Document:

Exhibit 10.4

 

FIBER
SUPPLY AGREEMENT

 

by
and between 

 

ESCANABA
TIMBER LLC

 

and

 

ESCANABA
PAPER COMPANY

 

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 ESCANABA PAPER COMPANY, 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). 

 

“Aspen Pulpwood” means pulpwood from
aspen.

 

“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.

 

“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 the Upper
Peninsula of Michigan.

 

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

 

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

 

“Mixed Softwood Pulpwood” means all
softwood pulpwood other than Pine Pulpwood.

 

“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).

 

“Pine Pulpwood” means the following species
of timber:  Jack Pine Pulpwood and Red
Pine Pulpwood.

 

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

 

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

 

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

 

“Softwood Pulpwood” shall mean Mixed
Softwood Pulpwood and Pine Pulpwood.

 

“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.

 

“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.

 

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“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 Michigan.

 

“Valuation Consultant” shall mean
either George Banzhaf & Company of Milwaukee, Wisconsin or
Steigerwaldt Land Services of Tomahawk, Wisconsin, 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 Aspen Pulpwood.
  Seller agrees to sell, and Buyer agrees
to purchase, receive and pay for, in each calendar year (a “Calendar Year”),
the Annual Volumes of Products. All Products 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 next Calendar Year (the “Annual Plan”).
Said Annual Plan shall include estimates of

 

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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 inability is caused by a
general suspension of payments by banks in the United States), or

 

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(ii) an act, omission or circumstance
arising from the negligence or willful misconduct of the party claiming that a
Force Majeure event has occurred. 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 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 notify
the other party in writing of the termination of such Force Majeure within ten
(10) days after such termination.

 

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ARTICLE III

 

MINIMUM
VOLUMES

 

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, 400,000 tons.

 

(b)           2006 – 2010. For the Calendar Years beginning January 1, 2006 and ending December 31,
2010, 490,000 tons.

 

(c)           2011 – 2016. For the Calendar Years beginning January 1, 2011 and ending December 31,
2016, 500,000 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, 500,000 tons.

 

ARTICLE IV

PRICE AND DELIVERY TERM

 

Section 4.1             Prices.

 

(a)     The initial prices for the Products
shall be as set forth in Schedule 4.1. 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 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 Softwood
Pulpwood species, Hardwood Pulpwood and Aspen Pulpwood 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(c)). 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

 

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calculation. Such prices, as calculated, for
each of the Softwood Pulpwood species, Hardwood Pulpwood and Aspen Pulpwood
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.l(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
Softwood Pulpwood species, Hardwood Pulpwood and Aspen Pulpwood, as the case
may be, for the upcoming six month Price Period. Each calendar half, including
the first, in any Calendar Year is a “Price Period”.

 

(c)       In addition to the other
amounts payable hereunder, in the event Buyer pays any amounts to any pulpwood
supplier to the Mill for fuel adjustments or snow bonuses, Buyer shall make
comparable and contemporaneous payments to Seller. Any such payments made to
Seller pursuant to this Section 4.l(c) 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 ninety (90) 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 March 31 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.

 

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Section 4.3             Delivery Terms.   All
Products covered by this Agreement shall be delivered to Buyer F.O.B. to the
Mill or to such other locations in the Market Region as Buyer may direct upon
reasonable advance notice to Seller. Risk of loss and 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.

 

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

 

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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.

 

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

 

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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 or 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 VIII

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 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

 

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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.

 

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

 

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contemplated hereby, each party hereby
consents to the jurisdiction of any United States Federal Court sitting in the
state of Michigan 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 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

 

12

 

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 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

 

13

 

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 110,000 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.

