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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
SECURITIES EXCHANGE ACT OF 1934
-----------------------
DATE OF EARLIEST EVENT REPORTED: NOVEMBER 13, 1997
U.S. TIMBERLANDS COMPANY, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 0-23259 91-1842156
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
P.O. BOX 10
6400 HIGHWAY 66
KLAMATH FALLS, OREGON 97601
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(541) 884-2240
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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ITEM 5. OTHER EVENTS
On November 19, 1997, the initial public offering of 7,458,684 common
units (the "Common Units") representing limited partner interests in U.S.
Timberlands Company, L.P. (the "Company") was consummated. In addition, the
initial public offering of $225 million aggregate principal amount of 9 5/8%
Senior Notes due 2007 issued by U.S. Timberlands Klamath Falls, L.L.C. (the
"Operating Company") and U.S. Timberlands Finance Corp. ("Finance Corp.") was
consummated. On December 12, 1997, the Company issued an additional 1,118,803
Common Units in connection with the underwriters' over-allotment option being
exercised in full. For additional information regarding the public offerings,
see the Company's Registration Statement on Form S-1 (No. 333-32811) and the
Operating Company and Finance Corp.'s Registration Statement on Form S-1 (No.
333-34389).
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
1.1 Underwriting Agreement, dated November 13, 1997, by and among U.S.
Timberlands Company, L.P., New Services, L.L.C., U.S. Timberlands
Klamath Falls, L.L.C., U.S. Timberlands Services Company, L.L.C.,
U.S. Timberlands Holdings, L.L.C. and Smith Barney Inc., as
Representative of the Underwriters.
3.1 Amended and Restated Agreement of Limited Partnership of U.S.
Timberlands Company, L.P. dated as of November 19, 1997.
3.2 Second Amended and Restated Operating Agreement of U.S.
Timberlands Klamath Falls, L.L.C. dated as of November 19, 1997.
10.1 Credit Agreement dated as of November 19, 1997, among U.S.
Timberlands Klamath Falls, L.L.C., Bank of America National Trust
and Savings Association, as Agent, and Letter of Credit Issuing
Bank and Other Financial Institutions.
10.2 Indenture dated November 19, 1997, among U.S. Timberlands Klamath
Falls, L.L.C., U.S. Timberlands Finance Corp. and State Street
Bank and Trust Company, as trustee.
10.3 Contribution, Conveyance and Assumption Agreement dated as of
November 19, 1997, among U.S. Timberlands Company, L.P., U.S.
Timberlands Management Company, L.L.C., U.S. Timberlands Klamath
Falls, L.L.C., U.S. Timberlands Holdings, L.L.C., U.S. Timberlands
Services Company, L.L.C. and Rudey Timber Company, L.L.C.
10.4 Underwriting Agreement, dated November 13, 1997, by and among New
Services, L.L.C., U.S. Timberlands Company, L.P., U.S. Timberlands
Services Company, L.L.C., U.S. Timberlands Holdings, L.L.C., U.S.
Timberlands Klamath Falls, L.L.C., U.S. Timberlands Finance Corp.
and Smith Barney Inc., as Representative of the Underwriters.
2
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10.5 Employment Agreement dated as of July 9, 1997, by and among U.S.
Timberlands Services Company, L.L.C., U.S. Timberlands Company,
L.P., New Services, L.L.C. and Edward J. Kobacker.
10.6 Employment and Consulting Agreement dated as of October 22, 1997,
by and among U.S. Timberlands Services Company, L.L.C., U.S.
Timberlands Company, L.P., New Services, L.L.C. and John J.
Stephens.
10.7 Employment Agreement dated as of November 4, 1997, by and among
U.S. Timberlands Services Company, L.L.C., U.S. Timberlands
Company, L.P., New Services, L.L.C. and John M. Rudey.
3
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
U.S. TIMBERLANDS COMPANY, L.P.
By: U.S. Timberlands Services Company, L.L.C.
Its General Partner
Date: January 14, 1998 By: /s/ John M. Rudey
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John M. Rudey
Chairman
4
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Exhibit Index
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ---------- --------------------------------------------------------------------------------
<S> <C>
1.1 Underwriting Agreement, dated November 13, 1997, by and among U.S. Timberlands
Company, L.P., New Services, L.L.C., U.S. Timberlands Klamath Falls, L.L.C.,
U.S. Timberlands Services Company, L.L.C., U.S. Timberlands Holdings, L.L.C. and
Smith Barney Inc., as Representative of the Underwriters.
3.1 Amended and Restated Agreement of Limited Partnership of U.S. Timberlands
Company, L.P. dated as of November 19, 1997.
3.2 Second Amended and Restated Operating Agreement of U.S. Timberlands Klamath
Falls, L.L.C. dated as of November 19, 1997.
10.1 Credit Agreement dated as of November 19, 1997, among U.S. Timberlands Klamath
Falls, L.L.C., Bank of America National Trust and Savings Association, as Agent,
and Letter of Credit Issuing Bank and Other Financial Institutions.
10.2 Indenture dated November 19, 1997, among U.S. Timberlands Klamath Falls, L.L.C.,
U.S. Timberlands Finance Corp. and State Street Bank and Trust Company, as
trustee.
10.3 Contribution, Conveyance and Assumption Agreement dated as of November 19, 1997,
among U.S. Timberlands Company, L.P., U.S. Timberlands Management Company,
L.L.C., U.S. Timberlands Klamath Falls, L.L.C., U.S. Timberlands Holdings,
L.L.C., U.S. Timberlands Services Company, L.L.C. and Rudey Timber Company,
L.L.C.
10.4 Underwriting Agreement, dated November 13, 1997, by and among New Services,
L.L.C., U.S. Timberlands Company, L.P., U.S. Timberlands Services Company,
L.L.C., U.S. Timberlands Holdings, L.L.C., U.S. Timberlands Klamath Falls,
L.L.C., U.S. Timberlands Finance Corp. and Smith Barney Inc., as Representative
of the Underwriters.
10.5 Employment Agreement dated as of July 9, 1997, by and among U.S. Timberlands
Services Company, L.L.C., U.S. Timberlands Company, L.P., New Services, L.L.C.
and Edward J. Kobacker.
10.6 Employment and Consulting Agreement dated as of October 22, 1997, by and among
U.S. Timberlands Services Company, L.L.C., U.S. Timberlands Company, L.P., New
Services, L.L.C. and John J. Stephens.
10.7 Employment Agreement dated as of November 4, 1997, by and among U.S. Timberlands
Services Company, L.L.C., U.S. Timberlands Company, L.P., New Services, L.L.C.
and John M. Rudey.
</TABLE>
5
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CONFORMED COPY
U.S. TIMBERLANDS COMPANY, L.P.
7,458,684 COMMON UNITS
REPRESENTING LIMITED PARTNER INTERESTS
UNDERWRITING AGREEMENT
----------------------
November 13, 1997
SMITH BARNEY INC.
DEUTSCHE MORGAN GRENFELL INC.
A.G. EDWARDS & SONS, INC.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
As Representatives of the Several Underwriters
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
U.S. Timberlands Company, L.P., a Delaware limited partnership (the
"Partnership"), proposes to issue and sell (the "Offering") an aggregate of
7,458,684 common units (the "Firm Units") representing limited partner interests
in the Partnership (the "Common Units") to the several underwriters named in
Schedule I hereto (the "Underwriters"), upon the terms and conditions set forth
in Section 2 hereof. The Partnership also proposes to sell to the Underwriters,
upon the terms and conditions set forth in Section 2 hereof, up to an additional
1,118,803 Common Units (the "Additional Units"). The Firm Units and the
Additional Units are hereinafter collectively referred to as the "Units."
It is understood and agreed to by all parties that the Partnership was
formed to acquire, own and operate the business and assets of U.S. Timberlands
Services Company, L.L.C., a Delaware limited liability company (to be renamed
"U.S. Timberlands Management Company, L.L.C.") ("Old Services"), and to acquire
the equity interests in U.S. Timberlands Klamath Falls, L.L.C., a Delaware
limited liability company (the "Operating Company"). New Services, L.L.C., a
recently formed Delaware limited liability company (to be renamed "U.S.
Timberlands Services Company, L.L.C.") (the "General Partner" and, together with
the Partnership and the Operating Company, the
<PAGE>
"U.S. Timberlands Parties"), will serve as the managing member of the Operating
Company and as the general partner of the Partnership.
The member interests of Old Services are held by Messrs. John Rudey
("Rudey"), John Stephens ("Stephens") and George Hornig ("Hornig") in the
amounts of 82.5%, 10% and 7.5%, respectively. The member interests of the
Operating Company are held 99% by U.S. Timberlands Holdings, L.L.C., a Delaware
limited liability company ("Holdings"), and 1% by Rudey Timber Company, L.L.C.,
a Delaware limited liability company ("Rudey Timber Company"). The membership
interests of Holdings are owned 1% by Rudey and 99% by Rudey Timber Company.
Rudey Timber Company is wholly owned by Rudey through a 99% directly held member
interest and a 1% member interest held by Garrin Properties Holdings, Inc., a
New York corporation wholly owned by Rudey ("Garrin Holdings").
Prior to or concurrently with the execution hereof, the Operating Company
and U.S. Timberlands Finance Corp., a recently formed Delaware corporation
("Finance Corp."), will enter into (a) an underwriting agreement (the "Note
Underwriting Agreement") with the several underwriters thereunder, providing for
the issuance and sale to such underwriters of $225 million aggregate principal
amount of unsecured senior notes (the "Notes") under an indenture relating to
the Notes (the "Indenture") and (b) will enter into a bank credit agreement (the
"Bank Credit Agreement") providing for a $25 million working capital facility
and a $75 million acquisition facility.
It is further understood and agreed by all parties that the following
transactions will occur on the Closing Date (as defined in Section 4): (i)
pursuant to a Contribution, Conveyance and Assumption Agreement (the
"Contribution Agreement"), Old Services will contribute substantially all of its
assets (the "Transferred Assets") to the General Partner in exchange for an
additional member interest in the General Partner; (ii the Operating Company
will assume certain indebtedness of Holdings, as described in the Registration
Statement (as defined in Section 1) (the "Holdings Debt"); (ii the General
Partner will contribute the portion of the Transferred Assets consisting of
working capital and timber operations to the Operating Company in exchange for
an additional member interest in the Operating Company; (iv Rudey Timber Company
will contribute its 1% member interest in the Operating Company to Holdings in
exchange for an additional member interest in Holdings; (v) the General Partner
will contribute all but 1.0101% of its member interest in the Operating Company
to the Partnership in exchange for (A) the continuation of its 1% general
partner interest in the Partnership, (B) the Incentive Distribution Rights (as
defined in the Agreement of Limited Partnership of the Partnership (as the same
may be amended or restated at or prior to the Closing Date, the "Partnership
Agreement") between the General Partner and Rudey, as organizational limited
partner (in such capacity, the "Organizational Limited Partner")), and (C)
1,387,963 subordinated limited partner interests in the Partnership
("Subordinated Units"); (vi Holdings will contribute all of its member interest
in the Operating Company to the Partnership
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in exchange for 2,894,157 Subordinated Units; (vi as a capital contribution, the
Partnership will contribute all of the issued and outstanding shares of capital
stock of Finance Corp. to the Operating Company; (viii) the public offering of
Firm Units contemplated hereby will be consummated; (ix) as a capital
contribution, the Partnership will contribute the net proceeds to the
Partnership of the Offering to the Operating Company; (x) the Operating Company
and Finance Corp. will issue the Notes pursuant to the Note Underwriting
Agreement and the Indenture; (xi) the closing under the Bank Credit Agreement
will occur; (xii) the Operating Company will use cash on hand, the proceeds to
it from the sale of the Notes, borrowings under the acquisition facility of the
Bank Credit Agreement and the net proceeds of the Offering contributed to it by
the Partnership to (A) repay the Holdings Debt, (B) repay all indebtedness of
the Operating Company under the Credit Agreement dated as of July 14, 1997 among
the Operating Company, Old Services and certain financial institutions party
thereto (the "Existing Credit Agreement") and (C) pay the expenses of each of
the Offering, the offering of the Notes and other expenses; (xiii) the General
Partner will distribute the 1,387,963 Subordinated Units held by it to Old
Services; and (xiv) Old Services will redeem Stephens' interest in Old Services
in exchange for (A) 95,238 Subordinated Units and (B) $1 million (the latter
payable in January 1998) and will redeem Hornig's interest in Old Services in
exchange for 48,160 Subordinated Units.
The transactions described above in clauses (i) through (xiv) are
collectively referred to as the "Transactions." In connection with the
consummation of the Transactions, the Partnership, the Operating Company, the
General Partner, Old Services and Holdings will enter into various bills of
sale, conveyances, deeds and other assignments (collectively with the
Contribution Agreement, the "Conveyance Agreements").
The Partnership, the Operating Company, the General Partner, Old Services
and Holdings (the "U.S. Timberlands Entities") wish to confirm as follows their
agreement with you (the "Representatives") and the several other Underwriters on
whose behalf you are acting, in connection with the several purchases of the
Units by the Underwriters.
1. Registration Statement and Prospectus. The Partnership has prepared
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and filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-1 under the Act (Commission File No.
333-32811) (the "registration statement"), including a prospectus subject to
completion relating to the Units. The term "Registration Statement" as used in
this Agreement means the registration statement (including all financial
schedules and exhibits), as amended at the time it becomes effective, or, if the
registration statement became effective prior to the execution of this
Agreement, as supplemented or amended prior to the execution of this Agreement.
If it is contemplated, at the time this Agreement is executed, that a post-
effective amendment to the registration statement will be filed and must be
declared effective before the offering of the Units may commence, the term
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<PAGE>
"Registration Statement" as used in this Agreement means the registration
statement as amended by said post-effective amendment. If it is contemplated,
at the time this Agreement is executed, that a registration statement or a post-
effective amendment will be filed pursuant to Rule 462(b) or Rule 462(d) under
the Act before the offering of the Units may commence, the term "Registration
Statement" as used in this Agreement includes such registration statement. The
term "Prospectus" as used in this Agreement means the prospectus in the form
included in the Registration Statement, or, if the prospectus included in the
Registration Statement omits information in reliance on Rule 430A under the Act
and such information is included in a prospectus filed with the Commission
pursuant to Rule 424(b) under the Act, the term "Prospectus" as used in this
Agreement means the prospectus in the form included in the Registration
Statement as supplemented by the addition of the Rule 430A information contained
in the prospectus filed with the Commission pursuant to Rule 424(b). The term
"Prepricing Prospectus" as used in this Agreement means the preliminary
prospectus dated October 24, 1997 relating to the Common Units as such
preliminary prospectus shall have been amended from time to time prior to the
date of the Prospectus.
2. Agreements to Sell and Purchase. The Partnership hereby agrees,
-------------------------------
subject to all the terms and conditions set forth herein, to issue and sell to
each Underwriter and, upon the basis of the representations, warranties and
agreements of the U.S. Timberlands Entities herein contained and subject to all
the terms and conditions set forth herein, each Underwriter agrees, severally
and not jointly, to purchase from the Partnership, at a purchase price of $19.61
per Unit (the "purchase price per Unit"), the number of Firm Units set forth
opposite the name of such Underwriter in Schedule I hereto (or such number of
Firm Units increased as set forth in Section 10 hereof).
The Partnership also agrees, subject to all the terms and conditions set
forth herein, to sell to the Underwriters, and, upon the basis of the
representations, warranties and agreements of the U.S. Timberlands Entities
herein contained and subject to all the terms and conditions set forth herein,
the Underwriters shall have the right to purchase from the Partnership, at the
purchase price per Unit, pursuant to an option (the "over-allotment option")
which may be exercised at any time and from time to time prior to 7:00 P.M., New
York City time, on the 30th day after the date of the Prospectus (or, if such
30th day shall be a Saturday or Sunday or a holiday, on the next business day
thereafter when the Nasdaq National Market is open for trading), up to an
aggregate of 1,118,803 Additional Units. Such option is granted solely for the
purpose of covering over-allotments in the sale of Firm Units. Upon any
exercise of the over-allotment option, each Underwriter, severally and not
jointly, agrees to purchase from the Partnership the number of Additional Units
(subject to such adjustments as you may determine in order to avoid fractional
Units) which bears the same proportion to the number of Additional Units to be
purchased by the Underwriters as the number of Firm Units set forth opposite the
name of such Underwriter in Schedule I hereto (or such number of Firm Units
increased as set forth in Section 10 hereof) bears to the aggregate number of
Firm Units.
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<PAGE>
3. Terms of Public Offering. The Partnership has been advised by you
------------------------
that the Underwriters propose to make a public offering of their respective
portions of the Units as soon after the Registration Statement and this
Agreement have become effective as in your judgment is advisable and initially
to offer the Units upon the terms set forth in the Prospectus.
4. Delivery of the Units and Payment Therefor. Delivery to the
------------------------------------------
Underwriters of and payment for the Firm Units shall be made at the office of
Smith Barney Inc., 388 Greenwich Street, New York, New York 10013, at 10:00
A.M., New York City time, on November 19, 1997 (the "Closing Date"). The place
of closing for the Firm Units and the Closing Date may be varied by agreement
between you and the Partnership.
Delivery to the Underwriters of and payment for any Additional Units to be
purchased by the Underwriters shall be made at the aforementioned office of
Smith Barney Inc. at such time on such date (the "Option Closing Date"), which
may be the same as the Closing Date but shall in no event be earlier than the
Closing Date nor earlier than two nor later than ten business days after the
giving of the notice hereinafter referred to, as shall be specified in a written
notice from you on behalf of the Underwriters to the Partnership of the
Underwriters' determination to purchase a number, specified in such notice, of
Additional Units. The place of closing for any Additional Units and the Option
Closing Date for such Units may be varied by agreement between you and the
Partnership.
Certificates for the Firm Units and for any Additional Units to be
purchased hereunder shall be registered in such names and in such denominations
as you shall request prior to 5:00 P.M., New York City time, on the third
business day preceding the Closing Date or any Option Closing Date, as the case
may be. Such certificates shall be made available to you in New York City for
inspection and packaging not later than 11:30 A.M., New York City time, on the
business day next preceding the Closing Date or the Option Closing Date, as the
case may be. The certificates evidencing the Firm Units and any Additional
Units to be purchased hereunder shall be delivered to you on the Closing Date or
the Option Closing Date, as the case may be, against payment of the purchase
price therefor in immediately available funds.
5. Agreements of the U.S. Timberlands Entities. Each of the U.S.
-------------------------------------------
Timberlands Entities, jointly and severally, agrees with the several
Underwriters as follows:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
to be declared effective before the offering of the Units may commence, the
Partnership and the General Partner will endeavor to cause the Registration
Statement or such post-effective amendment to become effective as soon as
possible and will advise you promptly and, if requested by you, will confirm
such advice in writing, when the Registration Statement or such post-effective
amendment has become effective.
(b) The Partnership will advise you promptly and, if requested by you,
will confirm such advice in writing: (i) of any request by the Commission for
amendment of or a
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<PAGE>
supplement to the Registration Statement, any Prepricing Prospectus or the
Prospectus or for additional information; (ii) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration Statement or
of the suspension of qualification of the Units for offering or sale in any
jurisdiction or the initiation of any proceeding for such purpose; and (iii)
within the period of time referred to in paragraph (f) below, of any change in
the condition (financial or other), business, prospects, properties, net worth
or results of operations of the U.S. Timberlands Parties, taken as a whole, or
of the happening of any event which makes any statement of a material fact made
in the Registration Statement or the Prospectus (as then amended or
supplemented) untrue or which requires the making of any additions to or changes
in the Registration Statement or the Prospectus (as then amended or
supplemented) in order to state a material fact required by the Act or the
regulations thereunder to be stated therein or necessary in order to make the
statements therein not misleading, or of the necessity to amend or supplement
the Prospectus (as then amended or supplemented) to comply with the Act or any
other applicable law. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, the Partnership and
the General Partner will make every reasonable effort to obtain the withdrawal
of such order at the earliest possible time.
(c) The Partnership will furnish to you, without charge, (i) two EDGAR
versions of the registration statement as originally filed with the Commission
and of each amendment thereto, including financial statements and all exhibits
to the registration statement, (ii) two manually signed copies of the
registration statement corresponding to the EDGAR version filed with the
Commission and of each amendment thereto, including financial statements and all
exhibits to the registration statement, and (iii) such number of conformed
copies of the registration statement as originally filed and of each amendment
thereto, but without exhibits, as you or your counsel may reasonably
request.
(d) The Partnership will not (i) file any amendment to the
Registration Statement or make any amendment or supplement to the Prospectus of
which you shall not previously have been advised or to which you or your counsel
shall reasonably object in writing after being so advised or (ii) so long as, in
the opinion of counsel for the Underwriters, a Prospectus is required to be
delivered in connection with sales by any Underwriter or dealer, file any
information, documents or reports pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), without delivering a copy of such
information, documents or reports to you, as Representatives of the
Underwriters, prior to or concurrently with such filing.
(e) Prior to the execution and delivery of this Agreement, the
Partnership has delivered to you, without charge, in such quantities as you have
reasonably requested, copies of each form of the Prepricing Prospectus. The
Partnership consents to the use, in accordance with the provisions of the Act
and with the securities or Blue Sky laws of the jurisdictions in which the Units
are offered by the several Underwriters and by dealers, prior to the date of the
Prospectus, of each Prepricing Prospectus so furnished by the Partnership.
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<PAGE>
(f) As soon after the execution and delivery of this Agreement as
possible and thereafter from time to time for such period as in the opinion of
counsel for the Underwriters a prospectus is required by the Act to be delivered
in connection with sales by any Underwriter or dealer, the Partnership will
expeditiously deliver to each Underwriter and each dealer, without charge, as
many copies of the Prospectus (and of any amendment or supplement thereto) as
you may reasonably request. At any time after nine months after the time of
issuance of the Prospectus, upon request, but at your expense, the Partnership
will deliver as many copies of an amended or supplemented Prospectus complying
with Section 10(a)(3) of the Act as you may reasonably request, provided that a
prospectus is required by the Act to be delivered in connection with sales of
Units by any Underwriter or dealer. The Partnership consents to the use of the
Prospectus (and of any amendment or supplement thereto) in accordance with the
provisions of the Act and with the securities or Blue Sky laws of the
jurisdictions in which the Units are offered by the several Underwriters and by
all dealers to whom Units may be sold, both in connection with the offering and
sale of the Units and for such period of time thereafter as the Prospectus is
required by the Act to be delivered in connection with sales by any Underwriter
or dealer. If during such period of time any event shall occur that in the
judgment of the Partnership or in the opinion of counsel for the Underwriters is
required to be set forth in the Prospectus (as then amended or supplemented) or
should be set forth therein in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or if it
is necessary to supplement or amend the Prospectus to comply with the Act or any
other law, the Partnership will forthwith prepare and, subject to the provisions
of paragraph (d) above, file with the Commission an appropriate supplement or
amendment thereto, and will expeditiously furnish to the Underwriters and
dealers a reasonable number of copies thereof; provided that if any such event
necessitating a supplement or amendment to the Prospectus occurs at any time
after nine months after the time of issuance of the Prospectus, such supplement
or amendment shall be prepared at your expense. In the event that the
Partnership and you, as Representatives of the several Underwriters, agree that
the Prospectus should be amended or supplemented, the Partnership, if requested
by you, will promptly issue a press release announcing or disclosing the matters
to be covered by the proposed amendment or supplement.
(g) The Partnership and the General Partner will cooperate with you
and with counsel for the Underwriters in connection with the registration or
qualification of the Units for offering and sale by the several Underwriters and
by dealers under the securities or Blue Sky laws of such jurisdictions as you
may designate and will file such consents to service of process or other
documents necessary or appropriate in order to effect such registration or
qualification; provided that in no event shall the Partnership or the General
Partner be obligated to qualify to do business in any jurisdiction where it is
not now so qualified or to take any action which would subject it to service of
process in suits, other than those arising out of the offering or sale of the
Units, in any jurisdiction where it is not now so subject.
(h) The Partnership will make generally available to its security
holders a consolidated earnings statement, which need not be audited, covering a
twelve-month period commencing after the effective date of the Registration
Statement and ending not later than 15
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<PAGE>
months thereafter, as soon as practicable after the end of such period, which
consolidated earnings statement shall satisfy the provisions of Section 11(a) of
the Act.
(i) During the period of two years hereafter, the Partnership will
furnish to you (i) as soon as publicly available, a copy of each report of the
Partnership mailed to unitholders or filed with the Commission or the principal
national securities exchange or automated quotation system upon which the Units
may be listed, and (ii) from time to time such other information concerning the
Partnership as you may reasonably request.
(j) If this Agreement shall terminate or shall be terminated after
execution pursuant to any provisions hereof (otherwise than pursuant to the
second paragraph of Section 10 hereof or by notice given by you terminating this
Agreement pursuant to Section 10 or Section 11 hereof) or if this Agreement
shall be terminated by the Underwriters because of any failure or refusal on the
part of any of the U.S. Timberlands Entities to comply with the terms or fulfill
any of the conditions of this Agreement, the U.S. Timberlands Entities, jointly
and severally, agree to reimburse the Representatives for all reasonable out-of-
pocket expenses (including reasonable fees and expenses of counsel for the
Underwriters) incurred by you in connection herewith.
(k) The Partnership will apply the net proceeds from the sale of the
Units, the Operating Company and Finance Corp. will apply the net proceeds from
the sale of the Notes and the Operating Company will apply any amount drawn
under the Bank Credit Agreement and all amounts contributed to it by the
Partnership from the sale of the Units, in accordance with the description set
forth under the caption "Use of Proceeds" in the Prospectus.
(l) If Rule 430A of the Act is employed, the Partnership will timely
file the Prospectus pursuant to Rule 424(b) under the Act and will advise you of
the time and manner of such filing.
(m) Except as provided in this Agreement, the U.S. Timberlands
Entities will not (i) offer, sell, contract to sell or otherwise dispose of any
Common Units or Subordinated Units, any securities that are convertible into or
exercisable or exchangeable for or that represent the right to receive Common
Units or Subordinated Units or any securities that are senior to or pari passu
with Common Units, or (ii) grant any options or warrants to purchase Common
Units or Subordinated Units (other than the grant of options to purchase Common
Units pursuant to the U.S. Timberlands 1997 Long-Term Incentive Plan), for a
period of 180 days after the date of the Prospectus without the prior written
consent of Smith Barney Inc., except for the issuance and transfer of Common
Units and Subordinated Units to occur upon the closing of the Offering described
in the Prospectus; provided however, that, notwithstanding the foregoing, each
of Old Services and Holdings may transfer any of the above-mentioned securities
held by them to John M. Rudey, any member of his immediate family or a trust,
family partnership or similar family-related or family controlled entity, all of
the interests of which are owned by John M. Rudey or members of his immediate
family, so long as such transferee shall execute a letter agreement in
substantially the form of Exhibit A hereto agreeing to the foregoing
restrictions.
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(n) Except as stated in this Agreement and in the Prepricing
Prospectus and Prospectus, the U.S. Timberlands Entities have not taken, and
will not take, directly or indirectly, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Common Units to facilitate the sale or resale of the Units.
(o) Each of the U.S. Timberlands Parties will take such steps as shall
be necessary to ensure that none of them shall become an "investment company"
within the meaning of such term under the Investment Company Act of 1940, as
amended, and the rules and regulations of the Commission thereunder.
(p) The Partnership shall timely complete all required filings and
otherwise fully comply in a timely manner with all provisions of the Exchange
Act, including the rules and regulations thereunder, in connection with the
registration of the Units thereunder.
(q) Each of the U.S. Timberlands Parties will cause to be accomplished
or obtained as soon as practicable all consents, recordings and filings
necessary to perfect, preserve and protect the title of the Operating Company to
the properties and assets owned by it as a result of the Transactions.
6. Representations and Warranties of the U.S. Timberlands Entities. The
---------------------------------------------------------------
U.S. Timberlands Entities, jointly and severally (except that the
representations and warranties contained in Sections 6(k) and 6(l) are made
solely by Old Services and the representations and warranties contained in
Sections 6(m) and 6(n) are made solely by Holdings), represent and warrant to
each Underwriter that:
(a) Any Prepricing Prospectus, at the date of filing thereof with the
Commission, complied in all material respects with the requirements of the Act
and did not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The Commission has not issued any order preventing or
suspending the use of any Prepricing Prospectus. The Registration Statement in
the form in which it became or becomes effective and also in such form as it may
be when any post-effective amendment thereto shall become effective and the
Prospectus and any supplement or amendment thereto when filed with the
Commission under Rule 424(b) under the Act complied or will comply in all
material respects with the provisions of the Act and did not or will not at any
such times contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading. Each of the statements made by the Partnership in such
documents within the coverage of Rule 175(b) of the rules and regulations under
the Act, including (but not limited to) any statements with respect to future
available cash or future cash distributions
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of the Partnership, the anticipated ratio of taxable income to distributions or
the size of the Partnership's expected harvest was made or will be made with a
reasonable basis and in good faith. Notwithstanding the foregoing, no
representation and warranty is made as to statements in or omissions from the
Registration Statement, the Prospectus or any Prepricing Prospectus made in
reliance upon and in conformity with information furnished to the Partnership in
writing by or on behalf of any Underwriter through you expressly for use
therein.
(b) The Partnership has been duly formed and is validly existing in
good standing as a limited partnership under the Delaware Revised Uniform
Limited Partnership Act (the "Delaware LP Act") with full partnership power and
authority to own or lease its properties to be owned or leased at the Closing
Date, to assume the liabilities being assumed by it pursuant to the Conveyance
Agreements and to conduct its business to be conducted at the Closing Date, in
each case in all material respects as described in the Registration Statement
and the Prospectus. The Partnership is, or at the Closing Date will be, duly
registered or qualified as a foreign limited partnership for the transaction of
business under the laws of each jurisdiction in which the character of the
business conducted by it or the nature or location of the properties owned or
leased by it makes such registration or qualification necessary, except where
the failure so to register or qualify would not (i) have a material adverse
effect on the condition (financial or other), business, prospects, properties,
net worth or results of operations of the Partnership and the Operating
Company, taken as a whole, or (ii) subject the limited partners of the
Partnership to any material liability or disability.
(c) The Operating Company has been duly formed and is validly existing
in good standing as a limited liability company under the Delaware Limited
Liability Company Act (the "Delaware LLC Act") with full limited liability
company power and authority to own or lease its properties to be owned or leased
at the Closing Date, to assume the liabilities being assumed by it pursuant to
the Conveyance Agreements and to conduct its business to be conducted at the
Closing Date, in each case in all material respects as described in the
Registration Statement and the Prospectus. The Operating Company is, or at the
Closing Date will be, duly registered or qualified as a foreign limited
liability company for the transaction of business under the laws of each
jurisdiction in which the character of the business conducted by it or the
nature or location of the properties owned or leased by it makes such
registration or qualification necessary, except where the failure so to register
or qualify would not (i) have a material adverse effect on the condition
(financial or other), business, prospects, properties, net worth or results of
operations of the Partnership and the Operating Company, taken as a whole, or
(ii) subject the limited partners of the Partnership to any material liability
or disability.
(d) The General Partner has been duly formed and is validly existing
in good standing as a limited liability company under the Delaware LLC Act with
full limited liability company power and authority to own or lease its
properties to be owned or leased at the Closing Date, to conduct its business to
be conducted at the Closing Date and to act as general partner of the
Partnership and as managing member of the Operating Company, in each case in all
material respects as described in the Registration Statement and the Prospectus.
The General Partner is duly registered or qualified as a foreign limited
liability company for the transaction of business
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under the laws of each jurisdiction in which the character of the business
conducted by it or the nature or location of the properties owned or leased by
it makes such registration or qualification necessary, except where the failure
so to register or qualify would not (i) have a material adverse effect on the
condition (financial or other), business, prospects, properties, net worth or
results of operations of the General Partner or (ii) subject the limited
partners of the Partnership to any material liability or disability.
(e) None of the U.S. Timberlands Parties or Finance Corp. has any
subsidiaries, other than the Partnership and Operating Company themselves and
Finance Corp.
(f) At the Closing Date and the Option Closing Date, after giving
effect to the Transactions, the General Partner will be the sole general partner
of the Partnership with a 1% general partner interest in the Partnership; such
general partner interest will be duly authorized and validly issued in
accordance with the Partnership Agreement; the General Partner will own all of
the Incentive Distribution Rights; such Incentive Distribution Rights will be
duly authorized and validly issued in accordance with the Partnership Agreement
and are fully paid (to the extent required under the Partnership Agreement) and
nonassessable (except as such nonassessability may be affected by matters
described in the Prospectus under the caption "The Partnership Agreement--
Limited Liability") and the General Partner will own such general partner
interest and Incentive Distribution Rights free and clear of all liens,
encumbrances, security interests, equities, charges or claims.
(g) At the Closing Date, after giving effect to the Transactions,
Holdings, Old Services, Stephens and Hornig will own limited partner interests
in the Partnership represented by 2,894,157, 1,244,565, 95,238 and 48,160
Subordinated Units, respectively; all of such Subordinated Units and the limited
partner interests represented thereby will be duly authorized and validly issued
in accordance with the Partnership Agreement, and will be fully paid (to the
extent required under the Partnership Agreement) and nonassessable (except as
such nonassessability may be affected by matters described in the Prospectus
under the caption "The Partnership Agreement--Limited Liability"); and Holdings
and Old Services will hold their respective
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limited partner interests represented by their Subordinated Units free and clear
of all liens, encumbrances, security interests, equities, charges or claims,
except as provided in that certain Pledge Agreement by and among John M. Rudey,
Laurie Rudey and Smith Barney Holdings Inc. (the "Rudey Pledge Agreement").
(h) At the Closing Date, there will be issued to the Underwriters the
Firm Units (assuming no purchase by the Underwriters of Additional Units); at
the Closing Date or the Option Closing Date, as the case may be, the Firm Units
or the Additional Units, as the case may be, and the limited partner interests
represented thereby will be duly authorized by the Partnership Agreement and,
when issued and delivered to the Underwriters against payment therefor in
accordance with the terms hereof, will be validly issued, fully paid (to the
extent required under the Partnership Agreement) and nonassessable (except as
such nonassessability may be affected by matters described in the Prospectus
under the caption "The Partnership Agreement--Limited Liability"); and other
than the Subordinated Units owned by Holdings, Old Services, Stephens and Hornig
as set forth above and the Incentive Distribution Rights issued to the General
Partner, the Units will be the only limited partner interests of the Partnership
issued and outstanding at the Closing Date or the Option Closing Date.
(i) At the Closing Date and the Option Closing Date, after giving
effect to the Transactions, the General Partner will own a 1.0101% member
interest in the Operating Company and the Partnership will own a 98.9899% member
interest in the Operating Company; such member interests will have been duly
authorized and validly issued in accordance with the Operating Agreement of the
Operating Company (as the same may be amended and restated at or prior to the
Closing Date, the "Operating Company Agreement") and will be fully paid (to the
extent required under the Operating Company Agreement) and nonassessable (except
as such nonassessability may be affected by Section 18-607 of the Delaware LLC
Act); and the General Partner and the Partnership will own such member interests
free and clear of all liens, encumbrances, security interests, equities, charges
or claims.
(j) At the Closing Date and the Option Closing Date, after giving
effect to the Transactions, Old Services, Stephens and Hornig will own member
interests of 70%, 10%, and 7.5%, respectively, in the General Partner; such
member interests will have been duly authorized and validly issued in accordance
with the Operating Agreement of the General Partner (as the same may be amended
and restated at or prior to the Closing Date, the "General Partner Agreement"
and together with the Partnership Agreement and the Operating Company Agreement,
the "Organization Agreements") and will be fully paid (to the extent required
under the General Partner Agreement) and nonassessable (except as such
nonassessability may be affected by Section 18-607 of the
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Delaware LLC Act); and Old Services will own its member interest free and clear
of all liens, encumbrances, security interests, equities, charges or
claims.
(k) Old Services has been duly formed and is validly existing in good
standing as a limited liability company under the Delaware LLC Act with full
limited liability company power and authority to own or lease its properties to
be owned or leased at the Closing Date, to conduct its business to be conducted
at the Closing Date and to execute and deliver this Agreement and the Operative
Agreements (as defined in Section 6(q)) to which it is a party and perform its
obligations hereunder and thereunder, in each case in all material respects as
described in the Registration Statement and the Prospectus. Old Services is
duly registered or qualified as a foreign limited liability company for the
transaction of business under the laws of each jurisdiction in which the
character of the business conducted by it or the nature or location of the
properties owned or leased by it makes such registration or qualification
necessary, except where the failure so to register or qualify would not have a
material adverse effect on the condition (financial or other), business,
prospects, properties, net worth or results of operations of the U.S.
Timberlands Parties, taken as a whole.
(l) At the Closing Date, after giving effect to the Transactions,
Rudey will own a 100% member interest in Old Services; such member interest will
have been duly authorized and validly issued in accordance with the Operating
Agreement of Old Services (as the same may be amended and restated at or prior
to the Closing Date, the "Old Services Agreement") and will be fully paid (to
the extent required under the Old Services Agreement) and nonassessable (except
as such assessability may be affected by Section 18-607 of the Delaware LLC
Act); and Rudey will own such member interest free and clear of all liens,
encumbrances, security interests, equities, charges or claims.
(m) Holdings has been duly formed and is validly existing in good
standing as a limited liability company under the Delaware LLC Act with full
limited liability company power and authority to own or lease its properties to
be owned or leased at the Closing Date, to conduct its business to be conducted
at the Closing Date and to execute and deliver this Agreement and the Operative
Agreements to which it is a party and perform its obligations hereunder and
thereunder, in each case, in all material respects as described in the
Registration Statement and the Prospectus.
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<PAGE>
(n) At the Closing Date, Rudey will own a 1% member interest in
Holdings and Rudey Timber Company will own a 99% member interest in Holdings;
such member interests will have been duly authorized and validly issued in
accordance with the Operating Agreement of Holdings (as the same may be amended
and restated at or prior to the Closing Date, the "Holdings Agreement") and will
be fully paid (to the extent required under the Holdings Agreement) and
nonassessable (except as such nonassessability may be affected by Section 18-607
of the Delaware LLC Act); and Rudey and Rudey Timber Company will own such
member interests free and clear of all liens, encumbrances, security interests,
equities, charges or claims.
(o) Except as described in the Prospectus, there are no preemptive
rights or other rights to subscribe for or to purchase, nor any restriction upon
the voting or transfer of, any limited partner interests in the Partnership or
any member interests in the Operating Company pursuant to either the Partnership
Agreement or the Operating Company Agreement, respectively, or any agreement or
other instrument to which the Partnership or the Operating Company is a party or
by which either of them may be bound. Neither the filing of the Registration
Statement nor the offering or sale of the Units as contemplated by this
Agreement gives rise to any rights for or relating to the registration of any
Units or other securities of the Partnership or the Operating Company. Except
as described in the Prospectus, there are no outstanding options or warrants to
purchase any Common Units or Subordinated Units or other partnership interests
in the Partnership or member interests in the
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Operating Company. The Units, when issued and delivered against payment therefor
as provided herein, and the Subordinated Units, when issued and delivered in
accordance with the terms of the Partnership Agreement and the Contribution
Agreement, will conform in all material respects to the description thereof
contained in the Prospectus. The Partnership has all requisite power and
authority to issue, sell and deliver (i) the Units, in accordance with and upon
the terms and conditions set forth in this Agreement, the Partnership Agreement
and the Registration Statement and Prospectus, and (ii) the Subordinated Units
and Incentive Distribution Rights, in accordance with the terms and conditions
set forth in the Partnership Agreement and the Contribution Agreement. At the
Closing Date and the Option Closing Date, all corporate, partnership and limited
liability company action, as the case may be, required to be taken by the U.S.
Timberlands Entities and Finance Corp. or any of their shareholders, partners or
members for the authorization, issuance, sale and delivery of the Units and the
Subordinated Units and the consummation of the transactions (including the
Transactions) contemplated by this Agreement, the Notes and the Operative
Agreements shall have been validly taken.
(p) The execution and delivery of, and the performance, by each of the
U.S. Timberlands Entities of their respective obligations under, this Agreement
have been duly and validly authorized by each of the U.S. Timberlands Entities,
and this Agreement has been duly executed and delivered by each of the U.S.
Timberlands Entities, and constitutes the valid and legally binding agreement of
each of the U.S. Timberlands Entities, enforceable against each of the U.S.
Timberlands Entities in accordance with its terms, provided that the
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws relating to or affecting
creditors' rights generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and except as rights to indemnity and contribution hereunder may be limited by
federal or state securities laws.
(q) At or before the Closing Date, the Partnership Agreement will have
been duly authorized, executed and delivered by the General Partner and will be
a valid and legally binding agreement of the General Partner and the
Organizational Limited Partner, enforceable against the General Partner and the
Organizational Limited Partner in accordance with its terms; at or before the
Closing Date, the Operating Company Agreement will have been duly authorized,
executed and delivered by each of the General Partner and the Partnership and
will be a valid and legally binding agreement of the General Partner and the
Partnership, enforceable against each of them in accordance with its terms; at
or before the Closing Date, the General Partner Agreement will have been duly
authorized, executed and delivered by the parties thereto and will be a valid
and legally binding agreement of each of them enforceable against each of them
in accordance with its terms; at or before the Closing Date, each of the
Conveyance Agreements will have been duly authorized, executed and delivered by
the parties thereto and will be a valid and legally binding agreement of the
parties thereto enforceable against such parties in accordance with its terms;
at or before the Closing Date, a non-competition agreement (the "Non-Competition
Agreement") will have been duly authorized, executed and delivered by each of
the Partnership, the Operating Company, Old Services, Rudey, Stephens,
Holdings, Rudey Timber
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<PAGE>
Company and Garrin Properties and will be a valid and legally binding agreement
of each of them enforceable against each of them in accordance with its terms;
at or before the Closing Date, the Bank Credit Agreement will have been duly
authorized, executed and delivered by the Operating Company and will be a valid
and legally binding agreement of the Operating Company enforceable against the
Operating Company in accordance with its terms; at or before the Closing Date,
the Indenture will have been duly authorized, executed and delivered by the
Operating Company and Finance Corp. and the Trustee and will be a valid and
legally binding agreement of the Operating Company and Finance Corp. enforceable
against the Operating Company and Finance Corp. in accordance with its terms and
will be duly qualified under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"); at or before the Closing Date, the Notes will have been
duly authorized for issuance and sale to the underwriters with respect to the
Notes by each of the Operating Company and Finance Corp. and, when issued and
authenticated in accordance with the terms of the Indenture and delivered
against payment therefor in accordance with the terms of the Note Underwriting
Agreement, will constitute valid and binding obligations of the Operating
Company and Finance Corp. enforceable against the Operating Company and Finance
Corp. in accordance with their terms and entitled to the benefits of the
Indenture; provided that, with respect to each agreement described in this
Section 6(q), the enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws
relating to or affecting creditors' rights generally and by general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law); and provided, further, that the indemnity,
contribution and exoneration provisions contained in any of such agreements may
be limited by applicable laws and public policy. The Organization Agreements,
the Conveyance Agreements, the Non-Competition Agreement, the Bank Credit
Agreement, the Indenture and the Notes are herein collectively referred to as
the "Operative Agreements."
(r) None of the offering, issuance and sale by the Partnership of the
Units, the offering, issuance and sale by the Operating Company and Finance
Corp. of the Notes, the execution, delivery and performance of this Agreement,
the Note Underwriting Agreement or the Operative Agreements (other than the
General Partner Agreement) by the U.S. Timberlands Entities which are parties
thereto, or the consummation of the transactions contemplated hereby and thereby
(including the Transactions) (i) conflicts or will conflict with or constitutes
or will constitute a violation of the agreement of limited partnership, limited
liability company operating agreement (other than the General Partner
Agreement), certificate or articles of incorporation or bylaws or other
organizational documents of any of the U.S. Timberlands Entities, (ii) conflicts
or will conflict with or constitutes or will constitute a breach or violation
of, or a default under (or an event which, with notice or lapse of time or both,
would constitute such an event), any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument (other than the General
Partner Agreement) to which any of the U.S. Timberlands Entities is a party or
by which any of them or any of their respective properties may be bound, (iii)
violates or will violate any statute, law or regulation or any order, judgment,
decree or injunction of any court or governmental agency or body directed to any
of the U.S. Timberlands
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Entities or any of their properties in a proceeding to which any of them or
their property is a party, (iv) will result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of any of the U.S.
Timberlands Entities, in the case of clauses (ii), (iii) or (iv) which
conflicts, breaches, violations or defaults would have a material adverse effect
upon the condition (financial or other), business, prospects, properties, net
worth or results of operations of the U.S. Timberlands Parties, taken as a
whole.
(s) No permit, consent, approval, authorization or order of any court,
governmental agency or body is required in connection with the execution and
delivery of, or the consummation by the U.S. Timberlands Entities of the
transactions contemplated by, this Agreement, the Note Underwriting Agreement or
the Operative Agreements, except (i) for such permits, consents, approvals and
similar authorizations required under the Securities Act, the Exchange Act, the
Trust Indenture Act and state securities or "Blue Sky" laws, (ii) for such
permits, consents, approvals and similar authorizations which have been, or
prior to the Closing Date will be, obtained, and (iii) for such permits,
consents, approvals and similar authorizations which, if not obtained, would
not, individually or in the aggregate, have a material adverse effect upon the
condition (financial or other), business, prospects, properties, net worth or
results of operations of the U.S. Timberlands Parties, taken as a whole.
(t) None of the U.S. Timberlands Entities is in (i) violation of its
agreement of limited partnership, limited liability company operating agreement,
certificate or articles of incorporation or bylaws or other organizational
documents, or of any law, statute, ordinance, administrative or governmental
rule or regulation applicable to it or of any decree of any court or
governmental agency or body having jurisdiction over it, or (ii) breach, default
(or an event which, with notice or lapse of time or both, would constitute such
an event) or violation in the performance of any obligation, agreement or
condition contained in any bond, debenture, note or any other evidence of
indebtedness or in any agreement, indenture, lease or other instrument to which
it is a party or by which it or any of its properties may be bound, which
breach, default or violation would, if continued, have a material adverse effect
on the condition (financial or other), business, prospects, properties, net
worth or results of operations of the U.S. Timberlands Parties, taken as a
whole, or could materially impair the ability of any of the U.S. Timberlands
Parties to perform its obligations under this Agreement, the Note Underwriting
Agreement, or the Operative Agreements. To the knowledge of the U.S.
Timberlands Entities, no third party to any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which any of the U.S.
Timberlands Parties is a party or by which any of them is bound or to which any
of their properties are subject, is in default under any such agreement, which
breach, default or violation would, if continued, have a material adverse effect
on the condition (financial or other), business, prospects, properties, net
worth or results of operations of the U.S. Timberlands Parties, taken as a
whole.
(u) The accountants, Arthur Andersen LLP, who have certified or shall
certify the audited financial statements included in the Registration Statement,
any Prepricing Prospectus and the Prospectus (or any amendment or supplement
thereto) are independent public accountants
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with respect to the U.S. Timberlands Entities as required by the Act and the
applicable published rules and regulations thereunder.
(v) At September 30, 1997, the Partnership would have had, on the
consolidated pro forma basis indicated in the Prospectus (and any amendment or
supplement thereto), a capitalization as set forth therein. The financial
statements (including the related notes and supporting schedules) included in
the Registration Statement, the Prepricing Prospectus dated October 24, 1997 and
the Prospectus (and any amendment or supplement thereto) present fairly in all
material respects the financial position, results of operations and cash flows
of the entities purported to be shown thereby on the basis stated therein at the
respective dates or for the respective periods which have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except to the extent disclosed therein. The
selected historical and pro forma information set forth in the Registration
Statement, the Prepricing Prospectus dated October 24, 1997 and the Prospectus
(and any amendment or supplement thereto) under the caption "Selected Historical
and Pro Forma Financial and Operating Data" is accurately presented in all
material respects and prepared on a basis consistent with the audited and
unaudited historical consolidated financial statements and pro forma financial
statements from which it has been derived. The pro forma financial statements
of the Partnership included in the Registration Statement, the Prepricing
Prospectus dated October 24, 1997 and the Prospectus (and any amendment or
supplement thereto) have been prepared in all material respects in accordance
with the applicable accounting requirements of Article 11 of Regulation S-X of
the Commission; the assumptions used in the preparation of such pro forma
financial statements are, in the opinion of the management of the U.S.
Timberlands Entities, reasonable; and the pro forma adjustments reflected in
such pro forma financial statements have been properly applied to the historical
amounts in compilation of such pro forma financial statements.
(w) Except as disclosed in the Registration Statement, the Prepricing
Prospectus dated October 24, 1997 and the Prospectus (or any amendment or
supplement thereto), subsequent to the respective dates as of which such
information is given in the Registration Statement, the Prepricing Prospectus
dated October 24, 1997 and the Prospectus (or any amendment or supplement
thereto), (i) none of the U.S. Timberlands Entities has incurred any liability
or obligation, indirect, direct or contingent, or entered into any transactions,
not in the ordinary course of business, that, singly or in the aggregate, is
material to the U.S. Timberlands Parties, taken as a whole, (ii) there has not
been any change in the capitalization, or material increase in the short-term
debt or long-term debt, of the U.S. Timberlands Entities and (iii) there has not
been any material adverse change, or any development involving or which may
reasonably be expected to involve, singly or in the aggregate, a prospective
material adverse change, in the condition (financial or other), business,
prospects, properties, net worth or results of operations of the U.S.
Timberlands Parties taken as a whole.
(x) There are no legal or governmental proceedings pending or, to the
knowledge of the U.S. Timberlands Entities, threatened, against any of the U.S.
Timberlands Entities, or to which any of the U.S. Timberlands Entities is a
party, or to which any of their
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respective properties is subject, that are required to be described in the
Registration Statement or the Prospectus but are not described as required, and
there are no agreements, contracts, indentures, leases or other instruments that
are required to be described in the Registration Statement or the Prospectus or
to be filed as an exhibit to the Registration Statement that are not described
or filed as required by the Act.
(y) Old Services and the Operating Company have, and upon
consummation of the Transactions on the Closing Date, the Operating Company will
have, good and marketable title in fee simple to all real property and good
title to all personal property described in the Prospectus to be owned by the
Operating Company, free and clear of all liens, claims, security interests or
other encumbrances except (i) as described in the Prospectus and (ii) such as do
not materially interfere with the use of such properties taken as a whole as
they have been used in the past and are proposed to be used in the future as
described in the Prospectus; and all real property and buildings held under
lease by Old Services and the Operating Company are held by Old Services and the
Operating Company, and upon consummation of the Transactions on the Closing
Date, will be held by the Operating Company, under valid and subsisting and
enforceable leases with such exceptions as do not materially interfere with the
use of such properties taken as a whole as they have been used in the past and
are proposed to be used in the future as described in the Prospectus. The
Conveyance Agreements will be, as of the Closing Date, legally sufficient to
transfer or convey to the Operating Company all properties not already held by
it that are, individually or in the aggregate, required to enable the Operating
Company to conduct its operations (in all material respects as contemplated by
the Prospectus), subject to the conditions, reservations and limitations
contained in the Conveyance Agreements and those set forth in the Prospectus.
The Operating Company will, upon execution and delivery of the Conveyance
Agreements, succeed in all material respects to the business, assets,
properties, liabilities and operations reflected by the pro forma financial
statements of the Partnership, except as disclosed in the Prospectus.
(z) The Partnership has not distributed and, prior to the later to
occur of (i) the Closing Date and (ii) completion of the distribution of the
Units, will not distribute, any prospectus (as defined under the Act) in
connection with the offering and sale of the Units other than the Registration
Statement, any Prepricing Prospectus, the Prospectus or other materials, if any,
permitted by the Act, including Rule 134 of the general rules and regulations
thereunder.
(aa) Each of the U.S. Timberlands Parties has, or at the Closing Date
will have, such permits, consents, licenses, franchises and authorizations of
governmental or regulatory authorities ("permits") as are necessary to own its
properties and to conduct its business in the manner described in the
Prospectus, subject to such qualifications as may be set forth in the Prospectus
and except for such permits which, if not obtained, would not have, individually
or in the aggregate, a material adverse effect upon the ability of the U.S.
Timberlands Parties considered as a whole to conduct their businesses in all
material respects as currently conducted and as contemplated by the Prospectus
to be conducted; each of the U.S. Timberlands Parties has, or at the Closing
Date will have, fulfilled and performed all its material obligations with
respect to such permits and no event has occurred which allows, or after notice
or lapse of time would allow,
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revocation or termination thereof or results in any impairment of the rights of
the holder of any such permit, except for such revocations, terminations and
impairments that would not have a material adverse effect upon the ability of
the U.S. Timberlands Parties considered as a whole to conduct their businesses
in all material respects as currently conducted and as contemplated by the
Prospectus to be conducted, subject in each case to such qualification as may be
set forth in the Prospectus; and, except as described in the Prospectus, none of
such permits contains any restriction that is materially burdensome to the U.S.
Timberlands Parties considered as a whole.
(bb) Each of the U.S. Timberlands Parties (i) makes and keeps books,
records and accounts, which, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of assets and (ii) maintains systems of
internal accounting controls sufficient to provide reasonable assurances that
(A) transactions are executed in accordance with management's general or
specific authorization; (B) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (C) access to
assets is permitted only in accordance with management's general or specific
authorization; and (D) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(cc) To the knowledge of the U.S. Timberlands Entities, none of the
U.S. Timberlands Entities nor any employee or agent of any of the U.S.
Timberlands Entities has made any payment of funds of a U.S. Timberlands Entity
or received or retained any funds in either case in violation of any law, rule
or regulation, which payment, receipt or retention of funds is of a character
required to be disclosed in the Prospectus.
(dd) Each of the U.S. Timberlands Entities has filed (or has obtained
extensions with respect to) all material tax returns required to be filed
through the date hereof, which returns are complete and correct in all material
respects, and has timely paid all taxes shown to be due pursuant to such
returns, other than those (i) which, if not paid, would not have a material
adverse effect on the condition (financial or other), business, prospects,
properties, net worth or results of operations of the U.S. Timberlands Entities,
taken as a whole, or (ii) which are being contested in good faith.
(ee) The U.S. Timberlands Entities own or possess, and at the Closing
Date the U.S. Timberlands Parties will own or possess, all patents, trademarks,
trademark registrations, service marks, service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets and rights owned by them or
necessary for the conduct of their respective businesses, and the U.S.
Timberlands Entities are not aware of any claim to the contrary or any challenge
by any other person to the rights of the U.S. Timberlands Entities with respect
to the foregoing.
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(ff) None of the U.S. Timberlands Parties is now, and after sale of
the Units to be sold by the Partnership hereunder and application of the net
proceeds from such sale as described in the Prospectus under the caption "Use of
Proceeds" will be, (i) an "investment company" or a company "controlled by" an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, or (ii) a "public utility company," "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" thereof, under the
Public Utility Holding Company Act of 1935, as amended.
(gg) None of the U.S. Timberlands Entities has sustained since the
date of the latest audited financial statements included in the Prospectus any
material loss or interference with its business from fire, explosion, flood or
other calamity whether or not covered by insurance, or from any labor dispute or
court or governmental action, investigation, order or decree, otherwise than as
set forth or contemplated in the Prospectus.
(hh) None of the U.S. Timberlands Entities has violated any
environmental, safety, health or similar law or regulation applicable to its
business relating to the protection of human health and safety, the environment
or hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), or lacks any permits, licenses or other approvals
required of them under applicable Environmental Laws to own, lease or operate
their properties and conduct their business as described in the Prospectus or is
violating any terms and conditions of any such permit, license or approval,
which in each case would have a material adverse effect on the condition
(financial or other), business, prospects, properties, net worth or results of
operations of the U.S. Timberlands Parties, taken as a whole.
(ii) Except as described in or contemplated by the Prospectus, no
material labor dispute with the employees of any of the U.S. Timberlands
Entities exists or, to the knowledge of any of the U.S. Timberlands Entities, is
imminent.
(jj) The U.S. Timberlands Entities maintain insurance covering their
properties, operations, personnel and businesses against such losses and risks
as are reasonably adequate to protect them and their businesses in a manner
consistent with other businesses similarly situated. None of the U.S.
Timberlands Entities has received notice from any insurer or agent of such
insurer that substantial capital improvements or other expenditures will have to
be made in order to continue such insurance; and all such insurance is
outstanding and duly in force on the date hereof and will be outstanding and
duly in force on the Closing Date.
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(kk) Except as described in the Prospectus, there is (i) no action,
suit or proceeding before or by any court, arbitrator or governmental agency,
body or official, domestic or foreign, now pending or, to the knowledge of the
U.S. Timberlands Entities, threatened, to which any of the U.S. Timberlands
Entities, or any of their respective subsidiaries, is or may be a party or to
which the business or property of any of the U.S. Timberlands Entities, or any
of their respective subsidiaries, is or may be subject, (ii) no statute, rule,
regulation or order that has been enacted, adopted or issued by any governmental
agency or that has been proposed by any governmental body and (iii) no
injunction, restraining order or order of any nature issued by a federal or
state court or foreign court of competent jurisdiction to which any of the U.S.
Timberlands Entities, or any of their respective subsidiaries, is or may be
subject, that, in the case of clauses (i), (ii) and (iii) above, is reasonably
expected to (A) singly or in the aggregate have a material adverse effect on the
condition (financial or other), business, prospects, properties, net worth or
results of operations of the U.S. Timberlands Parties, taken as a whole, (B)
prevent or result in the suspension of the offering and issuance of the Units or
the Notes or (C) in any manner draw into question the validity of this
Agreement, the Note Underwriting Agreement or any Operative Agreement.
(ll) The issuance of the Subordinated Units to each of the General
Partner and Holdings pursuant to the Contribution Agreement and the Partnership
Agreement, the distribution of Subordinated Units by the General Partner to Old
Services and the distribution by Old Services of certain of such Subordinated
Units to each of Messrs. Stephens and Hornig is exempt from the registration
requirements of the Act and the securities laws of any state having jurisdiction
with respect thereto, and none of the U.S. Timberlands Entities has taken or
will take any action that would cause the loss of such exemption.
(mm) The Units have been approved for listing on the Nasdaq National
Market, subject only to official notice of issuance.
7. Indemnification and Contribution. (a) Each of the U.S. Timberlands
--------------------------------
Entities, jointly and severally, agree to indemnify and hold harmless each of
you and each other Underwriter and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act from and against any and all losses, claims, damages, liabilities
and expenses (including reasonable costs of investigation) arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in any Prepricing Prospectus or in the Registration Statement or the
Prospectus or in any amendment or supplement thereto, or arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any untrue statement or omission or alleged untrue
statement or omission which has been made therein or
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omitted therefrom in reliance upon and in conformity with the information
furnished in writing to the Partnership or the General Partner by or on behalf
of any Underwriter through you expressly for use in connection therewith;
provided, however, that the indemnification contained in this paragraph (a) with
respect to any Prepricing Prospectus shall not inure to the benefit of any
Underwriter (or to the benefit of any person controlling such Underwriter) on
account of any such loss, claim, damage, liability or expense arising from the
sale of the Units by such Underwriter to any person if a copy of the Prospectus
shall not have been delivered or sent to such person within the time required by
the Act and the regulations thereunder, and the untrue statement or alleged
untrue statement or omission or alleged omission of a material fact contained in
such Prepricing Prospectus was corrected in the Prospectus, provided that the
Partnership has delivered the Prospectus to the several Underwriters in
requisite quantity and on a timely basis to permit such delivery or sending. The
foregoing indemnity agreement shall be in addition to any liability which any
U.S. Timberlands Entity may otherwise have.
(b) If any action, suit or proceeding shall be brought against any
Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against a U.S. Timberlands Entity, such Underwriter or
such controlling person shall promptly notify the U.S. Timberlands Entities in
writing, and the Partnership shall assume the defense thereof, including the
employment of counsel and payment of all reasonable fees and expenses. The
failure to notify the indemnifying party shall not relieve it from liability
which it may have to an indemnified party unless the indemnifying party is
foreclosed by reason of such delay from asserting a defense otherwise available
to it. Such Underwriter or any such controlling person shall have the right to
employ separate counsel in any such action, suit or proceeding and to
participate in (but not control) the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Underwriter or such controlling
person unless (i) a U.S. Timberlands Entity has agreed in writing to pay such
fees and expenses, (ii) the U.S. Timberlands Entities have failed to assume the
defense and employ counsel or (iii) the named parties to any such action, suit
or proceeding (including any impleaded parties) include both such Underwriter or
such controlling person and a U.S. Timberlands Entity, and such Underwriter or
such controlling person shall have been advised by its counsel that
representation of such indemnified party and such U.S. Timberlands Entity by the
same counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them (in which
case the U.S. Timberlands Entities shall not have the right to assume the
defense of such action, suit or proceeding on behalf of such Underwriter or such
controlling person). It is understood, however, that the U.S. Timberlands
Entities shall, in connection with any one such action, suit or proceeding or
separate but substantially similar or related actions, suits or proceedings in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of only one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Underwriters and controlling persons not having actual or potential
differing interests with you or among themselves, which firm shall be designated
in writing by Smith Barney Inc., and that all such fees and expenses shall be
reimbursed as they are incurred. None of the U.S. Timberlands Entities shall be
liable for any settlement of any such action, suit or proceeding effected
without its written consent, but if settled with such written consent, or if
there be a final
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judgment for the plaintiff in any such action, suit or proceeding, the U.S.
Timberlands Entities agree, jointly and severally, to indemnify and hold
harmless any Underwriter, to the extent provided in the preceding paragraph, and
any such controlling person from and against any loss, claim, damage, liability
or expense by reason of such settlement or judgment.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the U.S. Timberlands Entities, their respective directors and
officers who sign the Registration Statement, and any person who controls the
U.S. Timberlands Entities within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, to the same extent as the foregoing indemnity from the
U.S. Timberlands Entities to each Underwriter, but only with respect to
information furnished in writing by or on behalf of such Underwriter through you
expressly for use in the Registration Statement, the Prospectus or any
Prepricing Prospectus, or any amendment or supplement thereto. If any action,
suit or proceeding shall be brought against a U.S. Timberlands Entity, any of
such directors and officers or any such controlling person based on the
Registration Statement, the Prospectus or any Prepricing Prospectus, or any
amendment or supplement thereto, and in respect of which indemnity may be sought
against any Underwriter pursuant to this paragraph (c), such Underwriter shall
have the rights and duties given to the U.S. Timberlands Entities by paragraph
(b) above (except that if a U.S. Timberlands Entity shall have assumed the
defense thereof such Underwriter shall not be required to do so, but may employ
separate counsel therein and participate in (but not control) the defense
thereof, but the fees and expenses of such counsel shall be at such
Underwriter's expense), and the U.S. Timberlands Entities, any of such directors
and officers and any such controlling person shall have the rights and duties
given to the Underwriters by paragraph (b) above. The foregoing indemnity
agreement shall be in addition to any liability which the Underwriters may
otherwise have.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party under paragraph (a) or (c) hereof in respect
of any losses, claims, damages, liabilities or expenses referred to therein,
then an indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
U.S. Timberlands Entities on the one hand and the Underwriters on the other hand
from the offering of the Units, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the U.S. Timberlands Entities on the one hand and the
Underwriters on the other in connection with the statements or omissions that
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits received by
the U.S. Timberlands Entities on the one hand and the Underwriters on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the U.S. Timberlands Entities
bear to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault of the U.S. Timberlands Entities on the one
hand, and the Underwriters on the other hand shall be determined by reference
to, among other things, whether the untrue or alleged untrue
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statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the U.S. Timberlands Entities
or any other affiliate of the U.S. Timberlands Entities on the one hand, or by
the Underwriters on the other hand, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
(e) The U.S. Timberlands Entities and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by a pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in paragraph (d) above.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in paragraph (d) above
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price of the Units underwritten by it and distributed to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section 7 are several
in proportion to the respective numbers of Firm Units set forth opposite their
names in Schedule I hereto (or such numbers of Firm Units increased as set forth
in Section 10 hereof) and not joint.
(f) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
(g) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 7 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the U.S. Timberlands Entities set forth in
this Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the U.S. Timberlands Entities or any of their
respective directors or officers or any person controlling the U.S. Timberlands
Entities, (ii) acceptance of any Units and payment therefor in accordance with
the terms of this Agreement, and (iii) any termination of this Agreement. A
successor to any Underwriter or any person controlling any Underwriter, or to
the U.S. Timberlands Entities or any of their respective directors or officers
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or any person controlling a U.S. Timberlands Entity shall be entitled to the
benefits of the indemnity, contribution and reimbursement agreements contained
in this Section 7.
8. Conditions of Underwriters' Obligations. The several obligations of
---------------------------------------
the Underwriters to purchase the Firm Units hereunder are subject to the
following conditions:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the registration statement or a post-effective amendment thereto
to be declared effective before the offering of the Units may commence, the
registration statement or such post-effective amendment shall have become
effective not later than 5:30 P.M., New York City time, on the date hereof, or
at such later date and time as shall be consented to in writing by you, and all
filings, if any, required by Rules 424 and 430A under the Act shall be or have
been timely made, as the case may be; no stop order suspending the effectiveness
of the registration statement shall have been issued and no proceeding for that
purpose shall have been instituted or, to the knowledge of the U.S. Timberlands
Entities or any Underwriter, threatened by the Commission and any request of the
Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to your
reasonable satisfaction.
(b) Subsequent to the effective date of this Agreement, there shall
not have occurred (i) any change, or any development involving a prospective
change, in or affecting the condition (financial or other), business, prospects,
properties, net worth or results of operations of any of the U.S. Timberlands
Entities not contemplated by the Prospectus, which in your opinion, as
Representatives of the several Underwriters, would materially adversely affect
the market for the Units, or (ii) any event or development relating to or
involving any of the U.S. Timberlands Entities or any executive officer or
director of any of such entities which makes any statement made in the
Prospectus untrue or which, in the opinion of the Partnership and its counsel or
the Underwriters and their counsel, requires the making of any addition to or
change in the Prospectus in order to state a material fact required by the Act
or any other law to be stated therein or necessary in order to make the
statements therein not misleading, if amending or supplementing the Prospectus
to reflect such event or development would, in your opinion, as Representatives
of the several Underwriters, materially adversely affect the market for the
Units.
(c) You shall have received on the Closing Date, an opinion of Andrews
& Kurth L.L.P., special counsel for the U.S. Timberlands Entities, dated the
Closing Date and addressed to you, as Representatives of the several
Underwriters, to the effect that:
(i) The Partnership has been duly formed and is validly
existing in good standing as a limited partnership under the Delaware LP
Act with all necessary partnership power and authority to own or lease its
properties, assume the liabilities being assumed by it pursuant to the
Conveyance Agreements and conduct its business, in each case in all
material respects as described in the Registration Statement and the
Prospectus;
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(ii) The Partnership is duly registered or qualified as a
foreign limited partnership for the transaction of business under the laws
of the State of Oregon; and, to such counsel's knowledge, such jurisdiction
is the only jurisdiction in which the character of the business conducted
by the Partnership or the nature or location of the properties owned or
leased by it make such registration or qualification necessary (except
where the failure to so register or so qualify would not (A) have a
material adverse effect on the condition (financial or other), business or
results of operations of the Partnership and the Operating Company, taken
as a whole, or (B) subject the limited partners of the Partnership to any
material liability or disability);
(iii) The Operating Company has been duly formed and is validly
existing in good standing as a limited liability company under the Delaware
LLC Act with all necessary limited liability company power and authority to
own or lease its properties, assume the liabilities being assumed by it
pursuant to the Conveyance Agreements and conduct its business, in each
case in all material respects as described in the Registration Statement
and the Prospectus;
(iv) The Operating Company is duly registered or qualified as a
foreign limited liability company for the transaction of business under the
laws of the State of Oregon; and, to such counsel's knowledge, such
jurisdiction is the only jurisdiction in which the character of the
business conducted by the Operating Company or the nature or location of
the properties owned or leased by it make such registration or
qualification necessary (except where the failure to so register or so
qualify would not (A) have a material adverse effect on the condition
(financial or other), business or results of operations of the Partnership
and the Operating Company, taken as a whole, or (B) subject the limited
partners of the Partnership to any material liability or disability);
(v) The General Partner has been duly formed and is validly
existing in good standing as a limited liability company under the Delaware
LLC Act, with all necessary limited liability company power and authority
to own or lease its properties, to conduct its business and to act as
general partner of the Partnership and as managing member of the Operating
Company, in each case in all material respects as described in the
Prospectus;
(vi) The General Partner is duly registered or qualified as a
foreign limited liability company for the transaction of business under the
laws of the States of New York and Oregon; and to such counsel's knowledge,
such jurisdictions are the only jurisdictions in which the character of the
business conducted by the General Partner or the nature or location of the
properties owned or leased by it make such registration or qualification
necessary (except where the failure to so register or so qualify would not
(A) have a material adverse effect on the condition (financial or other),
business or results of operations of the U.S. Timberlands Parties, taken as
a whole, or (B) subject the limited partners of the Partnership to any
material liability or disability);
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(vii) The General Partner is the sole general partner of the
Partnership, with a 1% general partner interest in the Partnership; such
general partner interest has been duly authorized and validly issued in
accordance with the Partnership Agreement; the General Partner owns all of
the Incentive Distribution Rights; such Incentive Distribution Rights have
been duly authorized and validly issued in accordance with the Partnership
Agreement and are fully paid (to the extent required under the Partnership
Agreement) and nonassessable (except as such nonassessability may be
affected by matters described in the Prospectus under the caption "The
Partnership Agreement--Limited Liability"); and the General Partner owns
such general partner interest and Incentive Distribution Rights free and
clear of all liens, encumbrances, security interests, charges or claims (A)
in respect of which a financing statement under the Uniform Commercial Code
of the State of New York or the State of Oregon naming the General Partner
as debtor is on file in the office of the Secretary of State of the
applicable jurisdiction or (B) otherwise known to such counsel, without
independent investigation, other than those created by or arising under the
Delaware LP Act;
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(viii) The 1,387,963 and 2,894,157 Subordinated Units issued to
the General Partner and Holdings, respectively, pursuant to the Contribution
Agreement and the Partnership Agreement and the limited partner interests
represented thereby have been duly authorized and validly issued in accordance
with the Partnership Agreement and are fully paid (to the extent required under
the Partnership Agreement) and nonassessable (except as such nonassessability
may be affected by matters described in the Prospectus under "The Partnership
Agreement--Limited Liability"); after giving effect to the Transactions,
Holdings, Old Services, Mr. Stephens and Mr. Hornig will own 2,894,157,
1,244,565, 95,238 and 48,160 Subordinated Units, respectively; and Holdings and
Old Services will own their respective Subordinated Units free and clear of all
liens, encumbrances, security interests, charges or claims (A) in respect of
which a financing statement under the Uniform Commercial Code of, in the case of
Old Services, the State of Oregon, and in the case of Holdings, the State of New
York, naming any such owner as debtor is on file in the office of the Secretary
of State of the applicable jurisdiction or (B) otherwise known to such counsel,
without independent investigation, other than (1) those created by or arising
under the Delaware LP Act and (2) as provided in the Rudey Pledge Agreement;
(ix) The 7,458,684 Common Units to be issued and sold to the
Underwriters by the Partnership pursuant to the Underwriting Agreement
and the limited partner interests represented thereby have been duly
authorized by the Partnership Agreement and, when issued and delivered
against payment therefor as provided in the Underwriting Agreement,
will be validly issued, fully paid (to the extent required under the
Partnership Agreement) and nonassessable (except as such
nonassessability may be affected by matters described in the
Prospectus under the caption "The Partnership Agreement--Limited
Liability"); other than the Subordinated Units that will be owned by
Holdings, Old Services, Mr. Stephens and Mr. Hornig and the Incentive
Distribution Rights that will be owned by the General Partner, the
Units will be the only limited partner interests of the Partnership
issued and outstanding at the Closing Date;
(x) The General Partner owns a 1.0101% member interest in the
Operating Company and the Partnership owns a 98.9899% member interest
in the Operating Company; such member interests have been duly
authorized and validly issued in accordance with the Operating Company
Agreement and
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are fully paid (to the extent required under the Operating Company
Agreement) and nonassessable (except as such nonassessability may be
affected by Section 18-607 of the Delaware LLC Act); and the General
Partner and the Partnership own such member interests free and clear of all
liens, encumbrances, security interests, charges or claims (A) in respect
of which a financing statement under the Uniform Commercial Code of, in the
case of the General Partner, the State of New York or the State of Oregon,
naming the General Partner and in the case of the Partnership, the State of
Oregon, naming the Partnership, as debtor is on file in the office of the
Secretary of State of the applicable jurisdiction or (B) otherwise known to
such counsel, without independent investigation, other than those created
by or arising under the
DELAWARE LLC ACT;
(xi) Old Services, Stephens and Hornig own member interests of
70%, 10% and 7.5%, respectively, in the General Partner; such member
interests have been duly authorized and validly issued in accordance with
the General Partner Agreement and are fully paid (to the extent required
under the General Partner Agreement) and nonassessable (except as such
nonassessability may be affected by Section 18-607 of the Delaware LLC
Act); and the member interests of Old Services are owned free and clear of
all liens, encumbrances, security interests, charges or claims (A) in
respect of which a financing statement under the Uniform Commercial Code of
the State of Oregon naming Old Services as debtor is on file in the office
of the Secretary of State of the State of Oregon, or (B) otherwise known to
such counsel, without independent investigation, other than those created
by or arising under the Delaware LLC Act;
(xii) Each of Old Services, Holdings and Rudey Timber Company
has been duly formed and is validly existing in good standing as a limited
liability company under the Delaware LLC Act with all necessary limited
liability company power and authority to own or lease its properties, to
conduct its business and to execute and deliver this Agreement and the
Operative Agreements to which it is a party and perform its obligations
hereunder and thereunder, in each case in all material respects as
described in the Registration Statement and the Prospectus;
(xiii) Old Services is duly registered or qualified as a foreign
limited liability company under the laws of the State of Oregon; and to
such counsel's knowledge, Oregon is the only jurisdiction in which the
character of the business conducted by Old Services or the nature or
location of the properties owned or leased by it make such registration or
qualification necessary (except where the failure to so register or so
qualify would not have a material adverse effect on the condition
(financial or other), business or results of operations of the U.S.
Timberlands Parties taken as a whole;
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(xiv) Upon the redemption of Stephens' and Hornig's member
interests in Old Services, Rudey will own a 100% member interest in Old
Services; such member interest has been duly authorized and validly issued
in accordance with the Old Services Agreement and is fully paid (to the
extent required under the Old Services Agreement) and nonassessable (except
as such nonassessability may be affected by Section 18-607 of the Delaware
LLC Act); Rudey owns his member interest free and clear of all liens,
encumbrances, security interests, charges or claims (A) in respect of which
a financing statement under the Uniform Commercial Code of the State of New
York naming him as debtor is on file in the office of the Secretary of
State of the State of New York or (B) otherwise known to such counsel,
without independent investigation, other than those created by or arising
under the Delaware LLC Act;
(xv) Rudey and Rudey Timber Company own 1% and 99% member
interests, respectively, in Holdings; such member interests have been duly
authorized and validly issued in accordance with the Holdings Agreement and
are fully paid (to the extent required under the Holdings Agreement) and
nonassessable (except as such nonassessability may be affected by Section
18-607 of the Delaware LLC Act); and each of Rudey and Rudey Timber Company
owns such respective member interests free and clear of all liens,
encumbrances, security interests, charges or claims (A) in respect of which
a financing statement under the Uniform Commercial Code of, in the case of
Rudey, the State of New York, and in the case of Rudey Timber Company, the
State of Delaware, naming Rudey or Rudey Timber Company, as applicable, as
debtor is on file in the office of the Secretary of State of the applicable
jurisdiction or (B) otherwise known to such counsel, without independent
investigation, other than those created by or arising under the Delaware
LLC Act;
(xvi) Rudey and Garrin Holdings own 99% and 1% member interests,
respectively, in Rudey Timber Company; such member interests have been duly
authorized and validly issued in accordance with the Operating Agreement of
Rudey Timber Company (the "Rudey Timber Company Agreement") and are fully
paid (to the extent required under the Rudey Timber Company Agreement) and
nonassessable (except as such nonassessability may be affected by Section
18-607 of the Delaware LLC Act); and each of Rudey and Garrin Holdings owns
such respective member interests free and clear of all liens, encumbrances,
security interests, charges or claims (A) in respect of which a financing
statement under the Uniform Commercial Code of the State of New York,
naming Rudey or Garrin Holdings as debtor is on file in the office of the
Secretary of State of the State of New York or (B) otherwise known to such
counsel, without independent investigation, other than (1) those created by
or arising under the Delaware LLC Act or (2) as provided in the Rudey
Pledge Agreement;
(xvii) Except as described in the Prospectus, there are no
preemptive rights or other rights to subscribe for or to purchase, nor any
restriction upon the voting or transfer of, any limited partner interests
in the Partnership or member interests in the Operating
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Company pursuant to the Partnership Agreement, the Operating Company
Agreement or any other agreement or instrument known to such counsel to
which the Partnership or the Operating Company is a party or by which
either of them may be bound. To such counsel's knowledge, neither the
filing of the Registration Statement nor the offering or sale of the Units
as contemplated by this Agreement gives rise to any rights for or relating
to the registration of any Units or other securities of the Partnership or
the Operating Company. To such counsel's knowledge, except as described in
the Prospectus, there are no outstanding options or warrants to purchase
any Common Units or Subordinated Units or other partnership interests in
the Partnership or member interests in the Operating Company. The
Partnership has all requisite power and authority to issue, sell and
deliver (A) the Units, in accordance with and upon the terms and conditions
set forth in this Agreement, the Partnership Agreement and the Registration
Statement and Prospectus, and (B) the Subordinated Units and Incentive
Distribution Rights, in accordance with the terms and conditions set forth
in the Partnership Agreement and the Contribution Agreement;
(xviii) This Agreement has been duly authorized and validly
executed and delivered by each of the U.S. Timberlands Entities;
(xix) Each of the Operative Agreements (excluding the General
Partner Agreement) to which any of the U.S. Timberlands Entities is a party
have been duly authorized and validly executed and delivered by the U.S.
Timberlands Entities parties thereto and constitutes a valid and binding
obligation of the U.S. Timberlands Entities parties thereto, enforceable
against each such party in accordance with its respective terms, subject to
(A) applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or similar laws from time to time in effect affecting creditors'
rights and remedies generally and general principles of equity (regardless
of whether such principles are considered in a proceeding at law or in
equity) and (B) public policy, applicable law relating to fiduciary duties
and an implied covenant of good faith and fair dealing;
(xx) None of the offering, issuance and sale by the Partnership
of the Units, the offering, issuance and sale by the Operating Company and
Finance Corp. of the Notes, the execution, delivery and performance of this
Agreement, the Note Underwriting Agreement or the Operative Agreements
(other than the General Partner Agreement) by the U.S. Timberlands Entities
party thereto, or the consummation of the transactions contemplated hereby
and thereby (including the Transactions) (A) constitutes or will constitute
a violation of the agreement of limited partnership, limited liability
company operating agreement (other than the General Partner Agreement),
certificate or articles of incorporation or bylaws or other organizational
documents of any of the U.S. Timberlands Entities, Rudey Timber Company or
Finance Corp., (B) constitutes or will constitute a breach or violation of,
or a default under (or an event which, with notice or lapse of time or
both, would constitute such
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an event), any Operative Agreement (other than the General Partner
Agreement) or any other agreement filed as an exhibit to the Registration
Statement, (C) results or will result in any violation of the Delaware LP
Act, the Delaware LLC Act or the Delaware General Corporation Law ("DGCL"),
or (D) results or will result in the creation of imposition of any lien,
charge or encumbrance upon any property or assets of any of the U.S.
Timberlands Entities, Rudey Timber Company or Finance Corp., which in the
case of clauses (B), (C) or (D) would reasonably be expected to have a
material adverse effect on the financial condition, business or results of
operations of the U.S. Timberlands Parties and Finance Corp., taken as a
whole;
(xxi) No permit, consent, approval, authorization or order of
any Federal or Delaware court, governmental agency or body is required in
connection with the execution and delivery of, or the consummation by the
U.S. Timberlands Entities and Finance Corp. of the transactions
contemplated by, this Agreement, the Note Underwriting Agreement or the
Operative Agreements, except (A) for such permits, consents, approvals and
similar authorizations required under the Securities Act, the Exchange Act,
and the Trust Indenture Act, (B) for such permits consents, approvals and
similar authorizations required under state securities or "Blue Sky" laws,
as to which such counsel need not express any opinion and (C) as described
in the Prospectus;
(XXII) To the knowledge of such counsel, none of the Operating
Company, Old Services, Holdings or Rudey Timber Company is in (A) breach or
violation of the provisions of its limited liability company operating
agreement or other organizational documents or (B) default (and no event
has occurred which, with notice or lapse of time or both, would constitute
such a default) in the due performance of any term, covenant or condition
contained in the Existing Credit Agreement which would reasonably be
expected to have a material adverse effect on the financial condition,
business or results of operations of the U.S. Timberland Parties taken as a
whole, or could impair the ability of the Operating Company, Old Services,
Holdings or Rudey Timber Company to perform their obligations under the
Operative Agreements;
(xxiii) The statements in the Registration Statement and
Prospectus under the captions "The Transactions," "Cash Distribution
Policy," "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Description of Indebtedness," "Business and
Properties--Federal and State Regulation," "Certain Relationships and
Related Transactions--Contribution, Conveyance and Assumption Agreement,"
"Conflicts of Interest and Fiduciary Responsibilities," "Description of the
Common Units" and "The Partnership Agreement," insofar as they constitute
descriptions of the Operative Agreements or refer to statements of law or
legal conclusions, are accurate and complete in all material respects, and
the Units, the Subordinated Units and the Incentive Distribution Rights
conform in all material respects to the descriptions thereof contained in
the Registration Statement and Prospectus under the captions
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"Prospectus Summary--The Offering," "Cash Distribution Policy,"
"Description of the Common Units" and "The Partnership Agreement";
(xxiv) The opinion of Andrews & Kurth L.L.P. that is filed as
Exhibit 8.1 to the Registration Statement is confirmed and the Underwriters
may rely upon such opinion as if it were addressed to them;
(xxv) The Registration Statement was declared effective under
the Act on November 12, 1997; to the knowledge of such counsel, no stop
order suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or
threatened by the Commission; and any required filing of the Prospectus
pursuant to Rule 424(b) has been made in the manner and within the time
period required by such Rule;
(xxvi) The Registration Statement and the Prospectus (except for
the financial statements and the notes and the schedules thereto and the
other financial, statistical and accounting data included in the
Registration Statement or the Prospectus, as to which such counsel need not
express any opinion) comply as to form in all material respects with the
requirements of the Act and the rules and regulations promulgated
thereunder;
(xxvii) To the knowledge of such counsel, (A) there is no legal
or governmental proceeding pending or threatened to which any of the U.S.
Timberlands Entities is a party or to which any of their respective
properties is subject that is required to be disclosed in the Prospectus
and is not so disclosed and (B) there are no agreements, contracts or other
documents to which any of the U.S. Timberlands Entities is a party that are
required to be described in the Registration Statement or the Prospectus or
to be filed as exhibits to the Registration Statement that are not
described or filed as required;
(xxviii) None of the U.S. Timberlands Parties is an "investment
company" or a company "controlled by" an "investment company" as such terms are
defined in the Investment Company Act of 1940, as amended;
(xxix) Upon delivery to the Underwriters of certificates
evidencing the Units issued in the name of the Underwriters and payment by
the Underwriters of the purchase price for the Units, the Underwriters will
acquire the Units free of any adverse claim (as such term is defined in
Section 8-302 of the New York Uniform Commercial Code), assuming that the
Underwriters are acting in good faith and without notice of any adverse
claim;
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(xxx) The Common Units have been approved for listing on the
Nasdaq National Market, subject only to official notice of issuance;
and
(xxxi) The offer, sale and issuance of the Subordinated Units
to each of the General Partner and Holdings pursuant to the Contribution
Agreement and the Partnership Agreement, the distribution of Subordinated
Units by the General Partner to Old Services and the distribution by Old
Services of certain of such Subordinated Units to each of Messrs. Stephens
and Hornig is exempt from the registration requirements of the Act and the
securities laws of any state having jurisdiction with respect thereto.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the U.S. Timberlands
Entities and the independent public accountants of the Partnership and your
representatives, at which the contents of the Registration Statement and the
Prospectus and related matters were discussed, and although such counsel has not
independently verified, is not passing on, and is not assuming any
responsibility for the accuracy, completeness or fairness of the statements
contained in, the Registration Statement and the Prospectus (except to the
extent specified in the foregoing opinion), no facts have come to such counsel's
attention that lead such counsel to believe that the Registration Statement
(other than (i) the financial statements included therein, including the notes
and schedules thereto and the auditors' reports thereon, (ii) the other
historical, pro forma and projected financial information and the statistical
and accounting information included therein and (iii) the exhibits thereto, as
to which such counsel need not comment), as of its effective date contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or that the Prospectus (other than (i) the financial statements included
therein, including the notes and schedules thereto and the auditors' reports
thereon, and (ii) the other historical, pro forma and projected financial
information and the statistical and accounting information included therein, as
to which such counsel need not comment), as of its issue date and the Closing
Date contained an untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may (A) rely in respect of
matters of fact upon certificates of officers and employees of the U.S.
Timberlands Entities and upon information obtained from public officials, (B)
assume that all documents submitted to them as originals are authentic, that all
copies submitted to them conform to the originals thereof, and that the
signatures on all documents examined by them are genuine, (C) state that their
opinion is limited to federal laws, the Delaware LP Act, the Delaware LLC Act,
the DGCL and the laws of the State of New York, (D) with respect to the opinions
expressed in paragraphs (ii), (iv) (vi) and (xiii) above as to the due
qualification or registration as a foreign limited partnership or limited
liability company, as the case may be, of each of the U.S. Timberlands Entities,
state that such opinions are based upon the opinion of Lindsay, Hart, Neil &
Weigler, LLP provided pursuant to (e) below and upon certificates of foreign
qualification or registration provided by the Secretary of State of the State of
Oregon (each of which shall be dated as of a date not more than fourteen days
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prior to the Closing Date and shall be provided to you), (E) with respect to the
opinion expressed in paragraph (xxiii) above as to the section of the
Registration Statement and the Prospectus captioned "Business and Properties--
Federal and State Regulation" as to the laws of the State of Oregon, state that
such opinion is based upon the opinion of Manuel C. Hernandez & Associates,
P.C., provided pursuant to (f) below, (F) state that they express no opinion
with respect to the title of any of the U.S. Timberlands Entities to any of
their respective real or personal property and (G) state that they express no
opinion with respect to state or local taxes or tax statutes to which any of the
limited partners of the Partnership or any of the U.S. Timberlands Parties may
be subject.
(d) You shall have received on the Closing Date, a copy of the
opinion of Andrews & Kurth L.L.P. delivered pursuant to the Note Underwriting
Agreement, substantially in the form provided for therein, accompanied by a
letter dated the Closing Date and addressed to you from such counsel stating
that you are entitled to rely on such opinion as if it were addressed to you.
(e) You shall have received on the Closing Date, an opinion of
Lindsay, Hart, Neil & Weigler, LLP, counsel for the U.S. Timberlands Entities,
dated the Closing Date and addressed to you, as Representatives of the several
Underwriters, to the effect that:
(i) Each of the U.S. Timberlands Entities
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foreign limited partnership, as applicable, under the laws of the State of
Oregon;
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(ii) None of the offering, issuance and sale by the Partnership of
the Units, the offering, issuance and sale by the Operating Company and Finance
Corp. of the Notes, the execution, delivery and performance of this Agreement,
the Note Underwriting Agreement or the Operative Agreements by the U.S.
Timberlands Entities which are parties thereto, nor the consummation of the
transactions contemplated hereby and thereby (including the Transactions) (A)
constitutes or will constitute a breach or violation of, or a default under (or
an event which, with notice or lapse of time or both, would constitute such an
event), any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel (other than the Operative
Agreements and any other agreement filed as an exhibit to the Registration
Statement) to which any of the U.S. Timberlands Entities is a party or by which
any of them or any of their properties may be bound or (B) results or will
result in any violation of any statute, law or regulation of the State of Oregon
or any order, judgment, decree or injunction of any court or governmental agency
or body, in each case, known to such counsel and directed to any of the U.S.
Timberlands Entities or Rudey Timber Company or any of their properties in a
proceeding to which any of them or their property is subject, which in either
case would reasonably be expected to have a material adverse effect on the
financial condition, business or results of operations of the U.S. Timberlands
Parties, take as a whole;
(iii) No permit, consent, approval or authorization or order of any
Oregon court, governmental agency or body is required in connection with
the execution and
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delivery of, or the consummation by the U.S. Timberlands Entities of the
transactions contemplated by, this Agreement, the Note Underwriting
Agreement or the Operative Agreements, except (A) as may be required under
state securities or "Blue Sky" laws, as to which such counsel need not
express any opinion, (B) for such permits, consents, approvals and similar
authorizations which have been obtained, and (C) for such permits,
consents, approvals and similar authorizations which, if not obtained,
would not, individually or in the aggregate, have a material adverse effect
upon the condition (financial or other), business, prospects, properties,
net worth or results of operations of the U.S. Timberlands Parties, taken
as a whole.
(iv) To the knowledge of such counsel, none of the Operating
Company, Old Services, Holdings or Rudey Timber Company is in default (and
no event has occurred which, with notice or lapse of time or both, would
constitute such a default) in the due performance of any term, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which it is a party or by
which it is bound or to which any of its properties are subject (other than
the Existing Credit Agreement, with respect to which such counsel need not
express an opinion), which would reasonably be expected to have a material
adverse effect on the financial condition, business or results of
operations of the U.S. Timberlands Parties, taken as a whole, or could
impair the ability of the Operating Company, Old Services, Holdings or
Rudey Timber Company to perform their obligations under the Operative
Agreements; and
(v) To the knowledge of such counsel after due inquiry, other
than as described or contemplated in the Prospectus (or any supplement
thereto), there is no litigation, proceeding or governmental investigation
pending or threatened against any of the U.S. Timberlands Entities or to
which any of the U.S. Timberlands Entities is a party or to which any of
their respective properties is subject, that relates to any of the
Transactions or which, if adversely determined, would reasonably be
expected to have a material adverse effect on the condition (financial or
other), business or results of operations of the U.S. Timberlands Parties,
taken as a whole, or would impair or call into question the validity of
this Agreement, the performance by any of the U.S. Timberlands Entities or
Finance Corp. of their obligations under this Agreement, the Note
Underwriting Agreement or the Operative Agreements;
(vi) Except as described in the Prospectus, to the knowledge of
such counsel, each of the U.S. Timberlands Parties possess all permits,
consents, licenses, franchises and authorizations issued by the appropriate
local, state or federal regulatory agencies or bodies necessary to conduct
the business currently (or, as described or contemplated in the Prospectus,
to be) operated by them, except for such permits, consents, licenses,
franchises and authorizations which, if not obtained, would not reasonably
be expected to have, individually or in the aggregate, a material adverse
effect upon the
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financial condition, business or results of operations of the U.S.
Timberlands Parties, taken as a whole; and, to the knowledge of such
counsel, none of the U.S. Timberlands Parties has received any notice of
proceedings relating to the revocation or modification of any such permits,
consents, licenses, franchises and authorizations which, individually or in
the aggregate, if the subject of an unfavorable decision, ruling or
finding, would reasonably be expected to have a material adverse effect
upon the financial condition, business or results of operations of the U.S.
Timberlands Parties, taken as a whole.
(vii) The Operating Company has all requisite power and
authority as a limited liability company under the laws of the State of
Oregon to own or lease its properties and to conduct its business in the
State of Oregon; and upon the consummation of the Transactions, assuming
that the Partnership will not be liable under the laws of the State of
Delaware for the liabilities of the Operating Company and that the
Unitholders will not be liable under the laws of the State of Delaware for
liabilities of the Partnership or the Operating Company, the Partnership
will not be liable under the laws of the State of Oregon for the
liabilities of the Operating Company, and the Unitholders will not be
liable under the laws of the State of Oregon for the liabilities of the
Partnership or the Operating Company, except in each case to the same
extent as under the laws of the State of Delaware;
(viii) Each of the Conveyance Agreements, assuming the due
authorization, execution and delivery thereof by the parties thereto, to
the extent it is a valid and legally binding agreement under the applicable
law as stated therein and that such law applies thereto, is a valid and
legally binding agreement of the parties thereto under the laws of the
State of Oregon, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general application relating to or affecting creditors'
rights generally and to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law);
each of the Conveyance Agreements is in a form legally sufficient as
between the parties thereto to convey to the transferee thereunder all of
the right, title and interest of the transferor stated therein in and to
the properties located in the State of Oregon, as described in the
Conveyance Agreements, subject to the conditions, reservations and
limitations contained in the Conveyance Agreements, except motor vehicles
or other property requiring conveyance of certificated title as to which
the Conveyance Agreements are legally sufficient to compel delivery of such
certificated title; and
(ix) Each of the deeds and assignments (including, without
limitation, the form of the exhibits and schedules thereto) is in a form
legally sufficient for recordation in the appropriate public offices of the
State of Oregon, to the extent such recordation is required, and, upon
proper recordation of any of such deeds and assignments in the State of
Oregon, will constitute notice to all third parties under the recordation
statutes of the State of Oregon concerning record title to the assets
transferred thereby; recordation in the office of the County Clerk for each
county in which the Operating Company owns
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property is the appropriate public office in the State of Oregon for the
recordation of deeds and assignments of interests in real property located
in such county.
In rendering such opinion, such counsel may (A) rely in respect of matters
of fact upon certificates of officers and employees of the U.S. Timberlands
Entities and upon information obtained from public officials, (B) assume that
all documents submitted to them as originals are authentic, that all copies
submitted to them conform to the originals thereof, and that the signatures on
all documents examined by them are genuine, (C) state that such opinions are
limited to federal laws and the laws of the State of Oregon, excepting therefrom
municipal and local ordinances and regulations, (D) state that they express no
opinion with respect to state or local taxes or tax statutes, and (E) state that
they (1) express no opinion with respect to the title of any of the real or
personal property purported to be transferred by the Conveyance Agreements, (2)
have not made any review of specific properties or facilities or title files
relating to any such properties and (3) express no opinion regarding the
accuracy of the description or references to any real or personal property.
(f) You shall have received on the Closing Date an opinion of
Manuel C. Hernandez & Associates, P.C., counsel for the U.S. Timberland
Entities, dated the Closing Date and addressed to you, as Representatives of the
several Underwriters, to the effect that the statements in the Registration
Statement and Prospectus under the caption "Business and Properties--Federal and
State Regulation," insofar as they refer to statements of law or legal
conclusions, are accurate and complete in all material respects.
In rendering such opinion, such counsel may state that their opinion is
limited to federal laws and the laws of the State of Oregon, excepting therefrom
municipal and local ordinances and regulations.
(g) You shall have received on the Closing Date an opinion of Baker &
Botts, L.L.P., counsel for the Underwriters, dated the Closing Date and
addressed to you, as Representatives of the several Underwriters, with respect
to the issuance and sale of the Common Units, the Registration Statement and the
Prospectus (together with any supplement or amendment thereto).
(h) You shall have received a letter addressed to you and dated on or
prior to the date hereof from Mason, Bruce & Girard, Inc. substantially in the
form heretofore approved by you.
(i) You shall have received letters addressed to you, as
Representatives of the several Underwriters, and dated the date hereof and the
Closing Date from Arthur Andersen LLP, independent certified public accountants,
substantially in the forms heretofore approved by you.
(j) (i) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been instituted or taken or, to
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the knowledge of the Partnership and the General Partner, shall be threatened by
the Commission at or prior to the Closing Date; (ii) there shall not have been
any change in the partners' capital or member's equity of the Partnership, the
Operating Company or the General Partner, as the case may be, nor any material
increase in the short-term or the long-term debt of the Partnership, the
Operating Company, the General Partner or Old Services (other than in the
ordinary course of business) from that set forth or contemplated in the
Registration Statement or the Prospectus (or any amendment or supplement
thereto); (iii) there shall not have been, since the respective dates as of
which information is given in the Registration Statement and the Prospectus (or
any amendment or supplement thereto), except as may otherwise be stated in the
Registration Statement and the Prospectus (or any amendment or supplement
thereto), any material adverse change in or affecting the condition (financial
or other), business, prospects, properties, net worth or results of operations
of the U.S. Timberlands Parties and Old Services, taken as a whole; (iv) the
U.S. Timberlands Parties and Old Services shall not have any liabilities or
obligations, direct or contingent (whether or not in the ordinary course of
business), that are material to the U.S. Timberlands Parties taken as a whole
other than those reflected in the Registration Statement or the Prospectus (or
any amendment or supplement thereto); and (v) all the representations and
warranties of the U.S. Timberlands Entities contained in this Agreement shall be
true and correct on and as of the date hereof and on and as of the Closing Date
as if made on and as of the Closing Date.
(k) The U.S. Timberlands Entities shall not have failed at or
prior to the Closing Date to have performed or complied in all material respects
with any of their agreements herein contained and required to be performed or
complied with by them hereunder at or prior to the Closing Date.
(l) The Units shall have been approved for listing upon notice
of issuance on the Nasdaq National Market.
(m) The Partnership shall have furnished or caused to be
furnished to you such further certificates and documents as you shall have
reasonably requested.
(n) Prior to or simultaneously with the sale of the Units on
the Closing Date, (i) the conveyance of the Transferred Assets to the Operating
Company shall have been consummated, (ii) the closing of the offering of the
Notes shall have occurred on the basis set forth in the Prospectus and the Note
Underwriting Agreement and (iii) the Bank Credit Agreement shall have been
executed and delivered and become effective in substantially the form filed as
an exhibit to the Registration Statement.
(o) On or prior to the date hereof, the Partnership shall have
furnished to you a letter substantially in the form of Exhibit A hereto from
each officer and each director of each U.S. Timberland Entity.
(p) There shall have been furnished to you at the Closing Date
a certificate satisfactory to you, signed on behalf of the General Partner by
the President or the Executive Vice
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President and the Chief Financial Officer thereof to the effect that: (A) the
representations and warranties of each of the U.S. Timberlands Parties contained
in this Agreement are true and correct at and as of the Closing Date as though
made at and as of the Closing Date; (B) each of the U.S. Timberlands Parties has
in all material respects performed all obligations required to be performed by
it pursuant to the terms of this Agreement at or prior to the Closing Date; (C)
no stop order suspending the effectiveness of the Registration Statement has
been issued and no proceeding for that purpose has been instituted or taken or,
to the knowledge of any of the U.S. Timberlands Parties, threatened by the
Commission, and all requests for additional information on the part of the
Commission have been complied with or otherwise satisfied; (D) the Common Units
have been duly approved for listing, subject to official notice of issuance, on
the Nasdaq National Market; and (E) no event contemplated by subsection (j) of
this Section 8 in respect of the Partnership, the Operating Company or the
General Partner shall have occurred.
(q) There shall have been furnished to you at the Closing
Date, certificates reasonably satisfactory to you, signed on behalf of each of
Old Services and Holdings, respectively, by the President or a Vice President
thereof, respectively, to the effect that (A) the representations and warranties
of such party contained in this Agreement are true and correct at and as of the
Closing Date as though made at and as of the Closing Date and (B) such party has
in all material respects performed all obligations required to be performed by
it pursuant to the terms of this Agreement at or prior to the Closing Date;
All such opinions, certificates, letters and other documents referred
to in this Section 8 will be in compliance with the provisions hereof only if
they are reasonably satisfactory in form and substance to you and your counsel.
Any certificate or document signed by any officer of the General
Partner, Old Services or Holdings and delivered to you, as Representatives of
the Underwriters, or to counsel for the Underwriters, shall be deemed a
representation and warranty by the General Partner, Old Services or Holdings,
respectively to each Underwriter as to the statements made therein.
The several obligations of the Underwriters to purchase Additional
Units hereunder are subject to the satisfaction on and as of any Option Closing
Date of the conditions set forth in this Section 8, except that, if any Option
Closing Date is other than the Closing Date, the certificates, opinions and
letters referred to in paragraphs (c), (e) through (i), (m), (p) and (q) shall
be dated the Option Closing Date in question and the opinions called for by
paragraphs (c) through (i), as applicable, shall be revised to reflect the sale
of Additional Units.
9. Expenses. The Partnership agrees to pay the following costs and
--------
expenses and all other costs and expenses incident to the performance by it of
its obligations hereunder: (i) the preparation, printing or reproduction, and
filing with the Commission of the Registration Statement (including financial
statements and exhibits thereto), each Prepricing Prospectus, the Prospectus,
and each amendment or supplement to any of them; (ii) the printing (or
reproduction)
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<PAGE>
and delivery (including postage, air freight charges and charges for counting
and packaging) of such copies of the Registration Statement, each Prepricing
Prospectus, the Prospectus, and all amendments or supplements to any of them as
may be reasonably requested for use in connection with the offering and sale of
the Units; (iii) the preparation, printing, authentication, issuance and
delivery of certificates for the Units, including any stamp taxes in connection
with the original issuance and sale of the Units; (iv) the printing (or
reproduction) and delivery of this Agreement, the preliminary and supplemental
Blue Sky Memoranda, and all other agreements or documents printed (or
reproduced) and delivered in connection with the offering of the Units; (v) the
registration of the Common Units under the Exchange Act and the listing of the
Common Units on the Nasdaq National Market; (vi) the registration or
qualification of the Units for offer and sale under the securities or Blue Sky
laws of the several states as provided in Section 5(g) hereof (including the
reasonable fees, expenses and disbursements of counsel for the Underwriters
relating to the preparation, printing or reproduction, and delivery of the
preliminary and supplemental Blue Sky Memoranda and such registration and
qualification); (vii) the filing fees and the reasonable fees and expenses of
counsel for the Underwriters in connection with any filings required to be made
with the National Association of Securities Dealers, Inc.; (viii) the
transportation and other expenses incurred by or on behalf of officers and
employees of the Partnership in connection with presentations to prospective
purchasers of the Units; and (ix) the fees and expenses of the Partnership's
accountants and the fees and expenses of counsel (including local and special
counsel) for the Partnership.
It is understood, however, that except as otherwise provided in this
Section 9 and Section 5(j) hereof, the Underwriters will pay all of their own
costs and expenses, including the fees of their counsel, transfer taxes on any
resale of the Units by any Underwriter, any advertising expenses connected with
any offers they may make and the transportation and other expenses incurred by
the Underwriters on their own behalf in connection with presentations to
prospective purchasers of the Units.
10. Effective Date of Agreement. This Agreement shall become
---------------------------
effective: (i) upon the execution and delivery hereof by the parties hereto; or
(ii) if, at the time this Agreement is executed and delivered, it is necessary
for the Registration Statement or a post-effective amendment thereto to be
declared effective before the offering of the Units may commence, when
notification of the effectiveness of the Registration Statement or such post-
effective amendment has been released by the Commission. Until such time as
this Agreement shall have become effective, it may be terminated by the
Partnership by notifying you, or by you, as Representatives of the several
Underwriters, by notifying the Partnership.
If any one or more of the Underwriters shall fail or refuse to
purchase Units which it or they are obligated to purchase hereunder on the
Closing Date, and the aggregate number of Units which such defaulting
Underwriter or Underwriters are obligated but fail or refuse to purchase is not
more than one-tenth of the aggregate number of the Units which the Underwriters
are obligated to purchase on the Closing Date, each non-defaulting Underwriter
shall be obligated, severally, in the proportion which the number of Firm Units
set forth opposite its name in Schedule I
-44-
<PAGE>
hereto bears to the aggregate number of Firm Units set forth opposite the names
of all non-defaulting Underwriters or in such other proportion as you may
specify in accordance with Section 20 of the Master Agreement Among Underwriters
of Smith Barney Inc., to purchase the Units which such defaulting Underwriter or
Underwriters are obligated, but fail or refuse, to purchase. If any one or more
of the Underwriters shall fail or refuse to purchase Units which it or they are
obligated to purchase on the Closing Date and the aggregate number of Units with
respect to which such default occurs is more than one-tenth of the aggregate
number of Units which the Underwriters are obligated to purchase on the Closing
Date and arrangements satisfactory to you and the Partnership for the purchase
of such Units by one or more non-defaulting Underwriters or other party or
parties approved by you and the Partnership are not made within 36 hours after
such default, this Agreement will terminate without liability on the part of any
party hereto (other than the defaulting Underwriter). In any such case which
does not result in termination of this Agreement, either you or the Partnership
shall have the right to postpone the Closing Date, but in no event for longer
than seven days, in order that the required changes, if any, in the Registration
Statement and the Prospectus or any other documents or arrangements may be
effected. If any one or more of the Underwriters shall fail or refuse to
purchase Additional Units which it or they are obligated to purchase hereunder
on the Option Closing Date, each non-defaulting Underwriter shall be obligated,
severally, in the proportion which the number of Firm Units set forth opposite
its name in Schedule I hereto bears to the aggregate number of Firm Units set
forth opposite the names of all non-defaulting Underwriters or in such other
proportion as you may specify in accordance with Section 20 of the Master
Agreement Among Underwriters of Smith Barney Inc., to purchase the Additional
Units which such defaulting Underwriter or Underwriters are obligated, but fail
or refuse, to purchase. Any action taken under this paragraph shall not relieve
any defaulting Underwriter from liability in respect of any such default of any
such Underwriter under this Agreement. The term "Underwriter" as used in this
Agreement includes, for all purposes of this Agreement, any party not listed in
Schedule I hereto who, with your approval and the approval of the Partnership,
purchases Units which a defaulting Underwriter is obligated, but fails or
refuses, to purchase.
Any notice under this Section 10 may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
11. Termination of Agreement. This Agreement shall be subject to
------------------------
termination in your absolute discretion, without liability on the part of any
Underwriter to any U.S. Timberlands Entity, by notice to the Partnership, if
prior to the Closing Date or any Option Closing Date (if different from the
Closing Date and then only as to the Additional Units), as the case may be, (i)
trading in securities generally on the New York Stock Exchange, the American
Stock Exchange or the Nasdaq National Market shall have been suspended or
materially limited, (ii) a general moratorium on commercial banking activities
in New York or Oregon shall have been declared by either federal or state
authorities, or (iii) there shall have occurred any outbreak or escalation of
hostilities or other international or domestic calamity, crisis or change in
political, financial or economic conditions, the effect of which on the
financial markets of the United States is such as to make it, in your judgment,
impracticable or inadvisable to commence or continue the offering of the Units
at the offering price to the public set forth on the cover page of the
Prospectus or to enforce
-45-
<PAGE>
contracts for the resale of the Units by the Underwriters. Notice of such
termination may be given to the Partnership by telegram, telecopy or telephone
and shall be subsequently confirmed by letter.
12. Information Furnished by the Underwriters. The statements set
-----------------------------------------
forth in the last paragraph on the cover page, the stabilization legend on the
inside cover page, and the statements in the first, third, fifth and ninth
paragraphs and the third sentence of the seventh paragraph under the caption
"Underwriting" in any Prepricing Prospectus and in the Prospectus, constitute
the only information furnished by or on behalf of the Underwriters through you
as such information is referred to in Sections 6(b) and 7 hereof.
13. Miscellaneous. Except as otherwise provided in Sections 5, 10
-------------
and 11 hereof, notice given pursuant to any provision of this Agreement shall be
in writing and shall be delivered (i) if to any of the U.S. Timberlands
Entities, at the office of the Partnership at P.O. Box 10, 6400 Highway 66,
Klamath Falls, Oregon 97601, Attention: John Stephens, with a copy to John
Rudey, U.S. Timberlands Services Company, L.L.C., Suite 10-B, 625 Madison
Avenue, New York, New York 10022, or (ii) if to you, as Representatives of the
several Underwriters, care of Smith Barney Inc., 388 Greenwich Street, New York,
New York 10013, Attention: Manager, Investment Banking Division.
This Agreement has been and is made solely for the benefit of the
several Underwriters, the U.S. Timberlands Entities, their directors and
officers, and the other controlling persons referred to in Section 7 hereof and
their respective successors and assigns, to the extent provided herein, and no
other person shall acquire or have any right under or by virtue of this
Agreement. Neither the term "successor" nor the term "successors and assigns"
as used in this Agreement shall include a purchaser from any Underwriter of any
of the Units in his status as such purchaser.
14. Applicable Law; Counterparts. This Agreement shall be governed
----------------------------
by and construed in accordance with the laws of the State of New York applicable
to contracts made and to be performed within the State of New York.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
-46-
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Partnership, the Operating Company, the General Partner, Old Services
and Holdings and the several Underwriters.
Very truly yours,
U.S. TIMBERLANDS COMPANY, L.P.
By: NEW SERVICES, L.L.C.
By: /s/ John M. Rudey
-------------------
Name: John M. Rudey
Title: Managing Director
U.S. TIMBERLANDS KLAMATH FALLS,
L.L.C.
By: /s/ John M. Rudey
-------------------
Name: John M. Rudey
Title: Managing Director
NEW SERVICES, L.L.C.
By: /s/ John M. Rudey
-------------------
Name: John M. Rudey
Title: Managing Director
<PAGE>
U.S. TIMBERLANDS SERVICES
COMPANY, L.L.C.
By: /s/ John M. Rudey
-------------------
Name: John M. Rudey
Title: Managing Director
U.S. TIMBERLANDS HOLDINGS, L.L.C.
By: /s/ John M. Rudey
-------------------
Name: John M. Rudey
Title: Managing Director
Confirmed as of the date first
above mentioned on behalf of
themselves and the other several
Underwriters named in Schedule I
hereto.
SMITH BARNEY INC.
DEUTSCHE MORGAN GRENFELL INC.
A.G. EDWARDS & SONS, INC.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
As Representatives of the Several Underwriters
By: SMITH BARNEY INC.
By: /s/ Andrew Safran
-------------------
Managing Director
<PAGE>
SCHEDULE I
U.S. Timberlands Company, L.P.
<TABLE>
<CAPTION>
Number of Firm Units
Underwriter to be Purchased
----------- --------------------
<S> <C>
Smith Barney Inc.................................... 1,197,740
Deutsche Morgan Grenfell Inc........................ 1,197,736
A.G. Edwards & Sons, Inc............................ 1,197,736
PaineWebber Incorporated............................ 1,197,736
Prudential Securities Incorporated.................. 1,197,736
Allen C. Ewing & Co................................. 95,000
CIBC Oppenheimer Corp............................... 130,000
Credit Suisse First Boston Corporation.............. 130,000
D.A. Davidson & Co. Incorporated.................... 95,000
Donaldson, Lufkin & Jenrette Securities Corporation. 130,000
Fahnestock & Co. Inc................................ 95,000
Jensen Securities Co................................ 95,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated.. 130,000
Pacific Crest Securities............................ 95,000
Piper Jaffray Inc................................... 95,000
Ragen MacKenzie Incorporated........................ 95,000
Sands Brothers & Co., Ltd........................... 95,000
Stifel, Nicolaus & Company, Incorporated............ 95,000
Wedbush Morgan Securities........................... 95,000
---------
TOTAL 7,458,684
=========
</TABLE>
<PAGE>
EXHIBIT A
[Letterhead of officer, director or holder of Common Units]
U.S. Timberlands Company, L.P.
Public Offering of Common Units
-------------------------------
November 13, 1997
Smith Barney Inc.
Deutsche morgan grenfell inc.
A.G. Edwards & Sons, Inc.
PaineWebber Incorporated
prudential securities incorporated
c/o Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
This letter is being delivered to you in connection with the proposed
Underwriting Agreement (the "Underwriting Agreement") among U.S. Timberlands
Company, L.P., a Delaware limited partnership (the "Partnership"), U.S.
Timberlands Klamath Falls, L.L.C., New Services, L.L.C., U.S. Timberlands
Services Company, L.L.C., U.S. Timberlands Holdings, L.L.C., Smith Barney Inc.,
Deutsche Morgan Grenfell Inc., A.G. Edwards & Sons, Inc., PaineWebber
Incorporated and Prudential Securities Incorporated as representatives of the
underwriters, relating to an underwritten public offering of common units
representing limited partner interests (the "Common Units"), of the Partnership.
To induce you to enter into the Underwriting Agreement, the undersigned
agrees that it will not offer, sell, contract to sell or otherwise dispose of
any Common Units or Subordinated Units (as defined in the Underwriting
Agreement), any securities that are convertible into, or exercisable or
exchangeable for, or that represent the right to receive, Common Units or
Subordinated Units or any securities that are senior to or pari passu with
Common Units for a period of 180 days after the date of the Prospectus (as
defined in the Underwriting Agreement) without the prior written consent of
Smith Barney Inc. Notwithstanding the foregoing, this letter agreement shall
not prohibit any transfer by the undersigned of any of the above-mentioned
securities to a member of his immediate family or a trust, family partnership or
similar family-related or family controlled entity, all of the interests of
which are owned by the undersigned or members of the immediate family of the
undersigned, so long as such transferee shall execute a letter agreement in
substantially the form hereof agreeing to the restrictions set forth
herein.
<PAGE>
If for any reason the Underwriting Agreement is terminated before the
Closing Date (as defined in the Underwriting Agreement), the agreement set forth
above shall likewise be terminated.
Yours very truly,
[Signature of officer, director or common Unitholder]
[Name and address of officer, director or common
Unitholder]
<PAGE>
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF U.S. TIMBERLANDS
COMPANY, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF U.S.
TIMBERLANDS COMPANY, L.P. dated as of November 19, 1997, is entered into by
and among U.S. Timberlands Services Company, L.L.C. (formerly known as New
Services, L.L.C.), a Delaware limited liability company, as the General
Partner, and John M. Rudey, as the Organizational Limited Partner, together
with any other Persons who become Partners in the Partnership or parties
hereto as provided herein. In consideration of the covenants, conditions and
agreements contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this
Agreement.
"Acquisition" means any transaction in which any Group Member acquires
(through an asset acquisition, merger, stock acquisition or other form of
investment) control over all or a portion of the assets, properties or
business of another Person for the purpose of increasing the operating
capacity or revenues of the Partnership Group from the operating capacity or
revenues of the Partnership Group existing immediately prior to such
transaction.
"Additional Book Basis" means the portion of any remaining Carrying Value of
an Adjusted Property that is attributable to positive adjustments made to such
Carrying Value as a result of Book-Up Events. For purposes of determining the
extent that Carrying Value constitutes Additional Book Basis:
(i) Any negative adjustment made to the Carrying Value of an Adjusted
Property as a result of either a Book-Down Event or a Book-Up Event shall
first be deemed to offset or decrease that portion of the Carrying Value of
such Adjusted Property that is attributable to any prior positive
adjustments made thereto pursuant to a Book-Up Event or Book-Down Event.
(ii) If Carrying Value that constitutes Additional Book Basis is reduced
as a result of a Book-Down Event and the Carrying Value of other property
is increased as a result of such Book-Down Event, an allocable portion of
any such increase in Carrying Value shall be treated as Additional Book
Basis; provided that the amount treated as Additional Book Basis pursuant
hereto as a result of such Book-Down Event shall not exceed the amount by
which the Aggregate Remaining Net Positive Adjustments after such Book-Down
Event exceeds the remaining Additional Book Basis attributable to all of
the Partnership's Adjusted Property after such Book-Down Event (determined
without regard to the application of this clause (ii) to such Book-Down
Event).
"Additional Book Basis Derivative Items" means any Book Basis Derivative
Items that are computed with reference to Additional Book Basis. To the extent
that the Additional Book Basis attributable to all of the Partnership's
Adjusted Property as of the beginning of any taxable period exceeds the
Aggregate Remaining Net Positive Adjustments as of the beginning of such
period (the "Excess Additional Book Basis"), the Additional Book Basis
Derivative Items for such period shall be reduced by the amount that bears the
same ratio to the amount of Additional Book Basis Derivative Items determined
without regard to this sentence as the Excess Additional Book Basis bears to
the Additional Book Basis as of the beginning of such period.
"Additional Limited Partner" means a Person admitted to the Partnership as a
Limited Partner pursuant to Section 10.4 and who is shown as such on the books
and records of the Partnership.
"Adjusted Asset Sales Amount" means $50.0 million as increased by 10% of the
purchase price of asset acquisitions (other than like-kind exchanges)
subsequent to the Closing Date.
1
<PAGE>
"Adjusted Capital Account" means the Capital Account maintained for each
Partner as of the end of each fiscal year of the Partnership, (a) increased by
any amounts that such Partner is obligated to restore under the standards set
by Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to
restore under Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5)) and
(b) decreased by (i) the amount of all losses and deductions that, as of the
end of such fiscal year, are reasonably expected to be allocated to such
Partner in subsequent years under Sections 704(e)(2) and 706(d) of the Code
and Treasury Regulation Section 1.751-1(b)(2)(ii), and (ii) the amount of all
distributions that, as of the end of such fiscal year, are reasonably expected
to be made to such Partner in subsequent years in accordance with the terms of
this Agreement or otherwise to the extent they exceed offsetting increases to
such Partner's Capital Account that are reasonably expected to occur during
(or prior to) the year in which such distributions are reasonably expected to
be made (other than increases as a result of a minimum gain chargeback
pursuant to Section 6.1(d)(i) or 6.1(d)(ii)). The foregoing definition of
Adjusted Capital Account is intended to comply with the provisions of Treasury
Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith. The "Adjusted Capital Account" of a Partner in respect of a General
Partner Interest, a Common Unit, a Subordinated Unit or an Incentive
Distribution Right or any other specified interest in the Partnership shall be
the amount which such Adjusted Capital Account would be if such General
Partner Interest, Common Unit, Subordinated Unit, Incentive Distribution Right
or other interest in the Partnership were the only interest in the Partnership
held by a Partner from and after the date on which such General Partner
Interest, Common Unit, Subordinated Unit, Incentive Distribution Right or
other interest was first issued.
"Adjusted Operating Surplus" means, with respect to any period, Operating
Surplus generated during such period (a) less (i) any net increase in working
capital borrowings during such period and (ii) any net reduction in cash
reserves for Operating Expenditures during such period not relating to an
Operating Expenditure made during such period, and (b) plus (i) any net
decrease in working capital borrowings during such period and (ii) any net
increase in cash reserves for Operating Expenditures during such period
required by any debt instrument for the repayment of principal, interest or
premium. Adjusted Operating Surplus does not include that portion of Operating
Surplus included in clause (a)(i) of the definition of Operating Surplus.
"Adjusted Property" means any property the Carrying Value of which has been
adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii). Once an Adjusted
Property is deemed contributed to a new partnership in exchange for an
interest in the new partnership, followed by the deemed liquidation of the
Partnership for federal income tax purposes upon a termination of the
Partnership pursuant to Treasury Regulation Section 1.708-(b)(1)(iv), such
property shall thereafter constitute a Contributed Property until the Carrying
Value of such property is subsequently adjusted pursuant to Section 5.5(d)(i)
or 5.5(d)(ii).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question. As used
herein, the term "control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or
otherwise.
"Aggregate Remaining Net Positive Adjustments" means, as of the end of any
taxable period, the sum of the Remaining Net Positive Adjustments of all the
Partners.
"Agreed Allocation" means any allocation, other than a Required Allocation,
of an item of income, gain, loss or deduction pursuant to the provisions of
Section 6.1, including, without limitation, a Curative Allocation (if
appropriate to the context in which the term "Agreed Allocation" is used).
"Agreed Value" of any Contributed Property means the fair market value of
such property or other consideration at the time of contribution as determined
by the General Partner using such reasonable method of
2
<PAGE>
valuation as it may adopt. The General Partner shall, in its discretion, use
such method as it deems reasonable and appropriate to allocate the aggregate
Agreed Value of Contributed Properties contributed to the Partnership in a
single or integrated transaction among each separate property on a basis
proportional to the fair market value of each Contributed Property.
"Agreement" means this Amended and Restated Agreement of Limited Partnership
of U.S. Timberlands Company, L.P., as it may be amended, supplemented or
restated from time to time.
"Asset Sale" means a sale, lease, conveyance or other disposition of any
assets other than sales of inventory in the ordinary course of business and
consistent with past practice, but excluding (a) any transfer of assets by the
Partnership or any of its subsidiaries to a subsidiary of the Partnership, (b)
the sale of Timberlands in a like-kind exchange for a like interest in other
Timberlands having a fair market value (as determined in good faith by the
Board of Directors of the General Partner) at least equal to the fair market
value (as determined in good faith by the Board of Directors of the General
Partner) of the Timberlands sold, (c) the sale of not more than 10,000 acres
in the aggregate of Timberlands designated in good faith by the Board of
Directors of the General Partner for a higher and better use, (d) a
disposition of obsolete equipment in the ordinary course of business and (e)
timber deed, bulk, pay-as-cut and stumpage sales in the ordinary course of
business.
"Assignee" means a Non-citizen Assignee or a Person to whom one or more
Limited Partner Interests have been transferred in a manner permitted under
this Agreement and who has executed and delivered a Transfer Application as
required by this Agreement, but who has not been admitted as a Substituted
Limited Partner.
"Associate" means, when used to indicate a relationship with any Person, (a)
any corporation or organization of which such Person is a director, officer or
partner or is, directly or indirectly, the owner of 20% or more of any class
of voting stock or other voting interest; (b) any trust or other estate in
which such Person has at least a 20% beneficial interest or as to which such
Person serves as trustee or in a similar fiduciary capacity; and (c) any
relative or spouse of such Person, or any relative of such spouse, who has the
same principal residence as such Person.
"Available Cash" means, with respect to any Quarter ending prior to the
Liquidation Date,
(a) the sum of (i) all cash and cash equivalents of the Partnership Group
on hand at the end of such Quarter, and (ii) all additional cash and cash
equivalents of the Partnership Group on hand on the date of determination
of Available Cash with respect to such Quarter resulting from borrowings
for working capital purposes made subsequent to the end of such Quarter,
less
(b) the amount of any cash reserves that is necessary or appropriate in
the reasonable discretion of the General Partner to (i) provide for the
proper conduct of the business of the Partnership Group (including reserves
for future capital expenditures and for anticipated future credit needs of
the Partnership Group) subsequent to such Quarter, (ii) comply with
applicable law or any loan agreement, security agreement, mortgage, debt
instrument or other agreement or obligation to which any Group Member is a
party or by which it is bound or its assets are subject or (iii) provide
funds for distributions under Section 6.4 or 6.5 in respect of any one or
more of the next four Quarters; provided, however, that the General Partner
may not establish cash reserves pursuant to (iii) above if the effect of
such reserves would be that the Partnership is unable to distribute the
Minimum Quarterly Distribution on all Common Units with respect to such
Quarter; and, provided further, that disbursements made by a Group Member
or cash reserves established, increased or reduced after the end of such
Quarter but on or before the date of determination of Available Cash with
respect to such Quarter shall be deemed to have been made, established,
increased or reduced, for purposes of determining Available Cash, within
such Quarter if the General Partner so determines.
Notwithstanding the foregoing, "Available Cash" with respect to the Quarter
in which the Liquidation Date occurs and any subsequent Quarter shall equal
zero.
"Book Basis Derivative Items" means any item of income, deduction, gain or
loss included in the determination of Net Income or Net Loss that is computed
with reference to the Carrying Value of an Adjusted Property (e.g.,
depreciation, depletion, or gain or loss with respect to an Adjusted
Property).
"Book-Down Event" means an event which triggers a negative adjustment to the
Capital Accounts of the Partners pursuant to Section 5.5(d).
3
<PAGE>
"Book-Tax Disparity" means with respect to any item of Contributed Property
or Adjusted Property, as of the date of any determination, the difference
between the Carrying Value of such Contributed Property or Adjusted Property
and the adjusted basis thereof for federal income tax purposes as of such
date. A Partner's share of the Partnership's Book-Tax Disparities in all of
its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained
pursuant to Section 5.5 and the hypothetical balance of such Partner's Capital
Account computed as if it had been maintained strictly in accordance with
federal income tax accounting principles.
"Book-Up Event" means an event which triggers a positive adjustment to the
Capital Accounts of the Partners pursuant to Section 5.5(d).
"Business Day" means Monday through Friday of each week, except that a legal
holiday recognized as such by the government of the United States of America
or the states of New York or Oregon shall not be regarded as a Business Day.
"Capital Account" means the capital account maintained for a Partner
pursuant to Section 5.5. The "Capital Account" of a Partner in respect of a
General Partner Interest, a Common Unit, a Subordinated Unit, an Incentive
Distribution Right or any other Partnership Interest shall be the amount which
such Capital Account would be if such General Partner Interest, Common Unit,
Subordinated Unit, Incentive Distribution Right, or other Partnership Interest
were the only interest in the Partnership held by a Partner from and after the
date on which such General Partner Interest, Common Unit, Subordinated Unit,
Incentive Distribution Right or other Partnership Interest was first issued.
"Capital Contribution" means any cash, cash equivalents or the Net Agreed
Value of Contributed Property that a Partner contributes to the Partnership
pursuant to this Agreement.
"Capital Improvement" means any (a) addition or improvement to the capital
assets owned by any Group Member or (b) acquisition of existing, or the
construction of new, capital assets (including, without limitation,
timberlands, seed orchards, nurseries and timber processing and manufacturing
facilities and related assets), in each case made to increase the operating
capacity or revenues of the Partnership Group from the operating capacity or
revenues of the Partnership Group existing immediately prior to such addition,
improvement, acquisition or construction.
"Capital Surplus" has the meaning assigned to such term in Section 6.3(a).
"Carrying Value" means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all
depreciation, amortization and cost recovery deductions charged to the
Partners' and Assignees' Capital Accounts in respect of such Contributed
Property, and (b) with respect to any other Partnership property, the adjusted
basis of such property for federal income tax purposes, all as of the time of
determination. The Carrying Value of any property shall be adjusted from time
to time in accordance with Sections 5.5(d)(i) and 5.5(d)(ii) and to reflect
changes, additions or other adjustments to the Carrying Value for dispositions
and acquisitions of Partnership properties, as deemed appropriate by the
General Partner.
"Cause" means a court of competent jurisdiction has entered a final, non-
appealable judgment finding the General Partner liable for actual fraud, gross
negligence or willful or wanton misconduct in its capacity as general partner
of the Partnership.
"Certificate" means a certificate, substantially in the form of Exhibit A to
this Agreement or in such other form as may be adopted by the General Partner
in its discretion, issued by the Partnership evidencing ownership of one or
more Common Units or a certificate, in such form as may be adopted by the
General Partner in its discretion, issued by the Partnership evidencing
ownership of one or more other Partnership Securities.
"Certificate of Limited Partnership" means the Certificate of Limited
Partnership of the Partnership filed with the Secretary of State of the State
of Delaware as referenced in Section 2.1, as such Certificate of Limited
Partnership may be amended, supplemented or restated from time to time.
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"Citizenship Certification" means a properly completed certificate in such
form as may be specified by the General Partner by which an Assignee or a
Limited Partner certifies that he (and if he is a nominee holding for the
account of another Person, that to the best of his knowledge such other
Person) is an Eligible Citizen.
"Claim" has the meaning assigned to such term in Section 7.12(c).
"Closing Date" means the first date on which Common Units are sold by the
Partnership to the Underwriters pursuant to the provisions of the Underwriting
Agreement.
"Closing Price" has the meaning assigned to such term in Section 15.1(a).
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time. Any reference herein to a specific section or sections of
the Code shall be deemed to include a reference to any corresponding provision
of successor law.
"Combined Interest" has the meaning assigned to such term in Section
11.3(a).
"Commission" means the United States Securities and Exchange Commission.
"Common Unit" means a Partnership Security representing a fractional part of
the Partnership Interests of all Limited Partners and Assignees and of the
General Partner (exclusive of its interest as a holder of a General Partner
Interest and Incentive Distribution Rights) and having the rights and
obligations specified with respect to Common Units in this Agreement. The term
"Common Unit" does not refer to a Subordinated Unit prior to its conversion
into a Common Unit pursuant to the terms hereof.
"Common Unit Arrearage" means, with respect to any Common Unit, whenever
issued, as to any Quarter within the Subordination Period, the excess, if any,
of (a) the Minimum Quarterly Distribution with respect to a Common Unit in
respect of such Quarter over (b) the sum of all Available Cash distributed
with respect to a Common Unit in respect of such Quarter pursuant to Section
6.4(a)(i).
"Contributed Property" means each property or other asset, in such form as
may be permitted by the Delaware Act, but excluding cash, contributed to the
Partnership (or deemed contributed to a new partnership on termination of the
Partnership pursuant to Section 708 of the Code). Once the Carrying Value of a
Contributed Property is adjusted pursuant to Section 5.5(d), such property
shall no longer constitute a Contributed Property, but shall be deemed an
Adjusted Property.
"Conflicts Committee" means a committee of the Board of Directors of the
General Partner composed entirely of two or more directors who are neither
members, officers nor employees of the General Partner nor members, officers,
directors or employees of any Affiliate of the General Partner.
"Consolidated Cash Flow Available for Fixed Charges" means, with respect to
the Partnership and its subsidiaries for any period, the sum of, without
duplication, the amounts for such period, taken as a single accounting period,
of (a) Consolidated Net Income, (b) Consolidated Non-cash Charges, (c)
Consolidated Interest Expense and (d) Consolidated Income Tax Expense.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to the
Partnership and its subsidiaries, the ratio of the aggregate amount of
Consolidated Cash Flow Available for Fixed Charges for the four full fiscal
quarters for which financial information in respect thereof is available
immediately preceding the date of the transaction (the "Transaction Date")
giving rise to the need to calculate the Consolidated Fixed Charge Coverage
Ratio (such four full fiscal quarter period being referred to herein as the
"Four Quarter Period") to the aggregate amount of Consolidated Fixed Charges
of such Person for the Four Quarter Period. In addition to and without
limitation of the foregoing, for purposes of this definition, "Consolidated
Cash Flow Available for Fixed Charges" and "Consolidated Fixed Charges" shall
be calculated after giving effect on a pro forma basis for the period of such
calculation to, without duplication, (a) the incurrence or repayment of any
indebtedness of
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the Partnership or any of its subsidiaries (and, in the case of any
incurrence, the application of the net proceeds thereof) during the period
commencing on the first day of the Four Quarter Period to and including the
Transaction Date (the "Reference Period"), including, without limitation, the
incurrence of the indebtedness giving rise to the need to make such
calculation (and the application of the net proceeds thereof), as if such
incurrence (and application) occurred on the first day of the Reference Period
(including any actual interest payments made with respect to indebtedness
under the Working Capital Facility), and (b) any Asset Sales or asset
acquisitions occurring during the Reference Period, as if such Asset Sale or
asset acquisition occurred on the first day of the Reference Period; provided,
however, that (i) Consolidated Fixed Charges shall be reduced by amounts
attributable to businesses or assets that are so disposed of or discontinued
only to the extent that the obligations giving rise to such Consolidated Fixed
Charges would no longer be obligations contributing to the Consolidated Fixed
Charges subsequent to the date of determination of the Consolidated Fixed
Charge Coverage Ratio and (ii) Consolidated Cash Flow Available for Fixed
Charges generated by an acquired business or asset shall be determined by (x)
in the case of an acquisition of timber or timberlands by the Partnership or a
subsidiary during such period, by using the projected net cash flow of the
timber or timberlands so acquired, based on the harvest plan prepared in the
ordinary course of business and in good faith by the General Partner, for the
first harvest year; provided that such harvest plan shall not assume the
harvesting or sale of more than 10% (or, in the case of an acquisition under a
cutting contract with a term of less than 10 years, such higher percentage as
shall be equal to the quotient of 100% divided by the term of such cutting
contract (expressed in years)) of the total merchantable timber so acquired;
provided further, in determining projected cash flow from acquired timber or
timberlands, prices shall be assumed to equal the average prices realized by
the Partnership for comparable timber sold during such period; and (y) in the
case of all other asset acquisitions, the actual gross profit (revenues minus
cost of goods sold) of such acquired business or asset during the immediately
preceding four full fiscal quarters in the Reference Period minus the pro
forma expenses that would have been incurred by the Partnership and its
subsidiaries in the operation of such acquired business or asset during such
period computed on the basis of personnel expenses for employees retained or
to be retained by the Partnership and its subsidiaries in the operation of the
acquired business or asset and non-personnel costs and expenses incurred by
the Partnership and its subsidiaries in the operation of the Partnership's
business at similarly situated facilities. If the applicable Reference Period
for any calculation of the Consolidated Fixed Charge Coverage Ratio shall
include a portion prior to the Closing Date, then such Consolidated Fixed
Charge Coverage Ratio shall be calculated based upon the Consolidated Cash
Flow Available for Fixed Charges and the Consolidated Fixed Charges of the
Partnership on a pro forma basis for such portion of the Reference Period
prior to the Closing Date, giving effect to the transactions occurring on the
Closing Date, and the Consolidated Cash Flow Available for Fixed Charges and
the Consolidated Fixed Charges for the remaining portion of the Reference
Period on and after the Closing Date, giving pro forma effect, as described in
the two foregoing sentences, to all applicable transactions occurring on the
Closing Date or otherwise. Furthermore, in calculating "Consolidated Fixed
Charges" for purposes of determining the "Consolidated Fixed Charge Coverage
Ratio," (i) interest on outstanding indebtedness (other than indebtedness
referred to in clause (ii) below) determined on a fluctuating basis as of the
last day of the Four Quarter Period and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per
annum equal to the rate of interest on such indebtedness in effect on such
date; (ii) only actual interest payments associated with indebtedness under
the Working Capital Facility, including any refinancings thereof, during the
Four Quarter Period shall be included in such calculation; and (iii) if
interest on any indebtedness actually incurred on such date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate,
a eurocurrency interbank offered rate, or other rates, then the interest rate
in effect on the last day of the Four Quarter Period will be deemed to have
been in effect during such period.
"Consolidated Fixed Charges" means, with respect to the Partnership and its
subsidiaries for any period, the sum of, without duplication, (a) the amounts
for such period of Consolidated Interest Expense and (b) the product of (i)
the aggregate amount of dividends and other distributions paid or accrued
during such period in respect of preferred stock and redeemable capital stock
of the Partnership and its subsidiaries on a consolidated basis and (ii) a
fraction, the numerator of which is one and the denominator of which is one
minus the then applicable current combined federal, state and local statutory
tax rate, expressed as a percentage.
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"Consolidated Income Tax Expense" means, with respect to the Partnership and
its subsidiaries for any period, the provision for federal, state, local and
foreign income taxes of the Partnership and its subsidiaries for such period
as determined on a consolidated basis in accordance with U.S. GAAP.
"Consolidated Interest Expense" means, with respect to the Partnership and
its subsidiaries for any period, without duplication, the sum of (a) the
interest expense of the Partnership and its subsidiaries for such period as
determined on a consolidated basis in accordance with U.S. GAAP, including,
without limitation, (i) any amortization of debt discount, (ii) the net cost
under interest rate agreements, (iii) the interest portion of any deferred
payment obligation, (iv) all commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance financing and
(v) all accrued interest and (b) the interest component of capital leases
paid, accrued or scheduled to be paid or accrued by the Partnership and its
subsidiaries during such period as determined on a consolidated basis in
accordance with U.S. GAAP.
"Consolidated Net Income" means the net income of the Partnership and its
subsidiaries, as determined on a consolidated basis in accordance with U.S.
GAAP and as adjusted to exclude (a) net after-tax extraordinary gains or
losses, (b) net after-tax gains or losses attributable to Asset Sales to the
extent the net proceeds therefrom result in the aggregate net proceeds
received by the Partnership or any subsidiary of the Partnership from all
Asset Sales since the Closing Date exceeding the Adjusted Asset Sales Amount,
(c) the net income or loss of any Person which is not a subsidiary and which
is accounted for by the equity method of accounting, provided that
Consolidated Net Income shall include the amount of dividends or distributions
actually paid to the Partnership or any subsidiary, (d) the net income or loss
prior to the date of acquisition of any Person combined with the Partnership
or any subsidiary in a pooling of interest, (e) the net income of any
subsidiary to the extent that dividends or distributions of such net income
are not at the date of determination permitted by the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule or other
regulation and (f) the cumulative effect of any changes in accounting
principles.
"Consolidated Non-cash Charges" means, with respect to the Partnership and
its subsidiaries for any period, the aggregate depreciation, depletion,
amortization and any other non-cash charges, in each case reducing
Consolidated Net Income of the Partnership and its subsidiaries for such
period, determined on a consolidated basis in accordance with U.S. GAAP.
"Contribution and Conveyance Agreement" means that certain Contribution,
Conveyance and Assumption Agreement, dated as of the Closing Date, among the
General Partner, the Partnership, the Operating Company and certain other
parties, together with the additional conveyance documents and instruments
contemplated or referenced thereunder.
"Cumulative Common Unit Arrearage" means, with respect to any Common Unit,
whenever issued, and as of the end of any Quarter, the excess, if any, of (a)
the sum resulting from adding together the Common Unit Arrearage as to an
Initial Common Unit for each of the Quarters within the Subordination Period
ending on or before the last day of such Quarter over (b) the sum of any
distributions theretofore made pursuant to Section 6.4(a)(ii) and the second
sentence of Section 6.5 with respect to an Initial Common Unit (including any
distributions to be made in respect of the last of such Quarters).
"Curative Allocation" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 6.1(d)(xi).
"Current Market Price" has the meaning assigned to such term in Section
15.1(a).
"Delaware Act" means the Delaware Revised Uniform Limited Partnership Act, 6
Del C. (S)17-101, et seq., as amended, supplemented or restated from time to
time, and any successor to such statute.
"Departing Partner" means a former General Partner from and after the
effective date of any withdrawal or removal of such former General Partner
pursuant to Section 11.1 or 11.2.
"Economic Risk of Loss" has the meaning set forth in Treasury Regulation
Section 1.752-2(a).
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"Eligible Citizen" means a Person qualified to own interests in real
property in jurisdictions in which any Group Member does business or proposes
to do business from time to time, and whose status as a Limited Partner or
Assignee does not or would not subject such Group Member to a significant risk
of cancellation or forfeiture of any of its properties or any interest
therein.
"Event of Withdrawal" has the meaning assigned to such term in Section
11.1(a).
"Final Subordinated Units" has the meaning assigned to such term in Section
6.1(d)(x).
"First Liquidation Target Amount" has the meaning assigned to such term in
Section 6.1(c)(i)(D).
"First Target Distribution" means $0.550 per Unit per Quarter (or, with
respect to the period commencing on the Closing Date and ending on March 31,
1998, it means the product of $0.550 multiplied by the sum of (x) 1.00 and (y)
a fraction of which the numerator is the number of days in the period
commencing on the Closing Date and ending on December 31, 1997, and of which
the denominator is 92), subject to adjustment in accordance with Sections 6.6
and 6.9.
"General Partner" means U.S. Timberlands Services Company, L.L.C. (formerly
known as New Services, L.L.C.) and its predecessors, successors and permitted
assigns as general partner of the Partnership.
"General Partner Interest" means the ownership interest of the General
Partner in the Partnership (in its capacity as a general partner without
reference to any Limited Partner Interest held by it) which may be evidenced
by Partnership Securities or a combination thereof or interest therein, and
includes any and all benefits to which the General Partner is entitled as
provided in this Agreement, together with all obligations of the General
Partner to comply with the terms and provisions of this Agreement.
"Group" means a Person that with or through any of its Affiliates or
Associates has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting (except voting pursuant to a revocable proxy or
consent given to such Person in response to a proxy or consent solicitation
made to 10 or more Persons) or disposing of any Partnership Securities with
any other Person that beneficially owns, or whose Affiliates or Associates
beneficially own, directly or indirectly, Partnership Securities.
"Group Member" means a member of the Partnership Group.
"Holder" as used in Section 7.12, has the meaning assigned to such term in
Section 7.12(a).
"Holdings" means U.S. Timberlands Holdings, L.L.C., a Delaware limited
liability company.
"Incentive Distribution Right" means a Limited Partner Interest issued to
the General Partner in connection with the transfer of substantially all of
its member interest in the Operating Company to the Partnership pursuant to
Section 5.2, which Partnership Interest shall confer upon the holder thereof
only the rights and obligations specifically provided in this Agreement with
respect to Incentive Distribution Rights (and no other rights otherwise
available to or other obligations of holders of a Partnership Interest).
Notwithstanding anything in this Agreement to the contrary, the holder of an
Incentive Distribution Right shall not be entitled to vote such Incentive
Distribution Right on any Partnership matter except as may otherwise be
required by law.
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"Incentive Distributions" means any amount of cash distributed to the
holders of the Incentive Distribution Rights pursuant to Sections 6.4(a)(v),
(vi) and (vii) and 6.4(b)(iii), (iv) and (v).
"Indemnified Persons" has the meaning assigned to such term in Section
7.12(c).
"Indemnitee" means (a) the General Partner, any Departing Partner and any
Person who is or was an Affiliate of the General Partner or any Departing
Partner, (b) any Person who is or was a member, director, officer, employee,
agent or trustee of a Group Member, (c) any Person who is or was an officer,
member, partner, director, employee, agent or trustee of the General Partner
or any Departing Partner or any Affiliate of the General Partner or any
Departing Partner, or any Affiliate of any such Person and (d) any Person who
is or was serving at the request of the General Partner or any Departing
Partner or any such Affiliate as a director, officer, employee, member,
partner, agent, fiduciary or trustee of another Person; provided, that a
Person shall not be an Indemnitee by reason of providing, on a fee-for-
services basis, trustee, fiduciary or custodial services.
"Initial Common Units" means the Common Units sold in the Initial Offering.
"Initial Limited Partners" means the General Partner and Holdings (with
respect to the Subordinated Units and the Incentive Distribution Rights
received by them pursuant to Section 5.2) and the Underwriters, in each case
upon being admitted to the Partnership in accordance with Section 10.1.
"Initial Offering" means the initial offering and sale of Common Units to
the public, as described in the Registration Statement.
"Initial Unit Price" means (a) with respect to the Common Units and the
Subordinated Units, the initial public offering price per Common Unit at which
the Underwriters offered the Common Units to the public for sale as set forth
on the cover page of the prospectus included as part of the Registration
Statement and first issued at or after the time the Registration Statement
first became effective or (b) with respect to any other class or series of
Units, the price per Unit at which such class or series of Units is initially
sold by the Partnership, as determined by the General Partner, in each case
adjusted as the General Partner determines to be appropriate to give effect to
any distribution, subdivision or combination of Units.
"Interim Capital Transactions" means the following transactions if they
occur prior to the Liquidation Date: (a) borrowings, refinancings or
refundings of indebtedness and sales of debt securities (other than for
working capital purposes and other than for items purchased on open account in
the ordinary course of business) by any Group Member; (b) sales of equity
interests by any Group Member (other than Common Units sold to the
underwriters pursuant to the exercise of the Over-Allotment Option); and (c)
sales or other voluntary or involuntary dispositions of any assets of any
Group Member (other than (x) sales or other dispositions of inventory,
accounts receivable and other assets in the ordinary course of business,
including the exchange of timber or real property for other timber or real
property to the extent that the timber or real property received in exchange
is of equal or greater value, or the sale of timber or real property, to the
extent the proceeds are invested within 270 days in other timber or real
property, and (y) sales or other dispositions of assets as part of normal
retirements or replacements), in each case prior to the Liquidation Date.
Notwithstanding anything herein to the contrary, Interim Capital Transactions
shall not include (A) the first $50.0 million in real property (and related
timber) sales made by the Partnership Group subsequent to the Closing Date and
(B) stumpage, timber deed and other bulk timber sales (which, in the case of
(A) and (B) would otherwise be deemed Interim Capital Transactions) generally
of the type described in the Partnership's strategic plan approved by the
Board of Directors of the General Partner prior to the Closing Date.
"Issue Price" means the price at which a Unit is purchased from the
Partnership, after taking into account any sales commission or underwriting
discount charged to the Partnership.
"Limited Partner" means, unless the context otherwise requires, (a) the
Organizational Limited Partner, each Initial Limited Partner, each Substituted
Limited Partner, each Additional Limited Partner and any Partner
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upon the change of its status from General Partner to Limited Partner pursuant
to Section 11.3 or (b) solely for purposes of Articles V, VI, VII and IX and
Sections 12.3 and 12.4, each Assignee; provided, however, that when the term
Limited Partner is used herein in the context of any vote or other approval,
including without limitation Articles XIII and XIV, such term shall not,
solely for such purpose, include any holder of an Incentive Distribution Right
except as may otherwise be required by law.
"Limited Partner Interest" means the ownership interest of a Limited Partner
or Assignee in the Partnership, which may be evidenced by Common Units,
Subordinated Units, Incentive Distribution Rights or other Partnership
Securities or a combination thereof or interest therein, and includes any and
all benefits to which such Limited Partner or Assignee is entitled as provided
in this Agreement, together with all obligations of such Limited Partner or
Assignee to comply with the terms and provisions of this Agreement; provided,
however, that when the term Limited Partner Interest is used herein in the
context of any vote or other approval, including without limitation Articles
XIII and XIV, such term shall not, solely for such purpose, include any
Incentive Distribution Rights except as may otherwise be required by law.
