LEASE AGEREMENT

THIS LEASE AGREEMENT, dated as of January 1, 1997, by and between the CITY OF FORDYCE, ARKANSAS, a municipality under the laws of the State of Arkansas, as lessor (the “City”), and INTERNATIONAL PAPER COMPANY, a corporation organized and existing under and by virtue of the laws of he State of New York, as lessee (the “Company”).

WITNESSETH:

WHEREAS, the City is authorized and empowered under the laws of the State of Arkansas, including particularly Title 14, Chapter 164, Subchapter 2 of the Arkansas Code of 1987 Annotated (the “Act”), to issue revenue bonds and expend the proceeds thereof to finance the cost of acquiring, constructing and equipping lands, buildings or facilities for securing or developing industry; and

WHEREAS, the City has undertaken to furnish permanent financing of the cost of acquiring certain industrial facilities located in Fordyce, Arkansas by the issuance of its Industrial Development Revenue Bonds - International Paper Company Project, in the aggregate principal amount of $1,050,000 (the “Bonds”), and in connection therewith the City and the Company have entered into this Lease Agreement); and

NOW, THEREFORE, for valuable consideration, receipt of which is hereby acknowledged by the City and the Company, and in consideration of the mutual benefits and covenants herein contained, the City and the Company AGREE as follows:

ARTICLE I
DEFINITIONS

Section 1.1              Definitions .  In addition to the words and terms elsewhere defined in this Lease Agreement, the following words and terms as used in this Lease Agreement shall have the following meanings:

“ Act” — Title 14, Chapter 164, Subchapter 2 of the Arkansas Code of 1987 Annotated, as amended and enacted from time to time.

“Bonds” — The City of Fordyce, Arkansas Industrial Development Revenue Bonds - International Paper Company Project, Series A and B, in the aggregate principal amount of $1,050,000, issued pursuant to the Bond Purchase Agreement.  Two Bonds designated “Series A” shall be issued in the principal amount of $450,000 each, and one Bond designated “Series B” shall be issued in the principal amount of $150,000.

“Bond Purchase Agreement” — The Bond Purchase Agreement dated as of January 1, 1997, between the City and the Purchasers, and any amendments and supplements thereto.

“City” — City of Fordyce, Arkansas, a municipality under the laws of the State of Arkansas, and its successors and assigns.

“Company” International Paper Company, a corporation organized and existing under the laws of the State of New York, and any assign that assumes the obligations of the Company pursuant to the provisions of this Lease Agreement.

“Environmental Laws” — Any federal, state or local law, statute, ordinance or regulation pertaining to health, industrial hygiene or the environmental conditions on, under or about the Premises, now or hereafter enacted or interpreted, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA’’), as amended, 42 U.S.C. Sections 9601 et seq., and the Resource Conservation and Recovery Act of 1976 (“RCRA”), 42 U.S.C. Section 6901 et seq.

“Event of Default” — Any event of default specified in Section 6.1 hereof.

“Hazardous Substances” — (a)  Those substances included within the definitions of “hazardous substances”, “Hazardous materials”, “toxic substances” or “solid waste” in CERCLA, RCRA and the Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801 et seq. and in the regulations promulgated pursuant to said laws;

(b)           Those substances defined as “hazardous wastes” or “PCB” in the applicable statutes of the State of Arkansas as amended from time to time, and in the regulations promulgated thereunder;

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(c)           Those substances listed in the United States Department of Transportation Tab1e (49 CFT 172.101 and amendments thereto) or by the Environmental Protection Agency (or any successor agency) as hazardous substances (40 CFR Part 302 and amendments thereto);

(d)           Such other substances, materials and wastes which are or become regulated under applicable local, state or federal law, which are classified as hazardous, corrosive, ignitable, or toxic under federal, state or local laws or regulations; and

(e)           Any material, waste or substance which is (i) petroleum; (ii) asbestos; (iii) polychlorinated biphenyls; (iv) designated as a “hazardous substance” pursuant to Section 311 of the Clean Water Act, 33 U.S.C. Sections 1251 at seq. (33 U.S.C. 1321) or listed pursuant to Section 3078 of the Clean Water Apt (33 U.S.C. 1317); (v) flammable explosives; or (vi) radioactive materials.

