AFR CONTRIBUTION AGREEMENT

AFR CONTRIBUTION AGREEMENT

THIS CONTRIBUTION AGREEMENT (the “Agreement”) is entered into as of the 18th day of August, 2006, by and among American Forest Resources, LLC, a Delaware limited liability company, LLC (“AFR”), Inland Fiber Group, LLC, a Delaware limited liability company (“IFG”), and Fiber Finance Corp., a Delaware corporation (“FFC” and, together with IFG, the “Debtors”).          

W I T N E S S E T H:

WHEREAS, AFR owns 100% of the membership interests in IFG Holdings, LLC, which, in turn, owns approximately 99% of the membership interests and 100% of the voting rights in IFG;

WHEREAS, IFG owns all of the outstanding common stock of FFC;

WHEREAS, on November 14, 1997, the Debtors issued $225 million in 9-5/8% unsecured senior notes due 2007 (the “Debtor Notes”);

WHEREAS, AFR currently owes the Secured Obligations (as defined in the U.S. Timberlands Yakima Indenture, dated as of September 14, 2001, among AFR, as issuer, BNY Midwest Trust Company, as trustee, and MBIA Insurance Corporation, as insurer (“MBIA”), as amended, supplemented, and restated from time to time), including approximately $113 million in principal amount of secured notes (the “MBIA Debt”);

WHEREAS, on December 19, 2003, U.S. Bank National Association, as successor indenture trustee to State Street Bank & Trust Company on behalf of the holders of the Debtor Notes (the “Indenture Trustee”), commenced litigation in the Court of Chancery of the State of Delaware in and for New Castle County (the “Action”) against the Debtors, AFR, Cascades Resource Holdings Group, LLC, Timber Resource Services, LLC, John M. Rudey, Alan B. Abramson, Aubrey L. Cole, George R. Hornig, Robert F. Wright, and William A. Wyman;

WHEREAS, IFG, FFC, AFR, John M. Rudey, the Indenture Trustee, and 18 holders of the Debtor Notes or their respective affiliates that collectively own or manage $158.3 million (or approximately 70.4%) of the outstanding principal amount of the Debtor Notes entered into a support and lock-up agreement as of August 18, 2006, pursuant to which, among other things, (1) the Debtors agreed to commence Chapter 11 bankruptcy cases in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”), (2) the Debtors agreed to file a plan of reorganization (the “Plan”) in those cases that provides for the payment of $155.25 million to the Indenture Trustee on behalf of the holders of the Debtor Notes (subject to certain adjustments set forth in the Plan) (the “Settlement Amount”), and (3) 18 holders of the Debtor Notes agreed to vote in favor of the Plan;  

WHEREAS, on August 14, 2006, IFG and Richard L. Wendt, individually (the “Purchaser”), executed an asset purchase agreement pursuant to which the Purchaser agreed to acquire all of IFG’s assets (the “Asset Sale”) for a purchase price of $83 million (the “Sale Proceeds”);

WHEREAS, the Sale Proceeds would be used to fund a portion of the Settlement Amount;

WHEREAS, on August 18, 2006, the Debtors, certain of the other defendants in the Action, AIG Domestic Claims, Inc., on behalf of American International Specialty Lines Insurance Company (“AIG”), and The Travelers Indemnity Company, as successor by merger to Gulf Insurance Company (“Gulf”), entered into a global claims release and insurer settlement agreement pursuant to which AIG committed to fund at least $5.2 million and Gulf committed to fund $3.1 million in connection with the Plan, for a total of $8.3 million (the “Insurance Proceeds”);

WHEREAS, the Insurance Proceeds would be used to fund a portion of the Settlement Amount;

WHEREAS, on August 18, 2006, in exchange for the negotiated releases contained in the Plan, AFR Acquisition Company LLC, a Delaware limited liability company, executed a contribution agreement pursuant to which it agreed to contribute $108.35 million (or such other amount as is sufficient to allow the Debtors to satisfy their obligations under the Plan) (the “IFG Related Party Contribution”) to AFR on the effective date of the Plan (the “Effective Date”);

WHEREAS, AFR and its officers and directors will receive certain releases under the Plan;

WHEREAS, in exchange for those releases, AFR wishes to contribute, from the IFG Related Party Contribution, $63,002,000 (or such other amount as is sufficient to allow the Debtors to satisfy their obligations under the Plan) to IFG on the Effective Date to fund the portion of the Settlement Amount not funded by the Sale Proceeds and the Insurance Proceeds and to allow the Debtors to satisfy their other obligations under the Plan;

WHEREAS, AFR wishes to pay Golden Tree Asset Management, LP, Turnberry Capital Management, L.P., and QVT Financial, from the IFG Related Party Contribution, an aggregate of $948,000 on the Effective Date to reimburse them for their fees and expens