EXHIBIT 10.2
TIMBERLAND MANAGEMENT AND TIMBER PURCHASE AGREEMENT
between
POTLATCH CORPORATION,
a Delaware corporation
and
TIMBERLAND GROWTH LIMITED PARTNERSHIP,
a Delaware limited partnership
____________, 1998
TABLE OF CONTENTS
Page
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ARTICLE 1 Purposes of Agreement; Construction......................... 2
1.1 Purposes of this Agreement.................................. 2
1.2 Construction................................................ 2
1.3 Adjustment in Dollar Amounts and Volumes.................... 3
1.4 Dispute Resolution.......................................... 3
ARTICLE 2 Definitions................................................. 3
2.1 Certain Terms Defined....................................... 3
2.2 Section References.......................................... 3
ARTICLE 3 Basic Agreement............................................. 3
3.1 Timberland Management....................................... 3
3.2 Purchase and Sale of Timber................................. 3
3.3 Term of Agreement........................................... 4
3.4 Timberlands Subject to this Agreement....................... 4
ARTICLE 4 Management of Timberlands................................... 4
4.1 Inventories................................................. 4
4.2 Management Plans............................................ 5
4.3 Management Duties........................................... 6
4.4 Compliance with Legal Requirements.......................... 6
4.5 Indemnity................................................... 7
4.6 Responsibility for Contractors.............................. 8
4.7 Construction and Maintenance of Roads....................... 8
ARTICLE 5 Harvest Plans............................................... 9
5.1 Contents of Harvest Plan.................................... 9
5.2 Requirements for Proposed Harvest Plan...................... 10
5.3 Potlatch Review and Approval of Proposed Harvest
Plan........................................................ 10
5.4 Final Harvest Plan.......................................... 12
5.5 Changes in Harvest Plan Due to Unforeseen
Circumstances............................................... 13
5.6 Partnership's Right to Modify Harvest Plan.................. 14
5.7 Compliance With Reporting and Other Legal
Requirements................................................ 15
5.8 Marking Timber and Boundaries............................... 15
ARTICLE 6 Purchase and Sale of Timber................................. 16
6.1 Obligation to Harvest; Required Volumes;
Obligation to Purchase and Sell............................. 16
6.2 Stumpage Prices............................................. 18
6.3 Monthly Payments............................................ 20
6.4 Determination and Payment of Total Purchase
Price....................................................... 21
6.5 Method of Payment; Late Payments............................ 22
6.6 Scaling..................................................... 22
6.7 Monthly Logging Reports..................................... 23
6.8 Allocation of Costs; Payment of Taxes....................... 23
6.9 Records; Audits............................................. 23
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6.10 Disclaimer of Warranties.................................... 24
6.11 Lump Sum Sale............................................... 25
ARTICLE 7 Logging Practices, Etc...................................... 25
7.1 Logging Practices in General................................ 25
7.2 Protection of Improvements; Boundaries;
Trespass.................................................... 25
7.3 Fire Safety; Environmental Matters.......................... 25
7.4 Post-Harvest Cleanup........................................ 26
7.5 Responsibility for Contractors.............................. 26
7.6 Notice of Violations........................................ 26
7.7 Indemnity................................................... 27
7.8 Partnership Inspection; Claims Relating to
Damage or Incomplete Harvest................................ 27
ARTICLE 8 Title Matters............................................... 28
8.1 Partnership's Title to Timberlands.......................... 28
8.2 Potlatch's Title to Growing Timber.......................... 30
8.3 Security Agreement.......................................... 30
8.4 Title and Risk of Loss to Cut Timber........................ 31
8.5 Grant of Access Rights...................................... 31
8.6 Potlatch to Permit No Liens................................. 32
ARTICLE 9 Disposition of Timberlands and Acquisition of
Additional Timberlands...................................... 32
9.1 No Transfer of Former Potlatch Lands Without
Potlatch Consent; Exceptions................................ 32
9.2 Transferred Timberlands Remain Subject to this
Agreement................................................... 34
9.3 Potlatch's Right to Timber on Additional Lands.............. 35
9.4 Additional Timberlands...................................... 36
9.5 Release of Timberlands...................................... 37
9.6 Protection of Lenders....................................... 37
ARTICLE 10 Insurance................................................... 38
10.1 Potlatch Insurance.......................................... 38
10.2 Potlatch Contractors........................................ 39
10.3 Policy Terms of Potlatch Insurance.......................... 39
10.4 Partnership Insurance....................................... 39
10.5 Partnership Contractors..................................... 40
10.6 Policy Terms of Partnership Insurance....................... 40
10.7 Claims...................................................... 41
ARTICLE 11 Suspension of Performance for Force Majeure................. 41
11.1 Suspension of Obligations................................... 41
11.2 Extension of Time........................................... 41
11.3 Force Majeure Peculiar to Potlatch.......................... 42
ARTICLE 12 Default; Remedies........................................... 42
12.1 Potlatch Default............................................ 42
12.2 Partnership Default......................................... 43
12.3 Remedies.................................................... 43
12.4 Limited Right To Rescind or Terminate....................... 43
12.5 Right of Other Party To Perform............................. 44
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ARTICLE 13 Resolution of Disputes...................................... 44
13.1 Determinations by Consulting Forester....................... 44
13.2 Arbitration................................................. 46
ARTICLE 14 Assignment.................................................. 48
14.1 Assignment Prohibited....................................... 48
14.2 Exception for Assignment to Corporate Successor............. 48
14.3 Partial Assignment by Potlatch Permitted.................... 48
ARTICLE 15 Condemnation................................................ 49
15.1 Effect of Condemnation...................................... 49
15.2 Condemnation Award.......................................... 49
15.3 Notice...................................................... 50
ARTICLE 16 Notices..................................................... 50
16.1 Notices..................................................... 50
ARTICLE 17 Miscellaneous............................................... 50
17.1 Successors and Assigns...................................... 50
17.2 No Agency or Fiduciary Relationship......................... 50
17.3 No Third-Party Beneficiaries................................ 51
17.4 Attorneys' Fees............................................. 51
17.5 Entire Agreement............................................ 51
17.6 Amendments; Waiver; Time Periods............................ 51
17.7 Governing Law............................................... 52
17.8 Counterparts................................................ 52
17.9 Partial Invalidity.......................................... 52
17.10 Further Assurances.......................................... 52
17.11 Headings.................................................... 52
17.12 Jurisdiction and Venue...................................... 53
Appendices and Exhibits
Appendix A Defined Terms
Appendix B Initial Long-Range Plan
Appendix C 1998 Management Plan
Appendix D Maps of Initial Resource Units
Exhibit A Description of Initial Timberlands
Exhibit B Example of Resource Unit Harvest Map
Exhibit C Example of Harvest Plan Data Sheet
Exhibit D Example of Harvest Plan Summary
Exhibit E 1993-1997 Harvest Volumes
Exhibit F Example of Monthly Logging Report
Exhibit G Form of Memorandum of Agreement
Exhibit H Form of Stumpage Bid Worksheet
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TIMBERLAND MANAGEMENT AND TIMBER PURCHASE AGREEMENT
THIS TIMBERLAND MANAGEMENT AND TIMBER PURCHASE AGREEMENT (as further
defined in Appendix A, this "Agreement"), dated as of ______________, 1998,
between POTLATCH CORPORATION, a Delaware corporation ("Potlatch"), and
TIMBERLAND GROWTH LIMITED PARTNERSHIP, a Delaware limited partnership
("Partnership"),
W I T N E S S E T H:
WHEREAS, Partnership owns (or leases) and controls the Initial Timberlands,
consisting of approximately 825,000 acres of timberlands owned by Partnership
in Arkansas and along the Mississippi River between Louisiana and Southern
Illinois, and approximately 13,600 acres of timberlands leased by Partnership
in Arkansas, all as more particularly described in Exhibit A attached hereto,
that are being held and managed to produce a sustainable supply of high
quality forest products;
WHEREAS, Partnership has considerable expertise in the management of
timberlands;
WHEREAS, Potlatch owns Potlatch Conversion Facilities in the vicinities of
the Initial Timberlands that would provide suitable markets for the
Merchantable Timber grown on the Timberlands;
WHEREAS, Potlatch desires to assure, on a long-term basis, a steady and
reliable source of raw materials for the Potlatch Conversion Facilities and
Partnership desires to assure, on a long-term basis, suitable markets for the
Merchantable Timber grown on the Timberlands; and
WHEREAS, both parties hereto desire to enter into an agreement under which
Partnership will manage the Timberlands for sustained Timber production and
Potlatch will annually harvest a portion of the Timber from the Timberlands
and will purchase such harvested Timber from the Partnership at the ▇▇▇▇▇ (the
parties intending that such purchases shall be governed by section 631(b) of
the Internal Revenue Code of 1986, as amended, so long as such section or any
similar successor provision is in effect), all as hereinafter more
specifically provided.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and for other valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Partnership hereby grants to Potlatch and its successors
and assigns the rights to harvest and take Merchantable Timber, upon and
subject to the terms and conditions of this Agreement, and Partnership and
Potlatch agree as follows:
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ARTICLE 1
Purposes of Agreement; Construction
1.1 Purposes of this Agreement. The following (the "Agreement Purposes")
are the major purposes of this Agreement:
(a) to secure to Potlatch, during each year of the Term, a dependable
source of Merchantable Timber to supply raw materials for the Potlatch
Conversion Facilities at a fair market price, in volumes generally comparable
to the volumes Potlatch (or ATCO, as Potlatch's predecessor-in-interest)
previously obtained from the Initial Timberlands (as such volumes may be
adjusted, from time to time, to reflect the continuing application of
Sustainable Forestry Principles and to reflect the volume of Merchantable
Timber on the Additional Timberlands acquired and Timberlands disposed of
during the Term);
(b) to secure to Partnership, during each year of the Term, an assured
customer to harvest and purchase substantially all of the maximum sustainable
annual volume of the Partnership's Merchantable Timber on the Timberlands at a
fair market price, such that the revenue obtained by Partnership each year
pursuant to this Agreement approximates the revenue that Partnership could
obtain in such year by selling in the open market in the respective Resource
Regions a volume of Merchantable Timber from the Timberlands consistent with
Sustainable Forestry Principles; and
(c) to assure that the Timberlands are managed, harvested and utilized so
that: (i) during each year of the Term the volume of Merchantable Timber
harvested from each Resource Unit does not exceed the volume which would
permit a long-term sustained yield of Merchantable Timber from such Resource
Unit; and (ii) to the extent economically practicable, the quality (as a wood
products resource) and growth rate of the Merchantable Timber on the
Timberlands is optimized through application of state-of-the-art silvicultural
practices.
1.2 Construction. In view of the long duration of the Term and the
possibility that customs and practices relating to Timber management, Timber
harvesting and Timber sales ("Industry Practice") may change in material
respects during the Term, the provisions of this Agreement shall be construed
liberally in a manner designed to secure to Potlatch and Partnership the
benefits of this Agreement and to achieve the Agreement Purposes. In the event
that, due to changes in Applicable Law or Industry Practice, any provision of
this Agreement becomes archaic or its enforcement becomes impracticable or
inappropriate in view of the Agreement Purposes, the parties shall negotiate,
diligently and in good faith, to seek to agree upon an appropriate amendment
to this Agreement. If the parties are unable to agree on an amendment, either
party may submit the matter to arbitration in accordance with Article 13. In
no
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event shall the arbitrator's decision terminate this Agreement or be
inconsistent with fulfillment of the Agreement Purposes.
1.3 Adjustment in Dollar Amounts and Volumes. (a) All specific dollar
amounts referred to in this Agreement (not including the Exhibits attached
hereto) shall be adjusted annually in proportion to increases in CPI between
the date of this Agreement and the anniversary of the date of this Agreement
occurring most recently prior to the date on which the provision of this
Agreement containing such dollar reference is being applied.
(b) All specific volumes of Timber, any subcategory of Timber, or any
Product referred to in this Agreement or in any Management Plan or Long-Range
Plan shall be adjusted in such a manner and to such extent as the parties may
reasonably agree to reflect the addition of any Additional Timberlands or the
disposition of any Released Timberlands or any casualty losses.
1.4 Dispute Resolution. Potlatch and Partnership desire to avoid all forms
of litigation and, therefore, this Agreement provides for alternative methods
of dispute resolution, all of which are intended to further the Agreement
Purposes.
ARTICLE 2
Definitions
2.1 Certain Terms Defined. As used in this Agreement, the terms listed in
Appendix A attached hereto shall have the meanings set forth therein (such
definitions to be equally applicable to the singular and plural forms of the
terms defined).
2.2 Section References. Unless otherwise provided herein, all references to
numbered sections, articles or exhibits shall refer to the sections and
articles of this Agreement and the exhibits attached to this Agreement.
ARTICLE 3
Basic Agreement
3.1 Timberland Management. Throughout the Term, Partnership shall own and
manage the Timberlands in accordance with the terms and provisions of Article
4 and the other applicable terms and provisions of this Agreement.
3.2 Purchase and Sale of Timber. During each Harvest Year, Potlatch shall
harvest and purchase from Partnership, and Partnership shall sell to Potlatch,
the Merchantable Timber designated to be harvested in such Harvest Year in the
applicable Harvest Plan, subject to and in accordance with the
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applicable terms and provisions of Article 6 and the other applicable terms
and provisions of this Agreement.
3.3 Term of Agreement. The initial term of this Agreement (as the same may
be extended pursuant to this Section 3.3, the "Term") shall commence on
__________ __, 1998 (the "Commencement Date") and shall expire on _________
__, 2018 (as such date may be extended pursuant to this Section 3.3, the
"Expiration Date"); provided that the Term shall automatically be extended for
up to eighteen (18) successive periods of ten (10) years each, if either
party, at its sole option, elects to extend this Agreement beyond the Expiration
Date then in effect by written notice to the other party unequivocally
exercising the option to so extend this Agreement, delivered no later than the
date two (2) years prior to the Expiration Date then in effect ("Extension
Deadline"); provided, however, that this Agreement shall not terminate unless,
after the Extension Deadline, one party informs the other party in writing
that it does not intend to exercise the right to extend the Term, and the
other party fails, within sixty (60) days after receipt of the ensuing notice,
to give written notice exercising the right to extend the Term. Effective upon
each such automatic extension, the Expiration Date shall be the last day of
the ensuing 10-year extension period.
3.4 Timberlands Subject to this Agreement. All of the Timberlands shall be
subject to this Agreement throughout the Term; provided that the Leasehold
Lands will not be included in the Timberlands unless and until the Partnership
elects, by notice to Potlatch, to include the Leasehold Lands in the
Timberlands.
ARTICLE 4
Management of Timberlands
4.1 Inventories. (a) Partnership at its expense shall maintain, and shall
continue throughout the Term to enhance (to the extent economically feasible),
its computer-based inventory system with the objective of having the ability,
at any time, to generate a reasonably current inventory, in graphic or textual
format, describing the estimated volume and species mix of each Fiber Category
of Timber then growing on the Timberlands and, as to each Stand or Resource
Unit, its condition, height and age classes, degree of stocking, and other
information commonly included in such inventories (the "Inventory Data").
Inventory Data shall be maintained on a Stand level (at least as to the Former
Potlatch Lands), a Resource Unit level, a Resource Region level and on an
aggregate basis for the Timberlands as a whole. Inventory Data may include
volume by species, size class, grade, and merchantability standard as
reasonably appropriate for the applicable Resource Region. Partnership shall
cruise and update the Inventory Data on each Stand at reasonable intervals, and
shall take such other steps (including use of computer-based
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growth models) as may be necessary to keep the Inventory Data reasonably
current at all times.
(b) Inventory Data pertaining to the Timberlands shall be made available to
Potlatch at all times for purposes reasonably related to Potlatch's business,
but shall otherwise be kept confidential by the Partnership and Potlatch,
except to the extent disclosure is required by law (including disclosure
required in connection with the issuance of securities and other financings by
Partnership, its general partner or any other entity which controls, is
controlled by or is under common control with Partnership) or in order to
facilitate the ordinary operation of the respective businesses of Potlatch and
Partnership. If practicable, Potlatch shall have access to the Inventory Data by
remote computer link. If remote computer link is not practicable, Partnership
shall provide Inventory Data to Potlatch by such means as the parties may
reasonably agree.
4.2 Management Plans. (a) Not less frequently than once every five (5)
years, Partnership shall prepare a five-year management plan (each a "Long-
Range Plan") for the Timberlands, each relating to a five (5) calendar year
period commencing within twelve (12) months after the date of preparation of
the Long-Range Plan. The initial Long-Range Plan covering calendar years 1998
through 2002 is attached hereto as Appendix B. Each subsequent Long-Range Plan
shall be prepared and delivered to Potlatch not less than one hundred twenty
(120) days prior to the first day of the first calendar year to which it
pertains. Each Long-Range Plan shall set forth, for each Resource Region, the
Timber management objectives for the applicable period and the means proposed
to achieve them, and shall set forth the Timber management activities to be
undertaken during each year of such period in reasonable detail. In addition,
each Long-Range Plan shall include reasonably detailed projections of annual
harvest volumes for the applicable five-year period and a 50-year projection
of annual harvest volumes.
(b) Partnership shall prepare a management plan (each a "Management Plan")
for the Timberlands on an annual basis for each calendar year during the Term.
The initial Management Plan covering the remainder of 1998 is attached hereto
as Appendix C. Each subsequent Management Plan shall be prepared and delivered
to Potlatch not less than one hundred twenty (120) days prior to the first day
of the calendar year to which it pertains. Each Management Plan shall set
forth, for each Resource Region, the Timber management objectives for such
year and the means proposed to achieve them, and shall set forth the Timber
management activities to be undertaken during such year in reasonable detail.
(c) In preparing each Long-Range Plan and each Management Plan, Partnership
may consult with Potlatch and Potlatch shall provide any suggestions it
considers appropriate. Potlatch shall have no right to object to any Long-Range
Plan or
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Management Plan unless such Long-Range Plan or Management Plan is inconsistent
with the Agreement Purposes or the provisions of this Article 4. If Potlatch
believes a Long-Range Plan or Management Plan is inconsistent with the
Agreement Purposes or the provisions of this Article 4, Potlatch shall give
Partnership written notice specifying Potlatch's objections within thirty (30)
days after receipt of such Long-Range Plan or Management Plan. If Potlatch
does not object to a Long-Range Plan or a Management Plan within such period,
Potlatch shall be deemed to have accepted such Long-Range Plan or Management
Plan. If Potlatch objects to a Long-Range Plan or Management Plan, Partnership
and Potlatch shall negotiate, diligently and in good faith, to resolve the
dispute and approve a Long-Range Plan or Management Plan not less than sixty
(60) days prior to the commencement of the calendar year to which the
Management Plan pertains (or the first calendar year of the period to which
the Long-Range Plan pertains). If such dispute cannot be resolved by the
parties within such time period, then the parties shall submit the dispute to
the Consulting Forester serving pursuant to Section 13.1. If no Consulting
Forester is then serving or if the Consulting Forester does not reach a
determination as to such dispute on or prior to the date thirty (30) days
prior to the commencement of the calendar year to which the Management Plan
pertains (or the first calendar year of the period to which the Long-Range
Plan pertains), then either party may submit the dispute to arbitration in
accordance with Section 13.2. During the resolution of the dispute,
Partnership shall carry out all un-disputed aspects of the Long-Range Plan or
Management Plan and shall, to the extent applicable, comply with the
previously approved Long-Range Plan pertaining to the subject year as to the
subject matter of the dispute.
