EXHIBIT 10.5
WOOD SUPPLY AGREEMENT
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DATED: AUGUST 30, 1996
BETWEEN: U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.
A DELAWARE LIMITED LIABILITY COMPANY UST
AND: ▇▇▇▇▇▇▇ PRODUCTS LLC,
AN OREGON LIMITED LIABILITY COMPANY ▇▇▇▇▇▇▇
WHEREAS, ▇▇▇▇▇▇▇ has purchased a group of forest products ▇▇▇▇▇ in ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ from U.S. Timberlands Holdings Company, L.L.C. (the "▇▇▇▇▇")
pursuant to a Plant Asset Purchase Agreement (the "Plant Purchase Agreement").
UST owns timberlands in ▇▇▇▇▇▇▇, Lake and Klamath Counties, Oregon which were
formerly under common ownership with the ▇▇▇▇▇. Such timberlands are described
in the attached Exhibit A (the "Timberlands").
WHEREAS, as part of the transaction to purchase the ▇▇▇▇▇, UST has agreed
to supply ▇▇▇▇▇▇▇ with a minimum of thirty-four million (34,000,000) board feet
of logs meeting the standards set forth on Exhibit B annually including a
minimum of eight million (8,000,000) board feet of white fir. It is understood
that the wood supply is an essential part of the transaction for sale of the
▇▇▇▇▇.
NOW, THEREFORE, UST hereby sells to ▇▇▇▇▇▇▇ the wood supply referenced
herein subject to the terms and conditions of this Agreement.
Section 1. Volume of Timber.
The volume of merchantable timber which is sold to ▇▇▇▇▇▇▇ pursuant to this
Agreement is 34 million board feet ("mmbf"), of which at least 8 mmbf will be
white fir, per contract year during the term hereof. "Contract year" herein
means a twelve-month period commencing September 1 and ending on the following
August 30. The timber to be cut and removed by or for ▇▇▇▇▇▇▇ pursuant to this
Agreement, including the white fir referred to in this paragraph and paragraph
6, is referred to herein as the "Timber." The Timber is to be supplied from the
Timberlands except that UST may supply from other lands which it owns or in
which it has timber cutting rights of at least two (2) years duration. Should
market conditions dictate, mutually agreeable other sources of timber may be
used.
Section 2. Logging and Delivery by UST.
All logs shall be delivered to the log yard at the Mill complex at Klamath
Falls, Oregon or other destination designated by ▇▇▇▇▇▇▇ and all logs shall be
scaled with duplicates of scaling documents going to both ▇▇▇▇▇▇▇ and UST. Logs
shall be produced according to Exhibit B (the
"Specifications"). If ▇▇▇▇▇▇▇ specifies a delivery location other than the Mill
complex at Klamath Falls, the price for the logs will be adjusted to reflect the
actual difference in transportation costs incurred by UST in delivering logs to
the alternative location.
Section 3. Logging and Delivery by ▇▇▇▇▇▇▇.
From time to time the parties may agree to allow ▇▇▇▇▇▇▇ to cut the Timber
for purposes of supplying wood under this Agreement in which event the price
shall be adjusted for the cost of logging, and ▇▇▇▇▇▇▇ shall be given the right
subject to the conditions of Exhibit F to enter UST's land to log the stumpage.
Section 4. Term of Agreement.
This Agreement shall be for a term of 10 years. ▇▇▇▇▇▇▇ shall have the
right to extend the Agreement for two (2) additional terms of 5 years each by
giving UST written notice of its intention to extend at least six (6) months in
advance of the termination of the then current term. If ▇▇▇▇▇▇▇ extends this
Agreement, the base prices set forth in section 5.1 shall be adjusted, effective
as of the first day of the renewal term, to fair market value as agreed upon by
the parties or as determined by arbitration if the parties fail to agree. In
addition, after exercising the two renewal terms, ▇▇▇▇▇▇▇ shall have the right
to three (3) additional 5-year extensions upon giving of notice as provided
herein and obtaining the agreement of UST to each of such extensions, including
the pricing during such additional extension periods.
Section 5. Payment.
