used by Seller to produce Pine
Sawtimber for sale to Purchaser during the remainder of the Term, Seller
determines that it will be able to continue to deliver to Purchaser the Pine
Sawtimber Maximum Committed Volume from the remaining Timberlands and remain in
compliance with its obligations under Section 6.3, then by not later than January 31
of the year following the Calendar Year during which such sale occurred, Seller
shall in good faith calculate an adjusted number of Weighting Units for Pine
Sawtimber in the Timberlands as of December 31 of the Calendar Year in
which such sale occurred by taking into account all sales and purchases by
Seller from the Effective Date through such December 31 of Timberlands to
be used by Seller to produce Pine Sawtimber for sale to Purchaser during the
remainder of the Term (using the same methodology as was used in the
calculation of the Base Weighting Units for Pine Sawtimber as shown on Annex
G) and, based thereon, shall calculate an adjusted average freight premium
for Pine Sawtimber (using the same methodology as was used in the calculation
of the Base Average Sawtimber Freight Premium). 
To the extent that the adjusted average freight premium for Pine
Sawtimber so determined is greater than the Base Average Sawtimber Freight
Premium, then Seller shall pay to Purchaser an amount equal to the difference
between such adjusted average Pine Sawtimber freight premium and the Base
Average Sawtimber Freight Premium multiplied by the number of tons of Pine
Sawtimber purchased by Purchaser from Seller during the Calendar Year following
the Calendar Year in which the sale occurred, with such payment being made on
or before July 31 of such following Calendar Year (with respect to the
number of tons of Pine Sawtimber purchased during the first six months of the
Calendar Year) and on or before the following January 31 (with respect to
the number of tons of Pine Sawtimber purchased during the last six months of
the Calendar Year).  Seller shall make a
new calculation provided for in this Section 6.4(b)(ii) (and any
payment required by such calculation) with respect to each subsequent Calendar
Year in the Term (even if no additional sales of Timberlands occur).


 


Section 6.5             Independent Contractors.  No relationship of employer and employee, or
master and servant, is intended to exist, nor shall any be construed to exist,
between Purchaser and Seller, or between either party and any servant, agent,
employee, subcontractor or supplier of or to the other party.  Each party shall select and pay its own
servants, agents, employees,


 


30

















 


subcontractors and suppliers, and neither
party nor any of its servants, agents, employees, subcontractors and suppliers
shall be subject to any orders, supervision or control of the other party.  The parties acknowledge that this Agreement
does not create a partnership, joint venture or any relationship other than a
contract between independent parties.


 


Section 6.6             Compliance with Laws.  In performing their respective obligations
under this Agreement, each party shall comply, in all material respects, with
all applicable laws and all applicable rules, regulations and orders of
governmental authorities having jurisdiction over the party.


 


Section 6.7             Insurance. 
(a)  Seller shall maintain during the Term, at Seller’s sole
expense, insurance of the following types in at least the amounts specified:


 


(i)            Commercial General
Liability Occurrence insurance coverage with limits of liability of not less
than $1,000,000 per occurrence and $2,000,000 general aggregate.  Such insurance shall include Purchaser, its
Affiliates and their respective directors, officers and employees as additional
insureds and shall include a waiver of any rights of subrogation against Purchaser,
its Affiliates and their respective directors, officers and employees.


 


(ii)           Commercial
Automobile Liability insurance coverage for any automobile used in the
performance of Seller’s obligations under this Agreement with limits of
liability not less than $1,000,000 combined single limit.  Such insurance shall include Purchaser, its
Affiliates and their respective directors, officers and employees as additional
insureds and shall include a waiver of any right of subrogation against
Purchaser and its directors, officers and employees.


 


(iii)          Workers
Compensation and Employer’s Liability insurance coverage covering all persons
providing services to Purchaser under this Agreement.  Such insurance (which may consist of a
state-approved program of self-insurance) shall satisfy all applicable statutory
requirements and be in accordance with the laws of the state or states in which
Seller is operating under this Agreement and shall include a waiver of any
right of subrogation against Purchaser, its Affiliates and their respective
directors, officers and employees.


 


(iv)          Employer’s Liability
insurance coverage with limits of not less than:  (x) bodily injury by accident — $1,000,000
each accident, (y) bodily injury by disease — $1,000,000 each employee,
and (z) bodily injury by disease — $1,000,000 policy limit.


 


(v)           Excess Umbrella
Liability insurance coverage with limits of liability of not less than
$5,000,000 per occurrence, with excess limits provided for the Commercial
General Liability Occurrence, Automobile Liability and Employer’s Liability
insurance coverages required under this Section 6.7(a).  Such insurance shall include Purchaser , its
Affiliates and their respective directors, officers and employees as additional
insureds and shall include a waiver of any right of subrogation against Purchaser,
its Affiliates and their respective directors, officers and employees.


 


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(b)           Purchaser
shall maintain during the Term, at Purchaser’s sole expense, insurance of the
following types in at least the amounts specified:


 


(i)            Commercial General
Liability Occurrence insurance coverage with limits of liability of not less
than $1,000,000 per occurrence and $2,000,000 general aggregate.  Such insurance shall include Seller, its
Affiliates and their respective directors, officers and employees as additional
insureds and shall include a waiver of any rights of subrogation against
Seller, its Affiliates and their respective directors, officers and employees.


 


(ii)           Commercial
Automobile Liability insurance coverage for any automobile used in the
performance of Purchaser’s obligations under this Agreement with limits of
liability not less than $1,000,000 combined single limit.  Such insurance shall include Seller, its
Affiliates and their respective directors, officers and employees as additional
insureds and shall include a waiver of any right of subrogation against Seller,
its Affiliates and their respective directors, officers and employees.


 


(iii)          Workers
Compensation and Employer’s Liability insurance coverage covering all persons
providing services to Purchaser under this Agreement.  Such insurance (which may consist of a
state-approved program of self-insurance) shall satisfy all applicable
statutory requirements and be in accordance with the laws of the state or
states in which Purchaser is operating under this Agreement and shall include a
waiver of any right of subrogation against Seller, its Affiliates and their
respective and its directors, officers and employees.


 


(iv)          Employer’s Liability
insurance coverage with limits of not less than:  (x) bodily injury by accident — $1,000,000
each accident, (y) bodily injury by disease — $1,000,000 each employee,
and (z) bodily injury by disease — $1,000,000 policy limit.