(d) Each Long-Range Plan and each Management Plan, upon completion in
accordance with this Section 4.2, shall become a part of this Agreement as if
attached. Partnership may modify a Long-Range Plan or a Management Plan before
or during the period to which it pertains, subject to the approval of
Potlatch, which approval shall not be unreasonably withheld or delayed.
4.3 Management Duties. Throughout the Term, Partnership at its expense
shall manage and maintain the Timberlands pursuant to the applicable
Management Plan and in accordance with Applicable Laws, Prudent Management
Practices and the applicable terms and provisions of this Agreement.
4.4 Compliance with Legal Requirements. (a) Throughout the Term, Partnership
at its cost shall comply in all material respects with all Applicable Laws now
or hereafter in effect relating to the ownership, management and operation of
the Timberlands including applicable Environmental Laws, except to the extent
such compliance is the responsibility of Potlatch pursuant to Sections 5.7,
7.1 or 7.3(b). Without limiting the generality of the foregoing, Partnership
shall prepare and file with the applicable Governmental Authorities all
notices,
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reports, applications, statements or other filings required under Applicable
Laws, and shall obtain, as and when required under Applicable Laws, all
Governmental Approvals relating to the ownership, management and operation of
the Timberlands (except those for which Potlatch is responsible pursuant to
Section 5.7). Promptly upon Potlatch's request, Partnership shall deliver to
Potlatch copies of all required Governmental Approvals or other reasonable
evidence of Partnership's compliance with such Applicable Laws. Partnership
shall keep Potlatch generally apprised of material notices to or filings with
Governmental Authorities given or made by Partnership.
(b) If Partnership receives any notice from any Governmental Authority or
any other Person alleging that any part of the Timberlands or Partnership is
in violation of any Applicable Law or that Partnership has violated any rights
of such Person, and the amount of damages arising from the alleged violation,
or the cost of curing or correcting the violation, if adversely determined,
could reasonably be expected to exceed five hundred thousand dollars
($500,000), then Partnership shall, within ten (10) days after receiving such
notice, deliver to Potlatch a notice describing the allegation in reasonable
detail. The contents of any such notice shall be kept confidential, except to
the extent disclosure is required by law.
4.5 Indemnity. Partnership hereby agrees to indemnify, save, defend and
hold harmless Potlatch and its officers, agents, contractors, subcontractors,
licensees, invitees and employees ("Potlatch Indemnified Parties") from all
loss, cost, liability and expense resulting from injury to or death of any
person or persons (including, without limitation, Potlatch's officers, agents,
contractors, subcontractors, licensees, invitees and employees), or
destruction of or damage to property (including, without limitation, the
property of any Potlatch Indemnified Party), or any other claim of a third
party against any Potlatch Indemnified Party, arising out of or connected
with, either directly or indirectly, any failure by Partnership to perform its
obligations under this Agreement, the presence on the Timberlands of
Partnership or any partner, officer, agent, employee, contractor,
subcontractor, licensee or invitee of Partnership, or the condition of the
Timberlands or any portion thereof or improvement thereon, including, without
limitation, the presence on the Timberlands of any hazardous substances or the
failure of the Timberlands to comply with Applicable Laws, except to the
extent such injury, death, destruction, damage or other claim is caused by the
negligence or willful misconduct of any Potlatch Indemnified Party or the
breach by Potlatch of any of its obligations under this Agreement or is the
subject of Potlatch's indemnification obligation under Section 7.7 or under
section ___ of the Contribution Agreement. The obligations of Partnership
under this Section 4.5 shall survive the expiration or termination of this
Agreement.
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4.6 Responsibility for Contractors.
(a) In the event Partnership contracts with a contractor, or a subcontractor
of any tier is engaged, to perform any portion of the Timber management
operations described in this Agreement as being performed by Partnership, it
shall ensure that any such contractor or subcontractor shall be made aware of
and shall abide by all pertinent provisions of this Agreement.
(b) All obligations, duties, liabilities, and responsibilities of Partnership
arising pursuant to the provisions of this Agreement, or otherwise in law or
in equity, shall apply with equal force to the employees, agents, contractors
or subcontractors of any tier, licensees and suppliers of Partnership involved
in operations hereunder where the context permits, and Partnership shall be
responsible and liable to Potlatch for the activities of such parties.
(c) Specific use of the terms "subcontractor," "agent," "contractor," and
the like in certain sections of this Agreement, and omissions of such terms in
other sections shall not be deemed to nullify or restrict the force and effect
of this Section only to such sections where such terms are specifically used.
Use of the term "Partnership" in any section giving rise to duties or
obligations of Partnership shall be deemed to include the subcontractors,
agents, contractors, employees, and licensees of Partnership where the context
permits.
4.7 Construction and Maintenance of Roads. Partnership shall at its expense
design, construct and (except as otherwise provided in Section 7.8(b))
maintain, or shall cause its contractors to design, construct and maintain, a
system of roads throughout the Timberlands, and shall maintain river
transportation sites, all as necessary to perform management services,
logging, log transportation and fire prevention and control, including roads as
necessary for access during any Harvest Year to and from all Stands included in
the Harvest Plan for such Harvest Year (which access is not required to be
immediately adjacent to such a Stand if it is practicable to move equipment in
and out of such Stand and skid logs to a logging road across land adjacent to
such Stand). Notwithstanding the foregoing, to the extent it is customary in a
particular Resource Region for logging contractors to construct Temporary
Logging Roads or perform road maintenance work in connection with logging
operations, Potlatch may arrange for logging contractors to perform such work;
in such cases, the costs of such road work will be borne by Potlatch, but will
be reflected in Costs of Log and Haul. Potlatch shall be responsible for
obtaining any permits or licenses necessary for river transportation sites,
and Partnership shall provide reasonable cooperation in connection therewith.
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ARTICLE 5
Harvest Plans
5.1 Contents of Harvest Plan. No later than September 1 of each year,
Partnership shall prepare and deliver to Potlatch a proposed Harvest Plan for
each Resource Region for the ensuing two (2) Harvest Years (a "Proposed
Harvest Plan"). Each Proposed Harvest Plan shall include, for the applicable
Resource Region and for each Harvest Year covered by such Proposed Harvest Plan,
the following information:
(a) A map (a "Resource Unit Harvest Map") of each Resource Unit
proposed to be included in the Harvest Plan showing and identifying by
Stand Code Number each Stand proposed to be harvested, showing all logging
roads providing access to and from each such Stand, and showing the
location of any environmentally-sensitive areas which could be affected by
harvest operations pursuant to the Proposed Harvest Plan (an example of a
Resource Unit Harvest Map is attached hereto as Exhibit B);
(b) A listing (a "Harvest Plan Data Sheet"), broken down by Resource
Unit, of each Stand proposed to be harvested, and showing for each such
Stand (i) the acreage of the Stand; (ii) whether the Stand is to be
partially harvested or fully harvested (and if it is to be partially
harvested, describing in detail the marking codes or selection criteria
for the Timber proposed to be harvested); (iii) the estimated volumes to
be harvested of each Fiber Category in such Stand, and the estimated
volumes of each Product to be harvested in such Stand (excluding Products
which are estimated to constitute less than three percent (3%) of the
total volume of a Fiber Category in such Stand); and (iv) whether such
Stand is available for harvest throughout the Harvest Year or stating the
portion of such Harvest Year when the Stand will be available for harvest.
Each Harvest Plan Data Sheet shall describe any known special restrictions
or procedures (such as procedures to protect any environmentally-sensitive
areas) which will affect harvest operations (an example of a Harvest Plan
Data Sheet is attached hereto as Exhibit C);
(c) A summary compilation of the data set forth in the Harvest Plan
Data Sheets (a "Harvest Plan Summary"), broken down by Resource Unit and
showing totals for the Resource Region (an example of a Harvest Plan
Summary is attached hereto as Exhibit D).
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5.2 Requirements for Proposed Harvest Plan. Each Proposed Harvest Plan
shall be consistent with the following requirements (collectively, the "PHP
Requirements"):
(a) The Proposed Harvest Plan shall be consistent with the Agreement
Purposes and shall provide for the harvest of a volume of each Fiber
Category substantially equal to the maximum volume which may be harvested
consistent with Sustainable Forestry Principles, subject to such
exceptions as may be set forth in the applicable approved Long-Range Plan;
(b) As to each Fiber Category, the proposed harvest volumes shall be
not less than seventy-five percent (75%) for Sawtimber Fiber Categories
and fifty percent (50%) for Pulpwood Fiber Categories nor more than one
hundred twenty-five percent (125%) of the average annual harvest volume of
such Fiber Category in the Harvest Plans for the previous five (5) years
(for purposes of this determination during the first five (5) years of the
Term, the relevant harvest volumes for 1993-1997 are set forth in Exhibit
E attached hereto), subject to adjustment to reflect the effects of Force
Majeure and subject to such exceptions as may be set forth in the
applicable approved Long-Range Plan;
(c) Each Stand identified in the Proposed Harvest Plan shall, during
at least a reasonable portion of the Harvest Year, be accessible (directly
or across an adjacent Stand if practicable) by barge to a suitable landing
or by means of a logging road which will accommodate vehicles of the type
generally used in connection with harvest and transport operations;
(d) If harvest operations in some but not all portions of the
Resource Region are expected to be materially affected by standing water
or winter weather, the Proposed Harvest Plan shall include a reasonable
number of Stands which are located in areas where harvest operations may
be performed in winter weather or wet seasons, as the case may be, in
order to permit, to the extent practicable, a consistent level of harvest
throughout the year.
5.3 Potlatch Review and Approval of Proposed Harvest Plan.
(a) Within thirty (30) days after delivery of the Proposed Harvest Plan,
Potlatch may deliver to Partnership a written notice ("Objection Notice"): (i)
of any feature of the Proposed Harvest Plan which, in Potlatch's judgment, is
inconsistent with any of the PHP Requirements, in which case Potlatch shall
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propose a correction to achieve such consistency, or (ii) stating that
Potlatch wishes to modify the Proposed Harvest Plan for the ensuing Harvest
Year in accordance with Section 5.3(c), in which case Potlatch shall specify
the proposed modifications. If Potlatch does not deliver an Objection Notice
within such 30-day period, then the Proposed Harvest Plan shall be deemed
approved and shall constitute the Harvest Plan for the relevant Harvest Year,
subject to modification in accordance with Sections 5.5 and 9.4(a). If
Potlatch timely delivers an Objection Notice specifying a feature of the
Proposed Harvest Plan which Potlatch believes is inconsistent with the PHP
Requirements, Partnership shall, within fifteen (15) days after such delivery,
deliver to Potlatch a notice (an "Objection Response Notice") which either (A)
agrees that the Proposed Harvest Plan shall be modified as proposed in the
Objection Notice, (B) proposes an alternative modification to make the
Proposed Harvest Plan consistent with the PHP Requirements, or (C) states that
Partnership disputes Potlatch's judgment as to the inconsistency of the
Proposed Harvest Plan with the PHP Requirements. If Partnership does not
deliver an Objection Response Notice within such 15-day period, then
Partnership shall be deemed to have approved Potlatch's proposed modification
to the Proposed Harvest Plan, and the Harvest Plan shall reflect such
modification. If Potlatch timely delivers an Objection Notice proposing a
modification to the Proposed Harvest Plan pursuant to Section 5.3(c),
Partnership may, within fifteen (15) days after delivery of the Objection
Notice, notify Potlatch that such proposed modification is inconsistent with
Potlatch's rights under Section 5.3(c). If Partnership does not deliver such
notification within such 15-day period, Partnership shall be deemed to have
agreed to Potlatch's proposed modification, and the Harvest Plan shall reflect
such modification.
(b) If the parties disagree as to whether the Proposed Harvest Plan is
consistent with the PHP Requirements or as to whether any modifications to the
Proposed Harvest Plan proposed by Potlatch are consistent with Potlatch's
rights under Section 5.3(c), the parties shall each use diligent efforts in
good faith to negotiate an agreement promptly. If such negotiation does not
result in an agreement as to the Harvest Plan within sixty (60) days after the
Proposed Harvest Plan was delivered to Potlatch, then the parties shall submit
the dispute to the Consulting Forester serving pursuant to Section 13.1. If no
Consulting Forester is then serving or if the Consulting Forester does not
reach a determination as to such dispute on or prior to the date ninety (90)
days after the Proposed Harvest Plan was delivered to Potlatch, then either
party may thereafter submit such disagreement to arbitration in accordance with
Section 13.2.
(c) Potlatch shall have the right to modify a Proposed Harvest Plan,
pursuant to the procedures set forth in Section 5.3(a), by deleting specified
Stands identified in the Proposed
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Harvest Plan constituting not more than fifteen percent (15%) of the aggregate
acreage proposed to be harvested in the first Harvest Year of such Harvest
Plan, and substituting therefor other specified Stands ("Alternative Stands")
to be harvested in the Resource Region; provided that each of the following
requirements is satisfied:
(i) the Alternative Stands shall be Stands which the Proposed Harvest
Plan such Proposed Harvest designates to be Plan; harvested in the second
year of
(ii) the Harvest Plan, as so modified, would be consistent with the
PHP Requirements;
(iii) substitution of the Alternative Stands would not result in an
increase or volume of Merchantable Region during such decrease of more
Sawtimber to be first Harvest than five percent harvested in the Year;
(5%) in the total applicable Resource
(iv) substitution of the Alternative Stands could not reasonably be
expected to result Harvest Plan) of more than to be payable for the in a
decrease (as five percent (5%) in first Harvest compared with the the
Total Purchase Year under the Proposed Price Harvest Plan; and
(v) any deleted Stand must be harvested by Potlatch no later than
the fourth (4th) year after such Stand was first proposed to be harvested
in a Proposed Harvest Plan.
5.4 Final Harvest Plan. (a) When a Proposed Harvest Plan has been
approved (including approval of any proposed modifications pursuant to Section
5.3(c) and resolution of any disputes pursuant to Section 5.3(b)) ("Harvest
Plan"), Potlatch and Partnership shall cause their respective Authorized
Officers to sign the cover pages of two (2) counterparts of the Harvest Plan,
and each party shall take possession of one such counterpart. Notwithstanding
the preceding sentence, failure of either party to so evidence its approval
shall not affect the validity or effect of the Harvest Plan. Each Harvest Plan
upon completion and approval in accordance with this Article 5 shall become a
part of this Agreement as if attached hereto. Either party may propose
amendments to a Harvest Plan during the applicable Harvest Year, subject to
the approval of the other party, which approval shall not be unreasonably
withheld or delayed.
(b) In the event any dispute described in Section 5.3(b) remains
pending (or in the event a Harvest Plan has not been finalized for any other
reason) as of the beginning of the applicable Harvest Year, harvest operations
shall be carried out
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in a manner consistent with the undisputed portions of the Proposed Harvest
Plan until the Harvest Plan is finalized.
(c) If Partnership fails to deliver any Proposed Harvest Plan in accordance
with Section 5.1(a), Potlatch shall have the right, during the first calendar
year to which such Proposed Harvest Plan would apply, to harvest Timber
designated to be harvested during such calendar year pursuant to the previous
two-year Harvest Plan (under which such calendar year was the second year of
the two-year Harvest Plan).
5.5 Changes in Harvest Plan Due to Unforeseen Circumstances. (a) In the
event an area consisting of more than fifty (50) acres of the Timberlands is
affected by disease, pests, fire, severe windstorms or other events ("Timber
Damage Events"), but excluding ordinary mortality due to age, such that it
becomes necessary, in Partnership's reasonable judgment, for Potlatch to
harvest the affected Timber (or logs, as the case may be) promptly in order to
minimize the financial loss due to such events, then the provisions of this
Section 5.5 shall apply:
(i) Either party, upon obtaining knowledge of a Timber Damage Event,
shall promptly inform the other party;
(ii) The parties shall promptly confer and seek, in good faith and
with diligence, to negotiate a modification to the Harvest Plan to
provide for the prompt harvesting of Merchantable Timber in the areas
affected by the Timber Damage Events ("Salvage Timber"); provided,
however, that Potlatch shall not be obligated to accept a modification
which would (A) result in Potlatch obtaining a smaller volume of good
quality Sawtimber during the Harvest Year or the ensuing Harvest Year
than the volume to be harvested pursuant to the Harvest Plan, or (B)
increase the expenses to be borne by Potlatch in implementing the Harvest
Plan, unless Partnership shall agree to reimburse Potlatch for such
increase; and
(iii) unless Potlatch elects to harvest the Salvage Timber in addition
to the Timber to be harvested in accordance with the applicable Harvest
Plan, any Salvage Timber harvested by Potlatch in a Harvest Year shall be
credited toward the volumes of the respective Products Potlatch is
required to harvest during such Harvest Year in accordance with the
applicable Harvest Plan.
In the event that, after negotiation pursuant to this Section 5.5(a), Potlatch
does not agree to a modification to the Harvest Plan to provide for the
harvesting of Salvage Timber, then Partnership shall have the right to dispose
of the Salvage
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Timber by such means as Partnership may determine, including sale of such
Salvage Timber to any person; provided that no such transaction shall involve
the sale or other disposition of any Product other than Salvage Timber.
(b) In the event that, at any time, any Force Majeure impairs access to a
Stand which is to be harvested during the Harvest Year or if any Force Majeure
would materially impair harvest operations on such Stand, and either party
reasonably believes that suitable access for harvest equipment and logging
trucks will not be available, or that the impairment of harvest operations
will not be corrected, in time to complete the harvest of the affected Stand
during the Harvest Year, then the Harvest Plan shall be modified to delete the
affected Stand and substitute in its place a Stand or Stands in the same
Resource Region which is generally comparable in volumes and types of
Merchantable Timber available for harvest. Such substitute Stands shall be
selected by Potlatch from the Stands designated in the applicable Harvest Plan
for harvest during the following Harvest Year, and shall be identified by
written notice from Potlatch to Partnership, and unless Partnership reasonably
objects within five (5) days after receipt of such notice, the Harvest Plan
shall be deemed modified to reflect such substitution.
(c) In the event that, at any time during a Harvest Year, Potlatch
reasonably believes that the Stands which are to be harvested during the
Harvest Year will produce materially different volumes of any one or more
species or Fiber Categories than the volumes reflected in the Harvest Plan, then
Potlatch shall have the right to modify the Harvest Plan by deleting up to
fifteen percent (15%) of the aggregate acreage specified in the Harvest Plan or
by adding Alternative Stands, as the case may be, subject to the limitations
set forth in clauses (i) through (v) of Section 5.3(c). Such Alternative
Stands shall be identified by written notice from Potlatch to Partnership, and
unless Partnership reasonably objects within ten (10) days after receipt of
such notice, the Harvest Plan shall be deemed modified to reflect such
deletion, addition or substitution. The right to add, delete or substitute
Stands pursuant to this Section 5.5(c) is in addition to Potlatch's rights to
substitute Stands in a Proposed Harvest Plan pursuant to Section 5.3(c).
