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Date: 1/19/2006
Law Firm: Mazursky Dunaway LLP    

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December 16, 2005




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”).




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:




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 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 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:


























(i)Hardwood Pulpwood




















(ii) Pine Pulpwood

























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: 



Pine Pulpwood:


not less than 35,000 tons






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.      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.      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,

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