"Liquidation Date" means (a) in the case of an event giving rise to the
dissolution of the Partnership of the type described in clauses (a) and (b) of
the first sentence of Section 12.2, the date on which the applicable time
period during which the holders of Outstanding Units have the right to elect
to reconstitute the Partnership and continue its business has expired without
such an election being made, and (b) in the case of any other event giving
rise to the dissolution of the Partnership, the date on which such event
occurs.
"Liquidator" means one or more Persons selected by the General Partner to
perform the functions described in Section 12.3 as liquidating trustee of the
Partnership within the meaning of the Delaware Act.
"Merger Agreement" has the meaning assigned to such term in Section 14.1.
"Minimum Quarterly Distribution" means $0.50 per Unit per Quarter (or with
respect to the period commencing on the Closing Date and ending on March 31,
1998, it means the product of $0.50 multiplied by the sum of (x) 1.00 and (y)
a fraction of which the numerator is the number of days in the period
commencing on the Closing Date and ending on December 31, 1997, and of which
the denominator is 92), subject to adjustment in accordance with Sections 6.6
and 6.9.
"National Securities Exchange" means an exchange registered with the
Commission under Section 6(a) of the Securities Exchange Act of 1934, as
amended, supplemented or restated from time to time, and any successor to such
statute, or the Nasdaq Stock Market or any successor thereto.
"Net Agreed Value" means, (a) in the case of any Contributed Property, the
Agreed Value of such property reduced by any liabilities either assumed by the
Partnership upon such contribution or to which such property is subject when
contributed, and (b) in the case of any property distributed to a Partner or
Assignee by the Partnership, the Partnership's Carrying Value of such property
(as adjusted pursuant to Section 5.5(d)(ii)) at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner or
Assignee upon such distribution or to which such property is subject at the
time of distribution, in either case, as determined under Section 752 of the
Code.
"Net Income" means, for any taxable year, the excess, if any, of the
Partnership's items of income and gain (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss)
for such taxable year over the Partnership's items of loss and deduction
(other than those items taken into account in the computation of Net
Termination Gain or Net Termination Loss) for such taxable year. The items
included in the calculation of Net Income shall be determined in accordance
with Section 5.5(b) and shall not include any items specially allocated under
Section 6.1(d); provided that the determination of the items that have been
specially allocated under Section 6.1(d) shall be made as if Section
6.1(d)(xii) were not in this Agreement.
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"Net Loss" means, for any taxable year, the excess, if any, of the
Partnership's items of loss and deduction (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss)
for such taxable year over the Partnership's items of income and gain (other
than those items taken into account in the computation of Net Termination Gain
or Net Termination Loss) for such taxable year. The items included in the
calculation of Net Loss shall be determined in accordance with Section 5.5(b)
and shall not include any items specially allocated under Section 6.1(d);
provided that the determination of the items that have been specially
allocated under Section 6.1(d) shall be made as if Section 6.1(d)(xii) were
not in this Agreement.
"Net Positive Adjustments" means, with respect to any Partner, the excess,
if any, of the total positive adjustments over the total negative adjustments
made to the Capital Account of such Partner pursuant to Book-Up Events and
Book-Down Events.
"Net Termination Gain" means, for any taxable year, the sum, if positive, of
all items of income, gain, loss or deduction recognized by the Partnership
after the Liquidation Date. The items included in the determination of Net
Termination Gain shall be determined in accordance with Section 5.5(b) and
shall not include any items of income, gain or loss specially allocated under
Section 6.1(d).
"Net Termination Loss" means, for any taxable year, the sum, if negative, of
all items of income, gain, loss or deduction recognized by the Partnership
after the Liquidation Date. The items included in the determination of Net
Termination Loss shall be determined in accordance with Section 5.5(b) and
shall not include any items of income, gain or loss specially allocated under
Section 6.1(d).
"Non-citizen Assignee" means a Person whom the General Partner has
determined in its discretion does not constitute an Eligible Citizen and as to
whose Partnership Interest the General Partner has become the Substituted
Limited Partner, pursuant to Section 4.9.
"Nonrecourse Built-in Gain" means with respect to any Contributed Properties
or Adjusted Properties that are subject to a mortgage or pledge securing a
Nonrecourse Liability, the amount of any taxable gain that would be allocated
to the Partners pursuant to Sections 6.2(b)(i)(A), 6.2(b)(ii)(A) and
6.2(b)(iii) if such properties were disposed of in a taxable transaction in
full satisfaction of such liabilities and for no other consideration.
"Nonrecourse Deductions" means any and all items of loss, deduction or
expenditures (described in Section 705(a)(2)(B) of the Code) that, in
accordance with the principles of Treasury Regulation Section 1.704-2(b), are
attributable to a Nonrecourse Liability.
"Nonrecourse Liability" has the meaning set forth in Treasury Regulation
Section 1.752-1(a)(2).
"Notice of Election to Purchase" has the meaning assigned to such term in
Section 15.1(b) hereof.
"Operating Company" means U.S. Timberlands Klamath Falls, L.L.C., a Delaware
limited liability company, and any successors thereto.
"Operating Company Agreement" means the Amended and Restated Operating
Agreement of the Operating Company, as it may be amended, supplemented or
restated from time to time.
"Operating Expenditures" means all Partnership Group expenditures,
including, but not limited to, taxes, reimbursements of the General Partner,
debt service payments, and capital expenditures, subject to the following:
(a) Payments (including prepayments) of principal of and premium on
indebtedness shall not be an Operating Expenditure if the payment is (i)
required in connection with the sale or other disposition of assets or (ii)
made in connection with the refinancing or refunding of indebtedness with
the proceeds from new indebtedness or from the sale of equity interests.
For purposes of the foregoing, at the election and in the reasonable
discretion of the General Partner, any payment of principal or premium
shall be deemed to be refunded or refinanced by any indebtedness incurred
or to be incurred by the Partnership Group within 180 days before or after
such payment to the extent of the principal amount of such indebtedness.
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(b) Operating Expenditures shall not include (i) capital expenditures
made for Acquisitions or for Capital Improvements, (ii) payment of
transaction expenses relating to Interim Capital Transactions or (iii)
distributions to Partners. Where capital expenditures are made in part for
Acquisitions or for Capital Improvements and in part for other purposes,
the General Partner's good faith allocation between the amounts paid for
each shall be conclusive.
"Operating Surplus," means, with respect to any period ending prior to the
Liquidation Date, on a cumulative basis and without duplication,
(a) the sum of (i) $15.0 million plus all cash and cash equivalents of
the Partnership Group on hand as of the close of business on the Closing
Date, (ii) all cash receipts of the Partnership Group for the period
beginning on the Closing Date and ending with the last day of such period,
other than cash receipts from Interim Capital Transactions (except to the
extent specified in Section 6.5) and (iii) all cash receipts of the
Partnership Group after the end of such period but on or before the date of
determination of Operating Surplus with respect to such period resulting
from borrowings for working capital purposes, less
(b) the sum of (i) Operating Expenditures for the period beginning on the
Closing Date and ending with the last day of such period and (ii) the
amount of cash reserves that is necessary or advisable in the reasonable
discretion of the General Partner to provide funds for future Operating
Expenditures, provided, however, that disbursements made (including
contributions to a Group Member or disbursements on behalf of a Group
Member) or cash reserves established, increased or reduced after the end of
such period but on or before the date of determination of Available Cash
with respect to such period shall be deemed to have been made, established,
increased or reduced, for purposes of determining Operating Surplus, within
such period if the General Partner so determines.
Notwithstanding the foregoing, "Operating Surplus" with respect to the
Quarter in which the Liquidation Date occurs and any subsequent Quarter shall
equal zero.
"Opinion of Counsel" means a written opinion of counsel (who may be regular
counsel to the Partnership or the General Partner or any of its Affiliates)
acceptable to the General Partner in its reasonable discretion.
"Option Closing Date" has the meaning assigned to such term in the
Underwriting Agreement.
"Organizational Limited Partner" means John M. Rudey in his capacity as the
organizational limited partner of the Partnership pursuant to this Agreement.
"Outstanding" means, with respect to Partnership Securities, all Partnership
Securities that are issued by the Partnership and reflected as outstanding on
the Partnership's books and records as of the date of determination; provided,
however, that if at any time any Person or Group (other than the General
Partner or its Affiliates) beneficially owns 20% or more of any Outstanding
Partnership Securities of any class then Outstanding, all Partnership
Securities owned by such Person or Group shall not be voted on any matter and
shall not be considered to be Outstanding when sending notices of a meeting of
Limited Partners to vote on any matter (unless otherwise required by law),
calculating required votes, determining the presence of a quorum or for other
similar purposes under this Agreement, except that Common Units so owned shall
be considered to be Outstanding for purposes of Section 11.1(b)(iv) (such
Common Units shall not, however, be treated as a separate class of Partnership
Securities for purposes of this Agreement).
"Over-Allotment Option" means the over-allotment option granted to the
Underwriters by the Partnership pursuant to the Underwriting Agreement.
"Parity Units" means Common Units and all other Units having rights to
distributions or in liquidation ranking on a parity with the Common Units.
"Partner Nonrecourse Debt" has the meaning set forth in Treasury Regulation
Section 1.704-2(b)(4).
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"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
"Partner Nonrecourse Deductions" means any and all items of loss, deduction
or expenditure (including, without limitation, any expenditure described in
Section 705(a)(2)(B) of the Code) that, in accordance with the principles of
Treasury Regulation Section 1.704-2(i), are attributable to a Partner
Nonrecourse Debt.
"Partners" means the General Partner, the Limited Partners and the holders
of Common Units, Subordinated Units and Incentive Distribution Rights.
"Partnership" means U.S. Timberlands Company, L.P., a Delaware limited
partnership, and any successors thereto.
"Partnership Group" means the Partnership, the Operating Company and any
Subsidiary of either such entity, treated as a single consolidated entity.
"Partnership Interest" means an ownership interest in the Partnership, which
shall include General Partner Interests and Limited Partner Interests.
"Partnership Minimum Gain" means that amount determined in accordance with
the principles of Treasury Regulation Section 1.704-2(d).
"Partnership Security" means any class or series of equity interest in the
Partnership (but excluding any options, rights, warrants and appreciation
rights relating to any equity interest in the Partnership), including, without
limitation, Common Units, Subordinated Units and Incentive Distribution
Rights.
"Percentage Interest" means as of the date of such determination (a) as to
the General Partner (with respect to its General Partner Interest), an
aggregate 1.0%, (b) as to any Unitholder or Assignee holding Units, the
product obtained by multiplying (i) 99% less the percentage applicable to
paragraph (c) by (ii) the quotient obtained by dividing (A) the number of
Units held by such Unitholder or Assignee by (B) the total number of all
Outstanding Units, and (c) as to the holders of additional Partnership
Securities issued by the Partnership in accordance with Section 5.6, the
percentage established as a part of such issuance. The Percentage Interest
with respect to an Incentive Distribution Right shall at all times be zero.
"Person" means an individual or a corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization, association,
government agency or political subdivision thereof or other entity.
"Per Unit Capital Amount" means, as of any date of determination, the
Capital Account, stated on a per Unit basis, underlying any Unit held by a
Person other than the General Partner or any Affiliate of the General Partner
who holds Units.
"Pro Rata" means (a) when modifying Units or any class thereof, apportioned
equally among all designated Units in accordance with their relative
Percentage Interests, (b) when modifying Partners and Assignees, apportioned
among all Partners and Assignees in accordance with their respective
Percentage Interests and (c) when modifying holders of Incentive Distribution
Rights, apportioned equally among all holders of Incentive Distribution Rights
in accordance with the relative number of Incentive Distribution Rights held
by each such holder.
"Purchase Date" means the date determined by the General Partner as the date
for purchase of all Outstanding Units (other than Units owned by the General
Partner and its Affiliates) pursuant to Article XV.
"Quarter" means, unless the context requires otherwise, a fiscal quarter of
the Partnership.
"Recapture Income" means any gain recognized by the Partnership (computed
without regard to any adjustment required by Sections 734 or 743 of the Code)
upon the disposition of any property or asset of the Partnership, which gain
is characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
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"Record Date" means the date established by the General Partner for
determining (a) the identity of the Record Holders entitled to notice of, or
to vote at, any meeting of Limited Partners or entitled to vote by ballot or
give approval of Partnership action in writing without a meeting or entitled
to exercise rights in respect of any lawful action of Limited Partners or (b)
the identity of Record Holders entitled to receive any report or distribution
or to participate in any offer.
"Record Holder" means the Person in whose name a Common Unit is registered
on the books of the Transfer Agent as of the opening of business on a
particular Business Day, or with respect to other Partnership Securities, the
Person in whose name any such other Partnership Security is registered on the
books which the General Partner has caused to be kept as of the opening of
business on such Business Day.
"Redeemable Interests" means any Partnership Interests for which a
redemption notice has been given, and has not been withdrawn, pursuant to
Section 4.10.
"Registration Statement" means the Registration Statement on Form S-1
(Registration No. 333-32811) as it has been or as it may be amended or
supplemented from time to time, filed by the Partnership with the Commission
under the Securities Act to register the offering and sale of the Common Units
in the Initial Offering.
"Remaining Net Positive Adjustments" means as of the end of any taxable
period, (i) with respect to the Unitholders holding Common Units or
Subordinated Units, the excess of (a) the Net Positive Adjustments of the
Unitholders holding Common Units or Subordinated Units as of the end of such
period over (b) the sum of those Partners' Share of Additional Book Basis
Derivative Items for each prior taxable period, (ii) with respect to the
General Partner (as holder of the General Partner Interest), the excess of (a)
the Net Positive Adjustments of the General Partner as of the end of such
period over (b) the sum of the General Partner's Share of Additional Book
Basis Derivative Items with respect to the General Partner Interest for each
prior taxable period, and (iii) with respect to the holders of Incentive
Distribution Rights, the excess of (a) the Net Positive Adjustments of the
holders of Incentive Distribution Rights as of the end of such period over (b)
the sum of the Share of Additional Book Basis Derivative Items of the holders
of the Incentive Distribution Rights for each prior taxable period.
"Required Allocations" means (a) any limitation imposed on any allocation of
Net Losses or Net Termination Losses under Section 6.1(b) or 6.1(c)(ii) and
(b) any allocation of an item of income, gain, loss or deduction pursuant to
Section 6.1(d)(i), 6.1(d)(ii), 6.1(d)(iv), 6.1(d)(vii) or 6.1(d)(ix).
"Residual Gain" or "Residual Loss" means any item of gain or loss, as the
case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of a Contributed Property
or Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 6.2(b)(i)(A) or 6.2(b)(ii)(A), respectively, to eliminate
Book-Tax Disparities.
"Restricted Activities" means the following activities in North America: the
(i) acquisition, exchange, operation or sale of timber-producing real property
or rights to harvest timber a principal purpose of which is producing logs and
other forest products, (ii) harvesting of timber other than harvesting which
is incidental to the ownership or operation of real property not owned or
operated for a principal purpose of producing logs or other forest products,
(iii) sale, exchange or purchase of logs other than sales, exchanges or
purchases which are incidental to the ownership or operation of real property
not owned or operated for a principal purpose of producing logs or other
forest products, and (iv) any and all other activities relating to the forest
products industry to the extent such activities compete with the operations of
the Partnership or the Operating Company.
"Second Liquidation Target Amount" has the meaning assigned to such term in
Section 6.1(c)(i)(E).
"Second Target Distribution" means $0.633 per Unit per Quarter (or, with
respect to the period commencing on the Closing Date and ending on March 31,
1998, it means the product of $0.633 multiplied by the sum of (x) 1.00 and (y)
a fraction of which the numerator is equal to the number of days in the period
commencing on the Closing Date and ending on December 31, 1997, and of which
the denominator is 92), subject to adjustment in accordance with Sections 6.6
and 6.9.
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"Securities Act" means the Securities Act of 1933, as amended, supplemented
or restated from time to time and any successor to such statute.
"Share of Additional Book Basis Derivative Items" means in connection with
any allocation of Additional Book Basis Derivative Items for any taxable
period, (i) with respect to the Unitholders holding Common Units or
Subordinated Units, the amount that bears the same ratio to such Additional
Book Basis Derivative Items as the Unitholders' Remaining Net Positive
Adjustments as of the end of such period bears to the Aggregate Remaining Net
Positive Adjustments as of that time, (ii) with respect to the General Partner
(as holder of the General Partner Interest), the amount that bears the same
ratio to such additional Book Basis Derivative Items as the General Partner's
Remaining Net Positive Adjustments as of the end of such period bears to the
Aggregate Remaining Net Positive Adjustment as of that time, and (iii) with
respect to the Partners holding Incentive Distribution Rights, the amount that
bears the same ratio to such Additional Book Basis Derivative Items as the
Remaining Net Positive Adjustments of the Partners holding the Incentive
Distribution Rights as of the end of such period bears to the Aggregate
Remaining Net Positive Adjustments as of that time.
"Special Approval" means approval by a majority of the members of the
Conflicts Committee.
"Subordinated Unit" means a Unit representing a fractional part of the
Partnership Interests of all Limited Partners and Assignees (other than of
holders of the Incentive Distribution Rights) and having the rights and
obligations specified with respect to Subordinated Units in this Agreement.
The term "Subordinated Unit" as used herein does not include a Common Unit.
"Subordination Period" means the period commencing on the Closing Date and
ending on the first to occur of the following dates:
(a) the first day of any Quarter beginning after December 31, 2002 in
respect of which (i) (A) distributions of Available Cash from Operating
Surplus on each of the Outstanding Common Units and Subordinated Units with
respect to each of the three consecutive, non-overlapping four-Quarter
periods immediately preceding such date equaled or exceeded the sum of the
Minimum Quarterly Distribution on all Outstanding Common Units and
Subordinated Units during such periods and (B) the Adjusted Operating
Surplus generated during each of the three consecutive, non-overlapping
four-Quarter periods immediately preceding such date equaled or exceeded
the sum of the Minimum Quarterly Distribution on all of the Common Units
and Subordinated Units that were outstanding during such periods on a fully
diluted basis (i.e., taking into account for purposes of such determination
all Outstanding Common Units, all Outstanding Subordinated Units, all
Common Units and Subordinated Units issuable upon exercise of employee
options that have, as of the date of determination, already vested or are
scheduled to vest prior to the end of the quarter immediately following the
quarter with respect to which such determination is made, and all Common
Units and Subordinated Units that have as of the date of determination,
been earned by but not yet issued to management of the Partnership in
respect of incentive compensation), plus the related distribution on the
General Partner Interest in the Partnership and on the managing member
interest in the Operating Company and (ii) there are no Cumulative Common
Unit Arrearages; and
(b) the date on which the General Partner is removed as general partner
of the Partnership upon the requisite vote by holders of Outstanding Units
under circumstances where Cause does not exist and Units held by the
General Partner and its Affiliates are not voted in favor of such removal.
"Subsidiary" means, with respect to any Person, (a) a corporation of which
more than 50% of the voting power of shares entitled (without regard to the
occurrence of any contingency) to vote in the election of directors or other
governing body of such corporation is owned, directly or indirectly, at the
date of determination, by such Person, by one or more Subsidiaries of such
Person or a combination thereof, (b) a partnership (whether general or
limited) in which such Person or a Subsidiary of such Person is, at the date
of determination, a general or limited partner of such partnership, but only
if more than 50% of the partnership interests of such partnership (considering
all of the partnership interests of the partnership as a single class) is
owned, directly or indirectly, at the date of determination, by such Person,
by one or more Subsidiaries of such Person, or a combination
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thereof, or (c) any other Person (other than a corporation or a partnership)
in which such Person, one or more Subsidiaries of such Person, or a
combination thereof, directly or indirectly, at the date of determination, has
(i) at least a majority ownership interest or (ii) the power to elect or
direct the election of a majority of the directors or other governing body of
such Person.
"Substituted Limited Partner" means a Person who is admitted as a Limited
Partner to the Partnership pursuant to Section 10.2 in place of and with all
the rights of a Limited Partner and who is shown as a Limited Partner on the
books and records of the Partnership.
"Surviving Business Entity" has the meaning assigned to such term in Section
14.2(b).
"Third Target Distribution" means $0.822 per Unit per Quarter (or, with
respect to the period commencing on the Closing Date and ending on March 31,
1998, it means the product of $0.822 multiplied by the sum of (x) 1.00 and (y)
a fraction of which the numerator is equal to the number of days in the period
commencing on the Closing Date and ending on December 31, 1997, and of which
the denominator is 92), subject to adjustment in accordance with Sections 6.6
and 6.9.
"Trading Day" has the meaning assigned to such term in Section 15.1(a).
"Transfer" has the meaning assigned to such term in Section 4.4(a).
"Transfer Agent" means such bank, trust company or other Person (including
the General Partner or one of its Affiliates) as shall be appointed from time
to time by the Partnership to act as registrar and transfer agent for the
Common Units and as may be appointed from time to time by the Partnership to
act as registrar and transfer agent for any other Partnership Securities;
provided that if no Transfer Agent is specifically designated for any such
other Partnership Securities, the General Partner shall act in such capacity.
"Transfer Application" means an application and agreement for transfer of
Limited Partner Interests in the form set forth on the back of a Certificate
or in a form substantially to the same effect in a separate instrument.
"Underwriter" means each Person named as an underwriter in Schedule I to the
Underwriting Agreement who purchases Common Units pursuant thereto.
"Underwriting Agreement" means the Underwriting Agreement dated November 13,
1997 among the Underwriters, the Partnership and certain other parties,
providing for the purchase of Common Units by such Underwriters.
"Unit" means a Partnership Security that is designated as a "Unit" and shall
include Common Units and Subordinated Units but shall not include (x) a
General Partner Interest or (y) Incentive Distribution Rights.
"Unitholders" means the holders of Common Units and Subordinated Units.
"Unit Majority" means, during the Subordination Period, at least a majority
of the Outstanding Common Units voting as a class and at least a majority of
the Outstanding Subordinated Units voting as a class, and thereafter, at least
a majority of the Outstanding Units.
"Unpaid MQD" has the meaning assigned to such term in Section 6.1(c)(i)(B).
"Unrealized Gain" attributable to any item of Partnership property means, as
of any date of determination, the excess, if any, of (a) the fair market value
of such property as of such date (as determined under Section 5.5(d)) over (b)
the Carrying Value of such property as of such date (prior to any adjustment
to be made pursuant to Section 5.5(d) as of such date).
"Unrealized Loss" attributable to any item of Partnership property means, as
of any date of determination, the excess, if any, of (a) the Carrying Value of
such property as of such date (prior to any adjustment to be made pursuant to
Section 5.5(d) as of such date) over (b) the fair market value of such
property as of such date (as determined under Section 5.5(d)).
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"Unrecovered Capital" means at any time, with respect to a Unit, the Initial
Unit Price less the sum of all distributions constituting Capital Surplus
theretofore made in respect of an Initial Common Unit and any distributions of
cash (or the Net Agreed Value of any distributions in kind) in connection with
the dissolution and liquidation of the Partnership theretofore made in respect
of an Initial Common Unit, adjusted as the General Partner determines to be
appropriate to give effect to any distribution, subdivision or combination of
such Units.
"U.S. GAAP" means United States Generally Accepted Accounting Principles
consistently applied.
"U.S. Timberlands Services Company, L.L.C." means U.S. Timberlands Service
Company, L.L.C., a Delaware limited liability company, which is the General
Partner of the Partnership as of the Closing Date, and was formerly known as
New Services, L.L.C.
"Withdrawal Opinion of Counsel" has the meaning assigned to such term in
Section 11.1(b).
"Working Capital Facility" means the working capital facility of the
Operating Company provided for in the Credit Agreement, dated as of November
19, 1997, between the Operating Company and Bank of America National Trust and
Savings Association, as Agent and Letter of Credit Issuing Bank, and the other
financial institutions party thereto, in its individual capacity and as agent,
and the other banks which are or become parties from time to time thereto, as
it may be amended, supplemented or otherwise modified from time to time.
Section 1.2 Construction.
Unless the context requires otherwise: (a) any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural
and vice versa; (b) references to Articles and Sections refer to Articles and
Sections of this Agreement; and (c) "include" or "includes" means includes,
without limitation, and "including" means including, without limitation.
ARTICLE II
ORGANIZATION
Section 2.1 Formation.
The General Partner and the Organizational Limited Partner have previously
formed the Partnership as a limited partnership pursuant to the provisions of
the Delaware Act and hereby amend and restate the original Agreement of
Limited Partnership of U.S. Timberlands Company, L.P. in its entirety. This
amendment and restatement shall become effective on the date of this
Agreement. Except as expressly provided to the contrary in this Agreement, the
rights, duties (including fiduciary duties), liabilities and obligations of
the Partners and the administration, dissolution and termination of the
Partnership shall be governed by the Delaware Act. All Partnership Interests
shall constitute personal property of the owner thereof for all purposes and a
Partner has no interest in specific Partnership property.
Section 2.2 Name.
The name of the Partnership shall be "U.S. Timberlands Company, L.P." The
Partnership's business may be conducted under any other name or names deemed
necessary or appropriate by the General Partner in its sole discretion,
including the name of the General Partner. The words "Limited Partnership,"
"L.P.," "Ltd." or similar words or letters shall be included in the
Partnership's name where necessary for the purpose of complying with the laws
of any jurisdiction that so requires. The General Partner in its discretion
may change the name of the Partnership at any time and from time to time and
shall notify the Limited Partners of such change in the next regular
communication to the Limited Partners.
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Section 2.3 Registered Office; Registered Agent; Principal Office; Other
Offices.
Unless and until changed by the General Partner, the registered office of
the Partnership in the State of Delaware shall be located at 1209 Orange
Street, New Castle County, Wilmington, Delaware 19801, and the registered
agent for service of process on the Partnership in the State of Delaware at
such registered office shall be The Corporation Trust Company. The principal
office of the Partnership shall be located at 6400 Highway 66, Klamath Falls,
Oregon 97601 or such other place as the General Partner may from time to time
designate by notice to the Limited Partners. The Partnership may maintain
offices at such other place or places within or outside the State of Delaware
as the General Partner deems necessary or appropriate. The address of the
General Partner shall be 625 Madison Ave, Suite 10-B, New York, New York 10022
or such other place as the General Partner may from time to time designate by
notice to the Limited Partners.
Section 2.4 Purpose and Business.
The purpose and nature of the business to be conducted by the Partnership
shall be to (a) serve as a member of the Operating Company and, in connection
therewith, to exercise all the rights and powers conferred upon the
Partnership as a member of the Operating Company pursuant to the Operating
Company Agreement or otherwise, (b) engage directly in, or enter into or form
any corporation, partnership, joint venture, limited liability company or
other arrangement to engage indirectly in, any business activity that the
Operating Company is permitted to engage in by the Operating Company Agreement
and, in connection therewith, to exercise all of the rights and powers
conferred upon the Partnership pursuant to the agreements relating to such
business activity, (c) engage directly in, or enter into or form any
corporation, partnership, joint venture, limited liability company or other
arrangement to engage indirectly in, any business activity that is approved by
the General Partner and which lawfully may be conducted by a limited
partnership organized pursuant to the Delaware Act and, in connection
therewith, to exercise all of the rights and powers conferred upon the
Partnership pursuant to the agreements relating to such business activity;
provided, however, that the General Partner reasonably determines, as of the
date of the acquisition or commencement of such activity, that such activity
(i) generates "qualifying income" (as such term is defined pursuant to Section
7704 of the Code) or (ii) enhances the operations of an activity of the
Operating Company or a Partnership activity that generates qualifying income,
and (d) do anything necessary or appropriate to the foregoing, including the
making of capital contributions or loans to a Group Member. The General
Partner has no obligation or duty to the Partnership, the Limited Partners, or
the Assignees to propose or approve, and in its discretion may decline to
propose or approve, the conduct by the Partnership of any business.
Section 2.5 Powers.
The Partnership shall be empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described in
Section 2.4 and for the protection and benefit of the Partnership.
Section 2.6 Power of Attorney.
(a) Each Limited Partner and each Assignee hereby constitutes and appoints
the General Partner and, if a Liquidator (other than the General Partner)
shall have been selected pursuant to Section 12.3, the Liquidator, severally
(and any successor to the Liquidator by merger, transfer, assignment, election
or otherwise) and each of their authorized officers and attorneys-in-fact, as
the case may be, with full power of substitution, as his true and lawful agent
and attorney-in-fact, with full power and authority in his name, place and
stead, to:
(i) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (A) all certificates, documents and other
instruments (including this Agreement and the Certificate of Limited
Partnership and all amendments or restatements hereof or thereof) that the
General Partner or the Liquidator deems necessary or appropriate to form,
qualify or continue the existence or qualification of the Partnership as a
limited partnership (or a partnership in which the limited partners have
limited liability) in the State of Delaware and in all other jurisdictions
in which the Partnership may conduct business or own property; (B)
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all certificates, documents and other instruments that the General Partner
or the Liquidator deems necessary or appropriate to reflect, in accordance
with its terms, any amendment, change, modification or restatement of this
Agreement; (C) all certificates, documents and other instruments (including
conveyances and a certificate of cancellation) that the General Partner or
the Liquidator deems necessary or appropriate to reflect the dissolution
and liquidation of the Partnership pursuant to the terms of this Agreement;
(D) all certificates, documents and other instruments relating to the
admission, withdrawal, removal or substitution of any Partner pursuant to,
or other events described in, Article IV, X, XI or XII; (E) all
certificates, documents and other instruments relating to the determination
of the rights, preferences and privileges of any class or series of
Partnership Securities issued pursuant to Section 5.6; and (F) all
certificates, documents and other instruments (including agreements and a
certificate of merger) relating to a merger or consolidation of the
Partnership pursuant to Article XIV; and
(ii) execute, swear to, acknowledge, deliver, file and record all
ballots, consents, approvals, waivers, certificates, documents and other
instruments necessary or appropriate, in the discretion of the General
Partner or the Liquidator, to make, evidence, give, confirm or ratify any
vote, consent, approval, agreement or other action that is made or given by
the Partners hereunder or is consistent with the terms of this Agreement or
is necessary or appropriate, in the discretion of the General Partner or
the Liquidator, to effectuate the terms or intent of this Agreement;
provided, that when required by Section 13.3 or any other provision of this
Agreement that establishes a percentage of the Limited Partners or of the
Limited Partners of any class or series required to take any action, the
General Partner and the Liquidator may exercise the power of attorney made
in this Section 2.6(a)(ii) only after the necessary vote, consent or
approval of the Limited Partners or of the Limited Partners of such class
or series, as applicable.
Nothing contained in this Section 2.6(a) shall be construed as authorizing
the General Partner to amend this Agreement except in accordance with Article
XIII or as may be otherwise expressly provided for in this Agreement.
(b) The foregoing power of attorney is hereby declared to be irrevocable and
a power coupled with an interest, and it shall survive and, to the maximum
extent permitted by law, not be affected by the subsequent death,
incompetency, disability, incapacity, dissolution, bankruptcy or termination
of any Limited Partner or Assignee and the transfer of all or any portion of
such Limited Partner's or Assignee's Partnership Interest and shall extend to
such Limited Partner's or Assignee's heirs, successors, assigns and personal
representatives. Each such Limited Partner or Assignee hereby agrees to be
bound by any representation made by the General Partner or the Liquidator
acting in good faith pursuant to such power of attorney; and each such Limited
Partner or Assignee, to the maximum extent permitted by law, hereby waives any
and all defenses that may be available to contest, negate or disaffirm the
action of the General Partner or the Liquidator taken in good faith under such
power of attorney. Each Limited Partner or Assignee shall execute and deliver
to the General Partner or the Liquidator, within 15 days after receipt of the
request therefor, such further designation, powers of attorney and other
instruments as the General Partner or the Liquidator deems necessary to
effectuate this Agreement and the purposes of the Partnership.
Section 2.7 Term.
The term of the Partnership commenced upon the filing of the Certificate of
Limited Partnership in accordance with the Delaware Act and shall continue in
existence until the close of Partnership business on December 31, 2087 or
until the earlier dissolution of the Partnership in accordance with the
provisions of Article XII. The existence of the Partnership as a separate
legal entity shall continue until the cancellation of the Certificate of
Limited Partnership as provided in the Delaware Act.
Section 2.8 Title to Partnership Assets.
Title to Partnership assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner or Assignee, individually or collectively, shall have
any ownership interest in such Partnership assets or any portion thereof.
Title to any or all of the
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Partnership assets may be held in the name of the Partnership, the General
Partner, one or more of its Affiliates or one or more nominees, as the General
Partner may determine. The General Partner hereby declares and warrants that
any Partnership assets for which record title is held in the name of the
General Partner or one or more of its Affiliates or one or more nominees shall
be held by the General Partner or such Affiliate or nominee for the use and
benefit of the Partnership in accordance with the provisions of this
Agreement; provided, however, that the General Partner shall use reasonable
efforts to cause record title to such assets (other than those assets in
respect of which the General Partner determines that the expense and
difficulty of conveyancing makes transfer of record title to the Partnership
impracticable) to be vested in the Partnership as soon as reasonably
practicable; provided, further, that, prior to the withdrawal or removal of
the General Partner or as soon thereafter as practicable, the General Partner
shall use reasonable efforts to effect the transfer of record title to the
Partnership and, prior to any such transfer, will provide for the use of such
assets in a manner satisfactory to the General Partner. All Partnership assets
shall be recorded as the property of the Partnership in its books and records,
irrespective of the name in which record title to such Partnership assets is
held.
ARTICLE III
RIGHTS OF LIMITED PARTNERS
Section 3.1 Limitation of Liability.
The Limited Partners and the Assignees shall have no liability under this
Agreement except as expressly provided in this Agreement or the Delaware Act.
Section 3.2 Management of Business.
No Limited Partner or Assignee, in its capacity as such, shall participate
in the operation, management or control (within the meaning of the Delaware
Act) of the Partnership's business, transact any business in the Partnership's
name or have the power to sign documents for or otherwise bind the
Partnership. Any action taken by any Affiliate of the General Partner or any
officer, director, employee, member, general partner, agent or trustee of the
General Partner or any of its Affiliates, or any officers, director, employee,
member, general partner, agent or trustee of a Group Member, in its capacity
as such, shall not be deemed to be participation in the control of the
business of the Partnership by a limited partner of the Partnership (within
the meaning of Section 17-303(a) of the Delaware Act) and shall not affect,
impair or eliminate the limitations on the liability of the Limited Partners
or Assignees under this Agreement.
Section 3.3 Outside Activities of the Limited Partners.
Subject to the provisions of Section 7.5, which shall continue to be
applicable to the Persons referred to therein, regardless of whether such
Persons shall also be Limited Partners or Assignees, any Limited Partner or
Assignee shall be entitled to and may have business interests and engage in
business activities in addition to those relating to the Partnership,
including business interests and activities in direct competition with the
Partnership Group. Neither the Partnership nor any of the other Partners or
Assignees shall have any rights by virtue of this Agreement in any business
ventures of any Limited Partner or Assignee.
Section 3.4 Rights of Limited Partners.
(a) In addition to other rights provided by this Agreement or by applicable
law, and except as limited by Section 3.4(b), each Limited Partner shall have
the right, for a purpose reasonably related to such Limited Partner's interest
as a limited partner in the Partnership, upon reasonable written demand and at
such Limited Partner's own expense:
(i) to obtain true and full information regarding the status of the
business and financial condition of the Partnership;
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(ii) promptly after becoming available, to obtain a copy of the
Partnership's federal, state and local income tax returns for each year;
(iii) to have furnished to him a current list of the name and last known
business, residence or mailing address of each Partner;
(iv) to have furnished to him a copy of this Agreement and the
Certificate of Limited Partnership and all amendments thereto, together
with a copy of the executed copies of all powers of attorney pursuant to
which this Agreement, the Certificate of Limited Partnership and all
amendments thereto have been executed;
(v) to obtain true and full information regarding the amount of cash and
a description and statement of the Net Agreed Value of any other Capital
Contribution by each Partner and which each Partner has agreed to
contribute in the future, and the date on which each became a Partner; and
(vi) to obtain such other information regarding the affairs of the
Partnership as is just and reasonable.
(b) The General Partner may keep confidential from the Limited Partners and
Assignees, for such period of time as the General Partner deems reasonable,
(i) any information that the General Partner reasonably believes to be in the
nature of trade secrets or (ii) other information the disclosure of which the
General Partner in good faith believes (A) is not in the best interests of the
Partnership Group, (B) could damage the Partnership Group or (C) that any
Group Member is required by law or by agreement with any third party to keep
confidential (other than agreements with Affiliates of the Partnership the
primary purpose of which is to circumvent the obligations set forth in this
Section 3.4).
ARTICLE IV
CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS; REDEMPTION OF
PARTNERSHIP INTERESTS
Section 4.1 Certificates.
Upon the Partnership's issuance of Common Units or Subordinated Units to any
Person, the Partnership shall issue one or more Certificates in the name of
such Person evidencing the number of such Units being so issued. In addition,
(a) upon the General Partner's request, the Partnership shall issue to it one
or more Certificates in the name of the General Partner evidencing its
interests in the Partnership and (b) upon the request of any Person owning
Incentive Distribution Rights or any Partnership Securities, the Partnership
shall issue to such Person one or more certificates evidencing such Incentive
Distribution Rights or Partnership Securities. Certificates shall be executed
on behalf of the Partnership by the Chairman of the Board, President or any
Executive Vice President or Vice President and the Secretary or any Assistant
Secretary of the General Partner. No Common Unit Certificate shall be valid
for any purpose until it has been countersigned by the Transfer Agent. Subject
to the requirements of Section 6.7(b), the Partners holding Certificates
evidencing Subordinated Units may exchange such Certificates for Certificates
evidencing Common Units on or after the date on which such Subordinated Units
are converted into Common Units pursuant to the terms of Section 5.8.
Section 4.2 Mutilated, Destroyed, Lost or Stolen Certificates.
(a) If any mutilated Certificate is surrendered to the Transfer Agent, the
appropriate officers of the General Partner on behalf of the Partnership shall
execute, and the Transfer Agent shall countersign and deliver in exchange
therefor, a new Certificate evidencing the same number and type of Partnership
Securities as the Certificate so surrendered.
(b) The appropriate officers of the General Partner on behalf of the
Partnership shall execute and deliver, and the Transfer Agent shall
countersign a new Certificate in place of any Certificate previously issued if
the Record Holder of the Certificate:
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(i) makes proof by affidavit, in form and substance satisfactory to the
Partnership, that a previously issued Certificate has been lost, destroyed
or stolen;
(ii) requests the issuance of a new Certificate before the Partnership
has notice that the Certificate has been acquired by a purchaser for value
in good faith and without notice of an adverse claim;
(iii) if requested by the Partnership, delivers to the Partnership a
bond, in form and substance satisfactory to the Partnership, with surety or
sureties and with fixed or open penalty as the Partnership may reasonably
direct, in its sole discretion, to indemnify the Partnership, the Partners,
the General Partner and the Transfer Agent against any claim that may be
made on account of the alleged loss, destruction or theft of the
Certificate; and
(iv) satisfies any other reasonable requirements imposed by the
Partnership.
If a Limited Partner or Assignee fails to notify the Partnership within a
reasonable time after he has notice of the loss, destruction or theft of a
Certificate, and a transfer of the Limited Partner Interests represented by
the Certificate is registered before the Partnership, the General Partner or
the Transfer Agent receives such notification, the Limited Partner or Assignee
shall be precluded from making any claim against the Partnership, the General
Partner or the Transfer Agent for such transfer or for a new Certificate.
(c) As a condition to the issuance of any new Certificate under this Section
4.2, the Partnership may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the fees and expenses of the Transfer Agent)
reasonably connected therewith.
Section 4.3 Record Holders.
The Partnership shall be entitled to recognize the Record Holder as the
Partner or Assignee with respect to any Partnership Interest and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such Partnership Interest on the part of any other Person, regardless of
whether the Partnership shall have actual or other notice thereof, except as
otherwise provided by law or any applicable rule, regulation, guideline or
requirement of any National Securities Exchange on which such Partnership
Interests are listed for trading. Without limiting the foregoing, when a
Person (such as a broker, dealer, bank, trust company or clearing corporation
or an agent of any of the foregoing) is acting as nominee, agent or in some
other representative capacity for another Person in acquiring and/or holding
Partnership Interests, as between the Partnership on the one hand, and such
other Persons on the other, such representative Person (a) shall be the
Partner or Assignee (as the case may be) of record and beneficially, (b) must
execute and deliver a Transfer Application and (c) shall be bound by this
Agreement and shall have the rights and obligations of a Partner or Assignee
(as the case may be) hereunder and as, and to the extent, provided for herein.
Section 4.4 Transfer Generally.
(a) The term "transfer," when used in this Agreement with respect to a
Partnership Interest, shall be deemed to refer to a transaction by which the
General Partner assigns its Partnership Interest as a general partner in the
Partnership to another Person who becomes the General Partner, by which the
holder of a Limited Partner Interest assigns such Limited Partner Interest to
another Person who is or becomes a Limited Partner or an Assignee, and
includes a sale, assignment, gift, pledge, encumbrance, hypothecation,
mortgage, exchange or any other disposition by law or otherwise.
(b) No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article
IV. Any transfer or purported transfer of a Partnership Interest not made in
accordance with this Article IV shall be null and void.
(c) Nothing contained in this Agreement shall be construed to prevent a
disposition by any member of the General Partner of any or all of the issued
and outstanding member interests of the General Partner.
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Section 4.5 Registration and Transfer of Limited Partner Interests.
(a) The Partnership shall keep or cause to be kept on behalf of the
Partnership a register in which, subject to such reasonable regulations as it
may prescribe and subject to the provisions of Section 4.5(b), the Partnership
will provide for the registration and transfer of Limited Partner Interests.
The Transfer Agent is hereby appointed registrar and transfer agent for the
purpose of registering Common Units and transfers of such Common Units as
herein provided. The Partnership shall not recognize transfers of Certificates
evidencing Limited Partner Interests unless such transfers are effected in the
manner described in this Section 4.5. Upon surrender of a Certificate for
registration of transfer of any Limited Partner Interests evidenced by a
Certificate, and subject to the provisions of Section 4.5(b), the appropriate
officers of the General Partner on behalf of the Partnership shall execute and
deliver, and in the case of Common Units, the Transfer Agent shall countersign
and deliver, in the name of the holder or the designated transferee or
transferees, as required pursuant to the holder's instructions, one or more
new Certificates evidencing the same aggregate number and type of Limited
Partner Interests as was evidenced by the Certificate so surrendered.
(b) Except as otherwise provided in Section 4.9, the Partnership shall not
recognize any transfer of Limited Partner Interests until the Certificates
evidencing such Limited Partner Interests are surrendered for registration of
transfer and such Certificates are accompanied by a Transfer Application duly
executed by the transferee (or the transferee's attorney-in-fact duly
authorized in writing). No charge shall be imposed by the Partnership for such
transfer; provided, that as a condition to the issuance of any new Certificate
under this Section 4.5, the Partnership may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
with respect thereto.
(c) Limited Partner Interests may be transferred only in the manner
described in this Section 4.5. The transfer of any Limited Partner Interests
and the admission of any new Limited Partner shall not constitute an amendment
to this Agreement.
(d) Until admitted as a Substituted Limited Partner pursuant to Section
10.2, the Record Holder of a Limited Partner Interest shall be an Assignee in
respect of such Limited Partner Interest. Limited Partners may include
custodians, nominees or any other individual or entity in its own or any
representative capacity.
(e) A transferee of a Limited Partner Interest who has completed and
delivered a Transfer Application shall be deemed to have (i) requested
admission as a Substituted Limited Partner, (ii) agreed to comply with and be
bound by and to have executed this Agreement, (iii) represented and warranted
that such transferee has the right, power and authority and, if an individual,
the capacity to enter into this Agreement, (iv) granted the powers of attorney
set forth in this Agreement and (v) given the consents and approvals and made
the waivers contained in this Agreement.
(f) The General Partner and its Affiliates shall have the right at any time
to transfer its Subordinated Units and Common Units (whether issued upon
conversion of the Subordinated Units or otherwise) to one or more Persons.
Section 4.6 Transfer of General Partner Interest.
(a) Subject to Section 4.6(c) below, prior to December 31, 2007, the General
Partner shall not transfer all or any part of its General Partner Interest to
a Person unless such transfer (i) has been approved by the prior written
consent or vote of the holders of at least a Unit Majority or (ii) is of all,
but not less than all, of its General Partner Interest to (A) an Affiliate of
the General Partner or (B) another Person in connection with the merger or
consolidation of the General Partner with or into another Person or the
transfer by the General Partner of all or substantially all of its assets to
another Person.
(b) Subject to Section 4.6(c) below, on or after December 31, 2007, the
General Partner may transfer all or any of its General Partner Interest
without Unitholder approval.
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(c) Notwithstanding anything herein to the contrary, no transfer by the
General Partner of all or any part of its General Partner Interest to another
Person shall be permitted unless (i) the transferee agrees to assume the
rights and duties of the General Partner under this Agreement and the
Operating Company Agreement and to be bound by the provisions of this
Agreement and the Operating Company Agreement, (ii) the Partnership receives
an Opinion of Counsel that such transfer would not result in the loss of
limited liability of any Limited Partner or of any member of the Operating
Company or cause the Partnership or the Operating Company to be treated as an
association taxable as a corporation or otherwise to be taxed as an entity for
federal income tax purposes (to the extent not already so treated or taxed)
and (iii) such transferee also agrees to purchase all (or the appropriate
portion thereof, if applicable) of the partnership or member interest of the
General Partner as the general partner or managing member of each other Group
Member. In the case of a transfer pursuant to and in compliance with this
Section 4.6, the transferee or successor (as the case may be) shall, subject
to compliance with the terms of Section 10.3, be admitted to the Partnership
as a General Partner immediately prior to the transfer of the General Partner
Interest, and the business of the Partnership shall continue without
dissolution.
Section 4.7 Transfer of Incentive Distribution Rights.
Prior to December 31, 2007, a holder of Incentive Distribution Rights may
transfer any or all of the Incentive Distribution Rights held by such holder
without any consent of the Unitholders (a) to an Affiliate or (b) to another
Person in connection with (i) the merger or consolidation of such holder of
Incentive Distribution Rights with or into such other Person or (ii) the
transfer by such holder of all or substantially all of its assets to such
other Person. Any other transfer of the Incentive Distribution Rights prior to
December 31, 2007, shall require the prior approval of holders of at least a
Unit Majority. On or after December 31, 2007, a holder of Incentive
Distribution Rights may transfer any or all of its Incentive Distribution
Rights without Unitholder approval. The General Partner shall have the
authority (but shall not be required) to adopt such reasonable restrictions on
the transfer of Incentive Distribution Rights and requirements for registering
the transfer of Incentive Distribution Rights as the General Partner, in its
sole discretion, shall determine are necessary or appropriate.
Section 4.8 Restrictions on Transfers.
(a) Except as provided in Section 4.8(d) below, but notwithstanding the
other provisions of this Article IV, no transfer of any Partnership Interests
shall be made if such transfer would (i) violate the then applicable federal
or state securities laws or rules and regulations of the Commission, any state
securities commission or any other governmental authority with jurisdiction
over such transfer, (ii) terminate the existence or qualification of the
Partnership or the Operating Company under the laws of the jurisdiction of its
formation, or (iii) cause the Partnership or the Operating Company to be
treated as an association taxable as a corporation or otherwise to be taxed as
an entity for federal income tax purposes (to the extent not already so
treated or taxed).
(b) The General Partner may impose restrictions on the transfer of
Partnership Interests if a subsequent Opinion of Counsel determines that such
restrictions are necessary to avoid a significant risk of the Partnership or
the Operating Company becoming taxable as a corporation or otherwise to be
taxed as an entity for federal income tax purposes. The restrictions may be
imposed by making such amendments to this Agreement as the General Partner may
determine to be necessary or appropriate to impose such restrictions;
provided, however, that any amendment that the General Partner believes, in
the exercise of its reasonable discretion, could result in the delisting or
suspension of trading of any class of Limited Partner Interests on the
principal National Securities Exchange on which such class of Limited Partner
Interests is then traded must be approved, prior to such amendment being
effected, by the holders of at least a majority of the Outstanding Limited
Partner Interests of such class.
(c) The transfer of a Subordinated Unit that has converted into a Common
Unit shall be subject to the restrictions imposed by Section 6.7(b).
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(d) Nothing contained in this Article IV, or elsewhere in this Agreement,
shall preclude the settlement of any transactions involving Partnership
Interests entered into through the facilities of any National Securities
Exchange on which such Partnership Interests are listed for trading.
Section 4.9 Citizenship Certificates; Non-citizen Assignees.
(a) If any Group Member is or becomes subject to any federal, state or local
law or regulation that, in the reasonable determination of the General
Partner, creates a substantial risk of cancellation or forfeiture of any
property in which the Group Member has an interest based on the nationality,
citizenship or other related status of a Limited Partner or Assignee, the
General Partner may request any Limited Partner or Assignee to furnish to the
General Partner, within 30 days after receipt of such request, an executed
Citizenship Certification or such other information concerning his
nationality, citizenship or other related status (or, if the Limited Partner
or Assignee is a nominee holding for the account of another Person, the
nationality, citizenship or other related status of such Person) as the
General Partner may request. If a Limited Partner or Assignee fails to furnish
to the General Partner within the aforementioned 30-day period such
Citizenship Certification or other requested information or if upon receipt of
such Citizenship Certification or other requested information the General
Partner determines, with the advice of counsel, that a Limited Partner or
Assignee is not an Eligible Citizen, the Partnership Interests owned by such
Limited Partner or Assignee shall be subject to redemption in accordance with
the provisions of Section 4.10. In addition, the General Partner may require
that the status of any such Limited Partner or Assignee be changed to that of
a Non-citizen Assignee and, thereupon, the General Partner shall be
substituted for such Non-citizen Assignee as the Limited Partner in respect of
his Limited Partner Interests.
(b) The General Partner shall, in exercising voting rights in respect of
Limited Partner Interests held by it on behalf of Non-citizen Assignees,
distribute the votes in the same ratios as the votes of Partners (including
without limitation the General Partner) in respect of Limited Partner
Interests other than those of Non-citizen Assignees are cast, either for,
against or abstaining as to the matter.
(c) Upon dissolution of the Partnership, a Non-citizen Assignee shall have
no right to receive a distribution in kind pursuant to Section 12.4 but shall
be entitled to the cash equivalent thereof, and the Partnership shall provide
cash in exchange for an assignment of the Non-citizen Assignee's share of the
distribution in kind. Such payment and assignment shall be treated for
Partnership purposes as a purchase by the Partnership from the Non-citizen
Assignee of his Limited Partner Interest (representing his right to receive
his share of such distribution in kind).
(d) At any time after he can and does certify that he has become an Eligible
Citizen, a Non-citizen Assignee may, upon application to the General Partner,
request admission as a Substituted Limited Partner with respect to any Limited
Partner Interests of such Non-citizen Assignee not redeemed pursuant to
Section 4.10, and upon his admission pursuant to Section 10.2, the General
Partner shall cease to be deemed to be the Limited Partner in respect of the
Non-citizen Assignee's Limited Partner Interests.
Section 4.10 Redemption of Partnership Interests of Non-citizen Assignees.
(a) If at any time a Limited Partner or Assignee fails to furnish a
Citizenship Certification or other information requested within the 30-day
period specified in Section 4.9(a), or if upon receipt of such Citizenship
Certification or other information the General Partner determines, with the
advice of counsel, that a Limited Partner or Assignee is not an Eligible
Citizen, the Partnership may, unless the Limited Partner or Assignee
establishes to the satisfaction of the General Partner that such Limited
Partner or Assignee is an Eligible Citizen or has transferred his Partnership
Interests to a Person who is an Eligible Citizen and who furnishes a
Citizenship Certification to the General Partner prior to the date fixed for
redemption as provided below, redeem the Partnership Interest of such Limited
Partner or Assignee as follows:
(i) The General Partner shall, not later than the 30th day before the
date fixed for redemption, give notice of redemption to the Limited Partner
or Assignee, at his last address designated on the records of the
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Partnership or the Transfer Agent, by registered or certified mail, postage
prepaid. The notice shall be deemed to have been given when so mailed. The
notice shall specify the Redeemable Interests, the date fixed for
redemption, the place of payment, that payment of the redemption price will
be made upon surrender of the Certificate evidencing the Redeemable
Interests and that on and after the date fixed for redemption no further
allocations or distributions to which the Limited Partner or Assignee would
otherwise be entitled in respect of the Redeemable Interests will accrue or
be made.
(ii) The aggregate redemption price for Redeemable Interests shall be an
amount equal to the Current Market Price (the date of determination of
which shall be the date fixed for redemption) of Partnership Interests of
the class to be so redeemed multiplied by the number of Partnership
Interests of each such class included among the Redeemable Interests. The
redemption price shall be paid, in the discretion of the General Partner,
in cash or by delivery of a promissory note of the Partnership in the
principal amount of the redemption price, bearing interest at the rate of
10% annually and payable in three equal annual installments of principal
together with accrued interest, commencing one year after the redemption
date.
(iii) Upon surrender by or on behalf of the Limited Partner or Assignee,
at the place specified in the notice of redemption, of the Certificate
evidencing the Redeemable Interests, duly endorsed in blank or accompanied
by an assignment duly executed in blank, the Limited Partner or Assignee or
his duly authorized representative shall be entitled to receive the payment
therefor.
(iv) After the redemption date, Redeemable Interests shall no longer
constitute issued and Outstanding Partnership Interests.
(b) The provisions of this Section 4.10 shall also be applicable to
Partnership Interests held by a Limited Partner or Assignee as nominee of a
Person determined to be other than an Eligible Citizen.
(c) Nothing in this Section 4.10 shall prevent the recipient of a notice of
redemption from transferring his Partnership Interest before the redemption
date if such transfer is otherwise permitted under this Agreement. Upon
receipt of notice of such a transfer, the General Partner shall withdraw the
notice of redemption, provided the transferee of such Partnership Interest
certifies to the satisfaction of the General Partner in a Citizenship
Certification delivered in connection with the Transfer Application that he is
an Eligible Citizen. If the transferee fails to make such certification, such
redemption shall be effected from the transferee on the original redemption
date.
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
Section 5.1 Organizational Contributions.
In connection with the formation of the Partnership under the Delaware Act,
the General Partner made an initial Capital Contribution to the Partnership in
the amount of $10.00, for an interest in the Partnership and has been admitted
as the General Partner of the Partnership, and the Organizational Limited
Partner made an initial Capital Contribution to the Partnership in the amount
of $990.00 for an interest in the Partnership and has been admitted as a
Limited Partner of the Partnership. As of the Closing Date, the interest of
the Organizational Limited Partner shall be redeemed as provided in the
Contribution and Conveyance Agreement; the initial Capital Contributions of
each Partner shall thereupon be refunded; and the Organizational Limited
Partner shall cease to be a Limited Partner of the Partnership. Ninety-nine
percent of any interest or other profit that may have resulted from the
investment or other use of such initial Capital Contributions shall be
allocated and distributed to the Organizational Limited Partner, and the
balance thereof shall be allocated and distributed to the General Partner.
Section 5.2 Contributions by the General Partner and its Affiliates.
(a) On the Closing Date and pursuant to the Contribution and Conveyance
Agreement, the General Partner shall contribute to the Partnership, as a
Capital Contribution, all but 1.0101% of its member interest in the
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Operating Company in exchange for (i) the continuation of its Partnership
Interest as General Partner of the Partnership, subject to all of the rights,
privileges and duties of the General Partner under this Agreement, (ii)
1,387,963 Subordinated Units, and (iii) the Incentive Distribution Rights.
(b) On the Closing Date and pursuant to the Contribution and Conveyance
Agreement, Holdings shall contribute to the Partnership, as a Capital
Contribution, all of its member interest in the Operating Company in exchange
for 2,894,157 Subordinated Units.
(c) Upon the issuance of any additional Limited Partner Interests by the
Partnership (other than the issuance of the Common Units issued in the Initial
Offering or pursuant to the Over-Allotment Option), the General Partner shall
be required to make additional Capital Contributions equal to 1/99th of any
amount contributed to the Partnership in exchange for such additional Limited
Partner Interests. Except as set forth in the immediately preceding sentence
and Article XII, the General Partner shall not be obligated to make any
additional Capital Contributions to the Partnership.
Section 5.3 Contributions by Initial Limited Partners.
(a) On the Closing Date and pursuant to the Underwriting Agreement, each
Underwriter shall contribute to the Partnership cash in an amount equal to the
Issue Price per Initial Common Unit, multiplied by the number of Common Units
specified in the Underwriting Agreement to be purchased by such Underwriter at
the Closing Date. In exchange for such Capital Contributions by the
Underwriters, the Partnership shall issue Common Units to each Underwriter on
whose behalf such Capital Contribution is made in an amount equal to the
quotient obtained by dividing (i) the cash contribution to the Partnership by
or on behalf of such Underwriter by (ii) the Issue Price per Initial Common
Unit.
(b) Upon the exercise of the Over-Allotment Option, each Underwriter shall
contribute to the Partnership cash in an amount equal to the Issue Price per
Initial Common Unit, multiplied by the number of Common Units specified in the
Underwriting Agreement to be purchased by such Underwriter at the Option
Closing Date. In exchange for such Capital Contributions by the Underwriters,
the Partnership shall issue Common Units to each Underwriter on whose behalf
such Capital Contribution is made in an amount equal to the quotient obtained
by dividing (i) the cash contributions to the Partnership by or on behalf of
such Underwriter by (ii) the Issue Price per Initial Common Unit.
(c) No Limited Partner Partnership Interests will be issued or issuable as
of or at the Closing Date other than (i) the Common Units issuable pursuant to
subparagraph (a) hereof in aggregate number equal to 7,458,684, (ii) the
"Additional Units" as such term is used in the Underwriting Agreement in
aggregate number up to 1,118,803 issuable upon exercise of the Over-Allotment
Option pursuant to subparagraph (b) hereof, (ii) the 1,387,963 Subordinated
Units issuable to the General Partner and the 2,894,157 Subordinated Units
issuable to Holdings, in each case pursuant to Section 5.2 hereof, and (iii)
the Incentive Distribution Rights.
Section 5.4 Interest and Withdrawal.
No interest shall be paid by the Partnership on Capital Contributions. No
Partner or Assignee shall be entitled to the withdrawal or return of its
Capital Contribution, except to the extent, if any, that distributions made
pursuant to this Agreement or upon termination of the Partnership may be
considered as such by law and then only to the extent provided for in this
Agreement. Except to the extent expressly provided in this Agreement, no
Partner or Assignee shall have priority over any other Partner or Assignee
either as to the return of Capital Contributions or as to profits, losses or
distributions. Any such return shall be a compromise to which all Partners and
Assignees agree within the meaning of 17-502(b) of the Delaware Act.
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Section 5.5 Capital Accounts.
(a) The Partnership shall maintain for each Partner (or a beneficial owner
of Partnership Interests held by a nominee in any case in which the nominee
has furnished the identity of such owner to the Partnership in accordance with
Section 6031(c) of the Code or any other method acceptable to the General
Partner in its sole discretion) owning a Partnership Interest a separate
Capital Account with respect to such Partnership Interest in accordance with
the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital
Account shall be increased by (i) the amount of all Capital Contributions made
to the Partnership with respect to such Partnership Interest pursuant to this
Agreement and (ii) all items of Partnership income and gain (including,
without limitation, income and gain exempt from tax) computed in accordance
with Section 5.5(b) and allocated with respect to such Partnership Interest
pursuant to Section 6.1, and decreased by (x) the amount of cash or Net Agreed
Value of all actual and deemed distributions of cash or property made with
respect to such Partnership Interest pursuant to this Agreement and (y) all
items of Partnership deduction and loss computed in accordance with Section
5.5(b) and allocated with respect to such Partnership Interest pursuant to
Section 6.1.
(b) For purposes of computing the amount of any item of income, gain, loss
or deduction which is to be allocated pursuant to Article VI and is to be
reflected in the Partners' Capital Accounts, the determination, recognition
and classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes (including,
without limitation, any method of depreciation, cost recovery or amortization
used for that purpose), provided, that:
(i) Solely for purposes of this Section 5.5, the Partnership shall be
treated as owning directly its proportionate share (as determined by the
General Partner based upon the provisions of the Operating Company
Agreement) of all property owned by the Operating Company.
(ii) All fees and other expenses incurred by the Partnership to promote
the sale of (or to sell) a Partnership Interest that can neither be
deducted nor amortized under Section 709 of the Code, if any, shall, for
purposes of Capital Account maintenance, be treated as an item of deduction
at the time such fees and other expenses are incurred and shall be
allocated among the Partners pursuant to Section 6.1.
(iii) Except as otherwise provided in Treasury Regulation Section 1.704-
1(b)(2)(iv)(m), computation of all items of income, gain, loss and
deduction shall be made without regard to any election under Section 754 of
the Code which may be made by the Partnership and, as to those items
described in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without
regard to the fact that such items are not includable in gross income or
are neither currently deductible nor capitalized for federal income tax
purposes. To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Section 734(b) or 743(b) of the Code is
required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to
be taken into account in determining Capital Accounts, the amount of such
adjustment in the Capital Accounts shall be treated as an item of gain or
loss.
(iv) Any income, gain or loss attributable to the taxable disposition of
any Partnership property shall be determined as if the adjusted basis of
such property as of such date of disposition were equal in amount to the
Partnership's Carrying Value with respect to such property as of such date.
(v) In accordance with the requirements of Section 704(b) of the Code,
any deductions for depreciation, cost recovery or amortization attributable
to any Contributed Property shall be determined as if the adjusted basis of
such property on the date it was acquired by the Partnership were equal to
the Agreed Value of such property. Upon an adjustment pursuant to Section
5.5(d) to the Carrying Value of any Partnership property subject to
depreciation, cost recovery or amortization, any further deductions for
such depreciation, cost recovery or amortization attributable to such
property shall be determined (A) as if the adjusted basis of such property
were equal to the Carrying Value of such property immediately following
such adjustment and (B) using a rate of depreciation, cost recovery or
amortization derived from the same method and useful life (or, if
applicable, the remaining useful life) as is applied for federal income tax
purposes; provided, however, that, if the asset has a zero adjusted basis
for federal income tax purposes, depreciation, cost recovery or
amortization deductions shall be determined using any reasonable method
that the General Partner may adopt.
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(vi) If the Partnership's adjusted basis in a depreciable or cost
recovery property is reduced for federal income tax purposes pursuant to
Section 48(q)(1) or 48(q)(3) of the Code, the amount of such reduction
shall, solely for purposes hereof, be deemed to be an additional
depreciation or cost recovery deduction in the year such property is placed
in service and shall be allocated among the Partners pursuant to Section
6.1. Any restoration of such basis pursuant to Section 48(q)(2) of the Code
shall, to the extent possible, be allocated in the same manner to the
Partners to whom such deemed deduction was allocated.
(c) (i) A transferee of a Partnership Interest shall succeed to a pro rata
portion of the Capital Account of the transferor relating to the Partnership
Interest so transferred.
(ii) Immediately prior to the transfer of a Subordinated Unit or of a
Subordinated Unit that has converted into a Common Unit pursuant to Section
5.8 by a holder thereof (other than a transfer to an Affiliate unless the
General Partner elects to have this subparagraph 5.5(c)(ii) apply), the
Capital Account maintained for such Person with respect to its Subordinated
Units or converted Subordinated Units will (A) first, be allocated to the
Subordinated Units or converted Subordinated Units to be transferred in an
amount equal to the product of (x) the number of such Subordinated Units or
converted Subordinated Units to be transferred and (y) the Per Unit Capital
Amount for a Common Unit, and (B) second, any remaining balance in such
Capital Account will be retained by the transferor, regardless of whether it
has retained any Subordinated Units or converted Subordinated Units. Following
any such allocation, the transferor's Capital Account, if any, maintained with
respect to the retained Subordinated Units or converted Subordinated Units, if
any, will have a balance equal to the amount allocated under clause (B)
hereinabove, and the transferee's Capital Account established with respect to
the transferred Subordinated Units or converted Subordinated Units will have a
balance equal to the amount allocated under clause (A) hereinabove.
(d) (i) In accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(f),
on an issuance of additional Partnership Interests for cash or Contributed
Property or the conversion of the General Partner's Combined Interest to
Common Units pursuant to Section 11.3(b), the Capital Account of all Partners
and the Carrying Value of each Partnership property immediately prior to such
issuance shall be adjusted upward or downward to reflect any Unrealized Gain
or Unrealized Loss attributable to such Partnership property, as if such
Unrealized Gain or Unrealized Loss had been recognized on an actual sale of
each such property immediately prior to such issuance and had been allocated
to the Partners at such time pursuant to Section 6.1 in the same manner as any
item of gain or loss actually recognized during such period would have been
allocated. In determining such Unrealized Gain or Unrealized Loss, the
aggregate cash amount and fair market value of all Partnership assets
(including, without limitation, cash or cash equivalents) immediately prior to
the issuance of additional Partnership Interests shall be determined by the
General Partner using such reasonable method of valuation as it may adopt;
provided, however, that the General Partner, in arriving at such valuation,
must take fully into account the fair market value of the Partnership
Interests of all Partners at such time. The General Partner shall allocate
such aggregate value among the assets of the Partnership (in such manner as it
determines in its discretion to be reasonable) to arrive at a fair market
value for individual properties.
(ii) In accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(f),
immediately prior to any actual or deemed distribution to a Partner of any
Partnership property (other than a distribution of cash that is not in
redemption or retirement of a Partnership Interest), the Capital Accounts of
all Partners and the Carrying Value of all Partnership property shall be
adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Partnership property, as if such Unrealized Gain or
Unrealized Loss had been recognized in a sale of such property immediately
prior to such distribution for an amount equal to its fair market value, and
had been allocated to the Partners, at such time, pursuant to Section 6.1 in
the same manner as any item of gain or loss actually recognized during such
period would have been allocated. In determining such Unrealized Gain or
Unrealized Loss the aggregate cash amount and fair market value of all
Partnership assets (including, without limitation, cash or cash equivalents)
immediately prior to a distribution shall (A) in the case of an actual
distribution which is not made pursuant to Section 12.4 or in the case of a
deemed contribution and/or distribution occurring as a result of a termination
of the Partnership pursuant to Section 708 of the Code, be determined and
allocated in the same manner as that provided in Section 5.5(d)(i) or (B) in
the case of a
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liquidating distribution pursuant to Section 12.4, be determined and allocated
by the Liquidator using such reasonable method of valuation as it may adopt.
Section 5.6 Issuances of Additional Partnership Securities.
(a) Subject to Section 5.7, the Partnership may issue additional Partnership
Securities and options, rights, warrants and appreciation rights relating to
the Partnership Securities for any Partnership purpose at any time and from
time to time to such Persons for such consideration and on such terms and
conditions as shall be established by the General Partner in its sole
discretion, all without the approval of any Limited Partners.
(b) Each additional Partnership Security authorized to be issued by the
Partnership pursuant to Section 5.6(a) may be issued in one or more classes,
or one or more series of any such classes, with such designations,
preferences, rights, powers and duties (which may be senior to existing
classes and series of Partnership Securities), as shall be fixed by the
General Partner in the exercise of its sole discretion, including (i) the
right to share Partnership profits and losses or items thereof; (ii) the right
to share in Partnership distributions; (iii) the rights upon dissolution and
liquidation of the Partnership; (iv) whether, and the terms and conditions
upon which, the Partnership may redeem the Partnership Security; (v) whether
such Partnership Security is issued with the privilege of conversion or
exchange and, if so, the terms and conditions of such conversion or exchange;
(vi) the terms and conditions upon which each Partnership Security will be
issued, evidenced by certificates and assigned or transferred; and (vii) the
right, if any, of each such Partnership Security to vote on Partnership
matters, including matters relating to the relative rights, preferences and
privileges of such Partnership Security.
(c) The General Partner is hereby authorized and directed to take all
actions that it deems necessary or appropriate in connection with (i) each
issuance of Partnership Securities and options, rights, warrants and
appreciation rights relating to Partnership Securities pursuant to this
Section 5.6, (ii) the conversion of the General Partner Interest and Incentive
Distribution Rights into Units pursuant to the terms of this Agreement, (iii)
the admission of Additional Limited Partners and (iv) all additional issuances
of Partnership Securities. The General Partner is further authorized and
directed to specify the relative rights, powers and duties of the holders of
the Units or other Partnership Securities being so issued. The General Partner
shall do all things necessary to comply with the Delaware Act and is
authorized and directed to do all things it deems to be necessary or advisable
in connection with any future issuance of Partnership Securities or in
connection with the conversion of the General Partner Interest and Incentive
Distribution Rights into Units pursuant to the terms of this Agreement,
including compliance with any statute, rule, regulation or guideline of any
federal, state or other governmental agency or any National Securities
Exchange on which the Units or other Partnership Securities are listed for
trading.
Section 5.7 Limitations on Issuance of Additional Partnership Securities.
The issuance of Partnership Securities pursuant to Section 5.6 shall be
subject to the following restrictions and limitations:.
(a) During the Subordination Period, the Partnership shall not issue (and
shall not issue any options, rights, warrants or appreciation rights
relating to) an aggregate of more than 7,458,684 additional Parity Units
without the prior approval of the holders of a Unit Majority. In applying
this limitation, there shall be excluded Common Units and other Parity
Units issued (A) in connection with the exercise of the Over-Allotment
Option, (B) in accordance with Sections 5.7(b) and 5.7(c), (C) upon
conversion of Subordinated Units pursuant to Section 5.8, (D) upon
conversion of the General Partner Interest and Incentive Distribution
Rights pursuant to Section 11.3(b), (E) pursuant to the employee benefit
plans of the General Partner, the Partnership or any other Group Member and
(F) in the event of a combination or subdivision of Common Units.
(b) The Partnership may also issue an unlimited number of Parity Units,
prior to the end of the Subordination Period and without the approval of
the Unitholders, if the proceeds from such issuance are used exclusively to
repay up to $50.0 million of indebtedness of a Group Member where the
aggregate
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amount of distributions that would have been paid with respect to such
newly issued Units or Partnership Securities, plus the related
distributions on the General Partner Interest and on the managing member
interest in the Operating Company in respect of the four-Quarter period
ending prior to the first day of the Quarter in which the issuance is to be
consummated (assuming such additional Units or other Partnership Securities
had been Outstanding throughout such period and that distributions equal to
the distributions that were actually paid on the Outstanding Units during
the period were paid on such additional Units or other Partnership
Securities) did not exceed the interest costs actually incurred during such
period on the indebtedness that is to be repaid (or, if such indebtedness
was not outstanding throughout the entire period, would have been incurred
had such indebtedness been outstanding for the entire period). In the event
that the Partnership is required to pay a prepayment penalty in connection
with the repayment of such indebtedness, for purposes of the foregoing test
the number of Parity Units issued to repay such indebtedness shall be
deemed increased by the number of Parity Units that would need to be issued
to pay such penalty.
(c) During the Subordination Period, the Partnership shall not issue (and
shall not issue any options, rights, warrants or appreciation rights
relating to) additional Partnership Securities having rights to
distributions or in liquidation ranking prior or senior to the Common
Units, without the prior approval of the holders of a Unit Majority.
(d) No fractional Units shall be issued by the Partnership.
Section 5.8 Conversion of Subordinated Units.
(a) A total of 1,070,530 of the Outstanding Subordinated Units will convert
into Common Units on a one-for-one basis on the first day after the Record
Date for distribution in respect of any Quarter ending on or after December
31, 2000, in respect of which:
(i) distributions under Section 6.4 in respect of all Outstanding Common
Units and Subordinated Units with respect to each of the three consecutive,
non-overlapping four-Quarter periods immediately preceding such date
equaled or exceeded the sum of the Minimum Quarterly Distribution on all of
the Outstanding Common Units and Subordinated Units during such periods;
(ii) the Adjusted Operating Surplus generated during each of the two
consecutive, non-overlapping four-Quarter periods immediately preceding
such date equaled or exceeded the sum of the Minimum Quarterly Distribution
on all of the Common Units and Subordinated Units that were outstanding
during such periods on a fully diluted basis (i.e., taking into account for
purposes of such determination all Outstanding Common Units, all
Outstanding Subordinated Units, all Common Units and Subordinated Units
issuable upon exercise of employee options that have, as of the date of
determination, already vested or are scheduled to vest prior to the end of
the quarter immediately following the quarter with respect to which such
determination is made, and all Common Units and Subordinated Units that
have as of the date of determination, been earned by but not yet issued to
management of the Partnership in respect of incentive compensation), plus
the related distribution on the General Partner Interest and on the
managing member interest in the Operating Company; and
(iii) the Cumulative Common Unit Arrearage on all of the Common Units is
zero.
(b) An additional 1,070,530 of the Outstanding Subordinated Units will
convert into Common Units on a one-for-one basis on the first day after the
Record Date for distribution in respect of any Quarter ending on or after
December 31, 2001, in respect of which:
(i) distributions under Section 6.4 in respect of all Outstanding Common
Units and Subordinated Units with respect to each of the three consecutive,
non-overlapping four-Quarter periods immediately preceding such date
equaled or exceeded the sum of the Minimum Quarterly Distribution on all of
the Outstanding Common Units and Subordinated Units during such periods;
(ii) the Adjusted Operating Surplus generated during each of the two
consecutive, non-overlapping four-Quarter periods immediately preceding
such date equaled or exceeded the sum of the Minimum
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Quarterly Distribution on all of the Common Units and Subordinated Units
that were outstanding during such periods on a fully diluted basis (i.e.,
taking into account for purposes of such determination all Outstanding
Common Units, all Outstanding Subordinated Units, all Common Units and
Subordinated Units issuable upon exercise of employee options that have, as
of the date of determination, already vested or are scheduled to vest prior
to the end of the quarter immediately following the quarter with respect to
which such determination is made, and all Common Units and Subordinated
Units that have as of the date of determination, been earned by but not yet
issued to management of the Partnership in respect of incentive
compensation), plus the related distribution on the General Partner
Interest and on the managing member interest in the Operating Company; and
(iii) the Cumulative Common Unit Arrearage on all of the Common Units is
zero;
provided, however, that the conversion of Subordinated Units pursuant to this
Section 5.8(b) may not occur until at least one year following the conversion
of Subordinated Units pursuant to Section 5.8(a).
(c) In the event that less than all of the Outstanding Subordinated Units
shall convert into Common Units pursuant to Section 5.8(a) or 5.8(b) at a time
when there shall be more than one holder of Subordinated Units, then, unless
all of the holders of Subordinated Units shall agree to a different
allocation, the Subordinated Units that are to be converted into Common Units
shall be allocated among the holders of Subordinated Units pro rata based on
the number of Subordinated Units held by each such holder.
(d) Any Subordinated Units that are not converted into Common Units pursuant
to Sections 5.8(a) and (b) shall convert into Common Units on a one-for-one
basis on the first day following the Record Date for distributions in respect
of the final Quarter of the Subordination Period.
(e) Notwithstanding any other provision of this Agreement, all the then
Outstanding Subordinated Units will automatically convert into Common Units on
a one-for-one basis as set forth in, and pursuant to the terms of, Section
11.4.
(f) A Subordinated Unit that has converted into a Common Unit shall be
subject to the provisions of Section 6.7(b).
Section 5.9 Limited Preemptive Right.
Except as provided in this Section 5.9 and in Section 5.2, no Person shall
have any preemptive, preferential or other similar right with respect to the
issuance of any Partnership Security, whether unissued, held in the treasury
or hereafter created. The General Partner shall have the right, which it may
from time to time assign in whole or in part to any of its Affiliates, to
purchase Partnership Securities from the Partnership whenever, and on the same
terms that, the Partnership issues Partnership Securities to Persons other
than the General Partner and its Affiliates, to the extent necessary to
maintain the Percentage Interests of the General Partner and its Affiliates
equal to that which existed immediately prior to the issuance of such
Partnership Securities.
Section 5.10 Splits and Combination.
(a) Subject to Sections 5.10(d), 6.6 and 6.9 (dealing with adjustments of
distribution levels), the Partnership may make a Pro Rata distribution of
Partnership Securities to all Record Holders or may effect a subdivision or
combination of Partnership Securities so long as, after any such event, each
Partner shall have the same Percentage Interest in the Partnership as before
such event, and any amounts calculated on a per Unit basis (including any
Common Unit Arrearage or Cumulative Common Unit Arrearage) or stated as a
number of Units (including the number of Subordinated Units that may convert
prior to the end of the Subordination Period and the number of additional
Parity Units that may be issued pursuant to Section 5.7 without a Unitholder
vote) are proportionately adjusted retroactive to the beginning of the
Partnership.
(b) Whenever such a distribution, subdivision or combination of Partnership
Securities is declared, the General Partner shall select a Record Date as of
which the distribution, subdivision or combination shall be
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effective and shall send notice thereof at least 20 days prior to such Record
Date to each Record Holder as of a date not less than 10 days prior to the
date of such notice. The General Partner also may cause a firm of independent
public accountants selected by it to calculate the number of Partnership
Securities to be held by each Record Holder after giving effect to such
distribution, subdivision or combination. The General Partner shall be
entitled to rely on any certificate provided by such firm as conclusive
evidence of the accuracy of such calculation.
(c) Promptly following any such distribution, subdivision or combination,
the Partnership may issue Certificates to the Record Holders of Partnership
Securities as of the applicable Record Date representing the new number of
Partnership Securities held by such Record Holders, or the General Partner may
adopt such other procedures as it may deem appropriate to reflect such
changes. If any such combination results in a smaller total number of
Partnership Securities Outstanding, the Partnership shall require, as a
condition to the delivery to a Record Holder of such new Certificate, the
surrender of any Certificate held by such Record Holder immediately prior to
such Record Date.
(d) The Partnership shall not issue fractional Units upon any distribution,
subdivision or combination of Units. If a distribution, subdivision or
combination of Units would result in the issuance of fractional Units but for
the provisions of Section 5.7(e) and this Section 5.10(d), each fractional
Unit shall be rounded to the nearest whole Unit (and a 0.5 Unit shall be
rounded to the next higher Unit).
Section 5.11 Fully Paid and Non-Assessable Nature of Limited Partner
Interests.
All Limited Partner Interests issued pursuant to, and in accordance with the
requirements of, this Article V shall be fully paid and non-assessable Limited
Partner Interests in the Partnership, except as such non-assessability may be
affected by Section 17-607 of the Delaware Act.
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
Section 6.1 Allocations for Capital Account Purposes.
For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Section 5.5(b)) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided herein below.
(a) Net Income. After giving effect to the special allocations set forth
in Section 6.1(d), Net Income for each taxable year and all items of
income, gain, loss and deduction taken into account in computing Net Income
for such taxable year shall be allocated as follows:
(i) First, 100% to the General Partner in an amount equal to the
aggregate Net Losses allocated to the General Partner pursuant to
Section 6.1(b)(iii) for all previous taxable years until the aggregate
Net Income allocated to the General Partner pursuant to this Section
6.1(a)(i) for the current taxable year and all previous taxable years
is equal to the aggregate Net Losses allocated to the General Partner
pursuant to Section 6.1(b)(iii) for all previous taxable years;
(ii) Second, 1% to the General Partner in an amount equal to the
aggregate Net Losses allocated to the General Partner pursuant to
Section 6.1(b)(ii) for all previous taxable years and 99% to the
Unitholders, in accordance with their respective Percentage Interests,
until the aggregate Net Income allocated to such Partners pursuant to
this Section 6.1(a)(ii) for the current taxable year and all previous
taxable years is equal to the aggregate Net Losses allocated to such
Partners pursuant to Section 6.1(b)(ii) for all previous taxable years;
and
(iii) Third, the balance, if any, 100% to the General Partner and the
Unitholders in accordance with their respective Percentage Interests.
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(b) Net Losses. After giving effect to the special allocations set forth
in Section 6.1(d), Net Losses for each taxable period and all items of
income, gain, loss and deduction taken into account in computing Net Losses
for such taxable period shall be allocated as follows:
(i) First, 1% to the General Partner and 99% to the Unitholders, in
accordance with their respective Percentage Interests, until the
aggregate Net Losses allocated pursuant to this Section 6.1(b)(i) for
the current taxable year and all previous taxable years is equal to the
aggregate Net Income allocated to such Partners pursuant to Section
6.1(a)(iii) for all previous taxable years; provided that the Net
Losses shall not be allocated pursuant to this Section 6.1(b)(i) to the
extent that such allocation would cause any Unitholder to have a
deficit balance in its Adjusted Capital Account at the end of such
taxable year (or increase any existing deficit balance in its Adjusted
Capital Account);
(ii) Second, 1% to the General Partner and 99% to the Unitholders in
accordance with their respective Percentage Interests; provided, that
Net Losses shall not be allocated pursuant to this Section 6.1(b)(ii)
to the extent that such allocation would cause any Unitholder to have a
deficit balance in its Adjusted Capital Account at the end of such
taxable year (or increase any existing deficit balance in its Adjusted
Capital Account);
(iii) Third, the balance, if any, 100% to the General Partner.
(c) Net Termination Gains and Losses. After giving effect to the special
allocations set forth in Section 6.1(d), all items of income, gain, loss
and deduction taken into account in computing Net Termination Gain or Net
Termination Loss for such taxable period shall be allocated in the same
manner as such Net Termination Gain or Net Termination Loss is allocated
hereunder. All allocations under this Section 6.1(c) shall be made after
Capital Account balances have been adjusted by all other allocations
provided under this Section 6.1 and after all distributions of Available
Cash provided under Sections 6.4 and 6.5 have been made; provided, however,
that solely for purposes of this Section 6.1(c), Capital Accounts shall not
be adjusted for distributions made pursuant to Section 12.4.
(i) If a Net Termination Gain is recognized (or deemed recognized
pursuant to Section 5.5(d)), such Net Termination Gain shall be
allocated among the Partners in the following manner (and the Capital
Accounts of the Partners shall be increased by the amount so allocated
in each of the following subclauses, in the order listed, before an
allocation is made pursuant to the next succeeding subclause):
(A) First, to each Partner having a deficit balance in its Capital
Account, in the proportion that such deficit balance bears to the
total deficit balances in the Capital Accounts of all Partners,
until each such Partner has been allocated Net Termination Gain
equal to any such deficit balance in its Capital Account;
(B) Second, 99% to all Unitholders holding Common Units, in
proportion to their relative Percentage Interests, and 1% to the
General Partner until the Capital Account in respect of each Common
Unit then Outstanding is equal to the sum of (1) its Unrecovered
Capital plus (2) the Minimum Quarterly Distribution for the Quarter
during which the Liquidation Date occurs, reduced by any
distribution pursuant to Section 6.4(a)(i) or (b)(i) with respect to
such Common Unit for such Quarter (the amount determined pursuant to
this clause (2) is hereinafter defined as the "Unpaid MQD"), plus
(3) any then existing Cumulative Common Unit Arrearage;
(C) Third, if such Net Termination Gain is recognized (or is
deemed to be recognized) prior to the expiration of the
Subordination Period, 99% to all Unitholders holding Subordinated
Units, in proportion to their relative Percentage Interests, and 1%
to the General Partner until the Capital Account in respect of each
Subordinated Unit then Outstanding equals the sum of (1) its
Unrecovered Capital, determined for the taxable year (or portion
thereof) to which this allocation of gain relates, plus (2) the
Minimum Quarterly Distribution for the Quarter during which the
Liquidation Date occurs, reduced by any distribution pursuant to
Section 6.4(a)(iii) with respect to such Subordinated Unit for such
Quarter;
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(D) Fourth, 99% to all Unitholders, in accordance with their
relative Percentage Interests, and 1% to the General Partner until
the Capital Account in respect of each Common Unit then Outstanding
is equal to the sum of (1) its Unrecovered Capital, plus (2) the
Unpaid MQD, plus (3) any then existing Cumulative Common Unit
Arrearage, plus (4) the excess of (aa) the First Target Distribution
less the Minimum Quarterly Distribution for each Quarter of the
Partnership's existence over (bb) the cumulative per Unit amount of
any distributions of Operating Surplus that was distributed pursuant
to Sections 6.4(a)(iv) and 6.4(b)(ii) (the sum of (1) plus (2) plus
(3) plus (4) is hereinafter defined as the "First Liquidation Target
Amount");
(E) Fifth, 85.8673% to all Unitholders, in accordance with their
relative Percentage Interests, 13.1327% to the holders of the
Incentive Distribution Rights, Pro Rata, and 1% to the General
Partner until the Capital Account in respect of each Common Unit
then Outstanding is equal to the sum of (1) the First Liquidation
Target Amount, plus (2) the excess of (aa) the Second Target
Distribution less the First Target Distribution for each Quarter of
the Partnership's existence over (bb) the cumulative per Unit amount
of any distributions of Operating Surplus that was distributed
pursuant to Sections 6.4(a)(v) and 6.4(b)(iii) (the sum of (1) plus
(2) is hereinafter defined as the "Second Liquidation Target
Amount");
(F) Sixth, 75.7653% to all Unitholders, in accordance with their
relative Percentage Interests, 23.2347% to the holders of the
Incentive Distribution Rights, Pro Rata, and 1% to the General
Partner until the Capital Account in respect of each Common Unit
then Outstanding is equal to the sum of (1) the Second Liquidation
Target Amount, plus (2) the excess of (aa) the Third Target
Distribution less the Second Target Distribution for each Quarter of
the Partnership's existence over (bb) the cumulative per Unit amount
of any distributions of Operating Surplus that was distributed
pursuant to Sections 6.4(a)(vi) and 6.4(b)(iv); and
(G) Finally, any remaining amount 50.5102% to all Unitholders, in
accordance with their relative Percentage Interests, 48.4898% to the
holders of the Incentive Distribution Rights, Pro Rata, and 1% to
the General Partner.
(ii) If a Net Termination Loss is recognized (or deemed recognized
pursuant to Section 5.5(d)), such Net Termination Loss shall be
allocated among the Partners in the following manner:
(A) First, if such Net Termination Loss is recognized (or is
deemed to be recognized) prior to the conversion of the last
Outstanding Subordinated Unit, 99% to the Unitholders holding
Subordinated Units, in proportion to their relative Percentage
Interests, and 1% to the General Partner until the Capital Account
in respect of each Subordinated Unit then Outstanding has been
reduced to zero;
(B) Second, 99% to all Unitholders holding Common Units, in
proportion to their relative Percentage Interests, and 1% to the
General Partner until the Capital Account in respect of each Common
Unit then Outstanding has been reduced to zero; and
(C) Third, the balance, if any, 100% to the General Partner.
(d) Special Allocations. Notwithstanding any other provision of this
Section 6.1, the following special allocations shall be made for such
taxable period:
(i) Partnership Minimum Gain Chargeback. Notwithstanding any other
provision of this Section 6.1, if there is a net decrease in
Partnership Minimum Gain during any Partnership taxable period, each
Partner shall be allocated items of Partnership income and gain for
such period (and, if necessary, subsequent periods) in the manner and
amounts provided in Treasury Regulation Sections 1.704-2(f)(6), 1.704-
2(g)(2) and 1.704-2(j)(2)(i), or any successor provision. For purposes
of this Section 6.1(d), each Partner's Adjusted Capital Account balance
shall be determined, and the allocation of income or gain required
hereunder shall be effected, prior to the application of any other
allocations pursuant to this Section 6.1(d) with respect to such
taxable period (other than an allocation pursuant to
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Sections 6.1(d)(vi) and 6.1(d)(vii)). This Section 6.1(d)(i) is
intended to comply with the Partnership Minimum Gain chargeback
requirement in Treasury Regulation Section 1.704-2(f) and shall be
interpreted consistently therewith.
(ii) Chargeback of Partner Nonrecourse Debt Minimum
Gain. Notwithstanding the other provisions of this Section 6.1 (other
than Section 6.1(d)(i)), except as provided in Treasury Regulation
Section 1.704-2(i)(4), if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain during any Partnership taxable period,
any Partner with a share of Partner Nonrecourse Debt Minimum Gain at
the beginning of such taxable period shall be allocated items of
Partnership income and gain for such period (and, if necessary,
subsequent periods) in the manner and amounts provided in Treasury
Regulation Sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii), or any
successor provisions. For purposes of this Section 6.1(d), each
Partner's Adjusted Capital Account balance shall be determined, and the
allocation of income or gain required hereunder shall be effected,
prior to the application of any other allocations pursuant to this
Section 6.1(d), other than Section 6.1(d)(i) and other than an
allocation pursuant to Sections 6.1(d)(vi) and 6.1(d)(vii), with
respect to such taxable period. This Section 6.1(d)(ii) is intended to
comply with the chargeback of items of income and gain requirement in
Treasury Regulation Section 1.704-2(i)(4) and shall be interpreted
consistently therewith.
(iii) Priority Allocations.
(A) If the amount of cash or the Net Agreed Value of any property
distributed (except cash or property distributed pursuant to Section
12.4) to any Unitholder with respect to its Units for a taxable year
is greater (on a per Unit basis) than the amount of cash or the Net
Agreed Value of property distributed to the other Unitholders with
respect to their Units (on a per Unit basis), then (1) each
Unitholder receiving such greater cash or property distribution
shall be allocated gross income in an amount equal to the product of
(aa) the amount by which the distribution (on a per Unit basis) to
such Unitholder exceeds the distribution (on a per Unit basis) to
the Unitholders receiving the smallest distribution and (bb) the
number of Units owned by the Unitholder receiving the greater
distribution; and (2) the General Partner shall be allocated gross
income in an aggregate amount equal to 1/99 of the sum of the
amounts allocated in clause (1) above.
(B) After the application of Section 6.1(d)(iii)(A), all or any
portion of the remaining items of Partnership gross income or gain
for the taxable period, if any, shall be allocated 100% to the
holders of Incentive Distribution Rights, Pro Rata, until the
aggregate amount of such items allocated to the holders of Incentive
Distribution Rights pursuant to this paragraph 6.1(d)(iii)(B) for
the current taxable year and all previous taxable years is equal to
the cumulative amount of all Incentive Distributions made to the
holders of Incentive Distribution Rights from the Closing Date to a
date 45 days after the end of the current taxable year.
(iv) Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in
Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-
1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Partnership
income and gain shall be specially allocated to such Partner in an
amount and manner sufficient to eliminate, to the extent required by
the Treasury Regulations promulgated under Section 704(b) of the Code,
the deficit balance, if any, in its Adjusted Capital Account created by
such adjustments, allocations or distributions as quickly as possible
unless such deficit balance is otherwise eliminated pursuant to Section
6.1(d)(i) or (ii).
(v) Gross Income Allocations. In the event any Partner has a deficit
balance in its Capital Account at the end of any Partnership taxable
period in excess of the sum of (A) the amount such Partner is required
to restore pursuant to the provisions of this Agreement and (B) the
amount such Partner is deemed obligated to restore pursuant to Treasury
Regulation Sections 1.704-2(g) and 1.704-2(i)(5), such Partner shall be
specially allocated items of Partnership gross income and gain in the
amount of such excess as quickly as possible; provided, that an
allocation pursuant to this Section 6.1(d)(v) shall be made only if and
to the extent that such Partner would have a deficit balance in its
Capital Account as adjusted after all other allocations provided for in
this Section 6.1 have been tentatively made as if this Section
6.1(d)(v) were not in this Agreement.
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(vi) Nonrecourse Deductions. Nonrecourse Deductions for any taxable
period shall be allocated to the Partners in accordance with their
respective Percentage Interests. If the General Partner determines in
its good faith discretion that the Partnership's Nonrecourse Deductions
must be allocated in a different ratio to satisfy the safe harbor
requirements of the Treasury Regulations promulgated under Section
704(b) of the Code, the General Partner is authorized, upon notice to
the other Partners, to revise the prescribed ratio to the numerically
closest ratio that does satisfy such requirements.
(vii) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions
for any taxable period shall be allocated 100% to the Partner that
bears the Economic Risk of Loss with respect to the Partner Nonrecourse
Debt to which such Partner Nonrecourse Deductions are attributable in
accordance with Treasury Regulation Section 1.704-2(i). If more than
one Partner bears the Economic Risk of Loss with respect to a Partner
Nonrecourse Debt, such Partner Nonrecourse Deductions attributable
thereto shall be allocated between or among such Partners in accordance
with the ratios in which they share such Economic Risk of Loss.
(viii) Nonrecourse Liabilities. For purposes of Treasury Regulation
Section 1.752-3(a)(3), the Partners agree that Nonrecourse Liabilities
of the Partnership in excess of the sum of (A) the amount of
Partnership Minimum Gain and (B) the total amount of Nonrecourse Built-
in Gain shall be allocated among the Partners in accordance with their
respective Percentage Interests.
(ix) Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b)
or 743(c) of the Code is required, pursuant to Treasury Regulation
Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining
Capital Accounts, the amount of such adjustment to the Capital Accounts
shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis),
and such item of gain or loss shall be specially allocated to the
Partners in a manner consistent with the manner in which their Capital
Accounts are required to be adjusted pursuant to such Section of the
Treasury Regulations.
(x) Economic Uniformity. At the election of the General Partner with
respect to any taxable period ending upon, or after, the termination of
the Subordination Period, all or a portion of the remaining items of
Partnership gross income or gain for such taxable period, after taking
into account allocations pursuant to Section 6.1(d)(iii), shall be
allocated 100% to each Partner holding Subordinated Units that are
Outstanding as of the termination of the Subordination Period ("Final
Subordinated Units") in the proportion of the number of Final
Subordinated Units held by such Partner to the total number of Final
Subordinated Units then Outstanding, until each such Partner has been
allocated an amount of gross income or gain which increases the Capital
Account maintained with respect to such Final Subordinated Units to an
amount equal to the product of (A) the number of Final Subordinated
Units held by such Partner and (B) the Per Unit Capital Amount for a
Common Unit. The purpose of this allocation is to establish uniformity
between the Capital Accounts underlying Final Subordinated Units and
the Capital Accounts underlying Common Units held by Persons other than
the General Partner and its Affiliates immediately prior to the
conversion of such Final Subordinated Units into Common Units. This
allocation method for establishing such economic uniformity will only
be available to the General Partner if the method for allocating the
Capital Account maintained with respect to the Subordinated Units
between the transferred and retained Subordinated Units pursuant to
Section 5.5(c)(ii) does not otherwise provide such economic uniformity
to the Final Subordinated Units.
(xi) Curative Allocation.
(A) Notwithstanding any other provision of this Section 6.1, other
than the Required Allocations, the Required Allocations shall be
taken into account in making the Agreed Allocations so that, to the
extent possible, the net amount of items of income, gain, loss and
deduction allocated to each Partner pursuant to the Required
Allocations and the Agreed Allocations, together, shall be equal to
the net amount of such items that would have been allocated to each
such Partner under the Agreed Allocations had the Required
Allocations and the
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related Curative Allocation not otherwise been provided in this
Section 6.1. Notwithstanding the preceding sentence, Required
Allocations relating to (1) Nonrecourse Deductions shall not be
taken into account except to the extent that there has been a
decrease in Partnership Minimum Gain and (2) Partner Nonrecourse
Deductions shall not be taken into account except to the extent that
there has been a decrease in Partner Nonrecourse Debt Minimum Gain.
Allocations pursuant to this Section 6.1(d)(xi)(A) shall only be
made with respect to Required Allocations to the extent the General
Partner reasonably determines that such allocations will otherwise
be inconsistent with the economic agreement among the Partners.
Further, allocations pursuant to this Section 6.1(d)(xi)(A) shall be
deferred with respect to allocations pursuant to clauses (1) and (2)
hereof to the extent the General Partner reasonably determines that
such allocations are likely to be offset by subsequent Required
Allocations.
(B) The General Partner shall have reasonable discretion, with
respect to each taxable period, to (1) apply the provisions of
Section 6.1(d)(xi)(A) in whatever order is most likely to minimize
the economic distortions that might otherwise result from the
Required Allocations, and (2) divide all allocations pursuant to
Section 6.1(d)(xi)(A) among the Partners in a manner that is likely
to minimize such economic distortions.
(xii) Corrective Allocations. In the event of any allocation of
Additional Book Basis Derivative Items or any Book-Down Event or any
recognition of a Net Termination Loss, the following rules shall apply:
(A) In the case of any allocation of Additional Book Basis
Derivative Items (other than an allocation of Unrealized Gain or
Unrealized Loss under Section 5.5(d) hereof), the General Partner
shall allocate additional items of gross income and gain away from
the holders of Incentive Distribution Rights, Pro Rata, to the
Unitholders and the General Partner, or additional items of
deduction and loss away from the Unitholders and the General Partner
to the holders of Incentive Distribution Rights, Pro Rata, to the
extent that the Additional Book Basis Derivative Items allocated to
the Unitholders or the General Partner exceed their Share of
Additional Book Basis Derivative Items. For this purpose, the
Unitholders and the General Partner shall be treated as being
allocated Additional Book Basis Derivative Items to the extent that
such Additional Book Basis Derivative Items have reduced the amount
of income that would otherwise have been allocated to the
Unitholders or the General Partner under the Partnership Agreement
(e.g., Additional Book Basis Derivative Items taken into account in
computing cost of goods sold would reduce the amount of book income
otherwise available for allocation among the Partners). Any
allocation made pursuant to this Section 6.1(d)(xii)(A) shall be
made after all of the other Agreed Allocations have been made as if
this Section 6.1(d)(xii) were not in this Agreement and, to the
extent necessary, shall require the reallocation of items that have
been allocated pursuant to such other Agreed Allocations.
(B) In the case of any negative adjustments to the Capital
Accounts of the Partners resulting from a Book-Down Event or from
the recognition of a Net Termination Loss, such negative adjustment
(1) shall first be allocated, to the extent of the Aggregate
Remaining Net Positive Adjustments, in such a manner, as reasonably
determined by the General Partner, that to the extent possible the
aggregate Capital Accounts of the Partners will equal the amount
which would have been the Capital Account balance of the Partners if
no prior Book-Up Events had occurred, and (2) any negative
adjustment in excess of the Aggregate Remaining Net Positive
Adjustments shall be allocated pursuant to Section 6.1(c) hereof.
(C) In making the allocations required under this Section
6.1(d)(xii), the General Partner, in its sole discretion, may apply
whatever conventions or other methodology it deems reasonable to
satisfy the purpose of this Section 6.1(d)(xii).
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Section 6.2 Allocations for Tax Purposes.
(a) Except as otherwise provided herein, for federal income tax purposes,
each item of income, gain, loss and deduction shall be allocated among the
Partners in the same manner as its correlative item of "book" income, gain,
loss or deduction is allocated pursuant to Section 6.1.
(b) In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation, amortization and cost recovery deductions shall be allocated for
federal income tax purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such items attributable
thereto shall be allocated among the Partners in the manner provided under
Section 704(c) of the Code that takes into account the variation between
the Agreed Value of such property and its adjusted basis at the time of
contribution; and (B) any item of Residual Gain or Residual Loss
attributable to a Contributed Property shall be allocated among the
Partners in the same manner as its correlative item of "book" gain or loss
is allocated pursuant to Section 6.1.
(ii) (A) In the case of an Adjusted Property, such items shall (1) first,
be allocated among the Partners in a manner consistent with the principles
of Section 704(c) of the Code to take into account the Unrealized Gain or
Unrealized Loss attributable to such property and the allocations thereof
pursuant to Section 5.5(d)(i) or 5.5(d)(ii), and (2) second, in the event
such property was originally a Contributed Property, be allocated among the
Partners in a manner consistent with Section 6.2(b)(i)(A); and (B) any item
of Residual Gain or Residual Loss attributable to an Adjusted Property
shall be allocated among the Partners in the same manner as its correlative
item of "book" gain or loss is allocated pursuant to Section 6.1.
(iii) The General Partner shall apply the principles of Treasury
Regulation Section 1.704-3(d) to eliminate Book-Tax Disparities.
(c) For the proper administration of the Partnership and for the
preservation of uniformity of the Limited Partner Interests (or any class or
classes thereof), the General Partner shall have sole discretion to (i) adopt
such conventions as it deems appropriate in determining the amount of
depreciation, amortization and cost recovery deductions; (ii) make special
allocations for federal income tax purposes of income (including, without
limitation, gross income) or deductions; and (iii) amend the provisions of
this Agreement as appropriate (x) to reflect the proposal or promulgation of
Treasury Regulations under Section 704(b) or Section 704(c) of the Code or (y)
otherwise to preserve or achieve uniformity of the Limited Partner Interests
(or any class or classes thereof). The General Partner may adopt such
conventions, make such allocations and make such amendments to this Agreement
as provided in this Section 6.2(c) only if such conventions, allocations or
amendments would not have a material adverse effect on the Partners, the
holders of any class or classes of Limited Partner Interests issued and
Outstanding or the Partnership, and if such allocations are consistent with
the principles of Section 704 of the Code.
(d) The General Partner in its discretion may determine to depreciate or
amortize the portion of an adjustment under Section 743(b) of the Code
attributable to unrealized appreciation in any Adjusted Property (to the
extent of the unamortized Book-Tax Disparity) using a predetermined rate
derived from the depreciation or amortization method and useful life applied
to the Partnership's common basis of such property, despite any inconsistency
of such approach with Proposed Treasury Regulation Section 1.168-2(n),
Treasury Regulation Section 1.167(c)-l(a)(6) or the legislative history of
Section 197 of the Code. If the General Partner determines that such reporting
position cannot reasonably be taken, the General Partner may adopt
depreciation and amortization conventions under which all purchasers acquiring
Limited Partner Interests in the same month would receive depreciation and
amortization deductions, based upon the same applicable rate as if they had
purchased a direct interest in the Partnership's property. If the General
Partner chooses not to utilize such aggregate method, the General Partner may
use any other reasonable depreciation and amortization conventions to preserve
the uniformity of the intrinsic tax characteristics of any Limited Partner
Interests that would not have
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a material adverse effect on the Limited Partners or the Record Holders of any
class or classes of Limited Partner Interests.
(e) Any gain allocated to the Partners upon the sale or other taxable
disposition of any Partnership asset shall, to the extent possible, after
taking into account other required allocations of gain pursuant to this
Section 6.2, be characterized as Recapture Income in the same proportions and
to the same extent as such Partners (or their predecessors in interest) have
been allocated any deductions directly or indirectly giving rise to the
treatment of such gains as Recapture Income.
(f) All items of income, gain, loss, deduction and credit recognized by the
Partnership for federal income tax purposes and allocated to the Partners in
accordance with the provisions hereof shall be determined without regard to
any election under Section 754 of the Code which may be made by the
Partnership; provided, however, that such allocations, once made, shall be
adjusted as necessary or appropriate to take into account those adjustments
permitted or required by Sections 734 and 743 of the Code.
(g) Each item of Partnership income, gain, loss and deduction attributable
to a transferred Partnership Interest, shall for federal income tax purposes,
be determined on an annual basis and prorated on a monthly basis and shall be
allocated to the Partners as of the opening of the principal National
Securities Exchange on which the Common Units are then traded on the first
Business Day of each month; provided, however, that such items for the period
beginning on the Closing Date and ending on the last day of the month in which
the Option Closing Date or the expiration of the Over-allotment Option occurs
shall be allocated to the Partners as of the opening of the Nasdaq National
Market on the first Business Day of the next succeeding month; and provided,
further, that gain or loss on a sale or other disposition of any assets of the
Partnership other than in the ordinary course of business shall be allocated
to the Partners as of the opening of the Nasdaq National Market (or such other
National Securities Exchange on which the Common Units are then primarily
traded) on the first Business Day of the month in which such gain or loss is
recognized for federal income tax purposes. The General Partner may revise,
alter or otherwise modify such methods of allocation as it determines
necessary, to the extent permitted or required by Section 706 of the Code and
the regulations or rulings promulgated thereunder.
(h) Allocations that would otherwise be made to a Limited Partner under the
provisions of this Article VI shall instead be made to the beneficial owner of
Limited Partner Interests held by a nominee in any case in which the nominee
has furnished the identity of such owner to the Partnership in accordance with
Section 6031(c) of the Code or any other method acceptable to the General
Partner in its sole discretion.
Section 6.3 Requirement and Characterization of Distributions; Distributions
to Record Holders.
(a) Within 45 days following the end of each Quarter commencing with the
Quarter ending on March 31, 1998, an amount equal to 100% of Available Cash
with respect to such Quarter shall, subject to Section 17-607 of the Delaware
Act, be distributed in accordance with this Article VI by the Partnership to
the Partners as of the Record Date selected by the General Partner in its
reasonable discretion. All amounts of Available Cash distributed by the
Partnership on any date from any source shall be deemed to be Operating
Surplus until the sum of all amounts of Available Cash theretofore distributed
by the Partnership to the Partners pursuant to Section 6.4 equals the
Operating Surplus from the Closing Date through the close of the immediately
preceding Quarter. Any remaining amounts of Available Cash distributed by the
Partnership on such date shall, except as otherwise provided in Section 6.5,
be deemed to be "Capital Surplus." All distributions required to be made under
this Agreement shall be made subject to Section 17-607 of the Delaware Act.
(b) Notwithstanding Section 6.3(a), in the event of the dissolution and
liquidation of the Partnership, all receipts received during or after the
Quarter in which the Liquidation Date occurs, other than from borrowings
described in (a)(ii) of the definition of Available Cash, shall be applied and
distributed solely in accordance with, and subject to the terms and conditions
of, Section 12.4.
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(c) The General Partner shall have the discretion to treat taxes paid by the
Partnership on behalf of, or amounts withheld with respect to, all or less
than all of the Partners, as a distribution of Available Cash to such
Partners.
(d) Each distribution in respect of a Partnership Interest shall be paid by
the Partnership, directly or through the Transfer Agent or through any other
Person or agent, only to the Record Holder of such Partnership Interest as of
the Record Date set for such distribution. Such payment shall constitute full
payment and satisfaction of the Partnership's liability in respect of such
payment, regardless of any claim of any Person who may have an interest in
such payment by reason of an assignment or otherwise.
Section 6.4 Distributions of Available Cash from Operating Surplus.
(a) During Subordination Period. Available Cash with respect to any Quarter
within the Subordination Period that is deemed to be Operating Surplus
pursuant to the provisions of Section 6.3 or 6.5 shall, subject to Section 17-
607 of the Delaware Act, be distributed as follows, except as otherwise
required by Section 5.6(b) in respect of additional Partnership Securities
issued pursuant thereto:
(i) First, 99% to the Unitholders holding Common Units, Pro Rata, and 1%
to the General Partner until there has been distributed in respect of each
Common Unit then Outstanding an amount equal to the Minimum Quarterly
Distribution for such Quarter;
(ii) Second, 99% to the Unitholders holding Common Units, Pro Rata, and
1% to the General Partner until there has been distributed in respect of
each Common Unit then Outstanding an amount equal to the Cumulative Common
Unit Arrearage existing with respect to such Quarter;
(iii) Third, 99% to the Unitholders holding Subordinated Units, Pro Rata,
and 1% to the General Partner until there has been distributed in respect
of each Subordinated Unit then Outstanding an amount equal to the Minimum
Quarterly Distribution for such Quarter;
(iv) Fourth, 99% to all Unitholders, Pro Rata, and 1% to the General
Partner until there has been distributed in respect of each Unit then
Outstanding an amount equal to the excess of the First Target Distribution
over the Minimum Quarterly Distribution for such Quarter;
(v) Fifth, 85.8673% to all Unitholders, Pro Rata, 13.1327% to the holders
of the Incentive Distribution Rights, Pro Rata, and 1% to the General
Partner until there has been distributed in respect of each Unit then
Outstanding an amount equal to the excess of the Second Target Distribution
over the First Target Distribution for such Quarter;
(vi) Sixth, 75.7653% to all Unitholders, Pro Rata, 23.2347% to the
holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partner until there has been distributed in respect of each Unit
then Outstanding an amount equal to the excess of the Third Target
Distribution over the Second Target Distribution for such Quarter; and
(vii) Thereafter, 50.5102% to all Unitholders, Pro Rata, 48.4898% to the
holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partner;
provided, that no distributions may be made pursuant to Sections 6.4(a)(iii),
(iv), (v), (vi) or (vii) with respect to any Quarter within the Subordination
Period if the Consolidated Fixed Charge Coverage Ratio for the Four-Quarter
Period ended with such Quarter is equal to or less than 1.75 to 1.00;
provided, further, if the Minimum Quarterly Distribution, the First Target
Distribution, the Second Target Distribution and the Third Target Distribution
have been reduced to zero pursuant to the second sentence of Section 6.6(a),
the distribution of Available Cash that is deemed to be Operating Surplus with
respect to any Quarter will be made solely in accordance with Section
6.4(a)(vii).
(b) After Subordination Period. Available Cash with respect to any Quarter
after the Subordination Period that is deemed to be Operating Surplus pursuant
to the provisions of Section 6.3 or 6.5, subject to Section 17-607
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of the Delaware Act, shall be distributed as follows, except as otherwise
required by Section 5.6(b) in respect of additional Partnership Securities
issued pursuant thereto:
(i) First, 99% to all Unitholders, Pro Rata, and 1% to the General
Partner until there has been distributed in respect of each Unit then
Outstanding an amount equal to the Minimum Quarterly Distribution for such
Quarter;
(ii) Second, 99% to all Unitholders, Pro Rata, and 1% to the General
Partner until there has been distributed in respect of each Unit then
Outstanding an amount equal to the excess of the First Target Distribution
over the Minimum Quarterly Distribution for such Quarter;
(iii) Third, 85.8673% to all Unitholders, Pro Rata, and 13.1327% to the
holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partner until there has been distributed in respect of each Unit
then Outstanding an amount equal to the excess of the Second Target
Distribution over the First Target Distribution for such Quarter;
(iv) Fourth, 75.7653% to all Unitholders, Pro Rata, and 23.2347% to the
holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partner until there has been distributed in respect of each Unit
then Outstanding an amount equal to the excess of the Third Target
Distribution over the Second Target Distribution for such Quarter; and
(v) Thereafter, 50.5102% to all Unitholders, Pro Rata, and 48.4898% to
the holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partner;
provided, however, if the Minimum Quarterly Distribution, the First Target
Distribution, the Second Target Distribution and the Third Target Distribution
have been reduced to zero pursuant to the second sentence of Section 6.6(a),
the distribution of Available Cash that is deemed to be Operating Surplus with
respect to any Quarter will be made solely in accordance with Section
6.4(b)(v).
Section 6.5 Distributions of Available Cash from Capital Surplus.
Available Cash that is deemed to be Capital Surplus pursuant to the
provisions of Section 6.3(a) shall, subject to Section 17-607 of the Delaware
Act, be distributed, unless the provisions of Section 6.3 require otherwise,
99% to all Unitholders, Pro Rata, and 1% to the General Partner until a
hypothetical holder of a Common Unit acquired on the Closing Date has received
with respect to such Common Unit, during the period since the Closing Date
through such date, distributions of Available Cash that are deemed to be
Capital Surplus in an aggregate amount equal to the Initial Unit Price.
Available Cash that is deemed to be Capital Surplus shall then be distributed
99% to all Unitholders holding Common Units, Pro Rata, and 1% to the General
Partner until there has been distributed in respect of each Common Unit then
Outstanding an amount equal to the Cumulative Common Unit Arrearage.
Thereafter, all Available Cash shall be distributed as if it were Operating
Surplus and shall be distributed in accordance with Section 6.4.
Section 6.6 Adjustment of Minimum Quarterly Distribution and Target
Distribution Levels.
(a) The Minimum Quarterly Distribution, First Target Distribution, Second
Target Distribution, Third Target Distribution, Common Unit Arrearages and
Cumulative Common Unit Arrearages shall be proportionately adjusted in the
event of any distribution, combination or subdivision (whether effected by a
distribution payable in Units or otherwise) of Units or other Partnership
Securities in accordance with Section 5.10. In the event of a distribution of
Available Cash that is deemed to be from Capital Surplus, the then applicable
Minimum Quarterly Distribution, First Target Distribution, Second Target
Distribution and Third Target Distribution shall be adjusted proportionately
downward to equal the product obtained by multiplying the otherwise applicable
Minimum Quarterly Distribution, First Target Distribution, Second Target
Distribution and Third Target Distribution, as the case may be, by a fraction
of which the numerator is the Unrecovered Capital of the Common Units
immediately after giving effect to such distribution and of which the
denominator is the Unrecovered Capital of the Common Units immediately prior
to giving effect to such distribution.
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(b) The Minimum Quarterly Distribution, First Target Distribution, Second
Target Distribution and Third Target Distribution shall also be subject to
adjustment pursuant to Section 6.9.
Section 6.7 Special Provisions Relating to the Holders of Subordinated Units.
(a) Except with respect to the right to vote on or approve matters requiring
the vote or approval of a percentage of the holders of Outstanding Common
Units and the right to participate in allocations of income, gain, loss and
deduction and distributions made with respect to Common Units, the holder of a
Subordinated Unit shall have all of the rights and obligations of a Unitholder
holding Common Units hereunder; provided, however, that immediately upon the
conversion of Subordinated Units into Common Units pursuant to Section 5.8,
the Unitholder holding a Subordinated Unit shall possess all of the rights and
obligations of a Unitholder holding Common Units hereunder, including the
right to vote as a Common Unitholder and the right to participate in
allocations of income, gain, loss and deduction and distributions made with
respect to Common Units; provided, however, that such converted Subordinated
Units shall remain subject to the provisions of Sections 5.5(c)(ii), 6.1(d)(x)
and 6.7(b).
(b) The Unitholder holding a Subordinated Unit which has converted into a
Common Unit pursuant to Section 5.8 shall not be issued a Common Unit
Certificate pursuant to Section 4.1, and shall not be permitted to transfer
its converted Subordinated Units to a Person which is not an Affiliate of the
holder until such time as the General Partner determines, based on advice of
counsel, that a converted Subordinated Unit should have, as a substantive
matter, like intrinsic economic and federal income tax characteristics, in all
material respects, to the intrinsic economic and federal income tax
characteristics of an Initial Common Unit. In connection with the condition
imposed by this Section 6.7(b), the General Partner may take whatever
reasonable steps are required to provide economic uniformity to the converted
Subordinated Units in preparation for a transfer of such converted
Subordinated Units, including the application of Sections 5.5(c)(ii) and
6.1(d)(x); provided, however, that no such steps may be taken that would have
a material adverse effect on the Unitholders holding Common Units represented
by Common Unit Certificates.
Section 6.8 Special Provisions Relating to the Holders of Incentive
Distribution Rights.
Notwithstanding anything to the contrary set forth in this Agreement, the
holders of the Incentive Distribution Rights (a) shall (i) possess the rights
and obligations provided in this Agreement with respect to a Limited Partner
pursuant to Articles III and VII and (ii) have a Capital Account as a Partner
pursuant to Section 5.5 and all other provisions related thereto and (b) shall
not (i) be entitled to vote on any matters requiring the approval or vote of
the holders of Outstanding Units, (ii) be entitled to any distributions other
than as provided in Sections 6.4(a)(v), (vi) and (vii), 6.4(b)(iii), (iv) and
(v), and 12.4 or (iii) be allocated items of income, gain, loss or deduction
other than as specified in this Article VI.
Section 6.9 Entity-Level Taxation.
If legislation is enacted or the interpretation of existing language is
modified by the relevant governmental authority which causes the Partnership
or the Operating Company to be treated as an association taxable as a
corporation or otherwise subjects the Partnership or the Operating Company to
entity-level taxation for federal income tax purposes, the then applicable
Minimum Quarterly Distribution, First Target Distribution, Second Target
Distribution and Third Target Distribution shall be adjusted to equal the
product obtained by multiplying (a) the amount thereof by (b) one minus the
sum of (i) the highest marginal federal corporate (or other entity, as
applicable) income tax rate of the Partnership or the Operating Company for
the taxable year of the Partnership or the Operating Company in which such
Quarter occurs (expressed as a percentage) plus (ii) the effective overall
state and local income tax rate (expressed as a percentage) applicable to the
Partnership or the Operating Company for the calendar year next preceding the
calendar year in which such Quarter occurs (after taking into account the
benefit of any deduction allowable for federal income tax purposes with
respect to the payment of state and local income taxes), but only to the
extent of the increase in such rates resulting from such legislation or
interpretation. Such effective overall state and local income tax rate shall
be determined for the taxable year
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next preceding the first taxable year during which the Partnership or the
Operating Company is taxable for federal income tax purposes as an association
taxable as a corporation or is otherwise subject to entity-level taxation by
determining such rate as if the Partnership or the Operating Company had been
subject to such state and local taxes during such preceding taxable year.
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
Section 7.1 Management.
(a) The General Partner shall conduct, direct and manage all activities of
the Partnership. Except as otherwise expressly provided in this Agreement, all
management powers over the business and affairs of the Partnership shall be
exclusively vested in the General Partner, and no Limited Partner or Assignee
shall have any management power over the business and affairs of the
Partnership. In addition to the powers now or hereafter granted a general
partner of a limited partnership under applicable law or which are granted to
the General Partner under any other provision of this Agreement, the General
Partner, subject to Section 7.3, shall have full power and authority to do all
things and on such terms as it, in its sole discretion, may deem necessary or
appropriate to conduct the business of the Partnership, to exercise all powers
set forth in Section 2.5 and to effectuate the purposes set forth in Section
2.4, including the following:
(i) the making of any expenditures, the lending or borrowing of money,
the assumption or guarantee of, or other contracting for, indebtedness and
other liabilities, the issuance of evidences of indebtedness, including
indebtedness that is convertible into Partnership Securities, and the
incurring of any other obligations;
(ii) the making of tax, regulatory and other filings, or rendering of
periodic or other reports to governmental or other agencies having
jurisdiction over the business or assets of the Partnership;
(iii) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any or all of the assets of the Partnership or
the merger or other combination of the Partnership with or into another
Person (the matters described in this clause (iii) being subject, however,
to any prior approval that may be required by Section 7.3);
(iv) the use of the assets of the Partnership (including cash on hand)
for any purpose consistent with the terms of this Agreement, including the
financing of the conduct of the operations of the Partnership Group, the
lending of funds to other Persons (including the Operating Company), the
repayment of obligations of the Partnership Group and the making of capital
contributions to any member of the Partnership Group;
(v) the negotiation, execution and performance of any contracts,
conveyances or other instruments (including instruments that limit the
liability of the Partnership under contractual arrangements to all or
particular assets of the Partnership, with the other party to the contract
to have no recourse against the General Partner or its assets other than
its interest in the Partnership, even if same results in the terms of the
transaction being less favorable to the Partnership than would otherwise be
the case);
(vi) the distribution of Partnership cash;
(vii) the selection and dismissal of employees (including employees
having titles such as "president," "vice president," "secretary" and
"treasurer") and agents, outside attorneys, accountants, consultants and
contractors and the determination of their compensation and other terms of
employment or hiring;
(viii) the maintenance of such insurance for the benefit of the
Partnership Group and the Partners as it deems necessary or appropriate;
(ix) the formation of, or acquisition of an interest in, and the
contribution of property and the making of loans to, any further limited or
general partnerships, joint ventures, corporations or other relationships
(including the acquisition of interests in, and the contributions of
property to, the Operating Company from time to time) subject to the
restrictions set forth in Section 2.4;
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(x) the control of any matters affecting the rights and obligations of
the Partnership, including the bringing and defending of actions at law or
in equity and otherwise engaging in the conduct of litigation and the
incurring of legal expense and the settlement of claims and litigation;
(xi) the indemnification of any Person against liabilities and
contingencies to the extent permitted by law;
(xii) the entering into of listing agreements with any National
Securities Exchange and the delisting of some or all of the Limited Partner
Interests from, or requesting that trading be suspended on, any such
exchange (subject to any prior approval that may be required under Section
4.8);
(xiii) unless restricted or prohibited by Section 5.7, the purchase, sale
or other acquisition or disposition of Partnership Securities, or the
issuance of additional options, rights, warrants and appreciation rights
relating to Partnership Securities; and
(xiv) the undertaking of any action in connection with the Partnership's
participation in the Operating Company as a member.
(b) Notwithstanding any other provision of this Agreement, the Operating
Company Agreement, the Delaware Act or any applicable law, rule or regulation,
each of the Partners and Assignees and each other Person who may acquire an
interest in Partnership Securities hereby (i) approves, ratifies and confirms
the execution, delivery and performance by the parties thereto of the
Operating Company Agreement, the Underwriting Agreement, the Contribution and
Conveyance Agreement, the agreements and other documents filed as exhibits to
the Registration Statement, and the other agreements described in or filed as
a part of the Registration Statement; (ii) agrees that the General Partner (on
its own or through any officer of the Partnership) is authorized to execute,
deliver and perform the agreements referred to in clause (i) of this sentence
and the other agreements, acts, transactions and matters described in or
contemplated by the Registration Statement on behalf of the Partnership
without any further act, approval or vote of the Partners or the Assignees or
the other Persons who may acquire an interest in Partnership Securities; and
(iii) agrees that the execution, delivery or performance by the General
Partner, any Group Member or any Affiliate of any of them, of this Agreement
or any agreement authorized or permitted under this Agreement (including the
exercise by the General Partner or any Affiliate of the General Partner of the
rights accorded pursuant to Article XV), shall not constitute a breach by the
General Partner of any duty that the General Partner may owe the Partnership
or the Limited Partners or any other Persons under this Agreement (or any
other agreements) or of any duty stated or implied by law or equity.
Section 7.2 Certificate of Limited Partnership.
The General Partner has caused the Certificate of Limited Partnership to be
filed with the Secretary of State of the State of Delaware as required by the
Delaware Act and shall use all reasonable efforts to cause to be filed such
other certificates or documents as may be determined by the General Partner in
its sole discretion to be reasonable and necessary or appropriate for the
formation, continuation, qualification and operation of a limited partnership
(or a partnership in which the limited partners have limited liability) in the
State of Delaware or any other state in which the Partnership may elect to do
business or own property. To the extent that such action is determined by the
General Partner in its sole discretion to be reasonable and necessary or
appropriate, the General Partner shall file amendments to and restatements of
the Certificate of Limited Partnership and do all things to maintain the
Partnership as a limited partnership (or a partnership or other entity in
which the limited partners have limited liability) under the laws of the State
of Delaware or of any other state in which the Partnership may elect to do
business or own property. Subject to the terms of Section 3.4(a), the General
Partner shall not be required, before or after filing, to deliver or mail a
copy of the Certificate of Limited Partnership, any qualification document or
any amendment thereto to any Limited Partner.
Section 7.3 Restrictions on General Partner's Authority.
(a) The General Partner may not, without written approval of the specific
act by holders of all of the Outstanding Limited Partner Interests or by other
written instrument executed and delivered by holders of all of
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the Outstanding Limited Partner Interests subsequent to the date of this
Agreement, take any action in contravention of this Agreement, including,
except as otherwise provided in this Agreement, (i) committing any act that
would make it impossible to carry on the ordinary business of the Partnership;
(ii) possessing Partnership property, or assigning any rights in specific
Partnership property, for other than a Partnership purpose; (iii) admitting a
Person as a Partner; (iv) amending this Agreement in any manner; or (v)
transferring its interest as general partner of the Partnership.
(b) Except as provided in Articles XII and XIV, the General Partner may not
sell, exchange or otherwise dispose of all or substantially all of the
Partnership's assets in a single transaction or a series of related
transactions or approve on behalf of the Partnership the sale, exchange or
other disposition of all or substantially all of the assets of the Operating
Company, without the approval of holders of at least a Unit Majority; provided
however that this provision shall not preclude or limit the General Partner's
ability to mortgage, pledge, hypothecate or grant a security interest in all
or substantially all of the assets of the Partnership or Operating Company and
shall not apply to any forced sale of any or all of the assets of the
Partnership or Operating Company pursuant to the foreclosure of, or other
realization upon, any such encumbrance. Without the approval of holders of at
least a Unit Majority, the General Partner shall not, on behalf of the
Partnership, (i) consent to any amendment to the Operating Company Agreement
or, except as expressly permitted by Section 7.9(d), take any action permitted
to be taken by a member of the Operating Company, in either case, that would
have a material adverse effect on the Partnership as a member of the Operating
Company or (ii) except as permitted under Sections 4.6, 11.1 and 11.2, elect
or cause the Partnership to elect a successor general partner of the
Partnership or manager of the Operating Company.
Section 7.4 Reimbursement of the General Partner.
(a) Except as provided in this Section 7.4 and elsewhere in this Agreement
or in the Operating Company Agreement, the General Partner shall not be
compensated for its services as general partner or managing member of any
Group Member.
(b) The General Partner shall be reimbursed on a monthly basis, or such
other reasonable basis as the General Partner may determine in its sole
discretion, for (i) all direct and indirect expenses it incurs or payments it
makes on behalf of the Partnership (including salary, bonus, incentive
compensation and other amounts paid to any Person including Affiliates of the
General Partner to perform services for the Partnership or for the General
Partner in the discharge of its duties to the Partnership), and (ii) all other
necessary or appropriate expenses allocable to the Partnership or otherwise
reasonably incurred by the General Partner in connection with operating the
Partnership's business (including expenses allocated to the General Partner by
its Affiliates). The General Partner shall determine the expenses that are
allocable to the Partnership in any reasonable manner determined by the
General Partner in its sole discretion. Reimbursements pursuant to this
Section 7.4 shall be in addition to any reimbursement to the General Partner
as a result of indemnification pursuant to Section 7.7.
(c) Subject to Section 5.7, the General Partner, in its sole discretion and
without the approval of the Limited Partners (who shall have no right to vote
in respect thereof), may propose and adopt on behalf of the Partnership
employee benefit plans, employee programs and employee practices (including
plans, programs and practices involving the issuance of Partnership Securities
or options to purchase Partnership Securities), or cause the Partnership to
issue Partnership Securities in connection with, or pursuant to, any employee
benefit plan, employee program or employee practice maintained or sponsored by
the General Partner or any of its Affiliates, in each case for the benefit of
employees of the General Partner, any Group Member or any Affiliate, or any of
them, in respect of services performed, directly or indirectly, for the
benefit of the Partnership Group. The Partnership agrees to issue and sell to
the General Partner or any of its Affiliates any Partnership Securities that
the General Partner or such Affiliate is obligated to provide to any employees
pursuant to any such employee benefit plans, employee programs or employee
practices. Expenses incurred by the General Partner in connection with any
such plans, programs and practices (including the net cost to the General
Partner or such Affiliate of Partnership Securities purchased by the General
Partner or such Affiliate from the Partnership to fulfill options or awards
under such plans, programs and practices) shall be reimbursed in accordance
with Section 7.4(b). Any
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and all obligations of the General Partner under any employee benefit plans,
employee programs or employee practices adopted by the General Partner as
permitted by this Section 7.4(c) shall constitute obligations of the General
Partner hereunder and shall be assumed by any successor General Partner
approved pursuant to Section 11.1 or 11.2 or the transferee of or successor to
all of the General Partner's Partnership Interest as the General Partner in
the Partnership pursuant to Section 4.6.
Section 7.5 Outside Activities.
(a) After the Closing Date, the General Partner, for so long as it is the
General Partner of the Partnership (i) agrees that its sole business will be
to act as the general partner or managing member of the Partnership, the
Operating Company, and any other partnership or limited liability company of
which the Partnership or the Operating Company is, directly or indirectly, a
partner or managing member and to undertake activities that are ancillary or
related thereto (including being a limited partner in the partnership), (ii)
shall not engage in any business or activity or incur any debts or liabilities
except in connection with or incidental to (A) its performance as general
partner of one or more Group Members or as described in or contemplated by the
Registration Statement or (B) the acquiring, owning or disposing of debt or
equity securities in any Group Member and (iii) shall not, and shall cause its
Affiliates not to, engage in any Restricted Activity.
(b) Except as specifically restricted by Section 7.5(a), each Indemnitee
(other than the General Partner) shall have the right to engage in businesses
of every type and description and other activities for profit and to engage in
and possess an interest in other business ventures of any and every type or
description, whether in businesses engaged in or anticipated to be engaged in
by any Group Member, independently or with others, including business
interests and activities (other than Restricted Activities in North America,
unless such Restricted Activities are approved by Special Approval (as long as
the material facts known to such Indemnitee regarding such Restricted
Activities were disclosed to the Conflicts Committee at the time it gave its
approval)) in direct competition with the business and activities of any Group
Member, and none of the same shall constitute a breach of this Agreement or any
duty express or implied by law to any Group Member or any Partner or Assignee.
Neither any Group Member, any Limited Partner nor any other Person shall have
any rights by virtue of this Agreement, the Operating Company Agreement or the
partnership relationship established hereby or thereby in any business ventures
of any Indemnitee.
(c) Subject to the terms of Section 7.5(a) and 7.5(b), but otherwise
notwithstanding anything to the contrary in this Agreement, (i) the engaging
in competitive activities by any Indemnitees (other than the General Partner)
in accordance with the provisions of this Section 7.5 is hereby approved by
the Partnership and all Partners and (ii) it shall be deemed not to be a
breach of the General Partner's fiduciary duty or any other obligation of any
type whatsoever of the General Partner for the Indemnitees (other than the
General Partner) to engage in such business interests and activities in
preference to or to the exclusion of the Partnership (including, without
limitation, the General Partner and the Indemnities shall have no obligation
to present business opportunities to the Partnership).
(d) The General Partner and any of its Affiliates may acquire Partnership
Securities in addition to those acquired on the Closing Date and, except as
otherwise provided in this Agreement, shall be entitled to exercise all rights
of the General Partner or Limited Partner, as applicable, relating to such
Partnership Securities.
(e) The term "Affiliates" when used in Sections 7.5(a) and 7.5(b) with
respect to the General Partner shall not include any Group Member or any
Subsidiary of the Group Member.
(f) Anything in this Agreement to the contrary notwithstanding, to the
extent that provisions of Sections 7.7, 7.8, 7.9, 7.10 or other Sections of
this Agreement purport or are interpreted to have the effect of restricting
the fiduciary duties that might otherwise, as a result of Delaware or other
applicable law, be owed by the General Partner to the Partnership and its
Limited Partners, or to constitute a waiver or consent by the Limited Partners
to any such restriction, such provisions shall be inapplicable and have no
effect in determining whether the General Partner has complied with its
fiduciary duties in connection with determinations made by it under this
Section 7.5.
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Section 7.6 Loans from the General Partner; Loans or Contributions from the
Partnership; Contracts with Affiliates; Certain Restrictions on the
General Partner.
(a) The General Partner or its Affiliates may lend to any Group Member, and
any Group Member may borrow from the General Partner or any of its Affiliates,
funds needed or desired by the Group Member for such periods of time and in
such amounts as the General Partner may determine; provided, however, that in
any such case the lending party may not charge the borrowing party interest at
a rate greater than the rate that would be charged the borrowing party or
impose terms less favorable to the borrowing party than would be charged or
imposed on the borrowing party by unrelated lenders on comparable loans made
on an arm's-length basis (without reference to the lending party's financial
abilities or guarantees). The borrowing party shall reimburse the lending
party for any costs (other than any additional interest costs) incurred by the
lending party in connection with the borrowing of such funds. For purposes of
this Section 7.6(a) and Section 7.6(b), the term "Group Member" shall include
any Affiliate of a Group Member that is controlled by the Group Member. No
Group Member may lend funds to the General Partner or any of its Affiliates
(other than another Group Member).
(b) The Partnership may lend or contribute to any Group Member, and any
Group Member may borrow from the Partnership, funds on terms and conditions
established in the sole discretion of the General Partner; provided, however,
that the Partnership may not charge the Group Member interest at a rate less
than the rate that would be charged to the Group Member (without reference to
the General Partner's financial abilities or guarantees) by unrelated lenders
on comparable loans. The foregoing authority shall be exercised by the General
Partner in its sole discretion and shall not create any right or benefit in
favor of any Group Member or any other Person.
(c) The General Partner may itself, or may enter into an agreement with any
of its Affiliates to, render services to a Group Member or to the General
Partner in the discharge of its duties as general partner of the Partnership.
Any services rendered to a Group Member by the General Partner or any of its
Affiliates shall be on terms that are fair and reasonable to the Partnership;
provided, however, that the requirements of this Section 7.6(c) shall be
deemed satisfied as to (i) any transaction approved by Special Approval, (ii)
any transaction, the terms of which are no less favorable to the Partnership
Group than those generally being provided to or available from unrelated third
parties or (iii) any transaction that, taking into account the totality of the
relationships between the parties involved (including other transactions that
may be particularly favorable or advantageous to the Partnership Group), is
equitable to the Partnership Group. The provisions of Section 7.4 shall apply
to the rendering of services described in this Section 7.6(c).
(d) The Partnership Group may transfer assets to joint ventures, other
partnerships, corporations, limited liability companies or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions as are consistent with this Agreement and
applicable law.
(e) Neither the General Partner nor any of its Affiliates shall sell,
transfer or convey any property to, or purchase any property from, the
Partnership, directly or indirectly, except pursuant to transactions that are
fair and reasonable to the Partnership; provided, however, that the
requirements of this Section 7.6(e) shall be deemed to be satisfied as to (i)
the transactions effected pursuant to Sections 5.2 and 5.3, the Contribution
and Conveyance Agreement and any other transactions described in or
contemplated by the Registration Statement, (ii) any transaction approved by
Special Approval, (iii) any transaction, the terms of which are no less
favorable to the Partnership than those generally being provided to or
available from unrelated third parties, or (iv) any transaction that, taking
into account the totality of the relationships between the parties involved
(including other transactions that may be particularly favorable or
advantageous to the Partnership), is equitable to the Partnership. With
respect to any contribution of assets to the Partnership in exchange for
Partnership Securities, the Conflicts Committee, in determining whether the
appropriate number of Partnership Securities are being issued, may take into
account, among other things, the fair market value of the assets, the
liquidated and contingent liabilities assumed, the tax basis in the assets,
the extent to which tax-only allocations to the transferor will protect the
existing partners of the Partnership against a low tax basis, and such other
factors as the Conflicts Committee deems relevant under the circumstances.
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(f) The General Partner and its Affiliates will have no obligation to permit
any Group Member to use any facilities or assets of the General Partner and
its Affiliates, except as may be provided in contracts entered into from time
to time specifically dealing with such use, nor shall there be any obligation
on the part of the General Partner or its Affiliates to enter into such
contracts.
(g) Without limitation of Sections 7.6(a) through 7.6(f), and
notwithstanding anything to the contrary in this Agreement, the existence of
the conflicts of interest described in the Registration Statement are hereby
approved by all Partners.
Section 7.7 Indemnification.
(a) To the fullest extent permitted by law but subject to the limitations
expressly provided in this Agreement, all Indemnitees shall be indemnified and
held harmless by the Partnership from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including legal fees and
expenses), judgments, fines, penalties, interest, settlements or other amounts
arising from any and all claims, demands, actions, suits or proceedings,
whether civil, criminal, administrative or investigative, in which any
Indemnitee may be involved, or is threatened to be involved, as a party or
otherwise, by reason of its status as an Indemnitee; provided, that in each
case the Indemnitee acted in good faith and in a manner that such Indemnitee
reasonably believed to be in, or (in the case of a Person other than the
General Partner) not opposed to, the best interests of the Partnership and,
with respect to any criminal proceeding, had no reasonable cause to believe
its conduct was unlawful; provided, further, no indemnification pursuant to
this Section 7.7 shall be available to the General Partner with respect to its
obligations incurred pursuant to the Underwriting Agreement or the
Contribution and Conveyance Agreement (other than obligations incurred by the
General Partner on behalf of the Partnership or the Operating Company). The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere, or its equivalent, shall not
create a presumption that the Indemnitee acted in a manner contrary to that
specified above. Any indemnification pursuant to this Section 7.7 shall be
made only out of the assets of the Partnership, it being agreed that the
General Partner shall not be personally liable for such indemnification and
shall have no obligation to contribute or loan any monies or property to the
Partnership to enable it to effectuate such indemnification.
(b) To the fullest extent permitted by law, expenses (including legal fees
and expenses) incurred by an Indemnitee who is indemnified pursuant to Section
7.7(a) in defending any claim, demand, action, suit or proceeding shall, from
time to time, be advanced by the Partnership prior to the final disposition of
such claim, demand, action, suit or proceeding upon receipt by the Partnership
of any undertaking by or on behalf of the Indemnitee to repay such amount if
it shall be determined that the Indemnitee is not entitled to be indemnified
as authorized in this Section 7.7.
(c) The indemnification provided by this Section 7.7 shall be in addition to
any other rights to which an Indemnitee may be entitled under any agreement,
pursuant to any vote of the holders of Outstanding Limited Partner Interests
entitled to vote on such matter, as a matter of law or otherwise, both as to
actions in the Indemnitee's capacity as an Indemnitee and as to actions in any
other capacity (including any capacity under the Underwriting Agreement), and
shall continue as to an Indemnitee who has ceased to serve in such capacity
and shall inure to the benefit of the heirs, successors, assigns and
administrators of the Indemnitee.
(d) The Partnership may purchase and maintain (or reimburse the General
Partner or its Affiliates for the cost of) insurance, on behalf of the General
Partner, its Affiliates and such other Persons as the General Partner shall
determine, against any liability that may be asserted against or expense that
may be incurred by such Person in connection with the Partnership's activities
or such Person's activities on behalf of the Partnership, regardless of
whether the Partnership would have the power to indemnify such Person against
such liability under the provisions of this Agreement.
(e) For purposes of this Section 7.7, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Partnership
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also imposes duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute "fines" within the meaning of Section 7.7(a); and action
taken or omitted by it with respect to any employee benefit plan in the
performance of its duties for a purpose reasonably believed by it to be in the
interest of the participants and beneficiaries of the plan shall be deemed to
be for a purpose which is in, or not opposed to, the best interests of the
Partnership.
(f) In no event may an Indemnitee subject the Limited Partners to personal
liability by reason of the indemnification provisions set forth in this
Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or in part
under this Section 7.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the
transaction was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons.
(i) No amendment, modification or repeal of this Section 7.7 or any
provision hereof shall in any manner terminate, reduce or impair the right of
any past, present or future Indemnitee to be indemnified by the Partnership,
nor the obligations of the Partnership to indemnify any such Indemnitee under
and in accordance with the provisions of this Section 7.7 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part,
prior to such amendment, modification or repeal, regardless of when such
claims may arise or be asserted.
Section 7.8 Liability of Indemnitees.
(a) Notwithstanding anything to the contrary set forth in this Agreement, no
Indemnitee shall be liable for monetary damages to the Partnership, the
Limited Partners, the Assignees or any other Persons who have acquired
interests in the Partnership Securities, for losses sustained or liabilities
incurred as a result of any act or omission if such Indemnitee acted in good
faith.
(b) Subject to its obligations and duties as General Partner set forth in
Section 7.1(a), the General Partner may exercise any of the powers granted to
it by this Agreement and perform any of the duties imposed upon it hereunder
either directly or by or through its agents, and the General Partner shall not
be responsible for any misconduct or negligence on the part of any such agent
appointed by the General Partner in good faith.
(c) To the extent that, at law or in equity, an Indemnitee has duties
(including fiduciary duties) and liabilities relating thereto to the
Partnership or to the Partners, the General Partner and any other Indemnitee
acting in connection with the Partnership's business or affairs shall not be
liable to the Partnership or to any Partner for its good faith reliance on the
provisions of this Agreement. The provisions of this Agreement, to the extent
that they restrict or otherwise modify the duties and liabilities of an
Indemnitee otherwise existing at law or in equity, are agreed by the Partners
to replace such other duties and liabilities of such Indemnitee.
(d) Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the liability to the Partnership, the Limited Partners, the
General Partner, and the Partnership's and General Partner's directors,
officers and employees under this Section 7.8 as in effect immediately prior
to such amendment, modification or repeal with respect to claims arising from
or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise or
be asserted.
Section 7.9 Resolution of Conflicts of Interest.
(a) Unless otherwise expressly provided in this Agreement or the Operating
Company Agreement, whenever a potential conflict of interest exists or arises
between the General Partner or any of its Affiliates, on
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the one hand, and the Partnership, the Operating Company, any Partner or any
Assignee, on the other, any resolution or course of action by the General
Partner or its Affiliates in respect of such conflict of interest shall be
permitted and deemed approved by all Partners, and shall not constitute a
breach of this Agreement, of the Operating Company Agreement, of any agreement
contemplated herein or therein, or of any duty stated or implied by law or
equity, if the resolution or course of action is, or by operation of this
Agreement is deemed to be, fair and reasonable to the Partnership. The General
Partner shall be authorized but not required in connection with its resolution
of such conflict of interest to seek Special Approval of such resolution. Any
conflict of interest and any resolution of such conflict of interest shall be
conclusively deemed fair and reasonable to the Partnership if such conflict of
interest or resolution is (i) approved by Special Approval (as long as the
material facts known to the General Partner or any of its Affiliates regarding
any proposed transaction were disclosed to the Conflicts Committee at the time
it gave its approval), (ii) on terms no less favorable to the Partnership than
those generally being provided to or available from unrelated third parties or
(iii) fair to the Partnership, taking into account the totality of the
relationships between the parties involved (including other transactions that
may be particularly favorable or advantageous to the Partnership). The General
Partner may also adopt a resolution or course of action that has not received
Special Approval. The General Partner (including the Conflicts Committee in
connection with Special Approval) shall be authorized in connection with its
determination of what is "fair and reasonable" to the Partnership and in
connection with its resolution of any conflict of interest to consider (A) the
relative interests of any party to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interest; (B) any
customary or accepted industry practices and any customary or historical
dealings with a particular Person; (C) any applicable generally accepted
accounting practices or principles; and (D) such additional factors as the
General Partner (including the Conflicts Committee) determines in its sole
discretion to be relevant, reasonable or appropriate under the circumstances.
Nothing contained in this Agreement, however, is intended to nor shall it be
construed to require the General Partner (including the Conflicts Committee)
to consider the interests of any Person other than the Partnership. In the
absence of bad faith by the General Partner, the resolution, action or terms
so made, taken or provided by the General Partner with respect to such matter
shall not constitute a breach of this Agreement or any other agreement
contemplated herein or a breach of any standard of care or duty imposed herein
or therein or, to the extent permitted by law, under the Delaware Act or any
other law, rule or regulation.
(b) Whenever this Agreement or any other agreement contemplated hereby
provides that the General Partner or any of its Affiliates is permitted or
required to make a decision (i) in its "sole discretion" or "discretion," that
it deems "necessary or appropriate" or "necessary or advisable" or under a
grant of similar authority or latitude, except as otherwise provided herein,
the General Partner or such Affiliate shall be entitled to consider only such
interests and factors as it desires and shall have no duty or obligation to
give any consideration to any interest of, or factors affecting, the
Partnership, the Operating Company, any Limited Partner or any Assignee, (ii)
it may make such decision in its sole discretion (regardless of whether there
is a reference to "sole discretion" or "discretion") unless another express
standard is provided for, or (iii) in "good faith" or under another express
standard, the General Partner or such Affiliate shall act under such express
standard and shall not be subject to any other or different standards imposed
by this Agreement, the Operating Company Agreement, any other agreement
contemplated hereby or under the Delaware Act or any other law, rule or
regulation. In addition, any actions taken by the General Partner or such
Affiliate consistent with the standards of "reasonable discretion" set forth
in the definitions of Available Cash or Operating Surplus shall not constitute
a breach of any duty of the General Partner to the Partnership or the Limited
Partners. The General Partner shall have no duty, express or implied, to sell
or otherwise dispose of any asset of the Partnership Group other than in the
ordinary course of business. No borrowing by any Group Member or the approval
thereof by the General Partner shall be deemed to constitute a breach of any
duty of the General Partner to the Partnership or the Limited Partners by
reason of the fact that the purpose or effect of such borrowing is directly or
indirectly to (A) enable distributions to the General Partner or its
Affiliates (including in their capacities as Limited Partners) to exceed 1% of
the total amount distributed to all partners or (B) hasten the expiration of
the Subordination Period or the conversion of any Subordinated Units into
Common Units.
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(c) Whenever a particular transaction, arrangement or resolution of a
conflict of interest is required under this Agreement to be "fair and
reasonable" to any Person, the fair and reasonable nature of such transaction,
arrangement or resolution shall be considered in the context of all similar or
related transactions.
(d) The Unitholders hereby authorize the General Partner, on behalf of the
Partnership as a partner or member of a Group Member, to approve of actions by
the general partner or managing member of such Group Member similar to those
actions permitted to be taken by the General Partner pursuant to this Section
7.9.
Section 7.10 Other Matters Concerning the General Partner.
(a) The General Partner may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture
or other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties.
(b) The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants
and advisers selected by it, and any act taken or omitted to be taken in
reliance upon the opinion (including an Opinion of Counsel) of such Persons as
to matters that the General Partner reasonably believes to be within such
Person's professional or expert competence shall be conclusively presumed to
have been done or omitted in good faith and in accordance with such opinion.
(c) The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly authorized
officers, a duly appointed attorney or attorneys-in-fact or the duly
authorized officers of the Partnership.
(d) Any standard of care and duty imposed by this Agreement or under the
Delaware Act or any applicable law, rule or regulation shall be modified,
waived or limited, to the extent permitted by law, as required to permit the
General Partner to act under this Agreement or any other agreement
contemplated by this Agreement and to make any decision pursuant to the
authority prescribed in this Agreement, so long as such action is reasonably
believed by the General Partner to be in, or not inconsistent with, the best
interests of the Partnership.