 


(v)           Excess Umbrella
Liability insurance coverage with limits of liability of not less than
$5,000,000 per occurrence, with excess limits provided for the Commercial
General Liability Occurrence, Automobile Liability and Employer’s Liability
insurance coverages required under this Section 6.7(b).  Such insurance shall include Seller, its
Affiliates and their respective directors, officers and employees as additional
insureds and shall include a waiver of any right of subrogation against Seller,
its Affiliates and their respective directors, officers and employees.


 


(c)           All
insurance companies providing insurance required by this Section 6.7 must
be authorized to do business in each state in which the operations of the
insured party under this Agreement are conducted and must be rated “A-” or
better with a financial rating of “VII” or better in the most recent edition of
the A.M. Best Rating Guide (or, in the event such rating guide is no
longer published, or such ratings no longer are published in such rating guide,
such other published rating of insurance companies as the parties mutually
determine).


 


(d)           All
policies of insurance which a party is required to maintain under this Section 6.7
shall provide for 30 days prior written notice of cancellation or non-renewal
to the other party under this Agreement. 
Purchaser shall provide to Seller prior to the Effective Date


 


32

















 


certificates
evidencing all insurance coverages it is required to maintain under this
Agreement.  Seller shall make available
to Purchaser on Seller’s website prior to the Effective Date certificates
evidencing all such insurance coverages Seller is required to maintain under
this Agreement.


 


(e)           Failure
of either party to maintain insurance as required by this Agreement, to provide
evidence of such insurance or to notify the other party of any breach by such
other party of the provisions of this Section 6.7 shall not constitute a
waiver of any such requirements to maintain insurance.


 


Section 6.8             Limitation of Liability and Indemnity.  (a)  Purchaser and its Affiliates shall
in no way be liable for any personal injuries (including death), property
damage or other Losses caused by, resulting from, or attributable to, Seller’s
performance under this Agreement, or in the operation of the business of Seller
or any servant, agent, employee, subcontractor or supplier of Seller in
connection with this Agreement.  Seller
shall indemnify, defend and hold Purchaser and its subsidiaries and other
Affiliates, and each of its and their respective agents, officers, partners,
directors, employees, successors and assigns harmless, from and against any
third party claim, demand, cause of action, lawsuit or other Loss arising out
or resulting from performance of this Agreement by Seller, except to the extent
such Loss is finally determined (in accordance with the dispute resolution
provisions of this Agreement) to have arisen out of or resulted from, but only
to the extent of, the negligence, intentional misconduct or bad faith of
Purchaser or any such subsidiary, Affiliate, servant, agent, officer, partner,
director, subcontractor or supplier.


 


(b)           Seller
and its Affiliates shall in no way be liable for any personal injuries
(including death), property damage or other Losses caused by, resulting from,
or attributable to, Purchaser’s performance under this Agreement, or in the
operation of the business of Purchaser or any such servant, agent, employee,
subcontractor or supplier of Purchaser in connection with this Agreement.  Purchaser shall indemnify, defend and hold
Seller and its subsidiaries and other Affiliates, and each of their respective
agents, officers, partners, directors, employees, successors and assigns,
harmless from and against any third party claim, demand, cause of action,
lawsuit or other Loss arising out or resulting from performance of this
Agreement by Purchaser, except to the extent such Loss is finally determined
(in accordance with the dispute resolution provisions of this Agreement) to
have arisen out of or resulted from, but only to the extent of, the negligence,
intentional misconduct or bad faith of Seller or any such subsidiary,
Affiliate, servant, agent, officer, partner, director, employee, subcontractor
or supplier.


 


(c)           IN
NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY UNDER THIS AGREEMENT
FOR ANY INCIDENTAL, CONSEQUENTIAL, INDIRECT, SPECIAL, LIQUIDATED, PUNITIVE OR
EXEMPLARY DAMAGES.


 


ARTICLE
7.



TERMINATION


 


Section 7.1             General Termination.  (a)  This Agreement may be terminated
prior to the end of the Term in the following manner:


 


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(i)            at any time by the
mutual written agreement of the parties;


 


(ii)           by either party
following a material breach by the other party of any of its obligations under
this Agreement if the other party has failed to fully cure such breach within
60 days after receipt of written notice of such breach; provided however, that
if there is a bona fide dispute between the parties as to whether a material
breach has occurred, termination of this Agreement shall not occur until the
date on which it is determined, through the process described in Section 8.13,
that a material breach has occurred and, if the breach is capable of being
cured, an additional period of 60 days has passed following such determination
during which the breach has not been cured;


 


(iii)          by Seller, if
Purchaser fails to make more than two consecutive payments (including, without
limitation, any penalties for late payment) when due under this Agreement and
such failure is not cured within 15 calendar days following receipt of written
notice by Seller; provided that if there is a bona fide dispute between the
parties as to whether a payment was due, Purchaser shall not be deemed to have
failed to make such payment until it is determined, through the process
described in Section 8.13, that the payment is due and owing to Seller and
an additional 15 calendar days have passed following such determination; or 


 


(iv)          as provided in Section 7.2
or 7.3.


 


(b)           Termination
of this Agreement pursuant to Section 7.1(a)(i), (ii) or (iii) shall
not relieve a defaulting party of any liability to the non-defaulting party for
breach of its obligations hereunder.  The
provisions of Section 6.8 and the obligation to pay for any Products
delivered, and to pay any other obligation accrued, under this Agreement prior
to the date of termination shall survive any termination of this Agreement.


 


Section 7.2             Termination if Kraft Mill Will Cease Manufacturing.  If the Kraft Mill will cease manufacturing
paper and paperboard products for a period of more than six months, Purchaser
shall so notify Seller in writing at least 120 days (180 days, if Purchaser
then directly or indirectly controls another mill (other than Purchaser’s mill
in Roanoke Rapids, North Carolina) which is engaged in the production of
linerboard) (the “Notice Period”) in advance of
the date on which such operations are to cease, and this Agreement shall
terminate, effective as of the end of the Notice Period; provided, however,
that such termination shall not relieve Purchaser of the obligation to:  (i) purchase the full Annual Pulpwood
Take or Pay Volume and the full Annual Sawtimber Take or Pay Volume pursuant to
Section 3.1 during the period from the date of such written notice through
the Notice Period (with the amount to be purchased determined based on a pro
rata portion of the Annual Plan or Annual Plans in effect during such Notice
Period plus the amount of any unpurchased carryover from the prior Calendar
Year), (ii) pay Seller for any failure by Purchaser to purchase the full
Annual Pulpwood Non-Take or Pay Volume and the full Annual Sawtimber Non-Take
or Pay Volume pursuant to Section 3.2 during the period from the date of
such written notice through the Notice Period (with the amount to be purchased
determined based on a pro rata portion of the Annual Plan or Annual Plans in
effect during such period), and (iii) purchase from Seller any remaining
unpurchased amount of any Annual Pulpwood Take or Pay Volume and/or Annual
Sawtimber Take or Pay Volume carried over from the prior Calendar Year.  If during the Notice Period Purchaser
determines that the


 


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 Kraft
Mill will not cease manufacturing paper and paperboard products for a period of
more than six months, Purchaser may revoke the termination of this Agreement by
giving written notice of such revocation to Seller as soon as practicable and,
in any event, prior to the end of the Notice Period, in which event the Notice
Period shall immediately cease for purposes of the following sentence.  The provisions of Section 2.2(f) and
the last sentence of Section 2.6(b) shall not apply during the Notice
Period.