 

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:

 

14

 

	
  If
  to Buyer:

  	
   

  	
  Escanaba
  Paper Company

  
	
   

  	
   

  	
  7100
  County 426 M.5 Road

  
	
   

  	
   

  	
  Escanaba,
  Michigan 49829

  
	
   

  	
   

  	
   

  
	
  With
  a copy to:

  	
   

  	
  James
  D. Okraszewski

  
	
   

  	
   

  	
  7100
  County 426 M.5 Road

  
	
   

  	
   

  	
  Escanaba,
  Michigan 49829

  
	
   

  	
   

  	
  Telecopier
  No. 906-789-3276

  
	
   

  	
   

  	
  Telephone
  No. 906-233-2150

  
	
   

  	
   

  	
   

  
	
  and

  	
   

  	
   

  	
  Mark
  Lukacs

  
	
   

  	
   

  	
  7100
  County 426 M.5 Road

  
	
   

  	
   

  	
  Escanaba,
  Michigan 49829

  
	
   

  	
   

  	
  Telecopier
  No. 906-233-3221

  
	
   

  	
   

  	
  Telephone
  No. 906-233-2600

  
	
   

  	
   

  	
   

  
	
  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 instance upon strict
performance of any of the provisions of this Agreement or take advantage of any
of its rights hereunder shall not be construed as a waiver of any such
provisions or the relinquishment of any such rights, but the same shall
continue and remain in full force and effect.

 

Section 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.

 

15

 

Section 10.7           Sovereign Law.   This
Agreement shall be governed by and construed in accordance with the laws of the
State of Michigan, 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 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

 

16

 

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.

 

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.

 

17

 

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.

 

[SIGNATURES
ON FOLLOWING PAGE]

 

18

 

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

  
	
   

  	
   

  
	
   

  	
  ESCANABA
  PAPER COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Peter Vogel

  	
   

  
	
   

  	
   

  	
    Name:  Peter Vogel

  
	
   

  	
   

  	
    Title:  President

  

 

 

ANNEX A – PRODUCT
SPECIFICATIONS

 

Specifications:

 

1.               Pulpwood shall be produced from live trees.

 

2.               Entire loads will be rejected if stick
contains BURN or CHAR, metal (nails, spikes, wire, etc.), plastic or
fiberglass.

 

3.               Sticks will be reasonably straight, with
sweep or crook restricted to one plane. No elbows or forks permitted.

 

4.               Limbs, stubs and burls shall be trimmed flush
with the surface of bole. Individual loads containing a mixture of hardwood and
softwood will not be accepted.

 

5.               Pulpwood which is excessively aged (cut and
decked for a lengthy time before delivery) will be treated as cull material.

 

6.               Dimensions: 100” long, 4” minimum diameter
inside bark, 24” maximum diameter inside bark (a maximum of 24” at any point on
the stick – includes burls, stubs and swellings).

 

7.               Rot, doze, stains:

 

8.               GROUNDWOOD ASPEN: White heart rot shall not
exceed one-half of the diameter; dark stain shall not exceed one-fourth of the
diameter; 10% or more cull per load – classified as hardwood or refused.

 

9.               NORTHERN WHITE CEDAR: Individual loads
limited to 10% cedar

 

Wood Species Mix:

 

1.               GROUNDWOOD ASPEN: Trembling or large-tooth
aspen only (no Balm-of- Gilead).

 

2.               MIXED HARDWOOD: All northern hardwood
species; elm, ash, oak and basswood shall not exceed 10% on a load.

 

3.               MIXED SOFTWOOD: All northern softwood
species; restricted to no more than 10% hemlock. Loads containing more than 10%
hemlock by volume will be paid as hemlock (see item 9 under specifications).
Also restricted to no more than 10% northern white cedar.

 

4.               HEMLOCK: Hemlock in pure loads or hemlock
mixed with other softwoods. Loads containing more than 10% hemlock by volume
will be paid as hemlock.

 

5.               PINE/SPRUCE: Red pine, jack pine, white pine
and spruce; white pine volume not to exceed 20% per load.

 

 

SCHEDULE 10.16

 

 

STUMP AGE
AGREEMENT

 

Between

 

 

ESCANABA TIMBER LLC

 

and

 

 

ESCANABA PAPER COMPANY

 

 

May 2, 2005

 

 

STUMPAGE
AGREEMENT

 

This Agreement is made as
of                      ,
2005, 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

 

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.

