Document:

10.23

 

EXECUTION
COPY

 

 

STUMPAGE
AGREEMENT

 

Between

 

 

SCIOTO
LAND COMPANY, LLC

 

 

and

 

WICKLIFFE
PAPER COMPANY

 

 

December 16, 2005

 

STUMPAGE
AGREEMENT

 

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

 

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 the year preceding each Harvesting Year
during the Term of this Agreement (beginning with Harvesting Year 2006)
specifying which of the Actual Designated Tracts Buyer will harvest during the
upcoming calendar year.

 

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

 

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 January 1, 2006, and each subsequent
second anniversary from such date 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 Kentucky.

 

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 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 pulpwood from hardwood species of timber.

 

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.

 

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

 

1.17         “Natural
Hardwood” means Hardwood Pulpwood from timber stands that are naturally
regenerated.

 

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

 

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

 

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

 

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

 

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

 

1.23         “Plantation
Hardwood” means Hardwood Pulpwood from timber stands that are artificially
regenerated.

 

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

 

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

 

 

1.26         “Product
Price” shall mean the per ton price for each Product as set forth on Schedule 1.26(a) attached
hereto (the “Base Price”) adjusted up or down on a quarterly basis beginning January 1,
2006.  An example of the quarterly price
adjustment mechanism is set forth on Schedule 1.26(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
“Base Price” shall be used in determining the Product Price with respect to
each Product until the Base Price is adjusted on the next Base Price Adjustment
Date.

 

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

 

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 2,000 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         “Saw
Logs” means logs cut to be made into solid wood products from hardwood and pine
species of timber that do not include Pulpwood.

 

 

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

 

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

 

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

 

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

 

1.36         “Valuation
Consultant” shall mean either Sizemore & Sizemore of Tallassee,
Alabama or Larson & McGowin of Mobile, Alabama, 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 Zone designated in TMS as Tennessee Area 2.

 

 

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

 

	
  Year

  Source

  	
   

  	
  2006

  	
   

  	
  2007

  	
   

  	
  2008

  	
   

  	
  2009

  	
   

  	
  2010

  	
   

  	
  2011

  	
   

  	
  2012

  	
   

  	
  2013

  	
   

  	
  2014

  	
   

  	
  2015

  	
   

  	
  2016

  	
   

  
	
  (i)Hardwood
  Pulpwood

  	
   

  	
  50

  	
   

  	
  50

  	
   

  	
  50

  	
   

  	
  50

  	
   

  	
  50

  	
   

  	
  40

  	
   

  	
  30

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  (ii) Pine
  Pulpwood

  	
   

  	
  35

  	
   

  	
  35

  	
   

  	
  35

  	
   

  	
  35

  	
   

  	
  35

  	
   

  	
  35

  	
   

  	
  35

  	
   

  	
  35

  	
   

  	
  35

  	
   

  	
  35

  	
   

  	
  35

  	
   

  

 

2.2.2        2017
– 2019 - To the extent Buyer exercises its option to extend the 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)

  	
  Pine Pulpwood:

  	
   

  	
  not less than 35,000 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 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 January 1, 2006 and the
Harvesting Year commencing January 1, 2007.

 

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 Seller will
harvest to satisfy the volume requirements of this Agreement for the applicable
Harvesting Year, taking into account said proposed modifications reasonably
requested by Buyer, to the extent practicable (the “Actual Designated Tracts”),
and Seller shall simultaneously therewith deliver to Buyer a Harvesting Plan
for each of the Actual Designated Tracts.

 

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

 

4.             Harvesting
Procedures. 

 

4.1           Harvesting
Schedule.  Following determination of
the Actual Designated Tracts, Buyer shall provide a harvesting schedule to
Seller setting forth approximate start and completion dates relating to
harvesting Timber within each of the Actual Designated Tracts.

 

 

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

 

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

 

 

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 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.

 

4.4           Saw
Log Disposition.  Buyer will
coordinate the harvest of Saw Log timber from Actual Designated Tracts in
conjunction with its Pulpwood harvesting operations and will separate Saw Logs
from Buyer’s harvested Pulpwood.  Seller
shall be responsible for the merchandising and delivery of such Saw Logs and
bear the expenses and be entitled to all proceeds associated therewith.  Buyer and Seller shall cooperate to ensure
that Saw Log removal is accomplished in an efficient manner without undue
interference with Buyer’s Pulpwood harvesting operations.

 

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 at the Mill or at one of Buyer’s remote woodyards.  Buyer shall provide Seller on a weekly basis
with a settlement statement that shows the date, species and net tonnage for
each load, 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.  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 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,
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:

 

(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.

