Exhibit 10.5


 


FIBER SUPPLY AGREEMENT


 


by and between


 


ESCANABA TIMBER LLC


 


and


 


CHILLICOTHE PAPER INC.


 


 


May 2, 2005


 





















 


FIBER SUPPLY AGREEMENT


 


FIBER SUPPLY AGREEMENT, dated as of May 2, 2005 (this “Agreement”),
by and between ESCANABA TIMBER LLC, a Delaware limited liability company, (“Seller”)
and CHILLICOTHE PAPER, INC., a Delaware corporation (“Buyer”).


 


RECITALS


 


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


 


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, Seller and Buyer hereby agree as
follows:


 


ARTICLE I


 


DEFINITIONS


 


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


 


“AAA” shall have the meaning provided
in Section 10.14(a).


 


“AF&PA” shall have the meaning
provided in the definition of “Sustainable Forest Practice Standards”.


 


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


 


“Annual Plan” shall have the meaning
provided in Section 2.3(a).


 


“Annual Volumes” shall have the
meaning provided in Section 2.3(c).


 


“Assumed Volume” shall have the
meaning provided in Section 10.2(b).


 


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


 


“Contract Prices” shall have the
meaning provided in Section 4.1(b).


 


“Delivery Distance” means the trucking
distance between Seller’s harvest site and the Buyer’s delivery location (which
delivery location is within the Market Region).


 


“Force Majeure” shall have the meaning
provided in Section 2.4(a).


 





















 


“Force Majeure Period” shall have the
meaning provided in Section 2.4(c).


 


“Hardwood Pulpwood” means pulpwood
from hardwood species of timber.


 


“Hardwood Stringers” shall mean timber
meeting the specifications for the same set forth on Annex A.


 


“Liens” shall have the meaning
provided in Section 6.2(b).


 


“Losses” shall have the meaning
provided in Section 6.2(b).


 


“Market Region” shall mean all areas
which are located within one hundred twenty (120) miles of the Mill.


 


“Mill” shall mean Buyer’s pulp and
paper mill located in Chillicothe, Ohio.


 


“Minimum Volumes” shall have the
meaning provided in Section 2.3(b).


 


“Most Recent Price by Species” shall
have the meaning provided in Section 4.1(b).


 


“New Owner” shall have the meaning
provided in Section 10.2(b).


 


“Objection Notice” shall have the
meaning provided in Section 10.2(b).


 


“Past Due” shall have the meaning
provided in Section 4.4.


 


“Person” shall have the meaning
provided in Section 10.1(b).


 


“Price Period” shall have the meaning
provided in Section 4.1(b).


 


“Products” means Softwood Pulpwood,
Hardwood Pulpwood and Hardwood Stringers.


 


“Product Specifications” shall have
the meaning provided in Section 2.1.


 


“Pulpwood” means Hardwood Pulpwood and
Softwood Pulpwood.


 


“Softwood Pulpwood” shall mean
pulpwood from pine and other softwood.


 


“Sustainable Forest Practice Standards”
shall mean practices substantially in compliance with standards substantially
similar to the Sustainable Forestry Initiative of the American Forest and Paper
Association (the “AF&PA”) as those standards may be modified by AF&PA
from time to time.


 


“Term” shall have the meaning provided
in Section 5.1.


 


“Timberlands” shall mean all
timberland properties now or hereafter owned by Seller and located in the State
of Ohio and in Greenup and Lewis Counties, Kentucky.


 


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“Transfer” shall mean any sale, lease,
conveyance, exchange, assignment, hypothecation, disposition, foreclosure or
other transfer (excluding the granting of a mortgage or other security
agreement), directly or indirectly (whether by agreement, operation of law or
otherwise), of all or any portion of the Timberlands.


 


“Valuation Consultant” shall mean
either Fountain Forestry of Portsmouth, Ohio or BalkenTier Consulting of
Morgantown, West Virginia, or if such firms are no longer in existence, another
reputable, professionally qualified Person meeting all of the following
criteria.  Such Person (i) is not an
Affiliate of either Seller or Buyer, (ii) during the past two (2) years
has not transacted substantial business with either Seller or Buyer, and (iii) does
not have less than five (5) years experience relating to sales of timber
within the Market Region.  If Seller and
Buyer are unable to agree on the Valuation Consultant, an arbitrator selected
pursuant to Section 10.14 below shall select such Valuation
Consultant.  Seller and Buyer shall
provide to the Valuation Consultant such information as the Valuation
Consultant shall reasonably request to facilitate the determinations to be made
by the Valuation Consultant hereunder.


 


ARTICLE II


 


PURCHASE OF PRODUCTS


 


Section 2.1             Purchase of Softwood Pulpwood,
Hardwood Pulpwood and Hardwood Stringers. 
Seller agrees to sell, and Buyer agrees to purchase, receive and pay
for, in each calendar year (a “Calendar Year”), the Annual Volumes, as defined
herein, of Softwood Pulpwood, Hardwood Pulpwood and Hardwood Stringers.  All Softwood Pulpwood, Hardwood Pulpwood and
Hardwood Stringers purchased pursuant to this Agreement shall satisfy,
respectively, the specifications for the Products set forth in Annex A, as may
be modified from time to time in accordance with Section 2.2 (the “Product
Specifications”).  For the purposes of
this Agreement, a ton shall weigh two thousand (2,000) pounds.


 


Section 2.2             Modification of Specifications..  Buyer may, from time to time, and upon at
least two (2) months prior written notice to Seller, reasonably modify any
of the Product Specifications that Buyer applies to substantially all of its
Product suppliers to the Mill.  Buyer
shall not modify the Product Specifications to set higher standards for Seller
than for any such other Products suppliers. 
All Products sold by Seller to Buyer following the date the new specifications
become effective shall satisfy such modified Product Specifications.  If Product Specifications are modified to set
higher standards, the Annual Volumes shall be adjusted downward as deemed
reasonably necessary by Seller, and subject to Buyer’s reasonable approval, as
a result of said higher standards.


 


Section 2.3             Annual
Plan.


 


(a)           Seller shall on the date hereof and prior to September 1
of each Calendar Year during the Term, complete and submit to Buyer a written
delivery plan with respect to the Products to be made available for purchase by
Buyer during the


 


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next
Calendar Year (the “Annual Plan”).  Said
Annual Plan shall include estimates of delivery of the Products by Delivery
Distances, month and accumulated into estimated quarterly deliveries.  The Annual Plan shall set forth the quantity
of Products Seller intends to make available to Buyer during the next Calendar
Year, said quantities to be subject to the terms of Article III.


 


(b)           Subject to Seller’s obligation to offer at least the
minimum volumes required to be offered to Buyer pursuant to Section 3.1
below (the “Minimum Volumes”):  (i) all
Pulpwood volumes projected to be harvested from the Timberlands in the
applicable Calendar Year shall be made available in said Annual Plan for
Calendar Years 2006 through 2010; (ii) ninety percent (90%) of all
Pulpwood volumes projected to be harvested from the Timberlands in the
applicable Calendar Year shall be made available in said Annual Plan for Calendar
Years 2011 through 2013; and (iii) eighty-five percent (85%) of all
Pulpwood volumes projected to be harvested from the Timberlands in the
applicable Calendar Year shall be made available in said Annual Plan for
Calendar Years 2014 through 2016, and, if the Term is extended pursuant to Section 5.2
below, for Calendar Years 2017 through 2019.


 


(c)           Buyer shall within 30 days of receipt of said Annual
Plan confirm with Seller the volumes of the Products Buyer agrees to purchase
from Seller during the next Calendar Year; provided, however, that unless
Seller agrees otherwise, Buyer must agree to purchase at least ninety percent
(90%) of the volumes set forth in the Annual Plan.  Said agreed upon volumes shall then become in
the aggregate the “Annual Volumes” Buyer agrees to purchase and Seller agrees
to deliver in the next Calendar Year.


 


(d)           Following adoption of each Annual Plan (or as adjusted
according to Section 2.3(c) above), the parties shall act in good
faith and each use their respective reasonable best efforts to implement such
Annual Plan in accordance with its terms. 
Products shall be delivered throughout the Calendar Year in accordance
with the Annual Plan for such year; provided, however, that
during any Calendar Year, Seller may vary its deliveries, and Buyer may vary
its purchases of Products, subject to Section 4.2 herein, as long as
variations in delivery are immaterial and will not impair the operations of the
Mill or the operations of Seller on the Timberlands.


 


Section 2.4             Force
Majeure.


 


(a)           For the purposes of this Agreement, the term “Force
Majeure” means any cause, condition or event beyond Buyer’s and/or Seller’s
reasonable control that delays or prevents either party’s performance of its
obligations hereunder, including war, acts of terrorism (which shall not
include civil demonstrations), acts of government, acts of public enemy, riots,
lightning, fires, explosions, storms, floods, infestation, power failures,
other acts of God or nature, labor strikes or lockouts by employees, or other
disputes involving either party, adverse financial or market conditions, an
involuntary ceasing of operations at the Mill for a minimum of thirty (30)
consecutive days, and other similar events or circumstances; provided, however,
that “Force Majeure” shall not include (i) a party’s financial inability
to perform (unless such


 


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inability
is caused by a general suspension of payments by banks in the United States), (ii) an
act, omission or circumstance arising from the negligence or willful misconduct
of the party claiming that a Force Majeure event has occurred, or (iii) extended
periods of wet weather (subject to the provisions of Section 4.2(a) below).  The parties shall use reasonable best efforts
to mitigate the effects of the Force Majeure, and if the cause of Force Majeure
can be minimized or remedied, both parties shall use reasonable best efforts to
do so promptly.


 


(b)           Subject to the provisions of this Section 2.4,
neither party shall be liable hereunder for a delay in or failure of
performance of its obligations hereunder that is caused by Force Majeure.  If Force Majeure results in a reduction, but
not a complete cessation, of Buyer’s operations in connection with this
Agreement, Buyer shall not reduce its purchases of any Product from Seller in
greater proportion than the reduction in Buyer’s purchases of any such Products
from all its suppliers of pulpwood and saw log stringers to the Mill.  Notwithstanding anything contained in this
Agreement to the contrary, Force Majeure (other than a general suspension of
payments by banks in the United States) shall not excuse Buyer from its
obligation to pay, pursuant to the terms of this Agreement, Seller for any
quantity of Product delivered by Seller.


 


(c)           The quantity of any Product otherwise required to be
purchased or delivered hereunder shall be reduced as a result of Force Majeure
for the period during which such Force Majeure is in effect and continuing
(such period, the “Force Majeure Period”), based on the respective quantity for
each Calendar Year in which such Force Majeure is in effect, prorated (if
applicable) for the portion of such year constituting all or part of such Force
Majeure Period.  If the Force Majeure
Period is less than 15 days, (i) Buyer shall be required to purchase the
volume of Products not purchased during the Force Majeure Period within the
next 180 days following the end of the Force Majeure Period, and (ii) Seller
shall be required to make available the volume of Products not delivered during
the Force Majeure Period within the next 180 days following the end of the
Force Majeure Period.  If the Force
Majeure Period is more than 14 days, Buyer shall not be required to purchase
the volume of Products not purchased during the Force Majeure Period, and
Seller shall not be required to make available the volume of Products not
delivered during the Force Majeure Period. 
Notwithstanding anything contained in this Agreement to the contrary, Seller
shall have the right, but not the obligation, to sell that quantity of the
Product Buyer is unable to purchase because of Force Majeure to any third party
purchaser or purchasers in the event Force Majeure prevents Buyer from
performing hereunder.


 


(d)           Force Majeure shall not relieve a party of its
obligations or liability hereunder unless such party shall give notice
(including a reasonable description of such Force Majeure) to the other party
as soon as reasonably possible and in any event within fifteen (15) days of the
occurrence of such Force Majeure.  Upon
request, the party whose obligations were suspended shall provide the other
party with a plan for remedying the effects of such Force Majeure.  The party prevented from performing by Force
Majeure shall keep the other party advised by written notice of all matters
affecting such Force Majeure, and the extent of the delay by reason
thereof.  Such party shall


 


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notify
the other party in writing of the termination of such Force Majeure within ten (10) days
after such termination.


 


ARTICLE III


 


QUANTITY AND PRODUCT MIX


 


Section 3.1             Minimum
Volumes by Calendar Year.  With
respect to the Products to be purchased by Buyer hereunder, Seller shall make
available to Buyer in the applicable Annual Plan the following Minimum Volumes
of Products for each Calendar Year during the Term of this Agreement:


 


(a)           2005.  For the Calendar Year beginning May 2,
2005, and ending December 31, 2005:


 




	
  (i)

  	
   

  	
  Hardwood Pulpwood:

  	
   

  	
  not less than 115,000 tons

  
	
  (ii)

  	
   

  	
  Softwood Pulpwood:

  	
   

  	
  not less than 58,000 tons

  
	
  (iii)

  	
   

  	
  Hardwood Stringers:

  	
   

  	
  not less than 42,000 tons

  






 


(b)           2006
– 2010.  For the Calendar Years
beginning January 1, 2006 and ending December 31, 2010:


 




	
  (i)

  	
   

  	
  Hardwood Pulpwood:

  	
   

  	
  not less than 157,000 tons

  
	
  (ii)

  	
   

  	
  Softwood Pulpwood:

  	
   

  	
  not less than 86,000 tons

  
	
  (iii)

  	
   

  	
  Hardwood Stringers:

  	
   

  	
  not less than 51,000 tons

  






 


(c)           2011
– 2016.  For the Calendar Years
beginning January 1, 2011 and ending December 31, 2016:


 




	
  (i)

  	
   

  	
  Hardwood Pulpwood:

  	
   

  	
  not less than 82,000 tons

  
	
  (ii)

  	
   

  	
  Softwood Pulpwood:

  	
   

  	
  not less than 125,000 tons

  
	
  (iii)

  	
   

  	
  Hardwood Stringers

  	
   

  	
  not less than 28,000 tons

  






 


(d)           2017
– 2019 - To the extent Buyer exercises its option to extend the Term
pursuant to Section 5.2 below, for Calendar Years beginning January 1,
2017 and ending December 31, 2019, the mix of Products Seller shall make
available to Buyer shall be as follows:


 




	
  (i)

  	
   

  	
  Hardwood Pulpwood:

  	
   

  	
  not less than 60,000 tons

  
	
  (ii)

  	
   

  	
  Softwood Pulpwood:

  	
   

  	
  not less than 125,000 tons

  
	
  (iii)

  	
   

  	
  Hardwood Stringers

  	
   

  	
  not less than 20,000 tons

  






 


Section 3.2             Adjustments
to Product Mix.