 


Section 7.3             Termination if the SLM Sawmill Will Cease Operating.  If the SLM Sawmill will cease operating for a
period of more than six months, Purchaser shall so notify Seller in writing at
least 90 days (the “Sawmill Notice Period”) in
advance of the date on which such operation is to cease, and this Agreement
shall terminate with respect to Pine Sawtimber, effective as of the end of the
90-day period; provided, however, that:  (i) if
such termination occurs during the initial 24-month period following the date
of the Asset Purchase Agreement, then during the remainder of such 24-month
period Purchaser shall purchase or pay for the Annual Sawtimber Take or Pay
Volume, as adjusted in accordance with Section 2.2(e) as if the SLM
Sawmill had begun one-shift operation on the date of the Asset Purchase
Agreement (regardless of whether the SLM Sawmill was then operating with only
one shift), (ii) the Pine Pulpwood Committed Volume for the portion of
such Calendar Year following the effective date of such termination and each
subsequent Calendar Year during the Term shall be reduced by 50%, (iii) subject
to the penultimate sentence of this Section 7.3, Seller’s obligations
under Section 2.1(e) shall terminate, effective immediately, and (iv) Purchaser
shall purchase from Seller any remaining unpurchased amount of any Sawtimber
Take or Pay Volume carried over from the prior Calendar Year.  Notwithstanding any such termination of the
parties’ respective obligations with respect to Pine Sawtimber under this
Agreement, the chip mill located at the SLM Sawmill may, at Purchaser’s
discretion, continue to serve as a Delivery Location for the delivery of
Products other than Pine Sawtimber. 
Seller shall use commercially reasonable efforts to provide Purchaser
with the opportunity to quote on the purchase of Pine Pulpwood meeting the Pine
Pulpwood Quality Specifications that is to be harvested by Seller from the
Timberlands during the Sawmill Notice Period that does not meet the
specifications set forth in the last sentence of Section 2.1(e); provided
that Seller shall not be under any obligation to accept any such quote.  If during the Sawmill Notice Period Purchaser
determines that the SLM Sawmill will not cease operating for a period of more
than six months, Purchaser may revoke the termination of this Agreement with
respect to Pine Sawtimber by giving written notice of such revocation to Seller
as soon as practical and, in any event, prior to the end of the Sawmill Notice
Period, in which event:  (i) Seller’s
obligations under Section 2.1(e) shall be immediately reinstated, and
(ii) the Sawmill Notice Period shall immediately cease for purposes of the
following sentence.  The provisions of Section 2.2(f) shall
not apply during the Sawmill Notice Period.


 


ARTICLE
8.


 


MISCELLANEOUS


 


Section 8.1             Assignment by Seller.  Except as otherwise provided in Section 6.4(a) or
this Section 8.1, this Agreement may not be assigned by Seller in whole or
in part.  Notwithstanding the foregoing,
and subject to this Section 8.1, Seller may assign all of its rights


 


35

















 


and obligations under this Agreement, with
prior written notice to Purchaser:  (i) to
any Person who is and at all times during the Term remains controlled by
Seller, or (ii) to any Person who acquires all or a substantial part of
the Timberlands (whether through an asset sale or a merger) and who assumes all
of the liabilities and obligations of Seller under this Agreement (including,
without limitation, the obligation of Seller (together with any purchasers of
Timberlands who have assumed the obligations of Seller pursuant to Section 6.4(a))
to supply the Committed Volume of Pine Products and the obligations of Seller
under Section 2.1(e) and Section 2.3 with respect to the
Timberlands so acquired from Seller); provided, however, that in no event shall
any such obligations assumed by any such Person apply to or cover any
timberlands then or thereafter owned or controlled by such Person other than
the Timberlands so acquired from Seller. 
No such assignment or assumption pursuant to Section 8.1(i) shall
in any way affect the liabilities or obligations of Seller under this
Agreement, and in the event of any such assignment or assumption, Seller shall
remain fully liable for its liabilities and obligations under this
Agreement.  Upon any assignment and
assumption pursuant to Section 8.1(ii), Seller automatically shall be
released from all of its obligations under this Agreement; provided, however,
that thereafter until the fifteenth anniversary of the Effective Date (or such
earlier date on which this Agreement is terminated), Seller shall not sell any
Pine Pulpwood or Hardwood Pulpwood meeting the Pine Pulpwood Quality
Specifications (other than Pine Pulpwood described in the last sentence of Section 2.1(e))
or the Hardwood Pulpwood Quality Specifications, respectively, from any of the
Timberlands Seller continues to own or control (including, without limitation,
any Timberlands it thereafter acquires or controls) to any Person other than
Purchaser unless:  (x) such Pulpwood
is being sold to the Person who has assumed Seller’s rights and obligations
under this Agreement pursuant to this Section 8.1 for resale to Purchaser
pursuant to this Agreement as part of the Committed Volume of Pine Products, or
(y) Seller has first offered such Pine Pulpwood or Hardwood Pulpwood, as
the case may be, to Purchaser at prices determined as provided in Article 4
(or, if Seller elects not to sell such Products on a delivered basis, at the
Stumpage Price determined as provided in Article 4), and Purchaser
elects not to accept such offer.  If
Purchaser elects to accept the offer referred to in clause (y) of the
preceding sentence, Seller may sell the Pine Pulpwood or Hardwood Pulpwood
subject to such offer directly to Purchaser or to another Person who is
obligated in turn to sell all such Pine Pulpwood or Hardwood Pulpwood to
Purchaser at prices determined as provided in Article 4.  The purchase price for the foregoing Products
shall be paid as provided in Section 4.4, and the Products shall comply
with the warranties set forth in Section 4.7 and the last sentence of Section 6.3.  Any purported assignment or transfer of this
Agreement in violation of this Section 8.1 shall be void and of no force
or effect.  Nothing in this Section 8.1
shall limit the obligation of Seller to comply with Section 6.4.