So long as Timber is being logged and delivered by UST to ▇▇▇▇▇▇▇, the
following payment provisions shall apply:
5.1 Base Prices. The base prices F.O.B. the ▇▇▇▇▇ shall be as
follows:
$435 per mbf for white fir
$400 per mbf for lodge pole pine
$270 per mbf for Ponderosa pine 7" and less in diameter (top
diameter measurement inside bark)
$360 per mbf for Ponderosa pine over 7" in diameter (top
diameter measurement inside bark)
$495 per mbf for ▇▇▇▇▇▇▇ fir
5.2 Payment. Payment for Timber shall be due and payable twice
monthly on the 10th and 25th days of each month based upon scaling documents
indicating volumes delivered as of the last day of the preceding month and the
15th day of the current month.
5.3 Price Adjustments.
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5.3.1 White Fir. Prices for white fir shall be adjusted at
the end of each three (3) month period during the
contract year, retroactive to the beginning of such 3-
month period. The white fir price shall be increased
or decreased according to the adjustment formula set
forth on the attached Exhibit C.
5.3.2 Other Species. Prices for species other than white fir
shall be adjusted at the end of each 3-month period
during the contract year, retroactive to the beginning
of such 3-month period, so that the amount paid by
▇▇▇▇▇▇▇ to UST for each species shall equal the
average net delivered price for logs of that species
(and of similar diameter and grade as logs being sold
to ▇▇▇▇▇▇▇) sold by UST from the UST lands to
unaffiliated third parties in arm's-length
transactions during such calendar quarter. In
computing the average net delivered price, the
difference in haul distances as compared to hauling to
the ▇▇▇▇▇ shall be taken into consideration. If UST
sales are not sufficient to establish price
adjustments for any quarter, then the parties may rely
on the best evidence available to them to establish a
fair market value price for logs during the quarter in
question. Any disputes over application of this
paragraph shall be resolved by arbitration according
to the arbitration procedures set forth on Exhibit D
attached hereto, and the decision in such arbitration
shall be final and binding upon the parties.
5.3.3 Base Price Adjustment. Effective as of the first day
of the third contract year, and biennially as of the
first day of each second contract year thereafter
(i.e., once every two years), the base prices for
delivered logs as described in paragraph 4.1 shall be
reset to equal the fair market value. The parties
shall meet three (3) months prior to the effective
date and attempt to agree upon such values. If no
agreement is reached by a date which is sixty (60)
days prior to the adjustment date, then either party
may initiate arbitration according to the arbitration
procedures set forth on Exhibit D attached hereto, and
the decision in such arbitration shall be final and
binding upon the parties.
5.4 Disputes. Any disputes arising between the parties with
regard to the application or interpretation of this Section 5 shall be resolved
according to the arbitration procedures set forth on Exhibit D hereto.
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Section 6. ▇▇▇▇▇▇▇' Rights to White Fir.
During periods when UST is harvesting for its own account or permitting
harvesting of timber for other parties besides ▇▇▇▇▇▇▇, UST shall include in
deliveries to ▇▇▇▇▇▇▇ at least eighty percent (80%) of the white fir harvested
from the Timberlands in any given contract year, such volume to apply against
the 34 mmbf annual supply to ▇▇▇▇▇▇▇.
Section 7. ▇▇▇▇▇▇▇' Right to Purchase Extra Timber or Other Products.
7.1 Purchase of Chips. ▇▇▇▇▇▇▇ shall have the first right of
refusal to purchase any chipable materials such as tops and thinnings which UST
wishes to sell from the Timberlands and the first right to purchase any chips
produced by or for the account of UST for sale to third parties. UST shall
advise ▇▇▇▇▇▇▇ in writing of the quantity of such materials it has for sale, the
location, anticipated date of production and desired price. ▇▇▇▇▇▇▇ shall have
fifteen (15) days following receipt of such notice in which to elect to purchase
such material. If it does not elect to purchase such material, UST may sell it
to a third party on terms and conditions not materially different than the terms
and conditions offered to ▇▇▇▇▇▇▇.
7.2 Purchase of Other Timber Products. If UST offers stumpage,
cutting rights or log sales to third parties from the Timberlands, ▇▇▇▇▇▇▇ will
be provided with notice and an opportunity to bid to acquire the same.
Section 8. Covenants of UST.
At all times while this Agreement is in effect, UST covenants and agrees as
follows:
8.1 UST will continue to own at least 400,000 acres of the
Timberlands and will maintain on such Timberlands at least 1.1 billion board
feet of merchantable timber. Lands and timber which are subject to timber deeds
or timber sale contracts in favor of third parties shall be excluded from the
computation of acreage and merchantable timber under this Section 8.1.