 


Seller and Buyer acknowledge and agree that
either party may from time to time request modifications to the Product mix set
forth above during any Calendar


 


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Year as a result of its
temporary inability to satisfy such Product mix due to adverse weather or other
unanticipated conditions.  So long as the
aggregate total volume of all Products required to be delivered for the
Calendar Year is not reduced, and so long as the other party’s operations would
not be adversely affected in any material respect as a result thereof, each
party agrees to grant such requests.


 


ARTICLE IV


 


PRICE AND DELIVERY TERM


 


Section 4.1             Prices.


 


(a)           The initial prices for the Pulpwood Products shall be
as set forth in Schedule 4.1(a). 
Pulpwood Products delivered by Seller to Buyer will be paid for at the
prices outlined in Schedule 4.1, or as adjusted pursuant to Section 4.1(b),
based on the Delivery Distance.  Such
prices for the Pulpwood Products shall be adjusted as of January 1, 2006
and each subsequent July 1 and January 1 thereafter.


 


(b)           On or before January 1, 2006 and each subsequent July 1st
and January 1st of each Calendar Year of the Term, Buyer shall
calculate the average volume-weighted open market price by Delivery Distance
for each of the Pulpwood Products as paid by Buyer to open market suppliers
delivering pulpwood to the Mill from harvesting sites in the Market Region for
the previous six months.  Said open market
prices will be exclusive of the prices paid by Buyer for any of the Products
delivered pursuant to this Agreement, but shall include all amounts paid to all
other pulpwood suppliers to the Mill (exclusive of any payments to such
suppliers made pursuant to Section 4.1(d)).  If requested by Seller, Buyer shall provide
to a third party mutually agreeable to Seller and Buyer all information and
documentation necessary to allow such third party to confirm to Seller the
accuracy of said calculation and the pricing information used in connection
with said calculation.  Such prices, as
calculated for each of the Pulpwood Products, shall become the Most Recent
Price by Species (“Most Recent Price by Species”).  The initial prices as set forth in Section 4.1(a),
or as adjusted pursuant to this Section 4.1(b), shall be adjusted each July 1
and January 1, based on the latest absolute dollar change in the Most
Recent Price by Species.  Such prices, as
adjusted, shall be the “Contract Prices” for each of the Pulpwood Products for
the upcoming six month Price Period. 
Each calendar half, including the first, in any Calendar Year is a “Price
Period”.


 


(c)           The price for the Hardwood Stringers shall be $58.55
per ton through December 31, 2005. 
Thereafter, the price for Hardwood Stringers shall be adjusted
semiannually, beginning January 1, 2006, based on the price adjustment
mechanism set forth on Schedule 4.1(c) attached hereto and hereby
made a part hereof.


 


(d)           In addition to the other amounts payable hereunder, in
the event Buyer pays any bonuses to suppliers to the Mill for fuel adjustments
or adverse weather conditions, Buyer shall make comparable and contemporaneous
payments to Seller, provided, however that such payments are general bonuses
paid to at least fifty


 


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percent
(50%) of all such suppliers.  Any such
payments made to Seller pursuant to this Section 4.1(d) shall not be
used in calculating the Most Recent Price by Species.


 


Section 4.2             Pay
or Take.


 


(a)           Seller agrees to sell and deliver, subject to Force
Majeure, and Buyer agrees to purchase, subject to Force Majeure, the Annual
Volumes of Products to be produced under the direction of Seller during each
Calendar Year as determined in Section 2.3 (c).  If for any Calendar Year, Seller fails for
any reason other than Force Majeure to tender to Buyer at least ninety percent
(90%) of the designated Annual Volumes of Products, Seller will pay Buyer at a
rate of $15.00 per ton multiplied by the difference between (x) ninety percent
(90%) of the Annual Volumes of Products for the applicable Calendar Year minus
(y) the volume of Products actually tendered by Seller during such Calendar
Year, as liquidated damages and not as a penalty, and Buyer shall have no
further claim for damages on account of such shortfall in the delivery of the
Annual Volumes.  Payment shall be made by
Seller to Buyer on demand no later than fifteen (15) days from Buyer’s written
request for such payment. 
Notwithstanding the foregoing, if adverse weather conditions during the
last forty-five (45) days of any Calendar Year prevent Seller from delivering
the Annual Volumes for said Calendar Year, the payments provided for in this Section 4.2(a) shall
not apply unless and to the extent said volumes (together with any volumes
required with respect to the first quarter of the following Calendar Year) are
not delivered on or before February 15 of the following Calendar
Year.  Seller shall keep Buyer advised of
any such adverse weather conditions and Buyer’s need for additional time to
deliver said volumes.


 


(b)           If for any Calendar Year, Buyer fails for any reason
other than Force Majeure to purchase at least ninety percent (90%) of the
Annual Volumes of Products from Seller, then Buyer shall pay Seller for the
shortage at a rate of $15.00 per ton multiplied by the difference between (x)
ninety percent (90%) of the Annual Volumes of Products for the applicable
Calendar Year minus (y) the volume of Products actually purchased by Buyer
hereunder during such Calendar Year, as liquidated damages and not as a
penalty, and Seller shall have no further claim for damages on account of Buyer’s
failure to purchase the Annual Volumes. 
Payment shall be made by Buyer to Seller on demand no later than fifteen
(15) days from Seller’s written request for such payment.


 


(c)           Subject to the terms of Section 3.2 above, any
payments made pursuant to this Section 4.2 shall be calculated separately
for Softwood Pulpwood, Hardwood Pulpwood and Hardwood Stringers.  If this Agreement is in termination at a time
other than the beginning or end of a calendar year, the Annual Volumes for
purposes of calculating such shortage payment for either party will be prorated
equitably.


 


Section 4.3             Delivery
Terms.  All Pulpwood Products covered
by this Agreement shall be delivered to Buyer F.O.B. to the Mill, and all
Hardwood Stringers shall be delivered to Buyer’s Piketon merchandising yard,
or, with respect to both Pulpwood Products and Hardwood Stringers, to such
other locations in the Market Region as Buyer may direct upon reasonable
advance notice to Seller.  Risk of loss
and


 


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title shall pass when the Products are unloaded at the Mill or the
applicable delivery location.


 


Section 4.4             Payment.  Buyer shall pay Seller within fifteen (15)
days after the date of delivery for any Products delivered to Buyer, based upon
the volume of the Products delivered, as determined by the weight of such
Products at the time of delivery. 
Payments made after fifteen (15) days from the date of delivery shall be
considered past due (“Past Due”).  For
payments that are Past Due, Buyer shall pay interest at a rate per annum equal
to the daily prime rate as reported in the Wall Street Journal plus four
percent (4%) for each day that the payments are Past Due.  Such interest shall be calculated daily on
the basis of a year of 365 days and the actual number of days for which
interest is due.  If at any time during
the Term there are any payments outstanding to Seller that are Past Due, then,
in addition to any other remedies it may have hereunder, Seller may suspend
deliveries to Buyer until such time as all Past Due payments have been paid in
full.  In such event, Seller shall have
no obligation to supply or make up any portion of the Annual Volumes scheduled
for delivery and not delivered during such suspension and shall in no way be
liable to Buyer for any Losses (as defined below in Section 6.2(b)) or
payments pursuant to Section 4.2(a) related to any shortfall in delivered
volumes of Products arising out of said suspension.  Concurrently with the execution hereof, Buyer
has paid to Seller a deposit in the amount of $192,000.00 (the “Deposit”).  Seller may, in its sole discretion, apply all
or any part of the Deposit against any payments of Buyer that are Past
Due.  Provided that Buyer is current in
its payment obligations hereunder, the Deposit (less any amounts applied in
accordance with the preceding sentence) shall be deemed applied to reduce each
payment due Seller hereunder by an amount equal to 8.33% of each invoice, until
the unapplied portion of the Deposit is reduced to zero.  Any portion of the Deposit that is not so
applied on the second anniversary of the date of this Agreement shall be fully
applied against subsequent payments due Seller hereunder.


 


Section 4.5             Disputes.  If the personnel designated by Buyer and
Seller with operational responsibility for implementing this Agreement are
unable to agree as to any matter set forth in this Article IV then such
matter shall be addressed by the executives responsible for timberland
management for Seller and wood procurement for Buyer.  If such executives are unable to agree, then
such matter shall be determined by an arbitrator pursuant to Section 10.14.


 


Section 4.6             Compliance
with Product Specifications.  If any
shipment of any Product fails to satisfy the applicable Product Specifications,
Buyer shall have the right to reject such shipment. Buyer shall notify Seller
of any such rejection as soon as reasonably possible.


 


Section 4.7             Limitation
of Warranties.  EXCEPT FOR THE
WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT, THE PRODUCTS ARE BEING SOLD “AS
IS,” 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


 


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DEFINED IN THE DELAWARE UNIFORM COMMERCIAL CODE), ALL OF WHICH ARE
HEREBY EXPRESSLY EXCLUDED, DISCLAIMED AND WAIVED BY BUYER.


 


ARTICLE V


 


TERM


 


Section 5.1             Term.  This Agreement shall expire on December 31,
2016, unless this Agreement is sooner terminated for cause pursuant to Section 9.1
hereof, or unless this Agreement is extended as provided in Section 5.2
(the “Term”). 


 


Section 5.2             Extension
of Term.  Provided that Buyer shall
not then be in default under this Agreement, the Term of this Agreement may be
extended at the option of Buyer for one (1) additional three (3) year
term, which extension term shall commence concurrently with the expiration of
the initial term, upon the same terms and conditions as contained in this
Agreement.  In the event that Buyer
desires to extend this Agreement pursuant to the above extension option, it
shall give written notice of such desire to extend the Term to Seller no later
than January 1, 2016.


 


ARTICLE VI


 


REPRESENTATIONS, WARRANTIES AND COVENANTS


 


Section 6.1             Warranty
of Quality.  Seller warrants and
covenants that it will act in good faith and use its reasonable best efforts to
cause all Products to meet the Product Specifications.


 


Section 6.2             Ownership
of Products.  (a)  Seller
warrants and covenants that all Products delivered to Buyer will be free and
clear of all Liens (as defined in Section 6.2(b) below).  Seller shall protect, indemnify, defend and
hold harmless Buyer against any Losses (as defined in Section 6.2(b) below)
incurred or sustained by Buyer arising out of or resulting from any Liens
applicable to any of the Products at the time delivered by Seller.


 


(b)  The term “Liens” means any and all
liens, charges, mortgages, deeds to secure debt, pledges, security interests,
options of record, adverse claims or other encumbrances of a liquidated amount
or which are otherwise statutorily enforceable, other than liens for ad valorem
taxes not yet due and payable; provided, however, none of the aforementioned
shall constitute a “Lien” in the event the same fails to prevent Seller from
performing any of its obligations hereunder. 
The term “Losses” means any and all claims, liabilities, obligations,
losses, fines, costs, royalties, proceedings, deficiencies or damages (whether
absolute, accrued, conditional or otherwise and whether or not resulting from
third party claims) including, but not limited to, out-of-pocket expenses and
reasonable actual attorneys’ and actual accountants’ fees incurred in the
investigation or defense of any of the same or in enforcing any of their
respective rights hereunder.


 


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Section 6.3             Power
and Authority; Enforceability. 
Seller represents and warrants that it is a limited liability company
duly organized and validly existing under the laws of the State of Delaware,
and that it has all requisite corporate authority to enter into this Agreement
and to perform its obligations hereunder. 
Seller represents and warrants that 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 may be limited by (i) bankruptcy, reorganization,
insolvency, moratorium, receivership or other similar laws affecting or
relating to the enforcement of creditors’ rights or remedies generally, and (ii) general
principles of equity (whether considered at law or in equity).


 


Section 6.4             Compliance
with Laws; Maintenance of Timberlands. 
Seller agrees that its performance of this Agreement shall comply in all
material respects with applicable state and federal laws and regulations, including,
but not limited to, all environmental laws and the Fair Labor Standards Act of
1938, as amended.


 


Section 6.5             Seller
as Independent Contractor.  No
relationship of employer and employee, or master and servant, is intended to
exist, nor shall any be construed to exist, between Buyer and Seller, or
between Buyer and any servant, agent, employee, subcontractor or supplier of or
to Seller as a result of the parties entering into or performing this
Agreement.  Each party hereto shall
select and pay its own servants, agents, employees, subcontractors and
suppliers, and neither such party nor any of its servants, agents, employees,
subcontractors and suppliers shall be subject to any orders, supervision or
control of the other party hereto.  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             Buyer
Power and Authority; Enforceability. 
Buyer represents and warrants that it is a corporation duly organized
and validly existing under the laws of the State of Delaware, and that it has
all requisite corporate authority to enter into this Agreement and to perform
its obligations hereunder. Buyer represents and warrants that this Agreement has
been duly authorized, executed and delivered by Buyer and constitutes the
legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, except as may be limited by (i) bankruptcy,
reorganization, insolvency, moratorium, receivership or other similar laws
affecting or relating to the enforcement of creditors’ rights or remedies
generally; and (ii) general principles of equity (whether considered at
law or in equity).


 


ARTICLE VII


 


DEFAULT AND INDEMNIFICATION


 


Section 7.1             Indemnity.


 


(a)           Buyer 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,
the operation of the business


 


11





















 


of
Seller or the acts of any servant, agent, employee, subcontractor or supplier
of Seller in connection with this Agreement, except to the extent such Loss is
finally judicially determined to have arisen out of or resulted from the
negligence or intentional misconduct of any of Buyer, its subsidiaries and
other affiliates (other than Seller), or any of its or their respective
servants, agents, officers, partners, directors, employees, subcontractors or
suppliers. Seller shall protect, defend, indemnify and hold harmless NewPage Holding
Corporation, NewPage Corporation, Buyer, and their respective subsidiaries
and affiliates (other than Seller), and each of its and their respective
agents, officers, partners, directors, employees, successors and assigns, from
and against any claim, demand, cause of action, lawsuit or other Loss arising
out or resulting from performance of this Agreement by Seller, or of any
servant, agent, employee, subcontractor or supplier of or to Seller, including
any Loss based on the strict liability of Buyer except to the extent such Loss
is finally judicially determined to have arisen out of or resulted from the
negligence or intentional misconduct of any of Buyer, its subsidiaries and other
affiliates (other than Seller), or any of its or their respective servants,
agents, officers, partners, directors, employees, subcontractors or suppliers.