 

1.3                                 “Annual Purchase Amount” shall mean (a) for
the Harvesting Year beginning May 2, 2005, a minimum of Four Hundred
Thousand (400,000) tons of Qualifying Timber; (b) for each Harvesting Year
from January 1, 2006 through the Harvesting Year beginning January 1,
2010, a minimum of Four Hundred Ninety Thousand (490,000) tons of Qualifying
Timber; (c) for each Harvesting Year from January 1, 2011 through the
Harvesting Year beginning January 1, 2016, a minimum of Five Hundred
Thousand (500,000) 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 Five Hundred Thousand (500,000)
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.

 

2

 

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
Michigan.

 

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.

 

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

 

3

 

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 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 the following
types of Timber: Aspen Pulpwood and Other Hardwood Pulpwood.

 

1.15                           “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.

 

4

 

1.16                           “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.

 

1.17                           “Market Region” shall mean the Upper
Peninsula of Michigan.

 

1.18                           “Mechanism Notice” shall have the meaning set
forth in Section 1.12 hereof.

 

1.19                           “Mill” shall mean Buyer’s pulp and paper mill
located in Escanaba, Michigan.

 

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

 

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

 

1.22                           “Product” shall mean the individual types of
Timber listed in Section 1.31 below.

 

1.23                           “Product Price” shall mean the per ton price
for each Product as set forth on Schedule 1.23(a) attached hereto
(the “Base Price”) adjusted up or down on a semiannual basis beginning January 1,
2006 by the percentage change in the published TMN 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 1.23(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

 

5

 

such
Base Price Adjustment Date a new rolling average shall commence and shall
continue until the next Base Price Adjustment Date.

 

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

 

1.25                           “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 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.

 

1.26                           “Qualifying Timber” shall mean Timber which meets
or exceeds the specifications set forth in Schedule 1.26 to this
Agreement.

 

1.27                           “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.

 

1.28                           “Softwood Pulpwood” shall mean the following
types of Timber: Jack Pine Pulpwood, Red Pine Pulpwood, Spruce/Fir Pulpwood,
Hemlock Pulpwood and Other Softwood Pulpwood.

 

1.29                           “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.

 

6

 

1.30                           “Timber” shall mean the following types of
timber now or hereafter located on the Timberlands: Aspen Pulpwood, Other
Hardwood Pulpwood, Jack Pine Pulpwood, Other Softwood Pulpwood, Red Pine
Pulpwood, Spruce/Fir Pulpwood, Hemlock Pulpwood, Ash Saw Bolts, Aspen Saw
Bolts, Beech Saw Bolts, Hard Maple Saw Bolts, Other Hardwood Saw Bolts, Red Oak
Saw Bolts, Soft Maple Saw Bolts, White Birch Saw Bolts, Yellow Birch Saw Bolts,
Jack Pine Saw Bolts, Red Pine Saw Bolts, White Pine Saw Bolts, Ash Sawtimber,
Aspen Sawtimber, Basswood Sawtimber, Beech Sawtimber, Hard Maple Sawtimber,
Other Hardwood Sawtimber, Red Oak Sawtimber, Soft Maple Sawtimber, White Birch
Sawtimber, White Oak Sawtimber, Yellow Birch Sawtimber, Jack Pine Sawtimber,
Other Softwood Sawtimber, Red Pine Sawtimber, Spruce Sawtimber and White Pine
Sawtimber.

 

1.31                           “Timberlands” shall mean the land and
leasehold interests purchased by Seller from Escanaba Paper Company pursuant to
that certain Equity and Asset Purchase Agreement by and between MeadWestvaco
Corporation and Maple Acquisition LLC dated January 14, 2005.

