NEW ENVIRONMENTAL INDEMNIFICATION AGREEMENT
This NEW ENVIRONMENTAL INDEMNIFICATION AGREEMENT (the
"Agreement"), dated as of July 20, 1998, is entered into between The
Pacific Lumber Company ("Pacific Lumber") and Scotia Pacific Company LLC
(the "Issuer").
The Issuer and the Trustee have entered into the Indenture,
pursuant to which the Issuer has issued the Timber Notes and may issue
Additional Timber Notes; and the Issuer, the Collateral Agent and the Deed
of Trust Trustee have entered into the Deed of Trust, securing, among other
things, the Issuer's obligations under the Timber Notes, the Line of Credit
Agreement, any Additional Timber Notes and the Indenture; and
This Agreement is being entered into in connection with the
issuance and sale of the Timber Notes and any Additional Timber Notes.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the sufficiency of
which is hereby acknowledged, the Issuer and Pacific Lumber hereby agree as
follows:
I.
DEFINITIONS
For all purposes of this Agreement, unless the context otherwise
requires, all defined terms which are used but not defined herein shall
have the meaning set forth in Schedule A to the Indenture, which is
incorporated by reference as if fully set forth herein.
II.
REPRESENTATIONS AND WARRANTIES
Pacific Lumber hereby represents and warrants to the Issuer, as
of the time of the transfer of each parcel of land comprising the Company
Owned Timberlands by Pacific Lumber to Issuer or Issuer's predecessor, as
follows:
a. (i) Except as disclosed or referred to in the Offering
Memorandum or in respect of matters which are not likely to have a Material
Adverse Effect, or in respect of suspected or known Hazardous Materials
Contamination on lands adjoining the Company Owned Timberlands, which are
set forth on Schedule 1 hereto, Pacific Lumber is and has been in
compliance in all material respects with all Environmental Laws in
connection with its ownership and use of the Company Timber Property and
the harvesting, cutting, severing and marketing of timber and the disposal
or handling of any materials, products, wastes or other substances in, on,
from or attributable to the Company Timber Property; (ii) except as dis-
closed in or referred to in the Offering Memorandum, in respect of matters
which are not likely to have a Material Adverse Effect, or in respect of
suspected or known Hazardous Materials Contamination on lands adjoining the
Company Owned Timberlands, which are set forth on Schedule 1 hereto,
Pacific Lumber has not received (from governmental agencies or private
parties) any citations, complaints, consent orders, compliance schedules or
other similar enforcement orders, or any other written notice or commu-
nication, that indicates or alleges that the Company Timber Property is or
may be subject to any response, remedial action, penalty or fine or is not
or may not be (or that Pacific Lumber or Salmon Creek is not or may not
have been with respect to any such Company Timber Property) in material
compliance with any such Environmental Laws; and, (iii) as of the date
hereof, except for matters that have not had, and are not likely to have, a
Material Adverse Effect, (including, without limitation, any Incidental
Waste Disposal (as defined in Schedule A to the Deed of Trust) or in
respect of suspected or known Hazardous Materials Contamination on lands
adjoining the Company Owned Timberlands, which are set forth on Schedule 1
hereto) there were no current or past spills, discharges or releases of
gas, liquid or gaseous hydrocarbons or products therefrom, contaminants,
pollutants and/or Hazardous Materials from, affecting or in any way related
to the Company Timber Property that had not been (i) remedied and cleaned
up in accordance with applicable Environmental Law to the satisfaction of
any Governmental Authorities requiring clean-up, (ii) disclosed in writing
to the Trustee and the Issuer prior to the Closing Date and (iii) disclosed
to all appropriate Governmental Authorities if required under any Environ-
mental Law to be disclosed.