 


(b)           Seller shall in no way be liable for any personal
injuries (including death), property damage or other Losses caused by,
resulting from, or attributable to, Buyer’s performance under this Agreement,
the operation of the business of Buyer or the acts of any servant, agent,
employee, subcontractor or supplier of Buyer in connection with this Agreement,
except to the extent such Loss is finally judicially determined to have arisen
out of or resulted from the negligence or intentional misconduct of any of
Seller, its subsidiaries and other affiliates (other than NewPage Holding
Corporation and its subsidiaries), or any of its or their respective servants,
agents, officers, partners, directors, employees, subcontractors or
suppliers.  Buyer shall protect, defend,
indemnify and hold harmless Seller, and its subsidiaries and other affiliates
(other than NewPage Holding Corporation and its subsidiaries), and each of
its and their respective agents, officers, partners, directors, employees,
successors and assigns, from and against any claim, demand, cause of action,
lawsuit or other Loss arising out or resulting from performance of this
Agreement by Buyer, or of any servant, agent, employee, subcontractor or
supplier of or to Buyer, including any Loss based on the strict liability of
Seller, except to the extent such Loss is finally judicially determined to have
arisen out of or resulted from the negligence, or intentional misconduct of any
of Seller, its subsidiaries and other affiliates (other than NewPage Holding
Corporation and its subsidiaries), or any of its or their respective servants,
agents, officers, partners, directors, employees, subcontractors or suppliers.


 


Section 7.2             Certain
Remedies.  Notwithstanding anything
in this Agreement to the contrary, Buyer’s sole and exclusive remedies against
Seller (following the expiration of any applicable cure period) in the event
that Seller breaches its obligation to provide the Annual Volumes of Products
required under this Agreement shall be (a) to receive the payment provided
pursuant to Section 4.2(a) of this Agreement, and (b) to
terminate this Agreement pursuant to Section 9.1 of this Agreement.  


 


12





















 


ARTICLE VIII


 


CONSENT TO JURISDICTION


 


Section 8.1             Consent
to Jurisdiction.  In connection with
any proceeding initiated by either party under or with respect to this
Agreement and the transactions contemplated hereby, each party hereby consents
to the jurisdiction of any United States Federal Court sitting in the state of
Ohio having jurisdiction in the matter. 
Each party acknowledges and agrees that any controversy that may arise
under this Agreement is likely to involve complicated and difficult issues, and
therefor it hereby irrevocably and unconditionally waives any right it may have
to a trial by jury in respect of any litigation directly or indirectly arising
out of or relating to this Agreement, or the breach, termination or validity of
this Agreement, or the transactions contemplated by this Agreement.


 


ARTICLE IX


 


TERMINATION


 


Section 9.1             Termination
for Cause.  This Agreement shall
immediately terminate if any one of the following events (each, a “default”)
has occurred and is continuing on the tenth (10th) day after receipt of notice
of an intent to cancel by reason of such default (each, an “Event of Default”):


 


(a)           Breach of any term of this Agreement, which breach is
not cured within sixty (60) days after receipt of written notice thereof;


 


(b)           Insolvency or the filing by or against Seller or Buyer
of a petition in bankruptcy (which, in the event of an involuntary bankruptcy,
is not dismissed within ninety (90) days from the date of its commencement), or
appointment by a court of a temporary or permanent receiver, trustee or
custodian; or


 


(c)           If the Mill for any reason ceases all pulping
operations for a period that exceeds twelve (12) consecutive months at any time
during the Term.


 


Section 9.2             Effect
of Termination.  Termination shall
not relieve a defaulting party of any liability to the nondefaulting party for
breach of its obligations hereunder.


 


ARTICLE X


 


MISCELLANEOUS


 


Section 10.1           Definitions.


 


(a)           The words “hereby,” “herein,” “hereof,” “hereunder”
and words of similar import refer to this Agreement as a whole and not merely
to the specific


 


13





















 


section,
paragraph or clause in which such word appears. 
The word “party” or “parties” means a party or the parties to this
Agreement, unless preceded by the word “third” or unless the context shall
otherwise expressly require.  All
references herein to Articles, Sections, Annexes and Exhibits shall be deemed
references to Articles and Sections of, and Annexes and Exhibits to, this
Agreement unless the context shall otherwise require.  The words “include,” “includes” and “including”
shall be deemed to be followed by the phrase “without limitation,” unless already
expressly followed by such phrase or the phrase “but not limited to.”  The definitions given for terms in this Section 10.1
and in Article I above shall apply equally to both the singular and plural
forms of the terms defined.  Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms.


 


(b)           Whenever used in this Agreement, the following terms
shall have the respective meanings given to them below.


 


“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 of the term “affiliate,”
and elsewhere herein with respect to any affiliate of any 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.


 


“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, without limitation, any instrumentality, division,
agency, body or department thereof) or other entity.


 


Section 10.2           Assignment by Seller.


 


(a)           Except as provided in this Section 10.2, this
Agreement may not be assigned by Seller in whole or in part.  Notwithstanding the foregoing, at any time
during the Term, Seller may assign this Agreement (i) to any lender or
lenders as security for obligations to such lender or lenders in respect to
financing arrangements of Seller or any Affiliate thereof with such lender or
lenders, or (ii) upon prior written notice to Buyer, to any Person that is
and at all times remains an Affiliate of Seller or that merges or consolidates
with or into Seller or that acquires all or substantially all of the
Timberlands.


 


(b)           Notwithstanding any other provision of this Agreement
to the contrary, Buyer and Seller acknowledge and agree that Seller shall not
be prohibited from selling all or any portion of the Timberlands, provided that
any such sale of the Timberlands shall be made subject to the terms of this
Agreement and the obligation to supply the applicable portion of timber volumes
required hereunder.  Upon any sale of a


 


14





















 


portion
of the Timberlands, the purchaser of said portion of the Timberlands (“New
Owner”) shall assume the obligation to supply a portion of the timber volumes
to be supplied hereunder, said portion of the timber volumes (“Assumed Volume”)
to be agreed to by Seller and said New Owner, subject to Buyer’s consent to
such volume allocation, which consent shall not be unreasonably withheld or
delayed.  Upon such assumption by said
New Owner, Seller’s obligations to supply Products hereunder shall be reduced
by the volumes assumed by said New Owner, and Seller shall thereafter have no
obligation or liability with respect to said assumed volumes or with respect to
the portion of the Timberlands so conveyed. 
At the request of Seller, upon any such sale to a New Owner Buyer shall
execute an amendment to this Agreement acknowledging the foregoing.  Furthermore, upon request of Seller or Buyer,
upon such sale to a New Owner, Buyer and such New Owner shall enter into a
separate fiber supply agreement on the same terms and conditions as contained
in this Agreement (or such other terms as Buyer and such New Owner shall
mutually agree) except for the portion of the Timberlands covered thereby and
the volume of Products to be supplied thereunder.  In the event Buyer objects to any proposed
Assumed Volume, Buyer shall provide written notice of the same to Seller within
fifteen (15) days of notice to Buyer of said proposed Assumed Volume (“Objection
Notice”), said Objection Notice to include a detailed explanation of the basis
for said objection.  Failure by Buyer to
timely provide said Objection Notice shall be deemed to constitute the consent
of Buyer to said proposed Assumed Volume. 
In the event Buyer timely provides an Objection Notice, Seller shall
have the option of (i) revising said proposed Assumed Volume, in which
case Buyer shall have the further right to object by providing a new Objection
Notice as provided above or (ii) retaining the Valuation Consultant to
determine whether the proposed Assumed Volume is reasonable.  In the event the Valuation Consultant is so
retained and determines that said proposed Assumed Volume is reasonable, Buyer
shall be deemed to have consented to said Assumed Volume and shall pay all
costs and expenses of said Valuation Consultant.  Otherwise, said costs and expenses shall be
paid by Seller.  Notwithstanding the
foregoing, Seller may convey during the Term hereof up to 15,000 acres of the
Timberlands free and clear of the obligations of this Agreement (the “Exempt
Acres”), provided that Seller is able to supply the volume of Products required
to be supplied hereunder from the remaining portion of the Timberlands.  Buyer agrees to execute any and all
documentation requested by Seller in order to evidence the release of the
Exempt Acres from this Agreement.


 


Section 10.3           Assignment
by Buyer.


 


Except as provided in this Section 10.3,
this Agreement may not be assigned by Buyer in whole or in part.  Notwithstanding the foregoing, at any time
during the Term, Buyer may assign this Agreement (a) to any lender or
lenders as security for obligations to such lender or lenders in respect of
financing arrangements of Buyer or any affiliate thereof with such lender or
lenders, or (b) upon prior written notice to Seller, to any Person that is
and at all times remains an Affiliate of Buyer or that merges or consolidates
with or into Buyer or that acquires all or substantially all of the assets or
stock of Buyer.


 


15





















 


Section 10.4           Notices.  All notices, requests, demands and other
communications provided for hereunder shall be in writing and personally
delivered or sent by regular U.S. certified mail, telecopy or Federal Express
(or similar type of overnight delivery) to the applicable party at the address
indicated below:


 


	
  If to Buyer:

  	
  Chillicothe Paper Inc.

  401 S. Paint Street

  Chillicothe, Ohio  45601

  
	
   

  	
   

  
	
  With a copy to:

  	
  Stephen A. Brown

  327 South Paint Street

  P. O. Box 2500

  Chillicothe, Ohio  45601

  Telecopier No.  740-772-3670

  Telephone No.  740-772-3480

  
	
   

  	
   

  
	
  and

  	
  Lee Bendtsen

  401 South Paint Street

  Chillicothe, Ohio  45601

  Telecopier No.  740-772-0000

  Telephone No.  740-772-3960

  
	
   

  	
   

  
	
  If to Seller:

  	
  Escanaba Timber LLC

  c/o NewPage Corporation

  Courthouse Plaza N.E.

  Dayton, Ohio  45463

  



 


or, as to each party, at such other address as shall be designated by
such party in a written notice to the other party complying as to delivery with
the terms of this Section.  Notice shall
be deemed received when (i) hand delivered; (ii) sent, after receipt
of confirmation or answer back if sent by telecopy; (iii) five Business
Days after deposit in the U.S. mails, postage prepaid, for certified mail; and (iv) one
Business Day after delivery to Federal Express (or similar type of overnight
delivery), properly addressed to the applicable party.


 


Section 10.5           Amendment;
Waiver.  No amendment, modification
or discharge of this Agreement, and no waiver hereunder, 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.


 


16





















 


Section 10.6           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 10.7           Sovereign
Law.  This Agreement shall be
governed by and construed in accordance with the laws of the State of Ohio,
without reference to the conflicts of laws or choice of law provisions thereof.


 


Section 10.8           Binding
Agreement.  Subject to the provisions
of Sections 10.2 and 10.3, this Agreement shall bind and inure to the benefit
of the parties and their respective successors and assigns.


 


Section 10.9           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 10.10         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 10.11         Annexes
and Exhibits.  All annexes,
attachments, schedules and exhibits to this Agreement referenced herein are
incorporated herein by reference.


 


Section 10.12         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 10.12, 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 10.13         No
Presumption Against Drafter.  Each of
the parties hereto has jointly participated in the negotiation and drafting of
this Agreement.  In the event of an
ambiguity or a question of intent or interpretation arises, 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 10.14         Arbitration.


 


(a)           All controversies, disputes, or claims arising among
the parties in connection with, or with respect to, any provision of this
Agreement which


 


17





















 


have
not been resolved within twenty (20) days after either Buyer, on the one hand,
or Seller, on the other hand, has notified the other in writing of such
controversy, dispute or claim, shall be settled by arbitration administered by
the American Arbitration Association (“AAA”) under its Commercial Arbitration
Rules, and judgment on the award rendered by the arbitrator(s) may be entered in
any court having jurisdiction thereof. 
Notwithstanding anything contained in this Section 10.14 or the AAA
Commercial Arbitration Rules to the contrary, any arbitrator appointed
hereunder to resolve disputes shall be an attorney licensed to practice law in
the United States with experience in commercial real estate and the timber and
paper industries and shall have expertise appropriate to the dispute.  In addition to the aforementioned
qualifications, any arbitrator appointed hereunder to resolve disputes arising
out of any Article IV matter shall have a familiarity with the factors
taken into account in pricing wood fiber products and shall otherwise be
qualified to make the pricing determinations required by Article IV.


 


(b)           Nothing herein contained shall bar the right of any of
the parties to seek and obtain temporary injunctive relief from a court of
competent jurisdiction in accordance with applicable law against threatened
conduct that will cause loss or damage, pending completion of the arbitration,
and the prevailing party therein shall be entitled to an award of its
reasonable attorneys’ fees and costs.


 


(c)           Notwithstanding anything contained in this Agreement
to the contrary, in the event that any controversy, dispute, or claim exceeds
$10,000,000, this Section 10.14 shall not apply.


 


Except as otherwise provided in this
Agreement, this Section shall be interpreted, governed by and enforced in
accordance with the United States Arbitration Act, 9 U.S.C. Section 1-14.


 


Section 10.15         Sustainable
Forestry Initiative.  Seller shall
continue to manage the Timberlands in accordance with the Sustainable Forestry
Initiative during the Term of this Agreement. 
From time to time it may be necessary to agree upon a recognized
successor or alternative standard to the Sustainable Forestry Initiative, which
shall be negotiated in good faith to reflect changes or developments in the
evolution of widely accepted industry standards.


 


Section 10.16         Option
to Convert to Stumpage Agreement. 
At any time during the Term of this Agreement, upon not less than one
hundred twenty (120) days prior written notice from Seller to Buyer, Seller
shall have the one-time option to convert this Agreement from a delivered wood
agreement to a stumpage agreement. 
Upon such conversion (the “Conversion Date”), the parties shall enter
into a new agreement substantially in the form of the agreement attached hereto
as Schedule 10.16 (the “Stumpage Agreement”).  The Base Prices for such Stumpage Agreement
shall be the fair market value of the Products on the Conversion Date, as
reasonably and mutually agreed to by Buyer and Seller.  If the parties are unable to agree on said
Base Prices, said Base Prices shall be determined by the Valuation Consultant.


 


18





















 


Section 10.17         Memorandum
of Contract.  At the request of any
party hereto, a Memorandum of this Agreement shall be recorded in the recording
offices of each and every County in which the Timberlands are located.