 

7.6           Harvest
Volume Variances.  Following the
determination by Seller and Buyer of the Actual Designated Tracts for a given
Harvesting Year in accordance with Section 3.1.2.2, Seller and Buyer shall
be deemed to have satisfied the volume requirements of Section 2.2 in
respect of such Harvest Year regardless of whether Buyer actually harvests the
volumes contemplated by Section 2.2 where harvesting shortfalls arise from
(i) variances between actual timber volume and the inventory volumes of
such Actual Designated Tracts; or (ii) operational constraints associated
with Buyer’s adherence to Sustainable Forestry Practice Standards or applicable
Forestry Best Management Practices as promulgated by the Tennessee Department
of Agriculture Division of Forestry or any successor agency or standards
thereto.  In the event that Buyer’s
harvest volumes exceed the minimum volume requirements for any Harvest Year as
specified in Section 2.2, such excess harvest volume shall directly offset
the corresponding volume requirement for the subsequent Harvest Year.

 

 

8.             Pay or Take

 

8.1           Seller Responsibility.   Seller agrees to sell , subject to Force
Majeure, and Buyer agrees to purchase, subject to 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, :  (i) if
adverse weather conditions during the last ninety (90) days of any Calendar
Year prevent Buyer from purchasing the Annual Volumes of Natural Hardwood or Pine
Pulpwood for said Calendar Year, the payments provided for in this Section 8.1
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 purchased on or before March 31 of the following Calendar
Year.

 

8.2           Buyer
Responsibility.  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.

 

8.3           Additional
Terms.  Subject to the terms of Section 7
above, any payments made pursuant to this Section 8.3 shall be calculated
separately for Pine Pulpwood and Hardwood Pulpwood.  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.

 

9.             Term and
Termination.

 

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

 

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

 

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

 

 

after receipt of notice of an
intent to cancel by reason of such default (each, an “Event of Default”):

 

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

 

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

 

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

 

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

 

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

 

(b)           If
any material difference remains unresolved ten (10) Business Days after
the start of the process referenced in Subsection 10(a), or such longer
period as the persons referenced in Subsection 10(a) shall have
agreed, then the parties shall submit such matter to arbitration, pursuant to
the Rules of Commercial Arbitration of the American Arbitration
Association.  Any such arbitration shall
be conducted by a single arbitrator, whose decision shall be final.  The parties shall first attempt to agree on
the selection of the arbitrator, and, if they

 

 

cannot agree within fourteen (14) days after it becomes necessary to
submit the dispute to arbitration, either party may request the American
Arbitration Association to appoint the arbitrator.  In all cases, the arbitrator shall be a
person knowledgeable about sales of timber in the Market Region.  The arbitrator shall be instructed to schedule all
proceedings so that, if possible, a decision may be reached and communicated to
the parties within forty-five (45) days after the appointment of the
arbitrator.  All expenses of the
arbitration shall be divided equally between the parties, except that each
party shall bear the expense of its own counsel and the expense of the preparation
of its presentation.  Seller and Buyer
shall provide to the arbitrator such information as the arbitrator shall
reasonably request to facilitate the determinations to be made by the
arbitrator hereunder.

 

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

 

 

11.           Assignment.

 

11.1         Assignment
by Seller.

 

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

 

(b)           Notwithstanding
any other provision of this Agreement to the contrary, Buyer and Seller
acknowledge and agree that Seller shall not be prohibited from selling all or
any portion of the Timberlands, provided that any such sale of the Timberlands
shall be made subject to the terms of this Agreement and the obligation to
supply the applicable portion of Timber volumes required hereunder.  Upon any sale of a portion of the
Timberlands, the purchaser of said portion of the Timberlands (“New Owner”)
shall assume the obligation to supply a portion of the Timber volumes to be
supplied hereunder, said portion of the Timber volumes (“Assumed Volume”) to be
agreed to by Seller and said New Owner, subject to Buyer’s consent to such
volume allocation, which consent shall not be unreasonably withheld or
delayed.  Upon such assumption by said
New Owner, Seller’s obligations to supply Timber hereunder shall be reduced by
the volumes assumed by said New Owner, and Seller shall thereafter have no
obligation or liability with respect to said assumed volumes or with respect to
the portion of the Timberlands so conveyed. 
At the request of Seller, upon any such sale to a New Owner Buyer shall
execute an amendment to this Agreement acknowledging the foregoing.  Furthermore, upon request of Seller or Buyer,
upon such sale to a New Owner, Buyer and such New Owner shall enter into a
separate Stumpage Agreement on the same terms and conditions as contained
in this