5.6 Partnership's Right to Modify Harvest Plan. Upon and subject to the
terms and conditions of this Section 5.6, Partnership shall have the right,
one (1) time only in any Harvest Year, by written notice to Potlatch ("Harvest
Plan Modification Notice"), to modify the Harvest Plan to increase the volume
of Merchantable Sawlogs to be harvested in the current Harvest Year (a
"Harvest Plan Modification") by an amount (as specified in the Harvest Plan
Modification Notice) up to ten (10%) of the volume to be harvested during such
Harvest Year pursuant to the Harvest Plan (i.e., such that the volume of
Merchantable Sawlogs would be up to one hundred ten percent
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(110%) of the volume for such Harvest Year contemplated by the Harvest Plan
prior to such modification), provided that each of the following requirements
is satisfied:
(i) the Harvest Plan, as so modified, would be consistent with the
PHP Requirements;
(ii) the Harvest Plan Modification Notice shall be delivered to
Potlatch no later than: (A) August 1 of the Harvest Year if the Harvest
Plan Modification Notice proposes an increase in volume of five percent
(5%) or less, or (B) July 1 of the Harvest Year if the Harvest Plan
Modification Notice proposes an increase in volume of more than five
percent (5%);
(iii) Potlatch shall have the right to select the additional
Merchantable Sawlogs to be harvested, which shall be selected from Stands
which the Harvest Plan designates to be harvested in the second year of
such Harvest Plan (and Potlatch shall have the right to select only
Softwood Sawtimber, only Hardwood Sawtimber or a combination); and
(iv) the additional volume harvested pursuant to the Harvest Plan
Modification shall be offset by an equivalent reduction in harvest volumes
of the relevant Sawlog Categories during the following five or fewer
Harvest Years, as Potlatch and the Partnership may reasonably agree.
5.7 Compliance With Reporting and Other Legal Requirements. In the event
that Applicable Law requires that any Governmental Authority or other Person
receive any notice, plan or information regarding a contemplated harvest of
forest products pursuant to this Agreement or requires that any Governmental
Approval be obtained in connection therewith or requires any other action
respecting a contemplated harvest, Potlatch shall take all actions reasonably
necessary to comply in all material respects with such Applicable Law.
Partnership shall provide such cooperation as may be necessary to enable
Potlatch to so comply, but Partnership shall not be required to incur any
material expense in providing such cooperation. Promptly upon Partnership's
request, Potlatch shall deliver to Partnership copies of all required
Governmental Approvals or other reasonable evidence of Potlatch's compliance
with such Applicable Laws. Potlatch shall keep Partnership generally apprised
of material notices to or filings with Governmental Authorities given or made
by Potlatch relating to the Timberlands or Potlatch's operations under this
Agreement.
5.8 Marking Timber and Boundaries. Prior to Potlatch's commencement of
harvest operations on any Stand, Partnership shall ▇▇▇▇ as needed the Stand
boundaries and any streamside management zones or other environmentally
sensitive areas on or
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adjacent to the Stand and, if the Stand is to be partially harvested,
Partnership shall ▇▇▇▇ the trees to be cut or shall provide a detailed written
description of the method by which Potlatch or its contractor is to determine
which trees are to be cut (collectively, "Site Marking"). If Potlatch gives
notice to Partnership of the date on which Potlatch proposes to commence
harvest operations on a Stand, then Partnership shall complete the Site Marking
of such Stand prior to such date (but Partnership shall have at least ten (10)
days after such notice to complete the Site Marking). If Partnership fails to
complete such Site Marking within such ten (10) day period, Partnership shall
reimburse any costs incurred by Potlatch as a result of delay in Site Marking
promptly after written demand.
ARTICLE 6
Purchase and Sale of Timber
6.1 Obligation to Harvest; Required Volumes; Obligation to Purchase and
Sell.
(a) During each Harvest Year, upon and subject to the terms of this
Agreement, Potlatch shall cut and remove the Merchantable Timber to be
harvested in accordance with the Harvest Plan for such Harvest Year (as such
Harvest Plan may be modified in accordance with the provisions of Article 5).
Upon and subject to the terms and conditions of this Agreement, Potlatch shall
purchase and Partnership shall sell all Merchantable Timber cut by Potlatch.
(b) If, in a Harvest Year, Potlatch cuts and scales a volume of any Sawlog
Category which is more than ninety-five percent (95%) but less than one
hundred percent (100%) of the volume of such Sawlog Category to be harvested in
such Harvest Year pursuant to the applicable Harvest Plan, as such Harvest
Plan may theretofore have been modified (a "Harvest Deficit"), then the Harvest
Deficit shall be added to the volume of such Sawlog Category to be harvested in
the following Harvest Year pursuant to the applicable Harvest Plan, and the
Harvest Plan for such following year shall be modified to reflect such
additional volume; provided, however, that the foregoing requirement shall not
apply if such Harvest Deficit resulted from Force Majeure or inaccuracies in the
estimated volumes set forth in the Harvest Plan. If, in a Harvest Year,
Potlatch cuts and scales a volume of any Sawlog Category equal to more than one
hundred five percent (105%) of the volume of such Sawlog Category to be
harvested in such Harvest Year pursuant to the applicable Harvest Plan, as such
Harvest Plan may theretofore have been modified (a "Harvest Excess"), then the
Harvest Excess shall be subtracted from the volume of such Sawlog Category to be
harvested in the following Harvest Year pursuant to the applicable Harvest Plan,
and the Harvest Plan for such following year shall be modified to reflect such
reduced volume. Notwithstanding anything to the contrary in this Agreement,
-▇▇-
▇▇▇▇▇▇▇▇ shall not be required to cut, remove or purchase any Negative Value
Product except in accordance with the provisions of Section 6.1(e).
(c) Potlatch's failure (except to the extent resulting from Force Majeure
or inaccuracies in the estimated volumes set forth in the Harvest Plan) in any
Harvest Year to cut and scale a volume of any Sawlog Category equal to ninety-
five percent (95%) or more of the volume of such Fiber Category to be
harvested in such Harvest Year pursuant to the applicable Harvest Plan, as
such Harvest Plan may theretofore have been modified, shall constitute a
breach of this Agreement by Potlatch, unless Potlatch shall commence to cure
such failure within seventy-five (75) days after the end of such Harvest Year,
and thereafter diligently continue such cure, and shall fully cure such
failure within one hundred eighty (180) days after the end of such Harvest
Year.
(d) Potlatch shall use reasonable efforts to perform its harvest operations
on a fairly continuous basis throughout each Harvest Year, to the extent
practicable in light of weather conditions and other factors outside of
Potlatch's control. Potlatch may log the Stands specified in the Harvest Plan
in such order as Potlatch may elect (subject to any schedule restrictions set
forth in the Harvest Plan), but Potlatch shall provide written notice to
Partnership not less than three (3) business days prior to commencing logging on
a Stand, which notice shall specify the Stand by Stand Code Number and the
dates on which Potlatch intends to commence and complete logging. In
scheduling harvests, Potlatch shall make reasonable accommodations to permit
Partnership to perform scheduled silvicultural activities. In the event that
any Site Marking on a Stand required under the Harvest Plan will not have been
completed on the date specified in such notice as the date Potlatch intends to
commence logging, Partnership shall so notify Potlatch within one (1) business
day after receipt of Potlatch's notice and the provisions of Section 5.8 shall
apply.
(e) Notwithstanding anything to the contrary in this Agreement, Potlatch
shall have no obligation to cut, remove or purchase any Product if the Costs
of Log and Haul allocable to such Product would exceed the Delivered Log Price
for such Product (a "Negative Value Product"), unless Partnership shall have
notified Potlatch in writing that Partnership (i) wishes Potlatch to cut and
remove such Product and (ii) will pay Potlatch the amount (the "Net Cost") by
which such allocable Costs of Log and Haul exceeds such Delivered Log Price.
Upon delivery of such notice, Partnership shall be obligated to pay the Net
Cost of such Product to Potlatch within twenty (20) days after delivery to
Partnership of an invoice specifying the amount owed and a reasonably detailed
accounting of the calculation thereof. In the alternative, Potlatch may offset
the Net Cost of such Product against Monthly Payments due after delivery of
such invoice. In the event that Partnership is able
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to arrange for the harvest of a Negative Value Product by a Person other than
Potlatch at a cost less than the Net Cost calculated as set forth above (or
for a positive purchase price), then Partnership shall have the right to enter
into such an arrangement; provided that no such arrangement shall involve the
sale or other disposition of any Product other than Negative Value Products.
6.2 Stumpage Prices. (a) Potlatch shall purchase all Merchantable Timber
cut and scaled in a calendar quarter for a price (per MBF, per cord or per
green ton, as applicable under then current Industry Practice) equal to the
Market Stumpage Price prevailing during the relevant Pricing Period for the
applicable Product in the applicable Resource Region, as determined in
accordance with this Section 6.2. Market Stumpage Prices shall be established
each calendar quarter for each Resource Region, for each Fiber Category and,
if Market Stumpage Prices are different for different species, diameter
classes or other classifications within a Fiber Category, for each specific
Product to be harvested.
(b) Except as otherwise provided in Section 6.2(d), the term "Market
Stumpage Price" shall mean, as to any Product, the fair market price being
paid for the Product on a stumpage basis in arm's-length transactions in the
relevant Resource Region during the relevant Pricing Period. Subject to the
dispute resolution provisions of this Section 6.2, the Market Stumpage Price of
each Product shall be determined by good faith negotiations between the
parties. In determining Market Stumpage Prices, the parties shall take into
account both Net Log Prices in "purchased at mill" transactions and Stumpage
Sale Prices. Relevant transactions will include all transactions during the
Pricing Period in which Potlatch is the buyer (or a bidder in the case of
Stumpage Sale Transactions) or the seller and other transactions as to which the
parties agree the price, volume and other relevant terms are reasonable and
verifiable, but excluding transactions between Potlatch and Partnership.
Relevant transactions may include transactions reported or reflected in
recognized trade publications if Partnership and Potlatch agree, in the
particular case, that the data pertaining to such transactions are relevant.
The parties intend that, at least initially, Net Log Prices and Stumpage Sale
Prices will, as to Products for which reliable data is available respecting
both types of transactions, be treated as equally relevant in the calculation
of Market Stumpage Prices. The parties may, if they so agree in a given
calendar quarter, use a mathematical formula or other agreed upon methodology
for determining the Market Stumpage Price of any Product based on available
data regarding Net Log Prices and Stumpage Sale Prices. In assessing the
comparability of any transaction, the parties may take into account any
verifiable information they consider relevant, including the quality of the
Timber or logs involved in the transaction.
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(c) As to each Stumpage Sale Transaction in which only a single Product is
sold, for purposes of determining the unit price (per mbf, per ton, etc.) paid
for such Product in the Stumpage Sale Transaction, such unit price shall be
based upon Potlatch's reasonable estimate (as set forth in the Stumpage Bid
Worksheet for such Stumpage Sale Transaction prepared by Potlatch and reviewed
by Partnership), or other reasonable evidence, of the volume of the Product
included in the Stumpage Sale Transaction. As to each Stumpage Sale
Transaction in which more than one Product is sold for a single lump sum, for
purposes of determining the unit price paid in the Stumpage Sale Transaction for
each particular Product included in that Stumpage Sale Transaction, such unit
price shall be based upon Potlatch's reasonable estimates (as set forth in the
Stumpage Bid Worksheet for such Stumpage Sale Transaction prepared by Potlatch
and reviewed by Partnership), or other reasonable evidence, of (1) the volumes
of each Product included in the Stumpage Sale Transaction, and (2) the
relative values (per mbf, per ton, etc.) of the respective Products.
(d) In the event that Potlatch disposes of a portion of the Merchantable
Timber to be harvested pursuant to this Agreement by assigning the right to
harvest a specified Stand or Stands designated in the applicable Harvest Plan
to a third party on a stumpage basis (a "Stumpage Outsale"), and if such
Stumpage Outsale is made on a competitive bid basis or is otherwise at a price
approved by Partnership, then the "Market Stumpage Price" for the Merchantable
Timber sold in such Stumpage Outsale shall be the price paid to Potlatch by
the assignee in such Stumpage Outsale, minus the product of (i) the Average
Administrative Cost multiplied by (ii) the number of tons of Timber sold in
such Stumpage Outsale (which tonnage shall be reasonably agreed by the
parties). This Section 6.2(d) shall not apply to assignments of this Agreement
other than assignments of the right to harvest a specified Stand or Stands
designated in a then-current Harvest Plan.
(e) For purposes of determining the amount of the Monthly Payments to be
made pursuant to Section 6.3 during each respective calendar quarter,
commencing no later than the date forty-five (45) days prior to the commencement
of the calendar quarter, Partnership and Potlatch shall confer (in person or
by such other means as they may agree) and seek, through diligent and good
faith negotiations, to agree upon the Estimated Market Stumpage Prices for the
Products to be harvested during the calendar quarter. If the parties are
unable to reach agreement as to the Estimated Market Stumpage Price of any
Product on or prior to the date thirty (30) days prior to the commencement of
the calendar quarter, then the parties shall submit the dispute to the
Consulting Forester serving pursuant to Section 13.1, who shall determine such
Estimated Market Stumpage Price no later than the first day of the calendar
quarter. If no Consulting Forester is then serving or if the Consulting
Forester does not reach a determination within fifteen (15) days after the
dispute
-19-
shall have been submitted to the Consulting Forester, then at either party's
election, the Estimated Market Stumpage Price shall be determined by
arbitration in accordance with Section 13.2.
(f) [reserved]
(g) In the event the Estimated Market Stumpage Price for any Product has
not been determined by the first day of a calendar quarter, then until such
Estimated Market Stumpage Price has been determined, the Monthly Payments
shall be calculated as if the Market Stumpage Price for such Product for the
immediately preceding calendar quarter (or, if such Market Stumpage Price has
not been finally determined, then the most recently determined Estimated
Market Stumpage Price for such Product) were the Estimated Market Stumpage
Price for the current calendar quarter. When the Estimated Market Stumpage Price
has been determined in accordance with Section 6.2(e), a retroactive reconciling
payment shall be made, concurrently with the next Monthly Payment, to adjust
Monthly Payments previously made during the calendar quarter.
6.3 Monthly Payments. (a) No later than fifteen (15) days after the last
day of each calendar month, Potlatch shall pay Partnership an amount (the
"Monthly Payment") equal to the estimated purchase price payable under this
Agreement for all Merchantable Timber cut and scaled during such month, based
upon the Estimated Market Stumpage Prices of the respective Products purchased
and the respective volumes of such Products scaled during such month as set
forth in the Monthly Logging Report for such month. Each Monthly Payment shall
be credited toward payment of the Total Purchase Price for the subject
calendar quarter.
(b) In the event that, during any month of the Term, either party believes
that the volume of any Product reportedly scaled during any prior month in
such Harvest Year, as set forth in the Monthly Logging Report for such Month,
is greater or less than the actual volume of such Product scaled during such
month, then such party may, by notice to the other party (a "Volume Reset
Notice"), require that the Monthly Payment paid with respect to such month be
recalculated to reflect such difference in volume. Upon delivery of a Volume
Reset Notice, the parties shall negotiate diligently and in good faith to
reach an agreement as to whether and to what extent such Monthly Payment shall
be recalculated. In the event any dispute as to a Monthly Payment
recalculation based upon a Volume Reset Notice is not resolved through
negotiation within fifteen (15) days after delivery of such Volume Reset
Notice, then the parties shall submit the dispute to the Consulting Forester
serving pursuant to Section 13.1, who shall determine such Monthly Payment
recalculation. If no Consulting Forester is then serving or if the Consulting
Forester does not reach a determination as to such dispute on or prior to the
date forty-five (45) days after
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delivery of such Volume Reset Notice, then at either party's election, the
Monthly Payment recalculation shall be determined by arbitration in accordance
with Section 13.2. If it is determined pursuant to this Section 6.3(b) that a
Monthly Payment was miscalculated and should have been in a higher or lower
amount, then within fifteen (15) days after such determination, Potlatch shall
pay Partnership any underpayment or Partnership shall pay Potlatch any
overpayment, as the case may be, together with interest thereon from the last
day of the relevant month until paid, at a variable rate equal to the sum of
(i) the Prime Rate then in effect, plus (ii) two percent.
6.4 Determination and Payment of Total Purchase Price. (a) Commencing no
later than the date thirty (30) days prior to the last day of each calendar
quarter, Partnership and Potlatch shall confer (in person or by such other
means as they may agree) and seek, through diligent and good faith
negotiations, to agree upon the Market Stumpage Prices for the Products
harvested and scaled (or to be harvested and scaled) during such calendar
quarter. Each party shall provide evidence available to it of the prevailing
Delivered Log Prices and prices paid in Stumpage Sale Transactions in the
relevant Resource Regions during the relevant Pricing Period and of the
Average Procurement Cost for the Harvest Year. If the parties are unable to
reach agreement as to the Market Stumpage Price of any Product on or prior to
the date twenty (20) days prior to the last day of such calendar quarter, then
the parties shall submit the dispute to the Consulting Forester serving
pursuant to Section 13.1, who shall determine such Market Stumpage Price on or
prior to the date five (5) days after the last day of the calendar quarter.
Subject to the terms of Section 13.1, the Consulting Forester shall consider
such evidence and utilize such procedures as the Consulting Forester may deem
appropriate. If no Consulting Forester is then serving or if the parties agree
that the Consulting Forester is not likely to reach a determination as to such
Market Stumpage Price on or before the date five (5) days after the last day
of the calendar quarter, then at the election of either party any time after
the last day of the calendar quarter, the Market Stumpage Price shall be
determined by arbitration in accordance with Section 13.2.
(b) Within ten (10) days after the later of (i) final determination of all
Market Stumpage Prices for a calendar quarter pursuant to Section 6.4(a), and
(ii) delivery and approval of the Quarterly Logging Audit for such Harvest
Year, as described in Section 6.9(b), (A) if the Total Purchase Price for such
calendar quarter exceeds the aggregate amount of the Monthly Payments
previously made with respect to such calendar quarter, then Potlatch shall pay
the amount of such excess to Partnership, or (B) if the aggregate amount of
the Monthly Payments previously made with respect to such calendar quarter
exceed the Total Purchase Price for such calendar quarter, then Partnership
shall reimburse such amount to Potlatch (the amount of such payment by
Potlatch or Partnership is referred to herein
-21-
as the "Adjustment Amount"). The Adjustment Amount shall bear interest from
the last day of the relevant calendar quarter until paid, at a variable rate
equal to the sum of (i) the Prime then in effect, plus (ii) two percent, which
interest shall be payable together with payment of the Adjustment Amount. In
the event of a dispute as to the amount of the Total Purchase Price, any
undisputed portion of the Adjustment Amount shall be paid within sixty (60) days
after the last day of the calendar quarter.
6.5 Method of Payment; Late Payments. (a) All payments to be made under
this Agreement by either party to the other shall be made in lawful money of
the United States to the other party at its address for notices as provided in
Section 16.1, or at the request of the party entitled to payment, by wire
transfer or automatic funds transfer to such account as such party may
designate in writing from time to time.
(b) Any amount payable under this Agreement which is not paid when due
shall bear interest, from the date payment is due through the date paid, at a
variable rate (the "Default Rate") equal to the sum of (i) the Prime Rate then
in effect, plus (ii) four (4) percent.
6.6 Scaling. (a) Except as may otherwise be specifically provided herein,
the Merchantable Timber cut under this Agreement shall be scaled as promptly
as practicable after cutting, at Potlatch's Conversion Facility at which the
shipment is to be processed (the "Destination Mill") or such other place as
Potlatch may designate, by a competent and qualified log scaler employed or
contracted by Potlatch (or, in the case of logs delivered to a site other than
a Potlatch Conversion Facility, by a competent and qualified log scaler
reasonably designated by Potlatch). The scaler shall keep complete log scaling
records, and the scaler's records and procedures shall be subject to checking
and inspection by the representatives of Potlatch and Partnership at all
reasonable times. The cost of such scaling shall be borne by Potlatch and
shall not constitute Costs of Log and Haul.