 


Section 8.2             Assignment by Purchaser.  Except as otherwise provided in this Section 8.2,
this Agreement may not be assigned by Purchaser in whole or in part.  Notwithstanding the foregoing, Purchaser may
assign all of its rights and obligations under this Agreement, with prior
written notice to Seller, to any Person who is and at all times during the Term
remains controlled by Purchaser.  No such
assignment or assumption shall in any way affect the liabilities or obligations
of Purchaser under this Agreement, and in the event of any such assignment or
assumption, Purchaser shall remain fully liable for its liabilities and
obligations under this Agreement. 
Purchaser also may, upon written notice to Seller, assign its rights and
obligations under this Agreement with respect to Pine Pulpwood, Pine Chips,


 


36

















 


Hardwood Pulpwood and Hardwood Chips to any
Person who acquires all or substantially all of the assets of the Kraft Mill
(whether through an asset sale or a merger), upon which event Purchaser
automatically shall be released from all of its obligations hereunder with
respect to the purchase of such Products. 
Purchaser also may, upon written notice to Seller, assign its rights and
obligations under this Agreement with respect to Pine Sawtimber to any Person
who acquires substantially all of the assets of the SLM Sawmill (whether
through an asset sale or a merger) (a “Sawmill Purchaser”),
upon which event Purchaser automatically shall be released from all of its obligations
hereunder with respect to Pine Sawtimber. 
The applicable purchaser described in the foregoing two sentences shall
assume all of the liabilities and obligations of Purchaser with respect to the
applicable Products under this Agreement. 
In the event that Purchaser assigns its rights and obligations under
this Agreement with respect to Pine Sawtimber to a Sawmill Purchaser and Seller
subsequently terminates this Agreement with respect to Pine Sawtimber in
accordance with Section 7.1(a)(ii) or (iii) due to a breach of
this Agreement with respect to Pine Sawtimber by the Sawmill Purchaser, then,
from and after the effective date of such termination, (i) the Pine
Pulpwood Committed Volume for the portion of such Calendar Year following the
effective date of such termination and each subsequent Calendar Year during the
Term shall be reduced by 50% and (ii) Seller’s obligations under Section 2.1(e) shall
immediately terminate.  Any purported
assignment or transfer of this Agreement in violation of this Section 8.2
shall be void and of no force or effect.


 


Section 8.3             Notices. 
All notices and other communications hereunder shall be in writing and
shall be deemed given when delivered personally or sent by electronic mail
(other than notices under Sections 3.5, 6.4 or Article 7 or 8) or
overnight mail or, to the extent receipt is confirmed, by facsimile, or by
registered mail, return receipt requested, or by overnight courier service, to
a party at the following address (or to such other address as such party may
have specified by notice given to the other party pursuant to this Section 8.3):


 


	
   

  	
  If
  to Purchaser:

  	
  KAPSTONE
  CHARLESTON KRAFT LLC

  
	
   

  	
   

  	
  P.O. Box 118005

  	
   

  
	
   

  	
   

  	
  Charleston, SC 29423-8005

  	
   

  
	
   

  	
   

  	
  Attention: Manager of Wood
  Procurement

  	
   

  
	
   

  	
   

  	
  Telephone: 843-745-3125

  	
   

  
	
   

  	
   

  	
  Facsimile: 843-745-3495

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  With
  a copy (solely

  	
   

  	
   

  
	
   

  	
  with
  respect to

  	
   

  	
   

  
	
   

  	
  notices
  under

  	
   

  	
   

  
	
   

  	
  Section 3.5,
  Section 6.4

  	
   

  	
   

  
	
   

  	
  or
  Article 7 or 8) to:

  	
  KAPSTONE
  CHARLESTON KRAFT LLC

  	
   

  
	
   

  	
   

  	
  1101 Skokie Boulevard

  	
   

  
	
   

  	
   

  	
  Suite 300

  	
   

  
	
   

  	
   

  	
  Northbrook, Illinois 60062

  	
   

  
	
   

  	
   

  	
  Attention: President

  	
   

  
	
   

  	
   

  	
  Telephone: 847/239-8806

  	
   

  
	
   

  	
   

  	
  Facsimile: 847/205-7264

  	
   

  
	
   

  	
   

  	
  Telephone: 843-745-3125

  	
   

  
	
   

  	
   

  	
  Facsimile: 843-745-3495

  	
   

  



 


37

















 


	
   

  	
  If to Seller:

  	
  MEADWESTVACO FORESTRY, LLC

  	
   

  
	
   

  	
   

  	
  180 Westvaco Road

  	
   

  
	
   

  	
   

  	
  Summerville, SC 29483

  	
   

  
	
   

  	
   

  	
  Attention: Regional
  Director

  	
   

  
	
   

  	
   

  	
  Telephone: 843-851-4686

  	
   

  
	
   

  	
   

  	
  Facsimile: 843-851-4642

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  With a copy (solely

  	
   

  	
   

  
	
   

  	
  with respect to

  	
   

  	
   

  
	
   

  	
  notices under

  	
   

  	
   

  
	
   

  	
  Section 3.5, Section 6.4

  	
   

  	
   

  
	
   

  	
  or Article 7 or 8)
  to:

  	
  MEADWESTVACO CORPORATION

  	
   

  
	
   

  	
   

  	
  11013 West Broad Street

  	
   

  
	
   

  	
   

  	
  Glen Allen, Virginia  23060

  	
   

  
	
   

  	
   

  	
  Attention:  General Counsel

  	
   

  
	
   

  	
   

  	
  Telephone:  (804) 327-6443

  	
   

  
	
   

  	
   

  	
  Facsimile:  (804) 327-8164

  	
   

  



 


Notices shall be deemed received at the earlier of
actual receipt or one business day after being sent by overnight mail or by
overnight courier services, the first business day after being sent by
facsimile, or five business days after being sent by registered mail.  “Business day” shall be a business day in the
jurisdiction of the recipient.


 


Section 8.4             Amendment; Waiver.  No amendment, modification or discharge of
this Agreement, including by custom, usage of trade, or course of dealing or
performance, and no waiver under this Agreement, shall be valid or binding
unless set forth in writing and duly executed by the party against whom
enforcement of the amendment, modification, discharge or waiver is sought.  Any such waiver shall constitute a waiver
only with respect to the specific matter described in such writing and shall in
no way impair the rights of the party granting such waiver in any other respect
or at any other time.  The failure of
either party to insist in any one or more instances upon strict performance of
any of the provisions of this Agreement or take advantage of any of its rights
hereunder shall not be construed as a waiver of any such provisions or the
relinquishment of any such rights, but the same shall continue and remain in
full force and effect.