 

 

Agreement (or such other terms as Buyer and such New Owner shall
mutually agree) except for the portion of the Timberlands covered thereby and
the volume of Timber to be supplied thereunder. 
In the event Buyer objects to any proposed Assumed Volume, Buyer shall
provide written notice of the same to Seller within fifteen (15) days of notice
to Buyer of said proposed Assumed Volume (“Objection Notice”), said Objection
Notice to include a detailed explanation of the basis for said objection.  Failure by Buyer to timely provide said
Objection Notice shall be deemed to constitute the consent of Buyer to said
proposed Assumed Volume.  In the event
Buyer timely provides an Objection Notice, Seller shall have the option of (i) revising
said proposed Assumed Volume, in which case Buyer shall have the further right
to object by providing a new Objection Notice as provided above or (ii) retaining
the Valuation Consultant to determine whether the proposed Assumed Volume is
reasonable.  In the event the Valuation
Consultant is so retained and determines that said proposed Assumed Volume is
reasonable, Buyer shall be deemed to have consented to said Assumed Volume and
shall pay all costs and 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 7,000 acres of the
Timberlands free and clear of the obligations of this Agreement (the “Exempt
Acres”), provided that Seller is able to supply the volume of Timber required
to be supplied hereunder from the remaining portion of the Timberlands.  Buyer agrees to execute any and all
documentation requested by Seller in order to evidence the release of the
Exempt Acres from this Agreement.

 

11.2         Assignment
by Buyer.  Except as provided in this
Section 11.2, this Agreement may not be assigned by Buyer in whole or in
part.  Notwithstanding the foregoing, at
any time during the Term, Buyer may assign this Agreement (a) to any
lender or lenders as security for

 

 

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

 

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

 

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

 

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:

  	
   

  	
  Wickliffe Paper Company

  
	
   

  	
   

  	
  1724 Westvaco Road

  
	
   

  	
   

  	
  Wickliffe, Kentucky 42087

  

 

 

	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Bernie F. Coyle

  
	
   

  	
   

  	
  3901 Mayfield Road

  
	
   

  	
   

  	
  Wickliffe, Kentucky 42087

  
	
   

  	
   

  	
  Telecopier No.  270-335-6240

  
	
   

  	
   

  	
  Telephone No.  270-335-6241

  
	
   

  	
   

  	
   

  
	
  and

  	
   

  	
  Greg Hansrote

  
	
   

  	
   

  	
  1724 Westvaco Road

  
	
   

  	
   

  	
  Wickliffe, Kentucky 42087

  
	
   

  	
   

  	
  Telecopier No.  270-335-4110

  
	
   

  	
   

  	
  Telephone No.  270-335-4587

  
	
   

  	
   

  	
   

  
	
  If to
  Seller:

  	
   

  	
   

  	
  Scioto Land Company, LLC

  
	
   

  	
   

  	
   

  	
  c/o Tolleson
  Land & Timber, Inc.

  
	
   

  	
   

  	
   

  	
  P.O. Box
  970

  
	
   

  	
   

  	
   

  	
  Perry,
  Georgia 31069

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Attn.:
  Robert G. Chambers

  
	
   

  	
   

  	
   

  	
   

  
	
  with a copy
  to:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Mazursky &
  Dunaway LLP

  
	
   

  	
   

  	
   

  	
  Monarch
  Tower, Suite 2400

  
	
   

  	
   

  	
   

  	
  3424
  Peachtree Road

  
	
   

  	
   

  	
   

  	
  Atlanta,
  Georgia 30326-1118

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Attn: C. Glenn Dunaway,Esq.

  

 

or, as to 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 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 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 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.

 

24.1         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.

 

 

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

 

	
   

  	
  WICKLIFFE PAPER COMPANY

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Peter H.Vogel

  
	
   

  	
   

  	
  Name:

  	
  Peter H. Vogel

  
	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CLYNELISH, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  SCIOTO LAND COMPANY, LLC, its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Tolleson-Knox Land Management Company, LLC,
  Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Robert G. Chambers

  
	
   

  	
   

  	
  Name:

  	
  Robert G. Chambers

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice PresidentExhibit 10.24

 

EXECUTION
COPY

 

STUMPAGE
AGREEMENT

 

 

Between

 

 

SCIOTO
LAND COMPANY, LLC

 

 

and

 

 

CHILLICOTHE
PAPER INC.

 

 

STUMPAGE
AGREEMENT

 

This
Agreement is made as of December 16, 2005, by and between Scioto Land
Company, 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.