(b) The scaler shall provide scale tickets in three (3) parts for
distribution to Partnership, Potlatch and Potlatch's logger.
(c) Potlatch and Partnership agree that the scaler shall employ customary
scaling standards in accordance with Industry Practice in the Resource Region.
Sample scaling using a reasonable sampling of each shipment shall be
permitted.
(d) No Merchantable Timber shall be removed from the place or places fixed
for scaling until scaled or measured.
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(e) Potlatch shall not be entitled to any credit or deduction for
mismanufactured Products or Products damaged in logging or transport.
6.7 Monthly Logging Reports. No later than five (5) business days after the
last day of each calendar month, Potlatch shall deliver to Partnership a
report (a "Monthly Logging Report") setting forth: (a) for each Stand from
which any Product was scaled during such month, the volume of each shipment of
such Product scaled, the Estimated Market Stumpage Price then in effect for
such Product shipment, the estimated price for such Product shipment derived
by applying such Estimated Market Stumpage Price to such volume, and the total
estimated price for all Products scaled from such Stand derived by adding
together all such estimated Product shipment prices; and (b) for each Resource
Region, the totals for such month of the Product shipment volumes and
estimated Product prices of each Product included in the portion of the Monthly
Logging Report described in clause (a) above (an example of a Monthly Logging
Report is attached hereto as Exhibit F).
6.8 Allocation of Costs; Payment of Taxes. (a) Potlatch shall pay all Costs
of Log and Haul, but the parties acknowledge that the amounts thereof are to
be taken into account in determining Net Log Prices in accordance with Section
6.2(b). Except as otherwise expressly set forth in this Agreement or in cases
where Industry Practice imposes specific costs upon a stumpage purchaser,
Partnership shall pay all other costs and expenses arising from or related to
the ownership, management and operation of the Timberlands. Potlatch shall use
commercially reasonable efforts to minimize Costs of Log and Haul to the
extent consistent, in Potlatch's reasonable judgment, with maintaining an
appropriate level of quality and value in its wood products.
(b) All yield taxes, sales taxes, harvest taxes, severance taxes and other
taxes assessed in respect of Timber harvested shall be paid when due by
Partnership or Potlatch in accordance with Industry Practice in the relevant
state or Resource Region (i.e., if local custom calls for the mill owner to
pay, Potlatch shall pay), except so long as the validity or amount of such
taxes is being diligently protested in good faith and by appropriate proceedings
(provided that the protesting party shall pay any interest and penalties).
Partnership shall pay all other taxes, assessments and other governmental
impositions relating to the ownership, management and operation of the
Timberlands when due, except so long as the validity or amount of such taxes
is being diligently protested in good faith and by appropriate proceedings
(provided that Partnership shall be responsible for any interest and
penalties).
6.9 Records; Audits. (a) Potlatch shall maintain detailed operating and
financial records of all harvest operations carried out pursuant to this
Agreement, including (i) operating
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records setting forth the volumes of each Product cut and scaled and the date
and location of each scaling, and (ii) financial records setting forth the
Total Administrative Cost and the Costs of Log and Haul and invoices or other
evidence of all such costs. Potlatch shall maintain such records relating to
each Harvest Year for not less than five (5) years after the end of such Harvest
Year. Such records shall be available for review by Partnership or its
representatives at Potlatch's offices at any time during normal business hours
on not less than three (3) days prior written notice.
(b) As promptly as practicable but in no event later than five (5) business
days after the last day of each calendar quarter, Potlatch shall cause to be
delivered to Partnership a report (a "Quarterly Logging Audit") setting forth
for such calendar quarter the total volume of each Product cut and scaled
pursuant to this Agreement, the Total Administrative Costs and the Total Costs
of Log and Haul for the relevant Harvest Year and such other information
(other than prices) as may be necessary to establish the Total Purchase Price
for such calendar quarter. The Quarterly Logging Audit shall be prepared and
certified by Potlatch. Unless Potlatch or Partnership objects to a Quarterly
Logging Audit within ten (10) days after delivery thereof, the payment of the
Adjustment Amount for such calendar quarter shall be based upon the Quarterly
Logging Audit. In the event of an objection, any undisputed amount shall be
paid and Potlatch and Partnership shall use diligent efforts in good faith to
resolve such dispute promptly. Potlatch and Partnership shall have the right to
audit and review the Quarterly Logging Audit and the related records and
information respecting any calendar quarter provided that such audit shall be
commenced not later than the date one (1) year after delivery of the Quarterly
Logging Audit for such calendar quarter, and shall be completed not later than
the date two (2) years after delivery of the Quarterly Logging Audit for such
calendar quarter. Unless Potlatch or Partnership shall have timely commenced and
completed such an audit, the Quarterly Logging Report as to such calendar
quarter shall be final and binding as of the date two (2) years after delivery
of such Quarterly Logging Audit. In the event any such audit results (through
negotiation or arbitration) in an adjustment to the Total Purchase Price for
the relevant calendar quarter, the party owing such adjustment shall pay the
amount of such adjustment within twenty (20) days after such amount shall have
been determined, together with interest thereon from the last day of the
relevant calendar quarter until paid, at a variable rate equal to the sum of (i)
the Prime Rate then in effect, plus (ii) two percent.
6.10 Disclaimer of Warranties. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, PARTNERSHIP MAKES NO WARRANTY, EXPRESS OR IMPLIED, IN FACT, BY LAW
OR OTHERWISE, CONCERNING THE QUALITY, QUANTITY OR CHARACTER OF THE TIMBER
PURCHASED HEREUNDER
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AND HEREBY DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR
ANY PARTICULAR PURPOSE.
6.11 Lump Sum Sale. Potlatch will consider in good faith any request made
by Partnership, from time to time, to revise a Harvest Plan to provide for the
sale of certain portions of the Merchantable Timber to be harvested during the
Harvest Year for a lump sum advance payment in such amount as the parties
might agree and on such other terms as the parties might agree.
ARTICLE 7
Logging Practices, Etc.
7.1 Logging Practices in General. Potlatch shall cut all Merchantable
Timber being purchased by Potlatch hereunder in accordance with the applicable
Harvest Plan and remove all Merchantable Timber cut from the logging areas.
Potlatch agrees to cut and remove the Merchantable Timber purchased pursuant
to this Agreement in accordance with Prudent Logging Practices and to conform
in all material respects to the applicable Harvest Plan and all Applicable
Laws in conducting logging operations hereunder. All logging and transportation
contractors engaged by Potlatch shall meet such competency standards as
Potlatch and Partnership may reasonably agree from time to time.
7.2 Protection of Improvements; Boundaries; Trespass. (a) In conducting its
logging operations, Potlatch shall take reasonable precautions to avoid damage
to fences, utility poles and lines, and all other structures and improvements.
Potlatch shall, with reasonable promptness, repair any such damage at its
cost. Costs incurred in repairing such damage shall not be included in "Costs
of Log and Haul."
(b) Potlatch shall use diligent efforts to avoid the commission of any
trespass onto lands which are not part of the Timberlands, and Potlatch shall
be solely responsible for any damages arising from any trespass onto any such
lands, except that Partnership shall be responsible for any such trespass (i)
as set forth in Section 8.1(a), and (ii) to the extent resulting from
incomplete or inaccurate Site Marking. Costs incurred in repairing such damage
shall not be included in "Costs of Log and Haul."
7.3 Fire Safety; Environmental Matters. (a) In conducting its logging
operations, Potlatch shall exercise and shall cause its contractors to
exercise every reasonable precaution against fire. In the event any fire
results from Potlatch's logging operations, Potlatch shall promptly exert
every reasonable effort to suppress such fire. Costs incurred by Potlatch in
such fire suppression efforts due to fires resulting from Potlatch's
operations shall be Potlatch's sole responsibility and shall not constitute
Costs of Log and Haul.
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(b) In conducting its logging operations, Potlatch shall exercise and shall
cause its contractors to exercise every reasonable precaution against damage
to streams, lakes, riparian areas and other environmentally sensitive areas of
which it has knowledge, and shall comply in all material respects with
applicable restrictions and requirements in the applicable Harvest Plan and
with all applicable Environmental Laws. Potlatch shall be responsible for any
violations of applicable Environmental Laws to the extent resulting from the
operations of Potlatch under this Agreement. Potlatch shall remedy any damage
arising from any such violation, and shall be responsible for the costs of
such remediation in proportion to its allocable share of responsibility for
the damage. Such costs shall not be included in Costs of Log and Haul.
7.4 Post-Harvest Cleanup. When logging of a logging site has been completed,
Potlatch shall (a) remove from such logging site all equipment, supplies and
waste, and (b) take such other post-harvest actions as are customarily performed
by logging contractors in the particular Resource Region.
7.5 Responsibility for Contractors.
(a) In the event Potlatch contracts with a contractor, or a subcontractor
of any tier is engaged, to perform any portion of the logging or
transportation operations described in this Agreement as being performed by
Potlatch, it shall ensure that any such contractor or subcontractor shall be
made aware of and shall abide by all pertinent provisions of this Agreement.
(b) All obligations, duties, liabilities, and responsibilities of Potlatch
arising pursuant to the provisions of this Agreement, or otherwise in law or
in equity, shall apply with equal force to the employees, agents, contractors
or subcontractors of any tier, licensees and suppliers of Potlatch involved in
logging or transportation operations hereunder where the context permits, and
Potlatch shall be responsible and liable to Partnership for the activities of
such parties.
(c) Specific use of the terms "subcontractor," "agent," "contractor," and
the like in certain sections of this Agreement, and omissions of such terms in
other sections shall not be deemed to nullify or restrict the force and effect
of this Section only to such sections where such terms are specifically used.
Use of the term "Potlatch" in any section giving rise to duties or obligations
of Potlatch shall be deemed to include the subcontractors, agents,
contractors, employees, and licensees of Potlatch where the context permits.
7.6 Notice of Violations. If Potlatch receives any notice from any
Governmental Authority or any other Person alleging that Potlatch's logging or
transportation operations in connection with this Agreement are in violation
of any Applicable Law or that Potlatch, in conducting such operations,
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has violated any rights of such Person, and the amount of damages arising from
the alleged violation, or the cost of curing or correcting the violation, if
adversely determined, could reasonably be expected to exceed five hundred
thousand dollars ($500,000), then Potlatch shall, within ten (10) days after
receiving such notice, deliver to Partnership a notice describing the
allegation in reasonable detail. The contents of any such notice shall be kept
confidential, except to the extent disclosure is required by law.
7.7 Indemnity. Potlatch hereby agrees to indemnify, save, defend and hold
harmless Partnership and its officers, agents, contractors, subcontractors,
licensees, invitees and employees ("Partnership Indemnified Parties") from all
loss, cost, liability and expense resulting from injury to or death of any
person or persons (including, without limitation, Partnership's officers,
agents, contractors, subcontractors, licensees, invitees and employees), or
destruction of or damage to property (including, without limitation, the
property of any Partnership Indemnified Party), or any other claim of a third
party against any Partnership Indemnified Party, arising out of or connected
with, either directly or indirectly, any failure by Potlatch to perform its
obligations under this Agreement, the presence on the Timberlands of Potlatch
or any partner, officer, agent, employee, contractor, subcontractor, licensee
or invitee of Potlatch, except to the extent such injury, death, destruction,
damage or other claim is caused by the negligence or willful misconduct of any
Partnership Indemnified Party or the breach by Partnership of any of its
obligations under this Agreement or is the subject of Partnership's
indemnification obligation under Section 4.5. The obligations of Potlatch
under this Section 7.7 shall survive the expiration or termination of this
Agreement.
7.8 Partnership Inspection; Claims Relating to Damage or Incomplete
Harvest. (a) If Partnership or its representatives inspect any logging site
during logging operations, such inspection shall be conducted in a manner so
as to minimize interference with Potlatch's performance under this Agreement.
Partnership shall take all reasonable precautions to protect the safety of its
representatives and its property in connection with any such inspection.
(b) As to each Stand being harvested, Potlatch shall give Partnership
notice of the date on which Potlatch expects to complete logging operations on
such Stand not less than three (3) business days prior to such date. If, upon
Partnership's inspection of a Stand, Partnership notifies Potlatch on or prior
to such expected completion date of damage (other than ordinary wear and tear)
caused by Potlatch to the logging site, adjacent areas or logging roads,
Potlatch shall cause such damage to be repaired promptly (or, if such damage
cannot be repaired, Potlatch shall be liable for money damages, which damages
shall be in an amount reasonably determined by Partnership and shall be paid
within twenty (20) days after Partnership notifies
-▇▇-
▇▇▇▇▇▇▇▇ of such determination; provided that, if Potlatch reasonably disputes
such determination, such dispute shall be submitted to arbitration pursuant to
Section 13.2). If upon such inspection, Partnership notifies Potlatch on or
prior to such expected completion date that Potlatch has failed to complete
the harvest of such Stand in accordance with the Harvest Plan (e.g., failure
to cut or remove all Timber required to be harvested), Potlatch shall cure
such failure promptly. If Partnership does not notify Potlatch of any such
damage (other than damage occurring after a Partnership inspection or damage
which is obvious) or any such incomplete harvest prior to such expected
completion date, Potlatch shall have no obligation to repair any damage or
cure any failure to complete the harvest, and Partnership hereby waives any
claim for such damage (other than damage occurring after the Partnership
inspection or damage which is obvious) or failure unless notice thereof is
given prior to completion of logging operations. Potlatch shall cause to be
promptly repaired any such damage occurring after a Partnership inspection.
(c) Partnership shall have the right, by notice to Potlatch, to suspend
logging operations on a logging site at any time that Partnership reasonably
determines that, due to wet or muddy conditions at the logging site, harvest
operations would cause excessive rutting or other damage to the land. Such
suspension shall continue until such conditions cease to exist, as reasonably
determined by Partnership. In the event of such a suspension, the provisions
of Section 5.5(b) shall apply. If, due to wet or muddy conditions at any
logging site, it could reasonably be expected that harvest operations would
cause excessive rutting or other damage to the land, then Potlatch may request
a Partnership inspection. If, upon such request, Partnership either agrees
that logging operations may proceed or fails to respond to such request by
inspecting the site within three (3) business days after such request, then
notwithstanding the provisions of Section 7.8(b), Potlatch shall have no
obligation to repair any damage attributable to such wet or muddy conditions,
and Partnership hereby waives any claim for such damage.
ARTICLE 8
Title Matters
8.1 Partnership's Title to Timberlands. (a) Partnership hereby represents
and warrants that, except as provided in the following sentence, Partnership
is, and covenants that (except as otherwise provided herein) it will
throughout the Term remain, the owner of fee title to all of the Timberlands
(or, as to the Leasehold Lands, the owner of leasehold title) and will defend
the same and the validity and priority of Potlatch's rights under this
Agreement against the lawful claims of all Persons whomsoever; and Partnership
further represents and warrants that, except as provided in the following
sentence, the
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Timberlands are, and covenants that the Timberlands will throughout the Term
remain, free and clear of all liens and encumbrances of any kind, nature or
description, which could reasonably be expected, individually or in the
aggregate, to materially impair the rights of Potlatch under this Agreement or
materially reduce the value of Potlatch's interests under this Agreement.
Notwithstanding the preceding sentence, Partnership shall not be liable for
any failure of Partnership to hold title or any defect in title to the extent
such failure or defect would constitute a breach of the warranties of title by
Potlatch to Partnership given in connection with Potlatch's conveyance of the
Former Potlatch Lands to Partnership. Potlatch shall have no claim for breach
of Partnership's representations and warranties in this Section 8.1(a) unless
such breach results, directly or indirectly, in a claim by a third party
against Potlatch for, or in the nature of, trespass to timber.
(b) Partnership shall neither voluntarily nor involuntarily permit the
Former Potlatch Lands or any part thereof to become subject to any lien,
mortgage, security interest or monetary encumbrance of any kind whatsoever
(except (i) those which Potlatch determines, in its reasonable judgment, are
immaterial, and (ii) those which arise through the conduct of Potlatch),
without the prior written consent of Potlatch, and the imposition of any such
lien, mortgage, security interest or encumbrance shall constitute a
Partnership Event of Default. If any such lien, mortgage, security interest or
encumbrance is not released or reconveyed within twenty (20) days after notice
to Partnership, then Potlatch shall have the right, in addition to any other
rights and remedies Potlatch may have, at its sole option to pay to the holder
of such lien, mortgage, security interest or encumbrance the principal amount
thereof and all interest accrued and unpaid thereon (together with any other
amounts necessary to obtain a release or reconveyance of such lien, mortgage,
security interest or encumbrance), whereupon Partnership shall immediately pay
Potlatch the amount Potlatch shall have paid to such holder, together with
interest thereon at the Default Rate. Notwithstanding the foregoing, as to any
mechanics' or materialmen's lien or other involuntary lien, Partnership's
obligations under this Section 8.1(b) shall be suspended so long as (i)
Partnership is reasonably and in good faith contesting the amount or validity
of such lien by appropriate proceedings, and (ii) Partnership shall take all
actions necessary (including payment of or bonding against such lien) to avoid
a foreclosure of any such lien.
(c) Partnership shall have the right to grant easements, rights of way,
licenses or other limited use rights to third parties (e.g., for grazing,
hunting or recreational use of the Timberlands) only so long as (i) no such
grant and no such use shall cause material diminution in the value of or
material damage to the Timberlands or materially interfere with Potlatch's
operations on the Timberlands, and (ii) any such easement, rights of way,
license or other right (other than
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utility easements) shall be made expressly subject and subordinate to
Potlatch's rights under this Agreement.
8.2 Potlatch's Title to Growing Timber. From and after the Commencement
Date and during the entire Term, Potlatch shall have, as to all of the Timber
growing on the Timberlands from time to time, the rights to purchase such
Timber as provided in this Agreement. Potlatch's interest in the Timberlands
shall be, and Partnership hereby grants to Potlatch and its successors and
assigns, an exclusive and irrevocable profit a prendre with respect to all
growing Timber on the Timberlands, which interest shall endure for the entire
Term. The interest hereby granted shall run with the land and be binding upon
the successors and assigns of Partnership. Potlatch shall have no leasehold
estate or possessory interest in the Timberlands, and the Partnership shall
retain possession and control of the Timberlands to the extent consistent with
this Agreement. On or before the Commencement Date, Potlatch and Partnership
shall execute, acknowledge and deliver counterparts of a Memorandum of Agreement
in the form of Exhibit G attached hereto (a "Memorandum of Agreement") which
shall be recorded in the official real property records of each county or
other recording jurisdiction wherein any portion of the Timberlands is located.
8.3 Security Agreement. (a) In order to secure the performance of
Partnership's obligations to sell Merchantable Timber to Potlatch under this
Agreement, Partnership hereby grants, transfers, warrants, conveys, assigns
and mortgages to Potlatch, and grants to Potlatch a first priority security
interest in, all of the Timber from time to time located on the Timberlands and
all present and future proceeds and products of, increases, replacements and
accessions to, and documents covering or received by Partnership on account of
any such property (collectively, the "Collateral"), all for the benefit and
security of Potlatch. The grant of Collateral to Potlatch hereunder is as
security only and shall not subject Potlatch to, or transfer or in any way
affect or modify, any obligation or liability of Partnership relating to the
Collateral. The security interest granted pursuant to this Section 8.3 shall
not secure any monetary obligations of Partnership, but only the obligation to
sell Merchantable Timber in accordance with this Agreement.