Section 7.11 Purchase or Sale of Partnership Securities.
The General Partner may cause the Partnership to purchase or otherwise
acquire Partnership Securities (other than Incentive Distribution Rights);
provided that, except as permitted pursuant to Section 4.10, the General
Partner may not cause any Group Member to purchase Subordinated Units during
the Subordination Period. As long as Partnership Securities are held by any
Group Member, such Partnership Securities shall not be considered Outstanding
for any purpose, except as otherwise provided herein. The General Partner or
any Affiliate of the General Partner may also purchase or otherwise acquire
and sell or otherwise dispose of Partnership Securities for its own account,
subject to the provisions of Articles IV and X.
Section 7.12 Registration Rights of the General Partner and its Affiliates.
(a) If (i) the General Partner or any Affiliate of the General Partner
(including for purposes of this Section 7.12, any Person that is an Affiliate
of the General Partner at the date hereof notwithstanding that it may later
cease to be an Affiliate of the General Partner) holds Partnership Securities
that it desires to sell and (ii) Rule 144 of the Securities Act (or any
successor rule or regulation to Rule 144) or another exemption from
registration is not available to enable such holder of Partnership Securities
(the "Holder") to dispose of the number of Partnership Securities it desires
to sell at the time it desires to do so without registration under the
Securities Act, then upon the request of the General Partner or any of its
Affiliates, the Partnership shall file with the Commission as promptly as
practicable after receiving such request, and use all reasonable efforts to
cause to become effective and remain effective for a period of not less than
six months following its effective date or such shorter period as shall
terminate when all Partnership Securities covered by such registration
statement have been sold, a registration statement under the Securities Act
registering the offering and sale of the number of
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Partnership Securities specified by the Holder; provided, however, that the
Partnership shall not be required to effect more than three registrations
pursuant to this Section 7.12(a); and provided further, however, that if the
Conflicts Committee determines in its good faith judgment that a postponement
of the requested registration for up to six months would be in the best
interests of the Partnership and its Partners due to a pending transaction,
investigation or other event, the filing of such registration statement or the
effectiveness thereof may be deferred for up to six months, but not
thereafter. In connection with any registration pursuant to the immediately
preceding sentence, the Partnership shall promptly prepare and file (x) such
documents as may be necessary to register or qualify the securities subject to
such registration under the securities laws of such states as the Holder shall
reasonably request; provided, however, that no such qualification shall be
required in any jurisdiction where, as a result thereof, the Partnership would
become subject to general service of process or to taxation or qualification
to do business as a foreign corporation or partnership doing business in such
jurisdiction solely as a result of such registration, and (y) such documents
as may be necessary to apply for listing or to list the Partnership Securities
subject to such registration on such National Securities Exchange as the
Holder shall reasonably request, and do any and all other acts and things that
may reasonably be necessary or advisable to enable the Holder to consummate a
public sale of such Partnership Securities in such states. Except as set forth
in Section 7.12(c), all costs and expenses of any such registration and
offering (other than the underwriting discounts and commissions) shall be paid
by the Partnership, without reimbursement by the Holder.
(b) If the Partnership shall at any time propose to file a registration
statement under the Securities Act for an offering of equity securities of the
Partnership for cash (other than an offering relating solely to an employee
benefit plan), the Partnership shall use all reasonable efforts to include
such number or amount of securities held by the Holder in such registration
statement as the Holder shall request. If the proposed offering pursuant to
this Section 7.12(b) shall be an underwritten offering, then, in the event
that the managing underwriter or managing underwriters of such offering advise
the Partnership and the Holder in writing that in their opinion the inclusion
of all or some of the Holder's Partnership Securities would adversely and
materially affect the success of the offering, the Partnership shall include
in such offering only that number or amount, if any, of securities held by the
Holder which, in the opinion of the managing underwriter or managing
underwriters, will not so adversely and materially affect the offering. Except
as set forth in Section 7.12(c), all costs and expenses of any such
registration and offering (other than the underwriting discounts and
commissions) shall be paid by the Partnership, without reimbursement by the
Holder.
(c) If underwriters are engaged in connection with any registration referred
to in this Section 7.12, the Partnership shall provide indemnification,
representations, covenants, opinions and other assurance to the underwriters
in form and substance reasonably satisfactory to such underwriters. Further,
in addition to and not in limitation of the Partnership's obligation under
Section 7.7, the Partnership shall, to the fullest extent permitted by law,
indemnify and hold harmless the Holder, its officers, directors and each
Person who controls the Holder (within the meaning of the Securities Act) and
any agent thereof (collectively, "Indemnified Persons") against any losses,
claims, demands, actions, causes of action, assessments, damages, liabilities
(joint or several), costs and expenses (including interest, penalties and
reasonable attorneys' fees and disbursements), resulting to, imposed upon, or
incurred by the Indemnified Persons, directly or indirectly, under the
Securities Act or otherwise (hereinafter referred to in this Section 7.12(c)
as a "claim" and in the plural as "claims") based upon, arising out of or
resulting from any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which any
Partnership Securities were registered under the Securities Act or any state
securities or Blue Sky laws, in any preliminary prospectus (if used prior to
the effective date of such registration statement), or in any summary or final
prospectus or in any amendment or supplement thereto (if used during the
period the Partnership is required to keep the registration statement
current), or arising out of, based upon or resulting from the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements made therein not misleading;
provided, however, that the Partnership shall not be liable to any Indemnified
Person to the extent that any such claim arises out of, is based upon or
results from an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, such preliminary,
summary or final prospectus or such amendment or supplement, in
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reliance upon and in conformity with written information furnished to the
Partnership by or on behalf of such Indemnified Person specifically for use in
the preparation thereof.
(d) The provisions of Section 7.12(a) and 7.12(b) shall continue to be
applicable with respect to the General Partner (and any of the General
Partner's Affiliates) after it ceases to be a Partner of the Partnership,
during a period of two years subsequent to the effective date of such
cessation and for so long thereafter as is required for the Holder to sell all
of the Partnership Securities with respect to which it has requested during
such two-year period inclusion in a registration statement otherwise filed or
that a registration statement be filed; provided, however, that the
Partnership shall not be required to file successive registration statements
covering the same Partnership Securities for which registration was demanded
during such two-year period. The provisions of Section 7.12(c) shall continue
in effect thereafter.
(e) Any request to register Partnership Securities pursuant to this Section
7.12 shall (i) specify the Partnership Securities intended to be offered and
sold by the Person making the request, (ii) express such Person's present
intent to offer such shares for distribution, (iii) describe the nature or
method of the proposed offer and sale of Partnership Securities, and (iv)
contain the undertaking of such Person to provide all such information and
materials and take all action as may be required in order to permit the
Partnership to comply with all applicable requirements in connection with the
registration of such Partnership Securities.
Section 7.13 Reliance by Third Parties.
(a) Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the General
Partner and any officer of the General Partner authorized by the General
Partner to act on behalf of and in the name of the Partnership has full power
and authority to encumber, sell or otherwise use in any manner any and all
assets of the Partnership and to enter into any authorized contracts on behalf
of the Partnership, and such Person shall be entitled to deal with the General
Partner or any such officer as if it were the Partnership's sole party in
interest, both legally and beneficially. Each Limited Partner hereby waives
any and all defenses or other remedies that may be available against such
Person to contest, negate or disaffirm any action of the General Partner or
any such officer in connection with any such dealing. In no event shall any
Person dealing with the General Partner or any such officer or its
representatives be obligated to ascertain that the terms of the Agreement have
been complied with or to inquire into the necessity or expedience of any act
or action of the General Partner or any such officer or its representatives.
Each and every certificate, document or other instrument executed on behalf of
the Partnership by the General Partner or its representatives shall be
conclusive evidence in favor of any and every Person relying thereon or
claiming thereunder that (a) at the time of the execution and delivery of such
certificate, document or instrument, this Agreement was in full force and
effect, (b) the Person executing and delivering such certificate, document or
instrument was duly authorized and empowered to do so for and on behalf of the
Partnership and (c) such certificate, document or instrument was duly executed
and delivered in accordance with the terms and provisions of this Agreement
and is binding upon the Partnership.
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 8.1 Records and Accounting.
The General Partner shall keep or cause to be kept at the principal office
of the Partnership appropriate books and records with respect to the
Partnership's business, including all books and records necessary to provide
to the Limited Partners any information required to be provided pursuant to
Section 3.4(a). Any books and records maintained by or on behalf of the
Partnership in the regular course of its business, including the record of the
Record Holders and Assignees of Units or other Partnership Securities, books
of account and records of Partnership proceedings, may be kept on, or be in
the form of, computer disks, hard drives, punch cards, magnetic tape,
photographs, micrographics or any other information storage device; provided,
that the books and
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records so maintained are convertible into clearly legible written form within
a reasonable period of time. The books of the Partnership shall be maintained,
for financial reporting purposes, on an accrual basis in accordance with U.S.
GAAP.
Section 8.2 Fiscal Year.
The fiscal year of the Partnership shall be a fiscal year ending December
31.
Section 8.3 Reports.
(a) As soon as practicable, but in no event later than 120 days after the
close of each fiscal year of the Partnership, the General Partner shall cause
to be mailed or furnished to each Record Holder of a Unit as of a date
selected by the General Partner in its discretion, an annual report containing
financial statements of the Partnership for such fiscal year of the
Partnership, presented in accordance with U.S. GAAP, including a balance sheet
and statements of operations, Partnership equity and cash flows, such
statements to be audited by a firm of independent public accountants selected
by the General Partner.
(b) As soon as practicable, but in no event later than 90 days after the
close of each Quarter except the last Quarter of each fiscal year, the General
Partner shall cause to be mailed or furnished to each Record Holder of a Unit,
as of a date selected by the General Partner in its discretion, a report
containing unaudited financial statements of the Partnership and such other
information as may be required by applicable law, regulation or rule of any
National Securities Exchange on which the Units are listed for trading, or as
the General Partner determines to be necessary or appropriate.
ARTICLE IX
TAX MATTERS
Section 9.1 Tax Returns and Information.
The Partnership shall timely file all returns of the Partnership that are
required for federal, state and local income tax purposes on the basis of the
accrual method and a taxable year ending on December 31. The tax information
reasonably required by Record Holders for federal and state income tax
reporting purposes with respect to a taxable year shall be furnished to them
within 90 days of the close of the calendar year in which the Partnership's
taxable year ends. The classification, realization and recognition of income,
gain, losses and deductions and other items shall be on the accrual method of
accounting for federal income tax purposes.
Section 9.2 Tax Elections.
(a) The Partnership shall make the election under Section 754 of the Code in
accordance with applicable regulations thereunder, subject to the reservation
of the right to seek to revoke any such election upon the General Partner's
determination that such revocation is in the best interests of the Limited
Partners. Notwithstanding any other provision herein contained, for the
purposes of computing the adjustments under Section 743(b) of the Code, the
General Partner shall be authorized (but not required) to adopt a convention
whereby the price paid by a transferee of a Limited Partner Interest that is
traded on any National Securities Exchange will be deemed to be the lowest
quoted closing price of such Limited Partner Interests on any National
Securities Exchange on which such Limited Partner Interests are traded during
the calendar month in which such transfer is deemed to occur pursuant to
Section 6.2(g) without regard to the actual price paid by such transferee.
(b) The Partnership shall elect to deduct expenses incurred in organizing
the Partnership ratably over a sixty-month period as provided in Section 709
of the Code.
(c) Except as otherwise provided herein, the General Partner shall determine
whether the Partnership should make any other elections permitted by the Code.
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Section 9.3 Tax Controversies.
Subject to the provisions hereof, the General Partner is designated as the
Tax Matters Partner (as defined in the Code) and is authorized and required to
represent the Partnership (at the Partnership's expense) in connection with
all examinations of the Partnership's affairs by tax authorities, including
resulting administrative and judicial proceedings, and to expend Partnership
funds for professional services and costs associated therewith. Each Partner
agrees to cooperate with the General Partner and to do or refrain from doing
any or all things reasonably required by the General Partner to conduct such
proceedings.
Section 9.4 Withholding.
Notwithstanding any other provision of this Agreement, the General Partner
is authorized to take any action that it determines in its discretion to be
necessary or appropriate to cause the Partnership and the Operating Company to
comply with any withholding requirements established under the Code or any
other federal, state or local law including, without limitation, pursuant to
Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that the
Partnership is required or elects to withhold and pay over to any taxing
authority any amount resulting from the allocation or distribution of income
to any Partner or Assignee (including, without limitation, by reason of
Section 1446 of the Code), the amount withheld may at the discretion of the
General Partner be treated by the Partnership as a distribution of cash
pursuant to Section 6.3 in the amount of such withholding from such Partner.
ARTICLE X
ADMISSION OF PARTNERS
Section 10.1 Admission of Initial Limited Partners.
Upon the issuance by the Partnership of Subordinated Units and Incentive
Distribution Rights to Holdings and the General Partner as described in
Section 5.2, each of Holdings and the General Partner shall be deemed to have
been admitted to the Partnership as a Limited Partner in respect of the
Subordinated Units and Incentive Distribution Rights issued to it. Upon the
issuance by the Partnership of Common Units to the Underwriters as described
in Section 5.3 in connection with the Initial Offering and the execution by
each Underwriter of a Transfer Application, the General Partner shall admit
the Underwriters to the Partnership as Initial Limited Partners in respect of
the Common Units purchased by them.
Section 10.2 Admission of Substituted Limited Partner.
By transfer of a Limited Partner Interest in accordance with Article IV, the
transferor shall be deemed to have given the transferee the right to seek
admission as a Substituted Limited Partner subject to the conditions of, and
in the manner permitted under, this Agreement. A transferor of a Certificate
representing a Limited Partner Interest shall, however, only have the
authority to convey to a purchaser or other transferee who does not execute
and deliver a Transfer Application (a) the right to negotiate such Certificate
to a purchaser or other transferee and (b) the right to transfer the right to
request admission as a Substituted Limited Partner to such purchaser or other
transferee in respect of the transferred Limited Partner Interests. Each
transferee of a Limited Partner Interest (including any nominee holder or an
agent acquiring such Limited Partner Interest for the account of another
Person) who executes and delivers a Transfer Application shall, by virtue of
such execution and delivery, be an Assignee and be deemed to have applied to
become a Substituted Limited Partner with respect to the Limited Partner
Interests so transferred to such Person. Such Assignee shall become a
Substituted Limited Partner (x) at such time as the General Partner consents
thereto, which consent may be given or withheld in the General Partner's
discretion, and (y) when any such admission is shown on the books and records
of the Partnership. If such consent is withheld, such transferee shall be an
Assignee. An Assignee shall have an interest in the Partnership equivalent to
that of a Limited Partner with respect to allocations and distributions,
including liquidating distributions, of the Partnership. With respect to
voting rights attributable to Limited Partner Interests that are held by
Assignees, the General Partner shall be deemed to be the Limited Partner with
respect thereto
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and shall, in exercising the voting rights in respect of such Limited Partner
Interests on any matter, vote such Limited Partner Interests at the written
direction of the Assignee who is the Record Holder of such Limited Partner
Interests. If no such written direction is received, such Limited Partner
Interests will not be voted. An Assignee shall have no other rights of a
Limited Partner.
Section 10.3 Admission of Successor General Partner.
A successor General Partner approved pursuant to Section 11.1 or 11.2 or the
transferee of or successor to all of the General Partner's Partnership
Interest as general partner in the Partnership pursuant to Section 4.6 who is
proposed to be admitted as a successor General Partner shall be admitted to
the Partnership as the General Partner, effective immediately prior to the
withdrawal or removal of the predecessor or transferring General Partner
pursuant to Section 11.1 or 11.2 or the transfer of the General Partner's
Partnership Interest as a general partner in the Partnership pursuant to
Section 4.6, provided, however, that no such successor shall be admitted to
the Partnership until compliance with the terms of Section 4.6 has occurred
and such successor has executed and delivered such other documents or
instruments as may be required to effect such admission. Any such successor
shall, subject to the terms hereof, carry on the business of the members of
the Partnership Group without dissolution.
Section 10.4 Admission of Additional Limited Partners.
(a) A Person (other than the General Partner, an Initial Limited Partner or
a Substituted Limited Partner) who makes a Capital Contribution to the
Partnership in accordance with this Agreement shall be admitted to the
Partnership as an Additional Limited Partner only upon furnishing to the
General Partner (i) evidence of acceptance in form satisfactory to the General
Partner of all of the terms and conditions of this Agreement, including the
power of attorney granted in Section 2.6, and (ii) such other documents or
instruments as may be required in the discretion of the General Partner to
effect such Person's admission as an Additional Limited Partner.
(b) Notwithstanding anything to the contrary in this Section 10.4, no Person
shall be admitted as an Additional Limited Partner without the consent of the
General Partner, which consent may be given or withheld in the General
Partner's discretion. The admission of any Person as an Additional Limited
Partner shall become effective on the date upon which the name of such Person
is recorded as such in the books and records of the Partnership, following the
consent of the General Partner to such admission.
Section 10.5 Amendment of Agreement and Certificate of Limited Partnership.
To effect the admission to the Partnership of any Partner, the General
Partner shall take all steps necessary and appropriate under the Delaware Act
to amend the records of the Partnership to reflect such admission and, if
necessary, to prepare as soon as practicable an amendment to this Agreement
and, if required by law, the General Partner shall prepare and file an
amendment to the Certificate of Limited Partnership, and the General Partner
may for this purpose, among others, exercise the power of attorney granted
pursuant to Section 2.6.
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
Section 11.1 Withdrawal of the General Partner.
(a) The General Partner shall be deemed to have withdrawn from the
Partnership upon the occurrence of any one of the following events (each such
event herein referred to as an "Event of Withdrawal");
(i) The General Partner voluntarily withdraws from the Partnership by
giving written notice to the other Partners (and it shall be deemed that
the General Partner has withdrawn pursuant to this Section 11.1(a)(i) if
the General Partner voluntarily withdraws as managing member of the
Operating Company);
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(ii) The General Partner transfers all of its rights as General Partner
pursuant to Section 4.6;
(iii) The General Partner is removed pursuant to Section 11.2;
(iv) The General Partner (A) makes a general assignment for the benefit
of creditors; (B) files a voluntary bankruptcy petition for relief under
Chapter 7 of the United States Bankruptcy Code; (C) files a petition or
answer seeking for itself a liquidation, dissolution or similar relief (but
not a reorganization) under any law; (D) files an answer or other pleading
admitting or failing to contest the material allegations of a petition
filed against the General Partner in a proceeding of the type described in
clauses (A)-(C) of this Section 11.1(a)(iv); or (E) seeks, consents to or
acquiesces in the appointment of a trustee (but not a debtor-in-
possession), receiver or liquidator of the General Partner or of all or any
substantial part of its properties;
(v) A final and non-appealable order of relief under Chapter 7 of the
United States Bankruptcy Code is entered by a court with appropriate
jurisdiction pursuant to a voluntary or involuntary petition by or against
the General Partner; or
(vi) (A) in the event the General Partner is a corporation, a certificate
of dissolution or its equivalent is filed for the General Partner, or 90
days expire after the date of notice to the General Partner of revocation
of its charter without a reinstatement of its charter, under the laws of
its state of incorporation; (B) in the event the General Partner is a
partnership or a limited liability company, the dissolution and
commencement of winding up of the General Partner; (C) in the event the
General Partner is acting in such capacity by virtue of being a trustee of
a trust, the termination of the trust; (D) in the event the General Partner
is a natural person, his death or adjudication of incompetency; and (E)
otherwise in the event of the termination of the General Partner.
If an Event of Withdrawal specified in Section 11.1(a)(iv), (v) or (vi)(A),
(B), (C) or (E) occurs, the withdrawing General Partner shall give notice to
the Limited Partners within 30 days after such occurrence. The Partners hereby
agree that only the Events of Withdrawal described in this Section 11.1 shall
result in the withdrawal of the General Partner from the Partnership.
(b) Withdrawal of the General Partner from the Partnership upon the
occurrence of an Event of Withdrawal shall not constitute a breach of this
Agreement under the following circumstances: (i) at any time during the period
beginning on the Closing Date and ending at 12:00 midnight, Eastern Standard
Time, on December 31, 2007, the General Partner voluntarily withdraws by
giving at least 90 days' advance notice of its intention to withdraw to the
Limited Partners; provided that prior to the effective date of such
withdrawal, the withdrawal is approved by Unitholders holding at least a Unit
Majority and the General Partner delivers to the Partnership an Opinion of
Counsel ("Withdrawal Opinion of Counsel") that such withdrawal (following the
selection of the successor General Partner) would not result in the loss of
the limited liability of any Limited Partner or of a member of the Operating
Company or cause the Partnership or the Operating Company to be treated as an
association taxable as a corporation or otherwise to be taxed as an entity for
federal income tax purposes (to the extent not previously treated as such);
(ii) at any time after 12:00 midnight, Eastern Standard Time, on December 31,
2007, the General Partner voluntarily withdraws by giving at least 90 days'
advance notice to the Unitholders, such withdrawal to take effect on the date
specified in such notice; (iii) at any time that the General Partner ceases to
be the General Partner pursuant to Section 11.1(a)(ii) or is removed pursuant
to Section 11.2; or (iv) notwithstanding clause (i) of this sentence, at any
time that the General Partner voluntarily withdraws by giving at least 90
days' advance notice of its intention to withdraw to the Limited Partners,
such withdrawal to take effect on the date specified in the notice, if at the
time such notice is given one Person and its Affiliates (other than the
General Partner and its Affiliates) own beneficially or of record or control
at least 50% of the Outstanding Units. The withdrawal of the General Partner
from the Partnership upon the occurrence of an Event of Withdrawal shall also
constitute the withdrawal of the General Partner as general partner or
managing member, as the case may be, of the other Group Members. If the
General Partner gives a notice of withdrawal pursuant to Section 11.1(a)(i),
the holders of a Unit Majority, may, prior to the effective date of such
withdrawal, elect a successor General Partner. The Person so elected as
successor General Partner shall automatically become
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the successor general partner or managing member, as the case may be, of the
other Group Members of which the General Partner is a general partner or a
managing member. If, prior to the effective date of the General Partner's
withdrawal, a successor is not selected by the Unitholders as provided herein
or the Partnership does not receive a Withdrawal Opinion of Counsel, the
Partnership shall be dissolved in accordance with Section 12.1. Any successor
General Partner elected in accordance with the terms of this Section 11.1
shall be subject to the provisions of Section 10.3.
Section 11.2 Removal of the General Partner.
The General Partner may be removed if such removal is approved by the
Unitholders holding at least 66 2/3% of the Outstanding Units (including Units
held by the General Partner and its Affiliates). Any such action by such
holders for removal of the General Partner must also provide for the election
of a successor General Partner by the Unitholders holding at least a Unit
Majority (including Units held by the General Partner and its Affiliates).
Such removal shall be effective immediately following the admission of a
successor General Partner pursuant to Section 10.3. The removal of the General
Partner shall also automatically constitute the removal of the General Partner
as general partner or managing member, as the case may be, of the other Group
Members of which the General Partner is a general partner or a managing
member. If a Person is elected as a successor General Partner in accordance
with the terms of this Section 11.2, such Person shall, upon admission
pursuant to Section 10.3, automatically become a successor general partner or
managing member, as the case may be, of the other Group Members of which the
General Partner is a general partner or a managing member. The right of the
holders of Outstanding Units to remove the General Partner shall not exist or
be exercised unless the Partnership has received an opinion opining as to the
matters covered by a Withdrawal Opinion of Counsel. Any successor General
Partner elected in accordance with the terms of this Section 11.2 shall be
subject to the provisions of Section 10.3.
Section 11.3 Interest of Departing Partner and Successor General Partner.
(a) In the event of (i) withdrawal of the General Partner under
circumstances where such withdrawal does not violate this Agreement or (ii)
removal of the General Partner by the holders of Outstanding Units under
circumstances where Cause does not exist, if a successor General Partner is
elected in accordance with the terms of Section 11.1 or 11.2, the Departing
Partner shall have the option exercisable prior to the effective date of the
departure of such Departing Partner to require its successor to purchase its
Partnership Interest as a general partner in the Partnership and its
partnership or member interest as the general partner or managing member in
the other Group Members and all of its Incentive Distribution Rights
(collectively, the "Combined Interest") in exchange for an amount in cash
equal to the fair market value of such Combined Interest, such amount to be
determined and payable as of the effective date of its departure. If the
General Partner is removed by the Unitholders under circumstances where Cause
exists or if the General Partner withdraws under circumstances where such
withdrawal violates this Agreement or the Operating Company Agreement, and if
a successor General Partner is elected in accordance with the terms of Section
11.1 or 11.2, such successor shall have the option, exercisable prior to the
effective date of the departure of such Departing Partner, to purchase the
Combined Interest for such fair market value of such Combined Interest. In
either event, the Departing Partner shall be entitled to receive all
reimbursements due such Departing Partner pursuant to Section 7.4, including
any employee-related liabilities (including severance liabilities), incurred
in connection with the termination of any employees employed by the General
Partner for the benefit of the Partnership or the other Group Members.
For purposes of this Section 11.3(a), the fair market value of the Combined
Interest shall be determined by agreement between the Departing Partner and
its successor or, failing agreement within 30 days after the effective date of
such Departing Partner's departure, by an independent investment banking firm
or other independent expert selected by the Departing Partner and its
successor, which, in turn, may rely on other experts, and the determination of
which shall be conclusive as to such matter. If such parties cannot agree upon
one independent investment banking firm or other independent expert within 45
days after the effective date of such departure, then the Departing Partner
shall designate an independent investment banking firm or other independent
expert, the Departing Partner's successor shall designate an independent
investment banking firm or
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other independent expert, and such firms or experts shall mutually select a
third independent investment banking firm or independent expert, which third
independent investment banking firm or other independent expert shall
determine the fair market value of the Combined Interest. In making its
determination, such third independent investment banking firm or other
independent expert may consider the then current trading price of Units on any
National Securities Exchange on which Units are then listed, the value of the
Partnership's assets, the rights and obligations of the Departing Partner and
other factors it may deem relevant.
(b) If the Combined Interest is not purchased in the manner set forth in
Section 11.3(a), the Departing Partner (or its transferee) shall become a
Limited Partner and its Combined Interest shall be converted into Common Units
pursuant to a valuation made by an investment banking firm or other
independent expert selected pursuant to Section 11.3(a), without reduction in
such Partnership Interest (but subject to proportionate dilution by reason of
the admission of its successor). Any successor General Partner shall indemnify
the Departing Partner (or its transferee) as to all debts and liabilities of
the Partnership arising on or after the date on which the Departing Partner
(or its transferee) becomes a Limited Partner. For purposes of this Agreement,
conversion of the Combined Interest to Common Units will be characterized as
if the General Partner (or its transferee) contributed its Combined Interest
to the Partnership in exchange for the newly issued Common Units.
(c) If a successor General Partner is elected in accordance with the terms
of Section 11.1 or 11.2 and the option described in Section 11.3(a) is not
exercised by the party entitled to do so, the successor General Partner shall,
at the effective date of its admission to the Partnership, contribute to the
Partnership cash in the amount equal to 1/99th of the Net Agreed Value of the
Partnership's assets on such date. In such event, such successor General
Partner shall, subject to the following sentence, be entitled to 1% of all
Partnership allocations and distributions. The successor General Partner shall
cause this Agreement to be amended to reflect that, from and after the date of
such successor General Partner's admission, the successor General Partner's
interest in all Partnership distributions and allocations shall be 1%.
Section 11.4 Termination of Subordination Period, Conversion of Subordinated
Units and Extinguishment of Cumulative Common Unit Arrearages.
Notwithstanding any provision of this Agreement, if the General Partner is
removed as general partner of the Partnership under circumstances where Cause
does not exist and Units held by the General Partner and its Affiliates are
not voted in favor of such removal, (i) the Subordination Period will end and
all Outstanding Subordinated Units will immediately and automatically convert
into Common Units on a one-for-one basis and (ii) all Cumulative Common Unit
Arrearages on the Common Units will be extinguished.
Section 11.5 Withdrawal of Limited Partners.
No Limited Partner shall have any right to withdraw from the Partnership;
provided, however, that when a transferee of a Limited Partner's Limited
Partner Interest becomes a Record Holder of the Limited Partner Interest so
transferred, such transferring Limited Partner shall cease to be a Limited
Partner with respect to the Limited Partner Interest so transferred.
ARTICLE XII
DISSOLUTION AND LIQUIDATION
Section 12.1 Dissolution.
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement. Upon
the removal or withdrawal of the General Partner, if a successor General
Partner is elected pursuant to Section 11.1 or 11.2, the Partnership shall not
be dissolved and such successor General Partner shall continue the business of
the Partnership. The Partnership shall dissolve, and (subject to Section 12.2)
its affairs shall be wound up, upon:
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(a) the expiration of its term as provided in Section 2.7;
(b) an Event of Withdrawal of the General Partner as provided in Section
11.1(a) (other than Section 11.1(a)(ii)), unless a successor is elected and
an Opinion of Counsel is received as provided in Section 11.1(b) or 11.2
and such successor is admitted to the Partnership pursuant to Section 10.3;
(c) an election to dissolve the Partnership by the General Partner that
is approved by the holders of a Unit Majority;
(d) the entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Delaware Act; or
(e) the sale of all or substantially all of the assets and properties of
the Partnership Group.
Section 12.2 Continuation of the Business of the Partnership After
Dissolution.
Upon (a) dissolution of the Partnership following an Event of Withdrawal
caused by the withdrawal or removal of the General Partner as provided in
Section 11.1(a)(i) or (iii) and the failure of the Partners to select a
successor to such Departing Partner pursuant to Section 11.1 or 11.2, then
within 90 days thereafter, or (b) dissolution of the Partnership upon an event
constituting an Event of Withdrawal as defined in Section 11.1(a)(iv), (v) or
(vi), then, to the maximum extent permitted by law, within 180 days
thereafter, the holders of a Unit Majority may elect to reconstitute the
Partnership and continue its business on the same terms and conditions set
forth in this Agreement by forming a new limited partnership on terms
identical to those set forth in this Agreement and having as the successor
general partner a Person approved by the holders of a Unit Majority. Unless
such an election is made within the applicable time period as set forth above,
the Partnership shall conduct only activities necessary to wind up its
affairs. If such an election is so made, then:
(i) the reconstituted Partnership shall continue until the end of the
term set forth in Section 2.7 unless earlier dissolved in accordance with
this Article XII;
(ii) if the successor General Partner is not the former General Partner,
then the interest of the former General Partner shall be treated in the
manner provided in Section 11.3; and
(iii) all necessary steps shall be taken to cancel this Agreement and the
Certificate of Limited Partnership and to enter into and, as necessary, to
file a new partnership agreement and certificate of limited partnership,
and the successor general partner may for this purpose exercise the powers
of attorney granted the General Partner pursuant to Section 2.6; provided,
that the right of the holders of a Unit Majority to approve a successor
General Partner and to reconstitute and to continue the business of the
Partnership shall not exist and may not be exercised unless the Partnership
has received an Opinion of Counsel that (x) the exercise of the right would
not result in the loss of limited liability of any Limited Partner and (y)
neither the Partnership, the reconstituted limited partnership nor the
Operating Company would be treated as an association taxable as a
corporation or otherwise be taxable as an entity for federal income tax
purposes upon the exercise of such right to continue.
Section 12.3 Liquidator.
Upon dissolution of the Partnership, unless the Partnership is continued
under an election to reconstitute and continue the Partnership pursuant to
Section 12.2, the General Partner shall select one or more Persons to act as
Liquidator. The Liquidator (if other than the General Partner) shall be
entitled to receive such compensation for its services as may be approved by
holders of at least a majority of the Outstanding Common Units and
Subordinated Units voting as a single class. The Liquidator (if other than the
General Partner) shall agree not to resign at any time without 15 days' prior
notice and may be removed at any time, with or without cause, by notice of
removal approved by holders of at least a majority of the Outstanding Common
Units and Subordinated Units voting as a single class. Upon dissolution,
removal or resignation of the Liquidator, a successor and substitute
Liquidator (who shall have and succeed to all rights, powers and duties of the
original Liquidator) shall within 30 days thereafter be approved by holders of
at least a majority of the Outstanding Common Units and Subordinated Units
voting as a single class. The right to approve a successor or substitute
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Liquidator in the manner provided herein shall be deemed to refer also to any
such successor or substitute Liquidator approved in the manner herein
provided. Except as expressly provided in this Article XII, the Liquidator
approved in the manner provided herein shall have and may exercise, without
further authorization or consent of any of the parties hereto, all of the
powers conferred upon the General Partner under the terms of this Agreement
(but subject to all of the applicable limitations, contractual and otherwise,
upon the exercise of such powers, other than the limitation on sale set forth
in Section 7.3(b)) to the extent necessary or desirable in the good faith
judgment of the Liquidator to carry out the duties and functions of the
Liquidator hereunder for and during such period of time as shall be reasonably
required in the good faith judgment of the Liquidator to complete the winding
up and liquidation of the Partnership as provided for herein.
Section 12.4 Liquidation.
The Liquidator shall proceed to dispose of the assets of the Partnership,
discharge its liabilities, and otherwise wind up its affairs in such manner
and over such period as the Liquidator determines to be in the best interest
of the Partners, subject to Section 17-804 of the Delaware Act and the
following:
(a) Disposition of Assets. The assets may be disposed of by public or
private sale or by distribution in kind to one or more Partners on such
terms as the Liquidator and such Partner or Partners may agree. If any
property is distributed in kind, the Partner receiving the property shall
be deemed for purposes of Section 12.4(c) to have received cash equal to
its fair market value; and contemporaneously therewith, appropriate cash
distributions must be made to the other Partners. The Liquidator may, in
its absolute discretion, defer liquidation or distribution of the
Partnership's assets for a reasonable time if it determines that an
immediate sale or distribution of all or some of the Partnership's assets
would be impractical or would cause undue loss to the Partners. The
Liquidator may, in its absolute discretion, distribute the Partnership's
assets, in whole or in part, in kind if it determines that a sale would be
impractical or would cause undue loss to the partners.
(b) Discharge of Liabilities. Liabilities of the Partnership include
amounts owed to Partners otherwise than in respect of their distribution
rights under Article VI. With respect to any liability that is contingent,
conditional or unmatured or is otherwise not yet due and payable, the
Liquidator shall either settle such claim for such amount as it thinks
appropriate or establish a reserve of cash or other assets to provide for
its payment. When paid, any unused portion of the reserve shall be
distributed as additional liquidation proceeds.
(c) Liquidation Distributions. All property and all cash in excess of
that required to discharge liabilities as provided in Section 12.4(b) shall
be distributed to the Partners in accordance with, and to the extent of,
the positive balances in their respective Capital Accounts, as determined
after taking into account all Capital Account adjustments (other than those
made by reason of distributions pursuant to this Section 12.4(c)) for the
taxable year of the Partnership during which the liquidation of the
Partnership occurs (with such date of occurrence being determined pursuant
to Treasury Regulation Section 1.704-1(b)(2)(ii)(g)), and such distribution
shall be made by the end of such taxable year (or, if later, within 90 days
after said date of such occurrence).
Section 12.5 Cancellation of Certificate of Limited Partnership.
Upon the completion of the distribution of Partnership cash and property as
provided in Section 12.4 in connection with the liquidation of the
Partnership, the Partnership shall be terminated and the Certificate of
Limited Partnership and all qualifications of the Partnership as a foreign
limited partnership in jurisdictions other than the State of Delaware shall be
canceled and such other actions as may be necessary to terminate the
Partnership shall be taken.
Section 12.6 Return of Contributions.
The General Partner shall not be personally liable for, and shall have no
obligation to contribute or loan any monies or property to the Partnership to
enable it to effectuate, the return of the Capital Contributions of the
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Limited Partners or Unitholders, or any portion thereof, it being expressly
understood that any such return shall be made solely from Partnership assets.
Section 12.7 Waiver of Partition.
To the maximum extent permitted by law, each Partner hereby waives any right
to partition of the Partnership property.
Section 12.8 Capital Account Restoration.
No Limited Partner shall have any obligation to restore any negative balance
in its Capital Account upon liquidation of the Partnership. The General
Partner shall be obligated to restore any negative balance in its Capital
Account upon liquidation of its interest in the Partnership by the end of the
taxable year of the Partnership during which such liquidation occurs, or, if
later, within 90 days after the date of such liquidation.
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
Section 13.1 Amendment to be Adopted Solely by the General Partner.
Each Partner agrees that the General Partner, without the approval of any
Partner or Assignee, may amend any provision of this Agreement and execute,
swear to, acknowledge, deliver, file and record whatever documents may be
required in connection therewith, to reflect:
(a) a change in the name of the Partnership, the location of the
principal place of business of the Partnership, the registered agent of the
Partnership or the registered office of the Partnership;
(b) admission, substitution, withdrawal or removal of Partners in
accordance with this Agreement;
(c) a change that, in the sole discretion of the General Partner, is
necessary or advisable to qualify or continue the qualification of the
Partnership as a limited partnership or a partnership in which the Limited
Partners have limited liability under the laws of any state or to ensure
that the Partnership and the Operating Company will not be treated as an
association taxable as a corporation or otherwise taxed as an entity for
federal income tax purposes;
(d) a change that, in the discretion of the General Partner, (i) does not
adversely affect the Limited Partners in any material respect, (ii) is
necessary or advisable to (A) satisfy any requirements, conditions or
guidelines contained in any opinion, directive, order, ruling or regulation
of any federal or state agency or judicial authority or contained in any
federal or state statute (including the Delaware Act) or (B) facilitate the
trading of the Limited Partner Interest (including the division of any
class or classes of Outstanding Limited Partner Interest into different
classes to facilitate uniformity of tax consequences within such classes of
Limited Partner Interests) or comply with any rule, regulation, guideline
or requirement of any National Securities Exchange on which the Limited
Partner Interests are or will be listed for trading, compliance with any of
which the General Partner determines in its discretion to be in the best
interests of the Partnership and the Limited Partners, (iii) is necessary
or advisable in connection with action taken by the General Partner
pursuant to Section 5.10 or (iv) is required to effect the intent expressed
in the Registration Statement or the intent of the provisions of this
Agreement or is otherwise contemplated by this Agreement;
(e) a change in the fiscal year or taxable year of the Partnership and
any changes that, in the discretion of the General Partner, are necessary
or advisable as a result of a change in the fiscal year or taxable year of
the Partnership including, if the General Partner shall so determine, a
change in the definition of "Quarter" and the dates on which distributions
are to be made by the Partnership;
(f) an amendment that is necessary, in the Opinion of Counsel, to prevent
the Partnership, or the General Partner or its directors, officers,
trustees or agents from in any manner being subjected to the provisions of
the Investment Company Act of 1940, as amended, the Investment Advisers Act
of 1940, as
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amended, or "plan asset" regulations adopted under the Employee Retirement
Income Security Act of 1974, as amended, regardless of whether such are
substantially similar to plan asset regulations currently applied or
proposed by the United States Department of Labor;
(g) subject to the terms of Section 5.7, an amendment that, in the
discretion of the General Partner, is necessary or advisable in connection
with the authorization of issuance of any class or series of Partnership
Securities pursuant to Section 5.6;
(h) any amendment expressly permitted in this Agreement to be made by the
General Partner acting alone;
(i) an amendment effected, necessitated or contemplated by a Merger
Agreement approved in accordance with Section 14.3;
(j) an amendment that, in the discretion of the General Partner, is
necessary or advisable to reflect, account for and deal with appropriately
the formation by the Partnership of, or investment by the Partnership in,
any corporation, partnership, joint venture, limited liability company or
other entity other than the Operating Company, in connection with the
conduct by the Partnership of activities permitted by the terms of Section
2.4;
(k) a merger or conveyance pursuant to Section 14.3(d); or
(l) any other amendments substantially similar to the foregoing.
Section 13.2 Amendment Procedures.
Except as provided in Sections 13.1 and 13.3, all amendments to this
Agreement shall be made in accordance with the following requirements.
Amendments to this Agreement may be proposed only by or with the consent of
the General Partner which consent may be given or withheld in its sole
discretion. A proposed amendment shall be effective upon its approval by the
holders of at least a Unit Majority, unless a greater or different percentage
is required under this Agreement or by Delaware law. Each proposed amendment
that requires the approval of the holders of a specified percentage of
Outstanding Units shall be set forth in a writing that contains the text of
the proposed amendment. If such an amendment is proposed, the General Partner
shall seek the written approval of the requisite percentage of Outstanding
Units or call a meeting of the Unitholders to consider and vote on such
proposed amendment. The General Partner shall notify all Record Holders upon
final adoption of any such proposed amendments.
Section 13.3 Amendment Requirements.
(a) Notwithstanding the provisions of Sections 13.1 and 13.2, no provision
of this Agreement that establishes a percentage of Outstanding Units
(including Units deemed owned by the General Partner) required to take any
action shall be amended, altered, changed, repealed or rescinded in any
respect that would have the effect of reducing such voting percentage unless
such amendment is approved by the written consent or the affirmative vote of
holders of Outstanding Units whose aggregate Outstanding Units constitute not
less than the voting requirement sought to be reduced.
(b) Notwithstanding the provisions of Sections 13.1 and 13.2, no amendment
to this Agreement may (i) enlarge the obligations of any Limited Partner
without its consent, unless such shall be deemed to have occurred as a result
of an amendment approved pursuant to Section 13.3(c), (ii) enlarge the
obligations of, restrict in any way any action by or rights of, or reduce in
any way the amounts distributable, reimbursable or otherwise payable to, the
General Partner or any of its Affiliates without its consent, which consent
may be given or withheld in its sole discretion, (iii) change Section 12.1(a)
or 12.1(c), or (iv) change the term of the Partnership or, except as set forth
in Section 12.1(c), give any Person the right to dissolve the Partnership.
(c) Except as provided in Section 14.3, and except as otherwise provided,
and without limitation of the General Partner's authority to adopt amendments
to this Agreement as contemplated in Section 13.1, any amendment that would
have a material adverse effect on the rights or preferences of any class of
Partnership
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Interests in relation to other classes of Partnership Interests must be
approved by the holders of not less than a majority of the Outstanding
Partnership Interests of the class affected.
(d) Notwithstanding any other provision of this Agreement, except for
amendments pursuant to Section 13.1 and except as otherwise provided by
Section 14.3(b), no amendments shall become effective without the approval of
the holders of at least 90% of the Outstanding Common Units and Subordinated
Units voting as a single class unless the Partnership obtains an Opinion of
Counsel to the effect that such amendment will not affect the limited
liability of any Limited Partner under applicable law.
(e) Except as provided in Section 13.1, this Section 13.3 shall only be
amended with the approval of the holders of at least 90% of the Outstanding
Units.
Section 13.4 Special Meetings.
All acts of Limited Partners to be taken pursuant to this Agreement shall be
taken in the manner provided in this Article XIII. Special meetings of the
Limited Partners may be called by the General Partner or by Limited Partners
owning 20% or more of the Outstanding Limited Partner Interests of the class
or classes for which a meeting is proposed. Limited Partners shall call a
special meeting by delivering to the General Partner one or more requests in
writing stating that the signing Limited Partners wish to call a special
meeting and indicating the general or specific purposes for which the special
meeting is to be called. Within 60 days after receipt of such a call from
Limited Partners or within such greater time as may be reasonably necessary
for the Partnership to comply with any statutes, rules, regulations, listing
agreements or similar requirements governing the holding of a meeting or the
solicitation of proxies for use at such a meeting, the General Partner shall
send a notice of the meeting to the Limited Partners either directly or
indirectly through the Transfer Agent. A meeting shall be held at a time and
place determined by the General Partner on a date not less than 10 days nor
more than 60 days after the mailing of notice of the meeting. Limited Partners
shall not vote on matters that would cause the Limited Partners to be deemed
to be taking part in the management and control of the business and affairs of
the Partnership so as to jeopardize the Limited Partners' limited liability
under the Delaware Act or the law of any other state in which the Partnership
is qualified to do business.
Section 13.5 Notice of a Meeting.
Notice of a meeting called pursuant to Section 13.4 shall be given to the
Record Holders of the class or classes of Limited Partner Interests for which
a meeting is proposed in writing by mail or other means of written
communication in accordance with Section 16.1. The notice shall be deemed to
have been given at the time when deposited in the mail or sent by other means
of written communication.
Section 13.6 Record Date.
For purposes of determining the Limited Partners entitled to notice of or to
vote at a meeting of the Limited Partners or to give approvals without a
meeting as provided in Section 13.11 the General Partner may set a Record
Date, which shall not be less than 10 nor more than 60 days before (a) the
date of the meeting (unless such requirement conflicts with any rule,
regulation, guideline or requirement of any National Securities Exchange on
which the Limited Partner Interests are listed for trading, in which case the
rule, regulation, guideline or requirement of such exchange shall govern) or
(b) in the event that approvals are sought without a meeting, the date by
which Limited Partners are requested in writing by the General Partner to give
such approvals.
Section 13.7 Adjournment.
When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting and a new Record Date need not be fixed, if the
time and place thereof are announced at the meeting at which the adjournment
is taken, unless such adjournment shall be for more than 45 days. At the
adjourned meeting, the Partnership may transact any business which might have
been transacted at the original meeting. If the
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adjournment is for more than 45 days or if a new Record Date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given in
accordance with this Article XIII.
Section 13.8 Waiver of Notice; Approval of Meeting; Approval of Minutes.
The transactions of any meeting of Limited Partners, however called and
noticed, and whenever held, shall be as valid as if it had occurred at a
meeting duly held after regular call and notice, if a quorum is present either
in person or by proxy, and if, either before or after the meeting, Limited
Partners representing such quorum who were present in person or by proxy and
entitled to vote, sign a written waiver of notice or an approval of the
holding of the meeting or an approval of the minutes thereof. All waivers and
approvals shall be filed with the Partnership records or made a part of the
minutes of the meeting. Attendance of a Limited Partner at a meeting shall
constitute a waiver of notice of the meeting, except when the Limited Partner
does not approve, at the beginning of the meeting, of the transaction of any
business because the meeting is not lawfully called or convened; and except
that attendance at a meeting is not a waiver of any right to disapprove the
consideration of matters required to be included in the notice of the meeting,
but not so included, if the disapproval is expressly made at the meeting.
Section 13.9 Quorum.
The holders of a majority of the Outstanding Limited Partner Interests of
the class or classes for which a meeting has been called (including Limited
Partner Interests deemed owned by the General Partner) represented in person
or by proxy shall constitute a quorum at a meeting of Limited Partners of such
class or classes unless any such action by the Limited Partners requires
approval by holders of a greater percentage of such Limited Partner Interests,
in which case the quorum shall be such greater percentage. At any meeting of
the Limited Partners duly called and held in accordance with this Agreement at
which a quorum is present, the act of Limited Partners holding Outstanding
Limited Partner Interests that in the aggregate represent a majority of the
Outstanding Limited Partner Interests entitled to vote and be present in
person or by proxy at such meeting shall be deemed to constitute the act of
all Limited Partners, unless a greater or different percentage is required
with respect to such action under the provisions of this Agreement, in which
case the act of the Limited Partners holding Outstanding Limited Partner
Interests that in the aggregate represent at least such greater or different
percentage shall be required. The Limited Partners present at a duly called or
held meeting at which a quorum is present may continue to transact business
until adjournment, notwithstanding the withdrawal of enough Limited Partners
to leave less than a quorum, if any action taken (other than adjournment) is
approved by the required percentage of Outstanding Limited Partner Interests
specified in this Agreement (including Limited Partner Interests deemed owned
by the General Partner). In the absence of a quorum any meeting of Limited
Partners may be adjourned from time to time by the affirmative vote of holders
of at least a majority of the Outstanding Limited Partner Interests entitled
to vote at such meeting (including Limited Partner Interests deemed owned by
the General Partner) represented either in person or by proxy, but no other
business may be transacted, except as provided in Section 13.7.
Section 13.10 Conduct of a Meeting.
The General Partner shall have full power and authority concerning the
manner of conducting any meeting of the Limited Partners or solicitation of
approvals in writing, including the determination of Persons entitled to vote,
the existence of a quorum, the satisfaction of the requirements of Section
13.4, the conduct of voting, the validity and effect of any proxies and the
determination of any controversies, votes or challenges arising in connection
with or during the meeting or voting. The General Partner shall designate a
Person to serve as chairman of any meeting and shall further designate a
Person to take the minutes of any meeting. All minutes shall be kept with the
records of the Partnership maintained by the General Partner. The General
Partner may make such other regulations consistent with applicable law and
this Agreement as it may deem advisable concerning the conduct of any meeting
of the Limited Partners or solicitation of approvals in writing, including
regulations in regard to the appointment of proxies, the appointment and
duties of inspectors of votes and
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approvals, the submission and examination of proxies and other evidence of the
right to vote, and the revocation of approvals in writing.
Section 13.11 Action Without a Meeting.
If authorized by the General Partner, any action that may be taken at a
meeting of the Limited Partners may be taken without a meeting if an approval
in writing setting forth the action so taken is signed by Limited Partners
owning not less than the minimum percentage of the Outstanding Limited Partner
Interests (including Limited Partner Interests deemed owned by the General
Partner) that would be necessary to authorize or take such action at a meeting
at which all the Limited Partners were present and voted (unless such
provision conflicts with any rule, regulation, guideline or requirement of any
National Securities Exchange on which the Limited Partner Interests are listed
for trading, in which case the rule, regulation, guideline or requirement of
such exchange shall govern). Prompt notice of the taking of action without a
meeting shall be given to the Limited Partners who have not approved in
writing. The General Partner may specify that any written ballot submitted to
Limited Partners for the purpose of taking any action without a meeting shall
be returned to the Partnership within the time period, which shall be not less
than 20 days, specified by the General Partner. If a ballot returned to the
Partnership does not vote all of the Limited Partner Interests held by the
Limited Partners the Partnership shall be deemed to have failed to receive a
ballot for the Limited Partner Interests that were not voted. If approval of
the taking of any action by the Limited Partners is solicited by any Person
other than by or on behalf of the General Partner, the written approvals shall
have no force and effect unless and until (a) they are deposited with the
Partnership in care of the General Partner, (b) approvals sufficient to take
the action proposed are dated as of a date not more than 90 days prior to the
date sufficient approvals are deposited with the Partnership and (c) an
Opinion of Counsel is delivered to the General Partner to the effect that the
exercise of such right and the action proposed to be taken with respect to any
particular matter (i) will not cause the Limited Partners to be deemed to be
taking part in the management and control of the business and affairs of the
Partnership so as to jeopardize the Limited Partners' limited liability, and
(ii) is otherwise permissible under the state statutes then governing the
rights, duties and liabilities of the Partnership and the Partners.
Section 13.12 Voting and Other Rights.
(a) Only those Record Holders of the Limited Partner Interests on the Record
Date set pursuant to Section 13.6 (and also subject to the limitations
contained in the definition of "Outstanding") shall be entitled to notice of,
and to vote at, a meeting of Limited Partners or to act with respect to
matters as to which the holders of the Outstanding Limited Partner Interests
have the right to vote or to act. All references in this Agreement to votes
of, or other acts that may be taken by, the Outstanding Limited Partner
Interests shall be deemed to be references to the votes or acts of the Record
Holders of such Outstanding Limited Partner Interests.
(b) With respect to Limited Partner Interests that are held for a Person's
account by another Person (such as a broker, dealer, bank, trust company or
clearing corporation, or an agent of any of the foregoing), in whose name such
Limited Partner Interests are registered, such other Person shall, in
exercising the voting rights in respect of such Limited Partner Interests on
any matter, and unless the arrangement between such Persons provides
otherwise, vote such Limited Partner Interests in favor of, and at the
direction of, the Person who is the beneficial owner, and the Partnership
shall be entitled to assume it is so acting without further inquiry. The
provisions of this Section 13.12(b) (as well as all other provisions of this
Agreement) are subject to the provisions of Section 4.3.
ARTICLE XIV
MERGER
Section 14.1 Authority.
The Partnership may merge or consolidate with one or more corporations,
limited liability companies, business trusts or associations, real estate
investment trusts, common law trusts or unincorporated businesses,
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including a general partnership or limited partnership, formed under the laws
of the State of Delaware or any other state of the United States of America,
pursuant to a written agreement of merger or consolidation ("Merger
Agreement") in accordance with this Article XIV.
Section 14.2 Procedure for Merger or Consolidation.
Merger or consolidation of the Partnership pursuant to this Article XIV
requires the prior approval of the General Partner. If the General Partner
shall determine, in the exercise of its discretion, to consent to the merger
or consolidation, the General Partner shall approve the Merger Agreement,
which shall set forth:
(a) The names and jurisdictions of formation or organization of each of
the business entities proposing to merge or consolidate;
(b) The name and jurisdiction of formation or organization of the
business entity that is to survive the proposed merger or consolidation
(the "Surviving Business Entity");
(c) The terms and conditions of the proposed merger or consolidation;
(d) The manner and basis of exchanging or converting the equity
securities of each constituent business entity for, or into, cash, property
or general or limited partner interests, rights, securities or obligations
of the Surviving Business Entity; and (i) if any general or limited partner
interests, securities or rights of any constituent business entity are not
to be exchanged or converted solely for, or into, cash, property or general
or limited partner interests, rights, securities or obligations of the
Surviving Business Entity, the cash, property or general or limited partner
interests, rights, securities or obligations of any limited partnership,
corporation, trust or other entity (other than the Surviving Business
Entity) which the holders of such general or limited partner interests,
securities or rights are to receive in exchange for, or upon conversion of
their general or limited partner interests, securities or rights, and (ii)
in the case of securities represented by certificates, upon the surrender
of such certificates, which cash, property or general or limited partner
interests, rights, securities or obligations of the Surviving Business
Entity or any general or limited partnership, corporation, trust or other
entity (other than the Surviving Business Entity), or evidences thereof,
are to be delivered;
(e) A statement of any changes in the constituent documents or the
adoption of new constituent documents (the articles or certificate of
incorporation, articles of trust, declaration of trust, certificate or
agreement of limited partnership or other similar charter or governing
document) of the Surviving Business Entity to be effected by such merger or
consolidation;
(f) The effective time of the merger, which may be the date of the filing
of the certificate of merger pursuant to Section 14.4 or a later date
specified in or determinable in accordance with the Merger Agreement
(provided, that if the effective time of the merger is to be later than the
date of the filing of the certificate of merger, the effective time shall
be fixed no later than the time of the filing of the certificate of merger
and stated therein); and
(g) Such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or appropriate by the General
Partner.
Section 14.3 Approval by Limited Partners of Merger or Consolidation.
(a) Except as provided in Section 14.3(d), the General Partner, upon its
approval of the Merger Agreement, shall direct that the Merger Agreement be
submitted to a vote of Limited Partners, whether at a special meeting or by
written consent, in either case in accordance with the requirements of Article
XIII. A copy or a summary of the Merger Agreement shall be included in or
enclosed with the notice of a special meeting or the written consent.
(b) Except as provided in Section 14.3(d), the Merger Agreement shall be
approved upon receiving the affirmative vote or consent of the holders of a
Unit Majority unless the Merger Agreement contains any provision
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that, if contained in an amendment to this Agreement, the provisions of this
Agreement or the Delaware Act would require for its approval the vote or
consent of a greater percentage of the Outstanding Limited Partner Interests
or of any class of Limited Partners, in which case such greater percentage
vote or consent shall be required for approval of the Merger Agreement.
(c) Except as provided in Section 14.3(d), after such approval by vote or
consent of the Limited Partners, and at any time prior to the filing of the
certificate of merger pursuant to Section 14.4, the merger or consolidation
may be abandoned pursuant to provisions therefor, if any, set forth in the
Merger Agreement.
(d) Notwithstanding anything else contained in this Article XIV or in this
Agreement, the General Partner is permitted, in its discretion, without
Limited Partner approval, to merge the Partnership or any Group Member into,
or convey all of the Partnership's assets to, another limited liability entity
which shall be newly formed and shall have no assets, liabilities or
operations at the time of such Merger other than those it receives from the
Partnership or other Group Member if (i) the General Partner has received an
Opinion of Counsel that the merger or conveyance, as the case may be, would
not result in the loss of the limited liability of any Limited Partner or any
member in the Operating Company or cause the Partnership or Operating Company
to be treated as an association taxable as a corporation or otherwise to be
taxed as an entity for federal income tax purposes (to the extent not
previously treated as such), (ii) the sole purpose of such merger or
conveyance is to effect a mere change in the legal form of the Partnership
into another limited liability entity and (iii) the governing instruments of
the new entity provide the Limited Partners and the General Partner with the
same rights and obligations as are herein contained.
Section 14.4 Certificate of Merger.
Upon the required approval by the General Partner and the Limited Partners
of a Merger Agreement, a certificate of merger shall be executed and filed
with the Secretary of State of the State of Delaware in conformity with the
requirements of the Delaware Act.
Section 14.5 Effect of Merger.
(a) At the effective time of the certificate of merger:
(i) all of the rights, privileges and powers of each of the business
entities that has merged or consolidated, and all property, real, personal
and mixed, and all debts due to any of those business entities and all
other things and causes of action belonging to each of those business
entities, shall be vested in the Surviving Business Entity and after the
merger or consolidation shall be the property of the Surviving Business
Entity to the extent they were of each constituent business entity;
(ii) the title to any real property vested by deed or otherwise in any of
those constituent business entities shall not revert and is not in any way
impaired because of the merger or consolidation;
(iii) all rights of creditors and all liens on or security interests in
property of any of those constituent business entities shall be preserved
unimpaired; and
(iv) all debts, liabilities and duties of those constituent business
entities shall attach to the Surviving Business Entity and may be enforced
against it to the same extent as if the debts, liabilities and duties had
been incurred or contracted by it.
(b) A merger or consolidation effected pursuant to this Article shall not be
deemed to result in a transfer or assignment of assets or liabilities from one
entity to another.
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ARTICLE XV
RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS
Section 15.1 Right to Acquire Limited Partner Interests.
(a) Notwithstanding any other provision of this Agreement, if at any time
not more than 20% of the total Limited Partner Interests of any class then
Outstanding is held by Persons other than the General Partner and its
Affiliates, the General Partner shall then have the right, which right it may
assign and transfer in whole or in part to the Partnership or any Affiliate of
the General Partner, exercisable in its sole discretion, to purchase all, but
not less than all, of such Limited Partner Interests of such class then
Outstanding held by Persons other than the General Partner and its Affiliates,
at the greater of (x) the Current Market Price as of the date three days prior
to the date that the notice described in Section 15 is mailed and (y) the
highest price paid by the General Partner or any of its Affiliates for any
such Limited Partner Interest of such class purchased during the 90-day period
preceding the date that the notice described in Section 15.1(b) is mailed. As
used in this Agreement, (i) "Current Market Price" as of any date of any class
of Limited Partner Interests listed or admitted to trading on any National
Securities Exchange means the average of the daily Closing Prices (as
hereinafter defined) per limited partner interest of such class for the 20
consecutive Trading Days (as hereinafter defined) immediately prior to such
date; (ii) "Closing Price" for any day means the last sale price on such day,
regular way, or in case no such sale takes place on such day, the average of
the closing bid and asked prices on such day, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted for trading on the principal National
Securities Exchange (other than the Nasdaq Stock Market) on which such Limited
Partner Interests of such class are listed or admitted to trading or, if such
Limited Partner Interests of such class are not listed or admitted to trading
on any National Securities Exchange (other than the Nasdaq Stock Market), the
last quoted price on such day or, if not so quoted, the average of the high
bid and low asked prices on such day in the over-the-counter market, as
reported by the Nasdaq Stock Market or such other system then in use, or, if
on any such day such Limited Partner Interests of such class are not quoted by
any such organization, the average of the closing bid and asked prices on such
day as furnished by a professional market maker making a market in such
Limited Partner Interests of such class selected by the General Partner, or if
on any such day no market maker is making a market in such Limited Partner
Interests of such class, the fair value of such Limited Partner Interests on
such day as determined reasonably and in good faith by the General Partner;
and (iii) "Trading Day" means a day on which the principal National Securities
Exchange on which such Limited Partner Interests of any class are listed or
admitted to trading is open for the transaction of business or, if Limited
Partner Interests of a class are not listed or admitted to trading on any
National Securities Exchange, a day on which banking institutions in New York
City generally are open.
(b) If the General Partner, any Affiliate of the General Partner or the
Partnership elects to exercise the right to purchase Limited Partner Interests
granted pursuant to Section 15.1(a), the General Partner shall deliver to the
Transfer Agent notice of such election to purchase (the "Notice of Election to
Purchase") and shall cause the Transfer Agent to mail a copy of such Notice of
Election to Purchase to the Record Holders of Limited Partner Interests of
such class (as of a Record Date selected by the General Partner) at least 10,
but not more than 60, days prior to the Purchase Date. Such Notice of Election
to Purchase shall also be published for a period of at least three consecutive
days in at least two daily newspapers of general circulation printed in the
English language and published in the Borough of Manhattan, New York. The
Notice of Election to Purchase shall specify the Purchase Date and the price
(determined in accordance with Section 15.1(a)) at which Limited Partner
Interests will be purchased and state that the General Partner, its Affiliate
or the Partnership, as the case may be, elects to purchase such Limited
Partner Interests, upon surrender of Certificates representing such Limited
Partner Interests in exchange for payment, at such office or offices of the
Transfer Agent as the Transfer Agent may specify, or as may be required by any
National Securities Exchange on which such Limited Partner Interests are
listed or admitted to trading. Any such Notice of Election to Purchase mailed
to a Record Holder of Limited Partner Interests at his address as reflected in
the records of the Transfer Agent shall be conclusively presumed to have been
given regardless of whether the owner receives such notice. On or prior to the
Purchase Date, the General Partner, its Affiliate or the Partnership, as the
case may be, shall deposit with the Transfer Agent cash in
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an amount sufficient to pay the aggregate purchase price of all of such
Limited Partner Interests to be purchased in accordance with this Section
15.1. If the Notice of Election to Purchase shall have been duly given as
aforesaid at least 10 days prior to the Purchase Date, and if on or prior to
the Purchase Date the deposit described in the preceding sentence has been
made for the benefit of the holders of Limited Partner Interests subject to
purchase as provided herein, then from and after the Purchase Date,
notwithstanding that any Certificate shall not have been surrendered for
purchase, all rights of the holders of such Limited Partner Interests
(including any rights pursuant to Articles IV, V, VI, and XII) shall thereupon
cease, except the right to receive the purchase price (determined in
accordance with Section 15.1(a)) for Limited Partner Interests therefor,
without interest, upon surrender to the Transfer Agent of the Certificates
representing such Limited Partner Interests, and such Limited Partner
Interests shall thereupon be deemed to be transferred to the General Partner,
its Affiliate or the Partnership, as the case may be, on the record books of
the Transfer Agent and the Partnership, and the General Partner or any
Affiliate of the General Partner, or the Partnership, as the case may be,
shall be deemed to be the owner of all such Limited Partner Interests from and
after the Purchase Date and shall have all rights as the owner of such Limited
Partner Interests (including all rights as owner of such Limited Partner
Interests pursuant to Articles IV, V, VI and XII).
(c) At any time from and after the Purchase Date, a holder of an Outstanding
Limited Partner Interest subject to purchase as provided in this Section 15.1
may surrender his Certificate evidencing such Limited Partner Interest to the
Transfer Agent in exchange for payment of the amount described in Section
15.1(a), therefor, without interest thereon.
ARTICLE XVI
GENERAL PROVISIONS
Section 16.1 Addresses and Notices.
Any notice, demand, request, report or proxy materials required or permitted
to be given or made to a Partner or Assignee under this Agreement shall be in
writing and shall be deemed given or made when delivered in person or when
sent by first class United States mail or by other means of written
communication to the Partner or Assignee at the address described below. Any
notice, payment or report to be given or made to a Partner or Assignee
hereunder shall be deemed conclusively to have been given or made, and the
obligation to give such notice or report or to make such payment shall be
deemed conclusively to have been fully satisfied, upon sending of such notice,
payment or report to the Record Holder of such Partnership Securities at his
address as shown on the records of the Transfer Agent or as otherwise shown on
the records of the Partnership, regardless of any claim of any Person who may
have an interest in such Partnership Securities by reason of any assignment or
otherwise. An affidavit or certificate of making of any notice, payment or
report in accordance with the provisions of this Section 16.1 executed by the
General Partner, the Transfer Agent or the mailing organization shall be prima
facie evidence of the giving or making of such notice, payment or report. If
any notice, payment or report addressed to a Record Holder at the address of
such Record Holder appearing on the books and records of the Transfer Agent or
the Partnership is returned by the United States Post Office marked to
indicate that the United States Postal Service is unable to deliver it, such
notice, payment or report and any subsequent notices, payments and reports
shall be deemed to have been duly given or made without further mailing (until
such time as such Record Holder or another Person notifies the Transfer Agent
or the Partnership of a change in his address) if they are available for the
Partner or Assignee at the principal office of the Partnership for a period of
one year from the date of the giving or making of such notice, payment or
report to the other Partners and Assignees. Any notice to the Partnership
shall be deemed given if received by the General Partner at the principal
office of the Partnership designated pursuant to Section 2.3. The General
Partner may rely and shall be protected in relying on any notice or other
document from a Partner, Assignee or other Person if believed by it to be
genuine.
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Section 16.2 Further Action.
The parties shall execute and deliver all documents, provide all information
and take or refrain from taking action as may be necessary or appropriate to
achieve the purposes of this Agreement.
Section 16.3 Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
Section 16.4 Integration.
This Agreement constitutes the entire agreement among the parties hereto
pertaining to the subject matter hereof and supersedes all prior agreements
and understandings pertaining thereto.
Section 16.5 Creditors.
None of the provisions of this Agreement shall be for the benefit of, or
shall be enforceable by, any creditor of the Partnership.
Section 16.6 Waiver.
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of
any such breach of any other covenant, duty, agreement or condition.
Section 16.7 Counterparts.
This Agreement may be executed in counterparts, all of which together shall
constitute an agreement binding on all the parties hereto, notwithstanding
that all such parties are not signatories to the original or the same
counterpart. Each party shall become bound by this Agreement immediately upon
affixing its signature hereto or, in the case of a Person acquiring a Unit,
upon accepting the certificate evidencing such Unit or executing and
delivering a Transfer Application as herein described, independently of the
signature of any other party.
Section 16.8 Applicable Law.
This Agreement shall be construed in accordance with and governed by the
laws of the State of Delaware, without regard to the principles of conflicts
of law.
Section 16.9 Invalidity of Provisions.
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
Section 16.10 Consent of Partners.
Each Partner hereby expressly consents and agrees that, whenever in this
Agreement it is specified that an action may be taken upon the affirmative
vote or consent of less than all of the Partners, such action may be so taken
upon the concurrence of less than all of the Partners and each Partner shall
be bound by the results of such action.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
General Partner:
U.S. TIMBERLANDS SERVICES COMPANY,
L.L.C.
By: _________________________________
Name:
Title:
ORGANIZATIONAL LIMITED PARTNER:
_____________________________________
John M. Rudey
LIMITED PARTNERS
All Limited Partners now and
hereafter admitted as Limited
Partners of the Partnership,
pursuant to powers of attorney now
and hereafter executed in favor of,
and granted and delivered to the
General Partner.
By: _________________________________
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<PAGE>
EXHIBIT A TO THE AMENDED AND
RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF
U.S. TIMBERLANDS COMPANY, L.P.
CERTIFICATE EVIDENCING COMMON UNITS
REPRESENTING LIMITED PARTNER INTERESTS IN
U.S. TIMBERLANDS COMPANY, L.P.
No. Common Units
In accordance with Section 4.1 of the Amended and Restated Agreement of
Limited Partnership of U.S. Timberlands Company, L.P., as amended,
supplemented or restated from time to time (the "Partnership Agreement"), U.S.
Timberlands Company, L.P., a Delaware limited partnership (the "Partnership"),
hereby certifies that (the "Holder") is the registered
owner of Common Units representing limited partner interests in the
Partnership (the "Common Units") transferable on the books of the Partnership,
in person or by duly authorized attorney, upon surrender of this Certificate
properly endorsed and accompanied by a properly executed application for
transfer of the Common Units represented by this Certificate. The rights,
preferences and limitations of the Common Units are set forth in, and this
Certificate and the Common Units represented hereby are issued and shall in
all respects be subject to the terms and provisions of, the Partnership
Agreement. Copies of the Partnership Agreement are on file at, and will be
furnished without charge on delivery of written request to the Partnership at,
the principal office of the Partnership located at 6400 Highway 66, Klamath
Falls, Oregon 97601. Capitalized terms used herein but not defined shall have
the meanings given them in the Partnership Agreement.
The Holder, by accepting this Certificate, is deemed to have (i) requested
admission as, and agreed to become, a Limited Partner and to have agreed to
comply with and be bound by and to have executed the Partnership Agreement,
(ii) represented and warranted that the Holder has all right, power and
authority and, if an individual, the capacity necessary to enter into the
Partnership Agreement, (iii) granted the powers of attorney provided for in
the Partnership Agreement and (iv) made the waivers and given the consents and
approvals contained in the Partnership Agreement.
This Certificate shall not be valid for any purpose unless it has been
countersigned and registered by the Transfer Agent and Registrar.
Dated: U.S. TIMBERLANDS COMPANY, L.P.
Countersigned and Registered by:
U.S. Timberlands Services Company,
L.L.C., its General Partner
By: _________________________________
By: _________________________________
as Transfer Agent and Registrar Name:
Title:
By: _________________________________
Authorized Signature By: _________________________________
Secretary
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[REVERSE OF CERTIFICATE]
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as follows according to applicable laws
or regulations:
<TABLE>
<C> <S> <C>
TEN COM-- as tenants in common UNIF GIFT/TRANSFERS MIN
ACT
TEN ENT-- as tenants by the entireties Custodian
(Cust__________(Minor) )
JT TEN-- as joint tenants with right of survivorship under Uniform
and not as tenants in common Gifts/Transfers to
Minors Act _____________
(State)
</TABLE>
Additional abbreviations, though not in the above list, may also be used.
ASSIGNMENT OF COMMON UNITS
IN
U.S. TIMBERLANDS COMPANY, L.P.
IMPORTANT NOTICE REGARDING INVESTOR RESPONSIBILITIES
DUE TO TAX SHELTER STATUS OF U.S. TIMBERLANDS COMPANY, L.P.
You have acquired an interest in U.S. Timberlands Company, L.P., 6400
Highway 66, Klamath Falls, Oregon 97601, whose taxpayer identification number
is 91-1842156. The Internal Revenue Service has issued U.S. Timberlands
Company, L.P. the following tax shelter registration number:
YOU MUST REPORT THIS REGISTRATION NUMBER TO THE INTERNAL REVENUE SERVICE IF
YOU CLAIM ANY DEDUCTION, LOSS, CREDIT OR OTHER TAX BENEFIT OR REPORT ANY
INCOME BY REASON OF YOUR INVESTMENT IN U.S. TIMBERLANDS COMPANY, L.P.
You must report the registration number as well as the name and taxpayer
identification number of U.S. Timberlands Company, L.P. on Form 8271. FORM
8271 MUST BE ATTACHED TO THE RETURN ON WHICH YOU CLAIM THE DEDUCTION, LOSS,
CREDIT OR OTHER TAX BENEFIT OR REPORT ANY INCOME BY REASON OF YOUR INVESTMENT
IN U.S. TIMBERLANDS COMPANY, L.P.
If you transfer your interest in U.S. Timberlands Company, L.P. to another
person, you are required by the Internal Revenue Service to keep a list
containing (a) that person's name, address and taxpayer identification number,
(b) the date on which you transferred the interest and (c) the name, address
and tax shelter registration number of U.S. Timberlands Company, L.P. If you
do not want to keep such a list, you must (1) send the information specified
above to the Partnership, which will keep the list for this tax shelter, and
(2) give a copy of this notice to the person to whom you transfer your
interest. Your failure to comply with any of the above-described
responsibilities could result in the imposition of a penalty under Section
6707(b) or 6708(a) of the Internal Revenue Code of 1986, as amended, unless
such failure is shown to be due to reasonable cause.
ISSUANCE OF A REGISTRATION NUMBER DOES NOT INDICATE THAT THIS INVESTMENT OR
THE CLAIMED TAX BENEFITS HAVE BEEN REVIEWED, EXAMINED OR APPROVED BY THE
INTERNAL REVENUE SERVICE.
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FOR VALUE RECEIVED, HEREBY ASSIGNS, CONVEYS, SELLS AND
TRANSFERS UNTO
_____________________________________ _____________________________________
(Please print or typewrite name and (Please insert Social Security or
address of Assignee) other identifying number of
Assignee)
Common Units representing limited partner interests evidenced by this
Certificate, subject to the Partnership Agreement, and does hereby irrevocably
constitute and appoint as its attorney-in-fact with full
power of substitution to transfer the same on the books of U.S. Timberlands
Company, L.P.
Date: NOTE: The signature to any
endorsement hereon must
correspond with the name as
written upon the face of this
Certificate in every
particular, without
alteration, enlargement or
change.
_____________________________________
SIGNATURE(S) MUST BE GUARANTEED BY A (Signature)
MEMBER FIRM OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS,
INC. OR BY A COMMERCIAL BANK OR
TRUST COMPANY
_____________________________________
(Signature)
SIGNATURE(S) GUARANTEED
No transfer of the Common Units evidenced hereby will be registered on the
books of the Partnership, unless the Certificate evidencing the Common Units
to be transferred is surrendered for registration or transfer and an
Application for Transfer of Common Units has been executed by a transferee
either (a) on the form set forth below or (b) on a separate application that
the Partnership will furnish on request without charge. A transferor of the
Common Units shall have no duty to the transferee with respect to execution of
the transfer application in order for such transferee to obtain registration
of the transfer of the Common Units.
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APPLICATION FOR TRANSFER OF COMMON UNITS
The undersigned ("Assignee") hereby applies for transfer to the name of the
Assignee of the Common Units evidenced hereby.
The Assignee (a) requests admission as a Substituted Limited Partner and
agrees to comply with and be bound by, and hereby executes, the Amended and
Restated Agreement of Limited Partnership of U.S. Timberlands Company, L.P.
(the "Partnership"), as amended, supplemented or restated to the date hereof
(the "Partnership Agreement"), (b) represents and warrants that the Assignee
has all right, power and authority and, if an individual, the capacity
necessary to enter into the Partnership Agreement, (c) appoints the General
Partner of the Partnership and, if a Liquidator shall be appointed, the
Liquidator of the Partnership as the Assignee's attorney-in-fact to execute,
swear to, acknowledge and file any document, including, without limitation,
the Partnership Agreement and any amendment thereto and the Certificate of
Limited Partnership of the Partnership and any amendment thereto, necessary or
appropriate for the Assignee's admission as a Substituted Limited Partner and
as a party to the Partnership Agreement, (d) gives the powers of attorney
provided for in the Partnership Agreement, and (e) makes the waivers and gives
the consents and approvals contained in the Partnership Agreement. Capitalized
terms not defined herein have the meanings assigned to such terms in the
Partnership Agreement.
Date: _______________________________
_____________________________________ _____________________________________
Social Security or other identifying Signature of Assignee
number of Assignee
_____________________________________ _____________________________________
Purchase Price including Name and Address of Assignee
commissions, if any
Type of Entity (check one):
[_]Individual [_]Partnership [_]Corporation
[_]Trust [_]Other (specify)
____________________________________________
Nationality (check one):
[_]U.S. Citizen, Resident or Domestic Entity
[_]Non-resident Alien
[_]Foreign Corporation
If the U.S. Citizen, Resident or Domestic Entity box is checked, the
following certification must be completed.
Under Section 1445(e) of the Internal Revenue Code of 1986, as amended (the
"Code"), the Partnership must withhold tax with respect to certain transfers
of property if a holder of an interest in the Partnership is a foreign person.
To inform the Partnership that no withholding is required with respect to the
undersigned interestholder's interest in it, the undersigned hereby certifies
the following (or, if applicable, certifies the following on behalf of the
interestholder).
COMPLETE EITHER A OR B:
A.Individual Interestholder
1.I am not a non-resident alien for purposes of U.S. income taxation.
2.My U.S. taxpayer identification number (Social Security Number) is _____ .
3.My home address is _____________________________________________________ .
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B.Partnership, Corporation or Other Interestholder
1._________________________________________________________ is not a foreign
(Name of Interestholder)
corporation, foreign partnership, foreign trust or foreign estate (as
those terms are defined in the Code and Treasury Regulations).
2.The interestholder's U.S. employer identification number is ____________ .
3.The interestholder's office address and place of incorporation (if
applicable) is ___________________________________________________________ .
The interestholder agrees to notify the Partnership within sixty (60) days
of the date the interestholder becomes a foreign person.
The interestholder understands that this certificate may be disclosed to the
Internal Revenue Service by the Partnership and that any false statement
contained herein could be punishable by fine, imprisonment or both.
Under penalties of perjury, I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct
and complete and, if applicable, I further declare that I have authority to
sign this document on behalf of
_____________________________________
Name of Interestholder
_____________________________________
Signature and Date
_____________________________________
Title (if applicable)
Note: If the Assignee is a broker, dealer, bank, trust company, clearing
corporation, other nominee holder or an agent of any of the foregoing,
and is holding for the account of any other person, this application
should be completed by an officer thereof or, in the case of a broker or
dealer, by a registered representative who is a member of a registered
national securities exchange or a member of the National Association of
Securities Dealers, Inc., or, in the case of any other nominee holder, a
person performing a similar function. If the Assignee is a broker,
dealer, bank, trust company, clearing corporation, other nominee owner or
an agent of any of the foregoing, the above certification as to any
person for whom the Assignee will hold the Common Units shall be made to
the best of the Assignee's knowledge.
78
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Execution Copy
SECOND AMENDED AND RESTATED
OPERATING AGREEMENT
OF
U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
Section 1.1 Definitions.......................................................... 1
Section 1.2 Construction......................................................... 11
ARTICLE II
ORGANIZATION
Section 2.1 Formation........................................................... 11
Section 2.2 Name................................................................ 11
Section 2.3 Registered Office; Registered Agent;
Principal Office; Other Offices..................................... 11
Section 2.4 Purpose and Business................................................ 12
Section 2.5 Powers.............................................................. 12
Section 2.6 Power of Attorney................................................... 12
Section 2.7 Term................................................................ 14
Section 2.8 Title to Company Assets............................................. 14
ARTICLE III
RIGHTS OF MEMBERS
Section 3.1 Limitation of Liability............................................. 14
Section 3.2 Outside Activities of the Members................................... 15
Section 3.3 Rights of Members................................................... 15
ARTICLE IV
TRANSFERS OF INTERESTS
Section 4.1 Transfer Generally.................................................. 16
Section 4.2 Transfer of Manager's Membership Interest........................... 16
Section 4.3 Transfer of Other Membership Interests.............................. 16
Section 4.4 Restrictions on Transfers........................................... 17
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF INTERESTS
Section 5.1 Prior to Closing Date............................................... 17
Section 5.2 Contributions by the Manager and MLP at Closing..................... 17
Section 5.3 Additional Capital Contributions.................................... 18
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Section 5.4 Interest and Withdrawal............................................ 18
Section 5.5 Capital Accounts................................................... 18
Section 5.6 Loans from Members................................................. 21
Section 5.7 Limited Preemptive Rights.......................................... 21
Section 5.8 Fully Paid and Non-Assessable Nature of Membership Interests....... 21
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
Section 6.1 Allocations for Capital Account Purposes........................... 22
Section 6.2 Allocations for Tax Purposes....................................... 25
Section 6.3 Distributions...................................................... 27
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
Section 7.1 Management......................................................... 28
Section 7.2 Certificate of Formation........................................... 30
Section 7.3 Restrictions on Manager's Authority................................ 30
Section 7.4 Reimbursement of the Manager....................................... 31
Section 7.5 Outside Activities................................................. 31
Section 7.6 Loans from the Manager; Loans or Contributions from the Company;
Contracts with Affiliates; Certain Restrictions on the Manager.................... 33
Section 7.7 Indemnification.................................................... 34
Section 7.8 Liability of Indemnitees........................................... 36
Section 7.9 Resolution of Conflicts of Interest................................ 36
Section 7.10 Other Matters Concerning the Manager............................... 38
Section 7.11 Reliance by Third Parties.......................................... 39
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 8.1 Records and Accounting............................................. 39
Section 8.2 Fiscal Year........................................................ 39
ARTICLE IX
TAX MATTERS
Section 9.1 Tax Returns and Information........................................ 40
Section 9.2 Tax Elections...................................................... 40
Section 9.3 Tax Controversies.................................................. 40
Section 9.4 Withholding........................................................ 40
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ARTICLE X
ADMISSION OF MEMBERS
Section 10.1 Admission of MLP as a Member........................................ 41
Section 10.2 Admission of Substituted Members.................................... 41
Section 10.3 Admission of Additional Members..................................... 41
Section 10.4 Admission of Successor or Transferee General Partner................ 42
Section 10.5 Amendment of Agreement and Certificate of Formation................. 42
ARTICLE XI
WITHDRAWAL OR REMOVAL OF MEMBERS
Section 11.1 Withdrawal of the Manager........................................... 42
Section 11.2 Removal of the Manager.............................................. 44
Section 11.3 Interest of Departing Manager....................................... 44
Section 11.4 Withdrawal of Members Other than Manager............................ 45
ARTICLE XII
DISSOLUTION AND LIQUIDATION
Section 12.1 Dissolution......................................................... 45
Section 12.2 Continuation of the Business of the Company After Dissolution....... 46
Section 12.3 Liquidator.......................................................... 46
Section 12.4 Liquidation......................................................... 47
Section 12.5 Cancellation of Certificate of Formation............................ 48
Section 12.6 Return of Contributions............................................. 48
Section 12.7 Waiver of Partition................................................. 48
Section 12.8 Capital Account Restoration......................................... 48
ARTICLE XIII
AMENDMENT OF AGREEMENT
Section 13.1 Amendment to be Adopted Solely by the Manager....................... 48
Section 13.2 Amendment Procedures................................................ 50
ARTICLE XIV
MERGER
Section 14.1 Authority........................................................... 50
Section 14.2 Procedure for Merger or Consolidation............................... 50
Section 14.3 Approval by Members of Merger or Consolidation...................... 51
Section 14.4 Certificate of Merger............................................... 52
Section 14.5 Effect of Merger.................................................... 52
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ARTICLE XV
GENERAL PROVISIONS
Section 15.1 Addresses and Notices............................................... 53
Section 15.2 Further Action...................................................... 53
Section 15.3 Binding Effect...................................................... 53
Section 15.4 Integration......................................................... 53
Section 15.5 Creditors........................................................... 53
Section 15.6 Waiver.............................................................. 53
Section 15.7 Counterparts........................................................ 54
Section 15.8 Applicable Law...................................................... 54
Section 15.9 Invalidity of Provisions............................................ 54
Section 15.10 Consent of Members.................................................. 54
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<PAGE>
SECOND AMENDED AND RESTATED OPERATING AGREEMENT
OF
U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.
THIS SECOND AMENDED AND RESTATED OPERATING AGREEMENT OF U.S. TIMBERLANDS
KLAMATH FALLS, L.L.C., dated as of November 19, 1997, is entered into by and
between U.S. TIMBERLANDS SERVICES COMPANY, L.L.C., a Delaware limited liability
company, and U.S. TIMBERLANDS COMPANY, L.P., a Delaware limited partnership,
together with any other Persons who hereafter become Members in the Company or
parties hereto as provided herein.
R E C I T A L S:
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WHEREAS, U.S. Timberlands Holdings, L.L.C., a Delaware limited liability
company, and Rudey Timber Company, L.L.C., a Delaware limited liability company,
were, immediately prior to the Closing Date, the sole Members of the Company
pursuant to the Amended and Restated Operating Agreement of U.S. Timberlands
Klamath Falls, L.L.C. dated as of August 30, 1996 (the "Prior Agreement");
and
WHEREAS, upon and subject to the Closing Date, U.S. Timberlands Services
Company, L.L.C., a Delaware limited liability company (formerly known as New
Services, L.L.C.), and U.S. Timberlands Company, L.P., a Delaware limited
partnership, became the sole Members of the Company and now desire to amend the
Prior Agreement to reflect their admission as Members and certain other
matters.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements contained herein, the parties hereto hereby amend the Prior Agreement
and, as so amended, restate it in its entirety as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
Capitalized terms used herein but not otherwise defined shall have the meaning
assigned to such term in the MLP Agreement.
"Additional Member" means a Person admitted to the Company as a Member
pursuant to Section 10.4 and who is shown as such on the books and records of
the Company.
"Adjusted Capital Account" means the Capital Account maintained for each
Member as of the end of each fiscal year of the Company, (a) increased by any
amounts that such Member is
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obligated to restore under the standards set by Treasury Regulation Section
1.704-1(b)(2)(ii)(c) (or is deemed obligated to restore under Treasury
Regulation Sections 1.704-2(g) and 1.704-2(i)(5)) and (b) decreased by (i) the
amount of all losses and deductions that, as of the end of such fiscal year, are
reasonably expected to be allocated to such Member in subsequent years under
Sections 704(e)(2) and 706(d) of the Code and Treasury Regulation Section 1.751-
1(b)(2)(ii), and (ii) the amount of all distributions that, as of the end of
such fiscal year, are reasonably expected to be made to such Member in
subsequent years in accordance with the terms of this Agreement or otherwise to
the extent they exceed offsetting increases to such Member's Capital Account
that are reasonably expected to occur during (or prior to) the year in which
such distributions are reasonably expected to be made (other than increases as a
result of a minimum gain chargeback pursuant to Section 6.1(d)(i) or
6.1(d)(ii)). The foregoing definition of Adjusted Capital Account is intended to
comply with the provisions of Treasury Regulation Section 1.704-1(b)(2)(ii)(d)
and shall be interpreted consistently therewith.
"Adjusted Property" means any property the Carrying Value of which has
been adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii). Once an Adjusted
Property is deemed distributed by, and recontributed to, the Company for federal
income tax purposes upon a termination of the Company pursuant to Treasury
Regulation Section 1.708-(b)(1)(iv), such property shall thereafter constitute a
Contributed Property until the Carrying Value of such property is subsequently
adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question. As used
herein, the term "control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or
otherwise.
"Agreed Allocation" means any allocation, other than a Required Allocation,
of an item of income, gain, loss or deduction pursuant to the provisions of
Section 6.1, including, without limitation, a Curative Allocation (if
appropriate to the context in which the term "Agreed Allocation" is used).
"Agreed Value" of any Contributed Property means the fair market value of
such property or other consideration at the time of contribution as determined
by the Manager using such reasonable method of valuation as it may adopt. The
Manager shall, in its discretion, use such method as it deems reasonable and
appropriate to allocate the aggregate Agreed Value of Contributed Properties
contributed to the Company in a single or integrated transaction among each
separate property on a basis proportional to the fair market value of each
Contributed Property.
"Agreement" means this Second Amended and Restated Operating Agreement
of U.S. Timberlands Klamath Falls, L.L.C., as it may be amended, supplemented
or restated from time to time. The Agreement shall constitute a "limited
liability company agreement" as such term is defined in the Delaware Limited
Liability Company Act.
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"Assignee" means a Person to whom one or more Membership Interests
have been transferred in a manner permitted under this Agreement, but who has
not been admitted as a Substituted Member.
"Associate" means, when used to indicate a relationship with any Person,
(a) any corporation or organization of which such Person is a director, officer
or partner or is, directly or indirectly, the owner of 20% or more of any class
of voting stock or other voting interest; (b) any trust or other estate in which
such Person has at least a 20% beneficial interest or as to which such Person
serves as trustee or in a similar fiduciary capacity; and (c) any relative or
spouse of such Person, or any relative of such spouse, who has the same
principal residence as such Person.
"Available Cash" means, with respect to any Quarter ending prior to the
Liquidation Date,
(a) the sum of (i) all cash and cash equivalents of the Company Group
on hand at the end of such Quarter, and (ii) all additional cash and cash
equivalents of the Company Group on hand on the date of determination of
Available Cash with respect to such Quarter resulting from borrowings for
working capital purposes made subsequent to the end of such Quarter, less
(b) the amount of any cash reserves that is necessary or appropriate
in the reasonable discretion of the Manager to (i) provide for the proper
conduct of the business of the Company Group (including reserves for future
capital expenditures and for anticipated future credit needs of the Company
Group) subsequent to such Quarter, (ii) comply with applicable law or any loan
agreement, security agreement, mortgage, debt instrument or other agreement or
obligation to which any Group Member is a party or by which it is bound or its
assets are subject or (iii) provide funds for distributions under Section 6.4 or
6.5 of the MLP Agreement in respect of any one or more of the next four
Quarters; provided, however, that the Manager may not establish cash reserves
pursuant to (iii) above if the effect of such reserves would be that the MLP is
unable to distribute the Minimum Quarterly Distribution on all Common Units with
respect to such Quarter; and provided further that disbursements made by a Group
Member or cash reserves established, increased or reduced after the end of such
Quarter but on or before the date of determination of Available Cash with
respect to such Quarter shall be deemed to have been made, established,
increased or reduced, for purposes of determining Available Cash, within such
Quarter if the Manager so determines.
Notwithstanding the foregoing, "Available Cash" with respect to the
Quarter in which the Liquidation Date occurs and any subsequent Quarter shall
equal zero.
"Book-Tax Disparity" means with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Member's share of the Company's Book-Tax Disparities in all of its
Contributed Property and Adjusted Property will be reflected by the difference
between such Member's Capital Account balance as maintained pursuant to Section
5.5 and the hypothetical
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balance of such Member's Capital Account computed as if it had been maintained
strictly in accordance with federal income tax accounting principles.
"Business Day" means Monday through Friday of each week, except that a
legal holiday recognized as such by the government of the United States of
America or the states of New York or Oregon shall not be regarded as a Business
Day.
"Capital Account" means the capital account maintained for a Member
pursuant to Section 5.5. The "Capital Account" of a Member in respect of a
Membership Interest shall be the amount which such Capital Account would be if
such Membership Interest were the only interest in the Company held by a Member
from and after the date on which such Membership Interest was first issued.
"Capital Contribution" means any cash, cash equivalents or the Net
Agreed Value of Contributed Property that a Member contributes to the Company
pursuant to this Agreement.
"Carrying Value" means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all depreciation,
amortization and cost recovery deductions charged to the Members' and Assignees'
Capital Accounts in respect of such Contributed Property, and (b) with respect
to any other Company property, the adjusted basis of such property for federal
income tax purposes, all as of the time of determination. The Carrying Value of
any property shall be adjusted from time to time in accordance with Sections
5.5(d)(i) and 5.5(d)(ii) and to reflect changes, additions or other adjustments
to the Carrying Value for dispositions and acquisitions of Company properties,
as deemed appropriate by the Manager.
"Certificate of Formation" means the Certificate of Formation of the
Company filed with the Secretary of State of the State of Delaware as referenced
in Section 2.1, as such Certificate of Formation may be amended, supplemented or
restated from time to time.
"Closing Date" means the first date on which Common Units are sold by the
MLP to the Underwriters pursuant to the provisions of the Underwriting
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time. Any reference herein to a specific section or sections of the
Code shall be deemed to include a reference to any corresponding provision of
successor law.
"Commission" means the United States Securities and Exchange
Commission.
"Common Unit" has the meaning assigned to such term in the MLP
Agreement.
"Company" means U.S. Timberlands Klamath Falls, L.L.C., a Delaware limited
liability company, and any successors thereto.
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"Company Group" means the Company and any Subsidiary of the Company,
treated as a single consolidated entity.
"Contributed Property" means each property or other asset, in such form as
may be permitted by the Delaware Limited Liability Company Act, but excluding
cash, contributed to the Company (or deemed contributed to a new Company on
termination of the Company pursuant to Section 708 of the Code. Once the
Carrying Value of a Contributed Property is adjusted pursuant to Section 5.5(d),
such property shall no longer constitute a Contributed Property, but shall be
deemed an Adjusted Property.
"Contribution and Conveyance Agreement" means the Contribution,
Conveyance and Assumption Agreement dated as of November 19, 1997 between the
MLP, U.S. Timberlands Management Company, L.L.C.(formerly known as U.S.
Timberlands Services Company, L.L.C.), the Company, Holdings, the Manager and
Rudey Timber.
"Curative Allocation" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 6.1(d)(ix).
"Delaware Limited Liability Company Act" means the Delaware Limited
Liability Company Act, 6 Del. C. (S)18-101, et seq., as amended, supplemented or
restated from time to time, and any successor to such statute.
"Departing Manager" means a former Manager from and after the effective
date of any withdrawal or removal of such former Manager pursuant to Section
11.1 or 11.2.
"Economic Risk of Loss" has the meaning set forth in Treasury Regulation
Section 1.752-2(a).
"Event of Withdrawal" has the meaning assigned to such term in Section
11.1(a).
"Finance Corp." means U.S. Timberlands Finance Corp., a Delaware
corporation and a Subsidiary of the Company.
"Group" means a Person that with or through any of its Affiliates or
Associates has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting (except voting pursuant to a revocable proxy or
consent given to such Person in response to a proxy or consent solicitation made
to 10 or more Persons) or disposing of any MLP Securities with any other Person
that beneficially owns, or whose Affiliates or Associates beneficially own,
directly or indirectly, MLP Securities.
"Group Member" means a member of the Company Group.
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"Holdings" means U.S. Timberlands Holdings, L.L.C., a Delaware limited
liability company.
"Indemnitee" means (a) the Manager, any Departing Manager and any
Person who is or was an Affiliate of the Manager or any Departing Manager, (b)
any Person who is or was a director, officer, employee, agent or trustee of a
Group Member, (c) any Person who is or was an officer, member, partner,
director, employee, agent or trustee of the Manager or any Departing Manager or
any Affiliate of the Manager or any Departing Manager, or any Affiliate of any
such Person and (d) any Person who is or was serving at the request of the
Manager or any Departing Manager or any such Affiliate as a director, officer,
employee, member, partner, agent, fiduciary or trustee of another Person;
provided, that a Person shall not be an Indemnitee by reason of providing, on a
fee-for-services basis, trustee, fiduciary or custodial services.
"Initial Offering" means the initial offering and sale of Common Units to
the public, as described in the Registration Statement.
"Liquidation Date" means (a) in the case of an event giving rise to the
dissolution of the Company of the type described in clauses (a) and (b) of the
first sentence of Section 12.2, the date on which the applicable time period
during which the Members have the right to elect to reconstitute the Company and
continue its business has expired without such an election being made, and (b)
in the case of any other event giving rise to the dissolution of the Company,
the date on which such event occurs.
"Liquidator" means one or more Persons selected by the Manager to
perform the functions described in Section 12.3 as liquidating trustee of the
Company within the meaning of the Delaware Limited Liability Company Act.
"Manager" means U.S. Timberlands Services Company, L.L.C. and its
predecessors, successors and permitted assigns as manager of the Company.
"Member" means any Person that is admitted to the Company as a member
pursuant to the terms and conditions of this Agreement; but the term Member
shall not include any Person from and after the time such Person withdraws as a
Member from the Company.
"Membership Interest" means the ownership interest of a Member in the
Company.
"Merger Agreement" has the meaning assigned to such term in Section
14.1.
"MLP" means U.S. Timberlands Company, L.P., a Delaware limited
partnership.
"MLP Agreement" means the Amended and Restated Agreement of Limited
Partnership of U.S. Timberlands Company, L.P., as it may be amended,
supplemented or restated from time to time.
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"MLP Security" has the meaning assigned to the term "Partnership Security"
in the MLP Agreement.
"Net Agreed Value" means, (a) in the case of any Contributed Property, the
Agreed Value of such property reduced by any liabilities either assumed by the
Company upon such contribution or to which such property is subject when
contributed, and (b) in the case of any property distributed to a Member by the
Company, the Company's Carrying Value of such property (as adjusted pursuant to
Section 5.5(d)(ii)) at the time such property is distributed, reduced by any
indebtedness either assumed by such Member upon such distribution or to which
such property is subject at the time of distribution, in either case, as
determined under Section 752 of the Code.
"Net Income" means, for any taxable year, the excess, if any, of the
Company's items of income and gain (other than those items taken into account in
the computation of Net Termination Gain or Net Termination Loss) for such
taxable year over the Company's items of loss and deduction (other than those
items taken into account in the computation of Net Termination Gain or Net
Termination Loss) for such taxable year. The items included in the calculation
of Net Income shall be determined in accordance with Section 5.5(b) and shall
not include any items specially allocated under Section 6.1(d).
"Net Loss" means, for any taxable year, the excess, if any, of the
Company's items of loss and deduction (other than those items taken into account
in the computation of Net Termination Gain or Net Termination Loss) for such
taxable year over the Company's items of income and gain (other than those items
taken into account in the computation of Net Termination Gain or Net Termination
Loss) for such taxable year. The items included in the calculation of Net Loss
shall be determined in accordance with Section 5.5(b) and shall not include any
items specially allocated under Section 6.1(d).
"Net Termination Gain" means, for any taxable year, the sum, if positive,
of all items of income, gain, loss or deduction recognized by the Company after
the Liquidation Date. The items included in the determination of Net Termination
Gain shall be determined in accordance with Section 5.5(b) and shall not include
any items of income, gain or loss specially allocated under Section 6.1(d).
"Net Termination Loss" means, for any taxable year, the sum, if negative,
of all items of income, gain, loss or deduction recognized by the Company after
the Liquidation Date. The items included in the determination of Net Termination
Loss shall be determined in accordance with Section 5.5(b) and shall not include
any items of income, gain or loss specially allocated under Section 6.1(d).
"Nonrecourse Built-in Gain" means with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or pledge
securing a Nonrecourse Liability, the amount of any taxable gain that would be
allocated to the Members pursuant to Sections 6.2(b)(i)(A),
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6.2(b)(ii)(A) and 6.2(b)(iii) if such properties were disposed of in a taxable
transaction in full satisfaction of such liabilities and for no other
consideration.
"Nonrecourse Deductions" means any and all items of loss, deduction or
expenditures (described in Section 705(a)(2)(B) of the Code) that, in accordance
with the principles of Treasury Regulation Section 1.704-2(b), are attributable
to a Nonrecourse Liability.
"Nonrecourse Liability" has the meaning set forth in Treasury Regulation
Section 1.752-1(a)(2).
"Partner Nonrecourse Debt" has the meaning set forth in Treasury
Regulation Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
"Partner Nonrecourse Deductions" means any and all items of loss, deduction
or expenditure (including, without limitation, any expenditure described in
Section 705(a)(2)(B) of the Code) that, in accordance with the principles of
Treasury Regulation Section 1.704-2(i), are attributable to a Partner
Nonrecourse Debt.
"Partnership Minimum Gain" means that amount determined in accordance with
the principles of Treasury Regulation Section 1.704-2(d).
"Percentage Interest" means, (a) as to the Manager, 1.0101% and (b) as to
the MLP, 98.9899%.
"Person" means an individual or a corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization, association,
government agency or political subdivision thereof or other entity.
"Prior Agreement" is defined in the Recitals.
"Quarter" means, unless the context requires otherwise, a fiscal quarter of
the Company.
"Recapture Income" means any gain recognized by the Company (computed
without regard to any adjustment required by Sections 734 or 743 of the Code)
upon the disposition of any property or asset of the Company, which gain is
characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
"Registration Statement" means, collectively, the Registration
Statement on Form S-1 (Registration No. 333- 32811) as it has been or as it may
be amended or supplemented from time to time, filed by the MLP with the
Commission under the Securities Act to register the offering and
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sale of the Common Units in the Initial Offering and the Registration Statement
on Form S-1 (Registration No. 333-34389) as it has been or as it may be amended
or supplemented from time to time, filed by the Company and Finance Corp. with
the Commission under the Securities Act to register the offering and sale of the
Senior Notes.
"Required Allocations" means (a) any limitation imposed on any allocation
of Net Losses or Net Termination Losses under Section 6.1(b) or 6.1(c)(ii) and
(b) any allocation of an item of income, gain, loss or deduction pursuant to
Section 6.1(d)(i), 6.1(d)(ii), 6.1(d)(iv), 6.1(d)(vii) or 6.1(d)(ix).
"Residual Gain" or "Residual Loss" means any item of gain or loss, as the
case may be, of the Company recognized for federal income tax purposes resulting
from a sale, exchange or other disposition of a Contributed Property or Adjusted
Property, to the extent such item of gain or loss is not allocated pursuant to
Section 6.2(b)(i)(A) or 6.2(b)(ii)(A), respectively, to eliminate Book-Tax
Disparities.
"Restricted Activities" means the following activities in North
America: the (i) acquisition, exchange, operation or sale of timber-producing
real property or rights to harvest timber a principal purpose of which is
producing logs and other forest products, (ii) harvesting of timber other than
harvesting which is incidental to the ownership or operation of real property
not owned or operated for a principal purpose of producing logs or other forest
products, (iii) sale, exchange or purchase of logs other than sales, exchanges
or purchases which are incidental to the ownership or operation of real property
not owned or operated for a principal purpose of producing logs or other forest
products, and (iv) any and all other activities relating to the forest products
industry to the extent such activities compete with the operations of the MLP or
the Company.
"Rudy Timber" means Rudey Timber Company, L.L.C., a Delaware limited
liability company.
"Securities Act" means the Securities Act of 1933, as amended, supplemented
or restated from time to time and any successor to such statute.
"Senior Notes" means the $225 million aggregate principal amount of 9-5/8%
Senior Notes due 2007 of the Company and Finance Corp.
"Special Approval"has the meaning assigned to such term in the MLP
Agreement.
"Subsidiary" means, with respect to any Person, (a) a corporation of which
more than 50% of the voting power of shares entitled (without regard to the
occurrence of any contingency) to vote in the election of directors or other
governing body of such corporation is owned, directly or indirectly, at the date
of determination, by such Person, by one or more Subsidiaries of such Person or
a combination thereof, (b) a partnership (whether general or limited) in which
such Person or a Subsidiary of such Person is, at the date of determination, a
general or limited partner of such
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partnership, but only if more than 50% of the partnership interests of such
partnership (considering all of the partnership interests of the partnership as
a single class) is owned, directly or indirectly, at the date of determination,
by such Person, by one or more Subsidiaries of such Person, or a combination
thereof, or (c) any other Person (other than a corporation or a partnership) in
which such Person, one or more Subsidiaries of such Person, or a combination
thereof, directly or indirectly, at the date of determination, has (i) at least
a majority ownership interest or (ii) the power to elect or direct the election
of a majority of the directors or other governing body of such Person.
"Substituted Member" means a Person who is admitted as a Member to the
Company pursuant to Section 10.2 in place of and with all the rights of a Member
and who is shown as a Member on the books and records of the Company.
"Surviving Business Entity" has the meaning assigned to such term in
Section 14.2(b).
"Transfer" has the meaning assigned to such term in Section 4.4(a).
"Underwriter" means each Person named as an underwriter in Schedule I to
the Underwriting Agreement who purchases Common Units pursuant thereto.
"Underwriting Agreement" means, collectively, the Underwriting Agreement
dated November 13, 1997 among the Underwriters, the MLP and certain other
parties, providing for the purchase of Common Units by such Underwriters and the
Underwriting Agreement dated November 13, 1997 among the Company, Finance Corp.,
the MLP, certain other parties and the several underwriters parties thereto,
providing for the purchase of the Senior Notes by such underwriters.
"Unit" has the meaning assigned to such term in the MLP Agreement.
"Unit Majority" has the meaning assigned to such term in the MLP Agreement.
"Unrealized Gain" attributable to any item of Company property means, as of
any date of determination, the excess, if any, of (a) the fair market value of
such property as of such date (as determined under Section 5.5(d)) over (b) the
Carrying Value of such property as of such date (prior to any adjustment to be
made pursuant to Section 5.5(d) as of such date).
"Unrealized Loss" attributable to any item of Company property means, as of
any date of determination, the excess, if any, of (a) the Carrying Value of such
property as of such date (prior to any adjustment to be made pursuant to Section
5.5(d) as of such date) over (b) the fair market value of such property as of
such date (as determined under Section 5.5(d)).
"U.S. GAAP" means United States Generally Accepted Accounting Principles
consistently applied.
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Section 1.2 Construction.
Unless the context requires otherwise: (a) any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural and
vice versa; (b) references to Articles and Sections refer to Articles and
Sections of this Agreement; and (c) "include" or "includes" means includes,
without limitation, and "including" means including, without limitation.
ARTICLE II
ORGANIZATION
Section 2.1 Formation.
The Company was previously formed as a limited liability company pursuant
to the provisions of the Delaware Limited Liability Company Act. The Members
hereby amend and restate the Prior Agreement in its entirety. This second
amendment and restatement shall become effective on the date of this Agreement.
Except as expressly provided to the contrary in this Agreement, the rights,
duties, liabilities and obligations of the Members and the administration,
dissolution and termination of the Company shall be governed by the Delaware
Limited Liability Company Act. All Membership Interests shall constitute
personal property of the owner thereof for all purposes and a Member has no
interest in specific Company property.
Section 2.2 Name.
The name of the Company shall be "U.S. Timberlands Klamath Falls, L.L.C."
The Company's business may be conducted under any other name or names deemed
necessary or appropriate by the Manager in its sole discretion, including the
name of the Manager. The words "Limited Liability Company," "L.L.C." or "LLC"
shall be included in the Company's name where necessary for the purpose of
complying with the laws of any jurisdiction that so requires. The Manager in its
discretion may change the name of the Company at any time and from time to time
and shall notify the other Member(s) of such change in the next regular
communication to the Members.
Section 2.3 Registered Office; Registered Agent; Principal Office; Other
Offices.
Unless and until changed by the Manager, the registered office of the
Company in the State of Delaware shall be located at 1209 Orange Street, New
Castle County, Wilmington, Delaware 19801, and the registered agent for service
of process on the Company in the State of Delaware at such registered office
shall be The Corporation Trust Company. The principal office of the Company
shall be located at 6400 Highway 66, Klamath Falls, Oregon 97601 or such other
place as the Manager may from time to time designate by notice to the Members.
The Company may maintain offices at such other place or places within or outside
the State of Delaware as the Manager deems necessary or appropriate. The address
of the Manager shall be 625 Madison Ave., Suite 10-B, New
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York, New York 10022 or such other place as the Manager may from time to time
designate by notice to the Members.
Section 2.4 Purpose and Business.
The purpose and nature of the business to be conducted by the Company shall
be to (a) manage, operate, lease, sell and otherwise deal with any and all
assets or properties contributed to the Company by the Members, (b) to engage
directly in, or enter into or form any corporation, partnership, joint venture,
limited liability company or other arrangement to engage indirectly in, any type
of business or activity engaged in by the Manager and its predecessors prior to
the Closing Date and, in connection therewith, to exercise all of the rights and
powers conferred upon the Company pursuant to the agreements relating to such
business activity, (c) engage directly in, or enter into or form any
corporation, partnership, joint venture, limited liability company or other
arrangement to engage indirectly in, any business activity that is approved by
the Manager and which lawfully may be conducted by a limited liability company
organized pursuant to the Delaware Limited Liability Company Act and, in
connection therewith, to exercise all of the rights and powers conferred upon
the Company pursuant to the agreements relating to such business activity;
provided, however, that the Manager reasonably determines, as of the date of the
acquisition or commencement of such activity, that such activity (i) generates
"qualifying income" (as such term is defined pursuant to Section 7704 of the
Code) or (ii) enhances the operations of an activity of the Company or the MLP
that generates qualifying income, and (d) do anything necessary or appropriate
to the foregoing, including the making of capital contributions or loans to a
Group Member, the MLP or any Subsidiary of the MLP or the Company. The Manager
has no obligation or duty to the Company, the Members, or the Assignees to
propose or approve, and in its discretion may decline to propose or approve, the
conduct by the Company of any business.
Section 2.5 Powers.
The Company shall be empowered to do any and all acts and things necessary,
appropriate, proper, advisable, incidental to or convenient for the furtherance
and accomplishment of the purposes and business described in Section 2.4 and for
the protection and benefit of the Company.
Section 2.6 Power of Attorney.
(a) Each Member and each Assignee hereby constitutes and appoints the
Manager and, if a Liquidator shall have been selected pursuant to Section 12.3,
the Liquidator, severally (and any successor to the Liquidator by merger,
transfer, assignment, election or otherwise) and each of their authorized
officers and attorneys-in-fact, as the case may be, with full power of
substitution, as his true and lawful agent and attorney-in-fact, with full power
and authority in his name, place and stead, to:
(i) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (A) all certificates, documents and other
instruments (including this
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Agreement and the Certificate of Formation and all amendments or
restatements hereof or thereof) that the Manager or the Liquidator deems
necessary or appropriate to form, qualify or continue the existence or
qualification of the Company as a limited liability company in the State of
Delaware and in all other jurisdictions in which the Company may conduct
business or own property; (B) all certificates, documents and other
instruments that the Manager or the Liquidator deems necessary or
appropriate to reflect, in accordance with its terms, any amendment,
change, modification or restatement of this Agreement; (C) all
certificates, documents and other instruments (including conveyances and a
certificate of cancellation) that the Manager or the Liquidator deems
necessary or appropriate to reflect the dissolution and liquidation of the
Company pursuant to the terms of this Agreement; (D) all certificates,
documents and other instruments relating to the admission, withdrawal,
removal or substitution of any Member pursuant to, or other events
described in, Article IV, X, XI or XII; (E) all certificates, documents and
other instruments relating to the determination of the rights, preferences
and privileges of any class or series of Membership Interests issued
pursuant hereto; and (F) all certificates, documents and other instruments
(including agreements and a certificate of merger) relating to a merger or
consolidation of the Company pursuant to Article XIV; and
(ii) execute, swear to, acknowledge, deliver, file and record all
ballots, consents, approvals, waivers, certificates, documents and other
instruments necessary or appropriate, in the discretion of the Manager or
the Liquidator, to make, evidence, give, confirm or ratify any vote,
consent, approval, agreement or other action that is made or given by the
Members hereunder or is consistent with the terms of this Agreement or is
necessary or appropriate, in the discretion of the Manager or the
Liquidator, to effectuate the terms or intent of this Agreement; provided,
that when required by any provision of this Agreement that establishes a
percentage of the Members or of the Members of any class or series required
to take any action, the Manager and the Liquidator may exercise the power
of attorney made in this Section 2.6(a)(ii) only after the necessary vote,
consent or approval of the Members or of the Members of such class or
series, as applicable.
Nothing contained in this Section 2.6(a) shall be construed as authorizing
the Manager to amend this Agreement except in accordance with Article XIII or as
may be otherwise expressly provided for in this Agreement.
(b) The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, and it shall survive and, to
the maximum extent permitted by law, not be affected by the subsequent death,
incompetency, disability, incapacity, dissolution, bankruptcy or termination of
any Member and the transfer of all or any portion of such Member's Membership
Interest and shall extend to such Member's successors and assigns. Each such
Member hereby agrees to be bound by any representation made by the Manager or
the Liquidator acting in good faith pursuant to such power of attorney; and each
such Manager, to the maximum extent permitted by law, hereby waives any and all
defenses that may be available to contest, negate or disaffirm the action of the
Manager or the Liquidator taken in good faith under such power of
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attorney. Each Member shall execute and deliver to the Manager or the
Liquidator, within 15 days after receipt of the request therefor, such further
designation, powers of attorney and other instruments as the Manager or the
Liquidator deems necessary to effectuate this Agreement and the purposes of the
Company.
Section 2.7 Term.
The term of the Company commenced upon the filing of the Certificate of
Formation in accordance with the Delaware Limited Liability Company Act and
shall continue in existence until the close of Company business on December 31,
2087 or until the earlier dissolution of the Company in accordance with the
provisions of Article XII. The existence of the Company as a separate legal
entity shall continue until the cancellation of the Certificate of Formation as
provided in the Delaware Limited Liability Company Act.
Section 2.8 Title to Company Assets.
Title to Company assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Company as an entity,
and no Member, individually or collectively, shall have any ownership interest
in such Company assets or any portion thereof. Title to any or all of the
Company assets may be held in the name of the Company, the Manager, one or more
of its Affiliates or one or more nominees, as the Manager may determine. The
Manager hereby declares and warrants that any Company assets for which record
title is held in the name of the Manager or one or more of its Affiliates or one
or more nominees shall be held by the Manager or such Affiliate or nominee for
the use and benefit of the Company in accordance with the provisions of this
Agreement; provided, however, that the Manager shall use reasonable efforts to
cause record title to such assets (other than those assets in respect of which
the Manager determines that the expense and difficulty of conveyancing makes
transfer of record title to the Company impracticable) to be vested in the
Company as soon as reasonably practicable; provided, further, that, prior to the
withdrawal or removal of the Manager or as soon thereafter as practicable, the
Manager shall use reasonable efforts to effect the transfer of record title to
the Company and, prior to any such transfer, will provide for the use of such
assets in a manner satisfactory to the Manager. All Company assets shall be
recorded as the property of the Company in its books and records, irrespective
of the name in which record title to such Company assets is held.
ARTICLE III
RIGHTS OF MEMBERS
Section 3.1 Limitation of Liability.
The Members shall have no liability under this Agreement except as
expressly provided in this Agreement or in the Delaware Limited Liability
Company Act.
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Section 3.2 Outside Activities of the Members.
Subject to the provisions of Section 7.5, which shall continue to be
applicable to the Persons referred to therein, regardless of whether such
Persons shall also be Members, any Member shall be entitled to and may have
business interests and engage in business activities in addition to those
relating to the Company, including business interests and activities in direct
competition with the Company Group. Neither the Company nor any other Member
shall have any rights by virtue of this Agreement in any business ventures of
any Member.
Section 3.3 Rights of Members.
(a) In addition to other rights provided by this Agreement or by
applicable law, and except as limited by Section 3.3(b), each Member shall have
the right, for a purpose reasonably related to such Member's interest as a
member in the Company, upon reasonable written demand and at such Member's own
expense:
(i) to obtain true and full information regarding the status of the
business and financial condition of the Company;
(ii) promptly after becoming available, to obtain a copy of the
Company's federal, state and local income tax returns for each year;
(iii) to have furnished to him a current list of the name and last
known business, residence or mailing address of each Member;
(iv) to have furnished to him a copy of this Agreement and the
Certificate of Formation and all amendments thereto, together with a copy
of the executed copies of all powers of attorney pursuant to which this
Agreement, the Certificate of Formation and all amendments thereto have
been executed;
(v) to obtain true and full information regarding the amount of cash
and a description and statement of the Net Agreed Value of any other
Capital Contribution by each Member and which each Member has agreed to
contribute in the future, and the date on which each became a Member; and
(vi) to obtain such other information regarding the affairs of the
Company as is just and reasonable.
(b) The Manager may keep confidential from the Members, for such
period of time as the Manager deems reasonable, (i) any information that the
Manager reasonably believes to be in the nature of trade secrets or (ii) other
information the disclosure of which the Manager in good faith believes (A) is
not in the best interests of the Company Group, (B) could damage the Company
Group or (C) that any Group Member is required by law or by agreement with any
third party to
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keep confidential (other than agreements with Affiliates of the Company the
primary purpose of which is to circumvent the obligations set forth in this
Section 3.3).
ARTICLE IV
TRANSFERS OF INTERESTS
Section 4.1 Transfer Generally.
(a) The term "transfer," when used in this Agreement with respect to
a Membership Interest, shall be deemed to refer to a transaction by which the
holder of a Membership Interest assigns such Membership Interest to another
Person who is or becomes a Member or an Assignee, and includes a sale,
assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any
other disposition by law or otherwise.
(b) No Membership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article IV.
Any transfer or purported transfer of a Membership Interest not made in
accordance with this Article IV shall be null and void.
(c) Nothing contained in this Agreement shall be construed to prevent
a disposition by any member of the Manager of any or all of the issued and
outstanding membership interests of the Manager.
Section 4.2 Transfer of Manager's Membership Interest.
If the Manager transfers its interest as the general partner of the
MLP to any Person in accordance with the provisions of the MLP Agreement, the
Manager shall contemporaneously therewith transfer all, but not less than all,
of its Membership Interest herein to such Person, and the other Members hereby
expressly consent to such transfer.
Section 4.3 Transfer of Other Membership Interests.
A Member, other than the Manager, may transfer all, but not less than
all, of its Membership Interest in connection with the merger, consolidation or
other combination of such Member with or into any other Person or the transfer
by such Member of all or substantially all of its assets to another Person, and
following any such transfer such Person may become a Substituted Member pursuant
to Article X. Except as set forth in the immediately preceding sentence and in
Section 5.2, or in connection with any pledge of (or any related foreclosure on)
a Member's Membership Interest solely for the purpose of securing, directly or
indirectly, indebtedness of the
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Company or such Member, and except for the transfers contemplated by Sections
5.2 and 10.1, a Member may not transfer all or any part of its Membership
Interest or withdraw from the Company.
Section 4.4 Restrictions on Transfers.
(a) Notwithstanding the other provisions of this Article IV, no
transfer of any Membership Interest shall be made if such transfer would (i)
violate the then applicable federal or state securities laws or rules and
regulations of the Commission, any state securities commission or any other
governmental authority with jurisdiction over such transfer, (ii) terminate the
existence or qualification of the Company or the MLP under the laws of the
jurisdiction of its formation or (iii) cause the Company or the MLP to be
treated as an association taxable as a corporation or otherwise to be taxed as
an entity for federal income tax purposes (to the extent not already so treated
or taxed).
(b) The Manager may impose restrictions on the transfer of Membership
Interests if a subsequent Opinion of Counsel determines that such restrictions
are necessary to avoid a significant risk of the Company or the MLP becoming
taxable as a corporation or otherwise to be taxed as an entity for federal
income tax purposes. The restrictions may be imposed by making such amendments
to this Agreement as the Manager may determine to be necessary or appropriate to
impose such restrictions.
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF INTERESTS
Section 5.1 Prior to Closing Date.
Immediately prior to the Closing Date, ninety-nine percent (99%) of the
Membership Interests in the Company were held by Holdings and one percent (1%)
of the Membership Interests in the Company were held by Rudey Timber.
Section 5.2 Contributions by the Manager and MLP at Closing.
(a) On the Closing Date and pursuant to the Contribution and
Conveyance Agreement, the Manager shall contribute to the Company, as a Capital
Contribution, all of its timber operations in exchange for a Membership
Interest. Immediately following such contribution, the Manager shall transfer
all but a 1.0101% Membership Interest to the MLP in exchange for certain
interests therein as more particularly described in the Registration Statement.
(b) On the Closing Date and pursuant to the Contribution and
Conveyance Agreement, Rudey Timber shall contribute to Holdings all of its
Membership Interest in the Company in exchange for an additional member interest
in Holdings.
(c) On the Closing Date and pursuant to the Contribution and
Conveyance Agreement, the Company shall assume certain indebtedness of Holdings.
Immediately following
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such assumption, Holdings shall contribute all of its Membership Interest to the
MLP in exchange for certain interests therein as more particularly described in
the Registration Statement.
(d) On the Closing Date, the MLP shall contribute to the Company all
of the net proceeds from the sale of Common Units offered pursuant to the
Registration Statement.
(e) Following the foregoing transactions, the Manager shall hold a
1.0101% Membership Interest and the MLP shall hold a 98.9899% Membership
Interest.
Section 5.3 Additional Capital Contributions.
With the consent of the Manager, any other Member may, but shall not be
obligated to, make additional Capital Contributions to the Company.
Contemporaneously with the making of any Capital Contributions by any such
Member, in addition to those provided in Sections 5.1 and 5.2, the Manager shall
be obligated to make an additional Capital Contribution to the Company in an
amount equal to 1.0101 / 98.9899 of the Net Agreed Value of the additional
Capital Contribution then made by any such Member. Except as set forth in the
immediately preceding sentence and Article XII, the Manager shall not be
obligated to make any additional Capital Contributions to the Company.
Section 5.4 Interest and Withdrawal.
No interest shall be paid by the Company on Capital Contributions. No
Member shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent, if any, that distributions made pursuant to
this Agreement or upon termination of the Company may be considered as such by
law and then only to the extent provided for in this Agreement. Except to the
extent expressly provided in this Agreement, no Member shall have priority over
any other Member either as to the return of Capital Contributions or as to
profits, losses or distributions. Any such return shall be a compromise to which
all Members agree within the meaning of Section 18-502(b) of the Delaware
Limited Liability Company Act.
Section 5.5 Capital Accounts.
(a) The Company shall maintain for each Member (or a beneficial owner
of Membership Interests held by a nominee in any case in which the nominee has
furnished the identity of such owner to the Company in accordance with Section
6031(c) of the Code or any other method acceptable to the Manager in its sole
discretion) owning a Membership Interest a separate Capital Account with respect
to such Membership Interest in accordance with the rules of Treasury Regulation
Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the
amount of all Capital Contributions made to the Company with respect to such
Membership Interest pursuant to this Agreement and (ii) all items of Company
income and gain (including, without limitation, income and gain exempt from tax)
computed in accordance with Section 5.5(b) and allocated with respect to such
Membership Interest pursuant to Section 6.1, and decreased by (x) the amount of
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cash or Net Agreed Value of all actual and deemed distributions of cash or
property made with respect to such Membership Interest pursuant to this
Agreement and (y) all items of Membership deduction and loss computed in
accordance with Section 5.5(b) and allocated with respect to such Membership
Interest pursuant to Section 6.1.
(b) For purposes of computing the amount of any item of income,
gain, loss or deduction which is to be allocated pursuant to Article VI and is
to be reflected in the Members' Capital Accounts, the determination, recognition
and classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes (including,
without limitation, any method of depreciation, cost recovery or amortization
used for that purpose), provided, that:
(i) Solely for purposes of this Section 5.5, the Company shall be
treated as owning directly its proportionate share (as determined by the
Manager) of all property owned by any Subsidiary that is classified as a
partnership for federal income tax purposes;
(ii) All fees and other expenses incurred by the Company to promote
the sale of (or to sell) a Membership Interest that can neither be deducted
nor amortized under Section 709 of the Code, if any, shall, for purposes of
Capital Account maintenance, be treated as an item of deduction at the time
such fees and other expenses are incurred and shall be allocated among the
Members pursuant to Section 6.1.
(iii) Except as otherwise provided in Treasury Regulation Section
1.704-1(b)(2)(iv)(m), computation of all items of income, gain, loss and
deduction shall be made without regard to any election under Section 754 of
the Code which may be made by the Company and, as to those items described
in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard to the
fact that such items are not includable in gross income or are neither
currently deductible nor capitalized for federal income tax purposes. To
the extent an adjustment to the adjusted tax basis of any Company asset
pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to
Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into account
in determining Capital Accounts, the amount of such adjustment in the
Capital Accounts shall be treated as an item of gain or loss.
(iv) Any income, gain or loss attributable to the taxable disposition
of any Company property shall be determined as if the adjusted basis of
such property as of such date of disposition were equal in amount to the
Company's Carrying Value with respect to such property as of such date.
(v) In accordance with the requirements of Section 704(b) of the
Code, any deductions for depreciation, cost recovery or amortization
attributable to any Contributed Property shall be determined as if the
adjusted basis of such property on the date it was acquired by the Company
were equal to the Agreed Value of such property. Upon an adjustment
pursuant to Section 5.5(d) to the Carrying Value of any Company property
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subject to depreciation, cost recovery or amortization, any further
deductions for such depreciation, cost recovery or amortization
attributable to such property shall be determined (A) as if the adjusted
basis of such property were equal to the Carrying Value of such property
immediately following such adjustment and (B) using a rate of depreciation,
cost recovery or amortization derived from the same method and useful life
(or, if applicable, the remaining useful life) as is applied for federal
income tax purposes; provided, however, that, if the asset has a zero
adjusted basis for federal income tax purposes, depreciation, cost recovery
or amortization deductions shall be determined using any reasonable method
that the Manager may adopt.
(vi) If the Company's adjusted basis in a depreciable or cost recovery
property is reduced for federal income tax purposes pursuant to Section
48(q)(1) or 48(q)(3) of the Code, the amount of such reduction shall,
solely for purposes hereof, be deemed to be an additional depreciation or
cost recovery deduction in the year such property is placed in service and
shall be allocated among the Members pursuant to Section 6.1. Any
restoration of such basis pursuant to Section 48(q)(2) of the Code shall,
to the extent possible, be allocated in the same manner to the Members to
whom such deemed deduction was allocated.
(c) A transferee of a Membership Interest shall succeed to a pro rata
portion of the Capital Account of the transferor relating to the Membership
Interest so transferred.
(d) (i) In accordance with Treasury Regulation Section 1.704-
1(b)(2)(iv)(f), on an issuance of additional Membership Interests for cash
or Contributed Property, the Capital Account of all Members and the
Carrying Value of each Company property immediately prior to such issuance
shall be adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Company property, as if such
Unrealized Gain or Unrealized Loss had been recognized on an actual sale of
each such property immediately prior to such issuance and had been
allocated to the Members at such time pursuant to Section 6.1 in the same
manner as any item of gain or loss actually recognized during such period
would have been allocated. In determining such Unrealized Gain or
Unrealized Loss, the aggregate cash amount and fair market value of all
Company assets (including, without limitation, cash or cash equivalents)
immediately prior to the issuance of additional Membership Interests shall
be determined by the Manager using such reasonable method of valuation as
it may adopt; provided, however, that the Manager, in arriving at such
valuation, must take fully into account the fair market value of the
Membership Interests of all Members at such time. The Manager shall
allocate such aggregate value among the assets of the Company (in such
manner as it determines in its discretion to be reasonable) to arrive at a
fair market value for individual properties.
(ii) In accordance with Treasury Regulation Section 1.704-
1(b)(2)(iv)(f), immediately prior to any actual or deemed distribution to a
Member of any Company property (other than a distribution of cash that is
not in redemption or retirement of a Membership Interest), the Capital
Accounts of all Members and the Carrying Value of all
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Company property shall be adjusted upward or downward to reflect any
Unrealized Gain or Unrealized Loss attributable to such Company property,
as if such Unrealized Gain or Unrealized Loss had been recognized in a sale
of such property immediately prior to such distribution for an amount equal
to its fair market value, and had been allocated to the Members, at such
time, pursuant to Section 6.1 in the same manner as any item of gain or
loss actually recognized during such period would have been allocated. In
determining such Unrealized Gain or Unrealized Loss the aggregate cash
amount and fair market value of all Company assets (including, without
limitation, cash or cash equivalents) immediately prior to a distribution
shall (A) in the case of an actual distribution which is not made pursuant
to Section 12.4 or in the case of a deemed contribution and/or distribution
occurring as a result of a termination of the Company pursuant to Section
708 of the Code, be determined and allocated in the same manner as that
provided in Section 5.5(d)(i) or (B) in the case of a liquidating
distribution pursuant to Section 12.4, be determined and allocated by the
Liquidator using such reasonable method of valuation as it may adopt.
Section 5.6 Loans from Members.
Loans by a Member to the Company shall not constitute Capital
Contributions. If any Member shall advance funds to the Company in excess of
the amounts required hereunder to be contributed by it to the capital of the
Company, the making of such excess advances shall not result in any increase in
the amount of the Capital Account of such Member. The amount of any such excess
advances shall be a debt obligation of the Company to such Member and shall be
payable or collectible only out of the Company assets in accordance with the
terms and conditions upon which such advances are made.
Section 5.7 Limited Preemptive Rights.
Except as provided in Section 5.3, no Person shall have preemptive,
preferential or other similar rights with respect to (a) additional Capital
Contributions; (b) issuance or sale of any class or series of Membership
Interests, whether unissued, held in the treasury or hereafter created; (c)
issuance of any obligations, evidences of indebtedness or other securities of
the Company convertible into or exchangeable for, or carrying or accompanied by
any rights to receive, purchase or subscribe to, any such Membership Interests;
(d) issuance of any right of subscription to or right to receive, or any warrant
or option for the purchase of, any such Membership Interests; or (e) issuance or
sale of any other securities that may be issued or sold by the Company.
Section 5.8 Fully Paid and Non-Assessable Nature of Membership Interests.
All Membership Interests issued pursuant to, and in accordance with the
requirements of, this Article V shall be fully paid and non-assessable
Membership Interests, except as such non-assessability may be affected by
Section 18-607 of the Delaware Limited Liability Company Act.
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ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
Section 6.1 Allocations for Capital Account Purposes.
For purposes of maintaining the Capital Accounts and in determining the
rights of the Members among themselves, the Company's items of income, gain,
loss and deduction (computed in accordance with Section 5.5(b)) shall be
allocated among the Members in each taxable year (or portion thereof) as
provided herein below.
(a) Net Income. After giving effect to the special allocations set
----------
forth in Section 6.1(d), Net Income for each taxable year and all items of
income, gain, loss and deduction taken into account in computing Net Income for
such taxable year shall be allocated among the Members in accordance with their
respective Percentage Interests.
(b) Net Losses. After giving effect to the special allocations set
----------
forth in Section 6.1(d), Net Losses for each taxable period and all items of
income, gain, loss and deduction taken into account in computing Net Losses for
such taxable period shall be allocated among the Members in accordance with
their respective Percentage Interests.
(c) Net Termination Gains and Losses. After giving effect to the
--------------------------------
special allocations set forth in Section 6.1(d), all items of income, gain, loss
and deduction taken into account in computing Net Termination Gain or Net
Termination Loss for such taxable period shall be allocated in the same manner
as such Net Termination Gain or Net Termination Loss is allocated hereunder.
All allocations under this Section 6.1(c) shall be made after Capital Account
balances have been adjusted by all other allocations provided under this Section
6.1 and after all distributions of Available Cash provided under Section 6.4
have been made with respect to the taxable period ending on or before the
Liquidation Date; provided, however, that solely for purposes of this Section
6.1(c), Capital Accounts shall not be adjusted for distributions made pursuant
to Section 12.4.
(i) If a Net Termination Gain is recognized, such Net
Termination Gain shall be allocated among the Members in accordance with
their respective Percentage Interests.
(ii) If a Net Termination Loss is recognized, such Net
Termination Loss shall be allocated among the Members in accordance with
their respective Percentage Interests.
(d) Special Allocations. Notwithstanding any other provision of this
-------------------
Section 6.1, the following special allocations shall be made for such taxable
period:
(i) Partnership Minimum Gain Chargeback. Notwithstanding any other
-----------------------------------
provision of this Section 6.1, if there is a net decrease in Partnership
Minimum Gain during
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any Company taxable period, each Member shall be allocated items of Company
income and gain for such period (and, if necessary, subsequent periods) in
the manner and amounts provided in Treasury Regulation Sections 1.704-
2(f)(6), 1.704-2(g)(2) and 1.704-2(j)(2)(i), or any successor provision.
For purposes of this Section 6.1(d), each Member's Adjusted Capital Account
balance shall be determined, and the allocation of income or gain required
hereunder shall be effected, prior to the application of any other
allocations pursuant to this Section 6.1(d) with respect to such taxable
period (other than an allocation pursuant to Sections 6.1(d)(v) and
6.1(d)(vi)). This Section 6.1(d)(i) is intended to comply with the
Partnership Minimum Gain chargeback requirement in Treasury Regulation
Section 1.704-2(f) and shall be interpreted consistently therewith.
(ii) Chargeback of Partner Nonrecourse Debt Minimum Gain.
---------------------------------------------------
Notwithstanding the other provisions of this Section 6.1 (other than
Section 6.1(d)(i)), except as provided in Treasury Regulation Section
1.704-2(i)(4), if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain during any Company taxable period, any Member with a share of
Partner Nonrecourse Debt Minimum Gain at the beginning of such taxable
period shall be allocated items of Company income and gain for such period
(and, if necessary, subsequent periods) in the manner and amounts provided
in Treasury Regulation Sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii), or any
successor provisions. For purposes of this Section 6.1(d), each Member's
Adjusted Capital Account balance shall be determined, and the allocation of
income or gain required hereunder shall be effected, prior to the
application of any other allocations pursuant to this Section 6.1(d), other
than Section 6.1(d)(i) and other than an allocation pursuant to Sections
6.1(d)(v) and 6.1(d)(vi), with respect to such taxable period. This Section
6.1(d)(ii) is intended to comply with the chargeback of items of income and
gain requirement in Treasury Regulation Section 1.704-2(i)(4) and shall be
interpreted consistently therewith.
(iii) Qualified Income Offset. In the event any Member unexpectedly
-----------------------
receives any adjustments, allocations or distributions described in
Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-
1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Company income and
gain shall be specially allocated to such Member in an amount and manner
sufficient to eliminate, to the extent required by the Treasury Regulations
promulgated under Section 704(b) of the Code, the deficit balance, if any,
in its Adjusted Capital Account created by such adjustments, allocations or
distributions as quickly as possible unless such deficit balance is
otherwise eliminated pursuant to Section 6.1(d)(i) or (ii).
(iv) Gross Income Allocations. In the event any Member has a deficit
------------------------
balance in its Capital Account at the end of any Company taxable period in
excess of the sum of (A) the amount such Member is required to restore
pursuant to the provisions of this Agreement and (B) the amount such Member
is deemed obligated to restore pursuant to Treasury Regulation Sections
1.704-2(g) and 1.704-2(i)(5), such Member shall be specially allocated
items of Company gross income and gain in the amount of such excess as
quickly as possible; provided, that an allocation pursuant to this Section
6.1(d)(iv) shall be made only
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if and to the extent that such Member would have a deficit balance in its
Capital Account as adjusted after all other allocations provided for in
this Section 6.1 have been tentatively made as if this Section 6.1(d)(iv)
were not in this Agreement.
(v) Nonrecourse Deductions. Nonrecourse Deductions for any
----------------------
taxable period shall be allocated to the Members in accordance with their
respective Percentage Interests. If the Manager determines in its good
faith discretion that the Company's Nonrecourse Deductions must be
allocated in a different ratio to satisfy the safe harbor requirements of
the Treasury Regulations promulgated under Section 704(b) of the Code, the
Manager is authorized, upon notice to the other Members, to revise the
prescribed ratio to the numerically closest ratio that does satisfy such
requirements.
(vi) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions
------------------------------
for any taxable period shall be allocated 100% to the Member that bears the
Economic Risk of Loss with respect to the Partner Nonrecourse Debt to which
such Partner Nonrecourse Deductions are attributable in accordance with
Treasury Regulation Section 1.704-2(i). If more than one Member bears the
Economic Risk of Loss with respect to a Partner Nonrecourse Debt, such
Partner Nonrecourse Deductions attributable thereto shall be allocated
between or among such Members in accordance with the ratios in which they
share such Economic Risk of Loss.
(vii) Nonrecourse Liabilities. For purposes of Treasury Regulation
-----------------------
Section 1.752-3(a)(3), the Members agree that Nonrecourse Liabilities of
the Company in excess of the sum of (A) the amount of Partnership Minimum
Gain and (B) the total amount of Nonrecourse Built-in Gain shall be
allocated among the Members in accordance with their respective Percentage
Interests.
(viii) Code Section 754 Adjustments. To the extent an adjustment to
----------------------------
the adjusted tax basis of any Company asset pursuant to Section 734(b) or
743(c) of the Code is required, pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis), and such item of
gain or loss shall be specially allocated to the Members in a manner
consistent with the manner in which their Capital Accounts are required to
be adjusted pursuant to such Section of the Treasury Regulations.
(ix) Curative Allocation.
-------------------
(A) Notwithstanding any other provision of this Section 6.1,
other than the Required Allocations, the Required Allocations shall be
taken into account in making the Agreed Allocations so that, to the
extent possible, the net amount of items of income, gain, loss and
deduction allocated to each Member pursuant to the Required
Allocations and the Agreed Allocations, together, shall be equal to
the net amount
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of such items that would have been allocated to each such Member under
the Agreed Allocations had the Required Allocations and the related
Curative Allocation not otherwise been provided in this Section 6.1.
Notwithstanding the preceding sentence, Required Allocations relating
to (1) Nonrecourse Deductions shall not be taken into account except
to the extent that there has been a decrease in Partnership Minimum
Gain and (2) Partner Nonrecourse Deductions shall not be taken into
account except to the extent that there has been a decrease in Partner
Nonrecourse Debt Minimum Gain. Allocations pursuant to this Section
6.1(d)(ix)(A) shall only be made with respect to Required Allocations
to the extent the Manager reasonably determines that such allocations
will otherwise be inconsistent with the economic agreement among the
Members. Further, allocations pursuant to this Section 6.1(d)(ix)(A)
shall be deferred with respect to allocations pursuant to clauses (1)
and (2) hereof to the extent the Manager reasonably determines that
such allocations are likely to be offset by subsequent Required
Allocations.
(B) The Manager shall have reasonable discretion, with respect to
each taxable period, to (1) apply the provisions of Section
6.1(d)(ix)(A) in whatever order is most likely to minimize the
economic distortions that might otherwise result from the Required
Allocations, and (2) divide all allocations pursuant to Section
6.1(d)(ix)(A) among the Members in a manner that is likely to minimize
such economic distortions.
Section 6.2 Allocations for Tax Purposes.
(a) Except as otherwise provided herein, for federal income tax
purposes, each item of income, gain, loss and deduction shall be allocated among
the Members in the same manner as its correlative item of "book" income, gain,
loss or deduction is allocated pursuant to Section 6.1.
(b) In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation, amortization and cost recovery deductions shall be allocated for
federal income tax purposes among the Members as follows:
(i) (A) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Members in the manner
provided under Section 704(c) of the Code that takes into account the
variation between the Agreed Value of such property and its adjusted basis
at the time of contribution; and (B) any item of Residual Gain or Residual
Loss attributable to a Contributed Property shall be allocated among the
Members in the same manner as its correlative item of "book" gain or loss
is allocated pursuant to Section 6.1.
(ii) (A) In the case of an Adjusted Property, such items shall (1)
first, be allocated among the Members in a manner consistent with the
principles of Section 704(c) of the Code
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to take into account the Unrealized Gain or Unrealized Loss attributable to
such property and the allocations thereof pursuant to Section 5.5(d)(i) or
5.5(d)(ii), and (2) second, in the event such property was originally a
Contributed Property, be allocated among the Members in a manner consistent
with Section 6.2(b)(i)(A); and (B) any item of Residual Gain or Residual
Loss attributable to an Adjusted Property shall be allocated among the
Members in the same manner as its correlative item of "book" gain or loss
is allocated pursuant to Section 6.1.
(iii) The Manager shall apply the principles of Treasury Regulation
Section 1.704-3(d) to eliminate Book-Tax Disparities.
(c) For the proper administration of the Company and for the
preservation of uniformity of the Membership Interests or Units or other limited
partner interests of the MLP (or any class or classes thereof), the Manager
shall have sole discretion to (i) adopt such conventions as it deems appropriate
in determining the amount of depreciation, amortization and cost recovery
deductions; (ii) make special allocations for federal income tax purposes of
income (including, without limitation, gross income) or deductions; and (iii)
amend the provisions of this Agreement as appropriate (x) to reflect the
proposal or promulgation of Treasury Regulations under Section 704(b) or Section
704(c) of the Code or (y) otherwise to preserve or achieve uniformity of the
Membership Interests or Units or other limited partner interests of the MLP (or
any class or classes thereof). The Manager may adopt such conventions, make such
allocations and make such amendments to this Agreement as provided in this
Section 6.2(c) only if such conventions, allocations or amendments would not
have a material adverse effect on the Members, the holders of any class or
classes of Units or other limited partner interests of the MLP issued and
outstanding or the Company and if such allocations are consistent with the
principles of Section 704 of the Code.
(d) The Manager in its discretion may determine to depreciate or
amortize the portion of an adjustment under Section 743(b) of the Code
attributable to unrealized appreciation in any Adjusted Property (to the extent
of the unamortized Book-Tax Disparity) using a predetermined rate derived from
the depreciation or amortization method and useful life applied to the Company's
common basis of such property, despite any inconsistency of such approach with
Proposed Treasury Regulation Section 1.168-2(n), Treasury Regulation Section
1.167(c)-l(a)(6) or Proposed Treasury Regulation Section 1.197-2(g)(3). If the
Manager determines that such reporting position cannot reasonably be taken, the
Manager may adopt depreciation and amortization conventions under which all
purchasers acquiring Membership Interests or limited partner interests in the
MLP in the same month would receive depreciation and amortization deductions,
based upon the same applicable rate as if they had purchased a direct interest
in the Company's property. If the Manager chooses not to utilize such aggregate
method, the Manager may use any other reasonable depreciation and amortization
conventions to preserve the uniformity of the intrinsic tax characteristics of
any Membership Interests that would not have a material adverse effect on the
Members or the holders of any class or classes of limited partner interests of
the MLP.
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(e) Any gain allocated to the Members upon the sale or other taxable
disposition of any Company asset shall, to the extent possible, after taking
into account other required allocations of gain pursuant to this Section 6.2, be
characterized as Recapture Income in the same proportions and to the same extent
as such Members (or their predecessors in interest) have been allocated any
deductions directly or indirectly giving rise to the treatment of such gains as
Recapture Income.
(f) All items of income, gain, loss, deduction and credit recognized
by the Company for federal income tax purposes and allocated to the Members in
accordance with the provisions hereof shall be determined without regard to any
election under Section 754 of the Code which may be made by the Company;
provided, however, that such allocations, once made, shall be adjusted as
necessary or appropriate to take into account those adjustments permitted or
required by Sections 734 and 743 of the Code.
(g) The Manager may adopt such methods of allocation of income, gain,
loss or deduction between a transferor and a transferee of a Company Interest as
it determines necessary, to the extent permitted or required by Section 706 of
the Code and the regulations or rulings promulgated thereunder.
(h) Allocations that would otherwise be made to a Member under the
provisions of this Article VI shall instead be made to the beneficial owner of
Membership Interests held by a nominee in any case in which the nominee has
furnished the identity of such owner to the Company in accordance with Section
6031(c) of the Code or any other method acceptable to the Manager in its sole
discretion.
Section 6.3 Distributions.
(a) Within 45 days following the end of each Quarter commencing with
the Quarter ending on March 31, 1998, an amount equal to 100% of Available Cash
with respect to such Quarter shall, subject to Section 18-607 of the Delaware
Limited Liability Company Act, be distributed in accordance with this Article VI
by the Company to the Members in accordance with their respective Percentage
Interests. The immediately preceding sentence shall not
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(f) In no event may an Indemnitee subject the Members to personal
liability by reason of the indemnification provisions set forth in this
Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or
in part under this Section 7.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons.
(i) No amendment, modification or repeal of this Section 7.7 or any
provision hereof shall in any manner terminate, reduce or impair the right of
any past, present or future Indemnitee to be indemnified by the Company, nor the
obligations of the Company to indemnify any such Indemnitee under and in
accordance with the provisions of this Section 7.7 as in effect immediately
prior to such amendment, modification or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise or
be asserted.
Section 7.8 Liability of Indemnitees.
(a) Notwithstanding anything to the contrary set forth in this
Agreement, no Indemnitee shall be liable for monetary damages to the Company,
the Members, the Assignees or any other Persons who have acquired interests in
the Company, for losses sustained or liabilities incurred as a result of any act
or omission if such Indemnitee acted in good faith.
(b) Subject to its obligations and duties as Manager set forth in
Section 7.1(a), the Manager may exercise any of the powers granted to it by this
Agreement and perform any of the duties imposed upon it hereunder either
directly or by or through its agents, and the Manager shall not be responsible
for any misconduct or negligence on the part of any such agent appointed by the
Manager in good faith.
(c) To the extent that, at law or in equity, an Indemnitee has
duties (including fiduciary duties) and liabilities relating thereto to the
Company or to the Members, the Manager and any other Indemnitee acting in
connection with the Company's business or affairs shall not be liable to the
Company or to any Member for its good faith reliance on the provisions of this
Agreement. The provisions of this Agreement, to the extent that they restrict or
otherwise modify the duties and liabilities of an Indemnitee otherwise existing
at law or in equity, are agreed by the Members to replace such other duties and
liabilities of such Indemnitee.
(d) Any amendment, modification or repeal of this Section 7.8 or
any provision hereof shall be prospective only and shall not in any way affect
the limitations on the liability to the Company, the Members, the Manager, and
the Company's and Manager's directors, officers and
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employees under this Section 7.8 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.
Section 7.9 Resolution of Conflicts of Interest.
(a) Unless otherwise expressly provided in this Agreement, whenever a
potential conflict of interest exists or arises between the Manager or any of
its Affiliates, on the one hand, and the Company, any Member or any Assignee, on
the other, any resolution or course of action by the Manager or its Affiliates
in respect of such conflict of interest shall be permitted and deemed approved
by all Members, and shall not constitute a breach of this Agreement, of any
agreement contemplated herein, or of any duty stated or implied by law or
equity, if the resolution or course of action is, or by operation of this
Agreement is deemed to be, fair and reasonable to the Company. The Manager shall
be authorized but not required in connection with its resolution of such
conflict of interest to seek Special Approval of such resolution. Any conflict
of interest and any resolution of such conflict of interest shall be
conclusively deemed fair and reasonable to the Company if such conflict of
interest or resolution is (i) approved by Special Approval (as long as the
material facts known to the Manager or any of its Affiliates regarding any
proposed transaction were disclosed to the Conflicts Committee at the time it
gave its approval), (ii) on terms no less favorable to the Company than those
generally being provided to or available from unrelated third parties or (iii)
fair to the Company, taking into account the totality of the relationships
between the parties involved (including other transactions that may be
particularly favorable or advantageous to the Company). The Manager may also
adopt a resolution or course of action that has not received Special Approval.