 

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 2007) specifying which of the
Actual Designated Tracts Buyer will harvest during the upcoming calendar year.

 

1.3           “Annual
Purchase Amount” shall mean (a) 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; (b) 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 (c) 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 January 1, 2006 and each subsequent
second anniversary following January 1, 2006 (ie - January 1, 2008, January 1,
2010, etc...) during the Term of this Agreement.

 

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

 

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

 

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

 

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,
adverse financial or market conditions, or 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 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 quarterly basis pursuant to the
price adjustment mechanism set forth in said Schedule 1.15.  On each Base Price Adjustment Date during the
Term of this Agreement, the Base Price for Hardwood Stringers shall be adjusted
to equal the Fair Market Timber Value for such Product on the applicable Base
Price Adjustment Date.

 

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

 

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

 

1.18         “Harvesting
Year” shall mean the period from December 17, 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) (the
“Base Price”) adjusted up or down first on January 1, 2008 and again on
each Base Price Adjustment Date thereafter so that the applicable Pulpwood
Purchase Price shall be adjusted to equal the Fair Market Timber Value for such
Product on the applicable 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 three calendar quarters immediately
prior to the calendar quarter month period in which the applicable Base Price
Adjustment Date occurs (including sales that are subject to bona fide
agreements with unaffiliated third parties, whether or not they have been
harvested during such three calendar quarter period), 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.  Qualifying Sales shall exclude sales of
Qualifying Timber between Buyer and Seller under this Agreement.

 

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 set forth in Schedule 1.29
to this Agreement.

 

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

 

1.33         “Timber”
shall mean the following types of timber now or hereafter located on the
Timberlands set forth in Schedule 1.29 to this Agreement.

 

1.34         “Timberlands”
shall mean all timberland properties purchased by Seller from Escanaba Timber
LLC on the date hereof and located in the State of Ohio and the Ohio Woodlands
located in Greenup and Lewis Counties, Kentucky.

 

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

 

1.36         “Valuation
Consultant” shall mean either Fountain Forestry of Portsmouth, Ohio or
BalkenTier Consulting of Morgantown, West Virginia, or if such firms are no
longer in

 

 

existence, another
reputable, professionally qualified Person meeting all of the following
criteria.  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.

 

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        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

  

 

2.2.2        2011
– 2016.  For the Harvesting Years
beginning January 1, 2011 and ending December 31, 2016, the mix of
Timber Seller shall make available to Buyer shall be as follows:

 

	
  (a)

  	
  Hardwood Pulpwood:

  	
   

  	
  not less than 82,000 tons

  
	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
  Softwood Pulpwood:

  	
   

  	
  not less than 125,000 tons

  
	
   

  	
   

  	
   

  	
   

  
	
  (c)

  	
  Hardwood Stringers:

  	
   

  	
  not less than 28,000 tons

  
	
   

  	
   

  	
   

  	
   

  
	
  (d)

  	
  All Other Products:

  	
   

  	
  no minimum requirement

  

 

2.2.3        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

  

 

2.3           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 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.

 

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 January 1, 2006 and the
Harvesting Year commencing January 1, 2007.

 

3.1.2        Subsequent
Designation of Tracts to be Harvested. 
For the Harvesting Year commencing January 1, 2008, 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 October 1 prior to the applicable Harvesting Year (e.g. October 1,
2007 for the Harvesting Year commencing January 1, 2008), 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, and Preliminary Designated
Tracts will not contain Stringer stumpage from previously high-graded
tracts harvested during the Term of this Agreement, and Preliminary Designated
Tracts shall be offered to a buyer on a proportionate basis with other
purchasers of timber from the Timberlands (based on the relative volume of
purchases by Buyer and such other purchasers) to allow Buyer the opportunity
for wet-weather harvesting.

 

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.  During such thirty (30) day
period, Buyer and Seller agree to review the applicable Harvesting Plan to
determine whether Seller has not made available, in Buyer’s reasonable
judgment, a sufficient number of Preliminary Designated Tracts with pine trees
and, if Buyer so determines, the parties shall negotiate in good faith to reach
agreement with respect to the number of such pine trees to be included in the
Preliminary Designated Tracts.  To the
extent the parties are unable to read agreement on the availability of pine
trees, any such dispute shall be settled in accordance with Section 10 of
this Agreement. At the end of said thirty (30) day period, Seller shall notify
Buyer of the actual tracts which Buyer will harvest to satisfy the volume
requirements of this Agreement for the applicable Harvesting Year, taking into
account said proposed modifications reasonably requested by Buyer, to the
extent

 

 

practicable (the “Actual Designated Tracts”), and
Seller shall simultaneously therewith deliver to Buyer a Harvesting Plan for
each of the Actual Designated Tracts.