8.2 UST will report to ▇▇▇▇▇▇▇, within 30 days after the end of
each calendar quarter, the acreage and merchantable volume, by species, of the
Timberlands then owned by UST as of the end of such calendar quarter.
8.3 UST will notify ▇▇▇▇▇▇▇ at least ten (10) days in advance of
each sale of stumpage from the Timberlands and each sale of any portion of the
Timberlands.
8.4 UST will maintain a net worth, computed in accordance with
generally accepted accounting principles, of at least $50,000,000.
8.5 UST will deliver to ▇▇▇▇▇▇▇, contemporaneously with delivery
to UST's lenders, true and complete copies of all reports required by UST's
lenders, and will deliver, within
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ninety (90) days after the end of the fiscal year, a copy of UST's balance sheet
and financial statements for such fiscal year.
8.6 UST will provide to ▇▇▇▇▇▇▇, prior to commencing its annual
harvest, UST's harvest plan for the Timberlands for each calendar year.
Section 9. Default and Remedies.
9.1 Default by UST. A default shall occur if (i) UST fails to
make delivery sufficient to satisfy the required annual delivery to ▇▇▇▇▇▇▇,
(ii) UST should sell any portion of the Timberlands or timber thereon in
violation of, or without complying with, the provisions of this Agreement, (iii)
UST fails to comply with the decision of any arbitrator made pursuant to Exhibit
D hereto, (iv) any warranty by UST herein proves to have been false when made,
or (v) any other term or condition stated herein is not met and UST fails to
correct such noncompliance within thirty (30) days after written notice from
▇▇▇▇▇▇▇ specifying the noncompliance. If more than thirty (30) days would be
required to correct the noncompliance, then there shall be no default if UST
commences correction within the 30-day period and diligently pursues corrective
action.
9.2 Remedies of ▇▇▇▇▇▇▇. In the event of default by UST, ▇▇▇▇▇▇▇
shall have the following remedies, in addition to any other remedies available
under applicable law, which remedies may be exercised individually or in
combination to the extent permitted by applicable law:
9.2.1 The right to enjoin any activities by UST which are in
breach of the covenants contained herein.
9.2.2 The right to perform any obligation which UST has
failed to perform (including logging and delivery of
Timber) and to charge the costs of such performance to
UST, together with interest at the greater of twelve
percent (12%) per annum or the USNB prime rate plus
two percent on all amounts so expended until
reimbursed by UST.
9.2.3 The right to recover damages caused by the default.
9.2 4 The right to obtain specific performance.
9.2 5 The right to terminate this Agreement.
9.3 Default by ▇▇▇▇▇▇▇. A default by ▇▇▇▇▇▇▇ shall occur if (i)
▇▇▇▇▇▇▇ fails to accept delivery of logs as required hereby (unless the failure
is due to a good faith dispute regarding the compliance with the log
Specifications, in which event ▇▇▇▇▇▇▇ will not be in default if ▇▇▇▇▇▇▇ accepts
a disputed delivery within ten (10) days of a determination under Paragraph D of
Exhibit B that such logs meet the Specifications) or (ii) fails to make timely
payment for logs within ten (10) days of when due or (iii) ▇▇▇▇▇▇▇ fails to
comply with any other material provision of this Agreement
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within thirty (30) days after notice from UST specifying the non-compliance and
demanding its cure. If more than thirty (30) days wo would be required to
correct the noncompliance, then there shall be no default if ▇▇▇▇▇▇▇ commences
correction within the thirty (30) day period and diligently pursues corrective
action.
9.4 Remedies of UST. In the event of default by ▇▇▇▇▇▇▇, UST
shall have the following remedies in addition to any other remedies available
under applicable law, which remedies may be exercised individually or in
combination to the extent permitted by applicable law:
9.4.1 The right to recover damages caused by ▇▇▇▇▇▇▇'
default.
9.4.2 The right to perform the obligation of ▇▇▇▇▇▇▇ and to
charge the cost of such performance to ▇▇▇▇▇▇▇,
together with interest at the greater of twelve
percent (12%) per annum or the USNB prime rate plus
two percent (2%) on all amounts so expended until
reimbursed by ▇▇▇▇▇▇▇.