 


Section 8.5             Entire Agreement. 
This instrument constitutes the entire agreement between the parties
relating to the subject matter hereof and there are no agreements,
understandings, conditions, representations, or warranties not expressly set
forth herein.


 


Section 8.6             Governing Law. 
This Agreement shall be governed by and construed in accordance with the
laws of the State of South Carolina, without reference to the conflicts of laws
or choice of law provisions thereof.


 


38
















 


Section 8.7                                      Binding
Agreement.  Subject to the limitations
set forth in Sections 8.1 and 8.2, this Agreement shall bind and inure to the
benefit of the parties and their respective successors and permitted assigns,
and to the benefit of each Person entitled to indemnification under Section 6.8.


 


Section 8.8                                      Headings.  The section and other headings in this
Agreement are inserted solely as a matter of convenience and for reference, are
not a part of this Agreement, and shall not be deemed to affect the meaning or
interpretation of this Agreement.


 


Section 8.9                                      Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.


 


Section 8.10                                Annexes.  All Annexes to this Agreement referenced
herein are incorporated herein by reference.


 


Section 8.11                                Severability,
etc.  Any term or provision of this
Agreement that is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability, without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
unenforceability of any of the terms or provisions of this Agreement in any
other jurisdiction.  If any term or
provision of this Agreement is so broad as to be invalid or unenforceable, the
provision shall be interpreted to be only so broad as is valid or enforceable.  Subject to the foregoing provisions of this Section 8.11,
if any term or provision of this Agreement is invalid or unenforceable for any
reason, such circumstances shall not have the effect of rendering such term or
provision invalid or unenforceable in any other case or circumstance.


 


Section 8.12                                No
Presumption Against Drafter.  Each of the
parties hereto has jointly participated in the negotiation and drafting of this
Agreement.  In the event of any ambiguity
or question of intent or interpretation, this Agreement shall be construed as
if drafted jointly by each of the parties hereto and no presumptions or burdens
of proof shall arise favoring any party by virtue of the authorship of any of
the provisions of this Agreement.


 


Section 8.13                                Dispute
Resolution.  (a)  Each of the
parties from time to time shall designate an individual who shall be
responsible for managing such party’s relationship with the other party under
this Agreement (a “Contract Manager”).  In the event of any controversy, dispute or
claim arising between the parties in connection with, or with respect to, any
provision of this Agreement or the performance by any party of its obligations
under this Agreement, or the breach, termination or validity thereof, including
the dispute of any payment or any claim by a party that the other party has
breached the terms of this Agreement (a “Dispute”),
the parties shall refer the Dispute to the two Contract Managers, who shall
cooperate in attempting to resolve such Dispute.  If the Contract Managers fail to resolve the
Dispute within 10 days after it has been referred to them, either party may
submit the Dispute in writing for resolution to a panel consisting of the
individual then acting as general manager (regardless of title) of Seller’s
forestry operations and the individual then acting as general manager
(regardless of title) of Purchaser’s Kraft Mill.  Neither party shall institute any legal
action to enforce this Agreement 


 


39

















 


with respect to the matter that
is the subject of the Dispute until at least 10 days after the Dispute has been
referred to the two general managers for resolution.


 


(b)                                 Any Dispute which the parties
cannot resolve by themselves as provided in Section 8.13(a), shall be
settled exclusively by arbitration before a single arbitrator (“Arbitrator”) in accordance
with this Section 8.13(b) and the Commercial Arbitration Rules and
Expedited Procedures of the AAA then in effect (the “Rules”).  Judgment
upon any award rendered by the Arbitrator may be entered by any state or federal
court having jurisdiction thereof.  Such
arbitration shall be administered by the AAA and shall be the exclusive remedy
for determining any such Dispute, regardless of its nature.


 


(i)                                     If the parties are
unable to agree upon an arbitrator, within 15 days of receipt by respondent of
the demand for arbitration, the parties shall select a single arbitrator from a
list of nine arbitrator-candidates selected by the AAA.  Any arbitrator-candidate proposed by the AAA
shall be an expert in the forest products industry.  If the parties are unable to agree upon an
arbitrator from the list so drawn within 15 days of receipt thereof, then the
parties shall each have the opportunity to strike up to three names from the
list without cause, to rank the remaining names in order of preference in
accordance with the Rules, and to simultaneously return the list to the AAA
within 20 days of the transmittal date (or on such date as directed by the
AAA).  If a party does not return the
list within the time specified, all persons named therein shall be considered
acceptable.  Of the arbitrator-candidates
remaining on the list and in accordance with the designated order of mutual
preference, the AAA shall invite the acceptance of an arbitrator to serve.  If for any reason none of the arbitrators
remaining on the list are available to serve, the parties shall repeat the
striking and ranking process with a new list supplied by the AAA until an
Arbitrator is selected.


 


(ii)                                  Consistent with the
expedited nature of arbitration, the parties shall be entitled to reasonable
discovery subject to the discretion of the Arbitrator.  The Arbitrator may, upon an appropriate
motion, dismiss any claim without an evidentiary hearing if the party bringing the
motion establishes that it would be entitled to summary judgment if the matter
had been pursued in court litigation.  In
the event of a conflict between the applicable rules of the AAA and the
provisions of this paragraph (ii), the provisions of this paragraph (ii) shall
govern.


 


(iii)                               Any initial filing fees
shall be borne by the party requesting arbitration.  Thereafter, each party shall be responsible
for its own expenses and attorneys’ fees, and 50% of the costs and fees of the
arbitration.


 


(iv)                              The Arbitrator shall have
the authority to award any remedy of relief in accordance with the terms of
this Agreement and the laws of the State of South Carolina.  The Arbitrator shall render an award and
written opinion, stating the findings of fact and conclusions of law on which
the award is based, and the award shall be final and binding upon the
parties.  Neither party shall have the
right to appeal the Arbitrator’s decision, except on the limited grounds set
forth in the Federal Arbitration Act, 9 U.S.C. §1 et seq.


 


40

















 


(v)                                 Unless mutually agreed
by the parties otherwise, any arbitration shall take place in Charleston, South
Carolina.