 

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

 

4.             Harvesting Procedures.

 

4.1           Harvesting
Schedule.  Following determination of
the Actual Designated Tracts, Buyer shall provide a harvesting schedule to
Seller setting forth approximate start and completion dates relating to
harvesting Timber within each of the Actual Designated Tracts.  Buyer shall modify said harvesting schedule based
upon any reasonable objections raised by Seller with respect to any of said
harvesting dates, said reasonable objections may be for reasons which include,
but are not limited to, (a) a violation of Sustainable Forestry
Certification Requirements, (b) potential logging damage to the site, such
as rutting, or (c) failure to comply with Sustainable Forestry Initiative
regeneration requirements applicable to harvesting on adjacent lands.  Notwithstanding the foregoing, Buyer shall
harvest the Actual Designated Tracts on the basis of the Annual Buyer
Harvesting Notices provided by Buyer to Seller each calendar

 

 

year during the
Term of this Agreement, subject to a Force Majeure Event, and subject to the
provisions of Section 4.3 below.

 

4.2           Timber
Roads.  Seller shall construct, or cause to be
constructed, at Seller’s sole cost and expense, haul roads (including
temporary, winter haul roads (“Winter 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 Seller’s delivery of the Harvesting Plan
to Buyer, one or more representatives of Buyer shall review the construction of
the Winter Roads and negotiate in good faith with one or more representatives
of Seller to determine whether said Winter Roads are sufficient for the Buyer’s
intended use and, only upon such agreement being reached, Buyer shall retain
responsibility for the cost of maintaining and repairing said Winter
Roads.  If the parties are unable to
reach agreement with respect to the sufficiency of said Winter Roads, the
dispute shall be settled in accordance with Section 10 of this
Agreement.  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, and perennial and intermittent streams clear of logs,
timber, limbs or other debris.  All oil
drums, cans, bottles, cartons, delimbing bars, loading decks, abandoned
equipment and other debris resulting from Buyer’s operations shall be removed
from the applicable portions of the Timberlands upon completion of the
harvesting operations at Buyer’s expense. 
If repairs are not made or if the debris is not removed and cleared
within thirty (30) days after notice from Seller to Buyer, then Seller may
undertake such repair or removal for Buyer’s account, and Buyer shall be liable
to Seller for any expense incurred in repairing or removing same.  Buyer shall not, under any circumstance, bury
any material underground nor discharge, release or otherwise cause the
Timberlands or any portion thereof to be affected by hazardous wastes or
hazardous substances.  Buyer shall use
normal and customary care while conducting its harvesting operations so as not
to materially damage the Timberlands. 
Buyer acknowledges that a higher degree of care is required when the
site is abnormally wet and that such circumstances may require Buyer to halt
all harvesting activities.  Seller
reserves the right to suspend Buyer’s harvesting operations when Seller deems
site damage will result from continued operations; provided, however, that in
the event of such suspension, Buyer shall be entitled to an extension of the time
allotted for its harvesting operations equal to the number of days that the
suspension

 

 

continues.  Seller also reserves the right to suspend
Buyer’s harvesting operations on an Actual Designated Tract when Seller
determines, in the exercise of its reasonable discretion, that Buyer is not
conducting harvesting operations on the Actual Designated Tract in accordance
with the relevant Harvesting Plan.  In
the event Buyer conducts harvesting operations in violation of the 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, ) at the Mill, Piketon
Merchandising Yard, or other outside location as determined by Buyer.  Buyer shall provide Seller on a weekly basis
(with photocopies of weigh tickets if requested by Seller) and a settlement
statement, and shall pay Seller each week for all Timber weighed-in 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.  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.

 

5.3           Pay
or Take.

 

5.3.1        If
for any Calendar Year, Seller fails for any reason other than Force Majeure to
make available to Buyer Actual Designated Tracts for any Harvesting Year that
would allow Buyer to harvest at least ninety percent (90%) of each of the Products
comprising the designated Annual Purchase Amount for such Calendar Year, Seller
will pay Buyer at a rate of $10.00 per ton for Hardwood Pulpwood, $15.00 per
ton for Softwood Pulpwood and $30 per ton for Hardwood Stringers, respectively,
multiplied by the difference between (x) ninety percent (90%) of the number of
tons of the applicable Product comprising the Annual Purchase Amount for the
applicable Calendar Year minus (y) the actual number of tons of the applicable
Product made available by Seller for harvesting by Buyer 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 such
Product comprising the Annual Purchase Amount. 
Payment shall be made by Seller to Buyer on demand no later than fifteen
(15) days from Buyer’s written request for such payment.