 

1.32                           “TMN” shall mean the publication known as Timber
Mart-North published by George Banzhaf & Company, or in the event TMN
is no longer published, a comparable publication mutually acceptable to Seller
and Buyer.

 

1.33                           “Valuation Consultant” shall mean either
George Banzhaf & Company of Milwaukee, Wisconsin or Steigerwaldt Land
Services of Tomahawk, Wisconsin, 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 within thirty (30) days, then an arbitrator selected

 

7

 

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.

 

1.34                           “Zones” shall mean the following Zones
designated in TMN: Michigan Zone 2 and Michigan Zone 3.

 

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)

  	
  Pulpwood:

  	
   

  	
  not
  less than 400,000 tons

  
	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
  All
  Other Products:

  	
   

  	
  no
  minimum requirement

  

 

8

 

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)

  	
  Pulpwood:

  	
   

  	
  not
  less than 490,000 tons

  
	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
  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)

  	
  Pulpwood:

  	
   

  	
  not
  less than 500,000 tons

  
	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
  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)

  	
  Pulpwood:

  	
   

  	
  not
  less than 500,000 tons

  
	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
  All
  Other Products:

  	
   

  	
  no
  minimum requirement

  

 

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

 

9

 

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.

 

10

 

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

 

11

 

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 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 ratting,
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 Michigan.

 

12

 

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 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

 

13

 

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 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

 

14

 

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.

 

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.

 

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

 

15

 

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
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

 

16

 

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 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.

 

17

 

(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].

 

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”):

 

18

 

(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.

 

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

 

19

 

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 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.

 

20

 

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 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

 

21

 

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 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 110,000 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

 

22

 

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.

 

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:

 

23

 

	
  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.

  	
   

  	
   

  
					

 

24

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  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.

 

25

 

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

 

26

 

the
signer of such certificate no default exists under this Agreement or specifying
each such default to which the signer has knowledge.

 

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.

 

27

 

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; (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.

 

[SIGNATURES BEGIN ON NEXT PAGE]

 

28

 

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:

  	
   

  	
   

  
						

 

29

 

List of Schedules

 

	
  Schedule 1.23(a)

  	
   

  	
  Base
  Price Per Product

  
	
  Schedule 1.23(b)

  	
   

  	
  Wood
  Supply Calculation Formula for Price Indexing

  
	
  Schedule 1.26

  	
   

  	
  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 1.23(a)

 

Base Price Per Product

 

	
  Product

  	
   

  	
  Base Price Per Ton

  
	
   

  	
   

  	
   

  
	
  Aspen
  Pulpwood:

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Other
  Hardwood Pulpwood

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Jack
  Pine Pulpwood

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Other
  Softwood Pulpwood

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Red
  Pine Pulpwood

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Spruce/Fir
  Pulpwood

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Hemlock
  Pulpwood

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Ash
  Saw Bolts

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Aspen
  Saw Bolts

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Beech
  Saw Bolts

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Hard
  Maple Saw Bolts

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Other
  Hardwood Saw Bolts

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Red
  Oak Saw Bolts

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Soft
  Maple Saw Bolts

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  White
  Birch Saw Bolts

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Yellow
  Birch Saw Bolts

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Jack
  Pine Saw Bolts

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Red
  Pine Saw Bolts

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  White
  Pine Saw Bolts

  	
   

  	
  $

  

 

 

	
  Product

  	
   

  	
  Base Price/Board Feet Scribner

  
	
   

  	
   

  	
   

  
	
  Ash
  Sawtimber

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Aspen
  Sawtimber

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Basswood
  Sawtimber

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Beech
  Sawtimber

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Hard
  Maple Sawtimber

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Red
  Oak Sawtimber

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Other
  Hardwood Sawtimber

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Soft
  Maple Sawtimber

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  White
  Birch Sawtimber

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  White
  Oak Sawtimber

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Yellow
  Birch Sawtimber

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Jack
  Pine Sawtimber

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Other
  Softwood Sawtimber

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Red
  Pine Sawtimber

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Spruce
  Sawtimber

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  White
  Pine Sawtimber

  	
   