9.4.3 The right to obtain specific enforcement.
9.4.4 The right to enjoin any activities of ▇▇▇▇▇▇▇ which
are in breach of the covenants contained herein.
9.4.5 The right to terminate this Agreement, provided,
however, that (i) if the default is the failure to pay
for logs, UST may terminate this Agreement only if
▇▇▇▇▇▇▇ fails within 7 business days after notice from
UST specifying the failure to make payment, to make
the payment or advise UST of any good faith dispute
which exists with respect to the payment and (ii) if
the default is the failure to accept logs when there
is not a good faith dispute regarding compliance with
the log Specifications, this Agreement may be only
terminated pursuant to Section 10.11 below.
Section 10. General Provisions.
10.1 Force Majeure. If the Timberlands are damaged by fire,
windstorms, insects or other casualty to the extent that, or if for any other
reason not within ▇▇▇▇▇▇▇' control, 34 mmbf per year cannot be cut on a
sustained yield basis from the Timberlands, then the annual volume subject to
this Agreement shall be reduced to equal the actual sustained yield capacity of
the Timberlands after the casualty or other cause. If the parties disagree over
this issue, it may be determined by arbitration at the request of either party.
10.2 Assignability. ▇▇▇▇▇▇▇ shall have the right to assign this
Agreement (as security or otherwise) without UST's consent or sell Timber to
third parties. If requested by ▇▇▇▇▇▇▇,
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UST shall make deliveries to third parties of all or part of the 34 mmbf.
▇▇▇▇▇▇▇ shall pay or receive credit, as appropriate, for any hauling cost
differential.
10.3 Recordability. This Agreement shall not be recorded.
10.4 Liens, Severance and Harvest Taxes. UST shall pay for all
severance and harvest taxes on the Timber, and logs from the Timber shall be
delivered free of liens or security interests of third parties.
10.5 Lender Protection. ▇▇▇▇▇▇▇ shall make payments due to UST to
any lender who forecloses on the Timberlands or who acquires the Timberlands in
lieu of foreclosure. If ▇▇▇▇▇▇▇ is informed of the address of a lender holding
all or any part of the Timberlands as security, ▇▇▇▇▇▇▇ will give duplicate
copies of all notices in connection with this Agreement to such lender. If
▇▇▇▇▇▇▇ receives a demand from any lender to make payments due hereunder
directly to such lender, ▇▇▇▇▇▇▇ shall have the right to do so without liability
to UST. If requested by a lender for either party, the other party shall
promptly deliver a signed statement for the benefit of a lender as to whether
this Agreement is in good standing, or specifying any alleged defaults, and
furnishing such other information as a lender may reasonably request.
10.6 Attorneys' Fees. In the event suit, action, arbitration or
other proceeding of any nature whatsoever (including, without limitation, any
proceeding under the U.S. Bankruptcy Code) is instituted in connection with any
controversy arising out of this Agreement or to interpret or enforce any rights
under this Agreement, the prevailing party shall be entitled to recover its
attorneys', paralegals', accountants' and other experts' fees and all other
fees, costs and expenses actually incurred and reasonably necessary in
connection therewith, as determined by the arbitrator or by the court at trial
or on any appeal or petition for review, in addition to all other sums provided
by law.
10.7 Notices. Notices under this Agreement shall be in writing and
shall be effective when actually delivered by mail, private courier service,
facsimile transmission, or other accepted means of business communication. If
mailed, a notice shall be deemed effective on the third day after being
deposited in the U.S. mails, postage prepaid, directed to the other party at the
address shown below. The addresses and facsimile numbers for notices are set
forth below:
If to UST: U.S. Timberlands Klamath Falls, L.L.C.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Lindsay, ▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇, LLP
▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
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If to ▇▇▇▇▇▇▇: ▇▇▇▇▇▇▇ Products LLC
Attention: President
▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇ ▇. ▇▇▇▇▇
Stoel Rives LLP
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Either party may change its address or facsimile number for notices by
written notice to the other.
10.8 Waiver. Failure of either party at any time to require
performance of any provision of this Agreement shall not limit the party's right
to enforce the provision. Waiver of any breach of any provision shall not be a
waiver of any succeeding breach of the provision or a waiver of the provision
itself or any other provision.