 


Section 10.18         Publicity.  This Agreement is confidential and no party
shall issue press releases or engage in other types of publicity of any nature
dealing with the commercial and legal details of this Agreement without the
other party’s prior written approval. 
However, approval of such disclosure shall be deemed to be given to the
extent such disclosure is required to comply with applicable laws, governmental
rules, regulations or other governmental requirements, or in connection with
any financing arrangements of such party. 
In such event, the publishing party shall, to the extent reasonably
practicable, furnish, in advance, a copy of such proposed disclosure, to the
other party.


 


Section 10.19         Estoppel
Certificates.  Either party shall, at
no cost to the requesting party, from time to time, upon twenty (20) days prior
request by the other party, execute, acknowledge and deliver to the requesting
party a certificate signed by an officer of the certifying party stating that
this Agreement is unmodified and in full force and effect (or, if there have
been modifications, that this Agreement is in full force and effect as
modified, and setting forth such modifications) and the dates through which
payments have been made, and either stating that to the knowledge of the signer
of such certificate no default exists under this Agreement or specifying each
such default to which the signer has knowledge.


 


Section 10.20         Prevailing
Party.  If either party brings any
proceeding for the judicial or other interpretation, enforcement, termination,
cancellation or rescission of this Agreement, or for damages for the breach
thereof, the prevailing party in any such proceeding or appeal thereon shall be
entitled to its reasonable attorneys’ fees and court and other reasonable costs
incurred, to be paid by the losing party as fixed by the court in the same or a
separate proceeding, and whether or not such proceeding is pursued to decision
or judgment.  


 


ARTICLE XI


 


RACCOON ECOLOGICAL MANAGEMENT AREA


 


Section 11.1           Notice
of Proposed Sale.  The portion of the
Timberlands identified on Schedule 11.1 attached hereto is commonly
referred to as the Raccoon Ecological Management Area (the “REMA Tract”).  If Seller desires to sell, transfer or
convey, either directly or indirectly, by operation of law or otherwise, any
interest to all or any portion of the REMA Tract (the “Timberlands Interest”),
Buyer shall have a right of first offer to acquire all, but not less than all,
of such Timberlands Interest, and Seller shall not transfer such Timberlands
Interest without first complying with the provisions of this Article XI.  Seller shall give written notification to
Buyer, by certified mail or personal delivery, of Seller’s desire to sell the
Timberlands Interest at issue (the “RFO Notice”).  In order to be effective, the RFO Notice must
contain the following information: (i) a detailed description of the
Timberlands Interest to be sold, (ii) the cash


 


19





















 


price of the Timberlands Interest to be sold and (iii) the Assumed
Volume proposed to be allocated to said Timberlands Interest (the “Offer Terms”).  For purposes of this Article XI, the
sale, transfer or conveyance of a controlling interest in Seller (or the sale,
transfer or conveyance of an interest in Seller which when aggregated with
previous sales, transfers or conveyances would constitute a controlling
interest in Seller, a “Change of Control”) shall constitute a sale of a
Timberlands Interest subject to Buyer’s right of first offer hereunder;
provided, however, that Buyer’s failure to exercise its right of first offer in
connection with a Change of Control shall not result in a termination of said
right of first offer.


 


Section 11.2           Response
to Notice.  Buyer shall have the
right to purchase all (but not less than all) of the Timberlands Interest
proposed to be sold by Seller upon the same terms and conditions as stated in
the aforesaid RFO Notice by giving written notification to Seller, by certified
mail or personal delivery, of its intention to do so within thirty (30) days
after receiving the RFO Notice (the “RFO Response”).


 


Section 11.3           Waiver
of Right.  Except as hereinafter
provided, the failure of Buyer to timely provide the RFO Response shall result
in a waiver of its right to purchase the Timberlands Interest covered by such
RFO Notice for the six (6) month period commencing on the date on which
the RFO Response was required to be delivered. 
In such event, Seller shall be entitled to sell the Timberlands Interest
to a third party purchaser consistent with the Offer Terms, or for a cash price
which is more favorable to Seller than as set forth in the Offer Terms.  In the event Seller does not close the
proposed transaction consistent with the Offer Terms, or for a cash price which
is more favorable to Seller than as set forth in the Offer Terms, within six (6) months,
or if Seller desires to consummate a sale of the applicable Timberlands
Interest for a cash price which is less favorable to Seller than as set forth
in the Offer Terms, then Buyer’s right of first offer shall be reinstated as to
such Timberlands Interest in accordance with the terms and procedures set forth
above.  No sale of a Timberlands Interest
shall be valid unless Seller has complied with the provisions of this Article XI
prior to consummation of such sale.  In
the event Buyer fails to timely provide the RFO Response, Buyer shall promptly
execute any and all documentation requested by Seller in order to evidence the
waiver of Buyer’s right of first offer with respect to said Timberlands Interest.


 


Section 11.4           Closing.  In the event Buyer gives written notice to
Seller in compliance with Section 11.2 above of its desire to exercise its
right to purchase all of the Timberlands Interest which Seller desires to sell,
Seller shall designate the time, date and place of closing, provided that the
date of closing shall be no earlier than ninety (90) days, and no later than
one hundred eighty (180) days, after receipt by Seller of the RFO
Response.  In such event, the purchase
and sale of the Timberlands Interest shall be effected pursuant to the Offer
Terms and otherwise in accordance with the terms of Seller’s proposed real
estate sales contract (which contract shall be subject to Buyer’s reasonable
review and approval and shall allow Buyer to assign said contract so long as
Buyer is not released from its obligations under said contract).  


 


Section 11.5           Applicability
of Right of First Offer.  The right
of first offer set forth herein shall not apply to:  (a) any condemnation of any portion of
the REMA


 


20





















 


Tract, or any sale in lieu thereof; or (b) any easement, cutting
contract, or hunting license on any portion of the REMA Tract.


 


Section 11.6           Title
to REMA Tract.  Buyer’s rights set
forth in this Article XI are subject and subordinate to all matters of
record on the date hereof, including but not limited to the rights of others to
purchase the REMA Tract pursuant to a pre-existing option or right of first
refusal, if any.  During the term of this
Agreement, Seller shall not grant any mortgage, deed of trust or similar
encumbrance on the REMA Tract without the prior written consent of Buyer.  


 


21





















 


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


 


	
   

  	
  ESCANABA TIMBER LLC 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Linda Sheffield

  	
   

  
	
   

  	
  Name: Linda
  Sheffield

  
	
   

  	
  Title:
  Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CHILLICOTHE PAPER INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Linda Sheffield

  	
   

  
	
   

  	
  Name: Linda
  Sheffield

  
	
   

  	
  Title:
  Treasurer

  



 


22





















 


ANNEX A  - PRODUCT SPECIFICATIONS


 


NewPage


CHILLICOTHE,
OHIO


 


HARDWOOD PULPWOOD:


 


All species are accepted except black locust,
black walnut, and osage orange.


 


PINE PULPWOOD:


 


All species of pine, spruce and hemlock will
be accepted.  No cedar will be accepted.


 


PULPWOOD MUST MEET THE FOLLOWING CRITERIA:


 


Pulpwood may range from 12 to 25 feet in length, and wood must be 4 to
24 inches in diameter.  Do not mix short
pulpwood (12 to 16 feet) and long pulpwood in the same rick.


 


1.               Limbs and knots
must be trimmed flush with the stick and small branches must be removed.  Forks must be completely removed.


 


2.               We must be able to
cut the crook out of a stick so that it will go through a 24” cylinder.


 


3.               Pulpwood must not
have sap rot or heart rot more than 50%. 
Burned wood also will not be accepted.


 


4.               Pulpwood may not
contain metal or plastic of any kind.


 


5.               Pine pulpwood will
not be accepted with Southern Pine Beetle damage.  No dead pine accepted.


 


LOADING OF TRUCKS:


 


Trucks must be loaded so that all wood is at
least 12 inches from the bulkhead (“headache rack”).  Tractor-trailers hauling two ricks must have
the ricks completely separated by at least 12 inches.  If a truck is considered unsafe to unload for
any reason, including wood above the standards, it will not be unloaded.  There must be 11 feet of clearance between
standards, and 10 inches clearance between the wood and the truck frame.  It is all right to have a standard in the
middle, as long as it is in such a position that it does not hit the FWD forks
during unloading.


 





















 


8/01


 


VIOLATIONS:


 


Any truck containing pulpwood not meeting
these guidelines and any truck not meeting the safety guidelines will not be unloaded. 
These loads will be refused and the entire load
will be sent back.


 





 


For the safety of the truck driver, hard hats and safety glasses must
be worn at all times while on the Woodyard. 
Please deposit all trash in trash cans to help cut down on chip pile
contamination.  Thank you for your
cooperation.


 


A-2





















 


PIKETON LOG MERCHANDISING FACILITY


 


March 28,
2005


 


MINIMUM
STRINGER SPECIFICATIONS


 


1)              Top Diameter:  10” small end, inside bark, ONLY IF the last
10’ of the stringer is STRAIGHT AND SOUND. 
The 10” top should help maximize the production of 8’-12’ sawlogs from
the butts of smaller diameter class trees.


The following are exceptions to the 10” top
diameter for stringers:


•                  Poplar
peelers:  8’ 10” log to 8” minimum top
diameter;  17’ 10” log to 8” minimum top
diameter – BUCKING SPLITS NOT ACCEPTABLE.


•                  Hard
Maple, Walnut, and Cherry: 8” minimum top diameter, ONLY IF last 8’ is straight &
sound


•                  Beech:
10’-18’ Butt logs ONLY, 13” minimum top diameter, straight & sound


•                  Aspen,
Cottonwood, Sycamore, Gum, Hackberry, American Elm, Buckeye – On logs >=23”
on the butt, we will accept 10’& 12’ butt logs ONLY as necessary to achieve
a large end diameter <23”


 


2)              Rot:
Rot must not exceed 40% of the diameter of either log end provided there is no
indication the rot is getting worse.


 





3)              Shake and/or
Cracks: The area of the log end affected by shake and/or cracks
(defect) must be less than 40% of the total surface area of the log end.


 







	
  Log End

  	
   

  	
  Max Defect

  	
   

  
	
  Diameter

  	
   

  	
  Diameter

  	
   

  
	
  16

  	
   

  	
  10

  	
   

  
	
  17

  	
   

  	
  11

  	
   

  
	
  18

  	
   

  	
  11

  	
   

  
	
  19

  	
   

  	
  13

  	
   

  
	
  20

  	
   

  	
  13

  	
   

  
	
  21

  	
   

  	
  13

  	
   

  
	
  22

  	
   

  	
  14

  	
   

  
	
  23

  	
   

  	
  15

  	
   

  
	
  24

  	
   

  	
  15

  	
   

  
	
  25

  	
   

  	
  16

  	
   

  
	
  26

  	
   

  	
  16

  	
   

  
	
  27

  	
   

  	
  17

  	
   

  
	
  28

  	
   

  	
  18

  	
   

  






 


 


A-3





















 


4)             Forks:  Bucking point
as described below:


 


	
  No appreciable increase in
  log

  diameter up to fork.

  	
   

  	
  Noticeable increase in log

  diameter before fork.

  
	
   

  	
   

  	
   

  
	
  

  	
   

  	
  

  



 


5)                                      Sweep and/or Crook: Sweep and/or crook must not exceed more than
1⁄2 the diameter in inches of the final 8’ of either end of the stringer.


 





 


6)             Metal:  All metal and
signs of metal (stain) must be bucked out.


 


General:  All stringers should be manufactured with
sawlogs in mind.


1)              Stump height must be
as close to ground level as practicable.


2)              Carry and utilize
all required falling equipment (hammer, wedges, first aid kit)


3)              Utilize proper
falling technique to minimize stump pull and cracked logs.


4)              All stump spurs and
root flare must be removed by sawing.


5)              Limbs must be bucked
flush with the bole of the tree.


6)              All bucks must be
SQUARE WITH the bole of the tree and must be made in such a manner so as to
avoid slabbing/cracking.


7)              Bucking must
eliminate forks per minimum specifications as described above.


 


A-4





















 


SCHEDULE 4.1(a)


 




	
  Delivery Distance

  	
   

  	
   

  	
  Softwood

  	
   

  	
  Hardwood

  	
   

  
	
  (miles)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  0-20

  	
   

  	
   

  	
  $

  	
  24.00

  	
   

  	
  $

  	
  20.00

  	
   

  
	
  21-30

  	
   

  	
   

  	
  $

  	
  24.50

  	
   

  	
  $

  	
  20.50

  	
   

  
	
  31-40

  	
   

  	
   

  	
  $

  	
  25.00

  	
   

  	
  $

  	
  21.00

  	
   

  
	
  41-50

  	
   

  	
   

  	
  $

  	
  26.00

  	
   

  	
  $

  	
  21.50

  	
   

  
	
  51-60

  	
   

  	
   

  	
  $

  	
  27.00

  	
   

  	
  $

  	
  22.00

  	
   

  
	
  61-70

  	
   

  	
   

  	
  $

  	
  28.00

  	
   

  	
  $

  	
  22.50

  	
   

  
	
  71-80

  	
   

  	
   

  	
  $

  	
  29.00

  	
   

  	
  $

  	
  23.00

  	
   

  
	
  81-90

  	
   

  	
   

  	
  $

  	
  30.00

  	
   

  	
  $

  	
  23.50

  	
   

  
	
  91-100

  	
   

  	
   

  	
  $

  	
  31.00

  	
   

  	
  $

  	
  24.00

  	
   

  
	
  101-110

  	
   

  	
   

  	
  $

  	
  32.00

  	
   

  	
  $

  	
  24.50

  	
   

  
	
  111-120

  	
   

  	
   

  	
  $

  	
  33.00

  	
   

  	
  $

  	
  25.00

  	
   

  
	
  121-130

  	
   

  	
   

  	
  $

  	
  33.50

  	
   

  	
  $

  	
  25.00

  	
   

  
	
  131-140

  	
   

  	
   

  	
  $

  	
  34.00

  	
   

  	
  $

  	
  25.00

  	
   

  
	
  141-150

  	
   

  	
   

  	
  $

  	
  34.50

  	
   

  	
  $

  	
  25.00

  	
   

  
	
  151-170

  	
   

  	
   

  	
  $

  	
  35.00

  	
   

  	
  $

  	
  25.00

  	
   

  
	
  171-190

  	
   

  	
   

  	
  $

  	
  35.50

  	
   

  	
  $

  	
  25.00

  	
   

  
	
  191-225

  	
   

  	
   

  	
  $

  	
  36.00

  	
   

  	
  $

  	
  25.00

  	
   

  






 





















 


SCHEDULE 4.1(c)


 


PRICE ADJUSTMENT MECHANISM FOR HARDWOOD STRINGERS


 


The
initial delivered price of $58.55 was derived as follows:


 


“DELIVERED
PRICE IS EQUAL TO 31.5%** OF THE CURRENT 4/4 #1 COMMON LUMBER PRICES AS
REPORTED IN “HARDWOOD REVIEW WEEKLY”, MULTIPLIED BY THE 2004 HARVEST VOLUME
PERCENTAGES (REFLECTED IN THE TABLE BELOW) PLUS CURRENT AVERAGE CUT AND HAUL
FEE OF $22.00 PER TON.