The Manager (including the Conflicts Committee in connection with Special
Approval) shall be authorized in connection with its determination of what is
"fair and reasonable" to the Company and in connection with its resolution of
any conflict of interest to consider (A) the relative interests of any party to
such conflict, agreement, transaction or situation and the benefits and burdens
relating to such interest; (B) any customary or accepted industry practices and
any customary or historical dealings with a particular Person; (C) any
applicable generally accepted accounting practices or principles; and (D) such
additional factors as the Manager (including the Conflicts Committee) determines
in its sole discretion to be relevant, reasonable or appropriate under the
circumstances. Nothing contained in this Agreement, however, is intended to nor
shall it be construed to require the Manager (including the Conflicts Committee)
to consider the interests of any Person other than the Company. In the absence
of bad faith by the Manager, the resolution, action or terms so made, taken or
provided by the Manager with respect to such matter shall not constitute a
breach of this Agreement or any other agreement contemplated herein or a breach
of any standard of care or duty imposed herein or therein or, to the extent
permitted by law, under the Delaware Limited Liability Company Act or any other
law, rule or regulation.
(b) Whenever this Agreement or any other agreement contemplated hereby
provides that the Manager or any of its Affiliates is permitted or required to
make a decision (i) in its "sole discretion" or "discretion," that it deems
"necessary or appropriate" or "necessary or
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advisable" or under a grant of similar authority or latitude, except as
otherwise provided herein, the Manager or such Affiliate shall be entitled to
consider only such interests and factors as it desires and shall have no duty or
obligation to give any consideration to any interest of, or factors affecting,
the Company, any Member or any Assignee, (ii) it may make such decision in its
sole discretion (regardless of whether there is a reference to "sole discretion"
or "discretion") unless another express standard is provided for, or (iii) in
"good faith" or under another express standard, the Manager or such Affiliate
shall act under such express standard and shall not be subject to any other or
different standards imposed by this Agreement, the MLP Agreement, any other
agreement contemplated hereby or under the Delaware Limited Liability Company
Act or any other law, rule or regulation. In addition, any actions taken by the
Manager or such Affiliate consistent with the standards of "reasonable
discretion" set forth in the definition of Available Cash shall not constitute a
breach of any duty of the Manager to the Company or the Members. The Manager
shall have no duty, express or implied, to sell or otherwise dispose of any
asset of the Company Group other than in the ordinary course of business. No
borrowing by any Group Member or the approval thereof by the Manager shall be
deemed to constitute a breach of any duty of the Manager to the Company or the
Members by reason of the fact that the purpose or effect of such borrowing is
directly or indirectly to (A) enable distributions to the Manager or its
Affiliates to exceed 1% of the total amount distributed to all members or (B)
hasten the expiration of the Subordination Period or the conversion of any
Subordinated Units into Common Units.
(c) Whenever a particular transaction, arrangement or resolution of a
conflict of interest is required under this Agreement to be "fair and
reasonable" to any Person, the fair and reasonable nature of such transaction,
arrangement or resolution shall be considered in the context of all similar or
related transactions.
(d) The MLP hereby authorizes the Manager, on behalf of the Company as
a partner or member of a Group Member, to approve of actions by the general
partner or managing member of such Group Member similar to those actions
permitted to be taken by the Manager pursuant to this Section 7.9.
Section 7.10 Other Matters Concerning the Manager.
(a) The Manager may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture or other paper
or document believed by it to be genuine and to have been signed or presented by
the proper party or parties.
(b) The Manager may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants and
advisers selected by it, and any act taken or omitted to be taken in reliance
upon the opinion (including an Opinion of Counsel) of such Persons as to matters
that the Manager reasonably believes to be within such Person's professional or
expert competence shall be conclusively presumed to have been done or omitted in
good faith and in accordance with such opinion.
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(c) The Manager shall have the right, in respect of any of its powers
or obligations hereunder, to act through any of its duly authorized officers, a
duly appointed attorney or attorneys-in-fact or the duly authorized officers of
the Company.
(d) Any standard of care and duty imposed by this Agreement or under
the Delaware Limited Liability Company Act or any applicable law, rule or
regulation shall be modified, waived or limited, to the extent permitted by law,
as required to permit the Manager to act under this Agreement or any other
agreement contemplated by this Agreement and to make any decision pursuant to
the authority prescribed in this Agreement, so long as such action is reasonably
believed by the Manager to be in, or not inconsistent with, the best interests
of the Company.
Section 7.11 Reliance by Third Parties.
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Company shall be entitled to assume that the Manager and any
officer of the Manager authorized by the Manager to act on behalf of and in the
name of the Company has full power and authority to encumber, sell or otherwise
use in any manner any and all assets of the Company and to enter into any
authorized contracts on behalf of the Company, and such Person shall be entitled
to deal with the Manager or any such officer as if it were the Company's sole
party in interest, both legally and beneficially. Each Member hereby waives any
and all defenses or other remedies that may be available against such Person to
contest, negate or disaffirm any action of the Manager or any such officer in
connection with any such dealing. In no event shall any Person dealing with the
Manager or any such officer or its representatives be obligated to ascertain
that the terms of the Agreement have been complied with or to inquire into the
necessity or expedience of any act or action of the Manager or any such officer
or its representatives. Each and every certificate, document or other instrument
executed on behalf of the Company by the Manager or its representatives shall be
conclusive evidence in favor of any and every Person relying thereon or claiming
thereunder that (a) at the time of the execution and delivery of such
certificate, document or instrument, this Agreement was in full force and
effect, (b) the Person executing and delivering such certificate, document or
instrument was duly authorized and empowered to do so for and on behalf of the
Company and (c) such certificate, document or instrument was duly executed and
delivered in accordance with the terms and provisions of this Agreement and is
binding upon the Company.
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 8.1 Records and Accounting.
The Manager shall keep or cause to be kept at the principal office of the
Company appropriate books and records with respect to the Company's business,
including all books and records necessary to provide to the Members any
information required to be provided pursuant to Section 3.4(a). Any books and
records maintained by or on behalf of the Company in the regular course of its
business, including books of account and records of Company proceedings, may be
kept
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on, or be in the form of, computer disks, hard drives, punch cards, magnetic
tape, photographs, micrographics or any other information storage device;
provided, that the books and records so maintained are convertible into clearly
legible written form within a reasonable period of time. The books of the
Company shall be maintained, for financial reporting purposes, on an accrual
basis in accordance with U.S. GAAP.
Section 8.2 Fiscal Year.
The fiscal year of the Company shall be a fiscal year ending December 31.
ARTICLE IX
TAX MATTERS
Section 9.1 Tax Returns and Information.
The Company shall timely file all returns of the Company that are required
for federal, state and local income tax purposes on the basis of the accrual
method and a taxable year ending on December 31. The tax information reasonably
required by the Members for federal and state income tax reporting purposes with
respect to a taxable year shall be furnished to them within 90 days of the close
of the calendar year in which the Company's taxable year ends. The
classification, realization and recognition of income, gain, losses and
deductions and other items shall be on the accrual method of accounting for
federal income tax purposes.
Section 9.2 Tax Elections.
(a) The Company shall make the election under Section 754 of the Code
in accordance with applicable regulations thereunder, subject to the reservation
of the right to seek to revoke any such election upon the Manager's
determination that such revocation is in the best interests of the Members.
(b) The Company shall elect to deduct expenses incurred in organizing
the Company ratably over a sixty-month period as provided in Section 709 of the
Code.
(c) Except as otherwise provided herein, the Manager shall determine
whether the Company should make any other elections permitted by the Code.
Section 9.3 Tax Controversies.
Subject to the provisions hereof, the Manager is designated as the "tax
matters partner" (as defined in the Code) and is authorized and required to
represent the Company (at the Company's expense) in connection with all
examinations of the Company's affairs by tax authorities, including resulting
administrative and judicial proceedings, and to expend Company funds for
professional services and costs associated therewith. Each Member agrees to
cooperate with the Manager and to
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do or refrain from doing any or all things reasonably required by the Manager to
conduct such proceedings.
Section 9.4 Withholding.
Notwithstanding any other provision of this Agreement, the Manager is
authorized to take any action that it determines in its discretion to be
necessary or appropriate to cause the Company to comply with any withholding
requirements established under the Code or any other federal, state or local law
including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of
the Code. To the extent that the Company is required or elects to withhold and
pay over to any taxing authority any amount resulting from the allocation or
distribution of income to any Member (including, without limitation, by reason
of Section 1446 of the Code), the amount withheld may at the discretion of the
Manager be treated by the Company as a distribution of cash pursuant to Section
6.3 in the amount of such withholding from such Member.
ARTICLE X
ADMISSION OF MEMBERS
Section 10.1 Admission of MLP as a Member.
Upon the transfers and conveyances described in Section 5.2, the MLP shall
be admitted to the Company as a Member.
Section 10.2 Admission of Substituted Members.
By transfer of a Membership Interest in accordance with Article IV, the
transferor shall be deemed to have given the transferee the right to seek
admission as a Substituted Member subject to the conditions of, and in the
manner permitted under, this Agreement. A transferor of a Membership Interest
shall, however, only have the authority to convey to a purchaser or other
transferee (a) the right to negotiate such Membership Interest to a purchaser or
other transferee and (b) the right to request admission as a Substituted Member
to such purchaser or other transferee in respect of the transferred Membership
Interests. Each transferee of a Membership Interest shall be an Assignee and be
deemed to have applied to become a Substituted Member with respect to the
Interests so transferred to such Person. Such Assignee shall become a
Substituted Member (x) at such time as the Members consent thereto, which
consent may be given or withheld in the Members' discretion, and (y) when any
such admission is shown on the books and records of the Company. If such consent
is withheld, such transferee shall remain an Assignee. An Assignee shall have an
interest in the Company equivalent to that of a Member with respect to
allocations and distributions, including liquidating distributions, of the
Company. With respect to voting rights attributable to Membership Interests that
are held by Assignees, the Manager shall be deemed to be the Member with respect
thereto and shall, in exercising the voting rights in respect of such Interests
on any matter, vote such Membership Interests at the written direction of the
Assignee. If no such written
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direction is received, such Membership Interests will not be voted. An Assignee
shall have no other rights of a Member.
Section 10.3 Admission of Additional Members.
(a) A Person (other than an Initial Member or a Substituted Member)
who makes a Capital Contribution to the Company in accordance with this
Agreement shall be admitted to the Company as an Additional Member only upon
furnishing to the Manager (i) evidence of acceptance in form satisfactory to the
Manager of all of the terms and conditions of this Agreement, including the
power of attorney granted in Section 2.6, and (ii) such other documents or
instruments as may be required in the discretion of the Manager to effect such
Person's admission as an Additional Member.
(b) Notwithstanding anything to the contrary in this Section 10.3, no
Person shall be admitted as an Additional Member without the consent of the
Manager, which consent may be given or withheld in the Manager's discretion. The
admission of any Person as an Additional Member shall become effective on the
date upon which the name of such Person is recorded as such in the books and
records of the Company, following the consent of the Manager to such admission.
Section 10.4 Admission of Successor or Transferee General Partner.
A successor Manager approved pursuant to Section 11.1 or 11.2 or the
transferee of or successor to all of the Manager's Membership Interest pursuant
to Section 4.2 who is proposed to be admitted as a successor Manager shall,
subject to compliance with the terms of Section 11.3, if applicable, be admitted
to the Company as the Manager, effective immediately prior to the withdrawal or
removal of the predecessor or transferring Manager pursuant to Section 11.1 or
11.2 or the transfer of the Manager's Membership Interest pursuant to Section
4.2, provided, however, that no such successor shall be admitted to the Company
until compliance with the terms of Section 4.2 has occurred and such successor
has executed and delivered such other documents or instruments as may be
required to effect such admission. Any such successor shall, subject to the
terms hereof, carry on the business of the members of the Company Group without
dissolution.
Section 10.5 Amendment of Agreement and Certificate of Formation.
To effect the admission to the Company of any Member, the Manager shall
take all steps necessary and appropriate under the Delaware Limited Liability
Company Act to amend the records of the Company to reflect such admission and,
if necessary, to prepare as soon as practicable an amendment to this Agreement
and, if required by law, the Manager shall prepare and file an amendment to the
Certificate of Formation, and the Manager may for this purpose, among others,
exercise the power of attorney granted pursuant to Section 2.6.
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ARTICLE XI
WITHDRAWAL OR REMOVAL OF MEMBERS
Section 11.1 Withdrawal of the Manager.
(a) The Manager shall be deemed to have withdrawn from the Company
upon the occurrence of any one of the following events (each such event herein
referred to as an "Event of Withdrawal");
(i) The Manager voluntarily withdraws from the Company by giving
written notice to the other Members;
(ii) The Manager transfers all of its rights as Manager pursuant to
Section 4.2;
(iii) The Manager is removed pursuant to Section 11.2;
(iv) The Manager withdraws from, or is removed as the General
Partner of, the MLP;
(v) The Manager (A) makes a general assignment for the benefit of
creditors; (B) files a voluntary bankruptcy petition for relief under
Chapter 7 of the United States Bankruptcy Code; (C) files a petition or
answer seeking for itself a liquidation, dissolution or similar relief (but
not a reorganization) under any law; (D) files an answer or other pleading
admitting or failing to contest the material allegations of a petition
filed against the Manager in a proceeding of the type described in clauses
(A)-(C) of this Section 11.1(a)(v); or (E) seeks, consents to or acquiesces
in the appointment of a trustee (but not a debtor in possession), receiver
or liquidator of the Manager or of all or any substantial part of its
properties;
(vi) A final and non-appealable order of relief under Chapter 7 of
the United States Bankruptcy Code is entered by a court with appropriate
jurisdiction pursuant to a voluntary or involuntary petition by or against
the Manager; or
(vii) (A) in the event the Manager is a corporation, a certificate of
dissolution or its equivalent is filed for the Manager, or 90 days expire
after the date of notice to the Manager of revocation of its charter
without a reinstatement of its charter, under the laws of its state of
incorporation; (B) in the event the Manager is a partnership or limited
liability company, the dissolution and commencement of winding up of the
Manager; (C) in the event the Manager is acting in such capacity by virtue
of being a trustee of a trust, the termination of the trust; (D) in the
event the Manager is a natural person, his death or adjudication of
incompetency; and (E) otherwise in the event of the termination of the
Manager.
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If an Event of Withdrawal specified in Section 11.1(a)(iv)(with respect to
withdrawal), (v), (vi) or (vii)(A), (B), (C) or (E) occurs, the withdrawing
Manager shall give notice to the other Members within 30 days after such
occurrence. The Members hereby agree that only the Events of Withdrawal
described in this Section 11.1 shall result in the withdrawal of the Manager
from the Company.
(b) Withdrawal of the Manager from the Company upon the occurrence of
an Event of Withdrawal shall not constitute a breach of this Agreement under the
following circumstances: (i) at any time during the period beginning on the
Closing Date and ending at 12:00 midnight, Eastern Standard Time, on December
31, 2007, the Manager voluntarily withdraws by giving at least 90 days' advance
notice of its intention to withdraw to the other Members; provided that prior to
the effective date of such withdrawal, the withdrawal is approved by the other
Members and the Manager delivers to the Company an Opinion of Counsel
("Withdrawal Opinion of Counsel") that such withdrawal (following the selection
of the successor General Partner) would not result in the loss of the limited
liability of any Member or of the limited partners of the MLP or cause the
Company or the MLP to be treated as an association taxable as a corporation or
otherwise to be taxed as an entity for federal income tax purposes (to the
extent not previously treated as such); (ii) at any time after 12:00 midnight,
Eastern Standard Time, on December 31, 2007, the Manager voluntarily withdraws
by giving at least 90 days' advance notice to the other Members, such withdrawal
to take effect on the date specified in such notice; (iii) at any time that the
Manager ceases to be the Manager pursuant to Section 11.1(a)(ii), (iii) or (iv).
If the Manager gives a notice of withdrawal pursuant to Section 11.1(a)(i)
hereof or Section 11.1(a)(i) of the MLP Agreement, the other Members or the MLP,
as the case may be, may, prior to the effective date of such withdrawal, elect a
successor Manager; provided, however, that such successor shall be the same
person, if any, that is elected by the limited partners of the MLP pursuant to
Section 11.1 of the MLP Agreement as the successor to the general partner of the
MLP. If, prior to the effective date of the Manager's withdrawal, a successor is
not selected by the other Members or the limited partners of the MLP, as the
case may be, as provided herein or the Company does not receive a Withdrawal
Opinion of Counsel, the Company shall be dissolved in accordance with Section
12.1. Any successor Manager elected in accordance with the terms of this Section
11.1 shall be subject to the provisions of Section 10.3.
Section 11.2 Removal of the Manager.
The Manager shall be removed if the Manager is removed as the general
partner of the MLP pursuant to Section 11.2 of the MLP Agreement. Such removal
shall be effective concurrently with the effectiveness of the removal of the
Manager as the general partner of the MLP pursuant to the terms of the MLP
Agreement. If a successor general partner for the MLP is elected in connection
with the removal of the Manager, such successor general partner for the MLP
shall, upon admission pursuant to Article X, automatically become the successor
Manager of the Company. The admission of any such successor Manager to the
Company shall be subject to the provisions of Section 10.3.
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Section 11.3 Interest of Departing Manager.
(a) The Membership Interest of the Departing Manager departing as a
result of withdrawal or removal pursuant to Section 11.1 or 11.2 shall (unless
it is otherwise required to be converted into Common Units pursuant to Section
11.3(b) of the MLP Agreement) be purchased by the successor to the Departing
Manager for cash in the manner specified in the MLP Agreement. Such purchase (or
conversion into Common Units, as applicable) shall be a condition to the
admission to the Company of the successor as the Manager. Any successor Manager
shall indemnify the Departing Manager as to all debts and liabilities of the
Company arising on or after the effective date of the withdrawal or removal of
the Departing Manager.
(b) The Departing Manager shall be entitled to receive all
reimbursements due such Departing Manager pursuant to Section 7.4, including any
employee-related liabilities (including severance liabilities), incurred in
connection with the termination of any employees employed by such Departing
Manager for the benefit of the Company.
Section 11.4 Withdrawal of Members Other than Manager.
Without the prior written consent of the Manager, which may be granted or
withheld in its sole discretion, and except as provided in Section 10.1, no
Member (other than the Manager, whose rights to withdraw are governed by
Sections 11.1, 11.2 and 11.3) shall have the right to withdraw from the
Company.
ARTICLE XII
DISSOLUTION AND LIQUIDATION
Section 12.1 Dissolution.
The Company shall not be dissolved by the admission of Substituted Members
or Additional Members or by the admission of a successor Manager in accordance
with the terms of this Agreement. Upon the removal or withdrawal of the Manager,
if a successor Manager is elected pursuant to Section 11.1 or 11.2, the Company
shall not be dissolved and such successor Manager shall continue the business of
the Company. The Company shall dissolve, and (subject to Section 12.2) its
affairs shall be wound up, upon:
(a) the expiration of its term as provided in Section 2.7;
(b) an Event of Withdrawal of the Manager as provided in Section
11.1(a) (other than Section 11.1(a)(ii)), unless a successor is elected and an
Opinion of Counsel is received as provided in Section 11.1(b) or 11.2 and such
successor is admitted to the Company pursuant to Section 10.3;
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(c) an election to dissolve the Company by the Manager that is
approved by all of the Members;
(d) the entry of a decree of judicial dissolution of the Company
pursuant to the provisions of the Delaware Limited Liability Company Act;
(e) the sale of all or substantially all of the assets and properties
of the Company Group; or
(f) the dissolution of the MLP.
Section 12.2 Continuation of the Business of the Company After Dissolution.
Upon (a) dissolution of the Company following an Event of Withdrawal
caused by the withdrawal or removal of the Manager as provided in Section
11.1(a)(i) or (iii) and the failure of the Members to select a successor to such
Departing Manager pursuant to Section 11.1 or 11.2, then within 90 days
thereafter, or (b) dissolution of the Company upon an event constituting an
Event of Withdrawal as defined in Section 11.1(a)(iv), (v) or (vi) of the MLP
Agreement, then, to the maximum extent permitted by law, within 180 days
thereafter, the Members may elect to reconstitute the Company and continue its
business on the same terms and conditions set forth in this Agreement by forming
a new limited liability company on terms identical to those set forth in this
Agreement and having as a Manager a Person approved by the Members. In
addition, upon dissolution of the Company pursuant to Section 12.1(f), if the
MLP is reconstituted pursuant to Section 12.2 of the MLP Agreement, the
reconstituted MLP may, within 180 days after such event of dissolution, acting
alone, regardless of whether there are any other Members (other than the
Manager), elect to reconstitute the Company in accordance with the immediately
preceding sentence. Upon any such election by the Members or the MLP, as the
case may be, all Members shall be bound thereby and shall be deemed to have
approved same. Unless such an election is made within the applicable time
period as set forth above, the Company shall conduct only activities necessary
to wind up its affairs. If such an election is so made, then:
(a) the reconstituted Company shall continue until the end of the term
set forth in Section 2.7 unless earlier dissolved in accordance with this
Article XII;
(b) if the successor Manager is not the former Manager, then the
interest of the former Manager shall be purchased by the successor Manager or
converted into Common Units of the MLP as provided in the MLP Agreement; and
(c) all necessary steps shall be taken to cancel this Agreement and
the Certificate of Formation and to enter into and, as necessary, to file, a new
operating agreement and certificate of formation, and the successor Manager may
for this purpose exercise the power of attorney granted the Manager pursuant to
Section 2.6; provided, that the right of the MLP to reconstitute and to continue
the business of the Company shall not exist and may not be exercised unless the
Company
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has received an Opinion of Counsel that (x) the exercise of the right would not
result in the loss of limited liability of any Member and (y) neither the
Company, the reconstituted limited liability company, nor the MLP would be
treated as an association taxable as a corporation or otherwise be taxable as an
entity for federal income tax purposes upon the exercise of such right to
continue.
Section 12.3 Liquidator.
Upon dissolution of the Company, unless the Company is continued under an
election to reconstitute and continue the Company pursuant to Section 12.2, the
Manager shall select one or more Persons to act as Liquidator. The Liquidator
(if other than the Manager) shall be entitled to receive such compensation for
its services as may be approved by a majority of the Members (other than the
Manager). The Liquidator (if other than the Manager) shall agree not to resign
at any time without 15 days' prior notice and may be removed at any time, with
or without cause, by notice of removal approved by a majority of the Members.
Upon dissolution, removal or resignation of the Liquidator, a successor and
substitute Liquidator (who shall have and succeed to all rights, powers and
duties of the original Liquidator) shall within 30 days thereafter be approved
by holders of at least a majority of the Members (other than the Manger). The
right to approve a successor or substitute Liquidator in the manner provided
herein shall be deemed to refer also to any such successor or substitute
Liquidator approved in the manner herein provided. Except as expressly provided
in this Article XII, the Liquidator approved in the manner provided herein shall
have and may exercise, without further authorization or consent of any of the
parties hereto, all of the powers conferred upon the Manager under the terms of
this Agreement (but subject to all of the applicable limitations, contractual
and otherwise, upon the exercise of such powers, other than the limitation on
sale set forth in Section 7.3(b)) to the extent necessary or desirable in the
good faith judgment of the Liquidator to carry out the duties and functions of
the Liquidator hereunder for and during such period of time as shall be
reasonably required in the good faith judgment of the Liquidator to complete the
winding up and liquidation of the Company as provided for herein.
Section 12.4 Liquidation.
The Liquidator shall proceed to dispose of the assets of the Company,
discharge its liabilities, and otherwise wind up its affairs in such manner and
over such period as the Liquidator determines to be in the best interest of the
Members, subject to Section 18-804 of the Delaware Limited Liability Company Act
and the following:
(a) Disposition of Assets. The assets may be disposed of by public
---------------------
or private sale or by distribution in kind to one or more Members on such terms
as the Liquidator and such Member or Members may agree. If any property is
distributed in kind, the Member receiving the property shall be deemed for
purposes of Section 12.4(c) to have received cash equal to its fair market
value; and contemporaneously therewith, appropriate cash distributions must be
made to the other Members. The Liquidator may, in its absolute discretion, defer
liquidation or distribution of the Company's assets for a reasonable time if it
determines that an immediate sale or distribution of all or some of the
Company's assets would be impractical or would cause undue loss to the
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Members. The Liquidator may, in its absolute discretion, distribute the
Company's assets, in whole or in part, in kind if it determines that a sale
would be impractical or would cause undue loss to the Members.
(b) Discharge of Liabilities. Liabilities of the Company include
------------------------
amounts owed to Members otherwise than in respect of their distribution rights
under Article VI. With respect to any liability that is contingent, conditional
or unmatured or is otherwise not yet due and payable, the Liquidator shall
either settle such claim for such amount as it thinks appropriate or establish a
reserve of cash or other assets to provide for its payment. When paid, any
unused portion of the reserve shall be distributed as additional liquidation
proceeds.
(c) Liquidation Distributions. All property and all cash in excess
-------------------------
of that required to discharge liabilities as provided in Section 12.4(b) shall
be distributed to the Members in accordance with, and to the extent of, the
positive balances in their respective Capital Accounts, as determined after
taking into account all Capital Account adjustments (other than those made by
reason of distributions pursuant to this Section 12.4(c)) for the taxable year
of the Company during which the liquidation of the Company occurs (with such
date of occurrence being determined pursuant to Treasury Regulation Section
1.704-1(b)(2)(ii)(g)), and such distribution shall be made by the end of such
taxable year (or, if later, within 90 days after said date of such occurrence).
Section 12.5 Cancellation of Certificate of Formation.
Upon the completion of the distribution of Company cash and property as
provided in Section 12.4 in connection with the liquidation of the Company, the
Company shall be terminated and the Certificate of Formation, as well as all
qualifications of the Company as a foreign limited liability company in
jurisdictions other than the State of Delaware, shall be canceled and such other
actions as may be necessary to terminate the Company shall be taken.
Section 12.6 Return of Contributions.
The Manager shall not be personally liable for, and shall have no
obligation to contribute or loan any monies or property to the Company to enable
it to effectuate, the return of the Capital Contributions of the Members, or any
portion thereof, it being expressly understood that any such return shall be
made solely from Company assets.
Section 12.7 Waiver of Partition.
To the maximum extent permitted by law, each Member hereby waives any right
to partition of the Company property.
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Section 12.8 Capital Account Restoration.
No Member shall have any obligation to restore any negative balance in its
Capital Account upon liquidation of the Company.
ARTICLE XIII
AMENDMENT OF AGREEMENT
Section 13.1 Amendment to be Adopted Solely by the Manager.
Each Member agrees that the Manager, without the approval of any Member,
may amend any provision of this Agreement and execute, swear to, acknowledge,
deliver, file and record whatever documents may be required in connection
therewith, to reflect:
(a) a change in the name of the Company, the location of the principal
place of business of the Company, the registered agent of the Company or the
registered office of the Company;
(b) admission, substitution, withdrawal or removal of Members in
accordance with this Agreement;
(c) a change that, in the sole discretion of the Manager, is necessary
or advisable to qualify or continue the qualification of the Company as a
limited liability company in which the Members have limited liability under the
laws of any state or to ensure that neither the Company nor the MLP will be
treated as an association taxable as a corporation or otherwise taxed as an
entity for federal income tax purposes;
(d) a change that, in the discretion of the Manager, (i) does not
adversely affect the Members in any material respect, (ii) is necessary or
advisable to satisfy any requirements, conditions or guidelines contained in any
opinion, directive, order, ruling or regulation of any federal or state agency
or judicial authority or contained in any federal or state statute (including
the Delaware Limited Liability Company Act), (iii) is required to effect the
intent expressed in the Registration Statement or the intent of the provisions
of this Agreement or is otherwise contemplated by this Agreement or (iv) is
required to conform the provisions of this Agreement with the provisions of the
MLP Agreement as the provisions of the MLP Agreement may be amended,
supplemented or restated from time to time;
(e) a change in the fiscal year or taxable year of the Company and any
changes that, in the discretion of the Manager, are necessary or advisable as a
result of a change in the fiscal year or taxable year of the Company including,
if the Manager shall so determine, a change in the definition of "Quarter" and
the dates on which distributions are to be made by the Company;
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(f) an amendment that is necessary, in the Opinion of Counsel, to
prevent the Company, or the Manager or its directors, officers, trustees or
agents from in any manner being subjected to the provisions of the Investment
Company Act of 1940, as amended, the Investment Advisers Act of 1940, as
amended, or "plan asset" regulations adopted under the Employee Retirement
Income Security Act of 1974, as amended, regardless of whether such are
substantially similar to plan asset regulations currently applied or proposed by
the United States Department of Labor;
(g) any amendment expressly permitted in this Agreement to be made by
the Manager acting alone;
(h) an amendment effected, necessitated or contemplated by a Merger
Agreement approved in accordance with Section 14.3;
(i) an amendment that, in the discretion of the Manager, is necessary
or advisable to reflect, account for and deal with appropriately the formation
by the Company of, or investment by the Company in, any corporation,
partnership, joint venture, limited liability company or other entity, in
connection with the conduct by the Company of activities permitted by the terms
of Section 2.4;
(j) a merger or conveyance pursuant to Section 14.3(d); or
(k) any other amendments substantially similar to the foregoing.
Section 13.2 Amendment Procedures.
Except with respect to amendments of he type described in Section 13.1, all
amendments to this Agreement shall be made in accordance with the following
requirements: Amendments to this Agreement may be proposed only by or with the
consent of the Managing Manager which consent may be given or withheld in its
sole discretion. A proposed amendment shall be effective upon its approval by
the Member.
ARTICLE XIV
MERGER
Section 14.1 Authority.
The Company may merge or consolidate with one or more corporations, limited
liability companies, business trusts or associations, real estate investment
trusts, common law trusts or
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unincorporated businesses, including a general partnership or limited
partnership, formed under the laws of the State of Delaware or any other state
of the United States of America, pursuant to a written agreement of merger or
consolidation ("Merger Agreement") in accordance with this Article XIV.
Section 14.2 Procedure for Merger or Consolidation.
Merger or consolidation of the Company pursuant to this Article XIV
requires the prior approval of the Manager. If the Manager shall determine, in
the exercise of its discretion, to consent to the merger or consolidation, the
Manager shall approve the Merger Agreement, which shall set forth:
(a) The names and jurisdictions of formation or organization of each
of the business entities proposing to merge or consolidate;
(b) The name and jurisdiction of formation or organization of the
business entity that is to survive the proposed merger or consolidation (the
"Surviving Business Entity");
(c) The terms and conditions of the proposed merger or consolidation;
(d) The manner and basis of exchanging or converting the equity
securities of each constituent business entity for, or into, cash, property or
general or limited partner interests, rights, securities or obligations of the
Surviving Business Entity; and (i) if any general or limited partner interests,
securities or rights of any constituent business entity are not to be exchanged
or converted solely for, or into, cash, property or general or limited partner
interests, rights, securities or obligations of the Surviving Business Entity,
the cash, property or general or limited partner interests, rights, securities
or obligations of any limited partnership, corporation, trust or other entity
(other than the Surviving Business Entity) which the holders of such general or
limited partner interests, securities or rights are to receive in exchange for,
or upon conversion of their general or limited partner interests, securities or
rights, and (ii) in the case of securities represented by certificates, upon the
surrender of such certificates, which cash, property or general or limited
partner interests, rights, securities or obligations of the Surviving Business
Entity or any general or limited partnership, corporation, trust or other entity
(other than the Surviving Business Entity), or evidences thereof, are to be
delivered;
(e) A statement of any changes in the constituent documents or the
adoption of new constituent documents (the articles or certificate of
incorporation, articles of trust, declaration of trust, certificate or agreement
of limited partnership or other similar charter or governing document) of the
Surviving Business Entity to be effected by such merger or consolidation;
(f) The effective time of the merger, which may be the date of the
filing of the certificate of merger pursuant to Section 14.4 or a later date
specified in or determinable in accordance with the Merger Agreement (provided,
that if the effective time of the merger is to be
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later than the date of the filing of the certificate of merger, the effective
time shall be fixed no later than the time of the filing of the certificate of
merger and stated therein); and
(g) Such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or appropriate by the Manager.
Section 14.3 Approval by Members of Merger or Consolidation.
(a) Except as provided in Section 14.3(d), the Manager, upon its
approval of the Merger Agreement, shall direct that the Merger Agreement be
submitted to a vote of Members (other than the Manager), whether at a special
meeting or by written consent, in either case in accordance with the
requirements of Article XIII. A copy or a summary of the Merger Agreement shall
be included in or enclosed with the notice of a special meeting or the written
consent.
(b) Except as provided in Section 14.3(d), the Merger Agreement shall
be approved upon receiving the affirmative vote or consent of the Members (other
than the Manager).
(c) Except as provided in Section 14.3(d), after such approval by vote
or consent of the Members, and at any time prior to the filing of the
certificate of merger pursuant to Section 14.4, the merger or consolidation may
be abandoned pursuant to provisions therefor, if any, set forth in the Merger
Agreement.
(d) Notwithstanding anything else contained in this Article XIV or in
this Agreement, the Manager is permitted, in its discretion, without Member
approval, to merge the Company or any Group Member into, or convey all of the
Company's assets to, another limited liability entity which shall be newly
formed and shall have no assets, liabilities or operations at the time of such
Merger other than those it receives from the Company or other Group Member if
(i) the Manager has received an Opinion of Counsel that the merger or
conveyance, as the case may be, would not result in the loss of the limited
liability of any Member or any limited partner in the MLP or cause the Company
or the MLP to be treated as an association taxable as a corporation or otherwise
to be taxed as an entity for federal income tax purposes (to the extent not
previously treated as such), (ii) the sole purpose of such merger or conveyance
is to effect a mere change in the legal form of the Company into another limited
liability entity and (iii) the governing instruments of the new entity provide
the Members and the Manager with the same rights and obligations as are herein
contained.
Section 14.4 Certificate of Merger.
Upon the required approval by the Manager and the Members (other than the
Manager) of a Merger Agreement, a certificate of merger shall be executed and
filed with the Secretary of State of the State of Delaware in conformity with
the requirements of the Delaware Limited Liability Company Act.
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Section 14.5 Effect of Merger.
(a) At the effective time of the certificate of merger:
(i) all of the rights, privileges and powers of each of the business
entities that has merged or consolidated, and all property, real, personal
and mixed, and all debts due to any of those business entities and all
other things and causes of action belonging to each of those business
entities, shall be vested in the Surviving Business Entity and after the
merger or consolidation shall be the property of the Surviving Business
Entity to the extent they were of each constituent business entity;
(ii) the title to any real property vested by deed or otherwise in
any of those constituent business entities shall not revert and is not in
any way impaired because of the merger or consolidation;
(iii) all rights of creditors and all liens on or security interests
in property of any of those constituent business entities shall be
preserved unimpaired; and
(iv) all debts, liabilities and duties of those constituent business
entities shall attach to the Surviving Business Entity and may be enforced
against it to the same extent as if the debts, liabilities and duties had
been incurred or contracted by it.
(b) A merger or consolidation effected pursuant to this Article
shall not be deemed to result in a transfer or assignment of assets or
liabilities from one entity to another.
ARTICLE XV
GENERAL PROVISIONS
Section 15.1 Addresses and Notices.
Any notice, demand, request, report or proxy materials required or
permitted to be given or made to a Member under this Agreement shall be in
writing and shall be deemed given or made when delivered in person or when sent
by first class United States mail or by other means of written communication to
the Member at the address described below. Any notice to the Company shall be
deemed given if received by the Manager at the principal office of the Company
designated pursuant to Section 2.3. The Manager may rely and shall be protected
in relying on any notice or other document from a Member, Assignee or other
Person if believed by it to be genuine.
Section 15.2 Further Action.
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
Section 15.3 Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
-53-
<PAGE>
Section 15.4 Integration.
This Agreement constitutes the entire agreement among the parties hereto
pertaining to the subject matter hereof and supersedes all prior agreements and
understandings pertaining thereto.
Section 15.5 Creditors.
None of the provisions of this Agreement shall be for the benefit of, or
shall be enforceable by, any creditor of the Company.
Section 15.6 Waiver.
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach of any other covenant, duty, agreement or condition.
Section 15.7 Counterparts.
This Agreement may be executed in counterparts, all of which together shall
constitute an agreement binding on all the parties hereto, notwithstanding that
all such parties are not signatories to the original or the same counterpart.
Each party shall become bound by this Agreement immediately upon affixing its
signature hereto.
Section 15.8 Applicable Law.
This Agreement shall be construed in accordance with and governed by the
laws of the State of Delaware, without regard to the principles of conflicts of
law.
Section 15.9 Invalidity of Provisions.
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
Section 15.10 Consent of Members.
Each Member hereby expressly consents and agrees that, whenever in this
Agreement it is specified that an action may be taken upon the affirmative vote
or consent of less than all of the Members, such action may be so taken upon the
concurrence of less than all of the Members and each Member shall be bound by
the results of such action.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
U.S. TIMBERLANDS SERVICES COMPANY, L.L.C.
By: _____________________________________________
-54-
<PAGE>
Name:_____________________________________________
Its: _____________________________________________
U.S. TIMBERLANDS COMPANY, L.P.
By: U.S. TIMBERLANDS SERVICES COMPANY, L.L.C.
Its General Partner
By: _____________________________________________
Name:_____________________________________________
Its: _____________________________________________
-55-
<PAGE>
================================================================================
CREDIT AGREEMENT
Dated as of November 19, 1997
among
U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent,
and
Letter of Credit Issuing Bank
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
Arranged by
BANCAMERICA ROBERTSON STEPHENS
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS....................................................... 6
1.1 Certain Defined Terms................................................ 6
1.2 Other Interpretive Provisions........................................ 28
1.3 Accounting Principles................................................ 29
ARTICLE II THE CREDITS...................................................... 29
2.1 Amounts and Terms of Commitments..................................... 29
(a) The Acquisition Credit........................................ 29
(b) The Working Capital Credit.................................... 29
2.2 Evidence of Obligations.............................................. 30
2.3 Procedure for Borrowing.............................................. 30
2.4 Conversion and Continuation Elections................................ 31
2.5 Optional Prepayments................................................. 33
2.6 Mandatory Prepayments of Loans; Mandatory Commitment Reductions...... 33
(a) Mandatory Prepayments......................................... 33
(b) Mandatory Commitment Reductions............................... 34
2.7 Repayment............................................................ 35
(a) The W/C Revolving Credit...................................... 35
(b) The Acquisition Revolving Credit.............................. 36
(c) The Swingline Credit.......................................... 36
(d) Letters of Credit............................................. 36
2.8 Interest............................................................. 36
2.9 Swingline Loans...................................................... 37
2.10 Fees................................................................. 39
(a) Arrangement, Agency Fees...................................... 39
(b) Commitment Fees............................................... 39
2.11 Computation of Fees and Interest..................................... 40
2.12 Payments by the Company.............................................. 40
2.13 Payments by the Banks to the Agent................................... 41
2.14 Sharing of Payments, Etc............................................. 41
2.15 Voluntary Termination of Commitments................................. 42
ARTICLE III THE LETTERS OF CREDIT........................................... 42
3.1 The Letter of Credit Facility........................................ 42
3.2 Issuance, Amendment and Renewal of Letters of Credit................. 44
3.3 Risk Participations, Drawings and Reimbursements..................... 46
3.4 Repayment of Participations.......................................... 48
3.5 Role of the Issuing Bank............................................. 48
3.6 Obligations Absolute................................................. 49
3.7 Cash Collateral Pledge............................................... 50
3.8 Letter of Credit Fees................................................ 50
3.9 Uniform Customs and Practice......................................... 51
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE IV TAXES, YIELD PROTECTION AND ILLEGALITY........................... 51
4.1 Taxes................................................................ 51
4.2 Illegality........................................................... 52
4.3 Increased Costs and Reduction of Return.............................. 53
4.4 Funding Losses....................................................... 54
4.5 Inability to Determine Rates......................................... 54
4.6 Reserves on Offshore Rate Loans...................................... 55
4.7 Certificates of Banks; Limitation on Demand.......................... 55
4.8 Substitution of Banks................................................ 55
4.9 Survival............................................................. 56
ARTICLE V CONDITIONS PRECEDENT.............................................. 56
5.1 Conditions of Initial Loan........................................... 56
(a) Credit Agreement.............................................. 56
(b) Authorization Documents....................................... 56
(c) Legal Opinions................................................ 57
(d) Payment of Fees............................................... 57
(e) Certificates.................................................. 57
(f) Equity Offering............................................... 57
(g) Debt Offering................................................. 58
(h) Repayment of Existing Debt.................................... 58
(i) Compliance Certificate........................................ 58
(j) Quarterly Timber Report....................................... 58
(k) Other Documents............................................... 58
5.2 Conditions to Acquisition Revolving Loans............................ 58
5.3 Conditions to All Borrowings and Issuances of Letters of Credit...... 59
(a) Notice of Borrowing, Conversion/Continuation
or Letter of Credit Application............................... 59
(b) Continuation of Representations and Warranties................ 59
(c) No Existing Default........................................... 59
ARTICLE VI REPRESENTATIONS AND WARRANTIES................................... 59
6.1 Existence and Power.................................................. 59
6.2 Corporate Authorization; No Contravention............................ 60
6.3 Governmental Authorization........................................... 60
6.4 Binding Effect....................................................... 60
6.5 Litigation........................................................... 60
6.6 No Default........................................................... 61
6.7 ERISA Compliance..................................................... 61
6.8 Use of Proceeds; Margin Regulations.................................. 62
6.9 Title to Properties.................................................. 62
6.10 Taxes................................................................ 62
6.11 Financial Condition.................................................. 62
6.12 Environmental Matters................................................ 63
6.13 Regulated Entities................................................... 63
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
6.16 Subsidiaries......................................................... 64
6.17 Insurance............................................................ 64
6.18 Swap Obligations..................................................... 65
6.19 Full Disclosure...................................................... 65
ARTICLE VII AFFIRMATIVE COVENANTS........................................... 65
7.1 Financial Statements................................................. 65
7.2 Certificates; Other Information...................................... 66
7.3 Notices.............................................................. 68
7.4 Preservation of Existence, Etc....................................... 69
7.5 Maintenance of Property.............................................. 69
7.6 Insurance............................................................ 70
7.7 Payment of Obligations............................................... 70
7.8 Compliance with Laws................................................. 70
7.9 Compliance with ERISA................................................ 70
7.10 Inspection of Property and Books and Records......................... 70
7.11 Environmental Laws................................................... 71
7.12 Use of Proceeds...................................................... 71
ARTICLE VIII NEGATIVE COVENANTS............................................. 71
8.1 Limitation on Liens.................................................. 71
8.2 Disposition of Assets................................................ 73
8.3 Consolidations and Mergers........................................... 75
8.4 Loans and Investments................................................ 75
8.5 Limitation on Indebtedness........................................... 76
8.6 Transactions with Affiliates......................................... 77
8.7 Use of Proceeds...................................................... 77
8.8 Contingent Obligations............................................... 77
8.9 Joint Ventures....................................................... 78
8.10 Lease Obligations.................................................... 78
8.11 Restricted Payments.................................................. 79
8.12 ERISA................................................................ 79
8.13 Change in Business................................................... 79
8.14 Minimum Pro Forma EBITDDA to Pro Forma Interest Expense.............. 79
8.15 Maximum Funded Debt to Pro Forma EBITDDA............................. 80
8.16 Minimum Asset Value to Funded Debt Ratio............................. 80
8.17 Accounting Changes................................................... 80
8.18 Amendments to Documents.............................................. 80
8.19 Limitation on Voluntary Payments on Senior Notes..................... 80
8.20 Harvesting Restrictions.............................................. 80
ARTICLE IX EVENTS OF DEFAULT................................................ 81
9.1 Event of Default..................................................... 81
(a) Non-Payment................................................... 81
(b) Representation or Warranty.................................... 82
(c) Specific Defaults............................................. 82
(d) Other Defaults................................................ 82
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
(e) Cross-Default................................................. 82
(f) Insolvency; Voluntary Proceedings............................. 83
(g) Involuntary Proceedings....................................... 83
(h) ERISA......................................................... 83
(i) Monetary Judgments............................................ 83
(j) Non-Monetary Judgments........................................ 84
9.2 Remedies............................................................. 84
9.3 Rights Not Exclusive................................................. 85
ARTICLE X THE AGENT......................................................... 85
10.1 Appointment and Authorization; "Agent"............................... 85
10.2 Delegation of Duties................................................. 85
10.3 Liability of Agent................................................... 86
10.4 Reliance by Agent.................................................... 86
10.5 Notice of Default.................................................... 87
10.6 Credit Decision...................................................... 87
10.7 Indemnification of Agent............................................. 87
10.8 Agent in Individual Capacity......................................... 88
10.9 Successor Agent...................................................... 88
10.10 Withholding Tax...................................................... 89
ARTICLE XI MISCELLANEOUS.................................................... 90
11.1 Amendments and Waivers............................................... 90
11.2 Notices.............................................................. 91
11.3 No Waiver; Cumulative Remedies....................................... 92
11.4 Costs and Expenses................................................... 92
11.5 Company Indemnification.............................................. 92
11.6 Payments Set Aside................................................... 93
11.7 Successors and Assigns............................................... 93
11.8 Assignments, Participations, etc..................................... 93
11.9 Confidentiality...................................................... 95
11.10 Set-off.............................................................. 96
11.11 Automatic Debits of Fees............................................. 96
11.12 Notification of Addresses, Lending Offices, Etc..................... 96
11.13 Counterparts......................................................... 97
11.14 Severability......................................................... 97
11.15 No Third Parties Benefited........................................... 97
11.16 Governing Law and Jurisdiction....................................... 97
11.17 Waiver of Jury Trial................................................. 98
11.18 Entire Agreement..................................................... 98
</TABLE>
SCHEDULES
Schedule 2.1 Commitments
Schedule 5.1(b) States for Good Standing Certification
Schedule 6.7 ERISA
iv
<PAGE>
Schedule 8.1 Permitted Liens
Schedule 8.4(b) Cash Management Program
Schedule 8.4(g) Existing Investments
Schedule 8.5 Permitted Indebtedness
Schedule 8.6 Transactions with Affiliates
Schedule 8.8 Contingent Obligations
Schedule 11.2 Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D Form of Legal Opinion of Company's Counsel
Exhibit E Form of Assignment and Acceptance
Exhibit F-1 Form of Acquisition Revolving Promissory Note
Exhibit F-2 Form of W/C Revolving Promissory Note
Exhibit G Initial Timber Report
Exhibit H Form of Escrow Agreement
Exhibit I U.S. Timberlands Procedure for Purchase Orders, Check Requests
and Accounts Payable
Exhibit J U.S. Timberlands Investment Policy and Guidelines
v
<PAGE>
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of November 19, 1997, among U.S.
Timberlands Klamath Falls, L.L.C., a Delaware limited liability company (the
"Company"), the several financial institutions from time to time party to this
-------
Agreement (collectively, the "Banks"; individually, a "Bank"), and Bank of
----- ----
America National Trust and Savings Association, as letter of credit issuing bank
and as agent for the Banks.
WHEREAS, the Banks have agreed to make available to the Company revolving
credit facilities with a letter of credit subfacility upon the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 Certain Defined Terms. The following terms have the following meanings:
---------------------
"Acquisition" means any transaction or series of related transactions for
-----------
the purpose of or resulting, directly or indirectly, in (a) the acquisition of
all or substantially all of the assets of a Person (other than a natural
person), or of any business or division of a Person, (b) the acquisition of more
than 50% of the capital stock, partnership interests, membership interests or
equity of any Person having voting power for the election of directors or other
similar ability to control such Person, or otherwise causing any Person to
become a Subsidiary, or (c) a merger or consolidation or any other combination
with another Person (other than a Person that is a Subsidiary) provided that the
Company or the Subsidiary is the surviving entity.
"Acquisition Funding Date" means the date on which the funding of an
------------------------
Acquisition Revolving Loan occurs.
"Acquisition Revolving Commitment" has the meaning specified in subsection
--------------------------------
2.1(a).
"Acquisition Revolving Loans" has the meaning specified in subsection
---------------------------
2.1(a).
"Affiliate" means, as to any Person, any other Person which, directly or
---------
indirectly, is in control of, is controlled by, or is under common control with,
such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, membership interests, by contract,
or otherwise.
6
<PAGE>
"Agent" means BofA in its capacity as agent for the Banks hereunder, and
-----
any successor agent arising under Section 10.9.
"Agent-Related Persons" means BofA and any successor agent arising under
---------------------
Section 10.9 and any successor letter of credit issuing bank or Swingline Bank
hereunder, together with their respective Affiliates (including, in the case of
BofA, the Arranger), and the officers, directors, employees, agents and
attorneys-in-fact of such Persons and Affiliates.
"Agent's Payment Office" means the address for payments set forth on
----------------------
Schedule 11.2 or such other address as the Agent may from time to time specify.
- -------------
"Agreement" means this Credit Agreement.
---------
"Annual Timber Report" has the meaning specified in subsection 7.2(f).
--------------------
"Applicable Margin" means, (a) with respect to any Offshore Rate Loan or
-----------------
Base Rate Loan, the per annum amounts set forth below under Applicable Margin
opposite the Pricing Level in effect on the date such Offshore Rate Loan or Base
Rate Loan is borrowed, continued or converted (notwithstanding any subsequent
change in the Pricing Level during the Interest Period applicable to such
Offshore Rate Loan) and (b) with respect to the commitment fee and letter-of-
credit fee, the per annum amounts set forth below under Applicable Margin
opposite the Pricing Level in effect from time to time; provided, however, that
-------- -------
until delivery of the Compliance Certificate pursuant to subsection 7.2(b) for
the period ending June 30, 1998, the Applicable Margin shall be (i) 50 basis
points in the case of the commitment fee, (ii) 250 basis points in the case of
the Offshore Rate, (iii) 150 basis points in the case of the Base Rate, and (iv)
250 basis points in the case of letter of credit fees:
<TABLE>
<CAPTION>
======================================================================
Applicable Margin
(in basis points per annum)
======================================================================
Pricing Commitment Offshore Base Rate Letter of
Level Fee Rate+ Credit Fee
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. 37.5 100.0 0.0 100.0
----------------------------------------------------------------------
2. 37.5 137.5 37.5 137.5
----------------------------------------------------------------------
3. 50.0 175.0 75.0 175.0
----------------------------------------------------------------------
4. 50.0 225.0 125.0 225.0
----------------------------------------------------------------------
5. 50.0 250.0 150.0 250.0
======================================================================
</TABLE>
"Pricing Level" means, for each Pricing Period the pricing
-------------
level set forth below opposite the Leverage Ratio set forth in the
7
<PAGE>
Compliance Certificate most recently delivered to Agent pursuant to
Section 7.1 below:
<TABLE>
<CAPTION>
Pricing Level Leverage Ratio
------------- --------------------------------------------------
<S> <C>
1. less than or equal to 2.75 to 1.0
2. greater than 2.75 to 1.0 but less than or equal
to 3.50 to 1.0
3. greater than 3.50 to 1.0 but less than or equal
to 4.0 to 1.0
4. greater than 4.0 to 1.0 but less than or equal
to 4.50 to 1.0
5. greater than 4.50 to 1.0
</TABLE>
provided, however, that if any Compliance Certificate
-------- -------
is not delivered by the date required by subsection 7.2(b), then,
subject to the other provisions of this Agreement, commencing on the
date such Compliance Certificate was required to be delivered until
the date such Compliance Certificate is delivered, the highest
Applicable Margin shall apply; from and after the date three Business
Days after such Compliance Certificate is received, the Applicable
Margin indicated by the Leverage Ratio set forth in such Compliance
Certificate shall apply.
"Pricing Level Change Date" means, beginning June 30,
-------------------------
1998, the date five Business Days after the date upon which the
Company delivers a Compliance Certificate pursuant to subsection
7.2(b).
"Pricing Period" means each period commencing on each
--------------
Pricing Level Change Date and ending the day prior to the next Pricing
Level Change Date
"Arranger" means BancAmerica Robertson Stephens, a Delaware corporation.
--------
"Asset Value to Funded Debt Ratio" means, at any date of determination, the
--------------------------------
ratio of (a) 70% of the Retail Timberlands Value as of such date to (b) Funded
Debt.
"Assignee" has the meaning specified in subsection 11.8(a).
--------
"Attorney Costs" means and includes all fees and disbursements of any law
--------------
firm or other external counsel, the allocated cost of internal legal services
and all disbursements of internal counsel.
"Available Cash" means, with respect to any fiscal quarter and without
--------------
duplication: (a) the sum of (i) all cash and cash equivalents of the Company
and its Subsidiaries (collectively as a consolidated entity, the "Company
Group") on hand at the end of such quarter (excluding any amounts on deposit
pursuant to an Escrow Agreement) and (ii) all additional cash and cash
equivalents of the Company Group on
8
<PAGE>
hand on the date of determination of Available Cash with respect to such quarter
resulting from borrowings for working capital purposes made subsequent to the
end of such quarter, less (b) the amount of any cash reserves that is necessary
----
or appropriate in the reasonable discretion of the Managing Member to (i)
provide for the proper conduct of the business of the Company Group (including
reserves for future capital expenditures and for anticipated future credit needs
of the Company Group) subsequent to such quarter, (ii) comply with applicable
law or any loan agreement, security agreement, mortgage, debt instrument or
other agreement or obligation to which any member of the Company Group is a
party or by which it is bound or its assets are subject (including the Loan
Documents), or (iii) provide funds for distributions under Sections 6.4 or 6.5
of the Partnership Agreement in respect of any one or more of the next four
quarters; provided that disbursements made by a member of the Company Group or
cash reserves established, increased or reduced after the end of such quarter
but on or before the date of determination of Available Cash with respect to
such quarter shall be deemed to have been made, established, increased or
reduced for purposes of determining Available Cash, within such quarter if the
Managing Member so determines. In addition, without limiting the foregoing,
Available Cash for any fiscal quarter shall reflect reserves equal to (A) 50% of
the interest projected to be paid on the Senior Notes in the next succeeding
fiscal quarter plus (B) beginning with a date three fiscal quarters before a
scheduled principal payment date on the Senior Notes, 25% of the aggregate
principal amount thereof due on any such payment date in the third succeeding
fiscal quarter, 50% of the aggregate principal amount due on any such payment
date in the second succeeding fiscal quarter and 75% of the aggregate principal
amount due on any quarterly payment date in the next succeeding fiscal quarter,
plus (C) 100% of the aggregate amount of all accrued and unpaid interest in
respect the Loans on the date of determination, plus (D) if the Company has
elected to repay the Acquisition Revolving Loans pursuant to the installment
election provided in subsection 2.7(b)(ii), beginning with a date one fiscal
quarter before the first such installment is due hereunder, the amount of the
next scheduled installment of principal on account of the Acquisition Revolving
Loans.
"Bank" has the meaning specified in the introductory clause hereto.
----
References to the "Banks" shall include BofA, including in its capacity as a
Swingline Bank and an Issuing Bank; for purposes of clarification only, to the
extent that BofA may have any rights or obligations in addition to those of the
Banks due to its status as a Swingline Bank or an Issuing Bank, its status as
such will be specifically referenced.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11
---------------
U.S.C. (S)101, et seq.).
"Base Rate" means, for any day, the higher of: (a) 0.50% per annum above
---------
the latest Federal Funds Rate; and (b) the rate of interest in effect for such
day as publicly announced from time to time by BofA in San Francisco,
California, as its "reference rate." (The "reference rate" is a rate set by BofA
based upon various factors including BofA's costs and desired return, general
economic conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above, or below such announced
rate.) Any change in the reference rate announced by BofA shall take
9
<PAGE>
effect at the opening of business on the day specified in the public
announcement of such change.
"Base Rate Loan" means an Acquisition Revolving Loan, W/C Revolving Loan,
--------------
or L/C Advance, that bears interest based on the Base Rate.
"BofA" means Bank of America National Trust and Savings Association, a
----
national banking association.
"Borrowing" means a borrowing hereunder consisting of Loans of the same
---------
Type made to the Company on the same day by the Banks, or a Swingline Loan made
to the Company on the same day by the Swingline Bank, in each case pursuant to
Article II, and, other than in the case of Base Rate Loans, having the same
Interest Period.
"Borrowing Date" means any date on which a Borrowing occurs under Section
--------------
2.3.
"Business Day" means any day other than a Saturday, Sunday or other day on
------------
which commercial banks in New York City or San Francisco are authorized or
required by law to close and, if the applicable Business Day relates to any
Offshore Rate Loan, means such a day on which dealings are carried on in the
applicable London offshore dollar interbank market.
"Capital Adequacy Regulation" means any guideline, request or directive of
---------------------------
any central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any Bank or of any corporation controlling a Bank.
"Capital Lease" means, as to any Person, any lease of any property by such
-------------
Person as lessee that is classified and accounted for as a "capital lease" on
the balance sheet of such Person prepared in accordance with GAAP.
"Capital Lease Obligation" means, with respect to any Capital Lease, the
------------------------
amount of the obligation of the lessee thereunder that, in accordance with GAAP,
would appear on a balance sheet of such Person in respect of such Capital Lease.
"Cash Collateralize" means to pledge and deposit with or deliver to the
------------------
Agent, for the benefit of (i) in the case of L/C Obligations, the Agent, the
Issuing Bank and the Banks, and (ii) in the case of Offshore Rate Loans, the
Agent and the Banks, in each case as collateral for the L/C Obligations or the
Offshore Rate Loans, as applicable, cash or deposit account balances pursuant to
a cash collateral account agreement in form and substance satisfactory to the
Agent and the Majority Banks. Cash collateral shall be maintained in blocked,
interest bearing deposit accounts at BofA.
"Cash Equivalents" means (i) any evidence of Indebtedness with a maturity
----------------
of 365 days or less issued by or directly, fully and unconditionally guaranteed
or insured by the United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States of America
is pledged in support thereof); (ii)
10
<PAGE>
deposits, certificates of deposit or acceptances with a maturity of 365 days or
less of any institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than
$500,000,000; (iii) commercial paper with a maturity of 365 days or less issued
by a corporation (other than an Affiliate of the Company) incorporated or
organized under the laws of the United States or any state thereof or the
District of Columbia and rated at least "A-1" by S&P or "P-1" by Moody's; (iv)
repurchase agreements and reverse repurchase agreements relating to marketable
direct obligations issued by or directly, fully and unconditionally guaranteed
or insured by the United States of America or any agency or instrumentality
thereof , in each case maturing within 365 days from the date of acquisition;
(v) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and having as at such date the highest rating obtainable from either S&P
or Moody's, or (vi) money market mutual or similar funds that invest exclusively
in obligations referred to in clauses (i) through (v) of this definition, in
each case having assets in excess of $100,000,000.
"Change of Control" means the occurrence of any of the following: the
-----------------
Managing Member ceases to be the managing member of the Company or the MLP
ceases to be a member of the Company or reduces the percentage amount of its
equity interest in the Company below 98.9899%.
"Closing Date" means the date on which all conditions precedent set forth
------------
in Section 5.1 are satisfied (or, in the case of subsection 5.1(d), waived by
the Person entitled to receive such payment).
"Code" means the Internal Revenue Code of 1986, and regulations promulgated
----
thereunder.
"Commitment", as to each Bank, means such Bank's Acquisition Revolving
----------
Commitment or W/C Credit Commitment, as applicable; in the case of the Swingline
Bank, its Swingline Commitment; and in the case of the Issuing Bank, its L/C
Commitment.
"Compliance Certificate" means a certificate substantially in the form of
----------------------
Exhibit C.
- ---------
"Contingent Obligation" means, as to any Person, any direct or indirect
---------------------
liability of that Person, whether or not contingent, with or without recourse,
(a) with respect to any Indebtedness, lease, dividend, letter of credit or other
obligation (the "primary obligations") of another Person (the "primary
obligor"), including any obligation of that Person (i) to purchase, repurchase
or otherwise acquire such primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any such primary
obligation, or to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
item, level of income or financial condition of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary
11
<PAGE>
obligation of the ability of the primary obligor to make payment of such primary
obligation, or (iv) otherwise to assure or hold harmless the holder of any such
primary obligation against loss in respect thereof (each, a "Guaranty
--------
Obligation"); (b) with respect to any Surety Instrument (other than any Letter
- ----------
of Credit) issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings or payments; (c) to purchase any
materials, supplies or other property from, or to obtain the services of,
another Person if the relevant contract or other related document or obligation
requires that payment for such materials, supplies or other property, or for
such services, shall be made regardless of whether delivery of such materials,
supplies or other property is ever made or tendered, or such services are ever
performed or tendered, or (d) in respect of any Swap Contract. The amount of any
Contingent Obligation (other than Swap Contracts) shall be deemed equal to the
lesser of (i) the stated or determinable amount of the primary obligation in
respect of which such Contingent Obligation is made and (ii) the stated
determined amount for which such Person is liable, or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof.
The amount of any Swap Contract shall be equal to the Swap Termination Value
thereof.
"Contractual Obligation" means, as to any Person, any provision of any
----------------------
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement to
which such Person is a party or by which it or any of its property is bound.
"Conversion/Continuation Date" means any date on which, under Section 2.4,
----------------------------
the Company (a) converts Loans of one Type to another Type, or (b) continues as
Loans of the same Type, but with a new Interest Period, Loans having Interest
Periods expiring on such date.
"Conveyance Agreements" means the Contribution, Conveyance and Assumption
---------------------
Agreement among the Managing Member, the Company, Old Services, the MLP and
certain other parties, together with the additional conveyance documents and
instruments contemplated or referenced thereunder.
"Debt Offering" means a public offering of the Senior Notes.
-------------
"Default" means any event or circumstance which, with the giving of notice,
-------
the lapse of time, or both, would (if not cured or otherwise remedied during
such time) constitute an Event of Default.
"Dollars", "dollars" and "$" each mean lawful money of the United States.
------- ------- -
"EBITDDA" means, for any fiscal quarter, the sum of (a) Net Income, plus
------- --- ----
(b) all amounts treated as expenses for depreciation and the amortization of
intangibles of any kind to the extent included in the determination of Net
Income, plus (c) all amounts treated as expenses for the depletion of Timber
----
from the Timberlands, plus (d) Net Interest Expense to the extent included in
----
the determination of Net Income, plus (e) nonrecurring non-cash charges to the
----
extent included in the determination of Net Income, plus (f) Net Proceeds from
----
sales of assets permitted under Section 8.2 not in
12
<PAGE>
excess of $15,000,000 for any four consecutive fiscal quarters, all as
calculated for the Company and its Subsidiaries on a consolidated basis.
"Effective Amount" means (a) with respect to any Loans on any date, the
----------------
aggregate outstanding principal amount thereof after giving effect to any
Borrowings and prepayments or repayments of Loans occurring on such date; and
(b) with respect to any outstanding L/C Obligations on any date, the amount of
such L/C Obligations on such date after giving effect to any Issuances of
Letters of Credit occurring on such date and any other changes in the aggregate
amount of the L/C Obligations as of such date, including as a result of any
reimbursements of outstanding unpaid drawings under any Letters of Credit or any
reductions in the maximum amount available for drawing under Letters of Credit
taking effect on such date. For purposes of subsection 2.6(a), the Effective
Amount shall be determined without giving effect to any mandatory prepayments
required to be made thereunder that have not been made.
"Eligible Assignee" means (a) a commercial bank organized under the laws of
-----------------
the United States, or any state thereof, and having a combined capital and
surplus of at least $250,000,000; (b) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having a combined capital and surplus of at least $250,000,000,
provided that such bank is acting through a branch or agency located in the
United States; and (c) a Person that is primarily engaged in the business of
commercial banking and that is (i) a Subsidiary of a Bank, (ii) a Subsidiary of
a Person of which a Bank is a Subsidiary, or (iii) a Person of which a Bank is a
Subsidiary.
"Environmental Claims" means all claims, however asserted, by any
--------------------
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or injury
to the environment.
"Environmental Laws" means all federal, state or local laws, statutes,
------------------
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, requests, licenses, authorizations and permits of, and
agreements with, any Governmental Authorities, in each case relating to
environmental, health, safety and land use matters.
"Equity Offering" means a public offering of limited partner interests in
---------------
the MLP.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
-----
regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
---------------
under common control with the Company within the meaning of Section 414(b) or
(c) of the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a Pension Plan;
-----------
(b) a withdrawal by the Company or any ERISA Affiliate from a Pension Plan
subject to
13
<PAGE>
Section 4063 of ERISA during a plan year in which it was a substantial employer
(as defined in Section 4001(a)(2) of ERISA) or a cessation of operations which
is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete
or partial withdrawal by the Company or any ERISA Affiliate from a Multiemployer
Plan or notification that a Multiemployer Plan is in reorganization; (d) the
filing of a notice of intent to terminate, the treatment of a Plan amendment as
a termination under Section 4041 or 4041A of ERISA, or the commencement of
proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e)
an event or condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the
imposition of any liability under Title IV of ERISA, other than PBGC premiums
due but not delinquent under Section 4007 of ERISA, upon the Company or any
ERISA Affiliate.
"Escrow Agreement" means an agreement or agreements entered into by the
----------------
Company pursuant to subsection 8.2(b) or Section 8.20, substantially in the form
of Exhibit H.
---------
"Event of Default" means any of the events or circumstances specified in
----------------
Section 9.1.
"Event of Loss" means any of the following: (a) any material loss,
-------------
destruction or damage of any property, including any destruction of Timber due
to fire, disease or infestation, or (b) any actual condemnation, seizure or
taking, by exercise of the power of eminent domain or otherwise, of any
property, or confiscation of any property or the requisition of the use of such
property, in each case to the extent compensation is paid for such loss, whether
under an insurance policy or otherwise.
"Exchange Act" means the Securities Exchange Act of 1934, and regulations
------------
promulgated thereunder.
"Excess Asset Sales Proceeds" has the meaning specified in subsection
---------------------------
8.2(b).
"Excess Timber Harvest Proceeds" has the meaning specified in Section 8.20.
------------------------------
"Existing Credit Agreement" means the Credit Agreement dated as of July 14,
-------------------------
1997 among the Company, Old Services, the several financial institutions parties
thereto (as defined therein, the "Banks") and BofA, as agent for the Banks.
"Federal Funds Rate" means, for any day, the rate set forth in the weekly
------------------
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York (including any such successor,
"H.15(519)") on the preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if for any relevant day such rate is not so published on any
such preceding Business Day, the rate for such day will be the arithmetic mean
as determined by the Agent of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by
each of three leading brokers of Federal funds transactions in New York City
selected by the Agent.
14
<PAGE>
"Fee Letter" has the meaning specified in subsection 2.10(a).
----------
"Finance" means U.S. Timberlands Finance Corp., a Delaware corporation and
--------
a Wholly-Owned Subsidiary. "FRB" means the Board of Governors of the Federal
Reserve System, and any Governmental Authority succeeding to any of its
principal functions.
"FRB" Means the Board of Governors of the Federal Reserve System, and any
---
Governmental Authority succeeding to any of its principal functions.
"Funded Debt" means, as calculated for the Company on a consolidated basis
-----------
as of any date of determination, (a) the total Indebtedness of the Company of
the type described in clauses (a), (b), (d) or (e) of the definition of
Indebtedness, excluding therefrom however all obligations representing the
deferred purchase price of property with respect to which recourse is limited to
the asset so acquired, minus (b) cash and Cash Equivalents on the Company on
-----
such date that are not on deposit pursuant to an Escrow Agreement and that are
subject to no Lien other than as Cash Collateral hereunder or a right of set-off
by the relevant depository institution.
"Further Taxes" means any and all present or future taxes, levies,
-------------
assessments, imposts, duties, deductions, fees, withholdings or similar charges
(including, without limitation, net income taxes and franchise taxes), and all
liabilities with respect thereto, imposed by any jurisdiction on account of
amounts payable or paid pursuant to Section 4.1.
"GAAP" means generally accepted accounting principles set forth from time
----
to time in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date of
determination.
"Governmental Authority" means any nation or government, any state or other
----------------------
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Gross Interest Expense" means, as calculated for the Company and its
----------------------
Subsidiaries on a consolidated basis for any period as at any date of
determination, cash interest expense for such period (including all commissions,
discounts, fees and other charges under letters of credit and similar
instruments and under any Swap Contract) classified and accounted for in
accordance with GAAP.
"Guaranty Obligation" has the meaning specified in the definition of
-------------------
"Contingent Obligation."
"Holdings Credit Agreement" means the Credit Agreement dated as of August
-------------------------
29, 1996 among ABN AMRO Bank, N.V., as agent, the banks party thereto, and U.S.
15
<PAGE>
Timberlands Holdings, L.L.C., as affected by the assignment of the rights of ABN
AMRO Bank, N.V. thereunder to BofA.
"Honor Date" has the meaning specified in subsection 3.3(b).
----------
"Indebtedness" of any Person means, without duplication, (a) all
------------
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than trade
payables entered into in the Ordinary Course of Business on ordinary terms); (c)
all non-contingent reimbursement or payment obligations with respect to Surety
Instruments; (d) all outstanding obligations evidenced by notes, bonds,
debentures or similar instruments, including obligations so evidenced incurred
in connection with the acquisition of property, assets or businesses; (e) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
property acquired by the Person (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property); (f) all obligations with respect to
Capital Leases; (g) all indebtedness referred to in clauses (a) through (f)
above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien upon or in property
(including accounts and contracts rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness;
and (h) all Guaranty Obligations in respect of indebtedness or obligations of
others of the kinds referred to in clauses (a) through (g) above.
For all purposes of this Agreement, the Indebtedness of any Person shall
include all recourse Indebtedness of any partnership or joint venture or limited
liability company in which such Person is a general partner or a joint venturer
or a member.
"Indemnified Liabilities" has the meaning specified in Section 11.5.
-----------------------
"Indemnified Person" has the meaning specified in Section 11.5.
------------------
"Independent Auditor" has the meaning specified in subsection 7.1(a).
-------------------
"Insolvency Proceeding" means, with respect to any Person, (a) any case,
---------------------
action or proceeding with respect to such Person before any court or other
Governmental Authority relating to bankruptcy, reorganization, insolvency,
liquidation, receivership, dissolution, winding-up or relief of debtors, or (b)
any general assignment for the benefit of creditors, composition, marshalling of
assets for creditors, or other, similar arrangement in respect of its creditors
generally or any substantial portion of its creditors; undertaken under U.S.
Federal, state or foreign law, including the Bankruptcy Code.
"Initial Timber Report" means the Quarterly Timber Report delivered on the
---------------------
Closing Date substantially in the form of Exhibit G.
---------
"Interest Payment Date" means, as to (a) any Offshore Rate Loan, the last
---------------------
day of each Interest Period applicable to such Loan, (b) as to any Base Rate
Loan, the last Business Day of each calendar quarter, and (c) with respect to
any Swingline Loan, the
16
<PAGE>
last Business Day of each calendar month or, if sooner, the Revolving
Termination Date; provided, however, that if any Interest Period for an Offshore
-------- -------
Rate Loan exceeds three months, the date that falls three months after the
beginning of such Interest Period shall also be an Interest Payment Date.
"Interest Period" means, as to any Offshore Rate Loan, the period
---------------
commencing on the Borrowing Date of such Loan or on the Conversion/Continuation
Date on which the Loan is converted into or continued as an Offshore Rate Loan,
and ending on the date one, two, three or six months thereafter (and any other
period that is 12 months or less and is consented to by each of the Banks in the
given instance) as selected by the Company in its Notice of Borrowing or Notice
of Conversion/Continuation; provided that:
--------
(a) if any Interest Period would otherwise end on a day that is not a
Business Day, that Interest Period shall be extended to the following
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the preceding Business Day;
(b) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall end on
the last Business Day of the calendar month at the end of such Interest
Period;
(c) no Interest Period for any W/C Revolving Loan shall extend beyond
the Revolving Termination Date or any date necessary in order to comply
with subsection 2.6(a)(iv);
(d) no Interest Period for any Acquisition Revolving Loan shall
extend beyond the Revolving Termination Date, unless and until the Company
exercises its election to repay the Acquisition Loans in installments in
accordance with subsection 2.7(b), after which Interest Periods may extend
beyond the Revolving Termination Date so long as no Interest Period extends
beyond October 29, 2004; and
(e) no Interest Period applicable to any Acquisition Revolving Loan
after the Revolving Termination Date shall extend beyond any date upon
which any scheduled principal repayment is due pursuant to subsection
2.7(b) unless the aggregate principal amount of Acquisition Revolving Loans
represented by Base Rate Loans or Offshore Rate Loans having Interest
Periods that will expire on or before such date equals or exceeds the
amount of such principal payment.
"IRS" means the Internal Revenue Service, and any Governmental Authority
---
succeeding to any of its principal functions under the Code.
"Issuance Date" has the meaning specified in subsection 3.1(a).
-------------
17
<PAGE>
"Issue" means, with respect to any Letter of Credit, to issue or to extend
-----
the expiry of, or to renew or increase the amount of, such Letter of Credit; and
the terms "Issued," "Issuing" and "Issuance" have corresponding meanings.
------ ------- --------
"Issuing Bank" means BofA in its capacity as issuer of one or more Letters
------------
of Credit hereunder, together with any replacement letter of credit issuer
arising under subsection 10.1(b) or Section 10.9.
"Joint Venture" means a single-purpose corporation, partnership, limited
-------------
liability company, joint venture or other similar legal arrangement (whether
created by contract or conducted through a separate legal entity) now or
hereafter formed by the Company or any of its Subsidiaries with another Person
in order to conduct a common venture or enterprise with such Person.
"L/C Advance" means each Bank's participation in any L/C Borrowing in
-----------
accordance with its Pro Rata Share.
"L/C Amendment Application" means an application form for amendment of
-------------------------
outstanding standby or commercial documentary letters of credit as shall at any
time be in use at the Issuing Bank, as the Issuing Bank shall request.
"L/C Application" means an application form for issuances of standby or
---------------
commercial documentary letters of credit as shall at any time be in use at the
Issuing Bank, as the Issuing Bank shall request.
"L/C Borrowing" means an extension of credit resulting from a drawing under
-------------
any Letter of Credit which shall not have been reimbursed on the date when made
nor converted into a Borrowing of W/C Revolving Loans under subsection 3.3(b).
"L/C Commitment" means the commitment of the Issuing Bank to Issue, and the
--------------
commitment of the Banks severally to participate in, Letters of Credit from time
to time Issued or outstanding under Article III, in an aggregate amount not to
exceed on any date the amount of $5,000,000, as the same shall be reduced as a
result of a reduction in the L/C Commitment pursuant to Section 2.6; provided
that the L/C Commitment is a part of the combined W/C Commitments, rather than a
separate, independent commitment.
"L/C Obligations" means at any time the sum of (a) the aggregate undrawn
---------------
amount of all Letters of Credit then outstanding, plus (b) the amount of all
unreimbursed drawings under all Letters of Credit, including all outstanding L/C
Borrowings.
"L/C-Related Documents" means the Letters of Credit, the L/C Applications,
---------------------
the L/C Amendment Applications and any other document relating to any Letter of
Credit, including any of the Issuing Bank's standard form documents for letter
of credit issuances.
"Lending Office" means, with respect to any Bank and the Swingline Bank,
--------------
the office or offices of the Bank specified as its "Lending Office" or "Domestic
Lending Office" or "Offshore Lending Office", as the case may be, on Schedule
--------
11.2, or such
- ----
18
<PAGE>
other office or offices as the Bank may from time to time notify the Company and
the Agent.
"Letters of Credit" means any letters of credit (whether standby letters of
-----------------
credit or commercial documentary letters of credit) Issued by the Issuing Bank
pursuant to Article III.
"Leverage Ratio" means, as calculated quarterly as of the last day of each
--------------
fiscal quarter on a Rolling Four Quarter Basis, the ratio of (a) Funded Debt to
(b) EBITDDA.
"Lien" means any security interest, mortgage, deed of trust, pledge,
----
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or other) or preferential arrangement of any kind or nature
whatsoever in respect of any property (including those created by, arising under
or evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a Capital Lease, any financing lease having
substantially the same economic effect as any of the foregoing, or the filing of
any financing statement naming the owner of the asset described in such
financing statement as debtor, under the Uniform Commercial Code or any
comparable law) and any contingent or other agreement to provide any of the
foregoing, but not including the interest of a lessor under an operating lease
or a negative pledge clause.
"Loan" means an extension of credit by a Bank to the Company under Article
----
II or Article III in the form of an Acquisition Revolving Loan, W/C Revolving
Loan or an L/C Advance, which may be a Base Rate Loan or an Offshore Rate Loan
(each a "Type" of Loan) within the Acquisition Revolving Commitment or the W/C
Revolving Commitment.
"Loan Documents" means this Agreement, any Notes, the Fee Letter, the L/C-
--------------
Related Documents, and all other documents delivered to the Agent or any Bank in
connection herewith.
"Majority Banks" means at any time (a) Banks then holding at least 66-2/3%
--------------
of the then aggregate unpaid principal amount of the Loans, or (b) if no Loans
are outstanding but the Commitments are still in effect, Banks then having at
least 66-2/3% of the aggregate Commitments, or (c) if the Commitments have been
terminated and no Loans are outstanding, 66-2/3% of the Commitments as in effect
immediately before such termination.
"Managing Member" means U.S. Timberlands Services Company, L.L.C., a
---------------
Delaware limited liability company formerly named New Services L.L.C., as
managing member under the Operating Agreement.
"Margin Stock" means "margin stock" as such term is defined in Regulation
------------
G, T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse change in, or a
-----------------------
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise) or prospects of the Company or the Company and its
Subsidiaries taken as a
19
<PAGE>
whole; (b) a material impairment of the ability of the Company to perform its
payment or other material obligations under any Loan Document; or (c) a material
adverse effect upon the legality, validity, binding effect or enforceability
against the Company of any Loan Document.
"Maturity Date" means October 29, 2004.
-------------
"Maximum Amount" means, for any calendar year, $15,000,000 for each of
--------------
calendar years 1998, 1999, and 2000, but not in excess of $30,000,000 for all
three of those calendar years, and $10,000,000 for each calendar year
thereafter. Net Proceeds deposited in an escrow account shall be credited
against the Maximum Amount in the year in which such Net Proceeds were so
deposited. The period from the Closing Date through the end of 1997 shall be
considered part of calendar year 1998 for purposes of determining Maximum Amount
for calendar year 1998.
"Merchantable Timber" means any tree which will produce a log (a) at least
-------------------
sixteen (16) feet long, (b) at least five (5) inches in diameter inside the bark
at the small end and (c) at least twenty-five percent (25%) sound.
"Merchantable Timber Inventory" means the aggregate total of Merchantable
-----------------------------
Timber as set forth in the Initial Timber Report as thereafter adjusted for
purchases and sales, Timber Harvest and growth and as set forth in each
Quarterly Timber Report and as verified in and adjusted retroactively pursuant
to each Annual Timber Report. In the case of timber deed, bulk, pay-as-cut, and
stumpage sales, the Timber so sold shall be deemed removed from Merchantable
Timber Inventory when actually severed from the Timberlands.
"MLP" means U.S. Timberlands Company, L.P., a Delaware limited partnership.
---
"Multiemployer Plan" means a "multiemployer plan", within the meaning of
------------------
Section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate makes,
is making, or is obligated to make contributions or, during the preceding three
calendar years, has made, or been obligated to make, contributions.
"Net Income" means, as calculated for the Company and its Subsidiaries on a
----------
consolidated basis for any period as at any date of determination, the net
income (or loss) of the Company and its Subsidiaries for such period taken as a
single accounting period.
"Net Interest Expense" means, as calculated on a consolidated basis for the
--------------------
Company and its Subsidiaries for any period as at any date of determination, (a)
Gross Interest Expense, minus (b) interest income for that period and Swap
Contract payments received.
"Net Issuance Proceeds" means, as to any issuance of equity or debt
---------------------
securities by any Person, cash proceeds received or receivable by such Person in
connection therewith, net of reasonable out-of-pocket costs and expenses,
including underwriting spread, paid or incurred in connection therewith in favor
of any Person not an Affiliate of such Person, such costs and expenses not to
exceed 8% of the gross proceeds of such issuance.
20
<PAGE>
"Net Proceeds" means, (x) as to any sale of Timberlands or other assets
------------
(other than resulting from Timber Harvest) by a Person, proceeds in cash, checks
or other cash equivalent financial instruments as and when received by such
Person, net of: (a) the direct costs relating to such sale excluding amounts
------
payable to such Person or any Affiliate of such Person, except (in the case the
Company or its Subsidiaries) as are paid or payable to any such Affiliate in
compliance with Section 8.6 and as have been (except in the case of payments
between the Company and its Subsidiaries) approved in advance by the Majority
Banks, (b) sale, use or other transaction taxes paid or payable by such Person
as a direct result thereof, and (c) amounts required to be applied to repay
principal, interest and prepayment premiums and penalties on Indebtedness
secured by a Lien on the asset which is the subject of such sale; (y) as to any
Event of Loss, proceeds paid on account of any Event of Loss, net of (a) all
money actually applied to repair or reconstruct the damaged property or property
affected by the Event of Loss, (b) all of the costs and expenses reasonably
incurred in connection with the collection of such proceeds, award or other
payments, and (c) any amounts retained by or paid to parties having superior
rights to such proceeds, awards or other payments; and (z) as to any Timber
Harvest in excess of an applicable Timber Harvest limitation set forth in
Section 8.20, the net proceeds of that portion of such Timber Harvest in excess
of such limitation based upon average prices received on the sale of all Timber
subject to Timber Harvest during the relevant calendar year and a reasonable
allocation of direct cash expenses incurred in connection with the harvesting
and sale of Timber during that year, in each case multiplied by a fraction the
numerator of which is the amount of such Timber Harvest in excess of such
limitation and the denomintor of which is the entire amount of such Timber
Harvest.
"Note" means any promissory note executed by the Company in favor of a Bank
----
pursuant to subsection 2.2(b), in substantially the form of Exhibit F- 1, in the
------------
case of an Acquisition Revolving Note or Exhibit F -2, in the case of a W/C
------------
Revolving Note, and "Notes" means all such Notes, collectively.
"Notice of Borrowing" means a notice in substantially the form of Exhibit
------------------- -------
A.
- -
"Notice of Conversion/Continuation" means a notice in substantially the
---------------------------------
form of Exhibit B.
---------
"Obligations" means all advances, debts, liabilities, obligations,
-----------
covenants and duties arising under any Loan Document owing by the Company to any
Bank (including the Issuing Bank and the Swingline Bank), the Agent, or any
Indemnified Person, whether direct or indirect (including those acquired by
assignment of rights under the Loan Documents), absolute or contingent, due or
to become due, now existing or hereafter arising.
"Offshore Rate" means, for any Interest Period, with respect to Offshore
-------------
Rate Loans comprising part of the same Borrowing, the rate of interest per annum
(rounded upward to the next 1/16th of 1%) determined by the Agent as the rate of
interest at which dollar deposits in the approximate amount of the amount of the
Loan to be made or continued as, or converted into, an Offshore Rate Loan by the
Bank that acts as Agent
21
<PAGE>
and having a maturity comparable to such Interest Period would be offered to
major banks in the London interbank market at their request at approximately
11:00 a.m. (London time) two Business Days prior to the commencement of such
Interest Period.
"Offshore Rate Loan" means a Loan that bears interest based on the Offshore
------------------
Rate.
"Old Services" means U.S. Timberlands Management Company, L.L.C., a
------------
Delaware limited liability company formerly named U.S. Timberlands Services
Company, L.L.C.
"Operating Agreement" means the Second Amended and Restated Operating
-------------------
Agreement of the Company, dated as of November 19, 1997.
"Operating Lease" means, with respect to any Person, any lease of any
---------------
property by such Person as lessee (including leases which may be terminated by
the lessee at any time) that is, or should be, classified and accounted for as
an "operating lease" on the balance sheets, or notes thereto, of such Person
prepared in accordance with GAAP.
"Ordinary Course of Business" means, in respect of the Company or any
---------------------------
Subsidiary, as the case may be, the ordinary course of such Person's business,
as conducted by such Person in accordance with past practice and undertaken by
such Person in good faith and not for purposes of evading any covenant or
restriction in any Loan Document.
"Organization Documents" means, (a) for any corporation, the certificate or
----------------------
articles of incorporation, the bylaws, any certificate of determination or
instrument relating to the rights of preferred shareholders of such corporation,
any shareholder rights agreement, and all applicable resolutions of the board of
directors (or any committee thereof) of such corporation; (b) for any limited
partnership, the certificate of limited partnership and partnership agreement,
or (c) for any limited liability company, the certificate of formation,
operating agreement, resolutions, and membership list.
"Other Taxes" means any present or future stamp, court or documentary taxes
-----------
or any other excise or property taxes, charges or similar levies which arise
from any payment made hereunder or from the execution, delivery, performance,
enforcement or registration of, or otherwise with respect to, this Agreement or
any other Loan Documents.
"Participant" has the meaning specified in subsection 11.8(d).
-----------
"Partnership Agreement" means the Agreement of Limited Partnership of the
---------------------
MLP.
"PBGC" means the Pension Benefit Guaranty Corporation, or any Governmental
----
Authority succeeding to any of its principal functions under ERISA.
22
<PAGE>
"Pension Plan" means a pension plan (as defined in Section 3(2) of ERISA)
------------
subject to Title IV of ERISA which the Company sponsors, maintains, or to which
it makes, is making, or is obligated to make contributions, or in the case of a
multiple employer plan (as described in Section 4064(a) of ERISA) has made
contributions at any time during the immediately preceding five (5) plan years.
"Permitted Business" means any business engaged in by the Company on the
------------------
Closing Date, and any business substantially similar or related to any such
business located (other than soliciting and consummating purchases of Timber or
Timberlands outside of the United States) in the United States, which shall not
include pulp or paper manufacturing.
"Permitted Liens" has the meaning specified in Section 8.1.
---------------
"Permitted Swap Obligations" means all obligations (contingent or
--------------------------
otherwise) of the Company or any Subsidiary existing or arising under Swap
Contracts, provided that each of the following criteria is satisfied: (a) such
obligations are (or were) entered into by such Person in the Ordinary Course of
Business for the purpose of directly mitigating risks associated with
liabilities, commitments or assets held or reasonably anticipated by such
Person, or changes in the value of securities issued by such Person in
conjunction with a securities repurchase program not otherwise prohibited
hereunder, and not for purposes of speculation or taking a "market view;" (b)
such Swap Contracts do not contain any provision ("walk-away" provision)
exonerating the non-defaulting party from its obligation to make payments on
outstanding transactions to the defaulting party, and (c) the counterparty to
such Swap Contract is a Bank or an Affiliate of a Bank.
"Person" means an individual, partnership, corporation, limited liability
------
company, business trust, joint stock company, trust, unincorporated association,
joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA)
----
which the Company sponsors or maintains or to which the Company makes, is
making, or is obligated to make contributions and includes any Pension Plan.
"Planned Volume" means, as of the Closing Date, 125 million board feet per
--------------
calendar year of Timber Harvest. In the event of the acquisition by the Company
of Merchantable Timber or Timberlands (other than Timber or Timberlands acquired
with Excess Timber Harvest Proceeds or by exchange for other Timber or
Timberlands), Planned Volume will be increased each year for 10 years by 10% of
the volume of Merchantable Timber so acquired; provided that if such acquisition
of Merchantable Timber or Timberlands is made under a cutting contract with a
term of less than 10 years, Planned Volume will be increased for each year
during the term of the cutting contract by a number of board feet equal to the
number of board feet so acquired multiplied by the quotient of 100% divided by
the number of years in the cutting contract. In the event of a disposition
(including by Event of Loss) with respect to Merchantable Timber or Timberlands
(other than Timber Harvest with respect thereto), Planned Volume will be reduced
by 10% of the volume of Merchantable Timber so disposed of. In the event of
23
<PAGE>
Timber Harvest in any year in excess of the limitations set forth in Section
8.20, Planned Volume will be reduced by 10% of the amount of such excess.
"Pro Forma EBITDDA" means, at any date of determination, on a Rolling Four
-----------------
Quarter Basis, the sum of the following calculated on a pro forma basis for the
Company and its Subsidiaries on a consolidated basis for the four fiscal quarter
period ending on the last day of the most recent quarter for which financial
reports pursuant to subsections 7.1(a) and (b) and a Compliance Certificate
pursuant to subsection 7.2(b) having been delivered:
(i) EBITDDA; and
(ii) plus or minus, as applicable, in connection with any
---- -----
timberlands to be acquired by the Company with the proceeds of an
Acquisition Revolving Loan or previously acquired within such four fiscal
quarters, an amount equal to a good faith estimate of such additional
amounts that would be included in clause (i) above had such timberlands
been owned by the Company for such four fiscal quarters, as certified
(together with such supporting detail as the Majority Banks may reasonably
request) by the chief financial officer of the Company based upon such
chief financial officer's good faith estimates of applicable revenues and
expenses arising from such timberlands and assuming aggregate Timber
Harvest in an amount that does not require proceeds to be placed in an
escrow account pursuant to Section 8.20.
"Pro Forma Interest Expense" means, at any date of determination, on a
--------------------------
Rolling Four Quarter Basis, the sum of the following calculated for the Company
and its Subsidiaries on a consolidated basis for the four fiscal quarter period
ending on the last day of the most recent quarter for which financial reports
pursuant to subsections 7.1(a) and (b) and a Compliance Certificate pursuant to
subsection 7.2(b) have been delivered:
(a) interest expense payable during such four fiscal quarter period
on all Indebtedness of the Company and its Subsidiaries; plus
----
(b) interest expense that would have been payable during such four
fiscal quarter period in respect of (i) any Indebtedness proposed to be
incurred on such date of determination, including any Loan requested
hereunder or other Senior Debt, and (ii) Indebtedness incurred after the
end of such four fiscal quarter period and before such date of
determination, in each case based upon the interest rate applicable on such
date of determination to such Indebtedness and giving effect as of the
beginning of such four fiscal quarter period (A) to the incurrence of all
such Indebtedness described in clauses (i) and (ii), and (B) to the
application of any such Indebtedness to the substantially concurrent
repayment of any other Indebtedness outstanding during such four fiscal
quarter period.
"Pro Rata Share" means, as to any Bank at any time, the percentage
--------------
equivalent (expressed as a decimal, rounded to the ninth decimal place) at such
time of such Bank's combined Commitments divided by the aggregate Commitments,
or, if the Commitments
24
<PAGE>
have expired or been terminated, the percentage equivalent (expressed as a
decimal, rounded to the ninth decimal place) at such time of the Effective
Amount of such Bank's Loans divided by the aggregate Effective Amount of all
Loans. For purposes of computing Pro Rata Share , the L/C Commitment and the
Swingline Commitment shall not increase the Commitment of the Issuing Bank or
Swingline Bank, respectively.
"Quarterly Timber Report" has the meaning specified in subsection 7.2(e).
-----------------------
"Related Entities" means the Managing Member and the MLP.
----------------
"Replacement Bank" has the meaning specified in Section 4.8.
----------------
"Reportable Event" means, any of the events set forth in Section 4043(c) of
----------------
ERISA or the regulations thereunder, other than any such event for which the 30-
day notice requirement under ERISA has been waived in regulations issued by the
PBGC.
"Requirement of Law" means, as to any Person, any law (statutory or
------------------
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case legally binding upon the Person or any of
its property or to which the Person or any of its property is subject.
"Responsible Officer" means any managing director, chief executive officer,
-------------------
or chief financial officer of the managing member of the Managing Member acting
in its capacity as Managing Member on behalf of the Company.
"Restricted Payments" has the meaning specified in Section 8.11.
-------------------
"Retail Timberlands Value" means, for any date, the product of (a) the
------------------------
arithmetic average price per thousand board feet of sawlogs weighted by grade
and species (as reported by the most recent California State Board of
Equalization Timber Value Area 6 report or, if such report is unavailable, an
outside index or reporting service acceptable to the Agent and the Majority
Banks) (net of any applicable log and haul costs per thousand board feet during
the twelve calendar months next preceding such date) (the foregoing shall be
completed for future fiscal quarters in the same fashion as reflected for the
fiscal quarter ending September 30, 1997 in the Initial Timber Report); and (b)
the Merchantable Timber Inventory of the Company and its Subsidiaries as
adjusted on or most recently before such date pursuant to the definition thereof
in this Section 1.1.
"Revolving Termination Date" means the earlier to occur of:
--------------------------
(a) October 31, 2000; and
(b) the date on which the W/C Revolving Commitments and Acquisition
Revolving Commitments terminate in accordance with the provisions of this
Agreement.
"Rolling Four Quarter Basis" means with respect to the calculation of any
--------------------------
financial ratio in Article VIII, such ratio as measured on the last day of the
most recently
25
<PAGE>
completed fiscal quarter for the period comprising such fiscal quarter and the
three preceding fiscal quarters, provided that (i) for the fiscal quarters
ending September 30 and December 31, 1997, any calculation of Pro Forma EBITDDA
or Pro Forma Interest Expense shall be determined by multiplying the actual Pro
Forma EBITDDA or Pro Forma Interest Expense for that fiscal quarter by four (4),
(ii) for the fiscal quarter ending on March 31, 1998, any calculation of Pro
Forma EBITDDA or Pro Forma Interest Expense shall be determined by multiplying
the actual Pro Forma EBITDDA or Pro Forma Interest Expense for that fiscal
quarter and the prior fiscal quarter by two (2), and (iii) for the fiscal
quarter ending on June 30, 1998, any calculation of Pro Forma EBITDDA or Pro
Forma Interest Expense shall be determined by multiplying the actual Pro Forma
EBITDDA or Pro Forma Interest Expense for the period of such quarter and the two
preceding quarters by one and one-third (1-1/3).
"S-1" means the Registration Statement on Form S-1, dated as of August 4,
---
1997, as amended, filed by the MLP with the SEC.
"SEC" means the Securities and Exchange Commission, or any Governmental
---
Authority succeeding to any of its principal functions.
"Senior Debt" means Indebtedness of the Company under the Senior Notes and
-----------
the Obligations other than L/C Obligations constituting the undrawn amount of
outstanding Letters of Credit.
"Senior Notes" means the notes issued pursuant to the Senior Note
------------
Agreement.
"Senior Note Agreement" means the Indenture dated as of November 19, 1997,
---------------------
among the Company, Finance, and State Street Bank & Trust Company, as trustee.
"Subsidiary" of a Person means any corporation, association, partnership,
----------
limited liability company, joint venture or other business entity of which more
than 50% of the voting stock, membership interests or other equity interests (in
the case of Persons other than corporations), is owned or controlled directly or
indirectly by the Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires, references
herein to a "Subsidiary" refer to a Subsidiary of the Company.
"Surety Instruments" means all letters of credit (including standby and
------------------
commercial), banker's acceptances, bank guaranties, shipside bonds, surety bonds
and similar instruments.
"Swap Contract" means any agreement, whether or not in writing, relating to
-------------
any transaction that is a rate swap, basis swap, forward rate transaction,
commodity swap, commodity option, equity or equity index swap or option, bond,
note or bill option, interest rate option, forward foreign exchange transaction,
cap, collar or floor transaction, currency swap, cross-currency rate swap,
swaption, currency option or any other, similar transaction (including any
option to enter into any of the foregoing) or any combination of the foregoing,
and, unless the context otherwise clearly requires, any master agreement
relating to or governing any or all of the foregoing.
26
<PAGE>
"Swap Termination Value" means, in respect of any one or more Swap
----------------------
Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or after
the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a) the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts (which may include any Bank).
"Swingline Bank" means BofA or its assignee under Section 11.8.
--------------
"Swingline Clean-Up Day" has the meaning specified in subsection 2.7(c).
----------------------
"Swingline Commitment" has the meaning specified in Section 2.9.
--------------------
"Swingline Loan" has the meaning specified in Section 2.9.
--------------
"Taxes" means any and all present or future taxes, levies, assessments,
-----
imposts, duties, deductions, fees, withholdings or similar charges, and all
liabilities with respect thereto, excluding, in the case of each Bank and the
Agent, respectively, taxes imposed on or measured by its net income by the
jurisdiction (or any political subdivision thereof) under the laws of which such
Bank or the Agent, as the case may be, is organized or maintains a lending
office.
"Timber" means all crops and all trees, timber, whether severed or
------
unsevered and including standing and down timber, stumps and cut timber, and
logs, wood chips and other forest products, whether now located on or hereafter
planted or growing in or on the Timberlands or otherwise or now or hereafter
removed from the Timberlands or otherwise for sale or other disposition.
"Timber Harvest" means the harvest of Merchantable Timber from the
--------------
Timberlands or the disposition of the rights of the Company or any Subsidiary to
Timber on the Timberlands, including by means of timber deed, bulk, pay-as-cut,
and stumpage sales. In the case of timber deed, bulk, pay-as-cut, and stumpage
sales, the Timber so sold shall be deemed harvested for purposes of this
definition in equal monthly amounts over the life of the contract, regardless of
when the purchaser actually severs the Timber.
"Timberlands" means, at any date of determination, all real property owned
-----------
by or leased to the Company or any Subsidiary that is suitable for timber
production.
"Type" has the meaning specified in the definition of "Loan."
----
"Unfunded Pension Liability" means the excess of a Plan's benefit
--------------------------
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Plan's assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to Section 412 of the Code for the applicable plan
year.
27
<PAGE>
"United States" and "U.S." each means the United States of America.
------------- ----
"Wholly-Owned Subsidiary" means any corporation in which (other than
-----------------------
directors' qualifying shares required by law) 100% of the capital stock of each
class having ordinary voting power, and 100% of the capital stock of every other
class, in each case, at the time as of which any determination is being made, is
owned, beneficially and of record, by the Company, or by one or more of the
other Wholly-Owned Subsidiaries, or both.
"W/C Revolving Commitment" has the meaning specified in subsection 2.1(b).
------------------------
"W/C Revolving Loans" has the meaning specified in subsection 2.1(b).
-------------------
1.2 Other Interpretive Provisions.
-----------------------------
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar words refer
to this Agreement as a whole and not to any particular provision of this
Agreement; and subsection, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other
writings, however evidenced.
(ii) The term "including" is not limiting and means "including
without limitation."
(iii) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and including";
the words "to" and "until" each mean "to but excluding", and the word
"through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent restatements, amendments and other
modifications thereto, but only to the extent such restatements, amendments and
other modifications are not prohibited by the terms of any Loan Document, and
(ii) references to any statute or regulation are to be construed as including
all statutory and regulatory provisions consolidating, amending, replacing,
supplementing or interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for convenience
of reference only and shall not affect the interpretation of this Agreement.
28
<PAGE>
(f) This Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and shall each be
performed in accordance with their terms. Unless otherwise expressly provided,
any reference to any action of the Agent or the Banks by way of consent,
approval or waiver shall be deemed modified by the phrase "in its/their sole
discretion."
(g) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Agent, the Company
and the other parties, and are the products of all parties. Accordingly, they
shall not be construed against the Banks or the Agent merely because of the
Agent's or Banks' involvement in their preparation.
1.3 Accounting Principles.
---------------------
(a) Unless the context otherwise clearly requires, all accounting
terms not expressly defined herein shall be construed, and all financial
computations required under this Agreement shall be made, in accordance with
GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter" refer to
such fiscal periods of the Company.
ARTICLE II
THE CREDITS
-----------
2.1 Amounts and Terms of Commitments.
--------------------------------
(a) The Acquisition Credit.
----------------------
Each Bank severally agrees, on the terms and conditions set forth
herein, to make loans to the Company (each such loan, an "Acquisition Revolving
---------------------
Loan") from time to time on any Business Day from the Closing Date to the
- ----
Revolving Termination Date in an aggregate amount not to exceed the amount set
forth opposite such Bank's name under the heading "Acquisition Revolving
Commitment" on Schedule 2.1 (such Bank's "Acquisition Revolving Commitment");
------------ --------------------------------
provided, however, after giving effect to any Borrowing of Acquisition Revolving
- -------- -------
Loans, the Effective Amount of all Acquisition Revolving Loans shall not at any
time exceed the aggregate Acquisition Revolving Commitments. Within the limits
of each Bank's Acquisition Revolving Commitment, and subject to the other terms
and conditions hereof, the Company may borrow under this subsection 2.1(a),
prepay under Section 2.5 and reborrow under this subsection 2.1(a).
(b) The Working Capital Credit.
--------------------------
Each Bank severally agrees, on the terms and conditions set forth
herein, to make loans to the Company (each such loan, a "W/C Revolving Loan")
------------------
from time to time on any Business Day during the period from the Closing Date to
the Revolving
29
<PAGE>
Termination Date, in an aggregate amount not to exceed at any time
outstanding, together with such Bank's Pro Rata Share of Swingline Loans and L/C
Obligations outstanding at such time, the amount set forth opposite such Bank's
name under the heading "W/C Revolving Commitment" on Schedule 2.1 (such Bank's
------------
"W/C Revolving Commitment"); provided, however, that, after giving effect to any
------------------------ -------- -------
Borrowing of W/C Revolving Loans, (1) the Effective Amount of all W/C Revolving
Loans, Swingline Loans and L/C Obligations shall not at any time exceed the
aggregate W/C Revolving Commitments. Within the limits of each Bank's W/C
Revolving Commitment, and subject to the other terms and conditions hereof, the
Company may borrow under this subsection 2.1(b), prepay under Section 2.5 and
reborrow under this subsection 2.1(b).
2.2 Evidence of Obligations.
-----------------------
(a) The Loans made by each Bank (including the Swingline Bank) shall
be evidenced by one or more loan accounts or records maintained by such Bank in
the ordinary course of business. The loan accounts or records maintained by the
Agent, the Issuing Bank, the Swingline Bank, and each Bank shall be conclusive
absent manifest error of the amount of the Loans made by the Banks to the
Company and the interest and payments thereon. Any failure so to record or any
error in doing so shall not, however, limit or otherwise affect the obligation
of the Company hereunder to pay any amount owing with respect to the Loans or
Letters of Credit.
(b) Upon the request of any Bank made through the Agent, the Loans
made by such Bank may be evidenced by one or more Notes, instead of or in
addition to accounts. Each such Bank shall endorse on the schedules annexed to
its Note(s) the date, amount and maturity of each Loan made by it and the amount
of each payment of principal made by the Company with respect thereto. Each such
Bank is irrevocably authorized by the Company to endorse its Note(s) and each
Bank's record shall be conclusive absent manifest error; provided, however, that
--------- -------
the failure of a Bank to make, or an error in making, a notation thereon with
respect to any Loan shall not limit or otherwise affect the obligations of the
Company hereunder or under any such Note to such Bank.
2.3 Procedure for Borrowing.
-----------------------
(a) Each Borrowing shall be made upon the Company's irrevocable
written notice delivered to the Agent in the form of a Notice of Borrowing
(which notice must be received by the Agent prior to (i) 9:00 a.m. (San
Francisco time) three Business Days prior to the requested Borrowing Date, in
the case of Offshore Rate Loans; or (ii) 8:30 a.m. (San Francisco time) on the
requested Borrowing Date, in the case of Base Rate Loans), specifying:
(i) the amount of the Borrowing, which shall be in an
aggregate minimum amount of $2,000,000 or any multiple of $500,000 in
excess thereof;
30
<PAGE>
(ii) the requested Borrowing Date, which shall be a Business
Day;
(iii) the Type of Loans comprising the Borrowing and whether
such Borrowing shall be of W/C Revolving Loans, Acquisition Revolving
Loans, or both; and
(iv) the duration of the Interest Period applicable to such
Loans included in such notice. If the Notice of Borrowing
fails to specify the duration of the Interest Period for
any Borrowing comprising Offshore Rate Loans, such
Interest Period shall be one month.
Promptly upon receipt of any such Notice of Borrowing, the Agent shall notify
the Banks of the contents of such Notice of Borrowing.
(b) Each Bank will make the amount of its Pro Rata Share of each
Borrowing available to the Agent for the account of the Company at the Agent's
Payment Office by 11:00 a.m. (San Francisco time) on the Borrowing Date
requested by the Company in funds immediately available to the Agent. Except as
provided in the next sentence, the proceeds of all Loans will then be made
available to the Company by the Agent at such office by crediting the account of
the Company on the books of BofA with the aggregate of the amounts made
available to the Agent by the Banks and in like funds as received by the Agent
by 1:00 p.m. (San Francisco time) on the Borrowing Date. The proceeds of
Acquisition Revolving Loans may, at the election of the Agent or of the Majority
Banks, be made available to the Company by wire transfer pursuant to such escrow
arrangements as the Agent shall determine acceptable to confirm the satisfaction
of the conditions precedent to such Loans, in like funds as received by the
Agent.
(c) After giving effect to any Borrowing, unless the Agent shall
otherwise consent, there may not be more than five (5) different Interest
Periods in effect.
2.4 Conversion and Continuation Elections.
-------------------------------------
(a) The Company may, upon irrevocable written notice to the Agent in
accordance with subsection 2.4(b):
(i) elect, as of any Business Day, in the case of Base Rate
Loans, or as of the last day of the applicable Interest Period, in the case
of Offshore Rate Loans, to convert any such Loans (or any part thereof in
an amount not less than $2,000,000, or that is in an integral multiple of
$500,000 in excess of $2,000,000) into Loans of any other Type; or
(ii) elect, as of the last day of the applicable Interest
Period, to continue any Offshore Rate Loans having Interest Periods
expiring on such day (or any part thereof in an amount not less than
$2,000,000, or that is in an integral multiple of $500,000 in excess of
$2,000,000);
31
<PAGE>
provided that if at any time the aggregate amount of Offshore Rate Loans in
- -------- ----
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $2,000,000, such Offshore Rate Loans shall
automatically convert into Base Rate Loans, and on and after such date the right
of the Company to continue such Loans as, and convert such Loans into, Offshore
Rate Loans, as the case may be, shall terminate.
(b) The Company shall deliver a Notice of Conversion/Continuation to
be received by the Agent not later than (i) 9:00 a.m. (San Francisco time) at
least three Business Days in advance of the Conversion/Continuation Date, if the
Loans are to be converted into or continued as Offshore Rate Loans; and (ii)
8:30 a.m. (San Francisco time) on the Conversion/Continuation Date, if the Loans
are to be converted into Base Rate Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Loans to be converted or
continued;
(C) the Type of Loans resulting from the proposed
conversion or continuation; and
(D) other than in the case of conversions into Base Rate
Loans, the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to
Offshore Rate Loans, the Company has failed to select timely a new Interest
Period to be applicable to such Offshore Rate Loans or if any Default or Event
of Default then exists, the Company shall be deemed to have elected to convert
such Offshore Rate Loans into Base Rate Loans effective as of the expiration
date of such Interest Period.
(d) The Agent will promptly notify each Bank of its receipt of a
Notice of Conversion/Continuation for Loans, or, if no timely notice is provided
by the Company, the Agent will promptly notify each Bank of the details of any
automatic conversion. All conversions and continuations shall be made ratably
according to the respective outstanding principal amounts of the Loans held by
each Bank with respect to which the notice was given.
(e) Unless the Majority Banks otherwise consent, during the existence
of a Default or Event of Default, the Company may not elect to have a Loan
converted into or continued as a Offshore Rate Loan.
(f) After giving effect to any conversion or continuation of Loans,
unless the Agent shall otherwise consent, there may not be more than five (5)
different Interest Periods in effect with respect to Loans.
32
<PAGE>
2.5 Optional Prepayments.
--------------------
Subject to Section 4.4, the Company may, at any time or from time to time,
upon not less than (a) in the case of Offshore Rate Loans, three Business Days'
irrevocable notice to the Agent delivered by 9:00 a.m. (San Francisco time), (b)
in the case of Base Rate Loans, one Business Day's irrevocable notice to the
Agent, and (c) in the case of Swingline Loans, notice to the Agent by 8:30 a.m.
on the same day, ratably prepay Loans in whole or in part, in minimum amounts of
$2,000,000 or any multiple of $500,000 in excess thereof or, in the case of
Swingline Loans, in minimum amounts of $250,000 or any multiple of $100,000 in
excess thereof. Such notice of prepayment shall specify the date and amount of
such prepayment, the Type(s) of Loans to be prepaid, and whether such Loans are
Swingline Loans, W/C Revolving Loans or Acquisition Revolving Loans. The Agent
will promptly notify each Bank of its receipt of any such notice with respect to
W/C Revolving Loans and Acquisition Revolving Loans, and of such Bank's Pro Rata
Share of such prepayment. The payment amount specified in such notice shall be
due and payable on the date specified therein, together with accrued interest to
each such date on the amount prepaid and any amounts required pursuant to
Section 4.4. Optional prepayments of Acquisition Revolving Loans, after the
Company exercised or declined to exercise its option to repay the Acquisition
Revolving Loans in installments pursuant to Section 2.7 shall be applied to the
remaining principal repayments of the Acquisition Revolving Loans in the inverse
order of their maturity.
2.6 Mandatory Prepayments of Loans; Mandatory Commitment Reductions.
---------------------------------------------------------------
(a) Mandatory Prepayments.
---------------------
(i) (A) The Company shall apply all Excess Asset Sales Proceeds
that the Company has elected not to reinvest in accordance with subsection
8.2(b) and all Excess Timber Harvest Proceeds that the Company has elected not
to reinvest in accordance with Section 8.20 to the prepayment, purchase, or Cash
Collateralization of such Senior Debt as the Company may elect; provided that,
--------
in each case, unless no Loans or Letters of Credit are outstanding hereunder,
the Company may not prepay or purchase Senior Debt other than the Obligations
pursuant to this subsection 2.6(a)(i)(A) unless the Company shall also prepay or
Cash Collateralize the Obligations in an aggregate amount as shall be necessary
to cause the Banks to share such prepayment, purchase, or Cash Collateralization
with the other Senior Debt at least pro rata. Prepayments to be made with
respect to the Loans pursuant to this subsection 2.6(a)(i) shall be applied
first, to prepay any Acquisition Revolving Loans that are Base Rate Loans then
- -----
outstanding, second, at the Company's option, to Cash Collateralize (which cash
------
collateral shall be applied on the maturity date of their Interest Periods to
prepay then outstanding Acquisition Revolving Loans that are Offshore Rate Loans
in the order of their maturities) or to prepay any Acquisition Revolving Loans
that are Offshore Rate Loans (in the order of their maturities), third, to
-----
prepay any W/C Revolving Loans that are Base Rate Loans, and fourth, at the
------
Company's option, to Cash Collateralize (which cash collateral shall be applied
on the maturity date of their Interest Periods to prepay then outstanding W/C
Revolving Loans that are Offshore Rate Loans in the order of their
33
<PAGE>
maturities) or to prepay any W/C Revolving Loans that are Offshore Rate Loans
(in the order of their maturities).
(ii) Subject to payment of any amounts owing under Section 4.4,
if the Effective Amount of all W/C Revolving Loans, L/C Obligations, and
Swingline Loans then outstanding exceeds the aggregate W/C Revolving
Commitments, the Company shall immediately, and without notice or demand, prepay
the outstanding principal amount of the W/C Revolving Loans by an amount equal
to the applicable excess. Any such prepayment shall be applied first, to prepay
-----
any W/C Revolving Loans that are Base Rate Loans, second, to Cash Collateralize
------
(which cash collateral shall be applied on the maturity date of their Interest
Periods to prepay then outstanding W/C Revolving Loans that are Offshore Rate
Loans in the order of their maturities) or to prepay any W/C Revolving Loans
that are Offshore Rate Loans (in the order of their maturities), and third to
-----
Cash Collateralize any L/C Obligations.
(iii) Subject to payment of any amounts owing under Section 4.4,
if the Effective Amount of all Acquisition Revolving Loans then outstanding
exceeds the aggregate Acquisition Revolving Commitments, the Company shall
immediately, and without notice or demand, prepay the outstanding principal
amount of the Acquisition Revolving Loans by an amount equal to the applicable
excess. Any such prepayment shall be applied first, to prepay any Acquisition
-----
Revolving Loans that are Base Rate Loans, second, to Cash Collateralize (which
------
cash collateral shall be applied on the maturity date of their Interest Periods
to prepay then outstanding Acquisition Revolving Loans that are Offshore Rate
Loans in the order of their maturities) or to prepay any Acquisition Revolving
Loans that are Offshore Rate Loans (in the order of their maturities).
(iv) The Company shall repay the W/C Revolving Loans and
Swingline Loans from time to time so as to cause, at the end of any calendar
month, there to have been a period of at least 30 consecutive days during the
prior 12 calendar months when there were no W/C Revolving Loans and Swingline
Loans outstanding.
(v) After the Revolving Termination Date, all prepayments
shall be applied in the inverse order of maturity to the principal payments
required under subsection 2.7(b)(ii).
(vi) Upon the occurrence of a Change of Control, the Company
shall notify the Agent thereof and, upon demand by the Agent at the direction of
the Required Lenders within 90 days after the later of such Change of Control or
receipt of such notice, the Company shall repay the Loans in full within 10 days
after such demand.
(b) Mandatory Commitment Reductions.
-------------------------------
(i) The aggregate Acquisition Revolving Commitments and
aggregate W/C Revolving Commitments, in that order of priority, shall be
permanently reduced from time to time by the amount of any mandatory prepayment
or Cash Collateralization of the Loans required by subsection 2.6(a); provided
that to the extent a sale of assets, an
34
<PAGE>
Event of Loss or Timber Harvest shall not result in any prepayment of the Loans
pursuant to subsection 2.6(a) because the Loans have been repaid in full, first,
the aggregate Acquisition Revolving Commitment and, second, the aggregate W/C
Revolving Commitment, shall be permanently reduced in an amount equal to the
amount that would otherwise be applied to a prepayment or Cash Collateralization
of the Loans by operation of subsection 2.6(a). Such permanent reduction shall
take effect upon the date the corresponding mandatory prepayment is or would (if
Loans were outstanding) be required by subsection 2.6(a) or, in the case of
funds actually deposited as Cash Collateral under that subsection, upon the
application of such cash collateral to the W/C Revolving Loans or Acquisition
Revolving Loans, as applicable.
(ii) Upon the occurrence of a Change of Control, the Company
shall notify the Agent thereof and, upon notice to the Company by the Agent at
the direction of the Required Lenders within 90 days after the later of such
Change of Control or receipt of such notice of Change of Control, the aggregate
Acquisition Revolving Commitment and the aggregate W/C Revolving Commitment
shall be permanently reduced to $0 and terminated on the date 10 days after such
demand.
(iii) Upon any permanent reduction in the aggregate Acquisition
Revolving Commitments or aggregate W/C Revolving Commitments, the corresponding
Acquisition Revolving Commitment or W/C Revolving Commitment, as the case may
be, of each Bank shall automatically be reduced by an amount equal to such
Bank's ratable share of the reduction, effective as of the earlier of the date
that any corresponding prepayment is made or the date by which such prepayment
is due and payable hereunder. All accrued commitment fees to, but not including
the effective date of any reduction or termination of the Commitments shall be
paid on the effective date of such reduction or termination.
(iv) No reduction in the W/C Revolving Commitments pursuant to
Sections 2.5 or 2.6 shall reduce the L/C Commitment unless and until the W/C
Revolving Commitments have been reduced to the amount of the L/C Commitment;
thereafter, any reduction in the W/C Commitments pursuant to Sections 2.5 or 2.6
shall equally reduce the L/C Commitment.
(v) No reduction in the W/C Revolving Commitments pursuant to
Sections 2.5 or 2.6 shall reduce the Swingline Commitment unless and until the
W/C Revolving Commitments have been reduced to the amount of the Swingline
Commitment; thereafter, any reduction in the W/C Revolving Commitment pursuant
to Sections 2.5 or 2.6 shall equally reduce the Swingline Commitment.
2.7 Repayment.
---------
(a) The W/C Revolving Credit.
------------------------
The Company shall repay on the Revolving Termination Date the
aggregate outstanding principal amount of W/C Revolving Loans outstanding on
such date.
35
<PAGE>
(b) The Acquisition Revolving Credit.
--------------------------------
(i) Repayment on Revolving Termination Date. Unless the Company
---------------------------------------
shall have exercised its election to repay the Acquisition Revolving Loans
outstanding on the Revolving Termination Date in installments pursuant to
and in strict compliance with this subsection 2.7(b), the Company shall
repay to the Banks in full on the Revolving Termination Date the aggregate
principal amount of any Acquisition Revolving Loans outstanding on such
date.
(ii) Installment Election. So long as (A) no Default or Event of
--------------------
Default then exists, and (B) the representations and warranties in Article
VI are true and correct with the same effect as if made on and as of such
date (except to the extent such representations and warranties expressly
refer to an earlier date, in which case they are true and correct as of
such earlier date), in each case of clauses (A) and (B) above on the date
of such election and on the Revolving Termination Date, at least 60 days
before the Revolving Termination Date the Company may, in lieu of repaying
Acquisition Revolving Loans on the Revolving Termination Date under
subsection 2.7(b)(i), elect to repay the aggregate principal amount of
Acquisition Revolving Loans outstanding on the Revolving Termination Date
in sixteen (16) consecutive quarterly equal installments, each in an amount
equal to one-sixteenth of the Effective Amount of the Acquisition Revolving
Loans on the Revolving Termination Date and payable on the last Business
Day of each January, April, July and October through the Maturity Date,
commencing on January 31, 2001. The Agent shall promptly deliver a copy of
such notice to the Banks.
(c) The Swingline Credit.
--------------------
The Company shall repay Swingline Loans to the Swingline Bank on each
Business Day upon which there have been, for the seven (7) immediately preceding
Business Days, outstanding Swingline Loans (the "Swingline Clean-Up Day"), which
----------------------
Swingline Loans may not be reborrowed until such Swingline Clean-Up Day has
ended.
(d) Letters of Credit.
-----------------
The Company shall reimburse the Issuing Bank on or before the date
each drawing under a Letter of Credit is to be paid by the Issuing Bank for the
amount of such drawing.
2.8 Interest.
--------
(a) Each Loan shall bear interest on the outstanding principal amount
thereof from the applicable Borrowing Date at a rate per annum equal to the
Offshore Rate or the Base Rate, as the case may be (and subject to the Company's
right to convert to other Types of Loans under Section 2.4), plus the Applicable
----
Margin.
(b) Interest on each Loan shall be paid in arrears on each Interest
Payment Date. Interest shall also be paid on the date of any prepayment of
Offshore Rate
36
<PAGE>
Loans under Section 2.5 or 2.6 for the portion of the Offshore Rate Loans so
prepaid and upon payment (including prepayment) in full thereof and, during the
the existence of any Event of Default, interest shall be paid on demand
of the Agent at the request or with the consent of the Majority Banks.
(c) Notwithstanding subsection (a) of this Section, while any Event
of Default exists or after acceleration, the Company shall pay interest (after
as well as before entry of judgment thereon to the extent permitted by law) on
the principal amount of all outstanding Obligations, at a rate per annum which
is determined by adding 2% per annum to the Applicable Margin then in effect for
such Loans and, in the case of Obligations not subject to an Applicable Margin,
at a rate per annum equal to the Base Rate plus 2%; provided, however, that, on
---- -------- -------
and after the expiration of any Interest Period applicable to any Offshore Rate
Loan outstanding on the date of occurrence of such Event of Default or
acceleration, the principal amount of such Loan shall, during the continuation
of such Event of Default or after acceleration, bear interest at a rate per
annum equal to the Base Rate plus 2% plus the Applicable Margin for Base Rate
---- ----
Loans.
(d) Anything herein to the contrary notwithstanding, the obligations
of the Company to any Bank hereunder shall be subject to the limitation that
payments of interest shall not be required for any period for which interest is
computed hereunder, to the extent (but only to the extent) that contracting for
or receiving such payment by such Bank would be contrary to the provisions of
any law applicable to such Bank limiting the highest rate of interest that may
be lawfully contracted for, charged or received by such Bank, and in such event
the Company shall pay such Bank interest at the highest rate permitted by
applicable law.
2.9 Swingline Loans.
---------------
(a) Subject to the terms and conditions hereof, the Swingline Bank
severally agrees to make a portion of the Aggregate W/C Revolving Commitments
available to the Company by making swingline loans (individually, a "Swingline
---------
Loan"; collectively, the "Swingline Loans") to the Company on any Business Day
- ---- ---------------
during the period from the Closing Date to the Revolving Termination Date in
accordance with the procedures set forth in this Section in an aggregate
principal amount at any one time outstanding not to exceed $10,000,000,
notwithstanding the fact that such Swingline Loans, when aggregated with the
Swingline Bank's outstanding W/C Revolving Loans, may exceed the Swingline
Bank's W/C Revolving Commitment (the amount of such commitment of the Swingline
Bank to make Swingline Loans to the Company pursuant to this subsection 2.9(a),
as the same may be reduced as a result of any assignment pursuant to Section
11.8, the Swingline Bank's "Swingline Commitment"); provided, that at no time
-------------------- -------- ----
shall (i) the sum of the Effective Amount of all Swingline Loans, L/C
Obligations, and W/C Revolving Loans exceed the Aggregate W/C Revolving
Commitments, or (ii) the Effective Amount of all Swingline Loans exceed the
Swingline Commitment. Additionally, no more than three (3) Swingline Loans may
be outstanding at any one time, and except as otherwise provided in subsection
2.8(c), all Swingline Loans shall at all times bear interest at a rate per annum
equal to the Base Rate plus the Applicable Margin, unless otherwise agreed to by
----
the Swingline Bank in its sole
37
<PAGE>
discretion. Within the foregoing limits, and subject to the other terms and
conditions hereof, the Company may borrow under this subsection 2.9(a), prepay
pursuant to subsection 2.5 and reborrow pursuant to this subsection 2.9(a).
(b) The Company shall provide the Agent (with a copy to the Swingline
Bank) irrevocable written notice in the form of a Notice of Borrowing of any
Swingline Loan requested hereunder (which notice must be received by the
Swingline Bank and the Agent prior to 12:00 noon (San Francisco time) on the
requested Borrowing date) specifying (i) the amount to be borrowed, and (ii) the
requested Borrowing date, which must be a Business Day.
Upon receipt of the Notice of Borrowing, the Swingline Bank will
immediately confirm with the Agent (by telephone or in writing) that the Agent
has received a copy of the Notice of Borrowing from the Company and, if not, the
Swingline Bank will provide the Agent with a copy thereof. Unless the Swingline
Bank has received notice prior to 12:00 Noon (San Francisco time) on such
Borrowing date from the Agent (A) directing the Swingline Bank not to make the
requested Swingline Loan as a result of the limitations set forth in the proviso
-------
set forth in the first sentence of subsection 2.9(a); or (B) that one or more
conditions specified in Article V are not then satisfied; then, subject to the
terms and conditions hereof, the Swingline Bank will, not later than 2:00 p.m.
(San Francisco time) on the Borrowing date specified in such Notice, make the
amount of its Swingline Loan available to the Agent for the account of the
Company at the Agent's Payment Office in funds immediately available to the
Agent. The proceeds of such Swingline Loan will then promptly be made available
to the Company by the Agent crediting the account of the Company on the books of
BofA with the aggregate of the amounts made available to the Agent by the
Swingline Bank and in like funds as received by the Agent. Each Borrowing
pursuant to this Section shall be in an aggregate principal amount equal to two
hundred fifty thousand dollars ($250,000) or an integral multiple of one hundred
thousand dollars ($100,000) in excess thereof, unless otherwise agreed by the
Swingline Bank.
(c) If (i) any Swingline Loans shall remain outstanding at 9:00
a.m. (San Francisco time) on the Business Day immediately prior to a Swingline
Clean-Up Day and by such time on such Business Day the Agent shall have received
neither (A) a Notice of Borrowing delivered pursuant to Section 2.3 requesting
that W/C Revolving Loans be made pursuant to Section 2.1 on the Swingline Clean-
Up Day in an amount at least equal to the aggregate principal amount of such
Swingline Loans, nor (B) any other notice indicating the Company's intent to
repay such Swingline Loans with funds obtained from other sources, or (ii) any
Swingline Loans shall remain outstanding during the existence of a Default or
Event of Default and the Swingline Bank shall in its sole discretion notify the
Agent that the Swingline Bank desires that such Swingline Loans be converted
into W/C Revolving Loans, then the Agent shall be deemed to have received a
Notice of Borrowing from the Company pursuant to Section 2.3 requesting that
Base Rate W/C Revolving Loans be made pursuant to Section 2.1 on such Swingline
Clean-Up Day (in the case of the circumstances described in clause (i) above) or
on the first Business Day after the date of such notice from the Swingline Bank
(in the case of the circumstances described in clause (ii) above) in an amount
equal to the aggregate amount
38
<PAGE>
of such Swingline Loans, and the procedures set forth in subsections 2.3(b) and
2.3(c) shall be followed in making such Base Rate Loans; provided, that such
-------- ----
Base Rate W/C Revolving Loans shall be made notwithstanding the Company's
failure to comply with subsections 5.3(b) and 5.3(c); and provided, further,
-------- -------
that if a Borrowing of Base Rate W/C Revolving Loans becomes legally
impracticable and if so required by the Swingline Bank at the time such Base
Rate W/C Revolving Loans are required to be made by the Banks in accordance with
this subsection 2.9(c), each Bank agrees that in lieu of making Base Rate W/C
Revolving Loans as described in this subsection 2.9(c), such Bank shall purchase
a participation from the Swingline Bank in the applicable Swingline Loans in an
amount equal to such Bank's Pro Rata Share of such Swingline Loans, and the
procedures set forth in subsections 2.3(b) and 2.3(c) shall be followed in
connection with the purchases of such participations. The proceeds of such Base
Rate W/C Revolving Loans, or participations purchased, shall be applied to repay
such Swingline Loans. A copy of each notice given by the Agent to the Banks
pursuant to this subsection 2.9(c) with respect to the making of Loans, or the
purchases of participations, shall be promptly delivered by the Agent to the
Company. Each Bank's obligation in accordance with this Agreement to make the
W/C Revolving Loans, or purchase the participations, as contemplated by this
subsection 2.9(c), shall be absolute and unconditional and shall not be affected
by any circumstance, including (A) any set-off, counterclaim, recoupment,
defense or other right which such Bank may have against the Swingline Bank, the
Company or any other Person for any reason whatsoever; (B) the occurrence or
continuance of a Default, an Event of Default or a Material Adverse Change; or
(C) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing.
2.10 Fees.
----
(a) Arrangement, Agency Fees.
------------------------
The Company shall pay an arrangement fee to the Arranger for the
Arranger's own account, and shall pay an agency fee to the Agent for the Agent's
own account, as required by the letter agreement ("Fee Letter") between the
----------
Company and the Arranger and the Agent dated October 23, 1997.
(b) Commitment Fees.
---------------
The Company shall pay to the Agent for the account of each Bank a
commitment fee on the average daily unused portion of such Bank's W/C Revolving
Commitment and Acquisition Revolving Commitment, computed on a quarterly basis
in arrears on the last Business Day of each calendar quarter based upon the
average daily utilization for that quarter as calculated by the Agent, equal to
the Applicable Margin. Such commitment fee shall accrue in the case of the W/C
Revolving Commitment and the Acquisition Revolving Commitment, from the Closing
Date to the Revolving Termination Date and shall be due and payable quarterly in
arrears on the last Business Day of each calendar quarter commencing on December
31, 1997 through the Revolving Termination Date, with the final payment to be
made on the Revolving Termination Date. The commitment fees provided in this
subsection shall accrue at all times after the above-
39
<PAGE>
mentioned commencement date, including at any time during which one or more
conditions in Article V are not met.
2.11 Computation of Fees and Interest.
--------------------------------
(a) All computations of interest for Base Rate Loans when the Base
Rate is determined by BofA's "reference rate" shall be made on the basis of a
year of 365 or 366 days, as the case may be, and actual days elapsed. All other
computations of fees and interest shall be made on the basis of a 360-day year
and actual days elapsed (which results in more interest being paid than if
computed on the basis of a 365-day year). Interest and fees shall accrue during
each period during which interest or such fees are computed from the first day
thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent shall be
conclusive and binding on the Company and the Banks in the absence of manifest
error. The Agent will, at the request of the Company or any Bank, deliver to the
Company or the Bank, as the case may be, a statement showing the quotations used
by the Agent in determining any interest rate and the resulting interest rate.
2.12 Payments by the Company.
-----------------------
(a) All payments to be made by the Company shall be made without set-
off, recoupment or counterclaim. Except in the case of Swingline Loans and as
otherwise expressly provided herein, all payments by the Company shall be made
to the Agent for the account of the Banks at the Agent's Payment Office, and
shall be made in dollars and in immediately available funds, no later than 11:00
a.m. (San Francisco time) on the date specified herein. The Agent will promptly
distribute to each Bank its Pro Rata Share (or other applicable share as
expressly provided herein) of such payment in like funds as received. Any
payment received by the Agent later than 11:00 a.m. (San Francisco time) shall
be deemed to have been received on the following Business Day and any applicable
interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
(c) Unless the Agent receives notice from the Company prior to the
date on which any payment is due to the Banks that the Company will not make
such payment in full as and when required, the Agent may assume that the Company
has made such payment in full to the Agent on such date in immediately available
funds and the Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Bank on such due date an amount equal to the
amount then due such Bank. If and to the extent the Company has not made such
payment in full to the Agent, each Bank shall repay to the Agent on demand such
amount distributed to such Bank, together with interest thereon at the Federal
Funds Rate for each day from the date such amount is distributed to such Bank
until the date repaid.
40
<PAGE>
2.13 Payments by the Banks to the Agent.
----------------------------------
(a) Unless the Agent receives notice from a Bank on or prior to the
Closing Date or, with respect to any Borrowing after the Closing Date, at least
one Business Day prior to the date of such Borrowing, that such Bank will not
make available as and when required hereunder to the Agent for the account of
the Company the amount of that Bank's Pro Rata Share of the Borrowing, the Agent
may assume that each Bank has made such amount available to the Agent in
immediately available funds on the Borrowing Date and the Agent may (but shall
not be so required), in reliance upon such assumption, make available to the
Company on such date a corresponding amount. If and to the extent any Bank shall
not have made its full amount available to the Agent in immediately available
funds and the Agent in such circumstances has made available to the Company such
amount, that Bank shall on the Business Day following such Borrowing Date make
such amount available to the Agent, together with interest at the Federal Funds
Rate for each day during such period. A notice of the Agent submitted to any
Bank with respect to amounts owing under this subsection (a) shall be
conclusive, absent manifest error. If such amount is so made available, such
payment to the Agent shall constitute such Bank's Loan on the date of Borrowing
for all purposes of this Agreement. If such amount is not made available to the
Agent on the Business Day following the Borrowing Date, the Agent will notify
the Company of such failure to fund and, upon demand by the Agent, the Company
shall pay such amount to the Agent for the Agent's account, together with
interest thereon for each day elapsed since the date of such Borrowing, at a
rate per annum equal to the interest rate applicable at the time to the Loans
comprising such Borrowing (but without payment of the amounts that would have
been owing under Section 4.4 on account of such prepayment had such Loan been
made by the defaulting Bank as an Offshore Rate Loan).
(b) The failure of any Bank to make any Loan on any Borrowing Date
shall not relieve any other Bank of any obligation hereunder to make a Loan on
such Borrowing Date, but no Bank shall be responsible for the failure of any
other Bank to make the Loan to be made by such other Bank on any Borrowing Date.
2.14 Sharing of Payments, Etc.
------------------------
If, other than as expressly provided elsewhere herein, any Bank shall
obtain on account of the Obligations in its favor any payment (whether
voluntary, involuntary, through the exercise of any right of set-off, or
otherwise) in excess of its ratable share (or other share contemplated
hereunder), such Bank shall immediately (a) notify the Agent of such fact, and
(b) purchase from the other Banks such participations in the Loans made by them
as shall be necessary to cause such purchasing Bank to share the excess payment
pro rata with each of them; provided, however, that if all or any portion of
-------- -------
such excess payment is thereafter recovered from the purchasing Bank, such
purchase shall to that extent be rescinded and each other Bank shall repay to
the purchasing Bank the purchase price paid therefor, together with an amount
equal to such paying Bank's ratable share (according to the proportion of (i)
the amount of such paying Bank's required repayment to (ii) the total amount so
recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so
41
<PAGE>
recovered. The Company agrees that any Bank so purchasing a participation from
another Bank may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of set-off, but subject to Section 11.10)
with respect to such participation as fully as if such Bank were the direct
creditor of the Company in the amount of such participation. The Agent will keep
records (which shall be conclusive and binding in the absence of manifest error)
of participations purchased under this Section 2.14 and will in each case notify
the Banks following any such purchases or repayments.
2.15 Voluntary Termination of Commitments.
------------------------------------
The Company may, upon not less than three Business Days' prior notice to
the Agent, terminate the W/C Revolving Commitment or the Acquisition Revolving
Commitment in full but not in part as long as such termination is accompanied by
the simultaneous prepayment in full of all outstanding W/C Revolving Loans and
Acquisition Revolving Loans, respectively, and the termination, or Cash
Collateralization, of all outstanding L/C Obligations. Once terminated in
accordance with this Section, the W/C Revolving Commitment and the Acquisition
Revolving Commitment may not be reinstated. All accrued commitment fees to, but
not including the effective date of such termination, shall be paid on the
effective date of such termination.
ARTICLE III
THE LETTERS OF CREDIT
---------------------
3.1 The Letter of Credit Facility.
-----------------------------
(a) On the terms and conditions set forth herein, (i) the Issuing Bank
agrees, (A) from time to time on any Business Day during the period from the
Closing Date until 30 days before the Revolving Termination Date to issue
Letters of Credit for the account of the Company, and to amend or renew Letters
of Credit previously issued by it, in accordance with subsections 3.2(c) and
3.2(d), and (B) to honor drafts under the Letters of Credit; and (ii) the Banks
severally agree to participate in Letters of Credit Issued for the account of
the Company; provided, that the Issuing Bank shall not be obligated to Issue,
--------
and no Bank shall be obligated to participate in, any Letter of Credit if, as of
the date of Issuance of such Letter of Credit (the "Issuance Date"), (A) the
-------------
Effective Amount of all L/C Obligations, W/C Revolving Loans, and Swingline
Loans exceeds the aggregate W/C Revolving Commitments, (B) the participation of
any Bank in the Effective Amount of all L/C Obligations plus the Effective
----
Amount of the W/C Revolving Loans of such Bank plus the participation of such
----
Bank, if any, in the Effective Amount of all Swingline Loans exceeds such Bank's
W/C Revolving Commitment, or (C) the Effective Amount of L/C Obligations exceeds
the L/C Commitment. Within the foregoing limits, and subject to the other terms
and conditions hereof, the Company's ability to obtain Letters of Credit shall
be fully revolving, and, accordingly, the Company may, during the foregoing
period, obtain Letters of Credit to
42
<PAGE>
replace Letters of Credit which have expired or which have been drawn upon and
reimbursed .
(b) The Issuing Bank is under no obligation to Issue any Letter of Credit
if:
(i) any order, judgment or decree of any Governmental
Authority or arbitrator shall by its terms purport to enjoin or restrain the
Issuing Bank from Issuing such Letter of Credit, or any Requirement of Law
applicable to such Issuing Bank or any request or directive (whether or not
having the force of law) from any Governmental Authority with jurisdiction over
such Issuing Bank shall prohibit, or request that such Issuing Bank refrain
from, the Issuance of letters of credit generally or such Letter of Credit in
particular or shall impose upon such Issuing Bank with respect to such Letter of
Credit any restriction, reserve or capital requirement (for which such Issuing
Bank is not otherwise compensated hereunder), or shall impose upon such Issuing
Bank any unreimbursed loss, cost or expense;
(ii) the Issuing Bank has received written notice from any
Bank, the Agent or the Company, on or prior to the Business Day prior to the
requested date of Issuance of such Letter of Credit, that one or more of the
applicable conditions contained in Article V is not then satisfied;
(iii) the expiry date of any requested Letter of Credit is (A)
more than one calendar year after the date of Issuance, unless the Majority
Banks have approved such expiry date in writing, or (B) less than 30 days prior
to the Revolving Termination Date, unless all of the Banks have approved such
expiry date in writing;
(iv) the expiry date of any requested Letter of Credit is prior
to the maturity date of any financial obligation to be supported by the
requested Letter of Credit, unless such Letter of Credit is issued in connection
with worker's compensation or to secure self-insurance deductibles or
environmental clean-up obligations;
(v) any requested Letter of Credit does not provide for
drafts, or is not otherwise in form and substance reasonably acceptable to such
Issuing Bank, or the Issuance of a Letter of Credit may violate any policies of
the Issuing Bank;
(vi) any standby Letter of Credit is for the purpose of
supporting the issuance of any letter of credit by any other Person;
(vii) such Letter of Credit is in a face amount less than
$100,000 or to be denominated in a currency other than Dollars; or
(viii) the requested Letter of Credit provides for payment
thereunder sooner than the Business Day following the presentation to such
Issuing Bank of the documentation required thereunder.
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3.2 Issuance, Amendment and Renewal of Letters of Credit.
----------------------------------------------------
(a) Each Letter of Credit shall be issued upon the irrevocable written
request of the Company received by the Issuing Bank (with a copy sent by the
Company to the Agent) at least five days (or such shorter time as such Issuing
Bank may agree in a particular instance in its sole discretion) prior to the
proposed date of issuance. Each such request for issuance of a Letter of Credit
shall be made by an original writing or by facsimile, confirmed immediately in
an original writing, in the form of an L/C Application, and shall specify in
form and detail satisfactory to such Issuing Bank:
(i) the proposed date of issuance of the Letter of Credit
(which shall be a Business Day);
(ii) the face amount of the Letter of Credit;
(iii) the expiry date of the Letter of Credit;
(iv) the name and address of the beneficiary thereof;
(v) the documents to be presented by the beneficiary of the
Letter of Credit in case of any drawing thereunder;
(vi) the full text of any certificate to be presented by the
beneficiary in case of any drawing thereunder; and
(vii) such other usual and customary matters as the Issuing Bank
may require.
(b) At least three Business Days prior to the Issuance of any Letter of
Credit or any amendment or renewal of a Letter of Credit, the Issuing Bank will
confirm with the Agent (by telephone or in writing) that the Agent has received
a copy of the L/C Application or L/C Amendment Application from the Company and,
if not, such Issuing Bank will provide the Agent with a copy thereof. Unless the
Issuing Bank has received notice on or before the Business Day immediately
preceding the date such Issuing Bank is to issue, amend or renew a requested
Letter of Credit from the Agent, the Company, or the Majority Banks (i)
directing such Issuing Bank not to issue, amend or renew such Letter of Credit
because such issuance, amendment or renewal is not then permitted under
subsection 3.1(a) as a result of the limitations set forth in clauses (A)
through (C) thereof or subsection 3.1(b)(ii); or (ii) that one or more
conditions specified in Article V are not then satisfied; then, subject to the
terms and conditions hereof, such Issuing Bank shall, on the requested date,
issue a Letter of Credit for the account of the Company or amend or renew a
Letter of Credit, as the case may be, in accordance with such Issuing Bank's
usual and customary business practices.
(c) From time to time while a Letter of Credit is outstanding and prior
to the Revolving Termination Date, the Issuing Bank will, upon the written
request of the Company received by such Issuing Bank (with a copy sent by the
Company to the Agent) at least five days (or such shorter time as such Issuing
Bank may agree in a particular
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instance in its sole discretion) prior to the proposed date of amendment, amend
any Letter of Credit issued by it. Each such request for amendment of a Letter
of Credit shall be made by an original writing or by facsimile, confirmed
immediately in an original writing, made in the form of an L/C Amendment
Application and shall specify in form and detail satisfactory to such Issuing
Bank:
(i) the Letter of Credit to be amended;
(ii) the proposed date of amendment of the Letter of Credit
(which shall be a Business Day);
(iii) the nature of the proposed amendment; and
(iv) such other usual and customary matters as such Issuing
Bank may require.
Such Issuing Bank shall be under no obligation to amend any Letter of Credit if:
(A) such Issuing Bank would have no obligation at such time to issue such Letter
of Credit in its amended form under the terms of this Agreement; or (B) the
beneficiary of any such letter of Credit does not accept the proposed amendment
to the Letter of Credit. The Agent will promptly notify the Banks of the
receipt by it of any L/C Application or L/C Amendment Application.
(d) The Issuing Bank and the Banks agree that, while a Letter of Credit
is outstanding and prior to the Revolving Termination Date, at the option of the
Company and upon the written request of the Company received by the Issuing Bank
(with a copy sent by the Company to the Agent) at least five days (or such
shorter time as such Issuing Bank may agree in a particular instance in its sole
discretion) prior to the proposed date of notification of renewal, such Issuing
Bank shall be entitled to authorize the automatic renewal of any Letter of
Credit issued by it. Each such request for renewal of a Letter of Credit shall
be made by an original writing or by facsimile, confirmed immediately in an
original writing, in the form of an L/C Amendment Application, and shall specify
in form and detail satisfactory to such Issuing Bank:
(i) the Letter of Credit to be renewed;
(ii) the proposed date of notification of renewal of the Letter
of Credit (which shall be a Business Day);
(iii) the revised expiry date of the Letter of Credit; and
(iv) such other usual and customary matters as the Issuing Bank
may require.
The Issuing Bank shall be under no obligation so to renew any Letter of Credit
if: (A) such Issuing Bank would have no obligation at such time to issue or
amend such Letter of Credit in its renewed form under the terms of this
Agreement; or (B) the beneficiary of any such Letter of Credit does not accept
the proposed renewal of the
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Letter of Credit. If any outstanding Letter of Credit shall provide that it
shall be automatically renewed unless the beneficiary thereof receives notice
from such Issuing Bank that such Letter of Credit shall not be renewed, and if
at the time of renewal such Issuing Bank would be entitled to authorize the
automatic renewal of such Letter of Credit in accordance with this subsection
3.2(d) upon the request of the Company but the Issuing Bank shall not have
received any L/C Amendment Application from the Company with respect to such
renewal or other written direction by the Company with respect thereto, the
Issuing Bank shall nonetheless be permitted to allow such Letter of Credit to
renew, and the Company and the Banks hereby authorize such renewal, and,
accordingly, the Issuing Bank shall be deemed to have received an L/C Amendment
Application from the Company requesting such renewal.
(e) In connection with Letters of Credit that automatically renew or
extend their expiry date, the Issuing Bank may, at its election (or as required
by the Agent at the direction of the Majority Banks), deliver any notices of
termination or other communications to any Letter of Credit beneficiary or
transferee, and take any other action as necessary or appropriate, at any time
and from time to time, in order to cause the expiry date of such Letter of
Credit to be a date not later than 30 days before the Revolving Termination
Date.
(f) This Agreement shall control in the event of any conflict or
inconsistency with any L/C-Related Document.
(g) The Issuing Bank will also deliver to the Agent, concurrently or
promptly following its delivery of a Letter of Credit, or amendment to or
renewal of a Letter of Credit, to an advising bank or a beneficiary, a true and
complete copy of each such Letter of Credit or amendment to or renewal of a
Letter of Credit.
(h) The Issuing Bank shall deliver to the Agent such reports with respect
to the Letters of Credit as the Agent may reasonably request from time to time.
3.3 Risk Participations, Drawings and Reimbursements.
------------------------------------------------
(a) Immediately upon the Issuance of each Letter of Credit, each
Bank shall be deemed to, and hereby irrevocably and unconditionally agrees to,
purchase from the Issuing Bank a participation in such Letter of Credit and each
drawing thereunder in an amount equal to the product of (i) the Pro Rata Share
of such Bank, times (ii) the maximum amount available to be drawn under such
Letter of Credit and the amount of such drawing, respectively. For purposes of
Section 2.1, each Issuance of a Letter of Credit shall be deemed to utilize the
W/C Revolving Commitment of each Bank by an amount equal to the amount of such
participation.
(b) In the event of any request for a drawing under a Letter of
Credit by the beneficiary or transferee thereof, the Issuing Bank will promptly
notify the Company. The Company shall reimburse the Issuing Bank, directly or
with the proceeds of a Loan, prior to 10:00 a.m. (San Francisco time), on each
date that any amount is paid by such Issuing Bank under any Letter of Credit
(each such date, an "Honor Date"), in an
----------
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amount equal to the amount so paid by such Issuing Bank. If the Company fails to
reimburse the Issuing Bank for the full amount of any drawing under any Letter
of Credit by 10:00 a.m. (San Francisco time) on the Honor Date, the Issuing Bank
will promptly notify the Agent and the Agent will promptly notify each Bank
thereof, and the Company shall be deemed to have requested that Base Rate W/C
Revolving Loans be made by the Banks to be disbursed on the Honor Date under
such Letter of Credit, subject to the amount of the unutilized portion of the
Aggregate W/C Revolving Commitment and subject to the conditions set forth in
Section 5.3. Any notice given by such Issuing Bank or the Agent pursuant to this
subsection 3.3(b) may be oral if immediately confirmed in writing (including by
facsimile); provided that the lack of such an immediate confirmation shall not
-------- ----
affect the conclusiveness or binding effect of such notice.