“Lease Agreement” — This Lease Agreement and any amendments and supplements hereto.

“Mortgage” — The Mortgage dated as of January 1, 1997, between the City and the Purchasers, and any amendments and supplements thereto.

“Permitted Encumbrances” — (i) This Lease Agreement, the Mortgage, and the Bond Purchase Agreement, (ii) liens for taxes and assessments not then delinquent; (iii) any mechanic’s, laborer’s, materialmen’s, supplier’s, or vendor’s lien for work or services performed or materials furnished which are not yet due and payable; (iv) utility, access and other easements and rights of way, restrictions, reversions and exceptions that will not interfere with or impair the operations being conducted on the Premises, (v) such minor defects, irregularities, encumbrances, easements, rights of way, and clouds on title as normally exist with respect to properties similar in character to the Premises and as do not materially impair the value or utility of the Premises; and (vi) any other defect, irregularity, encumbrance, easement, right of way or cloud on title which is waived or permitted in writing by the City and Company.

“Premises” — The land, buildings, improvements and facilities leased by this Lease Agreement and described in Section 2.1 hereof.

“Purchasers” — Citizens First Bank, Fordyce, Arkansas (“Citizens”), Fordyce Bank & Trust Company, Fordyce, Arkansas (“FB&T”), and the Arkansas Development Finance Authority (“ADFA”).  Citizens and FB&T are the original purchasers of the Series A Bonds, and ADFA is the original purchaser of the Series B Bond, and the references include any subsequent owners of the Bonds.

“State” — The State of Arkansas.

Section 1.2              Use of Words and Phrases .  “Herein”, “hereby”, “hereunder”, “hereof”, “hereinabove”, “hereinafter”, and other equivalent words and phrases refers to this Lease Agreement and not solely to the particular portion thereof in which any such word is used.  The definitions act forth In Section 1.1 hereof include both singular and plural. Whenever used herein, any pronoun shall be deemed to include both singular and plural and to cover all genders.

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ARTICLE II
DEMISING CLAUSES; DURATION OF LEASE TERM;
RENTAL PROVISIONS

Section 2.1              Lease of Premises .  Subject to the tarns and provisions hereinafter set forth, and in consideration of the rent to be paid by the Company and in consideration of the covenants and agreements herein contained to be kept and performed by the Company, the City does hereby lease, demise and let unto the Company, subject to Permitted Encumbrances, and the Company does hereby hire and take from the City, subject to Permitted Encumbrances, for the uses and purposes hereinafter set out, a parcel of property and all improvements, located in the City of Fordyce, Dallas County, Arkansas, with the specific premises outlined on Exhibit “A”, which is attached hereto and made a part hereof (the “Premises”) .

TO HAVE AND TO HOLD the Premises unto the Company for the team of this Lease Agreement as hereafter set forth.

Section 2.2              Term .  (a)  Initial Term .  Unless sooner terminated or extended as hereinafter provided, this Lease Agreement shall be for a period of twenty (20) years, commencing on January 10, 1997 (the “Commencement Date”) and ending an January 10, 2017.

(b)           Option Terms .  Provided the Company is not then in default, the City hereby grants to the Company the option to extend the term of this Lease Agreement for two (2) additional periods.  The Company may exercise the first option for five (5) years (“First Option Term”) by giving the City written notice not later than twelve (12) months before the expiration of the is initial term.  The Company may exercise the second option for four (4) years (“Second Option Term”) by giving the City written notice not later than twelve (12) months before the expiration of the First  Option Term. Time is of the essence with respect to the Company’s exercise of those options.  Such renewals shall be on the same terms and conditions as contained herein except that the annual base rent for both Option Terms shal1 be Nine Thousand Nine Hundred Eighty-Four and 00/100 ($9,984.00), payable in equal monthly installments of Eight Hundred Thirty - Two and 00/100 Dollars ($832.00).