 

5.3.2        If
for any Calendar Year, Buyer fails for any reason other than Force Majeure to
harvest at least ninety percent (90%) of each Product comprising the Annual
Purchase Amount (other than by virtue of a failure of Seller to make available
the full amount of Tracts for harvesting such Product in the applicable
Calendar Year), then Buyer shall pay Seller for the shortage at a rate of $10.00
per ton for Hardwood Pulpwood, $15.00 per ton for Softwood Pulpwood and $30 per
ton for Hardwood Stringers, respectively, multiplied by the difference between
(x) ninety percent (90%) of the number of tons of the applicable Product
comprising the

 

 

Annual Product Amount for the applicable Calendar Year minus (y) the
volume of the applicable Product comprising the Annual Product Amount actually
harvested 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 harvest the Annual Product Amount.  Payment shall be made by Buyer to Seller on
demand no later than fifteen (15) days from Seller’s written request for such
payment.

 

5.3.3.       Subject
to the terms of Section 2.3 above, any payments made pursuant to this Section 5.3
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 Product Amount for purposes of calculating such shortage payment for
either party will be prorated equitably.

 

5.3.4        Notwithstanding
anything herein to the contrary, Seller shall not be obligated to pay
liquidated damages under Section 5.3.1 solely with respect to a failure to
make available a sufficient amount of Tracts for harvesting Softwood Pulpwood
to the extent Seller establishes to the reasonable satisfaction of Buyer that
from the date of this Agreement through the relevant date of determining the
applicability of liquidated damages there did not exist Tracts with sufficient
harvestable timber to enable Seller to satisfy its obligations to make
available the required volumes of Softwood Pulpwood under this Agreement.  Such determination shall be made such that
Seller shall not be entitled to the benefit of this provision to the extent the
failure to have Tracts available for harvesting is caused by any sale of the
Timberlands, whether permitted under the terms of this Agreement or not.

 

 

6.             Indemnity.

 

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

 

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

 

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

 

7.             Force Majeure.

 

7.1           Effect
of Force Majeure.  Except for the
obligation of a party to make payments required hereunder, the parties shall be
excused from performing any of their respective obligations under this
Agreement and shall not be liable in damages or otherwise on account of the
non-performance of any such obligation, for so long as and to the extent that
such party is unable to perform such obligation as a result of any Force Majeure
Event.

 

7.2           Mitigation
and Notice.  The occurrence of a
Force Majeure Event shall not relieve a party of its obligations and liability
hereunder to the extent such party fails to use commercially reasonable efforts
to remove the cause and remedy or mitigate the effects of the Force Majeure
Event if, with commercially reasonable efforts, such party could have removed
such cause or

 

 

remedied or
mitigated such effects.  In addition, no
Force Majeure Event shall relieve a party of its obligations or liability
hereunder unless such party shall give notice (including a reasonable
description of such Force Majeure Event) to the other party as soon as
reasonably possible and in any event within twenty (20) days of the occurrence
of such Force Majeure Event. Upon request, the party whose obligations were
suspended shall provide the other party with a plan for remedying the effects
of such Force Majeure Event.

 

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

 

7.4           Force
Majeure Event Affecting Actual Designated Tracts.  If either party becomes aware of a Force
Majeure Event that makes a portion of any Actual Designated Tract unavailable
for harvesting by Buyer in accordance with the schedule contemplated by
the parties, then it shall promptly notify the other party and Seller shall
promptly designate and make available for harvesting such other portions of the
Timberlands as shall be necessary to satisfy its obligations under this
Agreement.  If the Seller is unable to
designate sufficient portions of the Timberlands to satisfy its obligations
under this Agreement, then the provisions of Section 7.5 shall apply to
the unsatisfied obligations occasioned by such Force Majeure Event.