(c) Each Bank shall upon any notice pursuant to subsection 3.3(b)
make available to the Agent for the account of the relevant Issuing Bank an
amount in Dollars and in immediately available funds equal to its Pro Rata Share
of the amount of the drawing, whereupon the participating Banks shall (subject
to subsection 3.3(d)) each be deemed to have made a Loan consisting of a Base
Rate W/C Revolving Loan to the Company in that amount. If any Bank so notified
fails to make available to the Agent for the account of such Issuing Bank the
amount of such Bank's Pro Rata Share of the amount of the drawing by no later
than 12:00 noon (San Francisco time) on the Honor Date, then interest shall
accrue on such Bank's obligation to make such payment, from the Honor Date to
the date such Bank makes such payment, at a rate per annum equal to the Federal
Funds Rate in effect from time to time during such period. The Agent will
promptly give notice of the occurrence of the Honor Date, but failure of the
Agent to give any such notice on the Honor Date or in sufficient time to enable
any Bank to effect such payment on such date shall not relieve such Bank from
its obligations under this Section 3.3.
(d) With respect to any unreimbursed drawing that is not converted
into Base Rate W/C Revolving Loans to the Company in whole or in part, because
of the Company's failure to satisfy the conditions set forth in Section 5.3 or
for any other reason, the Company shall be deemed to have incurred from the
relevant Issuing Bank an L/C Borrowing in the amount of such drawing, which L/C
Borrowing shall be due and payable on demand (together with interest) and shall
bear interest at a rate per annum equal to the Base Rate plus 2% per annum, and
----
each Bank's payment to such Issuing Bank pursuant to subsection 3.3(c) shall be
deemed payment in respect of its participation in such L/C Borrowing and shall
constitute an L/C Advance from such Bank in satisfaction of its participation
obligation under this Section 3.3.
(e) Each Bank's obligation in accordance with this Agreement to make
the Loans or L/C Advances, as contemplated by this Section 3.3, as a result of a
drawing under a Letter of Credit, shall be absolute and unconditional and
without recourse to the Issuing Bank and shall not be affected by any
circumstance, including (i) any set-off, counterclaim, recoupment, defense or
other right which such Bank may have against such Issuing Bank, the Company or
any other Person for any reason whatsoever; (ii) the occurrence or continuance
of a Default, an Event of Default or a Material Adverse Change; or (iii) any
other circumstance, happening or event
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whatsoever, whether or not similar to any of the foregoing; provided, however,
-------- -------
that each Bank's obligation to make W/C Revolving Loans under this Section 3.3
is subject to the conditions set forth in Section 5.3.
3.4 Repayment of Participations.
---------------------------
(a) Upon (and only upon) receipt by the Agent for the account of the
Issuing Bank of immediately available funds from the Company (i) in
reimbursement of any payment made by the Issuing Bank under a Letter of Credit
with respect to which any Bank has paid the Agent for the account of the Issuing
Bank for such Bank's participation in the Letter of Credit pursuant to Section
3.3 or (ii) in payment of interest thereon, the Agent will pay to each Bank, in
the same funds as those received by the Agent for the account of the Issuing
Bank, the amount of such Bank's Pro Rata Share of such funds, and the Issuing
Bank shall receive the amount of the Pro Rata Share of such funds of any Bank
that did not so pay the Agent for the account of the Issuing Bank.
(b) If the Agent or the Issuing Bank is required at any time to
return to the Company, or to a trustee, receiver, liquidator, custodian, or any
official in any Insolvency Proceeding, any portion of the payments made by the
Company to the Agent for the account of such Issuing Bank pursuant to subsection
3.4(a) in reimbursement of a payment made under the Letter of Credit or interest
or fee thereon, each Bank shall, on demand of the Agent, forthwith return to the
Agent or such Issuing Bank the amount of its Pro Rata Share of any amounts so
returned by the Agent or such Issuing Bank plus interest thereon from the date
such demand is made to the date such amounts are returned by such Bank to the
Agent or the Issuing Bank, at a rate per annum equal to the Federal Funds Rate
in effect from time to time.
3.5 Role of the Issuing Bank.
------------------------
(a) Each Bank and the Company agree that, in paying any drawing under
a Letter of Credit, the Issuing Bank shall not have any responsibility to obtain
any document (other than any sight draft and certificates expressly required by
the Letter of Credit) or to ascertain or inquire as to the validity or accuracy
of any such document or the authority of the Person executing or delivering any
such document.
(b) No Agent-Related Person nor any correspondents, participant or
assignee of the Issuing Bank shall be liable to any Bank for: (i) any action
taken or omitted in connection herewith at the request or with the approval of
the Banks (including the Majority Banks, as applicable); (ii) any action taken
or omitted in the absence of gross negligence or willful misconduct; or (iii)
the due execution, effectiveness, validity or enforceability of any L/C-Related
Document.
(c) The Company hereby assumes all risks of the acts or omissions of
any beneficiary or transferee with respect to its use of any Letter of Credit;
provided, however, that this assumption is not intended to, and shall not,
- -------- -------
preclude the Company's pursuing such rights and remedies as it may have against
the beneficiary or transferee at law or under any other agreement. No Agent-
Related Person nor any of the
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correspondents, participants or assignees of the Issuing Bank shall be liable or
responsible for any of the matters described in clauses (a) through (g) of
Section 3.6; provided, however, notwithstanding anything in such clauses, that
-------- -------
the Company may have a claim against the Issuing Bank, and the Issuing Bank may
be liable to the Company, to the extent, but only to the extent, of any direct,
as opposed to consequential or exemplary, damages suffered by the Company which
the Company proves were caused by the Issuing Bank's willful misconduct or gross
negligence or the Issuing Bank's willful or grossly negligent failure to pay
under any Letter of Credit after the presentation to it by the beneficiary of a
sight draft and certificate(s) strictly complying with the terms and conditions
of a Letter of Credit. In furtherance and not in limitation of the foregoing:
(i) each Issuing Bank may accept documents that appear on their face to be in
order, without responsibility for further investigation, regardless of any
notice or information to the contrary; and (ii) such Issuing Bank shall not be
responsible for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason.
3.6 Obligations Absolute.
--------------------
The obligations of the Company under this Agreement and any L/C-Related
Document to reimburse the Issuing Bank for a drawing under a Letter of Credit,
and to repay any L/C Borrowing and any drawing under a Letter of Credit
converted into Loans shall be unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement and each such other L/C-
Related Document under all circumstances, including the following:
(a) any lack of validity or enforceability of this Agreement or any L/C-
Related Document;
(b) any change in the time, manner or place of payment of, or in any other
term of, all or any of the obligations of the Company in respect of any Letter
of Credit or any other amendment or waiver of or any consent to departure from
all or any of the L/C-Related Documents;
(c) the existence of any claim, set-off, defense or other right that the
Company may have at any time against any beneficiary or any transferee of any
Letter of Credit (or any Person for whom any such beneficiary or any such
transferee may be acting), the Issuing Bank or any other Person, whether in
connection with this Agreement, the transactions contemplated hereby or by the
L/C-Related Documents or any unrelated transaction;
(d) any draft, demand, certificate or other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect;
or any loss or delay in the transmission or otherwise of any document required
in order to make a drawing under any Letter of Credit;
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<PAGE>
(e) any payment by the Issuing Bank under any Letter of Credit against
presentation of a draft or certificate that does not strictly comply with the
terms of any Letter of Credit; or any payment made by the Issuing Bank under any
Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-
in-possession, assignee for the benefit of creditors, liquidator, receiver or
other representative of or successor to any beneficiary or any transferee of any
Letter of Credit, including any arising in connection with any Insolvency
Proceeding;
(f) any exchange, release or non-perfection of any collateral, or any
release or amendment or waiver of or consent to departure from any other
guarantee, for all or any of the obligations of the Company in respect of any
Letter of Credit; or
(g) any other circumstance or happening whatsoever, whether or not similar
to any of the foregoing, including any other circumstance that might otherwise
constitute a defense available to, or a discharge of, the Company or a
guarantor.
3.7 Cash Collateral Pledge.
----------------------
Upon the request of the Agent, if (a) the Issuing Bank has honored any full
or partial drawing request on any Letter of Credit and such drawing has resulted
in an L/C Borrowing hereunder, or (b) if, as of the Revolving Termination Date,
any Letters of Credit may for any reason remain outstanding and partially or
wholly undrawn, then, the Company shall immediately Cash Collateralize the L/C
Obligations in an amount equal to the L/C Obligations. The Company hereby grants
to the Agent, for the benefit of the Agent, the Issuing Bank and the Banks, a
security interest in all such cash and deposit account balances used to Cash
Collateralize the Company's obligations hereunder.
3.8 Letter of Credit Fees.
---------------------
(a) The Company shall pay to the Agent for the account of each of the
Banks a letter of credit fee with respect to the Letters of Credit on the
average daily maximum amount available to be drawn of the outstanding Letters of
Credit, computed on a quarterly basis in arrears on the last Business Day of
each calendar quarter based upon Letters of Credit outstanding for that quarter
as calculated by the Agent, equal to the Letter of Credit Rate. Such letter of
credit fees shall be due and payable quarterly in arrears on the last Business
Day of each calendar quarter during which Letters of Credit are outstanding,
commencing on the first such quarterly date to occur after the Closing Date,
through the Revolving Termination Date (or such later date upon which the
outstanding Letters of Credit shall expire), with the final payment to be made
on the Revolving Termination Date (or such later expiration date).
(b) The Company shall pay to the Agent for the account of the Issuing
Bank a letter of credit fronting fee equal to 0.125% per annum of the average
daily maximum amount available to be drawn under outstanding Letters of Credit,
computed on a quarterly basis in arrears on the last Business Day of each
calendar quarter. Such fronting fees shall be due and payable quarterly in
arrears on the last Business Day of each calendar quarter during which Letters
of Credit are outstanding, commencing on the
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first such quarterly date to occur after the Closing Date, through the Revolving
Termination Date (or such later date upon which the outstanding Letters of
Credit shall expire), with the final payment to be made on the Revolving
Termination Date (or such later expiration date).
(c) The Company shall pay to the Issuing Bank from time to time on
demand the normal issuance, presentation, amendment and other processing fees,
and other standard costs and charges, of the Issuing Bank relating to letters of
credit as from time to time in effect.
3.9 Uniform Customs and Practice.
----------------------------
The Uniform Customs and Practice for Documentary Credits as published by
the International Chamber of Commerce ("UCP") most recently at the time of
---
issuance of any Letter of Credit shall (unless otherwise expressly provided in
the Letters of Credit) apply to the Letters of Credit.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
--------------------------------------
4.1 Taxes.
-----
(a) Subject to subsection 4.1(f), any and all payments by the Company
to each Bank or the Agent under this Agreement and any other Loan Document shall
be made free and clear of, and without deduction or withholding for, any Taxes.
In addition, the Company shall pay all Other Taxes.
(b) If the Company shall be required by law to deduct or withhold any
Taxes, Other Taxes or Further Taxes from or in respect of any sum payable
hereunder to any Bank or the Agent, then:
(i) the sum payable shall be increased as necessary so that,
after making all required deductions and withholdings (including deductions
and withholdings applicable to additional sums payable under this Section),
such Bank or the Agent, as the case may be, receives and retains an amount
equal to the sum it would have received and retained had no such deductions
or withholdings been made;
(ii) the Company shall make such deductions and withholdings;
(iii) the Company shall pay the full amount deducted or withheld
to the relevant taxing authority or other authority in accordance with
applicable law; and
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(iv) the Company shall also pay to each Bank or the Agent for
the account of such Bank, at the time interest is paid, Further Taxes in
the amount that the respective Bank specifies as necessary to preserve the
after-tax yield the Bank would have received if such Taxes, Other Taxes or
Further Taxes had not been imposed.
(c) The Company agrees to indemnify and hold harmless each Bank and
the Agent for the full amount of (i) Taxes, (ii) Other Taxes, and (iii) Further
Taxes in the amount that the respective Bank specifies as necessary to preserve
the after-tax yield the Bank would have received if such Taxes, Other Taxes or
Further Taxes had not been imposed, and any liability (including penalties,
interest, additions to tax and expenses) arising therefrom or with respect
thereto, whether or not such Taxes, Other Taxes or Further Taxes were correctly
or legally asserted. Payment under this indemnification shall be made within 30
days after the date the Bank or the Agent makes written demand therefor.
(d) Within 30 days after the date of any payment by the Company of
Taxes, Other Taxes or Further Taxes, the Company shall furnish to each Bank or
the Agent the original or a certified copy of a receipt evidencing payment
thereof, or other evidence of payment satisfactory to such Bank or the Agent.
(e) If the Company is required to pay any amount to any Bank or the
Agent pursuant to subsection (b) or (c) of this Section, then such Bank shall
use reasonable efforts (consistent with legal and regulatory restrictions) to
change the jurisdiction of its Lending Office so as to eliminate any such
additional payment by the Company which may thereafter accrue, if such change in
the sole judgment of such Bank is not otherwise disadvantageous to such Bank.
(f) The Company will not be required to pay any additional amounts in
respect of Taxes constituting United States federal income tax to the Agent or
any Bank for the account of any Lending Office of such Bank: (i) if the
obligation to pay such additional amounts would not have arisen but for a
failure by such Bank to comply with its obligations under Section 12.10 in
respect of such Lending Office, or (ii) if such Bank shall have delivered to the
Company a Form 4224, Form 1001, or Form W-8 in respect of such Lending Office
pursuant to Section 12.10 and such Bank shall not at any time be entitled to
exemption from deduction or withholding of United States federal income tax in
respect of payments by the Company hereunder for the account of such Lending
Office for any reason other than a change in United States law or regulation or
in the official interpretation or administration thereof (whether or not having
the force of law) after the date of delivery of such form.
4.2 Illegality.
----------
(a) If any Bank determines that the introduction of any Requirement
of Law, or any change in any Requirement of Law, or in the interpretation or
administration of any Requirement of Law, has made it unlawful, or that any
central bank or other Governmental Authority has asserted that it is unlawful,
for that Bank or its applicable
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Lending Office to make Offshore Rate Loans, then, on notice thereof by the Bank
to the Company through the Agent, any obligation of that Bank to make Offshore
Rate Loans shall be suspended until the Bank notifies the Agent and the Company
that the circumstances giving rise to such determination no longer exist.
(b) If a Bank determines that it is unlawful to maintain any Offshore
Rate Loan, the Company shall, upon its receipt of notice of such fact and demand
from such Bank (with a copy to the Agent), prepay in full such Offshore Rate
Loans of that Bank then outstanding, together with interest accrued thereon and
amounts required under Section 4.4, either on the last day of the Interest
Period thereof, if the Bank may lawfully continue to maintain such Offshore Rate
Loans to such day, or immediately, if the Bank may not lawfully continue to
maintain such Offshore Rate Loan. If the Company is required to so prepay any
Offshore Rate Loan, then concurrently with such prepayment, the Company shall
borrow from the affected Bank, in the amount of such repayment, a Base Rate
Loan.
(c) If the obligation of any Bank to make or maintain Offshore Rate
Loans has been so terminated or suspended, the Company may elect, by giving
notice to the Bank through the Agent that all Loans which would otherwise be
made by that Bank as Offshore Rate Loans shall be instead Base Rate Loans.
(d) Before giving any notice to the Agent under this Section, the
affected Bank shall designate a different Lending Office with respect to its
Offshore Rate Loans if such designation will avoid the need for giving such
notice or making such demand and will not, in the judgment of that Bank, be
illegal or otherwise disadvantageous to that Bank.
4.3 Increased Costs and Reduction of Return.
---------------------------------------
(a) Without duplication of amounts that may be required to be paid
pursuant to subsection 4.3(b) but subject to Section 4.7, if any Bank determines
that, due to either (i) the introduction of or any change in or in the
interpretation of any law or regulation after the date hereof, or (ii) the
compliance by that Bank with any guideline or request from any central bank or
other Governmental Authority (whether or not having the force of law)
promulgated or made after the date hereof, there shall be any increase in the
cost to such Bank of agreeing to make or making, funding or maintaining any
Offshore Rate Loans or issuing or maintaining any Letter of Credit or any
participating interest therein, then the Company shall be liable for, and shall
from time to time, upon demand (with a copy of such demand to be sent to the
Agent), pay to the Agent for the account of such Bank, additional amounts as are
sufficient to compensate such Bank for such increased costs.
(b) Subject to Section 4.7, if any Bank determines that (i) the
introduction of any Capital Adequacy Regulation after the date hereof, (ii) any
change in any Capital Adequacy Regulation, or (iii) any change in the
interpretation or administration of any Capital Adequacy Regulation by any
central bank or other Governmental Authority charged with the interpretation or
administration thereof affects
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or would affect the amount of capital required or expected to be maintained by
that Bank (or any Lending Office) or any corporation controlling such Bank and
(taking into consideration such Bank's or such corporation's policies with
respect to capital adequacy and such Bank's desired return on capital)
determines that the amount of such capital is increased as a consequence of its
W/C Revolving, Acquisition Revolving, L/C, or Swingline Commitments, loans,
credits or obligations under this Agreement, then, upon demand of such Bank to
the Company through the Agent, the Company shall pay to such Bank, from time to
time as specified by such Bank, additional amounts sufficient to compensate such
Bank for such increase.
4.4 Funding Losses.
--------------
Subject to Section 4.7, the Company shall reimburse each Bank and hold each
Bank harmless from any loss or expense which such Bank may sustain or incur as a
consequence of:
(a) the failure of the Company to make on a timely basis any payment
of principal of any Offshore Rate Loan;
(b) the failure of the Company to borrow, continue or convert an
Offshore Rate Loan after the Company has given (or is deemed to have given) a
Notice of Borrowing or a Notice of Conversion/ Continuation;
(c) the failure of the Company to make any prepayment of an Offshore
Rate Loan in accordance with any notice delivered under Section 2.5;
(d) the prepayment (including pursuant to Section 2.6) or other
payment (including after acceleration thereof) of an Offshore Rate Loan on a day
that is not the last day of the relevant Interest Period; or
(e) the automatic conversion under Section 2.4 of any Offshore Rate
Loan to a Base Rate Loan on a day that is not the last day of the relevant
Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or from fees payable
to terminate the deposits from which such funds were obtained. For purposes of
calculating amounts payable by the Company to the Banks under this Section and
under subsection 4.3(a), each Offshore Rate Loan made by a Bank (and each
related reserve, special deposit or similar requirement) shall be conclusively
deemed to have been funded at the LIBOR used in determining the Offshore Rate
for such Offshore Rate Loan by a matching deposit or other borrowing in the
interbank eurodollar market for a comparable amount and for a comparable period,
whether or not such Offshore Rate Loan is in fact so funded.
4.5 Inability to Determine Rates.
----------------------------
If the Agent or the Majority Banks determine that for any reason adequate
and reasonable means do not exist for determining the Offshore Rate for any
requested Interest Period with respect to a proposed Offshore Rate Loan or that
the Offshore Rate
54
<PAGE>
applicable pursuant to subsection 2.8(a) for any requested Interest Period with
respect to a proposed Offshore Rate Loan does not adequately and fairly reflect
the cost to such Banks of funding such Loan, the Agent will promptly so notify
the Company and each Bank. Thereafter, the obligation of the Banks to make or
maintain Offshore Rate Loans, as the case may be, hereunder shall be suspended
until the Agent upon the instruction of the Majority Banks revokes such notice
in writing. Upon receipt of such notice, the Company may revoke any Notice of
Borrowing or Notice of Conversion/Continuation then submitted by it. If the
Company does not revoke such Notice, the Banks shall make, convert or continue
the Loans, as proposed by the Company, in the amount specified in the applicable
notice submitted by the Company, but such Loans shall be made, converted or
continued as Base Rate Loans instead of Offshore Rate Loans, as the case may be.
4.6 Reserves on Offshore Rate Loans.
-------------------------------
The Company shall pay to each Bank, as long as such Bank shall be required
under regulations of the FRB to maintain reserves with respect to liabilities or
assets consisting of or including Eurocurrency funds or deposits (currently
known as "Eurocurrency liabilities"), additional costs on the unpaid principal
------------------------
amount of each Offshore Rate Loan equal to the actual costs of such reserves
allocated to such Loan by the Bank (as determined by the Bank in good faith,
which determination shall be conclusive) payable on each date on which interest
is payable on such Loan, provided the Company shall have received at least 15
days' prior written notice (with a copy to the Agent) of such additional
interest from the Bank. If a Bank fails to give notice 15 days prior to the
relevant Interest Payment Date, such additional interest shall be payable 15
days from receipt of such notice.
4.7 Certificates of Banks; Limitation on Demand.
-------------------------------------------
Any Bank claiming reimbursement or compensation under this Article IV shall
deliver to the Company (with a copy to the Agent) a certificate setting forth in
reasonable detail the amount payable to the Bank hereunder and such certificate
shall be conclusive and binding on the Company in the absence of manifest error.
No Bank shall be entitled to claim reimbursement or compensation pursuant to
Sections 4.3 or 4.4 for any period more than 180 days before the date such
certificate is so delivered.
4.8 Substitution of Banks.
---------------------
Upon the receipt by the Company from any Bank (an "Affected Bank") of a
-------------
claim for compensation under Section 4.1, 4.3, or 4.6 or an assertion of
illegality that is not applicable to all Banks pursuant to Section 4.2, the
Company may: (i) request the Affected Bank to use its best efforts to obtain a
replacement bank or financial institution (in each case, which shall be an
Eligible Assignee) satisfactory to the Company and to the Agent (a "Replacement
-----------
Bank") to acquire and assume all or a ratable part of all of such Affected
- ----
Bank's Loans, L/C Obligations, participations in Swingline Loans, and W/C
Revolving Commitment and Acquisition Revolving Commitment, as applicable, and if
such Affected Bank or any Affiliate thereof is a Swap Provider, all Swap
Contracts of
55
<PAGE>
such Affected Bank and Affiliate; (ii) request one more of the other Banks to
acquire and assume all or part of such Affected Bank's Loans and Commitment; or
(iii) designate a Replacement Bank. Any such designation of a Replacement Bank
under clause (i) or (iii) shall be effected in accordance with the assignment
provisions contained in Section 11.8; provided, however, that the Company shall
-------- -------
be liable for any amounts arising pursuant to Section 4.4 as a result of the
substitution of any Bank(s) under this Section 4.8 on a date other than the last
day of an Interest Period with respect to outstanding Offshore Rate Loans.
4.9 Survival.
--------
The agreements and obligations of the Company in this Article IV shall
survive the payment of all other Obligations.
ARTICLE V
CONDITIONS PRECEDENT
--------------------
5.1 Conditions of Initial Loan.
--------------------------
The obligation of each Bank to make its initial Loan hereunder, is subject
to the condition that the Agent shall have received all of the following, in
form and substance satisfactory to the Agent and each Bank, and in sufficient
copies for each Bank:
(a) Credit Agreement.
----------------
This Agreement executed by each party thereto, and Notes (for those
Banks having requested them) executed by the Company;
(b) Authorization Documents.
-----------------------
For each of the Company and the Managing Member, a certificate
executed by the Secretary of such Person dated the Closing Date, certifying that
(i) such Person has the authority to execute, deliver and perform its
obligations under each of the Loan Documents or the Operating Agreement, as
applicable, (ii) attached behind Exhibit A to such certificate is a true,
---------
correct and complete copy of (A) the operating agreement of such Person then in
full force and effect, and (B) the certificate of formation such Person
certified by the Secretary of State of the State of Delaware as of a date not
more than ten (10) Business Days prior to the Closing Date, (iii) attached
behind Exhibit B to such certificate is a true, correct and complete copy of the
---------
resolutions adopted by the members such Person then in full force and effect
authorizing the execution, delivery and performance by such Person of each of
the Loan Documents, (iv) attached behind Exhibit C to such certificate is a
---------
true, correct and complete copy of such Person's membership list, (v) attached
behind Exhibit D to such certificate is a certificate of the Secretary of State
---------
of the state of Delaware and of each of the states set forth under such Person's
name in Schedule 5.1(b), in each case dated as of a date not more than fifteen
---------------
(15) Business Days prior to the Closing Date, stating that such Person is
56
<PAGE>
in good standing in such states, (vi) the name(s) of the Person(s) authorized to
execute Loan Documents or the Operating Agreement, as applicable, on behalf of
such Person, together with a sample of the true signatures of such Person(s),
and (vii) the Banks and the Agent may conclusively rely on such certificate
unless and until such Person shall have delivered to the Agent a further
certificate canceling or amending such prior certificate;
(c) Legal Opinions.
--------------
An opinion of Andrews & Kurth L.L.P., special counsel to the Company,
addressed to the Agent and the Banks, substantially in the form of
Exhibit D;
- ---------
(d) Payment of Fees.
---------------
Evidence of payment by the Company of all accrued and unpaid fees,
costs and expenses to the extent due and payable pursuant to the terms of any
Loan Document on the Closing Date, together with Attorney Costs of BofA to the
extent invoiced prior to or on the Closing Date, plus such additional amounts of
----
Attorney Costs as shall constitute BofA's reasonable estimate of Attorney Costs
incurred or to be incurred by it through the closing proceedings (provided that
such estimate shall not thereafter preclude final settling of accounts between
the Company and BofA), including any such costs, fees and expenses arising under
or referenced in subsections 2.10(a) and 11.4(a).
(e) Certificates.
------------
Certificates signed by an authorized officer of the Managing Member on
behalf of the Company, dated as of the Closing Date, stating that:
(i) the representations and warranties contained in Article VI
are true and correct on and as of such date, as though made on and as of
such date (except to the extent such representations and warranties
expressly refer to an earlier date, in which case they shall be true and
correct as of such earlier date);
(ii) no Default or Event of Default exists or would result from
the initial Borrowing; and
(iii) the Conveyance Agreements have been duly executed and
delivered by Old Services.
(f) Equity Offering.
---------------
The MLP shall have received gross issuance proceeds from the Equity
Offering in a minimum aggregate amount of $155,000,000, and the Net Issuance
Proceeds thereof shall have been contributed to the Company as equity;
57
<PAGE>
(g) Debt Offering.
-------------
The Company shall have received gross issuance proceeds from the Debt
Offering in a minimum aggregate amount of $225,000,000;
(h) Repayment of Existing Debt.
--------------------------
All Obligations (as defined therein) under the Existing Credit
Agreement and all Obligations (as defined therein) under the Holdings Credit
Agreement shall have been repaid in full (or satisfactory arrangements for
simultaneous repayment in full shall have been made) and all commitments of the
lenders thereunder terminated;
(i) Compliance Certificate.
----------------------
A Compliance Certificate for the fiscal quarter ended on September 30,
1997 dated as of the last day of such fiscal quarter, duly executed by a
Responsible Officer, with appropriate insertions satisfactory to the Agent and
the Majority Banks in their sole discretion, together with the financial
statements for such fiscal quarter upon which such Compliance Certificate is
based, which Compliance Certificate will evidence computation of the relevant
financial ratios set forth in Sections 8.14, 8.15, and 8.16 even though the
covenants relating thereto are not applicable with respect to such fiscal
quarter; such Compliance Certificate need not evidence compliance with such
financial covenants;
(j) Quarterly Timber Report.
-----------------------
A Quarterly Timber Report for the fiscal quarter ended on September
30, 1997 complying with the requirements of subsection 7.2(e); and
(k) Other Documents.
---------------
Such other approvals, opinions, documents or materials as the Agent or
any Bank may reasonably request.
5.2 Conditions to Acquisition Revolving Loans.
-----------------------------------------
The obligation of each Bank to make Acquisition Revolving Loans hereunder
(other than the initial Acquisition Loans to be made on the Closing Date to
repay Indebtedness under the Existing Credit Agreement in an aggregate amount
not to exceed $26,000,000) is subject to the condition that the Agent has
received a certificate of a Responsible Officer, in form and substance
reasonably satisfactory to the Agent and the Majority Banks, with sufficient
copies for each Bank, confirming, together with supporting financial information
and with such level of detail as the Agent or the Majority Banks may reasonably
request, that, on a pro forma basis after giving effect to the Acquisition in
question, the Company would have been in compliance with the financial covenants
contained in Sections 8.14 through 8.18, inclusive, at the last day of the most
recently ended fiscal quarter of the Company for which financial statements have
been delivered hereunder giving pro forma effect on a consolidated basis to such
58
<PAGE>
Acquisition and to the repayment or prepayment of any Indebtedness repaid or
prepaid in connection therewith and to the incurrence of any Indebtedness
arising therefrom (including the requested Acquisition Revolving Loans) in each
case on the first day of each relevant period for testing such compliance.
5.3 Conditions to All Borrowings and Issuances of Letters of Credit.
---------------------------------------------------------------
The obligation of each Bank, including the Swingline Bank and Issuing Bank,
to make any Loan to be made by it or to issue any Letter of Credit (including
its initial Loan or Letter of Credit) or to continue or convert any Loan as or
into an Offshore Rate Loan under Section 2.4 or to amend or extend any Letter of
Credit is subject to the satisfaction of the following conditions precedent on
the relevant Borrowing Date, Conversion/Continuation Date or date of Issuance or
amendment or extension, as applicable:
(a) Notice of Borrowing, Conversion/Continuation or Letter of Credit
----------------------------------------------------------------
Application.
-----------
The Agent shall have received (with, in the case of the initial Loan
only, a copy for each Bank) a Notice of Borrowing, Notice of
Conversion/Continuation, L/C Application, or L/C Amendment Application, as
applicable;
(b) Continuation of Representations and Warranties.
----------------------------------------------
The representations and warranties in Article VI shall be true and
correct on and as of such date with the same effect as if made on and as of such
date (except to the extent such representations and warranties expressly refer
to an earlier date, in which case they shall be true and correct as of such
earlier date); and
(c) No Existing Default.
-------------------
No Default or Event of Default shall exist or shall result from such
Borrowing, continuation, conversion, Issuance, or amendment or extension.
Each Notice of Borrowing, Notice of Conversion/Continuation, L/C Application,
and L/C Amendment Application submitted by the Company hereunder shall
constitute a representation and warranty by the Company hereunder, as of the
date of each such notice and as of each Borrowing Date, Conversion/Continuation
Date, or date of Issuance or amendment or extension, as applicable, that the
conditions in this Section 5.3 are satisfied.
59
<PAGE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company, represents and warrants to the Agent and each Bank that:
6.1 Existence and Power. The Company, each of its Subsidiaries and each
-------------------
Related Entity:
(a) is a corporation, limited liability company or limited
partnership duly formed or organized, validly existing and in good standing
under the laws of the jurisdiction of its formation or organization, as the case
may be;
(b) has the power and authority and all governmental licenses,
authorizations, consents and approvals to (i) own its assets, carry on its
business and (ii) in the case of the Company, to execute, deliver, and perform
its obligations under the Loan Documents;
(c) is duly qualified as a foreign corporation, limited liability
company or limited partnership and is licensed and in good standing under the
laws of each jurisdiction where its ownership, lease or operation of property or
the conduct of its business requires such qualification or license; and
(d) is in compliance with all Requirements of Law;
except, in each case referred to in clauses (b)(i), (c) or (d), to the extent
that the failure to do so could not reasonably be expected to have a Material
Adverse Effect.
6.2 Corporate Authorization; No Contravention.
-----------------------------------------
The execution, delivery and performance by the Company of this Agreement
and each other Loan Document have been duly authorized by all necessary
corporate action, and do not and will not:
(a) contravene the terms of any of its Organization Documents;
(b) result in any breach or contravention of, or the creation of any
Lien under, any document evidencing any material Contractual Obligation to which
it is a party or any order, injunction, writ or decree of any Governmental
Authority to which it or its property is subject; or
(c) violate any Requirement of Law.
6.3 Governmental Authorization.
--------------------------
No approval, consent, exemption, authorization, or other action by, or
notice to, or filing with, any Governmental Authority is necessary or required
in connection with the execution, delivery or performance by, or enforcement
against, the Company of this
60
<PAGE>
Agreement or any other Loan Document except (1) routine informational filings to
be made after the Closing Date that do not affect the enforceability of the Loan
Documents and (2) reconveyances and terminations of Liens securing the Existing
Credit Agreement.
6.4 Binding Effect.
--------------
This Agreement and each other Loan Document to which the Company is a party
constitute the legal, valid and binding obligations of the Company, enforceable
against it in accordance with their respective terms, except as may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, or similar
laws affecting the enforcement of creditors' rights generally or by general
equitable principles whether considered in a proceeding at law or in equity
(including principles of materiality, reasonableness, good faith, and fair
dealing).
6.5 Litigation.
----------
There are no actions, suits, proceedings, claims or disputes pending, or to
the best knowledge of the Company, threatened or contemplated, at law, in
equity, in arbitration or before any Governmental Authority, against the
Company, its Subsidiaries, the Related Entities or any of their respective
properties which:
(a) purport to affect or pertain to this Agreement or any other Loan
Document, the Debt Offering, the Equity Offering, or any of the transactions
contemplated hereby or thereby; or
(b) if determined adversely to the Company or its Subsidiaries, would
reasonably be expected to have a Material Adverse Effect.
No injunction, writ, temporary restraining order or any order of any nature has
been issued by any court or other Governmental Authority purporting to enjoin or
restrain the execution, delivery or performance of this Agreement or any other
Loan Document, or directing that the transactions provided for herein or therein
not be consummated as herein or therein provided.
6.6 No Default.
----------
No Default or Event of Default exists or would result from the incurring of
any Obligations by the Company. As of the Closing Date, neither the Company nor
any Subsidiary is in default under or with respect to any Contractual Obligation
in any respect which, individually or together with all such defaults, could
reasonably be expected to have a Material Adverse Effect, or that would, if such
default had occurred after the Closing Date, constitute an Event of Default
under subsection 9.1(e).
6.7 ERISA Compliance. Except as specifically disclosed in Schedule 6.7:
---------------- ------------
(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law. Each
Plan which is intended to qualify under Section 401(a) of the Code has received
a favorable
61
<PAGE>
determination letter from the IRS and to the best knowledge of the Company,
nothing has occurred which would cause the loss of such qualification. The
Company and each ERISA Affiliate has made all required contributions to any Plan
subject to Section 412 of the Code, and no application for a funding waiver or
an extension of any amortization period pursuant to Section 412 of the Code has
been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of Company,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably be expected to result in a Material Adverse
Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither
the Company nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA); (iv)
neither the Company nor any ERISA Affiliate has incurred, or reasonably expects
to incur, any liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v)
neither the Company nor any ERISA Affiliate has engaged in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA.
6.8 Use of Proceeds; Margin Regulations.
-----------------------------------
The proceeds of the Loans are to be used solely for the purposes set forth
in and permitted by Section 7.12 and Section 8.7. Neither the Company nor any
Subsidiary is generally engaged in the business of purchasing or selling Margin
Stock or extending credit for the purpose of purchasing or carrying Margin
Stock.
6.9 Title to Properties.
-------------------
The Company and each Subsidiary have good record and marketable title in
fee simple to, or valid leasehold interests in, all real property necessary or
used in the ordinary conduct of their respective businesses, except for such
defects in title as could not, individually or in the aggregate, have a Material
Adverse Effect. As of the Closing Date, the property of the Company and its
Subsidiaries is subject to no Liens, other than Permitted Liens. The Conveyance
Agreements will be, as of the Closing Date, legally sufficient to transfer or
convey to the Company all properties not already held by it that are,
individually or in the aggregate, required to enable the Company to conduct its
operations as contemplated by the S-1.
6.10 Taxes.
-----
The Company and its Subsidiaries have filed (or have obtained extensions
with respect to) all Federal and other material tax returns and reports required
to be filed, and have paid all Federal and other material taxes, assessments,
fees and other governmental
62
<PAGE>
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP. There is no proposed tax assessment against the Company or
any Subsidiary that would, if made, have a Material Adverse Effect.
6.11 Financial Condition.
-------------------
(a) The audited combined balance sheets of the Company and Old
Services dated December 31, 1996 and unaudited combined balance sheets of the
Company and Old Services dated June 30, 1997 provided to the Agent and the
Banks, and the related consolidated statements of income or operations, members'
equity and cash flows for the fiscal year and two fiscal quarters, respectively,
ended on that date:
(i) were prepared in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise
expressly noted therein;
(ii) fairly present the financial condition of the Company
and Old Services as of the dates thereof and results of operations for the
period covered thereby; and
(iii) show all material indebtedness and other liabilities,
direct or contingent, of the Company and Old Services as of the dates
thereof, including liabilities for taxes, material commitments and
Contingent Obligations.
(b) The pro forma unaudited consolidated financial statements of the
Company dated June 30, 1997 provided to the Agent and the Banks, and the related
pro forma consolidated statements of income or operations, members' equity and
cash flows for the two fiscal quarters ended on that date, fairly present on a
pro forma basis the effect of the transfer of the assets of Old Services to the
Company at the beginning of such period upon the combined financial performance
of the Company and Old Services described in the financial statements referenced
in subsection 6.11(a) for the two fiscal quarters ending on that date. The
Company will, upon execution and delivery of the Conveyance Agreements on the
Closing Date, succeed in all material respects to the business, assets,
properties, liabilities and operations reflected by those pro forma financial
statements of the Company other than $1,000,000 in cash or cash equivalents
being retained in Old Services.
(c) All projections heretofore or hereafter furnished to the Agent
and the Banks for purposes of or in connection with this Agreement have been
prepared in good faith on the basis of the assumptions stated therein, which
assumptions are, in the opinion of the management of the Company, fair in the
light of conditions existing at the time of delivery of such projections; and at
the time of delivery, the management of the Company believed that the forecasts
of the Company's future financial performance set forth in the projections were
reasonable and attainable.
(d) Since June 30, 1997, there has been no Material Adverse Effect.
63
<PAGE>
6.12 Environmental Matters.
---------------------
The Company conducts in the Ordinary Course of Business a review of the
effect of existing Environmental Laws and existing Environmental Claims on its
business, operations and properties, and as a result thereof the Company has
reasonably concluded that such Environmental Laws and Environmental Claims could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
6.13 Regulated Entities.
------------------
None of the Company, any Related Entity, any Person controlling the
Company, or any Subsidiary, is an "Investment Company" within the meaning of the
Investment Company Act of 1940. Neither the Company nor any Related Entity is
subject to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Interstate Commerce Act, any state public utilities code
to which it is subject, or any other statute or regulation of the United States
or any such state limiting its ability to incur Indebtedness.
6.14 No Burdensome Restrictions.
--------------------------
Neither the Company nor any Subsidiary nor any Related Entity is a party to
or bound by any Contractual Obligation, or subject to any restriction in any
Organization Document, or any Requirement of Law, which could reasonably be
expected to have a Material Adverse Effect.
6.15 Copyrights, Patents, Trademarks and Licenses, etc.
-------------------------------------------------
The Company or its Subsidiaries own or are licensed or otherwise have the
right to use all of the patents, trademarks, service marks, trade names,
copyrights, contractual franchises, authorizations and other rights that are
reasonably necessary for the operation of their respective businesses, without
conflict with the rights of any other Person. To the best knowledge of the
Company, no slogan or other advertising device, product, process, method,
substance, part or other material now employed, or now contemplated to be
employed, by the Company or any Subsidiary infringes upon any rights held by any
other Person. No claim or litigation regarding any of the foregoing is pending
or threatened, and no patent, invention, device, application, principle or any
statute, law, rule, regulation, standard or code is pending or, to the knowledge
of the Company, proposed, which, in either case, could reasonably be expected to
have a Material Adverse Effect.
6.16 Subsidiaries.
------------
As of the Closing Date, the Company has no Subsidiaries other than Finance
and has no equity investments in any other corporation or entity.
6.17 Insurance.
---------
The properties of the Company and its Subsidiaries are insured with
financially sound and reputable insurance companies not Affiliates of the
Company, in such
64
<PAGE>
amounts, with such deductibles and covering such risks as are customarily
carried by companies engaged in similar businesses and owning similar properties
in localities where the Company or such Subsidiary operates.
6.18 Swap Obligations.
----------------
Neither the Company nor any of its Subsidiaries has incurred any
outstanding obligations under any Swap Contracts, other than Permitted Swap
Obligations. The Company has undertaken its own independent assessment of its
consolidated assets, liabilities and commitments and has considered appropriate
means of mitigating and managing risks associated with such matters and has not
relied on any swap counterparty or any Affiliate of any swap counterparty in
determining whether to enter into any Swap Contract.
6.19 Full Disclosure.
---------------
None of the representations or warranties made by the Company in the Loan
Documents as of the date such representations and warranties are made or deemed
made, and none of the statements contained in any exhibit, written report,
statement or certificate furnished by or on behalf of the Company or any
Subsidiary in connection with the Loan Documents or the S-1 (including the
offering and disclosure materials delivered by or on behalf of the Company to
the Banks prior to the Closing Date), contains any untrue statement of a
material fact or omits any material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they are made, not misleading as of the time when made or delivered.
ARTICLE VII
AFFIRMATIVE COVENANTS
---------------------
So long as any Bank shall have any W/C Revolving Commitment or Acquisition
Revolving Commitment hereunder, or the Swingline Bank shall have any Swingline
Commitment hereunder, or any Loan or other Obligation shall remain unpaid or
unsatisfied, or any Letter of Credit shall remain outstanding, unless the
Majority Banks waive compliance in writing:
7.1 Financial Statements.
--------------------
The Company shall deliver to the Agent, in form and detail satisfactory to
the Agent and the Majority Banks, with sufficient copies for each Bank:
(a) as soon as available, but not later than 90 days after the end of
each fiscal year (commencing with the fiscal year ended December 31, 1997), a
copy of the audited consolidated balance sheet of the Company and its
Subsidiaries as at the end of such year and the related consolidated statements
of income or operations, members' equity and cash flows for such year, setting
forth in each case in comparative form the
65
<PAGE>
figures for the previous fiscal year, and accompanied by the opinion of Arthur
Andersen L.L.P. or another nationally-recognized independent public accounting
firm ("Independent Auditor"), which report shall state that such consolidated
-------------------
financial statement presents fairly the financial position of the Company and
its Subsidiaries for the periods indicated in conformity with GAAP applied on a
basis consistent with prior years (except as otherwise stated therein). Such
opinion shall not be qualified or limited because of a restricted or limited
examination by the Independent Auditor of any material portion of the Company's
or any Subsidiary's records;
(b) as soon as available, but not later than 60 days after the end of
each of the first three fiscal quarters of each fiscal year (commencing with the
fiscal quarter ended March 31, 1998), a copy of the unaudited consolidated
balance sheet of the Company and its Subsidiaries as of the end of such quarter
and the related consolidated statements of income, members' equity and cash
flows for the period commencing on the first day and ending on the last day of
such quarter, and certified by a Responsible Officer as fairly presenting, in
accordance with GAAP (subject to the absence of footnotes and ordinary year-end
audit adjustments), the financial position and the results of operations of the
Company and its Subsidiaries.
7.2 Certificates; Other Information. The Company shall furnish to the Agent,
-------------------------------
with sufficient copies for each Bank:
(a) concurrently with each delivery of financial statements of the Company
pursuant to subsection 7.1(a), a certificate of the Independent Auditor (i)
stating that their audit examination has included a review of the terms of this
Agreement as it relates to accounting matters, (ii) stating whether, in
connection with their audit examination, any condition or event which
constitutes a Default or an Event of Default as they relate to accounting
matters has come to their attention, and if such a condition or event has come
to their attention, specifying the nature and period of existence thereof, and
(iii) stating that based on their audit examination nothing has come to their
attention which causes them to believe that the matters set forth in the
Compliance Certificate delivered therewith for the applicable fiscal year are
not stated in accordance with the terms of this Agreement; provided that such
-------- ----
accountants shall not be liable by reason of any failure to obtain knowledge of
any such Default or Event of Default that would not be disclosed in the course
of their audit examination;
(b) concurrently with the delivery of the financial statements referred to
in subsections 7.1(a) and (b), a Compliance Certificate executed by a
Responsible Officer, which Compliance Certificate for the fourth fiscal quarter
in each fiscal year shall also include a reconciliation of the Quarterly Timber
Reports for such fiscal year with the Annual Timber Report for such fiscal year;
(c) promptly, copies, within 15 days of the filing thereof, of all
financial statements and reports that the Company, its Subsidiaries or any
Related Entity sends to its shareholders, and copies of all financial statements
and regular, periodical or special reports (including Forms 10K, 10Q and 8K)
that the Company, its Subsidiaries or any Related Entity may make to, or file
with, the SEC;
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(d) promptly, such additional information regarding the business,
financial or corporate affairs of the Company or any Subsidiary as the Agent, at
the request of any Bank, may from time to time reasonably request;
(e) as soon as practicable and in any event within sixty (60) days after
the end of each fiscal quarter, a certificate duly executed by a Responsible
Officer, certifying and setting forth a complete report of all Timber Harvest
for such fiscal quarter (the "Quarterly Timber Report"), including the
-----------------------
following:
(i) a summary of activity, including a breakdown of
harvesting under stumpage agreements and under other types of agreements, during
such fiscal quarter under (A) all outstanding timber cutting contracts or log
sale agreements or auctions or sales of logs conducted orally on the Timberlands
whereby the Company, as seller, is or may become obligated to cut, harvest or
otherwise remove Timber from the Timberlands and to sell or deliver such Timber
to third Persons, and (B) all stumpage and other Timber cutting contracts;
(ii) a summary of the total amount of Timber cut during such
fiscal quarter classified by species, total volumes removed and acreage disposed
of with such additional details as the Majority Banks may reasonably request;
(iii) an estimate of Timber growth during such fiscal
quarter, provided that, regardless of the actual amount of such estimate, the
addition to Merchantable Timber Inventory for any fiscal Quarter based upon such
estimate shall not exceed 1.25% of Merchantable Timber Inventory at the end of
the immediately preceding fiscal quarter;
(iv) all dispositions of Timberlands or other material
assets by the Company or any Subsidiary during such fiscal quarter;
(v) all proceeds received and revenues generated by such
cutting, harvesting, sale, exchange, or disposition during such fiscal quarter
and any other receipts from operation of the Timberlands such as wood use fees;
(vi) a summary of operating costs incurred in connection
with such cutting, harvesting, or removal during such fiscal quarter; and
(vii) a summary of the status of timber-harvesting and
similar permits applied for and received by the Company as of the end of such
fiscal quarter;
(f) as soon as practicable, and in any event within sixty (60) days after
the end of each fiscal year commencing with fiscal year 1998, a written
appraisal prepared by an independent timber appraiser of recognized standing
satisfactory to the Majority Banks and the Agent as to the volume and fair
market value of the Merchantable Timber standing on the Timberlands (an "Annual
------
Timber Report");
- -------------
(g) no later than sixty (60) days after the end of each fiscal year
commencing with fiscal year 1998, a one (1) year and five (5) year harvesting
plan for the Timberlands for the next succeeding fiscal year and five (5) fiscal
years, showing, in each case for each
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month during each such fiscal year, the total harvest volume by species, the
location of proposed cutting, the specifications and size of trees to be cut and
how such trees shall be designated, the time period in which harvesting is to
occur, logging methods to be used and the Planned Volume of annual harvests; and
(h) no later than sixty (60) days after the end of each fiscal year
commencing with fiscal year 1998, a one (1) year (prepared on a quarterly basis)
and five (5) year budget and business plan for the next fiscal year, each
including a pro forma balance sheet and statements of income and cash flows and
showing projected operating revenues, expenses and debt service of the Company
and its Subsidiaries and the volume of harvesting anticipated to be done under
stumpage agreements and under other types of agreements, and a certification by
a Responsible Officer that, based on such financial forecasts and the one year
harvesting plans being simultaneously furnished to the Agent and the Banks
pursuant to subsection 7.2(g), the Company will be able to comply with its
financial covenants set forth in Article VIII during the next fiscal year.
7.3 Notices. The Company shall promptly notify the Agent and each Bank:
-------
(a) upon a Responsible Officer obtaining knowledge thereof, of the
occurrence of any Default or Event of Default, or of the occurrence or existence
of any event or circumstance that foreseeably will become a Default or Event of
Default;
(b) upon a Responsible Officer obtaining knowledge thereof, of any matter
that has resulted or may result in a Material Adverse Effect, including (i)
breach or non-performance of, or any default under, a Contractual Obligation of
the Company or any Subsidiary; (ii) any dispute, litigation, investigation,
proceeding between the Company or any Subsidiary and any Governmental Authority
or the suspension of any permit issued by any Governmental Authority for the
benefit of the Company or any Subsidiary; or (iii) the commencement of, or any
material and adverse development in, any litigation or proceeding affecting the
Company or any Subsidiary; including pursuant to any applicable Environmental
Laws;
(c) of the occurrence of any of the following events affecting the Company
or any ERISA Affiliate (but in no event more than 10 days after such event), and
deliver to the Agent and each Bank a copy of any notice with respect to such
event that is filed with a Governmental Authority and any notice delivered by a
Governmental Authority to the Company or any ERISA Affiliate with respect to
such event:
(i) an ERISA Event;
(ii) a material increase in the Unfunded Pension Liability
of any Pension Plan;
(iii) the adoption of, or the commencement of contributions
to, any Plan subject to Section 412 of the Code by the Company or any ERISA
Affiliate; or
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(vi) the adoption of any amendment to a Plan subject to
Section 412 of the Code, if such amendment results in a material increase in
contributions or Unfunded Pension Liability.
(d) of any material change in accounting policies or financial reporting
practices by the Company or any of its consolidated Subsidiaries; and
(e) upon the request from time to time of the Agent, the Swap Termination
Values, together with a description of the method by which such values were
determined, relating to any then-outstanding Swap Contracts to which the Company
or any of its Subsidiaries is party.
Each notice under subsections (a), (b), (c) or (d) of this Section shall be
accompanied by a written statement by a Responsible Officer setting forth
details of the occurrence referred to therein, and stating what action the
Company or any affected Subsidiary proposes to take with respect thereto and at
what time. Each notice under subsection 7.3(a) shall describe with
particularity any and all clauses or provisions of this Agreement or other Loan
Document that have been (or foreseeably will be) breached or violated.
7.4 Preservation of Existence, Etc. The Company shall, and shall cause each
------------------------------
Related Entity and each Subsidiary to:
(a) preserve and maintain in full force and effect its limited
liability company, limited partnership, or corporate existence and good standing
under the laws of its state or jurisdiction of formation or of incorporation;
(b) preserve and maintain in full force and effect all governmental
rights, privileges, qualifications, permits, licenses and franchises necessary
or desirable in the normal conduct of its business except in connection with
transactions permitted by Section 8.3 and sales of assets permitted by Section
8.2;
(c) use reasonable efforts, in the Ordinary Course of Business, to
preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents, trademarks,
trade names and service marks, the non-preservation of which could reasonably be
expected to have a Material Adverse Effect.
7.5 Maintenance of Property.
-----------------------
The Company shall maintain, and shall cause each Subsidiary to maintain,
and preserve all its property which is used or useful in its business in good
working order and condition, ordinary wear and tear excepted, and make all
necessary repairs thereto and renewals and replacements thereof except where the
failure to do so could not reasonably be expected to have a Material Adverse
Effect, except as permitted by Section 8.2.
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7.6 Insurance.
---------
The Company shall maintain, and shall cause each Subsidiary to maintain,
with financially sound and reputable independent insurers, insurance with
respect to its properties and business against loss or damage of the kinds
customarily insured against by Persons engaged in the same or similar business,
of such types and in such amounts as are customarily carried under similar
circumstances by such other Persons.
7.7 Payment of Obligations.
----------------------
The Company shall, and shall cause each Subsidiary to, pay and discharge as
the same shall become due and payable, all their respective obligations and
liabilities, including:
(a) all tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets; and
(b) all lawful claims which, if unpaid, would by law become a Lien
upon its property;
unless the same are being contested in good faith by appropriate proceedings and
adequate reserves in accordance with GAAP are being maintained by the Company or
such Subsidiary.
7.8 Compliance with Laws.
--------------------
The Company shall comply, and shall cause each Subsidiary to comply, in all
material respects with all Requirements of Law of any Governmental Authority
having jurisdiction over it or its business (including the Federal Fair Labor
Standards Act), except such as may be contested in good faith or as to which a
bona fide dispute may exist.
7.9 Compliance with ERISA.
---------------------
The Company shall, and shall cause each of its ERISA Affiliates to: (a)
maintain each Plan in compliance in all material respects with the applicable
provisions of ERISA, the Code and other federal or state law; (b) cause each
Plan which is qualified under Section 401(a) of the Code to maintain such
qualification; and (c) make all required contributions to any Plan subject to
Section 412 of the Code.
7.10 Inspection of Property and Books and Records.
--------------------------------------------
The Company shall maintain and shall cause each Subsidiary to maintain
proper books of record and account, in which full, true and correct entries in
conformity with GAAP consistently applied shall be made of all financial
transactions and matters involving the assets and business of the Company and
such Subsidiary. The Company shall permit, and shall cause each Related Entity
and each Subsidiary to permit, representatives and independent contractors of
the Agent or any Bank to visit and inspect
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any of their respective properties, to examine their respective corporate,
financial and operating records, and make copies thereof or abstracts therefrom,
and to discuss their respective affairs, finances and accounts with their
respective directors, officers, and independent public accountants, all at the
expense of the Company and at such reasonable times during normal business hours
and as often as may be reasonably desired, upon reasonable advance notice to the
Company; provided, however, when an Event of Default exists the Agent or any
Bank may do any of the foregoing at the expense of the Company at any time
during normal business hours and without advance notice.
7.11 Environmental Laws.
------------------
The Company shall, and shall cause each Subsidiary to, conduct its
operations and keep and maintain its property in compliance with all
Environmental Laws except for such violations that could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
7.12 Use of Proceeds.
---------------
The Company shall use the proceeds of the (a) W/C Revolving Loans for
working capital and general corporate purposes, and (b) the Acquisition
Revolving Loans for the cost (including related fees, commissions and expenses)
of the acquisition of timberlands, standing timber, and related assets, and with
respect to only the initial Acquisition Revolving Loan to be made on the Closing
Date, to repay existing Indebtedness of the Company in an amount not to exceed
$26,000,000, in all cases not in contravention of any Requirement of Law or of
any Loan Document.
ARTICLE VIII
NEGATIVE COVENANTS
------------------
So long as any Bank shall have any W/C Revolving Commitment or Acquisition
Revolving Commitment hereunder, or the Swingline Bank shall have any Swingline
Commitment hereunder, or any Loan or other Obligation shall remain unpaid or
unsatisfied, or any Letter of Credit shall remain outstanding, unless the
Majority Banks waive compliance in writing:
8.1 Limitation on Liens.
-------------------
The Company shall not, and shall not suffer or permit any Subsidiary to,
directly or indirectly, make, create, incur, assume or suffer to exist any Lien
upon or with respect to any part of its property, whether now owned or hereafter
acquired, other than the following ("Permitted Liens"):
---------------
(a) any Lien existing on property of the Company or any Subsidiary on the
Closing Date and set forth in Schedule 8.1 securing Indebtedness outstanding on
------------
such date;
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<PAGE>
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental charges which
are not delinquent or remain payable without penalty, or to the extent that non-
payment thereof is permitted by Section 7.7, provided that no notice of lien has
been filed or recorded under the Code;
(d) carriers', warehousemen's, mechanics', loggers', landlords',
materialmen's, repairmen's or other similar Liens (whether arising by operation
of law, contract, or otherwise) arising in the Ordinary Course of Business which
are not delinquent or remain payable without penalty or which are being
contested in good faith and by appropriate proceedings, which proceedings have
the effect of preventing the forfeiture or sale of the property subject thereto;
(e) Liens (other than any Lien imposed by ERISA) consisting of pledges or
deposits required in the Ordinary Course of Business in connection with workers'
compensation, unemployment insurance and other social security legislation;
(f) Liens on the property of the Company or its Subsidiary securing (i)
the non-delinquent performance of bids, trade contracts (other than for borrowed
money), leases, statutory obligations, (ii) contingent obligations on surety and
appeal bonds, and (iii) other non-delinquent obligations of a like nature; in
each case, incurred in the Ordinary Course of Business;
(g) Liens consisting of judgment or judicial attachment liens that do not
constitute an Event of Default;
(h) easements, rights-of-way, road use rights, restrictions and other
similar encumbrances incurred in the Ordinary Course of Business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the businesses of the Company and its Subsidiaries;
(i) Liens securing obligations in respect of Capital Leases on assets
subject to such leases, provided that such Capital Leases are not otherwise
prohibited hereunder;
(j) purchase money security interests on any property acquired or held by
the Company or its Subsidiaries in the Ordinary Course of Business, securing
Indebtedness incurred or assumed for the purpose of financing all or any part of
the cost of acquiring such property; provided that (i) any such Lien attaches to
such property concurrently with or within 30 days after the acquisition thereof,
(ii) such Lien attaches solely to the property so acquired in such transaction,
(iii) the principal amount of the debt secured thereby does not exceed 100% of
the cost of such property, and (iv) the principal amount of the Indebtedness
secured by any and all such purchase money security interests shall not at any
time exceed, together with Indebtedness permitted under subsections 8.5(e) and
(without duplication) 8.5(h), $10,000,000;
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(k) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Company in excess of those set forth by regulations promulgated by
the FRB, and (ii) such deposit account is not intended by the Company or any
Subsidiary to provide collateral to the depository institution; and
(l) Liens on accounts receivable, inventory and proceeds thereof to secure
the W/C Revolving Loans, the L/C Obligations, and the Swingline Loans.
8.2 Disposition of Assets.
---------------------
The Company shall not, and shall not suffer or permit any Subsidiary to,
directly or indirectly, sell, convey, transfer or otherwise dispose of any
property (including, except as permitted by subsection 8.1(l), accounts and
notes receivable, with or without recourse) or permit or suffer to occur an
Event of Loss with respect to any of its properties, or enter into any agreement
to do any of the foregoing, except:
(a) Timber Harvest in compliance with Section 8.20;
(b) sales for fair market value thereof of assets not otherwise permitted
hereunder to Persons who are not Affiliates of the Company, and Events of Loss
with respect to properties of the Company and its Subsidiaries, if:
(i) in cases of a sale, at the time of such sale no Default
or Event of Default exists or shall result from such sale; and
(ii) the Net Proceeds of such sale or Event of Loss, if and
to the extent the aggregate of all Net Proceeds of all such sales and Events of
Loss received by the Company or its Subsidiaries in any calendar year exceed the
Maximum Amount for such year are applied, within 180 days of receipt of such
excess Net Proceeds (A) to the purchase of productive assets in a Permitted
Business (including purchases not consummated during such 180 days if a binding
agreement for such purchase is entered into during such period and such purchase
is completed within 90 days after the expiry of such 180 day period), or (B) to
the purchase, repayment, or Cash Collateralization of such Senior Debt as the
Company may elect to purchase, repay, or Cash Collateralize; provided, however,
-------- -------
the Company shall not be required to apply any excess Net Proceeds pursuant to
clause (A) or (B) above if and to the extent that, when received, such excess
Net Proceeds do not exceed cash expenditures by the Company for the purchase of
productive assets in a Permitted Business during the preceding 90 days
(excluding any purchase to the extent financed by a Loan or to the extent such
purchase was previously applied as a credit to reduce repayments, repurchases,
or Cash Collateralization of Senior Debt required by this subsection 8.2(b) or
Section 8.20) (all such Net Proceeds in excess of the cash expenditures referred
to in the immediately preceding proviso being herein referred to as the "Excess
------
Asset Sales Proceeds"); and, provided further, that (1) at any time the Company
- -------------------- -------- -------
shall elect to repay or purchase Senior Debt other than the Loans, the
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<PAGE>
Company shall also repay or Cash Collateralize Obligations by at least a pro
rata amount (based on the then outstanding principal of amount of all Senior
Debt), (2) a Responsible Officer shall have notified the Agent promptly after
its determination to so apply the Net Proceeds and shall have certified the
receipt of fair market value for such assets and the proper application of such
Net Proceeds in accordance with this subsection 8.2(b), and (3) all Excess Asset
Sales Proceeds that have not been applied to the purchase of productive assets
in a Permitted Business or distributed to the holders of Senior Debt for
application to the repayment of such Senior Debt shall be placed immediately
upon receipt thereof in an escrow account, pursuant to an Escrow Agreement, for
the purpose of application in accordance with clauses (A) and (B) above. The
Company shall apply all amounts withdrawn from escrow pursuant to an Escrow
Agreement, other than net earnings thereon arising from investment thereof as
provided in such Escrow Agreement, to the applications required by clauses (A)
or (B) above within three Business Days after such withdrawal;
(c) sales of used, worn-out or surplus equipment, in the Ordinary Course
of Business;
(d) sales of equipment to the extent that such equipment is exchanged for
credit against the purchase price of similar replacement equipment, or the
proceeds of such sale are reasonably promptly applied to the purchase price of
such replacement equipment; and
(e) simultaneous exchanges by the Company of Timberlands for other
timberlands in the Ordinary Course of Business, with Persons who are not
Affiliates of the Company, if:
(i) at the time of such exchange, no Event of Default
exists or shall result from such exchange;
(ii) the aggregate fair market value of all Timberlands so
exchanged by the Company do not exceed on a cumulative basis $100,000,000 during
the term of this Agreement;
(iii) the timberlands to be received in exchange are of at
least an equivalent fair market value to the Timberlands to be exchanged or, if
such other timberlands are not of at least an equivalent fair market value, the
amount of any shortfall shall constitute a sale under subsection 8.2(b) subject
to the requirements of subsection 2.6(a); and
(iv) the Agent has received, in form and substance
satisfactory to the Agent and the Majority Banks, copies of appraisals or
valuations for the Timberlands to be exchanged and the other timberlands to be
received in the exchange, which appraisals or valuation shall, in the case of
any exchange where the Company is transferring properties (in one or a series of
related transactions) having a fair market value in excess of $25,000,000, to be
prepared by an independent appraiser acceptable to the Agent and the Majority
Banks, and in all other cases the appraisal or other valuation may be
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<PAGE>
prepared by the Company in such form and content as is usual and customary in
accordance with past practices of the Company;
provided, however, that any exchange permitted by this subsection 8.2(e) may be
- -------- -------
in the form of a tax deferred exchange and the conditions described in clauses
(iii) and (iv) above may be satisfied up to 180 days after the sale of the
Timberlands, so long as the aggregate sale price of the Timberlands with respect
to which timberlands have not yet been received in exchange in accordance with
this subsection 8.2(e) do not at any one time exceed $25,000,000, or, if such
sale price exceeds $25,000,000, all Net Proceeds of such sales in excess of
$25,000,000 shall be placed immediately upon receipt thereof in an escrow
account, pursuant to an Escrow Agreement, for the purpose of application in
accordance with clauses (b)(ii)(A) and (b)(ii)(C) above. The Company shall
apply any Net Proceeds withdrawn from escrow pursuant to an Escrow Agreement to
the applications required by clauses (b)(ii)(A) or (b)(ii)(C) above within three
Business Days after such withdrawal.
8.3 Consolidations and Mergers.
--------------------------
The Company shall not, and shall not suffer or permit any Subsidiary to,
merge, consolidate with or into, or convey, transfer, lease or otherwise dispose
of (whether in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired) to or
in favor of any Person, except:
(a) any Subsidiary may merge with the Company, provided that the
Company shall be the continuing or surviving corporation, or with any one or
more Subsidiaries, provided that if any transaction shall be between a
Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall be
the continuing or surviving corporation; and
(b) any Subsidiary may sell all or substantially all of its assets
(upon voluntary liquidation or otherwise), to the Company or another Wholly-
Owned Subsidiary.
8.4 Loans and Investments.
---------------------
The Company shall not purchase or acquire, or suffer or permit any
Subsidiary to purchase or acquire, or make any commitment therefor, any capital
stock, equity interest, or any obligations or other securities of, or any
interest in, any Person, or make or commit to make any Acquisitions, or make or
commit to make any advance, loan, extension of credit or capital contribution to
or any other investment in, any Person including any Affiliate of the Company
(together, "Investments"), except for:
-----------
(a) subject to compliance with Section 8.20 or subsection 8.2(d), as
applicable, Acquisitions by the Company of assets constituting Timber or
Timberlands;
(b) Investments in Cash Equivalents and demand deposit accounts,
including those maintained with BofA, in each case in the manner described in
the Company's cash management program attached as Schedule 8.4(b) (subject to
---------------
restricting
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the Investments made pursuant thereto to Cash Equivalents and demand deposit
accounts);
(c) agreements between the Company and any other Person with respect
to the disposition of Timberlands or the grant of the right to harvest any
Timber pursuant to which the payment obligation for such Timberlands or such
Timber to be harvested by such other Person is in whole or in part deferred as
long as (i) such disposition of such Timber or Timberlands is permitted by
Section 8.2 and payment therefor is required at least proportionately with the
actual harvesting of the Timber in question and (ii) the aggregate amount
outstanding under all such arrangements does not at any time exceed $25,000,000;
(d) loans and advances to officers, directors, and employees made in
the Ordinary Course of Business not to exceed $1,000,000 in the aggregate at any
one time outstanding;
(e) Permitted Swap Obligations;
(f) extensions of trade credit in the Ordinary Course of Business and
Investments acquired by reason of the exercise of customary creditors' rights
upon default or pursuant to the bankruptcy, insolvency, or reorganization of
debtors; and
(g) Investments set forth on Schedule 8.4(g).
---------------
8.5 Limitation on Indebtedness.
--------------------------
The Company shall not, and shall not suffer or permit any Subsidiary to,
create, incur, assume, suffer to exist, or otherwise become or remain directly
or indirectly liable with respect to, any Indebtedness, except:
(a) the Senior Notes;
(b) the Obligations;
(c) Indebtedness incurred pursuant to Permitted Swap Obligations;
(d) accounts payable to trade creditors for goods and services and current
operating liabilities (not the result of the borrowing of money) incurred in the
Ordinary Course of Business in accordance with customary terms and paid within
the specified time, unless contested in good faith by appropriate proceedings
and reserved for in accordance with GAAP;
(e) Indebtedness existing on the Closing Date and set forth on Schedule
--------
8.5;
- ---
(f) endorsements for collection or deposit in the Ordinary Course of
Business;
(g) Indebtedness incurred in connection with Capital Leases permitted
pursuant to Section 8.10;
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(h) Indebtedness representing the deferred purchase price of specific
property acquired by the Company or a Subsidiary, whether or not secured by
Liens permitted by subsection 8.1(j), as long as the aggregate amount of such
Indebtedness, together with Indebtedness permitted by subsection 8.5(e), does
not at any time exceed $10,000,000; and
(i) Contingent Obligations permitted under Section 8.8.
8.6 Transactions with Affiliates.
----------------------------
The Company shall not, and shall not suffer or permit any Subsidiary to,
enter into any transaction with any Affiliate of the Company, except (i) as
permitted by subsection 8.4(d), (ii) Restricted Payments permitted by Section
8.11, (iii) transactions described on Schedule 8.6, and (iv) other transactions
upon fair and reasonable terms no less favorable to the Company or such
Subsidiary than would obtain in a comparable arm's-length transaction with a
Person not an Affiliate of the Company or such Subsidiary. Notwithstanding the
foregoing, the permitted transactions set forth in the foregoing sentence shall
not permit the payment to an Affiliate of compensation in the nature of
investment banking fees, placement fees or similar fees for financial advice or
consulting services without the prior consent of the Majority Banks.
8.7 Use of Proceeds.
---------------
(a) The Company shall not, and shall not suffer or permit any
Subsidiary to, use any portion of the Loan proceeds or any Letter of Credit,
directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or
otherwise refinance indebtedness of the Company or others incurred to purchase
or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or
carrying any Margin Stock, or (iv) to acquire any security in any transaction
that is subject to Section 13 or 14 of the Exchange Act.
(b) The Company shall not, directly or indirectly, use any portion of
the Loan proceeds or any Letter of Credit (i) knowingly to purchase Ineligible
Securities from the Arranger during any period in which the Arranger makes a
market in such Ineligible Securities, (ii) knowingly to purchase during the
underwriting or placement period Ineligible Securities being underwritten or
privately placed by the Arranger, or (iii) to make payments of principal or
interest on Ineligible Securities underwritten or privately placed by the
Arranger and issued by or for the benefit of the Company or any Affiliate of the
Company. The Arranger is a registered broker-dealer and permitted to underwrite
and deal in certain Ineligible Securities; and "Ineligible Securities" means
---------------------
securities which may not be underwritten or dealt in by member banks of the
Federal Reserve System under Section 16 of the Banking Act of 1933 (12 U.S.C.
(S) 24, Seventh), as amended.
8.8 Contingent Obligations.
----------------------
The Company shall not, and shall not suffer or permit any Subsidiary to,
create, incur, assume or suffer to exist any Contingent Obligations except:
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(a) endorsements for collection or deposit in the Ordinary Course of
Business;
(b) Permitted Swap Obligations;
(c) Contingent Obligations of the Company and its Subsidiaries
existing as of the Closing Date and listed in Schedule 8.8;
------------
(d) Contingent Obligations with respect to Surety Instruments other
than those described in subsection 8.8(f) below incurred in the Ordinary Course
of Business and not exceeding at any time $1,000,000 in the aggregate in respect
of the Company and its Subsidiaries on a consolidated basis;
(e) L/C Obligations;
(f) (i) non-delinquent bids, trade contracts (other than for borrowed
money), and statutory obligations, (ii) Contingent Obligations under surety and
appeal bonds supporting performance obligations of the Company or its
Subsidiaries, and (iii) other non-delinquent obligations of a like nature; in
each case, incurred in the Ordinary Course of Business; and
(g) Guaranty Obligations of the Company or a Subsidiary for the
Indebtedness of the Company or a Wholly-Owned Subsidiary not otherwise
prohibited hereunder.
8.9 Joint Ventures.
--------------
The Company shall not, and shall not suffer or permit any Subsidiary to
enter into any Joint Venture, other than to engage in a Permitted Business.
8.10 Lease Obligations.
-----------------
The Company shall not, and shall not suffer or permit any Subsidiary to,
create or suffer to exist any obligations for the payment of rent for any
property under lease or agreement to lease, except for:
(a) leases of the Company and of Subsidiaries in existence on the
Closing Date and any renewal, extension or refinancing thereof;
(b) Operating Leases entered into by the Company or any Subsidiary
after the Closing Date in the Ordinary Course of Business; provided that the
--------
aggregate annual rental payments for all such Operating Leases shall not exceed
$1,000,000 in any fiscal year for the Company and its Subsidiaries on a
consolidated basis; and
(c) Capital Leases other than those permitted under subsection
8.10(a) entered into by the Company or any Subsidiary after the Closing Date to
finance the acquisition of equipment; provided that the aggregate annual rental
--------
payments for all such
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Capital Leases shall not exceed in any fiscal year $1,000,000 for the Company
and its Subsidiaries on a consolidated basis.
8.11 Restricted Payments.
-------------------
The Company shall not, and shall not suffer or permit any Subsidiary to,
declare or make any dividend payment or other distribution of assets,
properties, cash, rights, obligations or securities (each, a "Restricted
----------
Payment") on account of any shares of any class of its capital stock or
- -------
membership interests, or purchase, redeem or otherwise acquire for value any
shares of its capital stock or membership interests or any warrants, rights or
options to acquire such shares or membership interests (collectively, "Equity
------
Interests"), now or hereafter outstanding; except that the Company and any
- ---------
Subsidiary may:
(a) declare and make dividend payments or other distributions payable
solely in Equity Interests of the Company or such Subsidiary, as applicable;
(b) any Subsidiary may make Restricted Payments to the Company or any
Wholly-Owned Subsidiary; and
(c) if no Default or Event of Default exists or would result from
such action, the Company may declare and make during each fiscal quarter one or
more Restricted Payments if such Restricted Payments in an aggregate amount do
not exceed Available Cash for the immediately preceding fiscal quarter.
8.12 ERISA.
-----
The Company shall not, and shall not suffer or permit any of its ERISA
Affiliates to: (a) engage in a prohibited transaction or violation of the
fiduciary responsibility rules with respect to any Plan which has resulted or
could reasonably expected to result in liability of the Company and its
Subsidiaries on a consolidated basis in an aggregate amount in excess of
$5,000,000; or (b) engage in a transaction that could be subject to Section 4069
or 4212(c) of ERISA.
8.13 Change in Business.
------------------
The Company shall not, and shall not suffer or permit any Subsidiary to,
engage in any material line of business other than a Permitted Business.
8.14 Minimum Pro Forma EBITDDA to Pro Forma Interest Expense.
-------------------------------------------------------
The Company shall not permit the ratio at the end of any fiscal quarter for
the four quarters then ending of Pro Forma EBITDDA to Pro Forma Interest Expense
(as measured on a Rolling Four Quarter Basis) to be less than (a) from the
Closing Date through June 30, 1998, 2.10:1.0, (b) thereafter and through June
30, 1999, 2.25:1.0, and (c) thereafter, 2.35:1.0.
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8.15 Maximum Funded Debt to Pro Forma EBITDDA.
----------------------------------------
The Company shall not permit the ratio of Funded Debt to Pro Forma
EBITDDA (as measured on a Rolling Four Quarter Basis) to be greater than (a)
from the Closing Date through June 30, 1998, 5.25:1.0, (b) thereafter and
through June 30, 1999, 4.75:1.0, and (c) thereafter, 4.50:1.0.
8.16 Minimum Asset Value to Funded Debt Ratio.
----------------------------------------
The Company shall not permit the Asset Value to Funded Debt Ratio, as
measured as of the last day of any fiscal quarter, to be less than 1.75:1.0.
8.17 Accounting Changes.
------------------
The Company shall not, and shall not suffer or permit any Subsidiary to,
make any significant change in accounting treatment or reporting practices,
except as required or permitted by GAAP.
8.18 Amendments to Documents.
-----------------------
The Company shall not, and shall not suffer or permit any other Person to
amend, modify, supplement, waive or otherwise modify any of the terms and
provisions contained in the Partnership Agreement or Operating Agreement (or any
document executed or delivered in connection with such Partnership Agreement or
Operating Agreement), or the partnership certificate of the MLP, or the Senior
Note Agreement, if such amendment, supplement or other modification shall impair
the Company's ability to perform its obligations under the Loan Documents,
further impair the rights of the Company to grant security for the Obligations,
expand the circumstances under which an event of default could arise under the
Senior Note Agreement, or increase any of its financial obligations to any of
its members.
8.19 Limitation on Voluntary Payments on Senior Notes.
------------------------------------------------
The Company shall not, and shall not permit any of its Subsidiaries to
make any voluntary or optional payment or prepayment on or redemption or
acquisition for value of (including by way of depositing with respect thereto
money or securities before due for the purpose of paying when due) the Senior
Notes, except as contemplated by Sections 4.16 or 4.17 of the Senior Note
Agreement as in effect on the Closing Date, subject to the requirements of
subsections 2.6(a) and 8.2(b) and Section 8.20.
8.20 Harvesting Restrictions.
-----------------------
The Company shall not, and shall not suffer or permit any of its
Subsidiaries to, in any calendar year commencing with 1998, permit aggregate
Timber Harvest in excess of:
(a) in any one such calendar year, 150% of the Planned Volume for
that calendar year;
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(b) in any two such consecutive calendar years, 140% of the Planned
Volume for such calendar years;
(c) in any three such consecutive calendar years, 130% of the Planned
Volume for such calendar years; and
(d) in any four such consecutive calendar years, 120% of the Planned
Volume for such calendar years;
unless the Net Proceeds from such excess Timber Harvest are, within ten Business
Days after the end of such period, placed in an escrow account, pursuant to an
Escrow Agreement, to be applied within 180 days after the end of such period (i)
to the purchase, repayment, or Cash Collateralization of such Senior Debt as the
Company may elect to so purchase, prepay, or Cash Collateralize as long as, at
any time the Company shall elect to repay or purchase Senior Debt other than the
Loans, the Company shall also repay or Cash Collateralize Obligations by at
least a pro rata amount (based on the outstanding principal of all Senior Debt),
or (ii) to purchase or commit to purchase productive assets in a Permitted
Business (including purchases not consummated during such 180 days if a binding
agreement for such purchase is entered into during such period and such purchase
is completed within 90 days after the expiry of such 180 day period); provided,
--------
however, the Company shall not be required to apply the proceeds of any excess
- -------
Timber Harvest pursuant to clause (i) or (ii) above if and to the extent that,
when received, such excess Net Proceeds do not exceed cash expenditures by the
Company for the purchase of productive assets in a Permitted Business during the
preceding 90 days (excluding any purchase to the extent financed by a Loan or to
the extent such purchase was previously applied as a credit to reduce
repayments, repurchases, or Cash Collateralization of Senior Debt required by
this Section 8.20 or subsection 8.2(b)) (all such Net Proceeds in excess of the
cash expenditures referred to in the immediately preceding proviso being herein
referred to as "Excess Timber Harvest Proceeds"). The Company shall apply any
------------------------------
amounts withdrawn from the escrow account pursuant to an Escrow Agreement, other
than net earnings thereon arising from investment thereof as provided in such
Escrow Agreement, to the applications required by clauses (i) or (ii) above
within three Business Days after such withdrawal.
ARTICLE IX
EVENTS OF DEFAULT
-----------------
9.1 Event of Default.
----------------
Any of the following shall constitute an "Event of Default":
----------------
(a) Non-Payment.
-----------
The Company fails to pay, when and as required to be paid herein, (i)
any amount of principal of any Loan or of any L/C Obligation, or (ii) any
interest, fee or any
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other amount payable hereunder or under any other Loan Document, and in the case
of this clause (ii), such failure continues for three Business Days; or
(b) Representation or Warranty.
--------------------------
Any representation or warranty by the Company or any Subsidiary made
or deemed made herein, in any other Loan Document, or which is contained in any
certificate, document or financial or other statement by the Company, any
Subsidiary, or any Responsible Officer, furnished at any time under this
Agreement, or in or under any other Loan Document, is incorrect in any material
respect on or as of the date made or deemed made; or
(c) Specific Defaults.
-----------------
The Company (i) fails to perform or observe any term, covenant or
agreement contained in any of Section 7.1, Section 7.2, or subsections 7.3(b),
(c), (d), or (e) and such failure continues for 20 days, or (ii) fails to
perform or observe any term, covenant or agreement contained in subsection
7.3(a) or Article VIII; or
(d) Other Defaults.
--------------
The Company or any Subsidiary party thereto fails to perform or
observe any other term or covenant contained in this Agreement or any other Loan
Document, and such default shall continue unremedied for a period of 20 days
after the earlier of (i) the date upon which a Responsible Officer knew or
reasonably should have known of such failure or (ii) the date upon which written
notice thereof is given to the Company by the Agent or any Bank; or
(e) Cross-Default.
-------------
(i) The Company or any Subsidiary (A) fails to make any payment in
respect of any Indebtedness or Contingent Obligation (other than in respect of
Swap Contracts), having an aggregate principal amount (including undrawn
committed or available amounts and including amounts owing to all creditors
under any combined or syndicated credit arrangement) of more than $10,000,000
when due (whether by scheduled maturity, required prepayment, acceleration,
demand, or otherwise) and such failure continues after the applicable grace or
notice period, if any, specified in the relevant document on the date of such
failure; or (B) fails to perform or observe any other condition or covenant, or
any other event shall occur or condition exist, under any agreement or
instrument relating to any such Indebtedness or Contingent Obligation, and such
failure continues after the applicable grace or notice period, if any, specified
in the relevant document on the date of such failure if the effect of such
failure, event or condition is to cause, or to permit the holder or holders of
such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause such Indebtedness to be declared to be due and payable
prior to its stated maturity, or such Contingent Obligation to become payable or
cash collateral in respect thereof to be demanded; or (ii) there occurs under
any Swap Contract an Early Termination Date (as defined in such Swap
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Contract) resulting from (1) any event of default under such Swap Contract as to
which the Company or any Subsidiary is the Defaulting Party (as defined in such
Swap Contract) or (2) any Termination Event (as so defined) as to which the
Company or any Subsidiary is an Affected Party (as so defined), and, in either
event, the Swap Termination Value owed by the Company or such Subsidiary as a
result thereof is greater than $10,000,000; or
(f) Insolvency; Voluntary Proceedings.
---------------------------------
The Company or any Subsidiary (i) ceases or fails to be solvent, or
generally fails to pay, or admits in writing its inability to pay, its debts as
they become due, subject to applicable grace periods, if any, whether at stated
maturity or otherwise; (ii) voluntarily ceases to conduct its business in the
ordinary course; (iii) commences any Insolvency Proceeding with respect to
itself; or (iv) takes any action to effectuate or authorize any of the
foregoing; or
(g) Involuntary Proceedings.
-----------------------
(i) Any involuntary Insolvency Proceeding is commenced or filed
against the Company or any Subsidiary, or any writ, judgment, warrant of
attachment, execution or similar process, is issued or levied against a
substantial part of the Company's or any Subsidiary's properties, and any such
proceeding or petition shall not be dismissed, or such writ, judgment, warrant
of attachment, execution or similar process shall not be released, vacated or
fully bonded within 60 days after commencement, filing or levy; (ii) the Company
or any Subsidiary admits the material allegations of a petition against it in
any Insolvency Proceeding, or an order for relief (or similar order under non-
U.S. law) is ordered in any Insolvency Proceeding; or (iii) the Company or any
Subsidiary acquiesces in the appointment of a receiver, trustee, custodian,
conservator, liquidator, mortgagee in possession (or agent therefor), or other
similar Person for itself or a substantial portion of its property or business;
or
(h) ERISA.
-----
(i) An ERISA Event shall occur with respect to a Pension Plan or
Multiemployer Plan which has resulted or could reasonably be expected to result
in liability of the Company under Title IV of ERISA to the Pension Plan,
Multiemployer Plan or the PBGC in an aggregate amount in excess of $10,000,000;
the aggregate amount of Unfunded Pension Liability among all Pension Plans at
any time exceeds $10,000,000; or (iii) the Company or any ERISA Affiliate shall
fail to pay when due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability under Section 4201
of ERISA under a Multiemployer Plan in an aggregate amount in excess of
$10,000,000; or
(i) Monetary Judgments.
------------------
One or more non-interlocutory judgments, non-interlocutory orders,
decrees or arbitration awards is entered against the Company or any Subsidiary
involving in the aggregate a liability (to the extent not covered by independent
third-party insurance
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as to which the insurer does not dispute coverage) as to any single or related
series of transactions, incidents or conditions, of $10,000,000 or more, and the
same shall remain unsatisfied, unvacated and unstayed pending appeal for a
period of 10 days after the entry thereof; or
(j) Non-Monetary Judgments.
----------------------
Any non-monetary judgment, order or decree is entered against the
Company or any Subsidiary which does or would reasonably be expected to have a
Material Adverse Effect, and there shall be any period of 30 consecutive days
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect.
9.2 Remedies.
--------
If any Event of Default occurs, the Agent shall, at the request of, or
may, with the consent of, the Majority Banks,
(a) declare the commitment of each Bank and the Swingline Commitment
of the Swingline Bank to make Loans and any obligation of the Issuing Bank to
Issue Letters of Credit to be terminated, whereupon such commitments and
obligation shall be terminated;
(b) declare an amount equal to the maximum aggregate amount that is
or at any time thereafter may become available for drawing under any outstanding
Letters of Credit (whether or not any beneficiary shall have presented, or shall
be entitled at such time to present, the drafts or other documents required to
draw under such Letters of Credit) to be immediately due and payable as Cash
Collateral for the L/C Obligations, and declare the unpaid principal amount of
all outstanding Loans, all interest accrued and unpaid thereon, and all other
amounts owing or payable hereunder or under any other Loan Document to be
immediately due and payable, without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by the Company;
(c) exercise on behalf of itself and the Banks all rights and
remedies available to it and the Banks under the Loan Documents or applicable
law; and
provided, however, that upon the occurrence of any event specified in subsection
- -------- -------
(f) or (g) of Section 9.1 (in the case of clause (i) of subsection (g) upon the
expiration of the 60-day period mentioned therein), the obligation of each Bank
and the Swingline Bank to make Loans and any obligation of the Issuing Bank to
Issue Letters of Credit shall automatically terminate and the unpaid principal
amount of all outstanding Loans and all interest and other amounts as aforesaid
shall automatically become due and payable without further act of the Agent, the
Issuing Bank, the Swingline Bank or any Bank.
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9.3 Rights Not Exclusive.
--------------------
The rights provided for in this Agreement and the other Loan Documents are
cumulative and are not exclusive of any other rights, powers, privileges or
remedies provided by law or in equity, or under any other instrument, document
or agreement now existing or hereafter arising.
ARTICLE X
THE AGENT
---------
10.1 Appointment and Authorization; "Agent".
--------------------------------------
(a) Each Bank hereby irrevocably (subject to Section 10.9) appoints,
designates and authorizes the Agent to take such action on its behalf under the
provisions of this Agreement and each other Loan Document and to exercise such
powers and perform such duties as are expressly delegated to it by the terms of
this Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the Agent
shall not have any duties or responsibilities, except those expressly set forth
herein, nor shall the Agent have or be deemed to have any fiduciary relationship
with any Bank, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against the Agent. Without limiting the generality
of the foregoing sentence, the use of the term "agent" in this Agreement with
reference to the Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
(b) The Issuing Bank shall act on behalf of the Banks with respect to
any Letters of Credit Issued by it and the documents associated therewith until
such time and except for so long as the Agent may agree at the request of the
Majority Banks to act for such Issuing Bank with respect thereto; provided,
however, that the Issuing Bank shall have all of the benefits and immunities (i)
provided to the Agent in this Article X with respect to any acts taken or
omissions suffered by the Issuing Bank in connection with Letters of Credit
Issued by it or proposed to be Issued by it and the application and agreements
for letters of credit pertaining to the Letters of Credit as fully as if the
term "Agent", as used in this Article X, included the Issuing Bank with respect
to such acts or omissions, and (ii) as additionally provided in this Agreement
with respect to the Issuing Bank.
10.2 Delegation of Duties.
--------------------
The Agent may execute any of its duties under this Agreement or any other
Loan Document by or through agents, employees or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
The Agent shall not
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be responsible for the negligence or misconduct of any agent or attorney-in-fact
that it selects with reasonable care.
10.3 Liability of Agent.
------------------
None of the Agent-Related Persons shall (i) be liable for any action taken
or omitted to be taken by any of them under or in connection with this Agreement
or any other Loan Document or the transactions contemplated hereby (except for
its own gross negligence or willful misconduct), or (ii) be responsible in any
manner to any of the Banks for any recital, statement, representation or
warranty made by the Company or any Subsidiary or Affiliate of the Company, or
any officer thereof, contained in this Agreement or in any other Loan Document,
or in any certificate, report, statement or other document referred to or
provided for in, or received by the Agent under or in connection with, this
Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of the Company or any other party to any Loan
Document to perform its obligations hereunder or thereunder. No Agent-Related
Person shall be under any obligation to any Bank to ascertain or to inquire as
to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Company or any of the Company's Subsidiaries
or Affiliates.
10.4 Reliance by Agent.
-----------------
(a) The Agent shall be entitled to rely, and shall be fully protected
in relying, upon any writing, resolution, notice, consent, certificate,
affidavit, letter, telegram, facsimile, telex or telephone message, statement or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons, and upon advice
and statements of legal counsel (including counsel to the Company), independent
accountants and other experts selected by the Agent. The Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Loan Document unless it shall first receive such advice or concurrence of
the Banks or the Majority Banks, as the case may be, as it deems appropriate
and, if it so requests, it shall first be indemnified to its satisfaction by the
Banks against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in accordance with a request or consent of
the Banks or the Majority Banks, as the case may be, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all of the
Banks.
(b) For purposes of determining compliance with the conditions
specified in Section 5.1, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Agent to such Bank for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to the Bank.
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10.5 Notice of Default.
-----------------
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default, except with respect to defaults
in the payment of principal, interest and fees required to be paid to the Agent
for the account of the Banks, unless the Agent shall have received written
notice from a Bank or the Company referring to this Agreement, describing such
Default or Event of Default and stating that such notice is a "notice of
default". The Agent will notify the Banks of its receipt of any such notice. The
Agent shall take such action with respect to such Default or Event of Default as
may be requested by the Majority Banks in accordance with Article IX; provided,
however, that unless and until the Agent has received any such request, the
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable or in the best interest of the Banks.
10.6 Credit Decision.
---------------
Each Bank acknowledges that none of the Agent-Related Persons has made any
representation or warranty to it, and that no act by the Agent hereinafter
taken, including any review of the affairs of the Company and its Subsidiaries,
shall be deemed to constitute any representation or warranty by any Agent-
Related Person to any Bank. Each Bank represents to the Agent that it has,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of the Company and
its Subsidiaries, and all applicable bank regulatory laws relating to the
transactions contemplated hereby, and made its own decision to enter into this
Agreement and to extend credit to the Company and its Subsidiaries hereunder.
Each Bank also represents that it will, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of the Company. Except for notices,
reports and other documents expressly herein required to be furnished to the
Banks by the Agent, the Agent shall not have any duty or responsibility to
provide any Bank with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of the Company which may come into the possession of any of the
Agent-Related Persons.
10.7 Indemnification of Agent.
------------------------
Whether or not the transactions contemplated hereby are consummated, the
Banks shall indemnify upon demand the Agent-Related Persons (to the extent not
reimbursed by or on behalf of the Company and without limiting the obligation of
the Company to do so), pro rata, from and against any and all Indemnified
Liabilities; provided, however, that no Bank shall be liable for the payment to
the Agent-Related Persons of any portion
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of such Indemnified Liabilities resulting solely from such Person's gross
negligence or willful misconduct. Without limitation of the foregoing, each Bank
shall reimburse the Agent upon demand for its ratable share of any costs or out-
of-pocket expenses (including Attorney Costs) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that the Agent is not
reimbursed for such expenses by or on behalf of the Company. The undertaking in
this Section shall survive the payment of all Obligations hereunder and the
resignation or replacement of the Agent.
10.8 Agent in Individual Capacity.
----------------------------
BofA and its Affiliates may make loans to, issue letters of credit for the
account of, accept deposits from, acquire equity interests in and generally
engage in any kind of banking, trust, financial advisory, underwriting or other
business with the Company and its Subsidiaries and Affiliates as though BofA
were not the Agent, the Swingline Bank or the Issuing Bank hereunder and without
notice to or consent of the Banks. The Banks acknowledge that, pursuant to such
activities, BofA or its Affiliates may receive information regarding the Company
or its Affiliates (including information that may be subject to confidentiality
obligations in favor of the Company or such Subsidiary) and acknowledge that the
Agent shall be under no obligation to provide such information to them. With
respect to its Loans, BofA shall have the same rights and powers under this
Agreement as any other Bank and may exercise the same as though it were not the
Agent or the Issuing Bank.
10.9 Successor Agent.
---------------
The Agent may, and at the request of the Majority Banks shall, resign as
Agent upon 30 days' notice to the Banks. If the Agent resigns under this
Agreement, the Majority Banks shall appoint from among the Banks a successor
agent for the Banks, which successor agent, unless a Default or Event of Default
exists, shall be approved by the Company. If no successor agent is appointed
prior to the effective date of the resignation of the Agent, the Agent may
appoint, after consulting with the Banks and the Company, a successor agent from
among the Banks. Upon the acceptance of its appointment as successor agent
hereunder, such successor agent shall succeed to all the rights, powers and
duties of the retiring Agent and the term "Agent" shall mean such successor
agent and the retiring Agent's appointment, powers and duties as Agent shall be
terminated. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Article X and Sections 11.4 and 11.5 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement. If no successor agent has accepted appointment as Agent by
the date which is 30 days following a retiring Agent's notice of resignation,
the retiring Agent's resignation shall nevertheless thereupon become effective
and the Banks shall perform all of the duties of the Agent hereunder until such
time, if any, as the Majority Banks appoint a successor agent as provided for
above. Notwithstanding the foregoing, however, BofA may not be
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removed as the Agent at the request of the Majority Banks unless BofA shall also
simultaneously be replaced as "Issuing Bank" and "Swingline Bank" hereunder
pursuant to documentation in form and substance reasonably satisfactory to BofA.
10.10 Withholding Tax.
---------------
(a) If any Bank is a "foreign corporation, partnership or trust" within
the meaning of the Code and such Bank claims exemption from, or a reduction of,
U.S. withholding tax under Sections 1441 or 1442 of the Code, such Bank agrees
with and in favor of the Agent, to deliver to the Agent:
(i) if such Bank claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, two properly completed and
executed copies of IRS Form 1001 before the payment of any interest in the first
calendar year and before the payment of any interest in each third succeeding
calendar year during which interest may be paid under this Agreement;
(ii) if such Bank claims that interest paid under this
Agreement is exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Bank, two properly
completed and executed copies of IRS Form 4224 before the payment of any
interest is due in the first taxable year of such Bank and in each succeeding
taxable year of such Bank during which interest may be paid under this
Agreement; and
(iii) such other form or forms as may be required under the Code
or other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Agent of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.
(b) If any Bank claims exemption from, or reduction of, withholding tax
under a United States tax treaty by providing IRS Form 1001 and such Bank sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Obligations of the Company to such Bank, such Bank agrees to notify the Agent of
the percentage amount in which it is no longer the beneficial owner of
Obligations of the Company to such Bank. To the extent of such percentage
amount, the Agent will treat such Bank's IRS Form 1001 as no longer valid.
(c) If any Bank claiming exemption from United States withholding tax by
filing IRS Form 4224 with the Agent sells, assigns, grants a participation in,
or otherwise transfers all or part of the Obligations of the Company to such
Bank, such Bank agrees to undertake sole responsibility for complying with the
withholding tax requirements imposed by Sections 1441 and 1442 of the Code.
(d) If any Bank is entitled to a reduction in the applicable withholding
tax, the Agent may withhold from any interest payment to such Bank an amount
equivalent to the applicable withholding tax after taking into account such
reduction. However, if the
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<PAGE>
forms or other documentation required by subsection (a) of this Section are not
delivered to the Agent, then the Agent may withhold from any interest payment to
such Bank not providing such forms or other documentation an amount equivalent
to the applicable withholding tax imposed by Sections 1441 and 1442 of the Code,
without reduction.
(e) If the IRS or any other Governmental Authority of the United States or
other jurisdiction asserts a claim that the Agent did not properly withhold tax
from amounts paid to or for the account of any Bank (because the appropriate
form was not delivered or was not properly executed, or because such Bank failed
to notify the Agent of a change in circumstances which rendered the exemption
from, or reduction of, withholding tax ineffective, or for any other reason)
such Bank shall indemnify the Agent fully for all amounts paid, directly or
indirectly, by the Agent as tax or otherwise, including penalties and interest,
and including any taxes imposed by any jurisdiction on the amounts payable to
the Agent under this Section, together with all costs and expenses (including
Attorney Costs). The obligation of the Banks under this subsection shall survive
the payment of all Obligations.
ARTICLE XI
MISCELLANEOUS
-------------
11.1 Amendments and Waivers.
----------------------
No amendment or waiver of any provision of this Agreement or any other
Loan Document, and no consent with respect to any departure by the Company
therefrom, shall be effective unless the same shall be in writing and signed by
the Majority Banks (or by the Agent at the written request of the Majority
Banks) and the Company and acknowledged by the Agent, and then any such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that
-------- -------
(a) no such waiver, amendment or consent shall, unless in writing and
signed by all Banks and the Company, with receipt acknowledged by the Agent, do
any of the following:
(i) increase or extend the Commitments of any Bank, or increase
or extend the Swingline Commitment of the Swingline Bank (or reinstate any such
Commitment terminated pursuant to Section 8.2); or
(ii) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees or other
amounts due to the Banks (or any of them) hereunder or under any other Loan
Document, including any prepayments specified under Section 2.6, or reduce the
amount due to the Banks (or any of them) on any such date; or
(iii) reduce the principal of, or the rate of interest or
commitment or other fee specified herein on, any Loan or the Commitments or,
subject to clause (C) the
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<PAGE>
proviso below, any other amounts payable to the Banks (or any of them) hereunder
- -------
or under any other Loan Document; or
(iv) amend any provision herein providing for consent or other
action by all Banks; or
(v) amend the definition of Majority Banks contained in Section
1.1;
and, provided, further, that (A) no amendment, waiver or consent shall, unless
-------- -------
in writing and signed by the Issuing Bank in addition to the Majority Banks or
all the Banks, as the case may be, affect the rights or duties of the Issuing
Bank under this Agreement or any L/C-Related Document relating to any Letter of
Credit Issued or to be Issued by it, (B) no amendment, waiver or consent shall,
unless in writing and signed by the Agent in addition to the Majority Banks or
all the Banks, as the case may be, affect the rights or duties of the
Administrative Lender under this Agreement or any other Loan Document, (C) the
Fee Letter may be amended, or rights or privileges thereunder waived, in a
writing executed by the parties thereto, and (D) no amendment, waiver or consent
shall, unless in writing and signed by the Swingline Bank in addition to the
Majority Banks or all the Banks, as the case may be, affect the rights or duties
of the Swingline Lender under this Agreement or any other Loan Document.
11.2 Notices.
-------
(a) All notices, requests, consents, approvals, waivers and
other communications shall be in writing (including, unless the context
expressly otherwise provides, by facsimile transmission, provided that any
matter transmitted by the Company by facsimile (i) shall be immediately
confirmed by a telephone call to the recipient at the number specified on
Schedule 11.2, and (ii) shall be followed promptly by delivery of a hard copy
original thereof) and mailed, faxed or delivered, to the address or facsimile
number specified for notices on Schedule 11.2; or, as directed to the Company or
the Agent, to such other address as shall be designated by such party in a
written notice to the other parties, and as directed to any other party, at such
other address as shall be designated by such party in a written notice to the
Company and the Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II, III or X to the Agent shall not be effective
until actually received by the Agent, and notices pursuant to Article III to the
Issuing Bank shall not be effective until actually received by the Issuing Bank
at the address specified for the "Issuing Bank" on the applicable signature page
hereof.
(c) Any agreement of the Agent and the Banks herein to receive
certain notices by telephone or facsimile is solely for the convenience and at
the request of the Company. The Agent and the Banks shall be entitled to rely on
the authority of
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<PAGE>
any Person purporting to be a Person authorized by the Company to give such
notice and the Agent and the Banks shall not have any liability to the Company
or other Person on account of any action taken or not taken by the Agent or the
Banks in reliance upon such telephonic or facsimile notice. The obligation of
the Company to repay the Loans and L/C Obligations shall not be affected in any
way or to any extent by any failure by the Agent and the Banks to receive
written confirmation of any telephonic or facsimile notice or the receipt by the
Agent and the Banks of a confirmation which is at variance with the terms
understood by the Agent and the Banks to be contained in the telephonic or
facsimile notice.
11.3 No Waiver; Cumulative Remedies.
------------------------------
No failure to exercise and no delay in exercising, on the part of the
Agent or any Bank, any right, remedy, power or privilege hereunder, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
11.4 Costs and Expenses. The Company shall:
------------------
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse BofA (including in its capacity as Agent and
Issuing Bank) within five Business Days after demand (subject to subsection
5.1(d)) for all reasonable costs and expenses incurred by BofA (including in its
capacity as Agent and Issuing Bank) in connection with the development,
preparation, delivery, administration, execution and initial syndication of, and
any amendment, supplement, waiver or modification to (in each case, whether or
not consummated), this Agreement, any Loan Document and any other documents
prepared in connection herewith or therewith, and the consummation of the
transactions contemplated hereby and thereby, including reasonable Attorney
Costs incurred by BofA (including in its capacity as Agent and Issuing Bank)
with respect thereto; and
(b) pay or reimburse the Agent, the Arranger and each Bank
within five Business Days after demand (subject to subsection 5.1(d)) for all
costs and expenses (including Attorney Costs) incurred by them in connection
with the enforcement, attempted enforcement, or preservation of any rights or
remedies under this Agreement or any other Loan Document during the existence of
an Event of Default or after acceleration of the Loans (including in connection
with any "workout" or restructuring regarding the Loans, and including in any
Insolvency Proceeding or appellate proceeding).
11.5 Company Indemnification.
-----------------------
Whether or not the transactions contemplated hereby are consummated, the
Company shall indemnify, defend and hold the Agent-Related Persons, and each
Bank and each of its respective officers, directors, employees, counsel, agents,
Affiliates, and attorneys-in-fact (each, an "Indemnified Person") harmless from
------------------
and against any and all
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<PAGE>
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, charges, expenses and disbursements (including reasonable Attorney Costs)
of any kind or nature whatsoever which may at any time (including at any time
following repayment of the Loans, the termination of the Letters of Credit and
the termination, resignation or replacement of the Agent or replacement of any
Bank) be imposed on, incurred by or asserted against any such Person in any way
relating to or arising out of this Agreement or any document contemplated by or
referred to herein, or the transactions contemplated hereby, the Debt Offering,
the Equity Offering, or any action taken or omitted by any such Person under or
in connection with any of the foregoing, including with respect to any
investigation, litigation or proceeding (including any Insolvency Proceeding or
appellate proceeding) related to or arising out of this Agreement or the Loans
or Letters of Credit or the use of the proceeds thereof, whether or not any
Indemnified Person is a party thereto (all the foregoing, collectively, the
"Indemnified Liabilities"); provided, that the Company shall have no obligation
-----------------------
hereunder to any Indemnified Person with respect to Indemnified Liabilities
resulting solely from the gross negligence or willful misconduct of such
Indemnified Person. The agreements in this Section shall survive payment of all
other Obligations.
11.6 Payments Set Aside.
------------------
To the extent that the Company makes a payment to the Agent or the Banks,
or the Agent or the Banks exercise their right of set-off, and such payment or
the proceeds of such set-off or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required (including
pursuant to any settlement entered into by the Agent or such Bank in its
discretion) to be repaid to a trustee, receiver or any other party, in
connection with any Insolvency Proceeding or otherwise, then (a) to the extent
of such recovery the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such set-off had not occurred, and (b) each Bank
severally agrees to pay to the Agent upon demand its pro rata share of any
amount so recovered from or repaid by the Agent.
11.7 Successors and Assigns.
----------------------
The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
except that the Company may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of the Agent
and each Bank.
11.8 Assignments, Participations, etc.
--------------------------------
(a) Any Bank may, with the written consent of the Company (at
all times other than during the existence of an Event of Default), the Agent and
the Issuing Bank, which consent of the Company shall not be unreasonably
withheld, at any time assign and delegate to one or more Eligible Assignees
(provided that no written consent of the Company, the Agent or the Issuing Bank
shall be required in connection with any assignment and delegation by a Bank to
an Eligible Assignee that is an Affiliate of such Bank) (each an "Assignee")
all, or any ratable part of all, of the Loans, the Commitments,
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<PAGE>
the L/C Obligations and the other rights and obligations of such Bank hereunder,
in a minimum amount of $10,000,000; provided, however, that (i) such assignment
-------- -------
shall be null and void if not undertaken on a pro rata basis between the
Acquisition Revolving Loans and Commitments and the W/C Revolving Loans and
Commitments; (ii) the Company and the Agent may continue to deal solely and
directly with such Bank in connection with the interest so assigned to an
Assignee until written notice of such assignment, together with payment
instructions, addresses and related information with respect to the Assignee,
shall have been given to the Company and the Agent by such Bank and the
Assignee; (iii) such Bank and its Assignee shall have delivered to the Company
and the Agent an Assignment and Acceptance in the form of Exhibit E ("Assignment
--------- ----------
and Acceptance") together with any Note or Notes subject to such assignment; and
- --------------
(iv) the assignor Bank or Assignee has paid to the Agent a processing fee in the
amount of $3,500. In connection with any assignment by BofA, its Swingline
Commitment may be in whole but not in part included as part of the assignment
transaction, and the Assignment and Acceptance may be appropriately modified to
include an assignment and delegation of its Swingline Commitment and any
outstanding Swingline Loans.
(b) From and after the date that the Agent notifies the assignor Bank
that it has received (and, to the extent required by subsection 11.8(a),
provided its consent with respect to) an executed Assignment and Acceptance and
payment of the above-referenced processing fee, (i) the Assignee thereunder
shall be a party hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment and Acceptance, shall have
the rights and obligations of a Bank under the Loan Documents, and (ii) the
assignor Bank shall, to the extent that rights and obligations hereunder and
under the other Loan Documents have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Loan Documents.
(c) Within five Business Days after its receipt of notice by the
Agent that it has received an executed Assignment and Acceptance and payment of
the processing fee, (and provided that it consents to such assignment if such
consent is required by subsection 11.8(a)), upon the request of the Assignee,
the Company shall execute and deliver to the Agent, upon the request of any
Assignee, new Notes evidencing such Assignee's assigned Loans and Commitment
and, if the assignor Bank has retained a portion of its Loans and its
Commitment, replacement Notes (if any) in the principal amount of the Loans
retained by the assignor Bank (such Notes to be in exchange for, but not in
payment of, the Notes held by such Bank). Immediately upon each Assignee's
making its processing fee payment under the Assignment and Acceptance, this
Agreement shall be deemed to be amended to the extent, but only to the extent,
necessary to reflect the addition of the Assignee and the resulting adjustment
of the Commitments arising therefrom. The Commitment allocated to each Assignee
shall reduce such Commitments of the assigning Bank pro tanto.
(d) Any Bank may at any time sell to one or more commercial banks or
other Persons not Affiliates of the Company (a "Participant") participating
-----------
interests in any Loans, the Commitment of that Bank and the other interests of
that Bank (the
94
<PAGE>
"originating Bank") hereunder and under the other Loan Documents; provided,
---------------- --------
however, that (i) such participation shall be null and void unless undertaken on
- -------
a pro rata basis between the Acquisition Revolving Loans and Commitments and the
W/C Revolving Loans and Commitments, (ii) the originating Bank's obligations
under this Agreement shall remain unchanged, (iii) the originating Bank shall
remain solely responsible for the performance of such obligations, (iv) the
Company, the Issuing Bank and the Agent shall continue to deal solely and
directly with the originating Bank in connection with the originating Bank's
rights and obligations under this Agreement and the other Loan Documents, and
(v) no Bank shall transfer or grant any participating interest under which the
Participant has rights to approve any amendment to, or any consent or waiver
with respect to, this Agreement or any other Loan Document, except to the extent
such amendment, consent or waiver would require unanimous consent of the Banks
as described in the first proviso to Section 11.1. In the case of any such
participation, the Participant shall be entitled to the benefit of Sections 4.1,
4.3 and 11.5 as though it were also a Bank hereunder, and if amounts outstanding
under this Agreement are due and unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Bank under this Agreement.
(e) Notwithstanding any other provision in this Agreement, any Bank
may at any time create a security interest in, or pledge, all or any portion of
its rights under and interest in this Agreement and the Note(s) held by it in
favor of any Federal Reserve Bank in accordance with Regulation A of the FRB or
U.S. Treasury Regulation 31 CFR (S)203.14, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.
11.9 Confidentiality.
---------------
Each Bank agrees to take and to cause its Affiliates to take normal and
reasonable precautions and exercise due care to maintain the confidentiality of
all information identified as "confidential" or "secret" by the Company and
provided to it by the Company or any Subsidiary, or by the Agent on the
Company's or such Subsidiary's behalf, under this Agreement or any other Loan
Document, and neither it nor any of its Affiliates shall use any such
information other than in connection with or in enforcement of this Agreement
and the other Loan Documents or in connection with other business now or
hereafter existing or contemplated with the Company or any Subsidiary; except to
the extent such information (i) was or becomes generally available to the public
other than as a result of disclosure by that Bank, or (ii) was or becomes
available on a non-confidential basis from a source other than the Company,
provided that such source is not bound by a confidentiality agreement with the
Company known to the Bank; provided, however, that any Bank may disclose such
information (A) at the request or pursuant to any requirement of any
Governmental Authority to which the Bank is subject or in connection with an
examination of such Bank by any such authority; (B) pursuant to subpoena or
other court process; (C) when required to do so in accordance with the
provisions of any applicable Requirement of Law; (D) to the extent reasonably
required
95
<PAGE>
in connection with any litigation or proceeding to which the Agent, any Bank or
their respective Affiliates may be party; (E) to the extent reasonably required
in connection with the exercise of any remedy hereunder or under any other Loan
Document; (F) to such Bank's independent auditors and other professional
advisors; (G) to any Participant or Assignee, actual or potential, provided that
such Person agrees in writing to keep such information confidential to the same
extent required of the Banks hereunder; (H) as to any Bank or its Affiliate, as
expressly permitted under the terms of any other document or agreement regarding
confidentiality to which the Company or any Subsidiary is party or is deemed
party with such Bank or such Affiliate; and (I) subject to such Bank's
undertaking on behalf of its Affiliates in the first sentence of this Section,
to its Affiliates.
11.10 Set-off.
-------
In addition to any rights and remedies of the Banks provided by law, if
an Event of Default exists or the Loans have been accelerated, each Bank is
authorized at any time and from time to time, without prior notice to the
Company, any such notice being waived by the Company to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held by, and other
indebtedness at any time owing by, such Bank to or for the credit or the account
of the Company against any and all Obligations owing to such Bank, now or
hereafter existing, irrespective of whether or not the Agent or such Bank shall
have made demand under this Agreement or any Loan Document and although such
Obligations may be contingent or unmatured. Each Bank agrees promptly to notify
the Company and the Agent after any such set-off and application made by such
Bank; provided, however, that the failure to give such notice shall not affect
the validity of such set-off and application.
11.1 Automatic Debits of Fees.
------------------------
With respect to any fee, or any other cost or expense (including Attorney
Costs) due and payable to the Agent, the Issuing Bank, the Swingline Bank, BofA
or the Arranger under the Loan Documents, the Company hereby irrevocably
authorizes BofA to debit any deposit account of the Company with BofA in an
amount such that the aggregate amount debited from all such deposit accounts
does not exceed such fee or other cost or expense. If there are insufficient
funds in such deposit accounts to cover the amount of the fee or other cost or
expense then due, such debits will be reversed (in whole or in part, in BofA's
sole discretion) and such amount not debited shall be deemed to be unpaid. No
such debit under this Section shall be deemed a set-off.
11.12 Notification of Addresses, Lending Offices, Etc.
-----------------------------------------------
Each Bank shall notify the Agent in writing of any changes in the address
to which notices to the Bank should be directed, of addresses of any Lending
Office, of payment instructions in respect of all payments to be made to it
hereunder and of such other administrative information as the Agent shall
reasonably request.
96
<PAGE>
11.13 Counterparts.
------------
This Agreement may be executed in any number of separate counterparts,
each of which, when so executed, shall be deemed an original, and all of said
counterparts taken together shall be deemed to constitute but one and the same
instrument.
11.14 Severability.
------------
The illegality or unenforceability of any provision of this Agreement or
any instrument or agreement required hereunder shall not in any way affect or
impair the legality or enforceability of the remaining provisions of this
Agreement or any instrument or agreement required hereunder.
11.15 No Third Parties Benefited.
--------------------------
This Agreement is made and entered into for the sole protection and legal
benefit of the Company, the Banks, the Swingline Bank, the Agent, the Agent-
Related Persons, and the Indemnified Persons and their permitted successors and
assigns, and no other Person shall be a direct or indirect legal beneficiary of,
or have any direct or indirect cause of action or claim in connection with, this
Agreement or any of the other Loan Documents. Neither the Agent, the Swingline
Bank, the Issuing Bank nor any Bank shall have any obligation to any Person not
a party to this Agreement or other Loan Documents.
11.6 Governing Law and Jurisdiction.
------------------------------
(a) THIS AGREEMENT AND ANY NOTES SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK; PROVIDED THAT THE AGENT
AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE COUNTY AND STATE OF
NEW YORK, THE COURTS OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF THE STATE
OF NEW YORK, THE COURTS OF THE STATE OF CALIFORNIA LOCATED IN THE CITY AND
COUNTY OF SAN FRANCISCO, OR THE COURTS OF THE UNITED STATES FOR THE NORTHERN
DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF
THE COMPANY, THE AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE
COMPANY, THE AGENT AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO. THE COMPANY, THE AGENT AND THE BANKS EACH WAIVE PERSONAL
97
<PAGE>
SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY
OTHER MEANS PERMITTED BY NEW YORK OR CALIFORNIA LAW.
11.7 Waiver of Jury Trial.
--------------------
THE COMPANY, THE BANKS AND THE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO
A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR
RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF
ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-
RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT
CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE BANKS AND THE AGENT EACH
AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT
THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION
AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
11.18 Entire Agreement.
----------------
This Agreement, together with the other Loan Documents, embodies the
entire agreement and understanding among the Company, the Banks, the Swingline
Bank and the Agent, and supersedes all prior or contemporaneous agreements and
understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof.
98
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.
By: U.S. TIMBERLANDS SERVICES COMPANY, L.L.C.,
its Managing Member
By: /s/ John M. Rudey
-----------------------------------------------
Name: John M. Rudey
Title: Chairman
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent, as a Bank, as Issuing Bank, and as
Swingline Bank
By: /s/ Michael J. Balok
-----------------------------------------------
Name: Michael J. Balok
Title: Managing Director
99
<PAGE>
Schedule 2.1
Commitments and Pro Rata Shares
Acquisition Revolving Commitments
---------------------------------
<TABLE>
<CAPTION>
Bank Commitment Pro Rata Share
- ---- ---------- --------------
<S> <C> <C>
Bank of America National
Trust and Savings Association $75,000,000 100%
- ------------------------------------------------------------------------------------------------
TOTAL $75,000,000 100%
</TABLE>
W/C Revolving Commitments
-------------------------
<TABLE>
<CAPTION>
Bank Commitment Pro Rata Share
- ---- ---------- --------------
<S> <C> <C>
Bank of America National
Trust and Savings Association $25,000,000 100%
- ------------------------------------------------------------------------------------------------
TOTAL $25,000,000 100%
</TABLE>
<PAGE>
Schedule 8.4(b)
Cash Management Program
BANK ACCOUNTS
- -------------
The Company will maintain bank accounts with a member of its banking group at
its corporate headquarters in Klamath Falls. The bank accounts will be under the
direction of the Chief Financial officer, which authority may be delegated to
the Controller. Petty cash accounts will be maintained at each of the remote
locations, and cash will be reimbursed to the petty cash accounts from the main
bank accounts in Klamath Falls upon receipt of approved documentation showing
disbursement of funds.
INTERNAL CONTROL PROCEDURES - CASH DISBURSEMENTS
- ------------------------------------------------
See attached memo regarding cash disbursement Internal control procedures.
INTERNAL CONTROL PROCEDURES - CASH RECEIPTS
- -------------------------------------------
The company will implement a lockbox cash receipts system as soon as possible
after the closing to control cash receipts.
INVESTMENT POLICY
- -----------------
See attached draft of Investment policy memo.
<PAGE>
Schedule 8.4(g)
Existing Investments
U. S. Timberlands Finance Corporation in the amount of $1,000,000.
Various Bank Accounts consistent with Schedule 8.4(b)
<PAGE>
Schedule 8.5
Permitted Indebtedness
Until the Closing Date, (1) indebtedness to the lenders under the Existing
Credit Agreement and the Holdings Credit Agreement and (2) indebtedness to Old
Services.
<PAGE>
Schedule 8.6
Transactions With Affiliates
ACQUISITION FEES
The Compensation Committee expects to adopt a policy to compensate individuals,
including directors of the Managing Member, who bring to the Company acquisition
transactions that ultimately are consummated, at levels that reflect the market
for such fees from time to time, but in no event shall such compensation to
directors of the Managing Member with respect to an acquisition exceed 0.25% of
the purchase price of such acquisition.
CONSULTING AGREEMENTS
The Managing Member intends to enter into consulting agreements with each of
Duck Creek Associates (a consulting firm affiliated with Mr. Beuter), Aubrey
Cole Associates (a consulting firm affiliated with Mr. Cole), Robert F. Wright
Associates, Inc. (a consulting firm affiliated with Mr. Wright) and George R.
Horning pursuant to which each such person or firm will provide consulting
services to the General Partner. Each such agreement will provide for an annual
retainer of $25,000, plus $150 per hour (with a maximum per diem of $1,200) for
services rendered at the request of the Managing Member. In addition, John
Stephens's employment agreement provides that, upon his resignation as President
and Chief Executive Officer of the Managing Member, he will enter into a
consulting arrangement with an annual retainer of $25,000, plus $200 per hour
(with a maximum per diem of $1,600) for services rendered at the request of the
Managing Member.
RELATED PARTY TRANSACTIONS
Pursuant to an agreement dated as of July 29, 1997 between Mr. Stephens and the
Company, Old Services, Mr. Rudey and certain of his affiliates, Mr. Stephens's
interest in Old Services will be redeemed for 95,238 Subordinated Units in the
MLP and $1.0 million payable in January 1998. Pursuant to an agreement dated as
of July 29, 1997 between Mr. Hornig and the Company, Old Services, Mr. Rudey and
certain of his affiliates, Mr. Hornig's interest in Old Services will be
redeemed in connection with the Equity Issuance for 48,160 Subordinated Units in
the MLP.
<PAGE>
Schedule 8.8
Contingent Obligations
None
<PAGE>
Schedule 11.2
Offshore and Domestic Lending Offices,
Addresses for Notices
U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.
- --------------------------------------
P.O. Box 10
6400 Highway 66
Klamath Falls, Oregon 97601
Attn: Mike Morgan
Telephone: (541) 884-2240
Facsimile: (541) 882-8872
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
- ------------------------------------------------------
as Agent
Bank of America National Trust
and Savings Association
Paper & Forest Products #9973
555 California Street - 41st Floor
San Francisco, CA 94104
Attention: M. J. Balok, Managing Director
Telephone: (415) 622-2018
Facsimile: (415) 622-2385
with a copy to:
- --------------
Bank of America National Trust and Savings Association
Agency Administrative Services #5596
1850 Gateway Blvd.
Concord, CA 94520-3281
Attention: Clayton Choo
Telephone: (510) 675-8453
Facsimile: (510) 675-8500
Agent's Payment Office:
Bank of America National Trust and Savings Association
ABA 121-000-358
Attention: Agency Administrative Services
1850 Gateway Blvd.
Concord, CA 94520
for credit to account No.: 12337-15643
<PAGE>
Domestic and Offshore Lending Office:
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
Global Payment Operations
Customer Service Americas (#5693)
1850 Gateway Blvd.
Concord, CA 94520
Attention: Angela Johnson
ABA 121-000-358 SF
Notices (other than Borrowing notices and Notices of Conversion/Continuation):
Bank of America National Trust and Savings Association
Paper & Forest Products #9973
555 California Street - 41st Floor
San Francisco, CA 94104
Attention: M. J. Balok, Managing Director
Telephone: (415) 622-2018
Facsimile: (415) 622-4585
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
- ------------------------------------------------------
as Issuing Bank
Address for notices as Issuing Bank:
Bank of America National Trust and Savings Association
Trade Operations Center #22621
333 S. Beaudry Ave., 19th Floor
Los Angeles, CA 90017
Attention: Sandra Leon
Telephone: (213) 345-5231
Facsimile: (213) 345-6694
<PAGE>
Exhibit A
FORM OF NOTICE OF BORROWING
Date: __________________
To: Bank of America National Trust and Savings Association, as Agent for the
Banks parties to the Credit Agreement dated as of November 19, 1997 (as
extended, renewed, amended or restated from time to time, the "Credit
------
Agreement") among U.S. Timberlands Klamath Falls, L.L.C., certain Banks
---------
that are signatories thereto, and Bank of America National Trust and
Savings Association, as Issuing Bank, as Swingline Bank and as Agent for
and on behalf of each of the Banks.
Bank of America National Trust and Savings Association
Agency Administrative Services #5596
1850 Gateway Blvd.
Concord, CA 94520-3281
Attn: Clayton Choo
Ladies and Gentlemen:
The undersigned, U.S. Timberlands Klamath Falls, L.L.C. (the "Company"),
refers to the Credit Agreement, the terms defined therein being used herein as
therein defined, and hereby gives you notice irrevocably, pursuant to Section
2.3 of the Credit Agreement, of the Borrowing specified herein:
1. The aggregate amount of the proposed Borrowing (the "Proposed
Borrowing") to be comprised of [Acquisition Revolving Loans] [W/C Revolving
Loans] [a Swingline Loan] is $____________.
2. The Borrowing Date of the Proposed Borrowing is ____________________,
19___.
3. The Proposed Borrowing is to be comprised of $_______ of [Base Rate]
[Offshore Rate] Loans. [If applicable]: The duration of the Interest Period for
the Offshore Rate Loans included in the Proposed Borrowing shall be [1, 2, 3 or
6 month(s) except as specified in the definition of "Interest Period" contained
in the Credit Agreement].
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the date of the proposed Borrowing before
and after giving effect thereto and to the application of the proceeds
therefrom:
(a) the representations and warranties of the Company contained in Article
VI of the Credit Agreement are true and correct as though made on and as of such
date (except to the extent such representations and warranties specifically
relate to an earlier date, in which case they were true and correct as of such
earlier date);
1
<PAGE>
(b) no Default or Event of Default exists; and
[(c) [Applicable to Acquisition Revolving Loans:] the Proposed Borrowing
will not cause the aggregate Effective Amount of all outstanding Acquisition
Revolving Loans to exceed the aggregate Acquisition Revolving Commitments.]
or
[(c) [Applicable to W/C Revolving loans and Swingline Loans:] the Proposed
Borrowing will not cause the aggregate Effective Amount of all W/C Revolving
Loans, Swingline Loans and L/C Obligations to exceed the aggregate W/C Revolving
Commitments.]
U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.
By: U.S. TIMBERLANDS SERVICES COMPANY,
L.L.C., its Managing Member
By:____________________________
Name:
Title:
2
<PAGE>
Exhibit B
FORM OF NOTICE OF CONVERSION/CONTINUATION
Date: __________________
To: Bank of America National Trust and Savings Association, as Agent for the
Banks parties to the Credit Agreement dated as of November 19, 1997 (as
extended, renewed, amended or restated from time to time, the "Credit
------
Agreement") among U.S. Timberlands Klamath Falls, L.L.C., certain Banks
that are signatories thereto, and Bank of America National Trust and
Savings Association, as Issuing Bank, as Swingline Bank and as Agent for
and on behalf of each of the Banks.
Bank of America National Trust and Savings Association
Agency Administrative Services #5596
850 Gateway Blvd.
Concord, CA 94520-3281
Attn: Clayton Choo
Ladies and Gentlemen:
The undersigned, U.S. Timberlands Klamath Falls, L.L.C. (the "Company"),
-------
refers to the Credit Agreement, the terms defined therein being used herein as
therein defined, and hereby give you notice irrevocably, pursuant to Section 2.4
of the Credit Agreement, of the [conversion] [continuation] of the Loans
specified herein, that:
1. The date of the [conversion] [continuation] is _________________,
19__.
2. The aggregate amount of the Loans to be [converted] [continued] is
$____________.
3. The Loans are to be [converted into] [Base Rate] [Offshore Rate] or
[continued as] Offshore Rate Loans.
4. [If applicable:] The duration of the Interest Period for the Offshore
Rate Loans included in the [conversion] [continuation] shall be [1, 2, 3 or 6
month(s) except as specified in the definition of "Interest Period" contained in
the Credit Agreement].
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the date of the proposed [conversion]
[continuation], before and after giving effect thereto and to the application of
the proceeds therefrom:
(a) [Include if conversion/continuation is into/as an Offshore Rate
Loan] the representations and warranties of the Company contained in Article VI
of
1
<PAGE>
the Credit Agreement are true and correct as though made on and as of such
date (except to the extent such representations and warranties specifically
relate to an earlier date, in which case they were true and correct as of such
earlier date); and
(b) no Default or Event of Default exists.
U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.
By: U.S. TIMBERLANDS SERVICES COMPANY,
L.L.C., its Managing Member
By:____________________________
Name:
Title:
2
<PAGE>
Exhibit C
U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.
FORM OF COMPLIANCE CERTIFICATE
Date: _________________________
Reference is made to the Credit Agreement, dated as of November 19, 1997
(as the same may be amended, restated, supplemented or otherwise modified from
time to time, the "Credit Agreement"; capitalized terms used herein and not
----------------
otherwise defined having the meanings assigned in the Credit Agreement), among
U.S Timberlands Klamath Falls, L.L.C., a Delaware limited liability company (the
"Company"), the several financial institutions from time to time party thereto
-------
(the "Banks"), and Bank of America National Trust and Savings Association, as
-----
Issuing Bank, as Swingline Bank and as agent for the Banks (in such last
capacity, the "Agent").
-----
The undersigned, a Responsible Officer of the Company, and acting on behalf
of the Company, hereby certifies on behalf of the Company as of the date hereof
that [he][she] is the ________________________ of the Company, and is duly
authorized to execute and deliver this Certificate to the Banks and the Agent on
behalf of the Company, and that:
1. Attached as Schedule 1 hereto are true and correct copies of the
----------
[unaudited] [audited] consolidated balance sheets of the Company and its
Subsidiaries and the MLP and its Subsidiaries, respectively, as at the end of
the fiscal [quarter] [year] ending _______, _____, and the related consolidated
statements of income, members' equity, and cash flows of the Company and its
Subsidiaries for such fiscal [quarter] [year], [(in the case of financial
statements, as at the end of any fiscal year setting forth in each case, in
comparative form the figures for the corresponding periods of the previous
fiscal year).] Such financial statements (i) present fairly in accordance with
GAAP (subject in the case of quarterly financial statements to the absence of
footnotes and ordinary year-end audit adjustments) the financial position of the
Company and its Subsidiaries as of the dates indicated and the results of their
operations, (ii) have been prepared in accordance with GAAP, subject to the
absence of footnotes and changes resulting from audit and normal year-end
audit(s).
2. The undersigned has reviewed and is familiar with the terms of the
Credit Agreement and has made, or has caused to be made under [his][her]
supervision, a review of the transactions and conditions (financial or
otherwise) of the Company and its Subsidiaries, during the accounting period
covered by the attached financial statements sufficient in [his][her] opinion to
be able to provide [his][her] certification.
3. To the best of the undersigned's knowledge, no Default or Event of
Default exists.
1
<PAGE>
4. The financial covenant analyses and information set forth on Schedule
--------
2 attached hereto are true and accurate on and as of the date of this
- -
Certificate.
IN WITNESS WHEREOF, the undersigned has executed this Certificate on behalf
of the Company as of _______________ __, ____.
U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.
By:____________________________________________________
Title:_________________________________________________
2
<PAGE>
Date: __________________
For the fiscal [quarter][year]
ended _________ ___, ____
SCHEDULE 2*
to the Compliance Certificate
($ in 000's)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
I. SECTION 8.14: MINIMUM PRO FORMA EBITDDA TO PRO FORMA INTEREST EXPENSE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(A) Pro Forma EBITDDA
- -------------------------------------------------------------------------------------------------------------------------
(1) EBITDDA
- -------------------------------------------------------------------------------------------------------------------------
(a) Net Income $_________
- -------------------------------------------------------------------------------------------------------------------------
(b) Expenses for depreciation and amortization of
intangibles to the extent included in the
determination of Net Income $_________
- -------------------------------------------------------------------------------------------------------------------------
(c) Expenses for the depletion of Timber from the
Timberlands to the extent included in the
determination of Net Income $_________
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
_____________________
* Due to space constraints, this Schedule is not inclusive of some detail
contained in the Credit Agreement. In all instances in which this Schedule is
inconsistent with the Credit Agreement, the Credit Agreement will prevail.
1
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(d) Net Interest Expense
- -------------------------------------------------------------------------------------------------------------------------
(i) Gross Interest Expense (cash interest expense
for the period, including all commissions,
discounts, fees and other charges under letters of
credit and similar instruments and under any Swap
Contract) $__________
- -------------------------------------------------------------------------------------------------------------------------
(ii) Interest income for the period, and Swap
Contract payments received $__________
(iii) Sum of (i) minus (ii) $__________
(e) Nonrecurring non-cash charges $__________
- -------------------------------------------------------------------------------------------------------------------------
(f) Net Proceeds from sales of assets permitted
under Section 8.2 (not in excess of the Maximum
Amount for any calendar year) $__________
- -------------------------------------------------------------------------------------------------------------------------
(g) sum of (a) plus (b) plus (c) plus (d)(iii) plus
(e) plus (f) $__________
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(2) [If applicable] In connection with
any timberlands to be acquired by
the Company with the proceeds of an
Acquisition Revolving Loan or
previously acquired within such
four fiscal quarters, an amount
equal to a good faith estimate of
such additional amounts that would
be included in EBITDDA had such
timberlands been owned by the
Company for such four fiscal
quarters, based upon good faith
estimates of applicable revenues
and expenses arising from such
timberlands and assuming aggregate
Timber Harvest in an amount that
does not require proceeds to be
placed in an escrow or cash
collateral account pursuant to
Section 8.20 $__________
- -------------------------------------------------------------------------------------------------------------------------
(3) The sum of (1) plus/minus (as
applicable) (2) $__________
- -------------------------------------------------------------------------------------------------------------------------
(B) Pro Forma Interest Expense
- -------------------------------------------------------------------------------------------------------------------------
(1) Interest expense payable
on all Indebtedness $____________
- -------------------------------------------------------------------------------------------------------------------------
(2) Interest expense that would have
been payable during the preceeding
four fiscal quarters, based upon
the interest rate applicable on the
date specified above and giving
effect as of the beginning of such
period to (x) the incurrence of
such Indebtedness and (y) the
application of such Indebtedness to
the substantially concurrent
repayment of any other
Indebtedness, in respect of:
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(a) Indebtedness proposed to be incurred on the date hereof, including any $__________
Loan requested under the Credit Agreement or other Senior Debt
(b) Indebtedness incurred after the end of the preceeding four fiscal $__________
quarters and before the date hereof
(c) sum of (a) plus (b) $__________
- ------------------------------------------------------------------------------------------------------------------------------------
(3) sum of (1) plus (2)(c) $__________
- ------------------------------------------------------------------------------------------------------------------------------------
(C) Ratio of Pro Forma EBITDDA ((A)(3)) to Pro Forma Interest Expense ____:1.00
((B)(3))
(D) Minimum Pro Forma EBITDDA to Pro Forma Interest Expense (from Section ____:1.00
8.14)
- ------------------------------------------------------------------------------------------------------------------------------------
II. SECTION 8.15: MAXIMUM FUNDED DEBT TO PRO FORMA EBITDDA
- ------------------------------------------------------------------------------------------------------------------------------------
(A) Funded Debt
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Indebtedness of the type described in clauses (a), (b), (d) or (e) of $__________
definition thereof, excluding deferred purchase price of property with
limited recourse
- ------------------------------------------------------------------------------------------------------------------------------------
(2) [If applicable] In connection with any timberlands to be acquired with $__________
the proceeds of an Acquisition Revolving Loan, Indebtedness proposed to be
incurred in connection with such acquisition, including such Acquisition
Revolving Loan
- ------------------------------------------------------------------------------------------------------------------------------------
(3) Cash and Cash Equivalents $__________
- ------------------------------------------------------------------------------------------------------------------------------------
(4) Sum of (1) plus (2) minus (3) $__________
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
---------------------------
<S> <C> <C>
(B) Pro Forma EBITDDA (from (I)(A)(3)) $__________
- ------------------------------------------------------------------------------------------------------------------------------------
(C) Ratio of Funded Debt ((A)(4)) to Pro Forma EBITDDA ((B)) ____:1.00
- ------------------------------------------------------------------------------------------------------------------------------------
(D) Maximum Funded Debt to Pro Forma EBITDDA (from Section 8.15) ____:1.00
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
III. SECTION 8.16 MINIMUM ASSET VALUE TO FUNDED DEBT RATIO
- ------------------------------------------------------------------------------------------------------------------------------------
(A) Asset Value
- ------------------------------------------------------------------------------------------------------------------------------------
(1) 70% of the Retail Timberlands Value, as $__________
reflected in the Quarterly/Annual Timber Report for
the fiscal quarter/fiscal year ended in the date
specified above
- ------------------------------------------------------------------------------------------------------------------------------------
(B) Funded Debt (from (II)(A)(3)) $__________
- ------------------------------------------------------------------------------------------------------------------------------------
(C) Ratio of Asset Value ((A)(1)) to Funded Debt ((B)) ____:1.00
- ------------------------------------------------------------------------------------------------------------------------------------
(D) Minimum Asset Value to Funded Debt Ratio (from Section 8.16) 1.75:1.00
- ------------------------------------------------------------------------------------------------------------------------------------
IV. RECONCILIATION OF QUARTERLY TIMBER REPORTS TO ANNUAL TIMBER REPORT
(FOURTH QUARTER ONLY)
- ------------------------------------------------------------------------------------------------------------------------------------
(A) Merchant Table Timber Inventory reported in most recent Quarterly _______ MBF
Timber Report (by volume and species)
- ------------------------------------------------------------------------------------------------------------------------------------
(B) Merchant Table Timer Inventory reported in Annual Timber Report (by _______ MBF
volume and species)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
Exhibit D
Form of Legal Opinion of Company's Counsel
November 19, 1997
Bank of America National Trust and Savings Association,
as Agent and as the Letter of Credit Issuing Bank, and
each of the Banks from time to time
parties to the Credit Agreement referred to below
c/o Bank of America National Trust and Savings Association
Agency Management Services #5596
1455 Market Street, 12th Floor
San Francisco, California 94103
Re: U.S. Timberlands Klamath Falls, L.L.C.
Ladies and Gentlemen:
We have acted as special counsel to U.S. Timberlands Klamath Falls, L.L.C.,
a Delaware limited liability company (the "Company"), and U.S. Timberlands
Finance Corp., a Delaware corporation ("Finance"), in connection with the Credit
Agreement, dated as of November 19, 1997 (the "Credit Agreement"), among the
Company, the several financial institutions from time to time parties thereto
(the "Banks"), and Bank of America National Trust and Savings Association, as
letter of credit issuing bank thereunder (in such capacity, the "Issuing Bank"),
and as agent for the Banks (in such capacity, the "Agent"). Unless otherwise
defined herein, terms defined in the Credit Agreement and used herein shall have
the meanings given to them in the Credit Agreement.
The opinions expressed below are furnished to you pursuant to Section
5.1(c) of the Credit Agreement at the request, and with the approval, of the
Company and Finance. With your permission, all assumptions and statements of
reliance herein have been made without any independent investigation or
verification on our part except to the extent otherwise expressly stated, and we
express no opinion with respect to the subject matter or accuracy of such
assumptions or items relied upon, except to the extent otherwise expressly
stated.
In connection with this opinion, we have (i) investigated such questions of
law, (ii) examined originals or certified, conformed or reproduction copies of
such agreements, instruments, documents and records of the Company, the Managing
<PAGE>
Bank of America National Trust and Savings
Association, as Agent, the Issuing Bank and the Banks
November 19, 1997
Page Two
Member and Finance, such certificates of public officials and other documents,
and (iii) received such information from officers and representatives of the
Company, the Managing Member and Finance, and from others, as we have deemed
necessary or appropriate for the purposes of this opinion. We have examined,
among other documents, executed copies of the Credit Agreement, including the
respective forms of promissory note annexed thereto as Exhibits F-1 and F-2.
In rendering the opinions hereinbelow expressed, we have assumed the legal
capacity of all natural persons executing documents (whether in an individual or
in a representative capacity), the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity to
authentic original documents of all documents submitted to us as certified,
conformed or reproduction copies. As to various questions of fact relevant to
such opinions, we have relied upon, and assume the accuracy of, representations
and warranties contained in the Credit Agreement and certificates and written
statements and other information of or from representatives of the Company, the
Managing Member and Finance, and from others, and assume compliance on the part
of all parties to the Credit Agreement with their covenants and agreements
contained therein.
In rendering such opinions, we have assumed that, except as to the matters
respecting the Company, Finance, and the Managing Member, and such other
matters, as are the subjects of our opinions in paragraphs 1-5 below or our
opinions referred to in the last sentence of this letter:
(i) each party to the Credit Agreement and to the operating agreement of
the Company (the "Operating Agreement"), is duly organized or
formed, validly existing and in good standing under the laws of its
jurisdiction of organization;
(ii) each party to the Credit Agreement and the Operating Agreement has
full power and authority and has obtained all requisite
authorizations, consents and approvals and made all requisite
filings and registrations, necessary to execute, deliver and perform
its obligations under such document;
(iii) the execution, delivery and performance of the Credit Agreement and
the Operating Agreement will not violate any law, rule, regulation,
order, decree or judgment binding upon or applicable to any party
thereto or its respective properties;
<PAGE>
Bank of America National Trust and Savings
Association, as Agent, the Issuing Bank and the Banks
November 19, 1997
Page Three
(iv) the Credit Agreement and the Operating Agreement have been duly
authorized, executed and delivered by all parties thereto;
(v) all signatories to the Credit Agreement and the Operating Agreement
on behalf of the parties thereto have been duly authorized; and
(vi) the Credit Agreement and Operating Agreement constitute the legal,
valid and binding obligations of all Persons parties thereto,
enforceable against such Persons in accordance with their respective
terms.
Based upon and subject to the foregoing, and subject also to the
qualifications, limitations, exceptions and further assumptions hereinbelow set
forth, we are of the opinion that:
1. The Company is a limited liability company duly formed and validly
existing in good standing under the Delaware Limited Liability Company Act, and
Finance is a corporation duly organized and validly existing in good standing
under the Delaware General Corporation Law. The Company is duly registered or
qualified as a foreign limited liability company for the transaction of business
under the laws of the State of Oregon.
2. The execution and delivery on behalf of the Company of the Credit
Agreement, the Notes and the L/C Related Documents, and the performance by the
Company of its obligations thereunder, have been duly authorized on behalf of
the Company by all requisite limited liability company action of the Managing
Member.
3. The Credit Agreement constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, and the Revolving Loans made today constitute, and upon the funding
thereof in accordance with the terms of the Credit Agreement, the Acquisition
Loans will constitute, the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with the terms of the Credit
Agreement.
4. (a) The Company has all requisite limited liability company power and
authority to execute, deliver and perform its obligations under the Credit
Agreement; and (b) no authorization, consent or approval of, or any filing or
registration with, any United States federal or New York State Governmental
Authority is necessary for such execution, delivery or performance, other than
(i) routine post-closing informational filings, and (ii) filings necessary to
release of record Liens granted to secure obligations under the Existing Credit
Agreement.
<PAGE>
Bank of America National Trust and Savings
Association, as Agent, the Issuing Bank and the Banks
November 19, 1997
Page Four
5. The execution and delivery by the Company of the Credit Agreement, and
performance of its obligations thereunder, will not violate any United States
federal or New York State law, rule, regulation or, to the best of our
knowledge, any order, decree or judgment binding upon the Company.
* * *
The foregoing opinions are subject to the following comments and
qualifications:
A. Our opinions in paragraph 3 are subject to and may be limited by (1)
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance,
fraudulent transfer or other similar laws relating to or affecting the rights of
creditors generally, and (2) general principles of equity (regardless of whether
considered in a proceeding in equity or at law), including, without limitation
(a) the possible unavailability of specific performance, injunctive relief or
any other equitable remedy, and (b) concepts of materiality, reasonableness,
good faith and fair dealing. Without limiting the generality of our
qualifications set forth directly above in this paragraph, we express no opinion
as to the applicability to, or effect upon, any obligations of the Company under
the Credit Agreement, or the opinions expressed herein, of Section 548 of the
Bankruptcy Code, Article 10 of the New York Debtor and Creditor Law, or any
other law dealing with fraudulent transfers or conveyances, or Section 547 of
the Bankruptcy Code.
B. We express no opinion herein with respect to the enforceability of
provisions of the Credit Agreement that (i) relate to rights of set-off; (ii)
purport to establish evidentiary standards for suits or proceedings to enforce
such document or otherwise, to establish certain determinations as conclusive,
or to establish or negate applicable rules of construction based upon
participation in negotiations or document preparation, or to permit the Agent or
any Bank to act in its sole discretion or to waive a right to a jury trial or
service of process or rights to notice, demands, defenses, counterclaims or
setoffs; (iii) relate to severability or separability; (iv) relate to
indemnification or reimbursement obligations to the extent any such provisions
would purport to require the Company to provide indemnification or reimbursement
in respect of the gross negligence, willful misconduct or unlawful behavior of
any Person; (v) purport to limit the liability of or exculpate any Person other
than the Company; (vi) contain any agreement to agree or purport to bind non-
parties or to bind the Company to control the actions of any Person other than
its Subsidiaries (including, without limitation, its partners); (vii) purport to
require that all amendments, waivers and terminations be in writing or to
require disregard of any course of dealing between the parties; (viii) purport
to confer subject matter jurisdiction in respect of bringing suit, enforcement
of judgments or otherwise on any court, to the extent that such court does
<PAGE>
Bank of America National Trust and Savings
Association, as Agent, the Issuing Bank and the Banks
November 19, 1997
Page Five
not have such jurisdiction; (ix) purport to waive inconvenient forum or the
defense of illegality or to establish any obligation of the Company as
unconditional regardless of the occurrence or non-occurrence of any other event;
(x) purport to require the Company to pay costs and expenses pursuant to Section
11.4(b) to the extent costs and expenses are not reasonable; or (xi) purport to
waive notice of acceleration.
C. We express no opinion as to any provisions of the Credit Agreement
which purport to impose liability on the Company, or to relieve the Issuing Bank
from liability, in connection with the Issuing Bank's payment, or failure to
make payment, of draws under a letter of credit to the extent that such
provisions are inconsistent with any provision of Article 5 of the Uniform
Commercial Code as in effect in the State of New York or the Uniform Customs and
Practice for Documentary Credits (the "UCP"), which provisions of said Article
5, or of the UCP, as the case may be, may not under applicable law or the UCP be
varied by agreement.
D. We express no opinion as to the effect of the laws of any jurisdiction
in which any Bank is located (other than the State of New York) that limit the
interest, fees or other charges such Bank may impose.
E. Without limiting the generality of paragraph G below, we express no
opinion as to any Environmental Laws or as to any antitrust or other laws
regulating anti-competitive practices.
F. Our opinion in paragraph 3 above regard to Section 11.16(a) of the
Credit Agreement is based solely on Section 5-1401 of the New York General
Obligations Law.
G. The opinions herein expressed are limited to the matters expressly set
forth in this opinion letter, and no opinion is implied or may be inferred
beyond the matters expressly so stated.
H. The foregoing opinions are limited to matters involving (1) in the
case of paragraphs 1 (first sentence), 2 and 4(a), the Delaware Limited
Liability Company Act and, in the case of paragraph 1, the Delaware General
Corporation Law, or (2) in the case of paragraphs 3, 4(b) and 5, the laws of the
State of New York and the federal laws of the United States which, in our
experience, are normally applicable to transactions of this nature or parties of
similar character as the Company and, in the case of said paragraph 5, such
orders, decrees and judgments as have been identified to us by the Company as
applicable to the Company. Our opinion in the second sentence of paragraph 1
above is based solely upon a certificate of the Secretary of State of Oregon. We
do not express any opinion as to any other laws. Moreover, we do not express any
<PAGE>
Bank of America National Trust and Savings
Association, as Agent, the Issuing Bank and the Banks
November 19, 1997
Page Six
opinion as to the various state and federal laws regulating the Agent or the
Banks (including the Issuing Bank) in the conduct of their respective businesses
that may relate to the Credit Agreement or any other Loan Document.
This opinion letter is provided to you by us in our capacity as special
counsel to the Company and Finance and may not be relied upon (i) by any Person
other than you and, as of its date, other Persons who shall become Banks under
the Credit Agreement, or (ii) by any Person for any purpose other than in
connection with the transactions contemplated by the Credit Agreement without,
in each instance, our prior written consent. This opinion letter speaks as of
its date and we undertake no, and hereby disclaim any, duty to advise you or any
other Person entitled to rely hereon as to changes of law or fact coming to our
attention after the delivery hereof on such date. You and each other Person
authorized to rely hereon, as specified in clause (i) of the first sentence of
this paragraph (subject in each case to be the limitations in clause (ii) of
such sentence), are hereby authorized to rely, as if addressed to you or such
Person, as the case may be, as of the date hereof and subject to all
assumptions, qualifications, limitations and exceptions therein contained, upon
our separate opinions of even date herewith addressed to the underwriters
parties to the underwriting agreements, each dated as of November 13, 1997, with
respect to (i) the Company's Senior Notes and (ii) the Common Units of U.S.
Timberlands Company, L.P.