(**31.5%
IS BASED ON THE RECENT SALE OF 3 LUMP SUM SALES TO OUTSIDE MARKETS.)


 


 


	
   

  	
   

  	
   

  
	
   

  	
  4/4 #1

  Common

  3/18/05

  	
   

  
	
   

  
	
   

  	
   

  	
  Specie %

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ash

  	
   

  	
  0.015

  	
   

  	
  605

  	
   

  	
  9.08

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Basswood

  	
   

  	
  0.002

  	
   

  	
  400

  	
   

  	
  0.8

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Beech

  	
   

  	
  0.007

  	
   

  	
  435

  	
   

  	
  3.05

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cherry

  	
   

  	
  0.016

  	
   

  	
  1610

  	
   

  	
  25.76

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hickory

  	
   

  	
  0.054

  	
   

  	
  595

  	
   

  	
  32.13

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hard Maple

  	
   

  	
  0.031

  	
   

  	
  1235

  	
   

  	
  38.29

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Soft Maple

  	
   

  	
  0.041

  	
   

  	
  825

  	
   

  	
  33.83

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Red Oak

  	
   

  	
  0.263

  	
   

  	
  770

  	
   

  	
  202.51

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  White Oak

  	
   

  	
  0.428

  	
   

  	
  710

  	
   

  	
  303.88

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Poplar

  	
   

  	
  0.138

  	
   

  	
  370

  	
   

  	
  51.06

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Walnut

  	
   

  	
  0.005

  	
   

  	
  1030

  	
   

  	
  5.15

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  705.52

  	
   

  	
  0.315

  	
   

  	
  222.24

  	
   

  	
  6.9

  	
   

  	
  32.21

  	
   

  
	
  Price adjustment

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  4.34

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  36.55

  	
   

  
	
  Cut and Haul

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  22

  	
   

  	
  22.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Del. Price

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  58.55

  	
   

  
																		



 





















 


The semiannual price adjustment will be made as follows:


 


1) The percent of volume harvested by specie will be calculated based
on the actual volume of the species delivered in the prior six month period


 


2) Harvest volumes by specie are then multiplied by the six month prior
average of the Appalachian prices, area 2, 4/4 #1 common, green in the Hardwood
Review Weekly


 


3) Total price is converted to tons and $4.34 is added to final price


 


4) Current average Cut and Haul is calculated and added to price


 





















 


Example of Adjustment is set forth below using hypothetical specie mix
and hypothetical prices in Hardwood Review Weekly:


 


	
  Example of average pricing last six months
  of 2005 - Assumptions made for specie% and prices in Hardwood Review Weekly

  



 


 


 


	
   

  	
  4/4 #1 Common (Green)

  
	
   

  
	
   

  	
   

  	
  Specie %

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ash

  	
   

  	
  0.013

  	
   

  	
  610

  	
   

  	
   

  	
   

  	
  7.93

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Basswood

  	
   

  	
  0.002

  	
   

  	
  410

  	
   

  	
   

  	
   

  	
  0.82

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Beech

  	
   

  	
  0.003

  	
   

  	
  425

  	
   

  	
   

  	
   

  	
  1.275

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cherry

  	
   

  	
  0.016

  	
   

  	
  1645

  	
   

  	
   

  	
   

  	
  26.32

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hickory

  	
   

  	
  0.059

  	
   

  	
  590

  	
   

  	
   

  	
   

  	
  34.81

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hard Maple

  	
   

  	
  0.038

  	
   

  	
  1190

  	
  Unselected

  	
   

  	
  45.22

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Soft Maple

  	
   

  	
  0.045

  	
   

  	
  820

  	
   

  	
   

  	
   

  	
  36.9

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Red Oak

  	
   

  	
  0.282

  	
   

  	
  825

  	
   

  	
   

  	
   

  	
  232.65

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  White Oak

  	
   

  	
  0.398

  	
   

  	
  725

  	
   

  	
   

  	
   

  	
  288.55

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Poplar

  	
   

  	
  0.141

  	
   

  	
  380

  	
   

  	
   

  	
   

  	
  53.58

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Walnut

  	
   

  	
  0.003

  	
   

  	
  1020

  	
   

  	
   

  	
   

  	
  3.06

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  731.115

  	
   

  	
  0.315

  	
   

  	
  230.30123

  	
   

  	
  6.9

  	
  ***

  	
  33.38

  	
   

  



 


***conversion to tons


 


	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Price adjustment (constant)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  4.34

  	
   

  
	
  New stumpage price for first six months of 2006

  	
   

  	
   

  	
   

  	
  37.72

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cut and Haul

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Average of Cut & Haul for first
  six months of 2005 from COGNOS wood del summary**

  	
   

  	
  18.74

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Average of Cut and Haul for last six months
  of 2005 from COGNOS wood del summary**

  	
   

  	
  19.01

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  New Cut and Haul for fist six months of 2006

  	
  = Current six month ave. - previous six
  month ave.

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  current six
  month ave.

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  = (19.01-18.74)/19.01= 0.014

  	
   

  	
   

  	
   

  	
  22.31

  	
   

  
	
   

  	
  = Base rate (22.00/ton) * (1.0 + 0.014)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Del. Price for first six months of 2006

  	
   

  	
   

  	
   

  	
   

  	
  60.03

  	
   

  
																			



 


**CHILL HDMIX HWPW


 





















 


SCHEDULE 10.16


 


STUMPAGE AGREEMENT


 


















 


SCHEDULE 10.16


 


STUMPAGE
AGREEMENT


 


Between


 


ESCANABA
TIMBER LLC


 


and


 


CHILLICOTHE
PAPER INC.


 





















 


STUMPAGE
AGREEMENT


 


This
Agreement is made as of                                    ,
20    , by and between              
                    
                      
              ,
a                  
                                    
(“Seller”) and                     
               ,
a                      
                          
                    
                           (“Buyer”).


 


Recitals


 


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


 


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


 


Agreement


 


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


 


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


 


1.2           “Annual
Buyer Harvesting Notice” shall mean a written notice from Buyer to Seller to be
given not later than October 1 of each Harvesting Year during the Term of
this Agreement (beginning with Harvesting Year 2005) specifying which of the
Actual Designated Tracts Buyer will harvest during the upcoming calendar year.


 


1





















 


1.3           “Annual
Purchase Amount” shall mean (a) for the Harvesting Year beginning May 2,
2005, a minimum of Two Hundred Fifteen Thousand (215,000) tons of Qualifying
Timber; (b) for each Harvesting Year from January 1, 2006 through the
Harvesting Year beginning January 1, 2010, a minimum of Two Hundred
Ninety-Four Thousand (294,000) tons of Qualifying Timber; (c) for each
Harvesting Year from January 1, 2011 through the Harvesting Year beginning
January 1, 2016, a minimum of Two Hundred Thirty-Five Thousand (235,000)
tons of Qualifying Timber; and (d) to the extent Buyer exercises its
option to extend the Term pursuant to Section 9.2 below, for each
Harvesting Year from January 1, 2017 through the Harvesting Year beginning
January 1, 2019, a minimum of Two Hundred Five Thousand (205,000) tons of
Qualifying Timber.


 


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


 


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


 


1.6           “Base
Price Adjustment Date” shall mean the second anniversary of the date of this
Agreement, and each subsequent second anniversary during the Term of this
Agreement.


 


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


 


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


 


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


 


2





















 


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


 


1.11         “Fair
Market Timber Value Mechanism” shall mean the following procedure used to
determine the Fair Market Timber Value of each type of Qualifying Timber
hereunder.  Either Seller or Buyer may
initiate commencement of the Fair Market Timber Value Mechanism by notice to
the other (a “Mechanism Notice”).  Not
later than ten (10) days following receipt of a Mechanism Notice, Seller
and Buyer shall agree on the Valuation Consultant.  Not later than thirty (30) days following
selection of the Valuation Consultant, each of Seller, Buyer and the Valuation
Consultant shall submit to the others not less than six (6) Qualifying
Sales relating to the then applicable Fair Market Timber Value
determination.  The Fair Market Timber
Value of the Qualifying Timber at issue shall be (a) the sum of (i) the
average price per ton of all Qualifying Sales submitted by Seller, plus (ii) the
average price per ton of all Qualifying Sales submitted by Buyer, plus (iii) the
average price per ton of all Qualifying Sales submitted by the Valuation
Consultant, (b) divided by three.


 


1.12         “Force
Majeure Event” shall mean any act, omission or circumstance occasioned by or
resulting from any acts of God, acts of the public enemy, wars, blockades,
insurrections, riots, epidemics, infestation, disease, landslides, lightning,
earthquakes, tornadoes, windstorms, volcanoes, fires, storms, floods,
disasters, civil disturbances, explosions, sabotage, governmental actions, the
failure to act of any Governmental Authority, strikes or other labor disputes,
failures or partial failures of any equipment, failure of transportation, an
involuntary ceasing of operations at the Mill for a minimum of thirty (30)
consecutive days, or any other events or circumstances not within the control
of a party hereto which prevents such party from


 


3





















 


performing its
obligations hereunder; provided, however, that “Force Majeure Event” shall not
include (i) a party’s financial inability to perform, or (ii) an act,
omission or circumstance arising from the negligence or willful misconduct of
the party claiming that a Force Majeure Event has occurred.


 


1.13         “Governmental
Authority” shall mean any federal, state, local or foreign government,
political subdivision, agency, board, court, regulatory body or commission, any
arbitrator with authority to bind a party at law, or any Person acting lawfully
on behalf of any of the foregoing.


 


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


 


1.15         “Hardwood
Stringer Product Price” shall mean the per ton price for Hardwood Stringers as
set forth on Schedule 1.15 attached hereto (the “Base Price”) adjusted up
or down beginning January 1, 2006 on a semi-annual basis pursuant to the
price adjustment mechanism set forth in said Schedule 1.15.  On each Base Price Adjustment Date during the
Term of this Agreement, the Base Price for Hardwood Stringers shall be adjusted
to equal the Fair Market Timber Value for such Product on the applicable Base
Price Adjustment Date.


 


1.16         “Hardwood
Stringers” shall mean timber meeting the specifications for the same set forth
on Schedule 1.29.


 


1.17         “Harvesting
Plan” shall mean a description of the type of harvest (such as clear cuts or
thins), together with diameter limits and residual basal area, as applicable.


 


1.18         “Harvesting
Year” shall mean the period from May 2, 2005 through December 31,
2005 for calendar year 2005 and January 1 through December 31 of each
year thereafter during the Term of this Agreement.


 


1.19         “Market
Region” shall mean all areas which are located within one hundred twenty (120)
miles of the Mill.


 


4





















 


1.20         “Mechanism
Notice” shall have the meaning set forth in Section 1.11 hereof.


 


1.21         “Mill”
shall mean Buyer’s pulp and paper mill located in Chillicothe, Ohio.


 


1.22         “Person”
means any individual, corporation, partnership, limited liability company,
joint venture, association, joint-stock company, trust, unincorporated
organization or Governmental Authority.


 


1.23         “Preliminary
Designated Tract” shall have the meaning set forth in Section 3.1.2.1
hereof.


 


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


 


1.25         “Product
Price” shall mean the Pulpwood Product Price or the Hardwood Stringer Product
Price, as applicable.


 


1.26         “Pulpwood”
shall mean Hardwood Pulpwood and Softwood Pulpwood.


 


1.27         “Pulpwood
Product Price” shall mean the per ton price for each Product as set forth on Schedule 1.27(a) attached
hereto (the “Base Price”) adjusted up or down beginning January 1, 2006 on
a semiannual basis by the percentage change in the published TMS average stumpage prices
for the applicable Product in the Zones, initially from the previous four
semiannual reporting periods and then on a rolling average based on the four
most recent semiannual reporting periods. 
An example of the semiannual price adjustment mechanism is set forth on Schedule 1.27(b) to
this Agreement.  On each Base Price
Adjustment Date during the Term of this Agreement, the Base Price for the
applicable Product shall be adjusted to equal the Fair Market Timber Value for
such Product on the applicable Base Price Adjustment Date.  On each such Base Price Adjustment Date a new
rolling average shall commence and shall continue until the next Base Price
Adjustment Date.


 


1.28         “Qualifying
Sales” shall mean per unit (as opposed to lump sum) sales of the type of
Qualifying Timber at issue made during the six months immediately prior to the
six month


 


5





















 


period in which
the applicable Base Price Adjustment Date occurs, provided such sales (i) are
made within the Market Region, and (ii) involve not less than 1,000 tons
of the type of Qualifying Timber at issue as to each such sale.


 


1.29         “Qualifying
Timber” shall mean Timber which meets or exceeds the specifications set forth
in Schedule 1.29 to this Agreement.


 


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


 


1.31         “Softwood
Pulpwood” shall mean the following types of Timber:  [LIST ALL APPLICABLE
SPECIES WHICH ARE LOCATED ON THE TIMBERLANDS.]


 


1.32         “Sustainable
Forest Practice Standards” shall mean practices substantially in compliance
with standards substantially similar to the Sustainable Forestry Initiative of
the American Forest and Paper Association (the “AF&PA”) and as that
standard may be modified by AF&PA from time to time.


 


1.33         “Timber”
shall mean the following types of timber now or hereafter located on the
Timberlands:  [LIST ALL
SPECIES WHICH ARE LOCATED ON THE TIMBERLANDS.]


 


1.34         “Timberlands”
shall mean all timberland properties now or hereafter owned by Seller and
located in the State of Ohio and Greenup and Lewis Counties, Kentucky.


 


1.35         “TMS”
shall mean the publication known as Timber Mart-South, or in the event TMS is
no longer published, a comparable publication mutually acceptable to Seller and
Buyer.


 


1.36         “Valuation
Consultant” shall mean either Fountain Forestry of Portsmouth, Ohio or
BalkenTier Consulting of Morgantown, West Virginia, or if such firms are no
longer in existence, another reputable, professionally qualified Person meeting
all of the following criteria.