 

7.5           Volume
Reduction Based on Force Majeure Event. 
If the party that becomes subject to a Force Majeure Event (the “Affected
Party”) reduces the volume of Timber to be purchased or sold due to a Force
Majeure Event (the amount of such reduction, the “Reduction Amount”), the
Affected Party shall give written notice to the other party (the “Non-Affected
Party”) of such reduction and the effective date thereof.  If such reduction continues in effect for

 

 

a period of sixty
(60) days or more, the Non-Affected Party shall then have the right, in the
case of Seller, to sell all or part of the Reduction Amount of such Timber not
purchased by Buyer to another buyer or buyers, and in the case of Buyer, to
purchase all or part of the Reduction Amount of Timber not sold by Seller from
another seller or sellers, subject to the following:

 

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

 

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

 

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

 

8.             [Intentionally Left Blank]

 

9.             Term and Termination.

 

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

 

9.2           Extension
of Term.               Provided that Buyer shall not then be in
default under this Agreement, the Term of this Agreement may be extended at the
option of Buyer for one (1) additional three (3) year term, which
extension term shall commence concurrently with the expiration of the initial
term, upon the same terms and conditions as contained in this Agreement.  In the event that Buyer desires to extend
this Agreement pursuant to the above

 

 

extension option,
it shall give written notice of such desire to extend the Term to Seller no
later than January 1, 2016.

 

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

 

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

 

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

 

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

 

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

 

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

 

(b)           If
any material difference remains unresolved ten (10) Business Days after
the start of the process referenced in Subsection 10(a), or such longer
period as the persons referenced in Subsection 10(a) shall have
agreed, then the parties shall submit such matter to

 

 

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

 

(c)           Notwithstanding
the existence of a dispute or the progress of the arbitration proceeding, but
subject to the terms of Section 5.2 above, the parties shall continue to
perform their respective obligations under this Agreement during such period.  To the extent that this Agreement provides
for specific performance or other equitable remedies for a particular
violation, and with respect to the ability of Seller to suspend Buyer’s
harvesting operations pursuant to Section 4.3 and the ability of Seller to
suspend Buyer’s harvesting operations (or deliveries by Seller to the Mill, if
applicable) pursuant to Section 5.2, this Section 10 shall not apply,
it being the intent that the aggrieved party be able to bring the matter to
court to seek enforcement as soon as possible. 
Further, this Section 10 shall not preclude any party from

 

 

seeking injunctive relief or such other interim equitable remedies as
may be required to preserve any claims hereunder.

 

11.           Assignment.

 

11.1         Assignment
by Seller.

 

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

 

(b)           Notwithstanding
any other provision of this Agreement to the contrary, Buyer and Seller
acknowledge and agree that Seller shall not be prohibited from selling all or
any portion of the Timberlands, provided that any such sale of the Timberlands
shall be made subject to the terms of this Agreement and the obligation to
supply the applicable portion of Timber volumes required hereunder.  Upon any sale of a portion of the
Timberlands, the purchaser of said portion of the Timberlands (“New Owner”)
shall assume the obligation to supply a portion of the Timber volumes to be
supplied hereunder, said portion of the Timber volumes (“Assumed Volume”) to be
agreed to by Seller and said New Owner, subject to Buyer’s consent to such
volume allocation, which consent shall not be unreasonably withheld or
delayed.  Upon such assumption by said
New Owner, Seller’s obligations to supply Timber hereunder shall be reduced by
the volumes assumed by said New Owner, and Seller shall thereafter have no
obligation or liability with respect to said assumed volumes or with respect to
the portion of the

 

 

Timberlands so conveyed.  At the request of Seller, upon any such sale
to a New Owner Buyer shall execute an amendment to this Agreement acknowledging
the foregoing.  Furthermore, upon request
of Seller or Buyer, upon such sale to a New Owner, Buyer and such New Owner
shall enter into a separate Stumpage Agreement on the same terms and
conditions as contained in this Agreement (or such other terms as Buyer and
such New Owner shall mutually agree) except for the portion of the Timberlands
covered thereby and the volume of Timber to be supplied thereunder.  In the event Buyer objects to any proposed
Assumed Volume, Buyer shall provide written notice of the same to Seller within
fifteen (15) days of notice to Buyer of said proposed Assumed Volume (“Objection
Notice”), said Objection Notice to include a detailed explanation of the basis for
said objection.  Failure by Buyer to
timely provide said Objection Notice shall be deemed to constitute the consent
of Buyer to said proposed Assumed Volume. 
In the event Buyer timely provides an Objection Notice, Seller shall
have the option of (i) revising said proposed Assumed Volume, in which
case Buyer shall have the further right to object by providing a new Objection
Notice as provided above or (ii) retaining the Valuation Consultant to
determine whether the proposed Assumed Volume is reasonable.  In the event the Valuation Consultant is so
retained and determines that said proposed Assumed Volume is reasonable, Buyer
shall be deemed to have consented to said Assumed Volume and shall pay all
costs and 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, except for Pine Plantations that have or will have volume that
continues to be available for harvesting during the Term of this Agreement (in
which case such Plantations maybe sold only if the requirements concerning an
allocation of volume to such purchaser and the New Owner entering into a stumpage agreement
with Buyer as otherwise

 

 

provided in this Section 11.1(b have been
satisfied),  free and clear of the
obligations of this Agreement (the “Exempt Acres”), provided that Seller is
able to supply the volume of Timber required to be supplied hereunder from the
remaining portion of the Timberlands. 
Buyer agrees to execute any and all documentation requested by Seller in
order to evidence the release of the Exempt Acres from this Agreement.