b. Except for Hazardous Materials contained in commercial
products used in the ordinary course of Pacific Lumber's business which
have been stored, used and disposed of in accordance with applicable
Environmental Laws, (i) there are no Hazardous Materials now located on,
at, in or under any of the Company Timber Property or any part thereof
which could have a Material Adverse Effect; (ii) no part of any of the
Company Timber Property is being used or, to the best of Pacific Lumber's
knowledge, has been used at any previous time for the disposal, storage,
treatment, processing or other handling of any Hazardous Material nor is
any part of any Company Timber Property affected by any Hazardous Materials
Contamination, other than such as do not individually in the aggregate have
a Material Adverse Effect, (including, without limitation any Incidental
Waste Disposal and suspected or known Hazardous Materials Contamination on
lands retained by Pacific Lumber adjoining the Company Owned Timberlands
Property, which are set forth on Schedule 1 hereto); (iii) to the best of
the knowledge and belief of Pacific Lumber, no property adjoining any
Company Timber Property is being used, or has ever been used at any previ-
ous time, for the disposal, storage, treatment, processing or other han-
dling of any Hazardous Material nor is any property adjoining any Company
Timber Property affected by Hazardous Materials Contamination, other than
(x) such as do not individually in the aggregate have a Material Adverse
Effect (including, without limitation, Incidental Waste Disposal and
suspected or known Hazardous Materials Contamination on lands retained by
Pacific Lumber adjoining the Company Owned Timberlands, which are set forth
on Schedule 1 hereto); (iv) each Disposal Site now being used, or, to the
best of Pacific Lumber's knowledge, that has been used, is or has been
properly licensed to the extent required by law; and (v) no administrative
order, consent order and agreement, litigation, settlement or, to the best
of Pacific Lumber's knowledge, investigation, with respect to Hazardous
Materials or Hazardous Materials Contamination is in existence or, to the
best of Pacific Lumber's knowledge, proposed, threatened or anticipated,
with respect to any of the Company Timber Property other than lands
affected by the known or suspected Hazardous Materials Contamination set
forth on Schedule I hereto. No part of any Company Timber Property is
currently on, and to Pacific Lumber's knowledge has ever been on, CERCLA's
Information System or National Priorities list, or any other Federal or
State "Superfund" or "Superlien" list. Pacific Lumber has not received
notice that any Disposal Site is currently on or has ever been on CERCLA's
Information System or National Priorities list, or any other Federal or
State "Superfund" or "Superlien" list.
c. Pacific Lumber has made available to the Issuer copies of
all environmental inspection reports obtained by or for the benefit of
Pacific Lumber, Issuer and Salmon Creek, or otherwise in the possession of
Pacific Lumber, Issuer and Salmon Creek through the date hereof.
III.
INDEMNIFICATION
Pacific Lumber shall indemnify, protect, defend and hold harmless
the Issuer, and its managers, directors, officers, employees, attorneys and
agents (collectively referred to as the "Indemnified Parties" in this
Agreement) from and against any and all liabilities (including, without
limitation, strict liability), actions, demands, orders, penalties, losses,
costs or expenses (including, without limitation, reasonable attorneys'
fees and expenses and remedial costs), suits, costs of any settlement or
judgment and claims of any and every kind whatsoever (including, without
limitation, those arising under CERCLA or similar state statutes) that may
now or in the future (whether before or after payment in full of the
Secured Obligations, whether before or after any final and full release of
the Deed of Trust, or whether before or after any exercise of any power of
sale, any foreclosure sale, judicial or non-judicial, under the Deed of
Trust or a conveyance in lieu of foreclosure) be paid, incurred or suffered
by or asserted against the Indemnified Parties by any Person or entity or
Tribunal for, with respect to, or as a direct or indirect result of, (i)
the actual or threatened presence in, on or under, or the actual or
threatened escape, seepage, leakage, spillage, discharge, emission or re-
lease from, any of the Company Timber Property or any Disposal Site, of any
Hazardous Materials, or any Hazardous Materials Contamination, or arising
out of or relating to the applicability of any Environmental Law relating
to Hazardous Materials (including, without limitation, any Federal, State
or local so-called "Superfund" or "Superlien" laws, statute, law,
ordinance, code, rule, regulation, order or decree), except to the extent
that a court of competent jurisdiction shall have made a final
determination that such liability was caused by the gross negligence or
willful misconduct of such Indemnified Party or (ii) any breach of the
representations and warranties in Article II hereof; provided, however,
that this indemnity shall be limited to matters occurring, with respect to
the various properties and assets comprising the Company Timber Property,
prior to the respective dates the Issuer acquired such Company Timber Prop-
erty or as a result of actions of Pacific Lumber occurring after the
respective dates the Issuer acquired such Company Timber Property or as a
result of migration of Hazardous Materials existing on, under or around the
Company Timber Property as of the date Issuer acquired such property onto
or under adjoining properties, which migration occurred or occurs after
such date; provided, further, that the foregoing proviso shall not be con-
strued to limit any claim arising after the date hereof in respect of the
foregoing matters.