 


6





















 


Such person (i) is
not an Affiliate of either Seller or Buyer, (ii) during the past two (2) years
has not transacted substantial business with either Seller or Buyer, and (iii) does
not have less than five (5) years experience relating to sales of Timber
within the Market Region.  If Seller and
Buyer are unable to agree within thirty (30) days, then an arbitrator selected
pursuant to Subsection 10(b) below shall select such reputable,
professionally qualified Person meeting the foregoing criteria.  Seller and Buyer shall provide to the
Valuation Consultant such information as the Valuation Consultant shall
reasonably request to facilitate the determinations to be made by the Valuation
Consultant hereunder.


 


1.37         “Zones”
shall mean the following Zones designated in TMS:  all Zones.


 


2.             Agreement to Sell and Purchase.


 


2.1           Quantities
to be Sold and Purchased.  Subject to
the terms and conditions of this Agreement, Seller agrees to sell and Buyer
agrees to purchase for each Harvesting Year during the Term of this Agreement
all Qualifying Timber harvested from the Actual Designated Tracts (as
hereinafter defined).


 


2.2           Required
Product Mix.  With respect to the
Timber to be purchased by Buyer hereunder, Seller shall make available to Buyer
the following product mix for each Harvesting Year during the Term of this
Agreement:


 


2.2.1        2005.  For the Harvesting Year beginning May 2,
2005, the mix of Timber Seller shall make available to Buyer shall be as
follows:


 


	
  (a)           Hardwood
  Pulpwood:

  	
   

  	
  not less than 115,000

  
	
   

  	
   

  	
   

  
	
  (b)           Softwood
  Pulpwood:

  	
   

  	
  tons not less than 58,000 tons

  
	
   

  	
   

  	
   

  
	
  (c)           Hardwood
  Stringers:

  	
   

  	
  not less than 42,000 tons

  
	
   

  	
   

  	
   

  
	
  (d)           All
  Other Products:

  	
   

  	
  no minimum requirement

  



 


7





















 


2.2.2        2006
– 2010.  For the Harvesting Years
beginning January 1, 2006 and ending December 31, 2010, the mix of
Timber Seller shall make available to Buyer shall be as follows:


 


	
  (a)           Hardwood
  Pulpwood:

  	
   

  	
  not less than 157,000 tons

  
	
   

  	
   

  	
   

  
	
  (b)           Softwood
  Pulpwood:

  	
   

  	
  not less than 86,000 tons

  
	
   

  	
   

  	
   

  
	
  (c)           Hardwood
  Stringers:

  	
   

  	
  not less than 51,000 tons

  
	
   

  	
   

  	
   

  
	
  (d)           All
  Other Products:

  	
   

  	
  no minimum requirement

  



 


2.2.3        2011
– 2016.  For the Harvesting Years
beginning January 1, 2011 and ending December 31, 2016, the mix of
Timber Seller shall make available to Buyer shall be as follows:


 


	
  (a)           Hardwood
  Pulpwood:

  	
   

  	
  not less than 82,000 tons

  
	
   

  	
   

  	
   

  
	
  (b)           Softwood
  Pulpwood:

  	
   

  	
  not less than 125,000 tons

  
	
   

  	
   

  	
   

  
	
  (c)           Hardwood
  Stringers:

  	
   

  	
  not less than 28,000 tons

  
	
   

  	
   

  	
   

  
	
  (d)           All
  Other Products:

  	
   

  	
  no minimum requirement

  



 


2.2.4        2017
– 2019 - To the extent Buyer exercises its option to extend the Term
pursuant to Section 9.2 below, for Harvesting Years beginning January 1,
2017 and ending December 31, 2019, the mix of Timber Seller shall make
available to Buyer shall be as follows:  


 


	
  (a)           Hardwood
  Pulpwood:

  	
   

  	
  not less than 60,000 tons

  
	
   

  	
   

  	
   

  
	
  (b)           Softwood
  Pulpwood:

  	
   

  	
  not less than 125,000 tons

  
	
   

  	
   

  	
   

  
	
  (c)           Hardwood
  Stringers:

  	
   

  	
  not less than 20,000 tons

  
	
   

  	
   

  	
   

  
	
  (d)           All
  Other Products:

  	
   

  	
  no minimum requirement

  



 


8





















 


3.             Designation of Tracts and Determination of Volumes.


 


3.1           Designation
of Tracts to Be Harvested.  During
the Term of this Agreement, Seller shall designate the portions of the
Timberlands which Seller shall make available to Buyer for harvesting during
each of the next two Harvesting Years.  A
sufficient number of tracts shall be made available so as to satisfy the
obligations of Seller herein to sell to Buyer and Buyer to purchase from Seller
the applicable Annual Purchase Amount. 
Seller shall follow the procedure for designating such tracts
hereinafter set forth in this Section 3.


 


3.1.1        Initial
Designation of Tracts to be Harvested. 
Schedule 3.1.1 attached hereto and made a part hereof sets
forth the portions of the Timberlands which Seller shall make available to
Buyer for the Harvesting Year commencing May 2, 2005 and the Harvesting
Year commencing January 1, 2006.


 


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


 


3.1.2.1     Designation
of Potential Harvesting Areas.  On or
before the November 1 prior to the applicable Harvesting Year (e.g. November 1,
2006 for the Harvesting Year commencing January 1, 2007), Seller shall
designate in a notice to Buyer those portions of the Timberlands which it
proposes to make available to Buyer for harvesting during the subsequent two
Harvesting Years (the “Preliminary Designated Tracts”).  To the extent practicable and not
inconsistent with the silvicultural and long-term management objectives of
Seller, the land which Seller designates as the Preliminary Designated Tracts
shall be distributed relatively uniformly over the four geographical quadrants
(north, south, east and west) of the Timberlands.


 


9





















 


3.1.2.2     Selection
of Actual Harvesting Areas.  During
the thirty (30) day period following receipt by Buyer of the applicable Annual
Seller Notice, Seller and Buyer shall meet to discuss any proposed modification
to the Preliminary Designated Tracts which may be reasonably requested by
Buyer.  At the end of said thirty (30)
day period, Seller shall notify Buyer of the actual tracts which Buyer will
harvest to satisfy the volume requirements of this Agreement for the applicable
Harvesting Year, taking into account said proposed modifications reasonably
requested by Buyer, to the extent practicable (the “Actual Designated Tracts”),
and Seller shall simultaneously therewith deliver to Buyer a Harvesting Plan
for each of the Actual Designated Tracts.


 


3.2           Boundary
and Timber Markings.  Within fifteen
(15) Business Days prior to the scheduled commencement of harvesting activities
on the applicable Actual Designated Tract, Seller and Buyer will proceed with
the designation of boundary lines consistent with past practices of
MeadWestvaco Corporation, but Seller reserves the right to designate on the
ground (using bright timber-marking paint) the boundary lines of all such
Actual Designated Tracts.  The boundary
lines shall clearly delineate the boundaries of the Actual Designated Tracts
from the boundaries of adjacent land not owned or leased by Seller, and from
the boundaries of other Timberlands not constituting Actual Designated Tracts
for such Harvesting Year.  Seller shall
also designate on the ground (using bright timber-marking paint) all SMZ’s
within the Actual Designated Tracts and any Timber to be removed from such
designated SMZ’s.


 


4.             Harvesting Procedures.


 


4.1           Harvesting
Schedule.  Following determination of
the Actual Designated Tracts, Buyer shall provide a harvesting schedule to
Seller setting forth approximate start and completion dates relating to
harvesting Timber within each of the Actual Designated Tracts.  Buyer shall modify said harvesting schedule based
upon any reasonable objections raised by


 


10





















 


Seller with
respect to any of said harvesting dates, said reasonable objections may be for
reasons which include, but are not limited to, (a) a violation of
Sustainable Forestry Certification Requirements, (b) potential logging
damage to the site, such as rutting, or (c) failure to comply with
Sustainable Forestry Initiative regeneration requirements applicable to
harvesting on adjacent lands. 
Notwithstanding the foregoing, Buyer shall harvest the Actual Designated
Tracts on the basis of the Annual Buyer Harvesting Notices provided by Buyer to
Seller each calendar year during the Term of this Agreement, subject to a Force
Majeure Event, and subject to the provisions of Section 4.3 below.


 


4.2           Timber
Roads.  Seller shall construct, or cause to be
constructed, at Seller’s sole cost and expense, haul roads (including
temporary, winter haul roads when appropriate) to the Actual Designated Tracts
necessary to provide Buyer in a timely manner with proper access to such Actual
Designated Tracts for its harvesting operations.  Construction of such roads shall be accomplished
in a good and workmanlike manner in compliance with all Applicable Laws so that
Buyer is provided with effective and functional access to all Actual Designated
Tracts for its logging practices. 
Following the construction of said roads, Buyer shall at its sole cost
and expense maintain and repair said roads for so long as it is harvesting on
the relevant Actual Designated Tracts. 
Upon completion of harvesting on the relevant Actual Designated Tracts,
Buyer shall leave such roads in a condition equal to or better than their
condition prior to the start of the operation. 
All such road maintenance and repair shall be performed in a manner so
as not to violate any Applicable Laws, or with respect to SMZ’s, so as to
comply with best management practices sanctioned by the State of Ohio.


 


4.3           Timber
Harvesting.  Buyer shall harvest
(i.e. cut and remove) in each Harvesting Year, all merchantable Timber as
identified in the Harvesting Plan for the Actual Designated Tracts for such
Harvesting Year, subject to a Force Majeure Event.  Such harvesting operations


 


11





















 


shall be conducted
in accordance with all Applicable Laws, in a manner consistent with established
industry logging practices, and in compliance with any reasonable additional
guidelines which may be established from time to time by Seller.  Buyer shall repair all fences or structures
damaged by its harvesting operations and shall leave all roads, fire breaks,
property lines, lakes, streams, and drainage ditches clear of logs, timber,
limbs or other debris.  All oil drums,
cans, bottles, cartons, delimbing bars, loading decks, abandoned equipment and
other debris resulting from Buyer’s operations shall be removed from the
applicable portions of the Timberlands upon completion of the harvesting
operations at Buyer’s expense.  If
repairs are not made or if the debris is not removed and cleared within thirty
(30) days after notice from Seller to Buyer, then Seller may undertake such
repair or removal for Buyer’s account, and Buyer shall be liable to Seller for
any expense incurred in repairing or removing same.  Buyer shall not, under any circumstance, bury
any material underground nor discharge, release or otherwise cause the
Timberlands or any portion thereof to be affected by hazardous wastes or
hazardous substances.  Buyer shall use
normal and customary care while conducting its harvesting operations so as not
to materially damage the Timberlands. 
Buyer acknowledges that a higher degree of care is required when the
site is abnormally wet and that such circumstances may require Buyer to halt
all harvesting activities.  Seller
reserves the right to suspend Buyer’s harvesting operations when Seller deems
site damage will result from continued operations; provided, however, that in
the event of such suspension, Buyer shall be entitled to an extension of the
time allotted for its harvesting operations equal to the number of days that
the suspension continues.  Seller also
reserves the right to suspend Buyer’s harvesting operations on an Actual
Designated Tract when Seller determines, in the exercise of its reasonable
discretion, that Buyer is not conducting harvesting operations on the Actual
Designated Tract in accordance with the relevant Harvesting Plan.  In the event Buyer conducts harvesting
operations in violation of the


 


12





















 


relevant
Harvesting Plan or outside the scope of the relevant Harvesting Plan, then
Seller shall be entitled to pursue all remedies available at law for timber
trespass.


 


5.             Prices and Payment.


 


5.1           Prices.  Buyer shall pay Seller for all Timber
purchased by Buyer in an amount equal to the then current applicable Product
Price.


 


5.2           Payment.  Promptly after harvest all Qualifying Timber
shall be weighed (or, with respect to sawtimber, scaled in board feet Scribner)
at the Mill.  Buyer shall provide Seller
on a weekly basis (with photocopies of scale tickets if requested by Seller)
and a settlement statement, and shall pay Seller each week for all Timber
weighed-in or scaled during the previous week. 
The equipment used for the weighing of Timber shall be maintained by
Buyer in good and accurate working order in accordance with all applicable laws
and regulations and prudent practice. 
Seller shall have the right to check and audit said equipment at any
time upon reasonable notice to Buyer. 
Personnel scaling sawtimber in board feet shall be qualified according
to regional standards.  Seller shall have
the right to check and audit sawtimber board feet scaling practices at any time
upon reasonable notice to the Buyer. 
Payments made after twenty (20) days from the date of delivery shall be
considered past due (“Past Due”).  For
payments that are Past Due, Buyer shall pay interest at a rate per annum equal
to the daily prime rate as reported in the Wall Street Journal plus four
percent (4%) for each day that the payments are Past Due.  Such interest shall be calculated daily on
the basis of a year of 365 days and the actual number of days for which interest
is due.  If at any time during the Term
there are any payments outstanding to Seller that are Past Due, then, in
addition to any other remedies it may have hereunder, Seller may suspend
harvesting by Buyer (or deliveries by Seller to the Mill, if applicable) until
such time as all Past Due payments have been paid in full.  [Buyer previously has paid to Seller a
deposit in the amount of $192,000.00 (the “Deposit”).  Seller may, in its sole


 


13





















 


discretion, apply
all or any part of the Deposit against any payments of Buyer that are Past
Due.  Provided that Buyer is current in
its payment obligations hereunder, the Deposit (less any amounts applied in
accordance with the preceding sentence) shall be deemed applied to reduce each
payment due Seller hereunder by an amount equal to 8.33% of each invoice, until
the unapplied portion of the Deposit is reduced to zero.  Any portion of the Deposit that is not so
applied on the second anniversary of the date of this Agreement shall be fully
applied against subsequent payments due Seller hereunder.]


 


6.             Indemnity.


 


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


 


6.2           Indemnification
by Buyer.  Buyer shall defend,
indemnify and hold Seller harmless from and against any and all claims,
liabilities, costs or damages (including without limitation reasonable attorneys
fees and court costs through all appeals) arising out of personal injury, death
or property damage arising from (i) Buyer’s harvesting operations on the
Timberlands, and (ii) the performance or non-performance by Buyer of its
obligations hereunder.