(b) Partnership (i) shall do, execute, acknowledge and deliver all and
every such further acts, supplemental agreements, assignments, instruments,
notices of assignments, financing statements, continuation statements,
transfers, assurances and other instruments, documents, writings and
agreements (herein collectively called "Other Assurances") as Potlatch may from
time to time reasonably deem necessary or advisable, for the better assuring,
conveying, assigning, transferring, hypothecating, pledging and confirming unto
Potlatch the Collateral and rights hereby granted, conveyed or assigned, or
which Partnership may be or may hereafter become
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bound to convey or assign to Potlatch, or for carrying out the intention of or
facilitating the performance of the terms of this Section 8.3, or for filing,
registering or recording the security interest hereby granted or subjecting
any portion of the Collateral to the lien and security interest hereof with
the priority required therefor hereunder; and (ii) upon request, shall
execute, deliver or file, and hereby authorizes Potlatch to execute, deliver or
file one or more Other Assurances, and hereby irrevocably appoints Potlatch to
be its attorney for and in its name and on its behalf for such purposes, and
generally to use its name in the exercise of all or any of the powers hereby
conferred on Potlatch with full power of substitution. The power and authority
hereby given and granted by Partnership to Potlatch shall be deemed coupled with
an interest and shall not be revocable by Partnership.
(c) Without the prior written consent of Potlatch, Partnership shall not
file or authorize or permit to be filed in any jurisdiction any financing
statement or like instrument covering or relating to any Collateral in which
Potlatch is not named as the secured party.
(d) Partnership shall not change the location of its chief executive office
unless Partnership, at least 30 days prior to such change, notifies Potlatch
of such change and takes all action necessary or that Potlatch may reasonably
request to preserve, perfect, confirm and protect Potlatch's liens and
security interests in the Collateral.
(e) Upon the occurrence of an Event of Default, in addition to, and not by
way of limitation of, any right which Potlatch may have hereunder, or under
applicable law or otherwise, Potlatch shall have all of the remedies of a
secured party under the Uniform Commercial Code, as in effect from time to
time in the State of Arkansas.
8.4 Title and Risk of Loss to Cut Timber. Title to all Timber included in
this Agreement remains in Partnership (i) until it has been felled in the case
of standing Timber, or (ii) in the case of down or wind thrown Timber until it
has been bucked. All risk of loss to felled Timber or down Timber bucked by
Potlatch pursuant to the terms of this Agreement shall be borne by Potlatch
and Potlatch shall not be entitled to any scale adjustment when such Timber is
scaled, by reason of decay, insect infestation, fire or other loss or damage
which occurs and affects such Timber after it has been felled in the case of
standing Timber, or bucked in the case of down or wind thrown Timber.
8.5 Grant of Access Rights. During the entire Term, Partnership shall
provide, and hereby grants to, Potlatch and its officers, agents, employees,
contractors, subcontractors and consultants full and free access at all times
to the Timberlands and the nonexclusive right to use all roads, river
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transportation sites and other means of ingress to and egress from the
Timberlands (subject to any applicable limitations under any easements or
other access agreements and subject to such access restrictions as may be
reasonably necessary to address environmental concerns) to the extent such
access is reasonably necessary or helpful in connection with Potlatch's rights
and obligations under this Agreement. Without limiting the generality of the
foregoing, Partnership hereby assigns to Potlatch (subject to any express
restrictions on such assignment) the nonexclusive right to use any easement,
right of way, license or permit for access heretofore or hereafter granted to
Partnership ("Access Rights") by any Person to the extent necessary or useful
to Potlatch in connection with this Agreement. To the extent such assignment
of any Access Right requires the consent or approval of the grantor of such
Access Right, Partnership shall use diligent efforts to obtain such consent
and deliver the same to Potlatch. At Potlatch's request, Partnership shall
(subject to the limitations described above) execute and deliver to Potlatch a
separate assignment of any Access Right, in such form as Potlatch may reasonably
request.
8.6 Potlatch to Permit No Liens. Potlatch shall not permit or suffer any
lien or liens to be enforced on or against the Timberlands, or any of the
improvements thereon or any Timber thereon, for work, labor, materials,
supplies or equipment furnished by or at the request of Potlatch, and Potlatch
shall hold Partnership harmless against and defend Partnership against any and
all such liens. If Potlatch fails to remove or bond against any such lien
within twenty (20) days after written notice thereof to Potlatch, Partnership
shall have the right, but shall have no obligation, to pay any amount required
to release and discharge any such lien or liens, or to defend any action
brought thereon, and to pay any judgment entered therein, and Potlatch shall
be liable to Partnership for all reasonable costs (including reasonable
attorneys fees) incurred by Partnership or for the payment of any of said
liens or any judgments obtained thereon, plus interest thereon at the Default
Rate; provided, however, that Potlatch's obligations under this Section 8.6
shall be suspended so long as (i) Potlatch is reasonably and in good faith
contesting the amount or validity of such lien by appropriate proceedings, and
(ii) Potlatch shall take all actions necessary (including payment of or
bonding against such lien) to avoid a foreclosure of any such lien.
ARTICLE 9
Disposition of Timberlands and
Acquisition of Additional Timberlands
9.1 No Transfer of Former Potlatch Lands Without Potlatch Consent;
Exceptions. (a) Except as set forth in Section 9.1(b) hereof, without the
prior written consent of Potlatch (which
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consent Potlatch may grant or withhold in its sole discretion), Partnership
shall not sell, transfer, assign or convey the Former Potlatch Lands, whether
voluntarily or by operation of law (but a transfer of partnership interests,
or other direct or indirect ownership interests, in Partnership shall not
constitute a "transfer by operation of law"). Any such sale, transfer,
assignment or conveyance of all or any portion of the Former Potlatch Lands,
whether voluntarily or by operation of law, without the prior written consent
of Potlatch shall constitute a Partnership Event of Default. Notwithstanding
anything contained herein to the contrary, Partnership hereby waives any right
it now has or may hereafter have to require Potlatch to prove an impairment of
its rights or any damages as a condition to enforcing Partnership's covenants
under this Section 9.1.
(b) Partnership shall have the right, from time to time, to transfer a
parcel or parcels of the Former Potlatch Lands, only upon and subject to the
terms and conditions of this Section 9.1(b). Partnership may sell, from time
to time, a parcel of the Former Potlatch Lands (a "Sale Parcel"), provided
that each of the following conditions is satisfied: (i) no Sale Parcel shall
be included in the Timberlands to be harvested pursuant to the two-year
Harvest Plan then in effect; (ii) Potlatch receives prior written notice of
such proposed transfer and copies of all transfer and other related documents;
(iii) the aggregate acreage of all Sale Parcels transferred in any calendar
year shall be less than five thousand (5,000) acres; and (iv) the aggregate
acreage of all Sale Parcels transferred in any period of twenty (20) consecutive
calendar years shall be less than the sum of (A) twenty thousand (20,000) acres,
plus (B) such acreage as contains not more than the Net Volume Increase. In
addition to parcels sold in accordance with the preceding sentence,
Partnership may transfer, from time to time, in connection with an Exchange (as
defined below) a parcel of the Former Potlatch Lands (an "Exchange Parcel"),
provided that each of the following conditions is satisfied: (i) no Sale
Parcel shall be included in the Timberlands to be harvested pursuant to the
two-year Harvest Plan then in effect; (ii) Potlatch receives prior written
notice of such Exchange and copies of all transfer and other related
documents; (iii) in connection with such transfer, a parcel or parcels of
Additional Timberlands in the same Resource Region as the Exchange Parcel (a
"Substitute Parcel") is acquired by Partnership in an exchange pursuant to
section 1031 of the Internal Revenue Code of 1986, as amended (an "Exchange"),
which Substitute Parcel is, in Potlatch's reasonable judgment, reasonably
equivalent to or better than the Exchange Parcel being transferred in volume
and species of Merchantable Timber, proximity to a Potlatch Conversion
Facility and other factors relevant to the desirability of such Substitute
Parcel; (iv) upon Partnership's acquisition of the Substitute Parcel, it shall
become a part of the Timberlands and shall become subject to this Agreement in
accordance with Section 9.4 (and the Substitute Parcel shall be
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deemed to be part of the Former Potlatch Lands for purposes of this Section
9.1); and (v) the aggregate acreage of all Exchange Parcels transferred
pursuant to this Section 9.1(b) in any calendar year shall be less than ten
thousand (10,000) acres. Any sale or transfer of any portion of the Former
Potlatch lands which does not comply with the foregoing terms and conditions
shall constitute a Partnership Event of Default. In the event of a transfer
permitted under this Section 9.1(b), Potlatch shall release the Sale Parcel or
Exchange Parcel being transferred in accordance with Section 9.5.
9.2 Transferred Timberlands Remain Subject to this Agreement. (a) As to any
transfer of a portion of the Timberlands (other than a transfer permitted
under Section 9.1(b)): (a) Potlatch must receive, for its review and approval,
copies of all transfer documents, (b) except as otherwise provided in Section
9.2(b), either the transferred property shall remain subject to this Agreement
in all respects or the transferee must be approved by Potlatch and must enter
into a written undertaking, in form and substance satisfactory to Potlatch,
whereunder the transferee agrees to manage the transferred property and make
the Timber thereon available to Potlatch, and (c) Partnership must pay all
reasonable costs and expenses in connection with such transfer including,
without limitation, all fees and expenses incurred by Potlatch. Except as
otherwise provided in Section 9.2(b), in the event the ownership of the
Timberlands, or any part thereof, shall become vested in a Person other than
Partnership, whether with or without the prior written consent of Potlatch,
Potlatch may, without notice to Partnership, deal with such successor or
successors in interest with reference to the Timberlands or such portion
thereof and this Agreement in the same manner and to the same extent as with
Partnership without in any way vitiating or discharging Partnership's liability
hereunder. Except as otherwise provided in Sections 9.1(b) or 9.2(b), no sale,
transfer or conveyance of the Timberlands or any portion thereof shall operate
to release, discharge, modify, change, or affect the original liability of
Partnership hereunder, either in whole or in part, nor to impair Potlatch's
right, title and interest in and to this Agreement or the Timberlands unless
expressly set forth in writing executed by Potlatch.
(b) Partnership shall have the right, from time to time, to require
Potlatch to release, in accordance with Section 9.5, a parcel or parcels of
the Former ATCO Lands specified in a written notice to Potlatch (an "ATCO
Parcel Release Request") which parcel or parcels the Partnership has sold or
transferred, or proposes to sell or transfer (an "ATCO Release Parcel"),
provided that each of the following conditions is satisfied: (i) no ATCO
Release Parcel shall be included in the Timberlands to be harvested pursuant to
the two-year Harvest Plan then in effect; (ii) Potlatch shall have received
prior written notice of such proposed transfer and copies of all transfer and
other related documents; (iii) the aggregate acreage of all ATCO
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Release Parcels to be released in any calendar year shall be less than five
thousand (5,000) acres; and (iv) the aggregate acreage of all ATCO Release
Parcels released in any period of twenty (20) consecutive calendar years shall
be less than the sum of (A) twenty thousand (20,000) acres, plus (B) such
acreage as contains not more than the Net Volume Increase. In addition to
parcels released in accordance with the preceding sentence, Partnership shall
have the right, from time to time, to require Potlatch to release, in
accordance with Section 9.5, a parcel or parcels of the Former ATCO Lands
specified in an ATCO Parcel Release Request which parcel or parcels the
Partnership has transferred, or proposes to transfer in connection with an
Exchange (an "ATCO Exchange Parcel"), provided that each of the following
conditions is satisfied: (i) no ATCO Exchange Parcel shall be included in the
Timberlands to be harvested pursuant to the two-year Harvest Plan then in
effect; (ii) Potlatch shall have received prior written notice of such
Exchange and copies of all transfer and other related documents; (iii) in
connection with such transfer, a Substitute Parcel or Parcels in same Resource
Region as the ATCO Exchange Parcel s acquired by Partnership in an Exchange,
which Substitute Parcel is, in Potlatch's reasonable judgment, reasonably
equivalent to or better than the ATCO Exchange Parcel being transferred in
volume and species of Merchantable Timber, proximity to a Potlatch Conversion
Facility and other factors relevant to the desirability of such Substitute
Parcel; (iii) upon Partnership's acquisition of the Substitute Parcel, it shall
become a part of the Timberlands and shall become subject to this Agreement in
accordance with Section 9.4 (and the Substitute Parcel shall be deemed to be
part of the Former ATCO Lands for purposes of this Section 9.2); and (iv) the
aggregate acreage of all Exchange Parcels transferred pursuant to this Section
9.2(b) in any calendar year shall be less than ten thousand (10,000) acres. In
the event of an ATCO Parcel Release Request and satisfaction of the conditions
set forth in this Section 9.2(b), Potlatch shall release the specified ATCO
Release Parcel or ATCO Exchange Parcel in accordance with Section 9.5,
effective upon Partnership's sale or transfer thereof.
9.3 Potlatch's Right to Timber on Additional Lands. (a) In the event that
Partnership proposes to acquire fee or leasehold title to any Timber-producing
property and Potlatch has the right pursuant to section 3 of the Opportunities
Agreement to cause such property to be added to the Timberlands (a "Potential
Addition"), Partnership shall give notice to Potlatch (a "Potential Addition
Notice") setting forth a general description of the Potential Addition
(acreage, location(s), degree of stocking, character of Timber) and offering
Potlatch the right to cause the Potential Addition to be added to the
Timberlands. Potlatch shall use reasonable efforts to determine promptly
whether Potlatch is interested in pursuing its rights under this Section 9.3 as
to any Potential Addition, and shall promptly inform Partnership, by written
notice, of any determination that Potlatch is not so interested. Unless
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Potlatch shall have delivered a notice in accordance with the preceding
sentence, Potlatch may, at any time within thirty (30) days after delivery of
the Potential Addition Notice, request additional information regarding the
Potential Addition or access to inspect the Potential Addition. At any time
prior to the later of (i) thirty (30) days after the date on which Partnership
shall have provided to Potlatch all requested information reasonably available
respecting the Potential Addition, or (ii) thirty (30) days after the date on
which Potlatch shall have been afforded reasonable access to inspect the
Potential Addition, or (iii) the date sixty (60) days after delivery of the
Potential Addition Notice if Potlatch shall have requested no additional
information or access (the "Timber Addition Deadline"), Potlatch shall have
the right, by giving notice to Partnership (a "Timber Addition Notice"), to
have all or any geographic part of the Potential Addition added to the
Timberlands if and when Partnership acquires the Potential Addition. Upon
Potlatch's timely delivery of a Timber Addition Notice, the Potential
Addition, or the portion thereof designated in the Timber Addition Notice,
shall be added to the Timberlands if and when Partnership acquires the Potential
Addition. If Potlatch does not timely deliver a Timber Addition Notice, then
Potlatch shall have no right to have the Potential Addition added to the
Timberlands. Until the Timber Addition Deadline or Potlatch's earlier notice
declining to have the Potential Addition added to the Timberlands, Partnership
shall not grant (or permit the reservation of) any rights respecting the
Potential Addition which would be inconsistent with Potlatch's rights which
would arise upon delivery of the Timber Addition Notice.
9.4 Additional Timberlands. (a) Immediately upon Partnership's acquisition
of any property as to which Potlatch has exercised its right to have such
property added to the Timberlands (or, if such exercise occurs after such
acquisition, then immediately upon such exercise), such property shall become
part of the Timberlands and shall be subject to all of the applicable terms
and provisions of this Agreement. The parties may, but shall not be required
to, modify the Management Plan or the Harvest Plan for the year in which the
property becomes Additional Timberlands to reflect the addition thereof. In
any event, Management Plans and Harvest Plans for subsequent years shall
include the Additional Timberlands.
(b) Promptly after any property becomes Additional Timberlands, Potlatch
and Partnership shall execute, acknowledge and deliver counterparts of a
Memorandum of Agreement with respect to the Additional Timberlands which shall
be recorded in the official real property records of each county or other
recording jurisdiction wherein any portion of the Additional Timberlands is
located.
(c) Commencing within sixty (60) days after any property becomes Additional
Timberlands, Potlatch and Partnership shall
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negotiate, with diligence and in good faith, appropriate modifications to this
Agreement (if any) which are reasonably necessary to reflect the addition of
such Additional Timberlands. By way of example, such modifications may be
required to supplement the provisions of this Agreement regarding logging
practices, scaling procedures or timberland management requirements if the
Additional Timberlands are in a new Resource Region or include a new species
of Timber.
9.5 Release of Timberlands. In the event that any portion of the Timberlands
ceases to be subject to this Agreement or is required to be released from this
Agreement, either pursuant to Sections 9.1(b), 9.2(b), 9.6(a) or 15.1 or
pursuant to Potlatch's voluntary agreement ("Released Timberlands"), Potlatch
shall at Partnership's request execute and deliver such documents and
instruments as may reasonably be required to evidence the termination or
release of Potlatch's rights respecting such Released Timberlands under this
Agreement.
9.6 Protection of Lenders. (a) Promptly upon the request of any Major
Lender, Potlatch shall enter into an agreement (a "Lender Protection
Agreement") with such Major Lender, in such form as Potlatch and such Major
Lender may agree, whereunder the parties agree that: (i) notwithstanding any
contrary provision of this Agreement (including Section 9.1), at any time during
a Default Period, any Timberlands may be sold or transferred (including
through foreclosure of a mortgage or judgment lien) without Potlatch's consent,
upon not less than thirty (30) days' notice to Potlatch; (ii) notwithstanding
any contrary provision of this Agreement (including Section 9.2), if, during
any Default Period, any of the Timberlands are sold or transferred ("Default
Sale Timberlands"), then at the option of the Major Lender or the purchaser or
transferee, exercised by written notice ("Release Notice") to Potlatch
delivered prior to or within thirty (30) days after the sale or transfer, the
Default Sale Timberlands shall cease to be subject to this Agreement, and
Potlatch's rights under this Agreement with respect to such Default Sale
Timberlands shall terminate, effective sixty (60) days after delivery of the
Release Notice; and, promptly upon delivery of a Release Notice, Potlatch
shall comply with the requirements of Section 9.5 to evidence the release of
such Default Sale Timberlands; (iii) Potlatch's security interest pursuant to
Section 8.3 with respect to the Timber on any Default Sale Timberlands shall
be subordinate to the rights of the Major Lender or any purchaser or
transferee pursuant to clause (ii) above; (iv) the Major Lender shall deliver
to Potlatch, simultaneously with delivery to Partnership, any notice demanding
performance of any obligation set forth in, or asserting a default by
Partnership under, any document or instrument evidencing or pertaining to the
indebtedness of Partnership to such Major Lender ("Loan Documents"); and
Potlatch shall have the right, but not the obligation, to perform such
obligation or cure such asserted default on behalf of Partnership; and the
Major Lender shall accept such
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performance or cure as if performed by Partnership; and (v) at any time during
a Default Period, Potlatch shall have the right, on not less than fifteen (15)
days' notice to the Major Lender, to purchase from the Major Lender, and the
Major Lender shall sell to Potlatch, all of Major Lender's right, title and
interest in, to and under the Loan Documents and the indebtedness evidenced
thereby, for a price equal to the total sum owed by Partnership to the Major
Lender under the Loan Documents, including all outstanding principal, accrued
and unpaid interest and other fees or costs owing.
(b) At the request of Potlatch or the Major Lender, Partnership shall join
as a party to any Lender Protection Agreement.
(c) Partnership and Potlatch agree that the provisions of this Section 9.6
shall not be amended or modified in any material respect, without the written
approval of any Major Lender then in existence.