10.9 Arbitration. The arbitration provisions contained in Exhibit
D hereto shall apply only to matters which are specifically made subject to
arbitration according to this Agreement.
10.10 Volume Production; Curtailment.
10.10.1 ▇▇▇▇▇▇▇ shall have the right to reduce the volume
of Timber taken in any contract year by ten
percent (10%), provided notice is given not less
than one hundred twenty (120) days prior to the
end of the contract year. If such reduction is
elected, ▇▇▇▇▇▇▇ will accept extra volume in the
next contract year equal to the reduction in the
prior contract year.
10.10.2 If ▇▇▇▇▇▇▇ is not operating the plywood mill due
to strikes, casualty or other causes beyond its
control (not including adverse economic
conditions), then ▇▇▇▇▇▇▇ may, at its option, give
notice electing to totally or partially curtail
its taking of Timber during such time. If such
curtailment is elected, ▇▇▇▇▇▇▇ shall lose all
rights to the Timber that would have been
delivered but for the curtailment.
10.11 Termination by UST. If for any reason other than those
specified in Sections 10.1 or 10.10, ▇▇▇▇▇▇▇ fails to accept a total of 57.8
mmbf of Timber meeting the Specifications during any two (2) consecutive
contract years, then UST may terminate this Agreement as of the end of the
second contract year. Termination shall be by notice from UST given ninety (90)
days prior
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to expiration of the contract year stating that unless a total of 57.8 mmbf is
accepted by the end of the contract year in question, the Agreement shall
terminate as of the last day of such contract year.
10.12 Net Worth Warranty by UST. UST warrants that as of the
commencement of this Agreement, it will have a net worth computed in accordance
with generally accepted accounting principles of not less than $75,000,000.
10.13 ▇▇▇▇▇▇▇ Financial Statements. While this Agreement is in
effect, ▇▇▇▇▇▇▇ will deliver to UST, within ninety (90) days after the ending of
its fiscal year, a copy of ▇▇▇▇▇▇▇ balance sheet and financial statements for
such fiscal year.
10.14 Exhibits. The following exhibits are attached to and
incorporated as part of this Agreement:
Exhibit A - Description of Timberlands [omitted]
Exhibit B - Logging Terms and Conditions
Exhibit C - White Fir Price Adjustment
Exhibit D - Arbitration Procedures
Exhibit E - [Intentionally deleted]
Exhibit F - Logging By ▇▇▇▇▇▇▇
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IN WITNESS WHEREOF, the parties have executed this Grant as of the date
first above written.
UST: U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Vice President
▇▇▇▇▇▇▇: ▇▇▇▇▇▇▇ PRODUCTS LLC
By: ▇▇▇▇▇▇▇▇▇ Resources Company, Member
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Its: President
By: Fremont Lumber Company, Member
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Its: President
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EXHIBIT B TO WOOD SUPPLY AGREEMENT
Logging Terms and Conditions
The following provisions shall apply for logging by UST in connection with
UST's logging and delivery of the Timber pursuant to the grant to ▇▇▇▇▇▇▇:
A. Log Lengths. Logs shall be bucked and manufactured according to
accepted industry standards with a minimum top diameter inside the bark of six
(6) inches and the following acceptable lengths: 104 inches, 17 feet 6 inches,
27 feet, 35 feet, 43 feet 6 inches.
B. Deliveries. Log deliveries shall occur evenly over the logging season
unless the parties agree in writing to a different schedule. The parties shall
communicate with regard to the scheduling of deliveries.
C. Scaling. All logs shall be scaled according to the rules of the
Southern Oregon Log Scaling and Grading Bureau unless otherwise agreed. The
logs shall be scaled by an independent scaling bureau selected by ▇▇▇▇▇▇▇ and
reasonably acceptable to UST, the cost of which shall be shared by the parties.
▇▇▇▇▇▇▇ may use weight scaling according to a formula approved by UST, which
approval shall not be unreasonably withheld.
D. Rejected Logs. If any logs do not meet the Specifications contained
herein, ▇▇▇▇▇▇▇ may reject the logs by notice to UST and UST will replace any
rejected logs with logs meeting the Specifications herein. If there is a
dispute as to whether logs rejected by ▇▇▇▇▇▇▇ meet the Specifications herein,
the parties shall have the independent scaling bureau selected under Paragraph C
above inspect the logs and determine whether the logs meet the Specifications,
which decision shall be binding upon the parties. If the logs are determined to
meet the Specifications, ▇▇▇▇▇▇▇ shall pay the fees of the independent scaling
bureau in connection with such dispute. If the logs are determined not to meet
the Specifications, UST shall pay the fees of the independent scaling bureau in
connection with such dispute.