  	
  $

  

 

 

Schedule 1.23(b)

 

Wood Supply Calculation
Formula for Price Indexing

 

 

For
January, 2006 Adjustment:

 

	
   

  	
  (4/04
  + 9/04 + 4/05 + 9/05)

  	
   

  
	
  Base
  Price X

  	
  (9/03
  + 4/04 + 9/04 + 4/05)

  	
    =
  Price – January 1, 2005

  

 

 

For
July, 2006 Adjustment:

 

	
  Price
  from

  	
  (9/04
  + 4/05 + 9/05 + 4/06)

  	
   

  
	
  previous
  Period X

  	
  (4/04
  + 9/04 + 4/05 + 9/05)

  	
    =
  Price – July 1, 2006

  

 

 

Schedule 1.26

 

General Product Specifications

 

 

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.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.l(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.l(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.

 

2

 

“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

 

3

 

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 the irrespective 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

 

4

 

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

 

5

 

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

 

6

 

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.l(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.l(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

 

7

 

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

 

8

 

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.

 

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

 

9

 

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.

 

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

 

10

 

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 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

 

11

 

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.

 

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

 

12

 

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 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

 

13

 

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 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 assumption by said New Owner, Seller’s obligations to supply
Products hereunder shall

 

14

 

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.

 

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:

 

15

 

	
  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.

 

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.

 

16

 

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 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

 

17

 

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.

 

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.

 

18

 

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 the fee title 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 price of
the Timberlands Interest to be sold and (iii) the Assumed Volume proposed
to be allocated to said Timberlands Interest (the “Offer Terms”).

 

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

 

19

 

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 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 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 Tract, or any sale in lieu thereof; or (b) any
easement, cutting contract, hunting license or lease of 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.

 

20

 

 

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

  

 

 

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.

 

 

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 

  Diameter

  	
   

  	
  Max Defect 

  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 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.

 

2

 

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

 

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

 

3

 

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 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.

 

4

 

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.

 

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

 

5

 

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 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.

 

6

 

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 the land and
leasehold interests purchased by [Seller] from Escanaba Paper Company pursuant
to that certain Equity and Asset Purchase Agreement by and between MeadWestvaco
Corporation and Maple Acquisition LLC dated January 14, 2005.

 

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. 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

 

7

 

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 tons

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  Softwood
  Pulpwood:

  	
   

  	
  not
  less than 58,000 tons

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (c)

  	
   

  	
  Hardwood
  Stringers:

  	
   

  	
  not
  less than 42,000 tons

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (d)

  	
   

  	
  All
  Other Products:

  	
   

  	
  no
  minimum requirement

  

 

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

  

 

8

 

	
  (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

  

 

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.

 

9

 

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.

 

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.

 

10

 

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 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.

 

11

 

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 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

 

12

 

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 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.

 

13

 

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.

 

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

 

14

 

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 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,

 

15

 

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 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:

 

16

 

(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]

 

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

 

17

 

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.

 

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

 

18

 

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 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.

 

19

 

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 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

 

20

 

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 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

 

21

 

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.

 

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.

  	
   

  	
   

  
					

 

22

 

	
  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.

  	
   

  	
   

  
					

 

	
  and

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Attn.:

  	
   

  	
   

  
	
   

  	
  Telecopier
  No.

  	
   

  	
   

  
	
   

  	
  Telephone
  No.

  	
   

  	
   

  
					

 

23

 

	
  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.

 

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

 

24

 

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.

 

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

 

25

 

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; (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

 

26

 

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 the
fee title 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 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

 

27

 

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”).

 

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
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.

 

28

 

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,
hunting license or lease of 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 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.

 

 

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

  Diameter

  	
   

  	
  Max Defect

  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

  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.

 

 

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

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