An Indemnified Party shall notify Pacific Lumber promptly of any
claim for which it may seek indemnity. Pacific Lumber shall have the right
to defend the claim, and the Indemnified Party shall cooperate in the
defense. If Pacific Lumber does not defend such claim, the Indemnified
Party may have separate counsel and Pacific Lumber shall pay the reasonable
fees and expenses of such counsel. Pacific Lumber shall have no obligation
to pay for any settlement of any such claim made without its consent.
IV.
MISCELLANEOUS
4.1 Survival. The representations, warranties, covenants and
indemnities contained in Articles II and III hereof shall survive the sale
of the Company Timber Property, and any exercise of a power of sale or any
foreclosure sale (whether judicial or nonjudicial) under the Deed of Trust
or conveyance in lieu of foreclosure, and the covenants and indemnities in
Article III hereof shall survive payment in full of the Secured Obligations
and any final and full release of the Deed of Trust.
4.2 Term. This Agreement shall become effective upon the date
first noted above and, subject to Section 4.1, shall continue in effect
until all amounts payable under the Timber Notes, the Additional Timber
Notes, the Line of Credit Agreement, the Indenture and the Deed of Trust
shall have been paid in full. This Agreement may not be amended or
terminated prior to the expiration of its term.
4.3 No Bankruptcy Petition. Pacific Lumber hereby covenants and
agrees that, prior to the date which is one year and one day after the
payment in full of all outstanding Timber Notes, it will not institute
against, or join any other Persons in instituting against, the Issuer, any
bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding or other similar proceeding under any Bankruptcy Law.
4.4 Notices. All notices and other communications required or
permitted hereunder shall be in writing and, unless otherwise provided in
this Agreement, shall be deemed to have been duly given when delivered in
person or by mail or when dispatched by telegram or electronic facsimile
transfer (confirmed in writing by mail simultaneously dispatched) to the
addressee at the address specified below:
If to Pacific Lumber:
The Pacific Lumber Company
P.O. Box 37
Scotia, California 95565
Fax: (707) 764-4269
Attention: Vice President, Finance and Administration
If to the Issuer:
Scotia Pacific Company LLC
P.O. Box 712
Scotia, California 95565
Fax: (707) 764-5001
Attention: Vice President, Finance and Administration
or such other address as either party may from time to time designate by
like notice.
4.5 Limitations on Assignment. Neither Pacific Lumber nor the
Issuer shall assign or transfer any of its rights or obligations under this
Agreement (except for the lien of the Deed of Trust and any transfer of the
rights of the Issuer hereunder by virtue of the exercise of remedies
provided for in the Deed of Trust). Notwithstanding the foregoing, nothing
herein shall prohibit any assignment occurring as a result of a transaction
permitted by Section 4.2 of the Services Agreement.
4.6 Effect of Provisions of the Other Operative Documents.
Notwithstanding any provision of the Indenture or the Deed of Trust
requiring the Issuer to pay an expense or perform an obligation, Pacific
Lumber shall not be relieved from any of its obligations under this
Agreement to pay expenses or perform obligations as expressly provided in
this Agreement.
4.7 Governing Law. This Agreement shall be governed by the
internal laws of the State of California without regard to principles of
conflict of laws.
4.8 Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed an original
but all of which together shall constitute one and the same instrument.
4.9 Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof.
4.10 Headings. The section headings of this Agreement are only
for the purpose of reference and shall not effect the meaning hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
THE PACIFIC LUMBER COMPANY
By: /S/ JOHN A. CAMPBELL
John A. Campbell
President
SCOTIA PACIFIC COMPANY LLC
By: /S/ GARY L. CLARK
Gary L. Clark
Vice-President,
Finance & Administration