ARTICLE 10
Insurance
10.1 Potlatch Insurance. Potlatch agrees to carry and maintain at all times
during the term of this Agreement:
(a) a policy or policies of commercial general liability insurance
with limits of not less than $5,000,000 protecting Potlatch and
Partnership against sums payable as damages because of personal injuries
or property damage, including the loss of the use thereof, arising out of
an occurrence directly connected with the logging operations herein
described or other operations of Potlatch, its employees, agents,
contractors, subcontractors, licensees, invitees or business visitors
incidental to such logging and other operations; provided that Potlatch
shall not be required to insure against damage to or destruction of
standing Timber or felled or bucked Timber.
(b) a policy of insurance covering automobile, bodily injury
liability, and property damage on its automobiles with coverage for death
or injury to persons and property damage and a limit of not less than
$3,000,000. (The word "automobile" shall mean any land motor vehicle,
trailer or semitrailer used for transporting logs, goods or passengers.)
(c) Workers' Compensation Insurance in compliance with the laws of the
respective States in which the subject Timberlands are located.
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10.2 Potlatch Contractors. During the term of this Agreement, Potlatch
shall assure that any contractor (of any tier) or agent employed by Potlatch
to perform any of the work described herein shall be covered by insurance with
such coverages as Potlatch and the Partnership shall, from time to time,
reasonably agree are customary for such contractors.
10.3 Policy Terms of Potlatch Insurance. Any insurance carried by Potlatch
hereunder shall be written by licensed insurance companies with a Best's
Rating of A-VII or better. Each policy shall be endorsed to provide that:
(a) With the exception of workers' compensation coverage, Partnership
shall be an additional insured with the understanding that any obligation
imposed upon Potlatch (including, without limitation, the liability to pay
premiums) shall be the sole obligation of Potlatch and not that of
Partnership;
(b) The insurer thereunder waives all rights of subrogation against
Partnership, any right of set off and counterclaim and any other right to
deduction whether by attachment or otherwise;
(c) Such insurance shall be primary without right of contribution of
any other insurance carried by Partnership with respect to its interests
as such in the Timberland;
(d) If such insurance is cancelled for any reason whatsoever,
including nonpayment of premium, or any substantial change is made in the
coverage which affects the interests of Partnership, such cancellation or
change shall not be effective as to Partnership for thirty (30) days after
receipt by Partnership of written notice sent by registered mail from each
insurer of such cancellation or change; and
(e) Any liability insurance policy shall be endorsed to provide
that, inasmuch as the policy is written to cover more than one (1)
insured, all terms, conditions, insuring agreements and endorsements, with
the exception of limits of liability shall operate in the same manner as
if there were a separate policy covering such insured.
Potlatch shall provide Partnership with certificates evidencing the insurance
carried by Potlatch hereunder at reasonable intervals as requested by
Partnership.
10.4 Partnership Insurance. Partnership agrees to carry and maintain at all
times during the term of this Agreement:
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(a) a policy or policies of commercial general liability insurance
with limits of not less than $5,000,000 protecting Partnership and
Potlatch against sums payable as damages because of personal injury or
property damage, including the loss of the use thereof, arising out of an
occurrence directly connected with the operations herein described or
other operations of Partnership, its employees, agents, contractors,
subcontractors, licensees, invitees or business visitors incidental to
such operations; provided that Partnership shall not be required to insure
against damage to or destruction of standing Timber or felled or bucked
Timber.
(b) a policy of insurance covering automobile, bodily injury
liability, and property damage on its automobiles with coverage for death
or injury to persons and property damage and a limit of not less than
$3,000,000. (The word "automobile" shall mean any land motor vehicle,
trailer or semitrailer used for transporting logs, goods or passengers.)
(c) Workers' Compensation Insurance in compliance with the laws of
the respective States in which the Timberlands are located.
10.5 Partnership Contractors. During the term of this Agreement, Partnership
shall assure that any contractor (of any tier) or agent employed by
Partnership to perform any of the work described herein shall be covered by
insurance with such coverages as Potlatch and the Partnership shall, from time
to time, reasonably agree are customary for such contractors. 10.6 Policy
Terms of Partnership Insurance. Any insurance carried by Partnership hereunder
shall be written by licensed insurance companies with a Best's Rating of A-VII
or better. Each policy shall be endorsed to provide that:
(a) With the exception of workers' compensation coverage, Potlatch
shall be an additional insured with the understanding that any obligation
imposed upon Partnership (including, without limitation, the liability to
pay premiums) shall be the sole obligation of Partnership and not that of
Potlatch;
(b) The insurer thereunder waives all rights of subrogation against
Potlatch, any right of set off and counterclaim and any other right to
deduction whether by attachment or otherwise;
(c) Such insurance shall be primary without right of contribution of
any other insurance carried by Potlatch with respect to its interests as
such in the Timberlands;
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(d) If such insurance is cancelled for any reason whatsoever,
including nonpayment of premium, or any substantial change is made in the
coverage which affects the interests of Potlatch, such cancellation or
change shall not be effective as to Potlatch for thirty (30) days after
receipt by Potlatch of written notice sent by registered mail from each
insurer of such cancellation or change; and
(e) Any liability insurance policy shall be endorsed to provide
that, inasmuch as the policy is written to cover more than one (1)
insured, all terms, conditions, insuring agreements and endorsements, with
the exception of limits of liability shall operate in the same manner as
if there were a separate policy covering such insured.
Partnership shall provide Potlatch with certificates evidencing the insurance
carried by Partnership hereunder at reasonable intervals as requested by
Potlatch.
10.7 Claims. With regard to any claim under the policies of insura nce
carried by either party, the party responsible for carrying such insurance
under this Article 10 shall be responsible for adjusting claims under such
policy.
ARTICLE 11
Suspension of Performance for Force Majeure
11.1 Suspension of Obligations. Any obligations, covenants or conditions
imposed upon either party under this Agreement shall (subject to the terms of
Section 5.5(b)) be suspended while and to the extent that compliance or
performance by such party (the "Excused Party") is substantially impaired or
prevented, directly or indirectly, by any one or more of the following: fires,
drought, infestation, pestilence, disease, floods and the elements, earth
movement, accidents, riots, wars, delays in transportation, interference by
government action, changes in Applicable Laws, strikes, lock-outs, picketing
or other form of labor trouble (whether or not participated in by the
employees of the Excused Party or arising from a dispute with or unfair labor
practices charged against the Excused Party) or any other causes beyond the
reasonable control of the Excused Party, whether similar or dissimilar to the
causes specifically mentioned (each a "Force Majeure"). Unless a Force Majeure
permanently renders performance of an obligation impossible or impracticable,
such Force Majeure shall only suspend the time for performance of, and shall
not discharge or release, any obligation.
11.2 Extension of Time. Within ten (10) days after commencement (or
discovery) of any Force Majeure, the Excused Party shall forward written
notice thereof to the other party
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and thereupon all time periods set forth in this Agreement or any plan
prepared pursuant to this Agreement for performance of an obligation shall be
extended for a period equal to each period of suspension during which the
Excused Party is prevented from performing its obligations under this Agreement
by reason of the Force Majeure. Upon discontinuance or termination of the any
Force Majeure, the Excused Party shall resume within a reasonable time and
prosecute with due diligence the obligations so suspended and endeavor to
complete the performance of such obligation with reasonable promptness.
11.3 Force Majeure Peculiar to Potlatch. In the event that a Force Majeure
renders it impossible or impracticable for Potlatch to harvest Merchantable
Timber in accordance with this Agreement for a continuous period in excess of
one hundred twenty (120) days, and such Force Majeure would not render it
impossible or impracticable for another Person to harvest such Merchantable
Timber, then Partnership shall have the right to sell to another Person or
otherwise dispose of Merchantable Timber designated for harvesting pursuant to
the Harvest Plan then in effect, provided that Partnership shall not sell or
dispose of a volume of Merchantable Timber in excess of the percentage of the
Merchantable Timber designated for the then current Harvest Year in the
Harvest Plan which is equal to the percentage of the relevant Harvest Year
during which Potlatch was subject to such Force Majeure.
ARTICLE 12
Default; Remedies
12.1 Potlatch Default. Each of the following events (each a "Potlatch Event
of Default") shall constitute an event of default by Potlatch hereunder:
(a) Potlatch fails to pay Partnership any amount owed hereunder within ten
(10) business days after receipt of written notice from Partnership that such
amount is due;
(b) Potlatch fails to perform or comply with any other material obligation
of Potlatch under this Agreement and fails to remedy such default within
thirty (30) days after receipt of written notice from Partnership to do so
(or, where the default cannot be cured by the payment of money and cannot be
completely remedied within said thirty (30) days, Potlatch fails to commence to
remedy such default within that period or fails after commencement to prosecute
the remedying thereof with reasonable diligence or complete the remedying
thereof within a reasonable time); and
(c) Potlatch is dissolved or liquidated without this Agreement being or
having been assigned to a Corporate Successor in accordance with Section 14.2.
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12.2 Partnership Default. Each of the following events (each a "Partnership
Event of Default") shall constitute an event of default by Partnership
hereunder:
(a) Partnership fails to pay Potlatch any amount owed hereunder within ten
(10) business days after receipt of written notice from Potlatch that such
amount is due;
(b) the occurrence of a Partnership Event of Default described in Section
9.1 with respect to a material portion of the Former Potlatch Lands;
(c) Partnership fails to perform or comply with any other material
obligation of Partnership under this Agreement and fails to remedy such
default within thirty (30) days after receipt of written notice from Potlatch
to do so (or, where the default cannot be cured by the payment of money and
cannot be completely remedied within said thirty (30) days, Partnership fails to
commence to remedy such default within that period or fails after commencement
to prosecute the remedying thereof with reasonable diligence or complete the
remedying thereof within a reasonable time); and
(d) Partnership is dissolved or liquidated without this Agreement being or
having been assigned to a Corporate Successor in accordance with Section 14.2.
12.3 Remedies. Upon the occurrence of an Event of Default by either party
hereto, or in the event either party fails to perform any obligation or
observe any of the terms or provisions of this Agreement and such failure
causes damage to the other party (irrespective of the cure periods set forth in
Sections 12.1 and 12.2), the non-defaulting party shall, subject to Section
12.4, have the right to pursue all remedies available to such party at law or
in equity in connection with such Event of Default, including the right:
(a) to money damages in the amount necessary to compensate the
non-defaulting party for all reasonably foreseeable losses and costs caused
by the Event of Default or failure to perform, together with interest on
any award of money damages from the date of the Event of Default or failure
to perform until paid at the Default Rate; and
(b) to injunctive or other equitable relief, including the right to
specific enforcement of the defaulting party's obligations (the parties
each acknowledging that money damages may be an inadequate remedy for a
default under this Agreement).
12.4 Limited Right To Rescind or Terminate. (a) Notwithstanding anything to
the contrary in this Agreement, except as otherwise expressly provided in
Section 12.4(b), this Agreement
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may not be rescinded or terminated at any time prior to the Expiration Date by
either party, by any other Person or by operation of law, notwithstanding the
occurrence of an Event of Default or any other occurrence, condition or event.
Potlatch and Partnership intend that neither party shall have any right to
rescind or terminate this Agreement or the obligations of the parties
hereunder, except as expressly provided in Section 12.4(b).
(b) This Agreement may be terminated:
(i) by Potlatch (A) upon the occurrence of a Partnership Event of
Default described in Section 12.2(b) or Section 12.2(d), or (B) if
Partnership, willfully and without reasonable justification, repudiates
this Agreement or fails continuously for a period in excess of ninety (90)
days to substantially perform its material obligations under this
Agreement; or
(ii) by Partnership (A) upon the occurrence of a Potlatch Event of
Default described in Section 12.1(c), or (B) if Potlatch, willfully and
without reasonable justification, repudiates this Agreement or fails
continuously for a period in excess of ninety (90) days to substantially
perform its material obligations under this Agreement.
12.5 Right of Other Party To Perform. If either party (a "defaulting
party") fails to perform any covenant or obligation hereunder on its part to
be performed, and such failure shall continue for ten (10) days (or such
shorter period as may be reasonable under emergency circumstances) after
written notice thereof by the other party (a "non-defaulting party"), the non-
defaulting party may, without waiving or releasing the defaulting party from any
obligation hereunder, perform any such covenant or obligation required to be
performed by the defaulting party, but the non-defaulting party shall not be
obligated to do so. All amounts incurred by the non-defaulting party and all
necessary costs of such performance incurred by the non-defaulting party,
together with interest thereon at the Default Rate from the date of such
payment or performance by the non-defaulting party, shall be paid (and the
defaulting party covenants to make such payment) to the non-defaulting party
on demand.
ARTICLE 13
Resolution of Disputes
13.1 Determinations by Consulting Forester.
(a) Any dispute or controversy which this Agreement provides is to be
determined by the Consulting Forester shall be
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resolved, and any other dispute or controversy arising under this Agreement
may by agreement of the parties be resolved, by the Consulting Forester in
accordance with this Section 13.1. Unless the parties otherwise agree, each
Consulting Forester serving pursuant to this Agreement shall have not less
than ten (10) years' experience in the forest resource management or wood
products business. The parties may, if they so agree, select more than one
Consulting Forester to serve concurrently, provided that the parties shall agree
as to the respective separate types of disputes that each such Consulting
Forester shall determine (e.g., one Consulting Forester for each Resource
Region, or one to determine price issues and another to determine other
issues).
(b) Prior to or promptly after the Commencement Date the parties
shall select by mutual agreement a person or persons to serve as Consulting
Forester. Each time a Consulting Forester is to be selected pursuant to this
Section 13.1, the parties shall use diligent efforts, in good faith, to agree
upon a Consulting Forester. The Consulting Forester shall serve for an
indefinite period, commencing upon the parties' agreement to appoint the
Consulting Forester and the Consulting Forester's agreement to serve, and ending
upon the Forester Termination Date (as defined below). Either party may elect,
at any time for any reason or none, to discontinue the appointment of a
Consulting Forester by delivering notice to the other party ("Forester
Termination Notice") specifying the date as of which such party wishes the
appointment to be terminated, provided that such date shall not be less than
sixty (60) days after such Forester Termination Notice is delivered. Promptly
after delivery of such Forester Termination Notice, the parties shall jointly
notify the Consulting Forester in writing of the termination of his or her
appointment. The parties shall use diligent efforts to reduce the likelihood
that any such termination shall influence or prejudice any decisions the
Consulting Forester may make after such notice of termination is delivered.
The Consulting Forester may, at his or her election, withdraw from service as
Consulting Forester, but shall be required to give reasonable advance notice
of any such withdrawal. The term "Forester Termination Date" shall mean the
date specified by a withdrawing Consulting Forester or the party delivering a
Forester Termination Notice as the effective date of the termination of the
Consulting Forester's services. Promptly after receiving notice of the
impending termination or withdrawal of the Consulting Forester, the parties
shall select a replacement by mutual agreement.
(c) If the parties have not selected a Consulting Forester (who has agreed
to serve) on or before the date thirty (30) days after the Commencement Date
or on or before any Forester Termination Date, then at the election of either
party, the selection of the Consulting Forester may be submitted to
arbitration pursuant to Section 13.2.
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(d) Potlatch and Partnership shall, unless they otherwise agree, enter into
a written agreement with each Consulting Forester setting forth the terms upon
which the Consulting Forester shall serve, including the scope of disputes to
be determined, the compensation to be paid for services, the terms and
conditions respecting withdrawal or termination, and such other matters as the
parties may agree. Such agreement shall require that the Consulting Forester
act in a neutral and unbiased manner and avoid any ex parte contact with
either party.
(e) Potlatch and Partnership shall be prohibited from engaging in ex parte
contact with the Consulting Forester. All determinations of the Consulting
Forester shall be rendered in writing delivered to the parties, and shall be
final, binding and non-appealable except on the grounds that: (i) the
determination is inconsistent with the express provisions of this Agreement,
or (ii) the determination was obtained by fraud or other malfeasance on the
part of a party. By entering into this Agreement, the parties undertake and
agree to act in accordance with, and fulfill the requirements of, any final
determination made by a Consulting Forester and, upon receipt of any final
determination of the Consulting Forester which is not subject to appeal pursuant
to the preceding sentence, either party (the "enforcing party") shall have the
right to require the other party to execute, through the other party's
counsel, and deliver to the enforcing party a stipulation for entry of
judgment, in such form as the enforcing party may reasonably require, for the
purpose of evidencing and giving effect to the Consulting Forester's
determination. The enforcing party shall be entitled to obtain, and obtain
entry of, a judgment based on such stipulation and to take any action as may
be required to cause the determination of the Consulting Forester to have the
effect of a duly entered order of a court of competent jurisdiction.
(f) Potlatch and Partnership may from time to time adopt by mutual
agreement rules and procedures, consistent with this Agreement, to govern the
proceedings of the Consulting Forester, including rules respecting time
schedules, presentation of evidence and relevance of specified types of
evidence. The parties and the Consulting Forester shall observe and comply
with any such rules and procedures as may be in effect at the time of the
proceedings.
(g) Potlatch and Partnership shall each bear one-half of the cost of the
Consulting Forester's services.
13.2 Arbitration. (a) ANY CLAIM, CONTROVERSY OR DISPUTE, WHETHER SOUNDING
IN CONTRACT, STATUTE, TORT, FRAUD, MISREPRESENTATION OR OTHER LEGAL THEORY,
RELATED DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, WHENEVER BROUGHT AND WHETHER
BETWEEN ANY OF THE PARTIES TO THIS AGREEMENT OR BETWEEN ANY OF THE PARTIES TO
THIS AGREEMENT AND THE EMPLOYEES, AGENTS OR
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AFFILIATED BUSINESSES OF ANY OTHER PARTY, UNLESS RESOLVED BY A CONSULTING
FORESTER IN ACCORDANCE WITH THIS AGREEMENT, SHALL BE RESOLVED BY ARBITRATION
AS PRESCRIBED IN THIS SECTION, WHETHER OR NOT SUCH CLAIM, CONTROVERSY OR
DISPUTE RELATES TO A PROVISION OF THIS AGREEMENT SPECIFICALLY REFERRING TO THIS
SECTION 13.2.
(b) UNLESS THE PARTIES OTHERWISE AGREE, A SINGLE ARBITRATOR WHO IS A
RETIRED FEDERAL OR ARKANSAS STATE COURT JUDGE SHALL CONDUCT THE ARBITRATION
UNDER THE THEN CURRENT COMMERCIAL ARBITRATION RULES OF THE AMERICAN
ARBITRATION ASSOCIATION (THE "AAA"). THE ARBITRATOR SHALL BE SELECTED BY MUTUAL
AGREEMENT OF THE PARTIES, OR IF THEY ARE UNABLE TO REACH AGREEMENT ON THE
ARBITRATOR WITHIN THIRTY (30) DAYS AFTER WRITTEN NOTICE BY ONE PARTY TO THE
OTHER(S) INVOKING THIS ARBITRATION PROVISION, IN ACCORDANCE WITH AAA
PROCEDURES FROM A LIST OF RETIRED FEDERAL OR ARKANSAS STATE COURT JUDGES
PROVIDED BY THE AAA, WHICH SHALL NOT BE LIMITED TO INDIVIDUALS WHO HAVE
EXCLUSIVE ARRANGEMENTS WITH THE AAA. THE ARBITRATION SHALL BE CONDUCTED IN THE
STATE OF ARKANSAS AND ALL EXPEDITED PROCEDURES OF THE AAA, WHETHER IN ITS
COMMERCIAL ARBITRATION RULES, RULES FOR LARGE CASES, OR OTHERWISE, SHALL BE
PERMITTED.