 


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


 


7.             Force Majeure.


 


7.1           Effect
of Force Majeure.  Except for the
obligation of a party to make payments required hereunder, the parties shall be
excused from performing any of their respective


 


14





















 


obligations under
this Agreement and shall not be liable in damages or otherwise on account of
the non-performance of any such obligation, for so long as and to the extent
that such party is unable to perform such obligation as a result of any Force
Majeure Event.


 


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


 


7.3           Failure
to Give Notice.  A failure to give
notice under Section 7.2 above “as soon as reasonably possible” will not
affect the rights and obligations of the party whose obligations are suspended
except if, and only to the extent that, the party which was entitled to receive
such notice was actually and materially prejudiced as a result of such failure.


 


7.4           Force
Majeure Event Affecting Actual Designated Tracts.  If either party becomes aware of a Force
Majeure Event that makes a portion of any Actual Designated Tract unavailable
for harvesting by Buyer in accordance with the schedule contemplated by
the parties, then it shall promptly notify the other party and Seller shall
promptly designate and make available for harvesting such other portions of the
Timberlands as shall be necessary to satisfy its obligations under this
Agreement.  If the Seller is unable to
designate sufficient portions of the Timberlands


 


15





















 


to satisfy its
obligations under this Agreement, then the provisions of Section 7.5 shall
apply to the unsatisfied obligations occasioned by such Force Majeure Event.


 


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


 


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


 


(ii)                                  The
Non-Affected Party shall give the Affected Party written notice of each such
contract, including the volume sold or purchased thereunder and the term
thereof.


 


(iii)                               The
annual volume commitment of the Non-Affected Party for Timber as specified
herein shall be reduced by such volume sold or purchased under such contract
for the duration thereof.


 


8.             [Intentionally Left Blank]


 


16





















 


9.             Term and Termination.


 


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


 


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


 


9.3           Termination
for Cause.  This Agreement shall
immediately terminate if any one of the following events (each, a “default”)
has occurred and is continuing on the tenth (10th) day after receipt of notice
of an intent to cancel by reason of such default (each, an “Event of Default”):


 


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


 


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


 


9.4           Effect
of Termination.  Termination shall
not relieve a defaulting party of any liability to the nondefaulting party for
breach of its obligations hereunder.


 


17





















 


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


 


(a)           The
appropriate responsible persons from Seller and Buyer shall meet and seek
amicably to resolve all differences.


 


(b)           If any
material difference remains unresolved ten (10) Business Days after the
start of the process referenced in Subsection 10(a), or such longer period
as the persons referenced in Subsection 10(a) shall have agreed, then
the parties shall submit such matter to arbitration, pursuant to the Rules of
Commercial Arbitration of the American Arbitration Association.  Any such arbitration shall be conducted by a
single arbitrator, whose decision shall be final.  The parties shall first attempt to agree on
the selection of the arbitrator, and, if they cannot agree within fourteen (14)
days after it becomes necessary to submit the dispute to arbitration, either
party may request the American Arbitration Association to appoint the
arbitrator.  In all cases, the arbitrator
shall be a person knowledgeable about sales of timber in the Market
Region.  The arbitrator shall be
instructed to schedule all proceedings so that, if possible, a decision
may be reached and communicated to the parties within forty-five (45) days
after the appointment of the arbitrator. 
All expenses of the arbitration shall be divided equally between the
parties, except that each party shall bear the expense of its own counsel and
the expense of the preparation of its presentation.  Seller and Buyer shall provide to the
arbitrator such information as the arbitrator shall reasonably request to
facilitate the determinations to be made by the arbitrator hereunder.


 


(c)           Notwithstanding
the existence of a dispute or the progress of the arbitration proceeding, but
subject to the terms of Section 5.2 above, the parties shall continue to


 


18





















 


perform their respective obligations under this
Agreement during such period.  To the
extent that this Agreement provides for specific performance or other equitable
remedies for a particular violation, and with respect to the ability of Seller
to suspend Buyer’s harvesting operations pursuant to Section 4.3 and the
ability of Seller to suspend Buyer’s harvesting operations (or deliveries by
Seller to the Mill, if applicable) pursuant to Section 5.2, this Section 10
shall not apply, it being the intent that the aggrieved party be able to bring
the matter to court to seek enforcement as soon as possible.  Further, this Section 10 shall not
preclude any party from seeking injunctive relief or such other interim
equitable remedies as may be required to preserve any claims hereunder.


 


11.           Assignment.


 


11.1         Assignment
by Seller.


 


(a)           Except as
provided in this Section 11.1, this Agreement may not be assigned by
Seller in whole or in part. 
Notwithstanding the foregoing, at any time during the Term, Seller may
assign this Agreement (i) to any lender or lenders as security for
obligations to such lender or lenders in respect to financing arrangements of
Seller or any Affiliate thereof with such lender or lenders, or (ii) upon
prior written notice to Buyer, to any Person that is and at all times remains
an Affiliate of Seller or that merges or consolidates with or into Seller or
that acquires all or substantially all of the Timberlands.


 


(b)           Notwithstanding
any other provision of this Agreement to the contrary, Buyer and Seller
acknowledge and agree that Seller shall not be prohibited from selling all or
any portion of the Timberlands, provided that any such sale of the Timberlands
shall be made subject to the terms of this Agreement and the obligation to
supply the applicable portion of Timber volumes required hereunder.  Upon any sale of a portion of the
Timberlands, the


 


19





















 


purchaser of said portion of the Timberlands (“New
Owner”) shall assume the obligation to supply a portion of the Timber volumes
to be supplied hereunder, said portion of the Timber volumes (“Assumed Volume”)
to be agreed to by Seller and said New Owner, subject to Buyer’s consent to
such volume allocation, which consent shall not be unreasonably withheld or
delayed.  Upon such assumption by said
New Owner, Seller’s obligations to supply Timber hereunder shall be reduced by
the volumes assumed by said New Owner, and Seller shall thereafter have no
obligation or liability with respect to said assumed volumes or with respect to
the portion of the Timberlands so conveyed. 
At the request of Seller, upon any such sale to a New Owner Buyer shall
execute an amendment to this Agreement acknowledging the foregoing.  Furthermore, upon request of Seller or Buyer,
upon such sale to a New Owner, Buyer and such New Owner shall enter into a
separate Stumpage Agreement on the same terms and conditions as contained
in this Agreement (or such other terms as Buyer and such New Owner shall
mutually agree) except for the portion of the Timberlands covered thereby and
the volume of Timber to be supplied thereunder. 
In the event Buyer objects to any proposed Assumed Volume, Buyer shall
provide written notice of the same to Seller within fifteen (15) days of notice
to Buyer of said proposed Assumed Volume (“Objection Notice”), said Objection
Notice to include a detailed explanation of the basis for said objection.  Failure by Buyer to timely provide said
Objection Notice shall be deemed to constitute the consent of Buyer to said
proposed Assumed Volume.  In the event
Buyer timely provides an Objection Notice, Seller shall have the option of (i) revising
said proposed Assumed Volume, in which case Buyer shall have the further right
to object by providing a new Objection Notice as provided above or (ii) retaining
the Valuation Consultant to determine whether the proposed Assumed Volume is
reasonable.  In the event the Valuation
Consultant is so retained and determines that said proposed Assumed Volume is
reasonable, Buyer shall be deemed to have consented to said Assumed Volume and
shall pay all costs and


 


20





















 


expenses of said Valuation Consultant.  Otherwise, said costs and expenses shall be
paid by Seller.  Notwithstanding the
foregoing, Seller may convey during the Term hereof up to 15,000 acres of the
Timberlands free and clear of the obligations of this Agreement (the “Exempt
Acres”), provided that Seller is able to supply the volume of Timber required
to be supplied hereunder from the remaining portion of the Timberlands.  Buyer agrees to execute any and all
documentation requested by Seller in order to evidence the release of the
Exempt Acres from this Agreement.


 


11.2         Assignment
by Buyer.  Except as provided in this
Section 11.2, this Agreement may not be assigned by Buyer in whole or in
part.  Notwithstanding the foregoing, at
any time during the Term, Buyer may assign this Agreement (a) to any
lender or lenders as security for obligations to such lender or lenders in
respect of financing arrangements of Buyer or any affiliate thereof with such
lender or lenders, or (b) upon prior written notice to Seller, to any
Person that is and at all times remains an affiliate of Buyer or that merges or
consolidates with or into Buyer or that acquires all or substantially all of
the assets or stock of Buyer.


 


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


 


13.           Headings.  The headings contained in this
Agreement are for convenience only and should not be construed to limit or
expand any terms otherwise provided.


 


21





















 


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


 


	
   

  	
  If to Buyer, to:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attn.:

  	
   

  
	
   

  	
   

  	
  Telecopier No.

  	
   

  
	
   

  	
   

  	
  Telephone No.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  With a copy to:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attn.:

  	
   

  
	
   

  	
   

  	
  Telecopier No.

  	
   

  
	
   

  	
   

  	
  Telephone No.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  If to Seller:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attn.:

  	
   

  
	
   

  	
   

  	
  Telecopier No.

  	
   

  
	
   

  	
   

  	
  Telephone No.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  With copies to:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attn.:

  	
   

  
	
   

  	
   

  	
  Telecopier No.

  	
   

  
	
   

  	
   

  	
  Telephone No.

  	
   

  
					



 


22





















 


	
   

  	
  and

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attn.:

  	
   

  
	
   

  	
   

  	
  Telecopier No.

  	
   

  
	
   

  	
   

  	
  Telephone No.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  and

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attn.:

  	
   

  
	
   

  	
   

  	
  Telecopier No.

  	
   

  
	
   

  	
   

  	
  Telephone No.

  	
   

  
					



 


or, as to each party, at such other address as shall be designated by
such party in a written notice to the other party complying as to delivery with
the terms of this Section.  Notice shall
be deemed received when (i) hand delivered; (ii) sent, after receipt
of confirmation or answer back if sent by telecopy; (iii) five Business
Days after deposit in the U.S. mails, postage prepaid, for certified mail; and (iv) one
Business Day after delivery to Federal Express (or similar type of overnight
delivery), properly addressed to the applicable party.


 


15.           Partial Illegality.  If any
provision, or part of a provision, of this Agreement is held to be invalid or
unenforceable under any Applicable Law, then the parties shall use all
commercially reasonable efforts to replace the invalid or unenforceable
provision by a provision that, to the extent permitted by Applicable Law,
achieves the purposes intended under the original provision and to allow the
parties to have the intended benefit of their bargain.  If it cannot be so reformed, it shall be
omitted.  The balance of this Agreement
shall remain valid and unchanged and in full force and effect.


 


23





















 


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


 


17.           Amendments and Waivers.  This
Agreement may not be terminated, amended, supplemented, waived or modified
orally, but only by a document in writing signed by the party against which the
enforcement of such termination, amendment, supplement, waiver or modification
is sought.


 


18.           Counterparts.  This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same document. 
All signatures need not be on the same counterpart.


 


19.           Estoppel Certificates.  Either
party shall, at no cost to the requesting party, from time to time, upon twenty
(20) days prior request by the other party, execute, acknowledge and deliver to
the requesting party a certificate signed by an officer of the certifying party
stating that this Agreement is unmodified and in full force and effect (or, if
there have been modifications, that this Agreement is in full force and effect
as modified, and setting forth such modifications) and the dates through which
payments have been made, and either stating that to the knowledge of the signer
of such certificate no default exists under this Agreement or specifying each
such default to which the signer has knowledge.


 


24





















 


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


 


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


 


22.           Third Party Beneficiaries.  Except as
hereinafter provided, this Agreement is intended to be solely for the benefit
of the parties thereto and their permitted assigns and is not intended to and
shall not confer any rights or benefits on any third party not a signatory
hereto.


 


23.           Memorandum of Contract.  At the
request of any party hereto, a Memorandum of this Agreement shall be recorded
in the recording offices of each and every County in which the Timberlands are
located.


 


24.           Insurance.  In the event that Buyer retains
any third party contractor to conduct harvesting operations on the Timberlands,
said third party contractor shall, before conducting any operations, obtain and
maintain the following types of insurance, in addition to any other insurance
required by law:  (a) Worker’s
Compensation and, to the extent the same is reasonably commercially obtainable,
Employer’s Liability Insurance, fully covering all operations;


 


25





















 


(b) Comprehensive Vehicle Liability Insurance, including owned, hired
and non-owned vehicles, with limits of not less than $1,000,000 single
occurrence and $1,000,000 cumulative bodily injury liability; and (c) Comprehensive
General Liability Insurance, including all contractual liability hereunder,
with limits of not less than $1,000,000 single occurrence and $1,000,000
cumulative bodily injury liability. 
Prior to the beginning of any harvesting operations hereunder, evidence
of all such insurance shall be furnished to Seller, and such insurance shall
provide for at least thirty (30) days notice to Seller of cancellation of such
insurance policies.  All such insurance
policies shall name Seller as an additional insured.


 


25.           Sustainable Forestry Initiative.  Seller
shall continue to manage the Timberlands in accordance with the Sustainable
Forestry Initiative during the Term of this Agreement.  From time to time it may be necessary to
agree upon a recognized successor or alternative standard to the Sustainable
Forestry Initiative, which shall be negotiated in good faith to reflect changes
or developments in the evolution of widely accepted industry standards.  In the future, Seller agrees to provide from
time to time at Buyer’s request third-party verification of its compliance with
such a standard on the portion of the Actual Designated Tracts from which
Timber is then being harvested.


 


26.           Raccoon Ecological Management Area.


 


26.1         Notice
of Proposed Sale.  The portion of the
Timberlands identified on Schedule 26 attached hereto is commonly referred
to as the Raccoon Ecological Management Area (the “REMA Tract”).  If Seller desires to sell, transfer or
convey, either directly or indirectly, by operation of law or otherwise, any
interest to all or any portion of the REMA Tract (the “Timberlands Interest”),
Buyer shall have a right of first offer to acquire all, but not less than all,
of such Timberlands Interest, and Seller shall not transfer such Timberlands
Interest without first complying with the provisions of this Section 26.  Seller shall give written


 


26





















 


notification to
Buyer, by certified mail or personal delivery, of Seller’s desire to sell the
Timberlands Interest at issue (the “RFO Notice”).  In order to be effective, the RFO Notice must
contain the following information: (i) a detailed description of the
Timberlands Interest to be sold, (ii) the cash price of the Timberlands
Interest to be sold and (iii) the Assumed Volume proposed to be allocated
to said Timberlands Interest (the “Offer Terms”).  For purposes of this Section 26, the
sale, transfer or conveyance of a controlling interest in Seller (or the sale,
transfer or conveyance of an interest in Seller which when aggregated with
previous sales, transfers or conveyances would constitute a controlling
interest in Seller, a “Change of Control”) shall constitute a sale of a
Timberlands Interest subject to Buyer’s right of first offer hereunder;
provided, however, that Buyer’s failure to exercise its right of first offer in
connection with a Change of Control shall not result in a termination of said
right of first offer.


