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Exhibit 10.39
Translation from Russian
Registered by
Administration of Xxxxxx Xxxxxxxx district
of Khabarovsk territory
on November 25, 1996 No. 1114
Agreement
on lease of timber tracts
Executed in Xxxxxx Xxxxxxxx region on September 27, 1996
1. Parties to the Agreement
The owner of the timber tracts in Kerbinsky leskhoz, represented by its
Director Nikolai Mikhailovich Ryabov, acting on the basis of the Statute on
Kerbinsky leskhoz, hereinafter referred to as "Lessor", on the one hand, and JSC
"Udinskoye", represented by its General Director Sergei Grigorievich
Tonkogolosyuk, acting on the basis of the charter, hereinafter referred to as
the "Lessee", on the other hand, have entered into this Agreement on the lease
of forest tracts.
2. Subject of the lease, usage types and volumes
2.1. The following III grade forest tracts shall be subject to leasing:
- in Kherpuchi leskhoz: tracts Nos.: 153, 154, 163, 166-182, 184-191,
194-200, 204-210, 215-222, 224, 227-232, 244-247, 251-258, 263, 265-269,
286-289, 292-300, 303-305, 312-315, 323-344, 364-401, 410, 439-444,
472-511, 536-539, 944, 945, 948
total 201,04 thousand hectares.
2.2. The characteristics of the leased sites is enclosed in Appendixes I
and IV to this Agreement.
Appendix I. Form 1 Forest fund calculations
Appendix II. Quarterly report on areas and resources.
Appendix III. List of available wild-grown resources.
Appendix IV. List of roads available to Lessee for commercial usage or
leasing.
2.3. The timber tracts shall be assigned to the Lessee for the following
types of activities -- timber harvesting.
2.4. Annual volume of timber harvesting shall be 300 thousand cubic
meters.
2.5. The amount of timber for state deliveries shall be set forth as
[none] from the volumes above.
2.6. The harvesting volume may be changed, if necessary, upon mutual
agreement between the Lessor and the Lessee.
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3. Term of lease
The term of this lease agreement shall be 50 years, starting September
27, 1995 until September 26, 2045.
4. Specific obligations of the Lessee
4.1. To implement fire safety measures on the territory of the leased
forest tracts indicated in Section 2.1 of this Agreement and adjourning tracts
in Kerbinsky, Nimelensky and Omalsky leskhoz.
4.2. To create 40 km of mineralized stripe, 2 reservoirs and 2 helicopter
grounds.
4.3. To conduct work on regeneration using methods indicated by the
Lessor, in volumes no lesser that specified in Sections 4.4-4.9 of this
Agreement.
4.4. To ensure natural regeneration on harvested areas in the amount
of ____ hectares.
4.5. To prepare soil for forest cultures on the area of 170 hectares,
including: current year __ hectares, next year 170 hectares.
4.6. To plant forest cultures on the area of 170 hectares.
4.7. To tend to plantation on the area of 170 hectares.
4.8. To do additional planting in the area as advised by the leskhoz
annually.
4.9. To store 30 kg of conifers' seeds.
4.10. Appendix V contains a sustainable forest development plan.
4.11. Appendix VI contains an environmental protection plan.
4.12. Other considerations: Forest regeneration shall be conducted as
advised by the leskhoz annually.
5. Rights and obligations of the Lessor
5.1.The Lessor shall have the right:
5.1.1. To suggest changes to the provisions of this Agreement.
5.1.2. To lease or transfer under other conditions same timber tracts
with multiple timber resources simultaneously to different users in order to
promote multi-purpose timber harvesting under the condition that such
arrangement does not violate rights and responsibilities set forth in this
Agreement.
5.1.3. To implement control over the condition of the forest and
protective measures employed, to enforce compliance with the timber legislation,
norms and procedures in force.
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5.1.4. To implement all types of timber harvesting, including cleaning
and sanitary felling, on the leased tracts, in the event the Lessee is not able
to do so.
5.1.5. To submit indemnification claims to the Lessee with regard to
violation of cutting rules and damages to the forest as a result of the Lessee's
commercial activities.
5.1.6. To obtain from the Lessee information, reference and other
materials with respect to use, regeneration and protection of forest.
5.1.7. To suspend or limit work under the following conditions:
- violation by the Lessee of the conditions provided for in the license
and the agreement on lease of timber tracts;
- use by the Lessee of the subject of lease without approved, according
to the set procedure, plans on timber harvesting;
- nonpayment of fees for timber tract use within the set time limits.
5.1.8. To stop, upon approval from local authorities, timber harvesting
effected by the Lessee in the event that such actions are in violation of the
timber legislation and other legislation in force and this Agreement until such
violation shall be eliminated.