(c) THE ARBITRATOR SHALL HAVE AUTHORITY TO TAKE INTO ACCOUNT INDUSTRY
CUSTOM AND PRACTICE, SHALL NOT BE EMPOWERED TO DECIDE DISPUTES SOLELY ON THE
BASIS OF NOTIONS OF FAIRNESS AND EQUITY IN DISREGARD OF THE PROVISIONS OF THIS
AGREEMENT, AND SHALL NOT HAVE THE AUTHORITY TO AWARD ANY FORM OF EXTRAORDINARY
DAMAGES (INCLUDING PUNITIVE DAMAGES). THE ARBITRATOR SHALL AWARD TO THE
PREVAILING PARTY ITS REASONABLE ATTORNEYS' FEES AND OTHER COSTS INCURRED IN
THE ARBITRATION, EXCEPT THE PARTIES SHALL SHARE EQUALLY THE FEES AND EXPENSES
OF THE ARBITRATOR. THE ARBITRATOR'S DECISION AND AWARD SHALL BE FINAL AND
BINDING AND JUDGMENT ON THE AWARD RENDERED BY THE ARBITRATOR MAY BE ENTERED IN
ANY COURT HAVING JURISDICTION THEREOF.
(d) IF ANY PARTY FILES A JUDICIAL OR ADMINISTRATIVE ACTION ASSERTING CLAIMS
SUBJECT TO ARBITRATION AS PRESCRIBED HEREIN, AND ANOTHER PARTY SUCCESSFULLY
OPPOSES SUCH ACTION OR COMPELS ARBITRATION OF SAID CLAIMS, THE PARTY FILING
SAID ACTION SHALL PAY THE OTHER PARTY'S COSTS AND EXPENSES INCURRED IN
OPPOSING SUCH ACTION OR COMPELLING ARBITRATION, INCLUDING REASONABLE ATTORNEYS'
FEES AND EXPENSES.
(e) WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES
ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION
TO NEUTRAL ARBITRATION.
Potlatch Initials: _________ Partnership Initials: ___________
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ARTICLE 14
Assignment
14.1 Assignment Prohibited. Except as otherwise expressly permitted under
Section 14.2 or Section 14.3, neither Potlatch nor Partnership shall, either
voluntarily or by operation of law, assign or transfer this Agreement or any
rights hereunder or interest herein, or agree to do so (each of the foregoing
defined herein as a "Transfer"), without the express prior written consent of
the other party, which consent such other party may grant or withhold in its
sole discretion. Any purported Transfer (whether voluntary or involuntary, by
operation of law or otherwise) without the consent of the other party shall,
at the option of such other party, be void or constitute an Event of Default
under this Agreement.
14.2 Exception for Assignment to Corporate Successor. Upon and subject to
the terms and conditions of this Section 14.2, either party (a "transferor")
may assign or transfer all, but not less than all, of its right, title and
interest in, to and under this Agreement and all of its obligations under this
Agreement, without the consent of the other party to this Agreement, to any of
the following (each a "Corporate Successor"): any corporation or entity
Controlled by the transferor, or to the surviving corporation or entity in the
event of a consolidation or merger of the transferor into such surviving
corporation or entity, or to a transferee as part of a transfer of all or
substantially all of the assets of the transferor; provided that, in any such
case, (i) in the event of a transfer by Partnership, the transferee shall,
simultaneously with such Transfer, acquire all of the Timberlands, (ii) the
transferee shall assume, in a writing reasonably satisfactory to the non-
transferring party, all of the obligations of the transferor under this
Agreement, (iii) the transferor shall pay all costs and expenses in connection
with the Transfer, including, without limitation, all fees and expenses
incurred by the non-transferring party, and (iv) the non-transferring party
shall be provided with copies of all assignment documentation promptly upon
consummation of the assignment.
14.3 Partial Assignment by Potlatch Permitted. (a) Potlatch shall have the
right, from time to time, to assign to any Person or Persons the right to
harvest and purchase during any one or more Harvest Years all or any portion
of the Timber specified to be harvested in the Harvest Plan for such Harvest
Years, provided that: (i) the assignee shall comply with all of the terms and
provisions of this Agreement applicable to the assigned rights; (ii) no such
assignment shall reduce or otherwise modify the obligations of Potlatch under
this Agreement; and (iii) Partnership shall be provided with notice prior to
such assignment and copies of all assignment documentation promptly upon
consummation of such assignment.
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(b) In the event Potlatch wishes to assign to a third party (a "Regional
Assignee") all of Potlatch's rights under this Agreement with respect to all
Timberlands in an entire Resource Region (an "Assigned Region") for the entire
Term, Potlatch shall have the right to require that this Agreement be divided
into two agreements. One such agreement shall relate to the Timberlands in the
Assigned Region and shall be entered into between Partnership and the Regional
Assignee (the "New Agreement"). The New Agreement shall (except as to the
scope of the Timberlands subject thereto) be on terms substantially identical
to this Agreement, with such modifications as Potlatch and Partnership may
agree. The second agreement shall be this Agreement amended to exclude the
Assigned Region and to terminate all further rights and obligations of Potlatch
and Partnership respecting the Timberlands in the Assigned Region. Potlatch
shall not be liable, directly or indirectly, for the obligations of the
Regional Assignee under the New Agreement if Potlatch establishes by
reasonable proof, within six (6) months after the date of the New Agreement,
that in light of the Regional Assignee's financial condition or prospects, it
is unlikely that the Regional Assignee will be unable to perform its
obligations under the New Agreement. Unless Potlatch so establishes such
Regional Assignee's capability of performing, Potlatch shall remain liable as
a surety for performance of all of the Regional Assignee's obligations under
the New Agreement. Notwithstanding the foregoing, if the New Agreement is
entered into during the initial 20-year term of this Agreement, Potlatch
shall, irrespective of the financial condition or prospects of the Regional
Assignee, guaranty the obligations of the Regional Assignee under the New
Agreement arising during such initial 20-year term (i.e., such guaranty shall
expire on __________________, 2018), pursuant to a form of guaranty reasonably
satisfactory to Potlatch and Partnership.
ARTICLE 15
Condemnation
15.1 Effect of Condemnation. In the event any portion of the Timberlands is
taken for public or quasi-public use in or by reason of any condemnation
proceeding or proceedings in eminent domain, this Agreement shall terminate as
to the portion so taken effective upon transfer of title pursuant to such
taking and such portion shall be released from this Agreement in accordance
with Section 9.7.
15.2 Condemnation Award. Any award in any such proceedings, and any payment
in consideration of a voluntary transfer under threat of eminent domain, with
respect to the Timberlands or standing Timber on the Timberlands shall belong
to Partnership insofar as such award is based upon the value of the property
taken, except for awards for Timber the title to which has passed to Potlatch.
Any award in any such proceedings with respect to logs the title to which has
passed to Potlatch, or
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with respect to the value of rights-of-way and right of access under this
Agreement, or with respect to expenses or losses incurred by Potlatch shall
belong to Potlatch.
15.3 Notice. Partnership shall promptly notify Potlatch in writing of the
commencement or threat deemed material by Partnership of any condemnation
proceeding or proceedings in eminent domain.
ARTICLE 16
Notices
16.1 Notices. Any notice or other communications required or permitted
under this Agreement to be given by one party to the other shall be effective
only if in writing. Notices shall be delivered to the party's address set
forth below, or to such other address as such party may specify by written
notice in accordance with this Section 16.1, by United States mail with postage
thereon fully prepaid, or by a recognized commercial delivery service, or by
facsimile transmission:
If to Potlatch: Potlatch Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Potlatch Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Partnership: Timberland Growth Limited Partnership
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
ARTICLE 17
Miscellaneous
17.1 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto, as well as their respective successors in
interest and assigns permitted hereunder, and wherever reference in this
Agreement is made to either of the parties hereto, such reference shall be
deemed to include, wherever applicable, also a reference to the successors and
permitted assigns of said party.
17.2 No Agency or Fiduciary Relationship. It is understood and agreed that
Potlatch and Partnership are independent
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entities; and that all operations of Potlatch hereunder shall be performed
entirely for Potlatch's account and not as an agent, representative, employee
or contractor of Partnership; and that all operations of Partnership hereunder
shall be performed entirely for Partnership's account and not as an agent,
representative, employee or contractor of Potlatch. Nothing in this Agreement
shall be construed as creating any partnership or other fiduciary relationship
between Potlatch and Partnership.
17.3 No Third-Party Beneficiaries. No Person other than Potlatch and
Partnership shall have any rights under this Agreement. Potlatch and
Partnership do not intend that any other Person shall be a third-party
beneficiary of this Agreement or any covenant, condition or provision herein.
17.4 Attorneys' Fees. If Partnership or Potlatch shall commence an
arbitration pursuant to Section 13.2, or take any other action against the
other party, to compel performance of or to recover for breach of any
covenant, agreement or condition of this Agreement, or for declaratory relief,
or to otherwise enforce its rights hereunder (but excluding any arbitration
of a matter which is, pursuant to the terms of this Agreement, to be submitted
in the first instance to the Consulting Forester), the losing party shall pay
to the prevailing party its reasonable attorneys' fees in addition to the
amount of any judgment and costs (including attorneys' fees and costs in any
appeal) as the arbitrator may determine, and the breaching party shall pay to
the nonbreaching party its reasonable attorney's fees and other costs incurred
in connection with any enforcement action which does not involve rendering a
judgment, including, without limitation, in connection with any bankruptcy or
insolvency proceeding involving the breaching party.
17.5 Entire Agreement. This Agreement, including all Appendices, Exhibits
and Schedules attached hereto, and the Long-Range Plans, Management Plans and
Harvest Plan in effect from time to time, together with any other agreements
or documents expressly incorporated herein or therein by reference, shall
constitute the entire and integrated agreement among the parties with respect
to the subject matter hereof; and all prior negotiations, understandings,
agreements and instruments with respect to such subject matter are hereby
superseded and shall be of no force and effect.
17.6 Amendments; Waiver; Time Periods. Neither this Agreement nor any of
the terms hereof may be terminated, amended, supplemented, waived or modified
orally, but only by an instrument in writing signed by the party against which
the enforcement of the termination, amendment, supplement, waiver or
modification shall be sought. The failure of either party for any period of
time to object to or to assert any remedy by reason of the other party's
failure to perform or observe any covenant or term hereof or the failure of
either party to assert any rights by reason of the happening or non-happening
of any
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condition hereof shall not be deemed a waiver of any right to assert and
enforce any remedy arising by reason of such failure or the happening or non-
happening of such condition or a waiver of any rights arising from any
subsequent failure of such other party to perform or observe the same or any
other term or covenant or by reason of the subsequent happening or non-
happening of the same or any other condition. Subject to Section 1.2, no
custom or practice which may develop between the parties hereto during the
Term shall be deemed a waiver of, or in any way affect, the right of the
parties hereto to insist upon performance in strict accordance with the terms
hereof. All references in this Agreement to time periods within which a party
is required to take specified action shall be deemed to permit the parties to
agree to a longer period.
17.7 Governing Law. This Agreement, and any decision by arbitrator(s)
pursuant to Section 13.2, shall be governed by, and construed in accordance
with, the laws of the State of Arkansas (but without regard to choice of law
rules), including all matters of construction, validity and performance, but
without regard to its choice of law rules. Notwithstanding the foregoing
sentence, questions concerning arbitrability under Section 13.2 shall be
governed exclusively by the United States Arbitration Act.
17.8 Counterparts. This Agreement and any amendments, supplements or
modifications hereof may be executed in more than one counterpart each of
which shall be deemed to be an original but all of which taken together shall
be deemed a single instrument.
17.9 Partial Invalidity. In the event that any provision of this Agreement
shall for any reason be determined to be invalid, illegal, or unenforceable in
any respect, the parties hereto shall attempt in good faith to agree to such
amendments, modifications, or supplements to this Agreement and take such
other appropriate actions as shall, to the maximum extent practicable in light
of such determination, implement and give effect to the intentions of the
parties as reflected herein. The provisions of this Agreement not so affected
shall remain in full force and effect.
17.10 Further Assurances. Potlatch and Partnership further covenant to
cooperate with one another in all reasonable respects necessary to consummate
and give effect to the transactions contemplated by this Agreement (including
executing and delivering such instruments or other writings as the other party
may reasonably request), and each will take all reasonable actions within its
authority to secure cooperation of any necessary third parties.
17.11 Headings. The headings of the sections of this Agreement are for
convenience of reference only and shall not
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affect the meanings or construction of any provision of this Agreement.
17.12 Jurisdiction and Venue. EACH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY:
(a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT, OR FOR RECOGNITION AND ENFORCEMENT
OF ANY JUDGMENT IN RESPECT THEREOF, INCLUDING, WITHOUT LIMITATION, ENTRY
OF JUDGMENT UPON ANY AWARD RENDERED BY ARBITRATORS IN ACCORDANCE WITH THIS
AGREEMENT, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE
STATE OF ARKANSAS, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE
DISTRICT OF ARKANSAS, AND APPELLATE COURTS FROM ANY THEREOF;
(b) WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE THAT ANY
SUCH ACTION OR PROCEEDING WAS BROUGHT IN ANY INCONVENIENT COURT;
(c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING
MAY BE EFFECTED CERTIFIED MAIL (OR ANY SUCH PARTY AT ITS BY MAILING A
SUBSTANTIALLY ADDRESS FOR COPY THEREOF BY SIMILAR FORM OF NOTICES
REGISTERED OR MAIL), POSTAGE PURSUANT TO PREPAID, TO SECTION 16.1;
(d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT THE
SERVICE OF PROCESS IN ANY OTHER LIMIT THE RIGHT TO ▇▇▇ IN MANNER PERMITTED
BY LAW OR SHALL ANY OTHER JURISDICTION; AND
(e) WAIVES TRIAL BY JURY IN ANY SUCH ACTION OR PROCEEDING.
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The foregoing shall not be deemed to negate or undercut the parties' intent to
resolve disputes in accordance with the other provisions of this Agreement,
including Article 13.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
POTLATCH CORPORATION, a Delaware
corporation
By
----------------------------------------
Title
----------------------------------
TIMBERLAND GROWTH LIMITED
PARTNERSHIP, a Delaware limited
partnership
By Timberland Growth Corporation,
a Delaware corporation, general
partner
By
----------------------------------------
Title
----------------------------------
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APPENDIX A
Defined Terms
"AAA" shall have the meaning given in Section 13.2(b).
"Access Rights" shall have the meaning given in Section 8.5.
"Additional Timberlands" shall mean Timber-producing property acquired by
Partnership after the Commencement Date and made subject to the provisions of
this Agreement pursuant to Section 9.4.
"Adjustment Amount" shall have the meaning given in Section 6.4(b).
"Agreement" shall mean this Timberlands Management and Timber Purchase
Agreement, including all Exhibits and Appendices attached hereto and all Long-
Range Plans, Management Plans and Harvest Plans in effect from time to time,
as any of the same may be amended, modified or supplemented from time to time.
"Agreement Purposes" shall have the meaning given in Section 1.1.
"Alternative Stands" shall have the meaning given in Section 5.3(c).
"Applicable Laws" shall mean, as to any Person, all laws (statutory or
common), treaties, rules, regulations, determinations, orders, judgments,
ordinances, decrees, injunctions, writs, interpretations or Governmental
Approvals, in each case applicable to or binding on such Person or any of its
property or to which such Person or any of its property is subject.
"Assigned Region" shall have the meaning given in Section 14.3(b).
"ATCO" shall mean ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Company, a Mississippi corporation, and
(as the context permits) its affiliates.
"ATCO Exchange Parcel" shall have the meaning given in Section 9.2(b).
"ATCO Parcel Release Request" shall have the meaning given in Section
9.2(b).
"ATCO Release Parcel" shall have the meaning given in Section 9.2(b).
"Authorized Officer" shall mean (a) as to any party to this Agreement, the
Person or Persons from time to time designated by
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such party in writing to the other party as such party's authorized officer
for purposes of this Agreement, and (b) if no such designation is in effect,
(i) as to any corporation (or as to a partnership of which a corporation is
general partner or as to a limited liability company of which a corporation is
manager), the Chairman, the President and any Vice President of such
corporation, and (ii) as to any partnership of which a natural person is
general partner or as to any limited liability company of which a natural
person is manager, such natural person.
"Average Administrative Cost" means, as to any Harvest Year, the Total
Administrative Cost for such Harvest Year divided by the total number of green
tons of wood fiber handled by Potlatch (i.e., procured from Potlatch's fee
lands, from the Partnership or from other sources or sold by Potlatch from its
fee lands to third parties) in such Harvest Year.
"Average Cost of Log and Haul" means, as to any Harvest Year, the Total
Cost of Log and Haul during such Harvest Year, divided by the total number of
green tons of Merchantable Timber purchased by Potlatch pursuant to this
Agreement during such Harvest Year. In the event that Potlatch in any Harvest
Year separately calculates the Average Cost of Log and Haul for different
Products or categories of Products, then for purposes of determining the
Average Procurement Cost for such Product for such Harvest Year, the Average
Cost of Log and Haul applicable to such Product shall be added to the Average
Administrative Cost for such Harvest Year.
"Average Procurement Cost" means, as to any Harvest Year, the sum of
Average Administrative Cost for such Harvest Year plus Average Cost of Log and
Haul for such Harvest Year.
"Best's Rating" shall mean the rating assigned to an insurer from time to
time as published in A. M. Best Company, Inc.'s insurance reports, or in the
event such reports cease to be published, the rating in an alternative
generally recognized insurance company rating report which would be equivalent
to a Best's rating.
"Collateral" shall have the meaning given in Section 8.3(a).
"Commencement Date" shall have the meaning given in Section 3.3.
"Consulting Forester" shall mean a person selected by the parties and
serving as Consulting Forester pursuant to Section 13.1.
"Contribution Agreement" shall mean the Contribution Agreement dated as of
____________ __, 1998 between Potlatch
-2-
and Partnership, whereunder the Former Potlatch Lands are to be transferred by
Potlatch to Partnership.
"Control," "Controlled" and "Controlling" shall mean (i) as to a corporation,
direct or indirect beneficial ownership of 50% or more of the aggregate voting
power of the voting securities of such corporation, (ii) as to a partnership,
direct or indirect beneficial ownership of a Controlling Interest of a general
partner of such partnership, and (iii) as to a partnership, limited liability
company or other entity, the direct or indirect beneficial ownership of 50% or
more of the voting power of the ownership interests in such entity.
"Controlling Interest" shall mean a direct or indirect beneficial ownership
interest in any Person which confers upon the holder thereof Control of such
Person.
"Corporate Successor" shall have the meaning given in Section 14.2.
"Costs of Log and Haul" shall mean the actual costs incurred by Potlatch
(without duplication of Total Administrative Costs) in harvesting Merchantable
Timber purchased pursuant to this Agreement and transporting Products to the
Destination Mill, including without limitation all costs of labor, equipment,
insurance, fuel, licenses and taxes (excluding yield taxes or sales taxes
which Potlatch is required to pay in accordance with Section 6.8(b)) incurred
in obtaining access to the logging site; transporting logging equipment to and
from the logging site; preparing the logging site for logging operations;
felling, delimbing and bucking Timber; skidding logs to a sorting and staging
area; sorting logs for transport; loading logs onto logging trucks; performing
road repairs and maintenance; completing post-harvest operations at the
logging site; and transporting logs to a Destination Mill (but excluding the
costs of secondary loading, unloading and transportation in excess of the costs
that would be incurred if the shipment in question were delivered to the
nearest Potlatch Conversion Facility capable of processing such shipment).