Section 2.3              Rent .  (a)  The Company agrees to pay to the City, without demand, deduction or set-off, except as provided in this Lease Agreement, an initial annual base rental at the rate of One Hundred Thirteen Thousand One Hundred Ninety-six and 00/100 Dollars ($113,196.00) per annum, payable in equal monthly installments on the tenth day of each calendar month, commencing February 10, 1997, during the term of this Lease Agreement in the amount of Nine Thousand Four Hundred Thirty-Three Thousand and 00/100 ($9,433.00).

(b)           Upon the seventh (7th) anniversary of the commencement date, the annual rent shall be adjusted to reflect the then current interest rate on the Series A Bonds (the interest on which shall be Two Hundred (200) basis points over the interest rate of similar eight (8) year U.S. Treasury Notes, in no event exceeding nine percent (9%) per annum, determined as provided in the Bond Purchase Agreement).  The adjusted annual rent shall not exceed One Hundred Sixteen Thousand Nine Hundred Forty and 00/100 Dollars ($116,940.00), payable in

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monthly installments of Nine Thousand Seven Hundred Forty-Five and 00/100 Dollars ($9,745.00).

(c)           Upon the fifteenth (15th) anniversary of the Commencement Date the annual base rent shall be Nine Thousand Nine Hundred Eighty-Four and 00/100 ($9,984.00), payable in equal monthly installments of Eight Hundred Thirty-Two and 00/100 Dollars ($832.00).

(d)           Each payment made pursuant to this Section 2.3 shall be made in immediately available funds directly to the Purchasers for the account of the City at the address of the Purchasers set forth herein or, in the case of each subsequent owner of the Bonds, at the place designated in the notice of assignment of the Bonds provided in Section 2.09 of the Bond Purchase Agreement, or at such other place as shall from time to time be designated by the Purchasers or such subsequent owner of the Bonds in each case after notice in writing to the City and the Company.

(e)           In the event the Company should fail to make, or cause to be made, any of the payments required in this Section, the item or installment so in default shall continue as an obligation of the Company until the amount in default shall have been fully paid.

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ARTICLE III
USE OF PREMISES

Section 3.1              Use of Premises .  The Premises shall be used by the Company for general office and warehouse use, manufacturing of paper products and uses incidental thereto.

The City represents that the Company’s use as set forth herein complies with all zoning ordinances and covenants and restrictions of record applicable to the Premises.

Section 3.2              Compliance with Laws .  During the term of this Lease Agreement, the Company shall, at the Company’s own cost and expense, comply with all laws, ordinances, orders, rules, regulations and requirements of all federal, state and municipal governments and appropriate departments, commissions, boards and officers thereof relating to the Premises, whether or not the same require repairs or alterations to the Premises.  The Company shall have the right to contest by appropriate legal proceedings, without cost or expense to the City, the validity of any law, ordinance, order, rule, regulation or requirement, applicable to the Premises, if no lien, charge or liability shall be imposed against the Premises or the City’s interest therein by reason thereof, and in such event, the Company may postpone compliance therewith until the final determination of any such proceeding.

Section 3.3              Services and Utilities .  The City shall furnish, at its own cost and expense, sewer, water, electric, gas and telephone connections into the Premises.

The Company shall pay all utility bills, including, but not limited to water, sewer, gas, electricity, telephone, fuel, light, and heat bills, for the Premises which services shall be separately monitored for the Premises.

Section 3.4              Maintenance and Repairs .  The Company shall, at all times during the term and at is own cost and expense, keep and maintain the Premises in good order and condition, except as such repairs are rendered necessary by the negligence of the City, its agents, employees, or invitees.

Section 3.5              Damage and Destruction .  (a)  In the event of the total destruction of the Premises by fire or other casualty during the term hereof, including any casualty attributable to any condition of the Premises which pre-exists the Commencement Data of this Lease Agreement or in the event of such partial destruction thereof as to render the Premises untenantable or unfit for occupancy, therein either event, unless such damages can, in the reasonable opinion of the City and the Company, be repaired within one hundred eighty (180) days after the occurrence, this Lease Agreement and the term hereby created shall cease from the date of such damage or destruction and the Company shall upon written notice from the City surrender the Premises to the City and the Company shall pay rent within said term only to the time of such damage or destruction.