Very truly yours,
<PAGE>
Exhibit E
Form of Assignment and Acceptance
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and
Acceptance"), dated as of __________, _____, is made between
____________________ (the "Assignor") and ____________________ (the "Assignee").
RECITALS
--------
WHEREAS, the Assignor is party to the Credit Agreement dated as of November
19, 1997 (as the same may be extended, renewed, amended or restated from time to
time, the "Credit Agreement"), among U.S. TIMBERLANDS KLAMATH FALLS, L.L.C. (the
----------------
"Company"), the financial institutions from time to time party thereto
-------
(including the Assignor, the "Banks") and BANK OF AMERICA NATIONAL TRUST AND
-----
SAVINGS ASSOCIATION, as Issuing Bank, as Swingline Bank and as agent for the
Banks (in such last capacity, the "Agent"). Any terms defined in the Credit
-----
Agreement and not defined in this Assignment and Acceptance are used herein as
defined in the Credit Agreement;
WHEREAS, as provided under the Credit Agreement, the Assignor has committed
to making (i) Acquisition Revolving Loans to the Company in an aggregate amount
not to exceed $__________ (the "Acquisition Revolving Commitment"), and (ii) W/C
--------------------------------
Revolving Loans, together with a Pro Rata Share of Swingline Loans and L/C
Obligations, to the Company in an aggregate amount not to exceed $__________
(the "W/C Revolving Commitment");
------------------------
WHEREAS, [the Effective Amount of all Acquisition Revolving Loans with
respect to the Assignor on the date hereof is $__________] [and] [the Effective
Amount of all W/C Revolving Loans with respect to the Assignor on the date
hereof is $__________] [and] [the Effective Amount of all Swingline Loans with
respect to the Assignor on the date hereof is $__________] [and] [the Effective
Amount of L/C Obligations with respect to the Assignor on the date hereof is
$__________] [no] [Acquisition Revolving Loans] [W/C Revolving Loans] [Swingline
Loans][or][Letters of Credit] are outstanding under the Credit Agreement];
[WHEREAS, the Assignor has acquired a participation in the Issuing Bank's
liability under Letters of Credit in an aggregate principal amount of
$__________ ] [and a participation in the Swingline Bank's liability under
Swingline Loans in an aggregate principal amount of $____________ ] [no Letters
of Credit are outstanding under the Credit Agreement] [no Swingline Loans are
outstanding under the Credit Agreement]; and ]
WHEREAS, the Assignor wishes to assign to the Assignee [a ratable portion
of the] [all] rights and obligations of the Assignor under the Credit Agreement
in respect of [(i)] [its Acquisition Revolving Commitment in an amount equal to
$__________, [together with a ratable portion of its outstanding Acquisition
Revolving Loans], (the "Assigned Acquisition Amount")] and [(ii)] its W/C
---------------------------
Revolving Commitment in an amount equal to $__________, [together with a ratable
portion of its outstanding W/C Revolving Loans, [applicable if the
1
<PAGE>
Assignor has acquired a participation in Swingline Loans] Swingline Loans,
[[applicable if the Assignor has acquired a participation in the Issuing Bank's
liability under Letters of Credit:] and L/C Obligations](the "Assigned W/C
------------
Amount"), on the terms and subject to the conditions set forth herein, and the
- ------
Assignee wishes to accept assignment of such rights and to assume such
obligations from the Assignor on such terms and subject to such conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:
1. Assignment and Acceptance.
-------------------------
(a) Subject to the terms and conditions of this Assignment and Acceptance,
(i) the Assignor hereby sells, transfers and assigns to the Assignee, and (ii)
the Assignee hereby purchases, assumes and undertakes from the Assignor, without
recourse and without representation or warranty (except as provided in this
Assignment and Acceptance) (A) __% (the "Assignee's Percentage Share") of each
---------------------------
the Acquisition Revolving Commitment [and the corresponding Acquisition
Revolving Loans] and a ratable percentage of the W/C Revolving Commitment [and
the corresponding [W/C Revolving Loans][Swingline Loans][and] [L/C Obligations]]
of the Assignor, and (B) all related rights, benefits, obligations, liabilities
and indemnities of the Assignor under and in connection with the Credit
Agreement and the Loan Documents.
[If appropriate, add paragraph specifying payment to Assignor by Assignee
of outstanding principal of, accrued interest on, and fees with respect to,
Acquisition Revolving Loans, W/C Revolving Loans, Swingline Loans and L/C
Obligations assigned.]
(b) With effect on and after the Effective Date (as defined herein), the
Assignee shall be a party to the Credit Agreement and succeed to all of the
rights and be obligated to perform all of the obligations of a Bank under the
Credit Agreement, including the requirements concerning confidentiality and the
payment of indemnification, with an Acquisition Revolving Commitment in an
amount equal to the Assigned Acquisition Amount and a W/C Revolving Commitment
in an amount equal to the Assigned W/C Amount. The Assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of the Credit Agreement are required to be performed by it as a Bank. It is the
intent of the parties hereto that (i) the Acquisition Revolving Commitment of
the Assignor shall, as of the Effective Date, be reduced by an amount equal to
the Assigned Acquisition Amount relating thereto, (ii) the W/C Revolving
Commitment of the Assignor shall, as of the Effective Date, be reduced by an
amount equal to the Assigned W/C Amount relating thereto, and (iii) the Assignor
shall relinquish its rights (except its rights with respect to indemnification
or compensation arising out of an event occurring before the Effective Date) and
be released from its obligations under the Credit Agreement to the extent such
obligations have been assumed by the Assignee.
(c) After giving effect to the assignment and assumption set forth herein,
on the Effective Date the Assignee's Acquisition Revolving Commitment will be
$__________ and the Assignee's W/C Revolving Commitment will be $__________.
2
<PAGE>
(d) After giving effect to the assignment and assumption set forth herein,
on the Effective Date the Assignor's Acquisition Revolving Commitment will be
$__________ and the Assignor's W/C Revolving Commitment will be $__________.
2. Payments.
--------
(a) As consideration for the sale, assignment and transfer contemplated in
Section 1, the Assignee shall pay to the Assignor on the Effective Date in
immediately available funds an amount equal to the sum of (i) $__________,
representing the Assignee's Percentage Share of the principal amount of the
Acquisition Revolving Loans of the Assignor, plus (ii) $__________, representing
the Assignee's Percentage Share of the principal amount of the W/C Revolving
Loans of the Assignor.
(b) The [Assignor] [Assignee] further agrees to pay to the Agent a
processing fee in the amount specified in Section 11.8(a) of the Credit
Agreement.
3. Reallocation of Payments.
------------------------
Any interest, fees and other payments accrued to the Effective Date with
respect to the Acquisition Revolving Commitment [and the related Acquisition
Revolving Loans] , and the W/C Revolving Commitment [and the related W/C
Revolving Loans] [and the corresponding Swingline Loans and L/C Obligations]
shall be for the account of the Assignor. Any interest, fees and other payments
accrued on and after the Effective Date with respect to the Assigned Amount
shall be for the account of the Assignee. Each of the Assignor and the Assignee
agrees that it will hold in trust for the other party any interest, fees and
other amounts which it may receive to which the other party is entitled pursuant
to the preceding sentence and pay to the other party any such amounts which it
may receive promptly upon receipt.
4. Independent Credit Decision.
---------------------------
The Assignee (a) acknowledges that it has received a copy of the Credit
Agreement and the Schedules and Exhibits thereto, together with copies of the
most recent financial statements referred to in Section 7.1 of the Credit
Agreement, and such other documents and information as it has deemed appropriate
to make its own credit and legal analysis and decision to enter into this
Assignment and Acceptance; and (b) agrees that it will, independently and
without reliance upon the Assignor, the Agent or any other Bank and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit and legal decisions in taking or not taking
action under the Credit Agreement.
5. Effective Date; Notices.
-----------------------
(a) As between the Assignor and the Assignee, the effective date for this
Assignment and Acceptance shall be __________, ____ (the "Effective Date");
--------------
provided, that the following conditions precedent have been satisfied on or
- --------
before the Effective Date:
3
<PAGE>
(i) this Assignment and Acceptance shall be executed and delivered
by the Assignor and the Assignee;
(ii) the consents of the Company[, the Issuing Bank,] [,the
Swingline Bank] and the Agent, if required for an effective assignment of
the Assigned Acquisition Amount and the Assigned W/C Amount by the Assignor
to the Assignee under Section 11.8(a) of the Credit Agreement, shall have
been duly obtained and shall be in full force and effect as of the
Effective Date;
(iii) the Assignee shall pay to the Assignor all amounts due to the
Assignor under this Assignment and Acceptance; and
(iv) the processing fee referred to in Section 2(b) hereof and in
Section 11.8(a) of the Credit Agreement shall have been paid to the Agent.
(b) Promptly following the execution of this Assignment and Acceptance,
the Assignor shall deliver to the Company [, the Issuing Bank,] [,the Swingline
Bank] and the Agent for acknowledgment by the Agent [and the Issuing Bank,]
[,the Swingline Bank] a Notice of Assignment in the form attached hereto as
Schedule 1.
6. Agent.
-----
(a) The Assignee hereby appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under the Credit
Agreement as are delegated to the Agent by the Banks pursuant to the terms of
the Credit Agreement.
[(b) The Assignee shall assume no duties or obligations held by the
Assignor in its capacity as Agent under the Credit Agreement.] [INCLUDE ONLY IF
ASSIGNOR IS AGENT]
[(c) If the Assignor is an Issuing Bank or Swingline Bank, the Assignee
shall assume no duties or obligations held by the Assignor in its capacity as
such under the Credit Agreement or any other Loan Document.] [INCLUDE ONLY IF
ASSIGNOR IS ISSUING BANK OR SWINGLINE BANK]
7. Withholding Tax.
---------------
The Assignee (a) represents and warrants to the Agent and the Company that
under applicable law and treaties no tax will be required to be withheld by the
Assignor with respect to any payments to be made to the Assignee hereunder, (b)
agrees to furnish (if it is organized under the laws of any jurisdiction other
than the United States or any State thereof) to the Agent and the Company prior
to the time that the Agent or the Company is required to make any payment of
principal, interest or fees hereunder, duplicate executed originals of either
U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form
1001 (wherein the Assignee claims entitlement to the benefits of a tax treaty
that provides for a complete exemption from U.S. federal income withholding tax
on all payments hereunder) and agrees to provide new Forms 4224 or 1001 upon the
expiration of any previously delivered form or comparable
4
<PAGE>
statements in accordance with applicable U.S. law and regulations and amendments
thereto, duly executed and completed by the Assignee, and (c) agrees to comply
with all applicable U.S. laws and regulations with regard to such withholding
tax exemption.
8. Representations and Warranties.
------------------------------
(a) The Assignor represents and warrants that (i) it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any lien, security interest or other adverse
claim; (ii) it is duly organized and existing and it has the full power and
authority to take, and has taken, all action necessary to execute and deliver
this Assignment and Acceptance and any other documents required or permitted to
be executed or delivered by it in connection with this Assignment and Acceptance
and to fulfill its obligations hereunder; (iii) no notices to, or consents,
authorizations or approvals of, any person are required (other than any already
given or obtained) for its due execution, delivery and performance of this
Assignment and Acceptance, and apart from any agreements or undertakings or
filings required by the Credit Agreement, no further action by, or notice to, or
filing with, any person is required of it for such execution, delivery or
performance; and (iv) this Assignment and Acceptance has been duly executed and
delivered by it and constitutes the legal, valid and binding obligation of the
Assignor, enforceable against the Assignor in accordance with the terms hereof,
subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors' rights and to general equitable principles.
(b) The Assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or any other instrument or document furnished pursuant thereto. The
Assignor makes no representation or warranty in connection with, and assumes no
responsibility with respect to, the solvency, financial condition or statements
of the Company, or the performance or observance by the Company, of any of its
respective obligations under the Credit Agreement or any other instrument or
document furnished in connection therewith.
(c) The Assignee represents and warrants that (i) it is duly organized and
existing and it has full power and authority to take, and has taken, all action
necessary to execute and deliver this Assignment and Acceptance and any other
documents required or permitted to be executed or delivered by it in connection
with this Assignment and Acceptance, and to fulfill its obligations hereunder;
(ii) no notices to, or consents, authorizations or approvals of, any person are
required (other than any already given or obtained) for its due execution,
delivery and performance of this Assignment and Acceptance; and apart from any
agreements or undertakings or filings required by the Credit Agreement, no
further action by, or notice to, or filing with, any person is required of it
for such execution, delivery or performance; (iii) this Assignment and
Acceptance has been duly executed and delivered by it and constitutes the legal,
valid and binding obligation of the Assignee, enforceable against the Assignee
in accordance with the terms hereof, subject, as to enforcement, to bankruptcy,
insolvency, moratorium, reorganization and other laws of general application
relating to or affecting creditors' rights and to general equitable principles;
and (iv) it is an Eligible Assignee.
5
<PAGE>
9. Further Assurances.
------------------
The Assignor and the Assignee each hereby agrees to execute and deliver
such other instruments, and take such other action, as either party may
reasonably request in connection with the transactions contemplated by this
Assignment and Acceptance, including the delivery of any notices or other
documents or instruments to the Company or the Agent, which may be required in
connection with the assignment and assumption contemplated hereby.
10. Miscellaneous.
-------------
(a) Any amendment or waiver of any provision of this Assignment and
Acceptance shall be in writing and signed by the parties hereto. No failure or
delay by either party hereto in exercising any right, power or privilege
hereunder shall operate as a waiver thereof and any waiver of any breach of the
provisions of this Assignment and Acceptance shall be without prejudice to any
rights with respect to any other or further breach thereof.
(b) All payments made hereunder shall be made without any set-off or
counterclaim.
(c) The Assignor and the Assignee shall each pay its own costs and
expenses incurred in connection with the negotiation, preparation,
execution and performance of this Assignment and Acceptance.
(d) This Assignment shall be null and void if not undertaken on a pro rata
basis between the Assignor's Acquisition Revolving Commitment
[together with a ratable portion of its outstanding Acquisition
Revolving Loans] and its W/C Revolving Commitment [together with a
ratable portion of its outstanding W/C Revolving Loans, Swingline
Loans and L/C Obligations].
(e) This Assignment and Acceptance may be executed in any number of
counterparts and all of such counterparts taken together shall be
deemed to constitute one and the same instrument.
(f) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK; PROVIDED THAT THE
--------
AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS ASSIGNMENT AND
ACCEPTANCE MAY BE BROUGHT IN THE COURTS OF THE COUNTY AND STATE OF NEW
YORK, THE COURTS OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF THE
STATE OF NEW YORK, THE COURTS OF THE STATE OF CALIFORNIA OR OF THE
UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY
EXECUTION AND DELIVERY OF THIS ASSIGNMENT AND ACCEPTANCE, EACH OF THE
ASSIGNOR AND THE ASSIGNEE CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF
THE ASSIGNOR AND THE ASSIGNEE IRREVOCABLY WAIVES ANY
6
<PAGE>
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
--------------------
HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION
IN RESPECT OF THIS ASSIGNMENT AND ACCEPTANCE. THE ASSIGNOR AND THE
ASSIGNEE EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
CALIFORNIA LAW.
(g) THE ASSIGNEE WAIVES ITS RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS
ASSIGNMENT AND ACCEPTANCE OR THE TRANSACTIONS CONTEMPLATED HEREBY IN
ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY THE
ASSIGNOR, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR
OTHERWISE. THE ASSIGNEE AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION
SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, ASSIGNEE FURTHER AGREES THAT ITS RIGHT TO A TRIAL BY JURY
IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM
OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE
VALIDITY OR ENFORCEABILITY OF THIS ASSIGNMENT AND ACCEPTANCE OR ANY
PROVISION CONTAINED HEREIN. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS ASSIGNMENT
AND ACCEPTANCE.
[Other provisions to be added as may be negotiated between the Assignor and
the Assignee, provided that such provisions are not inconsistent with the Credit
Agreement.]
7
<PAGE>
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed and delivered by their duly authorized
officers as of the date first above written.
[Name of Assignor]
By:_____________________________________
Title:
Address:
[Name of Assignee]
By:_____________________________________
Title:
Address:
8
<PAGE>
SCHEDULE 1
NOTICE OF ASSIGNMENT AND ACCEPTANCE
-----------------------------------
Date: _______________________
Bank of America National
Trust and Savings Association, as Agent [ Issuing Bank and Swingline Bank]
Paper and Forest Products #9973
555 California Street, 41st Floor
San Francisco, California 94104-1502
Attention: Michael Balok, Managing Director
Telephone: (415) 622-2018
Facsimile: (415) 622-2385
U.S Timberlands Klamath Falls, L.L.C.
P.O. Box 10
6400 Highway 66
Klamath Falls, Oregon 97601
Ladies and Gentlemen:
We refer to the Credit Agreement, dated as of November 19, 1997 (as the
same may be extended, renewed, amended or restated from time to time, the
"Credit Agreement"), among U.S. Timberlands Klamath Falls, L.L.C. (the
----------------
"Company"), the financial institutions party thereto (the "Banks") and Bank of
------- -----
America National Trust and Savings Association, as Issuing Bank, as Swingline
Bank and as agent for the Banks (in such last capacity, the "Agent"). Terms
-----
defined in the Credit Agreement are used herein as therein defined.
1. We hereby give you notice of, and request your consent to, the
assignment by _______________ (the "Assignor") to _______________ (the
"Assignee") of _____% of the right, title and interest of the Assignor in and to
--------
the Acquisition Commitment of the Assignor[, and all outstanding Acquisition
Revolving Loans under the Credit Agreement], made by the Assignor pursuant to
the Assignment and Acceptance Agreement attached hereto (the "Assignment and
----------
Acceptance"). Before giving effect to such assignment, the Assignor's
- ----------
Acquisition Revolving Commitment is $__________ [and the aggregate amount of its
outstanding Acquisition Revolving Loans is $__________.] Additionally, we hereby
give you notice of, and request your consent to, the assignment by the Assignor
to the Assignee of a ratable percentage of the right, title and interest of the
Assignor in and to the W/C Revolving Commitment of the Assignor [and all
outstanding W/C Revolving Loans, Swingline Loans and L/C Obligations] under the
Credit Agreement, made by the Assignor pursuant to the Assignment and Acceptance
Agreement attached hereto (the "Assignment and Acceptance"). Before giving
-------------------------
9
<PAGE>
effect to such assignment, the Assignor's W/C Revolving Commitment is
$__________ and the aggregate amount of its outstanding W/C Revolving Loans is
$__________[, the Effective Amount of the Assignor's Swingline Loans is
$_________ and the Effective Amount of the Assignor's L/C Obligations is
$__________].
2. The Assignee agrees that, upon receiving the consent of the Agent, the
Issuing Bank, the Swingline Bank and, if applicable, the Company, to such
assignment, the Assignee will be bound by the terms of the Credit Agreement as
fully and to the same extent as if the Assignee were the Bank originally holding
such interest in the Credit Agreement.
3. The following administrative details apply to the Assignee:
(A) Notice Address:
Assignee name: ____________________________
Address: ____________________________
____________________________
____________________________
Attention: ____________________________
Telephone: (___) ____________________________
Telecopier: (___) ____________________________
Telex (Answerback): ____________________________
(B) Payment Instructions:
Account No.: ____________________________
At: ____________________________
____________________________
____________________________
Reference: ____________________________
Attention: ____________________________
4. You are entitled to rely upon the representations, warranties and
covenants of each of the Assignor and Assignee contained in the Assignment and
Acceptance.
10
<PAGE>
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Notice
of Assignment and Acceptance to be executed by their respective duly authorized
officials, officers or agents as of the date first above written.
Very truly yours,
[Name of Assignor]
By:__________________________________
Name:
Title:
[Name of Assignee]
By:__________________________________
Name:
Title:
11
<PAGE>
Exhibit F-1
FORM OF ACQUISITION REVOLVING NOTE
U.S. $_________
FOR VALUE RECEIVED, U.S Timberlands Klamath Falls, L.L.C. (the "Borrower")
--------
hereby promises to pay to the order of ___________________________ (the "Bank")
----
the principal amount of ________________________ ($___________) or, if less, the
aggregate unpaid principal amount of all Acquisition Revolving Loans made by the
Bank from time to time to the Borrower pursuant to the Credit Agreement
described below, at the times and in the amounts specified in the Credit
Agreement. The Borrower promises to pay interest on such unpaid principal amount
at the times and at the rates specified in the Credit Agreement.
This Note is one of the Notes referred to in, and is issued under, the
Credit Agreement, dated as of November 19, 1997 (as the same may be amended,
restated, supplemented or otherwise modified from time to time, the "Credit
------
Agreement"), among the Borrower, the financial institutions party thereto (the
- ---------
"Banks"), and Bank of America National Trust and Savings Association, as Issuing
-----
Bank, as Swingline Bank and as agent for the Banks (in such last capacity, the
"Agent").
-----
The holder of this Note is authorized to record on the schedule
annexed hereto the date, amount, maturity and type of, and, in the case of
Offshore Rate Loans, the Interest Period with respect to each Acquisition
Revolving Loan made by it and the amount of each payment of principal made by
the Borrower with respect thereto. Any such recordation shall be conclusive
absent manifest error; provided, however, that the failure of the holder of this
-------- -------
Acquisition Revolving Note to make, or an error in making, a notation thereon
with respect to any Acquisition Revolving Loan shall not limit or otherwise
affect the obligations of the Borrower hereunder or under the Credit Agreement.
The holder of this Acquisition Revolving Note shall be entitled to the
benefits provided for in the Credit Agreement. Reference is hereby made to the
Credit Agreement for provisions concerning (i) the obligation of the Bank to
advance funds evidenced by this Acquisition Revolving Note, (ii) the manner in
which interest is computed and accrued, (iii) the Borrower's rights, if any, to
prepay all or part of the Acquisition Revolving Loans, (iv) the events upon
which the maturity of the principal of and accrued interest on this Acquisition
Revolving Note may be accelerated or shall be automatically accelerated, as the
case may be, (v) the manner in which Acquisition Revolving Loans may be
converted from one Type into another Type to the extent provided in the Credit
Agreement, (vi) attorney's fees and other fees and expenses incurred in any
enforcement of this Acquisition Revolving Note, (vii) the Borrower's right to
cure certain Events of Default, and (viii) the Bank's rights to assign all or
part of this Acquisition Revolving Note to Assignees and/or to sell
participating interests in any Acquisition Revolving Loans, as more fully set
forth in the Credit Agreement. Capitalized terms used herein and not otherwise
defined shall have the meanings assigned in the Credit Agreement.
1
<PAGE>
Principal and interest are payable in lawful money of the United States of
America in immediately available funds to Bank of America National Trust and
Savings Association, as Agent for the Bank, at the Agent's Payment Office
described in the Credit Agreement.
The Borrower hereby waives presentment, demand, protest or other notice of
any kind. No failure to exercise, and no delay in exercising, any rights
hereunder on the part of the holder hereof shall operate as a waiver of such
rights.
THIS ACQUISITION Revolving NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
---------------------------------------------------------------------
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT THE
- ------------------------------------------------------------------------------
AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
- ---------------------------------------------------------------------
IN WITNESS WHEREOF, the Borrower has caused this Acquisition Revolving Note
to be executed by its officer thereunto duly authorized.
U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.
By: U.S. Timberlands Services Company, L.L.C.,
its Managing Member
By:_______________________________________________
Name:
Title:
2
<PAGE>
SCHEDULE
Date Loan Amount Type Interest Principal Date Principal
Disbursed of Loan of Loan Period Payment Paid
- --------- ------- ------- ------ ------- ----
3
<PAGE>
Exhibit F-2
FORM OF W/C REVOLVING NOTE
U.S. $_______________ __________, _______
FOR VALUE RECEIVED, U.S. Timberlands Klamath Falls, L.L.C. (the "Borrower")
--------
hereby promises to pay to the order of ___________________________ (the "Bank")
----
the principal amount of __________________________ ($________________) or, if
less, the aggregate unpaid principal amount of all W/C Revolving Loans made by
the Bank from time to time to the Borrower pursuant to the Credit Agreement
described below and the Bank's Pro Rata Share of the L/C Obligations under the
Credit Agreement, at the times and in the amounts specified in the Credit
Agreement. The Borrower promises to pay interest on such unpaid principal amount
at the times and at the rates specified in the Credit Agreement.
This Note is one of the Notes referred to in, and is issued under, the
Credit Agreement, dated as of November 19, 1997 (as the same may be amended,
restated, supplemented or otherwise modified from time to time, the "Credit
------
Agreement"), among the Borrower, the financial institutions party thereto (the
- ---------
"Banks"), and Bank of America National Trust and Savings Association, as Issuing
-----
Bank, as Swingline Bank and as agent for the Banks (in such last capacity, the
"Agent").
-----
The holder of this Note is authorized to record on the schedule annexed
hereto the date, amount, maturity and type of, and, in the case of Offshore Rate
Loans, the Interest Period with respect to each W/C Revolving Loan made by it
and its Pro Rata Share of each L/C Obligation, and the amount of each payment of
principal made by the Borrower with respect thereto. Any such recordation shall
be conclusive absent manifest error; provided, however, that the failure of the
-------- -------
holder of this W/C Revolving Note to make, or an error in making, a notation
thereon with respect to any W/C Revolving Loan shall not limit or otherwise
affect the obligations of the Borrower hereunder or under the Credit Agreement.
The holder of this W/C Revolving Note shall be entitled to the benefits
provided for in the Credit Agreement. Reference is hereby made to the Credit
Agreement for provisions concerning (i) the obligation of the Bank to advance
funds evidenced by this W/C Revolving Note, (ii) the manner in which interest is
computed and accrued, (iii) the Borrower's rights, if any, to prepay all or part
of the W/C Revolving Loans, (iv) the events upon which the maturity of the
principal of and accrued interest on this W/C Revolving Note may be accelerated
or shall be automatically accelerated, as the case may be, (v) the manner in
which W/C Revolving Loans may be converted from one Type into another Type to
the extent provided in the Credit Agreement, (vi) attorney's fees and other fees
and expenses incurred in any enforcement of this W/C Revolving Note, (vii) the
Borrower's right to cure certain Events of Default, and (viii) the Bank's rights
to assign all or part of this W/C Revolving Note to Assignees and/or to sell
participating interests in any W/C Revolving Loans or L/C Obligations, as more
fully set forth in the Credit Agreement. Capitalized terms used herein and not
otherwise defined shall have the meanings assigned in the Credit Agreement.
1
<PAGE>
Principal and interest are payable in lawful money of the United States of
America in immediately available funds to Bank of America National Trust and
Savings Association, as Agent for the Bank, at the Agent's Payment Office
described in the Credit Agreement.
The Borrower hereby waives presentment, demand, protest or other notice of
any kind. No failure to exercise, and no delay in exercising, any rights
hereunder on the part of the holder hereof shall operate as a waiver of such
rights.
THIS W/C REVOLVING NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
------------------------------------------------------------------------
WITH, THE LAW OF THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT THE AGENT AND
- -----------------------------------------------------------------------------
THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
- -----------------------------------------------------------
IN WITNESS WHEREOF, the Borrower has caused this W/C Revolving Note to be
executed by its officer thereunto duly authorized.
U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.
By: U.S. Timberlands Services Company, L.L.C.,
its Managing Member
By:______________________________________________
Name:
Title:
2
<PAGE>
SCHEDULE
Date Loan Amount Type Interest Principal Date Principal
Disbursed of Loan of Loan Period Payment Paid
- --------- ------- ------- ------ ------- ------------
3
<PAGE>
EXHIBIT G
INITIAL TIMBER REPORT
<PAGE>
[LETTERHEAD OF MASON BRUCE & GIRARD Inc APPEARS HERE]
Mr. Mike Balok
Bank of America
555 California Street, 41st Floor
San Francisco, CA 94104
Fax (415)622-2514
Dear Mike:
We are enclosing information on timber pricing for the northeastern portion
of California, the area known as TVA-6. Enclosed you will find a copy of the
most recent report from the California State Board of Equalization, and in
addition you will find our summary of the past several years pricing movement
as well as a graph reflecting the tabular data.
When John Stephens called and asked about using the State Board of
Equalization materials as an index, I agreed that it would work fine in a long-
term situation. It only changes twice per year and historically hasn't made
dramatic movements. The data is, however, historic and reflects information
available to the state board staff for the 18 months prior to the date of
reporting. It therefore, does not usually reflect the immediate market
situation. In an up trending market, it is likely to be lower than the actual
prices, and in a down trending market, it is likely to be above the actual
prices, Specifically, the pricing is for young growth timber, and because of the
nature of the logs that move in the market, it reflects the trees sold at any
one time. Therefore, if the bulk of the data available to the staff was for poor
quality at any one time, it is likely the prices would be lower than appropriate
for high quality timber. However, with the foregoing caveats, it is probably the
best long-term trend indicator available from public data at this time.
Very truly yours,
/s/ Glen A. Zane
Glen A. Zane
GAZ:Imd
Attachments: State of California Board of Equalization reported prices for
July through December, 1997 Mason, Bruce & Girard, Inc.
tabulation of historic price data from SB reports Graphical
analysis of the tabular data.
c: John Stephens, Fax(541)347-5071
<PAGE>
State Board of Equalization
Timber Value Area 6
<TABLE>
<CAPTION>
PP SP WF DF IC LP MB&G Est.
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Apr-77 75 75 60 80 75 45
Jan-78 104 81 96 100 88 62
Jul-78 125 110 95 100 86 75
Jan-79 120 120 90 135 100 72
Jul-79 150 150 90 125 135 90
Jan-80 125 125 110 125 140 75
Jul-80 115 115 85 85 95 69
Jan-81 90 90 85 85 95 54
Jul-81 105 105 85 85 60 63
Jan-82 120 120 70 90 90 72
Jul-82 70 80 25 80 50 42
Jan-83 60 70 30 60 40 36
Jul-83 80 90 50 90 55 48
Jan-84 80 90 50 90 60 48
Jul-84 100 100 60 100 80 60
Jan-85 70 60 35 70 80 42
Jul-85 75 60 35 70 75 45
Jan-86 80 70 40 70 60 48
Jul-86 85 85 45 60 50 51
Jan-87 90 90 50 70 60 54
Jul-87 115 115 60 75 90 69
Jan-88 140 120 70 85 100 84
Jul-88 160 160 80 90 100 96
Jan-89 170 170 90 110 100 102
Jul-89 210 210 110 130 110 126
Jan-90 235 235 150 185 130 141
Jul-90 250 250 180 230 150 150
Jan-91 200 200 160 200 150 120
Jul-91 180 180 140 180 140 108
Jan-92 220 220 170 230 150 132
Jul-92 380 380 250 400 220 228
Jan-93 360 360 225 350 250 216
Jul-93 600 600 370 490 300 360
Jan-94 400 400 350 450 300 240
Jul-94 470 470 380 500 300 282
Jan-95 400 400 320 450 250 240
Jul-95 490 490 360 460 270 294
Jan-96 490 490 400 500 300 294
Jul-96 470 470 380 460 300 282
Jan-97 430 430 380 470 320 258
Jul-97 400 400 390 460 340 240
</TABLE>
<PAGE>
[LINE GRAPH PLOTTING STUMPAGE SALES APPEARS HERE]
<PAGE>
================================================================================
CALIFORNIA STATE BOARD OF EQUALIZATION
TIMBER VALUE AREAS
Prepared by: Tax Area Services-Geographic Information Centre
================================================================================
[MAP OF CALIFORNIA COUNTY BOUNDARIES APPEARS HERE]
<PAGE>
CALIFORNIA STATE BOARD OF EQUALIZATION
HARVEST VALUE SCHEDULES, EFFECTIVE JULY 1 THROUGH DECEMBER 31, 1997
NOT FINAL VALUES
TABLE 1, MISCELLANEOUS HARVEST VALUES - This table is applicable to all timber
value areas and shows the harvest values for special items such as Christmas
trees, fuelwood, chipwood, poles, posts, split products, small sawlogs, and cull
logs. Small sawlogs are logs of any species where the average net volume per
16-ft log for all sawlogs removed from a timber harvest operation during the
reporting quarter is less than 65 board feet, Scribner Short Log Scale. Cull
logs are to be reported in adjusted gross M board feet. For cull logs measured
in tons, use a conversion factor of 4 tons per gross MBF, Scribner scale. Except
for split products and small sawlogs, the items in this table are to be reported
in the column for other unit measure on the Timber Tax Harvest Report.
TABLE 2, SIZE-QUALITY RATING FOR OLD GROWTH - This table shows the log sizes
used to rate the listed species of old growth timber. The taxpayer determines
the appropriate size-quality code as 1, 2 or 3 based upon the average net volume
per 16' log. The average volume per log is for the reported quarterly-volume
within the harvest operation. It is calculated by dividing the net volume by
the actual number of short-log scaling segments. (An estimate of the number of
sealing segments may be made by dividing the total linear feet by 16.) Cull logs
are excluded from this determination. When size quality code determined from a
statistical sample such as a timber cruise, calculate the code by dividing the
total net volume of old growth on that species by the number of 16 foot old
growth logs for that species for the entire sale. This rating shall remain fixed
for the life of the timber operation.
TABLE 3, OLD GROWTH HARVEST VALUES - This table shows the harvest values for
such timber by species, size-quality if required, and timber value area. The
taxpayer must make the adjustments for the logging system and for small total
volume on the harvest operation and/or low average volume per acre on the
harvest operation and country location if the operation qualifies.
TABLE 4, YOUNG GROWTH HARVEST VALUES - This table shows the harvest values for
such timber by species and timber value area. The taxpayer must make the
adjustments for the logging system and for small total volume on the harvest
operation and/or low average volume per acre on the harvest operation and county
location if the operation qualifies.
TABLE 5, SALVAGE OLD GROWTH HARVEST VALUES - This table shows the harvest values
for such timber removed by salvage logging only. Table shows the harvest values
by species and timber value area. The taxpayer must make the adjustments for the
logging system and for small total volume on the harvest operation and county
location if the operation qualifies.
TABLE 6, SALVAGE YOUNG GROWTH HARVEST VALUES - This table shows the harvest
values for such timber removed by salvage logging only. The table shows the
harvest values by species and timber value area. The taxpayer must make the
adjustments for the logging system and for small total volume on the harvest
operation and county location if the operation qualifies.
5
<PAGE>
CALIFORNIA STATE BOARD OF EQUALIZATION
HARVEST VALUE SCHEDULES, EFFECTIVE JULY 1 THROUGH DECEMBER 31, 1997
NOT FINAL VALUES
- -------------------------------------------------------------------------------
TABLE 3 - OLD GROWTH TIMBER HARVEST VALUES
Tract or Logging [Logging Code 1]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
SPECIES SIZE TIMBER VALUE AREA
---------------------------------------------------------------------
SPECIES CODE CODE 1 2N 2S 3 4 5 6 7 8 9N 9S
============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ponderosa Pine PPD 1 * * * 660 680 660 700 650 675 650 *
----------------------------------------------------------------------------------------
2 600 500 450 550 600 680 620 550 675 650 275
----------------------------------------------------------------------------------------
3 * * * 450 600 470 550 450 450 475 *
- ------------------------------------------------------------------------------------------------------------
Sugar Pine SPO 1 * * * 650 680 660 700 650 675 650 *
------------------------------------------------------------------------------
2 600 600 450 650 600 580 620 550 675 650 275
------------------------------------------------------------------------------
3 * * * 450 600 470 550 450 450 475 *
- ------------------------------------------------------------------------------------------------------------
Fir and ???/??? FO 225 190 130 300 300 350 420 350 360 340 70
- ------------------------------------------------------------------------------------------------------------
Douglas-Fir DFO 1 700 * * 600 630 830 650 800 625 * *
------------------------------------------------------------------------------
2 575 400 380 600 630 640 560 500 485 340 70
------------------------------------------------------------------------------
3 400 * * 400 400 460 470 400 400 * *
- ------------------------------------------------------------------------------------------------------------
Incense- cedar ICO 300 270 300 300 310 380 350 350 315 65
- ------------------------------------------------------------------------------------------------------------
Conifers, misc CMO 100 125 125 200 200 190 200 210 180 200 40
- ------------------------------------------------------------------------------------------------------------
Redwood RD 1 850 * *
------------------------------------------------------------------------------
2 725 710 650
------------------------------------------------------------------------------
3 600 * *
- ------------------------------------------------------------------------------------------------------------
Port-Oxford-cedar PCD 3600 3000 3000
- ------------------------------------------------------------------------------------------------------------
Whitewoods WWD 190 180 130
- ------------------------------------------------------------------------------------------------------------
* This species is not rated for size in this Timber Value Area - do not enter a Size Code.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
ADJUSTMENTS
-----------
Logging System:
Deduct $10 for volumes which were high feed logged [Logging Code 2]
Deduct $30 for volumes which were short-span skyline logged [Logging Code
3]
Deduct $50 for volumes which were long-span skyline logged [Logging Code 4]
Deduct $140 for volumes which were helicopter logged [Logging Code 5]
County:
Deduct $50 if harvesting was located in any of the following counties:
Marin, Montaray, San Mateo, Santa Clara, or Santa ???
Small Total Volume:
Deduct $50 if total volume harvested this quarter is less than 300 MBF
Deduct $100 if total volume harvested this quarter is less than 100 MBF
Deduct $150 if total volume harvested this quarter is less than 25 MBF
Small Volume per Acre:
Deduct $25 if the average volume harvested this quarter is under 5 MBF per
acre
$1 PER MBF IS THE MINIMUM HARVEST VALUE ALLOWABLE AFTER ADJUSTMENT
(SEE REVERSE SIDE FOR YOUNG GROWTH TIMBER HARVEST VALUES)
- --------------------------------------------------------------------------------
<PAGE>
HARVEST VALUE SCHEDULES, EFFECTIVE JULY 1 THROUGH DECEMBER 31, 1997
NOT FINAL VALUES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 4 - YOUNG GROWTH TIMBER HARVEST VALUES
Tractor Logging (Logging Code 1)
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIES TIMBER VALUE AREA
---------------------------------------------------------------------------------------
SPECIES CODE 1 2N 2S 3 4 5 6 7 8 9N 9S
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ponderosa Pine PPY 310 260 240 330 360 350 400 410 400 390 180
- ------------------------------------------------------------------------------------------------------------------------------------
Sugar Pine SPY 310 260 240 330 360 350 400 410 400 390 180
- ------------------------------------------------------------------------------------------------------------------------------------
Fir and Ha???? FY 325 180 130 260 260 250 390 280 290 260 60
- ------------------------------------------------------------------------------------------------------------------------------------
Douglas-??? DFY 350 310 280 370 380 340 460 380 360 280 60
- ------------------------------------------------------------------------------------------------------------------------------------
Incense-cedar ICY 300 270 280 280 260 340 290 290 220 60
- ------------------------------------------------------------------------------------------------------------------------------------
Conifers, misc CMY 100 125 126 190 200 190 200 210 160 180 40
- ------------------------------------------------------------------------------------------------------------------------------------
Redwood RY 525 630 510 440
- ------------------------------------------------------------------------------------------------------------------------------------
Port-O???-cedar PCY 300 260 250
- ------------------------------------------------------------------------------------------------------------------------------------
Whitewoods WWY 190 180 130
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ADJUSTMENTS
-----------
Logging System:
Deduct $10 for volumes which were high-lead logged (Logging Code 2)
Deduct $30 for volumes which were short-open skyline logged (Logging Code
3)
Deduct $60 for volumes which were long-apart skyline logged (Logging Code
4)
Deduct $140 for volumes which were helicopter logged (Logging Code 5)
County:
Deduct $60 if harvesting was located in any of the following counties:
Marin, Monterey, San Maloo, Santa Clara, or Santa Crux
Small Total Volume:
Deduct $50 if total volume harvested this quarter is less than 900 MBF
Deduct $100 if total volume harvested this quarter is less than 100 MBF
Deduct $160 if total volume harvested this quarter is less than 26 MBF
Small Volume per Acre:
Deduct $25 if the average volume harvested this quarter is under 5 MBF per
acre
$1 PER MBF IS THE MINIMUM HARVEST VALUE ALLOWABLE AFTER ADJUSTMENT
(SEE REVERSE SIDE FOR OLD GROWTH TIMBER HARVEST VALUES)
- --------------------------------------------------------------------------------
<PAGE>
QUARTERLY TIMBER REPORT (SECTION 7.2(F))
FOR QUARTER ENDING 9/30/97
ASSET VALUE/FUNDED DEBT
VALUATION USING CALIFORNIA STATE BOARD OF EQUALIZATION TVA-5
PRICES EFFECTIVE 7/1/97 TO 12/31/97
DATE OF VALUATION; 9/30/97
<TABLE>
<CAPTION>
===========================================================================
VALUE LOG/HAUL NET VALUE
KLAMATH MBF F/MBF F/MBF $/MBF ($/MM)
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
POND PINE 738,863 400 140 240 192.38
DOUG FIR. 268,288 450 140 320 83.64
OTHER 978,255 380 140 250 244.07
TOTAL 1,974,387 403 679.07
OCHOCO
----------
POND less than 16" 78,850 400 112 288 22.18
POND greater than
or equal to 16" 133,140 700 212 548 78.29
DF 43,747 460 212 348 86.43
OTHER 17,037 390 712 278 1.74
TOTAL 270,489 557 120.41
TOTAL ALL 2,245,276 421 839.49
WHOLESALE @ 70% 447.84
===========================================================================
</TABLE>
<PAGE>
QUARTERLY TIMBER REPORT (SECTION 7.2(F))
FOR QUARTER ENDING 9/30/97
<TABLE>
<CAPTION>
==============================================================================================================
1/1/97 97.1 97.1 97.1 97.1 97.1 97.1 3/31/97
KLAMATH BEG INV HARVEST STUMPAGE STUMPAGE LAND SALES GROWTH ACQUISITION CLOSING
-------------
MBF MBF SOLD REMOVED MBF MBF MBF MBF
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PONDEROSA 732,700 4,667 0 0 0 9,098 0 731,911
DOUGLAS FIR 265,900 4,974 0 0 0 3,774 0 165,200
LODGEPOLE 452,400 5,216 11,045 0 0 5,577 0 451,780
WHITE FIR 424,100 8,100 0 0 0 5,125 0 423,216
OTHER 102,900 1,083 0 0 0 1,273 0 103,060
TOTAL 1,078,100 22,249 11,045 0 0 24,447 0 1,950,195
==============================================================================================================
<CAPTION>
==============================================================================================================
4/1/97 97.2 97.2 97.2 97.2 97.2 97.2 6/30/97
HLAMATH BEG INV HARVEST STUMPAGE STUMPAGE LAND SALES GROWTH ACQUISITION CLOSING
-------------
MBF MBF SOLD REMOVED MBF MBF MBF MBF
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PONDEROSA 738,911 5,270 1,595 559 0 9,139 0 740,248
DOUGLAS FIR 265,290 8,342 4,493 542 0 3,700 0 259,710
LODGEPOLE 461,780 1,073 0 0 0 5,634 0 455,320
WHITE FIR 427,250 8,088 1,898 105 0 4,170 0 418,500
OTHER 10?,050 1,000 256 58 0 1,276 0 103,068
TOTAL 1,980,156 33,782 9,443 3,103 0 24,427 0 1,578,610
==============================================================================================================
<CAPTION>
==============================================================================================================
7/1/97 97.3 97.3 97.3 97.3 97.3 97.3 9/30/97
HLAMATH BEG INV HARVEST STUMPAGE STUMPAGE LAND SALES GROWTH ACQUISITION CLOSING
-------------
MBF MBF SOLD REMOVED MBF MBF MBF MBF
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PONDEROSA 740,248 8,705 0 613 0 9,134 0 738,653
DOUGLAS FIR 259,216 3,921 0 214 0 3,166 0 250,285
LODGEPOLE 456,310 4,447 0 0 0 5,648 0 457,572
WHITE FIR 410,500 8,547 0 443 0 5,120 0 415,328
OTHER 103,256 1,117 0 21 0 1,277 0 103,405
TOTAL 1,978,650 27,038 0 1,501 0 24,375 0 1,574,388
OCHOCO
-------------
PPINE less than 16" 0 0 0 0 0 950 75,000 76,900
PPINE greater than
or equals to 16" 0 0 0 17,847 0 1,644 138,100 133,140
DOUGLAS FIR 0 0 0 1,698 0 540 44,300 43,741
OTHER 0 0 0 1,404 0 211 17,510 17,057
TOTAL 0 0 0 12,547 0 3,144 276,100 170,869
TOTAL ALL 1,978,650 27,038 17,036 17,847 0 27,719 276,100 2,245,771
==============================================================================================================
</TABLE>
<PAGE>
QUARTERLY TIMBER REPORT (SECTION 7.2(F)
FOR QUARTERLY ENDING 9/30/97
<TABLE>
<CAPTION>
1997 STUMPAGE SALES
MBF
========================================================================================================================
KOLAMATH FOX LAKE PINEHURST LONG PH TOM CK CHEMULT TOTAL
<S> <C> <C> <C> <C> <C> <C>
LPP 0 0 0 0 11,045 11,045
DF 1,646 1,112 1,123 912 4,693
PP/SP 351 575 1,344 726 2,696
WF 329 479 1,032 58 1,898
INC 90 17 42 101 256
TOTAL 2,383 2,282 3,541 1,197 11,045 20,488
OCHOCO OCHOC 1 OCHOC 2 TOTAL
------------------------------------------------------------------------------------------------------------------------
PP less than 16 0 0 0
PP greater than or equal 16 16,384 2,280 18,644
DF 2,442 660 3,102
OTHER 2,217 0 2,127
TOTAL 21,033 2,940 23,973
========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
UMBF
=============================================================================================================
PURCHASER SALE DF PP/SP LPP WF OTHER AVG
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CROWN CHEMULT 0 0 385 0 0 385
USF1 FOXLK 444 336 0 349 465 416
BOISE PINEHURST 606 485 0 335 315 453
MADISON JMK LONG PR 361 361 0 315 410 155
USF1 TOM CK 410 200 0 337 390 390
CROWN OCHOCO 1 370 827 0 340 0 868
OCHOCO LBR OCHOCO 2 370 646 0 340 0 584
=============================================================================================================
</TABLE>
<PAGE>
QUARTERLY TIMBER REPORT (SECTION 7.2(F)
FOR QUARTER ENDING 9/30/97
97.3 CUSTOMER SUMMARY
<TABLE>
<CAPTION>
- -------------------------------------------------------
SALES COSTS NET
CUSTOMER MBF HMBF HMBF HMBF
- -------------------------------------------------------
<S> <C> <C> <C> <C>
COLLINS PROD 7,882 477 749 278
OCHOCO CROWN 6,367 515 0 610
BOISE CASCADE 4,525 473 137 356
BUARILL 3,318 427 189 276
USF1 2,431 513 133 380
OCHOCO OCHOCO 2,188 583 0 583
COLLINS HB 1,119 199 144 47
HUFF & WRIGHT ????? 414 346 260
LONG PRAIRIE 1,601 350 0 360
CENTRAL POINT 1,181 441 153 280
1P 1,138 45 26 21
CROWN PACIFIC 1,180 660 191 477
THOMAS 1,084 518 145 365
WEYCO 484 60 0 60
P&M CEDAR 272 686 205 480
TIMER PROD 83 480 181 319
FREMONT 55 437 145 182
BIG VALLEY 47 400 155 245
17,023 462 140 ???
- -------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT H
ESCROW AGREEMENT
This ESCROW AGREEMENT ("Agreement") dated as of ______________, ____
---------
is entered into by and between U.S. TIMBERLANDS KLAMATH FALLS, L.L.C., a
Delaware limited liability company (the "Company"), and
-------
_________________________ (the "Escrow Agent").
------------
RECITALS
--------
A. The Company has entered into (i) the Credit Agreement dated as of
November 19, 1997 (as the same may be extended, renewed, amended or restated
from time to time, the "Credit Agreement"), with the several financial
----------------
institutions from time to time party thereto (the "Banks") and Bank of America
-----
National Trust and Savings Association, as Issuing Bank, as Swingline Bank and
as agent for the Banks (in such last capacity, the "Agent"), and (ii) the
-----
Indenture dated as of November 19, 1997 among the Company, U.S. Timberlands
Finance Corp., and State Street Bank & Trust Company, as trustee (together with
its successors and assigns, the "Trustee") (the "Indenture"), entered into for
------- ---------
the benefit of the holders from time to time of the notes issued pursuant
thereto (the "Senior Noteholders"). The Escrow Agent acknowledges receipt of
------------------
copies of each of the Credit Agreement and the Indenture provided to it by the
Company. Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to such terms in the Credit Agreement.
B. Subsection 8.2(b) of the Credit Agreement and Section 4.16 of the
Indenture permit the Company and its Subsidiaries to sell assets or, in the case
of subsection 8.2(b) of the Credit Agreement, suffer Events of Loss under the
circumstances described therein so long as certain proceeds thereof are applied
to the purchase of productive assets in a permitted business or to purchase,
repay or cash collateralize Senior Debt. Any Excess Asset Sales Proceeds that
have not been applied to purchase productive assets in a permitted business or
distributed to the holders of Senior Debt for the purchase, repayment or cash
collateralization of such Senior Debt are required by the Credit Agreement to be
placed immediately upon receipt thereof in an escrow or other similar account
for application in accordance with such subsection 8.2(b).
C. Section 8.20 of the Credit Agreement and Section 4.17 of the
Indenture permit the Company and its Subsidiaries to permit Timber Harvest in
excess of the limitations provided for in such Section so long as certain
proceeds thereof are applied to purchase productive assets in a permitted
business or to purchase, repay or cash collateralize Senior Debt. Any Excess
Timber Harvest Proceeds that have not been applied to purchase productive assets
in a permitted business or distributed to the holders of Senior Debt for the
purchase, repayment or cash collateralization of such Senior Debt are required
by the Credit Agreement to be placed
1
<PAGE>
immediately upon receipt thereof in an escrow or other similar account for
application in accordance with such Section 8.20.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the Company and the Escrow Agent hereby agree as
follows:
1. Escrow Account.
--------------
(a) Establishment of Escrow Account and Delivery of Funds. The
-----------------------------------------------------
Escrow Agent has established a special and irrevocable escrow account designated
the "U.S. Timberlands Escrow Account" (together with all subaccounts thereunder
and any successor account(s) that may be established from time to time with the
Escrow Agent in replacement thereof, the "Escrow Account"). The Escrow Agent
--------------
shall keep the funds held in the Escrow Account separate and apart from all
other funds and money held by it and shall hold the Escrow Account for the
account and benefit of the persons as hereinafter set forth. The Company may
make deposits from time to time to the Escrow Account in the amount of (i) asset
sales proceeds that the Company intends to apply in the manner contemplated by
subsection 8.2(b) of the Credit Agreement and Section 4.16 of the Indenture and
(ii) timber harvest proceeds that the Company intends to apply in the manner
contemplated by Section 8.20 of the Credit Agreement and Section 4.17 of the
Indenture. Once deposited, such funds shall be maintained and applied by the
Escrow Agent in accordance herewith. The Company agrees that upon the deposit
of funds into the Escrow Account by or at the direction of the Company, such
deposit shall become (except as expressly provided in Section 1(b) hereof)
irrevocable and the Company shall have no right to withdraw amounts contained
therein or interest or other income accrued thereon except as provided in
Section 1(b) hereof. By the acceptance of the benefits of this Agreement, each
of the Agent, the Banks, the Trustee, and the Senior Noteholders agree that the
deposit of funds into the Escrow Account shall not create a Lien for purposes of
the Credit Agreement or the Indenture. The Escrow Agent shall separately
account for each deposit made to the Escrow Account. Each deposit to the Escrow
Account shall be maintained by the Escrow Agent as a subaccount thereunder,
numbered sequentially in chronological order.
(b) Application of Funds.
--------------------
(i) Subject to prior distribution in accordance with clause
(iii) below, the Escrow Agent shall release funds held in the Escrow Account,
including the interest and other income accrued thereon, to or at the direction
of Company if and only if the Company shall have delivered to the Escrow Agent,
and the Escrow Agent has in turn provided a copy thereof to the Agent and the
Trustee no later than five Business Days prior to the proposed date of such
release, a certificate of a Responsible Officer substantially in the form of
Exhibit A hereto. The Escrow Agent agrees to provide such notice to the Trustee
- ---------
and the Agent by facsimile promptly after receipt thereof from the Company, but
in any event on or before the next business day after receipt by the Escrow
Agent. In releasing funds from the Escrow Account, the Escrow Agent shall
release deposits held in the Escrow Account pursuant to this clause (i) from the
subaccounts thereunder in the order in which such subaccounts were established.
For example,
2
<PAGE>
if the Company has delivered a certificate sufficient under this clause to
authorize the Escrow Agent to release $100 from the Escrow Account, and if the
Escrow Agent holds three subaccounts under the Escrow Account, number 1
(established on January 1 with $20), number 2 (established on February 1 with
$60), and number 3 (established on March 1 with $50), the Escrow Agent shall
satisfy such release of funds by first emptying subaccount number 1, second
emptying subaccount number 2, and third releasing an amount from subaccount
number 3 sufficient to bring the total release of funds (after giving effect to
interest released from subaccounts 1 and 2) to $100.
(ii) Subject to prior distribution by the Escrow Agent in
accordance with clause (i) above, the Escrow Agent shall hold the funds in each
subaccount under the Escrow Account and disburse such funds in accordance with
clause (iii) below upon the date identified to the Escrow Agent in writing by a
Responsible Officer as the "Disbursement Date" for such deposit, which date
shall be not later than the 300th day after the date of the deposit of such
funds with the Escrow Agent.
(iii) Subject to clause (iv) below, if on the Disbursement Date
with respect to any subaccount under the Escrow Account, any funds remain in
such subaccount, the Escrow Agent shall promptly distribute such funds to the
Agent or the Trustee, or to both, in the amounts and as directed by the Company
in writing to the Escrow Agent. The Escrow Agent shall be entitled to rely
conclusively upon the certificates referred to in this Section.
(iv) The Company shall have the right, when directing
disbursements of funds from the Escrow Account pursuant to clause (i) or (iii)
above, to direct that any amounts representing interest or other income on
amounts deposited arising from investment thereof, as contemplated by Section
2, be paid to the Company, or as it may otherwise direct.
2. Investments.
-----------
(a) The Escrow Agent shall have no obligation to make any
investment or reinvestment of any moneys held in the Escrow Account at any time
except as expressly provided in this Agreement.
(b) Any amounts held by the Escrow Agent shall be invested by
the Escrow Agent from time to time in Cash Equivalents as directed in writing by
the Company, and the Escrow Agent agrees to comply with the Company's written
request to invest in any Cash Equivalents (collectively, "Permitted
---------
Investments"); provided that all such investments shall mature in 180 days or
- ----------- --------
less after the date of investment. The Escrow Agent may sell any Permitted
Investment (without regard to maturity date) whenever necessary to make any
transfer required by Section 1.
(c) The Escrow Agent shall hold, invest and apply any income
realized as a result of any investment pursuant to this Section 2 as part of the
Escrow Account and within the same subaccount to which such interest is
attributable.
3
<PAGE>
(d) With respect to the investment of funds on deposit in the
Escrow Account pursuant to this Section 2 and to the extent the Company is
permitted to direct such investment hereunder, the Escrow Agent shall be
entitled to rely upon the written instructions of [that] [those] individual[s]
whose signatures appear in the spaces provided below, or such other
individual[s] as may hereafter be designated in writing by the Company:
________________________
[name]
[______________________]
[name]
3. Terms and Conditions; Representation of Escrow Agent. To the
----------------------------------------------------
extent not inconsistent with this Agreement, the Company agrees to be bound by
the Escrow Agent's Standard Terms and Conditions attached hereto as Exhibit D
---------
(as the same may from time to time be amended, modified or supplemented, the
"Standard Terms and Conditions") and they are hereby incorporated by reference
-----------------------------
into and form a part of this Agreement with the same effect as if they were set
forth in full herein. The Escrow Agent represents to the Company that it is not
an Affiliate of the Trustee, the Agent, or any Bank as identified to it in
writing by the Company.
4. Compensation. The Escrow Agent shall be entitled to compensation
------------
from the Company for the maintenance of, and investment of funds contained in,
the Escrow Account in accordance with Schedule 2 attached hereto. Such
compensation shall be payable as provided in Schedule 2. The fees of and the
costs incurred by the Escrow Agent shall not be a charge on and in no event
shall be deducted from the Escrow Account but shall be an additional obligation
of the Company which shall survive the termination of this Agreement.
5. Reports. The Escrow Agent shall submit to the Agent and Trustee
-------
a description of each deposit into the Escrow Account promptly after such
deposit occurs. In addition, upon request by the Company, the Agent, or the
Trustee, the Escrow Agent shall provide to the Company, the Agent, and the
Trustee a report covering all funds it shall have received and all payments it
shall have made or caused to be made hereunder during the period specified in
such request. Each report shall also list each deposit into the Escrow Account
and the investment income related thereto, all Permitted Investments and the
amount of money accounted for in each subaccount of the Escrow Account on the
date preceding the date of such report.
6. Notices, Etc. Any notice or other communication herein required
------------
or permitted to be given shall be in writing and may be delivered in person,
with receipt acknowledged, or sent by telex, telecopy or by United States mail,
registered or certified, return receipt requested, postage prepaid and addressed
as set forth on the signature pages to this Agreement in the case of the parties
hereto, and as set forth on Schedule I in the case of the
----------
4
<PAGE>
Agent and the Trustee, or at such other address as may be substituted by notice
given as herein provided. The giving of any notice required hereunder may be
waived in writing by the party entitled to receive such notice. All such notices
and communications shall be effective upon receipt. Failure or delay in
delivering copies of any notice, demand, request, consent, approval, declaration
or other communication to the persons designated above to receive copies shall
in no way adversely affect the effectiveness of such notice, demand, request,
consent, approval, declaration or other communication.
7. Termination. The Company may terminate this Agreement at any
-----------
time that the balance in each Escrow Account is zero upon three Business Days
prior written notice to the Escrow Agent with a copy to the Agent.
8. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the Company and the Escrow Agent and their respective
successors and assigns, except that the Company shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Escrow Agent, the Agent and the Trustee.
9. Governing Law. This Agreement shall be governed by, and
-------------
construed and enforced in accordance with, the laws of the State of New York and
any applicable laws of the United States of America.
10. Entire Agreement. This Agreement constitutes and contains the
----------------
entire agreement among the parties with respect to the subject matter hereof and
supersedes any and all prior agreements, negotiations, correspondence,
understandings and communications among the parties with respect to the subject
matter hereof, whether written or oral, respecting the subject matter hereof.
11. Interpretation. Any reference to a "Section" shall refer to the
--------------
relevant Section to this Agreement, unless specifically indicated to the
contrary and the words "herein," "hereof" and "hereunder" and other words of
similar import shall refer to this Agreement as a whole, as the same may from
time to time be amended, amended and restated, modified or supplemented, and not
to any particular section, subsection or clause contained in this Agreement.
12. Amendments; Waivers. No amendment, modification, discharge or
-------------------
waiver of, or consent to any departure by the Company from, any provision of
this Agreement shall be effective unless the same shall be in writing and signed
by the Escrow Agent, the Trustee, and the Agent and then such waiver shall be
effective only in the specific instance and for the specific purpose for which
given.
13. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such a manner as to be valid, legal and
enforceable under the applicable law of any jurisdiction. Without limiting the
generality of the foregoing sentence, in case any provision of this Agreement
shall be invalid, illegal or unenforceable under the applicable law of any
5
<PAGE>
jurisdiction, the validity, legality and enforceability of the remaining
provisions, or of such provision in any other jurisdiction, shall not in any way
be affected or impaired thereby.
14. Headings. Section headings in this Agreement are included herein
--------
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
15. No Third Parties Benefited. This Agreement is made and entered
--------------------------
into for the sole protection and legal benefit of the Company, the Escrow Agent,
the Agent, the Trustee, the Senior Noteholders and the Banks, and each of their
permitted successors and assigns, and no other person shall be a direct or
indirect legal beneficiary of, or have any direct or indirect cause of action or
claim in connection with this Agreement. Except as set forth herein, the Escrow
Agent shall have no obligation to any person not a party to this Agreement.
16. Counterparts. This Agreement and any amendments, waivers,
------------
consents or supplements hereto may be executed in any number of counterparts,
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.,
By: U.S. Timberlands Services Company, L.L.C.,
its Managing Member
By:___________________________________________
Title:________________________________________
Notice to be sent to:
___________________________________________________
as Escrow Agent
By:________________________________________________
Title:_____________________________________________
Notice to be sent to:
Attention: ________________________________________
Facsimile:____________________________________
Telephone:____________________________________
7
<PAGE>
Schedule 1 to
Escrow Agreement
AGENT ADDRESS FOR NOTICES
-------------------------
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
- ------------------------------------------------------
as Agent
Bank of America National Trust
and Savings Association
Paper & Forest Products #9973
555 California Street - 41st Floor
San Francisco, CA 94104
Attention: M. J. Balok, Managing Director
Telephone: (415) 622-2018
Facsimile: (415) 622-2385
with a copy to:
- --------------
Bank of America National Trust and Savings Association
Agency Administration Services #5596
1850 Gateway Blvd.
Concord, CA 94520- 281
Attention: Clayton Choo
Telephone: (510) 675-8453
Facsimile: (510) 675-8500
TRUSTEE ADDRESS FOR NOTICES
---------------------------
8
<PAGE>
Exhibit A to Escrow Agreement
OFFICER'S CERTIFICATE
________["Escrow Agent"]_________
_________________________________
_________________________________
_________________________________
Re: Escrow Agreement between you and U.S. Timberlands Klamath Falls;
L.L.C. dated as of ______, ___ (the "Escrow Agreement")
Ladies & Gentlemen:
Reference is made to the Escrow Agreement, capitalized terms not otherwise
defined herein shall have the meanings given in the Escrow Agreement. [The
Company hereby requests pursuant to clause (i) of subsection 1(b) of the Escrow
Agreement that the Escrow Agent disburse, to the Person(s) identified on
Schedule 1 attached hereto, in accordance with the wire transfer information set
forth on that Schedule, the amounts set forth opposite such Person's name on
that Schedule.] or [The Company hereby requests pursuant to clause (iii) of
subsection 1(b) of the Escrow Agreement that the Escrow Agent disburse, to the
Agent and/or the Trustee only, in accordance with the wire transfer information
set forth on that Schedule, the amounts set forth opposite the such Person's
name on that Schedule.]
The undersigned hereby certifies for the benefit of the Escrow Agent, the
Agent, the Banks, and the Senior Noteholders that (1) [he/she] is a Responsible
Officer of the Company and (2) the application of the funds the disbursement of
which is requested hereby complies in all respects with the Escrow Agreement,
subsection 8.2(b) and Section 8.20 of the Credit Agreement, as applicable, and
Sections 4.16 and 4.17 of the Indenture, as applicable.
Executed this _____ day of ____, _____
______________________
[Title] of
U.S. Timberlands Services Company, L.L.C.,
as Managing Member of
U.S. Timberlands Klamath Falls, L.L.C.
<PAGE>
EXECUTION COPY
================================================================================
U.S. Timberlands Klamath Falls, L.L.C.
U.S. Timberlands Finance Corp.
_______________
$225,000,000
9 5/8% SENIOR NOTES DUE 2007
_____________
INDENTURE
Dated as of November 19, 1997
_____________
State Street Bank and Trust Company
Trustee
================================================================================
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
- --------------- -----------------
<S> <C>
310(a)(1)......................................... 7.10
(a)(2)...................................... 7.10
(a)(3)...................................... N.A.
(a)(4)...................................... N.A.
(a)(5)...................................... 7.10
(b)......................................... 7.8; 7.10
(c)......................................... N.A.
311(a)............................................ 7.11
(b)......................................... 7.11
(c)......................................... N.A.
312(a)............................................ 2.5
(b)......................................... 11.3
(c)......................................... 11.3
313(a)............................................ 7.6
(b)(1)...................................... N.A.
(b)(2)...................................... 7.6
(c)......................................... 7.6
(d)......................................... 7.6
314(a)............................................ 4.3; 4.4
(b)......................................... N.A.
(c)(1)...................................... 11.4
(c)(2)...................................... 11.4
(c)(3)...................................... N.A.
(d)......................................... N.A.
(e)......................................... 11.5
(f)......................................... N.A.
315(a)............................................ 7.1(2)
(b)......................................... 7.5
(c)......................................... 7.1(1)
(d)......................................... 7.1(3)
(e)......................................... 6.11
316(a)(last sentence)............................. 2.10
(a)(1)(A)................................... 6.5
(a)(1)(B)................................... 6.4
(a)(2)...................................... N.A.
(b)......................................... 6.7
(c)......................................... 9.4
317(a)(1)......................................... 6.8
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
(a)(2)...................................... 6.9
(b)......................................... 2.3
318(a)............................................ 11.1
(b)......................................... N.A.
(c)......................................... 11.1
</TABLE>
______________
N.A. means not applicable
*This Cross-Reference Table is not part of the Indenture.
-ii-
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY
REFERENCE
<TABLE>
<S> <C>
Section 1.1 Definitions............................................... 1
Section 1.2 Other Definitions......................................... 22
Section 1.3 Incorporation by Reference of Trust Indenture Act......... 23
Section 1.4 Rules of Construction..................................... 24
ARTICLE 2
THE NOTES
Section 2.1 Form and Dating.......................................... 24
Section 2.2 Execution and Authentication............................. 25
Section 2.3 Registrar and Paying Agent............................... 25
Section 2.4 Paying Agent to Hold Money in Trust...................... 26
Section 2.5 Holder Lists............................................. 26
Section 2.6 Transfer and Exchange.................................... 26
Section 2.7 Replacement Notes........................................ 29
Section 2.8 Outstanding Notes........................................ 30
Section 2.9 Treasury Notes........................................... 30
Section 2.10 Temporary Notes.......................................... 30
Section 2.11 Cancellation............................................. 31
Section 2.12 Defaulted Interest....................................... 31
ARTICLE 3
REDEMPTION AND OFFERS TO PURCHASE
Section 3.1 Notice to Trustee........................................ 31
Section 3.2 Selection of Notes to Be Redeemed........................ 32
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
Section 3.3 Notice of Redemption..................................... 32
Section 3.4 Effect of Notice of Redemption........................... 33
Section 3.5 Deposit of Redemption Price.............................. 33
Section 3.6 Notes Redeemed in Part................................... 34
Section 3.7 Optional Redemption...................................... 34
Section 3.8 Mandatory Redemption..................................... 34
Section 3.9 Offer to Purchase by Application of Excess
Proceeds or Excess Harvest Proceeds..................... 35
ARTICLE 4
COVENANTS
Section 4.1 Payment of Notes......................................... 37
Section 4.2 Maintenance of Office or Agency.......................... 37
Section 4.3 Reports.................................................. 38
Section 4.4 Compliance Certificate................................... 38
Section 4.5 Taxes.................................................... 39
Section 4.6 Stay, Extension and Usury Laws........................... 39
Section 4.7 Company and Corporate Existence.......................... 39
Section 4.8 Limitation on Additional Indebtedness.................... 40
Section 4.9 Limitation on Restricted Payments........................ 40
Section 4.10 Limitation on Liens...................................... 42
Section 4.11 Limitation on Transactions with Affiliates............... 42
Section 4.12 Limitation on Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries........................ 43
Section 4.13 Limitation on Sale and Leaseback Transactions............ 43
Section 4.14 Limitation on Finance Corp............................... 44
Section 4.15 Line of Business......................................... 44
Section 4.16 Asset Sales.............................................. 44
Section 4.17 Limitation on Harvesting................................. 46
Section 4.18 Change of Control........................................ 46
Section 4.19 Limitation on Non-Guarantor Restricted Subsidiaries...... 47
ARTICLE 5
SUCCESSORS
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Section 5.1 Merger, Consolidation or Sale of Assets................... 48
Section 5.2 Successor Person Substituted.............................. 49
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.1 Events of Default........................................ 50
Section 6.2 Acceleration............................................. 52
Section 6.3 Other Remedies........................................... 52
Section 6.4 Waiver of Past Defaults.................................. 52
Section 6.5 Control by Majority...................................... 53
Section 6.6 Limitation on Suits...................................... 53
Section 6.7 Rights of Holders to Receive Payment..................... 53
Section 6.8 Collection Suit by Trustee............................... 54
Section 6.9 Trustee May File Proofs of Claim......................... 54
Section 6.10 Priorities............................................... 54
Section 6.11 Undertaking for Costs.................................... 55
ARTICLE 7
TRUSTEE
Section 7.1 Duties of Trustee........................................ 55
Section 7.2 Rights of Trustee........................................ 56
Section 7.3 Individual Rights of Trustee............................. 57
Section 7.4 Trustee's Disclaimer..................................... 57
Section 7.5 Notice of Defaults....................................... 57
Section 7.6 Reports by Trustee to Holders............................ 58
Section 7.7 Compensation and Indemnity............................... 58
Section 7.8 Replacement of Trustee................................... 59
Section 7.9 Successor Trustee by Merger, etc......................... 60
Section 7.10 Eligibility, Disqualification............................ 60
Section 7.11 Preferential Collection of Claims Against Issuers........ 60
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Section 8.1 Option to Effect Legal Defeasance or Covenant
Defeasance............................................... 60
Section 8.2 Legal Defeasance and Discharge........................... 61
Section 8.3 Covenant Defeasance...................................... 61
Section 8.4 Conditions to Legal Defeasance or Covenant Defeasance.... 62
Section 8.5 Deposited Money and Government Securities to be Held in
Trust, Other Miscellaneous Provisions.................... 63
Section 8.6 Repayment to Issuers..................................... 63
Section 8.7 Reinstatement............................................ 64
Section 8.8 Discharge of Liability on Securities; Defeasance......... 64
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.1 Without Consent of Holders............................... 65
Section 9.2 With Consent of Holders.................................. 66
Section 9.3 Compliance with Trust Indenture Act...................... 67
Section 9.4 Revocation and Effect of Consents........................ 67
Section 9.5 Notation on or Exchange of Notes......................... 67
Section 9.6 Trustee to Sign Amendments, etc.......................... 68
ARTICLE 10
SUBSIDIARY GUARANTEE OF NOTES
Section 10.1 Unconditional Guarantee.................................. 68
Section 10.2 Subsidiary Guarantors May Consolidate, etc., on
Certain Terms............................................ 69
Section 10.3 Addition of Subsidiary Guarantors........................ 70
Section 10.4 Release of a Subsidiary Guarantor........................ 70
Section 10.5 Limitation of Subsidiary Guarantor's Liability........... 71
Section 10.6 Contribution............................................. 71
Section 10.7 Severability............................................. 71
</TABLE>
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<TABLE>
<S> <C>
ARTICLE 11
MISCELLANEOUS
Section 11.1 Trust Indenture Act Controls............................. 72
Section 11.2 Notices.................................................. 72
Section 11.3 Communication by Holders with Other Holders.............. 73
Section 11.4 Certificate and Opinion as to Conditions Precedent....... 73
Section 11.5 Statements Required in Certificate or Opinion............ 74
Section 11.6 Form of Documents Delivered to Trustee................... 74
Section 11.7 Rules by Trustee and Agents.............................. 75
Section 11.8 Legal Holidays........................................... 75
Section 11.9 No Recourse Against Others............................... 75
Section 11.10 Duplicate Originals...................................... 76
Section 11.11 Governing Law............................................ 76
Section 11.12 No Adverse Interpretation of Other Agreements............ 76
Section 11.13 Successors............................................... 76
Section 11.14 Benefits of Indenture.................................... 76
Section 11.15 Severability............................................. 76
Section 11.16 Counterpart Originals.................................... 76
Section 11.17 Table of Contents, Headings, etc......................... 77
</TABLE>
-vii-
<PAGE>
INDENTURE, dated as of November 19, 1997, among U.S. Timberlands Klamath
Falls, L.L.C., a Delaware limited liability company (the "Company"), U.S.
Timberlands Finance Corp., a Delaware corporation ("Finance Corp." and, together
with the Company, the "Issuers"), and State Street Bank and Trust Company, as
trustee ("Trustee").
The Issuers and the Trustee agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders of the 9 5/8% Senior Notes
due 2007 (the "Notes") of the Issuers, as joint and several obligors.
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.1 Definitions.
"Acquired Indebtedness" means, with respect to any specified Person,
(a) Indebtedness of any other Person existing at the time such other Person
merged with or into or became a Subsidiary of such specified Person, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Subsidiary of such specified Person
and (b) Indebtedness encumbering any asset acquired by such specified Person.
"Acquisition Facility" means the loan facility of the Company provided
for in the Credit Agreement for the purpose of financing acquisitions.
"Acquisition Principal Amount" means $75.0 million.
"Adjusted Asset Sales Amount" means $50.0 million as increased by 10%
of the purchase price of Asset Acquisitions (other than like-kind exchanges)
subsequent to the Issue Date.
"Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean
the amount by which the fair value of the properties and assets of such
Subsidiary Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under its Subsidiary Guarantee, of such Subsidiary Guarantor at such
date.
"Affiliate" means, with respect to any specified Person, (a) any other
Person directly or indirectly controlling or controlled by, or under direct or
indirect common control with, such specified Person or (b) any other Person who
is a director or executive officer of (i) such specified Person or (ii) any
other Person described in the preceding clause (a). For purposes of this
definition, control shall mean the power to direct the management and policies,
whether through the ownership of voting securities, by contract or otherwise;
provided, that beneficial ownership of 10% or more
-1-
<PAGE>
of any class, or any series of any class, of Capital Stock of a Person, whether
or not Voting Stock, shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company, or shall be merged
with or into the Company or any Restricted Subsidiary of the Company, (b) the
acquisition by the Company or any Restricted Subsidiary of the Company of the
assets of any Person (other than a Restricted Subsidiary of the Company) which
constitute all or substantially all of the assets of such Person, (c) the
acquisition by the Company or any Restricted Subsidiary of the Company of
merchantable Timber or Timberlands outside the ordinary course of business, or
(d) the acquisition by the Company or any Restricted Subsidiary of the Company
of any division or line of business of any Person (other than a Restricted
Subsidiary of the Company).
"Attributable Debt" means, with respect to any Sale and Leaseback
Transaction not involving a Capital Lease, as of any date of determination, the
total obligation (discounted to present value at the rate of interest implicit
in the lease included in such transaction) of the lessee for rental payments
(other than amounts required to be paid on account of property taxes,
maintenance, repairs, insurance, assessments, utilities, operating and labor
costs and other items which do not constitute payments for property rights)
during the remaining portion of the term (including extensions which are at the
sole option of the lessor) of the lease included in such transaction (in the
case of any lease which is terminable by the lessee upon the payment of a
penalty, such rental obligation shall also include the amount of such penalty,
but no rent shall be considered as required to be paid under such lease
subsequent to the first date upon which it may be so terminated).
"Available Cash," as to any quarter means: (a) the sum of (i) all cash
and cash equivalents of the Company and any Subsidiary of the Company, treated
as a single consolidated entity (together the "Partnership Group"), on hand at
the end of such quarter, and (ii) all additional cash and cash equivalents of
the Partnership Group on hand on the date of determination of Available Cash
with respect to such quarter resulting from borrowings for working capital
purposes subsequent to the end of such quarter, less (b) the amount of any cash
reserves that is necessary or appropriate in the reasonable discretion of the
Manager to (i) provide for the proper conduct of the business of the Partnership
Group (including reserves for future capital expenditures and for anticipated
future credit needs of the Partnership Group) subsequent to such quarter, (ii)
comply with applicable law or any loan agreement, security agreement, mortgage,
debt instrument or other agreement or obligation to which any member of the
Partnership Group is a party or by which it is bound or its assets are subject
or (iii) provide funds for distributions under Sections 6.4 or 6.5 of the MLP
Partnership Agreement in respect of any one or more of the next four quarters;
provided, however, that the Manager may not establish cash reserves pursuant to
(iii) above if the effect of such reserves would be that the Master Partnership
is unable to distribute the Minimum Quarterly Distribution (as defined in the
MLP Partnership Agreement) on all Common Units (as defined in the
-2-
<PAGE>
MLP Partnership Agreement) with respect to such Quarter; provided, further, that
disbursements made by a member of the Partnership Group or cash reserves
established, increased or reduced after the end of such quarter but before the
date of determination of Available Cash with respect to such quarter shall be
deemed to have been made, established, increased or reduced, for purposes of
determining Available Cash, within such quarter if the Manager so determines;
provided, further, that Available Cash attributable to any Restricted Subsidiary
or the Company shall be excluded to the extent dividends or distributions of
such Available Cash by such Restricted Subsidiary are not at the date of
determination permitted by the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or other regulation.
"Bank Credit Facility" means the Acquisition Facility and the Working
Capital Facility.
"Board of Directors" means, as applicable, the Board of Directors of
the Manager, on behalf of the Company, or of Finance Corp., or any authorized
committee of either Board of Directors.
"Business" means the acquisition, ownership, management and harvesting
of Timber and activities reasonably related or incidental thereto.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) by such Person (as lessee or
guarantor or other surety) which would, in accordance with GAAP, be required to
be classified and accounted for as a capital lease on a balance sheet of such
Person.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, units representing interests, participations, rights in or other
equivalents (however designated) of such Person's capital stock, including, with
respect to partnerships, partnership interests (whether general or limited) and
any other interest or participation that confers upon a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
such partnership, and any rights (other than debt securities convertible into
capital stock), warrants or options exchangeable for or convertible into such
capital stock.
"Change of Control" means (a) any "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act), excluding Permitted
Holders or any Person of which one or more Permitted Holders beneficially own in
the aggregate at least a majority of the Voting Stock, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of more than 50% of the total voting power with respect
to the total Voting Stock of the Master Partnership or the Company, (b) the
sale, lease, conveyance or other disposition of all or substantially all of the
assets of the Master Partnership or the Company to any Person or group (as such
term is used in Section 13(d)(3) of the Exchange Act) other than Permitted
-3-
<PAGE>
Holders or any Person of which one or more Permitted Holders beneficially own in
the aggregate at least a majority of the Voting Stock, (c) the merger or
consolidation of the Master Partnership or the Company with another partnership,
limited liability company or corporation other than a Permitted Holder or any
Person of which one or more Permitted Holders beneficially own in the aggregate
at least a majority of the Voting Stock, in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Master Partnership or
the Company, as applicable, is converted into or exchanged for cash, securities
or other property, other than any such transaction where the Voting Stock of the
Master Partnership or the Company, as applicable, outstanding immediately prior
to such transaction is converted into or exchanged for Voting Stock of the
surviving or transferee Person constituting a majority of the outstanding shares
of such Voting Stock of such surviving or transferee person (immediately after
giving effect to such issuance), (d) the liquidation or dissolution of the
Master Partnership, the Company or the Manager, or (e) the occurrence of any
transaction, the result of which is that Permitted Holders beneficially own in
the aggregate, directly or indirectly, less than a majority of the Voting Stock
of the Manager.
"Common Units" means the common units representing limited partner
interests of the Master Partnership, having the rights and obligations specified
with respect to Common Units of the Master Partnership.
"Consolidated Cash Flow Available for Fixed Charges" means, with
respect to the Company and its Restricted Subsidiaries for any period, the sum
of, without duplication, the amounts for such period, taken as a single
accounting period, of (a) Consolidated Net Income, (b) Consolidated Non-cash
Charges, (c) Consolidated Interest Expense and (d) Consolidated Income Tax
Expense.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to the
Company and its Restricted Subsidiaries, the ratio of the aggregate amount of
Consolidated Cash Flow Available for Fixed Charges for the four full fiscal
quarters for which financial information in respect thereof is available
immediately preceding the date of the transaction (the "Transaction Date")
giving rise to the need to calculate the Consolidated Fixed Charge Coverage
Ratio (such four full fiscal quarter period being referred to herein as the
"Four Quarter Period") to the aggregate amount of Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated Cash Flow
Available for Fixed Charges" and "Consolidated Fixed Charges" shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to, without duplication, (a) the incurrence or repayment of any
Indebtedness of the Company or any of its Restricted Subsidiaries (and, in the
case of any incurrence, the application of the net proceeds thereof) during the
period commencing on the first day of the Four Quarter Period to and including
the Transaction Date (the "Reference Period"), including, without limitation,
the incurrence of the Indebtedness giving rise to the need to make such
calculation (and the application of the net proceeds thereof), as if such
incurrence (and application) occurred on the first day of the Reference Period
(including any actual interest payments made with respect to Indebtedness under
the Working Capital Facility), and (b) any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving
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rise to the need to make such calculation as a result of the Company or one of
its Restricted Subsidiaries (including any Person who becomes a Restricted
Subsidiary as a result of the Asset Acquisition) incurring, assuming or
otherwise being liable for Acquired Indebtedness) occurring during the Reference
Period, as if such Asset Sale or Asset Acquisition occurred on the first day of
the Reference Period; provided, however, that (i) Consolidated Fixed Charges
shall be reduced by amounts attributable to businesses or assets that are so
disposed of or discontinued only to the extent that the obligations giving rise
to such Consolidated Fixed Charges would no longer be obligations contributing
to the Consolidated Fixed Charges subsequent to the date of determination of the
Consolidated Fixed Charge Coverage Ratio and (ii) Consolidated Cash Flow
Available for Fixed Charges generated by an acquired business or asset shall be
determined by (x) in the case of an Asset Acquisition of Timber or Timberlands
by the Company or a Restricted Subsidiary during such period, by using the
projected net cash flow of the Timber or Timberlands so acquired, based on the
harvest plan prepared in the ordinary course of business and in good faith by
the Manager, for the first 12 full months of operations of the acquired Timber
or Timberlands following the date of the Asset Acquisition; provided that such
harvest plan shall not assume the harvesting or sale of more than 10% (or, in
the case of an acquisition under a cutting contract with a term of less than 10
years, such higher percentage as shall be equal to the quotient of 100% divided
by the term of such cutting contract (expressed in years)) of the total
merchantable Timber so acquired in the first 12 full months following the date
of the Asset Acquisition; provided further, in determining projected cash flow
from acquired Timber or Timberlands, prices shall be assumed to equal the
average prices realized by the Company for comparable Timber sold during such
period; and (y) in all the cases of all other Asset Acquisitions the actual
gross profit (revenues minus cost of goods sold) of such acquired business or
asset during the immediately preceding four full fiscal quarters in the
Reference Period minus the pro forma expenses that would have been incurred by
the Company and its Restricted Subsidiaries in the operation of such acquired
business or asset during such period computed on the basis of personnel expenses
for employees retained or to be retained by the Company and its Restricted
Subsidiaries in the operation of the acquired business or asset and non-
personnel costs and expenses incurred by the Company and its Restricted
Subsidiaries in the operation of the Company's business at similarly situated
facilities. If the applicable Reference Period for any calculation of the
Consolidated Fixed Charge Coverage Ratio shall include a portion prior to the
date of this Indenture, then such Consolidated Fixed Charge Coverage Ratio shall
be calculated based upon the Consolidated Cash Flow Available for Fixed Charges
and the Consolidated Fixed Charges of the Company on a pro forma basis for such
portion of the Reference Period prior to the Issue Date, giving effect to the
transactions occurring on the Issue Date, and the Consolidated Cash Flow
Available for Fixed Charges and the Consolidated Fixed Charges for the remaining
portion of the Reference Period on and after the Issue Date, giving pro forma
effect, as described in the two foregoing sentences, to all applicable
transactions occurring on the Issue Date or otherwise. Furthermore, in
calculating "Consolidated Fixed Charges" for purposes of determining the
"Consolidated Fixed Charge Coverage Ratio," (i) interest on outstanding
Indebtedness (other than Indebtedness referred to in clause (ii) below)
determined on a fluctuating basis as of the last day of the Four Quarter Period
and which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on such date; (ii) only actual interest payments
associated with Indebtedness incurred in accordance
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with clause (d) of the definition of Permitted Indebtedness and all Permitted
Refinancing Indebtedness in respect thereof, during the Four Quarter Period
shall be included in such calculation; and (iii) if interest on any Indebtedness
actually incurred on such date may optionally be determined at an interest rate
based upon a factor of a prime or similar rate, a eurocurrency interbank offered
rate, or other rates, then the interest rate in effect on the last day of the
Four Quarter Period will be deemed to have been in effect during such period.
"Consolidated Fixed Charges" means, with respect to the Company and
its Restricted Subsidiaries for any period, the sum of, without duplication, (a)
the amounts for such period of Consolidated Interest Expense and (b) the product
of (i) the aggregate amount of dividends and other distributions paid or accrued
during such period in respect of Preferred Stock and Redeemable Capital Stock of
the Company and its Restricted Subsidiaries on a consolidated basis and (ii) a
fraction, the numerator of which is one and the denominator of which is one
minus the then applicable current combined federal, state and local statutory
tax rate, expressed as a percentage.
"Consolidated Income Tax Expense" means, with respect to the Company
and its Restricted Subsidiaries for any period, the provision for federal,
state, local and foreign income taxes of the Company and its Restricted
Subsidiaries for such period as determined on a consolidated basis in accordance
with GAAP.
"Consolidated Interest Expense" means, with respect to the Company and
its Restricted Subsidiaries for any period, without duplication, the sum of (a)
the interest expense of the Company and its Restricted Subsidiaries for such
period as determined on a consolidated basis in accordance with GAAP, including,
without limitation, (i) any amortization of debt discount, (ii) the net cost
under Interest Rate Agreements, (iii) the interest portion of any deferred
payment obligation, (iv) all commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance financing and (v)
all accrued interest and (b) the interest component of Capital Leases paid,
accrued or scheduled to be paid or accrued by the Company and its Restricted
Subsidiaries during such period as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Net Income" means the net income of the Company and its
Restricted Subsidiaries, as determined on a consolidated basis in accordance
with GAAP and as adjusted to exclude (a) net after-tax extraordinary gains or
losses, (b) net after-tax gains or losses attributable to Asset Sales to the
extent the Net Proceeds therefrom result in the aggregate Net Proceeds received
by the Company or any Restricted Subsidiary from all Asset Sales since the Issue
Date exceeding the Adjusted Asset Sales Amount, (c) the net income or loss of
any Person which is not a Restricted Subsidiary and which is accounted for by
the equity method of accounting, provided that Consolidated Net Income shall
include the amount of dividends or distributions actually paid to the Company or
any Restricted Subsidiary, (d) the net income or loss prior to the date of
acquisition of any Person combined with the Company or any Restricted Subsidiary
in a pooling of interest, (e) the net income of any Restricted Subsidiary to the
extent that dividends or distributions of such net income are not at the date of
determination permitted by the terms of its charter or any agreement,
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instrument, judgment, decree, order, statute, rule or other regulation and (f)
the cumulative effect of any changes in accounting principles.
"Consolidated Net Worth" means, with respect to the Company and its
Restricted Subsidiaries at any date, the consolidated stockholders' equity,
partners' capital or members' capital of the Company and its Restricted
Subsidiaries less the amount of such stockholders' equity, partners' capital or
members' capital attributable to Redeemable Capital Stock as determined in
accordance with GAAP.
"Consolidated Non-cash Charges" means, with respect to the Company and
its Restricted Subsidiaries for any period, the aggregate depreciation,
depletion, amortization and any other non-cash charges, in each case reducing
Consolidated Net Income of the Company and its Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP.
"Contribution Agreement" means the Contribution, Conveyance and
Assumption Agreement, dated as of the Issue Date, among the Company, the Master
Partnership, the Manager and certain other parties together with the additional
conveyance documents and instruments contemplated or referenced thereunder.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 11.2 hereof or such other address as to which the
Trustee may give notice to the Issuers.
"Credit Agreement" means the Credit Agreement, dated as of November
19, 1997, among the Company, Bank of America National Trust and Savings
Association, as Letter of Credit Issuing Bank and as Agent, and the several
financial institutions which are or become parties from time to time thereto,
evidencing the Bank Credit Facility, as it may be amended, supplemented or
otherwise modified from time to time, including all exhibits and schedules
thereto, and any successor or replacement facility entered into in compliance
with this Indenture.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Definitive Notes" means Notes that are in the form of Exhibit A
attached hereto (but without including the text referred to in footnote 1
thereto).
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.3 hereof as
the Depositary with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
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"Designation Amount" means, with respect to the designation of a
Restricted Subsidiary or a newly acquired or formed Subsidiary as an
Unrestricted Subsidiary, an amount equal to (a) the net book value of all assets
of such Subsidiary at the time of such designation in the case of a Restricted
Subsidiary or (b) the cost of acquisition or formation in the case of a newly
acquired or formed Subsidiary.
"Disinterested Director" means, with respect to any transaction or
series of transactions with Affiliates, a member of the Board of Directors of
the Manager who has no financial interest, and whose employer has no financial
interest, in such transaction or series of transactions.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
the same may be amended from time to time.
"Event of Default" has the meaning set forth in Section 6.1 hereof.
"Excess Harvest" means a harvest of Timber (including timber deed,
bulk, pay-as-cut and stumpage sales) in excess in the aggregate of the following
limitations: (a) 150% of the Planned Volume during any fiscal year of the
Company, (b) 140% of the Planned Volume during any period of two consecutive
fiscal years of the Company, (c) 130% of the Planned Volume during any period of
three consecutive fiscal years of the Company and (d) 120% of the Planned Volume
during any period of four consecutive fiscal years of the Company. In the event
that the Company or any of its Restricted Subsidiaries sells Timber pursuant to
a timber deed, bulk, pay-as-cut or stumpage contract, the Timber shall be deemed
harvested in equal monthly amounts over the life of the contract, regardless of
when the purchaser actually severs the Timber.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Finance Corp." means the party named as such in this Indenture until
a successor replaces it pursuant to this Indenture and thereafter means the
successor.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States of America, which are applicable from time to
time.
"Global Note" means a Note that is issued in global form in the name
of Cede & Co. or such other name as may be requested by an authorized
representative of the Depositary, and that contains the paragraph referred to in
footnote 1 and the additional schedule referred to in the form of Note attached
hereto as Exhibit A.
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"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States of America is
pledged.
"Guaranty" as applied to any Person, any direct or indirect liability,
contingent or otherwise, of such Person with respect to any Indebtedness, lease,
cash dividend or other obligation of another, including, without limitation (a)
any such obligation directly or indirectly guaranteed or endorsed (otherwise
than for collection or deposit in the ordinary course of business) by such
Person, or in respect of which such Person is otherwise directly or indirectly
liable, (b) any other obligation under any contract which, in economic effect,
is substantially equivalent to a guaranty, including, without limitation, any
such obligation of a partnership in which such Person is a general partner or of
a joint venture in which such Person is a joint venturer, or (c) any obligation
in effect guaranteed by such Person through any agreement (contingent or
otherwise) to purchase, repurchase or otherwise acquire such obligation or any
security therefor, or to provide funds for the payment or discharge of such
obligation (whether in the form of loans, advances, stock purchases, capital
contributions or otherwise), or to maintain the solvency or any balance sheet or
other financial condition of the obligor of such obligation, or to make payment
for any products, materials or supplies or for any transportation or services
regardless of the non-delivery or nonfurnishing thereof, in any such case if the
purpose or intent of such agreement is to provide assurance that such obligation
will be paid or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such obligation will be protected against
loss in respect thereof.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means as applied to any Person (without duplication):
(a) any indebtedness for borrowed money and all obligations evidenced
by any bond, note, debenture or other similar instrument or letter of credit (or
reimbursement agreements in respect thereof) which such Person has directly or
indirectly created, incurred or assumed (other than obligations with respect to
letters of credit securing obligations (other than obligations described in
paragraphs (a) through (c) of this definition) entered into in the ordinary
course of business of such Person to the extent such letters of credit are not
drawn upon, or, if and to the extent drawn upon, such drawing is reimbursed no
later than the fifth Business Day following receipt by such Person of a demand
for reimbursement following payment on the letter of credit);
(b) any indebtedness for borrowed money and all obligations evidenced
by any bond, note, debenture or other similar instrument secured by any Lien in
respect of property owned by such Person, whether or not such Person has assumed
or become liable for the payment of such indebtedness, provided that the amount
of such Indebtedness, if such Person has not assumed the same or become liable
therefor, shall in no event be deemed to be greater than the fair market value
from time to time (as determined in good faith by such Person) of the property
subject to such Lien;
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(c) any indebtedness, whether or not for borrowed money (excluding
trade payables and accrued expenses arising in the ordinary course of business),
with respect to which such Person has become directly or indirectly liable and
which represents the deferred purchase price (or a portion thereof) or has been
incurred to finance the purchase price (or a portion thereof) of any property or
service or business acquired by such Person, whether by purchase, consolidation,
merger or otherwise;
(d) the principal component of any obligations under Capital Leases to
the extent such obligations would, in accordance with GAAP, appear on a balance
sheet of such Person;
(e) all Attributable Debt of such Person in respect of Sale and Lease-
Back Transactions not involving a Capital Lease;
(f) any indebtedness of any other Person of the character referred to
in clause (a), (b), (c), (d) or (e) of this definition with respect to which the
Person whose Indebtedness is being determined has become liable by way of a
Guaranty;
(g) all Redeemable Capital Stock of such Person valued at the greater
of its voluntary or involuntary maximum fixed repurchase price;
(h) any Preferred Stock (other than Redeemable Capital Stock) of any
Restricted Subsidiary of such Person that is not a Subsidiary Guarantor valued
at the liquidation preference thereof or any mandatory redemption payment
obligations in respect thereof; and
(i) any amendment, supplement, modification, deferral, renewal,
extension or refunding of any liability of the types referred to in clauses (a)
through (h) above.
For purposes hereof, the "maximum fixed repurchase price" of any
Redeemable Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Redeemable Capital Stock as if
such Redeemable Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such price
is based upon, or measured by, the fair market value of such Redeemable Capital
Stock, such fair market value shall be determined in good faith by the board of
directors of the issuer of such Redeemable Capital Stock.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to protect the Company or any Restricted
Subsidiary from fluctuations in interest rates.
"Investment" means as applied to any Person, any direct or indirect
purchase or other acquisition by such Person of stock or other securities of any
other Person, or any direct or indirect
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loan, advance or capital contribution by such Person to any other Person, and
any other item which would be classified as an "investment" on a balance sheet
of such Person prepared in accordance with GAAP, including, without limitation,
any direct or indirect contribution by such Person of property or assets to a
joint venture, partnership or other business entity in which such Person retains
an interest (it being understood that a direct or indirect purchase or other
acquisition by such Person of assets of any other Person (other than stock or
other securities) shall not constitute an "Investment" for purposes of this
Indenture). The amount involved in Investments made during any period shall be
the aggregate cost to the Company and its Restricted Subsidiaries of all such
Investments made during such period, determined in accordance with GAAP, but
without regard to unrealized increases or decreases in value, or write-ups,
write-downs or write-offs, of such Investments and without regard to the
existence of any undistributed earnings or accrued interest with respect thereto
accrued after the respective dates on which such Investments were made, less any
net return of capital realized during such period upon the sale, repayment or
other liquidation of such Investments (determined in accordance with GAAP, but
without regard to any amounts received during such period as earnings (in the
form of dividends not constituting a return of capital, interest or otherwise)
on such Investments or as loans from any Person in whom such Investments have
been made).
"Issue Date" means the date on which the Notes are originally issued.
"Issuers" means the parties named as such in this Indenture until a
successor replaces either such Issuer pursuant to this Indenture and thereafter
means the remaining Issuer and the successor.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or preference
or priority or other encumbrance upon or with respect to any property of any
kind. A Person shall be deemed to own subject to a Lien any property which such
Person has acquired or holds subject to the interest of a vendor or lessor under
any conditional sale agreement, Capital Lease or other title retention
agreement.
"Manager" means U.S. Timberlands Services Company, L.L.C., a Delaware
limited liability company, and any successors in the capacity of managing member
of the Company (including, if applicable, more than one successor in any such
capacity at the same time).
"Master Partnership" means U.S. Timberlands Company, L.P., a Delaware
limited partnership.
"Maturity Date" means, with respect to any Note, the date on which any
principal of such Note becomes due and payable as therein or herein provided,
whether at the Stated Maturity with respect to such principal or by declaration
of acceleration, call for redemption or purchase or otherwise.
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"MLP Offering" means the public issuance and sale of Common Units
of the Master Partnership, concurrent with the issuance of Notes under this
Indenture.
"MLP Partnership Agreement" means the Amended and Restated
Agreement of Limited Partnership of the Master Partnership, as in effect on the
Issue Date, and as the same may from time to time be amended, supplemented or
otherwise modified in accordance with the terms thereof.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Net Amount of Unrestricted Investment" means, without
duplication, the sum of (a) the aggregate amount of all Investments made after
the Issue Date pursuant to subdivision (h) of the definition of Permitted
Investment (computed as provided in the last sentence of the definition of
Investment) and (b) the aggregate of all Designation Amounts in connection with
the designation of Unrestricted Subsidiaries less all Designation Amounts in
respect of Unrestricted Subsidiaries which have been designated as Restricted
Subsidiaries and otherwise reduced in a manner consistent with the provisions of
the last sentence of the definition of Investment.
"Net Proceeds" means, with respect to any Asset Sale or Excess
Harvest, the proceeds thereof in the form of cash or cash equivalents including
payments in respect of deferred payment obligations when received in the form of
cash or cash equivalents (except to the extent that such deferred payment
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary of the Company) net of (a) brokerage commissions and other fees and
expenses (including, without limitation, fees and expenses of legal counsel and
accountants and fees, expenses, discounts or commissions of underwriters,
placement agents and investment bankers) related to such Asset Sale or Excess
Harvest, (b) provisions for all taxes payable as a result of such Asset Sale or
Excess Harvest, (c) amounts required to be paid to any person (other than the
Company or any Restricted Subsidiary of the Company) owning a beneficial
interest in the assets subject to such Asset Sale or Excess Harvest, (d)
appropriate amounts to be provided by the Company or any Restricted Subsidiary
of the Company, as the case may be, as a reserve required in accordance with
GAAP against any liabilities associated with such Asset Sale or Excess Harvest
and retained by the Company or any Restricted Subsidiary of the Company, as the
case may be, after such Asset Sale or Excess Harvest, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale or Excess Harvest and (e) amounts
required to be applied to the repayment of Indebtedness secured by a Lien on the
asset or assets sold in such Asset Sale or Excess Harvest.
"Note Custodian" means the Trustee, as custodian with respect to
the Notes in global form, or any successor entity thereto.
"Notes" means the 95/8% Senior Notes due 2007.
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"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person; provided,
however, that any reference to an Officer with respect to the Company shall mean
the respective Officer of the Manager.
"Officers' Certificate" means a certificate signed on behalf of
(i) the Manager (acting on behalf of the Company) by two Officers of the
Manager, one of whom must be the principal executive officer, the principal
financial officer, the treasurer or the principal accounting officer of the
Manager, or (ii) Finance Corp. by two Officers of Finance Corp., one of whom
must be the principal executive officer, the principal financial officer, the
treasurer or the principal accounting officer of Finance Corp., in either case
that meets the requirements of Section 11.5 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
11.5 hereof. The counsel may be an employee of or counsel to the Company, the
Manager, Finance Corp., any of their respective Subsidiaries or the Trustee.
"Permitted Holders" means (a) John M. Rudey, any member of Mr.
Rudey's immediate family, any of Mr. Rudey's lineal descendants and any member
of such lineal descendent's immediate family, (b) any trust (to the extent that
it is for the benefit of any of the foregoing), (c) any of Rudey Timber Company,
L.L.C., U.S. Timberlands Management Company, L.L.C., U.S. Timberlands Holdings,
L.L.C. and the Master Partnership, and (d) in the event of the incompetence or
death of any of the individuals described in clause (a) above, such individual's
estate, executor, administrator, committee or other personal representatives, or
beneficiaries.
"Permitted Indebtedness" means any of the following:
(a) Indebtedness of the Company evidenced by the Notes;
(b) Indebtedness outstanding on the Issue Date;
(c) Indebtedness of the Company or a Restricted Subsidiary
incurred for any purpose permitted under the Acquisition Facility, provided that
the aggregate principal amount of such Indebtedness outstanding at any time may
not exceed the Acquisition Principal Amount;
(d) Indebtedness of the Company or a Restricted Subsidiary
incurred for any purpose permitted under the Working Capital Facility, provided
that the aggregate principal amount of such Indebtedness outstanding at any time
may not exceed the Working Capital Principal Amount;
(e) Indebtedness of the Company owing to the Master Partnership or
the Manager or an Affiliate of the Master Partnership or the Manager that is
unsecured and that is Subordinated
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Indebtedness; provided that the aggregate principal amount of such Indebtedness
outstanding at any time may not exceed $10 million;
(f) Indebtedness owed by the Company or any Restricted Subsidiary
to any Restricted Subsidiary;
(g) Indebtedness under Interest Rate Agreements;
(h) Permitted Refinancing Indebtedness;
(i) Indebtedness of the Company and its Restricted Subsidiaries
represented by letters of credit supporting (i) obligations under workmen's
compensation laws and (ii) the repayment of Permitted Indebtedness;
(j) surety bonds and appeal bonds required in the ordinary course
of business or in connection with the enforcement of rights or claims of the
Company or any of its Subsidiaries or in connection with judgments that do not
result in a Default or Event of Default;
(k) the Subsidiary Guarantees of the Notes (and any assumption of
the obligations guaranteed thereby);
(l) the incurrence by the Company or any Restricted Subsidiary of
Indebtedness in respect of Capital Leases, mortgage financings or purchase money
obligations, in each case incurred for the purpose of financing all or any part
of the purchase price or cost of construction or improvement of property, plant
or equipment used in the business of the Company or such Restricted Subsidiary,
in an aggregate principal amount which, when aggregated with the principal
amount of all other Indebtedness then outstanding and incurred pursuant to this
clause (1) (together with any Permitted Refinancing Indebtedness with respect
thereto) does not exceed $5 million at any time outstanding;
(m) the incurrence by the Company or any Restricted Subsidiary of
additional Indebtedness in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any other Indebtedness
incurred pursuant to this clause (m), not to exceed $10 million.
For purposes of determining compliance with Section 4.8 hereof, in
the event that an item of Indebtedness meets the criteria of more than one of
the categories of Permitted Indebtedness described in clauses (a) through (m)
above or is entitled to be incurred pursuant to the first paragraph of such
covenant, the Company shall, in its sole discretion, classify such item of
Indebtedness in any manner that complies with this covenant and such item of
Indebtedness will be treated as having been incurred pursuant to only one of
such clauses or pursuant to the first paragraph of such covenant.
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"Permitted Investments" means any of the following:
(a) Investments made or owned by the Company or any Restricted
Subsidiary in (i) any evidence of Indebtedness with a maturity of 365 days or
less issued by or directly, fully and unconditionally guaranteed or insured by
the United States of America or any agency or instrumentality thereof (provided
that the full faith and credit of the United States of America is pledged in
support thereof); (ii) deposits, certificates of deposit or acceptances with a
maturity of 365 days or less of any institution that is a member of the Federal
Reserve System having combined capital and surplus and undivided profits of not
less than $500.0 million; (iii) commercial paper with a maturity of 365 days or
less issued by a corporation (other than an Affiliate of the Company)
incorporated or organized under the laws of the United States or any state
thereof or the District of Columbia and rated at least "A-l" by S&P or "P-l" by
Moody's; (iv) repurchase agreements and reverse repurchase agreements relating
to marketable direct obligations issued by or directly, fully and
unconditionally guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States of America is pledged in support thereof), in each case
maturing within 365 days from the date of acquisition, (v) marketable direct
obligations issued by any state of the United States of America or any political
subdivision of any such state or any public instrumentality thereof maturing
within one year from the date of acquisition thereof and having as at such date
the highest rating obtainable from either S&P or Moody's, or (vi) money market
mutual or similar funds that invest in obligations referred to in clauses (i)
through (v) of this definition, in each case having assets in excess of $100.0
million.
(b) the acquisition by the Company or any Restricted Subsidiary of
Capital Stock or other ownership interests, whether in a single transaction or
in a series of related transactions, of a Person engaged in substantially the
same business as the Company such that upon the completion of such transaction
or series of transactions, such Person becomes a Restricted Subsidiary;
(c) subject to the provisions of subdivision (h) below, the making
or ownership by the Company or any Restricted Subsidiary of Investments (in
addition to Investments permitted by subdivisions (a), (b), (d), (e), (f) and
(g)) in any Person which is engaged in substantially the same business as the
Company, provided that the aggregate amount of all such Investments made by the
Company and its Restricted Subsidiaries following the Issue Date and outstanding
pursuant to this subdivision (c) and subdivision (h) below shall not at any date
of determination exceed 10% of Total Assets (the "Investment Limit"), provided
that, in addition to Investments that would be permitted under the Investment
Limit, during any fiscal year the Company and its Restricted Subsidiaries may
invest up to $11 million (the "Annual Limit") pursuant to the provisions of this
subdivision (c), but the unused amount of the Annual Limit shall not be carried
over to any future years;
(d) the making or ownership by the Company or any Restricted
Subsidiary of Investments (i) arising out of loans and advances to employees
incurred in the ordinary course of business, (ii) arising out of extensions of
trade credit or advances to third parties in the ordinary course of business and
(iii) acquired by reason of the exercise of customary creditors' rights upon
default or pursuant to the bankruptcy, insolvency or reorganization of a debtor,
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(e) the creation or incurrence of liability by the Company or any
Restricted Subsidiary with respect to any Guaranty constituting an obligation,
warranty or indemnity, not guaranteeing Indebtedness of any Person, which is
undertaken or made in the ordinary course of business;
(f) the creation or incurrence of liability by the Company or any
Restricted Subsidiary with respect to any Interest Rate Agreements;
(g) the making by the Company or any Restricted Subsidiary of
Investments in the Company or another Restricted Subsidiary;
(h) the making or ownership by the Company or any Restricted
Subsidiary of Investments in Unrestricted Subsidiaries; provided that the Net
Amount of Unrestricted Investment shall not at any time exceed $5 million (and
subject to the limitations specified in subdivision (c) above); and
(i) the making or ownership by the Company or any Restricted
Subsidiary of Investments in Finance Corp.
"Permitted Liens" means any of the following:
(a) Liens for taxes, assessments or other governmental charges the
payment of which is not yet due and is being contested in good faith by
appropriate proceedings promptly initiated and diligently conducted and as to
which reserves or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor and be adequate in the good faith judgment of
the obligor;
(b) Liens of lessors, landlords and carriers, vendors, loggers,
warehousemen, mechanics, materialmen, repairmen and other like Liens incurred in
the ordinary course of business for sums not yet due or the payment of which is
being contested in good faith by appropriate proceedings promptly initiated and
diligently conducted and as to which reserves or other appropriate provision, if
any, as shall be required by GAAP shall have been made therefor and be adequate
in the good faith judgment of the obligor, in each case (i) not incurred or made
in connection with the borrowing of money, the obtaining of advances or credit
or the payment of the deferred purchase price of property or (ii) incurred in
the ordinary course of business securing the unpaid purchase price of property
or services constituting current accounts payable; and banker's Liens in the
nature of rights of setoff arising in the ordinary course of business of the
Company and its Subsidiaries in connection with Indebtedness permitted by this
Indenture;
(c) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business (i) in connection with workers'
compensation, unemployment insurance and other types of social security, or (ii)
to secure (or to obtain letters of credit that secure) the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
performance
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bonds, purchase, construction or sales contracts and other similar obligations,
in each case not incurred or made in connection with the borrowing of money;
(d) other deposits made to secure liability to insurance carriers
under insurance or self insurance arrangements;
(e) Liens securing reimbursement obligations under letters of
credit, provided in each case that such Liens cover only the title documents and
related goods (and any proceeds thereof) covered by the related letter of
credit;
(f) any attachment or judgment Lien relating to a judgment that
does not constitute an Event of Default;
(g) leases or subleases granted to others, easements, rights-of-
way, restrictions and other similar charges or encumbrances, which, in each case
either (i) are granted, entered into or created in the ordinary course of the
business of the Company or any Restricted Subsidiary or (ii) do not materially
impair the value or intended use of the property covered thereby;
(h) Liens on property or assets of any Restricted Subsidiary
securing Indebtedness of such Restricted Subsidiary owing to the Company or a
Restricted Subsidiary;
(i) Liens on assets of the Company or any Restricted Subsidiary
existing on the Issue Date;
(j) Liens existing on any property of any Person at the time it
becomes a Subsidiary of the Company, or existing at the time of acquisition upon
any property acquired by the Company or any such Subsidiary through purchase,
merger or consolidation or otherwise, whether or not assumed by the Company or
such Subsidiary, or created to secure Indebtedness incurred to pay all or any
part of the purchase price or cost of construction or improvement (a "Purchase
Money Lien") of property (including, without limitation, Capital Stock and other
securities) acquired by the Company or a Restricted Subsidiary; provided that
(i) any such Lien shall be confined solely to such item or items of property and
other property which is an improvement to or is acquired for use specifically in
connection with such acquired property, or, in the case of construction, related
unimproved land, (ii) in the case of a Purchase Money Lien, the principal amount
of the Indebtedness secured by such Purchase Money Lien shall at no time exceed
an amount equal to 100% of the purchase price or cost of construction or
improvement to the Company and the Restricted Subsidiaries of such property,
(iii) any such Purchase Money Lien shall be created not later than 180 days
after the acquisition of such property and (iv) any such Lien (other than a
Purchase Money Lien) shall not have been created or assumed in contemplation of
such Person's becoming a Subsidiary of the Company or such acquisition of
property by the Company or any Subsidiary;
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(k) easements, exceptions or reservations in any property of the
Company or any Restricted Subsidiary granted or reserved for the purpose of
pipelines, roads, the removal of oil, gas, coal or other minerals, and other
like purposes, or for the joint or common use of real property, facilities and
equipment, which are incidental to, and do not materially interfere with, the
ordinary conduct of the business of the Company or any Restricted Subsidiary; or
(l) any Lien renewing or extending any Lien permitted by
subdivision (i) or (j), provided that (i) the principal amount of the
Indebtedness secured by any such Lien shall not exceed the principal amount of
such Indebtedness outstanding immediately prior to the renewal or extension of
such Lien, and (ii) no assets encumbered by any such Lien other than the assets
encumbered immediately prior to such renewal or extension shall be encumbered
thereby.
"Permitted Refinancing Indebtedness" means Indebtedness incurred
by the Company or any Restricted Subsidiary to substantially concurrently
(excluding any notice period on redemptions) repay, refund, renew, replace,
extend or refinance, in whole or in part, any Permitted Indebtedness of the
Company or any Restricted Subsidiary or any other Indebtedness incurred by the
Company or any Restricted Subsidiary pursuant to Section 4.8 hereof, to the
extent (a) the principal amount of such Permitted Refinancing Indebtedness does
not exceed the principal or accreted amount plus the amount of accrued and
unpaid interest of the Indebtedness so repaid, refunded or refinanced (except
that, in the case of the Notes, such Permitted Refinancing Indebtedness may
include the redemption premium set forth in Section 3.7 hereof), (b) the
Permitted Refinancing Indebtedness ranks no more favorably in right of payment
with respect to the Notes than the Indebtedness so repaid, refunded, renewed,
replaced, extended or refinanced, and (c) the Permitted Refinancing Indebtedness
has a Weighted Average Life to Stated Maturity and Stated Maturity equal to, or
greater than, the Indebtedness so repaid, refunded, renewed, replaced, extended
or refinanced; provided, however, that Permitted Refinancing Indebtedness shall
not include Indebtedness incurred by a Restricted Subsidiary to repay, refund,
renew, replace, extend or refinance Indebtedness of the Company.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
charitable foundation, unincorporated organization, government or any agency or
political subdivision thereof or any other entity.
"Planned Volume" means, as of the Closing Date, 125 million board
feet per calendar year of Timber. In the event of the acquisition of
merchantable Timber or Timberlands (other than in a like-kind exchange of Timber
or Timberlands for other Timber or Timberlands and other than Timber or
Timberlands acquired with the Net Proceeds of an Excess Harvest) constituting an
Asset Acquisition, Planned Volume will be increased for 10 years by 10% of the
volume of merchantable Timber so acquired; provided that if such Asset
Acquisition is made under a cutting contract with a term of less than 10 years,
Planned Volume will be increased for each year during the term of the cutting
contract by a number of board feet equal to the number of board feet so acquired
multiplied by the quotient of 100% divided by the number of years in the cutting
contract. In the event of a disposition of merchantable Timber or Timberlands
constituting an Asset Sale, Planned Volume will
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be reduced by 10% of the volume of merchantable Timber sold in such Asset Sale.
In the event of an Excess Harvest, Planned Volume will be reduced by 10% of the
amount of the Excess Harvest.
"Preferred Stock," as applied to the Capital Stock of any Person,
means Capital Stock (other than the Common Units) of any class or classes
(however designated), which is preferred as to the payment of distributions,
dividends, or upon any voluntary or involuntary liquidation or dissolution of
such Person, over shares or units of Capital Stock of any other class of such
Person.
"Prospectus" means the Prospectus of the Issuers relating to the
offering of the Notes.
"Public Equity Offering" means a public offering by the Master
Partnership or the Company of its Capital Stock (other than Redeemable Capital
Stock) pursuant to a registration statement declared effective under the
Securities Act; provided that the MLP Offering (including any over-allotment
option in respect thereof) shall be excluded from the definition of Public
Equity Offering.
"Redeemable Capital Stock" means any shares of any class or series
of Capital Stock, that, either by the terms thereof, by the terms of any
security into which it is convertible or exchangeable or by contract or
otherwise, is or upon the happening of an event or passage of time would be,
required to be redeemed prior to the Stated Maturity with respect to the
principal of any Note or is redeemable at the option of the holder thereof at
any time prior to the Stated Maturity of the Notes, or is convertible into or
exchangeable for debt securities at any time prior to the Stated Maturity of the
Notes.
"Responsible Officer" when used with respect to the Trustee, means
any officer within the corporate trust department of the Trustee (or any
successor of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Subsidiary" means a Subsidiary of the Company, which,
as of the date of determination, is not an Unrestricted Subsidiary of the
Company.
"Sale and Leaseback Transaction" of any Person (a "Transferor")
means any arrangement (other than between the Company and a Restricted
Subsidiary or between Restricted Subsidiaries) whereby (a) property (the
"Subject Property") has been or is to be disposed of by such Transferor to any
other Person with the intention on the part of such Transferor of taking back a
lease of such Subject Property pursuant to which the rental payments are
calculated to amortize the purchase price of such Subject Property substantially
over the useful life of such Subject Property,
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and (b) such Subject Property is in fact so leased by such Transferor or an
Affiliate of such Transferor.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Significant Subsidiary" shall have the same meaning as in Rule
1.02(w) of Regulation S-X under the Securities Act.
"S&P" means Standard & Poor's Ratings Group, and its successors.
"Stated Maturity" means, (a) when used with respect to any Note or
any installment of interest thereon, the date specified in such Note as the
fixed date on which the principal of such Note or such installment of interest
is due and payable, and (b) when used with respect to any other Indebtedness,
means the date or dates specified in the instrument governing such Indebtedness
as the fixed date or dates on which each then remaining installment, sinking
fund, serial maturity or other required payments of principal, including payment
at final maturity, in respect of such Indebtedness, or any installment of
interest thereon, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or
any Subsidiary Guarantor which is expressly subordinated in right of payment to
the Notes or the Subsidiary Guarantee, respectively.
"Subsidiary" means, with respect to any Person, (a) a corporation
a majority of whose Voting Stock (or, in the case of a partnership, a majority
of the partners' Capital Stock, considering all partners' Capital Stock as a
single class) is at the time, directly or indirectly, owned by such Person, by
one or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries thereof and (b) any other Person, including, without limitation, a
joint venture, in which such Person, one or more Subsidiaries thereof or such
Person and one or more Subsidiaries thereof, directly or indirectly, at the date
of determination thereof, has at least majority ownership interest entitled to
vote in the election of directors, managers, general partners or trustees
thereof (or other Person performing similar functions) or, if such Persons are
not elected, to vote on any matter that is submitted to the vote of all Persons
holding ownership interests in such entity. For purposes of this definition, any
directors' qualifying shares or investments by foreign nationals mandated by
applicable law shall be disregarded in determining the ownership of a
Subsidiary.
"Subsidiary Guarantee" means any guarantee of the Notes by any
Subsidiary Guarantor in accordance with the provisions described under Article
10 hereof.
"Subsidiary Guarantor" means (i) each of the Company's
Subsidiaries, if any, executing a supplemental indenture in which such
Subsidiary agrees to be bound by the terms of the
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Indenture and (ii) any Person that becomes a successor guarantor of the Notes in
compliance with the provisions described under Section 10.2 hereof.
"Timber" means all crops and all trees, timber, whether severed or
unsevered and including standing and down timber, stumps and cut timber, and
logs, wood chips and other forest products, whether not located on or hereafter
planted or growing in or on the Timberlands or otherwise or now or hereafter
removed from the Timberlands or otherwise for sale or other disposition.
"Timberlands" means, at any date of determination, all real
property owned by or leased to the Company that is suitable for Timber
production.
"TIA" means the Trust Indenture Act of 1939, as in effect on the
date this Indenture is qualified under the TIA, except as provided in Section
9.3 hereof.
"Total Assets" means as of any date of determination, the
consolidated total assets of the Company and the Restricted Subsidiaries as
would be shown on a consolidated balance sheet of the Company and the Restricted
Subsidiaries prepared in accordance with GAAP as of that date.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"UCC" means the Uniform Commercial Code as it may be from time to
time in effect in the State of New York.
"Unrestricted Subsidiary" means any Subsidiary of the Company or a
Restricted Subsidiary that is designated as such by the Manager, provided that
no portion of the Indebtedness or any other obligation (contingent or otherwise)
of such Subsidiary (a) is guaranteed by the Company or any Restricted
Subsidiary, (b) is recourse to or obligates the Company or any Restricted
Subsidiary in any way or (c) subjects any property or assets of the Company or
any Restricted Subsidiary, directly or indirectly, contingently or otherwise, to
the satisfaction thereof. Notwithstanding the foregoing, the Company or a
Restricted Subsidiary may Guaranty or agree to provide funds for the payment or
maintenance of, or otherwise become liable with respect to Indebtedness of an
Unrestricted Subsidiary, but only to the extent that the Company or a Restricted
Subsidiary would be permitted to (a) make an Investment in such Unrestricted
Subsidiary pursuant to subdivision (h) of the definition of Permitted
Investments and (b) incur the Indebtedness represented by such Guaranty or
agreement pursuant to Section 4.8 herein. The Board of Directors may designate
an Unrestricted Subsidiary to be a Restricted Subsidiary, provided that
immediately after giving effect to such designation, (a) there exists no Default
or Event of Default and (b) if such Unrestricted Subsidiary has, as of the date
of such designation, outstanding Indebtedness (other than Permitted
Indebtedness), the Company could incur at least $1.00 of Indebtedness (other
than Permitted Indebtedness). Notwithstanding the foregoing, (a) no Subsidiary
may be designated an
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Unrestricted Subsidiary if such Subsidiary, directly or indirectly, holds
Capital Stock of a Restricted Subsidiary and (b) Finance Corp. may not be
designated an Unrestricted Subsidiary.
"Voting Stock" means any class or classes of Capital Stock
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to elect at least a majority of the board of directors,
managers, general partners or trustees of any Person (irrespective of whether or
not, at the time, Capital Stock of any other class or classes shall have, or
might have, voting power by reason of the happening of any contingency) or, with
respect to a partnership (whether general or limited), any general partner
interest in such partnership.
"Weighted Average Life to Stated Maturity" means, when applied to
any Indebtedness at any date, the number of years obtained by dividing (a) the
sum of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payments
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
principal amount of such Indebtedness; provided, however, that with respect to
any revolving Indebtedness, the foregoing calculation of Weighted Average Life
to Stated Maturity shall be determined based upon the total available
commitments and the required reductions of commitments in lieu of the
outstanding principal amount and the required payments of principal,
respectively.
"Wholly-Owned Restricted Subsidiary" means any Subsidiary of the
Company of which 98% of the outstanding Capital Stock is owned by the Company or
by one or more Wholly-Owned Restricted Subsidiaries of the Company or by the
Company and one or more Wholly-Owned Restricted Subsidiaries of the Company.
For purposes of this definition, any directors' qualifying shares or investments
by foreign nationals mandated by applicable law shall be disregarded in
determining the ownership of a Subsidiary.
"Working Capital Facility" means the working capital facility of
the Company provided for in the Credit Agreement.
"Working Capital Principal Amount" means $25.0 million.
Section 1.2 Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Asset Sale"...................... 4.16
"Asset Sale Offer"................ 4.16
"Bankruptcy Law".................. 6.1
"Change of Control Offer"......... 4.18
"Change of Control Payment"....... 4.18
</TABLE>
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<TABLE>
<S> <C>
"Change of Control Payment Date".. 4.18
"Covenant Defeasance"............. 8.3
"Custodian"....................... 6.1
"Excess Harvest Proceeds"......... 4.17
"Excess Proceeds"................. 4.16
"Funding Subsidiary Guarantor".... 10.6
"incur"........................... 4.8
"Legal Defeasance"................ 8.2
"Legal Holiday"................... 11.8
"Offer Amount".................... 3.9
"Offer Period".................... 3.9
"Paying Agent".................... 2.3
"Payment Default"................. 6.1
"Payment Restrictions"............ 4.12
"Purchase Date"................... 3.9
"Registrar"....................... 2.3
"Restricted Payments"............. 4.9
</TABLE>
Section 1.3 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder of Notes;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Issuers, as joint and several
obligors, or any successor obligor upon the Notes.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
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Section 1.4 Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles in the United States;
(3) references to "generally accepted accounting principles"
shall mean generally accepted accounting principles in effect in
the United States as of the date hereof;
(4) "or" is not exclusive;
(5) words in the singular include the plural, and in the plural
include the singular;
(6) provisions apply to successive events and transactions; and
(7) references to sections of or rules under the Securities Act
or the Exchange Act shall be deemed to include substitute,
replacement or successor or rules adopted by the SEC from time to
time.
ARTICLE 2
THE NOTES
Section 2.1 Form and Dating.
The Notes and the Trustee's certificate of authentication shall
be substantially in the form of Exhibit A, the terms of which are incorporated
in and made a part of this Indenture. The Notes may have notations, legends or
endorsements required by law, stock exchange rule or usage. Each Note shall be
dated the date of its authentication. The Notes shall be in denominations of
$1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute,
and are hereby expressly made, a part of this Indenture, and the Issuers and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
The Notes will initially be issued in the form of a Global Note,
substantially in the form of Exhibit A attached hereto (including the text
referred to in footnote 1 thereto). Definitive Notes shall be substantially in
the form of Exhibit A attached hereto (but without including the text referred
to in footnote 1 thereto). The Global Note shall represent such of the
outstanding Notes as shall be specified therein and shall provide that it shall
represent the aggregate amount of outstanding
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Notes from time to time endorsed thereon and that the aggregate amount of
outstanding Notes represented thereby may from time to time be reduced or
increased, as appropriate, to reflect exchanges and redemptions. Any endorsement
of a Global Note to reflect the amount of any increase or decrease in the amount
of outstanding Notes represented thereby shall be made by the Trustee in
accordance with instructions given by the Holder thereof as required by Section
2.6 hereof.
Section 2.2 Execution and Authentication.
The Notes shall be executed on behalf of the Company by the
Chairman of the Board, the Chief Executive Officer, the President or any Vice
President of the Manager and on behalf of Finance Corp. by its Chairman of the
Board, its Chief Executive Officer, its President or any of its Vice Presidents,
under its corporate seal reproduced or imprinted on the Notes by facsimile or
otherwise, and shall be attested by the Secretary or any Assistant Secretary of
the Manager and Finance Corp.
If an Officer of the Manager or of Finance Corp. whose signature
is on a Note no longer holds that office at the time the Note is authenticated,
the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature of the Trustee shall be conclusive
evidence that the Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Issuers signed by
an Officer of each of the Manager, on behalf of the Company, and of Finance
Corp., authenticate Notes for original issue up to $225,000,000. The aggregate
principal amount of Notes outstanding at any time may not exceed $225,000,000,
except as provided in Section 2.7 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Issuers to authenticate Notes. Unless limited by the terms of such appointment,
an authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same right as an
Agent to deal with the Issuers or an Affiliate of the Issuers.
Secction 2.3 Registrar and Paying Agent.
The Issuers shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Issuers may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agents. The Issuers may change any
Paying Agent or Registrar without notice to any Holder. The Issuers shall notify
the Trustee of the name and address
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of any Agent not a party to this Indenture. If the Issuers fail to appoint or
maintain another entity as Registrar or Paying Agent, the Trustee shall act as
such and shall be entitled to appropriate compensation in accordance with
Section 7.7 hereof. The Issuers or any of their Subsidiaries may act as Paying
Agent or Registrar.
The Issuers shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which shall incorporate the provisions
of the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Agent. The Issuers initially appoint The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Notes.
The Issuers initially appoint the Trustee to act as the Registrar
and Paying Agent and agent for service of notices and demands in connection with
the Notes.
Section 2.4 Paying Agent to Hold Money in Trust.
The Issuers shall require each Paying Agent (other than the
Trustee) to agree in writing that the Paying Agent shall hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal, premium, if any, or interest, on the Notes, and shall
notify the Trustee of any default by the Issuers or any Subsidiary Guarantor in
making any such payment. While any such default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. The Issuers
at any time may require a Paying Agent to pay all money held by it to the
Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the
Issuers or a Subsidiary) shall have no further liability for the money. If an
Issuer or a Subsidiary acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent. Upon any bankruptcy or reorganization proceedings relating to an
Issuer or a Subsidiary Guarantor, the Trustee shall serve as sole Paying Agent
for the Notes.
Section 2.5 Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is not
the Registrar, the Issuers shall furnish to the Trustee at least seven Business
Days before each interest payment date and at such other times as the Trustee
may request in writing a list in such form and as of such date as the Trustee
may reasonably require of the names and addresses of Holders, including the
aggregate principal amount of Notes held by each Holder, and the Issuers shall
otherwise comply with TIA (S) 312(a).
Section 2.6 Transfer and Exchange.
(a) Transfer and Exchange of Definitive Notes. When Definitive
Notes are presented to the Registrar with the request to register the transfer
of the Definitive Notes or to exchange such Definitive Notes for an equal
principal amount of Definitive Notes of other authorized denominations, the
Registrar shall register the transfer or make the exchange as requested
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if its requirement for such transactions are met; provided, however, that the
Definitive Notes presented or surrendered for register of transfer or exchange
shall be duly endorsed or accompanied by a written instruction of transfer in
form satisfactory to the Registrar duly executed by the Holder thereof or by his
attorney, duly authorized in writing.
(b) Transfer of a Definitive Note for a Beneficial Interest in a
Global Note. A Definitive Note may not be exchanged for a beneficial interest
in a Global Note except upon satisfaction of the requirements set forth below.
Upon receipt by the Trustee of a Definitive Note, duly endorsed or accompanied
by appropriate instruments of transfer, in form satisfactory to the Trustee,
together with written instructions from the Holder thereof directing the Trustee
to make, or direct the Note Custodian to make, an endorsement on the Global Note
to reflect an increase in the aggregate principal amount of the Notes
represented by the Global Note, then the Trustee shall cancel such Definitive
Note in accordance with Section 2.11 hereof and cause, or direct the Note
Custodian to cause, in accordance with the standing instructions and procedures
existing between the Depositary and the Note Custodian, the aggregate principal
amount of Notes represented by the Global Note to be increased accordingly. If
no Global Notes are then outstanding, the Issuers shall issue and, upon receipt
of an authentication order in accordance with Section 2.2 hereof, the Trustee
shall authenticate a new Global Note in the appropriate principal amount.
(c) Transfer and Exchange of Global Notes. The transfer and
exchange of Global Notes or beneficial interests therein shall be effected
through the Depositary, in accordance with this Indenture and the procedures of
the Depositary therefor.
(d) Transfer of a Beneficial Interest in a Global Note for a
Definitive Note. Any Person having a beneficial interest in a Global Note may
upon request exchange such beneficial interest for a Definitive Note. Upon
receipt by the Trustee of written instructions or such other form of
instructions as is customary for the Depositary, from the Depositary or its
nominee on behalf of any Person having a beneficial interest in a Global Note,
then the Trustee or the Note Custodian, at the direction of the Trustee, shall,
in accordance with the standing instructions and procedures existing between the
Depositary and the Note Custodian, cause the aggregate principal amount of
Global Notes to be reduced accordingly and, following such reduction, the
Issuers shall execute and, upon receipt of an authentication order in accordance
with Section 2.2 hereof, the Trustee shall authenticate and deliver to the
transferee a Definitive Note in the appropriate principal amount. Definitive
Notes issued in exchange for a beneficial interest in a Global Note pursuant to
this Section 2.6(d) shall be registered in such names and in such authorized
denominations as the Depositary, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Trustee. The Trustee
shall deliver such Definitive Notes to the Persons in whose names such Notes are
so registered.
(e) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.6), a Global Note may
not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the
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Depositary or by the Depositary or any such nominee to a successor Depositary or
a nominee of such successor Depositary.
(f) Authentication of Definitive Notes in Absence of Depositary.
If at any time (i) the Depositary for the Notes notifies the Issuers that the
Depositary is unwilling or unable to continue as Depositary for the Global Notes
and a successor Depositary for the Global Notes is not appointed by the Issuers
within 90 days after delivery of such notice or (ii) the Issuers, at their sole
discretion, notify the Trustee in writing that they elect to cause the issuance
of Definitive Notes under this Indenture, then each of the Issuers will execute,
and the Trustee, upon receipt of an Officers' Certificate requesting the
authentication and delivery of Definitive Notes, will authenticate and deliver
Definitive Notes, in an aggregate principal amount equal to the principal amount
of the Global Notes, in exchange for such Global Notes and registered in such
names as the Depositary shall instruct the Trustee or the Issuers in writing.
(g) Cancellation and/or Adjustment of Global Note. At such time
as all beneficial interests in a Global Note have either been exchanged for
Definitive Notes, redeemed, repurchased or canceled, such Global Note shall be
returned to or retained and cancelled by the Trustee. At any time prior to such
cancellation, if any beneficial interest in a Global Note is exchanged for
Definitive Notes, redeemed, repurchased or cancelled, the principal amount of
Notes represented by such Global Note shall be reduced and an endorsement shall
be made on such Global Note, by the Trustee or the Note Custodian, at the
direction of the Trustee to reflect such reduction.
(h) General Provisions with respect to Transfer and Exchanges.
(i) To permit registrations of transfers and exchanges,
each of the Issuers shall execute and the Trustee shall
authenticate Definitive Notes and Global Notes at the
Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Issuers
may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in
connection therewith (other than any such transfer
taxes or similar governmental charges payable upon
exchange or transfer pursuant to Sections 3.7, 3.9,
4.16, 4.17, 4.18 and 9.5 hereof).
(iii) The Registrar shall not be required to register the
transfer or exchange of any Note selected for
redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part.
(iv) All Definitive Notes and Global Notes issued upon any
registration of transfer or exchange of Definitive
Notes or Global Notes shall be the valid obligations of
each of the Issuers, as joint and several obligors,
evidencing the same debt, and entitled to the same
benefit
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under this Indenture as the Definitive Notes or Global
Notes surrendered upon such registration of transfer
or exchange.
(v) The Issuers shall not be required to issue, register
the transfer of or exchange Notes during a period
beginning at the opening of business 15 days before
the day of any selection of Notes for redemption under
Section 3.2 and ending at the close of business on the
day of selection.
(vi) Prior to due presentment for registration of transfer
of any Note, the Trustee, any Agent and the Issuers
may deem and treat the Person in whose name any Note
is registered as the absolute owner of such Note for
the purpose of receiving payment of principal of, and
premium, and interest on, such Note, and neither the
Trustee, any Agent nor the Issuers shall be affected
by notice to the contrary.
(vii) The Trustee shall authenticate Definitive Notes and
Global Notes in accordance with the provisions of
Section 2.2 hereof.
(viii) None of the Issuers nor the Trustee will have any
responsibility or liability for any aspect of the records relating to, or
payments made on account of, Notes by the Depositary, or for maintaining,
supervising or reviewing any records of the Depositary relating to such
Notes. None of the Issuers nor the Trustee shall be liable for any delay
by the related Global Note Holder or the Depositary in identifying the
beneficial owners of the related Notes and each such Person may
conclusively rely on, and shall be protected in relying on, instructions
from such Global Note Holder or of the Depositary for all purposes
(including with respect to the registration and delivery, and the
respective principal amounts, of the Notes to be issued).
(ix) The Registrar shall retain copies of all letters,
notices and other written communications received pursuant to this Section
2.6. The Issuers shall have the right to inspect and make copies of all
such letters, notices or other written communications at any reasonable
time upon the giving of reasonable written notice to the Registrar.
Section 2.7 Replacement Notes.
If any mutilated Note is surrendered to the Trustee, or the
Issuers and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Note, the Issuers shall issue and the Trustee,
upon the written order of the Issuers signed by an Officer of each of the
Manager, on behalf of the Company, and of Finance Corp. shall authenticate a
replacement Note if
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the Trustee's requirements are met. If required by the Trustee or the Issuers,
an indemnity bond must be supplied by the Holder that is sufficient in the
judgment of the Trustee and the Issuers to protect the Issuers, any Subsidiary
Guarantor, the Trustee, any Agent or any authenticating agent from any loss
which any of them may suffer if a Note is replaced. The Issuers and the Trustee
may charge for their expenses in replacing a Note.
Every replacement Note is an obligation of the Issuers and any
Subsidiary Guarantor and shall be entitled to all of the benefits of this
Indenture and any Subsidiary Guarantee equally and ratably with all other Notes
duly issued hereunder.
Section 2.9 Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated
by the Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee hereunder, and those described in this Section as not outstanding.
Except as set forth in Section 2.9 hereof, a Note does not cease to be
outstanding because either of the Issuers or an Affiliate of the Issuers holds a
Note. If a Note is replaced pursuant to Section 2.7 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser. If the principal amount of any
Note is considered paid under Section 4.1 hereof, it ceases to be outstanding
and interest on it ceases to accrue.
Section 2.8 Treasury Notes.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by either of the Issuers or any Affiliate of the Issuers shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes which a Responsible Officer of the Trustee knows are so owned shall
be so disregarded.
Section 2.10 Temporary Notes.
Until definitive Notes are ready for delivery, the Issuers may
prepare and the Trustee shall authenticate temporary Notes. Temporary Notes
shall be substantially in the form of definitive Notes but may have variations
that the Issuers and the Trustee consider appropriate for temporary Notes.
Without unreasonable delay, the Issuers shall prepare and the Trustee, upon
receipt of the written order of the Issuers signed by an Officer of each of the
Manager, on behalf of the Company, and of Finance Corp., shall authenticate,
definitive Notes in exchange for temporary Notes.
Until such exchange, Holders of temporary Notes shall be entitled
to all of the right, benefit and privileges of this Indenture.
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Section 2.11 Cancellation.
The Issuers at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee shall cancel all Notes surrendered for registration of transfer or
exchange, payment, replacement or cancellation. The Issuers may not issue new
Notes to replace Notes that have been redeemed or paid or that have been
delivered to the Trustee for cancellation. All cancelled Notes held by the
Trustee shall be destroyed and certification of their destruction delivered to
the Issuers unless by a written order, signed by one Officer of each of the
Manager, on behalf of the Company, and of Finance Corp., the Issuers shall
direct that cancelled Notes be returned to them.
Section 2.12 Defaulted Interest.
If the Issuers or any Subsidiary Guarantor defaults in a payment of
interest on the Notes, the Issuers or the Subsidiary Guarantors shall pay the
defaulted interest in any lawful manner plus, to the extent lawful, interest
payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, which date shall be at the earliest practicable
date but in all events at least five Business Days prior to the payment date, in
each case at the rate provided in the Notes and in Section 4.1 hereof. The
Issuers shall, with the consent of the Trustee, fix or cause to be fixed each
such special record date and payment date. At least 15 days before the special
record date, the Issuers (or the Trustee, in the name of and at the expense of
the Issuers) shall mail to Holders a notice that states the special record date,
the related payment date and the amount of such interest to be paid.
ARTICLE 3
REDEMPTION AND OFFERS TO PURCHASE
Section 3.1 Notice to Trustee.
If the Issuers elect to redeem Notes pursuant to the optional
redemption provisions of Section 3.7 hereof, they shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date (unless a
shorter notice period shall be satisfactory to the Trustee), an Officers'
Certificate setting forth (a) the Section of this Indenture pursuant to which
the redemption shall occur, (b) the redemption date, (c) the principal amount of
Notes to be redeemed and (iv) the redemption price.
If the Issuers are required to make an offer to purchase Notes
pursuant to the provisions of Sections 4.16, 4.17 or 4.18 hereof, they shall
furnish to the Trustee, at least 30 days before the scheduled purchase date, an
Officers' Certificate setting forth (a) the Section of this Indenture pursuant
to which the offer to purchase shall occur, (b) the terms of the offer, (c) the
purchase price, (d) the principal amount of the Notes to be purchased, and (e)
further setting forth
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a statement to the effect that (i) the Company or one of its Subsidiaries has
made an Asset Sale and there are Excess Proceeds aggregating more than $10
million and the amount of such Excess Proceeds, (ii) the Company and its
Subsidiaries have had an Excess Harvest and there are Excess Harvest Proceeds
aggregating more than $10 million and the amount of such Excess Harvest Proceeds
or (iii) a Change of Control has occurred, as applicable.
Section 3.2 Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed, the Trustee shall
select the Notes to be redeemed among the Holders of the Notes pro rata, by lot
or in accordance with a method which the Trustee considers to be fair and
appropriate (and in such manner as complies with applicable legal and stock
exchange requirements, if any). In the event of partial redemption by lot, the
particular Notes to be redeemed shall be selected, unless otherwise provided
herein, not less than 30 nor more than 60 days prior to the redemption date by
the Trustee from the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Issuers in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
them selected shall be in face amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
In the event the Issuers are required to make an Asset Sale Offer
pursuant to Section 3.9 and Section 4.16 or an Excess Harvest Offer pursuant to
Section 3.9 and Section 4.17, and the amount of the Net Proceeds from the Asset
Sale or Excess Harvest is not evenly divisible by $1,000, the Trustee shall
promptly refund to the Issuers the portion of such Excess Proceeds or Excess
Harvest Proceeds that is not necessary to purchase the immediately lesser
principal amount of Notes that is so divisible.
Section 3.3 Notice of Redemption.
Subject to the provisions of Section 3.9 hereof, at least 30 days but
not more than 60 days before a redemption date, the Issuers shall mail a notice
of redemption by first class mail to each Holder whose Notes are to be redeemed
at its registered address.
The notice shall identify the Notes to be redeemed (including CUSIP
number) and shall state:
(a) the redemption date;
(b) the redemption price;
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(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption
date, upon surrender of such Note, a new Note or Notes in principal amount
equal to the unredeemed portion will be issued;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Issuers default in making such redemption
payment, interest on Notes or portions of Notes called for redemption
ceases to accrue on and after the redemption date; and
(g) the paragraph of the Notes or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed.
At the Issuers' joint request, the Trustee shall give the notice of
redemption in the names of the Issuers and at their expense; provided, however,
that the Issuers shall deliver to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
Section 3.4 Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.3
hereof, Notes called for redemption become due and payable on the redemption
date at the redemption price stated in such notice. A notice of redemption may
not be conditional.
Section 3.5 Deposit of Redemption Price.
On or before the redemption date, the Issuers shall deposit with the
Trustee (to the extent not already held by the Trustee) or with the Paying Agent
money in immediately available funds sufficient to pay the redemption price of
and accrued interest, if any, on all Notes to be redeemed on that date. The
Trustee or the Paying Agent shall return to the Issuers any money deposited with
the Trustee or the Paying Agent by the Issuers in excess of the amount necessary
to pay the redemption price of and accrued interest on all Notes to be redeemed.
If the Issuers comply with the provisions of the preceding paragraph,
on and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest, if any, shall be paid to the Person in
whose name such Note was registered at the close of business on such record
date. If any Note
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called for redemption shall not be so paid upon surrender for redemption because
of the failure of the Issuers to comply with the preceding paragraph, interest
shall be paid on the unpaid principal, from the redemption date until such
principal is paid, and to the extent lawful on any interest not paid on such
unpaid principal, in each case at the rate provided in the Notes and in Section
4.1 hereof.
Section 3.6 Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Issuers shall
issue and the Trustee shall authenticate for the Holder at the expense of the
Issuers a new Note equal in principal amount to the unredeemed portion of the
Note surrendered.
Section 3.7 Optional Redemption.
The Notes are not redeemable prior to November 15, 2002. Thereafter,
the Notes will be subject to redemption at the option of the Issuers, in whole
or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth
below, plus accrued and unpaid interest thereon, if any, to the applicable
redemption date, if redeemed during the 12-month period beginning on November 15
of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002 104.8125%
2003 103.2083%
2004 101.6042%
2005 and thereafter 100.000%
</TABLE>
Notwithstanding the foregoing, at any time on or before November 15,
2000, the Company may redeem up to 35% of the original aggregate principal
amount of the Notes at a redemption price of 109.625% of the principal amount
thereof, plus accrued and unpaid interest thereon to the redemption date, with
the net proceeds of a Public Equity Offering; provided, however, that at least
65% of the aggregate principal amount of Notes originally issued shall be
outstanding immediately after such redemption; provided further, that such
redemption shall occur within 120 days of the date of the closing of such Public
Equity Offering; provided further, that in the event of a Public Equity Offering
by the Master Partnership, the Master Partnership contributes to the capital of
the Company the portion of the net cash proceeds of such Public Equity Offering
necessary to pay the aggregate redemption price (plus accrued and unpaid
interest thereon to the redemption date) of the Notes to be redeemed.
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Section 3.8 Mandatory Redemption.
The Issuers shall have no mandatory redemption or sinking fund
obligations with respect to the Notes.
Section 3.9 Offer to Purchase by Application of Excess Proceeds or Excess
Harvest Proceeds.
Any Asset Sale Offer pursuant to Section 4.16 or Excess Harvest Offer
pursuant to Section 4.17 shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). On a date within five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Issuers shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.16 or Section 4.18 hereof (the "Offer Amount")
or, if less than the Offer Amount has been tendered, all Notes tendered in
response to the Asset Sale Offer or Excess Harvest Offer. Payment for any Notes
so purchased shall be made in the same manner as interest payments are made.
The Issuers shall comply with any tender offer rules under the
Exchange Act which may then be applicable, including Rule 14e-1, in connection
with any offer required to be made by the Issuers to repurchase the Notes as a
result of an Asset Sale Offer or Excess Harvest Offer. To the extent that the
provisions of any securities laws or regulations conflict with provisions of
this Section 3.9, the Issuers shall comply with the applicable securities laws
or regulations and shall not be deemed to have breached their obligations
hereunder by virtue thereof.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer or Excess Harvest
Offer.
Upon the commencement of an Asset Sale Offer or Excess Harvest Offer,
the Issuers shall send, by first class mail, a notice to the Trustee and each of
the Holders, with a copy to the Trustee. The notice shall contain all
instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Asset Sale Offer or Excess Harvest Offer. The Asset Sale Offer
or Excess Harvest Offer shall be made to all Holders. The notice, which shall
govern the terms of the Asset Sale Offer or Excess Harvest Offer, shall state:
(a) (i) in the case of an Asset Sale Offer, that the Asset
Sale Offer is being made pursuant to this Section 3.9 and Section 4.16
hereof and the length of time the Asset Sale Offer shall remain open
and (ii) in the case of an Excess Harvest Offer, that the Excess
Harvest Offer is being made pursuant to this Section 3.9 and Section
4.17 hereof and the length of time the Excess Harvest Offer shall
remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
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(c) that any Note not tendered or accepted for payment shall
continue to accrue interest;
(d) that, unless the Issuers default in making such payments, any
Note accepted for payment pursuant to the Asset Sale Offer or Excess
Harvest Offer shall cease to accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer or Excess Harvest Offer may only elect to have all of
such Note purchased and may not elect to have only a portion of such
Note purchased;
(f) that Holders electing to have a Note purchased pursuant to
any Asset Sale Offer or Excess Harvest Offer shall be required to
surrender the Note, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Note completed, or transfer by book-
entry transfer, to the Issuers, a depositary, if appointed by the
Issuers, or a Paying Agent at the address specified in the notice at
least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if
the Issuers, the depositary or the Paying Agent, as the case may be,
receives, not later than the expiration of the Offer Period, a
telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Note the Holder
delivered for purchase and a statement that such Holder is withdrawing
his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered
by Holders exceeds the Offer Amount, the Issuers shall select the
Notes to be purchased on a pro rata basis (with such adjustments as
may be deemed appropriate by the Issuers so that only Notes in
denominations of $1,000, or integral multiples thereof, shall be
purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion
of the Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Issuers shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer or Excess Harvest Offer, or if less than the Offer Amount has been
tendered, all Notes tendered, and shall deliver to the Trustee an Officers'
Certificate stating that such Notes or portions thereof were accepted for
payment by the Issuers in accordance with the terms of this Section 3.9. The
Issuers, the Depositary or the Paying Agent, as the case may be, shall promptly
(but in any case not later than five Business Days after the Purchase Date) mail
or deliver to each tendering Holder an amount equal to the purchase price of the
Notes tendered by such
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Holder and accepted by the Issuers for purchase, and the Issuers shall promptly
issue a new Note, and the Trustee, upon joint written request from the Issuers
shall authenticate and mail or deliver such new Note to such Holder, in a
principal amount equal to any unpurchased portion of the Note surrendered. Any
Note not so accepted shall be promptly mailed or delivered by the Issuers to the
Holder thereof. The Issuers shall publicly announce by means of a press release
the results of the Asset Sale Offer or Excess Harvest Offer on the Purchase
Date.
Other than as specifically provided in this Section 3.9, any purchase
pursuant to this Section 3.9 shall be made pursuant to the provisions of
Sections 3.1 through 3.6 hereof.