 


(c)                                  Notwithstanding the foregoing,
however, nothing herein contained shall bar the right of either of the parties,
while the dispute resolution procedure provided for in this Section 8.13
is pending, to seek and obtain injunctive relief from a court of competent
jurisdiction in accordance with applicable law against threatened conduct with
respect to a matter in dispute that will cause loss or damage to such party.


 


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


 


	
   

  	
  KAPSTONE CHARLESTON KRAFT LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Roger W. Stone

  
	
   

  	
   

  	
  Name:  Roger W. Stone

  
	
   

  	
   

  	
  Title:    Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  MEADWESTVACO FORESTRY, LLC,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Robert E. Birkenholz

  
	
   

  	
   

  	
  Name:  Robert E. Birkenholz

  
	
   

  	
   

  	
  Title:    Treasurer

  
				



 


41

















 


ANNEX
A-1


 


PINE
PULPWOOD QUALITY SPECIFICATIONS


 


1.                                       Minimum
top diameter outside bark, [****] inches.


 


2.                                       Maximum
diameter outside bark anywhere on stem, [****] inches.


 


3.                                       Tops
from sawtimber trees (including CNS trees) acceptable.


 


4.                                       Minimum
piece length is [****] feet.


 


5.                                       Limbs
must be trimmed flush with stem.


 


6.                                       Defects
such as forks and excessive crooks not accepted.


 


7.                                       Stems
must be clean (no vines, limbs, plastic, etc.), and bark shall not
intentionally have been removed.


 


8.                                       Stems
must be free of wire, nails or metal of any kind.


 


9.                                       Stems
must be able to convey through the mill.


 


10.                                 Loads
deemed unsafe to unload for any reason such as stems placed above the standards
or any other unsafe condition will be rejected.


 


11.                                 Maximum
length not to exceed [****] feet.


 


12.                                 Wood
must be cut from sources harvested within the preceding [****] months.


 






“[****] indicates confidential
treatment”


 

















 


ANNEX
A-2


 


PINE
SAWTIMBER QUALITY SPECIFICATIONS


 


1.                                       Minimum
top diameter outside bark (DOB):  pine “chipnsaw”,
[****] inches and pine sawtimber, [****] inches


 


2.                                       Maximum
diameter outside bark anywhere on stem, [****] inches.


 


3.                                       Splinter
pulls are not acceptable.  Butt spurs
must be trimmed flush.


 


4.                                       Butts
must be sawed squarely, eliminating fiber separation and bevel cuts.


 


5.                                       All
stems with excessive flared butts must be trimmed.  Excessive flare is any butt that is [****]”
larger than the diameter of the stem one foot from the butt.


 


6.                                       The
butt diameter of a tree is determined at a point above any excessive
swell.  Excessive swell is any butt that
is [****] inches larger than the diameter of the stem [****] inches from the
butt.  In the case of a swelled butt the
official butt diameter will be measured at a point [****] inches above the
actual cut.


 


7.                                       Limbs
must be trimmed flush with stem.


 


8.                                       Defects
such as forks and excessive crooks are not acceptable.


 


9.                                       Stems
must be clean (no vines, limbs, plastic, etc.).


 


10.                                 Stems
must be free of wire, nails, or metal of any kind.


 


11.                                 No
severe cronartium scars.  Severe scars
are defined as those affecting [****] or more of the circumference of the stem
where they occur.


 


12.                                 No
Pond Pine or Spruce Pine will be accepted.


 


13.                                 Stems
must be reasonably straight and able to convey through the mill.


 


14.                                 Loads
deemed unsafe to unload for reasons such as stems placed above the standards or
any other unsafe condition will be rejected.


 


15.                                 Maximum
length not to exceed [****] feet.


 


16.                                 No
excessive or large knots.  Knots are
defined as the red core of a limb that has been cut off or a decayed knot.  Excessive knots are defined as three or more
knots that are greater than [****] inches in diameter in a [****] foot Section of
the log.  Large knots are [****] inches
or larger in diameter.


 






“[****]
indicates confidential treatment”


 

















 


17.                                 No
branch whorls.  A branch whorl is defined
as a group of knots resulting in [****] inches or more of taper in a one foot Section of
the log.


 


18.                                 Wood
must be cut from freshly harvested sources and delivered within [****] weeks of
harvest.


 


6 inch Top “Chipnsaw”
Specifications:


 


A.                                   No
minimum – [****] inch butt (DOB) without butt swell or flare.


 


B.                                     Minimum
length is [****] feet to a merchantable [****] inches minimum top DOB.


 


C.                                     Stems
must be reasonably straight.  Maximum
allowable sweep is [****] inches per [****] foot log on no minimum -[****] inch
butt stems and [****] inches per [****] foot log on the larger sizes.


 


D.                                    Stems
may be loaded in either direction to maximize payload.


 


7 inch Top
Sawtimber Specifications:


 


A.                                   [****]
inches -[****] inch butt (DOB) without butt swell or flare.


 


B.                                     Minimum
[****] inch merchantable top DOB.


 


C.                                     Stems
must be reasonably straight.  Maximum
allowable sweep is [****] inches per [****] foot log.


 


D.                                    Excessive
or large knots are not acceptable.


 


E.                                      Cut
logs [****] foot [****] inches or [****] foot [****] inches are
acceptable.  Up to [****] cut logs can be
placed on top of a long load between the front and rear bolsters.  Double deck loads are also acceptable.


 


F.                                      Minimum
length for tree length stems is [****] feet.


 






“[****] indicates confidential treatment”


 


44

















 


ANNEX
A-3


 


PINE
CHIP QUALITY SPECIFICATIONS


 


WOOD:  All chips are to be produced from sound,
clean, bark free, unseasoned materials. 
Chips are to be free of plastics and other foreign material (metal,
large limbs, tarps, rubber).


 


SPECIES:  Pine – trees of genus Pinus.


 


MOISTURE:
When delivered, the moisture content shall not exceed [****]%, which is
determined by comparing the sample weight to the oven dry (O.D.) weight of the
sample.  The parties shall review in a
systematic and scientific manner the impact, if any, on the operation of the
Kraft Mill from increasing the maximum moisture content of pine chips to [****]%
from the [****]% previously in effect and shall consider either changing the
purchase price of Pine Chips or reducing the Committed Volume of Pine Products
by a proportionate amount, in either case consistent with the impact, if any,
they determine exists.  No kiln dried
chips will be accepted.


 


BARK:
Bark content will not exceed [****]% by weight of the chips delivered.


 


CHIP SIZE:  The chipper will set up to cut a [****] inch
chip length with the majority of the chips falling in the [****]mm thickness
range. Target sizes as classified by the Radar Classifier are listed below.