If, however, in the reasonable opinion of the City and the Company, the damage as aforesaid can be repaired within one hundred eighty (180) days from the occurrence thereof, the City shall repair the Premises with all reasonable speed, and this Lease Agreement shall continue in full force and effect.

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(b)           In the event or the partial destruction of the Premises by fire or other casualty during the term hereof, including any casualty attributable to any condition of the Premises which pre-exists the Commencement Date of this Lease Agreement, which partial destruction does not render the Premises untenantable or unfit for occupancy, the City shall repair the damage with all reasonable speed within Sixty (60) days thereafter, and this Lease Agreement shall continue in full force and effect.

(c)           If the City does not restore the Premises or the affected portion to tenantability within the periods set forth in subsections (a) and (b) above, the Company may then terminate this Lease Agreement, retroactive to the date of casualty by written notice delivered to the City within fifteen (15) days after the end of those periods.

(d)           All insurance money paid on account of such casualty shall be paid to the City and used to repair or restore the damaged or destroyed property.  It requested by the Company, all insurance proceeds delivered to the City pursuant to the terms of this Lease Agreement shall be held in a separate account in any bank or trust company selected by the City and acceptable to the Company.  The Company shall have the right to audit the expenditure and handling of such proceeds.

(e)           The City’s obligation to repair or restore the Premises pursuant to this Section 3.5 shall be limited to the insurance proceeds received by the City for such purpose.  If the insurance money shall he insufficient to pay all coats of such repair or restoration, the City shall not be liable for the deficiency.  Any balance of the insurance proceeds remaining over and above the cost of such repair or restoration shall be used to prepay or redeem the outstanding principal of the Bonds, in accordance with the provisions of the Bond Purchase Agreement, and the rent payable under Section 2.3 hereof shall be adjusted downwards accordingly.

Section 3.6              Building Alterations .  The Company may, at its own cost and expense, with the City’s prior written consent, which consent shall not be unreasonably withheld, make alterations, additions, or improvements in or to the Premises providing (i) the structural integrity and market value of the Premises are not materially lessened by reason thereof, (ii) such work is completed in a good and workmanlike manner and in compliance with all applicable laws, rules, regulations and ordinances, and (iii) the specifications for such work equals or exceeds the specifications for the original construction of the Premises, taking into consideration any changes in construction practices and technology which may exist at the time of such alterations.

All alterations, additions, and improvements which may be erected, installed or affixed on or in the Premises during the term are and shall be deemed to be and immediately become part of the realty and the sole and absolute property of the City and shall be deemed to be part of the Premises, except that all furniture, trade fixtures or demountable partitions installed by the Company shall be and remain the property of the Company.

The Company may, at its own cost and expense, without the City’s consent, install, replace or remove any of the Company’s trade fixtures, furniture, demountable partitions and equipment (all hereinafter referred to as “Trade Fixtures”).  Any or all such Trade Fixtures shall be and remain the property of the Company, and may, at the Company’s option and

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expense, be removed by the Company at any time during the term of the Lease Agreement or at the Lease Agreement expiration date.  Thu Company shall be liable for damaged to the Premises caused by the Company’s removal of its Trade Fixtures.

Section 3.7              Signs .  The Company shall not attach or erect or permit anyone to attach or erect any signs, symbols, lettering of any kind on the walls or roof of the Premises without the prior written consent of the City, which consent shall not be unreasonably withheld.

Section 3.8              Access and Inspection .  The Company shall have access to the Premises twenty-four (24) hours a day, cloven (7) days a week.

The City and the Purchasers shall have the right to enter upon the Premises during reasonable business hours for the purpose of inspection or for maintenance work or repairs in accordance with the provisions hereof, provided that prior notice shall be given to the Company.  The City and the Purchasers shall also have the right to enter at any time without notice in the event of fire, explosion or other emergency, for the purposes of controlling, extinguishing or abating the same.

Section 3.9              Insurance .  The Company shall, at the Company’s sole cost and expense, keep the Premises and improvements thereon covered by Fire and Extended Coverage insurance against the perils of fire, flood, lightning, windstorm, hurricane, hail, explosion, radioactive contamination, riot, civil commotion, vandalism, malicious