 

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

 

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

 

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

 

 

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:

  	
   

  	
  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:

  	
   

  	
  Scioto Land Company, LLC

  
	
   

  	
   

  	
  c/o Tolleson
  Land & Timber, Inc.

  
	
   

  	
   

  	
  P.O. Box
  970

  
	
   

  	
   

  	
  Perry,
  Georgia 31069

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attn.:
  Robert G. Chambers

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Mazursky &
  Dunaway LLP

  
	
   

  	
   

  	
  Monarch
  Tower, Suite 2400

  
	
   

  	
   

  	
  3424 Peachtree
  Road

  
	
   

  	
   

  	
  Atlanta,
  Georgia 30326-1118

  

 

 

	
   

  	
   

  	
  Attn: C. Glenn Dunaway,Esq.

  

 

or, as to 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 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 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, consistent with the limits required by all of Buyer’s independent
Wood Producers, 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; and (c) Comprehensive
General Liability Insurance.  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         The
portion of the Timberlands identified on Schedule 26.1 attached hereto is
commonly referred to as the Raccoon Ecological Management Area (the “REMA Tract”).  Seller agrees that promptly after the date of
this Agreement it shall negotiate in good faith the sale of the REMA Tract to
the Ohio Department of Natural Resources (the “ODNR”) on a price reasonably
acceptable to Buyer and ODNR.  Until such
time, if any, that a sale of the REMA Tract is made, Seller agrees to manage
the REMA Tract in substantially the same manner as the REMA Tract had been
managed by Escanaba Timber LLC and under its prior ownership by MeadWestvaco
Corporation (or one of its Affiliates) and shall continue to make available
Timber for harvesting under this Agreement as necessary to fulfill Seller’s
volume requirements under this Agreement.

 

26.2         If
after good faith negotiations with the ODNR fail to result in a sale of the
REMA Tract to the ODNR, Seller may not sell, transfer or convey, either
directly or indirectly, by operation of law or otherwise, any interest to all
or any portion of the REMA Tract (the “Timberlands Interest”), unless the
acquiring party that will own the Timberland Interest agrees

 

 

in a written
instrument satisfactory to Buyer to be bound by the provisions of Sections 26.3
and 26.4 hereof (but not Section 26.1).

 

26.3         Use
of CORE REMA Tract.  Notwithstanding
anything herein to the contrary, unless and until the REMA Tract is sold to the
ODNR as contemplated hereby, Seller agrees that it shall permit Seller to
continue to use and have access to the facilities on the portion of the REMA
Tract described on Schedule 26.3 (the “CORE REMA Tract”) for the same
purposes as such facilities have been used prior to the date hereof and Seller
shall use reasonable best efforts to ensure that any subsequent owner of the
REMA Tract (other than the ODNR) permits such continued use by Seller.

 

26.4         Ownership
of Tangible Assets.  Seller
acknowledges and agrees that the tangible assets described in Schedule 26.4
are owned by Buyer (or one of its Affiliates) and the US Forest Service and
that nothing herein or in any other agreement shall convey any right, title or
interest in such assets (or any right to remove or make use of such assets) to
Seller and that Buyer and the US Forest Service shall maintain ownership thereof,
notwithstanding any sale of the REMA Tract, whether permitted under the terms
of this Agreement or otherwise.

 

26.5         Applicability
of Right of First Offer.  The
provisions of Section 26 shall not apply to:  (a) any condemnation of any portion of
the REMA Tract, or any sale in lieu thereof; or (b) any easement, cutting
contract, or hunting license on any portion of the REMA Tract.

 

 

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

 

	
   

  	
   

  	
  CHILLICOTHE PAPER INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Peter H. Vogel

  
	
   

  	
   

  	
  Name:

  	
  Peter H. Vogel

  
	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  SCIOTO LAND COMPANY, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Tolleson-Knox Land Management Company, LLC,

  
	
   

  	
   

  	
   

  	
  Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Robert G. Chambers

  
	
   

  	
   

  	
  Name:

  	
  Robert G. Chambers

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00096-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00096-of-00352.parquet"}]]