No repurchase of Notes under this Section 3.9 shall be deemed to be a
redemption of Notes.
ARTICLE 4
COVENANTS
Section 4.1 Payment of Notes.
The Issuers shall pay the principal of and interest on the Notes on
the dates and in the manner provided in the Notes. Principal and interest shall
be considered paid on the date due if the Paying Agent, other than the Issuers
or any of their Subsidiaries, holds on or before that date money deposited by
the Issuers in immediately available funds and designated for and sufficient to
pay all principal, premium, if any, and interest then due.
The Issuers shall pay interest (including post-petition interest under
any Bankruptcy Law) on overdue principal at the rate borne by the Notes to the
extent lawful and shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace period) at the same rate to the extent
lawful.
Section 4.2 Maintenance of Office or Agency.
The Issuers shall maintain in the Borough of Manhattan, The City of
New York, an office or agency (which may be an office of the Trustee, Registrar
or co-registrar) where Notes may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Issuers or Subsidiary
Guarantors in respect of the Notes and this Indenture may be served. The
Issuers shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Issuers or
Subsidiary Guarantors shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
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The Issuers may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Issuers of their obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York for such purposes. The Issuers will give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Issuers hereby designate the Corporate Trust Office of the Trustee
as one such office or agency of the Issuers in accordance with Section 2.3.
Section 4.3 Reports.
Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding, the Issuers shall furnish to the Holders of
Notes (a) all quarterly and annual financial information that would be required
to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Issuers
were required to file such forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual information only, a report thereon by the Issuers' certified
independent accountants and (ii) all reports that would be required to be filed
with the SEC on Form 8-K if the Issuers were required to file such reports. In
addition, whether or not required by the rules and regulations of the SEC, each
of the Issuers shall file a copy of all such information with the SEC for public
availability (unless the SEC will not accept such a filing) and make such
information available to investors who request it in writing. Each Issuer and
each Subsidiary Guarantor shall also comply with the provisions of TIA (S)
314(a).
Section 4.4 Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 120 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries (including Finance Corp.)
during the preceding fiscal year has been made under the supervision of the
signing Officers with a view to determining whether each Issuer and Subsidiary
Guarantor has kept, observed, performed and fulfilled its obligations under this
Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his knowledge each has kept, observed,
performed and fulfilled each and every covenant contained in this Indenture, and
is not in default in the performance or observance of any of the terms,
provisions and conditions hereof or thereof (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he may have knowledge and what action each is making or proposes to
take with respect thereto).
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.3 above shall be accompanied by a
written statement of the Company's independent certified public accountants that
in making the examination necessary for certification of such
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financial statements nothing has come to their attention which would lead them
to believe that either the Company or any of its Subsidiaries has violated any
provisions of Article 4 or Article 5 of this Indenture or, if any such violation
has occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) Each Issuer and Subsidiary Guarantor shall, so long as any of the
Notes are outstanding, deliver to the Trustee, forthwith upon any Officer
becoming aware of (i) any Default or Event of Default or (ii) any event of
default under any other mortgage, indenture or instrument referred to in Section
6.1(d), an Officers' Certificate specifying such Default, Event of Default or
other event of default and what action the Issuers and the Subsidiary Guarantors
are taking or propose to take with respect thereto.
Section 4.5 Taxes.
Each Issuer shall, and shall cause each of its respective Subsidiaries
to, pay prior to delinquency all material taxes, assessment, and governmental
levies except as contested in good faith and by appropriate proceedings or where
the failure to effect such payment is not adverse in any material respect to the
Holders.
Section 4.6 Stay, Extension and Usury Laws.
Each Issuer and any Subsidiary Guarantor covenants (to the extent that
each may lawfully do so) that it shall not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law wherever enacted, now or at any time hereafter in force,
which may affect the covenants or the performance of this Indenture; and each of
the Issuers and any Subsidiary Guarantor (to the extent that each may lawfully
do so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it shall not, by resort to any such law, hinder, delay or impede
the execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law has been enacted.
Section 4.7 Company and Corporate Existence.
Subject to Section 4.16 and Article 5 hereof, each Issuer shall do or
cause to be done all things necessary to preserve and keep in full force and
effect (a) its limited liability company or corporate existence, as the case may
be, and the corporate, partnership or other existence of each of their
respective Subsidiaries, in accordance with their respective organizational
documents (as the same may be amended from time to time) and (b) its (and its
Subsidiaries') rights (charter and statutory), licenses and franchises;
provided, however, that the Issuers shall not be required to preserve any such
right, license or franchise, or the corporate, partnership or other existence of
any Subsidiary, if the Board of Directors of the Manager on behalf of the
Company shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Issuers and their
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respective Subsidiaries taken as a whole and that the loss thereof is not
adverse in any material respect to the Holders.
Section 4.8 Limitation on Additional Indebtedness.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or in any manner become directly or indirectly liable, contingently or
otherwise, for the payment of (in each case, to "incur"), any Indebtedness
(including, without limitation, any Redeemable Capital Stock and Acquired
Indebtedness), unless at the time of such incurrence, and after giving pro forma
effect to the receipt and application of the proceeds of such Indebtedness, the
Consolidated Fixed Charge Coverage Ratio of the Company is greater than 2.25 to
1.
Notwithstanding the foregoing, the Company and its Restricted
Subsidiaries may incur Permitted Indebtedness.
Section 4.9 Limitation on Restricted Payments.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(a) declare or pay any dividend or make any other distribution or
payment on or in respect of Capital Stock of the Company or any of its
Restricted Subsidiaries or any payment made to the direct or indirect
holders (in their capacities as such) of Capital Stock of the Company
or any of its Restricted Subsidiaries (other than (i) dividends or
distributions payable solely in Capital Stock of the Company (other
than Redeemable Capital Stock) or in options, warrants or other rights
to purchase Capital Stock of the Company (other than Redeemable
Capital Stock), (ii) the declaration or payment of dividends or other
distributions to the extent declared or paid to the Company or any
Restricted Subsidiary of the Company and (iii) the declaration or
payment of dividends or other distributions by any Restricted
Subsidiary of the Company to all holders of Capital Stock of such
Restricted Subsidiary on a pro rata basis), (including, in the case of
the Company, to the Manager)),
(b) purchase, redeem, defease or otherwise acquire or retire for
value any Capital Stock of the Company or any of its Restricted
Subsidiaries (other than any such Capital Stock owned by a Wholly-
Owned Restricted Subsidiary of the Company),
(c) make any principal payment on, or purchase, defease,
repurchase, redeem or otherwise acquire or retire for value, prior to
any scheduled maturity, scheduled repayment, scheduled sinking fund
payment or other Stated Maturity, any
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Subordinated Indebtedness (other than any such Indebtedness owned by
the Company or a Wholly-Owned Restricted Subsidiary of the Company),
or
(d) make any Investment (other than any Permitted Investment) in
any Person
(such payments or Investments described in the preceding clauses (a), (b), (c)
and (d) are collectively referred to as "Restricted Payments"), unless, at the
time of and after giving effect to the proposed Restricted Payment, (A) no
Default or Event of Default shall have occurred and be continuing and (B) such
Restricted Payment, together with the aggregate of all other Restricted Payments
made by the Company and its Restricted Subsidiaries during the fiscal quarter
during which such Restricted Payment is made, shall not exceed (1) if the
Consolidated Fixed Charge Coverage Ratio of the Company shall be greater than
1.75 to 1, an amount equal to Available Cash for the immediately preceding
fiscal quarter or (2) if the Consolidated Fixed Charge Coverage Ratio of the
Company shall be equal to or less than 1.75 to 1, an amount equal to the sum of
(x) $7.5 million less the aggregate amount of all Restricted Payments made by
the Company and its Restricted Subsidiaries pursuant to this clause (2) (x)
during the period ending on the last day of the fiscal quarter of the Company
immediately preceding the date of such Restricted Payment and beginning on the
later of (I) the Issue Date and (II) the first day of the sixteenth full fiscal
quarter immediately preceding the date of such Restricted Payment, plus (y) the
aggregate net cash proceeds of any substantially concurrent (I) capital
contribution to the Company from any Person (other than a Restricted Subsidiary
of the Company) or (II) issuance and sale of shares of Capital Stock (other than
Redeemable Capital Stock) of the Company to any Person (other than to a
Restricted Subsidiary of the Company) (excluding any cash proceeds received
pursuant to any transaction occurring on or prior to the Issue Date). The
amount of any such Restricted Payment, if other than cash, shall be the fair
market value (as determined in good faith by the Board of Directors of the
Manager) on the date of such Restricted Payment of the asset(s) proposed to be
transferred by the Company or such Restricted Subsidiary, as the case may be,
pursuant to such Restricted Payment.
None of the foregoing provisions will prohibit: (a) the payment of any
dividend or distribution within 60 days after the date of its declaration, if at
the date of declaration such payment would be permitted by the foregoing
paragraph; (b) the redemption, repurchase or other acquisition or retirement of
any shares of any class of Capital Stock of the Company or any Restricted
Subsidiary of the Company in exchange for, or out of the net cash proceeds of, a
substantially concurrent (i) capital contribution to the Company from any Person
(other than a Restricted Subsidiary of the Company) or (ii) issue and sale of
other shares of Capital Stock (other than Redeemable Capital Stock) of the
Company to any Person (other than to a Restricted Subsidiary of the Company);
provided, however, that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase or other acquisition or retirement
shall be excluded from the calculation of Available Cash; or (c) any redemption,
repurchase or other acquisition or retirement of Subordinated Indebtedness by
exchange for, or out of the net cash proceeds of, a substantially concurrent (i)
capital contribution to the Company from any Person (other than a Restricted
Subsidiary of the Company) or (ii) issue and sale of (A) Capital Stock (other
than Redeemable
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Capital Stock) of the Company to any Person (other than to a Restricted
Subsidiary of the Company) or (B) Indebtedness of the Company issued to any
Person (other than a Restricted Subsidiary of the Company), so long as such
Indebtedness is Permitted Refinancing Indebtedness; provided, however, in each
case, that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase or other acquisition or retirement shall be excluded
from the calculation of Available Cash. In computing the amount of Restricted
Payments previously made for purposes of the preceding paragraph, Restricted
Payments made under clause (a) shall be included and Restricted Payments made
under clauses (b) and (c) shall not be so included.
Section 4.10 Limitation on Liens.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, create, incur, assume or suffer to exist any Liens, other than
Permitted Liens, upon any of its respective property or assets, whether owned on
the Issue Date or thereafter acquired, unless the Notes and the Subsidiary
Guarantees, as applicable, are secured equally and ratably with (or prior to, in
the case of the Subordinated Indebtedness) the obligations secured by such Lien.
Section 4.11 Limitation on Transactions with Affiliates.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, transfer, disposition, purchase, exchange or lease of assets, property
or services), with, or for the benefit of, any Affiliate of the Company, unless
(a) such transaction or series of related transactions is between the Company
and its Restricted Subsidiaries or between two Restricted Subsidiaries or (b)
(i) such transaction or series of related transactions is on terms that are no
less favorable to the Company or such Restricted Subsidiary, as the case may be,
than those which would have been obtained in a comparable transaction at such
time from Persons who are not Affiliates of the Company or a Restricted
Subsidiary and (ii) with respect to (A) a transaction or series of transactions
involving aggregate payments or value equal to or greater than $5 million, the
Company shall have delivered an Officers' Certificate to the Trustee certifying
that such transaction or series of transactions complies with the preceding
clause (i) and that such transaction or series of transactions has been approved
by a majority of the Board of Directors of the Manager (including a majority of
the Disinterested Directors) and (B) a transaction or series of transactions
involving aggregate payments or value equal to or greater than $10 million, the
Company delivers to the Trustee an opinion as to the fairness to the Company or
such Restricted Subsidiary from a financial point of view issued by an
accounting or investment banking firm of national standing; provided, however,
that this Section 4.11 will not apply to (i) any employment agreement, stock
option agreement, restricted stock agreement, consulting agreement or similar
agreement entered into in the ordinary course of business, (ii) transactions
permitted by the provisions of the Indenture set forth in Section 4.9 hereof,
(iii) any agreement in effect on the Issue Date or any amendment thereto (so
long as such amendment is no less favorable to the holders of the Notes than the
original agreement as in effect on the Issue Date) and any transactions
contemplated thereby, (iv) any transaction described in the Prospectus under the
caption "Certain
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Relationships and Related Transactions" and (v) the payment of reasonable fees
to, and indemnities provided on behalf of, officers, directors, employees or
consultants of the Company, the Manager or any Restricted Subsidiary in the
ordinary course of business.
Section 4.12 Limitation on Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or consensual restriction on the ability of
any Restricted Subsidiary to (a) pay dividends, in cash or otherwise, or make
any other distributions on or in respect of its Capital Stock, (b) pay any
Indebtedness owed to the Company or any other Restricted Subsidiary, (c) make
loans or advances to, or any investment in, the Company or any other Restricted
Subsidiary, or (d) transfer any of its properties or assets to the Company or
any other Restricted Subsidiary (collectively, "Payment Restrictions"), except
for such encumbrances or restrictions existing under or by reason of (i)
applicable law, rules or regulations, or any order or ruling by any governmental
authority; (ii) any agreement in effect at or entered into on the Issue Date
(including, without limitation, the Credit Agreement) or any agreement relating
to any Permitted Indebtedness; provided, however, that the encumbrances and
restrictions contained in the agreements governing such Permitted Indebtedness
are no more restrictive with respect to such Payment Restrictions than those set
forth in the Credit Agreement as in effect on the Issue Date; (iii) customary
non-assignment provisions of any contract, license or any lease governing a
leasehold interest of the Company or any Restricted Subsidiary; (iv) customary
restrictions on cash or other deposits imposed by customers under contracts
entered into in the ordinary course of business; (v) purchase money obligations
for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (d) above on the property so
acquired; (vi) contracts for the sale of assets, including, without limitation,
customary restrictions with respect to a Restricted Subsidiary pursuant to an
agreement that has been entered into for the sale of all or substantially all of
the Capital Stock or assets of such Restricted Subsidiary; (vii) any agreement
or other instrument governing Indebtedness of a Person acquired by the Company
or any Restricted Subsidiary (or of a Restricted Subsidiary of such Person) in
existence at the time of such acquisition (but not created in contemplation
thereof), which encumbrance or restriction is not applicable to any Person, or
the properties or assets of any Person, other than the Person, or the
properties, assets or Subsidiaries of the Person, so acquired; (viii) provisions
contained in agreements or instruments relating to Indebtedness which prohibit
the transfer of all or substantially all of the assets of the obligor thereunder
unless the transferee shall assume the obligations of the obligor under such
agreement or instrument; or (ix) Permitted Refinancing Indebtedness, provided
that the encumbrances or restrictions of the type referred to in clause (a),
(b), (c), or (d) above, contained in agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in the
agreement governing the Indebtedness being refinanced.
Section 4.13 Limitation on Sale and Leaseback Transactions.
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The Company will not, and will not permit any of its Restricted
Subsidiaries to, enter into any Sale and Leaseback Transaction with respect to
any property of the Company or any of its Restricted Subsidiaries.
Notwithstanding the foregoing, the Company and its Restricted Subsidiaries may
enter into Sale and Leaseback Transactions with respect to property acquired or
constructed after the Issue Date; provided that (a) the Company or such
Restricted Subsidiary would be permitted under this Indenture to incur
Indebtedness secured by a Lien on such property in an amount equal to the
Attributable Debt with respect to such Sale and Leaseback Transaction, or (b)
the lease in such Sale and Leaseback Transaction is for a term not in excess of
the lesser of (i) three years and (ii) 60% of the remaining useful life of such
property.
Section 4.14 Limitation on Finance Corp.
In addition to the restrictions set forth under Section 4.8 hereof,
Finance Corp. may not incur any Indebtedness unless (a) the Company is a co-
obligor and guarantor of such Indebtedness or (b) the net proceeds of such
Indebtedness are lent to the Company, used to acquire outstanding debt
securities issued by the Company or used directly or indirectly to refinance or
discharge Indebtedness permitted under the limitation of this Section 4.14.
Finance Corp. may not engage in any business not related directly or indirectly
to obtaining money or arranging financing for the Company.
Section 4.15 Line of Business.
The Company and its Restricted Subsidiaries will not engage to any
material extent in any business other than the Business.
Section 4.16 Asset Sales.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, (a) sell, lease, convey or otherwise dispose of any assets
(including by way of a Sale and Leaseback Transaction) other than sales of
inventory in the ordinary course of business and consistent with past practice
(provided, that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company shall be governed by the
provisions of this Indenture set forth under Section 4.18 hereof or Article 5
hereof and not by the provisions of this Section 4.16) or (b) issue or sell
Capital Stock of any of its Restricted Subsidiaries, in the case of either
clause (a) or (b) above, whether in a single transaction or a series of related
transactions that has a fair market value (as determined in good faith by the
Board of Directors of the Manager) in excess of $1.0 million or for net cash
proceeds of $1.0 million (each of the foregoing, an "Asset Sale"), unless (i)
the Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (as determined in good faith by the Board of Directors of the Manager) of
the assets sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash or cash equivalents; provided, however, that the amount of
(A) any liabilities (as shown on the Company's or such Restricted Subsidiary's
most recent balance sheet or in the notes thereto) of the Company
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or any Restricted Subsidiary that are assumed by the transferee of any such
assets and (B) any notes or other obligations received by the Company or any
such Restricted Subsidiary from such transferee that are converted by the
Company or such Restricted Subsidiary into cash (to the extent of the cash
received) within 90 days of such Asset Sale, shall be deemed to be cash for
purposes of this provision; and provided further, that the 75% limitation
referred to in this clause (ii) shall not apply to any Asset Sale in which the
cash portion of the consideration received therefrom, determined in accordance
with the foregoing proviso, is equal to or greater than what the after-tax
proceeds would have been had such Asset Sale complied with the aforementioned
75% limitation. Notwithstanding the foregoing, Asset Sales shall not be deemed
to include (a) any transfer of assets or Capital Stock by the Company or any of
its Restricted Subsidiaries to a Restricted Subsidiary of the Company, (b) any
transfer of assets pursuant to a Permitted Investment, (c) the sale of
Timberlands in a like-kind exchange for a like interest in other Timberlands
having a fair market value (as determined in good faith by the Board of
Directors of the Manager) at least equal to the fair market value (as determined
in good faith by the Board of Directors of the Manager) of the Timberlands sold,
(d) the sale of not more than 10,000 acres in the aggregate of Timberlands
designated in good faith by the Board of Directors of the Manager for a higher
and better use, (e) a disposition of obsolete equipment in the ordinary course
of business, (f) any sale of Capital Stock of, or Indebtedness or other
securities of, an Unrestricted Subsidiary, and (g) timber deed, bulk, pay-as-cut
and stumpage sales in the ordinary course of business.
In the event that the aggregate Net Proceeds received by the Company
or any of its Restricted Subsidiaries from one or more Asset Sales exceed the
Adjusted Asset Sales Amount since the Issue Date, within 270 days after the date
such aggregate Net Proceeds exceed such amount (or such longer period as may be
required to comply with any agreement in effect on the Issue Date), the Company,
at its option, shall apply the amount of such aggregate Net Proceeds (less the
amount of any such Net Proceeds previously applied during such fiscal year for
the purposes set forth in clauses (a) or (b) below) to (a) reduce senior
Indebtedness of the Company or Indebtedness of a Restricted Subsidiary (with a
permanent reduction of availability in the case of the Working Capital Facility)
or (b) make, or commit, pursuant to a binding written contract (provided that
the contract is consummated substantially in accordance with the terms thereof
within 30 days after the end of the 270-day period), to make, an investment in
assets used or useful in the Business. Pending the final application of any
such Net Proceeds, the Company or any Restricted Subsidiary may temporarily
reduce borrowings under the Bank Credit Facility or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture. Any such Net
Proceeds that are not applied or invested as provided in the first sentence of
this paragraph will be deemed to constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $10 million, the Issuers shall make
an offer to all Holders of Notes (an "Asset Sale Offer") to purchase the maximum
principal amount of Notes that may be purchased out of the Excess Proceeds, at
an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase, in
accordance with the procedures set forth in this Indenture. To the extent that
the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less
than the Excess Proceeds, the Company or any Restricted Subsidiary may use such
deficiency for general business purposes. If the aggregate principal amount of
Notes surrendered by Holders thereof exceeds the
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amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on
a pro rata basis. Upon completion of such Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
Section 4.17 Limitation on Harvesting.
In the event that the Company or any of its Restricted Subsidiaries
receive any Net Proceeds from one or more Excess Harvests, within 270 days after
the date of such receipt (or such longer period as may be required to comply
with any agreement in effect on the Issue Date), the Company, at its option,
shall apply the amount of such aggregate Net Proceeds (less the amount of any
such Net Proceeds previously applied during such fiscal year for the purposes
set forth in clauses (a) or (b) below) to (a) reduce senior Indebtedness of the
Company or Indebtedness of a Restricted Subsidiary (with a permanent reduction
of availability in the case of the Working Capital Facility) or (b) make, or
commit, pursuant to a binding written contract (provided that the contract is
consummated substantially in accordance with the terms thereof within 30 days
after the end of the 270-day period), to make, an investment in assets used or
useful in the Business. Pending the final application of any such Net Proceeds,
the Company or any Restricted Subsidiary may temporarily reduce borrowings under
the Bank Credit Facility or otherwise invest such Net Proceeds in any manner
that is not prohibited by the Indenture. Any such Net Proceeds that are not
applied or invested as provided in the first sentence of this paragraph will be
deemed to constitute "Excess Harvest Proceeds." When the aggregate amount of
Excess Harvest Proceeds exceeds $10 million, the Issuers shall make an offer to
all holders of Notes (an "Excess Harvest Offer") to purchase the maximum
principal amount of Notes that may be purchased out of the Excess Harvest
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
purchase, in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate amount of Notes tendered pursuant to an Excess Harvest
Offer is less than the Excess Harvest Proceeds, the Company or any Restricted
Subsidiary may use such deficiency for general business purposes. If the
aggregate principal amount of Notes surrendered by holders thereof exceeds the
amount of Excess Harvest Proceeds, the Trustee shall select the Notes to be
purchased on a pro rata basis. Upon completion of such Excess Harvest Offer,
the amount of Excess Harvest Proceeds shall be reset at zero.
Section 4.18 Change of Control.
Upon the occurrence of a Change of Control, each Holder of Notes will
have the right to require the Issuers to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase (the "Change of Control Payment").
Within 30 days following any Change of Control, the Issuers will mail a notice
to each Holder stating: (a) that the Change of Control Offer is being made
pursuant to this Section 4.18 and that all Notes tendered will be accepted for
payment; (b) the purchase price and the purchase date, which shall be no earlier
than 30 days nor later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"); (c) that any Note not tendered will continue
to accrue interest; (d) that, unless the Issuers
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default in the payment of the Change of Control Payment, all Notes accepted for
payment pursuant to the Change of Control Offer will cease to accrue interest
after the Change of Control Payment Date; (e) that Holders electing to have any
Notes purchased pursuant to a Change of Control Offer will be required to
surrender the Notes, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the third Business Day
preceding the Change of Control Payment Date; (f) that Holders will be entitled
to withdraw their election if the Paying Agent receives, not later than the
close of business on the expiration date of the Change of Control Offer, a
telegram, telex, facsimile transmission or letter setting forth the name of the
holder, the principal amount of Notes delivered for purchase, and a statement
that such Holder is withdrawing his election to have such Notes purchased; (g)
that Holders whose Notes are being purchased only in part will be issued new
Notes equal in principal amount to the unpurchased portion of the Notes
surrendered, which unpurchased portion must be equal to $1,000 in principal
amount or an integral multiple thereof; and (h) the material circumstances and
material facts regarding such Change of Control.
The Issuers will not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth herein applicable to a Change of Control Offer made by Issuers and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
On the Change of Control Payment Date, the Issuers will, to the extent
lawful, (a) accept for payment Notes or portions thereof tendered pursuant to
the Change of Control Offer, (b) deposit with the Paying Agent therefor an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (c) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate amount of the Notes or portions thereof tendered to the Issuers. The
Paying Agent will promptly mail to each Holder of Notes so accepted the Change
of Control Payment for such Notes, and the Trustee will promptly authenticate
and mail to each Holder a new Note equal in principal amount to the unpurchased
portion of the Notes surrendered, if any; provided that each such new Note will
be in a principal amount of $1,000 or an integral multiple thereof. The Issuers
will publicly announce the results of the Change of Control Offer on or as soon
as practicable after the Change of Control Payment Date.
The Issuers shall comply with any tender offer rules under the
Exchange Act which may then be applicable, including Rule 14e-1, in connection
with any offer required to be made by the Issuers to repurchase the Notes as a
result of a Change of Control. To the extent that the provisions of any
applicable securities laws or regulations conflict with provisions of this
Section 4.18, the Issuers shall comply with such securities laws and regulations
and shall not be deemed to have breached its obligations hereunder by virtue
thereof.
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Section 4.19 Limitation on Non-Guarantor Restricted Subsidiaries.
The Company will not permit any Restricted Subsidiary that is not a
Subsidiary Guarantor to guarantee the payment of any Indebtedness of the Company
unless: (a) (i) such Restricted Subsidiary simultaneously executes and delivers
a supplemental indenture to this Indenture in the form of Exhibit B hereto
providing for a Subsidiary Guarantee of the Notes by such Restricted Subsidiary
and (ii), with respect to any guarantee of Subordinated Indebtedness by a
Subsidiary, any such guarantee shall be subordinated to such Restricted
Subsidiary's Subsidiary Guarantee at least to the same extent as such
Subordinated Indebtedness is subordinated to the Notes; and (b) such Subsidiary
waives, and agrees not to exercise any right or claim or take the benefit or
advantage of, any rights of reimbursement, indemnity or subrogation or any other
rights against the Company or any other Subsidiary as a result of any payment by
such Subsidiary under its Subsidiary Guarantee until such time as the
obligations guaranteed thereby are paid in full; provided that this covenant
shall not be applicable to any guarantee of any Subsidiary that (A) existed at
the time such Person became a Subsidiary of the Company and (B) was not incurred
in connection with, or in contemplation of, such Person becoming a Subsidiary of
the Company. Further, a pledge of assets to secure any Indebtedness for which
the pledgor is not otherwise liable shall not be considered a guarantee.
Any Subsidiary Guarantee made pursuant to this Section 4.19 hereof
shall provide by its terms that it shall be automatically and unconditionally
released upon the occurrence of the events described in the first paragraph of
Section 10.4 hereof.
ARTICLE 5
SUCCESSORS
Section 5.1 Merger, Consolidation or Sale of Assets.
(a) The Company may not consolidate or merge with or into (whether or
not the Company is the surviving Person), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions to, another Person unless (a) the
Company is the surviving Person, or the Person formed by or surviving such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation, partnership or limited liability company organized or
existing under the laws of the United States, any state thereof or the District
of Columbia; (b) the Person formed by or surviving any such consolidation or
merger (if other than the Company) or the Person to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made assumes
all the obligations of the Company, pursuant to a supplemental indenture in a
form reasonably satisfactory to the Trustee, under the Notes and the Indenture;
(c) immediately after such transaction no Default or Event of Default exists;
and (d) the Company or such other Person formed by or surviving any such
consolidation or merger, or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (A) will
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have Consolidated Net Worth (immediately after the transaction but prior to any
purchase accounting adjustments resulting from the transaction) equal to or
greater than the Consolidated Net Worth of the Company immediately preceding the
transaction and (B) will, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the beginning of the
applicable Four-Quarter Period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Consolidated Fixed Charge Coverage Ratio
test set forth in Section 4.8 hereof. Notwithstanding the foregoing clause (d),
any Restricted Subsidiary (other than Finance Corp.) may consolidate or merge
with or into, or dispose of all or any part of its properties or assets to, the
Company.
(b) Finance Corp. may not consolidate or merge with or into (whether
or not Finance Corp. is the surviving Person), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions to, another Person unless (a) Finance
Corp. is the surviving Person, or the Person formed by or surviving such
consolidation or merger (if other than Finance Corp.) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia and a Wholly-Owned Restricted
Subsidiary of the Company; (b) the Person formed by or surviving any such
consolidation or merger (if other than Finance Corp.) or the Person to which
such sale, assignment, transfer, lease, conveyance or other disposition shall
have been made assumes all the obligations of Finance Corp., pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee, under
the Notes and this Indenture; and (c) immediately after such transaction no
Default or Event of Default exists.
(c) The Company or Finance Corp., as the case may be, shall deliver to
the Trustee prior to the consummation of any proposed transaction subject to the
foregoing paragraphs (a) and (b) an Officers' Certificate to the foregoing
effect and an Opinion of Counsel stating that the proposed transaction and such
supplemental indenture comply with this Indenture. The Trustee shall be
entitled to conclusively rely upon such Officers' Certificate and Opinion of
Counsel.
Section 5.2 Successor Person Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company or Finance Corp. in accordance with Section 5.1 hereof, the
successor Person formed by such consolidation or into or with which the Company
or Finance Corp. is merged or to which such sale, assignment, transfer, lease,
conveyance or other disposition is made shall succeed to, and be substituted for
(so that from and after the date of such consolidation, merger, sale, lease,
conveyance or other disposition, the provisions of this Indenture referring to
the "Company," "Finance Corp." or the "Issuers," as the case may be, shall refer
to or include instead the successor Person and not the Company or Finance Corp.,
as the case may be), and may exercise every right and power of the Company or
Finance Corp., as the case may be, under this Indenture with the same effect as
if such successor Person had been named as the Company or Finance Corp., as the
case may be, herein.
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ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.1 Events of Default.
An "Event of Default" occurs if:
(a) default by the Issuers or any Subsidiary Guarantors in the
payment of the principal of or premium, if any, on any Note when the
same becomes due and payable (upon Stated Maturity, acceleration,
optional redemption, required purchase or otherwise); or
(b) default by the Issuers or any Subsidiary Guarantors in the
payment of an installment of interest on any of the Notes, when the
same becomes due and payable, which default continues for a period of
30 days; or
(c) failure to perform or observe any other term, covenant or
agreement contained in the Notes, any Subsidiary Guarantee or the
Indenture (other than a default specified in clause (a) or (b) above)
and such default continues for a period of 60 days after written
notice of such default requiring the Issuers to remedy the same shall
have been given (i) to the Issuers or such Subsidiary Guarantor by the
Trustee or (ii) to the Issuers and the Trustee by Holders of 25% in
aggregate principal amount of the Notes then outstanding; or
(d) default or defaults under one or more agreements,
instruments, mortgages, bonds, debentures or other evidences of
Indebtedness under which the Company or any Restricted Subsidiary of
the Company then has outstanding Indebtedness, which default (i) is
caused by a failure to pay at its Stated Maturity or within the
applicable grace period, if any, provided with respect to such
Indebtedness, principal, premium or interest with respect to
Indebtedness of the Company or a Restricted Subsidiary (collectively,
a "Payment Default") or (ii) results in the acceleration of such
Indebtedness prior to its Stated Maturity and, in each case, the
principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated,
aggregates $10 million or more; or
(e) a final judgment or judgments (which is or are non-appealable
or which has or have not been stayed pending appeal) shall be rendered
against the Master Partnership, the Company, any Restricted Subsidiary
or the Manager for the payment of money in excess of $10 million in
the aggregate (other than that portion of a final judgment as to which
a reputable insurance company has accepted liability) and such
judgments shall not be
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discharged or execution thereon stayed pending appeal or review within
60 days after entry of such judgment, or, in the event of such a stay,
such judgment shall not be discharged within 30 days after such stay
expires; or
(f) any Subsidiary Guarantee shall for any reason cease to be,
or be asserted by the Company or any Subsidiary Guarantor, as
applicable, not to be, in full force and effect (except pursuant to
the release of any such Subsidiary Guarantee in accordance with this
Indenture); or
(g) the Company, Finance Corp. or any of their respective
Significant Subsidiaries that are Restricted Subsidiaries pursuant to
or within the meaning of any Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against
it in an involuntary case,
(iii) consents to the appointment of a Custodian of it or
for all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors,
(v) admits in writing its inability to pay debts as the
same become due; or
(h) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company, Finance Corp. or
any of their respective Significant Subsidiaries that are
Restricted Subsidiaries in an involuntary case,
(ii) appoints a Custodian of the Company, Finance Corp. or
any of their respective Significant Subsidiaries that are
Restricted Subsidiaries or for all or substantially all of their
property,
(iii) orders the liquidation of the Company, Finance Corp.
or any of their respective Significant Subsidiaries that are
Restricted Subsidiaries,
and the order or decree remains unstayed and in effect for 60 days.
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The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
Section 6.2 Acceleration.
If an Event of Default (other than an Event of Default specified in
clauses (g) and (h) of Section 6.1) occurs and is continuing, the Trustee by
notice to the Issuers, or the Holders of at least 25% in principal amount of the
then outstanding Notes by written notice to the Issuers and the Trustee may
declare the unpaid principal of and any accrued interest on all the Notes to be
due and payable. Upon such declaration the principal and interest shall be due
and payable immediately. If an Event of Default specified in clause (g) or (h)
of Section 6.1 occurs, such an amount shall ipso facto become and be immediately
due and payable without any declaration or other act on the part of the Trustee
or any Holder. The Holders of a majority in principal amount of the then
outstanding Notes by written notice to the Trustee may rescind an acceleration
and its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default (except nonpayment of principal or
interest that has become due solely because of the acceleration) have been cured
or waived. The Trustee may withhold from Holders of the Notes notice of any
continuing Default or Event of Default (except a Default relating to the payment
of principal or interest) if it determines in good faith that withholding notice
is in their interest.
Section 6.3 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy (under this Indenture or otherwise) to collect the
payment of principal or interest on the Notes or to enforce the performance of
any provision of the Notes, or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of Notes in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 6.4 Waiver of Past Defaults.
Holders of a majority in principal amount of the then outstanding
Notes by notice to the Trustee may waive an existing Default or Event of Default
and its consequences, except a continuing Default or Event of Default in the
payment of the principal of, premium, if any or interest on, the Notes. Upon
any such waiver, such Default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.
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Section 6.5 Control by Majority.
The Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
it. However, the Trustee may refuse to follow any direction that conflicts with
law or this Indenture that the Trustee determines may be unduly prejudicial to
the rights of other Holders of Notes, or that may involve the Trustee in
personal liability.
Section 6.6 Limitation on Suits.
A Holder of Notes may pursue a remedy with respect to this Indenture
or the Notes only if:
(a) the Holder gives to the Trustee written notice of a
continuing Event of Default or the Trustee receives such notice from
either Issuer;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder or Holders offer and, if requested, provide to
the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Notes do not give the Trustee
a direction inconsistent with the request.
A Holder of Notes may not use this Indenture to prejudice the rights of another
Holder of Notes or to obtain a preference or priority over another Holder of
Notes.
Section 6.7 Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium, if any, and
interest on the Notes, on or after the respective due dates expressed in the
Note (including in connection with a Change of Control Offer, an Asset Sale
Offer and an Excess Harvest Offer), or to bring suit for the enforcement of any
such payment on or after such respective dates, shall not be impaired or
affected without the consent of such Holder.
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Section 6.8 Collection Suit by Trustee.
If an Event of Default specified in Section 6.1(a) or (b) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Issuers for the whole amount of
principal and interest remaining unpaid on the Notes and interest on overdue
principal and, to the extent lawful, interest and such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
Section 6.9 Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of Notes allowed in any judicial proceedings relative to the Issuers (or
any other obligor upon the Notes, including any Subsidiary Guarantor), their
creditors or their property and shall be entitled and empowered to collect,
receive and distribute any money or other property payable or deliverable on any
such claims and any custodian in any such judicial proceeding is hereby
authorized by each Holder of Notes to make such payments to the Trustee, and in
the event that the Trustee shall consent to the making of such payments directly
to the Holders of Notes, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under Section 7.7
hereof. To the extent that the payment of any such compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.7 hereof out of the estate in any such
proceeding, shall be denied for any reason, payment of the same shall be secured
by a Lien on, and shall be paid out of, any and all distributions, dividends,
money, securities and other properties which the Holders of the Notes may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall
be deemed to authorize the Trustee to authorize or consent to or accept or adopt
on behalf of any Holder of Notes any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder of Notes in any such proceeding.
Section 6.10 Priorities.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.7, including payment of all compensation, expense and liabilities
incurred, and all advances made, by the Trustee and the costs and expenses of
collection;
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Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium and interest, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Notes for principal,
premium and interest, respectively; and
Third: to the Issuers or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes.
Section 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.7, or a suit by Holders of more than 10% in principal
amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
Section 7.1 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(i) The duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need perform
only those duties that are specifically set forth in this Indenture
and no others, and no implied covenants or obligations shall be read
into this Indenture against the Trustee.
(ii) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine the certificates
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and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) This paragraph does not limit the effect of paragraph (b)
of this Section.
(ii) The Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts.
(iii) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b) and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee may refuse to
perform any duty or exercise any right or power unless it receives indemnity
satisfactory to it against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuers.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
Section 7.2 Rights of Trustee.
Subject to the provisions of (S)(S) 315(a) through 315(d) of the TIA:
(a) The Trustee may conclusively rely upon any document believed by
it to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability, in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
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(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Issuers shall be sufficient if
signed by an Officer of the Manager, on behalf of the Company or by an Officer
of Finance Corp.
Section 7.3 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
Holder or pledgee of Notes and may otherwise deal with either the Issuer or any
Subsidiary Guarantor or an Affiliate of either the Issuer or any Subsidiary
Guarantor with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. However, the Trustee is subject to Sections
7.10 and 7.11.
Section 7.4 Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Issuers' use of the proceeds from the Notes or any money
paid to the Issuers or upon the Issuers' direction under any provision hereof,
it shall not be responsible for the use or application of any money received by
any Paying Agent other than the Trustee and it shall not be responsible for any
statement or recital herein or any statement in the Notes or any other document
in connection with the sale of the Notes or pursuant to this Indenture other
than its certificate of authentication and that it is duly authorized to execute
and deliver this Indenture, authenticate the Notes and perform its obligations
hereunder and that the statements made by it in a Statement of Eligibility and
Qualification on Form T-1, if any, supplied to the Issuers are true and accurate
subject to the qualifications set forth therein.
Section 7.5 Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to a Responsible Officer of the Trustee, the Trustee shall mail to Holders
of Notes a notice of the Default or Event of Default within 90 days after it
occurs. Except in the case of a Default or Event of Default in payment on any
Note pursuant to Section 6.1 (a) or (b), the Trustee may withhold the notice if
it determines in good faith that withholding the notice is in the interests of
Holders of Notes.
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Section 7.6 Reports by Trustee to Holders.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, the Trustee shall mail to Holders of Notes a brief
report dated as of such reporting date that complies with TIA (S) 313(a) (but if
no event described in TIA (S) 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA (S) 313(b). The Trustee shall also transmit by mail all
reports as required by TIA (S) 313(c).
A copy of each report at the time of its mailing to Holders of Notes
shall be filed with the SEC and each stock exchange on which the Notes are
listed.
Section 7.7 Compensation and Indemnity.
The Issuers and any Subsidiary Guarantor shall pay to the Trustee from
time to time reasonable compensation for its acceptance of this Indenture and
services hereunder. The Trustee's compensation shall not be limited by any law
on compensation of a trustee of an express trust. The Issuers and the Subsidiary
Guarantors shall reimburse the Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel,
except such disbursements, advances and expenses as may be attributable to its
negligence or bad faith.
The Issuers and the Subsidiary Guarantors shall indemnify the Trustee
against any and all losses, liabilities or expenses incurred by it without
negligence or bad faith on its part arising out of or in connection with the
acceptance or administration of its duties under this Indenture, except as set
forth below. The Trustee shall notify the Issuers and the Subsidiary Guarantors
promptly of any claim for which it may seek indemnity. Failure by the Trustee to
so notify the Issuers shall not relieve the Issuers and the Subsidiary
Guarantors of their obligations hereunder. The Issuers shall defend the claim
and the Trustee shall cooperate in the defense. The Trustee may have separate
counsel and the Issuers and the Subsidiary Guarantors shall pay the reasonable
fees and expenses of such counsel. Neither the Issuers and the Subsidiary
Guarantors need pay for any settlement made without their consent, which consent
shall not be unreasonably withheld.
The obligations of the Issuers and the Subsidiary Guarantors under
this Section 7.7 shall survive the satisfaction and discharge of this Indenture.
The Issuers and the Subsidiary Guarantors need not reimburse any
expense or indemnify against any loss or liability incurred by the Trustee
through its own negligence or bad faith.
To secure the Issuers' and the Subsidiary Guarantors' payment
obligations in this Section, the Issuers and the Subsidiary Guarantors hereby
grant to the Trustee a Lien prior to the
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Notes on all money or property held or collected by the Trustee, except that
held in trust to pay principal and interest on particular Notes. Such Lien shall
survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(a) or (b) hereof occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
Section 7.8 Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign at any time and be discharged from the trust
hereby created by so notifying the Issuers. The Holders of a majority in
principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Issuers. The Issuers may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or
its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Issuers shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Issuers.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuers, the
Subsidiary Guarantors or the Holders of at least 10% in principal amount of the
then outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee after written request by any Holder of Notes who has
been a Holder of Notes for at least six months fails to comply with Section
7.10, such Holder of Notes may petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
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A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of Notes. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, provided all sums owing
to the Trustee hereunder have been paid and subject to the Lien provided for in
Section 7.7 hereof. Notwithstanding replacement of the Trustee pursuant to this
Section 7.8, the Issuers' obligations under Section 7.7 hereof shall continue
for the benefit of the retiring Trustee.
Section 7.9 Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
Section 7.10 Eligibility, Disqualification.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any state thereof authorized under such laws to exercise corporate
trust powers, shall be subject to supervision or examination by Federal or state
authority and shall have a combined capital and surplus of at least $100,000,000
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA (S)(S) 310(a)(1) and 310(a)(5). The Trustee is subject to
TIA (S) 310(b).
Section 7.11 Preferential Collection of Claims Against Issuers.
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.1 Option to Effect Legal Defeasance or Covenant Defeasance.
The Issuers may, at their option and at any time, in each case
evidenced by a resolution set forth in an Officers' Certificate, elect to apply
either Section 8.2 or 8.3 hereof to all outstanding Notes upon compliance with
the conditions set forth below in this Article 8.
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Section 8.2 Legal Defeasance and Discharge.
Upon the Issuers' exercise under Section 8.1 hereof of the option
applicable to this Section 8.2, the Issuers and any Subsidiary Guarantors shall,
subject to the satisfaction of the conditions set forth in Section 8.4 hereof,
have all of their obligations discharged with respect to all outstanding Notes
and any Subsidiary Guarantees on the date the conditions set forth below are
satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance
means that the Issuers shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Notes, which shall thereafter be
deemed to be "outstanding" only for the purposes of Section 8.5 hereof and the
other Sections of this Indenture referred to in (a) and (b) below, and to have
satisfied all their other obligations under such Notes and this Indenture (and
the Trustee, on demand of and at the expense of the Issuers, shall execute
proper instruments acknowledging the same), except for the following provisions
which shall survive until otherwise terminated or discharged hereunder: (a) the
rights of Holders of outstanding Notes to receive solely from the trust fund
described in Section 8.4 hereof, and as more fully set forth in such Section,
payments in respect of the principal of, premium, if any, and interest on such
Notes when such payments are due, (b) the Issuers' obligations with respect to
the Notes concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (c) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and the Issuers' and
Subsidiary Guarantors' obligations in connection therewith and (d) this Article
8. Subject to compliance with this Article 8, the Issuers may exercise their
option under this Section 8.2 notwithstanding the prior exercise of their option
under Section 8.3 hereof.
Section 8.3 Covenant Defeasance.
Upon the Issuers' exercise under Section 8.1 hereof of the option
applicable to this Section 8.3, each of the Issuers and Subsidiary Guarantors
shall, subject to the satisfaction of the conditions set forth in Section 8.4
hereof, be released from their obligations under the covenants contained in
Sections 4.3, 4.4, 4.5, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16,
4.17, 4.18, 4.19 and 10.2 and Article 5 hereof with respect to the outstanding
Notes and Subsidiary Guarantors on and after the date the conditions set forth
below are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding Notes,
the Issuers may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein or in any
other document, and such omission to comply shall not constitute a Default under
Section 6.1 hereof, but, except as specified above, the remainder of this
Indenture and such Notes shall be unaffected thereby. In addition, upon the
Issuers' exercise under Section 8.1 hereof of the option applicable to this
Section 8.3 hereof, subject to the satisfaction of the conditions
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set forth in Section 8.4 hereof, Sections 6.1(c), 6.1(d) and 6.1(e) hereof, and
Sections 6.1(g) and 6.1(h) hereof with respect to any Restricted Subsidiary that
is a Significant Subsidiary, shall not constitute Events of Default.
Section 8.4 Conditions to Legal Defeasance or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 8.2 or 8.3 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance,
as applicable:
(a) the Issuers must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
certified public accountants, to pay the principal of, premium, if any, and
interest on the outstanding Notes on the stated date for payment thereof or
on the applicable redemption date, as the case may be;
(b) in the case of an election under Section 8.2 hereof, the Issuers
shall have delivered to the Trustee an Opinion of Counsel in the United
States not unacceptable to the Trustee in its reasonable discretion
confirming that (A) the Issuers have received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the date
of this Indenture, there has been a change in the applicable federal income
tax law, in either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Holders of the outstanding Notes will
not recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have
been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.3 hereof, the Issuers
shall have delivered to the Trustee an Opinion of Counsel in the United
States not unacceptable to the Trustee in its reasonable discretion
confirming that the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred;
(d) no Default shall have occurred and be continuing on the date of
such deposit or insofar as Section 6.1(g) or 6.1(h) hereof are concerned,
at any time in the period ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violations of, or constitute a default under, any material
agreement or instrument (other
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than this Indenture) to which either of the Issuers or any of their
respective Restricted Subsidiaries or Subsidiary Guarantors is a party or
by which either of the Issuers or any of their respective Restricted
Subsidiaries or Subsidiary Guarantors is bound;
(f) on or prior to the 91st day following the deposit, the Issuers
shall have delivered to the Trustee an Opinion of Counsel to the effect
that on the 91st day following the deposit, the trust funds are not subject
to any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
(g) the Issuers shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Issuers or the
Subsidiary Guarantors with the intent of preferring the Holders over any
other creditors of the Issuers or the Subsidiary Guarantors or with the
intent of defeating, hindering, delaying or defrauding any other creditors
of the Issuers or the Subsidiary Guarantors or others; and
(h) the Issuers shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
Section 8.5 Deposited Money and Government Securities to be Held in Trust,
Other Miscellaneous Provisions.
Subject to Section 8.6 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.5, the
"Trustee") pursuant to Section 8.4 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Issuers acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Issuers shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.4. hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Sectoion 8.6 Repayment to Issuers.
(a) Anything in this Article 8 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Issuers from time to time upon the joint
request of the Issuers any money or non-callable Government Securities held by
it as provided in Section 8.4 hereof which, in the opinion of a nationally
recognized firm of independent certified public accountants expressed in a
written
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certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.4(a) hereof), are in excess of the amount thereof that
would then be required to be deposited to effect an equivalent Legal Defeasance
or Covenant Defeasance.
(b) Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Issuers upon their joint request any money held by
them for the payment of principal, interest or premium, if any, that remains
unclaimed for one year after such principal, interest or premium, if any, became
due and payable, and, thereafter, Holders entitled to the money must look to the
Issuers for payment of such money as secured creditors and all liability of the
Trustee and the Paying Agent with respect to such money shall cease.
Section 8.7 Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.2 or
8.3 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Issuers' and Subsidiary Guarantors' obligations under this
Indenture, the Subsidiary Guarantors and the Notes shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.2 or 8.3
hereof until such time as the Trustee or Paying Agent is permitted to apply all
such money in accordance with Section 8.2 or 8.3 hereof, as the case may,
provided that, if the Issuers or the Subsidiary Guarantors make any payment of
principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Issuers shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
Section 8.8 Discharge of Liability on Securities; Defeasance.
When (a)(i) the Issuers deliver to the Trustee all outstanding Notes
for cancellation or (ii) all outstanding Notes have become due and payable,
whether at maturity or on a specified redemption date as a result of the mailing
of a notice of redemption pursuant to Article 3 hereof, (b) the Issuers
irrevocably deposit with the Trustee money sufficient to pay at maturity or upon
redemption all outstanding Notes, including interest and premium thereon to
maturity or such redemption date, and if in either case the Issuers pay all
other sums payable hereunder by the Issuers, and (c) if the Notes have been
called for redemption and the redemption date has not occurred, the Issuers
jointly deliver to the Trustee an Opinion of Counsel in the United States not
unacceptable to the Trustee in its reasonable discretion confirming that the
Holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such actions and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such actions had not occurred, then this
Indenture shall cease to be of further effect except for (i) the provisions set
forth in Article 2, Sections 4.2, 7.7 and 8.6 hereof and (ii) if the Notes have
been called for redemption and the redemption date has not occurred, the
Issuers' obligation to pay the redemption price on such redemption date. The
Trustee shall acknowledge satisfaction and discharge of this Indenture on joint
demand of the Issuers
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accompanied by an Officers' Certificate and an Opinion of Counsel and at the
cost and expense of the Issuers.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.1 Without Consent of Holders.
The Issuers, the Subsidiary Guarantors and the Trustee may amend or
supplement this Indenture, any Subsidiary Guarantee or the Notes without the
consent of any Holder of Notes:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for the assumption of the Issuers' and Subsidiary
Guarantors' obligations to the Holders of the Notes in the case of a
merger or consolidation pursuant to Article 5 or Article 10;
(c) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(d) to add or release any Subsidiary Guarantor pursuant to the terms
hereunder (provided that such addition or release will not adversely
affect the interests of the Holders in any material respect);
(e) to make any change that could provide additional rights or
benefits to the Holders of the Notes or that does not adversely affect
the legal rights hereunder of any Holder of the Notes; or
(f) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the joint request of the Issuers, accompanied by a resolution of the
Board of Directors of the Manager on behalf of the Company and the Board of
Directors of Finance Corp., authorizing the execution of any such supplemental
indenture or amendment, and upon receipt by the Trustee of the documents
described in Section 9.6 hereof required or requested by the Trustee, the
Trustee shall join with the Issuers and any Subsidiary Guarantor in the
execution of any supplemental indenture or amendment authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations which may be therein contained, but the Trustee shall not be
obligated to enter into such supplemental indenture or amendment which affects
its own rights, duties or immunities under this Indenture or otherwise.
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Section 9.2 With Consent of Holders.
The Issuers, the Subsidiary Guarantors and the Trustee, as applicable,
may amend this Indenture, any Subsidiary Guarantee or the Notes with the
written consent of the Holders of at least a majority in principal amount of the
then outstanding Notes and, subject to Sections 6.4 and 6.7 hereof, the Holders
of a majority in principal amount of the Notes then outstanding may waive
compliance in a particular instance by the Issuers or any Subsidiary Guarantor
with any provision of this Indenture, any Subsidiary Guarantee or the Notes.
Upon the joint request of the Issuers, accompanied by a resolution of
the Board of Directors of the Manager on behalf of the Company and the Board of
Directors of Finance Corp., authorizing the execution of any such supplemental
indenture, amendment or waiver, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid,
and upon receipt by the Trustee of the documents described in Section 9.6
hereof, the Trustee shall join with the Issuers and any Subsidiary Guarantor in
the execution of such supplemental indenture or amendment unless such
supplemental indenture, amendment or waiver affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in which case the
Trustee may in its discretion, but shall not be obligated to, enter into such
supplemental indenture, amendment or waiver.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed supplemental indenture,
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After a supplemental indenture, amendment or waiver under this Section
becomes effective, the Issuers shall mail to the Holders of each Note affected
thereby a notice briefly describing the supplemental indenture, amendment or
waiver. Any failure of the Issuers to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
supplemental indenture, amendment or waiver. Without the consent of each Holder
of Notes affected, an amendment or waiver under this Section may not (with
respect to any Notes held by a non-consenting Holder of Notes):
(a) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note,
alter the optional redemption provisions of any Note or reduce the prices
at which the Issuers shall offer to purchase such Notes pursuant to
Sections 3.9, 4.16, 4.17 and 4.18 hereof, provided, however, that such
Sections 3.9, 4.16, 4.17 and 4.18 may otherwise be amended or deleted in
accordance with the requirements of this Section 9.2;
(c) reduce the rate of or change the time for payment of interest on
any Notes;
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(d) waive a Default in the payment of principal or premium, if any,
or interest (except a rescission of acceleration of the Notes by the
holders of at least a majority in aggregate principal amount of the Notes
and a waiver of the payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in Section 6.4 or 6.7 hereof;
(g) waive a redemption payment with respect to any Note (other than
an offer to purchase Notes under Section 4.16, 4.17 or 4.18);
(h) release any Subsidiary Guarantee other than in accordance
hereunder; or
(i) make any change in this sentence of Section 9.2.
Section 9.3 Compliance with Trust Indenture Act.
Every amendment to this Indenture or the Notes shall be set forth in a
supplemental indenture that complies with the TIA as then in effect.
Section 9.4 Revocation and Effect of Consents.
Until a supplemental indenture, an amendment or waiver becomes
effective, a consent to it by a Holder of a Note is a continuing consent by the
Holder and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. A supplemental indenture, amendment or waiver becomes
effective in accordance with its terms and thereafter binds every Holder of
Notes.
The Issuers may fix a record date for determining which Holders must
consent to such supplemental indenture, amendment or waiver. If the Issuers fix
a record date, the record date shall be fixed at (a) the later of 30 days prior
to the first solicitation of such consent or the date of the most recent list of
Holders furnished to the Trustee prior to such solicitation pursuant to Section
2.5, or (b) such other date as the Issuers shall designate.
Section 9.5 Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about a supplemental
indenture, amendment or waiver on any Note thereafter authenticated. The
Issuers in exchange for all Notes may issue and the Trustee shall authenticate
new Notes (accompanied by a notation of the Subsidiary Guarantees duly endorsed
by the Subsidiary Guarantors) that reflect the amendment, supplement or
waiver.
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Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment or waiver.
Section 9.6 Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment, supplemental indenture or waiver
authorized pursuant to this Article 9 if the amendment, supplemental indenture
or waiver does not adversely affect the rights, duties, liabilities or
immunities of the Trustee. If it does, the Trustee may, but need not, sign it.
In signing or refusing to sign such amendment, supplemental indenture or waiver,
the Trustee shall be entitled to receive, if requested, an indemnity reasonably
satisfactory to it and to receive and, subject to Section 7.1, shall be fully
protected in relying upon, an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that such amendment, supplemental indenture or waiver is
authorized or permitted by this Indenture, that it is not inconsistent herewith
or therewith, and that it will be valid and binding upon the Issuers in
accordance with its terms. The Issuers and the Subsidiary Guarantors may not
may sign an amendment, supplemental indenture or waiver until the Board of
Directors of the Manager on behalf of the Company or the Board of Directors of
Finance Corp. approves it.
ARTICLE 10
SUBSIDIARY GUARANTEE OF NOTES
Section 10.1 Unconditional Guarantee.
Each Subsidiary Guarantor hereby unconditionally, jointly and
severally, guarantees to each Holder and to the Trustee the full and prompt
payment of the principal of, premium, if any, and interest on the Notes and all
other amounts due and payable under this Indenture and the Notes by the Issuers
whether at maturity, by acceleration, redemption, repurchase or otherwise,
including, without limitation, interest on the overdue principal of, premium, if
any, and interest on the Notes, to the extent lawful, all in accordance with the
terms hereof and thereof (subject, however, to the limitations set forth in
Section 10.5).
Each Subsidiary Guarantee shall be an unsecured general obligation of
the Subsidiary Guarantor and rank senior in right of payment to all existing and
future subordinated indebtedness of the Subsidiary Guarantor and pari passu in
right of payment to all existing and future senior indebtedness of the
Subsidiary Guarantor.
Failing payment when due of any amount so guaranteed for whatever
reason, the Subsidiary Guarantors will be jointly and severally obligated to pay
the same immediately. Each Subsidiary Guarantor hereby agrees that its
obligations pursuant to its Subsidiary Guarantee shall be unconditional
irrespective of the validity, regularity or enforceability of this Indenture,
the Notes, the obligations of the Issuers under this Indenture or the Notes or
any other Subsidiary Guarantee, the absence of any action to enforce the same,
any waiver or
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consent by any Holder of the Notes with respect to any provisions hereof or
thereof, the recovery of any judgment against the Issuers or any other
Subsidiary Guarantor, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of
any Subsidiary Guarantor. Each Subsidiary Guarantor, to the extent permitted by
law, hereby waives diligence, presentment, demand of payment, filing of claims
with a court in the event of insolvency or bankruptcy of an Issuer, any right to
require a proceeding first against the Issuers or any other Subsidiary
Guarantor, protest, notice, notice of intent to accelerate, notice of
acceleration and all demands whatsoever and covenants that this Subsidiary
Guarantee will not be discharged except by complete performance of the
obligations contained in the Notes, this Indenture and in its Subsidiary
Guarantee. If any Holder or the Trustee is required by any court or otherwise to
return to the Issuers, any Subsidiary Guarantor, or any custodian, trustee,
liquidator or other similar official acting in relation to the Issuers or any
Subsidiary Guarantor, any amount paid by the Issuers or any Subsidiary Guarantor
to the Trustee or such Holder, this Subsidiary Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect. Each
Subsidiary Guarantor agrees it shall not be entitled to any right of subrogation
in relation to the Holders in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby. Each Subsidiary Guarantor
further agrees that, as between each Subsidiary Guarantor, on the one hand, and
the Holders and the Trustee, on the other hand, (a) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 of the
Indenture for the purposes of this Subsidiary Guarantee, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the obligations guaranteed hereby, and (b) in the event of any acceleration of
such obligations as provided in Article 6 of the Indenture and subject to the
rescission thereof as provided therein, such obligations (whether or not due and
payable) shall forthwith become due and payable by each Subsidiary Guarantor for
the purpose of this Subsidiary Guarantee. Each Subsidiary Guarantor agrees that
this is a guarantee of payment not a guarantee or collection.
Section 10.2 Subsidiary Guarantors May Consolidate, etc., on Certain Terms.
(a) Except as set forth in Article 5, nothing contained in this
Indenture or in any of the Notes shall prevent any consolidation or merger of a
Subsidiary Guarantor with or into the Company or another Subsidiary Guarantor or
shall prevent any disposition of assets to the Company or another Subsidiary.
(b) Except as set forth in Article 5, nothing contained in this
Indenture or in any of the Notes shall prevent any consolidation or merger or
sale of a Subsidiary Guarantor with or into a Person other than an Issuer or a
Subsidiary Guarantor (regardless of whether an Affiliate of such Subsidiary
Guarantor), or successive consolidations or mergers in which a Subsidiary
Guarantor or its successor or successors shall be a party or parties, or shall
prevent any sale, assignment, transfer, lease, conveyance or other disposition
of all or substantially all of the assets of a Subsidiary Guarantor to a Person
other than an Issuer or another Subsidiary Guarantor (regardless of whether
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an Affiliate of such Subsidiary Guarantor) authorized to acquire and operate the
same; provided, however, (a) that if such consolidation, merger, sale,
assignment, transfer, lease, conveyance or other disposition results in a
surviving Person (other than the Company) who is not a Subsidiary Guarantor,
then the Person surviving such consolidation or merger, or to which such sale,
assignment, transfer, lease, conveyance or disposition has been made agrees to
assume such Subsidiary Guarantor's Guarantee and all its obligations arising
under this Indenture (except to the extent that Section 10.4 would result in the
release of such Subsidiary Guarantee and obligations) and (b) immediately after
such transaction, and giving effect thereto, no Default or Event of Default has
occurred and is continuing. Upon any consolidation or merger, or any sale,
assignment, transfer, lease, conveyance or other disposition of all or
substantially all of the assets of a Subsidiary Guarantor in accordance with
this paragraph (b) of Section 10.2, the successor Person formed by such
consolidation or into which such Subsidiary Guarantor is merged or to which such
sale, assignment, transfer, lease, conveyance or other disposition is made shall
succeed to, and be substituted for, and may exercise every right and power of, a
Subsidiary Guarantor under this Indenture with the same effect as if such
successor had been named as a Subsidiary Guarantor herein.
Section 10.3 Addition of Subsidiary Guarantors.
Any Restricted Subsidiary may become a Subsidiary Guarantor by
executing and delivering to the Trustee a supplemental indenture in the form set
forth in Exhibit B hereto. In addition, in order to become a Subsidiary
Guarantor, such Restricted Subsidiary shall provide the Trustee with an
Officers' Certificate to the effect that such supplemental indenture has been
duly authorized and executed by such Restricted Subsidiary and constitutes the
legal, valid, binding and enforceable obligation of such Restricted Subsidiary
(subject to such customary exceptions concerning creditors' rights and equitable
principles as may be acceptable to the Trustee in its discretion).
Section 10.4 Release of a Subsidiary Guarantor.
Upon (a) (i) the sale or other disposition of all of the Capital Stock
of a Subsidiary Guarantor to a Person other than the Company or another
Subsidiary Guarantor or (ii) the merger or consolidation of a Subsidiary
Guarantor with or into another Person or the sale of all or substantially all of
the assets of a Subsidiary Guarantor to another Person,
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in either case pursuant to a transaction that is in compliance with this
Indenture (including as described in Section 10.2 hereof) or (b) the release of
all guarantees by a Subsidiary Guarantor of Indebtedness of the Company, such
Subsidiary Guarantor shall be automatically and unconditionally released and
discharged from its Subsidiary Guarantee and all of its obligations in respect
of this Indenture.
Except as provided in this Section 10.4, a Subsidiary Guarantor may
not otherwise be released from its Subsidiary Guarantee and its related
obligations hereunder and this Subsidiary Guarantee is a continuing guarantee
which shall remain in full force and effect until payment in full of the Notes
and all other amounts payable under this Subsidiary Guarantee. The Trustee shall
deliver an appropriate instrument evidencing a release of a Subsidiary Guarantee
pursuant to this Section 10.4 upon receipt of a request by the Company
accompanied by an Officer's Certificate and an Opinion of Counsel certifying
that such release was made in accordance with the provisions of this Indenture.
Any Subsidiary Guarantor not so released remains liable for all amounts due on
the Notes as provided in this Article 10.
Section 10.5 Limitation of Subsidiary Guarantor's Liability.
By becoming a Subsidiary Guarantor, each Subsidiary Guarantor shall be
deemed to confirm, and by its acceptance of any Note, each Holder, confirms that
it is the intention of all Holders and all parties to this Indenture that the
Subsidiary Guarantee of such Subsidiary Guarantor not constitute a fraudulent
transfer or conveyance for purposes of any federal or state law. To effectuate
the foregoing intention, the obligations of each Subsidiary Guarantor under its
Subsidiary Guarantee shall be limited to the maximum amount, after giving effect
to all other contingent and fixed liabilities of such Subsidiary Guarantor and
after giving effect to any collections from or payments made by or on behalf of
any other Subsidiary Guarantor in respect of the obligations of such other
Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to Section 10.6,
as will result in the obligations of such Subsidiary Guarantor under its
Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under federal or state law. This Section 10.5 is for the benefit of the
creditors of each Subsidiary Guarantor, and, for purposes of applicable
fraudulent transfer and fraudulent conveyance law, any Indebtedness of a
Subsidiary Guarantor pursuant to the Bank Credit Facility shall be deemed to
have been incurred prior to the incurrence by such Subsidiary Guarantor of its
liability under its Subsidiary Guarantee.
Section 10.6 Contribution.
In order to provide for just and equitable contribution among the
Subsidiary Guarantors, in the event any payment or distribution is made by any
Subsidiary Guarantor (a "Funding Subsidiary Guarantor") under its Subsidiary
Guarantee, such Funding Subsidiary Guarantor shall be entitled to a contribution
from each other Subsidiary Guarantor in a pro rata amount based on the Adjusted
Net Assets of each Subsidiary Guarantor (including the Funding Subsidiary
Guarantor) for all payments, distributions, damages and expenses incurred by the
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<PAGE>
Funding Subsidiary Guarantor in discharging the Company's obligations with
respect to the Notes or any other Subsidiary Guarantor's obligations with
respect to any Subsidiary Guarantee.
Section 10.7 Severability.
In case any provision of this Subsidiary Guarantee shall be invalid,
illegal or unenforceable, that portion of such provision that is not invalid,
illegal or unenforceable shall remain in effect, and the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
ARTICLE 11
MISCELLANEOUS
Section 11.1 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by TIA (S) 318(c), the imposed duties shall control. If
any provision of this Indenture modifies or excludes any provision of the TIA
that may be so modified or excluded, the latter provision shall be deemed to
apply to this Indenture as so modified or to be excluded, as the case may be.
Section 11.2 Notices.
Any notice or communication by the Issuers or the Trustee to the
others is duly given if in writing and delivered in person or mailed by first-
class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' addresses:
If to the Issuers or any Subsidiary Guarantor:
U.S. Timberlands Klamath Falls, L.L.C.
U.S. Timberlands Finance Corp.
6400 Highway 66
Klamath Falls, Oregon 97601
Attention: President
Telecopier No.: (541) 882-8872
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<PAGE>
If to the Trustee:
State Street Bank and Trust Company
777 Main Street
Hartford, Connecticut 06815
Attn:Michael Hopkins
Telecopier No.: (860) 986-7920
The Issuers, the Subsidiary Guarantors or the Trustee by notice to the
others may designate additional or different addresses of subsequent notices or
communications.
All notices and communications (other than those sent to Holders of
Notes) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder of Notes shall be mailed by
first-class mail, certified or registered, return receipt requested, to his
address shown on the register kept by the Registrar. Failure to mail a notice
or communication to a Holder of Notes or any defect in it shall not affect its
sufficiency with respect to other Holders of Notes. If a notice or
communication is mailed in the manner provided above within the time prescribed,
it is duly given, whether or not the addressee receives it.
In case by reason of the suspension of regular mail service or by
reason of any other cause, it shall be impracticable to mail notice of any event
as required by any provision of this Indenture, then any method of giving such
notice as shall be reasonably satisfactory to the Trustee shall be deemed to be
a sufficient giving of such notice.
If the Issuers mail a notice or communication to Holders of Notes, it
shall mail a copy to the Trustee and each Agent at the same time.
Section 11.3 Communication by Holders with Other Holders.
Holders of Notes may communicate pursuant to TIA (S) 312(b) with other
Holders of Notes with respect to their rights under this Indenture or the Notes.
The Issuers, the Subsidiary Guarantors, the Trustee, the Registrar and anyone
else shall have the protection of TIA (S) 312(c).
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<PAGE>
Section 11.4 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by an Issuer or a Subsidiary Guarantor
to the Trustee to take any action under this Indenture, such Issuer or
Subsidiary Guarantor shall furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 11.5) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 11.5) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been complied with; and
provided, however, in the case of any such application or request as to which
the furnishing of such certificates and/or opinions is specifically required by
any provision of this Indenture relating to such particular application or
request, no additional certificate or opinion need be furnished.
Section 11.5 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA (S) 314(a)(4)) shall include:
(1) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with; provided, however, that
with respect to matters of fact, an Opinion of Counsel may rely upon an
Officers' Certificate or a certificate of a public official.
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<PAGE>
Section 11.6 Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Officer of the Issuers, may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such Officer knows that the certificate or
opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate or opinion
may be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Issuers stating
that the information with respect to such factual matters is in the possession
of the Issuers, unless such counsel knows that the certificate or opinion or
representations with respect to such matters are erroneous. Opinions of Counsel
required to be delivered to the Trustee may have qualifications customary for
opinions of the type required and counsel delivering such Opinions of Counsel
may rely on certificates of the Company or government or other officials
customary for opinions of the type required, including certificates certifying
as to matters of fact, including that various financial covenants have been
complied with.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 11.7 Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders of Notes. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
Section 11.8 Legal Holidays.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in The City of New York, in the city in which the Corporate Trust
Office of the Trustee is located or at a place of payment are authorized or
obligated by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
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<PAGE>
Section 11.9 No Recourse Against Others.
(a) No member of the Company or director, officer, employee, partner
or stockholder of the Master Partnership, the Manager, Finance Corp. or any
Subsidiary Guarantor, as such, shall have any liability for any obligations of
the Issuers and the Subsidiary Guarantors under the Notes, the Subsidiary
Guarantors or this Indenture or for any claim based on, in respect of or by
reason of such obligations. Each Holder of Notes, by accepting a Note, waives
and releases all such liability. The waiver and release shall be part of the
consideration for the issuance of the Notes.
(b) Except as provided for in any Subsidiary Guarantee, the
obligations of the Issuers under this Indenture and the Notes will be non-
recourse to the Manager and the Master Partnership (and their respective
affiliates (other than the Issuers)) and payable only out of the cash flow and
assets of the Issuers. The Trustee agrees, and each Holder of a Note, by
accepting a Note, will be deemed to have agreed in this Indenture that neither
the Manager nor its assets nor the Master Partnership nor its assets (nor any of
their respective affiliates (other than the Issuers) nor their respective
assets) shall be liable for any of the obligations of the Issuers under this
Indenture or the Notes (except as provided for by any Subsidiary Guarantee). In
addition, neither the Manager nor the Holders of Notes will have any right to
require the Company to make distributions to the Master Partnership.
(c) Notwithstanding the foregoing, nothing in this provision shall be
construed as a waiver or release of any claims under the federal securities
laws.
Section 11.10 Duplicate Originals.
The parties may sign any number of copies of this Indenture. One
signed copy is enough to prove this Indenture.
Section 11.11 Governing Law.
This Indenture, the Notes and the Subsidiary Guarantees shall be
governed by, and construed in accordance with, the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the application of the laws of another jurisdiction would be
required thereby.
Section 11.12 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Issuers or their respective Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
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Section 11.13 Successors.
All agreements of the Issuers and the Subsidiary Guarantors in this
Indenture, the Notes and the Subsidiary Guarantees shall bind their successors.
All agreements of the Trustee in this Indenture shall bind its successor.
Section 11.14 Benefits of Indenture.
Nothing in this Indenture, the Notes or the Subsidiary Guarantees,
expressed or implied, shall give to any Person (other than the parties hereto
and their successors hereunder, any Paying Agent and the Holders) any benefit or
any legal or equitable right, remedy or claim under this Indenture.
Section 11.15 Severability.
In case any provision in this Indenture, the Notes or the Subsidiary
Guarantees shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
Section 11.16 Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
Section 11.17 Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
[signatures on following page]
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<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the undersigned have caused this Indenture to be
executed as of the date first above written.
U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.
By: U.S. Timberlands Services Company, L.L.C.
as Managing Member
By:_____________________________________
Name:
Title:
U.S. TIMBERLANDS FINANCE CORP.
By:_____________________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
By:_____________________________________
Name:
Title:
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<PAGE>
EXHIBIT A
[Face of Note]
U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.
U.S. TIMBERLANDS FINANCE CORP.
9% SENIOR NOTE DUE 2007
No. $
CUSIP NO. 912737AA1
U.S. Timberlands Klamath Falls, L.L.C., a Delaware limited liability
company, and U.S. Timberlands Finance Corp., a Delaware corporation, jointly and
severally, promise to pay to __________________or registered assigns the
principal sum of ___________ Dollars on November 15, 2007.
Interest Payment Dates: May 15 and November 15
Record Dates: May 1 and November 1
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Issuers have caused this Note to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
Dated: November 19, 1997
[Seal] U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.
Attest: BY: U.S. TIMBERLANDS SERVICES
COMPANY, L.L.C.,
By:________________________ its Managing Member
By:_________________________
[Seal] U.S. TIMBERLANDS FINANCE CORP.
Attest:
By: By:
A-1
<PAGE>
Additional provisions of this Note are set forth on the other side of this
Note.
A-2
<PAGE>
Certificate of Authentication:
State Street Bank and Trust Company, as
Trustee, certifies that this is one of the
Notes referred to in the Indenture.
By:__________________________________________
Authorized Signature
[Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. The Depository Trust Company shall act as the Depositary until a
successor shall be appointed by the Company and the Registrar. Unless this
certificate is presented by an authorized representative of The Depository Trust
Company (55 Water Street, New York, New York) ("DTC"), to the Issuers or their
agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or such other name as may be
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or such other entity as may be requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.]/1/
_______________
/1/ This paragraph should be included only if the Note is issued in global
form.
A-3
<PAGE>
[Reverse of Note]
U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.
U.S. TIMBERLANDS FINANCE CORP.
9% SENIOR NOTE DUE 2007
1. Interest. U.S. Timberlands Klamath Falls, L.L.C., a Delaware limited
liability company (the "Company"), and U.S. Timberlands Finance Corp., a
Delaware corporation ("Finance Corp." and, together with the Company, the
"Issuers"), jointly and severally promise to pay interest on the principal
amount of this Note at 9 % per annum from November 19, 1997 until maturity. The
Issuers will pay interest semiannually on May 15 and November 15 of each year
(each an "Interest Payment Date"), or if any such day is not a Business Day, on
the next succeeding Business Day. Interest on the Notes will accrue from the
most recent Interest Payment Date on which interest has been paid or, if no
interest has been paid, from November 19, 1997; provided, that if there is no
existing Default in the payment of interest, and if this Note is authenticated
between a record date referred to on the face hereof and the next succeeding
Interest Payment Date, interest shall accrue from such next succeeding Interest
Payment Date; provided, further, that the first Interest Payment Date shall be
May 15, 1998. The Issuers shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue principal and premium, if
any, from time to time on demand at the rate borne by the Notes; it shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. Method of Payment. The Issuers will pay interest on the Notes (except
defaulted interest) to the Persons who are registered Holders of Notes at the
close of business on the record date immediately preceding the Interest Payment
Date, except as provided in Section 2.12 of the Indenture with respect to
defaulted interest. The Notes will be payable as to principal, premium,
interest, if any, at the office or agency of the Issuers maintained for such
purpose within or without the City and State of New York, or, at the option of
the Issuers, payment of interest may be made by check mailed to the Holders at
their respective addresses set forth in the register of Holders; provided that
payment by wire transfer of immediately available/same day funds will be
required with respect to principal of, and interest and premium, if any, on, the
Global Note. Such payment shall be in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts.
3. Paying Agent and Registrar. Initially, the Trustee will act as Paying
Agent and Registrar. The Issuers may change any Paying Agent, Registrar or co-
registrar without notice. The Issuers or any of their Subsidiaries may act as
Paying Agent or Registrar.
A-4
<PAGE>
4. Indenture. The Issuers issued the Notes under an Indenture, dated as
of November 19, 1997 (the "Indenture"), among the Issuers and the Trustee.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. The terms of the Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939 (15 U.S. Code (S)(S) 77aaa-77bbb) as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the Notes are
subject to all such terms, and Holders are referred to the Indenture and such
Act for a statement of such terms. The Notes are unsecured senior general
obligations of the Issuers limited to $225,000,000 aggregate principal amount.
Under certain circumstances, the Notes may become obligations of the Subsidiary
Guarantors.
5. Optional Redemption. The Notes are not redeemable prior to November
15, 2002. Thereafter, the Notes will be subject to redemption at the option of
the Issuers, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below, plus accrued and unpaid interest thereon to the applicable
redemption date, if redeemed during the 12-month period beginning on November 15
of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2002............... 104.8125%
2003............... 103.2083%
2004............... 101.6042%
2005 and thereafter 100.0000%
</TABLE>
Notwithstanding the foregoing, at any time on or before November 15, 2000,
the Issuers may redeem up to 35% of the original aggregate principal amount of
the Notes at a redemption price of 109.625% of the principal amount thereof,
plus accrued and unpaid interest thereon to the redemption date, with the net
proceeds of a Public Equity Offering; provided, however, that at least 65% of
the aggregate principal amount of Notes originally issued shall be outstanding
immediately after such redemption; provided further, that such redemption shall
occur within 120 days of the date of the closing of such Public Equity Offering;
provided further, that in the event of a Public Equity Offering by the Master
Partnership, the Master Partnership contributes to the capital of the Company
the portion of the net cash proceeds of such Public Equity Offering necessary to
pay the aggregate redemption price (plus accrued and unpaid interest thereon to
the redemption date) of the Notes to be redeemed.
6. Notice of Redemption. Notice of redemption will be mailed by first
class mail to the Holder's registered address at least 30 days but not more than
60 days before the redemption date to each Holder of Notes to be redeemed. If
less than all Notes are to be redeemed, the Trustee shall select the Notes to be
redeemed among the Holders of Notes pro rata, by lot or in accordance with a
method which the Trustee considers to be fair and appropriate (and in such
manner as complies with applicable legal and stock exchange requirements, if
any). If any Note is to be redeemed in part only, the notice of redemption that
relates to such Note shall state the portion of the principal amount
A-5
<PAGE>
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the redemption date interest
ceases to accrue on Notes or portions of them called for redemption (unless the
Issuers shall default in the payment of the redemption price or accrued
interest).
7. Change of Control. In the event of a Change of Control of the
Company, the Issuers shall be required to make an offer to purchase all or any
portion of each Holder's Notes, at 101% of the principal amount thereof, plus
accrued interest to the Change of Control Payment Date.
8. Asset Sale Offer. In the event of certain Asset Sales, the Issuers
may be required to make an Asset Sale Offer to purchase all or any portion of
each Holder's Notes, at 100% of the principal amount of the Notes plus accrued
interest, if any, to the Purchase Date.
9. Excess Harvest Offer. In the event of an Excess Harvest, the Issuers
may be required to make an Excess Harvest Offer to purchase the maximum
principal amount of Notes that may be purchased out of Excess Harvest Proceeds,
at 100% of the principal amount thereof plus accrued interest, if any, to the
Purchase Date.
10. Restrictive Covenants. The Indenture imposes certain limitations on,
among other things, the ability of the Company and Finance Corp. to merge or
consolidate with any other Person or sell, lease or otherwise transfer all or
substantially all of their respective properties or assets, the ability of the
Company or its Restricted Subsidiaries to dispose of certain assets, to pay
dividends and make certain other distributions and payments, to make certain
investments or redeem, retire, repurchase or acquire for value shares of Capital
Stock, to incur additional Indebtedness or incur encumbrances against certain
property, to harvest Timber and to enter into certain transactions with
Affiliates, all subject to certain limitations described in the Indenture.
11. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in denominations of $1,000 and whole multiples of $1,000. A
Holder may transfer or exchange Notes in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not transfer or exchange
any Notes selected for redemption. Also, it need not transfer or exchange any
Notes for a period of 15 days before a selection of Notes to be redeemed.
12. Persons Deemed Owners. The registered Holder of a Note may be treated
as the owner of it for all purposes and neither the Issuers, the Trustee nor any
Agent shall be affected by notice to the contrary.
13. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for one year, the Trustee or Paying Agent will pay the money
back to the Issuers at their joint request. After that, all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
A-6
<PAGE>
14. Amendment, Supplement, Waiver. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for Notes), and any existing default or noncompliance with any provision may be
waived with the consent of the Holders of a majority in principal amount of the
Notes then outstanding (including consents obtained in connection with a tender
offer or exchange offer for Notes). Without the consent of any Holder, the
Issuers may amend or supplement the Indenture, any Subsidiary Guarantee or the
Notes to, among other things, cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Issuer's and Subsidiary Guarantor's
obligations to holders of the Notes in the case of merger or consideration, to
add or release any Subsidiary Guarantor pursuant to the terms of the Indenture
or to make any change that does not adversely affect the rights of any
Holder.
15. Defaults and Remedies. An event of default generally is: default by
the Issuers or any Subsidiary Guarantor for 30 days in payment of interest on
the Notes; default by the Issuers or any Subsidiary Guarantor in payment of
principal of or premium, if any, on the Notes; defaults resulting in
acceleration prior to maturity of certain other Indebtedness or resulting from
payment defaults under certain other Indebtedness; failure by the Issuers for 60
days after notice to comply with any of its other agreements in the Indenture;
certain final judgments against the Issuers; the cessation, or assertion of
cessation by the Issuers or any Subsidiary Guarantor, of any Subsidiary
Guarantee; and certain events of bankruptcy or insolvency. Subject to certain
limitations in the Indenture, if an Event of Default occurs and is continuing,
the Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable immediately,
except that in the case of an Event of Default arising from certain events of
bankruptcy, insolvency or reorganization relating to either of the Issuers or
any Significant Subsidiaries, all outstanding Notes shall become due and payable
immediately without further action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. The Trustee may
require indemnity satisfactory to it before it enforces the Indenture or the
Notes. Subject to certain limitations, Holders of a majority in principal
amount of the Notes may direct the Trustee in its exercise of any trust or
power. The Issuers must furnish an annual compliance certificate to the
Trustee.
16. Subsidiary Guarantees. Subject to the limitations set forth in the
Indenture and any future Subsidiary Guarantees, the payment of principal of,
premium, if any, and interest on the Notes will be guaranteed by any future
Subsidiary Guarantors.
17. Trustee Dealings with Issuers. State Street Bank and Trust Company,
the Trustee under the Indenture, in its individual or any other capacity, may
become the owner or pledgee of Notes and may otherwise deal with the Issuers or
their respective Subsidiaries or Affiliates with the same rights it would have
if it were not Trustee.
A-7
<PAGE>
18. No Recourse Against Others. No member of the Company, director,
officer, employee, or stockholder of the Master Partnership, the Manager,
Finance Corp. or any Subsidiary Guarantor, as such, shall have any liability for
any obligations of the Issuers and the Subsidiary Guarantors under the Notes,
the Subsidiary Guarantees or the Indenture or for any claim based on, in respect
of or by reason of such obligations. Each Holder of Notes, by accepting a Note,
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
The obligations of the Issuers under the Indenture and the Notes will be
non-recourse to the Manager and the Master Partnership (and their respective
Affiliates (other than the Issuers)), and payable only out of the cash flow and
assets of the Issuers. The Trustee has, and each Holder of a Note, by accepting
a Note, will be deemed to have agreed in the Indenture that neither the Manager
nor its assets nor the Master Partnership nor its assets (nor any of their
respective Affiliates (other than the Issuers)) nor their respective assets,
shall be liable for any of the obligations of the Issuers under the Indenture or
the Notes (except as provided in the Subsidiary Guarantees). In addition,
neither the Issuers nor the Holders of Notes will have any right to require the
Company to make distributions to the Master Partnership.
19. Authentication. This Note shall not be valid until the Trustee or an
authenticating agent signs the certificate of authentication on the other side
of this Note.
20. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
21. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Securities Identification Procedures, the Issuers will
cause CUSIP numbers to be printed on the Notes as a convenience to Holders of
the Notes. No representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the other identification
numbers printed hereon.
The Issuers will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to U.S. Timberlands
Klamath Falls, L.L.C., 6400 Highway 66, Klamath Falls, Oregon 97601, Attention:
Secretary.
A-8
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to:
________________________________________________________________________________
(Insert assignee's social security or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________ as agent to transfer this Note
on the books of the Issuers. The agent may substitute another to act for him.
Your Signature:
_________________________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Date:______________________________
Signature Guarantee:_______________________
A-9
<PAGE>
FORM OF OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuers pursuant to
Section 4.16, Section 4.17 or Section 4.18 of the Indenture, check the
appropriate box:
Section 4.16 [_] Section 4.17 [_] Section 4.18 [_]
If you want to have only part of this Note purchased by the Issuers
pursuant to Section 4.16, Section 4.17 or Section 4.18 of the Indenture, state
the amount (in integral multiples of $1,000):
$________________________
Date:____________________ Signature:_______________________
(Sign exactly as your
name appears on the other
side of this Note)
Signature Guarantee:____________________________________________________________
A-10
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTE*
The following exchanges of a part of this Global Note for Definitive Notes have
been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of Amount of of this Global Note Signature of
decrease in increase in following such authorized officer
Principal Amount Principal Amount decrease Trustee or
Date of Exchange of this Global Note of this Global Note (or increase) Note Custodian
- ------------------ ------------------- ------------------- ------------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
_______________
* This should be included only if the Note is issued in global form.
A-11
<PAGE>
EXHIBIT B
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY FUTURE GUARANTORS
Supplemental Indenture (this "Supplemental Indenture"), dated as of
_________________, between _______________ (the "Guarantor"), a subsidiary of
U.S. Timberlands Klamath Falls, L.L.C., (or its successor), a Delaware limited
liability company (the "Company"), and State Street Bank and Trust Company, as
trustee under the indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company and U.S. Timberlands Finance Corp., a Delaware
corporation ("Finance Corp." and, together with the Company, the "Issuers") have
heretofore executed and delivered to the Trustee an indenture (the "Indenture"),
dated as of November 19, 1997, providing for the issuance of an aggregate
principal amount of $225,000,000 of 9% Senior Notes due 2007 (the
"Notes");
WHEREAS, Section 4.19 of the Indenture provides that under certain
circumstances the Company may cause the Guarantor to execute and deliver to the
Trustee a supplemental indenture pursuant to which the Guarantor shall
unconditionally guarantee all of the Issuers' obligations under the Notes
pursuant to a Subsidiary Guarantee on the terms and conditions set forth herein;
and
WHEREAS, pursuant to Section
B-1
<PAGE>
B-2
<PAGE>
B-3
<PAGE>
9.1 of the Indenture, the Trustee is authorized to execute and deliver this
Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guarantor and the Trustee mutually covenant and agree for the equal and ratable
benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guarantor hereby agrees that its
obligations to the Holder and the Trustee pursuant to this Subsidiary Guarantee
shall be as expressly set forth in Article 10 of the Indenture and in such other
provisions of the Indenture
B-4
<PAGE>
as are applicable to Guarantors, and reference is made to the Indenture for the
precise terms of this Supplemental Indenture. The terms of Article 10 of the
Indenture and such other provisions of the Indenture as are applicable to
Guarantors are incorporated herein by reference.
3. Execution and Delivery of Subsidiary Guarantee.
(A) To evidence its Subsidiary Guarantee set forth in this
Supplemental Indenture, the Guarantor hereby agrees that a notation of such
Subsidiary Guarantee substantially in the form of Exhibit C to the
Indenture shall be endorsed by an Officer of such Guarantor on each Note
authenticated and delivered by the Trustee after the date hereof.
(B) Notwithstanding the foregoing, the Guarantor hereby agrees
that its Subsidiary Guarantee set forth herein shall remain in full force
and effect notwithstanding any failure to endorse on each Note a notation
of such Subsidiary Guarantee.
(C) If an Officer whose signature is on this Supplemental
Indenture or on the Subsidiary Guarantee no longer holds that office at the
time the Trustee authenticates the Note on which a Subsidiary Guarantee is
endorsed, the Subsidiary Guarantee shall be valid nevertheless.
(d) The delivery of any Note by the Trustee, after the
authentication thereof under the Indenture, shall constitute due delivery
of the Subsidiary Guarantee set forth in this Supplemental Indenture on
behalf of the Guarantor.
4. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator or stockholder of the Guarantor, as such, shall
have any liability for any obligations of the Issuers or any Guarantor under the
Notes, any Subsidiary Guarantees, the Indenture or this Supplemental Indenture
or for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of the Notes by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes.
5. New York Law to Govern. The internal law of the State of New
York shall govern and be used to construe this Supplemental Indenture and the
Subsidiary Guarantee.
6. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
B-5
<PAGE>
7. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: [Guarantor]
By:
Name:
Title:
Dated:
as Trustee
By:
Name:
Title:
B-6
<PAGE>
EXHIBIT C
FORM OF NOTATION ON SENIOR NOTE
RELATING TO SUBSIDIARY GUARANTEE
Each Subsidiary Guarantor set forth below which in accordance with
Section 4.19 of the Indenture is required to guarantee the obligations of the
Issuers under the Notes upon execution of a counterpart of the Indenture, has
unconditionally, jointly and severally guaranteed the full and prompt payment of
the principal of, premium, if any, and interest on the Notes and all other
amounts due and payable under the Indenture and the Notes by the Issuers,
whether at maturity, by acceleration, redemption, repurchase or otherwise,
including, without limitation, interest on the overdue principal of, premium, if
any, and interest, on the Notes, to the extent lawful, all in accordance with
the terms hereof and of the Indenture.
The obligations of each Guarantor to the Holder and to the Trustee
pursuant to this Subsidiary Guarantee and the Indenture are as expressly set
forth in Article 10 of the Indenture and in such other provisions of the
Indenture as are applicable to Guarantors, and reference is hereby made to such
Indenture for the precise terms of this Subsidiary Guarantee. The terms of
Article 10 of the Indenture and such other provisions of the Indenture as are
applicable to Guarantors are incorporated herein by reference.
This is a continuing guarantee and shall remain in full force and
effect and shall be binding upon each Guarantor and its successors and assigns
until full and final payment of all of the Issuers' obligations under the Notes
and the Indenture and shall inure to the benefit of the successors and assigns
of the Trustee and the Holders and, in the event of any transfer or assignment
of rights by any Holder or the Trustee, the rights and privileges herein
conferred upon that party shall automatically extend to and be vested in such
transferee or assignee, all subject to the terms and conditions hereof. This is
a guarantee of payment and not a guarantee of collection.
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Note upon which this
Subsidiary Guarantee is noted shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized officers.
By:
Name:
Title:
C-1
<PAGE>
Execution Copy
CONTRIBUTION, CONVEYANCE AND ASSUMPTION AGREEMENT
This Contribution, Conveyance and Assumption Agreement, dated as of
November 19, 1997, is entered into by and among U.S. TIMBERLANDS COMPANY, L.P.,
a Delaware limited partnership (the "Partnership"), U.S. TIMBERLANDS MANAGEMENT
-----------
COMPANY, L.L.C., a Delaware limited liability company (formerly known as U.S.
Timberlands Services Company, L.L.C.) ("Old Services"), U.S. TIMBERLANDS KLAMATH
------------
FALLS, L.L.C., a Delaware limited liability company (the "Operating Company"),
-----------------
U.S. TIMBERLANDS HOLDINGS, L.L.C., a Delaware limited liability company
("Holdings"), U.S. TIMBERLANDS SERVICES COMPANY, L.L.C., a Delaware limited
--------
liability company (formerly known as New Services, L.L.C.) (the "General
-------
Partner") and RUDEY TIMBER COMPANY, L.L.C., a Delaware limited liability company
("Rudey Timber").
------------
RECITALS
WHEREAS, Old Services has formed the General Partner contributing
$1,000.00 to it in exchange for all of the interest therein;
WHEREAS, the General Partner, as general partner, and John M. Rudey,
as the organizational limited partner, have formed the Partnership pursuant to
the Delaware Revised Uniform Limited Partnership Act for the purpose of owning
certain member interests in the Operating Company;
WHEREAS, the General Partner contributed $10.00 to the capital of the
Partnership and received a 1% general partner interest therein; and John M.
Rudey contributed $990.00 to the capital of the Partnership and received a 99%
limited partner interest therein;
<PAGE>
WHEREAS, U.S. Timberlands Finance Corp. ("Finance Corp."), a Delaware
-------------
corporation, was formed on August 20, 1997 and on August 26, 1997, the
Partnership contributed $1,000.00 to it in exchange for 1,000 shares of common
stock, par value $.01 per share, of Finance Corp. and on October 17, 1997, all
such shares were contributed by the Partnership to the Operating Company;
WHEREAS, Old Services has agreed to contribute to the General Partner
all of its assets in exchange for an additional interest in the General Partner
and the assumption by the General Partner of substantially all of the
liabilities of Old Services as described herein;
WHEREAS, concurrently with the consummation of the transactions
contemplated hereby, the Operating Company will assume $130 million of
indebtedness of Holdings, together with all accrued interest and its obligation
to pay the guarantee fee to Weyerhaeuser Company pursuant to that certain
Indemnity and Operations Agreement dated as of August 30, 1996, between
Holdings, Rudey Timber, John M. Rudey and Weyerhaeuser Company, as amended (the
"Guarantee Fee");
-------------
WHEREAS, the General Partner has agreed to contribute its timber
operations to the Operating Company in exchange for an interest in the Operating
Company and the assumption by the Operating Company of substantially all of the
liabilities of the General Partner as described herein;
WHEREAS, Rudey Timber has agreed to contribute all of its member
interest in the Operating Company to Holdings in exchange for an additional
member interest in Holdings;
WHEREAS, pursuant to the Amended and Restated Agreement of Limited
Partnership of the Partnership (the "Partnership Agreement"), the General
---------------------
Partner has agreed to
-2-
<PAGE>
contribute to the Partnership, as a capital contribution thereto, all but
1.0101% of its member interest in the Operating Company (the "Operating Company
-----------------
LLC Interest") in exchange for (i) the continuation of its general partner
- ------------
interest in the Partnership, (ii) the right to receive Incentive Distributions
(as defined in the Partnership Agreement) and (iii) Subordinated Units;
WHEREAS, pursuant to the Partnership Agreement, Holdings has agreed to
contribute to the Partnership, as a capital contribution thereto, all of its
member interests in the Operating Company in exchange for Subordinated
Units;
NOW, THEREFORE, in consideration of their mutual undertakings and
agreements hereunder, the parties to this Agreement undertake and agree as
follows:
ARTICLE I
DEFINITIONS
The following capitalized terms shall have the meanings given below.
"Agreement" means this Contribution, Conveyance and Assumption
---------
Agreement.
"Effective Time" means 9:00 a.m. Eastern Standard Time on November 19,
--------------
1997.
"Employee Benefits" means sole sponsorship of all employee benefit
-----------------
plans and compensation programs of Old Services, including without limitation,
the 401(k) savings plan, the health insurance plan and the medical savings plan
and all trusts, insurance contracts or other funding instruments for such plans
and programs.
"Excluded General Partner Assets" means those assets of the General
-------------------------------
Partner described on Schedule I hereto.
-3-
<PAGE>
"Excluded Liabilities" means all of the liabilities described on
--------------------
Schedule II hereto.
"Excluded Old Services Assets" means cash in the amount of $1 Million.
----------------------------
"Excluded Old Services Liabilities" means all of the liabilities
---------------------------------
described on Schedule III hereto.
"Existing Indebtedness" means the bank indebtedness of Holdings in the
---------------------
principal amount of $130,000,000, together with accrued interest thereon and the
Guarantee Fee.
"General Partner" has the meaning assigned to such term in the
---------------
Recitals to this Agreement.
"General Partner Assets" means all assets owned, leased or held by the
----------------------
General Partner, as of the Effective Time, of every kind, character and
description, whether tangible or intangible, whether real, personal or mixed,
whether accrued or contingent, and wherever located, including without
limitation:
(a) all timber sale agreements, site preparation contracts, forestry
contracts, log sales agreements, stumpage sale agreements, logging
contracts, seedling production and supply contracts, grazing leases and
equipment leases;
(b) all motor vehicles, trailers, snowmobiles, tractors, forklifts and
forestry machinery and equipment;
(c) all inventory, including nursery and seed inventory and crops;
(d) all trade names, trade marks, service marks, logos, marks and
symbols of any kind;
-4-
<PAGE>
(e) every customer relationship, employee relationship, supplier
relationship and other relationship of any kind;
(f) all books, records, papers, files and instruments of whatever
nature and wherever located, including, without limitation, accounting and
financial records, documentation related to the General Partner Assets,
customer correspondence, sales records, credit reports and other data
relating to the General Partner Assets;
(g) all licenses, permits and authorizations of every kind;
(h) any and all rights, claims and causes of action that the General
Partner may have under warranties, insurance policies or otherwise against
any person or property, whether known or unknown, accrued or contingent,
and whether or not reflected on the books and records of the General
Partner as of the Effective Time, insofar as any of the same relate to the
General Partner Assets prior to the Effective Time and such rights, claims
or causes of action representing reimbursement or recovery of amounts
actually paid by the Partnership or the Operating Company after the
Effective Time;
(i) any and all monies, rents, revenues, accounts receivable or other
proceeds receivable or owning to the General Partner;
(j) all deposits, prepayments and prepaid expenses;
(k) all unbilled receivables; and
(l) every other proprietary right of any kind;
excluding all Excluded General Partner Assets.
"General Partner Assumed Liabilities" means all of the General
-----------------------------------
Partner's liabilities arising from or relating to the General Partner Assets, as
of the Effective Time, of every kind,
-5-
<PAGE>
character and description, whether matured or unmatured, known or unknown,
accrued or contingent, liquidated or unliquidated, and whether or not reflected
on the books and records of the General Partner as of the Effective Time,
excluding, however, any of such liabilities that constitute Excluded
Liabilities.
"Guarantee Fee" has the meaning assigned to such term in the recitals
-------------
to this Agreement.
"Holdings" has the meaning assigned to such term in the opening
--------
paragraph of this Agreement.
"Old Services" has the meaning assigned to such term in the opening
------------
paragraph of this Agreement.
"Old Services Assets" shall mean all assets owned, leased or held by
-------------------
Old Services, as of the Effective Time of every kind, character and description,
whether tangible or intangible, whether real, personal or mixed, whether accrued
or contingent, and wherever located, including without limitation all right,
title and interest of Old Services in and to:
(a) all timber sale agreements, site preparation contracts, forestry
contracts, log sales agreements, stumpage sale agreements, logging
contracts, seedling production and supply contracts, grazing leases and
equipment leases;
(b) all motor vehicles, trailers, snowmobiles, tractors, forklifts and
forestry machinery and equipment;
(c) all inventory, including nursery and seed inventory and crops;
(d) all computers, monitors, copiers, printers, fax machines,
typewriters, computer software, furniture and other office equipment and
machinery;
-6-
<PAGE>
(e) all trade names, trade marks, service marks, logos, marks and
symbols of any kind;
(f) every customer relationship, employee relationship, supplier
relationship and other relationship of any kind;
(g) all books, records, papers, files and instruments of whatever
nature and wherever located, including, without limitation, accounting and
financial records, documentation related to the Old Services Assets,
customer correspondence, sales records, credit reports and other data
relating to the Old Services Assets;
(h) all licenses, permits and authorizations of every kind;
(i) every other proprietary right of any kind;
(j) the Employee Benefits;
(k) any and all rights, claims and causes of action that Old Services
may have under warranties, insurance policies or otherwise against any
person or property, whether known or unknown, accrued or contingent, and
whether or not reflected on the books and records of Old Services as of the
Effective Time, insofar as any of the same relate to the Old Services
Assets prior to the Effective Time and such rights, claims or causes of
action representing reimbursement or recovery of amounts actually paid by
the Partnership or the Operating Company after the Effective Time;
(l) any and all monies, rents, revenues, accounts receivable or other
proceeds receivable or owing to Old Services;
-7-
<PAGE>
(m) all deposits, prepayments and prepaid expenses; and
(n) all unbilled receivables;
excluding the Excluded Old Services Assets.
"Old Services Assumed Liabilities" means all of Old Services'
--------------------------------
liabilities arising from or relating to the Old Services Assets, as of the
Effective Time, of every kind, character and description, whether matured or
unmatured, known or unknown, accrued or contingent, liquidated or unliquidated,
and whether or not reflected on the books and records of Old Services as of the
Effective Time, excluding, however, any of such liabilities that constitute
Excluded Old Services Liabilities.
"Operating Company" has the meaning assigned to such term in the
-----------------
opening paragraph of this Agreement.
"Operating Company LLC Interest" has the meaning assigned to such term
------------------------------
in the Recitals to this Agreement.
"Partnership" has the meaning assigned to such term in the opening
-----------
paragraph of this Agreement.
"Partnership Agreement" has the meaning assigned to such term in the
---------------------
Recitals to this Agreement.
"Restriction" has the meaning assigned to such term in Section 6.5.
-----------
"Restriction-Asset" has the meaning assigned to such term in Section
-----------------
6.5.
"Rudy Timber" has the meaning assigned to such term in the opening
-----------
paragraph of this Agreement.
-8-
<PAGE>
"Subordinated Units" has the meaning assigned to such term in the
------------------
Partnership Agreement.
"Weyerhaeuser Agreement" means that certain letter agreement dated May
----------------------
14, 1997 by and among Weyerhaeuser Company, Holdings, the Operating Company, Old
Services, Rudey Timber and John M. Rudey.
ARTICLE II
CONTRIBUTIONS TO THE GENERAL PARTNER, THE OPERATING COMPANY AND HOLDINGS
2.1 Contribution of Old Services Assets. Effective as of the Effective
-----------------------------------
Time, Old Services hereby grants, contributes, transfers and conveys to the
General Partner, its successors and assigns, for its and their own use forever,
all right, title and interest in and to the Old Services Assets in exchange for
(i) additional member interests in the General Partner and (ii) other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and the General Partner hereby accepts the Old Services Assets, as
a contribution to the capital of the General Partner.
TO HAVE AND TO HOLD the Old Services Assets unto the General Partner,
its successors and assigns, together with all and singular the rights and
appurtenances thereto, subject, however, to the terms and conditions stated in
this Agreement, forever.
2.2 Contribution of General Partner Assets. Effective as of the Effective
--------------------------------------
Time, the General Partner hereby grants, contributes, transfers and conveys to
the Operating Company, its successors and assigns, for its and their own use
forever, all right, title and interest of the General Partner in and to the
General Partner Assets in exchange for (i) member interests in the Operating
Company and (ii) other good and valuable consideration, the receipt and
sufficiency of which are
-9-
<PAGE>
hereby acknowledged and the Operating Company accepts the General Partner Assets
as a contribution to the capital of the Operating Company.
TO HAVE AND TO HOLD the General Partner Assets unto the Operating
Company, its successors and assigns, together with all and singular the rights
and appurtenances thereto, subject, however, to the terms and conditions stated
in this Agreement, forever.
2.3 Contribution of Rudey Timber. Effective as of the Effective Time,
----------------------------
Rudey Timber hereby grants, contributes, transfers and conveys to Holdings, its
successors and assigns, for its and their own use forever, all right, title and
interest of Rudey Timber in and to its member interest in the Operating Company
in exchange for an additional member interest in Holdings, the receipt and
sufficiency of which are hereby acknowledged and Holdings accepts the member
interest in the Operating Company as a contribution to the capital of
Holdings.
TO HAVE AND TO HOLD the member interest in the Operating Company unto
Holdings, its successors and assigns, together with all and singular the rights
and appurtenances thereto, subject, however, to the terms and conditions stated
in this Agreement, forever.
ARTICLE III
CONTRIBUTIONS TO THE PARTNERSHIP
3.1 General Partner Contribution. Effective as of the Effective Time,
----------------------------
the General Partner hereby grants, contributes, transfers and conveys to the
Partnership, its successors and assigns, for its and their own use forever, all
right, title and interest of the General Partner in and to the Operating Company
LLC Interest in exchange for (i) the continuation of the General Partner's
interest in the Partnership, (ii) the right to receive Incentive Distributions
(as defined in the Partnership Agreement) and receipt of 1,387,963 Subordinated
Units, and (iii) other good and valuable
-10-
<PAGE>
consideration, the sufficiency of which is hereby acknowledged and the
Partnership hereby accepts the Operating Company LLC Interest, as a contribution
to the capital of the Partnership.
TO HAVE AND TO HOLD the Operating Company LLC Interest unto the
Partnership, its successors and assigns, together with all and singular the
rights and appurtenances thereto, subject, however, to the terms and conditions
stated in this Agreement, forever.
3.2 Holdings Contribution. Effective as of the Effective Time, Holdings
---------------------
hereby grants, contributes, transfers and conveys to the Partnership, its
successors and assigns, for its and their own use forever, all right, title and
interest of Holdings in and to its member interest in the Operating Company in
exchange for (i) the receipt of 2,894,157 Subordinated Units and (ii) other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged and the Partnership hereby accepts said interest as a contribution
to the capital of the Partnership.
TO HAVE AND TO HOLD the member interest in the Operating Company unto the
Partnership, its successors and assigns, together with all and singular the
rights and appurtenances thereto in anywise belonging, subject, however, to the
terms and conditions stated in this Agreement, forever.
ARTICLE IV
ASSUMPTION OF CERTAIN LIABILITIES
4.1 Assumption of Certain Liabilities by the General Partner. In
--------------------------------------------------------
connection with the contribution and transfer of the Old Services Assets to the
General Partner by Old Services, the General Partner hereby assumes and agrees
to duly and timely pay, perform and discharge the Old Services Assumed
Liabilities, to the full extent that Old Services has been heretofore or would
have been in the future, were it not for the execution and delivery of this
Agreement, obligated to pay,
-11-
<PAGE>
perform and discharge the Old Services Assumed Liabilities; provided, however,
that said assumption and agreement to duly and timely pay, perform and discharge
the Old Services Assumed Liabilities shall not increase the obligation of the
General Partner with respect to the Old Services Assumed Liabilities beyond that
of Old Services, waive any valid defense that was available to Old Services with
respect to the Old Services Assumed Liabilities or enlarge any rights or
remedies of any third party under any of the Old Services Assumed Liabilities.
4.2 Assumption of Certain Liabilities by the Operating Company. In
----------------------------------------------------------
connection with the contribution and transfer of the General Partner Assets to
the Operating Company by the General Partner, the Operating Company hereby
assumes and agrees to duly and timely pay, perform and discharge the General
Partner Assumed Liabilities, to the full extent that the General Partner has
been heretofore or would have been in the future, were it not for the execution
and delivery of this Agreement, obligated to pay, perform and discharge the
General Partner Assumed Liabilities; provided, however, that said assumption and
agreement to duly and timely pay, perform and discharge the General Partner
Assumed Liabilities shall not increase the obligation of the Operating Company
with respect to the General Partner Assumed Liabilities beyond that of the
General Partner, waive any valid defense that was available to General Partner
with respect to the General Partner Assumed Liabilities or enlarge any rights or
remedies of any third party under any of the General Partner Assumed
Liabilities.
4.3 Assumption of Existing Indebtedness by the Operating Company.
------------------------------------------------------------
The Operating Company hereby assumes and agrees to discharge the Existing
Indebtedness to the full extent that Holdings has been heretofore or would have
been in the future, were it not for the execution and delivery of this
Agreement, obligated to pay, perform and discharge the Existing Indebtedness;
-12-
<PAGE>
provided, however, that said assumption and agreement to duly and timely pay,
perform and discharge the Existing Indebtedness shall not increase the
obligation of the Operating Company with respect to the Existing Indebtedness
beyond that of Holdings, waive any valid defense that was available to Holdings
with respect to the Existing Indebtedness or enlarge any rights or remedies of
any third party under any of the Existing Indebtedness.
ARTICLE V
INDEMNIFICATION
5.1 Indemnification With Respect to the Weyerhaeuser Agreement. The
----------------------------------------------------------
Partnership shall indemnify, defend and hold harmless John M. Rudey and Rudey
Timber, their respective members, officers and directors and their respective
successors and assigns from and against any and all claims, demands, costs,
liabilities (including, without limitation, liabilities arising by way of active
or passive negligence) and expenses (including court costs and reasonable
attorneys' fees) of every kind, character and description, arising from or
relating to the Weyerhaeuser Agreement.
5.2 Indemnification With Respect to Excluded Old Services Liabilities.
-----------------------------------------------------------------
Old Services shall indemnify, defend and hold harmless the General Partner, its
officers and directors and its successors and assigns from and against any and
all claims, demands, costs, liabilities (including, without limitation,
liabilities arising by way of active or passive negligence) and expenses
(including court costs and reasonable attorneys' fees) of every kind, character
and description, whether known or unknown, accrued or contingent, and whether or
not reflected on the books and records of Old Services as of the Effective Time,
arising from or relating to the Excluded Old Services Liabilities.
-13-
<PAGE>
5.3 Indemnification With Respect to Excluded Liabilities. Old Services
----------------------------------------------------
and the General Partner shall indemnify, defend and hold harmless the
Partnership, the Operating Company, their respective officers and directors and
their respective successors and assigns from and against any and all claims,
demands, costs, liabilities (including, without limitation, liabilities arising
by way of active or passive negligence) and expenses (including court costs and
reasonable attorneys' fees) of every kind, character and description, whether
known or unknown, accrued or contingent, and whether or not reflected on the
books and records of Old Services or the General Partner as of the Effective
Time, arising from or relating to (i) the Excluded Liabilities and the Excluded
Old Services Liabilities or (ii) any failure of Old Services or the General
Partner to comply with any applicable bulk sales law of any jurisdiction in
connection with the transfer of the General Partner Assets to the Operating
Company.
5.4 Indemnification With Respect to General Partner Assumed Liabilities.
-------------------------------------------------------------------
The Operating Company shall indemnify, defend and hold harmless the General
Partner and Old Services, and their respective officers, directors, successors
and assigns from and against any and all claims, demands, costs, liabilities
(including, without limitation, liabilities arising by way of active or passive
negligence) and expenses (including court costs and reasonable attorneys' fees)
of every kind, character and description, whether known or unknown, accrued or
contingent, and whether or not reflected on the books and records of the General
Partner as of the Effective Time, arising from or relating to the General
Partner Assumed Liabilities.
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<PAGE>
ARTICLE VI
MISCELLANEOUS
6.1 Subrogation. The contribution of the General Partner Assets made
-----------
under Section 2.2 is made with full rights of substitution and subrogation of
the Operating Company, and all persons claiming by, through and under the
Operating Company, to the extent assignable, in and to all covenants and
warranties by the predecessors-in-title of the General Partner, and with full
subrogation of all rights accruing under applicable statutes of limitation and
all rights of action of warranty against all former owners of the General
Partner Assets.
6.2 Waiver of Bulk Sales Laws. Each of the parties hereto hereby
-------------------------
waives compliance with any applicable bulk sales law or any similar law in any
applicable jurisdiction in respect of the transactions contemplated by this
Agreement.
6.3 Further Assurances. From time to time after the date hereof, and
------------------
without any further consideration, Old Services and the General Partner shall
each execute, acknowledge and deliver all such additional deeds, assignments,
bills of sale, conveyances, instruments, notices, releases, acquittances and
other documents, and will do all such other acts and things, all in accordance
with applicable law, as may be necessary or appropriate (i) more fully to assure
the Operating Company, its successors and assigns, all of the properties,
rights, titles, interests, estates, remedies, powers and privileges by this
Agreement granted to the Operating Company or intended so to be, (ii) more fully
and effectively to vest in the Operating Company and its successors and assigns
beneficial and record title to the General Partner Assets hereby contributed and
assigned to the Operating Company or intended so to be and to put the Operating
Company in actual possession and control of the
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<PAGE>
General Partner Assets and to more fully and effectively carry out the purposes
and intent of this Agreement.
6.4 Power of Attorney. The General Partner hereby constitutes and
-----------------
appoints the Operating Company, its successors and assigns, its true and lawful
attorney-in-fact with full power of substitution for it and in its name, place
and stead or otherwise on behalf of the General Partner, its successors and
assigns, and for the benefit of the Operating Company, its successors and
assigns, to demand and receive from time to time the General Partner Assets and
to execute in the name of the General Partner and its successors and assigns
instruments of conveyance, instruments of further assurance and to give receipts
and releases in respect of the same, and from time to time to institute and
prosecute in the name of the Operating Company or the General Partner for the
benefit of the Operating Company, as may be appropriate, any and all proceedings
at law, in equity or otherwise which the Operating Company, its successors and
assigns may deem proper in order to collect, assert or enforce any claims,
rights or titles of any kind in and to the General Partner Assets, and to defend
and compromise any and all actions, suits or proceedings in respect of any of
the General Partner Assets and to do any and all such acts and things in
furtherance of this Agreement as the Operating Company, its successors or
assigns shall deem advisable. The General Partner hereby declares that the
appointment hereby made and the powers hereby granted are coupled with an
interest and are and shall be irrevocable and perpetual and shall not be
terminated by any act of the General Partner, its successors or assigns or by
operation of law.
6.5 Consents; Restriction on Assignment. If there are prohibitions
-----------------------------------
against or conditions to the conveyance of any assets conveyed herein without
the prior written consent of third parties, including, without limitation,
governmental agencies (other than consents of a ministerial nature
-16-
<PAGE>
which are normally granted in the ordinary course of business), which if not
satisfied would result in a breach of such prohibitions or conditions or would
give an outside party the right to terminate the Operating Company's rights with
respect to such assets (herein called a "Restriction"), then any provision
contained in this Agreement to the contrary notwithstanding, the transfer of
title to or interest in each such asset (herein called the "Restriction-Asset")
pursuant to this Agreement shall not become effective unless and until such
Restriction is satisfied, waived or no longer applies. When and if such a
Restriction is so satisfied, waived or no longer applies, to the extent
permitted by applicable law and any applicable contractual provisions, the
assignment of the Restriction-Asset subject thereto shall become effective
automatically as of the Effective Time, without further action on the part of
the Operating Company, Old Services or the General Partner. Old Services, the
General Partner and the Operating Company agree to use their best efforts to
obtain satisfaction of any Restriction on a timely basis. The description of the
assets as a "Restriction-Asset" shall not be construed as an admission that any
Restriction exists with respect to the transfer of such assets. In the event
that any Restriction-Asset exists, Old Services and the General Partner, as the
case may be, agree to hold such Restriction-Asset in trust for the exclusive
benefit of the Operating Company and to otherwise use its best efforts to
provide the Operating Company with the benefits thereof, and Old Services and
the General Partner will enter into other agreements, or take such other action
as it deems necessary, in order to help ensure that the Operating Company has
the assets and concomitant rights necessary to enable it to operate the General
Partner Assets contributed to the Operating Company in all material respects as
they were operated prior to the Effective Time.
6.6 Costs. The Operating Company shall pay all sales, use and
-----
similar taxes arising out of the contributions, conveyances and deliveries to be
made hereunder, and shall pay all
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<PAGE>
documentary, filing, recording, transfer, deed, and conveyance taxes and fees
required in connection therewith. In addition, the Operating Company shall be
responsible for all costs, liabilities and expenses (including court costs and
reasonable attorneys' fees) incurred in connection with the satisfaction or
waiver of any Restriction pursuant to Section 6.5.
6.7 Headings: References: Interpretation. All Article and Section
------------------------------------
headings in this Agreement are for convenience only and shall not be deemed to
control or affect the meaning or construction of any of the provisions hereof.
The words "hereof," "herein" and "hereunder" and words of similar import, when
used in this Agreement, shall refer to this Agreement as a whole, including,
without limitation, all Schedules and Exhibits attached hereto, and not to any
particular provision of this Agreement. All references herein to Articles,
Sections, Schedules and Exhibits shall, unless the context requires a different
construction, be deemed to be references to the Articles and Sections of this
Agreement and the Schedules and Exhibits attached hereto, and all such Schedules
and Exhibits attached hereto are hereby incorporated herein and made a part
hereof for all purposes. All personal pronouns used in this Agreement, whether
used in the masculine, feminine or neuter gender, shall include all other
genders, and the singular shall include the plural and vice versa. The use
herein of the word "including" following any general statement, term or matter
shall not be construed to limit such statement, term or matter to the specific
items or matters set forth immediately following such word or to similar items
or matters, whether or not non-limiting language (such as "without limitation,"
"but not limited to," or words of similar import) is used with reference
thereto, but rather shall be deemed to refer to all other items or matters that
could reasonably fall within the broadest possible scope of such general
statement, term or matter.
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<PAGE>
6.8 Successors and Assigns. The Agreement shall be binding upon and
----------------------
inure to the benefit of the parties signatory hereto and their respective
successors and assigns.
6.9 No Third Party Rights. The provisions of this Agreement are
---------------------
intended to bind the parties signatory hereto as to each other and are not
intended to and do not create rights in any other person or confer upon any
other person any benefits, rights or remedies and no person is or is intended to
be a third party beneficiary of any of the provisions of this Agreement.
6.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which together shall constitute one agreement binding on
the parties hereto.
6.11 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York applicable to
contracts made and to be performed wholly within such state without giving
effect to conflict of law principles thereof, except to the extent that it is
mandatory that the law of some other jurisdiction, wherein the assets are
located, shall apply.
6.12 Severability. If any of the provisions of this Agreement are
------------
held by any court of competent jurisdiction to contravene, or to be invalid
under, the laws of any political body having jurisdiction over the subject
matter hereof, such contravention or invalidity shall not invalidate the entire
Agreement. Instead, this Agreement shall be construed as if it did not contain
the particular provision or provisions held to be invalid, and an equitable
adjustment shall be made and necessary provision added so as to give effect to
the intention of the parties as expressed in this Agreement at the time of
execution of this Agreement.
6.13 Deed; Bill of Sale; Assignment. To the extent required by
------------------------------
applicable law, this Agreement shall also constitute a "deed," "bill of sale" or
"assignment" of the Assets.
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<PAGE>
6.14 Amendment or Modification. This Agreement may be amended or
-------------------------
modified from time to time only by the written agreement of all the parties
hereto.
6.15 Integration. This Agreement supersedes all previous
-----------
understandings or agreements between the parties, whether oral or written, with
respect to its subject matter. This document is an integrated agreement which
contains the entire understanding of the parties. No understanding,
representation, promise or agreement, whether oral or written, is intended to be
or shall be included in or form part of this Agreement unless it is contained in
a written amendment hereto executed by the parties hereto after the date of this
Agreement.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the date first above written.
U.S. TIMBERLANDS COMPANY, L.P.,
a Delaware limited partnership
By: U.S. Timberlands Services Company, L.L.C.
(formerly known as New Services, L.L.C.)
as General Partner
By:__________________________
Name:________________________
Title:_______________________
U.S. TIMBERLANDS MANAGEMENT
COMPANY, L.L.C., (formerly known as
U.S. Timberlands Services Company L.L.C.),
a Delaware limited liability company
By:__________________________
Name:________________________
Title:_______________________
U.S. TIMBERLANDS KLAMATH,
FALLS, L.L.C.,
a Delaware limited liability company
By:__________________________
Name:________________________
Title:_______________________
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<PAGE>
U.S. TIMBERLANDS HOLDINGS, L.L.C.,
a Delaware limited liability company
By:__________________________
Name:________________________
Title:_______________________
U.S. TIMBERLANDS SERVICES
COMPANY, L.L.C. (formerly known as
New Services, L.L.C.),
a Delaware limited liability company
By:__________________________
Name:________________________
Title:_______________________
RUDEY TIMBER COMPANY, L.L.C.,
a Delaware limited liability company
By:__________________________
Name:________________________
Title:_______________________
-22-
<PAGE>
SCHEDULE I
Excluded General Partner Assets
-------------------------------
1. All computers, monitors, copiers, printers, fax machines, typewriters,
computer software, furniture and other office equipment and machinery.
2. Employee Benefits.
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<PAGE>
SCHEDULE II
Excluded Liabilities
--------------------
1. All of the liabilities of the General Partner to the extent that such
liabilities relate solely to the Excluded General Partner Assets.
2. All federal state and local income tax liabilities attributable to the
operations of the General Partner Assets prior to the Effective Time,
including any such income tax liabilities that may result from the
consummation of the transactions contemplated by this Agreement.
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<PAGE>
SCHEDULE III
Excluded Old Services Liabilities
---------------------------------
1. All federal state and local income tax liabilities attributable to the
operations of the Old Services Assets prior to the Effective Time,
including any such income tax liabilities that may result from the
consummation of the transactions contemplated by this Agreement.
2. The obligation of Old Services to distribute the Excluded Old Services
Assets to John Stephens.
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<PAGE>
CONFORMED COPY
U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.
U.S. TIMBERLANDS FINANCE CORP.
$225,000,000 9 5/8% SENIOR NOTES DUE 2007
UNDERWRITING AGREEMENT
----------------------
November 13, 1997
SMITH BARNEY INC.
BANCAMERICA ROBERTSON STEPHENS
DEUTSCHE MORGAN GRENFELL INC.
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
U.S. Timberlands Klamath Falls, L.L.C., a Delaware limited liability
company (the "Company"), and U.S. Timberlands Finance Corp., a Delaware
corporation ("Finance Corp." and, together with the Company, the "Issuers"),
propose to issue and sell (the "Offering") $225,000,000 aggregate principal
amount of their 9 5/8% Senior Notes Due 2007 (the "Notes") to the several
underwriters named in Schedule I hereto (the "Underwriters"), upon the terms and
conditions set forth in Section 2 hereof. The Notes will be issued pursuant to
the provisions of an Indenture to be dated as of November 19, 1997 (the
"Indenture"), among the Issuers and State Street Bank & Trust Company, as
Trustee (the "Trustee").
Upon consummation of the Transactions (as defined below), U.S. Timberlands
Company, L.P., a Delaware limited partnership (the "Partnership"), will own a
98.9899% member interest in the Company. The Partnership was formed to acquire,
own and operate the business and assets of U.S. Timberlands Services Company,
L.L.C., a Delaware limited liability company (to be renamed "U.S. Timberlands
Management Company, L.L.C.") ("Old Services"), and to acquire the equity
interests in the Company. Upon consummation of the Transactions, New Services,
L.L.C., a recently formed Delaware limited liability company (to be renamed
"U.S. Timberlands Services Company, L.L.C.") (the "Manager" and, together with
the Partnership and the Issuers, the "U.S. Timberlands Parties"), will serve as
the managing member of the Company, owning a 1.0101% member interest therein,
and as the general partner of the Partnership, owning a 1% general partner
interest therein; and Finance Corp. will be a wholly owned subsidiary of the
Company.
Finance Corp. is a wholly owned subsidiary of the Partnership.
<PAGE>
The member interests of Old Services are held by Messrs. John Rudey ("Rudey"),
John Stephens ("Stephens") and George Hornig ("Hornig") in the amounts of 82.5%,
10% and 7.5%, respectively. The member interests of the Company are held 99% by
U.S. Timberlands Holdings, L.L.C., a Delaware limited liability company
("Holdings"), and 1% by Rudey Timber Company, L.L.C., a Delaware limited
liability company ("Rudey Timber Company"). The membership interests of Holdings
are owned 1% by Rudey and 99% by Rudey Timber Company. Rudey Timber Company is
wholly owned by Rudey through a 99% directly held member interest and a 1%
member interest held by Garrin Properties Holdings, Inc., a New York corporation
wholly owned by Rudey ("Garrin Holdings").
Prior to or concurrently with the execution hereof, (a) the Partnership
will enter into an underwriting agreement (the "Equity Underwriting Agreement")
with the representatives of the several underwriters thereunder, providing for
the issuance and sale to such underwriters of 7,458,684 common units (the "Firm
Units") representing limited partner interests in the Partnership (the "Common
Units") (plus up to an additional 1,118,803 Common Units (the "Additional Units"
and, together with the Firm Units, the "Units") solely to cover over-allotments)
(the "Equity Offering") and (b) the Company will enter into a bank credit
agreement (the "Bank Credit Agreement") providing for a $25 million working
capital facility and a $75 million acquisition facility.
It is further understood and agreed by all parties that the following
transactions will occur on the Closing Date (as defined in Section 4): (i)
pursuant to a Contribution, Conveyance and Assumption Agreement (the
"Contribution Agreement"), Old Services will contribute substantially all of its
assets (the "Transferred Assets") to the Manager in exchange for an additional
member interest in the Manager; (ii the Company will assume certain indebtedness
of Holdings, as described in the Registration Statement (as defined in Section
1) (the "Holdings Debt"); (ii the Manager will contribute the portion of the
Transferred Assets consisting of working capital and timber operations to the
Company in exchange for an additional member interest in the Company; (iv Rudey
Timber Company will contribute its 1% member interest in the Company to Holdings
in exchange for an additional member interest in Holdings; (v) the Manager will
contribute all but 1.0101% of its member interest in the Company to the
Partnership in exchange for (A) the continuation of its 1% general partner
interest in the Partnership, (B) the Incentive Distribution Rights (as defined
in the Agreement of Limited Partnership of the Partnership (as the same may be
amended or restated at or prior to the Closing Date, the "Partnership
Agreement") between the Manager and Rudey, as organizational limited partner (in
such capacity, the "Organizational Limited Partner")), and (C) 1,387,963
subordinated limited partner interests in the Partnership ("Subordinated
Units"); (vi) Holdings will contribute all of its member interest in the Company
to the Partnership in exchange for 2,894,157 Subordinated Units; (vii) as a
capital contribution, the Partnership will contribute all of the issued and
outstanding shares of capital stock of Finance Corp. to the Company (viii) the
public offering of Firm Units contemplated by the Equity Underwriting Agreement
will be consummated; (ix) as a capital contribution, the Partnership will
contribute the net proceeds to the Partnership of the Equity Offering to the
Company; (x) the
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<PAGE>
public offering of Notes contemplated hereby will be consummated; (xi) the
closing under the Bank Credit Agreement will occur; (xii) the Company will use
cash on hand, the proceeds to it from the Offering, borrowings under the
acquisition facility of the Bank Credit Agreement and the net proceeds of the
Equity Offering contributed to it by the Partnership to (A) repay the Holdings
Debt, (B) repay all indebtedness of the Company under the Credit Agreement dated
as of July 14, 1997 among the Company, Old Services and certain financial
institutions party thereto (the "Existing Credit Agreement") and (C) pay the
expenses of each of the Offering, the Equity Offering and other expenses; (xiii)
the Manager will distribute the 1,387,963 Subordinated Units held by it to Old
Services; and (xiv) Old Services will redeem Stephens' interest in Old Services
in exchange for (A) 95,238 Subordinated Units and (B) $1 million (the latter
payable in January 1998) and will redeem Hornig's interest in Old Services in
exchange for 48,160 Subordinated Units.
The transactions described above in clauses (i) through (xiv) are
collectively referred to as the "Transactions." In connection with the
consummation of the Transactions, the Partnership, the Company, the Manager, Old
Services and Holdings will enter into various bills of sale, conveyances, deeds
and other assignments (collectively with the Contribution Agreement, the
"Conveyance Agreements").
The Partnership, the Company, Finance Corp., the Manager, Old Services and
Holdings (the "U.S. Timberlands Entities") wish to confirm as follows their
agreement with you in connection with the several purchases of the Notes by the
Underwriters.
1. Registration Statement and Prospectus. The Issuers have prepared and
-------------------------------------
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-1 under the Act (Commission File No.
333-34389) (the "registration statement"), including a prospectus subject to
completion relating to the Notes. The term "Registration Statement" as used in
this Agreement means the registration statement (including all financial
schedules and exhibits), as amended at the time it becomes effective, or, if the
registration statement became effective prior to the execution of this
Agreement, as supplemented or amended prior to the execution of this Agreement.
If it is contemplated, at the time this Agreement is executed, that a post-
effective amendment to the registration statement will be filed and must be
declared effective before the offering of the Notes may commence, the term
"Registration Statement" as used in this Agreement means the registration
statement as amended by said post-effective amendment. If it is contemplated,
at the time this Agreement is executed, that a registration statement or a post-
effective amendment will be filed pursuant to Rule 462(b) or Rule 462(d) under
the Act before the offering of the Notes may commence, the term "Registration
Statement" as used in this Agreement includes such registration statement. The
term "Prospectus" as used in this Agreement means the prospectus in the form
included in the Registration Statement, or, if the prospectus included in the
Registration Statement omits information in reliance on Rule 430A under the Act
and such information is included in a prospectus filed with the Commission
pursuant to Rule 424(b) under the Act, the term "Prospectus"
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<PAGE>
as used in this Agreement means the prospectus in the form included in the
Registration Statement as supplemented by the addition of the Rule 430A
information contained in the prospectus filed with the Commission pursuant to
Rule 424(b). The term "Prepricing Prospectus" as used in this Agreement means
the preliminary prospectus dated October 27, 1997 relating to the Notes as such
preliminary prospectus shall have been amended from time to time prior to the
date of the Prospectus.
2. Agreements to Sell and Purchase. The Issuers hereby agree, subject to
-------------------------------
all the terms and conditions set forth herein, to issue and sell to each
Underwriter and, upon the basis of the representations, warranties and
agreements of the U.S. Timberlands Entities herein contained and subject to all
the terms and conditions set forth herein, each Underwriter agrees, severally
and not jointly, to purchase from the Issuers, at a purchase price of 97.0% of
the principal amount thereof, the principal amount of Notes set forth opposite
the name of such Underwriter in Schedule I hereto (or such principal amount of
Notes increased as set forth in Section 10 hereof).
3. Terms of Public Offering. The Issuers have been advised by you that
------------------------
the Underwriters propose to make a public offering of their respective portions
of the Notes as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable and initially to offer the
Notes upon the terms set forth in the Prospectus.
4. Delivery of the Notes and Payment Therefor. The Notes to be purchased
------------------------------------------
hereunder will be represented by one or more definitive global notes in book-
entry form which will be deposited by or on behalf of the Issuers with The
Depository Trust Company ("DTC") or its designated custodian.
Delivery to the Underwriters of the Notes, against payment of the purchase
price therefor in federal (same day) funds, shall be made by causing DTC to
credit the Notes to the account or accounts designated by Smith Barney on behalf
of the Underwriters at DTC. The time and date of such delivery shall be 10:00
A.M., New York City time, on November 19, 1997 (the "Closing Date"). The other
documents to be delivered at the Closing Date by or on behalf of the parties
hereto shall be delivered at such time and date at the offices of Baker & Botts,
L.L.P. , 599 Lexington Avenue, New York, New York 10022. The place of closing
for the Notes and the Closing Date may be varied by agreement between you and
the Issuers.
The global certificates representing the Notes to be delivered to the
Underwriters shall be made available to you at the office of DTC or its
custodian for inspection not later than 9:30 A.M., New York City time, on the
business day next preceding the Closing Date.
5. Agreements of the U.S. Timberlands Entities. Each of the U.S.
-------------------------------------------
Timberlands Entities, jointly and severally, agrees with the several
Underwriters as follows:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
to be declared effective before the
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<PAGE>
offering of the Notes may commence, the Issuers and the Manager will endeavor to
cause the Registration Statement or such post-effective amendment to become
effective as soon as possible and will advise you promptly and, if requested by
you, will confirm such advice in writing, when the Registration Statement or
such post-effective amendment has become effective.
(b) The Issuers will advise you promptly and, if requested by you,
will confirm such advice in writing: (i) of any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prepricing
Prospectus or the Prospectus or for additional information; (ii) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Notes for
offering or sale in any jurisdiction or the initiation of any proceeding for
such purpose; and (iii) within the period of time referred to in paragraph (f)
below, of any change in the condition (financial or other), business, prospects,
properties, net worth or results of operations of the U.S. Timberlands Parties,
taken as a whole, or of the happening of any event which makes any statement of
a material fact made in the Registration Statement or the Prospectus (as then
amended or supplemented) untrue or which requires the making of any additions to
or changes in the Registration Statement or the Prospectus (as then amended or
supplemented) in order to state a material fact required by the Act or the
regulations thereunder to be stated therein or necessary in order to make the
statements therein not misleading, or of the necessity to amend or supplement
the Prospectus (as then amended or supplemented) to comply with the Act or any
other applicable law. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, the Issuers and the
Manager will make every reasonable effort to obtain the withdrawal of such order
at the earliest possible time.
(c) The Issuers will furnish to you, without charge, (i) two EDGAR
versions of the registration statement as originally filed with the Commission
and of each amendment thereto, including financial statements and all exhibits
to the registration statement, (ii) two manually signed copies of the
registration statement corresponding to the EDGAR version filed with the
Commission and of each amendment thereto, including financial statements and all
exhibits to the registration statement, (iii) such number of conformed copies of
the registration statement as originally filed and of each amendment thereto,
but without exhibits, as you or your counsel may reasonably request and (iv)
such number of copies of the Indenture as you may reasonably request.
(d) The Issuers will not (i) file any amendment to the Registration
Statement or make any amendment or supplement to the Prospectus of which you
shall not previously have been advised or to which you or your counsel shall
reasonably object in writing after being so advised or (ii) so long as, in the
opinion of counsel for the Underwriters, a Prospectus is required to be
delivered in connection with sales by any Underwriter or dealer, file any
information, documents or reports pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), without delivering a copy of such
information, documents or reports to you prior to or concurrently with such
filing.
-5-
<PAGE>
(e) Prior to the execution and delivery of this Agreement, the
Issuers have delivered to you, without charge, in such quantities as you have
reasonably requested, copies of each form of the Prepricing Prospectus. The
Issuers consent to the use, in accordance with the provisions of the Act and
with the securities or Blue Sky laws of the jurisdictions in which the Notes are
offered by the several Underwriters and by dealers, prior to the date of the
Prospectus, of each Prepricing Prospectus so furnished by the Issuers.
(f) As soon after the execution and delivery of this Agreement as
possible and thereafter from time to time for such period as in the opinion of
counsel for the Underwriters a prospectus is required by the Act to be delivered
in connection with sales by any Underwriter or dealer, the Issuers will
expeditiously deliver to each Underwriter and each dealer, without charge, as
many copies of the Prospectus (and of any amendment or supplement thereto) as
you may reasonably request. At any time after nine months after the time of
issuance of the Prospectus, upon request, but at your expense, the Issuers will
deliver as many copies of an amended or supplemented Prospectus complying with
Section 10(a)(3) of the Act as you may reasonably request, provided that a
prospectus is required by the Act to be delivered in connection with sales of
Notes by any Underwriter or dealer. The Issuers consent to the use of the
Prospectus (and of any amendment or supplement thereto) in accordance with the
provisions of the Act and with the securities or Blue Sky laws of the
jurisdictions in which the Notes are offered by the several Underwriters and by
all dealers to whom Notes may be sold, both in connection with the offering and
sale of the Notes and for such period of time thereafter as the Prospectus is
required by the Act to be delivered in connection with sales by any Underwriter
or dealer. If during such period of time any event shall occur that in the
judgment of the Issuers or in the opinion of counsel for the Underwriters is
required to be set forth in the Prospectus (as then amended or supplemented) or
should be set forth therein in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or if it
is necessary to supplement or amend the Prospectus to comply with the Act or any
other law, the Issuers will forthwith prepare and, subject to the provisions of
paragraph (d) above, file with the Commission an appropriate supplement or
amendment thereto, and will expeditiously furnish to the Underwriters and
dealers a reasonable number of copies thereof; provided that if any such event
necessitating a supplement or amendment to the Prospectus occurs at any time
after nine months after the time of issuance of the Prospectus, such supplement
or amendment shall be prepared at your expense. In the event that the Issuers
and you agree that the Prospectus should be amended or supplemented, the
Issuers, if requested by you, will promptly issue a press release announcing or
disclosing the matters to be covered by the proposed amendment or supplement.
(g) The Issuers and the Manager will cooperate with you and with
counsel for the Underwriters in connection with the registration or
qualification of the Notes for offering and sale by the several Underwriters and
by dealers under the securities or Blue Sky laws of such jurisdictions as you
may designate and will file such consents to service of process or other
documents necessary or appropriate in order to effect such registration or
qualification; provided that in no event shall the Issuers or the Manager be
obligated to qualify to do business in any jurisdiction where it is not now so
qualified or to take any action which would subject it to service of process in
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suits, other than those arising out of the offering or sale of the Notes, in any
jurisdiction where it is not now so subject.
(h) The Issuers will make generally available to its security holders
a consolidated earnings statement, which need not be audited, covering a twelve-
month period commencing after the effective date of the Registration Statement
and ending not later than 15 months thereafter, as soon as practicable after the
end of such period, which consolidated earnings statement shall satisfy the
provisions of Section 11(a) of the Act.
(i) During the period of two years hereafter, the Issuers will
furnish to you (i) as soon as publicly available, a copy of each report of the
Partnership mailed to unitholders or filed with the Commission or the principal
national securities exchange or automated quotation system upon which the Common
Units or Notes may be listed, and (ii) from time to time such other information
concerning the Partnership and the Issuers as you may reasonably request.
(j) If this Agreement shall terminate or shall be terminated after
execution pursuant to any provisions hereof (otherwise than pursuant to the
second paragraph of Section 10 hereof or by notice given by you terminating this
Agreement pursuant to Section 10 or Section 11 hereof) or if this Agreement
shall be terminated by the Underwriters because of any failure or refusal on the
part of any of the U.S. Timberlands Entities to comply with the terms or fulfill
any of the conditions of this Agreement, the U.S. Timberlands Entities, jointly
and severally, agree to reimburse you for all reasonable out-of-pocket expenses
(including reasonable fees and expenses of counsel for the Underwriters)
incurred by you in connection herewith.
(k) The Partnership will apply the net proceeds from the sale of the
Units, the Company and Finance Corp. will apply the net proceeds from the sale
of the Notes and the Company will apply any amount drawn under the Bank Credit
Agreement and all amounts contributed to it by the Partnership from the sale of
the Units, in accordance with the description set forth under the caption "Use
of Proceeds" in the Prospectus.
(l) If Rule 430A of the Act is employed, the Issuers will timely file
the Prospectus pursuant to Rule 424(b) under the Act and will advise you of the
time and manner of such filing.
(m) Except as stated in this Agreement and in the Prepricing
Prospectus and Prospectus, the U.S. Timberlands Entities have not taken, and
will not take, directly or indirectly, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Notes to facilitate the sale or resale of the Notes.
(n) Each of the U.S. Timberlands Parties will take such steps as
shall be necessary to ensure that none of them shall become an "investment
company" within the meaning of such term under the Investment Company Act of
1940, as amended, and the rules and regulations of the Commission thereunder.
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(o) The Issuers shall timely complete all required filings and
otherwise fully comply in a timely manner with all provisions of the Exchange
Act, including the rules and regulations thereunder, in connection with the
registration of the Notes thereunder.
(p) Each of the U.S. Timberlands Parties will cause to be
accomplished or obtained as soon as practicable all consents, recordings and
filings necessary to perfect, preserve and protect the title of the Company to
the properties and assets owned by it as a result of the Transactions.
6. Representations and Warranties of the U.S. Timberlands Entities. The
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U.S. Timberlands Entities, jointly and severally (except that the
representations and warranties contained in Sections 6(k) and 6(l) are made
solely by Old Services and the representations and warranties contained in
Sections 6(m) and 6(n) are made solely by Holdings), represent and warrant to
each Underwriter that:
(a) Any Prepricing Prospectus, at the date of filing thereof with the
Commission, complied in all material respects with the requirements of the Act
and did not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The Commission has not issued any order preventing or
suspending the use of any Prepricing Prospectus. The Registration Statement in
the form in which it became or becomes effective and also in such form as it may
be when any post-effective amendment thereto shall become effective and the
Prospectus and any supplement or amendment thereto when filed with the
Commission under Rule 424(b) under the Act complied or will comply in all
material respects with the provisions of the Act and did not or will not at any
such times contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading. Each of the statements made by the Issuers in such
documents within the coverage of Rule 175(b) of the rules and regulations under
the Act, including the size of the Company's expected harvest, was made or will
be made with a reasonable basis and in good faith. Notwithstanding the
foregoing, no representation and warranty is made as to statements in or
omissions from the Registration Statement, the Prospectus or any Prepricing
Prospectus made in reliance upon and in conformity with (i) information
furnished to the Issuers in writing by or on behalf of any Underwriter through
you expressly for use therein or (ii) the Trustee's Statement of Eligibility and
Qualification (Form T-1) under the Trust Indenture Act of 1939, as amended ("the
Trust Indenture Act").
(b) The Partnership has been duly formed and is validly existing in
good standing as a limited partnership under the Delaware Revised Uniform
Limited Partnership Act (the "Delaware LP Act") with full partnership power and
authority to own or lease its properties to be owned or leased at the Closing
Date, to assume the liabilities being assumed by it pursuant to the Conveyance
Agreements and to conduct its business to be conducted at the Closing Date, in
each case in all material respects as described in the Registration Statement
and the Prospectus. The Partnership is, or at the Closing Date will be, duly
registered or qualified as a foreign limited
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partnership for the transaction of business under the laws of each jurisdiction
in which the character of the business conducted by it or the nature or location
of the properties owned or leased by it makes such registration or qualification
necessary, except where the failure so to register or qualify would not (i) have
a material adverse effect on the condition (financial or other), business,
prospects, properties, net worth or results of operations of the Partnership and
the Company, taken as a whole, or (ii) subject the limited partners of the
Partnership to any material liability or disability.
(c) The Company has been duly formed and is validly existing in good
standing as a limited liability company under the Delaware Limited Liability
Company Act (the "Delaware LLC Act") with full limited liability company power
and authority to own or lease its properties to be owned or leased at the
Closing Date, to assume the liabilities being assumed by it pursuant to the
Conveyance Agreements and to conduct its business to be conducted at the Closing
Date, in each case in all material respects as described in the Registration
Statement and the Prospectus. The Company is, or at the Closing Date will be,
duly registered or qualified as a foreign limited liability company for the
transaction of business under the laws of each jurisdiction in which the
character of the business conducted by it or the nature or location of the
properties owned or leased by it makes such registration or qualification
necessary, except where the failure so to register or qualify would not (i) have
a material adverse effect on the condition (financial or other), business,
prospects, properties, net worth or results of operations of the Partnership
and the Company, taken as a whole, or (ii) subject the limited partners of the
Partnership to any material liability or disability.
(d) The Manager has been duly formed and is validly existing in good
standing as a limited liability company under the Delaware LLC Act with full
limited liability company power and authority to own or lease its properties to
be owned or leased at the Closing Date, to conduct its business to be conducted
at the Closing Date and to act as general partner of the Partnership and as
managing member of the Company, in each case in all material respects as
described in the Registration Statement and the Prospectus. The Manager is duly
registered or qualified as a foreign limited liability company for the
transaction of business under the laws of each jurisdiction in which the
character of the business conducted by it or the nature or location of the
properties owned or leased by it makes such registration or qualification
necessary, except where the failure so to register or qualify would not (i) have
a material adverse effect on the condition (financial or other), business,
prospects, properties, net worth or results of operations of the Manager or (ii)
subject the limited partners of the Partnership to any material liability or
disability.
(e) Finance Corp. has been duly organized and is validly existing in
good standing as a corporation under the Delaware General Corporation Law (the
"DGCL") with full corporate power and authority to issue the Notes.
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(f) None of the U.S. Timberlands Parties or Finance Corp. has any
subsidiaries, other than the Partnership and Company themselves and Finance
Corp. At the Closing Date, after giving effect to the Transactions, the Company
will own all of the issued and outstanding shares of capital stock of Finance
Corp.; such shares have been duly authorized and validly issued and are fully
paid and nonassessable; and the Company will own all of such shares free and
clear of all liens, encumbrances, security interests, charges or claims.
(g) At the Closing Date, after giving effect to the Transactions, the
Manager will be the sole general partner of the Partnership with a 1% general
partner interest in the Partnership; such general partner interest will be duly
authorized and validly issued in accordance with the Partnership Agreement; the
Manager will own all of the Incentive Distribution Rights; and the Manager will
own such general partner interest and Incentive Distribution Rights free and
clear of all liens, encumbrances, security interests, equities, charges or
claims.
(h) At the Closing Date, after giving effect to the Transactions,
Holdings, Old Services, Stephens and Hornig will own limited partner interests
in the Partnership represented by 2,894,157, 1,244,565, 95,238 and 48,160
Subordinated Units, respectively; other than the Subordinated Units owned by
Holdings, Old Services, Stephens and Hornig as set forth above and the Incentive
Distribution Rights issued to the Manager, the Units will be the only limited
partner interests of the Partnership issued and outstanding at the Closing Date;
and Holdings and Old Services will own their respective limited partner
interests represented by their Subordinated Units free and clear of all liens,
encumbrances, security interests, equities, charges or claims, except as
provided in that certain Pledge Agreement by and among John M. Rudey, Laurie
Rudey and Smith Barney Holdings Inc. (the "Rudey Pledge Agreement").
(i) At the Closing Date, after giving effect to the Transactions, the
Manager will own a 1.0101% member interest in the Company and the Partnership
will own a 98.9899% member interest in the Company free and clear of all liens,
encumbrances, security interests, equities, charges or claims.
(j) At the Closing Date, after giving effect to the Transactions, Old
Services, Stephens and Hornig will own member interests of 70%, 10%, and 7.5%,
respectively, in the Manager; and Old Services will own its member interest free
and clear of all liens, encumbrances, security interests, equities, charges or
claims.
(k) Old Services has been duly formed and is validly existing in good
standing as a limited liability company under the Delaware LLC Act with full
limited liability company power and authority to own or lease its properties to
be owned or leased at the Closing Date, to conduct its business to be conducted
at the Closing Date and to execute and deliver this Agreement
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and the Operative Agreements (as defined in Section 6(q)) to which it is a party
and perform its obligations hereunder and thereunder, in each case in all
material respects as described in the Registration Statement and the Prospectus.
Old Services is duly registered or qualified as a foreign limited liability
company for the transaction of business under the laws of each jurisdiction in
which the character of the business conducted by it or the nature or location of
the properties owned or leased by it makes such registration or qualification
necessary, except where the failure so to register or qualify would not have a
material adverse effect on the condition (financial or other), business,
prospects, properties, net worth or results of operations of the U.S.
Timberlands Parties, taken as a whole.
(l) At the Closing Date, after giving effect to the Transactions,
Rudey will own a 100% member interest in Old Services free and clear of all
liens, encumbrances, security interests, equities, charges or claims.
(m) Holdings has been duly formed and is validly existing in good
standing as a limited liability company under the Delaware LLC Act with full
limited liability company power and authority to own or lease its properties to
be owned or leased at the Closing Date, to conduct its business to be conducted
at the Closing Date and to execute and deliver this Agreement and the Operative
Agreements to which it is a party and perform its obligations hereunder and
thereunder, in each case, in all material respects as described in the
Registration Statement and the Prospectus.