B-1
EXHIBIT C TO WOOD SUPPLY AGREEMENT
White Fir Price Adjustment
White fir log prices shall be adjusted as of the first day of each three
(3) month period during a contract year based upon the average of the weekly
Random Lengths "for 1,000 square feet of 1/2" CDX plywood, Inland 4/5 Ply"
during the preceding 3-month period (the "RL Average"). The white fir price
shall be adjusted upward by $2.50 per mbf for each $1 increase in the RL Average
over the base period average and adjusted downward by $2.50 per mbf for each $1
decrease in the RL Average below the base period average. The base period
average shall be the 3-month period ending with the commencement of the first
contract year under this Agreement.
C-1
EXHIBIT D TO WOOD SUPPLY AGREEMENT
Arbitration Procedures
Any arbitration called for by this Agreement shall take place in Portland,
Oregon according to the commercial arbitration rules of the American Arbitration
Association using as arbitrator a person with experience in the forest products
industry in relation to the subject matter in question. If the parties are
unable to agree upon an arbitrator, each party will designate a reputable,
knowledgeable forest consultant, and the two consultants so designated will
select as arbitrator a person with experience in the forest products industry in
relation to the subject matter in question. If the consultants so designated are
unable to agree upon an arbitrator, the parties shall request the presiding
judge of the Circuit Court of the State of Oregon for Multnomah County to select
as arbitrator a person with experience in the forest products industry in
relation to the subject matter in question.
In addition to deciding the dispute, the arbitrator shall have the
authority to allocate the costs of the arbitration between the parties in
proportion to which the position of one party was followed as opposed to the
position of the other party, and to award attorneys' fees to the prevailing
party, if in the arbitrator's opinion such an award is justified.
D-1
EXHIBIT F TO WOOD SUPPLY AGREEMENT
Logging by ▇▇▇▇▇▇▇
In performing any logging pursuant to the foregoing Agreement, ▇▇▇▇▇▇▇ and
any independent contractors employed by ▇▇▇▇▇▇▇ to perform such logging shall be
subject to the following:
1. ▇▇▇▇▇▇▇ may use all existing roads on the Timberlands in connection
with its logging and shall have the right to construct spurs as needed to access
Timber. ▇▇▇▇▇▇▇ shall repair any damage to existing roads caused by its use and
shall pay proportionately for the repair of any weather damage or the cost of
performing normal maintenance to the road, such payment to be in proportion to
the use which ▇▇▇▇▇▇▇ is making of such road for the period in question compared
to the total uses of such road.
2. ▇▇▇▇▇▇▇ shall submit an annual plan for logging which shall be subject
to the approval of UST which will not be unreasonably withheld, delayed or
conditioned. If no approval is received within two (2) weeks after submission
of such plan, it shall be deemed approved.
3. ▇▇▇▇▇▇▇ shall use appropriate, good logging methods for the type of
timber and terrain in question and shall comply in all respects with the Forest
Practices Act. ▇▇▇▇▇▇▇ shall obtain all necessary licenses or permits for any
logging which is performed by it or on its behalf.
4. ▇▇▇▇▇▇▇ shall indemnify and hold UST harmless from any claims for
trespass as a result of ▇▇▇▇▇▇▇' logging operations or from any claims by third
parties for injuries to persons or property arising out of ▇▇▇▇▇▇▇' operations
on the Timberlands, except to the extent that negligence or intentional
misconduct of UST is the cause of such claim.
5. ▇▇▇▇▇▇▇ shall carry and cause any of its contractors to carry
liability insurance, including Loggers Broad Form B property damage insurance
with third-party fire fighting expense endorsements with combined single limit
coverage of $3 million naming UST as an additional insured as its interest
appears.
6. ▇▇▇▇▇▇▇ shall conduct its operations so as to minimize fire hazard and
shall promptly report any fires that it observes on the Timberlands. ▇▇▇▇▇▇▇
shall use reasonable care to avoid damage to any reproduction areas.
F-1