Notwithstanding the foregoing, Costs of Log and Haul shall not include (i)
costs incurred in correcting or repairing damage described in Sections 7.2,
7.3 or 7.8(b), (ii) indemnity payments pursuant to Section 7.7, or (iii) any
amount incurred for any work to the extent such amount is in excess of the
reasonable cost (under applicable market conditions) for the same work (but
Potlatch shall not be required to accept a low bid for work if Potlatch
reasonably believes a higher bid will provide a better value due to greater
reliability, trustworthiness, efficiency or skill of the higher bidder).
"CPI" shall mean the Consumer Price Index for All Urban Consumers for All
Cities, All Items, 1982-1984 equals 100, published by the United States
Department of Labor, Bureau of
-3-
Labor Statistics. If the federal government revises or ceases to publish the
Consumer Price Index, the parties shall substitute a substantially equivalent
official index published by the Bureau of Labor Statistics or its successors
and shall use any appropriate conversion factors to accomplish such
substitution. The substitute index shall thereafter constitute the "CPI"
hereunder.
"Default Period" means the period commencing with the exercise of the Major
Lender's right to accelerate the indebtedness of Partnership arising upon a
default by Partnership under the Loan Documents, and ending upon the earlier
of (1) payment in full of all such indebtedness, or (2) the Major Lender's
withdrawal or rescission of such acceleration.
"Default Rate" shall have the meaning given in Section 6.5(b).
"Default Sale Timberlands" shall have the meaning given in Section 9.6(a).
"Delivered Log Price" means, as to any Product, the price (net scale) for
the Product delivered to a Potlatch Conversion Facility or other conversion
facility (i.e., "purchased at mill") in the applicable Resource Region paid
during the Harvest Year in an arms'-length transaction (including transactions
in which Potlatch is the buyer (from a source other than Partnership) or the
seller).
"Destination Mill" shall have the meaning given in Section 6.6(a).
"Environmental Laws" shall mean any and all federal, state and local laws,
regulations, ordinances, codes and policies, and any and all judicial or
administrative interpretations thereof by governmental authorities relating to
pollution or protection of the environment, of natural resources, of wildlife
or of public health and safety, including, without limitation, those relating
to emissions, discharges, releases or threatened releases of Hazardous
Materials into the environment, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, release, transport
or handling of Hazardous Materials, and any and all orders and decrees
pursuant thereto.
"Estimated Market Stumpage Price" shall mean, as to any Product during any
calendar quarter, the estimate of the Market Stumpage Price of such Product
for such calendar quarter determined in accordance with Section 6.2(e).
"Event of Default" shall mean a Partnership Event of Default or a Potlatch
Event of Default.
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"Exchange" shall have the meaning given in Section 9.1(b).
"Exchange Parcel" shall have the meaning given in Section 9.1(b).
"Excused Party" shall have the meaning given in Section 11.1.
"Expiration Date" shall have the meaning given in Section 3.3.
"Extension Deadline" shall have the meaning given in Section 3.3.
"Fiber Categories" shall mean, collectively, Hardwood Merchantable
Sawtimber, Hardwood Merchantable Pulpwood, Softwood Merchantable Sawtimber and
Softwood Merchantable Pulpwood.
"Force Majeure" shall have the meaning given in Section 11.1.
"Forester Termination Date" shall have the meaning given in Section
13.1(b).
"Forester Termination Notice" shall have the meaning given in Section
13.1(b).
"Former ATCO Lands" shall mean the Initial Timberlands contributed to
Partnership by Partnership's general partner and formerly owned by ATCO,
consisting of approximately 324,000 acres concentrated in the States of
Arkansas and Mississippi.
"Former Potlatch Lands" shall mean the Initial Timberlands contributed by
Potlatch to Partnership pursuant to the Contribution Agreement (including the
Leasehold Lands), consisting of approximately 514,000 acres in the State of
Arkansas.
"Governmental Approvals" shall mean all consents, rights, exemptions,
concessions, permits, easements, rights of way, licenses, authorizations,
certificates, orders, franchises, determinations or other approvals of or
notices to or filings with any Governmental Authority.
"Governmental Authority" shall mean any governmental department, commission,
board, regulatory authority, bureau, legislative body, agency, or any
instrumentality of any federal, state, local or municipal government or
domestic court.
"Hardwood" shall mean Timber of those species, commonly referred to as
"hardwood," which are deciduous and have broad leaves (such as oak,
cottonwood, hackberry, sweet gum, ash, sycamore, willow, poplar and hickory).
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"Harvest Deficit" shall have the meaning given in Section 6.1(b).
"Harvest Excess" shall have the meaning given in Section 6.1(b).
"Harvest Plan" shall mean a Proposed Harvest Plan which has been approved
by the parties in accordance with Section 5.3, as the same may be modified
from time to time in accordance with this Agreement.
"Harvest Plan Data Sheet" shall have the meaning given in Section 5.1(b).
"Harvest Plan Summary" shall have the meaning given in Section 5.1(c).
"Harvest Year" shall mean a calendar year to which a Harvest Plan pertains.
"Hazardous Materials" shall mean substances which are explosive, corrosive,
radioactive or toxic and any substances defined as hazardous substances,
hazardous materials, toxic substances, toxic air contaminants or hazardous
wastes under federal, state or local laws or regulations, including without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. ss. 9601 et seq.), the Superfund Amendments
and Reauthorization Act of 1986 (Pub. L. 99-499, 100 Stat. 1617 (October
17,1986)), and all amendments to these laws and regulations adopted or
publications promulgated pursuant to these laws. Hazardous Materials shall also
include, without limitation, those asbestos-containing materials defined and
described in Environmental Protection Agency Report No. 560/5-85-024 (June
1985), or any related or successor report, or other applicable government
regulations defining or describing such materials.
"Including" and "includes" shall be deemed to mean "including without
limitation" or "includes without limitation."
"Industry Practice" shall have the meaning given in Section 1.2.
"Initial Timberlands" shall mean the Timberlands which are subject to this
Agreement as of the Commencement Date and are described in Exhibit A.
"Inventory Data" shall have the meaning given in Section 4.1(a).
"Leasehold Lands" shall mean the approximately 13,600 acres of the Former
Potlatch Lands that were leased, and not owned in fee, by Potlatch prior to
the Commencement Date, as identified in Exhibit A.
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"Lender Protection Agreement" shall have the meaning given in Section
9.6(a).
"Loan Documents" shall have the meaning given in Section 9.6(a).
"Long-Range Plan" shall have the meaning given in Section 4.2(a).
"Major Lender" means the holder or holders of any indebtedness for borrowed
money incurred or to be incurred by Partnership in an aggregate amount in
excess of fifty million dollars ($50,000,000).
"Management Plan" shall have the meaning given in Section 4.2(b).
"Market Stumpage Price" shall have the meaning given in Sections 6.2(b).
"MBF" shall mean one thousand (1000) board feet, and a board foot is a
standard unit of measure for Timber and logs in accordance with Industry
Practice.
"Memorandum of Agreement" shall have the meaning given in Section 8.2.
"Merchantable Pulpwood" shall mean wood fiber other than Merchantable
Sawlogs which, under Industry Practice in the respective Resource Regions, is
saleable for use as raw materials in the manufacturing of fiberboard, oriented
strandboard, paper products or other processed wood products.
"Merchantable Sawlog" shall mean, generally, a log of suitable size and
quality for the production of solid wood products as determined in accordance
with Industry Practice in the respective Resource Regions.
"Merchantable Sawtimber" shall mean Timber that will produce at least one
(1) Merchantable Sawlog.
"Merchantable Timber" shall mean Timber that will produce at least one (1)
Merchantable Sawlog or such volume of Merchantable Pulpwood as the parties may
reasonably agree, from time to time.
"Monthly Logging Report" shall have the meaning given in Section 6.7.
"Monthly Payment" shall have the meaning given in Section 6.3(a).
"Negative Value Product" shall have the meaning given in Section 6.1(e).
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"Net Cost" shall have the meaning given in Section 6.1(e).
"Net Log Price" means, for any Product sold in any Harvest Year in a
"purchased at mill" transaction, (a) the Delivered Log Price per green ton
paid for such Product in such transaction, minus (b) the Average Procurement
Cost for such Harvest Year.
"Net Volume Increase" shall mean, as to any Resource Region as of any time,
a volume of Merchantable Sawtimber on the Timberlands in such Resource Region
equal to (i) the aggregate volume of all Merchantable Sawtimber on all
Additional Timberlands in such Resource Region added to such Timberlands,
during the period from the Commencement Date through the date in question, in
accordance with Section 9.4 (which volume shall be measured as of the date of
such addition), minus (ii) the aggregate volume of Merchantable Sawtimber on
all Released Timberlands in such Resource Region which have been released from
this Agreement, during the period from the Commencement Date through the date
in question, in accordance with Section 9.5 (which volume shall be measured as
of the date of such release).
"New Agreement" shall have the meaning given in Section 14.3(b).
"Objection Notice" shall have the meaning given in Section 5.3(a).
"Objection Response Notice" shall have the meaning given in Section 5.3(a).
"Opportunities Agreement" shall mean the Opportunities Agreement dated
__________, 1998 between Potlatch and the Partnership, as the same may be
amended, modified or supplemented from time to time.
"Other Assurances" shall have the meaning given in Section 8.3(b).
"Partnership" shall mean Timberland Growth Limited Partnership, a Delaware
limited partnership, and any Person who may succeed to its rights and
obligations under this Agreement.
"Partnership Event of Default" shall have the meaning given in Section
12.2.
"Partnership Indemnified Parties" shall have the meaning given in Section
7.7.
"Person" shall mean an individual, a partnership, a limited liability
company, a corporation, a joint stock company, a trust, a joint venture, an
unincorporated organization or a governmental entity (or any department,
agency or political subdivision thereof).
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"PHP Requirements" shall have the meaning given in Section 5.2.
"Potential Addition" shall have the meaning given in Section 9.3(a).
"Potential Addition Notice" shall have the meaning given in Section 9.3(a).
"Potlatch" shall mean Potlatch Corporation, a Delaware corporation, and any
Person who may succeed to its rights and obligations under this Agreement.
"Potlatch Conversion Facilities" shall mean the sawmills, plywood ▇▇▇▇▇,
pulpmills and other wood products processing facilities owned or operated by
Potlatch now or in the future and which process Products harvested from the
Timberlands.
"Potlatch Event of Default" shall have the meaning given in Section 12.1.
"Potlatch Indemnified Parties" shall have the meaning given in Section 4.5.
"Price Reset Notice" shall have the meaning given in Section 6.2(h).
"Pricing Period" shall mean, as to any calendar quarter, the three (3)
calendar month period consisting of the last month of the previous calendar
quarter and the first two (2) months of the subject calendar quarter. For
example, the Pricing Period with respect to the second calendar quarter
(April, May and June) of 1999 shall consist of the period from March 1, 1999
through May 31, 1999.
"Prime Rate" shall mean the publicly announced prime rate or reference rate
charged on the relevant date by the San Francisco Main Office of Bank of
America NT & SA (or any successor bank thereto), or if there is no such
publicly announced rate, the rate quoted by such bank in pricing ninety (90) day
commercial loans to substantial commercial borrowers.
"Product" shall mean a subcategory of a Fiber Category which, as of the
relevant time in the relevant Resource Region, has a distinct Market Stumpage
Price based on its species, size, quality or other characteristics. For
example, two Merchantable Sawlogs of the same species may have different prices
per board foot based on their different diameters; each would constitute a
distinct Product. Conversely, two Merchantable Pulpwood logs of different
diameters and different species would constitute a single Product if they would
realize the same price per ton. A single log may consist of multiple Products
(e.g., the small end may be of insufficient diameter to constitute a
Merchantable Sawlog, but may constitute Merchantable Pulpwood).
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"Proposed Harvest Plan" shall have the meaning given in Section 5.1.
"Prudent Logging Practices" shall mean those practices, procedures,
methods, specifications and standards, as the same may change from time to
time, as are commonly utilized by experienced and competent loggers of
timberlands of significant size in the applicable Resource Region as good, safe
and environmentally sound logging practices.
"Prudent Management Practices" shall mean those practices, procedures,
methods, specifications and standards, as the same may change from time to
time, as are commonly utilized as good, safe and environmentally sound
practices by owners and managers of timberlands of significant size in the
applicable Resource Region in managing their own timberlands with a management
goal of maximizing growth and quality and maintaining a reasonably stable
inventory. Prudent Management Practices include planning and implementation of
silvicultural treatment programs; reforestation as required to maintain stable
inventory; animal, insect and disease monitoring and control programs;
management of all environmentally-sensitive areas within the owned timberlands
as may be required by Applicable Law, existing agreements or best management
practices for the protection of soil, water and wildlife; and implementation
of fire prevention programs providing every reasonable precaution against
fire, provision of a fire patrol during the fire season and prompt exertion of
all reasonable efforts to suppress all fires, however caused.
"Quarterly Logging Audit" shall have the meaning given in Section 6.9(b).
"Regional Assignee" shall have the meaning given in Section 14.3(b).
"Release Notice" shall have the meaning given in Section 9.6(a).
"Released Timberlands" shall have the meaning given in Section 9.5.
"Resource Unit" shall mean a geographic operating area within a Resource
Region, consisting of not less than 25,000 acres and not more than 50,000
acres, as designated by Partnership from time to time. The Resource Units in
existence as of the Commencement Date are shown in Appendix D.
"Resource Unit Harvest Map" shall have the meaning given in Section 5.1(a).
"Resource Region" shall mean a geographic area in which Partnership owns
Timberlands from time to time, which area constitutes a distinct forest
products market area (i.e., prices
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for a Product would be fairly uniform throughout a Resource Region) and has
relatively uniform Industry Practices. The Resource Regions, as of the
Commencement Date, are Southern Arkansas (as shown on the Resource Unit
Harvest Map) and the Mississippi River Valley (as shown on the Resource Unit
Harvest Map).
"Sale Parcel" shall have the meaning given in Section 9.1(b).
"Salvage Timber" shall have the meaning given in Section 5.5(a).
"Sawlog Categories" shall mean, collectively, Hardwood Merchantable Sawlogs
and Softwood Merchantable Sawlogs.
"Site Marking" shall have the meaning given in Section 5.8.
"Softwood" shall mean Timber of those species, commonly referred to as
"softwood," which are conifers and generally non-deciduous, such as firs,
pines, spruce and cedar.
"Stand" shall mean a Timber-growing site on which the growing conditions
(such as soil composition, drainage, aspect, elevation, Timber type, etc.) are
of general uniformity and are distinct in one or more ways from adjacent
areas, such that the site is deemed by the Partnership to be an appropriate
forest management unit.
"Stand Code Number" shall mean the identification number assigned to a
particular Stand or other management unit in Partnership's inventory system.
"Stumpage Bid Worksheet" shall mean a worksheet, in the form of Exhibit H
attached to the Agreement, setting forth Potlatch's assessment of the Timber
included in a Stumpage Sale Transaction, based upon Potlatch's cruise of such
Timber or other available information.
"Stumpage Outsale" shall have the meaning given in Section 6.2(d).
"Stumpage Sale Price" means, for any Product, the price paid for such
Product in a Stumpage Sale Transaction. As to each Stumpage Sale Transaction
in which only a single Product is sold, for purposes of determining the unit
price (per mbf, per ton, etc.) paid for such Product in the Stumpage Sale
Transaction, such unit price shall be based upon Potlatch's reasonable estimate
(as set forth in the Stumpage Bid Worksheet for such Stumpage Sale
Transaction), or other reasonable evidence, of the volume of the Product
included in the Stumpage Sale Transaction. As to each Stumpage Sale
Transaction in which more than one Product is sold for a single lump sum, for
purposes of determining the unit price paid in the Stumpage Sale
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Transaction for each particular Product included in that Stumpage Sale
Transaction, such unit price shall be based upon Potlatch's reasonable
estimates (as set forth in the Stumpage Bid Worksheet for such Stumpage Sale
Transaction), or other reasonable evidence, of (1) the volumes of each Product
included in the Stumpage Sale Transaction, and (2) the relative values (per mbf,
per ton, etc.) of the respective Products.
"Stumpage Sale Transaction" means an arms'-length sale transaction
(excluding any transaction between Potlatch and Partnership) in the relevant
Resource Region in which (a) a buyer purchases (at auction, in a sealed bid
procedure or in a privately negotiated transaction) the right to cut and
remove all or a portion of the Merchantable Timber from specified land during
a period ending not more than twenty-four (24) months after the sale price is
determined, (b) either (i) Potlatch submits a bid or offers to purchase at such
Stumpage Sale Transaction, or (ii) reasonable evidence of the species and
volumes of Timber included in such Stumpage Sale Transaction is obtained, and
(c) the winning bid is published or otherwise verifiable.
"Substitute Parcel" shall have the meaning given in Section 9.1(b).
"Sustainable Forestry Principles" shall mean timberland management and
harvest planning principles and policies (exemplified by the American Forest &
Paper Association's "Principles for Sustainable Forestry", as in effect on the
date of this Agreement) which, among other things, seek to: (a) ensure long-
term forest productivity and conservation of forest resources by, for
instance, limiting annual harvest levels in a given forest area to amounts which
could be sustained on an annual basis indefinitely without material depletion of
the Timber growing in the area; (b) protect water quality through riparian
protection measures and best management practices in all forest management
operations; (c) protect the quality of wildlife habitat and encourage
maintenance of aesthetic quality of forests by, for instance, limiting
clearcut size and adjacency.
"Temporary Logging Road" shall mean a temporary access road 12 to 15 feet
wide suitable for log trucks, which is typically not ditched, crowned or
gravelled, but which may include culverts or other drainage structures (which
culverts or structures are normally removed after harvest operations are
complete).
"Term" shall have the meaning given in Section 3.3.
"Termination Notice" shall have the meaning given in Section 3.3.
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"Timber" shall mean a tree or trees standing uncut in the ▇▇▇▇▇.
"Timber Addition Deadline" shall have the meaning given in Section 9.3(a).
"Timber Addition Notice" shall have the meaning given in Section 9.3(a).
"Timber Damage Event" shall have the meaning given in Section 5.5(a).
"Timberlands" shall mean, as of any time, the Initial Timberlands plus any
Additional Timberlands to which this Agreement is then applicable by virtue of
Section 9.4, but excluding any Released Timberlands to which this Agreement
has theretofore ceased to be applicable by virtue of Section 9.5
"Total Administrative Cost" means, as to any Harvest Year, all reasonable
costs (without duplication of Costs of Log and Haul) incurred by Potlatch for
the operation and administration of its wood procurement function in its
Southern Region (i.e., the total expenses of operating Potlatch's Southern
Region Procurement Department) during such Harvest Year. "Total Cost of
Log and Haul" shall mean, as to any Harvest Year, the total amount of all
Costs of Log and Haul during such Harvest Year.
"Total Purchase Price" shall mean, as to any calendar quarter or Harvest
Year, the total amount payable by Potlatch under this Agreement for all Timber
cut and scaled during such calendar quarter or Harvest Year, based upon the
respective Market Stumpage Prices and volumes of the Products cut and scaled,
all as determined in accordance with Article 6.
"Transfer" shall have the meaning given in Section 14.1.
"Volume Reset Notice" shall have the meaning given in Section 6.3(b).
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