 


26.2         Response
to Notice.  Buyer shall have the
right to purchase all (but not less than all) of the Timberlands Interest
proposed to be sold by Seller upon the same terms and conditions as stated in
the aforesaid RFO Notice by giving written notification to Seller, by certified
mail or personal delivery, of its intention to do so within thirty (30) days after
receiving the RFO Notice (the “RFO Response”).


 


26.3         Waiver
of Right.  Except as hereinafter
provided, the failure of Buyer to timely provide the RFO Response shall result
in the termination of its right to purchase the Timberlands Interest covered by
such RFO Notice.  In such event, Seller
shall be entitled to sell the Timberlands Interest to a third party purchaser
consistent with the Offer Terms, or for a cash price which is more favorable to
Seller than as set forth in the Offer Terms. 
In the event Seller does not close the proposed transaction consistent
with the Offer Terms, or for a cash price which is more favorable to Seller
than as set forth in the Offer Terms, within six (6) months, or if Seller
desires to consummate a sale of the applicable Timberlands Interest for a cash
price which


 


27





















 


is less favorable
to Seller than as set forth in the Offer Terms, then Buyer’s right of first
offer shall be reinstated as to such Timberlands Interest in accordance with
the terms and procedures set forth above. 
No sale of a Timberlands Interest shall be valid unless Seller has
complied with the provisions of this Section 26 prior to consummation of
such sale.  In the event Buyer fails to
timely provide the RFO Response, Buyer shall promptly execute any and all
documentation requested by Seller in order to evidence the waiver of Buyer’s
right of first offer with respect to said Timberlands Interest.


 


26.4         Closing.  In the event Buyer gives written notice to Seller
in compliance with Section 26.2 above of its desire to exercise its right
to purchase all of the Timberlands Interest which Seller desires to sell,
Seller shall designate the time, date and place of closing, provided that the
date of closing shall be no earlier than ninety (90) days, and no later than
one hundred eighty (180) days, after receipt by Seller of the RFO
Response.  In such event, the purchase
and sale of the Timberlands Interest shall be effected pursuant to the Offer
Terms and otherwise in accordance with the terms of Seller’s proposed real
estate sales contract (which contract shall be subject to Buyer’s reasonable
review and approval and shall allow Buyer to assign said contract so long as
Buyer is not released from its obligations under said contract).


 


26.5         Applicability
of Right of First Offer.  The right
of first offer set forth herein shall not apply to:  (a) any condemnation of any portion of
the REMA Tract, or any sale in lieu thereof; or (b) any easement, cutting
contract, or hunting license on any portion of the REMA Tract.


 


26.6         Title
to REMA Tract.  Buyer’s rights set
forth in this Section 26 are subject and subordinate to all matters of
record on the date hereof, including but not limited to the rights of others to
purchase the REMA Tract pursuant to a pre-existing option or right of first
refusal, if


 


28





















 


any.  During the term of this Agreement, Seller
shall not grant any mortgage, deed of trust or similar encumbrance on the REMA
Tract without the prior written consent of Buyer.


 


29





















 


Executed under seal as of the date first set
forth above.


 


	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
											



 


30





















 


List of
Schedules


 


	
  Schedule 1.15

  	
   

  	
  Base Price and Price Adjustment Mechanism
  for Hardwood Stringers

  	
   

  
	
  Schedule 1.27(a)

  	
   

  	
  Base Price Per Product

  	
   

  
	
  Schedule 1.27(b)

  	
   

  	
  Wood Supply Calculation Formula for Price
  Indexing

  	
   

  
	
  Schedule 1.29

  	
   

  	
  General Product Specifications

  	
   

  
	
  Schedule 3.1.1

  	
   

  	
  Description of Tracts to be Harvested For
  Harvesting Year Commencing May 2, 2005 and Harvesting Year Commencing
  July 1, 2006

  	
   

  
	
  Schedule 26

  	
   

  	
  Description of Raccoon Ecological
  Management Area

  	
   

  



 





















 


Schedule 1.15


 


PRICE ADJUSTMENT MECHANISM FOR HARDWOOD STRINGERS


 


The
initial Base Price will be derived as follows:


 


“DELIVERED
PRICE IS EQUAL TO 31.5%** OF THE CURRENT 4/4 #1 COMMON LUMBER PRICES AS
REPORTED IN “HARDWOOD REVIEW WEEKLY”, MULTIPLIED BY THE HARVEST VOLUME
PERCENTAGES BY SPECIE DELIVERED IN THE IMMEDIATE SIX MONTH PERIOD.


 


(**31.5%
IS BASED ON THE RECENT SALE OF 3 LUMP SUM SALES TO OUTSIDE MARKETS.)


 


The semiannual price adjustment will be made as follows:


 


1) The percent of volume harvested by specie will be calculated based
on the actual volume of the species delivered in the prior six month period


 


2) Harvest volumes by specie are then multiplied by the six month prior
average of the Appalachian prices, area 2, 4/4 #1 common, green in the Hardwood
Review Weekly


 


3) Total price is converted to tons and $4.34 is added to final price


 





















 


Example of Adjustment is set forth below using hypothetical specie mix
and hypothetical prices in Hardwood Review Weekly:


 


4/4 #1 Common (Green)


 


	
   

  	
   

  	
  Specie %

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ash

  	
   

  	
  0.013

  	
   

  	
  610

  	
   

  	
   

  	
   

  	
  7.93

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Basswood

  	
   

  	
  0.002

  	
   

  	
  410

  	
   

  	
   

  	
   

  	
  0.82

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Beech

  	
   

  	
  0.003

  	
   

  	
  425

  	
   

  	
   

  	
   

  	
  1.275

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cherry

  	
   

  	
  0.016

  	
   

  	
  1645

  	
   

  	
   

  	
   

  	
  26.32

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hickory

  	
   

  	
  0.059

  	
   

  	
  590

  	
   

  	
   

  	
   

  	
  34.81

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hard Maple

  	
   

  	
  0.038

  	
   

  	
  1190

  	
   Unselected

  	
   

  	
  45.22

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Soft Maple

  	
   

  	
  0.045

  	
   

  	
  820

  	
   

  	
   

  	
   

  	
  36.90

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Red Oak

  	
   

  	
  0.282

  	
   

  	
  825

  	
   

  	
   

  	
   

  	
  232.65

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  White Oak

  	
   

  	
  0.398

  	
   

  	
  725

  	
   

  	
   

  	
   

  	
  288.55

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Poplar

  	
   

  	
  0.141

  	
   

  	
  380

  	
   

  	
   

  	
   

  	
  53.58

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Walnut

  	
   

  	
  0.003

  	
   

  	
  1020

  	
   

  	
   

  	
   

  	
  3.06

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  731.115

  	
   

  	
  0.315

  	
   

  	
  6.9

  	
  ***

  	
  33.38

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Price adjustment
  (constant)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  4.34

  	
   

  
	
  New stumpage price

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  37.72

  	
   

  



 










***conversion to tons


 





















 


Schedule 1.27(a)


 


Base Price Per Product


 




	
  Product

  	
   

  	
   

  	
  Base Price Per Ton

  	
   

  
	
                                      :

  	
   

  	
   

  	
  $

  	
   

  
	
                                      :

  	
   

  	
   

  	
  $

  	
   

  
	
                                      :

  	
   

  	
   

  	
  $

  	
   

  






 





















 


Schedule 1.27(b)


 


Wood Supply
Calculation Formula for Price Indexing


 


For January, 2006 Adjustment:


 


	
   

  	
  (2Q/04 + 4Q/04 + 2Q/05 + 4Q/05)

  
	
  Base Price X

  	
  (4Q/03 + 2Q/04 + 4Q/04 + 2Q/05) = Price – January 16,
  2006

  



 


For July, 2006 Adjustment:


 


	
  Price from

  	
  (4Q/04 + 2Q/05 + 4Q/05 + 2Q/06)

  
	
  previous Period X

  	
  (2Q/04 + 4Q/04 + 2Q/05 + 4Q/05) = Price – July 16,
  2006

  



 


Timber Mart South publications are typically available
before the 15th day following end of the applicable semiannual period.  Price adjustment will be made and become
effective on the later of the 16th calendar day following the end of said
period or the first Monday following said 16th calendar day.


 


	
  1st Semiannual Period

  	
  January 16 - July 15

  
	
   

  	
   

  
	
  2nd Semiannual Period

  	
  July 16 - January 15

  



 





















 


Schedule 1.29


 


NewPage


CHILLICOTHE,
OHIO


 


HARDWOOD PULPWOOD:


 


All species are accepted except black locust,
black walnut, and osage orange.


 


PINE PULPWOOD:


 


All species of pine, spruce and hemlock will
be accepted.  No cedar will be accepted.


 


PULPWOOD MUST MEET THE FOLLOWING CRITERIA:


 


Pulpwood
may range from 12 to 25 feet in length, and wood must be 4 to 24 inches in
diameter.  Do not mix short pulpwood (12
to 16 feet) and long pulpwood in the same rick.


 


1.               Limbs and knots
must be trimmed flush with the stick and small branches must be removed.  Forks must be completely removed.


 


2.               We must be able to
cut the crook out of a stick so that it will go through a 24” cylinder.


 


3.               Pulpwood must not
have sap rot or heart rot more than 50%. 
Burned wood also will not be accepted.


 


4.               Pulpwood may not
contain metal or plastic of any kind.


 


5.               Pine pulpwood will
not be accepted with Southern Pine Beetle damage.  No dead pine accepted.


 


LOADING OF TRUCKS:


 


Trucks must be loaded so that all wood is at
least 12 inches from the bulkhead (“headache rack”).  Tractor-trailers hauling two ricks must have
the ricks completely separated by at least 12 inches.  If a truck is considered unsafe to unload for
any reason, including wood above the standards, it will not be unloaded.  There must be 11 feet of clearance between
standards, and 10 inches clearance between the wood and the truck frame.  It is all right to have a standard in the
middle, as long as it is in such a position that it does not hit the FWD forks
during unloading.


 





















 


8/01


 


VIOLATIONS:


 


Any truck containing pulpwood not meeting
these guidelines and any truck not meeting the safety guidelines will not be unloaded. 
These loads will be refused and the entire load
will be sent back.


 





 


For
the safety of the truck driver, hard hats and safety glasses must be worn at
all times while on the Woodyard.  Please
deposit all trash in trash cans to help cut down on chip pile contamination.  Thank you for your cooperation.


 





















 


PIKETON
LOG MERCHANDISING FACILITY


 


26.7         March 28, 2005


 


26.8         MINIMUM STRINGER
SPECIFICATIONS


 


1)              Top Diameter:  10” small end, inside bark, ONLY IF the last
10’ of the stringer is STRAIGHT AND SOUND. 
The 10” top should help maximize the production of 8’-12’ sawlogs from
the butts of smaller diameter class trees.


The following are exceptions to the 10” top
diameter for stringers:


•                  Poplar
peelers:  8’ 10” log to 8” minimum top
diameter;  17’ 10” log to 8” minimum top
diameter – BUCKING SPLITS NOT ACCEPTABLE.


•                  Hard
Maple, Walnut, and Cherry: 8” minimum top diameter, ONLY IF last 8’ is straight &
sound


•                  Beech:
10’-18’ Butt logs ONLY, 13” minimum top diameter, straight & sound


•                  Aspen,
Cottonwood, Sycamore, Gum, Hackberry, American Elm, Buckeye – On logs >=23”
on the butt, we will accept 10’& 12’ butt logs ONLY as necessary to achieve
a large end diameter <23”


 


2)              Rot:
Rot must not exceed 40% of the diameter of either log end provided there is no
indication the rot is getting worse.





3)              Shake and/or
Cracks: The area of the log end affected by shake and/or cracks
(defect) must be less than 40% of the total surface area of the log end.







	
  Log End

  	
   

  	
  Max Defect

  	
   

  
	
  Diameter

  	
   

  	
  Diameter

  	
   

  
	
  16

  	
   

  	
  10

  	
   

  
	
  17

  	
   

  	
  11

  	
   

  
	
  18

  	
   

  	
  11

  	
   

  
	
  19

  	
   

  	
  13

  	
   

  
	
  20

  	
   

  	
  13

  	
   

  
	
  21

  	
   

  	
  13

  	
   

  
	
  22

  	
   

  	
  14

  	
   

  
	
  23

  	
   

  	
  15

  	
   

  
	
  24

  	
   

  	
  15

  	
   

  
	
  25

  	
   

  	
  16

  	
   

  
	
  26

  	
   

  	
  16

  	
   

  
	
  27

  	
   

  	
  17

  	
   

  
	
  28

  	
   

  	
  18

  	
   

  






 


 





















 


4)              Forks:  Bucking point as described below:


 




	
  No appreciable increase in log

  	
   

  	
  Noticeable increase in log

  
	
  diameter up to fork.

  	
   

  	
  diameter before fork.

  
	
   

  	
   

  	
   

  
	
  

  	
   

  	
  

  






 


5)              Sweep and/or
Crook: Sweep and/or crook must not exceed more than 1⁄2 the diameter
in inches of the final 8’ of either end of the stringer.


 





 


6)              Metal:  All metal and signs of metal (stain) must be
bucked out.


 


General:  All stringers should be manufactured with
sawlogs in mind.


1)              Stump height must be
as close to ground level as practicable.


2)              Carry and utilize
all required falling equipment (hammer, wedges, first aid kit)


3)              Utilize proper
falling technique to minimize stump pull and cracked logs.


4)              All stump spurs and
root flare must be removed by sawing.


5)              Limbs must be bucked
flush with the bole of the tree.


6)              All bucks must be
SQUARE WITH the bole of the tree and must be made in such a manner so as to
avoid slabbing/cracking.


7)              Bucking must
eliminate forks per minimum specifications as described above.


 





















 


Schedule 3.1.1


 


Description of Tracts to be Harvested for Harvesting Year Commencing May 2,
2005 and for Harvesting Year Commencing January 1, 2006.


 





















 


Schedule 26


 


Description of REMA Tract


 





















 


SCHEDULE 11.1


 


Description of
REMA Tract


 


Tract 250, Vinton County, Ohio: 
15,859 acres