5.1.9. To withdraw for governmental use, in cases provided for in
legislation, certain leased timber tracts with mandatory compensation for
monetary damages, as agreed upon by the Lessee.
5.1.10. To draft the Lessee, in accordance with the resolution of the
local administration, to assist in forest fires.
5.1.11. To demand termination of this Agreement and indemnification of
damages in the event the Lessee fails to fulfill its obligations under this
Agreement.
5.2. The Lessor shall:
5.2.1. Implement control over the Lessee's forest usage and regeneration
activities on the leased territory.
5.2.2. Keep a forest cadastre, report timber tracts dynamics and make
changes to it on a timely manner.
5.2.3. Oversee forest management and inventory.
5.2.4. Provide the Lessee with materials, necessary for appropriate use
of timber resources, on a temporary basis.
5.2.5. Provide the Lessee with necessary materials on forest management
at the Lessee's expense.
5.2.6. Conduct annual marking out and appraisal of coupes, provide the
Lessee with logging tickets and other permits.
5.2.7. Examine logging sites.
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5.2.8. Provide specialized forest pathology control on leased tracts and
draft plans on pest and forest decease control.
5.2.9. Provide aerial forest control.
5.2.10. Finance forest management and regeneration measures in a timely
manner upon completion of such measures by the Lessee and acceptance of such
work by the Lessor. Financing of such work in 19__ shall be in the amount of __
thousand rubles.
5.2.11. Advance money for forest management and regeneration measures in
the amount of up to __% of their planned cost.
5.2.12. Coordinate with the Lessee location of commercial buildings,
storage facilities, forest roads, parking, measures on territorial improvement
necessary for timber harvesting.
5.2.13. Assist the Lessee with choosing forest regeneration methods,
timber species, provide the Lessee with planting material on a contractual
basis.
5.2.14. Lease timber equipment for timber harvesting and regeneration to
Lessee, if necessary.
5.2.15. Reimburse the costs of putting out forest fires to the Lessee
which occurred through no fault of the Lessee.
5.2.16. Indemnify the Lessee for losses it sustained as a result of an
unlawful suspension of his activities by the Lessor upon a court decision.
6. Rights and obligations of the Lessee
6.1. The Lessee shall have the right:
6.1.1. To effect timber harvesting on the territory of the allocated
timber tracts on conditions provided for in this Agreement and legislation in
force.
6.1.2. To build road in accordance with set procedures, temporary
commercial and lodging facilities and buildings on the leased territory
necessary for effective timber harvesting in accordance with the agreement with
the Lessor.
6.1.3. To independently chose the method for its commercial activities
with regard to the timber resources, handle harvested timber and profits
received from leasing timber tracts.
6.1.4. To suggest changes to the terms and conditions of this Agreement.
6.1.5. To effect principal and intermediate logging of timber on the
leased tracts.
6.1.6. To determine fees and receive expense reimbursement for buildings,
roads and other facilities constructed by the Lessee, in the event such
facilities are used for other purposes, excluding use of such facilities for the
purposes of the Lessor.
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6.1.7. To participate in examinations of the leased forest tracts to
assess its condition, compliance with the timber legislation, forest usage norms
and terms of this Agreement.
6.1.8. To use the Lessor's materials on condition, usage and protection
of the leased timber tracts.
6.1.9. To exercise preferential right with regard to assignment of limits
on [illegible].
6.1.10. To use equipment and machinery unless their use is prohibited by
applicable documents.
6.1.11. To demand termination of this Agreement and indemnification of
damages in the event the Lessor breaches the terms and conditions of this
Agreement.
6.1.12. To protect its interests by means of arbitration or court
proceedings in the event such interests are infringed upon.
6.2. The Lessee shall:
6.2.1. Use the lease timber tracts in accordance with legislation in
force, rules on timber harvesting, resolutions of local administration and terms
of this Agreement.
6.2.2. To ensure sustainable usage of forest resources, their
regeneration and preservation of ecological habitat of the forest.
6.2.3. Use methods that would prevent soil erosion, negative effects on
reservoirs and other natural sites.
6.2.4. Follow fire safety rules and effect fire prevention measures, help
in putting them out and assist in putting out massive forest fires on the
territory upon applicable decisions of the local administration.
6.2.5. Implement forest usage and regeneration measures, as well as other
conditions, in accordance with annually executed agreements with the Lessor.
6.2.6. Conduct regeneration measures at its own expense in excess of the
volumes provided for in this Agreements in the areas where the undergrowth was
destroyed as a result of commercial activity.
6.2.7. Take care of the regrown forest until it can be classified as
forest-covered area.
6.2.8. Refrain from undercutting forest (unfinished coupes) and leaving
harvested timber in the forest upon expiration of harvesting and removal terms.