 




	
  Category

  	
   

  	
  Target %

  	
   

  	
  Category

  
	
  Sawdust

  	
   

  	
  [****]

  	
   

  	
   

  
	
  3mm RH

  	
   

  	
  [****]

  	
   

  	
   

  
	
  2mm Bar

  	
   

  	
  [****]

  	
   

  	
   

  
	
  4mm Bar

  	
   

  	
  [****]

  	
   

  	
  [****]

  
	
  6mm Bar

  	
   

  	
  [****]

  	
   

  	
  [****]

  
	
  8mm Bar

  	
   

  	
  [****]

  	
   

  	
  [****]

  
	
  10mm Bar

  	
   

  	
  [****]

  	
   

  	
   

  






 


Target is that an average of [****]%
of the chips on a monthly basis will be in the “Accepts” category.  The “Accepts” percentage shall be a
percentage calculated in accordance with the following formula:  [****]


 


Suppliers should follow the
appropriate specification for chip size according to the primary type of
material (pine or hardwood) they are chipping.


 


UNACCEPTABLE
CHIPS: Chips exhibiting the following
characteristics are not acceptable:


 


a.               Metal


b.              Excessive mud or sand


c.               Rotten wood


d.              Contamination (tar, oils, concrete,
asphalt, rubber, plastic)


e.               Wood not harvested within the preceding
four months


 






“[****] indicates confidential
treatment”


 

















 


ANNEX
B-1


 


HARDWOOD
PULPWOOD QUALITY SPECIFICATIONS


 


19.                                 Minimum
to diameter outside bark, [****] inches.


 


20.                                 Maximum
diameter outside bark anywhere on the stem, is [****] inches.


 


21.                                 Tops
from sawtimber trees acceptable.


 


22.                                 Minimum
piece length is [****] feet.


 


23.                                 Limbs
must be trimmed flush with stem.


 


24.                                 Defects
such as excessive crooks are not accepted.


 


25.                                 Stems
must be clean (no vines, limbs, metal, plastic, etc.), and bark shall not
intentionally have been removed.


 


26.                                 Stems
must be free of wire, nails or metal of any kind.


 


27.                                 Stems
must be able to convey through the mill.


 


28.                                 Loads
deemed unsafe to unload for reasons such as stems placed above the standards or
any other unsafe condition will be rejected.


 


29.                                 Maximum
length not to exceed [****] feet.


 


30.                                 Wood
must be cut from sources harvested within the preceding [****] months.


 






“[****]
indicates confidential treatment”


 

















 


ANNEX
B-2


 


HARDWOOD
CHIP QUALITY SPECIFICATIONS


 


WOOD:  All chips are to be produced from sound,
clean, bark free, unseasoned materials. 
Chips are to be free of plastics and other foreign material (metal,
large limbs, tarps, rubber).


 


SPECIES:  Hardwood – local deciduous tree species that
bear leaves.  Pine and hardwood shall not
be mixed.


 


MOISTURE:
When delivered, the moisture content shall not exceed [****]%, which is
determined by comparing the sample weight to the oven dry (O.D.) weight of the
sample.  No kiln dried chips will be
accepted.


 


BARK:
Bark content will not exceed [****]% by weight of the chips delivered.


 


CHIP SIZE:
The chipper will set up to cut a [****] inch chip length, with the majority of
the chips falling in the [****]mm thickness range. Target sizes as classified
by the Radar Classifier are listed below.


 




	
  Category

  	
   

  	
  Target %

  	
   

  	
  Category

  
	
  Sawdust

  	
   

  	
  [****]

  	
   

  	
   

  
	
  3mm RH

  	
   

  	
  [****]

  	
   

  	
   

  
	
  2mm Bar

  	
   

  	
  [****]

  	
   

  	
  [****]

  
	
  4mm Bar

  	
   

  	
  [****]

  	
   

  	
  [****]

  
	
  6mm Bar

  	
   

  	
  [****]

  	
   

  	
  [****]

  
	
  8mm Bar

  	
   

  	
  [****]

  	
   

  	
   

  
	
  10mm Bar

  	
   

  	
  [****]

  	
   

  	
   

  






 


Target is that an average of [****]%
of the chips on a monthly basis will be in the “Accepts” category.  The “Accepts” percentage shall be a
percentage calculated in accordance with the following formula:  [****]


 


Seller shall follow the
appropriate specification for chip size according to the primary type of
material (pine or hardwood) it is chipping.


 


UNACCEPTABLE
CHIPS: Chips exhibiting the following
characteristics are not acceptable:


 


a.               Metal


b.              Excessive mud or sand


c.               Rotten wood


d.              Contamination (tar, oils, concrete, asphalt,
rubber, plastic)


e.               Wood not harvested within the preceding
four months


 






“[****] indicates confidential
treatment”


 

















 


ANNEX
C


 


PINE
PULPWOOD COMMITTED VOLUME

AND TAKE OR PAY VOLUME


 


	
  Calendar Year

  	
   

  	
  Committed Volume and

  Minimum Take or Pay

  Volume (in tons)

  	
   

  	
  Maximum Take or Pay Volume

  (in tons)

  (to the Extent Offered by Seller)

  	
   

  
	
  7/1/08 – 12/31/08

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  2009

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  2010

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  2011

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  2012

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  2013

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  2014

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  2015

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  2016

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  2017

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  2018

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  2019

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  2020

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  2021

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  2022

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  1/1/23 – 6/30/23

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  



 






“[****] indicates confidential
treatment”


 

















 


ANNEX
D


 


PINE
SAWTIMBER COMMITTED VOLUME AND TAKE OR PAY VOLUME


 


	
  Calendar Year

  	
   

  	
  Take or Pay Volume (and

  Minimum Committed Volume)

  (in tons)

  	
   

  
	
  7/1/08 – 12/31/08

  	
   

  	
  [****]

  	
   

  
	
  2009

  	
   

  	
  [****]

  	
   

  
	
  2010

  	
   

  	
  [****]

  	
   

  
	
  2011

  	
   

  	
  [****]

  	
   

  
	
  2012

  	
   

  	
  [****]

  	
   

  
	
  2013

  	
   

  	
  [****]

  	
   

  
	
  2014

  	
   

  	
  [****]

  	
   

  
	
  2015

  	
   

  	
  [****]

  	
   

  
	
  2016

  	
   

  	
  [****]

  	
   

  
	
  2017

  	
   

  	
  [****]

  	
   

  
	
  2018

  	
   

  	
  [****]

  	
   

  
	
  2019

  	
   

  	
  [****]