(n) At the Closing Date, Rudey will own a 1% member interest in
Holdings and Rudey Timber Company will own a 99% member interest in Holdings
free and clear of all liens, encumbrances, security interests, equities, charges
or claims.
(o) Except as described in the Prospectus, there are no preemptive
rights or other rights to subscribe for or to purchase, nor any restriction upon
the voting or transfer of, any limited partner interests in the Partnership or
any member interests in the Company pursuant to either the Partnership Agreement
or the Operating Agreement of the Company (as the same may be amended and
restated at or prior to the Closing Date, the "Company Agreement"),
respectively, or any agreement or other instrument to which the Partnership or
the Company is a party or by which either of them may be bound. Neither the
filing of the Registration Statement nor the offering or sale of the Notes as
contemplated by this Agreement gives rise to any rights for or relating to the
registration of any other securities of the Partnership, the Company or Finance
Corp. The Notes, when issued and delivered against payment therefor as provided
herein, and the Indenture, will conform in all material respects to the
descriptions thereof contained in the Prospectus. The Issuers have all
requisite power and authority to issue, sell and deliver the Notes
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in accordance with and upon the terms and conditions set forth in this
Agreement, the Indenture and the Registration Statement and Prospectus. At the
Closing Date, all corporate, partnership and limited liability company action,
as the case may be, required to be taken by the U.S. Timberlands Entities or any
of their shareholders, partners or members for the authorization, issuance, sale
and delivery of the Notes and the consummation of the transactions (including
the Transactions) contemplated by this Agreement and the Operative Agreements
shall have been validly taken.
(p) The execution and delivery of, and the performance by, each of
the U.S. Timberlands Entities of their respective obligations under, this
Agreement have been duly and validly authorized by each of the U.S. Timberlands
Entities, and this Agreement has been duly executed and delivered by each of the
U.S. Timberlands Entities, and constitutes the valid and legally binding
agreement of each of the U.S. Timberlands Entities, enforceable against each of
the U.S. Timberlands Entities in accordance with its terms, provided that the
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws relating to or affecting
creditors' rights generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and except as rights to indemnity and contribution hereunder may be limited by
federal or state securities laws.
(q) At or before the Closing Date, the Partnership Agreement will
have been duly authorized, executed and delivered by the Manager and will be a
valid and legally binding agreement of the Manager and the Organizational
Limited Partner, enforceable against the Manager and the Organizational Limited
Partner in accordance with its terms; at or before the Closing Date, the Company
Agreement will have been duly authorized, executed and delivered by each of the
Manager and the Partnership and will be a valid and legally binding agreement of
the Manager and the Partnership, enforceable against each of them in accordance
with its terms; at or before the Closing Date, the Operating Agreement of the
Manager (as the same may be amended and restated at or prior to the Closing
Date, the "Manager Agreement" and together with the Partnership Agreement and
the Company Agreement, the "Organization Agreements") will have been duly
authorized, executed and delivered by the parties thereto and will be a valid
and legally binding agreement of each of them enforceable against each of them
in accordance with its terms; at or before the Closing Date, each of the
Conveyance Agreements will have been duly authorized, executed and delivered by
the parties thereto and will be a valid and legally binding agreement of the
parties thereto enforceable against such parties in accordance with its terms;
at or before the Closing Date, a non-competition agreement (the "Non-Competition
Agreement") will have been duly authorized, executed and delivered by each of
the Partnership, Company, Old Services, Rudey, Stephens, Holdings, Rudey Timber
Company and Garrin Properties and will be a valid and legally binding agreement
of each of them enforceable against each of them in accordance with its terms;
at or before the Closing Date, the Bank Credit Agreement will have been duly
authorized, executed and delivered by the Company and will be a valid and
legally binding agreement of the Company enforceable against the Company in
accordance with its terms; at or before the Closing Date, the Indenture will
have been duly authorized, executed and delivered by the Issuers and the Trustee
and will be a valid and legally binding agreement of the Issuers enforceable
against the Issuers in accordance with its terms and will be duly qualified
under the Trust Indenture Act;
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at or before the Closing Date, the Notes will have been duly authorized for
issuance and sale to you by each of the Issuers and, when issued and
authenticated in accordance with the terms of the Indenture and delivered
against payment therefor in accordance with the terms hereof, will constitute
valid and binding obligations of the Issuers enforceable against the Issuers in
accordance with their terms and entitled to the benefits of the Indenture;
provided that, with respect to each agreement described in this Section 6(q),
the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws relating to or affecting
creditors' rights generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law);
and provided, further, that the indemnity, contribution and exoneration
provisions contained in any of such agreements may be limited by applicable laws
and public policy. The Organization Agreements, the Conveyance Agreements, the
Non-Competition Agreement, the Bank Credit Agreement, the Indenture and the
Notes are herein collectively referred to as the "Operative Agreements."
(r) None of the offering, issuance and sale by the Partnership of the
Units, the offering, issuance and sale by the Issuers of the Notes, the
execution, delivery and performance of this Agreement, the Equity Underwriting
Agreement or the Operative Agreements (other than the General Partner Agreement)
by the U.S. Timberlands Entities which are parties thereto, or the consummation
of the transactions contemplated hereby and thereby (including the Transactions)
(i) conflicts or will conflict with or constitutes or will constitute a
violation of the agreement of limited partnership, limited liability company
operating agreement (other than the General Partner Agreement), certificate or
articles of incorporation or bylaws or other organizational documents of any of
the U.S. Timberlands Entities, (ii) conflicts or will conflict with or
constitutes or will constitute a breach or violation of, or a default under (or
an event which, with notice or lapse of time or both, would constitute such an
event), any indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument (other than the General Partner Agreement) to which any
of the U.S. Timberlands Entities is a party or by which any of them or any of
their respective properties may be bound, (iii) violates or will violate any
statute, law or regulation or any order, judgment, decree or injunction of any
court or governmental agency or body directed to any of the U.S. Timberlands
Entities or any of their properties in a proceeding to which any of them or
their property is a party, (iv) will result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of any of the U.S.
Timberlands Entities, in the case of clauses (ii), (iii) or (iv) which
conflicts, breaches, violations or defaults would have a material adverse effect
upon the condition (financial or other), business, prospects, properties, net
worth or results of operations of the U.S. Timberlands Parties, taken as a
whole.
(s) No permit, consent, approval, authorization or order of any
court, governmental agency or body is required in connection with the execution
and delivery of, or the consummation by the U.S. Timberlands Entities of the
transactions contemplated by, this Agreement, the Equity Underwriting Agreement
or the Operative Agreements, except (i) for such permits, consents, approvals
and similar authorizations required under the Securities Act, the Exchange Act,
the Trust Indenture Act and state securities or "Blue Sky" laws, (ii) for such
permits, consents, approvals and similar authorizations which have been, or
prior to the Closing Date will be,
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obtained, and (iii) for such permits, consents, approvals and similar
authorizations which, if not obtained, would not, individually or in the
aggregate, have a material adverse effect upon the condition (financial or
other), business, prospects, properties, net worth or results of operations of
the U.S. Timberlands Parties, taken as a whole.
(t) None of the U.S. Timberlands Entities is in (i) violation of its
agreement of limited partnership, limited liability company operating agreement,
certificate or articles of incorporation or bylaws or other organizational
documents, or of any law, statute, ordinance, administrative or governmental
rule or regulation applicable to it or of any decree of any court or
governmental agency or body having jurisdiction over it, or (ii) breach, default
(or an event which, with notice or lapse of time or both, would constitute such
an event) or violation in the performance of any obligation, agreement or
condition contained in any bond, debenture, note or any other evidence of
indebtedness or in any agreement, indenture, lease or other instrument to which
it is a party or by which it or any of its properties may be bound, which
breach, default or violation would, if continued, have a material adverse effect
on the condition (financial or other), business, prospects, properties, net
worth or results of operations of the U.S. Timberlands Parties, taken as a
whole, or could materially impair the ability of any of the U.S. Timberlands
Parties to perform its obligations under this Agreement, the Equity Underwriting
Agreement or the Operative Agreements. To the knowledge of the U.S. Timberlands
Entities, no third party to any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which any of the U.S. Timberlands
Parties is a party or by which any of them is bound or to which any of their
properties are subject, is in default under any such agreement, which breach,
default or violation would, if continued, have a material adverse effect on the
condition (financial or other), business, prospects, properties, net worth or
results of operations of the U.S. Timberlands Parties, taken as a whole.
(u) The accountants, Arthur Andersen LLP, who have certified or shall
certify the audited financial statements included in the Registration Statement,
any Prepricing Prospectus and the Prospectus (or any amendment or supplement
thereto) are independent public accountants with respect to the U.S. Timberlands
Entities as required by the Act and the applicable published rules and
regulations thereunder.
(v) At September 30, 1997, the Company would have had, on the
consolidated pro forma basis indicated in the Prospectus (and any amendment or
supplement thereto), a capitalization as set forth therein. The financial
statements (including the related notes and supporting schedules) included in
the Registration Statement, the Prepricing Prospectus dated October 27, 1997 and
the Prospectus (and any amendment or supplement thereto) present fairly in all
material respects the financial position, results of operations and cash flows
of the entities purported to be shown thereby on the basis stated therein at the
respective dates or for the respective periods which have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except to the extent disclosed therein. The
selected historical and pro forma information set forth in the Registration
Statement, the Prepricing Prospectus dated October 27, 1997 and the Prospectus
(and any amendment or supplement thereto) under the caption "Selected Historical
and Pro Forma Financial and Operating Data" is
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accurately presented in all material respects and prepared on a basis consistent
with the audited and unaudited historical consolidated financial statements and
pro forma financial statements from which it has been derived. The pro forma
financial statements of the Company included in the Registration Statement, the
Prepricing Prospectus dated October 27, 1997 and the Prospectus (and any
amendment or supplement thereto) have been prepared in all material respects in
accordance with the applicable accounting requirements of Article 11 of
Regulation S-X of the Commission; the assumptions used in the preparation of
such pro forma financial statements are, in the opinion of the management of the
U.S. Timberlands Entities, reasonable; and the pro forma adjustments reflected
in such pro forma financial statements have been properly applied to the
historical amounts in compilation of such pro forma financial statements.
(w) Except as disclosed in the Registration Statement, the Prepricing
Prospectus dated October 27, 1997 and the Prospectus (or any amendment or
supplement thereto), subsequent to the respective dates as of which such
information is given in the Registration Statement, the Prepricing Prospectus
dated October 27, 1997 and the Prospectus (or any amendment or supplement
thereto), (i) none of the U.S. Timberlands Entities has incurred any liability
or obligation, indirect, direct or contingent, or entered into any transactions,
not in the ordinary course of business, that, singly or in the aggregate, is
material to the U.S. Timberlands Parties, taken as a whole, (ii) there has not
been any change in the capitalization, or material increase in the short-term
debt or long-term debt, of the U.S. Timberlands Entities and (iii) there has not
been any material adverse change, or any development involving or which may
reasonably be expected to involve, singly or in the aggregate, a prospective
material adverse change, in the condition (financial or other), business,
prospects, properties, net worth or results of operations of the U.S.
Timberlands Parties taken as a whole.
(x) There are no legal or governmental proceedings pending or, to the
knowledge of the U.S. Timberlands Entities, threatened, against any of the U.S.
Timberlands Entities, or to which any of the U.S. Timberlands Entities is a
party, or to which any of their respective properties is subject, that are
required to be described in the Registration Statement or the Prospectus but are
not described as required, and there are no agreements, contracts, indentures,
leases or other instruments that are required to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement that are not described or filed as required by the Act.
(y) Old Services and the Company have, and upon consummation of the
Transactions on the Closing Date, the Company will have, good and marketable
title in fee simple to all real property and good title to all personal property
described in the Prospectus to be owned by the Company, free and clear of all
liens, claims, security interests or other encumbrances except (i) as described
in the Prospectus and (ii) such as do not materially interfere with the use of
such properties taken as a whole as they have been used in the past and are
proposed to be used in the future as described in the Prospectus; and all real
property and buildings held under lease by Old Services and the Company are held
by Old Services and the Company, and upon consummation of the Transactions on
the Closing Date, will be held by the Company, under valid and subsisting and
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enforceable leases with such exceptions as do not materially interfere with the
use of such properties taken as a whole as they have been used in the past and
are proposed to be used in the future as described in the Prospectus. The
Conveyance Agreements will be, as of the Closing Date, legally sufficient to
transfer or convey to the Company all properties not already held by it that
are, individually or in the aggregate, required to enable the Company to conduct
its operations (in all material respects as contemplated by the Prospectus),
subject to the conditions, reservations and limitations contained in the
Conveyance Agreements and those set forth in the Prospectus. The Company will,
upon execution and delivery of the Conveyance Agreements, succeed in all
material respects to the business, assets, properties, liabilities and
operations reflected by the pro forma financial statements of the Company,
except as disclosed in the Prospectus.
(z) The Issuers have not distributed and, prior to the later to occur
of (i) the Closing Date and (ii) completion of the distribution of the Notes,
will not distribute, any prospectus (as defined under the Act) in connection
with the offering and sale of the Notes other than the Registration Statement,
any Prepricing Prospectus, the Prospectus or other materials, if any, permitted
by the Act, including Rule 134 of the general rules and regulations thereunder.
(aa) Each of the U.S. Timberlands Parties has, or at the Closing Date
will have, such permits, consents, licenses, franchises and authorizations of
governmental or regulatory authorities ("permits") as are necessary to own its
properties and to conduct its business in the manner described in the
Prospectus, subject to such qualifications as may be set forth in the Prospectus
and except for such permits which, if not obtained, would not have, individually
or in the aggregate, a material adverse effect upon the ability of the U.S.
Timberlands Parties considered as a whole to conduct their businesses in all
material respects as currently conducted and as contemplated by the Prospectus
to be conducted; each of the U.S. Timberlands Parties has, or at the Closing
Date will have, fulfilled and performed all its material obligations with
respect to such permits and no event has occurred which allows, or after notice
or lapse of time would allow, revocation or termination thereof or results in
any impairment of the rights of the holder of any such permit, except for such
revocations, terminations and impairments that would not have a material adverse
effect upon the ability of the U.S. Timberlands Parties considered as a whole to
conduct their businesses in all material respects as currently conducted and as
contemplated by the Prospectus to be conducted, subject in each case to such
qualification as may be set forth in the Prospectus; and, except as described in
the Prospectus, none of such permits contains any restriction that is materially
burdensome to the U.S. Timberlands Parties considered as a whole.
(bb) Each of the U.S. Timberlands Parties (i) makes and keeps books,
records and accounts, which, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of assets and (ii) maintains systems of
internal accounting controls sufficient to provide reasonable assurances that
(A) transactions are executed in accordance with management's general or
specific authorization; (B) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (C) access to
assets is permitted only in accordance with management's general or specific
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authorization; and (D) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(cc) To the knowledge of the U.S. Timberlands Entities, none of the
U.S. Timberlands Entities nor any employee or agent of any of the U.S.
Timberlands Entities has made any payment of funds of a U.S. Timberlands Entity
or received or retained any funds in either case in violation of any law, rule
or regulation, which payment, receipt or retention of funds is of a character
required to be disclosed in the Prospectus.
(dd) Each of the U.S. Timberlands Entities has filed (or has obtained
extensions with respect to) all material tax returns required to be filed
through the date hereof, which returns are complete and correct in all material
respects, and has timely paid all taxes shown to be due pursuant to such
returns, other than those (i) which, if not paid, would not have a material
adverse effect on the condition (financial or other), business, prospects,
properties, net worth or results of operations of the U.S. Timberlands Entities,
taken as a whole, or (ii) which are being contested in good faith.
(ee) The U.S. Timberlands Entities own or possess, and at the Closing
Date the U.S. Timberlands Parties will own or possess, all patents, trademarks,
trademark registrations, service marks, service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets and rights owned by them or
necessary for the conduct of their respective businesses, and the U.S.
Timberlands Entities are not aware of any claim to the contrary or any challenge
by any other person to the rights of the U.S. Timberlands Entities with respect
to the foregoing.
(ff) None of the U.S. Timberlands Parties is now, and after sale of
the Notes to be sold by the Issuers hereunder and application of the net
proceeds from such sale as described in the Prospectus under the caption "Use of
Proceeds" will be, (i) an "investment company" or a company "controlled by" an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, or (ii) a "public utility company," "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" thereof, under the
Public Utility Holding Company Act of 1935, as amended.
(gg) None of the U.S. Timberlands Entities has sustained since the
date of the latest audited financial statements included in the Prospectus any
material loss or interference with its business from fire, explosion, flood or
other calamity whether or not covered by insurance, or from any labor dispute or
court or governmental action, investigation, order or decree, otherwise than as
set forth or contemplated in the Prospectus.
(hh) None of the U.S. Timberlands Entities has violated any
environmental, safety, health or similar law or regulation applicable to its
business relating to the protection of human health and safety, the environment
or hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), or lacks any permits, licenses or other approvals
required of them under applicable Environmental Laws to own, lease or operate
their properties and conduct
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their business as described in the Prospectus or is violating any terms and
conditions of any such permit, license or approval, which in each case would
have a material adverse effect on the condition (financial or other), business,
prospects, properties, net worth or results of operations of the U.S.
Timberlands Parties, taken as a whole.
(ii) Except as described in or contemplated by the Prospectus, no
material labor dispute with the employees of any of the U.S. Timberlands
Entities exists or, to the knowledge of any of the U.S. Timberlands Entities, is
imminent.
(jj) The U.S. Timberlands Entities maintain insurance covering their
properties, operations, personnel and businesses against such losses and risks
as are reasonably adequate to protect them and their businesses in a manner
consistent with other businesses similarly situated. None of the U.S.
Timberlands Entities has received notice from any insurer or agent of such
insurer that substantial capital improvements or other expenditures will have to
be made in order to continue such insurance; and all such insurance is
outstanding and duly in force on the date hereof and will be outstanding and
duly in force on the Closing Date.
(kk) Except as described in the Prospectus, there is (i) no action,
suit or proceeding before or by any court, arbitrator or governmental agency,
body or official, domestic or foreign, now pending or, to the knowledge of the
U.S. Timberlands Entities, threatened, to which any of the U.S. Timberlands
Entities, or any of their respective subsidiaries, is or may be a party or to
which the business or property of any of the U.S. Timberlands Entities, or any
of their respective subsidiaries, is or may be subject, (ii) no statute, rule,
regulation or order that has been enacted, adopted or issued by any governmental
agency or that has been proposed by any governmental body and (iii) no
injunction, restraining order or order of any nature issued by a federal or
state court or foreign court of competent jurisdiction to which any of the U.S.
Timberlands Entities, or any of their respective subsidiaries, is or may be
subject, that, in the case of clauses (i), (ii) and (iii) above, is reasonably
expected to (A) singly or in the aggregate have a material adverse effect on the
condition (financial or other), business, prospects, properties, net worth or
results of operations of the U.S. Timberlands Parties, taken as a whole, (B)
prevent or result in the suspension of the offering and issuance of the Units or
the Notes or (C) in any manner draw into question the validity of this
Agreement, the Equity Underwriting Agreement or any Operative Agreement.
(ll) The Notes have been approved for listing on the New York Stock
Exchange, subject only to official notice of issuance.
(mm) None of the transactions by the U.S. Timberlands Entities
contemplated by this Agreement (including, without limitation, the use of
proceeds from the sale of the Notes) will violate or result in a violation of
Section 7 of the Exchange Act, or any regulation promulgated thereunder,
including, without limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System.
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7. Indemnification and Contribution. (a) Each of the U.S. Timberlands
--------------------------------
Entities, jointly and severally, agree to indemnify and hold harmless each of
you and each other Underwriter and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act from and against any and all losses, claims, damages, liabilities
and expenses (including reasonable costs of investigation) arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in any Prepricing Prospectus or in the Registration Statement or the
Prospectus or in any amendment or supplement thereto, or arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any untrue statement or omission or alleged untrue
statement or omission which has been made therein or omitted therefrom in
reliance upon and in conformity with the information furnished in writing to the
Issuers or the Manager by or on behalf of any Underwriter through you expressly
for use in connection therewith; provided, however, that the indemnification
contained in this paragraph (a) with respect to any Prepricing Prospectus shall
not inure to the benefit of any Underwriter (or to the benefit of any person
controlling such Underwriter) on account of any such loss, claim, damage,
liability or expense arising from the sale of the Notes by such Underwriter to
any person if a copy of the Prospectus shall not have been delivered or sent to
such person within the time required by the Act and the regulations thereunder,
and the untrue statement or alleged untrue statement or omission or alleged
omission of a material fact contained in such Prepricing Prospectus was
corrected in the Prospectus, provided that the Issuers have delivered the
Prospectus to the several Underwriters in requisite quantity and on a timely
basis to permit such delivery or sending. The foregoing indemnity agreement
shall be in addition to any liability which any U.S. Timberlands Entity may
otherwise have.
(b) If any action, suit or proceeding shall be brought against any
Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against a U.S. Timberlands Entity, such Underwriter or
such controlling person shall promptly notify the U.S. Timberlands Entities in
writing, and the Issuers shall assume the defense thereof, including the
employment of counsel and payment of all reasonable fees and expenses. The
failure to notify the indemnifying party shall not relieve it from liability
which it may have to an indemnified party unless the indemnifying party is
foreclosed by reason of such delay from asserting a defense otherwise available
to it. Such Underwriter or any such controlling person shall have the right to
employ separate counsel in any such action, suit or proceeding and to
participate in (but not control) the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Underwriter or such controlling
person unless (i) a U.S. Timberlands Entity has agreed in writing to pay such
fees and expenses, (ii) the U.S. Timberlands Entities have failed to assume the
defense and employ counsel or (iii) the named parties to any such action, suit
or proceeding (including any impleaded parties) include both such Underwriter or
such controlling person and a U.S. Timberlands Entity, and such Underwriter or
such controlling person shall have been advised by its counsel that
representation of such indemnified party and such U.S. Timberlands Entity by the
same counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests
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between them (in which case the U.S. Timberlands Entities shall not have the
right to assume the defense of such action, suit or proceeding on behalf of such
Underwriter or such controlling person). It is understood, however, that the
U.S. Timberlands Entities shall, in connection with any one such action, suit or
proceeding or separate but substantially similar or related actions, suits or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of only one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Underwriters and controlling persons not having actual or potential
differing interests with you or among themselves, which firm shall be designated
in writing by Smith Barney Inc., and that all such fees and expenses shall be
reimbursed as they are incurred. None of the U.S. Timberlands Entities shall be
liable for any settlement of any such action, suit or proceeding effected
without its written consent, but if settled with such written consent, or if
there be a final judgment for the plaintiff in any such action, suit or
proceeding, the U.S. Timberlands Entities agree, jointly and severally, to
indemnify and hold harmless any Underwriter, to the extent provided in the
preceding paragraph, and any such controlling person from and against any loss,
claim, damage, liability or expense by reason of such settlement or judgment.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the U.S. Timberlands Entities, their respective directors and
officers who sign the Registration Statement, and any person who controls the
U.S. Timberlands Entities within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, to the same extent as the foregoing indemnity from the
U.S. Timberlands Entities to each Underwriter, but only with respect to
information furnished in writing by or on behalf of such Underwriter through you
expressly for use in the Registration Statement, the Prospectus or any
Prepricing Prospectus, or any amendment or supplement thereto. If any action,
suit or proceeding shall be brought against a U.S. Timberlands Entity, any of
such directors and officers or any such controlling person based on the
Registration Statement, the Prospectus or any Prepricing Prospectus, or any
amendment or supplement thereto, and in respect of which indemnity may be sought
against any Underwriter pursuant to this paragraph (c), such Underwriter shall
have the rights and duties given to the U.S. Timberlands Entities by paragraph
(b) above (except that if a U.S. Timberlands Entity shall have assumed the
defense thereof such Underwriter shall not be required to do so, but may employ
separate counsel therein and participate in (but not control) the defense
thereof, but the fees and expenses of such counsel shall be at such
Underwriter's expense), and the U.S. Timberlands Entities, any of such directors
and officers and any such controlling person shall have the rights and duties
given to the Underwriters by paragraph (b) above. The foregoing indemnity
agreement shall be in addition to any liability which the Underwriters may
otherwise have.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party under paragraph (a) or (c) hereof in respect
of any losses, claims, damages, liabilities or expenses referred to therein,
then an indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
U.S. Timberlands Entities on the one hand and the Underwriters on the other hand
from the offering of the Notes, or (ii) if the allocation provided by
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clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the U.S. Timberlands Entities on the one
hand and the Underwriters on the other in connection with the statements or
omissions that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the U.S. Timberlands Entities on the one hand and the
Underwriters on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
U.S. Timberlands Entities bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault of the U.S. Timberlands
Entities on the one hand, and the Underwriters on the other hand shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the U.S. Timberlands Entities
or any other affiliate of the U.S. Timberlands Entities on the one hand, or by
the Underwriters on the other hand, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
(e) The U.S. Timberlands Entities and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by a pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in paragraph (d) above.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in paragraph (d) above
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price of the Notes underwritten by it and distributed to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section 7 are several
in proportion to the respective principal amount of Notes set forth opposite
their names in Schedule I hereto (or such principal amount of Notes increased as
set forth in Section 10 hereof) and not joint.
(f) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
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(g) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 7 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the U.S. Timberlands Entities set forth in
this Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the U.S. Timberlands Entities or any of their
respective directors or officers or any person controlling the U.S. Timberlands
Entities, (ii) acceptance of any Notes and payment therefor in accordance with
the terms of this Agreement, and (iii) any termination of this Agreement. A
successor to any Underwriter or any person controlling any Underwriter, or to
the U.S. Timberlands Entities or any of their respective directors or officers
or any person controlling a U.S. Timberlands Entity shall be entitled to the
benefits of the indemnity, contribution and reimbursement agreements contained
in this Section 7.
8. Conditions of Underwriters' Obligations. The several obligations of
---------------------------------------
the Underwriters to purchase the Notes hereunder are subject to the following
conditions:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the registration statement or a post-effective amendment thereto
to be declared effective before the offering of the Notes may commence, the
registration statement or such post-effective amendment shall have become
effective not later than 5:30 P.M., New York City time, on the date hereof, or
at such later date and time as shall be consented to in writing by you, and all
filings, if any, required by Rules 424 and 430A under the Act shall be or have
been timely made, as the case may be; no stop order suspending the effectiveness
of the registration statement shall have been issued and no proceeding for that
purpose shall have been instituted or, to the knowledge of the U.S. Timberlands
Entities or any Underwriter, threatened by the Commission and any request of the
Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to your
reasonable satisfaction.
(b) Subsequent to the effective date of this Agreement, there shall
not have occurred (i) any change, or any development involving a prospective
change, in or affecting the condition (financial or other), business, prospects,
properties, net worth or results of operations of any of the U.S. Timberlands
Entities not contemplated by the Prospectus, which in your opinion, would
materially adversely affect the market for the Notes, or (ii) any event or
development relating to or involving any of the U.S. Timberlands Entities or any
executive officer or director of any of such entities which makes any statement
made in the Prospectus untrue or which, in the opinion of the Issuers and their
counsel or the Underwriters and their counsel, requires the making of any
addition to or change in the Prospectus in order to state a material fact
required by the Act or any other law to be stated therein or necessary in order
to make the statements therein not misleading, if amending or supplementing the
Prospectus to reflect such event or development would, in your opinion,
materially adversely affect the market for the Notes.
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(c) You shall have received on the Closing Date, an opinion of
Andrews & Kurth L.L.P., special counsel for the U.S. Timberlands Entities, dated
the Closing Date and addressed to you, to the effect that:
(i) The Partnership has been duly formed and is validly
existing in good standing as a limited partnership under the Delaware LP
Act with all necessary partnership power and authority to own or lease its
properties, assume the liabilities being assumed by it pursuant to the
Conveyance Agreements and conduct its business, in each case in all
material respects as described in the Registration Statement and the
Prospectus;
(ii) The Partnership is duly registered or qualified as a
foreign limited partnership for the transaction of business under the laws
of the State of Oregon; and, to such counsel's knowledge, such jurisdiction
is the only jurisdiction in which the character of the business conducted
by the Partnership or the nature or location of the properties owned or
leased by it make such registration or qualification necessary (except
where the failure to so register or so qualify would not (A) have a
material adverse effect on the condition (financial or other), business or
results of operations of the Partnership and the Company, taken as a whole,
or (B) subject the limited partners of the Partnership to any material
liability or disability);
(iii) The Company has been duly formed and is validly existing
in good standing as a limited liability company under the Delaware LLC Act
with all necessary limited liability company power and authority to own or
lease its properties, assume the liabilities being assumed by it pursuant
to the Conveyance Agreements and conduct its business, in each case in all
material respects as described in the Registration Statement and the
Prospectus;
(iv) The Company is duly registered or qualified as a foreign
limited liability company for the transaction of business under the laws of
the State of Oregon; and, to such counsel's knowledge, such jurisdiction is
the only jurisdiction in which the character of the business conducted by
the Company or the nature or location of the properties owned or leased by
it make such registration or qualification necessary (except where the
failure to so register or so qualify would not (A) have a material adverse
effect on the condition (financial or other), business or results of
operations of the Partnership and the Company, taken as a whole, or (B)
subject the limited partners of the Partnership to any material liability
or disability);
(v) Finance Corp. has been duly organized and is validly
existing in good standing as a corporation under the DGCL, with full
corporate power and authority to issue the Notes;
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(vi) After giving effect to the Transactions, the Company
will own all of the issued and outstanding shares of capital stock of
Finance Corp.; such shares have been duly authorized and validly issued and
are fully paid and nonassessable; and the Company will own all of such
shares free and clear of all liens, encumbrances, security interests,
charges or claims (A) in respect of which a financing statement under the
Uniform Commercial Code of the State of Oregon naming the Company as debtor
is on file in the office of the Secretary of State of the State of Oregon
or Delaware or (B) otherwise known to such counsel, without independent
investigation, other than those created by or arising under the DGCL;
(vii) The Manager has been duly formed and is validly existing
in good standing as a limited liability company under the Delaware LLC Act,
with all necessary limited liability company power and authority to own or
lease its properties, to conduct its business and to act as general partner
of the Partnership and as managing member of the Company, in each case in
all material respects as described in the Prospectus;
(viii) The Manager is duly registered or qualified as a foreign
limited liability company for the transaction of business under the laws of
the States of Oregon and New York; and to such counsel's knowledge, such
jurisdictions are the only jurisdictions in which the character of the
business conducted by the Manager or the nature or location of the
properties owned or leased by it make such registration or qualification
necessary (except where the failure to so register or so qualify would not
(A) have a material adverse effect on the condition (financial or other),
business or results of operations of the U.S. Timberlands Parties, taken as
a whole, or (B) subject the limited partners of the Partnership to any
material liability or disability);
(ix) The Manager is the sole general partner of the
Partnership, with a 1% general partner interest in the Partnership; such
general partner interest has been duly authorized and validly issued in
accordance with the Partnership Agreement; the Manager owns all of the
Incentive Distribution Rights; and the Manager owns such general partner
interest and Incentive Distribution Rights free and clear of all liens,
encumbrances, security interests, charges or claims (A) in respect of which
a financing statement under the Uniform Commercial Code of the State of New
York or the State of Oregon naming the Manager as debtor is on file in the
office of the Secretary of State of the applicable jurisdiction or (B)
otherwise known to such counsel, without independent investigation, other
than those created by or arising under the Delaware LP Act;
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(x) After giving effect to the Transactions, Holdings, Old
Services, Mr. Stephens and Mr. Hornig will own 2,894,157, 1,244,565, 95,238
and 48,160 Subordinated Units, respectively; and Holdings and Old Services
will own their respective Subordinated Units free and clear of all liens,
encumbrances, security interests, charges or claims (A) in respect of which
a financing statement under the Uniform Commercial Code of, in the case of
Old Services, the State of Oregon, and in the case of Holdings, the State
of New York, naming any such owner as debtor is on file in the office of
the Secretary of State of the applicable jurisdiction or (B) otherwise
known to such counsel, without independent investigation, other than (1)
those created by or arising under the Delaware LP Act and (2) as provided
in the Rudey Pledge Agreement;
(xi) Other than the Subordinated Units that will be owned by
Holdings, Old Services, Mr. Stephens and Mr. Hornig and the Incentive
Distribution Rights that will be owned by the Manager, the Units will be
the only limited partner interests of the Partnership issued and
outstanding at the Closing Date;
(xii) The Manager owns a 1.0101% member interest in the
Company and the Partnership owns a 98.9899% member interest in the Company;
and the Manager and the Partnership own such member interests free and
clear of all liens, encumbrances, security interests, charges or claims (A)
in respect of which a financing statement under the Uniform Commercial Code
of, in the case of the Manager, the State of New York or the State of
Oregon, naming the Manager, and in the case of the Partnership, the State
of Oregon, naming the Partnership, as debtor is on file in the office of
the Secretary of State of the applicable jurisdiction or (B) otherwise
known to such counsel, without independent investigation, other than those
created by or arising under the Delaware LLC Act;
(xiii) Old Services, Stephens and Hornig own member interests
of 70%, 10% and 7.5%, respectively, in the Manager; and Old Services owns
its member interest free and clear of all liens, encumbrances, security
interests, charges or claims (A) in respect of which a financing statement
under the Uniform Commercial Code of the State of Oregon naming Old
Services as debtor is on file in the office of the Secretary of State of
the State of Oregon, or (B) otherwise known to such counsel, without
independent investigation, other than those created by or arising under the
Delaware LLC Act;
(xiv) Each of Old Services, Holdings and Rudey Timber Company
has been duly formed and is validly existing in good standing as a limited
liability company under the Delaware LLC Act with all necessary limited
liability company power and
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authority to own or lease its properties, to conduct its business and to
execute and deliver this Agreement and the Operative Agreements to which it
is a party and perform its obligations hereunder and thereunder, in each
case in all material respects as described in the Registration Statement
and the Prospectus;
(xv) Old Services is duly registered or qualified as a
foreign limited liability company under the laws of the State of Oregon;
and to such counsel's knowledge, Oregon is the only jurisdiction in which
the character of the business conducted by Old Services or the nature or
location of the properties owned or leased by it make such registration or
qualification necessary (except where the failure to so register or so
qualify would not have a material adverse effect on the condition
(financial or other), business or results of operations of the U.S.
Timberlands Parties taken as a whole;
(xvi) Upon the redemption of Stephens' and Hornig's member
interests in Old Services, Rudey will own a 100% member interest in Old
Services free and clear of all liens, encumbrances, security interests,
charges or claims (A) in respect of which a financing statement under the
Uniform Commercial Code of the State of New York naming him as debtor is on
file in the office of the Secretary of State of the State of New York or
(B) otherwise known to such counsel, without independent investigation,
other than those created by or arising under the Delaware LLC Act;
(xvii) Rudey and Rudey Timber Company own 1% and 99% member
interests, respectively, in Holdings free and clear of all liens,
encumbrances, security interests, charges or claims (A) in respect of which
a financing statement under the Uniform Commercial Code of, in the case of
Rudey, the State of New York, and in the case of Rudey Timber Company, the
State of Delaware, naming Rudey or Rudey Timber Company, as applicable, as
debtor is on file in the office of the Secretary of State of the applicable
jurisdiction or (B) otherwise known to such counsel, without independent
investigation, other than those created by or arising under the Delaware
LLC Act;
(xviii) Rudey and Garrin Holdings own 99% and 1% member
interests, respectively, in Rudey Timber Company free and clear of all
liens, encumbrances, security interests, charges or claims (A) in respect
of which a financing statement under the Uniform Commercial Code of the
State of New York, naming Rudey or Garrin Holdings as debtor is on file in
the office of the Secretary of State of the State of New York or (B)
otherwise known to such counsel, without independent investigation, other
than (1) those created by or arising under the Delaware LLC Act or (2) as
provided in the Rudey Pledge Agreement;
(xix) Except as described in the Prospectus, there are no
preemptive rights or other rights to subscribe for or to purchase, nor any
restriction upon the voting or transfer of, any limited partner interests
in the Partnership or member interests in the
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Company pursuant to the Partnership Agreement, the Operating Agreement or
any other agreement or instrument known to such counsel to which the
Partnership or the Company is a party or by which either of them may be
bound. To such counsel's knowledge, neither the filing of the Registration
Statement nor the offering or sale of the Notes as contemplated by this
Agreement gives rise to any rights for or relating to the registration of
any other securities of the Partnership or the Company or Finance Corp. The
Issuers have all requisite power and authority to issue, sell and deliver
the Notes in accordance with and upon the terms and conditions set forth in
this Agreement, the Indenture and the Registration Statement and
Prospectus;
(xx) This Agreement has been duly authorized and validly
executed and delivered by each of the U.S. Timberlands Entities;
(xxi) The Indenture has been duly authorized and validly
executed and delivered by each of the Issuers and (assuming the due
authorization, execution and delivery thereof by the Trustee) constitutes a
valid and binding obligation of the Issuers enforceable against the Issuers
in accordance with its terms, subject to (A) applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or similar laws
from time to time in effect affecting creditors' rights and remedies
generally and general principles of equity (regardless of whether such
principles are considered in a proceeding at law or in equity) and (B)
public policy, applicable law relating to fiduciary duties and an implied
covenant of good faith and fair dealing. The Indenture has been duly
qualified under the Trust Indenture Act.
(xxii) The Notes have been duly authorized for issuance and
sale by each of the Issuers and, when issued and authenticated in
accordance with the terms of the Indenture and delivered against payment
therefor in accordance with the terms hereof, will constitute a valid and
binding obligation of each Issuer enforceable against each Issuer in
accordance with their terms and entitled to the benefits of the Indenture,
subject to (A) applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or similar laws from time to time in effect
affecting creditors' rights and remedies generally and general principles
of equity (regardless of whether such principles are considered in a
proceeding at law or in equity) and (B) public policy, applicable law
relating to fiduciary duties and an implied covenant of good faith and fair
dealing.
(xxiii) Each of the Operative Agreements (other than the
Indenture, the Notes and the Manager Agreement) to which any of the U.S.
Timberlands Entities is a party have been duly authorized and validly
executed and delivered by the U.S. Timberlands Entities parties thereto and
constitutes a valid and binding obligation of the U.S. Timberlands Entities
parties thereto, enforceable against each such party in accordance with its
respective terms, subject to (A) applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or similar laws from time
to time in effect affecting creditors' rights and remedies generally and
general principles of equity (regardless of whether such
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principles are considered in a proceeding at law or in equity) and (B)
public policy, applicable law relating to fiduciary duties and an implied
covenant of good faith and fair dealing;
(xxiv) None of the offering, issuance and sale by the
Partnership of the Units, the offering, issuance and sale by the Issuers of
the Notes, the execution, delivery and performance of this Agreement, the
Equity Underwriting Agreement or the Operative Agreements (other than the
General Partner Agreement) by the U.S. Timberlands Entities party thereto,
or the consummation of the transactions contemplated hereby and thereby
(including the Transactions) (A) constitutes or will constitute a violation
of the agreement of limited partnership, limited liability company
operating agreement (other than the General Partner Agreement), certificate
or articles of incorporation or bylaws or other organizational documents of
any of the U.S. Timberlands Entities or Rudey Timber Company or (B)
constitutes or will constitute a breach or violation of, or a default under
(or an event which, with notice or lapse of time or both, would constitute
such an event), any Operative Agreement (other than the General Partner
Agreement) or any other agreement filed as an exhibit to the Registration
Statement, (C) results or will result in any violation of the Delaware LP
Act, the Delaware LLC Act or the DGCL, or (D) results or will result in the
creation of imposition of any lien, charge or encumbrance upon any property
or assets of any of the U.S. Timberlands Entities or Rudey Timber Company,
which in the case of clauses (B), (C) or (D) would reasonably be expected
to have a material adverse effect on the financial condition, business or
results of operations of the U.S. Timberlands Parties, taken as a
whole;
(xxv) No permit, consent, approval, authorization or order of
any Federal or Delaware court, governmental agency or body is required in
connection with the execution and delivery of, or the consummation by the
U.S. Timberlands Entities of the transactions contemplated by, this
Agreement, the Equity Underwriting Agreement or the Operative Agreements,
except (A) such permits, consents, approvals and similar authorizations
required under the Securities Act, the Exchange Act and the Trust Indenture
Act, (B) such permits consents, approvals and similar authorizations
required under state securities or "Blue Sky" laws, as to which such
counsel need not express any opinion and (C) as described in the
Prospectus;
(xxvi) To the knowledge of such counsel, none of the Company,
Old Services, Holdings or Rudey Timber Company is in (A) breach or
violation of the provisions of its limited liability company operating
agreement or other organizational documents or (B) default (and no event
has occurred which, with notice or lapse of time or both, would constitute
such a default) in the due performance of any term, covenant or condition
contained in the Existing Credit Agreement which would reasonably be
expected to have a material adverse effect on the financial condition,
business or results of operations of the U.S. Timberland Parties taken as a
whole, or could impair the ability of the Company,
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Old Services, Holdings or Rudey Timber Company to perform their obligations
under the Operative Agreements;
(xxvii) The statements in the Registration Statement and
Prospectus under the captions "The Transactions," "Business and
Properties--Federal and State Regulation," "Certain Relationships and
Related Transactions--Contribution, Conveyance and Assumption Agreement,"
"The Company Agreement," "Description of Bank Credit Facility," and
"Description of Notes" insofar as they constitute descriptions of the
Operative Agreements or refer to statements of law or legal conclusions,
are accurate and complete in all material respects, and the Notes and the
Indenture conform in all material respects to the descriptions thereof
contained in the Registration Statement and Prospectus under the captions
"Prospectus Summary--The Offering" and "Description of Notes";
(xxviii) The Registration Statement was declared effective under
the Act on November 12, 1997; to the knowledge of such counsel, no stop
order suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or
threatened by the Commission; and any required filing of the Prospectus
pursuant to Rule 424(b) has been made in the manner and within the time
period required by such Rule;
(xxix) The Registration Statement and the Prospectus (except
for the financial statements and the notes and the schedules thereto and
the other financial, statistical and accounting data included in the
Registration Statement or the Prospectus, as to which such counsel need not
express any opinion) comply as to form in all material respects with the
requirements of the Act and the rules and regulations promulgated
thereunder;
(xxx) To the knowledge of such counsel, (A) there is no legal
or governmental proceeding pending or threatened to which any of the U.S.
Timberlands Entities is a party or to which any of their respective
properties is subject that is required to be disclosed in the Prospectus
and is not so disclosed and (B) there are no agreements, contracts or other
documents to which any of the U.S. Timberlands Entities is a party that are
required to be described in the Registration Statement or the Prospectus or
to be filed as exhibits to the Registration Statement that are not
described or filed as required;
(xxxi) None of the U.S. Timberlands Parties is an "investment
company" or a company "controlled by" an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended; and
(xxxii) The Notes have been approved for listing on the New
York Stock Exchange, subject only to official notice of issuance.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the U.S. Timberlands
Entities and the independent public
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accountants of the Issuers and your representatives, at which the contents of
the Registration Statement and the Prospectus and related matters were
discussed, and although such counsel has not independently verified, is not
passing on, and is not assuming any responsibility for the accuracy,
completeness or fairness of the statements contained in, the Registration
Statement and the Prospectus (except to the extent specified in the foregoing
opinion), no facts have come to such counsel's attention that lead such counsel
to believe that the Registration Statement (other than (i) the financial
statements included therein, including the notes and schedules thereto and the
auditors' reports thereon, (ii) the other historical, pro forma and projected
financial information and the statistical and accounting information included
therein and (iii) the exhibits thereto, as to which such counsel need not
comment), as of its effective date contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or that the Prospectus
(other than (i) the financial statements included therein, including the notes
and schedules thereto and the auditors' reports thereon, and (ii) the other
historical, pro forma and projected financial information and the statistical
and accounting information included therein, as to which such counsel need not
comment), as of its issue date and the Closing Date contained an untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
In rendering such opinion, such counsel may (A) rely in respect of
matters of fact upon certificates of officers and employees of the U.S.
Timberlands Entities and upon information obtained from public officials, (B)
assume that all documents submitted to them as originals are authentic, that all
copies submitted to them conform to the originals thereof, and that the
signatures on all documents examined by them are genuine, (C) state that their
opinion is limited to federal laws, the Delaware LP Act, the Delaware LLC Act,
the DGCL and the laws of the State of New York, (D) with respect to the opinions
expressed in paragraphs (ii), (iv) (vi) and (xiii) above as to the due
qualification or registration as a foreign limited partnership or limited
liability company, as the case may be, of each of the U.S. Timberlands Entities,
state that such opinions are based upon the opinion of Lindsay, Hart, Neil &
Weigler, LLP provided pursuant to (e) below and upon certificates of foreign
qualification or registration provided by the Secretary of State of the State of
Oregon (each of which shall be dated as of a date not more than fourteen days
prior to the Closing Date and shall be provided to you), (E) with respect to the
opinion expressed in paragraph (xxvii) above as to the section of the
Registration Statement and Prospectus captioned "Business and Properties--
Federal and State Regulation" as to the laws of the State of Oregon, state that
such opinion is based upon the opinion of Manuel C. Hernandez & Associates,
P.C., provided pursuant to (f) below, (F) state that they express no opinion
with respect to the title of any of the U.S. Timberlands Entities to any of
their respective real or personal property and (G) state that they express no
opinion with respect to state or local taxes or tax statutes to which any of the
limited partners of the Partnership or any of the U.S. Timberlands Parties may
be subject.
(d) You shall have received on the Closing Date, a copy of the
opinion of Andrews & Kurth L.L.P. delivered pursuant to the Equity Underwriting
Agreement, substantially in the form provided for therein, accompanied by a
letter dated the Closing Date and addressed to
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you from such counsel stating that you are entitled to rely on such opinion as
if it were addressed to you.
(e) You shall have received on the Closing Date, an opinion of
Lindsay, Hart, Neil & Weigler, LLP, counsel for the U.S. Timberlands Entities,
dated the Closing Date and addressed to you, to the effect that:
(i) Each of the U.S. Timberlands Entities is duly registered or
qualified as a foreign limited liability company or foreign limited
partnership, as applicable, under the laws of the State of Oregon;
(ii) None of the offering, issuance and sale by the Partnership
of the Units, the offering, issuance and sale by the Issuers of the Notes,
the execution, delivery and performance of this Agreement, the Equity
Underwriting Agreement or the Operative Agreements by the U.S. Timberlands
Entities which are parties thereto, nor the consummation of the
transactions contemplated hereby and thereby (including the Transactions)
(A) constitutes or will constitute a breach or violation of, or a default
under (or an event which, with notice or lapse of time or both, would
constitute such an event), any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument known to such counsel (other
than the Operative Agreements and any other agreement filed as an exhibit
to the Registration Statement) to which any of the U.S. Timberlands
Entities is a party or by which any of them or any of their properties may
be bound or (B) results or will result in any violation of any statute, law
or regulation of the State of Oregon or any order, judgment, decree or
injunction of any court or governmental agency or body, in each case, known
to such counsel and directed to any of the U.S. Timberlands Entities or
Rudey Timber Company or any of their properties in a proceeding to which
any of them or their property is subject, which in either case would
reasonably be expected to have a material adverse effect on the financial
condition, business or results of operations of the U.S. Timberlands
Parties, take as a whole;
(iii) No permit, consent, approval or authorization or order of
any Oregon court, governmental agency or body is required in connection
with the execution and delivery of, or the consummation by the U.S.
Timberlands Entities of the transactions contemplated by, this Agreement,
the Equity Underwriting Agreement or the Operative Agreements, except (A)
as may be required under state securities or "Blue Sky" laws, as to which
such counsel need not express any opinion, (B) for such permits, consents,
approvals and similar authorizations which have been obtained, and (C) for
such permits, consents, approvals and similar authorizations which, if not
obtained, would not, individually or in the aggregate, have a material
adverse effect upon the condition (financial or other), business,
prospects, properties, net worth or results of operations of the U.S.
Timberlands Parties, taken as a whole.
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(iv) To the knowledge of such counsel, none of the Company, Old
Services, Holdings or Rudey Timber Company is in default (and no event has
occurred which, with notice or lapse of time or both, would constitute such
a default) in the due performance of any term, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which it is a party or by which it is
bound or to which any of its properties are subject (other than the
Existing Credit Agreement, with respect to which such counsel need not
express an opinion), which would reasonably be expected to have a material
adverse effect on the financial condition, business or results of
operations of the U.S. Timberlands Parties, taken as a whole, or could
impair the ability of the Company, Old Services, Holdings or Rudey Timber
Company to perform their obligations under the Operative Agreements; and
(v) To the knowledge of such counsel after due inquiry, other
than as described or contemplated in the Prospectus (or any supplement
thereto), there is no litigation, proceeding or governmental investigation
pending or threatened against any of the U.S. Timberlands Entities or to
which any of the U.S. Timberlands Entities is a party or to which any of
their respective properties is subject, that relates to any of the
Transactions or which, if adversely determined, would reasonably be
expected to have a material adverse effect on the condition (financial or
other), business or results of operations of the U.S. Timberlands Parties,
taken as a whole, or would impair or call into question the validity of
this Agreement, the performance by any of the U.S. Timberlands Entities of
their obligations under this Agreement, the Equity Underwriting Agreement
or the Operative Agreements;
(vi) Except as described in the Prospectus, to the knowledge of
such counsel, each of the U.S. Timberlands Parties possess all permits,
consents, licenses, franchises and authorizations issued by the appropriate
local, state or federal regulatory agencies or bodies necessary to conduct
the business currently (or, as described or contemplated in the Prospectus,
to be) operated by them, except for such permits, consents, licenses,
franchises and authorizations which, if not obtained, would not reasonably
be expected to have, individually or in the aggregate, a material adverse
effect upon the financial condition, business or results of operations of
the U.S. Timberlands Parties, taken as a whole; and, to the knowledge of
such counsel, none of the U.S. Timberlands Parties has received any notice
of proceedings relating to the revocation or modification of any such
permits, consents, licenses, franchises and authorizations which,
individually or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would reasonably be expected to have a
material adverse effect upon the financial condition, business or results
of operations of the U.S. Timberlands Parties, taken as a whole.
(vii) The Company has all requisite power and authority as a
limited liability company under the laws of the State of Oregon to own or
lease its properties and to conduct its business in the State of Oregon;
and upon the consummation of the Transactions, assuming that the
Partnership will not be liable under the laws of the State of Delaware for
the liabilities of the Company and that the Unitholders will not be liable
under the laws of
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the State of Delaware for liabilities of the Partnership or the Company,
the Partnership will not be liable under the laws of the State of Oregon
for the liabilities of the Company, and the Unitholders will not be liable
under the laws of the State of Oregon for the liabilities of the
Partnership or the Company, except in each case to the same extent as under
the laws of the State of Delaware;
(viii) Each of the Conveyance Agreements, assuming the due
authorization, execution and delivery thereof by the parties thereto, to
the extent it is a valid and legally binding agreement under the applicable
law as stated therein and that such law applies thereto, is a valid and
legally binding agreement of the parties thereto under the laws of the
State of Oregon, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general application relating to or affecting creditors'
rights generally and to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law);
each of the Conveyance Agreements is in a form legally sufficient as
between the parties thereto to convey to the transferee thereunder all of
the right, title and interest of the transferor stated therein in and to
the properties located in the State of Oregon, as described in the
Conveyance Agreements, subject to the conditions, reservations and
limitations contained in the Conveyance Agreements, except motor vehicles
or other property requiring conveyance of certificated title as to which
the Conveyance Agreements are legally sufficient to compel delivery of such
certificated title; and
(ix) Each of the deeds and assignments (including, without
limitation, the form of the exhibits and schedules thereto) is in a form
legally sufficient for recordation in the appropriate public offices of the
State of Oregon, to the extent such recordation is required, and, upon
proper recordation of any of such deeds and assignments in the State of
Oregon, will constitute notice to all third parties under the recordation
statutes of the State of Oregon concerning record title to the assets
transferred thereby; recordation in the office of the County Clerk for each
county in which the Company owns property is the appropriate public office
in the State of Oregon for the recordation of deeds and assignments of
interests in real property located in such county.
In rendering such opinion, such counsel may (A) rely in respect of matters
of fact upon certificates of officers and employees of the U.S. Timberlands
Entities and upon information obtained from public officials, (B) assume that
all documents submitted to them as originals are authentic, that all copies
submitted to them conform to the originals thereof, and that the signatures on
all documents examined by them are genuine, (C) state that such opinions are
limited to federal laws and the laws of the State of Oregon, excepting therefrom
municipal and local ordinances and regulations, (D) state that they express no
opinion with respect to state or local taxes or tax statutes, and (E) state that
they (1) express no opinion with respect to the title of any of the real or
personal property purported to be transferred by the Conveyance Agreements, (2)
have not made any review of specific properties or facilities or title files
relating to any such properties and (3) express no opinion regarding the
accuracy of the description or references to any real or personal property.
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(f) You shall have received on the Closing Date an opinion of Manuel
C. Hernandez & Associates, P.C., counsel for the U.S. Timberland Entities, dated
the Closing Date and addressed to you, to the effect that the statements in the
Registration Statement and Prospectus under the caption "Business and
Properties--Federal and State Regulation," insofar as they refer to statements
of law or legal conclusions, are accurate and complete in all material
respects.
In rendering such opinion, such counsel may state that their opinion is
limited to federal laws and the laws of the State of Oregon, excepting therefrom
municipal and local ordinances and regulations.
(g) You shall have received on the Closing Date an opinion of Baker &
Botts, L.L.P., counsel for the Underwriters, dated the Closing Date and
addressed to you, with respect to the issuance and sale of the Notes, the
Registration Statement and the Prospectus (together with any supplement or
amendment thereto).
(h) You shall have received a letter addressed to you and dated
hereof from Mason Bruce & Girard, Inc. substantially in the form heretofore
approved by you.
(i) You shall have received letters addressed to you, and dated the
date hereof and the Closing Date from Arthur Andersen LLP, independent certified
public accountants, substantially in the forms heretofore approved by you.
(j) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or taken or, to the knowledge of the Issuers
and the Manager, shall be threatened by the Commission at or prior to the
Closing Date; (ii) there shall not have been any change in the partners'
capital, member's equity or stockholders' equity of the Partnership, the
Company, Finance Corp. or the Manager, as the case may be, nor any material
increase in the short-term or the long-term debt of the Partnership, the
Company, Finance Corp., the Manager or Old Services (other than in the ordinary
course of business) from that set forth or contemplated in the Registration
Statement or the Prospectus (or any amendment or supplement thereto); (iii)
there shall not have been, since the respective dates as of which information is
given in the Registration Statement and the Prospectus (or any amendment or
supplement thereto), except as may otherwise be stated in the Registration
Statement and the Prospectus (or any amendment or supplement thereto), any
material adverse change in or affecting the condition (financial or other),
business, prospects, properties, net worth or results of operations of the U.S.
Timberlands Entities, taken as a whole; (iv) the U.S. Timberlands Entities shall
not have any liabilities or obligations, direct or contingent (whether or not in
the ordinary course of business), that are material to the U.S. Timberlands
Parties taken as a whole other than those reflected in the
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Registration Statement or the Prospectus (or any amendment or supplement
thereto); and (v) all the representations and warranties of the U.S. Timberlands
Entities contained in this Agreement shall be true and correct on and as of the
date hereof and on and as of the Closing Date as if made on and as of the
Closing Date.
(k) The U.S. Timberlands Entities shall not have failed at or prior
to the Closing Date to have performed or complied in all material respects with
any of their agreements herein contained and required to be performed or
complied with by them hereunder at or prior to the Closing Date.
(l) The Notes shall have been approved for listing upon notice of
issuance on the New York Stock Exchange.
(m) The Issuers shall have furnished or caused to be furnished to you
such further certificates and documents as you shall have reasonably
requested.
(n) Prior to or simultaneously with the sale of the Notes on the
Closing Date, (i) the conveyance of the Transferred Assets to the Company shall
have been consummated, (ii) the closing of the offering of the Firm Units shall
have occurred on the basis set forth in the Prospectus and the Equity
Underwriting Agreement and (iii) the Bank Credit Agreement shall have been
executed and delivered and become effective in substantially the form filed as
an exhibit to the Registration Statement.
(o) There shall have been furnished to you at the Closing Date a
certificate reasonably satisfactory to you, signed on behalf of the Manager by
the President or the Executive Vice President and the Chief Financial Officer
thereof to the effect that: (A) the representations and warranties of the
Partnership, the Company and the Manager contained in this Agreement are true
and correct at and as of the Closing Date as though made at and as of the
Closing Date; (B) each of the Partnership, the Company and the Manager has in
all material respects performed all obligations required to be performed by it
pursuant to the terms of this Agreement at or prior to the Closing Date; (C) no
stop order suspending the effectiveness of the Registration Statement has been
issued and no proceeding for that purpose has been instituted or taken or, to
the knowledge of any of the Partnership, the Company and the Manager, threatened
by the Commission, and all requests for additional information on the part of
the Commission have been complied with or otherwise satisfied; (D) the Notes
have been duly approved for listing, subject to official notice of issuance, on
the New York Stock Exchange; and (E) no event contemplated by subsection (j) of
this Section 8 in respect of the Partnership, the Company or the Manager shall
have occurred.
(p) There shall have been furnished to you at the Closing Date a
certificate reasonably satisfactory to you, signed on behalf of Finance Corp. by
the President or the Executive Vice President and a Vice President thereof to
the effect that: (A) the representations and warranties of Finance Corp.
contained in this Agreement are true and correct at and as of the Closing Date
as though made at and as of the Closing Date; (B) Finance Corp. has in all
material respects performed
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all obligations required to be performed by it pursuant to the terms of this
Agreement at or prior to the Closing Date; (C) no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceeding
for that purpose has been instituted or taken or, to the knowledge of Finance
Corp., threatened by the Commission, and all requests for additional information
on the part of the Commission have been complied with or otherwise satisfied;
(D) the Notes have been duly approved for listing, subject to official notice of
issuance, on the New York Stock Exchange; and (E) no event contemplated by
subsection (j) of this Section 8 in respect of Finance Corp. shall have
occurred.
(q) There shall have been furnished to you at the Closing Date,
certificates reasonably satisfactory to you, signed on behalf of each of Old
Services and Holdings, respectively, by the President or a Vice President
thereof, respectively, to the effect that (A) the representations and warranties
of such party contained in this Agreement are true and correct at and as of the
Closing Date as though made at and as of the Closing Date and (B) such party has
in all material respects performed all obligations required to be performed by
it pursuant to the terms of this Agreement at or prior to the Closing Date;
(r) There shall not have been any announcement by any "nationally
recognized statistical rating organization," as defined for purposes of Rule
436(g) under the Act, that (i) it is downgrading its rating assigned to the
Notes or (ii) it is reviewing its rating assigned to the Notes with a view to
possible downgrading, or with negative implications, or direction not
determined.
All such opinions, certificates, letters and other documents referred
to in this Section 8 will be in compliance with the provisions hereof only if
they are reasonably satisfactory in form and substance to you and your counsel.
Any certificate or document signed by any officer of the Manager,
Finance Corp., Old Services or Holdings and delivered to you, or to counsel for
the Underwriters, shall be deemed a representation and warranty by the Manager,
Finance Corp., Old Services or Holdings, respectively to each Underwriter as to
the statements made therein.
9. Expenses. The Issuers agrees to pay the following costs and
--------
expenses and all other costs and expenses incident to the performance by them of
their obligations hereunder: (i) the preparation, printing or reproduction, and
filing with the Commission of the Registration Statement (including financial
statements and exhibits thereto), each Prepricing Prospectus, the Prospectus,
and each amendment or supplement to any of them, and the Statement of
Eligibility and Qualification of the Trustee; (ii) the printing (or
reproduction) and delivery (including postage, air freight charges and charges
for counting and packaging) of such copies of the Registration Statement, each
Prepricing Prospectus, the Prospectus, and all amendments or supplements to any
of them as may be reasonably requested for use in connection with the offering
and sale of the Notes; (iii) the preparation, printing, authentication, issuance
and delivery of certificates for the Notes, including any stamp taxes in
connection with the original issuance and sale of the Notes; (iv) the printing
(or reproduction) and delivery of this Agreement, the preliminary and
supplemental Blue Sky
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Memoranda, and all other agreements or documents printed (or reproduced) and
delivered in connection with the offering of the Notes; (v) the registration of
the Notes under the Exchange Act and the listing of the Notes on the New York
Stock Exchange; (vi) the registration or qualification of the Notes for offer
and sale under the securities or Blue Sky laws of the several states as provided
in Section 5(g) hereof (including the reasonable fees, expenses and
disbursements of counsel for the Underwriters relating to the preparation,
printing or reproduction, and delivery of the preliminary and supplemental Blue
Sky Memoranda and such registration and qualification); (vii) the filing fees
and the reasonable fees and expenses of counsel for the Underwriters in
connection with any filings required to be made with the National Association of
Securities Dealers, Inc.; (viii) the fees and expenses of the Trustee; (ix) the
fees and expenses associated with obtaining ratings for the Notes from
nationally recognized statistical rating organizations; (x) the transportation
and other expenses incurred by or on behalf of officers and employees of the
Issuers in connection with presentations to prospective purchasers of the Notes;
and (xi) the fees and expenses of the Issuers' accountants and the fees and
expenses of counsel (including local and special counsel) for the Issuers.
It is understood, however, that except as otherwise provided in this
Section 9 and Section 5(j) hereof, the Underwriters will pay all of their own
costs and expenses, including the fees of their counsel, transfer taxes on any
resale of the Notes by any Underwriter, any advertising expenses connected with
any offers they may make and the transportation and other expenses incurred by
the Underwriters on their own behalf in connection with presentations to
prospective purchasers of the Notes.
10. Effective Date of Agreement. This Agreement shall become
---------------------------
effective: (i) upon the execution and delivery hereof by the parties hereto; or
(ii) if, at the time this Agreement is executed and delivered, it is necessary
for the Registration Statement or a post-effective amendment thereto to be
declared effective before the offering of the Notes may commence, when
notification of the effectiveness of the Registration Statement or such post-
effective amendment has been released by the Commission. Until such time as
this Agreement shall have become effective, it may be terminated by the Issuers
by notifying you, or by you, by notifying the Issuers.
If any one or more of the Underwriters shall fail or refuse to
purchase Notes which it or they are obligated to purchase hereunder on the
Closing Date, and the aggregate principal amount of Notes which such defaulting
Underwriter or Underwriters are obligated but fail or refuse to purchase is not
more than one-tenth of the aggregate principal amount of the Notes which the
Underwriters are obligated to purchase on the Closing Date, each non-defaulting
Underwriter shall be obligated, severally, in the proportion which the principal
amount of Notes set forth opposite its name in Schedule I hereto bears to the
aggregate principal amount of Notes set forth opposite the names of all non-
defaulting Underwriters or in such other proportion as you may specify in
accordance with Section 20 of the Master Agreement Among Underwriters of Smith
Barney Inc., to purchase the Notes which such defaulting Underwriter or
Underwriters are obligated, but fail or refuse, to purchase. If any one or more
of the Underwriters shall fail or refuse to purchase Notes which it or they are
obligated to purchase on the Closing Date and the aggregate principal amount of
Notes with respect to which such default occurs is more than one-tenth of the
aggregate principal
-37-
<PAGE>
amount of Notes which the Underwriters are obligated to purchase on the Closing
Date and arrangements satisfactory to you and the Issuers for the purchase of
such Notes by one or more non-defaulting Underwriters or other party or parties
approved by you and the Issuers are not made within 36 hours after such default,
this Agreement will terminate without liability on the part of any party hereto
(other than the defaulting Underwriter). In any such case which does not result
in termination of this Agreement, either you or the Issuers have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Registration Statement and the
Prospectus or any other documents or arrangements may be effected. Any action
taken under this paragraph shall not relieve any defaulting Underwriter from
liability in respect of any such default of any such Underwriter under this
Agreement. The term "Underwriter" as used in this Agreement includes, for all
purposes of this Agreement, any party not listed in Schedule I hereto who, with
your approval and the approval of the Issuers, purchases Notes which a
defaulting Underwriter is obligated, but fails or refuses, to purchase.
Any notice under this Section 10 may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
11. Termination of Agreement. This Agreement shall be subject to
------------------------
termination in your absolute discretion, without liability on the part of any
Underwriter to any U.S. Timberlands Entity, by notice to the Issuers, if prior
to the Closing Date, (i) trading in securities generally on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market shall have
been suspended or materially limited, (ii) a general moratorium on commercial
banking activities in New York or Oregon shall have been declared by either
federal or state authorities, or (iii) there shall have occurred any outbreak or
escalation of hostilities or other international or domestic calamity, crisis or
change in political, financial or economic conditions, the effect of which on
the financial markets of the United States is such as to make it, in your
judgment, impracticable or inadvisable to commence or continue the offering of
the Notes at the offering price to the public set forth on the cover page of the
Prospectus or to enforce contracts for the resale of the Notes by the
Underwriters. Notice of such termination may be given to the Issuers by
telegram, telecopy or telephone and shall be subsequently confirmed by letter.
12. Information Furnished by the Underwriters. The statements set
-----------------------------------------
forth in the last paragraph on the cover page, the stabilization legend on the
inside cover page, and the statements in the first, third and fourth paragraphs
and second sentence of the sixth paragraph under the caption "Underwriting" in
any Prepricing Prospectus and in the Prospectus, constitute the only information
furnished by or on behalf of the Underwriters through you as such information is
referred to in Sections 6(b) and 7 hereof.
13. Miscellaneous. Except as otherwise provided in Sections 5, 10
-------------
and 11 hereof, notice given pursuant to any provision of this Agreement shall be
in writing and shall be delivered (i) if to any of the U.S. Timberlands
Entities, at the office of the Company at P.O. Box 10, 6400 Highway 66, Klamath
Falls, Oregon 97601, Attention: John Stephens, with a copy to John Rudey, U.S.
Timberlands Services Company, L.L.C., Suite 10-B, 625 Madison Avenue, New
York,
-38-
<PAGE>
New York 10022, or (ii) if to you, care of Smith Barney Inc., 388 Greenwich
Street, New York, New York 10013, Attention: Manager, Investment Banking
Division.
This Agreement has been and is made solely for the benefit of the
several Underwriters, the U.S. Timberlands Entities, their directors and
officers, and the other controlling persons referred to in Section 7 hereof and
their respective successors and assigns, to the extent provided herein, and no
other person shall acquire or have any right under or by virtue of this
Agreement. Neither the term "successor" nor the term "successors and assigns"
as used in this Agreement shall include a purchaser from any Underwriter of any
of the Notes in his status as such purchaser.
14. Applicable Law; Counterparts. This Agreement shall be governed
----------------------------
by and construed in accordance with the laws of the State of New York applicable
to contracts made and to be performed within the State of New York.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
-39-
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Partnership, the Company, the Manager, Finance Corp., Old Services and
Holdings and the several Underwriters.
Very truly yours,
U.S. TIMBERLANDS COMPANY, L.P.
By: NEW SERVICES, L.L.C.
By: /s/ John M. Rudey
-----------------------------
Name: John M. Rudey
Title: Managing Director
U.S. TIMBERLANDS KLAMATH FALLS,
L.L.C.
By: /s/ John M. Rudey
----------------------------
Name: John M. Rudey
Title: Managing Director
NEW SERVICES, L.L.C.
By: /s/ John M. Rudey
----------------------------
Name: John M. Rudey
Title: Managing Director
U.S. TIMBERLANDS FINANCE CORP.
By: /s/ John M. Rudey
----------------------------
<PAGE>
Name: John M. Rudey
Title: Chairman
U.S. TIMBERLANDS SERVICES
COMPANY, L.L.C.
By: /s/ John M. Rudey
----------------------------
Name: John M. Rudey
Title: Managing Director
U.S. TIMBERLANDS HOLDINGS, L.L.C.
By: /s/ John M. Rudey
----------------------------
Name: John M. Rudey
Title: Managing Director
Confirmed as of the date first
above mentioned on behalf of
themselves and the other several
Underwriters named in Schedule I
hereto.
SMITH BARNEY INC.
BANCAMERICA ROBERTSON STEPHENS
DEUTSCHE MORGAN GRENFELL INC.
By: SMITH BARNEY INC.
By: /s/ Andrew Safran
-------------------------
Managing Director
<PAGE>
SCHEDULE I
U.S. Timberlands Klamath Falls, L.L.C.
U.S. Timberlands Finance Corp.
<TABLE>
<CAPTION>
Principal Amount of Notes
Underwriter to be Purchased
----------- ---------------
<S> <C>
Smith Barney Inc. $112,500,000
BancAmerica Robertson Stephens 67,500,000
Deutsche Morgan Grenfell Inc. 45,000,000
TOTAL $225,000,000
============
</TABLE>
<PAGE>
EXHIBIT 10.5
Conformed Copy
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
the 9th day of July, 1997, by and among U.S. Timberlands Services Company,
L.L.C., a Delaware limited liability company (the "Company"), U.S. Timberlands
Company, L.P., a Delaware limited partnership ("UST"), New Services (as defined
below), a Delaware limited liability company, and Edward J. Kobacker
("Executive").
Recitals:
- --------
A. The Company desires to employ Executive as its Executive Vice President
and Chief Operating Officer, and Executive desires to accept such employment, on
the terms and conditions set forth in this Agreement.
B. A new limited partnership, UST, has been formed and a new limited
liability company to be re-named "U.S. Timberlands Service Company, L.L.C."
("New Services"), has been formed to serve as the general partner of UST and as
the managing member of certain affiliated limited liability companies (together
with any subsidiary entities, the "UST Group") and upon the initial public
offering of the units representing limited partner interests in UST (the "IPO"),
New Services will assume the obligations of the Company hereunder as more fully
described in Section 12.2.
C. To induce Executive to accept such employment, UST desires to guarantee
the performance by the Company of its obligations hereunder.
Agreements:
- ----------
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants hereinafter set forth, the parties agree as follows:
Section 1. Employment.
The Company hereby employs Executive, and Executive hereby accepts
employment with the Company, on the terms and conditions set forth in this
Agreement.
Section 2. Term.
Subject to the provisions of Section 6, Executive's employment by the
Company under this Agreement shall be for a term (the "Term") commencing on the
date hereof and expiring on December 31, 2002.
<PAGE>
Section 3. Executive's Duties.
3.1 Duties. Executive shall hold the position of the Company's Executive
Vice President and Chief Operating Officer. Subject to the control of the board
of directors or other governing body of the Company (the "Board") and the Chief
Executive Officer, and any limitations set forth in the operating agreement of
the Company (the "Company Agreement") and in the agreements of limited
partnership of the partnerships within the UST Group, Executive shall, in
general, assist the Chief Executive Officer of the Company in the supervision
and control of all the day-to-day business and affairs of the Company and the
UST Group.
3.2 Performance of Duties. Executive shall perform Executive's duties and
responsibilities during the Company's normal business hours and at all other
times reasonably necessary to comply with the terms and conditions of this
Agreement. Executive shall devote the time and attention required to the
performance of Executive's duties and responsibilities for and on behalf of the
Company on the terms set forth in this Section 3.2. In addition, Executive may
from time to time serve as a consultant to and/or as a member of the board of
directors of other entities, provided that the Board in good faith determines
that such activities do not unreasonably interfere with the business of the
Company and the UST Group and the performance of Executive's duties hereunder.
The parties acknowledge that Executive currently serves as a board member or
advisory member of various civic and charitable organizations and may continue
to participate in these activities, subject to the limitations set forth in the
first two sentences of this Section 3.2; provided, however, that such continued
participation shall in no event be deemed a violation of the limitations of the
first two sentences of this Section 3.2 unless and until Executive shall have
been notified in writing thereof and afforded a reasonable opportunity to cure
the violation.
3.3 Principal Place of Employment. Executive's principal place of
employment shall be at the location of the Company's executive offices on the
date of this Agreement or at any other location which the Company establishes as
its executive offices. The Company shall provide Executive, at his principal
place of employment, with a private office, secretarial services and such other
facilities and support services as are appropriate to the positions of Executive
Vice President and Chief Operating Officer and necessary or appropriate in the
performance of Executive's assigned duties.
Section 4. Compensation and Other Benefits
Executive shall be entitled to receive from the Company the following
compensation and benefits for the services to be rendered by Executive
hereunder:
4.1 Salary and Bonuses. During the Term, the Company shall pay Executive an
annual base salary of $350,000, payable in equal installments during the year in
accordance with the Company's customary practices for senior executives ("Base
Salary"). The amount of Executive's Base Salary may be increased from time to
time by the Board, and, once increased, such higher amount shall become the Base
Salary for all purposes of this Agreement and may not thereafter be
2
<PAGE>
reduced. The Company shall also pay to Executive, to the extent earned, an
annual cash bonus, not to exceed 100% of Base Salary, which shall be based on
the performance of Executive and the UST Group's business as determined annually
by the Compensation Committee of the Board in its discretion. The Company shall
have the right to deduct and withhold from Executive's compensation all taxes
and charges that are currently or that hereafter may be required by law to be so
deducted and withheld. The Company shall establish a program whereby Executive
may, at his option, defer receipt of any or all of the Base Salary and bonuses
otherwise payable to him under this Agreement. Any amounts so deferred shall be
placed in a "rabbi" trust, with a bank or other financial institution reasonably
satisfactory to Executive as trustee providing the maximum security to
Executive without causing the constructive receipt of income for federal income
tax purposes (the "Deferred Compensation Trust") and distributed, together with
interest or other earnings thereon, according to a payment schedule to be
designated by Executive.
4.2 Long Term Incentive Plan. Executive shall be entitled to participate
in the Long Term Incentive Plan ("LTIP") adopted by the Company on the terms and
conditions set forth therein. Concurrently with the IPO, Executive will be
granted Phantom Units (as defined in the LTIP) pursuant to the LTIP in an amount
equal to 12.5% of the number of Phantom Units initially available to be granted
under the LTIP and substantially in the form of the grant agreement attached
hereto as Attachment A.
4.3 Interest in the Company. Upon or as soon as reasonably practicable
following the IPO, Executive shall receive as a sign-on bonus an Interest (as
defined in the Company Agreement) in the Company which is equal to 5% of all of
the Interests to be initially issued. Executive shall be a Class B Member and
his Interest shall be subject to all of the terms of the Company Agreement that
are applicable to Class B Members (as defined therein), including, without
limitation, Section 8.4(b) thereof, which provides for the pro rata reallocation
to the then Class B Members of the Interests of Class B and Class C Members that
are acquired by the Company upon the occurrence of the events described in
Section 8.4(a) thereof.
4.4. IP Stock Option Payment. The Company acknowledges that Executive's
acceptance of employment under this Agreement has caused Executive to forfeit
his right to exercise certain in-the-money stock options granted to him by a
prior employer. In consideration thereof, the Company shall contribute to the
Deferred Compensation Trust $450,000 in three equal installments of $150,000 on
January 1, 1998, January 1, 1999 and January 1, 2000.
4.5 Participation in Benefit Plans. During the Term, Executive shall be
eligible to participate in all employee benefit plans and arrangements now in
effect or which may hereafter be established that are generally applicable to
other senior executives of the Company, including, without limitation, all life,
group insurance, and medical and dental care plans and all disability,
retirement, 401(k) and other employee benefit plans of the Company, as long as
any such plan or arrangement remains generally applicable to other senior
executives of the Company. Executive shall also be entitled to the same
vacation benefits as are generally available to senior executives of the
Company, provided in any case that Executive shall have a minimum of four weeks'
vacation per year.
3
<PAGE>
4.6 Reimbursement of Expenses. The Company shall reimburse Executive for
reasonable expenses incurred by Executive in the performance of Executive's
duties hereunder in accordance with the policy of the Company for reimbursement
of expenses as adopted by the Board from time to time and generally applicable
to all senior executives of the Company. Executive shall furnish the Company
with the supporting documentation required under the Company's policy in
connection with the reimbursement of such expenses. The Company shall directly
pay all reasonable and ordinary costs of Executive moving his principal
residence from Dallas, Texas to the New York City metropolitan area. In the
event that the Company requires Executive to be based at a principal place of
employment outside of the New York City metropolitan area, the Company shall
directly pay all reasonable and ordinary costs of Executive moving his principal
residence to such principal place of employment.
Section 5. Membership on the Board
Executive shall be entitled to membership on the Board in accordance with
the terms of the Company Agreement as in effect on the date the Company
Agreement is first executed.
Section 6. Termination
6.1 Termination by the Company Without Cause. The Company may terminate
Executive's employment other than for Cause or Executive becoming Disabled (as
such terms are defined below) at any time during the Term if the Board
determines, in its sole discretion, that the continued employment of Executive
is not in the continued interests of the Company. In the event the Company
terminates Executive's employment pursuant to this Section 6.1, then Executive
shall be paid on termination (i) any unpaid Base Salary earned hereunder prior
to the termination date, (ii) all unused vacation time accrued by Executive as
of the termination date in accordance with the Company's vacation policy for
senior executives, (iii) all unpaid amounts of compensation in which Executive
is vested as of the termination date under any and all incentive compensation
plans or programs of the Company, (iv) any expenses in respect of which
Executive has requested, and is entitled to, reimbursement in accordance with
Section 4.6, (v) a prorated bonus for the year of such termination calculated
based on the bonus being equal to 100% of Base Salary, and (vi)(A) if such
termination occurs prior to July 1, 1999, an amount equal to the amount of Base
Salary that Executive would receive if Executive's employment had continued
without change for 24 months or (B) if such termination occurs on or after July
1, 1999, an amount equal to the amount of Base Salary that Executive would
receive if Executive's employment had continued without change through the
remainder of the Term or for 12 months, whichever is less (items (i) through
(iv) above being the "Earned Amounts").
6.2 Termination by the Company for Cause. The Company may terminate this
Agreement at any time, in the discretion of the Board, in the event of (i) any
conviction of Executive for a felony, (ii) any material breach by Executive of a
material written agreement between Executive and the Company or the UST Group,
including this Agreement, (iii) any breach caused by Executive of the Company
Agreement, the limited partnership agreement of any member of the UST Group, or
the charter or bylaws of any corporation within the UST Group, provided that
Executive had prior written notice of such agreement or other document and any
amendment thereto
4
<PAGE>
(including a copy of the full text thereof) and provided that such breach has a
material adverse effect on the Company, (iv) any willful conduct by Executive
materially injurious to the Company or the UST Group or their respective
businesses, (v) any willful failure by Executive to comply with any material
policies, procedures, or directives of the Board, provided that, Executive shall
first be given notice from the Board of such failure and such failure shall not
have been cured within three days after such notice or, if such failure is not
capable of being cured within three days, Executive shall not have commenced and
be diligently pursuing in good faith efforts to cure such default, or (vi) any
fraud, misappropriation of funds, embezzlement, or other similar acts of
misconduct by Executive with respect to the Company or the UST Group. In the
event the Company terminates Executive's employment pursuant to this Section 6.2
for Cause, then Executive shall be paid on termination the Earned Amounts. For
purposes of this Agreement, no act or failure to act on Executive's part shall
be deemed "willful" unless done, or omitted to be done, in bad faith or without
the reasonable belief that the act or failure to act was in the best interests
of the Company or the UST Group. Any act or failure to act on the basis of
authority given by resolution duly adopted by the Board or on the basis of
advice given by legal counsel for the Company shall be conclusively presumed to
have been done, or omitted to be done, in good faith and in the best interests
of the Company or the UST Group. No termination of Executive's employment shall
be for Cause unless such termination shall have been authorized in advance by a
resolution adopted by the Board and delivered to Executive, following a meeting
of the Board at which Executive (together with his counsel) shall have been
afforded a reasonable opportunity to refute the purported grounds for
termination for Cause.
6.3 Termination Upon Death or Disability of Executive. This Agreement shall
terminate upon the death of Executive, or upon Executive becoming Disabled (as
defined below). In the event of a termination of this Agreement pursuant to this
Section 6.3, Executive (or Executive's estate, if applicable) shall be paid on
termination the Earned Amounts. For purposes of this Agreement, "Disabled" shall
mean that Executive shall have qualified for and be receiving benefits under the
Company's long-term disability insurance plan or, if there is no such plan, that
Executive shall have qualified for and be receiving disability benefits under
the federal Social Security Act.
6.4 Voluntary Resignation for Good Reason. Executive may resign Executive's
employment with the Company at any time and, if such resignation is for "Good
Reason", Executive shall be entitled to the same payments and benefits that
Executive would receive under Section 6.1(i)-(v) and 6.1(vi)(B) if Executive's
employment were being terminated by the Company other than for Cause or
Executive becoming Disabled. "Good Reason" shall mean any one or more of the
following: (i) failure of UST to complete its IPO on or before March 31, 1998;
(ii) failure of the Company to appoint or re-appoint Executive to the offices of
Executive Vice President and Chief Operating Officer or to more senior offices;
(iii) failure of the Company's members to elect or re-elect Executive to the
Board; (iv) failure of the Company, by act, omission, amendment to the
instruments governing its organization and operation or otherwise, to vest in
Executive the position, duties and responsibilities contemplated by this
Agreement; (v) failure by the Company to pay when due any portion of the
compensation payable to Executive hereunder; (vi) any material breach by the
Company of any material provision of this Agreement; (vii) if, prior to December
31, 2000, the Company relocates its principal executive offices more than 75
miles from the Borough of Manhattan in the City of New York and fails to provide
Executive within such 75-mile radius, with the items set forth in the second
sentence of Section 3.3; or (viii) on or following a Change of
5
<PAGE>
Control (as such term is defined in the Company's LTIP, as the same may be
amended from time to time), either Executive is assigned any duties or
responsibilities materially inconsistent with, or diminished from, Executive's
duties and responsibilities with the Company and the UST Group immediately prior
to the Change of Control, or, Executive's status, duties, responsibilities,
titles or offices with the Company and the UST Group are materially diminished
from those in effect immediately prior to the Change of Control, as determined
in the good faith opinion of Executive; provided, however, Good Reason shall
exist with respect to a matter described in (ii) through (viii) above that is
capable of being corrected by the Company only if such matter is not corrected
by the Company within a reasonable period following its receipt of written
notice of such matter from Executive, and in no event shall a termination by
Executive occurring more than 60 days following any such written notice or the
event described in (i) above be for Good Reason.
Section 7. Covenant Not to Compete; Confidentiality
7.1 Noncompetition. Unless granted written permission by the Board and
subject to any further restrictions contained in the agreements of limited
partnership within the UST Group, while employed by the Company and for a period
of 12 months after the termination of such employment, Executive covenants that
Executive shall not (i) own (as a proprietor, partner, or stockholder of greater
than one percent of outstanding equity securities, interests or otherwise) an
interest in, or (ii) participate (as an officer, director, or in any other
capacity) in the management, operation, or control of, or (iii) perform services
as or act in the capacity of any employee, independent contractor, consultant,
or agent of any enterprise which engages in one or more of the following
activities in a state in which the Company or the UST Group is then conducting
business and in which the Company or the UST Group commenced conducting business
prior to the commencement of such activities therein by Executive:
(a) acquisition, exchange, operation or sale of timber-producing real
property or rights to harvest timber, a principal purpose of which is
producing logs or other forest products;
(b) harvesting of timber other than harvesting which is incidental to
the ownership or operation of real property not owned or operated for a
principal purpose of producing logs or other forest products;
(c) sale, exchange or purchase of logs other than sales, exchanges or
purchases which are incidental to the ownership or operation of real
property not owned or operated for a principal purpose of producing logs or
other forest products;
(d) acquisition or sale of any facilities used to convert logs into
lumber, plywood or other wood products;
(e) conversion of logs into lumber, plywood or other wood products;
(f) marketing and sale of lumber, plywood or other wood products;
6
<PAGE>
(g) import or export of logs, lumber, plywood or other wood products
to or from the United States;
(h) manufacture, marketing or sale of manufactured, engineered, or
substitute wood products to the extent such products compete with products
produced by the Company or any member of the UST Group; or
(i) any and all other activities relating to the United States forest
products industry to the extent such activities compete with activities of
the Company or any member of the UST Group.
The noncompetition restrictions set forth in this Section 7.1 shall not apply in
the event of a termination of this Agreement pursuant to Section 6.1 or 6.4 nor,
in the event of Executive's termination due to Executive becoming Disabled in
accordance with Section 6.3, shall they apply following Executive ceasing to
be Disabled unless the Company offers to re-employ Executive on terms and
conditions at least as favorable as those set forth in this Agreement.
7.2 Confidentiality. Executive acknowledges that in the course of
Executive's employment by the Company, including as a member of the Board
following employment, if applicable, Executive will be furnished and have access
to certain information concerning the business, financial condition, operations,
assets and liabilities of the Company and the UST Group that is confidential or
proprietary in nature. All such information (irrespective of the form of
communication) is hereinafter collectively referred to as the "Information."
Until the later to occur of (i) the date of termination of Executive's
employment hereunder or (ii) the date of Executive's resignation or removal from
the Board, and for a period of 18 months thereafter, Executive agrees to keep
the Information confidential and agrees that Executive will use the Information
solely for the purpose of performing Executive's duties hereunder or as a member
of the Board or as otherwise authorized by the Company. This Agreement shall be
inoperative as to such portions of the Information which (a) are or become
generally available to the public other than as a result of a disclosure by
Executive in violation of this Agreement, (b) become available to Executive on a
non-confidential basis from a source other than the Company or the UST Group
that is not bound by an obligation of confidentiality to such entity or
entities, or (c) are required to be disclosed by an order or decree of a court
or other tribunal of competent jurisdiction, provided the Company is given
prompt notice of, and the opportunity to contest disclosure under, such order or
decree. Upon termination of this Agreement, Executive will return the
Information furnished by the Company or the UST Group and any documents that
contain, reflect, or are based upon, in whole or in part, the Information.
7.3 Equitable Relief. Executive acknowledges and agrees that it would be
difficult to measure damage to the Company or the UST Group from any breach by
Executive of Section 7.1 or 7.2 and that monetary damages would be an inadequate
remedy for any such breach. Accordingly, Executive agrees that if Executive
shall breach Section 7.1 or 7.2, the Company shall be entitled, in addition to
all other remedies it may have at law or in equity, to an injunction or other
appropriate orders or equitable relief to restrain any such breach, without
showing or proving any
7
<PAGE>
actual damage sustained by the Company or the UST Group. Executive further
agrees to waive any requirement for the securing or posting of any bond in
connection with such remedies.
7.4 Executive's Acknowledgment. Executive hereby expressly acknowledges
and agrees that (i) the restrictions and obligations set forth in and imposed by
this Section 7 will not prevent Executive from obtaining gainful employment in
Executive's field of expertise or cause Executive undue hardship, and (ii) in
view and consideration of the substantial benefits Executive will receive from
the Company pursuant to this Agreement and the Company Agreement, the
restrictions and obligations imposed on Executive under this Section 7 are
reasonable and necessary to protect the legitimate business interests of the
Company and its members and the UST Group.
Section 8. Indemnification
(a) During the Term and for a period of six years thereafter, the Company
shall cause Executive to be covered by and named as an insured under any policy
or contract of insurance obtained by it to insure its directors and officers
against personal liability for acts or omissions in connection with service as
an officer or director of the Company or service in other capacities at the
request of the Company. The coverage provided to Executive pursuant to this
Section 8 shall be of a scope and on terms and conditions at least as favorable
as the coverage (if any) provided to any other officer or director of the
Company.
(b) To the maximum extent permitted under applicable law, during the Term
and for a period of six years thereafter, the Company shall indemnify Executive
against and hold Executive harmless from any costs, liabilities, losses and
exposures to the fullest extent and on the most favorable terms and conditions
that similar indemnification is offered to any director or officer of the
Company.
Section 9. Representations and Warranties
9.1 By Executive. Except for the conditions and limitations set forth in
the waiver of the employment agreement from Executive's prior employer, IP
Forest Resources Company, a copy of which is attached hereto as Exhibit B and
the terms and conditions of which the parties hereto agree Executive may comply
with without breaching the terms of this Agreement, Executive represents and
warrants to the Company that (i) Executive is under no contractual or other
restriction or obligation which would prevent the performance of Executive's
duties hereunder or interfere with the rights of the Company hereunder and (ii)
this Agreement has been duly executed and delivered by Executive, is the legal,
valid and binding obligation of Executive, and is enforceable against Executive
in accordance with its terms, except that no representation or warranty is made
with respect to the provisions of Section 7.
9.2 By the Company. The Company represents and warrants to Executive that
(i) it has all requisite limited liability company power and authority to
execute, deliver and perform this Agreement, (ii) all necessary proceedings of
the Company have been duly taken to authorize the execution, delivery and
performance of this Agreement, and (iii) this Agreement has been duly
authorized, executed and delivered by the Company, is the legal, valid and
binding obligation of the Company, and is enforceable against the Company in
accordance with its terms.
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Section 10. Life Insurance
If requested by the Company, Executive shall submit to such physical
examinations by a physician and otherwise take such actions and execute and
deliver such documents as may be reasonably necessary to enable the Company to
obtain life insurance on the life of Executive for the benefit of the Company,
but in no event shall Executive's failure to qualify for such coverage, as a
result of the outcome of the medical examination or otherwise, be grounds for a
termination of Executive's employment.
Section 11. Notices
Any notice given pursuant to this Agreement shall be in writing and shall
be deemed given on the earlier of the date (i) the notice is personally
delivered to the party to be notified, (ii) that is three days after the notice
is mailed, postage prepaid, certified with return receipt requested, addressed
as follows, or at such other address as a party may from time to time designate
by notice to the other party, (iii) the notice is delivered at the party's
address via courier service, or (iv) the notice is received by fax or
telecopier:
To the Company: U.S. Timberlands Services Company, L.L.C.
625 Madison Avenue - Suite 10-B
New York, New York 10022
Attn: John M. Rudey
Facsimile No: (212) 758-4009
To Executive: Edward J. Kobacker
5731 Still Forest Drive
Dallas, Texas 75252
Section 12. General Provisions
12.1 Remedies on Default. In the event either party breaches this
Agreement, the other party shall be entitled to pursue all remedies available at
law or in equity. Except as otherwise provided herein, in the event this
Agreement is breached by either party, the non-breaching party shall not
terminate this Agreement without notice and a reasonable opportunity to cure
such breach.
12.2 Assignment; Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company and any successor of the Company, by merger
or otherwise. The parties understand and hereby acknowledge that upon the
consummation of the IPO and related transactions, the obligations of the Company
under this Agreement shall be assumed by New Services. It is further agreed that
the Interest in the Company provided for in Section 4.3 shall refer to an
Interest in New Services as successor to the Company, unless the Company remains
the general partner of UST upon the effectiveness of UST. The Company will
require any successor, other than New Services, which is already a party to this
Agreement, by agreement in form and substance
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reasonably acceptable to Executive, to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place and following
such assumption all references to the Company herein shall be deemed to mean
such successor including New Services. Except as provided in the preceding
sentence, this Agreement, and the rights and obligations of the parties
hereunder, are personal and neither this Agreement, nor any right, benefit, or
obligation of either party hereto, shall be subject to voluntary or involuntary
assignment, alienation or transfer, whether by operation of law or otherwise,
without the prior written consent of the other party. Subject to the foregoing,
the provisions of this Agreement shall be binding upon and inure to the benefit
of the parties and their respective heirs, personal representatives,
administrators, successors, and permitted assigns.
12.3 Waiver. Failure of any party at any time to require performance of
any provision of this Agreement shall not limit such party's right to enforce
such provision, nor shall any waiver of any breach of any provision of this
Agreement constitute a waiver of any succeeding breach of such provision or a
waiver of such provision itself. No attempted or purported waiver of any
provision of this Agreement shall be effective unless set forth in writing and
signed by the party to be bound.
12.4 Amendment. This Agreement may not be modified or amended except by
the written agreement of the parties.
12.5 Severability. The agreements and covenants contained in this
Agreement are severable, and in the event any of the agreements and covenants
contained in this Agreement should be held to be invalid by any court or
tribunal of competent jurisdiction, this Agreement shall be interpreted as if
such invalid agreements and covenants were not contained herein; provided,
however, that if in any legal proceeding a court shall hold unenforceable the
covenants contained in Section 7 by reason of their extent or duration or
otherwise, any such covenant shall be reduced in scope to the extent required by
law and enforced in its reduced form.
12.6 Integration. This Agreement contains the entire agreement and
understanding of the parties with respect to the employment of Executive by the
Company and supersedes all prior and contemporaneous agreements (oral or
written) between them with respect to such subject matter.
12.7 Attorneys' Fees. If any legal action or other proceeding is brought
for the enforcement or interpretation of this Agreement, or because of an
alleged dispute or breach in connection with any of the provisions of this
Agreement, if Executive is the successful or prevailing party, Executive shall
be entitled to recover from the Company reasonable attorneys' fees and other
costs incurred by Executive in connection with that action or proceeding, and in
any petition for appeal or review therefrom, in addition to any other relief to
which Executive may be entitled. The Company shall reimburse Executive for the
reasonable attorney's fees and expenses Executive has incurred in the
negotiation of this Agreement.
12.8 Third Party Beneficiaries. This Agreement does not create, and shall
not be construed as creating, any rights enforceable by any person not a party
to this Agreement.
12.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
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12.10 Survival. In the event of termination of this Agreement by either
party, this Agreement shall become void and there shall be no liability on the
part of Executive or the Company except to the extent such termination results
from the breach by a party hereto of its obligations hereunder (in which case
Section 12.1 shall apply); provided that Sections 6.1, 6.2, 6.3, 6.4, 7, 8, 11,
12.7 and 12.11 shall survive the termination of this Agreement.
12.11 UST Guaranty. UST hereby irrevocably and unconditionally guarantees
to Executive the payment of all amounts and the performance of all other
obligations due from the Company in accordance with the terms of this Agreement
as and when due without requirement of presentment, demand of payment, protest
or notice of dishonor or nonpayment.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
The Company: U.S. TIMBERLANDS SERVICES COMPANY, L.L.C.,
a Delaware limited liability company
By: /s/ John M. Rudey
--------------------------------------------
Name: John M. Rudey
Title: Managing Director
UST: U.S. TIMBERLANDS COMPANY, L.P.
a Delaware limited partnership
By: New Services, L.L.C., as general partner
By: /s/ John M. Rudey
---------------------------------------------
Name: John M. Rudey
Title: Chairman
New Services: NEW SERVICES, L.L.C.
a Delaware limited liability company
By: /s/ John M. Rudey
---------------------------------------------
Name: John M. Rudey
Title: Chairman
Executive: /s/ Edward J. Kobacker
---------------------------------------------
Edward J. Kobacker
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EXHIBIT 10.6
Conformed Copy
EMPLOYMENT AND CONSULTING AGREEMENT
This EMPLOYMENT AND CONSULTING AGREEMENT (this "Agreement") is made and
entered into as of this 22nd day of October, 1997, by and among U.S. Timberlands
Services Company, L.L.C., a Delaware limited liability company (the "Company"),
U.S. Timberlands Company, L.P., a Delaware limited partnership ("UST"), New
Services (as defined below), a Delaware limited liability company, and John J.
Stephens ("Stephens").
W I T N E S S E T H
-------------------
WHEREAS, a new limited partnership, UST, has been formed and a new limited
liability company, to be re-named "U.S. Timberlands Service Company, L.L.C."
("New Services"), has been formed to serve as the general partner of UST and as
the managing member of certain affiliated limited liability companies (together
with any subsidiary entities, the "UST Group") and upon the initial public
offering of the units representing limited partner interests in UST (the "IPO"),
New Services will assume the obligations of the Company hereunder as more fully
described in Section 12.2; and
WHEREAS, Stephens brings over 25 years of responsible management experience
in the timberlands and forest products business, and has developed valuable
knowledge and contacts useful to the UST Group; and,
WHEREAS, Stephens has played an important role in making and operating
acquisitions on behalf of the UST Group including implementing new procedures
and strategies for operations and marketing, and providing proprietary
information for the purpose of developing the UST Group business; and,
WHEREAS, the Company desires to employ Stephens as its President and Chief
Executive Officer and, upon the occurrence of certain events, to engage Stephens
as a consultant after Stephens' termination of employment, and Stephens desires
to accept such employment and such contingent consulting agreement, on the terms
and conditions set forth in this Agreement;
WHEREAS, to induce Stephens to accept such employment, UST desires to
guarantee the performance by the Company of its obligations hereunder,
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants hereinafter set forth, the parties agree as follows:
Section 1. Employment
The Company hereby employs Stephens, and Stephens hereby accepts
employment with the Company, on the terms and conditions set forth in this
Agreement.
<PAGE>
Section 2. Term
Subject to the provisions of Section 6, Stephens' employment by the
Company under this Agreement shall be for a term (the "Employment Term")
commencing on the date hereof and expiring on the earlier of December 31, 2002
or the date Stephens ceases to be an officer as provided in Section 3.1.
Section 3. Stephens' Duties
3.1 Duties. Stephens shall hold the position of the Company's President
and Chief Executive Officer. Subject to the control of the board of directors
or other governing body of the Company (the "Board"), and any limitations set
forth in the operating agreement of the Company attached hereto as Exhibit A, as
amended from time to time in accordance with the terms thereof (the "Company
Agreement"), and in the agreements of limited partnership of the partnerships
and the operating agreements of the limited liability companies within the UST
Group, Stephens shall, in general, supervise and control all the day-to-day
business and affairs of the Company and the UST Group. Should Stephens desire
at any time to nominate the Chief Operating Officer of the Company to assume the
office of President, and should the Board approve such nomination, upon such
promotion of the Chief Operating Officer, Stephens shall cease to be an officer
or employee of the Company and shall assume the position and duties of a Vice
Chairman of the Board, a non-officer position.
3.2 Performance of Duties. Stephens shall perform Stephens' duties and
responsibilities as President and Chief Executive Officer during the Company's
normal business hours and at all other times reasonably necessary to comply with
the terms and conditions of this Agreement. Stephens shall devote the time and
attention required to the performance of Stephens' duties and responsibilities
as President and Chief Executive Officer for and on behalf of the Company on the
terms set forth in this Section 3.2. In addition, Stephens may from time to
time serve as a consultant to and/or as a member of the board of directors of
other entities, provided that the Board in good faith determines that such
activities do not unreasonably interfere with the business of the Company and
the UST Group and the performance of Stephens' duties hereunder. The parties
acknowledge that Stephens currently serves as a board member or advisory member
of various civic and charitable organizations and may continue to participate in
these activities; provided, however, that such continued participation shall in
no event be deemed a violation the limitations of the first two sentences of
this Section 3.2 unless and until Stephens shall have been notified in writing
thereof and afforded a reasonable opportunity to cure the violation.
3.3 Principal Place of Employment. Stephens' principal place of
employment and consulting shall be at Bandon, Oregon. The Company shall provide
Stephens, at such location, for so long as the Company needs an office at such
location, with a private office, secretarial services and such other facilities
and support services as are appropriate to the position of President and Chief
Executive Officer or a Vice Chairman of the Board, as the case may be, and
necessary or appropriate in the performance of Stephens' duties as the President
and Chief Executive Officer or a Vice Chairman; provided, that the Company shall
be under no obligation to maintain an office at Bandon,
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Oregon for any period subsequent to December 31, 1998; further provided, the
Company shall, in lieu of maintaining such an office, reimburse Stephens for his
clerical, professional and other expenses reasonably incurred in prosecution of
the Company's business, as other expenses are reimbursed at Section 4.4 below.
Section 4. Compensation and Other Benefits
Stephens shall be entitled to receive from the Company the following
compensation and benefits for the services to be rendered by Stephens hereunder:
4.1 Salary and Bonuses.
(a) During the Employment Term, the Company shall pay Stephens an annual
base salary of $450,000, payable in equal installments during the year in
accordance with the Company's customary practices for senior executives ("Base
Salary"). The amount of Stephens' Base Salary may be increased from time to
time by the Board, and, once increased, such higher amount shall become the Base
Salary for all purposes of this Agreement and may not thereafter be reduced. The
Company shall also pay to Stephens, to the extent earned, an annual cash bonus,
not to exceed 100% of Base Salary, which shall be based on the performance of
Stephens and the UST Group's business as determined annually by the Compensation
Committee of the Board in its discretion. The Company shall have the right to
deduct and withhold from Stephens' compensation all taxes and charges that are
currently or that hereafter may be required by law to be so deducted and
withheld.
The Company shall establish a program whereby Stephens may, at his option,
defer receipt of any or all of the Base Salary and bonuses otherwise payable to
him under this Agreement. Any amounts so deferred shall be placed in a "rabbi"
trust, with a bank or other financial institution reasonably satisfactory to
Stephens, as trustee, providing the maximum security to Stephens without causing
the constructive receipt of income for federal income tax purposes and
distributed, together with interest or other earnings thereon, according to a
payment schedule to be designated by Stephens.
(b) Notwithstanding the foregoing however, if Stephens ceases to be an
officer as provided in Section 3.1, Stephens shall thereafter, except as
provided below for consultant services, be entitled only to receive such meeting
fees and other benefits, if any, as the Company provides to the members of the
Board who are not also employees of the Company; provided that Stephens shall
continue to retain his current ownership of (a) all subordinated units
representing limited partner interests in UST issued to him at the closing of
the IPO, (b) his 10% member interest in New Services, subject to the provisions
of the Company Agreement, and (c) the Unit Options awarded to him under the U.S.
Timberlands Company 1997 Long-Term Incentive Plan (the "LTIP"), subject to the
terms of the LTIP. Stephens agrees to make himself available to the Company to
provide, upon reasonable request, consulting services of the nature Stephens is
qualified to perform by reason of Stephens' background, knowledge and
experience. As consideration for being available to provide such consulting
services, Stephens shall be entitled to receive an annual retainer of $25,000,
payable in equal quarterly installments of $6,250 on each January 2, April 1,
July 1 and October 1. Upon the presentation of invoices, in a form reasonably
satisfactory to the Company, from Stephens for such consulting services, the
Company shall also pay Stephens at the rate of $200 per hour for
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the consulting services rendered, up to a maximum of $1,600 for any one day,
and shall reimburse Stephens for all reasonable expenses incurred by Stephens in
performing such consulting services. The consulting agreement described herein
shall terminate at the effective date of the Stephens' removal, resignation or
retirement from the Board or upon his Death or becoming Disabled (the
"Consulting Term"). During the term of such consultancy, Stephens agrees to
present to the Board for consideration proposed acquisitions that meet the
Board's criteria prior to presenting such proposed acquisitions to any other
person. The Board will have a 30-day period in which to exercise its right of
first refusal and an additional 120 days thereafter either to consummate the
acquisition or enter into a binding agreement with respect thereto.
4.2 Long Term Incentive Plan. During the Employment Term and Consulting
Term, Stephens shall be entitled to participate in the LTIP on the terms and
conditions set forth therein. Concurrently with the IPO, Stephens will be
granted Unit Options (as defined in the LTIP) pursuant to the LTIP in an amount
equal to 12.5% of the number of Unit Options initially available to be granted
under the LTIP and substantially in the form of the grant agreement attached
hereto as Attachment A.
4.3 Participation in Benefit Plans. During the Employment Term, Stephens
shall be eligible to participate in all employee benefit plans and arrangements
now in effect or which may hereafter be established that are generally
applicable to other senior executives of the Company, including, without
limitation, all life, group insurance, and medical and dental care plans and all
disability, retirement, 401(k) and other employee benefit plans of the Company,
as long as any such plan or arrangement remains generally applicable to other
senior executives of the Company. Stephens shall also be entitled to the same
vacation benefits as are generally available to senior executives of the
Company, provided in any case that Stephens shall have a minimum of four weeks'
vacation per year.
4.4 Reimbursement of Expenses. The Company shall reimburse Stephens for
reasonable expenses incurred by Stephens in the performance of Stephens' duties
hereunder (including as set forth in the second proviso to Section 3.3) in
accordance with the policy of the Company for reimbursement of expenses as
adopted by the Board from time to time and generally applicable to all senior
executives of the Company. Stephens shall furnish the Company with the
supporting documentation required under the Company's policy in connection with
the reimbursement of such expenses.
Section 5. Membership on the Board
Stephens shall be entitled to membership on the Board in accordance with
the terms of the Company Agreement as in effect on the date the Company
Agreement is first executed.
Section 6. Termination
6.1 Termination by the Company Without Cause. The Company may terminate
Stephens' employment as President and Chief Executive Officer other than for
Cause or Stephens becoming Disabled (as such terms are defined below) at any
time during the Employment Term if the Board determines, in its sole discretion,
that the continued employment of Stephens is not in the continued
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interests of the Company. In the event the Company terminates Stephens'
employment pursuant to this Section 6.1, then Stephens shall be paid on
termination, (i) any unpaid Base Salary earned hereunder prior to the
termination date, (ii) all unused vacation time accrued by Stephens as of the
termination date in accordance with the Company's vacation policy for senior
executives, (iii) all unpaid amounts of compensation in which Stephens is vested
as of the termination date under any and all incentive compensation plans or
programs of the Company, (iv) any expenses in respect of which Stephens has
requested, and is entitled to, reimbursement in accordance with Section 4.4, (v)
a prorated bonus for the year of such termination calculated based on the bonus
being equal to 100% of Base Salary, and (vi) an amount equal to the amount of
Base Salary that Stephens would receive if Stephens' employment had continued
without change through the remainder of the Term or for 12 months, whichever is
less, (items (i) through (iv) above being the "Earned Amounts").
6.2 Termination by the Company for Cause. The Company may terminate this
Agreement at any time, in the discretion of the Board, in the event of (i) any
conviction of Stephens for a felony, (ii) any material breach by Stephens of a
material written agreement between Stephens and the Company or the UST Group,
including this Agreement, (iii) any breach caused by Stephens of the Company
Agreement, the limited partnership agreement of any member of the UST Group, or
the charter or bylaws of any corporation within the UST Group, provided that
Stephens had prior written notice of such agreement or other document and any
amendment thereto (including a copy of the full text thereof) and provided
further that such breach has a material adverse effect on the Company, (iv) any
willful conduct by Stephens materially injurious to the Company or the UST Group
or their respective businesses, (v) any willful failure by Stephens to comply
with any material policies, procedures, or directives of the Board, provided
that, Stephens shall first be given notice from the Board of such failure and
such failure shall not have been cured within 10 days after such notice or, if
such failure is not capable of being cured within 10 days, Stephens shall not
have commenced and be diligently pursuing in good faith efforts to cure such
default, or (vi) any fraud, misappropriation of funds, embezzlement, or other
similar acts of misconduct by Stephens with respect to the Company or the UST
Group. In the event the Company terminates Stephens' employment pursuant to
this Section 6.2 for Cause, then Stephens shall be paid on termination the
Earned Amounts. For purposes of this Agreement, no act or failure to act on
Stephens' part shall be deemed "willful" unless done, or omitted to be done, in
bad faith or without the reasonable belief that the act or failure to act was in
the best interests of the Company or the UST Group. Any act or failure to act
on the basis of authority given by resolution duly adopted by the Board or on
the basis of advice given by legal counsel for the Company shall be conclusively
presumed to have been done, or omitted to be done, in good faith and in the best
interests of the Company or the UST Group. No termination of Stephens'
employment shall be for Cause unless such termination shall have been authorized
in advance by a resolution adopted by the Board and delivered to Stephens,
following a meeting of the Board at which Stephens (together with his counsel)
shall have been afforded a reasonable opportunity to refute the purported
grounds for termination for Cause.
6.3 Termination Upon Death or Disability of Stephens. This Agreement
shall terminate upon the death of Stephens, or upon Stephens becoming Disabled
(as defined below). In the event of a termination of this Agreement pursuant to
this Section 6.3, Stephens (or Stephens' estate, if applicable) shall be paid on
termination the Earned Amounts. For purposes of this Agreement, "Disabled"
shall mean that Stephens shall have qualified for and be receiving benefits
under the
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Company's long-term disability insurance plan or, if there is no such plan, that
Stephens shall have qualified for and be receiving disability benefits under the
federal Social Security Act.
6.4 Voluntary Resignation for Good Reason. Stephens may resign Stephens'
employment as President and Chief Executive Officer of the Company at any time
and, if such resignation is for "Good Reason", Stephens shall be entitled to the
same payments and benefits that Stephens would receive under Section 6.1 if
Stephens' employment were being terminated by the Company other than for Cause
or Stephens becoming Disabled. "Good Reason" shall mean any one or more of the
following: (i) failure of UST to complete its IPO on or before March 31, 1998;
(ii) failure of the Company to appoint or re-appoint Stephens to the office of
President and Chief Executive Officer (excluding in the circumstances described
in Section 3.1); (iii) failure of the Company's members to elect or re-elect
Stephens to the Board; (iv) failure of the Company, by act, omission, amendment
to the instruments governing its organization and operation or otherwise, to
vest in Stephens the position, duties and responsibilities contemplated by this
Agreement; (v) failure by the Company to pay when due any portion of the
compensation payable to Stephens hereunder; (vi) any material breach by the
Company of any material provision of this Agreement; (vii) on or following a
Change of Control (as such term is defined in the Company's LTIP, as the same
may be amended from time to time), either Stephens is assigned any duties or
responsibilities materially inconsistent with, or diminished from, Stephens'
duties and responsibilities with the Company and the UST Group immediately prior
to the Change of Control, or, Stephens' status, duties, responsibilities, titles
or offices with the Company and the UST Group are materially diminished from
those in effect immediately prior to the Change of Control, as determined in the
good faith opinion of Stephens; or (viii) Stephens, on the basis of a
certificate of a medical doctor mutually acceptable to the Company and Stephens,
becomes unable to properly discharge his duties and responsibilities as
President and Chief Executive Officer of the Company due to the substantial
deterioration of his physical or mental health and gives the Company 30 days
prior written notice of his resignation; provided, however, Good Reason shall
exist with respect to a matter described in (ii) through (vii) above that is
capable of being corrected by the Company only if such matter is not corrected
by the Company within a 30-day period following its receipt of written notice of
such matter from Stephens, and in no event shall a termination by Stephens
occurring more than 60 days following any such written notice or the event
described in (i) above be for Good Reason.
Section 7. Covenant Not to Compete; Confidentiality
7.1 Noncompetition. Unless granted written permission by the Board and
subject to any further restrictions contained in the agreements of limited
partnership within the UST Group, while employed by the Company or a member of
the Board and for a period of 12 months after the termination of such employment
or membership on the Board, Stephens covenants that Stephens shall not (i) own
(as a proprietor, partner, or stockholder of greater than one percent of
outstanding equity securities, interests or otherwise) an interest in, or (ii)
participate (as an officer, director, or in any other capacity) in the
management, operation, or control of, or (iii) perform services as or act in the
capacity of any employee, independent contractor, consultant, or agent of any
enterprise which engages in one or more of the following activities in a state
in which the Company or the UST Group is then conducting business and in which
the Company or the UST Group commenced conducting business prior to the
commencement of such activities therein by Stephens:
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(a) acquisition, exchange, operation or sale of timber-producing real
property or rights to harvest timber, a principal purpose of which is
producing logs or other forest products;
(b) harvesting of timber other than harvesting which is incidental to
the ownership or operation of real property not owned or operated for a
principal purpose of producing logs or other forest products;
(c) sale, exchange or purchase of logs other than sales, exchanges or
purchases which are incidental to the ownership or operation of real
property not owned or operated for a principal purpose of producing logs or
other forest products;
(d) manufacture, marketing or sale of manufactured, engineered, or
substitute wood products to the extent such products compete with products
produced by the Company or any member of the UST Group; or
(e) any and all other activities relating to the United States forest
products industry to the extent such activities compete with activities of
the Company or any member of the UST Group.
The non-competition restrictions set forth in this Section 7.1 shall not apply
in the event of a termination of this Agreement pursuant to Section 6.1 or 6.4,
nor, in the event of Stephens' termination due to Stephens becoming Disabled in
accordance with Section 6.3, shall they apply following Stephens ceasing to be
Disabled unless the Company offers to re-employ Stephens on terms and
conditions at least as favorable as those set forth in this Agreement.
7.2 Confidentiality. Stephens acknowledges that in the course of
Stephens' employment by the Company, including as a member of the Board
following employment, if applicable, Stephens will be furnished and have access
to certain information concerning the business, financial condition, operations,
assets and liabilities of the Company and the UST Group that is confidential or
proprietary in nature. All such information (irrespective of the form of
communication) is hereinafter collectively referred to as the "Information."
Until the later to occur of (i) the date of termination of Stephens' employment
hereunder or (ii) the date of Stephens' resignation or removal from the Board,
and for a period of 12 months thereafter, Stephens agrees to keep the
Information confidential and agrees that Stephens will use the Information
solely for the purpose of performing Stephens' duties hereunder or as a member
of the Board or as otherwise authorized by the Company. This Agreement shall be
inoperative as to such portions of the Information which (a) are or become
generally available to the public other than as a result of a disclosure by
Stephens in violation of this Agreement, (b) become available to Stephens on a
non-confidential basis from a source other than the Company or the UST Group
that is not bound by an obligation of confidentiality to such entity or
entities, or (c) are required to be disclosed by an order or decree of a court
or other tribunal of competent jurisdiction, provided the Company is given
prompt notice of, and the opportunity to contest disclosure under, such order or
decree. Upon termination of this Agreement, Stephens will return the
Information furnished by the Company or the UST Group and any documents that
contain, reflect, or are based upon, in whole or in part, the Information.
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7.3 Equitable Relief. Stephens acknowledges and agrees that it would be
difficult to measure damage to the Company or the UST Group from any breach by
Stephens of Section 7.1 or 7.2 and that monetary damages would be an inadequate
remedy for any such breach. Accordingly, Stephens agrees that if Stephens shall
breach Section 7.1 or 7.2, the Company shall be entitled, in addition to all
other remedies it may have at law or in equity, to an injunction or other
appropriate orders or equitable relief to restrain any such breach, without
showing or proving any actual damage sustained by the Company or the UST Group.
Stephens further agrees to waive any requirement for the securing or posting of
any bond in connection with such remedies.
7.4 Stephens' Acknowledgment. Stephens hereby expressly acknowledges and
agrees that (i) the restrictions and obligations set forth in and imposed by
this Section 7 will not prevent Stephens from obtaining gainful employment in
Stephens' field of expertise or cause Stephens undue hardship, and (ii) in view
and consideration of the substantial benefits Stephens will receive from the
Company pursuant to this Agreement and the Company Agreement, the restrictions
and obligations imposed on Stephens under this Section 7 are reasonable and
necessary to protect the legitimate business interests of the Company and its
members and the UST Group.
Section 8. Indemnification
(a) During the Employment Term and thereafter if Stephens is a member
of the Board and for a period of six years thereafter, the Company shall cause
Stephens to be covered by and named as an insured under any policy or contract
of insurance obtained by it to insure its directors and officers against
personal liability for acts or omissions in connection with service as an
officer or director of the Company or service in other capacities at the request
of the Company. The coverage provided to Stephens pursuant to this Section 8
shall be of a scope and on terms and conditions at least as favorable as the
coverage (if any) provided to any other officer or director of the Company.
(b) To the maximum extent permitted under applicable law, during the
Employment Term and thereafter if Stephens is a member of the Board and for
a period of six years thereafter, the Company shall indemnify Stephens against
and hold Stephens harmless from any costs, liabilities, losses and exposures to
the fullest extent and on the most favorable terms and conditions that similar
indemnification is offered to any director or officer of the Company.
Section 9. Representations and Warranties
9.1 By Stephens. Stephens represents and warrants to the Company that
(i) Stephens is under no contractual or other restriction or obligation which
would prevent the performance of Stephens' duties hereunder or interfere with
the rights of the Company hereunder and (ii) this Agreement has been duly
executed and delivered by Stephens, is the legal, valid and binding obligation
of Stephens, and is enforceable against Stephens in accordance with its terms,
except that no representation or warranty is made with respect to the provisions
of Section 7.
9.2 By the Company. The Company represents and warrants to Stephens that
(i) it has all requisite limited liability company power and authority to
execute, deliver and perform this Agreement, (ii) all necessary proceedings of
the Company have been duly taken to authorize the
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execution, delivery and performance of this Agreement, and (iii) this Agreement
has been duly authorized, executed and delivered by the Company, is the legal,
valid and binding obligation of the Company, and is enforceable against the
Company in accordance with its terms.
Section 10. Life Insurance
If requested by the Company, Stephens shall submit to such physical
examinations by a physician and otherwise take such actions and execute and
deliver such documents as may be reasonably necessary to enable the Company to
obtain life insurance on the life of Stephens for the benefit of the Company,
but in no event shall Stephens' failure to qualify for such coverage, as a
result of the outcome of the medical examination or otherwise, be grounds for a
termination of Stephens' employment.
Section 11. Notices
Any notice given pursuant to this Agreement shall be in writing and shall
be deemed given on the earlier of the date (i) the notice is personally
delivered to the party to be notified, (ii) that is three days after the notice
is mailed, postage prepaid, certified with return receipt requested, addressed
as follows, or at such other address as a party may from time to time designate
by notice to the other party, (iii) the notice is delivered at the party's
address via courier service, or (iv) the notice is received by fax or
telecopier:
To the Company: U.S. Timberlands Services Company, L.L.C.
625 Madison Avenue - Suite 10-B
New York, New York 10022
Attn: John M. Rudey
Facsimile No: (212) 758-4009
To Stephens: John J. Stephens
Route 2, Box 2244
Bandon, OR 97411
Section 12. General Provisions
12.1 Remedies on Default. In the event either party breaches this
Agreement, the other party shall be entitled to pursue all remedies available at
law or in equity. Except as otherwise provided herein, in the event this
Agreement is breached by either party, the non-breaching party shall not
terminate this Agreement without notice and a reasonable opportunity to cure
such breach.
12.2 Assignment; Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company and any successor of the Company, by merger
or otherwise. The parties understand and hereby acknowledge that upon the
consummation of the IPO and related transactions, the obligations of the Company
under this Agreement shall be assumed by New Services. The Company will require
any successor, other than New Services, which is already a party to this
Agreement, by agreement in form and substance reasonably acceptable to Stephens,
to expressly assume and agree to perform this Agreement in the same manner and
to the same extent that the
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Company would be required to perform it if no such succession had taken place
and following such assumption all references to the Company herein shall be
deemed to mean such successor, including New Services. Except as provided in the
preceding sentence, this Agreement, and the rights and obligations of the
parties hereunder, are personal and neither this Agreement, nor any right,
benefit, or obligation of either party hereto, shall be subject to voluntary or
involuntary assignment, alienation or transfer, whether by operation of law or
otherwise, without the prior written consent of the other party. Subject to the
foregoing, the provisions of this Agreement shall be binding upon and inure to
the benefit of the parties and their respective heirs, personal representatives,
administrators, successors, and permitted assigns.
12.3 Waiver. Failure of any party at any time to require performance of
any provision of this Agreement shall not limit such party's right to enforce
such provision, nor shall any waiver of any breach of any provision of this
Agreement constitute a waiver of any succeeding breach of such provision or a
waiver of such provision itself. No attempted or purported waiver of any
provision of this Agreement shall be effective unless set forth in writing and
signed by the party to be bound.
12.4 Amendment. This Agreement may not be modified or amended except by
the written agreement of the parties.
12.5 Severability. The agreements and covenants contained in this
Agreement are severable, and in the event any of the agreements and covenants
contained in this Agreement should be held to be invalid by any court or
tribunal of competent jurisdiction, this Agreement shall be interpreted as if
such invalid agreements and covenants were not contained herein; provided,
however, that if in any legal proceeding a court shall hold unenforceable the
covenants contained in Section 7 by reason of their extent or duration or
otherwise, any such covenant shall be reduced in scope to the extent required by
law and enforced in its reduced form.
12.6 Integration. This Agreement contains the entire agreement and
understanding of the parties with respect to the employment of Stephens by the
Company and supersedes all prior and contemporaneous agreements (oral or
written) between them with respect to such subject matter.
12.7 Attorneys' Fees. If any legal action or other proceeding is brought
for the enforcement or interpretation of this Agreement, or because of an
alleged dispute or breach in connection with any of the provisions of this
Agreement, if Stephens is the successful or prevailing party, Stephens shall be
entitled to recover from the Company reasonable attorneys' fees and other costs
incurred by Stephens in connection with that action or proceeding, and in any
petition for appeal or review therefrom, in addition to any other relief to
which Stephens may be entitled.
12.8 Third Party Beneficiaries. This Agreement does not create, and shall
not be construed as creating, any rights enforceable by any person not a party
to this Agreement.
12.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Oregon.
12.10 Survival. In the event of termination of this Agreement by either
party, this Agreement shall become void and there shall be no liability on the
part of Stephens or the Company
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except to the extent such termination results from the breach by a party hereto
of its obligations hereunder (in which case Section 12.1 shall apply); provided
that Sections 6.1, 6.2, 6.3, 6.4, 7, 8, 11, 12.7 and 12.11 shall survive the
termination of this Agreement.
12.11 UST Guaranty. UST hereby irrevocably and unconditionally guarantees
to Stephens the payment of all amounts and the performance of all other
obligations due from the Company in accordance with the terms of this Agreement
as and when due without requirement of presentment, demand of payment, protest
or notice of dishonor or nonpayment.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
The Company: U.S. TIMBERLANDS SERVICES COMPANY, L.L.C.,
a Delaware limited liability company
By: /s/ John M. Rudey
------------------------
Name: John M. Rudey
Title: Managing Director
UST: U.S. TIMBERLANDS COMPANY, L.P.
a Delaware limited partnership
By: New Services, L.L.C., as general partner
By: /s/ John M. Rudey
-------------------------
Name: John M. Rudey
Title: Chairman
New Services: NEW SERVICES, L.L.C.
a Delaware limited liability company
By: /s/ John M. Rudey
-------------------------
Name: John M. Rudey
Title: Chairman
Stephens: /s/ John J. Stephens
--------------------------
John J. Stephens
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EXHIBIT 10.7
Conformed Copy
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
the 4th day of November 1997, by and among U.S. Timberlands Services Company,
L.L.C., a Delaware limited liability company (the "Company"), U.S. Timberlands
Company, L.P., a Delaware limited partnership ("UST"), New Services (as defined
below), a Delaware limited liability company, and John M. Rudey ("Executive").
Recitals:
- --------
A. The Company desires to employ Executive as its Chairman, and Executive
desires to accept such employment, on the terms and conditions set forth in this
Agreement.
B. A new limited partnership, UST, has been formed and a new limited
liability company to be re-named "U.S. Timberlands Service Company, L.L.C."
("New Services"), has been formed to serve as the general partner of UST and as
the managing member of certain affiliated limited liability companies (together
with any subsidiary entities, the "UST Group") and upon the initial public
offering of the units representing limited partner interests in UST (the "IPO"),
New Services will assume the obligations of the Company hereunder as more fully
described in Section 12.2.
C. To induce Executive to accept such employment, UST desires to guarantee
the performance by the Company of its obligations hereunder.
Agreements:
- ----------
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants hereinafter set forth, the parties agree as follows:
Section 1. Employment
The Company hereby employs Executive, and Executive hereby accepts
employment with the Company, on the terms and conditions set forth in this
Agreement.
Section 2. Term
Subject to the provisions of Section 6, Executive's employment by the
Company under this Agreement shall be for a term (the "Term") commencing on the
date hereof and expiring on December 31, 2002.
<PAGE>
Section 3. Executive's Duties
3.1 Duties. Executive shall hold the position of the Company's Chairman.
Subject to the control of the board of directors or other governing body of the
Company (the "Board"), and any limitations set forth in the operating agreement
of the Company (the "Company Agreement") and in the agreements of limited
partnership of the partnerships and the operating agreements of the limited
liability companies within the UST Group, Executive shall, in general, oversee
the Chief Executive Officer of the Company in the supervision and control of all
the day-to-day business and affairs of the Company and the UST Group.
3.2 Performance of Duties. Executive shall perform Executive's duties and
responsibilities during the Company's normal business hours and at all other
times reasonably necessary to comply with the terms and conditions of this
Agreement. Executive shall devote the time and attention required to the
performance of Executive's duties and responsibilities for and on behalf of the
Company on the terms set forth in this Section 3.2. In addition, Executive may
from time to time serve as a consultant to and/or as a member of the board of
directors of other entities, provided that the Board in good faith determines
that such activities do not unreasonably interfere with the business of the
Company and the UST Group and the performance of Executive's duties hereunder.
The parties acknowledge that Executive currently serves as a board member or
advisory member of various civic and charitable organizations and may continue
to participate in these activities, subject to the limitations set forth in the
first two sentences of this Section 3.2; provided, however, that such continued
participation shall in no event be deemed a violation of the limitations of the
first two sentences of this Section 3.2 unless and until Executive shall have
been notified in writing thereof and afforded a reasonable opportunity to cure
the violation.
3.3 Principal Place of Employment. Executive's principal place of
employment shall be at the location of the Company's executive offices in New
York City or at any other location which the Company establishes as its
executive offices. The Company shall provide Executive, at his principal place
of employment, with a private office, secretarial services and such other
facilities and support services as are appropriate to the position of Chairman
and necessary or appropriate in the performance of Executive's assigned duties.
Section 4. Compensation and Other Benefits
Executive shall be entitled to receive from the Company the following
compensation and benefits for the services to be rendered by Executive
hereunder:
4.1 Salary and Bonuses. During the Term, the Company shall pay Executive
an annual base salary of $300,000, payable in equal installments during the year
in accordance with the Company's customary practices for senior executives
("Base Salary"). The amount of Executive's Base Salary may be increased from
time to time by the Board, and, once increased, such higher
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amount shall become the Base Salary for all purposes of this Agreement and may
not thereafter be reduced. The Company shall also pay to Executive, to the
extent earned, an annual cash bonus, not to exceed 100% of Base Salary, which
shall be based on the performance of Executive and the UST Group's business as
determined annually by the Compensation Committee of the Board in its
discretion. The Company shall have the right to deduct and withhold from
Executive's compensation all taxes and charges that are currently or that
hereafter may be required by law to be so deducted and withheld.
The Company shall establish a program whereby Executive may, at his option,
defer receipt of any or all of the Base Salary and bonuses otherwise payable to
him under this Agreement. Any amounts so deferred shall be placed in a "rabbi"
trust, with a bank or other financial institution reasonably satisfactory to
Executive, as trustee, providing the maximum security to Executive without
causing the constructive receipt of income for federal income tax purposes and
distributed, together with interest or other earnings thereon, according to a
payment schedule to be designated by Executive.
4.2 Long Term Incentive Plan. Executive shall be entitled to participate
in the Long Term Incentive Plan ("LTIP") adopted by the Company on the terms and
conditions set forth therein. Concurrently with the IPO, Executive will be
granted Unit Options (as defined in the LTIP) pursuant to the LTIP in an amount
equal to 12.5% of the number of Unit Options initially available to be granted
under the LTIP and substantially in the form of the grant agreement attached
hereto as Attachment A.
4.3 Participation in Benefit Plans. During the Term, Executive shall be
eligible to participate in all employee benefit plans and arrangements now in
effect or which may hereafter be established that are generally applicable to
other senior executives of the Company, including, without limitation, all life,
group insurance, and medical and dental care plans and all disability,
retirement, 401(k) and other employee benefit plans of the Company, as long as
any such plan or arrangement remains generally applicable to other senior
executives of the Company. Executive shall also be entitled to the same
vacation benefits as are generally available to senior executives of the
Company, provided in any case that Executive shall have a minimum of four weeks'
vacation per year.
4.4 Reimbursement of Expenses. The Company shall reimburse Executive for
reasonable expenses incurred by Executive in the performance of Executive's
duties hereunder in accordance with the policy of the Company for reimbursement
of expenses as adopted by the Board from time to time and generally applicable
to all senior executives of the Company. Executive shall furnish the Company
with the supporting documentation required under the Company's policy in
connection with the reimbursement of such expenses.
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Section 5. Membership on the Board
Executive shall be entitled to membership on the Board in accordance with
the terms of the Company Agreement as in effect on the date the Company
Agreement is first executed.
Section 6. Termination
6.1 Termination by the Company Without Cause. The Company may terminate
Executive's employment other than for Cause or Executive becoming Disabled (as
such terms are defined below) at any time during the Term if the Board
determines, in its sole discretion, that the continued employment of Executive
is not in the continued interests of the Company. In the event the Company
terminates Executive's employment pursuant to this Section 6.1, then Executive
shall be paid on termination (i) any unpaid Base Salary earned hereunder prior
to the termination date, (ii) all unused vacation time accrued by Executive as
of the termination date in accordance with the Company's vacation policy for
senior executives, (iii) all unpaid amounts of compensation in which Executive
is vested as of the termination date under any and all incentive compensation
plans or programs of the Company, (iv) any expenses in respect of which
Executive has requested, and is entitled to, reimbursement in accordance with
Section 4.4, (v) a prorated bonus for the year of such termination calculated
based on the bonus being equal to 100% of Base Salary, and (vi) an amount equal
to the amount of Base Salary that Executive would receive if Executive's
employment had continued without change through the remainder of the Term or for
12 months, whichever is less, (items (i) through (iv) above being the "Earned
Amounts").
6.2 Termination by the Company for Cause. The Company may terminate this
Agreement at any time, in the discretion of the Board, in the event of (i) any
conviction of Executive for a felony, (ii) any material breach by Executive of a
material written agreement between Executive and the Company or the UST Group,
including this Agreement, (iii) any breach caused by Executive of the Company
Agreement, the limited partnership agreement or operating agreement of any
member of the UST Group, or the charter or bylaws of any corporation within the
UST Group, provided that Executive had prior written notice of such agreement or
other document and any amendment thereto (including a copy of the full text
thereof) and provided further that such breach has a material adverse effect on
the Company, (iv) any willful conduct by Executive materially injurious to the
Company or the UST Group or their respective businesses, (v) any willful failure
by Executive to comply with any material policies, procedures, or directives of
the Board, provided that, Executive shall first be given notice from the Board
of such failure and such failure shall not have been cured within three days
after such notice or, if such failure is not capable of being cured within three
days, Executive shall not have commenced and be diligently pursuing in good
faith efforts to cure such default, or (vi) any fraud, misappropriation of
funds, embezzlement, or other similar acts of misconduct by Executive with
respect to the Company or the UST Group. In the event the Company terminates
Executive's employment pursuant to this Section 6.2 for Cause, then Executive
shall be paid on termination the Earned Amounts. For purposes of this
Agreement, no act or failure to act on Executive's part shall be deemed
"willful" unless done, or omitted to be done, in bad faith or without the
reasonable belief that the act or failure to act was in the best
4
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interests of the Company or the UST Group. Any act or failure to act on the
basis of authority given by resolution duly adopted by the Board or on the basis
of advice given by legal counsel for the Company shall be conclusively presumed
to have been done, or omitted to be done, in good faith and in the best
interests of the Company or the UST Group. No termination of Executive's
employment shall be for Cause unless such termination shall have been authorized
in advance by a resolution adopted by the Board and delivered to Executive,
following a meeting of the Board at which Executive (together with his counsel)
shall have been afforded a reasonable opportunity to refute the purported
grounds for termination for Cause.
6.3 Termination Upon Death or Disability of Executive. This Agreement
shall terminate upon the death of Executive, or upon Executive becoming Disabled
(as defined below). In the event of a termination of this Agreement pursuant to
this Section 6.3, Executive (or Executive's estate, if applicable) shall be paid
on termination the Earned Amounts. For purposes of this Agreement, "Disabled"
shall mean that Executive shall have qualified for and be receiving benefits
under the Company's long-term disability insurance plan or, if there is no such
plan, that Executive shall have qualified for and be receiving disability
benefits under the federal Social Security Act.
6.4 Voluntary Resignation for Good Reason. Executive may resign
Executive's employment with the Company at any time and, if such resignation is
for "Good Reason", Executive shall be entitled to the same payments and benefits
that Executive would receive under Section 6.1 if Executive's employment were
being terminated by the Company other than for Cause or Executive becoming
Disabled. "Good Reason" shall mean any one or more of the following: (i)
failure of UST to complete its IPO on or before March 31, 1998; (ii) failure of
the Company to appoint or re-appoint Executive to the office of Chairman; (iii)
failure of the Company's members to elect or re-elect Executive to the Board;
(iv) failure of the Company, by act, omission, amendment to the instruments
governing its organization and operation or otherwise, to vest in Executive the
position, duties and responsibilities contemplated by this Agreement; (v)
failure by the Company to pay when due any portion of the compensation payable
to Executive hereunder; (vi) any material breach by the Company of any material
provision of this Agreement; or (vii) on or following a Change of Control (as
such term is defined in the Company's LTIP, as the same may be amended from time
to time) either Executive is assigned any duties or responsibilities materially
inconsistent with, or diminished from, Executive's duties and responsibilities
with the Company and the UST Group immediately prior to the Change of Control,
or, Executive's status, duties, responsibilities, titles or offices with the
Company and the UST Group are materially diminished from those in effect
immediately prior to the Change of Control, as determined in the good faith
opinion of Executive; provided, however, Good Reason shall exist with respect to
a matter described in (ii) through (vii) above that is capable of being
corrected by the Company only if such matter is not corrected by the Company
within a reasonable period following its receipt of written notice of such
matter from Executive, and in no event shall a termination by Executive
occurring more than 60 days following any such written notice or the event
described in (i) above be for Good Reason.
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Section 7. Covenant Not to Compete; Confidentiality
7.1 Noncompetition. Unless granted written permission by the Board and
subject to any further restrictions contained in the agreements of limited
partnership and operating agreements within the UST Group, while employed by the
Company or a member of the Board and for a period of 12 months after the
termination of such employment or membership on the Board, Executive covenants
that Executive shall not (i) own (as a proprietor, partner, or stockholder of
greater than one percent of outstanding equity securities, interests or
otherwise) an interest in, or (ii) participate (as an officer, director, or in
any other capacity) in the management, operation, or control of, or (iii)
perform services as or act in the capacity of any employee, independent
contractor, consultant, or agent of any enterprise which engages in one or more
of the following activities in a state in which the Company or the UST Group is
then conducting business and in which the Company or the UST Group commenced
conducting business prior to the commencement of such activities therein by
Executive:
(a) acquisition, exchange, operation or sale of timber-producing real
property or rights to harvest timber, a principal purpose of which is
producing logs or other forest products;
(b) harvesting of timber other than harvesting which is incidental to
the ownership or operation of real property not owned or operated for a
principal purpose of producing logs or other forest products;
(c) sale, exchange or purchase of logs other than sales, exchanges or
purchases which are incidental to the ownership or operation of real
property not owned or operated for a principal purpose of producing logs or
other forest products;
(d) acquisition or sale of any facilities used to convert logs into
lumber, plywood or other wood products;
(e) conversion of logs into lumber, plywood or other wood products;
(f) marketing and sale of lumber, plywood or other wood products;
(g) import or export of logs, lumber, plywood or other wood products
to or from the United States;
(h) manufacture, marketing or sale of manufactured, engineered, or
substitute wood products to the extent such products compete with products
produced by the Company or any member of the UST Group; or
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(i) any and all other activities relating to the United States forest
products industry to the extent such activities compete with activities of
the Company or any member of the UST Group.
The noncompetition restrictions set forth in this Section 7.1 shall not apply in
the event of a termination of this Agreement pursuant to Section 6.1 or 6.4,
nor, in the event of Executive's termination due to Executive becoming Disabled
in accordance with Section 6.3, shall they apply following Executive ceasing to
be Disabled unless the Company offers to re-employ Executive on terms and
conditions at least as favorable as those set forth in this Agreement.
7.2 Confidentiality. Executive acknowledges that in the course of
Executive's employment by the Company, including as a member of the Board
following employment, if applicable, Executive will be furnished and have access
to certain information concerning the business, financial condition, operations,
assets and liabilities of the Company and the UST Group that is confidential or
proprietary in nature. All such information (irrespective of the form of
communication) is hereinafter collectively referred to as the "Information."
Until the later to occur of (i) the date of termination of Executive's
employment hereunder or (ii) the date of Executive's resignation or removal from
the Board, and for a period of 18 months thereafter, Executive agrees to keep
the Information confidential and agrees that Executive will use the Information
solely for the purpose of performing Executive's duties hereunder or as a member
of the Board or as otherwise authorized by the Company. This Agreement shall be
inoperative as to such portions of the Information which (a) are or become
generally available to the public other than as a result of a disclosure by
Executive in violation of this Agreement, (b) become available to Executive on a
non-confidential basis from a source other than the Company or the UST Group
that is not bound by an obligation of confidentiality to such entity or
entities, or (c) are required to be disclosed by an order or decree of a court
or other tribunal of competent jurisdiction, provided the Company is given
prompt notice of, and the opportunity to contest disclosure under, such order or
decree. Upon termination of this Agreement, Executive will return the
Information furnished by the Company or the UST Group and any documents that
contain, reflect, or are based upon, in whole or in part, the Information.
7.3 Equitable Relief. Executive acknowledges and agrees that it would be
difficult to measure damage to the Company or the UST Group from any breach by
Executive of Section 7.1 or 7.2 and that monetary damages would be an inadequate
remedy for any such breach. Accordingly, Executive agrees that if Executive
shall breach Section 7.1 or 7.2, the Company shall be entitled, in addition to
all other remedies it may have at law or in equity, to an injunction or other
appropriate orders or equitable relief to restrain any such breach, without
showing or proving any actual damage sustained by the Company or the UST Group.
Executive further agrees to waive any requirement for the securing or posting of
any bond in connection with such remedies.
7.4 Executive's Acknowledgment. Executive hereby expressly acknowledges
and agrees that (i) the restrictions and obligations set forth in and imposed by
this Section 7 will not prevent Executive from obtaining gainful employment in
Executive's field of expertise or cause Executive
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undue hardship, and (ii) in view and consideration of the substantial benefits
Executive will receive from the Company pursuant to this Agreement and the
Company Agreement, the restrictions and obligations imposed on Executive under
this Section 7 are reasonable and necessary to protect the legitimate business
interests of the Company and its members and the UST Group.
Section 8. Indemnification
(a) During the Term and for a period of six years thereafter, the Company
shall cause Executive to be covered by and named as an insured under any policy
or contract of insurance obtained by it to insure its directors and officers
against personal liability for acts or omissions in connection with service as
an officer or director of the Company or service in other capacities at the
request of the Company. The coverage provided to Executive pursuant to this
Section 8 shall be of a scope and on terms and conditions at least as favorable
as the coverage (if any) provided to any other officer or director of the
Company.
(b) To the maximum extent permitted under applicable law, during the Term
and for a period of six years thereafter, the Company shall indemnify Executive
against and hold Executive harmless from any costs, liabilities, losses and
exposures to the fullest extent and on the most favorable terms and conditions
that similar indemnification is offered to any director or officer of the
Company.
Section 9. Representations and Warranties
9.1 By Executive. Executive represents and warrants to the Company that
(i) Executive is under no contractual or other restriction or obligation which
would prevent the performance of Executive's duties hereunder or interfere with
the rights of the Company hereunder and (ii) this Agreement has been duly
executed and delivered by Executive, is the legal, valid and binding obligation
of Executive, and is enforceable against Executive in accordance with its terms,
except that no representation or warranty is made with respect to the provisions
of Section 7.
9.2 By the Company. The Company represents and warrants to Executive that
(i) it has all requisite limited liability company power and authority to
execute, deliver and perform this Agreement, (ii) all necessary proceedings of
the Company have been duly taken to authorize the execution, delivery and
performance of this Agreement, and (iii) this Agreement has been duly
authorized, executed and delivered by the Company, is the legal, valid and
binding obligation of the Company, and is enforceable against the Company in
accordance with its terms.
Section 10. Life Insurance
If requested by the Company, Executive shall submit to such physical
examinations by a physician and otherwise take such actions and execute and
deliver such documents as may be reasonably necessary to enable the Company to
obtain life insurance on the life of Executive for the benefit of the Company,
but in no event shall Executive's failure to qualify for such coverage, as a
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result of the outcome of the medical examination or otherwise, be grounds for a
termination of Executive's employment.
Section 11. Notices
Any notice given pursuant to this Agreement shall be in writing and shall
be deemed given on the earlier of the date (i) the notice is personally
delivered to the party to be notified, (ii) that is three days after the notice
is mailed, postage prepaid, certified with return receipt requested, addressed
as follows, or at such other address as a party may from time to time designate
by notice to the other party, (iii) the notice is delivered at the party's
address via courier service, or (iv) the notice is received by fax or
telecopier:
To the Company: U.S. Timberlands Services Company, L.L.C.
625 Madison Avenue - Suite 10-B
New York, New York 10022
Attn: Chairman, Compensation Committee of the Board
Facsimile No: (212) 758-4009
To Executive: John M. Rudey
1030 Fifth Avenue
New York, NY 10028
Section 12. General Provisions
12.1 Remedies on Default. In the event either party breaches this
Agreement, the other party shall be entitled to pursue all remedies available at
law or in equity. Except as otherwise provided herein, in the event this
Agreement is breached by either party, the non-breaching party shall not
terminate this Agreement without notice and a reasonable opportunity to cure
such breach.
12.2 Assignment; Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company and any successor of the Company, by merger
or otherwise. The parties understand and hereby acknowledge that upon the
consummation of the IPO and related transactions, the obligations of the Company
under this Agreement shall be assumed by New Services. The Company will require
any successor, other than New Services, which is already a party to this
Agreement, by agreement in form and substance reasonably acceptable to
Executive, to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place and following such assumption all
references to the Company herein shall be deemed to mean such successor
including New Services. Except as provided in the preceding sentence, this
Agreement, and the rights and obligations of the parties hereunder, are personal
and neither this Agreement, nor any right, benefit, or obligation of either
party hereto, shall be subject to voluntary or involuntary assignment,
alienation or transfer, whether by operation of law or otherwise, without the
prior written consent
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of the other party. Subject to the foregoing, the provisions of this Agreement
shall be binding upon and inure to the benefit of the parties and their
respective heirs, personal representatives, administrators, successors, and
permitted assigns.
12.3 Waiver. Failure of any party at any time to require performance of
any provision of this Agreement shall not limit such party's right to enforce
such provision, nor shall any waiver of any breach of any provision of this
Agreement constitute a waiver of any succeeding breach of such provision or a
waiver of such provision itself. No attempted or purported waiver of any
provision of this Agreement shall be effective unless set forth in writing and
signed by the party to be bound.
12.4 Amendment. This Agreement may not be modified or amended except by
the written agreement of the parties.
12.5 Severability. The agreements and covenants contained in this
Agreement are severable, and in the event any of the agreements and covenants
contained in this Agreement should be held to be invalid by any court or
tribunal of competent jurisdiction, this Agreement shall be interpreted as if
such invalid agreements and covenants were not contained herein; provided,
however, that if in any legal proceeding a court shall hold unenforceable the
covenants contained in Section 7 by reason of their extent or duration or
otherwise, any such covenant shall be reduced in scope to the extent required by
law and enforced in its reduced form.
12.6 Integration. This Agreement contains the entire agreement and
understanding of the parties with respect to the employment of Executive by the
Company and supersedes all prior and contemporaneous agreements (oral or
written) between them with respect to such subject matter.
12.7 Attorneys' Fees. If any legal action or other proceeding is brought
for the enforcement or interpretation of this Agreement, or because of an
alleged dispute or breach in connection with any of the provisions of this
Agreement, if Executive is the successful or prevailing party, Executive shall
be entitled to recover from the Company reasonable attorneys' fees and other
costs incurred by Executive in connection with that action or proceeding, and in
any petition for appeal or review therefrom, in addition to any other relief to
which Executive may be entitled.
12.8 Third Party Beneficiaries. This Agreement does not create, and shall
not be construed as creating, any rights enforceable by any person not a party
to this Agreement.
12.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
12.10 Survival. In the event of termination of this Agreement by either
party, this Agreement shall become void and there shall be no liability on the
part of Executive or the Company except to the extent such termination results
from the breach by a party hereto of its obligations hereunder (in which case
Section 12.1 shall apply); provided that Sections 6.1, 6.2, 6.3, 6.4, 7, 8, 11,
12.7 and 12.11 shall survive the termination of this Agreement.
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12.11 UST Guaranty. UST hereby irrevocably and unconditionally guarantees
to Executive the payment of all amounts and the performance of all other
obligations due from the Company in accordance with the terms of this Agreement
as and when due without requirement of presentment, demand of payment, protest
or notice of dishonor or nonpayment.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
The Company: U.S. TIMBERLANDS SERVICES COMPANY, L.L.C.,
a Delaware limited liability company
By: /s/ John J. Stephens
--------------------------------------------
Name: John J. Stephens
Title: President
UST: U.S. TIMBERLANDS COMPANY, L.P.
a Delaware limited partnership
By: New Services, L.L.C., as general partner
By: /s/ John J. Stephens
---------------------------------------------
Name: John J. Stephens
Title: President and Chief Executive Officer
New Services: NEW SERVICES, L.L.C.
a Delaware limited liability company
By: /s/ John J. Stephens
---------------------------------------------
Name: John J. Stephens
Title: President and Chief Executive Officer
Executive: /s/ John M. Rudey
---------------------------------------------
John M. Rudey
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