6.2.9. Clear logging sites from pulp.
6.2.10. Restore, at its own expense, timber tracts damaged as a result of
its commercial activity o the conditions suitable for their future use as
provided in permits.
6.2.11. Turn in timber tracts to the owner upon the completing of
logging.
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6.2.12. Provide the Lessor with information necessary for inventory of
the timber resources and calculation of lease payments, as well as other
information on timber tracts' usage.
6.2.13. Make payments for the use of timber tracts in a timely manner and
in accordance with set procedures.
6.2.14. Implement the Lessor's recommendations with regard to detected
violations in accordance with the timber legislation within a determined time
frame.
6.2.15. Have a 5 to 10-year operations plan and an ecological passport.
6.2.16. Submit for acceptance by the Lessor completed facilities and
logging sites.
6.2.17. Assist with forest management and inventory.
6.2.18. Create and sustain in working order borders, rides between
quadrants, survey lines, forest management marks.
6.2.19. Participate in local ecological programs.
6.2.20. Comply with other requirements set forth in forest management
rules and regulations.
7. Payment for timber resources
7.1. Lease payments shall be set annually on the basis of the allowed
cutting volumes by the leskhoz.
7.2. The Lessee shall be obligated to transfer payments in the amount
of ____ thousand rubles to the Lessor's bank account for timber tracts leased in
19__.
7.3. Terms of payment shall be in accordance with set procedure.
7.4. Any preferential payments for use of timber resources shall be
determined by the territorial administration upon leskhoz' request.
8. Responsibilities of the parties
8.1. The Lessor shall be responsible for violation of timber legislation,
requirement on use of forest resources in accordance with the legislation of the
Russian Federation and legal regulations within the jurisdiction of local
authorities.
8.2. In the event of late response to forest fires, the Lessee shall
compensate damages in accordance with forest and environmental legislation in
force.
8.3. In the event the Lessee fails to perform regeneration procedures
during current calendar year, the incomplete amount of work shall be transferred
onto the next year along with proportional reduction in allocated forest tracts.
8.4. Upon termination of this Agreement, the guilty party shall pay
penalty in the amount of 10% of yearly lease payments.
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8.5. In the event of repeated non-fulfillment of obligations under this
Agreement (during two consecutive years), if termination is not discussed, the
guilty party shall pay penalty in the amount of 10% of annual lease payments.
8.6. In the event of late payments for timber resources and financing of
forest usage works, the guilty party shall pay penalties in the amount of 0,7%
of such amounts for each day of delay.
8.7. Any disputes arising with regard to this Agreement shall be resolved
in court or through arbitration.
9. General provisions
9.1. Upon mutual agreement, the parties can make amendments and changes
to this Agreement.
9.2. With regard to issues not provided for in this Agreement, the
parties shall be governed by legislation in force.
9.3. The provisions of this Agreement shall be subject to change in
compliance with changes in timber legislation.
9.4. This Agreement shall become effective as of its execution date.
9.5. The Lessor shall, within a 2-month period after the effective date
of this Agreement, transfer leased forest tracts and all necessary documentation
to the Lessee.
9.6. This Agreement is drafted in three copies, one of which shall be
distributed to the Lessee, one shall be forwarded to the local administration,
and one shall be kept at the leskhoz.
10. Legal addresses of the parties
10.1. Lessor: Kerbinsky leskhoz
Address: Xxxxxxxxxx Xxxxxx, 00
Xxxxxx Xxxxxxxx Xxxxxxxxxx
Xxxxxxxxxx Xxxxxxxxx 000000
Tel:
Banking requisites: APB "Konek" Account No. 141017
10.2. Lessee: JSC "Udinskoye"
Udinsk Settlement
Xxxxxx Xxxxxxxx District
Russian Federation 682391
Banking requisites: Account No. 0000000
in Komsomolsk-on-Amur branch of Regiobank
MFO 271255
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Director General Director
Kerbinsky leskhoz JSC "Udinskoye"
/s/ N. M. Ryabov /s/ S. G. Tonkogolosyuk
N. M. Ryabov S. G. Tonkogolosyuk
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THE PIONEER GROUP, INC.
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000-0000
000-000-0000
[PIONEER LOGO]
The undersigned hereby certifies that the translation of Agreement on the
Lease of Timber Tracts dated as of September 27, 1996 by and between Kerbinsky
Leskhoz and Closed Joint-Stock Company "Udinskoye" to which this certification
is attached is a fair and accurate translation of the original document executed
in Russian.
Dated: May 22, 2000
/s/ Xxxxxxxxx Xxxxxxx
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Name: Xxxxxxxxx Xxxxxxx
Title: Vice President and Assistant
General Counsel, The Pioneer Group,
Inc.