  	
   

  
	
  2020

  	
   

  	
  [****]

  	
   

  
	
  2021

  	
   

  	
  [****]

  	
   

  
	
  2022

  	
   

  	
  [****]

  	
   

  
	
  1/1/23 – 6/30/23

  	
   

  	
  [****]

  	
   

  



 






“[****] indicates confidential
treatment”


 

















 


ANNEX
E


 


INITIAL
DELIVERY LOCATIONS


 


North
Charleston Paper Mill


 


Andrews
Chip Mill


 


Hampton
Chip Mill


 


Beech
Hill Chip Mill

(or replacement facility at Badham)


 


Summerville
Lumber Mill


 


Dempsey
Wood Products

(Rowesville, South Carolina)


 
















 


ANNEX
F


 


LOGGING
FEE COMPONENTS AND INITIAL LOGGING FEES


 


Logging fees are calculated on
a per ton basis by adding the “Stump to Truck” amount plus the “Base Haul”
amount plus the “Rate Per Additional Mile” for each mile hauled over the
mileage covered by the “Base Haul” amount plus the applicable “Fuel Adjustment”
amount.


 


	
   

  	
   

  	
  Stump to Truck

  	
   

  	
  Base Haul (35 miles)

  	
   

  	
  Rate per Additl. Mile

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  I. CLEARCUT PINE

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Product Type

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Roundwood

  	
   

  	
  $

  	
  [****]

  	
  *

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  In-Woods Chips

  	
   

  	
  $

  	
  [****]

  	
  *

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
  **

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Shovel Roundwood

  (Deep swamp full-time)

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Shovel In-Woods Chips 

  (Deep swamp full-time)

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
  **

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  II. THINNING PINE

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Product Type

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Roundwood

  	
   

  	
  $

  	
  [****]

  	
  *

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  In-Woods Chips

  	
   

  	
  $

  	
  [****]

  	
  *

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
  **

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  III. CLEARCUT HARDWOOD

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Product Type

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Roundwood

  	
   

  	
  $

  	
  [****]

  	
  *

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  In-Woods Chips

  	
   

  	
  $

  	
  [****]

  	
  *

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
  **

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Shovel Roundwood 

  (Deep swamp full-time)

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Shovel In-Woods Chips 

  (Deep swamp full-time)

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
  **

  



 






*Add $[****]
per ton if the logger owns shovel logging equipment.


**To be reduced to $[****]
if the Reported Diesel Fuel Price falls below $[****] per gallon.


“[****] indicates confidential treatment”


 

















 


Fuel
Adjustment (per ton)


 


	
  On-Highway

  	
   

  	
  Roundwood

  	
   

  	
  In-Woods Chips

  	
   

  
	
  Diesel Price

  	
   

  	
  Adjustment

  	
   

  	
  Adjustment

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
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“[****] indicates confidential treatment”


 

















 


	
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“[****] indicates confidential treatment”


 


53

















 


	
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  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  



 


The parties shall expand this
table by including additional amounts (calculated on the same proportional
basis as the amounts already set forth in this table) if there are during the
Term increases or decreases in diesel fuel prices above or below the amounts
shown.


 






“[****] indicates confidential treatment”


 


54

















 


ANNEX
G


 


CALCULATION
OF PRODUCTIVE ACRES AND AVERAGE FREIGHT PREMIUM


 


Base Average Pulpwood Freight Premium


 


PINE PULPWOOD


 


	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Freight Logic Delivery Location (FLDL)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Weighted

  	
   

  	
  Weighting

  	
   

  	
  Weighted

  	
   

  	
  Average

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Number 

  	
   

  	
   

  	
   

  	
  Average

  	
   

  	
  Units >

  	
   

  	
  Average Haul

  	
   

  	
  Premium per

  	
   

  
	
   

  	
   

  	
  Minimum

  	
   

  	
  Mileage

  	
   

  	
  of

  	
   

  	
  Weighting

  	
   

  	
  Haul

  	
   

  	
  Minimum

  	
   

  	
  for Weighting

  	
   

  	
  Weighting

  	
   

  
	
   

  	
   

  	
  Haul

  	
   

  	
  Premium

  	
   

  	
  Tracts

  	
   

  	
  Units*

  	
   

  	
  Distance

  	
   

  	
  Haul

  	
   

  	
  Units > Min Haul

  	
   

  	
  Unit

  	
   

  
	
  Andrews

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  Badham

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  BeechHill

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  Hampton

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
  SLM

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  	
  ****

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Total Freight Premium per Weighting Unit:

  	
   

  	
  $

  	
  [****]

  	
   

  



 






*See worksheet “Weighting Units”


 


Base Average Sawtimber Freight
Premium


 


PINE SAWTIMBER


 


	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Freight Logic Delivery Location (FLDL)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Weighted

  	
   

  	
  Average

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Weighted

  	
   

  	
  Weighting

  	
   

  	
  Average Haul

  	
   

  	
  Premium per

  	
   

  
	
   

  	
   

  	
  Minimum

  	
   

  	
  Mileage

  	
   

  	
  Number of

  	
   

  	
  Weighting

  	
   

  	
  Average Haul

  	
   

  	
  Units >

  	
   

  	
  for Weighting

  	
   

  	
  Weighting

  	
   

  
	
   

  	
   

  	
  Haul

  	
   

  	
  Premium

  	
   

  	
  Tracts

  	
   

  	
  Units*

  	
   

  	
  Distance

  	
   

  	
  Minimum Haul

  	
   

  	
  Units > Min Haul

  	
   

  	
  Unit

  	
   

  
	
  SLM

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  $

  	
  [****]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Total Freight Premium per Weighting Unit:

  	
   

  	
  $

  	
  [****]

  	
   

  



 






*See
worksheet “Weighting Units”


 


*Weighting Units Worksheet


 


Pine Pulpwood Weighting Units


Pine
productive acres (PPA) for all pine stands, both planted and natural,
regenerated in 2008 or before


If
stand was planted after 2000, only a thinning is possible, so weighting units =
PPA * [****]%


If
stand was planted before 2001 and has already been thinned, weighting units =
PPA * [****]%


If
stand was planted before 2001 and has NOT been thinned, weighting units = PPA *
[****]%


 


Pine
Sawtimber Weighting Units


Pine
productive acres (PPA) for all pine stands, both planted and natural,
regenerated in 2000 or before, within [****] miles of SLM


If
stand has been thinned, weighting units = PPA * [****]%


If
stand has not been thinned, weighting units = PPA * [****]%


 






“[****]
indicates confidential treatment”